ANDERSONS INC, 10-K, 1997-03-28

ANDERSONS INC
10-K, 1997-03-28
FARM PRODUCT RAW MATERIALS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-K

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1996

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from
______________ to _________________

Commission file number 000-20557

THE ANDERSONS, INC.
(Exact name of registrant as specified in its charter)

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

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

Registrant's telephone number, including area code (419) 893-5050

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Shares

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 X NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.___

The aggregate market value of the registrant's voting stock which may be
voted by persons other than affiliates of the registrant was $64,059,586 on
February 28, 1997, computed by reference to the last sales price for such stock
on that date as reported on the Nasdaq National Market

The registrant had 8,316,992 Common shares outstanding, no par value, at
February 28, 1997.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report of The Andersons, Inc. and Proxy
Statement for the Annual Meeting of Shareholders to be held on May 22, 1997,
are incorporated by reference into Parts II (Items 5, 6, 7 and 8), III (Items
10, 11 and 12) and IV of this Annual Report on Form 10-K. The Proxy Statement
will be filed with the Commission on or about April 15, 1997.

PART I

Item 1. Business

(a) General Development of Business

The Andersons, Inc. is a diversified agribusiness and retailing company
operating in three segments. The Agriculture Group engages in grain
merchandising, operates grain elevator facilities located in Ohio, Michigan,
Indiana and Illinois, distributes wholesale agricultural fertilizer and
operates retail farm centers. The Retail Group operates six retail stores in
Ohio. The Processing and Manufacturing Group (formerly called the Business
Development Group) includes, primarily, the processing of lawn and industrial
products and the repair and leasing of railcars.

Prior to January 2, 1996 the Company was structured as two entities; The
Andersons Management Corp. (the "Corporation") and The Andersons (the
"Partnership"). The Corporation was the sole general partner of the
Partnership and provided all management services to the Partnership. The
Partnership was the successor to other Ohio limited partnerships which operated
as "The Andersons" continuously since 1947. On January 2, 1996, the
Partnership merged with and into the Corporation and the Corporation survived,
changing its name to The Andersons, Inc. See Note 1 to the consolidated
financial statements for further discussion about the merger. All information
herein gives effect to the merger.

(b) Financial Information About Industry Segments

See Note 13 to the consolidated financial statements for information
regarding business segments.

Agriculture Group

The Agriculture Group consists of grain operations, wholesale fertilizer
operations, and retail farm centers.

The Company's grain operations involve merchandising grain and operating
terminal grain elevator facilities. This includes purchasing, handling,
processing and conditioning grain, storing grain purchased by the Company as
well as grain owned by others, and selling grain. The principal grains sold by
the Company are yellow corn, yellow soybeans and soft red and white wheat. The
Company's total grain storage capacity was approximately 69 million bushels at
December 31, 1996.

Virtually all grain merchandised by the Company is grown in the Midwestern
portion of the United States (the Eastern Corn Belt) and is acquired from
country elevators, dealers and producers. The Company makes grain purchases at
prices referenced to Chicago Board of Trade quotations. The Company competes
for the purchase of grain with grain processors and feeders, as well as with
other grain merchandisers.

During 1996, approximately 72% of the grain sold by the Company was
purchased domestically by grain processors and feeders, and approximately 28%
was exported. Most of the exported grain was purchased by exporters for
shipment to foreign markets. Some grain is shipped directly to foreign
countries, mainly Canada. Almost all grain shipments are by rail or boat.
Rail shipments are made primarily to grain processors and feeders, with some
rail shipments made to exporters on the Gulf or east coast. All boat shipments
are from the Toledo, Ohio port elevator. Grain sales are effected on a
negotiated basis by the Company's merchandising staff.

The Company's grain business may be adversely affected by the grain supply
in its principal growing area including crop quality and quantity, government
regulations and policies, conditions in the shipping and rail industries and
commodity price levels. See "Government Regulation". The grain business is
seasonal coinciding with the harvest of the principal grains purchased and sold
by the Company.

Fixed price purchases and sales of cash grain and grain held in inventory
expose the Company to risks related to adverse changes in price. The Company
attempts to manage these risks by hedging fixed price purchase and sales
transactions and inventory through the use of futures and option contracts with
the Chicago Board of Trade ("CBOT"). The CBOT is a regulated commodity futures
exchange that maintains futures markets for the grains merchandised by the
Company. Futures prices are determined by supply and demand.

The Company's hedging program is designed to reduce the risk of changing
commodity prices. In that regard, hedging transactions also limit potential
gains from further changes in market prices. The grain division's
profitability is primarily derived from margins on grain sold, and revenues
generated from other merchandising activities with its customer, not from
hedging transactions. The Company has a policy which specifies the key
controls over its hedging program. This policy includes a description of the
hedging programs, mandatory review of positions by key management outside of
the trading function on a biweekly basis, daily position limits, modeling of
positions for changes in market conditions, and other internal controls.

Purchases of grain can be made the day the grain is delivered to a
terminal or via a forward contract made prior to actual delivery. Sales of
grain are generally made by contract for delivery in a future period. When the
Company purchases grain at a fixed price, the purchase is hedged with the sale
of a futures contract on the CBOT. Similarly, when the Company sells grain at
a fixed price, the sale is hedged with the purchase of a futures contract on
the CBOT. At the close of business each day, the open inventory ownership
positions as well as open futures and option positions, are marked-to-market.
Gains/losses in the value of the Company's owned inventory positions due to
changing prices are netted with and generally offset by losses/gains in the
value of the Company's futures positions.

When a futures contract is entered, an initial margin deposit must be sent
to the CBOT. The amount of the margin deposit is set by the CBOT and varies by
commodity. If the market price of a futures contract moves in a direction
which is adverse to the Company's position, an additional margin deposit,
called a maintenance margin, is required by the CBOT. Subsequent price changes
could require additional maintenance margins or could result in the return of
maintenance margins by the CBOT. Significant changes in market prices, such as
occur when weather conditions are unfavorable for extended periods, can have an
effect on liquidity and require the Company to maintain appropriate short-term
lines of credit. The Company has, at times, utilized CBOT option contracts to
limit its exposure to potential required margin deposits in the event of a
rapidly rising market.

The Grain division relies on forward purchase contracts with producers,
dealers and country elevators to ensure an adequate supply of grain to its
facilities throughout the year. Bushels contracted for future delivery at
February 28, 1997 approximated 23 million, 96% of which was to be delivered in
the 1996 and 1997 crop years. The Company relies heavily on its hedging
program as the method for minimizing price risk in its grain inventories and
contracts. The Company monitors current market conditions and may expand or
reduce the purchasing program in response to changes in those conditions. In
addition, the Company reviews its purchase contracts and the parties to those
contracts on a regular basis for defaults and non-delivery. Provision is made
under the Grain Trade Rules of the National Grain and Feed Association ("NGFA")
for resolution of contract defaults (non-delivery of grain) and for arbitration
of contract disputes. The Company's standard purchase and sales contracts
include arbitration clauses, and the Company is currently arbitrating several
cases before the NGFA. In addition, the Company is involved in litigation with
several producers. See "Legal Proceedings".

The Company competes in the sale of grain with other grain merchants,
other private elevator operators and farmer cooperatives which operate elevator
facilities. Competition is based primarily on price, service and reliability.
Some of the Company's competitors are also its customers and many of its
competitors have substantially greater financial resources than the Company.

The Company's wholesale fertilizer operations involve purchasing, storing,
formulating, and selling dry and liquid fertilizers; providing fertilizer
warehousing and services to manufacturers and customers; and wholesale
distribution of seeds and various farm supplies. The major fertilizer
ingredients sold by the Company are nitrogen, phosphate and potassium, all of
which are readily available from various sources.

The Company's wholesale fertilizer market area primarily includes
Illinois, Indiana, Michigan and Ohio and customers for the Company's fertilizer
products are principally retail dealers. Sales of agricultural fertilizer
products are heaviest in the spring and fall.

The Company's aggregate storage capacity for dry fertilizer was 14 million
cubic feet at December 31, 1996. The Company reserves 6 million cubic feet of
this space for various fertilizer manufacturers and customers. The Company's
aggregate storage capacity for liquid fertilizer at December 31, 1996 was 29
million gallons and 5 million gallons of this space is reserved for
manufacturers and customers. The agreements for reserved space provide the
Company storage and handling fees and, generally, are for an initial term of
one year and are renewable at the end of each term.

The Company operates nine retail farm centers located throughout Michigan,
Indiana and Ohio. These centers, often strategically located at or near the
Company's grain or wholesale fertilizer facilities, offer agricultural
fertilizer, custom application of fertilizer, and chemicals, seeds and supplies
to the farmer.

In its wholesale fertilizer and retail farm center businesses, the Company
competes with regional cooperatives; fertilizer manufacturers; multi-state
retail/wholesale chain store organizations; and other independent wholesalers
of agricultural products. Many of these competitors have considerably larger
resources than the Company. Competition in the agricultural products business
of the Company is based principally on price, location and service.

Retail Group

The Company's Retail Group consists of six stores operated under the trade
name "The Andersons", which are located in the Columbus, Lima and Toledo, Ohio
markets and serve urban, rural and suburban customers. The retail concept is
that of a destination store for the do-it-yourself homeowner and includes a
full line of home center products plus a wide array of other items not
available at the more traditional home center stores. In addition to hardware,
home remodeling and lawn & garden products, The Andersons stores offer
housewares, automotive, sporting goods, pet products, workwear and food
(bakery, deli, produce, wine and specialty groceries). Each store carries more
than 70,000 different items, has 100,000 square feet or more of in-store
display space plus 40,000 square feet of outdoor garden center space, and has a
center aisle that features do-it-yourself clinics, special promotions and
varying merchandise displays.

The retail merchandising business is highly competitive. The Company
competes with a variety of retail merchandisers, including numerous mass
merchandisers, home centers, department and hardware stores. The principal
competitive factors are quality of product, price, service and breadth of
selection. The Company's retail business is affected by seasonal factors with
significant sales occurring during the Christmas season and in the spring.

Processing and Manufacturing Group

The Processing and Manufacturing Group consists of three business units:
the processing division, the manufacturing division and the ventures division.

The processing division consists of lawn products, which manufactures and
markets fertilizer and related products to retailers and professional lawn care
companies and industrial products, which processes corn cobs into various
products for the chemical carrier, pet and industrial markets. The retail
granular lawn products are sold to mass merchandisers, small independent
retailers and other lawn fertilizer manufacturers. During the off-season, ice
melt products are distributed to many of the same retailers. The professional
granular lawn products are sold both direct and through distributors to lawn
service applicators and to golf courses. The principal raw materials for the
lawn care products are nitrogen, potash and phosphate, which are purchased
primarily from the Company's wholesale fertilizer division. The lawn products
industry is highly seasonal, with the majority of the sales occurring from
early spring to early summer. Competition is based principally on
merchandising ability, service and quality.

The Company is one of the largest producers of processed corncob products
in the United States. These products serve the chemical carrier, animal
litter, industrial and sorbent markets and are distributed throughout the
United States and Canada and into Europe and Asia. The principal sources for
the corncobs are the Company's grain operations and seed corn producers.

The Company's manufacturing division includes a full service railcar
repair shop, which specializes in repair, renovation and painting of railcars.
The division also is involved in the purchase and sale of railcars, leasing and
subleasing of railcars, and also provides fleet management services. It also
does custom fabrication work. Competition for railcar marketing and fleet
maintenance services are based primarily on service and access to third party
financing. Repair and fabrication shop competition is based primarily on
price, quality and location.

The Company's ventures division includes the production of pet foods,
which are marketed through a joint venture, the operation of eight auto service
centers, also a joint venture, and a lawn and garden power equipment sales and
service shop.

