Ladies and gentlemen, thank you for standing by, and welcome to the Andersons’ 2019 Fourth Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference to your speaker today, John Kraus, Director of Investor Relations. Please go ahead, sir.

Thanks, Joel. Good morning, everyone, and thank you for joining us for the Andersons’ fourth quarter 2019 earnings call. We have provided a slide presentation that will enhance today's discussion. If you're viewing this presentation via our webcast, the slides and commentary will be in sync. This webcast is being recorded, and the recording 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 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. The company believes that adjusted pretax income, adjusted pretax income attributable to the company, EBITDA and adjusted EBITDA provide additional information to investors and others about its operations, allowing an evaluation of underlying operating performance and better period-to-period comparability. Adjusted pretax income, EBITDA and adjusted EBITDA do not and should not be considered as alternatives to net income or income before income taxes as determined by generally accepted accounting principles. On the call with me today are Pat Bowe, Chief Executive Officer; and Brian Valentine, Chief Financial Officer. After our prepared remarks, Pat, Brian and I will be happy to take your questions. Before Pat makes his opening comments, I want to remind everyone that we will be holding an Investor Day beginning at 8:30 a.m. on Wednesday April 1st. The presentation will also be webcast live on our website. We invite you to listen in. With that Pat the floor is yours.

Thank you, John, and good morning everyone. Thank you for joining our call this morning to review our fourth quarter and full year 2019 results. I'll start by providing some high-level thoughts on our overall results and those of each of our four business groups. Brian will then present a brief business review, and I'll finish our prepared remarks with some comments about our current views on 2020. While adjusted fourth quarter pretax earnings fell short of those of the fourth quarter of 2018, we drove our adjusted EBITDA higher by more than 20%. Most of the quarterly earnings shortfall came from the Trade Group, many of it's newly acquired product lines performed very well. But the Trade Group's lower results were caused in a large part by a small, late and wet harvest in much of its historical Eastern Corn Belt footprint. The Ethanol Group remained profitable and the Plant Nutrient Group's results were slightly improved. The Rail Group's results were somewhat lower. We sold some assets during the quarter. We sold the Thompson's Ontario agronomy assets, a Michigan Farm Center and a Tennessee Grain Elevator. Most of the proceeds from these sales were used to pay down debt. For the full year, it is very clear that our Lansing Trade Group acquisition has been and is expected to be a very good one. Trade Group adjusted pretax income nearly doubled year-over-year and its adjusted EBITDA was over 150% higher. However, while the Ethanol Group was consistently profitable, a tough margin environment drove the group's year-over-year results significantly lower. The Plant Nutrient Group was impacted by an extremely wet and shortened planting season in its core geographies that together with an expected decrease in contract manufacturing sales resulted in lower pretax income than in 2018. Rail income was marginally lower as a slight improvement in leasing income was more than offset by lower income from both car sales and railcar repair business. The Trade Group's number one priority for 2019 was to integrate Lansing into the former Grain Group, and the integration is largely complete. We achieved our goal to identify and implement at least $10 million in run rate expense savings by the end of 2020. We have exceeded this goal a year early with our total run rate expense savings to date of approximately $11 million. The Ethanol Group's ELEMENT biorefinery came online in the third. While the pace of production ramp-up has been slower than planned, we began producing ethanol using our new cellulosic technology in the fourth quarter. Also in October, the Ethanol Group merged four separate entities with our partner, Marathon Petroleum Corporation. When the merger was closed, we were able to reduce long-term debt associated with the Ethanol business by nearly $50 million and the group's financial results are now consolidated. Brian will now walk you through a more detailed review for our financial results.

Thanks, Pat, and good morning everyone. We're now on Slide number 5. In the fourth quarter of 2019, the company reported net income attributable to the Andersons of $6.6 million, or $0.19 per diluted share and adjusted net income of $18.4 million or $0.55 per diluted share on revenues of $1.9 billion. In the fourth quarter of 2018, we reported net income of $23.8 million, or $0.84 per diluted share, and adjusted net income attributable to the company of $26 million, or $0.92 per diluted share, on revenues of approximately $800 million. Adjusted EBITDA attributable to the company increased 21% from $63 million in the fourth quarter of 2018 to $76.1 million in the fourth quarter of 2019. For the full year 2019, net income attributable to the Andersons was $18.3 million, or $0.55 per diluted share, and adjusted net income attributable to the Andersons was $43 million, or $1.30 per diluted share, on revenues of $8.2 billion. These numbers compare to 2018 reported net income of $41.5 million, or $1.46 per diluted share, and adjusted net income attributable to the company of $46.4 million, or $1.63 per diluted share, on revenues of $3 billion. Full year adjusted EBITDA attributable to the company was $246.3 million, which was up 39% over our 2018 adjusted EBITDA of $177.2 million. Our full year 2019 reported effective tax rate was 46.4% and our adjusted full year tax rate was 16.7%. By comparison, our 2018 effective tax rate was 22.4%. The adjusted 2019 rate accounts for amounts by which we adjusted pretax income that are not deductible on our U.S. income tax return. We currently believe that our 2020 effective tax rate will be in the range of 24% to 26%. Total long-term debt increased slightly compared to last quarter primarily as a result…

