Greetings and welcome to the REX American Resources fiscal 2019 third quarter conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. . I would now like to turn the conference over to Doug Bruggeman, Chief Financial Officer. Please go ahead..

Good morning and thank you for joining REX American Resources fiscal 2019 third quarter conference call. We will get to our presentation and comments momentarily as well as a question-and-answer session, but first I will review the Safe Harbor disclosure.

In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance. As such, actual results may vary materially from expectations..

Thank you, Doug. Going forward, our corn supply has improved over the last quarter and the crush spreads have also improved. There is less production going on currently in the industry as a number of plants have closed or slowed down. Demand next year should be up if the government sticks to the announced RIN products.

We are currently running at a profitable rate in ethanol, and we are running at a rate that's above last year's corresponding quarter and certainly above the quarter we just reported.

On refined coal , we currently continue to run at a rate that we continue to expect a rate less than last year, but we expect it to still be profitable in the current quarter on an after-tax basis. Our cash balance was approximately $196 million. We still have our authorized share repurchase program, 350,000 shares are still open to be bought.

We generally have bought those shares on dips. We still have that availability should we choose. We also continue to look for opportunities in the ethanol field. At the moment, there is nothing imminent, but we are looking.

We are also looking at opportunities outside the ethanol field where we can use our management abilities to make profits for shareholders. In terms of our cash, we are currently investing it in short-term securities. I will now turn the call over to Zafar Rizvi, our CEO, who will discuss more of our ethanol operations. Thank you..

Thank you, Stuart. Good morning everyone. As I mentioned in our previous two calls, a challenging environment has continued throughout the year. The company faced a number of issues due to weather-related problems which has delayed the planting of corn, uncertainty regarding the expected corn yields, and expected delays in the harvest.

We struggled to obtain an adequate supply of corn at our NuGen facility in South Dakota where production has fallen off of historical levels. Our production at this plant continues to be interrupted due to corn availability, including no operation in October. Thus largely we experienced a loss in the ethanol segment in the third quarter of 2019.

The only other time this happened was in the fourth quarter of fiscal 2012 because of drought and that was almost seven years ago..

Thank you. In conclusion, as Zafar just mentioned, crush spreads and corn supplies have improved quarter-to-date versus last quarter and we are again running at a profitable rate and currently project, if we can continue this, to do better than fourth quarter of last year. We continue to outperform the industry even in difficult times.

We attribute this to good plants, good rail and most importantly, we really believe we have the best people in the industry and that's really what separates us from the industry..

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If we have no questions, I thank everyone for their -- do we have a question, operator?.

Yes. Thank you. We do have a question..

Good. Thank you..

Our first question comes from the line of Pavel Molchanov with Raymond James. Please proceed..

Hi Pavel..

Yes. Thanks for taking the question, guys. I wanted to ask about just your individual perspective on the refinery waivers heading into 2020. The 35 or so waivers that were granted this past summer will come up for renewal in the summer of 2020, which of course, is the middle of the Presidential campaign.

Just on political grounds, if nothing else, is it your sense that it's more likely than not the administration will want to kind of set those aside, essentially end them by next summer instead of picking a fight with farmers in the middle of an election year?.

The way I understand it is, even if they grant the waivers, they are still going to require 15 billion in RINs next year. So, at least that was my current understanding of what will happen next year, which is always subject to change. We have been led to believe a lot of things that don't come true.

So, we are very skeptical of everything that comes out of the government today, because they have not, with these exemptions, they have very badly hurt our industry. So, I don't know which way it will go.

I know that we get a lot of talk that the government is going to help our industry, but we really haven't seen anything, in my opinion, of substance.

Zafar, you may want to add to that?.

Yes. I think, as I mentioned in my prepared remarks that we have not received any subsidy. And also, I think the promise, as Stuart said, the May 2 huge package, we have not received that huge package also. So, as I mentioned also, there’s 10 refineries already applied for, that's doubled. It’s 5, double them since September.

And it can go either way, but I think that they probably will keep it 15 billion, and there is some rumor that they may add the previous exemption, some of them to redistribute to some of the people -- refineries back to that, but to be honest with you, it's hard to say which direction EPA will go and which direction Trump will really go out at, yes..

