Good morning, everyone, and welcome to the Darling Ingredients Inc. Conference Call to discuss the company's Fourth Quarter and Year-End 2017 Financial Results. With us today are Randall Stuewe, Chairman and Chief Executive Officer of Darling Ingredients; and Brad Phillips, Executive Vice President and Chief Financial Officer. After the speaker's opening remarks, there will be a question-and-answer period and instructions will be given at that time. Today's call is being recorded. I now would like to turn the conference over to Melissa Gaither, Vice President of Investor Relations and Global Communications for Darling Ingredients. Please go ahead.

Thank you, Keith. Good morning, everyone, and thank you for joining us to discuss Darling Ingredients earnings results for the fourth quarter and fiscal year ended December 30, 2017. To augment management's formal presentation, please refer to the presentations section of our IR website for the earnings slide presentation. Randall Stuewe, our Chairman and CEO will begin today's call with an overview of our fourth quarter and year-end operational and financial performances focusing on year-over-year comparisons and will discuss some of the trends impacting our business. Brad Phillips, Executive Vice President and Chief Financial Officer will then provide additional details about our financial results. Please see the full disclosure of our non-GAAP U.S. GAAP measures in both our earnings release and earnings slide presentation. Finally, Randy will conclude the prepared portion of the call with some general remarks about the business and the year ahead. After which, we will be happy to answer your questions. Now for the Safe Harbor statement. This conference call will contain forward-looking statements regarding Darling Ingredients' business opportunities and anticipated results of operations. Please bear in mind that forward-looking information is subject to many risks and uncertainties and actual results may differ materially from what is projected. Many of these risks and uncertainties are described in Darling's Annual Report on the Form 10-K for the year ending December 30, 2017, our recent press release announced yesterday, and our filings with the SEC. Forward-looking statements in this conference call are based on our current expectations and beliefs, and we do not take any duty to update any of the forward-looking statements made in this conference call or otherwise. With that, I'd like to turn the call over to Randy.

Thanks, Melissa. Good morning, everyone. Thanks for joining us. Before I begin, I'd like to welcome Brad Phillips and congratulate him on his well-deserved promotion as our new Chief Financial Officer. As many of you know, Brad has a long tenure with Darling dating back to 1988 and has managed our Investor Relations effort for many years alongside his Treasury role since 1993. He has proven public company expertise, knows our culture, our operations and our businesses intimately. As you may recall, we reorganized and split the roles between CFO and Chief Administrative Officer, John Muse, our 20-year veteran CFO has opted not to retire and will fill the CAO role responsible for streamlining and integrating our global IT, global HR, global risk management and global internal audit functions, while Brad will be responsible for global accounting, treasury and tax. We are confident in the leadership of both individuals, and their contributions will be vital as we execute our long-term growth strategy. Now, turning to our overall performance. We delivered on target for fourth quarter, topping off a strong 2017 marked with several notable financial and operational achievements, executed our world of growth strategy. As reported, our earnings reflect the impact of the tax reform legislation passed in late December. Fourth quarter and full year results benefited significantly from a net tax benefit of $75 million or $0.45 a share. We also benefited from changes in European tax laws of $13.9 million or $0.08 a share. Brad's going to share you a little more detail about our new tax provisions during his financial review. Now, let's review some of our most important operational achievements and milestones of 2017. First, we grew our total system raw material volumes by 3.1% over 2016. We delivered adjusted EBITDA of $438.9 million without the…

Thanks, Randy. It's a pleasure to join you all on this earnings call. I'll begin with our balance sheet, where our cash position ended at $107 million, down from $115 million at the end of 2016. Despite spending approximately $37 million during 2017 for the three acquisitions Randy previously referenced, we were able to pay down $43 million in debt during the fourth quarter, and we exceeded our 2017 targeted pay-down of $100 million with the total pay down of $112.5 million. At year-end, our liquidity remained strong with approximately $976 million of availability under our senior revolving credit loan facility. We continue to focus on our working capital position as it improved by $61.8 million since year-end 2016, as reported in the statement of cash flows, which excludes the impacts of foreign exchange. In 2018, we will continue to target $20 million to $25 million worth of positive cash flow for the full year from further working capital improvements. CapEx was $77.7 million for the fourth quarter of 2017 compared to $47.1 million for the same period in 2016. We ended the year with CapEx of $274.2 million, exceeding the target of between $240 million and $250 million for the full year due to several new plant constructions and global plant expansions to meet expanding volumes and new suppliers worldwide. We expect the flow of expansion projects to continue in 2018, where we expect about $219 million for the more routine maintenance and compliance expenditures, another $114 million for new construction, which will bring our total CapEx to approximately an anticipated $333 million for 2018. Gross margin in the fourth quarter was 21.7% compared to 22.3% for the same period last year. Gross margin compression was driven by weaker protein pricing during 2017 compared to 2016, in addition to…

