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ANDERSONS : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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. Such factors include,
but are not limited to, the effects on our business from the COVID-19 pandemic
and the pace of recovery from the pandemic, economic and political conditions,
globally and in the markets we serve, fluctuations in cost and availability of
commodities, weather and agricultural conditions, governmental regulations, the
effectiveness of our internal control over financial reporting and the
unpredictability of existing and possible future litigation. However, it is not
possible to predict or identify all such factors. The reader is 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,
2020 (“2020 Form 10-K”). In some cases, the reader 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
management believes 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 2020 Form 10-K, have not materially changed through the second quarter of
2021.

Executive Overview

Our operations are organized, managed and classified into four reportable
business segments: Trade, Ethanol, Plant Nutrient, and Rail. Each of these
segments is generally based on the nature of products and services offered and
aligns with the management structure.

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 much less significant impact on gross profit. As a result, changes in
sales between periods may not necessarily be indicative of the overall
performance of the business and more focus should be placed on changes in gross
profit.

The Company has considered the potential impact of the book value of the
Company’s total shareholders’ equity exceeding the Company’s market
capitalization at various points during the year for impairment indicators. The
Company continues to believe that the share price is not an accurate reflection
of its current value. The long-term outlook remains positive for agricultural
commodities due to market volatility driven by scarcity of supply and strong
demand. Management believes that the market’s impact on the Company’s equity
value does not accurately reflect the impact of these external factors on the
Company. As a result of prior period tests, reviews of current operating results
and other relevant market factors, management ultimately concluded that, while
the Company’s shareholders equity exceeded the market capitalization for certain
portions of the period, that no impairment trigger existed as of June 30, 2021.
However, adverse market conditions or alternative management decisions on
operations may result in future impairment considerations.

Trade

The Trade Group’s second quarter results improved substantially over the prior
year as the Group saw the benefits of a demand-driven agriculture rally.
Commodity price volatility and market dislocations created merchandising
opportunities for the Group to be well positioned and execute on many
commodities in both the domestic and export markets. This demand driven rally
has created an inversion in the futures market for the majority of the
agricultural commodities stored by the Group’s asset business. However,
traditional space income through the old crop carryout has been accelerated and
exceeded by strong elevation margins and merchandising results. The Group’s
propane business added significant volume both through a new terminal location
and displacement opportunities. Finally, the business continued to benefit from
prior year reorganization synergies and other cost-cutting efforts.
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Agricultural inventories on hand at June 30, 2021 were 85.8 million bushels, of
which 1.2 million bushels were stored for others. These amounts compare to 74.4
million bushels on hand at June 30, 2020, of which 1.7 million bushels were
stored for others. Total Trade storage space capacity, including temporary pile
storage, was approximately 202 million bushels at June 30, 2021 compared to 201
million bushels at June 30, 2020.

We expect continued merchandising opportunities into harvest as scarcity of
supply is impacting overall prices. Crop conditions in the majority of the
Group’s draw area are excellent and the business is preparing for a large
harvest. As the volume of grain in store is expected to remain at levels below
recent years for some time, high prices and strong elevation margins are
expected to continue into 2022.

Ethanol

The Ethanol Group’s second quarter results were profitable, and a substantial
improvement compared to the prior year. The Group’s prior year results were
significantly impacted by COVID-19 as negative crush margins and weak demand
plagued the ethanol industry. The 2021 results reflect a considerable
improvement in crush margins, overall ethanol demand and higher ethanol trading
results. The Group also benefited from increased co-product values, including
high protein and traditional DDG products, as well as corn and other vegetable
oils.

Spot ethanol crush margins have continued to improve from the prior year and
higher corn and soybean meal prices continue to support feed product values.
While there is a level of uncertainty that persists regarding a tighter corn
balance sheet and how quickly the ethanol industry as a whole will recover from
COVID-19, the group has observed rebounding driving demand, strong coproduct
margins and continued trading opportunities.

Ethanol and related co-products volumes for the three and six months ended
June 30, 2021 and 2020 were as follows:

Three months ended June 30, Six months ended June 30,
(in thousands) 2021 2020 2021 2020
Ethanol (gallons shipped) 186,396 119,528 358,608 266,873
E-85 (gallons shipped) 11,914 4,396 19,805 13,489
Corn oil (pounds shipped) 56,760 20,968 104,708 50,262
DDG (tons shipped)* 454 334 931 964

* DDG tons shipped converts wet tons to a dry ton equivalent amount.

