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 ~~September~~June 30, ~~2018~~2019



¨☐	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~~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)~~ (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 ~~28.3~~32.6 million common shares outstanding ~~no par value,~~ at ~~October~~July 26, ~~2018.~~2019.

Securities registered pursuant to Section 12(b) of the Act:



Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common stock, $0.00 par value, $0.01 stated value	ANDE	The NASDAQ Stock Market LLC

THE ANDERSONS, INC.

INDEX



	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets – ~~September~~June 30, ~~2018,~~2019, December 31, ~~2017~~2018 and ~~September~~June 30, ~~2017~~2018	3
Condensed Consolidated Statements of Operations – Three and ~~nine~~Six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	5
Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and ~~nine~~Six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	6
Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	7
Condensed Consolidated Statements of Equity – ~~Nine~~Three and Six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	8
Notes to Condensed Consolidated Financial Statements	910
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3433
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4543
Item 4. Controls and Procedures	4543
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	4644
Item 1A. Risk Factors	4644
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4644
Item 4. Mine Safety Disclosure	44
Item 6. Exhibits	4745

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)

	September 30, 2018		December 31, 2017		September 30, 2017		June 30, 2019		December 31, 2018		June 30, 2018
Assets
Current assets:
Cash and cash equivalents	$	16,820	$	34,919	$	24,478	$	11,087	$	22,593	$	58,611
Accounts receivable, net	206,380		183,238		196,192		712,294		207,285		218,476
Inventories (Note 2)	490,331		648,703		475,602		753,641		690,804		495,611
Commodity derivative assets – current (Note 5)	76,861		30,702		45,202		233,015		51,421		54,259
Other current assets	58,374		63,790		53,958		58,439		50,703		42,648
Assets held for sale	29,527		37,859		8,383		151		392		9,816
Total current assets	878,293		999,211		803,815		1,768,627		1,023,198		879,421
Other assets:
Commodity derivative assets – noncurrent (Note 5)	766		310		245		6,161		480		1,008
Goodwill	6,024		6,024		23,105		135,872		6,024		6,024
Other intangible assets, net	100,730		112,893		113,371		188,818		99,138		105,289
Right of use assets, net							74,073		—		—
Other assets, net	26,174		12,557		11,852		21,841		22,341		26,888
Equity method investments	240,350		223,239		215,031		120,929		242,326		232,159
	374,044		355,023		363,604		547,694		370,309		371,368
Rail Group assets leased to others, net (Note 3)	464,776		423,443		377,393		559,711		521,785		458,424
Property, plant and equipment, net (Note 3)	434,505		384,677		419,348		695,827		476,711		408,575
Total assets	$	2,151,618	$	2,162,354	$	1,964,160	$	3,571,859	$	2,392,003	$	2,117,788

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)

	September 30, 2018			December 31, 2017			September 30, 2017			June 30, 2019			December 31, 2018			June 30, 2018
Liabilities and equity
Current liabilities:
Short-term debt (Note 4)	$	132,000		$	22,000		$	19,000		$	426,125		$	205,000		$	185,000
Trade and other payables	344,406			503,571			381,359			527,250			462,535			282,221
Customer prepayments and deferred revenue	38,242			59,710			29,520			49,761			32,533			16,103
Commodity derivative liabilities – current (Note 5)	91,403			29,651			38,578			69,369			32,647			85,160
Accrued expenses and other current liabilities	68,925			69,579			67,064			165,383			79,046			74,512
Current maturities of long-term debt (Note 4)	15,677			54,205			53,972			66,678			21,589			13,700
Total current liabilities	690,653			738,716			589,493			1,304,566			833,350			656,696
Long-term lease liabilities										48,401			—			—
Other long-term liabilities	30,615			33,129			34,407			18,398			32,184			30,325
Commodity derivative liabilities – noncurrent (Note 5)	2,548			825			902			3,985			889			3,202
Employee benefit plan obligations	25,356			26,716			36,356			22,019			22,542			26,131
Long-term debt, less current maturities (Note 4)	437,280			418,339			371,315			1,007,012			496,187			435,580
Deferred income taxes	122,523			121,730			181,876			146,839			130,087			118,864
Total liabilities	1,308,975			1,339,455			1,214,349			2,551,220			1,515,239			1,270,798
Commitments and contingencies (Note 14)
Commitments and contingencies (Note 15)
Shareholders’ equity:
Common shares, without par value (63,000 shares authorized; 29,430 shares issued at 9/30/2018, 12/31/17 and 9/30/2017)	96			96			96
Common shares, without par value (63,000 shares authorized; 33,357 shares issued at 6/30/2019, 29,430 shares issued at 12/31/2018 and 6/30/2018)										137			96			96
Preferred shares, without par value (1,000 shares authorized; none issued)	—			—			—			—			—			—
Additional paid-in-capital	222,368			224,622			223,814			331,186			224,396			223,259
Treasury shares, at cost (929, 1,063 and 1,079 shares at 9/30/2018, 12/31/17 and 9/30/2017, respectively)	(35,039		)	(40,312		)	(40,905		)
Accumulated other comprehensive loss	(4,364		)	(2,700		)	(9,682		)
Treasury shares, at cost (173, 936 and 943 shares at 6/30/2019, 12/31/2018 and 6/30/2018, respectively)										(6,449		)	(35,300		)	(35,561		)
Accumulated other comprehensive income (loss)										(6,241		)	(6,387		)	(5,347		)
Retained earnings	628,676			633,496			568,438			651,481			647,517			635,438
Total shareholders’ equity of The Andersons, Inc.	811,737			815,202			741,761			970,114			830,322			817,885
Noncontrolling interests	30,906			7,697			8,050			50,525			46,442			29,105
Total equity	842,643			822,899			749,811			1,020,639			876,764			846,990
Total liabilities and equity	$	2,151,618		$	2,162,354		$	1,964,160		$	3,571,859		$	2,392,003		$	2,117,788

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 September 30,					Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
	2018			2017		2018			2017			2019			2018			2019			2018
Sales and merchandising revenues	$	685,579		$	836,595	$	2,232,720		$	2,682,273		$	2,325,041		$	911,402		$	4,301,833		$	1,547,141
Cost of sales and merchandising revenues	631,715			766,924		2,024,677			2,448,310			2,164,313			820,928			4,031,441			1,392,962
Gross profit	53,864			69,671		208,043			233,963			160,728			90,474			270,392			154,179
Operating, administrative and general expenses	65,986			68,153		190,096			219,242			106,918			59,853			220,267			124,110
Asset impairment	—			—		6,272			—			3,081			6,272			3,081			6,272
Goodwill impairment	—			—		—			42,000
Interest expense	5,176			5,384		20,000			17,472			15,727			7,825			31,637			14,824
Other income:
Equity in earnings (loss) of affiliates, net	7,225			3,586		20,601			8,093			(157		)	9,803			1,362			13,376
Other income, net	6,434			5,285		10,949			17,028
Other income (loss), net												5,563			2,828			4,049			4,514
Income (loss) before income taxes	(3,639		)	5,005		23,225			(19,630		)	40,408			29,155			20,818			26,863
Income tax provision (benefit)	(1,764		)	2,389		5,668			7,505			10,997			7,742			5,555			7,432
Net income (loss)	(1,875		)	2,616		17,557			(27,135		)	29,411			21,413			15,263			19,431
Net income (loss) attributable to the noncontrolling interests	223			83		(175		)	73			(477		)	(116		)	(632		)	(398		)
Net income (loss) attributable to The Andersons, Inc.	$	(2,098	)	$	2,533	$	17,732		$	(27,208	)	$	29,888		$	21,529		$	15,895		$	19,829
Per common share:
Basic earnings (loss) attributable to The Andersons, Inc. common shareholders	$	(0.07	)	$	0.09	$	0.63		$	(0.96	)	$	0.92		$	0.76		$	0.49		$	0.70
Diluted earnings (loss) attributable to The Andersons, Inc. common shareholders	$	(0.07	)	$	0.09	$	0.62		$	(0.96	)	$	0.91		$	0.76		$	0.48		$	0.70
Dividends declared	$	0.165		$	0.160	$	0.495		$	0.480

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)(In thousands)


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net income (loss)	$	(1,875	)	$	2,616		$	17,557		$	(27,135	)	$	29,411		$	21,413		$	15,263		$	19,431
Other comprehensive income (loss), net of tax:
Change in fair value of convertible preferred securities (net of income tax of $0, $134, $0 and $134)	—			211			(87		)	211
Change in unrecognized actuarial loss and prior service cost (net of income tax of $(38), $(64), $(139) and $(699))	(129		)	(101		)	(467		)	(1,099		)
Cash flow hedge activity (net of income tax of $40, $0, $56 and $0)	119			—			170			—
Change in fair value of convertible preferred securities (net of income tax of $0, $0, $0 and $(87))													—			—			—			(87		)
Change in unrecognized actuarial loss and prior service cost (net of income tax of $(250), $(86), $(293) and $(101))													(728		)	(287		)	(854		)	(338		)
Cash flow hedge activity (net of income tax of $(1,974), $17, $(3,175) and $17)													(5,952		)	51			(9,574		)	51
Foreign currency translation adjustments (net of income tax of $0, $0, $0 and $0)	993			2,201			(1,280		)	3,674			(2,035		)	(1,123		)	10,574			(2,273		)
Other comprehensive income (loss)	983			2,311			(1,664		)	2,786			(8,715		)	(1,359		)	146			(2,647		)
Comprehensive income (loss)	(892		)	4,927			15,893			(24,349		)	20,696			20,054			15,409			16,784
Comprehensive income (loss) attributable to the noncontrolling interests	223			83			(175		)	73			(477		)	(116		)	(632		)	(398		)
Comprehensive income (loss) attributable to The Andersons, Inc.	$	(1,115	)	$	4,844		$	16,068		$	(24,422	)	$	21,173		$	20,170		$	16,041		$	17,182

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)(In thousands)


	Nine months ended September 30,						Six months ended June 30,
	2018			2017			2019			2018
Operating Activities
Net income (loss)	$	17,557		$	(27,135	)	$	15,263		$	19,431
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization	67,960			64,546			64,146			45,232
Bad debt expense (recovery)	(436		)	1,076			1,703			(837		)
Equity in (earnings) losses of affiliates, net of dividends	(18,390		)	(2,168		)	(1,034		)	(11,192		)
Gains on sale of Rail Group assets and related leases	(5,911		)	(7,642		)
Gain on sale of assets	(4,181		)	(11,443		)
Gains on sales of Rail Group assets and related leases							(1,298		)	(3,989		)
Loss (gain) on sales of assets							106			(342		)
Stock-based compensation expense	4,898			4,550			7,292			3,006
Goodwill impairment	—			42,000
Deferred federal income tax							5,793			—
Asset impairment	6,272			—			3,081			6,272
Other	(2,626		)	(610		)	1,102			(138		)
Changes in operating assets and liabilities:
Accounts receivable	(20,853		)	(334		)	(181,917		)	(33,859		)
Inventories	156,375			200,667			394,630			151,095
Commodity derivatives	18,080			16,073			(82,933		)	34,850
Other assets	127			10,422			27,420			17,552
Payables and other accrued expenses	(190,042		)	(229,268		)	(338,201		)	(271,010		)
Net cash provided by (used in) operating activities	28,830			60,734			(84,847		)	(43,929		)
Investing Activities
Acquisition of business, net of cash acquired	—			(3,507		)	(147,693		)	—
Purchases of Rail Group assets	(108,054		)	(77,513		)	(43,435		)	(68,087		)
Proceeds from sale of Rail Group assets	47,644			18,368			7,389			40,967
Purchases of property, plant and equipment and capitalized software	(86,694		)	(26,705		)	(87,209		)	(54,300		)
Proceeds from sale of assets	42,307			26,601			795			34,981
Proceeds from returns of investments in affiliates	—			1,339
Purchase of investments	(11,086		)	(4,929		)	(1,240		)	—
Other	—			1,470
Net cash provided by (used in) investing activities	(115,883		)	(64,876		)	(271,393		)	(46,439		)
Financing Activities
Net change in short-term borrowings	110,000			(11,059		)	(660		)	163,000
Proceeds from issuance of long-term debt	57,000			35,175			748,099			50,000
Proceeds from long-term financing arrangement	—			12,195
Payments of long-term debt	(112,995		)	(54,326		)	(390,528		)	(110,150		)
Proceeds from noncontrolling interest owner	31,115			—			4,715			21,806
Proceeds from sale of treasury shares to employees and directors	—			450
Payments of debt issuance costs	(1,446		)	(2,024		)	(5,788		)	(787		)
Dividends paid	(13,976		)	(13,485		)	(11,041		)	(9,312		)
Other	(744		)	(936		)	(387		)	(497		)
Net cash provided by (used in) financing activities	68,954			(34,010		)	344,410			114,060
Decrease in cash and cash equivalents	(18,099		)	(38,152		)
Effect of exchange rates on cash and cash equivalents							324			—
Increase (Decrease) in cash and cash equivalents							(11,506		)	23,692
Cash and cash equivalents at beginning of period	34,919			62,630			22,593			34,919
Cash and cash equivalents at end of period	$	16,820		$	24,478		$	11,087		$	58,611

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 Income
(Loss)

Retained
Earnings

Noncontrolling
Interests
Total
Balance at December 31, 2016 $ 96
$ 222,910
$ (45,383 ) $ (12,468 ) $ 609,206
$ 16,336
$ 790,697
Net income (loss) (27,208 ) 73
(27,135 )
Other comprehensive income (loss) 2,786
2,786
Other change in noncontrolling interest (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) 899
4,426
5,325
Dividends declared ($0.48 per common share) (13,503 ) (13,503 )
Restricted share award dividend equivalents 5
52
(57 ) —
Balance at September 30, 2017 $ 96
$ 223,814
$ (40,905 ) $ (9,682 ) $ 568,438
$ 8,050
$ 749,811

Balance at December 31, 2017 $ 96
$ 224,622
$ (40,312 ) $ (2,700 ) $ 633,496
$ 7,697
$ 822,899
Net income (loss) 17,732
(175 ) 17,557
Other comprehensive income (loss) (1,664 ) (1,664 )
Cash received from (paid to) noncontrolling interest (2,268 ) 23,384
21,116
Adoption of accounting standard, net of income tax of $2,869 (8,441 ) (8,441 )
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $(0) (134 shares) 14
5,153
5,167
Dividends declared ($0.495 per common share) (13,991 ) (13,991 )
Restricted share award dividend equivalents

120
(120 ) —
Balance at September 30, 2018 $ 96
$ 222,368
$ (35,039 ) $ (4,364 ) $ 628,676
$ 30,906
$ 842,643



	Three Months Ended
	Common Shares		Additional Paid-in Capital		Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Noncontrolling Interests			Total
Balance at March 31, 2018	$	96	$	221,990	$	(36,028	)	$	(3,988	)	$	618,572		$	22,115		$	822,757
Net income (loss)											21,529			(116		)	21,413
Other comprehensive income (loss)								(1,359		)							(1,359		)
Cash received from noncontrolling interest														7,106			7,106
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (12 shares)			1,269		467												1,736
Dividends declared ($0.165 per common share)											(4,663		)				(4,663		)
Balance at June 30, 2018	$	96	$	223,259	$	(35,561	)	$	(5,347	)	$	635,438		$	29,105		$	846,990

Balance at March 31, 2019	$	137	$	324,753	$	(7,216	)	$	2,474		$	627,136		$	51,002		$	998,286
Net income (loss)											29,888			(477		)	29,411
Other comprehensive income (loss)								(8,544		)							(8,544		)
Amounts reclassified from accumulated other comprehensive loss								(171		)							(171		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (20 shares)			1,738		754												2,492
Dividends declared ($0.170 per common share)											(5,530		)				(5,530		)
Stock award purchase price accounting adjustment			4,695														4,695
Restricted share award dividend equivalents					13						(13		)				—
Balance at June 30, 2019	$	137	$	331,186	$	(6,449	)	$	(6,241	)	$	651,481		$	50,525		$	1,020,639



	Six Months Ended
	Common Shares		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Noncontrolling Interests			Total
Balance at December 31, 2017	$	96	$	224,622		$	(40,312	)	$	(2,700	)	$	633,496		$	7,697		$	822,899
Net income (loss)												19,829			(398		)	19,431
Other comprehensive income (loss)									(2,647		)							(2,647		)
Cash received from noncontrolling interest															21,806			21,806
Adoption of accounting standard, net of income tax of $2,869												(8,441		)				(8,441		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (120 shares)			(1,363		)	4,631												3,268
Dividends declared ($0.33 per common share)												(9,326		)				(9,326		)
Restricted share award dividend equivalents						120						(120		)				—
Balance at June 30, 2018	$	96	$	223,259		$	(35,561	)	$	(5,347	)	$	635,438		$	29,105		$	846,990

Balance at December 31, 2018	$	96	$	224,396		$	(35,300	)	$	(6,387	)	$	647,517		$	46,442		$	876,764
Net income (loss)												15,895			(632		)	15,263
Other comprehensive income (loss)									(11,314		)							(11,314		)
Amounts reclassified from accumulated other comprehensive loss									11,460									11,460
Cash received from noncontrolling interest															4,715			4,715
Adoption of accounting standard, net of income tax of ($237)												(711		)				(711		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (764 shares)			(21,018		)	28,698												7,680
Dividends declared ($0.34 per common share)												(11,059		)				(11,059		)
Stock awards granted due to acquisition	41		127,800															127,841
Restricted share award dividend equivalents			8			153						(161		)				—
Balance at June 30, 2019	$	137	$	331,186		$	(6,449	)	$	(6,241	)	$	651,481		$	50,525		$	1,020,639

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, ~~2018.~~2019. An unaudited Condensed Consolidated Balance Sheet as of ~~September~~June 30, ~~2017~~2018 has been included as the Company operates in several seasonal industries.

The Condensed Consolidated Balance Sheet data at December 31, ~~2017~~2018 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, ~~2017~~2018 (the ~~“2017~~“2018 Form 10-K”).

New Accounting Standards

~~Derivatives and Hedging~~

Leasing

In August 2017, the FASB issued ASU 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 and, among other things, eliminates the requirement to separately measure and record hedge ineffectiveness. The Company early adopted ASU 2017-12 during the current year noting the effects of this standard on our condensed consolidated financial statements were not material. There was no transition impact.

~~Revenue Recognition~~

~~In May 2014,~~February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (ASC 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 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. The Company adopted the standard in the current year using the modified retrospective method. As a result of the adoption we recognized a cumulative catch-up transition adjustment in beginning retained earnings at January 1, 2018 for non-recourse financing transactions that were open as of December 31, 2017. This resulted in a $25.6 million increase in Rail Group net assets, $34.0 million increase in financing liabilities and deferred tax liabilities and $8.4 million decrease to retained earnings. See Note 7 for further detail.

~~Leasing~~

~~In February 2016, the FASB issued ASU No.~~(No. 2016-02, Leases (ASC 842). The FASB issued subsequent amendments to the initial guidance in July 2018 with ASU 2018-10 and in August 2018 with ASU 2018-11. ASC 842 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. ASC 842 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. The new standard is effective for the Company beginningEffective January 1, 2019, the Company adopted the standard using the Comparative Under ASC 840 method, which requires lease assets and ~~must~~liabilities to be ~~adopted using either~~recognized in the 2019 balance sheet and statement of equity and forgo the comparative reporting requirements under the modified retrospective approach, which requires application of the new guidance at the beginning of the earliest comparative period presented or the optional alternative approach, which requires application of the new guidance at the beginning of the standard’s effective date.

transition method. The Company ~~expects this standard~~also made an accounting policy election to ~~have the effect of bringing certain~~keep short-term leases less than twelve months off ~~balance-sheet rail assets onto~~ the balance sheet ~~along with a corresponding liability~~ for all classes of underlying assets, as well as elected to use the ~~associated obligations. Additionally, we have other arrangements currently classified as operating~~practical expedient that allows the combination of lease and non-leasecontract components in all of its underlying asset categories. In addition, the Company elected to apply the package of practical expedients that allows entities to forego reassessing at the transition date: (1) whether any expired or existing contracts are or contain leases; (2) lease classification for any expired or existing leases; and (3) whether unamortized initial direct costs for existing leases ~~which will be recorded as a right~~meet the definition of ~~use asset and corresponding liability on~~initial direct costs under the ~~balance sheet. We are currently evaluating the impact these changes will have on the Consolidated Financial Statements.~~new guidance. See Note 14 for additional information.

