Good day, ladies and gentlemen. And welcome to the Andersons' 2017 Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today’s conference, Mr. John Kraus, Director of Investor Relations. Please go ahead, sir.

Thank you, Kristi and good morning, everyone, and thank you for joining us for the Andersons' third quarter 2017 earnings call. We have provided a slide presentation that will enhance today's discussion. If you're viewing the presentation via our webcast, the slides and commentary will be in sync. This webcast is being recorded, and it and the supporting slides will be made available on the Investors page of our website at andersonsinc.com shortly. 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 connection with the company's offerings. Today's call includes financial information, which the company's independent auditors have not completely reviewed. 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 accurate. This presentation and today’s prepared remarks contain non-GAAP financial measures. Reconciliations of the GAAP to non-GAAP measures may be found within the financial tables of our earnings release and in the appendix of the slide deck that accompanies this presentation. Adjusted pre-tax income is our primary measure of period-over-period comparisons, and we believe it is a meaningful measure for investors to use to compare our results from period-to-period. EBITDA or earnings before interest, taxes, depreciation and amortization is a measure we use to access the cash flow generated by our operations. We have excluded the impairment charge we took in the second quarter related to our wholesale fertilizer business from both measures, as we believe it is not representative of our ongoing core operations when calculating adjusted pre-tax income, adjusted net income and adjusted EBITDA. On the call with me today are Pat Bowe, Chief Executive Officer; and John Granato, Chief Financial Officer. Pat, John and I will answer your questions after our prepared remarks. Now I'll turn the floor over to Pat for his opening comments.

Thank you, John and good morning everyone. Thank you for joining our call this morning to review our third quarter 2017 results. I'll start by providing some viewpoints on each of our four business groups and the progress we’re making on our strategic initiatives. After John Granato will provide a business review, I’ll conclude our prepared remarks with some comments about our outlook for the remainder of the year, and then give you a brief look into what we’re beginning to see for 2018. Our third quarter results were little better than our third quarter 2016 results but not as strong as we anticipated. In addition to continuing our work in some challenging markets, we incurred a number unusual expenses during the period. At a very high level, we’re happy to see the Grain Group continue to progress toward more typical earnings range. Ethanol margins were lower year-over-year and the current forward crush margins don’t show any near-term improvement compared to recent years. For the Plant Nutrient Group just in time farm buying and persistent oversupply in most fertilizer markets continue to compress margins. The Rail Group continues to ride a slow market recovery. Our grain business results in underlying grain fundamentals are continuing to improve. We remain comfortable with our grain ownership positions and continue to enjoy wide carrying charges in wheat. So far it looks like a good 2017 corn and soybean harvest and it will only exacerbate oil supply and carry-outs into 2018 which can cap both prices and market volatility low. Our grain affiliates results were little worse year-over-year due to challenging conditions in Ontario Canada for Thompsons. Therefore our business was profitable despite lower year-over-year margins which were driven by higher industry production and stocks. Weak international DDG demand in the last of our significant…

Thanks Pat and good morning everyone. In the third quarter 2017 the company reported net income attributable to the Andersons of $2.5 million or income of $0.09 per diluted share on revenues of $837 million. These result were better than in the third quarter 2016 when our revenues of $860 million generated net income of $1.7 million or $0.06 per diluted share. The 2017 third quarter results also include $4.4 million in pretax income associated with the company's exit from its retail business. Earnings before interest, taxes, depreciation and amortization or EBITDA improved year-over-year by 14% to $32 million. Our long-term debt is somewhat lower than at this time last year and our debt to equity ratio is basically unchanged at 0.5:1. Our target ratio is 0.8:01 so we have capacity for growth. We next present bridge graphs that compare 2016 reported pretax income to 2017 pretax income year-over-year for the third quarter and adjusted pretax income for the first nine months of the year. In the third quarter, the Grain Group's fourth consecutive year-over-year improvement was again driven by strong storage income. Ethanol's results were down primarily as a result of softer margin but also due to having recorded a $1.5 million expense when it cancelled the potential capital project following results of preliminary engineering work. Plan nutrients results were negatively impacted by a $2.2 million legal settlement expense that occurred in the quarter. Rails comparable leasing income and better car sale results were more than offset by a soft quarter for the repair business $750,000 and workers compensation and other expenses resulting from an August fatality in our Maumee repairs. Retail improvement relates almost entirely to gain on the sale of two former store property. We're in the process of selling our remaining two properties. For the nine…

