UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended ~~September~~June 30, ~~2016~~2017



¨	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)

(Former name, former address and former fiscal year, if changed since last report.)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files. Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~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 approximately ~~28.2~~28.4 million common shares outstanding, no par value, at ~~November 8, 2016.~~July 28, 2017.

THE ANDERSONS, INC.

INDEX



	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets – ~~September~~June 30, ~~2016,~~2017, December 31, ~~2015~~2016 and ~~September~~June 30, ~~2015~~2016	3
Condensed Consolidated Statements of Operations – Three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	5
Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	6
Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	7
Condensed Consolidated Statements of Equity – ~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	8
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2830
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4142
Item 4. Controls and Procedures	4142
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	4243
Item 1A. Risk Factors	4243
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4243
Item 6. Exhibits	4344

Part I. Financial Information

Item 1. Financial Statements

The Andersons, Inc. Condensed Consolidated Balance Sheets (Unaudited)(In thousands)	The Andersons, Inc. Condensed Consolidated Balance Sheets (Unaudited)(In thousands)						The Andersons, Inc. Condensed Consolidated Balance Sheets (Unaudited)(In thousands)

	September 30, 2016		December 31, 2015		September 30, 2015		June 30, 2017		December 31, 2016		June 30, 2016
Assets
Current assets:
Cash and cash equivalents	$	78,158	$	63,750	$	40,658	$	18,934	$	62,630	$	31,383
Restricted cash	190		451		181		1,033		471		987
Accounts receivable, net	173,593		170,912		201,664		186,331		194,698		212,588
Inventories (Note 2)	427,754		747,399		527,789		463,205		682,747		486,236
Commodity derivative assets – current (Note 5)	59,837		49,826		60,965		11,619		45,447		115,924
Deferred income taxes	—		6,772		6,735
Other current assets	43,761		90,412		66,411		59,873		72,133		48,754
Assets held for sale (Note 16)							10,028		—		—
Total current assets	783,293		1,129,522		904,403		751,023		1,058,126		895,872
Other assets:
Commodity derivative assets – noncurrent (Note 5)	1,346		412		1,584		1,191		100		1,934
Goodwill	63,934		63,934		116,086
Goodwill (Note 17)							23,105		63,934		63,934
Other intangible assets, net	110,155		120,240		124,943		113,492		106,100		113,245
Other assets, net	5,921		9,515		32,049		8,686		10,411		6,549
Equity method investments	225,114		242,107		223,207		215,794		216,931		238,478
	406,470		436,208		497,869		362,268		397,476		424,140
Rail Group assets leased to others, net (Note 3)	334,401		338,111		347,100		375,092		327,195		340,136
Property, plant and equipment, net (Note 3)	460,247		455,260		442,322		423,042		450,052		447,267
Total assets	$	1,984,411	$	2,359,101	$	2,191,694	$	1,911,425	$	2,232,849	$	2,107,415

The Andersons, Inc. Condensed Consolidated Balance Sheets (continued) (Unaudited)(In thousands)	The Andersons, Inc. Condensed Consolidated Balance Sheets (continued) (Unaudited)(In thousands)									The Andersons, Inc. Condensed Consolidated Balance Sheets (continued) (Unaudited)(In thousands)

	September 30, 2016			December 31, 2015			September 30, 2015			June 30, 2017			December 31, 2016			June 30, 2016
Liabilities and equity
Current liabilities:
Short-term debt (Note 4)	$	—		$	16,990		$	82,801		$	124,000		$	29,000		$	179,404
Trade and other payables	356,931			668,788			466,428			267,194			581,826			302,413
Customer prepayments and deferred revenue	15,725			66,762			23,581			15,113			48,590			18,252
Commodity derivative liabilities – current (Note 5)	59,770			37,387			49,911			18,104			23,167			43,183
Accrued expenses and other current liabilities	68,465			70,324			71,593			69,256			69,648			71,169
Current maturities of long-term debt (Note 4)	51,520			27,786			26,989			62,482			47,545			53,720
Total current liabilities	552,411			888,037			721,303			556,149			799,776			668,141
Other long-term liabilities	30,525			18,176			16,510			34,441			27,833			30,430
Commodity derivative liabilities – noncurrent (Note 5)	1,954			1,063			2,912			334			339			2,182
Employee benefit plan obligations	45,260			45,805			58,123			36,837			35,026			44,902
Long-term debt, less current maturities (Note 4)	395,559			436,208			413,561			354,066			397,065			398,746
Deferred income taxes	178,535			186,073			179,591			181,806			182,113			179,911
Total liabilities	1,204,244			1,575,362			1,392,000			1,163,633			1,442,152			1,324,312
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common shares, without par value (63,000 shares authorized; 29,430, 29,353 and 29,430 shares issued at 9/30/16, 12/31/15 and 9/30/15, respectively)	96			96			96
Common shares, without par value (63,000 shares authorized; 29,430 shares issued at 6/30/2017, 12/31/16 and 6/30/2016)										96			96			96
Preferred shares, without par value (1,000 shares authorized; none issued)	—			—			—			—			—			—
Additional paid-in-capital	221,326			222,848			224,595			222,261			222,910			219,489
Treasury shares, at cost (1,195, 1,397 and 1,425 shares at 9/30/16, 12/31/15 and 9/30/15, respectively)	(45,130		)	(52,902		)	(53,971		)
Treasury shares, at cost (1,080, 1,201 and 1,190 shares at 6/30/2017, 12/31/16 and 6/30/2016, respectively)										(40,945		)	(45,383		)	(44,970		)
Accumulated other comprehensive loss	(17,305		)	(20,939		)	(57,459		)	(11,993		)	(12,468		)	(17,094		)
Retained earnings	603,556			615,151			666,507			570,406			609,206			606,177
Total shareholders’ equity of The Andersons, Inc.	762,543			764,254			779,768			739,825			774,361			763,698
Noncontrolling interests	17,624			19,485			19,926			7,967			16,336			19,405
Total equity	780,167			783,739			799,694			747,792			790,697			783,103
Total liabilities and equity	$	1,984,411		$	2,359,101		$	2,191,694		$	1,911,425		$	2,232,849		$	2,107,415

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Operations

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


	Three months ended September 30,					Nine months ended September 30,				Three months ended June 30,					Six months ended June 30,
	2016		2015			2016		2015		2017			2016		2017			2016
Sales and merchandising revenues	$	859,612	$	909,093		$	2,811,735	$	3,015,022	$	993,662		$	1,064,244	$	1,845,678		$	1,952,123
Cost of sales and merchandising revenues	782,597		823,903			2,569,923		2,738,348		905,828			967,202		1,681,386			1,787,326
Gross profit	77,015		85,190			241,812		276,674		87,834			97,042		164,292			164,797
Operating, administrative and general expenses	78,767		88,698			234,053		251,044		69,928			75,405		151,875			155,286
Goodwill impairment										42,000			—		42,000			—
Interest expense	4,441		6,147			18,046		16,210		5,988			6,554		12,088			13,605
Other income (loss):
Equity in earnings (loss) of affiliates, net	8,422		3,845			3,789		23,295
Other income (loss), net	2,216		3,355			11,144		20,235
Equity in earnings (losses) of affiliates, net										6,385			2,344		4,507			(4,633		)
Other income, net										4,632			5,682		12,529			8,928
Income (loss) before income taxes	4,445		(2,455		)	4,646		52,950		(19,065		)	23,109		(24,635		)	201
Income tax provision (benefit)	1,104		(1,505		)	1,486		17,556		7,652			7,668		5,117			382
Net income (loss)	3,341		(950		)	3,160		35,394		(26,717		)	15,441		(29,752		)	(181		)
Net income (loss) attributable to the noncontrolling interests	1,619		277			1,711		1,433		(64		)	1,018		(10		)	92
Net income (loss) attributable to The Andersons, Inc.	$	1,722	$	(1,227	)	$	1,449	$	33,961	$	(26,653	)	$	14,423	$	(29,742	)	$	(273	)
Per common share:
Basic earnings (loss) attributable to The Andersons, Inc. common shareholders	$	0.06	$	(0.04	)	$	0.05	$	1.19	$	(0.94	)	$	0.51	$	(1.05	)	$	(0.01	)
Diluted earnings (loss) attributable to The Andersons, Inc. common shareholders	$	0.06	$	(0.04	)	$	0.05	$	1.19	$	(0.94	)	$	0.51	$	(1.05	)	$	(0.01	)
Dividends declared	$	0.155	$	0.14		$	0.465	$	0.42	$	0.160		$	0.155	$	0.320		$	0.310

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)(In thousands)


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,					Six months ended June 30,
	2016			2015			2016			2015			2017			2016		2017			2016
Net income (loss)	$	3,341		$	(950	)	$	3,160		$	35,394		$	(26,717	)	$	15,441	$	(29,752	)	$	(181	)
Other comprehensive income (loss), net of tax:
Recognition of gain on sale of debt securities (net of income tax of $0, $0, $74 and $0)	—			—			(126		)	—
Change in unrecognized actuarial loss and prior service cost (net of income tax of $53, $235, $716 and $1,760 - Note 8)	87			388			1,381			2,906
Foreign currency translation adjustments (net of income tax of $0, ($696), $0 and $(82))	(298		)	(2,750		)	2,259			(5,954		)
Cash flow hedge activity (net of income tax of $0, $38, $72 and $112)	—			62			120			184
Change in fair value of debt securities (net of income tax of $0, $0, $0 and $74)													—			—		—			(126		)
Change in unrecognized actuarial loss and prior service cost (net of income tax of $(628), $653, $(635) and $663 - Note 8)													(988		)	1,121		(998		)	1,294
Foreign currency translation adjustments (net of income tax of $0, $0, $0 and $0)													959			52		1,473			2,557
Cash flow hedge activity (net of income tax of $0, $36, $0, and $72)													—			60		—			120
Other comprehensive income (loss)	(211		)	(2,300		)	3,634			(2,864		)	(29		)	1,233		475			3,845
Comprehensive income (loss)	3,130			(3,250		)	6,794			32,530			(26,746		)	16,674		(29,277		)	3,664
Comprehensive income (loss) attributable to the noncontrolling interests	1,619			277			1,711			1,433			(64		)	1,018		(10		)	92
Comprehensive income (loss) attributable to The Andersons, Inc.	$	1,511		$	(3,527	)	$	5,083		$	31,097		$	(26,682	)	$	15,656	$	(29,267	)	$	3,572

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)(In thousands)


	Nine months ended September 30,						Six months ended June 30,
	2016			2015			2017			2016
Operating Activities
Net income (loss)	$	3,160		$	35,394		$	(29,752	)	$	(181	)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization	62,244			57,365			42,878			41,379
Bad debt expense	789			802			839			491
Equity in losses (earnings) of affiliates, net of dividends	12,804			(3,868		)
Gain on sale of investments	(685		)	—
Gains on sales of Rail Group assets and related leases	(6,366		)	(12,438		)
Excess tax benefit from share-based payment arrangement	—			(1,299		)
Equity in (earnings) losses of affiliates, net of dividends							(3,793		)	7,181
Gains on sale of facilities and investments in affiliates							(4,701		)	(685		)
Gains on sale of Rail Group assets and related leases							(4,984		)	(4,725		)
Deferred income taxes	(46		)	18,921			(628		)	(1,601		)
Stock-based compensation expense	5,542			2,598			2,935			3,696
Goodwill impairment expense	—			1,985			42,000			—
Other	(102		)	1,061			(2,339		)	234
Changes in operating assets and liabilities:
Accounts receivable	(5,425		)	(6,003		)	13,086			(43,650		)
Inventories	283,158			292,960			213,064			224,368
Commodity derivatives	12,592			16,160			27,670			(60,443		)
Other assets	36,536			(1,465		)	10,629			35,612
Payables and other accrued expenses	(362,855		)	(344,400		)	(352,133		)	(396,037		)
Net cash provided by (used in) operating activities	41,346			57,773			(45,229		)	(194,361		)
Investing Activities
Acquisition of business, net of cash acquired	—			(124,592		)	(3,507		)	—
Purchases of Rail Group assets	(57,979		)	(112,346		)	(66,506		)	(27,504		)
Proceeds from sale of Rail Group assets	44,061			64,978			9,390			10,397
Purchases of property, plant and equipment	(56,138		)	(42,387		)
Purchases of property, plant and equipment and capitalized software							(15,976		)	(34,443		)
Proceeds from sale of property, plant and equipment	330			184			646			173
Proceeds from returns of investments in affiliates	7,443			1,480			—			15,013
Proceeds from sale of investments	15,013			—
Proceeds from sale of facilities	54,330			—
Purchase of Investments	(2,523		)	—
Change in restricted cash	260			248
Proceeds from sale of facilities and investments							13,788			54,330
Purchase of investments							(2,429		)	(2,523		)
Other							437			(538		)
Net cash provided by (used in) investing activities	4,797			(212,435		)	(64,157		)	14,905
Financing Activities
Net change in short-term borrowings	(15,000		)	79,700			93,941			164,000
Proceeds from issuance of long-term debt	78,199			152,796			15,175			77,564
Proceeds from long-term financing arrangement	14,027			—			10,396			—
Payments of long-term debt	(91,393		)	(87,032		)	(42,849		)	(85,177		)
Purchase of treasury stock	—			(49,089		)
Distributions to noncontrolling interest owner	(3,400		)	(2,453		)
Proceeds from sale of treasury shares to employees and directors	1,159			447			473			1,282
Payments of debt issuance costs	(309		)	(271		)	(2,024		)	(309		)
Dividends paid	(13,020		)	(12,011		)	(8,984		)	(8,679		)
Excess tax benefit from share-based payment arrangement	—			1,299
Other	(1,998		)	(2,770		)	(438		)	(1,592		)
Net cash provided by (used in) financing activities	(31,735		)	80,616			65,690			147,089
Increase (decrease) in cash and cash equivalents	14,408			(74,046		)
Decrease in cash and cash equivalents							(43,696		)	(32,367		)
Cash and cash equivalents at beginning of period	63,750			114,704			62,630			63,750
Cash and cash equivalents at end of period	$	78,158		$	40,658		$	18,934		$	31,383

See Notes to Condensed Consolidated Financial Statements

The Andersons, Inc.

Condensed Consolidated Statements of Equity

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

Common
Shares

Additional
Paid-in
Capital

Treasury
Shares

Accumulated
Other
Comprehensive
Loss

Retained
Earnings

Noncontrolling
Interests
Total
Balance at December 31, 2014 $ 96
$ 222,789
$ (9,743 ) $ (54,595 ) $ 644,556
$ 20,946
$ 824,049
Net income 33,961
1,433
35,394
Other comprehensive loss (2,864 ) (2,864 )
Cash distributions to noncontrolling interest (2,453 ) (2,453 )
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $819 (163 shares) (2,635 ) 4,861
2,226
Purchase of Treasury Shares (1,193 shares)

(49,089 ) (49,089 )
Dividends declared ($0.42 per common share) (11,872 ) (11,872 )
Shares Issued for acquisitions (77 shares) 4,303
4,303
Performance share unit dividend equivalents 138
(138 ) —
Balance at September 30, 2015 $ 96
$ 224,595
$ (53,971 ) $ (57,459 ) $ 666,507
$ 19,926
$ 799,694

Balance at December 31, 2015 $ 96
$ 222,848
$ (52,902 ) $ (20,939 ) $ 615,151
$ 19,485
$ 783,739
Net income 1,449
1,711
3,160
Other comprehensive income 3,634
3,634
Cash distributions to noncontrolling interest (3,400 ) (3,400 )
Other change in noncontrolling interest (172 ) (172 )
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $471 (202 shares) (1,542 ) 7,772
6,230
Dividends declared ($0.465 per common share) (13,024 ) (13,024 )
Restricted share award dividend equivalents $ 20
$ (20 ) —
Balance at September 30, 2016 $ 96
$ 221,326
$ (45,130 ) $ (17,305 ) $ 603,556
$ 17,624
$ 780,167



	Common Shares		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Loss			Retained Earnings			Noncontrolling Interests			Total
Balance at December 31, 2015	$	96	$	222,848		$	(52,902	)	$	(20,939	)	$	615,151		$	19,485		$	783,739
Net income (loss)												(273		)	92			(181		)
Other comprehensive income (loss)									3,845									3,845
Other change in noncontrolling interest															(172		)	(172		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $424 (207 shares)			(3,379		)	7,932												4,553
Dividends declared ($0.31 per common share)												(8,681		)				(8,681		)
Restricted share award dividend equivalents			20									(20		)				—
Balance at June 30, 2016	$	96	$	219,489		$	(44,970	)	$	(17,094	)	$	606,177		$	19,405		$	783,103

Balance at December 31, 2016	$	96	$	222,910		$	(45,383	)	$	(12,468	)	$	609,206		$	16,336		$	790,697
Net income (loss)												(29,742		)	(10		)	(29,752		)
Other comprehensive income (loss)									475									475
Other change in noncontrolling interest															(8,359		)	(8,359		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $(323) (122 shares)			(654		)	4,386												3,732
Dividends declared ($0.32 per common share)												(9,001		)				(9,001		)
Restricted share award dividend equivalents			5			52						(57		)				—
Balance at June 30, 2017	$	96	$	222,261		$	(40,945	)	$	(11,993	)	$	570,406		$	7,967		$	747,792

See Notes to Condensed Consolidated Financial Statements

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”). All intercompany accounts and transactions are eliminated in consolidation.

