# REX AMERICAN RESOURCES Corp: Form 10-Q for the period ended Apr 30, 2023

- Company: [REX AMERICAN RESOURCES Corp](/companies/rex.md) (CIK 744187)
- Form: 10-Q
- Filed: 2023-05-26
- Accepted by EDGAR: May 26, 2023, 16:44 ET
- Period: 2023-04-30
- Accession: 0000930413-23-001660
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/744187/000093041323001660/c106416_10q-ixbrl.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/744187/000093041323001660/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-04-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-02-01 to 2023-04-30 | $212.7m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-02-01 to 2023-04-30 | $197.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-02-01 to 2023-04-30 | $15.0m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-02-01 to 2023-04-30 | $10.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Income tax | 3 months, 2023-02-01 to 2023-04-30 | $2.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-02-01 to 2023-04-30 | $5.2m | us-gaap:NetIncomeLoss |
| Operating cash flow | 3 months, 2023-02-01 to 2023-04-30 | −$10.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-02-01 to 2023-04-30 | $4.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-04-30 | $77.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-04-30 | $361.0m | us-gaap:AssetsCurrent |
| Total assets | at 2023-04-30 | $566.5m | us-gaap:Assets |
| Current liabilities | at 2023-04-30 | $36.2m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2023-04-30 | $453.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,463 characters.

### Ethanol and By-Products

At April 30, 2023, we had investments in three ethanol limited liability companies, in two of which we have a majority ownership interest. The following table is a summary of ethanol entity ownership interests at April 30, 2023:

| Entity | REX’s Current Ownership Interest |
| --- | ---: |
| One Earth Energy, LLC | 75.8% |
| NuGen Energy, LLC | 99.7% |
| Big River Resources, LLC: Big River Resources W Burlington, LLC Big River Resources Galva, LLC Big River United Energy, LLC Big River Resources Boyceville, LLC | 10.3% 10.3% 5.7% 10.3% |

Our ethanol operations and the results thereof are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains, distillers corn oil and natural gas, and availability of corn. As a result of price volatility for these commodities, our operating results can fluctuate substantially. The price and availability of corn is subject to significant fluctuations depending upon several factors that affect commodity prices in general, including crop conditions, the amount of corn stored on farms, weather, federal policy, foreign trade and international disruptions caused by wars or conflicts. Because the market prices of ethanol and distillers grains are not always directly related to corn prices (for example, demand for crude and other energy and related prices, the export market demand for ethanol and distillers grains, soybean meal prices, and the results of federal policy decisions and trade negotiations can impact ethanol and distillers grains prices), at times ethanol and distillers grains prices may not follow movements in corn prices and, in an environment of higher corn prices or lower ethanol or distillers grains prices, reduce the overall margin structure at the plants. As a result, at times, we may operate our plants at negative or minimally positive operating margins.

We expect our ethanol plants to produce approximately 2.9 gallons of denatured ethanol for each bushel of corn processed in the production cycle. We refer to the actual gallons of denatured ethanol produced per bushel of corn processed as the realized yield. We refer to the difference between the price per gallon of ethanol and the price per bushel of corn (divided by the realized yield) as the “crush spread”. Should the crush spread decline, it is possible that our ethanol plants will generate operating results that do not provide adequate cash flows for sustained periods of time. In such cases, production at the ethanol plants may be reduced or stopped altogether in order to minimize variable costs at individual plants.

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.

### Carbon Sequestration

Through our affiliate, One Earth Energy, LLC, we are in the exploratory stage of a carbon sequestration project near the One Earth Energy ethanol plant. 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. We have applied for a Class VI injection well permit for three wells with the U.S. Environmental Protection Agency (“EPA”). In addition, we have signed a construction contract to capture, dehydrate, and compress carbon from the One Earth Energy ethanol plant to a state suitable for sequestration. We are currently working on an engineering design study for a short pipeline to deliver carbon from the ethanol plant to the sequestration site. Although we have made meaningful progress with this project, we continue to complete required documentation for various government agencies and obtain other approvals with no assurances of ultimate success. If successful, we believe we would qualify for tax credits under section 45Q of the Internal Revenue Code (“45Q”) and section 45Z of the Internal Revenue Code (“45Z”) as outlined in the Inflation Reduction Act.

