March Investor Presentation
Investor Presentation March 2017 Forward Looking Statements & Non-GAAP Measures
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 Company’s industries, both in• theGrainU.S. and internationally,terminalsand inadditional Ohio,factors Michigan,that are described Indiana,in the Company’s publically-filed documents, including its ’34 Act filings and the prospectuses prepared in connection with the Company’sIllinois,offerings Nebraska,. Tennessee and Texas as This Presentationwellincludes as Manitobafinancial information andof which Saskatchewan,the Company’s independent auditors have not completed their review. Although the Company believes that the assumptions upon which the financial informationCanadaand its withforward lookingstoragestatements capacityare based are reasonable, of moreit can give no assurancesthanthat these 151assumptions millionwill prove bushelsto be accurate. This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of the non-GAAP to GAAP measures may be found within the financial tables of our earnings release. “Adjusted Pre-Tax Income Attributable to The Andersons” is our primary measure of period-over-period comparisons, and we believe it is a meaningful measure for investors to compare our results from period to period. We have excluded nonrecurring items and items that we believe are not representative of our ongoing operations when calculating this Adjusted Pre-Tax Income.
2 Toward an Improved 2017 Solid Path Forward Set in 2016
. Continue to work on key initiatives in place − Return core businesses to their earnings potential −•FocusShip on reducing 500 cost million and improving bushels capabilities in of our people,grain processes annually and systems − Continue focus on managing our asset portfolio − Target growth in specialty grains, identity preservation • Offer a number of unique grain marketing − Grow with precision agriculture as a supplier of high value added nutrients and risk management services to customers . Stage is set for businesses to perform better in the year ahead ‒ Grain Group positioned for improvements with good crop in Eastern Corn Belt ‒ Expanded Ethanol capacity coming on line in 1H 2017 ‒ Rail portfolio better positioned to navigate current slowdown than it was in ‘09 ‒ Plant Nutrient anticipates improved tons and margins in the spring planting season
3 Company Overview The Andersons Cohesive portfolio with a foundation in Grain
ANDE is well-positioned to capitalize on strong demographic trends: • Expanding world population Value in supply • Growing middle class chain of US grain • Demand for protein
5 Established Portfolio of Inter-Connected Businesses Founded in Grain and positioned to deliver long-term earnings growth with the portfolio and balance sheet to weather industry cycles
Grain Group Ethanol Group . Focused on the grower . Strong link to Grain that consumes 130mm+ . Provide value added risk management and of the 500mm+ bushels ANDE touches pricing tools in addition to origination annually . Shipper via rail to processors nationwide . Leverage market intelligence capabilities . Affiliates extend portfolio reach across Grain and Ethanol groups . Customer of Rail Group
Plant Nutrient Group Rail Group . Strong complement to our Grain business . Subject to different economic factors than . Leverages focus on and relationships with the agri-businesses, creating portfolio effect growers . Offsetting cycles allow all ANDE groups to be . In many cases, co-located with Grain to value buyers in each industry when individual leverage shared labor in offsetting seasons sectors are out of favor
Portfolio provides synergies, balanced performance and cash flows for long term
6 Key Financial Data Q4 ‘15 & ‘16 and FY ‘15 & ‘16 unaudited $ in millions, except per share data Q4 ‘16 Q4 ‘15 VPY FY ‘16 FY ‘15 VPY Net sales $1,113.1 $1,183.5 ($70.4) $3,924.8 $4,198.5 ($273.7) Gross profit $103.7 $99.2 $4.5 $345.5 $375.8 ($30.3) Operating and general expenses $84.6 $89.1 ($4.5) $318.4 $337.8 ($19.4) Equity in earnings of affiliates $5.9 $8.6 ($2.7) $9.7 $31.9 ($22.2) Income (loss) before income taxes $16.7 ($64.5) $81.2 $21.4 ($11.6) $33.0 Adjusted income before income taxes $16.7 $20.1 ($3.4) $21.4 $76.1 ($54.7) Net income (loss) attributable to $10.1 ($47.0) $57.1 $11.6 ($13.1) $24.7 The Andersons, Inc. Adjusted net income attributable to $10.1 $5.0 $5.1 $11.6 $41.2 ($29.6) The Andersons, Inc. Diluted earnings per share (EPS) $0.36 ($1.68) $2.04 $0.41 ($0.46) $0.87 Adjusted diluted earnings per share (EPS) $0.36 $0.18 $0.18 $0.41 $1.45 ($1.04) Depreciation and amortization $22.1 $20.8 $1.3 $84.3 $78.5 $5.8 EBITDA $40.7 ($39.9) $80.6 $123.9 $85.2 $38.7 Corporate unallocated expenses $8.7 $58.8 ($50.1) $28.3 $82.7 ($54.4) Adj. Corporate unallocated expenses $8.7 $7.3 $1.4 $28.3 $31.3 ($3.0) Long-term debt $397.1 $436.2 ($39.1) Long-term debt-to-equity ratio 0.50 0.56 (0.06) 7 Business Highlights Actions Taken to Manage Business Portfolio
