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BUSINESS COMBINATIONS

9 Months Ended

Oct. 31, 2017

Business Combination Disclosure [Text Block]

Note 3. Business Combinations

On August 10, 2017, the Company, through a 95.35% owned subsidiary, purchased the entire ownership interest of an entity that owns a refined coal facility. The Company began operating its refined coal facility immediately after the acquisition. The Company expects that the revenues from the sale of refined coal produced in the facility will be subsidized by federal production tax credits through November 2021, subject to meeting qualified emissions reductions as governed by Section 45 of the Internal Revenue Code.

The impact on the combined results of operations of the Company and the refined coal entity, on a pro forma basis, as though the companies had been combined as of the beginning of fiscal year 2016 is as follows:

Cost of sales would have increased by approximately $692,000 for the quarter ended October 31, 2016. Cost of sales would have increased by approximately $1,385,000 and $2,077,000 for the nine months ended October 31, 2017 and 2016, respectively. These pro forma increases are a result of increased depreciation expense as if the refined coal entity was consolidated during those periods. Selling, general and administrative expenses would have decreased by approximately $2,077,000 and $2,140,000 for the quarter and nine months ended October 31, 2017, respectively. Selling, general and administrative expenses would have increased by approximately $2,140,000 for the nine months ended October 31, 2016. These pro forma adjustments are a result of transaction costs occurring (on a pro forma basis) during the first quarter of fiscal year 2016. The benefit for income taxes would have increased by approximately $789,000 and $287,000 for the quarter and nine months ended October 31, 2017, respectively. The provision for income taxes would have decreased by approximately $263,000 and $1,602,000 for the quarter and nine months ended October 31, 2016, respectively. Net income attributable to REX common shareholders would have increased by approximately $1,228,000 and $447,000 for the quarter and nine months ended October 31, 2017, respectively. Net income attributable to REX common shareholders would have decreased by approximately $409,000 and $2,493,000 for the quarter and nine months ended October 31, 2016, respectively. Basic and diluted net income per share attributable to REX common shareholders would have increased by approximately $0.19 per share and $0.07 per share for the quarter and nine months ended October 31, 2017, respectively. Basic and diluted net income per share attributable to REX common shareholders would have decreased by approximately $0.06 per share and $0.38 per share for the quarter and nine months ended October 31, 2016, respectively.

The results of the Company’s refined coal operations (approximately $0.2 million of net sales and revenue and approximately $4.5 million of net income attributable to REX common shareholders, including the income tax benefit of estimated Section 45 credits to be earned) have been included in the consolidated financial statements subsequent to the acquisition date and are included in the Company’s refined coal segment.

The purchase price was $12,049,000, which was paid in cash. The acquisition was recorded by allocating the total purchase price to the assets acquired, based on their estimated fair values at the acquisition date. The purchase price allocation is based on the preliminary results of a valuation analysis. The purchase price allocation is preliminary until the valuation analysis is completed. The income approach was used to determine the fair values of assets acquired. The following table summarizes the estimated fair values of the assets acquired at the acquisition date (amounts in thousands):

Inventory	$	49
Property, plant and equipment		12,000
Total assets acquired and purchase price	$	12,049

Transaction costs totaled approximately $2.1 million during the first nine months of fiscal year 2017 and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.