Plant Nutrient

The Plant Nutrient Group’s second quarter results were considerably improved
compared to the prior year period. The improvement was largely driven by
improved margins in the Ag Supply Chain and Specialty Liquids product lines and
reflect demand from favorable spring weather, strong grower income and
well-positioned fertilizer inventory. Engineered Granules maintained strong
demand but contended against rising input costs and a tight labor market. The
group’s outlook is positive, anticipating continued higher fertilizer prices and
strong demand into the fall application season.

Storage capacity at our Ag Supply Chain and Specialty Liquids facilities,
including leased storage, was approximately 463 thousand tons for dry nutrients
and approximately 509 thousand tons for liquid nutrients at June 30, 2021,
compared to approximately 481 thousand tons for dry nutrients and approximately
510 thousand tons for liquid nutrients at June 30, 2020.

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Tons of product sold for the three and six months ended June 30, 2021 and 2020
were as follows:

Three months ended June 30, Six months ended June 30,
(in thousands) 2021 2020 2021 2020
Ag Supply Chain 661 690 1,008 904
Specialty Liquids 133 121 233 196
Engineered Granules 165 151 323 273
Total tons 959 962 1,564 1,373

In the table above, Ag Supply Chain represents facilities principally engaged in
the wholesale distribution and retail sale and application of primary
agricultural nutrients such as bulk nitrogen, phosphorus, and
potassium. Specialty Liquid locations produce and sell a variety of low-salt
liquid starter fertilizers, micronutrients for agricultural use, and specialty
products for use in various industrial processes. Engineered Granules facilities
primarily manufacture granulated dry products for use in specialty turf and
agricultural applications and a variety of corncob-based products.

Rail

Rail results increased driven by the opportunistic sale of older railcars due to
favorable scrap prices. The leasing business improved due to lower maintenance
expenses and bad debt recoveries despite slightly decreased average lease rates.
Average utilization rates increased from 88.3 percent in the second quarter of
2020 to 89.7 percent in the second quarter of 2021. Rail assets under management
(owned, leased or managed for financial institutions in non-recourse
arrangements) at June 30, 2021 were 21.8 thousand compared to 24.0 thousand at
June 30, 2020.

While the North American railcar industry is showing signs of a slow recovery,
lease rates are expected to stay relatively flat for much of the year.

Other

Our “Other” activities include corporate income and expense and cost for
functions that provide support and services to the operating segments. The
results include expenses and benefits not allocated to the operating segments
and other elimination and consolidation adjustments.

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Operating Results

The following discussion focuses on the operating results as shown in the
Condensed Consolidated Statements of Operations and includes a separate
discussion by segment. Additional segment information is included herein in Note
12, Segment Information.

Comparison of the three months ended June 30, 2021 with the three months ended
June 30, 2020 including a reconciliation of GAAP to non-GAAP measures:

Three months ended June 30, 2021
(in thousands) Trade Ethanol Plant Nutrient Rail Other Total

Sales and merchandising revenues $ 2,297,869$ 616,527

$ 321,409$ 37,921 $ – $ 3,273,726
Cost of sales and merchandising
revenues 2,220,038 581,811 270,549 27,284 – 3,099,682
Gross profit 77,831 34,716 50,860 10,637 – 174,044
Operating, administrative and general
expenses 61,514 6,577 26,568 4,416 10,901

109,976

Interest expense (income), net 7,452 2,021 1,146 3,394 (559)

13,454

Equity in earnings of affiliates, net 845 – – – – 845
Other income, net 4,067 38 849 237 116 5,307

Income (loss) before income taxes $ 13,777$ 26,156

$ 23,995$ 3,064$ (10,226)$ 56,766
Income (loss) before income taxes
attributable to the noncontrolling
interests – 2,625 – – –

2,625

Non-GAAP Income (loss) before income
taxes attributable to the Company $ 13,777$ 23,531$ 23,995$ 3,064$ (10,226)$ 54,141

Three months ended June 30, 2020
(in thousands) Trade Ethanol Plant Nutrient Rail Other Total

