REX AMERICAN RESOURCES Corp - Quarter Report: 2008 April (Form 10-Q)

Amendment of ARB No. 51” (“SFAS 160”). SFAS 141(R) retains the fundamental requirements of SFAS 141, broadens its scope by applying the acquisition method to all transactions and other events in which one entity obtains control over one or more other businesses, and requires, among other things, that assets acquired and liabilities assumed be measured at fair value as of the acquisition date, that liabilities related to contingent consideration be recognized at the acquisition date and remeasured at fair value in each subsequent reporting period, that acquisition-related costs be expensed as incurred, and that income be recognized if the fair value of the net assets acquired exceeds the fair value of the consideration transferred. SFAS 160 establishes accounting and reporting standards for noncontrolling interests (i.e., minority interests) in a subsidiary, including changes in a parent’s ownership interest in a subsidiary and requires, among other things, that noncontrolling interests in subsidiaries be classified as a separate component of equity. Except for the presentation and disclosure requirements of SFAS 160, which are to be applied retrospectively for all periods presented, SFAS 141 (R) and SFAS 160 are to be applied prospectively in financial statements issued for fiscal years beginning after December 15, 2008. The Company has not determined the effect, if any, the adoption of this statement will have on its financial condition or results of operations.

          In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company has not determined the effect, if any, the adoption of this statement will have on its financial condition or results of operations.

Note 3. Sale and Leaseback Transaction and Other Leases

          On April 30, 2007, the Company completed a transaction for the sale of 86 of its current and former store locations to KLAC REX, LLC (“Klac”), formerly referred to as Coventry Real Estate Investments, LLC (“Coventry”) for $74.5 million in cash, before selling expenses. The Company also entered into leases to leaseback 40 of the properties from Klac for initial lease terms expiring January 31, 2010, with renewal options for up to 15 additional years. Either the Company or Klac may terminate a lease after the initial six months of the initial lease term on 28 of the leases, 14 of which were terminated in fiscal year 2007. The Company also entered into license agreements with Klac for 15 of the properties that allowed the Company to occupy the properties for up to 90 days rent free. Upon the expiration of the license period, the Company vacated the properties.

          This transaction resulted in a gain (realized and deferred) of $14.8 million. Of this gain, $0.3 million and $3.2 million was recognized in the first quarter of fiscal years 2008 and 2007, respectively. The Company had a deferred gain of $5.1 million and $11.6 million at April 30, 2008 and 2007, respectively, based upon the present value of the remaining minimum lease payments. The deferred gain will be amortized as a reduction to lease expense over the lease periods or recognized as gain on disposal at the end of the lease period. The leases have been

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accounted for as operating leases. The following table summarizes the pre-tax gains and losses recognized during the first quarters of fiscal years 2008 and 2007 (amounts in thousands):

			Three Months Ended					Three Months Ended
Classification of Gain (Loss)			April 30, 2008					April 30, 2007
Continuing Operations				$	336				$	(10	)
Discontinued Operations					-					3,225
Total Pre-Tax Gain				$	336				$	3,215

The following table summarizes the components of the sale and leaseback transaction (dollar amounts in thousands):

			Number of
Property Category			Properties				Deferred Gain					Recognized Gain
Vacated				60				$	-				$	7,548
Leased until January 31, 2010				12					3,683					336
Leased until January 31, 2010
(6 month kickout clause)				14					1,407					1,831
Total				86				$	5,090				$	9,715

          Future amortization of the deferred gain is as follows (amounts in thousands):

	Year Ended
	January 31,			Amortization
	Remainder of 2009				$	1,007
	2010					1,343
	2011					539
	2012					539
	2013					539
	Thereafter					1,123
	Total				$	5,090

          On July 28, 2006, the Company completed a transaction for the sale and leaseback of one store under an initial three-year lease term. A pre-tax gain, classified as continuing operations, of approximately $1.7 million (net of expenses) resulted from this sale. The Company has also deferred approximately $0.5 million of the gain at April 30, 2008, based upon the present value of the minimum lease payments and will amortize this deferred gain as a reduction to lease expense over the lease term. The lease has been accounted for as an operating lease.

          In addition to the leaseback transactions described above, the Company is committed under operating leases for certain retail store locations. The lease agreements are for varying

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terms through fiscal year 2011 and contain renewal options for additional periods. Real estate taxes, insurance and maintenance costs are generally paid by the Company. Contingent rentals based on sales volume are not significant. Certain leases contain scheduled rent increases and rent expense is recognized on a straight-line basis over the term of the leases.

          The following table is a summary of rental activity under operating leases (amounts in thousands):

Years Ended			Minimum			Gain				Sublease
January 31			Rentals			Amortization				Income				Total
Remainder of
January 31, 2009			$	4,555		$	(1,082	)		$	(162	)		$	3,311
2010 (a)				4,541			(1,443	)			(134	)			2,964
2011 (a)				2,700			(640	)			(70	)			1,990
2012 (a)				2,267			(640	)			(5	)			1,622
2013 (a)				2,061			(640	)			-				1,421
Thereafter (a)				3,858			(1,123	)			-				2,735
Total			$	19,982		$	(5,568	)		$	(371	)		$	14,043

(a)	Amounts include minimum rentals related to lease renewal options assumed to be exercised in the amounts of $2,061,000 for the fiscal years ended January 31, 2011, 2012 and 2013 and $3,858,000 for the thereafter category.

