UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 

Part I.

The Andersons, Inc. (the "Company") is a diversified company rooted in agriculture. Founded in Maumee, Ohio in 1947, the Company is a significant player in the North American agricultural supply chain and conducts its business in the trade, ethanol,renewables, and plant nutrient and rail sectors.

The Company's operations are classified into fourthree reportable business segments: Trade, Ethanol,Renewables, and Plant Nutrient, and Rail.Nutrient. Each of these segments is organized based upon the nature of products and services offered and aligns with the management structure. See Note 12 to the Consolidated Financial Statements in Item 8 for information regarding business segments.

The Trade Group (formerly the Grain Group), through recent acquisitions, has evolved intosegment is a diversified business focusing on logisticscapturing profits through merchandising and merchandisingmanaging logistics across a wide range of commodities. The groupsegment specializes in the movement of physical commodities such asas: whole grains, grain products, feed ingredients frac sand,and domestic fuel products andamong other agricultural commodities. The businessCompany has a broad geographic footprint with a diversified portfolio of physical commodities, although the principal commodities sold by the Company are corn, wheat and soybeans. Exported commodity sales are made both through intermediaries and direct shipments to foreign countries.

Trade also operates grain elevators across the U.S.United States and Canada where income is earned on commodities bought and sold through the elevator, commodities that are purchased and conditioned for resale, and commodities that are held in inventory until a future period, earning space income. Space income consistsan elevation margin. Elevation margins consist of appreciation or depreciation in the basis value of commodities held, andwhich represents the difference between the cash price of a commodity in one of the Company's facilities and an exchange traded futures price (“basis”); appreciation or depreciation between the future exchange contract months (“spread”); and commodities stored for others upon which storage fees are earned. The Trade Group business also offers a number of unique grain marketing, risk management and origination services to its customers and affiliated ethanol facilities for which it collects fees.

Fixed price purchase and sale commitments as well as commodities held in inventory, expose the Company to risks related to adverse changes in market prices. Grain prices are typically comprised of two components, futures prices on regulated commodity exchanges and local basis adjustments. The Company manages the futures price risk by entering into exchange-traded futures and option contracts with regulated commodity exchanges. The contracts are economic hedges of price risk but are not designated or accounted for as hedging instruments. These regulated commodity exchanges maintain futures markets for the grains merchandised by the Company. Futures prices are determined by worldwide supply and demand.

The Ethanol GroupRenewables segment produces, purchases and sells ethanol and coproducts,co-products, offers facility operations, and provides risk management and ethanol and coproducts marketing services to the ethanol plants it invests in and operates.operates in. The groupCompany co-owns five ethanol plants located in Indiana, Iowa, Kansas, Michigan and Ohio. The groupsegment demonstrates an expertise in ethanol plant management, logistics and commercialization of ethanol and feed productsco-products with a focus on leading the industry in margins per bushel. The business also leverages partnerships, which are discussed in further detail below, to expand market knowledge and shared technology across its five plants. Due to the current year reorganization, the Company's moved its Distillers Dried Grains ("DDG") merchandising business from the Trade to EthanolThe segment whereby providing the groupalso operates a merchandising and trade portfolio of ethanol, ethanol co-products and coproducts.

Through the first nine months of 2019 the Ethanol Group held ownership interestsThe Company owns a 50.1% interest in three limited liability companies (“the ethanol LLCs” or “LLCs”), each of which owned an ethanol plant that was operated by the Company's Ethanol Group. On October 1, 2019, the Ethanol Group entered into an agreement to merge the LLCs and the Company's wholly-owned subsidiary, The Andersons Denison Ethanol LLC into a new legal entity, The Andersons Marathon Holdings LLC ("TAMH"). As a result of the merger, the Company and Marathon Petroleum Corporation ("Marathon") own 50.1% andowns the remaining 49.9% ofinterest. TAMH equity, respectively. The transaction resulted in the consolidationis comprised of TAMH’s results in the Company's financial statements effective October 1, 2019. Prior to October 1, 2019 the results of the Ethanol LLCs were accounted for under the equity method of accounting. The four ethanol plants within TAMH are located in Iowa, Indiana, Michigan, and Ohio. These plants have a combined nameplate capacity of 405 million gallons, but have a history of ethanol.outperforming the nameplate capacity. The Company operates these facilities under a management contract, provides corn origination, ethanol marketing, and risk management services. The Company fully consolidates TAMH's results in the Company's Consolidated Financial Statements.

The Company also owns 51% of ELEMENT, LLC ("ELEMENT") and ICM, Inc. ("ICM") owns the remaining 49% interest. In 2019 ELEMENT completed the constructionis comprised of a 70 million-gallon-per-year bio-refinery in Kansas which began limited production in the third quarter of 2019. ICMKansas. The Company operates the facility under a management contract, and managed the initial construction of the facility, while the Company provides corn origination, ethanol marketing, and risk management services. The Company fully consolidates ELEMENT's results in the Company's financial statements.Consolidated Financial Statements.

The Plant Nutrient Groupsegment is a leading manufacturer, distributor and retailer of agricultural and related plant nutrients, liquid industrial products, corncob-based products, and pelleted lime and gypsum products, in the U.S. Corn Belt and Puerto Rico. The group provides warehousing, packagingvarious turf fertilizer, pesticide and manufacturing services to basic nutrient producers and other distributors. The group also manufactures and distributes a variety of industrial products throughout the U.S. and Puerto Rico including nitrogen reagents for air pollution control systems used in coal-fired power plants, and water treatment and dust abatementherbicide products.

