Good day, ladies and gentlemen, and welcome to The Andersons, Inc. Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the call over to your host for today, Mr. Jim Burmeister, Vice President, Finance and Treasurer. Sir, you may begin.

Thank you, Ben. Good morning, everyone, and thank you for joining us for The Andersons 2015 Third Quarter Conference Call. For the purposes of today's discussion, we have provided a slide presentation that will enhance our talking points. If you are viewing this presentation via our Webcast, the slides and audio will be in sync. This Webcast and supporting slides are being recorded and will be made available on our Investor Relations section of our Web-site at andersonsinc.com. Certain information discussed today constitutes forward-looking statements and actual results could differ materially from those presented in the forward-looking statements as a result of many factors including general economic conditions, weather, competitive conditions, conditions in the Company's industries both in the United States and internationally, and additional factors that are described in the Company's publicly filed documents including its '34 act filings and the prospectuses prepared in conjunction with the Company's offerings. Today's call includes financial information for which the Company's independent auditors have not completed their review. Although the Company believes that the assumptions upon which the financial information and its forward-looking statements are based are reasonable, it can give no assurance that these assumptions will prove to be. On the call with me today are, Mike Anderson, Chairman of the Board; Pat Bowe, our Chief Executive Officer; Hal Reed, our Chief Operating Officer; and John Granato, Chief Financial Officer. Mike, Pat, Hal, John and I will answer questions that you may have at the end of the prepared remarks. Now, I will turn the call over to Mike for his opening comments. Mike?

Thank you, Jim, and good morning everyone. First I would like to officially welcome Pat Bowe who joined The Andersons this week as our new Chief Executive Officer. Pat comes to us with a strong background including over 35 years of progressive experience in the agriculture sector. Pat most recently served in a role as the Corporate Vice President of Cargill's Food Ingredients and Systems platform where he was responsible for strategy, capital allocation decisions, customer relationship management as well as a leading key sourcing and business excellence initiatives. We are pleased to have someone of Pat's caliber as our CEO. He is an accomplished executive with a proven track record of delivering results and he brings extensive global experience in the agriculture sector. Welcome aboard, Pat.

Good morning and thanks, Mike, for the introduction. It's truly an honor for me to join the Company. I have long admired The Andersons and I really look forward to capitalizing on the opportunities that lie ahead of us for the Company. I'm excited to have the opportunity to lead such an outstanding organization and I look forward to working closely with all of you. But having said that, I've just joined the Company on Monday and thus just after three days I won't be contributing too much to today's call, but I do look forward to working closely with all of you and meeting you in the future.

Pat, we are happy to have you. As Pat only joined us this week, Hal, John and I will be covering the third quarter results with you today. We'll set up opportunities for everyone to get to know Pat more in early 2016. Overall, this was a disappointing quarter where a few of our businesses and an equity investment encountered challenges in both the market and in execution. Our Grain Group performed poorly this quarter primarily due to our nonconsolidated affiliate, Lansing Trade Group, significantly underperforming. Further, our core Grain business experienced a trading loss which turned what would have been a modest profit into about $1 million loss in that business for the quarter. While the third quarter is typically a lower earnings quarter for the Plant Nutrient Group due to seasonality, the business had a larger loss than it experienced in the same period last year, due primarily to a $4.5 million loss related to recent acquisitions and a $2 million impairment in the cob business. Hal will describe both in more detail later in the call. The Ethanol Group's earnings decreased from its second quarter results, primarily due to a lower margin environment, earning $5.9 million of pre-tax income compared to the $9.7 million delivered in the second quarter of this year and $21 million in the third quarter of 2014. Our Rail Group continued to perform very well in the third quarter. Lease income remained strong, utilization rate increased year-over-year and our service and repair business had one of its best quarters. John and Hal will take you through the detailed results of the quarter. Then I'll finish up with our outlook for the remainder of 2015 and early 2016.

