Company Quick10K Filing
Andersons
Price23.19 EPS1
Shares33 P/E22
MCap766 P/FCF2
Net Debt947 EBIT64
TEV1,713 TEV/EBIT27
TTM 2019-09-30, in MM, except price, ratios
10-K 2020-12-31 Filed 2021-02-25
10-Q 2020-09-30 Filed 2020-11-05
10-Q 2020-06-30 Filed 2020-08-07
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-02-27
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-02-26
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-03-01
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-04
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-10
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-06
10-K 2010-12-31 Filed 2011-03-01
10-Q 2010-09-30 Filed 2010-11-08
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-02-26
8-K 2021-02-16 Earnings, Exhibits
8-K 2021-02-04 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2021-01-21 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-12-31 Officers, Exhibits
8-K 2020-12-08 Regulation FD, Exhibits
8-K 2020-11-03
8-K 2020-08-04
8-K 2020-05-13
8-K 2020-05-05
8-K 2020-02-12
8-K 2019-12-13
8-K 2019-11-14
8-K 2019-11-05
8-K 2019-10-30
8-K 2019-10-25
8-K 2019-10-01
8-K 2019-08-06
8-K 2019-05-10
8-K 2019-05-06
8-K 2019-03-04
8-K 2019-02-13
8-K 2019-02-01
8-K 2019-01-11
8-K 2019-01-02
8-K 2018-11-05
8-K 2018-10-15
8-K 2018-08-27
8-K 2018-08-07
8-K 2018-06-28
8-K 2018-06-01
8-K 2018-05-11
8-K 2018-05-07
8-K 2018-04-02
8-K 2018-03-23
8-K 2018-03-20
8-K 2018-03-07
8-K 2018-03-01
8-K 2018-02-14

ANDE 10K Annual Report

Part I.
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety
Part II.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III.
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV.
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10 - K Summary
EX-21.1 exhibit211subsidiarieslist.htm
EX-23.1 exhibit231consent2020-delo.htm
EX-23.2 exhibit232consent2020-kpmg.htm
EX-23.3 exhibit233consent2020-pwcc.htm
EX-31.1 exhibit311-ceosignature.htm
EX-31.2 exhibit312-cfosignature.htm
EX-32.1 exhibit321-ceoandcfosignat.htm
EX-95 exhibit95minesafetydisclos.htm

Andersons Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
3.73.02.21.50.70.02012201420172020
Assets, Equity
2.41.91.40.90.4-0.12012201420172020
Rev, G Profit, Net Income
0.50.30.1-0.1-0.3-0.52012201420172020
Ops, Inv, Fin

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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020 or
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-20201231_g1.jpg
THE ANDERSONS, INC.
(Exact name of the registrant as specified in its charter)
 
Ohio34-1562374
(State of incorporation or organization)(I.R.S. Employer Identification No.)
1947 Briarfield Boulevard
MaumeeOhio43537
(Address of principal executive offices)(Zip Code)
(419) 893-5050
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Trading Symbol Name of each exchange on which registered:
Common stock, $0.00 par value, $0.01 stated value ANDE The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ý No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ¨ No  ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filerAccelerated filerý
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report
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 aggregate market value of the registrant's voting stock which may be voted by persons other than affiliates of the registrant was $418.4 million as of June 30, 2020, computed by reference to the last sales price for such stock on that date as reported on the Nasdaq Global Select Market. The registrant had 33,196,241 common shares outstanding, no par value, at February 12, 2021.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on May 7, 2021, are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on Form 10-K. The Proxy Statement will be filed with the Commission within 120 days after the end of the fiscal year to which this report relates.


Table of Contents
THE ANDERSONS, INC.
Table of Contents
 
 Page No.
PART I.
PART II.
PART III.
PART IV.

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Part I.

Item 1. Business

Company Overview

The Andersons, Inc. (the "Company") is a diversified company rooted in agriculture. Founded in Maumee, Ohio in 1947, the Company is a significant player in the North American agricultural supply chain and conducts its business in the trade, ethanol, plant nutrient and rail sectors.

Segment Descriptions

The Company's operations are classified into four reportable business segments: Trade, Ethanol, Plant Nutrient, and Rail. Each of these segments is organized based upon the nature of products and services offered and aligns with the management structure. See Note 12 to the Consolidated Financial Statements in Item 8 for information regarding business segments.

Trade

The Trade Group (formerly the Grain Group), through recent acquisitions, has evolved into a diversified business focusing on logistics and merchandising across a wide range of commodities. The group specializes in the movement of physical commodities such as whole grains, grain products, feed ingredients, frac sand, domestic fuel products, and other agricultural commodities. The business also operates grain elevators across the U.S. and Canada where income is earned on commodities bought and sold through the elevator, commodities that are purchased and conditioned for resale, and commodities that are held in inventory until a future period, earning space income. Space income consists of appreciation or depreciation in the basis value of commodities held and represents the difference between the cash price of a commodity in one of the Company's facilities and an exchange traded futures price (“basis”); appreciation or depreciation between the future exchange contract months (“spread”); and commodities stored for others upon which storage fees are earned. The Trade Group business also offers a number of unique grain marketing, risk management and origination services to its customers and affiliated ethanol facilities for which it collects fees.

Sales are negotiated by the Company's merchandising staff as commodity prices are not predetermined. The Trade group has a diversified portfolio of physical commodities that are sold, however, the principal commodities sold by the Company are corn, wheat and soybeans which are consistent with the prior year. Most of the Company's exported commodity sales are made through intermediaries while some commodities are shipped directly to foreign countries, mainly Canada. The Company ships grain from its facilities by rail, truck, or boat. Rail shipments are made primarily to grain processors and feeders with some rail shipments made to exporters on the Gulf of Mexico or east coast. Boat shipments are from the Port of Toledo or the Port of Houston. In addition, commodities are transported via truck for direct ship transactions in which producers sell grain to the Company, but delivered directly to the end user.

The Company's trade operations rely principally on forward purchase contracts with producers, dealers and commercial elevators to ensure an adequate supply of commodities to the Company's facilities throughout the year. The Company makes commodity purchases at prices referenced to regulated commodity exchanges.

The Company competes in the sale of commodities with other public and private grain brokers, elevator operators and farmer owned cooperative elevators. Some of the Company's competitors are also its customers. Competition is based primarily on price, service and reliability. Because the Company generally buys in smaller lots, its competition for the purchase of commodities is generally local or regional in scope, although there are some large national and international companies that maintain regional grain purchase and storage facilities. Significant portions of grain bushels purchased and sold are made using forward contracts.

The grain handling business is seasonal in nature in that the largest portion of the principal grains are harvested and delivered from the farm and commercial elevators typically in July for wheat and September through November for corn and beans, although a significant portion of the principal grains are bought, sold and handled throughout the year.

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Fixed price purchase and sale commitments as well as commodities held in inventory expose the Company to risks related to adverse changes in market prices. Grain prices are typically comprised of two components, futures prices on regulated commodity exchanges and local basis adjustments. The Company manages the futures price risk by entering into exchange-traded futures and option contracts with regulated commodity exchanges. The contracts are economic hedges of price risk but are not designated or accounted for as hedging instruments. These regulated commodity exchanges maintain futures markets for the grains merchandised by the Company. Futures prices are determined by worldwide supply and demand.

The Company's grain risk management practices are designed to reduce the risk of changing commodity prices. In that regard, such practices also limit potential gains from further changes in market prices. The Company has policies that provide key controls over its risk management practices. These policies include a description of the objectives of the programs and review of daily position limits by key management outside of the trading function along with other internal controls. The Company monitors current market conditions and may expand or reduce the purchasing program in response to changes in those conditions. In addition, the Company monitors its counterparties on a regular basis for credit worthiness, defaults and non-delivery.

Purchases of commodities can be made the day the product is delivered to a terminal or via a forward contract made prior to actual delivery. Sales of commodities generally are made by contract for delivery in a future period. When the Company purchases commodities at a fixed price or at a price where a component of the purchase price is fixed via reference to a futures price on a regulated commodity exchange, it also enters into an offsetting sale of a futures contract on the regulated commodity exchange. Similarly, when the Company sells commodities at a fixed price, the sale is offset with the purchase of a futures contract on the regulated commodity exchange. At the close of business each day, inventory and open purchase and sale contracts as well as open futures and option positions are marked-to-market. Gains and losses in the value of the Company's ownership positions due to changing market prices are netted with, and substantially offset in the Statement of Operations by, losses and gains in the value of the Company's futures positions.

When a futures contract is entered into, an initial margin deposit must be sent to the regulated commodity exchange. The amount of the margin deposit is set by the regulated commodity exchange and varies by commodity. If the market price of a futures contract moves in a direction that is adverse to the Company's position, an additional margin deposit, called a maintenance margin, is required by regulated commodity exchanges. Subsequent price changes could require additional maintenance margin deposits or result in the return of maintenance margin deposits by the regulated commodity exchange. Significant increases in market prices, such as those that occur when grain supplies are affected by unfavorable weather conditions and/or when increases in demand occur, can have an effect on the Company's liquidity and, as a result, require it to maintain appropriate short-term lines of credit. The Company may utilize regulated commodity exchange option contracts to limit its exposure to potential required margin deposits in the event of a rapidly rising market.

The Company has a lease and marketing agreement with Cargill, Incorporated for Cargill's Maumee and Toledo, Ohio grain handling and storage facilities. As part of the agreement, Cargill holds certain marketing rights to grain in the Cargill-owned facilities as well as the adjacent Company-owned facilities in Maumee and Toledo. The marketing agreement contains a profit-sharing provision whereby cumulative earnings generated from the grain facilities are contractually shared. As of December 31, 2020, the lease of the Cargill-owned facilities covers approximately 4%, or 8.8 million bushels, of the Company's total storage space.

Ethanol

The Ethanol Group produces, purchases and sells ethanol and coproducts, offers facility operations, risk management, and ethanol and coproducts marketing services to the ethanol plants it invests in and operates. The group co-owns five ethanol plants located in Indiana, Iowa, Kansas, Michigan and Ohio. The group demonstrates an expertise in ethanol plant management, logistics and commercialization of ethanol and feed products with a focus on leading the industry in margins per bushel. The business also leverages partnerships, which are discussed in further detail below, to expand market knowledge and shared technology across its five plants. Due to the current year reorganization, the Company's moved its Distillers Dried Grains ("DDG") merchandising business from the Trade to Ethanol segment whereby providing the group a merchandising and trade portfolio of ethanol and coproducts.

