Annual Statements Open main menu

Andersons, Inc. - Quarter Report: 2021 September (Form 10-Q)

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended 09/30/2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to  .             
Commission file number 000-20557
 
ande-20210930_g1.jpg
THE ANDERSONS, INC.
(Exact name of the registrant as specified in its charter)
 
Ohio34-1562374
(State of incorporation or organization)(I.R.S. Employer Identification No.)
1947 Briarfield Boulevard
MaumeeOhio43537
(Address of principal executive offices)(Zip Code)

(419) 893-5050
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Trading Symbol Name of each exchange on which registered:
Common stock, $0.00 par value, $0.01 stated value ANDE The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filerAccelerated filerý
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes     No  ý

The registrant had 33,286,202 common shares outstanding at October 22, 2021.


Table of Contents
THE ANDERSONS, INC.
INDEX
 
 Page No.
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION



Table of Contents

Part I. Financial Information
Item 1. Financial Statements

The Andersons, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
 
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Sales and merchandising revenues (Note 6)
$2,998,824 $1,885,586 $8,829,348 $5,556,317 
Cost of sales and merchandising revenues2,876,989 1,792,349 8,430,665 5,314,101 
Gross profit121,835 93,237 398,683 242,216 
Operating, administrative and general expenses110,275 92,610 312,833 277,363 
Interest expense, net8,799 6,853 28,848 25,951 
Other income, net:
Equity in earnings (losses) of affiliates, net(250)20 2,389 228 
Other income, net13,806 3,846 24,743 10,154 
Income (loss) before income taxes from continuing operations16,317 (2,360)84,134 (50,716)
Income tax provision (benefit) from continuing operations4,027 (4,148)18,065 (18,628)
Net income (loss) from continuing operations12,290 1,788 66,069 (32,088)
Income from discontinued operations, net of income taxes1,846 427 7,453 3,224 
Net income (loss)14,136 2,215 73,522 (28,864)
Net income (loss) attributable to noncontrolling interests(1,602)3,273 (822)(20,583)
Net income (loss) attributable to The Andersons, Inc.$15,738 $(1,058)$74,344 $(8,281)
Earnings (loss) per share attributable to The Andersons, Inc. common shareholders: (Note 9)
Basic earnings (loss):
Continuing operations$0.42 $(0.04)$2.01 $(0.35)
Discontinued operations0.06 0.01 0.22 0.10 
$0.48 $(0.03)$2.23 $(0.25)
Diluted earnings (loss):
Continuing operations$0.41 $(0.04)$1.99 $(0.35)
Discontinued operations0.05 0.01 0.22 0.10 
$0.46 $(0.03)$2.21 $(0.25)
See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc. | Q3 2021 Form 10-Q | 1

Table of Contents
The Andersons, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In thousands)
 
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Net income (loss)$14,136 $2,215 $73,522 $(28,864)
Other comprehensive income (loss), net of tax:
Change in unrecognized actuarial loss
and prior service cost
(102)(119)(439)(220)
Foreign currency translation adjustments(3,004)2,351 (311)(1,039)
Cash flow hedge activity1,537 1,783 9,420 (13,740)
Other comprehensive income (loss)(1,569)4,015 8,670 (14,999)
Comprehensive income (loss)12,567 6,230 82,192 (43,863)
Comprehensive income (loss) attributable to the noncontrolling interests(1,602)3,273 (822)(20,583)
Comprehensive income (loss) attributable to The Andersons, Inc.$14,169 $2,957 $83,014 $(23,280)
See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc. | Q3 2021 Form 10-Q | 2

Table of Contents

Balance The Andersons, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
 (In thousands)
September 30,
2021
December 31,
2020
September 30,
2020
Assets
Current assets:
Cash and cash equivalents$216,874 $29,123 $13,693 
Accounts receivable, net735,349 641,326 509,964 
Inventories (Note 2)
1,017,804 1,293,066 747,588 
Commodity derivative assets – current (Note 5)
409,647 320,706 140,065 
Current assets held-for-sale (Note 14)
26,561 32,659 45,132 
Other current assets92,159 99,529 83,807 
Total current assets2,498,394 2,416,409 1,540,249 
Other assets:
Goodwill129,342 131,542 131,542 
Other intangible assets, net118,690 140,084 148,846 
Right of use assets, net50,270 33,387 33,547 
Other assets held-for-sale (Note 14)
38,863 643,474 642,538 
Other assets, net74,923 46,914 44,738 
Total other assets412,088 995,401 1,001,211 
Property, plant and equipment, net (Note 3)
797,660 860,311 870,151 
Total assets$3,708,142 $4,272,121 $3,411,611 
Liabilities and equity
Current liabilities:
Short-term debt (Note 4)
$281,199 $403,703 $100,405 
Trade and other payables825,923 954,809 635,206 
Customer prepayments and deferred revenue147,225 178,226 47,906 
Commodity derivative liabilities – current (Note 5)
78,702 146,990 79,159 
Current maturities of long-term debt (Note 4)
106,255 69,366 62,499 
Accrued taxes97,215 17,465 15,178 
Current liabilities held-for-sale (Note 14)
13,427 25,277 27,996 
Accrued expenses and other current liabilities173,215 135,846 128,187 
Total current liabilities1,723,161 1,931,682 1,096,536 
Long-term lease liabilities31,332 19,835 19,216 
Long-term debt, less current maturities (Note 4)
542,821 886,453 717,198 
Deferred income taxes79,636 170,147 163,454 
Other long-term liabilities held-for-sale (Note 14)
13,592 48,096 221,334 
Other long-term liabilities81,587 55,248 56,646 
Total liabilities2,472,129 3,111,461 2,274,384 
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common shares, without par value (63,000 shares authorized; 33,786, 33,599 and 33,599 shares issued at 9/30/2021, 12/31/2020 and 9/30/2020, respectively)
140 138 138 
Preferred shares, without par value (1,000 shares authorized; none issued)
 — — 
Additional paid-in-capital360,159 348,714 346,280 
Treasury shares, at cost (110, 45 and 41 shares at 9/30/2021, 12/31/2020 and 9/30/2020, respectively)
(2,611)(966)(879)
Accumulated other comprehensive loss(3,406)(12,076)(22,230)
Retained earnings679,154 626,081 615,890 
Total shareholders’ equity of The Andersons, Inc.1,033,436 961,891 939,199 
Noncontrolling interests202,577 198,769 198,028 
Total equity1,236,013 1,160,660 1,137,227 
Total liabilities and equity$3,708,142 $4,272,121 $3,411,611 
See Notes to Condensed Consolidated Financial Statements
The Andersons, Inc. | Q3 2021 Form 10-Q | 3

Table of Contents
The Andersons, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
 Nine months ended September 30,
 20212020
Operating Activities
Net income (loss) from continuing operations$66,069 $(32,088)
Income from discontinued operations, net of income taxes7,453 3,224 
Net income (loss)73,522 (28,864)
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities:
Depreciation and amortization142,137 141,167 
Bad debt (recovery) expense, net(2,182)8,049 
Equity in earnings of affiliates, net of dividends(2,389)(228)
Gain on sale of business from continuing operations(14,619)— 
Loss on sale of business from discontinued operations1,491 — 
Gain on sales of assets, net(6,505)(1,037)
Stock-based compensation expense6,727 7,742 
Deferred federal income tax(93,725)21,917 
Inventory write down3,399 10,933 
Other7,005 4,141 
Changes in operating assets and liabilities:
Accounts receivable(89,902)(1,952)
Inventories266,865 400,262 
Commodity derivatives(158,741)(2,574)
Other assets(3,357)(34,343)
Payables and other accrued expenses(10,659)(329,422)
Net cash provided by operating activities119,067 195,791 
Investing Activities
Purchases of property, plant and equipment and capitalized software(52,730)(59,414)
Proceeds from sale of assets3,999 8,121 
Purchases of investments(5,993)(2,849)
Proceeds from sale of business from continuing operations18,130 2,467 
Proceeds from sale of business from discontinued operations543,102 — 
Purchases of Rail assets(6,039)(26,258)
Proceeds from sale of Rail assets18,705 7,774 
Other349 — 
Net cash provided by (used in) investing activities519,523 (70,159)
Financing Activities
Net payments under lines of credit(324,279)(44,183)
Proceeds from issuance of short-term debt608,250 — 
Payments of short-term debt(408,250)— 
Proceeds from issuance of long-term debt186,800 213,906 
Payments of long-term debt(485,527)(310,694)
Contributions from noncontrolling interest owner4,655 6,493 
Distributions to noncontrolling interest owner(25)(10,322)
Payments of debt issuance costs(2,059)(250)
Dividends paid(17,503)(17,234)
Other(12,709)(4,143)
Net cash used in financing activities(450,647)(166,427)
Effect of exchange rates on cash and cash equivalents(192)(407)
Increase (decrease) in cash and cash equivalents187,751 (41,202)
Cash and cash equivalents at beginning of period29,123 54,895 
Cash and cash equivalents at end of period$216,874 $13,693 
See Notes to Condensed Consolidated Financial Statements
The Andersons, Inc. | Q3 2021 Form 10-Q | 4

Table of Contents
    The Andersons, Inc.
Condensed Consolidated Statements of Equity (Unaudited)
(In thousands, except per share data)
Three Months Ended
 Common
Shares
Additional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive Income
(Loss)
Retained
Earnings
Noncontrolling
Interests
Total
Balance at June 30, 2020
$138 $343,730 $(953)$(26,245)$622,718 $192,695 $1,132,083 
Net income (loss)(1,058)3,273 2,215 
Other comprehensive income1,868 1,868 
Amounts reclassified from accumulated other comprehensive income2,147 2,147 
Contributions from noncontrolling interests2,083 2,083 
Distributions to noncontrolling interests(23)(23)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (0 shares)
2,550 74 2,624 
Dividends declared ($0.175 per common share)
(5,770)(5,770)
Balance at September 30, 2020
$138 $346,280 $(879)$(22,230)$615,890 $198,028 $1,137,227 
Balance at June 30, 2021
$140 $357,606 $(2,650)$(1,837)$669,241 $202,464 $1,224,964 
Net income (loss)15,738 (1,602)14,136 
Other comprehensive loss(3,081)(3,081)
Amounts reclassified from accumulated other comprehensive income 1,512 1,512 
Contributions from noncontrolling interests1,715 1,715 
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (2 shares)
2,553 39 2,592 
Dividends declared ($0.175 per common share)
(5,825)(5,825)
Balance at September 30, 2021
$140 $360,159 $(2,611)$(3,406)$679,154 $202,577 $1,236,013 
The Andersons, Inc. | Q3 2021 Form 10-Q | 5