Thanks, Mike, and good morning everyone. In the third quarter of 2015, the Company generated a net loss attributable to The Andersons of $1.2 million or $0.04 per diluted share on revenues of $936 million. This compares to the third quarter of 2014 when a revenue of $953 million generated net income of $16.8 million or $0.59 per diluted share. Third quarter earnings before interest, taxes, depreciation, and amortization, EBITDA, totaled $24.2 million compared to EBITDA of $47.2 million for the same period in 2014. Operating, administrative and general expenses for the Company were $88.7 million for the quarter, up $12 million from the prior year. More than all of this increase in expense is attributable to the acquisitions completed in the last year and is primarily related to depreciation, maintenance and labor. Operating, administrative and general expenses for the rest of the Company were actually down about $3 million. The Company anticipates that its full year 2015 effective tax rate will be 33%, down from previous estimates primarily due to factoring in the pension plan termination and lower than anticipated results through the first nine months of this year. Turning to our IT infrastructure renewal project, we are pleased to highlight that our Grain SAP solution has passed an important test with successful operation during the recent peak harvest season at the locations where it has been deployed. To date, the grain solution is deployed at locations that have historically handled about a third of our annual bushels. We will continue to roll out the solution at other grain locations and start to focus on blueprinting for our Plant Nutrient and Ethanol groups. About a year ago, the Company disclosed that it started down a path to terminate its defined benefit pension plan. We're pleased to announce that the…

Thanks, John, and good morning everyone. As Mike mentioned in his opening remarks, our Grain Group had a disappointing quarter. The group's pre-tax income for the third quarter was $131,000 compared to $12.4 million in the same period last year. This was driven primarily by a significant drop in earnings from our affiliate, Lansing Trade Group, which fell $8.8 million from the same period last year, and a $3.4 million drop in our core Grain business. Lansing's performance was primarily impacted by a difficult merchandising environment due to falling China DEG demand and the ongoing decline in the U.S. oil and related fracking markets. Our corn grain business experienced approximately $4 million in trading losses coming from option and flat price positions which were within our trading limits, along with trades associated with our risk management programs. Without these losses, we would have seen a $3 million profit in our core Grain business. This year's corn harvest has been highly variable, particularly within the markets in which we operate. According to the USDA crop report issued Monday, corn harvest is 85% complete. In comparison, corn harvest was 62% complete last year at this time, and the five-year average would be 79% complete on November 1. Nationally, the bushel per acre yield estimates are currently in the mid to upper 160s, off of last year's record of 171 bushels per acre, with total production estimated to be down a little over 0.5 billion bushels. Regionally, the yield story is highly variable. As you can see in the included PRX slide, yields are strong in the West. When you get into the core of the Eastern Corn Belt, where approximately 70% of our assets are located, yields are challenged compared to last year due to the effects of excessive range and limited…

Thank you, Hal. The Company's net working capital as of September 30th was $183 million versus the $257 million a year ago. Primary changes in the assets were from lower cash and cash equivalents, partially offset by higher inventories and higher receivables driven by earlier harvest activity and acquired businesses. Liabilities were up driven by an increase in long-term debt and higher trade payables, partially offset by lower commodity derivative liabilities. Short term borrowings under our line of credit at September 30 were $83 million, compared to $500,000 at the same time last year. Long-term debt totaled $414 million at the end of the third quarter versus $289 million a year ago, with the primary increase stemming from the funding of our Nutra-Flo acquisition last quarter. We believe long-term debt to capital is the most appropriate metric of our leverage. Our long-term debt to capital ratio at the end of this quarter was 0.36 to 1 versus 0.31 to 1 at the end of the same period last year. Our effective interest rate for the third quarter was 3.73%. This decreased from last year's 4.49%. Mike will now cover a few more points before we take questions. Mike?

