Company: REX
Filing Date: 2025-06-04
Form Type: 10-Q
Source: 0000930413-25-001941
Chunk: 53

Company: REX AMERICAN RESOURCES Corp
Filing Date: 2025-06-04
Form: 10-Q
Item: Part I, Item 8
Chunk 53
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 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

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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 $1.9 million and $0.1 million and received no refunds during the three months ended
April 30, 2025 and 2024, respectively.

As of April 30, 2025, and January 31, 2025,
total unrecognized tax benefits were approximately $18.9 million. Accrued penalties and interest were approximately $105,000 and
approximately $99,000 at April 30, 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