Edgar Filing: ANDERSONS INC

ANDE 2014.03.31 10-Q

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 March 31, 2014



¨	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.)



480 W. Dussel Drive, 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 “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated Filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

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 million common shares outstanding, no par value, at April 30, 2014.

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THE ANDERSONS, INC.

INDEX



	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets – March 31, 2014, December 31, 2013 and March 31, 2013	3
Condensed Consolidated Statements of Income – Three months ended March 31, 2014 and 2013	5
Condensed Consolidated Statements of Comprehensive Income – Three months ended March 31, 2014 and 2013	6
Condensed Consolidated Statements of Cash Flows – Three months ended March 31, 2014 and 2013	7
Condensed Consolidated Statements of Equity – Three months ended March 31, 2014 and 2013	9
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3. Quantitative and Qualitative Disclosures about Market Risk	37
Item 4. Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	38
Item 1A. Risk Factors	38
Item 5. Other Information	38
Item 6. Exhibits	39

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Part I. Financial Information

Item 1. Financial Statements

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

	March 31, 2014		December 31, 2013		March 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	43,693	$	309,085	$	58,284
Restricted cash	652		408		635
Accounts receivable, net	191,972		173,930		197,842
Inventories (Note 2)	725,584		614,923		753,378
Commodity derivative assets – current	119,330		71,319		158,079
Deferred income taxes	9,104		4,931		15,482
Other current assets	48,214		47,188		63,350
Total current assets	1,138,549		1,221,784		1,247,050
Other assets:
Commodity derivative assets – noncurrent	1,365		246		813
Goodwill	58,554		58,554		54,387
Other assets, net	55,974		59,456		50,148
Pension assets	15,079		14,328		—
Equity method investments	232,396		291,109		190,377
	363,368		423,693		295,725
Railcar assets leased to others, net (Note 3)	237,534		240,621		244,706
Property, plant and equipment, net (Note 3)	386,132		387,458		364,307
Total assets	$	2,125,583	$	2,273,556	$	2,151,788

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

	March 31, 2014			December 31, 2013			March 31, 2013
Liabilities and equity
Current liabilities:
Borrowings under short-term line of credit	$	226,100		$	—		$	292,100
Accounts payable for grain	183,998			592,183			183,997
Other accounts payable	177,623			154,599			182,013
Customer prepayments and deferred revenue	124,981			59,304			160,191
Commodity derivative liabilities – current	32,153			63,954			50,157
Accrued expenses and other current liabilities	56,290			70,295			52,519
Current maturities of long-term debt (Note 10)	90,760			51,998			43,052
Total current liabilities	891,905			992,333			964,029
Other long-term liabilities	14,749			15,386			16,898
Commodity derivative liabilities – noncurrent	734			6,644			3,220
Employee benefit plan obligations	39,989			39,477			52,927
Long-term debt, less current maturities (Note 10)	306,161			375,213			412,700
Deferred income taxes	128,716			120,082			77,694
Total liabilities	1,382,254			1,549,135			1,527,468
Commitments and contingencies (Note 11)
Shareholders’ equity:
Common shares, without par value (42,000 shares authorized; 28,797 shares issued)	96			96			96
Preferred shares, without par value (1,000 shares authorized; none issued)	—			—			—
Additional paid-in-capital	184,474			184,380			181,845
Treasury shares, at cost (378, 607 and 713 shares at 3/31/14, 12/31/13 and 3/31/13, respectively)	(8,750		)	(10,222		)	(11,418		)
Accumulated other comprehensive loss	(24,157		)	(21,181		)	(43,277		)
Retained earnings	567,849			548,401			480,156
Total shareholders’ equity of The Andersons, Inc.	719,512			701,474			607,402
Noncontrolling interests	23,817			22,947			16,918
Total equity	743,329			724,421			624,320
Total liabilities and equity	$	2,125,583		$	2,273,556		$	2,151,788

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Income

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



	Three months ended March 31,
	2014		2013
Sales and merchandising revenues	$	1,003,294	$	1,271,970
Cost of sales and merchandising revenues	926,519		1,192,697
Gross profit	76,775		79,273
Operating, administrative and general expenses	70,985		62,008
Interest expense	6,002		6,404
Other income:
Equity in earnings of affiliates, net	20,501		7,804
Other income, net	19,612		2,726
Income before income taxes	39,901		21,391
Income tax provision	13,872		9,079
Net income	26,029		12,312
Net income (loss) attributable to the noncontrolling interests	3,321		(266		)
Net income attributable to The Andersons, Inc.	$	22,708	$	12,578
Per common share:
Basic earnings attributable to The Andersons, Inc. common shareholders	$	0.80	$	0.45
Diluted earnings attributable to The Andersons, Inc. common shareholders	$	0.80	$	0.45
Dividends paid	$	0.1100	$	0.1067

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)(In thousands)



