REX AMERICAN RESOURCES Corp

Previous wording

We attempt to manage the risk related to the volatility of commodity prices by utilizing forward corn and natural gas purchase contracts, forward ethanol, distillers grains and distillers corn oil sale contracts and commodity futures agreements, as management deems appropriate. We attempt to match quantities of these sale contracts with an appropriate quantity of corn purchase contracts over a given period of time when we can obtain an adequate gross margin resulting from the crush spread inherent in the contracts we have executed. However, the market for future ethanol sales contracts generally lags the spot market with respect to ethanol price. Consequently, we generally execute fixed price ethanol contracts for no more than four months into the future at any given time and we may lock in our corn or ethanol price without having a corresponding locked in ethanol or corn price for short durations of time. As a result of the relatively short period of time our fixed price contracts cover, we generally cannot predict the future movements in our realized crush spread for more than four months; thus, we are unable to predict the likelihood or amounts of future income or loss from the operations of our ethanol facilities. We utilize derivative financial instruments, primarily exchange traded commodity future contracts and swap contracts, in conjunction with certain of our corn procurement activities and commodity marketing activities.

Current wording

We attempt to manage the risk related to the volatility of commodity prices by utilizing forward corn and natural gas purchase contracts, forward ethanol, distillers grains and distillers corn oil sale contracts and commodity futures agreements, as management deems appropriate. We attempt to match quantities of these sale contracts with an appropriate quantity of corn purchase contracts over a given period of time when we can obtain an adequate gross margin resulting from the crush spread inherent in the contracts we have executed. However, the market for future ethanol sales contracts generally lags the spot market with respect to ethanol price. Consequently, we generally execute fixed price ethanol contracts for no more than four months into the future at any given time and we may lock in our corn or ethanol price without having a corresponding locked in ethanol or corn price for short durations of time. As a result of the relatively short period of time during which our fixed price contracts are fulfilled, we generally cannot predict the future movements in our realized crush spread for more than four months; thus, we are unable to predict the likelihood or amounts of future income or loss from the operations of our ethanol facilities. We utilize derivative financial instruments, primarily exchange traded commodity future contracts and swap contracts, in conjunction with certain of our corn procurement activities and commodity marketing activities.

Previous wording

Through our affiliate, One Earth Energy, LLC, we are in the developmental stage of a carbon sequestration project near the One Earth Energy ethanol plant in Gibson City, IL. A test well has been drilled to a total depth of approximately 7,100 feet, in which almost 2,000 feet of Mt. Simon Sandstone was encountered, which is the geological formation that is the region’s primary carbon storage resource. Three-dimensional seismic testing has been performed, as well as geological modeling for predicting the movement of injected carbon and the plume area to determine maximum injection pressure, reservoir quality and storage capacity for the potential wells. In October 2022, we applied for a Class VI injection well permit for three wells with the U.S. Environmental Protection Agency (“EPA”) and we continue to provide information to the EPA during the technical review of our application upon request. We currently expect the EPA to prepare a draft permit by calender year end 2024 and make a final permit decision by the second quarter of 2025, according to the EPA’s Class VI Permit Tracker Dashboard on their website. We have now secured sufficient subsurface easements for the proposed first injection well to allow for sequestration of all the carbon emissions from the One Earth Energy ethanol plant for a minimum of 15 years. We also need to obtain a county special-use zoning permit for the sequestration site. Last year, we began construction of a facility to capture, dehydrate, and compress carbon dioxide from the One Earth Energy ethanol plant to a state suitable for sequestration. We are nearing the completion of construction of the capture and compression facility. The start of testing the facility is dependent on the completion of the electric interconnection from our local utility, expected in the first quarter of fiscal year 2025.

Current wording

Through our affiliate, One Earth Energy, LLC, we are in the developmental stage of a carbon sequestration project near the One Earth Energy ethanol plant in Gibson City, IL. A test well has been drilled to a total depth of approximately 7,100 feet, in which almost 2,000 feet of Mt. Simon Sandstone was encountered, which is the geological formation that is the region’s primary carbon storage resource. Three-dimensional seismic testing has been performed, as well as geological modeling for predicting the movement of injected carbon and the plume area to determine maximum injection pressure, reservoir quality and storage capacity for the potential wells. In October 2022, we applied for a Class VI injection well permit for three wells with the U.S. Environmental Protection Agency (“EPA”), and we continue to provide information to the EPA during the technical review of our application upon request. We currently expect the EPA to prepare a draft permit by the first quarter of 2025 and make a final permit decision by the third quarter of 2025, according to the EPA’s Class VI Permit Tracker Dashboard on their website. We have now secured sufficient subsurface easements for the proposed first injection well to allow for sequestration of all the carbon emissions from the One Earth Energy ethanol plant for a minimum of 15 years. We also need to obtain a county special-use zoning permit for the sequestration site. Last year, we began construction of a facility to capture, dehydrate, and compress carbon dioxide from the One Earth Energy ethanol plant to a state suitable for sequestration. We are nearing the completion of construction of the capture and compression facility.

Previous wording

In October 2023, we submitted an application to the Illinois Commerce Commission (“ICC”) for a certificate of authority under the state’s Carbon Dioxide Transportation and Sequestration Act (the “CO 2 Act”) to build a short pipeline to deliver carbon dioxide from the One Earth Energy ethanol plant to the proposed sequestration site. We also have obtained easements from all of the necessary landowners for the use of their land for the pipeline for the first two wells. On May 26, 2024, however, the Illinois General Assembly passed the Safety and Aid for the Environment in Carbon Capture and Sequestration Act (Senate Bill 1289), which was signed by the governor in July 2024. The new legislation imposes additional safety, environmental and other requirements on obtaining permits and approvals for carbon capture and sequestration facilities in Illinois, including CO 2 pipelines. Further, the new legislation imposes a moratorium on the issuance of new certificates of authority for the construction of CO 2 pipelines until the earlier of the date proposed federal CO 2 pipeline safety standards are finalized by the Pipeline and Hazardous Materials Safety Administration (PHMSA) or, subject to certain other conditions, July 1, 2026. As a result of this legislation, the ICC dismissed our application without prejudice, and we will be required to resubmit an application after rules are finalized or subsequent to July 1, 2026.