### Refined Coal

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.

### Future Energy

During fiscal year 2013, we entered into a joint venture to file and defend patents for eSteam technology. The patented technology is an enhanced method of heavy oil recovery involving zero emissions downhole steam generation. To date, we have not successfully had a field operation nor demonstrated that the technology is commercially feasible. We own 60% and our partner owns 40% of the entity named Future Energy, LLC, an Ohio limited liability company. We have no current plans to operate this technology and are maintaining patents in limited countries.

### Critical Accounting Policies and Estimates

During the three months ended April 30, 2023, we did not change any of our critical accounting policies as disclosed in our 2022 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 30, 2023.

### Fiscal Year

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 2023” means the period February 1, 2023 to January 31, 2024.

### Results of Operations

### Trends and Uncertainties

Renewable Fuel Standard II (“RFS II”), established in October 2010, has been an important factor in the growth of ethanol usage in the United States. In recent years, there has been much uncertainty on the enforcement of RFS II. When it was originally established, RFS II required the volume of “conventional” or corn derived ethanol to be blended with gasoline to increase each year until it reached 15.0 billion gallons in 2015 and required that it remain at that level through 2022. There are no established congressional target volumes beginning in 2023 and the EPA has the authority to calculate and establish Renewable Volume Obligations. The EPA has the authority to waive the biofuel mandate, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms the domestic economy or environment. 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 requirement to submit renewable identification numbers (“RINs”) for the oil they process. The EPA, through consultation with the Department of Energy and the Department of Agriculture, can grant the refiner a full or partial waiver, or deny the waiver. The EPA issued 88 refinery exemptions for 2016-2018 compliance years, undercutting the statutory renewable fuel volumes by a total of 4.3 billion gallons.

On December 1, 2022, the EPA issued proposed Renewable Fuel Standard volume obligations for calendar years 2023-2025. The proposed volumes from conventional biofuels (which includes corn-based ethanol) were 15.0 billion gallons for 2023 and 15.25 billion gallons each for 2024 and 2025. They also proposed an additional 250 million gallon supplemental obligation for 2023 to make good on the shortfall from the 2016 compliance year.

The USDA reported United States corn harvest in 2022 was 13.7 billion bushels, a decrease of 9% from the prior year. The 2022 corn harvest near the NuGen Energy, LLC ethanol plant was below average for that area, which has lead to increased corn cost and lower supply for that plant.

Due to the Russian-Ukraine conflict, corn and natural gas supplies worldwide have been adversely affected, which has contributed to volatility in the prices for both commodities and has impacted corn availability in the United States.

The recently enacted 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”), that would be dependent on the level of greenhouse gas emissions reduction for each gallon of ethanol produced and sold, available for years 2025 to 2027. The Act also raises the carbon capture tax credit from $50 per metric ton to $85 per metric ton, under section 45Q of the Internal Revenue Code (“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 positively impact our distillers corn oil prices, 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; (c) funding biofuel refueling infrastructure which could positively 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.

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

### Comparison of Three Months Ended April 30, 2023 and 2022

The following table summarizes our results from operations (amounts in thousands):

|  | Three Months Ended April 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net sales and revenue | $212,714 | $194,228 |
| Cost of sales | 197,685 | 182,316 |
| Gross profit | $15,029 | $11,912 |
| Income before income taxes | $8,688 | $8,834 |
| Provision for income taxes | $(1,988) | $(1,848) |
| Net income attributable to REX common shareholders | $5,236 | $5,182 |

24

The following table summarizes net sales and revenue by product group (amounts in thousands):

|  | Three Months Ended April 30, 2023 | 2022 |
| --- | ---: | ---: |
| Ethanol | $157,549 | $146,462 |
| Dried distillers grains | 39,706 | 31,897 |
| Distillers corn oil | 13,081 | 11,102 |
| Modified distillers grains | 1,565 | 4,355 |
| Derivative financial instruments gains | 730 | 322 |
| Other | 83 | 90 |
| Total | $212,714 | $194,228 |