Thanks, Brad. We continue to execute well, diversify our global platform and deploy prudently our growth capital. During the second quarter of 2018, we look forward to bringing the expanded Diamond Green Diesel facility online boosting production to 275 million gallons. The team is also anxious to move forward with Valero on evaluating the expansion of DGD's production capacity to 550 million gallons. We expect this business to continue to provide robust returns even with the absence of the blenders tax credit in 2018. Rousselot also turned the corner during 2017 and is now positioned to take well – positioned well to take full advantage of the growing global demand for its gelatin products. Macroeconomic conditions in South America appear to have stabilized, which should enable us to improve returns in those markets that we have on the other three continents in which the company operates. On a regulatory basis, we will continue to lend our support to the state and federal regulations to help support our biodiesel operations. As we implement our growth and diversification strategies, we'll continue to find ways to aggressively manage our balance sheet, grow our earnings, and reinforce our financial positions. With that, Keith, let's go ahead and open it up to questions.

Yes. Thank you. We will now begin the question-and-answer session. And the first question comes from Adam Samuelson with Goldman Sachs. Adam Samuelson - Goldman Sachs & Co. LLC: Yes. Thanks. Good morning, everyone.

Good morning, Adam. Adam Samuelson - Goldman Sachs & Co. LLC: So, a couple of questions. Randy, maybe first, would love to get your perspective on kind of the policy landscape as we sit here today, some recent changes to the LCFS cadence in California, new discussion in the White House in Washington on the RFS seems to be more focused on the ethanol side, kind of the lack of blunders credit for 2018. Just how you think the regulatory environment is shaping up as you look over the next 12 to 18 months.

Okay. Hey, John Bullock, you want to chime in here for us?

Yeah. I think as we look at what CARB just recently did with the LCFS, I think they called it smoothing. We knew that they were coming out with what they were going to have as their targets from 2020 to 2030. In the process of announcing them, they also changed slightly the LCFS targets for 2019, 2020, and 2021 essentially before the 10% target was at 2020 and now they moved that up to (00:19:41) 2022. That's brought the LFCS market down a little bit. I think it was probably a prudent way for CARB to address what looked like a looming issue, which is that the amount of credits that were available to meet the amount of deficits that were being created in California. The deficit demand was ramping up so quickly versus the available credit that we could have worked ourselves into a situation where potentially we would have had excessively high LCFS pricing in the short term. That's not good for the program. The program needs to have a more sustained growth path. And so, what they did by moving the targets out a little bit and then announcing the ramp up schedule from 2022 forward all the way to 2030 where they actually increased the target from 18% to 20% (00:20:33) fundamentally good for how we are positioned in relationship to the LCFS market, so all good in relationship to what California is doing. As regards the RFS, obviously there is always turmoil. It seems like in Washington, D.C. around biofuels policy and the first quarter of this year sees no exception to that general rule. At the end of the day, you know there's always going to be lots of rumors, and there's going to be lots of stories out there. The most important…

John, you want to take that or you want me to?

Well, I mean the $1.25, the answer on that is – the $1.25 is exclusive of the tax credit. So, whether we have the tax credit during the year, we don't know. But I think, Randy your prepared comments were anticipating $1.25 or better in the first quarter, and kind of what our expectation for the year was, but you may want to comment on that too.

