Equibles

10-Q

Andersons, Inc. (ANDE)

10-Q 2020-11-05 For: 2020-09-30
View Original
Added on April 08, 2026

Table of Contents

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 09/30/2020

☐ 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-20200930_g1.jpg

THE ANDERSONS, INC.

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

Ohio 34-1562374
(State of incorporation or organization) (I.R.S. Employer Identification No.)
1947 Briarfield Boulevard
Maumee Ohio 43537
(Address of principal executive offices) (Zip Code)

(419) 893-5050

(Telephone Number)

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 filer ý Accelerated Filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes ☐    No  ý

The registrant had 32,978,498 common shares outstanding at October 23, 2020.

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THE ANDERSONS, INC.

INDEX

Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets –September30, 2020, December 31, 2019 andSeptember30, 2019 3
Condensed Consolidated Statements of Operations – Three andNinemonths endedSeptember30, 2020 and 2019 5
Condensed Consolidated Statements of Comprehensive Income (Loss) – Three andNinemonths endedSeptember30, 2020 and 2019 6
Condensed Consolidated Statements of Cash Flows –Ninemonths endedSeptember30, 2020 and 2019 7
Condensed Consolidated Statements of Equity – Three andNinemonths endedSeptember30, 2020 and 2019 8
Notes to Condensed Consolidated Financial Statements 10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27
Item 3. Quantitative and Qualitative Disclosures about Market Risk 35
Item 4. Controls and Procedures 36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 37
Item 1A. Risk Factors 37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 38
Item 4. Mine Safety Disclosure 38
Item 6. Exhibits 39

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Part I. Financial Information

Item 1. Financial Statements

The Andersons, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)(In thousands)

September 30,<br>2020 December 31,<br>2019 September 30,<br>2019
Assets
Current assets:
Cash, cash equivalents and restricted cash $ 13,693 $ 54,895 $ 21,299
Accounts receivable, net 529,584 536,367 523,110
Inventories (Note 2) 754,604 1,170,536 741,086
Commodity derivative assets – current (Note 5) 140,066 107,863 120,510
Other current assets 102,302 75,681 82,770
Total current assets 1,540,249 1,945,342 1,488,775
Other assets:
Goodwill (Note 15) 135,709 135,360 135,872
Other intangible assets, net 152,214 175,312 181,100
Right of use assets, net 58,108 76,401 70,773
Equity method investments 25,368 23,857 117,348
Other assets, net 23,601 21,753 21,442
Total other assets 395,000 432,683 526,535
Rail Group assets leased to others, net (Note 3) 587,851 584,298 565,746
Property, plant and equipment, net (Note 3) 888,511 938,418 703,396
Total assets $ 3,411,611 $ 3,900,741 $ 3,284,452

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September 30,<br>2020 December 31,<br>2019 September 30,<br>2019
Liabilities and equity
Current liabilities:
Short-term debt (Note 4) $ 100,405 $ 147,031 $ 138,249
Trade and other payables 641,812 873,081 594,708
Customer prepayments and deferred revenue 49,573 133,585 35,274
Commodity derivative liabilities – current (Note 5) 79,159 46,942 67,606
Current maturities of long-term debt (Note 4) 67,786 62,899 66,899
Accrued expenses and other current liabilities 157,801 176,381 162,749
Total current liabilities 1,096,536 1,439,919 1,065,485
Long-term lease liabilities 38,232 51,091 47,299
Long-term debt, less current maturities (Note 4) 916,087 1,016,248 968,117
Deferred income taxes 163,454 146,155 128,003
Other long-term liabilities 60,075 51,673 64,198
Total liabilities 2,274,384 2,705,086 2,273,102
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common shares, without par value (63,000 shares authorized; 33,599, 33,550 and 33,336 shares issued at 9/30/2020, 12/31/2019 and 9/30/2019, respectively) 138 137 137
Preferred shares, without par value (1,000 shares authorized; none issued) — — —
Additional paid-in-capital 346,280 345,359 335,916
Treasury shares, at cost (41, 207 and 213 shares at 9/30/2020, 12/31/2019 and 9/30/2019, respectively) (879) (7,342) (7,582)
Accumulated other comprehensive loss (22,230) (7,231) (7,620)
Retained earnings 615,890 642,687 641,607
Total shareholders’ equity of The Andersons, Inc. 939,199 973,610 962,458
Noncontrolling interests 198,028 222,045 48,892
Total equity 1,137,227 1,195,655 1,011,350
Total liabilities and equity $ 3,411,611 $ 3,900,741 $ 3,284,452

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Operations

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

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Sales and merchandising revenues $ 1,922,233 $ 1,982,755 $ 5,665,519 $ 6,284,588
Cost of sales and merchandising revenues 1,820,398 1,873,614 5,394,288 5,905,055
Gross profit 101,835 109,141 271,231 379,533
Operating, administrative and general expenses 98,219 107,118 293,415 327,385
Asset impairment — — — 3,081
Interest expense, net 10,569 13,975 37,983 45,613
Other income, net:
Equity in earnings (loss) of affiliates, net 20 (3,728) 228 (2,367)
Other income, net 4,434 2,598 12,697 6,649
Income (loss) before income taxes (2,499) (13,082) (47,242) 7,736
Income tax benefit (4,714) (7,212) (18,378) (1,657)
Net income (loss) 2,215 (5,870) (28,864) 9,393
Net income (loss) attributable to the noncontrolling interests 3,273 (1,633) (20,583) (2,265)
Net income (loss) attributable to The Andersons, Inc. $ (1,058) $ (4,237) $ (8,281) $ 11,658
Per common share:
Basic earnings (loss) attributable to The Andersons, Inc. common shareholders (Note 9) $ (0.03) $ (0.13) $ (0.25) $ 0.36
Diluted earnings (loss) attributable to The Andersons, Inc. common shareholders (Note 9) $ (0.03) $ (0.13) $ (0.25) $ 0.35

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)(In thousands)

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Net income (loss) $ 2,215 $ (5,870) $ (28,864) $ 9,393
Other comprehensive income (loss), net of tax:
Change in unrecognized actuarial loss and prior service cost (net of income tax of $(27), $(43), $(46) and $(337)) (119) (127) (220) (981)
Cash flow hedge activity (net of income tax of $590, $(946), $(4,544) and $(4,121)) 1,783 (2,852) (13,740) (12,426)
Foreign currency translation adjustments (net of income tax of $0 for all periods) 2,351 1,600 (1,039) 12,174
Other comprehensive income (loss) 4,015 (1,379) (14,999) (1,233)
Comprehensive income (loss) 6,230 (7,249) (43,863) 8,160
Comprehensive income (loss) attributable to the noncontrolling interests 3,273 (1,633) (20,583) (2,265)
Comprehensive income (loss) attributable to The Andersons, Inc. $ 2,957 $ (5,616) $ (23,280) $ 10,425

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)(In thousands)

Nine months ended September 30,
2020 2019
Operating Activities
Net income (loss) $ (28,864) $ 9,393
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization 141,167 98,396
Bad debt expense 8,049 3,615
Equity in (earnings) losses of affiliates, net of dividends (228) 2,894
(Gain) loss on sales of Rail Group assets and related leases, net (175) (1,515)
(Gain) loss on sales of assets, net (862) 101
Stock-based compensation expense 7,742 11,637
Deferred federal income tax 21,917 (11,671)
Inventory write down 10,933 —
Asset impairment — 3,081
Other 4,141 3,637
Changes in operating assets and liabilities:
Accounts receivable (1,952) 4,879
Inventories 400,262 405,620
Commodity derivatives (2,574) 29,942
Other assets (34,343) 18,782
Payables and other accrued expenses (329,422) (259,166)
Net cash provided by operating activities 195,791 319,625
Investing Activities
Acquisition of business, net of cash acquired — (149,622)
Purchases of Rail Group assets (26,258) (68,441)
Proceeds from sale of Rail Group assets 7,774 9,182
Purchases of property, plant and equipment and capitalized software (59,414) (125,351)
Proceeds from sale of assets 8,121 851
Proceeds from sale of business 2,467 —
Purchase of investments (2,849) (1,490)
Net cash used in investing activities (70,159) (334,871)
Financing Activities
Net change in short-term borrowings (44,183) (286,462)
Proceeds from issuance of long-term debt 213,906 811,698
Payments of long-term debt (310,694) (493,886)
Contributions from noncontrolling interest owner 6,493 4,714
Distributions to noncontrolling interest owner (10,322) —
Payments of debt issuance costs (250) (5,649)
Dividends paid (17,234) (16,571)
Other (4,143) (1,587)
Net cash provided by (used in) financing activities (166,427) 12,257
Effect of exchange rates on cash, cash equivalents and restricted cash (407) 1,695
Decrease in cash, cash equivalents and restricted cash (41,202) (1,294)
Cash, cash equivalents and restricted cash at beginning of period 54,895 22,593
Cash, cash equivalents and restricted cash at end of period $ 13,693 $ 21,299

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Equity

(Unaudited)(In thousands, except per share data)
Additional<br>Paid-in<br>Capital Treasury<br>Shares Accumulated<br>Other<br>Comprehensive Income<br>(Loss) Retained<br>Earnings Noncontrolling<br>Interests Total
Balance at June 30, 2019 137 $ 331,186 $ (6,449) $ (6,241) $ 651,481 $ 50,525 $ 1,020,639
Net income (loss) (4,237) (1,633) (5,870)
Other comprehensive income (loss) (1,405) (1,405)
Amounts reclassified from accumulated other comprehensive income (loss) 26 26
Contributions from noncontrolling interests 164 164
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of 0 (41 shares) 4,566 (1,223) 3,343
Dividends declared (0.17 per common share) (5,547) (5,547)
Restricted share award dividend equivalents 90 (90) —
Balance at September 30, 2019 137 $ 335,916 $ (7,582) $ (7,620) $ 641,607 $ 48,892 $ 1,011,350
Balance at June 30, 2020 138 $ 343,730 $ (953) $ (26,245) $ 622,718 $ 192,695 $ 1,132,083
Net income (loss) (1,058) 3,273 2,215
Other comprehensive income (loss) 1,868 1,868
Amounts reclassified from accumulated other comprehensive income (loss) 2,147 2,147
Contributions from noncontrolling interests 2,083 2,083
Distributions to noncontrolling interests (23) (23)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of 0 (0 shares) 2,550 74 2,624
Dividends declared (0.175 per common share) (5,770) (5,770)
Balance at September 30, 2020 138 $ 346,280 $ (879) $ (22,230) $ 615,890 $ 198,028 $ 1,137,227

All values are in US Dollars.

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Additional<br>Paid-in<br>Capital Treasury<br>Shares Accumulated<br>Other<br>Comprehensive Income<br>(Loss) Retained<br>Earnings Noncontrolling<br>Interests Total
Balance at December 31, 2018 96 $ 224,396 $ (35,300) $ (6,387) $ 647,517 $ 46,442 $ 876,764
Net income (loss) 11,658 (2,265) 9,393
Other comprehensive loss (12,719) (12,719)
Amounts reclassified from accumulated other comprehensive income (loss) 11,486 11,486
Contributions from noncontrolling interests 164 4,715 4,879
Adoption of accounting standard, net of income tax of (237) (711) (711)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of 0 (723 shares) (16,452) 27,475 11,023
Dividends declared (0.510 per common share) (16,606) (16,606)
Stock awards granted due to acquisition 127,800 127,841
Restricted share award dividend equivalents 8 243 (251) —
Balance at September 30, 2019 137 $ 335,916 $ (7,582) $ (7,620) $ 641,607 $ 48,892 $ 1,011,350
Balance at December 31, 2019 137 $ 345,359 $ (7,342) $ (7,231) $ 642,687 $ 222,045 $ 1,195,655
Net income (loss) (8,281) (20,583) (28,864)
Other comprehensive loss (19,340) (19,340)
Amounts reclassified from accumulated other comprehensive income (loss) 4,341 4,341
Contributions from noncontrolling interests 6,493 6,493
Distributions to noncontrolling interests (10,322) (10,322)
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) 1,380 6,072 (843) 6,610
Dividends declared (0.525 per common share) (17,282) (17,282)
Restricted share award dividend equivalents 391 (391) —
Balance at September 30, 2020 138 $ 346,280 $ (879) $ (22,230) $ 615,890 $ 198,028 $ 1,137,227

All values are in US Dollars.

See Notes to Condensed Consolidated Financial Statements

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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”), its 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. Certain prior year amounts have been reclassified to conform to current year presentation.

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, 2020. An unaudited Condensed Consolidated Balance Sheet as of September 30, 2019 has been included as the Company operates in several seasonal industries.

The Condensed Consolidated Balance Sheet data at December 31, 2019 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, 2019 (the “2019 Form 10-K”).