Note 4. Fair Value

          Effective January 1, 2008, the Company adopted SFAS 157, which provides a framework for measuring fair value under GAAP. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also eliminated the deferral of gains and losses at inception of certain derivative contracts whose fair value was not evidenced by market observable data. SFAS 157 requires that the impact of this change in accounting for derivative contracts be recorded as an adjustment to beginning retained earnings in the period of adoption. There was no impact on the beginning balance of retained earnings as a result of adopting SFAS 157 because the Company held no financial instruments in which a gain or loss at inception was deferred. For additional information on how the Company measures fair value, see Note 2. Financial assets and liabilities measured at fair value on a recurring basis are summarized below

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(amounts in thousands):
		Level 1			Level 2			Level 3			Fair Value
Cash Equivalents		$	99,293		$	-		$	-		$	99,293
Total Assets		$	99,293		$	-		$	-		$	99,293
Derivative Liabilities		$	-		$	2,129		$	-		$	2,129
Total Liabilities		$	-		$	2,129		$	-		$	2,129

Note 5. Business Combination

          On October 30 2007, the Company acquired 74% of the outstanding membership units of One Earth Energy, LLC (“One Earth”). The results of One Earth’s operations have been included in the consolidated financial statements subsequent to the acquisition date and are included in the Company’s alternative energy segment. The aggregate purchase price was $50.8 million, all of which was cash. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (amounts in thousands):

Cash		$	59,313
Property, plant and equipment			9,899
Prepaid expenses			307
Prepaid loan fees			1,012
Total assets acquired			70,531
Current liabilities			(1,922	)
Long term debt			(1,010	)
Minority interest			(16,832	)
Net purchase price		$	50,767

          Prepaid loan fees have an estimated useful life of 6 years. One Earth is a development stage entity that has commenced construction of an ethanol production facility in Gibson City, Illinois, which will have a design capacity of 100 million gallons of ethanol annually.

          The unaudited financial information in the table below summarizes the combined results of operations of the Company and One Earth, on a pro forma basis, as though the companies had been combined as of the beginning of the period presented. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of the period presented (in thousands, except per share amounts):

		Three Months Ended
		April 30, 2007
Net sales and revenue			$	48,888
Net income			$	7,480
Basic net income per share			$	0.71
Diluted net income per share			$	0.63

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Note 6. Other Assets

          The components of other assets at April 30, 2008, January 31, 2008 and April 30, 2007 are as follows (amounts in thousands):

		April 30,			January 31,			April 30,
		2008			2008			2007
Prepaid loan fees		$	5,088		$	5,187		$	4,074
Prepaid commissions			8,813			9,208			9,959
Equipment deposit			-			293			-
Other			197			115			131
Total			14,098			14,803			14,164
Less current portion			-			-			574
Long term		$	14,098		$	14,803		$	13,590

          Prepaid loan fees represent amounts paid to obtain mortgage debt, borrowings under the Company’s line of credit and an ethanol construction loan. Such amounts are amortized as interest expense.

          Prepaid commissions represent sales commissions paid in connection with extended warranties sold by the Company’s sales staff. Such amounts are capitalized and amortized ratably over the life of the extended warranty plan sold.

Note 7. Long Term Debt and Interest Rate Swaps

          During the first quarter of fiscal year 2008, Levelland Hockley borrowed $11.9 million under its construction loan agreement to fund construction of its ethanol plant. See note 16 for a discussion of a subsequent event affecting the Levelland Hockley construction loan.

          Levelland Hockley entered into a forward interest rate swap in the notional amount of $43.7 million with Merrill Lynch Capital during fiscal year 2007. The swap effectively fixed the variable interest rate of the term loan subsequent to the plant completion date at 7.89% . The swap settlements commence as of May 31, 2008 and terminate on May 31, 2010. At April 30, 2008, the Company has recorded a liability of $718,000 related to the fair value of the swap. The change in fair value was recorded in the Consolidated Condensed Statements of Income.

          One Earth entered into a forward interest rate swap in the notional amount of $50.0 million with First National Bank of Omaha during fiscal year 2007. The swap effectively fixed a portion of the variable interest rate of the term loan subsequent to the plant completion date at 7.9% . The swap settlements commence as of July 31, 2009 and terminate on July 8, 2014. At April 30, 2008, the Company has recorded a liability of $1,411,000 related to the fair value of the swap. The change in fair value was recorded in the Consolidated Condensed Statements of Income.

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Note 8. Stock Option Plans

          The Company has stock-based compensation plans under which stock options have been granted to directors, officers and key employees at the market price on the date of the grant.

          No options have been granted since fiscal 2004. The fair values of options granted were estimated as of the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions used for grants in the fiscal year ended January 31, 2005: risk-free interest rate of 4.7%, expected volatility of 65.4% and a weighted average stock option life of nine years for all option grants.

          The total intrinsic value of options exercised during the quarters ended April 30, 2008 and 2007 was approximately $0.2 million and $0.6 million, respectively, resulting in tax deductions to realize benefits of approximately $0.2 million and $0.2 million, respectively. The following table summarizes options granted, exercised and canceled or expired during the three months ended April 30, 2008:

					Weighted			Weighted Average		Aggregate
					Average			Remaining		Intrinsic
					Exercise			Contractual Term		Value
		Shares			Price			(in years)		(in thousands)
Outstanding at January 31, 2008		3,016,422			$	9.16
Exercised		(18,120	)		$	5.95
Forfeited		(1,200	)		$	12.64
Outstanding at April 30, 2008		2,997,102			$	9.18		3.2		$	21,020
Exercisable at April 30, 2008		2,835,583			$	8.98		3.0		$	20,437

          At April 30, 2008, there was approximately $1.0 million (pre-tax) of unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over a weighted average period of 0.9 years.

Note 9. Income Per Share from Continuing Operations

          The following table reconciles the computation of basic and diluted net income per share

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from continuing operations for each period presented (in thousands, except per share amounts):

		Three Months Ended						Three Months Ended
		April 30, 2008						April 30, 2007
						Per						Per
		Income		Shares		Share		Income		Shares		Share
Basic income per share from
continuing operations		$1,664		10,729		$0.15		$5,619		10,468		$0.54
Effect of stock options				891						1,331
Diluted income per share from
continuing operations		$1,664		11,620		$0.14		$5,619		11,799		$0.48

          For the three months ended April 30, 2008 and 2007, a total of 143,400 shares and 274,704 shares, respectively, subject to outstanding options were not included in the common equivalent shares outstanding calculation as the effect from these shares is antidilutive.

Note 10. Synthetic Fuel

           Income from continuing operations for the first quarter of fiscal year 2008 includes approximately $0.7 million of pre-tax investment income from the sales of the Company’s 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 for calendar year 2007 production 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 significant additional income from these sales. During the first quarter of fiscal year 2007, the Company recorded approximately $6.7 million of pre-tax investment income from these sales.

