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 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.)~~



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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically ~~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~~(§ 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.~~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, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated 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 ~~26, 2018.~~25, 2019.

THE ANDERSONS, INC.

INDEX



	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets – September 30, ~~2018,~~2019, December 31, ~~2017~~2018 and September 30, ~~2017~~2018	3
Condensed Consolidated Statements of Operations – Three and ~~nine~~Nine months ended September 30, ~~2018~~2019 and ~~2017~~2018	5
Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and ~~nine~~Nine months ended September 30, ~~2018~~2019 and ~~2017~~2018	6
Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, ~~2018~~2019 and ~~2017~~2018	7
Condensed Consolidated Statements of Equity – Three and Nine months ended September 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	3435
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4547
Item 4. Controls and Procedures	4547
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	4648
Item 1A. Risk Factors	4648
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4648
Item 4. Mine Safety Disclosure	48
Item 6. Exhibits	4749

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		September 30, 2019		December 31, 2018		September 30, 2018
Assets
Current assets:
Cash and cash equivalents	$	16,820	$	34,919	$	24,478
Cash, cash equivalents and restricted cash							$	21,299	$	22,593	$	16,820
Accounts receivable, net	206,380		183,238		196,192		523,110		207,285		206,380
Inventories (Note 2)	490,331		648,703		475,602
Commodity derivative assets – current (Note 5)	76,861		30,702		45,202
Inventories (Note 2)							741,086		690,804		490,331
Commodity derivative assets – current (Note 5)							120,510		51,421		76,861
Assets held for sale							573		392		29,527
Other current assets	58,374		63,790		53,958		82,197		50,703		58,374
Assets held for sale	29,527		37,859		8,383
Total current assets	878,293		999,211		803,815		1,488,775		1,023,198		878,293
Other assets:
Commodity derivative assets – noncurrent (Note 5)	766		310		245
Commodity derivative assets – noncurrent (Note 5)							1,943		480		766
Goodwill	6,024		6,024		23,105		135,872		6,024		6,024
Other intangible assets, net	100,730		112,893		113,371		181,100		99,138		100,730
Right of use assets, net							70,773		—		—
Equity method investments							117,348		242,326		240,350
Other assets, net	26,174		12,557		11,852		19,499		22,341		26,174
Equity method investments	240,350		223,239		215,031
	374,044		355,023		363,604
Rail Group assets leased to others, net (Note 3)	464,776		423,443		377,393
Property, plant and equipment, net (Note 3)	434,505		384,677		419,348
Total other assets							526,535		370,309		374,044
Rail Group assets leased to others, net (Note 3)							565,746		521,785		464,776
Property, plant and equipment, net (Note 3)							703,396		476,711		434,505
Total assets	$	2,151,618	$	2,162,354	$	1,964,160	$	3,284,452	$	2,392,003	$	2,151,618

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			September 30, 2019			December 31, 2018			September 30, 2018
Liabilities and equity
Current liabilities:
Short-term debt (Note 4)	$	132,000		$	22,000		$	19,000
Short-term debt (Note 4)										$	138,249		$	205,000		$	132,000
Trade and other payables	344,406			503,571			381,359			594,708			462,535			344,406
Customer prepayments and deferred revenue	38,242			59,710			29,520			35,274			32,533			38,242
Commodity derivative liabilities – current (Note 5)	91,403			29,651			38,578
Commodity derivative liabilities – current (Note 5)										67,606			32,647			91,403
Accrued expenses and other current liabilities	68,925			69,579			67,064			162,749			79,046			68,925
Current maturities of long-term debt (Note 4)	15,677			54,205			53,972
Current maturities of long-term debt (Note 4)										66,899			21,589			15,677
Total current liabilities	690,653			738,716			589,493			1,065,485			833,350			690,653
Long-term lease liabilities										47,299			—			—
Commodity derivative liabilities – noncurrent (Note 5)										1,960			889			2,548
Employee benefit plan obligations										21,311			22,542			25,356
Long-term debt, less current maturities (Note 4)										968,117			496,187			437,280
Deferred income taxes										128,003			130,087			122,523
Other long-term liabilities	30,615			33,129			34,407			40,927			32,184			30,615
Commodity derivative liabilities – noncurrent (Note 5)	2,548			825			902
Employee benefit plan obligations	25,356			26,716			36,356
Long-term debt, less current maturities (Note 4)	437,280			418,339			371,315
Deferred income taxes	122,523			121,730			181,876
Total liabilities	1,308,975			1,339,455			1,214,349			2,273,102			1,515,239			1,308,975
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; 33,336 shares issued at 9/30/2019, 29,430 shares issued at 12/31/2018 and 9/30/2018)										137			96			96
Preferred shares, without par value (1,000 shares authorized; none issued)	—			—			—			—			—			—
Additional paid-in-capital	222,368			224,622			223,814			335,916			224,396			222,368
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		)
Treasury shares, at cost (213, 936 and 943 shares at 9/30/2019, 12/31/2018 and 9/30/2018, respectively)										(7,582		)	(35,300		)	(35,039		)
Accumulated other comprehensive loss	(4,364		)	(2,700		)	(9,682		)	(7,620		)	(6,387		)	(4,364		)
Retained earnings	628,676			633,496			568,438			641,607			647,517			628,676
Total shareholders’ equity of The Andersons, Inc.	811,737			815,202			741,761			962,458			830,322			811,737
Noncontrolling interests	30,906			7,697			8,050			48,892			46,442			30,906
Total equity	842,643			822,899			749,811			1,011,350			876,764			842,643
Total liabilities and equity	$	2,151,618		$	2,162,354		$	1,964,160		$	3,284,452		$	2,392,003		$	2,151,618

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 September 30,						Nine months ended September 30,
	2018			2017		2018			2017			2019			2018			2019			2018
Sales and merchandising revenues	$	685,579		$	836,595	$	2,232,720		$	2,682,273		$	1,982,755		$	685,579		$	6,284,588		$	2,232,720
Cost of sales and merchandising revenues	631,715			766,924		2,024,677			2,448,310			1,873,614			631,715			5,905,055			2,024,677
Gross profit	53,864			69,671		208,043			233,963			109,141			53,864			379,533			208,043
Operating, administrative and general expenses	65,986			68,153		190,096			219,242			107,118			65,986			327,385			190,096
Asset impairment	—			—		6,272			—			—			—			3,081			6,272
Goodwill impairment	—			—		—			42,000
Interest expense	5,176			5,384		20,000			17,472			13,975			5,176			45,613			20,000
Other income:
Equity in earnings (loss) of affiliates, net	7,225			3,586		20,601			8,093			(3,728		)	7,225			(2,367		)	20,601
Other income, net	6,434			5,285		10,949			17,028
Other income (loss), net												2,598			6,434			6,649			10,949
Income (loss) before income taxes	(3,639		)	5,005		23,225			(19,630		)	(13,082		)	(3,639		)	7,736			23,225
Income tax provision (benefit)	(1,764		)	2,389		5,668			7,505			(7,212		)	(1,764		)	(1,657		)	5,668
Net income (loss)	(1,875		)	2,616		17,557			(27,135		)	(5,870		)	(1,875		)	9,393			17,557
Net income (loss) attributable to the noncontrolling interests	223			83		(175		)	73			(1,633		)	223			(2,265		)	(175		)
Net income (loss) attributable to The Andersons, Inc.	$	(2,098	)	$	2,533	$	17,732		$	(27,208	)	$	(4,237	)	$	(2,098	)	$	11,658		$	17,732
Per common share:
Basic earnings (loss) attributable to The Andersons, Inc. common shareholders	$	(0.07	)	$	0.09	$	0.63		$	(0.96	)	$	(0.13	)	$	(0.07	)	$	0.36		$	0.63
Diluted earnings (loss) attributable to The Andersons, Inc. common shareholders	$	(0.07	)	$	0.09	$	0.62		$	(0.96	)	$	(0.13	)	$	(0.07	)	$	0.35		$	0.62
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 September 30,						Nine months ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net income (loss)	$	(1,875	)	$	2,616		$	17,557		$	(27,135	)	$	(5,870	)	$	(1,875	)	$	9,393		$	17,557
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			—
Foreign currency translation adjustments (net of income tax of $0, $0, $0 and $0)	993			2,201			(1,280		)	3,674
Change in fair value of convertible preferred securities (net of income tax of $0 for all periods)													—			—			—			(87		)
Change in unrecognized actuarial loss and prior service cost (net of income tax expense (benefit) of $(43), $(38), $(337) and $(139))													(127		)	(129		)	(981		)	(467		)
Cash flow hedge activity (net of income tax of $(946), $40, $(4,121) and $56)													(2,852		)	119			(12,426		)	170
Foreign currency translation adjustments (net of income tax of $0 for all periods)													1,600			993			12,174			(1,280		)
Other comprehensive income (loss)	983			2,311			(1,664		)	2,786			(1,379		)	983			(1,233		)	(1,664		)
Comprehensive income (loss)	(892		)	4,927			15,893			(24,349		)	(7,249		)	(892		)	8,160			15,893
Comprehensive income (loss) attributable to the noncontrolling interests	223			83			(175		)	73			(1,633		)	223			(2,265		)	(175		)
Comprehensive income (loss) attributable to The Andersons, Inc.	$	(1,115	)	$	4,844		$	16,068		$	(24,422	)	$	(5,616	)	$	(1,115	)	$	10,425		$	16,068

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)(In thousands)


