Timothy Close - President & Chief Executive Officer Steve Sommerfeld - Chief Financial Officer

Michael Doumet - Scotiabank Jacob Bout - CIBC Andrew Wong - RBC Capital Markets Peter Prattas - Altacorp Capital Greg Colman - National Bank

Good morning, ladies and gentlemen. Welcome to AGI’s Third Quarter 2016 Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the meeting over to Mr. Tim Close, Chief Executive Officer of AGI. Please go ahead, Mr. Close.

Thank you, Elena. Good morning and thank you for joining us this morning to discuss our Q3 results. We are extremely pleased to also announce this morning that we have signed an agreement to acquire Yargus Manufacturing. Steve Sommerfeld and I are calling from to Marshall Illinois, where Yargus has been located since 1968. Yargus is the market leading fertilizer handling equipment manufacturing in the U.S. with a growing international platform and outstanding team, product line brand and reputation. Larry Yargus took over the business from his father in 1992, and devoted the following 24 years, as well as his energy, passion and innovation to growing the business. Through that time, Larry we also invested heavily in facilities, equipment and most importantly reinvested in the people required to transforming Yargus into market leader. Larry’s three daughters and Anne, Kate and Meg joined Larry to continue that growth and take a business to new customers domestically and new markets internationally. When combined with AGI’s growth platform and resources, Yargus is poised to continue to grow sales, margins, service capabilities, products and to reach new customers in South America. As we open our new facility in Brazil and together we will accelerate their international sales in all markets. This acquisition completes our fertilizer platform in North America, and fills in the key product lines, capabilities, scale and market presence required to provide our customers with market leading fertilizer solutions globally. We are very pleased to welcome this great company and team to AGI. We would like to thank Larry, Anne, Kate and Meg to placing their trust in AGI as a home for their business and people and we could not be more excited to partner with them and their team going forward. From a valuation perspective, we paid $43 million which is a seven time multiple based on an average over the past three years adjusted EBITDA after excluding the very recent investment in expansion their manufacturing facilities, in addition a new equipment and people to drive the next leg of their growth. While a little above some of the multiples we have paid historically, we are very comfortable that the recent investment, the current initiatives and revenue synergies deliver and attractive than accretive multiple and strategic acquisition for AGI. Shifting over to our Q3 results, we are happy to continue to report good news this morning. Sales in Q3 were 163 million and adjusted EBITDA grew to just over 36 million. Gross margin in the quarter were strong at 35.3% and adjusted EBITDA margin grew to 22%, which trumped Q3 2015 results by six percentage points. These results set new records for sales and EBITDA as we see strong results of our growth initiatives that we pursued over the past 18 months. We had solid contributions from all parts of AGI in both farm and commercial businesses as well as a tailwind provided by the strong U.S. dollar. While the farm environment in the U.S. remains challenging, our team did an exceptional job in managing the business to protect margins and position ourselves with better times. The Canadian farm environment has been more positive supported by more diverse crops and FX contributing to a better income profile for Canadian farmers, whether in both the U.S. and Canada led to strong crop yields more moisture at harvest and producing stronger aeration sales and an in-season surge in bin sales at Westeel. On the commercial side of our business, we saw a strong markets in the U.S. Canada and in international markets that we target to market Italian businesses. International project sales remained low in Q3 as we continue to see large projects being slow to move in the planning stage to execution. All of our commercial businesses performed well in the quarter with excellent contribution from Hi Roller in this and strong contribution on both legacy and recently acquired commercial businesses. In Brazil, we achieve positive EBITDA at Entringer and only slightly negative after counting for the additional team that we have built up as we prepare to move to our new facility and position ourselves to grow into our expanded capacity. This puts us a full quarter ahead of our previous projections and well placed for 2017 and beyond. Our facility is moving ahead on schedule with much of the envelope of the building completed, the floors are being poured this week and equipment is arriving on site. We continue to target end of Q1 for commissioning of several product manufacturing lines. These are record results for AGI and we are very proud of the effort and work form the people across our businesses that deliver these outstanding results. Will now turn the call back to Elena and we will take some questions.

Thank you. [Operator Instructions] The first question is from Michael Doumet with Scotiabank. Please go ahead.