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Through the first nine months of 2019 the Ethanol Group held ownership interests in three limited liability companies (“the ethanol LLCs” or “LLCs”), each of which owned an ethanol plant that was operated by the Company's Ethanol Group. On October 1, 2019, the Ethanol Group entered into an agreement to merge the LLCs and the Company's wholly-owned subsidiary, The Andersons Denison Ethanol LLC into a new legal entity, The Andersons Marathon Holdings LLC ("TAMH"). As a result of the merger, the Company and Marathon Petroleum Corporation ("Marathon") own 50.1% and 49.9% of TAMH equity, respectively. The transaction resulted in the consolidation of TAMH’s results in the Company's financial statements effective October 1, 2019. Prior to October 1, 2019 the results of the Ethanol LLCs were accounted for under the equity method of accounting. The four ethanol plants within TAMH are located in Iowa, Indiana, Michigan, and Ohio. These plants have a combined nameplate capacity of 405 million gallons of ethanol.

The Company also owns 51% of ELEMENT, LLC ("ELEMENT") and ICM, Inc. ("ICM") owns the remaining 49% interest.  In 2019 ELEMENT completed the construction of a 70 million-gallon-per-year bio-refinery in Kansas which began limited production in the third quarter of 2019. ICM operates the facility under a management contract and managed the initial construction of the facility, while the Company provides corn origination, ethanol marketing, and risk management services. The Company fully consolidates ELEMENT's results in the Company's financial statements.

Plant Nutrient

The Plant Nutrient Group is a leading manufacturer, distributor and retailer of agricultural and related plant nutrients, corncob-based products, and pelleted lime and gypsum products in the U.S. Corn Belt and Puerto Rico. The group provides warehousing, packaging and manufacturing services to basic nutrient producers and other distributors. The group also manufactures and distributes a variety of industrial products throughout the U.S. and Puerto Rico including nitrogen reagents for air pollution control systems used in coal-fired power plants, and water treatment and dust abatement products.

In its plant nutrient businesses, the Company competes with regional and local cooperatives, wholesalers and retailers, predominantly publicly owned manufacturers and privately-owned retailers, wholesalers and importers. Some of these competitors are also suppliers and have considerably larger resources than the Company. Competition in the nutrient business is based largely on depth of product offering, price, location and service. Sales and warehouse shipments of agricultural nutrients are heaviest in the spring and fall.

As of January 1, 2020, the group reorganized into the three divisions listed below:

Ag Supply Chain - The Ag Supply Chain business provides wholesale nutrients and farm services focused primarily in the Eastern Corn Belt. The wholesale nutrients part of the business stores and distributes dry and liquid agricultural nutrients, and soil amendments. The major nutrient products sold principally contain nitrogen, phosphate, potassium and sulfur which are typically bought and sold as commodities. The farm centers offer a variety of essential crop nutrients, crop protection chemicals and seed products in addition to application and agronomic services to commercial and family farmers. Soil and tissue sampling along with global satellite assisted services provide for pinpointing crop or soil deficiencies and prescriptive agronomic advice is provided to farmers.

Engineered Granules - The Engineered Granules business manufactures and distributes proprietary professional lawn care products that are primarily sold into the golf course and professional turf care markets, serving both U.S. and international customers. These products are sold both directly and through distributors to golf courses and lawn service applicators. The Company also performs contract manufacturing services to sell fertilizer and weed and pest control products to various markets as well as the manufacturing of pelleted lime, gypsum and value add soil amendments. Additionally, corncob-based products are manufactured for a variety of uses including laboratory animal bedding and private-label cat litter, as well as absorbents, blast cleaners, carriers and polishers. The products are distributed throughout the United States and Canada and into Europe and Asia. The principal sources for corncobs are seed corn producers.

Specialty Liquids - The Specialty Liquids business manufacturers specialty ag liquids, seed starters and zinc as well as a manufacturer of industrial liquids. The business has a diverse portfolio of specialty products which support more sustainable farming practices and command higher margins.

Rail

The Company's Rail segment leases various types of railcars and locomotives. In addition, Rail operates a nationwide network for railcar repair shops servicing third party railcars as well as its own. Lastly, Rail offers fleet management services to private railcar owners.
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The Company has a diversified fleet of car types (boxcars, gondolas, covered and open top hopper cars, tank cars and pressure differential cars), locomotives and barges serving a broad customer base. The Company operates in both the new and used car markets, allowing the Company to diversify its fleet both in terms of car types, industries and age of cars, as well as repairing and refurbishing used cars for specific markets and customers.

A significant portion of the railcars, locomotives and barges managed by the Company are included on the balance sheet as long-lived assets. The others are either included as leases (with the Company leasing assets from financial intermediaries and leasing those same assets to the end-users) or non-recourse arrangements (in which the Company is not subject to any lease arrangement related to the assets but provides management services to the owner of the assets). The Company generally holds purchase options on most assets owned by financial intermediaries. The Company is under contract to provide maintenance services for many of the Rail assets that we own or manage. Refer to Item 2. Properties below for a breakdown of our railcar, locomotive and barge positions at December 31, 2020.

Competition for marketing and fleet maintenance services is based primarily on price, service ability, and access to both used equipment and third-party financing. Repair facility competition is based primarily on price, quality and location.

Other

The Company's “Other” activities include corporate income, a small corporate venture fund 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 Enterprise Resource Planning ("ERP") project.

Human Capital Resources and Management

As of December 31, 2020, the company had a total of 2,359 employees across its Ethanol, Trade, Plant Nutrient, and Rail business segments and Corporate Services function. This total was comprised of 871 salary, 1,358 hourly, and 130 seasonal employees who conducted work at 141 locations across the U.S., Canada, United Kingdom and Singapore. Ninety of the Company’s locations included less than 10 employees.

Recruiting: Talent acquisition efforts target both internal and external candidates. The Company advertises opportunities on large online job boards, state job boards and various targeted diversity job boards, as well as geographically specific media channels. The Company strives to find candidates where they are to generate a diverse talent pool. It also engages in campus recruiting efforts for entry level professional talent, internships and professional development programs.
Focus on Safety: Maintaining a high standard of employee safety is paramount to the Company’s core values. Systems and technology have been implemented to support the Company’s safety initiative, maintain a safe working environment and foster a culture of personal accountability. As a part of our employee onboarding process, employees are required to complete core safety courses. A yearly training calendar is followed to ensure timely completion of annual safety training. In 2020, the Company advanced its safety program by identifying and focusing on high-risk work that has the potential of causing serious injury or fatality.
Employee Engagement: The Company maintains an open-door policy that encourages candid conversations between employees and any level of leadership about job-related concerns without fear of reprisal. It regularly solicits employee feedback through informal pulse surveys and formal engagement surveys. It also communicates with employees on a weekly, monthly and quarterly basis through electronic newsletters, town halls, its intranet site and small group meetings with the CEO.
Talent Development: The Company offers several resources to help employees expand their business knowledge and leadership skills. It hosts a Foundations of Leadership training course to newly appointed supervisors. It also offers a learning management system which houses numerous online courses, videos, audiobooks and podcasts that are available to all employees on demand. Additionally, several in-person trainings are led by internal staff.
Health and Wellness: The Company partners with a wellness vendor to offer a comprehensive Healthy Lifestyles program to employees and their spouses. The program uses rewards and incentives to encourage participants to take the necessary steps to manage their health and wellness. The program was recently expanded to offer a prediabetes program, personal e-coaching with a licensed health professional and financial wellness webinars.
Compensation and Benefits: The Company offers market competitive employee compensation and benefits programs. Benefits include a health care benefits, dental and vision benefits, disability and life insurance coverages and other a la carte voluntary benefit offerings. Company leave policies include domestic and sexual violence leave, family and medical leave, parental leave and military leave.
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Community Involvement: The Company believes strongly in sharing its time, talent and financial resources to help improve and sustain the quality of life in its communities. It has contributed a portion of its operating income to community organizations every year since its founding in 1947. The Company also encourages employees to share their time and gifts through volunteerism, participation in its annual workplace giving campaign and gift match program.
COVID-19: In 2020, the Company took several compensation and operational actions to protect employees and assist with the financial impact of the COVID-19 pandemic. A task force comprised of company leadership, human resources, and environment health and safety professionals was established to monitor the crisis. As an essential business, changes were made to work processes to comply with local, state and federal health requirements, including masks, social distancing and the physical redesign of spaces. The Company implemented a remote and flexible work policy for all non-essential personnel and extended sick pay benefits to accommodate all employees affected by the virus, including those required to quarantine due to close contacts. The Corporate Leadership Team, comprising of the CEO and his direct reports, took temporary pay reductions. Additionally, the Board of Directors reduced their annual retainer for the 2020-2021 board year. The Compensation Committee approved additional funding to the Company's Cash Profit Sharing Program, which is the short-term cash bonus plan for hourly employees. The Compensation Committee also approved funding of the Annual Incentive Plan discretionary pool to reward employees for extraordinary efforts through the COVID-19 crisis.

Government Regulation

Grain sold by the Company must conform to official grade standards imposed under a federal system of grain grading and inspection administered by the United States Department of Agriculture (“USDA”).

The production levels, markets and prices of the grains that the Company merchandises are affected by United States government programs, which include acreage control and price support programs of the USDA. In regard to our investments in ethanol production facilities, the U.S. government has mandated a ten percent blend for motor fuel gasoline sold.

The U.S. Food and Drug Administration (“FDA”) has developed bioterrorism prevention regulations for food facilities, which require that the Company registers its grain operations with the FDA, provide prior notice of any imports of food or other agricultural commodities coming into the United States and maintain records to be made available upon request that identifies the immediate previous sources and immediate subsequent recipients of its grain commodities.

The Company, like other companies engaged in similar businesses, is subject to a multitude of federal, state and local environmental protection laws and regulations including, but not limited to, laws and regulations relating to air quality, water quality, pesticides and hazardous materials. The provisions of these various regulations could require modifications of certain of the Company's existing facilities and could restrict the expansion of future facilities or significantly increase the cost of their operations. Compliance with environmental laws and regulations did not materially affect the Company's earnings or competitive position in 2020. In each of the countries in which we operate, we are subject to a variety of laws and regulations governing various aspects of our business, including general business regulations as well as those governing the manufacturing, handling, storage, transport, marketing and sale of our products. These include laws and regulations relating to facility licensing and permitting, food and feed safety, the handling and production of regulated substances, nutritional and labeling requirements, global trade compliance and other matters.

