INVESTMENTS AND DEPOSITS

12 Months Ended

Jan. 31, 2012

Investments And Deposits [Text Block]

2.	INVESTMENTS AND DEPOSITS
	The Company has $743,000 at January 31, 2012 and 2011 on deposit with the Florida Department of Financial Services to secure its obligation to fulfill future obligations related to extended warranty contracts sold in the state of Florida.
	In addition to the deposit with the Florida Department of Financial Services, the Company has $620,000 and $857,000 at January 31, 2012 and 2011, respectively, invested in a money market mutual fund to satisfy Florida Department of Financial Services regulations.
	The Company’s equity investments are accounted for under ASC 323 “Investments-Equity Method and Joint Ventures”. The following table summarizes equity method investments at January 31, 2012 and 2011 (amounts in thousands):

Entity	Ownership Percentage			Carrying Amount January 31, 2012		Carrying Amount January 31, 2011
Big River Resources, LLC		10	%	$	34,370	$	29,443
Patriot Renewable Fuels, LLC		26	%		27,309		21,829
NuGen Energy, LLC (1)		48	%		—		16,077
Total Equity Method Securities				$	61,679	$	67,349

(1) Ownership percentage through November 1, 2011.

During fiscal year 2007, the Company entered into an agreement to invest $20 million in Big River, an Iowa limited liability company and holding company for several entities. The Company funded this investment in exchange for a 10% ownership interest. Big River Resources West Burlington, LLC, a wholly owned subsidiary of Big River, presently operates an ethanol manufacturing plant with an annual nameplate capacity of 92 million gallons. Big River Resources Galva, LLC, a wholly owned subsidiary of Big River, presently operates an ethanol manufacturing plant with an annual nameplate capacity of 100 million gallons. Big River Resources United Energy, LLC, a 50.5% owned subsidiary of Big River, operates an ethanol manufacturing plant with an annual nameplate capacity of 100 million gallons. Big River Resources Boyceville, LLC, a wholly owned subsidiary of Big River, presently operates an ethanol manufacturing plant with an annual nameplate capacity of 55 million gallons. The Company recorded income of approximately $6,931,000, $5,387,000 and $2,487,000 as its share of earnings from Big River during fiscal years 2011, 2010 and 2009, respectively. At January 31, 2012, the carrying value of the investment in Big River is approximately $34.4 million; the amount of underlying equity in the net assets of Big River is approximately $32.8 million. The excess of the carrying value of the investment over the underlying equity in the net assets is accounted for as goodwill and is recorded within equity method investments on the accompanying Consolidated Balance Sheets.

During fiscal year 2007, the Company entered into an agreement to invest $16 million in Patriot. The Company funded this investment in exchange for a 23% ownership interest. During fiscal year 2011, the Company invested an additional $1.9 million which increased its ownership interest (effective January 1, 2012) in Patriot to 26%. The facility has an annual nameplate capacity of 100 million gallons and began operations during the second quarter of fiscal year 2008. The Company recorded income of approximately $5,274,000, $5,159,000 and $3,540,000 as its share of earnings or loss from Patriot during fiscal years 2011, 2010 and 2009, respectively. At January 31, 2012, the carrying value of the investment in Patriot is approximately $27.3 million; the amount of underlying equity in the net assets of Patriot is approximately $22.2 million. The excess of the carrying value of the investment over the underlying equity in the net assets is accounted for as goodwill and capitalized interest and is recorded within equity method investments on the accompanying Consolidated Balance Sheets. Capitalized interest is amortized as a basis difference over the life of the asset.

Effective July 1, 2010, the Company purchased a 48% equity interest in NuGen which operates an ethanol producing facility in Marion, South Dakota with an annual nameplate capacity of 100 million gallons. The Company’s investment included approximately $2,410,000 paid at closing to the then sole shareholder of NuGen and $6,805,000 contributed directly to NuGen. An additional $6,451,000 was due based upon cash distributions from NuGen that REX was entitled to until such balance was paid (“Contingent Consideration”). The Company determined that the fair value of the Contingent Consideration, at the acquisition date, was approximately $4,611,000. On November 1, 2011, the Company acquired an additional 50% equity interest in NuGen. Following the purchase, the Company owns all of the outstanding Class A membership interest units in NuGen, representing a 100% voting interest and a 98% equity interest in NuGen. The Company recorded income (under the equity method of accounting) of approximately $9,327,000 and $4,011,000 as its share of earnings from NuGen during fiscal years 2011 and 2010. Effective November 1, 2011, the Company ceased using the equity method of accounting and began consolidating the results of NuGen. Prior to fiscal year 2011, the Company recorded the results of NuGen on a one month lag. During fiscal year 2011, NuGen adopted the same fiscal year as the Company. As a result, the Company no longer records the results of NuGen on a one month lag. The impact of recording 13 months (ten months of equity method income and three months of consolidated operations) of NuGen’s results in fiscal year 2011 was not material, representing an increase to net income of approximately $0.9 million.