. Exited underperforming assets in Iowa in Q2
. Consolidated Cob operations to optimize performance in Q4
. Announced closure of Retail Group
. Announced sale of Plant Nutrient Southern Region Farm Centers
Created Momentum in Cost Management
. Made significant strides towards a leaner company
. Streamlined non-retail workforce by nearly 10%... Surpassed $10mm cost reduction goal a year early
Invested in Performance Improvement in Core Businesses
. Focused on critical roles, processes and technology investments to support long term performance and growth
8 Pre-Tax Income
Adjusted Pre-Tax Income FY’15 to Reported FY’16 Bridge Graph
$100,000
$90,000
$80,000
$70,000 $76,095 $60,000
$50,000 ($29,079) $40,000 ($3,780) ($386)
$ $ thousandsin $30,000 $2,944 $20,000 ($18,253) ($8,394) $19,147 $10,000
$0 FY 2015 Grain Ethanol Plant Nutrient Rail Retail Other FY 2016 Adjusted Reported
9 Pre-Tax Income
Adjusted Pre-Tax Income Q4’15 to Reported Q4’16 Bridge Graph
$35,000
$30,000 $4,006 $2,964 $25,000 $3,507
$20,000 ($5,696) $20,062 $15,000 ($7,233)
($1,398) $16,212 $ $ thousandsin $ $ thousandsin $10,000
$5,000
$0 Q4 2015 Grain Ethanol Plant Nutrient Rail Retail Other Q4 2016 Adjusted Reported
10 2017 Outlook
. Continue to focus on enhancing portfolio performance, managing costs and improving margins
. High beginning stocks should lead to improved space income . Current soil conditions and early planting intentions are positives
. Margins look to be soft in first half but comparable to 2016 overall . Working through vomitoxin-impacted corn from 2016 . Looking forward to the opening of new Albion capacity
. Expect improved market conditions; forecasted planting acres should increase nutrient sales . Anticipate positive lift from higher-margin specialty nutrients
. Beginning to see signs of a modest recovery as we approach mid-year
11 Grain Group Overview Focus on the Farmer
Base Grain – Merchant & Services ...... Leverage storage and 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 . Lansing Trade Group-focused on .. merchandising physical commodities including grains, feed ingredients, energy products, and freight within North America and internationally (Ownership ~31%) . Thompsons, Ltd. – a leading Canadian (Joint ownership with Lansing) provider of risk management, advanced agronomy, food grade beans and grain marketing services 12 Grain Group Strategy Building on long-term value in bringing crops to market
. Primary near-term goal: get performance of cornerstone division back on track Divested underperforming assets in Iowa in Q2 2016 Committed to improving strength of our core (Eastern Corn Belt) Re-focusing and building on “Partner of Choice” proposition, including business/risk management services for farmers . We believe that changes in on-farm and commercial storage are not structural to industry, but have significant influence on local economics of specific assets – Company is adapting as market conditions evolve: IA exit, TN investment . Secondary, longer-term strategy elements: Expand capabilities in handling and services for specialty grains (non-GMO, organic) Achieve cost and capability benefits from new ERP system Continue to invest in assets that expand our footprint and deliver profitable growth
13 Grain Group
Q4’16 and FY Performance Adjusted Five Year Performance . Improved crop production in the Eastern Corn Belt $80 $4,000 $3,500 $60 + Return to normal yields in most of the East $3,000 millionsRevenuein $40 + Space income opportunities improved $2,500 - Drying income below average $20 $2,000 $1,500 $0
. Base Grain Q4 pretax income improved $9.6 $1,000 tax Income/Loss in in millions Income/Loss tax - -$20
million from previous year Pre $500 . Affiliates incurred $3.0 million pretax loss on low -$40 $0 elevation margins and tough Chinese DDG trading 2012 2013 2014 2015 2016 Q1 Q2 Q3 Q4 Revenue
$ in millions, except margin Q4 ’16 Q4 ’15 VPY FY ’16 FY ‘15 VPY
Base Grain Revenues $745.2 $778.3 ($33.1) $2,357.2 $2,483.6 ($126.4) Gross Profit $43.9 $39.0 $4.9 $108.1 $123.6 ($15.5) Adj. Pre-tax Income $15.9 $6.3 $9.6 ($5.7) $0.6 ($6.3) Affiliates Pre-tax Income ($3.0) $3.6 ($6.6) ($10.0) $13.3 ($23.3) Group Adj. Pre-tax Income $12.9 $9.8 $3.1 ($15.7) $13.9 ($29.6) Group Reported Pre-tax Income $12.9 ($13.5) $26.4 ($15.7) ($9.4) ($6.3)
2015 Adjusted pre-tax income – adjusted for goodwill impairment, gains from partial redemption in Lansing Trade Group 14 Ethanol Group Overview Delivering high performance
