REX American Resources Corporation (NYSE:REX) Q3 2017 Earnings Conference Call Transcript

Nov 29, 2017 • 11:00 am ET


REX American Resources Corporation (NYSE:REX) Q3 2017 Earnings Conference Call Transcript


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Ladies and gentlemen, thank you for standing by. Welcome to the REX American Resources Fiscal 2017 Third Quarter Conference Call.

(Operator Instructions)

I would now like to turn the conference over to Doug Bruggeman, Chief Financial Officer. Please go ahead, sir.

Doug Bruggeman

Good morning, and thank you for joining REX American Resources Fiscal 2017 Third Quarter Conference Call. We'll get to our presentation and comments momentarily as well as your Q&A, but first, I'll review the Safe Harbor disclosure.

(Forward-Looking Cautionary Statements)

I have joining me on the call today, Stuart Rose, Executive Chairman of the Board; and Zafar Rizvi, Chief Executive Officer. I'll first review our financial performance and then turn the call over to Stuart for his comments.

The first thing I want to point out is we now have two reporting segments, ethanol and by-products, and refined coal. We acquired our refined coal facility on August 10, 2017, so this is the first quarter has been impacted our financial results. Our comments on refined coal segment are contractually limited, so please keep that in mind for your questions.

The third quarter resulted in our best quarter for the current year-to-date for our ethanol and by-products segment. Consolidated sales for the quarter increased approximately 4% to $121.2 million. Ethanol sales increased approximately 6%. Sales are based upon 66.4 million ethanol gallons this year versus 62.8 million gallons in the prior year as we continue to work on ramping up production at the consolidated plants.

Consistent with the first half of the year, we experienced a reduction in DDG pricing year-over-year, which resulted in approximately a $2.8 million reduction in DDG sales for the third quarter. This was partially offset by increased modified distillers production and resulting increased sales of approximately $1 million from modified distillers.

I'd like to point out, at the refined coal segment, we report sales net, meaning we reduce our sales of refined coal by the cost of the coal feedstock.

Primarily reflecting the above factors, gross profit for the ethanol and by-products segment declined slightly from $20.2 million to $18.3 million for the third quarter. GP was also negatively impacted from the refined coal segment by $3.4 million.

SG&A for the third quarter increased from $5.1 million to $7.3 million, largely due to transaction costs related to the refined coal acquisition.

Equity method income was $1.1 million this year versus $1.8 million in the prior year.

Interest and other income increased from $117,000 to $745,000 due to increased interest rates for the cash on hand, as well as grant money related to work at an ethanol plant.

Reflecting the benefits of our refined coal operations, we reported a tax benefit of $5.7 million this year versus a tax provision of $5.7 million in the prior year third quarter. The benefits reported for the quarter were larger than we expect for a normal quarter as this was the first quarter of refined coal operation. We estimate our expected tax rate for the full year, which results in