Current wording

In October 2023, we submitted an application to the Illinois Commerce Commission (“ICC”) for a certificate of authority under the state’s Carbon Dioxide Transportation and Sequestration Act (the “CO 2 Act”) to build a short pipeline to deliver carbon dioxide from the One Earth Energy ethanol plant to the proposed sequestration site. We also have obtained easements from all of the necessary landowners for the use of their land for the pipeline for the first two wells. On May 26, 2024, however, the Illinois General Assembly passed the Safety and Aid for the Environment in Carbon Capture and Sequestration Act (Senate Bill 1289), which was signed by the governor in July 2024. The new legislation imposes additional safety, environmental and other requirements on obtaining permits and approvals for carbon capture and sequestration facilities in Illinois, including CO 2 pipelines. Further, the new legislation imposes a moratorium on the issuance of new certificates of authority for the construction of CO 2 pipelines until the earlier of the date proposed federal CO 2 pipeline safety standards are finalized by the federal Pipeline and Hazardous Materials Safety Administration (PHMSA) or, subject to certain other conditions, July 1, 2026. As a result of this legislation, the ICC dismissed our application without prejudice, and we will be required to resubmit an application after rules are finalized or subsequent to July 1, 2026.

Previous wording

Although we have made meaningful progress and significant investments in the carbon sequestration project at One Earth Energy, we continue to work with the various government agencies involved to obtain all required permits and approvals, with no assurance of the ultimate success or timing of the project.

Current wording

Although we have made meaningful progress and significant investments in the carbon sequestration project at One Earth Energy, we continue to work with the various government agencies involved to obtain all required permits and approvals, with no assurance of the ultimate success or timing of the project. Also see the discussion under “Trends and Uncertainties” on page 27 of certain recently proposed legislation that, if enacted, could impact our carbon sequestration project.

Previous wording

We also are concurrently expanding the One Earth ethanol plant. We received a permit from the EPA to increase production from 150 million gallons of ethanol per year to 175 million gallons of ethanol per year. Once we achieve that level of production, planned for the first quarter of fiscal 2025, we intend to apply for another permit to further increase production to 200 million gallon per year.

Current wording

We also are concurrently expanding the One Earth ethanol plant. We received a construction permit from the EPA to increase production from 150 million gallons of ethanol per year to 175 million gallons of ethanol per year. Once we achieve that level of production, planned for the third quarter of fiscal 2025, we intend to apply for another permit to further increase production to 200 million gallon per year.

Previous wording

We continue to work to identify ways to reduce our carbon intensity (“CI”) score at the One Earth plant with the intention to maximize tax credits available under the Inflation Reduction Act, which created a new Clean Fuel Production Credit under 45Z of the Internal Revenue Code (“45Z”), available for calendar years 2025 – 2027, of approximately $0.02 per ethanol gallon per CI point reduction below a 50 CI point threshold to incentive further increases in plant efficiencies within the industry. The U.S. Department of the Treasury has not yet issued final rules on qualification for 45Z tax credits.

Current wording

We continue to work to identify ways to reduce our carbon intensity (“CI”) score at the One Earth plant with the intention of maximizing the tax credits available under the Inflation Reduction Act, which created a new Clean Fuel Production Credit under 45Z of the Internal Revenue Code (“45Z”), available for calendar years 2025 – 2027, of approximately $0.02 per ethanol gallon per CI point reduction below a 50 CI point threshold to incentivize further increases in plant efficiencies within the industry. The U.S. Department of the Treasury has not yet issued final rules on qualification for 45Z tax credits.

Previous wording

We expect the total cost of these projects to be approximately $165-175 million, which we currently plan to pay from our available cash. As of July 31, 2024, we have spent $49.1 million life-to-date and are contractually committed to spend an additional $5.3 million toward the carbon sequestration project. If the carbon sequestration project is successful, we believe we will qualify for tax credits under section 45Q of the Internal Revenue Code (“45Q”) and section 45Z of the Internal Revenue Code, as outlined in the Inflation Reduction Act. As of July 31, 2024, we have spent $41.7 million life-to-date and are contractually committed to spend an additional $12.5 million at the One Earth plant toward plant capacity expansion and ongoing efforts to reduce our CI scoring.

Current wording

We expect the total cost of these projects to be approximately $165-175 million, which we continue to pay from our available cash. As of October 31, 2024, we have spent $52.9 million life-to-date and are contractually committed to spend an additional $2.4 million toward the carbon sequestration project. If the carbon sequestration project is successful, we believe we will qualify for tax credits under section 45Q of the Internal Revenue Code (“45Q”) and section 45Z of the Internal Revenue Code, as outlined in the Inflation Reduction Act, with 45Z credits being subject to final guidance yet to be issued by the U.S. Department of the Treasury. As of October 31, 2024, we have spent $50.2 million life-to-date and are contractually committed to spend an additional $7.4 million at the One Earth plant toward plant capacity expansion and ongoing efforts to reduce our CI scoring.

Previous wording

On August 10, 2017, we purchased, through a 95.35% owned subsidiary, for approximately $12.0 million, the entire ownership interest of an entity that owned a refined coal facility. We began operating the refined coal facility immediately after the acquisition. As the plant was no longer eligible to receive federal production tax credits beginning on November 18, 2021, we ceased operations on that date. We began classifying this operation as discontinued operations in the third quarter of fiscal 2021. The federal production tax credits received through ownership of this facility remain under IRS audit.

Current wording

On August 10, 2017, we purchased, through a 95.35% owned subsidiary, for approximately $12.0 million, the entire ownership interest of an entity that owned a refined coal facility. We began operating the refined coal facility immediately after the acquisition. As the plant was no longer eligible to receive federal production tax credits beginning on November 18, 2021, we ceased operations on that date. We began classifying this operation as discontinued operations in the third quarter of fiscal 2021. Over the course of operation, we recognized $58.2 million in tax credits. The federal production tax credits received through operation of this facility remain under IRS audit.

