Andersons Inc Q1 2008 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Farha Aslam - Stephens, Inc. - Analyst : Hi. Good morning.

Question: Farha Aslam - Stephens, Inc. - Analyst : Just could you, Mike, share with us some color on basis? How much of this is an issue of simply timing, similar to what happened in 2006, and how much of it with what's going on right now with delivery and the convergence between futures and cash?

Question: Farha Aslam - Stephens, Inc. - Analyst : Okay, and that's what's figured into your guidance?

Question: Farha Aslam - Stephens, Inc. - Analyst : Okay. And when you look at your Plant Nutrients business, you had sort of calculated out 77% increase in your inventory level from the end of the year. Would you say most of that is pricing, or how much of that is volume?

Question: Farha Aslam - Stephens, Inc. - Analyst : Did you -- Mark, your inventory level at the end of the year in Plant Nutrition was $63 million? And, Gary, did you say it was up $49 million from the end of the year, your inventory positions today?

Question: Farha Aslam - Stephens, Inc. - Analyst : Right. So that $49 million, how much of that was just the mark to market, and how much was that -- any volume increase?

Question: Farha Aslam - Stephens, Inc. - Analyst : Okay. And so, Mike, could you share with us how you got that sort of 15-times increase in fertilizer in your Plant Nutrients business? What really fueled the increase? Was it --

Question: Farha Aslam - Stephens, Inc. - Analyst : Agree. And my final question is interest expense for the full year, Gary, what would be your estimate? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Farha Aslam - Stephens, Inc. - Analyst : Okay. Thank you very much.

Question: Brian Millberg - Piper Jaffray - Analyst : Yes, I'd like to talk a little bit more about the fertilizer inventory. You've mentioned this cautionary statement. As the year goes on, obviously, fertilizer costs are going to increase for you as you run through this older inventory. Can you give us any color on that? I mean we're talking -- some of these numbers are coming out anywhere from 100 to 200% higher at the wholesale level right now. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Brian Millberg - Piper Jaffray - Analyst : I guess my -- I totally agree, and I guess my question is if prices continue to go up, let's say, 25% on a year basis, something a little more reasonable, how much of that do you think you're going to be able to pass on? Are farmers going to be able to afford that at $6 grain?

Question: Brian Millberg - Piper Jaffray - Analyst : Um-hmm. Two other quick questions. Do you think you might re-look at issuing guidance again, let's say, first week in June once we really know what's been planted?

Question: Brian Millberg - Piper Jaffray - Analyst : Okay. And then, obviously, the number for the quarter, the EPS missed consensus, and I was just wondering how you felt about the quarter. Did it meet your expectations?

Question: Brian Millberg - Piper Jaffray - Analyst : Excellent. Thank you.

Question: Heather Jones - BB&T Capital Market - Analyst : Good morning. Unidentified Company Representative Good morning. Unidentified Company Representative Hi, Heather. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Heather Jones - BB&T Capital Market - Analyst : So you're saying that wheat was the biggest problem; by the end of the year, fast-forward into '09, you believe that basis levels will be around that 16.40 discount for July and November '09 futures?

Question: Heather Jones - BB&T Capital Market - Analyst : Is that what I'm hearing you say?

Question: Heather Jones - BB&T Capital Market - Analyst : Okay, okay. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Heather Jones - BB&T Capital Market - Analyst : Right, right. No, no, I agree. [Inaudible] concern -- and this is positive, several companies I follow -- is do you think there's -- I hate to use the word prominent, but a long, long-term dislocation relative to spot and futures just given the level of speculation in the futures market but also the influence of the weak dollar on futures prices?

Question: Heather Jones - BB&T Capital Market - Analyst : Yes, I don't want to use the word permanent, but longer-term.

Question: Heather Jones - BB&T Capital Market - Analyst : Okay, okay, that makes sense.

Question: Heather Jones - BB&T Capital Market - Analyst : Right, right. Now, going -- have you sold -- given that you're having to bring in inventories now as higher prices on the Plant Nutrient side, have you sold forward? I guess my concern is is there any chance that fertilizer prices come back to earth and you've brought in high-cost inventory? Or as you're bringing in inventory, are you selling it forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Heather Jones - BB&T Capital Market - Analyst : Well, I'm glad to know that I'm on the same wavelength as you all.

