Good day, ladies and gentlemen, and welcome to The Andersons, 2021 Third Quarter Earnings Conference Call. At this time, all participant lines are in a listen-only mode. Later, we will conduct a question-and-answer and instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to hand the conference over to your host today, Mike Hoelter, Vice President, Corporate Controller and Investor Relations. Please go ahead.

Thanks, Sarah. Good morning, everyone, and thank you for joining us for The Andersons third quarter 2021 earnings call. We have provided a slide presentation that will enhance today's discussion. If you are 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 shortly. Please direct your attention to the disclosure statement on Slide 2 of the presentation as well as the disclaimers in the press release related to forward-looking statements. Certain information discussed today constitutes forward-looking statements that reflect the company's current views with respect to future events, financial performance, and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Actual results could differ materially as a result of many factors which are described in the company's reports on file with the SEC. We encourage you to review these factors. This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are included within the appendix of this presentation. On the call with me today are Pat Bowe, President and Chief Executive Officer; and Brian Valentine, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Pat.

Thank you, Mike, and good morning, everyone. Thank you for joining our call this morning to review our third quarter results. We are extremely pleased with our overall third quarter results, which included an all-time record performance in the Trade Group and continued our strong momentum. Along with solid ag fundamentals, we have executed well, trading through an inverse market and addressing supply chain and labor challenges in a period of significant volatility. The company recorded its best third quarter since 2014, with the sale of our Rail leasing business in August. I'm also excited to note that our trailing 12-month adjusted EBITDA from continuing operations exceeded $294 million, not including the Rail segment. Across the company, our teams are working hard to provide extraordinary service to our customers in these favorable markets. Trade had a great quarter, executing well in dynamic grain markets, where low grain stocks have provided excellent merchandising and elevation opportunities. We had especially strong elevation margins in a number of regions. Our Louisiana locations were not impacted by the recent hurricanes, and we continuously served customers. Idaho also benefited from strong basis appreciation in its wheat inventory. Our propane distribution business continued to perform very well. Winter wheat harvest receipts were better than expected, and we are seeing storage income return to the corn and wheat markets. We also saw incremental gross profit from new profit centers in the quarter, including our Swiss trading office. Although our ethanol segment had a loss in the quarter, Board crush margins were improved and U.S. ethanol stocks ended the quarter very low. As we predicted in our last earnings call, we were negatively impacted in the third quarter by high corn basis at our ethanol plants but have seen relief as we started the corn harvest. We completed scheduled shutdowns and increased quarterly production of ethanol. Co-products, especially distillers corn oil and high-protein feeds were sold at improved values. Third-party merchandising of ethanol and related products nearly doubled 2020 results. The quarter also included mark-to-market losses of $6.8 million, while we expect the majority of these to reverse in the fourth quarter. Plant Nutrient quarterly results were comparable to the prior year and in line with our expectations for this seasonal business. Our year-to-date numbers are strong, and we've been well positioned in this high-priced and limited supply ag fertilizer market. Our agricultural product lines performed well, while our turf and specialty manufacturing business margins were negatively impacted by rising input costs and labor challenges. Our Rail leasing business was sold in August, and we announced the intent to sell the Rail repair business. We have used a portion of the Rail sale proceeds to reduce debt. I'm very proud of our team and the performance over the past quarter and for the entire year, executing well in these volatile markets and staying focused on serving our customers. I'm now going to turn things over to Brian to cover some key financial data. And when he's finished, I'll be back to discuss our outlook for the rest of 2021.

