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Related Party Transactions | 12 Months Ended
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Dec. 31, 2019
Related Party Transactions [Abstract] |
Related Party Transactions | 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 generally presented at cost plus its accumulated proportional share of income or loss, less any distributions it has received or other-than-temporary impairments recognized. The amount of equity method investments has decreased substantially from the prior year as two acquisitions in 2019 resulted in the consolidation of the former significant equity method investments. In January 2019, the Company purchased the remaining equity of LTG and Thompsons Limited and in October 2019, the Company merged its existing equity method ethanol investments to create the consolidated entity of TAMH. Prior to the acquisition in January of 2019, the Company was a minority investor in LTG. Prior to the acquisition in the current year, the Company accounted for this investment under the equity method. The Company sold and purchased both grain and ethanol with LTG in the ordinary course of business on terms similar to sales and purchases with unrelated customers. On July 31, 2013, the Company, along with LTG established joint ventures that acquired 100% of the stock of Thompsons Limited, including its investment in a related U.S. operating company. Each Company owned 50% of the investment. Thompsons Limited was a grain and food-grade bean handler and agronomy input provider, headquartered in Blenheim, Ontario, which operated 12 locations across Ontario and Minnesota. The Company did not hold a majority of the outstanding shares of Thompsons Limited joint ventures. All major operating decisions of these joint ventures were made by their Board of Directors and the Company did not have a majority of the board seats. Due to these factors, the Company did not have control over these joint ventures and therefore accounted for these investments under the equity method of accounting, as of December 31, 2018. As a result of the LTG acquisition in January 2019, both LTG and Thompsons Limited became consolidated entities of the Company. See Note 18 for additional information on the acquisition. In October of 2019, the Company entered into an agreement with Marathon Petroleum Corporation to merge The Andersons Albion Ethanol LLC (TAAE), The Andersons Clymers Ethanol LLC (TACE), The Andersons Marathon Ethanol LLC (TAME) and the Company's wholly-owned The Andersons Denison Ethanol LLC into a new legal entity, The Andersons Marathon Holdings LLC ("TAMH"). The Company now owns 50.1% equity in TAMH, and the transaction resulted in the consolidation of TAMH’s results in the Company's financial statements. See note 18 for additional information on the merger. The background information below related to the former ethanol LLCs applies through September 30, 2019, prior to consolidation. In 2005, the Company became an investor in TAAE. TAAE was a producer of ethanol and its co-products DDG and corn oil at its 110 million gallon-per-year ethanol production facility in Albion, Michigan. The Company operated the facility under a management contract and provided corn origination, ethanol, corn oil and DDG marketing and risk management services. The Company was separately compensated for all such services except corn oil marketing. The Company also leased its Albion, Michigan grain facility to TAAE. While the Company held 55% of the outstanding units of TAAE, a super-majority vote was required for all major operating decisions of TAAE based on the terms of the Operating Agreement. The Company concluded that the super-majority vote requirement gave the minority shareholders substantive participating rights and therefore consolidation for book purposes was not appropriate. The Company accounted for its investment in TAAE under the equity method of accounting through September 30, 2019. In 2006, the Company became a minority investor in TACE. TACE was also a producer of ethanol and its co-products DDG and corn oil at a 110 million gallon-per-year ethanol production facility in Clymers, Indiana. The Company operated the facility under a management contract and provided corn origination, ethanol, corn oil and DDG marketing and risk management services for which it was separately compensated. The Company also leased its Clymers, Indiana grain facility to TACE. The Company accounted for its investment in TACE under the equity method of accounting through September 30, 2019. In 2006, the Company became a minority investor in TAME. TAME was also a producer of ethanol and its co-products DDG and corn oil at a 110 million gallon-per-year ethanol production facility in Greenville, Ohio. In January 2007, the Company transferred its 50% share in TAME to The Andersons Ethanol Investment LLC, a consolidated subsidiary of the Company, of which a third party owned 34% of the shares. The Company operated the facility under a management contract and provided corn origination, ethanol, corn oil and DDG marketing and risk management services for which it was separately compensated. In 2009, TAEI invested an additional $1.1 million in TAME, retaining a 50% ownership interest. On January 