Andersons, Inc.

12. Commitments and Contingencies

Litigation activities

The Company is party to litigation, or threats thereof, both as defendant and plaintiff with some regularity, although individual cases that are material in size occur infrequently. As a defendant, the Company establishes reserves for claimed amounts that are considered probable and capable of estimation. If those cases are resolved for lesser amounts, the excess reserves are taken into income and, conversely, if those cases are resolved for larger than the amount the Company has accrued, the Company records additional expense. The Company believes it is unlikely that the results of its current legal proceedings for which it is the defendant, even if unfavorable, will be material. As a plaintiff, amounts that are collected can also result in sudden, non-recurring income.

Litigation results depend upon a variety of factors, including the availability of evidence, the credibility of witnesses, the performance of counsel, the state of the law, and the impressions of judges and jurors, any of which can be critical in importance, yet difficult, if not impossible, to predict. Consequently, cases currently pending, or future matters, may result in unexpected, and non-recurring losses, or income, from time to time. Finally, litigation results are often subject to judicial reconsideration, appeal and further negotiation by the parties, and as a result, the final impact of a particular judicial decision may be unknown for some time or may result in continued reserves to account for the potential of such post-verdict actions.

Specifically, the Company is party to a non-regulatory litigation claim related to the receivership of its former consolidated subsidiary. While the Company believes it has meritorious defenses against the suit, the ultimate resolution of the matter could result in a loss in excess of the amount accrued. Given the preliminary status of the claim, the Company does not believe an amount in excess of current reserves is determinable.

The estimated losses for all other outstanding claims that are considered reasonably possible and estimable are not material.

13. Stock Compensation Plans

The Company's 2019 Long-Term Incentive Compensation Plan, dated February 22, 2019, and subsequently approved by shareholders on May 10, 2019, and amended and restated on May 6, 2022, is authorized to issue up to 7.0 million shares of common stock as options, share appreciation rights, restricted shares and units, performance shares and units and other stock or cash-based awards. Approximately 2.4 million shares remain available for issuance at December 31, 2025.

Stock compensation expense and related income tax impacts were as follows:

Restricted Stock Units ("RSUs")

These awards are contingent to requisite service periods established within the grant documents and range from 1 to 3 years. RSUs graded vest in conjunction with the requisite service period. Total restricted stock expense is equal to the market value of the Company's common shares on the date of the award and is recognized over the requisite service period on a straight-line basis.

A summary of the status of the Company's non-vested RSUs as of December 31, 2025, and changes during the period then ended, is presented below:

As of December 31, 2025, there was $5.7 million of total unrecognized compensation cost related to non-vested RSUs that is expected to be recognized over a weighted-average period of 1.5 years.

Earnings Per Share-Based Performance Share Units with Total Shareholder Return Modifier (“Modified PSUs”)

Beginning in 2024, the Company began granting Modified PSUs. Each Modified PSU gives the participant the right to receive common shares dependent on both a performance condition (achievement of defined EPS levels) and a market condition (ranking of total shareholder return in comparison to our peer group) over a 3-year period. At the end of the period, the number of shares of stock issued from the target award will be determined by both company performance and market performance of the Company when compared to the peer group. The fair value of the Modified PSUs is estimated based on the market value of the Company's common shares on the date of the award in combination with a Monte Carlo Simulation to place a value on the modifier component of the award.

A summary of the status of the Company's Modified PSUs as of December 31, 2025, and changes during the period then ended, is presented below:

As of December 31, 2025, there was approximately $7.6 million unrecognized compensation cost related to non-vested Modified PSUs that is expected to be recognized over a weighted-average period of 1.7 years.

Earnings Per Share-Based Performance Share Units (“EPS PSUs”)

Each EPS PSU gives the participant the right to receive common shares dependent on the achievement of specified performance results over a 3-year performance period. At the end of the performance period, the number of shares of stock issued will be determined by adjusting the award upward or downward from a target award. Fair value of EPS PSUs issued is based on the market value of the Company's common shares on the date of the award. The related compensation expense is recognized over the performance period when achievement of the award is probable and is adjusted for changes in the number of shares expected to be issued if changes in performance are expected. Currently, the Company is accounting for the awards granted in 2023 at the maximum amount available for issuance. The EPS PSUs awards were discontinued after the 2023 grant in favor of the Modified PSUs as explained above.

A summary of the status of the Company's EPS PSUs as of December 31, 2025, and changes during the period then ended, is presented below:

As of December 31, 2025, there was no remaining unrecognized compensation cost related to non-vested EPS PSUs as all remaining non-vested awards will be settled in early 2026.

Total Shareholder Return-Based Performance Share Units (“TSR PSUs”)

Each TSR PSU gives the participant the right to receive common shares dependent on total shareholder return on the Company's Common Shares over a 3-year period. At the end of the period, the number of shares of stock issued will be determined by adjusting the award upward or downward from a target award. The TSR PSUs awards were discontinued after the 2023 grant in favor of the Modified PSUs as explained above.