Available Information

The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities and Exchange Commission (the “SEC”). The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements and other information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge at https://theandersonsinc.gcs-web.com/financial-information/sec-filings when such reports are available on the SEC’s website. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The Company periodically provides other information for investors on its corporate website, www.andersonsinc.com, and its investor relations website, https://theandersonsinc.gcs-web.com. This includes press releases and other information about financial performance, information on corporate governance and details related to the Company’s annual meeting of shareholders. The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual references only.

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Item 1A. Risk Factors

The Company's operations are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this Form 10-K and could have a material adverse impact on our financial results. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations. These risks can be impacted by factors beyond our control. The following risk factors should be read carefully in connection with evaluating our business and the forward-looking statements contained elsewhere in this Form 10-K.

Risks Related to our Business and Industry

The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adversely affected by the COVID-19 pandemic.

The novel strain of coronavirus ("COVID-19") has spread rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures have included restrictions on travel and business operations, temporary closures of businesses, quarantine requirements and shelter-in-place orders. The COVID-19 pandemic has significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets.

The COVID-19 pandemic and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact the Company’s business, results of operations, financial condition and stock price. Following the initial outbreak of the virus, the Company experienced disruptions in ethanol demand as a result of the stay at home orders enforced throughout the year limiting travel. The Company has been designated a key infrastructure company by the U.S. Cybersecurity and Infrastructure Security Agency which has resulted in the Company's facilities to remain open under the appropriate government guidelines to protect public health and the health and safety of employees and customers. The Company has at times required substantially all of its administrative employees to work remotely.

The Company is continuing to monitor the situation and has taken actions in accordance with the recommendations and requirements of relevant authorities. The full extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on the global economy. Additional future impacts on the Company may include, but are not limited to, material adverse effects on: demand for the Company’s products and services; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategic plans; and the Company’s profitability and cost structure.

To the extent the COVID-19 pandemic adversely affects the Company’s business, results of operations, financial condition and stock price, it may also have the effect of heightening many of the other risks described in this Part I, Item 1A of this Form 10-K.

Certain of our business segments are affected by the supply and demand of commodities and are sensitive to factors outside of our control. Adverse price movements could negatively affect our profitability and results of operations.

Our Trade, Ethanol and Plant Nutrient businesses buy, sell and hold inventories of agricultural input and output commodities, some of which are readily traded on commodity futures exchanges. Unfavorable weather conditions, both local and worldwide, as well as other factors beyond our control, can affect the supply and demand of these commodities and expose us to liquidity pressures to finance hedges in the commodity business in rapidly rising markets. In our Plant Nutrient business, changes in the supply and demand of these commodities can also affect the value of inventories that we hold, as well as the price of raw materials as we are unable to effectively hedge these commodities. Increased costs of inventory and prices of raw material would decrease our profit margins and adversely affect our results of operations.

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Corn - The principal raw material used to produce ethanol and co-products is corn. As a result, an increase in the price of corn in the absence of a corresponding increase in petroleum-based fuel prices will typically decrease ethanol margins thus adversely affecting financial results in the Ethanol Group. At certain levels, corn prices may make ethanol uneconomical to produce for fuel markets. The price of corn is influenced by weather conditions and other factors affecting crop yields, shifts in acreage allocated to corn versus other major crops and general economic and regulatory factors. These factors include government policies and subsidies with respect to agriculture and international trade, and global and local demand and supply. The significance and relative effect of these factors on the price of corn is difficult to predict. Any event that tends to negatively affect the supply of corn, such as adverse weather or crop disease, could increase corn prices and adversely impact income. In addition, we may also have difficulty, from time to time, in physically sourcing corn on economical terms due to supply shortages. High costs or shortages could require us to suspend ethanol operations until corn is available on economical terms, which would have an adverse effect on operating results.

Commodities - While we attempt to manage the risk associated with agricultural commodity price changes for our commodity inventory positions with derivative instruments, including purchase and sale contracts, we are unable to offset 100% of the price risk of each transaction due to timing, availability of futures and options contracts and third-party credit risk. Furthermore, there is a risk that the derivatives we employ will not be effective in offsetting all of the risks that we are trying to manage. This can happen when the derivative and the underlying value of grain inventories and purchase and sale contracts are not perfectly matched. Our commodity derivatives, for example, do not perfectly correlate with the basis component of our commodity inventory and contracts. Basis is defined as the difference between the local cash price of a commodity and the corresponding exchange-traded futures price. Differences can reflect time periods, locations or product forms. Although the basis component is smaller and generally less volatile than the futures component of our grain market price, basis moves on a large commodity position can significantly impact the profitability of the Trade business.

Our futures, options and over-the-counter contracts are subject to margin calls. If there are large movements in the commodities market, we could be required to post significant levels of margin deposits, which would impact our liquidity. There is no assurance that the efforts we have taken to mitigate the impact of the volatility of the prices of commodities upon which we rely will be successful and any sudden change in the price of these commodities could have an adverse effect on our business and results of operations.

Natural gas - We rely on third parties for our supply of natural gas, which is consumed in the drying of wet grain, manufacturing of certain lawn products, pelleted lime and gypsum, and manufacturing of ethanol. The prices for and availability of natural gas are subject to market conditions. These market conditions often are affected by factors beyond our control such as higher prices resulting from colder than average weather and overall economic conditions. Significant disruptions in the supply of natural gas could impair the operations of the ethanol facilities. Furthermore, increases in natural gas prices or changes in our natural gas costs relative to natural gas costs paid by competitors may adversely affect future results of operations and financial position.

Gasoline and oil - We market ethanol as a fuel additive to reduce vehicle emissions from gasoline, as an octane enhancer to improve the octane rating of gasoline with which it is blended and as a substitute for petroleum-based gasoline. As a result, ethanol prices will be influenced by the supply and demand for gasoline and oil and our future results of operations and financial position may be adversely affected if gasoline and oil demand or price changes.

Frac Sand - In our Trade business we own a frac sand processing, logistics, and transloading operation. Frac sand is a proppant used in the completion and re-completion of natural gas and oil wells through hydraulic fracturing. Frac sand is the most commonly used proppant and is less expensive than ceramic proppant, which is also used in hydraulic fracturing to stimulate and maintain oil and natural gas production. A significant shift in demand from frac sand to other proppants, such as ceramic proppants, could have a material adverse effect on our financial condition and results of operations based on the geography of our operations. Additionally, the frac sand business is significantly influenced by the demand in oil. Accordingly, a shift in demand of oil can have a material adverse effect on our financial condition and results of operations. The development and use of other effective alternative proppants, or the development of new processes to replace hydraulic fracturing altogether, could also cause a decline in demand for the frac sand we process and transload and could have a material adverse effect on our financial condition and results of operations.

Potash, phosphate and nitrogen - Raw materials used by the Plant Nutrient business include potash, phosphate and nitrogen, for which prices can be volatile and are driven by global and local supply and demand factors. Significant increases in the price of these commodities may result in lower customer demand and higher than optimal inventory levels. In contrast, reductions in the price of these commodities may create lower of cost or net realizable value adjustments to inventories.

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Some of our business segments operate in highly regulated industries. Changes in government regulations or trade association policies could adversely affect our results of operations.

Many of our business segments are subject to government regulation and regulation by certain private sector associations, compliance with which can impose significant costs on our business. Other regulations are applicable generally to all our businesses and corporate functions, including, without limitation, those promulgated under the Internal Revenue Code, the Affordable Care Act, the Employee Retirement Income Security Act and other employment and health care related laws, federal and state securities laws, and the US Patriot Act. Failure to comply with such regulations can result in additional costs, fines or criminal action.

A significant part of our operations is regulated by environmental laws and regulations, including those governing the labeling, use, storage, discharge and disposal of hazardous materials. Because we use and handle hazardous substances in our businesses, changes in environmental requirements or an unanticipated significant adverse environmental event could have an adverse effect on our business. We cannot assure that we have been, or will at all times be, in compliance with all environmental requirements, or that we will not incur costs or liabilities in connection with these requirements. Private parties, including current and former employees, could bring personal injury or other claims against us due to the presence of, or exposure to, hazardous substances used, stored or disposed of by us, or contained in our products. We are also exposed to residual risk because some of the facilities and land which we have acquired may have environmental liabilities arising from their prior use. In addition, changes to environmental regulations may require us to modify our existing plant and processing facilities which could significantly increase the cost of those operations.

Trade and Ethanol businesses - In our Trade and Ethanol businesses, agricultural production and trade flows can be affected by government programs and legislation. Production levels, markets and prices of the commodities we merchandise can be affected by U.S. government programs, which include acreage controls and price support programs administered by the USDA and required levels of ethanol in gasoline through the Renewable Fuel Standards as administered by the Environmental Protection Agency ("EPA"). Other examples of government policies that can have an impact on our business include tariffs, taxes, duties, subsidies, import and export restrictions, outright embargoes and price controls on agricultural commodities. Because a portion of our commodity sales are to exporters, the imposition of export restrictions and other foreign countries' regulations could limit our sales opportunities and create additional credit risk associated with export brokers if shipments are rejected at their destination.

International trade disputes can adversely affect agricultural commodity trade flows by limiting or disrupting trade between countries or regions. Trade disputes can lead to the implementing of tariffs on commodities in which we merchandise or otherwise use in our operations. This can lead to significant volatility in commodity prices, disruptions in historical trade flows and shifts in planting patterns in the Company's geographic footprint, which would present challenges and uncertainties for our business. The imposition of new tariffs or uncertainty around future tariff levels can cause significant fluctuations in the futures and basis levels of agricultural commodities, impacting our earnings. We cannot predict the effects that future trade policy or the terms of any negotiated trade agreements and their impact on our business.

