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)	March 31, 2016		December 31, 2015		March 31, 2015
The Andersons Albion Ethanol LLC	$	32,483	$	32,871	$	28,726
The Andersons Clymers Ethanol LLC	28,199		29,278		36,063
The Andersons Marathon Ethanol LLC	29,446		31,255		31,869
Lansing Trade Group, LLC	98,763		101,531		78,594
Thompsons Limited (a)	45,479		43,964		44,224
Other	1,713		3,208		2,606
Total	$	236,083	$	242,107	$	222,082

(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:



	% ownership at March 31, 2016	Three months ended March 31,
(in thousands)	% ownership at March 31, 2016	2016			2015
The Andersons Albion Ethanol LLC	55%	$	(322	)	$	1,091
The Andersons Clymers Ethanol LLC	38%	(1,079		)	288
The Andersons Marathon Ethanol LLC	50%	(1,809		)	333
Lansing Trade Group, LLC	32% (a)	(2,767		)	2,410
Thompsons Limited (b)	50%	(1,000		)	(861		)
Other	5%-34%	—			—
Total		$	(6,977	)	$	3,261

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

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

Total distributions received from unconsolidated affiliates were $0.1 million and $4.6 million three months ended March 31, 2016 and March 31, 2015, respectively.

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, 2016 and 2015:



(in thousands)	Three months ended March 31,
(in thousands)	2016			2015
Sales	$	1,462,213		$	1,699,063
Gross profit	23,364			47,659
Income (loss) from continuing operations	(8,377		)	10,586
Net income (loss)	(8,407		)	9,345
Net income (loss) attributable to companies	(8,006		)	8,343

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 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 March 31,
(in thousands)	2016		2015
Sales revenues	$	194,838	$	149,472
Service fee revenues (a)	4,636		4,925
Purchases of product	101,953		102,795
Lease income (b)	2,037		1,663
Labor and benefits reimbursement (c)	3,898		3,032
Other expenses (d)	149		338


(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)	March 31, 2016		December 31, 2015		March 31, 2015
Accounts receivable (e)	$	19,066	$	13,362	$	13,507
Accounts payable (f)	16,124		13,784		12,911


(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 March 31, 2016 and 2015, revenues recognized for the sale of ethanol that the Company purchased from the unconsolidated ethanol LLCs were $87.6 million and $101.8 million, respectively. For the three months ended March 31, 2016 and 2015, revenues recognized for the sale of corn to the unconsolidated ethanol LLCs under these agreements were $118.5 million and $96.7 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 of derivative contracts it enters into with unrelated parties. The fair value of derivative contract assets with related parties as of March 31, 2016, December 31, 2015 and March 31, 2015 was $2.3 million, $2.3 million and $2.4 million, respectively. The fair value of derivative contract liabilities with related parties as of March 31, 2016, December 31, 2015 and March 31, 2015 was $0.4 million, $0.3 million and $0.3 million, respectively.