REX American Resources Corporation

Greetings and welcome to the RECS American Resources Fiscal 2022 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 now like to turn the conference over to Mr. Doug Brueggemann, Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining REX American Resources Fiscal 2022 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 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 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 Rhodes, Executive Chairman of the Board and Zafar Rizvi, Chief Executive Officer. I'll review our financial performance and then turn the call over to Stuart for his comments. Sales for the third quarter increased by 8.5% as we experienced higher pricing for ethanol, distiller grains, and corn oil. Ethanol sales for the quarter were based upon 66.3 million gallons this year versus 69 million gallons last year. We report a gross profit of 11.3 million this year versus a gross profit of 25.2 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 8%. Dry distilled grain and corn oil pricing both improved by 25% for this year's quarter over the prior year third quarter. Corn cost increased by 17% and natural gas pricing increased by 56% for this year's quarter compared to the prior year. As inflationary pressures and the impact on commodity pricing from Ukraine-Russia conflict continued. Corn pricing was also impacted by higher corn basis based upon reduced availability of corn as we approached the harvest season. Gross profit comparison between years benefited slightly from fewer ethanol contracts sold net of freight in the current year, which leads to higher sales. SG&A increased for the third quarter to $7.9 million from $6.3 million in the prior year. The increase is primarily due to an increase in the number of ethanol contracts that require the freight to be paid by us compared to the prior year, which we classify as SG&A cost. We had income of $661,000 from our unconsolidated equity investment in this year's third quarter versus income of $349,000 in the prior year. The company's interest and other income in the current year increased dramatically to $2 million versus $35,000 in the previous year, primarily reflecting increased yields in our cash. The discontinued operations reflected in the prior year numbers are from the refined coal business as we ended those operations on November 18th of 2021. There was no impact in the current year. We reported a tax provision from continuing operations of $1.2 million for this year versus a provision of $4.3 million in the prior year, primarily reflecting the lower level of income in the current year. These factors led to net income attributable to REC shareholders from continuing operations of $3.2 million for this year's third quarter versus $13.3 million in the prior year. Total net income per share from continuing and discontinued operations attributable to REC shareholders was 18 cents for this year's third quarter versus $0.85 in the prior year. I would again like to point out all outstanding shares for all periods have been retroactively adjusted to reflect the three-for-one stock split, which was effective on August 5th of 2022. Stuart, I now turn the call over to you.

Thank you, Doug. Going forward, currently in the current quarter, we remain profitable, but crush spreads are still challenging, which our CEOs of Farber's Weed will discuss in his segment. We've made significant progress in carbon capture, which again will be discussed by Zafar Rizvi in his segment. In terms of our cash, we have approximately $290 million in cash, very little or no debt. We continue to look for investments in ethanol companies, although nothing is imminent. We're also making major investments in carbon capture, which will be discussed later in the call. We also now can earn meaningful interest on our cash, and with $290 million, we expect our interest income to go up during the current quarter and during the following quarters. We buy back stock on dips. We bought back approximately 250,000 shares in the quarter. We have board authorization for another 875,000 shares. So far as we will now discuss our ethanol and carbon capture operation. Thank you.