Hi good morning guys. Congratulations on the quarter and on the acquisition as well. So maybe just to start on the acquisitions. There was a mentioned of the recent building in expansion there, so is the expectation that we see some notable growth in the following years so that the acquisition multiple is more in line with historical acquisition multiples?

That's correct they just completed a pretty substantial expansion of their facilities and equipment preparing for that growth and after having some high backlogs for quite some time given demand and the growth for their business internationally so they are just finishing the preparation for that next leg of growth.

Okay, perfect. Thanks. And so yes maybe flipping over to margins in the quarter they seem to have been some component of labor efficiency, lower price deal, and a lower Canadian dollar. So when you look at the year-over-year improvement how would you break down those factors, I mean which one has the largest positive contribution?

Great. Hey Michael its Steve. It's difficult to quantify precisely. On a gross margin, percentage basis the weaker Canadian dollar isn’t it's not as significant, keeping in mind that our U.S. divisions are they sell on USD, costs are in USD and the percentage doesn’t move as a result of the FX rate. It really was a labor efficiencies, we had to some nice volume in the quarter, so gross margins really across the board in our commercial divisions in the U.S. and our farm divisions in Canada, all produced a very good result and we are very pleased with their performance in Q3.

Okay. Thanks. And just maybe lastly on Q4 you are anticipating adjusted EBITDA team moderately above Q4 of last year. I believe that includes acquisitions. So are you expecting any organic declines in some of your businesses and where would you expect to see that specifically?

We are not saying they are going to be organic declines. Q4 is a seasonally soft quarter for us. There is in-season sales really in October and beyond that is pre-season planning and so year-over-year when you look at each division, you don’t expect kind of a significant in-season pop. So we are sort of what we are guiding towards the sort of a similar Q4 to last year will manage our production levels, focus on margin and try to [pole-vault] (Ph) sales into 2016 rather manage for the longer-term.

I see. Okay. Well that’s it. We are done on the quarter again. Thanks guys.

Thank you. The next question is from Jacob Bout with CIBC. Please go ahead.

Good morning. Bit of a weird harvest this year in Canada. You talked a little bit about how that helped - I mean I’m assuming that aeration there would have been more need for the aeration with this harvest and do you expect with the delay in the harvest any sales can be pushed into the quarter or would you actually draw some sales from fourth quarter into third.

Yes, well that’s exactly right Jacob. It was a strange mix of weather here. The extra moisture did have a great result on - number one, it was having a good result on the expected yields and so farmers is coming into the harvest had very strong expectations for what those yields would be. That drove an in-season surge in bin sales at Westeel. We like to see that in-season demand and also at the same time that the moisture driving a lot of aeration sales. The subsequent weather though that put the brakes on harvest and had a lot of farmers worried about getting that last 10% to 15% or so off the field. It did have an impact on their sentiment coming into the end of the year. It’s been very warm across Western Canada this week, so they have picked up where they had left off and so that will moderate the impact of those early snow and impact on harvest. So it’s sort of week-to-week, it’s very different weather out there and I think at the end of the day we will end up with what will be a good crop size in Canada, some good crop prices and you know quality might be a concern and, but all-in-all it should produce a reasonable result as we go into the back end of this year.

Maybe just turning to that acquisition, maybe remind us again what your target debt metrics are, how are you going to pay for this and may be also talk about margins in the fertilizer blending side versus your traditional grain handling?

Hey, Jacob its Steve. I’ll answer the kind of the debt metric question in turn it back to Tim for the bus question Yargus. So our Q3 2016 obviously was very strong obviously improved our debt leverage ratio, to especially having dropped off a weaker Q3 of 2015 in our LTM. So our Yargus plan I think we will pay roughly $5 million in cash the balance through our revolving facility. Our leverage ratio at the end of Q3 of 2016 excluding Yargus, due to the improved results was approximately 1.8 times as we calculate it for the bank. So you will air Yargus on top of that now, the $38 million we planned to draw on our revolver for Yargus. That will push you up into 2.3 to 2.4 that’s a range where we lived a good chunk of the last while on the rank, we are very comfortable and I now we will watch it delever again as our results continue to improve.

And then on the margin question for fertilizer.

