Andersons Inc

NASDAQ:ANDE

Earnings Call Transcript 2018-Q4

[Operator]

Good day, ladies and gentlemen, and welcome to The Andersons 2018 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]

As a reminder, today’s call may be recorded. I would now like to turn the call over to John Kraus, Director of Investor Relations. Sir, please begin.

[John Kraus, Director-Investor Relations]

Good morning, everyone, and thank you for joining us for The Andersons fourth quarter 2018 earnings call. We’ve 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. The slides are available on our website now.

This webcast is being recorded, and it 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. The Company believes adjusted pre-tax income, adjusted net income, 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 pre-tax income, adjusted net 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. Reconciliations of the GAAP to non-GAAP measures maybe found within the financial tables of our earning release.

On the call with me today are Pat Bowe, President and Chief Executive Officer; and Brian Valentine, Senior Vice President and Chief Financial Officer. Pat, Brian and I will answer your questions after our prepared remarks.

Now I’ll turn the floor over to Pat for his opening comments.

[Pat Bowe, President and Chief Executive Officer]

Thanks John, and good morning, everyone. Thank you for joining our call this morning to review our fourth quarter 2018 results. I’ll start by providing some viewpoints on each of our four business groups. After Brian Valentine our CFO provides a business review, I’ll conclude our prepared remarks with some comments about our early views on 2019 and then we’ll take your questions.

Adjusted fourth quarter and full year 2018 results were better than those of the comparable 2017 periods. Grain and Plant Nutrient results, in particular, were much improved. We also successfully closed our acquisition of Lansing Trade Group, just after year-end, and we're excited about our early integration momentum.

We had our best fourth quarter in the Grain business since 2011. Weaker margins drove the Ethanol Group's results lower year-over-year, but they operated well given the market backdrop. Plant Nutrient Group improved results in each of its product lines, except specialty nutrients. And the Rail Group's results were on par with those in the fourth quarter of 2017.

The Grain Group rebounded from a tough third quarter as corn and soybeans based its values improved largely as we expected. However, weak spreads contracted sharply during the quarter, leading to a full year decrease in base income per bushel. Large U.S. carry outs in corn and soybeans limited trading opportunities while increasing storage income.

Lansing had a strong quarter on an operating basis. As I mentioned earlier, we successfully closed on the Lansing acquisition at the beginning of 2019. This transaction aligns very well with our overall growth strategy as it supports growth in grain originations, merchandising and specialty food and feed ingredients. It broadens our portfolio of products and services, and it expands our geographic reach. Despite industry margin headwinds, the Ethanol Group was profitable during the fourth quarter.

The group's achievements were driven by timely hedging and continuing production efficiency despite higher industry stocks and seasonally lower demand. The Plant Nutrient Group posted better results compared to those of late 2017. Wholesale nutrient results improved year-over-year on stronger primary nutrient margins. But specialty nutrient margins suffered further even though volumes were up.

The lawn business put a strong finish on a record year. The group did a nice job managing expenses, reducing them by about 10%. The railcar market continues to steadily improve. While these rates are rising for most car types, in many cases, renewal rates are still lower than the rates they're replacing.

Our utilization rate rose again sequentially to its highest level in recent history, at 94%. And we continue to buy cars in the secondary market. We continue to gain efficiencies across the Company by improving productivity. We achieved our $10 million run rate cost savings in each of 2016 and 2017 and also reached our goal of $7.5 million in 2018. That brings our three-year cost takeout total to nearly $30 million.

This year, while we'll still have our eyes on similar opportunities across the Company our primary focus will be on achieving $10 million in run rate cost synergies from the Lansing acquisition. I'll be back after Brian's remarks to discuss our early thoughts about 2019.

Brian will now walk you through a more detailed review of our fourth quarter financial results.

[Brian Valentine]

Thanks Pat and good morning everyone. We're now on Slide number 5. In the fourth quarter of 2018, the Company reported net income attributable to the Andersons of $23.8 million or $0.84 per diluted share and adjusted net income of $26 million or $0.92 per diluted share.

The adjusted results exclude $3.1 million of pretax transaction costs related to the Lansing acquisition. On an adjusted basis earnings per share for the quarter improved by more than 35% year-over-year.

Earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA for the fourth quarter of 2018 were $60.2 million and $63.3 million respectively, an increase in adjusted EBITDA of almost 20% year-over-year. For the full year 2018, revenue was just over $3 billion compared to $3.7 billion in revenue last year.

A 2018 change in revenue recognition rules reduced full-year sales by approximately $700 million but had an immaterial impact on gross profit. Net income attributable to the Andersons was $41.5 million in 2018 or $1.46 per diluted share.

Adjusted net income attributable to the Andersons was $46.4 million or $1.63 per diluted share. These numbers compare to reported net income of $42.5 million earned in the same period of 2017 or $1.50 per diluted share and adjusted net income attributable to the Company of $33.7 million or $1.19 per diluted share.

Full year adjusted EBITDA was $178.1 million, which compares favorably to full-year 2017 adjusted EBITDA of $157.4 million. Our full-year effective tax rate was 22.5%. The one time impact of 2017, U.S. federal income tax reform on 2018 income tax expense was negligible.

We currently believe that our 2019 effective income tax rate will be in the range of 24% to 26%. We're still evaluating the impact of the Lansing acquisition on that number. We increased our long-term debt during 2018, which raised our long-term debt to equity ratio to 0.57 to 1. The closing of the Lansing acquisition included the assumption of approximately $160 million of Lansing and Thompsons Limited long-term debt.

We refinanced the Lansing debt as well as the cash portion of the purchase price using part of our new $1.65 billion unsecured credit facility in mid-January. The new facility includes five and seven year tranches and provides us with future financing flexibility.

After the refinancing our long-term debt stands at approximately $1 billion and our long-term debt-to-equity ratio is approximately one to one. While the interest rates on the facility are variable, we have fixed the rate on much of a long-term debt.

Turning now to Slide number 6. We present bridge graphs that compare 2017 adjusted pretax income to 2018 adjusted pretax income year-over-year for the fourth quarter and for the full year.

In the fourth quarter, the Grain groups income improved due to higher merchandising income from recovery in corn and soybean basis levels offset somewhat by unexpected tightening of wheat spreads. The plant nutrient groups improvement was driven by better margins on primary nutrients and lower expenses. Unallocated net cost, adjusted for Lansing acquisition expenses, were higher, primarily due to a fourth quarter 2017 gain on the sale of a former retail store property.

On Slide 7, you can see that the only significant variances for the year ending December 31, 2018 were in the Rail Group and in other net unallocated expenses. The Rail Group anticipated lower income as the result of a change in accounting rules, but it also decided to scrap a significant number of cars at a book loss to generate cash, reduce carrying costs and take advantage of relatively high scrap steel prices.

Adjusted net unallocated costs were $13.8 million lower. A 2017 net loss in the former retail segment accounts for more than half of that change. And third quarter 2018 income from investments owned by Maumee Ventures accounts for most of the remainder. Before we leave this slide, I also wanted to point out that the Ethanol Group's results were up more than 15% in 2018, despite a difficult margin environment.

Now we'll move on to a review of each our four business units, beginning with the Grain Group on Slide number 8. Our fourth quarter Grain Group results improved year-over-year. The group reported pretax income of $25.4 million, an increase of more than 30% versus the adjusted pretax income of $19.2 million in the same period of 2017. Improved income from merchandising activities drove base grain pretax income to $22.4 million in the fourth quarter, compared to adjusted pretax income of $15.7 million for the fourth quarter of 2017.

Income from affiliates was moderately lower year-over-year. Lansing incurred expenses related to closing its sale to The Andersons and also recorded an impairment charge on an investment in a small Canadian-based grain company. These two charges had a nearly $2 million impact on the Grain Group's pretax results. Grain Group EBITDA for the quarter of $32.1 million was more than 25% higher than fourth quarter of 2017 adjusted EBITDA of $25.2 million.

Now we'll move to Ethanol's results on Slide number 9. As we anticipated during our last earnings call, the Ethanol Group's fourth quarter performance fell somewhat short of its comparable 2017 results. However, given the market conditions in which it operated during the quarter, we feel good about their accomplishments. The group earned fourth quarter pretax income attributable to the company of $5.1 million or $1.3 million less than the $6.4 million in pretax income attributable to the company for the same period last year.