Other applicable standards

In August 2018, the FASB issued ASU No. 2018-15, ~~Intangibles—Goodwill~~Intangibles-Goodwill and ~~Other—Internal-Use~~Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This ASU reduces the complexity of accounting for costs of implementing a cloud computing service arrangement. This standard aligns the accounting for implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software. The guidance is effective for fiscal years beginning after December 15, ~~2020. The Company does~~2019. We have evaluated the impact of this new standard on our consolidated financial statements noting it is not ~~expect this standard to have a material impact on its Consolidated Financial Statements and disclosures.~~

In August 2018, the FASB issued ASU No. 2018-14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This standard modified the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The standard is effective for fiscal years ending after December 15, 2020. and early adoption is permitted. The Company is currently evaluating when to adopt this standard but has not done so in the current period.

In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement which removes and modifies some existing disclosure requirements and adds others. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein.material. Early adoption is permitted, ~~for any eliminated or modified disclosures upon issuance of this ASU. is currently evaluating when to adopt this standard~~ but the Company has not ~~done~~chosen to do so ~~in the current period.~~at this time.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to

retained earnings in their consolidated financial statements. This guidance is effective for fiscal years beginning after December 15, 2018. We have evaluated the impact of this new standard on our consolidated financial statements noting it is not material. Early adoption is permitted, but the Company has not chosen to do so at this time.

In May 2017, the FASB issued ASU 2017-09 Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. Under this standard, 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 FASB then issued ASU 2018-07 which expands the scope to include share-based payment transactions for acquiring goods and services from nonemployees. The Company ~~has adopted these standards during the year, noting no impact as the Company has not made any modifications to our stock compensation awards.~~

In March 2017, the FASB issued ASU 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 Company has adopted this standard in the current year ~~using the retrospective approach and prior periods~~which did not have ~~been recast to reflect this change, noting the amounts are immaterial.~~a material impact on its financial statements or disclosures.

In August 2016, the FASB issued ASU 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 Company has adopted this standard in the current year noting the impact is immaterial.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The FASB issued subsequent amendments to the initial guidance in November 2018, April 2019 and May 2019 with ASU 2018-19, ASU 2019-04 and ASU 2019-05,respectively. 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.~~manner. 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, but the Company does not plan to do so.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The FASB issued subsequent amendments to the initial guidance in February 2018 and March 2018 within ASU 2018-03 and ASU 2018-04, respectively. This standard provides guidance for the recognition, measurement, presentation, and disclosure of financial instruments. The Company has adopted this standard in the current year noting the impact is immaterial.

2. Inventories

Major classes of inventories are as follows:


(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		June 30, 2019		December 31, 2018		June 30, 2018
Grain	$	324,232	$	505,217	$	342,837
Grain and other agricultural products							$	603,318	$	527,471	$	385,118
Frac sand and propane							9,287		—		—
Ethanol and co-products	15,419		11,003		12,502		26,185		11,918		22,828
Plant nutrients and cob products	145,363		126,962		114,131		109,156		145,693		82,230
Retail merchandise	—		—		718
Railcar repair parts	5,317		5,521		5,414		5,695		5,722		5,435
	$	490,331	$	648,703	$	475,602	$	753,641	$	690,804	$	495,611

Inventories on the Condensed Consolidated Balance Sheets at ~~December 31, 2017~~June 30, 2019, and ~~September~~June 30, ~~2017~~2018, do not include ~~1.0~~1.3 million and ~~1.0~~0.1 million bushels of grain, respectively, held in storage for others. ~~Inventories~~Grain inventories held in storage for others ~~was di minims~~were de minimis as of ~~September 30,~~December 31, 2018. 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)	September 30, 2018		December 31, 2017		September 30, 2017		June 30, 2019		December 31, 2018		June 30, 2018
Land	$	29,545	$	22,388	$	23,342	$	39,241	$	29,739	$	29,579
Land improvements and leasehold improvements	68,859		69,127		71,559		84,127		68,826		68,384
Buildings and storage facilities	282,826		284,820		298,951		327,418		284,998		280,226
Machinery and equipment	380,109		373,127		384,422		514,030		393,640		377,202
Construction in progress	65,539		7,502		7,703		164,532		102,394		37,456
	826,878		756,964		785,977		1,129,348		879,597		792,847
Less: accumulated depreciation	392,373		372,287		366,629		433,521		402,886		384,272
	$	434,505	$	384,677	$	419,348	$	695,827	$	476,711	$	408,575

~~Capitalized interest totaled $0.9 million for the nine months ended September 30, 2018.~~

Depreciation expense on property, plant and equipment was ~~$34.7~~$32.7 million and ~~$36.0~~$23.2 million for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ respectively.Additionally, depreciation expense on property, plant and equipment was ~~$11.5~~$15.0 million and ~~$11.9~~$11.5 million for the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ respectively.

In ~~June 2018,~~the second quarter of 2019, the Company recorded ~~charges totaling $1.6~~a $3.1 million ~~for~~ impairment ~~of property, plant and equipment~~charge related to its remaining Tennessee facilities in the Grain segment related to assets that were reclassified as assets held for sale at June 30, 2018 and were sold in the third quarter. In December 2017, the Company recorded charges totaling $10.9 million for impairment of property, plant and equipment in the Grain segment, of which $5.6 million relates to assets that are deemed held and used and $5.3 million related to assets that have been reclassified as assets held for sale at December 31, 2017.Trade group. The Company wrote down the value of these assets to the extent their carrying ~~amounts~~values exceeded their fair value. The Company classified the significant assumptions used to determine the fair value of the impaired assets as Level 3 inputs in the fair value hierarchy.

Rail Group Assets

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


(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		June 30, 2019		December 31, 2018		June 30, 2018
Rail Group assets leased to others	$	576,622	$	531,391	$	484,214	$	688,320	$	640,349	$	564,555
Less: accumulated depreciation	111,846		107,948		106,821		128,609		118,564		106,131
	$	464,776	$	423,443	$	377,393	$	559,711	$	521,785	$	458,424

Depreciation expense on Rail Group assets leased to others amounted to ~~$18.4~~$13.7 million and ~~$14.9~~$12.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Additionally, depreciation expense on Rail Group assets leased to others amounted to ~~$6.1~~$7.0 million and ~~$5.2~~$6.0 million for the three months ended ~~September 30, 2018 and 2017, respectively.~~

~~In June 2018, the Company recorded charges totaling $4.7 million related to Rail Group assets leased to others that have been reclassified as assets held for sale at~~ June 30, ~~2018. The Company classified the significant assumptions used to determine the fair value of the impaired assets as Level 3 inputs in the fair value hierarchy.~~2019 and 2018, respectively.

4. Debt

~~The~~Short-term and long-term debt at June 30, 2019, December 31, 2018 and June 30, 2018 consisted of the following:



(in thousands)	June 30, 2019		December 31, 2018		June 30, 2018
Short-term Debt – Non-Recourse (a)	$	75,476	$	—	$	—
Short-term Debt – Recourse	350,649		205,000		185,000
Total Short-term Debt	$	426,125	$	205,000	$	185,000

Current Maturities of Long-term Debt – Non-Recourse (b)	$	8,903	$	4,842	$	2,922
Current Maturities of Long-term Debt – Recourse (c)	40,785		16,747		10,778
Finance lease liability (d)	16,990		—		—
Total Current Maturities of Long-term Debt	$	66,678	$	21,589	$	13,700

Long-term Debt, Less: Current Maturities – Non-Recourse (b)	$	198,560	$	146,353	$	72,290
Long-term Debt, Less: Current Maturities – Recourse (c)	786,512		349,834		363,290
Finance lease liability (d)	21,940		—		—
Total Long-term Debt, Less: Current Maturities	$	1,007,012	$	496,187	$	435,580

(a) In conjunction with the recent acquisition, the Company ~~has a~~assumed Thompsons' revolving line of credit and a term loan with a syndicate of banks, which are non-recourse to the Company. The credit agreement provides the Company with a maximum availability of $183.4 million and had $107.9 million available for borrowing on this line of credit as of June 30, 2019. Any borrowings under the line of credit bear interest at variable rates, which are based on LIBOR or Bankers’ Acceptances plus an applicable spread. The maturity date for the revolving line of credit is June 26, 2023.

(b) In conjunction with the recent acquisition, the Company also assumed a term loan with a syndicate of banks. The ~~agreement provides~~term loan had a balance of $33.9 million at June 30, 2019. Interest rates for the term loans are based on LIBOR plus an applicable spread. Payments of $0.6 million are made on a ~~credit facility~~quarterly basis.

(c) On January 11, 2019 the Company entered into 5-year term loan in the amount of ~~$800~~$250 million and a 7-year term loan of $250 million. ~~During~~A portion of the ~~third quarter,~~term loans were used to pay down debt assumed in the ~~Andersons Railcar Leasing Company LLC amended~~LTG acquisition. Interest rates are based on LIBOR plus an applicable spread. Payments on the term loans will be made on a quarterly basis. As of June 30, 2019, $6.3 million has been paid on the 5-year term loan and ~~restated their revolving asset based loan agreement, increasing~~$6.3 million has been paid on the ~~credit facility to $200.0 million. Total~~7-year term loan.

(d) See Note 14, Leases, for additional information. June 30, 2019 balances include the former build-to-suit lease that was reclassed from other current liabilities and other long-term liabilities as a result of the new lease standard.

The total borrowing capacity ~~for~~of the ~~Company under all~~Company's lines of credit ~~is currently~~ at ~~$1,085.0~~June 30, 2019 was $1,628.4 million ~~including subsidiary debt that is non-recourse to the Company~~ of ~~$15.0 million for The Andersons Denison Ethanol LLC ("TADE"), $70.0 million for ELEMENT LLC and $200.0 million for The Andersons Railcar Leasing Company LLC. At September 30, 2018,~~which the Company had a total of ~~$823.1~~$1,006.1 million available for borrowing under its lines of ~~credit.~~credit, subject to certain limitations based on debt covenants. The Company's borrowing capacity is reduced by a combination of outstanding borrowings and letters of credit. The Company ~~was~~is in compliance with all financial covenants as of ~~September~~June 30, ~~2018.~~

~~The Company’s short-term and long-term debt at~~ ~~September 30, 2018~~, ~~December 31, 2017~~ ~~and~~ ~~September 30, 2017~~ ~~consisted of the following:~~

(in thousands) September 30,
2018 December 31,
2017 September 30,
2017
Short-term Debt – Non-Recourse $ —
$ —
$ —
Short-term Debt – Recourse 132,000
22,000
19,000
Total Short-term Debt $ 132,000
$ 22,000
$ 19,000

Current Maturities of Long-term Debt – Non-Recourse $ 3,772
$ —
$ —
Current Maturities of Long-term Debt – Recourse 11,905
54,205
53,972
Total Current Maturities of Long-term Debt $ 15,677
$ 54,205
$ 53,972

Long-term Debt, Less: Current Maturities – Non-Recourse $ 77,114
$ —
$ —
Long-term Debt, Less: Current Maturities – Recourse 360,166
418,339
371,315
Total Long-term Debt, Less: Current Maturities $ 437,280
$ 418,339
$ 371,315

2019.

5. Derivatives

The Company’s operating results are affected by changes to commodity prices. The ~~Grain~~Trade 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 ~~CME.~~

commodity exchanges. The Company’s forward purchase and sales contracts are for physical delivery of the commodity in a future period. Contracts to purchase commodities from producers generally relate to the current or future crop years for delivery periods quoted by regulated commodity exchanges. ~~Contracts~~Most contracts for the sale of commodities to processors or other commercial consumers generally do not extend beyond one year.

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

Realized and unrealized gains and losses in the value of commodity contracts (whether due to changes in commodity prices, changes in performance or credit risk, or due to sale, maturity or extinguishment of the commodity contract) and 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 future, option or an over-the-counter contract, an initial margin deposit may be required by the counterparty. The amount of the margin deposit varies by commodity. If the market price of a future, option or an over-the-counter contract moves in a direction that is adverse to the Company’s position, an additional margin deposit, called a maintenance margin, is required. The margin deposit assets and liabilities are included in short-term commodity derivative assets or liabilities, as appropriate, in the Condensed Consolidated Balance Sheets.

The following table presents at ~~September~~June 30, ~~2018,~~2019, December 31, ~~2017~~2018 and ~~September~~June 30, ~~2017,~~2018, 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:


	September 30, 2018				December 31, 2017				September 30, 2017					June 30, 2019					December 31, 2018				June 30, 2018
(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)	$	14,942	$	—	$	1,351	$	—	$	27,737		$	—	$	109,346		$	—	$	14,944	$	—	$	(52,888	)	$	—
Fair value of derivatives	36,653		—		17,252		—		(999		)	—		(5,996		)	—		22,285		—		68,244			—
Balance at end of period	$	51,595	$	—	$	18,603	$	—	$	26,738		$	—	$	103,350		$	—	$	37,229	$	—	$	15,356		$	—

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


	September 30, 2018															June 30, 2019
(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	$	69,957		$	767		$	731		$	38		$	71,493		$	166,652		$	6,748		$	3,360		$	57		$	176,817
Commodity derivative liabilities	(8,038		)	(1		)	(92,134		)	(2,586		)	(102,759		)	(42,983		)	(587		)	(72,729		)	(4,042		)	(120,341		)
Cash collateral	14,942			—			—			—			14,942
Cash collateral paid (received)																109,346			—			—			—			109,346
Balance sheet line item totals	$	76,861		$	766		$	(91,403	)	$	(2,548	)	$	(16,324	)	$	233,015		$	6,161		$	(69,369	)	$	(3,985	)	$	165,822


	December 31, 2017															December 31, 2018
(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	$	36,929		$	311		$	489		$	1		$	37,730		$	43,463		$	484		$	706		$	5		$	44,658
Commodity derivative liabilities	(7,578		)	(1		)	(30,140		)	(826		)	(38,545		)	(6,986		)	(4		)	(33,353		)	(894		)	(41,237		)
Cash collateral	1,351			—			—			—			1,351
Cash collateral (received)																14,944			—			—			—			14,944
Balance sheet line item totals	$	30,702		$	310		$	(29,651	)	$	(825	)	$	536		$	51,421		$	480		$	(32,647	)	$	(889	)	$	18,365


	September 30, 2017															June 30, 2018
(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	$	33,804		$	288		$	676		$	74		$	34,842		$	123,917		$	1,022		$	626		$	36		$	125,601
Commodity derivative liabilities	(16,339		)	(43		)	(39,254		)	(976		)	(56,612		)	(16,770		)	(14		)	(85,786		)	(3,238		)	(105,808		)
Cash collateral	27,737			—			—			—			27,737
Cash collateral (received)																(52,888		)	—			—			—			(52,888		)
Balance sheet line item totals	$	45,202		$	245		$	(38,578	)	$	(902	)	$	5,967		$	54,259		$	1,008		$	(85,160	)	$	(3,202	)	$	(33,095	)

The net ~~pre-tax~~pretax gains and losses on commodity derivatives not designated as hedging instruments included in the Company’s Condensed Consolidated Statements of Operations and the line ~~items~~item in which they are located for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 are as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,					Six months ended June 30,
(in thousands)	2018			2017			2018			2017			2019			2018		2019		2018
Gains (losses) on commodity derivatives included in cost of sales and merchandising revenues	$	(51,059	)	$	(690	)	$	(30,451	)	$	(15,538	)	$	(13,364	)	$	45,844	$	57,291	$	20,608

The Company had the following volume of commodity derivative contracts outstanding (on a gross basis) at ~~September~~June 30, ~~2018,~~2019, December 31, ~~2017~~2018 and ~~September~~June 30, ~~2017:~~2018:


	September 30, 2018				June 30, 2019
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	277,774	—	—	—	648,434	—	—	—
Soybeans	45,755	—	—	—	59,594	—	—	—
Wheat	7,948	—	—	—	93,621	—	—	—
Oats	31,155	—	—	—	40,582	—	—	—
Ethanol	—	230,813		—	—	211,352	—	—
Corn oil	—	—	2,560	—	—	—	8,809	—
Other	—	1,000	—	115	23,875	2,532	—	3,179
Subtotal	362,632	231,813	2,560	115	866,106	213,884	8,809	3,179
Exchange traded:
Corn	123,250	—	—	—	317,405	—	—	—
Soybeans	31,855	—	—	—	52,762	—	—	—
Wheat	44,130	—	—	—	55,150	—	—
Oats	1,005	—	—	—	1,045	—	—	—
Ethanol	—	92,274	—	—	—	82,988	—	—
Propane					—	13,230	—	—
Other					—	35	—	180
Subtotal	200,240	92,274	—	—	426,362	96,253	—	180
Total	562,872	324,087	2,560	115	1,292,468	310,137	8,809	3,359



	December 31, 2018
Commodity (in thousands)	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons
Non-exchange traded:
Corn	250,408	—	—	—
Soybeans	22,463	—	—	—
Wheat	14,017	—	—	—
Oats	26,230	—	—	—
Ethanol	—	244,863	—	—
Corn oil	—	—	2,920	—
Other	494	2,000	—	66
Subtotal	313,612	246,863	2,920	66
Exchange traded:
Corn	130,585	—	—	—
Soybeans	26,985	—	—	—
Wheat	33,760	—	—	—
Oats	1,475	—	—	—
Ethanol	—	77,112	—	—
Subtotal	192,805	77,112	—	—
Total	506,417	323,975	2,920	66

December 31, 2017
Commodity (in thousands)
Number of Bushels Number of Gallons Number of Pounds Number of Tons
Non-exchange traded:
Corn 218,391

—
Soybeans 18,127
—
—
—
Wheat 14,577
—
—
—
Oats 25,953
—
—
—
Ethanol —
197,607
—
—
Corn oil —
—
6,074
—
Other 47
—
—
97
Subtotal 277,095
197,607
6,074
97
Exchange traded:
Corn 82,835
—
—
—
Soybeans 37,170
—
—
—
Wheat 65,640
—
—
—
Oats 1,345
—
—
—
Ethanol —
39,438
—
—
Other —
840
—
—
Subtotal 186,990
40,278
—
—
Total 464,085
237,885
6,074
97


	September 30, 2017				June 30, 2018
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	222,287	—	—	—	272,979	—	—	—
Soybeans	44,463	—	—	—	49,208	—	—	—
Wheat	8,598	—	—	—	11,163	—	—	—
Oats	36,451	—	—	—	36,612	—	—	—
Ethanol	—	201,521		—	—	332,761		—
Corn oil	—	—	5,782	—	—	—	6,158	—
Other	51	—		110	82	1,500		77
Subtotal	311,850	201,521	5,782	110	370,044	334,261	6,158	77
Exchange traded:
Corn	113,990	—	—	—	133,730	—	—	—
Soybeans	45,220	—	—	—	45,775	—	—	—
Wheat	61,795	—	—	—	48,105	—	—	—
Oats	895	—	—	—	1,190	—	—	—
Ethanol	—	22,890	—	—	—	140,364	—	—
Other	—	840	—	—
Subtotal	221,900	23,730	—	—	228,800	140,364	—	—
Total	533,750	225,251	5,782	110	598,844	474,625	6,158	77

