REX American Resources Corp (REX) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Rex Stores 2009 fiscal fourth quarter results conference call.

During the presentation, all participants will be in a listen-only mode.

Afterwards we will conduct a question-and-answer session.

(Operator Instructions).

I would now like to turn the conference over to Doug Bruggerman, Chief Financial Officer.

Please go ahead, sir.

Good morning and thank you for joining Rex Stores' fiscal 2009 fourth quarter conference call.

We will get to our presentation and comments momentarily, as well as your questions and answers.

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.

The risks and uncertainties associated with the forward-looking statements are described in today's news announcement in the Company's filings with the Securities and Exchange Commission, including the Company's reports on Form 10K and 10-Q.

Rex Stores assumes no obligation to publicly update or revise any forward-looking statements.

I would like to now turn the call over to Stuart Rose, Chairman of the Board.

Thank you, Doug, and thank you, everyone, for listening.

For the fourth quarter our sales were 77 -- reported sales were $77.2 million versus $19.9 million last year.

Income from -- and that is on continuing operations -- income from continuing operations before tax and noncontrolling interest was $13.2 million versus a $5.3 million loss last year.

Income after taxes and noncontrolling interest was $5.2 million this year versus the $2.5 million loss last year.

Earnings per share were $0.54 for this quarter versus $0.26 for the fourth quarter of the past year.

Full net income including discontinued operations was $7.3 million this year versus a $5.3 million(Sic -- see press release) loss last year.

Earnings per share, $0.75 versus a $0.57 loss last year.

For the full year, revenue was $170 million versus $68.6 million.

Last year, net income, $8.6 million versus a $3.3 million loss last year.

Earnings per share, $0.91 versus $0.32 loss last year.

The year itself was a transition year.

We've moved out of the retail business and now we are fully an alternative energy/industrial company.

All our stores have been closed.

We actually made money closing our stores, which we are very proud of, and all our people, including the people who aren't with us today, were just terrific people to be able to do this -- who aren't working for us today to be able to do this in retail.

Again, we feel very good that we were able to actually make money for shareholders by closing the stores.

I think we made $0.13 for the quarter this year and $0.15 for the year on our discontinued operations.

In terms of continued involvement, we still own 31 retail stores and all or part of two distribution centers.

We are making efforts to market or sell each of these, sell or lease each of these, and we are doing -- we are doing all we can to either lease or market -- either lease or sell these stores.

We did make a little bit of money in the fourth quarter selling some stores.

I think it was about $1.25 million, but it is still an extremely difficult environment to be trying to lease or sell stores or warehouse space.

And we are working hard at trying to do it, but again it is very difficult right now and we are not doing any panic selling.

So we are waiting for the right opportunity before we sell the store or sign a lease.

In terms of ethanol, all our plants were profitable in the fourth quarter.

We now have all of our plants open and operating at full capacity and doing -- like I said, in the fourth quarter they did quite well.

We own 56% of the Levelland plant, 23% -- that's located in Levelland, Texas; 23% of the Patriot plant, which is located outside of Davenport, Iowa; 74% of the Gibson City plant or the One Earth plant which is located in Gibson City, Illinois, and between 5 and 10% of the Big River plant that we are involved in.

In terms of the industry, crush spreads in the fourth quarter rose significantly -- crush spreads being the margin, the difference between the price of ethanol and the price of corn -- and we were able to take full advantage of that rise in crush spreads, as you can see by our numbers in our earnings during the fourth quarter.

We did quite well during the -- during the first quarter, crush spreads have deteriorated somewhat.

We don't expect them to be, or they have not been anywhere near what the fourth quarter was.

We still expect our first quarter to be profitable although less profitable than the fourth quarter.

The causes for -- our feelings for a lower first quarter crush spread versus our fourth quarter crush spread where a lot of plants that were closed have reopened so less driving during the fourth quarter or during the first quarter related to weathers, you know, that type of thing, which causes less driving.

In terms of going forward, we are hopeful demand will rise with the general driving, with summer driving.

We also see a possibility of something called E15.

If that happens, the refiner gasoline can have up to 50% more ethanol in it than it currently does in many markets and that would be a big help to us.

Also the mandates with the government requires refiners to take are increasing each year.

And so that will be -- that is always going in our favor.