The primary drivers of the group's results were timely hedging and continued highly efficient production. Margins continued to be stressed by higher inventories, causing some producers to slow or halt production during the quarter. Falling gasoline prices also reduced demand for E85 for the quarter, although full year E85 sales rose more than 25% for the second consecutive year.

On Slide 10, we can see that the Plant Nutrient Group generated pretax income of $3.8 million, a marked improvement over the reported pretax loss of $18 million and an adjusted pretax loss of $900,000 in 2017. Gross profit rose by $2.4 million or more than 10%, primarily due to a significant improvement in gross margin per ton.

On the flip side, gross profit on specialty nutrient margins continued to suffer even as volume increased somewhat. The farm center and lawn businesses were modestly more profitable than in the fourth quarter of 2017. Plant Nutrient Group EBITDA for the quarter was $12.5 million compared to 2017 adjusted EBITDA of $6.9 million.

On Slide number 11, you can see that the Rail Group generated $6.7 million of pretax income, which was equal to fourth quarter 2017 results. Our utilization rate averaged 94.3% for the quarter, which was up compared to 92% last quarter and 8.1% above the fourth quarter 2017 utilization. Average lease rates were unchanged year-over-year.

Overall maintenance expense also was flat despite higher tank car recertification costs. Base leasing pretax income of $1.4 million was down by $0.5 million from last year's results due to higher interest expenses. The group recorded income from car sales of $1.2 million, down from $3.3 million of pretax income in the fourth quarter of 2017.

Much of the year-over-year variance was from gains recorded from non-recourse financing transactions in the fourth quarter of 2017, which were permitted under previous revenue recognition rules. The group's repair business produced fourth quarter results almost 30% better than those of the comparable period. We also recorded a $2.4 million gain on the sale of some barges.

The group's EBITDA for the quarter was $17.9 million, more than 25% better than the fourth quarter 2017 EBITDA of $14.3 million. From a fleet management perspective, 2018 was another active and productive year. The group spent $105 million to buy almost 2,400 cars which are the second highest annual amount since 2004 and 2005, respectively.

The group also scrapped almost 2,300 cars for almost 500 more than its previous high set in 2017. More importantly, the Rail Group maintained the size of the fleet and improved utilization while once again increasing its average remaining life in accordance with its fleet portfolio management objectives.

And with that, I'll now turn the call back over to Pat for a few comments on our outlook for 2019.

[Pat Bowe, President and Chief Executive Officer]

Thanks, Brian. As we look farther into 2019, we expect our overall company results to continue to improve. We're especially focused on getting Lansing fully integrated with our Grain business and operating as a trade group. The Grain Group was merged with Lansing to form the trade group when we closed the acquisition in early January. We expect the combined group to accelerate the steady improvements we've made in our Grain business performance since 2015.

We continue to believe that this acquisition will be accretive on an operating basis for the end of this year. Our new expanded scale has us well on our way to achieving our run rate expense synergy target of $10 million by the end of the year, and we're beginning to uncover some nice top line opportunities as well.

The result will be a larger Andersons that produces significantly more gross profit and EBITDA. The Ethanol Group's near-term outlook will continue to be defined by the margin pressure it experienced throughout 2018. As there were fewer opportunities to hedge forward margins into early 2019, we anticipate lower year-over-year results in the first half of the year. The group continues to focus on maximizing the margin it can earn on every bushel of corn it grinds.

We're making good progress on the construction of our new biorefinery in Kansas that will allow us to introduce some new products late this year. We still expect to begin producing conventional lower carbon ethanol in mid-2019. Our Plant Nutrient Group continue to be impacted by low margins, especially in specialty nutrients. While primary nutrient prices have strengthened, we don't anticipate significant appreciation into 2019.

Lawn and contract manufacturing should continue to perform well but will likely be off its record 2018 performance. The Rail Group continues to actively pursue its primary objectives: to profitably grow the number of railcars on lease and to continue to expand its railcar repair network. They continue to work through the last of the 2018 tank car requalification work.

We expect our average lease rates will remain under pressure as we continue to work through renewals of leases that were booked at peak rates. Overall, we anticipate steady improvement in the group's results.

