Net sales and revenue in the quarter ended October 31, 2009 were $64.4 million compared to $39.2 million in the prior year’s third quarter, representing an increase of $25.2 million or 64.4%. Net sales and revenue do not include merchandise sales from retail stores classified in discontinued operations. The increase was primarily caused by higher sales in our alternative energy segment of $38.9 million, which was partially offset by lower sales at retail stores of $13.9 million.
Net sales and revenue for the first nine months of fiscal year 2009 were $111.2 million compared to $99.6 million for the first nine months of fiscal year 2008. This represents an increase of $11.6 million or 11.6%. The increase was primarily caused by higher sales in our alternative energy segment of $43.8 million, which was partially offset by lower sales at retail stores of $32.8 million.
We closed our remaining retail store locations during the first nine months of fiscal year 2009 as we substantially completed the wind down of our retail operations.
Gross profit in the third quarter of fiscal year 2009 was $7.9 million (12.2% of net sales and revenue) compared to $3.7 million (9.4% of net sales and revenue) recorded in the third quarter of fiscal year 2008. This represents an increase of $4.2 million or 114.1%. Gross profit for the third quarter of fiscal year 2009 increased by $8.2 million as a result of operations in the alternative energy segment. Gross profit for the third quarter of fiscal year 2009 decreased by $3.9 million from our retail segment. In addition, our real estate segment had a decline in gross profit for the third quarter of fiscal year 2009 of $0.2 million.
Gross profit for the first nine months of fiscal year 2009 was $14.8 million (13.3% of net sales and revenue) compared to $16.3 million (16.4% of net sales and revenue) for the first nine months of fiscal year 2008. Gross profit for the nine months ended October 31, 2009 increased by $8.5 million as a result of operations in the alternative energy segment. Gross profit for the first nine months of fiscal year 2009 decreased by $9.4 million from our retail segment. Gross loss for the nine months ended October 31, 2009 from our real estate segment was 42.4% of segment net sales and revenue compared to gross profit of 93.3% of segment net sales and revenue for the nine months ended October 31, 2008.
Selling, general and administrative expenses for the third quarter of fiscal year 2009 were $2.6 million (4.0% of net sales and revenue), a decrease of $5.0 million or 65.9% from $7.6 million (19.3% of net sales and revenue) for the third quarter of fiscal year 2008. Selling, general and administrative expenses were $8.4 million (7.5% of net sales and revenue) for the first nine months of fiscal year 2009 representing a decrease of $13.3 million or 61.6% from $21.7 million (21.8% of net sales and revenue) for the first nine months of fiscal year 2008. For the third quarter of fiscal year 2009, these expenses declined approximately $4.0 million and $0.9 million in the retail and alternative energy segments, respectively. For the first nine months of fiscal year 2009, these expenses declined approximately $11.5 million and $1.7 million in the retail and alternative energy segments, respectively.
Investment income was $92,000 and $363,000 for the third quarter of fiscal years 2009 and 2008, respectively. Investment income was $356,000 and $1,732,000 for the first nine months of fiscal years 2009 and 2008, respectively. The decline generally results from lower yields earned on our excess cash in the current year compared to the prior year.
Interest expense was $1.6 million for the third quarter of fiscal year 2009, an increase of $0.6 million over the prior year third quarter. Interest expense was $3.3 million for the first nine months of fiscal year 2009 compared to $2.1 million for the first nine months of fiscal year 2008. The increases in interest expense are primarily attributable to the alternative energy segment.
During the third quarter of fiscal years 2009 and 2008, we recognized income of approximately $1,221,000 and $1,044,000 from our equity investments in Big River and Patriot, respectively. During the first nine months of fiscal years 2009 and 2008, we recognized income of approximately $1,144,000 and $2,966,000 from our equity investments in Big River and Patriot, respectively.
On September 16, 2008, we completed a transaction for the sale and leaseback of our Cheyenne, Wyoming distribution center under a three year lease term. A pre-tax gain, classified as continuing operations, of approximately $1.6 million (net of expenses) resulted from this sale. We also sold vacant land adjacent to the Cheyenne, Wyoming distribution center for a gain of $0.7 million.
During the third quarter of fiscal year 2009, Levelland Hockley entered into an agreement with Layne Christensen Company (“Layne”) to settle litigation between the two parties. As a result of the settlement agreement, Layne paid Levelland Hockley $1.5 million. Of the proceeds received, approximately $0.3 million was recognized as other income during the third quarter of fiscal year 2009. The remainder of the settlement offset contingent legal expenses and reduced the carrying amount of certain plant equipment.