Research and Development

The Company's research and development program is mainly concerned with
the development of improved products and processes, primarily for the
processing division of the Processing and Manufacturing Group. The Company
expended approximately $320,000, $370,000, and $490,000 on research and
development during 1996, 1995 and 1994, respectively.

Employees

At December 31, 1996, the Company had 1,160 full-time and 1,864 part-time
or seasonal employees. The Company believes its relations with its employees
are good.

Government Regulation

Grain sold by the Company must conform to official grade standards imposed
under a federal system of grain grading and inspection administered by the
United States Department of Agriculture ("USDA").

The production levels, markets and prices of the grains which the Company
merchandises are materially affected by United States government programs,
including acreage control and price support programs of the USDA. Also, under
federal law, the President may prohibit the export of any product, the scarcity
of which is deemed detrimental to the domestic economy, or under circumstances
relating to national security. Because a portion of the Company's grain sales
are to exporters, the imposition of such restrictions could have an adverse
effect upon the Company's operations.

The Company, like other companies engaged in similar businesses, is
subject to a multitude of federal, state and local environmental protection
laws and regulations including, but not limited to, laws and regulations
relating to air quality, water quality, pesticides and hazardous materials.
The provisions of these various regulations could require modifications of
certain of the Company's existing plant and processing facilities and could
restrict future facilities expansion or significantly increase their cost of
operation. Of the Company's capital expenditures, approximately $720,000,
$740,000 and $617,000 in 1996, 1995 and 1994, respectively, were made in order
to comply with these regulations.

Item 2. Properties

The Company's principal agriculture, retail and other properties are
described below. Except as otherwise indicated, all properties are owned by
the Company.

Agriculture Facilities

Location Wholesale Fertilizer
Grain Liquid
Storage Dry Storage Storage
(bushels) (cubic feet) (gallons)
Maumee, OH 17,270,000 6,333,000 2,620,000
Toledo, OH River 7,010,000 2,000,000 3,000,000
Metamora, OH 6,860,000 --- ---
Lyons, OH (3) 380,000 47,000 160,000
Toledo, OH 1,210,000 --- ---
Champaign, IL 13,500,000 833,000 ---
Delphi, IN 6,700,000 1,000,000 ---
Clymers, IN (1)(4) 4,450,000 --- 2,694,000
Clymers, IN (3) --- 37,000 480,000
Dunkirk, IN 5,980,000 900,000
Poneto, IN 620,000 --- 5,540,000
North Manchester, IN (3) --- 23,000 90,000
Logansport, IN --- 33,000 3,011,000
Walton, IN (3) --- 433,000 7,000,000
Albion, MI (3) 2,590,000 23,000 40,000
White Pigeon, MI 2,070,000 --- ---
Webberville, MI --- 2,017,000 3,200,000
Litchfield, MI (2)(3) --- 40,000 252,000
North Adams, MI(2)(3) --- 20,000 230,000
Union City, MI (3) --- 20,000 49,500
Munson, MI (3) --- 33,000 150,000
68,640,000 13,792,000 28,516,500

(1) Facility leased - lease expires in 1998, provides an option to purchase.
(2) Facility leased.
(3) Facility is or includes a retail farm center.
(4) Facility also stores soybean oil with a capacity of 61,000,000 pounds.

The grain facilities are mostly concrete and steel tanks, with some flat
storage. The Company also owns grain inspection buildings and dryers, a corn
sheller plant, maintenance buildings and truck scales and dumps.

Wholesale fertilizer and retail farm center properties consist mainly of
fertilizer warehouse and distribution facilities for dry and liquid
fertilizers. The Maumee, Ohio and Walton, Indiana locations have fertilizer
mixing, bagging and bag storage facilities. The Company also owns a seed
processing facility in Delta, Ohio. Aggregate storage capacity in the nine
retail farm centers located in Michigan, Indiana and Ohio for liquid fertilizer
and dry fertilizer is 1.5 million gallons and 243,000 cubic feet, respectively.

Retail Store Properties

Name Location Square Feet
Maumee Store Maumee, OH 131,000
Toledo Store Toledo, OH 130,000
Woodville Store (1) Northwood, OH 100,000
Lima Store (1) Lima, OH 117,000
Brice Store Columbus, OH 128,000
Sawmill Store Columbus, OH 134,000
Warehouse (1) Maumee, OH 245,000

(1) Leased

The leases for the two stores and the warehouse facility are long-term
leases with several renewal options and provide for minimum aggregate annual
lease payments approximating $1 million. The two store leases provide for
contingent lease payments based on achieved sales volume. Neither store
achieved a sales level triggering contingent lease payments in 1996, 1995 or
1994.

Other Properties

The Company owns lawn fertilizer production facilities and automated pet
food production and storage facilities in Maumee, Ohio. It also owns corncob
processing and storage facilities in Maumee, Ohio and Delphi, Indiana. The
Company leases a lawn fertilizer production facility and a warehouse facility.
In its railcar leasing business, the Company owns or leases approximately 2,000
railcars (primarily covered hopper cars) with lease terms ranging from one to
ten years and future minimum lease payments aggregating $18 million with future
minimum sublease income of an equal amount. The Company also owns a railcar
repair facility, a steel fabrication facility, a service and sales facility for
outdoor power equipment. Additionally, the Company is part of a joint venture
which owns or leases eight auto service centers. The Company also owns or
leases a number of switch engines, cranes and other equipment.

The Company's administrative office building is leased under a net lease
expiring in 2005. The Company owns approximately 704 acres of land on which
various of the above properties and facilities are located; approximately 439
acres of farmland and land held for future use; approximately 11 acres of
improved land in an office/industrial park held for sale; and certain other
real estate.

Real properties, machinery and equipment of the Company were subject to
aggregate encumbrances of approximately $36 million at December 31,1996.
Additions to property for the years ended December 31, 1996, 1995 and 1994
amounted to $10 million, $16 million, and $26 million, respectively. See Note
9 to the Company's consolidated financial statements for information as to the
Company's leases.

The Company believes that its properties, including its machinery,
equipment and vehicles, are adequate for its business, well maintained and
utilized, suitable for their intended uses and adequately insured.

Item 3. Legal Proceedings

The Company, like others in the agriculture industry, utilizes different
types of contracts with producers (including contracts commonly referred to as
"Hedged To-Arrive" or "HTA" contracts) to purchase grain. Some grain producers
have defaulted or threatened default on certain of these contracts, arguing
that their contracts are unenforceable. The Company believes that this is due,
in large part, to unprecedented high grain prices experienced in 1996. The
Company currently is engaged in litigation and/or arbitration with several
defaulting producers, including one purported class action filed on May 16,
1996 in the United States District Court for the Northern District of Illinois,
Eastern Division, Case no. 96C2936, Harter, et. al., v. Iowa Grain Company and
The Andersons Investment Services Corp., d.b.a. The Andersons, Inc., wherein
enforceability of the delivery obligation under certain grain contracts has
been raised as an issue. The Harter lawsuit seeks declaratory and injunctive
relief and compensatory, exemplary and punitive damages of an unspecified
amount. The Court, in Harter, ordered arbitration by the National Grain and
Feed Association and dismissed Iowa Grain Company as a defendant. The Company
believes its grain contracts are enforceable obligations and intends to enforce
them. Although no assurance can be given that the current litigation and
arbitration will not result in liability or loss, the Company continues to
believe that it has valid claims and defenses in the lawsuits and proceedings
in which it is involved.

Pursuant to subpoenas duces tecum served by the Commodities Futures
Trading Commission (the "CFTC"), the Company has produced certain records,
including names and phone numbers of certain customers and the depositions of
certain employees and former employees have been taken in the matter of
"Certain Transactions and Practices Among Grain Elevators, et. al., Involving
Futures Contracts."

In light of the Company's current and prior use of Hedged To-Arrive
contracts, related industry-wide litigation, and current conditions of the
industry as a whole, there can be no assurance that other litigation will not
be brought, that a class will not be certified or that other CFTC proceedings
will not be instituted. There currently is no reasonable basis to predict the
amount of future liability or loss, if any, that may arise from such litigation
or CFTC proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 4A. Executive Officers of the Registrant

Pursuant to General Instruction G(3) of Form 10-K, the following
information with respect to the executive officers of the registrant is
included herein in lieu of being included in the Registrant's Proxy Statement
for its Annual Meeting of Shareholders to be held May 22, 1997.

Name Position Age Year Assumed
Christopher President, Processing and 42 1996
J. Anderson Manufacturing Group
Vice President, Business 1992
Development Group
General Manager, Ventures & New 1990
Business Development
Daniel T. President, Retail Group 41 1996
Anderson Director of Marketing and 1996
Merchandising, Retail Group
General Merchandise Manager, 1991
Retail Group
Michael J. President and Chief Operating 45 1996
Anderson Officer
Vice President and General 1994
Manager, Retail Group
Vice President and General 1990
Manager, Grain Group
Richard M. Vice President and General 40 1996
Anderson Manager, Processing Division
Vice President and General 1990
Manager, Industrial Products
Group
General Manager, Industrial 1990
Products & Technical Development
Richard P. Chairman of the Board and Chief 67 1996
Anderson Executive Officer
President and Chief Executive 1987
Officer
Joseph L. President, Agriculture Group 46 1996
Braker Vice President and General 1994
Manager, Agriculture Group
Vice President and General 1990
Manager, Agricultural Products
Group
Joseph C. Vice President, Human Resource 48 1996
Christen Development
Director of Human Resource 1988
Development
Dale W. Vice President - Corporate 52 1992
Fallat Services
Senior Vice President, Corporate 1990
Services
Phillip C. Vice President, Corporate 55 1996
Fox Planning
Director of Company Planning 1988
Charles E. Vice President, Personnel 55 1996
Gallagher Director of Personnel 1988
Richard R. Vice President and Controller 47 1996
George Corporate Controller 1988
Beverly J. Vice President, General Counsel 55 1996
McBride and Secretary
General Counsel and Corporate 1987
Secretary
Gary L. Vice President, Finance and 51 1996
Smith Treasurer
Corporate Treasurer 1988

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

The information under the caption Market for Common Stock on page 10 and
Shareholders on the inside back cover of The Andersons, Inc. 1996 Annual Report
to Shareholders is incorporated herein by reference. The Company's first
quarterly dividend of three cents per common share was declared on December 20,
1996 for shareholders of record on January 2, 1997.

Item 6. Selected Financial Data

The information under the caption Selected Financial Data on page 9 of The
Andersons, Inc. 1996 Annual Report to Shareholders is incorporated herein by
reference.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

The information under the caption Management's Discussion and Analysis
appearing on pages 8 and 9 of The Andersons, Inc. 1996 Annual Report to
Shareholders is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The information under the caption Selected Quarterly Financial Data on
page 10 of The Andersons, Inc. 1996 Annual Report to Shareholders, as well as
the following consolidated financial statements of The Andersons, Inc. set
forth on pages 11 through 28 of The Andersons, Inc. 1996 Annual Report to
Shareholders are incorporated herein by reference:

Consolidated Statements of Income for the years ended December 31,
1996, 1995 and 1994

Consolidated Balance Sheets as of December 31, 1996 and 1995

Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994

Consolidated Statements of Changes in Owners' Equity for the years
ended December 31, 1996, 1995 and 1994

Notes to Consolidated Financial Statements

Following is the Report of Independent Auditors on the Consolidated
Financial Statements and schedule:

Report of Independent Auditors

Board of Directors
The Andersons, Inc.