Yeah. And that's right. And that, Adam, number one, we're not counting on the blenders tax credit for 2018. I mean there is much political noise around that whether or not it can be resurrected here in the one of the appropriations bills in March or even later this spring, we'll see how that plays out. But the current LCFS market, as John alluded, even though they have come down a little bit with the smoothing of the inclusion or the reduction curve there, still provide us with where we're structured with our freight, our logistics, current RIN values, we're in excess of that $1.25 today for Q1. That's what we're – just like last year, we said we'd step out around $0.55 for the year without the $1 a gallon. We achieved $0.54, pretty good crystal ball on our part at the end of the day. And so, we look at this year given that all of our production now is now headed to low-carbon markets, we believe we'll be able to achieve $1.25. That's a combination of whatever RIN assumption you want to make. Whatever LCFS function – value you want to make. So, we're telling to use 190 million, 200 million gallons. Why would it be 190 million gallons? Well, if we don't – if we're not ready to go down in mid-May because of some construction delay possibly related to weather, then we'll make less gallons at the higher rate in the back half of the year. So, that's kind of the forecast as we see it today. Adam Samuelson - Goldman Sachs & Co. LLC: Okay. And then, maybe just one final one for me, been a big focus across a lot of different sectors in the first quarter about rising logistics and transportation costs, are you seeing any of that impacting your business?

Yeah. We absolutely do, and I mean I read a lot of those statements out there. There's a significant difference here for us, we run our own – majority of the rendering North American rendering business our own trucking fleet and then all of our contracts other than some of our route contracts have the ability to pass on those fuel charges. The biggest issue you're facing out there today in North America is just the driver shortage. And we are at full employment in this country of at least people that want to work that have the skills necessary for those jobs. And so, that's the biggest challenge is – for us within our system today. Adam Samuelson - Goldman Sachs & Co. LLC: Okay. Okay. Appreciate the color. I'll pass it on.

Thank you.

Thank you. And the next question comes from Tom Palmer with JPMorgan.

Good morning. Thanks for taking my question.

Good morning, Tom.

First, I just wanted to ask about the $75 million dividend that looks like it could flow through this year both the (00:25:55) timing and then priority for capital deployment at the Darling level. Is it still debt reduction? And what level of reduction are you targeting this year?

Yeah. I mean, Tom, it's just a little bit like I was answering Adam. You kind of just sit there and you take the $123 million of cash that's sitting down in Diamond Green. You've got $53 million of debt that's down there, and then you throw in the balance of the expansion and then you look at running 200 million gallons at $1.25. So, another generation of $2.50 (00:26:35) cash. And you kind of mix that all up in the pot and it looks like at the end of the year, we'll probably have, if we're correct on our margin assumptions about $150 million extra cash along the way, probably some issues in timing, whether it's second quarter, third quarter, fourth quarter how it's weighted (00:26:52). But that's kind of how the back of a napkin math works. You're going to see us continue to de-lever down. You're going to see us continue to search for opportunities around the world to continue to deploy capital. And in Brad's script, he talked about $114 million of new plants. People keep forgetting that over the last three years I think we've built 10 or 12 new plants. We've got another 200 construction. We're starting the one in Grapevine, Texas right now. That's the first full scale, fully integrated stand-alone rendering plant I think in this country, and I don't know, 20, 30 years. And then, we're now building a second protein conversion plant up in Wahoo, Nebraska for a major retail customer up there that just got announced plus several other expansions, the new Peptan plant that we're building in Angoulême, France. That's – I don't know – nearly $20 million, and then an additional spray dryer going in for more Peptan production in South America (00:27:54). So, we got a big, robust new plant expansion plan that will take part of that capital, but we're also going to continue to look at deleveraging. Brad talked about $100 million goal again this year. At the end of the day, we'll knock this thing down all things considered with working capital improvements, debt payment, dividends. We'll be able to knock the debt ratio down hopefully closer to 3.0 at the end of the year.

Okay. Thank you. That's really helpful. Also, just wanted to ask quickly on Diamond Green Diesel's cost structure as we head into 2018. You've talked about the opportunity to capture a larger portion of the green premium in LCFS markets, also lower distribution costs as pipeline contracts roll off. Is this like a step function that occurs as we begin 2018 or is this more a gradual improvement as the year progresses and how are those negotiations coming along.