	Nine months ended September 30,						Nine months ended September 30,
	2018			2017			2019			2018
Operating Activities
Net income (loss)	$	17,557		$	(27,135	)	$	9,393		$	17,557
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization	67,960			64,546			98,396			67,960
Bad debt expense (recovery)	(436		)	1,076			3,615			(436		)
Equity in (earnings) losses of affiliates, net of dividends	(18,390		)	(2,168		)	2,894			(18,390		)
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							(1,515		)	(5,911		)
Loss (gain) on sales of assets							101			(4,181		)
Stock-based compensation expense	4,898			4,550			11,637			4,898
Goodwill impairment	—			42,000
Deferred federal income tax							(11,671		)	—
Asset impairment	6,272			—			3,081			6,272
Other	(2,626		)	(610		)	3,637			(2,626		)
Changes in operating assets and liabilities:
Accounts receivable	(20,853		)	(334		)	4,879			(20,853		)
Inventories	156,375			200,667			405,620			156,375
Commodity derivatives	18,080			16,073			29,942			18,080
Other assets	127			10,422			18,782			127
Payables and other accrued expenses	(190,042		)	(229,268		)	(259,166		)	(190,042		)
Net cash provided by (used in) operating activities	28,830			60,734			319,625			28,830
Investing Activities
Acquisition of business, net of cash acquired	—			(3,507		)	(149,622		)	—
Purchases of Rail Group assets	(108,054		)	(77,513		)	(68,441		)	(108,054		)
Proceeds from sale of Rail Group assets	47,644			18,368			9,182			47,644
Purchases of property, plant and equipment and capitalized software	(86,694		)	(26,705		)	(125,351		)	(86,694		)
Proceeds from sale of assets	42,307			26,601			851			42,307
Proceeds from returns of investments in affiliates	—			1,339
Purchase of investments	(11,086		)	(4,929		)	(1,490		)	(11,086		)
Other	—			1,470
Net cash provided by (used in) investing activities	(115,883		)	(64,876		)	(334,871		)	(115,883		)
Financing Activities
Net change in short-term borrowings	110,000			(11,059		)	(286,462		)	110,000
Proceeds from issuance of long-term debt	57,000			35,175			811,698			57,000
Proceeds from long-term financing arrangement	—			12,195
Payments of long-term debt	(112,995		)	(54,326		)	(493,886		)	(112,995		)
Proceeds from noncontrolling interest owner	31,115			—			4,714			31,115
Proceeds from sale of treasury shares to employees and directors	—			450
Payments of debt issuance costs	(1,446		)	(2,024		)	(5,649		)	(1,446		)
Dividends paid	(13,976		)	(13,485		)	(16,571		)	(13,976		)
Other	(744		)	(936		)	(1,587		)	(744		)
Net cash provided by (used in) financing activities	68,954			(34,010		)	12,257			68,954
Decrease in cash and cash equivalents	(18,099		)	(38,152		)
Cash and cash equivalents at beginning of period	34,919			62,630
Cash and cash equivalents at end of period	$	16,820		$	24,478
Effect of exchange rates on cash, cash equivalents and restricted cash							1,695			—
Increase (Decrease) in cash, cash equivalents and restricted cash							(1,294		)	(18,099		)
Cash, cash equivalents and restricted cash at beginning of period							22,593			34,919
Cash, cash equivalents and restricted cash at end of period							$	21,299		$	16,820

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 June 30, 2018	$	96	$	223,259		$	(35,561	)	$	(5,347	)	$	635,438		$	29,105		$	846,990
Net income (loss)												(2,098		)	223			(1,875		)
Other comprehensive income (loss)									983									983
Cash received from (paid to) noncontrolling interest			(2,268		)										1,578			(690		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (14 shares)			1,377			522												1,899
Dividends declared ($0.165 per common share)												(4,664		)				(4,664		)
Balance at September 30, 2018	$	96	$	222,368		$	(35,039	)	$	(4,364	)	$	628,676		$	30,906		$	842,643

Balance at June 30, 2019	$	137	$	331,186		$	(6,449	)	$	(6,241	)	$	651,481		$	50,525		$	1,020,639
Net income (loss)												(4,237		)	(1,633		)	(5,870		)
Other comprehensive income (loss)									(1,405		)							(1,405		)
Amounts reclassified from accumulated other comprehensive loss									26									26
Cash received from (paid to) noncontrolling interest			164															164
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (41 shares)			4,566			(1,223		)										3,343
Dividends declared ($0.17 per common share)												(5,547		)				(5,547		)
Restricted share award dividend equivalents						90						(90		)				—
Balance at September 30, 2019	$	137	$	335,916		$	(7,582	)	$	(7,620	)	$	641,607		$	48,892		$	1,011,350



	Nine Months Ended
	Common Shares		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Noncontrolling Interests			Total
Balance at December 31, 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

Balance at December 31, 2018	$	96	$	224,396		$	(35,300	)	$	(6,387	)	$	647,517		$	46,442		$	876,764
Net income (loss)												11,658			(2,265		)	9,393
Other comprehensive income (loss)									(12,719		)							(12,719		)
Amounts reclassified from accumulated other comprehensive loss									11,486									11,486
Cash received from (paid to) noncontrolling interest			164												4,715			4,879
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 (723 shares)			(16,452		)	27,475												11,023
Dividends declared ($0.51 per common share)												(16,606		)				(16,606		)
Stock awards granted due to acquisition	41		127,800															127,841
Restricted share award dividend equivalents			8			243						(251		)				—
Balance at September 30, 2019	$	137	$	335,916		$	(7,582	)	$	(7,620	)	$	641,607		$	48,892		$	1,011,350

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 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”).

The Company had restricted cash of $9.0 million as of September 30, 2019. This restricted cash balance was related to posting collateral for the release of a mortgage on one of the Company's ethanol assets to be contributed into The Andersons Marathon Holdings LLC. The restricted cash is scheduled to be released from escrow in the fourth quarter after the successful completion of the merger and related credit facility. The Company had no restricted cash balances as of December 31, 2018 or September 30, 2018.

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~~but the Company does not plan to ~~adopt this standard but has not done so in the current period.~~do so.

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~~We have evaluated the impact of this new standard on our consolidated financial statements noting it is not ~~historically incurred significant credit losses and does not currently anticipate circumstances that would lead~~expected to ~~a CECL approach differing from the Company's existing allowance estimates in a material way.~~be material. 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		September 30, 2019		December 31, 2018		September 30, 2018
Grain	$	324,232	$	505,217	$	342,837
Grain and other agricultural products							$	560,626	$	527,471	$	324,232
Frac sand and propane							14,592		—		—
Ethanol and co-products	15,419		11,003		12,502		26,218		11,918		15,419
Plant nutrients and cob products	145,363		126,962		114,131		133,839		145,693		145,363
Retail merchandise	—		—		718
Railcar repair parts	5,317		5,521		5,414		5,811		5,722		5,317
	$	490,331	$	648,703	$	475,602
Total Inventories							$	741,086	$	690,804	$	490,331

Inventories on the Condensed Consolidated Balance Sheets at ~~December 31, 2017 and~~ September 30, ~~2017~~2019, do not include ~~1.0 million and 1.0~~2.7 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 December 31, 2018 and September 30, 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		September 30, 2019		December 31, 2018		September 30, 2018
Land	$	29,545	$	22,388	$	23,342	$	39,393	$	29,739	$	29,545
Land improvements and leasehold improvements	68,859		69,127		71,559		95,720		68,826		68,859
Buildings and storage facilities	282,826		284,820		298,951		354,625		284,998		282,826
Machinery and equipment	380,109		373,127		384,422		608,831		393,640		380,109
Construction in progress	65,539		7,502		7,703		54,163		102,394		65,539
	826,878		756,964		785,977		1,152,732		879,597		826,878
Less: accumulated depreciation	392,373		372,287		366,629		449,336		402,886		392,373
	$	434,505	$	384,677	$	419,348
Property, plant and equipment, net							$	703,396	$	476,711	$	434,505

~~Capitalized interest totaled $0.9~~Depreciation expense on property, plant and equipment was $51.0 million and $34.7 million for the nine months ended September 30, ~~2018.~~

~~Depreciation expense on property, plant~~2019 and ~~equipment was $34.7 million and $36.0 million for the nine months ended September 30,~~ 2018, ~~and 2017,~~ respectively.Additionally, depreciation expense on property, plant and equipment was ~~$11.5~~$18.3 million and ~~$11.9~~$11.5 million for the three months ended September 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.

In June 2018, the Company recorded charges totaling $1.6 million for impairment of property, plant and equipment in the Trade segment related to assets that were reclassified as assets held for sale at June 30, 2018 and were sold in the third quarter of 2018.

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		September 30, 2019		December 31, 2018		September 30, 2018
Rail Group assets leased to others	$	576,622	$	531,391	$	484,214	$	699,972	$	640,349	$	576,622
Less: accumulated depreciation	111,846		107,948		106,821		134,226		118,564		111,846
	$	464,776	$	423,443	$	377,393
Rail Group assets, net							$	565,746	$	521,785	$	464,776

Depreciation expense on Rail Group assets leased to others amounted to ~~$18.4~~$21.1 million and ~~$14.9~~$18.4 million for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Additionally, depreciation expense on Rail Group assets leased to others amounted to ~~$6.1~~$7.4 million and ~~$5.2~~$6.1 million for the three months ended September 30, 2019 and 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.

4. Debt

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



(in thousands)	September 30, 2019		December 31, 2018		September 30, 2018
Short-term Debt – Non-Recourse (a)	$	35,278	$	—	$	—
Short-term Debt – Recourse	102,971		205,000		132,000
Total Short-term Debt	$	138,249	$	205,000	$	132,000

Current Maturities of Long-term Debt – Non-Recourse (b)	$	9,835	$	4,842	$	3,772
Current Maturities of Long-term Debt – Recourse (c)	39,733		16,747		11,905
Finance lease liability (d)	17,331		—		—
Total Current Maturities of Long-term Debt	$	66,899	$	21,589	$	15,677

Long-term Debt, Less: Current Maturities – Non-Recourse (b)	$	242,895	$	146,353	$	77,114
Long-term Debt, Less: Current Maturities – Recourse (c)	703,297		349,834		360,166
Finance lease liability (d)	21,925		—		—
Total Long-term Debt, Less: Current Maturities	$	968,117	$	496,187	$	437,280

(a) In conjunction with the Lansing Trade Group ("LTG") acquisition, the Company ~~has~~assumed a 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 $181.2 million and had $146.0 million available for borrowing on this line of credit as of September 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 LTG acquisition, the Company also assumed a term loan with a syndicate of banks. The ~~agreement provides~~term loan had a balance of $32.9 million at September 30, 2019. Interest rates for the term loans were 4.45% as of September 30, 2019 and 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 a 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. At September 30, 2019, the interest rates for the 5-year and ~~restated their revolving asset based~~7-year term loan ~~agreement, increasing~~were 3.77% and 4.02%, respectively. Payments on the ~~credit facility to $200.0 million. Total~~term loans will be made on a quarterly basis.

(d) See Note 14, Leases, for additional information. September 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 adoption of ASC 842.

