10-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K/A

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

or

[_] 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 registrant as specified in its charter)

OHIO
(State or other jurisdiction of
incorporation or organization) 34-1562374
(I.R.S. Employer
Identification No.)

480 W. Dussel Drive, Maumee, Ohio
(Address of principal executive offices) 43537
(Zip Code)

Registrant’s telephone number, including area code (419) 893-5050

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Shares

          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 [X] NO [   ]

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [   ]

          The aggregate market value of the registrant’s voting stock which may be voted by persons other than affiliates of the registrant was $80.8 million on June 30, 2002, computed by reference to the last sales price for such stock on that date as reported on the Nasdaq National Market.

          The registrant had 7.2 million Common shares outstanding, no par value, at February 28, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the 2002 Annual Report of The Andersons, Inc. and Proxy Statement for the Annual Meeting of Shareholders to be held on May 1, 2003, are incorporated by reference into Parts II (Items 5, 6, 7 and 8), III (Items 10, 11 and 12) and IV of this Annual Report on Form 10-K. The Proxy Statement will be filed with the Commission on or about March 17, 2003.

TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 4a. Executive Officers of the Registrant
PART II
	Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7a. Quantitative and Qualitative Disclosures about Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
	Item 14. Controls and Procedures
PART IV
	Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
Exhibit 13 The Andersons 2002 A/R to Shareholders
Exhibit 21 Subsidiaries of the Andersons
Exhibit 23 Consent of Independent Accountants
Exhibit 31.1 Certification - CEO
Exhibit 31.2 Certification - CIO
Exhibit 31.3 Certification - Treasurer
Exhibit 32.1 Certifications - Purs to 18 USC 1350

Explanatory Note

          The purpose of this Amendment No. 1 to Annual Report on Form 10-K/A is to restate the audited financial statements of The Andersons, Inc. for the fiscal year ended December 31, 2002 to reflect the adoption of EITF Topic D-96, “ Accounting for Management Fees Based on a Formula,” related to a certain five-year marketing agreement held with a third party and to amplify certain disclosures. These modifications were identified through a review of our periodic filings by the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (“SEC”) and were disclosed in our Quarterly Report on Form 10-Q for the second quarter ended June 30, 2003, filed with the SEC on August 19, 2003.

          The Items of our Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2002 which are amended and restated herein are:

1.     Item 1 – Business

          We have included expanded discussion of the Company’s sales to Cargill made by the Agriculture Group and more information about the Marketing agreement and Lease including filing of said agreements. In addition, we will discuss further our use of forward contracts in the Agriculture Group. In addition, sales information presented in this section was revised for the restatement.

2.     Item 6 – Selected Financial Data

          This information, incorporated by reference from our 2002 Annual Report to Shareholders, was revised in accordance with the restatement.

3.     Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

          This information, incorporated by reference from our 2002 Annual Report to Shareholders, was revised in accordance with the restatement.

4.     Item 8 – Financial Statements and Supplementary Data

          This information, incorporated by reference from our 2002 Annual Report to Shareholders, was revised in accordance with the restatement. All 2002 information impacted by the restatement was updated in this Exhibit 13 and a new Note 1. was added describing the reason for and impact of the restatement. The following specific information was restated:

1.	Quarterly financial data on page 12
2.	Report of independent accountants on page 14
3.	Consolidated statement of income for the year ended December 31, 2002 on page 15
4.	Consolidated balance sheet at December 31, 2002 on page 16
5.	Consolidated statement of cash flows for the year ended December 31, 2002 on page 17
6.	Consolidated statement of shareholders’ equity for the year ended December 31, 2002 on page 18, and
7.	Notes to consolidated financial statements

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5.     Item 15 – Exhibits, Financial Statement Schedules and Reports on Form 8-K

          Exhibit 13, The Andersons, Inc. 2002 Annual Report to Shareholders was restated as described above. Also, exhibits 10.4 and 10.5, the Marketing and Lease agreements with Cargill were added and are incorporated by reference from the Quarterly Report on Form 10-Q for the second quarter of 2003 and filed on August 19, 2003.

6.     The signature page has been amended to reflect The Andersons, Inc. current officers and directors.

7.     The certifications required by Rule 13(a)-14(a)/15d-14(a) have been updated

8.     The certifications required by Section 1350 have been updated

          The remaining Items contained within this Amendment No. 1 to Annual Report on Form 10-K/A consist of all other Items originally contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002 in the form filed with the SEC on March 19, 2003 (the “Original 10-K”). These remaining Items are not amended, herein, but are included for the convenience of the reader. In order to preserve the character of the disclosures set forth in such Items as originally filed, except as expressly noted herein, this report continues to speak as of the date of the original filing, and we have not updated the disclosures in this report to speak as of a later date. While this report primarily relates to the historical periods covered, events may have taken place since the original filing that might have been reflected in this report if they had taken place prior to the original filing.

PART I

Item 1. Business

(a) General development of business

          The Andersons, Inc. is a diversified corporation that began operations as a partnership in 1947. The Company is organized into four operating groups. The Agriculture Group purchases and merchandises grain, operates grain elevator facilities located in Ohio, Michigan, Indiana and Illinois, manufactures and sells dry and liquid agricultural nutrients, distributes agricultural inputs (nutrients, chemicals, seed and supplies) to dealers and farmers and formulates anti-icers for road and runway use. The Processing Group manufactures turf and ornamental plant fertilizer and control products for lawn and garden use, professional golf and landscaping industries and corncob-based products for use in various industries. The Rail Group sells, repairs, reconfigures, manages and leases railcars and locomotives. The Retail Group operates six large retail stores, and a distribution center in Ohio.

(b) Financial information about industry segments

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          See Note 13 to the consolidated financial statements for information regarding business segments.

(c) Narrative description of business

Agriculture Group

          The Agriculture Group operates grain elevators, plant nutrient formulation and distribution facilities, and farm centers.

          The Company’s grain operations involve merchandising grain and operating terminal grain elevator facilities. This includes purchasing, handling, processing and conditioning grain, storing grain purchased by the Company as well as grain owned by others, and selling grain. The principal grains sold by the Company are yellow corn, yellow soybeans and soft red and white wheat. The Company’s grain storage practical capacity was approximately 78.7 million bushels at December 31, 2002.

          Grain merchandised by the Company is grown in the Midwestern portion of the United States (the eastern corn belt) and is acquired from country elevators (grain elevators located in a rural area, served primarily by trucks (inbound and outbound) and possibly rail (outbound)), dealers and producers. The Company makes grain purchases at prices referenced to Chicago Board of Trade (“CBOT”) quotations. The Company competes for the purchase of grain with grain processors, regional cooperatives and animal feed operations, as well as with other grain merchandisers. Because the Company generally buys in smaller lots, its competition is generally local or regional in scope, although there are some large, national and international companies that maintain regional grain purchase and storage facilities. Some of these competitors are significantly larger than the Company.

          In 1998, the Company signed a five-year lease agreement (“Lease Agreement”) and a five-year marketing agreement (“Marketing Agreement”) with Cargill, Inc. for Cargill’s Maumee and Toledo, Ohio grain handling and storage facilities. As part of the agreement, Cargill was given the marketing rights to grain in the Cargill-owned facilities as well as the adjacent Company-owned facilities in Maumee and Toledo. These agreements cover 42%, or approximately 32.2 million bushels, of the Company’s total storage space and became effective on June 1, 1998. See also the Critical Accounting Policies section of the Management’s Discussion and Analysis on page 26 of The Andersons, Inc. 2002 Annual Report to Shareholders (Exhibit 13) for further discussion of this agreement and the “Restatement of Previously Issued Financial Statements” section in Management’s Discussion and Analysis on page 18 of the Annual Report to Shareholders (Exhibit 13) for discussion of a change in accounting principle and 2002 restatement of the results of this contract. Grain sales to Cargill totaled $154 million in 2002, and include grain covered by the Marketing Agreement as well as grain sold to Cargill via normal forward sales from locations not covered by the Marketing Agreement. If the Marketing Agreement were not in place for the Maumee and Toledo locations, Cargill would still purchase grain from us at these locations either for consumption in their processing facilities or to market to other end users. There were no sales to any other customer in excess of 10% of consolidated

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net sales. In addition, both the Lease Agreement and Marketing Agreement have been filed as Exhibits 10.4 and 10.5. The Company is in the process of negotiating a new contract with Cargill.

          Approximately 68% of the grain bushels sold by the Company in 2002 were purchased by U.S. grain processors and feeders, and approximately 32% were exported. Exporters purchased most of the exported grain for shipment to foreign markets, while some grain is shipped directly to foreign countries, mainly Canada. Almost all grain shipments are by rail or boat. Rail shipments are made primarily to grain processors and feeders, with some rail shipments made to exporters on the Gulf of Mexico or east coast. Boat shipments are from the Port of Toledo. Grain sales are made on a negotiated basis by the Company’s merchandising staff, except for grain sales subject to the marketing agreement with Cargill which are made on a negotiated basis with Cargill’s merchandising staff.

          The Company’s grain business may be adversely affected by the grain supply (both crop quality and quantity) in its principal growing area, government regulations and policies, conditions in the shipping and rail industries and commodity price levels. See “Government Regulation” on page 10. The grain business is seasonal coinciding with the harvest of the principal grains purchased and sold by the Company.

          Fixed price purchase and sale commitments for grain and grain held in inventory expose the Company to risks related to adverse changes in price. The Company attempts to manage these risks by hedging fixed price purchase and sale contracts and inventory through the use of futures and option contracts with the CBOT. The CBOT is a regulated commodity futures exchange that maintains futures markets for the grains merchandised by the Company. Futures prices are determined by worldwide supply and demand.

          The Company’s hedging program is designed to reduce the risk of changing commodity prices. In that regard, hedging transactions also limit potential gains from further changes in market prices. The grain division’s profitability is primarily derived from margins on grain sold, and revenues generated from other merchandising activities with its customers (including storage income), not from hedging transactions. The Company has policies that specify the key controls over its hedging program. These policies include a description of the hedging programs, mandatory review of positions by key management outside of the trading function on a biweekly basis, daily position limits, modeling of positions for changes in market conditions and other internal controls.

          Purchases of grain can be made the day the grain is delivered to a terminal or via a forward contract made prior to actual delivery. Sales of grain generally are made by contract for delivery in a future period. When the Company purchases grain at a fixed price, the purchase is hedged with the sale of a futures contract on the CBOT. Similarly, when the Company sells grain at a fixed price, the sale is hedged with the purchase of a futures contract on the CBOT. At the close of business each day, the open inventory ownership positions as well as open futures and option positions are marked-to-market. Gains and losses in the value of the Company’s

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inventory positions due to changing market prices are netted with and generally offset by losses and gains in the value of the Company’s futures positions.

          When a futures contract is entered into, an initial margin deposit must be sent to the CBOT. The amount of the margin deposit is set by the CBOT and varies by commodity. If the market price of a futures contract moves in a direction that is adverse to the Company’s position, an additional margin deposit, called a maintenance margin, is required by the CBOT. Subsequent price changes could require additional maintenance margins or result in the return of maintenance margins by the CBOT. Significant increases in market prices, such as those that occur when weather conditions are unfavorable for extended periods, can have an effect on the Company’s liquidity and, as a result, require it to maintain appropriate short-term lines of credit. The Company may utilize CBOT option contracts to limit its exposure to potential required margin deposits in the event of a rapidly rising market.

          The Company’s grain operations rely on forward purchase contracts with producers, dealers and country elevators to ensure an adequate supply of grain to the Company’s facilities throughout the year. Bushels contracted for future delivery at February 28, 2003 approximated 58.0 million, the majority of which is scheduled to be delivered to the Company for the 2002 and 2003 crop years (i.e., through September 2004). The Company relies heavily on its hedging program as the method for minimizing price risk in its grain inventories and contracts. The Company monitors current market conditions and may expand or reduce the purchasing program in response to changes in those conditions. In addition, the Company reviews its purchase contracts and the parties to those contracts on a regular basis for credit worthiness, defaults and non-delivery. The Company’s loan agreements also require it to be substantially hedged in its grain transactions.

          The Company has also developed the Crop Revenue Profiler® software program to assist producers in making complex risk management decisions. This software program integrates the variables of crop insurance and government programs with our grain marketing philosophy to help producers achieve a more predictable result, reducing the impact of volatile crop prices. By helping producers achieve more stable earnings, the Company helps to ensure a consistent supply of grain to its facilities.

          In January 2003, the Company became a minority investor in Lansing Grain company LLC, which is a 77-year old grain trading business with offices in Michigan, Minnesota and Kansas. This investment provides the Company a further opportunity to expand outside of its traditional geographic regions.

          The Company competes in the sale of grain with other grain merchants, other elevator operators and farmer cooperatives that operate elevator facilities. Competition is based primarily on price, service and reliability. Some of the Company’s competitors are also its customers and many of its competitors have substantially greater financial resources than the Company.

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          Grain sales make up 70-80% of the total sales in the Agriculture Group. Approximately 50% of grain bushels purchased are done so using forward contracts. On the sell-side, approximately 90% of grain bushels sold are done so under forward contracts.

          The Company’s plant nutrient operations involve purchasing, storing, formulating and selling dry and liquid fertilizer to dealers and farmers; providing warehousing and services to manufacturers and customers; formulation of liquid anti-icers and deicers for use on roads and runways; and the distribution of seeds and various farm supplies. The major fertilizer ingredients sold by the Company are nitrogen, phosphate and potash, all of which are readily available.

          The Company’s market area for its plant nutrient wholesale business includes, primarily, Illinois, Indiana, Michigan and Ohio. Customers for the Company’s fertilizer products are principally retail dealers. Sales of agricultural fertilizer products are heaviest in the spring and fall. The Plant Nutrient Division’s eleven farm centers, located throughout Michigan, Indiana and Ohio, are located within the same regions as the Company’s other agricultural facilities. These farm centers offer agricultural fertilizer, custom application of fertilizer, and chemicals, seeds and supplies to the farmer.

          Storage capacity at the Company’s fertilizer facilities, including its eleven farm centers, was approximately 13.3 million cubic feet for dry fertilizers and approximately 32.6 million gallons for liquid fertilizers at December 31, 2002. The Company reserves 5.9 million cubic feet of its dry storage capacity for various fertilizer manufacturers and customers and 9.6 million gallons of its liquid fertilizer capacity is reserved for manufacturers and customers. The agreements for reserved space provide the Company storage and handling fees and are generally for an initial term of one year, renewable at the end of each term. The Company also leases 2.3 million gallons of liquid fertilizer capacity under arrangements with various fertilizer dealers and warehouses in locations where the Company does not have facilities.

          In its plant nutrient businesses, the Company competes with regional and local cooperatives, fertilizer manufacturers, multi-state retail/wholesale chain store organizations and other independent wholesalers of agricultural products. Many of these competitors have considerably larger resources than the Company. Competition in the agricultural products business of the Company is based principally on price, location and service.

          Sales of grain (corn, soybeans, wheat and oats) totaled $554.1 million, $434.7 million and $449.9 million in 2002, 2001 and 2000, respectively. Sales of dry and liquid fertilizers (primarily potash, nitrogen and phosphate) to dealers totaled $135.1 million, $134.0 million and $112.7 million in 2002, 2001 and 2000, respectively.

Processing Group

          The Processing Group produces and markets turf and ornamental plant fertilizer and control products. It also produces and distributes corncob-based products to the chemical carrier, pet and industrial markets.

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          The Company sells consumer fertilizer and control products, for “do-it-yourself” application, to mass merchandisers, small independent retailers and other lawn fertilizer manufacturers. The Company also performs contract manufacturing of fertilizer and control products in its industrial line of business. In an industrial arrangement, the Company is not responsible for direct marketing support of the mass merchandiser. Margins on industrial tons are, therefore, lower than margins on consumer tons. Professional lawn products are sold both directly and through distributors to golf courses and lawn service applicators under the Andersons Golf Products^TM label.

          The turf products industry is highly seasonal, with the majority of sales occurring from early spring to early summer. During the off-season, the Company sells ice melt products to many of the same customers that purchase consumer turf products. With the acquisition in 2000 of the U.S. ProTurf® product line from The Scotts Company, Inc., the Company has a significant share of the golf course market in the United States. Principal raw materials for the turf care products are nitrogen, potash and phosphate, which are purchased primarily from the Company’s Plant Nutrient Division. Competition is based principally on merchandising ability, logistics, service and quality. The Company attempts to minimize the amount of finished goods inventory it must maintain for customers, however, because demand is highly seasonal and influenced by local weather conditions, it may be required to carry inventory that it has produced into the next season. Also, because a majority of the consumer and industrial businesses use private label packaging, the Company closely manages production to anticipated orders by product and customer. This is consistent with industry practices.

          Sales of turf and ornamental plant fertilizer and control products totaled $103.3 million, $102.2 million and $96.1 million in 2002, 2001 and 2000, respectively.

          The Company is one of a limited number of processors of corncob-based products in the United States. These products serve the chemical and feed ingredient carrier, animal litter and industrial markets and are distributed throughout the United States and Canada and into Europe and Asia. The principal sources for the corncobs are seed corn producers.

Rail Group

          The Company’s Rail Group buys, sells, leases, rebuilds and repairs various types of used railcars and rail equipment. The division also provides fleet management services to fleet owners and operates a custom steel fabrication business. A significant portion of the railcar fleet is leased from financial lessors and sub-leased to end-users, generally under operating leases which do not appear on the balance sheet. In addition, the Company also arranges non-recourse lease transactions under which it sells railcars or locomotives to a financial intermediary and assigns the related operating lease to the financial intermediary on a non-recourse basis. In such transactions, the Company generally provides ongoing railcar maintenance and management services for the financial intermediary, receiving a fee for these services. The Company generally holds purchase options on most railcars owned by financial intermediaries. Of the 5,699 railcars that the Company managed at December 31, 2002, 2,268, or 40%, were included on the balance

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sheet, primarily as long-lived assets. The remaining 3,431 railcars and 51 locomotives are either in off-balance sheet operating leases or non-recourse arrangements.

          The risk management philosophy of the Company includes match-funding of lease commitments and detailed review of lessee credit quality. Match-funding (in relation to rail lease transactions) means matching the terms between the lease with the customer and the funding arrangement with the financial intermediary. Generally, the Company completes non-recourse transactions whenever possible to minimize credit risk. The Company strives to be the Total Rail Solutions^SM provider for its railcar customers. The service mark depicts our willingness to serve the customers’ total railcar needs (including maintenance, car management, repairs, leasing, and all other railcar needs).

          Competition for railcar marketing and fleet maintenance services is based primarily on service ability, and access to both used rail equipment and third party financing. Repair and fabrication shop competition is based primarily on price, quality and location.

          Although the Company first managed a fleet of covered hopper cars used in the grain industry, it has diversified into other car types (boxcars, gondolas, open top hoppers and tank cars) and industries. In 2000, the Company added locomotives to the fleet managed. The Company plans to continue to diversify its fleet both in car types and industries.

          The Company announced on March 11, 2003 that it has signed a letter of intent to purchase certain railcar leasing assets from Railcar Ltd., a subsidiary of Progress Rail Services Company. This agreement anticipates a transaction where Railcar Ltd. sells approximately 7,000 railcars and 48 locomotives, most of which are currently under lease, and also will transfer the management of approximately 4,000 railcars to a new entity that will be owned by a consortium of investors. The Rail Group will hold a minority interest in the entity and will manage the assets on behalf of the investors for a management fee. Finalization of the transaction is dependent on due diligence, financing, completion of the definitive purchase agreement and Board of Directors approval.

Retail Group

          The Company’s Retail Group consists of six stores operated as “The Andersons”, which are located in the Columbus, Lima and Toledo, Ohio markets and serve urban, suburban and rural customers. The retail concept is “More for Your Home”® and includes a full line of home center products plus a wide array of other items not available at the more traditional home center stores. In addition to hardware, home remodeling and lawn and garden products, The Andersons stores offer housewares, automotive products, sporting goods, pet products, bath soft goods and food (bakery, deli, produce, wine and specialty groceries). Each store carries more than 70,000 different items, has 100,000 square feet or more of in-store display space plus 40,000 square feet of outdoor garden center space, and features do-it-yourself clinics, special promotions and varying merchandise displays. The majority of the Company’s non-perishable merchandise is received at a distribution center located in Maumee, Ohio.

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          The retail merchandising business is highly competitive. The Company competes with a variety of retail merchandisers, including home centers, department and hardware stores. Many of these competitors have substantially greater financial resources than the Company. The principal competitive factors are location, quality of product, price, service, reputation and breadth of selection. The Company’s retail business is affected by seasonal factors with significant sales occurring during the Christmas season and in the spring.

          The Company also operates a sales and service facility for outdoor power equipment near one of its conventional retail stores.

          Sales of retail merchandise totaled $181.2 million, $177.9 million and $183.8 million in 2002, 2001 and 2000, respectively.

Other Businesses

          The Company sold its interest in The Andersons – Tireman Auto Centers to its venture partner and the general manager on March 31, 2000.

Research and Development

          The Company’s research and development program is mainly involved with the development of improved products and processes, primarily for the Processing and Agriculture Groups. The Company expended approximately $517,000, $430,000, and $340,000 on research and development activities during 2002, 2001 and 2000, respectively.

Employees

          At December 31, 2002, the Company had 1,236 full-time and 1,722 part-time or seasonal employees. The Company believes its relations with its employees are good.

Government Regulation

          Grain sold by the Company must conform to official grade standards imposed under a federal system of grain grading and inspection administered by the United States Department of Agriculture (“USDA”).

          The production levels, markets and prices of the grains that the Company merchandises are materially affected by United States government programs, including acreage control and price support programs of the USDA. Also, under federal law, the President may prohibit the export of any product, the scarcity of which is deemed detrimental to the domestic economy, or under circumstances relating to national security. Because a portion of the Company’s grain sales is to exporters, the imposition of such restrictions could have an adverse effect upon the Company’s operations.

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          The Company, like other companies engaged in similar businesses, is subject to a multitude of federal, state and local environmental protection laws and regulations including, but not limited to, laws and regulations relating to air quality, water quality, pesticides and hazardous materials. The provisions of these various regulations could require modifications of certain of the Company’s existing plant and processing facilities and could restrict the expansion of future facilities or significantly increase the cost of their operations. The Company made capital expenditures of approximately $690,000, $880,000 and $860,000 in order to comply with these regulations in 2002, 2001 and 2000, respectively.

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Item 2. Properties

          The Company’s principal agriculture, retail and other properties are described below. Except as otherwise indicated, the Company owns all properties.

Agriculture Facilities

			Agricultural Fertilizer
(in thousands)	Grain Storage		Dry Storage		Liquid Storage
Location	(bushels)		(cubic feet)		(gallons)
Maumee, OH (3)		20,510		4,500		2,878
Toledo, OH Port (4)		11,650		1,800		2,812
Metamora, OH		6,980		—		—
Lyons, OH (2)		380		53		284
Toledo, OH (1)		990		—		—
Fremont, OH (2)		—		40		271
Fostoria, OH (2)		—		40		210
Gibsonburg, OH (2)		—		37		349
Lordstown, OH		—		197		—
Champaign, IL		12,730		833		—
Delphi, IN		7,060		923		—
Clymers, IN		4,720		—		—
Dunkirk, IN		7,800		833		—
Poneto, IN		—		10		5,284
North Manchester, IN (2)		—		25		211
Seymour, IN		—		720		943
Waterloo, IN (1) (2)		—		970		1,686
Logansport, IN		—		83		3,652
Walton, IN (2)		—		435		7,860
Albion, MI (2)		3,220		15		143
White Pigeon, MI		2,700		—		—
Webberville, MI		—		1,747		5,060
Litchfield, MI (2)		—		30		438
Union City, MI (2)		—		15		183
Munson, MI (2)		—		33		312
		78,740		13,339		32,576

(1)	Facility leased.
(2)	Facility is or includes a farm center.
(3)	Includes leased facilities with a 3,300-bushel capacity.
(4)	Includes leased facilities with a 5,500-bushel capacity.

          The grain facilities are mostly concrete and steel tanks, with some flat storage, which is primarily cover-on-first temporary storage. The Company also owns grain inspection buildings and dryers, maintenance buildings and truck scales and dumps.

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          The Plant Nutrient Division’s wholesale fertilizer and farm center properties consist mainly of fertilizer warehouse and distribution facilities for dry and liquid fertilizers. The Maumee, Ohio; Seymour, Indiana; and Walton, Indiana locations have fertilizer mixing, bagging and bag storage facilities.

Retail Store Properties

Name	Location	Square Feet
Maumee Store	Maumee, OH		131,000
Toledo Store	Toledo, OH		130,000
Woodville Store (1)	Northwood, OH		100,000
Lima Store (1)	Lima, OH		117,000
Brice Store	Columbus, OH		128,000
Sawmill Store	Columbus, OH		134,000
Distribution Center (1)	Maumee, OH		245,000

(1) Leased

          The leases for the two stores and the distribution center are long-term operating leases with several renewal options and provide for minimum aggregate annual lease payments approximating $1.1 million. The two store leases provide for contingent lease payments based on achieved sales volume. One store had sales triggering payments of contingent rental in 2002, 2001 and 2000. In addition, the Company owns a service and sales facility for outdoor power equipment adjacent to its Maumee, Ohio retail store.

Other Properties

          The Company owns lawn fertilizer production facilities in Maumee, Ohio; Bowling Green, Ohio; and Montgomery, Alabama. It also owns corncob processing and storage facilities in Maumee, Ohio and Delphi, Indiana. The Company leases lawn fertilizer warehouse facilities in Toledo, Ohio and Montgomery, Alabama and lawn fertilizer production and warehouse facilities in Pottstown, Pennsylvania.

          In its railcar business, the Company owns, leases or manages approximately 51 locomotives and 5,699 railcars (primarily covered or open hoppers with some boxcars, tank cars and gondolas) with lease terms ranging from one to twelve years. Future minimum lease payments for these railcars and locomotives are $30.1 million with future minimum contractual lease and service income of approximately $45.9 million. The Company also owns a railcar repair facility, a steel fabrication facility, and owns or leases a number of switch engines, cranes and other equipment.

          The Company also owns an auto service center that is leased to its former venture partner. The Company’s administrative office building is leased under a net lease expiring in 2005. The lease includes an option to purchase by the Company at termination. The Company owns

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approximately 1,060 acres of land on which the above properties and facilities are located and approximately 366 acres of farmland and land held for future use.

          Real properties, machinery and equipment of the Company were subject to aggregate encumbrances of approximately $59 million at December 31, 2002. Additions to property, including intangible assets but excluding railcar assets, for the years ended December 31, 2002, 2001 and 2000 amounted to $10 million, $9 million and $21 million, respectively. Additions to the Company’s railcar assets totaled $8.2 million, $21.8 million and $16.2 million for the years ended December 31, 2002, 2001 and 2000, respectively. These additions were offset by sales of railcars of $16.0 million, $15.4 million and $3.8 million for the same periods. See Note 10 to the Company’s consolidated financial statements for information as to the Company’s leases.

          The Company believes that its properties, including its machinery, equipment and vehicles, are adequate for its business, well maintained and utilized, suitable for their intended uses and adequately insured.

Item 3. Legal Proceedings

          The Company has been named as a defendant in various lawsuits arising in the ordinary course of business. It is not possible at the present time to estimate the ultimate outcome of these actions; however, management believes that the resultant liability, if any, will not be material based on previous experience with lawsuits of these types.

Item 4. Submission of Matters to a Vote of Security Holders

          No matters were voted upon during the fourth quarter of fiscal 2002.

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Item 4a. Executive Officers of the Registrant

          Pursuant to General Instruction G(3) of Form 10-K, the following information with respect to the executive officers of the registrant is included herein in lieu of being included in the Registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held May 1, 2003.

Name	Position	Age		Year Assumed
Dennis J. Addis	President, Plant Nutrient Division Vice President and General Manager, Plant Nutrient       Division, Agriculture Group		50		2000 1999
Daniel T. Anderson	President, Retail Group		47		1996
Michael J. Anderson	President and Chief Executive Officer President and Chief Operating Officer		51		1999 1996
Richard M. Anderson	President, Processing Group		47		1999
Richard P. Anderson	Chairman of the Board Chairman of the Board and Chief Executive Officer		73		1999 1996
Dale W. Fallat	Vice President, Corporate Services		58		1992
Philip C. Fox	Vice President, Corporate Planning		60		1996
Charles E. Gallagher	Vice President, Human Resources		61		1996
Richard R. George	Vice President, Controller and CIO Vice President and Controller		53		2002 1996
Beverly J. McBride	Vice President, General Counsel and Secretary		61		1996
Harold M. Reed	President, Grain Division Vice President and General Manager, Grain      Division, Agriculture Group		46		2000 1999
Rasesh H. Shah	President, Rail Group		48		1999
Gary L. Smith	Vice President, Finance and Treasurer		57		1996

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PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

          The information under the caption Quarterly Financial Data and Market for Common Stock on page 12 and Shareholders on the inside back cover of The Andersons, Inc. 2002 Annual Report to Shareholders is incorporated herein by reference. The Company paid quarterly dividends of $0.065, $0.065 and $0.06 per common share, respectively, in 2002, 2001 and 2000. The Company declared quarterly dividends of $0.07 per common share to be paid January 22, 2003 and April 22, 2003 to shareholders of record on January 2, 2003 and April 1, 2003, respectively.

Item 6. Selected Financial Data

          The information under the caption Selected Financial Data on page 12 of The Andersons, Inc. 2002 Annual Report to Shareholders, as restated, is incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

          The information under the caption Management’s Discussion & Analysis appearing on pages 18 through 28 of The Andersons, Inc. 2002 Annual Report to Shareholders, as restated, is incorporated herein by reference. See pages 39 and 40 of The Andersons, Inc. 2002 Annual Report to Shareholders for discussion of new accounting standards, which is incorporated herein by reference.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

          The information under the captions Market Risk-Sensitive Instruments and Positions, Commodity Prices and Interest Rates appearing on page 29 of The Andersons, Inc. 2002 Annual Report to Shareholders is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

          The information under the caption Quarterly Financial Data and Market for Common Stock on page 12 of The Andersons, Inc. 2002 Annual Report to Shareholders, as restated, the Report of Independent Accountants on page 13 of The Andersons, Inc. 2002 Annual Report to Shareholders, as restated, as well as the following consolidated financial statements of The Andersons, Inc. set forth on pages 14 through 17 and 31 through 37 of The Andersons, Inc. 2002 Annual Report to Shareholders are incorporated herein by reference:

• Consolidated Statements of Income for the years ended December 31, 2002 (restated), 2001 and 2000

16

• Consolidated Balance Sheets as of December 31, 2002 (restated) and 2001

• Consolidated Statements of Cash Flows for the years ended December 31, 2002 (restated), 2001 and 2000

• Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2002 (restated), 2001 and 2000

• Notes to Consolidated Financial Statements (restated)

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None

PART III

Item 10. Directors and Executive Officers of the Registrant

          For information with respect to the executive officers of the registrant, see “Executive Officers of the Registrant” included in Part I, Item 4a of this report. For information with respect to the Directors of the registrant, see “Election of Directors” in the Proxy Statement for the Annual Meeting of the Shareholders to be held on May 1, 2003 (the “Proxy Statement”), which is incorporated herein by reference; for information concerning 1934 Securities and Exchange Act Section 16(a) Compliance, see such section in the Proxy Statement, incorporated herein by reference.

Item 11. Executive Compensation

          The information set forth under the caption “Executive Compensation” in the Proxy Statement is incorporated herein by reference.

17

Item 12. Security Ownership of Certain Beneficial Owners and Management

          The information set forth under the caption “Security Ownership” in the Proxy Statement is incorporated herein by reference.

          The following table gives information as of December 31, 2002 about the Company’s common shares that may be issued upon the exercise of options under all of our existing equity compensation plans.

		Equity Compensation Plan Information
							(c)
							Number of securities
		(a)			(b)		remaining available for
		Number of securities to			Weighted-average		future issuance under equity
		be issued upon exercise			exercise price of		compensation plans
		of outstanding options,			outstanding options,		(excluding securities
Plan category		warrants and rights			warrants and rights		reflected in column (a))
Equity compensation plans approved by security holders			830,808	(1)	$	9.37		889,810	(2)
Equity compensation plans not approved by security holders			—			—		—
	Total		830,808		$	9.37		889,810

(1)

This number includes options (807,555) and restricted shares (23,253) outstanding under the Company’s Amended and Restated Long-Term Performance Compensation Plan dated December 14, 2001. This number does not include any shares related to the Employee Share Purchase Plan. This Employee Share Purchase Plan allows employees to purchase common shares at the lower of the market value on the beginning or end of the calendar year through payroll withholdings. This purchase is completed as of December 31.

(2)

This number includes 38,738 common shares available to be purchased under the Employee Share Purchase Plan.

Item 13. Certain Relationships and Related Transactions

          None

Item 14. Controls and Procedures

               The President and Chief Executive Officer; Vice President, Controller and CIO; and Vice President, Finance and Treasurer (the “Certifying Officers”) have evaluated our disclosure controls and procedures as defined in the rules of the SEC, within 90 days of the filing date of this report and have determined that such controls and procedures were effective in

18

ensuring that material information required to be disclosed by the Company in the reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms

          Our Certifying Officers are primarily responsible for the accuracy of the financial information that is presented in this report. To meet their responsibility for financial reporting, they have established internal controls and procedures which they believe are adequate to provide reasonable assurance that the Company’s assets are protected from loss. These internal controls are reviewed by the Company’s internal auditors in order to monitor compliance and by our independent accountants to support their audit work. In addition, our Board’s Audit Committee, which is composed entirely of independent directors, meets regularly with management, internal auditors and the independent accountants to review accounting, auditing and financial matters. This Committee and the independent accountants have free access to each other, with or without management being present.

          There were no significant changes in internal controls subsequent to the date of the Certifying Officers’ evaluation.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)  (1)           The consolidated financial statements of the Company, as set forth under Item 8 of this report on Form 10-K/A, are incorporated herein by reference from The Andersons, Inc. 2002 Annual Report to Shareholders. These consolidated financial statements have been restated.

(2) The following consolidated financial statement schedule and Report of Independent Accountants on Financial Statement Schedule is included in Item 15(d):

		Page
II.	Consolidated Valuation and Qualifying Accounts - years ended     December 31, 2002, 2001 and 2000		27
Report of Independent Accountants on Financial Statement Schedule			26

          All other schedules for which provisions are made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

(3) Exhibits:

2.1 Agreement and Plan of Merger, dated April 28, 1995 and amended as of September 26, 1995, by and between The Andersons Management Corp. and The Andersons. (Incorporated by reference to Exhibit 2.1 to Registration Statement No. 33-58963).

19

3.1	Articles of Incorporation. (Incorporated by reference to Exhibit 3(d) to Registration Statement No. 33-16936).
3.4	Code of Regulations of The Andersons, Inc. (Incorporated by reference to Exhibit 3.4 to Registration Statement No. 33-58963).
4.3	Specimen Common Share Certificate. (Incorporated by reference to Exhibit 4.1 to Registration Statement No. 33-58963).
4.4	The Seventeenth Supplemental Indenture dated as of August 14, 1997, between The Andersons, Inc. and The Fifth Third Bank, successor Trustee to an Indenture between The Andersons and Ohio Citizens Bank, dated as of October 1, 1985. (Incorporated by reference to Exhibit 4.4 to The Andersons, Inc. the 1998 Annual Report on Form 10-K).
10.1	Management Performance Program. * (Incorporated by reference to Exhibit 10(a) to the Predecessor Partnership’s Form 10-K dated December 31, 1990, File No. 2-55070).
10.2	The Andersons, Inc. Amended and Restated Long-Term Performance Compensation Plan * (Incorporated by reference to Appendix A to the Proxy Statement for the April 25, 2002 Annual Meeting).
10.3	The Andersons, Inc. Employee Share Purchase Plan * (Incorporated by reference to Appendix C to Registration Statement No. 33-58963).
10.4	Marketing Agreement between The Andersons, Inc. and Cargill dated June 1, 1998 (Incorporated by reference from Form 10-Q for the quarter ended June 30, 2003)
10.5	Lease and Sublease between Cargill, Incorporated and The Andersons, Inc. dated June 1, 1998 (Incorporated by reference from Form 10-Q for the quarter ended June 30, 2003)
13	The Andersons, Inc. 2002 Annual Report to Shareholders, as restated
21	Subsidiaries of The Andersons, Inc.
23	Consent of Independent Accountants
31.1	Certification of President and Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a)
31.2	Certification of Vice President, Corporate Controller & CIO under Rule 13(a)-14(a)/15d-14(a)

20

31.3	Certification of Vice President, Finance and Treasurer under Rule 13(a)-14(a)/15d-14(a)
32.1	Section 1350 Certifications

*     Management contract or compensatory plan.

          The Company agrees to furnish to the Securities and Exchange Commission a copy of any long-term debt instrument or loan agreement that it may request.

(b)	Reports on Form 8-K:
	There were no reports on Form 8-K filed in the fourth quarter of 2002.
(c)	Exhibits:
	The exhibits listed in Item 15(a)(3) of this report, and not incorporated by reference, follow “Financial Statement Schedule” referred to in (d) below.
(d)	Financial Statement Schedule and Report of Independent Accountants on Financial Statement Schedule:
	The financial statement schedule and Report of Independent Accountants on Financial Statement Schedule listed in 15(a)(2) follow “Signatures”.

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SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE ANDERSONS, INC. (Registrant)
By	/s/Michael J. Anderson
	Michael J. Anderson
	President and Chief Executive Officer

          Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date	Signature	Title	Date
/s/Michael J. Anderson	President and Chief Executive Officer	10/24/03	/s/Paul M. Kraus	Director	10/24/03
Michael J. Anderson	(Principal Executive Officer)		Paul M. Kraus
/s/Richard R. George	Vice President, Controller &    CIO	10/24/03	/s/Donald L. Mennel	Director	10/24/03
Richard R. George	(Principal Accounting Officer)		Donald L. Mennel
/s/Gary L. Smith	Vice President, Finance &    Treasurer	10/24/03	/s/David L. Nichols	Director	10/24/03
Gary L. Smith	(Principal Financial Officer)		David L. Nichols
/s/Richard P. Anderson	Chairman of the Board	10/24/03	/s/Sidney A. Ribeau	Director	10/24/03
	Director
Richard P. Anderson			Sidney A. Ribeau
/s/Thomas H. Anderson	Director	10/24/03	/s/Charles A. Sullivan	Director	10/24/03
Thomas H. Anderson			Charles A. Sullivan
/s/John F. Barrett	Director	10/24/03	/s/Jacqueline F. Woods	Director	10/24/03
John F. Barrett			Jacqueline F. Woods

Except for those portions of The Andersons, Inc. 2002 Annual Report to Shareholders specifically incorporated by reference in this report on Form 10-K/A, such annual report is furnished solely for the information of the Securities and Exchange Commission and is not to be deemed “filed” as a part of this filing.

22

Report of Independent Accountants on

Financial Statement Schedule

To the Board of Directors
of The Andersons, Inc.:

Our audits of the consolidated financial statements referred to in our report dated January 27, 2003, except as to the effect of the matters described in Note 1, which is as of October 24, 2003, appearing in the 2002 Annual Report to Shareholders of The Andersons, Inc., included herein as Exhibit 13, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K/A) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Annual Report on Form 10-K/A. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Toledo, Ohio
October 24, 2003

23

SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
THE ANDERSONS, INC.