On September 30, 2006, the Company acquired 47% of the outstanding membership units of Levelland Hockley County Ethanol, LLC, or Levelland Hockley, for $11.5 million. On December 29, 2006, the Company purchased a $5.0 million convertible secured promissory note from Levelland Hockley. On July 1, 2007, the Company converted the note into equity and increased its ownership percentage to approximately 56%.

Levelland Hockley, which is located in Levelland, Texas, commenced production operations in the first quarter of fiscal year 2008. The plant has an annual nameplate capacity of 40 million gallons of ethanol and 135,000 tons of dried distillers grains.

The plant was shut down in early January 2011 as a result of industry wide low crush spread margins and the plant’s inability to source grain at affordable prices. On January 31, 2011, the Company sold 814,000 of its membership units to Levelland Hockley for $1, reducing the ownership interest in Levelland Hockley to 49%. As a result, the Company no longer has a controlling financial interest in Levelland Hockley, and, therefore, effective January 31, 2011, the Company deconsolidated Levelland Hockley and began using the equity method of accounting. In connection with the deconsolidation, the Company recorded its remaining noncontrolling equity interest and debt investments at fair value. The Company’s estimate of fair value for all of its investments in Levelland Hockley was $0 at January 31, 2011. The Company recorded a pretax charge of approximately $18.4 million as a result of deconsolidating Levelland Hockley and writing its remaining investments in Levelland Hockley to $0 at January 31, 2011. The deconsolidation loss was computed as the difference between the sales proceeds and fair value of the retained investment and the Company’s carrying value of the investment prior to the transaction. The Company’s continuing involvement as an equity method investor precludes classification of this transaction as discontinued operations. The Company also recorded a pretax loss from the operating results of Levelland Hockley (prior to deconsolidation) of approximately $5.9 million. On April 27, 2011, Levelland Hockley voluntarily filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court, Northern District of Texas. As a result, the Company no longer could exercise significant influence over Levelland Hockley and began using the cost method of accounting. There was no change in the carrying value of the Company’s investments in Levelland Hockley as a result of the change to the cost method of accounting.

Undistributed earnings of equity method investees totaled approximately $22.8 million and $18.4 million at January 31, 2012 and 2011, respectively.

Summarized financial information for each of the Company’s equity method investees, as of their fiscal year end is presented in the following table (amounts in thousands):

As of December 31, 2011

	Patriot		Big River
Current assets	$	24,972	$	139,858
Non current assets		168,518		406,522
Total assets	$	193,490	$	546,380
Current liabilities	$	20,966	$	72,798
Long-term liabilities		76,103		111,928
Total liabilities	$	97,069	$	184,726
Noncontrolling interests	$	—	$	33,224
As of December 31, 2010
	Patriot		Big River		NuGen
Current assets	$	20,648	$	149,690	$	35,521
Non current assets		174,087		358,155		87,487
Total assets	$	194,735	$	507,845	$	123,008
Current liabilities	$	19,105	$	78,694	$	14,720
Long-term liabilities		94,963		129,936		86,563
Total liabilities	$	114,068	$	208,630	$	101,283
Noncontrolling interests	$	—	$	21,515	$	—

Summarized financial information for each of the Company’s equity method investees except for NuGen is presented in the following table for the years ended December 31, 2011, 2010 and 2009. The summarized information for NuGen is presented for the ten months ended October 31, 2011 and for the six months ended December 31, 2010 (amounts in thousands):

Periods Ended December 31 and October 31, 2011

	Patriot		Big River		Nugen
Net sales and revenue	$	377,250	$	1,162,308	$	256,973
Gross profit	$	29,207	$	105,207	$	24,490
Income from continuing
operations	$	22,615	$	71,384	$	18,133
Net income	$	22,615	$	71,384	$	18,133
Period Ended December 31, 2010
	Patriot		Big River		Nugen
Net sales and revenue	$	261,117	$	742,163	$	121,871
Gross profit	$	26,936	$	83,671	$	12,977
Income from continuing
operations	$	21,385	$	52,478	$	9,772
Net income	$	21,385	$	52,478	$	9,772
Year Ended December 31, 2009
	Patriot		Big River
Net sales and revenue	$	231,077	$	448,145
Gross profit	$	25,711	$	43,317
Income from continuing
operations	$	17,288	$	25,225
Net income	$	17,288	$	25,225

Patriot and Big River have debt agreements that limit and restrict amounts the entities can pay in the form of dividends or advances to owners. The restricted net assets of Patriot and Big River combined at January 31, 2012 are approximately $326.2 million. At January 31, 2012, the Company’s proportionate share of restricted net assets of Patriot and Big River combined is approximately $44.2 million.