Gary Anderson - Chief Executive Officer & Director Steve Sommerfeld - Executive Vice President & Chief Financial Officer Tim Close - President

Jacob Bout - CIBC Peter Prattas - Altacorp Capital Greg Colman - National Bank Financial Nelson Mah - Laurentian Bank

Good morning, ladies and gentlemen. Welcome to AGI’s Third Quarter 2015 Conference Call. As a reminder, this conference call is being recorded. I would like to turn the meeting over to Mr. Gary Anderson, Chief Executive Officer of AGI. Please go ahead, Mr. Anderson.

Thank you, Donna and good morning everyone. With me today is Tim Close, our President and soon to be CEO, and Steve Sommerfeld, our Executive Vice President and CFO. One of the privileges of the CEO position is holding the pen for quarterly messages and annual reports. I have always taken that responsibility seriously. In the past I have honored [Rob] [ph] shared our entrepreneurial roots, highlighted and celebrated our growth and achievements of our teams and paid tribute to the men and women on the shop floors. It has been customary and respectful to open with the phrase on behalf of board of directors and everyone at AGI. With this being my last opportunity to speak to you, I would like to take some additional editorial attitude, indeed everything I have to say is personal. First of all I am full of gratitude to everyone who has stepped up to the plate for us and with us over the years. We never could have built AGI without you, so I hope that you know that I know and that I am very appreciate. You will remain unnamed only because of the risk of inadvertently missing someone. The list runs the spectrum from customers to shareholders and employees to directors, from suppliers to bankers, from founders of acquired businesses to competitors from startup to future state. You have all contributed and hopefully many of you will continue to make a mark going forward. AGI needs you [indiscernible] with us, to create what is truly possible. I am also full of pride. We have acquired and developed an extensive catalogue serving customers from family farms to port facilities and everything in between. Along the way we have assembled an exceptional team with lots of caring and lots of compete. I am so proud of them. Perhaps that is why I struggled to accept that public markets feel of our current value. Shouldn’t our share price reflect both performance and potential? Yes, our stock can experiencing over steering from time to time not unlike much of the market. But this level of retreat seems particularly overstated, especially given our long-term performance as a market leader in our space, our yield and our growth potential. Today we are trading in the same range that we were trading in three years ago during the effects of one in fifty year drought in the U.S. corn belt. Back then we had LTM adjusted EBITDA of approximately $43 million. Today we have LTM adjusted EBITDA of $73 million, with only a modest increase in our share float and we have Westeel. We have a strong, resilient and highly dedicated team that never backs down from a fight. We have proven ourselves time and time again and have shown our commitment to our dividend under more difficult circumstances. We rebounded after the 2012 drought with refreshed product lines and new momentum. We have bounced back from the war in Ukraine with diversified growth in international sales year-to-date up 34% over 2014. And we will respond to the drought in Western Canada and the other market challenges. In Western Canada we will respond with market synergies from our newly acquired Westeel division. International markets will continue grow and diversify and we will continue to be acquisitive and strategic. My retirement is the culmination of our corporate succession planning process initiated in 2011. Commencing in early 2014, when I expressed to the board my desire to retire in 2016, the board and the human resource compensation committee worked with me and our HR consultants to develop a CEO selection criteria that led to a thorough, robust CEO succession process. The result was the appointment of Tim Close as President in March this year. At the time I retire, it will have been five years since we initiated our succession planning and almost two years since the CEO succession process commenced in earnest. A period that has allowed for the growth and development of the team and the positioning of the business. Tim is ready to lead. We have a strong balance sheet, upgraded manufacturing facilities, leading brands in all of our business segments, a clear path to lean as a culture, a strong base on North America and excellent growth potential internationally. This is not to minimize the challenges of today and those in the future that Tim and his team will experience from time to time and we have some short term internal work to complete at some of our divisions to up our game. It is all identifiable, measurable and solvable. I remain a believer in the long-term market opportunities that Tim and his team will pursue. AGI is ready for the next phase of development under the next generation of leadership. My parting words come from the music of the road during those early days of fighting our way into the market. Thank you, Mr. Springsteen for the advice. No retreat baby, no surrender. So I say good luck to Tim and the team and will open it up to questions

[Operator Instructions] And the first question is from Jacob Bout from CIBC. Please go ahead.