The Company had restricted cash of $9.0 million as of September 30, 2019. This restricted cash balance was related to posting collateral for the release of a mortgage on one of the Company's ethanol assets to be contributed into The Andersons Marathon Holdings LLC. The restricted cash was released from escrow in the fourth quarter of 2019 after the successful completion of the merger and related credit facility. The Company also had restricted cash of $8.7 million as of December 31, 2019. The restricted cash balance was a result of a royalty claim assumed in the TAMH merger and, accordingly, was included in the Consolidated Financial Statements of the Company. The restricted cash balance as of December 31, 2019 was subsequently released in the first quarter of 2020. The Company had no restricted cash balances as of September 30, 2020.

Recent Accounting Guidance Issued Not Yet Effective

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The provisions of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The impact of this update on our consolidated financial statements is currently being assessed. At this time the Company does not plan to early adopt the standard.

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  1. 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) September 30,<br>2020 December 31,<br>2019 September 30,<br>2019
Grain and other agricultural products (a) $ 557,808 $ 907,482 $ 560,626
Frac sand and propane 10,064 15,438 14,592
Ethanol and co-products (b) 59,543 95,432 26,218
Plant nutrients and cob products 120,173 146,164 133,839
Railcar repair parts 7,016 6,020 5,811
Total Inventories $ 754,604 $ 1,170,536 $ 741,086

(a) Includes RMI of $512.9 million, $852.6 million and $488.2 million at September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

(b) Includes RMI of $10.4 million, $10.6 million and $12.6 million at September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

Inventories do not include 2.3 million, 6.4 million and 2.7 million bushels of grain held in storage for others as of September 30, 2020, December 31, 2019 and September 30, 2019, 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.

For the nine months ended September 30, 2020, the Company recorded $10.9 million lower of cost or net realizable value charge related to lower ethanol market prices and decreased demand as a result of the COVID-19 pandemic, of which $10.6 million was recognized in the first quarter.

  1. Property, Plant and Equipment

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

(in thousands) September 30,<br>2020 December 31,<br>2019 September 30,<br>2019
Land $ 40,223 $ 40,442 $ 39,393
Land improvements and leasehold improvements 96,290 103,148 95,720
Buildings and storage facilities 384,203 373,961 354,625
Machinery and equipment 906,864 835,156 608,831
Construction in progress 21,657 59,993 54,163
1,449,237 1,412,700 1,152,732
Less: accumulated depreciation 560,726 474,282 449,336
Property, plant and equipment, net $ 888,511 $ 938,418 $ 703,396

Depreciation expense on property, plant and equipment was $93.8 million and $51.0 million for the nine months ended September 30, 2020 and 2019, respectively. Additionally, depreciation expense on property, plant and equipment was $31.6 million and $18.3 million for the three months ended September 30, 2020 and 2019, respectively. The large increase in depreciation expense from the prior year was due to the TAMH merger that took place in the fourth quarter of 2019 and ELEMENT being operational for all of the current year.

In the second quarter of 2019, the Company recorded a $3.1 million impairment related to its remaining Tennessee facilities in the Trade group. The Company wrote down the assets to the extent their carrying values exceeded their fair value. The Company classified the significant assumptions used to determine the fair value of the impaired assets as Level 3 inputs in the fair value hierarchy.

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Rail Group Assets

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

(in thousands) September 30,<br>2020 December 31,<br>2019 September 30,<br>2019
Rail Group assets leased to others $ 741,080 $ 723,004 $ 699,972
Less: accumulated depreciation 153,229 138,706 134,226
Rail Group assets, net $ 587,851 $ 584,298 $ 565,746

Depreciation expense on Rail Group assets leased to others amounted to $23.1 million and $21.1 million for the nine months ended September 30, 2020 and 2019, respectively. Additionally, depreciation expense on Rail Group assets leased to others amounted to $7.7 million and $7.4 million for the three months ended September 30, 2020 and 2019, respectively.

  1. Debt

Short-term and long-term debt at September 30, 2020, December 31, 2019 and September 30, 2019 consisted of the following:

(in thousands) September 30,<br>2020 December 31,<br>2019 September 30,<br>2019
Short-term debt – non-recourse $ 40,985 $ 54,029 $ 35,278
Short-term debt – recourse 59,420 93,002 102,971
Total short-term debt $ 100,405 $ 147,031 $ 138,249
Current maturities of long-term debt – non-recourse $ 5,059 $ 9,545 $ 10,122
Current maturities of long-term debt – recourse 62,727 53,354 56,777
Total current maturities of long-term debt $ 67,786 $ 62,899 $ 66,899
Long-term debt, less: current maturities – non-recourse $ 274,283 $ 330,250 $ 243,279
Long-term debt, less: current maturities – recourse 641,804 685,998 724,838
Total long-term debt, less: current maturities $ 916,087 $ 1,016,248 $ 968,117

The total borrowing capacity of the Company's lines of credit at September 30, 2020 was $1,693.2 million of which the Company had a total of $1,358.9 million available for borrowing under its lines of credit. The Company's borrowing capacity is reduced by a combination of outstanding borrowings and letters of credit. The Company is in compliance with all financial covenants as of September 30, 2020.

  1. 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.

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

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(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 September 30, 2020, December 31, 2019 and September 30, 2019, 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) September 30, 2020 December 31, 2019 September 30, 2019
Cash collateral paid $ 70,446 $ 56,005 $ 23,997
Fair value of derivatives (58,495) (10,323) 10,199
Net derivative asset position $ 11,951 $ 45,682 $ 34,196

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

September 30, 2020
(in thousands) Commodity Derivative Assets - Current Commodity Derivative Assets - Noncurrent Commodity Derivative Liabilities - Current Commodity Derivative Liabilities - Noncurrent Total
Commodity derivative assets $ 159,553 $ 3,565 $ 7,323 $ 42 $ 170,483
Commodity derivative liabilities (89,933) (508) (86,482) (490) (177,413)
Cash collateral paid 70,446 — — — 70,446
Balance sheet line item totals $ 140,066 $ 3,057 $ (79,159) $ (448) $ 63,516
December 31, 2019
--- --- --- --- --- --- --- --- --- --- ---
(in thousands) Commodity Derivative Assets - Current Commodity Derivative Assets - Noncurrent Commodity Derivative Liabilities - Current Commodity Derivative Liabilities - Noncurrent Total
Commodity derivative assets $ 92,429 $ 1,045 $ 7,439 $ 18 $ 100,931
Commodity derivative liabilities (40,571) (96) (54,381) (523) (95,571)
Cash collateral paid 56,005 — — — 56,005
Balance sheet line item totals $ 107,863 $ 949 $ (46,942) $ (505) $ 61,365

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September 30, 2019
(in thousands) Commodity Derivative Assets - Current Commodity Derivative Assets - Noncurrent Commodity Derivative Liabilities - Current Commodity Derivative Liabilities - Noncurrent Total
Commodity derivative assets $ 122,462 $ 1,951 $ 5,715 $ 67 $ 130,195
Commodity derivative liabilities (29,566) (8) (69,704) (2,027) (101,305)
Cash collateral paid 27,614 — (3,617) — 23,997
Balance sheet line item totals $ 120,510 $ 1,943 $ (67,606) $ (1,960) $ 52,887

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 nine months ended September 30, 2020 and 2019 are as follows:

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Gains (losses) on commodity derivatives included in cost of sales and merchandising revenues $ (52,047) $ (27,586) $ (12,290) $ 25,469

The Company had the following volume of commodity derivative contracts outstanding (on a gross basis) at September 30, 2020, December 31, 2019 and September 30, 2019:

September 30, 2020
(in thousands) Number of Bushels Number of Gallons Number of Pounds Number of Tons
Non-exchange traded:
Corn 527,924 — — —
Soybeans 121,248 — — —
Wheat 80,546 — — —
Oats 40,004 — — —
Ethanol — 96,470 — —
Corn oil — — 45,144 —
Soybean Oil — — 17,262 —
Other 42,235 3,655 350 2,237
Subtotal 811,957 100,125 62,756 2,237
Exchange traded:
Corn 250,445 — — —
Soybeans 62,785 — — —
Wheat 108,805 — — —
Oats 715 — — —
Ethanol — 19,488 — —
Propane — 31,962 — —
Other — 7,140 16 183
Subtotal 422,750 58,590 16 183
Total 1,234,707 158,715 62,772 2,420

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December 31, 2019
(in thousands) Number of Bushels Number of Gallons Number of Pounds Number of Tons
Non-exchange traded:
Corn 552,359 — — —
Soybeans 34,912 — — —
Wheat 100,996 — — —
Oats 24,700 — — —
Ethanol — 116,448 — —
Corn oil — — 14,568 —
Other 11,363 4,000 305 2,263
Subtotal 724,330 120,448 14,873 2,263
Exchange traded:
Corn 221,740 — — —
Soybeans 39,145 — — —
Wheat 68,171 — — —
Oats 2,090 — — —
Ethanol — 175,353 — —
Propane — 5,166 — —
Other — 15 — 232
Subtotal 331,146 180,534 — 232
Total 1,055,476 300,982 14,873 2,495
September 30, 2019
--- --- --- --- ---
(in thousands) Number of Bushels Number of Gallons Number of Pounds Number of Tons
Non-exchange traded:
Corn 653,757 — — —
Soybeans 46,895 — — —
Wheat 90,598 — — —
Oats 36,365 — — —
Ethanol — 256,815 — —
Corn oil — — 5,022 —
Other 15,196 6,150 363 3,178
Subtotal 842,811 262,965 5,385 3,178
Exchange traded:
Corn 280,890 — — —
Soybeans 58,980 — — —
Wheat 75,345 — — —
Oats 735 — — —
Ethanol — 145,769 — —
Propane — 12,516 — —
Other — 3 — 289
Subtotal 415,950 158,288 — 289
Total 1,258,761 421,253 5,385 3,467

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Interest Rate and Other Derivatives

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

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 September 30, 2020, December 31, 2019 and September 30, 2019, the Company had recorded the following amounts for the fair value of the Company's other derivatives:

(in thousands) September 30, 2020 December 31, 2019 September 30, 2019
Derivatives not designated as hedging instruments
Interest rate contracts included in Accrued expenses and other current liabilities $ (879) $ — $ —
Interest rate contracts included in Other long-term liabilities (491) (1,007) (1,261)
Foreign currency contracts included in Other current assets 326 2,742 115
Derivatives designated as hedging instruments
Interest rate contracts included in Accrued expenses and other current liabilities (8,431) (3,118) (2,981)
Interest rate contracts included in Other long-term liabilities $ (22,409) $ (9,382) $ (13,649)

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

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Derivatives not designated as hedging instruments
Interest rate derivative gains (losses) included in Interest income (expense), net $ 357 $ (36) $ (363) $ (972)
Foreign currency derivative losses included in Other income (loss), net — (615) — (684)
Derivatives designated as hedging instruments
Interest rate derivative losses included in Other Comprehensive Income (Loss) 2,373 (3,798) (18,284) (16,547)
Interest rate derivatives (losses) included in Interest income (expense), net $ (2,345) $ (224) $ (5,045) $ (243)

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Outstanding interest rate derivatives, as of September 30, 2020, are as follows:

Interest Rate Hedging Instrument Year Entered Year of Maturity Initial Notional Amount <br>(in millions) Description Interest Rate
Long-term
Swap 2014 2023 $ 23.0 Interest rate component of debt - not accounted for as a hedge 1.9%
Collar 2016 2021 $ 40.0 Interest rate component of debt - not accounted for as a hedge 3.5% to 4.8%
Swap 2017 2022 $ 20.0 Interest rate component of debt - accounted for as a hedge 1.8%
Swap 2018 2023 $ 10.0 Interest rate component of debt - accounted for as a hedge 2.6%
Swap 2018 2025 $ 20.0 Interest rate component of debt - accounted for as a hedge 2.7%
Swap 2018 2021 $ 40.0 Interest rate component of debt - accounted for as a hedge 2.6%
Swap 2018 2021 $ 25.0 Interest rate component of debt - accounted for as a hedge 2.5%
Swap 2019 2021 $ 50.0 Interest rate component of debt - accounted for as a hedge 2.5%
Swap 2019 2025 $ 100.0 Interest rate component of debt - accounted for as a hedge 2.5%
Swap 2019 2025 $ 50.0 Interest rate component of debt - accounted for as a hedge 2.5%
Swap 2019 2025 $ 50.0 Interest rate component of debt - accounted for as a hedge 2.5%
Swap 2020 2023 $ 50.0 Interest rate component of debt - accounted for as a hedge 0.8%
Swap 2020 2023 $ 50.0 Interest rate component of debt - accounted for as a hedge 0.7%
Swap 2020 2030 $ 50.0 Interest rate component of debt - accounted for as a hedge 0.0% to 0.8%
Swap 2020 2030 $ 50.0 Interest rate component of debt - accounted for as a hedge 0.0% to 0.8%
  1. Revenue