Previous wording

All references in this report to a particular fiscal year are to REX’s fiscal year ended January 31. The Company refers to its fiscal year by reference to the year immediately preceding the January 31 fiscal year end date. For example, “fiscal year 2024” means the period February 1, 2024 to January 31, 2025.

Current wording

All references in this report to a particular fiscal year are to REX’s fiscal year ended January 31. The Company refers to its fiscal year by reference to the year immediately preceding the January 31 fiscal year end date. For example, “fiscal year 2024” means the period February 1, 2024 to January 31, 2025. The Company includes the results of operations of One Earth Energy, LLC (“One Earth”) in its Consolidated Statements of Operations on a delayed basis of one month as One Earth has a fiscal year end of December 31.

Previous wording

In addition, under RFS II, a small refiner that processes less than 75,000 barrels of oil per day can petition the EPA for a waiver of their obligation to submit renewable identification numbers (“RINs”). The EPA, through consultation with the Department of Energy and the U.S. Department of Agriculture (“USDA”), can grant the refiner a full or partial waiver, or deny the waiver petition. The EPA issued 88 small refinery exemptions (“SREs”) for the 2016-2018 compliance years, undercutting the statutory renewable fuel volumes by a total of 4.3 billion gallons. The EPA did not grant any small refinery waivers for 2019-2022 and has continued that stance in the proposed volumes for 2023-2025. There remain multiple ongoing legal challenges on how the EPA has handled the small refinery waivers. On November 22, 2023, the Fifth U.S. Circuit Court of Appeals (the “Court”) ruled against the EPA on six SREs the EPA had previously denied. The Court remanded those six petitions back to the EPA, and each refinery will continue to operate under temporary SREs previously offered to them by the Court. In July 2024, the U.S. Court of Appeals for the District of Columbia Circuit vacated many of the EPA’s 2022 SRE denials. The Court consolidated 40 challenges, two of which were denied, while the remaining 38 were vacated and remanded back to the EPA. In total, there are 48 pending SREs not yet ruled upon by the EPA for various years.

Current wording

In addition, under RFS II, a small refiner that processes less than 75,000 barrels of oil per day can petition the EPA for a waiver of their obligation to submit renewable identification numbers (“RINs”). The EPA, through consultation with the Department of Energy and the U.S. Department of Agriculture (“USDA”), can grant the refiner a full or partial waiver, or deny the waiver petition. The EPA issued 88 small refinery exemptions (“SREs”) for the 2016-2018 compliance years, undercutting the statutory renewable fuel volumes by a total of 4.3 billion gallons. The EPA did not grant any small refinery waivers for 2019-2022 and has continued that stance in the proposed volumes for 2023-2025. There remain multiple ongoing legal challenges to how the EPA has handled the small refinery waivers. In July 2024, the U.S. Court of Appeals for the District of Columbia Circuit vacated many of the EPA’s 2022 SRE denials. The EPA had denied 105 SREs in 2022. As a result of this Court ruling, the EPA has voluntarily moved to rescind the agency’s 2023 denial of 26 SREs. On November 21, 2024, the EPA reported that 130 SRE petitions were then pending under the RFS, up from 50 as of mid-September. The increase is attributed to submissions from small refineries seeking reconsideration of petitions that were previously denied.

Previous wording

The Inflation Reduction Act of 2022 will likely impact our business by creating a new Clean Fuel Production Credit, section 45Z of the Internal Revenue Code (“45Z”), available for the years 2025 to 2027. The Clean Fuel Production Credit is approximately $0.02 per ethanol gallon per CI point reduction below a 50 CI point threshold. The Act also raises the carbon capture tax credit from $50 per metric ton to $85 per metric ton under section 45Q. Taxpayers may elect to be treated as making a payment against tax for 100% of the value of the 45Q credit (“direct pay”) for the first five years, starting with the year a qualifying carbon sequestration facility is placed in service, but not beyond December 31, 2032. Companies may elect either the 45Q credit or the 45Z credit in periods in which both tax credits are available. Other potential impacts include (a) extending the biodiesel tax credit, which could impact the value of our renewable corn oil, as this co-product serves as a low-carbon feedstock for renewable diesel and biomass based diesel production; (b) creating a new tax credit for sustainable aviation fuel (“SAF”); (c) funding biofuel refueling infrastructure which could impact the availability of higher level ethanol blended fuel; and (d) providing for production and purchase credits for electric vehicles, which could impact the amount of internal combustion engines on the road over time, and ultimately reduce the demand for gasoline, diesel fuels and ethanol.

Current wording

The Inflation Reduction Act will likely impact our business by creating a new Clean Fuel Production Credit, section 45Z of the Internal Revenue Code (“45Z”), available for the years 2025 to 2027. The Clean Fuel Production Credit is approximately $0.02 per ethanol gallon per CI point reduction below a 50 CI point threshold. The Act also raises the carbon capture tax credit from $50 per metric ton to $85 per metric ton under section 45Q. Taxpayers may elect to be treated as making a payment against tax for 100% of the value of the 45Q credit (“direct pay”) for the first five years, starting with the year a qualifying carbon sequestration facility is placed in service, but not beyond December 31, 2032. Companies may elect either the 45Q credit or the 45Z credit in periods in which both tax credits are available. Other potential impacts of the Inflation Reduction Act include (a) extension of the biodiesel tax credit, which could support the value of our renewable corn oil, as this co-product serves as a low-carbon feedstock for renewable diesel and biomass based diesel production; (b) creation of new tax credit for sustainable aviation fuel (“SAF”); (c) funding of biofuel refueling infrastructure which could increase the availability of higher level ethanol blended fuel; and (d) provision for production and purchase credits for electric vehicles, which could reduce the amount of internal combustion engines on the road over time, and ultimately reduce the demand for gasoline, diesel fuels and ethanol.