In its plant nutrient businesses,Plant Nutrient business, the Company competes with regional and local cooperatives, wholesalers and retailers, predominantly publicly owned manufacturers and privately-owned retailers, wholesalers and importers. Some of these competitors are also suppliers and have considerably larger resources than the Company.suppliers. Competition in the nutrient business is based largely on depth of product offering, price, location and service. Sales and warehouse shipments of agricultural nutrients and turf related products are heaviest in the spring and fall.

As of January 1, 2020, the group reorganizedThe segment is organized into the three divisions listed below:

Grain sold by the Company must conform to official grade standards imposed under a federal system of grain grading and inspection administered by the United States Department of Agriculture (“USDA”).

The production levels, markets and prices of the grains that the Company merchandises are affected by United States government programs, which include acreage control and price support programs of the USDA. In regard to our investments in ethanol production facilities, much of the U.S. government has mandated a ten percent blend for motor fuel gasoline sold.ethanol blending is done to meet the Renewable Fuel Standard by adding 10% ethanol.

The U.S. Food and Drug Administration (“FDA”) has developed bioterrorism prevention regulations for food facilities, which require that the Company registers its grain operations with the FDA, provide prior notice of any imports of food or other agricultural commodities coming into the United States and maintain records to be made available upon request that identifies the immediate previous sources and immediate subsequent recipients of its grain commodities.

The Company, like other companies engaged in similar businesses, is subject to a multitude of federal, state and local environmental protection laws and regulations including, but not limited to, laws and regulations relating to air quality, water quality, pesticides and hazardous materials. The provisions of these various regulations could require modifications of certain of the Company's existing facilities and could restrict the expansion of future facilities or significantly increase the cost of their operations. Compliance with environmental laws and regulations did not materially affect the Company's earnings or competitive position in 2020.2022. In each of the countries in which we operate, we are subject to a variety of laws and regulations governing various aspects of our business, including general business regulations as well as those governing the manufacturing, handling, storage, transport, marketing and sale of our products. These include laws and regulations relating to facility licensing and permitting, food and feed safety, the handling and production of regulated substances, nutritional and labeling requirements, global trade compliance and other matters.

The Company's operations are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this Form 10-K and could have a material adverse impact on ourthe financial results.results of the Company. The risks described below are not the only risks facing us.the Company. Additional risks and uncertainties not currently known to us or those we currently viewviewed to be immaterial may also materially and adversely affect our business, financial condition or results of operations. These risks can be impacted by factors beyond ourmanagement's control. The following risk factors should be read carefully in connection with evaluating our businessthe Company and the forward-looking statements contained elsewhere in this Form 10-K.

Our Trade, EthanolRenewables and Plant Nutrient businesses buy, sell and hold inventories of agricultural input and output commodities, some of which are readily traded on commodity futures exchanges. Unfavorable weather conditions, both local and worldwide, as well as other factors beyond our control, can affect the supply and demand of these commodities and expose us to liquidity pressures to finance hedges in the commodity business in rapidly rising markets. In our Plant Nutrient business, changes in the supply and demand of these commodities can also affect the value of inventories that we hold, as well as the price of raw materials as we are unable to effectively hedge these commodities. Increased costs of inventory and prices of raw material would decrease our profit margins and adversely affect our results of operations.

Our futures, options and over-the-counter contracts are subject to margin calls. If there are large movements in the commodities market, we could be required to post significant levels of margin deposits, which would impact our liquidity. There is no assurance that the efforts we have taken to mitigate the impact of the volatility of the prices of commodities upon which we rely will be successful and any sudden change in the price of these commodities could have an adverse effect on our business and results of operations.

Many of our business segments are subject to government regulation and regulation by certain private sector associations, compliance with which can impose significant costs on our business. Other regulations are applicable generally to all our businesses and corporate functions, including, without limitation, those promulgated under the Internal Revenue Code, the Affordable Care Act, the Employee Retirement Income Security Act and other employment and health care related laws, federal and state securities laws, and the US Patriot Act. Failure to comply with such regulations can result in additional costs, fines or criminal action.

A significant part of our operations is regulated by environmental laws and regulations, including those governing the labeling, use, storage, discharge and disposal of hazardous materials. Because we use and handle hazardous substances in our businesses, changes in environmental requirements or an unanticipated significant adverse environmental event could have an adverse effect on our business. We cannot assure that we have been, or will at all times be, in compliance with all environmental requirements, or that we will not incur costs or liabilities in connection with these requirements. Private parties, including current and former employees, could bring personal injury or other claims against us due to the presence of, or exposure to, hazardous substances used, stored or disposed of by us, or contained in our products. We are also exposed to residual risk because some of the facilities and land which we have acquired may have environmental liabilities arising from their prior use. In addition, changes to environmental regulations may require us to modify our existing plant and processing facilities which could significantly increase the cost of those operations.

We are exposed to the risk of a decrease in the value of our inventories due to a variety of circumstances in all of our businesses. For example, within our Trade and EthanolRenewables businesses, there is the risk that the quality of our inventory could deteriorate due to damage, moisture, insects, disease or foreign material. If the quality of our inventory were to deteriorate below an acceptable level, the value of our inventory could decrease significantly. In our Plant Nutrient business, planted acreage, and consequently the volume of fertilizer and crop protection products applied, is partially dependent upon government programs and the producer's perception of demand. Technological advances in agriculture, such as genetically engineered seeds that resist disease and insects, or that meet certain nutritional requirements, could also affect the demand for our crop nutrients and crop protection products. Either of these factors could render some of our inventory obsolete or reduce its value. Within our rail repair business, major design improvements to loading, unloading and transporting of certain products can render existing (especially old) equipment obsolete.

