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.

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



(in thousands)	June 30, 2018		December 31, 2017		June 30, 2017
The Andersons Albion Ethanol LLC	$	47,474	$	45,024	$	40,829
The Andersons Clymers Ethanol LLC	21,214		19,830		19,903
The Andersons Marathon Ethanol LLC	14,344		12,660		14,045
Lansing Trade Group, LLC	97,476		93,088		89,235
Thompsons Limited (a)	49,251		50,198		49,252
Other	2,400		2,439		2,530
Total	$	232,159	$	223,239	$	215,794

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

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



		Three months ended June 30,						Six months ended June 30,
(in thousands)	% Ownership at June 30, 2018	2018			2017			2018		2017
The Andersons Albion Ethanol LLC	55%	$	1,329		$	2,135		$	2,450	$	1,858
The Andersons Clymers Ethanol LLC	39%	1,236			569			1,745		776
The Andersons Marathon Ethanol LLC	33%	1,728			779			1,684		316
Lansing Trade Group, LLC	33% (a)	3,591			896			6,175		185
Thompsons Limited (b)	50%	1,980			2,081			1,311		1,486
Other	5% - 50%	(61		)	(75		)	11		(114		)
Total		$	9,803		$	6,385		$	13,376	$	4,507

(a) This does not consider restricted management units which once vested will reduce the ownership percentage by approximately 1%

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

Total distributions received from unconsolidated affiliates were $2.1 million and $0.6 million for the six months ended June 30, 2018 and 2017, respectively.

In the second quarter of 2018, Lansing Trade Group qualified as a significant equity investee of the Company under the income test. The following table presents unaudited financial information for the three and six months ended June 30, 2018 and 2017:



(in thousands)	Three months ended June 30,				Six months ended June 30,
(in thousands)	2018		2017		2018		2017
Revenues	$	1,372,059	$	1,010,639	$	2,604,118	$	2,357,338
Gross profit	45,915		33,054		90,336		62,810
Income (loss) from continuing operations	11,569		3,030		20,397		1,325
Net income (loss)	10,785		2,606		19,130		102
Net income (loss) attributable to Lansing Trade Group	10,785		2,899		19,130		826

Related Party Transactions

In the ordinary course of business and on an arms-length basis, the Company will enter into related party transactions with each of the investments described above, along with other related parties.

On March 2, 2018, the Company invested in ELEMENT, LLC. The Company owns 51% of ELEMENT, LLC and ICM, Inc. owns the remaining 49% interest. ELEMENT, LLC will construct a 70 million-gallon-per-year bio-refinery. As part of the Company’s investment into ELEMENT, LLC, the Company and ICM, Inc. entered into a number of agreements with the entity. Most notably, ICM, Inc. will operate the facility under a management contract and manage the initial construction of the facility, while the Company will provide corn origination, ethanol marketing, and risk management services. The results of operations for ELEMENT, LLC have been included in our consolidated results of operations beginning on March 2, 2018 and are a component of our Ethanol segment. Construction is underway and the plant is expected to be operational in 2019.

The following table sets forth the related party transactions entered into for the time periods presented:



	Three months ended June 30,				Six months ended June 30,
(in thousands)	2018		2017		2018		2017
Sales revenues	$	107,686	$	241,896	$	196,580	$	439,964
Service fee revenues (a)	5,191		9,410		10,308		14,036
Purchases of product and capital assets	197,444		167,904		378,968		302,411
Lease income (b)	1,624		1,422		3,206		2,709
Labor and benefits reimbursement (c)	3,601		6,863		7,168		10,553


(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.


(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.



(in thousands)	June 30, 2018		December 31, 2017		June 30, 2017
Accounts receivable (d)	$	27,030	$	30,252	$	25,673
Accounts payable (e)	39,620		27,866		25,590


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


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

For the three months ended June 30, 2018 and 2017, revenues recognized for the sale of ethanol and other co-products that the Company purchased from the unconsolidated ethanol LLCs were $172.3 million and $161.3 million, respectively. For the six months ended June 30, 2018 and 2017, revenues recognized for the sale of ethanol and other co-products that the Company purchased from the unconsolidated ethanol LLCs were $318.5 million and $284.5 million, respectively.

For the three and six months ended June 30, 2017 revenues recognized for the sale of corn to the unconsolidated ethanol LLCs were $125.5 million and $243.0 million. As a result of the new revenue recognition guidance, these transactions are now being recorded on a net basis instead of a gross basis, which is included in service fee revenues above. See Note 7 for further discussion.

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 grain and ethanol, for 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 June 30, 2018, December 31, 2017 and June 30, 2017 was $8.1 million, $0.2 million and $0.6 million, respectively. The fair value of derivative contract liabilities with related parties as of June 30, 2018, December 31, 2017 and June 30, 2017 was $3.9 million, $2.5 million and $0.7 million, respectively.