Well, I think, first off, here in January, we rolled off the last of the pipeline contract. So, there's a little bit of a ramp-up there, and we're obviously built in that $1.25 guidance forecast for 2018. That has that assumption in it of lower freight, better negotiated discounts on LCFS, et cetera. So, that's all built in there, Tom. But I think over time if we're successful, given the demand profile that we see in California and with the growth of the low-carbon fuel standard out there and around the world, we'll be able to even glean a higher portion of that premium over time. That would be at least what we expect and we see today.

Okay. Thank you.

Thank you. And the next question comes from Heather Jones of Vertical Group.

Good morning.

Morning.

Good morning.

Nice quarter. So, I guess a couple of questions. First, I don't know if I missed this. So, if I did, I apologize. But could you give us color on what you're thinking about Feed and Food for 2018? You mentioned Rousselot, it turned the corner. And 2017, Feed, obviously some of the fats complexes weaker, but meat and bone meal started to accelerate lately. So, could you give us some color on what you're thinking about those two segments for 2018 versus 2017?

Sure. And, yeah, probably should have added in the (00:30:34) scripted comments. I mean, as I look across the Food segment, it's kind of amazing that, as we've been talking to the Street here for years, we said that's a very predictable and really consistent, year-over-year $131 million versus $131 million. There were some moving parts in there, a little bit of challenges in South America. We had operating losses in Argentina. And then, at the end of the day, our casings business showed improvement. We landed a couple of big slaughterhouses that gave us more volume and allowed us to get some more critical mass there. And have a really nice year in the CTH business and that offset a little bit of the turn back in Rousselot that we experienced. For 2018, I see pretty much more of the same. I don't see a lot of – I see improvement in Rousselot provided South America doesn't derail here on us. And then, I see very consistent performances in our Sonac fat – that's the edible fat business. That's just a spread managed refining business. Our bone business, we've been able to grow that where we provide food grade bones to the Rousselot system and the bone China business. And I think CTH had such a really nice year, last year, it may back off a little bit. But overall, I think, net-net they'll all offset. And so if you had to ask me today given what I see, it's a very consistent performance to both 2016 and 2017. The Feed segment is one that we amazingly had a good year-over-year growth performance there. If I look back on 2017 just kind of optics for you, we had a really strong European rendering performance. We had a strong blood…

So, looking at Feed, given the headwinds and the tailwinds, as well as at least for half of 2018, you should have a better currency environment year-on-year and then you've got these capital growth projects it sound like those are steadily improving. Should we expect the full year improvement in Feed versus 2017, maybe a sluggish start, on a full-year basis should we expect Feed to be up year-on-year?

As I look at it, what I'm seeing in Europe today and Canada, we're in a sluggish start here in January, but my expectation would be that we're going to come out at or equivalent to where we were last year by the end of the year.

Okay. And then going to – I'm glad you mentioned the discounted waste products and all. So, I just wanted you to, one, see if I'm doing some math correctly. So, if you all would do this expansion to 550 million gallons, I estimate that Darling would go from being net exposed – net long fats to net short via its 50% interest in Diamond Green. So one, wondering if that is – if our math is correct. And two, I agree with you guys that CARB's decision made sense, but I'm wondering given that their decision seemed to surprise the market, does it change your calculus as far as moving forward that expansion, given that there – is there any concern that they will make further changes that would derail the investment thesis for that?

John, I'll let you answer that. I mean, the answer is no, it will not derail the investment thesis. We're actually more positive on it now. But John, go ahead and give some more color please.

Yeah, I think CARB does really nice job of thinking through their programs and all they were seeing I believe was that (00:36:38) they were seeing the LCFS premiums go up, probably prematurely in relationship to where a smoother transition would be. Do we think that CARB in any way shape or form by smoothing the front end and putting the guidance in place, which we knew was coming by the way. We knew that they were going to be putting the 2021 to 2030 numbers in place. What took the market by surprise is that they smoothed the front end a little bit, but does this mean that California has any less of a commitment to an environmentally friendly environment, no, we're not worried about that at all.

Okay. Thank you so much.

Thanks, Heather.

