Andersons Inc (ANDE) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to The Andersons, Inc., 2013 fourth-quarter and year-end earnings conference call, hosted by Nick Conrad, Vice President, Finance, and Treasurer.

My name is Bupendra. I will be your event manager today. (Operator Instructions). And now, I would like to hand the conference over to Nick. Please proceed, sir.

Good morning, everyone, and thank you for joining The Andersons, Inc.'s 2013 fourth-quarter and full-year conference call.

I want to point out that all earnings per-share data we are reporting today is post our 3-for-2 stock split. For instance, we will report post-split earnings per diluted share of $3.18 for 2013. Comparatively, earnings per diluted share would have been reported at $4.77 pre-split. For the fourth quarter, we will report post-split earnings per diluted share of $1.08. However, this would have been reported at $1.62 per share before the split.

We believe that our fourth-quarter performance modestly beat the consensus analysts' expectations. We further believe that our full-year performance exceeded most of the analysts' expectations. Following this call, we will be issuing a clarification to the news media.

We have included a slide presentation that will enhance our talking points this morning. If you are listening and watching this presentation via our website, the slides and audio are in sync. For those listening via telephone and watching the webcast, you should follow the directions sent to you in order to sync the slides and audio. This webcast is available through the investors section of our website at www.andersonsinc.com. The webcast is being recorded and will be available on our website.

Certain information discussed today constitutes forward-looking statements. Actual results could differ materially from those presented in the forward-looking statements as a result of many factors, including general economic conditions; weather; competitive conditions; conditions in the Company's industries, both in the US and internationally; and additional factors that are described in the Company's publicly-filed documents, including its 1934 Act filings and the prospectuses prepared in connection with the Company's offerings.

Today's call includes financial information for which the Company's independent auditors have not completed their review. Although the Company believes that the assumptions upon which the financial information in these forward-looking statements are based are reasonable, it can give no assurance that these assumptions will prove to be correct.

On the call with me today are Mike Anderson, Chairman and Chief Executive Officer; Hal Reed, Chief Operating Officer; and John Granato, Chief Financial Officer. Mike, Hal, John, and I will answer questions you have at the end of the prepared remarks.

Now I will turn the floor over to Mike for an opening comment.

Thank you, Nick.

The Company had a strong year in 2013 and a record fourth quarter. The ethanol group had record operating income for both the year and the quarter, as they benefited from strong ethanol margins. The rail group nearly matched its record 2012 results, even with a $4.3 million decrease in gains on railcar sales.

The turf and specialty group had a record year, which was more than double their prior-year results. Despite the unfavorable impacts of the 2012 drought, the grain group had good results, in part due to the strong earnings of Lansing Trade Group. The plant nutrient group also had good results as they professionally managed through a nutrient price reset.

We are also proud of the fact that the Company paid its 69th consecutive quarterly dividend on January 23. The dividend has increased approximately 50% the last two years.

Before we review the performance results, I would like to highlight some 2013 accomplishments that demonstrate the Company's continued commitment to growth. In July, Thompsons Limited was acquired in a 50-50 joint venture with Lansing Trade Group. Thompsons owns and operates 12 elevators in Ontario, Canada, which are co-located with agri products retail operations, two seed processing plants, five bean cleaning plants, and a wheat cleaning plant. Their principal business is the origination, storage, cleaning, and merchandising of corn, soybeans, wheat and dry beans, as well as providing growers with inputs in agronomy services.

Growth was also seen in the rail group. The assets of Mile Rail were acquired in August, which included three new railcar repair locations, 12 ladder trucks for car repair, and cleaning and storage for up to 300 railcars. The rail group also opened its newly constructed railcar paint facility in Maumee, Ohio, during the year.

At the end of 2013, the turf and specialty group purchased the assets of the Cycle Group. This North Carolina business included a granulation plant and patents relating to both cat litter and granules used in the insecticide markets.

As always, we continue to explore additional expansion and acquisition opportunities.

As Nick mentioned earlier, we recently announced a 3-for-2 stock split. Although the split will not be finalized until next week, we are already reporting our earnings per share, as required, utilizing shares outstanding which will result from the split.

I will now turn this over to John, who will provide details of the total Company results.

Thanks, Mike, and good morning, everyone.

The Company generated net income attributable to The Andersons, Inc., of $89.9 million in 2013, or $3.18 per diluted share on revenues of $5.6 billion. In 2012, net income of $79.5 million was reported, or $2.82 per diluted share on revenues of $3.5 billion (sic -- see --press release, "$5.3 billion").