Back on the margin side, I mean margins are pretty similar to the rest of our commercial businesses; they are depending on the product line, but there as strong as the rest of our commercial markets on the grain side. So it’s fits in very nicely on the margin side. We think there is good opportunity here with the Yargus to look at some shared resources and sales synergies between some of other plants and having a positive impact on margin as well, but directionally it’s very similar profile to rest of our commercial business.

Okay last question here. Just on a year-on-year basis, when you are looking into EBITDA. Can you and just help us break it down into the various buckets acquisition in U.S. dollar and then volume improvements if we do it that way?

Ill speak to the nine-months numbers, well actually in the MD&A on the Q3, I believe we disclosed precisely what the EBITDA related to acquisition was which is around $14.5 million and that includes all acquisitions made in 2015 and all acquisitions made in 2016. You know the impact of the U.S. dollar on EBITDA was significant, but keep in mind the exchange rates in the comp year 2015 was also pretty high. Rough numbers in closing the MDA again, rough numbers in 2015, our exchange rates of around 126, this year 132 to 133. Over the nine-months, EBITDA improvement owed fully to FX would have been roughly $4 million and that’s a bit of a high level estimate. So a nice tailwind, but not a significant factor in our increase in Q3.

And then volume improvements?

Volume had a nice impact at Westeel as you would expect in the quarter, but apart from that, margins would have held nicely or been pretty similar or flattish to prior periods in our farm, in our portable businesses. Some of the commercial businesses had some stronger of margin performance, but not - just think about a number, but to directionally and it was kind of a little bit of contribution from everywhere. So other than Westeel, which has probably the most immediate response from volume perspective, margin there wasn’t any other real anomaly driven just by volume.

Okay. All right. Thanks guys.

Thanks, Jacob.

Thank you. The next question is from Andrew Wong with RBC Capital Markets. Please go ahead.

Hi, good morning. Thanks for taking my questions. So just have couple of questions related to your M&A and so, you have had a pretty strong pipeline of deals recently. Are you still seeing a strong pipeline or how is that pipeline being used up a little bit and with quite a few acquisitions, do you see any need to slow down and kind of to breather to integrate some of these businesses you recently hired or is it still kind of full steam ahead? Thanks.

Yes, it’s always a good question. So let me just talk about integration for a while. We have been pretty active on the M&A front. So we have been developing strong teams for integration and it really goes back to end of last year when we divided the company so to speak into farm and commercial and each of those teams have has specific resources to handle integration within their groups. We have augmented that with other integration resources and Brazil is probably the best example where we have dedicated teams and work streams that are extremely active in managing, it’s probably across six to eight different work streams in any given time with specific deliverables for the execution of that integration. So it’s a component of the business, we take extremely seriously from an operations and managing the team and planning for the future perspective. So we continue to see a lot of opportunities for growth around the world for our core businesses. This one in particular was the completion of the strategy that we began at the end of 2015 when we acquired this with the mandate in an objective of building out a leading fertilizer handling platform. To supplement or to augment to compliment our grain business and to move us into a extremely attractive component of the agriculture market that fits in really nicely with our grain business. So this is the completion of that strategy, which saw really a lot of the acquisitions you saw over the past 10 to 12 months and drive by the execution of that strategy. So this completes that leg of our growth and will now focus that fertilizer team as we bring together some of the outstanding people at Yargus to lead and bring that strategy together and lead it going forward. So there are other parts of the agricultural business, grain, fertilizers, seed, feed, food and process I think that we continue to see opportunity in. We are conscious that we will watch our leverage ratios and bring those down to be comfortable where they are today and we will work to bring those down. So for us it’s a balance of looking at the opportunities that we have, finding new ways or additional ways to grow our business in the future and maintaining that focus on the appropriate balance sheet to support that. So it's a maybe a long way of answering your question, but M&A continues to be part of our strategy and we will remain active in looking at potential opportunities.

That's good, it’s really helpful. I mean thinking about next year the free cash flow starts improving and you mentioned that you would make some contributions to debt. Like how do you balance between debt and M&A and maybe increasing some of the capital return through dividends or repurchases as our free cash flow improves?

Andrew its Steve here. So to your question when we get up frequently and it's always difficult to answer, because when we look forward 12 months. There is number of opportunities in the M&A pipeline and we are always trying to balance investing cash into our company, pursuing good opportunities on M&A and making a fair returns to the shareholder. So it’s difficult for me to say right now how exactly that will pan out in 2017 as Tim said, we continue to explore M&A. So a long story short, I think in the absence of MD&A like we focus on reducing that leverage ratio in the short-term, right now we feel the return to the shareholders is fair and we have a nice balance between reinvesting in our company M&A and dividend.

