744187--4/16/2009--REX_STORES

related topics

{gas, price, oil}

{operation, natural, condition}

{tax, income, asset}

{investment, property, distribution}

{condition, economic, financial}

{property, intellectual, protect}

{loan, real, estate}

{cost, regulation, environmental}

{loss, insurance, financial}

{debt, indebtedness, cash}

{regulation, government, change}

{acquisition, growth, future}

{cost, contract, operation}

We have concentrations of cash deposits at financial institutions that exceed federal insurance limits. The current interest rate environment has resulted in lower yields on our excess cash. Risks Related to the wind down and planned exit of our retail business We may incur lease termination costs if we vacate leased stores prior to the expiration of the lease. We may not be able to sell our remaining inventory at profitable selling prices. Our future costs associated with administering extended product service contracts may result in higher than expected costs. We may have a significant amount of vacant warehouse space after we complete the wind down of our retail business. A majority of our owned real estate will be leased to subsidiaries of Appliance Direct upon their taking possession of our properties. Risks Related to our Synthetic Fuel Investments We face synthetic fuel risks as future IRS audits may result in the disallowance of previously recognized tax credits. We may not be able to generate sufficient taxable income to realize our deferred tax assets. We may realize capital losses related to our sales of synthetic fuel ownership interests. Risks Related to our Alternative Energy Business Certain of our ethanol investments are subject to the risks of a development stage business which could adversely affect the returns on our ethanol investments and our results of operations. One Earth and Big River are constructing new ethanol plants. As a result, we face significant project development risks that may adversely affect our investment returns. If cash flow from operations of our ethanol plants is not sufficient to service debt, the plants could fail and we could lose our entire investment. We depend on our partners to operate our ethanol investments We may not successfully acquire or develop additional ethanol investments. We face significant competition in the ethanol industry. The financial returns on our ethanol investments are highly dependent on commodity prices, which are subject to significant volatility and uncertainty, and the availability of supplies, so our results could fluctuate substantially. Our returns on ethanol investments are highly sensitive to grain prices. The spread between ethanol and corn and sorghum prices can vary significantly and may not return to recent high levels. The market for natural gas is subject to market conditions that create uncertainty in the price and availability of the natural gas that our ethanol plants use in their manufacturing process. Fluctuations in the selling price and production costs of gasoline may reduce profit margins at our ethanol plants. New plants under construction or decreases in demand for ethanol may result in excess production capacity in the ethanol industry, which may cause the price of ethanol and/or distillers grains to decrease. Our ethanol plants may be adversely affected by technological advances and efforts to anticipate and employ such technological advances may prove unsuccessful. The U.S. ethanol industry is highly dependent upon a myriad of federal and state legislation and regulation and any changes in legislation or regulation could materially and adversely affect our results of operations and financial position. The elimination or significant reduction of the blenders credit could have a material adverse effect on the results of our ethanol investments. Ethanol can be imported into the U.S. duty-free from some countries, which may undermine the ethanol industry in the U.S. The effect of the renewable fuel standard ( RFS ) program in the Energy Independence and Security Act signed into law on December 19, 2007 (the 2007 Act ) is uncertain. Waivers of the RFS minimum levels of renewable fuels included in gasoline could have a material adverse effect on the results of our ethanol investments. Various studies have criticized the efficiency of ethanol, in general, and corn-based ethanol in particular, which could lead to the reduction or repeal of incentives and tariffs that promote the use and domestic production of ethanol or otherwise negatively impact public perception and acceptance of ethanol as an alternative fuel. Levelland Hockley s water treatment plant is not functioning as planned. The debt agreements for the ethanol plants contain restrictive financial and performance covenants. Changes in interest rates could have a material adverse effect on the results of our ethanol investments.

Full 10-K form ▸

744187--4/16/2009--REX_STORES_CORP