UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

THE ANDERSONS, INC.

(Exact name of the registrant as specified in its charter)

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

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

(419) 893-5050
(Telephone Number)

(Former name, former address and former fiscal year, if changed since last report.)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated Filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The registrant had approximately 18.6 million common shares outstanding, no par value, at April 30, 2011.

 

 

THE ANDERSONS, INC.

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets — March 31, 2011, December 31, 2010 and March 31, 2010			3
Condensed Consolidated Statements of Income — Three months ended March 31, 2011 and 2010			5
Condensed Consolidated Statement of Cash Flows — Three months ended March 31, 2011 and 2010			6
Condensed Consolidated Statements of Shareholders’ Equity Three months ended March 31, 2011 and 2010			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures about Market Risk			28
Item 4. Controls and Procedures			28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			29
Item 1A. Risk Factors			29
Item 5. Other Information			29
Item 6. Exhibits			30
EX-10.46
EX-10.47
EX-12
EX-31.1
EX-31.2
EX-31.3
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Part I. Financial Information

Item 1. Financial Statements

The Andersons, Inc.

		March 31,				December 31,				March 31,
		2011				2010				2010
Assets
Current assets:
Cash and cash equivalents		$	22,320			$	29,219			$	74,459
Restricted cash			12,353				12,134				3,336
Accounts and notes receivable, net			220,665				152,227				142,617
Inventories			775,017				647,189				374,893
Commodity derivative assets — current			178,767				246,475				58,197
Deferred income taxes			18,578				16,813				14,205
Other current assets			46,721				34,501				40,844
Total current assets			1,274,421				1,138,558				708,551
Other assets:
Commodity derivative assets — noncurrent			12,996				18,113				158
Other assets and notes receivable, net			47,819				47,855				25,826
Equity method investments			173,977				175,349				167,167
			234,792				241,317				193,151
Railcar assets leased to others, net			169,189				168,483				175,219
Property, plant and equipment, net			150,262				151,032				132,661
Total assets		$	1,828,664			$	1,699,390			$	1,209,582

See notes to condensed consolidated financial statements

The Andersons, Inc.
Condensed Consolidated Balance Sheets (continued)
(Unaudited)(In thousands)

		March 31,				December 31,				March 31,
		2011				2010				2010
Liabilities and Shareholders’ equity
Current liabilities:
Borrowings under short-term line of credit		$	460,000			$	241,100			$	—
Accounts payable for grain			90,442				274,596				85,157
Other accounts payable			145,685				111,501				105,170
Customer prepayments and deferred revenue			115,908				78,550				86,128
Commodity derivative liabilities — current			67,869				57,621				62,636
Accrued expenses and other current liabilities			42,119				48,851				37,625
Current maturities of long-term debt			42,783				24,524				30,320
Total current liabilities			964,806				836,743				407,036
Other long-term liabilities			25,759				25,183				15,650
Commodity derivative liabilities — noncurrent			110				3,279				3,190
Employee benefit plan obligations			29,946				30,152				25,234
Long-term debt, less current maturities			263,218				276,825				287,851
Deferred income taxes			63,727				62,649				50,956
Total liabilities			1,347,566				1,234,831				789,917
Commitments and contingencies (Note 11)
Shareholders’ equity:
Common shares, without par value (42,000 shares authorized at 3/31/11 and 12/31/10; 25,000 shares authorized at 3/31/10; 19,198 shares issued)			96				96				96
Preferred shares, without par value (1,000 shares authorized; none issued)			—				—				—
Additional paid-in-capital			176,848				177,875				176,122
Treasury shares (629, 762 and 771 shares at 3/31/11, 12/31/10 and 3/31/10, respectively; at cost)			(12,118	)			(14,058	)			(14,168	)
Accumulated other comprehensive loss			(28,518	)			(28,799	)			(24,955	)
Retained earnings			331,540				316,317				269,270
Total shareholders’ equity of The Andersons, Inc.			467,848				451,431				406,365
Noncontrolling interest			13,250				13,128				13,300
Total shareholders’ equity			481,098				464,559				419,665
Total liabilities and shareholders’ equity		$	1,828,664			$	1,699,390			$	1,209,582

See notes to condensed consolidated financial statements

The Andersons, Inc.

		Three months ended
		March 31,
		2011				2010
Sales and merchandising revenues		$	1,001,674			$	721,998
Cost of sales and merchandising revenues			922,989				663,448
Gross profit			78,685				58,550
Operating, administrative and general expenses			53,707				45,403
Interest expense			7,336				4,635
Other income:
Equity in earnings of affiliates			7,246				9,905
Other income, net			2,306				3,654
Income before income taxes			27,194				22,071
Income tax provision			9,806				9,415
Net income			17,388				12,656
Net (income) loss attributable to the noncontrolling interest			(122	)			(391	)
Net income attributable to The Andersons, Inc.		$	17,266			$	12,265
Per common share:
Basic earnings attributable to The Andersons, Inc. common shareholders		$	0.93			$	0.67
Diluted earnings attributable to The Andersons, Inc. common shareholders		$	0.93			$	0.66
Dividends paid		$	0.1100			$	0.0875

See notes to condensed consolidated financial statements

The Andersons, Inc.