				Additions
		Balance at		Charged to			Charged to					Balance
(in thousands)		Beginning		Costs and			Other Accounts		Deductions			at End
Description		of Period		Expenses			- Describe		- Describe			of Period
Allowance for doubtful accounts receivable:
	Year ended December 31, 2002	$	2,701	$	514		$	—	$	201	(1)	$	3,014
	Year ended December 31, 2001		3,084		448			—		831	(1)		2,701
	Year ended December 31, 2000		3,980		776			—		1,672	(1)		3,084
Allowance for doubtful notes receivable:
	Year ended December 31, 2002	$	472	$	(161	)	$	—	$	89	(1)	$	222
	Year ended December 31, 2001		698		(224	)		—		2	(1)		472
	Year ended December 31, 2000		583		135			—		20	(1)		698

⁽¹⁾ Uncollectible accounts written off, net of recoveries

24

EXHIBIT INDEX

THE ANDERSONS, INC.

Exhibit
Number
13	The Andersons, Inc. 2002 Annual Report to Shareholders
21	Subsidiaries of The Andersons, Inc.
23	Consent of Independent Accountants
31.1	Certification of President and Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a)
31.2	Certification of Vice President, Corporate Controller & CIO under Rule 13(a)-14(a)/15d-14(a)
31.3	Certification of Vice President, Finance and Treasurer under Rule 13(a)-14(a)/15d-14(a)
32.1	Section 1350 Certifications

EX-13 3 l03650aexv13.txt EXHIBIT 13 THE ANDERSONS 2002 A/R TO SHAREHOLDERS . . . EXHIBIT 13 THE ANDERSONS 2002 ANNUAL REPORT TABLE OF CONTENTS Financial Highlights 1 Letter to Shareholders 2-4 Agriculture Group 6-7 Processing Group 8-9 Rail Group 10-11 Retail Group 12-13 Selected Financial Data 14 Report of Independent Accountants 15 Consolidated Financial Statements 16-19 Management's Discussion & Analysis 20-23 Notes to Consolidated Financial Statements 24-36 Officers & Directors Data Inside Back

[Pie Chart] [Pie Chart] BEGINNING [Bar Chart] 2002 ALLOCATED CAPITAL 2002 OPERATING INCOME REVENUES (AS OF (1/1/02) (RESTATED) YEAR: $1.1 BILLION TOTAL: $202 MILLION TOTAL: $16.0 MILLION Agriculture 70.8% 39.9% $15.2 Processing 10.6% 21.7% (1.3) Rail 1.7% 19.4% 1.5 Retail 16.9% 19.0% 4.0 Other -- -- (3.4) -------------------------------------------------------------------------- 100.0% 100.0% $16.0 ==========================================================================

2002 ACCOMPLISHMENTS - - Earned a record $1.92 (restated) per diluted share vs. $1.21 per diluted share in 2001 - - Shareholders enjoyed a 30% total return - - Revenues grew 9% to $1.1 billion - - Strong cash flow added working capital and reduced long-term debt - - Plant Nutrient achieved a record performance and Grain had its second best year ever - - Signed letter of intent to form an LLC with Lansing Grain Company - - Railcar utilization rate improved 10% in 2002 - - Retail's income grew by 114% in 2002 - - Retail added fresh meat in Toledo and Woodville and started reset of Woodville store - - Achieved significant turnaround in Processing Group through improved efficiencies and cost reductions - - Created an alliance with Powerspan Corp., developer of multi-pollutant control technology for power plants, to produce and market electro-catalytic oxidation fertilizer co-products. - - Joined ICG Commerce's e-Procurement services to improve purchasing efficiencies The Andersons, Inc. (Nasdaq: ANDE) is a diversified agribusiness and retailing company with annual revenues of $1.1 billion. The company, which began operations in Maumee, Ohio in 1947 with one grain elevator and 500,000 bushels of storage capacity, today has four operating groups: AGRICULTURE, PROCESSING, RAIL and RETAIL. For more in-depth information about the company, please visit our website at www.andersonsinc.com. FINANCIAL HIGHLIGHTS

2002 2001 % CHANGE (in thousands, except for per share and performance data) (RESTATED) -------------------------------------------- OPERATIONS Grain sales & revenues $ 583,947 $ 475,953 21.6% Fertilizer, retail & other sales 492,580 504,408 (2.3%) ---------------------------- TOTAL SALES & REVENUES $ 1,076,527 $ 980,361 9.3% ============================ Gross profit - grain $ 47,348 $ 52,029 (9.0%) Gross profit - fertilizer, retail & other 115,753 108,722 6.5% ---------------------------- TOTAL GROSS PROFIT $ 163,101 $ 160,751 1.5% ============================ Other income / gains (net) $ 3,741 $ 3,841 (2.6%) Income before income taxes and cumulative effect of accounting change 16,002 11,931 34.1% Net income before cumulative effect of change in accounting principle 10,764 9,042 21.5% Cumulative effect of change in accounting principle 3,480 (185) 100.0% Net income 14,244 8,857 60.8% Effective tax rate 32.7% 24.2% 35.1% Weighted average shares outstanding 7,283 7,281 -- PER SHARE DATA Net income - basic $ 1.96 $ 1.22 50.0% Net income - diluted 1.92 1.21 47.9% Dividends paid 0.26 0.26 -- Year end market value 12.70 10.00 27.0% PERFORMANCE Pretax return on beginning equity 16.9% 13.3% Net income return on beginning equity 15.0% 9.9% Funded long-term debt to equity ratio .80-TO-1 .96-TO-1 Number of employees 2,958 3,035

2 Shareholders and friends, The Andersons celebrated its 55TH year of growth and success in 2002 with a record-setting performance. Net income (as restated) was $14.2 million or $1.92 per diluted share for 2002 compared to $8.9 million or $1.21 per diluted share in 2001. Total revenues of $1.1 billion for 2002 rose 9% above revenues reported in 2001. Our shareholders have enjoyed excellent total returns (market price plus dividends) over the past two years - 30% in 2002 and 19% in 2001. Equity investors are returning to essential and basic industries for protection and long-term value as a result of the slowing economy, poor equity markets, and low bond interest rates. Agribusiness has been a good alternative for investors in these trying times. The company's record performance and tight control over capital spending in 2002 strengthened our balance sheet. As a result, all measurements of working capital and leverage have improved. We are at our targeted long-term funded debt-to-equity ratio of 0.8 to 1. Your company is committed to deliver quality, integrity, honesty, and fairness in its products, services, and reporting. We are also committed to creating value for our customers, shareholders, communities and employees. We are stewards of precious resources, we endeavor to honor God, and be respectful of each other in our efforts. Since we are a company of people engaged in these pursuits, we have featured a few of our 3,000 employees in the 2002 annual report. Our PEOPLE make it happen! We only wish we could feature more of them. The AGRICULTURE GROUP had excellent operating performance for the year. While grain production in the region was below average due to last year's wet planting and summer drought conditions, margin on grain sales was strong. Overall, earnings from grain storage were lower than 2001. The Plant Nutrient Division (formerly the Wholesale Fertilizer and Farm Center Divisions) reported a 7% increase in fertilizer sales volume. Attention to expenses, inventory positions, margin control and facility utilization were key to their success. The other three business units all reported significant improvement for 2002. The RETAIL GROUP reported 114% higher income in 2002 over that reported in 2001. Retail achieved slightly higher sales, but most significant improvement came from vigilant attention to gross profit and operating expenses. Lower railcar lease rates and the slowing economy continue to impact the RAIL GROUP. However, with improved fleet utilization and reduced carrying costs, Rail reported its best performance since 1999. The PROCESSING GROUP made the most significant turn around. Although not yet in the black, improved plant utilization, better control over raw material costs and right sizing the business all played a part in Processing's improved performance in 2002. On the CORPORATE side, we were blessed with lower interest rates, but burdened with higher employee benefit and insurance costs. In spite of these higher costs, we kept a purposeful tight rein on operating, administrative and general expenses, which in total were slightly below those of 2001. For more details on last year's performance, see the business review pages in this report. The prospects for 2003 are good. At this point we do not believe we can exceed the record performance we had in 2002; however, we expect to capitalize on many of the competencies we have built over the last 55 years. We have always stated our performance will reflect the cyclical 3 and seasonal nature of our industries. The weak 2002 harvest will negatively impact 2003 income, but these are expected road bumps we manage through from time to time. It comes with the industry. We have a long history of physical handling, storing, maintaining, formulating, transporting and financial management of bulk materials. Our experience has provided us with the opportunity to enhance those bulk materials into value added products and services that provide solutions for our customers. Our strategic financial goals include increasing market value, specific growth objectives for each Group and attaining targeted levels of income by 2005. Achieving these goals is more than asset and cost control alone. It requires finding the future products and services to serve current and new customers who will be the future source of sales and profit. The AGRICULTURE GROUP, which includes the Grain Division and Plant Nutrient Division (PND), forms our largest investment and the base on which most of our other businesses were created. We continue to believe population growth, demand for improved diets and higher standards of living will benefit those invested in the U.S. agriculture system, including The Andersons. The Grain Division ended 2002 with 56 million bushels of grain in storage, which is a good starting point. However, with last year's poor harvest, we are predicting lower storage income for 2003 as we expect grain inventory to be shipped earlier than usual. On the positive side, winter wheat plantings in our region are estimated to be 2.9 million acres, 23% above last year, which should provide opportunities in 2003. Higher corn prices should also encourage producers to increase plantings in 2003, and higher corn production offers us more margin opportunity than on soybeans. Grain supply and demand are directly impacted by good growing conditions in our marketing region; consequently, much of 2003's performance is dependent on the fall harvest. Producers make huge investments in the next growing season - inputs, rent, equipment, land, etc. To help them make complex decisions about crop production and marketing, we offer our Crop Revenue Profiler(R) software program. This software program integrates the variables of crop insurance and government programs with our grain marketing philosophy to help producers achieve a more predictable result, thus reducing the impact of volatile crop prices. When our customers are successful, it enhances our profitability. We continue to develop our progressive grain marketing tools, such as Freedom Contracts(SM), to assist producers in pricing decisions. In 2002 we began taking these contracts and marketing ideas outside our historic marketing region. What we call "portable originations" has been a way to contract with and serve customers without physically handling the grain. In addition, we have developed web-based customer contracts, statements and other information to help customers track and manage their contract positions. In 2003, the Grain Division became a minority investor in Lansing Grain Company LLC, which is a new company formed by Lansing Grain Company, a 77-year old grain trading business with offices in Michigan, Minnesota, and Kansas. This investment should benefit both parties as we serve different market sectors and geographic regions. The Plant Nutrient Division's focus is on consistent, dependable year-round logistics and supply. Higher grain prices and the newly signed U.S. Farm Bill are positive signs for PND in 2003. Cash 4 flow at the producer level is reported to be strong, which should allow producers to buy the necessary inputs for the 2003 planting season. The division continues to add capacity and re-capitalize existing assets to provide customers with a complete line of nutrient inputs and services. In addition, PND is investing more time and talent to serve the specialty agriculture, industrial and non-agricultural markets. Several new products introduced in the past year include liquid roadway and runway de-icers and anti-icers, specialty biological nutrients for wastewater treatment and specialty nutrients for agriculture. In the RAIL GROUP, railcar prices and lease rates are beginning to stabilize, which is a positive sign for 2003. Although new railcar production has been cut dramatically in recent years, there is usually demand for less expensive rebuilt-cars. We are positioned to meet this demand with rolling stock and our railcar repair and fabrication shops. Not only can these facilities repair and rebuild cars, it can also design and build bulkheads, gates, and hatches to match customer demand. With capabilities both in the railcar repair and fabrication business, it's easier to meet customer needs in the lease business. Our goal is to be the Total Rail Solutions(SM) provider for our railcar customers. Plans are for Rail to add a new repair facility in South Carolina in 2003. Rail had 5,699 railcars under management at the end of 2002, 5% more than in 2001. In addition, we have 51 locomotives under management. We ended 2002 with 85% of the railcars under management in service. This is up 10% from 2001, a huge improvement. Our utilization objective in 2003 is to be at 90%. We continue to believe this business can grow at a 20% annual rate for the near future. We have found opportunities by purchasing railcars with attached leases from investors looking to re-balance or modify their portfolios. With the sluggish economy, our focus is on short-term lease deals (where the largest demand is), diligent management of railcars, monitoring credit quality, valuation and positions, and stepping up our sales and marketing efforts. The PROCESSING GROUP made a sizable turnaround in 2002 and expects to be in the black in 2003. The business was reorganized to capture efficiencies in the areas of marketing, operations, and reporting/systems. We are implementing a cost system and are studying total IT systems needs. We have better control over ingredient costs by sourcing raw material earlier, margins have improved, and we are paying very close attention to working capital usage. We still have more work to do in order to get Processing to achieve an acceptable return. Lawn fertilizer shipments increased 3% in 2002, and they are expected to grow 3% in 2003. The "big box retail" consumer lawn fertilizer business is dynamic. However, because these larger customers have greater demands, change can be rewarding or painful. We have successfully served this market for decades and continue to believe we have opportunity to profitably add value as a private label supplier to the industry. For 2003 we landed a new international private label for U.S. distribution and expect this relationship to grow in future years. Our professional turf business, Andersons Golf Products(TM), has stabilized and is expected to grow by 8% in 2003. Our goal for this business is to increase distribution to New England and the Southeastern U.S. 5 The Processing Group's other businesses, cob-based carriers and animal bedding/litter products, were modestly profitable in 2002. There are a number of new products being tested in the marketplace that show promise for 2003. Our RETAIL GROUP'S focus on MORE FOR YOUR HOME(R) is paying off as noted by their 2002 improved performance. The addition of a fresh meat market in the Maumee Store was such a huge success that we added similar markets to the Toledo and Woodville stores. The addition complements our deli, bakery, produce and wine offerings and gives customers the convenience of one-stop food shopping. We are now considering fresh meat markets for our Central Ohio stores as well. This year we are rolling out a new shopping concept at our Woodville store designed to increase the average per-customer sale. The new store concept features a floor plan that improves customer flow and significantly increases the number of merchandise end-caps to more prominently feature selected merchandise. Margins are up in 2002 as a result of vigilant control over markdowns. We will focus on inventory turns, in-stock performance, labor utilization efficiency and improved technologies in 2003. The most important issue for Retail is growth - will there be a seventh store? We have been evaluating our long-term growth potential, testing site selection models and investigating a few specific sites. We expect to finalize a decision in 2003. On the ADMINISTRATIVE front we have been watchful of our operating, administrative and general expenses, developing and extending our use of ERP systems and technology, and intensifying strategic sourcing and procurement efforts to find more efficient and less expensive business practices. Interest expense improved by $1.8 million in 2002, mainly from lower interest rates. As a result of the lower interest rate environment, we made a number of capital market moves that we believe will benefit the company in 2003 and beyond. In November, we completed a $200 million short and long-term credit line syndicated with six major banks. In addition, we restructured our long-term debt, increasing the fixed rate portion to 90% of the total outstanding. Net working capital is up by 7%. Capital spending was managed very closely and as a result, operating cash flow was strong, all of which strengthened the year-end balance sheet. Our balance sheet has grown to over $469 million in total assets. Most of the asset growth is in grain inventories. Contrary to the way most non-commodity businesses operate, high grain inventories are generally a positive indicator for the near future. In our remaining businesses, we are striving to use working capital more efficiently. We expected an improvement in operating income in 2002 and that was accomplished. We thank our 3,000 hard working, creative and dedicated employees who provide extraordinary products and service to our customers. 6 We are grateful to them, to our customers and suppliers, and to you our shareholders. We believe in honesty, integrity, and mutual respect for our employees, customers and shareholders. These values will prevail at The Andersons. One final note. We want to extend our thanks to two long-time board members, Don Anderson and Rick Anderson, who are stepping down this year. Their dedication and guidance for the past 14 years have been invaluable. In the future, the board's governance / nominating committee will be seeking candidates to fill these two vacancies. Their choices will reflect The Andersons' commitment to a diversified board with a majority of non-management directors that represent a wide range of interests and business philosophies. Sincerely /s/ Mike Mike Anderson, CEO & President /s/ Dick Dick Anderson, Chairman of the Board WITH THANKS Don Anderson Director, 1988-2002 One of the six children of our founder Harold Anderson, Don's career with the company started at its inception in 1947 and continued to his retirement in 1996 as Director of Science. For the last 15 years Don has shared his wisdom and expertise as a member of our Board of Directors. Don is stepping down from the Board this year. We want to express our sincere thank you to him for his many years of service and dedication to The Andersons. Rick Anderson Director, 1988-2002 Rick joined The Andersons in 1986 and has been a member of the Board of Directors for the last 15 years. Although Rick will no longer be a member of our Board, he continues to serve the Company as President of the Processing Group. Thank you to Rick for his contributions and service to The Andersons Board of Directors and for his continued leadership of our Processing Group. 7 AGRICULTURE GROUP The AGRICULTURE GROUP operates grain elevators and plant nutrient formulation and distribution facilities in Ohio, Michigan, Indiana and Illinois. The group's elevators receive large quantities of grain and oilseeds (primarily corn, soybeans and wheat) from farms and country elevators in the region, store and condition it, then market it via rail or ship to domestic and export processors. The plant nutrient distribution facilities formulate and market large volumes of dry and liquid agricultural nutrients to dealers, distributors and company-owned farm centers. The group is a formulator of technologically advanced, environmentally friendly, liquid anti-icers for use in runway and roadway applications. In 2002, the Agriculture Group's operating income was $15.2 million, excellent operating performance for the year. Total revenues of $762 million in 2002 were almost $100 million higher than the previous year. The drought that affected grain production in the region this past summer broke a five-year string of relatively good growing seasons in the eastern corn belt. Fewer bushels were delivered to the group's elevators, and ending corn, soybean and wheat stocks in the U.S. also declined. As a result, the group's earnings from storing grain were lower than they were in 2001. Demand from grain processors remained strong resulting in double-digit percentage price increases, excellent margins, and increased gross profit from handling and conditioning grain. The group also experienced earnings growth from its emerging AgriPartners(R) Plus, Gold and PLATINUM service businesses, offering various information, marketing, crop insurance programs and licensing agreements to producers and elevators throughout the corn belt. The Plant Nutrient Division's wholesale tonnage volume increased in 2002 and gross margins remained strong. As a result, this business experienced growth in revenues, gross profit and operating income, surpassing its previous earnings record. Market share gains were achieved in its core plant nutrient formulation and distribution business through a strong customer focus, an excellent market position with basic manufacturers and strategically located assets. Twenty percent growth was achieved in the industrial and specialty agricultural customer sector as well. The group's farm centers again achieved a modest operating profit for the year. Custom application acreage increased in 2002, and expenses were pared by consolidating some locations to improve efficiency. A sizable portion of the Company's total spending on plant and equipment in 2002 was allocated to the Agriculture Group. In addition to numerous facility recapitalization projects, significant investments were made to improve the loadout and grain-cleaning capabilities of its river elevator in Toledo and to increase the storage capacity three-fold at its fertilizer terminal in Lordstown, Ohio to better serve the group's growing customer base in eastern Ohio, Pennsylvania and western New York. Early in 2003, the group also completed a joint venture transaction with Lansing Grain, a grain trading company, to form a new limited liability company that will serve as a platform for future growth initiatives. [Bar Charts]

1998 1999 2000 2001 2002 SALES & REVENUES $ 826 $ 669 $ 646 $ 659 $ 762 OPERATING INCOME 6.7 6.1 14.3 19.8 15.2 UNIT VOLUMES Grain Bushel Receipts (Millions) 157 158 156 155 142 Grain Bushels Shipped (Millions) 204 182 165 165 180 Wholesale Fertilizer Sales and Service Tons (000) 1,201 1,293 1,306 1,360 1,423 Farm Center Application Acres (000) 333 552 479 475 491

8 PROCESSING GROUP The PROCESSING GROUP manufactures turf and ornamental plant fertilizer and control products for sale by major retailers in the U.S. and is the industry's leading supplier of premium turf-care products for golf courses and other professional markets. It also produces corncob-based chemical and feed ingredient carriers, animal bedding, cat litter and ice-melter products. The group operates facilities in Maumee and Bowling Green, Ohio; Montgomery, Alabama; Pottstown, Pennsylvania; and Delphi, Indiana. Total revenues were $114 million in 2002, slightly higher than the $113 million realized in 2001. The group's bottom line reflected a significantly larger improvement, reducing the prior year loss by more than $6 million. The volume of turf fertilizer sold in the U.S. in 2002 was negatively impacted by the unusually dry summer throughout much of the country. The group's turf business was able to achieve a 3 percent increase in volume for the year, however, with growth in total sales to consumer and industrial accounts more than offsetting lower volumes going into professional markets. Average gross margins improved due to lower ingredient costs, primarily nitrogen, and a noticeable shift from straight fertilizers to higher-margin control products. Retailers across the country continued to focus on controlling in-store inventories and just-in-time delivery of product to their stores. Sales of turf-care products to the golf course market were hurt when the number of golf rounds played in the U.S. declined for the third straight year. Late in the year, the Processing Group began shipping a new line of turf-care products that consumers will begin to see on a major retailer's shelves in 2003. The group's other businesses, primarily the manufacturing of cob-based chemical and feed ingredient carriers, animal bedding and litter products, achieved modest bottom-line improvement in 2002. [Bar Charts]

1998 1999 2000 2001 2002 SALES & REVENUES $ 76.4 $ 85.0 $ 107.4 $ 112.8 $ 114.3 OPERATING INCOME (LOSS) $ 2.8 $ (0.1) $ (3.5) $ (7.7) $ (1.3)

9 RAIL GROUP The RAIL GROUP sells and leases railcars and locomotives. It also repairs and reconfigures various types of railcars to meet customer specifications, and operates a custom steel-fabrication business. The group's rail marketing business has grown significantly in recent years and now has approximately 5,700 railcars and 51 locomotives under management. The fleet consists of covered hopper cars, boxcars, open top hopper cars, gondolas, and tank cars. The group leases its rolling stock to shippers, railroads and fleet owners in a wide range of industries throughout North America. The group's total revenues were $18.7 million in 2002. This was $12.4 million, or 40 percent, below the $31.1 million generated in 2001. Revenues from railcar and locomotive leasing and the group's two shops increased in the past year, but the absence of any significant car sales in 2002 caused total revenues to decline. The fleet of cars managed by this group continued to grow in 2002. Significant improvement was also achieved in the utilization rate of the railcar fleet from 75 percent in 2001 to 85 percent at the end of 2002, following two successive years of decline. Because of the overall fleet growth and improved fleet utilization, more cars were in income-producing service, fewer cars were out of service, and total leasing income increased. Operating income also improved in 2002 primarily because of the writedown of the value of certain railcars during 2001. In total, the group achieved an operating income of $1.6 million in 2002, an improvement of $1.9 million from the operating loss of $0.3 million reported for 2001. Although no noticeable rebound has yet emerged in car values and lease rates for some types of railcars, two areas which have been in a cyclical downturn for the past three years, the group has positioned itself well and demonstrated its ability to achieve income growth through a well-managed leasing program. The railcar repair shop and the fabrication shop performed well in 2002. The integration of these shops with the rail marketing business continues to bear fruit. As the Rail Group strives to be a Total Rail Solutions(SM) provider for its customers, some exciting opportunities are emerging. In component manufacturing, for example, the group has the ability to design a component, manufacture it, install it on a car, then lease the refurbished car to a customer. As the group continues to build the lease fleet, it is taking care to diversify it in terms of lease duration, car types, industries, customers and geographic dispersion. The Rail Group will continue to monitor credit quality of its customers diligently, and to match fund assets and liabilities as much as possible to effectively manage risk. [Bar Charts]

1998 1999 2000 2001 2002 SALES & REVENUES $ 50.4 $ 55.3 $ 19.0 $ 31.1 $ 18.7 OPERATING INCOME (LOSS) $ 4.4 $ 4.2 $ 1.0 $ (0.3) $ 1.6 CARS UNDER MANAGEMENT Railcars 4,082 4,420 4,815 5,432 5,699 Locomotives -- 30 30 51 51

10 RETAIL GROUP The RETAIL GROUP operates six large stores in Ohio; three in the Toledo area, two in Columbus and one in Lima. Four are stand-alone facilities with in-store selling space of 130,000 or more square feet each. The other two are slightly smaller mall-based units. The goal of the Retail Group is to serve the needs of homeowners more effectively than competing home centers and mass merchants. The group's central message to the retail customer is MORE FOR YOUR HOME(R). The product offering includes a broad array of traditional home center merchandise - plumbing, electrical and building supplies, hardware, tools, kitchen and bath design, flooring, paint and lighting products. In addition to these, the stores feature lawn and garden products, extensive lines of housewares and domestics, workwear, pet supplies, automotive supplies and sporting goods. Each store also has an Uncommon Market(TM) with a unique offering of high quality foods including produce, a deli, a bakery, specialty gourmet foods, frozen and fresh meats, and one of the largest selections of fine wines in the Midwest. Despite the general sluggishness reported by retailers across the country, total sales for the Retail Group grew by 1.8% this year, from $178 million in 2001 to $181 million in 2002. Operating income of $4.0 million for the year was more than double the $1.9 million realized in 2001. Although the number of shoppers in the group's stores last year was virtually unchanged from a year ago, the average amount purchased by customers was higher and average gross margins also improved from year-earlier levels. The addition of a fresh meat business in two more stores in 2002 was received enthusiastically by customers. All three Toledo-area stores now offer this new product category. In addition, above-average growth was achieved in several Uncommon Market(TM) product categories, most notably produce, deli and specialty foods. The Retail Group also continued to focus heavily on operational improvements in 2002. Total store labor hours were again reduced from year-earlier levels without a reduction in customer service levels. In-stock performance showed gains, exceeding 2001's monthly levels throughout the year. Total in-stock performance was the highest it has been in the six years this metric has been measured. In addition to numerous facility recapitalization projects, the Retail Group made a significant investment to upgrade the already very successful garden center at the Toledo store. It also began a major remodeling project at another store to test a concept that will improve product accessibility for customers and greatly increase the number of promotional displays throughout the store. Constant attention to product mix enhancements and operational efficiency are driven by the group's desire to out-perform the competition in the customer's total shopping experience. [Bar charts]

1998 1999 2000 2001 2002 SALES & REVENUES Retail $ 174 $ 181 $ 184 $ 178 $ 181 OPERATING INCOME Retail $ 1.7 $ 2.6 $ 3.2 $ 1.9 $ 4.0

11 SELECTED FINANCIAL DATA

2002 2001 2000 1999 1998 (As Restated) (e) (in thousands, except for per common share data) Operating Results Total sales & revenues (f) $ 1,076,527 $ 980,361 $ 958,505 $ 1,001,804 $ 1,137,353 Net income 14,244 (a) 8,857 (a) 10,078 (b) 8,379 9,752 Per common share data: Earnings - diluted 1.92 1.21 1.34 1.03 1.20 Dividends paid 0.26 0.26 0.24 0.20 0.16 Balance Sheet Data Total assets (c) $ 469,218 $ 458,324 $ 442,965 $ 379,663 $ 362,663 Working capital 81,755 75,228 55,260 67,939 65,898 Long-term debt (d) 84,272 91,316 80,159 74,127 71,565 Shareholders' equity 105,765 94,934 89,836 84,805 82,734

(a) Gains of $0.3 million ($0.2 million after tax) for insurance settlements are included in each of 2002 and 2001 (b) Gains of $2.1 million for an insurance settlement and $1.0 million on the sale of a business are Included ($2.0 million after tax). (c) Includes reclassification of pension asset for all years presented (d) Excludes current portion. (e) To reflect the adoption of EITF Topic D-96. See Note 1 to the audited financial statements (f) Includes reclassification of revenues (and cost of sales) for all years presented relative to third party contract. See Note 1 to the audited financial statements QUARTERLY FINANCIAL DATA AND MARKET FOR COMMON STOCK

(in thousands, except for Net Income (Loss) before per common share data) Cumulative Effect Per Share- Net Sales Gross Profit Amount Basic ------------------------------------------------- Quarter Ended 2002 (as restated) March 31 $ 215,561 $ 35,015 $ 681 $ 0.09 June 30 301,001 48,919 8,328 1.14 September 30 204,868 33,779 (630) (0.09) December 31 355,097 45,388 2,385 0.33 ------------------------------------ Year $1,076,527 $ 163,101 $ 10,764 1.48 ==================================== 2001 March 31 $ 216,802 $ 35,369 $ (630) $ (0.09) June 30 272,714 48,722 7,274 1.00 September 30 184,829 31,646 (1,905) (0.26) December 31 306,016 45,014 4,303 0.60 ------------------------------------ Year $ 980,361 $ 160,751 $ 9,042 1.24 ====================================

(in thousands, except for Net Income (Loss) Common Stock Quote per common share data) ----------------------- ----------------------- Per Share- Dividends Amount Basic High Low Declared -------------------------------------------------------------- Quarter Ended 2002 (as restated) March 31 $ 4,161 $ 0.57 $ 10.40 $ 9.35 $ 0.065 June 30 8,328 1.14 13.75 10.12 0.065 September 30 (630) (0.09) 13.60 11.76 0.065 December 31 2,385 0.33 13.00 11.38 0.070 ---------- ---------- Year $ 14,244 1.96 $ 0.265 ========== ========== 2001 March 31 $ (815) $ (0.11) $ 8.94 $ 8.03 $ 0.065 June 30 7,274 1.00 8.88 7.50 0.065 September 30 (1,905) (0.26) 10.00 7.72 0.065 December 31 4,303 0.60 10.00 8.51 0.065 ---------- ---------- Year $ 8,857 1.22 $ 0.260 ========== ==========

12 Following is a table reconciling previously reported quarterly net sales, gross profit, net income (loss) before cumulative effect and net income (loss) to amounts which reflect the restatement for the adoption of EITF D-96 (See Note 1 to the audited financial statements). The "As Previously Reported" column includes reclassifications to gross profit related to the adoption of EITF 02-16, "Accounting by a Reseller for Cash Consideration received from a Vendor," which had no impact on net income or shareholders' equity. In addition, the adjustments to net sales include an election to reclassify the current period impact of the marketing agreement to a component of sales and merchandising revenues rather than cost of sales. This reclassification also had no impact to net income or shareholders' equity.

YEAR ENDED DECEMBER 31, 2002 AS PREVIOUSLY AS QUARTER ENDED CAPTION REPORTED ADJUSTMENTS RESTATED ------------------------------------------- March 31 Net Sales $ 214,831 $ 730 $ 215,561 Gross Profit 36,349 (1,334) 35,015 Net income (loss) before cumulative effect 1,609 (928) 681 Net Income (Loss) 1,609 2,552 4,161 June 30 Net Sales 301,098 (97) 301,001 Gross Profit 49,541 (622) 48,919 Net income (loss) before cumulative effect 8,760 (432) 8,328 Net Income (Loss) 8,760 (432) 8,328 September 30 Net Sales 204,722 146 204,868 Gross Profit 34,835 (1,056) 33,779 Net income (loss) before cumulative effect (84) (546) (630) Net Income (Loss) (84) (546) (630) December 31 Net Sales 355,183 (86) 355,097 Gross Profit 46,208 (820) 45,388 Net income (loss) before cumulative effect 3,034 (649) 2,385 Net Income (Loss) 3,034 (649) 2,385

13 Report of Independent Accountants To the Board of Directors and Shareholders of The Andersons, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and of shareholders' equity, as presented on pages 15 through 18 and pages 32 through 56, present fairly, in all material respects, the financial position of The Andersons, Inc. and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1, the Company restated its Consolidated Financial Statements as of and for the year ended December 31, 2002 to reflect the adoption of EITF Topic D-96, "Accounting for Management Fees Based on a Formula." /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Toledo, Ohio January 27, 2003, except as to the effect of the matters described in Note 1, which is as of October 24, 2003 14 The Andersons, Inc. Consolidated Statements of Income

YEAR ENDED DECEMBER 31 2002 2001 2000 (in thousands, except per common share data) (AS RESTATED) --------------------------------------- Sales and merchandising revenues $ 1,076,527 $ 980,361 $ 958,505 Cost of sales and merchandising revenues 913,426 819,610 800,323 --------------------------------------- Gross profit 163,101 160,751 158,182 Operating, administrative and general expenses 141,028 141,091 139,058 Interest expense 9,812 11,570 11,829 Other income / gains: Other income (net) 3,439 3,503 3,989 Gain on insurance settlements 302 338 2,088 Gain on sale of business -- -- 992 --------------------------------------- Income before income taxes and cumulative effect of accounting change 16,002 11,931 14,364 Income tax provision 5,238 2,889 4,286 --------------------------------------- Income before cumulative effect of accounting change 10,764 9,042 10,078 Cumulative effect of change in accounting principle, net of income tax benefit 3,480 (185) -- --------------------------------------- Net income $ 14,244 $ 8,857 $ 10,078 ======================================= PER COMMON SHARE: BASIC EARNINGS PER SHARE: Income before cumulative effect of accounting change $ 1.48 $ 1.24 $ 1.34 Cumulative effect of change in accounting principle, net of income tax benefit 0.48 (0.02) -- --------------------------------------- Net income $ 1.96 $ 1.22 $ 1.34 ======================================= DILUTED EARNINGS PER SHARE Income before cumulative effect of accounting change $ 1.45 $ 1.24 $ 1.34 Cumulative effect of change in accounting principle, net of income tax benefit 0.47 (0.03) -- --------------------------------------- Diluted earnings $ 1.92 $ 1.21 $ 1.34 ======================================= Dividends paid $ 0.26 $ 0.26 $ 0.24 =======================================

The Notes to Consolidated Financial Statements on pages 21-32 are an integral part of these statements. 15 The Andersons, Inc. Consolidated Balance Sheets

DECEMBER 31 2002 2001 (in thousands) (AS RESTATED) ----------------------- ASSETS Current assets: Cash and cash equivalents $ 6,095 $ 5,697 Accounts and notes receivable: Trade receivables, less allowance for doubtful accounts of $3,014 in 2002; $2,701 in 2001 59,800 51,080 Margin deposits -- 3,756 ----------------------- 59,800 54,836 Inventories 256,275 238,291 Railcars available for sale 550 11,932 Deferred income taxes 2,894 3,963 Prepaid expenses and other current assets 11,675 11,954 ----------------------- Total current assets 337,289 326,673 Other assets: Pension asset 5,828 4,248 Other assets and notes receivable, less allowance for doubtful notes receivable of $222 in 2002; $472 in 2001 5,794 5,344 Investments in and advances to affiliates 969 956 ----------------------- 12,591 10,548 Railcar assets leased to others, net 26,399 26,102 Property, plant and equipment, net 92,939 95,001 ----------------------- $ 469,218 $ 458,324 ======================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 70,000 $ 82,600 Accounts payable for grain 75,422 66,968 Other accounts payable 60,285 50,996 Customer prepayments and deferred income 20,448 22,683 Accrued expenses 19,604 17,824 Current maturities of long-term debt 9,775 10,374 ----------------------- Total current liabilities 255,534 251,445 Deferred income 717 2,209 Other long-term liabilities 381 223 Employee benefit plan obligations 12,198 9,550 Long-term debt, less current maturities 84,272 91,316 Deferred income taxes 10,351 8,647 ----------------------- Total liabilities 363,453 363,390 Shareholders' equity: Common shares, without par value Authorized -- 25,000 shares Issued -- 8,430 shares at stated value of $0.01 per share 84 84 Additional paid-in capital 66,662 66,431 Treasury shares, at cost (1,258 in 2002; 1,174 in 2001) (12,558) (10,687) Accumulated other comprehensive loss (815) (964) Unearned compensation (73) (83) Retained earnings 52,465 40,153 ----------------------- 105,765 94,934 ----------------------- $ 469,218 $ 458,324 =======================

The Notes to Consolidated Financial Statements on pages 21-32 are an integral part of these statements. 16 The Andersons, Inc. Consolidated Statements of Cash Flows

YEAR ENDED DECEMBER 31 (in thousands) 2002 2001 2000 (as restated) ------------------------------------ OPERATING ACTIVITIES Net income $ 14,244 $ 8,857 $ 10,078 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 14,314 14,264 13,119 Provision for losses on accounts and notes receivable 353 224 911 Cumulative effect of accounting change, net of income taxes (3,480) 185 -- Gain on insurance settlements (302) (338) (2,088) Gain on sale of business -- -- (992) Gain on sale of property, plant and equipment (406) (336) (35) Realized and unrealized (gains) losses on railcars (179) 1,172 (110) Deferred income tax provision (benefit) 1,432 (539) 2,242 Other 91 368 111 ------------------------------------ Cash provided by operations before changes in operating assets and liabilities 26,067 23,857 23,236 Changes in operating assets and liabilities: Accounts and notes receivable (5,249) 2,080 (6,984) Inventories (17,984) (26,428) (35,811) Prepaid expenses and other assets (474) (117) (3,604) Accounts payable for grain 8,454 (500) (1,415) Other accounts payable and accrued expenses 12,435 (5,000) 6,274 ------------------------------------ Net cash provided by (used in) operating activities 23,249 (6,108) (18,304) INVESTING ACTIVITIES Purchases of property, plant and equipment (9,834) (9,155) (16,189) Purchases of railcars (8,203) (21,790) (16,245) Purchase of U.S. ProTurf(R) and other business assets -- -- (16,311) Proceeds from sale of railcars 15,985 15,376 3,821 Proceeds from sale of property, plant and equipment 598 951 240 Proceeds from insurance settlements 302 338 2,346 Proceeds from sale of business -- -- 2,133 ------------------------------------ Net cash used in investing activities (1,152) (14,280) (40,205) FINANCING ACTIVITIES Net increase (decrease) in short-term borrowings (12,600) 11,300 26,300 Proceeds from issuance of long-term debt 22,333 23,250 194,723 Payments of long-term debt (29,976) (10,845) (187,417) Change in overdrafts 2,866 (7,796) 17,827 Payment of debt issue costs (634) -- -- Proceeds from sale of treasury shares under stock compensation plans 840 332 363 Dividends paid (1,903) (1,907) (1,819) Purchase of treasury shares (2,625) (1,387) (3,944) ------------------------------------ Net cash provided by (used in) financing activities (21,699) 12,947 46,033 ------------------------------------ Increase (decrease) in cash and cash equivalents 398 (7,441) (12,476) Cash and cash equivalents at beginning of year 5,697 13,138 25,614 ------------------------------------ Cash and cash equivalents at end of year $ 6,095 $ 5,697 $ 13,138 ==================================== NONCASH INVESTING ACTIVITIES Acquisition of intangible assets in exchange for long-term debt $ 3,879 ==========

The Notes to Consolidated Financial Statements on pages 21-32 are an integral part of these statements. 17 The Andersons, Inc. Consolidated Statements of Shareholders' Equity

Accumulated Additional Other Common Paid-in Treasury Comprehensive Unearned Retained (in thousands) Shares Capital Shares Loss Compensation Earnings Total ------------------------------------------------------------------------------ Balances at January 1, 2000 $ 84 $ 67,227 $ (7,158) $ (144) $ (158) $ 24,954 $ 84,805 --------- Net income 10,078 10,078 Other comprehensive income: Minimum pension liability, net of $0.1 million income taxes 144 144 --------- Comprehensive income 10,222 Stock awards, stock option exercises, and other shares issued to employees and directors (130 shares) (96) 607 (148) 363 Issuance of shares to complete acquisition (643) 643 -- Amortization of unearned compensation 228 228 Purchase of treasury shares (477 shares) (3,944) (3,944) Dividends declared ($0.245 per common share) (1,838) (1,838) ------------------------------------------------------------------------------ Balances at December 31, 2000 84 66,488 (9,852) -- (78) 33,194 89,836 --------- Net income 8,857 8,857 Other comprehensive income (loss): Cumulative effect of accounting change (1,172) (1,172) Other 208 208 --------- Comprehensive income 7,893 Stock awards, stock option exercises, and other shares issued to employees and directors, net of tax (62 shares) (57) 552 (163) 332 Amortization of unearned compensation 158 158 Purchase of treasury shares (166 shares) (1,387) (1,387) Dividends declared ($0.26 per common share) (1,898) (1,898) ------------------------------------------------------------------------------ Balances at December 31, 2001 84 66,431 (10,687) (964) (83) 40,153 94,934 --------- Net income (as restated) 14,244 14,244 Other comprehensive income: Cash flow hedge activity, net of income tax of $0.5 million 149 149 --------- Comprehensive income (as restated) 14,393 Stock awards, stock option exercises, and other shares issued to employees and directors, net of income tax of $0.3 million (132 shares) 231 754 (145) 840 Amortization of unearned compensation 155 155 Purchase of treasury shares (216 shares) (2,625) (2,625) Dividends declared ($0.265 per common share) (1,932) (1,932) ------------------------------------------------------------------------------ Balances at December 31, 2002 (as restated) $ 84 $ 66,662 $(12,558) $ (815) $ (73) $ 52,465 $ 105,765 ==============================================================================

The Notes to Consolidated Financial Statements on pages 21-32 are an integral part of these statements. 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OPERATING RESULTS Operating results for The Andersons, Inc. business segments are discussed in the Business Review on pages 6-13 of this annual report. In addition, Note 13 to the consolidated financial statements displays selected financial information for each of the Company's business segments. The following discussion focuses on the operating results as shown in the consolidated statements of income. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS In connection with a review of our periodic filings by the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission, we concluded that it is appropriate to modify our accounting related to a specific agreement with a third party. As previously disclosed, certain of the Company's agriculture facilities are subject to a five-year marketing agreement with a third party that provides for a base level of income and equal sharing of profits earned over the base level. The Company's share of profits is calculated annually under the marketing agreement based on a formula that recognizes the base level income as revenue on a pro-rata basis over the term of the agreement. The Company previously measured its share of the profits earned in excess of the base-level at the end of each contract year and was recognizing such income over the remaining term of the agreement. Upon further review and consideration, we have determined that the Emerging Issues Task Force Topic D-96, "Accounting for Management Fees Based on a Formula," ("EITF Topic D-96") applies to the Company's situation, specifically with respect to provisions of Method 2 described therein, which stipulates that revenues recorded under such arrangements should be the amount that would be due under the formula at any point in time as if the contract was terminated at that date. Upon review of the impact of the adjustments necessary to comply with the requirements of EITF Topic D-96, which became effective for the Company as of January 1, 2002, we concluded that restating our 2002 financial statements was appropriate. The transition provisions of EITF Topic D-96 require the impact of the change in accounting to be presented as a cumulative effect of a change in accounting principle at the date of adoption. The following table presents the impact of the restatement adjustments on the Company's previously reported sales and merchandising revenues, cost of sales and merchandising revenues, gross profit, income before income taxes and cumulative effect of accounting changes, income tax provision, cumulative effect of change in accounting principle, net of income tax provision, and net income for the year ended December 31, 2002. 19

YEAR ENDED DECEMBER 31, 2002 AS PREVIOUSLY INCOME STATEMENT CAPTION REPORTED ADJUSTMENTS AS RESTATED ------------------------------------------- Sales and merchandising revenues (b) $ 1,075,834 $ 693 $ 1,076,527 Cost of sales and merchandising revenues(a) 908,901 4,525 913,426 Gross profit 166,933 (3,832) 163,101 Income before income taxes and cumulative effect of accounting change 19,834 (3,832) 16,002 Income tax expense 6,515 (1,277) 5,238 Cumulative effect of change in accounting principle, net of income taxes -- 3,480 3,480 Net income 13,319 925 14,244

(a) Periods presented "As Previously Reported" include reclassifications made to conform to the current presentation. These reclassifications related to the adoption of EITF 02-16, Accounting by a Reseller for Cash Consideration Received from a Vendor, and had no impact on net income or shareholders' equity. (b) Upon adoption of EITF Topic D-96, the Company reclassified the current period impact to gross profit of the marketing agreement as a component of sales and merchandising revenues rather than cost of sales. Previously the Company considered the marketing agreement impact as an adjustment to its cost of grain rather than as an adjustment to sales and merchandising revenues and therefore had included the impact in its cost of sales. Prior periods have been reclassified to conform to this presentation. The following table presents a summary of the effects of the restatement on the Consolidated Balance Sheet as of December 31, 2002.

