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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Jan. 31, 2019
Accounting Policies [Abstract] |
Significant Accounting Policies [Text Block] |
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation – The accompanying financial statements consolidate the operating results and financial position of REX American Resources Corporation and its wholly-owned and majority owned subsidiaries (the “Company” or “REX”). All intercompany balances and transactions have been eliminated. As of January 31, 2019, the Company owns interests in five operating entities – four are consolidated and one is accounted for using the equity method of accounting. The results of One Earth are included on a delayed basis of one month lag as One Earth has a fiscal year end of December 31. The other consolidated entities have the same fiscal year end as the parent company. Fiscal Year – All references in these consolidated financial statements to a particular fiscal year are to the Company’s fiscal year ended January 31. For example, “fiscal year 2018” means the period February 1, 2018 to January 31, 2019. The Company refers to its fiscal year by reference to the year immediately preceding the January 31 fiscal year end date. Segments – In fiscal year 2017, the Company began reporting the results of its refined coal operation as a new segment as a result of the August 10, 2017 acquisition of an entity that operates a refined coal facility (see Note 4). Prior to the acquisition, the Company had one reportable segment, ethanol. Beginning with the third quarter of fiscal year 2017, the Company has two reportable segments: i) ethanol and by-products and ii) refined coal. Within the ethanol and by-products segment, the Company has equity investments in three ethanol limited liability companies, two of which are majority ownership interests. Within the refined coal segment, the Company has a majority equity interest in one refined coal limited liability company. In applying the criteria set forth in ASC 280, the Company determined that based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plants are aggregated into one reporting segment. Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents – Cash equivalents are principally short-term investments with original maturities of less than three months. The carrying amount of cash equivalents approximates fair value. Basis of Presentation –Interest and other income, net includes the following (amounts in thousands):
|  | Fiscal Year 2018 |  |  | Fiscal Year 2017 |  |  | Fiscal Year 2016 |
Interest income |  | $ | 3,514 |  |  | $ | 1,556 |  |  | $ | 434 |
(Loss) gain on sale of investment |  |  | — |  |  |  | (13 | ) |  |  | 192 |
(Loss) gain on disposal of real estate and property and equipment, net |  |  | (104 | ) |  |  | (192 | ) |  |  | 328 |
Other |  |  | (22 | ) |  |  | 709 |  |  |  | 162 |
Total |  | $ | 3,388 |  |  | $ | 2,060 |  |  | $ | 1,116 |
Concentrations of Risk –The Company maintains cash and cash equivalents in accounts with financial institutions which exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company does not believe there is significant credit risk related to its cash and cash equivalents. Six (fiscal years 2018 and 2017) and five (fiscal year 2016) customers accounted for approximately 85%, 87% and 83% of the Company’s net sales and revenue during fiscal years 2018, 2017 and 2016, respectively. At January 31, 2019 and 2018, these customers represented approximately 80% and 89%, respectively, of the Company’s accounts receivable balance. Inventory – Inventories are carried at the lower of cost or market on a first-in, first-out basis. Inventory includes direct production costs and certain overhead costs such as depreciation, property taxes and utilities related to producing ethanol and related by-products and refined coal. Inventory is permanently written down for instances when cost exceeds estimated net realizable value; such write-downs are based primarily upon commodity prices as the market value of inventory is often dependent upon changes in commodity prices. There was no significant write-down of inventory during fiscal years 2018, 2017 or 2016. Fluctuations in the write-down of inventory generally relate to the levels and composition of such inventory at a given point in time and commodity prices. The components of inventory are as follows (amounts in thousands):
|  | January 31, |
|  | 2019 |  |  | 2018 |
Ethanol and other finished goods |  | $ | 5,767 |  |  | $ | 8,402 |
Work in process |  |  | 3,094 |  |  |  | 2,824 |
Grain and other raw materials |  |  | 9,616 |  |  |  | 9,529 |
Total |  | $ | 18,477 |  |  | $ | 20,755 |
Property and Equipment – Property and equipment is recorded at cost or the fair value on the date of acquisition (for property and equipment acquired in a business combination). Depreciation is computed using the straight-line method. Estimated useful lives are 5 to 40 years for buildings and improvements, and 2 to 20 years for fixtures and equipment. The components of property and equipment are as follows (amounts in thousands):
|  | January 31, |
|  | 2019 |  |  | 2018 |
Land and improvements |  | $ | 21,469 |  |  | $ | 21,074 |
Buildings and improvements |  |  | 23,608 |  |  |  | 23,272 |
Machinery, equipment and fixtures |  |  | 297,807 |  |  |  | 288,832 |
Construction in progress |  |  | 708 |  |  |  | 3,155 |