The total borrowing capacity ~~for~~of the ~~Company under all~~Company's lines of credit ~~is currently~~ at $1,085.0 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,~~2019 was $1,628.7 million of which the Company had a total of ~~$823.1~~$1,207.7 million available for borrowing under its lines of credit. The Company's borrowing capacity is reduced by a combination of outstanding borrowings and letters of credit. The Company ~~was~~is in compliance with all financial covenants as of September 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 30, ~~2018,~~2019, December 31, ~~2017~~2018 and September 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					September 30, 2019				December 31, 2018				September 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		$	—	$	23,997	$	—	$	14,944	$	—	$	14,942	$	—
Fair value of derivatives	36,653		—		17,252		—		(999		)	—		10,199		—		22,285		—		36,653		—
Balance at end of period	$	51,595	$	—	$	18,603	$	—	$	26,738		$	—	$	34,196	$	—	$	37,229	$	—	$	51,595	$	—

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


	September 30, 2018															September 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		$	122,462		$	1,951		$	5,715		$	67		$	130,195
Commodity derivative liabilities	(8,038		)	(1		)	(92,134		)	(2,586		)	(102,759		)	(29,566		)	(8		)	(69,704		)	(2,027		)	(101,305		)
Cash collateral	14,942			—			—			—			14,942
Cash collateral paid (received)																27,614			—			(3,617		)	—			23,997
Balance sheet line item totals	$	76,861		$	766		$	(91,403	)	$	(2,548	)	$	(16,324	)	$	120,510		$	1,943		$	(67,606	)	$	(1,960	)	$	52,887


	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															September 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		$	69,957		$	767		$	731		$	38		$	71,493
Commodity derivative liabilities	(16,339		)	(43		)	(39,254		)	(976		)	(56,612		)	(8,038		)	(1		)	(92,134		)	(2,586		)	(102,759		)
Cash collateral	27,737			—			—			—			27,737
Cash collateral (received)																14,942			—			—			—			14,942
Balance sheet line item totals	$	45,202		$	245		$	(38,578	)	$	(902	)	$	5,967		$	76,861		$	766		$	(91,403	)	$	(2,548	)	$	(16,324	)

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 months ended September 30, ~~2018~~2019 and ~~2017~~2018 are as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,						Nine months ended September 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	)	$	(27,586	)	$	(51,059	)	$	25,469	$	(30,451	)

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


	September 30, 2018				September 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	—	—	—	653,757	—	—	—
Soybeans	45,755	—	—	—	46,895	—	—	—
Wheat	7,948	—	—	—	90,598	—	—	—
Oats	31,155	—	—	—	36,365	—	—	—
Ethanol	—	230,813		—	—	256,815	—	—
Corn oil	—	—	2,560	—	—	—	5,022	—
Other	—	1,000	—	115	15,196	6,150	363	3,178
Subtotal	362,632	231,813	2,560	115	842,811	262,965	5,385	3,178
Exchange traded:
Corn	123,250	—	—	—	280,890	—	—	—
Soybeans	31,855	—	—	—	58,980	—	—	—
Wheat	44,130	—	—	—	75,345	—	—	—
Oats	1,005	—	—	—	735	—	—	—
Ethanol	—	92,274	—	—	—	145,769	—	—
Propane					—	12,516	—	—
Other					—	3	—	289
Subtotal	200,240	92,274	—	—	415,950	158,288	—	289
Total	562,872	324,087	2,560	115	1,258,761	421,253	5,385	3,467



	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				September 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	—	—	—	277,774	—	—	—
Soybeans	44,463	—	—	—	45,755	—	—	—
Wheat	8,598	—	—	—	7,948	—	—	—
Oats	36,451	—	—	—	31,155	—	—	—
Ethanol	—	201,521		—	—	230,813	—	—
Corn oil	—	—	5,782	—	—	—	2,560	—
Other	51	—		110	—	1,000		115
Subtotal	311,850	201,521	5,782	110	362,632	231,813	2,560	115
Exchange traded:
Corn	113,990	—	—	—	123,250	—	—	—
Soybeans	45,220	—	—	—	31,855	—	—	—
Wheat	61,795	—	—	—	44,130	—	—	—
Oats	895	—	—	—	1,005	—	—	—
Ethanol	—	22,890	—	—	—	92,274	—	—
Other	—	840	—	—
Subtotal	221,900	23,730	—	—	200,240	92,274	—	—
Total	533,750	225,251	5,782	110	562,872	324,087	2,560	115

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



(in thousands)	September 30, 2019			December 31, 2018			September 30, 2018
Derivatives not designated as hedging instruments
Interest rate contracts included in Other long-term assets (Other long-term liabilities)	$	(1,261	)	$	(353	)	$	193
Foreign currency contracts included in Other current assets (Accrued expenses and other current liabilities)	$	115		$	(1,122	)	$	(737	)
Derivatives designated as hedging instruments
Interest rate contracts included in Other current assets (Accrued expenses and other current liabilities)	$	(2,981	)	$	—		$	—
Interest rate contracts included in Other long-term assets (Other long-term liabilities)	$	(13,649	)	$	(168	)	$	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)	2019			2018		2019			2018
Derivatives not designated as hedging instruments
Interest rate derivative gains (losses) included in Interest income (expense)	$	(36	)	$	521	$	(972	)	$	1,662
Foreign currency derivative gains (losses) included in Other income, net	$	(615	)	$	372	$	(684	)	$	(1,163	)
Derivatives designated as hedging instruments
Interest rate derivative gains (losses) included in Other Comprehensive Income (Loss)	$	(3,798	)	$	159	$	(16,547	)	$	226
Interest rate derivatives gains (losses) included in Interest income (expense)	$	(224	)	$	54	$	(243	)	$	126

Outstanding interest rate derivatives, as of September 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	*	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 months ended September 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 September 30,				Nine months ended September 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Interest cost	$	33	$	38	$	98	$	116	$	29	$	33	$	87	$	98
Recognized net actuarial loss	61		63		183		189		58		61		174		183
Benefit cost	$	94	$	101	$	281	$	305	$	87	$	94	$	261	$	281


	Postretirement Benefits												Postretirement Benefits
(in thousands)	Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,						Nine months ended September 30,
(in thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Service cost	$	81		$	81		$	243		$	310		$	68		$	81		$	206		$	243
Interest cost	188			202			565			784			214			188			641			565
Amortization of prior service cost	(227		)	(228		)	(683		)	(228		)	(228		)	(227		)	(684		)	(683		)
Benefit cost	$	42		$	55		$	125		$	866		$	54		$	42		$	163		$	125

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 September 30,				Nine months ended September 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	$	273,945	$	156,394	$	1,083,383	$	706,927
Revenues under ASC 840	25,853		78,110
Revenues under ASC 842					26,418		25,853		87,122		78,110
Revenues under ASC 815	503,332		1,447,683		1,682,392		503,332		5,114,083		1,447,683
Total Revenues	$	685,579	$	2,232,720	$	1,982,755	$	685,579	$	6,284,588	$	2,232,720

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:~~

Three months ended September 30, 2018
(in thousands) Grain Ethanol Plant Nutrient Rail Total
Specialty nutrients $ —
$ —
$ 36,856
$ —
$ 36,856
Primary nutrients —
—
60,460
—
60,460
Services 3,052
2,713
877
8,925
15,567
Co-products —
29,282
—
—
29,282
Other 245
—
5,996
7,988
14,229
Total $ 3,297
$ 31,995
$ 104,189
$ 16,913
$ 156,394

~~For~~line for the three and nine months ended September 30, 2019 and 2018, ~~approximately~~respectively:



	Three months ended September 30, 2019
(in thousands)	Trade		Ethanol		Plant Nutrient		Rail		Total
Specialty nutrients	$	9,840	$	—	$	35,182	$	—	$	45,022
Primary nutrients	4,610		—		66,733		—		71,343
Services	2,507		3,187		1,275		9,719		16,688
Products and co-products	48,158		34,655		—		—		82,813
Frac sand and propane	47,188		—		—		—		47,188
Other	2,159		163		6,256		2,313		10,891
Total	$	114,462	$	38,005	$	109,446	$	12,032	$	273,945



	Three months ended September 30, 2018
(in thousands)	Trade		Ethanol		Plant Nutrient		Rail		Total
Specialty nutrients	$	—	$	—	$	36,856	$	—	$	36,856
Primary nutrients	—		—		60,460		—		60,460
Service	2,232		3,533		877		8,925		15,567
Co-products	—		29,282		—		—		29,282
Other	245		—		5,996		7,988		14,229
Total	$	2,477	$	32,815	$	104,189	$	16,913	$	156,394



	Nine months ended September 30, 2019
(in thousands)	Trade		Ethanol		Plant Nutrient		Rail		Total
Specialty nutrients	$	45,648	$	—	$	191,247	$	—	$	236,895
Primary nutrients	27,401		—		294,729		—		322,130
Service	11,077		10,170		3,133		28,944		53,324
Products and Co-products	166,859		88,170		—		—		255,029
Frac sand and propane	184,418		—		—		—		184,418
Other	5,860		198		19,439		6,090		31,587
Total	$	441,263	$	98,538	$	508,548	$	35,034	$	1,083,383



	Nine months ended September 30, 2018
(in thousands)	Trade		Ethanol		Plant Nutrient		Rail		Total
Specialty nutrients	$	—	$	—	$	206,215	$	—	$	206,215
Primary nutrients	—		—		313,967		—		313,967
Service	8,386		10,483		3,498		26,350		48,717
Co-products	—		88,390		—		—		88,390
Other	747		—		19,231		29,660		49,638
Total	$	9,133	$	98,873	$	542,911	$	56,010	$	706,927

Approximately 5% and 10% of revenues accounted for under ASC 606 during each of the three months ended September 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 months ended September 30, 2019 and 2018, approximately 5% and 7% 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
Balance at September 30,	34,306		29,836

~~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~~third 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 Company recorded income tax benefit of $1.8 million for~~For the three months ended September 30, ~~2018,~~2019, the Company recorded an income tax benefit of $7.2 million at an effective income tax rate of ~~48.5%, as compared to income tax expense of $2.4 million for the three months ended September 30, 2017, an~~55.1%. The annual effective ~~income~~ tax rate ~~of 47.7%. Income tax expense was $5.7 million for~~differs from the ~~nine months ended September 30, 2018, an effective income~~statutory U.S. Federal tax rate due to the impact of ~~24.4%, as compared to $7.5 million for the nine months ended September 30, 2017, an~~state income taxes, nondeductible compensation, partially offset by benefits from income taxes on foreign earnings and federal tax credits. The increase in 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 30, ~~2018, is higher than our effective income tax rate for~~2019 as compared to the ~~three months ended September 30, 2017, due~~same period last year was primarily attributed to the impacts of the current period loss before ~~income~~ taxes and additional tax benefits from federal tax credits and permanent provision to return ~~items, including reversal~~items. For the three months ended September 30, 2018, the Company recorded an income tax benefit of $1.8 million at an effective income tax rate of 48.5%.

For the ~~provisional estimate for transition tax. These items resulted in a net increase~~nine months ended September 30, 2019, the Company recorded an income tax benefit of ~~14.8%, offset by~~$1.7 million at an effective income tax rate of 21.4%. 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 benefits from income taxes on foreign earnings and federal tax credits. The decrease in ~~the U.S. federal statutory rate of 14%.~~

~~Our~~ effective ~~income~~ tax rate for the nine months ended September 30, ~~2018, is higher than our effective~~2019 as compared to the same period last year was primarily attributed to lower pretax book income as compared to the prior year, and the impact of discrete net tax ~~rate for~~benefits from provision to return items and federal tax credits. For the nine months ended September 30, ~~2017,~~2018, the Company recorded an income tax expense of $5.7 million at an effective income tax rate of 24.4%.