The following table summarizes selected operating data:

|  | Three Months Ended April 30, 2023 | 2022 |
| --- | ---: | ---: |
| Average selling price per gallon of ethanol (net of hedging) | $2.21 | $2.28 |
| Gallons of ethanol sold (in millions) | 71.5 | 64.5 |
| Average selling price per ton of dried distillers grains | $244.85 | $218.90 |
| Tons of dried distillers grains sold | 162,166 | 145,714 |
| Average selling price per pound of distillers corn oil | $0.63 | $0.63 |
| Pounds of distillers corn oil sold (in millions) | 20.6 | 17.7 |
| Average selling price per ton of modified distillers grains | $127.58 | $118.09 |
| Tons of modified distillers grains sold | 12,270 | 36,879 |

Net sales and revenue in the quarter ended April 30, 2023 increased approximately 10% compared to the prior year’s first quarter, driven by an increase in quantities sold in the first quarter of 2023 compared to the first quarter of 2022.

Ethanol sales increased in the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022 as the quantities sold at our consolidated plants during the first quarter of fiscal year 2023 increased 11% from the prior year comparable period due to improved logistics in the current year, offset slightly by a lower average selling price on ethanol. Additionally, fewer ethanol contracts were sold net of freight according to contract terms in the first quarter of fiscal year 2023 compared to fiscal year 2022, which benefitted revenue in fiscal year 2023.

Dried distillers grains sales increased in the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022 as the average price per ton sold increased 12%, as well as a 11% increase in tons sold. The increase in the dried distillers grains selling price resulted primarily from an increase in corn prices as dried distillers grains prices often correlate with corn pricing.

Distillers corn oil sales increased in the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022 as the number of pounds sold increased 16% over the prior year first quarter.

Modified distillers grains sales decreased in the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022 due to a decrease in tons sold of 67%, offset partially by an 8% increase in price per ton sold. The increase in the modified distillers grains selling price resulted primarily from an increase in corn prices. Our consolidated plants’ decisions to sell modified or dried distillers grains fluctuates from time to time based on upon market conditions.

Gains on derivative financial instruments, included in net sales and revenue, of approximately $0.7 million in the first quarter of fiscal year 2023 related to our risk management activities and were impacted by the price movements and types of contracts entered into at one of our consolidated ethanol plants. There were gains on derivative financial instruments of approximately $0.3 million during the first quarter of fiscal year 2022.

Cost of sales increased approximately 8% in the quarter ended April 30, 2023, compared to the prior year first quarter. Corn accounted for approximately 83% ($163.9 million) of our cost of sales during the first quarter of fiscal year 2023 compared to approximately 84% ($152.7 million) during the first quarter of fiscal year 2022. The cost of corn increased approximately $29.6 million due to higher average corn prices and higher corn usage during the period. This increase was offset by hedging activities which resulted in lower cost of sales of $18.4 million, compared to the first quarter of 2022. Natural gas accounted for approximately 5% ($10.7 million) of our cost of sales during the first quarter of fiscal year 2023 compared to approximately 6% ($10.8 million) during the first quarter of fiscal year 2022.

As a result of the foregoing, gross profit for the first quarter of fiscal year 2023 increased approximately $3.1 million compared to the prior year’s first quarter.

We attempt to match quantities of ethanol, distillers grains and distillers corn oil sales contracts with an appropriate quantity of corn purchase contracts over a given time period when we can obtain a satisfactory 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 sales 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 contracts cover, we generally cannot predict the future movements in our realized crush spread for more than four months.