DECEMBER 31, 2002 AS PREVIOUSLY BALANCE SHEET CAPTION REPORTED ADJUSTMENTS AS RESTATED ----------------------------------------- Current deferred income tax asset $ 3,491 $ (597) $ 2,894 Customer prepayments and deferred income 21,970 (1,522) 20,448 Retained earnings 104,840 925 105,765

All information within this Annual Report to Shareholders has been updated for the above restatement and reclassifications. COMPARISON OF 2002 WITH 2001 Sales and merchandising revenues for 2002 totaled $1.08 billion, an increase of $96.2 million, or 10%, from 2001. Sales in the Agriculture Group were up $114.7 million, or 19%. Increased grain sales of $119.4 million included both a 9% volume increase and a 16% increase in the average price of bushels sold. All grains showed price per bushel increases and bushel volume was up for corn and wheat. Fertilizer sales were down $4.6 million, or 3%, due to a 9% decrease in the average price per ton sold, 20 partially offset by a 7% increase in tons sold. Revenues in both grain and fertilizer businesses are significantly impacted by the market price of the commodities being sold. Merchandising revenues in the Agriculture Group were down $11.0 million, or 23%, due to decreases in space income (before interest charges) in the grain division. Space income is income earned on grain held for our account or for our customers and includes storage fees earned and appreciation or depreciation in the value of grain owned. Grain on hand at December 31, 2002 was 56.3 million bushels, of which 13.4 million bushels were stored for others. This compares to 65.4 million bushels on hand at December 31, 2001, of which 10.4 million bushels were stored for others. The results of the 2002 harvest were mixed with poor yields in some portions of the Company's market area. As a result, management expects that the 14% decline in grain held in the Company's facilities from year to year will negatively impact space income in the first half of 2003. The higher grain prices, however, may favorably impact the fertilizer business for the same period. Wheat acreage (planted in 2002 for harvest in July 2003) in the Company's market area has increased and management expects that corn acreage to be planted in Spring 2003 will increase as well, due to the higher corn prices. However, poor weather during the spring planting season may unfavorably impact the corn and soybean planted acreage during that time. The Processing Group had a $1.5 million, or 1%, increase in sales and merchandising revenues resulting primarily from an overall 3% increase in lawn division tons sold, partially offset by a 3% decrease in the average price per lawn division ton sold. The industrial lawn business (where the Group is responsible only for the contract manufacturing of product and does no marketing) continues to grow in relative size, due, in part, to the movement of a large consumer customer to an industrial relationship. The Company receives less margin for industrial tons, as compared to consumer tons, because it is acting primarily as a contract manufacturer and not incurring certain sales and marketing costs. Further, the Company is no longer required to accept returns from the customer. The reduction of returns and elimination of marketing costs contributed to the sales increase. Sales and merchandising revenues were positively impacted by these reversals in 2002 by $1.4 million. The professional lawn business continues to be impacted by general softness in the golf course market and a reduction in the number of rounds played. The Rail Group had a $12.3 million, or 40%, decrease in sales. While lease revenue was up $1.8 million, or 14%, in 2002, sales of railcars were down $15.2 million. Sales in the fabrication and rail repair shops were up $1.1 million. Railcars under management at December 31, 2002 were 5,699 compared to 5,432 under management at December 31, 2001. Locomotives under management were 51 for both 2001 and 2002. The railcar utilization (railcars in lease service) rate increased from 75% at December 31, 2001 to 85% at the end of December 2002. The Retail Group had a 1.8% increase in same-store sales and revenues in 2002 as compared to 2001. Individual store results were mixed, however both the Toledo and Columbus markets showed increases. In addition, three of the six stores have added a fresh meat counter since the third quarter of 2001. This business is managed by a third party and the Company earns commissions on sales of fresh meat; these commissions have been included in merchandising revenues. The Company expects that significant new competition in the Toledo market may impact sales in 2003. The Company is also in the process of testing a new store layout in one of its Toledo area stores which should improve customer flow. 21 Gross profit for 2002 totaled $163.1 million, an increase of $2.3 million, or 1%, from 2001. The Agriculture Group had a $4.8 million, or 6%, decrease in gross profit, in spite of the significant increase in revenues mentioned previously. Gross profit in the grain division totaled $47.3 million, a decrease of $4.7 million, or 9%. The fertilizer businesses of the Agriculture Group recognized a decrease in gross profit of $0.1 million, primarily due to a decrease in gross profit per ton, nearly offset by increased volume of fertilizer sold. Gross profit for the Processing Group in 2002 increased $2.5 million, or 12%, when compared to 2001. Overall gross profit per ton for the Processing Group was up 11%. Although there was a 3% decrease in average price per lawn ton sold, there was also a 5% decrease in the average cost of a lawn ton. Coupled with the volume increase in the lawn division and the gross profit impact of the reduction in returns and marketing costs mentioned previously, lawn division gross profit was up $2.8 million, or 16%. The cob-based businesses experienced a decrease of $0.3 million, or 8%, in gross profit, resulting in the overall $2.5 million increase for the Group. Gross profit in the Rail Group increased $1.5 million, or 20%. Of this increase, $0.4 million was due to the improved performance of the lease fleet primarily related to the increase in railcars in service. In addition, the Group took a $0.3 million non-cash charge to recognize a permanent impairment in the value of certain railcars in 2002; the Group took a comparable charge of $1.5 million in 2001. Gross profit in the Retail Group increased $3.0 million, or 6%, from 2001. This was due to both the increase in sales discussed previously and a percentage point increase in margins. This margin increase results primarily from changes in product mix and better management of promotional programs and markdowns. The Company recorded gains of $0.3 million in each of 2002 and 2001 related to insurance recoveries. Operating, administrative and general expenses for 2002 totaled $141.0 million, a $0.1 million decrease from 2001. Full-time employees increased 2% from 2001, however, labor expense decreased $1.0 million, or 1%. The majority of the decrease relates to severance costs of $1.3 million in 2001 compared to $0.4 million in 2002. Benefit costs, however, rose 11% due to the increased cost of providing pension and health care benefits to current and former employees. In addition, the Company's performance incentive expense increased $1.3 million, which reflects the improved 2002 results when compared to 2001. Significant expense reductions were realized in rent, advertising and professional services. In addition to the benefit and performance incentive expense increases mentioned previously, increases were also realized in insurance expense and maintenance expense. In spite of actions taken to slow the growth of benefit and insurance expenses, the Company expects the trend toward higher costs to continue through 2003. Interest expense for 2002 was $9.8 million, a $1.8 million, or 15%, decrease from 2001. Average daily short-term borrowings for 2002 were up 2% when compared to 2001 while the average short-term interest rate decreased from 5.1% for 2001 to 3.2% for 2002. Long-term interest expense decreased slightly for the same period. As a result of the above, pretax income of $16.0 million for 2002 was 34% higher than the pretax income of $11.9 million in 2001. Income tax expense of $5.2 million was recorded in 2002 at an effective rate of 32.7%. In 2001, income tax expense of $2.9 million was recorded at an effective rate of 24.2%. The 22 significant change in the effective tax rates between 2001 and 2002 resulted primarily from a much higher benefit from our foreign sales corporation in 2001 relative to the pretax income. The Company also recorded a cumulative effect adjustment upon the adoption of EITF Topic D-96 ($3.5 million after tax). This cumulative effect adjustment reversed the December 31, 2001 balance of $5.4 million of deferred income that, under EITF Topic D-96, the Company earned as of January 1, 2002. As a result of the above, the 2002 net income of $14.2 million was $5.3 million better than the 2001 net income of $8.9 million. Basic earnings per share increased $0.74 from 2001 and diluted earnings per share increased $0.71 from 2001. COMPARISON OF 2001 WITH 2000 Sales and merchandising revenues for 2001 totaled $980.4 million, an increase of $21.9 million, or 2%, from 2000. Sales in the Agriculture segment were up $10.0 million, or 2%. Grain sales were down $15.1 million, or 3%, due to flat volumes and a 3% decrease in the average price per bushel sold. Fertilizer sales were up $25.1 million, or 17%, due to a 2% increase in volume and a 14% increase in average price per ton sold. Merchandising revenues in the Agriculture segment were up $2.8 million, or 6%, due primarily to increases in drying and mixing income, space income (before interest charges) in the grain division and licensing revenue from the Crop Revenue Profiler(R) software. Space income includes storage fees earned on grain held for our customers and appreciation in the value of grain owned. Grain bushels on hand at December 31, 2001 were 65.4 million, slightly more inventory than at December 31, 2000. The Processing segment had a sales increase of $5.4 million, or 5%. The majority of this increase was attributable to increased price per ton sold in the lawn fertilizer division and a full twelve months of sales in 2001 of the U.S. ProTurf(R) product line, which was acquired from The Scotts Company on May 31, 2000. Volume decreased for the period in the consumer and industrial lawn fertilizer businesses (sold into the retail distribution channel) due to softness in the economy coupled with cold weather in much of the spring application season. The much smaller corncob-based businesses experienced a 16% increase in the average price per ton sold, partially offset by an 11% reduction in volume. The Rail segment had a sales increase of $12.1 million, or 64%. Railcar sales transactions completed during 2001 were up $11.5 million, and lease fleet revenue was up $1.0 million, or 8%. The lease fleet revenue growth was due to an increased number of railcars and locomotives managed and in service as compared to 2000. Railcars managed at December 31, 2001 numbered 5,432, an increase of approximately 13% over railcars managed at December 31, 2000. The segment also added 21 locomotives to its fleet. The Retail segment experienced decreased sales of $5.9 million, or 3%, in 2001 when compared to 2000. More than half of this decrease relates to an extra (or 53rd) week in the 2000 fiscal year. In addition, weather during the months of January and December in 2001 was mild and demand for our cold weather items was very limited. This is in contrast to the same months in 2000 where weather drove significant sales of cold weather items. The absence of revenues in the Other segment for 2001 was due to the sale of the Company's interest in The Andersons-Tireman Auto Centers (Tireman), an automotive repair business, in 2000. 23 Gross profit for 2001 totaled $160.8 million, an increase of $2.6 million, or 2%, from 2000. The Agriculture segment had a gross profit increase of $11.1 million, or 15%, resulting from a 28% increase in margin on grain bushels sold, a 14% increase in gross profit on fertilizer tons sold and the 6% increase in merchandising revenues discussed previously. As always, this segment's results are highly dependent on weather conditions during the spring planting season through fall harvest in the eastern corn belt. Gross profit for the Processing segment decreased $1.8 million, or 8%, from the prior year. This decrease resulted from a 6% decrease in gross profit per lawn fertilizer ton sold and a 6% decrease in lawn fertilizer volume. The decrease in gross profit per ton was primarily caused by high raw material costs coupled with a change in product mix in the 2001 spring season, as customers opted for lower margin products. Gross profit in the corncob-based businesses was up $0.3 million, or 12%. Gross profit in the Rail segment decreased $1.0 million, or 12%, from the prior year. While gross profit from car sales, railcar repairs, the fabrication shop and lease transactions was up, the segment took a $1.5 million charge to write down the book value of certain impaired railcars. The increased sales activity in the latter portion of the year and some indications of future long-term deals are positive indications that the industry is improving; however, the recovery has been slow. Customer preference and market rates are still more focused on short-term lease opportunities rather than long-term leases or outright sales. Gross profit in the Retail segment decreased by $1.7 million, or 3%, from 2000. Half of this decrease was related to the extra week in 2000 mentioned previously. The remainder was due to the decrease in sales discussed above. New competition is expected in the Toledo market in 2002. Gross profit in the Other segment declined by $1.5 million in 2001 over 2000 due to the Company's sale of its interest in Tireman in March 2000. The Company recorded a gain of $0.3 million in 2001 related to an insurance recovery for a damaged grain tank at the Albion, Michigan facility. A tank collapse at its Webberville, Michigan wholesale fertilizer facility resulted in a 2000 gain of $2.1 million from an insurance settlement for the replacement of the fixed assets. In addition, the Company recognized a gain of $1.0 million on the sale of its 52.5% interest in Tireman. Operating, administrative and general expenses for 2001 totaled $141.1 million, a $2.0 million, or 1%, increase from 2000. The increase primarily reflects increased labor and benefits expenses including $1.3 million in severance expense. Full-time employees decreased 4% from the prior year, with reductions in all segments and at the corporate level. Interest expense for 2001 was $11.6 million, a $0.3 million, or 2%, decrease from 2000. Average daily short-term borrowings increased 1% from 2000 while the average short-term interest rate decreased from 6.95% in 2000 to 5.10% in 2001. However, the Company has increased its long-term debt (including current maturities) 14% from December 31, 2000 to December 31, 2001 and has seen a similar increase in its long-term interest expense. Income before income taxes of $11.9 million decreased $2.5 million, or 17%, from the 2000 pretax income of $14.4 million. Income tax expense was $2.9 million, a $1.4 million, or 33%, decrease from 2000. The effective tax rate decreased significantly from the 2000 rate of 29.8% to 24.2% in 2001. This 24 significant decrease resulted primarily from an increased benefit from the Company's foreign sales corporation. The Company recognized an after-tax charge of $0.2 million to record the cumulative effect of adopting the new financial accounting standard on derivatives. As a result of the above, net income for 2001 decreased $1.2 million, or 12%, from the $10.1 million in 2000 to $8.9 million in 2001. Basic earnings per share decreased $0.12 from 2000 and diluted earnings per share decreased $0.13 from 2000. LIQUIDITY AND CAPITAL RESOURCES The Company's operations (before changes in operating assets and liabilities) provided cash of $26.1 million in 2002, an increase of $2.2 million from 2001. Net working capital at December 31, 2002 was $81.8 million, an increase of $6.6 million from December 31, 2001. The Company has significant short-term lines of credit available to finance working capital, primarily inventories and accounts receivable. Effective on November 1, 2002, the Company entered into a borrowing arrangement with a syndicate of banks which provides the Company with $150 million in short-term lines of credit and an additional $50 million in a three-year line of credit. Prior to the syndication agreement, the Company managed several separate short-term lines of credit. The Company had $70.0 million outstanding on its short-term line of credit at December 31, 2002. Peak short-term borrowing during 2002 was $139.2 million on February 25, 2002. In most years, the Company's highest borrowing occurs in the spring due to seasonal inventory requirements in the fertilizer and retail businesses, credit sales of fertilizer and a customary reduction in grain payables due to the cash needs and market strategies of grain customers. The Company utilizes interest rate contracts to manage a portion of its interest rate risk on both its short and long-term debt and lease commitments. At December 31, 2002, the fair value of these derivative financial instruments recorded in the balance sheet (primarily interest rate swaps and interest rate caps) was a net liability of $0.1 million. Quarterly cash dividends of $0.065 per common share were paid in 2002 and 2001. A cash dividend of $0.07 per common share was declared on January 2, 2003 and was paid on January 22, 2003. The Company made income tax payments of $2.5 million in 2002. During 2002, the Company issued approximately 132 thousand shares to employees and directors under its share compensation plans. Total capital spending for 2002 on property, plant and equipment was $9.8 million and included $1.8 million for investments in facilities and expansion in the Agriculture Group, $1.6 million for information systems and $0.7 million for retail store improvements and additions. The remaining amount of $5.7 million was spent on numerous assets and projects with no single project costing more than $0.3 million. The Company also spent $8.2 million in 2002 for the purchase of railcars and capitalized modifications on railcars that may then be sold, financed off-balance sheet or owned by the Company for lease to customers. The Company sold or financed $16.0 million of railcars during 2002. Finally, the Company completed its minority investment in a new limited liability corporation specializing in grain trading formed by Lansing Grain Company in January, 2003. Certain of the Company's borrowings include provisions that impose minimum levels of working capital and equity, impose limitations on additional debt and require that grain inventory positions be 25 substantially hedged. In addition, certain of the Company's long-term borrowings are secured by first mortgages on various facilities or are collateralized by railcar assets. The Company was in compliance with all of these provisions at December 31, 2002. The marketability of the Company's grain inventories and the availability of short-term lines of credit enhance the Company's liquidity. In the opinion of management, the Company's liquidity is adequate to meet short-term and long-term needs. CONTRACTUAL OBLIGATIONS Future payments due under contractual obligations at December 31, 2002 are as follows: Payments Due by Period

CONTRACTUAL OBLIGATIONS Less than After 5 (in thousands) 1 year 1-3 years 4-5 years years Total --------------------------------------------------------- Long-term debt $ 9,454 $ 14,915 $ 16,600 $48,928 $ 89,897 Capital lease obligations 327 696 3,127 -- 4,150 Operating leases 10,367 14,606 6,869 9,992 41,834 Other 200 400 400 -- 1,000 ------------------------------------------------------- Total contractual cash obligations $ 20,348 $ 30,617 $ 26,996 $58,920 $136,881 =======================================================

Included in long-term debt are acquisition liabilities that include minimum royalty payments. There are additional contingent sales-based royalty payments that have not triggered to date and which are not expected to be material to the Company if they trigger in the future. The royalty period ends May 2005. The Company had standby letters of credit outstanding of $19.2 million at December 31, 2002, of which $8.5 million are credit enhancements for industrial revenue bonds included in the contractual obligations table above. The Company's grain inventories include the value of forward purchase contracts to buy and, to a lesser extent, forward sale contracts to sell grain. These contracts are marked to the market price and require performance in future periods. The terms of these contracts are consistent with industry standards. These contractual obligations are not included in the preceding table. Approximately 72% of the operating lease commitments above relate to 1,934 railcars that the Company leases from financial intermediaries. See the following section on Off-Balance Sheet Transactions. The Company is subject to various loan covenants as highlighted previously. Although the Company is and has been in compliance with its covenants, noncompliance could result in default and acceleration of long-term debt payments. The Company does not anticipate noncompliance with its covenants. OFF-BALANCE SHEET TRANSACTIONS The Company's Rail Group utilizes leasing arrangements that provide off-balance sheet financing for its activities. The Company leases railcars from financial intermediaries under operating leases through sale- 26 leaseback transactions, the majority of which involve operating leasebacks. Railcars owned by the Company, or leased by the Company from a financial intermediary, are generally leased to a customer under an operating lease. The Company also arranges non-recourse lease transactions under which it sells railcars or locomotives to a financial intermediary, and assigns the related operating lease to the financial intermediary on a non-recourse basis. In such arrangements, the Company generally provides ongoing railcar maintenance and management services for the financial intermediary, and receives a fee for such services. On most of the railcars and locomotives, the Company holds an option to purchase these assets at the end of the lease. The following table describes the railcar and locomotive positions at December 31, 2002.

METHOD OF CONTROL FINANCIAL STATEMENT NUMBER - ---------------------------------------------------------------------------------------------- Owned-railcars available for sale On balance sheet - current 144 Owned-railcar assets leased to others On balance sheet - non-current 2,124 Railcars leased from financial institutions Off balance sheet 1,934 Railcars - non-recourse arrangements Off balance sheet 1,497 ----------- TOTAL RAILCARS 5,699 =========== Locomotives - non-recourse arrangements Off balance sheet 51 ===========

The Company has future lease payment commitments aggregating $30.1 million for the railcars leased by the Company from financial intermediaries under various operating leases. Remaining lease terms vary with none exceeding 10 years. The majority of these railcars have been leased to customers at December 31, 2002 over similar terms. The segment manages risk by matching lease commitments with funding (where possible) and ongoing evaluation of lessee credit worthiness. In addition, the Company prefers non-recourse lease transactions, whenever possible, in order to minimize its credit risk. CRITICAL ACCOUNTING POLICIES The process of preparing financial statements requires management to make estimates and judgments that affect the carrying values of the Company's assets and liabilities as well as the recognition of revenues and expenses. These estimates and judgments are based on the Company's historical experience and management's knowledge and understanding of current facts and circumstances. Certain of the Company's accounting policies are considered critical, as these policies are important to the depiction of the Company's financial statements and require significant or complex judgment by management. Following are the accounting policies management considers critical to the Company's financial statements. Grain Inventories The Company marks all grain inventory, forward purchase and sale contracts for grain, and exchange-traded futures and options contracts to the market. Changes in market value are recorded as merchandising revenues in the statement of income. Because the Company marks inventories and sales commitments to the market, gross profit on a grain sale transaction is recognized when a contract for sale of the grain is executed. The related revenue is recognized upon shipment of the grain, at which time title transfers and customer acceptance occurs. Marketing Agreement The Company has negotiated a marketing agreement that covers certain of its grain facilities (certain of which are leased from Cargill). Under this five-year agreement (which began in June 27 1998 and expires in May 2003), the Company sells grain from these facilities to Cargill at market prices. Income earned from operating the facilities includes a base-level income guarantee and equal sharing of income over that base level. There is also a look-back provision that places at risk any income in excess of the base level for the term of the agreement upon the occurrence of certain circumstances. Measurement of this threshold is made on a cumulative basis and cash is paid to (received from) Cargill at each contract year end. Prior to 2002, the Company has recognized in income the base level guarantee amount for each year of the agreement and spreads its share of the amount in excess of the base level on a pro rata basis over all future periods covered by the agreement. As referenced in the discussion titled Restatement of Previously Issued Financial Statements, the Company changed its method of accounting and beginning in 2002, recognizes its pro-rata share of income to date at each month-end and accrues for any payment to (or receipt of cash from) Cargill in accordance with Emerging Issues Task Force Topic D-96, "Accounting for Management Fees Based on a Formula." Derivatives - Commodity Contracts The Company utilizes regulated commodity futures and options contracts to hedge its market price exposure on the grain it owns and related forward purchase and sale contracts. These contracts are included in the balance sheet in inventory at their current market value. Realized and unrealized gains and losses in the market value of these futures and option contracts are included in the income statement as a component of sales and merchandising revenues. While the Company considers all of its commodity contracts to be effective economic hedges, the Company does not designate its commodity futures and options contracts as hedges. Therefore the Company does not defer gains and losses on these same contracts as would occur for designated hedges under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." Both the underlying inventory and forward purchase and sale contracts and the related futures and options contracts are marked to market on a daily basis. Impairment of Long-Lived Assets The Company's various business segments are each highly capital intensive and require significant investment in facilities and / or rolling stock. In addition, the Company has a limited amount of intangible assets and goodwill (described more fully in Note 2 to the Company's annual consolidated financial statements) that it acquired in various business combinations. Whenever changing conditions warrant, we review the fair value of the tangible and intangible assets that may be impacted. We also annually review the balance of goodwill for impairment in the fourth quarter. These reviews for impairment take into account estimates of future cash flows. Our estimates of future cash flows are based upon a number of assumptions including lease rates, lease term, operating costs, life of the assets, potential disposition proceeds, budgets and long-range plans. While we believe the assumptions we use to estimate future cash flows are reasonable, there can be no assurance that the expected future cash flows will be realized. If management used different estimates and assumptions in its evaluation of these cash flows, the Company could recognize different amounts of expense in future periods. Employee Benefit Plans The Company provides substantially all full-time employees with pension benefits and postretirement health care benefits. In order to measure the expense and funded status of these employee benefit plans, management makes several estimates and assumptions, including interest rates used to discount certain liabilities, rates of return on assets set aside to fund these plans, rates of compensation increases, employee turnover rates, anticipated mortality rates and anticipated future healthcare cost trends. These estimates and assumptions are based on the Company's historical experience combined with management's knowledge and understanding of current facts and circumstances. The Company uses third-party specialists to assist management in measuring the expense 28 and funded status of these employee benefit plans. If management used different estimates and assumptions regarding these plans, the funded status of the plans could vary significantly and then the Company could recognize different amounts of expense over future periods. Revenue Recognition The Company recognizes revenue for the sales of its products at the time of shipment. Gross profit on sales of grain is recognized when sales contracts are entered into as the Company marks its contracts to the market on a daily basis. Revenues from other merchandising activities are recognized as open grain contracts are marked-to-market or as related services are provided. Sales returns and allowances, if required, are provided for at the time sales are recorded. Shipping and handling costs are included in cost of sales. The Company sells railcars to financial intermediaries and other customers. Proceeds from railcar sales, including railcars sold in non-recourse transactions, are recognized as revenue at the time of sale if there is no leaseback or the operating lease is assigned to the buyer, non-recourse to the Company. Revenue on operating leases (where the Company is the lessor) and on servicing and maintenance contracts in non-recourse transactions is recognized over the term of the lease or service contract. Leasing activities The Company accounts for its leasing activity in accordance with FASB Statement No. 13, as amended, and related pronouncements. The Company's Rail segment leases and manages railcars for third parties and leases railcars for internal use. Most leases to Rail segment customers are structured as operating leases. Railcars leased by the Company to its customers are either owned by the Company, leased from financial intermediaries under operating leases or leased from financial intermediaries under capital leases. The leases from financial intermediaries are generally structured as sale-leaseback transactions. Lease income and lease expense are recognized on a straight-line basis over the term of the lease. The Company also has a limited number of direct financing leases with its customers that qualify for capital lease treatment. The net investment in the direct financing lease, consisting of lease receivables and the estimated residual value of the equipment at lease termination and net of unearned income, is included as an asset in the balance sheet. The Company has financed some of its railcars through a capital lease with a financial intermediary. The terms of this lease required the Company to capitalize the assets and record the net present value of the lease obligation on its balance sheet as a long-term borrowing. There was no gain or loss on this financing transaction. This obligation is included with the Company's long-term debt as described in Note 8 to the consolidated annual financial statements. The railcars under this lease are being depreciated to their residual value over the term of the lease. The Company also arranges non-recourse lease transactions under which it sells railcars or locomotives to financial intermediaries and assigns the related operating lease on a non-recourse basis. The Company generally provides ongoing railcar maintenance and management services for the financial intermediaries, and receives a fee for such services when earned. On the date of sale, the Company recognizes the proceeds from sales of railcars in non-recourse lease transactions as revenue. Management and service fees are recognized as revenue, which is generally spread evenly over the lease term. 29 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk inherent in the Company's market risk-sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices and interest rates as discussed below. Commodity Prices The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, changes in global demand created by population growth and higher standards of living, and global production of similar and competitive crops. To reduce price risk caused by market fluctuations, the Company follows a policy of hedging its inventories and related purchase and sale contracts. The instruments used are exchange-traded futures and options contracts that function as hedges. The market value of exchange-traded futures and options used for hedging has a high, but not perfect correlation, to the underlying market value of grain inventories and related purchase and sale contracts. The less correlated portion of inventory and purchase and sale contract market value (known as basis) is much less volatile than the overall market value of exchange-traded futures and tends to follow historical patterns. The Company manages this less volatile risk using its daily grain position report to constantly monitor its position relative to the price changes in the market. The Company's accounting policy for its futures and options hedges, as well as the underlying inventory positions and purchase and sale contracts, is to mark them to the market price daily and include gains and losses in the statement of income in sales and merchandising revenues. A sensitivity analysis has been prepared to estimate the Company's exposure to market risk of its commodity position (exclusive of basis risk). The Company's daily net commodity position consists of inventories, related purchase and sale contracts and exchange-traded contracts. The fair value of the position is a summation of the fair values calculated for each commodity by valuing each net position at quoted futures market prices. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in such prices. The result of this analysis, which may differ from actual results, is as follows:

DECEMBER 31 (in thousands) 2002 2001 ----------------------- Net (short) long position ($2,302) $3,659 Market risk 230 366

Interest Rates 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. In addition, the Company has derivative interest rate contracts recorded in its balance sheet at their fair value. The fair value of these contracts is estimated based on quoted market termination values. Market risk, which is estimated as the potential increase in fair value resulting from a hypothetical one-half percent decrease in interest rates, is summarized below: 30

DECEMBER 31 (in thousands) 2002 2001 ---------------------- Fair value of long-term debt and interest rate contracts $96,358 $104,102 Fair value in excess of carrying value 2,236 2,344 Market risk 1,893 2,253

FORWARD LOOKING STATEMENTS The preceding Management's Discussion and Analysis contains various "forward-looking statements" which reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including but not limited to those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words "believe," "expect," "anticipate," "will" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following factors could cause actual results to differ materially from historical results or those anticipated: weather; supply and demand of commodities including grains, fertilizer and other basic raw materials; market prices for grains and the potential for increased margin requirements; environmental and governmental policies; competition; economic conditions; risks associated with acquisitions; interest rates; and income taxes. 31 The Andersons, Inc. Notes to Consolidated Financial Statements 1. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS In connection with a review of our periodic filings by the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission, we concluded that it is appropriate to modify our accounting related to a specific agreement with a third party. As previously disclosed, certain of the Company's agriculture facilities are subject to a five-year marketing agreement with a third party that provides for a base level of income and equal sharing of profits earned over the base level. The Company's share of profits is calculated annually under the marketing agreement based on a formula that recognizes the base level income as revenue on a pro-rata basis over the term of the agreement. The Company previously measured its share of the profits earned in excess of the base-level at the end of each contract year and was recognizing such income over the remaining term of the agreement. Upon further review and consideration, we have determined that the Emerging Issues Task Force Topic D-96, "Accounting for Management Fees Based on a Formula," ("EITF Topic D-96") applies to the Company's situation, specifically with respect to provisions of Method 2 described therein, which stipulates that revenues recorded under such arrangements should be the amount that would be due under the formula at any point in time as if the contract was terminated at that date. Upon review of the impact of the adjustments necessary to comply with the requirements of EITF Topic D-96, which became effective for the Company as of January 1, 2002, we concluded that restating our 2002 financial statements was appropriate. The transition provisions of EITF Topic D-96 require the impact of the change in accounting to be presented as a cumulative effect of a change in accounting principle at the date of adoption. The following table presents the impact of the restatement adjustments on the Company's previously reported sales and merchandising revenues, cost of sales and merchandising revenues, gross profit, income before income taxes and cumulative effect of accounting changes, income tax provision, cumulative effect of change in accounting principle, net of income tax provision, and net income for the year ended December 31, 2002. 32

YEAR ENDED DECEMBER 31, 2002 AS PREVIOUSLY INCOME STATEMENT CAPTION REPORTED ADJUSTMENTS AS RESTATED ----------------------------------------- Sales and merchandising revenues (b) $ 1,075,834 $ 693 $ 1,076,527 Cost of sales and merchandising revenues(a) 908,901 4,525 913,426 Gross profit 166,933 (3,832) 163,101 Income before income taxes and cumulative effect of accounting change 19,834 (3,832) 16,002 Income tax expense 6,515 (1,277) 5,238 Cumulative effect of change in accounting principle, net of income taxes -- 3,480 3,480 Net income 13,319 925 14,244

(a) Periods presented "As Previously Reported" include reclassifications made to conform to the current presentation. These reclassifications related to the adoption of EITF 02-16, Accounting by a Reseller for Cash Consideration Received from a Vendor, and had no impact on net income or shareholders' equity. (b) Upon adoption of EITF Topic D-96, the Company reclassified the current period impact to gross profit of the marketing agreement as a component of sales and merchandising revenues rather than cost of sales. Previously the Company considered the marketing agreement impact as an adjustment to its cost of grain rather than to as an adjustment to sales and merchandising revenues and therefore had included the impact in its cost of sales. Prior periods have been reclassified to conform to this presentation. The following table presents a summary of the effects of the restatement on the Consolidated Balance Sheet as of December 31, 2002.