During the three months ended September 30, 2019, the company recognized a tax benefit of $3.9 million for federal Research & Development Credits (“R&D Credits”) related to tax years 2015 to 2018 as ~~attributed to~~well as an estimated year-to-date tax benefit for federal R&D Credits for the ~~Company’s loss before~~2019 tax year. Unrecognized tax benefits of $17.7 million include $17.2 million recorded as a reduction of the deferred tax asset and refundable credits associated with the R&D Credits.

The 2019 effective tax rate can be affected by variances in the estimates and amounts of taxable income ~~taxes in~~among the various states, entities and activity types, realization of tax credits, adjustments from resolution of tax matters under review, valuation allowances and the company’s assessment of its liability for uncertain tax positions. The amount of unrecognized tax benefits for uncertain tax positions was $17.7 million as of September 30, 2019, and $0.6 million for 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”). 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 months ended September 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 September 30, 2019														Nine months ended September 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	$	(9,700	)	$	(976	)	$	258	$	4,177		$	(6,241	)	$	(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	(3,049		)	1,600			—		44			$	(1,405	)	(12,759		)	508			—		(468		)	(12,719		)
	Amounts reclassified from accumulated other comprehensive loss		—			—		(142		)	(142		)	—			—		(142		)	(142		)	Amounts reclassified from accumulated other comprehensive income (loss) (b)	197			—			—		(171		)	$	26		333			11,666			—		(513		)	11,486
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)	(2,852		)	1,600			—		(127		)	(1,379		)	(12,426		)	12,174			—		(981		)	(1,233		)
Ending balance	Ending balance		$	(7,328	)	$	211	$	(2,565	)	$	(9,682	)	$	(7,328	)	$	211	$	(2,565	)	$	(9,682	)	Ending balance	$	(12,552	)	$	624		$	258	$	4,050		$	(7,620	)	$	(12,552	)	$	624		$	258	$	4,050		$	(7,620	)

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

(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 September 30, 2019				Nine months ended September 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)	$	(684	)	(b)
	(228		)	Total before tax	(684		)	Total before tax
	57			Income tax provision	171			Income tax provision
	$	(171	)	Net of tax	$	(513	)	Net of tax

Cash Flow Hedges
Interest payments	$	263		Interest expense	$	445		Interest expense
	263			Total before tax	445			Total before tax
	(66		)	Income tax provision	(112		)	Income tax provision
	$	197		Net of tax	$	333		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	$	26		Net of tax	$	11,486		Net of tax



	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

(a) Amounts in parentheses indicate credits to profit/~~loss~~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 September 30,						Nine months ended September 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	)	$	(4,237	)	$	(2,098	)	$	11,658	$	17,732
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 per share – basic:
Weighted average shares outstanding – basic	28,263			28,350		28,254		28,327			32,626			28,263			32,550		28,254
Earnings (losses) per common share – basic	$	(0.07	)	$	0.09	$	0.63	$	(0.96	)
Earnings per common share – basic											$	(0.13	)	$	(0.07	)	$	0.36	$	0.63
Earnings per share – diluted:
Weighted average shares outstanding – basic	28,263			28,350		28,254		28,327			32,626			28,263			32,550		28,254
Effect of dilutive awards	—			134		233		—			—			—			484		233
Weighted average shares outstanding – diluted	28,263			28,484		28,487		28,327			32,626			28,263			33,034		28,487
Earnings (losses) per common share – diluted	$	(0.07	)	$	0.09	$	0.62	$	(0.96	)
Earnings per common share – diluted											$	(0.13	)	$	(0.07	)	$	0.35	$	0.62

All outstanding share awards were antidilutive for the three months ended September 30, 2019 and September 30, 2018 as the Company incurred a net loss in both periods. There were 60 thousand outstanding share awards that were antidilutive for the ~~period.~~nine months ended September 30, 2019. There were no0 antidilutive stock-based awards outstanding for the nine months ended September 30, 2018. There were 43 thousand antidilutive stock-based awards outstanding for the three months ended September 30, 2017, and all outstanding share awards were antidilutive for the nine months ended September 30, 2017.

11. Fair Value Measurements

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


(in thousands)	September 30, 2018											September 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	)	$	34,196		$	18,691		$	—	$	52,887
Provisionally priced contracts (b)	(55,697		)	(23,136		)	—		$	(78,833	)	(79,757		)	(23,535		)	—		(103,292		)
Convertible preferred securities (c)	—			—			7,154		$	7,154		—			—			8,404		8,404
Other assets and liabilities (d)	5,988			193			—		$	6,181		5,603			(17,891		)	—		(12,288		)
Total	$	1,886		$	(90,862	)	$	7,154	$	(81,822	)	$	(39,958	)	$	(22,735	)	$	8,404	$	(54,289	)



(in thousands)	December 31, 2018
Assets (liabilities)	Level 1			Level 2			Level 3		Total
Commodity derivatives, net (a)	$	37,229		$	(18,864	)	$	—	$	18,365
Provisionally priced contracts (b)	(76,175		)	(58,566		)	—		(134,741		)
Convertible preferred securities (c)	—			—			7,154		7,154
Other assets and liabilities (d)	5,186			(353		)	—		4,833
Total	$	(33,760	)	$	(77,783	)	$	7,154	$	(104,389	)

(in thousands) December 31, 2017
Assets (liabilities) Level 1 Level 2 Level 3 Total
Commodity derivatives, net (a) 18,603
(18,067 ) —
536
Provisionally priced contracts (b) (98,190 ) (67,094 ) —
(165,284 )
Convertible preferred securities (c) —
—
7,388
7,388
Other assets and liabilities (d) 9,705
(1,244 ) —
8,461
Total $ (69,882 ) $ (86,405 ) $ 7,388
$ (148,899 )


(in thousands)	September 30, 2017											September 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			$	51,595		$	(67,919	)	$	—	$	(16,324	)
Provisionally priced contracts (b)	(85,546		)	(33,944		)	—		(119,490		)	(55,697		)	(23,136		)	—		(78,833		)
Convertible preferred securities (c)	—			—			6,638		6,638			—			—			7,154		7,154
Other assets and liabilities (d)	10,996			(1,929		)	—		9,067			5,988			193			—		6,181
Total	$	(47,812	)	$	(56,644	)	$	6,638	$	(97,818	)	$	1,886		$	(90,862	)	$	7,154	$	(81,822	)


(a)	Includes associated cash posted/received as ~~collateral~~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					Convertible Preferred Securities
(in thousands)	2018			2017		2019		2018
Assets (liabilities) at January 1,	$	7,388		$	3,294	$	7,154	$	7,388
Gains (losses) included in earnings	—			—
Additional Investments						250		—
Assets (liabilities) at March 31,	$	7,388		$	3,294	$	7,404	$	7,388
Gains (losses) included in earnings	—			—
New investments	100			—
Additional investments						1,000		100
Asset (liabilities) at June 30,	$	7,488		$	3,294	$	8,404	$	7,488
Gains (losses) included in earnings	5,080			—		—		5,080
Unrealized gains (losses) included in other comprehensive income	—			344
New investments	986			3,000
Additional Investments						—		986
Sale proceeds	(6,400		)	—		—		(6,400		)
Asset (liability) at September 30,	$	7,154		$	6,638	$	8,404	$	7,154

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

(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 September 30, 2018

Valuation Method

Unobservable Input

Weighted Average

Convertible preferred securities (a)

6,638

Implied based on market prices

N/A

7,154

Implied based on market prices

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 and a pending sale of grain assets held by the Company.

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		September 30, 2019		December 31, 2018		September 30, 2018
Fair value of long-term debt, including current maturities	$	445,342	$	474,769	$	431,542	$	1,046,063	$	517,998	$	445,342
Fair value in excess of carrying value (a)	11,629		1,451		2,389		11,047		5,813		11,629

(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		September 30, 2019		December 31, 2018		September 30, 2018
The Andersons Albion Ethanol LLC	$	49,882	$	45,024	$	42,302	$	48,863	$	50,382	$	49,882
The Andersons Clymers Ethanol LLC	22,589		19,830		17,837		23,752		24,242		22,589
The Andersons Marathon Ethanol LLC	15,373		12,660		12,390		15,762		14,841		15,373
Lansing Trade Group, LLC(a)	99,904		93,088		89,541		—		101,715		99,904
Thompsons Limited (a)	50,280		50,198		50,399		—		48,987		50,280
Providence Grain Group Inc.							17,195		—		—
Other	2,322		2,439		2,562		11,776		2,159		2,322
Total	$	240,350	$	223,239	$	215,031	$	117,348	$	242,326	$	240,350

(a) The Company previously owned approximately 32.5% of LTG. Effective January 1, 2019, the Company purchased the remaining equity of LTG. The transaction resulted 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 September 30,						Nine months ended September 30,
(in thousands)	% Ownership at September 30, 2018	2018			2017			2018			2017			% Ownership at September 30, 2019	2019			2018			2019			2018
The Andersons Albion Ethanol LLC	55%	$	2,408		$	1,473		$	4,858		$	3,331		55%	$	(1,671	)	$	2,408		$	(1,292	)	$	4,858
The Andersons Clymers Ethanol LLC	39%	1,376			1,822			3,121			2,597			39%	(1,427		)	1,376			(152		)	3,121
The Andersons Marathon Ethanol LLC	33%	1,029			985			2,713			1,301			33%	(532		)	1,029			920			2,713
Lansing Trade Group, LLC(a)	33% (a)	2,428			305			8,603			491			100% (a)	—			2,428			—			8,603
Thompsons Limited ~~(b)~~(a)	50%	35			(940		)	1,345			546			100% (a)	—			35			—			1,345
Providence Grain Group Inc.														39%	(454		)	—			(2,297		)	—
Other	5% - 50%	(51		)	(59		)	(39		)	(173		)	5% - 51%	356			(51		)	454			(39		)
Total		$	7,225		$	3,586		$	20,601		$	8,093			$	(3,728	)	$	7,225		$	(2,367	)	$	20,601

(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 resulted 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 $0.4 million from unconsolidated affiliates ~~were~~for the nine months ended September 30, 2019 and received $2.2 ~~million and $7.1~~ million for the nine months ended September 30, ~~2018 and 2017, respectively.~~2018.

In the third quarter of 2019, the Company did not have significant equity investees. In the third 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~~several 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 construction of the plant was substantially completed, and operations commenced in August of 2019. As of September 30, 2019, approximately $5.2 million of remaining obligation is ~~expected to be operational in 2019.~~not yet incurred under a design build contract.

