Andersons, Inc. [ANDE] Filings

10-Q 1 ande-20220630.htm 10-Q ande-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended 06/30/2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 000-20557

THE ANDERSONS, INC.

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


Ohio		34-1562374
(State of incorporation or organization)		(I.R.S. Employer Identification No.)

1947 Briarfield Boulevard
Maumee	Ohio	43537
(Address of principal executive offices)		(Zip Code)

(419) 893-5050

(Telephone Number)

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

Title of each class:

Trading Symbol

Name of each exchange on which registered:

Common stock, $0.00 par value, $0.01 stated value

ANDE

The NASDAQ Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


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

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

The registrant had 33,860,914 common shares outstanding at July 22, 2022.

Table of Contents

THE ANDERSONS, INC.

INDEX


			Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations – Three and Si x months ended June 30 , 2022 and 2021			1
Condensed Consolidated Statements of Comprehensive Income – Three and Six months ended June 3 0 , 2022 and 2021			2
Condensed Consolidated Balance Sheets – June 3 0 , 2022, December 31, 2021 and June 3 0 , 2021			3
Condensed Consolidated Statements of Cash Flows – Six months ended June 3 0 , 2022 and 2021			4
Condensed Consolidated Statements of Equity – Three and Si x months ended June 3 0 , 2022 and 2021			5
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures about Market Risk			38
Item 4. Controls and Procedures			38
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			39
Item 1A. Risk Factors			39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 6. Exhibits			40

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Sales and merchandising revenues	$	4,450,617	$	3,235,805	$	8,428,571	$	5,830,524
Cost of sales and merchandising revenues	4,219,776		3,072,398		8,078,195		5,553,676
Gross profit	230,841		163,407		350,376		276,848
Operating, administrative and general expenses	112,559		105,560		214,546		202,558

Interest expense, net	16,921		10,060		27,780		20,049
Other income, net:
Equity in earnings (losses) of affiliates, net	(6,034)		845		(6,278)		2,639
Other income, net	22,826		5,070		26,988		10,938
Income before income taxes from continuing operations	118,153		53,702		128,760		67,818
Income tax provision from continuing operations	15,753		9,677		19,856		14,038
Net income from continuing operations	102,400		44,025		108,904		53,780
Income (loss) from discontinued operations, net of income taxes	(739)		2,099		(1,294)		5,606
Net income	101,661		46,124		107,610		59,386
Net income attributable to noncontrolling interests	21,856		2,625		22,303		780
Net income attributable to The Andersons, Inc.	$	79,805	$	43,499	$	85,307	$	58,606

Average number of shares outstanding - basic	33,850		33,263		33,795		33,226
Average number of share outstanding - diluted	34,416		33,579		34,416		33,617

Earnings (loss) per share attributable to The Andersons, Inc. common shareholders:
Basic earnings (loss):
Continuing operations	$	2.38	$	1.25	$	2.56	$	1.60
Discontinued operations	(0.02)		0.06		(0.04)		0.16
	$	2.36	$	1.31	$	2.52	$	1.76
Diluted earnings (loss):
Continuing operations	$	2.34	$	1.23	$	2.52	$	1.58
Discontinued operations	(0.02)		0.07		(0.04)		0.16
	$	2.32	$	1.30	$	2.48	$	1.74

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net income	$	101,661	$	46,124	$	107,610	$	59,386
Other comprehensive income (loss), net of tax:
Change in unrecognized actuarial loss and prior service cost	517		(234)		358		(337)
Foreign currency translation adjustments	(5,679)		1,469		(5,581)		2,693
Cash flow hedge activity	6,697		(1,858)		19,119		7,883
Other comprehensive income (loss)	1,535		(623)		13,896		10,239
Comprehensive income	103,196		45,501		121,506		69,625
Comprehensive income attributable to the noncontrolling interests	21,856		2,625		22,303		780
Comprehensive income attributable to The Andersons, Inc.	$	81,340	$	42,876	$	99,203	$	68,845

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Balance Sheets (Unaudited)