Thanks, Brian. When we spoke at this time last year, we were optimistic that 2019 results would be better than those of 2018. Especially, as we continued our Lansing integration work. We saw good early signs from the Trade Group, but we were feeling more guarded about the prospects for the Ethanol and Plant Nutrient Groups. We also expressed confidence about hitting our 2020 run rate EBITDA target of $300 million. Now 12 months later, we're continuing to manage through what has been among the worst Eastern Corn Belt harvest on record. This will negatively impact the earnings of those Trade Group assets well into 2020, but can also provide some good merchandising opportunities. The current margin environment has assuming cautious about ethanol's prospects, especially in the first half of the year. The continued ramp-up of the ELEMENT plant should result in the industry's lowest carbon score and is anticipated to help improve results late in the year. While the resolution of the China trade war should be a tailwind for both groups, it is unclear when and by how much that resolution will begin to drive demand. While we're on the topic of China, the coronavirus epidemic currently does not have a direct material impact to the Andersons. We think a likely increase in corn planting in 2020 will help the Plant Nutrient Group improve results to a level of more in line with recent history. It should be helpful for the three other business groups as well. For the Rail Group, the year-over-year decrease in North American railcar loadings continues to widen which suggest that both leasing and repair income could trend lower in 2020. We continue to feel more upbeat about our longer-term company outlook than what we reflected or what is reflected in the market of…

Thank you. [Operator Instructions] Our first question comes from Ben Bienvenu with Stephens Inc. Your line is now open. Okay.

Hey, thanks. Good morning guys.

Good morning. Dan.

I want to ask a question, the Trade Group continues to deliver better than what would the expected result in light of, as you alluded to, the challenging operating environment in the Eastern Corn Belt. And I wonder if you can help us think about if there's a general rule about when you identify merchandising opportunities through Lansing? How much of an offset relative to the traditional origination business from the Eastern Corn belt? Can we expect Lansing to offset in times of challenges? And then when you're making decisions, balancing those two businesses, can you help us think about $1 of revenue in the origination side of the business or from a volume perspective versus Lansing Trade Group, kind of the margin trade-off that you make, maybe an overly simplified question that's difficult to answer, but any guidance you can help with there would be helpful.

Sure, Ben. I think I know where you're coming from. It is a overly simplified of yet, very complicated question. So what we've done, as you know, the Andersons' footprint of grain assets, our elevators were predominantly Eastern Corn Belt where we had assets in Illinois, Indiana, Ohio and Michigan, and just a couple further west. But Lansing's assets are a little more diversified with elevators in Idaho and Louisiana. But Lansing has really been more of a point-to-point trading business and not so much focused on physical space where the Andersons has had a legacy of physical grain storage and handling and blending and shipping to export ethanol or protein markets. So we had, had a difficult planting season in harvest in the Eastern grain belt, that in some cases our wet harvest was good. We made some drying margins, but our production was definitely down, hurting what would potentially be normal storage margins in the east as well as carries in wheat have narrowed. So we don't make as much money as we had in recent years on storing wheat, softer wheat in the east. But the good news is that the breadth of the Lansing trading opportunities as broad as from pet food to propane. We have lots of businesses that have performed very well. We take advantage of regional disparities in the grain markets. And in spite of what its has been a relatively sluggish futures market and not in a pretty dim export pace, especially for corn, there has been quite a vibrant domestic demand and opportunities to trade domestically. And that's worked quite well for our trading team, and we continue to see that to be the case in 2020.

Thank you. Our next question comes from Ken Zaslow with Bank of Montreal. Your line is now open.

Hey good morning everyone.

Good morning, Ken.

A couple of questions. One is, can you talk about the Ethanol outlook? What is your expectation for China? And separately, your new cellulosic plant, what was the margin structure be relative to the rest of your plant? And I'll start there.