If cash on hand is insufficient to pay our obligations or margin calls as they come due at a time when we are unable to draw on our credit facility, it could have an adverse effect on our ability to conduct our business. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is dependent on various factors. These factors include general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Certain of our long-term borrowings include provisions that require minimum levels of working capital and equity and impose limitations on additional debt. Our ability to satisfy these provisions can be affected by events beyond our control, such as the demand for and the fluctuating price of commodities. Although we are and have been in complianceNoncompliance with these provisions noncompliance could result in default and acceleration of long-term debt payments.

The markets for our products in each of our business segments are highly competitive. While we have substantial operations in certain of the regions where we operate, some of our competitors are significantly larger, compete in wider markets, have greater purchasing power, and have considerably larger financial resources. We also may enter into new markets where our brand is not recognized and in which we do not have an established customer base. Competitive pressures in all of our businesses could affect the price of, and customer demand for, our products, thereby negatively impacting our profit margins and resulting in a loss of market share.

A significant amount of purchases and sales within the Trade and Ethanol segmentRenewables segments are made through forward contracting.contracting, much of which includes a natural back-to-back hedging relationship. In addition, the Company uses exchange traded and, to a lesser degree, over-the-counter contracts to further reduce volatility in changing commodity prices. A significant adverse change in commodity prices could cause a counter-party tocounterparty of one or more of our derivative contracts to not perform on its obligation.

Adverse weather conditions have historically caused volatility in the agricultural commodity industry and consequently in our operating results by causing crop failures or significantly reduced harvests, which may affect the supply and pricing of the agricultural commodities that we sell and use in our business, reduce demand for our fertilizer products and negatively affect the creditworthiness of agricultural producers who do business with us. A significant portion of the Company's assets are exposed to conditions in the Eastern CornGrain Belt. In this region, adverse weather during the fertilizer application, planting, and harvest seasons can have negative impacts on our Trade, EthanolRenewables and Plant Nutrient businesses. Higher basis levels or adverse crop conditions in the Eastern CornGrain Belt can increase the input costs or lower the market value of our products relative to other market participants that do not have the same geographic concentration.

Additionally, the potential physical impacts of climate change are uncertain and may vary by region. These potential effects could include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperature levels that could adversely impact our costs and business operations, the location, costs and competitiveness of agricultural commodity production and related storage and processing facilities and the supply and demand for agricultural commodities. These effects could be material to our results of operations, liquidity or capital resources.

We rely on a limited number of suppliers for certain of our raw materials and other products. If we were unable to obtain these raw materials and products from our current vendors, or if there were significant increases in our supplier's prices, it could significantly increase our costs and reduce our profit margins.

The level of demand for our products is affected by global and regional demographic and macroeconomic conditions, including population growth rates, and changes in standards of living.living and the occurrence of any health-related risks. A significant downturn in global economic growth, or recessionary conditions in major geographic regions, may lead to reduced demand for agricultural commodities and food products, which could adversely affect our business and results of operations. The occurrence of health-related risks including epidemics or global pandemics such as COVID-19 may adversely affect the economy. The COVID-19 pandemic has had unpredictable impacts on global economies, financial markets, and society. The extent to which similar outbreaks or future pandemics impact our business going forward will depend on the duration or scope of the outbreak and how governmental, businesses, and society respond, along with the economic impact including financial market volatility. The pace of economic improvement is uncertain especially given the current global pandemic caused by COVID-19 and there can be no assurance that economic and/or political conditions will not continue to affect market and consumer confidence or deteriorate further in the near term.

We continuously look for opportunities to enhance our existing businesses through strategic acquisitions. The process of integrating an acquired business into our existing business and operations may result in unforeseen operating difficulties and expenditures as well as require a significant amount of management resources. There is also the risk that our due diligence efforts may not uncover significant business flaws or hidden liabilities. In addition, we may not realize the anticipated benefits of an acquisition and they may not generate the anticipated financial results. Additional risks may include the inability to effectively integrate the operations, products, technologies and personnel of the acquired companies. The inability to maintain uniform standards, controls, procedures and policies would also negatively impact operations.

GAAP requires us to test for goodwill impairment at least annually. In addition, we review our tangible and intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill, or amortizable intangible assets and long-lived assets may not be recoverable include prolonged declines in stock price, market capitalization or cash flows, and slower growth rates in our industry. Depending on the results of our review, we could be required to record a significant charge to earnings in our Consolidated Financial Statements during the period in which any impairment of our goodwill or amortizable intangible assets wereis determined, negatively impacting our results of operations.

DueThere is an increased focus on environmental, social and corporate governance regulations for the industry. As a Company, we assess the potential impacts of our business on environmental risks including climate change, carbon emissions, physical and transition risks, along with other environmental issues. The Company, through our Enterprise Risk Management program and other efforts, is actively focused on strategic goals to expand responsible practices to reduce environmental risks while ensuring compliance with evolving laws and regulations. For example, through working with third parties such as Supplier Leadership on Climate Transition we have reported Scope 1 and 2 greenhouse gases emissions in our annual Sustainability Report, and we are working with third parties to develop Scope 3 data. We have been participating with customers in pilot sustainable sourcing projects as well as looking to participate in Field to Market which provides farming operation analytics to customers to create greater visibility into supply chain and sustainability efforts. If we are unable to properly assess these risks and meet our ESG reporting goals and metrics for Scope 1, 2 and 3 greenhouse gas emissions, or if our efforts are considered to be inadequate, then stakeholders, industry, and investors might perceive that we are not responding appropriately and responsibly to the growing concern, and we could be subject to fines and penalties. As a result, investors may reconsider their capital investments and our reputation could be diminished leading to customers and suppliers choosing to refrain from engaging in business with us.

