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ANDE Andersons

Filed: 4 Aug 21, 1:37pm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended 06/30/2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to  .             
Commission file number 000-20557
 
ande-20210630_g1.jpg
THE ANDERSONS, INC.
(Exact name of the registrant as specified in its charter)
 
Ohio34-1562374
(State of incorporation or organization)(I.R.S. Employer Identification No.)
1947 Briarfield Boulevard
MaumeeOhio43537
(Address of principal executive offices)(Zip Code)

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

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

The registrant had 33,282,749 common shares outstanding at July 23, 2021.


THE ANDERSONS, INC.
INDEX
 

The Andersons, Inc. | Q2 2021 Form 10-Q | 2


Part I. Financial Information
Item 1. Financial Statements

The Andersons, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)(In thousands)
June 30,
2021
December 31,
2020
June 30,
2020
Assets
Current assets:
Cash and cash equivalents$27,538 $29,123 $30,011 
Accounts receivable, net721,575 659,834 537,011 
Inventories (Note 2)
912,299 1,300,693 616,323 
Commodity derivative assets – current (Note 5)
507,148 320,706 112,089 
Other current assets65,740 106,053 102,755 
Total current assets2,234,300 2,416,409 1,398,189 
Other assets:
Goodwill135,709 135,709 135,709 
Other intangible assets, net127,756 142,940 160,180 
Right of use assets, net61,299 56,031 62,838 
Other assets, net73,678 49,907 48,235 
Total other assets398,442 384,587 406,962 
Rail assets leased to others, net (Note 3)
574,585 591,946 592,821 
Property, plant and equipment, net (Note 3)
841,762 879,179 906,017 
Total assets$4,049,089 $4,272,121 $3,303,989 
Liabilities and equity
Current liabilities:
Short-term debt (Note 4)
$757,271 $403,703 $96,071 
Trade and other payables547,169 957,683 503,892 
Customer prepayments and deferred revenue58,155 180,160 45,734 
Commodity derivative liabilities – current (Note 5)
90,366 146,990 65,186 
Current maturities of long-term debt (Note 4)
56,582 75,475 68,477 
Accrued expenses and other current liabilities181,015 167,671 147,422 
Total current liabilities1,690,558 1,931,682 926,782 
Long-term lease liabilities41,852 37,177 41,061 
Long-term debt, less current maturities (Note 4)
866,454 916,540 975,973 
Deferred income taxes173,212 170,147 162,475 
Other long-term liabilities52,049 55,915 65,615 
Total liabilities2,824,125 3,111,461 2,171,906 
Commitments and contingencies (Note 13)
000
Shareholders’ equity:
Common shares, without par value (63,000 shares authorized; 33,786, 33,599 and 33,599 shares issued at 6/30/2021, 12/31/2020 and 6/30/2020, respectively)140 138 138 
Preferred shares, without par value (1,000 shares authorized; NaN issued)0 
Additional paid-in-capital357,606 348,714 343,730 
Treasury shares, at cost (111, 45 and 40 shares at 6/30/2021, 12/31/2020 and 6/30/2020, respectively)(2,650)(966)(953)
Accumulated other comprehensive loss(1,837)(12,076)(26,245)
Retained earnings669,241 626,081 622,718 
Total shareholders’ equity of The Andersons, Inc.1,022,500 961,891 939,388 
Noncontrolling interests202,464 198,769 192,695 
Total equity1,224,964 1,160,660 1,132,083 
Total liabilities and equity$4,049,089 $4,272,121 $3,303,989 
See Notes to Condensed Consolidated Financial Statements
The Andersons, Inc. | Q2 2021 Form 10-Q | 1

The Andersons, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)(In thousands, except per share data)
 
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Sales and merchandising revenues (Note 6)
$3,273,726 $1,890,180 $5,909,455 $3,743,286 
Cost of sales and merchandising revenues3,099,682 1,783,914 5,612,699 3,573,890 
Gross profit174,044 106,266 296,756 169,396 
Operating, administrative and general expenses109,976 90,136 209,848 195,196 
Interest expense, net13,454 11,827 26,623 27,414 
Other income, net:
Equity in earnings of affiliates, net845 79 2,639 209 
Other income, net5,307 3,450 12,849 8,263 
Income (loss) before income taxes56,766 7,832 75,773 (44,742)
Income tax provision (benefit)10,642 (12,200)16,387 (13,664)
Net income (loss)46,124 20,032 59,386 (31,078)
Net income (loss) attributable to noncontrolling interests2,625 (10,407)780 (23,856)
Net income (loss) attributable to The Andersons, Inc.$43,499 $30,439 $58,606 $(7,222)
Per common share:
Basic earnings (loss) attributable to The Andersons, Inc. common shareholders (Note 9)
$1.31 $0.92 $1.76 $(0.22)
Diluted earnings (loss) attributable to The Andersons, Inc. common shareholders (Note 9)
$1.30 $0.92 $1.74 $(0.22)
See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc. | Q2 2021 Form 10-Q | 2

The Andersons, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)(In thousands)
 
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Net income (loss)$46,124 $20,032 $59,386 $(31,078)
Other comprehensive income (loss), net of tax:
Change in unrecognized actuarial gain (loss) and prior service cost(234)15 (337)(101)
Foreign currency translation adjustments1,469 3,249 2,693 (3,390)
Cash flow hedge activity(1,858)(1,860)7,883 (15,523)
Other comprehensive income (loss)(623)1,404 10,239 (19,014)
Comprehensive income (loss)45,501 21,436 69,625 (50,092)
Comprehensive income (loss) attributable to the noncontrolling interests2,625 (10,407)780 (23,856)
Comprehensive income (loss) attributable to The Andersons, Inc.$42,876 $31,843 $68,845 $(26,236)
See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc. | Q2 2021 Form 10-Q | 3

The Andersons, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)(In thousands)
 Six months ended June 30,
 20212020
Operating Activities
Net income (loss)$59,386 $(31,078)
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities:
Depreciation and amortization95,154 93,898 
Bad debt (recovery) expense, net(1,156)6,290 
Equity in earnings of affiliates, net of dividends(2,639)(209)
Gain on sales of Rail assets and related leases, net(4,987)(569)
(Gain) loss on sales of assets, net(1,266)341 
Stock-based compensation expense4,112 5,016 
Deferred federal income tax170 21,761 
Inventory write down2,599 10,922 
Other2,971 2,797 
Changes in operating assets and liabilities:
Accounts receivable(58,338)(9,181)
Inventories390,506 536,951 
Commodity derivatives(250,691)14,980 
Other assets35,568 (24,784)
Payables and other accrued expenses(516,883)(481,624)
Net cash (used in) provided by operating activities(245,494)145,511 
Investing Activities
Purchases of Rail assets(4,751)(24,649)
Proceeds from sale of Rail assets15,616 4,637 
Purchases of property, plant and equipment and capitalized software(34,264)(44,644)
Proceeds from sale of assets3,794 1,503 
Purchase of investments(4,701)(2,849)
Other832 
Net cash used in investing activities(23,474)(66,002)
Financing Activities
Net borrowings (payments) under lines of credit(258,157)(47,564)
Proceeds from issuance of short-term debt608,250 
Proceeds from issuance of long-term debt108,300 165,975 
Payments of long-term debt(177,586)(203,835)
Contributions from noncontrolling interest owner2,940 4,409 
Distributions to noncontrolling interest owner(25)(10,298)
Payments of debt issuance costs(2,059)(250)
Dividends paid(11,677)(11,469)
Other(2,436)(2,036)
Net cash provided by (used in) financing activities267,550 (105,068)
Effect of exchange rates on cash and cash equivalents(167)675 
Decrease in cash and cash equivalents(1,585)(24,884)
Cash and cash equivalents at beginning of period29,123 54,895 
Cash and cash equivalents at end of period$27,538 $30,011 
See Notes to Condensed Consolidated Financial Statements
The Andersons, Inc. | Q2 2021 Form 10-Q | 4