           The Company also sold its 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, the Company modified its agreement with the owners and operators of the synthetic fuel facility. Based on the terms of the modified agreement, the Company currently is not able to determine the likelihood and timing of collecting payments related to production occurring after September 30, 2006. Thus, the Company cannot currently determine the timing of income recognition, if any, related to production occurring subsequent to September 30, 2006. The Company did not recognize any income from this sale during the first quarter of fiscal years 2008 or 2007.

          Below is a table summarizing the income from the sales, net of certain expenses, of the

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Company’s interests in synthetic fuel entities (in thousands):

		Three Months
		Ended
		April 30,
		2008			2007
February 1, 1999 Colona sale		$	186		$	1,945
July 31, 2000 Colona sale			149			1,552
May 31, 2001 Colona sale			132			1,379
October 1, 2005 Somerset sale			203			1,857
Total		$	670		$	6,733

Note 11. Investments

          The following tables summarize investments at April 30, 2008, January 31, 2008 and April 30, 2007 (amounts in thousands):

Debt Securities April 30, 2008

									Fair Market		Carrying
Investment			Coupon Rate		Maturity		Classification		Value		Amount
United States							Held to
Treasury Bill			1.76%		5/29/2008		Maturity		$1,558		$1,558
Total Debt Securities									$1,558		$1,558
Debt Securities January 31, 2008
									Fair Market		Carrying
Investment			Coupon Rate		Maturity		Classification		Value		Amount
United States							Held to
Treasury Bill			2.82%		2/28/2008		Maturity		$1,548		$1,548
Total Debt Securities									$1,548		$1,548

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Debt Securities April 30, 2007

Fair Market

Carrying

Investment

Coupon Rate

Maturity

Classification

Value

Amount

Federal National

Mortgage

Association

Held to

Note

5.13%

5/16/2007

Maturity

$

1,492

$

1,492

Millennium

Ethanol, LLC

Convertible

Available for

Note

15.60%

4/1/2015

Sale

14,000

14,000

Total Debt

Securities

$

15,492

$

15,492

          There were no material realized or unrealized holding gains or losses at April 30, 2008 or 2007.

          The Company has approximately $933,000 at April 30, 2008, January 31, 2008 and April 30, 2007, respectively, 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. The deposits earned 5.9%, 6.3% and 4.9% at April 30, 2008, January 31, 2008 and April 30, 2007, respectively.

          The following table summarizes equity method investments at April 30, 2008, January 31, 2008 and April 30, 2007 (amounts in thousands):

Equity Method Investments April 30, 2008

			Ownership
Entity			Percentage		Carrying Amount					Initial Investment
Big River Resources, LLC			10%			$	22,960				$	20,000
Patriot Renewable Fuels, LLC			23%				16,549					16,000
Total Equity Securities						$	39,509				$	36,000

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Equity Method Investments January 31, 2008

			Ownership
Entity			Percentage		Carrying Amount					Initial Investment
Big River Resources, LLC			10%			$	22,353				$	20,000
Patriot Renewable Fuels, LLC			23%				16,395					16,000
Total Equity Securities						$	38,748				$	36,000
Equity Method Investments April 30, 2007
			Ownership
Entity			Percentage		Carrying Amount					Initial Investment
Big River Resources, LLC			7%			$	11,393				$	10,000
Patriot Renewable Fuels, LLC			23%				16,543					16,000
Total Equity Securities						$	27,936				$	26,000

          During the first quarter of fiscal years 2008 and 2007, the Company recorded income of $1,007,000 and $1,070,000, respectively as its share of earnings from Big River.

          The Company has capitalized interest included in equity method investments of $1,286,000 and $503,000 at April 30, 2008 and 2007, respectively as Patriot is constructing its ethanol plant. During the first quarter of fiscal years 2008 and 2007, the Company recorded income of $41,000 and $40,000, respectively as its share of earnings from Patriot.

          Undistributed earnings of equity method investees totaled approximately $2.2 million and $1.4 million at April 30, 2008 and 2007, respectively.

Note 12. Income Taxes

          The effective tax rate on consolidated pre-tax income from continuing operations was 26.5% for the quarter ended April 30, 2008, 36.9% for the year ended January 31, 2008 and 38.6% for the quarter ended April 30, 2007. An adjustment for recognizing the benefit of certain statutes of limitations expiring relating to uncertain tax positions of (13.1)% is reflected in the effective rate for the quarter ended April 30, 2008. In addition, a benefit of (6.3)% was recognized for a federal tax credit which is earned by Levelland Hockley as a small ethanol producer. The provision for state taxes is approximately 5% and 3% for the quarters ended April 30, 2008 and 2007, respectively. The provision for state taxes was approximately 2% for the year ended January 31, 2008. The effective tax rate was increased by 4.4% from the loss of

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pass-through entities (Levelland Hockley and One Earth) that is allocated to non-controlling interests.

          The Company files a U.S. federal income tax return and income tax returns in various states. In general, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years ended January 31, 2004 and prior.

          The Company adopted the provisions of FIN 48 on February 1, 2007. As a result of the adoption of FIN 48, the Company recorded a $287,000 decrease to retained earnings. As of April 30, 2008, total unrecognized tax benefits were $1,014,000 and accrued penalties and interest were $122,000. If the company were to prevail on all unrecognized tax benefits recorded, approximately $260,000 of the reserve would benefit the effective tax rate. 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 and annual basis, the Company accrues for the effects of open uncertain tax positions and the related potential penalties and interest. The Company recognized a benefit of approximately $266,000 during the first quarter of fiscal year 2008, related to statutes of limitations expiring in certain states.

          It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions will increase or decrease during the next 12 months; however, the Company does not expect the change to have a significant effect on results of operations or financial position. A reconciliation of the beginning and ending amount of unrecognized tax benefits, including interest and penalties, is as follows (amounts in thousands):

Unrecognized tax benefits, February 1, 2008		$1,394
Changes for tax positions for prior years, net		(258	)
Changes for current year tax positions		-
Unrecognized tax benefits, April 30, 2008		$1,136

Note 13. Discontinued Operations

          During the first three months of fiscal year 2008 the Company closed four stores in which the Company vacated the market or will not have a further continuing involvement with the related property. These stores, and certain other stores closed in previous periods, were classified as discontinued operations for all periods presented.