Question: Heather Jones - BB&T Capital Market - Analyst : Okay.

Question: Heather Jones - BB&T Capital Market - Analyst : Okay. I apologize for the noise in the background, but real quick, so do you all now anticipate Plant Nutrients and Lansing earnings to be up year on year for the full year?

Question: Heather Jones - BB&T Capital Market - Analyst : Right.

Question: Heather Jones - BB&T Capital Market - Analyst : Okay. And then my final question is the Greenville plant -- have you all locked in any more of that ethanol crush margin for this year, and have you begun to lock in your ethanol exposure for '09 yet?

Question: Heather Jones - BB&T Capital Market - Analyst : Okay.

Question: Heather Jones - BB&T Capital Market - Analyst : Okay. All right. Thank you very much.

Question: Brian Millberg - Piper Jaffray - Analyst : I'm not exactly sure how to say this.

Question: Brian Millberg - Piper Jaffray - Analyst : Do you think-- you know, I live in the Midwest, and I see the outer-ring suburbs slowly sucking up the farmland. And do you think the time for your retail stores may have passed because the customer basis has changed because of their locations?

Question: Brian Millberg - Piper Jaffray - Analyst : Okay, and then --

Question: Brian Millberg - Piper Jaffray - Analyst : Okay.

Question: Brian Millberg - Piper Jaffray - Analyst : Yes.

Question: Brian Millberg - Piper Jaffray - Analyst : Okay, and then -- I can't remember my next question. I'm hoping that your lower maintenance cost in Rail means you didn't replace as many wheels this quarter. Am I whistling in the dark here with the --

Question: Brian Millberg - Piper Jaffray - Analyst : Yes.

Question: Brian Millberg - Piper Jaffray - Analyst : Okay, I remember my question now. The Douglass Fertilizer business that you purchased -- I think we discussed this a little bit before -- again, it seems fairly labor-intensive compared to your existing fertilizer turf -- specialty and turf business.

Question: Brian Millberg - Piper Jaffray - Analyst : How are those margins going to work out? Are you able to keep prices up high enough as proprietary products and with the service-added component of the pricing, or how's that going to work?

Question: Brian Millberg - Piper Jaffray - Analyst : And will all of that income go into the Plant Nutrient?

Question: Brian Millberg - Piper Jaffray - Analyst : None into Turf and Specialty?

Question: Brian Millberg - Piper Jaffray - Analyst : Okay. And then on the Turf and Specialty, you had a great quarter, I think, and I'm a little curious. I'm looking at some of the numbers coming out now. Scott's, for example, showing downturns. Do you -- as the economy tightens, do you think any of that's going to affect that business?

Question: Brian Millberg - Piper Jaffray - Analyst : Okay.

Question: Brian Millberg - Piper Jaffray - Analyst : Excellent. Thank you.

Question: Farha Aslam - Stephens, Inc. - Analyst : Hey, Mike?

Question: Farha Aslam - Stephens, Inc. - Analyst : Could you please go through a little bit more detail on your Rail Group in terms of you had a very high utilization rate despite the fact that the economy is slowing. What do you think allowed you to get that?

Question: Farha Aslam - Stephens, Inc. - Analyst : Great. And could you give us some color on railcar rate, kind of where a grain hopper traded at the peak a year-and-a-half ago, kind of where it is now? And --

Question: Farha Aslam - Stephens, Inc. - Analyst : Okay. We have that number. The current rate --

Question: Farha Aslam - Stephens, Inc. - Analyst : Okay, that's fair. And could you just share with us your deal flow that you're seeing in that Rail business?

Question: Farha Aslam - Stephens, Inc. - Analyst : And is the credit crunch currently affecting pricing at all, or are the players better in the market?

Question: Farha Aslam - Stephens, Inc. - Analyst : The credit crunch that's currently going on in the market, the tighter credit conditions, is that affecting deal flow at all and the prices that are being paid?

Question: Farha Aslam - Stephens, Inc. - Analyst : Okay. Thank you very much.