UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2017



¨	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

THE ANDERSONS, INC.

(Exact name of the registrant as specified in its charter)



OHIO		34-1562374
(State of incorporation or organization)		(I.R.S. Employer Identification No.)



1947 Briarfield Boulevard, Maumee, Ohio		43537
(Address of principal executive offices)		(Zip Code)

(419) 893-5050

(Telephone Number)

(Former name, former address and former fiscal year, if changed since last report.)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files. Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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 filer	ý	Accelerated Filer	¨
Non-accelerated filer	¨	Smaller 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 approximately 28.4 million common shares outstanding, no par value, at ~~July 28,~~October 27, 2017.

THE ANDERSONS, INC.

INDEX



	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets – ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016	3
Condensed Consolidated Statements of Operations – Three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016	5
Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016	6
Condensed Consolidated Statements of Cash Flows – ~~Six~~Nine months ended ~~June~~September 30, 2017 and 2016	7
Condensed Consolidated Statements of Equity – ~~Six~~Nine months ended ~~June~~September 30, 2017 and 2016	8
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3028
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4240
Item 4. Controls and Procedures	4240
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	4341
Item 1A. Risk Factors	4341
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4341
Item 6. Exhibits	4442

Part I. Financial Information

Item 1. Financial Statements

The Andersons, Inc. Condensed Consolidated Balance Sheets (Unaudited)(In thousands)	The Andersons, Inc. Condensed Consolidated Balance Sheets (Unaudited)(In thousands)						The Andersons, Inc. Condensed Consolidated Balance Sheets (Unaudited)(In thousands)

	June 30, 2017		December 31, 2016		June 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
Assets
Current assets:
Cash and cash equivalents	$	18,934	$	62,630	$	31,383	$	24,478	$	62,630	$	78,158
Restricted cash	1,033		471		987		—		471		190
Accounts receivable, net	186,331		194,698		212,588		196,192		194,698		173,593
Inventories (Note 2)	463,205		682,747		486,236		475,602		682,747		427,754
Commodity derivative assets – current (Note 5)	11,619		45,447		115,924		45,202		45,447		59,837
Other current assets	59,873		72,133		48,754		53,958		72,133		43,761
Assets held for sale (Note 16)	10,028		—		—		8,383		—		—
Total current assets	751,023		1,058,126		895,872		803,815		1,058,126		783,293
Other assets:
Commodity derivative assets – noncurrent (Note 5)	1,191		100		1,934		245		100		1,346
Goodwill (Note 17)	23,105		63,934		63,934		23,105		63,934		63,934
Other intangible assets, net	113,492		106,100		113,245		113,371		106,100		110,155
Other assets, net	8,686		10,411		6,549		11,852		10,411		5,921
Equity method investments	215,794		216,931		238,478		215,031		216,931		225,114
	362,268		397,476		424,140		363,604		397,476		406,470
Rail Group assets leased to others, net (Note 3)	375,092		327,195		340,136		377,393		327,195		334,401
Property, plant and equipment, net (Note 3)	423,042		450,052		447,267		419,348		450,052		460,247
Total assets	$	1,911,425	$	2,232,849	$	2,107,415	$	1,964,160	$	2,232,849	$	1,984,411

The Andersons, Inc. Condensed Consolidated Balance Sheets (continued) (Unaudited)(In thousands)	The Andersons, Inc. Condensed Consolidated Balance Sheets (continued) (Unaudited)(In thousands)									The Andersons, Inc. Condensed Consolidated Balance Sheets (continued) (Unaudited)(In thousands)

	June 30, 2017			December 31, 2016			June 30, 2016			September 30, 2017			December 31, 2016			September 30, 2016
Liabilities and equity
Current liabilities:
Short-term debt (Note 4)	$	124,000		$	29,000		$	179,404		$	19,000		$	29,000		$	—
Trade and other payables	267,194			581,826			302,413			381,359			581,826			356,931
Customer prepayments and deferred revenue	15,113			48,590			18,252			29,520			48,590			15,725
Commodity derivative liabilities – current (Note 5)	18,104			23,167			43,183			38,578			23,167			59,770
Accrued expenses and other current liabilities	69,256			69,648			71,169			67,064			69,648			68,465
Current maturities of long-term debt (Note 4)	62,482			47,545			53,720			53,972			47,545			51,520
Total current liabilities	556,149			799,776			668,141			589,493			799,776			552,411
Other long-term liabilities	34,441			27,833			30,430			34,407			27,833			30,525
Commodity derivative liabilities – noncurrent (Note 5)	334			339			2,182			902			339			1,954
Employee benefit plan obligations	36,837			35,026			44,902			36,356			35,026			45,260
Long-term debt, less current maturities (Note 4)	354,066			397,065			398,746			371,315			397,065			395,559
Deferred income taxes	181,806			182,113			179,911			181,876			182,113			178,535
Total liabilities	1,163,633			1,442,152			1,324,312			1,214,349			1,442,152			1,204,244
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common shares, without par value (63,000 shares authorized; 29,430 shares issued at 6/30/2017, 12/31/16 and 6/30/2016)	96			96			96
Common shares, without par value (63,000 shares authorized; 29,430 shares issued at 9/30/2017, 12/31/16 and 9/30/2016)										96			96			96
Preferred shares, without par value (1,000 shares authorized; none issued)	—			—			—			—			—			—
Additional paid-in-capital	222,261			222,910			219,489			223,814			222,910			221,326
Treasury shares, at cost (1,080, 1,201 and 1,190 shares at 6/30/2017, 12/31/16 and 6/30/2016, respectively)	(40,945		)	(45,383		)	(44,970		)
Treasury shares, at cost (1,079, 1,201 and 1,195 shares at 9/30/2017, 12/31/16 and 9/30/2016, respectively)										(40,905		)	(45,383		)	(45,130		)
Accumulated other comprehensive loss	(11,993		)	(12,468		)	(17,094		)	(9,682		)	(12,468		)	(17,305		)
Retained earnings	570,406			609,206			606,177			568,438			609,206			603,556
Total shareholders’ equity of The Andersons, Inc.	739,825			774,361			763,698			741,761			774,361			762,543
Noncontrolling interests	7,967			16,336			19,405			8,050			16,336			17,624
Total equity	747,792			790,697			783,103			749,811			790,697			780,167
Total liabilities and equity	$	1,911,425		$	2,232,849		$	2,107,415		$	1,964,160		$	2,232,849		$	1,984,411

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)(In thousands, except per share data)


	Three months ended June 30,					Six months ended June 30,						Three months ended September 30,				Nine months ended September 30,
	2017			2016		2017			2016			2017		2016		2017			2016
Sales and merchandising revenues	$	993,662		$	1,064,244	$	1,845,678		$	1,952,123		$	836,595	$	859,612	$	2,682,273		$	2,811,735
Cost of sales and merchandising revenues	905,828			967,202		1,681,386			1,787,326			766,924		782,597		2,448,310			2,569,923
Gross profit	87,834			97,042		164,292			164,797			69,671		77,015		233,963			241,812
Operating, administrative and general expenses	69,928			75,405		151,875			155,286			68,456		78,767		220,331			234,053
Goodwill impairment	42,000			—		42,000			—			—		—		42,000			—
Interest expense	5,988			6,554		12,088			13,605			5,384		4,441		17,472			18,046
Other income (loss):
Equity in earnings (losses) of affiliates, net	6,385			2,344		4,507			(4,633		)
Other income:
Equity in earnings of affiliates, net												3,586		8,422		8,093			3,789
Other income, net	4,632			5,682		12,529			8,928			5,588		2,216		18,117			11,144
Income (loss) before income taxes	(19,065		)	23,109		(24,635		)	201			5,005		4,445		(19,630		)	4,646
Income tax provision (benefit)	7,652			7,668		5,117			382
Income tax provision												2,389		1,104		7,505			1,486
Net income (loss)	(26,717		)	15,441		(29,752		)	(181		)	2,616		3,341		(27,135		)	3,160
Net income (loss) attributable to the noncontrolling interests	(64		)	1,018		(10		)	92
Net income attributable to the noncontrolling interests												83		1,619		73			1,711
Net income (loss) attributable to The Andersons, Inc.	$	(26,653	)	$	14,423	$	(29,742	)	$	(273	)	$	2,533	$	1,722	$	(27,208	)	$	1,449
Per common share:
Basic earnings (loss) attributable to The Andersons, Inc. common shareholders	$	(0.94	)	$	0.51	$	(1.05	)	$	(0.01	)	$	0.09	$	0.06	$	(0.96	)	$	0.05
Diluted earnings (loss) attributable to The Andersons, Inc. common shareholders	$	(0.94	)	$	0.51	$	(1.05	)	$	(0.01	)	$	0.09	$	0.06	$	(0.96	)	$	0.05
Dividends declared	$	0.160		$	0.155	$	0.320		$	0.310		$	0.160	$	0.155	$	0.480		$	0.465

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)(In thousands)


	Three months ended June 30,					Six months ended June 30,						Three months ended September 30,						Nine months ended September 30,
	2017			2016		2017			2016			2017			2016			2017			2016
Net income (loss)	$	(26,717	)	$	15,441	$	(29,752	)	$	(181	)	$	2,616		$	3,341		$	(27,135	)	$	3,160
Other comprehensive income (loss), net of tax:
Change in fair value of debt securities (net of income tax of $0, $0, $0 and $74)	—			—		—			(126		)
Change in unrecognized actuarial loss and prior service cost (net of income tax of $(628), $653, $(635) and $663 - Note 8)	(988		)	1,121		(998		)	1,294
Change in fair value of convertible preferred securities (net of income tax of $134, $0, $134 and $74)												211			—			211			(126		)
Change in unrecognized actuarial loss and prior service cost (net of income tax (benefit) of $(64), $53, $(699) and $716 - Note 8)												(101		)	87			(1,099		)	1,381
Foreign currency translation adjustments (net of income tax of $0, $0, $0 and $0)	959			52		1,473			2,557			2,201			(298		)	3,674			2,259
Cash flow hedge activity (net of income tax of $0, $36, $0, and $72)	—			60		—			120
Cash flow hedge activity (net of income tax of $0, $0, $0, and $72)												—			—			—			120
Other comprehensive income (loss)	(29		)	1,233		475			3,845			2,311			(211		)	2,786			3,634
Comprehensive income (loss)	(26,746		)	16,674		(29,277		)	3,664			4,927			3,130			(24,349		)	6,794
Comprehensive income (loss) attributable to the noncontrolling interests	(64		)	1,018		(10		)	92			83			1,619			73			1,711
Comprehensive income (loss) attributable to The Andersons, Inc.	$	(26,682	)	$	15,656	$	(29,267	)	$	3,572		$	4,844		$	1,511		$	(24,422	)	$	5,083

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)(In thousands)


	Six months ended June 30,						Nine months ended September 30,
	2017			2016			2017			2016
Operating Activities
Net income (loss)	$	(29,752	)	$	(181	)	$	(27,135	)	$	3,160
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization	42,878			41,379			64,546			62,244
Bad debt expense	839			491			1,076			789
Equity in (earnings) losses of affiliates, net of dividends	(3,793		)	7,181			(2,168		)	12,804
Gains on sale of facilities and investments in affiliates	(4,701		)	(685		)
Gains on sale of Rail Group assets and related leases	(4,984		)	(4,725		)	(7,642		)	(6,366		)
Deferred income taxes	(628		)	(1,601		)
Gains on sale of assets							(11,443		)	(826		)
Stock-based compensation expense	2,935			3,696			4,550			5,542
Goodwill impairment expense	42,000			—
Goodwill impairment							42,000			—
Other	(2,339		)	234			(610		)	(7		)
Changes in operating assets and liabilities:
Accounts receivable	13,086			(43,650		)	(334		)	(5,425		)
Inventories	213,064			224,368			200,667			283,158
Commodity derivatives	27,670			(60,443		)	16,073			12,592
Other assets	10,629			35,612			10,422			36,536
Payables and other accrued expenses	(352,133		)	(396,037		)	(229,268		)	(362,855		)
Net cash provided by (used in) operating activities	(45,229		)	(194,361		)	60,734			41,346
Investing Activities
Acquisition of business, net of cash acquired	(3,507		)	—			(3,507		)	—
Purchases of Rail Group assets	(66,506		)	(27,504		)	(77,513		)	(57,979		)
Proceeds from sale of Rail Group assets	9,390			10,397			18,368			44,061
Purchases of property, plant and equipment and capitalized software	(15,976		)	(34,443		)	(26,705		)	(56,138		)
Proceeds from sale of property, plant and equipment	646			173
Proceeds from sale of assets							26,601			69,673
Proceeds from returns of investments in affiliates	—			15,013			1,339			7,443
Proceeds from sale of facilities and investments	13,788			54,330
Purchase of investments	(2,429		)	(2,523		)	(4,929		)	(2,523		)
Other	437			(538		)	1,470			260
Net cash provided by (used in) investing activities	(64,157		)	14,905			(64,876		)	4,797
Financing Activities
Net change in short-term borrowings	93,941			164,000			(11,059		)	(15,000		)
Proceeds from issuance of long-term debt	15,175			77,564			35,175			78,199
Proceeds from long-term financing arrangement	10,396			—			12,195			14,027
Payments of long-term debt	(42,849		)	(85,177		)	(54,326		)	(91,393		)
Distributions to noncontrolling interest owner							—			(3,400		)
Proceeds from sale of treasury shares to employees and directors	473			1,282			450			1,159
Payments of debt issuance costs	(2,024		)	(309		)	(2,024		)	(309		)
Dividends paid	(8,984		)	(8,679		)	(13,485		)	(13,020		)
Other	(438		)	(1,592		)	(936		)	(1,998		)
Net cash provided by (used in) financing activities	65,690			147,089			(34,010		)	(31,735		)
Decrease in cash and cash equivalents	(43,696		)	(32,367		)
Increase (decrease) in cash and cash equivalents							(38,152		)	14,408
Cash and cash equivalents at beginning of period	62,630			63,750			62,630			63,750
Cash and cash equivalents at end of period	$	18,934		$	31,383		$	24,478		$	78,158

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Equity

(Unaudited)(In thousands, except per share data)


	Common Shares		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Loss			Retained Earnings			Noncontrolling Interests			Total			Common Shares		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Loss			Retained Earnings			Noncontrolling Interests			Total
Balance at December 31, 2015	$	96	$	222,848		$	(52,902	)	$	(20,939	)	$	615,151		$	19,485		$	783,739		$	96	$	222,848		$	(52,902	)	$	(20,939	)	$	615,151		$	19,485		$	783,739
Net income (loss)												(273		)	92			(181		)												1,449			1,711			3,160
Other comprehensive income (loss)									3,845									3,845											3,634									3,634
Cash distribution to noncontrolling interest																																			(3,400		)	(3,400		)
Other change in noncontrolling interest															(172		)	(172		)															(172		)	(172		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $424 (207 shares)			(3,379		)	7,932												4,553
Dividends declared ($0.31 per common share)												(8,681		)				(8,681		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $471 (202 shares)																							(1,542		)	7,772												6,230
Dividends declared ($0.465 per common share)																																(13,024		)				(13,024		)
Restricted share award dividend equivalents			20									(20		)				—					20									(20		)				—
Balance at June 30, 2016	$	96	$	219,489		$	(44,970	)	$	(17,094	)	$	606,177		$	19,405		$	783,103
Balance at September 30, 2016																					$	96	$	221,326		$	(45,130	)	$	(17,305	)	$	603,556		$	17,624		$	780,167

Balance at December 31, 2016	$	96	$	222,910		$	(45,383	)	$	(12,468	)	$	609,206		$	16,336		$	790,697		$	96	$	222,910		$	(45,383	)	$	(12,468	)	$	609,206		$	16,336		$	790,697
Net income (loss)												(29,742		)	(10		)	(29,752		)												(27,208		)	73			(27,135		)
Other comprehensive income (loss)									475									475											2,786									2,786
Other change in noncontrolling interest															(8,359		)	(8,359		)															(8,359		)	(8,359		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $(323) (122 shares)			(654		)	4,386												3,732					899			4,426												5,325
Dividends declared ($0.32 per common share)												(9,001		)				(9,001		)
Dividends declared ($0.48 per common share)																																(13,503		)				(13,503		)
Restricted share award dividend equivalents			5			52						(57		)				—					5			52						(57		)				—
Balance at June 30, 2017	$	96	$	222,261		$	(40,945	)	$	(11,993	)	$	570,406		$	7,967		$	747,792
Balance at September 30, 2017																					$	96	$	223,814		$	(40,905	)	$	(9,682	)	$	568,438		$	8,050		$	749,811

See Notes to Condensed Consolidated Financial Statements

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”). 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.

