x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended March 31, 2019. | |
OR | |
o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the transition period from to . | |
COMMISSION FILE NUMBER 000-53036 |
Indiana | 20-2327916 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
1554 N. County Road 600 E., Union City, IN 47390 | ||||
(Address of principal executive offices) | ||||
(765) 964-3137 | ||||
(Registrant's telephone number, including area code) |
Large Accelerated Filer o | Accelerated Filer o |
Non-Accelerated Filer x | Smaller Reporting Company o |
Emerging Growth Company o | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Page Number | |
ASSETS | March 31, 2019 | September 30, 2018 | |||||
(Unaudited) | |||||||
Current Assets | |||||||
Cash | $ | 736,777 | $ | 17,989,013 | |||
Restricted cash | 1,240,939 | 1,248,979 | |||||
Trade accounts receivable | 13,097,226 | 9,539,007 | |||||
Miscellaneous receivables | 780,005 | 519,721 | |||||
Inventories | 28,895,643 | 16,552,600 | |||||
Prepaid and other current assets | 354,833 | 170,953 | |||||
Futures & options derivatives | 619,113 | 281,438 | |||||
Forward purchase/sales derivatives | 23,291 | 49,302 | |||||
Total current assets | 45,747,827 | 46,351,013 | |||||
Property, plant, and equipment, net | 93,002,332 | 96,948,671 | |||||
Other Assets | |||||||
Investment | 1,295,192 | 1,295,192 | |||||
Total other assets | 1,295,192 | 1,295,192 | |||||
Total Assets | $ | 140,045,351 | $ | 144,594,876 |
LIABILITIES AND MEMBERS' EQUITY | |||||||
Current Liabilities | |||||||
Checks written in excess of bank balances | $ | 2,946,560 | $ | — | |||
Contract liabilities | 1,035,952 | — | |||||
Accounts payable | 2,466,537 | 2,711,578 | |||||
Accounts payable-grain | 6,095,468 | 9,597,822 | |||||
Accrued expenses | 1,332,896 | 1,289,929 | |||||
Futures & options derivatives | 544,847 | 274,118 | |||||
Forward purchase/sales derivatives | 281,816 | 1,639,795 | |||||
Current maturities of long-term debt | 1,428,571 | 1,428,571 | |||||
Total current liabilities | 16,132,647 | 16,941,813 | |||||
Long-Term Debt, net of current maturities | 6,306,009 | 7,314,867 | |||||
Commitments and Contingencies | |||||||
Members’ Equity | |||||||
Members' contributions, net of cost of raising capital, 14,606 units authorized, issued and outstanding | 70,912,213 | 70,912,213 | |||||
Retained earnings | 46,694,482 | 49,425,983 | |||||
Total members' equity | 117,606,695 | 120,338,196 | |||||
Total Liabilities and Members’ Equity | $ | 140,045,351 | $ | 144,594,876 |
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | March 31, 2018 | March 31, 2019 | March 31, 2018 | ||||||||||||
Revenues | $ | 64,371,953 | $ | 65,712,336 | $ | 114,506,420 | $ | 121,567,824 | |||||||
Cost of Goods Sold | 62,407,751 | 62,569,584 | 113,402,606 | 115,023,721 | |||||||||||
Gross Profit | 1,964,202 | 3,142,752 | 1,103,814 | 6,544,103 | |||||||||||
Operating Expenses | 1,935,894 | 1,687,267 | 3,676,673 | 3,326,016 | |||||||||||
Operating Income (Loss) | 28,308 | 1,455,485 | (2,572,859 | ) | 3,218,087 | ||||||||||
Other Income (Expense) | |||||||||||||||
Interest expense | (96,443 | ) | (236,627 | ) | (207,764 | ) | (425,493 | ) | |||||||
Miscellaneous Income | 6,674 | 30,011 | 49,120 | 60,782 | |||||||||||
Total | (89,769 | ) | (206,616 | ) | (158,644 | ) | (364,711 | ) | |||||||
Net Income (Loss) | $ | (61,461 | ) | $ | 1,248,869 | $ | (2,731,503 | ) | $ | 2,853,376 | |||||
Weight Average Units Outstanding - basic and diluted | 14,606 | 14,606 | 14,606 | 14,606 | |||||||||||
Net Income (Loss) Per Unit - basic and diluted | $ | (4 | ) | $ | 86 | $ | (187 | ) | $ | 195 | |||||