The most significant year-to-year increase in revenue relates to our grain business, whose revenues have increased primarily due to greater sales volume. The higher volume has resulted from growth, which includes the Anselmo train loading facility that opened in August of 2012 and the Green Plains Grain acquisition, which was completed in December of last year.

The Company reported net income of $30.7 million in the fourth quarter, or $1.08 per diluted share on revenues of $1.6 billion. In the same three months of 2012, net income of $15 million was reported, or $0.53 per diluted share on revenues of $1.7 billion.

Now to a non-GAAP measure, EBITDA, earnings before interest, taxes, depreciation, and amortization. The Company's 2013 EBITDA was $219.9 million, an increase of $24.7 million from 2012. For the fourth quarter, EBITDA totaled $65.5 million, compared to $42.4 million for the same period last year.

Equity and earnings of affiliates, which excludes net income from noncontrolling interest, was up $52.2 million and totaled $68.7 million for 2013. The positive year-over-year change was driven by an increase in income from the Company's investment in the ethanol LLCs in Lansing Trade Group, along with Thompsons joint venture. Equity and earnings of affiliates for the fourth quarter totaled $28.7 million, compared to $1.1 million for the same period in 2012.

The Company's full-year 2013 interest expense totaled $20.9 million, down $1.3 million from last year. Year to date, interest expense has decreased year over year, primarily due to lower short-term borrowings, driven by lower grain prices and lower grain market volatility. In the fourth quarter, interest expense totaled $4.3 million, a decrease of $1.7 million from last year.

The Company's 2013 effective tax rate was 36%, down 1.1% from the 2012 rate of 37.1%. The decrease in the effective tax rate was due primarily to income attributable to the noncontrolling interests that do not impact income tax expense, which was then partially offset by a correction made in the first quarter with respect to the accounting for the other comprehensive income portion of the Company's retiree health care plan, liability, and Medicare Part D subsidy.

We are projecting our 2014 tax rate to be 36.3%.

The bridge in this next graph demonstrates which group's 2013 income is up or down in comparison to the prior year. The specifics behind these differences will be detailed as each group's operating performance is discussed; therefore, to better understand the total Company results, Hal will walk you through each of the six business groups.

Thanks, John. One quick correction. Early in his comments, John noted the 2012 revenues as $3.5 billion. That should have been $5.3 billion. A simple correction there.

All right, the ethanol group's full-year results were exceptional. They had record operating profit of $50.6 million. In 2012, the group had an operating loss of $3.7 million. The higher income is the result of significantly increased earnings from our investments in the ethanol limited liability companies.

The LLCs were positively impacted by higher ethanol margins, which in part resulted from solid ethanol export demand and lower corn costs. The group further benefited from service income and from increased sales of corn oil, E-85, and distillers dried grains.

Total revenues for the year were $832 million. In comparison, the group's revenues for 2012 were $743 million. Revenues increased due to an increase in both volume and the average price per gallon of ethanol. The majority of the volume increase was due to the addition of the Denison, Iowa, facility in May of 2012, as well as efficiency gains at the plants.

The ethanol group had its best quarter ever in the fourth quarter, with operating income of $26.6 million on revenues of $197 million. During the same period of 2012, the group incurred an operating loss of $800,000 on revenues of $215 million. The ethanol team worked diligently to simultaneously optimize margins, yields, production rates, and co-product sales. The ethanol plants continued to make productivity improvements, with another record production year in 2013.

Now let's discuss the grain group. Its operating income was $46.8 million in 2013. In the prior year, the group had operating income of $63.6 million. The group had considerably lower space income in 2013, in large part due to the lingering effects of the 2012 drought. The group did, however, benefit from strong Lansing Trade Group earnings and an increase in bushels sold.

Total revenues for the grain group were $3.6 billion in 2013 and $3.3 billion in 2012. In spite of declining grain prices, revenues increased due to greater sales volume. This volume increase was primarily due to strategic growth during 2012. Specifically, the Anselmo train loading facility was opened in August of 2012 and 12 former Green Plains Grains locations in Iowa and Tennessee were added at the end of 2012.

For the fourth quarter, the grain group's operating income was $22.1 million on revenues of $1.1 billion. This compares to $18.1 million in the same period of the prior year on revenues of $1.2 billion.