    The Andersons, Inc.
Condensed Consolidated Statements of Equity
(Unaudited)(In thousands, except per share data)
Three Months Ended
 Common
Shares
Additional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive Income
(Loss)
Retained
Earnings
Noncontrolling
Interests
Total
Balance at March 31, 2020$137 $341,382 $(652)$(27,649)$599,039 $201,605 $1,113,862 
Net income (loss)30,439 (10,407)20,032 
Other comprehensive loss(234)(234)
Amounts reclassified from accumulated other comprehensive income1,638 1,638 
Contributions from noncontrolling interests1,102 1,102 
Noncontrolling interests recognized in connection with business combination(459)395(64)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (20 shares)12,807 (454)(843)1,511 
Dividends declared ($0.175 per common share)(5,764)(5,764)
Restricted share award dividend equivalents153 (153)0 
Balance at June 30, 2020$138 $343,730 $(953)$(26,245)$622,718 $192,695 $1,132,083 
Balance at March 31, 2021$140 $355,961 $(2,872)$(1,214)$631,652 $198,884 $1,182,551 
Net income (loss)43,499 2,625 46,124 
Other comprehensive loss(2,108)(2,108)
Amounts reclassified from accumulated other comprehensive income1,485 1,485 
Contributions from noncontrolling interests980 980 
Distributions to noncontrolling interests(25)(25)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (11 shares)1,645 138 1,783 
Dividends declared ($0.175 per common share)(5,826)(5,826)
Restricted share award dividend equivalents84 (84)0 
Balance at June 30, 2021$140 $357,606 $(2,650)$(1,837)$669,241 $202,464 $1,224,964 
The Andersons, Inc. | Q2 2021 Form 10-Q | 5

Six Months Ended
 Common
Shares
Additional
Paid-in
Capital
Treasury
Shares
Accumulated
Other
Comprehensive Income
(Loss)
Retained
Earnings
Noncontrolling
Interests
Total
Balance at December 31, 2019$137 $345,359 $(7,342)$(7,231)$642,687 $222,045 $1,195,655 
Net income (loss)(7,222)(23,856)(31,078)
Other comprehensive loss(21,208)(21,208)
Amounts reclassified from accumulated other comprehensive income2,194 2,194 
Contributions from noncontrolling interests4,409 4,409 
Distributions to noncontrolling interests(10,298)(10,298)
Noncontrolling interests recognized in connection with business combination(459)395 (64)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (167 shares)1(1,170)5,998 (843)3,986 
Dividends declared ($0.350 per common share)(11,513)(11,513)
Restricted share award dividend equivalents391 (391)0 
Balance at June 30, 2020$138 $343,730 $(953)$(26,245)$622,718 $192,695 $1,132,083 
Balance at December 31, 2020$138 $348,714 $(966)$(12,076)$626,081 $198,769 $1,160,660 
Net income (loss)58,606 780 59,386 
Other comprehensive income7,311 7,311 
Amounts reclassified from accumulated other comprehensive income2,928 2,928 
Contributions from noncontrolling interests2,940 2,940 
Distributions to noncontrolling interests(25)(25)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (67 shares)2 8,892 (2,016)(3,480)3,398 
Dividends declared ($0.350 per common share)(11,634)(11,634)
Restricted share award dividend equivalents332 (332)0 
Balance at June 30, 2021$140 $357,606 $(2,650)$(1,837)$669,241 $202,464 $1,224,964 
See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc. | Q2 2021 Form 10-Q | 6

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


1. Basis of Presentation and Consolidation

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

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

Simplified Accounting for Income Taxes

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


2. Inventories

Major classes of inventories are presented below. Readily Marketable Inventories ("RMI") are agricultural commodity inventories such as corn, soybeans, wheat, and ethanol co-products, among others, carried at net realizable value which approximates fair value based on their commodity characteristics, widely available markets, and pricing mechanisms. The net realizable value of RMI is calculated as the fair value (spot price of the commodity in an exchange), less cost of disposal and transportation based on the local market. All other inventories are held at lower of cost or net realizable value.
(in thousands)June 30,
2021
December 31,
2020
June 30,
2020
Grain and other agricultural products (a)$636,380 $1,025,809 $452,339 
Frac sand and propane (a)11,265 12,477 6,498 
Ethanol and co-products (a)155,993 114,895 63,195 
Plant nutrients and cob products101,286 139,885 87,346 
Railcar repair parts7,375 7,627 6,945 
Total Inventories$912,299 $1,300,693 $616,323 
(a) Includes RMI of $612.2 million, $983.2 million and $418.0 million at June 30, 2021, December 31, 2020 and June 30, 2020, respectively.

The Andersons, Inc. | Q2 2021 Form 10-Q | 7


Inventories do not include 1.2 million, 3.0 million and 1.7 million bushels of grain held in storage for others as of June 30, 2021, December 31, 2020 and June 30, 2020, respectively. The Company does not have title to the grain and is only liable for any deficiencies in grade or shortage of quantity that may arise during the storage period. Management has not experienced historical losses on any deficiencies and does not anticipate material losses in the future.

Lower of cost or net realizable value charges were $2.6 million and $10.9 million for the six months ended June 30, 2021 and June 30, 2020, respectively. The charge in the prior year was a result of lower ethanol market prices and decreased demand as a result of the COVID-19 pandemic.


3. Property, Plant and Equipment

The components of Property, plant and equipment, net are as follows:
(in thousands)June 30,
2021
December 31,
2020
June 30,
2020
Land$39,884 $40,222 $40,188 
Land improvements and leasehold improvements97,454 96,700 96,028 
Buildings and storage facilities386,832 387,992 377,652 
Machinery and equipment948,517 925,074 881,144 
Construction in progress19,987 19,725 35,982 
1,492,674 1,469,713 1,430,994 
Less: accumulated depreciation650,912 590,534 524,977 
Property, plant and equipment, net$841,762 $879,179 $906,017 

Depreciation expense on property, plant and equipment was $64.2 million and $62.3 million for the six months ended June 30, 2021 and 2020, respectively. Additionally, depreciation expense on property, plant and equipment was $32.3 million and $31.2 million for the three months ended June 30, 2021 and 2020, respectively.
Rail Assets
The components of Rail assets leased to others are as follows:
(in thousands)June 30,
2021
December 31,
2020
June 30,
2020
Rail assets leased to others$735,255 $750,473 $742,107 
Less: accumulated depreciation160,670 158,527 149,286 
Rail assets, net$574,585 $591,946 $592,821 

Depreciation expense on Rail assets leased to others amounted to $15.3 million and $15.4 million for the six months ended June 30, 2021 and 2020, respectively. Additionally, depreciation expense on Rail assets leased to others amounted to $7.6 million and $7.7 million for the three months ended June 30, 2021 and 2020, respectively.