DECEMBER 31, 2002 AS PREVIOUSLY BALANCE SHEET CAPTION REPORTED ADJUSTMENTS AS RESTATED ----------------------------------------- Current deferred income tax asset $ 3,491 $ (597) $ 2,894 Customer prepayments and deferred income 21,970 (1,522) 20,448 Retained earnings 104,840 925 105,765

All information within this Annual Report to Shareholders has been updated for the above restatement and reclassifications. 2. BASIS OF FINANCIAL PRESENTATION / ACQUISITIONS These consolidated financial statements include the accounts of The Andersons, Inc. and its wholly-owned and majority-owned subsidiaries (the "Company"). All significant intercompany accounts and transactions are eliminated in consolidation. On May 31, 2000, the Company acquired inventory and intangible assets of the U.S. ProTurf(R) division of The Scotts Company. The acquisition was accounted for as a purchase, and the results of operations have been included in the consolidated statements of income from June 1, 2000. This transaction was 33 completed through a combination of cash paid and liabilities assumed with a total purchase price of approximately $19.8 million. Of this amount, $15.0 million was allocated to inventory and the remainder to goodwill and other intangible assets. The purchase agreement provides for additional payments to the seller through 2005 if the sales volume of the acquired business exceeds certain targets. These payments, if any, will be accounted for as additional purchase price; no such payments have been made since the acquisition to date. If the acquisition had taken place on January 1, 2000, pro forma revenues (unaudited) would have been $993.0 million for the year ended December 31, 2000. The business has been integrated into the Company's Processing segment and is expected to result in significantly different cost and expense structures. Therefore, pro forma operating income, net income and earnings per common share are not presented as they are not meaningful. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and all highly liquid debt instruments purchased with an initial maturity of three months or less. The carrying values of these assets approximate their fair values. INVENTORIES AND INVENTORY COMMITMENTS Grain inventories include owned bushels of grain, the value of forward contracts to buy and sell grain, and exchange traded futures and option contracts used to hedge the value of both owned grain and forward contracts. Each of these grain inventory components is marked to the market price. The forward contracts require performance in future periods. Contracts to purchase grain from producers generally relate to the current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of grain to processors or other consumers generally do not extend beyond one year. The terms of contracts for the purchase and sale of grain are consistent with industry standards. All other inventories are stated at the lower of cost or market. Cost is determined by the average cost method. DERIVATIVES - COMMODITY AND INTEREST RATE CONTRACTS For the purpose of hedging its market price risk exposure on grain owned and related forward grain purchase and sale contracts, the Company holds regulated commodity futures and options contracts for corn, soybeans, wheat and oats. The Company accounts for all commodity contracts using a daily mark-to-market method, the same method it uses to value grain inventory and forward purchase and sale contracts. Company policy limits the Company's unhedged grain position. While the Company considers all of its commodity contracts to be effective economic hedges, the Company does not designate or account for its commodity contracts as hedges. Realized and unrealized gains and losses in the value 34 of commodity contracts (whether due to changes in commodity prices or due to sale, maturity or extinguishment of the commodity contract), grain inventories and related forward grain contracts are included in sales and merchandising revenues in the statements of income. The Company also periodically enters into interest rate contracts to manage interest rate risk on borrowing or financing activities. The Company accounts for its long-term interest rate swap, Treasury rate lock and interest rate corridor contracts as cash flow hedges; accordingly, changes in the fair value of the instruments are recognized in other comprehensive income. While the Company considers all of its derivative positions to be effective economic hedges of specified risks, the Company does not designate or account for other open interest rate contracts as hedges. Changes in the market value of all other interest rate contracts are recognized currently in income. Upon termination of a derivative instrument or a change in the hedged item, any remaining fair value recorded on the balance sheet is immediately recorded as interest expense. The deferred derivative gains and losses on closed Treasury rate locks and the changes in fair value of the interest rate corridors are reclassified into income over the term of the underlying hedged items, which are either long-term debt or lease contracts. At January 1, 2001, the Company recorded in the statement of income a transition adjustment of $305 thousand ($185 thousand after tax) as a result of adopting Financial Accounting Standards Board (FASB) Statement No. 133, as amended, "Accounting for Derivative Instruments and Hedging Activities." This adjustment was made to write down open interest rate contracts to their fair values. The Company also reclassified deferred net losses of $1.2 million to other comprehensive income. This amount represented deferred net losses on the settlement of Treasury rate locks entered into for the purpose of hedging the interest rate component of firm commitment lease transactions. The deferred losses will be recognized as a component of gross profit over the term of the underlying leases. During 2002, the Company reclassified $0.2 million of other comprehensive income into rail lease cost of sales under the reclassification policy noted above for amortization of the closed Treasury rate locks. Less than $0.1 million was reclassified to interest expense as a result of amortization of other comprehensive income from the change in fair value of the interest rate corridors. Prior to the adoption of Statement No. 133, the Company recognized income or expense associated with interest rate swap contracts on the accrual basis over the term of the agreement as interest expense. The cost of short-term interest rate caps was expensed at the date of purchase, and the cost of long-term interest rate caps was expensed over the term of the underlying obligation. Gains or losses on settlement of Treasury rate locks hedging the interest component of firm commitment lease transactions were recognized over the term of the ensuing lease transaction. The fair value of interest rate contracts was not recognized in the balance sheet prior to 2001. RAILCARS AVAILABLE FOR SALE The Company's Rail segment purchases, leases, markets and manages railcars for third parties and for internal use. Railcars to which the Company holds title are shown on the balance sheet in one of two categories - railcars available for sale or railcar assets leased to others. Railcars that have been acquired but have not been placed in service are classified as current assets and are stated at the lower of cost or market. Railcars leased to others, both on short- and long-term leases, are classified as long-term assets and are depreciated over their estimated useful lives. Details about the Rail segment's leasing activities are presented in the Leases and Related Commitments note. 35 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost. Repairs and maintenance are charged to expense as incurred, while betterments that extend useful lives are capitalized. Depreciation is provided over the estimated economic useful lives of the individual assets, principally by the straight-line method. Estimated useful lives are generally as follows: land improvements and leasehold improvements - 10 to 16 years; buildings and storage facilities - 20 to 30 years; machinery and equipment - 3 to 20 years; and software - 3 to 10 years. The cost of assets retired or otherwise disposed of and the accumulated depreciation thereon are removed from the accounts, with any gain or loss realized upon sale or disposal credited or charged to operations. INTANGIBLE ASSETS AND GOODWILL Intangible assets are recorded at cost, less accumulated amortization. Amortization of intangible assets is provided over their estimated useful lives (generally around 5 years) by the straight-line method. Goodwill is recorded net of accumulated amortization through December 31, 2001. In accordance with FASB Statement No. 142, "Goodwill and Other Intangible Assets", effective January 1, 2002, goodwill is no longer amortized, but is subject to periodic impairment tests. Intangible asset and goodwill balances, net of accumulated amortization, included in the Other Assets and Notes Receivable were as follows:

WEIGHTED AVERAGE LIFE ORIGINAL ACCUMULATED NET BOOK (IN THOUSANDS) SEGMENT (YEARS) COST AMORTIZATION VALUE DECEMBER 31, 2002 Amortized intangible assets Trademarks / Noncompete agreements / Processing 5 $ 3,988 $ 2,061 $ 1,927 customer lists and other acquired intangibles Customer lists Agriculture 5 75 70 5 Patents and other Various 12 179 73 106 ------------------------------------ $ 4,242 $ 2,204 $ 2,038 ==================================== Intangible assets no longer subject to amortization Goodwill Agriculture $ 948 $ 308 $ 640 Goodwill Processing 791 105 686 ------------------------------------ $ 1,739 $ 413 $ 1,326 ==================================== DECEMBER 31, 2001 Amortized intangible assets Trademarks / Noncompete agreements / Processing 5 $ 3,988 $ 1,263 $ 2,725 customer lists and other acquired intangibles Customer lists Agriculture 5 75 55 20 Patents and other Various 12 149 67 82 ------------------------------------ $ 4,212 $ 1,385 $ 2,827 ====================================

36 Amortization expense for each of 2002 and 2001 was $0.8 million. Amortization expense for 2000 was $0.5 million. Expected aggregate annual amortization is as follows: 2003 -- $0.8 million; 2004 -- $0.8 million; 2005 -- $0.3 million; and negligible amounts for 2006 and thereafter. In 2001 and 2000, goodwill amortization of $0.1 million was included in net income ($0.2 million before tax). IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets, including intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of the assets to the future net cash flows the Company expects to generate with the asset. If such assets are considered to be impaired, the Company recognizes impairment expense for the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company recognized impairment losses on long-term railcars of $0.3 million in both 2002 and 2001 in cost of sales. The railcar impairments were each recognized on cars nearing the end of their useful life, which carried low lease rates. Fair value was determined by calculating the net present value of the lease stream of the railcars and their salvage value. This charge was recorded by the Rail Group. The railcar impairments were determined during our annual impairment review of long-term railcar assets. The Company also recognized a $0.2 million impairment on an agricultural facility in 2002, which was included in operating, administrative and general expenses. The agricultural facility impairment was triggered by the receipt of a bona fide offer from a third-party for an idle facility, was recorded by the Agriculture Group, and was based on the amount of the third-party offer. In addition, in 2001, the Company recorded a $1.2 million lower of cost or market adjustment for railcars classified as available for sale. Since railcars available for sale are held as current inventory, the adjustment was made to reduce the value of these cars to their then current market value, determined through a review of recent sales prices of similar railcars. ACCOUNTS PAYABLE FOR GRAIN Accounts payable for grain includes the liability for grain purchases on which price has not been established (delayed price). This amount has been computed on the basis of market prices at the balance sheet date, adjusted for the applicable premium or discount. DEFERRED INCOME Certain of the Company's agriculture facilities are subject to a five-year marketing agreement with a third party that provides for a base-level income guarantee and equal sharing of income earned over the base level. The marketing agreement includes a look-back provision that places at risk any income in excess of the base level for the term of the agreement. The Company recognizes the base-level income guarantee as revenue on a pro rata basis over the remaining life of the agreement. The Company measures its share of the cumulative income over the base-level income guarantee at the end of each contract year and recognizes such income on a pro rata basis over the life of the agreement. The marketing agreement will terminate in May 2003. Deferred income at December 31, 2002 and 2001 was $1.5 million and $5.4 million, respectively. 37 STOCK-BASED COMPENSATION The Company accounts for its stock-based compensation plans under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. The Company has adopted the disclosure only provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation." Accordingly, the Company provides pro forma disclosures assuming that the Company had accounted for its stock-based compensation programs using the fair value method promulgated by Statement No. 123.

(in thousands, except for per share data) YEAR ENDED DECEMBER 31 2002 2001 2000 (AS RESTATED) ----------------------------------- Net income reported $ 14,244 $ 8,857 $10,078 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (316) (318) (363) ---------------------------------- Pro forma net income $ 13,928 $ 8,539 $ 9,715 ================================== Earnings per share: Basic - as reported $ 1.96 $ 1.22 $ 1.34 ================================== Basic - pro forma $ 1.91 $ 1.17 $ 1.29 ================================== Diluted - as reported $ 1.92 $ 1.21 $ 1.34 ================================== Diluted - pro forma $ 1.87 $ 1.17 $ 1.29 ==================================

REVENUE RECOGNITION Sales of products are recognized at the time title transfers to the customer, which is generally at the time of shipment or when the customer takes possession of goods in the retail stores. Under the Company's mark-to-market method for its grain operations, gross profit on grain sales is recognized when sales contracts are executed. Sales of grain are then recognized at the time of shipment when title to the grain transfers to the customer. Revenues from other grain merchandising activities are recognized as open grain contracts are marked-to-market or as services are provided. Revenues for all other services are recognized as the service is provided. Rental revenues on operating leases are recognized on a straight-line basis over the term of the lease. Sales of railcars to financial intermediaries on a non-recourse basis are recognized as revenue on the date of sale. Sales for these transactions totaled $0.1 million, $15.3 million and $3.8 million in 2002, 2001 and 2000, respectively. Sales returns and allowances are provided for at the time sales are recorded. Shipping and handling costs are included in cost of sales. In all cases, revenues are recognized only if collectibility is reasonably assured. LEASE ACCOUNTING The Company accounts for its leases under FASB Statement No. 13, as amended, and related pronouncements. 38 The Company's Rail segment leases and manages railcars for third parties, and leases railcars for internal use. The Company is an operating lessor of railcars that are owned by the Company, or leased by the Company from financial intermediaries. The Company records lease income for its activities as an operating lessor as earned, which is generally spread evenly over the lease term. The Company expenses operating lease payments made to financial intermediaries on a straight-line basis over the lease term. The Company periodically enters into leases with Rail Group customers that are classified as direct financing capital leases. Although lease terms are not significantly different from other operating leases that the Company maintains with its railcar customers, they qualify as capital leases. For these leases, the net minimum lease payments, net of unearned income is included in prepaid expenses and other current assets for the amount to be received within one year and the remainder in other assets. The Company also arranges non-recourse lease transactions under which it sells railcars or locomotives to financial intermediaries and assigns the related operating lease on a non-recourse basis. The Company generally provides ongoing railcar maintenance and management services for the financial intermediaries, and receives a fee for such services when earned. On the date of sale, the Company recognizes the proceeds from sales of railcars in non-recourse lease transactions as revenue. Management and service fees are recognized as revenue, which is generally spread evenly over the lease term. The Company has financed the cost of certain railcar assets through a lease with a financial intermediary. The terms of this lease required the Company to capitalize the assets and record the net present value of the lease obligation on its balance sheet as a long-term borrowing. There was no gain or loss on this financing transaction. This obligation is included with the Company's long-term debt as described in Note 8 to the consolidated financial statements. The railcars under this lease are being depreciated to their residual value over the term of the lease. Details of this book value of the railcars are included in Note 5 to the consolidated financial statements. INCOME TAXES Income tax expense for each period includes taxes currently payable plus the change in deferred income tax assets and liabilities. Deferred income taxes are provided for temporary differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws governing periods in which the differences are expected to reverse. The Company evaluates the realizability of deferred tax assets and provides a valuation allowance for amounts that management does not believe are more likely than not to be recoverable, as applicable. ADVERTISING Advertising costs are expensed as incurred. Advertising expense of $2.2 million in 2002 and $2.8 million in each of 2001 and 2000 is included in operating, administrative and general expenses. 39 EARNINGS PER SHARE Basic earnings per share is equal to net income divided by weighted average shares outstanding. Diluted earnings per share is equal to basic earnings per share plus the incremental per share effect of dilutive options and restricted shares.

YEAR ENDED DECEMBER 31 (in thousands, except for per share data) 2002 2001 2000 ----------------------------- Weighted average shares outstanding - basic 7,283 7,281 7,507 Restricted shares and shares contingently issuable upon exercise of options 146 35 18 ----------------------------- Weighted average shares outstanding - diluted 7,429 7,316 7,525 =============================

Diluted earnings per common share excludes the impact of 1 thousand, 260 thousand and 634 thousand employee stock options for 2002, 2001 and 2000, respectively, as such options were antidilutive. NEW ACCOUNTING STANDARDS The FASB has issued Statement No. 148, "Accounting for Stock-Based Compensation - - Transition and Disclosure," which is effective for the Company's 2002 fiscal year. This statement requires additional disclosures about the Company's stock-based compensation plans. In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 clarifies disclosures that are required to be made for certain guarantees and establishes a requirement to record a liability at fair value for certain guarantees at the time of the guarantee's issuance. The disclosure requirements of FIN No. 45 have been applied in these financial statements. The requirement to record a liability applies to guarantees issued or modified after December 31, 2002. We do not believe the adoption of this portion of the interpretation will have a material effect on our financial condition or results of operations. The FASB also issued the following statements in 2002. These statements each require prospective application. - - Statement No. 145, "Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections" amends or corrects a variety of existing rules. The Company does not expect to be materially impacted by this statement. - - Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," addresses the accounting and reporting of costs associated with exit or disposal activities. The Company does not expect to be materially impacted by this statement. - - Statement No. 147, "Accounting Acquisitions of Certain Financial Institutions," amends previous guidance on this topic. The Company does not expect to be impacted by this statement. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." FIN No. 46 provides guidance on identification of a variable interest entity ("VIE") and on determination of whether the VIE should be consolidated in an enterprise's financial statements. In general, an 40 enterprise deemed to be the primary beneficiary of a VIE is required to consolidate the VIE. FIN No. 46 is effective immediately for any new FIE established after January 31, 2003 and must be adopted for any pre-existing VIEs at the beginning of the Company's third quarter. The Company's railcar leasing activities, as described above, include transactions with financial intermediaries that may constitute variable interest entities under the guidance of FIN No. 46. Management has not completed its evaluation of these arrangements to determine whether any of these arrangements involve a VIE or, if a VIE exists, whether the Company is the primary beneficiary of the VIE. Therefore, management has not determined the impact of FIN No. 46 on the Company's financial statements. The Emerging Issues Task Force of the FASB ("EITF") published EITF -00-21, "Accounting for Revenue Arrangements with Multiple Deliverables". This Issue addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. This Issue is effective for revenue arrangements entered into in the Company's 2003 third quarter and future periods. Management does not expect the impact of the statement to be material to its consolidated financial statements. RECLASSIFICATIONS Certain amounts in the 2001 and 2000 financial statements have been reclassified to conform to the 2002 presentation. These reclassifications had no effect on net income or shareholders' equity as previously presented. 41 4. INVENTORIES Major classes of inventories are as follows:

DECEMBER 31 (in thousands) 2002 2001 ------------------------- Grain $ 156,742 $ 140,316 Agricultural fertilizer and supplies 25,699 24,240 Lawn and garden fertilizer and corncob products 42,947 43,440 Railcar repair parts 1,455 1,401 Retail merchandise 29,076 28,539 Other 356 355 ------------------------- $ 256,275 $ 238,291 =========================

5. PROPERTY, PLANT AND EQUIPMENT AND RAILCAR ASSETS LEASED TO OTHERS The components of property, plant and equipment and railcar assets leased to others are as follows:

DECEMBER 31 (in thousands) 2002 2001 ------------------------- Land $ 11,735 $ 11,758 Land improvements and leasehold improvements 29,122 27,937 Buildings and storage facilities 95,892 94,309 Machinery and equipment 121,911 119,460 Software 4,771 3,714 Construction in progress 2,369 4,144 ------------------------- 265,800 261,322 Less accumulated depreciation and amortization 172,861 166,321 ------------------------- $ 92,939 $ 95,001 ========================= Railcar assets leased to others $ 32,144 $ 30,585 Less accumulated depreciation 5,745 4,483 ------------------------- $ 26,399 $ 26,102 =========================

On December 31, 2001, the Company entered into a sale-leaseback transaction with a financial institution; the Company accounts for its leaseback as a capital lease. These assets have a cost of $4.5 million and are included with other railcars above for both 2002 and 2001. Accumulated amortization for these assets was $0.3 million at December 31, 2002. 6. NONOPERATING GAINS During 2002, a conference facility owned by the Company was damaged by fire. This facility was insured for replacement value and the Company received insurance funds to repair the damaged assets. 42 The 2002 gain of $0.3 million represents the insurance proceeds received in 2002 in excess of the net book value of the destroyed assets. During 2000, a grain tank and related assets at the Company's Albion, Michigan facility were destroyed in a windstorm. This facility was insured for replacement value and the Company received insurance funds to replace the assets lost. The 2001 gain of $0.3 million represents the insurance proceeds received in 2001 in excess of the net book value of the destroyed assets. In March 2000, the Company sold its interest in The Andersons - Tireman Auto Centers, a joint venture in which it owned a 52.5% interest. The 2000 gain on sale of business of $1.0 million represents proceeds received in excess of the Company's investment. This business was previously included in the Company's financial statements and reported in the Other segment in the Company's segment data. During 2000, the Company completed the settlement of an insurance claim related to the 1999 collapse of a liquid fertilizer tank and adjoining assets at its Webberville, Michigan facility. The resultant gain of $2.1 million represents the insurance proceeds in excess of the net book value of the destroyed assets. 7. SHORT-TERM BORROWING ARRANGEMENTS During 2002, the Company entered into a borrowing arrangement with a syndicate of banks. The new arrangement provides the Company with $150 million in short-term lines of credit and an additional $50 million in a three-year line of credit. Short-term borrowings under this arrangement totaled $70.0 million at December 31, 2002. The borrowing arrangement terminates on October 29, 2003 but allows for indefinite renewals at the Company's option and as long as certain covenants are met. Management expects to renew the arrangement prior to its termination date. Borrowings under the lines of credit bear interest at variable interest rates, which are based on LIBOR, the prime rate or the federal funds rate, plus a spread. The terms of the borrowing agreement provide for annual commitment fees. Prior to this syndication, the Company managed several separate lines of credit for unsecured short-term debt with banks. The following information relates to short-term borrowings:

DECEMBER 31 (in thousands, except percentages) 2002 2001 2000 -------------------------------------------- Maximum amount borrowed $ 139,200 $ 130,400 $ 113,800 Average daily amount borrowed 92,534 91,014 89,798 Weighted average interest rate 3.24% 5.10% 6.95%

43 8. LONG-TERM DEBT AND INTEREST RATE CONTRACTS Long-term debt consists of the following:

DECEMBER 31 (in thousands, except percentages) 2002 2001 ------------------------ Note payable, 6.50%, payable $162 monthly, remainder due 2017 $ 17,758 $ -- Note payable, 6.95%, payable $317 quarterly, remainder due 2008 16,147 17,415 Note payable, 7.00%, payable $316 quarterly beginning in 2004, due 2016 10,681 10,681 Note payable, variable rate (2.76% at December 31, 2002), payable $150 first and second quarters and $99 third and fourth quarters of 2003, with decreasing quarterly payments thereafter, due 2005 6,787 7,750 Note payable under revolving line of credit -- 15,000 Notes payable, variable rate, due 2002 -- 1,657 Industrial development revenue bonds: Variable rate (1.68% at December 31, 2002), due 2019 4,650 4,650 Variable rate -- 1,944 Variable rate (1.70% at December 31, 2002), due 2025 3,100 3,100 Liabilities related to acquisition, discounted at 8.25%, due in variable quarterly installments through 2005 2,651 3,188 Debenture bonds, 5.50% to 8.50%, due 2003 through 2012 27,628 31,250 Obligations under capital lease 4,150 4,473 Other notes payable and bonds 495 582 ------------------------ 94,047 101,690 Less current maturities 9,775 10,374 ------------------------ $ 84,272 $ 91,316 ========================

In connection with its short-term borrowing agreement with a syndicate of banks, the Company obtained an unsecured $50.0 million long-term line of credit. Borrowings under this line of credit will bear interest based on LIBOR, plus a spread. The long-term line of credit expires on October 30, 2005, but may be renewed by the Company for an additional three years as long as covenants are met. After considering its standby letters of credit totaling $19.2 million, the Company had available borrowing capacity under this facility of $30.8 million. The notes payable due 2008, 2016 and 2017 and the industrial development revenue bonds are collateralized by first mortgages on certain facilities and related equipment with a book value of $29.2 million. The note payable due 2005 is collateralized by railcars with a book value of $6.8 million. The Company's short-term and long-term borrowing agreements include both financial and non-financial covenants that require the Company, among other things, to: - maintain minimum working capital of $45.0 million and net equity (as defined) of $65.0 million; - limit the addition of new long-term debt; - limit its unhedged grain position to 2.0 million bushels; and - restrict the amount of dividends paid. 44 The Company was in compliance with all covenants at December 31, 2002 and 2001. The aggregate annual maturities of long-term debt, including sinking fund requirements and capital lease obligations, are as follows: 2003--$9.8 million; 2004--$5.5 million; 2005--$10.1 million; 2006--$11.6 million; 2007--$8.0 million; and $49.0 million thereafter. Interest paid (including interest on short-term lines of credit) amounted to $9.7 million, $10.1 million and $11.5 million in 2002, 2001 and 2000, respectively. The Company has entered into derivative interest rate contracts to manage interest rate risk on short-term borrowings. The contracts convert variable interest rates to short-term fixed rates, consistent with projected borrowing needs. At December 31, 2002, the Company has two short-term interest rate cap agreements with a total notional amount of $20.0 million to hedge short-term borrowing costs. These agreements provide interest rate caps of between 2.75% and 3.00% and expire on April 1, 2003. Although these instruments are intended to hedge interest rate risk on short-term borrowings, the Company has elected not to account for them as hedges. Changes in their fair value are included in interest expense in the statements of income. The Company has also entered into various derivative financial instruments to hedge the interest rate component of long-term debt and lease obligations. The following table displays the contracts open at December 31, 2002.

INTEREST RATE INITIAL NOTIONAL HEDGING YEAR YEAR OF AMOUNT (IN INTEREST INSTRUMENT ENTERED MATURITY MILLIONS) HEDGED ITEM RATE - ------------------------------------------------------------------------------------------------------------------------------ Cap 1999 2003 $19.4 Interest rate component of an operating 6.50% lease - not accounted for as a hedge Cap 2000 2005 $12.5 Interest rate component of a long-term note 7.66% payable - not accounted for as a hedge Swap 2001 2004 $14.6 Convert floating interest rate component of 3.27% an operating lease to a fixed rate Corridor 2002 2006 $ 4.8 Interest rate component of a railcar debt 4.25% - financing 7.00% Corridor 2002 2007 $ 4.3 Interest rate component of a railcar 4.25% - sale-leaseback transaction 7.00%

The initial notional amounts on the above instruments amortize monthly in the same manner as the underlying hedged item. Changes in the fair value of the caps are included in interest expense in the statements of income, as they are not accounted for as cash flow hedges. The swap and the interest rate corridors are designated as cash flow hedges with changes in their fair values included as a component of other comprehensive income or loss. Also included in accumulated other comprehensive income are closed treasury rate locks entered into to hedge the interest rate component of railcar lease transactions prior to their closing. The reclassification of these amounts from other comprehensive income into interest or cost of railcar sales occurs over the term of the hedged debt or lease, as applicable. The fair values of all derivative instruments are included in other assets and notes receivable or other long-term liabilities. The net fair value amount for 2002 and 2001 was less than $0.1 million. The mark- 45 to-market effect of long-term and short-term interest rate contracts on interest expense was $0.1 million interest credit and $0.2 million additional interest expense for 2002 and 2001, respectively. If there are no additional changes in fair value, the Company expects to reclassify $0.3 million from other comprehensive income into interest expense or cost of railcar sales in 2003. 9. INCOME TAXES Income tax provision (benefit) consists of the following:

YEAR ENDED DECEMBER 31 2002 2001 2000 (in thousands) (AS RESTATED) ------------ -------- ---------- Current: Federal $ 3,606 $ 3,311 $ 2,219 State and local 200 117 (175) ---------------------------------------- 3,806 3,428 2,044 ---------------------------------------- Deferred: Federal 1,288 (496) 1,935 State and local 144 (43) 307 ---------------------------------------- 1,432 (539) 2,242 ---------------------------------------- Total: Federal 4,894 2,815 4,154 State and local 344 74 132 ---------------------------------------- $ 5,238 $ 2,889 $ 4,286 ========================================

A reconciliation from the statutory U.S. federal tax rate to the effective tax rate follows:

YEAR ENDED DECEMBER 31 2002 2001 2000 ---------------------------- Statutory U.S. federal tax rate 35.0% 35.0% 35.0% Increase (decrease) in rate resulting from: Effect of commissions paid to foreign sales corporation or excluded extraterritorial income (3.2) (11.3) (5.8) State and local income taxes, net of related federal taxes 1.4 0.4 0.6 Other, net (0.5) 0.1 -- ---------------------------- Effective tax rate 32.7% 24.2% 29.8% ============================

Income taxes paid in 2002, 2001 and 2000 were $2.5 million, $4.3 million, and $3.3 million, respectively. 46 Significant components of the Company's deferred tax liabilities and assets are as follows:

DECEMBER 31 2002 2001 (in thousands) (AS RESTATED) --------------------------- Deferred tax liabilities: Property, plant and equipment and railcar assets leased to others $ (14,084) $ (12,898) Prepaid employee benefits (3,857) (2,949) Other (344) (202) --------------------------- (18,285) (16,049) --------------------------- Deferred tax assets: Employee benefits 6,469 5,384 Deferred income 1,805 1,450 Accounts and notes receivable 1,246 1,289 Inventory 947 2,456 Investments 13 353 Other 348 433 --------------------------- 10,828 11,365 --------------------------- Net deferred tax liability $ (7,457) $ (4,684) ===========================

In 2002 the Company decreased a $1.9 million deferred tax asset related to its adoption of EITF Topic 0-96, as discussed in Note 1. This amount was included in the statement of income as a cumulative effect of a change in accounting principle. In 2002 and 2001, the Company recorded deferred tax assets of $0.5 million and $0.1 million, respectively, related to the accounting for derivatives under Statement 133. The 2002 amount is included in other comprehensive income in the statement of shareholders' equity. The 2001 amount is included in the statement of income as a cumulative effect of change in accounting principle. 10. STOCK COMPENSATION PLANS The Company's Amended and Restated Long-Term Performance Compensation Plan dated December 14, 2001 (the LT Plan) authorizes the Board of Directors to grant options and share awards to employees and outside directors for up to 2.1 million of the Company's common shares. Options granted under the LT Plan have a maximum term of 10 years. Options granted to outside directors have a fixed term of five years and vest after one year. Options granted to management personnel under the LT Plan have a five-year term and vest 40% immediately, an additional 30% after one year and the remaining 30% after two years. Options granted under the LT Plan are structured as fixed grants with exercise price equal to the market value of the underlying stock on the date of the grant; accordingly, no compensation expense is recognized for these grants. The LT Plan also permits awards of restricted stock. The Company issued 15 thousand, 21 thousand and 20 thousand restricted shares during 2002, 2001 and 2000, respectively; 23 thousand restricted shares remain outstanding at December 31, 2002. These shares carry voting and dividend rights; however, sale of the shares is restricted prior to vesting. Restricted shares vest 50% after one year and the remaining 50% after two years. Restricted shares issued under the LT Plan are recorded at their fair value on the grant date with a corresponding charge to shareholders' equity representing the unearned portion of the award. The unearned portion is amortized as compensation expense on a straight-line basis over the related vesting period. Compensation expense related to restricted stock issued under the LT Plan amounted to $0.2 million in each of 2002, 2001 and 2000. 47 Certain Company executives and outside directors have elected to receive a portion of their cash compensation in stock options and/or restricted stock issued under the LT Plan. These options and restricted stock vest immediately. The options have a ten-year term. There were 3 thousand, 6 thousand and 4 thousand restricted shares issued in lieu of cash compensation in 2002, 2001 and 2000, respectively and 10 thousand options issued in 2002. The Company's Employee Share Purchase Plan (the ESP Plan) allows employees to purchase common shares through payroll withholdings. The Company has reserved 300 thousand common shares for issuance to and purchase by employees under this plan. The ESP Plan also contains an option component. The purchase price per share under the ESP Plan is the lower of the market price at the beginning or end of the year. Employees purchased 25 thousand, 33 thousand and 33 thousand shares under the ESP Plan in 2002, 2001 and 2000, respectively. The Company records a liability for withholdings not yet applied towards the purchase of common stock. No compensation expense is recognized for stock purchases or options under the ESP Plan. Pro forma information regarding net income and earnings per share required by Statement No. 123, "Accounting for Stock-Based Compensation," is included in note 2 and is determined as if the Company accounted for its employee stock options under the fair value method. The fair value of each option grant is estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions by year.

2002 2001 2000 ----------------------------- LONG TERM PERFORMANCE COMPENSATION PLAN Risk free interest rate 4.42% 4.99% 6.36% Dividend yield 2.60% 3.01% 2.91% Volatility factor of the expected market price of the Company's common shares .300 .267 .276 Expected life for the options (in years) 5.30 5.00 5.00 EMPLOYEE SHARE PURCHASE PLAN Risk free interest rate 2.17% 5.32% 5.98% Dividend yield 2.60% 3.01% 2.91% Volatility factor of the expected market price of the Company's common shares .300 .267 .276 Expected life for the options (in years) 1.00 1.00 1.00

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. 48 A summary of the Company's stock option activity and related information for the years ended December 31 follows:

LONG-TERM PERFORMANCE COMPENSATION PLAN 2002 2001 2000 --------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE (common shares in thousands) SHARES PRICE SHARES PRICE SHARES PRICE --------------------------------------------------------------------- Outstanding at beginning of year 915 $ 9.18 862 $ 9.24 671 $ 9.60 Granted 171 10.00 224 8.63 229 8.25 Exercised (239) 9.14 (93) 8.83 -- -- Expired/forfeited (39) 9.12 (78) 8.68 (38) 9.59 ------ ------ ------ Outstanding at end of year 808 $ 9.37 915 $ 9.18 862 $ 9.24 ====== ====== ======

2002 2001 2000 --------- --------- --------- Weighted average fair value of options granted during year $ 2.62 $ 2.00 $ 2.18 ================================= Options exercisable at end of year 662 732 687 ================================= Weighted average exercise price of options exercisable at end of year $ 9.35 $ 9.35 $ 9.27 =================================

Options available for grant at December 31, 2002 851 Price range of options at December 31, 2002 $8.25 to $12.38 Weighted average remaining contractual life (in years) 3.61 11. OTHER COMMITMENTS AND CONTINGENCIES Railcar leasing activities: The Company is a lessor of railcars. The majority of railcars are leased to customers under operating leases that may be either net leases or full service leases under which the Company provides maintenance and fleet management services. The Company also provides such services to financial intermediaries to which it has sold railcars and locomotives in non-recourse lease transactions. Fleet management services generally include maintenance, escrow, tax filings and car tracking services. Many of the Company's leases provide for renewals. The Company also generally holds purchase options for railcars it has sold and leased-back from a financial intermediary, and railcars sold in non-recourse lease transactions. 49 Lease income from operating leases to customers and rental expense for railcar leases were as follows:

YEAR ENDED DECEMBER 31 (in thousands) 2002 2001 2000 ------------------------------------ Rental and service income - operating leases $ 11,521 $ 9,896 $ 9,497 ==================================== Rental expense $ 5,007 $ 4,387 $ 4,778 ====================================

Future minimum rentals and service income for all noncancelable railcar operating leases greater than one year are as follows:

FUTURE RENTAL AND FUTURE SERVICE INCOME - MINIMUM (in thousands) OPERATING LEASES RENTAL EXPENSE --------------------------------------- Year ended December 31 2003 $ 10,936 $ 6,795 2004 8,191 5,630 2005 6,307 3,803 2006 4,644 2,808 2007 3,651 2,362 Future years 12,162 8,707 ------------------------------------ $ 45,891 $ 30,105 ====================================

Direct Financing Lease: During 2002, the Company entered into a direct financing lease with a railcar customer. Future minimum lease payments to be received under this lease, net of executory costs, aggregated $2.5 million at December 31, 2002. The Company's net investment in the lease of $0.9 million is included as $0.8 million in other assets on the balance sheet and $0.1 million in prepaid expenses and other current assets. Other Leasing Activities: The Company, as a lessee, leases real property, vehicles and other equipment under operating leases. Certain of these agreements contain lease renewal and purchase options. The Company also leases excess property to third parties. Net rental expense under these agreements was $5.1 million, $5.4 million and $5.2 million in 2002, 2001 and 2000, respectively. Future minimum lease payments (net of sublease income commitments) under agreements in effect at December 31, 2002 are as follows: 2003--$3.1 million; 2004 -- $2.5 million; 2005 -- $2.3 million; 2006 -- $1.0 million; 2007 -- $0.6 million; and $1.2 million thereafter. Other Commitments: The Company has agreed to fund a research and development effort at a rate of $0.2 million per year for five years, ending June 30, 2007. The commitment may be satisfied, in part, by qualifying internal costs or expenditures to third parties. 50 The Company has from time to time entered into agreements which resulted in indemnifying third parties against certain potential liabilities. Management believes that judgments, if any, related to such agreements would not have a material effect on the Company's financial condition, results of operations or cash flow. 12. EMPLOYEE BENEFIT PLAN OBLIGATIONS The Company provides retirement benefits for substantially all of its employees under several defined benefit and defined contribution plans. The Company's expense for its defined contribution plans amounted to $1.4 million in each of 2002, 2001 and 2000. The Company also provides certain health insurance benefits to employees, including retirees. Following are the details of the liability and funding status of the pension and postretirement benefit plans:

PENSION BENEFITS POSTRETIREMENT BENEFITS (in thousands) 2002 2001 2002 2001 ------------------------------------------------ CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 26,959 $ 25,151 $ 18,950 $ 11,372 Service cost 2,265 1,884 721 610 Interest cost 1,891 1,560 1,601 1,224 Actuarial (gains)/losses 4,040 (121) 7,011 6,493 Plan amendment -- -- (8,658) -- Participant contributions -- -- 120 73 Benefits paid (1,551) (1,515) (862) (822) ----------------------------------------------- Benefit obligation at end of year 33,604 26,959 18,883 18,950 ----------------------------------------------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 24,480 26,117 -- -- Actual losses on plan assets (3,310) (1,671) -- -- Company contributions 4,506 1,549 742 749 Participant contributions -- -- 120 73 Benefits paid (1,551) (1,515) (862) (822) ----------------------------------------------- Fair value of plan assets at end of year 24,125 24,480 -- -- ----------------------------------------------- Funded (underfunded) status of plans at end of year (9,479) (2,479) (18,883) (18,950) Unrecognized net actuarial loss 14,670 5,369 16,063 9,825 Unrecognized prior service cost 89 115 (7,216) -- Unrecognized net transition obligation -- -- -- 1,217 ----------------------------------------------- Prepaid (accrued) benefit cost $ 5,280 $ 3,005 $(10,036) $ (7,908) ===============================================

51 Effective October 1, 2002, the Company amended its retiree health care plan to eliminate all retiree health care benefits for new employees hired after January 1, 2003. In addition, the Company has limited its premium contribution for future years to the rates in effect at December 31, 2002 plus a 3% inflation factor per year after that date. Finally, the Company raised its employee and retiree co-payments for all prescription drugs. The changes resulted in an $8.7 million reduction in the benefit obligation as measured at December 31, 2002. Amounts recognized in the consolidated balance sheets at December 31 consist of:

PENSION BENEFITS POSTRETIREMENT BENEFITS (in thousands) 2002 2001 2002 2001 ------------------------------------------------ Accrued expenses $ (548) $ (1,243) $ -- $ -- Pension asset 5,828 4,248 -- -- Employee benefit plan obligations -- -- (10,036) (7,908) ----------------------------------------------- Net amount recognized $ 5,280 $ 3,005 $(10,036) $ (7,908) ===============================================

Included in employee and benefit plan obligations are $1.7 million and $1.6 million at December 31, 2002 and 2001, respectively, of deferred compensation for certain employees who, due to Internal Revenue Service guidelines, may not take full advantage of the Company's primary defined contribution plan. Assets funding this plan are recorded at fair value in prepaid expenses and other current assets. Amounts applicable to a Company defined benefit plan with accumulated benefit obligations in excess of plan assets are as follows:

(in thousands) 2002 2001 ---------------- Projected benefit obligation $1,252 $ 933 ---------------- Accumulated benefit obligation $ 228 $ 137 ----------------

Following are components of the net periodic benefit cost for each year:

PENSION BENEFITS POSTRETIREMENT BENEFITS (in thousands) 2002 2001 2000 2002 2001 2000 ------------------------------------------------------------------ Service cost $ 2,265 $ 1,884 $ 2,062 $ 721 $ 610 $ 434 Interest cost 1,891 1,560 1,625 1,601 1,224 766 Expected return on plan assets (2,197) (2,366) (2,353) -- -- -- Amortization of prior service cost 26 26 26 (122) -- -- Recognized net actuarial loss 246 25 73 587 420 157 Amortization of net transition obligation -- -- -- 83 111 111 ------------------------------------------------------------------ Benefit cost $ 2,231 $ 1,129 $ 1,433 $ 2,870 $ 2,365 $ 1,468 ==================================================================

52

PENSION BENEFITS POSTRETIREMENT BENEFITS 2002 2001 2002 2001 ------------------------------------------- WEIGHTED AVERAGE ASSUMPTIONS AS OF DECEMBER 31 Discount rate 6.75% 7.25% 6.75% 7.25% Expected return on plan assets 9.0% 9.0% -- -- Rate of compensation increases 4.0% 4.0% -- -- Health care cost trend rate -- -- 7.5% 8.0%

The health care cost trend rate of 7.5% is assumed to decline 0.5% per year to 5.0% and remain at that level thereafter. During 2002, the Company amended its postretirement benefits plan to eliminate health benefits for any full-time employees hired after January 1, 2003. The assumed health care cost trend rate has a significant effect on the amounts reported for postretirement benefits. A one-percentage-point change in the assumed health care cost trend rate would have the following effects:

ONE-PERCENTAGE-POINT (in thousands) INCREASE DECREASE ------------------------------- Effect on total service and interest cost components in 2002 $ 505 $ (394) Effect on postretirement benefit obligation as of December 31, 2002 273 (249)

To partially fund self-insured health care and other employee benefits, the Company makes payments to a trust. Assets of the trust amounted to $4.0 million and $4.6 million at December 31, 2002 and 2001, respectively, and are included in prepaid expenses and other current assets. 13. FAIR VALUES OF FINANCIAL INSTRUMENTS The fair values of the Company's cash equivalents, margin deposits, short-term borrowings and certain long-term borrowings approximate their carrying values since the instruments are close to maturity and/or carry variable interest rates based on market indices. The Company accounts for investments in affiliates on the equity method. The estimated fair value of these investments could not be obtained without incurring excessive costs as these investments have no quoted market price. 53 Certain long-term notes payable and the Company's debenture bonds bear fixed rates of interest and terms of up to fifteen years. Based upon current interest rates offered by the Company on similar bonds and rates currently available to the Company for long-term borrowings with similar terms and remaining maturities, the Company estimates the fair values of its long-term debt instruments outstanding at December 2002 and 2001 as follows:

(in thousands) CARRYING AMOUNT FAIR VALUE ------------------------------------ 2002: Long-term notes payable $ 47,237 $ 49,242 Debenture bonds 27,628 27,863 --------------------------------- $ 74,865 $ 77,105 ================================= 2001: Long-term notes payable $ 31,284 $ 32,695 Debenture bonds 31,250 32,189 --------------------------------- $ 62,534 $ 64,884 =================================

14. BUSINESS SEGMENTS The Company's operations include four reportable business segments that are distinguished primarily on the basis of products and services offered. The Agriculture segment includes grain merchandising, the operation of terminal grain elevator facilities and the manufacture and distribution of agricultural inputs, primarily fertilizer, to dealers and farmers. The Processing segment includes the production and distribution of lawn care and corncob-based products. The Rail segment includes the leasing, marketing and fleet management of railcars and locomotives, railcar repair and metal fabrication. The Retail segment includes the operation of six large retail stores, a distribution center and a lawn and garden equipment sales and service shop. Included in the Other segment are the operations of several smaller businesses and corporate level amounts not attributable to an operating segment. These smaller businesses included the operations of ten auto service centers (a joint venture that was sold in March 2000) and the marketing of the Company's excess real estate. The segment information below (in thousands) includes the allocation of expenses shared by one or more 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. Operating income (loss) for each segment is based on net sales and merchandising revenues plus identifiable other income less all identifiable operating expenses, including interest expense for carrying working capital and long-term assets. Capital expenditures include additions to property, plant and equipment, software and intangible assets. 54

2002 (AS RESTATED) AGRICULTURE PROCESSING RAIL RETAIL OTHER TOTAL - -------------------------------------------------------------------------------------------------------------------------- REVENUES FROM EXTERNAL CUSTOMERS (c) $ 762,268 $ 114,315 $ 18,747 $ 181,197 -- $1,076,527 INTER-SEGMENT SALES 8,330 1,216 877 -- -- 10,423 OTHER INCOME (NET) 1,340 501 41 685 872 3,439 GAIN ON INSURANCE SETTLEMENT -- -- -- -- 302 302 INTEREST EXPENSE (INCOME) (a) 5,772 2,333 1,068 1,546 (907) 9,812 OPERATING INCOME (LOSS) (c) 15,154 (1,322) 1,563 4,003 (3,396) 16,002 IDENTIFIABLE ASSETS 263,651 85,140 35,378 57,046 28,003 469,218 CAPITAL EXPENDITURES 5,760 832 199 1,694 1,349 9,834 RAILCAR EXPENDITURES -- -- 8,203 -- -- 8,203 DEPRECIATION AND AMORTIZATION 5,950 2,263 2,525 2,415 1,161 14,314

2001 AGRICULTURE PROCESSING RAIL RETAIL OTHER TOTAL - ----------------------------------------------------------------------------------------------------------------- Revenues from external customers $ 658,524 $ 112,827 $ 31,061 $ 177,949 -- $ 980,361 Inter-segment sales 5,645 1,212 930 -- -- 7,787 Other income (net) 1,196 300 248 618 1,141 3,503 Gain on insurance settlement 338 -- -- -- -- 338 Interest expense (income) (a) 6,179 3,428 1,846 1,900 (1,783) 11,570 Operating income (loss) 19,765 (7,654) (349) 1,868 (1,699) 11,931 Identifiable assets 244,289 84,709 45,037 57,289 27,000 458,324 Capital expenditures 5,845 1,549 166 907 688 9,155 Railcar expenditures -- -- 21,790 -- -- 21,790 Depreciation and amortization 6,399 2,341 2,432 2,426 666 14,264

2000 AGRICULTURE PROCESSING RAIL RETAIL OTHER TOTAL - ---------------------------------------------------------------------------------------------------------------- Revenues from external customers $ 645,793 $ 107,434 $ 18,972 $ 183,817 $ 2,489 $ 958,505 Inter-segment sales 5,896 1,280 1,029 -- -- 8,205 Other income (net) 1,204 358 233 611 1,583 3,989 Gain on sale of business -- -- -- -- 992 992 Gain on insurance settlement 2,088 -- -- -- -- 2,088 Interest expense (income) (a) 6,186 3,424 1,748 1,706 (1,235) 11,829 Operating income (loss) 14,301 (3,470) 1,003 3,246 (716) 14,364 Identifiable assets 218,084 87,092 43,213 60,178 34,398 442,965 Capital expenditures (b) 9,648 9,276 72 1,484 488 20,968 Railcar expenditures -- -- 16,245 -- -- 16,245 Depreciation and amortization 6,223 2,032 1,417 2,755 692 13,119

(a) The interest income reported in the Other segment includes net interest income at the corporate level. These amounts result from a rate differential between the interest rate on which interest is allocated to the operating segments and the actual rate at which borrowings are made. (b) Capital expenditures in 2000 include assets purchased in exchange for long-term liabilities. 55 (c) The Company restated the 2002 segment information to reflect the adoption of EITF Topic D-96. The following table presents the impact of the restatement adjustments on the Company's sales and merchandising revenues and identifiable assets. See also Note 1. The adjustment to sales and merchandising revenues resulted from reclassifying the current period impact of the marketing agreement on gross profit to sales and merchandising revenues rather than cost of sales as originally presented.