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 September 30,				Nine months ended September 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Sales revenues	$	82,394	$	225,367	$	278,974	$	665,331	$	52,875	$	82,394	$	171,897	$	278,974
Service fee revenues (a)	5,231		14,397		15,539		28,433		2,852		5,231		11,015		15,539
Purchases of product and capital assets	177,583		165,084		556,551		467,495		174,420		177,583		520,091		556,551
Lease income (b)	1,623		1,850		4,829		4,559		1,887		1,623		5,195		4,829
Labor and benefits reimbursement (c)	3,436		3,208		10,603		10,071		3,513		3,436		10,973		10,603


(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		September 30, 2019		December 31, 2018		September 30, 2018
Accounts receivable (d)	$	32,584	$	30,252	$	18,694	$	23,394	$	17,829	$	32,584
Accounts payable (e)	32,347		27,866		27,413		21,201		28,432		32,347


(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 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~~$158.5 million and ~~$160.8~~$161.9 million, respectively. For the nine months ended September 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~~$456.7 million and ~~$445.4~~$480.4 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 30, ~~2018,~~2019, December 31, ~~2017~~2018 and September 30, ~~2017 was $6.8~~2018 were $0.4 million, ~~$0.2~~$1.9 million and ~~$1.9~~$6.8 million, respectively. The fair value of derivative contract liabilities with related parties as of September 30, ~~2018,~~2019, December 31, ~~2017~~2018 and September 30, ~~2017 was $7.2~~2018 were $2.6 million, ~~$2.5~~$6.3 million and ~~$0.1~~$7.2 million, respectively.

13. Segment Information

The Company’s operations include ~~four~~4 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 has evaluated 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. 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~~2 are consolidated and ~~three~~3 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 September 30,				Nine months ended September 30,
(in thousands)	2019		2018		2019		2018
Revenues from external customers
Trade	$	1,580,157	$	342,610	$	4,944,483	$	983,737
Ethanol	254,055		195,669		708,029		571,090
Plant Nutrient	109,446		104,188		508,548		542,911
Rail	39,097		43,112		123,528		134,982
Total	$	1,982,755	$	685,579	$	6,284,588	$	2,232,720


	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 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									$	242	$	442	$	1,054	$	1,435
Plant Nutrient	104,188		103,620		542,911		514,943		892		—		2,186		—
Rail	43,112		43,093		134,982		121,632		824		288		2,869		959
Other	—		738		—		47,595
Total	$	685,579	$	836,595	$	2,232,720	$	2,682,273	$	1,958	$	730	$	6,109	$	2,394

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 September 30,						Nine months ended September 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													$	(2,001	)	$	(9,914	)	$	4,268		$	(2,453	)
Ethanol	9,058			6,098			17,022			12,474			949			10,353			6,169			20,703
Plant Nutrient	(7,976		)	(7,920		)	8,239			(27,074		)	(7,440		)	(7,976		)	4,534			8,239
Rail	5,732			6,127			10,645			18,065			3,137			5,732			10,629			10,645
Other	(2,057		)	(2,024		)	(13,734		)	(27,665		)	(6,094		)	(2,057		)	(15,599		)	(13,734		)
Income (loss) before income taxes, net of noncontrolling interest													(11,449		)	(3,862		)	10,001			23,400
Noncontrolling interests	223			83			(175		)	73			(1,633		)	223			(2,265		)	(175		)
Total	$	(3,639	)	$	5,005		$	23,225		$	(19,630	)
Income (loss) before income taxes													$	(13,082	)	$	(3,639	)	$	7,736		$	23,225


(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		September 30, 2019		December 31, 2018		September 30, 2018
Identifiable assets
Grain	$	788,770	$	948,871	$	799,655
Trade							$	1,712,350	$	964,079	$	773,923
Ethanol	263,949		180,173		173,545		372,663		310,866		278,796
Plant Nutrient	415,314		379,309		389,396		376,615		403,780		415,314
Rail	564,227		490,448		446,884		679,056		590,407		564,227
Other	119,358		163,553		154,680		143,768		122,871		119,358
Total	$	2,151,618	$	2,162,354	$	1,964,160	$	3,284,452	$	2,392,003	$	2,151,618

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	September 30, 2019
Assets
Operating lease assets	Right of use assets, net	$	70,773
Finance lease assets	Property, plant and equipment, net	24,003
Finance lease assets	Rail Group assets leased to others, net	17,136
Total leased assets		$	111,912

Liabilities
Current operating leases	Accrued expenses and other current liabilities	24,544
Non-current operating leases	Long-term lease liabilities	47,299
Total operating lease liabilities		$	71,843

Current finance leases	Current maturities of long-term debt	17,331
Non-current finance leases	Long-term debt	21,925
Total finance lease liabilities		$	39,256
Total lease liabilities		$	111,099

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	Three months ended September 30, 2019		Nine months ended September 30, 2019
Lease cost:
Operating lease cost	Cost of sales and merchandising revenues	$	5,761	$	18,881
Operating lease cost	Operating, administrative and general expenses	3,417		10,251
Finance lease cost
Amortization of right-of-use assets	Operating, administrative and general expenses	443		1,042
Interest expense on lease liabilities	Interest expense	236		779
Other lease cost (a)	Cost of sales and merchandising revenues	193		731
Other lease cost (a)	Operating, administrative and general expenses	61		201
Total lease cost		$	10,111	$	31,885

(a) 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 September 30, 2019.



Weighted Average Remaining Lease Term
Operating leases	4.2 years
Finance leases	6.9 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 September 30, 2019.



Weighted Average Discount Rate
Operating leases	4.16	%
Finance leases	3.78	%

Supplemental Cash Flow Information Related to Leases



(in thousands)	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	24,982
Operating cash flows from finance leases	405
Financing cash flows from finance leases	973
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	6,365
Finance leases	16,498

Maturity Analysis of Leases Liabilities



	September 30, 2019
(in thousands)	Operating Leases		Finance Leases		Total
2019 (excluding the nine months ended September 30, 2019)	$	8,612	$	1,140	$	9,752
2020	23,210		17,613		40,823
2021	16,635		2,334		18,969
2022	11,613		2,341		13,954
2023	7,664		2,342		10,006
Thereafter	10,748		18,184		28,932
Total lease payments	$	78,482	$	43,954	$	122,436
Less: interest	6,639		4,698		11,337
Total	$	71,843	$	39,256	$	111,099

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 Company began construction of a new ethanol facility, which is expected to be completed in 2019. Portions of the project are covered by design and build contracts, with approximately $105.9 million of remaining obligation, of which $10.5 million has been prepaid, as of September 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.

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

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


	Nine months ended September 30,				Nine months ended September 30,
(in thousands)	2018		2017		2019			2018
Supplemental disclosure of cash flow information
Interest paid	$	23,327	$	20,356	$	47,164		$	23,327
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					29,956			—
Dividends declared not yet paid	4,663		4,501		5,547			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					8,245			13,941

~~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 $171.1 million in cash, which includes preliminary working capital adjustments of $30.0 million, and issued 4.4 million unregistered shares valued at $127.8 million based upon the stock price of the Company at the date of the acquisition.

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, finalization of deferred income taxes and ~~Dyer, Tennessee for $19.5 million plus~~a final working capital ~~during~~adjustment. A summarized preliminary purchase price allocation is as follows:



(in thousands)
Cash consideration paid	$	171,147
Equity consideration	127,841
Purchase price holdback/ other accrued liabilities	29,956
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 ~~second quarter of 2018 and its Como location for $1.3 million plus working capital during the third quarter of 2018.~~

~~During the third quarter of 2018, the Company also closed on an agreement to sell one of its convertible preferred security investments for $6.4~~LTG acquisition is $129.8 million and ~~recorded~~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.

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
Total other intangible assets	$	106,600	8 years	*

*weighted average number of years

Pro Forma Financial Information

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



	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2019			2018	2019		2018
Net sales	$	1,982,755		2,020,746	$	6,284,588	6,282,656
Net income	(5,869		)	2,934	13,364		35,004

Pro forma net income was also adjusted to account for the tax effects of the pro forma adjustments noted above using a ~~pre-tax gain~~statutory tax rate of ~~$3.9 million~~25%. The amount of LTG’s and Thompsons’ revenue and earnings included in ~~Other income, net.~~the Company’s consolidated statement of operations for the period ended September 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~~goodwill by reportable segment for the nine months ended September 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 (a)	129,848		—		—		129,848
Balance as of September 30, 2019	$	131,019	$	686	$	4,167	$	135,872

(a) Acquisitions represent the LTG acquisition's preliminary goodwill allocation.

Although substantially all of the Company’s goodwill as of September 30, 2019 resulted from the current year acquisition of LTG and is still preliminary, as part of the Company's on-going assessment of goodwill at September 30, 2019, management determined that a triggering event occurred due to the Company's market capitalization being less than the carrying value, resulting from the significant decline in the Company's share price during the ~~third quarter~~quarter. Thus, an interim impairment test was performed over the Company's goodwill as well as its other intangible and long-lived assets. Based on the results of ~~2017 for $7.6 million and~~the impairment test, none of the Company's reportable segments recorded a ~~$5.7 million gain in Other income, net.~~an impairment charge.

~~On March 31, 2017~~When performing our test for impairment, we measured each reporting unit's fair value using a combination of income and market approaches.

The income approach calculates the ~~Company sold four farm center locations~~fair value of the reporting unit based on a discounted cash flow analysis, incorporating the weighted average cost of capital of a hypothetical third-party buyer. Significant estimates in ~~Florida~~the income approach include the following: discount rate; expected financial outlook and profitability of the reporting unit's business (all Level 3 inputs in the fair value hierarchy). Discount rates use the weighted average cost of capital for ~~$17.4 million~~companies within our peer group, adjusted for specific company risk premium factors.

The market approach uses the "Guideline Company" method, which calculates the fair value of the reporting unit based on a comparison of the reporting unit to comparable publicly traded companies. Significant estimates in the market approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and ~~recorded a $4.7 million gain, net~~return on investment, assessing comparable multiples, as well as consideration of ~~transaction costs~~control premiums. The blended approach assigns an equal weighting to each approach. The blended fair value of both approaches is then compared to the carrying value, and to the extent that fair value exceeds the carrying value, no impairment exists. However, to the extent the carrying value exceeds the fair value, an impairment is recorded.

While two reporting units within the Trade group have fair value exceeding their carrying values by less than 10%, substantially all the goodwill relates to the recent LTG acquisition. Due to similar assumptions used to calculate the fair value for this test and those used in ~~Other income, net. The sale~~the initial purchase price ~~included a working capital adjustment~~allocation, the narrow cushions are consistent with expectations. However, as the fair value is highly sensitive to changes in assumptions, including interest rates and outlook for future volume and margins, general trends in the business and/or macro-economic factors could cause the estimated fair value of ~~$3.6 million.~~

the reporting units to fall below their carrying values.

~~17.~~

19. Exit Costs and Assets Held for Sale

The Company classified $0.6 million of property, plant and equipment as assets held for sale on the Condensed Consolidated Balance Sheet at September 30, 2019. These assets are primarily comprised of plant nutrient assets that were sold subsequent to the end of the third quarter for a nominal gain.