We continue to assess the impact of various U.S. federal, state, local and international legislative proposals that could result in a material increase to our U.S. federal, state, local and/or international taxes. We cannot predict what impact, if any, changes in federal policy, including tax policies, as a result of recent U.S. federal elections will have on our industry or whether any specific legislation will be enacted or the terms of any such legislation. However, if such proposals were to be enacted, or if modifications were to be made to certain existing regulations, the consequences could have a material adverse impact on us, including increasing our tax burden, increasing our cost of tax compliance or otherwise adversely affecting our financial position, results of operations, cash flows and liquidity. Changes in applicable U.S. or foreign tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our tax expense and profitability as they did in 2017 upon passage of the Tax Cuts and Jobs Act.profitability. Such impact may also be affected positively or negatively by subsequent potential judicial interpretation or related regulation or legislation which cannot be predicted with certainty.

In the ordinary course of business, we are subject to various legal and regulatory proceedings, which may include but are not limited to those involving antitrust, tax, environmental, intellectual property, data privacy and other matters, including general commercial litigation. Any claims raised in legal and regulatory proceedings, whether with or without merit, could be time consuming and expensive to defend and could divert management’s attention and resources. Additionally, the outcome of legal and regulatory proceedings may differ from our expectations because the outcomes of these proceedings are often difficult to predict reliably. Various factors and developments can lead to changes in our estimates of liabilities and related insurance receivables, where applicable, or may require us to make additional estimates, including new or modified estimates that may be appropriate due to a judicial ruling or judgment, a settlement, regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in charges that could have a material adverse effect on our results of operations in any particular period.

In accordance with customary practice, we maintain insurance against some, but not all, of these potential claims. In the future, we may not be able to maintain insurance at commercially acceptable premium levels. In addition, the levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities. If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse impact on our business, financial condition and results of operations.

The Company has no unresolved staff comments.

The Company's principal agriculture rail, and other properties are described below. The Company believes that its properties are adequate for its business, well maintained and utilized, suitable for their intended uses and adequately insured.

The Plant Nutrient properties consist mainly of fertilizer warehouse and formulation and packaging facilities for dry and liquid fertilizers. The Company owns approximately 99%substantially all of the dry and liquid storage capacityfacilities noted above.

The Company is currently subject to various claims and suits arising in the ordinary course of business, which include environmental issues, employment claims, contractual disputes, and defensive counterclaims. The Company accrues liabilities in which litigation losses are deemed probable and estimable. The Company believes it is unlikely that the results of its current legal proceedings, even if unfavorable, will result in material liabilities beyond what it currently has accrued. There can be no assurance, however, that any claims or suits arising in the future, whether taken individually or in the aggregate, will not have a material adverse effect on our financial condition or results of operations.

Part II.

The Common Shares of The Andersons, Inc. trade on the Nasdaq Global Select Market under the symbol “ANDE”.

At February 12, 2021,10, 2023, there were 1,034457 shareholders of record and approximately 13,29128,660 shareholders for whom security firms acted as nominees.

The Company has declared and paid consecutive quarterly dividends since its first year of trading in 1996. Dividends paid from January 20192021 to January 20212023 are as follows:

While the Company's objective is to pay a quarterly cash dividend, dividends are subject to approval from the Board of Director approval.Directors.

The graph below compares the total shareholder return on the Company's Common Shares to the cumulative total return for the Nasdaq U.S.Russell 3000 Index and a Peer Group Index. The Company chose to switch from the Nasdaq U.S. Index used in the prior year to the Russell 3000 Index in the current year. The Company currently uses the Russell 3000 Index as a benchmark for stock compensation awards as it more accurately reflects the Company's market capitalization and broad array of industries. Both the Nasdaq U.S Index and the Russell 3000 Index are included in the graph below for comparison purposes. The indices reflect the year-end market value of an investment in the stock of each company in the index, including additional shares assumed to have been acquired with cash dividends, if any. The Peer Group Index, weighted for market capitalization, includes the following companies:

The graph assumes a $100 investment in The Andersons, Inc. Common Shares on December 31, 20152017, and also assumes investments of $100 in each of the Russell 3000 Index, Nasdaq U.S. Index and Peer Group indices, respectively, on December 31 of the first year of the graph. The value of these investments as of the following calendar year-ends is shown in the table below the graph.

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. Without limitation, these risks include economic, weather and regulatory conditions, competition, the COVID-19 pandemicongoing economic impacts from the war in Ukraine, and those listed under Item 1.A, "Risk Factors." The reader is urged to carefully consider these risks and factors. 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 we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Executive Overview

Our operations are organized, managed and classified into fourthree reportable business segments: Trade, Ethanol,Renewables, and Plant Nutrient, and Rail.Nutrient. Each of these segments is generally based on the nature of products and services offered and aligns with the management structure.

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 commodities that the business deals in will have a relatively equal impact on sales and merchandising revenues and cost of sales and merchandising revenues and a much less significant impact on gross profit. As a result, changes in sales and merchandising revenues 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 Trade Group's performance reflects an increase in merchandising activity, however, this increase was offset bysegment's operating results improved from the prior year over year reductions in income as it pertains to its grain elevatorthe segment had a second consecutive record year. Both asset and foodmerchandising businesses exceeded prior year results as they were able to successfully navigate global disruptions and specialty ingredients businesses. The reduction in income from the grain elevator asset business was driven by the weak 2019 harvest carryovera volatile market. Assets in the Eastern Corn Belt assets and lower wheat opportunities. Additionally, thesegment's core geography benefited from strong elevation margins, even seeing storage income return on wheat. Our merchandising business executed well, optimizing income across a broad portfolio. Our food and specialty ingredients business netted loweralso delivered strong results that were driven by higher freight costs and lower volumes, a portion of which was due toin the impact COVID-19 hadyear as they realized significant premiums on the restaurant industry.organic products.

