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

Commission file number 000-20557

THE ANDERSONS, INC.

(Exact name of the registrant as specified in its charter

OHIO (State 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)

(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 o 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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 18.3 million common shares outstanding, no par value, at July 31, 2009.

 

 

THE ANDERSONS, INC.

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets – June 30, 2009 December 31, 2008 and June 30, 2008			3
Condensed Consolidated Statements of Income - Three and six months ended June 30, 2009 and 2008			5
Condensed Consolidated Statement of Cash Flows - Six months ended June 30, 2009 and 2008			6
Condensed Consolidated Statements of Shareholders’ Equity Six months ended June 30, 2009 and 2008			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosures about Market Risk			33
Item 4. Controls and Procedures			34
PART II. OTHER INFORMATION
Item 1A. Risk Factors			34
Item 4. Submission of Matters to a Vote of Security Holders			34
Item 6. Exhibits			35
EX-31.1
EX-31.2
EX-31.3
EX-32.1

Part I. Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets
(Unaudited)(In thousands)

		June 30,				December 31,				June 30,
		2009				2008				2008
Current assets:
Cash and cash equivalents		$	179,752			$	81,682			$	33,379
Restricted cash			4,243				3,927				3,664
Accounts and notes receivable, net			130,824				126,255				187,184
Margin deposits, net			38,009				13,094				79,017
Inventories:
Grain			107,722				223,107				230,781
Agricultural fertilizer and supplies			41,784				144,536				119,680
Lawn and garden fertilizer and corncob products			22,906				38,011				22,043
Retail merchandise			29,615				27,579				30,463
Other			3,057				3,687				3,872
			205,084				436,920				406,839
Commodity derivative assets – current			48,635				84,919				493,571
Deferred income taxes			8,478				15,338				4,827
Prepaid expenses and other current assets			32,086				93,827				42,662
Total current assets			647,111				855,962				1,251,143
Other assets:
Pension asset			—				—				7,229
Commodity derivative assets – noncurrent			1,354				3,662				84,297
Other assets and notes receivable, net			15,386				12,433				11,655
Investments in and advances to affiliates			137,895				141,055				137,121
			154,635				157,150				240,302
Railcar assets leased to others, net			176,656				174,132				152,879
Property, plant and equipment:
Land			14,566				14,524				13,560
Land improvements and leasehold improvements			39,524				39,040				37,224
Buildings and storage facilities			121,548				119,174				114,786
Machinery and equipment			156,005				151,401				144,767
Software			9,527				8,899				8,631
Construction in progress			3,822				6,597				3,258
			344,992				339,635				322,226
Less allowances for depreciation and amortization			(224,457	)			(218,106	)			(212,080	)
			120,535				121,529				110,146
Total assets		$	1,098,937			$	1,308,773			$	1,754,470

See notes to condensed consolidated financial statements

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

		June 30,				December 31,				June 30,
		2009				2008				2008
Current liabilities:
Short-term borrowings		$	—			$	—			$	432,500
Accounts payable for grain			63,475				216,307				76,409
Other accounts payable			90,907				97,770				135,294
Customer prepayments and deferred revenue			18,344				55,953				30,992
Commodity derivative liabilities – current			66,698				67,055				160,611
Accrued expenses and other current liabilities			35,047				60,437				83,444
Current maturities of long-term debt – non-recourse			13,336				13,147				13,175
Current maturities of long-term debt			21,947				14,594				11,481
Total current liabilities			309,754				525,263				943,906
Deferred income and other long-term liabilities			12,026				12,977				3,910
Commodity derivative liabilities – noncurrent			4,555				3,706				19,923
Employee benefit plan obligations			36,875				35,513				19,880
Long-term debt – non-recourse, less current maturities			28,938				40,055				47,934
Long-term debt, less current maturities			285,619				293,955				281,496
Deferred income taxes			36,871				32,197				29,268
Total liabilities			714,638				943,666				1,346,317
Shareholders’ equity:
The Andersons, Inc. shareholders’ equity:
Common shares, without par value (25,000 shares authorized; 19,198 shares issued and outstanding)			96				96				96
Preferred shares, without par value (1,000 shares authorized; none issued)			—				—				—
Additional paid-in-capital			174,108				173,393				171,571
Treasury shares (941; 1,069 and 1,074 shares at 6/30/09, 12/31/08 and 6/30/08, respectively; at cost)			(15,408	)			(16,737	)			(16,242	)
Accumulated other comprehensive loss			(29,266	)			(30,046	)			(10,099	)
Retained earnings			244,386				226,707				250,355
Total shareholders’ equity of The Andersons, Inc.			373,916				353,413				395,681
Noncontrolling interest			10,383				11,694				12,472
Total shareholders’ equity			384,299				365,107				408,153
Total liabilities, and shareholders’ equity		$	1,098,937			$	1,308,773			$	1,754,470