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

In the opinion of management, all adjustments consisting of normal and recurring items considered necessary for the fair presentation of the results of operations, financial position, and cash flows for the periods indicated have been made. The results in these Condensed Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2016.~~2017. An unaudited Condensed Consolidated Balance Sheet as of ~~September~~June 30, ~~2015~~2016 has been included as the Company operates in several seasonal industries.

The Condensed Consolidated Balance Sheet data at December 31, ~~2015~~2016 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, ~~2015~~2016 (the ~~“2015~~“2016 Form 10-K”).

New Accounting Standards

Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue From Contracts With Customers. ~~They~~The FASB issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, and ~~May~~December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10 ASU 2016-12 and ASU ~~2016-12,~~2016-20, respectively. The core principle of the new revenue model is that an entity recognizes revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. These standards are effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company plans on using the modified retrospective method of adoption and does not plan to early adopt.

While we are still continuing to evaluate the potential future impact of these standards on our financial statements, we believe the following items may be impacted upon adoption:

- Methodology for recognizing certain fee-based arrangements within our Grain and Ethanol segments;

- Determination of whether we are the principal or agent for certain revenue streams within several of our segments;

- Methodology for recognizing gains on certain sale transactions within our Rail segment.

Our evaluation of these standards, which includes reviewing representative samples of customer contracts, considers the amount and timing of revenues recognized, financial statement presentation, and required disclosures.

Leasing

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 supersedes the current accounting for leases. The new standard, while retaining two distinct types of leases, finance and operating, (i) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (ii) eliminates current real estate specific lease provisions, (iii) modifies the lease classification criteria and (iv) aligns many of the underlying lessor model principles with those in the new revenue standard. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within. Early adoption is permitted, however the Company does not plan to early adopt. Entities are required to use a modified retrospective approach when transitioning to ASU 2016-02 for leases that exist as of or are entered into after the beginning of the earliest comparative period presented in the financial statements.

The Company expects this standard to have the effect of bringing substantially all of the off balance-sheet rail assets currently in nonrecourse financing deals noted in Item 2 of Form 10-Q onto the balance sheet along with a corresponding liability for the

associated obligations. Additionally, we have other arrangements currently classified as operating leases which will be recorded as a right of use asset and corresponding liability on the balance sheet. The magnitude of these items is substantially less than the rail assets that will be recorded on the balance sheet. We expect any impact to the statement of operations to be minimal post adoption.

Other applicable standards

In May 2017, the FASB issued Accounting Standards Update No. 2017-09 Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. This standard states that if the vesting conditions, fair value, and classification of the awards are the same immediately before and after the modification an entity would not apply modification accounting. The ASU is effective for annual periods beginning after December 15, 2017. Early adoption is permitted, however the Company has not chosen to do so at this time. The Company does not expect the impact from adoption of this standard to be material.

In March 2017, the FASB issued Accounting Standards Update No. 2017-07 Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This standard requires that the service cost component be reported in the same line item as other compensation costs arising from services rendered by the employees during the period. The other components of net benefit costs should be presented in the income statement separately from the service cost component and outside of income from operations if that subtotal is presented. The ASU is effective for annual periods beginning after December 15, 2017. The Company is currently ~~assessing the method of adoption and~~evaluating the impact this standard will have on its Consolidated Financial Statements and disclosures.

~~Leasing~~

In ~~February 2016,~~January 2017, the FASB issued ~~Accounting Standards Update~~ASU No. ~~2016-02, Leases.~~2017-04 Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ~~standard is intended~~update removes the requirement to ~~increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on~~compare the ~~balance sheet~~implied fair value of goodwill with ~~expanded disclosures around those items. This guidance~~its carrying amount as part of step 2 of the goodwill impairment test. The ASU is effective prospectively for ~~annual and interim periods~~fiscal years beginning after December 15, ~~2018, and early~~2019. Early adoption is ~~permitted. The~~permitted, and the Company ~~is currently evaluating~~elected to implement this standard in the ~~impact of this standard.~~

~~Other applicable standards~~current quarter.

In August 2016, the FASB issued ~~Accounting Standards Update~~ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This standard clarifies how companies present and classify certain cash receipts and payments in the statement of cash flows. The standard is effective for annual and interim periods beginning after December 15, 2017. ~~The Company is currently evaluating when to adopt this standard but has not done so in the current period.~~ At ~~the time of future~~ adoption, the Company will ~~make the election~~elect to continue classifying distributions from equity method investments using the cumulative earnings approach which is consistent with current practice.

In ~~March~~June 2016, the FASB issued ~~Accounting Standards Update~~ASU No. ~~2016-09, Improvements to Employee Share-Based Payment Accounting.~~2016-13, Measurement of Credit Losses on Financial Instruments. This ~~standard simplifies~~update changes the accounting ~~treatment~~ for ~~excess tax benefits~~credit losses on loans and ~~deficiencies, forfeitures,~~held-to-maturity debt securities and ~~cash flow considerations related~~requires a current expected credit loss (CECL) approach to ~~share-based compensation.~~determine the allowance for credit losses. This includes allowances for trade receivables. The ~~standard~~Company has not historically incurred significant credit losses and does not currently anticipate circumstances that would lead to a CECL approach differing from the Company's existing allowance estimates in a material way. The guidance is effective for ~~annual and interim periods~~fiscal years beginning after December 15, ~~2016. The~~2019 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Early adoption is permitted, however the Company ~~is currently assessing the method of adoption and the impact this standard will have on its Consolidated Financial Statements and disclosures.~~does not plan to do so.

In January, 2016, the FASB issued Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. This standard provides guidance for the recognition, measurement, presentation, and disclosure

of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted. The Company ~~is currently evaluating~~does not expect the impact from adoption of this ~~standard.~~

~~In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory. This~~ standard ~~requires entities~~ to ~~measure inventory at the lower of cost or net realizable value rather than at the lower of cost or market. The standard is effective for annual~~be material to currently held financial assets and ~~interim periods beginning after December 15, 2016. The Company is currently evaluating the impact of this standard.~~

liabilities.

2. Inventories

Major classes of inventories are as follows:


(in thousands)	September 30, 2016		December 31, 2015		September 30, 2015		June 30, 2017		December 31, 2016		June 30, 2016
Grain	$	262,165	$	534,548	$	325,536	$	373,863	$	495,139	$	348,757
Ethanol and by-products	7,734		8,576		8,365
Ethanol and co-products							14,041		10,887		15,298
Plant nutrients and cob products	126,922		172,815		161,562		69,365		150,259		91,227
Retail merchandise	24,985		24,510		26,079		906		20,678		25,161
Railcar repair parts	5,948		6,894		6,057		5,030		5,784		5,793
Other	—		56		190
	$	427,754	$	747,399	$	527,789	$	463,205	$	682,747	$	486,236

Inventories on the Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2016,~~2017, December 31, ~~2015~~2016 and ~~September~~June 30, ~~2015~~2016 do not include ~~1.0~~0.8 million, ~~3.4~~0.9 million and ~~3.2~~4.0 million bushels of grain, respectively, held in storage for others. 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,~~Property, plant and equipment, net are as follows:


(in thousands)	September 30, 2016		December 31, 2015		September 30, 2015		June 30, 2017		December 31, 2016		June 30, 2016
Land	$	28,473	$	29,928	$	30,285	$	23,566	$	30,672	$	28,472
Land improvements and leasehold improvements	82,908		77,191		76,414		71,236		79,631		77,849
Buildings and storage facilities	319,950		303,482		301,125		298,077		322,856		290,528
Machinery and equipment	393,178		375,028		368,338		382,321		392,418		374,107
Construction in progress	21,284		32,871		21,044		7,372		12,784		51,672
	845,793		818,500		797,206		782,572		838,361		822,628
Less: accumulated depreciation	385,546		363,240		354,884		359,530		388,309		375,361
	$	460,247	$	455,260	$	442,322	$	423,042	$	450,052	$	447,267

Depreciation expense on property, plant and equipment was ~~$35.7~~$24.1 million and ~~$34.1~~$23.8 million for the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ respectively.Additionally, ~~Depreciation~~depreciation expense on property, plant and equipment was $12.0 million and ~~$11.9~~$11.6 million for the three months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ respectively.~~Capitalized software has been reclassified from~~

In December 2016, the Company recorded charges totaling $6.0 million for impairment of property, plant and equipment in the Retail business. This does not include $0.5 million of impairment charges related to software. The Company wrote down the value of these assets to the extent their carrying amounts exceeded fair value. The Company classified the significant assumptions used to determine fair value of the impaired assets as Level 3 inputs in the fair value hierarchy.

In December 2016, the Company also recorded charges totaling $2.3 million for impairment of property, plant and ~~is now presented as~~equipment in the Plant Nutrient segment due to the closing of a ~~component of other intangible assets. Prior year balance sheets have been recast to conform with the current period presentation.~~cob facility.

Rail Group Assets

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


(in thousands)	September 30, 2016		December 31, 2015		September 30, 2015		June 30, 2017		December 31, 2016		June 30, 2016
Rail Group assets leased to others	$	438,211	$	434,051	$	441,267	$	482,524	$	431,571	$	442,239
Less: accumulated depreciation	103,810		95,940		94,167		107,432		104,376		102,103
	$	334,401	$	338,111	$	347,100	$	375,092	$	327,195	$	340,136

Depreciation expense on Rail Group assets leased to others amounted to ~~$14.0~~$9.7 million and ~~$12.9~~$9.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. Additionally, depreciation expense on Rail Group assets leased to others amounted to ~~$4.7~~$5.0 million and ~~$4.6~~$4.7 million for the three months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ respectively.

4. Debt

~~The~~On April 13, 2017, the Company ~~is party to borrowing arrangements~~amended its line of credit agreement with a syndicate of banks. ~~See Note 5~~The amended agreement provides for a credit facility in the ~~Company’s 2015 Form 10-K for a description~~amount of ~~these arrangements.~~$800 million. Total borrowing capacity for the Company under all lines of credit is currently at ~~$872.5~~$820.0 million, including ~~$22.5~~$20.0 million of debt of The Andersons Denison Ethanol LLC ("TADE"), which is non-recourse to the Company. At ~~September~~June 30, ~~2016,~~2017, the Company had a total of ~~$809.9~~$633.5 million available for borrowing under its lines of credit. ~~Our~~The Company's borrowing capacity is reduced by a combination of outstanding borrowings and letters of credit. The Company was in compliance with all financial covenants as of ~~September~~June 30, ~~2016.~~2017.

The Company’s short-term and long-term debt at ~~September~~June 30, ~~2016~~2017, December 31, ~~2015~~2016 and ~~September~~June 30, ~~2015~~2016 consisted of the following:


(in thousands)	September 30, 2016		December 31, 2015		September 30, 2015		June 30, 2017		December 31, 2016		June 30, 2016
Short-term Debt – Non-Recourse							$	—	$	—	$	—
Short-term Debt - Recourse	$	—	$	16,990	$	82,801	$	124,000	$	29,000	$	179,404
Total Short-term Debt	—		16,990		82,801		124,000		29,000		179,404

Current Maturities of Long-term Debt – Non-Recourse							—		—		—
Current Maturities of Long-term Debt – Recourse	51,520		27,786		26,989		62,482		47,545		53,720
Total Current Maturities of Long-term Debt	51,520		27,786		26,989		62,482		47,545		53,720

Long-term Debt, Less: Current Maturities – Non-Recourse							—		—		—
Long-term Debt, Less: Current Maturities – Recourse	395,559		436,208		413,561		354,066		397,065		398,746
Total Long-term Debt, Less: Current Maturities	$	395,559	$	436,208	$	413,561	$	354,066	$	397,065	$	398,746

5. Derivatives

The Company’s operating results are affected by changes to commodity prices. The Grain and Ethanol businesses have established “unhedged” position limits (the amount of a commodity, either owned or contracted for, that does not have an offsetting derivative contract to lock in the price). To reduce the exposure to market price risk on commodities owned and forward grain and ethanol purchase and sale contracts, the Company enters into exchange traded commodity futures and options contracts and ~~over the counter~~over-the-counter forward and option contracts with various counterparties. These contracts are primarily traded via the regulated Chicago Mercantile Exchange ("CME"). 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. Contracts for the sale of commodities to processors or other commercial consumers generally do not extend beyond one year.

All 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 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 grain inventories are included in cost of sales and merchandising revenues. ~~These amounts were previously classified in sales and merchandising revenues but were reclassified starting in the fourth quarter of 2015.~~

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,~~futures, 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,~~futures, option or an over-the-counter contract moves in a direction that is adverse to the Company’s position, an additional margin deposit, called a maintenance margin, is required. The margin deposit assets and liabilities are included in short-term commodity derivative assets or liabilities, as appropriate, in the Condensed Consolidated Balance Sheets.

The following table presents at ~~September~~June 30, ~~2016~~2017, December 31, ~~2015~~2016 and ~~September~~June 30, ~~2015~~2016, 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 noncurrent commodity derivative assets (or liabilities) on the Condensed Consolidated Balance Sheets:


	September 30, 2016				December 31, 2015				September 30, 2015				June 30, 2017					December 31, 2016				June 30, 2016
(in thousands)	Net derivative asset position		Net derivative liability position		Net derivative asset position		Net derivative liability position		Net derivative asset position		Net derivative liability position		Net derivative asset position			Net derivative liability position		Net derivative asset position		Net derivative liability position		Net derivative asset position		Net derivative liability position
Collateral paid (received)	$	13,358	$	—	$	3,008	$	—	$	28,585	$	—	$	15,452		$	—	$	28,273	$	—	$	38,252	$	(480	)
Fair value of derivatives	16,258		—		25,356		—		5,733		—		(12,835		)	—		1,599		—		13,491		1,480
Balance at end of period	$	29,616	$	—	$	28,364	$	—	$	34,318	$	—	$	2,617		$	—	$	29,872	$	—	$	51,743	$	1,000

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


	September 30, 2016															June 30, 2017
(in thousands)	Commodity derivative assets - current			Commodity derivative assets - noncurrent			Commodity derivative liabilities - current			Commodity derivative liabilities - noncurrent			Total			Commodity Derivative Assets - Current			Commodity Derivative Assets - Noncurrent			Commodity Derivative Liabilities - Current			Commodity Derivative Liabilities - Noncurrent			Total
Commodity derivative assets	$	60,372		$	1,356		$	3,318		$	58		$	65,104		$	26,101		$	1,201		$	4,404		$	2		$	31,708
Commodity derivative liabilities	(13,893		)	(10		)	(63,088		)	(2,012		)	(79,003		)	(29,934		)	(10		)	(22,508		)	(336		)	(52,788		)
Cash collateral	13,358			—			—			—			13,358			15,452			—			—			—			15,452
Balance sheet line item totals	$	59,837		$	1,346		$	(59,770	)	$	(1,954	)	$	(541	)	$	11,619		$	1,191		$	(18,104	)	$	(334	)	$	(5,628	)


	December 31, 2015														December 31, 2016
(in thousands)	Commodity derivative assets - current			Commodity derivative assets - noncurrent		Commodity derivative liabilities - current			Commodity derivative liabilities - noncurrent			Total			Commodity Derivative Assets - Current			Commodity Derivative Assets - Noncurrent			Commodity Derivative Liabilities - Current			Commodity Derivative Liabilities - Noncurrent			Total
Commodity derivative assets	$	51,647		$	412	$	371		$	2		$	52,432		$	36,146		$	140		$	1,447		$	6		$	37,739
Commodity derivative liabilities	(4,829		)	—		(37,758		)	(1,065		)	(43,652		)	(18,972		)	(40		)	(24,614		)	(345		)	(43,971		)
Cash collateral	3,008			—		—			—			3,008			28,273			—			—			—			28,273
Balance sheet line item totals	$	49,826		$	412	$	(37,387	)	$	(1,063	)	$	11,788		$	45,447		$	100		$	(23,167	)	$	(339	)	$	22,041