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, 2017. An unaudited Condensed Consolidated Balance Sheet as of ~~June~~September 30, 2016 has been included as the Company operates in several seasonal industries. Certain prior year amounts within the operating and investing activities sections of the statements of cash flows have been reclassified to conform with current year presentation.

The Condensed Consolidated Balance Sheet data at December 31, 2016 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, 2016 (the “2016 Form 10-K”).

New Accounting Standards

Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue From Contracts With ~~Customers.~~Customers (Topic 606). The FASB issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10 ASU 2016-12 and ASU 2016-20, respectively. The core principle of the new revenue ~~model~~standard is that an entity recognizes revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ~~These standards are~~The new revenue standard is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company plans to adopt the standard on January 1, 2018, using the modified retrospective ~~method~~method. The adoption of ~~adoption~~this new guidance will require expanded disclosures in the Company’s consolidated financial statements including separate quantitative disclosure of revenues within the scope of Topic 606 and ~~does not plan to early adopt.~~revenues excluded from the scope of Topic 606.

Our evaluation of these standards, which includes reviewing representative samples of customer contracts, considers the amount and timing of revenues recognized, financial statement presentation, and required disclosures.

While we are still continuing to evaluate the potential future impact of these standards on our financial statements, we believe the following items ~~may~~will be impacted upon adoption:

- ~~Methodology for recognizing certain~~Many of the Company's Grain and Ethanol sales contracts are considered derivatives under ASC Topic 815, Derivatives and Hedging, and therefore are outside the scope of Topic 606;

- Certain fee-based arrangements within our Grain and Ethanol ~~segments;~~segments will be classified as reductions to our cost of sales rather than revenue. However, we do not expect a material change to the timing of when these fees are recognized in our financial statements.

In addition, we are still evaluating the following areas to determine the potential changes, if any, upon adoption:

- Determination of whether we are the principal or agent for certain revenue streams within several of our segments;

- Methodology for recognizing gains on certain sale transactions within our Rail segment.

Leasing

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 supersedes the current accounting for leases. The new standard, while retaining two distinct types of leases, finance and operating, (i) requires lessees to record a

right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (ii) eliminates current real estate specific lease provisions, (iii) modifies the lease classification criteria and (iv) aligns many of the underlying lessor model principles with those in the new revenue standard. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within. Early adoption is permitted, however the Company does not plan to early adopt. Entities are required to use a modified retrospective approach when transitioning to ASU 2016-02 for leases that exist as of or are entered into after the beginning of the earliest comparative period presented in the financial statements.

The Company expects this standard to have the effect of bringing ~~substantially all of the~~certain off balance-sheet rail assets ~~currently in nonrecourse financing deals~~ noted in Item 2 of Form 10-Q onto the balance sheet along with a corresponding liability for the

associated obligations. Additionally, we have other arrangements currently classified as operating leases which will be recorded as a right of use asset and corresponding liability on the balance sheet. ~~The magnitude of~~We are currently evaluating the impact these ~~items is substantially less than the rail assets that~~changes will ~~be recorded~~have on the ~~balance sheet. We expect any impact to the statement of operations to be minimal post adoption.~~consolidated financial statements.

Other applicable standards

In August 2017, the FASB issued Accounting Standards Update No. 2017-12 Targeted Improvements to Accounting for Hedging Activities. This standard simplifies the recognition and presentation of changes in the fair value of hedging instruments. The ASU is effective for annual periods beginning December 15, 2018. The Company does not expect the impact from adoption of this standard to be material to its Consolidated Financial Statements and disclosures.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09 Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. This standard states that if the vesting conditions, fair value, and classification of the awards are the same immediately before and after the modification an entity would not apply modification accounting. The ASU is effective for annual periods beginning after December 15, 2017. Early adoption is permitted, however the Company has not chosen to do so at this time. The Company does not expect the impact from adoption of this standard to be material.

In March 2017, the FASB issued Accounting Standards Update No. 2017-07 Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This standard requires that the service cost component be reported in the same line item as other compensation costs arising from services rendered by the employees during the period. The other components of net benefit costs should be presented in the income statement separately from the service cost component and outside of income from operations if that subtotal is presented. The ASU is effective for annual periods beginning after December 15, 2017. The Company ~~is currently evaluating~~does not expect the impact from adoption of this standard ~~will have on~~to be material to its Consolidated Financial Statements and disclosures.

In January 2017, the FASB issued ASU No. 2017-04 Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This update removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. The ASU is effective prospectively for fiscal years beginning after December 15, 2019. Early adoption is permitted, and the Company elected to implement this standard in the ~~current quarter.~~second quarter of 2017.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This standard clarifies how companies present and classify certain cash receipts and payments in the statement of cash flows. The standard is effective for annual and interim periods beginning after December 15, 2017. At adoption, the Company will elect to continue classifying distributions from equity method investments using the cumulative earnings approach which is consistent with current practice.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. This update changes the accounting for credit losses on loans and held-to-maturity debt securities and requires a current expected credit loss (CECL) approach to determine the allowance for credit losses. This includes allowances for trade receivables. The Company has not historically incurred significant credit losses and does not currently anticipate circumstances that would lead to a CECL approach differing from the Company's existing allowance estimates in a material way. The guidance is effective for fiscal years beginning after December 15, 2019 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Early adoption is permitted, however the Company does not plan to do so.

In January, 2016, the FASB issued Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. This standard provides guidance for the recognition, measurement, presentation, and disclosure of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted. The Company does not expect the impact from adoption of this standard to be material to currently held financial assets and liabilities.

2. Inventories

Major classes of inventories are as follows:


(in thousands)	June 30, 2017		December 31, 2016		June 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
Grain	$	373,863	$	495,139	$	348,757	$	342,837	$	495,139	$	262,165
Ethanol and co-products	14,041		10,887		15,298		12,502		10,887		7,734
Plant nutrients and cob products	69,365		150,259		91,227		114,131		150,259		126,922
Retail merchandise	906		20,678		25,161		718		20,678		24,985
Railcar repair parts	5,030		5,784		5,793		5,414		5,784		5,948
	$	463,205	$	682,747	$	486,236	$	475,602	$	682,747	$	427,754

Inventories on the Condensed Consolidated Balance Sheets at ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016 do not include ~~0.8~~1.0 million, 0.9 million and ~~4.0~~1.0 million bushels of grain, respectively, held in storage for others. 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.

3. Property, Plant and Equipment

The components of Property, plant and equipment, net are as follows:


(in thousands)	June 30, 2017		December 31, 2016		June 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
Land	$	23,566	$	30,672	$	28,472	$	23,342	$	30,672	$	28,473
Land improvements and leasehold improvements	71,236		79,631		77,849		71,559		79,631		82,908
Buildings and storage facilities	298,077		322,856		290,528		298,951		322,856		319,950
Machinery and equipment	382,321		392,418		374,107		384,422		392,418		393,178
Construction in progress	7,372		12,784		51,672		7,703		12,784		21,284
	782,572		838,361		822,628		785,977		838,361		845,793
Less: accumulated depreciation	359,530		388,309		375,361		366,629		388,309		385,546
	$	423,042	$	450,052	$	447,267	$	419,348	$	450,052	$	460,247

Depreciation expense on property, plant and equipment was ~~$24.1~~$36.0 million and ~~$23.8~~$35.7 million for the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016, respectively. Additionally, depreciation expense on property, plant and equipment was ~~$12.0~~$11.9 million and ~~$11.6~~$12.0 million for the three months ended ~~June~~September 30, 2017 and 2016, respectively.

In December 2016, the Company recorded charges totaling $6.0 million for impairment of property, plant and equipment in the Retail business. This does not include $0.5 million of impairment charges related to software. The Company wrote down the value of these assets to the extent their carrying amounts exceeded fair value. The Company classified the significant assumptions used to determine fair value of the impaired assets as Level 3 inputs in the fair value hierarchy.

In December 2016, the Company also recorded charges totaling $2.3 million for impairment of property, plant and equipment in the Plant Nutrient segment due to the closing of a cob facility.

Rail Group Assets

The components of Rail Group assets leased to others are as follows:


(in thousands)	June 30, 2017		December 31, 2016		June 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
Rail Group assets leased to others	$	482,524	$	431,571	$	442,239	$	484,214	$	431,571	$	438,211
Less: accumulated depreciation	107,432		104,376		102,103		106,821		104,376		103,810
	$	375,092	$	327,195	$	340,136	$	377,393	$	327,195	$	334,401

Depreciation expense on Rail Group assets leased to others amounted to ~~$9.7~~$14.9 million and ~~$9.3~~$14.0 million for the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016, respectively. Additionally, depreciation expense on Rail Group assets leased to others amounted to ~~$5.0~~$5.2 million and $4.7 million for the three months ended ~~June~~September 30, 2017 and 2016, respectively.

4. Debt

On April 13, 2017, the Company amended its line of credit agreement with a syndicate of banks. The amended agreement provides for a credit facility in the amount of $800 million. Total borrowing capacity for the Company under all lines of credit is currently at $820.0 million, including $20.0 million of debt of The Andersons Denison Ethanol LLC ("TADE"), which is non-recourse to the Company. At ~~June~~September 30, 2017, the Company had a total of ~~$633.5~~$718.5 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. The Company was in compliance with all financial covenants as of ~~June~~September 30, 2017.

The Company’s short-term and long-term debt at ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016 consisted of the following:


(in thousands)	June 30, 2017		December 31, 2016		June 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
Short-term Debt – Non-Recourse	$	—	$	—	$	—	$	—	$	—	$	—
Short-term Debt - Recourse	$	124,000	$	29,000	$	179,404
Short-term Debt – Recourse							19,000		29,000		—
Total Short-term Debt	124,000		29,000		179,404		$	19,000	$	29,000	$	—

Current Maturities of Long-term Debt – Non-Recourse	—		—		—		$	—	$	—	$	—
Current Maturities of Long-term Debt – Recourse	62,482		47,545		53,720		53,972		47,545		51,520
Total Current Maturities of Long-term Debt	62,482		47,545		53,720		$	53,972	$	47,545	$	51,520

Long-term Debt, Less: Current Maturities – Non-Recourse	—		—		—		$	—	$	—	$	—
Long-term Debt, Less: Current Maturities – Recourse	354,066		397,065		398,746		371,315		397,065		395,559
Total Long-term Debt, Less: Current Maturities	$	354,066	$	397,065	$	398,746	$	371,315	$	397,065	$	395,559

5. Derivatives

The Company’s operating results are affected by changes to commodity prices. The Grain and Ethanol businesses have established “unhedged” position limits (the amount of a commodity, either owned or contracted for, that does not have an offsetting derivative contract to lock in the price). To reduce the exposure to market price risk on commodities owned and forward grain and ethanol 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 the regulated Chicago Mercantile Exchange ("CME"). 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. Contracts for the sale of commodities to processors or other commercial consumers generally do not extend beyond one year.

All 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 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 grain 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 futures, 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 futures, 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 ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016, 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 noncurrent commodity derivative assets (or liabilities) on the Condensed Consolidated Balance Sheets:


	June 30, 2017					December 31, 2016				June 30, 2016					September 30, 2017					December 31, 2016				September 30, 2016
(in thousands)	Net derivative asset position			Net derivative liability position		Net derivative asset position		Net derivative liability position		Net derivative asset position		Net derivative liability position			Net derivative asset position			Net derivative liability position		Net derivative asset position		Net derivative liability position		Net derivative asset position		Net derivative liability position
Collateral paid (received)	$	15,452		$	—	$	28,273	$	—	$	38,252	$	(480	)	$	27,737		$	—	$	28,273	$	—	$	13,358	$	—
Fair value of derivatives	(12,835		)	—		1,599		—		13,491		1,480			(999		)	—		1,599		—		16,258		—
Balance at end of period	$	2,617		$	—	$	29,872	$	—	$	51,743	$	1,000		$	26,738		$	—	$	29,872	$	—	$	29,616	$	—

The following table presents, on a gross basis, current and noncurrent commodity derivative assets and liabilities:


	June 30, 2017															September 30, 2017
(in thousands)	Commodity Derivative Assets - Current			Commodity Derivative Assets - Noncurrent			Commodity Derivative Liabilities - Current			Commodity Derivative Liabilities - Noncurrent			Total			Commodity Derivative Assets - Current			Commodity Derivative Assets - Noncurrent			Commodity Derivative Liabilities - Current			Commodity Derivative Liabilities - Noncurrent			Total
Commodity derivative assets	$	26,101		$	1,201		$	4,404		$	2		$	31,708		$	33,804		$	288		$	676		$	74		$	34,842
Commodity derivative liabilities	(29,934		)	(10		)	(22,508		)	(336		)	(52,788		)	(16,339		)	(43		)	(39,254		)	(976		)	(56,612		)
Cash collateral	15,452			—			—			—			15,452			27,737			—			—			—			27,737
Balance sheet line item totals	$	11,619		$	1,191		$	(18,104	)	$	(334	)	$	(5,628	)	$	45,202		$	245		$	(38,578	)	$	(902	)	$	5,967



	December 31, 2016
(in thousands)	Commodity Derivative Assets - Current			Commodity Derivative Assets - Noncurrent			Commodity Derivative Liabilities - Current			Commodity Derivative Liabilities - Noncurrent			Total
Commodity derivative assets	$	36,146		$	140		$	1,447		$	6		$	37,739
Commodity derivative liabilities	(18,972		)	(40		)	(24,614		)	(345		)	(43,971		)
Cash collateral	28,273			—			—			—			28,273
Balance sheet line item totals	$	45,447		$	100		$	(23,167	)	$	(339	)	$	22,041


	June 30, 2016															September 30, 2016
(in thousands)	Commodity Derivative Assets - Current			Commodity Derivative Assets - Noncurrent			Commodity Derivative Liabilities - Current			Commodity Derivative Liabilities - Noncurrent			Total			Commodity Derivative Assets - Current			Commodity Derivative Assets - Noncurrent			Commodity Derivative Liabilities - Current			Commodity Derivative Liabilities - Noncurrent			Total
Commodity derivative assets	$	134,504		$	2,095		$	5,925		$	84		$	142,608		$	60,372		$	1,356		$	3,318		$	58		$	65,104
Commodity derivative liabilities	(56,832		)	(161		)	(48,628		)	(2,266		)	(107,887		)	(13,893		)	(10		)	(63,088		)	(2,012		)	(79,003		)
Cash collateral	38,252			—			(480		)	—			37,772			13,358			—			—			—			13,358
Balance sheet line item totals	$	115,924		$	1,934		$	(43,183	)	$	(2,182	)	$	72,493		$	59,837		$	1,346		$	(59,770	)	$	(1,954	)	$	(541	)