Thanks. While this was a difficult quarter, we continue to feel good about our outlook for the years ahead. The remainder of this year we see good elements amongst the few challenges, including the recording of approximately $54 million non-cash charge related to the termination of the pension plan. Utilization rates in our Rail Group remain high, which would carry them through to finish what has been a great year. Renewal rate seems to be holding for most equipment types but we are mindful of the longer-term economic cycle that could put pressure on some of our customers' industries. Ethanol is also on track to close out a good year, with many quarters of excellent operational performance. Margins seem steady as high production levels in the industry continue to be balanced with strong domestic demand in an export market that is held up despite a strong dollar. The Plant Nutrient Group is off to a good start in the fourth quarter as the early harvest has made way for some much-needed nutrients to be applied. We expect them to see a better fourth quarter than last year as legacy locations are seeing higher volume with modest pressure on margins quarter to date. As we further deepen our integration of the Nutra-Flo product line into our national marketing and distribution strategy, the group will be poised for significantly improved results in 2016 and forward. Grain results will continue to be muted as we navigate the rest of 2015 and early 2016, as the weaker yields and lower basis opportunities in the Eastern Corn Belt have hampered our ability to build inventories and carry is trending lower. Pockets in other areas of the country however had very favorable yields in locations such as the West and upper Michigan. As we begin to…

[Operator Instructions] Our first question today comes from the line of Heather Jones of BB&T Capital Markets. Your line is open. Please go ahead.

Mike, we're going to miss you on these calls, and let me extend a welcome to you, Pat. I look forward to working with you. I'll try to limit it to two questions. I guess on the Grain business, Hal, on the Q2 call, you had said that despite the issues in the Eastern Corn Belt, you thought that the Grain business, the core Grain business could come in within that $0.15 to $0.25 range, towards the [lower end] [ph] and maybe a little bit below that. Year to date we're at about a loss of $0.04 a bushel and it sounds like you have a pretty muted outlook for Q4. So I guess I was wondering if you could give us an update on where you think that business will ultimately shakeout this year.

Good question, Heather. Right now because of the high variability Q4 looks a lot like last year for us and that would take us a little bit below the bottom end of that range that we had shared with you before.

Okay. And on the Lansing business, could you give us some more detail on how the decline in oil production and – I mean did they get caught on the wrong side of some positions? I guess my point being, until crude oil production accelerates again and/or China starts importing greater volumes of DEGs, are we going to see this kind of pressure or was there some kind of wrong side to the trade in Q3? I mean how should we be thinking about that business for the next few quarters?

The largest piece of that oil and fracking piece is truly in the fracking and the sand side in our distribution business. And so that's a decline in volume, that's building of stocks and just lower opportunities for them to do what they normally do to arbitrage across marketplaces with freight and different opportunities. So it's just a complete backup of the product into the system and a lot less opportunity. I think we see that that has levelled off at this point in time, so we see a little bit more of a normal perspective of that going forward, but it was almost a complete halt in that business at that period of time. So I think we feel better about it looking forward and it was a point in time that created that bigger issue for them on the fracking and the sand side.

So we should see going forward, and let's just think about the next couple of quarters, we shouldn't see that kind of deterioration year on year with these?

That's correct.

Okay. All right, I'll get back in the queue.

Our next question comes from the line of Farha Aslam of Stephens. Your line is open. Please go ahead.

Mike, just want to also extend my thanks that over the years we've really appreciated your insights. And Pat, we are looking forward to hearing a lot more from you going forward. Perhaps, Hal, we can continue on Heather's questions regarding the Grain Group and the fact that we are going to go through this period of sort of depressed earnings from that storage business, could you give us some color in terms of how long that carryout stocks, it will take for you to build those back up so that you can get back to your historical earnings?

Obviously the Grain business works on kind of a crop year basis, and so carry in the marketplace is basically laid out for a crop year period. So with the fall harvest that we have had, we don't see much change in the first two quarters of next year from it being at the lower end of the range just because there isn't quantities of carry available in the markets. That being said, we have opportunities at some of the fringe markets in our western areas and in Michigan where there is a bit better carry. So what we're going to have to do is we're going to have to make the most of our opportunities for arbitrage and look at the cost side of our business in the next couple of quarters. We do have opportunity but there is definitely not as much carry in the market in general, so in a long-term sense, as we start to build stocks again with the next wheat harvest, the next corn harvest and build stocks across the belt, that's what will take us into the old levels of earnings that we have seen in recent years. So it's not something that we'll see dramatically change in the first two quarters.