(In thousands)	June 30, 2022		December 31, 2021		June 30, 2021
Assets
Current assets:
Cash and cash equivalents	$	86,035	$	216,444	$	27,538
Accounts receivable, net	1,141,167		835,180		702,869
Inventories (Note 2)	1,618,326		1,814,538		904,924
Commodity derivative assets – current (Note 5)	638,357		410,813		507,148
Current assets held-for-sale (Note 14)	18,627		20,885		28,555
Other current assets	70,367		74,468		63,266
Total current assets	3,572,879		3,372,328		2,234,300
Other assets:
Goodwill	129,342		129,342		131,542
Other intangible assets, net	105,222		117,137		125,731
Right of use assets, net	50,233		52,146		42,330
Other assets held-for-sale (Note 14)	24,298		43,169		620,745
Other assets, net	91,758		69,068		70,879
Total other assets	400,853		410,862		991,227

Property, plant and equipment, net (Note 3)	763,443		786,029		823,563
Total assets	$	4,737,175	$	4,569,219	$	4,049,090
Liabilities and equity
Current liabilities:
Short-term debt (Note 4)	$	1,161,428	$	501,792	$	757,271
Trade and other payables	772,996		1,199,324		543,503
Customer prepayments and deferred revenue	184,154		358,119		55,943
Commodity derivative liabilities – current (Note 5)	185,903		128,911		90,366
Current maturities of long-term debt (Note 4)	53,951		32,256		50,069
Current liabilities held-for-sale (Note 14)	7,314		13,379		25,185
Accrued expenses and other current liabilities	211,830		230,148		168,221
Total current liabilities	2,577,576		2,463,929		1,690,558
Long-term lease liabilities	28,929		31,322		27,134
Long-term debt, less current maturities (Note 4)	563,447		600,487		837,609
Deferred income taxes	63,383		71,127		173,212
Other long-term liabilities held-for-sale (Note 14)	3,113		16,119		43,993
Other long-term liabilities	83,521		78,531		51,620
Total liabilities	3,319,969		3,261,515		2,824,126
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common shares, without par value (63,000 shares authorized; 34,064, 33,870 and 33,786 shares issued at 6/30/2022, 12/31/2021 and 6/30/2021, respectively)	142		140		140
Preferred shares, without par value (1,000 shares authorized; none issued)	—		—		—
Additional paid-in-capital	378,740		368,595		357,606
Treasury shares, at cost (62, 11 and 111 shares at 6/30/2022, 12/31/2021 and 6/30/2021, respectively)	(2,313)		(263)		(2,650)
Accumulated other comprehensive income (loss)	15,090		1,194		(1,837)
Retained earnings	775,495		702,759		669,241
Total shareholders’ equity of The Andersons, Inc.	1,167,154		1,072,425		1,022,500
Noncontrolling interests	250,052		235,279		202,464
Total equity	1,417,206		1,307,704		1,224,964
Total liabilities and equity	$	4,737,175	$	4,569,219	$	4,049,090

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Six months ended June 30,
	2022		2021
Operating Activities
Net income from continuing operations	$	108,904	$	53,780
Income (loss) from discontinued operations, net of income taxes	(1,294)		5,606
Net income	107,610		59,386
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization	67,945		95,154
Bad debt expense, net	3,069		(1,156)
Equity in (earnings) losses of affiliates, net of dividends	6,278		(2,639)
Gain on sales of assets, net	(10,305)		(6,253)
Stock-based compensation expense	4,708		4,112
Deferred federal income tax	(13,755)		170

Other	8,549		5,570
Changes in operating assets and liabilities:
Accounts receivable	(289,196)		(58,338)
Inventories	186,685		390,506
Commodity derivatives	(189,090)		(250,691)
Other current and non-current assets	5,106		35,568
Payables and other current and non-current liabilities	(609,403)		(516,883)
Net cash used in operating activities	(721,799)		(245,494)
Investing Activities
Purchases of property, plant and equipment and capitalized software	(43,472)		(34,264)
Proceeds from sale of assets	4,672		3,794
Purchases of investments	(2,105)		(4,701)