Distributions Per Unit | $ | — | $ | 200 | $ | — | $ | 600 | |||||||
Six Months Ended | Six Months Ended | ||||||
March 31, 2019 | March 31, 2018 | ||||||
Cash Flows from Operating Activities | |||||||
Net income (loss) | $ | (2,731,503 | ) | $ | 2,853,376 | ||
Adjustments to reconcile net income (loss) to net cash used in operations: | |||||||
Depreciation | 5,652,309 | 5,799,420 | |||||
Change in fair value of commodity derivative instruments | (1,398,914 | ) | 347,710 | ||||
Loss (gain) on sale of equipment | 1,218 | (9,561 | ) | ||||
Non-cash dividend income | — | (198,955 | ) | ||||
Change in operating assets and liabilities: | |||||||
Trade accounts receivables | (3,558,218 | ) | 1,091,226 | ||||
Miscellaneous receivable | (260,284 | ) | 190,599 | ||||
Inventories | (12,343,043 | ) | (15,684,743 | ) | |||
Prepaid and other current assets | (183,880 | ) | (147,476 | ) | |||
Commodity derivative instruments | — | (302,748 | ) | ||||
Contract liabilities | 1,035,952 | 891,427 | |||||
Accounts payable | (518,751 | ) | (1,846,544 | ) | |||
Accounts payable-grain | (3,502,354 | ) | (5,915,052 | ) | |||
Accrued expenses | 42,968 | 1,376,374 | |||||
Net cash used in operating activities | (17,764,500 | ) | (11,554,947 | ) | |||
Cash Flows from Investing Activities | |||||||
Capital expenditures | (1,437,278 | ) | (1,749,054 | ) | |||
Payments for construction in progress | — | (89,525 | ) | ||||
Proceeds from sale of equipment | 3,800 | 10,000 | |||||
Net cash used for investing activities | (1,433,478 | ) | (1,828,579 | ) | |||
Cash Flows from Financing Activities | |||||||
Checks written in excess of bank balances | 2,946,560 | 2,920,987 | |||||
Distributions paid | — | (8,763,600 | ) | ||||
Proceeds from revolving credit loan | 1,329,925 | — | |||||
Payments against revolving credit loan | (1,329,925 | ) | — | ||||
Proceeds from long-term debt | — | 12,020,863 | |||||
Payments on long-term debt | (1,008,858 | ) | (10,376,980 | ) | |||
Net cash provided by (used for) financing activities | 1,937,702 | (4,198,730 | ) | ||||
Net Decrease in Cash and Restricted Cash | (17,260,276 | ) | (17,582,256 | ) | |||
Cash and Restricted Cash – Beginning of Period | 19,237,992 | 19,397,161 | |||||
Cash and Restricted Cash – End of Period | $ | 1,977,716 | $ | 1,814,905 |
Six Months Ended | Six Months Ended | ||||||
March 31, 2019 | March 31, 2018 | ||||||
Reconciliation of Cash and Restricted Cash | |||||||
Cash - Balance Sheet | $ | 736,777 | $ | 297,191 | |||
Restricted Cash - Balance Sheet | 1,240,939 | 1,517,714 | |||||
Cash and Restricted Cash | 1,977,716 | 1,814,905 | |||||
Supplemental Cash Flow Information | |||||||
Interest paid | $ | 226,065 | $ | 402,246 | |||
Supplemental Disclosure of Non-cash Investing and Financing Activities | |||||||
Construction in process included in accrued expenses and accounts payable | $ | 297,353 | $ | 59,168 |
Member Contributions | Retained Earnings | ||
September 30, 2017 | $70,912,213 | $55,670,618 | |
Net Income | — | 1,604,507 | |
Member Distributions | — | (5,842,400) | |
December 31, 2017 | 70,912,213 | 51,432,725 | |
Net Income | — | 1,248,869 | |
Member Distributions | — | (2,921,200) | |
March 31, 2018 | $70,912,213 | $49,760,394 | |
September 30, 2018 | $70,912,213 | $49,425,983 | |
Net Loss | — | (2,670,040) | |
December 31, 2018 | 70,912,213 | 46,755,943 | |
Net Loss | — | (61,461) | |
March 31, 2019 | $70,912,213 | $46,694,482 |
• | Ethanol Production Division. Based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plant, including the production and sale of ethanol and its co-products, are aggregated into one financial reporting segment. |