Agricultural inventories on hand were 129.7 million and 187.0 million bushels at December 31, 2022, and December 31, 2021, respectively. These bushels consist of inventory held at company-owned or leased facilities, transload inventory, in-transit inventory, and third-party held inventory. Total grainTrade storage space capacity at company owned or leased facilities, including temporary pile storage, was approximately 202.1183.6 million bushels as of December 31, 2020 and 206.6 million bushels as of December 31, 2019. Commodity inventories on hand at December 31, 2020 were 142.82022, and 185.5 million bushels of which 3.0 million bushels were stored for others. This compares to 152.8 million bushels on hand at December 31, 2019, of which 6.4 million bushels were stored for others.2021.

Looking forward, the 2020 corn and soybean harvest improved in the Eastern Corn Belt comparedag supply chain opportunities are expected to remain strong into 2023. Continued worldwide demand coupled with supply uncertainty due to the prior year. Further, export demand has been robust, especially from China, which is expectedongoing war in Ukraine and potential weather impacts in global grain production regions continues to continue into the first quarter of 2021. These conditions have led to a significant increase in basis, strong elevation marginskeep commodity prices relatively high and considerable volatility, which will createprovide ongoing merchandising opportunities.

Volumes shipped for the years ended December 31, 20202022 and December 31, 20192021, were as follows:

The Plant Nutrient Group'ssegment's 2022 operating results increased year-over-year duedecreased slightly from the segment's record year in 2021. Ag Supply Chain and Specialty Liquids product lines experienced strong margins on well-positioned inventory in a market of rising fertilizer prices, which more than offset the reduction in volumes from the prior period. The Engineered Granules product lines recorded some inventory write-offs on lawn products, which negatively impacted the current year performance. Fourth quarter fertilizer price declines have likely shifted some demand from the fourth quarter of 2022 into 2023 as buyers anticipate prices to favorable planting conditionscontinue to decline. Strong farmer income and lower fertilizer prices are expected to drive higher volumes of agricultural fertilizers in both the Spring and Fall application seasons compared to the wet and compressed planting2023 spring season, in 2019. Further, the group continues to benefit from cost reduction initiatives and effective working capital management.albeit at more normalized margins.

Total storage capacity at our ag supply chainAg Supply Chain and engineered granules businessesEngineered Granules locations was approximately 463448 thousand tons for dry nutrients and approximately 509515 thousand tons for liquid nutrients at December 31, 2020,2022, which is similar to the prior year.

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 facilities primarily manufacture granulated dry products for use in specialty turf and agricultural applications. and a variety of corncob-based products.

The Company's “Other” representsactivities include corporate income and expense and cost for functions that provide support and services to the operating segments. The results contained within this group include expenses and benefits not allocated back to the operating segments including a portion of our ongoing ERP costs.

Results for Fiscal 20192021 compared to Fiscal 20182020

For comparisons of the Company's consolidated and segment results of operations and consolidated cash flows for the fiscal years ended December 31, 20192021 to December 31, 2018,2020, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2021, filed with the SEC on February 27, 2020.24, 2022.

Operating Results

The following discussion focuses on the operating results as shown in the Consolidated Statements of Operations with a separate discussion by segment. Additional segment information is included in Note 12 to the Company's Consolidated Financial Statements in Item 8.

The Company uses Non-GAAP 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 Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations is a useful measure of the Company’s performance becauseas it provides investors additional information about the Company's operations allowing better evaluation of underlying business performance and better period-to-period comparability. This measure is not intended to replace or be an alternative to Income (loss) before income taxes from continuing operations, the most directly comparable amount reported under GAAP.GAAP, which is also presented in the table above.

Comparison of 20202022 with 20192021

Operating results for the Trade Groupsegment increased $42.0$7.3 million compared to prior year reported results, which included $38.5 million of asset impairments and $8.0 million of acquisition related costs.results. Sales and merchandising revenues decreased $3.1increased $3,743.2 million compared to prior year. While the sales and merchandising revenue balances were comparable year over year, cost of sales and merchandising revenues increased by $47.8$3,671.2 million resulting in a decreasean increase in gross profit of $50.9$72.0 million. The decreased gross profit comparedincrease to sales and merchandising revenues and cost of sales and merchandising revenues is mainly a result of new merchandising locations opened in the second half of 2021 as these new locations account for approximately 56% of the increase from the prior year, was due towith the remainder of the increase a reductionresult of $36.4increased commodity prices and volumes in the existing business. The $72.0 million in our grain assets business from the carryover effects of a weak 2019 harvest in our Eastern Corn Belt assets and lower wheat carries combined with a $15.2 million reductionincrease in gross profit relatedwas an even split between increases in both margins and volumes. The improved margins were driven by strong elevation margins and well-positioned animal feed ingredients and organic food and specialty inventories with the volume increases mainly attributable to new merchandising locations opened and acquired in the shutdownsecond half of many of our sand facilities. This was partly offset by stronger merchandising results.2021.

Interest expense increased $18.9 million from prior year primarily due to headcount reductionsrising interest rates on the Company's short-term line of credit combined with higher borrowings with the addition of our new merchandising locations and increased commodity prices.

Other income decreased by $23.2 million in the current year and was primarily attributable to the prior year sale of a grain asset in Champaign, Illinois in which the Company recorded a $14.6 million gain. Also contributing to the decrease was one of the Company's equity method investments being $10.7 million more favorable in the prior year. Included in this decrease from cost cutting initiatives and the strategic divestitureprior year was an impairment on this investment of certain businesses. Depreciation expense was also lower due to divestitures and impairments$4.5 million in 2022.