	Three months ended March 31,
	2014			2013
Net income	$	26,029		$	12,312
Other comprehensive (loss) income, net of tax:
(Decrease) increase in estimated fair value of investment in debt securities (net of income tax of ($1,958) and $187)	(3,232		)	303
Change in unrecognized actuarial loss and prior service cost (net of income tax of $113 and $232 - Note 14)	187			1,769
Cash flow hedge activity (net of income tax of $42 and $96)	69			30
Other comprehensive (loss) income	(2,976		)	2,102
Comprehensive income	23,053			14,414
Comprehensive income (loss) attributable to the noncontrolling interests	3,321			(266		)
Comprehensive income attributable to The Andersons, Inc.	$	19,732		$	14,680

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)(In thousands)



	Three months ended March 31,
	2014			2013
Operating Activities
Net income	$	26,029		$	12,312
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization	13,856			14,801
Bad debt expense	377			269
Cash distributions in excess of income of unconsolidated affiliates	45,061			531
Gain on sale of investments in affiliates	(17,055		)	—
Gains on sales of railcars and related leases	(10,769		)	(9,699		)
Excess tax benefit from share-based payment arrangement	(1,608		)	(55		)
Deferred income taxes	6,264			805
Stock-based compensation expense	1,462			768
Other	(2,504		)	102
Changes in operating assets and liabilities:
Accounts receivable	(19,390		)	11,815
Inventories	(110,661		)	23,299
Commodity derivatives	(86,842		)	(34,915		)
Other assets	(1,730		)	(9,534		)
Accounts payable for grain	(408,185		)	(398,656		)
Other accounts payable and accrued expenses	67,082			52,174
Net cash used in operating activities	(498,613		)	(335,983		)
Investing Activities
Acquisition of businesses, net of cash acquired	—			(3,345		)
Purchases of railcars	(14,005		)	(44,241		)
Proceeds from sale of railcars	25,465			36,144
Purchases of property, plant and equipment	(5,523		)	(6,194		)
Proceeds from sale of property, plant and equipment	108			68
Proceeds from sale of investments in affiliates	31,457			—
Change in restricted cash	(244		)	(237		)
Net cash provided by (used in) investing activities	37,258			(17,805		)
Financing Activities
Net change in short-term borrowings	226,100			267,881
Proceeds from issuance of long-term debt	3,598			25,254
Payments of long-term debt	(30,560		)	(17,888		)
Proceeds from sale of treasury shares to employees and directors	1,499			1,587
Payments of debt issuance costs	(3,175		)	(46		)
Dividends paid	(3,107		)	(2,989		)
Excess tax benefit from share-based payment arrangement	1,608			55
Net cash provided by financing activities	195,963			273,854
Decrease in cash and cash equivalents	(265,392		)	(79,934		)
Cash and cash equivalents at beginning of period	309,085			138,218
Cash and cash equivalents at end of period	$	43,693		$	58,284

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	Three months ended March 31,
	2014		2013
Supplemental disclosure of cash flow information
Capital project costs incurred but not yet paid	$	4,020	$	4,372
Purchase of capitalized software through seller-financing	$	2,562	$	4,294

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Condensed Consolidated Statements of Equity

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



	Common Shares		Additional Paid-in Capital			Treasury Shares			Accumulated Other Comprehensive Loss			Retained Earnings			Noncontrolling Interests			Total
Balance at December 31, 2012	$	96	$	181,627		$	(12,559	)	$	(45,379	)	$	470,628		$	17,032		$	611,445
Net income (loss)												12,578			(266		)	12,312
Other comprehensive income									2,102									2,102
Proceeds received from minority investor															152			152
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $1,052 (118 shares)			163			1,141												1,304
Dividends declared ($0.1067 per common share)												(2,995		)				(2,995		)
Performance share unit dividend equilavents			55									(55		)				—
Balance at March 31, 2013	$	96	$	181,845		$	(11,418	)	$	(43,277	)	$	480,156		$	16,918		$	624,320

Balance at December 31, 2013	$	96	$	184,380		$	(10,222	)	$	(21,181	)	$	548,401		$	22,947		$	724,421
Net income												22,708			3,321			26,029
Other comprehensive loss									(2,976		)							(2,976		)
Cash distributions to noncontrolling interest															(2,451		)	(2,451		)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $1,530 (214 shares)			18			1,472												1,490
Payment of cash in lieu for stock split (187 shares)			(58		)													(58		)
Dividends declared ($0.1100 per common share)												(3,126		)				(3,126		)
Performance share unit dividend equivalents			134									(134		)				—
Balance at March 31, 2014	$	96	$	184,474		$	(8,750	)	$	(24,157	)	$	567,849		$	23,817		$	743,329

See Notes to Condensed Consolidated Financial Statements

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The Andersons, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation and Consolidation

These Condensed Consolidated Financial Statements include the accounts of The Andersons, Inc. and its wholly owned and controlled subsidiaries (the “Company”). All significant 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 recurring items, considered necessary for a fair statement of the results of operations for the periods indicated, have been made. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2014.

The Condensed Consolidated Balance Sheet data at December 31, 2013 was derived from audited Consolidated Financial Statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. A Condensed Consolidated Balance Sheet as of March 31, 2013 has been included as the Company operates in several seasonal industries.