Plant Nutrient - Our Plant Nutrient business manufactures certain agricultural nutrients and uses potentially hazardous materials. All products containing pesticides, fungicides and herbicides must be registered with the EPA and state regulatory bodies before they can be sold. The inability to obtain or the cancellation of such registrations could have an adverse impact on our business. In the past, regulations governing the use and registration of these materials have required us to adjust the raw material content of our products and make formulation changes. Future regulatory changes may have similar consequences. Regulatory agencies, such as the EPA, may at any time reassess the safety of our products based on new scientific knowledge or other factors. If it were determined that any of our products were no longer considered to be safe, it could result in the amendment or withdrawal of existing approvals, which, in turn, could result in a loss of revenue, cause our inventory to become obsolete or give rise to potential lawsuits against us. Consequently, changes in existing and future government or trade association polices may restrict our ability to do business and cause our financial results to suffer.

Rail - Our Rail business is subject to regulation by the American Association of Railroads and the Federal Railroad Administration. These agencies regulate rail operations with respect to health and safety matters. New regulatory rulings could negatively impact financial results through higher maintenance costs or reduced economic value of railcar assets.

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The Rail business is also subject to risks associated with the demands and restrictions of the Class I railroads, a group of rail companies owning a high percentage of the existing rail lines. These companies exercise a high degree of control over whether private railcars can be allowed on their lines and may reject certain railcars or require maintenance or improvements to the railcars. This presents risk and uncertainty for our Rail business and it can increase maintenance costs. In addition, a shift in the railroads' strategy to investing in new railcars and improvements to existing railcars, instead of investing in locomotives and infrastructure, could adversely impact our business by causing increased competition and creating an oversupply of railcars. Our rail fleet consists of a range of railcar types (boxcars, gondolas, covered and open top hoppers, tank cars and pressure differential cars) and locomotives. However, a large concentration of a particular type of railcar could expose us to risk if demand were to decrease for that railcar type. Failure on our part to identify and assess risks and uncertainties such as these could negatively impact our business.

Demand for railcars closely follows general economic activity and may be adversely affected by recession and general economic or sector related slowdowns.

We are required to carry significant amounts of inventory across all of our businesses. If a substantial portion of our inventory becomes damaged or obsolete, its value would decrease, and our profit margins would suffer.

We are exposed to the risk of a decrease in the value of our inventories due to a variety of circumstances in all of our businesses. For example, within our Trade and Ethanol businesses, there is the risk that the quality of our inventory could deteriorate due to damage, moisture, insects, disease or foreign material. If the quality of our inventory were to deteriorate below an acceptable level, the value of our inventory could decrease significantly. In our Plant Nutrient business, planted acreage, and consequently the volume of fertilizer and crop protection products applied, is partially dependent upon government programs and the producer's perception of demand. Technological advances in agriculture, such as genetically engineered seeds that resist disease and insects, or that meet certain nutritional requirements, could also affect the demand for our crop nutrients and crop protection products. Either of these factors could render some of our inventory obsolete or reduce its value. Within our rail repair business, major design improvements to loading, unloading and transporting of certain products can render existing (especially old) equipment obsolete.

Our substantial indebtedness could negatively affect our financial condition, decrease our liquidity and impair our ability to operate the business.

If cash on hand is insufficient to pay our obligations or margin calls as they come due at a time when we are unable to draw on our credit facility, it could have an adverse effect on our ability to conduct our business. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is dependent on various factors. These factors include general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Certain of our long-term borrowings include provisions that require minimum levels of working capital and equity and impose limitations on additional debt. Our ability to satisfy these provisions can be affected by events beyond our control, such as the demand for and the fluctuating price of commodities. Although we are and have been in compliance with these provisions, noncompliance could result in default and acceleration of long-term debt payments.

We face increasing competition and pricing pressure from other companies in our industries. If we are unable to compete effectively with these companies, our sales and profit margins would decrease, and our earnings and cash flows would be adversely affected.

The markets for our products in each of our business segments are highly competitive. While we have substantial operations in certain of the regions where we operate, some of our competitors are significantly larger, compete in wider markets, have greater purchasing power, and have considerably larger financial resources. We also may enter into new markets where our brand is not recognized and in which we do not have an established customer base. Competitive pressures in all of our businesses could affect the price of, and customer demand for, our products, thereby negatively impacting our profit margins and resulting in a loss of market share.

Our Trade and Ethanol businesses use derivative contracts to reduce volatility in the commodity markets. Non-performance by the counter-parties to those contracts could adversely affect our future results of operations and financial position.

A significant amount of purchases and sales within the Trade and Ethanol segment are made through forward contracting. In addition, the Company uses exchange traded and, to a lesser degree, over-the-counter contracts to reduce volatility in changing commodity prices. A significant adverse change in commodity prices could cause a counter-party to one or more of our derivative contracts to not perform on its obligation.
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Adverse weather conditions, including as a result of climate change, may adversely affect the availability, quality and price of agricultural commodities and agricultural commodity products, as well as our operations and operating results.

Adverse weather conditions have historically caused volatility in the agricultural commodity industry and consequently in our operating results by causing crop failures or significantly reduced harvests, which may affect the supply and pricing of the agricultural commodities that we sell and use in our business, reduce demand for our fertilizer products and negatively affect the creditworthiness of agricultural producers who do business with us. A significant portion of the Company's assets are exposed to conditions in the Eastern Corn Belt. In this region, adverse weather during the fertilizer application, planting, and harvest seasons can have negative impacts on our Trade, Ethanol and Plant Nutrient businesses. Higher basis levels or adverse crop conditions in the Eastern Corn Belt can increase the input costs or lower the market value of our products relative to other market participants that do not have the same geographic concentration.

Additionally, the potential physical impacts of climate change are uncertain and may vary by region. These potential effects could include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperature levels that could adversely impact our costs and business operations, the location, costs and competitiveness of agricultural commodity production and related storage and processing facilities and the supply and demand for agricultural commodities. These effects could be material to our results of operations, liquidity or capital resources.

General Risk Factors

We rely on a limited number of suppliers for certain of our raw materials and other products and the loss of one or several of these suppliers could increase our costs and have a material adverse effect on any one of our business segments.

We rely on a limited number of suppliers for certain of our raw materials and other products. If we were unable to obtain these raw materials and products from our current vendors, or if there were significant increases in our supplier's prices, it could significantly increase our costs and reduce our profit margins.

We are subject to global and regional economic downturns and related risks.

The level of demand for our products is affected by global and regional demographic and macroeconomic conditions, including population growth rates and changes in standards of living. A significant downturn in global economic growth, or recessionary conditions in major geographic regions, may lead to reduced demand for agricultural commodities and food products, which could adversely affect our business and results of operations. The pace of economic improvement is uncertain especially given the current global pandemic caused by COVID-19 and there can be no assurance that economic and/or political conditions will not continue to affect market and consumer confidence or deteriorate further in the near term.

The Company may not be able to effectively integrate businesses it acquires.

We continuously look for opportunities to enhance our existing businesses through strategic acquisitions. The process of integrating an acquired business into our existing business and operations may result in unforeseen operating difficulties and expenditures as well as require a significant amount of management resources. There is also the risk that our due diligence efforts may not uncover significant business flaws or hidden liabilities. In addition, we may not realize the anticipated benefits of an acquisition and they may not generate the anticipated financial results. Additional risks may include the inability to effectively integrate the operations, products, technologies and personnel of the acquired companies. The inability to maintain uniform standards, controls, procedures and policies would also negatively impact operations.

If our goodwill or amortizable intangible assets become impaired, then we could be required to record a significant charge to earnings.

GAAP requires us to test for goodwill impairment at least annually. In addition, we review our tangible and intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable include prolonged declines in stock price, market capitalization or cash flows, and slower growth rates in our industry. Depending on the results of our review, we could be required to record a significant charge to earnings in our Consolidated Financial Statements during the period in which any impairment of our goodwill or amortizable intangible assets were determined, negatively impacting our results of operations.

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Our business involves considerable safety risks. Significant unexpected costs and liabilities would have an adverse effect on our profitability and overall financial position.

Due to the nature of some of the businesses in which we operate, we are exposed to significant operational hazards such as grain dust explosions, fires, malfunction of equipment, abnormal pressures, blowouts, pipeline and tank ruptures, chemical spills or run-off, transportation accidents and natural disasters. Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage and may result in suspension of operations and the imposition of civil or criminal penalties. If grain dust were to explode at one of our elevators, if an ethanol plant were to explode or catch fire, or if one of our pieces of equipment were to fail or malfunction due to an accident or improper maintenance, it could put our employees and others at serious risk.

The Company's information technology systems may impose limitations or failures, or may face external threats, which may affect the Company's ability to conduct its business.

The Company's information technology systems, some of which are dependent on services provided by third parties, provide critical data connectivity, information and services for internal and external users.  These interactions include, but are not limited to, ordering and managing materials from suppliers, converting raw materials to finished products, inventory management, shipping products to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, human resources and other processes necessary to manage the business.  The Company has put in place business continuity plans for its critical systems.  However, if the Company's information technology systems are damaged, or cease to function properly due to any number of causes, such as catastrophic events or power outages, and the Company's business continuity plans do not allow it to effectively recover on a timely basis, the Company may suffer interruptions in the ability to manage its operations, which may adversely impact the Company's operating results. Our security measures may also be breached due to employee error, malfeasance, or otherwise. In addition, although the systems continue to be refreshed periodically, portions of the infrastructure are outdated and may not be adequate to support new business processes, accounting for new transactions, or implementation of new accounting standards if requirements are complex or materially different than what is currently in place.
Additionally, outside parties may attempt to destroy critical information, or fraudulently induce employees, third-party service providers, or users to disclose sensitive information to gain access to our data or our users' data. As a response, the Company requires user names and passwords to access its information technology systems. The Company also uses encryption and authentication technologies designed to secure the transmission and storage of data and prevent access to Company and user data or accounts. The Company also conducts tests and assessments using independent third parties on a regular basis. As with all companies, these security measures are subject to third-party security breaches, employee error, malfeasance, faulty password management, or other irregularities. We cannot assure our ability to prevent, repel or mitigate the effects of such an attack by outside parties. The Company also relies on third parties to maintain and process certain information which could be subject to breach or unauthorized access to Company or employee information. Any such breach or unauthorized access could result in an inability to perform critical functions, significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our services that could potentially have an adverse effect on our business.
The Company's design and implementation of its Enterprise Resource Planning system could face significant difficulties.