We have audited the accompanying consolidated balance sheets of The Andersons,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, cash flows and changes in owners' equity for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Andersons, Inc. and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/ERNST & YOUNG LLP

Toledo, Ohio
January 31, 1997

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

For information with respect to the executive officers of the registrant,
see "Executive Officers of the Registrant" in Item 4A included in Part I of
this report. For information with respect to the Directors of the registrant,
see "Election of Directors" in the Proxy Statement for the Annual Meeting of
the Shareholders to be held on May 22, 1997 (the "Proxy Statement"), which is
incorporated herein by reference; for information concerning 1934 Securities
and Exchange Act Section 16(a) Compliance, see such section in the Proxy
Statement, incorporated herein by reference.

Item 11. Executive Compensation

The information set forth under the captions "Executive Compensation" in
the Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information set forth under the captions "Executive Compensation" in
the Proxy Statement is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

None

PART IV

Item 14. Financial Statement Schedules and Reports on Form 8-K

(a) (1) The consolidated financial statements of the Company, as set forth
under Item 8 of this report on Form 10-K, are incorporated herein by reference
from The Andersons, Inc. 1996 Annual Report to Shareholders.

(2) The following consolidated financial statement schedule is included
in Item 14(d):
Page
II. Consolidated Valuation and Qualifying Accounts - years
ended December 31, 1996, 1995 and 1994 14

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.

(3) Exhibits:

2.1 Agreement and Plan of Merger, dated April 28, 1995 and amended as
of September 26, 1995, by and between The Andersons Management Corp.
and The Andersons. (Incorporated by reference to Exhibit 2.1 to
Registration Statement No. 33-58963).

3.1 Articles of Incorporation. (Incorporated by reference to Exhibit 3(d)
to Registration Statement No. 33-16936).

3.4 Code of Regulations of The Andersons, Inc. (Incorporated by reference
to Exhibit 3.4 to Registration Statement No. 33-58963).

4.3 Specimen Common Share Certificate. (Incorporated by reference to
Exhibit 4.1 to Registration Statement No. 33-58963).

4.4 The Fifteenth Supplemental Indenture dated as of January 2, 1995,
between The Andersons, Inc. and Fifth Third Bank of Northwestern
Ohio, N.A., successor Trustee to an Indenture between The Andersons
and Ohio Citizens Bank, dated as of October 1, 1985. (Incorporated by
reference to Exhibit 4.4 to registrant's 1995 Annual Report on Form
10-K).

10.1 Management Performance Program. * (Incorporated by reference to
Exhibit 10(a) to the Partnership's Form 10-K dated December 31, 1990,
File No. 2-55070).

10.2 The Andersons, Inc. Long-Term Performance Compensation Plan *
(Incorporated by reference to Appendix B to Registration Statement
No. 33-58963).

10.3 The Andersons, Inc. Employee Share Purchase Plan * (Incorporated by
reference to Appendix C to Registration Statement No. 33-58963).

13 The Andersons, Inc. 1996 Annual Report to Shareholders

22 Subsidiaries of The Andersons, Inc.

23.1 Consent of Independent Auditors

* Management contract or compensatory plan.

The Company agrees to furnish to the Securities and Exchange Commission a
copy of any long-term debt instrument or loan agreement that it may request.

(b) Reports on Form 8-K:

No reports on Form 8-K were filed during the last quarter of the year.

The exhibits listed in Item 14(a)(3) of this report, and not
incorporated by reference, follow "Financial Statement Schedule"
referred to in (d) below.

(d) Financial Statement Schedule:

The financial statement schedule listed in 14(a)(2) follows
"Signatures".

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in Maumee, Ohio,
on the 28th day of March, 1997.

THE ANDERSONS, INC. (Registrant)

By /s/Richard P. Anderson
Richard P. Anderson
Chairman of the Board and Chief Executive
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant on the 28th day of March, 1997.

Signature Title Date
/s/Richard P. Anderson Chairman and Chief Executive 3/28/97
Richard P. Anderson Officer (Principal Executive Officer)

/s/Richard R. George Vice President and Controller 3/28/97
Richard R. George (Principal Accounting Officer)

/s/Gary L. Smith Vice President, Finance 3/28/97
Gary L. Smith and Treasurer
(Principal Financial Officer)

________________________ Director
Donald E. Anderson

/s/Michael J. Anderson Director 3/28/97
Michael J. Anderson

/s/Richard M. Anderson Director 3/28/97
Richard M. Anderson

/s/Thomas H. Anderson Director 3/28/97
Thomas H. Anderson

/s/John F. Barrett Director 3/28/97
John F. Barrett

/s/Paul M. Kraus Director 3/28/97
Paul M. Kraus

_______________________ Director
Donald M. Mennel

_______________________ Director
David L. Nichols

_______________________ Director
Dr. Sidney A. Ribeau

_______________________ Director
Charles A. Sullivan

Except for those portions of The Andersons, Inc. 1996 Annual Report to
Shareholders specifically incorporated by reference in this report on Form
10-K, such annual report is furnished solely for the information of the
Securities and Exchange Commission and is not to be deemed "filed" as a part of
this filing.
<TABLE>

SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
THE ANDERSONS, INC.
<CAPTION>
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions at End
Description of Period Expenses -Describe -Describe of Period
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts receivable:

Year ended December 31, 1996 $3,514,000 $4,321,994 $ - $4,605,994<F1> $3,230,000

Year ended December 31, 1995 2,292,000 2,220,830 - 998,830<F1> 3,514,000

Year ended December 31, 1994 1,178,000 2,682,904 - 1,568,904<F1> 2,292,000

Allowance for doubtful notes receivable:

Year ended December 31, 1996 $1,277,000 $ - $ - $ 542,000<F1> $ 735,000

Year ended December 31, 1995 727,000 550,000 - - 1,277,000

Year ended December 31, 1994 - 727,000 - - 727,000

<FN>
<F1> Uncollectible accounts written off, net of recoveries

</TABLE>

EXHIBIT INDEX

THE ANDERSONS, INC.

Exhibit
Number

13 The Andersons, Inc. 1996 Annual Report to Shareholders

22 Subsidiaries of The Andersons, Inc.

23.1 Consent of Independent Auditors

1996 Annual Report

Corporate Profile
The Andersons, Inc. (Nasdaq: ANDE) is a diversified agribusiness and
retailing Company with annual revenues of more than $1 billion. The Company,
which began operations in Maumee, Ohio, in 1947 with one grain elevator and
500,000 bushels of storage capacity, today has three operating groups:
Agriculture, Retail, and Processing & Manufacturing.

1996 Accomplishments
* Merged The Andersons Management Corp. and The Andersons (partnership) and
changed the name to The Andersons, Inc.
* Listed and initiated trading of the company's shares on Nasdaq: ANDE
* Exceeded 1995 pretax income by 15%
* Increased total sales by 5.2% and net income by 2.1%
* Declared our first cash dividend -- paid in 1997
* Achieved record sales and income in the Retail Group and significant
sales and income gains in our Lawn and railcar businesses.
* Redesigned and renovated the Toledo retail store
* Reorganized the Business Development Group to improve efficiency and
renamed it the Processing & Manufacturing Group to better reflect the
nature of the business
* Reduced balance sheet leverage -- improving the long-term debt to equity
ratio

Table of Contents

Highlights 1
Letter to Shareholders 2-3
Agriculture Group 4
Retail Group 5
Processing & Manufacturing Group 6
Management's Discussion & Analysis 7-9
Selected Financial Data 9-10
Audited Consolidated Financial Statements 11-28
Officers & Directors Data Inside Back

Welcome to our new shareholders! Thanks for your vote of confidence.

The Andersons, Inc.

Financial Highlights
(in thousands, except for per share and performance data)

1996 1995* % Change
Operations
Grain sales & revenue $ 700,326 $ 660,121 6.1%
Fertilizer, retail and other sales 449,978 432,289 4.1%
Other income 4,652 5,320 (12.5)%
Total sales & revenue 1,154,956 1,097,730 5.2%
Gross profit 159,231 153,554 3.7%
Income before income taxes 11,891 10,325 15.2%
Net income 6,406 6,273 2.1%

Per share
Net income $ 0.76 $ 0.74 2.7%
Book value 8.76 7.98 9.8%

Performance
Pre tax return on beginning equity 17.7% 15.9%
Net income return on beginning equity 9.6% 10.3%
Long-term debt to equity ratio 0.97 to 1 1.13 to 1
Weighted average
shares outstanding (000) 8,425 8,430
Number of employees 3,024 3,126

* 1995 net income and per share data on a pro forma basis

[Pie Graph]

1996 Operating Income 1996 Revenues
Total: $12.3 million Total: $1.2 billion
Agriculture 30.1% Agriculture 75.0%
Retail 30.9% Retail 15.2%
Processing & Manufacturing 39.0% Processing & Manufacturing 9.8%

Letter to Shareholders

The past year was an exciting and eventful one. 1996 confirmed the
soundness of our business diversification strategy. We exceeded 1995 pretax
income by 15%, modified our business structure from a partnership to a
corporation, changed our name to The Andersons, Inc., listed our shares on
Nasdaq (trading symbol ANDE), and directly addressed several strategic issues
in a number of our businesses. Looking forward, we see many opportunities to
improve and grow our Company.

While 1996 was a challenging year for a number of our grain operating
units, the Company's business diversification strategy served us well. Strong
performances by our retail, wholesale fertilizer, lawn products and railcar
businesses more than offset the reduction in grain income caused by a second
consecutive year of poor harvests in the Eastern Corn Belt. Both retail and
lawn products enjoyed healthy growth in sales and income.

Total revenues for 1996 increased 5% from 1995 to $1.2 billion primarily
due to grain price escalation in the Agriculture Group and volume growth in
other businesses. Pretax income for the year was up 15% to $11.9 million,
resulting in pretax return on beginning equity of 17.7%, against our goal of
25%. As a result of a one-time charge to establish the Company's deferred tax
liability resulting from the merger, total net income increased by only 2% to
$6.4 million versus pro forma net income of $6.3 million in 1995. Earnings
per share increased modestly to $0.76 in 1996 from $0.74 pro forma in 1995.

Strong cash flow in 1996 allowed us to increase working capital modestly
and reduce balance sheet leverage closer to our long-term debt to equity ratio
objective of 0.8 to 1. Total equity grew by 8.9% for the year. Our objective
is to achieve average annual internally-generated equity growth of 14%.

The January 2, 1996 restructuring from a partnership to a corporation and
subsequent Nasdaq listing has improved investment liquidity for you, our
shareholders, and enhanced the Company's access to the capital markets. It
also provides a currency for acquisitions and performance-based compensation
programs and permits increased employee ownership through the Employee Share
Purchase Plan. With our strengthened balance sheet and the improved liquidity
of our shares, we believe the Company has more flexibility and is in a better
position to support our present businesses and to make acquisitions. At year
end, the Company declared its first dividend since going public.

The Andersons invested heavily for the future in 1996. We added grain and
fertilizer storage capacity and increased liquid fertilizer manufacturing
capacity. We also completed renovation of the Toledo retail store, improving
product presentation and customer service. Based on the excellent customer
response to this renovation, we have initiated similar improvements at the
Maumee store and have begun to incorporate many of the new concepts in our two
Columbus stores. In 1997, we will complete these renovations and add a much
expanded state-of-the-art garden center at the Maumee store just in time for
the spring season. In addition, we are adding pet products manufacturing
capacity to support our corn cob-based consumer product offerings and will be
acquiring additional railcars by exercising purchase options on cars currently
under lease.

The Company's outlook for 1997 and beyond is good. Improving fundamentals
offer promise for our Agriculture Group businesses. Worldwide demand is
growing, both from population growth and a desire for improved diets supported
by rising average per capita incomes. In addition, the USDA has removed
acreage set-aside programs, allowing more acres to be planted in the U.S.
These conditions and a return to more "normal" growing seasons should benefit
our grain, wholesale fertilizer and retail farm center businesses.