|  |  | 343,592 |  |  |  | 336,333 |
Less: accumulated depreciation |  |  | (161,071 | ) |  |  | (138,506 | )
Total |  | $ | 182,521 |  |  | $ | 197,827 |
In accordance with ASC 360-05 “Impairment or Disposal of Long-Lived Assets”, the carrying value of long-lived assets is assessed for recoverability by management when changes in circumstances indicate that the carrying amount may not be recoverable. The Company tests for recoverability of an asset group by comparing its carrying amount to its estimated undiscounted future cash flows. If the carrying amount exceeds its estimated undiscounted future cash flows, the Company recognizes an impairment charge for the amount by which the asset group’s carrying amount exceeds its fair value, if any. The Company recorded no impairment charges in fiscal years 2018, 2017 and 2016. Depreciation expense was approximately $24,828,000, $21,462,000 and $19,519,000 in fiscal years 2018, 2017 and 2016, respectively. Investments – The method of accounting applied to long-term investments, whether consolidated, equity or cost, involves an evaluation of the significant terms of each investment that explicitly grant or suggest evidence of control or influence over the operations of the investee and also includes the identification of any variable interests in which the Company is the primary beneficiary. The Company accounts for investments in limited liability companies in which it may have a less than 20% ownership interest, using the equity method of accounting when the factors discussed in ASC 323 are met. The excess of the carrying value over the underlying equity in the net assets of equity method investees is allocated to specific assets and liabilities. Investments in businesses that the Company does not control but for which it has the ability to exercise significant influence over operating and financial matters are accounted for using the equity method. The Company accounts for its investment in Big River using the equity method of accounting and includes the results of Big River on a delayed basis of one month as it has a fiscal year end of December 31. The Company periodically evaluates its investments for impairment due to declines in market value considered to be other than temporary. Such impairment evaluations include, in addition to persistent, declining market prices, general economic and company-specific evaluations. If the Company determines that a decline in market value is other than temporary, then a charge to earnings is recorded in the Consolidated Statements of Operations and a new cost basis in the investment is established. Short-term investments, consisting of U.S. government obligations, are considered held-to-maturity, and, therefore are carried at amortized historical cost. Revenue Recognition – For ethanol and by-products segment sales, the Company recognizes sales of ethanol, distillers grains and non-food grade 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. For refined coal segment sales, the Company recognizes sales of refined coal when obligations under the term of the contract with its customer are satisfied; this occurs when control of the product transfers to the customer, generally upon the coal leaving the refined coal plant. Refined coal sales are recorded net of the cost of coal as the Company purchases the coal feedstock from the customer to which refined coal is sold (after processing). Cost of Sales – Cost of sales includes depreciation, costs of raw materials, inbound freight charges, purchasing and receiving costs, inspection costs, shipping costs, other distribution expenses, warehousing costs, plant management, certain compensation costs and general facility overhead charges. Selling, General and Administrative Expenses – The Company includes non-production related costs such as professional fees, selling charges and certain payroll in selling, general and administrative expenses. Financial Instruments – Certain of the forward grain purchase and ethanol, distillers grains and non-food grade 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 grain that will be delivered in quantities expected to be used and sales of ethanol, distillers grains and non-food grade corn oil that will be produced in quantities expected to be sold by us over a reasonable period of time in the normal course of business. During the years ended January 31, 2019, 2018 and 2017 there were no material settlements of forward contracts that were recorded at fair value. At January 31, 2019, the company recorded a liability of $21,000 associated with contracts not accounted for under the “normal purchases and normal sales” scope exemption of ASC 815. At January 31, 2018, the Company recorded an asset of approximately $0.1 million associated with contracts not accounted for under the “normal purchases and normal sales” scope exemption of ASC 815. The Company uses derivative financial instruments (exchange-traded futures contracts) to manage a portion of the risk associated with changes in commodity prices, primarily related to corn. The 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 sale 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. Stock Compensation – The Company has a stock-based compensation plan, approved by its shareholders, which reserves a total of 550,000 shares of common stock for issuance pursuant to its terms. The plan provides for the granting of shares of stock, including