Transcript Document
REX: NYSE
www.rexamerican.com
One Earth Energy, LLC
Gibson City, IL
Stuart Rose, Chairman & CEO
Doug Bruggeman, CFO
October 2011
Safe Harbor
This presentation contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements
can be identified by use of forward-looking terminology such as “project,” “may,” “expect,”
“estimate,” “anticipate” or “continue” or the negative thereof or other variations thereon or
comparable terminology. You are cautioned that there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred to in such forwardlooking statements. These risks and uncertainties are described in our filings with the Securities
and Exchange Commission.
2
REX Overview
Successful alternative energy investor since 1998
Synfuel investments of $6M yielded ~$178M return over 10 years
Discontinued legacy retail operations in FY ’09 to focus on alternative energy
Ethanol investments initiated in 2006
$24M profit in FY’ 07 on $14M early ethanol investment
Alternative energy now represents 99% of revenue and 68% of assets
Ownership in six operating ethanol production facilities representing
169.2M gallons of annual operating nameplate production
Revenues from ethanol, distillers grain & corn oil
Strong, liquid balance sheet
(based on 9.6M diluted shares)
(as of 7/31/11)
Unrestricted cash of
Net book value of retail real estate
Net deferred tax assets
Carrying value of ownership in six plants
REX shareholders’ book value
$84.2M
$18.7M
$ 8.8M
$140.2M
~ $ 8.80/share
~ $ 1.96/share
~ $ 0.92/share
~ $14.68/share
$249.7M
~$26.25/share
ROE-focused asset allocation discipline
11.2% average ROE since 1993 (despite low returns on high cash balances)
Ongoing share repurchase program
Insider ownership approximately 30%
3
Alternative Energy Investments
Entered alternative energy sector FY ‘98 investing in two synthetic fuel LP’s
Earned federal income tax credits based on the tonnage and content of solid
synthetic fuel produced and sold to unrelated parties
Sold interests in both partnerships and received quarterly income subject to
production levels and phase-outs through calendar 2007
Purchased 3rd synthetic fuel facility in FY ‘02; was sold in FY ’04
Synfuel partnership performance - FY ’98 - FY ’11
Total investment income ~$130M from sale of partnership interests
Allocated income tax credits of ~$48M
Plus $2.9M in income received in Q2 ‘11 from plant sold in 2006
Entered ethanol sector FY ’06 and today REX has:
Investments in six operating ethanol production facilities
Ownership of ~169.2mgy of nameplate ethanol production
Includes 48% interest in 100mgy NuGen Energy facility acquired 7/10
Wrote off Levelland-Hockley plant at 1/31/11; halted operations Jan 2011
4
REX Ethanol Portfolio at 7/31/11
Entity/Location
Nameplate
REX
Non-Recourse
Capacity
Carrying
Plant Debt (3)
(mgy)
Value (millions)
(millions)
%
Ownership
(millions)
RSC Capacity
Owned (mgy)
One Earth Energy, LLC
Gibson City, IL
100
$65.7
$74.3
74%
74.0
NuGen Energy, LLC
Marion, SD
100
$20.1
$83.4
48%
48.0
Patriot Renewable Fuels, LLC
Annawan, IL
100
$23.1
$63.5
23%
23.0
10%
9.2
10%
10.0
5%
5.0
n/a
n/a
169.2
$43.3
49%
19.6
Big River Resources, LLC
West Burlington, IA (1)
92
Big River Resources
Galva, IL (1)
100
Big River United Energy
Dyersville, IA (1)
100
TOTAL
592
Levelland Hockley County Ethanol, LLC(2)
Hockley County, TX
40
$31.3
$140.2
$0.00
$150.0
(1)REX owns a 10% interest in Big River which owns 100% of West Burlington & Galva & 50.5% of Dyersville plants.
(2)Wrote off entire investment of $18.4M in Levelland Hockley at end of FY ’10; LHCE ceased production January 2011.
(3) Plant debt figures are as of 6/30/11
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REX Ethanol Strategy
Disciplined investment criteria
Invest only if project meets strategic and financial risk and return criteria
Align with farmers, farm cooperatives and farming communities as
co-investors and owners of ethanol production facilities
Facilitates access to grain supply, local community support
Locate plants close to rail access and feedstocks
Utilize state-of-the-art ethanol production technology
Dry mill corn-processing
All plants are highly efficient Fagen, Inc. and/or ICM, Inc.