Ethanol – Long Term Value . US corn-based ethanol is one of the world’s 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 in JVs average 50% ownership – Provide management services including originating corn and marketing of ethanol, E-85 and DDGS . Focus on quality assets ANDE Ethanol LLC All four have good local corn supply ANDE Ethanol LLC with CO2 Three have strong local demand High performing technology, teams and strong partners
15 Ethanol Group Strategy Good base earnings – more structural upside than downside . Ethanol is a natural downstream extension of our grain business – U.S. ethanol is the most cost-effective, clean-burning source of octane – Ethanol mandate renewed by U.S. government mandate in 2016 . Well-positioned to profit from our unmatched production capacity for corn in the U.S. (as a huge surplus starch source) and the high demand for cost- effective, environmentally friendly and domestically produced liquid transportation fuel . Strategic direction to growing value: – De-risk through manager/investor model, earning origination, marketing and management fees – Expand high-performing asset in Albion, MI advantaged location: surplus corn, ethanol deficit – Open to other expansion, but have strict requirements for assets with above-industry advantages . Strategic partnership with Marathon Petroleum augments our upstream farming insight with downstream capabilities at the pump . Perform at the top of the industry and invest in high quality assets to provide: – Good returns in “normal” times and occasional great upside – Limited downside by being positioned to operate cash-positive when industry margins are tight 16 Ethanol Group 8 year corn vs. ethanol margins 1.2
1
0.8
0.6
0.4
0.2
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-0.2
-0.4
-0.6
8 Year Range 2017 8 Year Average 2016 2015 2014 -0.8 Sources: NYMEX Chicago Ethanol (Platts) Futures Electronic (Front Month); CBOT Corn Futures Electronic (Front Month); Est industry 2.8 gal / bushel 17 Ethanol Group
Q4 ’16 and FY Performance Five Year Performance
. Margins improved year over year for the quarter $100 $900 and the year $800
$80 millionsRevenuein + Lower corn and input costs supported margins $700 $60 $600 + Driving demand and export demands were $500 $40 both strong $400 $20 $300
- Chinese tariffs and vomitoxin issues led to in millions Income/Loss tax -
lower DDG prices Pre $200 $0 $100 . Record annual production volume record was set 2012 2013 2014 2015 2016 -$20 $0 Q1 Q2 Q3 Q4 Revenue
$ in millions Q4 ’16 Q4 ’15 VPY FY ’16 FY ’15 VPY
Revenues $147.9 $143.1 $4.8 $544.5 $556.2 ($11.7)
Equity Earnings of Affiliates $8.5 $4.7 $3.8 $18.5 $17.2 $1.3 Consolidated Operations and Service Fees $3.2 $3.0 $0.2 $6.2 $11.3 ($5.1) Pre-tax Income $11.7 $7.7 $4.0 $24.7 $28.5 ($3.8)
18 Plant Nutrient Group Overview Expanded market in 2015
Plant Nutrient foundation . Natural adjacency to Grain business, leveraging relationships and intelligence
North Sioux City Webberville with the grower and a drive to bring l Sioux City l Gibbon Sergeant Bluff Maumee l value and sustainability to growers Walton Carey Upper Sandusky Logansport Seymour . Founded in wholesale distribution of basic row crop fertilizer (NPK) . Significant expansion of specialty nutrient capabilities with May 2015 acquisition of Nutra-Flo
Specialty focus creates value for farmers and shareholders . Delivering precision agriculture solutions
Market area Market area . Specialty nutrients help maximize yields Manufacturing facility Manufacturing facility and minimize environmental impact Headquarters Headquarters . Improve economics for growers
19 Plant Nutrient Group Strategy Focused on bringing profitable solutions to the farm . 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 manufacturing and Western distribution – Fully integrated Nutra-Flo acquisition made The Andersons a leading US producer of low-salt liquid starter fertilizers . Strategic direction for growing value: – Macro trend towards precision agriculture provides growth segment of otherwise mature NPK market o Earn two to three times the margins manufacturing specialty products vs. distributing basic commodity nutrients o As environmental regulations become more stringent, our specialty products contribute to a more sustainable model . Growth opportunities in both organic expansion of current product lines and further M&A to augment specialty products offerings
20 Plant Nutrient Group Tons Sold
Historical seasonality (tons sold)
1,000
222 195 800 237
134 208 600 129
161 156 Thousands 400 186 129 124 83 126 80 104 73 594 78 86 83 73 69 538 119 549 78 200 88 243 278 266 205 225 179 240 212 219 0 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Basic NPK Specialty Other
Committed to Growth of Specialty Nutrients