SG&A expenses were approximately $10.6 million for the first quarter of fiscal year 2023, compared to approximately $5.2 million of expenses for the first quarter of fiscal year 2022. These increases were primarily the result of $4.8 million more outbound freight expense in the first quarter of fiscal year 2023 as more sales contracts provided for shipping to be paid by us to a third party compared to the first quarter of fiscal year 2022. In addition, performance bonus expense for the first quarter of fiscal year 2023 was approximately $0.6 million higher than the first quarter of fiscal year 2022, due in part to the addition of the RSUs granted to certain executive officers, as well as other increases in both the annual bonus accrued and restricted stock awards paid to directors and certain employees of the company.

During the first quarter of fiscal year 2023, we recognized income from our equity investment in Big River of approximately $1.5 million compared to income of approximately $2.0 million for the first quarter of fiscal year 2022. Our investment in Big River, which has interests in four ethanol production plants, represents an effective ownership of approximately 38.1 million gallons of ethanol shipped in the trailing twelve months ended April 30, 2023. 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.

Interest and other income was approximately $2.8 million for the first quarter of fiscal year 2023 versus approximately $0.2 million for the first quarter of fiscal year 2022. The increase is primarily due to an increase in interest income as yields on our excess cash and short-term investments increased in the first quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022.

As a result of the foregoing, income before income taxes was approximately $8.7 million for the first quarter of fiscal year 2023 versus approximately $8.8 million for the first quarter of fiscal year 2022.

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 $2.0 million and approximately $1.8 million for the three months ended April 30, 2023 and 2022, respectively.

As a result of the foregoing, net income was approximately $6.7 million for the first quarter of fiscal year 2023 compared to approximately $7.0 million for the first quarter of fiscal year 2022.

Income related to noncontrolling interests was approximately $1.5 million for the first quarter of fiscal year 2023 compared to $1.8 million for the first quarter of fiscal year 2022. These amounts represent the other owners’ share of the income of NuGen and One Earth.

As a result of the foregoing, net income attributable to REX common shareholders from for the first quarter of fiscal year 2023 was approximately $5.2 million, consistent with net income attributable to REX common shareholders of approximately $5.2 million for the first quarter of fiscal year 2022.

### Liquidity and Capital Resources

Net cash used in operating activities was approximately $10.6 million for the first three months of fiscal year 2023, compared to cash used in operating activities of approximately $17.7 million for the first three months of fiscal year 2022. For the first three months of fiscal year 2023, cash was provided by net income of approximately $6.7 million, adjusted for non-cash items of approximately $4.2 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 and stock-based compensation expense. An increase in the balance of accounts receivable used cash of approximately $4.1 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 three months of fiscal year 2023, providing cash of $7.4 million. An increase in the balance of other assets of approximately $3.3 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 $2.0 million primarily relates to amounts paid toward taxes currently payable for the previous fiscal year and quarterly estimated tax payments. An decrease in the balance of accounts payable used cash of approximately $16.1 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 $3.4 million.

Net cash used in operating activities was approximately $17.7 million for the first three months of fiscal year 2022. For the first three months of fiscal year 2022, cash was provided by net income of approximately $7.0 million, adjusted for non-cash items of approximately $5.2 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 and stock-based compensation expense. A decrease in the balance of accounts receivable provided cash of approximately $0.4 million, primarily a result of the timing of products shipped and the receipt of customer payments at One Earth and NuGen. Inventories increased by approximately $14.2 million, primarily a result of the timing of receipt of raw materials and the shipment of finished goods, as well as an increase in commodity prices. An increase in the balance of other assets of approximately $3.6 million primarily relates to changes in the carrying value of forward purchase contracts recorded at fair value. A decrease in the balance of refundable income taxes of approximately $0.6 million primarily relates to amount currently payable on income from the first three months of the fiscal year. A decrease in the balance of accounts payable used cash of approximately $13.2 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 $0.1 million.

At April 30, 2023, working capital was approximately $324.8 million, compared to approximately $318.0 million at January 31, 2023. The ratio of current assets to current liabilities was 10.0 to 1 at April 30, 2023 and 6.8 to 1 at January 31, 2023.