Thank you. And the next question comes from Ken Zaslow with Bank of Montreal.

Hey. Good morning, everyone.

Good morning, Ken.

Good morning.

I have two questions. One is, I remember you guys saying on the expansion in the bolt-on acquisition for 2018 would be – expansion is about $19 million of incremental EBITDA and bolt-on about $4 million to $5 million. Is that still the case?

I think that's pretty close, Ken. I don't have those numbers in front of me. I mean, we brought on several start-ups this year, and then they'll be on the back half of this year. I mean, we'll be bringing on Mering and Denderleeuw, and then the Grapeland plant will be ready to run right at the end of the year or so. And then Los Angeles and the Wahoo red meat plant are now fully scale online and will ramp up during the year. So, I think that's pretty close.

And then, as you were saying to Heather, the core line businesses (00:38:19) should also improve as well. So, you're getting both – the expansion opportunities, the bolt-on acquisitions, plus some improvement in the market conditions. That's fair right for those two businesses?

Yeah. It's – for us, it's really a timing. As I said, protein – if you had asked me in December, November, I was really worried about meat and bone meal pricing at least in the U.S.A. and North America. And now, I'm more worried that winter fat is going to come back here. It's just hard to believe that we're once again at (00:38:49) $0.12, $0.13 discount to soybean oil.

Okay. And then on the LCFS credit, can you explain to us how much of that is included in your margin? How that actually incorporate (00:39:01) that? I know there was a time of logistics of kind of give back (00:39:03). So, now that we're past the contract, you've renegotiated everything. If the price of LCSF is 135 (00:39:13), what do you get of that? How do we think about that?

John, you want to answer that to the degree you can?

Yeah. I mean, we don't – this is a contractual negotiation between this – us and the people who buy the product for us. And obviously, that's a proprietary thing that we would not want to talk about in the open market. I think what I can say is that every time we've met a new negotiation or we've come to a new negotiation on supply out of the LCFS markets, we've gotten a substantially greater percentage of that LCFS as the supplier. What is materially different this year versus last year, and one of the reasons why we think we can make $1.25 with reasonably priced LCFS and rent prices this year, well last year we only made $0.55 or $0.60, is because we simply don't have anything under the old pipeline contracts anymore. So before, there was the issue of what percentage of the LCFS we got and then there was the issue of what we had to essentially reimburse the folks that we were taking out of the pipeline. We don't have to do that anymore, at least after January, and that means that we're getting the full share of the LCFS as we negotiated with our customers and that's been (00:40:41) a greater percentage this year than it was last year. So, we're moving in the right direction, but I would hesitate to give you a percentage because that would be giving away confidential information that our customers would expect us to keep confidential.

So, John, you would say that our fair share is 100%, right though?

Well, that's our perspective, but...

Okay. Agree with that.

And the logistics, I know you changed logistics. Has that really reduced your cost structure? And where is that with getting shipping out to California?

Yeah. John, go ahead.

We are getting much more efficient at moving the product to California, and obviously, to the extent that we can cut the freight bill down that benefits both us and our suppliers and allows for greater sharing by our suppliers to us of the LCFS premium.

And how do we kind of think about that? How much do they (00:41:36) penalize you and where are you now? And I'll leave it at that.

Yeah, I mean at one point in time I think we had said that we thought $0.40 to $0.50 was kind of the freight to California. So, that was primarily U.S. flag going around to California. Obviously, we have rail capability out of Diamond. Those prices are somewhere to a third to a half of what the old vessel freights were. And we're working on other things that we think might be able to reduce that a little bit further as we go forward, so a big change.

Great. Thank you.

Thank you. And the next question comes from Chip Moore with Canaccord.

Yeah. Good morning. Thanks. Maybe we can go back to capital allocation just a little bit. Obviously no shortage of organic efforts here and continuing to de-lever, maybe what you're seeing on the M&A pipeline, and if you'd start to look at larger type deals, and then extending that buyback another two years, is that just more to give you flexibility or how are you thinking about that. Thanks.