In terms of our plants, we tried to run the most efficient ethanol plants and we think we do in the United States in virtually all of our plants with one exception.

Our plants are almost all 100 million gallon plants with good rail access, good corn access, and good DDG markets.

And so we feel very good about all of our plants.

The one exception to that would be Levelland, Texas which is a 40 million gallon plant, which is not the most efficient size to operate.

And it is in a sorghum market, not a corn market, which causes some seasonal difficulties, which we are learning about and coping with.

In terms of going forward, we are asking shareholders to change the name of the Company to Rex American Resources Corporation.

We think this much better reflects the type of company we are today.

We also have $80 million in unencumbered cash which we are looking to possibly invest in a number of ways.

First being, looking for ethanol opportunities.

Again we think we've become if not the best operator in the business, one of the best operators and there are some ethanol plants in good markets that are not being operated maybe as well as they could or could use the information that we can supply maybe or just want to join up with a little bit bigger company.

So we are looking at the possibility of -- we are entertaining the possibility of combining or buying maybe one or two of those plants.

We are also looking at other businesses where we feel our management has expertise.

We -- again whether it is retail, whether it is ethanol, whether it is an industrial company, we feel we are very good at controlling costs.

And so we look for businesses where -- and also building large-scale projects, so we look for businesses -- and have not found any yet.

But we continue to look for businesses where we think we can use our expertise.

The other thing that we are looking to -- or have done continually is buying back shares.

We bought back another 62,000 shares.

We still have the Board authorization to buy 481,000 more shares.

With the price of our stock today, each time we buy shares we are increasing the net worth for the book value per share for our shareholders that choose not to sell.

And we think this is going to -- because we think this is a terrific use of cash, because -- so we continue to buy in shares, obvious and make money, obviously, that increases the earnings per share and the book value for our existing shareholders.

Now I would like to leave the forum open for questions.

(Operator Instructions).

William Jones with Singular Research.

Please proceed with your question.

Hello.

Great quarter.

If I'm under -- if I'm looking at this right, the crush spread was about $0.54 realized for the quarter?

Yes, that's about right.

That's about right.

And the production is 36.1 million gallons.

I'm sorry, 36.3, which is about 145 annual which is actually above the nameplate capacity.

Maybe you could talk to that a little bit?

Sure.

Of these plants we report our nameplate most -- everyone else in the industry is basically -- use 10% more than the nameplate of their capacity when talking to investors.

They say these plants are really made to produce a little bit more than nameplate capacity.

So they may look like they are underproducing whereas we, being conservative, have always just used our nameplate capacity as being our actual capacity.

But they are made to produce more and in profitable times, we try to produce more.

Understood.

So you expect that you will continue about at that rate going forward?

We have the capability.

Yes.

Yes.

Great.

And in terms of the equity income, that was pretty strong, $4.9 million for Big River and Patriot.

And there is also $17.9 million cash at the subsidiaries.

Maybe you could talk about how -- is there -- do you expect that cash to come back to the parent or how that works?

On the ones we control subject to bank restrictions, it is something that we have the ability to influence greatly coming back to us and whether we do that or not will be again up to the Board of Directors of the individual plants.

We have received dividends on big River.

We've also received debt repayments on Patriot, which will come back to us.

So Gibson City is the one that now is sitting with a pretty fair amount of cash and now we might have the opportunity, should we choose it.

Again it is not just us, it's the whole Board of Directors of that facility should they decide to pay dividends.

We feel in that particular one it's a real possibility.

Great, and then retail has moved to discontinued operations.

So that actually in a way costs about $0.5 million of profit, $0.02 or $0.03 per share.

It comes out -- even thought it's non-cash, it comes out of operating profits.

Am I understanding that?

Yes you are.

That's right.

And we --.

And it helps with the (multiple speakers).

Fairly logical because we are not in retail any longer and so I -- it's -- we think it is the logical thing to do is just throw it over to discontinued.

And it will flush off in our net income on the bottom line.

Okay.

Great.

Fair enough.

I think I will drop back into the queue and, again, congratulations on a good quarter.

Okay, thanks.

Appreciate it.

Carter Driscoll from CapStone Investments.

My first question was revolving around the strategy mentioned for the use of cash in terms of the rolling off or looking for inefficient plants.