During the third quarter of fiscal year 2009, Levelland Hockley received notification from the United States Department of Agriculture that Levelland Hockley had been approved to receive funds under the Advanced Biofuel Producer Program. As a result, approximately $0.5 million was recognized as other income during the third quarter of fiscal year 2009.
During the first nine months of fiscal year 2008, we recognized approximately $0.7 million of income from the sales of our entire partnership interests in Colona SynFuel Limited Partnership, L.L.L.P., (Colona) and Somerset Synfuel, L.P. (Somerset). This income represents the estimated final settlements related to Colona and Somerset as all synthetic fuel production ceased during fiscal year 2007. As the Section 29/45K program expired December 31, 2007, the Company does not expect additional income from these sales.
On March 30, 2004, we also sold our membership interest in the limited liability company that owned a synthetic fuel facility in Gillette, Wyoming. The plant was subsequently sold and during the third quarter of fiscal year 2006, we modified our agreement with the owners and operators of the synthetic fuel facility. Based on the terms of the modified agreement, we currently are not able to determine the likelihood and timing of collecting payments related to production occurring after September 30, 2006. Thus, we cannot currently determine the timing of income recognition, if any,
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related to production occurring subsequent to September 30, 2006. We did not recognize any income from this sale during the first nine months of fiscal years 2009 or 2008.
We recognized losses of $899,000 and $947,000 during the third quarter of fiscal years 2009 and 2008, respectively, related to forward interest rate swap agreements that Levelland Hockley and One Earth entered into during fiscal year 2007. We recognized a loss related to the swaps of $1,561,000 during the first nine months of fiscal year 2009 compared to a gain of $481,000 during the first nine months of fiscal year 2008.
Our effective tax rate was 31.3% and 1.8% for the third quarter of fiscal years 2009 and 2008, respectively. Our effective tax rate for the first nine months of fiscal year 2009 was 38.4% compared to 112.0% for the first nine months of fiscal year 2008. The fluctuations in the effective tax rates are primarily a result of not recognizing a tax provision or benefit on the income or loss attributable to the noncontrolling interests in our consolidated ethanol subsidiaries.
During the quarter and nine months ended October 31, 2009 we closed 29 and 53 retail stores, respectively, that were classified as discontinued operations. As a result of these closings and certain other retail store closings from prior periods, we had a loss from discontinued operations, net of tax benefit, of $22,000 for the third quarter of fiscal year 2009 compared to $344,000 for the third quarter of fiscal year 2008. We had a loss from discontinued operations, net of tax benefit, of $873,000 for the first nine months of fiscal year 2009 compared to $103,000 for the first nine months of fiscal year 2008.
On April 30, 2007, we completed a transaction for the sale of 86 of our former store locations to KLAC REX, LLC (“Klac”) for $74.5 million in cash, before selling expenses. We also entered into leases to leaseback 40 of the properties from Klac for initial lease terms expiring January 31, 2010. All of the leases with Klac have been terminated as of October 31, 2009.
This transaction resulted in a gain (realized and deferred) of $14.8 million. Of this gain, $3.9 million and $1.1 million was recognized in the first nine months of fiscal years 2009 and 2008, respectively. The following table summarizes the pre-tax gains recognized during the third quarter and first nine months of fiscal years 2009 and 2008 (amounts in thousands):
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| | Three Months Ended October 31, | | Nine Months Ended October 31, | |
Classification of Gain | | 2009 | | 2008 | | 2009 | | 2008 | |
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Discontinued Operations | $ | — | | $ | 323 | | $ | 3,933 | | $ | 1,068 | |
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Two properties classified as discontinued operations were sold or abandoned during the first nine months of fiscal year 2009, resulting in a gain, net of tax expense of $0.1 million. These gains are consistent with those recognized in the prior year.
Noncontrolling interest (income) loss of $(1,012,000) and $1,878,000 for the quarters ended October 31, 2009 and 2008, respectively and $(195,000) and $2,070,000 for the nine months ended October 31, 2009 and 2008, respectively, represents the owners’ (other than REX) share of the income or loss of Levelland Hockley and One Earth.