The Company is designing and implementing ERP systems, requiring significant capital and human resources to deploy. There is risk of such implementations being more expensive and taking longer to fully implement than originally planned, resulting in increased capital investment, higher fees and expenses of third parties, delayed deployment scheduling, and more on-going maintenance expense once implemented, and, as such, the ultimate costs and schedules are not yet known. If for any reason portions of the implementation are not successful, the Company could be required to expense rather than capitalize related amounts. Beyond cost and scheduling, potential flaws in the implementation of an ERP system may pose risks to the Company's ability to operate successfully and efficiently. These risks include, without limitation, inefficient use of employees, distractions to the Company's core businesses, adverse customer reactions, loss of key information, delays in decision making, as well as unforeseen additional costs due to the inability to integrate vital information processes.

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Unauthorized disclosure of sensitive or confidential customer information could harm the Company's business and standing with our customers.

The protection of our customer, employee and Company data is critical to us. The Company relies on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential customer information, such as payment card and personal information. The Company also conducts annual tests and assessments using independent third parties. Despite the security measures the Company has in place, its facilities and systems, and those of its third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors, or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by the Company or its vendors, could damage our reputation, expose us to risk of litigation and liability, disrupt our operations and harm our business.
A change in tax laws or regulations of any federal, state or international jurisdiction in which we operate could increase our tax burden and otherwise adversely affect our financial position, results of operations, cash flows and liquidity.

We continue to assess the impact of various U.S. federal, state, local and international legislative proposals that could result in a material increase to our U.S. federal, state, local and/or international taxes. We cannot predict what impact, if any, changes in federal policy, including tax policies, as a result of recent U.S. federal elections will have on our industry or whether any specific legislation will be enacted or the terms of any such legislation. However, if such proposals were to be enacted, or if modifications were to be made to certain existing regulations, the consequences could have a material adverse impact on us, including increasing our tax burden, increasing our cost of tax compliance or otherwise adversely affecting our financial position, results of operations, cash flows and liquidity. Changes in applicable U.S. or foreign tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our tax expense and profitability as they did in 2017 upon passage of the Tax Cuts and Jobs Act. Such impact may also be affected positively or negatively by subsequent potential judicial interpretation or related regulation or legislation which cannot be predicted with certainty.

We are subject to various legal and regulatory proceedings, including litigation in the ordinary course of business, and uninsured judgments or a rise in insurance premiums may adversely impact our business, financial condition and results of operations.

In the ordinary course of business, we are subject to various legal and regulatory proceedings, which may include but are not limited to those involving antitrust, tax, environmental, intellectual property, data privacy and other matters, including general commercial litigation. Any claims raised in legal and regulatory proceedings, whether with or without merit, could be time consuming and expensive to defend and could divert management’s attention and resources. Additionally, the outcome of legal and regulatory proceedings may differ from our expectations because the outcomes of these proceedings are often difficult to predict reliably. Various factors and developments can lead to changes in our estimates of liabilities and related insurance receivables, where applicable, or may require us to make additional estimates, including new or modified estimates that may be appropriate due to a judicial ruling or judgment, a settlement, regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in charges that could have a material adverse effect on our results of operations in any particular period.

In accordance with customary practice, we maintain insurance against some, but not all, of these potential claims. In the future, we may not be able to maintain insurance at commercially acceptable premium levels. In addition, the levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities. If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse impact on our business, financial condition and results of operations.


Item 1B. Unresolved Staff Comments

The Company has no unresolved staff comments.


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Item 2. Properties

The Company's principal agriculture, rail, and other properties are described below. The Company believes that its properties are adequate for its business, well maintained and utilized, suitable for their intended uses and adequately insured.

Agriculture and Ethanol Facilities
TradeEthanolPlant Nutrient
(in thousands)Grain StorageNameplate CapacityDry Fertilizer StorageLiquid Fertilizer Storage
Location(bushels)(gallons)(tons)(tons)
Canada22,578 — — — 
Colorado1,586 — — — 
Idaho16,655 — — — 
Illinois16,164 — 56 11 
Indiana21,690 110,000 132 134 
Iowa— 55,000 — 65 
Kansas— 70,000 — — 
Kentucky1,410 — — — 
Louisiana24,948 — — — 
Michigan28,572 130,000 66 46 
Minnesota1,779 — — 47 
Nebraska18,414 — — 45 
New York— — — — 
Ohio42,151 110,000 182 72 
Puerto Rico— — — 11 
Texas6,152 — — — 
Wisconsin— — 27 78 
202,099 475,000 463 509 

The Trade facilities are mostly concrete and steel tanks, with some flat storage buildings. The Company also owns grain inspection buildings and dryers, maintenance buildings and truck scales and dumps. Approximately 84% of the total storage capacity noted above, which includes temporary pile storage, is owned, while the remaining 16% of the total capacity is leased from third parties.

The Plant Nutrient properties consist mainly of fertilizer warehouse and formulation and packaging facilities for dry and liquid fertilizers. The Company owns approximately 99% of the dry and liquid storage capacity noted above.

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Rail Equipment
EquipmentNumber of UnitsPercentage of Fleet
Covered Hoppers14,76063.6%
Tanks4,45919.2%
Gondolas1,0694.6%
Open-top Hoppers8363.6%
Boxcars7773.3%
Pressure Differential Covered Hoppers7713.3%
Flat Cars5142.2%
Locomotives230.1%
Other230.1%
23,232100.0%

The Company’s revenue-generating equipment, either owned or long-term leased, consists of freight cars and locomotives as described below.
 
Covered hoppers - Have a permanent roof and are segregated based upon commodity density. Lighter bulk commodities such as grain, fertilizer, flour, salt, plastics, DDGs and lime are shipped in medium, large and jumbo covered hoppers. Heavier commodities like cement, fly ash, ground limestone and industrial sand are shipped in small cube covered hoppers.

Tanks - Transports liquid and gaseous commodities.

Gondolas - Supports metals markets, coal, aggregates and stone, and provides transport for woodchips and other bulk commodities.  

Open-top hoppers - Transports heavy dry bulk commodities such as coal, coke, stone, sand, ores and gravel that are resistant to weather conditions.

Boxcars - Includes a variety of tonnages, sizes, door configurations and heights to accommodate a wide range of finished products, including building materials, metal products, minerals, cement and food products.  

Pressure differential covered hoppers - Transports cement, fertilizers, flour, grain products, clay and sand that utilize a pressure differential system on the hopper cars that assists with unloading of the commodities from either side of the car.

Flat cars - Used for shipping bulk and finished goods, such as lumber, steel, pipe, plywood, drywall and pulpwood.

Other cars - Primarily leased refrigerator cars and barges.

Locomotives - Primarily to pull trains. 

The Company operates 28 railcar repair facilities throughout the country.


Item 3. Legal Proceedings

The Company is currently subject to various claims and suits arising in the ordinary course of business, which include environmental issues, employment claims, contractual disputes, and defensive counterclaims. The Company accrues liabilities in which litigation losses are deemed probable and estimable. The Company believes it is unlikely that the results of its current legal proceedings, even if unfavorable, will result in material liabilities beyond what it currently has accrued. There can be no assurance, however, that any claims or suits arising in the future, whether taken individually or in the aggregate, will not have a material adverse effect on our financial condition or results of operations.

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Item 4. Mine Safety

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

Under the Dodd-Frank Act, each operator of a coal or other mine is required to include certain mine safety results within its periodic reports filed with the SEC. As required by the reporting requirements included in §1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, the required mine safety results regarding certain mining safety and health matters for each of our mine locations that are covered under the scope of the Dodd-Frank Act are included in Exhibit 95 of Item 15. Exhibits and Financial Statement Schedules.

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Part II.


Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Common Shares of The Andersons, Inc. trade on the Nasdaq Global Select Market under the symbol “ANDE”.

Shareholders

At February 12, 2021, there were 1,034 shareholders of record and approximately 13,291 shareholders for whom security firms acted as nominees.

Dividends

The Company has declared and paid consecutive quarterly dividends since its first year of trading in 1996. Dividends paid from January 2019 to January 2021 are as follows:
Payment DateAmount
1/23/2019$0.170
4/22/2019$0.170
7/22/2019$0.170
10/22/2019$0.170
1/23/2020$0.175
4/22/2020$0.175
7/22/2020$0.175
10/22/2020$0.175
1/20/2021$0.175

While the Company's objective is to pay a quarterly cash dividend, dividends are subject to Board of Director approval.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers
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
October 2020
3,066 $19.17   
November 2020
692 21.78   
December 2020
2,718 24.08   
Total6,476 $21.51   
(1) During the three months ended December 31, 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.

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Performance Graph

The graph below compares the total shareholder return on the Company's Common Shares to the cumulative total return for the Nasdaq U.S. Index and a Peer Group Index. The indices reflect the year-end market value of an investment in the stock of each company in the index, including additional shares assumed to have been acquired with cash dividends, if any. The Peer Group Index, weighted for market capitalization, includes the following companies:
Archer-Daniels-Midland Co.Nutrien Ltd.
GATX Corp.The Greenbrier Companies, Inc.
Green Plains, Inc.The Scott's Miracle-Gro Company
Ingredion Incorporated

The graph assumes a $100 investment in The Andersons, Inc. Common Shares on December 31, 2015 and also assumes investments of $100 in each of the Nasdaq U.S. and Peer Group indices, respectively, on December 31 of the first year of the graph. The value of these investments as of the following calendar year-ends is shown in the table below the graph.


ande-20201231_g2.jpg

Base PeriodCumulative Returns
December 31, 2015
20162017201820192020
The Andersons, Inc.$100.00 $143.88 $102.20 $100.03 $86.83 $87.47 
NASDAQ U.S.100.00 108.87 141.13 137.12 187.44 271.64 
Peer Group Index100.00 126.88 131.59 118.95 134.99 154.05 

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Item 7. 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. Without limitation, these risks include economic, weather and regulatory conditions, competition, the COVID-19 pandemic and those listed under Item 1.A, "Risk Factors." The reader is urged to carefully consider these risks and factors. In some cases, the reader can identify forward-looking statements by terminology such as “may”, “anticipates”, “believes”, “estimates”, “predicts”, or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These forward-looking statements relate only to events as of the date on which the statements are made and the Company undertakes no obligation, other than any imposed by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

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 commodities that the business deals in will have a relatively equal impact on sales and cost of sales and a much less significant impact on gross profit. As a result, changes in sales between periods may not necessarily be indicative of the overall performance of the business and more focus should be placed on changes in gross profit.