Could you elaborate [among] some more specific criteria?

I mean are you looking at operations (multiple speakers).

They may not even be inefficient.

They may just be plants that are looking to combine with a bigger entity they can share the information to --.

All of our plants basically, once they are in our group, they have the ability to ask questions and that is invaluable.

Some of these plants are just one off plants that don't have that ability.

So they look for that opportunity.

And then there are some that there's been some out there and we have looked at a bunch of them that, for whatever reason -- Chapter 11 or about to go Chapter 11 and those might have done and just not be -- they might have locked in with a marketing company that's given them that pricing on ethanol.

They might not be properly marketing their DDGs.

They might be buying their natural gas wrong.

A number of things that maybe we can help them.

But not necessarily the structure.

I mean, you would still look for ones that have access to distribution whether it is rail or access to the raw materials else.

I mean are those factors --?

Absolutely, we still look for ones that we think can generate above normal crush spreads.

And would you -- is there a particular size, given that most of your facilities (multiple speakers)?

I think we would stick with 100 million as I mentioned earlier; our 40 million gallon plant has lots of challenges that the 100 million gallon plants don't have.

Okay, could you look at a lower -- I mean, could you look at an 80 million gallon?

I mean, is 100 kind of the threshold point at which you think (multiple speakers) --?

I'm sure we would just say because it is 90 and not 100 we are not going to look at it.

We -- sure we'd look at it.

Okay.

But most of the plants were made either 40 million or 100 million.

There aren't that many.

There's a few that [would standard] to 80 million or 90 million, but that's not -- that wasn't a standard size and making of the plants, if it is a Fagen plant.

We have been -- felt very strongly to stick with Fagen ICM plants and that keeps everything a lot simpler.

And we find the -- in looking at other plants around the country we find the Fagen plants to be much more efficient than the others we've looked at.

And switching gears a little bit, is -- can you elaborate a little bit around the commercial real estate environment?

Obviously, it is probably still in deterioration mode and you aren't compelled to move some of these properties at unfavorable terms.

But what is your vision for maybe say 2010, 2011?

How do you see the market correcting or do you see it still being a little (multiple speakers) --?

We took a charge off during this quarter based on the -- we have got a number of properties at price based on those appraisals.

We took a charge up.

The charge up was still I believe less than the income we brought in.

The profit we brought in selling a couple of these stores.

So we feel like we've -- the bad stores we feel like we've marked in and the stores we haven't marked in there might be some opportunity for some profit.

But, again, that's in -- and with the real estate market still it's very precarious.

We will probably end up leasing the bulk of these stores not selling them, would be my guess today.

We think that there is value there but not the value there was two years ago.

But we feel comfortable that the number that is on our balance sheet is a good number.

Okay.

So that -- would it be fair to say you think it's at least a net neutral impact on P&L going forward?

At least as your (multiple speakers).

That would be -- I feel comfortable saying that, but you know it depends.

Any real estate is such a precarious thing right now.

I think it could go -- if it completely deteriorates, which everyone is saying how great -- if you look at the real estate stocks, the market says it's not going to happen, but if you look at what reality out there in the market, it could happen.

So we will see.

Yes.

Okay.

And then the next question is just a little bit bigger picture looking at some of the legislative developments.

Obviously, you mentioned E15 potentially obviously raising the market opportunity, but some of the other opportunities, maybe from a competitive front, about the way vehicles and fleets are looking at alternatives to being fueled by ethanol or methanol.

Could you address where you see legislation potentially heading or what you monitor from that perspective, outside of what directly impacts ethanol production?

We monitor everything that goes on with the government and the whole industry does.

There's an industry association.

In terms of what individual fleets are doing, I honestly do not monitor that and maybe there is something going on and maybe not.

But I honestly don't follow what say Hertz Rent-a-Car is doing with their fleets or Enterprise.

And that when I say they're going to E15 that would be a huge impact to us if Hertz or Enterprise went to all E85, that would be great.

But again, I don't monitor that.

Maybe it is something I should start monitoring.

Yes I'm thinking --

I would say, significantly, it would save them a lot of money on gas.

I'm thinking longer term in parallel with that, you have got guys like T.

Boone Pickens talking about moving commercial fleets and buses and trucking shops to natural gas.