Okay, that's great. And then just one last one on the U.S. market, I mean it's been a bit slower from some of the negative farmer sentiment that you mentioned in the press release. What sort of catalyst could you see out there that might speed up that U.S. replacement cycle and what timing do you see for next year when that pent up demand might come for newer equipment. Thanks.

Yes, the catalyst, it continues to be crop borrowings and the amount of crop that goes to our equipment and now we have seen farmers push it out a bit and over the last couple of harvest. But this has been unique out of the last four to five harvests I think it was very wet difficult harvest and that does tend to have a big impact and ware out our equipment a little bit faster. It will have an impact on the replacement cycle. So it's always very hard for us to pin point which year it happens, but we do see this being a trough and it's happened in the past, it will happen again and the market comes back and it's pretty resilient from that perspective. I mean were quite pleased with even in this environment and those buying patterns that we are seeing relatively speaking very resilient performance from our portable equipment businesses. So it’s a matter of timing and it’s a strong reason why we pursue the diversification within our segment as much as we do. There is different parts of the product lines or geographies that are active at any given time.

That’s great. Thank you, I appreciate all thoughts.

Thank you. The next question is from Peter Prattas with Altacorp. Please go ahead.

Good morning everyone. My first quarter here is on margins, they continue to be strong despite the relative strength of Westeel, normally associate that with being a slightly lower margin product versus some of your others. So are you still getting the benefit of steel purchases you had entering the year and how sustainable do you think that your recent margin strength is? Thanks.

Yes, and so you got it exactly right, it has been typically the lower margin side of our catalogue and steel is interesting through this year, it was bottomed out towards the end of last year beginning of this year and then made some pretty rapid advances through the years or through the months of this year. So we did by a lot of that steel at the beginning of the year and turned through that and we did have a net benefit from that. The entire industry was dealing with that huge increase or large increase in steel throughout the season and that started to come back off and so there were price increases throughout North America on the bin product lines in particular that industry wide not just in Canada and certainly not just us. And so with that the fluctuation in steel from a real low to run up and then easing off, combination with some price increasing, we feel pretty good from a sustainability measure. This season may be there is a little bit of an upside from a surge of demand in season, which is done typically at without the rebates of pre-season buys. So and all of that combined to give us that performance in Q3.

Okay. And then Tim sorry, I might add a couple of comments to that. Our U.S. commercial divisions should give them a bit of a shadow, had a very good Q3 margin wise. You might remember last year this time we were talking a lot about Union Iron and margin difficulties they were having. I’m pleased to say that has reversed, Union Iron is performing very well. And our commercial group as a whole in U.S. had strong margins in Q3 and part of that is due to the two new facilities that we built in 2015. The margin is coming out of both of those and [Indiscernible] indicators are very strong. And on top of that, our farms division in Canada, the volume has been a bit spotty due to the U.S. sentiment, but those guys have managed very well through it and the margin have maintained even though volume aren’t where they were a year ago or two years ago.

Thanks for that color and just one on the acquisition. You have provided that three year EBITDA average that as you typically do. But obviously, the company invested in expansion here with another 5 million or so invested. So that suggests that the things have been I guess trending higher over that three year horizon. Can you confirm that and also suggest whether or not are there any synergies available as well.

Yes, Yargus has been pretty steadily growing over that period of time and from a sales perspective, the last year has been in line with sort of flat to slightly down-ish which would be consistent with the lot of the industry. And we do expect now coming off of what was the slow summer across North America with projects sort of being a little bit slower to materialize on the fertilizer side, but we saw that too at Yargus, but very temporary. And backlog at Yargus being very strong and so that growth momentum we expect to pick-up. We do see some synergies across our commercial divisions. So we would be talking revenue synergies across really all of the commercial divisions, both not just in North America in Europe and in South America. This is a product line and capability and a team and that we will use their product lines in Brazil. So the team here at Yargus will be looking for their contribution to help build some of the components in Brazil. They face the same obstacles we do, high tariffs in imported equipment and in tariffs aside you need to be local and in manufacturing, in support and installation and so that the team at Yargus will be very active. They have been very active in Brazil they have a growing pipeline of sales in Brazil, in South America and we are very excited to get their help in introducing their product lines to our facility to our regions. And we expect that the extra capacity here we will be growing into that capacity in the near-term and adding to the team and the resources here in Marshall to achieve that as well.