YEAR ENDED DECEMBER 31, 2002 CAPTION SEGMENT AS PREVIOUSLY REPORTED ADJUSTMENTS AS RESTATED -------------------------------------------------------------- Sales and merchandising revenues Agriculture $ 761,575 $ 693 $ 762,268 Operating income Agriculture 18,986 (3,832) 15,154

AS OF DECEMBER 31, 2002 AS PREVIOUSLY REPORTED ADJUSTMENTS AS RESTATED --------------------------------------------------------------- Identifiable assets Other 28,600 (597) 28,003

Grain sales for export to foreign markets amounted to approximately $149 million, $191 million and $172 million in 2002, 2001 and 2000, respectively. Grain sales of $154 million, $122 million and $153 million in 2002, 2001, and 2000, respectively, were made to Cargill, Inc. 56 CORPORATE OFFICERS DENNIS J. ADDIS President, Plant Nutrient Division DANIEL T. ANDERSON President, Retail Group MICHAEL J. ANDERSON President & Chief Executive Officer RICHARD M. ANDERSON President, Processing Group RICHARD P. ANDERSON Chairman DALE W. FALLAT Vice President, Corporate Services PHILIP C. FOX Vice President, Corporate Planning CHARLES E. GALLAGHER Vice President Human Resources RICHARD R. GEORGE Vice President, Controller & CIO BEVERLY J. MCBRIDE Vice President, General Counsel & Corporate Secretary HAROLD M. REED President, Grain Division RASESH H. SHAH President, Rail Group GARY L. SMITH Vice President, Finance & Treasurer BOARD OF DIRECTORS DONALD E. ANDERSON Director of Science, Retired The Andersons, Inc. MICHAEL J. ANDERSON President & Chief Executive Officer The Andersons, Inc. RICHARD M. ANDERSON President, Processing Group The Andersons, Inc. RICHARD P. ANDERSON Chairman The Andersons, Inc. THOMAS H. ANDERSON Chairman Emeritus The Andersons, Inc. JOHN F. BARRETT (2) (3) Chairman, President & Chief Executive Officer The Western & Southern Life Insurance Co. PAUL M. KRAUS Attorney Marshall & Melhorn LLC DONALD L. MENNEL(1)(3) President & Treasurer The Mennel Milling Company DAVID L. NICHOLS(1)(3) President & Chief Operating Officer, Rich's-Macy's/Lazarus/ Goldsmith's Division of Federated Department Stores, Inc. DR. SIDNEY RIBEAU(2)(3) President Bowling Green State University CHARLES A. SULLIVAN(1)(3) Chairman Interstate Bakeries Corp JACQUELINE F. WOODS(2)(3) Retired President Ameritech Ohio (1) Audit Committee (2) Compensation Committee (3) Governance/Nominating Committee INVESTOR INFORMATION INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP, Toledo, OH NASDAQ SYMBOL The Andersons, Inc. common shares are traded on the Nasdaq National Market tier of The Nasdaq Stock Market under the symbol ANDE SHAREHOLDERS As of February 28, 2003, there were 7.2 million shares of common stock outstanding: 674 shareholders of record and approximately 2,500 shareholders for whom security firms acted as nominees. CORPORATE OFFICES The Andersons, Inc 480 West Dussel Drive Maumee, OH 43537 419-893-5050 www.andersonsinc.com TRANSFER AGENT & REGISTRAR Computershare Investor Services, LLC 2 North LaSalle Street Chicago, IL 60602 312-588-4991 FORM 10-K The Andersons' 2002 Form 10-K, filed in mid-March 2003 with the SEC, is available to stockholders and interested individuals without charge by writing or calling Investor Relations. INVESTOR RELATIONS Gary L. Smith Vice President, Finance & Treasurer 419-891-6417 gary_smith@andersonsinc.com ANNUAL MEETING The annual shareholders' meeting of The Andersons, Inc. will be held at The Andersons' Activities Building, 1833 South Holland-Sylvania Road, Maumee, OH at 1:30 p.m. on May 1, 2003. 57 OUR MISSION We firmly believe that our company is a powerful vehicle through which we channel our time, talent, and energy in pursuit of the fundamental goal of serving God by serving others. Through our collective action we greatly magnify the impact of our individual efforts to: - - Provide extraordinary service to our customers - - Help each other improve - - Support our communities - - Increase the value of our Company The Andersons, Inc. 480 West Dussel Drive Maumee, Ohio 43537 58 EX-21 4 l03650aexv21.txt EXHIBIT 21 SUBSIDIARIES OF THE ANDERSONS . . . Exhibit 21

SUBSIDIARIES OF THE ANDERSONS Subsidiary State of Organization - ---------------------------------------------------------- ---------------------- The Andersons Ag Software, Inc. Ohio (a corporation owned 100% by Metamora Commodity Company, Incorporated) The Andersons Agriculture Group, LP Ohio (a limited partnership owned 99% by The Andersons, Inc. and owned 1% by TAI Holdings, Inc.) The Andersons Agriservices, Inc. Illinois (a corporation owned 100% by The Andersons, Inc.) The Andersons AgVantage Agency, LLC Ohio (a limited liability corporation owned 100% by Metamora Commodity Company, Incorporated) The Andersons ALACO Lawn, Inc. Alabama (a corporation owned 100% by The Andersons, Inc.) The Andersons Lawn Fertilizer Division, Inc. Ohio (a corporation owned 100% by The Andersons, Inc.) The Andersons Mower Center, Inc. Ohio (a corporation owned 100% by The Andersons, Inc.) The Andersons Technologies, Inc. Michigan (a corporation owned 100% by The Andersons Lawn Fertilizer Division, Inc.) Crop & Soil Service, Inc. Ohio (a corporation owned 100% by The Andersons, Inc.) Metamora Commodity Company Incorporated Ohio (a corporation owned 100% by The Andersons, Inc.) TAI Holdings, Inc. Michigan (a corporation owned 100% by The Andersons, Inc.)

2 EX-23 5 l03650aexv23.txt EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-101770, 333-00233 and 333-53137) and Registration Statement on Form S-3 (No. 333-79307) of The Andersons, Inc. of our report dated January 27, 2003, except as to the effect of the matters described in Note 1 to the Consolidated Financial Statements which is as of October 24, 2003, relating to the consolidated financial statements, which appears in the 2002 Annual Report to Shareholders, included herein as Exhibit 13, which is incorporated in this Annual Report on Form 10-K/A. We also consent to the incorporation by reference of our report dated October 24, 2003 relating to the financial statement schedule, which appears in this Annual Report on Form 10-K/A. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Toledo, Ohio October 24, 2003 3 EX-31.1 6 l03650aexv31w1.txt EXHIBIT 31.1 CERTIFICATION - CEO EXHIBIT 31.1 CERTIFICATIONS I, Michael J. Anderson, certify that: 1. I have reviewed this annual report on Form 10-K/A of The Andersons, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fourth fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 24, 2003 /s/Michael J. Anderson ------------------------------ Michael J. Anderson President and Chief Executive Officer EX-31.2 7 l03650aexv31w2.txt EXHIBIT 31.2 CERTIFICATION - CIO EXHIBIT 31.2 CERTIFICATIONS I, Richard R. George, certify that: 1. I have reviewed this annual report on Form 10-K/A of The Andersons, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fourth fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 24, 2003 /s/Richard R. George ---------------------------------- Richard R. George Vice President, Controller and CIO EX-31.3 8 l03650aexv31w3.txt EXHIBIT 31.3 CERTIFICATION - TREASURER EXHIBIT 31.3 CERTIFICATIONS I, Gary L. Smith, certify that: 1. I have reviewed this annual report on Form 10-K/A of The Andersons, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fourth fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 24, 2003 /s/Gary L. Smith --------------------------- Gary L. Smith Vice President, Finance and Treasurer EX-32.1 9 l03650aexv32w1.txt EXHIBIT 32.1 CERTIFICATIONS - PURS TO 18 USC 1350 Exhibit 32.1 THE ANDERSONS, INC. CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Annual Report of The Andersons, Inc. (the "Company") on Form 10-K for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies pursuant to 18 W.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003, that to such officer's knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. October 24, 2003 /s/Michael J. Anderson ----------------------------------- Michael J. Anderson President and Chief Executive Officer /s/Richard R. George ------------------------------------- Richard R. George Vice President, Controller and CIO /s/Gary L. Smith ----------------------------------- Gary L. 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EX-13

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                                                                               .
                                                                               .

                                                                      EXHIBIT 13

THE ANDERSONS 2002 ANNUAL REPORT

TABLE OF CONTENTS

                                            
Financial Highlights                                     1
Letter to Shareholders                                 2-4
Agriculture Group                                      6-7
Processing Group                                       8-9
Rail Group                                           10-11
Retail Group                                         12-13
Selected Financial Data                                 14
Report of Independent Accountants                       15
Consolidated Financial Statements                    16-19
Management's Discussion & Analysis                   20-23
Notes to Consolidated Financial Statements           24-36
Officers & Directors Data                      Inside Back





                                                      [Pie Chart]
                          [Pie Chart]                  BEGINNING                 [Bar Chart]
                              2002                 ALLOCATED CAPITAL        2002 OPERATING INCOME
                            REVENUES                (AS OF (1/1/02)               (RESTATED)
                       YEAR: $1.1 BILLION         TOTAL: $202 MILLION        TOTAL: $16.0 MILLION
                                                                   
Agriculture                   70.8%                      39.9%                       $15.2
Processing                    10.6%                      21.7%                        (1.3)
Rail                           1.7%                      19.4%                         1.5
Retail                        16.9%                      19.0%                         4.0
Other                           --                         --                         (3.4)
                       --------------------------------------------------------------------------
                             100.0%                     100.0%                       $16.0
                       ==========================================================================


2002 ACCOMPLISHMENTS

- -    Earned a record $1.92 (restated) per diluted share vs. $1.21 per diluted
     share in 2001

- -    Shareholders enjoyed a 30% total return

- -    Revenues grew 9% to $1.1 billion

- -    Strong cash flow added working capital and reduced long-term debt

- -    Plant Nutrient achieved a record performance and Grain had its second best
     year ever

- -    Signed letter of intent to form an LLC with Lansing Grain Company

- -    Railcar utilization rate improved 10% in 2002

- -    Retail's income grew by 114% in 2002

- -    Retail added fresh meat in Toledo and Woodville and started reset of
     Woodville store

- -    Achieved significant turnaround in Processing Group through improved
     efficiencies and cost reductions

- -    Created an alliance with Powerspan Corp., developer of multi-pollutant
     control technology for power plants, to produce and market
     electro-catalytic oxidation fertilizer co-products.

- -    Joined ICG Commerce's e-Procurement services to improve purchasing
     efficiencies



The Andersons, Inc. (Nasdaq: ANDE) is a diversified agribusiness and retailing
company with annual revenues of $1.1 billion. The company, which began
operations in Maumee, Ohio in 1947 with one grain elevator and 500,000 bushels
of storage capacity, today has four operating groups: AGRICULTURE, PROCESSING,
RAIL and RETAIL. For more in-depth information about the company, please visit
our website at www.andersonsinc.com.

FINANCIAL HIGHLIGHTS



                                                                        2002            2001            % CHANGE
    (in thousands, except for per share and performance data)        (RESTATED)
                                                                    --------------------------------------------
                                                                                               
OPERATIONS
Grain sales & revenues                                              $    583,947    $    475,953         21.6%
Fertilizer, retail & other sales                                         492,580         504,408         (2.3%)
                                                                    ----------------------------
TOTAL SALES & REVENUES                                              $  1,076,527    $    980,361          9.3%
                                                                    ============================
Gross profit - grain                                                $     47,348    $     52,029         (9.0%)
Gross profit - fertilizer, retail & other                                115,753         108,722          6.5%
                                                                    ----------------------------
TOTAL GROSS PROFIT                                                  $    163,101    $    160,751          1.5%
                                                                    ============================
Other income / gains (net)                                          $      3,741    $      3,841         (2.6%)
Income before income taxes and cumulative effect of accounting
   change                                                                 16,002          11,931         34.1%
Net income before cumulative effect of change in accounting
   principle                                                              10,764           9,042         21.5%
Cumulative effect of change in accounting principle                        3,480            (185)       100.0%
Net income                                                                14,244           8,857         60.8%
Effective tax rate                                                          32.7%           24.2%        35.1%
Weighted average shares outstanding                                        7,283           7,281           --

PER SHARE DATA
Net income - basic                                                  $       1.96    $       1.22         50.0%
Net income - diluted                                                        1.92            1.21         47.9%
Dividends paid                                                              0.26            0.26           --
Year end market value                                                      12.70           10.00         27.0%

PERFORMANCE
Pretax return on beginning equity                                           16.9%           13.3%
Net income return on beginning equity                                       15.0%            9.9%
Funded long-term debt to equity ratio                                   .80-TO-1        .96-TO-1
Number of employees                                                        2,958           3,035


                                       2


Shareholders and friends,

The Andersons celebrated its 55TH year of growth and success in 2002 with a
record-setting performance. Net income (as restated) was $14.2 million or $1.92
per diluted share for 2002 compared to $8.9 million or $1.21 per diluted share
in 2001. Total revenues of $1.1 billion for 2002 rose 9% above revenues reported
in 2001. Our shareholders have enjoyed excellent total returns (market price
plus dividends) over the past two years - 30% in 2002 and 19% in 2001. Equity
investors are returning to essential and basic industries for protection and
long-term value as a result of the slowing economy, poor equity markets, and low
bond interest rates. Agribusiness has been a good alternative for investors in
these trying times.

The company's record performance and tight control over capital spending in 2002
strengthened our balance sheet. As a result, all measurements of working capital
and leverage have improved. We are at our targeted long-term funded
debt-to-equity ratio of 0.8 to 1.

Your company is committed to deliver quality, integrity, honesty, and fairness
in its products, services, and reporting. We are also committed to creating
value for our customers, shareholders, communities and employees. We are
stewards of precious resources, we endeavor to honor God, and be respectful of
each other in our efforts. Since we are a company of people engaged in these
pursuits, we have featured a few of our 3,000 employees in the 2002 annual
report. Our PEOPLE make it happen! We only wish we could feature more of them.

The AGRICULTURE GROUP had excellent operating performance for the year. While
grain production in the region was below average due to last year's wet planting
and summer drought conditions, margin on grain sales was strong. Overall,
earnings from grain storage were lower than 2001. The Plant Nutrient Division
(formerly the Wholesale Fertilizer and Farm Center Divisions) reported a 7%
increase in fertilizer sales volume. Attention to expenses, inventory positions,
margin control and facility utilization were key to their success.

The other three business units all reported significant improvement for 2002.
The RETAIL GROUP reported 114% higher income in 2002 over that reported in 2001.
Retail achieved slightly higher sales, but most significant improvement came
from vigilant attention to gross profit and operating expenses. Lower railcar
lease rates and the slowing economy continue to impact the RAIL GROUP. However,
with improved fleet utilization and reduced carrying costs, Rail reported its
best performance since 1999. The PROCESSING GROUP made the most significant turn
around. Although not yet in the black, improved plant utilization, better
control over raw material costs and right sizing the business all played a part
in Processing's improved performance in 2002.

On the CORPORATE side, we were blessed with lower interest rates, but burdened
with higher employee benefit and insurance costs. In spite of these higher
costs, we kept a purposeful tight rein on operating, administrative and general
expenses, which in total were slightly below those of 2001. For more details on
last year's performance, see the business review pages in this report.

The prospects for 2003 are good. At this point we do not believe we can exceed
the record performance we had in 2002; however, we expect to capitalize on many
of the competencies we have built over the last 55 years. We have always stated
our performance will reflect the cyclical

                                       3


and seasonal nature of our industries. The weak 2002 harvest will negatively
impact 2003 income, but these are expected road bumps we manage through from
time to time. It comes with the industry.

We have a long history of physical handling, storing, maintaining, formulating,
transporting and financial management of bulk materials. Our experience has
provided us with the opportunity to enhance those bulk materials into value
added products and services that provide solutions for our customers. Our
strategic financial goals include increasing market value, specific growth
objectives for each Group and attaining targeted levels of income by 2005.
Achieving these goals is more than asset and cost control alone. It requires
finding the future products and services to serve current and new customers who
will be the future source of sales and profit.

The AGRICULTURE GROUP, which includes the Grain Division and Plant Nutrient
Division (PND), forms our largest investment and the base on which most of our
other businesses were created. We continue to believe population growth, demand
for improved diets and higher standards of living will benefit those invested in
the U.S. agriculture system, including The Andersons.

The Grain Division ended 2002 with 56 million bushels of grain in storage, which
is a good starting point. However, with last year's poor harvest, we are
predicting lower storage income for 2003 as we expect grain inventory to be
shipped earlier than usual. On the positive side, winter wheat plantings in our
region are estimated to be 2.9 million acres, 23% above last year, which should
provide opportunities in 2003. Higher corn prices should also encourage
producers to increase plantings in 2003, and higher corn production offers us
more margin opportunity than on soybeans. Grain supply and demand are directly
impacted by good growing conditions in our marketing region; consequently, much
of 2003's performance is dependent on the fall harvest.

Producers make huge investments in the next growing season - inputs, rent,
equipment, land, etc. To help them make complex decisions about crop production
and marketing, we offer our Crop Revenue Profiler(R) software program. This
software program integrates the variables of crop insurance and government
programs with our grain marketing philosophy to help producers achieve a more
predictable result, thus reducing the impact of volatile crop prices. When our
customers are successful, it enhances our profitability.

We continue to develop our progressive grain marketing tools, such as Freedom
Contracts(SM), to assist producers in pricing decisions. In 2002 we began taking
these contracts and marketing ideas outside our historic marketing region. What
we call "portable originations" has been a way to contract with and serve
customers without physically handling the grain. In addition, we have developed
web-based customer contracts, statements and other information to help customers
track and manage their contract positions.

In 2003, the Grain Division became a minority investor in Lansing Grain Company
LLC, which is a new company formed by Lansing Grain Company, a 77-year old grain
trading business with offices in Michigan, Minnesota, and Kansas. This
investment should benefit both parties as we serve different market sectors and
geographic regions.

The Plant Nutrient Division's focus is on consistent, dependable year-round
logistics and supply. Higher grain prices and the newly signed U.S. Farm Bill
are positive signs for PND in 2003. Cash

                                       4


flow at the producer level is reported to be strong, which should allow
producers to buy the necessary inputs for the 2003 planting season. The division
continues to add capacity and re-capitalize existing assets to provide customers
with a complete line of nutrient inputs and services.

In addition, PND is investing more time and talent to serve the specialty
agriculture, industrial and non-agricultural markets. Several new products
introduced in the past year include liquid roadway and runway de-icers and
anti-icers, specialty biological nutrients for wastewater treatment and
specialty nutrients for agriculture.

In the RAIL GROUP, railcar prices and lease rates are beginning to stabilize,
which is a positive sign for 2003. Although new railcar production has been cut
dramatically in recent years, there is usually demand for less expensive
rebuilt-cars. We are positioned to meet this demand with rolling stock and our
railcar repair and fabrication shops. Not only can these facilities repair and
rebuild cars, it can also design and build bulkheads, gates, and hatches to
match customer demand. With capabilities both in the railcar repair and
fabrication business, it's easier to meet customer needs in the lease business.
Our goal is to be the Total Rail Solutions(SM) provider for our railcar
customers. Plans are for Rail to add a new repair facility in South Carolina in
2003.

Rail had 5,699 railcars under management at the end of 2002, 5% more than in
2001. In addition, we have 51 locomotives under management. We ended 2002 with
85% of the railcars under management in service. This is up 10% from 2001, a
huge improvement. Our utilization objective in 2003 is to be at 90%. We continue
to believe this business can grow at a 20% annual rate for the near future. We
have found opportunities by purchasing railcars with attached leases from
investors looking to re-balance or modify their portfolios. With the sluggish
economy, our focus is on short-term lease deals (where the largest demand is),
diligent management of railcars, monitoring credit quality, valuation and
positions, and stepping up our sales and marketing efforts.

The PROCESSING GROUP made a sizable turnaround in 2002 and expects to be in the
black in 2003. The business was reorganized to capture efficiencies in the areas
of marketing, operations, and reporting/systems. We are implementing a cost
system and are studying total IT systems needs. We have better control over
ingredient costs by sourcing raw material earlier, margins have improved, and we
are paying very close attention to working capital usage. We still have more
work to do in order to get Processing to achieve an acceptable return.

Lawn fertilizer shipments increased 3% in 2002, and they are expected to grow 3%
in 2003. The "big box retail" consumer lawn fertilizer business is dynamic.
However, because these larger customers have greater demands, change can be
rewarding or painful. We have successfully served this market for decades and
continue to believe we have opportunity to profitably add value as a private
label supplier to the industry. For 2003 we landed a new international private
label for U.S. distribution and expect this relationship to grow in future
years.

Our professional turf business, Andersons Golf Products(TM), has stabilized and
is expected to grow by 8% in 2003. Our goal for this business is to increase
distribution to New England and the Southeastern U.S.

                                       5


The Processing Group's other businesses, cob-based carriers and animal
bedding/litter products, were modestly profitable in 2002. There are a number of
new products being tested in the marketplace that show promise for 2003.

Our RETAIL GROUP'S focus on MORE FOR YOUR HOME(R) is paying off as noted by
their 2002 improved performance. The addition of a fresh meat market in the
Maumee Store was such a huge success that we added similar markets to the Toledo
and Woodville stores. The addition complements our deli, bakery, produce and
wine offerings and gives customers the convenience of one-stop food shopping. We
are now considering fresh meat markets for our Central Ohio stores as well.

This year we are rolling out a new shopping concept at our Woodville store
designed to increase the average per-customer sale. The new store concept
features a floor plan that improves customer flow and significantly increases
the number of merchandise end-caps to more prominently feature selected
merchandise.

Margins are up in 2002 as a result of vigilant control over markdowns. We will
focus on inventory turns, in-stock performance, labor utilization efficiency and
improved technologies in 2003.

The most important issue for Retail is growth - will there be a seventh store?
We have been evaluating our long-term growth potential, testing site selection
models and investigating a few specific sites. We expect to finalize a decision
in 2003.

On the ADMINISTRATIVE front we have been watchful of our operating,
administrative and general expenses, developing and extending our use of ERP
systems and technology, and intensifying strategic sourcing and procurement
efforts to find more efficient and less expensive business practices.

Interest expense improved by $1.8 million in 2002, mainly from lower interest
rates. As a result of the lower interest rate environment, we made a number of
capital market moves that we believe will benefit the company in 2003 and
beyond. In November, we completed a $200 million short and long-term credit line
syndicated with six major banks. In addition, we restructured our long-term
debt, increasing the fixed rate portion to 90% of the total outstanding. Net
working capital is up by 7%. Capital spending was managed very closely and as a
result, operating cash flow was strong, all of which strengthened the year-end
balance sheet.

Our balance sheet has grown to over $469 million in total assets. Most of the
asset growth is in grain inventories. Contrary to the way most non-commodity
businesses operate, high grain inventories are generally a positive indicator
for the near future. In our remaining businesses, we are striving to use working
capital more efficiently.

We expected an improvement in operating income in 2002 and that was
accomplished. We thank our 3,000 hard working, creative and dedicated employees
who provide extraordinary products and service to our customers.

                                       6


We are grateful to them, to our customers and suppliers, and to you our
shareholders. We believe in honesty, integrity, and mutual respect for our
employees, customers and shareholders. These values will prevail at The
Andersons.

One final note. We want to extend our thanks to two long-time board members, Don
Anderson and Rick Anderson, who are stepping down this year. Their dedication
and guidance for the past 14 years have been invaluable. In the future, the
board's governance / nominating committee will be seeking candidates to fill
these two vacancies. Their choices will reflect The Andersons' commitment to a
diversified board with a majority of non-management directors that represent a
wide range of interests and business philosophies.

Sincerely

/s/ Mike
Mike Anderson, CEO & President

/s/ Dick
Dick Anderson, Chairman of the Board

WITH THANKS

Don Anderson
Director, 1988-2002

One of the six children of our founder Harold Anderson, Don's career with the
company started at its inception in 1947 and continued to his retirement in 1996
as Director of Science. For the last 15 years Don has shared his wisdom and
expertise as a member of our Board of Directors. Don is stepping down from the
Board this year. We want to express our sincere thank you to him for his many
years of service and dedication to The Andersons.

Rick Anderson
Director, 1988-2002

Rick joined The Andersons in 1986 and has been a member of the Board of
Directors for the last 15 years. Although Rick will no longer be a member of our
Board, he continues to serve the Company as President of the Processing Group.
Thank you to Rick for his contributions and service to The Andersons Board of
Directors and for his continued leadership of our Processing Group.

                                       7


AGRICULTURE GROUP

The AGRICULTURE GROUP operates grain elevators and plant nutrient formulation
and distribution facilities in Ohio, Michigan, Indiana and Illinois. The group's
elevators receive large quantities of grain and oilseeds (primarily corn,
soybeans and wheat) from farms and country elevators in the region, store and
condition it, then market it via rail or ship to domestic and export processors.
The plant nutrient distribution facilities formulate and market large volumes of
dry and liquid agricultural nutrients to dealers, distributors and company-owned
farm centers. The group is a formulator of technologically advanced,
environmentally friendly, liquid anti-icers for use in runway and roadway
applications.

In 2002, the Agriculture Group's operating income was $15.2 million, excellent
operating performance for the year. Total revenues of $762 million in 2002 were
almost $100 million higher than the previous year.

The drought that affected grain production in the region this past summer broke
a five-year string of relatively good growing seasons in the eastern corn belt.
Fewer bushels were delivered to the group's elevators, and ending corn, soybean
and wheat stocks in the U.S. also declined. As a result, the group's earnings
from storing grain were lower than they were in 2001. Demand from grain
processors remained strong resulting in double-digit percentage price increases,
excellent margins, and increased gross profit from handling and conditioning
grain. The group also experienced earnings growth from its emerging
AgriPartners(R) Plus, Gold and PLATINUM service businesses, offering various
information, marketing, crop insurance programs and licensing agreements to
producers and elevators throughout the corn belt.

The Plant Nutrient Division's wholesale tonnage volume increased in 2002 and
gross margins remained strong. As a result, this business experienced growth in
revenues, gross profit and operating income, surpassing its previous earnings
record. Market share gains were achieved in its core plant nutrient formulation
and distribution business through a strong customer focus, an excellent market
position with basic manufacturers and strategically located assets. Twenty
percent growth was achieved in the industrial and specialty agricultural
customer sector as well.

The group's farm centers again achieved a modest operating profit for the year.
Custom application acreage increased in 2002, and expenses were pared by
consolidating some locations to improve efficiency.

A sizable portion of the Company's total spending on plant and equipment in 2002
was allocated to the Agriculture Group. In addition to numerous facility
recapitalization projects, significant investments were made to improve the
loadout and grain-cleaning capabilities of its river elevator in Toledo and to
increase the storage capacity three-fold at its fertilizer terminal in
Lordstown, Ohio to better serve the group's growing customer base in eastern
Ohio, Pennsylvania and western New York. Early in 2003, the group also completed
a joint venture transaction with Lansing Grain, a grain trading company, to form
a new limited liability company that will serve as a platform for future growth
initiatives.

[Bar Charts]



                                                            1998       1999       2000       2001       2002
                                                                                       
SALES & REVENUES                                          $    826   $    669   $    646   $    659   $    762
OPERATING INCOME                                               6.7        6.1       14.3       19.8       15.2
UNIT VOLUMES
    Grain Bushel Receipts (Millions)                           157        158        156        155        142
    Grain Bushels Shipped (Millions)                           204        182        165        165        180
    Wholesale Fertilizer Sales and Service Tons (000)        1,201      1,293      1,306      1,360      1,423
    Farm Center Application Acres (000)                        333        552        479        475        491


                                       8


PROCESSING GROUP

The PROCESSING GROUP manufactures turf and ornamental plant fertilizer and
control products for sale by major retailers in the U.S. and is the industry's
leading supplier of premium turf-care products for golf courses and other
professional markets. It also produces corncob-based chemical and feed
ingredient carriers, animal bedding, cat litter and ice-melter products. The
group operates facilities in Maumee and Bowling Green, Ohio; Montgomery,
Alabama; Pottstown, Pennsylvania; and Delphi, Indiana.

Total revenues were $114 million in 2002, slightly higher than the $113 million
realized in 2001. The group's bottom line reflected a significantly larger
improvement, reducing the prior year loss by more than $6 million.

The volume of turf fertilizer sold in the U.S. in 2002 was negatively impacted
by the unusually dry summer throughout much of the country. The group's turf
business was able to achieve a 3 percent increase in volume for the year,
however, with growth in total sales to consumer and industrial accounts more
than offsetting lower volumes going into professional markets. Average gross
margins improved due to lower ingredient costs, primarily nitrogen, and a
noticeable shift from straight fertilizers to higher-margin control products.

Retailers across the country continued to focus on controlling in-store
inventories and just-in-time delivery of product to their stores. Sales of
turf-care products to the golf course market were hurt when the number of golf
rounds played in the U.S. declined for the third straight year.

Late in the year, the Processing Group began shipping a new line of turf-care
products that consumers will begin to see on a major retailer's shelves in 2003.

The group's other businesses, primarily the manufacturing of cob-based chemical
and feed ingredient carriers, animal bedding and litter products, achieved
modest bottom-line improvement in 2002.

[Bar Charts]



                                                            1998       1999       2000       2001       2002
                                                                                       
SALES & REVENUES                                          $   76.4   $   85.0   $  107.4   $  112.8   $  114.3

OPERATING INCOME (LOSS)                                   $    2.8   $   (0.1)  $   (3.5)  $   (7.7)  $   (1.3)


                                       9


RAIL GROUP

The RAIL GROUP sells and leases railcars and locomotives. It also repairs and
reconfigures various types of railcars to meet customer specifications, and
operates a custom steel-fabrication business. The group's rail marketing
business has grown significantly in recent years and now has approximately 5,700
railcars and 51 locomotives under management. The fleet consists of covered
hopper cars, boxcars, open top hopper cars, gondolas, and tank cars. The group
leases its rolling stock to shippers, railroads and fleet owners in a wide range
of industries throughout North America.

The group's total revenues were $18.7 million in 2002. This was $12.4 million,
or 40 percent, below the $31.1 million generated in 2001. Revenues from railcar
and locomotive leasing and the group's two shops increased in the past year, but
the absence of any significant car sales in 2002 caused total revenues to
decline.

The fleet of cars managed by this group continued to grow in 2002. Significant
improvement was also achieved in the utilization rate of the railcar fleet from
75 percent in 2001 to 85 percent at the end of 2002, following two successive
years of decline. Because of the overall fleet growth and improved fleet
utilization, more cars were in income-producing service, fewer cars were out of
service, and total leasing income increased.

Operating income also improved in 2002 primarily because of the writedown of the
value of certain railcars during 2001. In total, the group achieved an operating
income of $1.6 million in 2002, an improvement of $1.9 million from the
operating loss of $0.3 million reported for 2001.

Although no noticeable rebound has yet emerged in car values and lease rates for
some types of railcars, two areas which have been in a cyclical downturn for the
past three years, the group has positioned itself well and demonstrated its
ability to achieve income growth through a well-managed leasing program.

The railcar repair shop and the fabrication shop performed well in 2002. The
integration of these shops with the rail marketing business continues to bear
fruit. As the Rail Group strives to be a Total Rail Solutions(SM) provider for
its customers, some exciting opportunities are emerging. In component
manufacturing, for example, the group has the ability to design a component,
manufacture it, install it on a car, then lease the refurbished car to a
customer. As the group continues to build the lease fleet, it is taking care to
diversify it in terms of lease duration, car types, industries, customers and
geographic dispersion. The Rail Group will continue to monitor credit quality of
its customers diligently, and to match fund assets and liabilities as much as
possible to effectively manage risk.

[Bar Charts]



                                                            1998       1999       2000       2001       2002
                                                                                       
SALES & REVENUES                                          $   50.4   $   55.3   $   19.0   $   31.1   $   18.7

OPERATING INCOME (LOSS)                                   $    4.4   $    4.2   $    1.0   $   (0.3)  $    1.6

CARS UNDER MANAGEMENT
      Railcars                                               4,082      4,420      4,815      5,432      5,699
      Locomotives                                               --         30         30         51         51


                                       10


RETAIL GROUP

The RETAIL GROUP operates six large stores in Ohio; three in the Toledo area,
two in Columbus and one in Lima. Four are stand-alone facilities with in-store
selling space of 130,000 or more square feet each. The other two are slightly
smaller mall-based units. The goal of the Retail Group is to serve the needs of
homeowners more effectively than competing home centers and mass merchants. The
group's central message to the retail customer is MORE FOR YOUR HOME(R). The
product offering includes a broad array of traditional home center merchandise -
plumbing, electrical and building supplies, hardware, tools, kitchen and bath
design, flooring, paint and lighting products. In addition to these, the stores
feature lawn and garden products, extensive lines of housewares and domestics,
workwear, pet supplies, automotive supplies and sporting goods. Each store also
has an Uncommon Market(TM) with a unique offering of high quality foods
including produce, a deli, a bakery, specialty gourmet foods, frozen and fresh
meats, and one of the largest selections of fine wines in the Midwest.

Despite the general sluggishness reported by retailers across the country, total
sales for the Retail Group grew by 1.8% this year, from $178 million in 2001 to
$181 million in 2002. Operating income of $4.0 million for the year was more
than double the $1.9 million realized in 2001.

Although the number of shoppers in the group's stores last year was virtually
unchanged from a year ago, the average amount purchased by customers was higher
and average gross margins also improved from year-earlier levels.

The addition of a fresh meat business in two more stores in 2002 was received
enthusiastically by customers. All three Toledo-area stores now offer this new
product category. In addition, above-average growth was achieved in several
Uncommon Market(TM) product categories, most notably produce, deli and specialty
foods.

The Retail Group also continued to focus heavily on operational improvements in
2002. Total store labor hours were again reduced from year-earlier levels
without a reduction in customer service levels. In-stock performance showed
gains, exceeding 2001's monthly levels throughout the year. Total in-stock
performance was the highest it has been in the six years this metric has been
measured.

In addition to numerous facility recapitalization projects, the Retail Group
made a significant investment to upgrade the already very successful garden
center at the Toledo store. It also began a major remodeling project at another
store to test a concept that will improve product accessibility for customers
and greatly increase the number of promotional displays throughout the store.

Constant attention to product mix enhancements and operational efficiency are
driven by the group's desire to out-perform the competition in the customer's
total shopping experience.

[Bar charts]



                                                            1998       1999       2000       2001       2002
                                                                                       
SALES & REVENUES
        Retail                                            $    174   $    181   $    184   $    178   $    181
OPERATING INCOME
        Retail                                            $    1.7   $    2.6   $    3.2   $    1.9   $    4.0


                                       11


SELECTED FINANCIAL DATA



                                 2002            2001           2000             1999          1998
                             (As Restated) (e)
                                                                             
 (in thousands, except for
   per common share data)
Operating Results
  Total sales & revenues (f)  $ 1,076,527      $ 980,361      $ 958,505      $  1,001,804   $ 1,137,353
  Net income                       14,244 (a)      8,857 (a)     10,078 (b)         8,379         9,752
  Per common share data:
    Earnings - diluted               1.92           1.21           1.34              1.03          1.20
    Dividends paid                   0.26           0.26           0.24              0.20          0.16

Balance Sheet Data
  Total assets (c)            $   469,218      $ 458,324      $ 442,965      $    379,663   $   362,663
  Working capital                  81,755         75,228         55,260            67,939        65,898
  Long-term debt (d)               84,272         91,316         80,159            74,127        71,565
  Shareholders' equity            105,765         94,934         89,836            84,805        82,734


(a)  Gains of $0.3 million ($0.2 million after tax) for insurance settlements
     are included in each of 2002 and 2001

(b)  Gains of $2.1 million for an insurance settlement and $1.0 million on the
     sale of a business are Included ($2.0 million after tax).

(c)  Includes reclassification of pension asset for all years presented

(d)  Excludes current portion.