          Below is a table reflecting certain items of the Consolidated Condensed Statements of

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Income that were reclassified as discontinued operations for the period indicated.

		Three Months Ended
		April 30,
		2008				2007
		(In Thousands)
Net sales and revenue		$	587			$	20,835
Cost of sales			590				16,281
Loss before income taxes			(215	)			(1,498	)
Benefit for income taxes			77				537
Gain on disposal			-				4,483
Provision for income taxes			-				(1,607	)
Net (loss) income		$	(138	)		$	1,915

Note 14. Commitments

          In June 2006, Levelland Hockley entered into an agreement with a designer/builder for the construction of Levelland’s ethanol plant. The designer/builder is responsible for all engineering, labor, materials and equipment to design, construct, startup and achieve guaranteed performance criteria of the plant. The contract price is approximately $59.0 million, subject to adjustments as provided by the general conditions of the agreement, of which approximately $51.9 million has been spent through April 30, 2008. At March 31, 2008, the ethanol plant was in production as construction was substantially completed, however, there are ongoing disputes with one contractor concerning the performance of certain water treatment equipment.

          In July 2002, Levelland Hockley entered into an agreement with RIO Technical Services, Inc. (“RIO”) regarding the planning, financing, design, construction, and operation of Levelland’s ethanol plant. RIO is a related party, as certain officers of RIO own equity interests in Levelland Hockley. The Company estimates that fees for these services will be approximately $3.0 million, of which approximately $2.3 million has been spent through April 30, 2008. In addition, Levelland Hockley paid RIO approximately $3.6 million as compensation for RIO’s evaluation and assistance for Levelland Hockley to obtain financing. These costs are recorded as either prepaid loan fees or equity issuance costs.

          Levelland Hockley has forward purchase contracts for 3,605,000 bushels of sorghum, the principal raw material for its ethanol plant. Levelland Hockley expects to take delivery of the sorghum through December 2008. The unrealized gain of such contracts was approximately $1.0 million at March 31, 2008.

          Levelland Hockley has sales commitments for 5.9 million gallons of ethanol and 10,500 tons of distiller grains. Levelland Hockley expects to deliver the ethanol and distiller grains through September 2008. The unrealized loss of such contracts was approximately $1.0 million at March 31, 2008.

          In May 2007, One Earth entered into an agreement with a designer/builder for the construction of One Earth’s ethanol plant. The designer/builder is responsible for all

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engineering, labor, materials and equipment to design, construct, startup and achieve guaranteed performance criteria of the plant. The contract price is approximately $120 million, subject to adjustments as provided by the general conditions of the agreement, of which approximately $54 million has been spent through April 30, 2008. One Earth has also entered other construction and facility related contracts. Some of these contracts have been completed and all required funds have been expended as of April 30, 2008. The total of other incomplete construction and facility related contracts is approximately $8 million, of which approximately $7 million has been spent through April 30, 2008.

Note 15. Segment Reporting

          The Company has two reportable segments, consumer electronics and appliance retailing (“retail”) and alternative energy. The Company evaluates the performance of each reportable segment based on segment profit. Segment profit excludes income taxes, indirect interest expense, discontinued operations, indirect interest 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. Segment profit includes realized and unrealized gains on derivative financial instruments.

          The following table summarizes segment and other results and assets (amounts in thousands):

		Three Months Ended April 30,
		2008				2007
Net sales and revenue:
Retail		$	45,934			$	48,888
Alternative energy			1,167				-
Total net sales and revenues		$	47,101			$	48,888
Segment profit:
Retail segment profit		$	865			$	1,920
Alternative energy segment profit			428				1,680
Corporate expense			(537	)			(888	)
Interest expense			(121	)			(672	)
Interest income			664				530
Income from synthetic fuel investments			670				6,733
Income from continuing operations
before income taxes		$	1,969			$	9,303

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		April 30,			January 31,			April 30,
		2008			2008			2007
Assets:
Retail		$	112,449		$	120,711		$	261,785
Alternative energy			192,323			167,070			74,239
Corporate			121,665			121,197			39,063
Total assets		$	426,437		$	408,978		$	375,087
		Three Months Ended April 30,
			2008			2007
Sales of products retail segment:
Televisions			53%			50%
Appliances			29%			29%
Audio			4%			5%
Video			2%			3%
Other			5%			6%
Total			93%			93%
Sales of services retail segment:
Extended service contracts			7%			7%
Total retail segment sales			100%			100%
Sales of products alternative energy segment:
Ethanol and related by products			100%			-

          Certain corporate costs and expenses, including information technology, employee benefits and other shared services are allocated to the business segments. The allocations are generally amounts agreed upon by management, which may differ from amounts that would be incurred if such services were purchased separately by the business segment. Corporate assets are primarily cash, synthetic fuel accounts receivable and deferred income tax benefits.

          Cash, except for cash held by Levelland Hockley and One Earth, is considered to be fungible and available for both corporate and segment use dependent on liquidity requirements. Cash of approximately $5.8 million held by Levelland Hockley will be used to fund remaining construction costs and provide working capital. Cash of $10.5 million held by One Earth will be used primarily to fund the construction of a 100 million gallon ethanol plant and to provide working capital until the plant commences operations.

Note 16. Subsequent Events

          Effective June 1, 2008, Levelland Hockley’s construction loan agreement with GE

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Business Financial Services, Inc. (formerly known as Merrill Lynch Business Financial Services, Inc.) was converted into a term loan. Payments will be due in 59 equal monthly payments of principal plus accrued interest with the principal portion calculated based on a 120 month amortization schedule. One final installment will be required on the maturity date for the remaining unpaid principal balance.