		Three months ended
		March 31,
		2011				2010
Operating Activities
Net income		$	17,388			$	12,656
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization			9,884				9,750
Bad debt expense (recovery)			2,437				(596	)
Equity in loss (earnings) of unconsolidated affiliates, net of distributions received			1,372				(9,807	)
Gains on sales of railcars and related leases			(4,766	)			(2,559	)
Excess tax benefit from share-based payment arrangement			—				(728	)
Deferred income taxes			(854	)			927
Stock based compensation expense			791				768
Other			(21	)			13
Changes in operating assets and liabilities:
Accounts and notes receivable			(70,469	)			(3,475	)
Inventories			(127,828	)			32,951
Commodity derivatives			79,903				36,171
Other assets			(11,109	)			(10,170	)
Accounts payable for grain			(184,154	)			(149,239	)
Other accounts payable and accrued expenses			65,672				19,820
Net cash used in operating activities			(221,754	)			(63,518	)
Investing Activities
Purchases of railcars			(10,814	)			(8,361	)
Proceeds from sale of railcars			9,159				6,014
Purchases of property, plant and equipment			(4,162	)			(4,859	)
Proceeds from sale of property, plant and equipment			64				21
Change in restricted cash			(219	)			(213	)
Net cash used in investing activities			(5,972	)			(7,398	)
Financing Activities
Net increase in short-term borrowings			218,900				—
Proceeds from issuance of long-term debt			22,957				994
Payments of long-term debt			(18,305	)			(1,783	)
Proceeds from sale of treasury shares to employees and directors			123				1,263
Purchase of treasury stock			—				—
Payments of debt issuance costs			(815	)			(151	)
Dividends paid			(2,033	)			(1,605	)
Excess tax benefit from share-based payment arrangement			—				728
Net cash provided by (used in) financing activities			220,827				(554	)
Decrease in cash and cash equivalents			(6,899	)			(71,470	)
Cash and cash equivalents at beginning of period			29,219				145,929
Cash and cash equivalents at end of period		$	22,320			$	74,459

See notes to condensed consolidated financial statements

The Andersons, Inc.

		The Andersons, Inc. Shareholders’ Equity
						Additional								Accumulated
		Common				Paid-in				Treasury				Other Comprehensive				Retained				Noncontrolling
		Shares				Capital				Shares				Loss				Earnings				Interest				Total
Balance at December 31, 2009		$	96			$	175,477			$	(15,554	)		$	(25,314	)		$	258,662			$	12,909			$	406,276
Net income																			12,265				391				12,656
Other comprehensive income:
Unrecognized actuarial loss and prior service costs (net of income tax of $23)															431												431
Cash flow hedge activity (net of income tax of $52)															(72	)											(72	)
Comprehensive income																											13,015
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $360 (148 shares)							645				1,386																2,031
Dividends declared ($0.09 per common share)																			(1,657	)							(1,657	)
Balance at March 31, 2010		$	96			$	176,122			$	(14,168	)		$	(24,955	)		$	269,270			$	13,300			$	419,665
Balance at December 31, 2010		$	96			$	177,875			$	(14,058	)		$	(28,799	)		$	316,317			$	13,128			$	464,559
Net income																			17,266				122				17,388
Other comprehensive income:
Unrecognized actuarial loss and prior service costs (net of income tax of $111)															186												186
Cash flow hedge activity (net of income tax of $57)															95												95
Comprehensive income																											17,669
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $952 (133 shares)							(1,027	)			1,940																913
Dividends declared ($0.11 per common share)																			(2,043	)							(2,043	)
Balance at March 31, 2011		$	96			$	176,848			$	(12,118	)		$	(28,518	)		$	331,540			$	13,250			$	481,098

See notes to condensed consolidated financial statements

The Andersons, Inc.

1. Basis of Presentation and Consolidation

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

Investments in unconsolidated entities in which the Company has significant influence, but not control, are accounted for using the equity method of accounting.

In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation of the results of operations for the periods indicated, have been made. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011.

The year-end Condensed Consolidated Balance Sheet data at December 31, 2010 was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. A Condensed Consolidated Balance Sheet as of March 31, 2010 has been included as the Company operates in several seasonal industries.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in The Andersons, Inc. Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”).

New Accounting Standards

FASB Accounting Standards Update (ASU) 2009-13, Multiple-Deliverable Revenue Arrangements, significantly changes the accounting for revenue recognition arrangements with multiple deliverables. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Management has reviewed all significant agreements to determine the impact the standard may have on revenue recognition for the Company and has concluded that the standard is not applicable to the Company based on the nature of its present revenue producing activities.

2. Inventories

Major classes of inventories are as follows:

		March 31,				December 31,				March 31,
(in thousands)		2011				2010				2010
Grain		$	563,235			$	497,247			$	195,002
Agricultural fertilizer and supplies			153,559				90,182				122,951
Lawn and garden fertilizer and corncob products			27,396				32,954				26,613
Retail merchandise			27,800				24,416				27,309
Railcar repair parts			2,715				2,058				2,691
Other			312				312				327
		$	775,017			$	647,189			$	374,893

3. Property, Plant and Equipment

The components of property, plant and equipment are as follows:

		March 31,				December 31,				March 31,
(in thousands)		2011				2010				2010
Land		$	15,424			$	15,424			$	15,191
Land improvements and leasehold improvements			45,359				45,080				42,781
Buildings and storage facilities			142,017				141,349				130,696
Machinery and equipment			183,568				181,650				164,600
Software			10,549				10,306				10,201
Construction in progress			2,734				2,572				3,432
			399,651				396,381				366,901
Less accumulated depreciation and amortization			249,389				245,349				234,240
		$	150,262			$	151,032			$	132,661

Depreciation expense on property, plant and equipment amounted to $4.9 million, $18.7 million and $4.5 million for the periods ended March 31, 2011, December 31, 2010 and March 31, 2010, respectively.

Railcars

The components of Railcar assets leased to others are as follows:

		March 31,				December 31,				March 31,
(in thousands)		2011				2010				2010
Railcar assets leased to others		$	236,285			$	234,667			$	235,535
Less accumulated depreciation			67,096				66,184				60,316
		$	169,189			$	168,483			$	175,219

Depreciation expense on railcar assets leased to others amounted to $3.3 million, $14.0 million and $4.2 million for the periods ended March 31, 2011, December 31, 2010 and March 31, 2010, respectively.