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, 2013 (the “2013 Form 10-K”).

On December 19, 2013, the Company's board of directors approved a three-for-two stock split effected in the form of a stock dividend. The split was effective February 18, 2014 and all share, dividend and per share information within this document has been retroactively adjusted to reflect the stock split.

2. Inventories

Major classes of inventories are as follows:



(in thousands)	March 31, 2014		December 31, 2013		March 31, 2013
Grain	$	488,492	$	432,893	$	507,927
Ethanol and by-products	17,658		14,453		25,531
Agricultural fertilizer and supplies	151,144		100,593		157,882
Lawn and garden fertilizer and corncob products	37,218		39,960		30,343
Retail merchandise	26,205		22,505		28,097
Railcar repair parts	4,661		4,312		3,469
Other	206		207		129
	$	725,584	$	614,923	$	753,378

Inventories on the Condensed Consolidated Balance Sheets at March 31, 2014, December 31, 2013 and March 31, 2013 do not include 5.6 million, 13.3 million and 17.7 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 does not anticipate material losses on any deficiencies.

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3. Property, Plant and Equipment

The components of property, plant and equipment are as follows:



(in thousands)	March 31, 2014		December 31, 2013		March 31, 2013
Land	$	21,906	$	21,801	$	22,637
Land improvements and leasehold improvements	67,876		67,153		64,972
Buildings and storage facilities	234,109		231,976		219,500
Machinery and equipment	309,283		308,215		290,930
Software	13,403		13,351		13,464
Construction in progress	52,200		48,135		38,893
	698,777		690,631		650,396
Less: accumulated depreciation and amortization	312,645		303,173		286,089
	$	386,132	$	387,458	$	364,307

Depreciation expense on property, plant and equipment amounted to $9.9 million, $37.5 million and $9.3 million for the year-to-date periods ended March 31, 2014, December 31, 2013, and March 31, 2013, respectively.

In December 2013, the Company recorded charges totaling $4.4 million for asset impairment, primarily due to the write down of asset values in Retail. 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 the fair value of the impaired assets, which were not material, as Level 3 in the fair value hierarchy.

Railcar assets leased to others

The components of Railcar assets leased to others are as follows:



(in thousands)	March 31, 2014		December 31, 2013		March 31, 2013
Railcar assets leased to others	$	316,520	$	317,750	$	325,633
Less: accumulated depreciation	78,986		77,129		80,927
	$	237,534	$	240,621	$	244,706

Depreciation expense on railcar assets leased to others amounted to $3.4 million, $14.7 million and $3.7 million for the year-to-date periods ended March 31, 2014, December 31, 2013 and March 31, 2013, respectively.

4. 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 forward and option contracts with various counterparties. The exchange traded contracts are primarily via the regulated Chicago Mercantile Exchange. 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 same method it uses to value its grain inventory. 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

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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 sales and merchandising revenues.

Generally accepted accounting principles permit a party to a master netting arrangement to offset fair value amounts recognized for derivative instruments against the right to reclaim cash collateral or obligation to return cash collateral under the same master netting arrangement. The Company has master netting arrangements for its exchange traded futures and options contracts and certain over-the-counter contracts. When the Company enters into a future, option or an over-the-counter contract, an initial margin deposit may be required by the counterparty. The amount of the margin deposit varies by commodity. If the market price of a future, option or an over-the-counter contract moves in a direction that is adverse to the Company’s position, an additional margin deposit, called a maintenance margin, is required. The Company nets, by counterparty, its futures and over-the-counter positions against the cash collateral provided or received. 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 March 31, 2014, December 31, 2013 and March 31, 2013, 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 short-term commodity derivative assets (or liabilities) on the Condensed Consolidated Balance Sheets:



	March 31, 2014					December 31, 2013				March 31, 2013
(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
Collateral paid	$	142,791		$	—	$	15,480	$	—	$	73,033	$	—
Fair value of derivatives	(88,498		)	—		31,055		—		35,403		—
Balance at end of period	$	54,293		$	—	$	46,535	$	—	$	108,436	$	—

Certain of our contracts allow the Company to post items other than cash as collateral. Grain inventory posted as collateral on our derivative contracts are recorded in Inventories on the Condensed Consolidated Balance Sheets. There was no inventory posted as collateral as of March 31, 2014. The fair value of inventory posted as collateral was $0.3 million, and $0.7 million as of December 31, 2013, and March 31, 2013, respectively.

