Slide 1: Investor Presentation June 2016
For internal use only Investor Presentation June 2016
Slide 2: Forward looking statements & non-GAAP measures
For internal use only2 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 in the C
Slide 3: New CEO, Renewed Andersons
For internal use only3 Our long-term strategic plan for the Company is already being implemented, with key initiatives in place and recent achievements including: Reduced senior management positions leaner overhead Brought in two external leaders fresh senior management perspectives Laun
Slide 4: The Andersons: Cohesive portfolio with a foundation in Grain
For internal use only4 – Strong link to Grain with 130mm+ of the 500mm+ bushels that ANDE touches annually – Natural extension of our Grain business – Leverages focus on and relationships with farmers – Focused on the farm gate and our grower customers – Providing value added risk management and pri
Slide 5: Response to unsolicited proposal
For internal use only Response to unsolicited proposal
Slide 6: HC2's proposal undervalues ANDE
For internal use only6 HC2’s proposal undervalues ANDE Wrong time, wrong price, wrong buyer HC2’s offer is not in the best interest of The Andersons’ shareholders and other stakeholders Opportunistic attempt to acquire ANDE near historic lows in the industry cycle Substantially undervalues the c
Slide 7: A sale of Grain & Rail would be costly and destroy value
For internal use only A sale of Grain & Rail would be costly, and ultimately destroy value for shareholders ANDE has a cohesive portfolio of complementary agri-businesses - Each segment plays an important part in The Andersons’ role as trusted partner to farmers - The businesses interact in a mutu
Slide 8: Company overview
For internal use only Company overview
Slide 9: Value in supply chain of US grain
For internal use only9 ANDE is well-positioned to capitalize on strong demographic trends: • Expanding world population • Growing middle class • Demand for protein Value in supply chain of US grain The Andersons Cohesive portfolio with a foundation in Grain
Slide 10: Grain Group overview
For internal use only Base Grain – Merchant & Services Leverage storage & handling capabilities to create value from difference in time and distance between grain harvest and processing Provides value added services to farmers including risk management and pricing tools Affiliate investments L
Slide 11: Grain Group strategy
For internal use only Primary near-term goal: get performance of cornerstone division back on track Recently divested underperforming assets in Iowa Committed to improving strength of our core (Eastern Corn Belt) Re-focusing and building on “Partner of Choice” proposition, including business
Slide 12: Lingering impact of Spring 2015
For internal use only Current condition: lingering impact of Spring 2015 Challenges expected to persist until 2016 Fall Harvest 12 2015 in ANDE backyard Excessive rains in May/June Limited planting & fertilizing Reduced crop production Statewide precipitation ranks (June 2015) Period: 1895 – 2
Slide 13: Grain Group financial performance
For internal use only Lack of basis appreciation in quarter contributed to $10mm reduction in space income for Base Grain Chinese anti-dumping and countervailing duties significantly impacted DDGS trading for Lansing Trade Group Exited underperforming assets in Iowa Construction of new space
Slide 14: Ethanol Group overview
For internal use only Ethanol – Long Term Value US corn based ethanol is one of the worlds lowest cost and cleanest burning sources of octane Demand expected to grow… exports, need for octane, and higher blend rates Advantaged position in volatile space Manager / investor approach – Facilities
Slide 15: Ethanol strategic direction
For internal use only15 Ethanol is a natural downstream extension of our Grain Business – US ethanol is the most cost-effective, clean-burning source of octane – Renewal of US ethanol government mandate in 2016 Well positioned to profit from our unmatched productive capacity for corn in the US (