Sales and merchandising revenues $ 1,351,168$ 223,745

$ 279,825$ 35,442 $ – $ 1,890,180
Cost of sales and merchandising
revenues 1,291,786 226,344 241,060 24,724 – 1,783,914
Gross profit 59,382 (2,599) 38,765 10,718 – 106,266
Operating, administrative and general
expenses 54,998 5,506 18,281 5,184 6,167

90,136

Interest expense (income), net 5,056 1,900 1,463 3,833 (425)

11,827

Equity in earnings (losses) of
affiliates, net 79 – – – – 79
Other income (expense), net 986 466 386 905 707 3,450

Income (loss) before income taxes $ 393$ (9,539)

$ 19,407$ 2,606$ (5,035)$ 7,832
Income (loss) before income taxes
attributable to the noncontrolling
interests – (10,407) – – –

(10,407)

Non-GAAP Income (loss) before income
taxes attributable to the Company $ 393$ 868$ 19,407$ 2,606$ (5,035)$ 18,239

The Company uses Income (loss) before income taxes attributable to the Company,
a non-GAAP financial measure as defined by the Securities and Exchange
Commission, to evaluate the Company’s financial performance. This performance
measure is not defined by accounting principles generally accepted in the United
States and should be considered in addition to, and not in lieu of, GAAP
financial measures. Management believes that Income (loss) before income taxes
attributable to the Company is a useful measure of the Company’s performance
because it provides investors additional information about the Company’s
operations allowing evaluation of underlying business performance and
period-to-period comparability. This measure is not intended to replace or be
alternatives to Income (loss) before income taxes, the most directly comparable
amounts reported under GAAP.

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Trade

Operating results for the Trade Group increased by $13.4 million compared to the
results of the same period last year. Sales and merchandising revenues increased
by $946.7 million and cost of sales and merchandising revenues increased by
$928.3 million for a favorable net gross profit impact of $18.4 million. Most of
the increase to sales and cost of sales is the result of increased commodity
prices. The net increase in gross profit was primarily driven by improved
merchandising results as weather and export demand created volatility that
allowed traders to identify arbitrage opportunities from geographical
dislocations. This increase was partially offset by a decrease in the Group’s
traditional assets, however, as inverted futures markets in several commodities
provided less space income, replacing and accelerating the income with
merchandising opportunities noted above.

Operating, administrative and general expenses increased by $6.5 million. The
increase from the prior year is primarily related to higher incentive
compensation costs from improved operating results and other professional
service fees.

Interest expense increased by $2.4 million due to higher group borrowings on the
Company’s short-term line of credit compared to the prior year.

Other income increased by $3.1 million from prior year largely driven by a gain
on the sale of a grain location in the current year.

Ethanol

Operating results for the Ethanol Group increased by $22.7 million from the same
period last year. Sales and merchandising revenues increased by $392.8 million
and cost of sales and merchandising revenues increased by $355.5 million
compared to prior year results. As a result gross profit increased by $37.3
million compared to 2020 results. Most of the increase to sales and cost of
sales is the result of increased commodity prices. The net increase to gross
profit in the current period results reflect improved ethanol margins, higher
coproduct sales from DDGs and corn oil and strong merchandising revenues. The
prior year results were significantly impacted by COVID-19.

Operating, administrative and general expenses increased by $1.1 million from
the increase in labor and incentive compensation costs from increased production
and improved operating results, respectively.

Plant Nutrient

Operating results for the Plant Nutrient Group increased by $4.6 million
compared to the same period in the prior year. Sales and merchandising revenues
increased by $41.6 million and cost of sales and merchandising revenues
increased by $29.5 million resulting in a $12.1 million increase in gross
profit. The increase in gross profit was driven by improved margins across the
Ag Supply Chain and Specialty Liquids product lines and reflects higher spring
demand, strong grower income and well positioned fertilizer inventory.

Operating, administrative and general expenses increased by $8.3 million due to
higher incentive compensation costs from and improved operating results.

Interest expense decreased by $0.3 million due to lower interest rates.

Rail

Operating results increased by $0.5 million from the same period last year.
Sales and merchandising revenues increased by $2.5 million from prior year. This
was driven by a $4.9 million increase in car sale revenues and a $0.6 million
increase in repair revenues that was partially offset by a $3.0 million decrease
in leasing revenue. Cost of sales and merchandising revenues increased by $2.6
million compared to the prior year due to increased car sale revenues from the
prior year. As a result, gross profit decreased by $0.1 million compared to the
same period last year.