Interest Rate and Other Derivatives

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a

counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

~~At September 30, 2018, December 31, 2017 and September 30, 2017, the Company had recorded the following amounts for the fair value of the Company's other derivatives:~~

September 30, 2018 December 31, 2017 September 30, 2017
(in thousands)
Derivatives not designated as hedging instruments
Interest rate contracts included in Other long-term assets (Other long-term liabilities) $ 193

$ (1,244 )
$ (1,929 )
Foreign currency contracts included in Other current assets (Accrued expenses and other current liabilities) (737 )
426

1,605
Derivatives designated as hedging instruments
Interest rate contract included in Other assets 227

—

—

~~The recording of derivatives gains and losses and the financial statement line in which they are located are as follows:~~

Three months ended September 30, Nine months ended September 30,
(in thousands) 2018 2017 2018 2017
Derivatives not designated as hedging instruments
Interest rate derivative gains (losses) included in Interest income (expense) $ 521

$ 229

$ 1,662

$ 601
Foreign currency derivative gains (losses) included in Other income, net 372

950

(1,163 )
1,717
Derivatives designated as hedging instruments
Interest rate derivative gains (losses) included in OCI 159

—

226

—
Interest rate derivatives gains (losses) included in Interest income (expense) 54

—

126

—

As of September 30, 2018, the Company had one outstanding interest rate derivative, with a notional amount of $40 million and a maturity date of March 2021, that was designated as a cash flow hedge of interest rate risk. The ~~gain~~gains or ~~loss~~losses on the ~~derivative is~~derivatives are recorded in ~~Accumulated~~ Other Comprehensive Income (Loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

At June 30, 2019, December 31, 2018 and June 30, 2018, the Company had recorded the following amounts for the fair value of the Company's other derivatives:



(in thousands)	June 30, 2019			December 31, 2018			June 30, 2018
Derivatives not designated as hedging instruments
Interest rate contracts included in Other long-term assets (Other long-term liabilities)	$	(10,750	)	$	(353	)	$	(37	)
Foreign currency contracts included in Other current assets (Accrued expenses and other current liabilities)	$	(22	)	$	(1,122	)	$	(1,109	)
Derivatives designated as hedging instruments
Interest rate contract included in Accrued expenses and other current liabilities	$	—		$	—		$	(88	)
Interest rate contract included in Other assets (Other long-term liabilities)	$	(10,587	)	$	(168	)	$	155

The recording of derivatives gains and losses and the financial statement line in which they are located are as follows:



	Three months ended June 30,						Six months ended June 30,
(in thousands)	2019			2018			2019			2018
Derivatives not designated as hedging instruments
Interest rate derivative gains (losses) included in Interest income (expense)	$	(1,065	)	$	351		$	(2,055	)	$	1,141
Foreign currency derivative gains (losses) included in Other income, net	$	(366	)	$	(413	)	$	(1,833	)	$	(1,535	)
Derivatives designated as hedging instruments
Interest rate derivative gains (losses) included in Other Comprehensive Income (Loss)	$	(7,926	)	$	67		$	(12,917	)	$	67
Interest rate derivatives gains (losses) included in Interest income (expense)	$	—		$	—		$	165		$	—

Outstanding interest rate derivatives, as of June 30, 2019, are as follows:



Interest Rate Hedging Instrument		Year Entered	Year of Maturity	Initial Notional Amount (in millions)		Description	Interest Rate
Long-term
Swap		2014	2023	$	23.0	Interest rate component of debt - not accounted for as a hedge	1.9%
Collar		2016	2021	$	40.0	Interest rate component of debt - not accounted for as a hedge	3.5% to 4.8%
Swap	*	2016	2019	$	50.0	Interest rate component of debt - not accounted for as a hedge	1.2%
Swap	*	2017	2022	$	20.0	Interest rate component of debt - accounted for as a hedge	1.8%
Swap	*	2018	2023	$	10.0	Interest rate component of debt - accounted for as a hedge	2.6%
Swap	*	2018	2025	$	20.0	Interest rate component of debt - accounted for as a hedge	2.7%
Swap		2018	2021	$	40.0	Interest rate component of debt - accounted for as a hedge	2.6%
Swap		2019	2021	$	25.0	Interest rate component of debt - accounted for as a hedge	2.5%
Swap		2019	2021	$	50.0	Interest rate component of debt - accounted for as a hedge	2.5%
Swap		2019	2025	$	100.0	Interest rate component of debt - accounted for as a hedge	2.5%
Swap		2019	2025	$	50.0	Interest rate component of debt - accounted for as a hedge	2.5%
Swap		2019	2025	$	50.0	Interest rate component of debt - accounted for as a hedge	2.5%

* Acquired on 1/1/2019 in conjunction with the acquisition of LTG.

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 ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:


	Pension Benefits								Pension Benefits
(in thousands)	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Interest cost	$	33	$	38	$	98	$	116	$	29	$	32	$	58	$	65
Recognized net actuarial loss	61		63		183		189		58		61		116		122
Benefit cost	$	94	$	101	$	281	$	305	$	87	$	93	$	174	$	187


	Postretirement Benefits												Postretirement Benefits
(in thousands)	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(in thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Service cost	$	81		$	81		$	243		$	310		$	64		$	75		$	138		$	162
Interest cost	188			202			565			784			221			190			427			377
Amortization of prior service cost	(227		)	(228		)	(683		)	(228		)	(228		)	(228		)	(456		)	(456		)
Benefit cost	$	42		$	55		$	125		$	866		$	57		$	37		$	109		$	83

7. Revenue

Many of the Company’s revenues are generated from contracts that are outside the scope of ASC 606 and thus are accounted for under other accounting standards. Specifically, many of the Company's ~~Grain~~Trade and Ethanol sales contracts are derivatives under ASC 815, Derivatives and Hedging and the Rail Group's leasing revenue is accounted for under ASC ~~840,~~842, Leases. The breakdown of revenues between ASC 606 and other standards is as follows:


					Three months ended June 30,				Six months ended June 30,
(in thousands)	Three months ended September 30, 2018		Nine months ended September 30, 2018		2019		2018		2019		2018
Revenues under ASC 606	$	156,394	$	706,927	$	494,266	$	356,883	$	809,438	$	550,533
Revenues under ASC 840	25,853		78,110
Revenues under ASC 842					31,836		26,228		60,704		52,257
Revenues under ASC 815	503,332		1,447,683		1,798,939		528,291		3,431,691		944,351
Total Revenues	$	685,579	$	2,232,720	$	2,325,041	$	911,402	$	4,301,833	$	1,547,141

The remainder of this note applies only to those revenues that are accounted for under ASC 606.

Disaggregation of revenue

The following tables disaggregate revenues under ASC 606 by major product/service ~~line:~~line for the three and six months ended June 30, 2019 and 2018, respectively:


	Three months ended September 30, 2018										Three months ended June 30, 2019
(in thousands)	Grain		Ethanol		Plant Nutrient		Rail		Total		Trade		Ethanol		Plant Nutrient		Rail		Total
Specialty nutrients	$	—	$	—	$	36,856	$	—	$	36,856	$	31,870	$	—	$	87,665	$	—	$	119,535
Primary nutrients	—		—		60,460		—		60,460		22,364		—		174,907		—		197,271
Services	3,052		2,713		877		8,925		15,567		7,745		3,547		1,696		9,278		22,266
Co-products	—		29,282		—		—		29,282
Products and co-products											55,943		32,047		—		—		87,990
Frac sand and propane											56,767		—		—		—		56,767
Other	245		—		5,996		7,988		14,229		2,537		35		6,309		1,556		10,437
Total	$	3,297	$	31,995	$	104,189	$	16,913	$	156,394	$	177,226	$	35,629	$	270,577	$	10,834	$	494,266

~~For the three months ended September 30, 2018, approximately 10%~~



	Three months ended June 30, 2018
(in thousands)	Trade		Ethanol		Plant Nutrient		Rail		Total
Specialty nutrients	$	—	$	—	$	94,281	$	—	$	94,281
Primary nutrients	—		—		200,288		—		200,288
Service	3,381		2,760		2,412		9,308		17,861
Co-products	—		32,462		—		—		32,462
Other	292		—		6,124		5,575		11,991
Total	$	3,673	$	35,222	$	303,105	$	14,883	$	356,883



	Six months ended June 30, 2019
(in thousands)	Trade		Ethanol		Plant Nutrient		Rail		Total
Specialty nutrients	$	35,808	$	—	$	156,065	$	—	$	191,873
Primary nutrients	22,791		—		227,996		—		250,787
Service	8,570		6,983		1,858		19,225		36,636
Co-products	118,701		53,517		—		—		172,218
Frac sand and propane	137,230		—		—		—		137,230
Other	3,697		35		13,183		3,779		20,694
Total	$	326,797	$	60,535	$	399,102	$	23,004	$	809,438



	Six months ended June 30, 2018
(in thousands)	Trade		Ethanol		Plant Nutrient		Rail		Total
Specialty nutrients	$	—	$	—	$	169,359	$	—	$	169,359
Primary nutrients	—		—		253,507		—		253,507
Service	7,799		5,305		2,621		17,425		33,150
Co-products	—		59,108		—		—		59,108
Other	502		—		13,235		21,672		35,409
Total	$	8,301	$	64,413	$	438,722	$	39,097	$	550,533

Approximately 4% and 5% of revenues accounted for under ASC 606 during each of the three and months ended June 30, 2019 and 2018, are recorded over time which primarily relates to service revenues noted above.

Nine months ended September 30, 2018
(in thousands) Grain Ethanol Plant Nutrient Rail Total
Specialty nutrients $ —
$ —
$ 206,215
$ —
$ 206,215
Primary nutrients —
—
313,967
—
313,967
Service 10,851
8,018
3,498
26,350
48,717
Co-products —
88,390
—
—
88,390
Other 747
—
19,231
29,660
49,638
Total $ 11,598
$ 96,408
$ 542,911
$ 56,010
$ 706,927

~~For~~ Additionally, during the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, approximately 7%4% and 6% of revenues were accounted for under ASC 606, ~~are recorded over time which primarily relates to service revenues noted above.~~respectively.

~~Specialty and primary nutrients~~

The Company sells several different types of specialty nutrient products, including: low-salt liquid starter fertilizers, micro-nutrients and other specialty lawn products. These products can be sold through the wholesale distribution channels as well as directly to end users at the farm center locations. Similarly, the Company sells several different types of primary nutrient products, including nitrogen, phosphorus and potassium. These products may be purchased and re-sold as is or sold as finished goods resulting from a blending and manufacturing process. The contracts associated with specialty and primary nutrients generally have just a single performance obligation, as the Company has elected the accounting policy to consider shipping and handling costs as fulfillment costs. Revenue is recognized when control of the product has passed to the customer. Payment terms generally range from 0 - 30 days.

~~Service~~

Service revenues primarily relate to the railcar repair business. The Company owns several railcar repair shops which repair railcars through specific contracts with customers or by operating as an agent for a particular railroad to repair cars that are on its rail line per Association of American Railroads (“AAR”) standards. These contracts contain a single performance obligation which is to complete the requested and/or required repairs on the railcars. As the customer simultaneously receives and consumes the benefit of the repair work we perform, revenue for these contracts is recognized over time. The Company uses an input-based measure of progress using costs incurred to total expected costs as that is the measure that most faithfully depicts our progress towards satisfying our performance obligation. Upon completion of the work, the invoice is sent to the customer, with payment terms that generally range from 0 - 30 days.

~~Co-products~~

In addition to the ethanol sales contracts that are considered derivative instruments, the Ethanol Group sells several other co-products that remain subject to ASC 606, including E-85, DDGs, syrups and renewable identification numbers (“RINs”). RINs are credits for compliance with the Environmental Protection Agency's Renewable Fuel Standard program and are created by renewable fuel producers. Contracts for these co-products generally have a single performance obligation, as the Company has elected the accounting policy to consider shipping and handling costs as fulfillment costs. Revenue is recognized when control of the product has passed to the customer which follows shipping terms on the contract. Payment terms generally range from 5 - 15 days.

Contract balances

The opening and closing balances of the Company’s contract liabilities are as follows:

(in thousands) Contract liabilities
Balance at January 1, 2018 $ 25,520
Balance at March 31, 2018 67,715
Balance at June 30, 2018 10,047
Balance at September 30, 2018 29,836



(in thousands)	2019		2018
Balance at January 1,	$	28,858	$	25,520
Balance at March 31,	146,824		67,715
Balance at June 30,	48,225		10,047

~~The~~Exclusive of acquisition related impacts, the residual difference between the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. ~~Contract~~The contract liabilities ~~relate to the Plant Nutrient~~have two main drivers, including Trade prepayments by counter parties and payments for primary and specialty nutrients received in advance of fulfilling our performance obligations under our customer contracts. The primary and specialty business records contract liabilities for payments received in advance of fulfilling our performance obligations under our customer contracts. ~~Due~~Further, due to seasonality of this business, contract liabilities were built up in the

first ~~quarter.~~quarter of the year. In the second quarter, the ~~change~~decrease in liabilities is due to the revenue recognized in the current period relating to the ~~liability. This~~ liability ~~then increased~~built up in the ~~third quarter primarily as a result of payments received in advance of fulfilling our performance obligations under our customer contracts in preparation for early spring.~~

~~Impact of New Revenue Guidance on Financial Statement Line Items~~

~~The following table compares the reported condensed consolidated balance sheet, as of September 30, 2018, to the pro forma amounts had the previous guidance been in effect:~~

Balance Sheet
September 30, 2018
(in thousands) As Reported ASC 606 Impact Pro forma as if the previous accounting guidance was in effect
Cash and cash equivalents and restricted cash $ 16,820
$ —
$ 16,820
Accounts receivable, net 206,380
—
206,380
Inventories 490,331
178
490,509
Commodity derivative assets - current 76,861
—
76,861
Other current assets 87,901
(268 ) 87,633
Other noncurrent assets 374,044
—
374,044
Rail Group assets leased to others, net 464,776
(23,337 ) 441,439
Property, plant and equipment, net 434,505
—
434,505
     Total assets 2,151,618

(23,427 ) 2,128,191
Short-term debt and current maturities of long-term debt 147,677
(3,772 ) 143,905
Trade and other payables and accrued expenses and other current liabilities 413,331
—
413,331
Commodity derivative liabilities - current 91,403
—
91,403
Customer prepayments and deferred revenue 38,242
—
38,242
Commodity derivative liabilities - noncurrent and Other long-term liabilities 33,163
—
33,163
Employee benefit plan obligations 25,356
—
25,356
Long-term debt, less current maturities 437,280
(31,018 ) 406,262
Deferred income taxes 122,523
2,869
125,392
     Total liabilities 1,308,975
(31,921 ) 1,277,054
Retained earnings 628,676
8,494
637,170
Common shares, additional paid-in-capital, treasury shares, accumulated other comprehensive loss and noncontrolling interests 213,967
—
213,967
     Total equity 842,643
8,494
851,137
     Total liabilities and equity $ 2,151,618
$ (23,427 ) $ 2,128,191

Total reported assets were $23.4 million greater than on the pro forma balance sheet, which assumes the previous guidance remained in effect as of September 30, 2018. This was largely due to the Rail Group assets that were recorded on the balance sheet on January 1, 2018 as part of the cumulative catch-up adjustment upon the adoption of ASC 606.

Total reported liabilities were $31.9 million greater than on the pro forma balance sheet, which assumes the previous guidance remained in effect as of September 30, 2018. This was largely due to the financing obligation and deferred taxes related to the Rail Group assets that were recorded on the balance sheet on January 1, 2018 as part of the cumulative catch-up adjustment upon the adoption of ASC 606.

~~The following table compares the reported condensed statement of operations for the three and nine months ended September 30, 2018, to the pro forma amounts had the previous guidance been in effect:~~

Statement of Operations
Three months ended September 30, 2018
(in thousands) As Reported ASC 606 Impact Pro forma as if the previous accounting guidance was in effect
Sales and merchandising revenues $ 685,579
$ 173,183
$ 858,762
Cost of sales and merchandising revenues 631,715
173,706
805,421
Gross profit 53,864
(523 ) 53,341
Operating, administrative and general expenses 65,986
—
65,986
Asset impairment —
—
—
Interest expense 5,176
(387 ) 4,789
Other income:
Equity in earnings of affiliates, net 7,225
—
7,225
Other income, net 6,434
—
6,434
Income (loss) before income taxes (3,639 ) (136 ) (3,775 )
Income tax provision (1,764 ) (34 ) (1,798 )
Net income (loss) (1,875 ) (102 ) (1,977 )
Net income attributable to the noncontrolling interests 223
—
223
Net income (loss) attributable to The Andersons, Inc. $ (2,098 ) $ (102 ) $ (2,200 )

Statement of Operations
Nine months ended September 30, 2018
(in thousands) As Reported ASC 606 Impact Pro forma as if the previous accounting guidance was in effect
Sales and merchandising revenues $ 2,232,720
$ 522,648
$ 2,755,368
Cost of sales and merchandising revenues 2,024,677
524,121
2,548,798
Gross profit 208,043
(1,473 ) 206,570
Operating, administrative and general expenses 190,096
—
190,096
Asset impairment 6,272
—
6,272
Interest expense 20,000
(1,185 ) 18,815
Other income:
Equity in earnings of affiliates, net 20,601
—
20,601
Other income, net 10,949
—
10,949
Income (loss) before income taxes 23,225
(288 ) 22,937
Income tax provision 5,668
(72 ) 5,596
Net income (loss) 17,557
(216 ) 17,341
Net income attributable to the noncontrolling interests (175 ) —
(175 )
Net income (loss) attributable to The Andersons, Inc. $ 17,732
$ (216 ) $ 17,516

The following summarizes the significant changes on the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2018 due to the adoption of ASC 606 on January 1, 2018 compared to the results that would have been reported if the Company had continued to recognize revenues under ASC 605:

While grain origination agreements, and their related sales contracts, will be accounted for under ASC 815, we are still required to evaluate the principal versus agent guidance in ASC 606 to determine whether realized gains or losses should be presented on a gross or net basis in the consolidated statements of operations upon physical settlement. The

Company has determined that it is the agent in certain origination arrangements within our Grain Group and therefore realized gains or losses will be presented under ASC 606. Since these transactions are now being recorded on a net basis, revenues and related cost of sales would have been $170.4 million and $515.4 million higher under the previous guidance for the three and nine months ended September 30, 2018, respectively.

ASC 606 requires certain Rail Group assets and related financing obligations to be recorded on the balance sheet as these transactions no longer qualify as sales as a result of the existence of repurchase options within the sales contracts. The result of this change primarily impacts geography within the income statement, as lease expense to the financial institution is replaced with a combination of depreciation and interest expense.

The net impact of accounting for revenue under the new guidance had an immaterial impact on net income (loss) and no impact on the Company's earnings per common share for the three and nine months ended September 30, 2018.

The adoption of ASC 606 had an immaterial on the Company’s cash flows from operations. The aforementioned impacts resulted in offsetting shifts in cash flows throughout net income and various changes in working capital balances.

~~Transaction Price Allocated to Future Performance Obligations~~

ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied at period end. The guidance provides certain practical expedients that limit this requirement. The Company has various contracts that meet the following practical expedients provided by ASC 606:

~~The performance obligation is part of a contract that has an original expected duration of one year or less.~~

The variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with ASC 606-10-25-14(b), for which the criteria in ASC 606-10-32-40 have been met.

~~Contract costs~~

The company has elected to apply the practical expedient and accordingly recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in Operating, administrative and general expenses.