Space income this quarter was lower than originally anticipated due to a market inverse that lasted well into October, which negatively impacted basis income during the harvest season. Quarterly revenues for the group declined in the fourth quarter, as the average grain price decreased almost 24%.

Storage capacity of the grain group decreased slightly to approximately 139 million bushels. The Thompsons Limited joint venture did not increase reported capacity, as it is not consolidated and is accounted for as an equity investment.

The rail group achieved operating income of $42.8 million, which was just shy of its record operating income of $42.8 million in 2012. Gross profit from the leasing business was higher than the prior year, due to both higher lease and utilization rates. The overall utilization rate for 2013 increased 1.5% to 86.1%.

The group recognized $19.4 million in pretax gains on sales of railcars and related leases and nonrecourse transactions. In 2012, the Company recognized gains of $23.7 million on similar transactions.

Rail group revenues of $165 million for 2013 were higher than the $156 million reported in the prior year, due mainly to increased leasing revenue. The rail group had operating income of $6.2 million in the fourth quarter, on revenues of $32 million. In 2012, operating income for the same three-month period was $8.6 million, on revenues of $29 million.

During the fourth quarter, the group recognized $3.5 million in gains on sales of railcars and related leases and nonrecourse transactions, compared to the $1.5 million recognized last year.

In the fourth quarter of 2012, the group also received a $2.8 million lease settlement.

The average utilization rate for the fourth quarter was 88.2%, up 4.4% from last year. The group now has 22,700 cars and locomotives, which is down approximately 600 cars from its year-earlier total. The car total is down as the group has both scrapped some cars and sold some cars outright as part of their railcar optimization strategy.

The plant nutrient group had operating income of $27.3 million in 2013, on revenues of $709 million. In the prior year, the group's operating income was $39.3 million and revenues were $797 million. Margins in 2013 were lower than the prior year due to flat to declining nutrient markets, but were still solid. In 2012, margins benefited from significant nutrient price appreciation.

Volume for 2013 was lower as customers appeared to be purchasing nutrients as needed due to volatility in the market and anticipated lower nutrient prices.

Fourth-quarter operating income for the plant nutrient group was $6.2 million, on revenues of $171 million. In the same three-month period of 2012, the group reported $4.7 million in operating income, on revenue of $178 million. Increased operating income in the quarter was due to higher volume, as the group recaptured some of the third-quarter volume shortfall.

The group effectively managed its nitrogen, phosphate, and potassium ownership positions throughout the year, even as the nutrient market was resetting. Storage capacity of the plant nutrient group increased to 888,000 tons from 870,000 tons in 2012, due to the building and expansion of both dry and liquid storage.

The turf and specialty group had record full-year operating income of $4.7 million, on $141 million of revenues. Last year, the group had operating income of $2.2 million, on revenues of $131 million. The turf business had relatively flat volume, but benefited from increased gross profit per ton and decreased expenses that resulted from operational improvements made last year.

The cob business invested this year in plant improvements at the Mt. Pulaski location, which are expected to pay dividends in the future.

During the fourth quarter, the turf and specialty group incurred an operating loss of $1.4 million, on revenues of $23 million. Last year, the group reported a loss of $1.2 million on $21 million of revenue during the same period.

The retail group's full-year operating loss was $7.5 million in 2013, which included $4.7 million in one-time costs. In the prior year, the group's operating loss was $4.0 million, which included $1.1 million in one-time costs. Excluding one-time items, the group's operating results were consistent with the prior year.

Total 2013 sales for the group were $141 million, compared to sales of $151 million in the prior year. During the fourth quarter, the retail group had an operating loss of $3.9 million, which included $3.9 million in asset impairment charges on two stores. Last year, during the same three-month period, the group's operating loss was $900,000, $1.1 million of which related to costs associated with the closing of the Woodville store.

Fourth-quarter revenues were $37 million and $41 million in 2013 and 2012, respectively.

Now, I will turn the floor back to Nick for the Treasurer's report.

Thanks, Hal.

At the end of 2013, net working capital was $229.5 million, a decrease of $74.8 million from last year. Current assets totaled $1.2 billion at year-end, a decrease of $75.4 million from the same period of 2012. This change was driven by a $161.8 million decrease in inventories, along with a $34.9 million decrease in Accounts Receivable and a $31.8 million decrease in commodity derivative assets, current. The change to inventories was primarily the result of lower grain prices, as well as lower grain inventories.