	September 30, 2015															June 30, 2016
(in thousands)	Commodity derivative assets - current			Commodity derivative assets - noncurrent			Commodity derivative liabilities - current			Commodity derivative liabilities - noncurrent			Total			Commodity Derivative Assets - Current			Commodity Derivative Assets - Noncurrent			Commodity Derivative Liabilities - Current			Commodity Derivative Liabilities - Noncurrent			Total
Commodity derivative assets	$	43,892		$	1,591		$	2,306		$	32		$	47,821		$	134,504		$	2,095		$	5,925		$	84		$	142,608
Commodity derivative liabilities	(11,512		)	(7		)	(52,217		)	(2,944		)	(66,680		)	(56,832		)	(161		)	(48,628		)	(2,266		)	(107,887		)
Cash collateral	28,585			—			—			—			28,585			38,252			—			(480		)	—			37,772
Balance sheet line item totals	$	60,965		$	1,584		$	(49,911	)	$	(2,912	)	$	9,726		$	115,924		$	1,934		$	(43,183	)	$	(2,182	)	$	72,493

The gains ~~(losses)~~and losses included in the Company’s Condensed Consolidated Statements of Operations and the line items in which they are located are as follows:


	Three months ended September 30,						Nine months ended September 30,					Three months ended June 30,					Six months ended June 30,
(in thousands)	2016			2015			2016			2015		2017			2016		2017			2016
Gains (losses) on commodity derivatives included in cost of sales and merchandising revenues	$	(48,620	)	$	(16,910	)	$	(22,679	)	$	34,902	$	(41,873	)	$	34,800	$	(14,848	)	$	25,941

The Company had the following volume of commodity derivative contracts outstanding (on a gross basis) at ~~September~~June 30, ~~2016~~2017, December 31, ~~2015~~2016 and ~~September~~June 30, ~~2015~~2016:


	September 30, 2016				June 30, 2017
Commodity (in thousands)	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons
Non-exchange traded:
Corn	226,492	—	—	—	184,197	—	—	—
Soybeans	60,614	—	—	—	31,532	—	—	—
Wheat	7,933	—	—	—	7,340	—	—	—
Oats	28,939	—	—	—	41,526	—	—	—
Ethanol	—	191,906	—	—	—	256,518	—	—
Corn oil	—	—	7,153	—	—	—	4,658	—
Other	129	—	—	251	90	500	—	100
Subtotal	324,107	191,906	7,153	251	264,685	257,018	4,658	100
Exchange traded:
Corn	105,395	—	—	—	94,895	—	—	—
Soybeans	35,245	—	—	—	27,470	—	—	—
Wheat	39,715	—	—	—	43,925	—	—	—
Oats	2,800	—	—	—	2,290	—	—	—
Ethanol	—	74,046	—	—	—	3,990	—	—
Other					—	840	—	60
Subtotal	183,155	74,046	—	—	168,580	4,830	—	60
Total	507,262	265,952	7,153	251	433,265	261,848	4,658	160


	December 31, 2015				December 31, 2016
Commodity (in thousands)	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons
Non-exchange traded:
Corn	227,248	—	—	—	175,549	—	—	—
Soybeans	13,357	—	—	—	20,592	—	—	—
Wheat	13,710	—	—	—	7,177	—	—	—
Oats	15,019	—	—	—	36,025	—	—	—
Ethanol	—	138,660	—	—	—	215,081	—	—
Corn oil	—	—	11,532	—	—	—	9,358	—
Other	297	—	—	116	108	1,144	—	110
Subtotal	269,631	138,660	11,532	116	239,451	216,225	9,358	110
Exchange traded:
Corn	106,260	—	—	—	63,225	—	—	—
Soybeans	17,255	—	—	—	39,005	—	—	—
Wheat	28,135	—	—	—	45,360	—	—	—
Oats	3,480	—	—	—	4,120	—	—	—
Ethanol	—	840	—	—	—	78,120	—	—
Other	—	840	—	—
Subtotal	155,130	1,680	—	—	151,710	78,120	—	—
Total	424,761	140,340	11,532	116	391,161	294,345	9,358	110

September 30, 2015
Commodity (in thousands)
Number of Bushels Number of Gallons Number of Pounds Number of Tons
Non-exchange traded:
Corn 331,740
—
—
—
Soybeans 47,208
—
—
—
Wheat 12,631
—
—
—
Oats 19,449
—
—
—
Ethanol —
131,789
—
—
Corn oil —
—
10,063
—
Other 572
—
—
123
Subtotal 411,600
131,789
10,063
123
Exchange traded:
Corn 129,810
—
—
—
Soybeans 24,860
—
—
—
Wheat 28,360
—
—
—
Oats 3,285
—
—
—
Ethanol —
3,192
—
—
Subtotal 186,315
3,192
—
—
Total 597,915
134,981
10,063
123



	June 30, 2016
Commodity (in thousands)	Number of Bushels	Number of Gallons	Number of Pounds	Number of Tons
Non-exchange traded:
Corn	242,269	—	—	—
Soybeans	52,599	—	—	—
Wheat	13,100	—	—	—
Oats	30,722	—	—	—
Ethanol	—	130,464	—	—
Corn oil	—	—	13,800	—
Other	17	—	—	128
Subtotal	338,707	130,464	13,800	128
Exchange traded:
Corn	148,665	—	—	—
Soybeans	46,570	—	—	—
Wheat	22,790	—	—	—
Oats	2,820	—	—	—
Ethanol	—	36,540	—	—
Subtotal	220,845	36,540	—	—
Total	559,552	167,004	13,800	128

At ~~September~~June 30, ~~2016,~~2017, December 31, ~~2015~~2016 and ~~September~~June 30, ~~2015,~~2016, the Company had recorded the following amounts for the fair value of the Company's interest rate derivatives:

September 30, December 31, September 30,
(in thousands) 2016 2015 2015
Derivatives not designated as hedging instruments
Interest rate contracts included in other long term liabilities $ (4,774 ) $ (3,133 ) $ —
Total fair value of interest rate derivatives not designated as hedging instruments $ (4,774 ) $ (3,133 ) $ —
Derivatives designated as hedging instruments
Interest rate contract included in other short term liabilities $ —
$ (191 ) $ —
Total fair value of interest rate derivatives designated as hedging instruments $ —
$ (191 ) $ —



	June 30, 2017			December 31, 2016			June 30, 2016
(in thousands)	June 30, 2017			December 31, 2016			June 30, 2016
Derivatives not designated as hedging instruments
Interest rate contracts included in other long-term liabilities	$	(2,158	)	$	(2,530	)	$	(5,422	)
Total fair value of interest rate derivatives not designated as hedging instruments	$	(2,158	)	$	(2,530	)	$	(5,422	)

The gains and losses included in the Company's Consolidated Statements of Operations and the line item in which they are located for interest rate derivatives not designated as hedging instruments are as follows:


	Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,						Six months ended June 30,
(in thousands)	2016		2015		2016			2015		2017			2016			2017		2016
Interest expense	$	652	$	—	$	(1,642	)	$	—
Interest income (expense)										$	(17	)	$	(694	)	$	372	$	(2,294	)

The Company also has foreign currency derivatives which are considered effective economic hedges of specified economic risks but which are not designated as accounting hedges. At ~~September~~June 30, ~~2016,~~2017, December 31, ~~2015~~2016 and ~~September~~June 30, ~~2015,~~2016, the Company had recorded the following amounts for the fair value of the Company's foreign currency derivatives:


	September 30,			December 31,		September 30,		June 30, 2017		December 31, 2016			June 30, 2016
(in thousands)	2016		��	2015		2015		June 30, 2017					June 30, 2016
Derivatives not designated as hedging instruments										December 31, 2016
Foreign currency contracts included in short term assets	$	1,130		$	—	$	—
Foreign currency contracts included in short-term assets (liabilities)								$	654	$	(112	)	$	1,391
Total fair value of foreign currency contract derivatives not designated as hedging instruments	$	1,130		$	—	$	—	$	654	$	(112	)	$	1,391

The gains and losses included in the Company's Consolidated Statements of Operations and the line item in which they are located for foreign currency contract derivatives not designated as hedging instruments are as follows:

Three months ended September 30, Nine months ended September 30,
(in thousands) 2016 2015 2016 2015
Foreign currency derivative gains (losses) included in Other income, net $ (261 ) $ —
$ 1,130
$ —



	Three months ended June 30,					Six months ended June 30,
(in thousands)	2017		2016			2017		2016
Foreign currency derivative gains included in Other income, net	$	669	$	(87	)	$	767	$	1,391

6. Employee Benefit Plans

The following are components of the net periodic benefit cost for the pension and ~~post-retirement~~postretirement benefit plans maintained by the Company for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015:~~2016:


	Pension Benefits								Pension Benefits
(in thousands)	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(in thousands)	2016		2015		2016		2015		2017		2016		2017		2016
Service cost	$	—	$	59	$	—	$	177	$	—	$	—	$	—	$	—
Interest cost	49		45		145		136		39		48		78		97
Recognized net actuarial loss	36		379		109		1,137		63		37		126		73
Benefit cost	$	85	$	483	$	254	$	1,450	$	102	$	85	$	204	$	170


	Post-retirement Benefits												Postretirement Benefits
(in thousands)	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,					Six months ended June 30,
(in thousands)	2016			2015			2016			2015			2017		2016			2017		2016
Service cost	$	190		$	225		$	570		$	675		$	106	$	167		$	229	$	380
Interest cost	387			396			1,162			1,188			282		370			582		775
Amortization of prior service cost	(88		)	(136		)	(266		)	(408		)	—		(89		)	—		(177		)
Recognized net actuarial loss	192			379			576			1,138			—		149			—		384
Benefit cost	$	681		$	864		$	2,042		$	2,593		$	388	$	597		$	811	$	1,362

7. Income Taxes

On a quarterly basis, the Company estimates the effective tax rate expected to be applicable for the full year and makes changes if necessary based on new information or events. The estimated annual effective tax rate is forecast based on actual historical information and forward-looking estimates and is used to provide for income taxes in interim reporting periods. The Company also recognizes the tax impact of certain unusual or infrequently occurring items, such as the effects of changes in tax laws or rates and impacts from settlements with tax authorities, discretely in the quarter in which they occur. Additionally, the annual effective tax rate differs from the statutory U.S. Federal tax rate of 35% primarily due to the impact of state income taxes, the tax benefit related to railroad track maintenance credit transactions, and to benefits or costs related to various permanent book to tax differences and tax credits.

For the three months ended ~~September~~June 30, ~~2016,~~2017, the Company recorded income tax expense of ~~$1.1~~$7.7 million at an effective tax rate of ~~24.8%~~(40.1)%, which varied from the U.S. Federal tax rate of 35% primarily due to ~~5.8% in discrete~~the recording of a $42.0 million goodwill impairment charge which did not provide a corresponding tax ~~benefits related to prior years and a 3.4% tax benefit related to railroad track maintenance credit transactions.~~benefit. For the three months ended ~~September~~June 30, ~~2015,~~2016, the Company recorded an income tax ~~benefit~~expense of ~~$1.5~~$7.7 million at an effective tax rate of ~~61.3%~~33.2%. The higher effective tax rate in the prior year was primarily due to the cumulative impact of revised full year earnings expectations, driven by the inclusion of a one-time charge which occurred in the fourth quarter related to the termination of the Company’s pension plan, and relatively low third quarter earnings.

For the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, the Company recorded income tax expense of ~~$1.5~~$5.1 million at an effective tax rate of ~~32.0%~~(20.8)%, which varied from the U.S. Federal tax rate of 35% primarily due to ~~a 3.3% tax benefit related to railroad track maintenance credit transactions. The discrete tax benefits related to prior years that impacted~~ the ~~third quarter tax rate did not have a significant impact on~~recording of the ~~nine month effective tax rate due to an offsetting discrete tax~~$42.0 million goodwill impairment charge ~~related to prior years that was recorded in the first quarter.~~noted above. For the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, the Company recorded income tax expense of ~~$17.6~~$0.4 million at an effective tax rate of ~~33.2%.~~189.6% which varied from the U.S. Federal tax rate of 35% primarily due to a 174.7% discrete tax charge related to state income taxes.

~~There have~~During the three months ended June 30, 2017, the company agreed to a state income tax assessment that had been ~~no material changes to the balance of~~under appeal. The related $0.3 million reserve for unrecognized tax benefits ~~reported at December 31, 2015. During the quarter ended March 31, 2016, the IRS completed its audit of the Company’s 2011 and 2012 consolidated Federal~~has been reclassified as currently payable state income ~~tax returns. The results of the examination will not have a material effect on the Company’s 2016 effective tax rate.~~

tax.

8. Accumulated Other Comprehensive Loss

The following tables summarize the after-tax components of accumulated other comprehensive income (loss) attributable to the Company for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015:~~2016:


		Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)																													Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
		For the three months ended September 30, 2016													For the nine months ended September 30, 2016																Three months ended June 30, 2017									Six months ended June 30, 2017
(in thousands)	(in thousands)	Losses on Cash Flow Hedges		Foreign Currency Translation Adjustment			Investment in Debt Securities		Defined Benefit Plan Items			Total			Losses on Cash Flow Hedges			Foreign Currency Translation Adjustment			Investment in Debt Securities			Defined Benefit Plan Items			Total			(in thousands)	Foreign Currency Translation Adjustment			Defined Benefit Plan Items			Total			Foreign Currency Translation Adjustment			Defined Benefit Plan Items			Total
Beginning Balance	Beginning Balance	$	9	$	(9,484	)	$	—	$	(7,619	)	$	(17,094	)	$	(111	)	$	(12,041	)	$	126		$	(8,913	)	$	(20,939	)	Beginning Balance	$	(10,488	)	$	(1,476	)	$	(11,964	)	$	(11,002	)	$	(1,466	)	$	(12,468	)
	Other comprehensive income (loss) before reclassifications	—		(298		)	—		143			(155		)	120			2,259			—			1,547			3,926			Other comprehensive income (loss) before reclassifications	959			(988		)	(29		)	1,473			(998		)	475
	Amounts reclassified from accumulated other comprehensive loss	—		—			—		(56		)	(56		)	—			—			(126		)	(166		)	(292		)
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	—		(298		)	—		87			(211		)	120			2,259			(126		)	1,381			3,634			Net current-period other comprehensive income (loss)	959			(988		)	(29		)	1,473			(998		)	475
Ending balance	Ending balance	$	9	$	(9,782	)	$	—	$	(7,532	)	$	(17,305	)	$	9		$	(9,782	)	$	—		$	(7,532	)	$	(17,305	)	Ending balance	$	(9,529	)	$	(2,464	)	$	(11,993	)	$	(9,529	)	$	(2,464	)	$	(11,993	)


		Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)																													Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
		For the three months ended September 30, 2015														For the nine months ended September 30, 2015															Three months ended June 30, 2016												Six months ended June 30, 2016
(in thousands)	(in thousands)	Losses on Cash Flow Hedges			Foreign Currency Translation Adjustment			Investment in Debt Securities		Defined Benefit Plan Items			Total			Losses on Cash Flow Hedges			Foreign Currency Translation Adjustment			Investment in Debt Securities		Defined Benefit Plan Items			Total			(in thousands)	Losses on Cash Flow Hedges			Foreign Currency Translation Adjustment			Defined Benefit Plan Items			Total			Losses on Cash Flow Hedges			Foreign Currency Translation Adjustment			Investment in Debt Securities			Defined Benefit Plan Items			Total
Beginning Balance	Beginning Balance	$	(242	)	$	(7,913	)	$	126	$	(47,130	)	$	(55,159	)	$	(364	)	$	(4,709	)	$	126	$	(49,648	)	$	(54,595	)	Beginning Balance	$	(51	)	$	(9,536	)	$	(8,740	)	$	(18,327	)	$	(111	)	$	(12,041	)	$	126		$	(8,913	)	$	(20,939	)
	Other comprehensive income (loss) before reclassifications	62			(2,750		)	—		473			(2,215		)	184			(5,954		)	—		3,161			(2,609		)	Other comprehensive income (loss) before reclassifications	60			52			1,177			1,289			120			2,557			—			1,406			4,083
	Amounts reclassified from accumulated other comprehensive loss	—			—			—		(85		)	(85		)	—			—			—		(255		)	(255		)	Amounts reclassified from accumulated other comprehensive loss	—			—			(56		)	(56		)	—			—			(126		)	(112		)	(238		)
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	62			(2,750		)	—		388			(2,300		)	184			(5,954		)	—		2,906			(2,864		)	Net current-period other comprehensive income (loss)	60			52			1,121			1,233			120			2,557			(126		)	1,294			3,845
Ending balance	Ending balance	$	(180	)	$	(10,663	)	$	126	$	(46,742	)	$	(57,459	)	$	(180	)	$	(10,663	)	$	126	$	(46,742	)	$	(57,459	)	Ending balance	$	9		$	(9,484	)	$	(7,619	)	$	(17,094	)	$	9		$	(9,484	)	$	—		$	(7,619	)	$	(17,094	)

(a) All amounts are net of tax. Amounts in parentheses indicate debits

There were no reclassification adjustments from accumulated other comprehensive loss to net income for the three and six months ended June 30, 2017.