4. Derivatives

The margin deposit assets and liabilities which were shown net on the face of the balance sheet in previous periods are now included in short-term commodity derivative assets and liabilities, as appropriate. Prior periods have been reclassified to conform to current year presentation. The change in presentation had no effect on current or total assets and liabilities on the Consolidated Balance Sheets.

The Company’s operating results are affected by changes to commodity prices. The Company has established “unhedged” grain position limits (the amount of grain, either owned or contracted for, that does not have an offsetting derivative contract to lock in the price). To reduce the exposure to market price risk on grain owned and forward grain and ethanol purchase and sale contracts, the Company enters into commodity futures contracts, primarily via a regulated exchange such as the Chicago Mercantile Exchange and, to a lesser extent, via over-the-counter contracts with various counterparties. The Company’s forward contracts are for physical delivery of the commodity in a future period. 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 the contracts for the purchase and sale of grain and ethanol are consistent with industry standards. The Company, although to a lesser extent, also enters into option contracts for the purpose of providing pricing features to its customers and to manage price risk on its own inventory.

All of these contracts are considered derivatives. While the Company considers its commodity contracts to be effective economic hedges, the Company does not designate or account for its commodity contracts as hedges as defined under current accounting standards. The Company accounts for its commodity derivatives at estimated fair value, the same method it uses to value its grain inventory. The estimated fair value of the commodity derivative contracts that require the receipt or posting of cash collateral is recorded on a net basis (offset against cash collateral posted or received) within commodity derivative assets or liabilities. Management determines fair value based on exchange-quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets and non-performance risk. For contracts for which the Company expects to take physical delivery, balance sheet classification is based on estimated delivery date. All contracts held as economic hedges or are traded on a regulated exchange are based on the net position.

Realized and unrealized gains and losses in the value of commodity contracts (whether due to changes in commodity prices, changes in performance or credit risk, or due to sale, maturity or extinguishment of the commodity contract) and grain inventories are included in sales and merchandising revenues in the statements of income.

Generally accepted accounting principles permit a party to a master netting arrangement to offset fair value amounts recognized for derivative instruments against the right to reclaim cash collateral or obligation to return cash collateral under the same master netting arrangement. Note 1 of the Company’s 2010 Form 10-K provides information surrounding the Company’s various master netting arrangements related to its futures, options and over-the-counter contracts. The following table presents at March 31, 2011, December 31, 2010 and March 31, 2010, a summary of the estimated fair value of the Company’s commodity derivative instruments that require cash collateral and the associated cash posted/received as collateral. The net asset or liability positions of these derivatives (net of their cash collateral) are determined on a counterparty-by-counterparty basis and are included within short-term commodity derivative assets (or liabilities) on the Consolidated Balance Sheets:

		March 31, 2011								December 31, 2010								March 31, 2010
		Net				Net				Net				Net				Net				Net
		derivative				derivative				derivative				derivative				derivative				derivative
		asset				liability				asset				liability				asset				liability
(in thousands)		position				position				position				position				position				position
Collateral paid		$	—			$	46,305			$	166,589			$	—			$	215			$	—
Collateral received			—				—				—				—				(6,471	)			—
Fair value of derivatives			—				(87,125	)			(146,330	)			—				38,511				—
Balance at end of period		$	—			$	(40,820	)		$	20,259			$	—			$	32,255			$	—

Certain of our contracts allow the Company to post grain inventory as collateral rather than cash. Grain inventory posted as collateral on our derivative contracts are recorded in Inventories on the Consolidated Balance Sheets and the estimated fair value of such inventory was $91.7 million, $27.3 million, and $11.7 million as of March 31, 2011, December 31, 2010, and March 31, 2010, respectively.

The gains included in the Company’s Condensed Consolidated Statement of Income and the line items in which they are located for the three months ended March 31, 2011 and 2010 are as follows:

		Three months ended				Three months ended
(in thousands)		March 31, 2011				March 31, 2010
Gains on commodity derivatives included in sales and merchandising revenues		$	1,278			$	44,703

At March 31, 2011, the Company had the following bushels, tons and gallons outstanding (on a gross basis) on all commodity derivative contracts:

		Number of bushels				Number of tons				Number of gallons
Commodity		(in thousands)				(in thousands)				(in thousands)
Non-exchange traded:
Corn			353,901				—				—
Soybeans			17,571				—				—
Wheat			17,599				—				—
Oats			9,399				—				—
Soymeal			—				8				—
Ethanol			—				—				273,675
Other			698				—				—
Subtotal			399,168				8				273,675
Exchange traded:
Corn		153,510					—				—
Soybeans		24,445					—				—
Wheat		58,035					—				—
Oats		5,020					—				—
Soymeal			—				4				—
Ethanol			—				—			50,990
Other		—					1				260
Subtotal		241,010				5				51,250
Total			640,178				13				324,925

Interest Rate Derivatives

The Company periodically enters into interest rate contracts to manage interest rate risk on borrowing or financing activities. Information regarding the nature and terms of the Company’s interest rate derivatives is presented in Note 15 “Derivatives,” in the Company’s 2010 Annual Report on Form 10-K and such information is consistent with that as of March 31, 2011. The fair values of these derivatives are not material for any of the periods presented and are included in the Company’s Condensed Consolidated Balance Sheet in either other current liabilities (if short-term in nature) or in other assets or other long-term liabilities (if non-current in nature). The impact to the Company’s results of operations related to these interest rate derivatives was not material for any period presented.

During the first quarter, the Company entered into two $10 million swaptions for Rail purchase options on sale leaseback transactions to manage the risk of higher interest rates in the future. The effective dates of the options to enter into a swap are September 28, 2012 and 2013. The swaptions are recorded at fair value and are marked-to-market on a quarterly basis, with the change recorded to income. The impact on income for the first quarter was a loss of $14 thousand.