Yeah. No, I think what you're seeing is that we're taking a three to five-year view out now. I mean as I feel very, very confident, we have – our model has been tried, tested and it's true out (00:42:57) there. We understand our core business, how it operates. Sometimes it doesn't hit on all cylinders on all continents, but at the end of the day it delivers a very consistent and improving return. So,, we've been able to – if you think about our cap structure, Chip, we've been able to de-lever, I don't know, $400 million-plus, $500 million whatever the number is 2.2 to 1.7 (00:43:23) with only $75 million of dividends – total dividends out of Diamond Green over the last four years, on top of what I consider deploying almost $1 billion in maintenance, environmental, and growth CapEx. So, the model is generating significant cash. You saw us go out. We refinanced or extended the term loan B, lowering the cost of borrowing down to a couple of hundred over LIBOR. We've got our couple bonds (00:43:51) out there that we'll make some decisions on as we move on in the year here. And so, you've got a cap structure about $1.5 billion, $1.6 billion, little under that of just $1 billion – a little over $1 billion of bonds and some $500 million of a pre-payable debt in the term loan B and then a little bit left out here and a senior piece it will (00:44:13) disappear here shortly. So, that's kind of the place setting as we're out there. So, we wanted to make sure that as we make the assumptions on the potential dividends, future dividends coming out of Diamond Green at the $2.75 rate and then on up to the $5.50…

That's perfect. Thanks, Randy. That's great color.

Okay.

Thank you. And the next question comes from David Katter with Baird. David Katter - Robert W. Baird & Co., Inc.: Good morning, guys. Thank you for taking the question. After all the acquisitions in recent years, I was wondering how much room you guys see to reduce costs on the OpEx front? Yeah.

That – I don't know. It's a very difficult question to throw you a number out. I mean, the guys and the team are globally challenged each year to get their per ton operating cost down. And we set some goals in Europe this year that are pretty stretched goals. Once again, they were put in place in the U.S. to continue. You can either get your tonnage up or your cost down per unit. So, that's – I'd say, we continue to work on that everywhere in the world. Today, it's just difficult to quantify and explain that more so than what goes on normally each year within the business units. David Katter - Robert W. Baird & Co., Inc.: Got it. That makes sense. Thanks. And then another quick one, and then I'll hop back in queue. How big is California in the overall LCFS market? What percentage (00:47:21)?

Hey, John.

California is the most significant LCSF market simply because of the size of California. There's a whole lot of folks that live in that state. The others as a group though, while individually much smaller, add up to a fairly good demand when you take Oregon, British Columbia, Ontario, and then we have Québec, and potentially Washington State coming on with programs. And then they're talking about having a national type of program in Canada as well. So, all of those others are compared to California much, much smaller. When you add them up, they start to add up to a fairly significant amount of demand. And then, of course, the demand in Europe is equal to or greater than what the demand in North America is for this product. David Katter - Robert W. Baird & Co., Inc.: Great. That's helpful. Thanks guys.

Thank you. And the next question comes from Craig Irwin with ROTH Capital Partners.

Hi. Good morning. And thanks for taking my questions. So the first one is Diamond Green. You gave us a really healthy result this quarter. You're pointing to improving strength in the March quarter, and obviously in 2018. But when we look at the conversion costs in the fourth quarter, they were kind of at the high end of the range where you've been the last couple of years. Can you comment about whether this is something like a timing issue, feedstock costs, feedstock mix? And if you would expect to be more in line with your more recent trend as you complete the first quarter and then work your way through the rest of 2018?

John, do you want to take it?

Yeah. I'm not exactly sure what the question was. I think what you're saying is that our – is that our – is the spread between what we're selling our finished products or buying our fats for were at a pretty healthy level in Q4, and that's one of the things that contributed to our profitability. I think you will continue to see a good spread there, in part because what you saw in Q4 was us still having to buy ourselves out of a fair bit of a pipeline business. And obviously, while we have to do that in January, we no longer have to do that, but I think we had a small trail of one little contract into the first 10 days of February, but we're essentially done with that now. And so, we're getting the full value as we negotiate with our partners out of the LCFS. There is no discount to get ourselves out of the pipeline contracts anymore. And that's a significant incremental contributor to that spread or margin that you talked about.