The Andersons, Inc. | Q2 2021 Form 10-Q | 8


4. Debt

Short-term and long-term debt at June 30, 2021, December 31, 2020 and June 30, 2020 consisted of the following:
(in thousands)June 30,
2021
December 31,
2020
June 30,
2020
Short-term debt – non-recourse$120,020 $93,192 $43,284 
Short-term debt – recourse637,251 310,511 52,787 
Total short-term debt$757,271 $403,703 $96,071 
Current maturities of long-term debt – non-recourse$9,078 $6,438 $4,845 
Current maturities of long-term debt – recourse47,504 69,037 63,632 
Total current maturities of long-term debt$56,582 $75,475 $68,477 
Long-term debt, less: current maturities – non-recourse$116,219 $143,406 $325,819 
Long-term debt, less: current maturities – recourse750,235 773,134 650,154 
Total long-term debt, less: current maturities$866,454 $916,540 $975,973 

On February 4, 2021, the Company completed the second amendment to its credit agreement dated January 11, 2019. The amendment, which replaced an underwritten bridge loan received on January 21, 2021, provided for a short-term $250 million term note in which the entire stated principal is due on December 31, 2021. The term note bears interest at variable rates, which are based on LIBOR plus an applicable spread.

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

The total borrowing capacity of the Company's lines of credit at June 30, 2021 was $1,404.6 million of which the Company had a total of $1,173.5 million available for borrowing under its lines of credit. The Company's borrowing capacity is reduced by a combination of outstanding borrowings and letters of credit.

As of June 30, 2021, December 31, 2020 and June 30, 2020, the estimated fair value of long-term debt, including the current portion, was $946.8 million, $1,026.8 million and $1,090.1 million, respectively. The Company estimates the fair value of its long-term debt based upon the Company’s credit standing and current interest rates offered to the Company on similar bonds and rates currently available to the Company for long-term borrowings with similar terms and remaining maturities.

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


5. Derivatives

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

The Andersons, Inc. | Q2 2021 Form 10-Q | 9


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

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

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

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

(in thousands)June 30, 2021December 31, 2020June 30, 2020
Cash collateral paid$219,469 $208,670 $799 
Fair value of derivatives(180,842)(157,301)21,363 
Net derivative asset position$38,627 $51,369 $22,162 

The following table presents, on a gross basis, current and non-current commodity derivative assets and liabilities:
June 30, 2021
(in thousands)Commodity Derivative Assets - CurrentCommodity Derivative Assets - NoncurrentCommodity Derivative Liabilities - CurrentCommodity Derivative Liabilities - NoncurrentTotal
Commodity derivative assets$547,186 $16,480 $34,327 $423 $598,416 
Commodity derivative liabilities(259,507)(873)(124,693)(3,874)(388,947)
Cash collateral paid219,469 0 0 0 219,469 
Balance sheet line item totals$507,148 $15,607 $(90,366)$(3,451)$428,938 

The Andersons, Inc. | Q2 2021 Form 10-Q | 10

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

June 30, 2020
(in thousands)Commodity Derivative Assets - CurrentCommodity Derivative Assets - NoncurrentCommodity Derivative Liabilities - CurrentCommodity Derivative Liabilities - NoncurrentTotal
Commodity derivative assets$142,110 $2,916 $5,511 $124 $150,661 
Commodity derivative liabilities(30,820)(214)(70,697)(3,813)(105,544)
Cash collateral paid799 799 
Balance sheet line item totals$112,089 $2,702 $(65,186)$(3,689)$45,916 

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

 Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Gains on commodity derivatives included in cost of sales and merchandising revenues$73,688 $8,797 $240,673 $39,757 


The Andersons, Inc. | Q2 2021 Form 10-Q | 11

The Company had the following volume of commodity derivative contracts outstanding (on a gross basis) at June 30, 2021, December 31, 2020 and June 30, 2020:
June 30, 2021
(in thousands)Number of BushelsNumber of GallonsNumber of PoundsNumber of Tons
Non-exchange traded:
Corn696,674 0 0 0 
Soybeans75,507 0 0 0 
Wheat129,264 0 0 0 
Oats45,810 0 0 0 
Ethanol0 198,316 0 0 
Corn oil0 0 70,637 0 
Soybean Oil0 0 23,952 0 
Other7,803 3,957 2,757 1,925 
Subtotal955,058 202,273 97,346 1,925 
Exchange traded:
Corn243,190 0 0 0 
Soybeans49,375 0 0 0 
Wheat80,004 0 0 0 
Oats1,430 0 0 0 
Ethanol0 112,812 0 0 
Propane0 18,480 0 0 
Other0 5 2,351 197 
Subtotal373,999 131,297 2,351 197 
Total1,329,057 333,570 99,697 2,122 
December 31, 2020
(in thousands)Number of BushelsNumber of GallonsNumber of PoundsNumber of Tons
Non-exchange traded:
Corn684,654 
Soybeans73,521 
Wheat109,661 
Oats27,482 
Ethanol124,795 
Corn oil36,015 
Soybean oil26,510 
Other4,371 2,058 740 1,859 
Subtotal899,689 126,853 63,265 1,859 
Exchange traded:
Corn267,792 
Soybeans53,730 
Wheat80,733 
Oats1,800 
Ethanol73,584 
Propane17,094 
Other2,898 14 149 
Subtotal404,055 93,576 14 149 
Total1,303,744 220,429 63,279 2,008 

The Andersons, Inc. | Q2 2021 Form 10-Q | 12

June 30, 2020
(in thousands)Number of BushelsNumber of GallonsNumber of PoundsNumber of Tons
Non-exchange traded:
Corn437,275 
Soybeans50,012 
Wheat95,133 
Oats49,053 
Ethanol141,549 
Corn oil8,098 
Other25,005 5,000 415 2,370 
Subtotal656,478 146,549 8,513 2,370 
Exchange traded:
Corn287,840 
Soybeans36,970 
Wheat67,040 
Oats685 
Ethanol27,300 
Propane28,602 
Other13,650 340 208 
Subtotal392,535 69,552 340 208 
Total1,049,013 216,101 8,853 2,578 


Interest Rate and Other Derivatives

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

The gains or losses on the derivatives designated as hedging instruments are recorded in Other Comprehensive Income (Loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.
At June 30, 2021, December 31, 2020 and June 30, 2020, the Company had recorded the following amounts for the fair value of the Company's other derivatives:
(in thousands)June 30, 2021December 31, 2020June 30, 2020
Derivatives not designated as hedging instruments
Interest rate contracts included in Accrued expenses and other current liabilities$0 $(589)$(1,174)
Interest rate contracts included in Other long-term liabilities(309)(430)(553)
Foreign currency contracts included in Other current assets1,523 2,753 791 
Derivatives designated as hedging instruments
Interest rate contracts included in Other current assets$3,849 $164 $
Interest rate contracts included in Accrued expenses and other current liabilities(6,944)(6,664)(8,806)
Interest rate contracts included in Other long-term liabilities(11,506)(18,539)(24,388)

The Andersons, Inc. | Q2 2021 Form 10-Q | 13

The recording of derivatives gains and losses and the financial statement line in which they are located are as follows:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Derivatives not designated as hedging instruments
Interest rate derivative gains (losses) included in Interest income (expense), net$355 $186 $709 $(720)
Derivatives designated as hedging instruments
Interest rate derivative losses included in Other comprehensive income (loss)2,471 (2,475)$(10,476)$(20,657)
Interest rate derivatives losses included in Interest income (expense), net$(1,656)$(1,917)(3,273)(2,700)

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


Interest Rate
Long-term
Swap20142023$23.0 Interest rate component of debt - not accounted for as a hedge1.9%
Swap20172022$20.0 Interest rate component of debt - accounted for as a hedge1.8%
Swap20182023$10.0 Interest rate component of debt - accounted for as a hedge2.6%
Swap20182025$20.0 Interest rate component of debt - accounted for as a hedge2.7%
Swap20192025$100.0 Interest rate component of debt - accounted for as a hedge2.5%
Swap20192025$50.0 Interest rate component of debt - accounted for as a hedge2.5%
Swap20192025$50.0 Interest rate component of debt - accounted for as a hedge2.5%
Swap20202023$50.0 Interest rate component of debt - accounted for as a hedge0.0% to 0.8%
Swap20202023$50.0 Interest rate component of debt - accounted for as a hedge0.0% to 0.7%
Swap20202030$50.0 Interest rate component of debt - accounted for as a hedge0.0% to 0.8%
Swap20202030$50.0 Interest rate component of debt - accounted for as a hedge0.0% to 0.8%