Operating, administrative and general expenses decreased by $0.8 million due to
a decrease in bad debt expense as compared to the prior year. This was partially
offset by higher incentive compensation from improved operating results.

Interest expense decreased by $0.4 million due to lower interest rates.

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Other

Operating results for the second quarter declined by $5.2 million compared to
the same period in 2020. The increase in operating losses was primarily driven
by higher operating, administrative and general expenses due to increased
incentive-based compensation as a result of improved company-wide performance
year over year and higher professional services expenses.

Income Taxes

For the three months ended June 30, 2021, the Company recorded an income tax
expense of $10.6 million at an effective rate of 18.7%. For the three months
ended June 30, 2020, the Company recorded an income tax benefit of $12.2 million
at an effective tax rate of 155.8%. The change in effective tax rate for the
three months ended June 30, 2021 as compared to the same period last year was
primarily attributed to the treatment of mark-to-market activity on certain
contracts in the Ethanol segment. The prior year also reflects the benefit of
net operating loss carryback tax savings opportunities as provided by the CARES
Act.

Comparison of the six months ended June 30, 2021 with the six months ended
June 30, 2020 including a reconciliation of GAAP to non-GAAP measures:

Six months ended June 30, 2021
(in thousands) Trade Ethanol Plant Nutrient Rail Other

Total

Sales and merchandising revenues $ 4,280,377$ 1,059,486

$ 490,661$ 78,931 $ – $ 5,909,455
Cost of sales and merchandising
revenues 4,129,989 1,016,287 407,400 59,023 – 5,612,699
Gross profit 150,388 43,199 83,261 19,908 – 296,756
Operating, administrative and general
expenses 118,445 13,233 49,967 7,290 20,913

209,848

Interest expense (income), net 14,503 4,094 2,212 6,574 (760)

26,623

Equity in earnings (losses) of
affiliates, net 2,639 – – – – 2,639
Other income (expense), net 7,553 1,365 1,436 1,911 584 12,849

Income (loss) before income taxes $ 27,632$ 27,237

$ 32,518$ 7,955$ (19,569)$ 75,773
Income (loss) before income taxes
attributable to the noncontrolling
interests – 780 – – –

780

Non-GAAP Income (loss) before income
taxes attributable to the Company $ 27,632$ 26,457$ 32,518$ 7,955$ (19,569)$ 74,993

Six months ended June 30, 2020
(in thousands) Trade Ethanol Plant Nutrient Rail Other Total

Sales and merchandising revenues $ 2,729,209$ 536,784

$ 404,738$ 72,555 $ – $ 3,743,286
Cost of sales and merchandising
revenues 2,607,361 568,782 345,609 52,138 – 3,573,890
Gross profit 121,848 (31,998) 59,129 20,417 – 169,396
Operating, administrative and general
expenses 123,153 11,621 38,022 10,443 11,957

195,196

Interest expense (income), net 12,245 4,257 3,248 8,316 (652)

27,414

Equity in earnings (losses) of
affiliates, net 209 – – – – 209
Other income (expense), net 3,750 912 356 1,955 1,290 8,263

Income (loss) before income taxes $ (9,591)$ (46,964)

$ 18,215$ 3,613$ (10,015)$ (44,742)
Income (loss) before income taxes
attributable to the noncontrolling
interests – (23,856) – – –

(23,856)

Non-GAAP Income (loss) before income
taxes attributable to the Company $ (9,591)$ (23,108)$ 18,215$ 3,613$ (10,015)$ (20,886)

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Trade

Operating results for the Trade Group increased by $37.2 million compared to the
results of the same period last year. Sales and merchandising revenues increased
by $1,551.2 million and cost of sales and merchandising revenues increased by
$1,522.6 million for an increased gross profit impact of $28.5 million. Most of
the increase to sales and cost of sales is the result of increased commodity
prices. The net increase in gross profit was primarily driven by improved
merchandising results as weather and export demand created volatility that
allowed traders to identify arbitrage opportunities from geographical
dislocations. This increase was partially offset by a decrease in the Group’s
traditional assets, however, as inverted futures markets in several commodities
provided less space income, replacing and accelerating the income with
merchandising opportunities noted above.