The Company classified $29.5 million of ~~assets~~Property, plant and equipment as Assets held for sale on the Condensed Consolidated Balance Sheet at September 30, 2018. This includes $25.1 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 million of Retail store assets and $0.2 million relating to administrative offices at an outlying location in the Plant Nutrient ~~Group~~Group.

20. Subsequent Events

On October 1, 2019, the Company entered into a definitive agreement to merge The ~~Company classified $37.9~~Andersons Albion Ethanol LLC, The Andersons Clymers Ethanol LLC, The Andersons Marathon Ethanol LLC and the Company's wholly-owned The Andersons Denison Ethanol LLC into a new legal entity named The Andersons Marathon Holdings LLC ("TAMH"). As a result of the merger, The Andersons and Marathon will own 50.1% and 49.9% of TAMH equity, respectively. The transaction will result in the consolidation of TAMH’s results in the Company's financial statements effective October 1, 2019.

Effective October 1, 2019, in conjunction with the merger noted above, TAMH entered into a credit agreement that includes a $70 million ~~of assets as Assets held for sale~~term note and a $130 million revolving credit facility. Borrowings under the credit agreement bear interest at variable interest rates, which are based on LIBOR plus an applicable spread. Payments on the ~~Condensed Consolidated Balance Sheet at December 31, 2017. This includes $19.5~~term loan will be made on a quarterly basis.

On October 2, 2019, the Company closed on the sale of its farm center assets in Bay City, Michigan. A pretax gain of $2.9 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 to the remaining Retail store assets and administrative offices at an outlying locationwill be realized in the ~~Plant Nutrient Group, respectively.~~fourth quarter of 2019.

During the fourth quarter, the Company reached an agreement to sell the agronomy assets of Thompsons Limited, a wholly owned subsidiary in Ontario, Canada, to Sylvite Holdings Inc. of Burlington, Ontario. The ~~Company classified $8.4 million of Property, plant~~sale is expected to close in the fourth quarter. The Andersons will continue to own 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 of 2017. Inventory~~operate Thompsons' grain storage and fixtures liquidation efforts were completed throughout the year. The Company recorded minimal additional exit charges during the third quarter of 2017 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 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 segment disclosures. As previously disclosed, we closed~~consolidation of Thompsons Limited of Ontario, Canada and related entities, which LTG and the ~~Retail~~Company jointly owned. 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 ~~also includes other corporate level costs not attributable to an operating segment.~~has been renamed, Trade Group, with the remaining pieces of the acquired business included in Ethanol as stated in the segment footnote (note 13).

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, the Company has considered the potential impact that the book value of the Company’s total shareholders’ equity exceeded the Company’s market capitalization for impairment indicators. Management ultimately concluded that, while substantially all of the Company's goodwill resulted from the current year LTG acquisition and the purchase price allocation is preliminary, an impairment triggering event occurred and the Company performed quantitative impairment tests over its goodwill and other long-lived assets in the third quarter. As a result of these tests, the Company concluded that no impairment exists as of September 30, 2019.

The Company has frac sand and sand transloading assets within the Trade segment. Due to an adverse change within the industry, the Company determined that a triggering event had occurred during the quarter for the asset group to be assessed for impairment. The asset group was determined to not be impaired in the third quarter. However, continuing adverse market conditions or alternative management decisions surrounding the future of these operations may result in future impairment considerations.

Trade Group

The ~~Grain~~Trade Group’s results in the third quarter ~~were down due to significantly~~reflect continued benefit from the Lansing acquisition with stronger merchandising income, despite 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.income from assets.

~~Grain~~Agricultural inventories on hand at September 30, ~~2018~~2019 were ~~72.0~~97.5 million ~~bushels.~~bushels, of which 2.7 million bushels were stored for others. These amounts compare to ~~75.1~~72.0 million bushels on hand at September 30, ~~2017,~~2018, of which ~~1.0 million~~the bushels ~~were~~ stored for ~~others.~~others were de minimis. Total ~~grain~~Trade storage capacity, including temporary pile storage, was approximately 202 million bushels at September 30, 2019 compared to 140 million bushels at September 30, ~~2018 compared to 153 million bushels at September 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 market volatility but expects headwinds to continue in the ~~agricultural marketplace.~~fourth quarter and into 2020 from the unpredictability of the crop production in the Eastern Corn Belt due to the extreme weather during the 2019 planting season.

Ethanol Group

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

third quarter despite a challenging margin environment. The construction of the Ethanol Group's new bio-refinery facility ~~is well underway~~was substantially completed and operational during the ~~project is expected~~third quarter. The Ethanol Group expects the margin headwinds to ~~be operational by mid- 2019.~~slightly ease in the fourth quarter allowing more attractive hedging opportunities, however, increases in the Eastern corn belt basis will continue to create challenges.

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


					Three months ended September 30,		Nine months ended September 30,
(in thousands)	Three months ended September 30,		Nine months ended September 30,		2019	2018	2019	2018
	2018	2017	2018	2017
Ethanol (gallons shipped)	117,848	108,452	337,984	307,379	131,878	117,848	393,203	337,984
E-85 (gallons shipped)	16,022	12,482	47,501	32,385	9,284	16,022	36,412	47,501
Corn Oil (pounds shipped)	5,200	4,504	15,574	12,842	5,067	5,200	14,821	15,574
DDG (tons shipped) *	40	42	120	121	49	40	122	120

* 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 quarter results ~~reflect~~were a ~~decrease in sales volume in our primary nutrients and lower margins in our specialty nutrient products. While primary product margins have improved,~~modest improvement from the ~~outlook for~~prior period as weather delays from the ~~Group remains challenged.~~Spring season pushed volumes into the third quarter.

Storage capacity at our wholesale nutrient and farm center facilities, including leased storage, was approximately 487 thousand tons for dry nutrients and approximately 514 thousand tons for liquid nutrients at September 30, 2019, compared to approximately 476 thousand tons for dry nutrients and approximately 515 thousand tons for liquid nutrients at September 30, ~~2018, compared to approximately 478 thousand tons for dry nutrients and approximately 525 thousand tons for liquid nutrients at September 30, 2017.~~2018.

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


					Three months ended September 30,		Nine months ended September 30,
(in thousands)	Three months ended September 30,		Nine months ended September 30,		2019	2018	2019	2018
	2018	2017	2018	2017
Primary nutrients	214	254	1,072	1,099	287	214	1,054	1,072
Specialty nutrients	108	109	541	540	95	108	468	541
Other	13	15	42	53	13	13	42	42
Total tons	335	378	1,655	1,692	395	335	1,564	1,655

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 a decrease~~declined mainly due to fewer car sales than the prior year. Leasing income slightly decreased from the prior year as the group faced headwinds 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~~Sand and Ethanol markets as well as lower lease ~~rates, the base leasing business remains healthy as it saw an increase in average~~renewal rates. Average utilization rates decreased from ~~85.8~~93.4 percent in the third quarter of ~~2017~~2018 to ~~92.0~~89.2 percent in the third quarter of ~~2018. A portion~~2019 as the group made an opportunistic purchase of ~~this increase is attributable to~~1,100 idle railcars at the ~~railcar scrap program from the second quarter. However, most~~end of the ~~increase is from higher industry carload traffic.~~quarter. Excluding the additional cars that were purchased in the third quarter, utilization rates would have been steady at 93.2 percent. Rail Group assets under management (owned, leased or managed for financial institutions in non-recourse arrangements) at September 30, ~~2018~~2019 were ~~22,509~~24,864 compared to ~~22,986~~22,509 at September 30, ~~2017, due to the scrapped cars and excluding the remaining cars held for sale.~~2018.

The ~~Group expects continued steady growth~~leasing business is showing signs of weakening with decreased loading volumes particularly in the frac sand and ethanol markets. However, we expect utilization rates to stay above 90% and cars onunder lease ~~with an abundant railcar supply putting pressure on renewing lease rates. We also expect the repair business~~ to continue to ~~grow profitably.~~increase.

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 30, ~~2018~~2019 with the three months ended September 30, ~~2017~~:2018 including a reconciliation of GAAP to non-GAAP measures:

~~Grain Group~~


	Three months ended September 30,						Three months ended September 30, 2019
(in thousands)	2018			2017			Trade			Ethanol			Plant Nutrient			Rail		Other			Total
Sales and merchandising revenues	$	343,430		$	497,613		$	1,580,157		$	254,055		$	109,446		$	39,097	$	—		$	1,982,755
Cost of sales and merchandising revenues	326,818			465,297			1,505,405			247,345			93,595			27,269		—			1,873,614
Gross profit	16,612			32,316			74,752			6,710			15,851			11,828		—			109,141
Operating, administrative and general expenses	26,142			27,622			69,662			3,971			21,970			5,334		6,181			107,118
Interest expense (income)	2,126			1,898			7,869			210			1,831			4,211		(146		)	13,975
Equity in earnings (losses) of affiliates, net	2,412			(694		)	(98		)	(3,630		)	—			—		—			(3,728		)
Other income (expense), net	625			539			876			417			510			854		(59		)	2,598
Income (loss) before income taxes	$	(8,619	)	$	2,641		(2,001		)	(684		)	(7,440		)	3,137		(6,094		)	(13,082		)
Income (loss) before income taxes attributable to the noncontrolling interests							—			(1,633		)	—			—		—			(1,633		)
Non-GAAP Income (loss) before income taxes, net of noncontrolling interests attributable to The Andersons, Inc.							$	(2,001	)	$	949		$	(7,440	)	$	3,137	$	(6,094	)	$	(11,449	)



	Three months ended September 30, 2018
(in thousands)	Trade			Ethanol			Plant Nutrient			Rail		Other			Total
Sales and merchandising revenues	$	342,610		$	195,669		$	104,188		$	43,112	$	—		$	685,579
Cost of sales and merchandising revenues	326,819			187,888			88,646			28,362		—			631,715
Gross profit	15,791			7,781			15,542			14,750		—			53,864
Operating, administrative and general expenses	26,083			3,355			22,829			6,636		7,083			65,986
Interest expense (income)	2,126			(784		)	1,315			2,602		(83		)	5,176
Equity in earnings (losses) of affiliates, net	2,412			4,813			—			—		—			7,225
Other income (expense), net	92			553			626			220		4,943			6,434
Income (loss) before income taxes	(9,914		)	10,576			(7,976		)	5,732		(2,057		)	(3,639		)
Income (loss) before income taxes attributable to the noncontrolling interests	—			223			—			—		—			223
Non-GAAP Income (loss) before income taxes, net of noncontrolling interests attributable to The Andersons, Inc.	$	(9,914	)	$	10,353		$	(7,976	)	$	5,732	$	(2,057	)	$	(3,862	)

Trade Group

Operating results for the ~~Grain~~Trade Group ~~declined~~increased by ~~$11.3~~$7.9 million compared to the results of the same period last year. Sales and merchandising revenues ~~decreased $154.2~~increased by $1,237.5 million and cost of sales and merchandising revenues ~~decrease $138.5~~increased $1,178.6 million for ~~an unfavorable~~a favorable net gross profit impact of ~~$15.7~~$59.0 million. Substantially all of the gross profit increase was a direct result of acquiring LTG and Thompsons and reflect strong merchandising results.

