# REX AMERICAN RESOURCES Corp: Form 10-Q for the period ended Apr 30, 2024

- Company: [REX AMERICAN RESOURCES Corp](/companies/rex.md) (CIK 744187)
- Form: 10-Q
- Filed: 2024-05-30
- Accepted by EDGAR: May 30, 2024, 20:14 ET
- Period: 2024-04-30
- Accession: 0000930413-24-001828
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/744187/000093041324001828/c109056_10q-ixbrl.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/744187/000093041324001828/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-04-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-02-01 to 2024-04-30 | $161.2m | us-gaap:Revenues |
| Gross profit | 3 months, 2024-02-01 to 2024-04-30 | $14.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-02-01 to 2024-04-30 | $6.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Income tax | 3 months, 2024-02-01 to 2024-04-30 | $3.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-02-01 to 2024-04-30 | $12.3m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2024-02-01 to 2024-04-30 | $0.58 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-02-01 to 2024-04-30 | $0.58 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-02-01 to 2024-04-30 | 17,664,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-02-01 to 2024-04-30 | −$2.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-02-01 to 2024-04-30 | $24.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-04-30 | $231.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-04-30 | $421.6m | us-gaap:AssetsCurrent |
| Total assets | at 2024-04-30 | $671.0m | us-gaap:Assets |
| Current liabilities | at 2024-04-30 | $62.7m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2024-04-30 | $524.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,684 characters.

### Ethanol and By-Products

At April 30, 2024, 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, 2024:

| Entity | Location | REX’s Current Ownership Interest |
| --- | --- | ---: |
| One Earth Energy, LLC | Gibson City, IL | 75.9% |
| NuGen Energy, LLC | Marion, SD | 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 | W. Burlington, IA Galva, IL Dyersville, IA Boyceville, WI | 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.

### One Earth Energy, LLC Carbon Sequestration and Plant Expansion

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 regarding our application upon request. 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. In addition, we have begun construction for a facility to capture, dehydrate, and compress carbon dioxide from the One Earth Energy ethanol plant to a state suitable for sequestration. We expect to complete construction of the capture and compression facility by July 31, 2024, at which time testing of the facility could commence, upon completion of other infrastructure.

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 “CO2 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 consent from all of the necessary landowners for the use of their land for the pipeline.

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 the governor is expected to sign. The new legislation imposes additional safety, environmental and other requirements on obtaining permits and approvals for carbon capture and sequestration facilities in Illinois, including CO2 pipelines. Under the new legislation, we believe that the ICC will be required to dismiss our pending application for a certificate of authority under the CO2 Act, and we will be required to refile our application complying with the requirements of the new legislation. Further, the new legislation imposes a moratorium on the issuance of new certificates of authority for the construction of CO2 pipelines until the earlier of the date proposed federal CO2 pipeline safety standards are finalized by the Pipeline and Hazardous Materials Safety Administration (PHMSA) or, subject to certain other conditions, July 1, 2026. The Company is currently reviewing Senate Bill 1289 for its impact on the timing and other aspects of the Company’s proposed pipeline and carbon sequestration project, and investigating alternative methods to deliver carbon to a sequestration site.

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.

We also intend to concurrently expand 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. Finally, 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. The Inflation Reduction Act created a new Clean Fuel Production Credit, 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.

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 April 30, 2024, we have spent $41.0 million life-to-date and are contractually committed to spend an additional $9.2 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 (“45Z”), as outlined in the Inflation Reduction Act. As of April 30, 2024, we have spent $37.0 million life-to-date and are contractually committed to spend an additional $5.1 million at the One Earth plant toward plant capacity expansion and ongoing efforts to reduce our CI scoring.

### 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.

### Critical Accounting Policies and Estimates

During the three months ended April 30, 2024, we did not change any of our critical accounting policies as disclosed in our 2023 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 29, 2024.

### 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 2024” means the period February 1, 2024 to January 31, 2025.

### 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 have been no established congressional target volumes beginning in 2023. The EPA also 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 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 refinery exemptions for the 2016-2018 compliance years, undercutting the statutory renewable fuel volumes by a total of 4.3 billion gallons. The EPA has not granted 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.

Numerous lawsuits had been filed against the EPA after it finalized RFS volumes for the years 2020-2022. A District of Columbia Circuit Court of Appeals recently issued a decision upholding the EPA’s renewable fuel volume obligations for the 2020-2022 years, including a 250 million gallon supplemental volume requirements for 2022. The Court also upheld the method the EPA used in its 2022 set rule to account for SREs in calculating the volume obligations under the RFS program.