• | Trading Division. During 2017, the Company constructed a grain loading facility within our single site to buy, hold and sell inventories of agricultural grains, primarily soybeans. We perform no additional processing of these grains, unlike the corn inventory we hold and use in ethanol production. The activities of buying, selling and holding of grains other than for ethanol and co-product production comprise this financial reporting segment. |
• | Ethanol. The Company sells its ethanol via a marketing agreement with Murex, LLC. Murex sells one hundred percent of the Company's ethanol production based on agreements with end users at prices agreed upon mutually among the end user, Murex and the Company. Murex then provides a schedule of deliveries required and an order for each rail car or tankers needed to fulfill their commitment with the end user. These are individual performance obligations of the Company. The marketing agreement calls for control and title to pass when the delivery vehicle is filled. Revenue is recognized then at the price in the agreement with the end user, net of commissions, freight, and insurance. |
• | Distillers grains. The Company engages another third-party marketing company, CHS, Inc, to sell one hundred percent of the distillers grains it produces at the plant. The process for selling the distillers grains is like that of ethanol, except that CHS takes title and control once a rail car is released to the railroad or a truck is released from the Company's scales. Prices are agreed upon among the three parties and CHS provides schedules and orders representing performance obligations. Revenue is recognized net of commissions, freight and fees. |
• | Distillers corn oil (corn oil). The Company sells its production of corn oil directly to commercial customers. The customer is provided with a delivery schedule and pick up orders representing performance obligations are fulfilled when the customer’s driver picks up the scheduled load. The price is agreed upon at the time each contract is made, and the Company recognizes revenue at the time of delivery at that price. |
• | Carbon dioxide. The Company sells a portion of the carbon dioxide it produces to a customer that maintains a plant on-site for a set price per ton. Delivery is defined as transference of the gas from our stream to their plant. |
• | Soybeans and other grains. The Company sells soybeans exclusively to commercial mills, processors or grain traders. Contracts are negotiated directly with the parties at prices based on negotiated prices. |
Ethanol Production | Grain Trading | Total | |||||||||
Revenues from contracts with customers under ASC Topic 606 | |||||||||||
Ethanol | $ | 45,212,248 | $ | — | $ | 45,212,248 | |||||
Distillers' grains | 11,377,793 | — | 11,377,793 | ||||||||
Corn Oil | 1,871,635 | — | 1,871,635 | ||||||||
Carbon Dioxide | 123,375 | — | 123,375 | ||||||||
Other | 15,050 | 4,400 | 19,450 | ||||||||
Total revenues from contracts with customers | 58,600,101 | 4,400 | 58,604,501 | ||||||||
Revenues from contracts accounted for as derivatives under ASC Topic 815 (1) | |||||||||||
Soybeans and other grains | — | 5,767,452 | 5,767,452 | ||||||||
Total revenues from contracts accounted for as derivatives | — | 5,767,452 | 5,767,452 | ||||||||
Total Revenues | $ | 58,600,101 | $ | 5,771,852 | $ | 64,371,953 |
Ethanol Production | Grain Trading | Total | |||||||||
Revenues from contracts with customers under ASC Topic 606 | |||||||||||
Ethanol | $ | 77,825,727 | $ | — | $ | 77,825,727 | |||||
Distillers' grains | 21,543,872 | — | 21,543,872 | ||||||||
Corn Oil | 3,638,919 | — | 3,638,919 | ||||||||