Previous wording

In April 2024, the U.S Department of the Treasury and the IRS released updated guidance which included an updated GREET lifecycle model for the section 40B SAF tax credit. This model provides a pathway for U.S. corn-based ethanol to be considered a qualifying feedstock for SAF if certain measures are taken to lower carbon intensity of production. GREET, or Greenhouse gases, Regulated Emissions, and Energy use in Technologies, is used as a model to calculate greenhouse gas (“GHG”) reductions. The GREET model aims to provide a comprehensive assessment of the environmental impact of aviation fuels focusing on reducing GHG emissions through the entire lifecycle of the fuel, including through carbon capture and certain climate-smart agricultural (“CSA) practices. CSA practices for corn production must include no-till farming, planting cover crops and using enhanced efficiency nitrogen fertilizers. The section 40B credit expires on December 31, 2024 and is to be replaced by the 45Z tax credit. A new 45Z-GREET model has not yet been developed by the U.S. Department of the Treasury but will likely require further modeling, data assumptions, and verification.

Current wording

In April 2024, the U.S Department of the Treasury and the IRS released updated guidance which included an updated GREET (Greenhouse Gases, Regulated Emissions, and Energy use in Technologies) lifecycle model for the section 40B SAF tax credit. This model provides a pathway for U.S. corn-based ethanol to be considered a qualifying feedstock for SAF if certain measures are taken to lower carbon intensity of production. GREET is used as a model to calculate greenhouse gas (“GHG”) reductions. The GREET model aims to provide a comprehensive assessment of the environmental impact of aviation fuels focusing on reducing GHG emissions through the entire lifecycle of the fuel, including through carbon capture and certain climate-smart agricultural (“CSA) practices. CSA practices for corn production must include no-till farming, planting cover crops and using enhanced efficiency nitrogen fertilizers. The section 40B credit expires on December 31, 2024 and is being replaced by the 45Z tax credit. A new 45Z-GREET model has not yet been developed by the U.S. Department of the Treasury, but will likely require further modeling, data assumptions, and verification.

Previous wording

Additionally, see “One Earth Energy, LLC Carbon Sequestration and Plant Expansion” above for a discussion of certain uncertainties associated with our Illinois carbon sequestration and plant expansion project.

Current wording

Additionally, see “One Earth Energy, LLC Carbon Sequestration and Plant Expansion” above for a discussion of certain other uncertainties associated with our Illinois carbon sequestration and plant expansion projects.

Previous wording

Should any of the trends and uncertainties mentioned above continue, our future operating results could be impacted.

Current wording

The trends and uncertainties mentioned above could impact our future operating results in both positive and negative ways.

Previous wording

Comparison of Three and Six Months Ended July 31, 2024 and 2023

Current wording

Comparison of Three and Nine Months Ended October 31, 2024 and 2023

Previous wording

Net sales and revenue in the quarter ended July 31, 2024 decreased 30% compared to the prior year’s second quarter. Net sales and revenue in the first six months ended July 31, 2024 decreased approximately 27% compared to the first six months of 2023.

Current wording

Net sales and revenue in the quarter ended October 31, 2024 decreased 21% compared to the prior year’s third quarter. Net sales and revenue in the first nine months ended October 31, 2024 decreased approximately 25% compared to the first nine months of 2023.

Previous wording

Ethanol revenue decreased 31% in the second quarter of fiscal year 2024 compared to the second quarter of fiscal year 2023 as the average selling price of ethanol at our consolidated plants decreased 26% during the second quarter of fiscal year 2024 compared to the prior year comparable period, coupled with a 6% decrease in gallons of ethanol sold. Ethanol revenue decreased 28% in the first six months of fiscal year 2024 compared to the first six months of fiscal year 2023, driven by a 27% decrease in selling price while gallons sold did not change significantly. The decrease in the ethanol selling price resulted primarily from a decrease in commodity prices.

Current wording

Ethanol revenue decreased 19% in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 as the average selling price of ethanol at our consolidated plants decreased 21% during the third quarter of fiscal year 2024 compared to the prior year comparable period, partially offset by a 3% increase in gallons of ethanol sold. Ethanol revenue decreased 25% in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023, driven by a 25% decrease in selling price while gallons sold did not change significantly. The decrease in the ethanol selling price resulted primarily from a decrease in corn prices as the market price for ethanol often correlates with the market price for corn.

Previous wording

Dried distillers grains revenue decreased 32% in the second quarter of fiscal year 2024 compared to the second quarter of fiscal year 2023 as the average price per ton sold decreased 27%, coupled with a 6% decrease in tons sold. Dried distillers grains revenue decreased 27% in the first six months of fiscal year 2024 compared to the first six months of fiscal year 2023, driven by a 25% decrease in the average selling price, along with a 2% decrease in the tons sold. The decrease in the dried distillers grains selling price resulted primarily from a decrease in corn prices as dried distillers grains prices often correlate with corn pricing.

Current wording

Dried distillers grains revenue decreased 28% in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 as the average price per ton sold decreased 25%, coupled with a 5% decrease in tons sold. Dried distillers grains revenue decreased 27% in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023, driven by a 25% decrease in the average selling price, along with a 3% decrease in the tons sold. The decrease in the dried distillers grains selling price resulted primarily from a decrease in corn prices as dried distillers grains prices often correlate with corn pricing.

Previous wording

Distillers corn oil revenue decreased approximately 25% in the second quarter of fiscal year 2024 compared to the second quarter of fiscal year 2023 as the average price per pound sold decreased 22%, along with a 2% decrease in pounds sold. Distillers corn oil revenue decreased 25% in the first six months of 2024 compared to the first six months of 2023 as the average price per pound decreased 24% while pounds sold did not change significantly. The decrease in the distillers corn oil selling price resulted primarily from a decrease in commodity prices.

Current wording

Distillers corn oil revenue decreased approximately 31% in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 as the average price per pound sold decreased 28%, along with a 3% decrease in pounds sold. Distillers corn oil revenue decreased 27% in the first nine months of 2024 compared to the first nine months of 2023 as the average price per pound decreased 27%, along with a 1% decrease in pounds sold. The decrease in the distillers corn oil selling price resulted primarily from fluctuations in demand with the renewable biodiesel market and is often tied to the price of soybean oil.