The gains and losses included in the Company’s Condensed Consolidated Statements of Operations and the line items in which they are located are as follows:


	Three months ended June 30,					Six months ended June 30,					Three months ended September 30,						Nine months ended September 30,
(in thousands)	2017			2016		2017			2016		2017			2016			2017			2016
Gains (losses) on commodity derivatives included in cost of sales and merchandising revenues	$	(41,873	)	$	34,800	$	(14,848	)	$	25,941	$	(690	)	$	(48,620	)	$	(15,538	)	$	(22,679	)

The Company had the following volume of commodity derivative contracts outstanding (on a gross basis) at ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016:


	June 30, 2017				September 30, 2017
Commodity (in thousands)	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons
Non-exchange traded:
Corn	184,197	—	—	—	222,287	—	—	—
Soybeans	31,532	—	—	—	44,463	—	—	—
Wheat	7,340	—	—	—	8,598	—	—	—
Oats	41,526	—	—	—	36,451	—	—	—
Ethanol	—	256,518	—	—	—	201,521		—
Corn oil	—	—	4,658	—	—	—	5,782	—
Other	90	500	—	100	51	—		110
Subtotal	264,685	257,018	4,658	100	311,850	201,521	5,782	110
Exchange traded:
Corn	94,895	—	—	—	113,990	—	—	—
Soybeans	27,470	—	—	—	45,220	—	—	—
Wheat	43,925	—	—	—	61,795	—	—	—
Oats	2,290	—	—	—	895	—	—	—
Ethanol	—	3,990	—	—	—	22,890	—	—
Other	—	840	—	60	—	840	—	—
Subtotal	168,580	4,830	—	60	221,900	23,730	—	—
Total	433,265	261,848	4,658	160	533,750	225,251	5,782	110



	December 31, 2016
Commodity (in thousands)	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons
Non-exchange traded:
Corn	175,549	—	—	—
Soybeans	20,592	—	—	—
Wheat	7,177	—	—	—
Oats	36,025	—	—	—
Ethanol	—	215,081	—	—
Corn oil	—	—	9,358	—
Other	108	1,144	—	110
Subtotal	239,451	216,225	9,358	110
Exchange traded:
Corn	63,225	—	—	—
Soybeans	39,005	—	—	—
Wheat	45,360	—	—	—
Oats	4,120	—	—	—
Ethanol	—	78,120	—	—
Subtotal	151,710	78,120	—	—
Total	391,161	294,345	9,358	110


	June 30, 2016				September 30, 2016
Commodity (in thousands)	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons
Non-exchange traded:
Corn	242,269	—	—	—	226,492	—	—	—
Soybeans	52,599	—	—	—	60,614	—	—	—
Wheat	13,100	—	—	—	7,933	—	—	—
Oats	30,722	—	—	—	28,939	—	—	—
Ethanol	—	130,464	—	—	—	191,906	—	—
Corn oil	—	—	13,800	—	—	—	7,153	—
Other	17	—	—	128	129	—	—	251
Subtotal	338,707	130,464	13,800	128	324,107	191,906	7,153	251
Exchange traded:
Corn	148,665	—	—	—	105,395	—	—	—
Soybeans	46,570	—	—	—	35,245	—	—	—
Wheat	22,790	—	—	—	39,715	—	—	—
Oats	2,820	—	—	—	2,800	—	—	—
Ethanol	—	36,540	—	—	—	74,046	—	—
Subtotal	220,845	36,540	—	—	183,155	74,046	—	—
Total	559,552	167,004	13,800	128	507,262	265,952	7,153	251

At ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016, the Company had recorded the following amounts for the fair value of the Company's ~~interest rate derivatives:~~

other derivatives not designated as hedging instruments:

June 30, 2017 December 31, 2016 June 30, 2016
(in thousands)
Derivatives not designated as hedging instruments
Interest rate contracts included in other long-term liabilities $ (2,158 ) $ (2,530 ) $ (5,422 )
Total fair value of interest rate derivatives not designated as hedging instruments $ (2,158 ) $ (2,530 ) $ (5,422 )



	September 30, 2017			December 31, 2016			September 30, 2016
(in thousands)	September 30, 2017			December 31, 2016			September 30, 2016
Interest rate contracts included in Other long-term liabilities	$	(1,929	)	$	(2,530	)	$	(4,774	)
Foreign currency contracts included in Other current assets (Accrued expenses and other current liabilities)	1,605			(112		)	1,130

The gains and losses included in the Company's Consolidated Statements of Operations and the line item in which they are located for ~~interest rate~~ derivatives not designated as hedging instruments are as follows:

Three months ended June 30, Six months ended June 30,
(in thousands) 2017 2016 2017 2016
Interest income (expense) $ (17 ) $ (694 ) $ 372
$ (2,294 )

The Company also has foreign currency derivatives which are considered effective economic hedges of specified economic risks but which are not designated as accounting hedges. At June 30, 2017, December 31, 2016 and June 30, 2016, the Company had recorded the following amounts for the fair value of the Company's foreign currency derivatives:

June 30, 2017 December 31, 2016 June 30, 2016
(in thousands)
Derivatives not designated as hedging instruments
Foreign currency contracts included in short-term assets (liabilities) $ 654
$ (112 ) $ 1,391
Total fair value of foreign currency contract derivatives not designated as hedging instruments $ 654
$ (112 ) $ 1,391

The gains and losses included in the Company's Consolidated Statements of Operations and the line item in which they are located for foreign currency contract derivatives not designated as hedging instruments are as follows:


	Three months ended June 30,					Six months ended June 30,				Three months ended September 30,					Nine months ended September 30,
(in thousands)	2017		2016			2017		2016		2017		2016			2017		2016
Foreign currency derivative gains included in Other income, net	$	669	$	(87	)	$	767	$	1,391
Interest rate derivative gains (losses) included in Interest income (expense)										$	229	$	652		$	601	$	(1,642	)
Foreign currency derivative gains (losses) included in Other income, net										950		(261		)	1,717		(1,130		)

6. Employee Benefit Plans

The following are components of the net periodic benefit cost for the pension and postretirement benefit plans maintained by the Company for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016:


	Pension Benefits								Pension Benefits
(in thousands)	Three months ended June 30,				Six months ended June 30,				Three months ended September 30,				Nine months ended September 30,
(in thousands)	2017		2016		2017		2016		2017		2016		2017		2016
Service cost	$	—	$	—	$	—	$	—
Interest cost	39		48		78		97		38		49		116		145
Recognized net actuarial loss	63		37		126		73		63		36		189		109
Benefit cost	$	102	$	85	$	204	$	170	$	101	$	85	$	305	$	254


	Postretirement Benefits										Postretirement Benefits
(in thousands)	Three months ended June 30,					Six months ended June 30,					Three months ended September 30,						Nine months ended September 30,
(in thousands)	2017		2016			2017		2016			2017			2016			2017			2016
Service cost	$	106	$	167		$	229	$	380		$	81		$	190		$	310		$	570
Interest cost	282		370			582		775			202			387			784			1,162
Amortization of prior service cost	—		(89		)	—		(177		)	(228		)	(88		)	(228		)	(266		)
Recognized net actuarial loss	—		149			—		384			—			192			—			576
Benefit cost	$	388	$	597		$	811	$	1,362		$	55		$	681		$	866		$	2,042

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 forecast 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. Additionally, the annual effective tax rate differs from the statutory U.S. Federal tax rate of 35%primarily due to the impact of state income taxes, ~~the tax benefit related to railroad track maintenance credit transactions,~~impact of foreign equity earnings and to benefits or costs related to various permanent book toversus tax differences and tax credits.

For the three months ended ~~June~~September 30, 2017, the Company recorded income tax expense of ~~$7.7~~$2.4 million at an effective tax rate of ~~(40.1)%~~47.7%, which varied from the U.S. Federal tax rate of 35% primarily due to a 6.7% increase in the ~~recording~~rate related to the reversal of ~~a $42.0 million goodwill impairment charge which did not provide a corresponding~~previously recorded railroad track maintenance tax ~~benefit.~~credit benefits and tax charges related to non-deductible

expenses. For the three months ended ~~June~~September 30, 2016, the Company recorded an income tax expense of ~~$7.7~~$1.1 million at an effective tax rate of ~~33.2%~~24.8%.

For the ~~six~~nine months ended ~~June~~September 30, 2017, the Company recorded income tax expense of ~~$5.1~~$7.5 million at an effective tax rate of ~~(20.8)~~(38.2)%, which varied from the U.S. Federal tax rate of 35% primarily due to the recording of the $42.0 million goodwill impairment charge ~~noted above.~~which did not provide a corresponding tax benefit. For the ~~six~~nine months ended ~~June~~September 30, 2016, the Company recorded income tax expense of ~~$0.4~~$1.5 million at an effective tax rate of ~~189.6% which varied from the U.S. Federal tax rate of 35% primarily due to a 174.7% discrete tax charge related to state income taxes.~~32.0%.

During the three months ended June 30, 2017, the company agreed to a state income tax assessment that had been under appeal. The related $0.3 million reserve for unrecognized tax benefits has been reclassified as currently payable state income tax.

8. Accumulated Other Comprehensive Loss

The following tables summarize the after-tax components of accumulated other comprehensive income (loss) attributable to the Company for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016:



		Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
		Three months ended September 30, 2017											Nine months ended September 30, 2017
(in thousands)		Foreign Currency Translation Adjustment			Investment in Convertible Preferred Securities		Defined Benefit Plan Items			Total			Foreign Currency Translation Adjustment			Investment in Convertible Preferred Securities		Defined Benefit Plan Items			Total
Beginning Balance		$	(9,529	)	$	—	$	(2,464	)	$	(11,993	)	$	(11,002	)	$	—	$	(1,466	)	$	(12,468	)
	Other comprehensive income (loss) before reclassifications	2,201			211		41			$	2,453		3,674			211		(957		)	2,928
	Amounts reclassified from accumulated other comprehensive loss	—			—		(142		)	$	(142	)	—			—		(142		)	(142		)
Net current-period other comprehensive income (loss)		2,201			211		(101		)	2,311			3,674			211		(1,099		)	2,786
Ending balance		$	(7,328	)	$	211	$	(2,565	)	$	(9,682	)	$	(7,328	)	$	211	$	(2,565	)	$	(9,682	)

Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
Three months ended June 30, 2017 Six months ended June 30, 2017
(in thousands) Foreign Currency Translation Adjustment Defined Benefit Plan Items Total Foreign Currency Translation Adjustment Defined Benefit Plan Items Total
Beginning Balance $ (10,488 ) $ (1,476 ) $ (11,964 ) $ (11,002 ) $ (1,466 ) $ (12,468 )
Other comprehensive income (loss) before reclassifications 959
(988 ) (29 ) 1,473
(998 ) 475
Net current-period other comprehensive income (loss) 959
(988 ) (29 ) 1,473
(998 ) 475
Ending balance $ (9,529 ) $ (2,464 ) $ (11,993 ) $ (9,529 ) $ (2,464 ) $ (11,993 )


		Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)																												Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
		Three months ended June 30, 2016												Six months ended June 30, 2016																Three months ended September 30, 2016											Nine months ended September 30, 2016
(in thousands)	(in thousands)	Losses on Cash Flow Hedges			Foreign Currency Translation Adjustment			Defined Benefit Plan Items			Total			Losses on Cash Flow Hedges			Foreign Currency Translation Adjustment			Investment in Debt Securities			Defined Benefit Plan Items			Total			(in thousands)	Losses on Cash Flow Hedges		Foreign Currency Translation Adjustment			Defined Benefit Plan Items			Total			Losses on Cash Flow Hedges			Foreign Currency Translation Adjustment			Investment in Debt Securities			Defined Benefit Plan Items			Total
Beginning Balance	Beginning Balance	$	(51	)	$	(9,536	)	$	(8,740	)	$	(18,327	)	$	(111	)	$	(12,041	)	$	126		$	(8,913	)	$	(20,939	)	Beginning Balance	$	9	$	(9,484	)	$	(7,619	)	$	(17,094	)	$	(111	)	$	(12,041	)	$	126		$	(8,913	)	$	(20,939	)
	Other comprehensive income (loss) before reclassifications	60			52			1,177			1,289			120			2,557			—			1,406			4,083			Other comprehensive income (loss) before reclassifications	—		(298		)	143			(155		)	120			2,259			—			1,547			3,926
	Amounts reclassified from accumulated other comprehensive loss	—			—			(56		)	(56		)	—			—			(126		)	(112		)	(238		)	Amounts reclassified from accumulated other comprehensive loss	—		—			(56		)	(56		)	—			—			(126		)	(166		)	(292		)
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	60			52			1,121			1,233			120			2,557			(126		)	1,294			3,845			Net current-period other comprehensive income (loss)	—		(298		)	87			(211		)	120			2,259			(126		)	1,381			3,634
Ending balance	Ending balance	$	9		$	(9,484	)	$	(7,619	)	$	(17,094	)	$	9		$	(9,484	)	$	—		$	(7,619	)	$	(17,094	)	Ending balance	$	9	$	(9,782	)	$	(7,532	)	$	(17,305	)	$	9		$	(9,782	)	$	—		$	(7,532	)	$	(17,305	)

(a) All amounts are net of tax. Amounts in parentheses indicate debits

~~There were no reclassification adjustments from accumulated other comprehensive loss to net income for the three and six months ended June 30, 2017.~~

The following table shows the reclassification adjustments from accumulated other comprehensive loss to net income for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016:



	Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (a)
(in thousands)	Three months ended September 30, 2017				Nine months ended September 30, 2017
Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented
Defined Benefit Plan Items
Amortization of prior-service cost	(227		)	(b)	(227		)	(b)
	(227		)	Total before tax	(227		)	Total before tax
	85			Income tax provision	85			Income tax provision
	$	(142	)	Net of tax	$	(142	)	Net of tax

Total reclassifications for the period	$	(142	)	Net of tax	(142		)	Net of tax


		Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (a)									Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (a)
(in thousands)	(in thousands)	Three months ended June 30, 2016				Six months ended June 30, 2016				(in thousands)	Three months ended September 30, 2016				Nine months ended September 30, 2016
Details about Accumulated Other Comprehensive Income (Loss) Components		Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented		Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented
Defined Benefit Plan Items
Amortization of prior-service cost		$	(89	)	(b)	$	(177	)	(b)		$	(89	)	(b)	$	(266	)	(b)
		(89		)	Total before tax	(177		)	Total before tax		(89		)	Total before tax	(266		)	Total before tax
		33			Income tax provision	65			Income tax provision		33			Income tax provision	100			Income tax provision
		$	(56	)	Net of tax	$	(112	)	Net of tax		$	(56	)	Net of tax	$	(166	)	Net of tax

Other items
Recognition of gain on sale of investment		—				(200		)
		—			Total before tax	(200		)	Total before tax
�� Recognition of gain on sale of investment											—				(200		)
		—			Income tax provision	74			Income tax provision		—			Total before tax	(200		)	Total before tax
		—			Net of tax	(126		)	Net of tax		—			Income tax provision	74			Income tax provision
											—			Net of tax	(126		)	Net of tax

Total reclassifications for the period		$	(56	)	Net of tax	(238		)	Net of tax		$	(56	)	Net of tax	(292		)	Net of tax

(a) Amounts in parentheses indicate credits to profit/loss

(b) This accumulated other comprehensive loss component is included in the computation of net periodic benefit cost (see Note 6).

