Presentation on theme: "Stuart Rose, Chairman & CEO"— Presentation transcript:
1 Stuart Rose, Chairman & CEO REX: NYSEOne Earth Energy, LLC Gibson City, ILStuart Rose, Chairman & CEODoug Bruggeman, CFODecember 2011
2 Safe HarborThis 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 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 forward-looking statements. These risks and uncertainties are described in our filings with the Securities and Exchange Commission.
3 REX Overview Successful alternative energy investor since 1998 Synfuel investments of $6M yielded ~$178M return over 10 yearsDiscontinued legacy retail operations in FY ’09 to focus on alternative energyEthanol investments initiated in 2006$24M profit in FY’ 07 on $14M early ethanol investmentAlternative energy represented 99% of revenue and 74% of assets (10/31/11)Ownership in six operating ethanol production facilities representing219M gallons of annual operating nameplate productionRevenues from ethanol, distillers grain & corn oilStrong, liquid balance sheet (as of 10/31/11) (based on 8.4M diluted shares)Unrestricted cash of $67.0M ~ $ 7.98/shareNet book value of retail real estate $18.6M ~ $ 2.21/shareCarrying value of ownership in six plants $156.2M ~ $18.60/shareREX shareholders’ book value $238.2M ~$28.36/shareROE-focused asset allocation discipline11.2% average ROE since 1993 (despite low returns on high cash balances)Ongoing share repurchase programInsider ownership approximately 33%
4 Alternative Energy Investments Entered alternative energy sector FY ‘98 investing in two synthetic fuel LP’sEarned federal income tax credits based on the tonnage and content of solid synthetic fuel produced and sold to unrelated partiesSold interests in both partnerships and received quarterly income subject to production levels and phase-outs through calendar 2007Purchased 3rd synthetic fuel facility in FY ‘02; was sold in FY ’04Synfuel partnership performance - FY ’98 - FY ’11Total investment income ~$130M from sale of partnership interestsAllocated income tax credits of ~$48MPlus $2.9M in income received in Q2 ‘11 from plant sold in 2006Entered ethanol sector FY ’06 and as of 11/1/11 REX has:Investments in six operating ethanol production facilitiesOwnership of ~219.2mgy of nameplate ethanol productionIncludes 48% interest in 100mgy NuGen Energy facility acquired 7/10 and additional 50% NuGen Energy interest acquired 11/11
5 Ethanol Industry Considerations Ethanol industry blends approximately 13 billion gallons per year, thereby reducing our reliance on foreign oilHelps U.S. balance of tradeHelps country move towards energy independenceApproximately 1/3 of corn used in ethanol production is returned to feed market in the form of DDG, corn gluten meal and feed*National benefitsFarmers require fewer price subsidiesLand being transitioned away from “land bank”Ethanol generates higher tax revenuesEthanol production added nearly $54 bn to GDP*Ethanol production increased household income by $36 bn*Industry will no longer get tax subsidies effective 1/1/12(VEETC)Farm states less impacted by challenged economic environmentEthanol estimated to have created 400,000 jobs across ancillary industries from agriculture to manufacturing to the service sector** Source: Renewable Fuels Associations55
6 REX Ethanol Portfolio at 11/1/11 Nameplate Non-Recourse %Entity/Location Capacity Plant Debt Ownership REX Capacity(mgy) (millions) (millions) Owned (mgy)One Earth Energy, LLCGibson City, IL 100 $71.7 (2) 74% 74.0NuGen Energy, LLCMarion, SD 100 $55.0 (3) 98% 98.0Patriot Renewable Fuels, LLCAnnawan, IL 100 $60.9 (2) 23% 23.0Big River Resources, LLCWest Burlington, IA (1) % 9.2Big River Resources $117.5 (2)Galva, IL (1) % 10.0Big River United EnergyDyersville, IA (1) % 5.0TOTAL n/a n/a 219.2REX owns a 10% interest in Big River which owns 100% of West Burlington & Galva & 50.5% of Dyersville plants.Non-Recourse Plant Debt figures are as of 9/30/11NuGen Non-Recourse Plant Debt is as of 11/1/11