See notes to condensed consolidated financial statements

Condensed Consolidated Statements of Income
(Unaudited)(In thousands, except per share data)

		Three months ended								Six months ended
		June 30,								June 30,
		2009				2008				2009				2008
Sales and merchandising revenues		$	810,954			$	1,100,700			$	1,508,346			$	1,813,701
Cost of sales and merchandising revenues			737,620				980,363				1,373,638				1,641,123
Gross profit			73,334				120,337				134,708				172,578
Operating, administrative and general expenses			46,723				49,973				93,253				91,264
Interest expense			5,161				8,521				10,851				17,643
Other income (loss):
Equity in earnings (loss) of affiliates			784				7,781				(2,890	)			16,420
Other income, net			2,724				2,155				3,963				5,039
Income before income taxes			24,958				71,779				31,677				85,130
Income tax expense			9,312				26,835				12,118				31,428
Net income			15,646				44,944				19,559				53,702
Net (income) loss attributable to the noncontrolling interest			272				682				1,311				(253	)
Net income attributable to The Andersons, Inc.		$	15,918			$	45,626			$	20,870			$	53,449
Earnings per common share:
Basic earnings attributable to The Andersons, Inc. common shareholders		$	0.87			$	2.52			$	1.15			$	2.95
Diluted earnings attributable to The Andersons, Inc. common shareholders		$	0.87			$	2.48			$	1.14			$	2.90
Dividends paid		$	0.0875			$	0.0775			$	0.1725			$	0.155

See notes to condensed consolidated financial statements

Condensed Consolidated Statements of Cash Flows
(Unaudited)(In thousands)

		Six months ended
		June 30,
		2009				2008
Operating Activities
Net income		$	19,559			$	53,702
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization			16,212				13,900
Bad debt expense			90				2,569
Equity in earnings/loss of unconsolidated affiliates, net of distributions received			3,260				2,391
Realized gains on sales of railcars and related leases			(1,168	)			(3,317	)
Excess tax benefit from share-based payment arrangement			(340	)			(1,502	)
Deferred income taxes			11,080				2,010
Stock based compensation expense			1,518				2,657
Lower of cost or market inventory and contract adjustment			2,944				—
Other			15				6
Changes in operating assets and liabilities:
Accounts and notes receivable			(4,535	)			(65,976	)
Inventories			228,892				102,443
Commodity derivatives and margin deposits			14,169				(345,048	)
Prepaid expenses and other assets			60,214				616
Accounts payable for grain			(152,832	)			(67,071	)
Other accounts payable and accrued expenses			(67,801	)			46,559
Net cash provided by (used in) operating activities			131,277				(256,061	)
Investing Activities
Acquisition of business, net of $0.3 million cash acquired			—				(6,699	)
Purchases of railcars			(11,884	)			(55,123	)
Proceeds from sale of railcars and related leases			4,943				41,331
Purchases of property, plant and equipment			(7,290	)			(7,833	)
Proceeds from sale of property, plant and equipment			128				67
Change in restricted cash			(316	)			62
Investments in affiliates			(100	)			(20,600	)
Net cash used in investing activities			(14,519	)			(48,795	)
Financing Activities
Net increase in short-term borrowings			—				187,000
Proceeds received from issuance of long-term debt			4,744				201,535
Payments on long-term debt			(5,727	)			(61,574	)
Payments of non-recourse long-term debt			(10,928	)			(8,891	)
Proceeds from sale of treasury shares to employees and directors			755				1,057
Purchase of treasury stock			(229	)
Payments of debt issuance costs			(4,494	)			(1,893	)
Dividends paid			(3,149	)			(2,801	)
Excess tax benefit from share-based payment arrangement			340				1,502
Net cash provided by (used in) financing activities			(18,688	)			315,935
Increase in cash and cash equivalents			98,070				11,079
Cash and cash equivalents at beginning of period			81,682				22,300
Cash and cash equivalents at end of period		$	179,752			$	33,379