Two competitors (five stores) left Toledo in 1996, helping the Retail
Group's three stores in that market. Our Columbus and Lima stores, however,
were confronted with new competitors. Additional new competition is expected
to open in Toledo in 1997. To date, we have met the challenge of the "big
box" competitors, but realize that we must maintain a sharper focus on our
customers' needs and desires to earn and retain their business. This year our
advertising campaign will reinforce the concept of our renovated stores with
the theme that The Andersons is a home center plus a whole lot more.

The Processing & Manufacturing Group, reorganized and renamed during the
year, also has a promising future. Income improvement in 1996 was driven by
solid growth in our lawn products markets. In addition, the sorbents business
was sold to enable us to sharpen our focus on higher value-added products.
The manufacturing division anticipates strong demand for railcar leasing and
repair services as well as opportunities in rail fleet management. In
addition, we will continue to explore ways to focus our engineering and steel
fabrication capabilities on broader railcar opportunities.

As noted in last year's annual report, our friend and fellow board member,
Ren McPherson, passed away early in 1996. Later in the year, Dan Anderson,
Dale Fallat and Janet Schoen retired from our board. We want to thank them
again for their years of service and numerous contributions to our Company's
success. We also want to acknowledge and thank two other board members: Tom
Anderson, who retired as Chairman of the Board and now serves as Chairman
Emeritus, and Don Anderson, who remains on the board but who retired as
Director of Science this year. We also welcomed two new board members: Chuck
Sullivan, Chairman and CEO of Interstate Bakeries Corp. and Dr. Sidney Ribeau,
President of Bowling Green State University. We look forward to their
contributions in the coming years.

While the Company has experienced a great deal of change recently, our
commitment to the goals outlined in our Mission Statement has not changed. As
a result of the efforts of over 3,000 dedicated employees, The Andersons has
achieved a half century of success. We see improving fundamentals in
agriculture and are pursuing growth opportunities in all three operating
groups. We believe that The Andersons, Inc. is well positioned to benefit
from this growth.

The following pages review in greater detail the performance of our three
operating groups.

/s/ Richard P. Anderson
Richard P. Anderson, Chairman & Chief Executive Officer

/s/ Michael J. Anderson
Michael J. Anderson, President & Chief Operating Officer

Agriculture Group

The Agriculture Group consists of 12 grain elevators in Ohio, Michigan,
Indiana and Illinois with a combined storage capacity of 69 million bushels;
wholesale fertilizer operations in the same area of the Eastern Corn Belt with
dry and liquid fertilizer storage capacity of more than 550,000 tons; and nine
retail farm centers in Michigan, Indiana and Ohio that offer agricultural
fertilizer, chemicals and seeds for sale and custom application.

Operating income of the group dropped $2.3 million in 1996. Income gains in
the wholesale fertilizer division and retail farm centers were more than
offset by the decline in grain division income. This occurred for two
reasons: a second straight year of poor harvests in parts of our market area
and charges against earnings resulting from the industry's hedged-to-arrive
contract issues aggravated by last year's extraordinary rally in grain prices.
The sales growth depicted by the top graph was a direct result of these
unusually high prices.

Because of poor weather in northwest Ohio, southern Michigan and parts of
Indiana, total bushels delivered to our grain facilities fell 23% and grain
division gross profit declined. At the same time, costs increased. The
extraordinary grain prices resulted in high levels of short-term bank debt and
related interest expense to support the Company's margin deposits on hedged
grain and grain contracts. Expenses were also up due to the additional
provisions for hedged-to-arrive contract issues, i.e. potential losses
relating to some customers' nonperformance on grain contracts and related
nonpayment of accounts receivable.

Although total revenues were down slightly because of a drop in average
prices, the wholesale fertilizer division achieved increases in volume and
gross profit in 1996. This was primarily due to growth in our liquid
fertilizer business. Overall operating expenses were slightly lower.

Profitability continued to improve in our retail farm center division in 1996.
Most centers experienced a decrease in tonnage due to poor planting
conditions, but this was more than offset by margin growth. Custom application
revenue continued to grow with increased acreage, improved service charges,
changing agronomic practices and our expanded participation in that change.

With strong demand for grain, low stocks and no USDA acreage set-aside
programs, we expect more acres to be planted this spring. This should be good
for our wholesale fertilizer and retail farm center divisions. Although early
months will be challenging for the grain division, a more normal growing
season this year would lead to higher volumes this fall. Longer term, we
believe that the Company is well positioned to take advantage of improving
fundamentals in the worldwide agricultural industry and growth opportunities
within our region.

[Bar Graphs] In Millions of Dollars
1992 1993 1994 1995 1996
Sales & Revenues $555 $571 $ 711 $831 $869
Operating Income 4.5 9.2 12.3 6.0 3.7

Unit Volume
1992 1993 1994 1995 1996
Grain Bushels (Millions) 129 124 137 164 137
Wholesale Fertilizer Tons (000) 726 879 963 879 908

Retail Group

The Retail Group operates six large stores in three markets in Ohio; three in
the Toledo area, two in Columbus and one in Lima. Each store has about 100,000
square feet of in-store display space plus about 40,000 square feet of outdoor
garden center space.

The group achieved a 4.6% growth in sales in 1996, with the Toledo-area stores
producing the biggest gains. Because of this increase in volume and a strong
focus on improving efficiency, the group's operating income of $3.8 million in
1996 was a record, more than double 1995. During 1996, we completed the
Toledo store renovation which began the previous year. The reconfigured
layout emphasizes our position as a destination store for the do-it-yourself
homeowner - having a full line of home center products plus a wide array of
other items not available at the more traditional home center stores. In
addition to hardware, home remodeling, and lawn & garden products, our stores
offer housewares, automotive supplies, sporting goods, pet, workwear, and food
(bakery, deli, produce, wine and specialty groceries).

The excellent customer response and sales growth achieved at the Toledo store
once the renovation was completed, has encouraged us to begin similar
improvements in our Maumee store and to redesign the interior of both Columbus
stores. The Maumee renovation also includes a prototype greenhouse and
expanded garden center. All three projects are underway and should be ready
for the traditionally strong spring season.

The competition in Columbus has been especially tough in recent years. While
we have benefited from the recent exit of two major competitors in the Toledo
area, new competition is scheduled to open very soon. In spite of this, the
strong performance of our refurbished Toledo store indicates that we are
developing a prototype which can be used to successfully grow this business.

[Bar Graphs] In Millions of Dollars
1992 1993 1994 1995 1996

Sales Volume $149 $153 $169 $168 $176
Operating Income 2.8 0.4 2.3 1.8 3.8

Processing & Manufacturing Group

The Processing & Manufacturing Group is made up of three divisions. The
processing division includes a lawn products business that serves consumer and
professional markets, and an industrial products business which processes corn
cobs for use as chemical carriers, animal bedding, cat litter and a wide
variety of other products. The manufacturing division repairs, sells and
leases various types of railcars, offers fleet management services for private
railcar fleets, manufactures railcar components and performs custom steel
fabrication. The ventures division is comprised of three smaller businesses
involved in automotive service and repair, pet food manufacturing and outdoor
power equipment sales and service.

The group continued to achieve sales growth in 1996, reaching a total of $113
million, up 7.6% from 1995. Total operating income also grew, from $3.7
million in 1995 to $4.8 million in 1996.

In the processing division, an increase in lawn products tonnage fueled sales
and income growth. This business manufactures and markets fertilizer and
related products to retailers and professional lawn care companies. In the
off-season, it markets various ice melt products. Revenue increases in
industrial products also led to bottom line improvement.

The lawn and industrial products businesses were combined during the year to
form the processing division. Late in 1996, the division's sorbents business,
which had evolved from a cob-based product line to one with synthetic
materials as well, was sold. This will allow us to focus on other processing
and higher value-added opportunities. The Company will remain a major raw
material supplier to the new owners of the sorbents business.

The manufacturing division also had a strong year. Because of gross profit
growth from car sales and increased fleet income, the biggest year-to-year
gains were realized in the division's railcar marketing business. We believe
that there is additional growth potential in our manufacturing division.

The group's ventures division had mixed results this year. The Tireman auto
centers continued to expand and achieved income growth. Our pet food venture,
however, was adversely impacted by high ingredient costs, and the unusually
wet spring hurt our lawn and garden power equipment business.

[Bar Graphs] In Millions of Dollars
1992 1993 1994 1995 1996
Sales Mix
Processing $50.6 $53.3 $63.3 $ 66.5 $ 75.5
Manufacturing 8.4 7.8 14.0 20.4 21.2
Ventures & Other 10.4 18.0 17.3 17.7 15.9
Total $69.4 $79.1 $94.6 $104.6 $112.6

Operating Income $1.8 $4.4 $3.2 $3.7 $4.8

Management's Discussion and Analysis

Introduction

The following discussion should be read in conjunction with the consolidated
financial statements and the notes thereto. The consolidated financial
statements included in this annual report present the historical results of
operations for The Andersons, Inc., resulting from the merger of a limited
partnership (the "Partnership") into its corporate general partner on January
2, 1996. As operations had been combined historically, the only adjustments
made to the historical statements have been to show on a pro forma basis, the
effect of income taxes on income tax expense, net income and earnings per
share had the merged companies always operated as a consolidated corporation.

Operating Results

Operating results for The Andersons, Inc. business segments are discussed in
the Business Review on pages 4, 5 and 6 of this annual report. In addition,
Note 13 to the consolidated financial statements displays sales and revenues,
operating profit, identifiable assets, capital expenditures and depreciation
and amortization for each of the Company's three business segments. The
following discussion focuses on the consolidated operating results as shown in
the consolidated Statements of Income.

Comparison of 1996 with 1995

Sales and revenue for 1996 totaled $1.2 billion, an increase of $57.2 million
or 5.2% from 1995. The Agriculture Group accounted for $41.3 million of the
increase. Grain shipment volume was down approximately 19% from 1995. This
was more than offset by a 31% increase in average price per bushel. The
majority of the volume decrease resulted from a poor 1996 wheat harvest and a
poor 1996 corn harvest in some of the primary growing areas served by the
Company. The increase in the average selling price is reflective of
significant increases in market prices of commodities in the fall of 1995
through late spring of 1996. Wholesale fertilizer experienced a 1% increase
in sales with a slight volume increase of 3% and a decrease of 2% in average
prices, while the Retail Farm Center sales were unchanged from 1995. The
Retail Group experienced a 4.7% increase in sales, led by increases in each of
the three Toledo, Ohio area stores. Store closings by some competitors, as
well as significant refurbishing of one of the Toledo stores, contributed to
this increase. Increased competition is expected in this region in 1997. The
Processing and Manufacturing Group experienced sales increases of 8.6% with
all major divisions contributing to the Group's improvement. The processing
division recorded an increase in sales of $7.8 million or 12%, the
manufacturing division had increased sales of $0.5 million or 2.6% and the
ventures division increased sales of $0.4 million or 2.9%. Included in other
income in 1996 are proceeds of approximately $1 million from the sale of the
sorbents business, a small component of the processing division. Overall,
other income decreased from 1995 when sales of excess real estate added
approximately $2.5 million to operating income.

Gross profit for 1996 totaled $159 million, an increase of $5.7 million or
3.7% from 1995. Significant increases in gross profit were experienced in the
Retail Group, with a $2.4 million or 5% increase, and the Processing and
Manufacturing Group, with a $3.7 million or 10.7% increase. Gross profit in
the Agriculture Group was unchanged. Gross profit, as a percent of total
sales and revenue, declined slightly from 14% in 1995 to 13.8% in 1996.

Operating, administrative and general expenses for 1996 totaled $133.6
million, a $4.4 million or 3.4% increase over 1995. Two million dollars of
this increase was due to additional provision for losses on accounts and notes
receivable relating primarily to nonperformance on grain contracts and related
nonpayment of accounts receivable. As a percent of total sales and revenue,
operating administrative and general expenses again decreased from 11.8% in
1995 to 11.6% in 1996.