Slide 16: Ethanol Group basic industry margin history
For internal use only ($0.80) ($0.60) ($0.40) ($0.20) $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 8 Year Range 2016 8 Year Average 2014 2015 16 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sources: NYMEX Chicago Ethanol (Platts) Futures Electronic (Front Month); CBOT Corn Futures Electronic (Front
Slide 17: Ethanol Group financial performance
For internal use only Group remained cash positive through challenging quarter Headwind from higher-than-normal corn basis in Eastern Corn Belt relative to national market High industry supply during seasonally slow demand quarter impacted margins Albion expansion has begun and is on schedul
Slide 18: Plant Nutrient Group overview
For internal use only Plant Nutrient foundation Natural adjacency to Grain business, leveraging relationships and intelligence with the farm and drive to bring value and sustainability to growers Founded in wholesale distribution of basic row crop fertilizer (NPK) Significant expansion of spec
Slide 19: Plant Nutrient strategic direction
For internal use only Plant Nutrient is a natural strategic extension of our relationships with farmers Growing the business on a good foundation: – Leveraging strong Eastern Corn Belt wholesale distribution and retail farm center capabilities significant expansion into specialty fertilizer ma
Slide 20: Plant Nutrient Group tons sold
For internal use only20 Basic NPK = nitrogen, phosphorous, potassium Specialty = value added nutrients, low-salt liquid starter fertilizers, micro-nutrients Other = other farm centers, lawn, cob 205 594 225 243 179 537 240 278 212 83 134 73 69 88 129 78 104 119 124 222 83 186 126 237 80 161 129 0 20
Slide 21: Plant Nutrient Group financial performance
For internal use only Basic Nutrients volume had slow start in Q1 due to falling nutrient prices, but ended higher than Q1 ‘15 Majority of the Specialty tons increase was due to Nutra-Flo sales Lawn sales strong in the quarter, partially offset by lower Cob volume 21 $ in millions, except marg
Slide 22: Rail Group overview
For internal use only Rail Group origins in Grain Grew out of service to Grain customers Beginnings in Grain covered hoppers diversified over time into broad portfolio of equipment types Currently provides leasing, repair and management services for a fleet of nearly 23,000 railcars, barges
Slide 23: Rail Group strategy
For internal use only23 Focus on older cars and repair facilities to drive earnings in a profitable niche – Rail cars represent long-lived assets (potentially ~50/65 years) where we can make a good return on the middle to back half of a car’s life Repair and fabrication capabilities support full
Slide 24: Railcar fleet by customer commodity industry
For internal use only24 As of Mar. 31, 2016. ~1,800 idle railcars Grain / Grain Products, 25% Fertilizer / Minerals, 14% Sand / Sand Products / Cement, 10% Plastics, 10% Oil / Ethanol / Gasoline, 8% Wood & Forestry / Paper, 8% Metals & Products, 5% Chemicals, 4% Aggregates & Stone / Limestone, 5% Co
Slide 25: Rail Group financial performance
For internal use only Diverse portfolio and relatively even spread of lease renewals helping sustained utilization rates Lease rates were stable while cost of sales were higher due to increased depreciation on some newer cars Lower railcar sales in quarter due to timing Growth in repair reve
Slide 26: Established portfolio of inter-connected businesses
For internal use only26 Established portfolio of inter-connected businesses Rail Group • Different economic factors than the agri- businesses, creating portfolio effect and allowing ANDE to be a value buyer in each unit when individual sectors are out of favor Ethanol Group • Strong link to Grain wi
Slide 27: Power to deliver long term returns
