REX American Resources Corporation

Welcome to the RECS American Resources Fiscal 2020 Second Quarter Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, 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 an 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 Second Quarter Conference Call. We'll get to our presentation and comments momentarily, as well as your questions and answers, 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 risks 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 the 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. I'll first review our financial performance and then turn the call over to Stuart for his comments. Sales for the quarter decreased 63% primarily due to lower production levels as we had idled our One Earth and Nugent ethanol plants in March. We reopened the One Earth plant in late May and the Nugent plant in late June, which resulted in approximately one month of production for each of the plants in the second quarter. Ethanol sales for the quarter were based upon 26.5 million gallons this year versus 60.4 million last year. Sales for the quarter were also impacted by 11% decline on ethanol pricing year over year. We reported a gross profit of $553,000 in the second quarter for the ethanol and byproduct segment versus a gross profit of $6.2 million in the prior year. The decrease in gross profit was primarily caused by the same factors that impacted sales. Our refined coal segment had a gross loss of $1.8 million for the second quarter of fiscal 2020 versus $2.2 million for the prior year based upon lower volume. These losses are offset by a tax benefit of $2.9 million and $3.2 million for the second quarters of fiscal 2020 and 2019, respectively. Recorded from this section, 45 credits and the tax benefits from operating losses. SG&A was similar between quarters at $4.4 million this year versus $4.8 million in a prior year. We had a loss of $507,000 from our unconsolidated equity investment in this year's second quarter versus income of $239,000 in the prior year, reflecting overall ethanol industry conditions. Interest and other income declined year-over-year from $1.3 million to $197,000, primarily due to lower interest rates on our cash and short-term investments as interest rates fell sharply during the current year. We recorded a tax benefit of $4.1 million for the second quarter of this year versus $2.6 million in the prior year. We recorded our federal tax benefit from currently calculated tax losses at 35% rather than the current 21% tax rate based upon our ability to carry back losses five years due to the CARES Act. These factors led to a net loss attributable to REC shareholders of $1.7 million in the current year's second quarter versus net income of $2.3 million in the prior year. Stuart?

Going forward, ethanol is currently profitable with all plants open. The ethanol prices are up over last quarter. Corn appears to be plentiful with hopefully a good harvest in sight. The only negative that we see, or that I see, is at this current time, or the biggest negative I see, is there's 98 refineries that have applied for RIN exemptions. And if they were given all 98, that would have an impact on our business. Or if the government does not follow the law on RINs, that could have an impact on our business. In terms of cash, we had over $180 million on a consolidated basis. We continue to work on our potential carbon capture site, which Zafar Rizvi, our CEO, will discuss a little later. We bought back 30,536 shares during the last quarter. We're authorized to buy another 241,185 which we will again work on if the stock dips to levels that we think are attractive for the company to be buying back the stock. We continue looking for quality ethanol plants at reasonable prices. We've not found anything and nothing's imminent there. We continue to look at ancillary products that can be made out of ethanol or its byproducts. We would still consider an investment in something other than ethanol that could use our abilities, but again, nothing's imminent in that area. Zafar Rizvi, our CEO, will now discuss further our ethanol business in carbon capture. Thank you.