Cash and cash equivalents ended the year at $309.1 million, an increase of $170.9 million year over year. Noncurrent assets increased $166.6 million year over year, driven principally by a $100.2 million increase in equity method investments.

As a result, total assets at the end of the year were $2.3 billion, an increase of $91.3 million from last year.

Current liabilities at the end of the year were $992.3 million, which is similar to the prior year.

At year-end, the Company had no borrowings on the short-term portion of the line of credit. This is a decrease of $24 million from 2012. The average short-term borrowing interest rate for 2013 was 1.9%, which is down from the previous year's rate of 2%.

Long-term debt ended the year at $375.2 million, a decrease of $52 million from 2012. At the end of 2013, the Company had no borrowings under the long-term portion of the line of credit. This is a decrease of $25 million from last year.

The average long-term interest rate for 2013 was 4.5%, which was down from the previous year's rate of 4.7%.

The long-term funded debt-to-equity ratio was 0.52 to 1 on December 31, down from 0.7 to 1 at the previous year-end. Total committed lines of credit under the Company's syndicated facility remain $850 million, of which $735 million are short term and $115 million are long term.

Total equity on December 31 was $724.4 million, an increase of $113 million from the prior year.

Mike will now make a few comments before we take questions.

Thank you, Nick.

Today, I would like to provide a little outlook for 2014. First, our agricultural groups should benefit from the record corn crop seen in 2013 and the anticipated sizable corn crop in 2014. We expect improved results for both our grain and plant nutrient groups.

The ethanol group is still seeing good margins, although they are not at the levels seen in late 2013, but they are well above the margin seen in the first half of 2013. The ethanol market is volatile, making future margins difficult to predict.

We anticipate our rail group having a great year, but gains on sales are expected to be lower than the past two years.

We expect turf and specialty group to continuing its earnings growth trend.

We are quite proud of the results our Company has achieved. The last few years, we have worked through the most severe drought in 60 years. The fact that we have achieved such strong aggregate results speaks well for the strength of our diversification strategy and business model and the resilience of our employees.

That concludes our prepared remarks. Hal, John, Nick, and I will now be happy to answer any questions you may have. Bupendra, we will turn it back to you.

(Operator Instructions). Farha Aslam, Stephens Inc.

A couple of questions. Starting out with grain, in the prepared remarks, you highlighted an inverse that affected the first half of your quarter. Now coming back into the first part of 2014, do you expect that to reverse, and just any commentary regarding summer selling and opportunities in grain?

Thanks, Farha. Yes, the inverse did persist from the old crop into the new crop a little longer, I think, than most expected, which as -- did as you said early on. We did go back to carry in the marketplace by the end of October, roughly, not the same size carry that I think people may have expected with the size of that crop.

Farmer selling has been a little bit slower, I think, than in the past years. They have got used to selling $6 and $7 corn, and $4.50 to $5 corn is not as exciting. Also, the weather the past few weeks across much of the Midwest has slowed it down quite a bit, and railroad performance has been a little bit tough, as well.

I will tell you this, the farm bins are pretty full, and we are seeing a relatively good price as we get into our Feb averaging for our crop insurance levels for 2014, so we expect to see opportunities continue. The carryout for corn is still expected to be around 1.5 billion bushels, which is a pretty sizable carryout and should help put some carry into the marketplace.

Thank you, and then on to plantings. You'd highlighted that you expect a good corn crop, or a good crop in 2014. Could you comment about plant nutrients applications and acres planted for 2014?

Yes, the acres planted number is -- I would tell you in a range of about 93 million to 97 million acres of corn, depending on who you talk to. We're estimating 93 million to 94 million, internally. The range is a bit wider than that. So that's a pretty sizable planting of corn acres.

Nutrient prices have reset over the course of the fourth quarter, or really over the course of a lot of last year, to fairly reasonable levels, lower levels than we have seen recently, and so that actually has started to turn around just slightly. We started to see prices, again, starting to move up just slightly on the nutrient side. So given the lower price levels that existed at the beginning of this year and that expectations for around mid-90 million acres, we expected it to be a pretty good spring season.

Great, and just two more questions. First, on ethanol. You had a very good quarter in the fourth quarter. Looking out into the first half versus second half, any color you can provide about profitability levels and what levels you are hedged in at, that would be helpful.

Yes, Mike's comments were a pretty good summary level of commentary that while the margins began 2014 good, they are not as good as the end of 2013, but better than the first half of 2013. So I think those comments summarize where we are pretty well.