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As a result of the foregoing, net income attributable to REX common shareholders for the third quarter of fiscal year 2009 was $2.3 million, an increase of $3.0 million from the loss of $0.7 million for the third quarter of fiscal year 2008. Net income attributable to REX common shareholders for the first nine months of fiscal year 2009 was $1.4 million, a decrease of $0.7 million from net income of $2.1 million for the first nine months of fiscal year 2008.
Business Segment Results
Beginning in the second quarter of fiscal year 2009, we realigned our reportable business segments to be consistent with changes to our management structure and reporting. We now have three segments: alternative energy, real estate and retail. The real estate segment was formerly included in the retail segment. For stores and warehouses closed for which we have a retained interest in the related real estate, operations are now presented in the real estate segment when retail operations ceased.
As discussed in Note 17, our chief operating decision maker (as defined by the accounting standards) evaluates the operating performance of our business segments using a measure we call segment profit. Segment profit includes realized and unrealized gains and losses on derivative financial instruments. Segment profit excludes income taxes, indirect interest expense, discontinued operations, indirect investment income and certain other items that are included in net income determined in accordance with accounting principles generally accepted in the United States of America. Management believes these are useful financial measures; however, they should not be construed as being more important than other comparable GAAP measures.
Items excluded from segment profit generally result from decisions made by corporate executives. Financing, divestiture and tax structure decisions are generally made by corporate executives. Excluding these items from our business segment performance measure enables us to evaluate business segment operating performance based upon current economic conditions.
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The following table sets forth, for the periods indicated, sales and profits by segment (amounts in thousands):
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| | Three Months Ended October 31, | | Nine Months Ended October 31, | |
| | 2009 | | 2008 | | 2009 | | 2008 | |
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Net sales and revenue: | | | | | | | | | | | | | |
Alternative energy | | $ | 61,368 | | $ | 22,444 | | $ | 92,296 | | $ | 48,468 | |
Real estate | | | 341 | | | 83 | | | 827 | | | 270 | |
Retail | | | 2,707 | | | 16,644 | | | 18,057 | | | 50,904 | |
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Total net sales and revenues | | $ | 64,416 | | $ | 39,171 | | $ | 111,180 | | $ | 99,642 | |
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Segment gross profit (loss): | | | | | | | | | | | | | |
Alternative energy | | $ | 5,790 | | $ | (2,443 | ) | $ | 6,740 | | $ | (1,753 | ) |
Real estate | | | (117 | ) | | 77 | | | (351 | ) | | 252 | |
Retail | | | 2,187 | | | 6,038 | | | 8,383 | | | 17,807 | |
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Total gross profit | | $ | 7,860 | | $ | 3,672 | | $ | 14,772 | | $ | 16,306 | |
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Segment profit (loss): | | | | | | | | | | | | | |
Alternative energy | | $ | 4,569 | | $ | (4,957 | ) | $ | 2,222 | | $ | (3,527 | ) |
Real estate | | | (187 | ) | | 25 | | | (462 | ) | | 95 | |
Retail | | | 843 | | | 2,936 | | | 3,142 | | | 3,331 | |
Corporate expense | | | (430 | ) | | (484 | ) | | (1,046 | ) | | (1,113 | ) |
Interest expense | | | (60 | ) | | (111 | ) | | (314 | ) | | (332 | ) |
Investment income | | | 82 | | | 345 | | | 230 | | | 1,481 | |
Income from synthetic fuel investments | | | — | | | 21 | | | — | | | 691 | |
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Income (loss) from continuing operations before income taxes | | $ | 4,817 | | $ | (2,225 | ) | $ | 3,772 | | $ | 626 | |
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Alternative Energy
The alternative energy segment includes the consolidated financial statements of Levelland Hockley and One Earth, our other investments in ethanol facilities, the income or loss related to those investments and certain administrative expenses. One Earth began limited production operations late in the second quarter of fiscal year 2009 and became fully operational during the third quarter of fiscal year 2009.