Carbon Dioxide | 262,895 | — | 262,895 | ||||||||
Other | 29,200 | 8,900 | 38,100 | ||||||||
Total revenues from contracts with customers | 103,300,613 | 8,900 | 103,309,513 | ||||||||
Revenues from contracts accounted for as derivatives under ASC Topic 815 (1) | |||||||||||
Soybeans and other grains | — | 11,196,907 | 11,196,907 | ||||||||
Total revenues from contracts accounted for as derivatives | — | 11,196,907 | 11,196,907 | ||||||||
Total Revenues | $ | 103,300,613 | $ | 11,205,807 | $ | 114,506,420 |
March 31, 2019 (Unaudited) | September 30, 2018 | ||||||
Ethanol Division: | |||||||
Raw materials | $ | 9,939,823 | $ | 7,053,371 | |||
Work in progress | 1,374,080 | 1,299,716 | |||||
Finished goods | 2,124,018 | 1,929,177 | |||||
Spare parts | 3,247,874 | 2,927,438 | |||||
Ethanol Division Subtotal | $ | 16,685,795 | $ | 13,209,702 | |||
Trading Division: | |||||||
Grain inventory | $ | 12,209,848 | $ | 3,342,898 | |||
Trading Division Subtotal | $ | 12,209,848 | $ | 3,342,898 | |||
Total Inventories | $ | 28,895,643 | $ | 16,552,600 |
Instrument | Balance Sheet Location | Assets | Liabilities | ||||||
Ethanol Futures and Options Contracts | Futures & Options Derivatives | $ | — | $ | 3,486 | ||||
Corn Futures and Options Contracts | Futures & Options Derivatives | $ | — | $ | 541,361 | ||||
Soybean Futures and Options Contracts | Futures & Options Derivatives | $ | 619,113 | $ | — | ||||
Soybean Forward Purchase and Sales Contracts | Forward Purchase/Sales Derivatives | $ | 23,291 | $ | 281,816 | ||||
Totals | $ | 642,404 | $ | 826,663 |
Instrument | Balance Sheet Location | Assets | Liabilities | ||||||
Ethanol Futures and Options Contracts | Futures & Options Derivatives | $ | — | $ | 118,062 | ||||
Corn Futures and Options Contracts | Futures & Options Derivatives | $ | — | $ | 156,056 | ||||
Soybean Futures and Options Contracts | Futures & Options Derivatives | $ | 281,438 | $ | — | ||||
Soybean Forward Purchase and Sales Contracts | Forward Purchase/Sales Derivatives | $ | 49,302 | $ | 1,639,795 | ||||
Totals | $ | 330,740 | $ | 1,913,913 |
Instrument | Statement of Operations Location | Three Months Ended March 31, 2019 | Six Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Six Months Ended March 31, 2018 | ||||||||
Corn Futures and Options Contracts | Cost of Goods Sold | $ | (254,158 | ) | $ | (328,612 | ) | $ | (437,723 | ) | $ | (181,388 | ) |
Ethanol Futures and Options Contracts | Revenues | 163,702 | 185,440 | (252,292 | ) | (325,076 | ) | ||||||
Natural Gas Futures and Options Contracts | Cost of Goods Sold | — | 37,727 | 36,584 | 157,013 | ||||||||
Soybean Futures and Options Contracts | Cost of Good Sold | 487,494 | 287,892 | (753,160 | ) | (929,987 | ) | ||||||
Soybean Forward Purchase Contracts | Cost of Goods Sold | (147,839 | ) | 1,502,007 | 804,575 | 931,728 | |||||||
Totals | $ | 249,199 | $ | 1,684,454 | $ | (602,016 | ) | $ | (347,710 | ) |
Instruments | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||
Corn Futures and Options Contracts | $ | (541,361 | ) | $ | (541,361 | ) | $ | (643,562 | ) | $ | 102,201 | $ | — | ||
Ethanol Futures and Options Contracts | $ | (3,486 | ) | $ | (3,486 | ) | $ | (3,486 | ) | $ | — | $ | — | ||
Soybean Futures and Options Contracts | $ | 619,113 | $ | 619,113 | $ | 520,662 | $ | 98,451 | $ | — | |||||
Soybean Forward Purchase Contracts | $ | (258,525 | ) | $ | (258,525 | ) | $ | — | $ | (258,525 | ) | $ | — | ||
Soybean Inventory | $ | 12,209,848 | $ | 12,209,848 | $ | — | $ | 12,209,848 | $ | — |
Instruments | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||