Previous wording

Modified distillers grains revenue increased 3% in the second quarter of fiscal year 2024 compared to the second quarter of fiscal year 2023 due to a 67% increase in the tons sold, offset by a decrease in the average selling price per ton sold of 38%. Modified distillers grains revenue decreased 13% in the first six months of fiscal year 2024 compared to the first six months of fiscal year 2023 due to a 38% decrease in the average selling price per ton sold, offset by a 41% increase in tons sold during the same period. The decrease in the modified distillers grains selling price resulted primarily from a decrease in corn prices as prices tend to move in the same direction. Our consolidated plants’ decisions to sell modified or dried distillers grains fluctuates from time to time based upon market conditions.

Current wording

Modified distillers grains revenue did not change in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 due to a 36% increase in the tons sold, offset by a decrease in the average selling price per ton sold of 27%. Modified distillers grains revenue decreased 9% in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023 due to a 34% decrease in the average selling price per ton sold, offset by a 39% increase in tons sold during the same period. The decrease in the modified distillers grains selling price resulted primarily from a decrease in corn prices as prices tend to move in the same direction. Our consolidated plants’ decisions to sell modified or dried distillers grains fluctuate from time to time based upon market conditions.

Previous wording

Gains on derivative financial instruments, included in net sales and revenue, were approximately $0.4 million in the three and six month periods ended July 31, 2024, compared to losses on derivative financial instruments of approximately $29,000 during the three and six month periods ended July 31, 2023. These gains and losses are related to our risk management activities and were impacted by the price movements of ethanol.

Current wording

Gains on derivative financial instruments, included in net sales and revenue, were approximately $0.3 million in the three-month period ended October 31, 2024, compared to no gain or loss on derivative financial instruments during the three-month period ended October 31, 2023. Gains on derivative financial instruments, included in net sales and revenue, were approximately $0.7 million in the nine-month period ended October 31, 2024, compared to losses of $29,000 on derivative financial instruments during the nine-month period ended October 31, 2023. These gains and losses are related to our risk management activities and were impacted by the price movements of ethanol.

Previous wording

Cost of sales decreased approximately 34% in the quarter ended July 31, 2024, compared to the prior year second quarter. Corn accounted for approximately 77% ($98.9 million) of our cost of sales during the second quarter of fiscal year 2024 compared to approximately 82% ($158.0 million) during the second quarter of fiscal year 2023. Natural gas accounted for approximately 3% of our cost of sales during the second quarter of fiscal year 2024 ($3.9 million) and the second quarter of fiscal year 2023 ($6.4 million). Cost of sales decreased approximately 31% in the six months ended July 31, 2024, compared to the prior year comparable period. Corn accounted for approximately 76% ($209.6 million) of our cost of sales during the first six months of fiscal year 2024 compared to approximately 81% ($321.8 million) during the first six months of fiscal year 2023. Natural gas accounted for approximately 4% of our cost of sales during the six months ended July 31, 2024 ($11.0 million) and during the first six months of fiscal year 2023 ($17.1 million). The cost of corn and natural gas decreased primarily due to lower pricing for both during the three and six months ended July 31, 2024.

Current wording

Cost of sales decreased approximately 26% in the quarter ended October 31, 2024, compared to the prior year third quarter. Corn accounted for approximately 76% ($102.6 million) of our cost of sales during the third quarter of fiscal year 2024 compared to approximately 80% ($145.2 million) during the third quarter of fiscal year 2023. Natural gas accounted for approximately 3% of our cost of sales during the third quarter of fiscal year 2024 ($4.6 million) and the third quarter of fiscal year 2023 ($6.2 million). Cost of sales decreased approximately 29% in the nine-months ended October 31, 2024, compared to the prior year comparable period. Corn accounted for approximately 76% ($312.2 million) of our cost of sales during the first nine months of fiscal year 2024 compared to approximately 81% ($467.0 million) during the first nine months of fiscal year 2023. Natural gas accounted for approximately 4% of our cost of sales during the nine months ended October 31, 2024 ($15.6 million) and during the first nine months of fiscal year 2023 ($23.3 million). The cost of corn and natural gas decreased primarily due to lower pricing for both during the three and nine months ended October 31, 2024.

Previous wording

As a result of the foregoing, gross profit for the second quarter of fiscal year 2024 increased approximately $1.4 million compared to the prior year’s second quarter. Gross profit for the first six months of fiscal year 2024 increased approximately $5.7 million compared to the first six months of fiscal year 2023.

Current wording

As a result of the foregoing, gross profit for the third quarter of fiscal year 2024 increased approximately $0.4 million compared to the prior year’s third quarter. Gross profit for the first nine months of fiscal year 2024 increased approximately $6.1 million compared to the first nine months of fiscal year 2023.

Previous wording

SG&A expenses were approximately $6.4 million for the second quarter of fiscal year 2024, compared to approximately $8.6 million of expenses for the second quarter of fiscal year 2023. SG&A expenses were approximately $12.6 million for the first six months of fiscal year 2024, compared to approximately $14.4 million for the first six months of fiscal year 2023. The decreases are primarily related to restricted stock awards granted to certain executive officers in the second quarter of 2023, which were expensed upon issuance, offset partially by the increase in performance bonus expense as a result of higher net income in 2024.

Current wording

SG&A expenses were approximately $8.4 million for the third quarter of fiscal year 2024, compared to approximately $7.6 million of expenses for the third quarter of fiscal year 2023. The increase from the prior year third quarter are due primarily to an increase in railcar lease expense and an increase in donations of emergency equipment to local first responders related to carbon capture. SG&A expenses were approximately $21.0 million for the first nine months of fiscal year 2024, compared to approximately $22.0 million for the first nine months of fiscal year 2023. The decrease compared to the prior year nine-month period are primarily related to restricted stock awards granted to certain executive officers in the second quarter of 2023, which were expensed upon issuance, offset partially by the increase in performance bonus expense as a result of higher net income in 2024.

Previous wording

During the second quarter of fiscal year 2024, we recognized income from our equity investment in Big River of approximately $1.7 million compared to income of approximately $3.0 million for the second quarter of fiscal year 2023. During the first six months of fiscal year 2024, we recognized income from our equity investment in Big River of approximately $3.5 million compared to income of approximately $4.5 million during the first six months of fiscal year 2023. Our investment in Big River, which has interests in four ethanol production plants, represents an effective ownership of approximately 38.3 million gallons of ethanol shipped in the trailing twelve months ended July 31, 2024. Due to the inherent volatility of commodity prices within the ethanol industry, we cannot predict the likelihood of future operating results from Big River being similar to historical results.

