Related Party Transactions

3 Months Ended

Mar. 31, 2019

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)	March 31, 2019		December 31, 2018		March 31, 2018
The Andersons Albion Ethanol LLC	$	50,641	$	50,382	$	46,145
The Andersons Clymers Ethanol LLC	24,823		24,242		20,339
The Andersons Marathon Ethanol LLC	15,650		14,841		12,615
Lansing Trade Group, LLC (a)	—		101,715		94,483
Thompsons Limited (a)	—		48,987		48,362
Providence Grain	19,258		—		—
Other	11,409		2,159		2,505
Total	$	121,781	$	242,326	$	224,449

(a) The Company previously owned approximately 32.5% of LTG. Effective January 1, 2019, the Company purchased the remaining equity of LTG. The transaction results in the consolidation of Thompsons Limited of Ontario, Canada and related entities, which LTG and the Company had equally owned.

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



		Three months ended March 31,
(in thousands)	% Ownership at March 31, 2019	2019			2018
The Andersons Albion Ethanol LLC	55%	$	259		$	1,121
The Andersons Clymers Ethanol LLC	39%	581			509
The Andersons Marathon Ethanol LLC	33%	809			(44		)
Lansing Trade Group, LLC (a)	100% (a)	—			2,584
Thompsons Limited (a)	100% (a)	—			(669		)
Providence Grain	39%	(125		)	—
Other	5% - 51%	(5		)	72
Total		$	1,519		$	3,573

(a) The Company previously owned approximately 32.5% of LTG. Effective January 1, 2019, the company purchased the remaining equity of LTG. The transaction results in the consolidation of Thompsons Limited and related entities, which LTG and the Company had equally owned.

The Company received no distributions from unconsolidated affiliates for the three months ended March 31, 2019 and received $1.2 million for the three months ended March 31, 2018.

In the first quarter of 2019, the Company did not have significant equity investees. However, in the first quarter of 2018, The Andersons Albion Ethanol LLC, The Andersons Clymers Ethanol LLC, Lansing Trade Group, and Thompsons Limited qualified as significant equity investees of the Company under the income test. The following table presents unaudited summarized financial information for the investees excluding LTG and Thompsons in 2019 as they are now reflected in consolidated results:



(in thousands)	Three months ended March 31,
(in thousands)	2019		2018
Revenues	$	122,862	$	1,459,331
Gross profit	4,021		56,096
Income (loss) from continuing operations	1,963		8,908
Net income (loss)	1,963		9,462
Net income (loss) attributable to Companies	1,963		9,462

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 is constructing 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. The plant is expected to be operational in the third quarter of 2019.

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



	Three months ended March 31,
(in thousands)	2019		2018
Sales revenues	$	61,168	$	88,815
Service fee revenues (a)	4,112		5,117
Purchases of product and capital assets	169,229		181,524
Lease income (b)	1,014		1,582
Labor and benefits reimbursement (c)	3,857		3,567


(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.



(in thousands)	March 31, 2019		December 31, 2018		March 31, 2018
Accounts receivable (d)	$	20,134	$	17,829	$	27,438
Accounts payable (e)	24,644		28,432		33,184


(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 March 31, 2019 and 2018, revenues recognized for the sale of ethanol and other co-products that the Company purchased from the unconsolidated ethanol LLCs were $144.0 million and $146.2 million, respectively.

From time to time, the Company enters into derivative contracts with certain of its related parties, including the unconsolidated ethanol LLCs, 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 March 31, 2019, December 31, 2018 and March 31, 2018 was $3.4 million, $1.9 million and $0.6 million, respectively. The fair value of derivative contract liabilities with related parties as of March 31, 2019, December 31, 2018 and March 31, 2018 was $2.2 million, $6.3 million and $2.9 million, respectively.