Interest expense for 1996 was $13.7 million, a $0.3 million or 2.3% decrease
from 1995. The average daily borrowing amount was unchanged from 1995 but the
average rate decreased 0.45%. Borrowings for both 1995 and 1996 were
unusually high due to the significant rise in commodity prices in the third
quarter of 1995 until their fall in mid-1996. The Company's cost to carry
higher value grain inventory and resulting margin requirements for its
commodity hedge portfolio, required additional funding in the first half of
the year. These short-term borrowings were reduced to zero by year end.

Income before income taxes of $11.9 million represented an improvement of $1.6
million or 15% from the 1995 pretax income of $10.3 million. Net income
(after considering the 1995 pro forma tax adjustment) also improved 2.1% to
$6.4 million from $6.3 million. The 1996 net income includes a non-recurring
charge of $0.8 million to establish deferred income taxes on the assets and
liabilities of the Partnership. Earnings per share (also after considering
the 1995 pro forma tax adjustment) increased 2.7% from $0.74 per share in 1995
to $0.76 per share in 1996.

Comparison of 1995 with 1994:

Sales and revenue for 1995 totaled $1.1 billion, an increase of $126 million
or 13% from 1994. Grain shipment volume increased 11% and the average price
per bushel increased 9%, representing 85% of the total increase. A portion of
the volume increase resulted from two grain facilities which the Company
leased or acquired in mid 1994 and, therefore, did not report full year
results of operations. The Company's Retail Group experienced a 1% decrease
in same-store sales but all other operating units experienced some level of
increase. Notable increases include the manufacturing division of the
Processing and Manufacturing Group, which experienced a $6.4 million or 46%
increase in sales and the Retail Farm Center division of the Agriculture Group
which experienced a $7 million or 35% increase. Half of the Retail Farm
Center increase resulted from new facilities. In addition, the Company
liquidated a portion of its excess real estate, realizing gains of
approximately $2.5 million which are included in other income.

Gross profit for 1995 was $154 million, a $4 million or 2.8% increase from
1994. The increase in other income of $2.6 million accounts for the majority
of the gross profit increase. Gross profit, as a percent of total sales and
revenue decreased from 15.4% in 1994 to 14% in 1995.

Operating, administrative and general expenses for 1995 were $129 million, a
$3.7 million or 3% increase over 1994. Of this increase, one percent was due
to the two facilities which began operations in 1994. As a percent of total
sales and revenue, operating, administrative and general expenses decreased
from 12.9% in 1994 to 11.8% in 1995.

Interest expense for 1995 was $14 million, a $5.6 million or 67% increase over
1994. This was due to a 64% higher average daily borrowing and a 1.5%
increase in the average short-term interest rate. See Note 6 to the
consolidated financial statements.

Income before income taxes of $10.3 million represented a decrease from the
1994 level of $15.5 million. Net income (after considering pro forma tax
adjustments for both 1995 and 1994) represented a decrease of $3 million or
32% from the 1994 level. After the pro forma tax adjustment, earnings per
share for 1995 were $0.74 as compared to $1.10 in 1994.

Liquidity and Capital Resources

The Company's operations provided cash of $159 million in 1996 as compared to
using $60 million in cash in 1995. This change was due primarily to the sale
of a portion of the Company's grain inventories in response to market
conditions and a reduction in the market price (on which the Company values
its commodity inventories) decreasing the value of the bushels remaining in
inventory. In addition, margin deposits with the Chicago Board of Trade were
refunded to the Company as the commodity prices dropped.

The Company has significant short-term lines of credit available to finance
working capital, primarily inventories and accounts receivable. Lines of
credit available on December 31, 1996 were $250 million, a reduction from a
high of $385 million that the Company had available earlier in the year.
Although there were no outstanding balances on the Company's short-term lines
of credit on December 31, 1996, several lines were again drawn in January
1997. Typically, the Company's highest borrowing occurs in the spring due to
seasonal inventory requirements in several of the Company's businesses, credit
sales in the lawn products and agricultural fertilizer businesses and a
customary reduction in grain payables due to customer cash needs and market
strategies. The Company utilizes interest rate contracts to manage interest
rate risk by converting variable rates on its short-term borrowings to
intermediate-term fixed rates, consistent with projected borrowing needs. As
of December 31, 1996, the Company had four $10 million interest rate swaps
maturing in 1997 which converted variable rates to fixed rates ranging from
4.94% to 5.965%. The Company incurred $30,000 of additional interest expense
from participating in swaps.

The final payments to former partners electing not to participate in the
merger were made in the first quarter of 1996. No cash dividends were paid in
1996, but a cash dividend of $0.03 per common share was declared for
shareholders of record on January 2, 1997. The Company will be required to
make quarterly income tax deposits in 1997 as well as pay its 1996 income tax
liability in the first quarter of 1997. The Company also purchased 70,000 of
its common shares on the open market for use in its Employee Share Purchase
program at an average price of $8.57 per share.

During 1996, the Company invested approximately $10 million in capital
additions and improvements, including $2.0 million for renovations to the
Maumee and Toledo retail stores, $1.6 million for new information systems,
$0.7 million for additional storage capacity and $3.6 million for plant
upgrades and improvements. Approximately $17 million is budgeted for capital
spending in 1997 including $6 million for retail store improvements, $5
million for acquisition of businesses and transportation systems, $1 million
for additional storage capacity and $1 million for improvements to production
facilities. These expenditures are expected to be funded by cash generated
from operations.

Certain of the Company's long-term debt is secured by first mortgages on
various facilities. In addition, some of the long-term borrowings include
provisions that impose minimum levels of working capital and equity,
limitations on additional debt and requires that the Company be substantially
hedged in its grain transactions. Additionally, the Company has entered into
a long-term interest rate contract to convert $9.4 million of its variable
rate debt to a fixed rate of 6.85%.

As of December 31, 1996 the Company held $22 million in short-term
investments. The Company's liquidity is enhanced by the fact that grain
inventories are readily marketable and the Maumee and Toledo, Ohio elevators
serve as delivery points for Chicago Board of Trade contracts. In the opinion
of management, the Company's liquidity is adequate to meet short-term and
long-term needs.

Forward Looking Statements

The preceding Letter to Shareholders, Business Review and Management's
Discussion and Analysis contain various "forward-looking statements" which
reflect the Company's current views with respect to future events and
financial performance. These forward-looking statements are subject to
certain risks and uncertainties, including but not limited to those identified
below, which could cause actual results to differ materially from historical
results or those anticipated. The words "believe," "expect," "anticipate" and
similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. The following factors could
cause actual results to differ materially from historical results or those
anticipated; weather, supply and demand of commodities including grains,
fertilizer and other basic raw materials, market prices for grains and the
potential for increased margin requirements, regulatory agency review of grain
contracts and related contract default litigation, competition, interest rates
and income taxes.

SELECTED FINANCIAL DATA

(in thousands, except for per share data)
1996 1995 1994 1993 1992

Operating Results
Total sales and revenues $1,154,956 $1,097,730 $971,638 $800,345 $771,380
Income from continuing
operations (a) 6,406 6,273 9,285 6,986 6,284
Per share data:
Income from continuing
operations (b) .76 .74 1.10 .83 .75
Dividends paid (c) - - - - -

Balance Sheet Data
Total assets $346,591 $455,518 $344,809 $360,586 $259,294
Working capital 61,649 58,897 57,623 47,795 40,940
Long-term debt 68,568 74,139 71,217 52,259 46,077
Owners' equity 73,249 67,260 64,870 56,256 51,970

(a) Includes pro forma income taxes of $3,915 thousand, $5,886 thousand,
$4,094 thousand and $3,761 thousand for 1995, 1994, 1993, and 1992,
respectively. Income taxes for 1996 includes a charge of $812 thousand to
establish deferred income taxes on the assets and liabilities of the
Partnership. See Note 1 to the consolidated financial statements of the
Company.
(b) Amounts are net of pro forma income taxes of $.47, $.70, $.48 and $.44 for
1995, 1994, 1993 and 1992, respectively. Amounts for 1992 through 1995 were
calculated using the actual number of shares that were outstanding on the date
of the merger.
(c) There were no dividends paid in 1996. Distributions made to partners are
not included in this table.

SELECTED QUARTERLY FINANCIAL DATA

The following tables present selected unaudited quarterly financial data for
the years ended December 31, 1996 and 1995:

(in thousands, except per share data)

1996 First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales $256,714 $345,229 $227,651 $325,362
Cost of sales 216,981 303,250 196,542 278,952
Gross profit 39,733 41,979 31,109 46,410
Net income (loss) 1,269 1,380 (1,806) 5,563
Net income (loss)
per share $.15 $.16 $(.21) $.66

1995

Net sales $207,327 $262,637 $283,778 $343,988
Cost of sales 170,983 224,501 252,682 296,010
Gross profit 36,344 38,136 31,096 47,978
Pro forma net income
(loss) 1,198 1,615 (2,026) 5,486
Pro forma net income
(loss) per share $.14 $.19 $(.24) $.65

Market for Common Stock

The following table sets forth the high and low bid prices for the Company's
Common Stock as quoted on the Nasdaq National Market System for the period
from February 20, 1996 (the Company's first day of trading) to December 31,
1996. Such quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.

1996 High Low

First quarter $17.68 $9.75
Second quarter 11.00 8.75
Third quarter 9.50 8.00
Fourth quarter 9.50 7.25

Report of Independent Auditors

Board of Directors
The Andersons, Inc.

We have audited the accompanying consolidated balance sheets of The Andersons,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, cash flows and changes in owners' equity
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Andersons,
Inc. and subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.

/s/ Ernst & Young LLP

Toledo, Ohio
January 31, 1997

The Andersons, Inc.
Consolidated Statements of Income
Year ended December 31
(in thousands, except per share data) 1996 1995 1994

Grain sales and revenues $ 700,326 $ 660,121 $ 551,836
Fertilizer, retail and other sales 449,978 432,289 417,044
Other income 4,652 5,320 2,758
1,154,956 1,097,730 971,638

Cost of grain sales 659,244 617,934 513,893
Cost of fertilizer, retail
and other sales 336,481 326,242 308,381
995,725 944,176 822,274
Gross profit 159,231 153,554 149,364

Operating, administrative and
general expenses 133,637 129,210 125,472
Interest expense 13,703 14,019 8,395
147,340 143,229 133,867
Income before income taxes 11,891 10,325 15,497
Income taxes 5,485 137 326
Net income $ 6,406 10,188 15,171

Pro forma income taxes (See Note 1) 3,915 5,886
Pro forma net income $ 6,273 $ 9,285
Earnings per share (Pro forma for
1995 and 1994 - See Note 1) $ .76 $ .74 $ 1.10

Weighted average shares outstanding 8,425 8,430 8,430

See accompanying notes.

The Andersons, Inc.
Consolidated Balance Sheets
December 31
(in thousands) 1996 1995

Assets
Current assets:
Cash and cash equivalents $ 27,524 $ 5,052
Accounts receivable:
Trade accounts, less allowance for
doubtful accounts of $3,230 in
1996; $3,514 in 1995 73,694 68,362
Margin deposits 327 20,753
74,021 89,115
Inventories 150,297 269,930
Deferred income taxes 1,864 -
Prepaid expenses 3,929 4,314
Total current assets 257,635 368,411
Other assets:
Notes receivable and other assets,
less allowance for doubtful notes
receivable of $735 in 1996; $1,277
in 1995 5,951 4,575
Investments in and advances to
affiliates 1,340 670
7,291 5,245
Property, plant and equipment 81,665 81,862
$346,591 $455,518

Liabilities and owners' equity
Current liabilities:
Notes payable $ -- $120,267
Accounts payable for grain 96,932 94,084
Other accounts payable 75,713 72,777
Accrued expenses 16,981 14,357
Current maturities of long-term debt 6,360 8,029
Total current liabilities 195,986 309,514
Pension and postretirement benefits 2,804 2,929
Long-term debt 68,568 74,139
Deferred income taxes 5,371 675
Minority interest 613 1,001
Owners' equity 73,249 67,260
$346,591 $455,518
See accompanying notes.