That's helpful. And then do you see anything happening in Ethanol in terms of supply that can jolt us out of the current sort of breakeven to plus or minus a little bit in terms of margins in Ethanol to get us back to healthy profitability in that segment?

I don't see anything that would change it dramatically right now. We have a pretty balanced supply and demand table and we see that continuing going forward with modest margins. Exports remain good and they will adjust based upon a strong or weak dollar, but not very much. Cheap gasoline does provide an opportunity for us to have good driving demand in the U.S. and that's a good thing. So there are some minor opportunities here and there, but as you ask for something major, no, that's not the case.

Okay. And my final question is on the Rail segment. You are enjoying some really nice lease rates and it's notable that [indiscernible] cycle. How many quarters can we continue to expect those lease rates to be a really nice positive for you?

We've seen a good trend as you said. It's been fairly long-term. We do realize that that business ties to the GDP of the U.S. economy pretty well. Things seem fairly solid going forward for the next few quarters and we don't see any major changes. So we're looking forward to continued good performance. I don't see any sizable changes in interest rates or U.S. GDP or anything that would dramatically change that. As you know, the portfolio is pretty well-balanced over the number of years that we have our portfolio and it's pretty well-balanced across a variety of industries. So we feel good about managing that and doing our analytics and trying to stay on top of all of those different factors to maximize that portfolio.

Great, that's very helpful.

Our next question comes from the line of Sandy Klugman of Vertical Research. Your line is open. Please go ahead.

So on Ethanol, you discussed your near to medium-term expectations, but over the longer term how do you think about the opportunity for higher blends to gain traction and how meaningful do you expect the export market to become for U.S. producers?

That's a great question. We have a lot of positive perspective relative to the long-term use of Ethanol for higher octane blends. There is some great work being done for those possibilities and we look for the U.S. export demand to continue to pick up. It's the cheapest source of octane that we can put into the motor vehicle fuel and that's why we see – even with the change in the strong U.S. dollar, we didn't see a change nearly at all in exports. We see China picking up a little bit of imports in that marketplace, but that would be a great market to open up to U.S. high-octane corn ethanol. So we see a lot of positives going forward in the ethanol marketplace. How far out is it? We see them building slowly but it's there. The horizons of things that could happen to improve next year's exports and beyond are clearly available to us. There's lots of good work being done in the things that you mentioned. So we're excited about the Ethanol business going forward.

Thank you. That's helpful. And just to shift to Kay Flo, so demand for fertilizers is clearly being hit by compressed grower margins, farmers are taking a closer look at what they are going to apply. So in an environment where growers have to be increasingly selective about applications, how do you see demand for liquid starter fertilizers holding up?

It's a great question. We've talked for probably the last few quarters or more about our move into that whole specialty micronutrient liquid starter fertilizers because of the efficiencies it produces for the farmer both in the planting as well as in the growing of the crops. So we've been moving into that marketplace for a number of quarters now with a couple of acquisitions, and that's exactly why we've been excited about this Kay Flo and Nutra-Flo acquisition. They have fantastic names, fantastic products in the marketplace and we're excited to mesh them together with what we have got. That is exactly where farmers need to go to get the bang for their buck to put the nutrient in furrow with the seed and we're excited about the future of that liquid starter fertilizer business going forward.

Our next question comes from the line of Kenneth Zaslow of BMW Capital Markets. Your line is open. Please go ahead.

Company is the BMW, which is kind of cool. Mike, we would definitely miss you [indiscernible], so thank you for all your help. And Pat, we obviously extend our welcome to you as well. Mike, I will at least see if I could squeeze in one question to you, when you were looking for a CEO, what were you looking for and do you expect there to be a change in strategic direction say maybe expanding to the West, is there a real play for regional, just kind of your thoughts conceptually on that outlook?