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



	March 31, 2014
(in thousands)	Commodity derivative assets - current			Commodity derivative assets - noncurrent			Commodity derivative liabilities - current			Commodity derivative liabilities - noncurrent			Total
Commodity derivative assets	$	86,512		$	1,543		$	4,552		$	308		$	92,915
Commodity derivative liabilities	(109,973		)	(178		)	(36,705		)	(1,042		)	(147,898		)
Cash collateral	142,791			—			—			—			142,791
Balance sheet line item totals	$	119,330		$	1,365		$	(32,153	)	$	(734	)	$	87,808

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	December 31, 2013
(in thousands)	Commodity derivative assets - current			Commodity derivative assets - noncurrent		Commodity derivative liabilities - current			Commodity derivative liabilities - noncurrent			Total
Commodity derivative assets	$	69,289		$	246	$	1,286		$	49		$	70,870
Commodity derivative liabilities	(13,450		)	—		(65,240		)	(6,693		)	(85,383		)
Cash collateral	15,480			—		—			—			15,480
Balance sheet line item totals	$	71,319		$	246	$	(63,954	)	$	(6,644	)	$	967



	March 31, 2013
(in thousands)	Commodity derivative assets - current			Commodity derivative assets - noncurrent			Commodity derivative liabilities - current			Commodity derivative liabilities - noncurrent			Total
Commodity derivative assets	$	101,833		$	834		$	3,898		$	19		$	106,584
Commodity derivative liabilities	(16,787		)	(21		)	(54,055		)	(3,239		)	(74,102		)
Cash collateral	73,033			—			—			—			73,033
Balance sheet line item totals	$	158,079		$	813		$	(50,157	)	$	(3,220	)	$	105,515

The gains included in the Company’s Condensed Consolidated Statements of Income and the line items in which they are located for the three months ended March 31, 2014 and 2013 are as follows:



	Three months ended March 31,
(in thousands)	2014			2013
Gains (losses) on commodity derivatives included in sales and merchandising revenues	$	(53,686	)	$	36,368

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The Company had the following volume of commodity derivative contracts outstanding (on a gross basis) at March 31, 2014, December 31, 2013 and March 31, 2013:



	March 31, 2014
Commodity	Number of bushels (in thousands)	Number of gallons (in thousands)	Number of pounds (in thousands)	Number of tons (in thousands)
Non-exchange traded:
Corn	274,762	—	—	—
Soybeans	29,332	—	—	—
Wheat	12,753	—	—	—
Oats	31,691	—	—	—
Ethanol	—	278,697	—	—
Corn oil	—	—	20,790	—
Other	207	—	—	110
Subtotal	348,745	278,697	20,790	110
Exchange traded:
Corn	197,405	—	—	—
Soybeans	20,810	—	—	—
Wheat	26,750	—	—	—
Oats	8,335	—	—	—
Ethanol	—	82,194	—	—
Subtotal	253,300	82,194	—	—
Total	602,045	360,891	20,790	110



	December 31, 2013
Commodity	Number of bushels (in thousands)	Number of gallons (in thousands)	Number of pounds (in thousands)	Number of tons (in thousands)
Non-exchange traded:
Corn	185,978	—	—	—
Soybeans	18,047	—	—	—
Wheat	11,485	—	—	—
Oats	27,939	—	—	—
Ethanol	—	179,212	—	—
Corn oil	—	—	25,911	—
Other	81	—	—	89
Subtotal	243,530	179,212	25,911	89
Exchange traded:
Corn	124,420	—	—	—
Soybeans	11,030	—	—	—
Wheat	23,980	—	—	—
Oats	6,820	—	—	—
Ethanol	—	21,630	—	—
Subtotal	166,250	21,630	—	—
Total	409,780	200,842	25,911	89

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	March 31, 2013
Commodity	Number of bushels (in thousands)	Number of gallons (in thousands)	Number of pounds (in thousands)	Number of tons (in thousands)
Non-exchange traded:
Corn	236,725	—	—	—
Soybeans	14,639	—	—	—
Wheat	22,818	—	—	—
Oats	8,562	—	—	—
Ethanol	—	150,988	—	—
Corn oil	—	—	14,824	—
Other	173	—	—	102
Subtotal	282,917	150,988	14,824	102
Exchange traded:
Corn	140,030	—	—	—
Soybeans	9,575	—	—	—
Wheat	32,760	—	—	—
Oats	4,540	—	—	—
Ethanol	—	32,970	—	—
Subtotal	186,905	32,970	—	—
Total	469,822	183,958	14,824	102

5. Earnings Per Share

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 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 March 31,
(in thousands, except per common share data)	2014		2013
Net income attributable to The Andersons, Inc.	$	22,708	$	12,578
Less: Distributed and undistributed earnings allocated to nonvested restricted stock	104		49
Earnings available to common shareholders	$	22,604	$	12,529
Earnings per share – basic:
Weighted average shares outstanding – basic	28,155		27,912
Earnings per common share – basic	$	0.80	$	0.45
Earnings per share – diluted:
Weighted average shares outstanding – basic	28,155		27,912
Effect of dilutive awards	69		150
Weighted average shares outstanding – diluted	28,224		28,062
Earnings per common share – diluted	$	0.80	$	0.45

There were no antidilutive stock-based awards outstanding at March 31, 2014 or 2013.