(e)  To reflect the adoption of EITF Topic D-96. See Note 1 to the audited
     financial statements

(f)  Includes reclassification of revenues (and cost of sales) for all years
     presented relative to third party contract. See Note 1 to the audited
     financial statements

QUARTERLY FINANCIAL DATA AND MARKET FOR COMMON STOCK



(in thousands, except for                               Net Income (Loss) before
per common share data)                                      Cumulative Effect
                                                                      Per Share-
                               Net Sales   Gross Profit    Amount       Basic
                               -------------------------------------------------
                                                          
Quarter Ended
 2002 (as restated)
March 31                       $  215,561   $   35,015   $      681   $     0.09
June 30                           301,001       48,919        8,328         1.14
September 30                      204,868       33,779         (630)       (0.09)
December 31                       355,097       45,388        2,385         0.33
                               ------------------------------------
          Year                 $1,076,527   $  163,101   $   10,764         1.48
                               ====================================

          2001
March 31                       $  216,802   $   35,369   $     (630)  $    (0.09)
June 30                           272,714       48,722        7,274         1.00
September 30                      184,829       31,646       (1,905)       (0.26)
December 31                       306,016       45,014        4,303         0.60
                               ------------------------------------
          Year                 $  980,361   $  160,751   $    9,042         1.24
                               ====================================


(in thousands, except for          Net Income (Loss)        Common Stock Quote
per common share data)         -----------------------   -----------------------
                                            Per Share-                             Dividends
                                 Amount        Basic        High         Low        Declared
                               --------------------------------------------------------------
                                                                    
Quarter Ended
 2002 (as restated)
March 31                       $    4,161   $     0.57   $    10.40   $     9.35   $    0.065
June 30                             8,328         1.14        13.75        10.12        0.065
September 30                         (630)       (0.09)       13.60        11.76        0.065
December 31                         2,385         0.33        13.00        11.38        0.070
                               ----------                                          ----------
          Year                 $   14,244         1.96                             $    0.265
                               ==========                                          ==========

          2001
March 31                       $     (815)  $    (0.11)  $     8.94   $     8.03   $    0.065
June 30                             7,274         1.00         8.88         7.50        0.065
September 30                       (1,905)       (0.26)       10.00         7.72        0.065
December 31                         4,303         0.60        10.00         8.51        0.065
                               ----------                                          ----------
          Year                 $    8,857         1.22                             $    0.260
                               ==========                                          ==========


                                       12

         Following is a table reconciling previously reported quarterly net
         sales, gross profit, net income (loss) before cumulative effect and net
         income (loss) to amounts which reflect the restatement for the adoption
         of EITF D-96 (See Note 1 to the audited financial statements). The "As
         Previously Reported" column includes reclassifications to gross profit
         related to the adoption of EITF 02-16, "Accounting by a Reseller for
         Cash Consideration received from a Vendor," which had no impact on net
         income or shareholders' equity. In addition, the adjustments to net
         sales include an election to reclassify the current period impact of
         the marketing agreement to a component of sales and merchandising
         revenues rather than cost of sales. This reclassification also had no
         impact to net income or shareholders' equity.



                                                                             YEAR ENDED DECEMBER 31, 2002
                                                                   AS PREVIOUSLY                         AS
QUARTER ENDED                    CAPTION                              REPORTED        ADJUSTMENTS     RESTATED
                                                                   -------------------------------------------
                                                                                         
March 31        Net Sales                                            $ 214,831         $    730      $ 215,561
                Gross Profit                                            36,349           (1,334)        35,015
                Net income (loss) before cumulative effect               1,609             (928)           681
                Net Income (Loss)                                        1,609            2,552          4,161
June 30         Net Sales                                              301,098              (97)       301,001
                Gross Profit                                            49,541             (622)        48,919
                Net income (loss) before cumulative effect               8,760             (432)         8,328
                Net Income (Loss)                                        8,760             (432)         8,328
September 30    Net Sales                                              204,722              146        204,868
                Gross Profit                                            34,835           (1,056)        33,779
                Net income (loss) before cumulative effect                 (84)            (546)          (630)
                Net Income (Loss)                                          (84)            (546)          (630)
December 31     Net Sales                                              355,183              (86)       355,097
                Gross Profit                                            46,208             (820)        45,388
                Net income (loss) before cumulative effect               3,034             (649)         2,385
                Net Income (Loss)                                        3,034             (649)         2,385


                                       13


                        Report of Independent Accountants

To the Board of Directors and
Shareholders of The Andersons, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of shareholders' equity, as
presented on pages 15 through 18 and pages 32 through 56, present fairly, in all
material respects, the financial position of The Andersons, Inc. and its
subsidiaries at December 31, 2002 and 2001, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2002, in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As described in Note 1, the Company restated its Consolidated Financial
Statements as of and for the year ended December 31, 2002 to reflect the
adoption of EITF Topic D-96, "Accounting for Management Fees Based on a
Formula."

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Toledo, Ohio
January 27, 2003, except as to the effect of the matters described in Note 1,
which is as of October 24, 2003

                                       14


                               The Andersons, Inc.

                        Consolidated Statements of Income



                                                                              YEAR ENDED DECEMBER 31
                                                                       2002          2001           2000
 (in thousands, except per common share data)                      (AS RESTATED)
                                                                    ---------------------------------------
                                                                                       
Sales and merchandising revenues                                    $ 1,076,527   $   980,361   $   958,505
Cost of sales and merchandising revenues                                913,426       819,610       800,323
                                                                    ---------------------------------------
Gross profit                                                            163,101       160,751       158,182

Operating, administrative and general expenses                          141,028       141,091       139,058
Interest expense                                                          9,812        11,570        11,829
Other income / gains:
  Other income (net)                                                      3,439         3,503         3,989
  Gain on insurance settlements                                             302           338         2,088
  Gain on sale of business                                                   --            --           992
                                                                    ---------------------------------------
Income before income taxes and cumulative effect of accounting
   change                                                                16,002        11,931        14,364
Income tax provision                                                      5,238         2,889         4,286
                                                                    ---------------------------------------
Income before cumulative effect of accounting change                     10,764         9,042        10,078
Cumulative effect of change in accounting principle, net of
   income tax benefit                                                     3,480          (185)           --
                                                                    ---------------------------------------
Net income                                                          $    14,244   $     8,857   $    10,078
                                                                    =======================================
PER COMMON SHARE:
BASIC EARNINGS PER SHARE:
Income before cumulative effect of accounting change                $      1.48   $      1.24   $      1.34
Cumulative effect of change in accounting principle, net of
   income tax benefit                                                      0.48         (0.02)           --
                                                                    ---------------------------------------
Net income                                                          $      1.96   $      1.22   $      1.34
                                                                    =======================================

DILUTED EARNINGS PER SHARE
Income before cumulative effect of accounting change                $      1.45   $      1.24   $      1.34
Cumulative effect of change in accounting principle, net of
   income tax benefit                                                      0.47         (0.03)           --
                                                                    ---------------------------------------
Diluted earnings                                                    $      1.92   $      1.21   $      1.34
                                                                    =======================================
Dividends paid                                                      $      0.26   $      0.26   $      0.24
                                                                    =======================================


The Notes to Consolidated Financial Statements on pages 21-32 are an integral
part of these statements.

                                       15


                               The Andersons, Inc.

                           Consolidated Balance Sheets



                                                                                         DECEMBER 31
                                                                                      2002         2001
                                 (in thousands)                                   (AS RESTATED)
                                                                                   -----------------------
                                                                                          
ASSETS
Current assets:
   Cash and cash equivalents                                                       $    6,095   $    5,697
   Accounts and notes receivable:
     Trade receivables, less allowance for doubtful accounts
         of $3,014 in 2002; $2,701 in 2001                                             59,800       51,080
     Margin deposits                                                                       --        3,756
                                                                                   -----------------------
                                                                                       59,800       54,836
   Inventories                                                                        256,275      238,291
   Railcars available for sale                                                            550       11,932
   Deferred income taxes                                                                2,894        3,963
   Prepaid expenses and other current assets                                           11,675       11,954
                                                                                   -----------------------
Total current assets                                                                  337,289      326,673

Other assets:
   Pension asset                                                                        5,828        4,248
   Other assets and notes receivable, less allowance for doubtful notes
   receivable of $222 in 2002; $472 in 2001                                             5,794        5,344
   Investments in and advances to affiliates                                              969          956
                                                                                   -----------------------
                                                                                       12,591       10,548
Railcar assets leased to others, net                                                   26,399       26,102
Property, plant and equipment, net                                                     92,939       95,001
                                                                                   -----------------------
                                                                                   $  469,218   $  458,324
                                                                                   =======================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Notes payable                                                                   $   70,000   $   82,600
   Accounts payable for grain                                                          75,422       66,968
   Other accounts payable                                                              60,285       50,996
   Customer prepayments and deferred income                                            20,448       22,683
   Accrued expenses                                                                    19,604       17,824
   Current maturities of long-term debt                                                 9,775       10,374
                                                                                   -----------------------
Total current liabilities                                                             255,534      251,445

Deferred income                                                                           717        2,209
Other long-term liabilities                                                               381          223
Employee benefit plan obligations                                                      12,198        9,550
Long-term debt, less current maturities                                                84,272       91,316
Deferred income taxes                                                                  10,351        8,647
                                                                                   -----------------------
Total liabilities                                                                     363,453      363,390
Shareholders' equity:
   Common shares, without par value
     Authorized -- 25,000 shares
     Issued -- 8,430 shares at stated value of $0.01 per share                             84           84
   Additional paid-in capital                                                          66,662       66,431
   Treasury shares, at cost (1,258 in 2002; 1,174 in 2001)                            (12,558)     (10,687)
   Accumulated other comprehensive loss                                                  (815)        (964)
   Unearned compensation                                                                  (73)         (83)
   Retained earnings                                                                   52,465       40,153
                                                                                   -----------------------
                                                                                      105,765       94,934
                                                                                   -----------------------
                                                                                   $  469,218   $  458,324
                                                                                   =======================


The Notes to Consolidated Financial Statements on pages 21-32 are an integral
part of these statements.

                                       16



                               The Andersons, Inc.

                      Consolidated Statements of Cash Flows



                                                                                    YEAR ENDED DECEMBER 31
                              (in thousands)                                     2002          2001         2000
                                                                             (as restated)
                                                                              ------------------------------------
                                                                                               
OPERATING ACTIVITIES
Net income                                                                    $   14,244   $    8,857   $   10,078
Adjustments to reconcile net income to net cash provided by (used in)
   operating activities:
     Depreciation and amortization                                                14,314       14,264       13,119
     Provision for losses on accounts and notes receivable                           353          224          911
     Cumulative effect of accounting change, net of income taxes                  (3,480)         185           --
     Gain on insurance settlements                                                  (302)        (338)      (2,088)
     Gain on sale of business                                                         --           --         (992)
     Gain on sale of property, plant and equipment                                  (406)        (336)         (35)
     Realized and unrealized (gains) losses on railcars                             (179)       1,172         (110)
     Deferred income tax provision (benefit)                                       1,432         (539)       2,242
     Other                                                                            91          368          111
                                                                              ------------------------------------
     Cash provided by operations before changes in operating assets and
       liabilities                                                                26,067       23,857       23,236
     Changes in operating assets and liabilities:
       Accounts and notes receivable                                              (5,249)       2,080       (6,984)
       Inventories                                                               (17,984)     (26,428)     (35,811)
       Prepaid expenses and other assets                                            (474)        (117)      (3,604)
       Accounts payable for grain                                                  8,454         (500)      (1,415)
       Other accounts payable and accrued expenses                                12,435       (5,000)       6,274
                                                                              ------------------------------------
Net cash provided by (used in) operating activities                               23,249       (6,108)     (18,304)

INVESTING ACTIVITIES
Purchases of property, plant and equipment                                        (9,834)      (9,155)     (16,189)
Purchases of railcars                                                             (8,203)     (21,790)     (16,245)
Purchase of U.S. ProTurf(R) and other business assets                                 --           --      (16,311)
Proceeds from sale of railcars                                                    15,985       15,376        3,821
Proceeds from sale of property, plant and equipment                                  598          951          240
Proceeds from insurance settlements                                                  302          338        2,346
Proceeds from sale of business                                                        --           --        2,133
                                                                              ------------------------------------
Net cash used in investing activities                                             (1,152)     (14,280)     (40,205)

FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings                                 (12,600)      11,300       26,300
Proceeds from issuance of long-term debt                                          22,333       23,250      194,723
Payments of long-term debt                                                       (29,976)     (10,845)    (187,417)
Change in overdrafts                                                               2,866       (7,796)      17,827
Payment of debt issue costs                                                         (634)          --           --
Proceeds from sale of treasury shares under stock compensation plans                 840          332          363
Dividends paid                                                                    (1,903)      (1,907)      (1,819)
Purchase of treasury shares                                                       (2,625)      (1,387)      (3,944)
                                                                              ------------------------------------
Net cash provided by (used in) financing activities                              (21,699)      12,947       46,033
                                                                              ------------------------------------

Increase (decrease) in cash and cash equivalents                                     398       (7,441)     (12,476)
Cash and cash equivalents at beginning of year                                     5,697       13,138       25,614
                                                                              ------------------------------------
Cash and cash equivalents at end of year                                      $    6,095   $    5,697   $   13,138
                                                                              ====================================

NONCASH INVESTING ACTIVITIES
   Acquisition of intangible assets in exchange for long-term debt                                      $    3,879
                                                                                                        ==========


The Notes to Consolidated Financial Statements on pages 21-32 are an integral
part of these statements.

                                       17


                               The Andersons, Inc.

                 Consolidated Statements of Shareholders' Equity



                                                                               Accumulated
                                                        Additional                Other
                                                Common   Paid-in    Treasury  Comprehensive    Unearned    Retained
               (in thousands)                   Shares   Capital     Shares       Loss       Compensation  Earnings    Total
                                                ------------------------------------------------------------------------------
                                                                                                
Balances at January 1, 2000                     $  84    $ 67,227   $ (7,158)     $  (144)     $   (158)   $ 24,954  $  84,805
                                                                                                                     ---------
   Net income                                                                                                10,078     10,078
   Other comprehensive income:
     Minimum pension liability, net of $0.1
      million income taxes                                                            144                                  144
                                                                                                                     ---------
   Comprehensive income                                                                                                 10,222
   Stock awards, stock option exercises,
     and other shares issued to employees
     and directors (130 shares)                               (96)       607                       (148)                   363
   Issuance of shares to complete
     acquisition                                             (643)       643                                                --

   Amortization of unearned compensation                                                            228                    228
   Purchase of treasury shares (477 shares)                           (3,944)                                           (3,944)
   Dividends declared ($0.245 per common
     share)                                                                                                  (1,838)    (1,838)
                                                ------------------------------------------------------------------------------
Balances at December 31, 2000                      84      66,488     (9,852)          --           (78)     33,194     89,836
                                                                                                                     ---------
   Net income                                                                                                 8,857      8,857
   Other comprehensive income (loss):
     Cumulative effect of accounting change                                        (1,172)                              (1,172)
     Other                                                                            208                                  208
                                                                                                                     ---------
   Comprehensive income                                                                                                  7,893
   Stock awards, stock option exercises,
     and other shares issued to employees
     and directors, net of tax (62 shares)                    (57)       552                       (163)                   332
   Amortization of unearned compensation                                                            158                    158
   Purchase of treasury shares (166 shares)                           (1,387)                                           (1,387)
   Dividends declared ($0.26 per common
     share)                                                                                                  (1,898)    (1,898)
                                                ------------------------------------------------------------------------------
Balances at December 31, 2001                      84      66,431    (10,687)        (964)          (83)     40,153     94,934
                                                                                                                     ---------
   Net income (as restated)                                                                                  14,244     14,244
   Other comprehensive income:
     Cash flow hedge activity, net of
     income tax of $0.5 million                                                       149                                  149
                                                                                                                     ---------
   Comprehensive income (as restated)                                                                                   14,393
   Stock awards, stock option exercises,
     and other shares issued to employees
     and directors, net of income tax of
     $0.3 million (132 shares)                                231        754                       (145)                   840
   Amortization of unearned compensation                                                            155                    155
   Purchase of treasury shares (216 shares)                           (2,625)                                           (2,625)
   Dividends declared ($0.265 per common
     share)                                                                                                  (1,932)    (1,932)
                                                ------------------------------------------------------------------------------
Balances at December 31, 2002 (as restated)     $  84   $  66,662   $(12,558)     $  (815)     $    (73)   $ 52,465  $ 105,765
                                                ==============================================================================


The Notes to Consolidated Financial Statements on pages 21-32 are an integral
part of these statements.

                                       18


                      MANAGEMENT'S DISCUSSION AND ANALYSIS

OPERATING RESULTS

Operating results for The Andersons, Inc. business segments are discussed in the
Business Review on pages 6-13 of this annual report. In addition, Note 13 to the
consolidated financial statements displays selected financial information for
each of the Company's business segments. The following discussion focuses on the
operating results as shown in the consolidated statements of income.

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

In connection with a review of our periodic filings by the staff of the Division
of Corporation Finance of the U.S. Securities and Exchange Commission, we
concluded that it is appropriate to modify our accounting related to a specific
agreement with a third party.

As previously disclosed, certain of the Company's agriculture facilities are
subject to a five-year marketing agreement with a third party that provides for
a base level of income and equal sharing of profits earned over the base level.
The Company's share of profits is calculated annually under the marketing
agreement based on a formula that recognizes the base level income as revenue on
a pro-rata basis over the term of the agreement. The Company previously measured
its share of the profits earned in excess of the base-level at the end of each
contract year and was recognizing such income over the remaining term of the
agreement.

Upon further review and consideration, we have determined that the Emerging
Issues Task Force Topic D-96, "Accounting for Management Fees Based on a
Formula," ("EITF Topic D-96") applies to the Company's situation, specifically
with respect to provisions of Method 2 described therein, which stipulates that
revenues recorded under such arrangements should be the amount that would be due
under the formula at any point in time as if the contract was terminated at that
date.

Upon review of the impact of the adjustments necessary to comply with the
requirements of EITF Topic D-96, which became effective for the Company as of
January 1, 2002, we concluded that restating our 2002 financial statements was
appropriate. The transition provisions of EITF Topic D-96 require the impact of
the change in accounting to be presented as a cumulative effect of a change in
accounting principle at the date of adoption. The following table presents the
impact of the restatement adjustments on the Company's previously reported sales
and merchandising revenues, cost of sales and merchandising revenues, gross
profit, income before income taxes and cumulative effect of accounting changes,
income tax provision, cumulative effect of change in accounting principle, net
of income tax provision, and net income for the year ended December 31, 2002.

                                       19




                                                                YEAR ENDED DECEMBER 31, 2002
                                                         AS PREVIOUSLY
               INCOME STATEMENT CAPTION                     REPORTED     ADJUSTMENTS     AS RESTATED
                                                         -------------------------------------------
                                                                               
Sales and merchandising revenues (b)                      $  1,075,834   $        693   $  1,076,527
Cost of sales and merchandising revenues(a)                    908,901          4,525        913,426
Gross profit                                                   166,933         (3,832)       163,101
Income before income taxes and cumulative effect of
   accounting change                                            19,834         (3,832)        16,002
Income tax expense                                               6,515         (1,277)         5,238
Cumulative effect of change in accounting principle,
   net of income taxes                                              --          3,480          3,480
Net income                                                      13,319            925         14,244


     (a) Periods presented "As Previously Reported" include reclassifications
         made to conform to the current presentation. These reclassifications
         related to the adoption of EITF 02-16, Accounting by a Reseller for
         Cash Consideration Received from a Vendor, and had no impact on net
         income or shareholders' equity.

     (b) Upon adoption of EITF Topic D-96, the Company reclassified the current
         period impact to gross profit of the marketing agreement as a component
         of sales and merchandising revenues rather than cost of sales.
         Previously the Company considered the marketing agreement impact as an
         adjustment to its cost of grain rather than as an adjustment to sales
         and merchandising revenues and therefore had included the impact in its
         cost of sales. Prior periods have been reclassified to conform to this
         presentation.

The following table presents a summary of the effects of the restatement on the
Consolidated Balance Sheet as of December 31, 2002.



                                                            DECEMBER 31, 2002
                                               AS PREVIOUSLY
               BALANCE SHEET CAPTION              REPORTED    ADJUSTMENTS    AS RESTATED
                                               -----------------------------------------
                                                                    
Current deferred income tax asset               $    3,491     $     (597)   $    2,894
Customer prepayments and deferred income            21,970         (1,522)       20,448
Retained earnings                                  104,840            925       105,765


All information within this Annual Report to Shareholders has been updated for
the above restatement and reclassifications.

COMPARISON OF 2002 WITH 2001

Sales and merchandising revenues for 2002 totaled $1.08 billion, an increase of
$96.2 million, or 10%, from 2001. Sales in the Agriculture Group were up $114.7
million, or 19%. Increased grain sales of $119.4 million included both a 9%
volume increase and a 16% increase in the average price of bushels sold. All
grains showed price per bushel increases and bushel volume was up for corn and
wheat. Fertilizer sales were down $4.6 million, or 3%, due to a 9% decrease in
the average price per ton sold,

                                       20


partially offset by a 7% increase in tons sold. Revenues in both grain and
fertilizer businesses are significantly impacted by the market price of the
commodities being sold.

Merchandising revenues in the Agriculture Group were down $11.0 million, or 23%,
due to decreases in space income (before interest charges) in the grain
division. Space income is income earned on grain held for our account or for our
customers and includes storage fees earned and appreciation or depreciation in
the value of grain owned. Grain on hand at December 31, 2002 was 56.3 million
bushels, of which 13.4 million bushels were stored for others. This compares to
65.4 million bushels on hand at December 31, 2001, of which 10.4 million bushels
were stored for others.

The results of the 2002 harvest were mixed with poor yields in some portions of
the Company's market area. As a result, management expects that the 14% decline
in grain held in the Company's facilities from year to year will negatively
impact space income in the first half of 2003. The higher grain prices, however,
may favorably impact the fertilizer business for the same period. Wheat acreage
(planted in 2002 for harvest in July 2003) in the Company's market area has
increased and management expects that corn acreage to be planted in Spring 2003
will increase as well, due to the higher corn prices. However, poor weather
during the spring planting season may unfavorably impact the corn and soybean
planted acreage during that time.

The Processing Group had a $1.5 million, or 1%, increase in sales and
merchandising revenues resulting primarily from an overall 3% increase in lawn
division tons sold, partially offset by a 3% decrease in the average price per
lawn division ton sold. The industrial lawn business (where the Group is
responsible only for the contract manufacturing of product and does no
marketing) continues to grow in relative size, due, in part, to the movement of
a large consumer customer to an industrial relationship. The Company receives
less margin for industrial tons, as compared to consumer tons, because it is
acting primarily as a contract manufacturer and not incurring certain sales and
marketing costs. Further, the Company is no longer required to accept returns
from the customer. The reduction of returns and elimination of marketing costs
contributed to the sales increase. Sales and merchandising revenues were
positively impacted by these reversals in 2002 by $1.4 million. The professional
lawn business continues to be impacted by general softness in the golf course
market and a reduction in the number of rounds played.

The Rail Group had a $12.3 million, or 40%, decrease in sales. While lease
revenue was up $1.8 million, or 14%, in 2002, sales of railcars were down $15.2
million. Sales in the fabrication and rail repair shops were up $1.1 million.
Railcars under management at December 31, 2002 were 5,699 compared to 5,432
under management at December 31, 2001. Locomotives under management were 51 for
both 2001 and 2002. The railcar utilization (railcars in lease service) rate
increased from 75% at December 31, 2001 to 85% at the end of December 2002.

The Retail Group had a 1.8% increase in same-store sales and revenues in 2002 as
compared to 2001. Individual store results were mixed, however both the Toledo
and Columbus markets showed increases. In addition, three of the six stores have
added a fresh meat counter since the third quarter of 2001. This business is
managed by a third party and the Company earns commissions on sales of fresh
meat; these commissions have been included in merchandising revenues. The
Company expects that significant new competition in the Toledo market may impact
sales in 2003. The Company is also in the process of testing a new store layout
in one of its Toledo area stores which should improve customer flow.

                                       21



Gross profit for 2002 totaled $163.1 million, an increase of $2.3 million, or
1%, from 2001. The Agriculture Group had a $4.8 million, or 6%, decrease in
gross profit, in spite of the significant increase in revenues mentioned
previously. Gross profit in the grain division totaled $47.3 million, a decrease
of $4.7 million, or 9%. The fertilizer businesses of the Agriculture Group
recognized a decrease in gross profit of $0.1 million, primarily due to a
decrease in gross profit per ton, nearly offset by increased volume of
fertilizer sold.

Gross profit for the Processing Group in 2002 increased $2.5 million, or 12%,
when compared to 2001. Overall gross profit per ton for the Processing Group was
up 11%. Although there was a 3% decrease in average price per lawn ton sold,
there was also a 5% decrease in the average cost of a lawn ton. Coupled with the
volume increase in the lawn division and the gross profit impact of the
reduction in returns and marketing costs mentioned previously, lawn division
gross profit was up $2.8 million, or 16%. The cob-based businesses experienced a
decrease of $0.3 million, or 8%, in gross profit, resulting in the overall $2.5
million increase for the Group.

Gross profit in the Rail Group increased $1.5 million, or 20%. Of this increase,
$0.4 million was due to the improved performance of the lease fleet primarily
related to the increase in railcars in service. In addition, the Group took a
$0.3 million non-cash charge to recognize a permanent impairment in the value of
certain railcars in 2002; the Group took a comparable charge of $1.5 million in
2001.

Gross profit in the Retail Group increased $3.0 million, or 6%, from 2001. This
was due to both the increase in sales discussed previously and a percentage
point increase in margins. This margin increase results primarily from changes
in product mix and better management of promotional programs and markdowns.

The Company recorded gains of $0.3 million in each of 2002 and 2001 related to
insurance recoveries.

Operating, administrative and general expenses for 2002 totaled $141.0 million,
a $0.1 million decrease from 2001. Full-time employees increased 2% from 2001,
however, labor expense decreased $1.0 million, or 1%. The majority of the
decrease relates to severance costs of $1.3 million in 2001 compared to $0.4
million in 2002. Benefit costs, however, rose 11% due to the increased cost of
providing pension and health care benefits to current and former employees. In
addition, the Company's performance incentive expense increased $1.3 million,
which reflects the improved 2002 results when compared to 2001. Significant
expense reductions were realized in rent, advertising and professional services.
In addition to the benefit and performance incentive expense increases mentioned
previously, increases were also realized in insurance expense and maintenance
expense. In spite of actions taken to slow the growth of benefit and insurance
expenses, the Company expects the trend toward higher costs to continue through
2003.

Interest expense for 2002 was $9.8 million, a $1.8 million, or 15%, decrease
from 2001. Average daily short-term borrowings for 2002 were up 2% when compared
to 2001 while the average short-term interest rate decreased from 5.1% for 2001
to 3.2% for 2002. Long-term interest expense decreased slightly for the same
period.

As a result of the above, pretax income of $16.0 million for 2002 was 34% higher
than the pretax income of $11.9 million in 2001. Income tax expense of $5.2
million was recorded in 2002 at an effective rate of 32.7%. In 2001, income tax
expense of $2.9 million was recorded at an effective rate of 24.2%. The

                                       22



significant change in the effective tax rates between 2001 and 2002 resulted
primarily from a much higher benefit from our foreign sales corporation in 2001
relative to the pretax income.

The Company also recorded a cumulative effect adjustment upon the adoption of
EITF Topic D-96 ($3.5 million after tax). This cumulative effect adjustment
reversed the December 31, 2001 balance of $5.4 million of deferred income that,
under EITF Topic D-96, the Company earned as of January 1, 2002. As a result of
the above, the 2002 net income of $14.2 million was $5.3 million better than the
2001 net income of $8.9 million. Basic earnings per share increased $0.74 from
2001 and diluted earnings per share increased $0.71 from 2001.

COMPARISON OF 2001 WITH 2000

Sales and merchandising revenues for 2001 totaled $980.4 million, an increase of
$21.9 million, or 2%, from 2000. Sales in the Agriculture segment were up $10.0
million, or 2%. Grain sales were down $15.1 million, or 3%, due to flat volumes
and a 3% decrease in the average price per bushel sold. Fertilizer sales were up
$25.1 million, or 17%, due to a 2% increase in volume and a 14% increase in
average price per ton sold. Merchandising revenues in the Agriculture segment
were up $2.8 million, or 6%, due primarily to increases in drying and mixing
income, space income (before interest charges) in the grain division and
licensing revenue from the Crop Revenue Profiler(R) software. Space income
includes storage fees earned on grain held for our customers and appreciation in
the value of grain owned. Grain bushels on hand at December 31, 2001 were 65.4
million, slightly more inventory than at December 31, 2000.

The Processing segment had a sales increase of $5.4 million, or 5%. The majority
of this increase was attributable to increased price per ton sold in the lawn
fertilizer division and a full twelve months of sales in 2001 of the U.S.
ProTurf(R) product line, which was acquired from The Scotts Company on May 31,
2000. Volume decreased for the period in the consumer and industrial lawn
fertilizer businesses (sold into the retail distribution channel) due to
softness in the economy coupled with cold weather in much of the spring
application season. The much smaller corncob-based businesses experienced a 16%
increase in the average price per ton sold, partially offset by an 11% reduction
in volume.

The Rail segment had a sales increase of $12.1 million, or 64%. Railcar sales
transactions completed during 2001 were up $11.5 million, and lease fleet
revenue was up $1.0 million, or 8%. The lease fleet revenue growth was due to an
increased number of railcars and locomotives managed and in service as compared
to 2000. Railcars managed at December 31, 2001 numbered 5,432, an increase of
approximately 13% over railcars managed at December 31, 2000. The segment also
added 21 locomotives to its fleet.

The Retail segment experienced decreased sales of $5.9 million, or 3%, in 2001
when compared to 2000. More than half of this decrease relates to an extra (or
53rd) week in the 2000 fiscal year. In addition, weather during the months of
January and December in 2001 was mild and demand for our cold weather items was
very limited. This is in contrast to the same months in 2000 where weather drove
significant sales of cold weather items.

The absence of revenues in the Other segment for 2001 was due to the sale of the
Company's interest in The Andersons-Tireman Auto Centers (Tireman), an
automotive repair business, in 2000.

                                       23



Gross profit for 2001 totaled $160.8 million, an increase of $2.6 million, or
2%, from 2000. The Agriculture segment had a gross profit increase of $11.1
million, or 15%, resulting from a 28% increase in margin on grain bushels sold,
a 14% increase in gross profit on fertilizer tons sold and the 6% increase in
merchandising revenues discussed previously. As always, this segment's results
are highly dependent on weather conditions during the spring planting season
through fall harvest in the eastern corn belt.

Gross profit for the Processing segment decreased $1.8 million, or 8%, from the
prior year. This decrease resulted from a 6% decrease in gross profit per lawn
fertilizer ton sold and a 6% decrease in lawn fertilizer volume. The decrease in
gross profit per ton was primarily caused by high raw material costs coupled
with a change in product mix in the 2001 spring season, as customers opted for
lower margin products. Gross profit in the corncob-based businesses was up $0.3
million, or 12%.

Gross profit in the Rail segment decreased $1.0 million, or 12%, from the prior
year. While gross profit from car sales, railcar repairs, the fabrication shop
and lease transactions was up, the segment took a $1.5 million charge to write
down the book value of certain impaired railcars. The increased sales activity
in the latter portion of the year and some indications of future long-term deals
are positive indications that the industry is improving; however, the recovery
has been slow. Customer preference and market rates are still more focused on
short-term lease opportunities rather than long-term leases or outright sales.

Gross profit in the Retail segment decreased by $1.7 million, or 3%, from 2000.
Half of this decrease was related to the extra week in 2000 mentioned
previously. The remainder was due to the decrease in sales discussed above. New
competition is expected in the Toledo market in 2002.

Gross profit in the Other segment declined by $1.5 million in 2001 over 2000 due
to the Company's sale of its interest in Tireman in March 2000.

The Company recorded a gain of $0.3 million in 2001 related to an insurance
recovery for a damaged grain tank at the Albion, Michigan facility. A tank
collapse at its Webberville, Michigan wholesale fertilizer facility resulted in
a 2000 gain of $2.1 million from an insurance settlement for the replacement of
the fixed assets. In addition, the Company recognized a gain of $1.0 million on
the sale of its 52.5% interest in Tireman.

Operating, administrative and general expenses for 2001 totaled $141.1 million,
a $2.0 million, or 1%, increase from 2000. The increase primarily reflects
increased labor and benefits expenses including $1.3 million in severance
expense. Full-time employees decreased 4% from the prior year, with reductions
in all segments and at the corporate level.

Interest expense for 2001 was $11.6 million, a $0.3 million, or 2%, decrease
from 2000. Average daily short-term borrowings increased 1% from 2000 while the
average short-term interest rate decreased from 6.95% in 2000 to 5.10% in 2001.
However, the Company has increased its long-term debt (including current
maturities) 14% from December 31, 2000 to December 31, 2001 and has seen a
similar increase in its long-term interest expense.

Income before income taxes of $11.9 million decreased $2.5 million, or 17%, from
the 2000 pretax income of $14.4 million. Income tax expense was $2.9 million, a
$1.4 million, or 33%, decrease from 2000. The effective tax rate decreased
significantly from the 2000 rate of 29.8% to 24.2% in 2001. This

                                       24



significant decrease resulted primarily from an increased benefit from the
Company's foreign sales corporation.

The Company recognized an after-tax charge of $0.2 million to record the
cumulative effect of adopting the new financial accounting standard on
derivatives. As a result of the above, net income for 2001 decreased $1.2
million, or 12%, from the $10.1 million in 2000 to $8.9 million in 2001. Basic
earnings per share decreased $0.12 from 2000 and diluted earnings per share
decreased $0.13 from 2000.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations (before changes in operating assets and liabilities)
provided cash of $26.1 million in 2002, an increase of $2.2 million from 2001.
Net working capital at December 31, 2002 was $81.8 million, an increase of $6.6
million from December 31, 2001.

The Company has significant short-term lines of credit available to finance
working capital, primarily inventories and accounts receivable. Effective on
November 1, 2002, the Company entered into a borrowing arrangement with a
syndicate of banks which provides the Company with $150 million in short-term
lines of credit and an additional $50 million in a three-year line of credit.
Prior to the syndication agreement, the Company managed several separate
short-term lines of credit. The Company had $70.0 million outstanding on its
short-term line of credit at December 31, 2002. Peak short-term borrowing during
2002 was $139.2 million on February 25, 2002. In most years, the Company's
highest borrowing occurs in the spring due to seasonal inventory requirements in
the fertilizer and retail businesses, credit sales of fertilizer and a customary
reduction in grain payables due to the cash needs and market strategies of grain
customers.

The Company utilizes interest rate contracts to manage a portion of its interest
rate risk on both its short and long-term debt and lease commitments. At
December 31, 2002, the fair value of these derivative financial instruments
recorded in the balance sheet (primarily interest rate swaps and interest rate
caps) was a net liability of $0.1 million.

Quarterly cash dividends of $0.065 per common share were paid in 2002 and 2001.
A cash dividend of $0.07 per common share was declared on January 2, 2003 and
was paid on January 22, 2003. The Company made income tax payments of $2.5
million in 2002. During 2002, the Company issued approximately 132 thousand
shares to employees and directors under its share compensation plans.

Total capital spending for 2002 on property, plant and equipment was $9.8
million and included $1.8 million for investments in facilities and expansion in
the Agriculture Group, $1.6 million for information systems and $0.7 million for
retail store improvements and additions. The remaining amount of $5.7 million
was spent on numerous assets and projects with no single project costing more
than $0.3 million. The Company also spent $8.2 million in 2002 for the purchase
of railcars and capitalized modifications on railcars that may then be sold,
financed off-balance sheet or owned by the Company for lease to customers. The
Company sold or financed $16.0 million of railcars during 2002. Finally, the
Company completed its minority investment in a new limited liability corporation
specializing in grain trading formed by Lansing Grain Company in January, 2003.

Certain of the Company's borrowings include provisions that impose minimum
levels of working capital and equity, impose limitations on additional debt and
require that grain inventory positions be

                                       25



substantially hedged. In addition, certain of the Company's long-term borrowings
are secured by first mortgages on various facilities or are collateralized by
railcar assets. The Company was in compliance with all of these provisions at
December 31, 2002.

The marketability of the Company's grain inventories and the availability of
short-term lines of credit enhance the Company's liquidity. In the opinion of
management, the Company's liquidity is adequate to meet short-term and long-term
needs.

CONTRACTUAL OBLIGATIONS

Future payments due under contractual obligations at December 31, 2002 are as
follows:

                             Payments Due by Period




     CONTRACTUAL OBLIGATIONS        Less than                             After 5
          (in thousands)              1 year      1-3 years   4-5 years    years      Total
                                    ---------------------------------------------------------
                                                                     
Long-term debt                       $   9,454    $  14,915   $  16,600   $48,928   $ 89,897
Capital lease obligations                  327          696       3,127        --      4,150
Operating leases                        10,367       14,606       6,869     9,992     41,834
Other                                      200          400         400        --      1,000
                                     -------------------------------------------------------
Total contractual cash obligations   $  20,348    $  30,617   $  26,996   $58,920   $136,881
                                     =======================================================


Included in long-term debt are acquisition liabilities that include minimum
royalty payments. There are additional contingent sales-based royalty payments
that have not triggered to date and which are not expected to be material to the
Company if they trigger in the future. The royalty period ends May 2005.

The Company had standby letters of credit outstanding of $19.2 million at
December 31, 2002, of which $8.5 million are credit enhancements for industrial
revenue bonds included in the contractual obligations table above.

The Company's grain inventories include the value of forward purchase contracts
to buy and, to a lesser extent, forward sale contracts to sell grain. These
contracts are marked to the market price and require performance in future
periods. The terms of these contracts are consistent with industry standards.
These contractual obligations are not included in the preceding table.

Approximately 72% of the operating lease commitments above relate to 1,934
railcars that the Company leases from financial intermediaries. See the
following section on Off-Balance Sheet Transactions.

The Company is subject to various loan covenants as highlighted previously.
Although the Company is and has been in compliance with its covenants,
noncompliance could result in default and acceleration of long-term debt
payments. The Company does not anticipate noncompliance with its covenants.

OFF-BALANCE SHEET TRANSACTIONS

The Company's Rail Group utilizes leasing arrangements that provide off-balance
sheet financing for its activities. The Company leases railcars from financial
intermediaries under operating leases through sale-

                                       26



leaseback transactions, the majority of which involve operating leasebacks.
Railcars owned by the Company, or leased by the Company from a financial
intermediary, are generally leased to a customer under an operating lease. The
Company also arranges non-recourse lease transactions under which it sells
railcars or locomotives to a financial intermediary, and assigns the related
operating lease to the financial intermediary on a non-recourse basis. In such
arrangements, the Company generally provides ongoing railcar maintenance and
management services for the financial intermediary, and receives a fee for such
services. On most of the railcars and locomotives, the Company holds an option
to purchase these assets at the end of the lease.

The following table describes the railcar and locomotive positions at December
31, 2002.



             METHOD OF CONTROL                       FINANCIAL STATEMENT             NUMBER
- ----------------------------------------------------------------------------------------------
                                                                            
Owned-railcars available for sale              On balance sheet - current                 144
Owned-railcar assets leased to others          On balance sheet - non-current           2,124
Railcars leased from financial institutions    Off balance sheet                        1,934
Railcars - non-recourse arrangements           Off balance sheet                        1,497
                                                                                  -----------
TOTAL RAILCARS                                                                          5,699
                                                                                  ===========

Locomotives - non-recourse arrangements        Off balance sheet                           51
                                                                                  ===========


The Company has future lease payment commitments aggregating $30.1 million for
the railcars leased by the Company from financial intermediaries under various
operating leases. Remaining lease terms vary with none exceeding 10 years. The
majority of these railcars have been leased to customers at December 31, 2002
over similar terms. The segment manages risk by matching lease commitments with
funding (where possible) and ongoing evaluation of lessee credit worthiness. In
addition, the Company prefers non-recourse lease transactions, whenever
possible, in order to minimize its credit risk.

CRITICAL ACCOUNTING POLICIES

The process of preparing financial statements requires management to make
estimates and judgments that affect the carrying values of the Company's assets
and liabilities as well as the recognition of revenues and expenses. These
estimates and judgments are based on the Company's historical experience and
management's knowledge and understanding of current facts and circumstances.
Certain of the Company's accounting policies are considered critical, as these
policies are important to the depiction of the Company's financial statements
and require significant or complex judgment by management. Following are the
accounting policies management considers critical to the Company's financial
statements.