Purchases of Rail assets	(27,276)		(4,751)
Proceeds from sale of Rail assets	36,341		15,616
Other	1,746		832
Net cash used in investing activities	(30,094)		(23,474)
Financing Activities
Net receipts (payments) under short-term lines of credit	862,698		(258,157)
Proceeds from issuance of short-term debt	350,000		608,250
Payments of short-term debt	(550,000)		—
Proceeds from issuance of long-term debt	—		108,300
Payments of long-term debt	(15,077)		(177,586)
Contributions from noncontrolling interest owner	2,450		2,940
Distributions to noncontrolling interest owner	(9,980)		(25)
Payments of debt issuance costs	(7,802)		(2,059)
Dividends paid	(12,245)		(11,677)
Proceeds from exercises of stock options	5,024		—
Other	(2,955)		(2,436)
Net cash provided by financing activities	622,113		267,550
Effect of exchange rates on cash and cash equivalents	(629)		(167)
Decrease in cash and cash equivalents	(130,409)		(1,585)
Cash and cash equivalents at beginning of period	216,444		29,123
Cash and cash equivalents at end of period	$	86,035	$	27,538

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Equity (Unaudited)

(In thousands, except per share data)


	Three Months Ended
	Common Shares		Additional Paid-in Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Noncontrolling Interests		Total
Balance at March 31, 2021	$	140	$	355,961	$	(2,872)	$	(1,214)	$	631,652	$	198,884	$	1,182,551
Net income									43,499		2,625		46,124
Other comprehensive loss							(2,108)						(2,108)
Amounts reclassified from accumulated other comprehensive income							1,485						1,485
Contributions from noncontrolling interests											980		980
Distributions to noncontrolling interests											(25)		(25)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (11 shares)			1,645		138								1,783
Dividends declared ($0.1750 per common share)									(5,826)				(5,826)
Restricted share award dividend equivalents					84				(84)				—
Balance at June 30, 2021	$	140	$	357,606	$	(2,650)	$	(1,837)	$	669,241	$	202,464	$	1,224,964

Balance at March 31, 2022	$	142	$	375,794	$	(2,265)	$	13,555	$	701,799	$	228,196	$	1,317,221
Net income									79,805		21,856		101,661
Other comprehensive income							750						750
Amounts reclassified from accumulated other comprehensive income							785						785


Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (1 share)			2,946		(63)								2,883
Dividends declared ($0.180 per common share)									(6,094)				(6,094)
Restricted share award dividend equivalents					15				(15)				—
Balance at June 30, 2022	$	142	$	378,740	$	(2,313)	$	15,090	$	775,495	$	250,052	$	1,417,206

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	Six Months Ended
	Common Shares		Additional Paid-in Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Noncontrolling Interests		Total
Balance at December 31, 2020	$	138	$	348,714	$	(966)	$	(12,076)	$	626,081	$	198,769	$	1,160,660
Net income									58,606		780		59,386
Other comprehensive income							7,311						7,311
Amounts reclassified from Accumulated other comprehensive income							2,928						2,928
Cash received from noncontrolling interests, net											2,940		2,940
Distributions to noncontrolling interests											(25)		(25)

Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (67 shares)	2		8,892		(2,016)				(3,480)				3,398
Dividends declared ($0.350 per common share)									(11,634)				(11,634)
Restricted share award dividend equivalents					332				(332)				—
Balance at June 30, 2021	$	140	$	357,606	$	(2,650)	$	(1,837)	$	669,241	$	202,464	$	1,224,964

Balance at December 31, 2021	$	140	$	368,595	$	(263)	$	1,194	$	702,759	$	235,279	$	1,307,704
Net income									85,307		22,303		107,610
Other comprehensive income							11,721						11,721
Amounts reclassified from Accumulated other comprehensive income							2,175						2,175
Cash received from noncontrolling interests, net											2,450		2,450
Distributions to noncontrolling interests											(9,980)		(9,980)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $0 (51 shares)	2		10,091		(2,385)								7,708
Dividends declared ($0.360 per common share)									(12,182)				(12,182)
Restricted share award dividend equivalents			54		335				(389)				—
Balance at June 30, 2022	$	142	$	378,740	$	(2,313)	$	15,090	$	775,495	$	250,052	$	1,417,206

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation and Consolidation

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

Investments in unconsolidated entities in which the Company has significant influence, but not control, are accounted for using the equity method of accounting.