Obviously self interestedly, but obviously that would be very -- you know retrofitting distribution stations would be very difficult, both from a hybrid or all electric perspective (multiple speakers).

There is a lot of talk about all that stuff, but the 85 would be very easy for the fleets to move to.

They basically do a flex fuel tank.

Buy cars that are flex fuel and then in their own tanks put in E85.

It would be very, very simple and it would save them a lot of money.

And (multiple speakers).

Interesting.

Because Brazil moved to this years ago, these types of tanks and obviously all of the gas pipes with the flexible plastic, and have really not suffered any drawbacks in either fuel efficiency and --.

And they have a lot cleaner air than we do and it used to be a lot dirtier than ours till they did that.

That's right.

Appreciate that.

I will pass it along.

Thanks for your time, gentlemen.

Mike Neary with Neary Asset Investment.

I have a couple of questions.

What was depreciation and CapEx in the quarter?

The CapEx for the fourth quarter was $1.120 million.

The depreciation I don't have that in front of me, but I can get that.

And what do you anticipate for CapEx for next year?

Or for this year?

We have nothing major planned.

We are going to add a little bit to the Gibson, some more corn storage to that and then that will be in the next --.

That would be my -- we expect to but we haven't let the contract out on that.

But I don't see, other than replacement parts and things like that, I don't see any huge expenditures.

Do you know what your replacement CapEx is yet?

I do not know that.

In the facilities?

Okay, and then deferred taxes came down a lot over the course of the year.

Is that just because you used them, or did you take any valuation allowances against them?

It's just based upon the profit.

We did not take any valuations against it, factories got a tax --.

Based upon some accelerated depreciation that we had taken on the ethanol facilities, we got a refund last year and expect to get another refund this year.

So what that has done is put some of the alternative minimum tax credits back out there to be used in the future.

Okay and what size of the refund are you looking at for this year?

It's about $7 million to $8 million.

Subsequent to January 31, we did get a refund from the previous year.

Okay.

And then, Stuart, you had mentioned other ethanol facilities you are looking at.

What are market prices for ethanol facilities out there per gallon?

What kind of things do you see?

It depends on the plant, obviously.

You can get a terrible plant for probably $0.50, but it is still going to be a terrible plant in a bad location.

Good plant, I would think it's in the $1.20 to $1.50 range.

We try to buy for less than that.

And that is an all-in or that includes the associated debt with the facility?

That includes associated debt, yes.

And I know no one is doing this, but do you know what building costs are currently?

I don't know.

No one -- I would think they would be about $1.80.

And then --.

That's a guess by the way, Mike.

I don't know.

I haven't quoted one recently.

In terms of financing, can you (multiple speakers) --

One other thing that you should know, when I talk [in terms] I call 100 million gallons -- nameplate plant -- 100 million gallons.

Other people would call it 110 million gallons.

(multiple speakers) you can add 10% depending on who you are talking to.

And in terms of financing, can you still get nonrecourse financing?

No.

No?

No.

I don't think -- I don't think there is any financing out there for ethanol plants that I can get, recourse or nonrecourse.

Okay.

So if you did it, it would have to be 100% equity?

Well, not necessarily.

We -- a lot of these plants that are out there already have their financing and we would look to assume the loan.

I see.

Mike, that fourth quarter depreciation was about $4 million.

It also might be a case where the bank writes down part of the loan and brings us in.

We will watch everything very closely.

Because -- and they know you can pay.

Yes.

And we [net] all of those things.

All right.

Thank you very much.

Richard Dearnly with Longport Partners.

Good morning.

The Levelland plant -- are the problems there, the sorghum or the fact that it's a 40 million gallon which is kind of suboptimal size?

Both.

The sorghum market is great.

It is an area where farmers don't store a lot.

So during harvest and we are learning the market.

Taken a couple of years, but the sorghum is also quickly, cheaply, no one -- in the Midwest for farmers and the co-ops and everyone stores their corn for basically the whole year in anticipation of a year's worth of business.

So you can buy on the spot market fairly easily.

In Texas you get it real cheap for a certain part of the year then it runs out on the sorghum end.

On the 40 million gallon, that is another issue where it is just not as efficient plant.

And it doesn't have the same economies of scale.

That being said, there's some advantages to being in Texas.

