REX American Resources Corporation

Good day and welcome to the RECS American Resources Fiscal 2020 Third 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 like to turn the conference over to Doug Bruggeman, Chief Financial Officer. Please go ahead.

Doug Bruggeman Good morning and thank you for joining REX American Resources fiscal 2020 third quarter conference call. We'll get to our presentation and comments momentarily as well as your question and answer 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 meanings 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 increased 43% primarily due to increased production levels. Ethanol sales for the quarter were based upon 74.6 million gallons this year versus 47.6 million gallons last year. We ran our consolidated plants at full capacity in the current year third quarter while last year we had reduced the run rate at the Nugent plant based upon tight corn supply in that region. Ethanol price per gallon did decline from $1.39 in the prior year to $1.31 in the current year. We reported a large increase in gross profit to $18.9 million in the third quarter for the ethanol and byproduct segment versus gross profit of $28,000 in the prior year. Our crush spread between ethanol and corn was approximately 19 cents in the current year versus approximately a negative 4 cents in the prior year, primarily reflecting year-over-year lower corn pricing of 21%. Our refined coal segment had a gross loss of 1.3 million for the third quarter fiscal 2020 versus 1.6 million in the prior year based upon lower volumes. These losses are offset by tax benefits of 1 million and 2.2 million for the third quarter's fiscal 2020 and 2019 respectively, recorded from the section 45 credits and the tax benefit from operating losses. SG&A was similar for the third quarter at 4.3 million versus 4.1 million in the prior year. We recorded income of 1.2 million from our unconsolidated equity investment in this year's third quarter versus a small loss of 15,000 in the prior year. Interest and other income declined year-over-year from $1 million to $537,000, 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 provision of $4.1 million for the third quarter of this year versus a benefit of $3.2 million in the prior year. We had a tax expense in the current quarter based upon returning to profitable operations reversing in the third quarter previously recorded federal benefit of losses at 35% for the current year as well as having lower run rates at the refined coal facility. The above factors led to net income attributable to REC shareholders of $8.8 million or $1.44 per share in this year's third quarter versus the net loss of $2.1 million or a loss of $0.32 per share in the prior year. Stuart, I'll turn the call over to you now for your comments.

Thank you, Doug. On the quarter to date going forward, we so far are profitable, but crush spreads have deteriorated rapidly in the last 30 days. Zafar Rizvi, our CEO, will discuss that further. We have hopes for a possible better EPA and agriculture secretary related to ethanol in the Biden administration. That should be a positive. We hope to be a positive for our company. Currently, there's less driving, which is related to COVID. It's hitting people hard, and I expect it to hit people even harder right before the vaccine, or hit us even harder right before the vaccine as people are more cautious as they see a vaccine coming soon, and we believe more people will be staying home. In terms of refined coal, we have approximately one year left where we received tax credits. are expected to receive tax credits on that business. The fourth quarter did well, or we expect it to improve over the third quarter on an after-tax basis. When cold weather hits, the utilities usually run more, which gives us a chance to make more refined coal. The utility usually runs more, which gives us a chance to make more refined coal. In terms of short-term cash on the balance sheet, We have approximately $202 million in short-term investments and cash on the balance sheet. We have approximately $202 million. We've repurchased 316,349 shares. And so far in fiscal 2020, we have authorization for another 33,512. under our current authorization, and we tend to or try to buy or use our buyback to buy the stock on dips. We're also looking for opportunities in the ethanol field. We only are really looking at plants that we consider among the very, very best. In terms of carbon capture, we're working hard on that. Zafar Rizvi, our CEO, will will discuss that. I'll now turn the conference call over to our CEO, Zafar Rizvi.