Thanks, Pat, and good morning, everyone. We're now turning to our third quarter results on Slide #5. In the third quarter of 2021, the company reported net income attributable to The Andersons from continuing operations of $13.9 million or $0.41 per diluted share and adjusted net income from continuing operations of $5.2 million or $0.15 per diluted share on revenues of $3 billion. This compares to a net loss attributable to the company of $1.5 million or $0.04 per diluted share and an adjusted net loss of $2.9 million or $0.08 per diluted share on revenues of $1.9 billion in the third quarter of 2020. Adjusted EBITDA from continuing operations for the third quarter of 2021 was $56.3 million, an increase of 20% when compared to third quarter 2020 EBITDA of $47 million. Adjusted EBITDA from continuing operations for the trailing 12 months was $294.3 million, an increase of nearly $130 million. Each of our three business units has significantly improved year-to-date EBITDA compared with 2020. Our effective tax rate varies each quarter based on the amount of income or loss attributable to the non-controlling interest. We recorded taxes for the quarter at an effective rate of 24.7% and are currently forecasting a full-year effective tax rate of between 22% and 25%. Next, we'll move to Slide 6 to discuss cash, liquidity, and debt. We generated third quarter cash flow from continuing operations before changes in working capital of $55.6 million compared to $52.8 million in 2020. Year-to-date cash flow has already exceeded our full year of 2020. We have seen an expected seasonal reduction in short-term debt as the balance of readily marketable inventories has declined somewhat, and we have paid down our revolver. Futures prices in the grain markets remain high but are down from the levels earlier this year. Typically, our highest borrowings occur in the spring as a result of our seasonal businesses, and we have seen a reduction from the $915 million borrowed at March 31 as inventories have been reduced. We continue to take a disciplined approach to capital spending, which we will expect will be about $85 million for the year. We have reduced long-term debt by more than $300 million since year-end and have met our stated target of a long-term debt to EBITDA ratio of less than 2.5x. With lower leverage and a stronger balance sheet, we are well positioned to invest in our core agricultural businesses. We also ended the quarter with more cash than is typical, a portion of which will be used for our fourth quarter tax payment, which we expect will be approximately $90 million to $100 million, resulting from the significant asset sales. Now I will move on to a review of each of our business segments, beginning with Trade on Slide #7. Trade had record third quarter adjusted pretax income of $27.6 million compared to pretax income of $6.9 million in the same period of 2020. Elevation margins from early harvest draw areas were particularly strong. Merchandising gross profit was about 50% higher than the prior year and includes $7 million related to new businesses. Storage income opportunities have returned for wheat as we were able to accumulate larger-than-expected new crop bushels. In addition to the organic growth we just mentioned, we also closed on the acquisition of Capstone Commodities just after the end of the quarter, which will help to extend our feed ingredient supply chain to Southwestern U.S. dairies. Trades adjusted EBITDA for the quarter was $43.9 million, nearly double the adjusted EBITDA of $22.3 million in the third quarter of 2020. Moving to Slide 8. Ethanol had a third quarter pretax loss attributable to the company of $3.6 million compared to third quarter 2020 pretax income of $1.1 million. Improving Board crush margins were reduced by high corn basis before the fall harvest. This was partially offset by strong co-product values and third-party trading results. As Pat mentioned, our third quarter results included unrealized mark-to-market losses from hedge activities of nearly $7 million, most of which we expect to reverse in the fourth quarter. As of this call, we have completed all of our planned maintenance shutdowns for the year. Ethanol generated EBITDA of $19.2 million in the third quarter of 2021 compared to $24.4 million in the third quarter of last year. Turning to Slide 9. The Plant Nutrient business recorded a pretax loss of $5.8 million in the third quarter compared to a third quarter 2020 pretax loss of $5.4 million. Similar to last quarter, well positioned inventory with continued demand led to solid margins per ton in our agricultural product lines. Our turf and specialty business experienced a small volume increase, but was challenged by inflation in labor and raw material costs. Plant Nutrient's EBITDA for the quarter was $1.8 million compared to $2.2 million in the third quarter of 2020.