Fagen is large, respected U.S. green energy design-builder
ICM engineers, builds, and supports renewable fuel bio-refineries
ICM process technology produces ~6.6 billion gallons of ethanol
Seek to match grain prices with ethanol and DDG sales at most plants
Forward grain purchases and ethanol sales contracts generally two month duration
Derivative contracts are generally not employed to hedge commodity price risks
Maximize ethanol plant returns via:
Running plants efficiently, often above nameplate capacity
Sale of dried (and wet) distillers grain (DDG) as animal feed
Adding corn oil production capabilities
6
Demand/Pricing Drivers
Ethanol
Federal EPA ethanol purchasing mandates continue to rise, requiring refiners
to purchase more ethanol each year:
Year
2011
2012
2013
2014
2015 & beyond
Target
12.6 BGY
13.2 BGY
13.8 BGY
14.4 BGY
15.0 BGY
$0.45 per gallon VEETC (blender’s credit) expires Dec. 31, 2011
Distillers Grain
Rising corn prices have driven DDG pricing increases, helping offset impact on
crush spreads
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Crush Spread & DDG Pricing
Crush Spread = price of 1 gallon of ethanol - cost of corn to produce it
One bushel of corn makes ~2.8 gallons of ethanol
Crush spread = Ethanol price – (Corn bushel price / 2.8)
Crush spread excludes other production, transportation costs, etc.
Dried distillers grain (DDG) pricing has offset weaker crush spreads
REX’s average realized DDG prices per quarter are reflected on green line below.
70
60
56
Crush Spread Trend (cents per gallon)
62
$149
51
50
$101
$193
$183
46
$119
$121
44
$113
44
40
$109
28
30
29
31
34
34
25
26
21
24
23
20
17
9
10
4
9
6
2
(1)
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
(4)
Jun-11
(10)
Calculated using CBOT monthly average prices
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Six Months Operating Results
$ in millions, except per share data
Six Months Ended
7/31/11
7/31/10
$154.4
0.7
$155.1
$135.8
0.5
$136.3
$4.4
$13.4
$10.5
(1.4)
(1.2)
2.9
0.1
$10.7
(0.5)
(1.5)
-0.1
Income from continuing operations
including non-controlling interests
$6.6
$5.6
Net income from continuing operations
Net income from continuing operations per share
$6.0
$0.63
$4.4
$0.44
Net income
Diluted net income per share
$7.0
$0.73
$5.4
$0.54
Net sales and revenue:
Alternative energy (1)
Real estate
Total net sales and revenue
Gross profit
Segment profit (loss):
Alternative energy (1)
Real estate
Corporate expense
Income from synthetic fuel partnership
Interest income, net
Weighted average diluted shares outstanding
9.6
10.0
(1) 7/31/10 period includes results attributable to non-controlling interest of Levelland Hockley (44%) and One Earth
Energy (26%) and 7/31/11 period includes results attributable to non-controlling interest in One Earth Energy (26%).
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Strong Balance Sheet
$ in millions
7/31/11
1/31/11
$ 96.4
$ 91.0
Total Current Assets
121.2
125.8
Property & Equipment, net
163.1
169.8
8.8
11.0
74.5
67.3
1.6
1.6
Total Assets
$370.2
$375.7
Current Debt
$ 11.0
$ 10.0
24.6
24.6
4.0
6.4
63.7
69.0
1.2
1.9
$249.7
$244.9
Cash and Cash Equivalents
Deferred Taxes, net
Equity Method Investments
Other Investments and Deposits
Total Current Liabilities
Deferred Income
Long Term Debt - Non Recourse
Long Term Debt - Recourse
Total REX Equity (excludes non-controlling interests)
10
Real Estate Assets
Previously built and operated 260-store consumer electronics chain
Discontinued retail operations in FY ’09
Retail service contract deferred income recognized in discontinued operations
Monetized real estate as industry dynamics challenged retail operations
Reduced store count using disciplined financial criteria for each location
Sold 86 company-owned sites in 2007 for $74.5M in cash
Real estate holdings as of 7/31/11:
Carrying value $18.7M, net of $1.2M of debt
27 owned store locations & 1 distribution center
Divesting real estate on an opportunistic basis
No urgency to exit at lower valuations given strong cash position
11
Capital Allocation Priorities
Ethanol plants and other industrial investments
Share repurchases below book value
3.7M shares repurchased last three years + YTD; $13.04 avg. price
Repurchased 939,801 shares YTD; $16.71 avg. price
New 500,000 share repurchase authorization announced Oct. 20, 2011
Growth in Book Value Per Share vs.