Corn Futures and Options Contracts | $ | (156,056 | ) | $ | (156,056 | ) | $ | (164,625 | ) | $ | 8,569 | $ | — | ||
Ethanol Futures and Options Contracts | $ | (118,062 | ) | $ | (118,062 | ) | $ | (118,062 | ) | $ | — | $ | — | ||
Soybean Futures and Options Contracts | $ | 281,438 | $ | 281,438 | $ | 281,438 | $ | — | $ | — | |||||
Soybean Forward Purchase Contracts | $ | (1,590,493 | ) | $ | (1,590,493 | ) | $ | — | $ | (1,590,493 | ) | $ | — | ||
Soybean Inventory | $ | 3,342,898 | $ | 3,342,898 | $ | — | $ | 3,342,898 | $ | — |
Grain Loadout facility loan | $ | 7,734,580 | |
Less amounts due within one year | $ | 1,428,571 | |
Net long-term debt | $ | 6,306,009 |
April 1, 2019 to March 31, 2020 | $ | 1,428,571 | |
April 1, 2020 to March 31, 2021 | 1,428,571 | ||
April 1, 2021 to March 31, 2022 | 1,428,571 | ||
April 1, 2022 to March 31, 2023 | 3,448,867 | ||
Total long-term debt | $ | 7,734,580 |
Total | |||
April 1, 2019 to March 31, 2020 | $ | 3,227,112 | |
April 1, 2020 to March 31, 2021 | 3,227,112 | ||
April 1, 2021 to March 31, 2022 | 2,844,612 | ||
April 1, 2022 to March 31, 2023 | 1,539,408 | ||
Total minimum lease commitments | $ | 10,838,244 |
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | March 31, 2018 | March 31, 2019 | March 31,2018 | ||||||||||||
Revenue: | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||
Ethanol production | $ | 58,600,101 | $ | 55,705,899 | $ | 103,300,613 | $ | 106,424,886 | |||||||
Grain trading | $ | 5,771,852 | $ | 10,006,437 | $ | 11,205,807 | $ | 15,142,938 | |||||||
Total Revenue | $ | 64,371,953 | $ | 65,712,336 | $ | 114,506,420 | $ | 121,567,824 | |||||||
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | March 31, 2018 | March 31, 2019 | March 31, 2018 | ||||||||||||
Gross Profit: | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||
Ethanol production | $ | 1,895,445 | $ | 3,167,673 | $ | 1,185,882 | $ | 6,219,334 | |||||||
Grain Trading | $ | 68,757 | $ | (24,921 | ) | $ | (82,068 | ) | $ | 324,769 | |||||
Total Gross Profit | $ | 1,964,202 | $ | 3,142,752 | $ | 1,103,814 | $ | 6,544,103 | |||||||
Three Months Ended | Six Months Ended | ||||||||||||||
March 31, 2019 | March 31, 2018 | March 31, 2019 | March 31, 2018 | ||||||||||||
Operating Income (Loss): | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||
Ethanol production | $ | 276,794 | $ | 1,676,267 | $ | (1,856,306 | ) | $ | 3,273,745 | ||||||
Grain trading | $ | (248,486 | ) | $ | (220,782 | ) | $ | (716,553 | ) | $ | (55,658 | ) | |||
Total Operating Income (Loss) | $ | 28,308 | $ | 1,455,485 | $ | (2,572,859 | ) | $ | 3,218,087 |
March 31, 2019 | September 30, 2018 | ||||||
Grain Inventories: | (unaudited) | ||||||
Ethanol production | $ | 9,939,823 | $ | 7,053,371 | |||
Grain trading | $ | 12,209,848 | $ | 3,342,898 | |||
Total Grain Inventories | $ | 22,149,671 | $ | 10,396,269 | |||
March 31, 2019 | September 30, 2018 | ||||||
Total Assets: | (unaudited) | ||||||
Ethanol production | $ | 115,233,230 | $ | 128,960,169 | |||
Grain trading | $ | 24,812,121 | $ | 15,634,707 | |||
Total Assets | $ | 140,045,351 | $ | 144,594,876 |
• | Reduction, delay, or elimination of the Renewable Fuel Standard; |
• | Changes in the availability and price of corn, natural gas and other grains; |
• | Our inability to secure credit or obtain additional equity financing we may require in the future to continue our operations; |
• | Decreases in the price we receive for our ethanol, distiller grains,corn oil and other grains; |
• | Our ability to satisfy the financial covenants contained in our credit agreements with our senior lender; |
• | Our ability to profitably operate the ethanol plant and maintain a positive spread between the selling price of our products and our raw material costs; |