Foreign Currency Derivatives

The Company has entered into a zero cost foreign currency collar to hedge the change in conversion rate between the Canadian dollar and the U.S. dollar for railcar leases in Canada. Information regarding the nature and terms of this derivative is presented in Note 15 “Derivatives,” in the Company’s 2010 Annual Report on Form 10-K and such information is consistent with that as of March 31, 2011. The fair value of this derivative and its impact to the Company’s results of operations for any of the periods presented were not material.

5. Earnings Per Share

Unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. The Company’s nonvested restricted stock are considered participating securities since the share-based awards contain a non-forfeitable right to dividends irrespective of whether the awards ultimately vest.

		Three months ended
		March 31,
(in thousands except per share data)		2011				2010
Net income attributable to The Andersons, Inc.		$	17,266			$	12,265
Less: Distributed and undistributed earnings allocated to nonvested restricted stock			51				34
Earnings available to common shareholders		$	17,215			$	12,231
Earnings per share — basic:
Weighted average shares outstanding — basic			18,454				18,313
Earnings per common share — basic		$	0.93			$	0.67
Earnings per share — diluted:
Weighted average shares outstanding — basic			18,454				18,313
Effect of dilutive awards			142				108
Weighted average shares outstanding — diluted			18,596				18,421
Earnings per common share — diluted		$	0.93			$	0.66

There were no antidilutive stock-based awards outstanding for the first quarter of 2011and approximately 1 thousand outstanding for the first quarter of 2010.

6. Employee Benefit Plans

Included as charges against income for the three months ended March 31, 2011 and 2010 are the following amounts for pension and postretirement benefit plans maintained by the Company:

		Pension Benefits
		Three months ended
		March 31,
(in thousands)		2011				2010
Service cost		$	—			$	357
Interest cost			1,126				1,035
Expected return on plan assets			(1,560	)			(1,363	)
Recognized net actuarial loss			223				424
Benefit (income) cost		$	(211	)		$	453

		Postretirement Benefits
		Three months ended
		March 31,
(in thousands)		2011				2010
Service cost		$	141			$	119
Interest cost			318				300
Amortization of prior service cost			(136	)			(128	)
Recognized net actuarial loss			209				158
Benefit cost		$	532			$	449

In March 2010, the Patient Protection and Affordable Care Act (“PPACA”) was signed into law. One of the provisions of the PPACA eliminates the tax deductibility of retiree health care costs to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare Part D coverage. As a result, the Company was required to make an adjustment to its deferred tax asset associated with its postretirement benefit plan in the amount of $1.5 million during the first quarter of 2010. The offset to this adjustment was included in the provision for income taxes on the Company’s Consolidated Income Statement.

7. Segment Information

During the first quarter of 2011, management re-evaluated the Company’s reportable segments. Based on that evaluation, the Company has begun to separate the segment previously reported as Grain & Ethanol into two separate reportable segments for external financial reporting. We have also evaluated the impact of this change on the recoverability of our goodwill and no impairment charge was necessary. Corresponding items of segment information for earlier periods have been restated for comparability purposes.

The Company’s operations include six reportable business segments that are distinguished primarily on the basis of products and services offered. The Grain business includes grain merchandising, the operation of terminal grain elevator facilities and the investment in Lansing Trade Group LLC (“LTG”). The Ethanol business purchases and sells ethanol and also manages the ethanol production facilities in which the Company has investments and various service contracts for these investments. Rail operations include the leasing, marketing and fleet management of railcars and locomotives, railcar repair and metal fabrication. The Plant Nutrient business manufactures and distributes agricultural inputs, primarily fertilizer, to dealers and farmers. Turf & Specialty operations include the production and distribution of turf care and corncob-based products. The Retail business operates large retail stores, a specialty food market, a distribution center and a lawn and garden equipment sales and service shop. Included in Other are the corporate level amounts not attributable to an operating segment.

		Results of Operations — Segment Disclosures
		(in thousands)
														Plant				Turf &
First Quarter 2011		Grain				Ethanol				Rail				Nutrient				Specialty				Retail				Other				Total
Revenues from external customers		$	637,967			$	132,748			$	28,910			$	123,649			$	47,270			$	31,130			$	—			$	1,001,674
Inter-segment sales			1				—				189				5,385				705				—				—				6,280
Equity in earnings of affiliates			6,230				1,014				—				2				—				—				—				7,246
Other income, net			580				58				753				125				290				156				344				2,306
Interest expense			4,840				412				1,447				843				449				260				(915	)			7,336
Operating income (loss) (a)			15,101				3,571				3,546				5,114				3,278				(2,664	)			(874	)			27,072
(Income) loss attributable to noncontrolling interest			—				(122	)			—				—				—				—				—				(122	)
Income (loss) before income taxes			15,101				3,693				3,546				5,114				3,278				(2,664	)			(874	)			27,194

														Plant				Turf &
First Quarter 2010		Grain				Ethanol				Rail				Nutrient				Specialty				Retail				Other				Total
Revenues from external customers		$	402,368			$	118,521			$	26,690			$	103,158			$	41,633			$	29,628			$	—			$	721,998
Inter-segment sales			—				—				154				4,638				633				—				—				5,425
Equity in earnings of affiliates			3,059				6,844				—				2				—				—				—				9,905
Other income (loss), net			649				24				1,809				331				417				119				305				3,654
Interest expense			1,391				214				1,327				1,133				539				287				(256	)			4,635
Operating income (a)			12,198				8,518				1,026				719				2,664				(2,827	)			(618	)			21,680
(Income) loss attributable to noncontrolling interest			—				(391	)			—				—				—				—				—				(391	)
Income (loss) before income taxes			12,198				8,909				1,026				719				2,664				(2,827	)			(618	)			22,071

8. Related Party Transactions

Equity Method Investments

The Company, directly or indirectly, holds investments in companies that are accounted for under the equity method. The Company’s equity in these entities is presented at cost plus its accumulated proportional share of income or loss, less any distributions it has received. See Note 3 in the Company’s 2010 Form 10-K for more information, including descriptions of various arrangements the Company has with certain of these entities.