Basic NPK = nitrogen, phosphorous, potassium Specialty = value added nutrients, low-salt liquid starter fertilizers, micro-nutrients Other = other farm centers, lawn, cob 21 Plant Nutrient Group
Q4 ’16 and FY Performance Adjusted Five Year Performance . Volumes rose in the quarter but fell from the $50 $1,000 $40 previous year, caused by producer and distributor $800 reluctance to buy due to: $30 millionsRevenuein $600 − Falling price environment $20 $10 − $400 Lower net farm income $0 $200
. in millions Income/Loss tax -$10
Full supply pipeline compressed margins - . Lawn business had a record year, earning pre-tax Pre -$20 $0 2012 2013 2014 2015 2016 income of $8.9 million Q1 Q2 Q3 Q4 Revenue
tons in thousands Q4 ’16 Q4 ’15 VPY FY ’16 FY ‘15 VPY Basic Nutrient Tons 266 278 (12) 1,246 1,234 12 Specialty Nutrient Tons 86 104 (18) 491 398 93 Other (Farm Centers, Lawn, Cob) Tons 156 161 (5) 554 604 (50) $ in millions, except margin Revenue $136.4 $187.9 ($51.5) $725.2 $848.3 ($123.1) Gross Profit $26.5 $28.6 ($2.1) $122.1 $119.5 $2.6 Gross Profit Margin 19.4% 15.2% 4.2% 16.8% 14.1% 2.7% Group Adj. Pre-tax Income ($3.8) $2.1 ($5.9) $14.2 $14.8 ($0.6) Group Reported Pre-tax Income ($3.8) ($8.1) $4.3 $14.2 $0.1 $14.1
2015 Adjusted pre-tax income – adjusted for goodwill impairment, onetime costs from acquisition of Nutra-Flo 22 Rail Group Overview Diversified portfolio
Total railcar fleet by car type Rail Group origins in Grain
. Grew out of service to Grain customers PD hopper Box car Gondola 2.9% 8.0% Locomotive 8.7% 0.2% . Beginnings in Grain covered hoppers…
Flat car Open top diversified over time into broad range 1.9% hopper 5.3% of equipment types Tank car 14.0% . Currently provides leasing, repair and Refrigerator car management services for a fleet of 0.1% about 23,000 railcars, barges and locomotives
Covered As of 12/31/16 . hopper 19 railcar repair locations across the 58.9% United States
Diversification Mitigates Industry Volatility
23 Rail Group Strategy Continued focus on long-lived assets . Focus on older cars and repair locations to drive earnings in a profitable niche – Rail cars are long-lived assets (potentially ~50/65 years) on which we can make a good return in the middle to back half of a car’s life
. Repair and fabrication capabilities support full service leasing and ability to cater to specific customer needs
. We add value by being more agile for smaller accounts and railcar quantities
. Strong portfolio management has positioned the business to better perform through the cycle, including during the current downturn – Diverse fleet of assets with a wide variety of customers and relatively evenly spread lease maturities mitigate shocks in market demand
. Strategic direction for growing value: – Opportunistically grow the fleet without losing discipline as a value buyer – Seek portfolios of assets and/or businesses that would be attractive acquisitions
24 Rail Group Overview Railcar fleet by customer commodity industry
Finished / Refined Goods, 1% Other, 6% Coal / Coke, 3% Aggregates & Stone / Grain / Grain Products, Limestone, 5% 25% Chemicals, 5% Metals & Products, 5%
Wood & Forestry / Paper, 10% Fertilizer / Minerals, 13% Oil / Ethanol / Gasoline, 8% Sand / Sand Products / Plastics, 11% Cement, 9%
As of 12/31/16 ~2,900 idle railcars
25 Rail Group
Q4 Performance Five Year Performance $60 $175 $170 . Lease income down year-over-year due to $50
lower utilization rates $165 millionsRevenuein $40 $160 . Lower car sale income year-over-year $30 $155 . $150 Improvement in railcar repair and $20
fabrication business within Service & $145 tax Income/Loss in in millions Income/Loss tax - $10 Other Income Pre $140 $0 $135 2012 2013 2014 2015 2016 Q1 Q2 Q3 Q4 Revenue
$ in millions, except margin Q4 ’16 Q4 ’15 VPY FY ’16 FY ‘15 VPY
Revenues $45.5 $36.4 $9.1 $163.7 $170.8 ($7.1) Gross Profit $15.2 $14.6 $0.6 $55.9 $67.7 ($11.8) Gross Profit Margin 33.5% 40.1% (6.6%) 34.1% 39.6% (5.5%) Lease Income $2.9 $4.5 ($1.6) $13.2 $31.5 ($18.3) Railcar Sales Income $4.7 $0.8 $3.9 $11.0 $13.3 ($2.3) Service & Other Income $2.1 $1.5 $0.6 $8.2 $5.9 $2.3