~~Significant judgments~~

In making its determination of standalone selling price, the Company maximizes its use of observable inputs. Standalone selling price, once established, is then used to allocate total consideration proportionally to the various performance obligations, if applicable, within a contract.

To estimate variable consideration, the Company applies both the “expected value” method and “most likely amount” method based on the form of variable consideration, according to which method would provide the best prediction. The expected value method involves a probability-weighted determination of the expected amount, whereas the most likely amount method identifies the single most likely outcome in a range of possible amounts. However, once a method has been applied to one form of variable consideration, it is applied consistently throughout the contract term.

The primary types of variable consideration present in the Company’s contracts are product returns, volume rebates and the CPI index. The overall impact of this variable consideration is not material.

~~Practical expedients~~

~~The Company has elected to apply the following practical expedients provided by ASC 606:~~

~~Future performance obligations - see discussion above.~~

~~Contract costs - see discussion above.~~

~~Shipping and handling activities - see discussion above.~~

Sales tax presentation - the Company has elected to exclude from the transaction price all sales taxes that are assessed by a governmental authority that are imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer.

~~Modified retrospective approach - see discussion in Note 1 regarding adoption elections.~~first quarter.

8. 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~~forecasted based on actual historical information and forward-looking estimates and is used to provide for income taxes in interim reporting periods. The Company also recognizes the tax impact of certain unusual or infrequently occurring items, such as the effects of changes in tax laws or rates and impacts from settlements with tax authorities, discretely in the quarter in which they occur.

~~The~~For the three months ended June 30, 2019, the Company recorded income tax ~~benefit~~expense of ~~$1.8~~$11.0 million ~~for the three months ended September 30, 2018,~~at an effective income tax rate of ~~48.5%, as compared~~27.2%. The annual effective tax rate differs from the statutory U.S. Federal tax rate due to the impact of state income taxes, nondeductible compensation, and income taxes on foreign earnings. The effective tax ~~expense of $2.4 million~~rate for the ~~three months~~three-month period ended ~~September~~June 30, ~~2017, an~~2019 also includes tax benefits from foreign and general business tax credits. The increase in effective income tax rate of 47.7%. Income tax expense was $5.7 million for the nine months ended September 30, 2018, an effective income tax rate of 24.4%, as compared to $7.5 million for the nine months ended September 30, 2017, an effective income tax rate of (38.2)%. The current year income tax expense for both the three and nine-month periods ended September 30, 2018 reflect the reduction in the U.S. statutory tax rate and other U.S. tax law changes as a result of the 2017 Tax Cuts and Jobs Act.

~~Our effective income~~ tax rate for the three months ended ~~September~~June 30, 2019 as compared to the same period last year was primarily attributed to the impacts of nondeductible compensation and noncontrolling interest, partially offset by benefits from income taxes on foreign earnings. For the three months ended June 30, 2018, ~~is higher than our~~the Company recorded an income tax expense of $7.7 million at an effective income tax rate ~~for~~of 26.6%.

For the ~~three~~six months ended ~~September~~June 30, ~~2017, due to~~2019, the ~~current period loss before~~Company recorded income ~~taxes and additional~~ tax ~~benefits from tax credits and permanent provision to return items, including reversal~~expense of ~~the provisional estimate for transition tax. These items resulted in a net increase of 14.8%, offset by the decrease in the U.S. federal statutory rate of 14%.~~

~~Our~~$5.6 million at an effective income tax rate of 26.7%. The annual effective tax rate differs from the statutory U.S. Federal tax rate due to the impact of state income taxes, nondeductible compensation, and income taxes on foreign earnings. The effective tax rate for the ~~nine~~six-month period ended June 30, 2019 also includes tax benefits from foreign and general business tax credits. The decrease in effective tax rate for the six months ended ~~September~~June 30, 2019 as compared to the same period last year was primarily attributed to income taxes on foreign earnings and discrete activity in the prior period for a statutory merger that did not recur in the current period. For the six months ended June 30, 2018, ~~is higher than our~~the Company recorded an income tax expense of $7.4 million at an effective income tax rate for the nine months ended September 30, 2017, as attributed to the Company’s loss before income taxes in the period ended September 31, 2017, after a goodwill write-off which did not provide a corresponding tax benefit. This was partially offset in the current period by the reduction of ~~the U.S. corporate tax rate from 35% to 21% as a result of the 2017 Tax Cuts and Jobs Act.~~

The company’s accounting for certain elements of the Tax Act was incomplete as of the period ended December 31, 2017, and remains incomplete as of September 30, 2018. However, the company was able to make reasonable estimates of the effects and, therefore, recorded provisional estimates for these items. In connection with its initial analysis of the impact of the Tax

Act, the Company recorded a provisional discrete net tax benefit of $73.5 million in the period ended December 31, 2017. This provisional estimate consists of a net expense of $1.4 million for the one-time transition tax and a net benefit of $74.9 million related to revaluation of deferred tax assets and liabilities, caused by the new lower corporate tax rate. To determine the

transition tax provisional estimate, the Company determined the estimate of the amount of post-1986 accumulated earnings and profits of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. While the Company was able to make a reasonable estimate of the impact of the reduction to the corporate tax rate, its rate may be affected by other analysis related to the Tax Act, including, but not limited to, the state tax effect of adjustments made to federal temporary differences. Due to the complexity of the new global intangible low-taxed income ("GILTI") tax rules, the company is continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under GAAP, the Company is allowed to make an accounting policy choice to either (i) treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method"); or (ii) factor in such amounts into a company’s measurement of its deferred taxes (the “deferred method”)27.7%. The Company’s selection of an accounting policy with respect to the new GILTI tax rules is dependent on additional analysis and potential future modifications to existing structures, which are not currently known. The Company has not made a policy decision regarding whether to record deferred taxes on GILTI. The Company will continue to analyze the full effects of the Tax Act on its Consolidated Financial Statements. During the third quarter of 2018, a portion of initial estimate was refined as a result of the US federal tax return filing and regulations issued by the Internal Revenue Service. As a result, the Company recorded a provisional benefit of $1.4 million in the third quarter of 2018 to reverse the one-time transition tax expense provisional estimate, as well as a $1.3 million expense related to the remeasurement of certain deferred tax assets and liabilities. The measurement period under SAB 118 remains open as there is still anticipated guidance clarifying certain aspects of the Act. Any subsequent adjustment to these amounts will be recorded to current tax expense in the fourth quarter of 2018 when the full analysis is complete.

9. Accumulated Other Comprehensive ~~Loss~~Income (Loss)

The following tables summarize the after-tax components of accumulated other comprehensive income (loss) attributable to the Company for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:

Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)

Three months ended September 30, 2018 Nine months ended September 30, 2018
(in thousands) Cash Flow Hedges Foreign Currency Translation Adjustment Investment in Convertible Preferred Securities Defined Benefit Plan Items Total Cash Flow Hedges Foreign Currency Translation Adjustment Investment in Convertible Preferred Securities Defined Benefit Plan Items Total
Beginning Balance $ 51
$ (9,989 ) $ 257
$ 4,334
$ (5,347 ) $ —
$ (7,716 ) $ 344
$ 4,672
$ (2,700 )
Other comprehensive income (loss) before reclassifications 65
993
—
39
$ 1,097
44
(1,280 ) (87 ) 37
(1,286 )
Amounts reclassified from accumulated other comprehensive loss 54
—
—
(168 ) $ (114 ) 126
—
—
(504 ) (378 )
Net current-period other comprehensive income (loss) 119
993
—
(129 ) 983
170
(1,280 ) (87 ) (467 ) (1,664 )
Ending balance $ 170
$ (8,996 ) $ 257
$ 4,205
$ (4,364 ) $ 170
$ (8,996 ) $ 257
$ 4,205
$ (4,364 )


		Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)																								Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
		Three months ended September 30, 2017												Nine months ended September 30, 2017												Three months ended June 30, 2019														Six months ended June 30, 2019
(in thousands)	(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			(in thousands)	Cash Flow Hedges			Foreign Currency Translation Adjustment			Investment in Convertible Preferred Securities		Defined Benefit Plan Items			Total			Cash Flow Hedges			Foreign Currency Translation Adjustment			Investment in Convertible Preferred Securities		Defined Benefit Plan Items			Total
Beginning Balance	Beginning Balance		$	(9,529	)	$	—	$	(2,464	)	$	(11,993	)	$	(11,002	)	$	—	$	(1,466	)	$	(12,468	)	Beginning Balance	$	(3,748	)	$	1,059		$	258	$	4,905		$	2,474		$	(126	)	$	(11,550	)	$	258	$	5,031		$	(6,387	)
	Other comprehensive income (loss) before reclassifications		2,201			211		41			2,453			3,674			211		(957		)	2,928			Other comprehensive loss before reclassifications	(5,952		)	(2,035		)	—		(557		)	$	(8,544	)	(9,710		)	(1,092		)	—		(512		)	(11,314		)
	Amounts reclassified from accumulated other comprehensive loss		—			—		(142		)	(142		)	—			—		(142		)	(142		)	Amounts reclassified from accumulated other comprehensive income (loss) (b)	—			—			—		(171		)	$	(171	)	136			11,666			—		(342		)	11,460
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)		2,201			211		(101		)	2,311			3,674			211		(1,099		)	2,786			Net current-period other comprehensive income (loss)	(5,952		)	(2,035		)	—		(728		)	(8,715		)	(9,574		)	10,574			—		(854		)	146
Ending balance	Ending balance		$	(7,328	)	$	211	$	(2,565	)	$	(9,682	)	$	(7,328	)	$	211	$	(2,565	)	$	(9,682	)	Ending balance	$	(9,700	)	$	(976	)	$	258	$	4,177		$	(6,241	)	$	(9,700	)	$	(976	)	$	258	$	4,177		$	(6,241	)

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

~~The following table shows~~(b) Reflects foreign currency translation adjustments attributable to the ~~reclassification adjustments from accumulated other comprehensive loss to net income for the three and nine months ended September 30, 2018:~~

Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (a)
(in thousands) Three months ended September 30, 2018 Nine months ended September 30, 2018
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 (228 ) (b) (684 ) (b)
(228 ) Total before tax (684 ) Total before tax
60
Income tax provision 180
Income tax provision
$ (168 ) Net of tax $ (504 ) Net of tax

Cash Flow Hedges
Interest payments 73
Interest expense 171
Interest expense
73
Total before tax 171
Total before tax
(19 ) Income tax provision (45 ) Income tax provision
$ 54
Net of tax $ 126
Net of tax

Total reclassifications for the period $ (114 ) Net of tax $ (378 ) Net of tax
consolidation of Thompsons Limited as summarized in Note 17.

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



		Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
		Three months ended June 30, 2018													Six months ended June 30, 2018
(in thousands)		Cash Flow Hedges		Foreign Currency Translation Adjustment			Investment in Convertible Preferred Securities		Defined Benefit Plan Items			Total			Cash Flow Hedges		Foreign Currency Translation Adjustment			Investment in Convertible Preferred Securities			Defined Benefit Plan Items			Total
Beginning Balance		$	—	$	(8,866	)	$	257	$	4,621		$	(3,988	)	$	—	$	(7,716	)	$	344		$	4,672		$	(2,700	)
	Other comprehensive income (loss) before reclassifications	51		(1,123		)	—		(119		)	(1,191		)	51		(2,273		)	(87		)	(2		)	(2,311		)
	Amounts reclassified from accumulated other comprehensive loss	—		—			—		(168		)	(168		)	—		—			—			(336		)	(336		)
Net current-period other comprehensive income (loss)		51		(1,123		)	—		(287		)	(1,359		)	51		(2,273		)	(87		)	(338		)	(2,647		)
Ending balance		$	51	$	(9,989	)	$	257	$	4,334		$	(5,347	)	$	51	$	(9,989	)	$	257		$	4,334		$	(5,347	)

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



	Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (a)
(in thousands)	Three months ended June 30, 2019				Six months ended June 30, 2019
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	$	(228	)	(b)	$	(456	)	(b)
	(228		)	Total before tax	(456		)	Total before tax
	57			Income tax provision	114			Income tax provision
	$	(171	)	Net of tax	$	(342	)	Net of tax

Cash Flow Hedges
Interest payments	—			Interest expense	$	182		Interest expense
	—			Total before tax	182			Total before tax
	—			Income tax provision	(46		)	Income tax provision
	$	—		Net of tax	$	136		Net of tax

Foreign Currency Translation Adjustment
Realized loss on pre-existing investment	—			Other income, net	$	11,666		Other income, net
	—			Total before tax	$	11,666		Total before tax
	—			Income tax provision	$	—		Income tax provision
	$	—		Net of tax	$	11,666		Net of tax

Total reclassifications for the period	$	(171	)	Net of tax	$	11,460		Net of tax



	Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (a)
(in thousands)	Three months ended June 30, 2018				Six months ended June 30, 2018
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	$	(228	)	(b)	$	(456	)	(b)
	(228		)	Total before tax	(456		)	Total before tax
	60			Income tax provision	120			Income tax provision
	$	(168	)	Net of tax	$	(336	)	Net of tax

Total reclassifications for the period	$	(168	)	Net of tax	$	(336	)	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).

10. 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 September 30,					Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
(in thousands, except per common share data)	2018			2017		2018		2017			2019		2018		2019		2018
Net income (loss) attributable to The Andersons, Inc.	$	(2,098	)	$	2,533	$	17,732	$	(27,208	)
Net income attributable to The Andersons, Inc.											$	29,888	$	21,529	$	15,895	$	19,829
Less: Distributed and undistributed earnings allocated to nonvested restricted stock	—			—		—		—			—		—		—		—
Earnings (losses) available to common shareholders	$	(2,098	)	$	2,533	$	17,732	$	(27,208	)
Earnings available to common shareholders											$	29,888	$	21,529	$	15,895	$	19,829
Earnings per share – basic:
Weighted average shares outstanding – basic	28,263			28,350		28,254		28,327			32,521		28,261		32,511		28,249
Earnings (losses) per common share – basic	$	(0.07	)	$	0.09	$	0.63	$	(0.96	)
Earnings per common share – basic											$	0.92	$	0.76	$	0.49	$	0.70
Earnings per share – diluted:
Weighted average shares outstanding – basic	28,263			28,350		28,254		28,327			32,521		28,261		32,511		28,249
Effect of dilutive awards	—			134		233		—			212		128		560		187
Weighted average shares outstanding – diluted	28,263			28,484		28,487		28,327			32,733		28,389		33,071		28,436
Earnings (losses) per common share – diluted	$	(0.07	)	$	0.09	$	0.62	$	(0.96	)
Earnings per common share – diluted											$	0.91	$	0.76	$	0.48	$	0.70

All outstanding share awards were 33 thousand and 61 thousand antidilutive for the three and six months ended ~~September~~June 30, ~~2018 as the Company incurred a net loss for the period.~~2019, respectively. There were ~~no antidilutive stock-based awards outstanding for the nine months ended September 30, 2018. There were 43~~28 thousand and 25 thousand antidilutive stock-based awards outstanding for the three and six months ended ~~September~~June 30, ~~2017, and all outstanding share awards were antidilutive for the nine months ended September 30, 2017.~~2018, respectively.

11. Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at ~~September~~June 30, ~~2018~~2019, December 31, ~~2017~~2018 and ~~September~~June 30, ~~2017~~2018:


(in thousands)	September 30, 2018											June 30, 2019
Assets (liabilities)	Level 1			Level 2			Level 3		Total			Level 1			Level 2			Level 3		Total
Commodity derivatives, net (a)	$	51,595		$	(67,919	)	$	—	$	(16,324	)	$	103,350		$	62,473		$	—	$	165,823
Provisionally priced contracts (b)	(55,697		)	(23,136		)	—		$	(78,833	)	(1,064		)	(38,215		)	—		(39,279		)
Convertible preferred securities (c)	—			—			7,154		$	7,154		—			—			8,404		8,404
Other assets and liabilities (d)	5,988			193			—		$	6,181		5,284			(10,750		)	—		(5,466		)
Total	$	1,886		$	(90,862	)	$	7,154	$	(81,822	)	$	107,570		$	13,508		$	8,404	$	129,482


(in thousands)	December 31, 2017											December 31, 2018
Assets (liabilities)	Level 1			Level 2			Level 3		Total			Level 1			Level 2			Level 3		Total
Commodity derivatives, net (a)	18,603			(18,067		)	—		536			$	37,229		$	(18,864	)	$	—	$	18,365
Provisionally priced contracts (b)	(98,190		)	(67,094		)	—		(165,284		)	(76,175		)	(58,566		)	—		(134,741		)
Convertible preferred securities (c)	—			—			7,388		7,388			—			—			7,154		7,154
Other assets and liabilities (d)	9,705			(1,244		)	—		8,461			5,186			(353		)	—		4,833
Total	$	(69,882	)	$	(86,405	)	$	7,388	$	(148,899	)	$	(33,760	)	$	(77,783	)	$	7,154	$	(104,389	)


(in thousands)	September 30, 2017											June 30, 2018
Assets (liabilities)	Level 1			Level 2			Level 3		Total			Level 1			Level 2			Level 3		Total
Commodity derivatives, net (a)	26,738			(20,771		)	—		5,967			$	15,356		$	(48,451	)	$	—	$	(33,095	)
Provisionally priced contracts (b)	(85,546		)	(33,944		)	—		(119,490		)	(37,787		)	(24,511		)	—		(62,298		)
Convertible preferred securities (c)	—			—			6,638		6,638			—			—			7,488		7,488
Other assets and liabilities (d)	10,996			(1,929		)	—		9,067			4,136			(37		)	—		4,099
Total	$	(47,812	)	$	(56,644	)	$	6,638	$	(97,818	)	$	(18,295	)	$	(72,999	)	$	7,488	$	(83,806	)


(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 assets held in rabbi trusts to fund deferred compensation plans, 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 exchanged-traded futures and options contracts that the Company holds, net of the cash collateral that the Company has in its margin account.

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

~~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 Company’s net commodity derivatives primarily consist of futures or options contracts via regulated exchanges and contracts with producers or customers under which the future settlement date and bushels (or gallons in the case of ethanol contracts) of commodities to be delivered (primarily wheat, corn, soybeans and ethanol) are fixed and under which the price may or may not be fixed. Depending on the specifics of the individual contracts, the fair value is derived from the futures or options prices quoted on ~~the CME or the New York Mercantile Exchange~~various exchanges for similar commodities and delivery dates as well as observable quotes for local basis adjustments (the difference, which is attributable to local market conditions, between the quoted futures price and the local cash price). Because ~~basis~~“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~~agribusiness industry, we have concluded that ~~basis~~“basis” is typically a Level 2 fair value input for purposes of the fair value disclosure requirements related to our commodity ~~derivatives.~~derivatives, depending on the specific commodity. Although nonperformance risk, both of the Company and the counterparty, is present in each of these commodity contracts and is a component of the estimated fair values, based on the Company’s historical experience with its producers and customers and the Company’s knowledge of their businesses, the Company does not view nonperformance risk to be a ~~material~~significant 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 2.2 Inventories. 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~~we have delivered provisionally priced grain and a subsequent payable or receivable is set up for any future changes in the grain price, quoted ~~CBOT~~exchange prices are used and the liability is deemed to be Level 1 in the fair value hierarchy. ~~All~~For all other unpriced contracts ~~primarily~~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 as they include variable future and basis components.~~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~~exchange prices and as such, the balance is deemed to be Level 1 in the fair value hierarchy.