A good question, Ken. The whole world that now has been focused on China for some time, and we've all been talking about the trade deal and now that the trade deal has happened, we have a South American harvest that's been very strong. Brazilian real, that's in an all-time low, so just cash markets would favor South American supply to China. So we haven't seen Chinese come to the U.S. market in real strong buying pattern, or that first purchase of ethanol. So the question is about China. When and how big that will be and when will that will happen? And I guess, we don't know that. I think a lot of focus has shifted from the impact of African swine fever, domestic hog production in China now to more coronavirus. What that means for domestic food consumption in China and how those things shift. We'll have to watch that closely. But I think to your question about what that impact to ethanol, I think it won't have an impact to DDGs or Ethanol until we actually see ships hit the water. On the rumor of the trade deal margins went up a little bit, but not seeing that come through with actual orders. It's kind of dissipated to some extent. So the ethanol market in the first half of the year is kind of sluggish from a margin standpoint. We expect that to pick up later in the year. When you switch focus back to our ELEMENT plant, we were delayed with a really wet construction season, so we're a little bit behind schedule than we originally planned. And we're in the ramp-up phase. The good news is our new technologies that we've introduced there are working well, but I'd say we're still up in the ramp-up phase. And that plant when it's completed and we get certification of the carbon score in California will be a very good position for us. At the time of the project, we talked about a $0.10 to $0.15 premium to California market for sales and the market still looks to be that case, if not a little bit higher than that. So we're still optimistic about what the ultimate marketplace will be for that ELEMENT out, but that hasn't changed. If anything, it's slightly firmer than when we started the project.

And then are you surprised by the ramp-up of ethanol production, and I'll leave the ethanol questions at that?

Yes. I think we've seen this for years, right? When we slow down production comes off, and then the market comes out of shutdowns and then it starts to ramp up a little bit. So now we've built stocks as an industry and some production ramp-up has occurred, which keeps a damper on margin structure. So it's somewhat expected because that's been what the past behavior has been. So have to see really how the demand pace continues as we get out of these – the winter doldrums and into more of a spring/summer driving season.

[Operator Instructions] Our next question comes from Eric Larson with Buckingham Research. Your line is now open.

Yes. Good morning everyone. How are you doing?

Good morning, Eric. How are you.

I'm well thanks. So my first question is, your grain earnings kind of, actually kind of came in where I thought they would, they were pretty good. Your ethanol margins were better, your Plant Nutrient was quite a bit better. So I guess the first question is, if we're expecting significant increase in corn acres, which I would expect this spring, the setup for 2Q for Plant Nutrient looks pretty good, but you still drag on margins. How do the industry inventories look and volume should be good, but can you get the margin in the second quarter if we get the acreage?

Yes, that's a good question, Eric. And we'll probably – our estimates are for 93 million planted acres, which is probably close to what the industry average is, which will be a nice pickup and that'll be good for overall fertilizer demand. We had a relatively good fall weather that gave farmers and retailers a good opportunity late in the year to get some applications. Our outlook for the spring has kind of returned to normal with a normal planting season. And has some upside with these additional corn acres, as you said, we especially like that. We've had a relatively mild winter across most of the Midwest and so in pretty good shape that way. Be great for some starters to be applied early. And that would be upside potential on margin for us. So fertilizer prices have been relatively stable during this period and there's ample supplies available. So I think we'll have a good solid spring. That's what we're looking forward to.

Okay. Then, a quick question on the Trade Group, you were struggling all year and I think you did struggle again in the fourth quarter. I think the comps get better. You still struggled against some very high wheat profitability in your grain storage numbers, I believe also in the fourth quarter. Was that a factor in Q4 significantly again, and have we lapped? Well, Q1 start lapsing that – those difficult comps for grain?

Yeah, I think you got about right. So as you remember the last three years we had outside storage income on soft wheat and that was a factor also in the fourth quarter. I know if I'll call it struggling. I think it's just been opportunity wasn't here that was here in one year and two or three years ago, where we enjoyed that wheat carry and that, that's where the market works sometimes. We are using that opportunity to move more corn and beans through that space and handle that. So it's like when one market changes, it gives – creates an opportunity in another one. So our trade opportunities, especially into the southeast, which has been a strong market here with protein demand is good. So I think we'll have an active Eastern Rail market and some of the other markets where we trade in, and we've done quite well in those spaces.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to John Kraus for closing remarks.

Thanks Joel. We want to thank you all for joining us this morning. I also want to mention again that this presentation and slides with additional supporting information are available on the Investors page of our website at andersonsinc.com. Before we sign off, I also want to remind everyone again of our upcoming Investor Day on Wednesday, April 1. Our next earnings call is scheduled for Wednesday, May 6, at 11:00 AM Eastern Time, when we'll review our first quarter 2020 results. We hope you can join us again at that time until then be well.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.