So when we were first looking in evaluating, we were going to just [indiscernible] internal also look out external. There were about two things that we were pretty clear. We wanted to have a cultural or value based [indiscernible] which is not to suggest that there shouldn't be change. We found that in Pat and it's evident so far. The other thing, the Board was – and this was a Board decision, not a Mike decision, the Board was pretty clear – clear, not pretty, it was clear that this was not being done because of a desire to have a strategic direction change, a large course correction. Having said that, when I came into this CEO's chair, one of the things we did was to – after a few years to decide to rapidly grow our Rail business and to provide Hal and his team the opportunity to look at the potential to get into that corn processing business, Ethanol, which we did. So although not a big course change, we've got a lot of capability and attributes and Pat's going to bring his own background, his own insight, his perspective and work with the team that has an appetite to grow. So I have no doubt that we're going to look back a few years from now and we'll see things that are changes in direction, not – maybe enough on that. I'd say also, as we were looking that this ability to get someone as we're looking to expand on capabilities and to bring someone in who has a background, an agricultural background that's as broad as Pat's, was one of the things that was of real interest to us, and the fact that he has lived in many parts of the world but also has roots in the grain and grain business with his family and himself in mainland United States, it's just a nice combination.

My second question would be, how long would it take Andersons to restore its earnings power? Over the course of years, we've all come up with our earnings power, but we generally come up probably in the same way as everybody else. Now how long will it take, and if it doesn't get accomplished, is there a case to be made that a regional player may be more difficult to find its path with this global market? And then I'll leave it at that.

I'll go ahead and start the answer. I think there's a couple of things, and I'll let John add to them as well. First of all, to the last part of your question, I think our growth especially in our business like our Rail business and our Nutrient business is completely natural. Now we are the leading liquid fertilizer manufacturer in the country at this point in time with the acquisition of Nutra-Flo. So I don't think it's at all about regional. Our growth in recent years from Tennessee to Nebraska and expanding our current footprint has truly made us much more than a regional. So I'll leave that aside to begin with. From a timing perspective, I think we've talked about the opportunities in our Nutrient business starting even as much as this fourth quarter and clearly in the spring. So we're looking for that to start right away. We're looking for continued very solid performance in our Rail business. We talked about the GDP and the lease rates and all that. And so it really gets down to a question of what we see in the Ethanol and Grain markets, and I think the Grain markets for the next couple of quarters are soft until we start to get to the next wheat crop and the next corn crop. And so the timing of that one is maybe a little bit slower than the other two, but it looks like we are off to a start even in fourth quarter. In Ethanol, Ethanol I could say, we think we produce ethanol quite well on a Company-level and we do a good work on risk management and marketing. So we are excited about the business and we're excited about the long-term potential. We're pleased with that business as well. So maybe it may not jumpstart as quickly as the Nutrient business or continue as strong in the immediate sense as the Rail business, but we're positive about it going forward. John, did you want to add, or Pat?

I'd like to make a couple of comments. This is Pat Bowe. And maybe it kind of leads to, so why am I here? It's what makes me excited about the Andersons. So we don't know each other yet, but as Mike mentioned, I have 35 years of experience in ag industry, catch grain trading, futures trading, sales administration, working overseas in Brazil, been involved in the ethanol industry for 25 years running a corn milling business. So for me the Andersons is right in the sweet spot of my experience in the ag sector and the reputation of the Andersons and their brand to the farmer and the reputation in the marketplace is second to none. The culture, the values, how they conduct themselves, and that's why they are a partner of choice for many of their farmer customers. Having said that, I'm really excited about the opportunities that we have on the performance improvement. So what do you do when times get tough? We have productivity gains that we can make and big strides that we can make in becoming more efficient. Mike talked about this SAP deployment that's going well. We have lots of opportunities in procurement and other processes that we can get better and that's what will help us. The other thing that's exciting that was mentioned I think by John that we have a strong balance sheet and we're well-positioned in the downturn of the cycle for organic growth and bolt-ons in the regions that make sense for us in our segments as well as expanding into some whitespace that might be good for us to grow. So I'm excited about looking at that as we go forward. And probably more importantly, as Hal just mentioned, is the breadth of the portfolio, right. This is not just a grain storage company and it's not just a rail company, it's not just a fertilizer company, but managing up and down the ag supply chain as Andersons does puts us in a good position to have a more balanced portfolio. And lastly, I really want to thank Mike and the Board for selecting me and their support, but more importantly to Mike who is just a class act and is making this a very smooth transition with the whole management team here and it's really great to have Mike in the seat as Chair of the Board as a mentor and to help me guide the Company going forward. So really looking forward to our next call when we have a chance to get my hands around the strategy for next year and we could be more specific, but those are just some high level thoughts I have after three days.