Pre-tax Income $9.7 $6.8 ($2.9) $32.4 $50.7 ($18.3) 26 Appendix 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 affiliates) Ethanol Margin Hedging: From time-to-time we establish hedge positions with futures and derivative contracts that lock in prices for purchases of corn and sales of ethanol, as well as purchases of natural gas with the intent of securing portions our future sales margins LT Debt to Capital: Ratio of long-term debt (including current maturities) to total capital defined as LT debt plus total equity Bushels Shipped: Includes shipments from our facilities, farm-to-market (F2M) and origination services for corn, soybeans, wheat and oats F2M: Bushels that The Andersons purchases from the farm and are delivered directly to an Andersons customer. The bushels are never delivered to an Andersons facility Bushels Owned: Bushels delivered to an Andersons elevator or storage facility rented by The Andersons where title to the grain is transferred to The Andersons Bushels Stored for Others: Bushels stored by The Andersons for the owner of the grain for which the company charges a storage fee Railcar Fleet Utilization: Percentage of railcars in leased service / total railcars controlled by company CAGR: Compounded annual growth rate ROIC: Return on invested capital = (EBITDA tax effected at a 36% tax rate) / (LT debt + book equity) WACC: Weighted average cost of capital calculated using levered Barra beta, market cap, and total debt. Includes equity size premium from Ibbotson
28 Five-Year History all in millions
Gross profit EBITDA
$255.0 $397.1 $358.0 $365.2 $375.8 $219.9 $345.5 $195.2
$123.9 $85.2
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Pre-tax income Capital expenditure
$184.1 $117.6 $110.9 $149.5 $106.3 $89.7 $120.1
$42.1
$21.4
($11.6) 2012 2013 2014 2015 2016
2012 2013 2014 2015 2016 Includes net purchases of Rail Group assets 29 Grain Group Ref: Variable Storage Rates (VSR) Background: Variable Storage Rates (VSR) were proposed by the CME Group and approved by the Commodity Futures Trading Commission in 2009 • The VSR allows the maximum charge that a facility that is registered as “regular for delivery” can charge for storage • The amount of variance in the maximum storage charge depends on spread relationships determined in the futures market • VSR is designed to improve cash-futures convergence at futures contract expiration The basic idea of VSR is to trigger higher storage rates that allow wider spreads when spreads are near financial full carry and trigger lower storage rates when spreads are narrow or inverted For The Andersons: Variable Storage Rates (VSR) can improve storage income, as our elevators in Maumee, OH are registered as “regular for delivery” points • Still holding at two “ticks” triggered in mid-2016, indicating a max storage charge of $0.00265 per bushel per day • The Andersons primarily handles corn, soybeans and wheat, and typically dedicates 20 to 35 million bushels of our available space to wheat • Each “tick” up or down in the VSR raises or lowers storage $0.001 per bushel per day and can potentially impact future earnings by $2 to $3 million per quarter
Source: For more details see the CME Group’s website at: http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/variable-storage-rate.html 30 Grain Group
Grain Storage Capacity Bushels Sold
Core Grain Average Storage Capacity Adj. Pre-tax Income per Bushel Target Range Excess Wheat Basis 600 526.1
Pre 505.3 180 $0.70 467.5
- 500 Excessive wheat tax Bushelper Income 160 $0.60 basis appreciation 400 140 $0.50 300 120 $0.40
100 200 146.2 151.3 151.6 Millions Millions ofBushels Millions Millions ofBushels $0.30 80 100 $0.20 60 0 40 $0.10 2014 2015 2016 20 $0.00 Q4 YTD 0 -$0.10 06 07 08 09 10 11 12 13 14 15 16 U.S. Planted Acres Grain Inventory 250 200 55.7 56.2 58.8 55.0 50.2 In millions Q4 ’14 Q4 ’15 Q4 ’16 150 77.2 76.8 83.3 83.4 Bushels owned 109.5 116.4 107.5 82.7 100
Bushels stored for others 3.1 3.4 0.9 millions In 50 97.3 95.4 90.6 88.0 94.0 0 Total bushel inventory 112.6 119.8 108.4 12-13 13-14 14-15 15-16 16-17
Corn Soybeans Wheat 31 USDA US Storage Capacity / Supply Impact
(a) In billions of bushels Storage capacity utilization
Crop year 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17
Supply(b) 18.7 20.3 19.8 21.3 21.0 19.8 18.3 21.3 22.3 22.6 24.9
Capacity 20.6 20.9 21.4 21.8 22.3 22.9 23.2 23.5 23.8 24.2 NA
Utilization(a) 91% 97% 93% 98% 94% 86% 79% 91% 94% 93% NA
Carry-out 2.4 2.1 2.5 2.8 2.2 1.9 1.7 1.9 2.7 2.9 4.3
(b) (a) Storage capacity utilization = Total supply /total storage capacity 17-18 Estimate (b) Total supply = corn, soybeans, wheat Supply 24.4 Carry-out 4.2 30,000 21,283 22,469 22,469 25,000 21,278 19,815 18,274 22,296 18,667 20,243 19,847 20,956 20,000 13,135 13,235 13,235 12,535 12,790 12,940 13,005 15,000 11,655 11,815 12,025 12,272
10,000 In millions bushels millions of In 5,000 8,763 9,057 9,361 9,473 9,741 10,113 10,289 10,430 10,659 10,977 10,977 0 06-07 07-08 08-09 09-10 10-11 11-12 12-11 13-14 14-15 15-16 16-17 Off-Farm On-Farm Total Supply
Source: PRX (The ProExporter Network) 32 US Storage Capacity
2016 total US commercial (off-farm) storage capacity of 10,977 million bushels, and 13,235 million on-farm storage
In thousands of bushels
State Off-farm Storage Capacity Storage Capacity Percentage
Ohio 425,000 42,483 9.8%