• | Negative impacts that our hedging activities may have on our operations; |
• | Ethanol and distiller grains supply exceeding demand and corresponding price reductions; |
• | Our ability to generate free cash flow to invest in our business and service our debt; |
• | Changes in the environmental regulations that apply to our plant operations; |
• | Changes in our business strategy, capital improvements or development plans; |
• | Changes in plant production capacity or technical difficulties in operating the plant; |
• | Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries; |
• | Lack of transport, storage and blending infrastructure preventing our products from reaching high demand markets; |
• | Changes in federal and/or state laws; |
• | Changes and advances in ethanol production technology; |
• | Competition from alternative fuel additives; |
• | Changes in interest rates or the lack of credit availability; |
• | Changes in legislation benefiting renewable fuels; |
• | Our ability to retain key employees and maintain labor relations; |
• | Volatile commodity and financial markets; |
• | Limitations and restrictions contained in the instruments and agreements governing our indebtedness; and |
• | Decreases in export demand due to the imposition of tariffs by foreign governments on ethanol and distillers grains produced in the United States. |
2019 | 2018 | ||||||||||||
Statement of Operations Data | Amount | % | Amount | % | |||||||||
Revenue | $ | 64,371,953 | 100.0 | $ | 65,712,336 | 100.0 | |||||||
Cost of Goods Sold | 62,407,751 | 96.9 | 62,569,584 | 95.2 | |||||||||
Gross Profit | 1,964,202 | 3.1 | 3,142,752 | 4.8 | |||||||||
Operating Expenses | 1,935,894 | 3.1 | 1,687,267 | 2.6 | |||||||||
Operating Income (Loss) | 28,308 | — | 1,455,485 | 2.2 | |||||||||
Other Expense, Net | (89,769 | ) | (0.1 | ) | (206,616 | ) | (0.3 | ) | |||||
Net Income (Loss) | $ | (61,461 | ) | (0.1 | ) | $ | 1,248,869 | 1.9 |
2019 | 2018 | ||||||||||
Revenue: | Amount | % of Total Revenues | Amount | % of Total Revenues | |||||||
Ethanol production | $ | 58,600,101 | 91.0 | % | 55,705,899 | 84.8 | % | ||||
Grain trading | 5,771,852 | 9.0 | 10,006,437 | 15.2 | |||||||
Total Revenue | $ | 64,371,953 | 100.0 | % | $ | 65,712,336 | 100.0 | % |
2019 | 2018 | ||||||||||
Revenue Source | Amount | % of Revenues | Amount | % of Revenues | |||||||
Ethanol Sales | $ | 45,212,248 | 77.2 | % | $ | 42,657,305 | 76.6 | % | |||
Distillers Grains Sales | 11,377,793 | 19.4 | 10,889,653 | 19.5 | |||||||
Corn Oil Sales | 1,871,635 | 3.2 | 1,805,210 | 3.2 | |||||||
Carbon Dioxide Sales | 123,375 | 0.2 | 123,375 | 0.3 | |||||||
Other Revenue | 15,050 | — | 230,356 | 0.4 | |||||||
Total Revenues | $ | 58,600,101 | 100.0 | % | $ | 55,705,899 | 100.0 | % |
2019 | 2018 | ||||||||||
Revenue Source | Amount | % of Revenues | Amount | % of Revenues | |||||||
Soybean Sales | $ | 5,767,452 | 99.9 | % | $ | 10,006,437 | 100.0 | % | |||
Other Revenue | 4,400 | 0.1 | $ | — | — | ||||||
Total Revenues | $ | 5,771,852 | 100.0 | % | $ | 10,006,437 | 100.0 | % |
2019 | 2018 | ||||||||||
Amount | % of Revenues | Amount | % of Revenues | ||||||||
Soybeans | $ | 5,703,095 | 100.0 | % | $ | 10,031,358 | 100.0 | % | |||
Total Cost of Goods Sold | $ | 5,703,095 | 100.0 | % | $ | 10,031,358 | 100.0 | % |
2019 | 2018 | ||||||||||||
Statement of Operations Data | Amount | % | Amount | % | |||||||||
Revenue | $ | 114,506,420 | 100.0 | $ | 121,567,824 | 100.0 | |||||||
Cost of Goods Sold | 113,402,606 | 99.0 | 115,023,721 | 94.6 | |||||||||
Gross Profit | 1,103,814 | 1.0 | 6,544,103 | 5.4 | |||||||||