The Company has considered the potential impact of the book value of the Company’s total shareholders’ equity exceeding the Company’s market capitalization 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 and annual impairment tests, reviews of current operating results and other relevant market factors, the Company concluded that no impairment trigger existed as of December 31, 2020. However, continuing adverse market conditions or alternative management decisions on operations may result in future impairment considerations.

Recent Developments

For fiscal year 2020, the global emergence of COVID-19 has had a significant impact on the global economy, including several industries in which the Company 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 Trade, Ethanol and Rail Groups. 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 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 I, Item 1A. Risk Factors.

Trade

The Trade Group's performance reflects an increase in merchandising activity, however, this increase was offset by year over year reductions in income as it pertains to its grain elevator asset and food and specialty ingredients businesses. The reduction in income from the grain elevator asset business was driven by the weak 2019 harvest carryover in the Eastern Corn Belt assets and lower wheat opportunities. Additionally, the food and specialty ingredients business netted lower results that were driven by higher freight costs and lower volumes, a portion of which was due to the impact COVID-19 had on the restaurant industry.

Total grain storage capacity, including temporary pile storage, was approximately 202.1 million bushels as of December 31, 2020 and 206.6 million bushels as of December 31, 2019. Commodity inventories on hand at December 31, 2020 were 142.8 million bushels, of which 3.0 million bushels were stored for others. This compares to 152.8 million bushels on hand at December 31, 2019, of which 6.4 million bushels were stored for others.

Looking forward, the 2020 corn and soybean harvest improved in the Eastern Corn Belt compared to the prior year. Further, export demand has been robust, especially from China, which is expected to continue into the first quarter of 2021. These conditions have led to a significant increase in basis, strong elevation margins and considerable volatility, which will create merchandising opportunities.

Nearby futures prices have continued to rally, creating an inverse in corn and soybean 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 factors, the current outlook for the Trade Group is stronger on merchandising but reserved on income from storing grain.

Ethanol

The Ethanol Group's results were significantly impacted by the COVID-19 pandemic as the lack of driving demand created a surplus of both oil and ethanol which drove margins negative for the better part of the year. The reduction in income from the prior year was also attributable to a large one time gain as a result of the TAMH merger. As we move into 2021,the Ethanol Group expects continued margin headwinds from a current unbalanced supply of ethanol and a high corn basis and futures price. These challenges may continue while oil and gasoline demands remain low as a result of the COVID-19 pandemic. Fortunately, the high corn prices are improving coproducts sales as we are able to sell products such as DDGs and corn oil at higher values.

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Volumes shipped for the years ended December 31, 2020 and December 31, 2019 were as follows:
Twelve months ended December 31,
(in thousands)20202019
Ethanol (gallons shipped)592,738 542,146 
E-85 (gallons shipped)27,321 47,708 
Corn Oil (pounds shipped)117,563 48,702 
DDG (tons shipped)*1,850 1,846 
* 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 in the Consolidated Financial Statements 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 for the fourth quarter of 2019 and the 2020 amounts above. Total ethanol, DDG, and corn oil production by the unconsolidated LLCs in 2019 was 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 results increased year-over-year due to favorable planting conditions in both the Spring and Fall application seasons compared to the wet and compressed planting season in 2019. Further, the group continues to benefit from cost reduction initiatives and effective working capital management.

Total storage capacity at our ag supply chain and engineered granules businesses was approximately 463 thousand tons for dry nutrients and approximately 509 thousand tons for liquid nutrients at December 31, 2020, which is similar to the prior year.

At January 1, 2020, the group reorganized into three divisions as described below. Prior period amounts below were recast to reflect this change.

Looking forward, the group expects continued improvement in 2021 assuming continued higher commodity prices and another strong planting season.

Tons of product sold for the years ended December 31, 2020 and December 31, 2019 were as follows:
Twelve months ended December 31,
(in thousands)20202019
Ag Supply Chain1,585 1,312 
Specialty Liquids351 333 
Engineered Granules416 410 
Total tons2,352 2,055 

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.

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Rail

The Rail segment's results were lower than the prior year. The reduction in earnings was driven by lower average lease rates, lower North American railcar loadings, a reduction in car sales and certain customer defaults particularly in the sand and ethanol markets. The average utilization rate (Rail assets under management that are in lease service, exclusive of those managed for third-party investors) was 88.1% for the year ended December 31, 2020 which was 4.3% lower than the prior year. Rail assets under management (owned, leased or managed for financial institutions in non-recourse arrangements) at December 31, 2020 were 23,232 compared to 24,884 at December 31, 2019.

The COVID-19 pandemic caused the idling of nearly one-third of the North American railcar fleet at one point during the year and has driven year-to-date railcar loadings lower year over year. While we have seen modest improvements in railcar loadings and fewer idled cars, the recovery in 2021 may be slow. Lease rates are expected to stay relatively flat until later into the year.

Other

The Company's “Other” represents corporate functions that provide support and services to the operating segments. The results contained within this group include expenses and benefits not allocated back to the operating segments, including a portion of our ongoing ERP costs.


Results for Fiscal 2019 compared to Fiscal 2018

For comparisons of the Company's consolidated and segment results of operations and consolidated cash flows for the fiscal years ended December 31, 2019 to December 31, 2018, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 27, 2020.

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Operating Results

The following discussion focuses on the operating results as shown in the Consolidated Statements of Operations with a separate discussion by segment. Additional segment information is included in Note 12 to the Company's Consolidated Financial Statements in Item 8.
 
Year ended December 31, 2020
(in thousands)TradeEthanolPlant NutrientRailOtherTotal
Sales and merchandising revenues$6,141,402 $1,260,259 $662,959 $143,816 $ $8,208,436 
Cost of sales and merchandising revenues5,863,186 1,278,526 556,711 105,091  7,803,514 
Gross profit278,216 (18,267)106,248 38,725  404,922 
Operating, administrative and general expenses244,147 24,405 85,702 21,512 23,441 399,207 
Interest expense (income)21,974 7,461 5,805 17,491 (1,456)51,275 
Equity in earnings (losses) of affiliates, net638     638 
Other income (expense), net11,954 2,795 1,274 2,885 1,540 20,448 
Income (loss) before income taxes24,687 (47,338)16,015 2,607 (20,445)(24,474)
Income (loss) before income taxes attributable to the noncontrolling interests (21,925)   (21,925)
Non-GAAP Income (loss) before income taxes, attributable to the Company$24,687 $(25,413)$16,015 $2,607 $(20,445)$(2,549)

 
Year ended December 31, 2019
(in thousands)TradeEthanolPlant NutrientRailOtherTotal
Sales and merchandising revenues$6,144,526 $1,211,997 $646,730 $166,938 $— $8,170,191 
Cost of sales and merchandising revenues5,815,430 1,179,430 547,626 109,813 — 7,652,299 
Gross profit329,096 32,567 99,104 57,125 — 517,892 
Operating, administrative and general expenses276,280 20,639 84,719 27,132 28,072 436,842 
Asset impairment38,536 — 2,175 — 501 41,212 
Interest expense (income)34,843 943 7,954 16,486 (535)59,691 
Equity in earnings (losses) of affiliates, net(6,835)(524)— — — (7,359)
Other income (expense), net10,070 37,199 4,903 1,583 1,568 55,323 
Income (loss) before income taxes(17,328)47,660 9,159 15,090 (26,470)28,111 
Income (loss) before income taxes attributable to the noncontrolling interests— (3,247)— — — (3,247)
Non-GAAP Income (loss) before income taxes, attributable to the Company$(17,328)$50,907 $9,159 $15,090 $(26,470)$31,358 

The Company uses Non-GAAP Income (loss) before income taxes, attributable to the Company, a non-GAAP financial measure as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.

Management believes that Non-GAAP Income (loss) before income taxes, attributable to the Company is a useful measure of the Company’s performance because it provides investors additional information about the Company's operations allowing better evaluation of underlying business performance and better period-to-period comparability. This measure is not intended to replace or be an alternative to Income (loss) before income taxes, the most directly comparable amount reported under GAAP.

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Comparison of 2020 with 2019

Trade

Operating results for the Trade Group increased $42.0 million compared to prior year reported results, which included $38.5 million of asset impairments and $8.0 million of acquisition related costs. Sales and merchandising revenues decreased $3.1 million compared to prior year. While the sales and merchandising revenue balances were comparable year over year, cost of sales and merchandising revenues increased by $47.8 million resulting in a decrease in gross profit of $50.9 million. The decreased gross profit compared to the prior year was due to a reduction of $36.4 million in our grain assets business from the carryover effects of a weak 2019 harvest in our Eastern Corn Belt assets and lower wheat carries combined with a $15.2 million reduction in gross profit related to the shutdown of many of our sand facilities. This was partly offset by stronger merchandising results.

Operating, administrative and general expenses decreased $32.1 million compared to prior year results. Labor and benefits expenses were lower due to headcount reductions from cost cutting initiatives and the strategic divestiture of certain businesses. Depreciation expense was also lower due to divestitures and impairments of certain asset groups. Additionally, a reduction of $5.1 million for acquisition-related stock compensation did not recur in 2020.

The Trade Group recorded asset impairment charges of $38.5 million in 2019. The prior year asset impairment charges include a $34.8 million impairment of the Company's Frac Sand business following a fundamental shift in the operating environment in the areas we are located and a $3.7 million charge related to the Company's Tennessee assets, as it disposed of its remaining assets in this region. No such impairments occurred in the current year.

Interest expense decreased $12.9 million due to the pay down of long-term debt, lower interest rates and lower short-term borrowings for most of the year.

Equity in earnings of affiliates were $0.6 million in the current year. This resulted in an increase of $7.5 million as compared to the prior year. This was due to a loss of $2.5 million and an other-than-temporary impairment charge of approximately $5.0 million from an investment in 2019.

Ethanol

Operating results for the Ethanol Group decreased $76.3 million from the prior year. Sales and merchandising revenues increased $48.3 million due to increased volumes resulting primarily from the ELEMENT plant in Colwich, Kansas which commenced operations in the second half of 2019 and cost of sales and merchandising revenues increased $99.1 million compared to the prior year. As a result, gross profit decreased by $50.8 million from significantly lower margins and mark-to-market losses as higher corn prices outpaced ethanol price increases. The lower, and often negative, margins were a direct result of the decreased demand resulting from the COVID-19 pandemic.