The following ~~tables show~~table shows the reclassification adjustments from accumulated other comprehensive loss to net income ~~(loss)~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 and 2015:~~2016:

Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (a)
(in thousands) For the three months ended September 30, 2016 For the nine months ended September 30, 2016
Details about Accumulated Other Comprehensive Income (Loss) Components Amount Reclassified from Accumulated Other Comprehensive Income (Loss) Affected Line Item in the Statement Where Net Income Is Presented Amount Reclassified from Accumulated Other Comprehensive Income (Loss) Affected Line Item in the Statement Where Net Income Is Presented
Defined Benefit Plan Items
Amortization of prior-service cost $ (89 ) (b) $ (266 ) (b)
(89 ) Total before tax (266 ) Total before tax
33
Income tax provision 100
Income tax provision
$ (56 ) Net of tax $ (166 ) Net of tax

Other items
Recognition of gain on sale of investment $ —
(200 )
—
Total before tax (200 ) Total before tax
—
Income tax provision 74
Income tax provision
$ —
Net of tax $ (126 ) Net of tax

Total reclassifications for the period (56 ) Net of tax (292 ) Net of tax


		Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (a)									Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (a)
(in thousands)	(in thousands)	For the three months ended September 30, 2015				For the nine months ended September 30, 2015				(in thousands)	Three months ended June 30, 2016				Six months ended June 30, 2016
Details about Accumulated Other Comprehensive Income (Loss) Components		Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented		Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented
Defined Benefit Plan Items
Amortization of prior-service cost		$	(136	)	(b)	$	(408	)	(b)		$	(89	)	(b)	$	(177	)	(b)
		(136		)	Total before tax	(408		)	Total before tax		(89		)	Total before tax	(177		)	Total before tax
		51			Income tax provision	153			Income tax provision		33			Income tax provision	65			Income tax provision
		$	(85	)	Net of tax	$	(255	)	Net of tax		$	(56	)	Net of tax	$	(112	)	Net of tax

Other items
Recognition of gain on sale of investment											—				(200		)
											—			Total before tax	(200		)	Total before tax
											—			Income tax provision	74			Income tax provision
											—			Net of tax	(126		)	Net of tax


Total reclassifications for the period		$	(85	)	Net of tax	$	(255	)	Net of tax		$	(56	)	Net of tax	(238		)	Net of tax

(a) Amounts in parentheses indicate credits to profit/loss

(b) This accumulated other comprehensive loss component is included in the computation of net periodic benefit cost (see Note 6).

9. Earnings Per Share

The Company’s non-vested restricted stock that was granted prior to March 2015 is considered a participating security since the share-based awards contain a non-forfeitable right to dividends irrespective of whether the awards ultimately vest. Unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. The Company’s nonvested restricted stock that was granted prior to March 2015 is considered a participating security since the share-based awards contain a non-forfeitable right to dividends irrespective of whether the awards ultimately vest.


(in thousands, except per common share data)	Three months ended September 30,					Nine months ended September 30,				Three months ended June 30,					Six months ended June 30,
(in thousands, except per common share data)	2016		2015			2016		2015		2017			2016		2017			2016
Net income (loss) attributable to The Andersons, Inc.	$	1,722	$	(1,227	)	$	1,449	$	33,961	$	(26,653	)	$	14,423	$	(29,742	)	$	(273	)
Less: Distributed and undistributed earnings (loss) allocated to nonvested restricted stock	2		(2		)	7		61
Earnings (loss) available to common shareholders	$	1,720	$	(1,225	)	$	1,442	$	33,900
Less: Distributed and undistributed earnings allocated to nonvested restricted stock										—			8		—			5
Earnings (losses) available to common shareholders										$	(26,653	)	$	14,415	$	(29,742	)	$	(278	)
Earnings per share – basic:
Weighted average shares outstanding – basic	28,222		28,071			28,184		28,394		28,350			28,227		28,316			28,164
Earnings (loss) per common share – basic	$	0.06	$	(0.04	)	$	0.05	$	1.19
Earnings (losses) per common share – basic										$	(0.94	)	$	0.51	$	(1.05	)	$	(0.01	)
Earnings per share – diluted:
Weighted average shares outstanding – basic	28,222		28,071			28,184		28,394		28,350			28,227		28,316			28,164
Effect of dilutive awards	140		—			196		60		—			86		—			—
Weighted average shares outstanding – diluted	28,362		28,071			28,380		28,454		28,350			28,313		28,316			28,164
Earnings (loss) per common share – diluted	$	0.06	$	(0.04	)	$	0.05	$	1.19
Earnings (losses) per common share – diluted										$	(0.94	)	$	0.51	$	(1.05	)	$	(0.01	)

All outstanding share awards were antidilutive for the six and three months ended June 30, 2017 and for the six months ended June 30, 2016 as the Company experienced a net loss. There were no antidilutive stock-based awards outstanding ~~at September~~for the three months ended June 30, ~~2016 or September 30, 2015.~~2016.

10. Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at ~~September~~June 30, ~~2016~~2017, December 31, ~~2015~~2016 and ~~September~~June 30, ~~2015~~2016:


(in thousands)	September 30, 2016											June 30, 2017
Assets (liabilities)	Level 1			Level 2			Level 3		Total			Level 1			Level 2			Level 3		Total
Cash equivalents	$	—		$	—		$	—	$	—
Restricted cash	190			—			—		190			$	1,033		$	—		$	—	$	1,033
Commodity derivatives, net (a)	34,620			(35,161		)	—		(541		)	2,817			(8,445		)	—		(5,628		)
Provisionally priced contracts (b)	(79,022		)	(20,500		)	—		(99,522		)	(87,958		)	(30,779		)	—		(118,737		)
Convertible preferred securities (c)	—			—			3,294		3,294			—			—			3,294		3,294
Other assets and liabilities (d)	11,015			(4,774		)	—		6,241			10,155			(2,158		)	—		7,997
Total	$	(33,197	)	$	(60,435	)	$	3,294	$	(90,338	)	$	(73,953	)	$	(41,382	)	$	3,294	$	(112,041	)


(in thousands)	December 31, 2015											December 31, 2016
Assets (liabilities)	Level 1			Level 2			Level 3		Total			Level 1			Level 2			Level 3		Total
Cash equivalents	$	26,931		$	—		$	—	$	26,931
Restricted cash	450			—			—		450			$	471		$	—		$	—	$	471
Commodity derivatives, net (a)	26,890			(15,101		)	—		11,789			29,872			(7,831		)	—		22,041
Provisionally priced contracts (b)	(133,842		)	(103,148		)	—		(236,990		)	(105,321		)	(64,876		)	—		(170,197		)
Convertible preferred securities (c)	—			—			13,550		13,550			—			—			3,294		3,294
Other assets and liabilities (d)	8,635			(3,324		)	350		5,661			9,391			(2,530		)	—		6,861
Total	$	(70,936	)	$	(121,573	)	$	13,900	$	(178,609	)	$	(65,587	)	$	(75,237	)	$	3,294	$	(137,530	)


(in thousands)	September 30, 2015											June 30, 2016
Assets (liabilities)	Level 1			Level 2			Level 3		Total			Level 1			Level 2			Level 3		Total
Cash equivalents	$	16,121		$	—		$	—	$	16,121		$	11,578		$	—		$	—	$	11,578
Restricted cash	181			—			—		181			987			—			—		987
Commodity derivatives, net (a)	34,337			(24,611		)	—		9,726			48,412			24,083			—		72,495
Provisionally priced contracts (b)	(81,037		)	(54,612		)	—		(135,649		)	(42,213		)	(18,495		)	—		(60,708		)
Convertible preferred securities (c)	—			—			12,800		12,800			—			—			3,294		3,294
Other assets and liabilities (d)	10,814			(4,010		)	350		7,154			6,080			(5,426		)	—		654
Total	$	(19,584	)	$	(83,233	)	$	13,150	$	(89,667	)	$	24,844		$	162		$	3,294	$	28,300


(a)	Includes associated cash posted/received as collateral


(b)	Included in "Provisionally priced contracts" are those instruments based only on underlying futures values (Level 1) and delayed price contracts (Level 2)


(c)	Recorded in “Other noncurrent assets” on the Company’s Condensed Consolidated Balance Sheets


(d)	Included in other assets and liabilities are deferred compensation assets, ethanol risk management contracts, and foreign exchange derivative contracts (Level 1), and interest rate derivatives (Level 2)~~, and contingent consideration to the former owners of Kay Flo Industries, Inc (Level 3)~~.

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

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

The Company’s net commodity derivatives primarily consist of futures or options contracts via regulated exchanges and contracts with producers or customers under which the future settlement date and bushels (or gallons in the case of ethanol contracts) of commodities to be delivered (primarily wheat, corn, soybeans and ethanol) are fixed and under which the price may or may not be fixed. Depending on the specifics of the individual contracts, the fair value is derived from the futures or

options prices on the CME or the New York Mercantile Exchange for similar commodities and delivery dates as well as observable quotes for local basis adjustments (the difference, which is attributable to local market conditions, between the quoted futures price and the local cash price). Because basis for a particular commodity and location typically has multiple quoted prices from other agribusinesses in the same geographical vicinity and is used as a common pricing mechanism in the

Agribusiness industry, we have concluded that basis is a Level 2 fair value input for purposes of the fair value disclosure requirements related to our commodity derivatives. Although nonperformance risk, both of the Company and the counterparty, is present in each of these commodity contracts and is a component of the estimated fair values, based on the Company’s historical experience with its producers and customers and the Company’s knowledge of their businesses, the Company does not view nonperformance risk to be a material input to fair value for these commodity contracts.

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

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

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

The Company’s stake in the Iowa Northern Railway Company ("IANR") was redeemed in the first quarter of 2016. The remaining convertible preferred securities are interests in two early-stage enterprises in the form of debt securities with the possibility of conversion to equity under certain circumstances.

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


												Contingent Consideration					Convertible Securities
(in thousands)	2016			2015		2016			2015			2017		2016			2017		2016
	Contingent Consideration			Contingent Consideration		Convertible Securities			Convertible Securities
Asset (liability) at January 1,	$	(350	)	$	—	$	13,550		$	13,300		$	—	$	(350	)	$	3,294	$	13,550
Gains (losses) included in earnings	190			—		710			—			—		190			—		710
Sales proceeds	—			—		(13,485		)	—			—		—			—		(13,485		)
Asset (liability) at March 31,	$	(160	)	$	—	$	775		$	13,300		$	—	$	(160	)	$	3,294	$	775
Gains (losses) included in earnings	160			—		19			—			—		160			—		19
New agreements	—			350		2,500			—			—		—			—		2,500
Asset (liability) at June 30,	—			350		3,294			13,300			$	—	$	—		$	3,294	$	3,294
Sales proceeds	—			—		—			(992		)
Realized gains (losses) included in earnings	—			—		—			492
Asset at September 30,	$	—		$	350	$	3,294		$	12,800

The following tables summarize quantitative information about the Company's Level 3 fair value measurements as of ~~September~~June 30, ~~2016~~2017, December 31, ~~2015~~2016 and ~~September~~June 30, ~~2015:~~2016:



Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value as of June 30, 2017		Valuation Method	Unobservable Input	Weighted Average
Convertible Notes	$	3,294	Cost Basis, Plus Interest	N/A	N/A



(in thousands)	Fair Value as of December 31, 2016		Valuation Method	Unobservable Input	Weighted Average
Convertible Notes	$	3,294	Cost Basis, Plus Interest	N/A	N/A

Real Property	$	11,210	Third-Party Appraisal	N/A	N/A

Quantitative Information about Level 3 Fair Value Measurements
(in thousands) Fair Value as of September 30, 2016 Valuation Method Unobservable Input Weighted Average
Convertible Notes $ 3,294
Cost basis plus interest N/A N/A

(in thousands) Fair Value as of December 31, 2015 Valuation Method Unobservable Input Weighted Average
Convertible Preferred Securities $ 12,800
Market Approach EBITDA Multiples 5.6
Income Approach Discount Rate 14.5 %

Convertible Notes $ 750
Cost basis plus interest N/A N/A

(in thousands)

Fair Value as of September 30, 2015

Valuation Method

Unobservable Input

Weighted Average

Fair Value as of June 30, 2016

Valuation Method

Unobservable Input

Weighted Average

Convertible Preferred Securities

12,800

Market Approach

EBITDA Multiples

5.535

Income Approach

Discount Rate

14.5

Convertible Notes

3,294

Cost Basis, Plus Interest

N/A

Fair Value of Financial Instruments

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


(in thousands)	September 30, 2016		December 31, 2015		September 30, 2015		June 30, 2017		December 31, 2016		June 30, 2016
Fair value of long-term debt, including current maturities	$	458,268	$	467,703	$	448,298	$	423,316	$	450,940	$	472,714
Fair value in excess of carrying value	7,714		3,708		8,040		2,612		3,116		16,498

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

11. Related Party Transactions

Equity Method Investments

The Company, directly or indirectly, holds investments in companies that are accounted for under the equity method. The Company’s equity in these entities is presented at cost plus its accumulated proportional share of income or loss, less any distributions it has received.

On December 4, 2015, Lansing Trade Group, LLC ("LTG") agreed to the sale of equity to New Hope Liuhe Investment (USA), Inc., a U.S. subsidiary of the Chinese company, New Hope Liuhe Co. Ltd. New Hope paid cash for a 20 percent equity interest in LTG. The impact of this transaction to the Company was a reduction in total ownership share of LTG from approximately 38.5 percent to 31.0 percent which includes dilution from newly issued shares as well as a redemption of shares that occurred on a pro rata basis between the Company and the other existing owners of LTG. The Company recognized a total gain of $23.1 million on these transactions. Cash of $8.2 million was received of which $1.3 million was a return of capital and $6.7 million was a return on capital. The remainder was a book gain on cash received in excess of basis in the shares redeemed.

The following table presents the Company’s investment balance in each of its equity method investees by entity:


(in thousands)	September 30, 2016		December 31, 2015		September 30, 2015		June 30, 2017		December 31, 2016		June 30, 2016
The Andersons Albion Ethanol LLC	$	36,661	$	32,871	$	31,409	$	40,829	$	38,972	$	34,133
The Andersons Clymers Ethanol LLC	21,340		29,278		31,151		19,903		19,739		30,088
The Andersons Marathon Ethanol LLC	23,812		31,255		30,066		14,045		22,069		31,158
Lansing Trade Group, LLC	91,573		101,531		84,081		89,235		89,050		90,884
Thompsons Limited (a)	47,494		43,964		43,803		49,252		46,184		47,948
Other	4,234		3,208		2,697		2,530		917		4,267
Total	$	225,114	$	242,107	$	223,207	$	215,794	$	216,931	$	238,478

(a) Thompsons Limited and related U.S. operating company held by joint ventures

~~The Company holds a majority interest (66%) in~~On January 1, 2017, The Andersons Ethanol Investment LLC (“TAEI”)~~. This consolidated entity holds a~~ ~~50%~~ ~~interest in~~ was merged with and into The Andersons Marathon Ethanol LLC (“TAME”). The Company had owned (66%) of TAEI, which, in turn, had owned 50% of TAME. Pursuant to the merger, the Company’s ownership units in TAEI were canceled and converted into ownership units in TAME. As a result, the Company now directly owns 33% of the outstanding ownership units of TAME.

Prior to this transaction, the noncontrolling interest in TAEI iswas attributed ~~34%~~33% of the gains and losses of TAME recorded by the Company in its equity in earnings of affiliates.

The following table summarizes income (loss) earned from the Company’s equity method investments by entity:


		Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(in thousands)	% Ownership at September 30, 2016	2016			2015			2016			2015		% Ownership at June 30, 2017	2017			2016			2017			2016
The Andersons Albion Ethanol LLC	55%	$	2,528		$	665		$	3,857		$	4,080	55%	$	2,135		$	1,650		$	1,858		$	1,328
The Andersons Clymers Ethanol LLC	38%	2,706			1,454			3,516			4,922		39%	569			1,889			776			810
The Andersons Marathon Ethanol LLC	50%	2,655			385			2,557			3,530		33%	779			1,712			316			(97		)
Lansing Trade Group, LLC	33% (a)	689			1,382			(7,412		)	9,290		33% (a)	896			(5,333		)	185			(8,101		)
Thompsons Limited (b)	50%	(156		)	17			1,271			1,385		50%	2,081			2,426			1,486			1,427
Other	5% - 34%	—			(58		)	—			88		5% - 50%	(75		)	—			(114		)	—
Total		$	8,422		$	3,845		$	3,789		$	23,295		$	6,385		$	2,344		$	4,507		$	(4,633	)

(a) This does not consider restricted management units which once vested will reduce the ownership percentage by approximately ~~0.8%~~0.6%

(b) Thompsons Limited and related U.S. operating company held by joint ventures

Total distributions received from unconsolidated affiliates were ~~$24.1~~$0.6 million and ~~$20.8~~$2.7 million for the ~~nine~~six months ended ~~September~~June 30, 2017 and June 30, 2016, ~~and September 30, 2015.~~respectively.