I guess, first off, good luck in your retirement and I think we have all appreciated your candor over the years.

Thanks, Jacob.

Why don’t you dig in a bit on your guidance that you have given for the fourth quarter of 2015 and first quarter of 2016. I want to understand how much of this is a timing issue or these issues that you are seeing in the participation in the -- some of these on farm programs. Why wouldn’t that persist for the remainder of 2016? And maybe just walk us through exactly what these farm programs are?

Sure. Hi, Jacob, it's Steve. So maybe we will deal with Westeel separately from, kind of other parts of AGI. And so really we are talking only about the on farm business. You know the commercial business is separate and we can talk about that after that. In Canada in the on-farm business we hit a situation where, for a [indiscernible]

I can pick up and help there Jacob. The farm programs in Western Canada is impacted by the drought and we don’t see a lot of changes to that going forward and into '16 be impacted by the lower crop in Western Canada. That ended up being surprisingly good at the end of the day. In the comments where Gary and Steve talk about the amount of product that was put out in our distribution channels at Westeel in Q4 of last year and Q1 of this year, it will take the remainder of this year and into Q1 for that to move through the system. So the combination of a lot of product put out into the channels and than a drought in the initial stages of the crop and that’s really the timing where wins are bought and put up. That’s what caused the excess inventories running into the end of this year and into next year a little bit. So there are end of program or end of year programs that we are going through right now that affect -- that are on the bins as well as some of the handling equipment and the portable equipment. And so some of that inventory will have an impact on those end of year programs as we move into '16 but we expect that that will work through the system into Q1 and then return the sort of historic averages going through the in-season and through the end of next...

That’s exactly right, Jacob. Unless we get into the new growing season or [slide] [ph] to the border, really it's kind of a start over on portable side. So we have some inventory to work during Q4 and to a lesser extent in Q1. Sort of hit the reset. On the commercial side, our guidance towards Q1, we are not necessarily saying we are going to have a weak quarter. Q1 '15 at Westeel was a very strong quarter due to their shipping out very aggressively on their preseason. And AGI Q1, if you know, also was very strong. We expect to have a decent Q1, especially on the commercial side our businesses, our backlog, they are shaping up very nicely for a strong start to Q1 of '16. But we are just being a little bit cautious because of some of the inventory carryover on the portable side.

Okay. So the guidance that you are -- or sort of what you are comparing this to is to your traditional business for AGI and Westeel for the first quarter?

Yes. I think that’s right, if I understand you correctly. I mean both sides had a very strong Q1 in '15. In our view Westeel is maybe somewhat artificial because of the pace at which they shipped out their preseason.

And to be fair, if you recall back for Westeel in 2014, they were going flat out a record year in Western Canada in the industry so the national inclination is to keep the engines running. All we are really wanting to do, Jacob, is level load our winter season a little bit more appropriately than what happened last year. And as things move, we can adjust up as we need to.

Okay. And maybe we could just talk a bit about the dividend and talk a bit about how -- what payout ratio that you are comfortable with?

Sure. Historically, we have always been very comfortable with that 60% to 70% payout ratio. We have never had a defined policy for dividend linking directly to the payout ratio and we have operated through short-term period where the ratios are higher than that, 2012 being a prime example. But we are not impacted in our thinking by short-term events, such as weather event we had in Canada this year. We are fine operating at payout ratio higher than, kind of that 50% sort of guideline which is really just an internal measure for periods of time.

The commitment to the dividend hasn’t changed. Actually I thought everybody understood that after extreme pressure we went under in 2012 and we saw the value of that commitment in putting the floor on our share price and I just didn’t want that to be forgotten and [indiscernible].

Anything else, Jacob?

We will proceed to the next question. The next question is from Peter Prattas from Altacorp Capital. Please go ahead.

Good morning, guys and a special good morning to Gary whom I will certainly miss and nice Springsteen quote as well. First question is on the international front where you seem to have some continuing strength there. Can you comment on where in Latin America you are having success? Whether you think the strength in the Ukraine is sustainable and any update you can provide on Brazil? Thanks.