Grain Inventories The Company marks all grain inventory, forward purchase and
sale contracts for grain, and exchange-traded futures and options contracts to
the market. Changes in market value are recorded as merchandising revenues in
the statement of income. Because the Company marks inventories and sales
commitments to the market, gross profit on a grain sale transaction is
recognized when a contract for sale of the grain is executed. The related
revenue is recognized upon shipment of the grain, at which time title transfers
and customer acceptance occurs.

Marketing Agreement The Company has negotiated a marketing agreement that covers
certain of its grain facilities (certain of which are leased from Cargill).
Under this five-year agreement (which began in June

                                       27



1998 and expires in May 2003), the Company sells grain from these facilities to
Cargill at market prices. Income earned from operating the facilities includes a
base-level income guarantee and equal sharing of income over that base level.
There is also a look-back provision that places at risk any income in excess of
the base level for the term of the agreement upon the occurrence of certain
circumstances. Measurement of this threshold is made on a cumulative basis and
cash is paid to (received from) Cargill at each contract year end. Prior to
2002, the Company has recognized in income the base level guarantee amount for
each year of the agreement and spreads its share of the amount in excess of the
base level on a pro rata basis over all future periods covered by the agreement.
As referenced in the discussion titled Restatement of Previously Issued
Financial Statements, the Company changed its method of accounting and beginning
in 2002, recognizes its pro-rata share of income to date at each month-end and
accrues for any payment to (or receipt of cash from) Cargill in accordance with
Emerging Issues Task Force Topic D-96, "Accounting for Management Fees Based on
a Formula."

Derivatives - Commodity Contracts The Company utilizes regulated commodity
futures and options contracts to hedge its market price exposure on the grain it
owns and related forward purchase and sale contracts. These contracts are
included in the balance sheet in inventory at their current market value.
Realized and unrealized gains and losses in the market value of these futures
and option contracts are included in the income statement as a component of
sales and merchandising revenues. While the Company considers all of its
commodity contracts to be effective economic hedges, the Company does not
designate its commodity futures and options contracts as hedges. Therefore the
Company does not defer gains and losses on these same contracts as would occur
for designated hedges under FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Both the underlying inventory and forward
purchase and sale contracts and the related futures and options contracts are
marked to market on a daily basis.

Impairment of Long-Lived Assets The Company's various business segments are each
highly capital intensive and require significant investment in facilities and /
or rolling stock. In addition, the Company has a limited amount of intangible
assets and goodwill (described more fully in Note 2 to the Company's annual
consolidated financial statements) that it acquired in various business
combinations. Whenever changing conditions warrant, we review the fair value of
the tangible and intangible assets that may be impacted. We also annually review
the balance of goodwill for impairment in the fourth quarter. These reviews for
impairment take into account estimates of future cash flows. Our estimates of
future cash flows are based upon a number of assumptions including lease rates,
lease term, operating costs, life of the assets, potential disposition proceeds,
budgets and long-range plans. While we believe the assumptions we use to
estimate future cash flows are reasonable, there can be no assurance that the
expected future cash flows will be realized. If management used different
estimates and assumptions in its evaluation of these cash flows, the Company
could recognize different amounts of expense in future periods.

Employee Benefit Plans The Company provides substantially all full-time
employees with pension benefits and postretirement health care benefits. In
order to measure the expense and funded status of these employee benefit plans,
management makes several estimates and assumptions, including interest rates
used to discount certain liabilities, rates of return on assets set aside to
fund these plans, rates of compensation increases, employee turnover rates,
anticipated mortality rates and anticipated future healthcare cost trends. These
estimates and assumptions are based on the Company's historical experience
combined with management's knowledge and understanding of current facts and
circumstances. The Company uses third-party specialists to assist management in
measuring the expense

                                       28



and funded status of these employee benefit plans. If management used different
estimates and assumptions regarding these plans, the funded status of the plans
could vary significantly and then the Company could recognize different amounts
of expense over future periods.

Revenue Recognition The Company recognizes revenue for the sales of its products
at the time of shipment. Gross profit on sales of grain is recognized when sales
contracts are entered into as the Company marks its contracts to the market on a
daily basis. Revenues from other merchandising activities are recognized as open
grain contracts are marked-to-market or as related services are provided. Sales
returns and allowances, if required, are provided for at the time sales are
recorded. Shipping and handling costs are included in cost of sales.

The Company sells railcars to financial intermediaries and other customers.
Proceeds from railcar sales, including railcars sold in non-recourse
transactions, are recognized as revenue at the time of sale if there is no
leaseback or the operating lease is assigned to the buyer, non-recourse to the
Company. Revenue on operating leases (where the Company is the lessor) and on
servicing and maintenance contracts in non-recourse transactions is recognized
over the term of the lease or service contract.

Leasing activities The Company accounts for its leasing activity in accordance
with FASB Statement No. 13, as amended, and related pronouncements. The
Company's Rail segment leases and manages railcars for third parties and leases
railcars for internal use. Most leases to Rail segment customers are structured
as operating leases. Railcars leased by the Company to its customers are either
owned by the Company, leased from financial intermediaries under operating
leases or leased from financial intermediaries under capital leases. The leases
from financial intermediaries are generally structured as sale-leaseback
transactions. Lease income and lease expense are recognized on a straight-line
basis over the term of the lease.

The Company also has a limited number of direct financing leases with its
customers that qualify for capital lease treatment. The net investment in the
direct financing lease, consisting of lease receivables and the estimated
residual value of the equipment at lease termination and net of unearned income,
is included as an asset in the balance sheet.

The Company has financed some of its railcars through a capital lease with a
financial intermediary. The terms of this lease required the Company to
capitalize the assets and record the net present value of the lease obligation
on its balance sheet as a long-term borrowing. There was no gain or loss on this
financing transaction. This obligation is included with the Company's long-term
debt as described in Note 8 to the consolidated annual financial statements. The
railcars under this lease are being depreciated to their residual value over the
term of the lease.

The Company also arranges non-recourse lease transactions under which it sells
railcars or locomotives to financial intermediaries and assigns the related
operating lease on a non-recourse basis. The Company generally provides ongoing
railcar maintenance and management services for the financial intermediaries,
and receives a fee for such services when earned. On the date of sale, the
Company recognizes the proceeds from sales of railcars in non-recourse lease
transactions as revenue. Management and service fees are recognized as revenue,
which is generally spread evenly over the lease term.

                                       29



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in the Company's market risk-sensitive instruments and
positions is the potential loss arising from adverse changes in commodity prices
and interest rates as discussed below.

Commodity Prices

The availability and price of agricultural commodities are subject to wide
fluctuations due to unpredictable factors such as weather, plantings, government
(domestic and foreign) farm programs and policies, changes in global demand
created by population growth and higher standards of living, and global
production of similar and competitive crops. To reduce price risk caused by
market fluctuations, the Company follows a policy of hedging its inventories and
related purchase and sale contracts. The instruments used are exchange-traded
futures and options contracts that function as hedges. The market value of
exchange-traded futures and options used for hedging has a high, but not perfect
correlation, to the underlying market value of grain inventories and related
purchase and sale contracts. The less correlated portion of inventory and
purchase and sale contract market value (known as basis) is much less volatile
than the overall market value of exchange-traded futures and tends to follow
historical patterns. The Company manages this less volatile risk using its daily
grain position report to constantly monitor its position relative to the price
changes in the market. The Company's accounting policy for its futures and
options hedges, as well as the underlying inventory positions and purchase and
sale contracts, is to mark them to the market price daily and include gains and
losses in the statement of income in sales and merchandising revenues.

A sensitivity analysis has been prepared to estimate the Company's exposure to
market risk of its commodity position (exclusive of basis risk). The Company's
daily net commodity position consists of inventories, related purchase and sale
contracts and exchange-traded contracts. The fair value of the position is a
summation of the fair values calculated for each commodity by valuing each net
position at quoted futures market prices. Market risk is estimated as the
potential loss in fair value resulting from a hypothetical 10% adverse change in
such prices. The result of this analysis, which may differ from actual results,
is as follows:



                                   DECEMBER 31
     (in thousands)             2002          2001
                             -----------------------
                                       
Net (short) long position     ($2,302)       $3,659
Market risk                       230           366


Interest Rates

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. In
addition, the Company has derivative interest rate contracts recorded in its
balance sheet at their fair value. The fair value of these contracts is
estimated based on quoted market termination values. Market risk, which is
estimated as the potential increase in fair value resulting from a hypothetical
one-half percent decrease in interest rates, is summarized below:

                                       30





                                                                      DECEMBER 31
                      (in thousands)                               2002        2001
                                                                ----------------------
                                                                       
Fair value of long-term debt and interest rate contracts          $96,358    $104,102
Fair value in excess of carrying value                              2,236       2,344
Market risk                                                         1,893       2,253


FORWARD LOOKING STATEMENTS

The preceding Management's Discussion and Analysis contains various
"forward-looking statements" which reflect the Company's current views with
respect to future events and financial performance. These forward-looking
statements are subject to certain risks and uncertainties, including but not
limited to those identified below, which could cause actual results to differ
materially from historical results or those anticipated. The words "believe,"
"expect," "anticipate," "will" and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The following factors could cause actual results to differ materially from
historical results or those anticipated: weather; supply and demand of
commodities including grains, fertilizer and other basic raw materials; market
prices for grains and the potential for increased margin requirements;
environmental and governmental policies; competition; economic conditions; risks
associated with acquisitions; interest rates; and income taxes.

                                       31



                               The Andersons, Inc.

                   Notes to Consolidated Financial Statements

1. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

In connection with a review of our periodic filings by the staff of the Division
of Corporation Finance of the U.S. Securities and Exchange Commission, we
concluded that it is appropriate to modify our accounting related to a specific
agreement with a third party.

As previously disclosed, certain of the Company's agriculture facilities are
subject to a five-year marketing agreement with a third party that provides for
a base level of income and equal sharing of profits earned over the base level.
The Company's share of profits is calculated annually under the marketing
agreement based on a formula that recognizes the base level income as revenue on
a pro-rata basis over the term of the agreement. The Company previously measured
its share of the profits earned in excess of the base-level at the end of each
contract year and was recognizing such income over the remaining term of the
agreement.

Upon further review and consideration, we have determined that the Emerging
Issues Task Force Topic D-96, "Accounting for Management Fees Based on a
Formula," ("EITF Topic D-96") applies to the Company's situation, specifically
with respect to provisions of Method 2 described therein, which stipulates that
revenues recorded under such arrangements should be the amount that would be due
under the formula at any point in time as if the contract was terminated at that
date.

Upon review of the impact of the adjustments necessary to comply with the
requirements of EITF Topic D-96, which became effective for the Company as of
January 1, 2002, we concluded that restating our 2002 financial statements was
appropriate. The transition provisions of EITF Topic D-96 require the impact of
the change in accounting to be presented as a cumulative effect of a change in
accounting principle at the date of adoption. The following table presents the
impact of the restatement adjustments on the Company's previously reported sales
and merchandising revenues, cost of sales and merchandising revenues, gross
profit, income before income taxes and cumulative effect of accounting changes,
income tax provision, cumulative effect of change in accounting principle, net
of income tax provision, and net income for the year ended December 31, 2002.

                                       32





                                                                       YEAR ENDED DECEMBER 31, 2002
                                                               AS PREVIOUSLY
               INCOME STATEMENT CAPTION                           REPORTED     ADJUSTMENTS   AS RESTATED
                                                               -----------------------------------------
                                                                                    
Sales and merchandising revenues (b)                           $  1,075,834     $    693     $ 1,076,527
Cost of sales and merchandising revenues(a)                         908,901        4,525         913,426
Gross profit                                                        166,933       (3,832)        163,101
Income before income taxes and cumulative effect of
   accounting change                                                 19,834       (3,832)         16,002
Income tax expense                                                    6,515       (1,277)          5,238
Cumulative effect of change in accounting principle,
   net of income taxes                                                   --        3,480           3,480
Net income                                                           13,319          925          14,244


(a) Periods presented "As Previously Reported" include reclassifications
    made to conform to the current presentation. These reclassifications related
    to the adoption of EITF 02-16, Accounting by a Reseller for Cash
    Consideration Received from a Vendor, and had no impact on net income or
    shareholders' equity.

(b) Upon adoption of EITF Topic D-96, the Company reclassified the current
    period impact to gross profit of the marketing agreement as a component of
    sales and merchandising revenues rather than cost of sales. Previously the
    Company considered the marketing agreement impact as an adjustment to its
    cost of grain rather than to as an adjustment to sales and merchandising
    revenues and therefore had included the impact in its cost of sales. Prior
    periods have been reclassified to conform to this presentation.

The following table presents a summary of the effects of the restatement on the
Consolidated Balance Sheet as of December 31, 2002.



                                                           DECEMBER 31, 2002
                                             AS PREVIOUSLY
         BALANCE SHEET CAPTION                  REPORTED     ADJUSTMENTS   AS RESTATED
                                             -----------------------------------------
                                                                  
Current deferred income tax asset              $   3,491       $  (597)     $   2,894
Customer prepayments and deferred income          21,970        (1,522)        20,448
Retained earnings                                104,840           925        105,765


All information within this Annual Report to Shareholders has been updated for
the above restatement and reclassifications.

2. BASIS OF FINANCIAL PRESENTATION / ACQUISITIONS

These consolidated financial statements include the accounts of The Andersons,
Inc. and its wholly-owned and majority-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions are eliminated in
consolidation.

On May 31, 2000, the Company acquired inventory and intangible assets of the
U.S. ProTurf(R) division of The Scotts Company. The acquisition was accounted
for as a purchase, and the results of operations have been included in the
consolidated statements of income from June 1, 2000. This transaction was

                                       33



completed through a combination of cash paid and liabilities assumed with a
total purchase price of approximately $19.8 million. Of this amount, $15.0
million was allocated to inventory and the remainder to goodwill and other
intangible assets. The purchase agreement provides for additional payments to
the seller through 2005 if the sales volume of the acquired business exceeds
certain targets. These payments, if any, will be accounted for as additional
purchase price; no such payments have been made since the acquisition to date.
If the acquisition had taken place on January 1, 2000, pro forma revenues
(unaudited) would have been $993.0 million for the year ended December 31, 2000.
The business has been integrated into the Company's Processing segment and is
expected to result in significantly different cost and expense structures.
Therefore, pro forma operating income, net income and earnings per common share
are not presented as they are not meaningful.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and all highly liquid debt instruments
purchased with an initial maturity of three months or less. The carrying values
of these assets approximate their fair values.

INVENTORIES AND INVENTORY COMMITMENTS

Grain inventories include owned bushels of grain, the value of forward contracts
to buy and sell grain, and exchange traded futures and option contracts used to
hedge the value of both owned grain and forward contracts. Each of these grain
inventory components is marked to the market price. The forward contracts
require performance in future periods. Contracts to purchase grain from
producers generally relate to the current or future crop years for delivery
periods quoted by regulated commodity exchanges. Contracts for the sale of grain
to processors or other consumers generally do not extend beyond one year. The
terms of contracts for the purchase and sale of grain are consistent with
industry standards.

All other inventories are stated at the lower of cost or market. Cost is
determined by the average cost method.

DERIVATIVES - COMMODITY AND INTEREST RATE CONTRACTS

For the purpose of hedging its market price risk exposure on grain owned and
related forward grain purchase and sale contracts, the Company holds regulated
commodity futures and options contracts for corn, soybeans, wheat and oats. The
Company accounts for all commodity contracts using a daily mark-to-market
method, the same method it uses to value grain inventory and forward purchase
and sale contracts. Company policy limits the Company's unhedged grain position.
While the Company considers all of its commodity contracts to be effective
economic hedges, the Company does not designate or account for its commodity
contracts as hedges. Realized and unrealized gains and losses in the value

                                       34



of commodity contracts (whether due to changes in commodity prices or due to
sale, maturity or extinguishment of the commodity contract), grain inventories
and related forward grain contracts are included in sales and merchandising
revenues in the statements of income.

The Company also periodically enters into interest rate contracts to manage
interest rate risk on borrowing or financing activities. The Company accounts
for its long-term interest rate swap, Treasury rate lock and interest rate
corridor contracts as cash flow hedges; accordingly, changes in the fair value
of the instruments are recognized in other comprehensive income. While the
Company considers all of its derivative positions to be effective economic
hedges of specified risks, the Company does not designate or account for other
open interest rate contracts as hedges. Changes in the market value of all other
interest rate contracts are recognized currently in income. Upon termination of
a derivative instrument or a change in the hedged item, any remaining fair value
recorded on the balance sheet is immediately recorded as interest expense. The
deferred derivative gains and losses on closed Treasury rate locks and the
changes in fair value of the interest rate corridors are reclassified into
income over the term of the underlying hedged items, which are either long-term
debt or lease contracts.

At January 1, 2001, the Company recorded in the statement of income a transition
adjustment of $305 thousand ($185 thousand after tax) as a result of adopting
Financial Accounting Standards Board (FASB) Statement No. 133, as amended,
"Accounting for Derivative Instruments and Hedging Activities." This adjustment
was made to write down open interest rate contracts to their fair values. The
Company also reclassified deferred net losses of $1.2 million to other
comprehensive income. This amount represented deferred net losses on the
settlement of Treasury rate locks entered into for the purpose of hedging the
interest rate component of firm commitment lease transactions. The deferred
losses will be recognized as a component of gross profit over the term of the
underlying leases.

During 2002, the Company reclassified $0.2 million of other comprehensive income
into rail lease cost of sales under the reclassification policy noted above for
amortization of the closed Treasury rate locks. Less than $0.1 million was
reclassified to interest expense as a result of amortization of other
comprehensive income from the change in fair value of the interest rate
corridors.

Prior to the adoption of Statement No. 133, the Company recognized income or
expense associated with interest rate swap contracts on the accrual basis over
the term of the agreement as interest expense. The cost of short-term interest
rate caps was expensed at the date of purchase, and the cost of long-term
interest rate caps was expensed over the term of the underlying obligation.
Gains or losses on settlement of Treasury rate locks hedging the interest
component of firm commitment lease transactions were recognized over the term of
the ensuing lease transaction. The fair value of interest rate contracts was not
recognized in the balance sheet prior to 2001.

RAILCARS AVAILABLE FOR SALE

The Company's Rail segment purchases, leases, markets and manages railcars for
third parties and for internal use. Railcars to which the Company holds title
are shown on the balance sheet in one of two categories - railcars available for
sale or railcar assets leased to others. Railcars that have been acquired but
have not been placed in service are classified as current assets and are stated
at the lower of cost or market. Railcars leased to others, both on short- and
long-term leases, are classified as long-term assets and are depreciated over
their estimated useful lives. Details about the Rail segment's leasing
activities are presented in the Leases and Related Commitments note.

                                       35



PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost. Repairs and maintenance are
charged to expense as incurred, while betterments that extend useful lives are
capitalized. Depreciation is provided over the estimated economic useful lives
of the individual assets, principally by the straight-line method. Estimated
useful lives are generally as follows: land improvements and leasehold
improvements - 10 to 16 years; buildings and storage facilities - 20 to 30
years; machinery and equipment - 3 to 20 years; and software - 3 to 10 years.
The cost of assets retired or otherwise disposed of and the accumulated
depreciation thereon are removed from the accounts, with any gain or loss
realized upon sale or disposal credited or charged to operations.

INTANGIBLE ASSETS AND GOODWILL

Intangible assets are recorded at cost, less accumulated amortization.
Amortization of intangible assets is provided over their estimated useful lives
(generally around 5 years) by the straight-line method. Goodwill is recorded net
of accumulated amortization through December 31, 2001. In accordance with FASB
Statement No. 142, "Goodwill and Other Intangible Assets", effective January 1,
2002, goodwill is no longer amortized, but is subject to periodic impairment
tests. Intangible asset and goodwill balances, net of accumulated amortization,
included in the Other Assets and Notes Receivable were as follows:



                                                                   WEIGHTED
                                                                 AVERAGE LIFE     ORIGINAL    ACCUMULATED    NET BOOK
               (IN THOUSANDS)                    SEGMENT            (YEARS)         COST      AMORTIZATION    VALUE
                                                                                              
DECEMBER 31, 2002
Amortized intangible assets
  Trademarks / Noncompete agreements /         Processing              5         $    3,988     $  2,061     $  1,927
     customer lists and other acquired
     intangibles
  Customer lists                               Agriculture             5                 75           70            5
  Patents and other                            Various                12                179           73          106
                                                                                 ------------------------------------
                                                                                 $    4,242     $  2,204     $  2,038
                                                                                 ====================================

Intangible assets no longer subject to
     amortization
  Goodwill                                     Agriculture                       $      948     $    308     $    640
  Goodwill                                     Processing                               791          105          686
                                                                                 ------------------------------------
                                                                                 $    1,739     $    413     $  1,326
                                                                                 ====================================

DECEMBER 31, 2001
Amortized intangible assets
  Trademarks / Noncompete agreements /         Processing              5         $    3,988     $  1,263     $  2,725
     customer lists and other acquired
     intangibles
  Customer lists                               Agriculture             5                 75           55           20
  Patents and other                            Various                12                149           67           82
                                                                                 ------------------------------------
                                                                                 $    4,212     $  1,385     $  2,827
                                                                                 ====================================


                                       36



Amortization expense for each of 2002 and 2001 was $0.8 million. Amortization
expense for 2000 was $0.5 million. Expected aggregate annual amortization is as
follows: 2003 -- $0.8 million; 2004 -- $0.8 million; 2005 -- $0.3 million; and
negligible amounts for 2006 and thereafter. In 2001 and 2000, goodwill
amortization of $0.1 million was included in net income ($0.2 million before
tax).

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, including intangible assets, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by comparing the carrying amount of the assets to the future net cash
flows the Company expects to generate with the asset. If such assets are
considered to be impaired, the Company recognizes impairment expense for the
amount by which the carrying amount of the assets exceeds the fair value of the
assets.

The Company recognized impairment losses on long-term railcars of $0.3 million
in both 2002 and 2001 in cost of sales. The railcar impairments were each
recognized on cars nearing the end of their useful life, which carried low lease
rates. Fair value was determined by calculating the net present value of the
lease stream of the railcars and their salvage value. This charge was recorded
by the Rail Group. The railcar impairments were determined during our annual
impairment review of long-term railcar assets. The Company also recognized a
$0.2 million impairment on an agricultural facility in 2002, which was included
in operating, administrative and general expenses. The agricultural facility
impairment was triggered by the receipt of a bona fide offer from a third-party
for an idle facility, was recorded by the Agriculture Group, and was based on
the amount of the third-party offer.

In addition, in 2001, the Company recorded a $1.2 million lower of cost or
market adjustment for railcars classified as available for sale. Since railcars
available for sale are held as current inventory, the adjustment was made to
reduce the value of these cars to their then current market value, determined
through a review of recent sales prices of similar railcars.

ACCOUNTS PAYABLE FOR GRAIN

Accounts payable for grain includes the liability for grain purchases on which
price has not been established (delayed price). This amount has been computed on
the basis of market prices at the balance sheet date, adjusted for the
applicable premium or discount.

DEFERRED INCOME

Certain of the Company's agriculture facilities are subject to a five-year
marketing agreement with a third party that provides for a base-level income
guarantee and equal sharing of income earned over the base level. The marketing
agreement includes a look-back provision that places at risk any income in
excess of the base level for the term of the agreement. The Company recognizes
the base-level income guarantee as revenue on a pro rata basis over the
remaining life of the agreement. The Company measures its share of the
cumulative income over the base-level income guarantee at the end of each
contract year and recognizes such income on a pro rata basis over the life of
the agreement. The marketing agreement will terminate in May 2003. Deferred
income at December 31, 2002 and 2001 was $1.5 million and $5.4 million,
respectively.

                                       37



STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation plans under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. The Company has adopted
the disclosure only provisions of FASB Statement No. 123, "Accounting for
Stock-Based Compensation." Accordingly, the Company provides pro forma
disclosures assuming that the Company had accounted for its stock-based
compensation programs using the fair value method promulgated by Statement No.
123.



                    (in thousands, except for per share data)                              YEAR ENDED DECEMBER 31
                                                                                        2002          2001       2000
                                                                                    (AS RESTATED)
                                                                                    -----------------------------------
                                                                                                      
Net income reported                                                                   $  14,244     $ 8,857    $10,078
Deduct: Total stock-based employee compensation expense determined under fair
    value based method for all awards, net of related tax effects                          (316)       (318)      (363)
                                                                                    ----------------------------------
Pro forma net income                                                                  $  13,928     $ 8,539    $ 9,715
                                                                                    ==================================

Earnings per share:
    Basic - as reported                                                               $    1.96     $  1.22    $  1.34
                                                                                    ==================================
    Basic - pro forma                                                                 $    1.91     $  1.17    $  1.29
                                                                                    ==================================
    Diluted - as reported                                                             $    1.92     $  1.21    $  1.34
                                                                                    ==================================
    Diluted - pro forma                                                               $    1.87     $  1.17    $  1.29
                                                                                    ==================================


REVENUE RECOGNITION

Sales of products are recognized at the time title transfers to the customer,
which is generally at the time of shipment or when the customer takes possession
of goods in the retail stores. Under the Company's mark-to-market method for its
grain operations, gross profit on grain sales is recognized when sales contracts
are executed. Sales of grain are then recognized at the time of shipment when
title to the grain transfers to the customer. Revenues from other grain
merchandising activities are recognized as open grain contracts are
marked-to-market or as services are provided. Revenues for all other services
are recognized as the service is provided. Rental revenues on operating leases
are recognized on a straight-line basis over the term of the lease. Sales of
railcars to financial intermediaries on a non-recourse basis are recognized as
revenue on the date of sale. Sales for these transactions totaled $0.1 million,
$15.3 million and $3.8 million in 2002, 2001 and 2000, respectively.

Sales returns and allowances are provided for at the time sales are recorded.
Shipping and handling costs are included in cost of sales. In all cases,
revenues are recognized only if collectibility is reasonably assured.

LEASE ACCOUNTING

The Company accounts for its leases under FASB Statement No. 13, as amended, and
related pronouncements.

                                       38



The Company's Rail segment leases and manages railcars for third parties, and
leases railcars for internal use. The Company is an operating lessor of railcars
that are owned by the Company, or leased by the Company from financial
intermediaries. The Company records lease income for its activities as an
operating lessor as earned, which is generally spread evenly over the lease
term. The Company expenses operating lease payments made to financial
intermediaries on a straight-line basis over the lease term. The Company
periodically enters into leases with Rail Group customers that are classified as
direct financing capital leases. Although lease terms are not significantly
different from other operating leases that the Company maintains with its
railcar customers, they qualify as capital leases. For these leases, the net
minimum lease payments, net of unearned income is included in prepaid expenses
and other current assets for the amount to be received within one year and the
remainder in other assets.

The Company also arranges non-recourse lease transactions under which it sells
railcars or locomotives to financial intermediaries and assigns the related
operating lease on a non-recourse basis. The Company generally provides ongoing
railcar maintenance and management services for the financial intermediaries,
and receives a fee for such services when earned. On the date of sale, the
Company recognizes the proceeds from sales of railcars in non-recourse lease
transactions as revenue. Management and service fees are recognized as revenue,
which is generally spread evenly over the lease term.

The Company has financed the cost of certain railcar assets through a lease with
a financial intermediary. The terms of this lease required the Company to
capitalize the assets and record the net present value of the lease obligation
on its balance sheet as a long-term borrowing. There was no gain or loss on this
financing transaction. This obligation is included with the Company's long-term
debt as described in Note 8 to the consolidated financial statements. The
railcars under this lease are being depreciated to their residual value over the
term of the lease. Details of this book value of the railcars are included in
Note 5 to the consolidated financial statements.

INCOME TAXES

Income tax expense for each period includes taxes currently payable plus the
change in deferred income tax assets and liabilities. Deferred income taxes are
provided for temporary differences between financial reporting and tax bases of
assets and liabilities and are measured using enacted tax rates and laws
governing periods in which the differences are expected to reverse. The Company
evaluates the realizability of deferred tax assets and provides a valuation
allowance for amounts that management does not believe are more likely than not
to be recoverable, as applicable.

ADVERTISING

Advertising costs are expensed as incurred. Advertising expense of $2.2 million
in 2002 and $2.8 million in each of 2001 and 2000 is included in operating,
administrative and general expenses.

                                       39



EARNINGS PER SHARE

Basic earnings per share is equal to net income divided by weighted average
shares outstanding. Diluted earnings per share is equal to basic earnings per
share plus the incremental per share effect of dilutive options and restricted
shares.



                                                              YEAR ENDED DECEMBER 31
       (in thousands, except for per share data)            2002       2001       2000
                                                          -----------------------------
                                                                         
Weighted average shares outstanding - basic                 7,283      7,281      7,507
Restricted shares and shares contingently issuable upon
    exercise of options                                       146         35         18
                                                          -----------------------------
Weighted average shares outstanding - diluted               7,429      7,316      7,525
                                                          =============================


Diluted earnings per common share excludes the impact of 1 thousand, 260
thousand and 634 thousand employee stock options for 2002, 2001 and 2000,
respectively, as such options were antidilutive.

NEW ACCOUNTING STANDARDS

The FASB has issued Statement No. 148, "Accounting for Stock-Based Compensation
- - Transition and Disclosure," which is effective for the Company's 2002 fiscal
year. This statement requires additional disclosures about the Company's
stock-based compensation plans.

In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." FIN No. 45 clarifies disclosures that are
required to be made for certain guarantees and establishes a requirement to
record a liability at fair value for certain guarantees at the time of the
guarantee's issuance. The disclosure requirements of FIN No. 45 have been
applied in these financial statements. The requirement to record a liability
applies to guarantees issued or modified after December 31, 2002. We do not
believe the adoption of this portion of the interpretation will have a material
effect on our financial condition or results of operations.

The FASB also issued the following statements in 2002. These statements each
require prospective application.

- -    Statement No. 145, "Rescission of FASB Statements Nos. 4, 44 and 64,
     Amendment of FASB Statement No. 13 and Technical Corrections" amends or
     corrects a variety of existing rules. The Company does not expect to be
     materially impacted by this statement.

- -    Statement No. 146, "Accounting for Costs Associated with Exit or Disposal
     Activities," addresses the accounting and reporting of costs associated
     with exit or disposal activities. The Company does not expect to be
     materially impacted by this statement.

- -    Statement No. 147, "Accounting Acquisitions of Certain Financial
     Institutions," amends previous guidance on this topic. The Company does not
     expect to be impacted by this statement.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." FIN No. 46 provides guidance on identification of a
variable interest entity ("VIE") and on determination of whether the VIE should
be consolidated in an enterprise's financial statements. In general, an

                                       40



enterprise deemed to be the primary beneficiary of a VIE is required to
consolidate the VIE. FIN No. 46 is effective immediately for any new FIE
established after January 31, 2003 and must be adopted for any pre-existing VIEs
at the beginning of the Company's third quarter.

The Company's railcar leasing activities, as described above, include
transactions with financial intermediaries that may constitute variable interest
entities under the guidance of FIN No. 46. Management has not completed its
evaluation of these arrangements to determine whether any of these arrangements
involve a VIE or, if a VIE exists, whether the Company is the primary
beneficiary of the VIE. Therefore, management has not determined the impact of
FIN No. 46 on the Company's financial statements.

The Emerging Issues Task Force of the FASB ("EITF") published EITF -00-21,
"Accounting for Revenue Arrangements with Multiple Deliverables". This Issue
addresses certain aspects of the accounting by a vendor for arrangements under
which it will perform multiple revenue-generating activities. This Issue is
effective for revenue arrangements entered into in the Company's 2003 third
quarter and future periods. Management does not expect the impact of the
statement to be material to its consolidated financial statements.

RECLASSIFICATIONS

Certain amounts in the 2001 and 2000 financial statements have been reclassified
to conform to the 2002 presentation. These reclassifications had no effect on
net income or shareholders' equity as previously presented.

                                       41



4. INVENTORIES

Major classes of inventories are as follows:



                                                            DECEMBER 31
              (in thousands)                            2002          2001
                                                    -------------------------
                                                              
Grain                                               $   156,742     $ 140,316
Agricultural fertilizer and supplies                     25,699        24,240
Lawn and garden fertilizer and corncob products          42,947        43,440
Railcar repair parts                                      1,455         1,401
Retail merchandise                                       29,076        28,539
Other                                                       356           355
                                                    -------------------------
                                                    $   256,275     $ 238,291
                                                    =========================


5. PROPERTY, PLANT AND EQUIPMENT AND RAILCAR ASSETS LEASED TO OTHERS

The components of property, plant and equipment and railcar assets leased to
others are as follows:



                                                            DECEMBER 31
                (in thousands)                          2002           2001
                                                    -------------------------
                                                              
Land                                                $    11,735     $  11,758
Land improvements and leasehold improvements             29,122        27,937
Buildings and storage facilities                         95,892        94,309
Machinery and equipment                                 121,911       119,460
Software                                                  4,771         3,714
Construction in progress                                  2,369         4,144
                                                    -------------------------
                                                        265,800       261,322
Less accumulated depreciation and amortization          172,861       166,321
                                                    -------------------------
                                                    $    92,939     $  95,001
                                                    =========================

Railcar assets leased to others                     $    32,144     $  30,585
Less accumulated depreciation                             5,745         4,483
                                                    -------------------------
                                                    $    26,399     $  26,102
                                                    =========================


On December 31, 2001, the Company entered into a sale-leaseback transaction with
a financial institution; the Company accounts for its leaseback as a capital
lease. These assets have a cost of $4.5 million and are included with other
railcars above for both 2002 and 2001. Accumulated amortization for these assets
was $0.3 million at December 31, 2002.

6. NONOPERATING GAINS

During 2002, a conference facility owned by the Company was damaged by fire.
This facility was insured for replacement value and the Company received
insurance funds to repair the damaged assets.

                                       42



The 2002 gain of $0.3 million represents the insurance proceeds received in 2002
in excess of the net book value of the destroyed assets.

During 2000, a grain tank and related assets at the Company's Albion, Michigan
facility were destroyed in a windstorm. This facility was insured for
replacement value and the Company received insurance funds to replace the assets
lost. The 2001 gain of $0.3 million represents the insurance proceeds received
in 2001 in excess of the net book value of the destroyed assets.

In March 2000, the Company sold its interest in The Andersons - Tireman Auto
Centers, a joint venture in which it owned a 52.5% interest. The 2000 gain on
sale of business of $1.0 million represents proceeds received in excess of the
Company's investment. This business was previously included in the Company's
financial statements and reported in the Other segment in the Company's segment
data.

During 2000, the Company completed the settlement of an insurance claim related
to the 1999 collapse of a liquid fertilizer tank and adjoining assets at its
Webberville, Michigan facility. The resultant gain of $2.1 million represents
the insurance proceeds in excess of the net book value of the destroyed assets.

7. SHORT-TERM BORROWING ARRANGEMENTS

During 2002, the Company entered into a borrowing arrangement with a syndicate
of banks. The new arrangement provides the Company with $150 million in
short-term lines of credit and an additional $50 million in a three-year line of
credit. Short-term borrowings under this arrangement totaled $70.0 million at
December 31, 2002. The borrowing arrangement terminates on October 29, 2003 but
allows for indefinite renewals at the Company's option and as long as certain
covenants are met. Management expects to renew the arrangement prior to its
termination date. Borrowings under the lines of credit bear interest at variable
interest rates, which are based on LIBOR, the prime rate or the federal funds
rate, plus a spread. The terms of the borrowing agreement provide for annual
commitment fees. Prior to this syndication, the Company managed several separate
lines of credit for unsecured short-term debt with banks. The following
information relates to short-term borrowings:



                                                                     DECEMBER 31
        (in thousands, except percentages)              2002            2001            2000
                                                    --------------------------------------------
                                                                           
Maximum amount borrowed                             $   139,200     $    130,400    $    113,800
Average daily amount borrowed                            92,534           91,014          89,798

Weighted average interest rate                             3.24%            5.10%           6.95%


                                       43


8. LONG-TERM DEBT AND INTEREST RATE CONTRACTS

Long-term debt consists of the following:



                                                                                       DECEMBER 31
                     (in thousands, except percentages)                            2002           2001
                                                                                ------------------------
                                                                                          
Note payable, 6.50%, payable $162 monthly, remainder due 2017                   $   17,758      $     --
Note payable, 6.95%, payable $317 quarterly, remainder due 2008                     16,147        17,415
Note payable, 7.00%, payable $316 quarterly beginning in 2004, due 2016             10,681        10,681

Note payable, variable rate (2.76% at December 31, 2002), payable $150 first
   and second quarters and $99 third and fourth quarters of 2003, with
   decreasing quarterly payments thereafter, due 2005                                6,787         7,750

Note payable under revolving line of credit                                             --        15,000
Notes payable, variable rate, due 2002                                                  --         1,657
Industrial development revenue bonds:
   Variable rate (1.68% at December 31, 2002), due 2019                              4,650         4,650
   Variable rate                                                                        --         1,944
   Variable rate (1.70% at December 31, 2002), due 2025                              3,100         3,100
Liabilities related to acquisition, discounted at 8.25%, due in variable
   quarterly installments through 2005                                               2,651         3,188
Debenture bonds, 5.50% to 8.50%, due 2003 through 2012                              27,628        31,250
Obligations under capital lease                                                      4,150         4,473
Other notes payable and bonds                                                          495           582
                                                                                ------------------------
                                                                                    94,047       101,690
Less current maturities                                                              9,775        10,374
                                                                                ------------------------
                                                                                $   84,272      $ 91,316
                                                                                ========================


In connection with its short-term borrowing agreement with a syndicate of banks,
the Company obtained an unsecured $50.0 million long-term line of credit.
Borrowings under this line of credit will bear interest based on LIBOR, plus a
spread. The long-term line of credit expires on October 30, 2005, but may be
renewed by the Company for an additional three years as long as covenants are
met. After considering its standby letters of credit totaling $19.2 million, the
Company had available borrowing capacity under this facility of $30.8 million.

The notes payable due 2008, 2016 and 2017 and the industrial development revenue
bonds are collateralized by first mortgages on certain facilities and related
equipment with a book value of $29.2 million. The note payable due 2005 is
collateralized by railcars with a book value of $6.8 million.

The Company's short-term and long-term borrowing agreements include both
financial and non-financial covenants that require the Company, among other
things, to:

      -     maintain minimum working capital of $45.0 million and net equity (as
            defined) of $65.0 million;

      -     limit the addition of new long-term debt;

      -     limit its unhedged grain position to 2.0 million bushels; and

      -     restrict the amount of dividends paid.

                                       44


The Company was in compliance with all covenants at December 31, 2002 and 2001.

The aggregate annual maturities of long-term debt, including sinking fund
requirements and capital lease obligations, are as follows: 2003--$9.8 million;
2004--$5.5 million; 2005--$10.1 million; 2006--$11.6 million; 2007--$8.0
million; and $49.0 million thereafter.

Interest paid (including interest on short-term lines of credit) amounted to
$9.7 million, $10.1 million and $11.5 million in 2002, 2001 and 2000,
respectively.

The Company has entered into derivative interest rate contracts to manage
interest rate risk on short-term borrowings. The contracts convert variable
interest rates to short-term fixed rates, consistent with projected borrowing
needs. At December 31, 2002, the Company has two short-term interest rate cap
agreements with a total notional amount of $20.0 million to hedge short-term
borrowing costs. These agreements provide interest rate caps of between 2.75%
and 3.00% and expire on April 1, 2003. Although these instruments are intended
to hedge interest rate risk on short-term borrowings, the Company has elected
not to account for them as hedges. Changes in their fair value are included in
interest expense in the statements of income.

