REX American Resources Corporation

Greetings and welcome to the RECS American Resources Fiscal 2020 First Quarter Conference Call. During the presentation, all participants will be in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach the operator, please press star 0. I would now like to turn the conference over to Doug Bruggeman. Chief Financial Officer, please go ahead.

Good morning and thank you for joining REX American Resources fiscal 2020 first quarter conference call. We hope everyone and their family and friends have remained safe and healthy since we last spoke. We'll get to our presentation and comments momentarily as well as your Q&A session, but first I'll review the safe harbor disclosure. In addition to historical facts or statements of current conditions, Today's conference call contains forward-looking statements that involve risk and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectations. The risk and uncertainties associated with forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and 10-Q. REX American Resources assumes no obligation to publicly update or revise any forward-looking statements. I have joining me on the call today, Stuart Rose, Executive Chairman of the Board and Zafar Rizvi, Chief Executive Officer. Let me first review our financial performance. Sales for the quarter decreased 20.4% primarily due to lower production levels as we idled our Nugent plant mid-first quarter as the crush margin for this plant was affected by local corn availability, the COVID-19 pandemic, and lower oil pricing in the impact on ethanol demand and pricing. Ethanol sales for the quarter were based upon 48.3 million gallons this year versus 61.3 million last year. Although we idled the One Earth plant, it occurred at its quarter end, so there was no significant impact on its volume for the first quarter. We reported a gross loss of $8.2 million for the ethanol and byproduct segment versus a gross profit of $6.1 million in the prior year. Gross margin in the current year was not only impacted by the lower volume and negative ethanol corncrest spread, but also by the $9.1 million lower cost or net realizable value charge as corn and ethanol values fell sharply due in part to the slowdown in demand from the COVID-19 impact, all of which was offset somewhat by a hedge gain of $3.1 million. Our refined coal segment had a gross loss of $1.1 million for the first quarter of fiscal 2020 versus $2.5 million for the prior year based upon lower volume. These losses are offset by tax benefits of $959,000 and $3.9 million for the first quarter of fiscal 2020 and 2019, respectively, recorded for the Section 45 credits and the tax benefits from operating losses. We had a loss of $477,000 from our unconsolidated equity investment in this year's first quarter versus income of $126,000 for the prior year, reflecting ethanol industry conditions. Interest and other income declined from 1.1 million to 669,000, primarily due to lower interest rates on our cash and short-term investments as interest rates fell sharply during the quarter. We recorded a tax benefit of 5.3 million for the first quarter of this year versus 3.5 million in the prior year. We recorded our federal tax benefits from losses at 35% rather than the current 21% federal tax rate Thank you, Doug. Going forward

Our ethanol business is currently losing money, and we expect it to lose money in the second quarter, but we do not expect a loss to be as much as the first quarter. Wind prices and ethanol prices have risen, allowing us to reopen our Gibson City plant. Hopefully, we can have all plants operational by the fall. Corn harvest looks good, and the CARES Act certainly helped us as losses can be carried back five years. There's also some other benefits in the CARES Act that we certainly will take advantage of where it applies to us. In terms of refined coal, it continues to be down as coal use for electricity has declined, and especially at the utility where we have our operations. In terms of quarter end, we had 195 million roughly in cash on a consolidated basis. We plan on investing in a potential carbon capture site, which Zafar Rizvi, our CEO, will discuss following May. We continue to buy in shares on DIPS. Opportunistically, we bought in 108,706 shares during the first quarter and since the first quarter and were authorized to buy 241,185 more. We continue to look for quality ethanol plants. We still believe in the industry, but we'd have to have very, very good prices, and certainly we have nothing imminent at this time. We would consider outside investments. We've done that in the past. That's how we got into the ethanol business. If we feel it would be profitable and would fit our skill set. Again, there's nothing imminent. I'd like to turn this over to Zafar now to talk a little bit about the ethanol business and the carbon capture that we've just initiated, carbon capture project we've just initiated. Thank you.