Thanks, Brian. We remain positive in our outlook for 2021. While grain export demand has seasonally slowed, we expect high global demand for U.S. produced crops into 2022. This demand continues to support world grain trade and commodity prices higher than historical averages. Harvest in our draw area is progressing well. Farmer income is high, and we expect an abundant harvest that will provide us additional merchandising and elevation opportunities into 2022. Given these conditions, we remain optimistic about the potential for our trade segment. Worldwide supplies are projected to be tight beyond this 2021 harvest. Some storage income opportunity has returned to corn and wheat, and we're able to acquire more of the summer wheat harvest than projected. A large 2021 harvest will reduce but not eliminate the impact of strong worldwide demand. With a broad trade portfolio, the benefits from merchandising grains for consumptive demand as well as by providing storage space, we see continuing complementary opportunities. We continue to navigate well in these volatile markets, and we remain focused on managing risk. While we believe our fourth quarter in Trade could be comparable to 2020, keep in mind that the prior year included some especially high-margin soybean sales. We expect good results from the harvest despite some delays from recent wet weather across the corn belt. In Ethanol, gasoline demand has returned to pre-pandemic levels and Board crush margins are strong and positive into the first quarter of 2022. U.S. ethanol stocks are currently low, but industry production is increasing to meet this demand. Co-product values support our overall margin as the new renewable diesel demand continues to drive high corn oil values. We've received approval on our California Air Resources Board application for ethanol sales from our Colwich, Kansas plant. Once verified, we expect to begin shipments to California later this year. We expect our Plant Nutrient segment to continue to perform well in an ongoing period of tight supply. We have strong relationships with our suppliers and continue to appropriately manage positions and price risk. Demand looks to be strong in all product lines. We're well prepared to execute in volatile markets and have a solid track record in managing risk, logistics, and operations. With our strong balance sheet, we're well prepared for this volatility and are committed to maintaining and improving our financial metrics. With a positive nearby outlook, we're excited about our prospects for growth. Now we'll turn to Slide 11, where I'll summarize key aspects of our growth strategy. Over the past several months, we completed a strategy review with an outside consultant and recently shared the conclusions with our Board of Directors. Included in this work was a deep review of our portfolio and the decision to divest of our Rail business and focus on our core agricultural verticals. We're optimistic about the long-term growth prospects in our core ag segments, including adjacent new products and markets. We're using two trees here to illustrate our two verticals of grain and fertilizer as well as several current product lines together with future growth opportunities. Examples of our targeted growth areas include: applying our expertise in commodity trading and logistics to exciting new areas with limited investment in fixed assets. This could include strategically redirecting merchandising talent to focus on new products or geographies, such as our new Swiss trading office. It also could include bolt-on acquisitions of complementary trading companies that align with our core, like our recently announced Capstone Commodities acquisition. In addition to focusing on product lines, we're also investigating adjacencies such as farmgate solutions for carbon and other opportunities in sustainable ag. We will continue to invest in premium products in food and feed supply chains. We are evaluating both organic and new ingredients for human and animal consumption, including pet food and are expanding our organic fertilizer offerings. Biofuels is a rapidly evolving space, especially in the supply chain surrounding renewable diesel. We will participate here primarily through input and offtake agreements as well as optimizing our production of feedstocks. In addition, we'll continue to improve efficiency in our ethanol plants in order to maintain our strong position. In addition to expanding our organic fertilizer offering, we're developing innovative new specialty products for consumers and growers of crops beyond traditional row crops. We'll also consider M&A within our core areas of strength and product line extensions for our manufacturing products. We will continue to maintain discipline in our capital allocation and stay true to investing within our core. These are exciting times in the ag industry with favorable evolving trends that align with The Andersons' core strengths and capabilities. We are well positioned to capitalize on these opportunities. With that, I'd like to hand the call back to Sarah, and we'll be happy to entertain your questions.

Our first question comes from Ken Zaslow with BMO Capital Markets.

Just a couple of questions I have. One is, when you think about the current quarter, what do you think was either transient on the positive side or on the negative side during the quarter? And can you discuss the magnitude of that? That will be my first question.

Okay. Good question, Ken. It's funny, I think a week ago or 10 days ago, Ken, we probably said rain, because, as you know, we had those big storms come across the corn belt, and we were worried about maybe some delays in harvest. Now this week, we've got really bright sunshine in the eastern grain belt, some frost, which is actually good for harvest conditions. So it feels like maybe weather isn't as big of a concern as it would have been 10 days ago. So that seems to have alleviated on the harvest side. I think probably the biggest swing factor is really about ethanol pricing in November and December; crush margins right now and production have picked up. So if the margins can stay strong through November and December, it will be a big factor in our quarterly results.

I see. Was there anything from the storm? I believe you mentioned that your Louisiana plant was not affected, but the elevated margins were higher. Was that a result of the storm and something that may not be a one-time occurrence? We don't want to downplay your business model, but it might not continue like this moving forward. Is that a reasonable way to consider it? On the other hand, it seems like there are other factors that may have negatively affected you in terms of supply and logistics. I'm just trying to understand if there's anything extraordinary about this quarter.