In the ~~third~~second quarter of 2016, The Andersons Albion Ethanol LLC, The Andersons Clymers Ethanol LLC, The Andersons Marathon Ethanol LLC, Lansing Trade Group, and Thompsons ~~Ltd.~~Limited qualified as significant equity investees of the Company under the income test. The following table presents combined summarized unaudited financial information of these investments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015:~~2016:


(in thousands)	Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,					Six months ended June 30,
	2016		2015		2016			2015		2017		2016			2017		2016
Revenues	$	1,646,697	$	2,250,326	$	4,676,583		$	5,129,523	$	1,380,361	$	1,340,809		$	3,002,406	$	3,029,680
Gross profit	50,141		73,881		127,963			211,470		58,812		52,204			97,728		77,782
Income (loss) from continuing operations	18,965		18,008		1,428			65,645
Income from continuing operations										16,328		556			11,518		(17,568		)
Net income (loss)	17,217		17,310		(2,924		)	59,637		13,421		(2,051		)	7,248		(20,164		)
Net income (loss) attributable to companies	17,752		15,990		(1,347		)	57,787		13,714		(1,410		)	7,972		(19,122		)

Investment in Debt Securities

The Company previously owned 100% of the cumulative convertible preferred shares of Iowa Northern Railway Company (“IANR”), which operates a short-line railroad in Iowa. In the first quarter of 2016, these shares were redeemed and the

Company no longer has an ownership stake ~~with~~in this entity. See Footnote 10 for additional information on the effects of this transaction.

Related Party Transactions

In the ordinary course of business, the Company will enter into related party transactions with each of the investments described above, along with other related parties. The following table sets forth the related party transactions entered into for the time periods presented:


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(in thousands)	2016		2015		2016		2015		2017		2016		2017		2016
Sales revenues	$	177,724	$	230,409	$	549,426	$	577,133	$	241,896	$	176,865	$	439,964	$	371,702
Service fee revenues (a)	3,800		3,610		13,290		14,865		9,410		9,490		14,036		14,126
Purchases of product	128,081		123,051		346,590		339,159		167,904		116,556		302,411		218,509
Lease income (b)	1,300		1,542		4,662		4,787		1,422		1,994		2,709		3,861
Labor and benefits reimbursement (c)	2,862		2,950		9,702		8,761		6,863		6,841		10,553		10,738
Other expenses (d)	—		269		149		827		—		—		—		149


(a)	Service fee revenues include management fees, corn origination fees, ethanol and distillers dried grains (DDG) marketing fees, and other commissions.


(b)	Lease income includes the lease of the Company’s Albion, Michigan and Clymers, Indiana grain facilities as well as certain railcars to the various ethanol LLCs and IANR.


(c)	The Company provides all operational labor to the unconsolidated ethanol LLCs and charges them an amount equal to the Company’s costs of the related services.


(d)	Other expenses include payments to IANR for repair facility rent and use of their railroad reporting mark, payment to LTG for the lease of railcars and other various expenses.


(in thousands)	September 30, 2016		December 31, 2015		September 30, 2015		June 30, 2017		December 31, 2016		June 30, 2016
Accounts receivable (e)	$	18,028	$	13,362	$	19,799	$	25,673	$	26,254	$	20,685
Accounts payable (f)	15,352		13,784		15,929		25,590		23,961		10,022


(e)	Accounts receivable represents amounts due from related parties for sales of corn, leasing revenue and service fees.


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

For the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, revenues recognized for the sale of ethanol that the Company purchased from the unconsolidated ethanol LLCs were ~~$109.3~~$161.3 million and ~~$105.1~~$111.3 million, respectively. Additionally, for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, revenues recognized for the sale of ethanol that the Company purchased from the unconsolidated ethanol LLCs were ~~$220.6~~$284.5 million and ~~$315.9~~$198.9 million, respectively.

For the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, revenues recognized for the sale of corn to the unconsolidated ethanol LLCs ~~under these agreements~~ were ~~$90.4~~$125.5 million and ~~$119.4~~$105.6 million, respectively. ~~Additionally, for~~For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, revenues recognized for the sale of corn to the unconsolidated ethanol LLCs ~~under these agreements~~ were ~~$314.5~~$243.0 million and ~~$323.7~~$224.1 million, respectively.

~~The~~From time to time, the Company enters into derivative contracts with certain of its related parties, including the unconsolidated ethanol LLCs, LTG, and the Thompsons Limited joint ventures, for the purchase and sale of ~~corn~~grain and ethanol, for similar price risk mitigation purposes and on similar terms as the purchase and sale of derivative contracts it enters into with unrelated parties. The fair value of derivative contract assets with related parties as of ~~September~~June 30, 2017, December 31, 2016 and June 30, 2016 ~~December 31, 2015 and September 30, 2015~~ was ~~$5.0~~$0.6 million, ~~$2.3~~$4.1 million and ~~$3.4~~$5.2 million, respectively. The fair value of derivative contract liabilities with related parties as of ~~September~~June 30, 2017, December 31, 2016 and June 30, 2016 ~~December 31, 2015 and September 30, 2015~~ was ~~$0.2~~$0.7 million, ~~$0.3~~$0.1 million and ~~$0.3~~$1.0 million, respectively.

12. Segment Information

The Company’s operations include five reportable business segments that are distinguished primarily on the basis of products and services offered. The Grain business includes grain merchandising, the operation of terminal grain elevator facilities and the investments in LTG and Thompsons Limited. The Ethanol business purchases and sells ethanol and also manages the ethanol production facilities organized as limited liability companies, one is consolidated and three are investments accounted for under the equity method. ~~There are~~The Company performs services under various ~~service~~ contracts for these investments. Rail operations include the leasing, marketing and fleet management of railcars and other assets, railcar repair and metal fabrication. The Plant Nutrient business

manufactures and distributes agricultural inputs, primarily fertilizer, to dealers and farmers, along with turf care and corncob-based products. The Retail business operates large retail stores, a distribution center, and a lawn and garden

equipment sales and service facility. The Retail business closed during the second quarter of 2017, and liquidation efforts are substantially complete. Included in “Other” are the corporate level costs not attributed to an operating segment.

The segment information below includes the allocation of expenses shared by one or more operating segments. Although management believes such allocations are reasonable, the operating information does not necessarily reflect how such data might appear if the segments were operated as separate businesses. Inter-segment sales are made at prices comparable to normal, unaffiliated customer sales. The Company does not have any customers who represent 10 percent or more of total revenues.


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(in thousands)	2016		2015		2016		2015		2017		2016		2017		2016
Revenues from external customers
Grain	$	550,189	$	545,320	$	1,611,992	$	1,705,393	$	488,447	$	522,989	$	966,975	$	1,061,803
Ethanol	139,413		137,765		396,626		413,130		187,831		142,520		341,984		257,213
Plant Nutrient	101,770		149,303		588,797		660,440		264,736		320,036		411,323		487,027
Rail	38,201		44,758		118,152		134,497		38,149		40,342		78,539		79,951
Retail	30,039		31,947		96,168		101,562		14,499		38,357		46,857		66,129
Total	$	859,612	$	909,093	$	2,811,735	$	3,015,022	$	993,662	$	1,064,244	$	1,845,678	$	1,952,123


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(in thousands)	2016		2015		2016		2015		2017		2016		2017		2016
Inter-segment sales
Grain	$	7	$	404	$	1,632	$	2,534	$	141	$	174	$	207	$	1,625
Plant Nutrient	61		53		422		517		70		114		241		361
Rail	328		388		1,062		813		275		355		566		734
Total	$	396	$	845	$	3,116	$	3,864	$	486	$	643	$	1,014	$	2,720


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(in thousands)	2016			2015			2016			2015			2017			2016			2017			2016
Income (loss) before income taxes
Grain	$	1,879		$	131		$	(28,563	)	$	4,024		$	6,929		$	(13,037	)	$	1,856		$	(30,442	)
Ethanol	9,541			5,888			13,048			20,833			4,660			6,187			6,376			3,507
Plant Nutrient	(7,231		)	(11,114		)	18,008			8,183			(25,825		)	23,535			(19,154		)	25,239
Rail	6,754			11,913			22,698			43,915			5,860			6,569			11,938			15,944
Retail	(1,578		)	(769		)	(2,644		)	(1,483		)	(6,718		)	1,010			(13,564		)	(1,066		)
Other	(6,539		)	(8,781		)	(19,612		)	(23,955		)	(3,907		)	(2,173		)	(12,077		)	(13,073		)
Noncontrolling interests	1,619			277			1,711			1,433			(64		)	1,018			(10		)	92
Total	$	4,445		$	(2,455	)	$	4,646		$	52,950		$	(19,065	)	$	23,109		$	(24,635	)	$	201


(in thousands)	September 30, 2016		December 31, 2015		September 30, 2015		June 30, 2017		December 31, 2016		June 30, 2016
Identifiable assets
Grain	$	721,412	$	1,010,810	$	852,388	$	783,316	$	961,114	$	879,055
Ethanol	174,822		183,080		186,250		170,730		171,115		192,470
Plant Nutrient	462,328		531,753		546,673		351,871		484,455		448,225
Rail	383,631		405,702		413,955		448,417		398,446		388,456
Retail	42,880		44,135		45,403		11,830		31,257		43,878
Other	199,338		183,621		147,025		145,261		186,462		155,331
Total	$	1,984,411	$	2,359,101	$	2,191,694	$	1,911,425	$	2,232,849	$	2,107,415

13. Commitments and Contingencies

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

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

The estimated range of loss for all outstanding claims that are considered reasonably possible is not material.

Build-to-Suit Lease

In August, 2015, the Company entered into a lease agreement with an initial term of 15 years for a build-to-suit facility to be used as the new corporate headquarters which was completed in the third quarter of 2016. Since the Company is deemed to be the owner of this facility for accounting purposes during the construction period, ~~we have~~it has recognized an asset and a corresponding financing obligation.

~~As of September 30, 2016, we have~~The Company has recorded a build-to-suit financing obligation ~~of $13.7 million~~ in other long-term liabilities of $23.9 million, $14.0 million, and ~~$1.3~~$13.0 million at June 30, 2017, December 31, 2016, and June 30, 2016, respectively. The Company has recorded a build-to-suit financing obligation in other current ~~liabilities.~~

liabilities of $0.8 million, $0.9 million, and $1.5 million at June 30, 2017, December 31, 2016, and June 30, 2016, respectively.

14. Supplemental Cash Flow Information

Certain supplemental cash flow information, including noncash investing and financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 are as follows:

Nine months ended September 30,
(in thousands) 2016 2015
Noncash investing and financing activity
Capital projects incurred but not yet paid $ 13,104
$ 10,708
Purchase of a productive asset through seller-financing —
1,010
Shares issued for acquisition of business —
4,303
Dividends declared not yet paid 4,342
3,967

~~15. Business Acquisitions~~

~~There were no business acquisitions completed in the nine months ended September 30, 2016.~~

~~Prior Year Business Acquisitions~~

On May 18, 2015, the Company purchased Kay Flo Industries, Inc. and certain subsidiaries. The Company acquired 100% of the outstanding shares of Kay Flo Industries, Inc. In connection with the acquisition, the Company agreed to pay contingent consideration based on the achievement of specified objectives, including reaching targeted gross profit thresholds. The range of undiscounted amounts the Company could be required to pay under the contingent consideration arrangement is between $0 and $24 million.

The total fair value of consideration for the acquisitions was $129.4 million, including working capital and $0.4 million in estimated fair value of the contingent consideration arrangement. The Company has funded this transaction with long-term debt, short-term debt, and cash on hand. The debt has been drawn from the Company's existing line of credit. The purchase price allocation was finalized as of December 31, 2015.



	Six months ended June 30,
(in thousands)	2017		2016
Supplemental disclosure of cash flow information
Interest paid	$	12,430	$	9,567
Noncash investing and financing activity
Capital projects incurred but not yet paid	$	3,695	$	9,653
Investment merger (decreasing equity method investments and non-controlling interest)	8,360		—
Outstanding receivable for sale of assets	4,356		—
Dividends declared not yet paid	4,501		4,341

~~16.~~15. Sale of Assets

On ~~April 5,~~March 31, 2017 the Company sold four farm center locations in Florida for $17.4 million and recorded a $4.7 million gain, net of transaction costs in Other income, net. The sale price included a working capital adjustment of $3.6 million.

On May 2, 2016 the ~~Company's Board of Directors approved the sale of~~Company sold eight grain and agronomy locations in Iowa to MaxYield Cooperative of West Bend, Iowa. The Andersons acquired these locations as a part of its 2012 acquisition from Green Plains Grain Company. The Tennessee assets acquired during that same transaction will remain a part of the Company.

~~This transaction closed on May 2, 2016.~~

~~Total cash received was~~for $54.3 million and recorded a nominal ~~gain was recognized~~gain.

16. Exit Costs and Assets Held for Sale

The Retail business closed during the second quarter of 2017, and liquidation efforts are substantially complete as of June 30, 2017. The Company recorded $3.5 million of exit charges during the second quarter of 2017 for a total of $11.3 million of exit charges recorded during the first six months of 2017. As a result of the closure, the Company also classified $10.0 million of Property, plant and equipment, net as Assets held for sale on the ~~sale.~~Condensed Consolidated Balance Sheet.

17. Goodwill and Other Intangible Assets

As previously reported, the Company had monitored the performance of its wholesale nutrient business, within the Plant Nutrient segment, throughout 2016. During the third quarter of 2016, the Company reported that the wholesale business was under pressure due to an uncertain outlook for future crop prices and decreased domestic demand for fertilizer. The Company performed its annual goodwill impairment analysis during the fourth quarter of 2016, which resulted in an excess of fair value over carrying value of 8% for the wholesale nutrient reporting unit. During the first quarter of 2017, the Company's assessment of the business did not indicate the presence of any goodwill impairment triggering events.

During the second quarter of 2017, the Company identified certain factors that we considered important in assessing the requirement to perform an interim impairment evaluation for the wholesale nutrient reporting unit. First, current year actual results were significantly below historical and expected operating results. Second, the nutrient industry's future outlook continued to reflect depressed margins and minimal growth, driven by an oversupply of base nutrients, low crop prices and low farmer income. After considering these items, the Company determined that an interim goodwill impairment assessment was required, as well as an impairment assessment for our definite-lived intangible and other long-lived assets. No impairment was recognized for definite-lived intangibles and other long-lived assets.

Upon early adoption of ASU No. 2017-04, the Company now uses a one-step quantitative approach that compares the business enterprise value ("BEV") of each reporting unit with its carrying value. The BEV was computed based on both an income approach (discounted cash flows) and a market approach. The income approach uses a reporting unit's estimated future cash flows, discounted at the weighted average cost of capital of a hypothetical third-party buyer. The market approach estimates fair value by applying cash flow multiples to the reporting unit's operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting unit. Any excess of the carrying value of the goodwill over the BEV will be recorded as an impairment loss. The calculation of the BEV is based on significant unobservable inputs, such as price trends, customer demand, material costs and discount rates, and are classified as Level 3 in the fair value hierarchy.

The discounted cash flow model used for the income approach assumed discrete period revenue growth through 2021 that was reflective of market opportunities, changes in product mix, and cyclical trends within the wholesale nutrient business. In the terminal year, the Company assumed a long-term earnings growth rate of 2.0 percent that is believed to be appropriate given the current industry-specific expectations. As of the valuation date, the Company utilized a weighted-average cost of capital of 10.1 percent, which reflects the relative risk and time value of money. The testing resulted in a $42.0 million impairment charge for goodwill associated with the Wholesale reporting unit.

With the estimated fair value of the reporting unit now equaling its carrying value as of June 30, 2017, the Wholesale reporting unit has a risk of future impairment to the remaining goodwill balance of $17.8 million. A deterioration in operating performance significantly below current expectations, including changes in projected future revenue, profitability and cash flow, as well as higher working capital, interest rates, or cost of capital, could have a negative effect on the fair value of the reporting unit. It is also possible the Company's performance meets current expectations but is still unable overcome the general trends in the business and/or macro-economic factors in the time frame forecast, which could impact the long-term discount rate values used in estimating fair value, causing the estimated fair value of the reporting unit to fall below its carrying value. This would result in recording another impairment to the goodwill of the wholesale business.

The changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2017 are as follows:



(in thousands)	Grain		Plant Nutrient			Rail		Total
Balance as of January 1, 2017	$	—	$	59,767		$	4,167	$	63,934
Acquisitions	1,171		—			—		1,171
Impairments	—		(42,000		)	—		(42,000		)
Balance as of June 30, 2017	$	1,171	$	17,767		$	4,167	$	23,105

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

Forward Looking Statements

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements which relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. ~~You are~~The reader is urged to carefully consider these risks and others, including those risk factors listed under Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 (“~~2015~~2016 Form 10-K”). In some cases, you 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.

Critical Accounting Policies and Estimates

Our critical accounting policies and critical accounting estimates, as described in our ~~2015~~2016 Form 10-K, have not materially changed through the ~~third~~second quarter of ~~2016.~~2017.

Executive Overview

Our operations are organized, managed and classified into five reportable business segments: Grain, Ethanol, Plant Nutrient, Rail, and Retail. Each of these segments is based on the nature of products and services offered.

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

Grain Group

The Grain Group's performance in the ~~third~~second quarter reflects continued performance challenges in its core grain assets, as well as lower returns from affiliates. Overall results did improve, primarily due to the divestiture of underperforming assets in Iowa during the first half of 2016. The impact of the challenged harvest insignificant improvement over the prior year, especially due to higher space income. The Group was able to purchase grain at more typical prices during the 2016 harvest and the market continued to ~~limit opportunities for space income~~reward the Group with basis appreciation in corn, beans and ~~earnings from blending activities.~~wheat. LTG also saw significant improvements over the prior year.

Grain inventories on hand at ~~September~~June 30, ~~2016~~2017 were ~~67.0~~78.0 million bushels, of which ~~1.0~~0.8 million bushels were stored for others. This compares to ~~67.3~~75.7 million bushels on hand at ~~September~~June 30, ~~2015,~~2016, of which ~~3.2~~4.0 million bushels were stored for others. Total grain storage capacity was flat with approximately ~~152~~153 million bushels at ~~September~~both June 30, ~~2016 compared~~2017 and June 30, 2016.

Wheat harvest is complete in our southern footprint and underway in our remaining locations. Harvest results to ~~163 million bushels at September 30, 2015 due to~~date appear positive and we expect continued opportunities for space income on our wheat position. Corn and beans were planted through variable weather conditions across our footprint during the ~~sale of Iowa grain assets~~quarter, which could result in varied qualities and an opportunity for blending income during harvest. During the ~~construction~~quarter, the Group also completed an acquisition of a ~~new elevator in Tennessee.~~

~~Based on preliminary indications, the Grain Group is expecting an increase in soybean~~small specialty grain handling and ~~corn production in~~milling business that further expands our ~~core markets in the fourth quarter of 2016 compared to the prior year.~~food ingredient capabilities.

Ethanol Group

The Ethanol Group's ~~third~~second quarter results reflect ~~improvements~~lower ethanol margins from record levels of industry production and stocks during the quarter. While DDG margins have improved from the prior quarter, elevated levels of vomitoxin in ~~overall~~eastern draw areas have continued to negatively impact margins. The weak ethanol and DDG margins ~~as reductions in corn and natural gas input prices~~ were ~~only~~ partially offset by ~~modest decreases in the sales price of ethanol. Additionally, higher prices were realized on~~high ethanol ~~by-products in relation to the cost of the underlying~~export demand and strong E-85 and corn ~~inputs. Driving demand remains strong which supports high sales volumes.~~

oil sales.

Ethanol volumes shipped for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 were as follows:


(in thousands)	Three months ended September 30,		Nine months ended September 30,		Three months ended June 30,		Six months ended June 30,
	2016	2015	2016	2015	2017	2016	2017	2016
Ethanol (gallons shipped)	73,990	72,839	223,236	221,535	109,504	75,463	198,927	149,246
E-85 (gallons shipped)	11,309	10,294	26,722	25,433	10,646	9,093	19,903	15,413
Corn Oil (pounds shipped)	3,639	4,244	10,921	11,601	4,078	3,668	8,338	7,282
DDG (tons shipped) *	42	42	122	124	37	40	79	80

* DDG tons shipped converts wet tons to a dry ton equivalent amount

The above table shows only shipped volumes that flow through the Company's sales revenues. Total ethanol, corn oil and DDG production by the unconsolidated LLCs ~~are higher, however,~~is higher. However, the portion of ~~this~~that volume that is sold directly to their customers is excluded here.

Plant Nutrient Group

The Plant Nutrient Group's second quarter results reflect ~~price declines, particularly~~a continued depressed nutrient market. An oversupply of base nutrients in ~~base nutrient products,~~the market has put pressure on prices, which has put pressure on overall margins. Volumes have also declined compared to the prior year as we lost a ~~result~~key portion of our application window due to inclement weather, as well as lower crop prices that continue to keep farm income ~~and a market~~low, preventing investment in high margin nutrients that ~~continues~~yield better results. We expect this trend to ~~experience uncertainty around future nutrient prices leading to lower immediate demand.~~continue during the year.

Storage capacity at our wholesale nutrient and farm center facilities, including leased storage, was approximately ~~488~~486 thousand tons for dry nutrients and approximately ~~547~~527 thousand tons for liquid nutrients at ~~September~~June 30, ~~2016~~2017 and approximately ~~508~~497 thousand tons for dry nutrients and approximately ~~546~~550 thousand tons for liquid nutrients at ~~September~~June 30, ~~2015.~~2016. The decrease in our ~~dry~~ storage capacity is a result of the ~~sale~~sales of ~~Iowa~~Florida farm center assets in the ~~second~~first quarter of ~~2016.~~2017.

Tons of product shipped (including sales and service tons) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 were as follows:

(in thousands) Three months ended September 30, Nine months ended September 30,
2016 2015 2016 2015
Basic Nutrients (Tons) 219
240
980
956
Specialty Nutrients (Tons) 78
78
404
295
Other (Farm Centers, Lawn, Cob) 73
80
398
443
Total tons 370
398
1,782
1,694

Margins in our wholesale fertilizer business continue to be under pressure due to an uncertain outlook for future crop prices and decreased domestic demand for fertilizer. The analysis of goodwill held by this reporting unit is subject to changes in key assumptions that affect the calculated fair value at the annual October 1 assessment date as the annual budgeting and long-term planning process is completed. The goodwill fair value is highly sensitive to changes in those assumptions, including interest rates and outlook for future volume and margins. If recent weakness in our wholesale fertilizer business affects our forecast for future years, this may result in a goodwill impairment charge. Total goodwill in the wholesale nutrient reporting unit is $59.1 million.



(in thousands)	Three months ended June 30,		Six months ended June 30,
	2017	2016	2017	2016
Wholesale Nutrients - Base nitrogen, phosphorus, potassium	545	549	735	761
Wholesale Nutrients - Value added products	173	208	303	327
Other (includes Farm Centers, Turf, and Cob)	147	185	276	314
Total tons	865	942	1,314	1,402

Rail Group

The Rail Group saw a decline in average utilization rates from ~~91.6~~88.6 percent in the ~~third~~second quarter of ~~2015~~2016 to ~~86.2~~84.4 percent in the ~~third~~second quarter of ~~2016.~~2017. Average lease rates remained relatively flat. ~~Railcars, locomotives, and barges~~Rail Group assets under management (owned, leased or managed for financial institutions in non-recourse arrangements) at ~~September~~June 30, ~~2016~~2017 were ~~23,203~~23,649 compared to ~~23,301~~23,220 at ~~September~~June 30, ~~2015.~~2016.

Utilization rates are recovering at a modest rate, however, lease rates are still under pressure ~~due~~from an over-supplied car market. We expect utilization to ~~substantial increases in operational efficiency~~continue to rebound and lease rates to hold steady through the end of the ~~railroads in North America driving a decrease~~year, with increased harvest demand in the ~~number of cars needed to move the same volume of freight. This has made it more difficult for us to re-market cars as they are returned from existing leases.~~fourth quarter.

The Group ~~will continue~~purchased 774 cars with leases attached in the quarter and continues to focus on ~~ways to~~ strategically ~~grow~~growing the rail fleet, ~~and~~as well as look for opportunities to open new repair facilities.

Retail Group

The ~~retail industry is highly competitive. Our~~Retail Group closed its remaining stores ~~compete with~~and substantially completed its liquidation efforts during the second quarter. We have closed on the sale of one of the properties in July, recording a variety of retail merchandisers, including home centers, department and hardware stores, as well as local and national grocers. In the fourth quarter of 2016, we announced the closure of our specialty food concept store.nominal gain.

Other

Our “Other” activities include corporate costs and functions that provide support and services to the operating segments. The results include expenses and benefits not allocated to the operating segments, including a portion of our ERP project.

Operating Results

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


	Three months ended September 30,					Nine months ended September 30,				Three months ended June 30,					Six months ended June 30,
(in thousands)	2016		2015			2016		2015		2017			2016		2017			2016
Sales and merchandising revenues	$	859,612	$	909,093		$	2,811,735	$	3,015,022	$	993,662		$	1,064,244	$	1,845,678		$	1,952,123
Cost of sales and merchandising revenues	782,597		823,903			2,569,923		2,738,348		905,828			967,202		1,681,386			1,787,326
Gross profit	77,015		85,190			241,812		276,674		87,834			97,042		164,292			164,797
Operating, administrative and general expenses	78,767		88,698			234,053		251,044		69,928			75,405		151,875			155,286
Interest expense	4,441		6,147			18,046		16,210
Equity in earnings (loss) of affiliates, net	8,422		3,845			3,789		23,295
Other income, net	2,216		3,355			11,144		20,235
Goodwill impairment										42,000			—		42,000			—
Interest expense (income)										5,988			6,554		12,088			13,605
Equity in earnings (losses) of affiliates, net										6,385			2,344		4,507			(4,633		)
Other income (expense), net										4,632			5,682		12,529			8,928
Income (loss) before income taxes	4,445		(2,455		)	4,646		52,950		(19,065		)	23,109		(24,635		)	201
Income (loss) attributable to noncontrolling interests	1,619		277			1,711		1,433		(64		)	1,018		(10		)	92
Income (loss) before income taxes attributable to The Andersons, Inc.	$	2,826	$	(2,732	)	$	2,935	$	51,517	$	(19,001	)	$	22,091	$	(24,625	)	$	109

Comparison of the three months ended ~~September~~June 30, ~~2016~~2017 with the three months ended ~~September~~June 30, ~~2015~~2016:

Grain Group


	Three months ended September 30,					Three months ended June 30,
(in thousands)	2016		2015			2017		2016
Sales and merchandising revenues	$	550,189	$	545,320		$	488,447	$	522,989
Cost of sales and merchandising revenues	519,724		515,394			458,000		505,438
Gross profit	30,465		29,926			30,447		17,551
Operating, administrative and general expenses	27,743		31,087			25,955		27,362
Interest expense	1,737		668
Equity in earnings (loss) of affiliates, net	533		1,340
Other income, net	361		618
Interest expense (income)						2,327		2,961
Equity in earnings (losses) of affiliates, net						2,903		(2,907		)
Other income (expense), net						1,861		2,642
Income (loss) before income taxes	1,879		129			$	6,929	$	(13,037	)
Income (loss) attributable to noncontrolling interest	—		(2		)
Income (loss) before income taxes attributable to The Andersons, Inc.	$	1,879	$	131

Operating results for the Grain Group have ~~increased $1.7 million compared to the results of the same period last year. Sales and merchandising revenues increased $4.9 million. This was partially offset~~improved by an increase of cost of sales and merchandising revenues for a net favorable gross profit impact of $0.5 million. The increase was driven by improved trading income, and partially offset by modest declines in margins on sale of grain, income from blending operations, and limited opportunities for basis appreciation. Additionally, the 2016 divestiture of Iowa grain assets reduced gross profit by $1.5 million. However, it also provided a $3.0 million reduction in other, administrative and general expenses for a net positive impact of $1.5 million compared to the same quarter in 2015.

Operating, administrative and general expenses showed a decrease of $3.3 million compared to the same period in 2015 due primarily to decreases in labor and benefit costs and the Iowa divestiture noted above.

~~Equity in earnings of affiliates were not a major driver of performance in the current quarter with a decrease of $0.8 million compared to the same period in 2015.~~

~~Ethanol Group~~

Three months ended September 30,
(in thousands) 2016 2015
Sales and merchandising revenues $ 139,413
$ 137,765
Cost of sales and merchandising revenues 133,112
131,500
Gross profit 6,301
6,265
Operating, administrative and general expenses 3,025
2,625
Interest expense 11
14
Equity in earnings (loss) of affiliates, net 7,889
2,505
Other income, net 6
36
Income (loss) before income taxes 11,160
6,167
Income (loss) attributable to noncontrolling interests 1,619
279
Income (loss) before income taxes attributable to The Andersons, Inc. $ 9,541
$ 5,888

Operating results for the Ethanol Group increased $3.7 million from the same period last year. Sales and merchandising revenues increased $1.6 million compared to the results of the same period last year with cost of sales and merchandising revenues increasing by a similar amount. These changes were due to minor fluctuations in ethanol sales prices and volumes related to our consolidated operations during the quarter but were not a significant driver of results.

Equity in earnings of affiliates increased $5.4 million due to higher earnings from the unconsolidated ethanol LLCs. This was driven by a variety of factors. Corn and natural gas input prices declined more than the price of the ethanol being produced, increasing margins during the current period in the markets where we operate our unconsolidated ethanol facilities. Additionally, the ratio of price realized on ethanol by-products relative to the price of corn inputs improved.

~~Plant Nutrient Group~~

Three months ended September 30,
(in thousands) 2016 2015
Sales and merchandising revenues $ 101,770
$ 149,303
Cost of sales and merchandising revenues 82,383
126,983
Gross profit 19,387
22,320
Operating, administrative and general expenses 25,746
32,593
Interest expense 1,583
1,788
Other income, net 711
947
Income (loss) before income taxes $ (7,231 ) $ (11,114 )

Operating results for the Plant Nutrient Group improved $3.9 million from the same period last year. Sales and merchandising revenues decreased $47.5 million primarily due to significant declines in fertilizer prices as well as a 6.9 percent decline in total tons sold. The decrease in cost of sales and merchandising revenues follows the commodity price and volume declines noted above. Additionally, we saw margin compression in products used in agricultural end markets. The total impact of the volume decreases and lower margins to gross profit was a decrease of $2.9 million. The primary driver of performance during the current quarter has been pressure on farmer income causing nutrient purchases to be deferred or reduced.

Operating, administrative, and general expenses decreased $6.8 million, primarily due to decreased labor and benefits cost as well as a $2.0 million goodwill impairment charge related to the cob business in the prior year.

~~Rail Group~~

Three months ended September 30,
(in thousands) 2016 2015
Sales and merchandising revenues $ 38,201
$ 44,758
Cost of sales and merchandising revenues 25,674
27,267
Gross profit 12,527
17,491
Operating, administrative and general expenses 4,528
6,165
Interest expense 1,696
1,506
Other income, net 451
2,093
Income (loss) before income taxes $ 6,754
$ 11,913

Operating results for the Rail Group decreased $5.2 million from the same period last year. Sales and merchandising revenues decreased $6.6 million, partially offset by a $1.6 million decrease in cost of sales. The net gross profit decline of $5.0 million was primarily driven by a $2.6 million reduction in base leasing margin due to lower utilization rates and a decrease of $1.6 million in gains on the sale of railcars.

The decline in other income of $1.6 million was due mostly to a $0.6 million decline in end of lease settlement activity and prior year dividends of $0.5 million on our investment in Iowa Northern Railway Corporation which was sold in 2016.

