Download Distillers Grains / Corn Oil

REX: NYSE
www.rexamerican.com
Stuart Rose, CEO
Doug Bruggeman, CFO
June 2014
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 forward-looking
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 (~40% CAGR)
 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 represented 99.9% of revenue and 85.9% of assets
 Ownership in seven ethanol production facilities
 In aggregate, 750.2 million gallons of TTM annualized gallons shipped by seven plants
 REX effective ownership interest of TTM annualized gallons shipped = 262.8 million gallons
 Pre-tax ROI’s of 25% - 52% (trailing four fiscal years annualized)
 Revenues from ethanol, distillers grains & corn oil
 Strong, liquid balance sheet (as of 4/30/14)
(based on 8.2M diluted shares)
 Unrestricted cash
$55.5M
~ $ 6.76 / share
 Net book value of retail real estate
$4.6M
~ $ 0.56 / share
 Carrying value of ownership in seven plants $267.8M
~ $32.65 / share
 REX shareholders’ book value
$302.4M
~ $36.87 / share
 ROE-focused asset allocation discipline
 10.7% average ROE since 1993 (despite low returns on high cash balances)
 Long-term/active share repurchase program
 Insider ownership approximately 21%
3
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. constructed utilizing ICM, Inc. technology
 Fagen is large, respected U.S. green energy design-builder
 Seek to match grain prices with ethanol and distiller grain sales at consolidated plants
 Derivative contracts are generally not employed to hedge commodity price risks
 Maximize ethanol plant returns via:
 Running plants efficiently, often above nameplate capacity
 Sell distillers grains as animal feed
 Production of corn oil
 Ongoing reduction of plant level debt
4
REX Corn Belt Ethanol Portfolio
Illinois
ONE EARTH ENERGY, LLC
REX AMERICAN RESOURCES
TTM GALLONS SHIPPED BY PLANTS IN WHICH IT HAS INTERESTS
Gibson City, IL
750.2 MILLION
REX OWNERSHIP INTEREST
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED
74%
262.8 MILLION
South Dakota
NUGEN ENERGY, LLC
Marion, SD
REX OWNERSHIP INTEREST
99%
TTM GALLONS SHIPPED
TTM GALLONS SHIPPED
REX’S EFFECTIVE OWNERSHIP OF TTM
GALLONS SHIPPED
REX’S EFFECTIVE OWNERSHIP OF TTM
GALLONS SHIPPED
Illinois
Iowa
PATRIOT HOLDINGS, LLC
BIG RIVER RESOURCES WEST
BURLINGTON, LLC
112.0 MILLION
114.2 MILLION
82.9 MILLION
113.1 MILLION
Annawan, IL
West Burlington, IA
REX OWNERSHIP INTEREST
27%
REX OWNERSHIP INTEREST
10%
TTM GALLONS SHIPPED
120.7 MILLION
TTM GALLONS SHIPPED
107.4 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM
GALLONS SHIPPED
REX’S EFFECTIVE OWNERSHIP OF TTM
GALLONS SHIPPED
32.6 MILLION
10.7 MILLION
Illinois
Iowa
BIG RIVER RESOURCES, GALVA, LLC
Galva, IL
REX OWNERSHIP INTEREST
10%
TTM GALLONS SHIPPED
118.4 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM
GALLONS SHIPPED
11.8 MILLION
BIG RIVER UNITED ENERGY, LLC
Wisconsin
BIG RIVER RESOURCES BOYCEVILLE, LLC
Boyceville, WI
Dyersville, IA
REX OWNERSHIP INTEREST
5%
TTM GALLONS SHIPPED
REX OWNERSHIP INTEREST
121.7 MILLION
TTM GALLONS SHIPPED
REX’S EFFECTIVE OWNERSHIP OF TTM
GALLONS SHIPPED
10%
55.8 MILLION
REX’S EFFECTIVE OWNERSHIP OF TTM GALLONS SHIPPED
5.6 MILLION
6.1 MILLION
Figures as of 4/30/14
5
High Return Ethanol Investments
Plant
Investment
Timeline
REX
Total Investment
Cumulative
Earnings (4/30/14)
REX Trailing
Four Year Annualized
ROI (1/31/14)*
One Earth (1)
Oct. ’07
$51M
$62M
25%
NuGen
June ‘10 ($12.3M)
Nov. ’11 ($19.7M)
$32M
$68M
52%
Patriot (2)
Dec. ’06 ($16.0M)
Jan. ‘12 ($1.9M)
$18M
$24M
28%
Big River
Oct. ’06 ($5.0M)
Jan. ‘07 ($5.0M)
July ‘07 ($10.0M)
Sept. ‘09 ($0.03M)
$20M
$34M
27%
$121M
$188M
Total
* Calculated based upon the weighted average capital invested and pre-tax returns generated over the time period
1 Production commenced in July ’09
2 Production commenced in Sept. ‘08
6
Favorable Quarterly Comps
First Quarter 2014
$ in thousands, except per share / per gallon data
Sales
REX
GPRE (3)
PEIX (3)
$155,936
$733,889
$254,543
Gross Profit
36,550
100,749
38,545
Operating Income
38,676
78,343
34,875
Pre Tax Income (Loss) from
Continuing Operation
35,574
69,728
(7,556)
Net Income
21,742
43,203
(10,826)
$2.67
$1.04
($0.69)
64.4 (1)
230.8 (2)
39.8 (2)
$0.55
$0.30
($0.19)
EPS
Ethanol gallons production sold
(millions)
Pre Tax Income (Loss)/Gallon
(1) Rex gallons are ownership adjusted. (2) Based upon gallons produced and sold . (3) Publicly sourced data.