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The following table summarizes sales from Levelland Hockley and One Earth by product group (amounts in thousands):
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| | Three Months Ended October 31, | | Nine Months Ended October 31, | |
| | 2009 | | 2008 | | 2009 | | 2008 | |
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Ethanol | | $ | 51,332 | | $ | 18,766 | | $ | 75,108 | | $ | 40,356 | |
Dried distiller grains | | | 7,636 | | | 1,936 | | | 10,925 | | | 4,674 | |
Wet distiller grains | | | 2,268 | | | 1,622 | | | 5,958 | | | 3,287 | |
Other | | | 132 | | | 120 | | | 305 | | | 151 | |
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Total | | $ | 61,368 | | $ | 22,444 | | $ | 92,296 | | $ | 48,468 | |
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The following table summarizes selected operating data from Levelland Hockley and One Earth:
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| | Three Months Ended October 31, | | Nine Months Ended October 31, | |
| | 2009 | | 2008 | | 2009 | | 2008 | |
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Average selling price per gallon of ethanol | | $ | 1.59 | | $ | 2.32 | | $ | 1.59 | | $ | 2.31 | |
Average selling price per ton of dried distiller grains | | $ | 101.00 | | $ | 188.00 | | $ | 113.00 | | $ | 188.0 | |
Average selling price per ton of wet distiller grains | | $ | 44.00 | | $ | 50.00 | | $ | 48.00 | | $ | 53.00 | |
Average cost per bushel of grain | | $ | 3.63 | | $ | 6.13 | | $ | 3.61 | | $ | 5.95 | |
Average cost of natural gas (per mmbtu) | | $ | 3.63 | | $ | 11.30 | | $ | 4.17 | | $ | 10.76 | |
Segment Results – Third Quarter Fiscal Year 2009 Compared to Third Quarter Fiscal Year 2008
Net sales and revenue for the current year increased $38.9 million to $61.4 million, primarily a result of One Earth becoming fully operational during the third quarter of fiscal year 2009. The average selling price per gallon of ethanol declined from $2.32 in the prior year 2008 to $1.59 in the current year. Our sales were based upon 32.4 million gallons of ethanol in the current year compared to 8.1 million gallons in the prior year.
Gross profit from these sales was approximately $5.8 million during the current year compared to a gross loss of $2.4 million during the prior year. Gross profit improved primarily as a result of an improved spread between ethanol and grain prices compared to the prior year.
Segment profit was $4.6 million in the current year compared to segment loss of $5.0 million in the prior year. The increase in segment performance was primarily related to the increase in gross profit discussed above. In addition, selling general and administrative expenses decreased by $0.9 million in the current year compared to the prior year 2008. An impairment charge of $1.3 million
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related to the write off of goodwill associated with the Levelland Hockley acquisition caused a majority of this fluctuation. Interest expense increased $0.6 million in the current year over the prior year, as we no longer capitalize interest on the One Earth credit facility subsequent to the commencement of operations at the plant. Other income increased $0.8 million in the current year compared to the prior year. The increase is a result of recognizing a legal settlement of $0.3 million and grant income of $0.5 million in fiscal year 2009.
Segment Results – Nine Months Ended October 31, 2009 Compared to Nine Months Ended October 31, 2008
Net sales and revenue for the current year were $92.3 million compared to $48.5 million for the prior year. The increase in sales is primarily a result of One Earth becoming fully operational during the third quarter of fiscal year 2009. The average selling price per gallon of ethanol declined from $2.31 in the prior year 2008 to $1.59 in the current year. Our sales were based upon 47.3 million gallons of ethanol in the current year compared to 17.5 million gallons in the prior year.
Gross profit from these sales was approximately $6.7 million during the current year compared to a gross loss of $1.8 million during the prior year. Gross profit improved primarily as a result of an improved spread between ethanol and grain prices compared to the prior year.
Segment profit was $2.2 million in the current year compared to segment loss of $3.5 million in the prior year. The increase in segment performance was primarily related to the increase in gross profit discussed above. In addition, selling general and administrative expenses decreased by $1.7 million in the current year compared to the prior year. An impairment charge of $1.3 million recognized in the prior year that related to the write off of goodwill associated with the Levelland Hockley acquisition caused a majority of this fluctuation. Interest expense increased $1.3 million in the current year over the prior year, as we no longer capitalize interest on the One Earth credit facility subsequent to the commencement of operations at the plant. Income from equity method investments declined from $3.0 million in the prior year to $1.1 million in the current year. Losses on derivative financial instruments were $1.6 million in the current year compared to gains of $0.5 million in the prior year.
Real Estate
The real estate segment includes all owned and sub-leased real estate including those previously used as retail store and distribution center operations, our real estate sales and leasing activities and certain administrative expenses. It excludes results from discontinued operations.