See notes to condensed consolidated financial statements

Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)(In thousands)

		The Andersons, Inc. Shareholders’
						Additional								Accumulated
		Common				Paid-in				Treasury				Other Comprehensive				Retained				Noncontrolling
		Shares				Capital				Shares				Loss				Earnings				Interest				Total
Balance at December 31, 2007		$	96			$	168,286			$	(16,670	)		$	(7,197	)		$	199,849			$	12,219			$	356,583
Net income (loss)																			53,449				253				53,702
Other comprehensive income:
Unrecognized actuarial loss and prior service costs (net of income tax of $1,716)															(2,921	)											(2,921	)
Cash flow hedge activity (net of income tax of $11)															19												19
Comprehensive income																											50,800
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $1,821 (121 shares)							3,285				428																3,713
Dividends declared ($0.1625 per common share)																			(2,943	)							(2,943	)
Balance at June 30, 2008			96				171,571				(16,242	)			(10,099	)			250,355				12,472				408,153
Balance at December 31, 2008			96				173,393				(16,737	)			(30,046	)			226,707				11,694				365,107
Net income (loss)																			20,870				(1,311	)			19,559
Other comprehensive income:
Unrecognized actuarial loss and prior service costs (net of income tax of $263)															452												452
Cash flow hedge activity (net of income tax of $192)															328												328
Comprehensive income																											20,339
Purchase of treasury shares (20 shares)											(229	)															(229	)
Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of $478 (149 shares)							715				1,558																2,273
Dividends declared ($0.175 per common share)																			(3,191	)							(3,191	)
Balance at June 30, 2009		$	96			$	174,108			$	(15,408	)		$	(29,266	)		$	244,386			$	10,383			$	384,299

See notes to condensed consolidated financial statements

Notes to Condensed Consolidated Financial Statements
(unaudited)

Note A: Basis of Presentation and Consolidation

These consolidated financial statements include the accounts of The Andersons, Inc. and its wholly and majority-owned 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. The Company has evaluated subsequent events through the date of issuance, which is August 7, 2009. Operating results for the three and six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2009.

The condensed consolidated balance sheet data at December 31, 2008 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 June 30, 2008 has been included as the Company operates in several seasonal industries.

In December 2007, the Financial Accounting Standards Board (“FASB”) released Statement No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.” SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires the noncontrolling interest in a subsidiary to be presented within equity, separate from the parent’s equity. In addition, the amount of consolidated net income attributable to the parent and the noncontrolling interest must be clearly identified and presented on the face of the income statement with the caption “net income” being defined as net income attributable to the consolidated group. SFAS 160 became effective for the Company beginning with the first quarter of 2009. Prior periods have been revised to reflect the current presentation.

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, 2008 (the “2008 Form 10-K”).

Certain balance sheet items have been reclassified from their prior presentation to more appropriately reflect the nature of such items. These reclassifications are not considered material and had no effect on the income statement, statement of shareholders’ equity, current assets, current liabilities, or operating cash flows as previously reported.

New Accounting Pronouncements

In April 2009, the FASB issued FSP No. FAS 157-4 “Determining Whether a Market is Not Active and a Transaction is Not Distressed”. This FSP provides additional guidance to highlight and expand on the factors that should be considered in estimating fair value where there has been a significant decrease in market activity for a financial asset. This FSP became effective during the second quarter ended June 30, 2009 and did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1 “Interim Disclosures about Fair Value of Financial Instruments”. This FSP requires an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP became effective during the second quarter ended

June 30, 2009 and the Company has provided the required fair value disclosures in our notes to the financial statements.

In May 2009, the FASB issued FAS 165 “Subsequent Events”. FAS 165 requires entities to evaluate subsequent events through the date that the financial statements are issued or are available to be issued. A Company must disclose within their Quarterly Reports on Form 10Q and Annual Report on Form 10K the date through which subsequent events have been evaluated. This FAS became effective during the second quarter ended June 30, 2009 and the Company has provided the required disclosures.