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

          We are a specialty retailer in the consumer electronics/appliance industry. As of April 30, 2008, we operated 111 stores in 34 states, predominantly in small to medium-sized markets under the trade name "REX". We recently initiated a strategic alternative review process for our retail segment. We expect to consider and evaluate a broad range of alternatives during this process.

          In fiscal year 2006, we entered the alternative energy industry by investing in several entities organized to construct and, subsequently operate, ethanol producing plants. As we continue to seek to diversify sources of revenue and earnings, we have current investments in four entities as of April 30, 2008, utilizing both debt and equity investments.

          Since fiscal year 1998, we invested in three entities which owned facilities producing synthetic fuel. These entities earn federal income tax credits under Section 29/45K of the Internal Revenue Code based on the tonnage and content of solid synthetic fuel produced and sold to related parties. We have sold our entire ownership interest in these entities in prior years, and as a result; receive payments in connection with production of synthetic fuel. These entities are no longer eligible to receive Section 25/45K income tax credits subsequent to December 31, 2007 and the facilities have permanently ceased operations.

Fiscal Year

          All references in this report to a particular fiscal year are to REX's fiscal year ended January 31. For example, "fiscal year 2008" means the period February 1, 2008 to January 31, 2009.

Results of Operations

          The following table sets forth, for the periods indicated, the relative percentages that

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certain income and expense items bear to net sales and revenue:

		Three Months Ended
		April 30,
		2008			2007
Net sales and revenue		100.0	%		100.0	%
Cost of sales		71.4			68.4
Gross profit		28.6			31.6
Selling, general and administrative expenses		(30.5	)		(29.9	)
Interest income		1.8			2.6
Interest expense		(0.3	)		(0.2	)
Loss on early termination of debt		-			(1.2	)
Equity in income of unconsolidated ethanol affiliates		2.2			2.3
Income from synthetic fuel investments		1.4			13.8
Unrealized gain on derivative financial instruments		1.0			-
Income from continuing operations before
provision for income taxes, minority interest and
discontinued operations		4.2			19.0
Provision for income taxes		(1.1	)		(7.3	)
Minority interest		0.4			(0.2	)
Income from continuing operations		3.5			11.5
Loss from discontinued operations, net of tax		(0.3	)		(2.0	)
Gain on disposal of discontinued operations, net of tax		-			5.9
Net income		3.2	%		15.4	%

Business Segment Results

          As discussed in Note 15, our chief operating decision maker (as defined by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”) evaluates the operating performance of our business segments using a measure we call segment profit. Segment profit includes realized and unrealized gains on derivative financial instruments. Segment profit excludes income taxes, indirect interest expense, discontinued operations, indirect interest 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.

          The following table sets forth, for the periods indicated, sales and profits by segment (amounts in thousands):

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		Three Months April 30,
		2008				2007
Net sales and revenue:
Retail		$	45,934			$	48,888
Alternative energy			1,167				-
Total net sales and revenues		$	47,101			$	48,888
Segment profit:
Retail segment profit		$	865			$	1,920
Alternative energy segment profit			428				1,680
Corporate expense			(537	)			(888	)
Interest expense			(121	)			(672	)
Interest income			664				530
Income from synthetic fuel investments			670				6,733
Income from continuing operations
before income taxes and minority interest		$	1,969			$	9,303

Retail

          The retail segment includes all of our store and distribution center operations, our real estate sales and leasing activities and certain administrative expenses. It excludes results from discontinued operations.

          The net sales and revenue from our retail segment are discussed in the Comparison of Three Months Ended April 30, 2008 and 2007 discussion below.

          Segment profit decreased $1.0 million (52.6%) to $0.9 million in the first quarter of fiscal year 2008 from $1.9 million in the first quarter of fiscal year 2007. The decrease in segment profit was primarily related to lower gross profit of approximately $2.0 million, generally reflecting lower sales and lower gross margin percentages. This unfavorable result was partially offset by lower professional fees and payroll expenses. Professional fees declined approximately $0.7 million reflecting higher fees incurred in the first quarter of fiscal year 2007 related to the sale leaseback transaction we completed in the first quarter of fiscal year 2007. In addition we had lower payroll expenses of $0.5 million, reflecting the restructuring of our retail operations completed in fiscal year 2007.

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 related to those investments and certain administrative expenses.

          Net sales and revenue increased to $1.2 million as Levelland Hockley commenced production operations late in the first quarter of fiscal year 2008. Gross profit from these sales was approximately $0.1 million during the first quarter of fiscal year 2008. Gross profit was negatively affected by inefficiencies and costs associated

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with initial plant production and testing efforts. We expect Levelland’s gross margins to improve beginning in the second quarter of fiscal year 2008.

          Segment profit decreased $1.3 million (75%) in the first quarter of fiscal year 2008 from $1.7 million in the first quarter of fiscal year 2007. The decrease in segment profit was primarily related to increased operating expenses of approximately $1.2 million in the first quarter of fiscal year 2008. The increase results from $0.9 million in increased expenses at Levelland Hockley and $0.2 million in increased expenses at One Earth. Levelland Hockley commenced production operations late in the first quarter of fiscal year 2008 and was a development stage enterprise in the first quarter of fiscal year 2007. We purchased One Earth, a development stage enterprise, during the third quarter of fiscal year 2007; thus, there were no expenses attributable to One Earth in the first quarter of fiscal year 2007 included in segment profit. Income from equity method investments of $1.0 million in the first quarter of fiscal year 2008 was comparable to the $1.1 million recognized in the first quarter of fiscal year 2007.

Corporate and Other

          Corporate and other includes certain administrative expenses of the corporate headquarters, interest expense and interest income not directly allocated to the retail or alternative energy segments and income from synthetic fuel investments.

          Income from synthetic fuel investments declined to $0.7 million in the first quarter of fiscal year 2008 from $6.7 million in the first quarter of fiscal year 2007. Current year income represents the estimated final settlements as all synthetic fuel production ceased during fiscal year 2007. As the Section 29/45K program expired December 31, 2007, we do not expect significant additional income from these sales. We sold our entire membership interest in an entity that operated a synthetic fuel facility in Gillette, Wyoming. During the third quarter of fiscal year 2006, we modified our agreement with the owners and operators of the synthetic fuel facility in Gillette, Wyoming. Based on the terms of the modified agreement, we are not currently 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, related to production occurring subsequent to September 30, 2006. We did not recognize any income from this sale during the first quarter of fiscal years 2008 or 2007.