One thing that we have seen, Pavel, is a much lower or I shouldn't say much, but a lower rate of production. Plants have shut down. Plants have slowed down. And that's increased our crush spread even with all this stuff that's happened to us this year.

So, even with the government doing basically the exemption, so if things do go bad, we are in a really good position because our plants are really good. So, let's see what happens.

But we prefer a strong -- we prefer the government not to give the exemptions or at least to commit to 15 billion gallons, but even if that doesn't happen, we think we are in a really good position because we have what we consider among the best plants in the industry..

Okay..

And I think I would add to that. I wish that we can resolve these trade disputes more because that will help us to export more ethanol on the same time, so the uncertainty is also really a major factor that what's going on in the industries apart from those exemptions..

The one thing, the government did allow was E15, but that has been because of the pumps that are out there and we have always said that would be not a major improvement, a minor improvement. It's turned out that it has only been a minor improvement because there is not a lot of gas stations relative to the grand total of gas stations that pump E15..

Okay. Well, you actually answered my second question on the E15, kind of first year with yearround E15. It sounds like you are a little skeptical about the scale of that..

It's better, it someday may be something. But today, it's very minor in my opinion..

Yes. I think the E15, as you probably know that all of the costs which is mostly, apart from a couple of manufacturers, rest of the manufacturers are who are bringing these 2020 automobiles, all of them have approved E15 and certainly that includes even BMW and others.

So that will certainly with some help, but I think Stuart is right, unless we have more -- all of these ethanol -- they have started mixing up the E15 blend, and it's available blended E15 everywhere. It will not be really going to make much difference..

Got it. I appreciate it guys..

Thank you Pavel..

Thank you. Our next question comes from the line of Chris Sakai with Singular Research. Please proceed..

Hi. Good morning. I just had a question for, Stuart mentioned that you guys are possibly looking for acquisitions outside of ethanol. Just was wondering if you could elaborate more on that..

Well, I mean there is a lot of things in alternative energy that could fit our abilities, but we have nothing imminent that we can talk about, so there’s really not a lot to talk about. But for example, a good example of what we have done in the past, we were a retailer at one time, we became an ethanol producer.

We were an ethanol producer, we are now in refined coal. There is a number of things out there related to our expertise in basically handling things like refined coal, but not that we are going to go in the coal business. We certainly aren't.

But there is a lot of things related to tax credits in energy that we know a lot about, and that would be the type of thing that we are looking for that we feel we could use our abilities to run a successful operation other than ethanol..

And then I guess for valuations in other ethanol plants like, how are they, are you seeing anything there?.

We have made. We have talked. We have tried to talk to some people, and the valuations on the really good ones have not come down or at least have not come down to the profitability of many company, almost all have had a rough third quarter, but everyone is looking at fourth quarter as being hopefully a little bit better.

And everyone hopes to get the industry on track next year. And so, because of that, no one is really -- of the good plants.

Now there are plants out there that we are not interested in, but of the plants were interested in, we have not seen anything at a valuation that's attractive, and we have seen a couple one or two for sale, but not at a valuation attractive to us..

Yes..

Okay.

And then I guess lastly, I mean for the NuGen facility, in this quarter, how is it going there? Are they still facing same difficulties as last quarter? Or is it getting better?.

I think, as I mentioned earlier that we have enough corn at this time, but we restarted the plants late in the first or second week of early November when the harvest started and now we have enough corn for at least month and so after December. We have some enough corn for at least half of the month, but not month of January.

So I think things has improved, generally speaking. But as I mentioned, there is almost one billion bushels are not really harvested yet. And if you look at that North Dakota I think is about close to 30% to 35% harvest was done. There is Mexican, there is not enough harvest done in Wisconsin due to all these weather related.

So I think I will be very cautious up to the time the harvest is completed. But generally speaking, at this time, we have no problem..

Okay. All right. Thanks..

Thanks..

Thank you..

Thank you Mr. Rose, there are no further questions at this time. I will now turn the call back to you..

Okay. I would like to thank everyone for listening and we will talk to you next call at the year-end call. Thank you very much. Bye..

Thanks everybody..

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line..