9. Earnings Per Share

The Company’s non-vested restricted stock that was granted prior to March 2015 is considered a participating security since the share-based awards contain a non-forfeitable right to dividends irrespective of whether the awards ultimately vest. Unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings.


(in thousands, except per common share data)	Three months ended June 30,					Six months ended June 30,						Three months ended September 30,				Nine months ended September 30,
(in thousands, except per common share data)	2017			2016		2017			2016			2017		2016		2017			2016
Net income (loss) attributable to The Andersons, Inc.	$	(26,653	)	$	14,423	$	(29,742	)	$	(273	)	$	2,533	$	1,722	$	(27,208	)	$	1,449
Less: Distributed and undistributed earnings allocated to nonvested restricted stock	—			8		—			5			—		2		—			7
Earnings (losses) available to common shareholders	$	(26,653	)	$	14,415	$	(29,742	)	$	(278	)	$	2,533	$	1,720	$	(27,208	)	$	1,442
Earnings per share – basic:
Weighted average shares outstanding – basic	28,350			28,227		28,316			28,164			28,350		28,222		28,327			28,184
Earnings (losses) per common share – basic	$	(0.94	)	$	0.51	$	(1.05	)	$	(0.01	)	$	0.09	$	0.06	$	(0.96	)	$	0.05
Earnings per share – diluted:
Weighted average shares outstanding – basic	28,350			28,227		28,316			28,164			28,350		28,222		28,327			28,184
Effect of dilutive awards	—			86		—			—			134		140		—			196
Weighted average shares outstanding – diluted	28,350			28,313		28,316			28,164			28,484		28,362		28,327			28,380
Earnings (losses) per common share – diluted	$	(0.94	)	$	0.51	$	(1.05	)	$	(0.01	)	$	0.09	$	0.06	$	(0.96	)	$	0.05

There were 43 thousand antidilutive stock-based awards outstanding for the three months ended September 30, 2017. All outstanding share awards were antidilutive for the ~~six and three~~nine months ended ~~June~~September 30, 2017 ~~and for the six months ended June 30, 2016~~ as the Company experienced a net loss. There were no antidilutive stock-based awards outstanding for the three and nine months ended ~~June~~September 30, 2016.

10. Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016:


(in thousands)	June 30, 2017											September 30, 2017
Assets (liabilities)	Level 1			Level 2			Level 3		Total			Level 1			Level 2			Level 3		Total
Restricted cash	$	1,033		$	—		$	—	$	1,033
Commodity derivatives, net (a)	2,817			(8,445		)	—		(5,628		)	$	26,738		$	(20,771	)	$	—	$	5,967
Provisionally priced contracts (b)	(87,958		)	(30,779		)	—		(118,737		)	(85,546		)	(33,944		)	—		(119,490		)
Convertible preferred securities (c)	—			—			3,294		3,294			—			—			6,638		6,638
Other assets and liabilities (d)	10,155			(2,158		)	—		7,997			10,996			(1,929		)	—		9,067
Total	$	(73,953	)	$	(41,382	)	$	3,294	$	(112,041	)	$	(47,812	)	$	(56,644	)	$	6,638	$	(97,818	)



(in thousands)	December 31, 2016
Assets (liabilities)	Level 1			Level 2			Level 3		Total
Restricted cash	$	471		$	—		$	—	$	471
Commodity derivatives, net (a)	29,872			(7,831		)	—		22,041
Provisionally priced contracts (b)	(105,321		)	(64,876		)	—		(170,197		)
Convertible preferred securities (c)	—			—			3,294		3,294
Other assets and liabilities (d)	9,391			(2,530		)	—		6,861
Total	$	(65,587	)	$	(75,237	)	$	3,294	$	(137,530	)


(in thousands)	June 30, 2016											September 30, 2016
Assets (liabilities)	Level 1			Level 2			Level 3		Total			Level 1			Level 2			Level 3		Total
Cash equivalents	$	11,578		$	—		$	—	$	11,578
Restricted cash	987			—			—		987			$	190		$	—		$	—	$	190
Commodity derivatives, net (a)	48,412			24,083			—		72,495			34,620			(35,161		)	—		(541		)
Provisionally priced contracts (b)	(42,213		)	(18,495		)	—		(60,708		)	(79,022		)	(20,500		)			(99,522		)
Convertible preferred securities (c)	—			—			3,294		3,294			—			—			3,294		3,294
Other assets and liabilities (d)	6,080			(5,426		)	—		654			11,015			(4,774		)	—		6,241
Total	$	24,844		$	162		$	3,294	$	28,300		$	(33,197	)	$	(60,435	)	$	3,294	$	(90,338	)


(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 noncurrent assets” on the Company’s Condensed Consolidated Balance Sheets


(d)	Included in other assets and liabilities are deferred compensation assets, ethanol risk management contracts, and foreign exchange derivative contracts (Level 1), and interest rate derivatives (Level 2).

Level 1 commodity derivatives reflect the fair value of the exchange-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 on the CME or the New York Mercantile Exchange 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, we have concluded that basis is a Level 2 fair value input for purposes of the fair value disclosure requirements related to our commodity derivatives. 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 material input to fair value for these commodity contracts.

These fair value disclosures exclude physical grain 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 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 ~~futures~~future changes in the grain price, quoted CBOT 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 risk management contract liability allows related ethanol customers to effectively unprice the futures component of their inventory for a period of time, subjecting the bushels to market fluctuations. The Company records an asset or liability for the market value changes of the commodities over the life of the contracts based on quoted CBOT prices and as such, the balance is deemed to be Level 1 in the fair value hierarchy.

The Company’s stake in the Iowa Northern Railway Company ("IANR") was redeemed in the first quarter of 2016. The remaining convertible preferred securities are interests in ~~two~~several early-stage enterprises in the form of convertible debt ~~securities with the possibility of conversion to~~and preferred equity ~~under certain circumstances.~~securities.

A reconciliation of beginning and ending balances for the Company’s fair value measurements using Level 3 inputs is as follows:


	Contingent Consideration					Convertible Securities					Contingent Consideration					Convertible Preferred Securities
(in thousands)	2017		2016			2017		2016			2017		2016			2017		2016
Asset (liability) at January 1,	$	—	$	(350	)	$	3,294	$	13,550		$	—	$	(350	)	$	3,294	$	13,550
Gains (losses) included in earnings	—		190			—		710			—		190			—		710
Sales proceeds	—		—			—		(13,485		)	—		—			—		(13,485		)
Asset (liability) at March 31,	$	—	$	(160	)	$	3,294	$	775		$	—	$	(160	)	$	3,294	$	775
Gains (losses) included in earnings	—		160			—		19			—		160			—		19
New agreements	—		—			—		2,500
New investments											—		—			—		2,500
Asset (liability) at June 30,	$	—	$	—		$	3,294	$	3,294		$	—	$	—		$	3,294	$	3,294
Unrealized gains (losses) included in other comprehensive income											—		—			344		—
New investments											—		—			3,000		—
Asset (liability) at September 30,											$	—	$	—		$	6,638	$	3,294

The following tables summarize quantitative information about the Company's Level 3 fair value measurements as of ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016:

Quantitative Information about Level 3 Fair Value Measurements

(in thousands)

Fair Value as of June 30, 2017

Valuation Method

Unobservable Input

Weighted Average

Fair Value as of September 30, 2017

Valuation Method

Unobservable Input

Weighted Average

Convertible Notes

3,294

Cost Basis, Plus Interest

N/A

Convertible preferred securities (a)

6,638

Implied based on market prices

N/A

(in thousands)

Fair Value as of December 31, 2016

Valuation Method

Unobservable Input

Weighted Average

Fair Value as of December 31, 2016

Valuation Method

Unobservable Input

Weighted Average

Convertible Notes

3,294

Cost Basis, Plus Interest

N/A

Convertible preferred securities (a)

3,294

Cost Basis, Plus Interest

N/A

Real Property

11,210

Third-Party Appraisal

N/A

11,210

Third-Party Appraisal

N/A

(in thousands)

Fair Value as of June 30, 2016

Valuation Method

Unobservable Input

Weighted Average

Fair Value as of September 30, 2016

Valuation Method

Unobservable Input

Weighted Average

Convertible Notes

3,294

Cost Basis, Plus Interest

N/A

Convertible preferred securities (a)

3,294

Cost Basis, Plus Interest

N/A

(a) Due to early stages of business and timing of investments, cost basis, plus interest was deemed to approximate fair value in prior periods. As the underlying enterprises have evolved additional market data is available to consider in order to estimate fair value.

Fair Value of Financial Instruments

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 for similar types of borrowing arrangements. As such, the Company has concluded that the fair value of long-term debt is considered Level 2 in the fair value hierarchy.


(in thousands)	June 30, 2017		December 31, 2016		June 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
Fair value of long-term debt, including current maturities	$	423,316	$	450,940	$	472,714	$	431,542	$	450,940	$	458,268
Fair value in excess of carrying value(a)	2,612		3,116		16,498		2,389		3,116		7,714

(a) Carrying value used for this purpose excludes unamortized prepaid debt issuance costs

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 Party Transactions

Equity Method Investments

The Company, directly or indirectly, holds investments in companies that are accounted for under the equity method. The Company’s equity in these entities is presented at cost plus its accumulated proportional share of income or loss, less any distributions it has received.

The following table presents the Company’s investment balance in each of its equity method investees by entity:


(in thousands)	June 30, 2017		December 31, 2016		June 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
The Andersons Albion Ethanol LLC	$	40,829	$	38,972	$	34,133	$	42,302	$	38,972	$	36,661
The Andersons Clymers Ethanol LLC	19,903		19,739		30,088		17,837		19,739		21,340
The Andersons Marathon Ethanol LLC	14,045		22,069		31,158		12,390		22,069		23,812
Lansing Trade Group, LLC	89,235		89,050		90,884		89,541		89,050		91,573
Thompsons Limited (a)	49,252		46,184		47,948		50,399		46,184		47,494
Other	2,530		917		4,267		2,562		917		4,234
Total	$	215,794	$	216,931	$	238,478	$	215,031	$	216,931	$	225,114

(a) Thompsons Limited and related U.S. operating company held by joint ventures

On January 1, 2017, The Andersons Ethanol Investment LLC (“TAEI”) was merged with and into The Andersons Marathon Ethanol LLC (“TAME”). The Company had owned (66%) of TAEI, which, in turn, had owned 50% of TAME. Pursuant to the merger, the Company’s ownership units in TAEI were canceled and converted into ownership units in TAME. As a result, the Company now directly owns 33% of the outstanding ownership units of TAME.

Prior to this transaction, the noncontrolling interest in TAEI was attributed 33% of the gains and losses of TAME recorded by the Company in its equity in earnings of affiliates.

The following table summarizes income (loss) earned from the Company’s equity method investments by entity:


		Three months ended June 30,						Six months ended June 30,							Three months ended September 30,						Nine months ended September 30,
(in thousands)	% Ownership at June 30, 2017	2017			2016			2017			2016			% Ownership at September 30, 2017	2017			2016			2017			2016
The Andersons Albion Ethanol LLC	55%	$	2,135		$	1,650		$	1,858		$	1,328		55%	$	1,473		$	2,528		$	3,331		$	3,857
The Andersons Clymers Ethanol LLC	39%	569			1,889			776			810			39%	1,822			2,706			2,597			3,516
The Andersons Marathon Ethanol LLC	33%	779			1,712			316			(97		)	33%	985			2,655			1,301			2,557
Lansing Trade Group, LLC	33% (a)	896			(5,333		)	185			(8,101		)	33% (a)	305			689			491			(7,412		)
Thompsons Limited (b)	50%	2,081			2,426			1,486			1,427			50%	(940		)	(156		)	546			1,271
Other	5% - 50%	(75		)	—			(114		)	—			5% - 50%	(59		)	—			(173		)	—
Total		$	6,385		$	2,344		$	4,507		$	(4,633	)		$	3,586		$	8,422		$	8,093		$	3,789

(a) This does not consider restricted management units which once vested will reduce the ownership percentage by approximately 0.6%

(b) Thompsons Limited and related U.S. operating company held by joint ventures

Total distributions received from unconsolidated affiliates were ~~$0.6~~$7.1 million and ~~$2.7~~$24.1 million for the ~~six~~nine months ended ~~June~~September 30, 2017 and ~~June~~September 30, 2016, respectively.

In the ~~second~~third quarter of 2016, The Andersons Albion Ethanol LLC, The Andersons Clymers Ethanol LLC, The Andersons Marathon Ethanol LLC, Lansing Trade Group, and Thompsons Limited qualified as significant equity investees of the Company under the income test. The following table presents combined summarized unaudited financial information of these investments for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016:


(in thousands)	Three months ended June 30,					Six months ended June 30,					Three months ended September 30,				Nine months ended September 30,
	2017		2016			2017		2016			2017		2016		2017		2016
Revenues	$	1,380,361	$	1,340,809		$	3,002,406	$	3,029,680		$	1,601,778	$	1,646,697	$	4,603,808	$	4,676,583
Gross profit	58,812		52,204			97,728		77,782			58,826		50,141		155,568		127,963
Income from continuing operations	16,328		556			11,518		(17,568		)	9,501		18,965		15,507		1,428
Net income (loss)	13,421		(2,051		)	7,248		(20,164		)	7,918		17,217		14,878		(2,924		)
Net income (loss) attributable to companies	13,714		(1,410		)	7,972		(19,122		)	9,545		17,752		15,781		(1,347		)

Investment in Debt Securities

The Company previously owned 100% of the cumulative convertible preferred shares of Iowa Northern Railway Company (“IANR”), which operates a short-line railroad in Iowa. In the first quarter of 2016, these shares were redeemed and the Company no longer has an ownership stake in this entity. See Footnote 10 for additional information on the effects of this transaction.

Related Party Transactions

In the ordinary course of business, the Company will enter into related party transactions with each of the investments described above, along with other related parties. The following table sets forth the related party transactions entered into for the time periods presented:


	Three months ended June 30,				Six months ended June 30,				Three months ended September 30,				Nine months ended September 30,
(in thousands)	2017		2016		2017		2016		2017		2016		2017		2016
Sales revenues	$	241,896	$	176,865	$	439,964	$	371,702	$	225,367	$	177,724	$	665,331	$	549,426
Service fee revenues (a)	9,410		9,490		14,036		14,126		14,397		3,800		28,433		13,290
Purchases of product	167,904		116,556		302,411		218,509		165,084		128,081		467,495		346,590
Lease income (b)	1,422		1,994		2,709		3,861		1,850		1,300		4,559		4,662
Labor and benefits reimbursement (c)	6,863		6,841		10,553		10,738		3,208		2,862		10,071		9,702
Other expenses (d)	—		—		—		149		—		—		—		149


(a)	Service fee revenues include management fees, corn origination fees, ethanol and distillers dried grains (DDG) marketing fees, and other commissions.


(b)	Lease income includes the lease of the Company’s Albion, Michigan and Clymers, Indiana grain facilities as well as certain railcars to the various ethanol LLCs and IANR.


(c)	The Company provides all operational labor to the unconsolidated ethanol LLCs and charges them an amount equal to the Company’s costs of the related services.


(d)	Other expenses include payments to IANR for repair facility rent and use of their railroad reporting mark, payment to LTG for the lease of railcars and other various expenses.