In June 2009, the FASB issued FAS 167 “Amendments to FASB Interpretation No. 46(R)”. FAS 167 amends the analysis an entity must perform to determine if it has a controlling financial interest in a variable interest entity (“VIE”). FAS 167 provides that the primary beneficiary of a VIE must have both of the following characteristics:

	•		The power to direct the activities of the VIE that most significantly impact the VIE’s economic performance.
	•		The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

FAS 167 will be effective for the Company beginning January 1, 2010. The Company is currently assessing what the impact, if any, there will be.

In June 2009, the FASB issued FAS 168 “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FAS No. 162”. The FASB Codification will become the source of authoritative U.S. generally accepted accounting principles. On the effective date of this statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. The Codification will not change the current accounting rules, only how they are referenced. FAS 168 will be effective for the Company beginning with the third quarter of 2009.

Note B: Master Netting Arrangements

FASB Staff Position No. FIN 39-1 (“FSP FIN 39-1”), permits 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 2008 Form 10-K provides information surrounding the Company’s various master netting arrangements related to its futures, options and over-the-counter contracts. At June 30, 2009, December 31, 2008 and June 30, 2008, the Company’s margin deposit assets and margin deposit liabilities consisted of the following:

		June 30, 2009								December 31, 2008								June 30, 2008
		Margin				Margin				Margin				Margin				Margin				Margin
		deposit				deposit				deposit				deposit				deposit				deposit
(in thousands)		assets				liabilities				assets				liabilities				assets				liabilities
Collateral posted		$	7,838			$	—			$	26,023			$	—			$	276,285			$	45,884
Collateral received			(14,210	)			—				—				(5,858	)			—				—
Fair value of derivatives			44,381				—				(12,929	)			4,080				(197,268	)			(70,257	)
Balance at end of period		$	38,009			$	—			$	13,094			$	(1,778	)		$	79,017			$	(24,373	)

Note C: Derivatives

In March 2008, the FASB issued SFAS 161 “Disclosures about Derivative Instruments and Hedging Activities” which requires companies with derivative instruments to disclose additional information that will enable users of financial statements to understand how and why a company uses derivative instruments, how

derivative instruments and related hedged items are accounted for under FASB Statement No. 133, as amended, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows.

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 regulated commodity futures contracts for corn, soybeans, wheat and oats and over-the-counter contracts for ethanol. The 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. Contracts for the purchase and sale of ethanol currently 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.

All of these contracts are considered derivatives under SFAS 133. 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. The Company records forward commodity contracts on the balance sheet as assets or liabilities, as appropriate, and accounts for them at estimated fair value, the same method it uses to value its grain inventory. The estimated fair value of the regulated commodity futures and options contracts as well as the over-the-counter contracts is recorded on a net basis (offset against cash collateral posted or received) within Margin deposits on the balance sheet. 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.

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.

The following table presents the fair value of the Company’s commodity derivatives as of June 30, 2009, and the balance sheet line item in which they are located:

(in thousands)		June 30, 2009
Forward commodity contracts included in Commodity derivative assets —current		$	48,635
Forward commodity contracts included in Commodity derivative assets — noncurrent			1,354
Forward commodity contracts included in Commodity derivative liabilities — current			(66,698	)
Forward commodity contracts included in Commodity derivative liabilities — noncurrent			(4,555	)
Regulated futures and options contracts included in Margin deposits (a)			38,566
Over-the-counter contracts included in Margin deposits (a)			5,815
Total estimated fair value of commodity derivatives		$	23,117

The gains included in the Company’s Consolidated Statement of Income and the line items in which they are located for the three and six months ended June 30, 2009 are as follows:

		Three months ended				Six months ended
(in thousands)		June 30, 2009				June 30, 2009
Gains on commodity derivatives included in sales and merchandising revenues		$	317			$	19,424

At June 30, 2009, the Company had the following bushels and gallons outstanding (on a gross basis) on all commodity derivative contracts:

Commodity		Number of bushels (in thousands)				Number of gallons (in thousands)
Corn			184,710				—
Soybeans			29,249				—
Wheat			6,467				—
Oats			6,664				—
Ethanol			—				235,273
Total			227,090				235,273

Interest Rate Derivatives

The Company periodically enters into interest rate contracts, including interest rate swaps and caps, to manage interest rate risk on borrowing or financing activities. The Company’s long-term interest rate swap is recorded in other long-term liabilities and is designated as a cash flow hedge; accordingly, changes in the fair value of this instrument are recognized in other comprehensive income. The terms of the swap match the terms of the underlying debt instrument. The deferred derivative gains and losses on the interest rate swap are reclassified into income over the term of the underlying hedged items. The Company expects to reclassify less than $0.1 million of accumulated other comprehensive loss into earnings in the next twelve months.

The Company has other interest rate contracts that are not designated as hedges. While the Company considers all of its interest rate derivative positions to be effective economic hedges of specified risks, these interest rate contracts are recorded on the balance sheet in prepaid expenses and other assets or current and long-term liabilities and changes in fair value are recognized currently in income as interest expense.

The following table presents the open interest rate contracts at June 30, 2009.

										Initial
Interest Rate										Notional
Hedging		Year				Year of				Amount						Interest
Instrument		Entered				Maturity				(in millions)				Hedged Item		Rate
Short-term
Cap			2008				2010			$	20.0			Interest rate component of debt — not accounted for as a hedge			4.25	%
Long-term
Swap			2005				2016			$	4.0			Interest rate component of an operating lease — not accounted for as a hedge			5.23	%
Swap			2006				2016			$	14.0			Interest rate component of debt — accounted for as cash flow hedge			5.95	%
Cap			2008				2010			$	10.0			Interest rate component of debt — not accounted for as a hedge			4.67	%
Cap			2009				2011			$	10.0			Interest rate component of debt — not accounted for as a hedge			2.92	%
Cap			2009				2012			$	10.0			Interest rate component of debt — not accounted for as a hedge			3.42	%
Cap			2009				2011			$	10.0			Interest rate component of debt — not accounted for as a hedge			2.92	%

At June 30, 2009, the Company had recorded the following amounts for the fair value of the Company’s interest rate derivatives:

(in thousands)		June 30, 2009
Derivatives not designated as hedging instruments under SFAS No. 133
Interest rate contracts included in other assets		$	82
Interest rate contracts included in deferred income and other long term liabilities			(346	)
Total fair value of interest rate derivatives not designated as hedging instruments under SFAS No. 133		$	(264	)
Derivatives designated as hedging instruments under SFAS No. 133
Interest rate contract included in deferred income and other long term liabilities		$	(1,659	)
Total fair value of interest rate derivatives designated as hedging instruments under SFAS No. 133		$	(1,659	)

The gains included in the Company’s Consolidated Statement of Income and the line item in which they are located for interest rate derivatives not designated has hedging instruments are as follows:

		Three months ended				Six months ended
(in thousands)		June 30, 2009				June 30, 2009
Interest expense		$	191			$	159

The gains included in the Company’s Statement of Shareholders’ Equity and the line item in which they are located for interest rate derivatives designated as hedging instruments are as follows:

		Three months ended				Six months ended
(in thousands)		June 30, 2009				June 30, 2009
Other comprehensive income		$	597			$	774

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. This zero cost collar, which is being accounted for as a cash flow hedge, has an initial notional amount of $6.8 million and places a floor and ceiling on the Canadian dollar to U.S. dollar exchange rate at $0.9875 and $1.069, respectively. Changes in the fair value of this derivative are included as a component of other comprehensive income or loss. The terms of the collar match the underlying lease agreements and therefore any ineffectiveness is considered immaterial.