And for the most part, I think as you have heard across the industry, it has pretty much been spot market for margins in the ethanol business. So it's hard to predict them going forward.

And then, my last question relates to your other in corporate. There was a $4 million bump in the fourth quarter. What was the key driver of that bump?

There's a couple things there, Farha. Let me just grab my sheet here. There's -- primarily due to Denison, though, is -- and Denison flowing through for the full year here.

And so, is that a good rate for us to continue anticipating?

(multiple speakers). Farha, could you do your question again, just to make sure we heard it right?

Okay, we just wanted to make sure, so if we are planning forward or modeling forward corporate, we should keep it at 2013 levels for 2014? Is that a fair assessment?

So, the question is about corporate levels of expenses, whether this is a good proxy. Is that what you are asking, Farha?

Exactly.

Okay.

Yes, I think it's a relatively good proxy.

Great. Thank you very much.

Ken, can you check if your phone is on mute? Your line is open.

This is Andrew Strelzik in for Ken. So, obviously you had some headwinds with space income in the quarter. It sounds like they are starting to get a little bit better, but still in the quarter you did about -- over $0.40 a bushel in terms of profitability, which is towards the high end of your normal range. So, also you made some comments about the corn crop.

So I am just wondering, as things normalize in terms of space income and if you get a good crop next year, are we entering maybe a two-year runway here where you could have grain margins per bushel towards the high end or even above that $0.50 level?

Thanks, it's a good question. Two points. First of all, there is a little bit of an influence on the Lansing numbers in that calculation you made that takes it a little higher, but that is just one point.

But you asked primarily about the two-year look going forward. And I think we have talked about this maybe in the last couple conference calls. It really is -- at a 1.5 billion or so bushel carryout, it really is the second good crop that makes the large change in storage basis appreciation and spreads going forward. So, we would anticipate the runway is positive, based on the potential of normal crops with these 93 million to 95 million bushel -- 93 million to 95 million acres planted. So, yes.

Okay, great. And if I stripped out from the rail segment the gains that you got on the sales, it came in a little bit below what we would have anticipated and what you have been doing over the last couple of quarters. Just wondering if there was anything in the quarter that caused that or any -- is there anything you can talk to there?

I don't see anything that would notably impact that. I don't think it's a substantial amount below the previous. We did -- go ahead, Nick.

I would think a more meaningful metric there is utilization at the end of the quarter, and I will just leave it at that.

We did have the Mile Rail startup in the second half of the year. It might have been some expenses with the new startup and those changes, but there wasn't anything that substantial in those numbers.

Okay, so nothing to worry about there?

Yes, there was -- as I mentioned, there was the one-time recovery last year, $2.8 million for a settlement, in a lease settlement. That was in fourth quarter last year. That may have been impacting the numbers you're looking at a little bit.

Sure, okay. And then, last, obviously you have a lot of cash on the balance sheet and you are selling some of the stake in Lansing. Just wondering how you are thinking about allocating capital going forward?

Capital allocation.

We continue to refine our allocation model, focusing on the grain, rail, plant nutrient areas, along with ethanol, and we continue to see lots of opportunities, but we're going to be disciplined. We build all our analytics from the bottom up, and as we see opportunities, we will take those opportunities.

I would add to that if you went back a year ago in December when we just closed on Green Plains, which was pretty sizable, and finished the year, our long-term debt to equity was about what?

0.7.

0.7, and we were -- we had another -- Thompsons was just cropping up and we had not determined exactly how we were going to approach it, so we were actually looking to beam up to our -- maybe just hadn't -- or feel for a little bit of some acquisition, but what I will tell you, we went with a 50-50 venture. We've had a really good year of cash generation and we do have -- we do continue to work on a pipeline for acquisition, but we're not going to grow for the sake of growth.

But we're going to continue to look for the opportunities in a manner consistent with what John said. It's nice to have what I will call -- maybe dry powder is not the right phrase, but it's nice to be in a good position.

Understood, thanks a lot. I really appreciate it.

Brett Hundley, BB&T Capital Markets.

Hal, by my measure, your grain business was actually towards the low end of what you do historically in Q4 from a profit per bushel standpoint, and you guys talked about the inverse. You talked about maybe some slower farmer selling. But if I am right on that, if you rip those out, would you have been around your historical average otherwise?