Current wording

During the third quarter of fiscal year 2024, we recognized income from our equity investment in Big River of approximately $3.6 million compared to income of approximately $4.7 million for the third quarter of fiscal year 2023. During the first nine months of fiscal year 2024, we recognized income from our equity investment in Big River of approximately $7.1 million compared to income of approximately $9.3 million during the first nine months of fiscal year 2023. Our investment in Big River, which has interests in four ethanol production plants, represents an effective ownership of approximately 38.5 million gallons of ethanol shipped in the trailing twelve months ended October 31, 2024. Due to the inherent volatility of commodity prices within the ethanol industry, we cannot predict the likelihood of future operating results from Big River being similar to historical results.

Previous wording

Interest and other income was approximately $4.4 million for the second quarter of fiscal year 2024 versus approximately $3.3 million for the second quarter of fiscal year 2023. Interest and other income was approximately $10.3 million for the first six months of 2024 versus approximately $6.1 million for the first six months of fiscal year 2023. One of our consolidated ethanol plants recognized $1.2 million in patronage income from an investment in a cooperative in the first quarter of 2024. The remaining change between both periods related to increased interest income in the current year based upon higher balances and yields on our excess cash and short-term investments in fiscal year 2024, compared to 2023.

Current wording

Interest and other income was approximately $4.6 million for the third quarter of fiscal year 2024 versus approximately $4.9 million for the third quarter of fiscal year 2023. Interest and other income was approximately $15.0 million for the first nine months of 2024 versus approximately $10.9 million for the first nine months of fiscal year 2023. One of our consolidated ethanol plants recognized $1.2 million in patronage income from an investment in a cooperative in the first quarter of 2024. During 2023, the Company’s consolidated plants received COVID-19 relief grants from the USDA of approximately $0.9 million and $1.0 million for the three- and nine-month periods ended October 31, 2023. The remaining change between the year-to-date periods related to increased interest income in the current year based upon higher balances and yields on our excess cash and short-term investments in fiscal year 2024, compared to 2023.

Previous wording

As a result of the foregoing, income before income taxes was approximately $19.5 million and $16.1 million for the second quarters of fiscal year 2024 and 2023, respectively. Income before income taxes was approximately $35.5 million and $24.7 million for the first six months of fiscal year 2024 and 2023, respectively.

Current wording

As a result of the foregoing, income before income taxes was approximately $39.5 million and $41.3 million for the third quarters of fiscal year 2024 and 2023, respectively. Income before income taxes was approximately $75.0 million and $66.0 million for the first nine months of fiscal year 2024 and 2023, respectively.

Previous wording

The Company applies an effective tax rate to interim periods that is consistent with the Company’s estimated annual tax rate as adjusted for discrete items impacting the interim periods. Our income tax provision was approximately $4.5 million and $3.8 million for the three months ended July 31, 2024 and 2023, respectively. Our income tax provision was approximately $ 8.2 million and $5.8 million for the first six months of fiscal year 2024 and 2023, respectively.

Current wording

The Company applies an effective tax rate to interim periods that is consistent with the Company’s estimated annual tax rate as adjusted for discrete items impacting the interim periods. Our income tax provision was approximately $9.4 million and $9.6 million for the three months ended October 31, 2024 and 2023, respectively. Our income tax provision was approximately $17.6 million and $15.4 million for the first nine months of fiscal year 2024 and 2023, respectively.

Previous wording

As a result of the foregoing, net income was approximately $15.0 for the second quarter of fiscal year 2024 compared to approximately $12.3 million for the second quarter of fiscal year 2023. Net income was approximately $27.3 million for the first six months of fiscal year 2024 compared to approximately $19.0 million for the first six months of fiscal year 2023.

Current wording

As a result of the foregoing, net income was approximately $30.1 for the third quarter of fiscal year 2024 compared to approximately $31.6 million for the third quarter of fiscal year 2023. Net income was approximately $57.4 million for the first nine months of fiscal year 2024 compared to approximately $50.6 million for the first nine months of fiscal year 2023.

Previous wording

Net income attributable to noncontrolling interests was approximately $2.6 million for the second quarter of fiscal year 2024 compared to $3.2 million for the second quarter of fiscal year 2023. Net income attributable to noncontrolling interests was approximately $4.7 million for the first six months of fiscal years 2024 and 2023. These amounts represent the other owners’ share of the income of NuGen and One Earth.

Current wording

Net income attributable to noncontrolling interests was approximately $5.6 million for the third quarters of fiscal year 2024 and 2023. Net income attributable to noncontrolling interests was approximately $10.3 million for the first nine months of fiscal years 2024 and 2023. These amounts represent the other owners’ share of the income of NuGen and One Earth.

Previous wording

As a result of the foregoing, net income attributable to REX common shareholders for the second quarter of fiscal year 2024 was approximately $12.4 million, compared to net income attributable to REX common shareholders of approximately $9.1 million for the second quarter of fiscal year 2023. Net income attributable to REX common shareholders from the first six months of fiscal year 2024 was approximately $22.6 million, compared to net income attributable to REX common shareholders of approximately $14.3 million for the first six months of fiscal year 2023.

Current wording

As a result of the foregoing, net income attributable to REX common shareholders for the third quarter of fiscal year 2024 was approximately $24.5 million, compared to net income attributable to REX common shareholders of approximately $26.1 million for the third quarter of fiscal year 2023. Net income attributable to REX common shareholders from the first nine months of fiscal year 2024 was approximately $47.1 million, compared to net income attributable to REX common shareholders of approximately $40.4 million for the first nine months of fiscal year 2023.