6. Revenue

Many of the Company’s revenues are generated from contracts that are outside the scope of Accounting Standard Codification ("ASC") 606 and thus are accounted for under other accounting standards. Specifically, many of the Company's Trade and Ethanol sales contracts are derivatives under ASC 815, Derivatives and Hedging and the Rail leasing revenue is accounted for under ASC 842, Leases. The breakdown of revenues between ASC 606 and other standards are as follows:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Revenues under ASC 606$640,083 $459,105 $1,146,551 $806,607 
Revenues under ASC 8152,611,981 1,406,307 4,719,603 2,886,360 
Revenues under ASC 84221,662 24,768 43,301 50,319 
Total revenues$3,273,726 $1,890,180 $5,909,455 $3,743,286 

The Andersons, Inc. | Q2 2021 Form 10-Q | 14


The Company's revenues under ASC 842 are as follows:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Operating lease revenue$20,458 $23,276 $41,308 $47,332 
Sales-type lease revenue101 232 202 334 
Variable lease revenue1,103 1,260 1,791 2,653 
Total revenues$21,662 $24,768 $43,301 $50,319 


The remainder of this note applies only to those revenues that are accounted for under ASC 606.
Disaggregation of revenue
The following tables disaggregate revenues under ASC 606 by major product/service line for the three and six months ended June 30, 2021 and 2020, respectively:
Three months ended June 30, 2021
(in thousands)TradeEthanolPlant NutrientRailTotal
Specialty nutrients$0 $0 $84,915 $0 $84,915 
Primary nutrients0 0 213,604 0 213,604 
Services2,114 0 3,869 9,233 15,216 
Products and co-products74,948 184,263 0 0 259,211 
Frac sand and propane36,649 0 0 0 36,649 
Other4,037 394 19,020 7,037 30,488 
Total$117,748 $184,657 $321,408 $16,270 $640,083 
Three months ended June 30, 2020
(in thousands)TradeEthanolPlant NutrientRailTotal
Specialty nutrients$$$82,634 $$82,634 
Primary nutrients188,463 188,463 
Service2,357 2,596 8,658 13,611 
Products and co-products63,344 75,773 139,117 
Frac sand and propane21,439 21,439 
Other5,330 352 6,132 2,027 13,841 
Total$92,470 $76,125 $279,825 $10,685 $459,105 
Six months ended June 30, 2021
(in thousands)TradeEthanolPlant NutrientRailTotal
Specialty nutrients$0 $0 $161,721 $0 $161,721 
Primary nutrients0 0 285,263 0 285,263 
Service3,568 0 5,158 19,177 27,903 
Products and co-products146,936 329,907 0 0 476,843 
Frac sand and propane128,714 0 0 0 128,714 
Other6,969 4,153 38,518 16,467 66,107 
Total$286,187 $334,060 $490,660 $35,644 $1,146,551 

The Andersons, Inc. | Q2 2021 Form 10-Q | 15

Six months ended June 30, 2020
(in thousands)TradeEthanolPlant NutrientRailTotal
Specialty nutrients$$$155,865 $$155,865 
Primary nutrients234,153 234,153 
Service4,043 2,778 17,394 24,215 
Products and co-products116,509 177,472 293,981 
Frac sand and propane71,314 71,314 
Other9,318 968 11,942 4,851 27,079 
Total$201,184 $178,440 $404,738 $22,245 $806,607 


Approximately 3% of revenues accounted for under ASC 606 during both three and six months periods ended June 30, 2021 and 2020, respectively, are recorded over time which primarily relates to service revenues noted above.

Contract balances

The balances of the Company’s contract liabilities were $17.0 million and $45.6 million as of June 30, 2021 and December 31, 2020, respectively. The difference between the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. The main driver of the contract liabilities balance is payments for primary and specialty nutrients received in advance of fulfilling our performance obligations under our customer contracts. Due to seasonality of this business, contract liabilities were built up at year-end in preparation for the spring application season. As expected the revenue recognized in the current period satisfied the contract liabilities throughout the spring application season.


7. Income Taxes

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

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

For the three months ended June 30, 2021, the Company recorded income tax expense of $10.6 million at an effective income tax rate of 18.7%. The annual effective tax rate differs from the statutory U.S. Federal tax rate due to the impacts of state and local taxes and non-deductible compensation, offset by benefits related to the treatment of mark-to-market activity on certain contracts in the Ethanol segment. The change in effective tax rate for the three months ended June 30, 2021 as compared to the same period last year was primarily attributed to the favorable impact of the mark-to-market activity on certain contracts in the Ethanol segment, coupled with additional benefits from the CARES Act in the prior year. For the three months ended June 30, 2020, using the discrete effective tax rate method to calculate the interim tax provision, the Company recorded an income tax benefit of $12.2 million at an effective income tax rate of 155.8%.

The Andersons, Inc. | Q2 2021 Form 10-Q | 16


For the six months ended June 30, 2021, the Company recorded an income tax expense of $16.4 million at an effective income tax rate of 21.6%. The annual effective tax rate differs from the statutory U.S. Federal tax rate due to the impacts of state and local taxes and non-deductible compensation, offset by benefits related to the treatment of mark-to-market activity on certain contracts in the Ethanol segment. The change in effective tax rate for the six months ended June 30, 2021, as compared to the same period last year was primarily attributed to additional tax benefits from net operating loss carry backs as a result of the CARES Act in the prior year, offset by the favorable impact of the mark-to-market activity on the contracts within the ethanol segment. For the six months ended June 30, 2020, using the discrete effective tax rate method to calculate the interim tax provision, the Company recorded an income tax benefit of $13.7 million at an effective income tax rate of 30.5%.

The 2021 effective tax rate can be affected by variances in the estimates and amounts of taxable income 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 $44.4 million and $24.7 million as of June 30, 2021 and June 30, 2020, respectively. The unrecognized tax benefits of $44.4 million include $40.6 million recorded as a reduction of the deferred tax asset and refundable credits associated with the Federal Research and Development Credits.


8. Accumulated Other Comprehensive Income (Loss)

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

Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Currency Translation Adjustment
Beginning balance$6,963 $(5,574)$5,739 $1,065 
Other comprehensive income (loss) before reclassifications1,469 3,249 2,693 (3,390)
  Tax effect0 0 
Other comprehensive income (loss), net of tax1,469 3,249 2,693 (3,390)
Ending balance$8,432 $(2,325)$8,432 $(2,325)
Hedging Adjustment
Beginning balance$(8,365)$(23,106)$(18,106)$(9,443)
Other comprehensive income (loss) before reclassifications(3,514)(3,669)4,613 (18,059)
Amounts reclassified from accumulated other comprehensive income (loss)(a)2,208 2,412 4,360 3,381 
  Tax effect(552)(603)(1,090)(845)
Other comprehensive income (loss), net of tax(1,858)(1,860)7,883 (15,523)
Ending balance$(10,223)$(24,966)$(10,223)$(24,966)
Pension and Other Postretirement Adjustment
Beginning balance$(70)$773 $33 $889 
Other comprehensive income (loss) before reclassifications(63)186 5 241 
Amounts reclassified from accumulated other comprehensive income (loss)(b)(228)(228)(456)(456)
  Tax effect57 57 114 114 
Other comprehensive income (loss), net of tax(234)15 (337)(101)
Ending balance$(304)$788 $(304)$788 
Investments in Convertible Preferred Securities Adjustment
Beginning balance$258 $258 $258 $258 
Other comprehensive income (loss), net of tax0 0 
Ending balance$258 $258 $258 $258 
Total AOCI Ending Balance$(1,837)$(26,245)$(1,837)$(26,245)
(a) Amounts reclassified from gain (loss) on cash flow hedges are reclassified from AOCI to income when the hedged item affects earnings and is recognized in Interest expense, net. See Note 5 for additional information.
The Andersons, Inc. | Q2 2021 Form 10-Q | 17

(b) This accumulated other comprehensive loss component is included in the computation of net periodic benefit cost recorded in Operating, administrative and general expenses.