For the quarters ended March 31, 2011 and 2010, revenues recognized for the sale of ethanol that the Company purchased from the ethanol LLCs were $158.0 million and $112.6 million, respectively. For the quarters ended March 31, 2011 and 2010, revenues recognized for the sale of corn to the ethanol LLCs under these agreements were $146.7 million and $97.6 million, respectively.

The Company also sells and purchases both grain and ethanol with LTG in the ordinary course of business on terms similar to sales and purchases with unrelated customers.

From time to time, the Company enters into derivative contracts with certain of its related parties, including the ethanol LLCs and LTG, for the purchase and sale of corn and ethanol, for similar price risk mitigation purposes and on similar terms as the purchase and sale derivative contracts it enters into with unrelated parties. At March 31, 2011, the fair value of derivative contracts with related parties was a gross asset and liability of $18.2 million and $10.9 million, respectively.

In the first quarter of 2011, LTG qualified as a significant subsidiary of the Company under the income test. The following table presents the required summarized unaudited financial information of this investment for the three month periods ended March 31, 2011 and 2010:

		Three months ended
		March 31,
(in thousands)		2011				2010
Sales		$	1,495,861			$	954,325
Gross profit			36,535				20,007
Income from continuing operations			14,521				6,105
Net income			13,533				6,221
Net income attributable to LTG			12,090				5,371

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

		% ownership at
		March 31, 2011				Three months ended
		(direct and				March 31,
(in thousands)		indirect)				2011				2010
The Andersons Albion Ethanol LLC			50	%		$	384			$	2,721
The Andersons Clymers Ethanol LLC			38	%			136				2,884
The Andersons Marathon Ethanol LLC			50	%			495				1,239
Lansing Trade Group LLC			51	%			6,166				2,886
Other			7%-33	%			65				175
Total						$	7,246			$	9,905

Total distributions received from unconsolidated affiliates were $8.6 million for the first quarter of 2011.

While the Company holds a majority of the outstanding shares of LTG, all major operating decisions of LTG are made by LTG’s Board of Directors and the Company does not have a majority of the board seats. In addition, based on the terms of the LTG operating agreement, the minority shareholders have substantive participating rights that allow them to effectively participate in the decisions made in the ordinary course of business that are significant to LTG. Due to these factors, the Company does not have control over LTG and therefore accounts for this investment under the equity method.

The Company holds a majority interest (66%) in The Andersons Ethanol Investment LLC (“TAEI”). This consolidated entity holds a 50% interest in The Andersons Marathon Ethanol LLC (“TAME”). The noncontrolling interest in TAEI is attributed 34% of all gains and losses of TAME.

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

		Three months ended				Year ended				Three months
		March 31,				December 31,				ended March 31,
(in thousands)		2011				2010				2010
The Andersons Albion Ethanol LLC		$	29,931			$	31,048			$	31,534
The Andersons Clymers Ethanol LLC			37,323				37,496				36,589
The Andersons Marathon Ethanol LLC			35,424				34,929				35,052
Lansing Trade Group LLC			69,500				70,143				62,534
Other			1,799				1,733				1,458
Total		$	173,977			$	175,349			$	167,167

Investment in Debt Securities

During the second quarter of 2010, the Company paid $13.1 million to acquire 100% of newly issued cumulative convertible preferred shares of Iowa Northern Railway Corporation (“IANR”). IANR operates a 163-mile short-line railroad that runs diagonally through Iowa from northwest to southeast from Manly to Cedar Rapids and a branch line from Waterloo to Oelwein. IANR has a fleet of 21 locomotives and approximately 500 railcars and serves primarily agribusiness customers. It is also involved in the development of logistics terminals designed to aid the transloading of various products, including ethanol and wind turbine components. As a result of this investment, the Company has a 49.9% voting interest in IANR, with the remaining 50.1% voting interest held by the common shareholders. The preferred shares purchased by the Company have certain rights associated with them, including voting, dividends, liquidation, redemption and conversion. Dividends accrue to the Company at a rate of 14% annually

whether or not declared by IANR and are cumulative in nature. The Company can convert its preferred shares into common shares of IANR at any time, but the shares cannot be redeemed until after five years. This investment is accounted for as “available-for-sale” debt securities in accordance with ASC 320 and is carried at estimated fair value in “Other noncurrent assets” on the Company’s balance sheet. The estimated fair value of the Company’s investment in IANR as of March 31, 2011 was $15.8 million.

Based on the Company’s assessment, IANR is considered a variable interest entity (VIE). Since the Company does not possess the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, it is not considered to be the primary beneficiary of IANR and therefore does not consolidate IANR. The decisions that most significantly impact the economic performance of IANR are made by IANR’s Board of Directors. The Board of Directors has five directors; two directors from the Company, two directors from the common shareholders and one independent director who is elected by unanimous decision of the other four directors. The vote of four of the five directors is required for all key decisions.

The Company’s current maximum exposure to loss related to IANR is $17.4 million, which represents the Company’s investment plus unpaid accrued dividends to date of $1.6 million. The Company does not have any obligation or commitments to provide additional financial support to IANR.