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

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Revenues under ASC 606 $ 295,850 $ 273,945 $ 1,102,457 $ 1,083,383
Revenues under ASC 842 23,056 26,418 73,375 87,122
Revenues under ASC 815 1,603,327 1,682,392 4,489,687 5,114,083
Total Revenues $ 1,922,233 $ 1,982,755 $ 5,665,519 $ 6,284,588

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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 nine months ended September 30, 2020 and 2019, respectively:

Three months ended September 30, 2020
(in thousands) Trade Ethanol Plant Nutrient Rail Total
Specialty nutrients $ — $ — $ 31,835 $ — $ 31,835
Primary nutrients — — 62,094 — 62,094
Services 2,010 — 975 10,134 13,119
Products and co-products 55,235 97,703 — — 152,938
Frac sand and propane 21,676 — — — 21,676
Other 2,414 513 7,803 3,458 14,188
Total $ 81,335 $ 98,216 $ 102,707 $ 13,592 $ 295,850 Three months ended September 30, 2019
--- --- --- --- --- --- --- --- --- --- ---
(in thousands) Trade Ethanol Plant Nutrient Rail Total
Specialty nutrients $ 9,840 $ — $ 35,182 $ — $ 45,022
Primary nutrients 4,610 — 66,733 — 71,343
Service 2,507 3,187 1,275 9,719 16,688
Products and co-products 48,158 34,655 — — 82,813
Frac sand and propane 47,188 — — — 47,188
Other 2,159 163 6,256 2,313 10,891
Total $ 114,462 $ 38,005 $ 109,446 $ 12,032 $ 273,945
Nine months ended September 30, 2020
--- --- --- --- --- --- --- --- --- --- ---
(in thousands) Trade Ethanol Plant Nutrient Rail Total
Specialty nutrients $ — $ — $ 187,700 $ — $ 187,700
Primary nutrients — — 296,247 — 296,247
Service 6,053 — 3,753 27,528 37,334
Products and co-products 171,744 275,175 — — 446,919
Frac sand and propane 92,990 — — — 92,990
Other 11,732 1,481 19,745 8,309 41,267
Total $ 282,519 $ 276,656 $ 507,445 $ 35,837 $ 1,102,457
Nine months ended September 30, 2019
--- --- --- --- --- --- --- --- --- --- ---
(in thousands) Trade Ethanol Plant Nutrient Rail Total
Specialty nutrients $ 45,648 $ — $ 191,247 $ — $ 236,895
Primary nutrients 27,401 — 294,729 — 322,130
Service 11,077 10,170 3,133 28,944 53,324
Products and co-products 166,859 88,170 — — 255,029
Frac sand and propane 184,418 — — — 184,418
Other 5,860 198 19,439 6,090 31,587
Total $ 441,263 $ 98,538 $ 508,548 $ 35,034 $ 1,083,383

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Approximately 4% and 5% of revenues accounted for under ASC 606 during both three months periods ended September 30, 2020 and 2019, respectively, are recorded over time which primarily relates to service revenues noted above. Additionally, during the nine months ended September 30, 2020 and 2019, approximately 4% and 5% of revenues were accounted for under ASC 606, respectively.

Contract balances

The balances of the Company’s contract liabilities were $18.6 million and $28.5 million as of September 30, 2020 and December 31, 2019, 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. Further, due to seasonality of this business, contract liabilities were built-up at year-end and through the first quarter of the year in preparation for the spring planting season. The decrease in liabilities from December 31, 2019 is due to the revenue recognized in the current period as the built up liabilities were relieved as obligations were met.

  1. Income Taxes

On March 27, 2020, President Trump signed into U.S. federal law the CARES Act, which is aimed at providing emergency assistance and health care for individuals, families and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. In particular, under the CARES Act, (i) for taxable years beginning before 2021, net operating loss carryforwards and carrybacks may offset 100% of taxable income, (ii) NOLs arising in 2018, 2019, and 2020 taxable years may be carried back to each of the preceding five years to generate a refund and (iii) for taxable years beginning in 2019 and 2020, the base for interest deductibility is increased from 30% to 50% of EBITDA. On April 17, 2020, the Internal Revenue Service issued Revenue Procedure 2020-25, allowing for companies to revoke an election out of bonus depreciation. The Company has analyzed the impact of the CARES Act to determine the effect on 2018 and 2019 filing positions that will be carried back to prior tax years, and recorded a financial statement benefit of $14.8 million.

Historically, the Company calculated its provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period. However, it was determined that since small changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate of income taxes in the third quarter of 2020.

For the nine months ended on September 30, 2020, the Company utilized the discrete effective tax rate method to calculate the interim tax provision. The discrete method treats the year-to-date period as if it were the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied for scenarios where small changes in estimated pre-tax book income would result in significant changes in the estimated annual effective tax rate that may result in an unreliable estimate of income taxes.

For the three months ended September 30, 2020, the Company recorded an income tax benefit of $4.7 million at an effective income tax rate of 188.6%. The annual effective tax rate differs from the statutory U.S. Federal tax rate as the tax benefit from consolidated pre-tax loss is offset by the portion of losses owned by noncontrolling interests that do not provide for a tax benefit, as well as impacts from foreign earnings and non-deductible compensation. These impacts are further offset by tax benefits from net operating loss carrybacks as a result of the CARES Act. The change in effective tax rate for the three months ended September 30, 2020 as compared to the same period last year was primarily attributed to the tax benefit generated from the current period loss before taxes offset by the effect of noncontrolling interest in the discrete effective tax rate, and additional tax benefits from net operating loss carrybacks as a result of the CARES Act. For the three months ended September 30, 2019, the Company recorded an income tax benefit of $7.2 million at an effective income tax rate of 55.1%.

For the nine months ended September 30, 2020, the Company recorded an income tax benefit of $18.4 million at an effective income tax rate of 38.9%. The annual effective tax rate differs from the statutory U.S. Federal tax rate as the tax benefit from consolidated pre-tax losses is offset by the portion of losses owned by noncontrolling interests that do not provide for a tax benefit, as well as impacts from foreign earnings and non-deductible compensation. These impacts are further offset by tax benefits from net operating loss carrybacks as a result of the CARES Act. The increase in effective tax rate for the nine months

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ended September 30, 2020 as compared to the same period last year was primarily attributed to the tax benefit generated from the current period loss before taxes offset by the effect of noncontrolling interest in the discrete effective tax rate, and additional tax benefits from net operating loss carrybacks as a result of the CARES Act. For the nine months ended September 30, 2019, the Company recorded an income tax benefit of $1.7 million at an effective income tax rate of 21.4%.

The 2020 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 $31.1 million and $17.7 million as of September 30, 2020 and September 30, 2019, respectively. The unrecognized tax benefits of $31.1 million include $28.6 million recorded as a reduction of the deferred tax asset and refundable credits associated with the R&D Credits.

  1. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in of accumulated other comprehensive income (loss) attributable to the Company for the three and nine months ended September 30, 2020 and 2019:

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Currency Translation Adjustment
Beginning balance $ (2,325) $ (976) $ 1,065 $ (11,550)
Other comprehensive income (loss) before reclassifications 2,351 1,600 (1,039) 508
Amounts reclassified from accumulated other comprehensive income (a) — — — 11,666
Other comprehensive income (loss), net of tax 2,351 1,600 (1,039) 12,174
Ending Balance $ 26 $ 624 $ 26 $ 624
Hedging Adjustment
Beginning balance $ (24,966) $ (9,700) $ (9,443) $ (126)
Other comprehensive income (loss) before reclassifications (535) (3,049) (18,594) (12,759)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax (b) 2,318 197 4,854 333
Other comprehensive income (loss), net of tax 1,783 (2,852) (13,740) (12,426)
Ending Balance $ (23,183) $ (12,552) $ (23,183) $ (12,552)
Pension and Other Postretirement Adjustment
Beginning balance $ 788 $ 4,177 $ 889 $ 5,031
Other comprehensive income (loss) before reclassifications 52 44 293 (468)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax (c) (171) (171) (513) (513)
Other comprehensive income (loss), net of tax (119) (127) (220) (981)
Ending Balance $ 669 $ 4,050 $ 669 $ 4,050
Investments in Convertible Preferred Securities Adjustment
Beginning balance $ 258 $ 258 $ 258 $ 258
Other comprehensive income (loss) before reclassifications — — — —
Amounts reclassified from accumulated other comprehensive income (loss), net of tax — — — —
Other comprehensive income (loss), net of tax — — — —
Ending Balance $ 258 $ 258 $ 258 $ 258
Total AOCI Ending Balance $ (22,230) $ (7,620) $ (22,230) $ (7,620)

(a) Reflects foreign currency translation adjustments in Other income, net attributable to the consolidation of Thompsons Limited in 2019.

(b) 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.

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

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  1. Earnings Per Share
(in thousands, except per common share data) Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Numerator:
Net income (loss) available to The Andersons Inc. common shareholders $ (1,058) $ (4,237) $ (8,281) $ 11,658
Denominator:
Weighted average shares outstanding – basic 32,962 32,626 32,905 32,550
Effect of dilutive awards — — — 484
Weighted average shares outstanding – diluted 32,962 32,626 32,905 33,034
Earnings (loss) per share
Basic $ (0.03) $ (0.13) $ (0.25) $ 0.36
Diluted $ (0.03) $ (0.13) $ (0.25) $ 0.35

There were no antidilutive awards as the Company incurred a net loss for the three months ended September 30, 2020 and September 30, 2019, as well as, the nine months ended September 30, 2020. There were 60 thousand antidilutive share awards outstanding for the nine months ended September 30, 2019.

  1. Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2020, December 31, 2019 and September 30, 2019:

(in thousands) September 30, 2020
Assets (liabilities) Level 1 Level 2 Level 3 Total
Commodity derivatives, net (a) $ 11,951 $ 51,565 $ — $ 63,516
Provisionally priced contracts (b) (5,190) (22,541) — (27,731)
Convertible preferred securities (c) — — 8,654 8,654
Other assets and liabilities (d) 4,998 (32,210) — (27,212)
Total $ 11,759 $ (3,186) $ 8,654 $ 17,227 (in thousands) December 31, 2019
--- --- --- --- --- --- --- --- ---
Assets (liabilities) Level 1 Level 2 Level 3 Total
Commodity derivatives, net (a) $ 45,682 $ 15,683 $ — $ 61,365
Provisionally priced contracts (b) (118,414) (68,237) — (186,651)
Convertible preferred securities (c) — — 8,404 8,404
Other assets and liabilities (d) 9,469 (13,507) — (4,038)
Total $ (63,263) $ (66,061) $ 8,404 $ (120,920) (in thousands) September 30, 2019
--- --- --- --- --- --- --- --- ---
Assets (liabilities) Level 1 Level 2 Level 3 Total
Commodity derivatives, net (a) $ 34,196 $ 18,691 $ — $ 52,887
Provisionally priced contracts (b) (79,757) (23,535) — (103,292)
Convertible preferred securities (c) — — 8,404 8,404
Other assets and liabilities (d) 5,603 (17,891) — (12,288)
Total $ (39,958) $ (22,735) $ 8,404 $ (54,289)

(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, ethanol risk management contracts, and foreign exchange derivative contracts (Level 1) and interest rate derivatives (Level 2).

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

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

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

Convertible Preferred Securities
(in thousands) 2020 2019
Assets at January 1, $ 8,404 $ 7,154
Additional investments 250 250
Assets at March 31, $ 8,654 $ 7,404
Additional investments — 1,000
Assets at June 30, $ 8,654 $ 8,404
Additional investments — —
Assets at September 30, $ 8,654 $ 8,404

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The following tables summarize quantitative information about the Company's Level 3 fair value measurements as of September 30, 2020, December 31, 2019 and September 30, 2019:

Quantitative Information about Recurring Level 3 Fair Value Measurements
(in thousands) Fair Value as of September 30, 2020 Valuation Method Unobservable Input Weighted Average
Convertible preferred securities (a) $ 8,654 Implied based on market prices N/A N/A (in thousands) Fair Value as of December 31, 2019 Valuation Method Unobservable Input Weighted Average
--- --- --- --- --- ---
Convertible preferred securities (a) $ 8,404 Implied based on market prices N/A N/A (in thousands) Fair Value as of September 30, 2019 Valuation Method Unobservable Input Weighted Average
--- --- --- --- --- ---
Convertible preferred securities (a) $ 8,404 Implied based on market prices N/A N/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.