In closing, our 2018 company results were considerably better than those of 2017. I'm optimistic that we will see continued improvement in 2019, especially as we integrate Lansing. While the trade group is showing good early signs and rail continues to steadily improve, we'll remain guarded in the near-term about the prospects for Ethanol and Plant Nutrient.

The Lansing acquisition and the ELEMENT project give us more confidence that we'll achieve the 2020 EBITDA target of $300 million on an operating basis that we set in late 2017.

With that, I'd like to hand the call back over to Mark, our operator, to entertain your questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from the line of Eric Larson of Buckingham Research. Your line is now open.

[Eric Larson, Buckingham Research]

Thank you. Nice quarter everybody. Congrats on a good year. So really, I have to start with kind of Lansing. You've closed on the transaction here. The look of your P&L is going to change quite a bit. So do you expect Lansing to be accretive to earnings this – I mean, how should we be modeling this thing for 2019?

[Pat Bowe, President and Chief Executive Officer]

Thanks, Eric. We're really excited about the progress we're making on integration with Lansing. We're proud of the fact that we've made good investment to have some people help us with the integration planning and setting up the IMO office. We have good work streams that are actively working on putting the two companies together.

We've seen a lot of – already, just in the short period of time, the teams are working great together and we're excited about how the traders of both companies are working together on a shared trade book. So things are going very well with Lansing. We're also targeting these synergies we've said before, and the work on that goes well. So all that feels very good.

And your last part of your question is yes, we expect the transaction to be accretive in the first year on an operating basis so all lights are green so far with very good feelings towards Lansing.

[Brian Valentine]

And this is Brian. I would just add. We're working through the – all the valuation work, and so our first quarter results, of course, will have impacts of purchase accounting and that type of stuff. But we'll carve all that out separately. And as Pat said, it's our expectation we'll be accretive on an operating basis.

[Eric Larson, Buckingham Research]

Okay. And then the overall grain environment, which, obviously, with all the kind of a U.S.-China trade deal has remained pretty difficult. There's not a lot of volatility in the grain markets. Trading opportunities are limited. Your first half kind of grain cadence in earnings, how should we be thinking about that for you, Pat, as well?

[Pat Bowe, President and Chief Executive Officer]

Yes. I think you hit the nail on the head there. I think the market is paying a lot of attention on geopolitical events, more so than maybe market fundamentals in grain. Good news for us is that we put on really good farmers positions and field most our elevators, and carrying charges on corn and soybeans have widened. The bad news is wheat spreads have narrowed in dramatically, so the carry we've enjoyed the last few years on wheat has come in quite a bit.

So that's something that's different than we had the last couple of years. I think one thing will happen. We'll have to see what the China trade talks happen here in the next couple of weeks that could be encouraging overall to the marketplace, and you had to just have that behind us for our farmers and the ag industry in general. So that would also give some potential good strength to Ethanol if China opened again for DDGs and ethanol import. So that's, I think, the big geopolitical thing that most people in the markets are watching right now.

[Eric Larson, Buckingham Research]

Okay, yes. Then one final question. Obviously, the way the market is pricing grain today, you grow the cost of production for farmers on beans, you're kind of maybe at the cost of production maybe a little bit higher. If we stay above $4 on the harvest contract, you can kind of make a little bit of money in corn, which means – implies that you should have a fair increase in acreage planted in corn this year is my guess. So why would that not start helping your Plant Nutrient business a lot more? I understand having a guarded view is probably very prudent. But why wouldn't the prospects for Plant Nutrient be a little bit better?

[Pat Bowe, President and Chief Executive Officer]

Yes. I think you got – again, you have a good analysis there on how we look to corn acreage would be beneficial overall to fertilizer use. We also with pretty poor weather here in the fourth quarter didn't get much. Early application work done across the Midwest with all the cold and snow and ice, so it could get off to a decent start.

On the other hand, price has started to recover on the wholesale side but have kind of stalled a little bit. So we're kind of keeping an eye on what absolute fertilizer prices do. And because of that low farmer income that's been troubling to our specialty products with farmers not wanting to pay up for our specialty products, so that's a concern for us. And that's why we said we're probably more guarded. A boost in corn acreage would be a nice fundamental thing to support our fertilizer business.

[Eric Larson, Buckingham Research]

All right, thanks guys. I’ll pass it on.