          Selling, general and administrative expenses were $0.5 million in the first quarter of fiscal year 2008, compared to $0.9 million in the first quarter of fiscal year 2007. The decrease in expenses was primarily related to lower professional fees in the current year and lower executive compensation attributable to the decline in synthetic fuel income in the first quarter of fiscal year 2008.

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Comparison of Three Months Ended April 30, 2008 and 2007

          The majority of our net sales and revenue were generated by our retail segment, as Levelland Hockley commenced operations late in the first quarter of fiscal year 2008. Net sales and revenue in the quarter ended April 30, 2008 were $47.1 million compared to $48.9 million in the prior year’s first quarter, representing a decrease of $1.8 million or 3.7% . Net sales and revenue do not include sales from stores classified in discontinued operations.

          This decrease was primarily caused by a decrease in closed stores that are classified as continuing operations. Sales from these stores declined by $2.7 million in the first quarter of fiscal year 2008 compared to fiscal year 2007. This decrease was partially offset by an increase in sales from Levelland Hockley of $1.2 million in the first quarter of fiscal year 2008 compared to $0 in fiscal year 2007 as Levelland Hockley began production late in the first quarter of fiscal year 2008. Comparable store sales in the first quarter of fiscal year 2008 declined $0.1 million (0.3%) compared to the first quarter of fiscal year 2007. We consider a store to be comparable after it has been open six full fiscal quarters. Comparable store sales do not include sales of extended service contracts.

          Our strongest product category for the first quarter of fiscal year 2008 was the television category which positively impacted comparable store sales by 2.2% . The television category performance was primarily due to improved sales of LCD and plasma televisions offsetting declines in projection and analog televisions. The audio category negatively impacted comparable store sales by 1.2% . The audio category decline is consistent with industry trends away from traditional audio products to portable digital media which we do not sell. The video category negatively impacted comparable store sales by 0.8% . The video category has generally been impacted by lower price points as many of these products continue to become more of a commodity item with very high levels of competition. The appliance category negatively impacted comparable store sales by 0.4% .

          The following table reflects the approximate percent of net sales for each major product and service group for the following periods:

			Three Months Ended
			April 30,
Product Category			2008			2007
Televisions			51.4	%		50.4	%
Appliances			28.1			28.7
Audio			4.1			5.3
Video			1.8			2.6
Extended warranties			7.1			7.0
Ethanol and related by products			2.5			-
Other			5.0			6.0
			100.0	%		100.0	%

          At April 30, 2008, we operated 111 stores compared to 164 stores one year earlier. We did not open any stores and closed four stores, upon the expiration of our lease as tenant, during

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the first three months of fiscal year 2008. We did not open any stores and closed 29 stores during the first three months of fiscal year 2007.

           At April 30, 2008, we had lease agreements, as landlord/sub landlord, for all or parts of 13 properties. We own 10 of these properties and are the tenant/sub landlord for three of the properties. In two of the owned locations, we operate a store and lease a portion of the property to another party. We do not operate a store in eight of the owned properties. We have four owned properties that are vacant at April 30, 2008. We are marketing these vacant properties to lease or sell.

          Gross profit of $13.4 million (28.6% of net sales and revenue) in the first quarter of fiscal year 2008 was approximately $2.1 million lower than the $15.5 million (31.6% of net sales and revenue) recorded in the first quarter of fiscal year 2007. Gross profit for the first quarter of fiscal year 2008 was negatively impacted by lower sales and vendor support pricing compared to the prior year. In addition, low margins at Levelland contributed to the decline in gross profit margin as Levelland’s start up and testing activities generated only $0.1 million of gross profit on sales of $1.2 million during the first quarter of fiscal year 2008. We expect Levelland’s gross margins to improve beginning in the second quarter of fiscal year 2008. Extended service contracts contributed gross profit of $2.6 million in the first quarter of fiscal year 2008 compared to $2.9 million in the first quarter of fiscal year 2007. Our direct warranty repair costs were approximately 23% and 22% of extended service contract revenue in the first quarter of fiscal years 2008 and 2007, respectively.

          Selling, general and administrative expenses for the first quarter of fiscal year 2008 were $14.4 million (30.5% of net sales and revenue), a decrease of $0.2 million or 1.4% from $14.6 million (29.9% of net sales and revenue) for the first quarter of fiscal year 2007. The decrease in expenses was primarily a result of lower professional fees of $0.7 million primarily related to fees incurred in connection with the sale leaseback transaction we completed during the first quarter of fiscal year 2007. In addition, we had lower retail payroll expenses of $0.5 million, reflecting the restructuring of our retail operations completed in fiscal year 2007. These decreases were partially offset by an increase in selling, general and administrative expenses from Levelland Hockley of $0.9 million as Levelland Hockley began operations during the first quarter of fiscal year 2008.

          Interest income was $0.9 million (1.8% of net sales and revenue) for the first quarter of fiscal year 2008 compared to $1.3 million (2.6% of net sales and revenue) for the first quarter of fiscal year 2007. The decrease results primarily from interest income related to a note receivable from Millennium Ethanol, LLC which generated $0.6 million in interest income in the first quarter of fiscal year 2007. The note was converted into equity, and subsequently sold, in fiscal year 2007 thus; no interest income was recognized subsequent to the conversion.

          Interest expense was $121,000 for the first quarter of fiscal year 2008, consistent with $74,000 for the first quarter of fiscal year 2007.

          During the first quarter of fiscal year 2007, we paid off approximately $15.6 million of debt in connection with the sale and leaseback transaction with Klac. As a result, we incurred prepayment penalties and the write off of prepaid loan fees totaling approximately $598,000.

