Related Party Transactions

6 Months Ended

Jun. 30, 2019

Equity Method Investments

The Company, directly or indirectly, holds investments in companies that are accounted for under the equity method. The Company’s equity in these entities is presented at cost plus its accumulated proportional share of income or loss, less any distributions it has received.

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



(in thousands)	June 30, 2019		December 31, 2018		June 30, 2018
The Andersons Albion Ethanol LLC	$	50,760	$	50,382	$	47,474
The Andersons Clymers Ethanol LLC	25,260		24,242		21,214
The Andersons Marathon Ethanol LLC	16,294		14,841		14,344
Lansing Trade Group, LLC (a)	—		101,715		97,476
Thompsons Limited (a)	—		48,987		49,251
Providence Grain Group Inc.	17,161		—		—
Other	11,454		2,159		2,400
Total	$	120,929	$	242,326	$	232,159

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

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



		Three months ended June 30,						Six months ended June 30,
(in thousands)	% Ownership at June 30, 2019	2019			2018			2019			2018
The Andersons Albion Ethanol LLC	55%	$	120		$	1,329		$	379		$	2,450
The Andersons Clymers Ethanol LLC	39%	694			1,236			1,276			1,745
The Andersons Marathon Ethanol LLC	33%	644			1,728			1,453			1,684
Lansing Trade Group, LLC (a)	100% (a)	—			3,591			—			6,175
Thompsons Limited (a)	100% (a)	—			1,980			—			1,311
Providence Grain Group Inc.	39%	(1,719		)	—			(1,844		)	—
Other	5% - 51%	104			(61		)	98			11
Total		$	(157	)	$	9,803		$	1,362		$	13,376

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

The Company received $0.3 million from unconsolidated affiliates for the six months ended June 30, 2019 and received $2.1 million for the six months ended June 30, 2018.

In the second quarter of 2019, the Company did not have significant equity investees. In the second quarter of 2018, Lansing Trade Group qualified as significant equity investee of the Company under the income test. In January of 2019, the Company acquired the remaining equity of LTG and is now reflected in the consolidated results of the Company.

Related Party Transactions

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

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

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



	Three months ended June 30,				Six months ended June 30,
(in thousands)	2019		2018		2019		2018
Sales revenues	$	57,854	$	107,686	$	119,022	$	196,580
Service fee revenues (a)	4,052		5,191		8,163		10,308
Purchases of product and capital assets	176,442		197,444		345,671		378,968
Lease income (b)	1,645		1,624		3,309		3,206
Labor and benefits reimbursement (c)	3,602		3,601		7,460		7,168


(a)	Service fee revenues include management fees, corn origination fees, ethanol and distillers dried grains (DDG) marketing fees, and other commissions.


(b)	Lease income includes the lease of the Company’s Albion, Michigan and Clymers, Indiana grain facilities as well as certain railcars to the various ethanol LLCs.


(c)	The Company provides all operational labor to the unconsolidated ethanol LLCs.



(in thousands)	June 30, 2019		December 31, 2018		June 30, 2018
Accounts receivable (d)	$	19,515	$	17,829	$	27,030
Accounts payable (e)	24,700		28,432		39,620


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


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

For the three months ended June 30, 2019 and 2018, revenues recognized for the sale of ethanol and co-products that the Company purchased from the unconsolidated ethanol LLCs were $154.2 million and $172.3 million, respectively. For the six months ended June 30, 2019 and 2018, revenues recognized for the sale of ethanol and co-products that the Company purchased from the unconsolidated ethanol LLCs were $298.2 million and $318.5 million, respectively.

The Company may enter into derivative contracts with certain of its related parties, including the unconsolidated ethanol LLCs, for the purchase and sale of grain or ethanol, for price risk mitigation purposes and on similar terms as the purchase and sale of derivative contracts it enters into with unrelated parties. The fair value of derivative contract assets with related parties as of June 30, 2019, December 31, 2018 and June 30, 2018 was $0.2 million, $1.9 million and $8.1 million, respectively. The fair value of derivative contract liabilities with related parties as of June 30, 2019, December 31, 2018 and June 30, 2018 was $2.1 million, $6.3 million and $3.9 million, respectively.