A summary of the status of the Company's TSR PSUs as of December 31, 2025, and changes during the period then ended, is presented below:

As of December 31, 2025, there was no remaining unrecognized compensation cost related to non-vested TSR PSUs as all remaining non-vested awards will be settled in early 2026.

Employee Share Purchase Plan (the “ESP Plan”)

The ESP Plan allows employees to purchase common shares through payroll withholdings. The Company's 2004 ESP Plan, restated and amended in 2023, is authorized to issue up to 500 thousand common shares. The Company has approximately 218 thousand common shares remaining available for issuance to and purchase by employees under this plan. The ESP Plan also contains an option component. The purchase price per share under the ESP Plan is the lower of the market price at the beginning or end of the year. The Company records a liability for withholdings not yet applied towards the purchase of common stock. This liability is included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The fair value of the option component of the ESP Plan is estimated at the date of grant under the Black-Scholes option pricing model with the following assumptions at the grant date. Expected volatility was estimated based on the historical volatility of the Company's common shares over the past year. The average expected life was based on the contractual term of the plan. The risk-free rate is based on the U.S. Treasury yield curve rate with aone year term.

14. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2025 and 2024, are as follows:

(a) The Agribusiness segment is shown net of accumulated impairment losses of $116.0 million for all periods presented.

Goodwill is tested for impairment annually as of October 1, or more frequently if impairment indicators arise. The Company uses a one-step quantitative approach that compares the fair value of each reporting unit with its carrying value. Fair value is computed based on both an income approach (discounted cash flows) and a market approach. The income approach uses a reporting unit's estimated future cash flows discounted at the weighted average cost of capital ("WACC"). The market approach estimates fair value by applying cash flow market multiples to the reporting unit's past operating performance and estimated future results. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting unit. Any excess of the carrying value of the goodwill over the fair value will be recorded as an impairment loss.

There can be no assurance that anticipated financial results will be achieved and the goodwill balances remain susceptible to future impairment charges. As of October 1, 2025, the goodwill related to one of the reporting units within the Agribusiness segment is determined to have the greatest risk of future impairment charges given the difference (approximately 12%) between the fair value and carrying value of the reporting unit. If the Company's projected future cash flows were lower, the assumed weighted average cost of capital were higher, or selected market multiples were lower, the testing performed at the annual assessment date may have indicated an impairment of the goodwill. Any impairment charges that the Company may take in the future could be material to its Consolidated Statements of Operations and financial condition.

The Company's other intangible assets are as follows:

Amortization expense for intangible assets was $16.8 million, $22.5 million, and $24.5 million for the years ended December 31, 2025, 2024, and 2023, respectively. Expected future annual amortization expense for the assets above is as follows: 2026 -- $14.7 million; 2027 -- $14.6 million; 2028 -- $12.6 million; 2029 -- $3.0 million; 2030 -- $2.7 million; and thereafter -- $15.9 million.

15. Other Income, Net

The following table sets forth the items in Other income, net for the periods presented below:

Individually significant items included in the table above are:

Clean fuel production credits - The Inflation Reduction Act, enacted on August 16, 2022, introduced Section 45Z of the Internal Revenue Code, offering clean fuel production credits to incentivize low-carbon fuel production starting January 1, 2025. This replaces previous fuel-related credits and supports efforts to reduce greenhouse gas emissions, strengthen energy security, and boost rural economies. On July 4, 2025, the credit was extended through 2029 under the One Big Beautiful Bill Act. Eligible producers of clean transportation fuels can receive up to $1 per gallon. Under guidance available in 2025, the credit is indexed annually for inflation, and eligibility is based on lifecycle emissions, production location, and sales to unrelated parties.

For the year ended December 31, 2025, the Company recognized $35.0 million of Section 45Z credits once there was reasonable assurance the conditions of the year-to-date credit conditions were satisfied. The Company intends to apply these credits to reduce its income tax liability and monetize any remaining credits through sales to third parties.

Property insurance recoveries-The vast majority of the property insurance recoveries recorded in 2025 are related to a current year incident at a grain terminal in Sunray, Texas. In 2024 and 2023, property insurance recoveries were related to prior period incidents at Agribusiness grain locations in Indiana, Michigan, and Louisiana.

Interest income -Substantially all of interest income recorded by the Company was due to the amount of cash and cash equivalents on hand in all periods presented.

Patronage income -As part of the Company's normal operations it relies heavily on short-term lines of credit in order to support working capital needs in addition to long-term debt presented on the Consolidated Balance Sheets. As part of these programs, the Company receives patronage income from its lenders.

Gain on deconsolidation of joint venture -On April 18, 2023, ELEMENT was placed into receivership. As the receiver took control of ELEMENT, under the VIE consolidation model, the Company deemed to have lost control of the entity and therefore deconsolidated ELEMENT from its Consolidated Financial Statements. As a result of these activities, the Company recognized a gain on deconsolidation. See Note 17 for additional information.