Michigan 220,000 31,289 15.6%
Indiana 526,000 26,544 5.0%
Illinois 1,470,000 14,649 0.9%
Nebraska 928,940 14,472 1.4%
Iowa 1,500,000 2,600 0.2%
Tennessee 66,000 16,135 20.4%
Texas 640,000 1,412 0.2%
TOTAL 5,775,940 149,584 2.6%
Off-farm storage Source: USDA 33 Ethanol Group Investments 2006-2015
Name Est. bushels Est. DDGS Investment Date Plate Ownership processed production Capacity
The Andersons Spring, 2017 55 MMGY 20 million 155,000 tons 53% Albion Ethanol Aug., 2006 55 MMGY 20 million 155,000 tons
The Andersons May, 2012 55 MMGY 20 million 155,000 tons 85% Denison Ethanol
The Andersons Feb., 2008 110 MMGY 40 million 330,000 tons 33% Marathon Ethanol
The Andersons Apr., 2007 110 MMGY 40 million 310,000 tons 38% Clymers Ethanol
TOTAL 385 MMGY 140 million 1,105,000 tons
34 Sources of Octane
125 Not covered Banned in 26 states. by OEM 120 No liability protection warranties for producers 115 Limited to 1% of the blend 115 110 113 110 105 Extremely high 106 RVP 100 103 101 95 Premium Gasoline
90 Regular Gasoline 92 85 84 80
75 Sub-octane Butane Benzene Toluene Xylene MTBE Ethanol Methanol
Ethanol Demand Driven by Economic, Clean Source of Octane
Source: U.S Department of Energy, National Renewable Energy Lab 35 US Ethanol Exports Exports tracking to last year’s levels
Cumulative US ethanol exports 2017 ethanol exports by destination (million gallons)
Singapore, 1.3 Colmbia, 2.0 Peru, 1.2 2016 total 1,046 million Mexico, 3.5
Philippines, 5.8
India, 11.1
Korea, 0.5
UAE, 10.8 Brazil, 58.9
2017 YTD 124 million Canada, 24.1
Through January
2016 ethanol exports by destination (million gallons) Brazil 224.2 Peru 31.8 Canada 212.4 Korea 23.5 China 178.9 Other 23.0 India 80.9 Mexico 22.9 Philippines 50.4 UAE 20.1 Jamaica 14.1 2017 gross exports expected to be 1 billion – 1.2 billion gallons
Source: EIA 36 Ethanol Facts
. Ethanol is a low cost, clean burning, high octane, renewable fuel product . Global supply and demand charts are relevant
Ethanol facts: Global ethanol mandates by country: • 1 ton of corn =~ 96.4 gallons of ethanol South America Hungary 4% Sudan 10% • 1 ton of corn in the ethanol process also produces: Brazil 27% Italy 5% Zambia 10% Chile 5% Latvia 5% Zimbabwe 10% • ~ 643 lbs of distillers dried grain for Columbia 10% Lithuania 5% livestock feed Costa Rica 7% Luxembourg 2% Asia Jamaica 10% Malta 1% China 10% • ~ 18 lbs of corn oil Panama 5% Netherlands 3% Fiji 5%-10% Paraguay 24% Norway 5% • ~ 643 lbs of CO India 5% 2 Peru 8% Portugal 5% Indonesia 3% Uruguay 5% Romania 6% Japan3% Slovakia 3% Philippines 10% North America Spain 4% South Korea 2% Energy Act of 2007 – Canada 5% Sweden 5% Thailand 5% Renewable Fuels Standard United States 10% Turkey 3% Mexico 2% United Kingdom 4% Australia • 2012: 13.2 billion gallons New South Wales 6% Europe Africa • 2013: 13.8 billion gallons Austria 3% Angola 10% • 2014: 14.4 billion gallons Belgium 10% Ethiopia 5% Czech Rep. 5% Kenya 10% • 2015: 15.0 billion gallons Denmark 5% Malawi 10% • 2016: 15.0 billion gallons France 7% Mozambique 10% Germany 3% Nigeria 5%
37 Ethanol Group Production Ethanol Gallons Produced E-85 Gallons Shipped 500 40 37.7 387.3 400 372.2 384.0 35.4 30 27.5 300
20
200 In millions millions In
In millions millions In 11.0 98.6 101.0 99.8 7.9 100 10 6.6
0 0 2014 2015 2016 2014 2015 2016
Q4 YTD Q4 YTD
DDGS Tons Shipped Corn Oil Pounds Shipped 1,200 1,057 1,036 1,051 100 1,000 90 85.5 81.0 81.4 80 800 70 60 600 50 40 400 280.2 271.8 270 In thousands thousands In 30 22.2 21.8
In millions millions In 21.4 200 20 10 0 0 2014 2015 2016 2014 2015 2016
Q4 YTD Q4 YTD Charts include activity at nonconsolidated joint ventures 38 Life Cycle of Nutrients
Spring pre- Spring & summer growing season Fall post- planting harvest
Pre-Season Planting Side Dressing Protecting Post-Season • Agronomy • Starter • Nitrogen (UAN) to • Pesticides • Agronomy Testing • Low Salt support yields Testing Tasselling Maturity • Base load of Sillking • Base load of NPK NPK Application Pollination Application • Micro- • Micro Nutrient Nutrient Application Application Tassel and ear initiation
Emergence
Days Growth 7 14 28 42 56 66 70-100
39 Nutrient Demand
Crop nutrient (N,P,K) use is highest for Corn
60% N P K
50% 44% 41% 43% 40% Nitrogen Phosphorus Potassium 30%
17% 19% 20% 15% 14% 10% 5% 5% 5% 6% 2% 0%
-10%
Strong corn acreage supports NPK demand
40 Plant Nutrient Group
. 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 Industries May, 2015 . Manufactures granular lawn fertilizer, pesticides and ice-melt products for major retailers throughout the US; ContecDG®, known as NutriDG® internationally . Manufactures corncob-based products for a variety of uses including animal bedding and private- label cat litter products for Arm & Hammer®