That's a fair clarification. It's important to note that our assets are located in Northeast Louisiana, not at the Gulf, and I'm not referring to export elevators. Unfortunately, some of our peers in the industry experienced significant damage from the hurricanes, which we feel terrible about. Our operations involve domestic rail and storage assets in the northern part of the state, and we managed to avoid any storm-related damage. As a result, we were able to take advantage of early premiums, likely higher than usual due to the steep inverse this year. We had very strong results in Louisiana, especially since it was the first harvested corn in the country, allowing us to benefit from being in the right place at the right time. Whether this will happen again next year remains to be seen. Overall, it was a very good year for us in Louisiana.

When you discuss your capital allocation, you've mentioned bolt-on acquisitions and various other aspects, but you haven't elaborated much on your focus regarding high-protein feed and your strategy for it. Could you share your thoughts on what you anticipate for this segment, not just in the next quarter but also for next year and the following year? How significant do you believe this could be for your growth strategy? Additionally, do you see any risks associated with the potential increase in capacity from new crushers?

Yes. It's a good clarification, Ken. And if I didn't mention that, that was a mistake. So we still continue to pursue high-protein feed strategy at our ethanol plants. We have it installed and doing very well at our western plants in Kansas and Iowa, and we're working on projects to do additional higher value feed products in our eastern plants. So we see that being a part of the overall crush margin optimization in years going forward and also reducing energy and lowering our carbon intensity score as well. So that is a big part of our optimization of ethanol assets in the years ahead. Like I said, we're not doing it all in one quarter. We're pecking away at those projects in a logical fashion. We're still very friendly to value-add to DDGs. I think one of the challenges is short term, Ken, as you mentioned. So the protein complex as crushing will increase for oil products across the country may keep some pressure on meal and feed values relative to corn. So that could be a little bit of a cap to overall returns on the protein complex in general. But overall, improving net corn costs for ethanol plants make lots of sense long-term.

My final question is about the addition of Swiss trading and possibly other low trading businesses along with new ventures. Can you explain, over the past year, how much additional profit has come from those actions? More importantly, what do you anticipate for 2022 and 2023? I'm curious about the trading operations you've introduced in various locations and the new products you've launched. Can you provide a way to connect the capital you spent with the returns you've seen and what you expect going forward? I realize it's a challenging question, but any framework would be helpful.

And Ken, maybe harder to define in the short term. But I'd say that this past, let's even go back a little bit, that the acquisition of Lansing back in 2019 was the biggest in our company's history, and that's really paid huge dividends for us and really broadened our portfolio. And so we're really happy about the results of that integration and where we're going with the talent and being able to broaden those product lines. So that's what's leading us to some of these opportunities like in feed ingredients that we're adding with Capstone to take us to the Texas and Southwest markets. The opening of our Geneva office is about extending our supply chain, mostly to Africa. So those businesses are up and going well. Not a big contribution to this year, this current quarter. But next year, I'd say probably 10%, 15%.

Ken, I would say probably $10 million to $15 million of EBITDA is kind of a reasonable range for '22 for those on an incremental basis.

And I think the bigger question you're asking, Ken, is we have some ideas in the pipeline to be able to do more of that. And those are numbers that it's harder to project out because those are not completed deals. But that's what we'd like to do '22, '23, '24, continue to broaden our supply chains and add new products. And that's where we had kind of growth capital when we talked in previous discussions with you about projects down the road.

Let me just phrase it one more time because I think it's actually interesting. So in a capital constrained environment, where you're able to only put in capital wherever you could, you got probably about $10 million to $15 million. While going forward, you will actually have more capital to deploy, assuming that you don't do anything poorly and you keep the same strategy, the opportunity should be greater than that $10 million to $15 million because you have more capital to release, and your capital discipline should not go down the wayside. Is that a fair way of looking at it?

Absolutely. It's a very fair point. And part of the strategy I mentioned that we reviewed with our Board and the decision behind the sale of our Rail assets was to improve our balance sheet and to create dry capital for those growth plans that we think can provide higher returns than we were making with the Rail business. So our plan is to continue to grow in those segments. It's likely not one super large acquisition early, so something like we did with Lansing. They're probably more midsized type of acquisitions to be in the $50 million to $250 million kind of range. So we're excited to look at those opportunities. We don't want to pay too high in the super-hot market, but those opportunities that are quite attractive for many of our segments that we think we can grow with.

Our next question comes from the line of Ben Bienvenu with Stephens.