Operating, administrative and general expenses increased $3.8 million from the prior year due to the first full year of ELEMENT operations, and the impact of the TAMH merger in October 2019. Prior to the merger, the Company's share of operating, administrative and general expenses would have been recognized in equity earnings. This increase was partially offset by lower labor and incentive compensation costs from cost cutting initiatives.

Interest expense increased $6.5 million due to the cessation of the capitalization of interest related to the construction of the ELEMENT facility which was completed in 2019.

Other income, net decreased by $34.4 million from the prior year as a result of a $35.2 million gain on the pre-existing equity method investments that were given as consideration in the 2019 TAMH merger.


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Plant Nutrient

Operating results for Plant Nutrient increased $6.9 million compared to the prior year. Sales and merchandising revenues increased $16.2 million and cost of sales and merchandising revenues increased $9.1 million from increases in volumes from more normal planting conditions. The increases in volumes were slightly offset by lower margins as raw material prices increased. These factors led to an increased gross profit of $7.1 million from the prior year.

Operating, administrative and general expenses increased $1.0 million primarily due to higher labor and benefits due to increased overtime and incentive compensation. This was largely offset by lower depreciation from reductions in capital spending and the lack of nonrecurring impairment charges from the prior year.

Interest expense decreased $2.1 million from reduced working capital usage and lower interest rates in the current year.

Rail

Operating results for Rail decreased $12.5 million from the prior year. Sales and merchandising revenues decreased $23.1 million and cost of sales and merchandising revenues decreased $4.7 million compared to prior year results. The decreased revenues were driven by a decrease of $15.3 million in leasing revenues due to lower utilization rates with fewer cars on lease and a decrease of $7.8 million in car sale revenues as the Company sold more cars in 2019.

Operating, administrative and general expenses decreased $5.6 million due to lower incentives, cost cutting initiatives and more efficient labor costs within the repair business.

Interest expense increased $1.0 million due to an additional $2.8 million of interest expense related to the early termination of several interest rate swaps. This was partially offset by lower interest rates and a reduction in outstanding debt.

Other income increased $1.3 million resulting from more end-of-lease settlements in the current year.

Other

Operating, administrative and general expenses decreased $4.6 million due to headcount reductions, lower incentive compensation and other cost cutting initiatives. Severance related expense of $6.1 million associated with the departure of certain executive officers and key employees is also included in 2020 results.

Income Taxes

In 2020, the Company recorded income tax benefit of $10.3 million at an effective rate of 41.9%. In 2019, the Company recorded income tax expense of $13.1 million at an effective tax rate of 46.4%. The change in effective tax rate 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 non-controlling interest and derivatives instruments and hedging activities, along with the additional benefits from net operating loss carrybacks as a result of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.


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Liquidity and Capital Resources

Working Capital

At December 31, 2020, the Company had working capital of $484.7 million, a decrease of $20.7 million from the prior year. This decrease was attributable to changes in the following components of current assets and current liabilities:
(in thousands)December 31, 2020December 31, 2019Variance
Current Assets:
Cash, cash equivalents and restricted cash$29,123 $54,895 $(25,772)
Accounts receivable, net659,834 536,367 123,467 
Inventories1,300,693 1,170,536 130,157 
Commodity derivative assets – current320,706 107,863 212,843 
Other current assets106,053 75,681 30,372 
Total current assets2,416,409 1,945,342 471,067 
Current Liabilities:
Short-term debt403,703 147,031 256,672 
Trade and other payables957,683 873,081 84,602 
Customer prepayments and deferred revenue180,160 133,585 46,575 
Commodity derivative liabilities – current146,990 46,942 100,048 
Accrued expenses and other current liabilities167,671 176,381 (8,710)
Current maturities of long-term debt75,475 62,899 12,576 
Total current liabilities1,931,682 1,439,919 491,763 
Working capital$484,727 $505,423 $(20,696)

December 31, 2020 current assets increased $471.1 million in comparison to prior year. The increase was noted in all asset categories except cash. The increases in accounts receivable and inventory balances can largely be attributable to higher commodity prices. Current commodity derivative assets and liabilities, which reflect customers net assets or liabilities 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 current 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 $491.8 million compared to the prior year largely due to an increase in short-term debt, trade and other payables and commodity derivative liabilities as a result of higher commodity prices.

Sources and Uses of Cash 2020 compared to 2019

Operating Activities and Liquidity

Our operating activities used cash of $74.4 million in 2020 compared to cash provided by operations of $348.6 million in 2019. The increase in cash used was primarily due to increases in working capital accounts driven by higher commodity prices, as discussed above, and lower operating results.

Net income taxes of $2.4 million were paid in 2020 and net income taxes of $2.0 million were paid in 2019.

Investing Activities

Investing activities used $86.8 million in 2020 compared to $325.0 million used in 2019. In addition to the significant cash used for the acquisition of Lansing Trade Group in 2019 the remaining decrease was largely driven by the Company's strategic focus on reduced capital spending to conserve cash as a result of the impacts of COVID-19 in conjunction with efforts to pay down long-term debt. Cash used for the purchases of property, plant, equipment, and capitalized software decreased $88.1 million primarily due to the previously mentioned strategic efforts as well as significant prior year costs associated with the construction of the bio-refinery facility in 2019.
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Purchases of Rail assets were $27.7 million in the current year compared to $105.3 million in the prior year as the Company strategically reduced capital spending to focus on paying down long-term debt. Proceeds from the sale of Rail assets were $10.1 million in 2020 and $18.1 million in 2019. The decrease is primarily due to fewer railcar portfolio sales. As such, net spend on Rail assets decreased $69.5 million compared to the prior year.

Capital spending of $77.1 million for 2020 on property, plant and equipment includes: Trade - $14.9 million; Ethanol - $39.8 million; Plant Nutrient - $16.6 million; Rail - $4.4 million; and $1.5 million in corporate / enterprise resource planning project spending.

Proceeds from the sale of assets decreased $19.5 million. This was due to fewer dispositions as compared to the prior year which included a significant facility sale of $25.1 million which did not recur.
We expect to invest approximately $100 to $125 million in property, plant and equipment in 2021; approximately 60% of which will be to maintain current facilities.

Financing Arrangements

Net cash provided by financing activities was $136.3 million in 2020, compared to $8.7 million in 2019. This was largely due to an increase in proceeds from short term debt for working capital needs as commodity prices increased significantly through the latter part of the year. The increase in short term borrowings was offset in part by reductions in long-term debt consistent with the Company's strategy to reduce long-term debt and achieving a targeted long-term debt-to-EBITDA ratio of less than 2.5 times by the end of 2023.

As of December 31, 2020, the Company was party to borrowing arrangements with a syndicate of banks that provide a total short and long-term borrowing capacity of $1,374.2 million. This amount includes $20.0 million for ELEMENT and $197 million for TAMH, all of which are non-recourse to the Company. There was $868.4 million available for borrowing at December 31, 2020. Typically, our highest borrowing occurs in the late winter and early spring due to seasonal inventory requirements in our fertilizer and grain businesses, however, rising commodity prices during the fourth quarter required more borrowing than the prior year.

The Company paid $23.0 million in dividends in 2020 compared to $22.1 million in 2019. The Company paid $0.175 per common share for the dividends paid in January, April, July and October 2020, and $0.170 per common share for the dividends paid in January, April, July and October 2019. On December 17, 2020, we declared a cash dividend of $0.175 per common share, payable on January 20, 2021 to shareholders of record on January 4, 2021.

Certain of our long-term borrowings include covenants that, among other things, impose minimum levels of equity and limitations on additional debt. We are in compliance with all such covenants as of December 31, 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 we are a significant consumer of short-term debt in peak seasons and the majority of this is variable rate debt, increases in interest rates could have a significant impact on our profitability. In addition, periods of high commodity prices and/or unfavorable market conditions could require us to make additional margin deposits on our exchange traded futures contracts. Conversely, in periods of declining prices, we receive a return of cash.

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

Future payments due under contractual obligations at December 31, 2020 are as follows:
Payments Due by Period

(in thousands)
Less than 1 year1-3 years3-5 yearsAfter 5 yearsTotal
Long-term debt, recourse$69,037 $122,208 $188,202 468,203 $847,650 
Long-term debt, non-recourse6,438 27,110 85,372 32,479 151,399 
Interest obligations (a)25,245 44,466 32,185 44,107 146,003 
Operating leases21,262 25,087 7,785 7,067 61,201 
Purchase commitments (b)3,096,336 167,280 — — 3,263,616 
Retiree healthcare programs (c)2,324 3,118 3,044 27,947 36,433 
Total contractual cash obligations$3,220,642 $389,269 $316,588 $579,803 $4,506,302 
(a) Future interest obligations are calculated based on interest rates in effect as of December 31, 2020 for the Company's variable rate debt and do not include any assumptions on expected borrowings, if any, under the short-term line of credit.
(b) Includes the amounts related to purchase obligations in the Company's operating units, including $3,126.3 million for the purchase of grain from producers. There are also forward grain and ethanol sales contracts to consumers and traders and the net of these forward contracts are offset by exchange-traded futures and options contracts or over-the-counter contracts. See the narrative description of businesses for the Trade and Ethanol segments in Item 1 of this Annual Report on Form 10-K for further discussion.
(c) Obligations under the retiree healthcare programs are not fixed commitments and will vary depending on various factors, including the level of participant utilization and inflation. Our estimates of postretirement payments have considered recent payment trends and actuarial assumptions.

At December 31, 2020, we had standby letters of credit outstanding of $25.5 million.

Off-Balance Sheet Transactions

Our Rail segment utilizes leasing arrangements that provide off-balance sheet financing for its activities. We lease assets from financial intermediaries through sale-leaseback transactions, the majority of which involve operating leasebacks. We also arrange non-recourse lease transactions under which we sell assets to a financial intermediary and assign the related operating lease to the financial intermediary on a non-recourse basis. In such arrangements, we generally provide ongoing maintenance and management services for the financial intermediary and receive a fee for such services. We have a total of 324 railcars that would be considered off-balance sheet at December 31, 2020. 

Industrial Revenue Bonds. 