Storage Capacity in tons
Q4 '14 507 444
Q4 '15 508 546 In thousandsIn
Q4 '16 488 548
Dry Fertilizer Liquid Fertilizer 41 Rail Group
Lease Income
$ in millions Q1 ‘14 Q2 ’14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16 Q2 ‘16 Q3 ‘16 Q4 ‘16
Average # of Assets 22,295 22,148 22,066 22,285 22,879 22,972 23,301 22,916 23,026 23,242 23,185 22,935 Beginning $ on BS $240.6 $237.5 $242.1 $245.8 $297.7 $313.1 $330.8 $347.1 $338.1 $334.7 $340.1 $334.4
Average % Utilization 88.4% 89.3% 89.9% 90.3% 91.8% 93.5% 91.6% 92.7% 91.5% 88.6% 86.2% 84.8%
Lease Income $4.2 $3.7 $1.8 $3.9 $5.0 $15.6 $6.4 $4.5 $4.3 $2.7 $3.4 $2.9
Remarketing Income $ in millions Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ’16 Q2 ‘16 Q3 ’16 Q4 ‘16
Asset Sale Income $10.8 $2.5 $1.4 $1.2 $4.5 $4.7 $3.2 $0.8 $2.4 $2.3 $1.6 $4.7
Service & Other Income $ in millions Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ’16 Q2 ‘16 Q3 ‘16 Q4 ‘16
Pre-tax Income $0 $0.5 $1.0 $0.5 $0.8 $1.4 $2.3 $1.5 $2.7 $1.6 $1.7 $2.1
Total Rail Income
$ in millions Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16 Q2 ‘16 Q3 ‘16 Q4 ‘16
Revenue $52.3 $33.4 $32.0 $31.2 $44.2 $45.5 $44.8 $36.4 $39.6 $40.3 $38.2 $45.5 Gross Profit $21.9 $13.9 $10.8 $13.2 $17.3 $18.2 $17.5 $14.6 $14.6 $13.6 $12.5 $15.2
Gross Profit Margin 41.9% 41.6% 33.8% 42.2% 39.2% 40.1% 39.1% 40.1% 36.8% 33.7% 32.7% 33.5%
Pre-tax Income $15.0 $6.7 $4.2 $5.6 $10.3 $21.7 $11.9 $6.8 $9.4 $6.6 $6.8 $9.7 42 Rail Group Earnings Power
Lease Income
$ in millions 2012 2013 2014 2015 2016 Sources of Income Average # of Assets 23,019 22,990 22,199 23,017 23,057 Beginning $ on BS $197.1 $228.3 $240.6 $297.7 $338.1 Average % Utilization 84.6% 86.1% 89.5% 92.4% 87.8% . Generates lease income Lease Income $13.4 $18.9 $13.6 $31.5 $13.2 from long-lived assets Remarketing Income $ in millions 2012 2013 2014 2015 2016 . Maximizes value by Asset Sale Income $23.7 $19.4 $15.8 $13.3 $11.0 remarketing assets opportunistically Service & Other Income $ in millions 2012 2013 2014 2015 2016 . Provides repair services Rail Services & Other $5.7 $4.5 $2.0 $5.9 $8.2 embedded in leases and to third parties Total Rail Income $ in millions 2012 2013 2014 2015 2016 Revenue $156.4 $164.8 $149.0 $170.8 $163.7 Gross Profit $56.7 $58.9 $59.8 $67.7 $55.9 Gross Profit % 36.3% 35.7% 40.1% 39.6% 34.1% Pre-tax Income $42.8 $42.8 $31.4 $50.7 $32.4 43 Rail 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 Trains (HHFTs) . Existing tank cars must be retrofitted in accordance with the DOT-prescribed retrofit design or performance standard for use in HHFTs . Retrofits must be completed based on a mandated schedule. The retrofit timeline focuses on two risk factors: the packing group and differing types of DOT-111 and CPC-1231 tank car . A retrofit reporting requirement is triggered if consignees owning or leasing tank cars covered under this rulemaking do not meet the initial retrofit milestone . Less than 10% of ANDE’s fleet is subject to these regulations; decisions will not need to be made for several years
DOT 117 Specification
44 Retail Group
Q4’16 and FY Performance Five Year Performance
. Announced exit from retail business $4 $155 − Plan to close the remaining four stores in $2
$150 millionsRevenuein Q2 2017 $0 -$2 $145 . Took $6.5 million pretax charge for -$4 $140 impairment of long-lived assets -$6
-$8 $135 tax Income/Loss in in millions Income/Loss tax
. Q4 results also included $1.4 million in closing - -$10 Pre $130 costs for the Sylvania food store -$12 -$14 $125 2012 2013 2014 2015 2016
Q1 Q2 Q3 Q4 Revenue
$ in millions Q4 ’16 Q4 ’15 VPY FY ’16 FY ‘15 VPY
Revenues $38.1 $37.9 $0.2 $134.2 $139.5 ($5.3)
Pre-tax Income ($6.2) $1.0 ($7.2) ($8.8) ($0.5) ($8.3)
45 Retail Business
. Announced plans to exit Retail business and close remaining four stores in second quarter 2017. . Reported a $6.5 million asset impairment charge in Q4 ‘16 …expect to record pre-tax charges in range of $9 to $14 million in first half of 2017. . Anticipate that the full carrying value of the inventory may not be recoverable during the stores liquidation. − Inventory and other assets value of $21.0 million as of Dec. 31, 2016 − Long-lived assets value of $9.8 million as of Dec. 31, 2016
46 Company Time-Line
1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010 2011 2012 2013 2014