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6. Employee Benefit Plans

The following are components of the net periodic benefit cost for the pension and postretirement benefit plans maintained by the Company for the three months ended March 31, 2014 and 2013:



	Pension Benefits
(in thousands)	Three months ended March 31,
(in thousands)	2014			2013
Service cost	$	43		$	—
Interest cost	1,162			1,065
Expected return on plan assets	(1,905		)	(1,755		)
Recognized net actuarial loss	207			392
Benefit income	$	(493	)	$	(298	)



	Postretirement Benefits
(in thousands)	Three months ended March 31,
(in thousands)	2014			2013
Service cost	$	187		$	224
Interest cost	393			346
Amortization of prior service cost	(136		)	(136		)
Recognized net actuarial loss	229			359
Benefit cost	$	673		$	793

7. Segment Information

The Company’s operations include six 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 Lansing Trade Group, LLC (“LTG”) and the Thompsons Limited joint ventures. The Ethanol business purchases and sells ethanol and also manages the ethanol production facilities organized as limited liability companies, one of which is consolidated and three of which are investments accounted for under the equity method, and also has various service contracts for these investments. Rail operations include the leasing, marketing and fleet management of railcars and locomotives, railcar repair and metal fabrication. The Plant Nutrient business manufactures and distributes agricultural inputs, primarily fertilizer, to dealers and farmers. Turf & Specialty operations include the production and distribution of turf care and corncob-based products. The Retail business operates large retail stores, a specialty food market, a distribution center and a lawn and garden equipment sales and service facility. Included in “Other” are the corporate level amounts not attributable 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.

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	Three months ended March 31,
	2014		2013
(in thousands)
Revenues from external customers
Grain	$	583,159	$	836,495
Ethanol	188,820		199,309
Plant Nutrient	107,630		111,902
Rail	52,302		46,364
Turf & Specialty	43,725		47,187
Retail	27,658		30,713
Total	$	1,003,294	$	1,271,970



	Three months ended March 31,
(in thousands)	2014		2013
Inter-segment sales
Grain	$	—	$	332
Plant Nutrient	7,367		7,697
Rail	109		104
Turf & Specialty	806		999
Total	$	8,282	$	9,132



	Three months ended March 31,
(in thousands)	2014		2013
Interest expense (income)
Grain	$	2,775	$	3,849
Ethanol	100		326
Plant Nutrient	771		918
Rail	1,656		1,513
Turf & Specialty	418		402
Retail	170		215
Other	112		(819		)
Total	$	6,002	$	6,404



	Three months ended March 31,
(in thousands)	2014		2013
Equity in earnings (loss) of affiliates, net
Grain	$	1,884	$	7,910
Ethanol	18,617		(106		)
Total	$	20,501	$	7,804

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	Three months ended March 31,
(in thousands)	2014			2013
Other income (expense), net
Grain (a)	$	18,346		$	571
Ethanol	(226		)	231
Plant Nutrient	185			(25		)
Rail	710			946
Turf & Specialty	307			275
Retail	112			114
Other	178			614
Total	$	19,612		$	2,726

(a) Increase is related to gain on LTG partial share redemption. See Note 8. Related Party Transactions for details of the LTG gain in 2014.



	Three months ended March 31,
(in thousands)	2014			2013
Income (loss) before income taxes
Grain	$	11,306		$	8,299
Ethanol	19,824			2,479
Plant Nutrient	(1,411		)	(562		)
Rail	15,045			14,574
Turf & Specialty	1,375			4,001
Retail	(2,335		)	(3,169		)
Other	(7,224		)	(3,965		)
Noncontrolling interests	3,321			(266		)
Total	$	39,901		$	21,391



(in thousands)	March 31, 2014		December 31, 2013		March 31, 2013
Identifiable assets
Grain	$	979,608	$	921,914	$	1,025,350
Ethanol	224,931		229,797		209,666
Plant Nutrient	311,219		268,238		323,653
Rail	303,532		312,654		302,717
Turf & Specialty	110,538		89,939		97,842
Retail	47,710		44,910		53,668
Other	148,045		406,104		138,892
Total	$	2,125,583	$	2,273,556	$	2,151,788

8. 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 LTG for a partial redemption of the Company's investment in LTG for $60 million. The redemption reduced the Company's interest in LTG 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

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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, net for the three months ended March 31, 2014.

In July 2013, the Company, along with Lansing Trade Group, LLC established joint ventures that acquired 100% of the stock of Thompsons Limited, including its investment in the related U.S. operating company, for a purchase price of $152 million, which included an adjustment for excess working capital. The purchase price included $48 million cash paid by the Company, $40 million cash paid by LTG, and $64 million of external debt at Thompsons Limited. As part of the purchase LTG also contributed a Canadian branch of its business to Thompsons Limited. Each Company owns 50% of the investment. Thompsons Limited is a grain and food-grade bean handler and agronomy input provider, headquartered in Blenheim, Ontario, and operates 12 locations across Ontario and Minnesota. The Company does not hold a majority of the outstanding shares of the Thompsons Limited joint ventures. All major operating decisions of these joint ventures are made by their Board of Directors, and the Company does not have a majority of the board seats. Due to these factors, the Company does not have control over these joint ventures and accounts for these investments under the equity method of accounting.