That’s it for me. Thanks very much.

Thank you.

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

Hi, thanks a lot. I have got a couple here. Back to one of the earlier questions when we were talking about how you take your free cash flow in 2017 and put into a couple of different buckets there. Thanks for the color on it. But dive into that little bit more detail, is there potentially a target debt ratio you want to get down to before maybe starting to increase cash towards other end users like increasing return to shareholders. Is there a target you are looking for in 2017 or is just basically reduce debt to kind of comfort levels?

We are already at comfort level Greg, its Steve here, good morning. We have no specific target on the debt leverage ratio, as we have said before I mean over the longer term having a senior debt to EBITDA ratio of two times is kind of a round number that kind of we look towards. Having a ratio today where we are between 2.3 and 2.4 is certainly a very comfortable against our covenant ratio of three in a quarter and a growth profile that we have demonstrated during Q3. So the short answer is no, we don’t have specific debt leverage ratio of target and we will watch that leverage ratio decline as we continue to prove strong results. And really, next year 2017, as I said earlier we need to watch and see how the M&A opportunities play out.

No problem. And on that the 2.3 or 2.4 Steve that you mentioned, that’s pro forma or the purchase so includes the cash and the balance sheet, does that also include the EBITDA contribution?

It includes the EBITDA contribution and I'm referencing the calculation that we calculate them for the bank. So that calculation only allows us, deduct $10 million of cash regardless of how much cash we have in our balance sheet. When you calculate it when you are running your numbers, you can certainly use the entire cash balance. We have the opportunity obviously to use that cash to flag in debt and reduce our leverage that way. We are devoting that cash to other areas right now including the CapEx initiative in Brazil.

Right, okay. Got it. So it’s net debt, but only using $10 million of the cash in that net debt calculation and including the EBITDA, which was generated from the target in the past trailing 12 month EBITDA number.

That’s correct.

And is that the average of the three years like you quote in the press release or is the actual trailing 12 months EBITDA that Yargus had in this past 12 months?

It’s the LTM, yeas.

Okay. Sorry for the details there. But I just want to make sure I get the right one. Keeping on the acquisition, I mean we had a view that your commercial fertilizers sort of division was pretty full turnkey catalog and you mention this as kind of completing the picture there. Can you talk to us a little bit about how its difference in its products or services or geography I suppose than your other acquisitions in commercial fertilizer?

Yes, well the best example would be a couple of product lines declining weight, blending equipment and software and controls to operate that equipment. So they have developed their own controls, they build their own control boxes here and write their own software, produce their own proprietary software to run those controls. That's the capability we just simply don’t have across the rest of the platform, so we would be buying third-party solutions to bolt-on to our systems. Yargus has a very advanced capability in producing the software and the electronics and controls to run these systems. So that capability alone will advance us and round out a component of providing a turnkey system. And we will leverage that and look to expand that capability for other parts of our commercial business outside the fertilizer. So they have been doing this very long time specifically focused on just fertilizer and fertilizer systems and we have components of that certainly at [Indiscernible] and that new vision and bins form Westeel, but you do need to have a rounded out from the product side. Some of the ones we talked about a little bit in a few others, also the scale and capacity to ramp up our market share to this sort of levels that we want to see it at.

Okay, now that makes sense. And moving a little bit on to the guidance side. We have had a couple of questions from that already, but I just want to dig in one more time. You mentioned Steve that your forecast for Q4 don’t explicitly include any organic contraction year-over-year. It's just a bit of a slower quarter obviously; it can be pouring sales into it. But if that's the case, then we are not thinking about any organic contraction. Does the acquisition contribution from the 2016 purchases give us some kind of idea some of kind of quantified idea as to what you mean when you say up moderately would that be a fair comment?

Fair comment. Keeping in mind that our acquisitions experienced the same seasonality of AGI. So when you see an acquisition metric and given with all the acquisition metrics an annual EBITDA, that's weighted on almost all of them to Q2 to Q3 just like AGIs results are so. Yes, we have to bake in a little bit of weakness in the Q4 for all of these acquisitions.