Operating, administrative and general expenses increased by $43.6 million. The ~~adoption~~acquisition of ~~ASC 606 led~~the remaining equity in LTG and Thompsons accounted for substantially all of this increase. Included in the increased expenses are acquisition related items, such as, $2.6 million of stock-based compensation expense and $2.4 million of incremental depreciation and amortization expenses.

Interest expense increased $5.7 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 higher borrowing rates.

Equity in earnings of affiliates ~~improved~~decreased by ~~$3.1~~$2.5 million ~~due to better operating results from Lansing Trade Group during the quarter.~~as LTG and Thompsons are now consolidated entities.

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 $9.4 million from the same period last year. Sales and merchandising revenues increased ~~$3.3~~$58.4 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$59.5 million compared to 2018 results, primarily attributable to the LTG acquisition. Gross profit decreased by $1.1 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 $0.6 million primarily due to ~~a $1.5~~an increase in labor and benefits, most of which was from the addition of the LTG ethanol trading team.

Interest expense increased $1.0 million ~~write-off~~due to the prior period capitalization of ~~a potential capital project that occurred in 2017.~~interest related to the construction of the ELEMENT facility.

Equity in earnings of affiliates ~~increased $0.5~~decreased $8.4 million ~~due to improved results from~~as a result of the unconsolidated ethanol ~~LLCs. The improved results were driven by an improvement in DDG values and productivity savings in the current quarter.~~LLCs experiencing compressed margins from higher corn costs.

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 $0.5 million compared to the same period in the prior year. Sales and merchandising revenues increased ~~$0.6 million which~~$5.3 million. This was ~~more than offset~~driven by ana slight increase in ~~cost~~primary and specialty ton volumes, mostly from weather delays in the prior quarter that shifted to the current period. Cost of sales and merchandising revenues ~~of $2.4 million. This led to a decrease in~~and gross profit ~~of $1.8 million. While there was an 10% reduction~~increased by $4.9 million and $0.3, respectively, due to the slight increase in ~~volume year over year, much of the shortfall in gross profit is the result of continued margin compression for specialty nutrients.~~sales volumes.

~~Operating, administrative~~Interest expense increased $0.5 million from carrying higher levels of inventories into the quarter due to the wet weather that delayed and ~~general expenses increased $0.7 million due an increase in amortization from capitalized software.~~reduced planting.

~~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~~$2.6 million from the same period last year while ~~Sales~~sales and merchandising revenues ~~remained flat. Leasing revenues increased by approximately $1.4 million due to higher utilization and repair and other revenues increased $0.3~~decreased $4.0 million. This decrease was ~~offset~~driven by a $5.6 million decrease in car ~~sales revenue~~sale income as a result of ~~$2.1~~lower scrap rates from the prior year, which was partially offset by increases of $0.9 million ~~as we sold fewer cars than prior year.~~and $0.7 million in leasing and repair revenues, respectively. Cost of sales and merchandising ~~revenues~~ decreased ~~$1.3~~$1.1 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~~volumes from the prior ~~year quarter.~~year. As a result, gross profit ~~increased $1.3~~decreased $2.9 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~~$1.3 million ~~of transaction~~driven by more efficient labor costs within the repair business.

Interest expense increased $1.6 million due to higher debt balances and higher borrowing.

Other

Operating, administrative and general expenses decreased $0.9 million due to costs related to due diligence for the ~~merger with~~ LTG which was partially offset by reduction in health care claim costs. Additionally, labor, severance, benefits and other operating expenses decreased $1.5 million due to the shutdown of the retail business as these costs were incurredacquisition that did not recur in the ~~third quarter of 2017 but not incurred in the second quarter of 2018.~~current year.

Other income, net decreased by $0.7 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 of gains related to the sale of retail stores.

Income Taxes

For the three months ended September 30, 2019, the Company recorded an income tax benefit of $7.2 million at an effective rate of 55.1%. For the three months ended September 30, 2018, the Company recorded an income tax benefit of $1.8 million at an effective tax rate of 48.5%. ~~In 2017, the Company recorded an income tax expense of $2.4 million at an effective tax rate of 47.4%.~~ The ~~net~~ increase in effective tax rate ~~resulted from~~for the three months ended September 30, 2019 as compared to the same period last year primarily attributed to the impacts of 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~~from federal tax credits and permanent provision to return items. During the three months ended September 30, 2019, the company recognized a tax benefit of $3.9 million for federal Research & Development Credits (“R&D Credits”) related to tax ~~credits. This was offset by~~years 2015 to 2018 as well as an estimated year-to-date tax benefit for federal R&D Credits for the ~~reduction of the U.S. corporate~~2019 tax ~~rate from 35% to 21% as a result of the U.S. tax reform.~~year.

Comparison of the ~~Nine~~nine months ended September 30, 2019 with the nine months ended September 30, 2018 ~~with the Nine months ended September 30, 2017:~~including a reconciliation of GAAP to non-GAAP measures:

~~Grain Group~~


	Nine months ended September 30,				Nine months ended September 30, 2019
(in thousands)	2018		2017		Trade			Ethanol			Plant Nutrient		Rail		Other			Total
Sales and merchandising revenues	$	986,202	$	1,464,588	$	4,944,483		$	708,029		$	508,548	$	123,528	$	—		$	6,284,588
Cost of sales and merchandising revenues	908,833		1,378,176		4,697,896			693,199			432,965		80,995		—			5,905,055
Gross profit	77,369		86,412		246,587			14,830			75,583		42,533		—			379,533
Operating, administrative and general expenses	77,669		78,904		210,073			12,617			66,218		21,225		17,252			327,385
Asset impairment	1,564		—		3,081			—			—		—		—			3,081
Interest expense (income)	9,015		6,921		29,028			(1,520		)	6,478		12,071		(444		)	45,613
Equity in earnings (losses) of affiliates, net	9,909		864		(1,843		)	(524		)	—		—		—			(2,367		)
Other income (expense), net	2,198		3,046		1,706			695			1,647		1,392		1,209			6,649
Income (loss) before income taxes	$	1,228	$	4,497	4,268			3,904			4,534		10,629		(15,599		)	7,736
Income (loss) before income taxes attributable to the noncontrolling interests					—			(2,265		)	—		—		—			(2,265		)
Non-GAAP Income (loss) before income taxes, net of noncontrolling interests attributable to The Andersons, Inc.					$	4,268		$	6,169		$	4,534	$	10,629	$	(15,599	)	$	10,001



	Nine months ended September 30, 2018
(in thousands)	Trade			Ethanol			Plant Nutrient		Rail		Other			Total
Sales and merchandising revenues	$	983,737		$	571,090		$	542,911	$	134,982	$	—		$	2,232,720
Cost of sales and merchandising revenues	908,834			553,756			467,965		94,122		—			2,024,677
Gross profit	74,903			17,334			74,946		40,860		—			208,043
Operating, administrative and general expenses	77,298			10,337			64,210		18,730		19,521			190,096
Asset impairment	1,564			—			—		4,708		—			6,272
Interest expense (income)	9,018			(1,098		)	4,397		7,688		(5		)	20,000
Equity in earnings (losses) of affiliates, net	9,909			10,692			—		—		—			20,601
Other income (expense), net	615			1,741			1,900		911		5,782			10,949
Income (loss) before income taxes	(2,453		)	20,528			8,239		10,645		(13,734		)	23,225
Income (loss) before income taxes attributable to the noncontrolling interests	—			(175		)	—		—		—			(175		)
Non-GAAP Income (loss) before income taxes, net of noncontrolling interests attributable to The Andersons, Inc.	$	(2,453	)	$	20,703		$	8,239	$	10,645	$	(13,734	)	$	23,400

Trade Group

Operating results for the ~~Grain~~Trade Group ~~declined~~increased by ~~$3.3~~$6.7 million compared to the results of the same period last year. Sales and merchandising revenues ~~decreased $478.4~~increased $3,960.7 million ~~which was largely offset by a decrease in~~and cost of sales and merchandising revenues ~~of $469.3~~increased $3,789.1 million for ~~a decrease~~an increase in net gross profit of ~~$9.0~~$171.7 million. Substantially all of the gross profit increase was a direct result of acquiring LTG and Thompsons and reflect strong merchandising results.

Operating, administrative and general expenses increased $132.8 million. The ~~adoption~~acquisition of ~~ASC 606 led to a decrease~~the remaining equity in ~~revenue~~LTG and Thompsons accounted for substantially all of ~~$515.4 million and an equal offsetting decrease to cost of sales related primarily to grain origination revenues. The gross profit decrease was driven by mark-to-market changes on our grain inventory~~this increase. Included in the ~~third quarter.~~

~~In the second quarter~~increased expenses are several purchase accounting related items, such as, $7.3 million of ~~2018, asset impairment charges were recorded for $1.6~~stock-based compensation expense, $7.2 million ~~related to Grain operations in Tennessee. These assets were sold during the third quarter.~~of incremental depreciation and amortization expense and $6.9 million of other transaction-related costs.

Interest expense increased ~~$2.1~~$20.0 million primarily due to ~~rising interest rates~~the acquisition and ~~higher average working capital usage.~~increased borrowing rates. The Company also wrote off $0.6 million in deferred financing fees in conjunction with its new credit facility.

Equity in earnings of affiliates ~~improved~~decreased by ~~$9.0~~$11.8 million ~~due to better operating results from Lansing Trade Group.~~as LTG and Thompsons are now consolidated entities.

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 $14.5 million from the same period last year. Sales and merchandising revenues increased ~~$35.1~~$136.9 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$139.4 million compared to 2018 results. The incremental sales and a ~~result~~majority of the increased cost of sales are attributable to the LTG acquisition. Lower average sales prices from an oversupply of ethanol in the market as well as higher corn costs resulted in decreased gross profit of $2.5 million.

Operating, administrative and general expenses increased $2.3 million primarily due to the ELEMENT facility coming online in the third quarter and an increase in ~~sales volume.~~labor and benefits, most of which was from the addition of the acquired LTG trading team.

Interest expense ~~is $1.0~~decreased $0.4 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~~ELEMENT facility.

Equity in earnings of affiliates ~~increased $3.5~~decreased $11.2 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.~~as a result of higher corn costs compressing sales margins.