Cash of approximately $21.0 million was provided by investing activities for the first three months of fiscal year 2023, compared to cash used by investing activities of approximately $142.8 million during the first three months of fiscal year 2022. During the first three months of fiscal year 2023, we had capital expenditures of approximately $4.2 million, primarily for various expansion and carbon intensity score reduction projects at the One Earth and NuGen facilities. We expect capital expenditures to be in the range of approximately $60 million to $70 million for the remainder of fiscal year 2023, primarily related to these projects. During the first three months of fiscal year 2023, we purchased short-term U.S. Treasury Bills of approximately $102.3 million, while U.S. Treasury Bills of approximately $127.6 million matured. The U.S Treasury Bills had maturities of less than one year and we classified them as short-term investments. Depending on investment options available, we may elect to retain the funds, or a portion thereof, in cash, short-term investments or long-term investments.

Cash of approximately $142.8 million was used in investing activities for the first three months of fiscal year 2022. During the first three months of fiscal year 2022, we had capital expenditures of approximately $1.5 million, primarily for improvements at the One Earth and NuGen facilities. During the first three months of fiscal year 2022, we purchased U.S. Treasury Bills of approximately $161.6 million. During the first three months of fiscal year 2022 certificates of deposit of approximately $20.3 million matured. The certificates of deposit and U.S. Treasury Bills had maturities of less than one year and we classified as short-term investments.

Cash of approximately $716,000 was used in financing activities for the first three months of fiscal year 2023 for payments to noncontrolling interests holders, compared to approximately $1,000 for the first three months of fiscal year 2022.

We are investigating various uses for our excess cash and short-term investments. We have a stock buyback program with 876,786 shares remaining authorized at April 30, 2023. 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 fit our investment criteria.

### Forward-Looking Statements

This Form 10-Q contains or may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements can be identified by use of forward-looking terminology such as “may,” “expect,” “believe,” “estimate,” “anticipate” or “continue” or the negative thereof or other variations thereon or comparable terminology. Readers are cautioned that there are 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 include the risk factors set forth from time to time in the Company’s filings with the Securities and Exchange Commission and include among other things: the effect of pandemics such as COVID-19 on the Company’s business operations, including impacts on supplies, demand, personnel and other factors, the impact of legislative and regulatory changes, the price volatility and availability of corn, distillers grains, ethanol, distillers corn oil, gasoline and natural gas, commodity market risk, ethanol plants operating efficiently and according to forecasts and projections, logistical interruptions, changes in the international, national or regional economies, the impact of inflation, the ability to attract employees, weather, results of income tax audits, changes in income tax laws or regulations, the impact of U.S. foreign trade policy, changes in foreign currency exchange rates and the effects of terrorism or acts of war. The Company does not intend to update publicly any forward-looking statements except as required by law. Other factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2023 (File No. 001-09097).

## Market risk

As filed, 1,068 characters.

We are exposed to the impact of market fluctuations associated with commodity prices as discussed below.

We manage a portion of our risk with respect to the volatility of commodity prices inherent in the ethanol industry by using forward fixed-price purchase and fixed-price sale contracts and exchange traded commodity futures contracts. Our remaining exposure to market risk, which includes the impact of our risk management activities resulting from our fixed-price purchase and sale contracts and derivatives, is based on the estimated effect on pre-tax income for the twelve months following April 30, 2023 is as follows, assuming normal operating capacity (amounts in thousands):

| Commodity | Estimated Total Volume for 12 Months | Unit of Measure | Decrease in Pre-tax Income From a 10% Adverse Change in Price |
| --- | ---: | --- | ---: |
| Ethanol | 284,000 | Gallons | $62,953 |
| Corn | 101,000 | Bushels | $57,604 |
| Distillers Grains | 729 | Tons | $14,932 |
| Distillers Corn Oil | 82,100 | Pounds | $3,962 |
| Natural Gas | 7,400 | MmBtu | $1,612 |

## Controls and procedures

As filed, 1,088 characters.

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 136 characters.

There have been no material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended January 31, 2023.

Filed May 26, 2023.
Source: SEC EDGAR, the filing index for accession 0000930413-23-001660. Last ingested by Listed: Oct 24, 2026, 14:54 ET. No prices; not investment advice.