Quantitative Information about Non-recurring Level 3 Fair Value Measurements
(in thousands) Fair Value as of December 31, 2019 Valuation Method Unobservable Input Weighted Average
Frac sand assets (a) $ 16,546 Third party appraisal Various N/A
Real property (b) 608 Market approach Various N/A
Equity method investment (c) 12,424 Discounted cash flow analysis Various N/A

(a) The Company recognized impairment charges on long lived related to its frac sand business. The fair value of the assets were determined using prior transactions and third-party appraisals. These measures are considered Level 3 inputs on a nonrecurring basis.

(b) The Company recognized impairment charges on certain Trade assets and measured the fair value using Level 3 inputs on a nonrecurring basis. The fair value of the assets were determined using prior transactions in the local market and a recent sale of comparable Trade group assets held by the Company.

(c) The Company recorded an other-than-temporary impairment charge on an existing equity method investment. The fair value of the investment was determined using a discounted cash flow analysis.

There were no non-recurring fair value measurements as of September 30, 2020 and September 30, 2019.

Fair Value of Financial Instruments

The fair value of the Company’s long-term debt is estimated using quoted market prices or discounted future cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. As such, the Company has concluded that the fair value of long-term debt is considered Level 2 in the fair value hierarchy.

(in thousands) September 30,<br>2020 December 31,<br>2019 September 30,<br>2019
Fair value of long-term debt, including current maturities $ 1,022,113 $ 1,096,010 $ 1,046,063
Fair value in excess of carrying value (a) 31,080 8,257 11,047

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

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

  1. Related Parties

In the ordinary course of business and on an arms-length basis, the Company will mainly 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.

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

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Sales revenues $ 44,789 $ 52,875 $ 129,143 $ 171,897
Service fee revenues (a) — 2,852 — 11,015
Purchases of product and capital assets 16,641 174,420 38,637 520,091
Lease income (b) 142 1,887 440 5,195
Labor and benefits reimbursement (c) — 3,513 — 10,973

(a)Prior period service fee revenues include management fees, corn origination fees, ethanol and distillers dried grains ("DDG") marketing fees, and other commissions. In the current period these revenues are now eliminated in consolidation as a result of the TAMH merger.

(b)Prior period lease income includes certain railcars leased to related parties and the lease of the Company’s Albion, Michigan and Clymers, Indiana grain facilities. This income is now eliminated in consolidation as a result of the TAMH merger.

(c)Prior period labor and benefits reimbursement includes all operations labor to the unconsolidated ethanol LLCs. This reimbursement is now eliminated in consolidation as a result of the TAMH merger.

(in thousands) September 30, 2020 December 31, 2019 September 30, 2019
Accounts receivable (d) $ 7,184 $ 10,603 $ 23,394
Accounts payable (e) 3,058 12,303 21,201

(d)Accounts receivable represents amounts due from related parties for the sale of ethanol and other various items.

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

  1. Segment Information

The Company’s operations include four 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 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. In January 2020, the Company moved its Lansing Vermont DDG business from the Trade group to the Ethanol group as part of internal restructuring efforts. Prior year results have been recast to reflect this change.

During the third quarter, the Company announced a change in the management structure of the business. The Trade and Ethanol Groups and the Rail and Plant Nutrient Groups were combined to be led by one Company president each. The Company considered current accounting guidance concluding that its reportable operating segments would not change under the new management structure as the aggregation criteria could not be met.

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 revenue.

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Revenues from external customers
Trade $ 1,432,922 $ 1,515,107 $ 4,162,130 $ 4,753,375
Ethanol 349,957 319,105 886,742 899,137
Plant Nutrient 102,707 109,446 507,445 508,548
Rail 36,647 39,097 109,202 123,528
Total $ 1,922,233 $ 1,982,755 $ 5,665,519 $ 6,284,588

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Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Income (loss) before income taxes attributable to the Company
Trade $ 5,941 $ (2,122) $ (3,650) $ 2,610
Ethanol 1,148 1,070 (21,960) 7,827
Plant Nutrient (5,387) (7,440) 12,828 4,534
Rail (139) 3,137 3,474 10,629
Other (7,335) (6,094) (17,351) (15,599)
Income (loss) before income taxes attributable to the Company (5,772) (11,449) (26,659) 10,001
Income (loss) attributable to noncontrolling interests 3,273 (1,633) (20,583) (2,265)
Income (loss) before income taxes $ (2,499) $ (13,082) $ (47,242) $ 7,736
(in thousands) September 30, 2020 December 31, 2019 September 30, 2019
--- --- --- --- --- --- ---
Identifiable assets
Trade $ 1,642,220 $ 2,012,060 $ 1,712,350
Ethanol 625,587 690,548 372,663
Plant Nutrient 343,121 383,781 376,615
Rail 641,797 693,931 679,056
Other 158,886 120,421 143,768
Total $ 3,411,611 $ 3,900,741 $ 3,284,452
  1. Commitments and Contingencies

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

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

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.

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  1. Supplemental Cash Flow Information

Certain supplemental cash flow information, including noncash investing and financing activities for the nine months ended September 30, 2020 and 2019 are as follows:

Nine months ended September 30,
(in thousands) 2020 2019
Supplemental disclosure of cash flow information
Interest paid $ 38,978 $ 47,164
Noncash investing and financing activity
Dividends declared not yet paid 5,770 5,547
Capital projects incurred but not yet paid 5,534 8,245
Equity issued in conjunction with acquisition — 127,841
Removal of pre-existing equity method investment — (159,459)
Purchase price holdback/ other accrued liabilities — 29,956
  1. Goodwill

During the first quarter of 2020, the Company completed a reorganization of its structure whereby the Company moved certain of its operations between the Trade and Ethanol segments to enhance operating decisions and assessing performance. The reorganization resulted in the reassignment of goodwill to the affected reporting units using a relative fair value approach. At the time of the reassignment and allocation, the Company performed an interim review of the carrying value of goodwill at the Trade and Ethanol segments for possible impairment on both a pre and post-reorganization basis. No impairment of goodwill was indicated at the pre and post-reorganization reporting units.

The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2020 are as follows:

(in thousands) Trade Ethanol Plant Nutrient Rail Total
Balance at December 31, 2019 $ 127,781 $ 2,726 $ 686 $ 4,167 $ 135,360
Reorganization (a) (5,714) 5,714 — — —
Acquisitions (b) — 349 — — 349
Balance at September 30, 2020 $ 122,067 $ 8,789 $ 686 $ 4,167 $ 135,709

(a) Reorganization related to move of the DDG business line from the Trade to Ethanol segment.

(b) Acquisitions represent the finalized goodwill allocation from the TAMH acquisition.

  1. Subsequent Events

On October 23, 2020, the Company entered into a new amendment to its credit agreement dated January 11, 2019. The amendment provides for an incremental $150 million term loan maturing January 11, 2026, with quarterly principal payments. This term loan replaced the Andersons Railcar Leasing Company LLC’s (“TARLC”) existing credit facility. Borrowings under the loan bear interest at variable rates, which are based on LIBOR plus an applicable spread. Proceeds from the loan have been used to extinguish debt of TARLC, a wholly owned subsidiary. The TARLC debt was hedged by interest rate swaps and due to the debt prepayment, these swaps were redesignated or terminated which resulted in an approximately $2.8 million loss on existing OCI balances which were reclassified into earnings. The Company also incurred approximately $0.3 million of losses due to the write off of unamortized debt issuance costs associated to the TARLC debt.

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

Forward Looking Statements

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements which relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. The reader is urged to carefully consider these risks and others, including those risk factors listed under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”) and Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q. 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 2019 Form 10-K, have not materially changed through the third quarter of 2020.

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 exceeded the Company’s market capitalization for impairment indicators. Management ultimately concluded that, while the Company's shareholders equity exceeded the market capitalization for the period, an impairment triggering event had not occurred. The Company continues to believe that the share price is not an accurate reflection of its current value. While adverse conditions are currently present and pervasive in the agriculture space during this time, the long-term outlook remains positive and 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, the Company concluded that no impairment trigger existed as of September 30, 2020. However, continuing adverse market conditions or alternative management decisions on operations may result in future impairment considerations.

Recent Developments

For fiscal year 2020 to date, the global emergence of the novel strain of coronavirus ("COVID-19") has had a significant impact on the global economy, including several industries in which The Andersons operates. Government-mandated stay-at-home orders and other public health mandates and recommendations, as well as behavioral changes in response to the pandemic, have reduced demand for gasoline, ethanol and corn. The reduced demand coupled with a general economic downturn has negatively impacted our Rail, Ethanol and Trade Groups. As previously announced the Company idled its ethanol plants for extended maintenance shutdowns in an effort to maintain the Company's ethanol plants, protect employees and conserve cash. Since that announcement, all of the Company's ethanol plants resumed operations in the second quarter and continue to operate. The Company is continuing to actively manage its response to the COVID-19 pandemic, however, the future impacts of the ongoing pandemic on the Company’s business remain highly uncertain at this time.

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The Company is a critical infrastructure industry as defined by The United States Department of Homeland Security, Cybersecurity and Infrastructure Agency, in its March 19, 2020 Memorandum. As COVID-19 continues to spread and certain regions experience accelerated spread or resurgences, the Company is currently conducting business as usual to the greatest extent possible in the current circumstances. The Company is taking a variety of measures to ensure the availability of its services throughout our network, promote the safety and security of our employees, and support the communities in which we operate. Certain modifications the Company has made in response to the COVID-19 pandemic include: implementing working at home protocols for all non-essential support staff; restricting employee business travel; strengthening clean workplace practices; reinforcing socially responsible sick leave recommendations; limiting visitor and third-party access to Company facilities; launching internal COVID-19 resources for employees; creating a pandemic response team comprised of employees and members of senior management; encouraging telephonic and video conference-based meetings along with other hygiene and social distancing practices recommended by health authorities including Health Canada, the U.S. Centers for Disease Control and Prevention, and the World Health Organization; and maintaining employment benefit coverage of employees through the pandemic. The Company is responding to this crisis through measures designed to protect our workforce and prevent disruptions to the Company's operations within the North American agricultural supply chain.

Management has observed many other companies, including those in our supply chain, taking precautionary and preemptive actions to address the COVID-19 pandemic, and companies may take further actions that alter their normal business operations. The Company will continue to actively monitor the situation and may take further actions that could materially alter our business operations as may be required or recommended by federal, provincial, state or local authorities, or that management determines are in the best interests of our employees, customers, shareholders, partners, suppliers, and other stakeholders.

Additional information concerning the impact COVID-19 may have to our future business and results of operations is provided in Part II, Item 1A. Risk Factors.

Trade

The Trade Group’s results in the third quarter improved over the prior year from strong results in the commodity merchandising business. The performance of the Group's assets improved slightly despite earning less income from wheat. The business also continued to benefit from the successful integration of prior year acquisitions, portfolio optimization and other cost-cutting efforts.

Conversely, the food and specialty ingredients business netted lower results that were driven by higher freight costs and lower volume, particularly in the food business.

Agricultural inventories on hand at September 30, 2020 were 82.3 million bushels, of which 2.3 million bushels were stored for others. These amounts compare to 97.5 million bushels on hand at September 30, 2019, of which 2.7 million bushels were stored for others. Total Trade storage capacity, including temporary pile storage, was approximately 199.5 million bushels at September 30, 2020 compared to 202 million bushels at September 30, 2019.

The 2020 corn and soybean harvest is much improved from the short crop in the Eastern corn belt that hurt the Group in the prior year. However, nationwide, this year's crop is smaller and drier than originally anticipated. Export demand has been improving, especially from China, which we expect to run well into the first quarter. These conditions have led to a significant increase in basis, strong elevation margins and considerable volatility, which should create good merchandising opportunities.

Nearby futures prices have rallied, creating an inverse in corn, soybean and wheat markets. If those conditions persist, they will diminish the opportunity to earn storage income through the first part of 2021. As a result of these conditions, the current outlook for the Trading Group in the next four quarters is stronger on merchandising but weaker on income from assets.

Ethanol

The Ethanol Group's third quarter results were profitable as improved crush margins were the primary driver of significantly improved performance by the Group's five plants combined with higher ethanol and feed ingredient trading results. These improved results were partially offset by non-cash mark-to-market charges due to increases in corn and DDG prices late in the quarter.

Spot ethanol crush margins continue to be positive but, similar to grain markets, are inverted. The Group continues to line out some of the new technologies being used in the ELEMENT plant and are now producing a new high-protein feed product at both ELEMENT and at our Denison, Iowa plant. Uncertainty persists regarding how 2020 will finish and 2021 will begin hinging on the balance between gasoline demand and ethanol industry supply.