Related Party Transactions

In the ordinary course of business, the Company will enter into related party transactions with each of the investments described above. The following table sets forth the related party transactions entered into for the time periods presented:

		Three months ended
		March 31,
(in thousands)		2011				2010
Sales and service fee revenues		$	180,747			$	119,315
Purchases of product			128,743				109,753
Lease income (a)			1,252				1,383
Labor and benefits reimbursement (b)			2,773				2,686
Accounts receivable at March 31 (c)			21,879				8,635
Accounts payable at March 31 (d)			21,035				14,588

9. Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2011, December 31, 2010 and March 31, 2010:

(in thousands)		March 31, 2011
Assets (liabilities)		Level 1				Level 2				Level 3				Total
Cash and cash equivalents		$	22,320			$	—			$	—			$	22,320
Commodity derivatives, net			(13,486	)			122,287				14,983				123,784
Convertible preferred securities (b)			—				—				15,790				15,790
Other assets and liabilities (a)			18,644				—				(1,502	)			17,142
Total		$	27,478			$	122,287			$	29,271			$	179,036

(in thousands)		December 31, 2010
Assets (liabilities)		Level 1				Level 2				Level 3				Total
Cash and cash equivalents		$	29,219			$	—			$	—			$	29,219
Commodity derivatives, net			61,559				129,723				12,406				203,688
Convertible preferred securities (b)			—				—				15,790				15,790
Other assets and liabilities (a)			17,983				—				(2,156	)			15,827
Total		$	108,761			$	129,723			$	26,040			$	264,524

(in thousands)		March 31, 2010
Assets (liabilities)		Level 1				Level 2				Level 3				Total
Cash and cash equivalents		$	74,459			$	—			$	—			$	74,459
Commodity derivatives, net			14,148				(21,641	)			22				(7,471	)
Other assets and liabilities (a)			8,703				—				(1,925	)			6,778
Total		$	97,310			$	(21,641	)		$	(1,903	)		$	73,766

A reconciliation of beginning and ending balances for the Company’s fair value measurements using Level 3 inputs is as follows:

		March 31, 2011
		Interest
		rate												March 31, 2010
		derivatives				Convertible				Commodity				Interest				Commodity
		and				preferred				derivatives,				rate				derivatives,
(in thousands)		swaptions				securities				net				derivatives				net
|		| | | |
Asset (liability) at beginning of period		$	(2,156	)		$	15,790			$	12,406			$	(1,763	)		$	1,948
Realized gains (losses) included in earnings			(2	)			—				77				(72	)			(1,926	)
Unrealized gains (losses) included in other comprehensive income			149				—				—				(126	)			—
New contracts entered into			507				—				—				36				—
Transfers from level 2			—				—				2,500				—				—
Asset (liability) at end of period		$	(1,502	)			15,790			$	14,983			$	(1,925	)		$	22

The majority of the Company’s assets and liabilities measured at fair value are based on the market approach valuation technique. With the market approach, fair value is derived using prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The Company’s net commodity derivatives primarily consist of futures or options contracts via regulated exchanges and contracts with producers or customers under which the future settlement date and bushels (or gallonsin the case of ethanol contracts) of commodities to be delivered (primarily wheat, corn, soybeans and ethanol) are fixed and under which the price may or may not be fixed. Depending on the specifics of the individual contracts, the fair value is derived from the futures or options prices on the Chicago Mercantile Exchange (“CME”) or the New York Merchantile Exchange (“NYMEX”) for similar commodities and delivery dates as well as observable quotes for local basis adjustments (the difference, which is attributable to local market conditions, between the quoted futures price and the local cash price).

Although nonperformance risk, both of the Company and the counterparty, is present in each of these commodity contracts and is a component of the estimated fair values, based on the Company’s historical experience with its producers and customers and the Company’s knowledge of their businesses, the Company does not view nonperformance risk to be a significant input to fair value for the majority of these commodity contracts. However, in situations where the Company believes that nonperformance risk is higher (based on past or present experience with a customer or knowledge of the customer’s operations or financial condition), the Company classifies these commodity contracts as “level 3” in the fair value hierarchy and, accordingly, records estimated fair value adjustments based on internal projections and views of these contracts.

During the second quarter of 2010, the Company invested in cumulative convertible preferred shares of Iowa Northern Railway Corporation. These shares are carried at estimated fair value in “Other noncurrent assets” on the Company’s balance sheet. Changes in estimated fair value are recorded within “other comprehensive income”. See Note 8 for further information.

Fair Value of Financial Instruments

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 thousands)		March 31, 2011				December 31, 2010
Fair value of long-term debt and interest rate contracts		$	308,304			$	307,865
Fair value in excess of carrying value			146				4,359

The fair value of the Company’s cash equivalents, accounts receivable and accounts payable approximate their carrying value as they are close to maturity.

10. Debt

The Company is party to borrowing arrangements with a syndicate of banks. See Note 8 in the Company’s 2010 Form 10-K for a complete description of these arrangements. Total borrowing capacity for the Company under all lines of credit is currently at $1.1 billion. At March 31, 2011, the Company had a total of $614.2 million available for borrowing under its lines of credit.

On February 26, 2010, the Company entered into an Amended and Restated Note Purchase Agreement for its Senior Guaranteed Notes. The Amended and Restated Note Purchase Agreement changed the maturity of the $92 million Series A note, which was originally due March 2011, into Series A — $17 million due March 2011; Series A-1 — $25 million due March 2012; Series A-2 — $25 million due March 2013; and Series A-3 — $25 million due March 2014. The Series A note was paid off during the first quarter of 2011.