I would like to follow up with a question similar to Ken's regarding the third quarter and this year. How do you assess your earnings delivery compared to your potential? Do you see ongoing opportunities? Do you believe you are currently overachieving? You've set a long-term goal for significantly higher EBITDA and plan to invest capital to reach it. However, there have been several factors to consider this year, so I'm trying to understand where you believe the balance lies.

It's a very fair comment, Ben, and I think it's hard to look back. I'd love to say, I think our team did a very good job, especially in the grain markets to navigate the inverse and all the activities that are here with the shortage of truck drivers and the container challenges. There's a lot of interesting obstacles, I think, in the overall economy right now that everyone is dealing with, from labor shortages and manufacturing to transportation challenges. We've been able to navigate through that. I think there are opportunities for us to do even better. We haven't had any big negative hits to any of our businesses or any important losses. We've done well across the board in all of our product lines. I think there's potential to do even better. Margins aren't at historical highs, like they were back in the 2012 through 2014 period. So you can't say we're trading at some all-time highs, but we have done well this year, especially in our trade group. I think our fertilizer business has more potential upside as we continue to have incentives for farmers to really put nutrients into their crops. And as we work forward on carbon, I think there's going to be a lot of interesting opportunities in grain and in fertilizer related to sustainability. We continue to work on a transparent food supply chain. That has higher margin opportunities, both in human consumptive food as well as pet food ingredients. So there are a lot of areas that I think we can do even better, and we have more growth potential on volume and margin in those businesses. So the answer is, I think the best is still in front of us.

Yes. I think, Ben, a lot of those puts and takes kind of offset, to your point. I mean, in trade, when you see some opportunities in Louisiana and also in Idaho with some conditions up in the Pacific Northwest. I think at the same time, higher corn basis and ethanol offsets that. Pat talked about some of the higher input costs and labor costs in plant nutrients. So I think on the whole, none of us earlier in the year, I think folks wouldn't have predicted tariffs coming back into the wheat market. So I think on the whole, some of these puts and takes offset. And I do think there's opportunity for continued growth from here.

That's great. Sticking on the topic of future growth. Brian, I think you said you're expecting $85 million of capex this year. Should we expect a little bit more than that next year as you think about investing in the pipeline ahead of you, both organic and inorganic growth? What's a reasonable level of CapEx to be thinking about?

I would say, so I would probably put it in the range of $100 million to $125 million is probably where I'd frame it. I would probably say that half of that is sort of maintenance capital and the rest being allocated to growth would be where I'd go from a high-level estimate perspective at this point.

And I think it's a good clarification that our CapEx during tighter times, during COVID and everything, we tightened our belts. Now we have some upkeep to do in our assets and plan to spend more on our assets to make sure they're shipshape as we have good fertilizer and grain opportunities in front of us. But that also includes some significant capital projects where we can really improve our assets. And that's going to become very important for us as we think they'll be stressed in the coming years with very busy volumes.

That's great. It makes sense. Considering the future opportunities ahead, what is The Andersons' capacity to pursue growth? Do you feel the company is ready to chase these opportunities? You've completed the integration of Lansing and added a few acquisitions. You've also moved past the divestiture of the Rail business. What is the company's capacity for pursuing growth? Do you have enough resources to take that on?

I think we have a really strong bench with, like you said, the acquisition of Lansing. We really broadened our capabilities in merchandising and business development. An example would be a year ago how we moved people into a veg oil trading desk to participate in renewable diesel supply. We've become a pretty important player in that business. I think we have the ability to apply talent to emerging opportunities. The exciting part is there's lots of opportunities in the sustainability part from the farmgate, all the way up into end customers. A lot of that is new space that everyone in the industry is learning about and applying resources to. So I think we have the capabilities to do what we need now, and these new growth opportunities; we have talent to execute against it. So simple answer is, I think we're in a very good position to execute against our growth strategies. When we get into some of the assets and growth opportunities within those assets, we probably have to bring on some additional resources at that time. But excited about the team we have and the opportunities in front of them.

Congrats and best luck with the rest of the year.

There are no further questions. I will now turn the call back to Mike Hoelter for closing remarks.

Thanks, Sarah. We want to thank you all for joining us this morning. Our next earnings conference call is scheduled for Wednesday, February 16, 2022, at 11:00 AM Eastern Time, when we will review our fourth quarter results. As always, thank you for your interest in The Andersons, and we look forward to speaking with you again soon.

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