The Andersons, Inc.
Consolidated Statements of Cash Flows

Year ended December 31
(in thousands) 1996 1995 1994

Operating activities
Net income, as reported $ 6,406 $ 10,188 $ 15,171
Adjustments to reconcile net income,
as reported, to net cash provided
by (used in) operating activities:
Depreciation and amortization 9,730 9,318 8,105
Provision for losses on accounts
and notes receivable 4,322 2,229 2,683
Deferred income taxes 2,766 -- --
Gain on sale of property,
plant and equipment (182) (2,568) (161)
Other (491) (70) (77)
Changes in operating assets
and liabilities:
Accounts receivable 10,772 (38,775) 10,486
Inventories 119,633 (71,295) 12,388
Prepaid expenses and other
assets (1,875) 815 (992)
Accounts payable for grain 2,848 10,240 132
Other accounts payable and
accrued expenses 5,335 19,818 4,574
Net cash provided by (used in) operating
activities 159,264 (60,100) 52,309

Investing activities
Purchases of property, plant and
equipment (9,955) (11,894) (22,663)
Proceeds from sale of property, plant
and equipment 720 1,242 848
Sales and maturities of investments 366 565 2,179
(Advances to) payments received from
affiliates (29) 518 (640)
Acquisition of business, net of cash
acquired -- (1,427) --
Purchases of investments -- (101) (739)
Net cash used in investing activities (8,898) (11,097) (21,015)

Financing activities
Net increase (decrease) in short-term
borrowings (120,267) 68,578 (37,900)
Proceeds from issuance of long-term debt 140,780 56,570 35,509
Payments of long-term debt (147,743) (49,616) (20,144)
Purchase of common stock for the
treasury (600) -- --
Payments to partners and shareholders
and other deductions from owners
equity accounts (64) (7,556) (7,323)
Capital invested by partners and
shareholders -- 1,350 755
Net cash provided by (used in) financing
activities (127,894) 69,326 (29,103)

Increase (decrease) in cash and cash
equivalents 22,472 (1,871) 2,191
Cash and cash equivalents at beginning
of year 5,052 6,923 4,732
Cash and cash equivalents at end of
year $ 27,524 $ 5,052 $ 6,923

Noncash operating, investing and
financing activities:
Exchange of fixed assets for
investment $ 513
Exchange of employee bonds for
common shares $ 275
Acquisition of business:
Working capital, other than cash $ 90
Property, plant and equipment 4,096
Short and long-term debt assumed (2,070)
Deferred tax liabilities assumed (689)
Net cash expended $ 1,427

Donation of land to charity $ 1,648
Notes received on sale of land $ 2,431
Assumption of long-term debt in
purchase of property, plant
and equipment $ 5,217

See accompanying notes.

The Andersons, Inc.
Consolidated Statements of Changes in Owners' Equity

Converted Equity
The
Andersons
The Management
Andersons Corp. Additional
Partners' Common Common Treasury Paid-in Retained
(in thousands) Capital Shares Shares Shares Capital Earnings Total

Balances at
January 1, 1994 $ 54,649 $ 1,388 $ -- $ -- $ -- $ 219 $56,256
Net income as
reported 14,919 252 15,171
Distributions
and other
changes (6,560) 3 (6,557)
Balances at
December 31,
1994 63,008 1,391 -- -- -- 471 64,870
Net income as
reported 9,960 228 10,188
Distributions
and other
changes (7,812) (15) 29 (7,798)
Balances at
December 31,
1995 65,156 1,376 -- -- -- 728 67,260
Merger transaction
Issuance of 8,399
thousand shares
to convert
equity (65,092) (1,376) 84 66,384 --
Payments to
dissenting
partners and
for fractional
shares (64) (64)
Issuance of 31
thousand shares
to convert
employee bonds 275 275
Balances at
January 2, 1996 -- -- 84 -- 66,659 728 67,471
Net income for
the year 6,406 6,406
Purchase of 70
thousand shares
for treasury (600) (600)
Sale of available-
for-sale
securities (28) (28)
Balances at
December 31,
1996 $ -- $ -- $84 $(600) $66,659 $7,106 $73,249

See accompanying notes.

The Andersons, Inc.
Notes to Consolidated Financial Statements
December 31, 1996

1. Basis of Financial Presentation

On January 2, 1996, The Andersons, an Ohio limited partnership (the
"Partnership") merged with and into The Andersons Management Corp. (the
"Company") and the partnership was dissolved. Concurrent with the merger, the
Company changed its name to The Andersons, Inc. Prior to the merger, the
Company was the sole general partner of the Partnership, and the Company and
the Partnership shared common ownership in that ownership of Class A Common
shares of the Company was restricted to limited partners of the Partnership
and ownership of Class B Common shares (voting shares) was restricted to
holders of Class A Common shares.

The merger has been accounted for as a reorganization of entities under common
control similar to a pooling of interests. The Company's financial statements
have been restated to include the accounts and operations of the Partnership
for all periods prior to the merger. The Company, in previous years, had
presented financial statements that combined the accounts and results of
operations of the Company and the Partnership. All material intercompany
accounts and transactions had been eliminated in the combined presentation
and, consequently, the restatement to reflect the merger was not material to
the historical presentation.

The Partnership's net income was includable in the federal income tax returns
of its partners, and therefore, the Partnership did not pay federal income
taxes. The Partnership's operations will be included in the Company's U. S.
federal income tax return effective January 2, 1996, and therefore, a net
deferred tax liability and corresponding expense of $0.8 million was recorded
in the first quarter of 1996. The income statements for 1995 and 1994 were
restated to present pro forma income taxes and pro forma earnings per share as
if the change in the corporate structure had been effective on January 1,
1994.

Pro forma net income per share is calculated on the actual shares that were
outstanding at the date of the merger. In the merger transaction, 8.1 million
shares were issued to the partners of the Partnership and the remainder to
shareholders of the Company and employees who held convertible bonds of the
Partnership.

In connection with the merger, approximately $0.6 of merger costs and expenses
were incurred and were charged to expense in 1995. The merger costs consisted
of legal, accounting and benefits consulting fees.

2. Significant Accounting Policies

Estimates and Assumptions

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash and all highly liquid debt instruments
purchased with an initial maturity of three months or less. The carrying value
of these assets approximate their fair values.

Securities

Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when there is
positive intent and ability to hold the securities to maturity. Held-to-
maturity securities are stated at amortized cost.

Marketable equity securities and debt securities not classified as held-to-
maturity are classified as available-for-sale. Available-for-sale securities
are carried at fair value, with the unrealized gains and losses, net of tax,
reported in a separate component of owners' equity.

The fair market value of held-to-maturity securities, consisting primarily of
time deposits and U.S. Treasury securities, approximated their amortized cost
of $22.9 million and $6.0 million at December 31, 1996 and 1995, respectively.
The held-to-maturity securities are included in cash and cash equivalents and
margin deposits in the consolidated balance sheets and mature within one year.

Inventories

Inventories of grain are hedged to the extent practicable and are valued on
the basis of replacement market prices prevailing at the end of the year. Such
inventories are adjusted for the amount of gain or loss (based on year-end
market price quotations) on open grain contracts at the end of the year.
Contracts in the commodities futures market, maintained for hedging purposes,
are valued at market at the end of the year and income or loss to that date is
recognized. Grain contracts maintained for other merchandising purposes are
valued in a similar manner, and net margins from these transactions are
included in grain sales and revenues.

All other inventories are stated at the lower of cost or market. Cost is
determined by the average cost method.

Property, Plant and Equipment

Land, buildings and equipment are carried at cost. Depreciation is provided
over the estimated useful lives of the individual assets principally by the
straight-line method.

Accounts Payable for Grain

The liability for grain purchases on which price has not been established
(delayed price) has been computed on the basis of replacement market at the
end of the year, adjusted for the applicable premium or discount.

Revenue Recognition

Sales of grain and other products are recognized at the time of shipment.
Revenues from merchandising activities are recognized as open contracts are
marked to market or as services are provided.

Income Taxes

Deferred income taxes are determined based on temporary differences between
financial reporting and tax bases of assets and liabilities and are measured
using the tax rates and laws that will be in effect when the differences are
expected to reverse.

Preopening Expenses

Preopening expenses are charged to income as incurred.

Advertising

Advertising costs are expensed as incurred. Advertising expense of $3.1
million, $3.6 million and $4.2 million is included in operating,
administrative and general expense in 1996, 1995 and 1994, respectively.

Reclassifications

Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform with the 1996 presentation. These reclassifications
had no effect on net income.

3. Inventories

Major classes of inventories are as follows:

December 31
(in thousands) 1996 1995

Grain $ 70,762 $186,989
Agricultural fertilizer and supplies 21,897 19,602
Merchandise 29,527 29,909
Lawn and corn cob products 17,633 21,729
Other 10,478 11,701
$150,297 $269,930

4. Property, Plant and Equipment

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

December 31
(in thousands) 1996 1995

Land $ 11,261 $ 11,179
Land improvements and leasehold
improvements 24,431 23,926
Buildings and storage facilities 80,669 78,210
Machinery and equipment 99,871 97,970
Construction in progress 1,795 972
218,027 212,257
Less allowances for depreciation
and amortization 136,362 130,395
$ 81,665 $ 81,862

5. Banking and Credit Arrangements

The Company has available lines of credit for unsecured short-term debt with
banks aggregating $250 million. The credit arrangements, the amounts of which
are adjusted from time to time to meet the Company's needs, do not have
termination dates but are reviewed at least annually for renewal. The terms of
certain of the lines of credit provide for annual commitment fees.

The following information relates to borrowings under short-term lines of
credit during the year indicated.

(in thousands, except for interest rate) 1996 1995 1994

Maximum borrowed $207,800 $195,500 $127,600
Average daily amount borrowed
(total of daily borrowings divided by
number of days in period) 119,187 118,382 72,183
Average interest rate (computed by
dividing interest expense by average
daily amount outstanding) 6.10% 6.55% 5.03%

6. Long-Term Debt

Long-term debt consists of the following:

December 31
(in thousands) 1996 1995
Note payable, 7.84%, payable $75
thousand quarterly through July
1997, and $398 thousand quarterly
thereafter, due 2004 $14,250 $14,550
Note payable under revolving credit line 16,300 20,000
Notes payable, variable rate (6.5625% at
December 31, 1996), payable $336
thousand quarterly beginning October
1997, due 2004 9,418 9,418
Other notes payable 1,036 1,101
Industrial development revenue bonds:
6.5%, sinking fund $900 thousand to
$1 million payable annually, due 1999 2,900 3,700
Variable rate (5.5% at December 31, 1996),
payable $882 thousand annually through
2004 6,351 7,233
Variable rate (4.6% at December 31, 1996),
due 2025 3,100 3,100
Debenture bonds, 6.5% to 10%, due 1997
through 2006 21,030 22,193
Employee bonds -- 304
Other bonds, 4% to 9.6% 543 569
74,928 82,168
Less current maturities 6,360 8,029
$68,568 $74,139

The Company has a $40 million revolving line of credit with a bank which bears
interest based on the LIBOR rate (7.225% at December 31, 1996). Borrowings
under this agreement totalled $16.3 million at December 31, 1996. The
revolving credit line expires on July 1, 1998.