Thanks John. While moving to the fall harvest with the grain business that is hitting on all of its cylinders there was some concerns in our other three groups as we begin to consider prospects for 2018. The Grain Group has now achieved year-over-year improvements in four consecutive quarters. Low grain prices continue influence farmer selling behavior followup what looks like an another good crop. We're set up well to continue to earn solid storage income although low grain prices and volatility or low volatility may dampen trading opportunities. While the 2017 corn harvest is behind its normal pace we're seeing robust high quality crops in our dry areas. We expect to continue to earn good storage income through the remainder of 2017 harvest and into early 2018. The Ethanol Group is working hard on production efficiency and all four plants are running well. In the quarter the industry continued to out produce demand, margins began to rebound in late July and rose throughout most of the quarter but began to decline really rapidly in mid September despite higher spot demand, rising production and monitoring seasonal driving demand kind of concerned about our margins for the rest of 2017 and into 2018. More specifically we expect our fourth quarter results about half of the fourth quarter of 2016 unusually strong results in ethanol. That said Nutrient Group continues to be impacted by an unfavorable combination of oversupply, low margins and an ultimate grower customer that is still making very conservative processing decisions due to persistent low farm income. The fertilizer industry needs to move toward a supply and demand balance to stabilize prices which could lead to more normal buying patterns. We had a little better summer fill program that in 2016 though the pace of deliveries has been slower…

[Operator Instructions] Our first question is from Farha Aslam of Stephens Inc. Your line is open.

I have a question on the Grain Group, they've seen some strong improvement should benefit from the harvest but the harvest is coming in late. Is fourth quarter earnings going to be up year-over-year in your mind or should we think about that being more of a first quarter or first half benefit for next year.

We doubt that same would be our advise so crop projects as you mentioned started out really nice especially in the Western belt and we had last five days a pretty strong rainstorm across all the Eastern rain belt that really slowed things up. So for example Ohio, the numbers we reported yesterday was 60% harvested in corn, Michigan at 57, Indiana at 70. So we got a quite bit of work to do so but the 10 day outlook looks to be, we got a beautiful sunshine here today. So we’re about two to three weeks behind but as far as the main part of your question we see the numbers being pretty similar to last year.

And then a longer-term question on ethanol, I knew that perhaps the fourth quarter and first quarter will be a bit challenge in that group but looking further out into exports and potential market opening up how do you think 2018 can develop for ethanol and particularly with Mexico and China?

We mentioned here that we see that the quarter finishing pretty soft specific compared to last year because remember fourth quarter last year we had a pretty robust margins. Going into the quarter we had about 5% hedged in the third quarter going in and we’re about 50% now for the balance of note these but the margins just aren’t there is highly were a year ago. There has been a lot of rumors in the market as you said export don’t get reported till the actual time of shipment but there has been a lot of chatter about China coming into the market into next year also some talk of India, Canada, Brazil both they’re new business but those aren’t all 100% confirmed yet. So the one thing we have to be positive about is see the value of U.S. ethanol is really low in the world’s octane market and we’re seeing good interest in Europe. So if that’s what going to pick up that’s going to be the key to get the ethanol margins higher without that keeping at record pace like we’re at 12 and 13 pace this year, it would be hard because it is producing so much domestic ethanol. So we tend to lean into hedging opportunities in Q1 if margins opportunities arise but we’re a little bit cautious about ethanol margins going into 2018.