(in thousands)	June 30, 2017		December 31, 2016		June 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
Accounts receivable (e)	$	25,673	$	26,254	$	20,685	$	18,694	$	26,254	$	18,028
Accounts payable (f)	25,590		23,961		10,022		27,413		23,961		15,352


(e)	Accounts receivable represents amounts due from related parties for sales of corn, leasing revenue and service fees.


(f)	Accounts payable represents amounts due to related parties for purchases of ethanol and other various items.

For the three months ended ~~June~~September 30, 2017 and 2016, revenues recognized for the sale of ethanol and other co-products that the Company purchased from the unconsolidated ethanol LLCs were ~~$161.3~~$160.8 million and ~~$111.3~~$109.3 million, respectively. Additionally, for the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016, revenues recognized for the sale of ethanol and other co-products that the Company purchased from the unconsolidated ethanol LLCs were ~~$284.5~~$445.4 million and ~~$198.9~~$220.6 million, respectively.

For the three months ended ~~June~~September 30, 2017 and 2016, revenues recognized for the sale of corn to the unconsolidated ethanol LLCs were ~~$125.5~~$119.1 million and ~~$105.6~~$90.4 million, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016, revenues recognized for the sale of corn to the unconsolidated ethanol LLCs were ~~$243.0~~$362.2 million and ~~$224.1~~$314.5 million, respectively.

From time to time, the Company enters into derivative contracts with certain of its related parties, including the unconsolidated ethanol LLCs, LTG, and the Thompsons Limited joint ventures, for the purchase and sale of grain and ethanol, for similar price risk mitigation purposes and on similar terms as the purchase and sale of derivative contracts it enters into with unrelated parties. The fair value of derivative contract assets with related parties as of ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016 was ~~$0.6~~$1.9 million, $4.1 million and ~~$5.2~~$5.0 million, respectively. The fair value of derivative contract liabilities with related parties as of ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016 was ~~$0.7~~$0.1 million, $0.1 million and ~~$1.0~~$0.2 million, respectively.

12. Segment Information

The Company’s operations include five reportable business segments that are distinguished primarily on the basis of products and services offered. The Grain business includes grain merchandising, the operation of terminal grain elevator facilities and the investments in LTG and Thompsons Limited. The Ethanol business purchases and sells ethanol and also manages the ethanol production facilities organized as limited liability companies, one is consolidated and three are investments accounted for under the equity method. The Company performs services under various contracts for these investments. Rail operations include the leasing, marketing and fleet management of railcars and other assets, railcar repair and metal fabrication. The Plant Nutrient business manufactures and distributes agricultural inputs, primarily fertilizer, to dealers and farmers, along with turf care and corncob-based products. The Retail business operates large retail stores, a distribution center, and a lawn and garden

equipment sales and service facility. The Retail business closed during the second quarter of 2017, and liquidation efforts are substantially complete. Included in “Other” are the corporate level costs not attributed to an operating 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. Inter-segment sales are made at prices comparable to normal, unaffiliated customer sales. The Company does not have any customers who represent 10 percent or more of total revenues.


	Three months ended June 30,				Six months ended June 30,				Three months ended September 30,				Nine months ended September 30,
(in thousands)	2017		2016		2017		2016		2017		2016		2017		2016
Revenues from external customers
Grain	$	488,447	$	522,989	$	966,975	$	1,061,803	$	497,613	$	550,189	$	1,464,588	$	1,611,992
Ethanol	187,831		142,520		341,984		257,213		191,531		139,413		533,515		396,626
Plant Nutrient	264,736		320,036		411,323		487,027		103,620		101,770		514,943		588,797
Rail	38,149		40,342		78,539		79,951		43,093		38,201		121,632		118,152
Retail	14,499		38,357		46,857		66,129		738		30,039		47,595		96,168
Total	$	993,662	$	1,064,244	$	1,845,678	$	1,952,123	$	836,595	$	859,612	$	2,682,273	$	2,811,735


	Three months ended June 30,				Six months ended June 30,				Three months ended September 30,				Nine months ended September 30,
(in thousands)	2017		2016		2017		2016		2017		2016		2017		2016
Inter-segment sales
Grain	$	141	$	174	$	207	$	1,625	$	72	$	7	$	279	$	1,632
Plant Nutrient	70		114		241		361		—		61		241		422
Rail	275		355		566		734		327		328		893		1,062
Total	$	486	$	643	$	1,014	$	2,720	$	399	$	396	$	1,413	$	3,116


	Three months ended June 30,						Six months ended June 30,						Three months ended September 30,						Nine months ended September 30,
(in thousands)	2017			2016			2017			2016			2017			2016			2017			2016
Income (loss) before income taxes
Grain	$	6,929		$	(13,037	)	$	1,856		$	(30,442	)	$	2,641		$	1,879		$	4,497		$	(28,563	)
Ethanol	4,660			6,187			6,376			3,507			6,098			9,541			12,474			13,048
Plant Nutrient	(25,825		)	23,535			(19,154		)	25,239			(7,920		)	(7,231		)	(27,074		)	18,008
Rail	5,860			6,569			11,938			15,944			6,127			6,754			18,065			22,698
Retail	(6,718		)	1,010			(13,564		)	(1,066		)	4,424			(1,578		)	(9,140		)	(2,644		)
Other	(3,907		)	(2,173		)	(12,077		)	(13,073		)	(6,448		)	(6,539		)	(18,525		)	(19,612		)
Noncontrolling interests	(64		)	1,018			(10		)	92			83			1,619			73			1,711
Total	$	(19,065	)	$	23,109		$	(24,635	)	$	201		$	5,005		$	4,445		$	(19,630	)	$	4,646

(in thousands) June 30, 2017 December 31, 2016 June 30, 2016
Identifiable assets
Grain $ 783,316
$ 961,114
$ 879,055
Ethanol 170,730
171,115
192,470
Plant Nutrient 351,871
484,455
448,225
Rail 448,417
398,446
388,456
Retail 11,830
31,257
43,878
Other 145,261
186,462
155,331
Total $ 1,911,425
$ 2,232,849
$ 2,107,415



(in thousands)	September 30, 2017		December 31, 2016		September 30, 2016
Identifiable assets
Grain	$	799,655	$	961,114	$	721,412
Ethanol	173,545		171,115		174,822
Plant Nutrient	389,396		484,455		462,328
Rail	446,884		398,446		383,631
Retail	9,138		31,257		42,880
Other	145,542		186,462		199,338
Total	$	1,964,160	$	2,232,849	$	1,984,411

13. Commitments and Contingencies

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.

In the third quarter of 2017, the Company’s Plant Nutrient business recorded a $2.2 million reserve for settlement of a 2015 legal claim. The case regarded allegations that the Plant Nutrient business had improperly acquired another company’s confidential and proprietary intellectual property in connection with hiring a former employee of the plaintiff. Information obtained through the course of discovery, and completed during the third quarter, and anticipated legal costs, in conjunction with the preparation for the planned mediation scheduled for October, 2017, led management to conclude that a loss was probable and reasonably estimable. In October, settlement was finalized at the reserve amount.

Prior to the settlement, substantially all the Company’s legal expenses were paid by a liability insurance carrier.

The estimated range of loss for all other outstanding claims that are considered reasonably possible is not material.

Build-to-Suit Lease

In August, 2015, the Company entered into a lease agreement with an initial term of 15 years for a build-to-suit facility to be used as the new corporate headquarters which was completed in the third quarter of 2016. Since the Company is deemed to be the owner of this facility for accounting purposes during the construction period, it has recognized an asset and a corresponding financing obligation.

The Company has recorded a build-to-suit financing obligation in other long-term liabilities of ~~$23.9~~$24.7 million, $14.0 million, and ~~$13.0~~$13.7 million at ~~June~~September 30, 2017, December 31, 2016, and ~~June~~September 30, 2016, respectively. The Company has recorded a build-to-suit financing obligation in other current liabilities of ~~$0.8~~$1.4 million, $0.9 million, and ~~$1.5~~$1.3 million at ~~June~~September 30, 2017, December 31, 2016, and ~~June~~September 30, 2016, respectively.

14. Supplemental Cash Flow Information

Certain supplemental cash flow information, including noncash investing and financing activities for the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016 are as follows:


	Six months ended June 30,				Nine months ended September 30,
(in thousands)	2017		2016		2017		2016
Supplemental disclosure of cash flow information
Interest paid	$	12,430	$	9,567	$	20,356	$	18,008
Noncash investing and financing activity
Capital projects incurred but not yet paid	$	3,695	$	9,653	6,319		13,104
Investment merger (decreasing equity method investments and non-controlling interest)	8,360		—		8,360		—
Outstanding receivable for sale of assets	4,356		—
Dividends declared not yet paid	4,501		4,341		4,501		4,342

15. Sale of Assets

During the third quarter of 2017 the Company sold two of its retail properties for $7.6 million and recorded a $5.7 million gain in Other income, net.

On March 31, 2017 the Company sold four farm center locations in Florida for $17.4 million and recorded a $4.7 million gain, net of transaction costs in Other income, net. The sale price included a working capital adjustment of $3.6 million.

On May 2, 2016 the Company sold eight grain and agronomy locations in Iowa for $54.3 million and recorded a nominal gain.

16. Exit Costs and Assets Held for Sale

The Retail business closed during the second quarter of 2017, and inventory and fixtures liquidation efforts are ~~substantially complete as of June 30, 2017.~~complete. The Company ~~recorded $3.5 million of~~incurred minimal additional exit charges during the ~~second~~third quarter of 2017 ~~for~~and a total of ~~$11.3~~$11.5 million ~~of exit charges recorded during~~through the first ~~six months~~three quarters of ~~2017.~~2017, consisting primarily of employee severance and related benefits. As a result of the closure, the Company also classified ~~$10.0~~$8.4 million of Property, plant and equipment, net as Assets held for sale on the Condensed Consolidated Balance ~~Sheet.~~Sheet at September 30, 2017.

17. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2017 are as follows:

As previously reported, the Company had monitored the performance of its wholesale nutrient business, within the Plant Nutrient segment, throughout 2016. During the third quarter of 2016, the Company reported that the wholesale business was under pressure due to an uncertain outlook for future crop prices and decreased domestic demand for fertilizer.



(in thousands)	Grain		Plant Nutrient			Rail		Total
Balance as of January 1, 2017	$	—	$	59,767		$	4,167	$	63,934
Acquisitions	1,171		—			—		1,171
Impairments	—		(42,000		)	—		(42,000		)
Balance as of September 30, 2017	$	1,171	$	17,767		$	4,167	$	23,105

The Company ~~performed its annual~~recorded a goodwill impairment ~~analysis during the fourth quarter~~charge of 2016, which resulted in an excess of fair value over carrying value of 8% for the wholesale nutrient reporting unit. During the first quarter of 2017, the Company's assessment of the business did not indicate the presence of any goodwill impairment triggering events.

During the second quarter of 2017, the Company identified certain factors that we considered important in assessing the requirement to perform an interim impairment evaluation for the wholesale nutrient reporting unit. First, current year actual results were significantly below historical and expected operating results. Second, the nutrient industry's future outlook continued to reflect depressed margins and minimal growth, driven by an oversupply of base nutrients, low crop prices and low farmer income. After considering these items, the Company determined that an interim goodwill impairment assessment was required, as well as an impairment assessment for our definite-lived intangible and other long-lived assets. No impairment was recognized for definite-lived intangibles and other long-lived assets.

Upon early adoption of ASU No. 2017-04, the Company now uses a one-step quantitative approach that compares the business enterprise value ("BEV") of each reporting unit with its carrying value. The BEV was computed based on both an income approach (discounted cash flows) and a market approach. The income approach uses a reporting unit's estimated future cash flows, discounted at the weighted average cost of capital of a hypothetical third-party buyer. The market approach estimates fair value by applying cash flow multiples to the reporting unit's operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting unit. Any excess of the carrying value of the goodwill over the BEV will be recorded as an impairment loss. The calculation of the BEV is based on significant unobservable inputs, such as price trends, customer demand, material costs and discount rates, and are classified as Level 3 in the fair value hierarchy.

The discounted cash flow model used for the income approach assumed discrete period revenue growth through 2021 that was reflective of market opportunities, changes in product mix, and cyclical trends within the wholesale nutrient business. In the terminal year, the Company assumed a long-term earnings growth rate of 2.0 percent that is believed to be appropriate given the current industry-specific expectations. As of the valuation date, the Company utilized a weighted-average cost of capital of 10.1 percent, which reflects the relative risk and time value of money. The testing resulted in a $42.0 million ~~impairment charge for goodwill~~ associated with the Wholesale reporting ~~unit.~~

unit in the second quarter of 2017. With the estimated fair value of the reporting unit now equaling its carrying value as of June 30, 2017, the Wholesale reporting unit has a greater risk of future impairment to the remaining goodwill balance of ~~$17.8~~$17.1 million. ~~A deterioration~~The Company will be completing its annual goodwill assessment as of October 1.

Any negative change in ~~operating~~assumptions, including decreased current performance ~~significantly below current expectations, including changes in projected future revenue, profitability and cash flow,~~and/or forecasted performance, as well as ~~higher working capital,~~increased interest rates and/or cost of capital ~~could have a negative effect on~~will negatively impact the fair value of the reporting unit. ~~It is also possible the Company's performance meets current expectations but is still unable overcome the general trends~~Increases in the ~~business and/or macro-economic factors in the time frame forecast, which could impact the long-term discount rate values used in estimating fair value, causing the estimated fair~~book value of the reporting unit, such as additional capital investments or working capital increases will also negatively impact the goodwill assessment. Finally relative performance shortfalls, when compared to ~~fall below its carrying value. This would~~peer results, could also negatively impact the goodwill assessment. The magnitude of each of these changes may result in ~~recording another~~additional goodwill impairment ~~to the goodwill of the wholesale business.~~

~~The changes~~ in the ~~carrying amount~~fourth quarter of ~~goodwill by reportable segment for the six months ended June 30, 2017 are as follows:~~

(in thousands) Grain Plant Nutrient Rail Total
Balance as of January 1, 2017 $ —
$ 59,767
$ 4,167
$ 63,934
Acquisitions 1,171
—
—
1,171
Impairments —
(42,000 ) —
(42,000 )
Balance as of June 30, 2017 $ 1,171
$ 17,767
$ 4,167
$ 23,105
2017.

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. The reader is urged to carefully consider these risks and others, including those risk factors listed under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016 (“2016 Form 10-K”). In some cases, ~~you~~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.

Critical Accounting Policies and Estimates

Our critical accounting policies and critical accounting estimates, as described in our 2016 Form 10-K, have not materially changed through the ~~second~~third quarter of 2017.

Executive Overview

Our operations are organized, managed and classified into five reportable business segments: Grain, Ethanol, Plant Nutrient, Rail, and Retail. Each of these segments is based on the nature of products and services offered.

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.

Grain Group

The Grain Group's performance in the ~~second~~third quarter reflects ~~significant improvement over~~continued recovery from the prior ~~year, especially due~~year. Holding wheat has led to higher space income. ~~The Group was able to purchase grain at more typical prices during the 2016 harvest~~Our risk management services and ~~the market continued to reward the Group with basis appreciation in corn, beans and wheat. LTG~~trading income has also ~~saw significant improvements over the prior year.~~improved.

