REX American Resources Corporation

Greetings and welcome to the RECS American Resources Fiscal 2022 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. 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. As a reminder, this conference is being recorded Tuesday, August 30th, 2022. I would now like to turn the conference over to Doug Bruggerman, Chief Financial Officer. Please go ahead.

Good morning and thank you for joining Rex American Resources Fiscal 2022 Second 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 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 will first review our financial performance and then turn the call over to Stuart for his comments. Sales for the second quarter increased by 23% as we experienced higher pricing for ethanol, distiller grains, and corn oil. Ethanol sales for the quarter were based upon 71.4 million gallons this year versus 69 million last year. We reported gross profit of 16.6 million this year versus a gross profit of $14.2 million in the prior year. For the current year quarter, improved selling prices were offset by higher corn and natural gas pricing. Ethanol pricing improved by 20%, dried distilled grain improved by 21%, and corn oil pricing improved by 53% for this year's quarter over the prior year's second quarter. Corn costs increased by 21%, and natural gas pricing increased by 113%. for this year's quarter compared to the prior year as inflationary pressures and the impact on commodity pricing from the Yukon-Russia conflict continued. Gross profit comparison between years also benefited slightly from fewer ethanol contracts sold net of freight in the current year, which leads to higher sales. SG&A increased for the second quarter to 9.1 million from 6.2 million in the prior year. $1.1 million of the increase is due to the increase in the number of ethanol contracts that require the freight to be paid by us compared to the prior year and approximately $900,000 from increased incentive compensation. We had income of $3.6 million from our unconsolidated equity investment in this year's second quarter versus income of $1.8 million in the prior year. The majority of the increase was a result of funds they received from the COVID-19 relief grants from the USDA. The company's interest and other income in the current year includes approximately $7.8 million of income from COVID-19 relief grants, the consolidated plans also received from the USDA in May. The discontinued operations reflected in the prior year numbers are from the refined coal business as we ended those operations on November 18, 2021. There was no impact in the current year. We reported a tax provision from continuing operations of $4.3 million for this year versus a provision of $1.8 million in the prior year, primarily reflecting the higher level of income in the current year. These factors led to net income attributable to REC shareholders from continuing operations of $11.2 million for this year's second quarter versus $5.7 million in the prior year. Total net income per share from continuing and discontinued operations attributable to Rex shareholders was 63 cents for this year's second quarter versus 44 cents in the prior year. I would like to point out all outstanding shares for all periods have been retroactively adjusted to reflect the recent three-for-one stock split. Stuart, I'll turn the call over to you.

Thank you, Doug. Continuing into the current quarter, we continue so far this quarter to be profitable. There are challenges in the ethanol business, which Zafar will discuss in his section. Our carbon capture project continues to receive very good news with the Inflation Reduction Act. Continue to work hard on that. Again, Zafar will discuss that in his section. In terms of consolidated funds, we have cash of over 245 million. Our cash flow is significantly helped by the carry forward of tax credits previously earned. We continue to use that cash for our buyback. We buy back on dips. We bought 221,883 shares on a split adjusted basis during the last quarter. We continue to look for profitable alternative energy possibilities. We're currently studying the Inflation Reduction Act to see if there's anything new that might be an opportunity for our company. Again, we are always looking for ethanol plants, but nothing is imminent. We have not found anything at this point in time that would really work for us. In terms of our cash, we're now able to invest it. at a much higher rate than before, between 2% and 4%, versus virtually zero the year before. So that should help with our current cash position. That should help our income over the next few quarters. I'll now turn the call over to Zafar to talk about ethanol and carbon capture. Thank you.