~~Retail Group~~

Three months ended September 30,
(in thousands) 2016 2015
Sales and merchandising revenues $ 30,039
$ 31,947
Cost of sales and merchandising revenues 21,704
22,759
Gross profit 8,335
9,188
Operating, administrative and general expenses 9,858
9,999
Interest expense 138
50
Other income, net 83
92
Income (loss) before income taxes $ (1,578 ) $ (769 )

~~Operating results for the Retail Group declined from the same period last year, with a 4% decrease in customer count, partially offset by a slight decline in general expenses.~~

~~Other~~

Three months ended September 30,
(in thousands) 2016 2015
Sales and merchandising revenues $ —
$ —
Cost of sales and merchandising revenues —
—
Gross profit —
—
Operating, administrative and general expenses 7,867
6,229
Interest expense (income) (724 ) 2,121
Other income (loss), net 604
(431 )
Income (loss) before income taxes $ (6,539 ) $ (8,781 )

The other operating loss not allocated to business segments decreased $2.2 million compared to the same period in the prior year. The majority of the change was a $2.8 million decrease in interest expense due to lower borrowing during the period as well as mark-to-market adjustments on interest rate derivative contracts. This was offset by increased operating,

~~administrative, and general expenses which were primarily due to the timing of certain employee benefit charges being incurred and allocated to the operating segments compared to the prior year.~~

~~Income Taxes~~

Income tax expense of $1.1 million was provided at 24.8% in the current quarter. In the third quarter of 2015, income tax benefit of $1.5 million was provided at 61.3%. The high 2015 effective tax rate is primarily due to the cumulative impact of revised full year earnings expectations and relatively low third quarter earnings, while the lower 2016 effective tax rate is primarily due to tax benefits related to railroad track maintenance credit transactions and tax benefits related to prior years.

The Company anticipates that its 2016 effective annual rate will be 30.7%. The Company’s actual 2015 effective tax rate was a benefit of 2.1%. The lower benefit rate in 2015 relative to our losses before income taxes is primarily due to the impact of the 2015 write-off of goodwill that did not provide a corresponding tax benefit.

~~Comparison of the nine months ended September 30, 2016 with the nine months ended September 30, 2015:~~

~~Grain Group~~

Nine months ended September 30,
(in thousands) 2016 2015
Sales and merchandising revenues $ 1,611,992
$ 1,705,393
Cost of sales and merchandising revenues 1,547,776
1,620,737
Gross profit 64,216
84,656
Operating, administrative and general expenses 83,127
89,020
Interest expense 7,185
5,066
Equity in earnings (loss) of affiliates, net (6,141 ) 10,764
Other income, net 3,671
2,682
Income (loss) before income taxes (28,566 ) 4,016
Income (loss) attributable to noncontrolling interest (3 ) (8 )
Income (loss) before income taxes attributable to The Andersons, Inc. $ (28,563 )
$ 4,024

~~Operating results for the Grain Group have decreased $32.6~~$20.0 million compared to the results of the same period last year. Sales and merchandising revenues decreased ~~$93.4 million. This~~$34.5 million due to a 33% decrease in bushel sales as bushels are being strategically held for sale in the second half of the year due to strong space income opportunities in the market. Additionally, bushels received are down 27% compared to the same period in 2016 which is also a partial driver in the decline in sales. The decrease in volume was ~~partially~~more than offset by a decrease ofin cost of sales and merchandising revenues of ~~$73.0~~$47.4 million for a net ~~unfavorable~~favorable gross profit impact of ~~$20.4~~$12.9 million. ~~This decrease~~The gross profit increase was ~~primarily~~ driven by ~~elevated basis levels in the eastern corn belt causing significant reductions~~$15.6 million increase in space income relating to corn, beans, and ~~basis appreciation~~wheat as ~~well as reduced opportunities to earn margins on grain purchases and sales. Additionally, we saw reduced gross profit~~the value of ~~$3.2 million from the sale of our Iowa grain assets in 2016.~~

~~Operating, administrative and general expenses showed a decrease of $5.9 million~~storage capacity has significantly improved compared to the same period in ~~2015, $5.3 million of which was due to prior year expenses incurred at the underperforming assets in Iowa which were sold earlier in the year and lower labor and benefit expenses.~~

The reductions in gross profit and expenses noted above in relation to the sale of Iowa assets have combined for a net positive impact of $2.1 million so far this year, excluding the impact of the sale transaction itself.2016.

Equity in earnings of affiliates ~~decreased $16.9~~improved $5.8 million ~~compared~~due to ~~the same period in 2015. This was driven by reduced performance at~~improved operating results of Lansing Trade ~~Group.~~

Group ("LTG") who also continues to recover from under performance in its core markets in the second quarter of 2016.

Ethanol Group


	Nine months ended September 30,				Three months ended June 30,
(in thousands)	2016		2015		2017			2016
Sales and merchandising revenues	$	396,626	$	413,130	$	187,831		$	142,520
Cost of sales and merchandising revenues	383,419		394,736		184,511			137,950
Gross profit	13,207		18,394		3,320			4,570
Operating, administrative and general expenses	8,380		8,684		2,243			2,607
Interest expense	34		50
Equity in earnings (loss) of affiliates, net	9,930		12,531
Other income, net	39		83
Interest expense (income)					(22		)	12
Equity in earnings (losses) of affiliates, net					3,482			5,251
Other income (expense), net					15			3
Income (loss) before income taxes	14,762		22,274		4,596			7,205
Income (loss) attributable to noncontrolling interests	1,714		1,441		(64		)	1,018
Income (loss) before income taxes attributable to The Andersons, Inc.	$	13,048	$	20,833	$	4,660		$	6,187

Operating results for the Ethanol Group decreased ~~$7.8~~$1.5 million from the same period last year. Sales and merchandising revenues increased $45.3 million compared to the results of the same period last year. This was driven by the Albion expansion which led to record ethanol production. Cost of sales and merchandising revenues increased at a similar rate. The $1.3 million decrease in gross profit is driven by low margins due to record levels of industry production and stock.

Equity in earnings of affiliates decreased $1.8 million compared to the same period in 2016 due to declining results from the unconsolidated ethanol LLCs. This was primarily driven by ethanol margins as noted above as well as continued lower DDG margins as a result of localized elevated vomitoxin levels in eastern draw areas.

Plant Nutrient Group



	Three months ended June 30,
(in thousands)	2017			2016
Sales and merchandising revenues	$	264,736		$	320,036
Cost of sales and merchandising revenues	224,802			270,459
Gross profit	39,934			49,577
Operating, administrative and general expenses	22,580			25,186
Goodwill impairment	42,000			—
Interest expense (income)	1,815			2,078
Other income (expense), net	636			1,222
Income (loss) before income taxes	$	(25,825	)	$	23,535

Operating results for the Plant Nutrient Group declined $49.4 million over the same period in the prior year. Sales and merchandising revenues decreased $55.3 million and cost of sales and merchandising revenues have decreased $45.7 million. The decrease in sales and merchandising revenues is driven by a 30% decrease in farm centers volume due to the sale of farm center locations in Florida. Additionally, wholesale volume was down 5% due to lower movement base nutrients and value added products. Gross profit for the Plant Nutrient Group decreased $9.6 million from the same period last year. Margins remain tight due to margin compression in the wholesale and farm center businesses due to lower base nutrient prices, lower farm income, and resulting lower demand.

Operating, administrative and general expenses decreased $2.6 million due to $1.0 million of labor and benefit reductions relating to the sale of farm center locations in Florida and lower incentive compensation expense. Smaller reductions were also realized in a number of other categories as part of our overall cost control efforts. The Group also recognized a goodwill impairment charge of $42.0 million after experiencing several periods of compressed margins and lower sales volumes, as well as anticipated unfavorable operating conditions in the nutrient market for some time.

Rail Group



	Three months ended June 30,
(in thousands)	2017		2016
Sales and merchandising revenues	$	38,149	$	40,342
Cost of sales and merchandising revenues	25,450		26,740
Gross profit	12,699		13,602
Operating, administrative and general expenses	5,395		4,997
Interest expense (income)	1,936		2,221
Other income (expense), net	492		185
Income (loss) before income taxes	$	5,860	$	6,569

Operating results declined $0.7 million from the same period last year. Sales and merchandising revenues decreased $2.2 million. Revenue from car sales decreased $1.9 million due to fewer car sales and leasing revenues decreased $1.4 million due to lower utilization rates compared to the prior year. These decreases were partially offset by increased repair and other revenues as the repair shops continue to produce strong results. Cost of sales and merchandising revenues decreased $1.3 million primarily due to lower car sales. Gross profit decreased $0.9 million compared to last year. This decrease was driven by $0.9 million from fewer car sales and $1.0 million from weaker utilization and offset by $1.0 million of increased repair and other gross profit from greater efficiencies in the repair shops.

Retail Group



	Three months ended June 30,
(in thousands)	2017			2016
Sales and merchandising revenues	$	14,499		$	38,357
Cost of sales and merchandising revenues	13,065			26,615
Gross profit	1,434			11,742
Operating, administrative and general expenses	9,373			10,666
Interest expense (income)	82			157
Other income (expense), net	1,303			91
Income (loss) before income taxes	$	(6,718	)	$	1,010

Operating results for the Retail Group declined $7.7 million from the same period last year. Sales and merchandising revenues decreased $23.9 million and cost of sales and merchandising revenues decreased $13.6 million leading to a decrease in gross profit of $10.3 million. These decreases reflect partial operations during the quarter due to the closure of the retail business during the second quarter of 2017. Additionally, inventory was marked down for liquidation causing a decrease in margins.

While operating, administrative and general expenses decreased by $1.3 million, the group incurred exit charges of $3.5 million in 2017, most of which was severance. The remaining operating, administrative and general expenses decrease was due to the group being operational for only a portion of the quarter. The increase in other income is due to a $1.2 million gain on the sale of fixtures.

Other



	Three months ended June 30,
(in thousands)	2017			2016
Sales and merchandising revenues	$	—		$	—
Cost of sales and merchandising revenues	—			—
Gross profit	—			—
Operating, administrative and general expenses	4,382			4,587
Interest expense (income)	(150		)	(875		)
Other income (expense), net	325			1,539
Income (loss) before income taxes	$	(3,907	)	$	(2,173	)

The other operating loss not allocated to business segments increased $1.7 million compared to the same period in the prior year. Other income decreased by $1.2 million as a result of $1.3 million gain on final settlement of our pension plan in 2016.

Income Taxes

In the second quarter of 2017, income tax expense of $7.7 million was provided at (40.1)%. In the second quarter of 2016, income tax expense of $7.7 million was provided at 33.2%. The lower 2017 effective tax rate relative to the loss before income taxes is primarily due to a $42.0 million goodwill impairment charge which did not provide a corresponding tax benefit.

The Company anticipates that its 2017 annual effective tax rate will be 99.2%. The Company’s actual 2016 effective tax rate was 32.3%. The higher tax rate in 2017 is primarily due to a $42 million goodwill impairment charge which did not provide a corresponding tax benefit.

Comparison of the six months ended June 30, 2017 with the six months ended June 30, 2016:

Grain Group



	Six months ended June 30,
(in thousands)	2017		2016
Sales and merchandising revenues	$	966,975	$	1,061,803
Cost of sales and merchandising revenues	912,879		1,028,052
Gross profit	54,096		33,751
Operating, administrative and general expenses	51,282		55,384
Interest expense (income)	5,023		5,448
Equity in earnings (losses) of affiliates, net	1,558		(6,674		)
Other income (expense), net	2,507		3,310
Income (loss) before income taxes	1,856		(30,445		)
Income (loss) attributable to noncontrolling interests	—		(3		)
Income (loss) before income taxes attributable to The Andersons, Inc.	$	1,856	$	(30,442	)

Operating results for the Grain Group have improved by $32.3 million compared to the results of the same period last year. Sales and merchandising revenues decreased ~~$16.5~~$94.8 million due to a ~~decline~~21% decrease in bushels sold as bushels are being strategically held for sale in the ~~average price~~second half of ~~ethanol and~~the year due to strong carry in the market. Additionally, direct ship bushels are down 21% as the group continues to focus on the most profitable markets to increase margins. This decrease was more than offset by a decrease of cost of sales and merchandising revenues for a net favorable gross profit impact of $20.3 million. The gross profit increase was driven by a $24.5 million increase in ~~DDG prices. Ethanol gallons sold were up 1.3 percent~~space income relating to corn, beans, and wheat as the value of storage capacity has significantly improved compared to the ~~prior year. The $11.3~~same period in 2016.

Operating, administrative and general expenses decreased by $4.1 million compared to the same period in 2016 due to a $3.5 million decrease in ~~cost~~expenses relating to the Iowa divestiture and a $2.2 million decrease in labor and benefit costs as a result of ~~sales is~~productivity efforts.

Equity in losses of affiliates improved $8.2 million due to ~~lower input costs, primarily corn~~improved operating results of LTG who also continues to recover from under performance in its core markets in 2016.

Ethanol Group



	Six months ended June 30,
(in thousands)	2017			2016
Sales and merchandising revenues	$	341,984		$	257,213
Cost of sales and merchandising revenues	333,124			250,307
Gross profit	8,860			6,906
Operating, administrative and general expenses	5,490			5,355
Interest expense (income)	(25		)	23
Equity in earnings (losses) of affiliates, net	2,949			2,041
Other income (expense), net	22			33
Income (loss) before income taxes	6,366			3,602
Income (loss) attributable to noncontrolling interests	(10		)	95
Income (loss) before income taxes attributable to The Andersons, Inc.	$	6,376		$	3,507

Operating results for the Ethanol Group increased $2.9 million from the same period last year. Sales and ~~natural gas. The ethanol plants' performance was also unfavorably impacted by pricing pressure on ethanol byproducts~~merchandising revenues increased $84.8 million compared to the ~~prior~~results of the same period last year. This was driven by the Albion expansion which led to record ethanol production. Cost of sales and merchandising revenues increased at a similar rate. The $2.0 million increase in gross profit was driven by the Group's ability to enter 2017 with approximately half of its margins hedged.

Equity in earnings of affiliates increased $0.9 million due to better results from the unconsolidated ethanol LLCs. The facilities' productivity and output remained strong and margins were better, primarily in the first quarter as noted above.

Plant Nutrient Group


	Nine months ended September 30,				Six months ended June 30,
(in thousands)	2016		2015		2017			2016
Sales and merchandising revenues	$	588,797	$	660,440	$	411,323		$	487,027
Cost of sales and merchandising revenues	493,144		569,456		345,581			410,761
Gross profit	95,653		90,984		65,742			76,266
Operating, administrative and general expenses	74,814		80,136		45,641			49,068
Interest expense	5,559		5,106
Other income, net	2,728		2,441
Goodwill impairment					42,000			—
Interest expense (income)					3,455			3,976
Other income (expense), net					6,200			2,017
Income (loss) before income taxes	$	18,008	$	8,183	$	(19,154	)	$	25,239

Operating results for the Plant Nutrient Group ~~increased $9.8~~declined $44.4 million from the same period in the prior year. Gross profit decreased $10.5 million from the same period last year. Sales and merchandising revenues decreased ~~$71.6~~$75.7 million ~~primarily~~ due to ~~significant declines in fertilizer prices. The~~a 21% decrease in ~~cost~~farm center tons as a result of the sale of our farm center locations in Florida. Additionally, wholesale volume was down 5% due to lower movement base nutrients and value added products. Cost of sales and merchandising revenues ~~of $76.3 million exceeds the impact of lower sales noted above~~decreased $65.2 million. Margins remain tight due to ~~a decrease~~competitive pressures and margin compression in the ~~cost of raw materials~~wholesale and ~~is also impacted by an increase in the proportion of higher margin specialty products. The total net positive impact~~farm center businesses due to ~~gross profit of the items noted above was $4.7 million.~~lower base nutrient prices, lower farm income, and resulting lower demand.

Operating, administrative and general expenses decreased ~~$5.3 million due primarily to~~$3.4 million. The largest driver was a $2.3 million decrease in labor and benefits, much of it relating to the sale of farm center locations in Florida in the first quarter of 2017 and the sale of the farm center locations in Iowa in the first quarter of 2016. Smaller reductions were also realized in a number of other categories as part of our overall cost control efforts. The Group also recognized a goodwill impairment charge of $42.0 million after experiencing several periods of compressed margins and lower sales volumes, as well as ~~a $1.4 million reduction~~anticipated unfavorable operating conditions in ~~maintenance costs compared to~~ the ~~prior year.~~nutrient market for some time.

Other income increased as a result of a $4.7 million gain on the sale of farm center locations in Florida.

Rail Group


	Nine months ended September 30,				Six months ended June 30,
(in thousands)	2016		2015		2017		2016
Sales and merchandising revenues	$	118,152	$	134,497	$	78,539	$	79,951
Cost of sales and merchandising revenues	77,463		81,435		53,532		51,789
Gross profit	40,689		53,062		25,007		28,162
Operating, administrative and general expenses	14,396		18,984		10,895		9,868
Interest expense	5,608		4,929
Other income, net	2,013		14,766
Interest expense (income)					3,745		3,912
Other income (expense), net					1,571		1,562
Income (loss) before income taxes	$	22,698	$	43,915	$	11,938	$	15,944

Operating results for the Rail Group ~~decreased $21.2~~declined $4.0 million from the same period last year. Sales and merchandising revenues decreased ~~$16.3~~$1.4 million. Leasing revenues decreased $3.4 million, partially offset by $2.4 million of increased repair and other revenues. The remaining change related to a ~~$4.0 million~~slight decrease in ~~cost~~car sale revenues. Cost of ~~sales. The net gross profit decline of $12.3~~sales and merchandising revenues increased $1.7 million ~~was primarily driven by a decrease of $6.0 million in gains on the sale of railcars, and a $4.2 million reduction in base leasing margin caused by lower utilization rates~~ compared to the ~~prior~~same period last year due to higher storage costs resulting from lower cars in service and increased repair sales, as noted above. Gross profit decreased $3.2 million compared to last year.