During the third quarter of 2021, substantially all of the assets and liabilities of the Rail business were classified as held-for-sale in the accompanying Condensed Consolidated Balance Sheets. As discussed further in Note 14, the Company executed a definitive agreement to sell the Rail Leasing business. In conjunction with the sale of the Rail Leasing business, the Company announced its intent to divest the remainder of the Rail business, which primarily consisted of the Rail Repair business. These transactions effectively constitute the entirety of what has historically been included in the Rail reportable segment. Therefore, the associated operating results, net of income tax, have been classified as discontinued operations in the accompanying Condensed Consolidated Statements of Operations for all periods presented. Throughout this Quarterly Report on Form 10-Q, with the exception of the Condensed Consolidated Statements of Cash Flows and unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

Certain reclassifications have been made to the prior year financial statements to conform to current year classifications. The reclassification relates to the Condensed Consolidated Balance Sheet presentation of assets and liabilities as held-for-sale and Condensed Consolidated Statements of Operations presentation of results classified as discontinued operations in relation to the Rail business transactions noted above.

In the opinion of management, all adjustments consisting of normal and recurring items considered necessary for the fair presentation of the results of operations, financial position, and cash flows for the periods indicated have been made. The results in these Condensed Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. An unaudited Condensed Consolidated Balance Sheet as of June 30, 2021 has been included as the Company operates in several seasonal industries.

The Condensed Consolidated Balance Sheet data at December 31, 2021 was derived from the audited Consolidated Financial Statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in The Andersons, Inc. Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).

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2. Inventories

Major classes of inventories are presented below. Readily Marketable Inventories ("RMI") are agricultural commodity inventories such as corn, soybeans, wheat, and ethanol co-products, among others, carried at net realizable value which approximates fair value based on their commodity characteristics, widely available markets, and pricing mechanisms. The net realizable value of RMI is calculated as the fair value (spot price of the commodity in an exchange), less cost of disposal and transportation based on the local market. All other inventories are held at lower of cost or net realizable value.


(in thousands)	June 30, 2022		December 31, 2021		June 30, 2021
Grain and other agricultural products (a)	$	1,241,933	$	1,427,708	$	636,380
Propane and frac sand (a)	19,483		23,780		11,265
Ethanol and co-products (a)	179,175		184,354		155,993
Plant nutrients and cob products	177,735		178,696		101,286
Total Inventories	$	1,618,326	$	1,814,538	$	904,924

(a) Includes RMI of $1,214.4 million, $1,410.9 million and $612.2 million at June 30, 2022, December 31, 2021 and June 30, 2021, respectively.

Inventories do not include 1.3 million, 3.0 million and 1.2 million bushels of grain held in storage for others as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively. The Company does not have title to the grain and is only liable for any deficiencies in grade or shortage of quantity that may arise during the storage period. Management has not experienced historical losses on any deficiencies and does not anticipate material losses in the future.

3. Property, Plant and Equipment

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


(in thousands)	June 30, 2022		December 31, 2021		June 30, 2021
Land	$	38,630	$	39,162	$	39,367
Land improvements and leasehold improvements	91,542		91,122		93,166
Buildings and storage facilities	370,453		368,577		377,946
Machinery and equipment	949,142		936,476		921,190
Construction in progress	31,237		20,676		19,723
	1,481,004		1,456,013		1,451,392
Less: accumulated depreciation	717,561		669,984		627,829
Property, plant and equipment, net	$	763,443	$	786,029	$	823,563

Depreciation expense on property, plant and equipment used in continuing operations was $55.8 million and $62.5 million for the six months ended June 30, 2022 and 2021, respectively. Additionally, depreciation expense on property, plant and equipment used in continuing operations was $27.5 million and $31.4 million for the three months ended June 30, 2022 and 2021, respectively.

During the second quarter of 2022, the Company closed on the sale of the remaining assets of the Company's Frac Sand business for total consideration of $8.4 million resulting in a pre-tax gain of $3.7 million.