Yes, I would tell you that as you look -- if I just select the inverse and what that changed at the basis levels of the early acquired bushels and then the resultant basis change from the end of October through the end of December, I would tell you that we would be much more in that normal range if I extract the event of the drought and that inverse, right.

And you were absolutely right in that conclusion that we're on the low -- and below, [somewhat] at the low end of the range on that side if you strip out Lansing, if you look just at the base grain.

Yes, okay, I just wanted to make sure that I was working off a correct number.

Yes, you were. Yes.

And so, maybe is it fair to say, then, that maybe some weather, farmer holding, et cetera, during January, but maybe some of those conditions have eased up a little bit? Hal, you talked to it, how pricing has become a little bit better here. Is that a fair statement, do you think?

Right, it's clearly been a slow start for all the reasons you mentioned, but on the other perspective, our export numbers have been quite good for the total country. So, we are looking forward to getting out of the freeze and getting things started.

Yes, and the other thing that is notably different is that wheat spreads have narrowed up substantially, even the front end going to a slight inverse here recently. So that's probably the other big change here as we get into 2014.

Okay, okay. And then, Mike or Hal, I just wanted to ask, are you guys surprised at all by ethanol today? And the reason I ask that is we saw a little bit of a swoon there, if you can even call it that, a sequential drop in margins during January, but actually by my measure, ethanol margins have come back pretty solidly here during the early part of February. They are looking pretty close to levels that we saw at certain points during Q4.

So my point is ethanol has continued to be very strong. Prices are very strong, and everyone talks about maybe the idled capacity that is sitting on the sidelines, the potential for that to come back. And so, I guess I'm just curious to get your thoughts on if you were surprised at all that profitability has remained this strong, and just how you think about it over the near term.

One thing I'm going to talk about -- this is Mike, and Hal can chime in, but idled capacity, we believe, is mostly back, although there is -- you end up with the weather shutdowns and normal shutdowns and whatnot. So in the supply side, you can bring on the supply side is we're up near the top of what we can, although if you look at the daily production, I think it suggests there is a little more room to produce more.

The demand side is pretty static at 10% of -- okay, you've got the mandate and its impact, E-85 at 10% of highway gasoline, it's probably blended, but the big thing that's additive to that is the export market. And if you look at base as we were coming into the harvest, and before you consider exports, there was a little concern that with lower corn, you bring back capacity and you produce more ethanol than is needed domestically. And more ethanol -- and there was a concern around the mandate and how that would be handled.

But then, you bring in export demand because of, really, I guess you could say, a pretty simple situation, low-priced corn results in low-priced ethanol in a world market, and that's a good story right now. And your assessment of margins here in Jan and Feb, right on the money.

A big negative surprise was natural gas, and I think just what it did in the spot cash market had a negative impact, but the base margin is quite healthy. Hal, I (multiple speakers)

Good summary. I do think the only idled capacity out there is pretty much the fringe stuff, and since the margins looking forward aren't enough to get anybody to come into the market for a long-term deal, it's hard to suggest that would come back on anytime soon. It's been shut down for a while.

The export market is the key. Cheap ethanol makes us attractive all around the world for people who are using ethanol, and we're selling ethanol profitably well below $2 a gallon, and gasoline in the United States is well above $3 and around the world, much more than that. It's a great source of energy. So we feel pretty good about it.

Okay, I appreciate those comments. And Hal, on (multiple speakers)

Let me also add, we feel real good about it. But let's look at the last five years. It is one real volatile industry. So it's pretty hard to forecast out very far.

On plant nutrient, Hal, you talked about some benefit from the Q3 volume movement maybe into Q4, and I had planned to ask about that. I was just curious if you can maybe quantify just maybe how much of an impact that was? Did it really benefit Q4 or was it more of a modest help?

It was just a modest help. It was one of the factors, that's all. We did mention a shortfall in the volume in Q3, and this was simply a portion of that coming back, timing-wise. That's all.

Okay, and then just my last question is on -- I have read that spot railcar quotes have been excellent, just given poor weather in the Midwest, and I was just curious how much of your business is done spot and if that's positively impacted you guys year to date?

Yes, I would tell you that's a very small sliver of what we do. Most of our cars are out on long-term deals, which is how we manage the entire portfolio of the business. So, there's a few opportunities, but it's not substantial.

But you're right. There is -- because of railroad traffic problems, there have been some spot numbers that have been paid pretty high.

Okay, thanks so much, guys.

Eric Larson, CL King.