Grain inventories on hand at ~~June~~September 30, 2017 were ~~78.0~~75.1 million bushels, of which ~~0.8~~1.0 million bushels were stored for others. ~~This compares~~These amounts compare to ~~75.7~~67.0 million bushels on hand at ~~June~~September 30, 2016, of which ~~4.0~~1.0 million bushels were stored for others. Total grain storage capacity ~~was flat with~~of approximately 153 million bushels at ~~both June~~September 30, 2017 ~~and June~~was unchanged from September 30, 2016.

~~Wheat~~

After a late start, harvest is ~~complete in our southern footprint and~~ underway in our ~~remaining locations. Harvest results~~core markets and wet weather has caused it to ~~date appear positive~~be drawn out. We expect varying drying and ~~we expect continued~~mixing opportunities, ~~for space income~~depending on ~~our wheat position. Corn~~commodity and beans were planted through variable weather conditions across our footprint during the quarter, which could result in varied qualities and an opportunity for blending income during harvest. During the quarter, the Group also completed an acquisition of a small specialty grain handling and milling business that further expands our food ingredient capabilities.location.

Ethanol Group

The Ethanol Group's ~~second~~third quarter results reflect continued lower ethanol margins ~~from record levels of industry production and stocks~~as supply exceeded demand during the quarter. ~~While~~ DDG margins have ~~improved from~~continued to be negatively impacted by the ~~prior quarter,~~ elevated levels of vomitoxin in eastern draw ~~areas have continued to negatively impact margins.~~areas. The weak ethanol and DDG margins were partially offset by high ethanol export demand and strong E-85 and corn oil sales.

Looking forward, we expect margins to continue to be impacted by high industry production and inventory levels.

Ethanol and related coproducts volumes ~~shipped~~ for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016 were as follows:


(in thousands)	Three months ended June 30,		Six months ended June 30,		Three months ended September 30,		Nine months ended September 30,
	2017	2016	2017	2016	2017	2016	2017	2016
Ethanol (gallons shipped)	109,504	75,463	198,927	149,246	108,452	73,990	307,379	223,236
E-85 (gallons shipped)	10,646	9,093	19,903	15,413	12,482	11,309	32,385	26,722
Corn Oil (pounds shipped)	4,078	3,668	8,338	7,282	4,504	3,639	12,842	10,921
DDG (tons shipped) *	37	40	79	80	42	42	121	122

* DDG tons shipped converts wet tons to a dry ton equivalent amount

The above table shows only shipped volumes that flow through the Company's sales revenues. Total ethanol, corn oil and DDG production by the unconsolidated LLCs is higher. However, the portion of that volume that is sold directly to ~~their~~its customers is excluded here.

Plant Nutrient Group

The Plant Nutrient Group's ~~second~~third quarter results reflect a continued depressed nutrient market. AnQuarterly wholesale nutrient volumes increased over the prior year, but the oversupply of base nutrients in the market has continued to put pressure on prices, which has ~~put~~compressed overall margins. The quarterly results were also negatively impacted by a settlement reserve for a 2015 legal claim, which was settled in October, 2017. As we moved into 2018, we expect low prices and oversupply conditions to persist, putting further pressure on overall margins. Volumes have also declined compared to the prior year as we lost a key portion of our application window due to inclement weather, as well as lower crop prices that continue to keep farm income low, preventing investment in high margin nutrients that yield better results. We expect this trend to continue during themargins into next year.

Storage capacity at our wholesale nutrient and farm center facilities, including leased storage, was approximately ~~486~~478 thousand tons for dry nutrients and approximately ~~527~~525 thousand tons for liquid nutrients at ~~June~~September 30, 2017 and approximately ~~497~~488 thousand tons for dry nutrients and approximately ~~550~~547 thousand tons for liquid nutrients at ~~June~~September 30, 2016. The decrease in our storage capacity is a result of the sales of Florida farm center assets in the first quarter of 2017.

Tons of product shipped (including sales and service tons) for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016 were as follows:


(in thousands)	Three months ended June 30,		Six months ended June 30,		Three months ended September 30,		Nine months ended September 30,
	2017	2016	2017	2016	2017	2016	2017	2016
Wholesale Nutrients - Base nitrogen, phosphorus, potassium	545	549	735	761	236	219	971	980
Wholesale Nutrients - Value added products	173	208	303	327	84	78	387	404
Other (includes Farm Centers, Turf, and Cob)	147	185	276	314	58	73	334	398
Total tons	865	942	1,314	1,402	378	370	1,692	1,782

Rail Group

The Rail Group ~~saw~~performed well in the third quarter despite soft market conditions. Utilization rates are recovering at a ~~decline in~~very modest pace, however, lease rates are still under pressure from an over-supplied car market and we expect lease rates to continue to be pressured into next year.

The Group's average utilization rates declined from ~~88.6~~86.2 percent in the ~~second~~third quarter of 2016 to ~~84.4~~85.8 percent in the ~~second~~third quarter of 2017. Average lease rates ~~remained relatively flat.~~also declined compared to the prior year. Rail Group assets under management (owned, leased or managed for financial institutions in non-recourse arrangements) at ~~June~~September 30, 2017 were ~~23,649~~22,986 compared to ~~23,220~~23,203 at ~~June~~September 30, 2016.

Utilization rates are recovering at a modest rate, however, lease rates are still under pressure from an over-supplied car market. We expect utilization to continue to rebound and lease rates to hold steady through the end of the year, with increased harvest demand in the fourth quarter.

The Group has purchased ~~774 cars~~over 1,500 railcars with leases attached inthrough the third quarter of 2017 and continues to focus on strategically ~~growing~~purchasing railcars and managing the ~~rail~~average age of the fleet, as well as ~~look~~looking for opportunities to open new repair facilities.

Retail Group

The Retail Group ~~closed its remaining stores and substantially~~has completed its liquidation efforts ~~during the second quarter.~~and is focused on selling its remaining real estate assets. We have closed on the sale of ~~one~~two of the four properties in ~~July,~~the third quarter of 2017, recording a ~~nominal~~$5.7 million gain.

Other

Our “Other” activities include corporate costs and functions that provide support and services to the operating segments. The results include expenses and benefits not allocated to the operating segments, including a portion of our ERP project.

Operating Results

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


	Three months ended June 30,					Six months ended June 30,						Three months ended September 30,				Nine months ended September 30,
(in thousands)	2017			2016		2017			2016			2017		2016		2017			2016
Sales and merchandising revenues	$	993,662		$	1,064,244	$	1,845,678		$	1,952,123		$	836,595	$	859,612	$	2,682,273		$	2,811,735
Cost of sales and merchandising revenues	905,828			967,202		1,681,386			1,787,326			766,924		782,597		2,448,310			2,569,923
Gross profit	87,834			97,042		164,292			164,797			69,671		77,015		233,963			241,812
Operating, administrative and general expenses	69,928			75,405		151,875			155,286			68,456		78,767		220,331			234,053
Goodwill impairment	42,000			—		42,000			—			—		—		42,000			—
Interest expense (income)	5,988			6,554		12,088			13,605			5,384		4,441		17,472			18,046
Equity in earnings (losses) of affiliates, net	6,385			2,344		4,507			(4,633		)	3,586		8,422		8,093			3,789
Other income (expense), net	4,632			5,682		12,529			8,928			5,588		2,216		18,117			11,144
Income (loss) before income taxes	(19,065		)	23,109		(24,635		)	201			5,005		4,445		(19,630		)	4,646
Income (loss) attributable to noncontrolling interests	(64		)	1,018		(10		)	92			83		1,619		73			1,711
Income (loss) before income taxes attributable to The Andersons, Inc.	$	(19,001	)	$	22,091	$	(24,625	)	$	109		$	4,922	$	2,826	$	(19,703	)	$	2,935

Comparison of the three months ended ~~June~~September 30, 2017 with the three months ended ~~June~~September 30, 2016:

Grain Group


	Three months ended June 30,					Three months ended September 30,
(in thousands)	2017		2016			2017			2016
Sales and merchandising revenues	$	488,447	$	522,989		$	497,613		$	550,189
Cost of sales and merchandising revenues	458,000		505,438			465,297			519,724
Gross profit	30,447		17,551			32,316			30,465
Operating, administrative and general expenses	25,955		27,362			27,622			27,743
Interest expense (income)	2,327		2,961			1,898			1,737
Equity in earnings (losses) of affiliates, net	2,903		(2,907		)	(694		)	533
Other income (expense), net	1,861		2,642			539			361
Income (loss) before income taxes	$	6,929	$	(13,037	)	$	2,641		$	1,879

Operating results for the Grain Group ~~have~~ improved by ~~$20.0~~$0.8 million compared to the results of the same period last year. Sales and merchandising revenues decreased ~~$34.5~~$52.6 million due to a ~~33%~~43% decrease in ~~bushel sales~~bushels sold as more bushels are being strategically ~~held for sale in the second half of the year~~stored due to strong space income opportunities in the ~~market.~~market and an intentional reduction in bushels sold directly from supplier to customer as the group continues to focus only on the most profitable markets to increase margins. Additionally, bushels received are down ~~27%~~13% compared to the same period in 2016 due to a later start to harvest, which is also a partial driver in the decline in sales. The decrease in volume was more than offset by a decrease in cost of sales and merchandising revenues

of ~~$47.4~~$54.4 million for a net favorable gross profit impact of ~~$12.9~~$1.9 million. The gross profit increase was driven by ~~$15.6~~$2.8 million increase in space income relating primarily to ~~corn, beans, and~~ wheat as the value of storage capacity has significantly improved, as well as a $3.0 million increase from risk management fees, trading income and other items compared to the same period in 2016. These increases were partially offset by a $3.9 million decrease in drying and mixing income. The decrease is due to unusually high drying and mixing income in the prior year that did not recur in the current year.

Equity in earnings of affiliates ~~improved $5.8~~declined $1.2 million primarily due to ~~improved~~lower operating results ~~of Lansing Trade Group ("LTG") who also continues to recover~~ from ~~under performance in its core markets in~~our Canadian affiliate during the ~~second quarter of 2016.~~

quarter.

Ethanol Group


	Three months ended June 30,					Three months ended September 30,
(in thousands)	2017			2016		2017			2016
Sales and merchandising revenues	$	187,831		$	142,520	$	191,531		$	139,413
Cost of sales and merchandising revenues	184,511			137,950		185,143			133,112
Gross profit	3,320			4,570		6,388			6,301
Operating, administrative and general expenses	2,243			2,607		4,526			3,025
Interest expense (income)	(22		)	12		(27		)	11
Equity in earnings (losses) of affiliates, net	3,482			5,251		4,280			7,889
Other income (expense), net	15			3		12			6
Income (loss) before income taxes	4,596			7,205		6,181			11,160
Income (loss) attributable to noncontrolling interests	(64		)	1,018		83			1,619
Income (loss) before income taxes attributable to The Andersons, Inc.	$	4,660		$	6,187	$	6,098		$	9,541

Operating results for the Ethanol Group decreased ~~$1.5~~$3.4 million from the same period last year. Sales and merchandising revenues increased ~~$45.3~~$52.1 million compared to the results of the same period last year. This was driven by a 47% increase in ethanol gallons sold, a portion of which is attributable to the Albion ~~expansion which led to record ethanol production.~~plant expansion. Cost of sales and merchandising revenues increased at a ~~similar rate. The $1.3 million decrease in~~higher rate than revenues as the cost of corn increased 4% and the natural gas cost per gallon increased 5%. Despite higher volumes, higher input costs caused gross profit ~~is driven by low margins due~~ to ~~record levels of industry production and stock.~~remain flat between periods.

~~Equity in earnings of affiliates decreased $1.8~~Operating, administrative and general expenses increased $1.5 million compared to the same period in 2016, primarily as a result of the write-off of a capital project. Equity in earnings of affiliates decreased $3.6 million due to declining results from the unconsolidated ethanol LLCs. ~~This was~~These results were primarily driven by low ethanol ~~margins as noted above as well as continued lower~~and DDG ~~margins as~~margins. The decrease is also driven by our merging TAEI with and into TAME in the first quarter. Prior to this transaction, the noncontrolling interest in TAEI was attributed 33% of the gains and losses of TAME recorded by the Company in its equity in earnings of affiliates. With a ~~result~~33% direct ownership in TAME now, our share of ~~localized elevated vomitoxin levels~~gains and losses recorded in ~~eastern draw areas.~~equity in earnings of affiliates will decrease, with a corresponding decrease in income attributable to noncontrolling interests.

Plant Nutrient Group


	Three months ended June 30,					Three months ended September 30,
(in thousands)	2017			2016		2017			2016
Sales and merchandising revenues	$	264,736		$	320,036	$	103,620		$	101,770
Cost of sales and merchandising revenues	224,802			270,459		86,271			82,383
Gross profit	39,934			49,577		17,349			19,387
Operating, administrative and general expenses	22,580			25,186		22,086			25,746
Goodwill impairment	42,000			—
Interest expense (income)	1,815			2,078		1,561			1,583
Other income (expense), net	636			1,222		(1,622		)	711
Income (loss) before income taxes	$	(25,825	)	$	23,535	$	(7,920	)	$	(7,231	)

Operating results for the Plant Nutrient Group declined ~~$49.4~~$0.7 million over the same period in the prior year. Sales and merchandising revenues ~~decreased $55.3 million and cost~~were relatively unchanged, as the 7% increase in wholesale nutrient tons sold was mostly offset by a 21% decrease in other tons sold. Cost of sales and merchandising revenues ~~have decreased $45.7 million. The decrease in sales and merchandising revenues is driven by a 30% decrease in farm centers volume~~increased $3.9 million, primarily due to a 2%

increase in overall tons sold, as well as higher cost of certain wholesale nutrient inventory carried over from the ~~sale of farm center locations in Florida. Additionally, wholesale volume was down 5% due to lower movement base nutrients and value added products. Gross~~spring. As such, gross profit for the Plant Nutrient Group decreased ~~$9.6~~$2.0 million from the same period last year. Margins remain tight due to competitive pressures and margin compression in the wholesale and farm center businesses ~~due to~~resulting from lower base nutrient prices and lower ~~farm income, and resulting lower demand.~~crop prices.

Operating, administrative and general expenses decreased ~~$2.6~~$3.7 million due to ~~$1.0~~$1.8 million of labor and benefit reductions relating to the sale of farm center locations in Florida and lower incentive compensation expense. Smaller reductions were also realized in a number of other categories as part of our overall cost control efforts. ~~The Group also recognized~~Other income (expense), net decreased $2.3 million, primarily as a ~~goodwill impairment charge~~result of ~~$42.0~~a $2.2 million ~~after experiencing several periods of compressed margins and lower sales volumes, as well as anticipated unfavorable operating conditions in~~legal settlement reserve recorded during the ~~nutrient market for some time.~~

quarter.

Rail Group


	Three months ended June 30,				Three months ended September 30,
(in thousands)	2017		2016		2017		2016
Sales and merchandising revenues	$	38,149	$	40,342	$	43,093	$	38,201
Cost of sales and merchandising revenues	25,450		26,740		29,671		25,674
Gross profit	12,699		13,602		13,422		12,527
Operating, administrative and general expenses	5,395		4,997		6,246		4,528
Interest expense (income)	1,936		2,221		1,742		1,696
Other income (expense), net	492		185		693		451
Income (loss) before income taxes	$	5,860	$	6,569	$	6,127	$	6,754

Operating results declined ~~$0.7~~$0.6 million from the same period last year. Sales and merchandising revenues ~~decreased $2.2~~increased $4.9 million. Revenue from car sales ~~decreased $1.9~~increased by $5.2 million due to ~~fewer~~higher car sales while repair and other revenues increased by $0.6 million. These were partially offset by a $0.9 million decrease in leasing revenues ~~decreased $1.4 million~~ due to lower average utilization and lease rates compared to the prior year. ~~These decreases were partially offset by increased repair and other revenues as the repair shops continue to produce strong results.~~ Cost of sales and merchandising revenues ~~decreased $1.3~~increased $4.0 million ~~primarily~~compared to the prior year almost entirely due to ~~lower~~increased car sales. ~~Gross~~As a result, gross profit ~~decreased~~increased $0.9 million compared to last year. This ~~decrease~~increase was driven by ~~$0.9~~$1.2 million from ~~fewer~~ car ~~sales~~sale margins and ~~$1.0 million from weaker utilization and offset by $1.0 million of increased~~slight decreases in leasing, repair and other ~~gross profit~~businesses.