Table of Contents
Nine Months Ended
 Common
Shares
Additional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive Income
(Loss)
Retained
Earnings
Noncontrolling
Interests
Total
Balance at December 31, 2019
$137 $345,359 $(7,342)$(7,231)$642,687 $222,045 $1,195,655 
Net income (loss)(8,281)(20,583)(28,864)
Other comprehensive loss(19,340)(19,340)
Amounts reclassified from accumulated other comprehensive income4,341 4,341 
Contributions from noncontrolling interests6,493 6,493 
Distributions to noncontrolling interests(10,322)(10,322)
Noncontrolling interests recognized in connection with business combination(459)395 (64)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (167 shares)
11,380 6,072 (843)6,610 
Dividends declared ($0.525 per common share)
(17,282)(17,282)
Restricted share award dividend equivalents391 (391) 
Balance at September 30, 2020
$138 $346,280 $(879)$(22,230)$615,890 $198,028 $1,137,227 
Balance at December 31, 2020
$138 $348,714 $(966)$(12,076)$626,081 $198,769 $1,160,660 
Net income (loss)74,344 (822)73,522 
Other comprehensive income4,230 4,230 
Amounts reclassified from accumulated other comprehensive income4,440 4,440 
Contributions from noncontrolling interests4,655 4,655 
Distributions to noncontrolling interests(25)(25)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (65 shares)
2 11,445 (1,977)(3,479)5,991 
Dividends declared ($0.525 per common share)
(17,460)(17,460)
Restricted share award dividend equivalents332 (332) 
Balance at September 30, 2021
$140 $360,159 $(2,611)$(3,406)$679,154 $202,577 $1,236,013 
See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc. | Q3 2021 Form 10-Q | 6

Table of Contents
The Andersons, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)


1. Basis of Presentation and Consolidation

These Condensed Consolidated Financial Statements include the accounts of The Andersons, Inc. and its wholly owned and controlled subsidiaries (the “Company”). Controlled subsidiaries include majority-owned subsidiaries and variable interest entities (“VIEs”) of which the Company is the primary beneficiary. The portion of these entities that is not owned by the Company is presented as noncontrolling interests. All intercompany accounts and transactions are eliminated in consolidation.
Investments in unconsolidated entities in which the Company has significant influence, but not control, are accounted for using the equity method of accounting.

During the third quarter of 2021, substantially all of the assets and liabilities of the Rail business were classified as held-for-sale in the accompanying Condensed Consolidated Balance Sheets. As discussed further in Note 14, the Company executed a definitive agreement to sell the Rail Leasing business. In conjunction with the sale of the Rail Leasing business, the Company announced its intent to divest the remainder of the Rail business, primarily consistent of the Rail Repair business. These transactions effectively constitute the entirety of what has historically been included in the Rail reportable segment. Therefore, the associated operating results, net of income tax, have been classified as discontinued operations in the accompanying consolidated statements of operations for all periods presented. Throughout this Quarterly Report on Form 10-Q, with the exception of the statements of cash flows and unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

Certain reclassifications have been made to the prior year financial statements to conform to current year classifications. The reclassification relates to the Condensed Consolidated Balance Sheet presentation of assets and liabilities as held for sale and Condensed Consolidated Statement of Operations presentation of results classified as discontinued operations in relation to the Rail business transactions noted above.

In the opinion of management, all adjustments consisting of normal and recurring items considered necessary for the fair presentation of the results of operations, financial position, and cash flows for the periods indicated have been made. The results in these Condensed Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. An unaudited Condensed Consolidated Balance Sheet as of September 30, 2020 has been included as the Company operates in several seasonal industries.
The Condensed Consolidated Balance Sheet data at December 31, 2020 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in The Andersons, Inc. Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).
Recently Adopted Accounting Pronouncements

Simplified Accounting for Income Taxes

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update 2019-12. The new standard simplifies accounting for income taxes, including guidance relating to the approach for calculating income taxes in an interim period, intraperiod tax allocation, and the recognition of deferred tax liabilities among other items. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. The new standard did not have a material impact to the company’s financial statements or disclosures.


The Andersons, Inc. | Q3 2021 Form 10-Q | 7

Table of Contents

2. Inventories

Major classes of inventories are presented below. Readily Marketable Inventories ("RMI") are agricultural commodity inventories such as corn, soybeans, wheat, and ethanol co-products, among others, carried at net realizable value which approximates fair value based on their commodity characteristics, widely available markets, and pricing mechanisms. The net realizable value of RMI is calculated as the fair value (spot price of the commodity in an exchange), less cost of disposal and transportation based on the local market. All other inventories are held at lower of cost or net realizable value.
(in thousands)September 30,
2021
December 31,
2020
September 30,
2020
Grain and other agricultural products (a)$732,512 $1,025,809 $557,808 
Frac sand and propane (a)18,481 12,477 10,064 
Ethanol and co-products (a)105,052 114,895 59,543 
Plant nutrients and cob products161,759 139,885 120,173 
Total Inventories$1,017,804 $1,293,066 $747,588 
(a) Includes RMI of $700.3 million, $983.2 million and $523.3 million at September 30, 2021, December 31, 2020 and September 30, 2020, respectively.

Inventories do not include 2.0 million, 3.0 million and 2.3 million bushels of grain held in storage for others as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively. The Company does not have title to the grain and is only liable for any deficiencies in grade or shortage of quantity that may arise during the storage period. Management has not experienced historical losses on any deficiencies and does not anticipate material losses in the future.

Lower of cost or net realizable value charges were $3.4 million and $10.9 million for the nine months ended September 30, 2021 and September 30, 2020, respectively. The current year charge primarily relates to certain fertilizer values decreasing after the spring application season. The charge in the prior year was a result of lower ethanol market prices and decreased demand as a result of the COVID-19 pandemic.


3. Property, Plant and Equipment

The components of Property, plant and equipment, net are as follows:
(in thousands)September 30,
2021
December 31,
2020
September 30,
2020
Land$39,159 $39,704 $39,705 
Land improvements and leasehold improvements89,941 92,455 92,138 
Buildings and storage facilities368,678 379,195 375,715 
Machinery and equipment920,232 898,557 881,617 
Construction in progress24,556 19,473 20,936 
1,442,566 1,429,384 1,410,111 
Less: accumulated depreciation 644,906 569,073 539,960 
Property, plant and equipment, net$797,660 $860,311 $870,151 

Depreciation expense on property, plant and equipment used in continuing operations was $97.7 million and $91.4 million for the nine months ended September 30, 2021 and 2020, respectively. Additionally, depreciation expense on property, plant and equipment used in continuing operations was $35.2 million and $30.8 million for the three months ended September 30, 2021 and 2020, respectively.

During the quarter ended September 30, 2021, the Company sold its grain assets in Champaign, Illinois plus working capital for $23.3 million which resulted in a $14.6 million gain.


The Andersons, Inc. | Q3 2021 Form 10-Q | 8

Table of Contents

4. Debt

Short-term and long-term debt at September 30, 2021, December 31, 2020 and September 30, 2020 consisted of the following:
(in thousands)September 30,
2021
December 31,
2020
September 30,
2020
Short-term debt – non-recourse$81,494 $93,192 $40,985 
Short-term debt – recourse199,705 310,511 59,420 
Total short-term debt$281,199 $403,703 $100,405 
Current maturities of long-term debt – non-recourse$69,932 $678 $211 
Current maturities of long-term debt – recourse36,323 68,688 62,288 
Total current maturities of long-term debt$106,255 $69,366 $62,499 
Long-term debt, less: current maturities – non-recourse$ $127,192 $89,419 
Long-term debt, less: current maturities – recourse542,821 759,261 627,779 
Total long-term debt, less: current maturities$542,821 $886,453 $717,198 

On February 4, 2021, the Company completed the second amendment to its credit agreement dated January 11, 2019. The amendment, which replaced an underwritten bridge loan received on January 21, 2021, provided for a short-term $250 million term note in which the entire stated principal is due on December 31, 2021. The entire principal balance was repaid as of September 30, 2021.

On May 6, 2021, the Company completed the third amendment to its credit agreement dated January 11, 2019. The amendment provides for a short-term note of approximately $358 million in which the entire stated principal is due on March 31, 2022. The term note will bear interest at variable rates, which are based on LIBOR plus an applicable spread. As of September 30, 2021 $200 million of principal remains outstanding.

The total borrowing capacity of the Company's lines of credit at September 30, 2021 was $1,297.5 million of which the Company had a total of $1,169.9 million available for borrowing under its lines of credit. The Company's borrowing capacity is reduced by a combination of outstanding borrowings and letters of credit.

As of September 30, 2021, December 31, 2020 and September 30, 2020, the estimated fair value of long-term debt, including the current portion, was $667.9 million, $1,003.1 million and $831.3 million, respectively. The Company estimates the fair value of its long-term debt based upon the Company’s credit standing and current interest rates offered to the Company on similar bonds and rates currently available to the Company for long-term borrowings with similar terms and remaining maturities.

As part of the Company's ongoing covenant monitoring process, the Company determined that it was virtually certain that ELEMENT will be out of compliance with its debt service coverage ratio covenant of no less than 1.4 to be initially measured on December 31, 2021. If ELEMENT is not in compliance with the debt service coverage ratio at December 31, 2021, it would result in an event of default, which if not cured or waived, could result in the lender accelerating the maturity of the ELEMENT’s indebtedness or preventing access to additional funds under the line of credit agreement, or requiring prepayment of outstanding indebtedness under the loan agreement or the line of credit agreement. Because it was determined that it was virtually certain that ELEMENT would violate this covenant in the future and has not yet received a waiver, the $70 million of non-recourse debt associated with ELEMENT has been classified as current maturity of long-term debt.

The Company is in compliance with all other financial covenants as of September 30, 2021.