1, 2017, TAEI was merged with and into TAME. The Company had owned (66%) of TAEI. Pursuant to the merger, the Company’s ownership units in TAEI were canceled and converted into ownership units in TAME. As a result, the Company owned 33% of the outstanding ownership units of TAME. The Company accounted for its investment in TAME under the equity method of accounting through September 30, 2019. The Company had marketing agreements with TAAE, TACE, and TAME under which the Company purchased and marketed the ethanol produced to external customers. As compensation for these marketing services, the Company earned a fee on each gallon of ethanol sold. The Company entered into marketing agreements with each of the ethanol LLCs. Under the ethanol marketing agreements, the Company purchased most, if not all, of the ethanol produced by the LLCs at the same price it resold the ethanol to external customers. The Company acted as the principal in these ethanol sales transactions to external parties as the Company had ultimate responsibility of performance to the external parties. Substantially all of these purchases and subsequent sales were executed through forward contracts on matching terms and, outside of the fee the Company earned for each gallon sold, the Company did not recognize any gross profit on the sales transactions. For the nine months ended September 30, 2019 and years ended December 31, 2018 and 2017, revenues recognized for the sales of ethanol and co-products purchased from related parties were $456.7 million, $625.2 million and $590.9 million, respectively. In addition to the ethanol marketing agreements, the Company held corn origination agreements, under which the Company originated all of the corn used in production for each unconsolidated ethanol LLC. For this service, the Company received a unit-based fee. Similar to the ethanol sales described above, the Company acted as an agent in these transactions, and accordingly, these transactions were recorded on a net basis. For the year ended December 31, 2017, revenues recognized for the sale of corn under these agreements were $498.8 million. As part of the corn origination agreements, the Company also marketed the DDG produced by the entities. For this service the Company received a unit-based fee. The Company did not purchase any of the DDG from the ethanol entities; however, as part of the agreement, the Company guaranteed payment by the buyer for DDG sales. At December 31, 2019, the three unconsolidated ethanol entities had no outstanding receivables balance for DDG and a balance of $7.0 million as of December 31, 2018, of which $0.1 million was more than thirty days past due. As the Company had not experienced historical losses and the DDG receivable balances greater than thirty days past due was immaterial, the Company concluded that the fair value of this guarantee was inconsequential. The following table presents 2019 information for aggregate summarized financial information of TAAE, TACE and TAME through September 30, 2019 along with the Company's equity method investments in Providence Grain Group Inc., Quadra Commodities S.A. and other various investments. In the prior years, the table represents the aggregated summarized financial information of LTG, TAAE, TACE, TAME, Thompsons Limited, and other various investments as they qualified as significant equity method investees in the aggregate. No individual equity investments qualified as significant for the years ended December 31, 2019, 2018 and 2017.
| December 31,
(in thousands) | 2019 |  | 2018 |  | 2017
Sales | $ | 1,930,289 |  |  | $ | 6,111,036 |  |  | $ | 6,080,795 |
Gross profit | 39,253 |  |  | 257,594 |  |  | 217,629 |
Income from continuing operations | 1,895 |  |  | 71,608 |  |  | 50,937 |
Net income | 940 |  |  | 68,876 |  |  | 42,970 |
Current assets | 255,052 |  |  | 1,111,826 |  |  | 1,045,124 |
Non-current assets | 80,823 |  |  | 526,169 |  |  | 538,671 |
Current liabilities | 196,163 |  |  | 792,184 |  |  | 802,161 |
Non-current liabilities | 31,509 |  |  | 281,103 |  |  | 309,649 |
The following table presents the Company’s investment balance in each of its equity method investees by entity:
| December 31,
(in thousands) | 2019 |  | 2018
The Andersons Albion Ethanol LLC (a) | $ | — |  |  | $ | 50,382 |
The Andersons Clymers Ethanol LLC (a) | — |  |  | 24,242 |
The Andersons Marathon Ethanol LLC (a) | — |  |  | 14,841 |
Lansing Trade Group, LLC (b) | — |  |  | 101,715 |
Thompsons Limited (b) | — |  |  | 48,987 |
Providence Grain Group Inc. (c) | 12,424 |  |  | — |
Quadra Commodities S.A. (c) | 5,574 |  |  | — |
Other | 5,859 |  |  | 2,159 |
Total | $ | 23,857 |  |  | $ | 242,326 |
(a) The Company previously owned approximately 55%, 39%, 33% in The Andersons Albion LLC, The Andersons Clymers Ethanol LLC and The Andersons Marathon Ethanol LLC, respectively. Effective October 1, 2019, the Company contributed its interests in these three entities into TAMH. The transaction resulted in the consolidation of these entities into the Company's Consolidated Financial Statements. (b) The Company previously owned approximately 32.5% of LTG. Effective January 1, 2019, the Company purchased the remaining equity of LTG. The transaction resulted in the consolidation of Thompsons Limited of Ontario, Canada and related entities, which LTG and the Company had equally owned. (c) The Company acquired the equity method investments in Providence Grain Group Inc. and Quadra Commodities S.A. through the consolidation of LTG. The following table summarizes income (losses) earned from the Company’s equity method investments by entity:
| % ownership at December 31, 2019 |  | December 31,
(in thousands) |  | 2019 |  | 2018 |  | 2017
The Andersons Albion Ethanol LLC (a) | N/A |  | $ | (1,292 | ) |  | $ | 5,531 |  |  | $ | 6,052 |
The Andersons Clymers Ethanol LLC (a) | N/A |  | (151 | ) |  | 4,846 |  |  | 4,591 |
The Andersons Marathon Ethanol LLC (a) | N/A |  | 920 |  |  | 3,832 |  |  | 1,571 |
Lansing Trade Group, LLC (b) | N/A |  | — |  |  | 10,413 |  |  | 4,038 |
Thompsons Limited (b) | N/A |  | — |  |  | 2,568 |  |  | 696 |
Providence Grain Group Inc. (c)(d) | 37.8% |  | (7,411 | ) |  | — |  |  | — |
Quadra Commodities S.A. (c) | 17.7% |  | 910 |  |  | — |  |  | — |
Other | 5% - 52% |  | (335 | ) |  | (49 | ) |  | (225 | )
Total |  |  | $ | (7,359 | ) |  | $ | 27,141 |  |  | $ | 16,723 |
(a) The Company previously owned approximately 55%, 39%, 33% in The Andersons Albion LLC, The Andersons Clymers Ethanol LLC and The Andersons Marathon Ethanol LLC, respectively. Effective October 1, 2019, the Company contributed its interests in these three entities into TAMH. The transaction resulted in the consolidation of these entities into the Company's Consolidated Financial Statements. (b) The Company previously owned approximately 32.5% of LTG. Effective January 1, 2019, the Company purchased the remaining equity of LTG. The transaction resulted in the consolidation of Thompsons Limited of Ontario, Canada and related entities, which LTG and the Company had equally owned. (c) The Company acquired the equity method investments in Providence Grain Group Inc. and Quadra Commodities S.A. through the consolidation of LTG. (d) The Company recorded an other-than-temporary impairment charge of $5.0 million in the equity method investment in Providence Grain Group which is recorded in equity earnings (losses) in affiliates. Total distributions received from unconsolidated affiliates were $0.4 million for the year ended December 31, 2019. 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. The Company owns 51% of ELEMENT and ICM, Inc. owns the remaining 49% interest. ELEMENT, LLC constructed a 70 million-gallon-per-year bio-refinery. As part of the Company’s investment into ELEMENT, 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 construction of the facility, while the Company will provide corn origination, ethanol marketing, and risk management services. The results of operations for ELEMENT have been included in the Company's consolidated results and are a component of the Ethanol segment. The construction of the plant was substantially completed, and operations commenced in August of 2019. As of December 31, 2019, approximately $3.9 million of remaining obligation is not yet incurred under a design build contract. The following table sets forth the related party transactions entered into for the time periods presented:
| December 31,
(in thousands) | 2019 |  | 2018 |  | 2017
Sales revenues | $ | 246,540 |  |  | $ | 358,856 |  |  | $ | 893,950 |
Service fee revenues (a) | 12,181 |  |  | 20,843 |  |  | 24,357 |
Purchases of product | 569,619 |  |  | 741,736 |  |  | 615,739 |
Lease income (b) | 3,516 |  |  | 6,523 |  |  | 6,175 |
Labor and benefits reimbursement (c) | 10,973 |  |  | 13,487 |  |  | 13,894 |
(a) | Service fee revenues included management fee, corn origination fee, ethanol and DDG marketing fees, and other commissions for the prior periods and through September 30, 2019.
(b) | Lease income included the lease of the Company’s Albion, Michigan and Clymers, Indiana grain facilities as well as certain railcars to the unconsolidated ethanol LLCs and IANR for the prior periods and through September 30, 2019.
(c) | The Company provided all operational labor to the unconsolidated ethanol LLCs and charged them an amount equal to the Company’s costs of the related services for the prior periods and through September 30, 2019.
| December 31,
(in thousands) | 2019 |  | 2018
Accounts receivable (d) | $ | 10,603 |  |  | $ | 17,829 |
Accounts payable (e) | 12,303 |  |  | 28,432 |
(d) | Accounts receivable represents amounts due from related parties for sales of ethanol and other various items.
(e) | Accounts payable represents amounts due to related parties for purchases of equipment and other various items.
From time to time, the Company enters into derivative contracts with certain of its related parties, for similar price risk mitigation purposes and on similar terms as the purchase and sale derivative contracts it enters into with unrelated parties. The fair value of derivative contracts with related parties in a gross asset position as of December 31, 2019 and 2018 was $0.3 million and $1.9 million, respectively. The fair value of derivative contracts with related parties in a gross liability position were de minimis as of December 31, 2019 and $6.3 million as of December 31, 2018.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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