The Andersons, Inc. | Q2 2021 Form 10-Q | 18


9. Earnings Per Share
(in thousands, except per common share data)Three months ended June 30,Six months ended June 30,
2021202020212020
Numerator:
Net income (loss) available to The Andersons Inc. common shareholders$43,499 $30,439 $58,606 $(7,222)
Denominator:
Weighted average shares outstanding – basic33,263 32,932 33,226 32,876 
Effect of dilutive awards316 77 391 
Weighted average shares outstanding – diluted33,579 33,009 33,617 32,876 
Earnings (loss) per share
Basic$1.31 $0.92 $1.76 $(0.22)
Diluted$1.30 $0.92 $1.74 $(0.22)

There were 57 thousand and 471 thousand antidilutive awards for the three months ended June 30, 2021 and June 30, 2020, respectively. There were 82 thousand antidilutive share awards outstanding for the six months ended June 30, 2021.
All awards were antidilutive for the six months ended June 30, 2020 as the Company incurred a net loss.


10. Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2021, December 31, 2020 and June 30, 2020:
(in thousands)June 30, 2021
Assets (liabilities)Level 1Level 2Level 3Total
Commodity derivatives, net (a)
$38,627 $390,311 $0 $428,938 
Provisionally priced contracts (b)
32,710 (25,210)0 7,500 
Convertible preferred securities (c)
0 0 13,550 13,550 
Other assets and liabilities (d)
5,373 (14,909)0 (9,536)
Total$76,710 $350,192 $13,550 $440,452 
(in thousands)December 31, 2020
Assets (liabilities)Level 1Level 2Level 3Total
Commodity derivatives, net (a)
$51,369 $126,098 $$177,467 
Provisionally priced contracts (b)
19,793 (48,818)(29,025)
Convertible preferred securities (c)
8,849 8,849 
Other assets and liabilities (d)
7,972 (26,058)(18,086)
Total$79,134 $51,222 $8,849 $139,205 
(in thousands)June 30, 2020
Assets (liabilities)Level 1Level 2Level 3Total
Commodity derivatives, net (a)
$22,162 $23,754 $$45,916 
Provisionally priced contracts (b)
(15,139)(41,897)(57,036)
Convertible preferred securities (c)
8,654 8,654 
Other assets and liabilities (d)
4,102 (34,922)(30,820)
Total$11,125 $(53,065)$8,654 $(33,286)
(a)Includes associated cash posted/received as collateral
(b)Included in "Provisionally priced contracts" are those instruments based only on underlying futures values (Level 1) and delayed price contracts (Level 2)
(c)Recorded in “Other assets, net” on the Company’s Consolidated Balance Sheets related to certain available for sale securities.
(d)Included in other assets and liabilities are assets held by the Company to fund deferred compensation plans and foreign exchange derivative contracts (Level 1), as well as, interest rate derivatives (Level 2).

The Andersons, Inc. | Q2 2021 Form 10-Q | 19


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

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

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

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

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

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

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

The Andersons, Inc. | Q2 2021 Form 10-Q | 20


The following tables summarize quantitative information about the Company's Level 3 fair value measurements as of June 30, 2021, December 31, 2020 and June 30, 2020:
Quantitative Information about Recurring Level 3 Fair Value Measurements
Fair Value as of
(in thousands)June 30, 2021December 31, 2020June 30, 2020Valuation MethodUnobservable InputWeighted Average
Convertible preferred securities (a)
$13,550 $8,849 $8,654 Implied based on market pricesN/AN/A
(a) The Company considers observable price changes and other additional market data available to estimate fair value, including additional capital raising, internal valuation models, progress towards key business milestones, and other relevant market data points.

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

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


11. Related Parties

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

The following table sets forth the related party transactions entered into for the time periods presented:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Sales revenues$85,294 $29,659 $151,940 $84,353 
Purchases of product and capital assets8,662 6,419 20,336 21,996 

(in thousands)June 30, 2021December 31, 2020June 30, 2020
Accounts receivable (a)
$11,835 $5,623 $7,332 
Accounts payable (b)
2,287 5,251 2,598 
(a) Accounts receivable represents amounts due from related parties for the sale of ethanol and other various items.
(b) Accounts payable represents amounts due to related parties for purchases of ethanol equipment and other various items.


12. Segment Information

The Company’s operations include 4 reportable business segments that are distinguished primarily on the basis of products and services offered as well as the structure of management. The Trade business includes commodity merchandising and the operation of terminal grain elevator facilities. The Ethanol business produces ethanol and co-products through its five co-owned and fully consolidated ethanol production facilities as well as purchases and sells ethanol and ethanol co-products. The Plant Nutrient business manufactures and distributes agricultural inputs, primarily fertilizer, to dealers and farmers, along with turf care and corncob-based products. Rail operations include the leasing, marketing and fleet management of railcars and other assets, railcar repair and metal fabrication. The Other category includes other corporate level costs not attributable to an operating segment and intercompany eliminations between the segments.

The segment information below includes the allocation of expenses shared by one or more operating segments. Although management believes such allocations are reasonable, the operating information does not necessarily reflect how such data might appear if the segments were operated as separate businesses. The Company does not have any customers who represent 10 percent or more of total revenues from external customers.
The Andersons, Inc. | Q2 2021 Form 10-Q | 21

 Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Revenues from external customers
Trade$2,297,869 $1,351,168 $4,280,377 $2,729,209 
Ethanol616,527 223,745 1,059,486 536,784 
Plant Nutrient321,409 279,825 490,661 404,738 
Rail37,921 35,442 78,931 72,555 
Total$3,273,726 $1,890,180 $5,909,455 $3,743,286 

 Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Income (loss) before income taxes attributable to the Company
Trade$13,777 $393 $27,632 $(9,591)
Ethanol23,531 868 26,457 (23,108)
Plant Nutrient23,995 19,407 32,518 18,215 
Rail3,064 2,606 7,955 3,613 
Other(10,226)(5,035)(19,569)(10,015)
Income (loss) before income taxes attributable to the Company54,141 18,239 74,993 (20,886)
Income (loss) attributable to noncontrolling interests2,625 (10,407)780 (23,856)
Income (loss) before income taxes$56,766 $7,832 $75,773 $(44,742)


13. Commitments and Contingencies

Litigation activities

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

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

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

The estimated losses for all other outstanding claims that are considered reasonably possible are not material.
The Andersons, Inc. | Q2 2021 Form 10-Q | 22