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

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

Convertible Preferred Securities
(in thousands) 2018 2017
Assets (liabilities) at January 1, $ 7,388
$ 3,294
Gains (losses) included in earnings —
—
Assets (liabilities) at March 31, $ 7,388
$ 3,294
Gains (losses) included in earnings —
—
New investments 100
—
Asset (liabilities) at June 30,
$ 7,488

$ 3,294
Gains (losses) included in earnings 5,080
—
Unrealized gains (losses) included in other comprehensive income —
344
New investments 986
3,000
Sale proceeds (6,400 ) —
Asset (liability) at September 30, $ 7,154
$ 6,638



	Convertible Preferred Securities
(in thousands)	2019		2018
Assets (liabilities) at January 1,	$	7,154	$	7,388
Additional Investments	250		—
Assets (liabilities) at March 31,	$	7,404	$	7,388
Additional investments	1,000		100
Asset (liabilities) at June 30,	$	8,404	$	7,488

The following tables summarize quantitative information about the Company's Level 3 fair value measurements as of ~~September~~June 30, ~~2018~~,2019, December 31, ~~2017~~2018 and ~~September~~June 30, ~~2017:~~2018:

Quantitative Information about Level 3 Fair Value Measurements

(in thousands)

Fair Value as of September 30, 2018

Valuation Method

Unobservable Input

Weighted Average

Fair Value as of June 30, 2019

Valuation Method

Unobservable Input

Weighted Average

Convertible preferred securities (a)

7,154

Implied based on market prices

N/A

8,404

Implied based on market prices

N/A

Real Property (b)

2,719

Market Approach

N/A

(in thousands)

Fair Value as of December 31, 2017

Valuation Method

Unobservable Input

Weighted Average

Fair Value as of December 31, 2018

Valuation Method

Unobservable Input

Weighted Average

Convertible preferred securities (a)

7,388

Implied based on market prices

N/A

7,154

Implied based on market prices

N/A

Real Property (b)

29,347

Third-Party Appraisal

N/A

(in thousands)

Fair Value as of September 30, 2017

Valuation Method

Unobservable Input

Weighted Average

Fair Value as of June 30, 2018

Valuation Method

Unobservable Input

Weighted Average

Convertible preferred securities (a)

6,638

Implied based on market prices

N/A

7,488

Implied based on market prices

N/A

Real property (b)

1,300

Sale agreement

N/A

Rail car assets (c)

4,063

National scrap index less cost to sell

N/A

(a) ~~Due to early stages of business and timing of investments, implied value based on market price was deemed to approximate fair value. As the underlying enterprises have matured,~~The Company considers observable price changes and other additional market data is available ~~to consider~~ in order to estimate fair value, including additional capital raising, internal valuation models, progress towards key business milestones, and other relevant market data points.

(b) The Company recognized impairment charges on certain assets and measured the fair value using Level 3 inputs on a nonrecurring basis. The fair value of the assets was determined using prior transactions ~~third-party appraisals~~in the local market and a pending sale of grain assets held by the Company.

(c)The Company recognized impairment charges on rail assets during 2018 and measured fair value using Level 3 inputs on a nonrecurring basis. The fair value of the assets was determined based on a national scrap index less cost to sell.

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)	September 30, 2018		December 31, 2017		September 30, 2017		June 30, 2019		December 31, 2018		June 30, 2018
Fair value of long-term debt, including current maturities	$	445,342	$	474,769	$	431,542	$	1,078,185	$	517,998	$	444,821
Fair value in excess of carrying value (a)	11,629		1,451		2,389		4,495		5,813		(8,063		)

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

12. 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)	September 30, 2018		December 31, 2017		September 30, 2017		June 30, 2019		December 31, 2018		June 30, 2018
The Andersons Albion Ethanol LLC	$	49,882	$	45,024	$	42,302	$	50,760	$	50,382	$	47,474
The Andersons Clymers Ethanol LLC	22,589		19,830		17,837		25,260		24,242		21,214
The Andersons Marathon Ethanol LLC	15,373		12,660		12,390		16,294		14,841		14,344
Lansing Trade Group, LLC(a)	99,904		93,088		89,541		—		101,715		97,476
Thompsons Limited (a)	50,280		50,198		50,399		—		48,987		49,251
Providence Grain Group Inc.							17,161		—		—
Other	2,322		2,439		2,562		11,454		2,159		2,400
Total	$	240,350	$	223,239	$	215,031	$	120,929	$	242,326	$	232,159

(a) The Company previously owned approximately 32.5% of LTG. Effective January 1, 2019, the Company purchased the remaining equity of LTG. The transaction results in the consolidation of Thompsons Limited of Ontario, Canada and related ~~U.S. operating company held by joint ventures~~entities, which LTG and the Company had equally owned.

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


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,						Six months ended June 30,
(in thousands)	% Ownership at September 30, 2018	2018			2017			2018			2017			% Ownership at June 30, 2019	2019			2018			2019			2018
The Andersons Albion Ethanol LLC	55%	$	2,408		$	1,473		$	4,858		$	3,331		55%	$	120		$	1,329		$	379		$	2,450
The Andersons Clymers Ethanol LLC	39%	1,376			1,822			3,121			2,597			39%	694			1,236			1,276			1,745
The Andersons Marathon Ethanol LLC	33%	1,029			985			2,713			1,301			33%	644			1,728			1,453			1,684
Lansing Trade Group, LLC(a)	33% (a)	2,428			305			8,603			491			100% (a)	—			3,591			—			6,175
Thompsons Limited ~~(b)~~(a)	50%	35			(940		)	1,345			546			100% (a)	—			1,980			—			1,311
Providence Grain Group Inc.														39%	(1,719		)	—			(1,844		)	—
Other	5% - 50%	(51		)	(59		)	(39		)	(173		)	5% - 51%	104			(61		)	98			11
Total		$	7,225		$	3,586		$	20,601		$	8,093			$	(157	)	$	9,803		$	1,362		$	13,376

(a) ~~This does not consider restricted management units which once vested will reduce~~The Company previously owned approximately 32.5% of LTG. Effective January 1, 2019, the ~~ownership percentage by approximately 1%~~

~~(b)~~company purchased the remaining equity of LTG. The transaction results in the consolidation of Thompsons Limited and related ~~U.S. operating company held by joint ventures~~entities, which LTG and the Company had equally owned.

~~Total distributions~~The Company received $0.3 million from unconsolidated affiliates ~~were $2.2 million~~for the six months ended June 30, 2019 and ~~$7.1~~received $2.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018 and 2017, respectively.~~2018.

In the ~~third~~second quarter of 2019, the Company did not have significant equity investees. In the second quarter of 2018, ~~The Andersons Albion Ethanol LLC and~~ Lansing Trade Group ~~("LTG")~~ qualified as significant equity ~~investees~~investee of the Company under the income test. ~~The following table presents unaudited summarized financial information for~~In January of 2019, the ~~investees:~~

(in thousands) Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
Revenues $ 1,504,141
$ 1,341,123
$ 4,244,385
$ 3,797,546
Gross profit 49,497
42,973
147,013
111,468
Income (loss) from continuing operations 12,126
3,265
36,955
7,950
Net income (loss) 11,678
3,121
35,240
6,583
Net income (loss) attributable to Companies 11,678
3,300
35,240
7,486

Company acquired the remaining equity of LTG and is now reflected in the consolidated results of the Company.

Related Party Transactions

In the ordinary course of business and on an arms-length basis, the Company will enter into related party transactions with each of the investments described above, along with other related parties.

On March 2, 2018, the Company invested in ELEMENT, LLC. The Company owns 51% of ELEMENT, LLC and ICM, Inc. owns the remaining 49% interest. ELEMENT, LLC is constructing a 70 million-gallon-per-year bio-refinery. As part of the Company’s investment into ELEMENT, LLC, the Company and ICM, Inc. entered into a number of agreements with the entity. Most notably, ICM, Inc. will operate the facility under a management contract and manage the initial construction of the facility, while the Company will provide corn origination, ethanol marketing, and risk management services. The results of operations for ELEMENT, LLC have been included in ~~our~~the Company's consolidated results of operations beginning on March 2, 2018 and are a component of ~~our~~the Ethanol segment. The plant is expected to be operational in the third quarter of 2019.

The following table sets forth the related party transactions entered into for the time periods presented:


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Sales revenues	$	82,394	$	225,367	$	278,974	$	665,331	$	57,854	$	107,686	$	119,022	$	196,580
Service fee revenues (a)	5,231		14,397		15,539		28,433		4,052		5,191		8,163		10,308
Purchases of product and capital assets	177,583		165,084		556,551		467,495		176,442		197,444		345,671		378,968
Lease income (b)	1,623		1,850		4,829		4,559		1,645		1,624		3,309		3,206
Labor and benefits reimbursement (c)	3,436		3,208		10,603		10,071		3,602		3,601		7,460		7,168


(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.


(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.~~LLCs.


(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		June 30, 2019		December 31, 2018		June 30, 2018
Accounts receivable (d)	$	32,584	$	30,252	$	18,694	$	19,515	$	17,829	$	27,030
Accounts payable (e)	32,347		27,866		27,413		24,700		28,432		39,620


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


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

For the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, revenues recognized for the sale of ethanol and ~~other~~ co-products that the Company purchased from the unconsolidated ethanol LLCs were ~~$161.9~~$154.2 million and ~~$160.8~~$172.3 million, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, revenues recognized for the sale of ethanol and ~~other~~ co-products that the Company purchased from the unconsolidated ethanol LLCs were ~~$480.4~~$298.2 million and ~~$445.4~~$318.5 million, respectively.

For the three and nine months ended September 30, 2017 revenues recognized for the sale of corn to the unconsolidated ethanol LLCs were $119.1 million and $362.2 million. As a result of the new revenue recognition guidance, these transactions are now being recorded on a net basis instead of a gross basis, which is included in service fee revenues above. See Note 7 for further discussion.

~~From time to time, the~~The Company ~~enters~~may enter 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~~or ethanol, for 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 ~~September~~June 30, 2019, December 31, 2018 and June 30, 2018 ~~December 31, 2017 and September 30, 2017~~ was ~~$6.8 million,~~ $0.2 million, $1.9 million and ~~$1.9~~$8.1 million, respectively. The fair value of derivative contract liabilities with related parties as of ~~September~~June 30, 2019, December 31, 2018 and June 30, 2018 ~~December 31, 2017 and September 30, 2017~~ was ~~$7.2~~$2.1 million, ~~$2.5~~$6.3 million and ~~$0.1~~$3.9 million, respectively.

13. Segment Information

The Company’s operations include four reportable business segments that are distinguished primarily on the basis of products and services offered. The ~~Grain~~Trade business includes grain merchandising, the operation of terminal grain elevator facilities and, historically, the investments in LTG and Thompsons Limited. In January 2019, the Company acquired the remaining 67.5% of LTG equity that it did not already own. The transaction also resulted in the consolidation of Thompsons Limited of Ontario, Canada and related entities, which LTG and the Company jointly owned. The Company is continuing to evaluate its segment reporting structure as a result of the acquisition. The presentation includes a majority of the acquired business within the legacy Grain Group which has been renamed, Trade Group. The acquired ethanol trading business of LTG is included within the Ethanol Group. This presentation is still preliminary as the reporting structure may further evolve this year. The Company also moved certain commission income and an elevator lease from the legacy Grain Group to the Ethanol Group to better align business segments. Prior year results have been recast to reflect this change. The Ethanol business purchases and sells ethanol, and provides risk management, origination and management services to ethanol production facilities. These facilities are organized as limited liability companies, two are consolidated and three are investments accounted for under the equity method. The Company performs a combination of these services under various contracts for these investments. The Plant Nutrient business manufactures and distributes agricultural inputs, primarily fertilizer, to dealers and farmers, along with turf care and corncob-based products. Rail operations include the leasing, marketing and fleet management of railcars and other assets, railcar repair and metal fabrication. Prior to 2018, the Company reported the Retail operations as a fifth reportable business segment even though it did not meet the quantitative thresholds for segment disclosures. As previously disclosed, the Company closed the Retail business during 2017, and accordingly has recast the prior results for this segment within theThe Other category ~~which also~~ includes other corporate level costs not attributable 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.~~revenue.



	Three months ended June 30,				Six months ended June 30,
(in thousands)	2019		2018		2019		2018
Revenues from external customers
Trade	$	1,766,305	$	365,920	$	3,364,326	$	642,772
Ethanol	245,143		200,938		453,974		373,776
Plant Nutrient	270,577		303,106		399,102		438,723
Rail	43,016		41,438		84,431		91,870
Total	$	2,325,041	$	911,402	$	4,301,833	$	1,547,141


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Revenues from external customers
Grain	$	343,430	$	497,613	$	986,202	$	1,464,588
Ethanol	194,849		191,531		568,625		533,515
Inter-segment sales
Trade									$	631	$	462	$	812	$	993
Plant Nutrient	104,188		103,620		542,911		514,943		1,274		—		1,294		—
Rail	43,112		43,093		134,982		121,632		771		338		2,046		671
Other	—		738		—		47,595
Total	$	685,579	$	836,595	$	2,232,720	$	2,682,273	$	2,676	$	800	$	4,152	$	1,664

Three months ended September 30, Nine months ended September 30,
(in thousands) 2018 2017 2018 2017
Inter-segment sales
Grain $ 442
$ 72
$ 1,435
$ 279
Plant Nutrient —
—
—
241
Rail 288
327
959
893
Total $ 730
$ 399
$ 2,394
$ 1,413


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(in thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Income (loss) before income taxes
Grain	$	(8,619	)	$	2,641		$	1,228		$	4,497
Income (loss) before income taxes, net of noncontrolling interest
Trade													$	23,731		$	9,877		$	6,268		$	9,847
Ethanol	9,058			6,098			17,022			12,474			2,649			6,125			5,221			7,964
Plant Nutrient	(7,976		)	(7,920		)	8,239			(27,074		)	15,903			15,124			11,974			16,215
Rail	5,732			6,127			10,645			18,065			3,180			944			7,492			4,913
Other	(2,057		)	(2,024		)	(13,734		)	(27,665		)	(4,578		)	(2,799		)	(9,505		)	(11,678		)
Income (loss) before income taxes, net of noncontrolling interest													40,885			29,271			21,450			27,261
Noncontrolling interests	223			83			(175		)	73			(477		)	(116		)	(632		)	(398		)
Total	$	(3,639	)	$	5,005		$	23,225		$	(19,630	)
Income (loss) before income taxes													$	40,408		$	29,155		$	20,818		$	26,863


(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		June 30, 2019		December 31, 2018		June 30, 2018
Identifiable assets
Grain	$	788,770	$	948,871	$	799,655
Trade							$	2,057,305	$	978,974	$	820,016
Ethanol	263,949		180,173		173,545		361,522		295,971		248,560
Plant Nutrient	415,314		379,309		389,396		381,924		403,780		356,166
Rail	564,227		490,448		446,884		657,617		590,407		535,087
Other	119,358		163,553		154,680		113,491		122,871		157,959
Total	$	2,151,618	$	2,162,354	$	1,964,160	$	3,571,859	$	2,392,003	$	2,117,788

14. Leases

The Company leases certain grain handling and storage facilities, ethanol storage terminals. warehouse space, railcars, locomotives, barges, office space, machinery and equipment, vehicles and information technology equipment under operating leases. Lease expense for these leases is recognized within the Consolidated Statements of Operations on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred.

The following table summarizes the amounts recognized in the Company's Condensed Consolidated Balance Sheet related to leases:



(in thousands)	Condensed Consolidated Balance Sheet Classification	June 30, 2019
Assets
Operating lease assets	Right of use assets, net	$	74,073
Finance lease assets	Property, plant and equipment, net	24,099
Finance lease assets	Rail Group assets leased to others, net	2,047
Total leased assets		$	100,219

Liabilities
Current operating leases	Accrued expenses and other current liabilities	25,672
Non-current operating leases	Long-term lease liabilities	48,401
Total operating lease liabilities		$	74,073

Current finance leases	Current maturities of long-term debt	16,990
Non-current finance leases	Long-term debt	21,940
Total finance lease liabilities		$	38,930
Total lease liabilities		$	113,003

The components of lease cost recognized within the Company's Condensed Consolidated Statement of Operations were as follows:



(in thousands)	Condensed Consolidated Statement of Operations Classification	June 30, 2019
Lease cost:
Operating lease cost	Cost of sales and merchandising revenues	$	13,120
Operating lease cost	Operating, administrative and general expenses	6,834
Finance lease cost
Amortization of right-of-use assets	Operating, administrative and general expenses	1,912
Interest expense on lease liabilities	Interest expense	543
Other lease cost (1)	Operating, administrative and general expenses	199
Other lease cost (1)	Interest expense	24
Total lease cost		$	22,632


(1)	Other lease cost includes short-term lease costs and variable lease costs

The Company often has the option to renew lease terms for buildings and other assets. The exercise of a lease renewal option is generally at the sole discretion of the Company. In addition, certain lease agreements may be terminated prior to their original expiration date at the discretion of the Company. Each renewal and termination option is evaluated at the lease commencement date to determine if the Company is reasonably certain to exercise the option on the basis of economic factors. The table below summarizes the weighted average remaining lease terms as of June 30, 2019.



Weighted Average Remaining Lease Term
Operating leases	4.3 years
Finance leases	7.1 years

The discount rate implicit within our leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for each lease is determined based on its term and the currency in which lease payments are made, adjusted for the impacts of collateral. The table below summarizes the weighted average discount rate used to measure the Company's lease liabilities as of June 30, 2019.



Weighted Average Discount Rate
Operating leases	4.16	%
Finance leases	3.74	%

Supplemental Cash Flow Information Related to Leases



(in thousands)	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	21,345
Operating cash flows from finance leases	$	304
Financing cash flows from finance leases	$	775
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	3,992
Finance leases	$	15,920

Maturity Analysis of Leases Liabilities



	As of June 30, 2019
(in thousands)	Operating Leases		Finance Leases		Total
2019 (excluding the six months ended June 30, 2019)	$	15,849	$	3,672	$	19,521
2020	22,069		15,288		37,357
2021	15,898		2,162		18,060
2022	10,550		2,169		12,719
2023	6,193		2,170		8,363
Thereafter	10,613		18,331		28,944
Total lease payments	$	81,172	$	43,792	$	124,964
Less interest	7,099		4,862		11,961
Total	$	74,073	$	38,930	$	113,003

15. 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.

The Company recorded a $5.0 million reserve relating to an outstanding non-regulatory litigation claim, based upon preliminary settlement negotiations in the ~~third~~first quarter of ~~2017,~~2019. The claim is in response to penalties and fines paid to regulatory entities by LTG in 2018 for the ~~Company’s Plant Nutrient business recorded a $2.2 million reserve for~~ settlement of ~~a 2015 legal claim.~~matters which focused on certain trading activity.

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

Commitments

~~In the first quarter of 2018, the~~

The Company ~~began~~continues its construction of a new ~~ethanol~~bio-refinery facility, which is expected to be completed in 2019. Portions of the project are covered by design and build contracts, with approximately ~~$105.9~~$13 million of the remaining obligation not yet incurred, of which ~~$10.5~~$0.9 million has been prepaid, as of ~~September~~June 30, ~~2018.~~

~~Build-to-Suit Lease~~

~~In August 2015, the Company entered into a lease agre~~ement 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 $23.1 million, $24.3 million, and $24.7 million at September 30, 2018, December 31, 2017, and September 30, 2017, respectively. The Company has recorded a build-to-suit financing obligation in other current liabilities of $1.5 million, $1.4 million, and $1.4 million at September 30, 2018, December 31, 2017, and September 30, 2017, respectively.2019.