The EPA has issued Renewable Fuel Standard volume obligations for calendar years 2023-2025 for conventional biofuels (which includes corn-based ethanol) of 15.0 billion gallons. Additionally, for 2023, the EPA restored 250 million gallons previously waived.

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 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 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.

In April 2024, the U.S Department of 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 will be developed but will require further modeling, data assumptions, and verification.

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.

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

### Comparison of Three Months Ended April 30, 2024 and 2023

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

|  | Three Months Ended April 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net sales and revenue | $161,231 | $212,714 |
| Cost of sales | 146,780 | 202,548 |
| Gross profit | $14,451 | $10,166 |
| Income before income taxes | $15,963 | $8,688 |
| Provision for income taxes | $(3,690) | $(1,988) |
| Net income attributable to REX common shareholders | $10,191 | $5,236 |

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

|  | Three Months Ended April 30, 2024 | 2023 |
| --- | ---: | ---: |
| Ethanol | $119,427 | $158,279 |
| Dried distillers grains | 30,686 | 39,706 |
| Distillers corn oil | 9,805 | 13,081 |
| Modified distillers grains | 1,197 | 1,565 |
| Other | 116 | 83 |
| Total | $161,231 | $212,714 |

27

The following table summarizes selected operating data:

|  | Three Months Ended April 30, 2024 | 2023 |
| --- | ---: | ---: |
| Average selling price per gallon of ethanol (net of hedging) | $1.60 | $2.21 |
| Gallons of ethanol sold (in millions) | 74.5 | 71.5 |
| Average selling price per ton of dried distillers grains | $187.64 | $244.85 |
| Tons of dried distillers grains sold | 163,533 | 162,166 |
| Average selling price per pound of distillers corn oil | $0.47 | $0.63 |
| Pounds of distillers corn oil sold (in millions) | 21.0 | 20.6 |
| Average selling price per ton of modified distillers grains | $82.52 | $127.58 |
| Tons of modified distillers grains sold | 14,510 | 12,270 |

Net sales and revenue in the quarter ended April 30, 2024 decreased 24% compared to the prior year’s first quarter.

Ethanol revenue decreased 25% in the first quarter of fiscal year 2024 compared to the first quarter of fiscal year 2023 as the average selling price of ethanol at our consolidated plants decreased 28% during the first quarter of fiscal year 2024 compared to the prior year comparable period, offset by a 4% increase in gallons of ethanol sold. The decrease in the ethanol selling price resulted primarily from a decrease in commodity prices.

Dried distillers grains revenue decreased 23% in the first quarter of fiscal year 2024 compared to the first quarter of fiscal year 2023 as the average price per ton sold decreased 23%, offset slightly by a 1% increase in 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.

Distillers corn oil revenue decreased approximately 25% in the first quarter of fiscal year 2024 compared to the first quarter of fiscal year 2023 as the average price per pound sold decreased 25%, offset partially by a 2% increase in pounds sold. The decrease in the distillers corn oil selling price resulted primarily from a decrease in commodity prices.

Modified distillers grains revenue decreased 24% in the first quarter of fiscal year 2024 compared to the first quarter of fiscal year 2023 due to a 35% decrease in the average selling price per ton sold, partially offset by an 18% increase in tons sold. The decrease in the modified distillers grains selling price resulted primarily from a decrease in corn prices. Our consolidated plants’ decisions to sell modified or dried distillers grains fluctuates from time to time based upon market conditions.

Cost of sales decreased approximately 28% in the quarter ended April 30, 2024, compared to the prior year first quarter. Corn accounted for approximately 75% ($110.6 million) of our cost of sales during the first quarter of fiscal year 2024 compared to approximately 81% ($163.7 million) during the first quarter of fiscal year 2023. The cost of corn decreased primarily due to lower corn prices, partially offset by an increase in corn used between the two periods. Natural gas accounted for approximately 5%

($7.1 million) of our cost of sales during the first quarter of fiscal year 2024, consistent with approximately 5% ($10.7 million) during the first quarter of fiscal year 2023.

As a result of the foregoing, gross profit for the first quarter of fiscal year 2024 increased approximately $4.3 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. 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.

SG&A expenses were approximately $6.1 million for the first quarter of fiscal year 2024, compared to approximately $5.8 million of expenses for the first quarter of fiscal year 2023. The increases are primarily related to the increase in performance bonus expense as a result of higher net income in 2024, offset partially by decreases in professional fees, railcar lease expense and freight expense.

During the first 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 $1.5 million for the first quarter of fiscal year 2023. Our investment in Big River, which has interests in four ethanol production plants, represents an effective ownership of approximately 38.8 million gallons of ethanol shipped in the trailing twelve months ended April 30, 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.