[Pat Bowe, President and Chief Executive Officer]

Thank you.

[Operator]

Thank you. And our next question comes from the line of Ken Zaslow of BMO Capital Markets. Your line is now open.

[Ken Zaslow, BMO Capital Markets]

Good afternoon, guys.

[Pat Bowe, President and Chief Executive Officer]

Good afternoon, Ken. How are you?

[Ken Zaslow, BMO Capital Markets]

So a couple of questions. One is on the ethanol, you may have mentioned some comment that you said you have – the timing hedges, which we knew about, but the efficiency of production really contributed. And then you followed that up with you need to halt production. So two questions on this. One is what were your real efficiencies and where did you gain that from? And did you have to halt production as well? Or you just left production that was part of your efficiencies? Can you just tie those two together?

[Pat Bowe, President and Chief Executive Officer]

Yes, good question, Ken. So we've been working on different technologies at all of our plants. Our four plants in the past three years, it really helped a lot. A big portion has been on energy cost reduction. One of the bigger ones we did was in Albion, Michigan where we saw quite a bit of reduction in energy costs. Some other mechanical improvements we've made on our plants that are helping us with our fermentation yield and some other bottom line yield and recovery opportunities in the plants.

So that's just about operating better when margins are under pressure like they've been, we tend to try to operate in a more cheaper fashion, so we wouldn't put – we wouldn't try to maximize yields. We try to maybe cut costs back on enzyme and yeast and other things we would use to maximize cost efficiency over production. So we never closed during the period, other than our normal shutdowns. So we're just trying to maximize our cost position, and most of that comes from mechanical and technical work in the plants.

[Ken Zaslow, BMO Capital Markets]

Can you tell that if you ex-out the hedges, what is your outperformance relative to industry margins? How do you kind of think about that? Do you guys outperform by $0.05, $0.10? Like how do you think about that it sounds like there is a separation here?

[Pat Bowe, President and Chief Executive Officer]

I really couldn’t comment on that. I think what we've just tried to focus on our improvement week-over-week, month-over-month, year-over-year especially on cost, as you remember, a year ago, we had trouble with some of our by-product quality with the talks and issues we had over in Michigan. Those are behind us, so feed quality was really good. We did have the opportunity, as you mentioned, to hedge some early into the period, which is tougher to do now, given the forward nature of the curve here. But I think the key thing for us is again to focus on our grain originations and how we can maximize every bushel we're buying.

And we have spent a lot of time on our coproduct yield and quality issues to make sure we have the best possible returns on coproducts, the ethanol market will be what the ethanol market is going to be. We can't control the price of gasoline, but we've done a nice job from a plant side.

[KenZaslow]

And then my last set of question is just on the Grain Group. Can you talk about the opportunities and how you are framing next year overall? I just wanted to put the pieces together. I think you said the narrowing of the wheat spread. The elevation margin, I guess, is also contracting. What's going in your favor? And how do you kind of figure this out in terms of a margin structure.

[Pat Bowe, President and Chief Executive Officer]

Good question. So I think a big difference this year now from what we had before was this collapsing of wheat spreads, which impacts our income on storage for wheat, which is different than the last couple of years, where we had wide carrying charges in wheat and even VSR ticks that we were able to earn. That is changed.

But the good news is that we have wider carrying charges on corn and soybeans we're able to make. I think that there is some interesting export opportunities that are potential to pop up in the second half of the year that can help drive trading opportunities.

And the other thing with Lansing, now we are much more diversified with a broader range of customer mix and feed ingredients, pet food products and specialty grains. So we worked on that whole wide range of portfolio to drive the total bottom line.

So we're cautiously optimistic about how the next half is going to be. The trade war was a big thing that's going to impact everyone. So we'll see how that plays out. And watch how the farmers gets into planting season this spring.

[Ken Zaslow, BMO Capital Markets]

But you would say that, even excluding Lansing, the underlying fundamentals have improved. Is that fair, in 2019 versus 2018? Is that the expectation?

[Pat Bowe, President and Chief Executive Officer]

No, I think what you were talking about earlier, the traditional margins, I think the wheat carries a big impact that would be a negative but would be probably considered not constructive look – outlook into 2019. Corn and soybeans have a group that maybe don't make up for all of that. I'm just talking a normal carry situation of storage. And our trading opportunities, working together with Lansing now, we're much more optimistic about the skilled traders we brought into the company from Lansing. And I think that's going to help us drive better trading opportunities in the balance of 2019.