There is a very good truck market, which allows us to get -- there's a Conoco Phillips blending station nearby and a decent truck market that allows us to get a little bit higher price for the ethanol.

And during sorghum season, we are able to buy our raw materials at an extremely attractive price.

We again have to figure ways to keep that supply for a whole year.

Does sorghum store like corn?

It stores like corn.

Yes.

It's just no one does it.

Are you building storage facilities?

We are not at this time.

We are --.

There's other ways to do it and there's public storage and (multiple speakers).

There's other ways besides building our own.

Then the -- what was the average price you paid in the fourth quarter and for the year for the stock?

Doug, do you have that?

On the buyback?

For -- actually for the quarter and a year they are both right on top of each other, like $14.06 and $14.07.

Okay.

Thank you.

And then the share count was up for the year by 200,000 shares and yet you bought 600,000 for the year, right?

I thought --.

That's related to exercised options.

Exercised options.

So the --.

Our number of options will be way down this year that are out there.

We stopped issuing options many years ago, but there's still a fair amount out there.

And that's related to that.

The other thing it is related to is the stock price goes up and (multiple speakers) increase the number of shares.

With the slowdown of repurchasing in the fourth quarter, it doesn't look like the volume of the stock was meaningfully less than in the fourth quarter.

Was that related to the fact that the stock prices had gone up?

Yes, we traditionally buy on dips.

There weren't a whole lot of dips in the fourth quarter.

Richard, let me correct a statement.

For the year, our average price was about $12.50 and then for the quarter it was like $14.06.

Okay, thank you.

In the past, you've talked about other potential investment areas being mortgage markets and other kinds of real estate and maybe (multiple speakers).

I think we've moved away.

-- that was when things were at their maximum (inaudible) which changed very quickly.

Have all those other things kind of dropped out of the potential area?

I would say it has.

We think we can -- we don't think real estate to be an attractive use of our money at this point in time.

Okay.

Thank you.

[Robert Middlehull] with JPMorgan.

Stuart, with your eyes and ears in Washington, do you have any sort of sense of when a decision will be made on E15?

No, it keeps being put off.

So I wouldn't want to even speculate on that.

I am very disappointed.

Is it primarily the push backs in the automobile companies?

Is that where most of it, the resistance, is coming from?

I don't think it is really from them.

I think they are sort of fronting for the oil companies.

I can't imagine -- that's just my personal opinion.

I don't think it hurts the automobile companies any.

I don't see why it would really matter that much to them.

Whereas the oil companies, each gallon of ethanol that we sell is one less gallon of their own oil that they bring out of the ground fairly inexpensively and sell very expensively.

What do you make of the recent decision on Brazil's part to remove tariffs on imported ethanol?

I don't --.

I don't know.

I don't have any opinion on it.

I don't know if (multiple speakers).

Because I think they were looking to us to do that.

(multiple speakers).

They are highly dependent on ethanol and I would think they must feel very confident to remove tariffs that there are still not going to be much imported into their markets.

But I think the presumption was that they were hoping that we would and others would drop our tariffs as well.

And today if that happened (multiple speakers)

Is that how you interpret it?

(multiple speakers) makes a whole lot of difference from everything I've heard.

Their price to bring ethanol into the United States is higher than our price to produce ethanol.

But I don't know.

I can't imagine that much is going to change in that area.

But who knows?

Okay.

Thank you.

Tom Garvey with Rafferty Capital Markets.

Just getting back to the ethanol crush spreads.

Could you talk to --?

I think the first caller had said somewhere around $0.54 or realized during the quarter.

Is that correct?

Yes.

Okay and looking out, obviously, we have had a number of new plants come on and I see a couple coming in on this summer.

Valero has got three plants coming on line.

What is sort of your outlook for the crush spreads moving forward into 2010?

My feeling is, there will be a net drop-off of plants.

Some of these plants have reopened will end up coming offline again.

Valero has a he few plants and then, KDM has a few plants coming on line, but then there's a lot of marginal plants and that could go either way.

When you think about some of those smaller plants, as you said are a little bit more inefficient, is there a certain crush margin where maybe you consider going idle with some of your smaller plants?

We only have one smaller plant that is (inaudible).

All the rest are the perfect size, in my opinion.

(multiple speakers) and the one's at Levelland and we wouldn't -- if it is making money, it won't go idle.