The Trade Group recorded asset impairment charges of $38.5 million in 2019. The priorRenewables segment had a strong year asset impairment charges include a $34.8 million impairment of the Company's Frac Sand business following a fundamental shift in the operating environment in the areas we are located and a $3.7 million charge relatedoperationally as Income before income taxes attributable to the Company's Tennessee assets, as it disposed of its remaining assets in this region. No such impairments occurred in the current year.

The Plant Nutrient segment had a decrease of $3.5 million in operating results when compared to the record results of the prior year. Sales and merchandising revenues increased $232.4 million and cost of sales and merchandising revenues increased $223.3 million resulting in increased gross profit of $9.1 million from the prior year. The increase in sales and merchandising revenues and cost of sales and merchandising revenues was due a significant appreciation of fertilizer prices from the prior year. This increase in fertilizer prices from the prior year was partially offset by a decrease in demand as volumes sold decreased by $50.8approximately 25%. Gross profit improved year-over-year due to increased margins on well-positioned inventory from the prior year representing a $43.4 million from significantly lowermargin difference that was partially offset by a $34.3 million decrease in margins and mark-to-market lossesdirectly correlated with the reduced sales volumes. Ag Supply Chain led the way in 2022 with a $9.2 million increase in gross profit as higher corn prices outpaced ethanol price increases. The lower, and often negative, margins were a direct result of the decreased demand resultingstrong margins from the COVID-19 pandemic.well-positioned inventory in a tight supply market.

Operating, administrative and general expenses increased $3.8$10.5 million from the prior yearyear. The vast majority of this increase is due to inflationary pressures on the first full year of ELEMENT operations, andbusiness, with labor costs being the impact of the TAMH merger in October 2019. Prior to the merger, the Company's share of operating, administrative and general expenses would have been recognized in equity earnings. This increase was partially offset by lower labor and incentive compensation costs from cost cutting initiatives.single biggest driver.

Interest expense increased $6.5 million due to the cessation of the capitalization of interest related to the construction of the ELEMENT facility which was completed in 2019.

Operating, administrative and general expenses decreased $4.6Results improved by $3.0 million from the prior year. This improvement from the prior year was mainly due to headcount reductions, lower incentive compensation and other cost cutting initiatives. Severance related expense$3.4 million of $6.1 million associated withstranded costs from the departuresale of certain executive officers and key employees is also includedour Rail Leasing business being held in 2020 results.Corporate in the prior year.

In 2020,2022, the Company recorded incomeIncome tax benefitexpense from continuing operations of $10.3 million at an$39.6 million. The Company's effective rate for 2022 was 20.4% on Income before income taxes from continuing operations of 41.9%. In 2019,$194.6 million. The difference between the Company recorded income tax expense of $13.1 million at an20.4% effective tax rate of 46.4%. The change in effectiveand the U.S. federal statutory tax rate compared to the same period last year wasof 21% is primarily attributedattributable to the tax benefit generated from the current period loss before taxes offset byFederal Research and Development Credits ("R&D Credits"), foreign tax credits, derivative instruments and hedging activities and the effect of non-controlling interest offset by state and derivatives instrumentslocal income taxes, nondeductible compensation, and hedging activities, along with the additional benefits from net operating loss carrybacks as a result of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.changes in unrecognized tax benefits.

December 31, 2020 currentCurrent assets from continuing operations increased $471.1$111.6 million in comparison to prior year. TheThis increase was noted in all asset categories except cash. The increasesattributable to the increase in accounts receivable and inventory balances can largely be attributable to higher commodity prices. Current commodity derivative assets and liabilities, which reflect customers net assets or liabilities based onas all other current asset accounts decreased from the value of forward contracts as compared to market prices atprior year. The main driver behind the endsubstantial increase in receivables is the addition of the period, show a net increase. The increase in other current assets is due to significant prepaid federal income taxes as a resultgrowing international merchandising business along with the timing of the CARES Act.some large vessel shipments from our U.S. port facilities. See also the discussion below on additional sources and uses of cash for an understanding of the decrease in cash from prior year.

Operating Activities and Liquidity

Our operating activities usedprovided cash of $74.4$287.1 million in 20202022 compared to cash provided byused in operations of $348.6$51.1 million in 2019.2021. The increase in cash usedprovided by operating activities was primarily due to increasesincreased operating results and a decrease in the cash used through working capital accounts drivenchanges. However, when removing the impact from changes in operating assets and liabilities, taxes paid on the Rail Leasing sale in the prior year and the timing of CARES Act tax refunds cash provided by higher commodity prices, as discussed above, and lower operating results.activities exceeded the prior year.

Net income taxes of $2.4$88.7 million and $51.7 million were paid in 2020the years ended December 31, 2022 and net2021, respectively. The increase in the current year is driven by the increased Income before income taxes from continuing operations combined with the taxable gain associated with the sale of $2.0 million were paidthe remaining pieces of the Company's Rail segment in 2019.2022.

Investing activities used $86.8 million in 2020 compared to $325.0 million used in 2019. In addition to the significant cash used for the acquisition of Lansing Trade Group in 2019 the remaining decrease was largely driven by the Company's strategic focus on reduced capital spending to conserve cash as a result of the impacts of COVID-19 in conjunction with efforts to pay down long-term debt. Cash used for the purchases of property, plant, equipment, and capitalized software decreased $88.1 million primarily due to the previously mentioned strategic efforts as well as significant prior year costs associated with the construction of the bio-refinery facility in 2019.