[Ken Zaslow, BMO Capital Markets]

Thank you.

[Pat Bowe, President and Chief Executive Officer]

Thank you Ken.

[Operator]

And we have a follow-up question from the line of Eric Larson of Buckingham Research. Your line is now open.

[Eric Larson, Buckingham Research]

Just a quick follow-up question on your fourth quarter grain results. You entered Q4, I think, with – I forget the exact number. I think it was either $10 million or $12 million of mark-to-market losses. Were MTMs a significant part of Q3 grain income?

[Pat Bowe, President and Chief Executive Officer]

Somewhat yes, especially on corn and soybean basis. So not crazy, though. I mean, we just have nice appreciation is what we expected to see, and that's a good sign. As I mentioned again, the – not the outright price of wheat. As you mentioned earlier, our monthly average closes has been a pretty narrow range on flat price, but we continue to do steady business on wheat, corn and beans. Just the spread conditions on wheat changed quite a bit, so the ones in a big mark-to-market impact for the quarter.

[Eric Larson, Buckingham Research]

Okay. Yes. We could use a little bit of grain market volatility here, so okay. Thanks guys.

[Pat Bowe, President and Chief Executive Officer]

Thank you.

[Operator]

And we have a follow-up question from the line of Ken Zaslow of BMO Capital Markets. Your line is now open.

[Ken Zaslow, BMO Capital Markets]

Hi guys. The railcar utilization rate, the 94% versus 92% last quarter and up 8%, 800 basis points, but yet that contradicts the idea that your leasing rates will keep on coming down. Can you talk about why that's a balancing act between those two? It seems it's kind of contradictory. I would assume that your leasing rates would actually start to improve.

[Pat Bowe, President and Chief Executive Officer]

Yes. I think what – over the longer term, you're correct. So we scrapped a bunch of older cars which helped us a lot with our utilization rates. We have some of the leases that are coming off those peak rates, so we kept our work through that to get a steady improvement. But we are seeing these rates improve, as you just mentioned. So we just have some of those cars that are on lease at those higher levels that we need to get through the system. I don't know, Brian, do you want to add

[Brian Valentine]

If you think about stuff that maybe was under a five that's coming off from stuff that was done in, call it, 2014 – 2013, 2014 timeframe coming off, they're lower rates, but our utilization is up. And our total number of cars on lease is also up.

[Pat Bowe, President and Chief Executive Officer]

So, Ken, overall, the railway, so go ahead.

[Ken Zaslow, BMO Capital Markets]

No, no you go, you are the CEO you go first.

[Pat Bowe, President and Chief Executive Officer]

I was just going to add that, overall, we feel pretty good about steady improvement on our Rail business. Also our shop network, we added four additional shops this past year. There's quite a bit of repair business going on for our shops, so we're getting nice, steady improvement. Rail is not a business that shoots way up or shoots way done, but we have a nice, steady recovery happening across our Rail business.

[Ken Zaslow, BMO Capital Markets]

When will the five year peak contract be completely lapping that you will be then lapping – then you'll start to actually form a base to which to grow? Is it a 2020 event, a 2021 event? How do I think about that?

[Brian Valentine]

I would say we're seeing the rates increase steadily, and so we don't – I don't have that right in front of me, but we can follow up and get that to you when we have a call.

[Ken Zaslow, BMO Capital Markets]

But you understand what I'm trying to say is that

[Brian Valentine]

Yes, I absolutely understand. Yes, I absolutely understand. We should be able to get that. Yes. it just wouldn't last. We will be able to get that for you.

[Ken Zaslow, BMO Capital Markets]

Perfect thank you guys.

[Operator]

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

[John Kraus, Director-Investor Relations]

Thanks Mark. 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 will be made available shortly on the investors page of our website at andersonsinc.com.

Our next earnings conference call is scheduled for Tuesday, May 7, 2019, at 11:00 A.M. Eastern Time when we will review our first quarter 2019 results. We hope are able to join us again at that time. Until then, be well.

[Operator]

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