Operating, administrative and general expenses increased $1.7 million primarily due to higher labor and benefit costs from ~~greater efficiencies in the~~opening new repair ~~shops.~~shops and reserves related to a fatality at a repair shop.

Retail Group


	Three months ended June 30,					Three months ended September 30,
(in thousands)	2017			2016		2017		2016
Sales and merchandising revenues	$	14,499		$	38,357	$	738	$	30,039
Cost of sales and merchandising revenues	13,065			26,615		542		21,704
Gross profit	1,434			11,742		196		8,335
Operating, administrative and general expenses	9,373			10,666		1,542		9,858
Interest expense (income)	82			157		99		138
Other income (expense), net	1,303			91		5,869		83
Income (loss) before income taxes	$	(6,718	)	$	1,010	$	4,424	$	(1,578	)

Operating results for the Retail Group ~~declined $7.7~~improved $6.0 million ~~from~~primarily due to the ~~same period last year. Sales and merchandising revenues decreased $23.9 million and cost~~gains recognized in other income on the sale of ~~sales and merchandising revenues decreased $13.6 million leading to a decrease in gross profit of $10.3 million. These decreases reflect partial operations~~two store properties during the ~~quarter due to~~quarter. The decreases in the remaining captions above reflect the impact of the closure of the retail business ~~during the second quarter of 2017. Additionally, inventory was marked down for~~and additional liquidation ~~causing a decrease in margins.~~

While operating, administrative and general expenses decreased by $1.3 million, the group incurred exit charges of $3.5 million in 2017, most of which was severance. The remaining operating, administrative and general expenses decrease was due to the group being operational for only a portion of the quarter. The increase in other income is due to a $1.2 million gain on the sale of fixtures.efforts.

Other


	Three months ended June 30,						Three months ended September 30,
(in thousands)	2017			2016			2017			2016
Sales and merchandising revenues	$	—		$	—		$	—		$	—
Cost of sales and merchandising revenues	—			—			—			—
Gross profit	—			—			—			—
Operating, administrative and general expenses	4,382			4,587			6,434			7,867
Interest expense (income)	(150		)	(875		)	111			(724		)
Other income (expense), net	325			1,539			97			604
Income (loss) before income taxes	$	(3,907	)	$	(2,173	)	$	(6,448	)	$	(6,539	)

The other operating loss not allocated to business segments ~~increased $1.7~~decreased $0.1 million compared to the same period in the prior year. ~~Other income~~Operating, administrative and general expenses decreased ~~by $1.2~~$1.4 million asdue to lower incentive compensation expense and a ~~result of $1.3 million gain on final settlement of our pension plan~~reduction in ~~2016.~~health care claims.

Income Taxes

In the ~~second~~third quarter of 2017, income tax expense of ~~$7.7~~$2.4 million was provided at ~~(40.1)%~~an effective rate of 47.7%. In the ~~second~~third quarter of 2016, income tax expense of ~~$7.7~~$1.1 million was provided at ~~33.2%~~24.8%. The ~~lower~~higher 2017 effective tax rate ~~relative to the loss before income taxes~~ is primarily due to decreased benefit related to federal railroad track maintenance tax credits and the absence of tax benefit recorded in 2016 related to a ~~$42.0 million goodwill impairment charge which did not provide a corresponding tax benefit.~~previous business acquisition.

The Company anticipates that its 2017 annual effective tax rate will be ~~99.2%~~227.8%. The Company’s actual 2016 effective tax rate was 32.3%. The higher tax rate in 2017 is primarily due to a $42 million goodwill impairment charge which did not provide a corresponding tax ~~benefit.~~benefit and the lack of current year benefit related to federal railroad track maintenance tax credits

Comparison of the ~~six~~nine months ended ~~June~~September 30, 2017 with the ~~six~~nine months ended ~~June~~September 30, 2016:

Grain Group


	Six months ended June 30,					Nine months ended September 30,
(in thousands)	2017		2016			2017		2016
Sales and merchandising revenues	$	966,975	$	1,061,803		$	1,464,588	$	1,611,992
Cost of sales and merchandising revenues	912,879		1,028,052			1,378,176		1,547,776
Gross profit	54,096		33,751			86,412		64,216
Operating, administrative and general expenses	51,282		55,384			78,904		83,127
Interest expense (income)	5,023		5,448			6,921		7,185
Equity in earnings (losses) of affiliates, net	1,558		(6,674		)	864		(6,141		)
Other income (expense), net	2,507		3,310			3,046		3,671
Income (loss) before income taxes	1,856		(30,445		)	4,497		(28,566		)
Income (loss) attributable to noncontrolling interests	—		(3		)	—		(3		)
Income (loss) before income taxes attributable to The Andersons, Inc.	$	1,856	$	(30,442	)	$	4,497	$	(28,563	)

Operating results for the Grain Group ~~have~~ improved by ~~$32.3~~$33.1 million compared to the results of the same period last year. Sales and merchandising revenues decreased ~~$94.8~~$147.4 million due to a ~~21%~~28% decrease in bushels sold as more bushels are being strategically ~~held for sale in the second half of the year~~stored due to strong ~~carry~~space income opportunities in the ~~market. Additionally, direct ship~~market and an intentional reduction in bushels ~~are down 21%~~sold directly from supplier to customer as the group continues to focus only on the most profitable markets to increase margins. Additionally, bushels received are down 18% compared to the same period in 2016 due to a later start to harvest, which is also a partial driver in the decline in sales. This decrease was more than offset by a decrease of cost of sales and merchandising revenues for a net favorable gross profit impact of ~~$20.3~~$22.2 million. The gross profit increase was driven by a ~~$24.5~~$27.5 million increase in space income relating to corn, beans, and wheat as the value of storage capacity has significantly improved, as well as a $4.0 million increase from risk management fees, trading income and other items compared to the ~~same period~~prior year. This increase was partially offset by decreases in ~~2016.~~drying and mixing income and the 2016 Iowa divestiture totaling $9.3 million. Of this

decrease, drying and mixing income accounted for $7.9 million due to unusually high drying and mixing income in the prior year that did not recur in the current year.

Operating, administrative and general expenses decreased by ~~$4.1~~$4.2 million compared to the same period in 2016 due to a $3.5 million decrease in expenses relating to the Iowa divestiture and a ~~$2.2~~$2.8 million decrease in labor and benefit costs ~~as a result of~~primarily due to productivity efforts.

These decreases were partially offset by minor increases in depreciation, utilities and maintenance expenses.

Equity in ~~losses~~earnings of affiliates improved ~~$8.2~~$7.0 million due to the improved operating results of LTG, ~~who~~which also continues to recover from under performance in its core markets in 2016.

Ethanol Group


	Six months ended June 30,					Nine months ended September 30,
(in thousands)	2017			2016		2017			2016
Sales and merchandising revenues	$	341,984		$	257,213	$	533,515		$	396,626
Cost of sales and merchandising revenues	333,124			250,307		518,267			383,419
Gross profit	8,860			6,906		15,248			13,207
Operating, administrative and general expenses	5,490			5,355		10,016			8,380
Interest expense (income)	(25		)	23		(52		)	34
Equity in earnings (losses) of affiliates, net	2,949			2,041		7,229			9,930
Other income (expense), net	22			33		34			39
Income (loss) before income taxes	6,366			3,602		12,547			14,762
Income (loss) attributable to noncontrolling interests	(10		)	95		73			1,714
Income (loss) before income taxes attributable to The Andersons, Inc.	$	6,376		$	3,507	$	12,474		$	13,048

Operating results for the Ethanol Group ~~increased $2.9~~decreased $0.6 million from the same period last year. Sales and merchandising revenues increased ~~$84.8~~$136.9 million compared to the results of the same period last year. This was driven by a 38% increase in ethanol gallons sold, a portion of which is attributable to the Albion plant expansion, ~~which led to record~~and a 3% increase in ethanol ~~production.~~prices. Cost of sales and merchandising revenues increased atdue to these higher volumes and a ~~similar rate. The~~21% increase in natural gas costs. These factors led to a $2.0 million increase in gross profit, much of which was ~~driven by~~from the ~~Group's ability to enter 2017 with approximately half of its margins hedged.~~first quarter.

Operating, administrative and general expenses increased $1.6 million compared to the same period in 2016, primarily as a result of the write-off of a potential capital project. Equity in earnings of affiliates ~~increased $0.9~~decreased $2.7 million due to ~~better~~declining results from the unconsolidated ethanol LLCs. These results were primarily driven by low ethanol and DDG margins. The ~~facilities' productivity~~decrease is also driven by our merging TAEI with and ~~output remained strong and margins were better, primarily~~into TAME in the first ~~quarter as noted above.~~quarter. Prior to this transaction, the noncontrolling interest in TAEI was attributed 33% of the gains and losses of TAME recorded by the Company in its equity in earnings of affiliates. With a 33% direct ownership in TAME now, our share of gains and losses recorded in equity in earnings of affiliates will decrease, with a correlated decrease in income attributable to noncontrolling interests.

Plant Nutrient Group


	Six months ended June 30,					Nine months ended September 30,
(in thousands)	2017			2016		2017			2016
Sales and merchandising revenues	$	411,323		$	487,027	$	514,943		$	588,797
Cost of sales and merchandising revenues	345,581			410,761		431,852			493,144
Gross profit	65,742			76,266		83,091			95,653
Operating, administrative and general expenses	45,641			49,068		67,727			74,814
Goodwill impairment	42,000			—		42,000			—
Interest expense (income)	3,455			3,976		5,016			5,559
Other income (expense), net	6,200			2,017		4,578			2,728
Income (loss) before income taxes	$	(19,154	)	$	25,239	$	(27,074	)	$	18,008

Operating results for the Plant Nutrient Group declined ~~$44.4~~$45.1 million from the same period in the prior year. ~~Gross~~Sales and merchandising revenues decreased $73.9 million. Approximately half of the decrease is due to a 2% decrease in wholesale tons sold and 8% decrease in average wholesale prices. The primary driver for the remaining decrease is a 16% decrease in other tons sold and a 7% decrease in average prices in our farm center business. The decrease in other tons sold is as a result of the sales of our farm center locations in Florida in the first quarter of 2017 and Iowa in the first quarter of 2016. Cost of sales and merchandising revenues decreased $61.3 million as a result of the same factors. As such, gross profit decreased ~~$10.5~~$12.6 million from the same period last year. Sales and merchandising revenues decreased $75.7 million due to a 21% decrease in farm center tons as a result of the sale of our farm center locations in Florida. Additionally, wholesale volume was down 5% due to lower movement base nutrients and value added products. Cost of sales and merchandising revenues decreased $65.2 million. Margins remain tight due to competitive pressures and margin compression in the wholesale and farm center businesses ~~due to~~resulting from lower base nutrient prices and lower ~~farm income, and resulting lower demand.~~crop prices.

Operating, administrative and general expenses decreased ~~$3.4~~$7.1 million. The largest driver was a ~~$2.3~~$4.1 million decrease in labor and benefits, much of it relating to the sale of farm center locations in Florida in the first quarter of 2017 and the sale of the farm center locations in Iowa in the first quarter of 2016. Smaller reductions were also realized in a number of other categories as part of our overall cost control efforts. The Group also recognized a second quarter goodwill impairment charge of $42.0 million after experiencing several periods of compressed margins and lower sales volumes, as well as anticipated unfavorable operating conditions in the nutrient market for some time.

Other income increased $1.9 million primarily as a result of a $4.7 million gain on the sale of farm center locations in ~~Florida.~~Florida, offset by a $2.2 million legal settlement reserve.

Rail Group


	Six months ended June 30,				Nine months ended September 30,
(in thousands)	2017		2016		2017		2016
Sales and merchandising revenues	$	78,539	$	79,951	$	121,632	$	118,152
Cost of sales and merchandising revenues	53,532		51,789		83,203		77,463
Gross profit	25,007		28,162		38,429		40,689
Operating, administrative and general expenses	10,895		9,868		17,141		14,396
Interest expense (income)	3,745		3,912		5,487		5,608
Other income (expense), net	1,571		1,562		2,264		2,013
Income (loss) before income taxes	$	11,938	$	15,944	$	18,065	$	22,698

Operating results for the Rail Group declined $4.6 million from the same period last year. Sales and merchandising revenues increased $3.5 million. Revenue from car sales increased by $4.6 million due to a higher volume of car sales while repair and other revenues increased by $2.9 million. These increases were partially offset by a $4.0 million decrease in leasing revenues due to average utilization of 84.6% in the current year and 88.8% in the prior year, as well as a 2% decrease in lease rates compared to the prior year. Cost of sales and merchandising revenues increased $5.7 million compared to the prior year due to increased car sales and higher storage costs because fewer cars were in service. Gross profit decreased $2.3 million compared to last year. This decrease was driven by a $5.6 million reduction in our leasing gross profit, offset by a $2.1 million increase in our repair and other business and slight increases in car sale margins.

Operating, administrative and general expenses increased $2.7 million primarily due to higher labor and benefit costs from opening new repair shops and reserves related to a fatality at a repair shop.

Retail Group



	Nine months ended September 30,
(in thousands)	2017			2016
Sales and merchandising revenues	$	47,595		$	96,168
Cost of sales and merchandising revenues	36,812			68,121
Gross profit	10,783			28,047
Operating, administrative and general expenses	26,956			30,513
Interest expense (income)	269			441
Other income (expense), net	7,302			263
Income (loss) before income taxes	$	(9,140	)	$	(2,644	)

Operating results for the Retail Group declined $6.5 million from the same period last year. Sales and merchandising revenues decreased $1.4 million. Leasing revenues decreased $3.4 million, partially offset by $2.4 million of increased repair and other revenues. The remaining change related to a slight decrease in car sale revenues. Cost of sales and merchandising revenues increased $1.7 million compared to the same period last year due to higher storage costs resulting from lower cars in service and increased repair sales, as noted above. Gross profit decreased $3.2 million compared to last year. This decrease was driven by almost $5.5 million in our leasing business, offset by a $1.9 million increase in our repair and other business and slight increases on car sale margins.

~~Retail Group~~

Six months ended June 30,
(in thousands) 2017 2016
Sales and merchandising revenues $ 46,857
$ 66,129
Cost of sales and merchandising revenues 36,270
46,417
Gross profit 10,587
19,712
Operating, administrative and general expenses 25,414
20,655
Interest expense (income) 170
303
Other income (expense), net 1,433
180
Income (loss) before income taxes $ (13,564 ) $ (1,066 )

~~Operating results for the Retail Group declined $12.5 million from the same period last year. Sales and merchandising revenues decreased $19.3~~$48.6 million while cost of sales and merchandising revenues decreased ~~$10.1~~$31.3 million. These decreases ~~are~~were due to lower volumes as a result of the closure of the retail business during the second quarter of 2017. Additionally, inventory ~~was~~ marked down for liquidation ~~causing~~caused a significant decrease in margins leading to a ~~$9.1~~$17.3 million decrease in gross profit.