Capital spendingexpenditures of $77.1$108.3 million for 20202022 on property, plant and equipment includes: Trade - $14.9$29.4 million; EthanolRenewables - $39.8$42.7 million; Plant Nutrient - $16.6 million; Rail - $4.4$34.7 million; and $1.5$1.4 million in corporate / enterprise resource planning project spending.

Net cash provided byused in financing activities was $136.3$334.7 million in 2020,2022, compared to $8.7$248.8 million used in 2019. This was largely due to an increase in proceeds from short term debt for working capital needs as commodity prices increased significantly through the latter part of the year.2021. The increase in short term borrowingscash used in financing activities from the prior year was offsetdue to several factors. First, the Company made distributions of approximately $44.9 million to the non-controlling interest shareholder of TAMH due to the strength of the financial results in part by reductionsboth 2021 and 2022. The Company also continued to pay down both long and short-term debt in long-term debt consistentthe current year which resulted in additional cash of $17.7 million used. Lastly, the Company also began to repurchase common shares under its Repurchase Plan where $100 million of repurchases were authorized to be repurchased on or before August 20, 2024. As of December 31, 2022, approximately $12.7 million of the Repurchase Plan had been utilized, with all of these repurchases being made in the Company's strategy to reduce long-term debt and achieving a targeted long-term debt-to-EBITDA ratio of less than 2.5 times by the end of 2023.year ended December 31, 2022.

As of December 31, 2020,2022, the Company was party to borrowing arrangements with a syndicate of banks that provide a total short and long-term borrowing capacity of $1,374.2$1,990.8 million. This amount includes $20.0 million for ELEMENT and $197 million for TAMH, all of which are non-recourse to the Company. There was $868.4$1,659.6 million available for borrowing at December 31, 2020.2022. Typically, ourthe Company's highest borrowing occurs in the late winter and early spring due to seasonal inventory requirements in ourthe fertilizer and grain businesses, however, rising commodity prices duringbusinesses. At December 31, 2022, the fourth quarter required more borrowing than the prior year.Company had standby letters of credit outstanding of $38.6 million.

The Company paid $23.0$24.6 million in dividends in 20202022 compared to $22.1$23.7 million in 2019.2021. The Company paid $0.180 per common share for the dividends paid in January, April, July and October 2022, and $0.175 per common share for the dividends paid in January, April, July and October 2020, and $0.170 per common share for the dividends paid in January, April, July and October 2019.2021. On December 17, 2020, we16, 2022, the Company declared a cash dividend of $0.175$0.185 per common share, payable on January 20, 20212023, to shareholders of record on January 4, 2021.3, 2023.

Certain of our long-term borrowings include covenants that, among other things, impose minimum levels of working capital and a minimum ratio of owner's equity. The Company has concluded as of December 31, 2022, that within the next twelve months ELEMENT is virtually certain to be out of compliance for an owner's equity ratio covenant in relation to the $63.3 million non-recourse credit agreement associated with the ELEMENT operations. As such, the Company classified the total $63.3 million of non-recourse debt under the ELEMENT credit agreement as a current maturity of long-term debt as of December 31, 2022. Additionally, ELEMENT did not make a required debt payment in February 2023 and limitationssubsequently received a default notice from the lender on additional debt. We areFebruary 17, 2023. Subsequent to year end, the Company began to consider various strategies related to the investment. The Company is in compliance with all such covenants as of December 31, 2020.2022. In addition, certain of our recourse long-term borrowings are collateralized by first mortgages on various facilities or are collateralized by railcar assets.facilities. Our non-recourse long-term debt that is currently classified in current maturities of long-term debt as described above, is collateralized by ethanolELEMENT plant assets and railcar assets.

Because we are a significant consumer 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 commodity prices and/or unfavorable market conditions could require us to make additional margin deposits on ourthe Company's exchange traded futures contracts. Conversely, in periods of declining prices, wethe Company would receive a return of cash.

We believe ourManagement believes the sources of liquidity will be adequate to fund our operations, capital expenditures and payments of dividends in the foreseeable future.

Contractual Obligations

As of December 31, 2020 are as follows:2022, the Company had outstanding recourse and non-recourse long-term debt with both floating and fixed rates of varying maturities for an aggregate principal amount outstanding of $541.4 million and $64.2 million, respectively. $46.3 million and $63.8 million of the outstanding principal of the recourse and non-recourse long-term debt is payable within 12 months. See Note 4 to the Consolidated Financial Statements for additional information.

(a) Future interest obligations are calculated based onpayments associated with the recourse long-term debt total $165.6 million, with $28.1 million payable within 12 months. Substantially all of the future interest rates in effectpayments associated with the non-recourse long-term debt is related to the $63.3 million non-recourse credit agreement associated with the ELEMENT operations that has been classified as a current maturity of long-term debt as of December 31, 20202022, for the Company's variable rate debtreasons described above. See Note 4 to the Consolidated Financial Statements for additional information.

The Company has a postretirement health care benefit plan that covers substantially all of businesses for the Trade and Ethanol segments in Itemits full-time employees hired prior to January 1, of this Annual Report on Form 10-K for further discussion.

Off-Balance Sheet Transactions

Critical Accounting Estimates

The process of preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Management evaluates these estimates and assumptions on an ongoing basis. Estimates and assumptions are based on historical experience and management's knowledge and understanding of current facts and circumstances. Actual results, under conditions and circumstances different from those assumed, may change from these estimates.

