REX American Resources Corporation

Greetings and welcome to the RECS American Resources Fiscal 2021 First 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 RECS American Resources Fiscal 2021 First 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 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 with the Securities and Exchange Commission including the company's report 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. Before going over the financial performance, I would like to mention an additional disclosure in our press release. After mailing the proxy material, we noted that a reference to broker nonvotes and shareholder abstentions counting against the proposal to amend the Articles of Incorporation so as to allow potential issuance of preferred stock by the company had been erroneously deleted from the proxy. Effective this morning, a supplement to the proxy material was filed with the SEC. We included reference in this morning's press release will post it on our website and we will do a mailing to all stockholders of record, bringing this supplement to shareholders' attention. We apologize for this error but are taking prompt action to remedy and notify all shareholders. Sales for the quarter increased substantially by 97%, primarily due to higher production levels as we had idled our Nugent plant during the first quarter of last year due to the impact of the pandemic amongst other factors. Ethanol sales for the quarter were based upon 70 million gallons this year versus 48.3 million last year. We also benefited from a significant increase in average selling prices in the ethanol and byproduct segment. We reported gross profit of 19.5 million for the ethanol and byproduct segment versus a gross loss of 8.2 million in the prior year. Gross margin benefited from the increased volume in selling prices, which were offset somewhat by higher corn pricing. Gross profit also benefited from certain shipping costs being recorded in SG&A this year based upon contract terms and our placement of shipping costs. Our refined coal segment had a gross loss of $1.7 million for the first quarter of fiscal 2021 versus $1.1 million for the prior year based upon increased volume. These losses are offset by a tax benefit of $2.2 million and $959,000 for the first quarter of fiscal 2021 and 2020, respectfully. recorded from the section 45 credits and tax benefits from operating losses. SG&A increased for the first quarter to $10 million from $4.6 million in the prior year with the primary increase reflecting again the increased shipping cost related to certain ethanol contracts. We had income of $570,000 from our unconsolidated equity investment in this year's first quarter versus a loss of $477,000 the prior year reflecting the improved ethanol industry conditions. Interest and other income decreased to approximately $43,000 from $669,000 in the prior year, primarily reflecting lower interest rates. We recorded a tax provision of $29,000 for the first quarter of this year versus a benefit of $5.3 million in the prior year. Fluctuations in rates are largely caused by levels of refined coal production and credits versus income during the period. All of these factors led to net income attributable to REC shareholders of $7.8 million in this year's first quarter versus the net loss of $7.6 million in the prior year. I'd now like to turn the call over to Stuart Rose, Executive Chairman of the Board. Stuart, are you there?

Sorry. Going forward, second quarter today continues to be profitable, similar to first quarter. Ethanol prices, RIN prices, and DDG prices and corn oil prices have been strong. It's been offset by higher corn prices, natural gas prices. Zafar Rizvi, our COO, will discuss this further in the call when he discusses the ethanol settlement. Refined coal area. Production this quarter to date is exceeding last year's quarter by a large margin. This is mostly, I believe, due to reopening causing higher utility use and also higher natural gas prices, which is changing the utility we work with, we think, over to more coal. This business ends in the middle of November, but the credits can be carried forward for 20 years, and we believe we will benefit from these credits with higher cash flows for years to come. Corderan Rex had approximately consolidated $193 million in cash and no debt. Uses of cash include looking for opportunities in the ethanol business. It must be a good plant, good locations, and most importantly, a good price. We've explored these, and so far we have found nothing. We've explored a few opportunities, but nothing is imminent. We're looking at other opportunities in alternative energy that would fit our business skills. So far, again, nothing imminent. Stock buybacks on dips are authorized, although, again, we buy stock on dips. We're also working on a serious carbon capture project, which Zafar Rizvi will discuss further in his call. I'll turn the call over to Zafar Rizvi.