Operating Expenses | 3,676,673 | 3.2 | 3,326,016 | 2.7 | |||||||||
Operating Income (Loss) | (2,572,859 | ) | (2.5 | ) | 3,218,087 | 2.6 | |||||||
Other Expense, Net | (158,644 | ) | (0.1 | ) | (364,711 | ) | (0.3 | ) | |||||
Net Income (Loss) | $ | (2,731,503 | ) | (2.4 | ) | $ | 2,853,376 | 2.3 |
2019 | 2018 | ||||||||||
Revenue: | Amount | % of Total Revenues | Amount | % of Total Revenues | |||||||
Ethanol production | $ | 103,300,613 | 90.2 | % | $ | 106,424,886 | 87.5 | % | |||
Grain trading | $ | 11,205,807 | 9.8 | $ | 15,142,938 | 12.5 | |||||
Total Revenue | $ | 114,506,420 | 100.0 | % | $ | 121,567,824 | 100.0 | % |
2019 | 2018 | ||||||||||
Revenue Source | Amount | % of Revenues | Amount | % of Revenues | |||||||
Ethanol Sales | $ | 77,825,727 | 75.3 | % | $ | 82,506,875 | 77.5 | % | |||
Distillers Grains Sales | $ | 21,543,872 | 20.9 | 19,384,679 | 18.2 | ||||||
Corn Oil Sales | $ | 3,638,919 | 3.5 | 4,056,549 | 3.8 | ||||||
Carbon Dioxide Sales | $ | 262,895 | 0.3 | 246,750 | 0.3 | ||||||
Other Revenue | $ | 29,200 | — | 230,033 | 0.2 | ||||||
Total Revenues | $ | 103,300,613 | 100.0 | % | $ | 106,424,886 | 100.0 | % |
2019 | 2018 | ||||||||||
Revenue Source | Amount | % of Revenues | Amount | % of Revenues | |||||||
Soybean Sales | $ | 11,196,907 | 99.9 | % | $ | 15,142,938 | 100.0 | % | |||
Other Revenue | $ | 8,900 | 0.1 | — | |||||||
Total Revenues | $ | 11,205,807 | 100.0 | % | $ | 15,142,938 | 100.0 | % |
2019 | 2018 | ||||||||||
Amount | % of Revenues | Amount | % of Revenues | ||||||||
Soybeans | $ | 11,287,875 | 100.0 | % | $ | 14,818,169 | 100.0 | % | |||
Total Cost of Goods Sold | $ | 11,287,875 | 100.0 | % | $ | 14,818,169 | 100.0 | % |
March 31, 2019 (Unaudited) | September 30, 2018 | ||||||
Current Assets | $ | 45,747,827 | $ | 46,351,013 | |||
Current Liabilities | $ | 16,132,647 | $ | 16,941,813 | |||
Long-Term Liabilities | $ | 6,306,009 | $ | 7,314,867 | |||
Member's Equity | $ | 117,606,695 | $ | 120,338,196 |
2019 | 2018 | |||||||
Net cash used in operating activities | $ | (17,764,500 | ) | $ | (11,554,947 | ) | ||
Net cash used for investing activities | $ | (1,433,478 | ) | $ | (1,828,579 | ) | ||
Net cash provided by (used in) financing activities | $ | 1,937,702 | $ | (4,198,730 | ) | |||
Net decrease in Cash and Restricted cash | $ | (17,260,276 | ) | $ | (17,582,256 | ) | ||
Cash and Restricted cash, beginning of period | $ | 19,237,992 | $ | 19,397,161 | ||||
Cash and Restricted cash, end of period | $ | 1,977,716 | $ | 1,814,905 |
Three Months Ended March 31, 2019 | Six Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Six Months Ended March 31, 2018 | |||||||||
Corn Futures and Options Contracts | $ | (254,158 | ) | $ | (328,612 | ) | $ | (437,723 | ) | $ | (181,388 | ) |
Ethanol Futures and Options Contracts | 163,702 | 185,440 | (252,292 | ) | (325,076 | ) | ||||||
Natural Gas Futures and Options Contracts | — | 37,727 | 36,584 | 157,013 | ||||||||
Soybean Futures and Options Contracts | 487,494 | 287,892 | (753,160 | ) | (929,987 | ) | ||||||
Soybean Forward Purchase Contracts | (147,839 | ) | 1,502,007 | 804,575 | 931,728 | |||||||
Totals | $ | 249,199 | $ | 1,684,454 | $ | (602,016 | ) | $ | (347,710 | ) |
Estimated Volume Requirements for the next 12 months (net of forward and futures contracts) | Unit of Measure | Hypothetical Adverse Change in Price as of March 31, 2019 | Approximate Adverse Change to Income | ||||
Natural Gas | 3,300,000 | MMBTU | 10% | $ | 541,336 | ||
Ethanol | 135,000,000 | Gallons | 10% | $ | 18,049,500 | ||
Corn | 43,170,488 | Bushels | 10% | $ | 14,274,768 | ||
DDGs | 324,000 | Tons | 10% | $ | 4,073,720 | ||