7 Acquisition of Additional NuGen Interest Effective 11/1 acquired additional 50% equity interest in NuGen Energy ethanol production plant, raising REX’s ownership to 98%Total cash consideration of $12.7 million for additional equity and REX’s remaining contingent liability and REX made a $7.0 million capital contribution to reduce NuGen long-term debtTransaction funded with cash on handNuGen’s non-recourse bank debt refinanced$55 million mortgage debt and $10 million revolving credit facilityIncreases REX’s ownership of annual nameplate production by ~30% to approximately 219 mgyResults will be consolidated in REX’s financial statements beginning Q4FY’11NuGen operates a nameplate 100 mgy ethanol production facilityFavorable location with excellent infrastructure including railroad, natural gas and local corn supplyProduced mgy and mgy of denatured ethanol in FYE 7/31/11 and 7/31/10, respectivelyPlant built by Fagen, Inc. with ICM, Inc. technologyDollars in millions, unauditedTwelve Months Ended July 31,20112010ChangeSales$$%Gross Profit31.118.6%General and Administrative Expense4.85.3(9.4) %EBITDA*32.018.0%Depreciation and Amortization Expense(4.7)(4.6)+2.2 %Earnings Before Interest and Taxes27.313.4%Interest Expense, net(3.0)(3.3)(9.1) %Net Income (pre-tax)$$%Denatured Production (millions of gallons)115.7110.3 %* EBITDA, or earnings before interest, taxes, depreciation and amortization is not a measure of performance or liquidity calculated in accordance with GAAP. EBITDA for NuGen is calculated by adding interest expense, net and depreciation and amortization expense to pre-tax net income.77
8 REX Ethanol Strategy Disciplined investment criteria Invest only if project meets strategic and financial risk and return criteriaAlign with farmers, farm cooperatives and farming communities as co-investors and owners of ethanol production facilitiesFacilitates access to grain supply, local community supportLocate plants close to rail access and feedstocksUtilize state-of-the-art ethanol production technologyDry mill corn-processingAll plants are highly efficient Fagen, Inc. and/or ICM, Inc.Fagen is large, respected U.S. green energy design-builderICM engineers, builds, and supports renewable fuel bio-refineriesICM process technology produces ~6.6 billion gallons of ethanolSeek to match grain prices with ethanol and DDG sales at most plantsForward grain purchases and ethanol sales contracts generally two month durationDerivative contracts are generally not employed to hedge commodity price risksMaximize ethanol plant returns via:Running plants efficiently, often above nameplate capacitySale of dried (and wet) distillers grain (DDG) as animal feedAdding corn oil production capabilities
9 Demand/Pricing Drivers EthanolFederal EPA ethanol purchasing mandates continue to rise, requiring refiners to purchase more ethanol each year:Year TargetBGYBGYBGYBGY2015 & beyond 15.0 BGY$0.45 per gallon VEETC (blender’s credit) expires Dec. 31, 2011Distillers GrainRising corn prices have driven DDG pricing increases, helping offset impact on crush spreads
10 Crush Spread & DDG Pricing Crush Spread = price of 1 gallon of ethanol - cost of corn to produce itOne bushel of corn makes ~2.8 gallons of ethanolCrush 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 in 1H’11 and supplemented improved crush spreads in 2H’11REX’s average realized DDG prices per quarter are reflected on green line below.Calculated using CBOT monthly average prices
11 Operating Results Nine Months Ended 10/31/11 10/31/10 $ in millions, except per share data10/31/11 10/31/10Net sales and revenue:Alternative energy (1) $238.6 $205.8Real estateTotal net sales and revenue $239.5 $206.5Gross profit $13.3 $20.5Segment profit (loss):Alternative energy (1) $22.8 $18.6Real estate (1.5) (0.6)Corporate expense (1.7) (2.1)Income from synthetic fuel partnershipInterest income, netIncome from continuing operationsincluding non-controlling interests $14.5 $10.3Net income from continuing operations $12.1 $8.2Net income from continuing operations per share $1.28 $0.83Net income $13.5 $9.7Diluted net income per share $1.43 $0.98Weighted average diluted shares outstanding10/31/10 period includes results attributable to non-controlling interest of Levelland Hockley (44%) and One Earth Energy (26%) and 10/31/11 period includes results attributable to non-controlling interest in One Earth Energy (26%).