The Andersons, Inc. | Q3 2021 Form 10-Q | 9

Table of Contents

5. Derivatives

The Company’s operating results are affected by changes to commodity prices. The Trade and Ethanol businesses have established “unhedged” futures position limits (the amount of a commodity, either owned or contracted for, that does not have an offsetting derivative contract). To reduce the exposure to market price risk on commodities owned and forward purchase and sale contracts, the Company enters into exchange traded commodity futures and options contracts and over-the-counter forward and option contracts with various counterparties. These contracts are primarily traded via regulated commodity exchanges. The Company’s forward purchase and sales contracts are for physical delivery of the commodity in a future period. Contracts to purchase commodities from producers generally relate to the current or future crop years for delivery periods quoted by regulated commodity exchanges. Most contracts for the sale of commodities to processors or other commercial consumers generally do not extend beyond one year.

Most of these contracts meet the definition of derivatives. While the Company considers its commodity contracts to be effective economic hedges, the Company does not designate or account for its commodity contracts as hedges as defined under current accounting standards. The Company primarily accounts for its commodity derivatives at estimated fair value. The estimated fair value of the commodity derivative contracts that require the receipt or posting of cash collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin deposits) within commodity derivative assets or liabilities. Management determines fair value based on exchange-quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets and non-performance risk. For contracts for which physical delivery occurs, balance sheet classification is based on estimated delivery date. For futures, options and over-the-counter contracts in which physical delivery is not expected to occur but, rather, the contract is expected to be net settled, the Company classifies these contracts as current or noncurrent assets or liabilities, as appropriate, based on the Company’s expectations as to when such contracts will be settled.

Realized and unrealized gains and losses in the value of commodity contracts (whether due to changes in commodity prices, changes in performance or credit risk, or due to sale, maturity or extinguishment of the commodity contract) and commodity inventories are included in cost of sales and merchandising revenues.

Generally accepted accounting principles permit a party to a master netting arrangement to offset fair value amounts recognized for derivative instruments against the right to reclaim cash collateral or obligation to return cash collateral under the same master netting arrangement. The Company has master netting arrangements for its exchange traded futures and options contracts and certain over-the-counter contracts. When the Company enters into a future, option or an over-the-counter contract, an initial margin deposit may be required by the counterparty. The amount of the margin deposit varies by commodity. If the market price of a future, option or an over-the-counter contract moves in a direction that is adverse to the Company’s position, an additional margin deposit, called a maintenance margin, is required. The margin deposit assets and liabilities are included in short-term commodity derivative assets or liabilities, as appropriate, in the Condensed Consolidated Balance Sheets.

The following table presents at September 30, 2021, December 31, 2020 and September 30, 2020, a summary of the estimated fair value of the Company’s commodity derivative instruments that require cash collateral and the associated cash posted/received as collateral. The net asset or liability positions of these derivatives (net of their cash collateral) are determined on a counterparty-by-counterparty basis and are included within current or non-current commodity derivative assets (or liabilities) on the Condensed Consolidated Balance Sheets:

(in thousands)September 30, 2021December 31, 2020September 30, 2020
Cash collateral paid$136,977 $208,670 $70,446 
Fair value of derivatives(14,100)(157,301)(58,495)
Net derivative asset position$122,877 $51,369 $11,951 

The Andersons, Inc. | Q3 2021 Form 10-Q | 10

Table of Contents

The following table presents, on a gross basis, current and non-current commodity derivative assets and liabilities:
September 30, 2021
(in thousands)Commodity Derivative Assets - CurrentCommodity Derivative Assets - NoncurrentCommodity Derivative Liabilities - CurrentCommodity Derivative Liabilities - NoncurrentTotal
Commodity derivative assets$380,391 $11,704 $27,035 $461 $419,591 
Commodity derivative liabilities(107,721)(370)(105,737)(7,645)(221,473)
Cash collateral paid136,977    136,977 
Balance sheet line item totals$409,647 $11,334 $(78,702)$(7,184)$335,095 

December 31, 2020
(in thousands)Commodity Derivative Assets - CurrentCommodity Derivative Assets - NoncurrentCommodity Derivative Liabilities - CurrentCommodity Derivative Liabilities - NoncurrentTotal
Commodity derivative assets$304,533 $4,328 $19,386 $14 $328,261 
Commodity derivative liabilities(192,023)(348)(166,850)(243)(359,464)
Cash collateral paid208,196 — 474 — 208,670 
Balance sheet line item totals$320,706 $3,980 $(146,990)$(229)$177,467 

September 30, 2020
(in thousands)Commodity Derivative Assets - CurrentCommodity Derivative Assets - NoncurrentCommodity Derivative Liabilities - CurrentCommodity Derivative Liabilities - NoncurrentTotal
Commodity derivative assets$159,553 $3,565 $7,323 $42 $170,483 
Commodity derivative liabilities(89,933)(508)(86,482)(490)(177,413)
Cash collateral paid70,446 — — — 70,446 
Balance sheet line item totals$140,066 $3,057 $(79,159)$(448)$63,516 

The net pre-tax gains and losses on commodity derivatives not designated as hedging instruments are included in the Company’s Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 are as follows:

 Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Gains (losses) on commodity derivatives included in cost of sales and merchandising revenues$(11,353)$(52,047)$229,320 $(12,290)


The Andersons, Inc. | Q3 2021 Form 10-Q | 11

Table of Contents
The Company had the following volume of commodity derivative contracts outstanding (on a gross basis) at September 30, 2021, December 31, 2020 and September 30, 2020:
September 30, 2021
(in thousands)Number of BushelsNumber of GallonsNumber of PoundsNumber of Tons
Non-exchange traded:
Corn687,177    
Soybeans96,061    
Wheat94,132    
Oats35,460    
Ethanol 174,381   
Corn oil  92,709  
Soybean Oil  41,322  
Other31,086 2,264 1,959 2,324 
Subtotal943,916 176,645 135,990 2,324 
Exchange traded:
Corn236,395    
Soybeans60,660    
Wheat101,087    
Oats1,290    
Ethanol 96,894   
Propane 24,402   
Other 8 1,890 240 
Subtotal399,432 121,304 1,890 240 
Total1,343,348 297,949 137,880 2,564 
December 31, 2020
(in thousands)Number of BushelsNumber of GallonsNumber of PoundsNumber of Tons
Non-exchange traded:
Corn684,654 — — — 
Soybeans73,521 — — — 
Wheat109,661 — — — 
Oats27,482 — — — 
Ethanol— 124,795 — — 
Corn oil— — 36,015 — 
Soybean oil— — 26,510 — 
Other4,371 2,058 740 1,859 
Subtotal899,689 126,853 63,265 1,859 
Exchange traded:
Corn267,792 — — — 
Soybeans53,730 — — — 
Wheat80,733 — — — 
Oats1,800 — — — 
Ethanol— 73,584 — — 
Propane— 17,094 — — 
Other— 2,898 14 149 
Subtotal404,055 93,576 14 149 
Total1,303,744 220,429 63,279 2,008 

The Andersons, Inc. | Q3 2021 Form 10-Q | 12

Table of Contents
September 30, 2020
(in thousands)Number of BushelsNumber of GallonsNumber of PoundsNumber of Tons
Non-exchange traded:
Corn527,924 — — — 
Soybeans121,248 — — — 
Wheat80,546 — — — 
Oats40,004 — — — 
Ethanol— 96,470 — — 
Corn oil— — 45,144 — 
Soybean oil— — 17,262 — 
Other42,235 3,655 350 2,237 
Subtotal811,957 100,125 62,756 2,237 
Exchange traded:
Corn250,445 — — — 
Soybeans62,785 — — — 
Wheat108,805 — — — 
Oats715 — — — 
Ethanol— 19,488 — — 
Propane— 31,962 — — 
Other— 7,140 16 183 
Subtotal422,750 58,590 16 183 
Total1,234,707 158,715 62,772 2,420 

Interest Rate and Other Derivatives

The Company’s objectives for using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 

The gains or losses on the derivatives designated as hedging instruments are recorded in Other Comprehensive Income (Loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.
At September 30, 2021, December 31, 2020 and September 30, 2020, the Company had recorded the following amounts for the fair value of the Company's other derivatives:
(in thousands)September 30, 2021December 31, 2020September 30, 2020
Derivatives not designated as hedging instruments
Interest rate contracts included in Accrued expenses and other current liabilities$ $(589)$(879)
Interest rate contracts included in Other long-term liabilities(258)(430)(491)
Foreign currency contracts included in Other assets491 2,753 326 
Derivatives designated as hedging instruments
Interest rate contracts included in Other assets$4,431 $164 $— 
Interest rate contracts included in Accrued expenses and other current liabilities(6,892)(6,664)(8,431)
Interest rate contracts included in Other long-term liabilities(9,146)(18,539)(22,409)

The Andersons, Inc. | Q3 2021 Form 10-Q | 13

Table of Contents

The recording of derivatives gains and losses and the financial statement line in which they are located are as follows:
Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Derivatives not designated as hedging instruments
Interest rate derivative gains (losses) included in Interest income (expense), net$51 $357 $760 $(363)
Derivatives designated as hedging instruments
Interest rate derivative losses included in Other comprehensive income (loss)$(2,044)$2,373 $(12,520)$(18,284)
Interest rate derivatives losses included in Interest income (expense), net(1,746)(2,345)(5,020)(5,045)

Outstanding interest rate derivatives, as of September 30, 2021, are as follows:
Interest Rate Hedging InstrumentYear EnteredYear of MaturityInitial Notional Amount
(in millions)
Description


Interest Rate
Long-term
Swap20142023$23.0 Interest rate component of debt - not accounted for as a hedge1.9%
Swap20172022$20.0 Interest rate component of debt - accounted for as a hedge1.8%
Swap20182023$10.0 Interest rate component of debt - accounted for as a hedge2.6%
Swap20182025$20.0 Interest rate component of debt - accounted for as a hedge2.7%
Swap20192025$100.0 Interest rate component of debt - accounted for as a hedge2.5%
Swap20192025$50.0 Interest rate component of debt - accounted for as a hedge2.5%
Swap20192025$50.0 Interest rate component of debt - accounted for as a hedge2.5%
Swap20202030$50.0 Interest rate component of debt - accounted for as a hedge
0.0% to 0.8%
Swap20202030$50.0 Interest rate component of debt - accounted for as a hedge
0.0% to 0.8%