At October 31, 2009, we had lease or sub-lease agreements, as landlord, for all or parts of seven former retail store properties. We own six of these properties and are the tenant/sub landlord for one of the properties. We have 38 owned properties, including one former distribution center, that are vacant at October 31, 2009. We are marketing these vacant properties to lease or sell. In
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addition, we have one owned former distribution center that is partially leased to a tenant; we are marketing the vacant space for lease or sale.
Segment Results – Third Quarter Fiscal Year 2009 Compared to Third Quarter Fiscal Year 2008
Net sales and revenue in the current year increased to approximately $0.3 million from approximately $0.1 million in the prior year; the increase is primarily a result of 15 properties leased to Appliance Direct for a portion of the current year that were utilized in our retail segment in the prior year. Gross loss from these sales was approximately $0.1 million during the current year compared to gross profit of approximately $0.1 million during the prior year. Gross profit declined as a result of expenses associated with vacant properties. The increase in vacant properties is a result of the agreement we reached with Appliance Direct during the current year which relieved Appliance Direct of their obligation to lease properties from us.
Segment loss was approximately $200,000 for the current year compared to segment profit of approximately $25,000 for the prior year. The decline in segment profit is primarily a result of the lower gross profit in the current year discussed above.
Segment Results – Nine Months Ended October 31, 2009 Compared to Nine Months Ended October 31, 2008
Net sales and revenue for the current year were approximately $0.8 million compared to approximately $0.3 million for the prior year. The increase in revenue is primarily a result of 15 properties leased to Appliance Direct for a portion of the current year that were utilized in our retail segment in fiscal year 2008. Gross loss from these sales was approximately $0.4 million during the current year compared to gross profit of approximately $0.3 during the prior year. Gross profit declined as a result of expenses associated with vacant properties. The increase in vacant properties is a result of the agreement we reached with Appliance Direct during the current year which relieved Appliance Direct of their obligation to lease properties from us.
Retail
The retail segment includes all of our store and distribution center operations and certain administrative expenses. It excludes results from discontinued operations. We substantially exited the retail business as of July 31, 2009. We expect ongoing results from the retail segment to include revenue and expense associated with our extended warranty operations.
Segment Results – Third Quarter Fiscal Year 2009 Compared to Third Quarter Fiscal Year 2008
Net sales and revenue for the current year decreased to approximately $2.7 million from approximately $16.6 million, primarily a result of the winding down of our retail business. Gross profit was approximately $2.2 million in the current year 2009 compared to approximately $6.0 million in the prior year. The decrease in gross profit is primarily attributable to the decline in retail sales. However, gross profit margin as a percentage of sales increased in the current year as gross
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profit from extended service plans was a higher percentage of retail gross profit in the current year compared to the prior year.
Retail segment profit decreased approximately $2.1 million to approximately $0.8 million in the current year from approximately $2.9 million in the prior year. The decrease in segment profit was primarily related to lower gross profit in the current year discussed above. In addition, selling, general and administrative expenses declined to approximately $1.3 million in the current year compared to approximately $5.4 million in the prior year. This decrease is primarily a result of cost reductions in fiscal year 2009 associated with the wind down of our retail business.
Segment Results – Nine Months Ended October 31, 2009 Compared to Nine Months Ended October 31, 2008
Net sales and revenue for the current year decreased to approximately $18.1 million from approximately $50.9 million, primarily a result of the winding down of our retail business. Gross profit was approximately $8.4 million in the current year compared to approximately $17.8 million in the prior year. The decrease in gross profit is primarily attributable to the decline in retail sales. However, gross profit margin as a percentage of sales increased in the current year 2009 as gross profit from extended service plans was a higher percentage of retail gross profit in the current year compared to the prior year.
Retail segment profit of approximately $3.1 million in the current year is consistent with the prior year profit of $3.3 million. Selling, general and administrative expenses declined by approximately $11.5 million offsetting the decline in net sales and revenue. This decline is primarily a result of cost reductions in the current year associated with the wind down of our retail business. We had gains of approximately $2.3 million on the sale of retail related real estate in the prior year; there were no such gains in the current year.
Corporate and Other
Corporate and other includes certain administrative expenses of the corporate headquarters, interest expense and interest income not directly allocated to the alternative energy, real estate or retail segments and income from synthetic fuel investments.
Corporate and Other Results – Third Quarter Fiscal Year 2009 Compared to Third Quarter Fiscal Year 2008
Selling, general and administrative expenses were $0.4 million in the current year, consistent with $0.5 million in the prior year.
