Business context and reporting period
REX American Resources Corporation is primarily an ethanol and by-products investor/operator, with majority-owned interests in One Earth Energy and NuGen Energy and a minority equity-method investment in Big River Resources. Its six invested facilities shipped approximately 691 million gallons of ethanol in aggregate; REX’s effective share was about 271 million gallons.
Period clarification: Although the request metadata says “2021 Q4,” this is a Form 10-K for fiscal 2022, the year ended January 31, 2023 (February 1, 2022–January 31, 2023), with fiscal 2021 as the main comparison.
Financial results and liquidity
| Metric | Fiscal 2022 | Fiscal 2021 |
|---|---|---|
| Net sales and revenue | $855.0 million | $774.8 million |
| Gross profit / margin | $54.7 million / 6.4% | $97.6 million / 12.6% |
| Income before income taxes | $47.5 million | $75.8 million |
| Net income attributable to REX shareholders | $27.7 million | $52.4 million |
| Diluted earnings per share | $1.57 | $2.92 |
| Cash provided by operating activities | $54.8 million | $91.7 million |
Fiscal 2022 revenue increased about 10%, mainly from higher commodity selling prices. Profitability fell as the crush spread narrowed to approximately $0.02 per gallon from $0.16, while natural gas costs increased. Average ethanol selling price rose to $2.44 per gallon from $2.21, but gallons sold declined about 4% to 265.8 million. Average grain cost rose to $7.24 per bushel from $5.99, and natural gas cost rose to $6.66 per MmBtu from $4.27.
At January 31, 2023, cash and cash equivalents were $69.6 million and short-term investments were $211.3 million, or $280.9 million combined; the prior-year combined balance was $255.7 million. Current assets were $372.6 million and current liabilities $54.6 million. The balance sheet reports no conventional borrowings; operating lease liabilities totaled $15.0 million. Cash provided by operations was more than offset by $198.5 million of investing outflows, largely purchases of short-term investments, and $17.0 million of financing outflows. Capital expenditures were $15.6 million. REX repurchased approximately 472,000 shares for $13.0 million during the year.
Other results: equity income from Big River was $8.7 million versus $6.6 million. Interest and other income was $13.0 million versus $0.1 million, including $7.8 million of USDA biofuel producer relief grants received by consolidated plants. REX reported no refined-coal discontinued-operations income in fiscal 2022; the prior-year shareholder income included $4.8 million from discontinued operations.
Outlook, risks and unusual items
- Management expects fiscal 2023 capital expenditures of approximately $60–$70 million for plant expansion and carbon-intensity reduction projects, depending partly on carbon-sequestration progress. It expects to fund these from cash held at the ethanol subsidiaries. No earnings or revenue guidance is provided.
- The One Earth carbon-sequestration project remains exploratory. REX has drilled a test well, completed seismic work, applied for EPA Class VI permits for three wells, signed a carbon-capture equipment construction contract, and is studying a pipeline. Permits and other approvals remain outstanding, with no assurance of completion. Potential benefits include federal 45Q and 45Z credits.
- Key operating risks include volatile corn, ethanol, distillers-grains, corn-oil and natural-gas prices; narrow or negative crush spreads; rail/logistics and corn availability; and regulatory, trade and fuel-demand changes. The 2022 NuGen-area corn harvest was below average, which management expected to affect supply until the 2023 harvest.
- Commodity hedging may not fully offset price exposure. REX’s fixed-price contracting generally extends no more than four months, and derivative fair-value changes are recognized in current earnings.
- At year-end, consolidated plants had approximately $87.7 million of contracted future purchases and other commitments, including capital contracts, with $75.1 million payable within 12 months; operating lease payments totaled $17.0 million, including $5.6 million due within 12 months. The filing also reports 18.0 million bushels of corn and 2.7 million MmBtu of natural-gas purchase commitments, alongside product sales commitments.
- A federal income-tax examination covers fiscal years 2015–2020. Unrecognized tax benefits were approximately $19.0 million; management says the examination could result in additional tax payments. A $250,000 liability was recorded for a patent-infringement contingency related to the former refined-coal facility.
- Customer concentration is significant: eight customers accounted for approximately 90% of fiscal 2022 revenue, and four customers represented approximately 81% of year-end receivables. Approximately $238.8 million of cash and short-term investments was held by One Earth and NuGen for their operating, capital and other needs.
- The refined-coal facility ceased operations in November 2021 after becoming ineligible for production tax credits and was subsequently sold. The auditor gave unqualified opinions on the financial statements and internal control; the tax-asset realizability assessment was identified as a critical audit matter.
Important facts for investors to verify
- Whether crush spreads and corn and natural-gas availability recover, particularly at NuGen, and how that affects margins and operating cash flow.
- Progress, required approvals, committed costs and expected timing for the One Earth sequestration project and related tax-credit eligibility.
- Availability and permitted uses of cash held at subsidiaries, and whether planned $60–$70 million fiscal 2023 capital expenditures remain consistent with liquidity needs.
- Outcome and potential cash impact of the federal tax examination and the realizability of deferred tax assets and tax-credit carryforwards.
- Customer concentration, commodity-contract exposure, and the amount and timing of purchase, sales, lease and capital commitments.
- Reconcile the requested “2021 Q4” period with the filing’s actual fiscal 2022 reporting period ended January 31, 2023.