6. Revenue

Many of the Company’s revenues are generated from contracts that are outside the scope of Accounting Standard Codification ("ASC") 606 and thus are accounted for under other accounting standards. Specifically, many of the Company's Trade and Ethanol sales contracts are derivatives under ASC 815, Derivatives and Hedging and the Rail leasing revenue is accounted for under ASC 842, Leases. The breakdown of revenues between ASC 606 and other standards are as follows:
Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Revenues under ASC 606$457,621 $282,258 $1,568,529 $1,066,620 
Revenues under ASC 8152,541,203 1,603,328 7,260,819 4,489,697 
Total revenues$2,998,824 $1,885,586 $8,829,348 $5,556,317 

The Andersons, Inc. | Q3 2021 Form 10-Q | 14

Table of Contents

The remainder of this note applies only to those revenues that are accounted for under ASC 606.
Disaggregation of revenue
The following tables disaggregate revenues under ASC 606 by major product/service line for the three and nine months ended September 30, 2021 and 2020, respectively:
Three months ended September 30, 2021
(in thousands)TradeEthanolPlant NutrientTotal
Specialty nutrients$ $ $49,249 $49,249 
Primary nutrients  69,835 69,835 
Services8,828  2,233 11,061 
Products and co-products70,924 183,225  254,149 
Frac sand and propane
49,379   49,379 
Other2,163 1,046 20,739 23,948 
Total$131,294 $184,271 $142,056 $457,621 
Three months ended September 30, 2020
(in thousands)TradeEthanolPlant NutrientTotal
Specialty nutrients$— $— $31,835 $31,835 
Primary nutrients— — 62,094 62,094 
Service2,010 — 975 2,985 
Products and co-products55,235 97,703 — 152,938 
Frac sand and propane21,676 — — 21,676 
Other2,414 513 7,803 10,730 
Total$81,335 $98,216 $102,707 $282,258 
Nine months ended September 30, 2021
(in thousands)TradeEthanolPlant NutrientTotal
Specialty nutrients$ $ $210,971 $210,971 
Primary nutrients  355,098 355,098 
Service12,396  7,391 19,787 
Products and co-products217,859 513,132  730,991 
Frac sand and propane178,094   178,094 
Other9,132 5,199 59,257 73,588 
Total$417,481 $518,331 $632,717 $1,568,529 

Nine months ended September 30, 2020
(in thousands)TradeEthanolPlant NutrientTotal
Specialty nutrients$— $— $187,700 $187,700 
Primary nutrients— — 296,247 296,247 
Service6,053 — 3,753 9,806 
Products and co-products171,744 275,175 — 446,919 
Frac sand and propane92,990 — — 92,990 
Other11,732 1,481 19,745 32,958 
Total$282,519 $276,656 $507,445 $1,066,620 

Substantially all of the Company's revenues accounted for under ASC 606 during both three and nine months periods ended September 30, 2021 and 2020, respectively, are recorded at a point in time instead of over time.

The Andersons, Inc. | Q3 2021 Form 10-Q | 15

Table of Contents

Contract balances

The balances of the Company’s contract liabilities were $31.2 million and $45.6 million as of September 30, 2021 and December 31, 2020, respectively. The difference between the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. The main driver of the contract liabilities balance is payments for primary and specialty nutrients received in advance of fulfilling our performance obligations under our customer contracts. Due to seasonality of this business, contract liabilities were built up at year-end in preparation for the spring application season. As expected, the revenue recognized through the first nine months of 2021 satisfied the contract liabilities throughout the application season.


7. Income Taxes

On a quarterly basis, the Company estimates the effective tax rate expected to be applicable for the full year and makes changes, if necessary, based on new information or events. The estimated annual effective tax rate is forecasted based on actual historical information and forward-looking estimates and is used to provide for income taxes in interim reporting periods. The Company also recognizes the tax impact of certain unusual or infrequently occurring items, such as the effects of changes in tax laws or rates and impacts from settlements with tax authorities, discretely in the quarter in which they occur.

For the nine months ended September 30, 2021, the Company estimated its annual effective tax rate utilizing the annualized effective tax rate method under ASC 740, Income Taxes, to calculate its interim income tax provision. For the nine months ended September 30, 2020, the Company utilized the discrete effective tax rate method, as allowed under ASC 740, to calculate its interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. At the time, it was not possible to reliably estimate the annual effective tax rate for the year due to uncertainty created by the COVID-19 pandemic. As a result, relatively small changes in the provision for income taxes in 2020 caused disproportionate changes in the effective tax rate, as compared to 2021.

For the three months ended September 30, 2021, the Company recorded income tax expense from continuing operations of $4.0 million at an effective income tax rate of 24.7%. The effective tax rate differs from the statutory U.S. Federal tax rate of 21% due to the impacts of state and local taxes, non-deductible compensation and the treatment of mark-to-market activity on certain contracts in the Ethanol segment. The rate impacts were further offset by the portion of income owned by noncontrolling interests that do not result in a tax expense. The change in effective tax rate for the three months ended September 30, 2021 as compared to the same period last year was primarily attributed to additional tax benefits from net operating loss carry backs as a result of the CARES Act in the prior year, offset by the portion of income owned by noncontrolling interests that do not result in a tax expense. For the three months ended September 30, 2020, using the discrete effective tax rate method to calculate the interim tax provision, the Company recorded an income tax benefit from continuing operations of $4.1 million at an effective income tax rate of 175.8%.

For the nine months ended September 30, 2021, the Company recorded an income tax expense from continuing operations of $18.1 million at an effective income tax rate of 21.5%. The effective tax rate differs from the statutory U.S. Federal tax rate of 21% due to the impacts of state and local taxes and non-deductible compensation. The rate impacts were further offset by benefits related to the treatment of mark-to-market activity on certain contracts in the Ethanol segment and the portion of income owned by noncontrolling interests that do not result in a tax expense. The change in effective tax rate for the nine months ended September 30, 2021, as compared to the same period last year was primarily attributed to additional tax benefits from net operating loss carry backs as a result of the CARES Act in the prior year, offset by the favorable impact of the mark-to-market activity on the contracts within the ethanol segment and the portion of income owned by noncontrolling interests that do not result in a tax expense. For the nine months ended September 30, 2020, using the discrete effective tax rate method to calculate the interim tax provision, the Company recorded an income tax benefit from continuing operations of $18.6 million at an effective income tax rate of 36.7%.


The Andersons, Inc. | Q3 2021 Form 10-Q | 16

Table of Contents

8. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss) attributable to the Company for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Currency Translation Adjustment
Beginning balance$8,432 $(2,325)$5,739 $1,065 
Other comprehensive income (loss) before reclassifications(3,004)2,351 (311)(1,039)
  Tax effect —  — 
Other comprehensive income (loss), net of tax(3,004)2,351 (311)(1,039)
Ending balance$5,428 $26 $5,428 $26 
Hedging Adjustment
Beginning balance$(10,223)$(24,966)$(18,106)$(9,443)
Other comprehensive income (loss) before reclassifications(146)(535)4,467 (18,594)
Amounts reclassified from accumulated other comprehensive income (loss)(a)2,244 3,090 6,604 6,471 
  Tax effect(561)(772)(1,651)(1,617)
Other comprehensive income (loss), net of tax1,537 1,783 9,420 (13,740)
Ending balance$(8,686)$(23,183)$(8,686)$(23,183)
Pension and Other Postretirement Adjustment
Beginning balance$(304)$788 $33 $889 
Other comprehensive income (loss) before reclassifications69 52 74 293 
Amounts reclassified from accumulated other comprehensive income (loss)(b)(228)(228)(684)(684)
  Tax effect57 57 171 171 
Other comprehensive income (loss), net of tax(102)(119)(439)(220)
Ending balance$(406)$669 $(406)$669 
Investments in Convertible Preferred Securities Adjustment
Beginning balance$258 $258 $258 $258 
Other comprehensive income (loss), net of tax —  — 
Ending balance$258 $258 $258 $258 
Total AOCI Ending Balance$(3,406)$(22,230)$(3,406)$(22,230)
(a) Amounts reclassified from gain (loss) on cash flow hedges are reclassified from AOCI to income when the hedged item affects earnings and is recognized in Interest expense, net. See Note 5 for additional information.
(b) This accumulated other comprehensive loss component is included in the computation of net periodic benefit cost recorded in Operating, administrative and general expenses.


The Andersons, Inc. | Q3 2021 Form 10-Q | 17

Table of Contents

9. Earnings Per Share
(in thousands, except per common share data)Three months ended September 30,Nine months ended September 30,
2021202020212020
Numerator:
Net income (loss) from continuing operations$12,290 $1,788 $66,069 $(32,088)
Net income (loss) attributable to noncontrolling interests(a)
(1,602)3,273 (822)(20,583)
Net income (loss) available to The Andersons Inc. common shareholders from continuing operations$13,892 $(1,485)$66,891 $(11,505)
Income (loss) from discontinued operations, net of income taxes$1,846 $427 $7,453 $3,224 
Denominator:
Weighted average shares outstanding – basic33,284 32,962 33,246 32,905 
Effect of dilutive awards350 — 424 — 
Weighted average shares outstanding – diluted33,634 32,962 33,670 32,905 
Earnings (loss) per share attributable to The Andersons, Inc. common shareholders:
Basic earnings (loss):
Continuing operations$0.42 $(0.04)$2.01 $(0.35)
Discontinued operations0.06 0.01 0.22 0.10 
$0.48 $(0.03)$2.23 $(0.25)
Diluted earnings (loss):
Continuing operations$0.41 $(0.04)$1.99 $(0.35)
Discontinued operations0.05 0.01 0.22 0.10 
$0.46 $(0.03)$2.21 $(0.25)
(a) All net income (loss) attributable to noncontrolling interests is within the continuing operations of the Company.

There were 80 thousand antidilutive share awards outstanding for both the three and nine months ended September 30, 2021, respectively. All awards were antidilutive for the three and nine months ended September 30, 2020 as the Company incurred a net loss in both periods.


10. Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2021, December 31, 2020 and September 30, 2020:
(in thousands)September 30, 2021
Assets (liabilities)Level 1Level 2Level 3Total
Commodity derivatives, net (a)
$122,877 $212,218 $ $335,095 
Provisionally priced contracts (b)
28,469 (25,134) 3,335 
Convertible preferred securities (c)
  11,066 11,066 
Other assets and liabilities (d)
4,171 (11,865) (7,694)
Total$155,517 $175,219 $11,066 $341,802 
The Andersons, Inc. | Q3 2021 Form 10-Q | 18

Table of Contents
(in thousands)December 31, 2020
Assets (liabilities)Level 1Level 2Level 3Total
Commodity derivatives, net (a)
$51,369 $126,098 $— $177,467 
Provisionally priced contracts (b)
19,793 (48,818)— (29,025)
Convertible preferred securities (c)
— — 8,849 8,849 
Other assets and liabilities (d)
7,972 (26,058)— (18,086)
Total$79,134 $51,222 $8,849 $139,205 
(in thousands)September 30, 2020
Assets (liabilities)Level 1Level 2Level 3Total
Commodity derivatives, net (a)
$11,951 $51,565 $— $63,516 
Provisionally priced contracts (b)
(5,190)(22,541)— (27,731)
Convertible preferred securities (c)
— — 8,654 8,654 
Other assets and liabilities (d)
4,998 (32,210)— (27,212)
Total$11,759 $(3,186)$8,654 $17,227 
(a)Includes associated cash posted/received as collateral
(b)Included in "Provisionally priced contracts" are those instruments based only on underlying futures values (Level 1) and delayed price contracts (Level 2)
(c)Recorded in “Other assets, net” on the Company’s Condensed Consolidated Balance Sheets related to certain available for sale securities.
(d)Included in other assets and liabilities are assets held by the Company to fund deferred compensation plans and foreign exchange derivative contracts (Level 1), as well as interest rate derivatives (Level 2).

Level 1 commodity derivatives reflect the fair value of the exchanged-traded futures and options contracts that the Company holds, net of the cash collateral, that the Company has in its margin account.

The majority of the Company’s assets and liabilities measured at fair value are based on the market approach valuation technique. With the market approach, fair value is derived using prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The Company’s net commodity derivatives primarily consist of futures or options contracts via regulated exchanges and contracts with producers or customers under which the future settlement date and bushels (or gallons in the case of ethanol contracts) of commodities to be delivered (primarily wheat, corn, soybeans and ethanol) are fixed and under which the price may or may not be fixed. Depending on the specifics of the individual contracts, the fair value is derived from the futures or options prices quoted on various exchanges for similar commodities and delivery dates as well as observable quotes for local basis adjustments (the difference, which is attributable to local market conditions, between the quoted futures price and the local cash price). Because “basis” for a particular commodity and location typically has multiple quoted prices from other agribusinesses in the same geographical vicinity and is used as a common pricing mechanism in the agribusiness industry, the Company has concluded that “basis” is typically a Level 2 fair value input for purposes of the fair value disclosure requirements related to our commodity derivatives, depending on the specific commodity. Although nonperformance risk, both of the Company and the counterparty, is present in each of these commodity contracts and is a component of the estimated fair values, based on the Company’s historical experience with its producers and customers and the Company’s knowledge of their businesses, the Company does not view nonperformance risk to be a significant input to fair value for these commodity contracts.

These fair value disclosures exclude RMI which consists of agricultural commodity inventories measured at net realizable value. The net realizable value used to measure the Company’s agricultural commodity inventories is the fair value (spot price of the commodity in an exchange), less cost of disposal and transportation based on the local market. This valuation would generally be considered Level 2. The amount of RMI is disclosed in Note 2. Changes in the net realizable value of commodity inventories are recognized as a component of cost of sales and merchandising revenues.

Provisionally priced contract liabilities are those for which the Company has taken ownership and possession of grain, but the final purchase price has not been established. In the case of payables where the unpriced portion of the contract is limited to the futures price of the underlying commodity or the Company has delivered provisionally priced grain and a subsequent payable or receivable is set up for any future changes in the grain price, quoted exchange prices are used and the liability is deemed to be Level 1 in the fair value hierarchy. For all other unpriced contracts which include variable futures and basis components, the amounts recorded for delayed price contracts are determined on the basis of local grain market prices at the balance sheet date and, as such, are deemed to be Level 2 in the fair value hierarchy.

The Andersons, Inc. | Q3 2021 Form 10-Q | 19

Table of Contents
The convertible preferred securities are interests in several early-stage enterprises that may be in various forms, such as convertible debt or preferred equity securities.

A reconciliation of beginning and ending balances for the Company’s fair value measurements using Level 3 inputs is as follows:
Convertible Preferred Securities
(in thousands)20212020
Assets at January 1,$8,849 $8,404 
Additional investments2,800 250 
Assets at March 31,$11,649 $8,654 
Additional Investments1,901 — 
Assets at June 30,$13,550 $8,654 
Additional investments300 — 
Losses included in earnings(2,784)— 
Assets at September 30,$11,066 $8,654 

The following tables summarize quantitative information about the Company's Level 3 fair value measurements as of September 30, 2021, December 31, 2020 and September 30, 2020:
Quantitative Information about Recurring Level 3 Fair Value Measurements
Fair Value as of
(in thousands)September 30, 2021December 31, 2020September 30, 2020Valuation MethodUnobservable InputWeighted Average
Convertible preferred securities (a)
$11,066 $8,849 $8,654 Implied based on market pricesN/AN/A
(a) The Company considers observable price changes and other additional market data available to estimate fair value, including additional capital raising, internal valuation models, progress towards key business milestones, and other relevant market data points.

There were no non-recurring fair value measurements as of September 30, 2021, December 31, 2020 and September 30, 2020.

The fair value of the Company’s cash equivalents, accounts receivable and accounts payable approximate their carrying value as they are close to maturity.


11. Related Parties

In the ordinary course of business, and on an arm's length basis, the Company will enter into related party transactions with the minority shareholders of the Company's ethanol operations and several equity method investments that the Company holds, along with other related parties.

The following table sets forth the related party transactions entered into for the time periods presented:
Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Sales revenues$77,577 $44,789 $229,517 $129,143 
Purchases of product and capital assets9,715 16,641 30,051 38,637 

(in thousands)September 30, 2021December 31, 2020September 30, 2020
Accounts receivable (a)
$13,523 $5,623 $7,184 
Accounts payable (b)
2,514 5,251 3,058 
(a) Accounts receivable represents amounts due from related parties for the sale of ethanol and other various items.
(b) Accounts payable represents amounts due to related parties for purchases of ethanol equipment and other various items.


The Andersons, Inc. | Q3 2021 Form 10-Q | 20

Table of Contents

12. Segment Information

As of the third quarter of 2021, the Company’s operations include three reportable business segments that are distinguished primarily on the basis of products and services offered as well as the structure of management. The Trade business includes commodity merchandising and the operation of terminal grain elevator facilities. The Ethanol business produces ethanol and co-products through its five co-owned and fully consolidated ethanol production facilities as well as purchases and sells ethanol and ethanol co-products. The Plant Nutrient business manufactures and distributes agricultural inputs, primarily fertilizer, to dealers and farmers, along with turf care and corncob-based products. The Other category includes other corporate level costs not attributable to an operating segment and intercompany eliminations between the segments. See Note 14 for details of the divestiture of the Rail segment.

The segment information below includes the allocation of expenses shared by one or more operating segments. Although management believes such allocations are reasonable, the operating information does not necessarily reflect how such data might appear if the segments were operated as separate businesses. The Company does not have any customers who represent 10 percent or more of total revenues from external customers.
 Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Revenues from external customers
Trade$2,242,131 $1,432,922 $6,522,508 $4,162,130 
Ethanol614,637 349,957 1,674,123 886,742 
Plant Nutrient142,056 102,707 632,717 507,445 
Total$2,998,824 $1,885,586 $8,829,348 $5,556,317 

 Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Income (loss) before income taxes attributable to the Company from continuing operations
Trade$41,999 $5,941 $69,631 $(3,650)
Ethanol(3,636)1,148 22,821 (21,960)
Plant Nutrient(5,832)(5,387)26,686 12,828 
Other(14,612)(7,335)(34,182)(17,351)
Income (loss) before income taxes attributable to the Company from continuing operations17,919 (5,633)84,956 (30,133)
Income (loss) attributable to noncontrolling interests(1,602)3,273 (822)(20,583)
Income (loss) before income taxes from continuing operations$16,317 $(2,360)$84,134 $(50,716)

(in thousands)September 30, 2021December 31, 2020September 30, 2020
Identifiable assets
Trade$2,313,417 $2,486,412 $1,642,219 
Ethanol679,687 666,839 625,587 
Plant Nutrient409,112 374,653 343,121 
Other240,502 68,084 113,014 
Total assets of continuing operations3,642,718 3,595,988 2,723,941 
Assets of discontinued operations65,424 676,133 687,670 
Total assets$3,708,142 $4,272,121 $3,411,611 


The Andersons, Inc. | Q3 2021 Form 10-Q | 21

Table of Contents

13. Commitments and Contingencies

Litigation activities

The Company is party to litigation, or threats thereof, both as defendant and plaintiff with some regularity, although individual cases that are material in size occur infrequently. As a defendant, the Company establishes reserves for claimed amounts that are considered probable and capable of estimation. If those cases are resolved for lesser amounts, the excess reserves are taken into income and, conversely, if those cases are resolved for larger than the amount the Company has accrued, the Company records additional expense. The Company believes it is unlikely that the results of its current legal proceedings for which it is the defendant, even if unfavorable, will be material. As a plaintiff, amounts that are collected can also result in sudden, non-recurring income.

Litigation results depend upon a variety of factors, including the availability of evidence, the credibility of witnesses, the performance of counsel, the state of the law, and the impressions of judges and jurors, any of which can be critical in importance, yet difficult, if not impossible, to predict. Consequently, cases currently pending, or future matters, may result in unexpected, and non-recurring losses, or income, from time to time. Finally, litigation results are often subject to judicial reconsideration, appeal and further negotiation by the parties, and as a result, the final impact of a particular judicial decision may be unknown for some time or may result in continued reserves to account for the potential of such post-verdict actions.

Specifically, the Company is party to a non-regulatory litigation claim, which is in response to penalties and fines paid to regulatory entities by a previously unconsolidated subsidiary in 2018 for the settlement of matters which focused on certain trading activity. While the Company believes it has meritorious defenses against the suit, the ultimate resolution of the matter could result in a loss in excess of the amount accrued. Given the status of the claim, the Company does not believe the excess, net of the acquisition-related indemnity, is material.