For internal use only Power to deliver long term returns 27 Portfolio built for the long term . . . Portfolio of businesses operating on different cycles Strong balance sheet to weather tough markets and capacity to be a value buyer . . . yielding long-term returns amidst short- term volatility
Slide 28: 2016 outlook
For internal use only ANDE Corporate Launched initiative to reduce annual run-rate costs by at least $10 million over the next two years Grain Group Impact from poor Eastern Corn Belt crop expected to continue until fall harvest Increasing carry-out in US grain supply chain can provide upside
Slide 29: Appendix
For internal use only Appendix
Slide 30: Definitions
For internal use only Definitions EBITDA: Earnings before interest, taxes, depreciation, and amortization, is a non-GAAP measure. It is one of the measures the company uses to evaluate liquidity and leverage Base Grain: Grain operations owned and operated by The Andersons (does not include affiliate
Slide 31: Key financial data
For internal use only Key financial data $ in millions, except per share data Q1 2016 Q1 2015 VPY FY 2015 Net sales $887.9 $918.2 ($30.3) $4,198.5 Gross profit $67.8 $83.3 ($15.5) $375.8 Operating and general expenses $79.9 $78.6 $1.3 $338.1 Equity in earnings/(loss) of affiliates ($7.0) $3.3 ($10.3
Slide 32: Five-year history (as reported)
For internal use only Five-year history (as reported) Gross profit Capital expenditure 32 Pre-tax income EBITDA $352.8 $358.0 $365.2 $397.1 $375.8 2011 2012 2013 2014 2015 $147.9 $120.1 $149.5 $184.1 ($11.6) ($50.0) $0.0 $50.0 $100.0 $150.0 $200.0 2011 2012 2013 2014 2015 $77.9 $89.7 $42.1 $117.6 $1
Slide 33: US corn planting progress
For internal use only US corn planting progress Ahead of 5-year averages 33 80% 90% 96% 62% 51%89% 96% 79% 83% 98% 65% 63% 90% 97% 84% 97% 91% 91% May 22, 2016 86% 85% 5-year average May 22, 2015 90% Source: USDA Percentages completed by state Gold shaded states ahead of ‘15 Light shaded states behi
Slide 34: US soybean planting progress
For internal use only 51% 81% 74% 24% 34% 46% 32% 76% 50% 86% 31% 22% 21% 82% 54% 82% 56% 66% US soybean planting progress Ahead of 5-year averages 34 May 22, 2016 56% 52% 5-year average May 22, 2015 56% Source: USDA Percentages completed by state Gold shaded states ahead of ‘15 Light shaded states
Slide 35: US wheat condition
For internal use only 85% 66% 59% 74% 79% 80% 55% 39% 67% 77% 59% 70% 67% 47% 87% 66% 77% 62% US wheat condition 35 May 22, 2016 62% May 22, 2015 74% Source: USDA Rated good-to-excellent by state
Slide 36: Grain Group storage capacity and bushels sold
For internal use only Grain Group Grain storage capacity Bushels sold M ill io n s o f B u sh el s In co m e p er B u sh el $0.00 $0.20 $0.40 $0.60 $0.80 0 50 100 150 200 05 06 07 08 09 10 11 12 13 14 15 Core Grain Storage Capacity Income per Bushel Excessive wheat basis appreciation 0.35 0.15 95.7
Slide 37: US storage capacity / supply impact
For internal use only 8,530 8,763 9,057 9,361 9,473 9,741 10,113 10,289 10,430 10,659 10,977 11,415 11,655 11,815 12,025 12,272 12,535 12,790 12,940 13,005 13,135 13,235 19,285 18,667 20,243 19,847 21,278 20,956 19,815 18,274 21,283 22,296 22,548 0 5,000 10,000 15,000 20,000 25,000 30,000 05-06 06-0
Slide 38: US storage capacity
For internal use only US storage capacity State Off-farm Storage Capacity Storage Capacity Percentage Ohio 425,000 41,623 9.8% Michigan 220,000 34,691 15.6% Indiana 526,000 28,125 5.0% Illinois 1,470,000 13,389 0.9% Nebraska 928,940 12,107 1.4% Iowa 1,500,000 *2,600 0.2% Tennessee 66,000 12,675 20.4
Slide 39: Ethanol Group investments 2006-2015
For internal use only Ethanol Group investments 2006-2015 Investment Date Name Plate Capacity Est. bushels processed Est. DDGS production Ownership The Andersons Albion Ethanol PRE-EXPANSION Dec., 2015 55 MMGY 20 million 155,000 tons 53% The Andersons Denison Ethanol May, 2012 55 MMGY 20 million 155
Slide 40: Sources of octane