Year is not over yet but if we look at kind of run rate production for the year of 15.6 billion 15.7 billion gallons, we see that going north of 16 billion gallons next year. So as Pat alluded to we’re going to need some additional exports to soak up that capacity otherwise we’re going need some – see some capacity come out barring any significant changes in domestic ethanol demand going forward into 2018.

Our next question is from Heather Jones of Vertical Group. Your line is open.

So I have a number of just really quick detailed question, so when you talk about Q4 2017 being about half of Q4 2016 for ethanol you’re referring to per gallon or in total dollars?

Pretax total dollars.

And when you talk about 2018 versus 2016 and you say with the exception of grain are you talking about, so you expect ethanol, fertilizer and rail to be down versus 2017 is that understands you correctly?

Well I think we talked about headwinds there and I would say that ethanol as we just talked about the years going to be made probably in the second half of the year so that they wait and see. Rail if you look at it this year is pacing about 80% of last year's pretax income and so I think we would expect that to continue for the rest of the year given kind of where we are in the year and so as Pat talked about given the headwinds probably down 10% to 20% relative to that pacing. And then Plant Nutrient again Pat highlighted we don't really see margin improvement coming unless we see some supply demand in balance that's getting fixed pretty quickly here as we grow into the key planting season in the second quarter. Also I think we need to recognize farm incomes are low and so although nutrient prices are low that is impacting farmer buying our nutrients particularly on a forward basis as we look into 2018. So again not expecting necessarily erosion in that business but not seeing a lot of potential for improvement either other than in some of the clock take out initiatives the group has taken.

So I’m having a hard time telling this if you’re just trying to set appropriate expectations sounding notes of caution or if because when I look at pricing and I completely get that things are not robust by any stretch of imagination but you have had some capacity taken out and there has been improvement in nutrient pricing and per your comments about the wet weather there seem to be some nutrients that have been leased from the soil. So I guess I have a really hard time seeing in 2018 that’s flat with 2017. And so is this just caution on your part because we’re in the middle of just - it’s just lot of things in flock so what am I missing?

I think you’re making fair observations but we don’t really see like you said there are some places of some commodity fertilizer products that have rebounded here in the off-season. The question would be at these kind of prices 347 nearby corn value-added sales which is our higher margin business that's the tough sale when corn prices are cheap we experience that since last year. We don’t see grain prices rebounding strongly in the year despite farmers interest to do more extensive value-added applications. Our volume has been decent, our prefill reset was pretty good but the margins have been hurt here this year. Margin could be slightly better if we get some stability but we just can do but we’re not just that optimistic about seeing a rebound in fertilizer prices barring as you said major reductions of capacitors something that happens in the marketplace from a pricing across the board.

I guess I should add that if you look at the legal settlement obviously is not expected to recur we have as I noted taken some cost out of the business and there was severance in the business this year so that does help move it up a little bit from where we were but I think as we’re talking about this when you look at the core margin structure of the business it just doesn't feel like you’re going to see significant improvement.

And going to the rail side with the recertification expense, so it sounds like if I understood you correctly the way - the average life of your different cars that it’s unlikely you’re going to see this much expense in another year over the next 10 years. So my gut is most of analysts will treat those as nonrecurring so are you going to call out each quarter how much that expense was or given that it unlikely to recur in '19 and '20?

I guess to be determined what I would say if we think it was material to a particular quarter relative to the prior year's quarter, we would certainly point that out to you. But again we noted it was about $3 million relative to 2017.

And it can’t comment on our balance of - this will impact about 575 tank cars certification for next year but in that we have - ethanol we had a big chunk of them - I’m sorry 625 total cars, but we also have sweetener cars, veg roll cars so isn’t just fuel cars these are any kind of tanker that we certified and the cost we estimate to be around $8,700 a car as John mentioned. So we're bringing out this year because there is a big chunk that all came onboard mainly back to the ethanol boom when we got those cars we won’t have a bubble quite that big in any quarter going forward.

I guess maybe the way to think about it is we edge and recertifying these tank cars are well and just depending on age and what we have here is the bubble so we felt it was important to be transparent and let everybody know now that there is that $3 million-ish headwind for next year.