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Ethanol and related co-products volumes for the three and nine months ended September 30, 2020 and 2019 were as follows:

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Ethanol (gallons shipped) 169,409 131,878 436,282 393,203
E-85 (gallons shipped) 7,455 9,284 20,955 36,412
Corn oil (pounds shipped) 33,257 5,067 83,519 14,821
DDG (tons shipped) * 536 468 1,384 1,270

* DDG tons shipped converts wet tons to a dry ton equivalent amount. Prior year DDG tons shipped were recast from the Trade Group to the Ethanol Group. See note 12 for further details of the recast.

The above table shows only shipped volumes that flow through the Consolidated Financial Statements of the Company. As the Company merged its former unconsolidated LLCs into the consolidated TAMH entity in the fourth quarter of 2019, these consolidated volumes are now included in the 2020 amounts above. Total ethanol, DDG, and corn oil production by the unconsolidated LLCs in 2019 is actually higher than disclosed above. However, the portion of this volume that was sold from the unconsolidated LLCs directly to their customers for the nine months ended September 30, 2019 is excluded here.

Plant Nutrient

The Plant Nutrient Group's third quarter results were an improvement from the prior period. While tons sold were largely unchanged, the improvement was driven by slightly better margin per ton and continued disciplined expense management.

We expect our Plant Nutrient business to finish the year strong with the fall application season trending well. We expect some modest improvement in 2021 assuming continued higher commodity prices and another strong planting season.

Storage capacity at our Ag Supply Chain and Specialty Liquids facilities, including leased storage, was approximately 477 thousand tons for dry nutrients and approximately 509 thousand tons for liquid nutrients at September 30, 2020, compared to approximately 487 thousand tons for dry nutrients and approximately 514 thousand tons for liquid nutrients at September 30, 2019.

Tons of product sold for the three and nine months ended September 30, 2020 and 2019 were as follows:

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Ag Supply Chain 273 280 1,178 977
Specialty Liquids 64 57 257 249
Engineered Granules 59 58 331 338
Total tons 396 395 1,766 1,564

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

The Rail Group results declined as the leasing business accounted for the majority of the shortfall due to lower lease rates and fleet utilization year over year; repair revenues and margins also fell. Average utilization rates decreased from 89.2 percent in the third quarter of 2019 to 87.0 percent in the third quarter of 2020 as the Group had fewer cars on lease from the sand and ethanol market headwinds. Rail Group assets under management (owned, leased or managed for financial institutions in non-recourse arrangements) at September 30, 2020 were 23,463 compared to 24,864 at September 30, 2019.

The COVID-19 pandemic has caused the idling of nearly one-third of the North American railcar fleet and has driven year-to-date railcar loadings lower year over year. These conditions are expected to continue until the general economy returns to normal levels, and will continue to negatively impact lease renewals, lease rates and demand for railcar repairs.

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Other

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

Operating Results

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

Comparison of the three months ended September 30, 2020 with the three months ended September 30, 2019 including a reconciliation of GAAP to non-GAAP measures:

Three months ended September 30, 2020
(in thousands) Trade Ethanol Plant Nutrient Rail Other Total
Sales and merchandising revenues $ 1,432,922 $ 349,957 $ 102,707 $ 36,647 $ — $ 1,922,233
Cost of sales and merchandising revenues 1,367,350 338,788 86,211 28,049 — 1,820,398
Gross profit 65,572 11,169 16,496 8,598 — 101,835
Operating, administrative and general expenses 58,385 5,650 21,175 5,609 7,400 98,219
Interest expense (income), net 4,380 1,651 1,287 3,716 (465) 10,569
Equity in earnings of affiliates, net 20 — — — — 20
Other income, net 3,114 553 579 588 (400) 4,434
Income (loss) before income taxes $ 5,941 $ 4,421 $ (5,387) $ (139) $ (7,335) $ (2,499)
Income (loss) before income taxes attributable to the noncontrolling interests — 3,273 — — — 3,273
Non-GAAP Income (loss) before income taxes attributable to the Company $ 5,941 $ 1,148 $ (5,387) $ (139) $ (7,335) $ (5,772)
Three months ended September 30, 2019
--- --- --- --- --- --- --- --- --- --- --- --- ---
(in thousands) Trade Ethanol Plant Nutrient Rail Other Total
Sales and merchandising revenues $ 1,515,107 $ 319,105 $ 109,446 $ 39,097 $ — $ 1,982,755
Cost of sales and merchandising revenues 1,441,728 311,022 93,595 27,269 — 1,873,614
Gross profit 73,379 8,083 15,851 11,828 — 109,141
Operating, administrative and general expenses 68,491 5,142 21,970 5,334 6,181 107,118
Interest expense (income), net 7,788 291 1,831 4,211 (146) 13,975
Equity in earnings (losses) of affiliates, net (98) (3,630) — — — (3,728)
Other income (expense), net 876 417 510 854 (59) 2,598
Income (loss) before income taxes $ (2,122) $ (563) $ (7,440) $ 3,137 $ (6,094) $ (13,082)
Income (loss) before income taxes attributable to the noncontrolling interests — (1,633) — — — (1,633)
Non-GAAP Income (loss) before income taxes attributable to the Company $ (2,122) $ 1,070 $ (7,440) $ 3,137 $ (6,094) $ (11,449)

Trade

Operating results for the Trade Group increased by $8.1 million compared to the results of the same period last year. Sales and merchandising revenues decreased by $82.2 million and cost of sales and merchandising revenues decreased by $74.4 million for an unfavorable net gross profit impact of $7.8 million. The performance of the unit's assets improved through strong corn and soybean sales despite earning less income from wheat. The business also continued to benefit from the successful integration of the LTG and Thompson's businesses.

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Operating, administrative and general expenses decreased by $10.1 million. The decrease from the prior year is primarily related to the divestiture of the farm services business, winding down operations at select sand locations and the Company's cost saving initiatives, much of which is headcount reductions, both from acquisition integration and in response to the COVID-19 pandemic.

Interest expense decreased by $3.4 million due to the Company paying down debt, declining interest rates and lower group borrowings on the Company's short-term line of credit compared to the prior year.

Other income increased by $2.2 million from prior year due to a gain on the sale of a grain location in the current year.

Ethanol

Operating results for the Ethanol Group increased by $0.1 million from the same period last year. Sales and merchandising revenues increased by $30.9 million and cost of sales and merchandising revenues increased by $27.8 million compared to prior year results. Gross profit increased by $3.1 million compared to 2019 results from improved production at the facilities and that this activity was captured in the Equity in earnings of affiliates line item in the prior year.

Operating, administrative and general expenses increased by $0.5 million from the increase in labor and benefits from the TAMH merger, as these expenses are now reflected in consolidated earnings. This increase was partially offset by lower labor and incentive compensation costs from cost cutting initiatives.

Interest expense increased by $1.4 million due to the inclusion of interest expense as a result of the consolidation of TAMH and ELEMENT's ability to capitalize interest related to the construction of the ELEMENT facility in the prior year.

Equity in earnings of affiliates increased by $3.6 million as a result of the former unconsolidated ethanol LLCs being merged into TAMH, a consolidated entity.

Plant Nutrient

Operating results for the Plant Nutrient Group increased by $2.1 million compared to the same period in the prior year. Sales and merchandising revenues decreased by $6.7 million and cost of sales and merchandising revenues decreased by $7.4 million resulting in a slight improvement in gross profit. The increase in gross profit was driven by improved margins within Ag supply chain that was offset by decreased volumes.

Operating, administrative and general expenses decreased by $0.8 million due to more efficient production compared to the prior year as well as cost cutting initiatives.

Interest expense decreased by $0.5 million due to lower interest rates.

Rail

Operating results declined by $3.3 million from the same period last year. Sales and merchandising revenues decreased by $2.5 million driven by a $4.0 million decrease in leasing revenues that was partially offset by a $1.1 million increase in car sale revenues and a $0.4 million increase in repair revenues. Cost of sales and merchandising revenues increased by $0.8 million compared to the prior year due to increased car sale revenues from the prior year. As a result, gross profit decreased by $3.2 million compared to the same period last year.

Operating, administrative and general expenses increased by $0.3 million due to an increase to bad debt expense resulting from headwinds in the ethanol and sand markets.

Interest expense decreased by $0.5 million due to lower interest rates.

Other

Operating results for the third quarter declined by $1.2 million compared to the same period in 2019. The increase in operating losses was primarily driven by higher operating, administrative and general expenses due to $3.2 million of severance related expense associated with the departure of certain executive officers and key employees. These severance costs were offset by run-rate labor and benefit expense savings from prior quarter headcount reductions.

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Income Taxes

For the three months ended September 30, 2020, the Company recorded an income tax benefit of $4.7 million at an effective rate of 188.6%. For the three months ended September 30, 2019, the Company recorded an income tax benefit of $7.2 million at an effective tax rate of 55.1%. The increase in effective tax rate for the three months ended September 30, 2020 as compared to the same period last year was primarily attributed to nondeductible income related to our noncontrolling interests within the Ethanol group. These losses were offset by NOL carryback tax savings opportunities as provided by the CARES Act.

Comparison of the nine months ended September 30, 2020 with the nine months ended September 30, 2019 including a reconciliation of GAAP to non-GAAP measures:

Nine months ended September 30, 2020
(in thousands) Trade Ethanol Plant Nutrient Rail Other Total
Sales and merchandising revenues $ 4,162,130 $ 886,742 $ 507,445 $ 109,202 $ — $ 5,665,519
Cost of sales and merchandising revenues 3,974,710 907,571 431,820 80,187 — 5,394,288
Gross profit 187,420 (20,829) 75,625 29,015 — 271,231
Operating, administrative and general expenses 181,539 17,271 59,197 16,052 19,356 293,415
Interest expense (income), net 16,624 5,908 4,535 12,032 (1,116) 37,983
Equity in earnings (losses) of affiliates, net 228 — — — — 228
Other income (expense), net 6,865 1,465 935 2,543 889 12,697
Income (loss) before income taxes $ (3,650) $ (42,543) $ 12,828 $ 3,474 $ (17,351) $ (47,242)
Income (loss) before income taxes attributable to the noncontrolling interests — (20,583) — — — (20,583)
Non-GAAP Income (loss) before income taxes attributable to the Company $ (3,650) $ (21,960) $ 12,828 $ 3,474 $ (17,351) $ (26,659) Nine months ended September 30, 2019
--- --- --- --- --- --- --- --- --- --- --- --- ---
(in thousands) Trade Ethanol Plant Nutrient Rail Other Total
Sales and merchandising revenues $ 4,753,375 $ 899,137 $ 508,548 $ 123,528 $ — $ 6,284,588
Cost of sales and merchandising revenues 4,511,931 879,164 432,965 80,995 — 5,905,055
Gross profit 241,444 19,973 75,583 42,533 — 379,533
Operating, administrative and general expenses 206,875 15,815 66,218 21,225 17,252 327,385
Asset impairment 3,081 — — — — 3,081
Interest expense (income), net 28,740 (1,232) 6,478 12,071 (444) 45,613
Equity in earnings (losses) of affiliates, net (1,843) (524) — — — (2,367)
Other income (expense), net 1,705 696 1,647 1,392 1,209 6,649
Income (loss) before income taxes $ 2,610 $ 5,562 $ 4,534 $ 10,629 $ (15,599) $ 7,736
Income (loss) before income taxes attributable to the noncontrolling interests — (2,265) — — — (2,265)
Non-GAAP Income (loss) before income taxes attributable to the Company $ 2,610 $ 7,827 $ 4,534 $ 10,629 $ (15,599) $ 10,001

Trade

Operating results for the Trade Group decreased by $6.3 million compared to the results of the same period last year. Sales and merchandising revenues decreased by $591.2 million and cost of sales and merchandising revenues decreased by $537.2 million for a decreased gross profit impact of $54.0 million. The decrease in gross profit was primarily driven by the lack of appreciation of corn and wheat basis and the decreased oil demand creating headwinds in the Company's sand operations when compared to the prior year. The performance of the unit's assets improved through strong corn and soybean sales despite

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earning less income from wheat. The business also continued to benefit from the successful integration of the LTG and Thompson's businesses.

Operating, administrative and general expenses decreased by $25.3 million. The decrease from the prior year is primarily related to $11.0 million of transaction expenses in the prior period that did not recur in the current year, the divestiture of our farm services business and the Company's cost saving initiatives, much of which is headcount reduction, both from acquisition integration and in response to the COVID-19 pandemic.

Interest expense decreased by $12.1 million due to the Company paying down debt, declining interest rates and lower group borrowings on the Company's short-term line of credit compared to the prior year.

Other income increased by $5.2 million as there were approximately $2.0 million worth of insurance settlements in the current year, an initial remeasurement loss of $1.1 million on the Company's preexisting equity method investment in LTG and Thompsons that didn't recur and a $1.3 million gain on sale of a grain location in the current year.