~~The decline in other income of $12.8 million is primarily~~ This decrease was driven by ~~higher than normal lease settlement activity~~almost $5.5 million in ~~the prior year.~~our leasing business, offset by a $1.9 million increase in our repair and other business and slight increases on car sale margins.

Retail Group


	Nine months ended September 30,						Six months ended June 30,
(in thousands)	2016			2015			2017			2016
Sales and merchandising revenues	$	96,168		$	101,562		$	46,857		$	66,129
Cost of sales and merchandising revenues	68,121			71,984			36,270			46,417
Gross profit	28,047			29,578			10,587			19,712
Operating, administrative and general expenses	30,513			31,037			25,414			20,655
Interest expense	441			308
Other income, net	263			284
Interest expense (income)							170			303
Other income (expense), net							1,433			180
Income (loss) before income taxes	$	(2,644	)	$	(1,483	)	$	(13,564	)	$	(1,066	)

Operating results for the Retail Group declined ~~by $1.2~~$12.5 million from the same period last year. ~~This~~Sales and merchandising revenues decreased $19.3 million while cost of sales and merchandising revenues decreased $10.1 million. These decreases are due to lower volumes as a result of the closure of the retail business during the second quarter of 2017. Additionally, inventory was ~~driven primarily by~~marked down for liquidation causing a 3%significant decrease in ~~customer count.~~margins leading to a $9.1 million decrease in gross profit.

~~Other~~

Operating, administrative and general expenses increased by $4.8 million, which includes one time exit charges of $11.3 million, most of which was severance. This decrease was partially offset by the group being operational for only a portion of the year. The increase in other income was due to a $1.2 million gain on the sale of fixtures.

Other


	Nine months ended September 30,						Six months ended June 30,
(in thousands)	2016			2015			2017			2016
Sales and merchandising revenues	$	—		$	—		$	—		$	—
Cost of sales and merchandising revenues	—			—			—			—
Gross profit	—			—			—			—
Operating, administrative and general expenses	22,823			23,183			13,153			14,956
Interest expense (income)	(781		)	751			(280		)	(57		)
Other income (loss), net	2,430			(21		)
Other income (expense), net							796			1,826
Income (loss) before income taxes	$	(19,612	)	$	(23,955	)	$	(12,077	)	$	(13,073	)

The other operating loss not allocated to business segments decreased ~~$4.3~~$1.0 million compared to the same period in the prior year. ~~Interest expense declined~~Operating, administrative and general expenses decreased $1.8 million, which is due to ~~mark-to-market adjustments on interest rate derivative contracts.~~

~~The majority of~~severance costs in the ~~change~~prior year that did not occur in ~~other income~~2017. This was partially offset by a $1.3 million gain on final settlement of our pension ~~plan.~~plan in Other income in 2016.

Income Taxes

~~Income~~In 2017, income tax expense of ~~$1.5~~$5.1 million was provided at ~~32.0%~~(20.8)%. In ~~2015,~~2016, income tax expense of ~~$17.6~~$0.4 million was provided at ~~33.2%~~189.6%. The lower ~~2016~~2017 effective tax rate relative to the loss before income taxes is primarily due ~~primarily~~ to a $42.0 million goodwill impairment charge which did not provide a corresponding tax ~~benefit related to railroad track maintenance credit transactions.~~

benefit.

Liquidity and Capital Resources

Working Capital

At ~~September~~June 30, ~~2016~~2017, wethe Company had working capital of ~~$230.9~~$194.9 million. The following table presents changes in the components of current assets and current liabilities:


(in thousands)	September 30, 2016		September 30, 2015		Variance			June 30, 2017		June 30, 2016		Variance
Current Assets:
Cash and cash equivalents	$	78,158	$	40,658	$	37,500		$	18,934	$	31,383	$	(12,449	)
Restricted cash	190		181		9			1,033		987		46
Accounts receivable, net	173,593		201,664		(28,071		)	186,331		212,588		(26,257		)
Inventories	427,754		527,789		(100,035		)	463,205		486,236		(23,031		)
Commodity derivative assets – current	59,837		60,965		(1,128		)	11,619		115,924		(104,305		)
Deferred income taxes	—		6,735		(6,735		)
Other current assets	43,761		66,411		(22,650		)	59,873		48,754		11,119
Assets held for sale								10,028		—		10,028
Total current assets	783,293		904,403		(121,110		)	751,023		895,872		(144,849		)
Current Liabilities:
Short-term debt	—		82,801		(82,801		)	124,000		179,404		(55,404		)
Trade and other payables	356,931		466,428		(109,497		)	267,194		302,413		(35,219		)
Customer prepayments and deferred revenue	15,725		23,581		(7,856		)	15,113		18,252		(3,139		)
Commodity derivative liabilities – current	59,770		49,911		9,859			18,104		43,183		(25,079		)
Accrued expenses and other current liabilities	68,465		71,593		(3,128		)	69,256		71,169		(1,913		)
Current maturities of long-term debt	51,520		26,989		24,531			62,482		53,720		8,762
Total current liabilities	552,411		721,303		(168,892		)	556,149		668,141		(111,992		)
Working Capital	$	230,882	$	183,100	$	47,782		$	194,874	$	227,731	$	(32,857	)

In comparison to ~~September~~June 30, ~~2015,~~2016 current assets decreased significantly. This was primarily due to ~~declining~~a decrease in Commodity derivative assets. Current commodity ~~prices resulting in a decline in~~derivative assets and liabilities have decreased which reflects the customer net asset or liability based on the value of ~~both inventory and accounts receivable~~forward contracts as compared to market prices at the end of the period as well as a significant decrease in ~~our Grain and Plant Nutrient segments. This was partially offset by increases in our cash on hand~~the need for margin deposits compared to the prior ~~year which~~year. Accounts receivable, net was also down due to a decrease in Grain receivables as a result of lower sales and shipment activity for the first half of 2017 compared to prior periods. Plant Nutrient Group also contributed to a decrease in accounts receivable as a result of the sale of Florida farm center locations and a decrease in sales. Additionally, inventories are down. Retail inventory is ~~caused by a reduced need for margin deposits on our grain contracts~~down due to the ~~lower prices.~~decision to close the retail stores. Liquidations efforts are substantially complete as of June 30, 2017. Plant Nutrient inventory is also down as a result of carrying fewer tons, including inventory in transit at the end of the period, and as a result of the sale of the Florida locations. These decreases are partially offset by an increase in Grain inventory as bushels are being held for sale in the second half of the year. See discussion below on additional sources and uses of cash for an understanding of the decrease in cash from prior year.

Current liabilities were down compared to the prior year due to ~~many~~a decrease in short-term debt, trade and other payables, and commodity derivative liabilities which are mentioned above. Short-term debt decreased as a result of borrowings on the ~~same factors driving the changes~~revolver in ~~our current assets. We paid off all of our short-term line of credit borrowings~~2016 that did not occur in 2017. Trade and other payables decreased primarily due to ~~reduced margin needs~~a decrease in ~~the grain business. Additionally, our accounts payable balance is lower~~Plant Nutrient Group payables due to ~~substantial declines in prices for recently purchased fertilizer~~more timely processing of payments as well as decreased inventory levels and ~~grain inventory. This was partially offset by a greater portion of our long-term debt becoming current compared to the prior year.~~purchases at quarter end.

Sources and Uses of Cash

Operating Activities

Our operating activities ~~provided~~used cash of ~~$41.3~~$45.2 million and ~~$57.8~~$194.4 million in the first ~~nine~~six months of ~~2016~~2017 and ~~2015,~~2016, respectively. The decrease in cash ~~provided~~used year to date is primarily due to a ~~result of seasonal changes~~decrease in ~~the use of working capital, particularly the fact that we have seen significant reductions in prepaid fertilizer balances compared~~cash collateral relating to ~~the beginning of the period and that our prepaid income tax balances have declined compared to the prior year.~~commodity derivatives.

Investing Activities

Investing activities ~~provided~~used cash of ~~$4.8~~$64.2 million through the first ~~nine~~six months of ~~2016,~~2017, compared to ~~using~~ cash provided of ~~$212.4~~$14.9 million in the prior year. This change is due to ~~$124.6 million for the prior year acquisition~~three main factors. Proceeds from sale of ~~Kay Flo Industries, Inc, net of cash received~~facilities and ~~prior to final working capital adjustments, as well~~investments in affiliates decreased by $40.5 million. Proceeds in 2016 were higher as a ~~$33.5 million decrease in net spend on railcar acquisitions and sales. Cash provided in the current year was positively impacted by the~~result of a $54.3 million sale of underperforming assets in Iowa as well as the redemption of our investment in the Iowa Northern Railway Corporation which provided proceeds of $13.5

million. ~~We also received $7.4 million in return of capital distributions from our ethanol investments. This was offset by~~Additionally, 2017 reflects a ~~$13.8~~$40.0 million increase in ~~purchases of other property, plant,~~net spend on railcar acquisitions and ~~equipment.~~sales. The variability in railcar purchases and sales is driven by timing of opportunities in the Rail Group asset market.

Finally, property, plant, and equipment spend is down compared to the same period in 2016.

In ~~2016,~~2017, we expect to spend a total of ~~$99.8~~$145.0 million for the purchase of railcars, barges and related leases and capitalized modifications of railcars. We also expect to offset this amount by proceeds from ~~the~~ sales and dispositions of approximately ~~$73.9~~$120.0 million during the year.

Additionally, total capital spending for ~~2016~~2017 on property, plant and equipment in our base business excluding rail leasing activity, but inclusive of information technology spending ~~and the construction of a new corporate headquarters building~~ is expected to be approximately ~~$106.4~~$70 million.

Financing Activities

Financing activities ~~used cash of $31.7 million and~~ provided cash of ~~$80.6~~$65.7 million and $147.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. Short term borrowings ~~used cash of $15.0 million in the current year compared to providing cash of $79.7 million in the prior year.~~decreased $70.1 million. This change was driven primarily by declines in commodity prices and associated working capital requirements. In addition, the current year saw a decrease of ~~$74.6~~$52.0 million in funds provided by long-term debt issuance and other long-term financing arrangements, but this was largely offset by ~~$49.1~~a $42.3 million decrease in ~~prior year repurchases of the company's common stock. We also received $14.0 million in reimbursement payments related to the~~ long-term ~~financing agreement of our new corporate headquarters.~~debt payments.

We are party to borrowing arrangements with a syndicate of banks that ~~provides~~provide a total of ~~$872.5~~$820.0 million in borrowings, which includes ~~$22.5~~$20.0 million of debt of The Andersons Denison Ethanol LLC which is non-recourse to the Company. Of that total, we had ~~$809.9~~$633.5 million remaining available for borrowing at ~~September~~June 30, ~~2016.~~2017. Peak short-term borrowings to date were ~~$412.0~~$292.0 million on ~~January 6, 2016.~~April 3, 2017. Typically, our highest borrowing occurs in the late ~~Winter~~winter and early ~~Spring~~spring due to seasonal inventory requirements in our fertilizer and grain businesses.

We paid ~~$13.0~~$9.0 million in dividends in the first ~~nine~~six months of ~~2016~~2017 compared to ~~$12.0~~$8.7 million in the prior year. We paid $0.16 per common share for the dividends paid in January and April, 2017 and $0.155 per common share for the dividends paid in January and April, ~~and July 2016, and $0.14 per common share for the dividends paid in January, April, and July 2015.~~2016. On ~~August 26, 2016,~~May 12, 2017, we declared a cash dividend of ~~$0.155~~$0.16 per common share payable on ~~October~~July 24, ~~2016~~2017 to shareholders of record on ~~October~~July 3, ~~2016.~~2017.

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 ~~September~~June 30, ~~2016.~~2017. 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.

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 grain prices and/or unfavorable market conditions could require us to make additional margin deposits on our exchange traded futures contracts. Conversely, in periods of declining prices, 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.

Off-Balance Sheet Transactions

Our Rail Group 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. Rail Group assets we own or lease from a financial intermediary are generally leased to a customer under an operating lease. 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. On most of the assets, we hold an option to purchase the assets at the end of the lease.

The following table describes our Rail Group asset positions at ~~September~~June 30, ~~2016:~~2017:



Method of Control	Financial Statement	Units
Owned-railcars available for sale	On balance sheet – current	~~255~~429
Owned-railcar assets leased to others	On balance sheet – non-current	~~15,695~~16,685
Railcars leased from financial intermediaries	Off balance sheet	~~4,282~~3,614
Railcars – non-recourse arrangements	Off balance sheet	~~2,971~~2,817
Total Railcars		~~23,203~~23,545
Locomotive assets leased to others	On balance sheet – non-current	3635
Locomotives leased from financial intermediaries	Off balance sheet	4
Total Locomotives		4039
Barge assets leased to others	On balance sheet – non-current	—
Barge assets leased from financial intermediaries	Off balance sheet	65
Total Barges		65

In addition, we manage ~~413~~415 railcars for ~~third-party~~third party customers or owners for which we receive a fee.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For further information, refer to our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. There were no material changes in market risk, specifically commodity and interest rate risk during the quarter ended ~~September~~June 30, ~~2016.~~2017.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer ("Certifying Officers"), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on the results of this evaluation, management concluded that, as of ~~September~~June 30, ~~2016,~~2017, the Company's disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

Management concluded that the Company’s system of internal control over financial reporting was effective as of December 31, ~~2015.~~2016. As required by Rule 13a-15(d) of the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of any change in the Company’s internal controls over financial reporting that have materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting. The Company is undertaking the phased implementation of an ERP software system. The Company believes it is maintaining and monitoring appropriate internal controls during the implementation period and further believes that its internal control environment will be enhanced as a result of this implementation. There have been no other changes in the Company’s internal controls over financial reporting during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

We are currently subject to various claims and suits arising in the ordinary course of business, which include environmental issues, employment claims, contractual disputes, and defensive counter claims. We accrue liabilities where litigation losses are deemed probable and estimable. We believe it is unlikely that the results of our current legal proceedings, even if unfavorable, will be materially different from what we currently have 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.

Item 1A. Risk Factors

Our operations are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this Form 10-Q and could have a material adverse impact on our financial results. These risks can be impacted by factors beyond our control as well as by errors and omissions on our part. The most significant factors known to us that could materially adversely affect our business, financial condition or operating results are described in our ~~2015~~2016 Form 10-K (Item 1A).

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

No sales or repurchases of shares have occurred in ~~2016.~~2017.

Item 6. Exhibits

(a) Exhibits




No.		Description

12		Computation of Ratio of Earnings to Fixed Charges

31.1		Certification of the Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a)

31.2		Certification of the Chief Financial Officer under Rule 13(a)-14(a)/15d-14(a)

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

101		Financial Statements from the interim report on Form 10-Q of The Andersons, Inc. for the period ended ~~September~~June 30, ~~2016,~~2017, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Equity, (v) the Condensed Consolidated Statement of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		THE ANDERSONS, INC. (Registrant)

Date: ~~November 8, 2016~~August 7, 2017		By /s/ Patrick E. Bowe
		Patrick E. Bowe
		Chief Executive Officer (Principal Executive Officer)

Date: ~~November 8, 2016~~August 7, 2017		By /s/ John Granato
		John Granato
		Chief Financial Officer (Principal Financial Officer)

Exhibit Index

The Andersons, Inc.




No.		Description

12		Computation of Ratio of Earnings to Fixed Charges

31.1		Certification of the Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a)

31.2		Certification of the Chief Financial Officer under Rule 13(a)-14(a)/15d-14(a)

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

101		Financial Statements from the interim report on Form 10-Q of The Andersons, Inc. for the period ended ~~September~~June 30, ~~2016,~~2017, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Equity, (v) the Condensed Consolidated Statement of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.

4546



Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value as of September 30, 2016		Valuation Method	Unobservable Input	Weighted Average
Convertible Notes	$	3,294	Cost basis plus interest	N/A	N/A



(in thousands)	Fair Value as of December 31, 2015		Valuation Method	Unobservable Input	Weighted Average
Convertible Preferred Securities	$	12,800	Market Approach	EBITDA Multiples	5.6
			Income Approach	Discount Rate	14.5	%

Convertible Notes	$	750	Cost basis plus interest	N/A	N/A