On December 3, 2019, we closed an industrial revenue bond transaction with the City of Colwich, Kansas (the "City") in order to receive a 20-year real property tax abatement on our renovated and newly-constructed ELEMENT ethanol facility. Pursuant to this transaction, the City issued a principal amount of $166.1 million of its industrial revenue bonds to us and then used the proceeds to purchase the land and facility from us. The City then leased the facilities back to us under a finance lease, the terms of which provide for the payment of basic rent in an amount sufficient to pay principal and interest on the bonds. Subsequent to the issuance of the bonds, the Company redeemed $165.1 million of the bonds, leaving $1.0 million issued and outstanding. Our obligation to pay rent under the lease is in the same amount and due on the same date as the City’s obligation to pay debt service on the bonds which we hold. The lease permits us to present the bonds at any time for cancellation, upon which our obligation to pay basic rent would be canceled.  The bonds' maturity date is 2029, at which time the facilities will revert to us without costs. If we were to present the bonds for cancellation prior to maturity, a nominal fee would be incurred. We recorded the land and buildings as assets in property, plant, and equipment, net, on our Consolidated Balance Sheets. Because we own all outstanding bonds, have a legal right to set-off, and intend to set-off the corresponding lease and interest payment, we have netted the finance lease obligation with the bond asset. No amount for our obligation under the finance lease is reflected on our Consolidated Balance Sheets, nor do we reflect an amount for the corresponding industrial revenue bond asset (see Note 14 to the Consolidated Financial Statements).

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Critical Accounting Estimates

The process of preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Management evaluates these estimates and assumptions on an ongoing basis. Estimates and assumptions are based on historical experience and management's knowledge and understanding of current facts and circumstances. Actual results, under conditions and circumstances different from those assumed, may change from these estimates.

Certain of our accounting estimates are considered critical, as they are important to the depiction of the Company's financial statements and/or require significant or complex judgment by management. There are other items within our financial statements that require estimation, however, they are not deemed critical as defined above. Note 1 to the Consolidated Financial Statements in Item 8 describes our significant accounting policies which should be read in conjunction with our critical accounting estimates.

Management believes that the accounting for readily marketable inventories and commodity derivative contracts, including adjustments for counterparty risk, uncertain tax positions, impairment of long-lived assets, goodwill and equity method investments and business combinations involve significant estimates and assumptions in the preparation of the Consolidated Financial Statements.

Readily Marketable Inventories and Derivative Contracts

Readily Marketable Inventories ("RMI") are stated at their net realizable value, which approximates fair value based on their commodity characteristics, widely available markets, and pricing mechanisms. The Company marks to market all forward purchase and sale contracts for commodities and ethanol, over-the-counter commodity and ethanol contracts, and exchange-traded futures and options contracts. The overall market for commodity inventories is very liquid and active; market value is determined by reference to prices for identical commodities on regulated commodity exchange (adjusted primarily for transportation costs); and the Company's RMI may be sold without significant additional processing. The Company uses forward purchase and sale contracts and both exchange traded and over-the-counter contracts (such as derivatives generally used by the International Swap Dealers Association). Management estimates fair value based on exchange-quoted prices, adjusted for differences in local markets, as well as counter-party non-performance risk in the case of forward and over-the-counter contracts. The amount of risk, and therefore the impact to the fair value of the contracts, varies by type of contract and type of counterparty. With the exception of specific customers thought to be at higher risk, the Company looks at the contracts in total, segregated by contract type, in its quarterly assessment of non-performance risk. For those customers that are thought to be at higher risk, the Company makes assumptions as to performance based on past history and facts about the current situation. Changes in fair value are recorded as a component of Cost of sales and merchandising revenues in the Statement of Operations.

Impairment of Long-Lived Assets, Goodwill, and Equity Method Investments

The Company's business segments are each highly capital intensive and require significant investment. Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. This is done by evaluating the recoverability based on undiscounted projected cash flows, excluding interest. If an asset group is considered impaired, the impairment loss to be recognized is measured as the amount by which the asset group's carrying amount exceeds its fair value.

Goodwill is tested for impairment at the reporting unit level, which is the operating segment or one level below the operating segment. The quantitative review for impairment takes into account our estimates of future cash flows. Our estimates of future cash flows are based upon a number of assumptions including operating costs, life of the assets, potential disposition proceeds, budgets and long-range plans. These factors are discussed in more detail in Note 17, Goodwill and Intangible Assets, to the Consolidated Financial Statements.
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As part of the Company's on-going assessment of goodwill, management determined that in the first quarter a triggering event occurred due to the Company's reorganization whereby the Company combined its operations between the Trade and Ethanol segments to enhance operating decisions and assessing performance. On January 1, 2020, the Company moved its Distillers Dried Grains ("DDG") business from the Trade to Ethanol segment. The reorganization resulted in the reassignment of goodwill to the affected reporting units using a relative fair value approach. As a result 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 or post-reorganization reporting units.
Further, due to the severe decline in ethanol prices, largely impacted by COVID-19 during the first quarter, management determined that a triggering event occurred within the Ethanol segment. Accordingly, an interim impairment test was performed over the Ethanol group's goodwill as well as its other intangible and long-lived assets. Based on the results of the impairment test, the Ethanol segment did not record an impairment charge. The results of the goodwill impairment test within the Ethanol group supported the calculated fair value exceeding the carrying values by greater than 20% at the time of the test.
Our annual goodwill impairment test is performed as of October 1st each year which is discussed in further detail in Note 17 to the Consolidated Financial Statements.
As our market capitalization remained below our book value through the end of the year, we performed an update to our annual test whereby management reviewed market influences and any relevant changes in assumptions from our annual test. Based on the methodologies used it was determined that the Company's reporting units estimated fair values continued to exceed that of their carrying values.
In addition, the Company holds investments in several companies that are accounted for using the equity method of accounting. The Company reviews its investments to determine whether there has been a decline in the estimated fair value of the investment that is below the Company's carrying value which is other than temporary. Other than consideration of past and current performance, these reviews take into account forecasted earnings which are based on management's estimates of future performance as well as the market or other income approach to estimate fair value.

Management considers several factors to be significant when estimating fair value including expected financial outlook of the business, changes in the Company's stock price, the impact of changing market conditions on financial performance and expected future cash flows, the geopolitical environment and other factors. Deterioration in any of these factors may result in a lower fair value assessment, which could lead to impairment charges in the future. Specifically, actual results may vary from the Company's forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions could result in non-cash impairment charges.

Business Combinations

Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed and pre-acquisition contingencies. We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets.

Examples of critical estimates in valuing certain of the intangible assets and goodwill we have acquired include but are not limited to the future expected cash flows of the acquired company's operations, the assumptions regarding the attrition rates associated with customer relationships and the period of time non-compete agreements will continue, and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

Uncertain Tax Positions

Conclusions on recognizing and measuring uncertain tax positions involve significant estimates and management judgment and include complex considerations of the Internal Revenue Code, related regulations, tax case laws, and prior year audit settlements. To account for uncertainty in income taxes, the Company evaluates the likelihood of a tax position based on the technical merits of the position, performs a subsequent measurement related to the maximum benefit and degree of likelihood, and determines the benefits to be recognized in the financial statements, if any. During the year ended December 31, 2020, the Company recognized tax benefits of $1.4 million for Federal Research and Development Credits ("R&D Credits") related to tax years 2015 to 2019. Unrecognized tax benefits of $44.4 million include $40.6 million recorded as a reduction of the deferred tax assets and refundable credits associated with the R&D Credits.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The market risk inherent in the Company's market risk-sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices and interest rates as discussed below.

Commodity Prices

The Company's daily net commodity position consists of inventories, related purchase and sale contracts, exchange-traded futures, and over-the-counter contracts. The fair value of the position is a summation of the fair values calculated for each commodity by valuing each net position at quoted futures market prices. The Company has established controls to manage and limit risk exposure, which consists of a daily review of position limits and effects of potential market price moves on those positions.

A sensitivity analysis has been prepared to estimate the Company's exposure to market risk of its net commodity futures position. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in quoted market prices. The result of this analysis, which may differ from actual results, is as follows:
December 31,
(in thousands)20202019
Net commodity position$(14,093)$(8,969)
Market risk1,409 896 

Foreign Currency

The Company has subsidiaries located outside the United States where the local currency is the functional currency.  To reduce the risks associated with foreign currency exchange rate fluctuations, the Company enters into currency exchange contracts to minimize its foreign currency position related to transactions denominated primarily in the British pound, Mexican peso and Canadian dollar.  These currencies represent the major functional or local currencies in which recurring business transactions occur.  The Company does not use currency exchange contracts as hedges against amounts indefinitely invested in foreign subsidiaries and affiliates.  The currency exchange contracts used are forward contracts, swaps with banks, exchange-traded futures contracts, and over-the-counter options.  The changes in market value of such contracts have a high correlation to the price changes in the currency of the related transactions. The potential loss in fair value for such net currency position resulting from a hypothetical 10% adverse change in foreign currency exchange rates is not material.
Interest Rates

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 and credit ratings for similar types of borrowing arrangements. Market risk, which is estimated as the potential increase in fair value resulting from a hypothetical one-half percent decrease in interest rates, is summarized below:
December 31,
(in thousands)20202019
Fair value of long-term debt, including current maturities$1,026,881 $1,096,010 
Carrying value less fair value27,832 8,257 
Market risk9,891 7,573 

Actual results may differ. The estimated fair value and market risk will vary from year to year depending on the total amount of long-term debt and the mix of variable and fixed rate debt.

Additionally, the Company may enter into interest rate swaps from time to time to manage our mix of fixed and variable interest rate debt effectively which may decrease market risk noted above. See Note 5 to the Consolidated Financial Statements for further discussion on the impact of these hedging instruments.



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Item 8. Financial Statements and Supplementary Data


The Andersons, Inc.
Index to Financial Statements

Page No.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of The Andersons, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Andersons, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15 (collectively, referred to as, the “financial statements”). In our opinion, based on our audits and the reports of the other auditors, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We did not audit the financial statements of Lansing Trade Group, LLC or Lux JV Treasury Holding Company S.à.r.l. as of and for the year ended December 31, 2018, the Company’s investments which were accounted for by use of the equity method. The accompanying financial statements of the Company include its equity in earnings in Lansing Trade Group, LLC of $10.4 million, and Lux JV Treasury Holding Company S.à.r.l. of $2.2 million, for the year ended December 31, 2018. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Lansing Trade Group, LLC and Lux JV Treasury Holding Company S.à.r.l., is based solely on the reports of the other auditors.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting based on our audit.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases using the modified retrospective transition approach in 2019 due to adoption of ASC 842, Leases.

Basis for Opinion

These financial statements are the responsibility of the Company’s manageme