Ethanol

Operating results for the Ethanol Group decreased by $29.8 million from the same period last year. Sales and merchandising revenues decreased by $12.4 million and cost of sales and merchandising revenues increased by $28.4 million compared to prior year. As a result, gross profit decreased by $40.8 million compared to prior year, as decreased driving demand due to the COVID-19 pandemic lead to an over supply of ethanol. The negative margin environment existing through most of the second quarter rebounded through the third quarter.

Operating, administrative and general expenses increased by $1.5 million primarily due to an increase in labor and benefits from the TAMH merger as these expenses are now reflected in consolidated earnings. This increase was partially offset by lower labor and incentive compensation costs from cost cutting initiatives.

Interest expense increased by $7.1 million due to the inclusion of interest expense related to the consolidation of TAMH and due to ELEMENT's ability to capitalize a portion of interest related to the construction of the ELEMENT facility in the prior year.

Equity in earnings of affiliates increased by $0.5 million as a result of the former unconsolidated ethanol LLCs being merged into the consolidated entity of TAMH.

Plant Nutrient

Operating results for the Plant Nutrient Group increased by $8.3 million compared to the same period in the prior year. Sales and merchandising revenues decreased $1.1 million and cost of sales and merchandising revenues decreased by $1.1 million resulting in gross profit being flat. Gross profit was flat year over year as increases in volumes from more normal planting conditions were offset by lower margins.

Operating, administrative and general expenses decreased by $7.0 million due to more efficient production compared to the prior year as well as cost cutting initiatives.

Interest expense decreased by $1.9 million from lower interest rates compared to the prior year.

Rail

Operating results decreased by $7.2 million from the same period last year. Sales and merchandising revenues decreased by $14.3 million driven by an $11.7 million decrease in leasing revenues, a $1.2 million decrease in car sale revenue and a $1.4 million decrease in repair and other revenue. Cost of sales and merchandising decreased by $0.8 million compared to the prior year due to cars on lease, average lease rate and utilization all being lower as railcar loadings continued to decrease from the prior year. As a result, gross profit decreased by $13.5 million compared to the same period last year.

Operating, administrative and general expenses decreased by $5.2 million driven by more efficient labor costs within the repair business.

Other income increased by $1.2 million due to more end of lease settlements in the current year.

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Other

Operating results declined by $1.8 million from the same period last year. The increase in operating losses was primarily driven by higher operating, administrative and general expenses due to $5.6 million of severance related expense associated with the departure of certain executive officers and key employees. These severance costs were offset by run-rate labor and benefit expense reductions from prior quarter headcount reductions.

Income Taxes

For the nine months ended September 30, 2020, the Company recorded an income tax benefit of $18.4 million at an effective rate of 38.9%. For the nine months ended September 30, 2019, the Company recorded an income tax benefit of $1.7 million at an effective tax rate of 21.4%. The increase in effective tax rate for the nine months ended September 30, 2020 as compared to the same period last year primarily attributed to nondeductible income related to our noncontrolling interests within the Ethanol group. These losses were offset by NOL carryback tax savings opportunities as provided by the CARES Act.

Liquidity and Capital Resources

Working Capital

At September 30, 2020, the Company had working capital of $443.7 million. The following table presents changes in the components of current assets and current liabilities:

(in thousands) September 30, 2020 September 30, 2019 Variance
Current Assets:
Cash, cash equivalents and restricted cash $ 13,693 $ 21,299 $ (7,606)
Accounts receivable, net 529,584 523,110 6,474
Inventories 754,604 741,086 13,518
Commodity derivative assets – current 140,066 120,510 19,556
Other current assets 102,302 82,770 19,532
Total current assets $ 1,540,249 $ 1,488,775 $ 51,474
Current Liabilities:
Short-term debt 100,405 138,249 (37,844)
Trade and other payables 641,812 594,708 47,104
Customer prepayments and deferred revenue 49,573 35,274 14,299
Commodity derivative liabilities – current 79,159 67,606 11,553
Current maturities of long-term debt 67,786 66,899 887
Accrued expenses and other current liabilities 157,801 162,749 (4,948)
Total current liabilities $ 1,096,536 $ 1,065,485 $ 31,051
Working Capital $ 443,713 $ 423,290 $ 20,423

Current assets as of September 30, 2020 increased $51.5 million in comparison to those as of September 30, 2019. This increase was noted in all areas except for cash. The increases in accounts receivable and inventory balances can largely be attributable to the consolidation of the TAMH entity on October 1, 2019 as the plants comprising this entity were recorded as equity method investments in the comparable period. Current commodity derivative assets and liabilities, which reflects the customer net asset or liability based on the value of forward contracts as compared to market prices at the end of the period, show a net increase. The increase in other assets is due to significant prepaid federal income taxes as a result of the CARES Act. See also the discussion below on additional sources and uses of cash for an understanding of the decrease in cash from prior year.

Current liabilities increased $31.1 million compared to the prior year primarily due to increases in trade and other payables and customer prepayments and deferred revenue offset by reductions in short-term debt. The increase in trade and other payables can largely be attributable to the consolidation of the TAMH entity on October 1, 2019 as the plants comprising this entity were recorded as equity method investments in the comparable period. The increase in customer prepayments was driven by larger customer prepayments within the Trade business. The decrease in short-term debt is the result of lower working capital needs.

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Sources and Uses of Cash

Nine Months Ended
(in thousands) September 30, 2020 September 30, 2019
Net cash provided by operating activities $ 195,791 $ 319,625
Net cash used in investing activities (70,159) (334,871)
Net cash provided by (used in) financing activities (166,427) 12,257

Operating Activities

Our operating activities provided cash of $195.8 million and $319.6 million in the first nine months of 2020 and 2019, respectively. The decrease in cash provided was primarily due to a result in the change of working capital, as discussed above, and lower operating results.

Investing Activities

Investing activities used cash of $70.2 million through the first nine months of 2020 compared to cash used of $334.9 million in the prior year. The decrease from the prior year was a result of the acquisition of LTG in the prior year and a strategic reduction of capital spending in the current year to enhance overall liquidity and cash management.

In 2020, management expects to spend up to a total of approximately $35.0 million for the purchase of railcars and related leases and capitalized modifications of railcars. Total capital spending on property, plant and equipment in our base business excluding rail leasing activity, but inclusive of information technology spending, is expected to be approximately $100 million for 2020.

Financing Activities

Financing activities used cash of $166.4 million and provided cash of $12.3 million for the nine months ended September 30, 2020 and 2019, respectively. This change from the prior year was largely due to a decrease in proceeds as new debt was issued in the prior year to finance the LTG acquisition and a current year reduction in short term borrowings consistent with the Company's strategy and focus to pay down debt.

The Company is party to borrowing arrangements with a syndicate of banks that provide a total of $1,693.2 million in borrowings. Of the total capacity, $500.1 million is non-recourse to the Company. As of September 30, 2020, the Company had $1,358.9 million available for borrowing with $250.1 million of that total being non-recourse to the Company.

The Company paid $17.2 million in dividends in the first nine months of 2020 compared to $16.6 million in the prior year. The Company paid $0.175 per common share for the dividends paid in January, April and July of 2020 and $0.17 per common share for the dividends paid in January, April and July of 2019. On August 21, 2020, the Company declared a cash dividend of $0.175 per common share payable on October 22, 2020 to shareholders of record on October 1, 2020.

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 September 30, 2020. 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.

While the effects of the COVID-19 pandemic have had a negative impact on operating cash flows and the continuing effects remain uncertain, management believes our sources of liquidity will be adequate to fund our operations, capital expenditures and service our indebtedness.

At September 30, 2020, the Company had standby letters of credit outstanding of $25.7 million.

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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, 2019. There were no material changes in market risk, specifically commodity and interest rate risk during the nine months ended September 30, 2020.

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 September 30, 2020 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 third quarter of 2020, 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. As a result of the COVID-19 pandemic, the majority of our workforce began working remotely in March 2020. The Company has taken a phased approach for the workforce to return back to the office, which is expected to continue into 2021. These changes to the working environment did not have a material effect on our internal controls over financial reporting during the most recent quarter.

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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 2019 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 2019 Form 10-K with the exception of those disclosed below.

The COVID-19 pandemic could negatively affect the Company's business and operating results

The continuing and future impacts of the global emergence of the novel strain of coronavirus ("COVID-19") and the disease it causes on the Company's business or operating and financial results are unpredictable and cannot be identified or assessed with certainty at this time. The widespread health crisis has adversely affected the global economy and resulted in a widespread economic downturn and significant behavioral changes which have adversely impacted demand for certain of our products and services and these impacts may continue or reoccur in the future. Such interruptions could include fluctuations to commodity prices, disruptions or restrictions on the ability to transport freight in the ordinary course, temporary closures of facilities and ports, or the facilities and ports of our customers, decreased demand for our products, and/or changes to export/import restrictions. Transportation fuels in particular, including ethanol, have experienced significant price declines and reduced demand. A further or extended downturn in economic growth, or recessionary conditions in major geographic regions in which we operate, or continued behavioral changes as a results of the pandemic, could lead to poor demand for ethanol and negatively affect the market prices of our products, materially and adversely affecting our business and results of operations.

The COVID-19 pandemic has contributed to the idling of nearly one-third of the North American railcar fleet and has driven year-to-date railcar loadings lower year over year. There can be no assurance that these conditions will improve or that the general economy will return to normal levels, and such conditions will continue to negatively impact lease renewals, lease rates and demand for railcar repairs. The pandemic caused by COVID-19 may impact the seasonal trends that typically characterize our revenues and operating income. There is no assurance that the outbreak will not have a material adverse impact on our business or results of operations. Further, our operations could be negatively affected if a significant number of our employees are unable to perform their normal duties because of contracting COVID-19 or based on further direction from governments, public health authorities or regulatory agencies. The extent of the impact, if any, will depend on developments beyond our control, including actions taken by governments, financial institutions, monetary policy authorities, and public health authorities to contain and respond to public health concerns, behavioral changes as a result of the pandemic and general economic conditions as a result of the pandemic or the foregoing actions.

Management will continue to actively monitor the situation and may take further actions that alter our business operations as may be required or recommended by federal, provincial, state or local authorities, or that management determines are in the best interests of our employees, customers, partners, suppliers, shareholders and other stakeholders. The Company cannot be certain of potential effects any such alterations or modifications may have on our business or operating and financial results for the fiscal year ending December 31, 2020 or thereafter. The COVID-19 pandemic continues to rapidly evolve and its ultimate impact remains unknown.

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

Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 2020 2,785 $ 12.97 — —
August 2020 5,486 14.36 — —
September 2020 815 14.78 — —
Total 9,086 $ 13.97 — —

(1) During the three months ended September 30, 2020, 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.

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Item 6. Exhibits

Exhibit Number Description
10.1* Amendment No. 1 to Credit Agreement
31.1* Certification of the Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a)
31.2* Certification of the Chief Financial Officer under Rule 13(a)-14(a)/15d-14(a)
32.1** Certifications Pursuant to 18 U.S.C. Section 1350
95.1* Mine Safety Disclosure
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

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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.<br>(Registrant)
Date: November 5, 2020 /s/ Patrick E. Bowe
Patrick E. Bowe
Chief Executive Officer (Principal Executive Officer)
Date: November 5, 2020 /s/ Brian A. Valentine
Brian A. Valentine
Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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Document

AMENDMENT NO. 1 TO CREDIT AGREEMENT

THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT dated and effective as of October 23, 2020 (this “Amendment”), is among THE ANDERSONS, INC., an Ohio corporation (the “Borrower”), U.S. BANK NATIONAL ASSOCIATION, in its capacity as the administrative agent (in such capacity, the “Administrative Agent”), each of the Guarantors party hereto and each of the Lenders party hereto.

Recitals:

A.The Borrower, the lenders party thereto (the “Lenders”) and the Administrative Agent have entered into that certain Credit Agreement dated as of January 11, 2019 (the “Existing Credit Agreement”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement (as defined below).

B.The Guarantors and the Administrative Agent have entered into that certain Guaranty dated as of January 11, 2019 (the “Guaranty”).

C.The Borrower has advised the Administrative Agent and the Lenders that it desires to add an additional tranche of Term Loans pursuant to Section 2.25 of the Existing Credit Agreement and arrange for the future extension of the 364-Day Revolving Commitments pursuant to Section 2.26 of the Existing Credit Agreement and, as a result thereof, amend the Existing Credit Agreement as set forth herein.

D.Subject to the terms and conditions set forth below, the Administrative Agent and the Lenders party hereto have agreed to so amend the Existing Credit Agreement.