Okay. Sure. And I am wanting to not only be the only speaker here today for obvious reasons but I have to say that the success we are having is widespread throughout Latin America. I will ask Tim to speak to speak on Brazil as well. Our team is right now over in Germany at the end of AgroTecnica which is a commercial show therefore not only for western Europe but eastern Europe and parts of the rest of the globe. There is a lot of international players come in to that show. And our team is very active, I am very encouraged with the discussions we have been having, again this time of the year in terms of preparations for next year. There is just an amazing resilience to that marketplace in Ukraine. And of course it's spilled into Romania because investors are looking for other ways of positioning themselves along the Black Sea in order to have these export facilities. So it continues to do very well over there. And now only Westeel and our companies over in Italy, we have another opportunity in that region and then into their traditional trading area in North Africa as well. But I will pass over to Tim as far as Brazil goes here.

Good morning. Brazil is continuing to develop. We continue to develop a pipeline in Brazil. And also looking of ways and opportunities for us to expand in that market. So the story, the tariffs and fortress Brazil, as we call it, hasn’t changed and the currency and economic instability in Brazil obviously impacts all parts of the economy although agriculture has been a standout in that country. And it hasn’t had the impact that oil and gas and mining have had in Brazil. So the market still is healthy and we have -- we are very positive about our prospects for growth in Brazil.

Great. And then just one on Westeel here. I mean it seems the performance so is largely as a result of inventory in the channel. So does that mean after, say Q1, you are optimistic that the inventory headwind will subside by then and Westeel will recover quite well barring any weather events?

Yes. You know what, we just want to be clear that it's the inventory in the channel and it was combined with that drought in the early stages of the crop here for us. Had there not been a draught, you could very well have sold through some of that inventory. So a combination of overly aggressive build in Q1 and that drought is what really combined to cause that problem. We do expect to work through Q4 and into Q1 and that we do expect to have a return to averages in the Westeel business. And the Westeel business is -- there are a few components to that including smooth wall bins as well as the corrugated bins and each of them have slightly different drivers but we do expect to see a return to more normal patterns going forward.

Thank you. The next question is from Greg Colman from National Bank Financial. Please go ahead.

Gary, congratulations on great career wrapping up. I am sorry to harp on Q1 guidance and I know we have already talked about it. But I just want to be clear because I wasn’t and so [indiscernible] two other people that aren't. You have said that adjust EBITDA in Q1 of 2016 are likely to fall below 2015 levels. And 2015, we have from your financials, was 16.4 million. But it did include Westeel, which obviously was purchased in May. So are you saying that the financial results we are likely to see in Q1 of 2016, which will include Westeel, will be below that 16.4 or we do we need to make an adjustment for that Westeel?

You would need to make an adjustment for that Westeel. We are really trying to get to more high level guidance as opposed to kind of the more specific guidance we have provided for Q4. And again, Westeel had a very strong Q1 of 2015 at AGI and we are just trying to be a little bit cautious because on certain parts of our business we see some softness coming into the quarter and another part we see some strength. But we, again, just of trying to get too far ahead of ourselves unless we get through Q1, we do see a return to some pretty strong quarters.

No, and again sorry to harp on that, I wanted to make sure that I was talking about the same facts that’s all. Keeping on Westeel for a little bit, because they were running flat out prior to the acquisition and we know the courtship period was probably a little bit longer plus there was some reviews by the competition bureau. Does the activity that you have seen as you have started to dig into the distribution channels now that you own them and you are seeing how the destocking is going through. Does this change your view as sort of to what the structural profitability of Westeel is? Either a little bit better or a little bit below?

Yes, I think it's validated our view of the structural strength of Westeel. It's been an interesting process to start working with customers in the distribution channels that we have known and done business with for long periods of time but now have this additional brand at the table. And as the conversations have been elevated as a result and from that end I think it's been not a surprise but certainly a validation of the strength of this brand.