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



(in thousands)	March 31, 2014		December 31, 2013		March 31, 2013
The Andersons Albion Ethanol LLC (a)	$	31,867	$	40,194	$	31,169
The Andersons Clymers Ethanol LLC (a)	40,412		44,418		32,900
The Andersons Marathon Ethanol LLC (a)	45,946		46,811		32,164
Lansing Trade Group, LLC (b)	60,837		106,028		91,752
Thompsons Limited (c)	49,520		49,833		—
Other	3,814		3,825		2,392
Total	$	232,396	$	291,109	$	190,377

(a) Decrease in LLCs investment balance is due to cash distributions made during the first quarter of 2014, partially offset by strong earnings

(b) Decrease in LTG investment balance is driven by the sale of a portion of the Company's interest in LTG during the first quarter of 2014

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.

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



	% ownership at March 31, 2014	Three months ended March 31,
(in thousands)	% ownership at March 31, 2014	2014			2013
The Andersons Albion Ethanol LLC	53%	$	4,943		$	944
The Andersons Clymers Ethanol LLC	38%	5,539			(219		)
The Andersons Marathon Ethanol LLC	50%	8,135			(832		)
Lansing Trade Group, LLC	41% (a)	2,221			7,991
Thompsons Limited (b)	50%	(313		)	—
Other	5%-23%	(24		)	(80		)
Total		$	20,501		$	7,804

(a) This does not consider restricted management units which once vested will reduce the ownership percentage by approximately 2%

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

Total distributions received from unconsolidated affiliates, excluding proceeds on sale of investments of affiliates, were $65.6 million for the three months ended March 31, 2014.

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In the first quarter of 2013, LTG qualified as a significant subsidiary of the Company under the income test. The following table presents the required summarized unaudited financial information of this investment for the three months ended March 31, 2014 and 2013:



(in thousands)	Three months ended March 31,
(in thousands)	2014		2013
Sales	$	2,222,994	$	2,553,145
Gross profit	31,056		44,107
Income before income taxes	8,002		17,117
Net income	5,573		16,892
Net income attributable to LTG	5,320		16,798

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, redemption and conversion. 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, 2014 was $20.5 million.

Based on the Company’s assessment, IANR is considered a variable interest entity (“VIE”). Since the Company does not possess the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, it is not considered to be the primary beneficiary of IANR and therefore does not consolidate IANR. The decisions that most significantly impact the economic performance of IANR are made by IANR’s Board of Directors. The Board of Directors has five directors; two directors from the Company, two directors from the common shareholders and one independent director who is elected by unanimous decision of the other four directors. The vote of four of the five directors is required for all key decisions.

The Company’s current maximum exposure to loss related to IANR is $26.5 million, which represents the Company’s investment at fair value plus unpaid accrued dividends to date of $6.0 million. The Company does not have any obligation 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:



	Three months ended March 31,
(in thousands)	2014		2013
Sales revenues	$	221,994	$	309,705
Service fee revenues (a)	5,638		5,801
Purchases of product	155,015		161,955
Lease income (b)	1,664		1,552
Labor and benefits reimbursement (c)	2,868		2,643
Other expenses (d)	486		358
Accounts receivable at March 31 (e)	30,609		12,550
Accounts payable at March 31 (f)	24,454		24,967


(a)	Service fee revenues include management fee, corn origination fee, 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.


(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.


(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 quarters ended March 31, 2014 and 2013, revenues recognized for the sale of ethanol that the Company purchased from the unconsolidated ethanol LLCs were $144.3 million and $145.8 million, respectively. For the quarters ended March 31, 2014 and 2013, revenues recognized for the sale of corn to the unconsolidated ethanol LLCs under these agreements were $117.2 million and $204.9 million, respectively.

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 derivative contracts it enters into with unrelated parties. The fair value of derivative contract assets with related parties for the periods ended March 31, 2014, December 31, 2013 and March 31, 2013 was $24.0 million, $8.9 million, and $5.0 million, respectively. The fair value of derivative contract liabilities with related parties for the periods ended March 31, 2014, December 31, 2013 and March 31, 2013 was $10.3 million, $1.2 million, and $0.8 million, respectively.

9. Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2014, December 31, 2013 and March 31, 2013:



(in thousands)	March 31, 2014
Assets (liabilities)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	25,821	$	—		$	—	$	25,821
Restricted cash	652		—			—		652
Commodity derivatives, net (a)	82,626		5,182			—		87,808
Convertible preferred securities (b)	—		—			20,530		20,530
Other assets and liabilities (c)	10,960		(951		)	—		10,009
Total	$	120,059	$	4,231		$	20,530	$	144,820



(in thousands)	December 31, 2013
Assets (liabilities)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	97,751	$	—		$	—	$	97,751
Restricted cash	408		—			—		408
Commodity derivatives, net (a)	50,777		(49,810		)	—		967
Convertible preferred securities (b)	—		—			25,720		25,720
Other assets and liabilities (c)	10,143		(159		)	—		9,984
Total	$	159,079	$	(49,969	)	$	25,720	$	134,830