A couple basic start-out questions. First of all, was there any -- could you explain the rationale of the sale -- your sale of that percentage of Lansing? Obviously, you got a good price. Is there anything more to the rationale of reducing your ownership position in Lansing?

No, I think as we mentioned in the separate release about that, it gave us a chance to monetize a small portion and remain still a very large owner. And it's been a great run. We have just done a venture with them up in Canada with Thompsons, so I think we covered all those points and that's pretty much all there is to it.

Okay, so you basically got your investment out, and now you're just playing with house money?

You said that, Eric.

You said that, Eric. (laughter)

Okay. I thought I would try to put at least some flavor on it.

The second question I have is, guys, you normally have been very aggressive over the years of hedging forward and hedging -- locking in your margins. Have you locked in your ethanol margins or are you still -- have you had opportunities to do that? I am assuming you have, or are you still staying on a spot basis for your ethanol margins?

Yes, I would tell you that other than the nearby couple weeks, it has been very difficult to lock in anything like spot margins for probably the last 60 to 90 days.

Deferred margins out more than just a couple of weeks are and have been dramatically lower since probably Thanksgiving, so it's very hard to lock in anything forward. We do have some opportunities at the time to lock in a week or two or so, and some local demand that changes maybe in a couple locations, but in general, it is very difficult to get anything forward.

Okay. The next question is also based on ethanol. If you take your $51 million of EBIT performance in 2013, if you just break that out between basic market fundamentals, i.e., better ethanol pricing, lower corn costs, and your increased contribution from investments, how would that break out? What portion of that $51 million would be from just your increased investment exposure to the industry?

Our last increased investment was Denison, which would have been spring of 2012. So -- yes, 2012, correct? So, May (multiple speakers) that is.

So you would have anniversaried all of that?

Yes, we would -- correct, in the last six months. And at that point in time, we were in a net negative margin, so adding capacity didn't bring us anything. That was more of a view of the future was going to get better, relative to what we were -- what we paid.

So yes, we would have anniversaried it, and so we -- we have done -- we continue to do things to tweak production, to get a little more juice, but it's fundamentally margin. I mean, the vast, vast, vast, vast majority of the increase is lower margin.

Okay. Then a question on the grain side. Obviously, the second crop this year, if we have just -- if the Lord is willing to give us a halfway decent normal crop again this year, it could be a very interesting year for you folks. When you go back to -- go back to 2011, you had profits in that business of about $87 million. Now I think in 2011, you had really high wheat storage, extraordinarily high, non-repeatable wheat storage income in 2011. So, we can't -- we got to look away from that or take that away from the $87 million you earned then, but it's also very reasonable -- you also didn't have a lot of the storage that you have today, as well, so there is an offsetting factor in there.

And this year, if we are not -- if we don't have to take 1.5 billion bushels of the crop being harvested this year to replenish depleted inventories, which is what I think really hurt the basis last year, or didn't give you the upside in the basis that everyone may have been expecting, you could get that this year. And couldn't you challenge your $87 million profitability in that business for 2014?

Yes, well, look, first of all, the chart that you've talked about has been mentioned a couple of times is in the appendix, so in case anybody is questioning that.

That 2011 year is probably about almost 30% above the next highest year, and that is the wheat income that you noted, which is non-repeatable. So I think you have to take that out, and there isn't really any way for the corn market to make up for that non-repeatable wheat income, so you do have to weigh that out first.

However, as you did say, with 1.5 billion bushel carry-on, if we get to the size of crop that we could generate with 93 million, 94 million acres of corn planted, the carries in the marketplace and the large carryout that ensue should provide some really good opportunity from our space income perspective. There is no question about that.

I'll add just a little color to that. Eric, one is we still have to get through August/September of this year, and you look at the carry of the corn market which is there, but not much, wheat carry is -- we have now gone to flat spreads, slight inverse, and beans have been an inverse, so we don't get -- we just can't get the full-year benefit of that, even if we recharge the bins.

But I would tell you that, yes, we have added more capacity, what, roughly 30% more capacity, rated capacity, and if -- and Hal said that really great year was 30% above the top of the range. Well, 30% rated capacity isn't all usable and the top of the range is what I would call the high end of normal. So it would be -- this year, the answer is no, to your question.

Next year, it would still be challenging to get that type of a year in total, unless the stars really aligned, and it would be the added storage we have, not the return on storage.

Okay, no, that's a very fair comment. The inverse in beans and the inverse in the wheat market, it does add some more challenges. It doesn't mean that all your stars are lining up, so that makes some sense.