Biofuel Producer Program funds - The USDA as a part of the Biofuel Producer Program, created under CARES Act, provided funding to support biofuel producers who faced unexpected market losses due to the COVID-19 pandemic. In 2023, the Company received proceeds of $2.2 million under this program.

16. Earnings Per Share

Basic earnings per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock awards.

The components of basic and diluted earnings per share were as follows:

Anti-dilutive share based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

17. ELEMENT

ELEMENT was structured as a limited liability company established for the primary purpose of producing ethanol and additional co-products such as distiller’s dried grain and corn oil. The facility located in Colwich, Kansas, was designed to produce 70 million gallons of ethanol per year and began operations in August 2019.

The Company holds 51% of the membership units and ICM owns the remaining 49% of the membership units. The Company had acted as the manager of the facility, responsibilities which were assumed per the Management Services Agreement dated January 1, 2021. ELEMENT was concluded to be a VIE and had been consolidated within the Company’s Consolidated Financial Statements.

In early 2023, ELEMENT was unable to make its scheduled debt payments and was placed into default. The default led to an impairment triggering event, concluding in an $87.2 million impairment charge in the first quarter.

On April 18, 2023, ELEMENT was placed into receivership and a receiver was appointed, which took possession and control of the rights and interests of ELEMENT. With this appointment, while retaining its investment in ELEMENT, the Company ceased to have a controlling financial interest and was no longer deemed to be the primary beneficiary in the subsidiary. Accordingly, the Company deconsolidated ELEMENT at that time and began accounting for the subsidiary as an equity method investment which resulted in a pretax gain of $18.1 million. Additionally, at the time of deconsolidation the Company had $9.6 million in raw material and fee receivables as well as $2.0 million in loans and interest due from ELEMENT that were previously eliminated in consolidation, among other minor balances. Upon deconsolidation, the fair values of these receivables and loans from ELEMENT to the Company were ascertained to have minimal value, resulting in a pretax loss of $11.6 million. The combination of this activity triggered by the ELEMENT deconsolidation resulted in a cumulative net pretax gain of $6.5 million which was recorded in Other income, net in the Condensed Consolidated Statements of Operations.

On January 31, 2024, the receiver sold substantially all of the assets of ELEMENT for approximately $44.0 million. From the point of deconsolidation to December 31, 2023, the ELEMENT entity continued to incur losses and made no payments on the outstanding receivables or loan mentioned previously until the first quarter of 2024. The Company recognized an additional $3.1 million gain on deconsolidation in the first quarter of 2024 recorded in Other income, net in the Condensed Consolidated Statements of Operations as the amount of cash distributed to the Company related to its receivables from ELEMENT exceeded management's estimate at the time of deconsolidation. No equity method losses related to ELEMENT have been recorded since deconsolidation as the investment is in a negative position for all periods presented.

18. Business Acquisition

On November 1, 2024, the Company entered into a definitive purchase agreement for a 65% ownership interest in Skyland Grain LLC ("Skyland") for $85.0 million, subject to customary working capital adjustments. Skyland operates grain storage and handling facilities in Kansas, Colorado, Oklahoma, and Texas. It also operates three cotton gins, a full-service agronomy sales and service division, and a retail and wholesale fuel sales and delivery division. The purchase was completed on November 1, 2024, and funded by cash on hand. The transaction enables the Company to expand its core grain and fertilizer businesses across strategic markets, including Kansas, Oklahoma, Colorado, and Texas. The Company's 65% ownership of Skyland's equity resulted in the consolidation of Skyland’s results in the Company's Consolidated Financial Statements in the Agribusiness segment.

The purchase price allocation was finalized in the second quarter of 2025. Measurement period adjustments recorded in 2025 were not material. The summarized purchase price allocation is as follows:

The fair value in the opening balance sheet of the 35% noncontrolling interest in Skyland was estimated to be $45.8 million. The fair value was estimated based on 35% of the total equity value of Skyland based on the transaction price for the 65% stake in Skyland, considering the consideration transferred noted above. Acquisition costs of $2.4 million were all incurred in the fourth quarter of 2024 and recorded in Operating, general and administrative expenses in the Statements of Operations.

If the Skyland acquisition was effective January 1, 2024, the Company's pro forma net sales and net income for the twelve months ended December 31, 2024 were $11,748.0 million and $170.5 million, respectively. Pro forma net income was also adjusted to account for the tax effects of the pro forma adjustments noted above using a blended federal, state, and local tax rate of 25%. Pro forma financial information is not necessarily indicative of the Company's actual results of operations if the acquisition had been completed at the date indicated, nor is it necessarily an indication of future operating results. Amounts do not reflect any operating efficiencies or cost savings that the Company believes are achievable.