Interest and other income was approximately $5.9 million for the first quarter of fiscal year 2024 versus approximately $2.8 million for the first quarter of fiscal year 2023. One of our consolidated ethanol plants recognized $1.2 million in patronage income from an investment in a cooperative. The remaining change in the three-month period related to increased interest income in the current year as yields on our excess cash and short-term investments increased in fiscal year 2024, compared to 2023.

As a result of the foregoing, income before income taxes was approximately $16.0 million and $8.7 million for the first quarters of fiscal year 2024 and 2023, respectively.

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 $3.7 million and $2.0 million for the three months ended April 30, 2024 and 2023, respectively.

As a result of the foregoing, net income was approximately $12.3 for the first quarter of fiscal year 2024 compared to approximately $6.7 million for the first quarter of fiscal year 2023.

Net income attributable to noncontrolling interests was approximately $2.1 million for the first quarter of fiscal year 2024 compared to $1.5 million for the first quarter of fiscal year 2023. 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 for the first quarter of fiscal year 2024 was approximately $10.2 million, compared to net income attributable to REX common shareholders of approximately $5.2 million for the first quarter of fiscal year 2023.

### Liquidity and Capital Resources

Net cash used in operating activities was approximately $2.3 million for the first three months of fiscal year 2024, compared to cash used in operating activities of approximately $14.0 million for the first three months of fiscal year 2023. For the first three months of fiscal year 2024, cash was provided by net income of approximately $12.3 million, adjusted upward for non-cash items of approximately $5.6 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, and stock-based compensation expense. A decrease in the balance of accounts receivable provided cash of approximately $1.7 million, primarily a result of the timing of products shipped and the receipt of customer payments at One Earth and NuGen. Inventories were nearly flat over the first three months of fiscal year 2024. An increase in the balance of other assets of approximately $3.8 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. A decrease in the balance of refundable income taxes of approximately $1.1 million primarily relates to the accrual of the federal taxes currently payable for the first quarter 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 $12.7 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 a decrease in accrued payroll of approximately $5.4 million following the payment of fiscal year 2023 bonuses.

Net cash used in operating activities was approximately $14.0 million for the first three months of fiscal year 2023. 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, stock-based compensation expense, and gain on sale of property and equipment. 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 $6.2 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 $2.0 million primarily relates to amounts paid toward taxes currently payable for the previous fiscal year and quarterly estimated tax payments. A 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 $4.0 million.

At April 30, 2024, working capital was approximately $358.9 million, compared to $385.8 million at January 31, 2024. The ratio of current assets to current liabilities was 6.7 to 1 at April 30, 2024 and 6.8 to 1 at January 31, 2024.

Cash of approximately $11.9 million was provided by investing activities for the first three months of fiscal year 2024, compared to cash provided by investing activities of approximately $21.0 million during the first three months of fiscal year 2023. During the first three months of fiscal year 2024, we had capital expenditures of approximately $24.8 million, primarily for various capital projects at our consolidated ethanol plants, including $10.1 million for expansion and CI scoring reduction projects at the One Earth facility and $11.0 million for the carbon sequestration project. During the first three months of fiscal year 2024, we purchased short-term U.S. Treasury Bills of approximately $85.0 million, while U.S. Treasury Bills of approximately $121.5 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.

Cash of approximately $21.0 million was provided by investing activities for the first three months of fiscal year 2023. 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. During the first three months of fiscal year 2023, we purchased U.S. Treasury Bills of approximately $102.3 million. During the first three months of fiscal year 2023 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.

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

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 April 30, 2024, we have spent $41.0 million since inception and are contractually committed to spend an additional $9.2 million toward the carbon sequestration project. As of April 30, 2024, we have spent $37.0 million since inception and are contractually committed to spend an additional $5.1 million toward plant capacity expansion and CI scoring reduction efforts. For all projects, we plan to spend $85 million to $110 million during the remainder of fiscal year 2024.

We have a stock buyback program with 876,786 shares remaining authorized at April 30, 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.

### 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, success in permitting and developing the planned carbon sequestration facility near the One Earth Energy ethanol plant, 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, 2024 (File No. 001-09097).

## Market risk

As filed, 1,067 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, 2024 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 | 285,000 | Gallons | $42,665 |
| Corn | 98,600 | Bushels | $40,082 |
| Distillers Grains | 689 | Tons | $10,466 |
| Distillers Corn Oil | 86,200 | Pounds | $3,576 |
| Natural Gas | 7,400 | MmBtu | $1,018 |

## 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, 2024.

Filed May 30, 2024.
Source: SEC EDGAR, the filing index for accession 0000930413-24-001828. Last ingested by Listed: Oct 24, 2026, 14:54 ET. No prices; not investment advice.