For internal use only Sources of octane 84 92 101 103 106 110 113 115 75 80 85 90 95 100 105 110 115 120 125 Sub-octane Butane Benzene Toluene Xylene MTBE Ethanol Methanol Premium Gasoline Regular Gasoline Source: U.S Department of Energy, National Renewable Energy Lab Extremely high RVP Limited to
Slide 41: US ethanol exports
For internal use only US ethanol exports Exports tracking to last year’s levels 41 2016 ethanol exports by destination (million gallons) China, 75.1 Brazil, 49.8 Canada, 39.4 UAE, 10.9 Korea, 13.7 India, 12.5 Phillippines, 8.4 Mexico, 7.0 Peru, 7.0 Jamaica, 6.0 Other, 8.3 Cumulative US ethanol expor
Slide 42: Ethanol Group facts and global mandates
For internal use only Ethanol Group Ethanol is a low cost, clean burning, high octane, renewable fuel product Global supply and demand charts are relevant Ethanol facts: • 1 ton of corn =~ 96.4 gallons of ethanol • 1 ton of corn in the ethanol process also produces: • ~ 643 lbs of distillers dri
Slide 43: Ethanol Group production and shipments
For internal use only Ethanol Group 90.8 93.2 95.0 372.2 384.0 0 50 100 150 200 250 300 350 400 450 500 2014 2015 2016 Q1 YTD 5.6 5.6 6.3 27.5 35.4 0 10 20 30 40 2014 2015 2016 Q1 YTD 256 256 256 1,036 1,051 0 200 400 600 800 1,000 1,200 1,400 2014 2015 2016 Q1 YTD 20.4 19.0 18.9 85.5 81.0 0 10 20 3
Slide 44: Life cycle of nutrients
For internal use only Life cycle of nutrients Pre-Season • Agronomy Testing • Base load of NPK Application • Micro Nutrient Application Spring & summer growing season Fall post- harvest Spring pre- planting Post-Season • Agronomy Testing • Base load of NPK Application • Micro Nutrient Application Pl
Slide 45: Strong corn acreage supports NPK demand
For internal use only Nutrient demand • Twenty nutrient facilities and 13 farm centers in Ohio, Michigan, Indiana, Illinois, Iowa, Florida, Minnesota, Wisconsin and Puerto Rico • Formulate, store and distribute 2.1 million tons of dry and liquid agricultural nutrients • Six liquid fertilizer operati
Slide 46: Plant Nutrient sales and service volume
For internal use only Plant Nutrient Sales and Service Volume in Tons Storage Capacity Geographical footprint growth extends participation in core markets throughout the Midwest and Southeast Expanding markets and enlarging range of products and services for customers Acquired Kay Flo Industri
Slide 47: Rail Group earnings power
For internal use only Rail Group earnings power $ in millions Q1 ‘14 Q2 ’14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16 Average # of Assets 22,295 22,148 22,066 22,285 22,789 22,972 23,301 22,916 23,026 Beginning $ on BS $240.6 $237.5 $242.1 $245.8 $297.7 $313.1 $330.8 $347.1 $338.1 Average % U
Slide 48: Rail Group earnings power – five year
For internal use only Rail Group earnings power – five year $ in millions 2011 2012 2013 2014 2015 Average # of Assets 22,265 23,019 22,990 22,199 23,017 Beginning $ on BS $168.5 $197.1 $228.3 $240.6 $297.7 Average % Utilization 84.6% 84.6% 86.1% 89.5% 92.4% Lease Income ($1.8) $13.4 $18.9 $13.6 $31
Slide 49: Tank car regulations
For internal use only Tank car regulations Tank cars constructed after October 1, 2015 are required to meet new DOT Specification 117 design of performance criteria for use in an High-Hazard Flammable Train (HHFT) Existing tank cars must be retrofitted in accordance with the DOT-prescribed retro
Slide 50: Retail Group financial performance
For internal use only Early Easter offset lower sales of outerwear and snow removal items due to mild winter We have already shuttered underperforming sites and are close to returning the group to profitability 50 $ in millions, except margin Q1 ’16 Q1 ’15 VPY FY ’15 Revenue $27.8 $28.6 ($0.8) (
Slide 51: Time Line
For internal use only Time Line 1940s 1950s 2010s 1960s 1970s 1980s 1990s 2000s The Andersons Truck Terminal (ATT) founded by Harold & Margaret Anderson in 1947. ATT is established as an operating partnership by Harold & Margaret and their six children. 1947, Grain terminal built with nine truck bay