Company: REX
Filing Date: 2025-06-04
Form Type: 10-Q
Source: 0000930413-25-001941
Chunk: 7

Company: REX AMERICAN RESOURCES Corp
Filing Date: 2025-06-04
Form: 10-Q
Item: Part I, Item 1
Chunk 7
---
 ethanol,
distillers grains and distillers corn oil when obligations under the terms of the respective contracts with customers are satisfied;
this occurs with the transfer of control of products, generally upon shipment from the ethanol plant or upon loading of the rail
car used to transport the products.

Cost of Sales

Cost of sales includes depreciation,
costs of raw materials, third-party freight charges, purchasing and receiving costs, inspection costs, other distribution expenses,
warehousing costs, plant repair and maintenance costs, production labor and related payroll costs, and general facility overhead
charges.

Selling, General and Administrative Expenses

The Company includes non-production
related costs such as professional fees, selling charges, operating lease expense, and certain payroll in SG&A expenses.

Financial Instruments

Certain of the forward corn and natural
gas purchase contracts and ethanol, distillers grains and distillers corn oil sale contracts are accounted for under the “normal
purchases and normal sales” scope exemption of ASC 815 because these arrangements are for purchases of corn that will be
delivered in quantities expected to be used by the Company and sales of ethanol, distillers grains and distillers corn oil in 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

9

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