If it is not making money, we still -- we prefer it didn't go idle because we've got a great customer base there.

But there comes a point where you look at it and you evaluate it and obviously crush spreads get to $0.10 or something and the whole industry hurts.

And that plant would hurt worse than our other plants.

Final question, [or if it's] two volume requirements.

It looks like for 2010 12 billion gallons of implied corn-based ethanol, you know, which moves up to 2 -- 12.6 billion gallons in 2011.

Do you think there is any opportunity for that to be increased, if maybe some of these cellulosic biofuels or advanced biofuels don't come online or does that cap -- is that a pretty strict number that you see there?

That's a minimum.

I think there is a great chance that if we go to E15 that people will produce more than -- I feel confident Valero will.

Any oil refiner that is not integrated is going to produce as much as they can using ethanol, because they are losing a lot of money on the other side buying oil at these high prices.

And they make a lot on ethanol.

So and going to E15 could conceivably, again, the caps are only at the minimum.

E15 could cause demand to go up potentially 50%.

That happens (multiple speakers).

Okay so you think there might be -- there is demand to support a substantial increase above that 12 billion gallon a year number?

With E15, yes.

With E15.

Okay.

Thank you very much.

Jay Petschek of Corsair.

Most of my questions were asked, but just looking at your balance sheet, where would I see the discontinued -- the assets of the discontinued operations?

How much does that carry forward in the balance sheet?

They don't get classified out separately.

On the balance sheet they remain with everything.

(multiple speakers)

Don't you normally do that for discontinued ops?

No?

No, just on the statement of income on the balance sheet (multiple speakers).

Do you know how much that (multiple speakers) --?

Fixed assets was about $33 million from the retail stores which quite obviously are not in discontinued operations anyhow.

There is very little assets left on this.

Basically, the deferred liability from the warranty which becomes income over time.

Right.

(inaudible) against that.

So the net of those two, off the top of my head, probably about $6 million or $7 million.

But it is actually not a -- it's more liability than asset.

Okay, thank you.

And then I did have a question on the options which you started to talk about.

What -- how many options that are still outstanding today and give us a flavor of what the strike prices are because while the Company has bought back stock and as the caller pointed out, that despite the buyback our shares went up.

So I'm just trying to figure out how much more dilution we have to go?

The number of options is about 825,000 options.

And I don't have it at my fingers, but that strike prices, but I will get that for you and answer that before we hang up.

Great.

Those -- that's all I've got.

Thank you.

Arnold Brief with Goldsmith & Harris.

Just trying to do this on the run so I don't know how accurate it is, but it would look -- when you look at your balance sheet and try to subtract everything out and get back to the ethanol facilities, it would seem as if they're being valued at considerably higher valuation than $1.20 per gallon.

That's the one question and the other -- would you comment on that?

And my other question (multiple speakers).

Well again you are talking about the worst performers.

The best -- we have some of the best performers in the industry and I believe the $1.20 was with (inaudible).

And I had said $1.20 to $1.50, what the current price was to buy a plant not our type.

I would, I can assure you we think our plants with possible exception of Texas are worth a lot more than that.

Our plants are moneymakers.

We are talking about plants that generally are not doing as well as ours.

(multiple speakers) as well as ours.

Is Texas -- ?

Again that is with the possible exception of Texas.

Is Texas profitable?

Is it returning an adequate return on investment?

Would you (multiple speakers)?

It made good money in the fourth quarter (multiple speakers).

Arnold, it did make good money in the fourth quarter, but it's in a much tougher environment.

It would be marginal.

Would you consider closing it or would you want to try to buy something to (multiple speakers).

We think it is a seasonal thing there and, again, as I said earlier there's a -- sorghum comes quickly and you have to -- and then it disappears.

There is a lot of sorghum produced in that area.

You look at it for a year.

But it tends to be sold very quickly so we have to get used to that environment which is different than the rest of our environment.

And the 40 million gallon plant is 40 million size is a problem.

With the sorghum that's there, we cannot expand it, but I think there's ways to make money out of that plant, and that is what our people are working very hard on doing.

And we did make money.

If you look at it on an annual basis, we did make money last year and we have hopes to make money this year.

So your plan is to continue to operate it?