The variable rate notes payable, the notes payable in quarterly installments,
and the industrial development revenue bonds are collateralized by first
mortgages on certain facilities and related property with a book value of
approximately $29 million .

The various underlying loan agreements, including the Company's revolving
credit line, contain certain provisions which require the Company to, among
other things, maintain minimum working capital of $32 million and net equity
(as defined) of $43 million, limit the addition of new long-term debt, limit
its unhedged grain position to 2 million bushels, and restrict the amount of
dividends. The Company was in compliance with these covenants at December 31,
1996.

The aggregate annual maturities of long-term debt, including sinking fund
requirements, are as follows: 1997--$6 million; 1998--$24 million; 1999--$6
million; 2000--$7 million and 2001--$7 million.

Interest paid (including short-term lines of credit) amounted to $15 million,
$13 million and $8 million in 1996, 1995 and 1994, respectively.

The Company periodically utilizes interest rate contracts to manage interest
rate risk by converting variable interest rates on short-term borrowings to
intermediate-term fixed rates consistent with projected borrowing needs.
Income or expense associated with interest rate swap agreements is recognized
on the accrual basis over the life of the swap agreement as a component of
interest expense. The Company entered into a long-term interest rate swap in
December 1996 to convert its variable rate $9.4 million note payable to a
fixed rate of 6.85%. This swap expires in October 2002. The notional amount of
this swap equals the outstanding balance of the long-term note and amortizes
in the same manner as the note principal. At December 31, 1996, the Company
was participating in four short-term interest rate swap agreements, each with
a notional amount of $10 million. The interest rate swaps expire in March and
June of 1997 and convert variable interest rates to fixed rates of 4.94% to
5.965%. The effect of interest rate swaps on interest expense was not
significant in 1996, 1995 and 1994.

7. Income Taxes

Income taxes consist of the following:
Year ended December 31
Pro Forma
(Unaudited)
(in thousands) 1996 1995 1994

Current:
Federal $2,268 $3,088 $5,652
State and local 451 791 1,404
2,719 3,879 7,056

Deferred:
Federal 2,134 138 (676)
State and local 632 35 (168)
2,766 173 (844)
Total:
Federal 4,402 3,226 4,976
State and local 1,083 826 1,236
$5,485 $4,052 $6,212

A reconciliation from the statutory U.S. federal tax rate of 35% to the
effective tax rate is as follows:

Pro Forma
(Unaudited)
1996 1995 1994

Statutory U.S. Federal tax rate 35.0% 35.0% 35.0%
Increase in rate due to:
State and local income taxes net of
related federal taxes 4.4% 4.4% 4.4%
Net basis differences of partnership 6.8% -- --
Other (0.1)% (0.2)% 0.7%
Effective tax rate 46.1% 39.2% 40.1%

Income taxes paid in 1996, 1995 and 1994 were $131,000, $340,000, and
$321,000.

Significant components of the Company's historical deferred tax liabilities
and assets are as follows:

December 31
(in thousands) 1996 1995

Deferred tax liabilities:
Tax depreciation in excess of book
depreciation $(7,602) $(675)
Prepaid employee benefits (1,170) --
Deferred income (695) --
Other (216) --
(9,683) (675)
Deferred tax assets:
Employee benefits 2,534 --
Accounts receivable allowance for
doubtful accounts 1,249 --
Inventory reserve 1,042 --
Investments 866 --
Deferred income 309 --
Other 176 --
6,176 --
Net deferred tax liability $(3,507) $(675)

8. Owners' Equity

Owners' equity is comprised of the following:

(in thousands) December 31
1996 1995
Common Shares, without par value
Authorized -- 25,000 shares
Issued -- 8,430 shares at stated
value of $.01 per share $ 84 $ --
Additional paid in capital 66,060 --
Converted Equity
The Andersons Partners' Capital -- 65,156
The Andersons Management Corp. Common
Shares -- 1,376
Retained earnings 7,105 699
Unrealized gain on available-for-sale
securities -- 29
$73,249 $67,260

The Company has two stock-based compensation plans: Long-Term Performance
Compensation Plan (the "LT Plan") and its Employee Share Purchase Plan (the
"ES Plan"). The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and
related Interpretations in accounting for its employee stock options under
these plans because, as discussed below, the alternative fair value accounting
provided for under FASB Statement No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense was recognized
for either of its plans.

The Company's shareholders approved the LT Plan which authorizes the board of
directors to grant options to employees and outside directors for up to
500,000 common shares of the Company. Options granted to employees have a
term of 10 years or less. Formula-based options granted to outside directors
have a fixed term of five years and vest after one year. Options granted to
management personnel under the LT Plan in 1996 have a five year term and vest
40% immediately, 30% after one year and the remaining 30% after two years.

The Company's ES Plan, whereby employees may use payroll withholdings to
purchase common shares of the Company, also contains an option component. The
share purchase price is the lower of the market value at the beginning of the
year or the market value at the end of the year. A liability has been
recorded for withholdings not yet applied towards the purchase of common
stock.

Pro forma information regarding net income and earnings per share is required
by Statement 123, which also requires that the information be determined as if
the Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The fair
value of the options under the Company's two plans is estimated at the date of
grant using a Black-Scholes option pricing model. Assumptions for the LT Plan
were as follows: risk free interest rate of 5.39% for options granted to non-
employee directors and 5.55% for options granted to employees; dividend yield
of 1.30%; volatility factor of the expected market price of the Company's
common shares of .389; and an expected life for the options of five years.
Assumptions for the ES Plan were as follows: risk free interest rate of 5.07%;
dividend yield of 1.30%, volatility factor of the expected market price of the
Company's common shares of .389; and an expected life for the option of one
year.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected share price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.

Had compensation cost for the Company's two stock option plans been determined
based on fair value at the grant date for awards, consistent with the
provisions of Statement 123, the Company's net income and earnings per share
would have been reduced to $6,154 and $0.73, respectively, in 1996, on a pro
forma basis.

A summary of the Company's stock option activity, and related information for
the year ended December 31, 1996 follows:

(in thousands, except for weighted-averages) LT PLAN ES PLAN

Outstanding at January 1, 1996 -- --
Granted / Subscribed 137 59
Exercised -- --
Forfeited / Cancelled -- (10)
Outstanding at December 31, 1996 137 49

Exercisable at December 31, 1996 52 49

Weighted-average remaining contractual life
(in years) 4.14 0

The weighted-average exercise price for all options outstanding at December
31, 1996 is $8.60. The weighted-average fair value of options granted at
December 31, 1996 is $2.76.

9. Leases

The Company leases certain equipment and real property under operating leases,
including rail cars which are subleased to third parties. Net rental expense
under operating leases was as follows:

(in thousands) 1996 1995 1994

Total rental expense $11,934 $11,242 $8,562
Less rental income from subleases 7,924 6,313 2,884
Net rental expense $ 4,010 $ 4,929 $5,678

Future minimum rentals for all noncancelable operating leases and future
rental income from subleases are as follows:

(in thousands)
Future Minimum Future Sublease
Rentals Income

1997 $ 9,679 $ 6,648
1998 8,034 5,796
1999 5,144 3,313
2000 3,107 1,426
2001 2,503 829
Future years 5,773 608
$34,240 $18,620

10. Employee Benefit Plans

The Company sponsors several employee benefit programs which include the
following: Defined Benefit Pension Plan and Supplemental Defined Benefit
Pension Plan, Retirement Savings Investment Plan, Cash Profit Sharing Plan,
Management Performance Program and health insurance benefits.

Substantially all full-time employees are covered by the Company's Defined
Benefit Pension Plan. The benefits are based on the employee's highest five
consecutive years of compensation during their last ten years of service. The
Company's policy is to pay into trusteed funds each year an amount equal to
the annual pension expense calculated under the Entry Age Normal method. In
addition, the Company has a Supplemental Retirement Plan which is a non-
qualified deferred compensation plan designed to cover all Defined Benefit
Plan participants whose compensation exceeds the Internal Revenue Code
limitation. Supplemental Plan benefits are calculated similarly to the Defined
Benefit Plan and are based on compensation in excess of the Internal Revenue
Code limitation.

The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheets as of December 31, 1996 and 1995.

December 31
(in thousands) 1996 1995

Actuarial present value of benefit obligation:
Vested benefits $ 8,456 $ 6,666
Non-vested benefits 442 329
Accumulated benefits obligation 8,898 6,995
Impact of future salary increases 5,184 4,196
Projected benefit obligation for service
rendered to date 14,082 11,191
Plan assets at fair value 13,017 9,606
Projected benefit obligation in excess of
plan assets 1,065 1,585
Unrecognized net asset at adoption of FAS 87,
net of amortization 92 143
Unrecognized net gain (loss) (497) 526
Prior service cost (254) (292)
Net pension liability recognized in balance sheet
(includes current portion of $865 thousand in
1996 and $1,498 thousand in 1995) $ 406 $ 1,962

Net periodic pension cost includes the following components:

Year ended December 31
(in thousands) 1996 1995 1994

Service cost - benefits earned during
the period $ 1,503 $ 1,234 $ 1,082
Interest cost on projected benefit
obligation 796 681 563
Return on plan assets (1,394) (2,018) 71
Net amortization and deferral 547 1,425 (655)
Net periodic pension cost $ 1,452 $ 1,322 $ 1,061

The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation was 7.5% and 4%, respectively. The weighted average long-
term rate of return on plan assets used in determining the expected return on
plan assets included in net periodic pension cost was 8% for all years
presented. Substantially all of the plan assets are invested in a family of
mutual funds.

Under the Retirement Savings Investment Plan (RSIP) (401K) eligible
participating employees may elect to contribute specified amounts up to 15% of
their gross pay on a tax-deferred basis, subject to certain limitations, to a
trust for investment in a family of mutual funds. The Company contributes an
amount equal to 50% of the participant's contributions, but not in excess of
3% of the participant's annual gross pay. Participants are fully vested in
their contributions to the RSIP. Participants hired before January 1,
1993 vest immediately in the Company's matching contributions and participants
hired after December 31, 1992 vest ratably over five years. The matching
contributions to the RSIP amounted to $1 million, $0.9 million, and $0.9
million in 1996, 1995 and 1994, respectively.

Substantially all full-time employees are included in the Cash Profit Sharing
Plan. The Plan provides for participants to receive certain percentages of
their pay as various threshold levels of return on capital of the Company are
achieved. The Company also has a Management Performance Program for certain
levels of management. Participants in the Management Performance Program are
not eligible to participate in the Cash Profit Sharing Plan. The expense for
profit sharing/management performance programs was $2.2 million, $1.6 million
and $3.9 million for 1996, 1995 and 1994, respectively.

The Company currently provides certain health insurance benefits to its
employees, including retired employees. The Company has reserved the right in
most circumstances to modify the benefits provided and in recent years has in
fact made changes. The Company has elected to recognize the accrued benefits
earned by employees as of January 1, 1993 (transition obligation)
prospectively, which means this cost will be recognized as a component of the
net periodic postretirement benefit cost over a period of approximately 20
years.

The Company's postretirement benefits are not funded. The status of the plan
as of December 31 is as follows:
(in thousands) 1996 1995

Accumulated postretirement benefit
obligation:
Retirees $ 5,035 $ 5,502
Fully eligible active plan participants 823 656
Other active participants 3,737 3,593
9,595 9,751
Unrecognized net transition obligation (6,730) (7,150)
Unrecognized net gain (loss) 398 (136)
Accrued postretirement benefit cost $ 3,263 $ 2,465

Net periodic postretirement benefit cost includes the following components:

Year ended December 31
(in thousands) 1996 1995 1994
Service cost $ 272 $ 247 $ 245
Interest cost 666 679 750
Net amortization 421 421 452
Net periodic postretirement benefit costs $1,359 $1,347 $1,447

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%. The weighted average discount rate
used in determining the postretirement benefit cost was 7.5% for all years
presented.