Interest expense of $0.1 million in the current year is consistent with prior year expense.
Investment income was $0.1 million in the current year compared to $0.3 million in the prior year. The decline generally results from lower yields earned on our excess cash in the current year compared to the prior year.
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Corporate and Other Results – Nine Months Ended October 31, 2009 Compared to Nine Months Ended October 31, 2008
Selling, general and administrative expenses were $1.0 million in the current year consistent with the $1.1 million in the prior year.
Interest expense of $0.3 million in the current year is consistent with prior year expense.
Investment income was $0.2 million in the current year 2009 compared to $1.5 million in the prior year. The decline generally results from lower yields earned on our excess cash in the current year compared to the prior year.
Income from synthetic fuel investments declined $0.7 million in the current year compared to the prior year. Prior year income represents the estimated final settlements for Colona and Somerset as all synthetic fuel production ceased during fiscal year 2007.
Liquidity and Capital Resources
Net cash provided by operating activities was approximately $0.3 million for the first nine months of fiscal year 2009, compared to cash used of $26.3 million for the first nine months of fiscal year 2008. For the first nine months of fiscal year 2009, cash was provided by net income of $1.6 million, non-cash items of $(8.4) million, which consisted of depreciation and amortization, income from equity method investments, deferred income, unrealized losses on derivative financial instruments, other items and the deferred income tax provision. In addition, inventory and other assets provided cash of $16.7 million and $5.1 million, respectively, primarily a result of the wind down of our retail business. The primary use of cash was a decrease in accounts payable of $6.2 million as we finalized several outstanding retail vendor accounts associated with the wind down of our retail business. Accounts receivable increased $5.1 million as a result of production and sales from both of our consolidated ethanol entities. Other liabilities decreased $3.3 million as we paid certain payroll and other accrued expenses in connection with the wind down of our retail business.
Net cash used in operating activities was approximately $26.3 million for the first nine months of fiscal year 2008. For the first nine months of fiscal year 2008, cash was provided by net income of $0.01 million, adjusted for the impact of $0.7 million for gains on our sales of synthetic fuel investments, the gain on the disposal of real estate and property and equipment of $3.3 million and non-cash items of $(2.9) million, which consisted of depreciation and amortization, income from equity method investments, deferred income, unrealized gains on derivative financial instruments, other items and the deferred income tax provision. In addition, other assets provided cash of $1.6 million, primarily a result of reductions in our levels of prepaid commissions associated with the sale of extended service contracts. The increase in accounts receivable of $2.8 million is primarily a result of Levelland Hockley commencing operations in the current fiscal year. The increase in inventory of $6.6 million was primarily due to seasonal fluctuations in our retail segment and Levelland Hockley commencing operations in the current fiscal year. The decrease in accounts payable is primarily a result of our modification of payment terms with one of our retail product vendors. The primary use of cash was a decrease in other liabilities of $10.5 million; primarily a
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result of payments related to synthetic fuel obligations, incentive compensation and other payroll and sales tax payments being made in the first quarter of fiscal year 2008.
At October 31, 2009, working capital was $76.2 million compared to $84.4 million at January 31, 2009. This decrease is primarily a result of treasury stock purchases. The ratio of current assets to current liabilities was 2.9 to 1 and 2.5 to 1 at October 31, 2009 and January 31, 2009, respectively.
Cash of $34.4 million was used in investing activities for the first nine months of fiscal year 2009, compared to $69.6 million for the first nine months of fiscal year 2008. During the first nine months of fiscal year 2009, we received proceeds of $1.0 million from the sale of real estate and property and equipment. We had capital expenditures of approximately $34.5 million during the first nine months of fiscal year 2009, primarily related to construction at the One Earth ethanol plant. We deposited approximately $1.0 million into a restricted account as collateral for a letter of credit on behalf of Levelland Hockley to secure grain purchasing.
Cash of $69.6 million was used in investing activities for the first nine months of fiscal year 2008. During the first nine months of fiscal year 2008, we received proceeds of $1.3 million from the sales of our synthetic fuel investments and $6.4 million from the sale of real estate and property and equipment. We had capital expenditures of approximately $75.9 million during the first nine months of fiscal year 2008, primarily related to construction at the Levelland Hockley and One Earth ethanol plants. We deposited $1.3 million in escrow accounts (restricted cash) in connection with the final draw on Levelland Hockley’s construction loan.