Previous wording

Net cash provided by operating activities was approximately $5.7 million for the first six months of fiscal year 2024, compared to cash provided by operating activities of approximately $6.6 million for the first six months of fiscal year 2023. For the first six months of fiscal year 2024, cash was provided by net income of approximately $27.3 million, adjusted upward for non-cash items of approximately $12.6 million, which consisted of depreciation, amortization of operating lease right-of-use assets, income from equity method investments, interest income from short-term investments, the deferred income tax provision, stock-based compensation expense, and loss on disposal of property and equipment. An increase in the balance of accounts receivable used cash of approximately $1.1 million, primarily a result of the timing of products shipped and the receipt of customer payments at One Earth and NuGen. Inventories increased over the first six months of fiscal year 2024, using cash of approximately $2.2 million. An increase in the balance of other assets of approximately $12.3 million primarily relates to prepayments on certain executed lease agreements, offset by changes in the carrying value of forward purchase contracts and commodity futures positions recorded at fair value, decreases to spare parts inventory and decreases to prepaid insurance balances. A decrease in the balance of refundable income taxes of approximately $0.5 million primarily relates to the accrual of the federal taxes currently payable and the timing of estimated tax payments for the first six months of 2024. While the Company has tax credits available to offset all amounts owed, the Company is limited to using tax credits for only 75% of federal taxes owed. A decrease in the balance of accounts payable used cash of approximately $14.0 million, which was primarily a result of the timing of inventory receipts and vendor payments. A decrease in the balance of other liabilities used cash of approximately $5.0 million, which was primarily caused by a decrease in accrued payroll of approximately $3.9 million following the payment of fiscal year 2023 bonuses, offset by the accrual of the first six months of the fiscal year 2024 bonuses. Additionally, a reduction in the lease and accrued utility liabilities used cash of approximately $3.0 million and $1.8 million, respectively. These reductions were offset primarily by an increase in the mark-to-market liability recorded for certain corn contracts.

Current wording

Net cash provided by operating activities was approximately $39.1 million for the first nine months of fiscal year 2024, compared to net cash provided by operating activities of approximately $65.5 million for the first nine months of fiscal year 2023. For the first nine months of fiscal year 2024, cash was provided by net income of approximately $57.4 million, adjusted upward for non-cash items of approximately $20.3 million, which consisted of depreciation, amortization of operating lease right-of-use assets, income from equity method investments, interest income from short-term investments, the deferred income tax provision, stock-based compensation expense, and loss on disposal of property and equipment. We received dividends from Big River of approximately $3.0 million. A decrease in the balance of accounts receivable provided cash of approximately $0.9 million, primarily a result of the timing of products shipped and the receipt of customer payments at One Earth and NuGen. Inventories increased over the first nine months of fiscal year 2024, using cash of approximately $2.1 million. An increase in the balance of other assets of approximately $12.6 million primarily relates to prepayments on certain executed lease agreements, offset by changes in the carrying value of forward purchase contracts and commodity futures positions recorded at fair value, decreases to spare parts inventory and decreases to prepaid insurance balances. A decrease in the balance of refundable income taxes of approximately $0.2 million primarily relates to the accrual of the federal taxes currently payable and the timing of estimated tax payments for the first nine months of 2024. While the Company has tax credits available to offset all amounts owed, the Company is limited to using tax credits for only 75% of federal taxes owed. A decrease in the balance of accounts payable used cash of approximately $21.6 million, which was primarily a result of the timing of inventory receipts and vendor payments. A decrease in the balance of other liabilities used cash of approximately $6.2 million, which was primarily caused by the reduction in the lease liability of $4.0 million from payments made during the year. Additionally, a decrease in accrued payroll and accrued utility liabilities used cash of approximately $0.6 million and $1.3 million, respectively. The decrease in the accrued payroll is primarily related to the payment of the 2023 incentive bonuses, offset partially by the accrual of the 2024 incentive bonuses to be paid in 2025. Other offsetting fluctuations within other liabilities were insignificant.

Previous wording

Net cash provided by operating activities was approximately $6.6 million for the first six months of fiscal year 2023. For the first six months of fiscal year 2023, cash was provided by net income of approximately $19.0 million, adjusted for non-cash items of approximately $11.1 million, which consisted of depreciation, amortization of operating lease right-of-use assets, income from equity method investments, interest income from short-term investments, the deferred income tax provision, stock-based compensation expense, and loss on disposal of property and equipment. An increase in the balance of accounts receivable used cash of approximately $6.8 million, primarily a result of the timing of products shipped and the receipt of customer payments at One Earth and NuGen. Inventories decreased over the first six months of fiscal year 2023, providing cash of $2.8 million. An increase in the balance of other assets of approximately $7.2 million primarily relates to changes in the carrying value of forward purchase contracts and commodity futures positions recorded at fair value. An increase in the balance of refundable income taxes of approximately $2.7 million primarily relates to overpayment of taxes currently payable for the previous fiscal year and quarterly estimated tax payments. While the Company has tax credits available to offset all amounts owed, the Company is limited to using tax credits for only 75% of federal taxes owed. A decrease in the balance of accounts payable used cash of approximately $12.6 million, which was primarily a result of the timing of inventory receipts and vendor payments. An increase in the balance of other liabilities provided cash of approximately $3.0 million.

Current wording

Net cash provided by operating activities was approximately $65.5 million for the first nine months of fiscal year 2023. For the first nine months of fiscal year 2023, cash was provided by net income of approximately $50.6 million, adjusted for non-cash items of approximately $16.3 million, which consisted of depreciation, amortization of operating lease right-of-use assets, income from equity method investments, interest income from short-term investments, the deferred income tax provision, stock-based compensation expense, and loss on disposal of property and equipment. We received dividends from Big River of approximately $5.5 million. An increase in the balance of accounts receivable used cash of approximately $5.0 million, primarily a result of the timing of products shipped and the receipt of customer payments at One Earth and NuGen. Inventories decreased over the first nine months of fiscal year 2023, providing cash of $11.2 million. An increase in the balance of other assets of approximately $1.3 million primarily relates to changes in the carrying value of forward purchase contracts and commodity futures positions recorded at fair value. An increase in the balance of refundable income taxes of approximately $1.5 million primarily relates to overpayment of taxes currently payable for the previous fiscal year and quarterly estimated tax payments. While the Company has tax credits available to offset all amounts owed, the Company is limited to using tax credits for only 75% of federal taxes owed. A decrease in the balance of accounts payable used cash of approximately $5.6 million, which was primarily a result of the timing of inventory receipts and vendor payments. A decrease in the balance of other liabilities used cash of approximately $4.8 million.