Operating, administrative and general expenses decreased by $4.7 million. The
decrease from the prior year is primarily related to the Company’s cost saving
initiatives, much of which is headcount reduction, both from acquisition
integration and in response to the COVID-19 pandemic. The decrease was partially
offset by higher incentive compensation costs from improved operating results.

Interest expense increased by $2.3 million due to higher group borrowings on the
Company’s short-term line of credit compared to the prior year.

Ethanol

Operating results for the Ethanol Group increased by $49.6 million from the same
period last year. Sales and merchandising revenues increased by $522.7 million
and cost of sales and merchandising revenues increased by $447.5 million
compared to prior year. As a result, gross profit increased by $75.2 million
compared to prior year. Most of the increase to sales and cost of sales is the
result of increased commodity prices. The net increase to gross profit in the
current period results reflect significantly improved crush margins, higher
coproduct sales from DDGs and corn oil and strong merchandising revenues. The
prior year results were significantly impacted by COVID-19 and the group
recorded a $10.9 million inventory write down and a $9.6 million mark to market
loss.

Operating, administrative and general expenses increased by $1.6 million
primarily due to higher labor and incentive compensation costs from increased
production and improved operating results, respectively.

Plant Nutrient

Operating results for the Plant Nutrient Group increased by $14.3 million
compared to the same period in the prior year. Sales and merchandising revenues
increased $85.9 million and cost of sales and merchandising revenues increased
by $61.8 million resulting in increased gross profit of $24.1 million. Gross
profit improved year over year due to increases in volumes and margins across
the breadth of product lines and reflects higher demand, strong grower income
and well positioned fertilizer inventory.

Operating, administrative and general expenses increased by $11.9 million due to
increased incentive compensation from improved operating results, and other
variable expenses supporting additional volume in the current year.

Interest expense decreased by $1.0 million from lower interest rates compared to
the prior year.

Rail

Operating results increased by $4.3 million from the same period last year.
Sales and merchandising revenues increased by $6.4 million. This was driven by a
$11.5 million increase in car sale revenues and a $1.8 million increase in
repair revenues that was partially offset by a $6.9 million decrease in leasing
revenue. Cost of sales and merchandising increased by $6.9 million compared to
the prior year driven by the book value of cars that were sold in the quarter.
As a result, gross profit decreased by $0.5 million compared to the same period
last year.

Operating, administrative and general expenses decreased by $3.2 million driven
by a $1.6 million recovery of previously written off bad debt and overall lower
expenses in the period.

Interest expense decreased by $1.7 million from lower borrowings and interest
rates compared to the prior year.

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Other

Operating results declined by $9.6 million from the same period last year. The
increase in operating losses was primarily driven by increased incentive-based
compensation in operating, administrative and general expenses due to improved
company-wide performance year over year and higher professional services
expenses.

Income Taxes

For the six months ended June 30, 2021, the Company recorded an income tax
expense of $16.4 million at an effective rate of 21.6%. For the six months ended
June 30, 2020, the Company recorded an income tax benefit of $13.7 million at an
effective tax rate of 30.5%. The change in effective tax rate for the six months
ended June 30, 2021 as compared to the same period last year primarily
attributed improved operating results in the current year, including additional
nondeductible compensation and increased foreign tax expense, as well as the
treatment of mark-to-market activity on certain contracts in the Ethanol
segment.

Liquidity and Capital Resources

Working Capital
At June 30, 2021, the Company had working capital of $543.7 million. The
following table presents changes in the components of current assets and current
liabilities:

(in thousands) June 30, 2021 June 30, 2020 Variance
Current Assets:
Cash and cash equivalents $ 27,538$ 30,011$ (2,473)
Accounts receivable, net 721,575 537,011 184,564
Inventories 912,299 616,323 295,976
Commodity derivative assets – current 507,148 112,089 395,059
Other current assets 65,740 102,755 (37,015)
Total current assets $ 2,234,300$ 1,398,189$ 836,111
Current Liabilities:
Short-term debt 757,271 96,071 661,200
Trade and other payables 547,169 503,892 43,277
Customer prepayments and deferred revenue 58,155 45,734 12,421
Commodity derivative liabilities – current 90,366 65,186 25,180
Current maturities of long-term debt 56,582 68,477 (11,895)
Accrued expenses and other current liabilities 181,015 147,422 33,593
Total current liabilities $ 1,690,558$ 926,782$ 763,776
Working Capital $ 543,742$ 471,407$ 72,335