Certain of our accounting estimates are considered critical, as they are important to the depiction of the Company's financial statementsConsolidated Financial Statements and/or require significant or complex judgment by management. There are other items within our financial statementsthe Company's Consolidated Financial Statements that require estimation, however, they are not deemed critical as defined above. Note 1 to the Consolidated Financial Statements in Item 8 describes ourthe Company's significant accounting policies which should be read in conjunction with our critical accounting estimates.

Management believes that the accounting for readily marketable inventories and commodity derivative contracts, including adjustments for counterparty risk, uncertain tax positions, impairment of long-lived assets, goodwill and equity method investments, and business combinationsuncertain tax positions involve significant estimates and assumptions in the preparation of the Consolidated Financial Statements.

Readily Marketable Inventories ("RMI") are stated at their net realizable value, which approximates fair value based on their commodity characteristics, widely available markets, and pricing mechanisms. The Company marks to market all forward purchase and sale contracts for commodities and ethanol, over-the-counter commodity and ethanol contracts, and exchange-traded futures and options contracts. The overall market for commodity inventories is very liquid and active; market value is determined by reference to prices for identical commodities on regulated commodity exchange (adjusted primarily for transportation costs); and the Company's RMI may be sold without significant additional processing. The Company uses forward purchase and sale contracts and both exchange traded and over-the-counter contracts (such as derivatives generally used by the International Swap Dealers Association). Management estimates fair value based on exchange-quoted prices, adjusted for differences in local markets, as well as counter-partycounterparty non-performance risk in the case of forward and over-the-counter contracts. The amount of risk, and therefore the impact to the fair value of the contracts, varies by type of contract and type of counterparty. With the exception of specific customers thought to be at higher risk, the Company looks at the contracts in total, segregated by contract type, in its quarterly assessment of non-performance risk. For those customers that are thought to be at higher risk, the Company makes assumptions as to performance based on past history and facts about the current situation. Changes in fair value are recorded as a component of Cost of sales and merchandising revenues in the StatementConsolidated Statements of Operations.

The Company's business segments are each highly capital intensive and require significant investment. Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. This is done by evaluating the recoverability based on undiscounted projected cash flows, excluding interest. If an asset group is considered impaired, the impairment loss to be recognized is measured as the amount by which the asset group's carrying amount exceeds its fair value.

Goodwill is tested for impairment at the reporting unit level, which is the operating segment or one level below the operating segment. The quantitative review for impairment takes into account our estimates of future cash flows.flows, as well as a market-based approach. Our estimates of future cash flows are based upon a number of assumptions including operating costs, life of the assets, potential disposition proceeds, budgets and long-range plans. The Market based approach compares results of public companies that reflect economic conditions and risks that are similar to the Company to calculate an estimated enterprise value. These factors are discussed in more detail in Note 17, Goodwill and Intangible Assets, to the Consolidated Financial Statements.

Our annual goodwill impairment test is performed as of October 1st1 each year which is discussed in further detail in Note 17 to the Consolidated Financial Statements.

In addition, the Company holds investments in several companies that are accounted for using the equity method of accounting. The Company reviews its investments to determine whether there has been a decline in the estimated fair value of the investment that is below the Company's carrying value which is other than temporary. Other than consideration of past and current performance, these reviews take into account forecasted earnings which are based on management's estimates of future performance as well as the market or other income approach to estimate fair value.

Management considers several factors to be significant when estimating fair value including expected financial outlook of the business, changes in the Company's stock price, the impact of changing market conditions on financial performance and expected future cash flows, the geopolitical environment and other factors. Deterioration in any of these factors may result in a lower fair value assessment, which could lead to impairment charges in the future. Specifically, actual results may vary from the Company's forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions could result in non-cash impairment charges.

The market risk inherent in the Company's market risk-sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices foreign currency exchange rates and interest rates as discussed below.

The Company's daily net commodity position consists of inventories, related purchase and sale contracts, exchange-traded futures, and over-the-counter contracts. The fair value of the position is a summation of the fair values calculated for each commodity by valuing each net position at quoted futures market prices. The Company has established controls to manage and limit risk exposure, which consists of a daily review of position limits and effects of potential market price moves on those positions.

A sensitivity analysis has been prepared to estimate the Company's exposure to market risk of its net commodity futures position. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in quoted market prices. The result of this analysis, which may differ from actual results, is as follows:

The Company has subsidiaries located outside the United States where the local currency is the functional currency. To reduce the risks associated with foreign currency exchange rate fluctuations, the Company enters into currency exchange contracts to minimize its foreign currency position related to transactions denominated primarily in the euro, British pound, Mexican peso, Swiss franc, Egyptian pound, and Canadian dollar. These currencies represent the major functional or local currencies in which recurring business transactions occur. The Company does not use currency exchange contracts as hedges against amounts indefinitely invested in foreign subsidiaries and affiliates. The currency exchange contracts used are forward contracts, swaps with banks, exchange-traded futures contracts, and over-the-counter options. The changes in market value of such contracts have a high correlation to the price changes in the currency of the related transactions. The potential loss in fair value for such net currency position resulting from a hypothetical 10% adverse change in foreign currency exchange rates is not material.

The fair value of the Company's long-term debt is estimated using quoted market prices or discounted future cash flows based on the Company's current incremental borrowing rates and credit ratings for similar types of borrowing arrangements. Market risk, which is estimated as the potential increase in fair value resulting from a hypothetical one-half percent decrease in interest rates, is summarized below:

Actual results may differ. The estimated fair value and market risk will vary from year to year depending on the total amount of long-term debt and the mix of variable and fixed rate debt. The Company is also party to short-term debt borrowing arrangements with a capacity of approximately $2.0 billion. As the Company is a significant consumer of short-term debt in peak seasons and the majority of the borrowings are variable rate debt, increases in interest rates could have a significant impact on our profitability.