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

Forward Looking Statements

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements which relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. Such factors include, but are not limited to, the effects on our business from the COVID-19 pandemic and the pace of recovery from the pandemic, economic and political conditions, globally and in the markets we serve, fluctuations in cost and availability of commodities, weather and agricultural conditions, governmental regulations, the effectiveness of our internal control over financial reporting and the unpredictability of existing and possible future litigation. However, it is not possible to predict or identify all such factors. The reader is urged to carefully consider these risks and others, including those risk factors listed under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”). In some cases, the reader can identify forward-looking statements by terminology such as may, anticipates, believes, estimates, predicts, or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These forward-looking statements relate only to events as of the date on which the statements are made and the Company undertakes no obligation, other than any imposed by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although management believes that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Critical Accounting Policies and Estimates

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

Executive Overview

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

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

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

Trade

The Trade Group’s second quarter results improved substantially over the prior year as the Group saw the benefits of a demand-driven agriculture rally. Commodity price volatility and market dislocations created merchandising opportunities for the Group to be well positioned and execute on many commodities in both the domestic and export markets. This demand driven rally has created an inversion in the futures market for the majority of the agricultural commodities stored by the Group's asset business. However, traditional space income through the old crop carryout has been accelerated and exceeded by strong elevation margins and merchandising results. The Group’s propane business added significant volume both through a new terminal location and displacement opportunities. Finally, the business continued to benefit from prior year reorganization synergies and other cost-cutting efforts.
The Andersons, Inc. | Q2 2021 Form 10-Q | 23


Agricultural inventories on hand at June 30, 2021 were 85.8 million bushels, of which 1.2 million bushels were stored for others. These amounts compare to 74.4 million bushels on hand at June 30, 2020, of which 1.7 million bushels were stored for others. Total Trade storage space capacity, including temporary pile storage, was approximately 202 million bushels at June 30, 2021 compared to 201 million bushels at June 30, 2020.

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

Ethanol

The Ethanol Group's second quarter results were profitable, and a substantial improvement compared to the prior year. The Group's prior year results were significantly impacted by COVID-19 as negative crush margins and weak demand plagued the ethanol industry. The 2021 results reflect a considerable improvement in crush margins, overall ethanol demand and higher ethanol trading results. The Group also benefited from increased co-product values, including high protein and traditional DDG products, as well as corn and other vegetable oils.

Spot ethanol crush margins have continued to improve from the prior year and higher corn and soybean meal prices continue to support feed product values. While there is a level of uncertainty that persists regarding a tighter corn balance sheet and how quickly the ethanol industry as a whole will recover from COVID-19, the group has observed rebounding driving demand, strong coproduct margins and continued trading opportunities.

Ethanol and related co-products volumes for the three and six months ended June 30, 2021 and 2020 were as follows:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Ethanol (gallons shipped)186,396 119,528 358,608 266,873 
E-85 (gallons shipped)11,914 4,396 19,805 13,489 
Corn oil (pounds shipped)56,760 20,968 104,708 50,262 
DDG (tons shipped)*454 334 931 964 
* DDG tons shipped converts wet tons to a dry ton equivalent amount.


Plant Nutrient

The Plant Nutrient Group's second quarter results were considerably improved compared to the prior year period. The improvement was largely driven by improved margins in the Ag Supply Chain and Specialty Liquids product lines and reflect demand from favorable spring weather, strong grower income and well-positioned fertilizer inventory. Engineered Granules maintained strong demand but contended against rising input costs and a tight labor market. The group's outlook is positive, anticipating continued higher fertilizer prices and strong demand into the fall application season.

Storage capacity at our Ag Supply Chain and Specialty Liquids facilities, including leased storage, was approximately 463 thousand tons for dry nutrients and approximately 509 thousand tons for liquid nutrients at June 30, 2021, compared to approximately 481 thousand tons for dry nutrients and approximately 510 thousand tons for liquid nutrients at June 30, 2020.

The Andersons, Inc. | Q2 2021 Form 10-Q | 24


Tons of product sold for the three and six months ended June 30, 2021 and 2020 were as follows:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Ag Supply Chain661 690 1,008 904 
Specialty Liquids133 121 233 196 
Engineered Granules165 151 323 273 
Total tons959 962 1,564 1,373 

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

Rail

Rail results increased driven by the opportunistic sale of older railcars due to favorable scrap prices. The leasing business improved due to lower maintenance expenses and bad debt recoveries despite slightly decreased average lease rates. Average utilization rates increased from 88.3 percent in the second quarter of 2020 to 89.7 percent in the second quarter of 2021. Rail assets under management (owned, leased or managed for financial institutions in non-recourse arrangements) at June 30, 2021 were 21.8 thousand compared to 24.0 thousand at June 30, 2020.

While the North American railcar industry is showing signs of a slow recovery, lease rates are expected to stay relatively flat for much of the year.

Other

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


The Andersons, Inc. | Q2 2021 Form 10-Q | 25


Operating Results

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

Comparison of the three months ended June 30, 2021 with the three months ended June 30, 2020 including a reconciliation of GAAP to non-GAAP measures:
 Three months ended June 30, 2021
(in thousands)TradeEthanolPlant NutrientRailOtherTotal
Sales and merchandising revenues$2,297,869 $616,527 $321,409 $37,921 $ $3,273,726 
Cost of sales and merchandising revenues2,220,038 581,811 270,549 27,284  3,099,682 
Gross profit77,831 34,716 50,860 10,637  174,044 
Operating, administrative and general expenses61,514 6,577 26,568 4,416 10,901 109,976 
Interest expense (income), net7,452 2,021 1,146 3,394 (559)13,454 
Equity in earnings of affiliates, net845     845 
Other income, net4,067 38 849 237 116 5,307 
Income (loss) before income taxes$13,777 $26,156 $23,995 $3,064 $(10,226)$56,766 
Income (loss) before income taxes attributable to the noncontrolling interests 2,625    2,625 
Non-GAAP Income (loss) before income taxes attributable to the Company$13,777 $23,531 $23,995 $3,064 $(10,226)$54,141 

 Three months ended June 30, 2020
(in thousands)TradeEthanolPlant NutrientRailOtherTotal
Sales and merchandising revenues$1,351,168 $223,745 $279,825 $35,442 $— $1,890,180 
Cost of sales and merchandising revenues1,291,786 226,344 241,060 24,724 — 1,783,914 
Gross profit59,382 (2,599)38,765 10,718 — 106,266 
Operating, administrative and general expenses54,998 5,506 18,281 5,184 6,167 90,136 
Interest expense (income), net5,056 1,900 1,463 3,833 (425)11,827 
Equity in earnings (losses) of affiliates, net79 — — — — 79 
Other income (expense), net986 466 386 905 707 3,450 
Income (loss) before income taxes$393 $(9,539)$19,407 $2,606 $(5,035)$7,832 
Income (loss) before income taxes attributable to the noncontrolling interests— (10,407)— — — (10,407)
Non-GAAP Income (loss) before income taxes attributable to the Company$393 $868 $19,407 $2,606 $(5,035)$18,239 

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

The Andersons, Inc. | Q2 2021 Form 10-Q | 26


Trade

Operating results for the Trade Group increased by $13.4 million compared to the results of the same period last year. Sales and merchandising revenues increased by $946.7 million and cost of sales and merchandising revenues increased by $928.3 million for a favorable net gross profit impact of $18.4 million. Most of the increase to sales and cost of sales is the result of increased commodity prices. The net increase in gross profit was primarily driven by improved merchandising results as weather and export demand created volatility that allowed traders to identify arbitrage opportunities from geographical dislocations. This increase was partially offset by a decrease in the Group's traditional assets, however, as inverted futures markets in several commodities provided less space income, replacing and accelerating the income with merchandising opportunities noted above.

Operating, administrative and general expenses increased by $6.5 million. The increase from the prior year is primarily related to higher incentive compensation costs from improved operating results and other professional service fees.

Interest expense increased by $2.4 million due to higher group borrowings on the Company's short-term line of credit compared to the prior year.