Our next question comes from the line of Brent Rystrom of Feltl. Your line is open. Please go ahead.

Mike, my best wishes as well, and Pat, welcome. Just from a philosophical perspective, I was just thinking as we are talking about the things going on with the Company right now and some of the issues facing it, has there been or do you think there is an opportunity to address the portfolio approach of the Company? Historically there's been a lot of good discussion and a lot of good data to suggest that the portfolio approach of the Company has structured, has worked well over time, and I don't think that's hard to argue. My thought is more a little bit different. You're particularly at risk for when the farmer is starting to face maybe a little bit better environment and you do better when the farmer underperforms. So when there is excess supply in ethanol and in grain, you tend to do well, and when there is tight supply your primary exposure is to the Plant Nutrient Group. Is there a thought process or do you think there should be to maybe look to balance that and change the risk profile of the farm side of the business?

I'll try. It's a broad question. I'll try to take a few pieces of it. As you said, the portfolio approach has worked quite well in a number of different instances. Your perspective about where we are at risk relative to the farmer side of the business or in contrast to the farmer side of the business is interesting, and right now given the circumstances it is a bit of a negative. However, it isn't always that and there is – we have also had an addition in recent decade of Lansing to help us take advantage of the periods of time when the arbitrage opportunities represent more income than the facility opportunity. So we have done a number of things there. We have also done a number of things to improve our connectivity so that it isn't just simply a storage space gain for The Andersons but it is about providing risk management opportunities for farmers that draws that farm customer base into us. So there is always a strategic discussion and assessment about how a business should best operate. And with a new CEO, obviously those discussions are going to get a little bit of a different insight and a different light shone on them. So we should always be looking to make sure we understand where we operate well and how we could operate better. I don't know that we can provide you with an answer to your specific question today other than to say that the history has been good and we always do our best to look at how we should operate going forward.

I'll add some perspective. It may not be so much specific but I think questions like that are really wonderful and challenging and they are especially relevant I think when we go through a change like this, and [indiscernible] back to change with me. It does allow one to take a little bit of a [indiscernible] look at what you do and how you do it. My own perspective or the perspective we've had and it's one of the things maybe I'm entrenched in is the portfolio approach makes sense and within the portfolio you look within our Plant Nutrient portfolio, it's a portfolio within there too. So my quick reaction to that is, no, the portfolio makes sense and we got the seasonality, we got the variability, we got to run a good operation on the cost side and if we're going to get our objectives, we'll get return on capital over time. But the longer answer, and I'm glad Hal went first, is that it's a perfect question with Pat coming in along with other perfect strategic questions to put up on the Board to evaluate, which is in a way ducking your answer but not. It's a fair question.

I appreciate that. My final question has to do then with thinking about fourth quarter, first quarter for a second from both the Grain and the Ethanol perspective. Obviously with Grain it kind of pushes off to next year's crop sort of event as far as when that turns. We've been reading a lot recently when we have a reduction in the corn carryout of this size, more than just 1% or 2%, when you translate that into corn prices, realized corn prices in the spring, 15 out of the last 15 times we have had a reduction in the carryout of the size, we've had a fairly substantial increase in the price of corn by spring. If that happens and if gasoline doesn't work higher or ethanol can't work higher, how are you viewing the Ethanol business, is it likely that that business will stay profitable or do you think the business is at risk of maybe losing some money?