At June 30, 2009, the Company had recorded the following amount for the fair value of the Company’s foreign currency derivatives:

(in thousands)		June 30, 2009
Foreign currency contract included in other assets		$	310

The losses included in the Company’s Statement of Shareholders’ Equity and the line item in which they are located for foreign currency derivatives designated as hedging instruments are as follows:

		Three months ended				Six months ended
(in thousands)		June 30, 2009				June 30, 2009
Accumulated other comprehensive loss		$	(325	)		$	(272	)

Note D: Earnings Per Share

In June 2008, the FASB issued Staff Position (FSP) Emerging Issues Task Force (EITF) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” This FSP provides that unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method described in Statement of Financial Accounting Standards (SFAS) No. 128, “Earnings per Share.” 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. This FSP became effective for the Company for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. The adoption of FSP EITF 03-6-1 reduced the reported amounts of basic and diluted earnings per share for the quarter ended June 30, 2008 by $.01 and zero, respectively, per share. For the six months ended June 30, 2008 it reduced the reported amounts of both basic and diluted earnings per share by $.01.

		Three months ended								Six months ended
		June 30,								June 30,
(in thousands)		2009				2008				2009				2008
Net income attributable to The Andersons, Inc.		$	15,918			$	45,626			$	20,870			$	53,449
Less: Distributed and undistributed earnings allocated to nonvested restricted stock			50				131				69				139
Earnings available to common shareholders		$	15,868			$	45,495			$	20,801			$	53,310
Earnings per share — basic:
Weighted average shares outstanding — basic			18,171				18,065				18,164				18,046
Earnings per common share — basic		$	0.87			$	2.52			$	1.15			$	2.95
Earnings per share — diluted:
Weighted average shares outstanding — basic			18,171				18,065				18,164				18,046
Effect of dilutive options			129				292				115				321
Weighted average shares outstanding — diluted			18,300				18,357				18,279				18,367
Earnings per common share — diluted		$	0.87			$	2.48			$	1.14			$	2.90

There were approximately 527 thousand and 59 thousand antidilutive stock-based awards outstanding for the second quarter of 2009 and 2008, respectively. For the six months ended June 30, 2009 and 2008 there were approximately 629 thousand and 28 thousand antidilutive stock-based awards outstanding.

Note E: Employee Benefit Plans

Included as charges against income for the three and six months ended June 30, 2009 and 2008 are the following amounts for pension and postretirement benefit plans maintained by the Company:

		Pension Benefits
		Three months ended								Six months ended
		June 30								June 30,
(in thousands)		2009				2008				2009				2008
Service cost		$	734			$	696			$	1,456			$	1,333
Interest cost			1,035				983				2,029				1,807
Expected return on plan assets			(1,012	)			(1,249	)			(2,026	)			(2,518	)
Amortization of prior service cost			(147	)			(155	)			(294	)			(310	)
Recognized net actuarial loss			903				345				1,912				472
Benefit cost		$	1,513			$	620			$	3,077			$	784

		Postretirement Benefits
		Three months ended								Six months ended
		June 30								June 30,
(in thousands)		2009				2008				2009				2008
Service cost		$	101			$	100			$	206			$	187
Interest cost			283				283				577				562
Amortization of prior service cost			(127	)			(127	)			(255	)			(255	)
Recognized net actuarial loss			152				178				312				305
Benefit cost		$	409			$	434			$	840			$	799

The Company made contributions to its defined benefit pension plan of $1.5 million and $1.3 million in the first six months of 2009 and 2008, respectively. The Company currently expects to make a total contribution of approximately $6.0 million in fiscal 2009, which exceeds the required minimum contribution. The Company contributed $10.0 million in fiscal 2008.

The postretirement benefit plan is not funded. Company contributions during the period represent actual claim payments and insurance premiums for covered retirees. In both the second quarters of 2009 and 2008, the Company made payments of $0.2 million. For each of the six months ended June 30, 2009 and 2008, the Company made payments of $0.4 million.

Note F: Segment Information

Results of Operations — Segment Disclosures
(in thousands)

Second quarter ended		Grain &								Plant				Turf &
June 30, 2009		Ethanol				Rail				Nutrient				Specialty				Retail				Other				Total
Revenues from external customers		$	500,401			$	23,762			$	197,638			$	39,752			$	49,401			$	—			$	810,954
Inter-segment sales			2				106				2,756				425				—				—				3,289
Equity in earnings of affiliates			781				—				3				—				—				—				784
Other income, net			590				221				770				236				136				771				2,724
Interest expense			2,502				1,229				908				421				265				(164	)			5,161
Operating income (loss) (a)			8,931				619				10,345				3,042				2,864				(571	)			25,230
Loss attributable to noncontrolling interest			272				—				—				—				—				—				272
Income before income taxes			8,659				619				10,345				3,042				2,864				(571	)			24,958