options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, restricted stock, and restricted stock unit awards to eligible employees, non-employee directors and consultants. The Company measures share-based compensation grants at fair value on the grant date, adjusted for estimated forfeitures. The Company records noncash compensation expense related to equity and liability awards in its consolidated financial statements over the requisite service period on a straight-line basis. See Note 12 for a further discussion of restricted stock. Income Taxes – 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 bases and operating loss and tax credit carryforwards. The Company provides for a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company’s annual effective tax rate includes the impact of its refined coal operation and the expected federal income tax credits to be earned and the impact of research and experimentation credits. In addition, for fiscal year 2017, the Company’s annual effective tax rate includes a benefit related to remeasuring deferred tax liabilities at a federal income tax rate of 21% compared to 35% in historical periods, a result of the Tax Act, which reduced the federal income tax rate on corporations from 35% to 21%. Comprehensive Income – The Company has no components of other comprehensive income, and therefore, comprehensive income equals net income. New Accounting Pronouncements – Effective February 1, 2018, the Company adopted the amended guidance in ASC Topic 606 “Revenue from Contracts with Customers”, which requires revenue recognition to reflect the transfer of promised goods or services to customers and replaces existing revenue recognition guidance. See Note 3 for a discussion of the adoption of this amended guidance. Effective February 1, 2018, the Company prospectively adopted Accounting Standards Update “ASU” 2016-15 “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments”. This standard provides guidance on eight specific cash flow issues. The cash flow issues covered by this ASU are: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interests in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle for distributions received from equity method investees in the Statement of Cash Flows. The adoption of this standard did not affect the consolidated financial statements and related disclosures. Effective February 1, 2018, the Company adopted ASU 2016-18 “Statement of Cash Flows (Topic 230), Restricted Cash”. This standard requires that the statements of cash flows explain the changes in the combined total of restricted and unrestricted cash balances. Amounts generally described as restricted cash will be combined with unrestricted cash and cash equivalents when reconciling the beginning and end of period balances on the statements of cash flows. The Company adopted this standard retrospectively. Therefore, the balance of cash and cash equivalents was increased by $354,000 and $130,000 as of January 31, 2018 and 2017, respectively to reflect the respective restricted cash amounts. Net cash used in investing activities was adjusted to exclude the change in restricted cash of $224,000 and $76,000 for the years ended January 31, 2018 and 2017, respectively. In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02 “Leases (Codified as Topic 842)”. This standard requires that virtually all leases will be recognized by lessees on their balance sheet as a right-of-use asset and a corresponding lease liability, including leases currently accounted for as operating leases. The Company is required to adopt this standard effective February 1, 2019. The related leases are currently accounted for as operating leases (see Note 8). This standard requires a modified retrospective transition approach and allows for early adoption. This standard provides three practical expedients, which the Company intends to elect as a package and apply consistently to all leases. Pursuant to this package, the Company will not reassess i) whether any expired or existing contracts are or contain leases, ii) the lease classification for any expired or existing leases that were previously classified as operating leases, or iii) initial direct costs for any existing leases. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides an option to apply the transition provisions of the new standard at the adoption date instead of the earliest comparative period presented in the financial statements. The Company will elect to use this optional transition method. The Company expects the adoption of this new standard to result in the recognition of a range of approximately $18 million to $22 million in right-of-use assets and lease liabilities on the Consolidated Balance Sheet. The Company does not expect the adoption of this new standard to have a material impact on its Consolidated Statements of Operations Cash Flows or Shareholders’ Equity. The Company expects to use the lessee non-lease component accounting policy election, for all asset classes, to include both the lease and non-lease components as a single component and account for them as a lease. The Company is currently working to complete the implementation of new processes and information technology tools to assist in ongoing lease data collection and analysis, and is updating accounting policies and internal controls in connection with the adoption of the new standard.

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