Great. Thank you for that. The second thing I wanted to ask about is the naphtha and LPG contribution. So, we can do basic math based on naphtha prices out there, but nobody publishes a price for Green naphtha, and it seems that you're getting some pretty healthy margins on those products, healthy profit contribution. Can you maybe describe the potential of this market. If we do see you go to 550 million or 1 billion gallons in the future, is that a market that you expect to be very deep where you can continue to price at a premium, or is this something where we would expect once we get a good deal larger that there will be, maybe more in line with commodity now for naphtha and LPG? (00:50:51)

First of all, the intermediate gasoline market is huge. So, in terms of a supply-and-demand basis, as long as you got the proper (00:51:03) pressure point on it, there's an unlimited demand for this material. I think we see it the other way, not so much as the potential downside or what we've been able to do with our naphtha, but more on the potential upside what we may be able to do with our naphtha. And we are evaluating alternatives on how we might be able to bring that product for a better premium going forward as we look at the expansion potentially to the 550 million gallon unit.

Great. And then last question, if I may. That expansion to 550 million gallons, can you maybe frame out for us the conversations that are happening with your joint venture partner about potentially financing this third phase, establishing firm timing? What we should look for from the investment side of the house to see sort of how that likely comes together?

Yeah. I'll take that one, John. Valero has been a very special partner for us for a number of years, and it's been a very successful relationship. We always remind people Valero was there and provided the debt financing to create the technology and make the venture successful, and that's the last piece of the $53.7 million that will be repaid here shortly. As we go forward, then the proceeds from the operating rate, the blenders tax credit being received here this spring will pay for the expansion to 275 million and then provide opportunities if the operating rates that we predict are real to continue to finance and payout dividends to the partners, so it will become a very, very nice improved equity return to us. The 550 million gallon or let's just say the doubling from 275 million to 275 million, that's a parallel plant built adjacent to the existing plant. It's going to have improved, if you will, infrastructure. It's going to have the ability to come in off of the second railroad. We're going to be piped to the water so we can bring in by – bring in by water and exit by water. There's just a lot of neat improvements that we learn from serial number 01 that will be implemented in 02. Valero has a very staged and gated engineering and decision-making process. We're part of that. And the design is done. And it's now into the cost estimating and – process that that takes it down to a plus or minus (00:53:36) percentage here. That will then be presented to Valero's management committee and Darling's board here later this summer once we get it down to a reasonable level of accuracy. And given that we've built one of these, we kind of…

Thank you for that. Thanks again for taking my questions.

You bet, Craig.

Thank you. And the next question comes from Tyson Bauer with KC Capital.

Good morning, gentlemen, and welcome to the limelight, Brad.

Thanks, Tyson.

A couple other (00:55:55) questions regarding trade with naphtha in the news probably affecting more of your protein supply in that marketplace that can cause disruptions for you going forward, maybe more so than yourself other than distilled fuels heading south of the border. Kind of your view and the cautious stance, maybe some of your customers, clients are taking with naphtha being outstanding. And then, obviously, Europe kicks Argentine volumes out. They come to the U.S.; U.S. kicks them out. They go back to Europe. Now, that's their turn to try to figure out what they want to do with the flood of volumes going there. Where do you see kind of that international trade on those fields? And also, what are your feelings in regards to naphtha and what those repercussions could be?

Yeah. I'll take a little bit of this, Tyson. I mean, naphtha, obviously, we're monitoring it. I mean, that's a huge trade – potential trade issue, beef, pork, corn, soybean meal, all the above, and ultimately I hope it doesn't come to some type of real (00:57:06). I think, obviously, the trade leverage that the U.S. has is being played and we're closely monitoring it. As we look at our products produced in North America, we look – we're heavily reliant on exports out of here to continue to support the pricing of our proteins. The weaker dollar is clearly helping that for us right now. The Argentine issue while you've parlayed it into a biodiesel and being diverted to Europe back (00:57:38) issue. Argentina from a crushing standpoint, if someone said today what do you need to watch? I would say keep your eye on that Argentine crop and see how small it gets or how big it improves. And at the end of the day, Argentina exports, I think, as much protein as the U.S. and Brazil does. And so, at the end of the day the world's going to be deficit protein, you're seeing that once again in the soybean meal run up that with lower crush in Argentina means you're going to crush and you're going to have less oil to try to move into the markets. Now, I anticipate the Europeans in the swiftest (00:58:19) that they can move, which is debatable, we'll once again resurrect some type of tariff on the Argentine stuff move in there. So, ultimately I don't know where it moves, whether it will move back as just bean oil into the world trade market. But to discount it, give it a tax advantage, and move it into our markets is probably not going to happen this year. John Bullock, you got a different view on it?

