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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.
THE ANDERSONS, INC.
INDEX
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PART I. FINANCIAL INFORMATION | |
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PART II. OTHER INFORMATION | |
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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
The Andersons, Inc. | Q2 2022 Form 10-Q | 1
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
The Andersons, Inc. | Q2 2022 Form 10-Q | 2
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 | |
| 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: | | | | | |
| $ | 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
The Andersons, Inc. | Q2 2022 Form 10-Q | 3
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
The Andersons, Inc. | Q2 2022 Form 10-Q | 4
The Andersons, Inc.
Condensed Consolidated Statements of Equity (Unaudited)
(In thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| Common Shares | | Additional Paid-in Capital | | Treasury Shares | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Noncontrolling Interests | | Total |
Balance at March 31, 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 | |
The Andersons, Inc. | Q2 2022 Form 10-Q | 5
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended |
| Common Shares | | Additional Paid-in Capital | | Treasury Shares | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Noncontrolling Interests | | Total |
Balance at December 31, 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
The Andersons, Inc. | Q2 2022 Form 10-Q | 6
The Andersons, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Basis of Presentation and Consolidation
These Condensed Consolidated Financial Statements include the accounts of The Andersons, Inc. and its wholly owned and controlled subsidiaries (the “Company”). Controlled subsidiaries include majority-owned subsidiaries and variable interest entities (“VIEs”) of which the Company is the primary beneficiary. The portion of these entities that is not owned by the Company is presented as noncontrolling interests. All intercompany accounts and transactions are eliminated in consolidation.
Investments in unconsolidated entities in which the Company has significant influence, but not control, are accounted for using the equity method of accounting.
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”).
The Andersons, Inc. | Q2 2022 Form 10-Q | 7
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.
The Andersons, Inc. | Q2 2022 Form 10-Q | 8
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.
The Andersons, Inc. | Q2 2022 Form 10-Q | 9
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
The following table presents, on a gross basis, current and non-current commodity derivative assets and liabilities:
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| June 30, 2022 |
(in thousands) | Commodity Derivative Assets - Current | | Commodity Derivative Assets - Noncurrent | | Commodity Derivative Liabilities - Current | | Commodity Derivati |