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(in thousands)	March 31, 2013
Assets (liabilities)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	49,202	$	—		$	—	$	49,202
Restricted cash	635		—			—		635
Commodity derivatives, net (a)	110,581		(5,066		)	—		105,515
Convertible preferred securities (b)	—		—			17,710		17,710
Other assets and liabilities (c)	8,861		(1,784		)	—		7,077
Total	$	169,279	$	(6,850	)	$	17,710	$	180,139


(a)	Includes associated cash posted/received as collateral


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


(c)	Included in other assets and liabilities are interest rate and foreign currency derivatives and swaptions (Level 2) and deferred compensation assets (Level 1)

Level 1 commodity derivatives reflect the fair value of the exchanged-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 significant input to fair value for these commodity contracts.

The Company’s convertible preferred securities are measured at fair value using a combination of the income and market approaches. Specifically, the income approach incorporates the use of the Discounted Cash Flow method, whereas the Market Approach incorporates the use of the Guideline Public Company method. Application of the Discounted Cash Flow method requires estimating the annual cash flows that the business enterprise is expected to generate in the future. The assumptions input into this method are estimated annual cash flows for a specified estimation period, the discount rate, and the terminal value at the end of the estimation period. In the Guideline Public Company method, valuation multiples, including total invested capital, are calculated based on financial statements and stock price data from selected guideline publicly traded companies. On an annual basis, a comparative analysis is then performed for factors including, but not limited to size, profitability and growth to determine fair value.

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



	2014			2013
(in thousands)	Convertible preferred securities			Convertible preferred securities
Asset (liability) at December 31,	$	25,720		$	17,220
Unrealized gains included in other comprehensive income	(5,190		)	490
Asset at March 31,	$	20,530		$	17,710

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The following table summarizes information about the Company's Level 3 fair value measurements as of March 31, 2014:



Quantitative Information about Level 3 Fair Value Measurements
					Range
(in thousands)	Fair Value as of March 31, 2014		Valuation Method	Unobservable Input	Low		High		Weighted Average
Convertible Preferred Securities	$	20,530	Market Approach	EBITDA Multiples	7.50		8.00		7.75
			Income Approach	Discount Rate	14.5	%	14.5	%	14.5	%

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)	March 31, 2014		December 31, 2013
Fair value of long-term debt, including current maturities	$	400,495	$	429,723
Fair value in excess of carrying value	3,574		2,512

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

10. Debt

The Company is party to borrowing arrangements with a syndicate of banks. One such agreement was amended on March 4, 2014 and provides the Company with $850 million in lines of credit. The Company can designate up to $400 million of borrowings as long-term when the debt is used for long-term purposes such as replacing long-term debt that is maturing, funding the purchase of long-term assets, or increasing permanent working capital when needed. The maturity date for the lines of credit is March 2019. See Note 10 in the Company’s 2013 Form 10-K for an additional description of the remaining arrangements. Total borrowing capacity for the Company under all lines of credit is currently at $878.1 million, including $28.1 million non-recourse debt of The Andersons Denison Ethanol LLC ("TADE"). At March 31, 2014, the Company had a total of $621.6 million available for borrowing under its lines of credit. The Company was in compliance with all financial and non-financial covenants as of March 31, 2014.

The Company’s short-term and long-term debt at March 31, 2014, December 31, 2013 and March 31, 2013 consisted of the following:



(in thousands)	March 31, 2014		December 31, 2013		March 31, 2013
Borrowings under short-term line of credit – nonrecourse	$	—	$	—	$	8,400
Borrowings under short-term line of credit – recourse	226,100		—		283,700
Total borrowings under short-term line of credit	$	226,100	$	—	$	292,100
Current maturities of long-term debt – nonrecourse	$	6,012	$	6,012	$	3,271
Current maturities of long-term debt – recourse	84,748		45,986		39,781
Total current maturities of long-term debt	$	90,760	$	51,998	$	43,052
Long-term debt, less current maturities – nonrecourse	$	3,288	$	4,063	$	24,141
Long-term debt, less current maturities – recourse	302,873		371,150		388,559
Total long-term debt, less current maturities	$	306,161	$	375,213	$	412,700

11. 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

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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. In 2013, the Company recorded a $3.5 million gain in other income related to the settlement of an early rail lease termination.

The estimated range of loss for all outstanding claims that are considered reasonably possible of occurring is not material. The Company has received, and is cooperating fully with, a request for information from the United States Environmental Protection Agency (“U.S. EPA”) regarding the history of our grain and fertilizer facility along the Maumee River in Toledo, Ohio. The U.S. EPA is investigating the possible introduction into the Maumee River of hazardous materials potentially leaching from rouge piles deposited along the riverfront by glass manufacturing operations that existed in the area prior to our initial acquisition of the land in 1960. The Company has on several prior occasions cooperated with local, state and federal regulators to install or improve drainage systems to contain storm water runoff and sewer discharges along our riverfront property to minimize the potential for such leaching. Other area land owners and the successor to the original glass making operations have also been contacted by the U.S. EPA for information. No claim or finding has been asserted thus far.