We don't look at the carryout estimates as changing all that dramatically to be honest with you. We're down a little bit from some of the earlier USDA numbers but we're not down to a number where we're impacting it. We're still a little over 1.5 billion carryout I believe, and our estimate of the carryout is a little bit above some of the recent 1.5 billion. So we don't see it dramatically changing that much and we don't really see it dramatically changing the price of corn. What will happen to change the price of corn likely more than that is planting conditions and crop progress in the Southern Hemisphere and then planting conditions in the spring. So we'll look to those two things and at this point in time the Southern Hemisphere looks like it's in pretty good shape, the range has been good, and so right now we don't see a lot of pressure on flat priced corn. I would agree with you that it's likely that lower oil prices at some level are likely to be with us for a while, but again we've had some great increases in demand from driving, et cetera, so I don't see anything changing dramatically in either direction in the oil price market but that market is such a volatile market that it's hard to say, but I don't look at high priced corn creating an issue for the Ethanol business going forward.

This is Pat. I'm just going to add, when you are talking about our Eastern belt/Western belt grain supplies, when you look at the macro issue there on ethanol, you got to look at global feed grains and the ample crops we have had in South America, the biggest [indiscernible] in record in Brazil, looks like crop conditions have been good with a cheaper [indiscernible]. So we think that conditions for the globe continue to be amply supplied with grain and that's kind of the broader picture that's more important to exports.

Our next question comes from the line of Eric Larson of Buckingham Research. Your line is open. Please go ahead.

Mike, congratulations, and Pat, congratulations as well. Mike, I have to say, I do feel a little abandoned this morning because I think the one thing I can probably safely say is that you and I are probably the two oldest [indiscernible] dogs that have been on this call for many, many, many years. So you're leaving me high and dry. But congrats, I think it's a very big thing.

Thanks Eric. We do go back a ways.

Quite a ways. I can't say that we actually have pictures of each other but we're not far from that either I'm sure. Just a couple of questions, and I don't know if this is for Hal or for who, and they are more specific to the quarter, can you give us a little more breakdown of the $4.5 million dilution from the acquisitions in the quarter as to a part that might be interest, the part that might be – you mentioned the one time piece of that and you talked about what that was, but you didn't really give us the magnitude, is there a way to kind of walk us through some of that to give us a sense of what happened there?

I will lump it into two buckets. The largest portion of the $4.5 million is truly the ongoing cost from the added Nutra-Flo and ABG assets that we didn't have in the previous quarter. That comes in the quarter when the fertilizer business generally makes about no money, all right, where [indiscernible] breakeven kind of numbers in the quarter. So we have got added depreciation and labor costs and all the ongoing stuff for those new businesses without a lot of gross profit and a slightly smaller portion of the total is a combination of one-time acquisition cost and that inventory that we talked about that we are selling through without any margin because GAAP requires us to write it up at the time of the acquisition. So those two pieces that are this one time and the inventory piece are a lesser portion of the total. The larger portion of the total is the ongoing expenses of those businesses in the quarter where gross profit generation is generally low.

Okay, all right, that helps. At least we can kind of do some pencilling around that. And then to the Grain business, I think we probably had pretty good crop production in Nebraska this year and I know that your greenfield facility there had been underutilized. Is that improving, are you making money yet in that Western asset or is it still kind of a gradual build?

We had a pretty good year in Nebraska. The crops were good. We have much more highly utilized net asset from a Rail perspective. The rail markets were much more competitive. So we have seen an improvement, notable improvement in the performance in the Nebraska assets for this year.

