Related Party Transactions | 3 Months Ended |
Mar. 31, 2015 |
Related Party Transactions [Abstract] | |
Related Party Transactions | 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 January 22, 2014, the Company entered into an agreement with Lansing Trade Group, LLC ("LTG") for a partial redemption of the Company's investment in LTG for $60 million. At the time of redemption, the Company's interest in LTG reduced from approximately 47.5 percent to approximately 39.2 percent on a fully diluted basis. A portion of the proceeds ($28.5 million) was considered a distribution of earnings and reduced the Company's cost basis in LTG. The difference between the remaining proceeds of $31.5 million and the new cost basis of the shares sold, net of deal costs, resulted in a book gain of $17.1 million ($10.7 million after tax). This gain was recorded in Other income. |
The following table presents the Company’s investment balance in each of its equity method investees by entity: |
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(in thousands) | March 31, 2015 | | December 31, 2014 | | March 31, 2014 |
The Andersons Albion Ethanol LLC | $ | 28,726 | | | $ | 27,824 | | | $ | 31,867 | |
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The Andersons Clymers Ethanol LLC | 36,063 | | | 37,624 | | | 40,412 | |
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The Andersons Marathon Ethanol LLC | 31,869 | | | 31,537 | | | 45,946 | |
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Lansing Trade Group, LLC | 78,594 | | | 78,696 | | | 60,837 | |
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Thompsons Limited (a) | 44,224 | | | 48,455 | | | 49,520 | |
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Other | 2,606 | | | 2,721 | | | 3,814 | |
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Total | $ | 222,082 | | | $ | 226,857 | | | $ | 232,396 | |
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(a) Thompsons Limited and related U.S. operating company held by joint ventures |
The Company holds a majority interest (66%) in The Andersons Ethanol Investment LLC (“TAEI”). This consolidated entity holds a 50% interest in The Andersons Marathon Ethanol LLC (“TAME”). The noncontrolling interest in TAEI is attributed 34% of the gains and losses of TAME recorded by the Company in its equity in earnings of affiliates. |
The following table summarizes income earned from the Company’s equity method investments by entity: |
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| % ownership at | | Three months ended | | |
31-Mar-15 | March 31, | | |
(in thousands) | | | 2015 | | 2014 | | |
The Andersons Albion Ethanol LLC | 53% | | $ | 1,091 | | | $ | 4,943 | | | |
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The Andersons Clymers Ethanol LLC | 38% | | 288 | | | 5,539 | | | |
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The Andersons Marathon Ethanol LLC | 50% | | 333 | | | 8,135 | | | |
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Lansing Trade Group, LLC | 40% (a) | | 2,410 | | | 2,221 | | | |
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Thompsons Limited (b) | 50% | | (861 | ) | | (313 | ) | | |
Other | 5%-34% | | — | | | (24 | ) | | |
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Total | | | $ | 3,261 | | | $ | 20,501 | | | |
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(a) This does not consider restricted management units which once vested will reduce the ownership percentage by approximately 1.5% |
(b) Thompsons Limited and related U.S. operating company held by joint ventures |
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Total distributions received from unconsolidated affiliates were $4.6 million and $65.6 million for the three months ended March 31, 2015 and 2014, respectively. |
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In the first quarter of 2015, LTG and The Andersons Albion Ethanol LLC 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 months ended March 31, 2015 and 2014: |
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| Three months ended | | | | |
March 31, | | | | |
(in thousands) | 2015 | | 2014 | | | | |
Sales | $ | 1,699,063 | | | $ | 1,944,106 | | | | | |
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Gross Profit | 47,659 | | | 41,124 | | | | | |
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Income before income taxes | 10,586 | | | 17,314 | | | | | |
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Net income | 9,345 | | | 14,885 | | | | | |
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Net income attributable to the entities | 8,343 | | | 14,632 | | | | | |
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Investment in Debt Securities |
The Company owns 100% of the cumulative convertible preferred shares of Iowa Northern Railway Corporation (“IANR”), which operates a short-line railroad in Iowa. As a result of this investment, the Company has a 49.9% voting interest in IANR, with the remaining 50.1% voting interest held by the common shareholders. The preferred shares have certain rights associated with them, including voting, dividends, liquidation preference, redemption and conversion rights. Dividends accrue to the Company at a rate of 14% annually whether or not declared by IANR and are cumulative in nature. The Company can convert its preferred shares into common shares of IANR at any time, but the shares cannot be redeemed until May 2015. This investment is accounted for as “available-for-sale” debt securities in accordance with ASC 320 and is carried at estimated fair value in “Other noncurrent assets” on the Company’s Condensed Consolidated Balance Sheet. The estimated fair value of the Company’s investment in IANR as of March 31, 2015 was $13.3 million. See Footnote 10 for additional discussion on the change in the investment value. |
The Company’s current maximum exposure to loss related to IANR is $21.6 million, which represents the Company’s investment at fair value plus unpaid accrued dividends of $8.3 million as of March 31, 2015. The Company does not have any obligations or commitments to provide additional financial support to IANR. |
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: |
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| Three months ended | | | | |
March 31, | | | | |
(in thousands) | 2015 | | 2014 | | | | |
Sales revenues | $ | 149,472 | | | $ | 221,994 | | | | | |
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Service fee revenues (a) | 4,925 | | | 5,638 | | | | | |
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Purchases of product | 102,795 | | | 155,015 | | | | | |
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Lease income (b) | 1,663 | | | 1,664 | | | | | |
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Labor and benefits reimbursement (c) | 3,032 | | | 2,868 | | | | | |
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Other expenses (d) | 338 | | | 486 | | | | | |
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(a) | Service fee revenues include management fees, corn origination fees, ethanol and DDG marketing fees, and other commissions. | | | | | | | | | | |
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(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. | | | | | | | | | | |
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(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. | | | | | | | | | | |
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(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. | | | | | | | | | | |
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(in thousands) | March 31, 2015 | | December 31, 2014 | | March 31, 2014 |
Accounts receivable (e) | $ | 13,507 | | | $ | 25,049 | | | $ | 30,609 | |
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Accounts payable (f) | 12,911 | | | 17,687 | | | 24,454 | |
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(e) | Accounts receivable represents amounts due from related parties for sales of corn, leasing revenue and service fees. | | | | | | | | | | |
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(f) | Accounts payable represents amounts due to related parties for purchases of ethanol and other various items. | | | | | | | | | | |
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For the quarters ended March 31, 2015 and 2014, revenues recognized for the sale of ethanol that the Company purchased from the unconsolidated ethanol LLCs were $101.8 million and $144.3 million, respectively. For the quarters ended March 31, 2015 and 2014, revenues recognized for the sale of corn to the unconsolidated ethanol LLCs under these agreements were $96.7 million and $117.2 million, respectively. |
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From time to time, the Company enters into derivative contracts with certain of its related parties for the purchase and sale of corn 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 for as of March 31, 2015, December 31, 2014 and March 31, 2014 was $2.4 million, $1.4 million and $24.0 million, respectively. The fair value of derivative contract liabilities with related parties as of March 31, 2015, December 31, 2014 and March 31, 2014 was $0.3 million, $3.8 million and $10.3 million, respectively. |