12. Business Acquisitions

There were no business acquisitions completed in the first quarter of 2014.

Prior Year Business Acquisitions

On December 9, 2013, the Turf and Specialty Group completed the purchase of substantially all of the assets of Cycle Group, Inc. for a purchase price of $4.2 million. The operation consists of a modern granulated products facility in Mocksville, North Carolina.

The summarized final purchase price allocation is as follows:



(in thousands)
Inventory	$	77
Intangible assets	330
Property, plant and equipment	3,825
Total purchase price	$	4,232

Details of the intangible assets acquired are as follows:



(in thousands)	Fair Value		Useful Life
Customer relationships	$	150	5 years
Noncompete agreement	55		7 years
Patents	125		5 years
Total identifiable intangible assets	$	330	5 years *

*weighted average number of years

On August 5, 2013, the Company completed the purchase of substantially all of the assets of Mile Rail, LLC and a sister entity for a purchase price of $7.8 million. The operations consist of a railcar repair and cleaning facility headquartered in Kansas City, Missouri, with 2 satellite locations in Nebraska and Indiana.

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The summarized final purchase price allocation is as follows:



(in thousands)
Inventory	$	512
Other assets	14
Intangible assets	650
Goodwill	4,167
Property, plant and equipment	2,605
Other liabilities	(144		)
Total purchase price	$	7,804

The goodwill recognized as a result of the Mile Rail acquisition is $4.2 million, which is fully deductible for tax purposes, and is included in the Rail segment. The goodwill relates to geography that is complimentary to the Rail Group's existing repair network and from its additional connections to several U.S. Class I railroads, from which we anticipate future growth and capacity to generate gross profit.

Details of the intangible assets acquired are as follows:



(in thousands)	Fair Value		Useful Life
Customer relationships	$	400	5 years
Noncompete agreement	250		5 years
Total identifiable intangible assets	$	650	5 years *

*weighted average number of years

On December 3, 2012, the Company completed the purchase of a majority of the grain and agronomy assets of Green Plains Grain Company ("GPG"), a subsidiary of Green Plains Renewable Energy, Inc. for a purchase price of $120.2 million, which included a $3.3 million payable to the acquiree that was outstanding as of December 31, 2012 and paid in January 2013. The various facilities located in Iowa and Tennessee have a combined grain storage capacity of more than 32.0 million bushels and 12,000 tons of nutrient storage.

During the first quarter of 2013, the purchase price allocation for Green Plains Grain Company, which was acquired in the fourth quarter of 2012, was finalized. The measurement period adjustments to the purchase price allocation were the result of additional information obtained since the filing of our Form 10-K for the year ended December 31, 2012. December 31, 2012 balances have been revised to include the effect of the adjustment as if the additional information had been available on the acquisition date. Due to these revision of estimates, goodwill increased $3 million with the majority of the offset to intangible assets.

The summarized final purchase price allocation is as follows:



(in thousands)
Accounts receivable	$	19,174
Inventory	121,983
Property, plant and equipment	57,828
Intangible assets	4,600
Goodwill	33,175
Commodity derivatives	4,701
Other assets	1,775
Accounts payable	(91,001		)
Debt assumed	(29,632		)
Other liabilities and noncontrolling interests	(2,371		)
Total purchase price	$	120,232

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The goodwill recognized as a result of the GPG acquisition is $33.2 million, for which the full amount is deductible for tax purposes, and is included in the Grain reportable segment. The goodwill relates to the value of a fully functional business consisting of a successful management team and an experienced and talented work force.

Details of the intangible assets acquired are as follows:



(in thousands)	Fair Value		Useful Life
Supplier relationships	$	4,600	3 to 5 years
Total identifiable intangible assets	$	4,600	4 years *

*weighted average number of years

13. Income Taxes

For the three months ended March 31, 2014, the income tax effective rate was 34.8%. For the three months ended March 31, 2013, the income tax effective rate was 42.4%. The higher 2013 effective tax rate was due primarily to a correction made with respect to the accounting for the other comprehensive income (“OCI”) portion of the Company’s retiree health care plan liability and the Medicare Part D subsidy. The 2014 effective tax rate also reflects a benefit associated with income attributable to noncontrolling interests that does not increase tax expense.

The Company's 2013 income tax provision includes deferred tax expense of $1.4 million due to a correction of other comprehensive income related to the portion of the Company's retiree health care plan liability and the Medicare Part D subsidy. The correction related to the years 2009 through 2012 and was recorded during the first quarter of 2013. The impact of this error on amounts previously reported was determined to be immaterial to the Consolidated Financial Statements. As a result of the correction of the error, deferred income tax expense for the three months ended March 31, 2013 increased and accumulated other comprehensive loss decreased by $1.4 million.

14. 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 months ended March 31, 2014 and 2013:

Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)