Company: REX
Filing Date: 2025-09-02
Form Type: 10-Q
Source: 0000930413-25-002856
Chunk: 66

Company: REX AMERICAN RESOURCES Corp
Filing Date: 2025-09-02
Form: 10-Q
Item: Part I, Item 8
Chunk 66
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 quantities
expected to be produced by the Company over a reasonable period of time in the normal course of business.

The Company uses derivative financial instruments
(exchange-traded futures contracts and swaps) to manage a portion of the risk associated with changes in commodity prices, primarily
related to corn. The

10

Company monitors and manages this exposure as part of its overall
risk management policy. As such, the Company seeks to reduce the potentially adverse effects that the volatility of these markets
may have on its operating results. The Company may take hedging positions in these commodities as one way to mitigate risk. While
the Company attempts to link its hedging activities to purchase and sales activities, there are situations in which these hedging
activities can themselves result in losses. The Company does not hold or issue derivative financial instruments for trading or
speculative purposes. The changes in fair value of these derivative financial instruments are recognized in current period earnings
as the Company does not use hedge accounting.

Income Taxes

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. The Company provides for deferred tax liabilities and assets for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis
and operating loss and tax credit carryforwards. The Company provides for a valuation allowance if, based on the weight of available
positive and negative evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The
Company paid income taxes of approximately $3.1 million and $2.3 million and received no refunds during the six months ended July
31, 2025 and 2024, respectively.

As of July 31, 2025, and January 31, 2025, total
unrecognized tax benefits were approximately $18.9 million. Accrued penalties and interest were approximately $111,000 and approximately
$99,000 at July 31, 2025 and January 31, 2025, respectively. If the Company were to prevail on all unrecognized tax benefits recorded,
the provision for income taxes would be reduced by approximately $18.8 million. In addition, the impact of penalties and interest
would also benefit the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within
income tax expense. On a quarterly basis, the Company accrues for the effects of open uncertain