7
Favorable Annual Comps
Annual 2013
$ in thousands, except per share / per gallon data
Sales
REX
GPRE (3)
PEIX (3)
$666,091
$3,041,011
$908,437
Gross Profit
64,151
173,020
32,930
Operating Income
63,480
107,851
18,909
Pre Tax Income (Loss) from
Continuing Operation
54,614
72,281
(781)
Net Income
35,073
43,391
(781)
$4.29
$1.26
($0.17)
262.4 (1)
734.5 (2)
149.7(2)
$0.21
$0.10
($0.01)
EPS
Ethanol gallons production sold
(millions)
Pre Tax Income (Loss)/Gallon
(1) Rex gallons are ownership adjusted. (2) Based upon gallons produced and sold . (3) Publicly sourced data.
8
Ethanol Industry Considerations
 The ethanol industry produced approximately 13.3 billion gallons of
ethanol in 2013, thereby reducing U.S. reliance on foreign oil
 Helps U.S. balance of trade
 Helps U.S. move towards energy independence
 Over 462M barrels of imported oil displaced
 Approximately 1/3 of corn used in ethanol production is returned to feed
market in the form of distiller grains, corn gluten meal and corn oil*
 National benefits
 Government payments to corn growers have fallen from nearly $9
billion in 2006 to less than $2 billion in 2013*
 Land transitioned away from “land bank”
 Ethanol production generates higher tax revenues
 Ethanol production added over $44B to GDP*
 Ethanol production increased household income by ~$31B*
 Industry receives no tax subsidies
 Farm states are less impacted by challenged economic environment
 Ethanol estimated to have supported over 387,000 jobs,
including across ancillary industries, from agriculture to
manufacturing to the service sector*
 On a life cycle basis, corn-based ethanol reduces greenhouse gas
emissions (GHGs) by ~34% compared to gasoline – 13.3 billion gallons
of ethanol reduced GHG emissions by 38 million metric tons, the
equivalent of taking 8 million cars off the road*
 $8.3B paid in federal, state and local taxes*
Sources:* Renewable Fuels Associations
9
Expense/Demand/Pricing Drivers
Corn
 USDA Crop Production Forecast:
2013 (January 2014 report)
13.9 billion bushels
(average acre yield of 158.8 bushels)
2012 (November 2012 report) 10.7 billion bushels
(average acre yield of 122.3 bushels)
Ethanol
 Federal EPA ethanol purchasing mandates(1) :
Year
Target
2013
13.8 BGY
2014
13.0 BGY(2)
 Efficient plants expected to operate near capacity levels
Year
Capacity
2013
14.8 BGY
(14.0 in operation at Jan. 2014)
Distillers Grains / Corn Oil
 Allows for the recovery of approximately 1/3 of the cost of corn
1 Mandates can be partially met by use of available RINS from the prior years toward the current
year requirements and/or to carry forward a deficit into the next compliance year.