Other income increased by $3.1 million from prior year largely driven by a gain on the sale of a grain location in the current year.

Ethanol

Operating results for the Ethanol Group increased by $22.7 million from the same period last year. Sales and merchandising revenues increased by $392.8 million and cost of sales and merchandising revenues increased by $355.5 million compared to prior year results. As a result gross profit increased by $37.3 million compared to 2020 results. Most of the increase to sales and cost of sales is the result of increased commodity prices. The net increase to gross profit in the current period results reflect improved ethanol margins, higher coproduct sales from DDGs and corn oil and strong merchandising revenues. The prior year results were significantly impacted by COVID-19.

Operating, administrative and general expenses increased by $1.1 million from the increase in labor and incentive compensation costs from increased production and improved operating results, respectively.

Plant Nutrient

Operating results for the Plant Nutrient Group increased by $4.6 million compared to the same period in the prior year. Sales and merchandising revenues increased by $41.6 million and cost of sales and merchandising revenues increased by $29.5 million resulting in a $12.1 million increase in gross profit. The increase in gross profit was driven by improved margins across the Ag Supply Chain and Specialty Liquids product lines and reflects higher spring demand, strong grower income and well positioned fertilizer inventory.

Operating, administrative and general expenses increased by $8.3 million due to higher incentive compensation costs from and improved operating results.

Interest expense decreased by $0.3 million due to lower interest rates.

Rail

Operating results increased by $0.5 million from the same period last year. Sales and merchandising revenues increased by $2.5 million from prior year. This was driven by a $4.9 million increase in car sale revenues and a $0.6 million increase in repair revenues that was partially offset by a $3.0 million decrease in leasing revenue. Cost of sales and merchandising revenues increased by $2.6 million compared to the prior year due to increased car sale revenues from the prior year. As a result, gross profit decreased by $0.1 million compared to the same period last year.

Operating, administrative and general expenses decreased by $0.8 million due to a decrease in bad debt expense as compared to the prior year. This was partially offset by higher incentive compensation from improved operating results.

Interest expense decreased by $0.4 million due to lower interest rates.

The Andersons, Inc. | Q2 2021 Form 10-Q | 27


Other

Operating results for the second quarter declined by $5.2 million compared to the same period in 2020. The increase in operating losses was primarily driven by higher operating, administrative and general expenses due to increased incentive-based compensation as a result of improved company-wide performance year over year and higher professional services expenses.

Income Taxes

For the three months ended June 30, 2021, the Company recorded an income tax expense of $10.6 million at an effective rate of 18.7%. For the three months ended June 30, 2020, the Company recorded an income tax benefit of $12.2 million at an effective tax rate of 155.8%. The change in effective tax rate for the three months ended June 30, 2021 as compared to the same period last year was primarily attributed to the treatment of mark-to-market activity on certain contracts in the Ethanol segment. The prior year also reflects the benefit of net operating loss carryback tax savings opportunities as provided by the CARES Act.


Comparison of the six months ended June 30, 2021 with the six months ended June 30, 2020 including a reconciliation of GAAP to non-GAAP measures:
 Six months ended June 30, 2021
(in thousands)TradeEthanolPlant NutrientRailOtherTotal
Sales and merchandising revenues$4,280,377 $1,059,486 $490,661 $78,931 $ $5,909,455 
Cost of sales and merchandising revenues4,129,989 1,016,287 407,400 59,023  5,612,699 
Gross profit150,388 43,199 83,261 19,908  296,756 
Operating, administrative and general expenses118,445 13,233 49,967 7,290 20,913 209,848 
Interest expense (income), net14,503 4,094 2,212 6,574 (760)26,623 
Equity in earnings (losses) of affiliates, net2,639     2,639 
Other income (expense), net7,553 1,365 1,436 1,911 584 12,849 
Income (loss) before income taxes$27,632 $27,237 $32,518 $7,955 $(19,569)$75,773 
Income (loss) before income taxes attributable to the noncontrolling interests 780    780 
Non-GAAP Income (loss) before income taxes attributable to the Company$27,632 $26,457 $32,518 $7,955 $(19,569)$74,993 
 Six months ended June 30, 2020
(in thousands)TradeEthanolPlant NutrientRailOtherTotal
Sales and merchandising revenues$2,729,209 $536,784 $404,738 $72,555 $— $3,743,286 
Cost of sales and merchandising revenues2,607,361 568,782 345,609 52,138 — 3,573,890 
Gross profit121,848 (31,998)59,129 20,417 — 169,396 
Operating, administrative and general expenses123,153 11,621 38,022 10,443 11,957 195,196 
Interest expense (income), net12,245 4,257 3,248 8,316 (652)27,414 
Equity in earnings (losses) of affiliates, net209 — — — — 209 
Other income (expense), net3,750 912 356 1,955 1,290 8,263 
Income (loss) before income taxes$(9,591)$(46,964)$18,215 $3,613 $(10,015)$(44,742)
Income (loss) before income taxes attributable to the noncontrolling interests— (23,856)— — — (23,856)
Non-GAAP Income (loss) before income taxes attributable to the Company$(9,591)$(23,108)$18,215 $3,613 $(10,015)$(20,886)



The Andersons, Inc. | Q2 2021 Form 10-Q | 28


Trade

Operating results for the Trade Group increased by $37.2 million compared to the results of the same period last year. Sales and merchandising revenues increased by $1,551.2 million and cost of sales and merchandising revenues increased by $1,522.6 million for an increased gross profit impact of $28.5 million. Most of the increase to sales and cost of sales is the result of increased commodity prices. The net increase in gross profit was primarily driven by improved merchandising results as weather and export demand created volatility that allowed traders to identify arbitrage opportunities from geographical dislocations. This increase was partially offset by a decrease in the Group's traditional assets, however, as inverted futures markets in several commodities provided less space income, replacing and accelerating the income with merchandising opportunities noted above.

Operating, administrative and general expenses decreased by $4.7 million. The decrease from the prior year is primarily related to the Company's cost saving initiatives, much of which is headcount reduction, both from acquisition integration and in response to the COVID-19 pandemic. The decrease was partially offset by higher incentive compensation costs from improved operating results.

Interest expense increased by $2.3 million due to higher group borrowings on the Company's short-term line of credit compared to the prior year.

Ethanol

Operating results for the Ethanol Group increased by $49.6 million from the same period last year. Sales and merchandising revenues increased by $522.7 million and cost of sales and merchandising revenues increased by $447.5 million compared to prior year. As a result, gross profit increased by $75.2 million compared to prior year. Most of the increase to sales and cost of sales is the result of increased commodity prices. The net increase to gross profit in the current period results reflect significantly improved crush margins, higher coproduct sales from DDGs and corn oil and strong merchandising revenues. The prior year results were significantly impacted by COVID-19 and the group recorded a $10.9 million inventory write down and a $9.6 million mark to market loss.

Operating, administrative and general expenses increased by $1.6 million primarily due to higher labor and incentive compensation costs from increased production and improved operating results, respectively.

Plant Nutrient

Operating results for the Plant Nutrient Group increased by $14.3 million compared to the same period in the prior year. Sales and merchandising revenues increased $85.9 million and cost of sales and merchandising revenues increased by $61.8 million resulting in increased gross profit of $24.1 million. Gross profit improved year over year due to increases in volumes and margins across the breadth of product lines and reflects higher demand, strong grower income and well positioned fertilizer inventory.

Operating, administrative and general expenses increased by $11.9 million due to increased incentive compensation from improved operating results, and other variable expenses supporting additional volume in the current year.