The final question that I have is your Green Plains acquisition, you have now anniversaried that as well. Is that delivering the types of returns, however you want to characterize it? I am assuming that it is accretive to EPS, given today's financing rates, but is it meeting your expectations? Can you give us a little review of how that is performing for you?

Sure, I would tell you that I would -- in an aggregate sense, it's probably slightly less than what we would have liked it to be, anticipated it to be, but it's actually two very different worlds.

There is a Tennessee cluster of facilities which is doing quite well, and we are really enjoying that marketplace and have had good weather. There is a set of assets in Iowa that is in a much tougher competitive neighborhood, have had a little bit less-than-perfect weather out there, and so the Iowa facility is probably not doing quite as well as we would want, and in an aggregate sense, that's probably keeping it from performing exactly how we would have liked it to be.

Interesting, Tennessee, Hal mentioned the weather. We had really good crops down there, booming wheat crops, and the whole inverse situation that hurt us in total really didn't -- I would say it was a net plus down there.

In Iowa, it was more like the rest of our group where what it took through the inverse was more painful than we thought it would be, and I would say Iowa is going to be one of those where we got to get through this year and see where the crop is, because that's great land, great production, a great customer set out there, but we had some roadblocks -- or hurdles that we haven't gotten through yet.

Okay, yes, and Iowa, particularly in the northeastern portion of the state, really had some difficult growing conditions and poor -- Iowa wasn't optimal production last year, either, so that probably was another challenge.

Right, exactly.

Okay, thank you, guys. I will go back in the queue.

Paul Massoud, Stifel.

Thanks for taking my question. I was wondering if you could talk a little bit about the outlook for potential divestitures. I know you have been pretty opportunistic with both M&A and selling a stake like you are doing with Lansing at the right price, but I'm just curious how you think about selling off assets, especially assets that are probably outside of -- out of the grain group and that generally aren't necessarily turning a profit.

It's Mike. We will periodically look at that. Besides what we did at Lansing, we also sold a chunk of railcars last year, and that was a lot easier to manage as a portfolio.

In general, we are not much of a divestiture, although we will periodically close or sell. We are not sitting here with what I will call planned to divest. If we think that something makes some sense, we will address it. We're more on the acquisitive side and taking the assets that we have and improving them.

Okay. Going back to ethanol, I know you talked a little bit about the export side. I don't know that I heard you give an estimate for what you think exports might look like this year. Is that a number that you put out there?

Yes, we didn't put any official number out there, based upon the recent 60 days. The other thing you have to realize is that data doesn't come to the marketplace until 60 days after it occurs. So that's really a bit of a black hole of information in an otherwise pretty informative world.

But people have been talking about as much as 1 billion gallons for the year, that's at the high range of what anything we've ever done in the past, but some of the monthly numbers here recently suggest that maybe we could get to that number. So, 1 billion gallons of export demand would really keep this market chugging away pretty strongly to meet the demand.

And I guess apart from just capacity, are there logistical issues that would make it tough to get to that point, or logistically, could we do -- could the US export more than that?

The US can export the 1 billion gallons pretty easily with the current infrastructure that we have.

And then, finally, just on -- going to the nutrient group. You talked about some price moves starting to move in the other direction, I guess up, as opposed to down like we have seen for the last few years. But in particular, I was curious if there was one nutrient of the main three, more than others, or two that are moving more than others? We have seen some of the potash producers announce some price increases. I know there has been some seasonal upticks just based on demand.

I guess I am curious as to how that really factors -- filters into where you are in the chain and (multiple speakers)

Yes, that's a good question. I think what we noted here in the last month or so is an uptick in urea pricing, a little bit of phosphate increase here recently, nothing substantial, but a little bit. So I think the next month is probably more critical as to what we see as people start to get ready to fill for spring season. But those are maybe the two we've seen a little bit of improvement in here early in the year.

Thanks.

Thank you. We have no further questions in the queue. Ladies and gentlemen, that concludes your call for today. Thank you for joining. You may now disconnect.

I want to thank you all for joining. I also want to mention for those that are interested, there are seven appendix slides to this presentation available on AndersonsInc.com website at the investors tab under the fourth-quarter and year-end earnings call replay.

Our next conference call is scheduled for Thursday, May 8, at 11 AM Eastern Time to review our first-quarter 2014 results. We hope you are able to join us again at that time. Until then, have a wonderful day.