Yes, why would we -- I mean, again, we made (multiple speakers) money last year.

We made money and even though -- and we are in a -- that time same thing happened to us last year during this time of year.

It was a very, very tough time down there.

Thank you.

(multiple speakers) to give you some idea that we owned about 56% of that plant.

It is a 40 million gallon plant.

It is not a large part of our ethanol holdings.

I think we are spending a lot of time on something that is a relatively small part of ethanol holdings.

To answer the previous question, the stock price -- the strike price on the options is $10.14 at January 31.

The next is a follow-up question from William Jones with Singular Research.

I was just going to ask, you have 31 former stores that are vacant, 10 that are leased.

So what's the total number of stores?

Is it 40 or 41 stores owned?

Now?

Plus the two distribution centers?

Correct.

That's correct.

Is that 40 or 41?

I'm sorry.

It's 40, because we've also got a store that is a lease and sublease.

Okay.

Plus the two distribution centers?

Correct.

Okay.

Fair enough.

Thank you.

Richard Dearnly with Longport Partners.

In the past you have said that the ethanol plants, I think all of them, were capable of doing, of running cellulosic process.

Have you -- is that true and have you been (multiple speakers)?

I think I said and to clarify what I said in the past and maybe I need to clarify it now, is there are people out there trying to put together a cellulosic process that works on our plants.

And should that happen, our plants will be one of the ones that, because they are Fagen ICM plants, would be one of the ones that they are work -- that people are trying to design cellulosic ethanol for.

But to date, I don't know if anyone that has cracked that magic bullet.

I don't know any cellulosic ethanol anywhere that is running on Fagen ICM plants, although I know people are working on it.

So nothing -- continues to be nothing is imminent?

Yes.

Thank you.

Jay Petschek.

Corsair.

It's been actually asked.

Thank you.

Tom Garvey.

Rafferty Capital Markets.

Just getting back to the ethanol crush spreads.

$0.54 kind of realized across the board for all of your facilities.

I was wondering if you could go into any more detail?

Some of those 100 million gallon plants.

Is the crush margin a little bit higher there or is it sort of the same across all of your facilities?

That's when in the fourth quarter, the Texas for -- had a probably better than -- had a very good crush spread.

So I wouldn't -- you can -- it wasn't really related to one plant doing terrifically better than another.

Let me clarify also.

That crush spread is just for the two facilities that we consolidate which is One Earth and Levelland.

And when we are talking about crush spread, all we talk about is price for ethanol and corn or sorghum.

So it's not that dependent upon the size of the facility as far as what your crush spread is going to be.

Okay, so relatively similar (multiple speakers)

Profits would also be tied into natural gas and DDGs and there's another area.

Both of those areas we get -- we do better in Texas for obvious reasons.

And DDG (inaudible) is a cattle feed and so it's a great market for that down there.

Thank you.

Bruce Baughman with Franklin Templeton.

Just to circle back.

I want to make sure I'm understanding the answers to some of the other questions correctly.

The property and equipment net, $246 million, almost $247 million -- does that include the discontinued retail operations?

Yes it does.

Okay and what was that --

It doesn't -- it just includes the fixed assets from the stores that we still own.

So that's not technically a discontinued.

The assets themselves are not in discontinued operations, just the retail operations were put into discontinued operations.

(multiple speakers) activity going forward within continuing operations.

And out of that $247 million, how much of that is retail or former retail related versus the two plants?

It's about $33 million in fixed assets from the former retail stores and distribution centers.

Which is real estate, hard assets, hard real estate.

Okay.

So you can take that amount out if you're trying to calculate the carrying value on -- per gallon of capacity for the consolidated plants?

That would be the next step.

Is that correct?

Yes, that's correct.

You would take that out.

And then the long-term mortgage debt and capital lease obligations, alternative energy, $124 million -- that is specifically those two plants?

Correct.

And nothing else?

That is correct.

Okay and then finally, the $28.5 million of noncontrolling interest would represent a net number of assets and liabilities related to the consolidated plants, right?

Yes, that's correct.

On a pro rata ownership basis?

Yes, being based upon the 44% or 27%.

All right.

Thank you.

There are no further questions at this time.

I would like to thank everyone for listening and appreciate it very, very much.

Ladies and gentlemen, that does conclude the conference call for today.

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