Interest expense decreased by $1.0 million from lower interest rates compared to the prior year.

Rail

Operating results increased by $4.3 million from the same period last year. Sales and merchandising revenues increased by $6.4 million. This was driven by a $11.5 million increase in car sale revenues and a $1.8 million increase in repair revenues that was partially offset by a $6.9 million decrease in leasing revenue. Cost of sales and merchandising increased by $6.9 million compared to the prior year driven by the book value of cars that were sold in the quarter. As a result, gross profit decreased by $0.5 million compared to the same period last year.

Operating, administrative and general expenses decreased by $3.2 million driven by a $1.6 million recovery of previously written off bad debt and overall lower expenses in the period.

Interest expense decreased by $1.7 million from lower borrowings and interest rates compared to the prior year.

The Andersons, Inc. | Q2 2021 Form 10-Q | 29


Other

Operating results declined by $9.6 million from the same period last year. The increase in operating losses was primarily driven by increased incentive-based compensation in operating, administrative and general expenses due to improved company-wide performance year over year and higher professional services expenses.

Income Taxes

For the six months ended June 30, 2021, the Company recorded an income tax expense of $16.4 million at an effective rate of 21.6%. For the six months ended June 30, 2020, the Company recorded an income tax benefit of $13.7 million at an effective tax rate of 30.5%. The change in effective tax rate for the six months ended June 30, 2021 as compared to the same period last year primarily attributed improved operating results in the current year, including additional nondeductible compensation and increased foreign tax expense, as well as the treatment of mark-to-market activity on certain contracts in the Ethanol segment.


Liquidity and Capital Resources

Working Capital
At June 30, 2021, the Company had working capital of $543.7 million. The following table presents changes in the components of current assets and current liabilities:

(in thousands)June 30, 2021June 30, 2020Variance
Current Assets:
Cash and cash equivalents$27,538 $30,011 $(2,473)
Accounts receivable, net721,575 537,011 184,564 
Inventories912,299 616,323 295,976 
Commodity derivative assets – current507,148 112,089 395,059 
Other current assets65,740 102,755 (37,015)
Total current assets$2,234,300 $1,398,189 $836,111 
Current Liabilities:
Short-term debt757,271 96,071 661,200 
Trade and other payables547,169 503,892 43,277 
Customer prepayments and deferred revenue58,155 45,734 12,421 
Commodity derivative liabilities – current90,366 65,186 25,180 
Current maturities of long-term debt56,582 68,477 (11,895)
Accrued expenses and other current liabilities181,015 147,422 33,593 
Total current liabilities$1,690,558 $926,782 $763,776 
Working Capital$543,742 $471,407 $72,335 

Current assets as of June 30, 2021 increased $836.1 million in comparison to those as of June 30, 2020. This increase was noted in all areas except for cash and cash equivalents and other current assets. The increases in accounts receivable, current commodity derivative assets and inventory balances can largely be attributable to the significant increases in the prices of agricultural commodities that the Company transacts in the ordinary course of business. The decrease in other current assets is attributable to the receipt of federal income tax refunds as a result of the CARES Act in 2020. See also the discussion below on additional sources and uses of cash for an understanding of the increase in cash from prior year.
Current liabilities increased $763.8 million compared to the prior year primarily due to increases in short-term debt and trade and other payables. The increase in short-term debt is the result of higher working capital needs and driven by significant increases in the prices of agricultural commodities. The increase in trade and other payables is also the result of increasing agricultural commodity prices. Short-term borrowings, while typically at a seasonal high in the spring, are further supporting an unusual price run-up in our core commodities. As we liquidate these commodities in advance of harvest, we expect a reduction to the level of short-term borrowing. The increase in current liabilities was slightly offset by reductions in current maturities of long-term debt.
The Andersons, Inc. | Q2 2021 Form 10-Q | 30


Sources and Uses of Cash
Six Months Ended
(in thousands)June 30, 2021June 30, 2020
Net cash (used in) provided by operating activities$(245,494)$145,511 
Net cash used in investing activities(23,474)(66,002)
Net cash provided by (used in) financing activities267,550 (105,068)

Operating Activities
Our operating activities used cash of $245.5 million and provided cash of $145.5 million in the first six months of 2021 and 2020, respectively. The increase in cash used was primarily due to a result in the change of working capital, as discussed above, driven by significant increases in agricultural commodity prices. However, when you remove the impact from changes in working capital, cash provided by operating activities was much stronger than the prior period due to favorable operating results.

Investing Activities
Investing activities used cash of $23.5 million through the first six months of 2021 compared to cash used of $66.0 million in the prior year. The decrease from the prior year was a result of higher proceeds from sales of assets and railcars, fewer purchased railcars and the continued strategic use of capital spending to enhance overall liquidity and cash management.
We expect to invest approximately $100 million in property, plant and equipment in 2021; approximately 60% of which will be to maintain facilities.

Financing Activities
Financing activities provided cash of $267.6 million and $105.1 million for the six months ended June 30, 2021 and 2020, respectively. This change from the prior year was largely due to a significant increase in short term borrowings to cover working capital needs as the prices of agricultural commodities continue to rise.
The Company is party to borrowing arrangements with a syndicate of banks that provide a total of $1,404.6 million in borrowings. Of the total capacity, $404.6 million is non-recourse to the Company. As of June 30, 2021, the Company had $1,173.5 million available for borrowing with $237.2 million of that total being non-recourse to the Company.

The Company paid $11.7 million in dividends in the first six months of 2021 compared to $11.5 million in the prior year. The Company paid $0.175 per common share for the dividends paid in January and April of 2021 and 2020. On June 25, 2021, the Company declared a cash dividend of $0.175 per common share payable on July 22, 2021 to shareholders of record on July 6, 2021.
Certain of our long-term borrowings include covenants that, among other things, impose minimum levels of equity and limitations on additional debt. The Company is in compliance with all such covenants as of June 30, 2021. 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 the Company is a significant borrower of short-term debt in peak seasons and the majority of this is variable rate debt, increases in interest rates could have a significant impact on our profitability. In addition, periods of high grain prices and/or unfavorable market conditions could require us to make additional margin deposits on our exchange traded futures contracts. Conversely, in periods of declining prices, the Company could receive a return of cash.
Management believes our sources of liquidity will be adequate to fund our operations, capital expenditures and service our indebtedness.

At June 30, 2021, the Company had standby letters of credit outstanding of $25.5 million.

The Andersons, Inc. | Q2 2021 Form 10-Q | 31



Item 3. Quantitative and Qualitative Disclosures about Market Risk

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


Item 4. Controls and Procedures

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

There were no changes in the Company’s internal control over financial reporting during the second quarter of 2021, identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Andersons, Inc. | Q2 2021 Form 10-Q | 32


Part II. Other Information

Item 1. Legal Proceedings

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

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


Item 1A. Risk Factors

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


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 202112,760 $27.38 — — 
May 2021— — — — 
June 2021177 30.86 — — 
Total12,937 $27.43 — — 
(1) During the three months ended June 30, 2021, the Company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.
(2) No shares were purchased as part of publicly announced plans or programs.


Item 4. Mine Safety Disclosure

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

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

The Andersons, Inc. | Q2 2021 Form 10-Q | 33




Item 6. Exhibits
Exhibit NumberDescription
10.1
31.1*
31.2*
32.1**
95.1*
101**Inline XBRL Document Set for the Condensed Consolidated Financial Statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
104**Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.
* Filed herewith
** Furnished herewith
Items 3 and 5 are not applicable and have been omitted

The Andersons, Inc. | Q2 2021 Form 10-Q | 34

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

The Andersons, Inc. | Q2 2021 Form 10-Q | 35