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          On April 30, 2007, we completed a transaction for the sale of 86 of our current and former store locations to Klac for $74.5 million in cash, before selling expenses. We also entered into agreements to leaseback 40 of the properties from Klac for initial lease terms expiring January 31, 2010, with renewal options for up to 15 additional years. Either Klac or REX may terminate a lease after the initial six months of the initial lease term on 28 of the leases, 14 of which were terminated in fiscal year 2007. We also entered into license agreements with Klac for 15 of the properties that allowed us to occupy the properties for up to 90 days rent free. Upon the expiration of the license period, we vacated the 15 properties.

          This transaction resulted in a gain (realized and deferred) of $14.8 million. Of this gain, $0.3 million and $3.2 million was recognized in the first quarter of fiscal years 2008 and 2007, respectively. We had a deferred gain of $5.1 million and $11.6 million at April 30, 2008 and 2007, respectively, based upon the present value of the remaining minimum lease payments. The deferred gain will be amortized as a reduction to lease expense over the lease periods or recognized as gain on disposal at the end of the lease period. The leases have been accounted for as operating leases. The following table summarizes the pre-tax gains and losses recognized during the first quarters of fiscal years 2008 and 2007 (amounts in thousands):

			Quarter Ended				Quarter Ended
Classification of Gain (Loss)			April 30, 2008				April 30, 2007
Continuing Operations				$336				$   (10)
Discontinued Operations				-				3,225
Total Pre- Tax Gain				$336				$3,215

          The following table summarizes the components of the sale and leaseback transaction (dollar amounts in thousands):

Property Category		Number of Properties				Deferred Gain				Recognized Gain
Vacated			60				$        -				$7,548
Leased until
January 31, 2010			12				3,683				336
Leased until
January 31, 2010
(6 month kickout			14				1,407				1,831
clause)
Total			86				$5,090				$9,715

          During the first quarter of fiscal year 2008, we recognized income of approximately $1,007,000 and $41,000 from our equity investments in Big River Resources, LLC and Patriot Renewable Fuels, LLC, respectively. During the first quarter of fiscal year 2007, we recognized

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income of approximately $1,070,000 and $40,000 from our equity investments in Big River Resources, LLC and Patriot Renewable Fuels, LLC, respectively.

           Income from continuing operations for the first quarter of fiscal year 2008 includes approximately $0.7 million of pre-tax investment income from the sales of the Company’s 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. During the first quarter of fiscal year 2007, the Company recorded approximately $6.7 million of pre-tax investment income from these sales.

          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, related to production occurring subsequent to September 30, 2006. We did not recognize any income from this sale during the first quarter of fiscal years 2008 or 2007.

          Below is a table summarizing the income recognized from the sales, net of certain expenses, of our interests in synthetic fuel entities.

		Three Months Ended
			April 30
			2008					2007
		(In Thousands)
February 1, 1999 Colona sale			$	186				$	1,945
July 31, 2000 Colona sale				149					1,552
May 31, 2001 Colona sale				132					1,379
October 1, 2005 Somerset sale				203					1,857
			$	670				$	6,733

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          We recognized an unrealized gain of $472,000 during the first quarter of fiscal year 2008, related to forward starting interest rate swap agreements that Levelland Hockley and One Earth entered into during fiscal year 2007. Levelland Hockley’s unrealized gain was $161,000 and One Earth’s unrealized gain was $311,000. These agreements were entered into subsequent to the first quarter of fiscal year 2007.

          Our effective tax rate was 26.5% and 38.6% for the first quarter of fiscal years 2008 and 2007, respectively. The decrease is primarily a result of a reduction in the reserve for uncertain tax positions during fiscal year 2008, related to the expiration of the statute of limitations in certain states and the recognition of a federal tax credit that is earned by Levelland Hockley as a small ethanol producer. The effective tax rate was increased by 4.4% from the loss of pass-through entities (Levelland Hockley and One Earth) that is allocated to non-controlling interests. We expect our effective tax rate to be in a range between 30% and 35% for the remainder of fiscal year 2008.

          Minority interest income (loss) of $217,000 and ($95,000) represents the owners’ (other than REX) share of the income or loss of Levelland Hockley and One Earth for the quarters ended April 30, 2008 and 2007, respectively.

          During the quarter ended April 30, 2008 we closed four stores that were classified as discontinued operations. As a result of these closings and certain other store closings from prior periods, we had a loss from discontinued operations, net of tax benefit, of $0.1 million for the first quarter of fiscal year 2008 compared to $1.0 million for the first quarter of fiscal year 2007.

          No properties classified as discontinued operations were sold during the first quarter of fiscal year 2008. As a result of the previously discussed sale and leaseback with Klac we had a gain from discontinued operations, net of tax expense, of approximately $2.9 million for the first quarter of fiscal year 2007.

          As a result of the foregoing, net income for the first quarter of fiscal year 2008 was $1.5 million, a decrease of $6.0 million from $7.5 million for the first quarter of fiscal year 2007.

Liquidity and Capital Resources

          Net cash used in operating activities was approximately $5.2 million for the first quarter of fiscal year 2008, compared to $5.9 million for the first quarter of fiscal year 2007. For the first three months of fiscal year 2008, cash was provided by net income of $1.5 million, adjusted for the impact of $0.7 million for gains on our installment sales of the limited partnership interests, the unrealized gain on derivative financial instruments of $0.5 million and non-cash items of $2.1 million, which consisted of depreciation and amortization, stock based compensation expense, income from equity method investments, minority interest, deferred income and the deferred income tax provision. In addition, accounts payable provided cash of $11.6 million, primarily a result of changes in inventory levels and extended terms from vendors. The primary use of cash was a decrease in other liabilities of $8.5 million, primarily a result of incentive compensation and other payroll and sales tax payments being made in the first quarter

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of fiscal year 2008. The increase in inventory of $6.9 million was primarily due to seasonal fluctuations in our retail segment and Levelland Hockley commencing operations.