~~15.~~16. Supplemental Cash Flow Information

Certain supplemental cash flow information, including noncash investing and financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 are as follows:


	Nine months ended September 30,				Six months ended June 30,
(in thousands)	2018		2017		2019			2018
Supplemental disclosure of cash flow information
Interest paid	$	23,327	$	20,356	$	30,287		$	16,982
Noncash investing and financing activity
Capital projects incurred but not yet paid	13,941		6,319
Investment merger (decreasing equity method investments and non-controlling interest)	—		8,360
Equity issued in conjunction with acquisition					127,841			—
Removal of pre-existing equity method investment					(159,459		)	—
Purchase price holdback/ other accrued liabilities					31,885			—
Dividends declared not yet paid	4,663		4,501		5,530			4,663
Debt resulting from accounting standard adoption	36,953		—		—			36,953
Railcar assets resulting from accounting standard adoption	25,643		—
Railcar assets and liabilities resulting from accounting standard adoption					—			25,643
Capital projects incurred but not yet paid					15,317			10,744

~~16. Sale~~17. Business Acquisition

Effective January 1, 2019, the Company completed its acquisition of ~~Assets~~the remaining 67.5% equity of LTG. The transaction resulted in the consolidation of Thompsons Limited of Ontario, Canada and related entities as they were jointly owned by the Company and LTG in equal portions.

Total consideration paid by the Company to complete the acquisition of LTG was $328.9 million. The Company paid $169.2 million in cash, which includes preliminary working capital adjustments of $31.9 million, and issued 4.4 million unregistered shares valued at $127.8 million based upon the stock price of the Company.

The ~~Company closed on an agreement to sell its grain elevators in Humboldt, Kenton~~purchase price allocation is preliminary, pending completion of the full valuation report and ~~Dyer, Tennessee for $19.5 million plus~~a final working capital adjustment to be agreed upon between the Company and the sellers. A summarized preliminary purchase price allocation is as follows:



(in thousands)
Cash consideration paid	$	169,218
Equity consideration	127,841
Purchase price holdback/ other accrued liabilities	31,885
Total purchase price consideration	$	328,944

The preliminary purchase price allocation at January 1, 2019, is as follows:



(in thousands)
Cash and cash equivalents	$	21,525
Accounts receivable	320,467
Inventories	456,963
Commodity derivative assets - current	82,595
Other current assets	27,474
Commodity derivative assets - noncurrent	13,576
Goodwill	129,848
Other intangible assets	106,600
Right of use asset	37,894
Equity method investments	28,728
Other assets, net	5,582
Property, plant and equipment, net	171,820
	$	1,403,072

Short-term debt	218,901
Trade and other payables	303,321
Commodity derivative liabilities - current	29,024
Customer prepayments and deferred revenue	99,530
Accrued expense and other current liabilities	64,512
Other long-term liabilities, including commodity derivative liabilities - noncurrent	3,175
Long-term lease liabilities	21,193
Long-term debt, including current maturities	161,688
Deferred income taxes	14,403
	$	915,747
Fair value of acquired assets and assumed liabilities	$	487,325

Removal of preexisting ownership interest, including associated cumulative translation adjustment	(159,459		)
Pretax loss on derecognition of preexisting ownership interest	1,078
Total purchase price consideration	$	328,944

The goodwill recognized as a result of the LTG acquisition is $129.9 million and is allocated to the Trade Group segment. A portion of the goodwill is expected to be deductible for tax purposes. The goodwill recognized is primarily attributable to the addition of an assembled workforce and complementary assets with greater scale that significantly expands the Company's reach in the agricultural marketplace. Due to refinements in the valuation and finalization of certain replacement equity award during the second quarter, ~~of 2018~~goodwill increased approximately $7.5 million and ~~its Como location for $1.3~~other intangible assets decreased $9.6 million ~~plus~~as well as various working capital ~~during the third quarter of 2018.~~

~~During the third quarter of 2018, the~~adjustments. The Company also ~~closed on an agreement to sell one~~finalized the determination of the preacquisition fair value of its ~~convertible preferred security investments~~preexisitng ownership interests, which resulted in a revision of the previously recorded pretax loss by $2.4 million.

Details of the intangible assets acquired are as follows:



(in thousands)			Estimated useful life
Customer relationships	$	86,300	10 years
Noncompete agreements	20,300		3 years
	$	106,600	8 years	*

*weighted average number of years

Pro Forma Financial Information

The summary pro forma financial information for ~~$6.4 million~~the periods presented below gives effect to the LTG acquisition as if it had occurred at January 1, 2018.



	Three months ended June 30,				Six months ended June 30,
(in thousands)	2019		2018		2019		2018
Net sales	$	2,359,077	$	2,333,598	$	4,335,869	$	4,261,910
Net income	29,985		42,506		19,232		32,110

Pro forma net loss was also adjusted to account for the tax effects of the pro forma adjustments noted above using a statutory tax rate of 25%. The amount of LTG’s and ~~recorded a pre-tax gain~~Thompsons’ revenue and earnings included in the Company’s consolidated statement of ~~$3.9 million in Other income, net.~~operations for the period ended June 30, 2019 are not practicable to determine given the level of integration of LTG and Thompsons into the Company’s operations effective January 1, 2019.

18. Goodwill

The ~~Company sold two~~changes in the carrying amount of ~~its retail properties during~~goodwill by reportable segment for the ~~third quarter of 2017 for $7.6 million and recorded a~~ six months ended June 30, 2019 are as follows:



(in thousands)	Trade		Plant Nutrient		Rail		Total
Balance as of January 1, 2019	$	1,171	$	686	$	4,167	$	6,024
Acquisitions	129,848		—		—		129,848
Balance as of June 30, 2019	$	131,019	$	686	$	4,167	$	135,872

~~$5.7 million gain in Other income, net.~~

~~On March 31, 2017~~Acquisitions represent 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.LTG acquisition's preliminary goodwill allocation.

~~17.~~19. Exit Costs and Assets Held for Sale

The Company classified ~~$29.5~~$9.8 million of ~~assets~~Property, plant and equipment as Assets held for sale on the Condensed Consolidated Balance Sheet at ~~September~~June 30, 2018. This includes ~~$25.1~~$4.2 million of Retail store assets, $4.1 million of Rail Group assets, ~~which is primarily comprised of barges. Additionally, property plant~~ and ~~equipment of $4.4 million was classified as held for sale including $4.2~~$1.3 million of ~~Retail store~~former Grain Group assets relating to Como, Tennessee operations, and $0.2 million relating to administrative offices at an outlying location in the Plant Nutrient ~~Group~~Group.

The Company classified $37.9 million of assets as Assets held for sale on the Condensed Consolidated Balance Sheet at December 31, 2017. This includes $19.5 million of Property, plant and equipment, net, $11.4 million of Inventories, and $1.2 million of Commodity derivative assets related to certain western Tennessee locations of the Grain Group. The Company classified $4.2 million and $1.6 million of additional Property, plant and equipment, net as Assets held for sale related

20. Subsequent Events

Subsequent to the ~~remaining Retail store assets and administrative offices at an outlying location in the Plant Nutrient Group, respectively.~~

~~The Company classified $8.4 million~~end of ~~Property, plant and equipment, net as Assets held for sale on the Condensed Consolidated Balance Sheet at September 30, 2017, all of which related to Retail store assets.~~

~~The Retail business closed during~~ the second quarter, the Company reached an agreement to sell the agronomy assets of ~~2017. Inventory~~Thompsons Limited, a wholly owned subsidiary in Ontario, Canada, to Sylvite Holdings Inc. of Burlington, Ontario. The sale is expected to close in September 2019. The Andersons will continue to own and ~~fixtures liquidation efforts were completed throughout the year. The Company recorded minimal additional exit charges during the third quarter of 2017~~operate Thompsons’ grain storage and ~~a total of $11.5 million during the first nine months of 2017.~~food processing facilities in Ontario.

~~18. Subsequent Events~~

On October 15, 2018, the Company entered into an agreement to purchase the remaining equity (not currently owned by the Company) of LTG. The transaction will also result in the consolidation of Thompsons and related entities as they are currently jointly owned by the Company and LTG. The Company currently owns approximately 32.5% of LTG equity and will acquire the remaining approximately 67.5% interest for approximately $305 million, which includes the Company’s share of estimated working capital of the acquired entities and other closing adjustments. The Company will assume approximately $166 million of long-term debt, consisting of up to $130 million from LTG and about $36 million from Thompsons. The Company will pay the purchase price with cash and unregistered common shares of the Company. The Company intends to fund the cash portion utilizing the Company's existing line of credit. The final purchase price will be dependent on the number of shares issued, share price on date of closing, and actual working capital, among other items. The transaction is expected to close in the January 2019.

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, ~~2017~~2018 (“~~2017~~2018 Form 10-K”). In some cases, the reader can identify forward-looking statements by terminology such as may, anticipates, believes, estimates, predicts, or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These forward-looking statements relate only to events as of the date on which the statements are made and the Company undertakes no obligation, other than any imposed by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although 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 ~~2017~~2018 Form 10-K, have not materially changed through the ~~third~~second quarter of ~~2018,~~2019, other than as a result of adopting the new ~~revenue recognition~~lease accounting standard. See additional information regarding these policies in the Notes to the Condensed Consolidated Financial statements herein in Notes 1 and 7.14.

Executive Overview

Our operations are organized, managed and classified into four reportable business segments: ~~Grain,~~Trade, Ethanol, Plant Nutrient, and Rail. Each of these segments is generally based on the nature of products and services offered. ~~Prior to 2018, we reported~~In January, the ~~Retail operations as a fifth reportable business segment even though~~Company completed the acquisition of 67.5% of LTG equity that it did not ~~meet~~already own. The transaction also resulted in the ~~quantitative thresholds for~~consolidation of Thompsons Limited of Ontario, Canada and related entities, which LTG and the Company jointly owned. The Company is continuing to evaluate its segment ~~disclosures. As previously disclosed, we closed~~reporting structure as a result of the ~~Retail~~acquisition. The presentation here includes a majority of the acquired business ~~during 2017, and accordingly have recast the prior results for this segment~~ within the ~~Other category,~~legacy Grain Group which has been renamed, Trade Group. The acquired ethanol trading business is included within the Ethanol Group. As a result of the LTG acquisition, the Company also ~~includes other corporate level costs not attributable~~moved certain commission income and an elevator lease from the legacy Grain Group to ~~an operating segment.~~the Ethanol Group to better align business segments. Prior year results have been recast to reflect this change.

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~~Further, we have considered the potential impact that the Company’s total shareholders’ equity exceeded the Company’s market capitalization value at various points during the quarter for impairment indicators. While we ultimately concluded that the book value in excess of market capitalization is a short-term anomaly and that no impairment triggering event has occurred, the assessment performed for goodwill may be influenced by these market conditions and affect the calculated fair value of the reporting unit at the annual October 1 assessment date. A goodwill impairment charge might result if recent weaknesses in our business units prove to be long-term in nature and affect our forecast for future years. Total goodwill across the Company is $135.9 million.

Trade Group

The ~~Grain~~Trade Group’s results in the ~~third~~second quarter ~~were down~~reflect improved market conditions from strong corn and wheat basis appreciation and capitalizing on better merchandising opportunities due to significantly lower basis levels, due primarily to high new crop yields and exports tariffs. While the drop in basis levels led to third quarter losses, the Group should now have the ability to fill the remainder of our storage capacity at attractive prices which provides strong basis appreciation opportunity going into the fourth quarter.increased market volatility.

~~Grain~~Agricultural inventories on hand at ~~September~~June 30, ~~2018~~2019 were ~~72.0 million bushels. These amounts compare to 75.1~~96.1 million bushels, ~~on hand at September 30, 2017,~~ of which ~~1.0~~1.3 million bushels were stored for others. These amounts compare to 80.9 million bushels on hand at June 30, 2018, of which 0.1 million bushels were stored for

others. Total ~~grain~~Trade storage capacity, including temporary pile storage, was approximately ~~140~~216 million bushels at ~~September~~June 30, ~~2018~~2019 compared to ~~153~~145 million bushels at ~~September~~June 30, ~~2017.~~2018. This ~~decrease~~increase in capacity iswas a result of the ~~sale of four Tennessee locations in 2018.~~LTG acquisition.

~~In October, the Company announced that it had entered into a merger agreement with Lansing~~The Trade Group ~~LLC, its long-time affiliate,~~will seek to acquire the 67.5% of Lansing equity that it does not already own. We believe the acquisition will create a grain and trading business of highly complementary assets with greater scale that will significantly expand our reachcapitalize on continued market volatility, but expects headwinds in the ~~agricultural marketplace.~~second half of the year from the unpredictability of the crop production in the Eastern Corn Belt due to the extreme weather during the first half of the year.

Ethanol Group

The Ethanol Group's ~~third~~second quarter results ~~reflect increased ethanol volumes from improved yields at the plant locations as well as~~remained profitable despite an ~~increase in coproduct sales. Improved DDG values helped drive improved results at the Group's unconsolidated LLC's.~~

extremely weak margin environment. The construction of the Ethanol Group's new bio-refinery facility ~~is well underway~~continues and the project is ~~expected~~on target to be operational ~~by mid-~~in the third quarter of 2019. The Ethanol Group expects the margin headwinds to continue into the second half of the year due to rising corn basis levels.

Ethanol and related ~~coproducts~~co-products volumes for ~~the~~ three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:


(in thousands)	Three months ended September 30,		Nine months ended September 30,		Three months ended June 30,		Six months ended June 30,
	2018	2017	2018	2017	2019	2018	2019	2018
Ethanol (gallons shipped)	117,848	108,452	337,984	307,379	130,297	117,061	261,325	220,136
E-85 (gallons shipped)	16,022	12,482	47,501	32,385	13,959	16,577	22,892	31,479
Corn Oil (pounds shipped)	5,200	4,504	15,574	12,842	4,821	5,567	9,754	10,374
DDG (tons shipped) *	40	42	120	121	36	42	73	81

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

The above table shows only shipped volumes ~~that flow through~~reflected in 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 its customers is excluded here. The increase in ethanol gallons shipped is a result of the LTG acquisition.

Plant Nutrient Group

The Plant Nutrient Group's ~~third~~second quarter results reflect ~~a decrease in sales volume in our~~improved primary ~~nutrients~~ and ~~lower margins in our~~ specialty nutrient ~~products. While primary product~~ margins ~~have improved, the outlook~~and depressed volumes due to unprecedented wet weather in much of its core footprint. The Group is optimistic margins will remain strong for the ~~Group remains challenged.~~second half of the year despite the lawn business expecting to continue to face headwinds.

Storage capacity at our wholesale nutrient and farm center facilities, including leased storage, was approximately ~~476~~487 thousand tons for dry nutrients and approximately 515 thousand tons for liquid nutrients at ~~September~~June 30, ~~2018,~~2019, compared to approximately ~~478~~484 thousand tons for dry nutrients and approximately ~~525~~515 thousand tons for liquid nutrients at ~~September~~June 30, ~~2017.~~2018.

Tons of product sold for ~~the~~ three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:


(in thousands)	Three months ended September 30,		Nine months ended September 30,		Three months ended June 30,		Six months ended June 30,
	2018	2017	2018	2017	2019	2018	2019	2018
Primary nutrients	214	254	1,072	1,099	589	657	767	859
Specialty nutrients	108	109	541	540	207	247	372	433
Other	13	15	42	53	13	13	29	29
Total tons	335	378	1,655	1,692	809	917	1,168	1,321

In the table above, primary nutrients is comprised of nitrogen, phosphorus, and potassium from our wholesale and farm center businesses. Specialty nutrients encompasses low-salt liquid starter fertilizers, ~~micro-nutrients~~micronutrients for wholesale and farm center businesses, as well as the lawn business. Other tons ~~includes~~include those from the cob business.

Rail Group

The Rail Group results ~~reflect~~improved due to stronger utilization rates from more cars on lease and an impairment charge in the prior year. These increases were partially offset by a decrease in the leasing business due to lower leasing rates. Renewal lease rates are lower than the expiring rates, even though market rates have seen gradual improvement. Despite lower lease rates, the base leasing business remains healthy as it saw an increase in averageincome from car sales and other services. Average utilization rates increased from ~~85.8~~89.5 percent in the ~~third~~second quarter of ~~2017~~2018 to ~~92.0~~94.6 percent in the ~~third~~second quarter of ~~2018.~~2019. A portion of this

increase, however, is attributable to the railcar scrap program ~~from~~which occurred in the second ~~quarter. However, most~~quarter of 2018. Additionally, the ~~increase is from higher industry carload traffic.~~Company focused on putting idle cars in service and growing the fleet with strategic purchases. Rail Group assets under management (owned, leased or managed for financial institutions in non-recourse arrangements) at ~~September~~June 30, ~~2018~~2019 were ~~22,509~~23,966 compared to ~~22,986~~23,059 at ~~September~~June 30, ~~2017, due to the scrapped cars and excluding the remaining cars held for sale.~~2018.

The ~~Group expects continued steady growth in~~leasing business continues to perform well with more cars on lease ~~with an abundant railcar supply putting pressure on renewing~~and higher average lease ~~rates. We also expect the repair business to continue to grow profitably.~~rates year over year. Lease rates and utilization rates have likely hit their peak but should remain steady.

Other

Our “Other” activities include corporate income and expense and cost for functions that provide support and services to the operating segments. The results include expenses and benefits not allocated to the operating segments, including a portion of our ERP ~~project. The results of our former retail business, which was closed in 2017, are also included in "Other" activities.~~project, and other elimination and consolidation adjustments.

Operating Results

The following discussion focuses on the operating results as shown in the Condensed Consolidated Statements of Operations and includes a separate discussion by segment. Additional segment information is included ~~in the Notes to the Condensed Consolidated Financial Statements~~ herein in Note 13, Segment Information.

Three months ended September 30, Nine months ended September 30,
(in thousands) 2018 2017 2018 2017
Sales and merchandising revenues $ 685,579
$ 836,595
$ 2,232,720
$ 2,682,273
Cost of sales and merchandising revenues 631,715
766,924
2,024,677
2,448,310
Gross profit 53,864
69,671
208,043
233,963
Operating, administrative and general expenses 65,986
68,153
190,096
219,242
Asset impairment —
—
6,272
—
Goodwill impairment —
—
—
42,000
Interest expense (income) 5,176
5,384
20,000
17,472
Equity in earnings (losses) of affiliates, net 7,225
3,586
20,601
8,093
Other income (expense), net 6,434
5,285
10,949
17,028
Income (loss) before income taxes (3,639 ) 5,005
23,225
(19,630 )
Income (loss) attributable to noncontrolling interests 223
83
(175 ) 73
Income (loss) before income taxes attributable to The Andersons, Inc. $ (3,862 ) $ 4,922
$ 23,400
$ (19,703 )

Comparison of the three months ended ~~September~~June 30, ~~2018~~2019 with the three months ended ~~September~~June 30, ~~2017~~:2018:

~~Grain Group~~


	Three months ended September 30,						Three months ended June 30, 2019
(in thousands)	2018			2017			Trade			Ethanol			Plant Nutrient		Rail		Other			Total
Sales and merchandising revenues	$	343,430		$	497,613		$	1,766,305		$	245,143		$	270,577	$	43,016	$	—		$	2,325,041
Cost of sales and merchandising revenues	326,818			465,297			1,663,459			240,831			231,779		28,244		—			2,164,313
Gross profit	16,612			32,316			102,846			4,312			38,798		14,772		—			160,728
Operating, administrative and general expenses	26,142			27,622			67,995			4,697			21,079		7,740		5,407			106,918
Asset impairment							3,081			—			—		—		—			3,081
Interest expense (income)	2,126			1,898			10,243			(906		)	2,386		4,181		(177		)	15,727
Equity in earnings (losses) of affiliates, net	2,412			(694		)	(1,614		)	1,457			—		—		—			(157		)
Other income (expense), net	625			539			3,818			194			570		329		652			5,563
Income (loss) before income taxes	$	(8,619	)	$	2,641		23,731			2,172			15,903		3,180		(4,578		)	40,408
Income (loss) attributable to the noncontrolling interests							—			(477		)	—		—		—			(477		)
Income (loss) before income taxes, net of noncontrolling interests attributable to The Andersons, Inc.							$	23,731		$	2,649		$	15,903	$	3,180	$	(4,578	)	$	40,885



	Three months ended June 30, 2018
(in thousands)	Trade		Ethanol			Plant Nutrient		Rail		Other			Total
Sales and merchandising revenues	$	365,100	$	201,758		$	303,106	$	41,438	$	—		$	911,402
Cost of sales and merchandising revenues	331,213		195,896			265,939		27,880		—			820,928
Gross profit	33,887		5,862			37,167		13,558		—			90,474
Operating, administrative and general expenses	26,444		2,770			21,024		5,863		3,752			59,853
Asset impairment	1,564		—			—		4,708		—			6,272
Interest expense (income)	3,930		(270		)	1,641		2,718		(194		)	7,825
Equity in earnings (losses) of affiliates, net	5,510		4,293			—		—		—			9,803
Other income (expense), net	1,248		(476		)	622		675		759			2,828
Income (loss) before income taxes	8,707		7,179			15,124		944		(2,799		)	29,155
Income (loss) attributable to the noncontrolling interests	—		(116		)	—		—		—			(116		)
Income (loss) before income taxes, net of noncontrolling interests attributable to The Andersons, Inc.	$	8,707	$	7,295		$	15,124	$	944	$	(2,799	)	$	29,271

Trade Group

Operating results for the ~~Grain~~Trade Group ~~declined~~increased by ~~$11.3~~$15.0 million compared to the results of the same period last year. Sales and merchandising revenues ~~decreased $154.2~~increased by $1,401.2 million and cost of sales and merchandising revenues ~~decrease $138.5~~increased $1,332.2 million for ~~an unfavorable~~favorable net gross profit impact of ~~$15.7~~$69.0 million. Substantially all of the gross profit increase was a direct result of acquiring LTG and Thompsons, however, the Company also realized significant basis appreciation on its corn and wheat positions.