The assumed health care cost trend rate used to measure the expected cost of
benefits covered by the plan was 6% in 1996, declining to 5% in 1997 and
remaining at that level thereafter. A 1% increase in the assumed health care
cost trend rate would increase the annual postretirement benefit cost by
approximately $190 thousand and the accumulated postretirement benefit
obligation as of December 31, 1996 by approximately $1.6 million.

To partially fund self-insured health care and other employee benefits, the
Company makes payments to a trust. Assets of the trust amounted to $2.3
million and $2.7 million at December 31, 1996 and 1995, respectively, and such
amounts are included in prepaid expenses.

11. Commitments and Risk Management

The Company has, in the normal course of its business, entered into contracts
to purchase and sell grain and has interest in other commodity contracts
requiring performance in future periods. Contracts for purchase of grain from
producers generally relate to the current or future crop years for delivery
periods quoted by regulated commodity exchanges. Contracts for sale of grain
to processors and other consumers generally do not extend beyond one year.
The terms of these contracts are consistent with industry practice.

The Company utilizes futures and option contracts that are traded on a
regulated exchange to hedge its net price exposure from grain inventories held
and firm commitments to purchase or sell grain and to limit its cash
requirements for margin calls in the event of rising market prices. The
Company's policy is to hedge its net price exposure and at December 31, 1996,
nearly 100% of its grain inventories held and firm commitments under forward
contracts were hedged with futures contracts. All grain inventories held, firm
commitments under forward contracts and futures and option contracts are
marked to market on a daily basis.

12. Fair Values of Financial Instruments

The fair values of the Company's financial instruments, consisting of cash
equivalents, margin deposits, investments in and advances to affiliates and
long and short-term debt, approximate their carrying values since the
instruments either provide for short terms to maturity or interest at variable
rates based on market indexes or, in the case of investments in affiliates,
the investments are being carried on the equity method which approximate fair
value. The Company believes the fair value of its long-term notes payable and
debentures, some of which bear fixed rates and terms of five or ten years,
outstanding at December 31, 1996 and 1995 approximate their carrying values,
based upon current interest rates offered by the Company on similar bonds and
rates currently available to the Company.

13. Business Segments

The Company operates three business segments: Agriculture Group, Retail Group
and the Processing and Manufacturing Group (formerly the Business Development
Group). The Agriculture Group includes grain merchandising, operation of
terminal grain elevator facilities, and distribution of agricultural products,
primarily fertilizer. The Retail Group includes operation of retail stores and
a distribution center. The Processing and Manufacturing Group includes
production and distribution of lawn and corn cob products, railcar leasing and
repair and the marketing of the Company's excess real estate as well as other,
smaller businesses.

In 1995, the Company realigned its segments, moving some smaller divisions to
the Processing and Manufacturing Group to reflect the management structure and
development cycle of these businesses.

The segment information includes the allocation of expenses shared by one or
more segments. Although management believes such allocations are reasonable,
the operating information does not necessarily reflect how such data might
appear if the segments were operated as separate businesses.

Year ended December 31
(in thousands) 1996 1995 1994
Sales and revenues:
Agriculture Group:
Sales to unaffiliated customers $ 841,262 $ 796,754 $ 678,316
Intersegment sales 2,314 6,630 3,106
Merchandising revenue and other
income 25,472 28,090 29,623
869,048 831,474 711,045
Retail Group:
Sales to unaffiliated customers 175,987 168,051 169,009
Other income 146 282 113
176,133 168,333 169,122
Processing and Manufacturing Group:
Sales to unaffiliated customers 108,997 100,402 92,965
Intersegment sales 950 929 870
Other income 2,615 3,296 765
112,562 104,627 94,600

Other income 477 855 847
Eliminations--intersegment sales (3,264) (7,559) (3,976)
Total sales and revenues $1,154,956 $1,097,730 $971,638

Operating profit:
Agriculture Group $ 15,046 $ 16,920 $ 18,901
Retail Group 6,680 4,392 4,596
Processing and Manufacturing Group 7,733 6,719 5,594
Total operating profit 29,459 28,031 29,091

Other income 371 664 641
Interest expense (13,703) (14,019) (8,395)
General expenses (4,236) (4,351) (5,840)
Income before income taxes $ 11,891 $ 10,325 $ 15,497

Identifiable assets:
Agriculture Group $ 190,932 $ 321,045 $207,833
Retail Group 61,799 61,296 64,135
Processing and Manufacturing Group 56,196 62,313 59,881
General 37,664 10,864 12,960
Total assets $ 346,591 $ 455,518 $344,809

Depreciation and amortization expense:
Agriculture Group $ 4,336 $ 4,186 $ 3,391
Retail Group 2,870 2,771 2,567
Processing and Manufacturing Group 2,061 1,960 1,789
General 463 401 358
Total depreciation and amortization
expense $ 9,730 $ 9,318 $ 8,105

Capital expenditures:
Agriculture Group $ 4,417 $ 10,072 $ 6,689
Retail Group 3,042 2,749 12,981
Processing and Manufacturing Group 2,029 2,536 5,995
General 690 633 635
Total expenditures $ 10,178 $ 15,990 $ 26,300

Intersegment sales are made at prices comparable to normal, unaffiliated
customer sales. Operating profit is sales and merchandising revenues plus
interest and other income attributable to the operating area less operating
expenses, excluding interest and general expenses. Identifiable assets by
segment include accounts receivable, inventories, advances to suppliers,
property, plant and equipment and other assets that are directly identified
with those operations. General assets consist of cash, investments, land and
buildings and equipment associated with administration and services, and other
assets not directly identified with segment operations. Grain sales for export
to foreign markets amounted to approximately $193 million, $194 million and
$130 million in 1996, 1995 and 1994, respectively.

Board of Directors

Richard P. Anderson (3)
Chairman & Chief Executive Officer
The Andersons, Inc.

Thomas H. Anderson (3)
Chairman Emeritus
The Andersons, Inc.

Donald E. Anderson (3)
Director of Science, retired
The Andersons, Inc.

Michael J. Anderson (3)
President & Chief Operating Officer
The Andersons, Inc.

Richard M. Anderson (1) (3)
Vice President & General Manager,
Processing Division
The Andersons, Inc.

John F. Barrett (2)/(3)
President & Chief Executive Officer,
The Western & Southern Life Insurance Co.

Paul M. Kraus (3)
Attorney
Marshall & Melhorn

Donald M. Mennel (1)/(3)
Attorney, Retired Chairman of the Board
& Chief Executive Officer,
The Mennel Milling Company

David L. Nichols (1)/(2)/(3)
Chairman & Chief Executive Officer,
Mercantile Stores Company, Inc.

Dr. Sidney A. Ribeau (3)
President
Bowling Green State University

Charles A. Sullivan (1)/(2)/(3)
Chairman & Chief Executive Officer,
Interstate Bakeries Corp.

(1) Audit Committee
(2) Compensation Committee
(3) Nominating Committee

Corporate Officers

Thomas H. Anderson
Chairman Emeritus

Richard P. Anderson
Chairman & Chief Executive Officer

Michael J. Anderson
President & Chief Operating Officer

Christopher J. Anderson
President, Processing & Mfg. Group

Daniel T. Anderson
President, Retail Group

Joseph L. Braker
President, Agriculture Group

Joseph C. Christen
Vice President, Human Resource Development

Dale W. Fallat
Vice President, Corporate Services

Phillip C. Fox
Vice President, Corporate Planning

Charles E. Gallagher
Vice President, Personnel

Richard R. George
Vice President & Controller

Beverly J. McBride
Vice President, General Counsel & Secretary

Gary L. Smith
Vice President, Finance & Treasurer

Investor Information

Corporate Offices The Andersons, Inc.
480 West Dussel Drive
Maumee, Ohio 43537
(419) 893-5050
Internet: www.andersonsinc.com

Transfer Agent and Registrar Harris Trust & Savings Bank
Shareholder Services Division
311 W. Monroe
P.O. Box A-3504
Chicago, Illinois 60690-3504
Shareholder Services (312) 461-5042

Form 10K The Company will provide without charge
to any person who is a beneficial owner
of its shares, a copy of the Company's
1996 Annual Report on Form 10-K, as
filed with the Securities and Exchange
Commission. Requests should be addressed
to the Investor Relations department of
the Company.

Annual Meeting The annual shareholders' meeting of The
Andersons, Inc. will be held at the Lucas
Auditorium of the Eleanor Dana Center, on
the campus of the Medical College of
Ohio, Glendale Avenue, Toledo, Ohio at
7:30 p.m. on May 22, 1997.

Investor Relations Gary Smith, Vice President, Finance &
Treasurer, (419) 891-6417

Independent Auditors Ernst & Young LLP, Toledo, Ohio

Nasdaq Symbol The Andersons, Inc. common shares are
traded on the Nasdaq National Market
under the symbol "ANDE".

Shareholders On March 1, 1997, there were 701
registered common shareholders.

With Thanks

Tom Anderson
Chairman Emeritus

It is no overstatement to say that The Andersons would not be the company
it is today if Tom Anderson had not been a key part of it. One of five sons
of founder Harold Anderson, Tom has spent his entire adult working life with
the company, starting as a crew boss during construction of the first elevator
50 years ago. He has continued to be a builder, innovator, and leader of The
Andersons and the Anderson Foundation. Over the years he also has worked
tirelessly to improve the quality of life in the communities in which we do
business. Tom stepped down as Chairman of the Board in 1996, but will
continue to share his wit and wisdom for the benefit of The Andersons and all
who know him.

Ren McPherson
Director, 1988-1996

The Andersons lost one of its guiding lights when Ren McPherson died on
February 26, 1996. A man of great warmth and intellect, he was one of the
first people from outside the company to join our Board of Directors. He was
former chairman and CEO at the Dana Corporation and former dean of the
graduate school of business at Stanford University who maintained that "People
are important, management is not." Because he recognized that the "expert in
any job is the person performing it," he stressed that the four most important
words in running an organization are "What do you think?" We who admired him
and learned so much from him know that he will be dearly missed.

Mission Statement

We firmly believe that our company is a powerful vehicle through which we
channel our time, talent, and energy in pursuit of the fundamental goal of
serving God by serving others.

Through our collective action we greatly magnify the impact of our individual
efforts to:
* Provide extraordinary service to our customers
* Help each other improve
* Support our communities
* Increase the value of our company

The Andersons, Inc.
480 W. Dussel Drive
Maumee, Ohio 43537

Exhibit 22
SUBSIDIARIES OF THE ANDERSONS

Subsidiary State of Organization

The Andersons White Pigeon Terminal (a limited Ohio
Company of which The Andersons, Inc. is the sole
general partner)

The Andersons Investment Services Corp. Ohio
(a corporation owned 100% by The Andersons, Inc.)

The Andersons Agriservices, Inc. Illinois
(a corporation owned 100% by The Andersons, Inc.)

The Andersons Export Sales Corp. Barbados
(a corporation owned 100% by The Andersons, Inc.)

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-01249) pertaining to The Andersons, Inc. Long-Term Performance
Compensation Plan, (Form S-8 No. 33-00233) pertaining to The Andersons, Inc.
Employee Share Purchase Plan and (Form S-3 No. 333-4213) pertaining to the
registration of debenture bonds, of The Andersons, Inc. of our report dated
January 31, 1997, with respect to the consolidated financial statements of The
Andersons, Inc. incorporated by reference in the Annual Report (Form 10-K) for
the year ended December 31, 1996.

/s/Ernst & Young LLP

Toledo, Ohio
March 26, 1997

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