Previous wording

At July 31, 2024, working capital was approximately $367.0 million, compared to $385.8 million at January 31, 2024. The ratio of current assets to current liabilities was 8.1 to 1 at July 31, 2024 and 6.8 to 1 at January 31, 2024.

Current wording

At October 31, 2024, working capital was approximately $392.5 million, compared to $385.8 million at January 31, 2024. The ratio of current assets to current liabilities was 9.9 to 1 at October 31, 2024 and 6.8 to 1 at January 31, 2024.

Previous wording

Cash of approximately $33.8 million was provided by investing activities for the first six months of fiscal year 2024, compared to cash provided by investing activities of approximately $24.9 million during the first six months of fiscal year 2023. During the first six months of fiscal year 2024, we had capital expenditures of approximately $40.2 million, primarily for various capital projects at our consolidated ethanol plants, including $15.4 million for expansion and CI scoring reduction projects at the One Earth facility and $17.4 million for the carbon sequestration project. During the first six months of fiscal year 2024, we purchased short-term U.S. Treasury Bills of approximately $156.1 million, while U.S. Treasury Bills of approximately $229.7 million matured. The U.S Treasury Bills had maturities of less than one year and we classified them as short-term investments. Depending on the investment options available, we may elect to retain the funds, or a portion thereof, in cash, short-term investments or long-term investments.

Current wording

Cash of approximately $37.6 million was provided by investing activities for the first nine months of fiscal year 2024, compared to cash used in investing activities of approximately $63.3 million during the first nine months of fiscal year 2023. During the first nine months of fiscal year 2024, the Company had capital expenditures of approximately $55.4 million, primarily for various capital projects at our consolidated ethanol plants, including $24.5 million for expansion and CI scoring reduction projects at the One Earth facility and $22.4 million for the carbon sequestration project. During the first nine months of fiscal year 2024, we purchased short-term U.S. Treasury Bills of approximately $210.3 million, while U.S. Treasury Bills of approximately $303.0 million matured. The U.S Treasury Bills had maturities of less than one year and we classified them as short-term investments. Depending on the investment options available, we may elect to retain the funds, or a portion thereof, in cash, short-term investments or long-term investments.

Previous wording

Cash of approximately $24.9 million was provided by investing activities for the first six months of fiscal year 2023. During the first six months of fiscal year 2023, we had capital expenditures of approximately $8.2 million, primarily for various capital projects at our consolidated ethanol plants, including expansion and carbon intensity (“CI”) score reduction projects at the One Earth facility. During the first six months of fiscal year 2023, we purchased U.S. Treasury Bills of approximately $194.4 million. During the first six months of fiscal year 2023 U.S. Treasury Bills of approximately $227.5 million matured. The U.S Treasury Bills had maturities of less than one year and we classified them as short-term investments.

Current wording

Cash of approximately $63.3 million was used in investing activities for the first nine months of fiscal year 2023. During the first nine months of fiscal year 2023, we had capital expenditures of approximately $22.4 million, primarily for various capital projects at our consolidated ethanol plants, including $7.7 million for expansion and CI scoring reduction projects at the One Earth facility and $8.0 million for the carbon sequestration project. During the first nine months of fiscal year 2023, we purchased U.S. Treasury Bills of approximately $378.4 million. During the first nine months of fiscal year 2023 U.S. Treasury Bills of approximately $337.5 million matured. The U.S Treasury Bills had maturities of less than one year and we classified them as short-term investments.

Previous wording

Cash of approximately $1.8 million was used in financing activities for the first six months of fiscal year 2024 for payments to noncontrolling interests holders, compared to approximately $0.7 million for the first six months of fiscal year 2023.

Current wording

Cash of approximately $1.9 million was used in financing activities for the first nine months of fiscal year 2024 for payments to noncontrolling interests holders, compared to approximately $0.7 million for the first nine months of fiscal year 2023.

Previous wording

We are investigating various uses for our excess cash and short-term investments. We expect total capital expenditures related to the construction at the One Earth facilities to approximate $165 million to $175 million, inclusive of the carbon sequestration project and plant capacity expansion and ongoing efforts to reduce CI scoring, which we currently plan to pay from our available cash. As of July 31, 2024, we have spent $49.1 million since inception and are contractually committed to spend an additional $5.3 million toward the carbon sequestration project. As of July 31, 2024, we have spent $41.7 million since inception and are contractually committed to spend an additional $12.5 million toward plant capacity expansion and CI scoring reduction efforts. For all projects, we plan to spend $50 million to $60 million during the remainder of fiscal year 2024.

Current wording

We are investigating various uses for our excess cash and short-term investments. We expect total capital expenditures related to the construction at the One Earth facilities to approximate $165 million to $175 million, inclusive of the carbon sequestration project and plant capacity expansion and ongoing efforts to reduce CI scoring, which we currently plan to pay from our available cash. As of October 31, 2024, we have spent $52.9 million since inception and are contractually committed to spend an additional $2.4 million toward the carbon sequestration project. As of October 31, 2024, we have spent $50.2 million since inception and are contractually committed to spend an additional $7.4 million toward plant capacity expansion and CI scoring reduction efforts. For all projects, we plan to spend $25 million to $35 million during the remainder of fiscal year 2024.

Previous wording

We have a stock buyback program with 876,786 shares remaining authorized at July 31, 2024. We typically repurchase our common stock when our stock price is trading at a price we deem to be a discount to the underlying value of our net assets. We plan to seek and evaluate various investment opportunities including ethanol and/or energy related, carbon sequestration related, agricultural or other ventures we believe meet our investment criteria.

Current wording

We have a stock buyback program with 876,786 shares remaining authorized at October 31, 2024. We typically repurchase our common stock when our stock price is trading at a price we deem to be a discount to the underlying value of our net assets. We continue to seek investment opportunities, including ethanol and/or energy related, carbon sequestration related, agricultural or other ventures, we believe meet our investment criteria.