Second quarter ended		Grain &								Plant				Turf &
June 30, 2008		Ethanol				Rail				Nutrient				Specialty				Retail				Other				Total
Revenues from external customers		$	695,787			$	42,941			$	273,501			$	35,915			$	52,556			$	—			$	1,100,700
Inter-segment sales			7				104				1,973				333				—				—				2,417
Equity in earnings of affiliates			7,780				—				1				—				—				—				7,781
Other income, net			1,222				340				180				96				161				156				2,155
Interest expense			6,684				1,082				1,555				397				217				(1,414	)			8,521
Operating income (loss) (a)			19,994				4,874				47,369				1,882				3,360				(5,018	)			72,461
Loss attributable to noncontrolling interest			682				—				—				—				—				—				682
Income before income taxes			19,312				4,874				47,369				1,882				3,360				(5,018	)			71,779

Six months ended		Grain &								Plant				Turf &
June 30, 2009		Ethanol				Rail				Nutrient				Specialty				Retail				Other				Total
Revenues from external customers		$	980,922			$	50,532			$	309,400			$	84,455			$	83,037			$	—			$	1,508,346
Inter-segment sales			5				254				6,957				1,390				—				—				8,606
Equity in earnings (loss) of affiliates			(2,895	)			—				5				—				—				—				(2,890	)
Other income, net			1,149				187				1,258				541				247				581				3,963
Interest expense			4,796				2,431				1,997				812				499				316				10,851
Operating income (loss) (a)			14,666				1,501				12,392				6,139				163				(1,873	)			32,988
Loss attributable to noncontrolling interest			1,311				—				—				—				—				—				1,311
Income before income taxes			13,355				1,501				12,392				6,139				163				(1,873	)			31,677

Six months ended		Grain &								Plant				Turf &
June 30, 2008		Ethanol				Rail				Nutrient				Specialty				Retail				Other				Total
Revenues from external customers		$	1,194,910			$	77,952			$	378,970			$	75,576			$	86,293			$	—			$	1,813,701
Inter-segment sales			10				233				7,429				750				—				—				8,422
Equity in earnings of affiliates			16,417				—				3				—				—				—				16,420
Other income, net			3,758				518				324				189				308				(58	)			5,039
Interest expense			12,988				2,062				2,093				822				406				(728	)			17,643
Operating income (loss) (a)			22,227				11,300				54,909				3,882				(17	)			(7,424	)			84,877
(Income) attributable to noncontrolling interest			(253	)			—				—				—				—				—				(253	)
Income before income taxes			22,480				11,300				54,909				3,882				(17	)			(7,424	)			85,130

Note G: Equity Method Investments and Related Party Transactions

The Company, directly or indirectly, holds investments in seven limited liability 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 2008 Form 10-K for more information, including descriptions of various arrangements the Company has with certain of these entities, primarily three ethanol LLCs that the Company has ownership interests in (the “ethanol LLCs”).

For the quarters ended June 30, 2009 and 2008, revenues recognized for the sale of ethanol that the Company purchased from its ethanol LLCs were $95.2 million and $120.7 million, respectively. For the six months ended June 30, 2009 and 2008, revenues recognized for the sale of ethanol that the Company purchased from its ethanol LLCs were $188.3 million and $223.3 million, respectively. For the quarters ended June 30, 2009 and 2008, revenues recognized for the sale of corn to the ethanol LLCs were $93.2 million and $105.4 million, respectively. For the six months ended June 30, 2009 and 2008, revenues recognized for the sale of corn to the ethanol LLCs were $206.4 million and $188.8 million, respectively.