Open railcar repair 2010s Acquired United Grain LLC. shops in Henderson, Achieved record first Opened 14th railcar repair quarter net income of and Keller Grain Inc., two NV. , Woodland, CA. Record Earnings Per Share facility, Romulus, NY San Antonio,Texas based and Manly, IA. of $5.09 $18.4 million, or $0.98 per diluted shares food grade corn companies Record EBITDA of $212.3 •Significantly expanded the million Record operating Purchased Auburn Bean & The Andersons railcar fleet and added income for both Grain Grain of Auburn, Michigan. The Andersons Truck Warehouse Market repair shops in Georgia, The Grain and Plant and Rail groups New General store built Six grain and four agronomy Terminal (ATT) founded opens as the first retail In 1960, the first deep- Grain elevators added South Carolina, Mississippi, Nutrient groups both in Maumee, 1972. locations by Harold & Margaret store in 1952. water grain loading facility - Albion and White 1st Railcar repair shop and Utah. acheived record earnings, Anderson in 1947. on the U.S. side of the Pigeon, MI 1981 built Maumee, 1991. and Ethanol Group second Acquired New Eezy Gro Inc., Great Lakes is opened by - Dunkirk, IN 1983. best earnings Carey, OH and Sycamore, Opened newly The Andersons. Purchased O'Malley Grain OH constructed state-of-the- facilities in Mansfield, IL. Initial investment in art 27,000 square ft. 1996 Mike Anderson and Fairmont, NE. railcar paint facility in Grain drier building built Garden Center opens in Lansing Trade Group, named CEO. Maumee, OH in 1952. Maumee, 1961. 2003. Unit train grain shipments head to Gulf 2015 ports from Champaign, IL. Open General Stores - Toledo, OH 1984 Acquied Kay Flo Industries, a - Columbus, OH 1986 leading fertilizer - Columbus, OH 1987. Entered the ethanol The Andersons Denison manufacturing and Largest steel tank grain The Andersons, Inc. is business, overseeing the Iowa Northern Railway Ethanol LLC acquired distributior. Three ATT is established as an storage installation in incorporated and is first construction and investment in 2010. ethanol plant in Denison, IA operating partnership by facailities located in Iowa North America is listed on NASDAQ on Feb. operation of three plants Harold & Margaret and constructed in Maumee 20, 1996. and providing corn their six children. Three million bushels of in 1964. originations and DDG Plant Nutrient Group grain storage added, marketing. acquired Immokalee Along with Lansing Trade Group, LLC acquired known nationally as "The Lawn Products business - Albion, MI 2006 Farmers Supply, Fertilizer facilities Thompsons Limited. a Big Pour" in 1953. begins in 1964. Four million bushel grain - Clymers, IN 2007 Immokalee, FL added... grain and food-grade elevator built in Delphi, - Greenville, OH 2008. - Champaign, IL. 1983 bean handler and Garden Center opens in IN. in 1975. - Dunkirk, IN. 1984 Issued additional shares in Opened newly constructed agronomy input provider Dublin, OH, 1967. 1958, Ear corn and cob - Webberville, MI. 1985. the form of a 2-for-1 stock 3.8 million bushel grain with 11 facilities in 2016 milling facilities are split and follow-on offering elevator facility in Anselmo, southern Ontario and one added. in 2006. Acquired B4 Grain NE. facility in Minnesota facilities in Kearney and Expanded professional Riverdale NE., and Cob mill added at Purchased substantially all Delphi, IN in 1976. turf products. assumed leased facility in assets of Mt. Pulaski Acquired Mile Rail, LLC, a Added $200 million in Products, LLC. railcar repair and cleaning 1947, Grain terminal Major Lawn Fertilizer new term debt in 2006. provider headquartered built with nine truck bays Unit train fertilizer expansion in 1983. in Kansas City, Missouri, Completed new 2.9 million for rapid turnaround and Began construction of shipments arrive from along with locations in bushel capacity grain facility better service to farmers. Twelve million bushel 27,300 square-foot railcar western U.S. and Liquid fertilizer facilities Nebraska and Indiana. In in Humbolt, TN grain elevator built in paint and blast shop Canada, 1977. open on the Maumee Opened railcar repair addition a midwest Champaign, IL. in 1968. Grain and liquid storage First fertilizer blending River in 1987. facilities in Aberdeen, WA footprint with mobile facilites are acquired in Opened specialty foods begins in 1959. and San Diego, CA. units Clymers, Walton, store, Sylvania, OH 2007. Grain receipts almost Logansport, Seymour, Unit trains began hauling Fertilizer acquisitions triple and the river North Manchester and Acquired Cycle Group, grain to North Atlantic - 2008 Douglass Fertilizer elevator expanded. Waterloo, IN. Inc., a granular ports from Maumee, Florida and Puerto Rico. Ten million bushels of manufacturer in North 1968. - 2008 Mineral grain storage added Carolina (steel tanks) in Maumee, Processing Completed construction of Purchased 12 grain 1959. Pelleted Lime new Corporate facilities in Iowa and John Anderson becomes Ohio, Illinois, and Headquarters Managing Partner. Nebraska. Tennessee from Green Enter railcar leasing - 2009 Hartung Brothers Plains Grain Company LLC. market in 1989. Fertilizer Division
47