So Heather we should go back to normal maintenance expenses each quarter and not anything unusual from a large number cars at one time.

In 2019?

Yes.

Two final question on - how much of a problem - headwind was that during the quarter and is that just a one quarter issue or did they have an issue with the harvest that has lasted in the next few quarters?

Well their harvest is still ongoing and so that question is on the harvest is PVD.

Very similar fertilizer experience in Ontario than we did here down in Eastern rain belt so it’s not as a big factor so the big things for us is if they had good successful harvest finish off harvest season up in Ontario similar to down here to make sure we’re borrowing at the right levels and filling up space.

There was the issue in the quarter fertilizer or was the issue in the quarter handling commercial handling?

Yes, a little bit of both, little bit of both. It’s not a big number but we’re just behind pace of previous year.

And my follow up question is what is this capital project you were evaluating on the ethanol side that you decided to walk away from?

Yes, we’ve been looking at seeing various technology implementations in ethanol when successful over the last three or four years of many new technologies and couple of squeeze up more juice so to speak. We also have been looking at value-added protein and how we can extract more value at our coproducts. We done a pretty extensive work on our project and did pre engineering and then as we summed up the total capital cost to build the plant it just didn't quite make the earnings expectations. We had in mind for that. So we sold that project and thus we had to take the charge for the pre-engineering expenses during the quarter. We still continue to look down the road for opportunities to add value to coproducts also there is technologies we’re very interested to implement and ethanol that can up our bottom-line. So we’re going to continue to look to add new technologies unfortunately the payback just wasn't there and I thought it was prudent by our ethanol team to call off the project because we didn't see the returns we would have liked for the project.

Our next question is from Eric Larson of Buckingham Research. Your line is open.

Just a couple questions you talk about the farm belt we know that farmer income is still pretty tough. I guess one of the questions that I have for you is I think we all know how the returns are penciling out it kind of just strictly matter which screen you’re talking about. How do you look at what happens next year from a planting perspective I mean corn at 350 is pretty tough obviously you have to look at the next year at these numbers for next year, but still it doesn’t really matter how would you look at planting for '18 kind of settling out?

Yes I think it's interesting if you bought up and we have low carrying prices across the board and the corm bean ratio is kind of normal percentages so it’s not sending a signal performers for not plant corn so we think we probably could see similar corn acres and this time its early but I think that would be unlikely to have major shift as our exports have just been fair in corn. So we were I think at 1.85 billion bushels versus 2.2 last year so we’re down almost 17% on corn exports and you’ve seen some of the big grain companies talking about a little bit of these challenge to the U.S. export market on corn. So that probably will keep corn relatively subdued and price and we have Chicago and Kansas City both at 427, it’s not about short selling in the weak market and so prices are just don't stiff of here and it's a tough situation for farmers with those kind of income.

Yes and it’s the volatility the world volatility that really makes tough for everybody other way.

Eric I think the one other wildcard here is how much will bankers get involved in influencing planting, next year obviously corn is more expensive crop to put in but generally I think as stat noted it doesn't feel like you’re going to see significant shifts at this point but is a wildcard out there.

I mean it really is, the bankers are getting more involved the last couple of years but I think this spring will be the more pronounced. The final question I have, your wheat income year-to-date kind of through the quarter I mean we’re running on the texts we’re running close to 50% carrier, I am assuming you are not getting a tremendous amount of benefit from the tax rate now I am guessing that the markets are may be getting closer to normal. Can you help us what that benefit may have been in the quarter and maybe year-to-date?

Sure. We continue I think - we’ll keep two text on Chicago read into next year and one the two trips throughout the year. If you look at the DC week spread is about $0.07 to $0.08 nearby wheat spreads because markets come under some selling pressure is a little bit narrow $0.175 nearby and be smart. So the spreads that you properly noted or ended about 52% of full carry on wheat so that’s lesser than it was earlier this year where corn and beans have windup closer to the 80%, 90%. So we think there is going to be opportunities for wheat to move back out and give good carries and we’re pretty confident to hang onto the two ticks into next year and probably maintain wanted to throughout the whole year.

