REX American Resources Corporation — Form 10-Q Summary
Period note: The request metadata says 2021 Q3, but the filing is for the quarter ended October 31, 2022 (REX fiscal 2022 Q3), with nine-month comparisons to October 31, 2021. Amounts below are in millions of dollars unless stated otherwise.
Business context and reporting period
REX operates in ethanol and by-products, with majority interests in One Earth Energy and NuGen Energy and a minority equity-method investment in Big River Resources. Products include ethanol, distillers grains and non-food grade corn oil. The refined coal business ceased operating in November 2021 and is reported as discontinued operations; accordingly, prior-year comparisons include refined-coal income while current-year results do not.
Financial results and liquidity
| Metric | Three months ended Oct. 31 | Nine months ended Oct. 31 |
|---|---|---|
| Revenue, 2022 / 2021 | $220.3 / $203.1 | $654.8 / $562.8 |
| Gross profit, 2022 / 2021 | $11.3 / $25.2 | $39.8 / $58.8 |
| Gross margin, 2022 / 2021 | 5.1% / 12.4% | 6.1% / 10.4% |
| Income before taxes, 2022 / 2021 | $6.1 / $19.2 | $34.1 / $39.2 |
| Net income attributable to REX shareholders, 2022 / 2021 | $3.2 / $15.3 | $19.5 / $30.9 |
| Diluted EPS, 2022 / 2021 | $0.18 / $0.85 | $1.10 / $1.72 |
- Revenue rose 8% for the quarter and 16% for the nine months, mainly reflecting higher product prices. Higher corn and natural-gas costs more than offset selling-price gains, reducing gross profit.
- At October 31, cash and cash equivalents were $136.0 and short-term investments were $153.8, versus $229.8 and $25.9, respectively, at January 31. Total current assets were $374.0 and current liabilities $57.3; working capital was $316.7 and the current ratio was 6.5:1.
- No borrowings are presented on the balance sheet. Operating lease liabilities totaled $14.8, including $4.9 current and $9.9 long term.
- Nine-month operating cash flow was $54.0, versus $50.4 in 2021. Investing activities used $134.0, chiefly reflecting net purchases of short-term investments; capital expenditures were $7.2. Financing activities used $14.7, including $13.0 for share repurchases and $1.7 distributed to noncontrolling-interest holders. Cash, cash equivalents and restricted cash declined $94.8 to $137.3.
Material changes and unusual items
- Quarterly ethanol selling price increased 8%, but gallons sold decreased 4%; corn cost per bushel increased 17%. Management reported the quarterly crush spread fell from $0.11 to negative $0.07. For the nine months, ethanol price rose 17%, corn cost per bushel rose 20%, and the crush spread fell from $0.06 to approximately break-even.
- Higher prices also lifted distillers-grains and corn-oil revenue. Nine-month average selling prices increased 16% for dried distillers grains and 49% for corn oil, while volumes were slightly lower.
- Interest and other income included approximately $7.8 of USDA Biofuel Producer Program grants received by consolidated plants. Big River’s reported equity income also benefited by $1.6 from USDA relief grants. These are significant nonrecurring factors in reported income.
- REX repurchased approximately 471,000 shares for $13.0 during the nine months. At October 31, authorization remained for approximately 877,000 shares. A three-for-one stock split was paid in August 2022; share and per-share data are retrospectively adjusted.
Outlook, risks and contingencies
- REX provided no formal earnings guidance. It expected fourth-quarter fiscal 2022 capital expenditures of approximately $5–$7, primarily for its carbon-sequestration project.
- Management is exploring carbon sequestration at One Earth, including an EPA Class VI permit application and planned carbon-capture infrastructure. Approvals and project progress may take considerable time.
- Results remain exposed to volatile corn, ethanol, natural-gas and by-product prices, supply and logistics disruptions, inflation, weather, and changes in renewable-fuel policy. Management notes that crush spreads can become inadequate and plants may reduce or suspend production.
- The filing describes proposed EPA renewable-fuel volumes for 2023–2025 and potential Inflation Reduction Act incentives, including Sections 45Q and 45Z; eligibility, implementation and economic effects remain uncertain. The filing also flags possible long-term ethanol-demand effects from electric-vehicle incentives.
- REX reported approximately $16.8 of unrecognized tax benefits and an ongoing federal income-tax examination covering fiscal years ended January 31, 2015 through 2020. Management said a change in uncertain tax positions over the next 12 months was not expected to materially affect results or financial position.
- Management said ordinary-course legal matters were not expected to have a material adverse effect. Disclosure controls were assessed as effective, with no material change in internal control reported for the quarter.
Important facts for investors to verify
- Confirm the intended reporting period: this filing covers fiscal 2022 Q3, not 2021 Q3.
- Assess whether higher product prices can offset corn and natural-gas costs and restore sustainable crush spreads and margins.
- Separate recurring operating performance from USDA grant income, equity-method results and other investment income.
- Review cash deployment, including Treasury-bill purchases, planned carbon-sequestration spending and remaining share-repurchase authorization.
- Monitor EPA and tax-credit policy developments, carbon-project permitting, corn availability, and the outcome of the federal tax examination.