The estimated losses for all other outstanding claims that are considered reasonably possible are not material.


14. Discontinued Operations

On August 16, 2021, the Company entered into a definitive agreement under which the Company sold the assets of the Company’s Rail Leasing business for a cash purchase price of approximately $543.1 million. In conjunction with the sale of the Rail Leasing business, the Company announced its intent to divest the remaining pieces of the Rail Leasing business and the Rail Repair business.

During the third quarter of 2021, substantially all of the assets and liabilities of our Rail business were classified as discontinued operations in the accompanying Condensed Consolidated Balance Sheets.

The table below summarizes the results of the Rail Leasing business and the Rail Repair business for the three and nine months ended September 30, 2021 and 2020 which are reflected in the consolidated statements of operations as discontinued operations.

 Three months ended September 30,Nine months ended September 30,
 (in thousands)2021202020212020
Sales and merchandising revenues$25,018 $36,647 $103,950 $109,202 
Cost of sales and merchandising revenues19,065 28,049 78,089 80,187 
Gross profit5,953 8,598 25,861 29,015 
Operating, administrative and general expenses3,415 5,609 10,705 16,052 
Interest expense, net2,139 3,716 8,714 12,032 
Other income, net:
Other income (loss), net(1,330)588 583 2,543 
Income (loss) from discontinued operations before income taxes(931)(139)7,025 3,474 
Income tax provision (benefit)(2,777)(566)(428)250 
Income (loss) from discontinued operations, net of income taxes$1,846 $427 $7,453 $3,224 

The Andersons, Inc. | Q3 2021 Form 10-Q | 22

Table of Contents


The following table summarizes the assets and liabilities which are classified as discontinued operations at September 30, 2021, December 31, 2020 and September 30, 2020.

(in thousands)September 30,
2021
December 31,
2020
September 30,
2020
Assets
Current assets:
Cash and cash equivalents$ $— $— 
Accounts receivable, net18,389 18,508 19,620 
Inventories6,803 7,627 7,016 
Other current assets1,369 6,524 18,496 
Current assets held-for-sale26,561 32,659 45,132 
Other assets:
Rail assets leased to others, net458 591,946 587,848 
Property, plant and equipment, net17,439 18,868 18,360 
Goodwill4,167 4,167 4,167 
Other intangible assets, net24 2,855 3,369 
Right of use assets, net16,521 22,644 24,561 
Other assets, net254 2,994 4,233 
Total non-current assets held-for-sale38,863 643,474 642,538 
Total assets held-for-sale$65,424 $676,133 $687,670 
Liabilities
Current liabilities:
Trade and other payables$4,223 $2,874 $6,607 
Customer prepayments and deferred revenue128 1,934 1,667 
Current maturities of long-term debt 6,109 5,286 
Accrued expenses and other current liabilities9,076 14,360 14,436 
Total current liabilities held-for-sale13,427 25,277 27,996 
Long-term lease liabilities13,592 17,342 19,016 
Long-term debt, less current maturities 30,087 198,889 
Other long-term liabilities 667 3,429 
Non-current liabilities held-for-sale13,592 48,096 221,334 
Total liabilities held-for-sale$27,019 $73,373 $249,330 

The following table summarizes cash flow data relating to discontinued operations for the nine months ended September 30, 2021 and 2020:
 Nine months ended September 30,
 (in thousands)20212020
Depreciation and amortization$21,786 $26,670 
Capital expenditures(8,368)(29,460)
Proceeds from sale of assets18,705 7,774 
Loss on sale of discontinued operations1,491 — 
Non-cash operating activities - Gain on sale of railcars(5,603)(175)
Non-cash operating activities - fixed asset impairment626 — 
Non-cash investing activities - capital expenditures, consisting of unpaid capital expenditure liabilities at period end 1,081 



The Andersons, Inc. | Q3 2021 Form 10-Q | 23

Table of Contents

15. Goodwill

The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2021 are as follows:
(in thousands)TradeEthanolPlant NutrientTotal
Balance at December 31, 2020
$122,067 $8,789 $686 $131,542 
Divestitures (a)
(2,200)  (2,200)
Balance at September 30, 2021
$119,867 $8,789 $686 $129,342 
(a) Removal of allocated goodwill due to the sale of the grain asset location in Champaign, IL.
The Andersons, Inc. | Q3 2021 Form 10-Q | 24

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements which relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. Such factors include, but are not limited to, the effects on our business from the COVID-19 pandemic and the pace of recovery from the pandemic, economic and political conditions, globally and in the markets we serve, fluctuations in cost and availability of commodities, weather and agricultural conditions, governmental regulations, the effectiveness of our internal control over financial reporting and the unpredictability of existing and possible future litigation. However, it is not possible to predict or identify all such factors. The reader is urged to carefully consider these risks and others, including those risk factors listed under Item 1A of the 2020 Form 10-K. In some cases, the reader can identify forward-looking statements by terminology such as may, anticipates, believes, estimates, predicts, or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These forward-looking statements relate only to events as of the date on which the statements are made and the Company undertakes no obligation, other than any imposed by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although management believes that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Critical Accounting Policies and Estimates

Our critical accounting policies and critical accounting estimates, as described in our 2020 Form 10-K, have not materially changed through the third quarter of 2021.

Executive Overview

Our operations are organized, managed and classified into three reportable business segments: Trade, Ethanol and Plant Nutrient. Each of these segments is generally based on the nature of products and services offered and aligns with the management structure. Due to the Rail Group segment being presented as discontinued operations, the Company has excluded it from the following discussions of financial condition and results of operations.

The agricultural commodity-based business is one in which changes in selling prices generally move in relationship to changes in purchase prices. Therefore, increases or decreases in prices of the agricultural commodities that the business deals in will have a relatively equal impact on sales and cost of sales and a much less significant impact on gross profit. As a result, changes in sales between periods may not necessarily be indicative of the overall performance of the business and more focus should be placed on changes in gross profit.

The Company has considered the potential impact of the book value of the Company’s total shareholders' equity exceeding the Company’s market capitalization at various points during the year for impairment indicators. The Company believes that the share price at those points were not an accurate reflection of its current value. The long-term outlook remains positive for agricultural commodities due to market volatility driven by scarcity of supply and strong demand. Management believes that the market’s impact on the Company’s equity value does not accurately reflect the impact of these external factors on the Company. As a result of prior period tests, reviews of current operating results and other relevant market factors, management ultimately concluded that, while the Company's shareholders equity exceeded the market capitalization for certain portions of the period, that no impairment trigger existed as of September 30, 2021. However, adverse market conditions or alternative management decisions on operations may result in future impairment considerations.

Trade

The Trade Group’s third quarter results improved substantially over the prior year as the Group continues to benefit from the demand-driven agriculture rally. Commodity price volatility and market dislocations created merchandising opportunities for the Group to be well positioned across our broad portfolio of commodities. This demand driven rally created an inversion in the futures market for the majority of the agricultural commodities stored by the Group's asset business, resulting in strong elevation margins earlier in the year and less traditional storage income. The Group also benefited by strong elevation margins in our early harvest draw areas while starting to see storage income opportunities return to the wheat and corn markets.

The Andersons, Inc. | Q3 2021 Form 10-Q | 25

Table of Contents

Agricultural inventories on hand at September 30, 2021 were 84.1 million bushels, of which 2.0 million bushels were stored for others. These amounts compare to 82.3 million bushels on hand at September 30, 2020, of which 2.3 million bushels were stored for others. Total Trade storage space capacity, including temporary pile storage, was approximately 186 million bushels at September 30, 2021 compared to 200 million bushels at September 30, 2020.

We expect continued merchandising opportunities into harvest as scarcity of supply is impacting overall prices. Crop conditions in the majority of the Group's draw area are excellent and the business is expecting to benefit from a large harvest. As the volume of grain in store is expected to remain at levels below recent years for some time, high prices and strong elevation margins are expected to continue into 2022.

Ethanol

The Ethanol Group's third quarter income from operations were down despite higher revenues as compared to the prior year largely driven by higher corn basis levels. The 2021 results reflect improvement in crush margins, overall ethanol demand and higher ethanol trading results. The Group also benefited from increased co-product values.

Spot ethanol crush margins have continued to improve from the prior year as gasoline demand has returned to pre-pandemic levels and overall industry stocks remain low. Co-product values continue to support our overall margins as new renewable diesel demand continues to drive high corn oil values.

Ethanol and related co-products volumes for the three and nine months ended September 30, 2021 and 2020 were as follows:
Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Ethanol (gallons shipped)184,655 169,409 538,955 436,282 
E-85 (gallons shipped)12,977 7,455 32,781 20,955 
Corn oil (pounds shipped) 79,756 33,257 188,974 83,519 
DDG (tons shipped)*570 536 1,544 1,384 
* DDG tons shipped converts wet tons to a dry ton equivalent amount.

Plant Nutrient

The Plant Nutrient Group's third quarter results were relatively comparable to the prior year period. Tons sold across the Group's product lines were down slightly period over period, however, the lower volumes were offset by improved margins in the Ag Supply Chain and Specialty Liquids product lines. The improved margins reflect demand from strong grower income and well-positioned fertilizer inventory. Engineered Granules maintained strong demand but contended against rising input costs and a tight labor market. We expect demand to remain strong across all product lines which, along with ongoing tight supplies, should provide continued opportunities for the group.

Storage capacity at our Ag Supply Chain and Specialty Liquids facilities, including leased storage, was approximately 450 thousand tons for dry nutrients and approximately 509 thousand tons for liquid nutrients at September 30, 2021, compared to approximately 477 thousand tons for dry nutrients and approximately 509 thousand tons for liquid nutrients at September 30, 2020.

The Andersons, Inc. | Q3 2021 Form 10-Q | 26

Table of Contents

Tons of product sold for the three and nine months ended September 30, 2021 and 2020 were as follows:
Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Ag Supply Chain253 273 1,261 1,178 
Specialty Liquids71 64 304 257 
Engineered Granules60 59 383 331 
Total tons384 396 1,948 1,766 

In the table above, Ag Supply Chain represents facilities principally engaged in the wholesale distribution and retail sale and application of primary agricultural nutrients such as bulk nitrogen, phosphorus, and potassium. Specialty Liquid locations produce and sell a variety of low-salt liquid starter fertilizers, micronutrients for agricultural use, and specialty products for use in various industrial processes. Engineered Granules include a variety of corncob-based products and facilities that primarily manufacture granulated dry products for use in specialty turf and agricultural applications.