12 Strong Balance Sheet $ in millions 10/31/11 1/31/11 Cash and Cash Equivalents $ $Total Current AssetsProperty & Equipment, netDeferred Taxes, netEquity Method InvestmentsOther Investments and DepositsTotal Assets $356.6 $375.7Current Debt $ $Total Current LiabilitiesDeferred IncomeLong Term Debt - Non RecourseLong Term Debt - RecourseTotal REX Equity (excludes non-controlling interests) $238.2 $244.9
13 Real Estate AssetsPreviously built and operated 260-store consumer electronics chainDiscontinued retail operations in FY ’09Retail service contract deferred income recognized in discontinued operationsMonetized real estate as industry dynamics challenged retail operationsReduced store count using disciplined financial criteria for each locationSold 86 company-owned sites in 2007 for $74.5M in cashReal estate holdings as of 10/31/11:Carrying value $17.4M, net of $1.1M of debt24 owned store locations & 1 distribution centerDivesting real estate on an opportunistic basisNo urgency to exit at lower valuations given strong cash position
14 Capital Allocation Priorities Ethanol plants and other industrial investmentsShare repurchases below book value4.3M shares repurchased last three years + YTD; $13.58 avg. priceRepurchased 1,506,814 shares YTD; $16.86 avg. price162,455 shares remaining under current repurchase authorization
15 REX Summary Successful alternative energy investor since 1998 Interests in six operating ethanol production facilities219.2M gals of production capacity/yearAlternative energy segment profit of $13.4M in FY’10 and $22.8M in FY’11 YTDIndustry leading ethanol production skill and plant efficienciesREX ethanol operations are among best performing plantsGrowth opportunities in ethanol and other industrial sectorsExpand ownership of existing facilitiesInvest in new ethanol plants or industrial projects requiring similar skill setsProven management team with asset allocation discipline11.2% average ROE since 1993, despite low returns on high cash balancesLong-term program of share repurchases below book valueInsider ownership of ~33%Strong asset base (at 10/31/11):Shareholders‘ equity $238.2M (~$28.36 share)Unrestricted cash $67.0MNet real estate value $17.4M8.3M common shares outstanding at 11/30/11
16 REX AMERICAN RESOURCES CORPORATION REX: NYSE Review of REX American’sInvestments in Operating Ethanol PlantsInvestor Relations Contacts:Joseph Jaffoni/David CollinsJaffoni & Collins Incorporated212/ or
17 One Earth Energy, LLC Summary REX has a 74% ownership interest in One EarthOperates dry mill corn-processing ethanol plant in Gibson City, IL100 mgy ethanol capacity; 320,000 tons of dried distiller grainsPlant capital costs: ~$153.5M10/07: REX funded $50.8M to secure a 74% ownership7/09: Plant commenced operationFagen and ICM construction, process design and engineeringStrong partners, location and corn supplyAlliance Grain and Cooperative is a farmer-owned elevator system established in 1991 located directly in front of the ethanol plantFive 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 feedTwo 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 countiesREX has received dividends of $5.1M through 10/31/11
18 NuGen Energy, LLC Summary REX has a 98% ownership interest in NuGen Energy, LLCAcquired additional 50% interest effective 11/1/11Operates dry mill corn processing ethanol plant in Marion, SDIn 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 $14MREX sold its interests in the plant in 2007 to U.S. BioEnergy for ~$24M profit100 mgy ethanol capacity; and 320,000 tons of dried distiller grainsPlant commenced construction October 2006; commenced production Feb. 20086/30/10: 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, 201111/1/11: REX acquired additional 50% interest for $19.7M which also paid in full prior contingent consideration liabilityFagen and ICM construction, design and engineeringREX received dividends of $3.1M through 10/31/11
19 Patriot Renewable Fuels, LLC Summary REX has a 23% ownership interest in PatriotOperates dry mill corn-processing ethanol plant in Annawan, Illinois100 mgy ethanol capacity; 320,000 tons of dried distiller grainsCapital costs: ~ $155M12/06: Acquired 23% of Patriot for $16.0M9/08: Plant commenced operationFagen and ICM construction, process design and engineeringLocated near rail access in heart of Illinois corn productionAccess to ample grain supplies at competitive pricesREX has received dividends of $1.6M through 10/31/11
20 Big River Resources, LLC Summary Big River was formed to develop/acquire ethanol facilitiesOwns 5 elevators with ~10M bushels of grain storageREX acquired 10% ownership in Big River for $20MBig River Facilities:92 mgy plant in West Burlington, IACommenced operation in (REX interest is 10%)100 mgy plant in Galva, ILCommenced operation 5/09 (REX interest is 10%)50.5% stake in 100 mgy plant in Dyersville, IAAcquired 8/09 (REX interest is 5%)All plants Fagen/ICM construction, process design and engineeringAll plants in close proximity to rail and highway transportationREX has received dividends of $4.7M through 10/31/11
21 Stuart Rose, Chairman & CEO REX: NYSEOne Earth Energy, LLC Gibson City, ILStuart Rose, Chairman & CEODoug Bruggeman, CFODecember 2011
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