In furtherance of the foregoing, the parties agree as follows:

Section 1.    Amendments to Existing Credit Agreement. Subject to the terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, the Existing Credit Agreement is hereby amended as follows (as so amended, the “Credit Agreement”):

(a)    The cover page is hereby amended by inserting a new line below “Seven Year Term Loan CUSIP 03416EAK7” that reads “Incremental 2020 Term Loan CUSIP 03416EAL5”.

(b)    Section 1.1 is hereby amended by amending and restating the following definitions set forth therein as follows:

“364-Day Revolving Loan Termination Date” means, except as such date as may be extended in accordance with Section 2.26, the earlier of (i) January 8, 2021 and (ii) the expiration of the applicable 364-Day Revolving Facility Availability Period; provided, that if such day occurs on a non-Business Day, then such day shall be required to occur on the immediately preceding Business Day. Notwithstanding the foregoing, in connection with Amendment No. 1, each of the Borrower and the 364-Day Lenders agreed to extend the date set forth in the preceding clause (i) to January 7, 2022 automatically upon satisfaction of each of the following conditions: (1) on January 8, 2021 no Default or Event of Default shall have occurred and be continuing or would result from such extension, (2) the representations and warranties contained

in Article V are (x) with respect to any representations or warranties that contain a materiality qualifier, true and correct in all respects as of January 8, 2021, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all respects on and as of such earlier date and (y) with respect to any representations or warranties that do not contain a materiality qualifier, true and correct in all material respects as of January 8, 2021, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all material respects on and as of such earlier date, (3) any outstanding 364-Day Revolving Loans shall be paid in full at the time of such extension on January 8, 2021, (4) the Administrative Agent shall have received a certificate certifying as to the satisfaction of the foregoing conditions dated as of January 8, 2021 and executed by an Authorized Officer of the Borrower and (5) the Borrower shall have paid all fees previously agreed to with the 364-Day Lenders in connection with such extension. Accordingly, on January 8, 2021, upon satisfaction of each of the conditions set forth in the preceding sentence, the date set forth in the preceding clause (i) shall be automatically, without further action, amended to be January 7, 2022, so long as prior to giving effect thereto the 364-Day Revolving Commitments shall not have expired or been terminated (it being understood that the 364-Day Revolving Facility Availability Period shall be reset after giving effect to such extension).

“Advance” means a borrowing hereunder, of (i) 364-Day Revolving Loans made by some or all of the 364-Day Revolving Lenders, of the same Type, made, converted or continued on the same Borrowing Date or date of conversion or continuation, as applicable, and, in the case of Eurodollar Loans, for the same Interest Period, (ii) Five-Year Revolving Loans made by some or all of the Revolving Lenders, of the same Type, made, converted or continued on the same Borrowing Date or date of conversion or continuation, as applicable, and, in the case of Eurodollar Loans, for the same Interest Period, (iii) a Five-Year Term Loan made on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, (iv) a Seven-Year Term Loan made on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect and (v) an Incremental 2020 Term Loan made on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. The term “Advance” shall include Swing Line Loans unless otherwise expressly provided.

“Applicable Margin” means, at any time, with respect to Advances of any Type and commitment fees, the following percentages per annum, based upon the Recourse Long Term Debt to Capitalization Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.1(a) or 6.1(b):

Pricing Level Recourse Long Term Debt to Capitalization Ratio 364-Day Revolving Loan, Five-Year Revolving Loan and Five-Year Term Loan Eurodollar Rate Seven-Year Term Loan Eurodollar Rate 364-Day Revolving Loan, Five-Year Revolving Loan and Five-Year Term Loan Base Rate Seven-Year Term Loan Base Rate Commitment Fee Rate
1 > 0.65 to 1.00 2.00% 2.25% 1.00% 1.25% 0.225%
2 < 0.65 to 1.00 but<br><br>> 0.50 to 1.00 1.75% 2.00% 0.75% 1.00% 0.20%
3 < 0.50 to 1.00 but<br><br>> 0.35 to 1.00 1.50% 1.75% 0.50% 0.75% 0.175%
4 < 0.35 to 1.00 1.375% 1.625% 0.375% 0.625% 0.15%
Pricing Level Recourse Long Term Debt to Capitalization Ratio Incremental 2020 Term Loan Eurodollar Rate Incremental 2020 Term Loan Base Rate
--- --- --- ---
1 > 0.65 to 1.00 2.00% 1.00%
2 < 0.65 to 1.00 but<br><br>> 0.50 to 1.00 1.75% 0.75%
3 < 0.50 to 1.00 1.50% 0.50%

Adjustments, if any, to the Applicable Margin shall be effective from and after the first day of the first fiscal month immediately following the date on which the delivery of a Compliance Certificate is required pursuant to Section 6.1(a) or 6.1(b) until the first day of the first fiscal month immediately following the next such date on which delivery of a Compliance Certificate is so required. If the Borrower fails to deliver a Compliance Certificate to the Administrative Agent at the time required pursuant to Section 6.1(a) or 6.1(b), then the Applicable Margin shall be the highest Applicable Margin set forth in the applicable foregoing table until five (5) days after such Compliance Certificate is so delivered.

Notwithstanding the foregoing (but subject to the last sentence of the preceding paragraph), Pricing Level 3 shall be deemed to be applicable with respect to the Incremental 2020

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Term Loans until the Administrative Agent’s receipt of the applicable Compliance Certificate for the Borrower’s fiscal quarter ending on September 30, 2020, and adjustments to the Pricing Level then in effect shall thereafter be effected in accordance with the preceding paragraph.

“Commitment” means, for each Lender, the sum of such Lender’s Revolving Commitment and Term Loan Commitment, in an amount not exceeding the amount set forth in Schedule 1 (or, in the case of the Incremental 2020 Term Loan Commitment, Schedule 1 to Amendment No.1) as it may be modified (i) pursuant to Section 2.7, (ii) as a result of any assignment that has become effective pursuant to Section 12.3(c) or (iii) otherwise from time to time pursuant to the terms hereof.

“Loan” means a 364-Day Revolving Loan, a Five-Year Revolving Loan, a Swing Line Loan, a Five-Year Term Loan, a Seven-Year Term Loan, or an Incremental 2020 Term Loan.

“Term Lender” means a Five-Year Term Lender, a Seven-Year Term Lender or an Incremental 2020 Term Lender, and “Term Lenders” means, collectively, the Five-Year Term Lenders, the Seven-Year Term Lenders and the Incremental 2020 Term Lenders.

“Term Loan” means a Five-Year Term Loan, a Seven-Year Term Loan, an Incremental 2020 Term Loan or any other Incremental Term Loan, and “Term Loans” means collectively, the Five-Year Term Loans, the Seven-Year Term Loans, the Incremental 2020 Term Loans and the other Incremental Term Loans.

“Term Loan Commitment” means a Five-Year Term Loan Commitment, a Seven-Year Term Loan Commitment and/or an Incremental 2020 Term Loan Commitment, as the context requires.

“Term Loan Maturity Date” means, (a) with respect to the Five-Year Term Loans, the Five-Year Term Loan Maturity Date, (b) with respect to the Seven-Year Term Loans, the Seven-Year Term Loan Maturity Date, (c) with respect to the Incremental 2020 Term Loan, the Incremental 2020 Term Loan Maturity Date and (d) with respect to any Incremental Term Loans, the maturity date established with respect to such Incremental Term Loans.

(c)    Section 1.1 is hereby amended by adding the following definitions in the appropriate alphabetical order therein:

“Amendment No. 1” means Amendment No. 1 to Credit Agreement, dated as of the Amendment No. 1 Effective Date, among the Borrower, the Guarantors party thereto, the Lenders party thereto and the Administrative Agent.

“Amendment No. 1 Effective Date” means October 23, 2020.

“Incremental 2020 Term Lender” means, as of any date of determination, a Lender having an Incremental 2020 Term Loan Commitment.

“Incremental 2020 Term Loan Commitment” means, for each Incremental 2020 Term Lender, the obligation, if any, of such Incremental 2020 Term Lender to make an Incremental 2020 Term Loan to the Borrower, as set forth in Schedule 1 to Amendment No.1, as it may be

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modified (i) as a result of any assignment that has become effective pursuant to Section 12.3(c) or (ii) otherwise from time to time pursuant to the terms hereof. As of the date of the Amendment No. 1 Effective Date, the aggregate amount of the Incremental 2020 Term Lenders’ Incremental 2020 Term Loan Commitments is $150,000,000. After advancing the Incremental 2020 Term Loan, each reference to an Incremental 2020 Term Lender’s Incremental 2020 Term Loan Commitment shall refer to that Incremental 2020 Term Lender’s Pro Rata Share of the Incremental 2020 Term Loans.

“Incremental 2020 Term Loan Maturity Date” means January 11, 2026; provided, that if such day occurs on a non-Business Day, then such day shall be required to occur on the immediately preceding Business Day.

“Incremental 2020 Term Loans” means, with respect to a Lender, such Lender’s loan made pursuant to Section 2.1(b)(iii) (or any conversion or continuation thereof).

(d)    Section 2.1(b) is hereby amended by inserting the following new subsection (iii) to the end thereof:

(iii)    Incremental 2020 Term Loans. Each Incremental 2020 Term Lender severally agrees, on the terms and conditions set forth in this Agreement, to make an Incremental 2020 Term Loan to the Borrower on the Amendment No. 1 Effective Date, in an amount equal to such Incremental 2020 Term Lender’s Incremental 2020 Term Loan Commitment by making immediately available funds available to the Administrative Agent’s designated account, not later than the time specified by the Administrative Agent.

(e)    Section 2.1 is hereby further amended by amending and restating the penultimate sentence in the paragraph immediately following subsection (b) thereof to read as follows

Unless previously terminated, (i) the Term Loan Commitments shall terminate at 5:00 p.m. (local time in Denver, Colorado) on the Effective Date (or, in the case of the Incremental 2020 Term Loan Commitment, the Amendment No. 1 Effective Date) and (ii) all other the 364-Day Revolving Commitments and Five-Year Revolving Commitments shall terminate on the applicable Revolving Loan Termination Date.

(f)    The penultimate sentence of Section 2.3 is hereby amended and restated to read as follows:

Each Term Loan Advance hereunder shall consist of Term Loans made from the several Term Lenders ratably according to their Pro Rata Shares on the Effective Date (or, in the case of the Incremental 2020 Term Loans, on the Amendment No. 1 Effective Date).

(g)    The last sentence of Section 2.10 is hereby amended and restated to read as follows:

No Interest Period may end after the 364-Day Revolving Loan Termination Date, the Five-Year Revolving Loan Termination Date, the Five-Year Term Loan Maturity Date, the Seven-Year Term Loan Maturity Date or the Incremental 2020 Term Loan Maturity Date, as applicable.

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(h)    Section 2.12(b) is hereby amended by inserting the following sentence at the end thereof:

Beginning with the period ending March 31, 2021 and on the last day of each fiscal quarter thereafter (or, if such date is not a Business Day, on the immediately preceding Business Day), the Borrower shall make quarterly payments of principal on the Incremental 2020 Term Loans in an amount equal to one and one quarter percent (1.25%) of the initial aggregate principal amount of the Incremental 2020 Term Loans.

(i)    Section 2.12 is hereby further amended by amending and restating the paragraph immediately following subsection (b) thereof to read as follows:

To the extent not previously paid, all unpaid Five-Year Term Loans, Seven-Year Term Loans and Incremental 2020 Term Loans, as applicable, shall be paid in full in cash by the Borrower on the applicable Term Loan Maturity Date with respect to the Five-Year Term Loans, Seven-Year Term Loans and Incremental 2020 Term Loans, as applicable.

(j)    Section 2.13(d) is hereby amended and restated to read as follows:

(d)    Any Lender (including the Swing Line Lender) may request that its Loans be evidenced by a promissory note representing its 364-Day Revolving Loans, Five-Year Revolving Loans, Swing Line Loans, Five-Year Term Loans, Seven-Year Term Loans and Incremental 2020 Term Loans, respectively, substantially in the form of Exhibit D-1, D-2, D-3, D-4 or D-5, as applicable (with appropriate changes for notes evidencing Swing Line Loans) (each a “Note”). In such event, the Borrower shall prepare, execute and deliver to such Lender such Note or Notes payable to such Lender in a form supplied by the Administrative Agent. Thereafter, the Loans evidenced by such Note or Notes and interest thereon shall at all times (prior to any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the payee named therein (and its registered assigns), except to the extent that any such Lender subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in clauses (b) (i) and (ii) above.

(k)    A new Exhibit D-5 (Form of Incremental 2020 Term Note) is hereby added to the Existing Credit Agreement in the form attached as Annex I hereto.