Other

Our “Other” activities include corporate income and expense and cost for functions that provide support and services to the operating segments. The results include expenses and benefits not allocated to the operating segments and other elimination and consolidation adjustments.


The Andersons, Inc. | Q3 2021 Form 10-Q | 27

Table of Contents

Operating Results

The following discussion focuses on the operating results as shown in the Condensed Consolidated Statements of Operations and includes a separate discussion by segment. Additional segment information is included herein in Note 12, Segment Information.

Comparison of the three months ended September 30, 2021 with the three months ended September 30, 2020 including a reconciliation of GAAP to non-GAAP measures:
 Three months ended September 30, 2021
(in thousands)TradeEthanolPlant NutrientOtherTotal
Sales and merchandising revenues$2,242,131 $614,637 $142,056 $ $2,998,824 
Cost of sales and merchandising revenues2,143,935 608,886 124,168  2,876,989 
Gross profit98,196 5,751 17,888  121,835 
Operating, administrative and general expenses67,590 10,014 22,883 9,788 110,275 
Interest expense (income), net5,243 1,658 1,146 752 8,799 
Equity in earnings (losses) of affiliates, net(250)   (250)
Other income, net16,886 683 309 (4,072)13,806 
Income (loss) before income taxes from continuing operations$41,999 $(5,238)$(5,832)$(14,612)$16,317 
Income (loss) before income taxes attributable to the noncontrolling interests (1,602)  (1,602)
Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations$41,999 $(3,636)$(5,832)$(14,612)$17,919 

 Three months ended September 30, 2020
(in thousands)TradeEthanolPlant NutrientOtherTotal
Sales and merchandising revenues$1,432,922 $349,957 $102,707 $— $1,885,586 
Cost of sales and merchandising revenues1,367,350 338,788 86,211 — 1,792,349 
Gross profit65,572 11,169 16,496 — 93,237 
Operating, administrative and general expenses58,385 5,650 21,175 7,400 92,610 
Interest expense (income), net4,380 1,651 1,287 (465)6,853 
Equity in earnings (losses) of affiliates, net20 — — — 20 
Other income (expense), net3,114 553 579 (400)3,846 
Income (loss) before income taxes from continuing operations$5,941 $4,421 $(5,387)$(7,335)$(2,360)
Income (loss) before income taxes attributable to the noncontrolling interests— 3,273 — — 3,273 
Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations$5,941 $1,148 $(5,387)$(7,335)$(5,633)


The Company uses Income (loss) before income taxes attributable to the Company from continuing operations, a non-GAAP financial measure as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures. Management believes that Income (loss) before income taxes attributable to the Company from continuing operations is a useful measure of the Company’s performance because it provides investors additional information about the Company's operations allowing evaluation of underlying business performance and period-to-period comparability. This measure is not intended to replace or be alternatives to Income (loss) before income taxes from continuing operations, the most directly comparable amounts reported under GAAP.

The Andersons, Inc. | Q3 2021 Form 10-Q | 28

Table of Contents

Trade

Operating results for the Trade Group increased by $36.1 million compared to the results of the same period last year. Sales and merchandising revenues increased by $809.2 million and cost of sales and merchandising revenues increased by $776.6 million for a favorable net gross profit impact of $32.6 million. Most of the increase to sales and cost of sales is the result of increased commodity prices. The net increase in gross profit was driven by our traditional asset locations which were significantly better than the prior year due to strong elevation margins in our early harvest draw areas. The group also had improved merchandising results as geographic dislocations created volatility that allowed traders to identify arbitrage opportunities.

Operating, administrative and general expenses increased by $9.2 million. The increase from the prior year is primarily related to higher incentive compensation costs from improved operating results and other professional service fees.

Interest expense increased by $0.9 million due to higher group borrowings on the Company's short-term line of credit compared to the prior year.

Other income increased by $13.8 million from prior year largely driven by a gain on the sale of a grain asset location in the current year.

Ethanol

Operating results for the Ethanol Group declined by $4.8 million from the same period last year. Sales and merchandising revenues increased by $264.7 million and cost of sales and merchandising revenues increased by $270.1 million compared to prior year results. As a result gross profit decreased by $5.4 million compared to 2020 results. Most of the increase to sales and cost of sales is the result of increased corn and ethanol commodity prices. The decrease to gross profit in the current period results reflect higher corn basis levels offset in part by higher co-product sales and third-party trading revenues.

Operating, administrative and general expenses increased by $4.4 million from the increase in labor and incentive compensation costs from increased production and improved full year operating results, respectively.

Plant Nutrient

Operating results for the Plant Nutrient Group declined by $0.4 million compared to the same period in the prior year. Sales and merchandising revenues increased by $39.3 million and cost of sales and merchandising revenues increased by $38.0 million resulting in a $1.3 million increase in gross profit. The increase in gross profit was driven by improved margins across the Ag Supply Chain and Specialty Liquids product lines due to strong grower income and well positioned fertilizer inventory despite slightly lower volumes sold. Partially offsetting this increase were lower results in our Engineered Granules business from rising input costs and a tight labor market.

Operating, administrative and general expenses increased by $1.7 million due to higher incentive compensation costs from improved operating results.

Interest expense decreased by $0.1 million due to lower interest rates and reduced borrowings.

Other

Operating results for the third quarter declined by $7.3 million compared to the same period in 2020. The increase in operating losses was primarily driven by higher operating, administrative and general expenses due to increased variable incentive-based compensation as a result of improved company-wide performance year over year as well as stranded costs from the sale of our Rail Leasing business.

The Andersons, Inc. | Q3 2021 Form 10-Q | 29

Table of Contents

Income Taxes

For the three months ended September 30, 2021, the Company recorded an income tax expense from continuing operations of $4.0 million at an effective rate of 24.7%. For the three months ended September 30, 2020, the Company recorded an income tax benefit from continuing operations of $4.1 million at an effective tax rate of 175.8%. The change in effective tax rate for the three months ended September 30, 2021 as compared to the same period last year was primarily attributed to additional tax benefits from net operating loss carry backs as a result of the CARES Act in the prior year, offset by the portion of income owned by noncontrolling interests that do not result in a tax expense.


Comparison of the nine months ended September 30, 2021 with the nine months ended September 30, 2020 including a reconciliation of GAAP to non-GAAP measures:
 Nine months ended September 30, 2021
(in thousands)TradeEthanolPlant NutrientOtherTotal
Sales and merchandising revenues$6,522,508 $1,674,123 $632,717 $ $8,829,348 
Cost of sales and merchandising revenues6,273,924 1,625,173 531,568  8,430,665 
Gross profit248,584 48,950 101,149  398,683 
Operating, administrative and general expenses186,035 23,247 72,850 30,701 312,833 
Interest expense (income), net19,746 5,752 3,358 (8)28,848 
Equity in earnings (losses) of affiliates, net2,389    2,389 
Other income (expense), net24,439 2,048 1,745 (3,489)24,743 
Income (loss) before income taxes from continuing operations$69,631 $21,999 $26,686 $(34,182)$84,134 
Income (loss) before income taxes attributable to the noncontrolling interests (822)  (822)
Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations$69,631 $22,821 $26,686 $(34,182)$84,956 
 Nine months ended September 30, 2020
(in thousands)TradeEthanolPlant NutrientOtherTotal
Sales and merchandising revenues$4,162,130 $886,742 $507,445 $— $5,556,317 
Cost of sales and merchandising revenues3,974,710 907,571 431,820 — 5,314,101 
Gross profit187,420 (20,829)75,625 — 242,216 
Operating, administrative and general expenses181,539 17,271 59,197 19,356 277,363 
Interest expense (income), net16,624 5,908 4,535 (1,116)25,951 
Equity in earnings (losses) of affiliates, net228 — — — 228 
Other income (expense), net6,865 1,465 935 889 10,154 
Income (loss) before income taxes from continuing operations$(3,650)$(42,543)$12,828 $(17,351)$(50,716)
Income (loss) before income taxes attributable to the noncontrolling interests— (20,583)— — (20,583)
Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations$(3,650)$(21,960)$12,828 $(17,351)$(30,133)

Trade

Operating results for the Trade Group increased by $73.3 million compared to the results of the same period last year. Sales and merchandising revenues increased by $2,360.4 million and cost of sales and merchandising revenues increased by $2,299.2 million for an increased gross profit impact of $61.2 million. Most of the increase to sales and cost of sales is the result of increased commodity prices. The net increase in gross profit was driven by improved merchandising results as geographic dislocations created volatility that allowed traders to identify arbitrage opportunities. Additionally, our traditional asset locations which were significantly better than the prior year due to strong elevation margins in our early harvest draw areas.

The Andersons, Inc. | Q3 2021 Form 10-Q | 30

Table of Contents

Operating, administrative and general expenses increased by $4.5 million. The increase from the prior year is primarily related to higher incentive compensation costs from improved operating results. Despite the expense increase, the Company continues to benefit from cost saving initiatives, much of which is headcount reduction, both from acquisition integration and in response to the COVID-19 pandemic.

Interest expense increased by $3.1 million due to higher group borrowings on the Company's short-term line of credit compared to the prior year.

The increase in other income is largely driven by a gain on the sale of a grain asset location in the current year.

Ethanol

Operating results for the Ethanol Group increased by $44.8 million from the same period last year. Sales and merchandising revenues increased by $787.4 million and cost of sales and merchandising revenues increased by $717.6 million compared to prior year. As a result, gross profit increased by $69.8 million compared to prior year. Most of the increase to sales and cost of sales is the result of increased commodity prices. The net increase to gross profit in the current period results reflect significantly improved crush margins, higher co-product sales from traditional and high-protein DDGs and corn oil and strong merchandising revenues. The prior year results were significantly impacted by COVID-19, resulting in a lack of demand and also included a $10.9 million inventory write down.

Operating, administrative and general expenses increased by $6.0 million primarily due to higher labor and incentive compensation costs from increased production and improved operating results, respectively.