Cash provided by financing activities totaled approximately $26.6 million for the first nine months of fiscal year 2009 compared to $34.4 million for the first nine months of fiscal year 2008. Cash of approximately $12.1 million was used to repay debt and capital lease obligations. Cash was provided by debt borrowings of $44.0 million on One Earth’s construction loan and stock option activity of $1.2 million. Cash of approximately $5.5 million was also used to acquire 535,000 shares of our common stock. As of October 31, 2009, we had approximately 45,000 authorized shares remaining available for purchase under the stock buy-back program. Cash of approximately $1.0 million was used to pay settlements of derivative financial instruments.
Cash provided by financing activities totaled approximately $34.4 million for the first nine months of fiscal year 2008. Cash of approximately $4.4 million was used to repay debt and capital lease obligations. Cash was provided by new debt borrowings at Levelland Hockley and One Earth of $53.1 million. Cash of approximately $15.5 million was also used to acquire 1,332,000 shares of our common stock.
We believe we have sufficient working capital and credit availability to fund our commitments and to maintain our operations at their current levels for the next twelve months and foreseeable future.
We plan to seek and evaluate various investment opportunities. We can make no assurances that we will be successful in our efforts to find such opportunities.
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Forward-Looking Statements
This Form 10-Q contains or may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements can be identified by use of forward-looking terminology such as “may,” “expect,” “believe,” “estimate,” “anticipate” or “continue” or the negative thereof or other variations thereon or comparable terminology. Readers are cautioned that there are risks and uncertainties that could cause actual events or results to differ materially from those referred to in such forward-looking statements. These risks and uncertainties include the risk factors set forth from time to time in the Company’s filings with the Securities and Exchange Commission and include among other things: the uncertainty of constructing ethanol plants on time and on budget, the impact of legislative changes, the price volatility and availability of corn, sorghum, distiller grains, ethanol, gasoline and natural gas, ethanol plants operating efficiently and according to forecasts and projections, changes in the national or regional economies, weather, the effects of terrorism or acts of war, changes in real estate market conditions, the fluctuating amount of income received from the Company’s synthetic fuel investments and the impact of Internal Revenue Service audits. The Company does not intend to update publicly any forward-looking statements except as required by law. Other factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009 (File No. 001-09097).
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
No material changes since January 31, 2009.
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Item 4. Controls and Procedures |
Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings |
Levelland Hockley entered into a lease agreement with Layne Christensen Company (“Layne”) for certain water treatment equipment for its ethanol plant. Levelland Hockley filed a lawsuit, as amended, against Layne in the District Court, Hockley County, Texas on April 30, 2008, generally alleging that Layne was negligent in its design and construction of the water treatment facility and breached its various process guaranties and warranties. Layne and Levelland Hockley
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settled this litigation during the third quarter of fiscal year 2009 as the parties executed a settlement agreement.
During the quarter ended October 31, 2009, there have been no material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended January 31, 2009.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
Issuer Purchases of Equity Securities
| | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) | |
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August 1-31, 2009 | | — | | $ | — | | | — | | | 298,843 | |
September 1-30, 2009 | | 42,713 | | $ | 10.51 | | | 42,713 | | | 256,130 | |
October 1-31, 2009 | | 211,329 | | $ | 12.10 | | | 211,329 | | | 44,801 | |
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Total | | 254,042 | | $ | 11.83 | | | 254,042 | | | 44,801 | |
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| (1) | At October 31, 2009, a total of 44,801 shares remained available to purchase under this authorization. On December 1, 2009, the Company’s Board of Directors authorized the Company to purchase up to an additional 500,000 shares from time to time in private or market transactions at prevailing market prices. |
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| The following exhibits are filed with this report: |
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| 31 | | Rule 13a-14(a)/l5d-14(a) Certifications |
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| 32 | | Section 1350 Certifications |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| REX STORES CORPORATION |
| Registrant |
| | | | |
Signature | | Title | | Date |
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| | | | |
/s/ Stuart A. Rose | | Chairman of the Board | | December 3, 2009 |
| | (Chief Executive Officer) | | |
(Stuart A. Rose) | | | | |
| | | | |
/s/ Douglas L. Bruggeman | | Vice President, Finance and Treasurer | | December 3, 2009 |
| | (Chief Financial Officer) | | |
(Douglas L. Bruggeman) | | | | |
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