Got it. And I just have two more quick ones and then I will be wrapping up. On the SG&A side, it came in a little bit higher than we were expected and a little bit higher than previous quarters. Last quarter was about 17 and change. We were thinking 18. And it came up in the low 20s, 24 million or so. Just wondering, is that what we would expect right now as more of a run rate or were there some one times or specific costs that had to with the quarter or the quarter itself. Just being a little bit more elevated as it tends be a bit of a busier time of the year.

No. There were some unusual items in the SG&A this quarter. Two that I would point out to is we took a provision on a bad debt that approached $3 million which we don’t expect to occur again. It's by far the largest we have ever taken. And also in the quarter we had some moving cost associated with our commercial divisions moving to their new plants. Year-to-date that amount came to almost million dollars and in Q3 I believe was $500,000 to $600,000.

So we have got about 3.5, call it million, that was kind of unusual costs in there which would bring the run rate SG&A down a little bit closer to the $20 million market?

Yes.

Great. And then just finally wrapping up. On the commercial side, I don’t think it was sort of out in the newswires but we saw that you added [Dave Worzing] [ph] to your North American commercial sales team. Wondering if you can talk a little bit about the potential there and the demand you are seeing on the commercial sale North America or what was the impetus to kind of ramp that sales force?

Yes, Greg, it's Tim. I can jump in a little bit and give a bit of an explanation there. First of all, David has been with us for quite some time and is unique in that he has spent some time at our head office in Winnipeg as well out at divisions. And what you are seeing there is a little bit of, I guess the initial steps of what will be a broader reorganization of the business firmly to be based around the customer. So we will be organizing the business based on farm and based on commercial. And many of you have heard us talk about that theme in the past and this is a first of some steps to firmly restructure the business to have that focus on the customer and as you know those two customers are very different. The customer with the roots of AGI and then over the last five years as we have grown into the commercial space, we have gained a lot of very valuable customer relationships in the commercial side. So that commercial port for instance is a very different product and customer than the farm side. So this is just part of moving the business to have that focus on the customer.

And Tim, how long do you anticipate the reorientation of the sales team will take until you have it where you would like it focusing on those two different distribution channels.

Yes. It's well underway and it's in many ways taking the assets and the people we have and they are already doing those rules and just bringing our focus to how they go to market and how they sell. So that will take price gradually or with -- as we tweak the business over the next, probably quarter or two. So we are happy with where it's going to end up. And that focus, we do expect to drive increased sales and be a positive development for both our top line, our bottom line and ultimately for the customer experience for our clients around the globe.

Thank you. The next question is from Nelson Mah from Laurentian Bank. Please go ahead.

I was just wondering, on that bad debt expansion you mentioned, could you give us a bit more general color on it. I guess is it international related or U.S. related?

It was international related from a project completed a few years ago. We have been in constant touch with the customer carrying in the receivable for quite some time and felt now we could no longer carry it on our balance sheet. Put a claim in it, followed on with the EDC and would be held for records. We couldn’t justify not allowing for the provision in our financial statement. We will continue to pursue collection along with the EDC.

So EDC insured that, right

Yes. That’s right. That portion that we expensed through our P&L was the uninsured portion.

Okay. Understood. Then my only other question is related to Westeel. Some of your business is also like non-grain, liquid portion. I was wondering how is that performing?

I am sorry, I missed that.

So on the Westeel side, so is the general -- I guess, I was just wondering about, you have to sell your [tools] [ph] and there is a liquid portion as well. So how is that performing?

The liquid business has performed fairly well and I would call an average level of performance. And you are right, very different drives on that side. In fact, a lot of that is the fuel containment business and as you know the fuel prices are down quite a bit and on the farm the farmers are using or are tending to replace older tanks with larger ones and take advantage of storing fuel at lower prices as well as the distribution network than on the commercial side has been growing, evolving and expanding their distribution, fuel distribution network. So it's been a healthy year for the fuel side.

Thank you. [Operator Instructions] There are no further questions at this time. I would like to turn the meeting back over to Mr. Anderson.

Okay. Well, thanks everyone and I appreciate your support over the years and hopefully we can see each other down the road somewhere. Okay. Take care.

Thank you. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.