Plant Nutrient

Operating results for the Plant Nutrient Group increased by $13.9 million compared to the same period in the prior year. Sales and merchandising revenues increased $125.3 million and cost of sales and merchandising revenues increased by $99.7 million resulting in increased gross profit of $25.5 million. Gross profit improved year over year due to increases in volumes and margins across the breadth of product lines and reflects higher demand, strong grower income and well-positioned fertilizer inventory.

Operating, administrative and general expenses increased by $13.7 million due to increased incentive compensation from improved operating results, and other variable expenses supporting additional volume in the current year.

Interest expense decreased by $1.2 million from lower interest rates compared to the prior year.

Other

Operating results declined by $16.8 million from the same period last year. The increase in operating losses was primarily driven by increased variable incentive-based compensation in operating, administrative and general expenses due to improved company-wide performance year over year, as well as stranded costs from the sale of our Rail Leasing business.

Income Taxes

For the nine months ended September 30, 2021, the Company recorded an income tax expense from continuing operations of $18.1 million at an effective rate of 21.5%. For the nine months ended September 30, 2020, the Company recorded an income tax benefit from continuing operations of $18.6 million at an effective tax rate of 36.7%. The change in effective tax rate for the nine months ended September 30, 2021 as compared to the same period last year primarily attributed to additional tax benefits from net operating loss carry backs as a result of the CARES Act in the prior year, offset by the favorable impact of the mark-to-market activity on the contracts within the ethanol segment and the portion of income owned by noncontrolling interests that do not result in a tax expense.


The Andersons, Inc. | Q3 2021 Form 10-Q | 31

Table of Contents

Liquidity and Capital Resources

Working Capital
At September 30, 2021, the Company had working capital related to its continuing operation of $762.1 million. The following table presents changes in the components of current assets and current liabilities:

(in thousands)September 30, 2021September 30, 2020Variance
Current Assets from Continuing Operations:
Cash and cash equivalents$216,874 $13,693 $203,181 
Accounts receivable, net735,349 509,964 225,385 
Inventories1,017,804 747,588 270,216 
Commodity derivative assets – current409,647 140,065 269,582 
Other current assets92,159 83,807 8,352 
Total current assets from continuing operations$2,471,833 $1,495,117 $976,716 
Current Liabilities from Continuing Operations:
Short-term debt281,199 100,405 180,794 
Trade and other payables825,923 635,206 190,717 
Customer prepayments and deferred revenue147,225 47,906 99,319 
Commodity derivative liabilities – current78,702 79,159 (457)
Current maturities of long-term debt106,255 62,499 43,756 
Accrued taxes97,215 15,178 82,037 
Accrued expenses and other current liabilities173,215 128,187 45,028 
Total current liabilities from continuing operations$1,709,734 $1,068,540 $641,194 
Working Capital from Continuing Operations$762,099 $426,577 $335,522 

Current assets from continuing operations as of September 30, 2021 increased $976.7 million in comparison to those as of September 30, 2020. This increase was noted in all working capital asset accounts. The increases in accounts receivable, current commodity derivative assets and inventory balances can largely be attributable to the significant increases in the prices of agricultural commodities, including fertilizer, that the Company transacts in the ordinary course of business. The significant increase in cash and cash equivalents is largely due to proceeds received during the third quarter of the current year from the Rail Leasing business sale. See also the discussion below on additional sources and uses of cash for an understanding of the increase in cash from prior year.
Current liabilities from continuing operations increased $641.2 million compared to the prior year primarily due to increases in short-term debt and trade and other payables. The increase in short-term debt is the result of higher working capital needs and driven by significant increases in the prices of agricultural commodities. The increase in trade and other payables is also the result of increasing agricultural commodity prices. The increase in accrued expenses is largely driven by the income tax payable associated with the significant taxable gain realized in conjunction with the Rail Leasing business sale in the current year. The increase in current maturities of long-term debt is due to the shift of ELEMENT debt as it was determined that it was virtually certain that a covenant violation would occur in the future.

The Andersons, Inc. | Q3 2021 Form 10-Q | 32

Table of Contents

Sources and Uses of Cash
Nine Months Ended
(in thousands)September 30, 2021September 30, 2020
Net cash provided by operating activities$119,067 $195,791 
Net cash provided by (used in) investing activities519,523 (70,159)
Net cash used in financing activities(450,647)(166,427)

Operating Activities
Our operating activities provided cash of $119.1 million and $195.8 million in the first nine months of 2021 and 2020, respectively. The decrease in cash provided was primarily due to a result in the change of working capital, as discussed above, driven by significant increases in agricultural commodity prices. However, when you remove the impact from changes in working capital, cash provided by operating activities was much stronger than the prior period due to favorable operating results.

Investing Activities
Investing activities provided cash of $519.5 million through the first nine months of 2021 compared to cash used of $70.2 million in the prior year. The significant increase from the prior year was a result of proceeds received for the sale of the Rail Leasing business as well as a grain asset location within the Trade segment. Additional contributing factors to the increase were higher proceeds from sales of assets and railcars in the normal course of business, fewer purchased railcars and the continued strategic use of capital spending to enhance overall liquidity and cash management.
We expect to invest approximately $85 million in property, plant and equipment in 2021 related to continuing operations.

Financing Activities
Financing activities used cash of $450.6 million and $166.4 million for the nine months ended September 30, 2021 and 2020, respectively. This change from the prior year was largely due to the Company's continued strategic effort to pay down debt which was accelerated with proceeds from the Rail Leasing sale.
The Company is party to borrowing arrangements with a syndicate of banks that provide a total of $1,297.5 million in borrowings. Of the total capacity, $397.5 million is non-recourse to the Company. As of September 30, 2021, the Company had $1,169.9 million available for borrowing with $160.1 million of that total being non-recourse to the Company.

The Company paid $17.5 million in dividends in the first nine months of 2021 compared to $17.2 million in the prior year. The Company paid $0.175 per common share for the dividends paid in January, April and July of 2021 and 2020. On August 20, 2021, the Company declared a cash dividend of $0.175 per common share payable on October 22, 2021 to shareholders of record on October 1, 2021.
Certain of our long-term borrowings include covenants that, among other things, impose minimum levels of equity and limitations on additional debt. The Company has concluded that in relation to the $70 million non-recourse credit agreement associated with the ELEMENT operations, is virtually certain to violate a debt service coverage ratio covenant at December 31, 2021, if it does not otherwise obtain a waiver. ELEMENT plans to work with the lending party to do so, however, in the meantime has classified this debt as a current maturity of long-term debt as of September 30, 2021. The Company is in compliance with all other covenants as of September 30, 2021. In addition, certain of our long-term borrowings are collateralized by first mortgages on various facilities. Our non-recourse long-term debt is collateralized by ethanol plant assets.
Because the Company is a significant borrower of short-term debt in peak seasons and the majority of this is variable rate debt, increases in interest rates could have a significant impact on our profitability. In addition, periods of high grain prices and/or unfavorable market conditions could require us to make additional margin deposits on our exchange traded futures contracts. Conversely, in periods of declining prices, the Company could receive a return of cash.
Management believes our sources of liquidity will be adequate to fund our operations, capital expenditures and service our indebtedness.

At September 30, 2021, the Company had standby letters of credit outstanding of $26.0 million.
The Andersons, Inc. | Q3 2021 Form 10-Q | 33

Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For further information, refer to our Annual Report on Form 10-K for the year ended December 31, 2020. There were no material changes in market risk, specifically commodity and interest rate risk during the nine months ended September 30, 2021.


Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of September 30, 2021 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the third quarter of 2021, identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Andersons, Inc. | Q3 2021 Form 10-Q | 34

Table of Contents

Part II. Other Information

Item 1. Legal Proceedings

The Company is subject to legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. Except as described in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 13, “Commitments and Contingencies,” in the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss greater than a recorded accrual, concerning loss contingencies for asserted legal and other claims.

The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.


Item 1A. Risk Factors

The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in Part I, Item 1A of the 2020 Form 10-K under the heading “Risk Factors,” any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price. There have been no material changes to the Company’s risk factors since the 2020 Form 10-K.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
PeriodsTotal Number of Shares PurchasedAverage Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 2021
— $— — $— 
August 2021
— — — — 
September 2021
1,305 28.40 — — 
Total1,305 $28.40 — $100,000,000 
(1) As of August 20, 2021, the Company was authorized to purchase up to $100 million of the Company’s common stock (the "Repurchase Plan") on or before August 20, 2024. As of September 30, 2021, none of the $100 million available to repurchase shares had been utilized. The Repurchase Plan does not obligate the Company to acquire any specific number of shares. Under the Repurchase Plan, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.


Item 4. Mine Safety Disclosure

The Company is committed to protecting the occupational health and well-being of each of our employees. Safety is one of our core values and as an organization strive to ensure that safety is the first priority for all employees. Our internal objective is to achieve zero injuries and incidents across the Company by focusing on proactively identifying needed prevention activities, establishing standards and evaluating performance to mitigate any potential loss to people, equipment, production and the environment. The Company has implemented employee training that is geared toward maintaining a high level of awareness and knowledge of safety and health issues in the work environment. Management believes that through these policies the Company has developed an effective safety management system.

Under the Dodd-Frank Act, each operator of a coal or other mine is required to include certain mine safety results within its periodic reports filed with the SEC. As required by the reporting requirements included in §1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, the required mine safety results regarding certain mining safety and health matters for each of our mine locations that are covered under the scope of the Dodd-Frank Act are included in Exhibit 95.1 of Item 6. Exhibits of this Quarterly Report on Form 10-Q.

The Andersons, Inc. | Q3 2021 Form 10-Q | 35

Table of Contents



Item 6. Exhibits
Exhibit NumberDescription
2.1
31.1*
31.2*
32.1**
95.1*
101**Inline XBRL Document Set for the Condensed Consolidated Financial Statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
104**
Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.
* Filed herewith
** Furnished herewith
Items 3 and 5 are not applicable and have been omitted

The Andersons, Inc. | Q3 2021 Form 10-Q | 36

Table of Contents
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
THE ANDERSONS, INC.
Date: November 4, 2021/s/ Patrick E. Bowe
Patrick E. Bowe
President and Chief Executive Officer
Date: November 4, 2021/s/ Brian A. Valentine
Brian A. Valentine
Executive Vice President and Chief Financial Officer

The Andersons, Inc. | Q3 2021 Form 10-Q | 37