The amendments to the Existing Credit Agreement are limited to the extent specifically set forth above and no other terms, covenants or provisions of the Loan Documents are intended to be effected hereby.

Section 2.    Incremental 2020 Term Loan Commitments. Each of the Administrative Agent and the Lenders party hereto acknowledges and agrees that the Incremental 2020 Term Loan Commitments of the Lenders are as set forth on Schedule 1 attached hereto and that such Incremental 2020 Term Loan Commitments are being provided pursuant to Section 2.25 of the Existing Credit Agreement.

Section 3.    Conditions Precedent. The effectiveness of this Amendment and the amendments and other agreements contemplated hereby is subject to the satisfaction of the following conditions precedent:

(a)     Documentation. The Administrative Agent and Farm Credit Mid-America, PCA shall have received each of the following (each in form and substance satisfactory to them):

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(i)    this Amendment, duly executed and delivered by the Borrower, the Guarantors, the Administrative Agent and the Lenders agreeing to provide the Incremental 2020 Term Loans and to extend their 364-Day Revolving Commitments;

(ii)    an Incremental 2020 Term Note for each Lender requesting the same, duly executed and delivered by the Borrower;

(iii)    such documents and certificates relating to the organization, existence and good standing of the Borrower and the authorization of the transactions contemplated by this Amendment;

(iv)    a certificate of the Borrower certifying as to (A) the matters set forth in Section 4(a) below as of the date hereof and (B) the compliance by the Borrower with the covenants contained in Section 6.4 of the Credit Agreement (on a pro forma basis reasonably acceptable to the Administrative Agent after giving effect to this Amendment and the incurrence of Indebtedness contemplated hereby), duly executed and delivered by the Borrower;

(v)    a written opinion of the Borrower’s counsel, addressed to the Administrative Agent and the Lenders, in respect of such matters related to this Amendment as the Administrative Agent and Farm Credit Mid-America, PCA shall request;

(vi)    an Increasing Lender Supplement, duly executed and delivered by the Borrower, the Administrative Agent and the Lenders agreeing to provide the Incremental 2020 Term Loans;

(vii)    a borrowing notice (in the form requested by the Administrative Agent) with respect to the Incremental 2020 Term Loans, duly executed and delivered by the Borrower; and

(viii)    a Payment Notice evidencing the reduction of the 364-Day Revolving Commitments effective as of the effective date of this Amendment to $100,000,000, duly executed and delivered by the Borrower.

(b)    Fees and Expenses. The Borrower shall have paid (i) all fees payable to each of Farm Credit Mid-America, PCA, as arranger, and the Lenders party hereto pursuant to that certain engagement letter (the “Engagement Letter”) dated as of September 3, 2020 between Farm Credit Mid-America, PCA and the Borrower in connection with this Amendment, in each case to the extent due and payable on the date hereof, (ii) all fees and expenses of Farm Credit Mid-America, PCA required to be reimbursed in connection herewith pursuant to the Engagement Letter and (iii) all fees and expenses of the Administrative Agent required to be reimbursed in connection herewith pursuant to the Credit Agreement.

Section 4.    Representations and Warranties.

(a)    In order to induce the Administrative Agent and the Lenders party hereto to enter into this Amendment, the Borrower represents and warrants to the Administrative Agent and the Lenders party hereto as follows:

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(i)    The representations and warranties contained in Article V of the Credit Agreement are (x) with respect to any representations or warranties that contain a materiality qualifier, true and correct in all respects as of the date hereof, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty is true and correct in all respects on and as of such earlier date and (y) with respect to any representations or warranties that do not contain a materiality qualifier, true and correct in all material respects as of the date hereof, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty is true and correct in all material respects on and as of such earlier date.

(ii)    There exists no Default or Event of Default, nor would a Default or Event of Default result from this Amendment or the incurrence of any Indebtedness in connection herewith.

(b)    In order to induce the Administrative Agent and the Lenders party hereto to enter into this Amendment, each of the Borrower and each Guarantor represents and warrants to the Administrative Agent and the Lenders party hereto that this Amendment has been duly authorized, executed and delivered by it and sets forth the legal, valid and binding obligations of the Borrower or such Guarantor, respectively, and is enforceable against the Borrower and such Guarantor, respectively, in accordance with its terms.

Section 5.    Miscellaneous.

(a)    Ratification and Confirmation of Loan Documents. Each of the Borrower and each Guarantor hereby consents, acknowledges and agrees to the amendments and other agreements set forth herein and hereby confirms and ratifies in all respects the Loan Documents to which such Person is a party (including without limitation, with respect to each Guarantor, the continuation of its payment and performance obligations under the Guaranty), in each case after giving effect to the amendments and other agreements contemplated hereby.

(b)    Fees and Expenses. Without limiting the generality of Section 2(c) above or the Engagement Letter, the Borrower shall pay all reasonable out-of-pocket expenses of the Administrative Agent and Farm Credit Mid-America, PCA in connection with the preparation, negotiation, execution, and delivery of this Amendment and any other documents prepared in connection herewith, including, without limitation, the reasonable out-of-pocket fees, disbursements and charges of outside counsel for the Administrative Agent and Farm Credit Mid-America, PCA.

(c)    Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

(d)    Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Amendment shall be governed by and construed in accordance with the laws of the State of New York (but giving effect to federal laws applicable to national banks), and shall be further subject to the provisions of Sections 15.2 and 15.3 of the Credit Agreement.

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(e)    Counterparts. This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic transmission (including .pdf file) shall be effective as delivery of a manually executed counterpart hereof.

(f)    Entire Agreement. This Amendment, together with the Engagement Letter and the other Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other in relation to the subject matter hereof or thereof. None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise except in writing in accordance with Section 8.3 of the Credit Agreement.

(g)    Severability of Provisions.

. Any provision in this Amendment that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of this Amendment are declared to be severable.

(h)    Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns (subject to Article XII of the Credit Agreement).

(i)    Reduction of 364-Day Revolving Commitment. Each of the parties hereto acknowledges and agrees that effective as of the date hereof the aggregate 364-Day Revolving Commitments shall be automatically and permanently reduced to $100,000,000 and, concurrently with the effectiveness of this Amendment, the Borrower will prepay 364-Day Revolving Loans to the extent necessary to reduce the aggregate 364-Day Revolving Exposure below the 364-Day Revolving Commitments after giving effect thereto.

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

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The following parties have caused this Amendment to be executed as of the date first written above.

BORROWER:

THE ANDERSONS, INC.

By:

Name:

Title:

GUARANTORS:

THE ANDERSONS EXECUTIVE SERVICES LLC

By:

Name:

Title:

THE ANDERSONS PLANT NUTRIENT LLC

By:

Name:

Title:

TITAN LANSING, LLC

By:

Name:

Title:

LANSING TRADE GROUP, LLC

By:

Name:

Title:

PLANT NUTRIENT OPERATIONS LLC

By:

Name:

Title:

AMENDMENT NO. 1 TO CREDIT AGREEMENT

Signature Page

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ADMINISTRATIVE AGENT:

AMENDMENT NO. 1 TO CREDIT AGREEMENT

Signature Page

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U.S. BANK NATIONAL ASSOCIATION,

as Administrative Agent

By:

Name:

Title:

LENDER(S):

AMENDMENT NO. 1 TO CREDIT AGREEMENT

Signature Page

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FARM CREDIT MID-AMERICA, PCA, as a Lender

By:

Name:

Title:

AMENDMENT NO. 1 TO CREDIT AGREEMENT

Signature Page

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SCHEDULE 1

Incremental 2020 Term Loan Commitments

Lender: Incremental 2020 Term Loan Commitment:
Farm Credit Mid-America, PCA $150,000,000
TOTAL COMMITMENTS $150,000,000

ANNEX I

Form of Incremental 2020 Term Note

(see attached)

135203899

Document

Exhibit 31.1

Certifications

I, Patrick E. Bowe, certify that:

| 1. | I have reviewed this report on Form 10-Q of The Andersons, Inc. | | --- | --- || 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | | --- | --- || 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | | --- | --- || 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | | --- | --- || a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | | --- | --- || b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | | --- | --- || c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | | --- | --- || d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | | --- | --- || 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | | --- | --- || a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | | --- | --- || b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | | --- | --- |

November 5, 2020

/s/ Patrick E. Bowe
Patrick E. Bowe
Chief Executive Officer (Principal Executive Officer)

Document

Exhibit 31.2

Certifications

I, Brian A. Valentine, certify that:

| 1. | I have reviewed this report on Form 10-Q of The Andersons, Inc. | | --- | --- || 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | | --- | --- || 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | | --- | --- || 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | | --- | --- || a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | | --- | --- || b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | | --- | --- || c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | | --- | --- || d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | | --- | --- || 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | | --- | --- || a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | | --- | --- || b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | | --- | --- |

November 5, 2020

/s/ Brian A. Valentine
Brian A. Valentine
Executive Vice President and Chief Financial Officer (Principle Financial Officer)

Document

Exhibit 32.1

The Andersons, Inc.

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

In connection with the Quarterly Report of The Andersons, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

(1)The Report fully complies with the requirements of 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

November 5, 2020

/s/ Patrick E. Bowe
Patrick E. Bowe
Chief Executive Officer (Principal Executive Officer)
/s/ Brian A. Valentine
Brian A. Valentine
Executive Vice President and Chief Financial Officer (Principle Financial Officer)

Document

Exhibit 95.1

Mine Safety Disclosure

Our mining operation(s) are subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). We have disclosed below information regarding certain citations and orders issued by MSHA and related assessments and legal actions with respect to these mining operation(s).  In evaluating the below information regarding mine safety and health, investors should take into account factors such as: (i) the number of citations and orders will vary depending on the size of a mine; (ii) the number of citations issued will vary from inspector to inspector and mine to mine; and (iii) citations and orders can be contested and appealed, and in that process, are often reduced in severity and amount, and are sometimes dismissed or vacated. The tables below include information regarding issued citations and/or orders which may or may not become final orders. The tables below do not include any orders or citations issued to independent contractors at our mines.

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, we present the following items regarding certain mining safety and health matters, for the period presented, for each of our mine locations that are covered under the scope of the Dodd-Frank Act:

(A)    Mine Act Section 104 Significant and Substantial (“S&S”) citations shown below are for alleged violations of mandatory health or safety standards that could significantly and substantially contribute to a mine health and safety hazard.

(B)    Mine Act Section 104(b) orders are for alleged failures to totally abate a citation within the time period specified in the citation.

(C)    Mine Act Section 104(d) citations and orders are for an alleged unwarrantable failure (i.e., aggravated conduct constituting more than ordinary negligence) to comply with mandatory health or safety standards.

(D)    Mine Act Section 110(b)(2) violations are for an alleged “flagrant” failure (i.e., reckless or repeated) to make reasonable efforts to eliminate a known violation of a mandatory safety or health standard that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury.

(E)    Mine Act Section 107(a) orders are for alleged conditions or practices which could reasonably be expected to cause death or serious physical harm before such condition or practice can be abated and result in orders of immediate withdrawal from the area of the mine affected by the condition.

(F) Amounts shown include assessments proposed by MSHA during the three months ended September 30, 2020 on all citations and orders, including those citations and orders that are not required to be included within the above chart.

(G)    Mine Act Section 104(e) written notices are for an alleged pattern of violations of mandatory health or safety standards that could significantly and substantially contribute to a mine safety or health hazard.

The following tables disclose the information listed above for the three months ended September 30, 2020:

Three months ended September 30, 2020
(A) (B) (C) (D) (E) (F)
Mine Name/MSHA ID No. Section 104 S&S<br>Citations Section 104(b)<br>Orders Section 104(d) Citations/Orders Section 110(b)(2) Citations/Orders Section 107(a)<br>Orders Total Dollar Value of MSHA Assessments Proposed<br><br>(In thousands)
Industrial Sand Processing Plt-North Branch/21-02917 — — — — — $—
Titan Lansing OKC Sand Plant/34-02189 — — — — — $—
Three months ended September 30, 2020
--- --- --- --- --- ---
(G)
Mine Name/MSHA ID No. Received Notice of Pattern of Violations Under Section 104(e) (yes/no) Total Number of Mining Related Fatalities Legal Actions Pending as of Last Day of Period Legal Actions Initiated During Period Legal Actions Resolved During Period
Industrial Sand Processing Plt-North Branch/21-02917 No — — — —
Titan Lansing OKC Sand Plant/34-02189 No — — — —

During the three months ended September 30, 2020, there were no legal actions initiated, pending, or resolved before the Federal Mine Safety and Health Review Commission related to contests of citations and orders, contests of proposed penalties, complaints for compensation, complaints of discharge/discrimination/interference, applications for temporary relief, or appeals of judges’ rulings.

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