The Company’s long-term debt at March 31, 2011, December 31, 2010 and March 31, 2010 consisted of the following:

(in thousands)		March 31, 2011				December 31, 2010				March 31, 2010
Current maturities of long -term debt — nonrecourse		$	2,835			$	2,841			$	7,890
Current maturities of long-term debt — recourse			39,948				21,683				22,430
			42,783				24,524				30,320
Long-term debt, less current maturities — nonrecourse			12,414				13,150				15,316
Long-term debt, less current maturities — recourse			250,804				263,675				272,535
		$	263,218			$	276,825			$	287,851

11. Commitments and Contingencies

The Company is party to litigation, or threats thereof, both as defendant and plaintiff with some regularity, although individual cases that are material in size occur infrequently. As a defendant, the Company establishes reserves for claimed amounts that are considered probable, and capable of estimation. If those cases are resolved for lesser amounts, the excess reserve can be taken into income and, conversely, if those cases are resolved for amounts incremental to what the Company has accrued, the Company records a charge to income. The Company believes it is unlikely that the results of its current legal proceedings for which it is the defendant, even if unfavorable, will be material. As a plaintiff, amounts that are collected can also result in sudden, non-recurring income. Litigation results depend upon a variety of factors, including the availability of evidence, the credibility of witnesses, the performance of counsel, the state of the law, and the impressions of judges and jurors, any of which can be critical in importance, yet difficult, if not impossible, to predict. Consequently, cases currently pending, or future matters, may result in unexpected, and non-recurring losses, or income, from time to time. In that regard, the Company currently is involved in a certain disputed matter which may result in significant gains and it is reasonably possible that the Company could recognize material gains from such disputes over the next 12 months, although for all the reasons cited above neither the likelihood of success, nor the amounts or collection of any settlement or verdict, can be predicted, estimated or assured.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements which relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. You are urged to carefully consider these risks and others, including those risk factors listed under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010 (“2010 Form 10-K”). In some cases, you can identify forward-looking statements by terminology such as “may,” “anticipates,” “believes,” “estimates,” “predicts,” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These forward-looking statements relate only to events as of the date on which the statements are made and the Company undertakes no obligation, other than any imposed by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Critical Accounting Policies and Estimates

Our critical accounting policies and critical accounting estimates, as described in our 2010 Form 10-K, have not materially changed during the first three months of 2011.

Executive Overview

Grain Business

The Grain business operates grain elevators in various states, primarily in the U.S. Corn Belt. In addition to storage, merchandising and grain trading, Grain performs risk management and other services for its customers. Grain is a significant investor in Lansing Trade Group LLC (“LTG”), an established grain merchandising business with operations throughout the country and internationally. LTG continues to increase its capabilities, including ethanol trading, and is exposed to many of the same risks as the Company’s Grain business. This investment provides the business with a further opportunity to expand outside of its traditional geographic regions.

The agricultural commodity-based business is one in which changes in selling prices generally move in relationship to changes in purchase prices. Therefore, increases or decreases in prices of the agricultural commodities that the business deals in will have a relatively equal impact on sales and cost of sales and a minimal impact on gross profit. As a result, changes in sales for the period may not necessarily be indicative of the businesses overall performance and more focus should be placed on changes to merchandising revenues and service income.

The March U.S. Department of Agriculture (USDA) reports estimated wheat acres for 2011 at 58 million, about 1 million acres higher than market expectations. Wheat conditions for 2011, as tracked by the USDA, for unharvested crops, are behind 2010 with 62%, on average, rated as good to excellent for the five states where the Company has facilities. The biggest decrease in crop condition is in Nebraska with only 43% rated as good to excellent. The primary harvest period for winter wheat is in the month of July.

The USDA expects U.S. farmers to plant a record-high 92.2 million acres of corn in 2011, a 5% increase from 2010, which are the second highest planted corn acres since 1944. Projected soybean acres are expected to decline by 1% from last year to 76.6 million, but will still be the third largest soybean planting on record. Planted acreage is expected to be up in most states compared to last year due to higher prices and grower expectations of better net returns. Weather patterns in the Midwest during the important agricultural planting and growing season will strongly contribute to the success of the base grain business.

Ethanol Business

The Ethanol business operates the three ethanol production facilities for which the Company has investments. The business also offers facility operations, risk management, corn origination, ethanol and distillers dried grains (“DDG”) marketing to the ethanol plants it operates as well as third parties.

The ethanol industry has been impacted by the rising corn prices caused by global supply and demand. Several existing factors that contribute to greater ethanol production and use are tax credits for blending corn ethanol into gasoline and tariffs that limit the importation of sugar ethanol. In addition, subsequent to year-end, the EPA approved an increase in the use of ethanol blends from 10% to 15% for light vehicle models 2001 and newer. As the high demand for corn continues into 2011, the Company continues to monitor the volatility in corn and ethanol prices and its impact on the ethanol LLCs closely.

The Ethanol business’s investments in the three ethanol LLCs had lower results for the first quarter of 2011 compared to the same period in 2010 due to the decline in ethanol margins. However, first quarter results were better than expected due to an increase in the price of ethanol despite slightly less volume year over year. With the current price volatility of various inputs, if the weather is not optimal as we move into the crop season, there could be adverse impacts on gross profit in future quarters.

Rail Business

The Rail business buys, sells, leases, rebuilds and repairs various types of used railcars and rail equipment. The business also provides fleet management services to fleet owners and operates a custom steel fabrication business. Rail has a diversified fleet of car types (boxcars, gondolas, covered and open top hoppers, tank cars and pressure differential cars) and locomotives and also serves a wide range of customers.

Railcars and locomotives under management (owned, leased or managed for financial institutions in non-recourse arrangements) at March 31, 2011 were 22,236 compared to 23,362 at March 31, 2010. The average utilization rate (railcars and locomotives under management that are in lease services, exclusive of railcars managed for third party investors) has increased from 70.0% for the quarter ended March 31, 2010 to 82.4% for the quarter ended March 31, 2011. Rail traffic on major U.S. railroads through the first three months of 2011 rose 4% over the same period last year.

As part of the strategy to diversify its portfolio, Rail purchased over 600 used intermodal containers for $1.9 million subsequent to quarter end. These containers can be used for multiple purposes including transporting freight and stacking various types of cargo. Rail plans to continue pursuing growth opportunities through portfolio purchases, expansion of repair facilities, and other possible prospects.