No. I think that's exactly right.

Okay.

Okay. We've seen the progression where fat spreads narrow between soy and corn oil animal based fats. On the protein side, are we getting into a paradigm where we're going to see a spread widening between plant-based proteins and animal-based proteins as diets change in the formulas?

Yeah. I think you kind of answered your own question in a sense that we're seeing it. We're seeing a couple things. I mean clearly there's been a move to a portion of the poultry industry that's all veg. At the end of the day, you've seen – you've got ample amounts of grains, feed (00:59:27) and soybean meal out there within the system today. And meat and bone meal, to a degree, is the ugly child that's out there today for numerous reasons. In the global market, you got to remember – we have a global supply chain out there. Our European partners and businesses are all trying to move meat and bone meal now onto the world that's been re-classed. But for 20 years, they told everyone the stuff was toxic and now they're out on the global market trying to market that. So, that's hit meat and bone meal prices. So, you got veg diets, the European remarketing the product (01:00:06). But ultimately, a calorie is a calorie. It will find its value back in nutrition. It's going to find its way into the Pac Rim Asia-Pacific area for continued poultry production. And it's just a matter – we're seeing that happen right now. I came into the year, Tyson, pretty numb to meat and bone meal prices, and worried about them globally, and now I'm starting to feel a little better from what I see with the improvement after Chinese New Year's and the improvement in protein. I don't know that we'll trade parity to soybean meal on a per unit basis, but I also believe, we won't stay at $100 a ton under soybean meal. So, remember the slaughter in the U.S., the slaughter in Europe, just like we said at the start of the call, we're up 3%, 4%. There's a lot of protein on the market that has to find a home. The good news is the pet food and aqua side are taking ample amounts of high-quality premium proteins. It's really the commodity low meat and bone meal that's having to fight for share and ration (01:01:17) right now, but economics will prevail there.

Okay. And one common theme in the headlines we have seen, whether it's Senator Grassley or Senator Cruz is E15. Looking at that as a vacuum, there are some impacts towards you with corn oil. Obviously, supply would eventually go up, but also the RIN effect outside of the obligated parties for D4 and D5. Have you been able to run any kind of sensitivities or what you think just an E15 would have an impact on some of your biofuels and the business as far as your feedstock cost?

John, you want to take it?

Yeah, I think on the RIN side, obviously, the D4, the D5 will move in the advanced pool, so it will depend on what the supply and demand is in the advanced pool. But – if they didn't move to an E15, possibility of more corn ethanol production, although most of the ethanol industry is running flat out today. So, whether or not we'd see a big increase in corn oil supply from that, that's – quite frankly, we don't know the answer to that question at this point in time. But if anything, we might see a little cheaper corn oil. The D4 and D5 will depend upon what the mandates are in the biomass-based diesel and the advanced category.

All right. Thank you, gentlemen.

Thanks, Tyson.

Thank you. And the next question is a follow-up from Ken Zaslow with Bank of Montreal.

Hey. Just a quick question for housekeeping, what is the tax rate you're assuming for 2018?

Ken, what is the tax what? I couldn't...

Tax rate. Tax rate.

The tax rate.

(01:03:05).

With the blenders tax credit, it's going to be...

...with 2018.

In 2018, with the blenders tax credit, in 2018 it'll be around 15% is our estimate, and without, around 25% for 2018.

Okay. Great. Thank you.

You bet. Yes.

Thank you. And as there are no questions at the present time, I would like to return the call to Mr. Stuewe for any closing comments.

All right. Thanks, Keith. Appreciate everybody's questions today. Great questions. We had a good quarter. We're turning good momentum into 2018 here and we look forward to talking to you after the end of the quarter in May. Take care and be safe.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.