Okay, I know that makes sense. Okay, great. And then this is my last one. Can you just give us a quick update Tim, I think in your prepared remarks you gave us a little bit of a door opener there, but on Entringer can you just give us an update as to where the build that is today. Is there any change to your view as to when that division starts to be a positive EBITDA contributor in 2017?

No. I think we were right in line with our prior guidance, the manufacturing building will be completed in December and towards the end of the year and then we need to commission the equipment lines and we know that that takes a little time to iron out the things and get everything working well. And so the first one to go in will be our in line that is transferring down from Nobleford, about 40 containers left in Nobleford, Alberta and showing up in Brazil right now and those will start to go in. From an equipment perspective, all key components have been ordered and have been scheduled to arrive where I talked a little bit about with the team there. We have made some very key hires over the last two to three months that will be building out that the team we need to run as we expanded business in Brazil in the near-term. So from a lien perspective, we have run a three events, three lien events down in Brazil with the team that we have in place at our current facility that have responded just outstandingly to the lien concepts and the lien way of manufacturing in doing business. Probably to put it in perspective, but they have responded faster I think than seen a team ever before. I mean from an introduction to lien to really diving into it, embracing it and putting it into place on everyday at cross the lot of the business, I mean it's been just been outstanding to see. Gary Anderson has helped us in that initiative and his many, many years of experience in doing this. So we have relied on really heavily here and along with the Michelle Martin, that helps us on lien from across all of our businesses and then some local resources in Brazil. This is an investment in getting manufacturing and processes correct upfront that will payout in space as we move forward. So we just couldn’t be happier with the way that the team is responding there. From a sales side, we have some very unique initiatives in place that we are starting to see some traction on in building a pipeline. Returning that business to breakeven ahead of schedule is - the positive EBITDA is just speaks to the discipline and the pricing strategies that our team have put in place. So no led by Dan Donner and then locally by Wilfred Totch, it’s just really happy across a lot of components in Brazil. The team in particular and then the building is - luckily, we partnered with a very good building partner and doing an outstanding job in bringing that facility together. So right now, we feel really good about the work that’s being done, where we are going to end up, the timeline we are on and it’s nice to see that Brazil’s Ag sector is very busy as well. There has been some drought across different parts of Brazil, but farmers are benefitting from that strong U.S. dollar as well. So we remain really happy with the progress to-date and very optimistic about where we will see 2017 and beyond in Brazil.

Great. Thanks for that color Tim and congratulations again everyone on a really strong quarter. That’s it for me.

Thanks Greg.

Thank you. [Operator Instructions] The next question is from [John Sheu] (Ph) Laurentian Bank Securities. Please go ahead.

Good morning everyone. So I just want to make sure I understood on the commercial margin side, when you are saying it was a pretty strong contributor. So the Union Iron and the two new plants does seem to be a more sustainable level for that division? Is that fair to say?

The margins out of the twofold is always very strong and then the new facility they moved into year ago or so have only helped. Union Iron I think we went through pretty excruciating detail with the market. Some of our troubles in 2015 and trying to get our margins straightened out there and we have succeeded. There is always certain factors at play or forward volumes in particular, but in general; the answer to your question is, yes, there are sustainable margins at similar volume.

Okay. And just on the Westeel, when I look back when it was under the I think Big West banner, it seems like the margins that you have been posting recently have been rivaling the highest margins that they have posted on record. Is that a fair statement and/or actually you are actually exceeding that?

Well. Yes, you take us back in memory here John. It’s certainly fair to say its rivaling and some of the better results. Keep in mind we have a very different cost structure with Westeel today than exited under the Big West ownership. So I don’t have the historical in front of us, but they have been very strong.

Okay. And then maybe just give us a sense of what you think the market opportunity is on the U.S. fertilizer storage side?

The fertilizer storage side, well in the U.S. fertilizers are a little bit different than Western Canada. So there is a lot of fertilizer stored on farm in smooth wall bins in Western Canada, less so, in the U.S., there is some and there is some smooth wall bin manufacturers down here. We don’t have smooth wall manufacturing in the U.S. and it’s a regional product. So we wouldn’t sell any really from Westeel into the U.S. There the model here is, there is a higher percentage of fertilizer that goes from a retail directly to farm and farmer won’t store any on farm. I don’t want to think that too broadly. It does occur, but the model in the U.S. for storage is different than Canada and Western Canada.