Our next question is from Kenneth Zaslow of BMO Capital Markets. Your line is open.

Just continue with the ticks so you think that next year you’re not going to get the trigger the other way?

We thought we might loss one so like right now we’re at two kind of depends how spreads play out through the course of the year so we’re thinking we’ll maintain one to two so is it possible to lose one of the wheat ticks as spreads have spreads still bit narrow as we go through the year, but we think given the burden some global wheat supplies there is no reason that wheat shouldn’t be trading at wider carries. And I think we'll see it go back to more normal spread relationship as time moves on here.

And then if you do lose a tick, where is the offset to the income from that because - or it just you lose the income in that bid or is there an ops that you’re able to d something else?

Yes it’s coming through some game but also purchase and sales if you end up having margin on sales where we can sell wheat into the market at decent margins but we wanted to maintain that wider carrying charges for all grain. This is the part of the grain business that Virgo differentiated the domestic store these kind of white carrying charges are good for us as opposed to I said weaker export markets right now. So if we continue to maintain that space income throughout the year and that’s one positive side although we’d like to see a little more volatility or some things come into markets create trading opportunities.

I have a kind of philosophical question like over the last couple of years, you guys have built more ethanol plants and now we’re in a state of overcapacity. As you look back do you think there is a right decision and how do you reassess that and would there be a point in time that would think about slowing down production or changing your production level how do you think about that?

Going back we did built our plants we expanded our Albion plant a year ago and that’s one of the better plants in the industry and provides really good margins. It has a good return for investments so the answer would be yes we would do that again. Even looking back on today’s spot margins in the nearby, we feel optimistic about ethanol overall that as the export market is going to continue to grow we see again opportunities not just nearby in African countries in Canada and Mexico but China, Brazil also in Europe right now there is good opportunities for our can. And so we think the export markets is going to grow and I think there is opportunities for technology to enhance new production methods of ethanol going forward and we like to be part of that. So we think that it could be very good industry it always has this cycle of ups and downs as you all know Ken and we’re not as strong in the current margin as we were a year ago we’re still have positive margins for the business.

Then if I think about the Brazil export environment obviously there was a 20% tax that they have on us do you think that’s going to change do you think what the markets will compensate for any lost value and how much loss value do you think there will be in export market next year and where do you think it’s going to be compensated from?

I don’t know by a specific number but I think that the big hopes are probably for China as we heard - like you said opportunities as China declares to do something with their pollution problems in using ethanol as part of that and imports would be a good way to solve that. That could be one big positive one. Brazil is the key one to watch all the time and we talking about slowdown what we do in our plants, we optimize production for costs when margins are good and then when margins are not good we slow back production by using a little more expensive materials or methods to slow production taking to complete halt in idling of forecast it doesn't seem to make sense, it's more about pushing hard when margins are good and throttling back when they’re less good. And that’s the practice that we've used in the past.

And my final question is on China just clarify, so using that if they went to the 2020 E10 policy that they would not be able to work down their inventory - their core inventories and supply their own country that they would need to come for the export market?

Yes, you’ll have to built a heck a lot of capacity to right, so it’s not ever a 100% certain what will happen in China but because the market is so big and if you didn’t do an E10 you would need to import ethanol then the question is how does the economics look on Brazil versus U.S. at the time. But I think there is optimism growing export market.

Thank you. And that does conclude our Q&A session for today. I’d like to turn the call back over to Mr. John Kraus for any further remarks.

Thank you Kristi, and thank you all for joining us. We want to thank you for joining us this morning. I also want to mention again that this presentation and slides with additional supporting information will be made available later today on the Investors page of our website@andersonsinc.com. Our next earnings conference call is scheduled for Thursday, February 15, 2018 at 11 AM Eastern when we'll review our fourth quarter and full-year 2017 results. We hope you're able to join us again at that time. Until then be well.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today’s program and you may all disconnect. Everyone have a great day.