Plant Nutrient Business

The Company’s Plant Nutrient business is a leading manufacturer, distributor and retailer principally of agricultural plant nutrients and pelleted lime and gypsum products in the U.S. Corn Belt and Florida. It operates 30 facilities in Ohio, Michigan, Indiana, Illinois, Florida, Wisconsin, Minnesota and Puerto Rico. Plant Nutrient provides warehousing, packaging and manufacturing services to basic manufacturers and other distributors. The business also manufactures and distributes a variety of industrial products in the U.S. including nitrogen reagents for air pollution control systems used in coal-fired power plants, water treatment products, and de-icers and anti-icers for airport runways, roadways, and other commercial applications. The major nutrient products sold by the business principally contain nitrogen, phosphate, potassium and sulfur.

We expect 2011 to be a strong volume year as the demand for nutrients is high and acres planted are expected to increase. As a result, margins should be strong as well as a result of tight supplies of the basic nutrients and strong price trends. However, adverse weather in the second and fourth quarters could reduce sales, margins and lead to potential lower-of-cost-or-market exposure.

Turf & Specialty Business

The Turf & Specialty business produces granular fertilizer products for the professional lawn care and golf course markets. It also sells consumer fertilizer and weed and turf pest control products for “do-it-yourself” application, to mass merchandisers, small independent retailers and other lawn fertilizer manufacturers and performs contract manufacturing of fertilizer and weed and turf pest control products. Turf & Specialty is one of a limited number of processors of corncob-based products in the United States. These products primarily serve the weed and turf pest control and feed ingredient carrier, animal litter and industrial markets, and are distributed throughout the United States and Canada and into Europe and Asia. The turf products industry is highly seasonal, with the majority of sales occurring from early spring to early summer. Corncob-based products are sold throughout the year.

The business continues to see positive results from its focus on proprietary products and expanded product lines. The Company has spent considerable time marketing the A+ program which has boosted liquid and dispersible granular sales.

Retail Business

The Retail business includes large retail stores operated as “The Andersons” and a specialty food market operated as “The Andersons Market”. It also operates a sales and service facility for outdoor power equipment. The retail concept is More for Your Home ^® and the conventional retail stores focus on providing significant product breadth with offerings in home improvement and other mass merchandise categories, as well as specialty foods, wine and indoor and outdoor garden centers.

The retail business is highly competitive. The Company competes with a variety of retail merchandisers, including home centers, department and hardware stores, as well as local and national grocers. Food reset projects were completed during 2010 in three of the stores, which we expect will increase traffic in the stores and increase sales. In 2011, Retail continues to work on the new departments and products added in the food areas as part of the reset to maximize the profitability of these new additions.

Other

The “Other” business segment of the Company represents corporate functions that provide support and services to the operating segments. The results contained within this segment include expenses and benefits not allocated back to the operating segments.

Operating Results

The following discussion focuses on the operating results as shown in the Condensed Consolidated Statements of Income with a separate discussion by segment. Additional segment information is included in the Notes to the Condensed Consolidated Financial Statements herein in Note 7. Segment Information.

		Three months ended
		March 31,
(in thousands)		2011				2010
Sales and merchandising revenues		$	1,001,674			$	721,998
Cost of sales and merchandising revenues			922,989				663,448
Gross profit			78,685				58,550
Operating, administrative and general expenses			53,707				45,403
Interest expense			7,336				4,635
Equity in earnings of affiliates			7,246				9,905
Other income, net			2,306				3,654
Income before income taxes		$	27,194			$	22,071

Comparison of the three months ended March 31, 2011 with the three months ended March 31, 2010:

Grain Division

		Three months ended
		March 31,
(in thousands)		2011				2010
Sales and merchandising revenues		$	637,967			$	402,368
Cost of sales and merchandising revenues			606,675				380,168
Gross profit			31,292				22,200
Operating, administrative and general expenses			18,161				12,319
Interest expense			4,840				1,391
Equity in earnings of affiliates			6,230				3,059
Other income, net			580				649
Operating income			15,101				12,198

Operating income for the Grain Division increased $2.9 million over the results from the same period last year. Sales of grain increased $232.3 million, or 61% driven primarily by rising grain prices. Sales of grain increased in the first quarter of 2011 compared to the first quarter of 2010 due to the acquisitions in the second half of 2010 and due to the average price per bushel of grain sold which increased by 60%, which was offset by a slight decrease in the volume of corn and wheat bushels. Merchandising revenues increased $3.2 million over the first quarter of 2010 and is related primarily to an increase in space income, and more specifically basis appreciation, due to a 50% increase in wheat bushels owned in 2011 versus 2010.

Gross profit increased $9.1 million over the first quarter of 2010 which relates to the increase in space income mentioned previously.

Operating expenses for Grain increased $5.8 million over the same period in 2010 and is spread among several expense categories. Bad debt expense, labor, maintenance, and depreciation and amortization are

up from prior year and are partly attributable to incremental expenses added by acquisitions in the second quarter and end of 2010.

Interest expense increased $3.4 million from the same period in 2010 due to an increase in inventory ownership and funding to cover margin deposit requirements. Other income did not change significantly quarter over quarter.

Equity in earnings of affiliates increased $3.2 million over the same period in 2010 primarily due to the investment in LTG.

Ethanol Division

		Three months ended
		March 31,
(in thousands)		2011				2010
Sales and merchandising and service fee revenues		$	132,748			$	118,521
Cost of sales and merchandising revenues			128,283				114,788
Gross profit			4,465				3,733
Operating, administrative and general expenses			1,432				1,478
Interest expense			412				214
Equity in earnings of affiliates			1,014				6,844
Other income, net			58				24
Operating income before noncontrolling interest			3,693				8,909
(Income) loss attributable to noncontrolling interest			(122	)			(391	)
Operating income		$	3,571			$	8,518