Operating, administrative and general expenses increased by $41.6 million. The ~~adoption~~acquisition of ~~ASC 606 led~~the remaining equity in LTG and Thompsons accounted for $39.4 million of this increase. Included in the increased expenses are several acquisition related items, such as, $1.3 million of stock-based compensation expense, $0.4 million of incremental depreciation and amortization expenses and $0.4 million of other transaction-related costs.

Interest expense increased $6.3 million due to a decrease in revenue of $170.4 million related primarily to grain origination revenues. The gross profit decrease was primarily driven by mark-to-market changes on our grain inventory that we believe will substantially rebound before year-end.the increased debt levels resulting from the acquisition and rising interest rates.

Equity in earnings of affiliates ~~improved~~decreased by ~~$3.1~~$7.1 million ~~due~~as LTG and Thompsons are now consolidated entities.

Other income, net includes a $2.4 million adjustment to ~~better operating results from Lansing Trade Group~~the previously recorded $3.5 million loss on pre-existing investments in LTG and Thompsons, pursuant to the accounting rules that govern step acquisitions, as the Company finalized its valuation of the pre-acquisition fair value of these investments during the ~~quarter.~~quarter as a part of the preliminary purchase price accounting.

Ethanol Group

Three months ended September 30,
(in thousands) 2018 2017
Sales and merchandising revenues $ 194,849
$ 191,531
Cost of sales and merchandising revenues 187,889
185,143
Gross profit 6,960
6,388
Operating, administrative and general expenses 3,296
4,526
Interest expense (income) (784 ) (27 )
Equity in earnings (losses) of affiliates, net 4,813
4,280
Other income (expense), net 20
12
Income (loss) before income taxes 9,281
6,181
Income (loss) attributable to noncontrolling interests 223
83
Income (loss) before income taxes attributable to The Andersons, Inc. $ 9,058
$ 6,098

Operating results for the Ethanol Group ~~improved $3.0~~declined $4.6 million from the same period last year. Sales and merchandising revenues increased ~~$3.3~~$43.4 million ~~compared to the results of the same period last year. This was driven by strong yields which led to a 9% increase in ethanol gallons sold. Cost~~and cost of sales and merchandising revenues increased as$44.9 million compared to 2018 results were primarily attributable to the LTG acquisition. Gross profit decreased by $1.6 million compared to 2018 results due to a ~~result of the increase in sales volume.~~compressed industry margin environment.

Operating, administrative and general expenses ~~decreased $1.2~~increased $1.9 million primarily due to ~~a $1.5 million write-off~~an increase in labor and benefits, most of ~~a potential capital project that occurred in 2017.~~which was from the addition of the acquired ethanol trading team.

~~Equity in earnings of affiliates increased $0.5~~Interest expense decreased $0.6 million due to ~~improved results from~~ the ~~unconsolidated ethanol LLCs. The improved results were driven by an improvement in DDG values and productivity savings in~~capitalization of interest related to the ~~current quarter.~~construction of the ELEMENT plant.

Plant Nutrient Group

Three months ended September 30,
(in thousands) 2018 2017
Sales and merchandising revenues $ 104,188
$ 103,620
Cost of sales and merchandising revenues 88,646
86,271
Gross profit 15,542
17,349
Operating, administrative and general expenses 22,829
22,086
Interest expense (income) 1,315
1,561
Other income (expense), net 626
(1,622 )
Income (loss) before income taxes $ (7,976 ) $ (7,920 )

Operating results for the Plant Nutrient Group ~~were flat~~increased by $0.8 million compared to the same period in the prior year. Sales and merchandising revenues increased $0.6 million which was more than offset by an increase in cost of sales and merchandising revenues of $2.4 million. This led to a decrease in gross profit of $1.8 million. While there was an 10% reduction in volume year over year, much of the shortfall in gross profit is the result of continued margin compression for specialty nutrients.

~~Operating, administrative and general expenses increased $0.7 million due an increase in amortization from capitalized software.~~

~~Other income is $2.2 million higher due to a legal settlement of $2.1 million paid in the prior year.~~

~~Rail Group~~

Three months ended September 30,
(in thousands) 2018 2017
Sales and merchandising revenues $ 43,112
$ 43,093
Cost of sales and merchandising revenues 28,362
29,671
Gross profit 14,750
13,422
Operating, administrative and general expenses 6,636
6,246
Interest expense (income) 2,602
1,742
Other income (expense), net 220
693
Income (loss) before income taxes $ 5,732
$ 6,127

Operating results declined $0.4 million from the same period last year while Sales and merchandising revenues remained flat. Leasing revenues increased by approximately $1.4 million due to higher utilization and repair and other revenues increased $0.3decreased $32.5 million. This was ~~offset~~driven by a significant decrease in ~~car sales revenue of $2.1 million as we sold fewer cars than~~primary and specialty ton

volumes. These decreases are due to unfavorable weather conditions when compared to the prior year. Cost of sales and merchandising revenues decreased ~~$1.3~~by $34.2 million due to the decrease in sales volumes, improved cost containment, operational efficiency and product mix. While volumes decreased, margins improved from the prior year and led to an increased gross profit of $1.6 million.

Interest expense increased $0.7 million from carrying higher levels of inventories due to the wet weather that delayed and reduced planting.

Rail Group

Operating results increased $2.2 million from the same period last year while sales and merchandising revenues increased $1.6 million. This increase was driven by a $2.1 million increase in leasing revenues from more cars on lease. This increase was partially offset from decreased car sale revenues of $0.5 million as the Company sold more cars in the second quarter of 2018. Cost of sales and merchandising increased $0.4 million compared to the prior year due to ~~lower car sales, in addition to lower freight and storage costs, as we had on average fewer idle cars than the prior year quarter.~~higher depreciation expense. As a result, gross profit increased ~~$1.3~~$1.2 million compared to last ~~year.~~

~~Interest expense increased $0.9 million as a result of the revolving asset-based loan and impact of adopting the new revenue recognition standard.~~

~~Other~~

Three months ended September 30,
(in thousands) 2018 2017
Sales and merchandising revenues $ —
$ 738
Cost of sales and merchandising revenues —
542
Gross profit —
196
Operating, administrative and general expenses 7,083
7,673
Interest expense (income) (83 ) 210
Other income (expense), net 4,943
5,663
Income (loss) before income taxes $ (2,057 ) $ (2,024 )

Sales and merchandising revenues decreased $0.7 million, cost of sales and merchandising revenues decreased $0.5 million and gross profit decreased $0.2 million. These decreases are a result of the retail business winding down operations in the prior year.

Operating, administrative and general expenses ~~decreased $0.6 million. We incurred $3.5~~increased $1.9 million ~~of transaction~~driven by increased costs related to ~~the merger with LTG which was partially offset by reduction in health care claim costs. Additionally,~~opening and closing repair shops and increased labor ~~severance, benefits~~ and ~~other operating expenses decreased~~workers’ compensation expenses. The prior period results also include an impairment charge on idle fleet assets

Interest expense increased $1.5 million due to ~~the shutdown of the retail business as these costs were incurred in the third quarter of 2017 but not incurred in the second quarter of 2018.~~higher debt balances and rising interest rates.

Other ~~income, net decreased by $0.7 million. Income for 2018 includes $3.9~~

Operating, administrative and general expenses increased $1.7 million ~~of gains related~~due to favorable benefit costs in the ~~sale of an investment and an increase in value of $1.2 million related to another investment, while 2017 includes $5.7 million of gains related to the sale of retail stores.~~prior year.

Income Taxes

For the three months ended ~~September~~June 30, ~~2018,~~2019, the Company recorded income tax ~~benefit~~expense of ~~$1.8~~$11.0 million at an effective rate of ~~48.5%~~27.2%. In ~~2017,~~2018, the Company recorded an income tax expense of ~~$2.4~~$7.7 million at an effective tax rate of ~~47.4%~~26.6%. The ~~net~~ increase in effective tax rate ~~resulted~~for the three months ended June 30, 2019 as compared to the same period last year was primarily attributed to the impacts of nondeductible compensation and noncontrolling interest, partially offset by benefits from ~~the current period loss before~~ income taxes discrete net tax benefits from provision to return items including transition tax, and additional tax benefits for prior year amendments for federal tax credits. This was offset by the reduction of the U.S. corporate tax rate from 35% to 21% as a result of the U.S. tax reform.on foreign earnings.

Comparison of the ~~Nine~~six months ended ~~September~~June 30, ~~2018~~2019 with the ~~Nine~~six months ended ~~September~~June 30, ~~2017:~~2018:

~~Grain Group~~


	Nine months ended September 30,				Six months ended June 30, 2019
(in thousands)	2018		2017		Trade			Ethanol			Plant Nutrient		Rail		Other			Total
Sales and merchandising revenues	$	986,202	$	1,464,588	$	3,364,326		$	453,974		$	399,102	$	84,431	$	—		$	4,301,833
Cost of sales and merchandising revenues	908,833		1,378,176		3,192,491			445,854			339,370		53,726		—			4,031,441
Gross profit	77,369		86,412		171,835			8,120			59,732		30,705		—			270,392
Operating, administrative and general expenses	77,669		78,904		140,411			8,646			44,248		15,891		11,071			220,267
Asset impairment	1,564		—		3,081			—			—		—		—			3,081
Interest expense (income)	9,015		6,921		21,158			(1,730		)	4,647		7,860		(298		)	31,637
Equity in earnings (losses) of affiliates, net	9,909		864		(1,745		)	3,107			—		—		—			1,362
Other income (expense), net	2,198		3,046		828			278			1,137		538		1,268			4,049
Income (loss) before income taxes	$	1,228	$	4,497	6,268			4,589			11,974		7,492		(9,505		)	20,818
Income (loss) attributable to the noncontrolling interests					—			(632		)	—		—		—			(632		)
Income (loss) before income taxes, net of noncontrolling interests attributable to The Andersons, Inc.					$	6,268		$	5,221		$	11,974	$	7,492	$	(9,505	)	$	21,450



	Six months ended June 30, 2018
(in thousands)	Trade		Ethanol			Plant Nutrient		Rail		Other			Total
Sales and merchandising revenues	$	641,126	$	375,422		$	438,723	$	91,870	$	—		$	1,547,141
Cost of sales and merchandising revenues	582,015		365,868			379,319		65,760		—			1,392,962
Gross profit	59,111		9,554			59,404		26,110		—			154,179
Operating, administrative and general expenses	52,265		5,932			41,381		12,094		12,438			124,110
Asset impairment	1,564		—			—		4,708		—			6,272
Interest expense (income)	6,892		(314		)	3,082		5,086		78			14,824
Equity in earnings (losses) of affiliates, net	7,497		5,879			—		—		—			13,376
Other income (expense), net	1,573		138			1,274		691		838			4,514
Income (loss) before income taxes	7,460		9,953			16,215		4,913		(11,678		)	26,863
Income (loss) attributable to the noncontrolling interests	—		(398		)	—		—		—			(398		)
Income (loss) before income taxes, net of noncontrolling interests attributable to The Andersons, Inc.	$	7,460	$	10,351		$	16,215	$	4,913	$	(11,678	)	$	27,261

Trade Group

Operating results for the ~~Grain~~Trade Group ~~declined~~decreased by ~~$3.3~~$1.2 million compared to the results of the same period last year. Sales and merchandising revenues ~~decreased $478.4~~increased $2,723.2 million ~~which was largely offset by a decrease in~~and cost of sales and merchandising revenues ~~of $469.3~~increased $2,610.5 million for ~~a decrease~~an increase in net gross profit of ~~$9.0~~$112.7 million. ~~The adoption of ASC 606 led to a decrease in revenue of $515.4 million and an equal offsetting decrease to cost of sales related primarily to grain origination revenues.~~ The gross profit ~~decrease~~increase was ~~driven by mark-to-market changes on our grain inventory~~a direct result of acquiring LTG and Thompsons.

Operating, administrative and general expenses increased $88.1 million. The acquisition of the remaining equity in LTG and Thompsons accounted for $80.4 million of this increase. Included in the ~~third quarter.~~

~~In the second quarter~~increased expenses are several purchase accounting related items, such as, $4.8 million of ~~2018, asset impairment charges were recorded for $1.6~~stock-based compensation expense, $4.8 million ~~related to Grain operations in Tennessee. These assets were sold during the third quarter.~~of incremental depreciation and amortization expense and $1.2 million of other transaction-related costs.

Interest expense increased ~~$2.1~~$14.3 million primarily due to the acquisition and rising interest ~~rates and higher average working capital usage.~~rates. The Company also wrote off $0.6 million in deferred financing fees as part of its new credit facility.

Equity in earnings of affiliates ~~improved~~decreased by ~~$9.0~~$9.2 million ~~due~~because LTG and Thompsons are now consolidated entities.

Other income, net includes a $1.1 million loss on the pre-acquisition fair value of our LTG and Thompsons investments compared to ~~better operating results from Lansing Trade Group.~~our previous carrying values. The loss was driven by prior periods' foreign currency translation losses related to Thompsons, previously recorded in Other Comprehensive Income, that were recognized in earnings upon the consolidation of Thompsons.

Ethanol Group

Nine months ended September 30,
(in thousands) 2018 2017
Sales and merchandising revenues $ 568,625
$ 533,515
Cost of sales and merchandising revenues 553,757
518,267
Gross profit 14,868
15,248
Operating, administrative and general expenses 9,966
10,016
Interest expense (income) (1,095 ) (52 )
Equity in earnings (losses) of affiliates, net 10,692
7,229
Other income (expense), net 158
34
Income (loss) before income taxes 16,847
12,547
Income (loss) attributable to noncontrolling interests (175 ) 73
Income (loss) before income taxes attributable to The Andersons, Inc. $ 17,022
$ 12,474

Operating results for the Ethanol Group ~~improved $4.5~~decreased $5.1 million from the same period last year. Sales and merchandising revenues increased ~~$35.1~~$78.6 million ~~compared to the results of the same period last year. This was driven by an 11% increase in ethanol volumes largely attributable to the Albion expansion. Cost~~and cost of sales and merchandising revenues increased ~~as a result~~$80.0 million compared to 2018 results. The incremental sales and corresponding cost of sales are attributable to the LTG acquisition. Lower average sales prices from an oversupply of ethanol in the market resulted in decreased gross profit of $1.4 million.

Operating, administrative and general expenses increased $2.7 million primarily due to an increase in labor and benefits, most of which was from the addition of the ~~increase in sales volume.~~acquired ethanol trading team.

Interest expense ~~is $1.0~~decreased $1.4 million ~~less than~~due to the ~~same period last year as a result~~capitalization of ~~capitalizing~~ interest related to the construction of the ~~bio-refinery facility.~~ELEMENT plant.

Equity in earnings of affiliates increased $3.5 million due to improved results from the unconsolidated ethanol LLCs. Improved earnings are driven by improved DDG values, lower expense and lower productivity savings in the current quarter.

Plant Nutrient Group

Nine months ended September 30,
(in thousands) 2018 2017
Sales and merchandising revenues $ 542,911
$ 514,943
Cost of sales and merchandising revenues 467,965
431,852
Gross profit 74,946
83,091
Operating, administrative and general expenses 64,210
67,727
Goodwill impairment —
42,000
Interest expense (income) 4,397
5,016
Other income (expense), net 1,900
4,578
Income (loss) before income taxes $ 8,239
$ (27,074 )

Operating results for the Plant Nutrient Group ~~improved $35.3~~decreased $4.2 million ~~over~~compared to the same period ~~in the prior year, driven mostly from the nonrecurring goodwill impairment charge of $42.0 recorded~~ in the prior year. Sales and merchandising revenues ~~increased $28.0 million which~~decreased $39.6 million. This was ~~more than offset~~driven by ~~an increase~~a significant decrease in ~~cost~~primary and specialty ton volumes. These decreases are due to unfavorable weather conditions as well as higher volumes in the lawn business that did not recur in the current year. Cost of sales and merchandising revenues ~~of $36.1 million. This~~decreased by $39.9 million due to the decrease in sales. While primary nutrient volumes decreased, improved margins led to ~~an $8.1 million decrease in~~increased gross profit ~~as the result~~ of ~~margin compression, mainly for specialty products and the sale of the Florida Farm Center after the first quarter of 2017.~~$0.3 million.

Operating, administrative and general expenses ~~decreased $3.5~~increased $2.9 million ~~largely~~primarily due an increase in rent and storage and unfavorable costs from low production volumes due to ~~the sale of the Florida farm center locations in 2017.~~weak market conditions.

~~Other income, net decreased $2.7~~Interest expense increased $1.6 million ~~which is~~from carrying higher levels of inventories as a result of ~~a $4.7 million gain on~~ the ~~sale of farm center locations in Florida~~wet weather that delayed and ~~a legal settlement of $2.1 million that were recorded in 2017.~~reduced planting.

Rail Group

Nine months ended September 30,
(in thousands) 2018 2017
Sales and merchandising revenues $ 134,982
$ 121,632
Cost of sales and merchandising revenues 94,122
83,203
Gross profit 40,860
38,429
Operating, administrative and general expenses 18,730
17,141
Asset impairment 4,708
—
Interest expense (income) 7,688
5,487
Other income (expense), net 911
2,264
Income (loss) before income taxes $ 10,645
$ 18,065

Operating results ~~declined $7.4~~for the Rail Group increased $2.6 million from the same period ~~last~~in the prior year. ~~Sales~~While operating results improved sales and merchandising revenues ~~increased $13.4~~decreased $7.4 million. ~~Revenue from~~This decrease in revenues was driven by a decrease of $14.3 million in car ~~sales increased~~sale revenues as the Company sold more cars in 2018, partially offset by ~~$9.5~~an increase of $5.1 million ~~including cars scrapped, and~~in leasing revenues ~~increased by $6.0 million~~ due to higher ~~utilization. These were offset by a $2.1~~utilization rates with more cars on lease and $1.8 million ~~decrease~~ in repair and other revenues. Cost of sales and merchandising revenues ~~increased $10.9~~decreased $12.0 million compared to the prior year ~~primarily~~ due to ~~an increase~~lower car sales and improved margins in ~~car sales. As a result, gross profit increased $2.4 million compared to last year.~~services.