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4. Debt

Short-term and long-term debt at June 30, 2022, December 31, 2021 and June 30, 2021 consisted of the following:


(in thousands)	June 30, 2022		December 31, 2021		June 30, 2021
Short-term debt – non-recourse	$	97,668	$	65,485	$	120,020
Short-term debt – recourse	1,063,760		436,307		637,251
Total short-term debt	$	1,161,428	$	501,792	$	757,271

Current maturities of long-term debt – non-recourse	$	7,707	$	7,601	$	3,691
Current maturities of long-term debt – recourse	46,244		24,655		46,378
Total current maturities of long-term debt	$	53,951	$	32,256	$	50,069

Long-term debt, less: current maturities – non-recourse	$	60,396	$	64,972	$	100,876
Long-term debt, less: current maturities – recourse	503,051		535,515		736,733
Total long-term debt, less: current maturities	$	563,447	$	600,487	$	837,609

On March 2, 2022, the Company completed an incremental term loan amendment to its credit agreement dated January 11, 2019. The amendment provided for a short-term note of $250.0 million in which the entire stated principal was due on May 31, 2022 (subsequently extended to August 31, 2022 as described below). On March 9, 2022, the Company completed an additional term loan amendment that expanded the short-term note capacity from $250.0 million to $450.0 million. On May 27, 2022, the Company completed an additional amendment to convert the $350.0 million then outstanding balance from the $450.0 million incremental term loan amendment to a revolving credit agreement with a capacity of up to $450.0 million. The entire amount outstanding will be due on August 31, 2022. The revolving credit agreement will bear interest at variable rates, which are based on SOFR plus an applicable spread. As of June 30, 2022, the Company had drawn $250.0 million on the revolving credit agreement.

On March 28, 2022, the Company amended its credit agreement dated January 11, 2019. The amendment increased borrowing capacity on the revolver from $900.0 million to $1,550.0 million and extended the maturity dates of the $140.6 million and $209.4 million long-term notes originally due in 2026 to March 26, 2027 and March 28, 2029, respectively. The amendment also transitions the reference rate in the credit agreement from LIBOR to SOFR. The revolver and term notes will bear interest at variable rates, which are based on SOFR plus an applicable spread.

During the first quarter of 2022, the Company repaid the remaining $200.0 million balance that was outstanding as of December 31, 2021 on a short-term note that was classified as recourse debt to the Company.

The total borrowing capacity of the Company's lines of credit at June 30, 2022 was $2,501.7 million of which the Company had a total of $1,315.2 million available for borrowing under its lines of credit. The Company's borrowing capacity is reduced by a combination of outstanding borrowings and letters of credit.

As of June 30, 2022, December 31, 2021 and June 30, 2021, the estimated fair value of long-term debt, including the current portion, was $617.5 million, $650.7 million and $910.5 million, respectively. The Company estimates the fair value of its long-term debt based upon the Company’s credit standing and current interest rates offered to the Company on similar bonds and rates currently available to the Company for long-term borrowings with similar terms and remaining maturities.

The Company is in compliance with all financial covenants as of June 30, 2022.

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5. Derivatives

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

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

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

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

The following table presents at June 30, 2022, December 31, 2021 and June 30, 2021, a summary of the estimated fair value of the Company’s commodity derivative instruments that require cash collateral and the associated cash posted/received as collateral. The net asset or liability positions of these derivatives (net of their cash collateral) are determined on a counterparty-by-counterparty basis and are included within current or non-current commodity derivative assets (or liabilities) on the Condensed Consolidated Balance Sheets:


(in thousands)	June 30, 2022		December 31, 2021		June 30, 2021
Cash collateral paid	$	70,442	$	165,250	$	219,469
Fair value of derivatives	165,223		(36,843)		(180,842)
Net derivative asset position	$	235,665	$	128,407	$	38,627

The Andersons, Inc. | Q2 2022 Form 10-Q | 10

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

June 30, 2022

(in thousands)

Commodity Derivative Assets - Current

Commodity Derivative Assets - Noncurrent

Commodity Derivative Liabilities - Current

Commodity Derivati