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 $3.7 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 $34.4 million. This was ~~more than offset~~driven by ~~an increase~~a significant decrease in ~~cost~~primary and specialty ton volumes. The volume decreases are due to unfavorable weather conditions as well as volumes in the lawn business that did not recur in the current year. Cost of sales and merchandising revenues ~~of $36.1 million. This led~~decreased by $35.0 million following the decrease in sales. While primary nutrient volumes decreased, improved margins more than offset the volume decrease which lead 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.~~$0.6 million.

Operating, administrative and general expenses ~~decreased $3.5~~increased $2.0 million ~~largely~~primarily due to increases in rent and storage from holding more product on hand and unfavorable production costs resulting from low volumes due to weak market conditions.

Interest expense increased $2.1 million from carrying higher levels of inventories into the quarter due to the ~~sale of the Florida farm center locations in 2017.~~wet weather that delayed and reduced planting.

~~Other income, net decreased $2.7 million which is a result of a $4.7 million gain on the sale of farm center locations in Florida and a legal settlement of $2.1 million that were recorded in 2017.~~

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 million~~for the Rail Group remained flat from the same period ~~last~~in the prior year. ~~Sales~~While operating results remained flat, sales and merchandising revenues ~~increased $13.4~~decreased $11.5 million. ~~Revenue from~~This decrease in revenues was driven by a decrease of $20.0 million in car ~~sales increased~~sale revenues as the Company sold more cars in 2018 when scrap rates were more favorable. This decrease in revenues was partially offset by ~~$9.5~~an increase of $6.0 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 $2.5 million ~~decrease~~ in repair and other revenues. Cost of sales and merchandising revenues ~~increased $10.9~~decreased $13.1 million compared to the prior year ~~primarily~~ due to ~~an increase in~~lower car ~~sales. As a result, gross profit increased $2.4 million compared to last year.~~

~~Operating, administrative and general expenses increased primarily due to an increase in depreciation from cars added to the balance sheet as a result of adopting the new revenue accounting standard.~~

~~Asset impairment charges were recorded for $4.7 million from a decision to scrap idle, out-of-favor cars during the second quarter of 2018.~~

~~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~~improved margins in ~~the first six months of 2017 but no longer operational in 2018.~~rail repairs.

Operating, administrative and general expenses decreased ~~$25.9~~$2.2 million ~~primarily~~from the prior year. The prior period results included a $4.7 million impairment charge on idle fleet assets. Partially offsetting the prior period impairment is an increase of $2 million of bad debt expense in the current period.

Interest expense increased $4.4 million due to ~~a decrease in labor, severance, benefits~~higher debt balances and ~~other operating expenses that were incurred in the first nine months of 2017 as a result of the shutdown of the retail business, but not incurred in 2018.~~higher borrowing.

Other ~~income, net~~

Operating, administrative and general expenses decreased ~~by $1.4 million. Income for~~$2.3 million due to severance, acquisition due diligence costs and other IT implementation costs reflected in 2018 ~~includes $3.9 million of gains related to the sale of an investment and an increase~~which did not recur 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 months ended September 30, 2019, the Company recorded an income tax benefit of $1.7 million at an effective rate of (21.4)%. For the nine months ended September 30, 2018, anthe Company recorded income tax expense of $5.7 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)%.~~ The ~~change~~decrease in ~~2018~~ effective tax rate ~~is primarily due~~for the nine months ended September 30, 2019 as compared to the same period last year was primarily attributed to lower pre-tax book income as compared to the prior year, and the impact of discrete net tax benefits from provision to return items and federal income tax credits including a tax benefit of $3.9 million for federal Research & Development Credits (“R&D Credits”) related to tax ~~reform~~years 2015 to 2018 as well as ~~a nondeductible goodwill impairment charge that was recorded in~~an estimated year-to-date tax benefit for federal R&D Credits for the ~~prior~~2019 tax year.

Liquidity and Capital Resources

Working Capital

At September 30, ~~2018~~2019, the Company had working capital of ~~$187.6~~$423.3 million. The following table presents changes in the components of current assets and current liabilities:


(in thousands)	September 30, 2018		September 30, 2017		Variance			September 30, 2019		September 30, 2018		Variance
Current Assets:
Cash and cash equivalents	$	16,820	$	24,478	$	(7,658	)
Cash, cash equivalents and restricted cash								$	21,299	$	16,820	$	4,479
Accounts receivable, net	206,380		196,192		10,188			523,110		206,380		316,730
Inventories	490,331		475,602		14,729			741,086		490,331		250,755
Commodity derivative assets – current	76,861		45,202		31,659			120,510		76,861		43,649
Other current assets	58,374		53,958		4,416			82,197		58,374		23,823
Assets held for sale	29,527		8,383		21,144			573		29,527		(28,954		)
Total current assets	878,293		803,815		74,478			$	1,488,775	$	878,293	$	610,482
Current Liabilities:
Short-term debt	132,000		19,000		113,000			138,249		132,000		6,249
Trade and other payables	344,406		381,359		(36,953		)	594,708		344,406		250,302
Customer prepayments and deferred revenue	38,242		29,520		8,722			35,274		38,242		(2,968		)
Commodity derivative liabilities – current	91,403		38,578		52,825			67,606		91,403		(23,797		)
Accrued expenses and other current liabilities	68,925		67,064		1,861			162,749		68,925		93,824
Current maturities of long-term debt	15,677		53,972		(38,295		)	66,899		15,677		51,222
Total current liabilities	690,653		589,493		101,160			$	1,065,485	$	690,653	$	374,832
Working Capital	$	187,640	$	214,322	$	(26,682	)	$	423,290	$	187,640	$	235,650

September 30, ~~2018~~2019 current assets increased ~~$74.5~~$610 million in comparison to ~~those of~~ September 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 $603 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~~$375 million compared to the prior year primarily due to ~~increases~~the acquisition of LTG, and the debt related changes detailed 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 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 Tennessee due to the sale of these locations.Note 4, Debt.

Sources and Uses of Cash

Operating Activities

Our operating activities provided cash of ~~$28.8~~$319.6 million and ~~$60.7~~$28.8 million in the first nine months of ~~2018~~2019 and ~~2017,~~2018, respectively. The ~~decrease~~increase in cash provided was due to changes in working capital, as discussed ~~above. This was partially offset~~above, driven primarily by ~~a $16.2 million decrease due to lower dividends~~increased activity from ~~equity affiliates.~~the Lansing acquisition.

Investing Activities

Investing activities used cash of ~~$115.9~~$334.9 million through the first nine months of ~~2018~~2019 compared to cash used of ~~$64.8~~$115.9 million in the prior year. Cash used for the ~~purchases~~acquisition of ~~property, plant, equipment, and software~~business increased $149.6 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~~$111 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 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~~$128 million.

Financing Activities

Financing activities provided cash of ~~$69.0~~$12.3 million and ~~used $34.0~~$69.0 million for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. This was largely due to an increase in proceeds from new debt ~~and an increase~~issued to finance the LTG acquisition offset by a reduction in ~~proceeds from noncontrolling interest owner related~~short-term borrowing used to ~~our investment in the bio-refinery.~~finance working capital.

We are party to borrowing arrangements with a syndicate of banks that provide a total of ~~$1,085.0~~$1,628.7 million in borrowings. This amount includes ~~$15.0~~$70.0 million of ~~debt of The Andersons Denison Ethanol LLC, $70 million of debt~~capacity of ELEMENT LLC, ~~and~~ $200.0 million of ~~debt~~capacity of The Andersons Railcar Leasing Company LLC ~~that~~and $181.2 million of capacity of Thompsons, all of which is non-recourse to the Company. Of that total, wethe Company had ~~$823.1~~$1,207.7 million available for borrowing at September 30, 2018. Peak short-term 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.2019.

We paid ~~$14.0~~$16.6 million in dividends in the first nine months of ~~2018~~2019 compared to ~~$13.5~~$14.0 million in the prior year. We paid $0.17 per common share for the dividends paid in January, April and July of 2019 and $0.165 per common share for the dividends paid in January, 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~~23, 2019 we declared a cash dividend of ~~$0.165~~$0.17 per common share payable on October 22, ~~2018~~2019 to shareholders of record on October 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 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 September 30, 2019 are as follows:



	Payments Due by Period
(in thousands)	2019 (remaining three months)		2020-2021		2022-2023		After 2023		Total
Long-term debt, recourse	$	44,192	$	133,096	$	312,667	$	325,801	$	815,756
Long-term debt, non-recourse	4,829		130,859		9,961		6,370		152,019
Interest obligations (a)	32,978		58,858		15,450		29,241		136,527
Operating leases (b)	8,612		39,845		19,277		10,748		78,482
Finance leases	1,140		19,947		4,683		18,184		43,954
Purchase commitments (c)	1,809,263		909,153		6,498		—		2,724,914
Other long-term liabilities (d)	3,317		6,711		6,804		24,695		41,527
Construction commitment (e)	5,199		—		—		—		5,199
Total contractual cash obligations	$	1,909,530	$	1,298,469	$	375,340	$	415,039	$	3,998,378

(a) Future interest obligations are calculated based on interest rates in effect as of September 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 43% 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 $2,398 million for the purchase of commodities, including grain from producers and $246 million for the purchase of ethanol from the unconsolidated ethanol LLCs. Effective October 1, 2019, there will no longer be any purchase commitments from the unconsolidated ethanol LLCs as TAMH will be a consolidated entity. 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 Trade (formerly Grain) and Ethanol Groups in Item 1 of the 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 $5.2 million for the remainder of 2019 to complete the construction of this plant.

At September 30, 2019, we had standby letters of credit outstanding of $32.8 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 30, ~~2018:~~2019:



Method of Control	Financial Statement	Units
Owned - railcars available for sale	On balance sheet – current	~~665~~1,328
Owned - railcar assets leased to others	On balance sheet – non-current	~~18,853~~21,394
Railcars leased from financial intermediaries	Off balance sheet	~~2,502~~1,922
Railcars in non-recourse arrangements	Off balance sheet	~~326~~177
Total Railcars		~~22,346~~24,821
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~~963 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 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 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
July 2019	37,174	$	27.23	—	—
August 2019	—	—		—	—
September 2019	532	22.71		—	—
Total	37,706	$	27.17	—	—

(1) During the three months ended September 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 of shares have occurred in 2018.~~programs.

Item 4. Mine Safety Disclosure

We are committed to protecting the occupational health and well-being of 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 implemented employee training that is geared toward maintaining a high level of awareness and knowledge of safety and health issues in 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~~		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)

12		~~Computation of Ratio of Earnings to Fixed Charges~~

31.1		Certification of the Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a) (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 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~~8, 2019		By /s/ Patrick E. Bowe
		Patrick E. Bowe
		Chief Executive Officer (Principal Executive Officer)

Date: November ~~6, 2018~~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~~		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)

12		~~Computation of Ratio of Earnings to Fixed Charges~~

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

4952



(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	)