Operating, administrative and general expenses ~~increased~~decreased by ~~$4.8~~$3.6 million ~~which includes one time exit charges~~as a result of ~~$11.3 million, most of which was severance. This decrease was partially offset by~~lower operating costs related to the group ~~being~~be operational for only a portion of the year. ~~The increase in other~~This decrease was partially offset by one time exit charges of $11.5 million, most of which was for severance costs. Other income ~~was~~increased primarily due to $5.7 million gains on the sale of two store properties and a $1.2 million gain on the sale of fixtures.

Other


	Six months ended June 30,						Nine months ended September 30,
(in thousands)	2017			2016			2017			2016
Sales and merchandising revenues	$	—		$	—		$	—		$	—
Cost of sales and merchandising revenues	—			—			—			—
Gross profit	—			—			—			—
Operating, administrative and general expenses	13,153			14,956			19,587			22,823
Interest expense (income)	(280		)	(57		)	(169		)	(781		)
Other income (expense), net	796			1,826			893			2,430
Income (loss) before income taxes	$	(12,077	)	$	(13,073	)	$	(18,525	)	$	(19,612	)

The other operating loss not allocated to business segments decreased ~~$1.0~~$1.1 million compared to the same period in the prior year. Operating, administrative and general expenses decreased ~~$1.8~~$3.2 million, which iswas due to higher severance costs in the prior year ~~that did not occur~~and a reduction in ~~2017.~~health care claims. This lower expense was partially offset by a $1.3 million gain on final settlement of our pension plan in ~~Other~~other income in 2016.

Income Taxes

In 2017, income tax expense of ~~$5.1~~$7.5 million was provided at ~~(20.8)~~an effective tax rate of (38.2)%. In 2016, income tax expense of ~~$0.4~~$1.5 million was provided at ~~189.6%~~32.0%. The lower 2017 effective tax rate relative to the loss before income taxes is primarily due to a ~~$42.0~~$42 million goodwill impairment charge which did not provide a corresponding tax benefit.

Liquidity and Capital Resources

Working Capital

At ~~June~~September 30, 2017, the Company had working capital of ~~$194.9~~$214.3 million. The following table presents changes in the components of current assets and current liabilities:


(in thousands)	June 30, 2017		June 30, 2016		Variance			September 30, 2017		September 30, 2016		Variance
Current Assets:
Cash and cash equivalents	$	18,934	$	31,383	$	(12,449	)	$	24,478	$	78,158	$	(53,680	)
Restricted cash	1,033		987		46			—		190		(190		)
Accounts receivable, net	186,331		212,588		(26,257		)	196,192		173,593		22,599
Inventories	463,205		486,236		(23,031		)	475,602		427,754		47,848
Commodity derivative assets – current	11,619		115,924		(104,305		)	45,202		59,837		(14,635		)
Other current assets	59,873		48,754		11,119			53,958		43,761		10,197
Assets held for sale	10,028		—		10,028			8,383		—		8,383
Total current assets	751,023		895,872		(144,849		)	803,815		783,293		20,522
Current Liabilities:
Short-term debt	124,000		179,404		(55,404		)	19,000		—		19,000
Trade and other payables	267,194		302,413		(35,219		)	381,359		356,931		24,428
Customer prepayments and deferred revenue	15,113		18,252		(3,139		)	29,520		15,725		13,795
Commodity derivative liabilities – current	18,104		43,183		(25,079		)	38,578		59,770		(21,192		)
Accrued expenses and other current liabilities	69,256		71,169		(1,913		)	67,064		68,465		(1,401		)
Current maturities of long-term debt	62,482		53,720		8,762			53,972		51,520		2,452
Total current liabilities	556,149		668,141		(111,992		)	589,493		552,411		37,082
Working Capital	$	194,874	$	227,731	$	(32,857	)	$	214,322	$	230,882	$	(16,560	)

InSeptember 30, 2017 current assets increased $20.5 million in comparison to ~~June~~those of September 30, ~~2016 current assets decreased significantly.~~2016. This increase was primarily due to ~~a decrease~~increases in ~~Commodity derivative assets.~~inventories and accounts receivable. The increase in inventory relates to higher grain inventories from higher wheat and bean prices and more bushels owned. This increase was partially offset by the liquidation of retail inventory in the current year. Accounts receivable increased due to the amount and timing of sales in the Grain and Ethanol businesses. Current commodity derivative assets and liabilities, ~~have decreased~~ which reflects the customer net asset or liability based on the value of forward contracts as compared to market prices at the end of the period, ~~as well as a significant decrease in~~have decreased. See the need for margin deposits compared to the prior year. Accounts receivable, net was also down due to a decrease in Grain receivables as a result of lower sales and shipment activity for the first half of 2017 compared to prior periods. Plant Nutrient Group also contributed to a decrease in accounts receivable as a result of the sale of Florida farm center locations and a decrease in sales. Additionally, inventories are down. Retail inventory is down due to the decision to close the retail stores. Liquidations efforts are substantially complete as of June 30, 2017. Plant Nutrient inventory is also down as a result of carrying fewer tons, including inventory in transit at the end of the period, and as a result of the sale of the Florida locations. These decreases are partially offset by an increase in Grain inventory as bushels are being held for sale in the second half of the year. See discussion below on additional sources and uses of cash for an understanding of the decrease in cash from prior year.

Current liabilities ~~were down~~increased $37.1 million compared to the prior year due to ~~a decrease~~an increase in short-term debt, trade and other payables, and ~~commodity derivative liabilities which are mentioned above.~~customer prepayments and deferred revenue. Short-term debt ~~decreased~~increased as a result of higher borrowings on the ~~revolver~~short-term line of credit in ~~2016 that did not occur in 2017.~~the current year. Trade and other payables ~~decreased primarily~~increased due to ~~a decrease~~timing of activity and processing payments within the Grain and Ethanol businesses. The increase in ~~Plant Nutrient Group payables due~~customer prepayments and deferred revenues related to ~~more timely processing of payments as well as decreased inventory levels and purchases at quarter end.~~an increase in wholesale nutrient tons that have been prepaid. Changes in the commodity derivative liabilities balance partially offset this increase, which is mentioned above.

Sources and Uses of Cash

Operating Activities

Our operating activities ~~used~~provided cash of ~~$45.2~~$60.7 million and ~~$194.4~~$41.3 million in the first ~~six~~nine months of 2017 and 2016, respectively. The ~~decrease~~increase in cash ~~used year to date is primarily~~provided was due to several factors. Net income excluding the non-cash impact of impairments increased by $11.6 million compared to the prior year and the impact of operating asset and liability fluctuations resulted in a $33.6 million increase in operating cash flows. This was partially offset by a $15.0 million decrease due to improved operating results at our equity affiliates which were not fully distributed in the form of cash, ~~collateral relating to commodity derivatives.~~as well as other individually small fluctuations in operating activities.

Investing Activities

Investing activities used cash of ~~$64.2~~$64.9 million through the first ~~six~~nine months of 2017 compared to cash provided of ~~$14.9~~$4.8 million in the prior year. This change iswas due to three main factors. Proceeds from sale of ~~facilities and investments in affiliates~~assets decreased by ~~$40.5~~$43.1 million. Proceeds

in 2016 were higher as a result of a $54.3 million sale of underperforming assets in Iowa as well as the redemption of our investment in the Iowa Northern Railway Corporation ~~which provided proceeds of~~for $13.5

million. Additionally, 2017 ~~reflects a $40.0 million increase in~~ net ~~spend~~spending on railcar acquisitions ~~and sales.~~increased by $45.2 million. The variability in railcar purchases and sales is driven by timing of opportunities in the Rail ~~Group~~Group's asset market. ~~Finally, property,~~Property, plant, and equipment ~~spend is down~~and capitalized software spending partially offset these uses of cash, decreasing $29.4 million compared to the same period in 2016.

In 2017, we expect to spend a total of ~~$145.0~~$175 million for the purchase of railcars ~~barges~~ and related leases and capitalized modifications of railcars. We also expect these purchases to ~~offset this amount by proceeds~~be funded from sales and dispositions or non-recourse debt of approximately ~~$120.0~~$150 million during the year.

Additionally, total capital spending for 2017 on property, plant and equipment in our base business excluding rail leasing activity, but inclusive of information technology spending is expected to be approximately ~~$70~~$56 million.

Financing Activities

Financing activities ~~provided~~used cash of ~~$65.7~~$34.0 million and ~~$147.1~~$31.7 million for the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016, respectively. Short term borrowings decreased $70.1 million. This change was driven primarily by declines in commodity prices and associated working capital requirements. In addition, the current year saw a decrease of $52.0 million in funds provided byWhile proceeds from long-term debt issuance ~~and other long-term financing arrangements, but~~decreased $43.0 million, this was largely offset by a ~~$42.3 million decrease~~reduction in long-term debt payments.

We are party to borrowing arrangements with a syndicate of banks that provide a total of $820.0 million in ~~borrowings, which~~borrowings. This amount includes $20.0 million of debt of The Andersons Denison Ethanol LLC ~~which~~that is non-recourse to the Company. Of that total, we had ~~$633.5~~$718.5 million ~~remaining~~ available for borrowing at ~~June~~September 30, 2017. Peak short-term borrowings to date were ~~$292.0~~$367.0 million on ~~April 3,~~February 15, 2017. Typically, our highest borrowing occurs in the late winter and early spring due to seasonal inventory requirements in our fertilizer and grain businesses.

We paid ~~$9.0~~$13.5 million in dividends in the first ~~six~~nine months of 2017 compared to ~~$8.7~~$13.0 million in the prior year. We paid $0.16 per common share for the dividends paid in January, April and ~~April,~~July, 2017 and $0.155 per common share for the dividends paid in January, April and ~~April,~~July, 2016. On ~~May 12,~~August 25, 2017, we declared a cash dividend of $0.16 per common share payable on ~~July 24,~~October 23, 2017 to shareholders of record on ~~July 3,~~October 2, 2017.

Certain of our long-term borrowings include covenants that, among other things, impose minimum levels of equity and limitations on additional debt. We are in compliance with all such covenants as of ~~June~~September 30, 2017. In addition, certain of our long-term borrowings are collateralized by first mortgages on various facilities or are collateralized by railcar assets. Our non-recourse long-term debt is collateralized by ethanol plant 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 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, we receive a return of cash.

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

Off-Balance Sheet Transactions

Our Rail Group utilizes leasing arrangements that provide off-balance sheet financing for its activities. We lease assets from financial intermediaries through sale-leaseback transactions, the majority of which involve operating leasebacks. Rail Group assets we own or lease from a financial intermediary are generally leased to a customer under an operating lease. We also arrange non-recourse lease transactions under which we sell assets to a financial intermediary, and assign the related operating lease to the financial intermediary on a non-recourse basis. In such arrangements, we generally provide ongoing maintenance and management services for the financial intermediary, and receive a fee for such services. On most of the assets, we hold an option to purchase the assets at the end of the lease.

The following table describes our Rail Group asset positions at ~~June~~September 30, 2017:



Method of Control	Financial Statement	Units
~~Owned-railcars~~Owned - railcars available for sale	On balance sheet – current	~~429~~290
~~Owned-railcar~~Owned - railcar assets leased to others	On balance sheet – non-current	~~16,685~~16,650
Railcars leased from financial intermediaries	Off balance sheet	~~3,614~~3,448
Railcars –in non-recourse arrangements	Off balance sheet	~~2,817~~2,497
Total Railcars		~~23,545~~22,885
Locomotive assets leased to others	On balance sheet – non-current	3532
Locomotives leased from financial intermediaries	Off balance sheet	4
Total Locomotives		3936
Barge assets leased to others	On balance sheet – non-current	—
Barge assets leased from financial intermediaries	Off balance sheet	65
Total Barges		65

In addition, we manage ~~415~~515 railcars for third party customers or owners for which we receive a fee.

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, 2016. There were no material changes in market risk, specifically commodity and interest rate risk during the quarter ended ~~June~~September 30, 2017.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer ("Certifying Officers"), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on the results of this evaluation, management concluded that, as of ~~June~~September 30, 2017, the Company's disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

Management concluded that the Company’s system of internal control over financial reporting was effective as of December 31, 2016. As required by Rule 13a-15(d) of the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of any change in the Company’s internal controls over financial reporting that have materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting. The Company is undertaking the phased implementation of an ERP software system. The Company believes it is maintaining and monitoring appropriate internal controls during the implementation period and further believes that its internal control environment will be enhanced as a result of this implementation. There have been no other changes in the Company’s internal controls over financial reporting during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

We are currently subject to various claims and suits arising in the ordinary course of business, which include environmental issues, employment claims, contractual disputes, and defensive counter claims. We accrue liabilities where litigation losses are deemed probable and estimable. We believe it is unlikely that the results of our current legal proceedings, even if unfavorable, will be materially different from what we currently have 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.

Item 1A. Risk Factors

Our operations are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this Form 10-Q and could have a material adverse impact on our financial results. These risks can be impacted by factors beyond our control as well as by errors and omissions on our part. The most significant factors known to us that could materially adversely affect our business, financial condition or operating results are described in our 2016 Form 10-K (Item 1A).

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

No sales or repurchases of shares have occurred in 2017.

Item 6. Exhibits

(a) Exhibits




No.		Description

12		Computation of Ratio of Earnings to Fixed Charges

31.1		Certification of the Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a)

31.2		Certification of the Chief Financial Officer under Rule 13(a)-14(a)/15d-14(a)

32.1		Certifications Pursuant to 18 U.S.C. Section 1350

101		Financial Statements from the interim report on Form 10-Q of The Andersons, Inc. for the period ended ~~June~~September 30, 2017, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Equity, (v) the Condensed Consolidated Statement of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.

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. (Registrant)

Date: ~~August~~November 7, 2017		By /s/ Patrick E. Bowe
		Patrick E. Bowe
		Chief Executive Officer (Principal Executive Officer)

Date: ~~August~~November 7, 2017		By /s/ John Granato
		John Granato
		Chief Financial Officer (Principal Financial Officer)

Exhibit Index

The Andersons, Inc.




No.		Description

12		Computation of Ratio of Earnings to Fixed Charges

31.1		Certification of the Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a)

31.2		Certification of the Chief Financial Officer under Rule 13(a)-14(a)/15d-14(a)

32.1		Certifications Pursuant to 18 U.S.C. Section 1350

101		Financial Statements from the interim report on Form 10-Q of The Andersons, Inc. for the period ended ~~June~~September 30, 2017, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Equity, (v) the Condensed Consolidated Statement of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.

4644



		Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
		Three months ended June 30, 2017									Six months ended June 30, 2017
(in thousands)		Foreign Currency Translation Adjustment			Defined Benefit Plan Items			Total			Foreign Currency Translation Adjustment			Defined Benefit Plan Items			Total
Beginning Balance		$	(10,488	)	$	(1,476	)	$	(11,964	)	$	(11,002	)	$	(1,466	)	$	(12,468	)
	Other comprehensive income (loss) before reclassifications	959			(988		)	(29		)	1,473			(998		)	475
Net current-period other comprehensive income (loss)		959			(988		)	(29		)	1,473			(998		)	475
Ending balance		$	(9,529	)	$	(2,464	)	$	(11,993	)	$	(9,529	)	$	(2,464	)	$	(11,993	)