2 Proposed – not final EPA number.
10
REX TTM Sales Mix
Revenue Mix TTM 4/30/14
Distiller Grains
$128.6M
20.7%
Revenue Mix TTM 4/30/13
Corn Oil
$17.6M
2.8%
Syrup
$0.2M
0.1%
Corn Oil
$17.7M
2.6%
Distiller Grains
$154.2M
22.5%
Syrup
$2.0M
0.3%
Ethanol
$474.4M
76.4%
Total TTM 4/30/14 Revenue of $620.6M
Ethanol
$510.0M
74.6%
Total TTM 4/30/13 Revenue of $683.8M
TTM Sales Mix
Ethanol
Distiller Grains
Corn Oil
Syrup
TTM 4/30/14
$474,356,813
76.4%
128,553,994
20.7%
17,557,790
2.8%
161,771
0.1%
TTM 4/30/13
$509,962,933 74.6%
154,159,507 22.5%
17,716,241
2.6%
1,987,450
0.3%
TOTAL
$620,630,368
$683,826,131
100.0%
100.0%
11
Operating Results
$ in millions, except per share data
Three Months
Ended April 30,
2014
2013
Twleve Months
Ended January 31,
2014
2013
Alternative Energy
Real Estate
Total net sales and revenue
$155.8
0.1
$155.9
$178.3
0.1
$178.4
$665.6
0.5
$666.1
$656.1
0.5
$656.6
Gross profit
$36.6
$9.0
$64.2
$13.6
Segment profit (loss)
Alternative energy
Real estate
Corporate expense, net
$38.9
(0.1)
(0.8)
$6.6
(0.1)
(0.7)
$63.2
(0.4)
(3.1)
$(1.0)
(0.5)
(2.3)
Net income (loss) from continuing operations
$21.7
$3.2
$33.9
$(2.9)
Diluted net income (loss) from continuing operations per share
$2.66
$0.39
$4.15
$(0.35)
Net income (loss)
$21.7
$3.5
$35.1
$(2.3)
Diluted net income (loss) per share
$2.67
$0.43
$4.29
$(0.28)
8.1
8.2
8.2
8.3
Amounts Attributable to REX Common Shareholders
Weighted average diluted shares outstanding
12
Strong Balance Sheet
$ in millions
April 30,
2014
$ 125.6
January 31,
2014
$ 105.1
Total current assets
168.5
148.8
Property & equipment, net
198.4
202.3
Equity method investments
74.4
71.2
Total Assets
$ 446.9
$ 427.9
Current portion of long-term debt
$
$
Cash and cash equivalents
10.1
12.2
Total current liabilities
31.0
32.1
Long term debt
58.1
63.5
$ 302.4
$ 279.3
Total REX Equity (excludes non-controlling interests)
13
Capital Allocation Priorities
 Ethanol plants and other industrial investments
 Repay debt at existing facilities
 Energy projects using our commodity experience and state-of-the-art technology focus
 Share repurchases below book value
 ~1.7M shares repurchased over the last three fiscal years at average price of $17.82
 ~2.8M shares repurchased over the last five fiscal years at average price of $16.00
 Repurchased 137,015 shares in FY’13 at average price of $25.44
 280,006 shares remaining under current repurchase authorization
 8.2 million common shares outstanding
Growth in Book Value Per Share vs.
Annual Average Price of Shares Repurchase
$40
$35
$34.06
$30
$30.06
$25
$20
$25.82
$23.51
$15
$10
$24.93
$15.99
$10.82
$10.82
FY08
FY09
$30.04
$25.44
$17.02
$17.82
FY11
FY12
$5
$FY10
FY13
14
Deep Heavy Oil Technology Investment
 Much of the world’s oil reserves are in the form of heavy oil in deposits at depths below 2,000
feet
 Heavy oil is too viscous to flow to the well at a reasonable rate under ordinary conditions, so
technology is needed to help extract it
 The most practical method developed so far is to inject steam into the reservoir, to raise the
temperature thereby reducing the oil's viscosity
 Current methods are limited by the heat losses on the surface and in the well bore as the
steam is sent down the injection well. For any particular heavy oil reservoir and price of oil,
there is a maximum depth of the reservoir that can be economically exploited
 REX invested in patented technology with potential to steam oil
at depths currently unattainable
 Current technology allows for injecting steam below grade to
~2,000 feet to extract heavy oil
 New downhole steam generator technology seeks to create
steam at depths below 2,000 feet to produce deep heavy oil
 Modest investment / high potential returns
 REX has invested ~$1.2M (through 4/30/14) for 60% equity
stake in technology developer, to secure patents, and to
pursue commercialization of the downhole steam generation
technology
 Presently seeking sites/opportunities to test and prove
technology
15
REX Summary
 Successful alternative energy investor since 1998
 Interests in seven ethanol production facilities with annualized sales of ~750 million gallons (TTM)
 REX effective ownership interest of annualized TTM gallons sold = ~263 million gallons
 Pre-tax ROI’s of 25% - 52% (trailing four year annualized)
 Industry leading ethanol production skill and plant efficiencies
 REX ethanol operations are among best performing plants
 Alternative energy segment profit of $63.2M in in FY’13 and $38.9M in Q1’14
 Growth opportunities in ethanol and other industrial sectors
 Repay debt at existing facilities and expand ownership of existing facilities
 Invest in new ethanol plants or industrial projects requiring similar skill sets
 Proven management team with asset allocation discipline
 10.7% average ROE since 1993, despite low returns on high cash balances
 Long-term program of share repurchases below book value
 Insider ownership of approximately 21%
 Strong asset base (at 4/30/14):
 Shareholders’ equity
$302.4M (~$36.87 per share)
 Consolidated cash
$125.6M
 8.2M shares outstanding
16
Doug Bruggeman
REX
Chief Financial Officer
(937) 276-3931
Joseph Jaffoni, Norberto Aja
JCIR
(212) 835-8500
[email protected]
One Earth Energy, LLC
Gibson City, IL