The Company has also entered into various derivative financial instruments to
hedge the interest rate component of long-term debt and lease obligations. The
following table displays the contracts open at December 31, 2002.



INTEREST RATE                                      INITIAL NOTIONAL
   HEDGING          YEAR           YEAR OF           AMOUNT (IN                                                       INTEREST
  INSTRUMENT       ENTERED         MATURITY            MILLIONS)                        HEDGED ITEM                     RATE
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Cap                  1999            2003                $19.4          Interest rate component of an operating         6.50%
                                                                          lease - not accounted for as a hedge
Cap                  2000            2005                $12.5          Interest rate component of a long-term note     7.66%
                                                                          payable - not accounted for as a hedge
Swap                 2001            2004                $14.6          Convert floating interest rate component of     3.27%
                                                                          an operating lease to a fixed rate
Corridor             2002            2006                $ 4.8          Interest rate component of a railcar debt       4.25% -
                                                                          financing                                     7.00%
Corridor             2002            2007                $ 4.3          Interest rate component of a railcar            4.25% -
                                                                          sale-leaseback transaction                    7.00%


The initial notional amounts on the above instruments amortize monthly in the
same manner as the underlying hedged item. Changes in the fair value of the caps
are included in interest expense in the statements of income, as they are not
accounted for as cash flow hedges. The swap and the interest rate corridors are
designated as cash flow hedges with changes in their fair values included as a
component of other comprehensive income or loss. Also included in accumulated
other comprehensive income are closed treasury rate locks entered into to hedge
the interest rate component of railcar lease transactions prior to their
closing. The reclassification of these amounts from other comprehensive income
into interest or cost of railcar sales occurs over the term of the hedged debt
or lease, as applicable.

The fair values of all derivative instruments are included in other assets and
notes receivable or other long-term liabilities. The net fair value amount for
2002 and 2001 was less than $0.1 million. The mark-

                                       45



to-market effect of long-term and short-term interest rate contracts on interest
expense was $0.1 million interest credit and $0.2 million additional interest
expense for 2002 and 2001, respectively. If there are no additional changes in
fair value, the Company expects to reclassify $0.3 million from other
comprehensive income into interest expense or cost of railcar sales in 2003.

9. INCOME TAXES

Income tax provision (benefit) consists of the following:



                                                           YEAR ENDED DECEMBER 31
                                                       2002          2001          2000
              (in thousands)                      (AS RESTATED)
                                                  ------------     --------     ----------
                                                                       
Current:
   Federal                                        $      3,606     $  3,311     $    2,219
   State and local                                         200          117           (175)
                                                  ----------------------------------------
                                                         3,806        3,428          2,044
                                                  ----------------------------------------
Deferred:
   Federal                                               1,288         (496)         1,935
   State and local                                         144          (43)           307
                                                  ----------------------------------------
                                                         1,432         (539)         2,242
                                                  ----------------------------------------
Total:
   Federal                                               4,894        2,815          4,154
   State and local                                         344           74            132
                                                  ----------------------------------------
                                                  $      5,238     $  2,889     $    4,286
                                                  ========================================


A reconciliation from the statutory U.S. federal tax rate to the effective tax
rate follows:



                                                                       YEAR ENDED DECEMBER 31
                                                                    2002        2001        2000
                                                                    ----------------------------
                                                                                   
Statutory U.S. federal tax rate                                     35.0%       35.0%       35.0%
Increase (decrease) in rate resulting from:
  Effect of  commissions  paid to foreign  sales  corporation  or
    excluded extraterritorial income                                (3.2)      (11.3)       (5.8)
  State and local income taxes, net of related federal taxes         1.4         0.4         0.6
  Other, net                                                        (0.5)        0.1          --
                                                                    ----------------------------
Effective tax rate                                                  32.7%       24.2%       29.8%
                                                                    ============================


Income taxes paid in 2002, 2001 and 2000 were $2.5 million, $4.3 million, and
$3.3 million, respectively.

                                       46



Significant components of the Company's deferred tax liabilities and assets are
as follows:



                                                                              DECEMBER 31
                                                                          2002           2001
                                (in thousands)                        (AS RESTATED)
                                                                      ---------------------------
                                                                               
Deferred tax liabilities:
  Property, plant and equipment and railcar assets leased to others   $    (14,084)  $    (12,898)
  Prepaid employee benefits                                                 (3,857)        (2,949)
  Other                                                                       (344)          (202)
                                                                      ---------------------------
                                                                           (18,285)       (16,049)
                                                                      ---------------------------
Deferred tax assets:
  Employee benefits                                                          6,469          5,384
  Deferred income                                                            1,805          1,450
  Accounts and notes receivable                                              1,246          1,289
  Inventory                                                                    947          2,456
  Investments                                                                   13            353
  Other                                                                        348            433
                                                                      ---------------------------
                                                                            10,828         11,365
                                                                      ---------------------------
Net deferred tax liability                                            $     (7,457)  $     (4,684)
                                                                      ===========================


In 2002 the Company decreased a $1.9 million deferred tax asset related to its
adoption of EITF Topic 0-96, as discussed in Note 1. This amount was included in
the statement of income as a cumulative effect of a change in accounting
principle.

In 2002 and 2001, the Company recorded deferred tax assets of $0.5 million and
$0.1 million, respectively, related to the accounting for derivatives under
Statement 133. The 2002 amount is included in other comprehensive income in the
statement of shareholders' equity. The 2001 amount is included in the statement
of income as a cumulative effect of change in accounting principle.

10. STOCK COMPENSATION PLANS

The Company's Amended and Restated Long-Term Performance Compensation Plan dated
December 14, 2001 (the LT Plan) authorizes the Board of Directors to grant
options and share awards to employees and outside directors for up to 2.1
million of the Company's common shares. Options granted under the LT Plan have a
maximum term of 10 years. Options granted to outside directors have a fixed term
of five years and vest after one year. Options granted to management personnel
under the LT Plan have a five-year term and vest 40% immediately, an additional
30% after one year and the remaining 30% after two years. Options granted under
the LT Plan are structured as fixed grants with exercise price equal to the
market value of the underlying stock on the date of the grant; accordingly, no
compensation expense is recognized for these grants.

The LT Plan also permits awards of restricted stock. The Company issued 15
thousand, 21 thousand and 20 thousand restricted shares during 2002, 2001 and
2000, respectively; 23 thousand restricted shares remain outstanding at December
31, 2002. These shares carry voting and dividend rights; however, sale of the
shares is restricted prior to vesting. Restricted shares vest 50% after one year
and the remaining 50% after two years. Restricted shares issued under the LT
Plan are recorded at their fair value on the grant date with a corresponding
charge to shareholders' equity representing the unearned portion of the award.
The unearned portion is amortized as compensation expense on a straight-line
basis over the related vesting period. Compensation expense related to
restricted stock issued under the LT Plan amounted to $0.2 million in each of
2002, 2001 and 2000.

                                       47



Certain Company executives and outside directors have elected to receive a
portion of their cash compensation in stock options and/or restricted stock
issued under the LT Plan. These options and restricted stock vest immediately.
The options have a ten-year term. There were 3 thousand, 6 thousand and 4
thousand restricted shares issued in lieu of cash compensation in 2002, 2001 and
2000, respectively and 10 thousand options issued in 2002.

The Company's Employee Share Purchase Plan (the ESP Plan) allows employees to
purchase common shares through payroll withholdings. The Company has reserved
300 thousand common shares for issuance to and purchase by employees under this
plan. The ESP Plan also contains an option component. The purchase price per
share under the ESP Plan is the lower of the market price at the beginning or
end of the year. Employees purchased 25 thousand, 33 thousand and 33 thousand
shares under the ESP Plan in 2002, 2001 and 2000, respectively. The Company
records a liability for withholdings not yet applied towards the purchase of
common stock. No compensation expense is recognized for stock purchases or
options under the ESP Plan.

Pro forma information regarding net income and earnings per share required by
Statement No. 123, "Accounting for Stock-Based Compensation," is included in
note 2 and is determined as if the Company accounted for its employee stock
options under the fair value method. The fair value of each option grant is
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions by year.



                                                            2002       2001       2000
                                                           -----------------------------
                                                                        
LONG TERM PERFORMANCE COMPENSATION PLAN
Risk free interest rate                                       4.42%      4.99%      6.36%
Dividend yield                                                2.60%      3.01%      2.91%
Volatility  factor of the  expected  market price of the
   Company's common shares                                    .300       .267       .276
Expected life for the options (in years)                      5.30       5.00       5.00

EMPLOYEE SHARE PURCHASE PLAN
Risk free interest rate                                       2.17%      5.32%      5.98%
Dividend yield                                                2.60%      3.01%      2.91%
Volatility  factor of the  expected  market price of the
   Company's common shares                                    .300       .267       .276
Expected life for the options (in years)                      1.00       1.00       1.00


For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period.

                                       48



A summary of the Company's stock option activity and related information for the
years ended December 31 follows:



                                                 LONG-TERM PERFORMANCE COMPENSATION PLAN
                                           2002                    2001                    2000
                                   ---------------------------------------------------------------------
                                               WEIGHTED                WEIGHTED                WEIGHTED
                                                AVERAGE                 AVERAGE                 AVERAGE
                                               EXERCISE                EXERCISE                EXERCISE
      (common shares in thousands)  SHARES      PRICE       SHARES      PRICE      SHARES      PRICE
                                   ---------------------------------------------------------------------
                                                                             
Outstanding at beginning of year      915      $    9.18      862      $    9.24      671      $    9.60
Granted                               171          10.00      224           8.63      229           8.25
Exercised                            (239)          9.14      (93)          8.83       --             --
Expired/forfeited                     (39)          9.12      (78)          8.68      (38)          9.59
                                   ------                  ------                  ------
Outstanding at end of year            808      $    9.37      915      $    9.18      862      $    9.24
                                   ======                  ======                  ======




                                                              2002       2001        2000
                                                           ---------   ---------   ---------
                                                                          
Weighted average fair value of options granted during
   year                                                    $    2.62   $    2.00   $    2.18
                                                           =================================

Options exercisable at end of year                               662         732         687
                                                           =================================
Weighted average exercise price of options exercisable
   at end of year                                          $    9.35   $    9.35   $    9.27
                                                           =================================


                                                        
Options available for grant at December 31, 2002                 851
Price range of options at December 31, 2002                $8.25 to $12.38
Weighted average remaining contractual life (in years)          3.61



11. OTHER COMMITMENTS AND CONTINGENCIES

Railcar leasing activities:

The Company is a lessor of railcars. The majority of railcars are leased to
customers under operating leases that may be either net leases or full service
leases under which the Company provides maintenance and fleet management
services. The Company also provides such services to financial intermediaries to
which it has sold railcars and locomotives in non-recourse lease transactions.
Fleet management services generally include maintenance, escrow, tax filings and
car tracking services.

Many of the Company's leases provide for renewals. The Company also generally
holds purchase options for railcars it has sold and leased-back from a financial
intermediary, and railcars sold in non-recourse lease transactions.

                                       49



Lease income from operating leases to customers and rental expense for railcar
leases were as follows:



                                                      YEAR ENDED DECEMBER 31
              (in thousands)                      2002          2001        2000
                                               ------------------------------------
                                                                
Rental and service income - operating leases   $   11,521   $    9,896   $    9,497
                                               ====================================

Rental expense                                 $    5,007   $    4,387   $    4,778
                                               ====================================


Future minimum rentals and service income for all noncancelable railcar
operating leases greater than one year are as follows:



                                         FUTURE RENTAL AND           FUTURE
                                         SERVICE INCOME -            MINIMUM
           (in thousands)                OPERATING LEASES        RENTAL EXPENSE
                                        ---------------------------------------
                                                           
Year ended December 31
2003                                       $    10,936              $  6,795
2004                                             8,191                 5,630
2005                                             6,307                 3,803
2006                                             4,644                 2,808
2007                                             3,651                 2,362
Future years                                    12,162                 8,707
                                        ------------------------------------
                                           $    45,891              $ 30,105
                                        ====================================


Direct Financing Lease:

During 2002, the Company entered into a direct financing lease with a railcar
customer. Future minimum lease payments to be received under this lease, net of
executory costs, aggregated $2.5 million at December 31, 2002. The Company's net
investment in the lease of $0.9 million is included as $0.8 million in other
assets on the balance sheet and $0.1 million in prepaid expenses and other
current assets.

Other Leasing Activities:

The Company, as a lessee, leases real property, vehicles and other equipment
under operating leases. Certain of these agreements contain lease renewal and
purchase options. The Company also leases excess property to third parties. Net
rental expense under these agreements was $5.1 million, $5.4 million and $5.2
million in 2002, 2001 and 2000, respectively. Future minimum lease payments (net
of sublease income commitments) under agreements in effect at December 31, 2002
are as follows: 2003--$3.1 million; 2004 -- $2.5 million; 2005 -- $2.3 million;
2006 -- $1.0 million; 2007 -- $0.6 million; and $1.2 million thereafter.

Other Commitments:

The Company has agreed to fund a research and development effort at a rate of
$0.2 million per year for five years, ending June 30, 2007. The commitment may
be satisfied, in part, by qualifying internal costs or expenditures to third
parties.

                                       50


The Company has from time to time entered into agreements which resulted in
indemnifying third parties against certain potential liabilities. Management
believes that judgments, if any, related to such agreements would not have a
material effect on the Company's financial condition, results of operations or
cash flow.

12. EMPLOYEE BENEFIT PLAN OBLIGATIONS

The Company provides retirement benefits for substantially all of its employees
under several defined benefit and defined contribution plans. The Company's
expense for its defined contribution plans amounted to $1.4 million in each of
2002, 2001 and 2000. The Company also provides certain health insurance benefits
to employees, including retirees.

Following are the details of the liability and funding status of the pension and
postretirement benefit plans:




                                                     PENSION BENEFITS      POSTRETIREMENT BENEFITS
           (in thousands)                           2002         2001         2002         2001
                                                  ------------------------------------------------
                                                                             
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year           $ 26,959     $ 25,151     $ 18,950     $ 11,372
Service cost                                         2,265        1,884          721          610
Interest cost                                        1,891        1,560        1,601        1,224
Actuarial (gains)/losses                             4,040         (121)       7,011        6,493
Plan amendment                                          --           --       (8,658)          --
Participant contributions                               --           --          120           73
Benefits paid                                       (1,551)      (1,515)        (862)        (822)
                                                  -----------------------------------------------
Benefit obligation at end of year                   33,604       26,959       18,883       18,950
                                                  -----------------------------------------------

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year      24,480       26,117           --           --
Actual losses on plan assets                        (3,310)      (1,671)          --           --
Company contributions                                4,506        1,549          742          749
Participant contributions                               --           --          120           73
Benefits paid                                       (1,551)      (1,515)        (862)        (822)
                                                  -----------------------------------------------
Fair value of plan assets at end of year            24,125       24,480           --           --
                                                  -----------------------------------------------

Funded (underfunded) status of plans at
end of year                                         (9,479)      (2,479)     (18,883)     (18,950)
Unrecognized net actuarial loss                     14,670        5,369       16,063        9,825
Unrecognized prior service cost                         89          115       (7,216)          --
Unrecognized net transition obligation                  --           --           --        1,217
                                                  -----------------------------------------------
Prepaid (accrued) benefit cost                    $  5,280     $  3,005     $(10,036)    $ (7,908)
                                                  ===============================================


                                       51


Effective October 1, 2002, the Company amended its retiree health care plan to
eliminate all retiree health care benefits for new employees hired after January
1, 2003. In addition, the Company has limited its premium contribution for
future years to the rates in effect at December 31, 2002 plus a 3% inflation
factor per year after that date. Finally, the Company raised its employee and
retiree co-payments for all prescription drugs. The changes resulted in an $8.7
million reduction in the benefit obligation as measured at December 31, 2002.

Amounts recognized in the consolidated balance sheets at December 31 consist of:




                                        PENSION BENEFITS      POSTRETIREMENT BENEFITS
         (in thousands)                2002         2001         2002         2001
                                     ------------------------------------------------
                                                                
Accrued expenses                     $   (548)    $ (1,243)    $     --     $     --
Pension asset                           5,828        4,248           --           --
Employee benefit plan obligations          --           --      (10,036)      (7,908)
                                     -----------------------------------------------
Net amount recognized                $  5,280     $  3,005     $(10,036)    $ (7,908)
                                     ===============================================


Included in employee and benefit plan obligations are $1.7 million and $1.6
million at December 31, 2002 and 2001, respectively, of deferred compensation
for certain employees who, due to Internal Revenue Service guidelines, may not
take full advantage of the Company's primary defined contribution plan. Assets
funding this plan are recorded at fair value in prepaid expenses and other
current assets.

Amounts applicable to a Company defined benefit plan with accumulated benefit
obligations in excess of plan assets are as follows:



      (in thousands)               2002      2001
                                  ----------------
                                      
Projected benefit obligation      $1,252    $  933
                                  ----------------
Accumulated benefit obligation    $  228    $  137
                                  ----------------


Following are components of the net periodic benefit cost for each year:



                                                     PENSION BENEFITS               POSTRETIREMENT BENEFITS
        (in thousands)                        2002         2001        2000       2002         2001       2000
                                             ------------------------------------------------------------------
                                                                                      
Service cost                                 $ 2,265     $ 1,884     $ 2,062     $   721     $   610    $   434
Interest cost                                  1,891       1,560       1,625       1,601       1,224        766
Expected return on plan assets                (2,197)     (2,366)     (2,353)         --          --         --
Amortization of prior service cost                26          26          26        (122)         --         --
Recognized net actuarial loss                    246          25          73         587         420        157
Amortization of net transition obligation         --          --          --          83         111        111
                                             ------------------------------------------------------------------
Benefit cost                                 $ 2,231     $ 1,129     $ 1,433     $ 2,870     $ 2,365    $ 1,468
                                             ==================================================================


                                       52




                                                 PENSION BENEFITS    POSTRETIREMENT BENEFITS
                                                  2002     2001           2002     2001
                                                 -------------------------------------------
                                                                       
WEIGHTED AVERAGE ASSUMPTIONS AS OF DECEMBER 31
Discount rate                                     6.75%    7.25%          6.75%    7.25%
Expected return on plan assets                     9.0%     9.0%            --       --
Rate of compensation increases                     4.0%     4.0%            --       --
Health care cost trend rate                         --       --            7.5%     8.0%


The health care cost trend rate of 7.5% is assumed to decline 0.5% per year to
5.0% and remain at that level thereafter. During 2002, the Company amended its
postretirement benefits plan to eliminate health benefits for any full-time
employees hired after January 1, 2003.

The assumed health care cost trend rate has a significant effect on the amounts
reported for postretirement benefits. A one-percentage-point change in the
assumed health care cost trend rate would have the following effects:



                                                                            ONE-PERCENTAGE-POINT
                        (in thousands)                                INCREASE               DECREASE
                                                                      -------------------------------
                                                                                      
Effect on total service and interest cost components in 2002           $  505               $  (394)
Effect on postretirement benefit obligation as of December 31, 2002       273                  (249)


To partially fund self-insured health care and other employee benefits, the
Company makes payments to a trust. Assets of the trust amounted to $4.0 million
and $4.6 million at December 31, 2002 and 2001, respectively, and are included
in prepaid expenses and other current assets.

13. FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair values of the Company's cash equivalents, margin deposits, short-term
borrowings and certain long-term borrowings approximate their carrying values
since the instruments are close to maturity and/or carry variable interest rates
based on market indices. The Company accounts for investments in affiliates on
the equity method. The estimated fair value of these investments could not be
obtained without incurring excessive costs as these investments have no quoted
market price.

                                       53


Certain long-term notes payable and the Company's debenture bonds bear fixed
rates of interest and terms of up to fifteen years. Based upon current interest
rates offered by the Company on similar bonds and rates currently available to
the Company for long-term borrowings with similar terms and remaining
maturities, the Company estimates the fair values of its long-term debt
instruments outstanding at December 2002 and 2001 as follows:



             (in thousands)                       CARRYING AMOUNT           FAIR VALUE
                                                  ------------------------------------
                                                                      
2002:
  Long-term notes payable                           $  47,237               $  49,242
  Debenture bonds                                      27,628                  27,863
                                                    ---------------------------------
                                                    $  74,865               $  77,105
                                                    =================================
2001:
  Long-term notes payable                           $  31,284               $  32,695
  Debenture bonds                                      31,250                  32,189
                                                    ---------------------------------
                                                    $  62,534               $  64,884
                                                    =================================


14. BUSINESS SEGMENTS

The Company's operations include four reportable business segments that are
distinguished primarily on the basis of products and services offered. The
Agriculture segment includes grain merchandising, the operation of terminal
grain elevator facilities and the manufacture and distribution of agricultural
inputs, primarily fertilizer, to dealers and farmers. The Processing segment
includes the production and distribution of lawn care and corncob-based
products. The Rail segment includes the leasing, marketing and fleet management
of railcars and locomotives, railcar repair and metal fabrication. The Retail
segment includes the operation of six large retail stores, a distribution center
and a lawn and garden equipment sales and service shop.

Included in the Other segment are the operations of several smaller businesses
and corporate level amounts not attributable to an operating segment. These
smaller businesses included the operations of ten auto service centers (a joint
venture that was sold in March 2000) and the marketing of the Company's excess
real estate.

The segment information below (in thousands) includes the allocation of expenses
shared by one or more 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. Operating income (loss) for each segment is based on net sales
and merchandising revenues plus identifiable other income less all identifiable
operating expenses, including interest expense for carrying working capital and
long-term assets. Capital expenditures include additions to property, plant and
equipment, software and intangible assets.

                                       54




       2002 (AS RESTATED)               AGRICULTURE   PROCESSING        RAIL         RETAIL          OTHER        TOTAL
- --------------------------------------------------------------------------------------------------------------------------
                                                                                              
REVENUES FROM EXTERNAL CUSTOMERS (c)    $  762,268    $  114,315     $   18,747    $  181,197            --     $1,076,527
INTER-SEGMENT SALES                          8,330         1,216            877            --            --         10,423
OTHER INCOME (NET)                           1,340           501             41           685           872          3,439
GAIN ON INSURANCE SETTLEMENT                    --            --             --            --           302            302
INTEREST EXPENSE (INCOME) (a)                5,772         2,333          1,068         1,546          (907)         9,812
OPERATING INCOME (LOSS) (c)                 15,154        (1,322)         1,563         4,003        (3,396)        16,002
IDENTIFIABLE ASSETS                        263,651        85,140         35,378        57,046        28,003        469,218
CAPITAL EXPENDITURES                         5,760           832            199         1,694         1,349          9,834
RAILCAR EXPENDITURES                            --            --          8,203            --            --          8,203
DEPRECIATION AND AMORTIZATION                5,950         2,263          2,525         2,415         1,161         14,314




          2001                      AGRICULTURE  PROCESSING      RAIL         RETAIL         OTHER        TOTAL
- -----------------------------------------------------------------------------------------------------------------
                                                                                      
Revenues from external customers    $ 658,524    $ 112,827     $  31,061     $ 177,949           --     $ 980,361
Inter-segment sales                     5,645        1,212           930            --           --         7,787
Other income (net)                      1,196          300           248           618        1,141         3,503
Gain on insurance settlement              338           --            --            --           --           338
Interest expense (income) (a)           6,179        3,428         1,846         1,900       (1,783)       11,570
Operating income (loss)                19,765       (7,654)         (349)        1,868       (1,699)       11,931
Identifiable assets                   244,289       84,709        45,037        57,289       27,000       458,324
Capital expenditures                    5,845        1,549           166           907          688         9,155
Railcar expenditures                       --           --        21,790            --           --        21,790
Depreciation and amortization           6,399        2,341         2,432         2,426          666        14,264




                2000               AGRICULTURE   PROCESSING      RAIL        RETAIL        OTHER         TOTAL
- ----------------------------------------------------------------------------------------------------------------
                                                                                     
Revenues from external customers    $ 645,793    $ 107,434     $  18,972    $ 183,817    $   2,489     $ 958,505
Inter-segment sales                     5,896        1,280         1,029           --           --         8,205
Other income (net)                      1,204          358           233          611        1,583         3,989
Gain on sale of business                   --           --            --           --          992           992
Gain on insurance settlement            2,088           --            --           --           --         2,088
Interest expense (income) (a)           6,186        3,424         1,748        1,706       (1,235)       11,829
Operating income (loss)                14,301       (3,470)        1,003        3,246         (716)       14,364
Identifiable assets                   218,084       87,092        43,213       60,178       34,398       442,965
Capital expenditures (b)                9,648        9,276            72        1,484          488        20,968
Railcar expenditures                       --           --        16,245           --           --        16,245
Depreciation and amortization           6,223        2,032         1,417        2,755          692        13,119


(a) The interest income reported in the Other segment includes net interest
    income at the corporate level. These amounts result from a rate differential
    between the interest rate on which interest is allocated to the operating
    segments and the actual rate at which borrowings are made.

(b) Capital expenditures in 2000 include assets purchased in exchange for
    long-term liabilities.

                                       55

 (c) The Company restated the 2002 segment information to reflect the adoption
     of EITF Topic D-96. The following table presents the impact of the
     restatement adjustments on the Company's sales and merchandising revenues
     and identifiable assets. See also Note 1. The adjustment to sales and
     merchandising revenues resulted from reclassifying the current period
     impact of the marketing agreement on gross profit to sales and
     merchandising revenues rather than cost of sales as originally presented.



                                                                            YEAR ENDED DECEMBER 31, 2002
          CAPTION                       SEGMENT           AS PREVIOUSLY REPORTED    ADJUSTMENTS              AS RESTATED
                                                          --------------------------------------------------------------
                                                                                                 
Sales and merchandising revenues      Agriculture                $ 761,575            $    693                $ 762,268
Operating income                      Agriculture                   18,986              (3,832)                  15,154




                                                                               AS OF DECEMBER 31, 2002
                                                          AS PREVIOUSLY REPORTED       ADJUSTMENTS            AS RESTATED
                                                          ---------------------------------------------------------------
                                                                                                  
Identifiable assets                   Other                         28,600                (597)                  28,003


Grain sales for export to foreign markets amounted to approximately $149
million, $191 million and $172 million in 2002, 2001 and 2000, respectively.

Grain sales of $154 million, $122 million and $153 million in 2002, 2001, and
2000, respectively, were made to Cargill, Inc.

                                       56


CORPORATE OFFICERS

DENNIS J. ADDIS
President,
Plant Nutrient Division

DANIEL T. ANDERSON
President, Retail Group

MICHAEL J. ANDERSON
President & Chief
Executive Officer

RICHARD M. ANDERSON
President, Processing Group

RICHARD P. ANDERSON
Chairman

DALE W. FALLAT
Vice President,
Corporate Services

PHILIP C. FOX
Vice President,
Corporate Planning

CHARLES E. GALLAGHER
Vice President Human
Resources

RICHARD R. GEORGE
Vice President,
Controller & CIO

BEVERLY J. MCBRIDE
Vice President,
General Counsel & Corporate Secretary

HAROLD M. REED
President,
Grain Division

RASESH H. SHAH
President,
Rail Group

GARY L. SMITH
Vice President,
Finance & Treasurer

BOARD OF DIRECTORS

DONALD E. ANDERSON
Director of Science, Retired
The Andersons, Inc.

MICHAEL J. ANDERSON
President & Chief Executive Officer
The Andersons, Inc.

RICHARD M. ANDERSON
President, Processing Group
The Andersons, Inc.

RICHARD P. ANDERSON
Chairman
The Andersons, Inc.

THOMAS H. ANDERSON
Chairman Emeritus
The Andersons, Inc.

JOHN F. BARRETT (2) (3)
Chairman, President &
Chief Executive Officer
The Western & Southern
Life Insurance Co.

PAUL M. KRAUS
Attorney
Marshall & Melhorn
LLC

DONALD L. MENNEL(1)(3)
President & Treasurer
The Mennel Milling
Company

DAVID L. NICHOLS(1)(3)
President & Chief
Operating Officer,
Rich's-Macy's/Lazarus/
Goldsmith's Division of
Federated Department
Stores, Inc.

DR. SIDNEY RIBEAU(2)(3)
President
Bowling Green State
University

CHARLES A. SULLIVAN(1)(3)
Chairman
Interstate Bakeries Corp

JACQUELINE F. WOODS(2)(3)
Retired President
Ameritech Ohio

(1)  Audit Committee
(2)  Compensation Committee
(3)  Governance/Nominating Committee

INVESTOR INFORMATION

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers
LLP, Toledo, OH

NASDAQ SYMBOL
The Andersons, Inc. common shares are traded on the Nasdaq National Market tier
of The Nasdaq Stock Market under the symbol ANDE

SHAREHOLDERS
As of February 28, 2003, there were 7.2 million shares of common stock
outstanding: 674 shareholders of record and approximately 2,500 shareholders for
whom security firms acted as nominees.

CORPORATE OFFICES
The Andersons, Inc
480 West Dussel Drive
Maumee, OH 43537
419-893-5050
www.andersonsinc.com

TRANSFER AGENT & REGISTRAR
Computershare Investor Services, LLC
2 North LaSalle Street
Chicago, IL 60602
312-588-4991

FORM 10-K
The Andersons' 2002 Form 10-K, filed in mid-March 2003 with the SEC, is
available to stockholders and interested individuals without charge by writing
or calling Investor Relations.

INVESTOR RELATIONS
Gary L. Smith
Vice President, Finance & Treasurer
419-891-6417
gary_smith@andersonsinc.com

ANNUAL MEETING
The annual shareholders' meeting of The Andersons, Inc. will be held at The
Andersons' Activities Building, 1833 South Holland-Sylvania Road, Maumee, OH at
1:30 p.m. on May 1, 2003.

                                       57


OUR MISSION

We firmly believe that our company is a powerful vehicle through which we
channel our time, talent, and energy in pursuit of the fundamental goal of
serving God by serving others.

Through our collective action we greatly magnify the impact of our individual
efforts to:

- -   Provide extraordinary service to our customers

- -   Help each other improve

- -   Support our communities

- -   Increase the value of our Company

The Andersons, Inc.
480 West Dussel Drive
Maumee, Ohio 43537

                                       58

EX-21

                                                                               .
                                                                               .
                                                                               .

                                                                      Exhibit 21



                                          SUBSIDIARIES OF THE ANDERSONS
                  Subsidiary                                                               State of Organization
- ----------------------------------------------------------                                 ----------------------
                                                                                        
The Andersons Ag Software, Inc.                                                                 Ohio
(a corporation owned 100% by Metamora Commodity
         Company, Incorporated)

The Andersons Agriculture Group, LP                                                             Ohio
(a limited partnership owned 99% by The Andersons, Inc.
         and owned 1% by TAI Holdings, Inc.)

The Andersons Agriservices, Inc.                                                                Illinois
(a corporation owned 100% by The Andersons, Inc.)

The Andersons AgVantage Agency, LLC                                                             Ohio
(a limited liability corporation owned 100% by Metamora
         Commodity Company, Incorporated)

The Andersons ALACO Lawn, Inc.                                                                  Alabama
(a corporation owned 100% by The Andersons, Inc.)

The Andersons Lawn Fertilizer Division, Inc.                                                    Ohio
(a corporation owned 100% by The Andersons, Inc.)

The Andersons Mower Center, Inc.                                                                Ohio
(a corporation owned 100% by The Andersons, Inc.)

The Andersons Technologies, Inc.                                                                Michigan
(a corporation owned 100% by The Andersons Lawn Fertilizer
         Division, Inc.)

Crop & Soil Service, Inc.                                                                       Ohio
(a corporation owned 100% by The Andersons, Inc.)

Metamora Commodity Company Incorporated                                                         Ohio
(a corporation owned 100% by The Andersons, Inc.)

TAI Holdings, Inc.                                                                              Michigan
(a corporation owned 100% by The Andersons, Inc.)


                                       2

EX-23

                                                                      Exhibit 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-101770, 333-00233 and 333-53137) and
Registration Statement on Form S-3 (No. 333-79307) of The Andersons, Inc. of our
report dated January 27, 2003, except as to the effect of the matters described
in Note 1 to the Consolidated Financial Statements which is as of October 24,
2003, relating to the consolidated financial statements, which appears in the
2002 Annual Report to Shareholders, included herein as Exhibit 13, which is
incorporated in this Annual Report on Form 10-K/A. We also consent to the
incorporation by reference of our report dated October 24, 2003 relating to the
financial statement schedule, which appears in this Annual Report on Form
10-K/A.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Toledo, Ohio
October 24, 2003

                                       3

EX-31.1

                                                                    EXHIBIT 31.1

                                 CERTIFICATIONS

I, Michael J. Anderson, certify that:

     1.       I have reviewed this annual report on Form 10-K/A of The
              Andersons, Inc.;

     2.       Based on my knowledge, this report does not contain any untrue
              statement of a material fact or omit to state a material fact
              necessary to make the statements made, in light of the
              circumstances under which such statements were made, not
              misleading with respect to the period covered by this report;

     3.       Based on my knowledge, the financial statements, and other
              financial information included in this report, fairly present in
              all material respects the financial condition, results of
              operations and cash flows of the registrant as of, and for, the
              periods presented in this report;

     4.       The registrant's other certifying officers and I are responsible
              for establishing and maintaining disclosure controls and
              procedures (as defined in Exchange Act Rules 13a-15(e) and
              15d-15(e)) for the registrant and have:

              a)       Designed such disclosure controls and procedures, or
                       caused such disclosure controls and procedures to be
                       designed under our supervision, to ensure that material
                       information relating to the registrant, including its
                       consolidated subsidiaries, is made known to us by others
                       within those entities, particularly during the period in
                       which this annual report is being prepared;

              b)       Evaluated the effectiveness of the registrant's
                       disclosure controls and procedures and presented in this
                       report our conclusions about the effectiveness of the
                       disclosure controls and procedures, as of the end of the
                       period covered by this report based on such evaluation;
                       and

              c)       Disclosed in this report any change in the registrant's
                       internal control over financial reporting that occurred
                       during the registrant's most recent fourth fiscal quarter
                       that has materially affected, or is reasonable likely to
                       materially affect, the registrant's internal control over
                       financial reporting; and

     5.       The registrant's other certifying officers and I have disclosed,
              based on our most recent evaluation of internal control over
              financial reporting, to the registrant's auditors and the audit
              committee of registrant's board of directors (or persons
              performing the equivalent functions):

              a)       All significant deficiencies and material weaknesses in
                       the design or operation of internal control over
                       financial reporting which are reasonably likely to



                  adversely affect the registrant's ability to record, process,
                  summarize and report financial information; and

         b)       Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

October 24, 2003

                                           /s/Michael J. Anderson
                                           ------------------------------
                                           Michael J. Anderson
                                           President and Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

                                 CERTIFICATIONS

I, Richard R. George, certify that:

     1.       I have reviewed this annual report on Form 10-K/A of The
              Andersons, Inc.;

     2.       Based on my knowledge, this report does not contain any untrue
              statement of a material fact or omit to state a material fact
              necessary to make the statements made, in light of the
              circumstances under which such statements were made, not
              misleading with respect to the period covered by this report;

     3.       Based on my knowledge, the financial statements, and other
              financial information included in this report, fairly present in
              all material respects the financial condition, results of
              operations and cash flows of the registrant as of, and for, the
              periods presented in this report;

     4.       The registrant's other certifying officers and I are responsible
              for establishing and maintaining disclosure controls and
              procedures (as defined in Exchange Act Rules 13a-15(e) and
              15d-15(e)) for the registrant and have:

              a)       Designed such disclosure controls and procedures, or
                       caused such disclosure controls and procedures to be
                       designed under our supervision, to ensure that material
                       information relating to the registrant, including its
                       consolidated subsidiaries, is made known to us by others
                       within those entities, particularly during the period in
                       which this annual report is being prepared;

              b)       Evaluated the effectiveness of the registrant's
                       disclosure controls and procedures and presented in this
                       report our conclusions about the effectiveness of the
                       disclosure controls and procedures, as of the end of the
                       period covered by this report based on such evaluation;
                       and

              c)       Disclosed in this report any change in the registrant's
                       internal control over financial reporting that occurred
                       during the registrant's most recent fourth fiscal quarter
                       that has materially affected, or is reasonable likely to
                       materially affect, the registrant's internal control over
                       financial reporting; and

     5.       The registrant's other certifying officers and I have disclosed,
              based on our most recent evaluation of internal control over
              financial reporting, to the registrant's auditors and the audit
              committee of registrant's board of directors (or persons
              performing the equivalent functions):

              a)       All significant deficiencies and material weaknesses in
                       the design or operation of internal control over
                       financial reporting which are reasonably



                  likely to adversely affect the registrant's ability to record,
                  process, summarize and report financial information; and

         b)       Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

October 24, 2003

                                              /s/Richard R. George
                                              ----------------------------------
                                              Richard R. George
                                              Vice President, Controller and CIO

EX-31.3

                                                                    EXHIBIT 31.3

                                 CERTIFICATIONS

I, Gary L. Smith, certify that:

     1.       I have reviewed this annual report on Form 10-K/A of The
              Andersons, Inc.;

     2.       Based on my knowledge, this report does not contain any untrue
              statement of a material fact or omit to state a material fact
              necessary to make the statements made, in light of the
              circumstances under which such statements were made, not
              misleading with respect to the period covered by this report;

     3.       Based on my knowledge, the financial statements, and other
              financial information included in this report, fairly present in
              all material respects the financial condition, results of
              operations and cash flows of the registrant as of, and for, the
              periods presented in this report;

     4.       The registrant's other certifying officers and I are responsible
              for establishing and maintaining disclosure controls and
              procedures (as defined in Exchange Act Rules 13a-15(e) and
              15d-15(e)) for the registrant and have:

              a)       Designed such disclosure controls and procedures, or
                       caused such disclosure controls and procedures to be
                       designed under our supervision, to ensure that material
                       information relating to the registrant, including its
                       consolidated subsidiaries, is made known to us by others
                       within those entities, particularly during the period in
                       which this annual report is being prepared;

              b)       Evaluated the effectiveness of the registrant's
                       disclosure controls and procedures and presented in this
                       report our conclusions about the effectiveness of the
                       disclosure controls and procedures, as of the end of the
                       period covered by this report based on such evaluation;
                       and

              c)       Disclosed in this report any change in the registrant's
                       internal control over financial reporting that occurred
                       during the registrant's most recent fourth fiscal quarter
                       that has materially affected, or is reasonable likely to
                       materially affect, the registrant's internal control over
                       financial reporting; and

     5.       The registrant's other certifying officers and I have disclosed,
              based on our most recent evaluation of internal control over
              financial reporting, to the registrant's auditors and the audit
              committee of registrant's board of directors (or persons
              performing the equivalent functions):

              a)       All significant deficiencies and material weaknesses in
                       the design or operation of internal control over
                       financial reporting which are reasonably likely to



                  adversely affect the registrant's ability to record, process,
                  summarize and report financial information; and

         b)       Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

October 24, 2003

                                           /s/Gary L. Smith
                                           ---------------------------
                                           Gary L. Smith
                                           Vice President, Finance and Treasurer

EX-32.1

                                                                    Exhibit 32.1

                               THE ANDERSONS, INC.

                CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350

         In connection with the Annual Report of The Andersons, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), each of
the undersigned officers of the Company certifies pursuant to 18 W.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003, that
to such officer's knowledge:

         (1)      The Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934, and

         (2)      The information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company as of the dates and for the periods
                  expressed in the Report.

October 24, 2003

                                           /s/Michael J. Anderson
                                           -----------------------------------
                                           Michael J. Anderson
                                           President and Chief Executive Officer

                                           /s/Richard R. George
                                           -------------------------------------
                                           Richard R. George
                                           Vice President, Controller and CIO

                                           /s/Gary L. Smith
                                           -----------------------------------
                                           Gary L. Smith
                                           Vice President, Finance and Treasurer