          Net cash used in operating activities was approximately $5.9 million for the first quarter of fiscal year 2007, compared to $6.1 million for the first quarter of fiscal year 2006. For the first three months of fiscal year 2007, cash was provided by net income of $7.5 million, adjusted for the impact of $6.7 million for gains on our installment sales of the limited partnership interests, the gain on the disposal of real estate and property and equipment of $4.5 million and non-cash items of $2.1 million, which consisted of depreciation and amortization, stock based compensation expense, impairment charges, deferred income and the deferred income tax provision. In addition, accounts payable provided cash of $18.2 million, primarily a result of changes in inventory levels and extended terms from vendors. The primary use of cash was an increase in inventory of $20.3 million primarily due to seasonal fluctuations. The inventory increase from January 31, 2007 primarily results from higher television levels. The other use of cash was a decrease in other current liabilities of $1.3 million.

           At April 30, 2008, working capital was $112.9 million compared to $132.3 million at January 31, 2008. This decrease is primarily a result of the ethanol plant construction expenditures at the Levelland Hockley and One Earth facilities. The ratio of current assets to current liabilities was 2.7 to 1 and 3.2 to 1 at April 30, 2008 and January 31, 2008, respectively.

          Cash of $27.4 million was used in investing activities for the first quarter of fiscal year 2008, compared to $78.3 million of cash provided during the first quarter of fiscal year 2007. During the first quarter of fiscal year 2008, we received proceeds of $1.2 million from the installment sales of our ownership interests in synthetic fuel entities. We had capital expenditures of approximately $28.7 million during the first quarter of fiscal year 2008, primarily related to construction at the Levelland Hockley and One Earth ethanol plants.

          Cash of $78.3 million was provided by investing activities for the first quarter of fiscal year 2007. During the first quarter of fiscal year 2007, we received proceeds of $77.3 million from the sale and leaseback transaction with Klac and other real estate sales and $10.1 million from the installment sales of our ownership interests in synthetic fuel entities. We had capital expenditures of approximately $9.1 million during the first quarter of fiscal year 2007, primarily related to the Levelland Hockley County Ethanol, LLC ethanol plant construction.

          Cash provided by financing activities totaled approximately $11.2 million for the first quarter of fiscal year 2008 compared to cash used of $10.0 million for the first quarter of fiscal year 2007. Cash was provided by debt borrowings of $11.9 million and stock option activity of $0.3 million. Cash of $1.0 million was used for scheduled payments of mortgage debt.

          Cash used in financing activities totaled approximately $10.0 million for the first quarter of fiscal year 2007. Cash was provided by new debt borrowings of $5.0 million and stock option activity of $1.3 million. Cash of $16.3 million was used for scheduled and early payments of mortgage debt.

          In June 2006, Levelland Hockley entered into an agreement with a designer/builder for the construction of Levelland’s ethanol plant. The designer/builder is responsible for all

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engineering, labor, materials and equipment to design, construct, startup and achieve guaranteed performance criteria of the plant. The contract price is approximately $59.0 million, of which $51.9 million has been spent through April 30, 2008.

          On July 25, 2002, Levelland Hockley entered into an agreement with RIO Technical Services, Inc., (“RIO”) regarding the planning, financing, design and construction of Levelland’s ethanol plant. RIO is a related party, as certain officers of RIO own equity interests in Levelland Hockley. The Company estimates that fees for these services will be approximately $3.0 million, of which approximately $2.3 million has been spent through April 30, 2008.

          We believe Levelland Hockley has sufficient working capital and credit availability to fund these commitments.

          In May 2007, One Earth entered into an agreement with a designer/builder for the construction of One Earth’s ethanol plant. The designer/builder is responsible for all engineering, labor, materials and equipment to design, construct, startup and achieve guaranteed performance criteria of the plant. The contract price is approximately $120.2 million, subject to adjustments as provided by the general conditions of the agreement, of which approximately $54.4 million has been spent through April 30, 2008. One Earth has also entered other construction and facility related contracts. Some of these contracts have been completed and all required funds have been expended as of April 30, 2008. The total of other incomplete construction and facility related contracts is approximately $8.3 million, of which approximately $7.4 million has been spent through April 30, 2008.

          We believe One Earth has sufficient working capital and credit availability to fund these commitments.

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 highly competitive nature of the consumer electronics retailing industry, changes in the national or regional economies, weather, the effects of terrorism or acts of war on consumer spending patterns, the availability of certain products, technological changes and changes in real estate market conditions, the fluctuating amount of quarterly payments received by the Company with respect to sales of its partnership interest in its synthetic fuel investments, and the uncertain amount of synthetic fuel production and resulting income received from time to time from the Company’s synthetic fuel investments. As it relates to ethanol investments, risks and uncertainties include among other things: the uncertainty of constructing plants on time and on budget, the price volatility of corn, sorghum, distiller grains, ethanol, gasoline and natural gas and the plants operating efficiently and according to forecasts and projections. Other factors that could cause actual results to differ materially from those in the forward-looking statements are

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set forth in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2008 (File No. 001-09097).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

          No material changes since January 31, 2008.

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 other than the implementation of controls at Levelland Hockley related to production commencing in the first quarter of fiscal year 2008.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

          During the quarter ended April 30, 2008, 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, 2008.

Item 4. Submission of Matters to a Vote of Security Holders.

          The annual meeting of shareholders of REX Stores Corporation was held on June 3, 2008, at which the following matter was submitted to a vote of shareholders:

          1. Election of seven directors.

Nominee		For		Withheld
Stuart A. Rose		6,576,277		2,977,602
Lawrence Tomchin		6,436,785		3,117,094
Robert Davidoff		8,996,058		557,821
Edward M. Kress		6,437,745		3,116,134
Charles A. Elcan		6,046,899		3,506,980
David S. Harris		8,892,133		661,746
Mervyn L. Alphonso		9,142,993		410,886

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Item 6. Exhibits.

          The following exhibits are filed with this report:

	31	Rule 13a-14(a)/15d-14(a) Certifications
	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.

REX STORES CORPORATION
Registrant

Signature		Title		Date
/s/ Stuart A. Rose		Chairman of the Board		June 9, 2008
(Stuart A. Rose)		(Chief Executive Officer)
/s/ Douglas L. Bruggeman		Vice President, Finance and Treasurer		June 9, 2008
(Douglas L. Bruggeman)		(Chief Financial Officer)

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