Current assets as of June 30, 2021 increased $836.1 million in comparison to
those as of June 30, 2020. This increase was noted in all areas except for cash
and cash equivalents and other current assets. The increases in accounts
receivable, current commodity derivative assets and inventory balances can
largely be attributable to the significant increases in the prices of
agricultural commodities that the Company transacts in the ordinary course of
business. The decrease in other current assets is attributable to the receipt of
federal income tax refunds as a result of the CARES Act in 2020. See also the
discussion below on additional sources and uses of cash for an understanding of
the increase in cash from prior year.
Current liabilities increased $763.8 million compared to the prior year
primarily due to increases in short-term debt and trade and other payables. The
increase in short-term debt is the result of higher working capital needs and
driven by significant increases in the prices of agricultural commodities. The
increase in trade and other payables is also the result of increasing
agricultural commodity prices. Short-term borrowings, while typically at a
seasonal high in the spring, are further supporting an unusual price run-up in
our core commodities. As we liquidate these commodities in advance of harvest,
we expect a reduction to the level of short-term borrowing. The increase in
current liabilities was slightly offset by reductions in current maturities of
long-term debt.
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Sources and Uses of Cash
Six Months Ended
(in thousands) June 30, 2021 June 30, 2020
Net cash (used in) provided by operating activities $ (245,494)$ 145,511
Net cash used in investing activities (23,474)

(66,002)

Net cash provided by (used in) financing activities 267,550 (105,068)

Operating Activities
Our operating activities used cash of $245.5 million and provided cash of $145.5
million in the first six months of 2021 and 2020, respectively. The increase in
cash used was primarily due to a result in the change of working capital, as
discussed above, driven by significant increases in agricultural commodity
prices. However, when you remove the impact from changes in working capital,
cash provided by operating activities was much stronger than the prior period
due to favorable operating results.

Investing Activities
Investing activities used cash of $23.5 million through the first six months of
2021 compared to cash used of $66.0 million in the prior year. The decrease from
the prior year was a result of higher proceeds from sales of assets and
railcars, fewer purchased railcars and the continued strategic use of capital
spending to enhance overall liquidity and cash management.
We expect to invest approximately $100 million in property, plant and equipment
in 2021; approximately 60% of which will be to maintain facilities.

Financing Activities
Financing activities provided cash of $267.6 million and $105.1 million for the
six months ended June 30, 2021 and 2020, respectively. This change from the
prior year was largely due to a significant increase in short term borrowings to
cover working capital needs as the prices of agricultural commodities continue
to rise.
The Company is party to borrowing arrangements with a syndicate of banks that
provide a total of $1,404.6 million in borrowings. Of the total capacity, $404.6
million is non-recourse to the Company. As of June 30, 2021, the Company had
$1,173.5 million available for borrowing with $237.2 million of that total being
non-recourse to the Company.

The Company paid $11.7 million in dividends in the first six months of 2021
compared to $11.5 million in the prior year. The Company paid $0.175 per common
share for the dividends paid in January and April of 2021 and 2020. On June 25,
2021, the Company declared a cash dividend of $0.175 per common share payable on
July 22, 2021 to shareholders of record on July 6, 2021.
Certain of our long-term borrowings include covenants that, among other things,
impose minimum levels of equity and limitations on additional debt. The Company
is in compliance with all such covenants as of June 30, 2021. In addition,
certain of our long-term borrowings are collateralized by first mortgages on
various facilities or are collateralized by railcar assets. Our non-recourse
long-term debt is collateralized by ethanol plant assets and railcar assets.
Because the Company is a significant borrower of short-term debt in peak seasons
and the majority of this is variable rate debt, increases in interest rates
could have a significant impact on our profitability. In addition, periods of
high grain prices and/or unfavorable market conditions could require us to make
additional margin deposits on our exchange traded futures contracts. Conversely,
in periods of declining prices, the Company could receive a return of cash.
Management believes our sources of liquidity will be adequate to fund our
operations, capital expenditures and service our indebtedness.

At June 30, 2021, the Company had standby letters of credit outstanding of $25.5
million.

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