Annual Average Price of Shares Repurchased
$30.00
$25.82
$26.15
$24.93
$23.51
$20.00
$15.99
$16.71
$10.82
$10.82
$10.00
$0.00
FY 08
FY 09
FY 10
FY 11 YTD
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REX Summary
Successful alternative energy investor since 1998
Interests in six operating ethanol production facilities
169.2M gals of production capacity/year
Alternative energy segment profit of $13.4M in FY ’10 and $10.5M in 1H FY ’11
Industry leading ethanol production skill and plant efficiencies
REX ethanol operations are among best performing plants
Growth opportunities in ethanol and other industrial sectors
Expand ownership of existing facilities
Invest in new ethanol plants or industrial projects requiring similar skill sets
Proven management team with asset allocation discipline
11.2% average ROE since 1993, despite low returns on high cash balances
Long-term program of share repurchases below book value
Insider ownership of ~30%
Strong asset base (at 7/31/11):
Shareholders‘ equity $249.7M (~$26.15 share)
Unrestricted cash
$84.2M
Net real estate value
$18.7M
Net deferred tax asset $ 8.8M
9.6M diluted shares outstanding at 7/31/11
8.7M basic shares out at 10/20/11
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REX AMERICAN RESOURCES CORPORATION
REX: NYSE
www.rexamerican.com
Review of REX American’s
Investments in Operating Ethanol Plants
Investor Relations Contacts:
Joseph Jaffoni/David Collins
Jaffoni & Collins Incorporated
212/835-8500 or [email protected]
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One Earth Energy, LLC Summary
REX has a 74% ownership interest in One Earth
Operates dry mill corn-processing ethanol plant in Gibson City, IL
100 mgy ethanol capacity; 320,000 tons of dried distiller grains
Plant capital costs: ~$153.5M
10/07: REX funded $50.8M to secure a 74% ownership
7/09: Plant commenced operation
Fagen and ICM construction, process design and engineering
Strong partners, location and corn supply
Alliance Grain and Cooperative is a farmer-owned elevator system established in
1991 located directly in front of the ethanol plant
Five operational elevators near the plant all of which are rail load-out accessible via
Alliances Bloomer Line Rail Company, offering transportation savings for corn and feed
Two major rail services available: Canadian National and Norfolk Southern
~54M bushels of grain can be stored at three of the nearest elevator locations
~200M bushels of corn are produced annually in surrounding counties
REX has received dividends of $5.1M through 7/31/11
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NuGen Energy, LLC Summary
REX has a 48% ownership interest in NuGen Energy, LLC
Acquired effective 6/30/10
Operates dry mill corn processing ethanol plant in Marion, SD
In partnership with Central Farmers Cooperative, LLC, one of the largest and most
successful grain and corn procurement entities and grain terminals in the region.
REX previously owned 33.9% interest in plant acquired for $14M
REX sold its interests in the plant in 2007 to U.S. BioEnergy for ~$24M profit
100 mgy ethanol capacity; and 320,000 tons of dried distiller grains
Plant commenced construction October 2006; commenced production Feb. 2008
6/30/10: REX re-acquired 48% interest for $9.2M and commitment to pay up to an
additional $6.5M based on future profitability
$3.1M received and funded through July 31, 2011
Fagen and ICM construction, design and engineering
REX has received dividends of $3.1M through 7/31/11
16
Patriot Renewable Fuels, LLC Summary
REX has a 23% ownership interest in Patriot
Operates dry mill corn-processing ethanol plant in Annawan, Illinois
100 mgy ethanol capacity; 320,000 tons of dried distiller grains
Capital costs: ~ $155M
12/06: Acquired 23% of Patriot for $16.0M
9/08: Plant commenced operation
Fagen and ICM construction, process design and engineering
Located near rail access in heart of Illinois corn production
Access to ample grain supplies at competitive prices
REX has received dividends of $1.6M through 7/31/11
17
Big River Resources, LLC Summary
Big River was formed to develop/acquire ethanol facilities
Owns 5 elevators with ~10M bushels of grain storage
REX acquired 10% ownership in Big River for $20M
Big River Facilities:
92 mgy plant in West Burlington, IA
Commenced operation in 2004
(REX interest is 10%)
100 mgy plant in Galva, IL
Commenced operation 5/09
(REX interest is 10%)
50.5% stake in 100 mgy plant in Dyersville, IA
Acquired 8/09
(REX interest is 5%)
All plants Fagen/ICM construction, process design and engineering
All plants in close proximity to rail and highway transportation
REX has received dividends of $4.7M through 7/31/11
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REX: NYSE
rexamerican.com
One Earth Energy, LLC
Gibson City, IL
Stuart Rose, Chairman & CEO
Doug Bruggeman, CFO
October 2011
19