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

		% ownership at
		June 30, 2009				Three months ended								Six months ended
		(direct and				June 30,								June 30,
(in thousands)		indirect)				2009				2008				2009				2008
The Andersons Albion Ethanol LLC			49	%		$	758			$	1,740			$	792			$	3,771
The Andersons Clymers Ethanol LLC			37	%			174				2,245				91				5,968
The Andersons Marathon Ethanol LLC			50	%			(586	)			(2,618	)			(3,541	)			(5,115	)
Lansing Trade Group LLC			49	%			435				6,413				(272	)			11,677
Other			7%-33	%			3				1				40				119
Total						$	784			$	7,781			$	(2,890	)		$	16,420

The Company holds a majority interest (66%) in The Andersons Ethanol Investment LLC (“TAEI”). This consolidated entity holds the 50% interest in The Andersons Marathon Ethanol LLC (“TAME”). In addition to the investment in TAME, TAEI enters into derivative contracts with external parties to economically hedge the impact of a portion of TAME’s input and output commodity prices. The impact of this derivative activity is included in gross profit in the Company’s income statement. For the quarters ended June 30, 2009 and 2008, the gains from this derivative activity was less than $0.1 million and $0.5 million, respectively. For the six months ended June 30, 2009 and 2008, the impact to gross profit was $0.1 million and $5.9 million, respectively. The noncontrolling interest in TAEI is attributed 34% of all gains and losses.

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

		June 30,				December 31,				June 30,
(in thousands)		2009				2008				2008
The Andersons Albion Ethanol LLC		$	25,944			$	25,299			$	26,563
The Andersons Clymers Ethanol LLC			30,831				30,805				31,769
The Andersons Marathon Ethanol LLC			26,236				29,777				30,423
Lansing Trade Group LLC			53,595				54,025				47,188
Other			1,289				1,149				1,178
Total		$	137,895			$	141,055			$	137,121

In the first quarter of 2009, the Company’s majority-owned subsidiary, TAEI, along with the other 50% partner in TAME, signed a limited guarantee under which each party is guaranteeing 50% of all scheduled installment payments on TAME’s term loan during 2009 (not to exceed $11.0 million in total) as well as the interest accrued through 2009 associated with the loan if TAME were to default on a scheduled loan payment. TAEI, along with the other 50% partner, guaranteed the debt obligation in order for TAME to renegotiate certain of its debt covenants. As of the end of July 2009, TAME had made its three scheduled quarterly installments. Its fourth quarterly installment is due in October 2009. The Company does not anticipate TAEI having to make any payments on the guarantee. In addition, the Company has signed a guarantee with TAME’s natural gas supplier to guarantee the payment of $4.5 million in natural gas purchases through December 31, 2009. TAME’s other 50% owner has signed a similar guarantee. The Company does not anticipate having to make any payments on this guarantee. The fair value of these guarantee obligations are considered immaterial.

In the ordinary course of business, the Company will enter into related party transactions with its equity method investees. The following table sets forth the related party transactions entered into for the time periods presented.

		Three months ended								Six months ended
		June 30,								June 30,
(in thousands)		2009				2008				2009				2008
Sales and revenues		$	109,994			$	157,736			$	235,861			$	272,831
Purchases of product			93,544				107,221				183,749				206,636
Lease income			1,351				1,419				2,748				2,898
Labor and benefits reimbursement (a)			2,471				2,463				5,008				4,954
Accounts receivable at June 30,			9,472				12,736
Accounts payable at June 30,			4,988				24,778

Note H: Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis under SFAS 157 at June 30, 2009, December 31, 2008 and June 30, 2008.

(in thousands)						June 30, 2009
Assets (liabilities)		Level 1				Level 2				Level 3				Total
Cash and cash equivalents		$	179,752			$	—			$	—			$	179,752
Commodity derivatives, net			—				(24,296	)			3,032				(21,264	)
Net margin deposit assets			38,009				—				—				38,009
Net margin deposit liabilities			—				—				—				—
Other assets and liabilities (a)			9,160				—				(1,613	)			7,547
Total		$	226,921			$	(24,296	)		$	1,419			$	204,044

(in thousands)						December 31, 2008
Assets (liabilities)		Level 1				Level 2				Level 3				Total
Cash and cash equivalents		$	81,682			$	—			$	—			$	81,682
Commodity derivatives, net			—				12,706				5,114				17,820
Net margin deposit assets			13,094				—				—				13,094
Net margin deposit liabilities			—				(1,778	)			—				(1,778	)
Other assets and liabilities (a)			13,303				—				(2,367	)			10,936
Total		$	108,079			$	10,928			$	2,747			$	121,754