So it sounds like its more non-farmer or I guess we will call it commercial, institutional customer that you are focusing on?

That’s right. Commercial, it goes distributed to local commercial facilities that then fell direct to the farmer and apply direct from where they pick up the blended fertilizer at the retail and commercial lines. So we don’t have smooth wall in the U.S, there might be a pocket here and there that would make sense someday, but it’s not a currently a focus of ours.

Okay. And does that suggest the market might be a bit better than what you would have in Canada then because of that dynamic or…

Yes, your fertilizer in the U.S. would be all handling equipment, which tends to have a stronger margin profile.

Okay, great. And then lastly, I know there is a focus on the international side of folks looking at product sales versus project sales and obviously the weakness that you are seeing now would pr lend to that strategy of trying to smooth out the visibility of the revenue. Just kind of curious in terms of how things are progressing from a coding and backlog perspective with that product sale and emphasis.

Yes, product versus project, yes it’s a good question. I mean that applies to a component of domestic as well as international. International is where the focus would be. So in our opening remarks here we talked a little bit about strong international sale that are originated out of our European facilities and businesses. And then we do want to be clear that that’s different then the international project sales, which tend to be larger projects, but sourced from our North American facilities. And that’s the component that have been slow. And you are right, we have been driving an initiative to advance that sales pipeline from a focus on just projects to more individual project sales or smaller sales so that you get a nice blend of big ticket projects with sort of more single and double type equipment sales. So that’s I guess bit of background. We feel pretty good that’s been a focus of ours for a while here now and starting to see some nice success from that strategy going into the pipeline and backlog in international. So much like there has been prior years, a lot of activity right now and in the international markets that tends to come together towards throughout this month and next month and then we see the benefit of that in the backlog going into 2017. And a lot of that early backlog or backlog that’s established now and early month of 2017 is really where we see the international projects sales playing out. And there is very healthy pipeline there and we are starting to see some nice projects convert to backlog. So we feeling pretty good about the project side into 2017.

And presumably, the focus on product sales, the margins will be better than the project sales?

Not necessarily. It’s about the same.

Okay. All right, thank you.

Thanks John.

Thank you. The next question is a follow up question from Andrew Wong with RBC Capital Markets. Please go ahead.

Hi thanks. Actually, it’s a follow-up and John kind of touched on it. Regarding the international project sales, could you talk a little bit more about which regions you see the most potential for improvement next year? Thanks.

Well, it’s a bit of a blend, which is nice to see. In the pipeline there is projects in Ukraine, continues to be active, South America places like Argentina. We have put a fair amount of work into Argentina over the past three or four years, even when really the market was closed off or effectively closed off, not a lot happening in the market and we are starting to see the benefit of that. We have had some activity there. A lot of I would say in general, it is fair to say that market is opening up, but the changes in government there, we are starting to see some pretty quick changes in sentiment for investment in that region. Agriculture in particular have been pent up for many, many years. So we are seeing that play out now in terms of projects that players have a long time to plan and now moving to the execution stage. So we are positively biased on Argentina going forward and we think it will continue to stabilize or become more progressive and more open market. Northern Africa, we are quoting into some projects there and really EMEA, Middle East, Southeast Asia we are seeing some projects. The pipeline continues to have some nice diversity in it.

And are this [Indiscernible] type of sales, are they from the legacy Ag growth business or is it hard to kind of tell now?

No, no it’s really both. The [Indiscernible] tend to be focused on more of the EMEA region and then our North American facilities are quoting a little bit of everywhere, but we do have some key initiatives in place to increase those product sales out of those North American facilities.

Okay. That’s great. Thank you.

Thank you. There are no further questions registered at this time. I would now like to turn the meeting back over to Mr. Close.

Okay, well thanks very much, we are pretty excited here, we are heading over to plant here at the Yargus and no we have got a fun day ahead of us to welcome the team and startup planning going forward. So we will layout our 100 day plan here just like Mr. Trump and be very excited to get the team moving forward and look at the opportunities we have as a combined business and team. So thank you very much for joining us this morning for Q3 and look forward to talking to you in the near future.

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