Operating, administrative and general expenses increased ~~primarily~~$3.8 million driven by a $1.1 million increase in labor and benefits due to the growth of the repair business and increased costs related to opening and closing repair shops and increased labor and workers’ compensation expenses. The prior period results also include an ~~increase in depreciation from cars added to the balance sheet as~~impairment charge on idle fleet assets. As a result, ~~of adopting the new revenue accounting standard.~~gross profit increased $4.6 million compared to last year.

~~Asset impairment charges were recorded for $4.7~~Interest expense increased $2.8 million ~~from a decision~~due to ~~scrap idle, out-of-favor cars during the second quarter of 2018.~~rising interest rates and higher debt balances.

Other ~~income decreased $1.4 million, as end of lease settlements that occurred in the first quarter of 2017 did not recur.~~

~~Other~~

Nine months ended September 30,
(in thousands) 2018 2017
Sales and merchandising revenues $ —
$ 47,595
Cost of sales and merchandising revenues —
36,812
Gross profit —
10,783
Operating, administrative and general expenses 19,521
45,454
Interest expense (income) (5 ) 100
Other income (expense), net 5,782
7,106
Income (loss) before income taxes $ (13,734 ) $ (27,665 )

Sales and merchandising revenues decreased $47.6 million, cost of sales and merchandising revenues decreased $36.8 million and gross profit decreased $10.8 million. These decreases are a result of the retail business partially operating in the first six months of 2017 but no longer operational in 2018.

Operating, administrative and general expenses decreased ~~$25.9~~$1.4 million ~~primarily~~ due to ~~a decrease in labor,~~ severance ~~benefits~~ and other ~~operating expenses that were incurred~~IT implementation costs reflected in ~~the first nine months of 2017 as a result of the shutdown of the retail business, but~~2018 which did not ~~incurred~~recur in ~~2018.~~

Other income, net decreased by $1.4 million. Income for 2018 includes $3.9 million of gains related to the sale of an investment and an increase in value of $1.2 million related to another investment, while 2017 includes $5.7 million in gains related to the sale of retail stores and $1.2 million for the sale of fixtures.2019.

Income Taxes

For the ~~nine~~six months ended ~~September~~June 30, 2019, the Company recorded income tax expense of $5.6 million at an effective rate of 26.7%. In 2018, the Company recorded an income tax expense of ~~$5.7~~$7.4 million ~~was recorded~~ at an effective tax rate of ~~24.4%. In 2017, income tax expense of $7.5 million was recorded at an effective rate of (38.2)%~~27.7%. The ~~change~~decrease in ~~2018~~ effective tax rate ~~is primarily due~~for the six months ended June 30, 2019 as compared to the ~~benefits of tax reform as well as a nondeductible goodwill impairment charge that~~same period last year was ~~recorded~~primarily attributed to income taxes on foreign earnings and discrete activity in the prior ~~year.~~period for a statutory merger that did not recur in the current period.

Liquidity and Capital Resources

Working Capital

At ~~September~~June 30, ~~2018~~2019, the Company had working capital of ~~$187.6~~$464.1 million. The following table presents changes in the components of current assets and current liabilities:


(in thousands)	September 30, 2018		September 30, 2017		Variance			June 30, 2019		June 30, 2018		Variance
Current Assets:
Cash and cash equivalents	$	16,820	$	24,478	$	(7,658	)	$	11,087	$	58,611	$	(47,524	)
Accounts receivable, net	206,380		196,192		10,188			712,294		218,476		493,818
Inventories	490,331		475,602		14,729			753,641		495,611		258,030
Commodity derivative assets – current	76,861		45,202		31,659			233,015		54,259		178,756
Other current assets	58,374		53,958		4,416			58,439		42,648		15,791
Assets held for sale	29,527		8,383		21,144			151		9,816		(9,665		)
Total current assets	878,293		803,815		74,478			1,768,627		879,421		889,206
Current Liabilities:
Short-term debt	132,000		19,000		113,000			426,125		185,000		241,125
Trade and other payables	344,406		381,359		(36,953		)	527,250		282,221		245,029
Customer prepayments and deferred revenue	38,242		29,520		8,722			49,761		16,103		33,658
Commodity derivative liabilities – current	91,403		38,578		52,825			69,369		85,160		(15,791		)
Accrued expenses and other current liabilities	68,925		67,064		1,861			165,383		74,512		90,871
Current maturities of long-term debt	15,677		53,972		(38,295		)	66,678		13,700		52,978
Total current liabilities	690,653		589,493		101,160			1,304,566		656,696		647,870
Working Capital	$	187,640	$	214,322	$	(26,682	)	$	464,061	$	222,725	$	241,336

~~September~~June 30, ~~2018~~2019 current assets increased ~~$74.5~~$889 million in comparison to ~~those of September~~June 30, ~~2017.~~2018. This increase was ~~primarily due~~related to ~~increases in accounts receivable, inventories,~~the Trade Group as the current assets ~~held~~balance for ~~sale and commodity derivative assets. Accounts receivable~~the group increased by $914 million from the prior year due to the amount and timing of sales in the Grain Group. The increase in inventory relates to an increase in Plant Nutrients inventory as a result of holding inventory for appreciation, which was partially offset by a decrease in Grain inventory due to the sale of Tennessee locations. Assets held for sale increased primarily as a result of the decision to sell barges in the Rail Group. Current commodity derivative assets and liabilities, 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, show a net decrease.LTG acquisition. See also the discussion below on additional sources and uses of cash for an understanding of the decrease in cash from prior year.

Current liabilities increased ~~$101.2~~$648 million compared to the prior year ~~primarily due to increases in short-term debt and commodity derivative liabilities. Current maturities of long-term debt decreased~~ as ~~debt was paid down using short-term debt. Overall, debt~~the Trade Group current liabilities increased due of timing of payables and purchases of fixed assets in the rail group. Additionally, trade and other payables decreased due to higher hold pay requests from vendors and a decrease in payables related to Tennesseeby $366 million due to the ~~sale~~acquisition of ~~these locations.~~LTG, and Corporate current liabilities increased by $277 million from the increased debt related to the acquisition detailed in Note 4, Debt.

Sources and Uses of Cash

Operating Activities

Our operating activities ~~provided~~used cash of ~~$28.8~~$84.8 million and ~~$60.7~~$43.9 million in the first ~~nine~~six months of ~~2018~~2019 and ~~2017,~~2018, respectively. The ~~decrease~~increase in cash ~~provided~~used was due to changes in working capital, as discussed above. ~~This was partially offset by a $16.2 million decrease due to lower dividends from equity affiliates.~~

Investing Activities

Investing activities used cash of ~~$115.9~~$271.4 million through the first ~~nine~~six months of ~~2018~~2019 compared to cash used of ~~$64.8~~$46.4 million in the prior year. Cash used for the ~~purchases~~acquisition of ~~property, plant, equipment, and software~~business increased $147.7 million due to ~~costs associated with~~ the construction of the bio-refinery in the first nine months of 2018. This was partially offset by $15.7 million proceeds from the sale of assets from the sale of three Tennessee grain locations, corporate investments and proceeds from scrapping project in the Rail Group.

LTG acquisition.

In ~~2018,~~2019, we expect to spend up to a total of ~~$120~~$160 million for the purchase of railcars and related leases and capitalized modifications of railcars. We also expect these purchases to be funded from sales and dispositions of railcars or non-recourse debt of approximately ~~$100~~$135 million during the year.

In addition to the construction of the bio-refinery, total capital spending for ~~2018~~2019 on property, plant and equipment in our base business excluding rail leasing activity, but inclusive of information technology spending is expected to be approximately ~~$60~~$180 million.

Financing Activities

Financing activities provided cash of ~~$69.0~~$344.4 million and ~~used $34.0~~$114.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. This was largely due to an increase in proceeds from new debt issued to finance the LTG acquisition and ~~an increase in proceeds from noncontrolling interest owner related to our investment in the bio-refinery.~~higher seasonal working capital.

We are party to borrowing arrangements with a syndicate of banks that provide a total of ~~$1,085.0~~$1,628.4 million in borrowings. This amount includes ~~$15.0 million of debt of The Andersons Denison Ethanol LLC,~~ $70 million of debt of ELEMENT LLC, ~~and $200.0~~$200 million of debt of The Andersons Railcar Leasing Company LLC, that is non-recourse to the Company, and $183.4 million of debt of Thompsons, that is non-recourse to the Company. Of that total, we had ~~$823.1~~$1,006.1 million available for borrowing at ~~September~~June 30, ~~2018. Peak short-term~~2019. Consistent with the higher sales volumes as a result of the acquisition borrowings ~~to date were $555 million on April 12, 2018. Typically, our highest borrowing occurs in the late winter and early spring due to seasonal inventory requirements in our fertilizer and grain businesses.~~have also increased.

We paid ~~$14.0~~$11.0 million in dividends in the ~~nine~~six months of ~~2018~~2019 compared to ~~$13.5~~$9.3 million in the prior year. We paid $0.17 per common share for the dividends paid in January and April of 2019 and $0.165 per common share for the dividends paid in January and April ~~and July 2018 and $0.16 per common share for the dividends paid in January, April and July 2017.~~of 2018. On ~~August 24, 2018~~May 10, 2019 we declared a cash dividend of ~~$0.165~~$0.17 per common share payable on ~~October~~July 22, ~~2018~~2019 to shareholders of record on ~~October~~July 1, ~~2018.~~2019.

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 ~~September~~June 30, ~~2018.~~2019. 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 and railcar assets.

Because we are a significant borrower of short-term debt in peak seasons and the majority of this is variable rate debt, increases in interest rates could have a significant impact on our profitability. However, much of this risk is mitigated by hedging instruments that are in place. 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 could 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.

Contractual Obligations

Future payments due under contractual obligations at June 30, 2019 are as follows:



	Payments Due by Period
(in thousands)	2019 (remaining six months)		2020-2021		2022-2023		��	After 2023		Total
Long-term debt, recourse	$	44,549	$	133,841	$	313,459		$	332,325	$	824,174
Long-term debt, non-recourse	4,829		130,859		9,961			6,370		152,019
Interest obligations (a)	41,022		64,013		38,650			30,989		174,674
Operating leases (b)	30,678		34,749		12,294			8,688		86,409
Purchase commitments (c)	2,229,633		665,976		1,395			—		2,897,004
Other long-term liabilities (d)	3,317		6,711		6,804			24,695		41,527
Construction commitment (e)	39,747		—		—			—		39,747
Total contractual cash obligations	$	2,393,775	$	1,036,149	$	382,563		$	403,067	$	4,215,554

(a) Future interest obligations are calculated based on interest rates in effect as of June 30, 2019 for the Company's variable rate debt and do not include any assumptions on expected borrowings, if any, under the short-term line of credit.

(b) Approximately 39% of the operating lease commitments above relate to Rail Group assets that the Company leases from financial intermediaries.

(c) Includes the amounts related to purchase obligations in the Company's operating units, including $2,582 million for the purchase of commodities, including grain from producers and $235 million for the purchase of ethanol from the unconsolidated ethanol LLCs. There are also forward commodities sales contracts, including those for grain and ethanol, to consumers and traders and the net of these forward contracts are offset by exchange-traded futures and options contracts or over-the-counter contracts. See the narrative description of businesses for the Grain and Ethanol Groups in Item 1 of 2018 Annual Report on Form 10-K for further discussion.

(d) Other long-term liabilities include estimated obligations under our retiree healthcare programs and principal and interest payments for the financing arrangement on our headquarters. Obligations under the retiree healthcare programs are not fixed commitments and will vary depending on various factors, including the level of participant utilization and inflation. Our estimates of postretirement payments through 2023 have considered recent payment trends and actuarial assumptions.

(e) In 2018, the Company entered into an agreement to construct a bio-refinery. The company expects to contribute $70 million in 2019 for the construction of this plant.

At June 30, 2019, we had standby letters of credit outstanding of $32.9 million.

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.

The following table describes our Rail Group asset positions at ~~September~~June 30, ~~2018:~~2019:



Method of Control	Financial Statement	Units
Owned - railcars available for sale	On balance sheet – current	~~665~~289
Owned - railcar assets leased to others	On balance sheet – non-current	~~18,853~~21,363
Railcars leased from financial intermediaries	Off balance sheet	~~2,502~~2,101
Railcars in non-recourse arrangements	Off balance sheet	~~326~~170
Total Railcars		~~22,346~~23,923
Locomotive assets leased to others	On balance sheet – non-current	24
Locomotives leased from financial intermediaries	Off balance sheet	4
Total Locomotives		28
Barge assets leased from financial intermediaries	Off balance sheet	15
Total Barges		15

In addition, we manage ~~750~~1,027 railcars for third party customers or owners for which we receive a ~~fee and we classified 69 railcars and 50 barges as held for sale as of September 30, 2018, all of which are excluded from the table above.~~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, ~~2017.~~2018. There were no material changes in market risk, specifically commodity and interest rate risk during the quarter ended ~~September~~June 30, ~~2018.~~2019.

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 ~~September~~June 30, ~~2018,~~2019, 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, ~~2017.~~2018. 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 acquired the remaining equity of LTG and Thompsons during the first quarter of 2019. In connection with the integration of LTG and Thompsons, the Company will implement enhancements to its internal control over financial reporting as necessary. Additionally, 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 ~~2017~~2018 Form 10-K (Item 1A).

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



Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 2019	704	32.32	—	—
May 2019	—	—	—	—
June 2019	—	—	—	—
Total	704	32.32	—	—

(1) During the three months ended June 30, 2019, the company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

(2) No ~~sales~~shares were purchased as part of publicly announced plans or ~~repurchases~~programs.

Item 4. Mine Safety Disclosure

We are committed to protecting the occupational health and well-being of ~~shares~~each of our employees. Safety is one of our core values and we strive to ensure that safety is the first priority for all employees. Our internal objective is to achieve zero injuries and incidents across the Company by focusing on proactively identifying needed prevention activities, establishing standards and evaluating performance to mitigate any potential loss to people, equipment, production and the environment. We have ~~occurred~~implemented employee training that is geared toward maintaining a high level of awareness and knowledge of safety and health issues in ~~2018.~~the work environment. We believe that through these policies we have developed an effective safety management system.

Under the Dodd-Frank Act, each operator of a coal or other mine is required to include certain mine safety results within its periodic reports filed with the SEC. As required by the reporting requirements included in §1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, the required mine safety results regarding certain mining safety and health matters for each of our

mine locations that are covered under the scope of the Dodd-Frank Act are included in Exhibit 95 of Item 6. Exhibits of this Quarterly Report on Form 10-Q.

Item 6. Exhibits

(a) Exhibits




No.		Description

~~2.1~~10.1		Form of Performance Share Unit Agreement and Plan of Merger among The Andersons, Inc., Brisket Merger Sub 1, LLC, Brisket Merger Sub 2, LLC, Brisket Merger Sub 3, LLC, LGC Group, Inc. and Lansing Trade Group, LLC, dated October 15, 2018 (Incorporated by reference to Form 8-K filed October 16, 2018)- Earnings Per Share (filed herewith).

1210.2		~~Computation~~Form of ~~Ratio of Earnings to Fixed Charges~~Restricted Share Award - Non-Employee Directors Agreement (filed herewith).

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

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

32.1		Certifications Pursuant to 18 U.S.C. Section 1350 (filed herewith).

95		Mine Safety Disclosure (filed herewith).

101		Financial Statements from the interim report on Form 10-Q of The Andersons, Inc. for the period ended ~~September~~June 30, ~~2018,~~2019, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (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: ~~November 6, 2018~~August 8, 2019		By /s/ Patrick E. Bowe
		Patrick E. Bowe
		Chief Executive Officer (Principal Executive Officer)

Date: ~~November 6, 2018~~August 8, 2019		By /s/ Brian A. Valentine
		Brian A. Valentine
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Exhibit Index

The Andersons, Inc.




No.		Description

~~2.1~~10.1		Form of Performance Share Unit Agreement and Plan of Merger among The Andersons, Inc., Brisket Merger Sub 1, LLC, Brisket Merger Sub 2, LLC, Brisket Merger Sub 3, LLC, LGC Group, Inc. and Lansing Trade Group, LLC, dated October 15, 2018 (Incorporated by reference to Form 8-K filed October 16, 2018)- Earnings Per Share (filed herewith).

1210.2		~~Computation~~Form of ~~Ratio of Earnings to Fixed Charges~~Restricted Share Award - Non-Employee Directors Agreement (filed herewith).

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

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

32.1		Certifications Pursuant to 18 U.S.C. Section 1350 (filed herewith).

95		Mine Safety Disclosure (filed herewith).

101		Financial Statements from the interim report on Form 10-Q of The Andersons, Inc. for the period ended ~~September~~June 30, ~~2018,~~2019, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (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.

4947



(in thousands)	Contract liabilities
Balance at January 1, 2018	$	25,520
Balance at March 31, 2018	67,715
Balance at June 30, 2018	10,047
Balance at September 30, 2018	29,836



	Balance Sheet
	September 30, 2018
(in thousands)	As Reported		ASC 606 Impact			Pro forma as if the previous accounting guidance was in effect
Cash and cash equivalents and restricted cash	$	16,820	$	—		$	16,820
Accounts receivable, net	206,380		—			206,380
Inventories	490,331		178			490,509
Commodity derivative assets - current	76,861		—			76,861
Other current assets	87,901		(268		)	87,633
Other noncurrent assets	374,044		—			374,044
Rail Group assets leased to others, net	464,776		(23,337		)	441,439
Property, plant and equipment, net	434,505		—			434,505
Total assets	2,151,618		(23,427		)	2,128,191
Short-term debt and current maturities of long-term debt	147,677		(3,772		)	143,905
Trade and other payables and accrued expenses and other current liabilities	413,331		—			413,331
Commodity derivative liabilities - current	91,403		—			91,403
Customer prepayments and deferred revenue	38,242		—			38,242
Commodity derivative liabilities - noncurrent and Other long-term liabilities	33,163		—			33,163
Employee benefit plan obligations	25,356		—			25,356
Long-term debt, less current maturities	437,280		(31,018		)	406,262
Deferred income taxes	122,523		2,869			125,392
Total liabilities	1,308,975		(31,921		)	1,277,054
Retained earnings	628,676		8,494			637,170
Common shares, additional paid-in-capital, treasury shares, accumulated other comprehensive loss and noncontrolling interests	213,967		—			213,967
Total equity	842,643		8,494			851,137
Total liabilities and equity	$	2,151,618	$	(23,427	)	$	2,128,191



	Statement of Operations
	Three months ended September 30, 2018
(in thousands)	As Reported			ASC 606 Impact			Pro forma as if the previous accounting guidance was in effect
Sales and merchandising revenues	$	685,579		$	173,183		$	858,762
Cost of sales and merchandising revenues	631,715			173,706			805,421
Gross profit	53,864			(523		)	53,341
Operating, administrative and general expenses	65,986			—			65,986
Asset impairment	—			—			—
Interest expense	5,176			(387		)	4,789
Other income:
Equity in earnings of affiliates, net	7,225			—			7,225
Other income, net	6,434			—			6,434
Income (loss) before income taxes	(3,639		)	(136		)	(3,775		)
Income tax provision	(1,764		)	(34		)	(1,798		)
Net income (loss)	(1,875		)	(102		)	(1,977		)
Net income attributable to the noncontrolling interests	223			—			223
Net income (loss) attributable to The Andersons, Inc.	$	(2,098	)	$	(102	)	$	(2,200	)