Okay. And then the final question, it gets back to kind of your storage facility. You are building a new greenfield asset in Humboldt, Tennessee. Frankly I'm not all that familiar with Tennessee but I don't think there's as much storage capacity down there as you'll find in more of the heart of the row crop farm belt. But I get nervous every time I see a greenfield facility get built in the storage industry because there's just so much capacity. Are the competitive dynamics down there better than what you might get in some other regions of the country for storage?

The simple answer is, yes. We take great pains to analyze crop production versus storage capacity and that area is the best ratio of any place that we have our assets. Plus the amount of ground that has been moving from things like tobacco and cotton in the last five years into row crops has been substantial. And in addition there has been an additional investment in irrigation in the area that also supports that. So those are three pretty core factors that have led us to be very excited about the Tennessee marketplace.

Ben, we have probably time for one last question. Then we need to wrap it up.

Our final question will come from the line of Heather Jones of BB&T Capital Markets. Your line is open. Please go ahead.

I just have two more follow-up questions. Wondering I think it was a $4 million hit in your core Grain business, for what I understand as long as I've followed this Company, you guys are essentially basis traders and I don't remember you guys ever having a loss on a position that large. So I was wondering if you could help me understand that more and has there been any change in your strategic direction there?

There has not been any change in the strategic direction. There has not been any impact in our position limit. So it is nothing different. You haven't heard about them in the past because generally any trading losses that we have had in the past tend to be on the positive side and they tend to be small. So what happened is that we had a highly volatile period of time at the very beginning of the third quarter. If you go look at a corn [indiscernible] for the last couple of days of June, the first week or so of July, you will see it was an extremely volatile timeframe. And in addition to normal positions that our merchants would hold relative to options and futures, we also have risk management positions that we have on for ourselves and for our customers and managing those options positions and futures positions wasn't done at the level that we would have liked it to have been done at that time, and that plus simply merchants with the wrong position on accumulated to those numbers. So it's not a change, it's kind of a perfect storm, it's an accumulation of a number of things and it's not something you've heard about and hopefully not something you'll hear about again. There is nothing different, it just happened that way at this point in time.

And then my final question is just in your Grain business on an ongoing basis, we are hearing more and more about essentially disintermediation between the end user and the farmer, and I was wondering if you could talk about what you're seeing in your core geographies there, and if that is a trend that's going to continue, does this incent you guys to move more into the processing side where it's less of a middleman type role?

A good question and obviously our move in the ethanol the past decade has been quite a bit about that. We also talk quite often about our direct connection to that farm customer for reasons of our ability to provide risk management solutions and services. And so we may be part of that disintermediation that you are talking about and we feel pretty good about it. I'm not sure exactly where it will take us in the processing business but our direct connection to our farmer customers is a big deal to us. It's crucial to who we are and what we do and we think we do it quite well. So how that leads to us to grow our businesses more in the future, whether it's processing or geography or whatever that is, it's important to us and we believe that there is real value to it as well.

If I can build onto Hal's point, a lot of my recent experience has been in the ag processing side for food ingredients and the trend you are talking about for customers about transparency in the supply chain is real and I think that's nothing but opportunity for The Andersons. So the link to the farmer when you're talking about non-GM organic specialty grains, different new wheat varieties, it's going to be a way to someone who can handle it and work with the farmer and manage that supply-chain and get it to the right processes in the right fashion with the right documentation, there is going to be real need for that as we go forward, and nobody is positioned as well as The Andersons to do that, and I think that's an exciting opportunity for us.

Perfect. Thank you so much.

With that, I want to thank you all for joining us. Also a mention for those that are interested, there are appendix slides to the presentation available on the andersonsinc.com Web-site at the Shareholder Relations tab under the Third Quarter Earnings Call Replay. Our next conference call is scheduled for Thursday, February 11, 2016 at 11 AM Eastern Time to review our fourth quarter and full year 2015 results. We hope you are able to join us again at that time and I want to again thank you for all the support you have provided us, and have a great day and a great rest of the year. See you later.

Ladies and gentlemen, thank you for your participation in today's call. This does conclude the program and you may all disconnect. Have a great rest of your day.