Corn Oil | 31,500,000 | Pounds | 10% | $ | 687,423 | ||
Soybeans | 5,000,000 | Bushels | 10% | $ | 3,911,346 |
(a) | The following exhibits are filed as part of this report. |
Exhibit No. | Exhibit | ||
31.1 | |||
31.2 | |||
32.1 | |||
32.2 | |||
101 | The following financial information from Cardinal Ethanol, LLC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of March 31, 2019 and September 30, 2018, (ii) Condensed Statements of Operations for the three and six months ended March 31, 2019 and 2018, (iii) Condensed Statements of Cash Flows for the six months ended March 31, 2019 and 2018, (iv) Condensed Statements of Changes in Members' Equity for the three months and six ended March 31, 2019 and 2018, and (v) the Notes to Condensed Unaudited Financial Statements.** |
CARDINAL ETHANOL, LLC | |||
Date: | May 3, 2019 | /s/ Jeffrey Painter | |
Jeffrey Painter | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: | May 3, 2019 | /s/ William Dartt | |
William Dartt | |||
Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Cardinal Ethanol, LLC; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 3, 2019 | /s/ Jeffrey Painter | |
Jeffrey Painter, Chief Executive Officer (President and Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Cardinal Ethanol, LLC; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 3, 2019 | /s/ William Dartt | |
William Dartt, Chief Financial Officer (Principal Financial Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Jeffrey Painter | ||
Jeffrey Painter, President and | ||
Principal Executive Officer | ||
Dated: | May 3, 2019 |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ William Dartt | ||
William Dartt, Chief Financial Officer | ||
(Principal Financial Officer) | ||
Dated: | May 3, 2019 |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 03, 2019 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Cardinal Ethanol LLC | |
Entity Central Index Key | 0001352081 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 14,606 |
Condensed Balance Sheets (Parenthetical) - shares |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Members' contributions, units issued and outstanding | 14,606 | 14,606 |
Condensed Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Statement [Abstract] | ||||
Revenues | $ 64,371,953 | $ 65,712,336 | $ 114,506,420 | $ 121,567,824 |
Cost of Goods Sold | 62,407,751 | 62,569,584 | 113,402,606 | 115,023,721 |
Gross Profit | 1,964,202 | 3,142,752 | 1,103,814 | 6,544,103 |
Operating Expenses | 1,935,894 | 1,687,267 | 3,676,673 | 3,326,016 |
Operating Income (Loss) | 28,308 | 1,455,485 | (2,572,859) | 3,218,087 |
Other Income (Expense) | ||||
Interest expense | (96,443) | (236,627) | (207,764) | (425,493) |
Miscellaneous Income | 6,674 | 30,011 | 49,120 | 60,782 |
Total | (89,769) | (206,616) | (158,644) | (364,711) |
Net Income (Loss) | $ (61,461) | $ 1,248,869 | $ (2,731,503) | $ 2,853,376 |
Weight Average Units Outstanding - basic and diluted (in units) | 14,606 | 14,606 | 14,606 | 14,606 |
Net Income (Loss) Per Unit - basic and diluted (in dollars per unit) | $ (4) | $ 86 | $ (187) | $ 195 |
Distributions Per Unit (in dollars per unit) | $ 0 | $ 200 | $ 0 | $ 600 |
Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements for the year ended September 30, 2018, contained in the Company's annual report on Form 10-K. In the opinion of management, the interim condensed financial statements reflect all adjustments considered necessary for fair presentation. Nature of Business Cardinal Ethanol, LLC, (the “Company”) is an Indiana limited liability company currently producing fuel-grade ethanol, distillers grains, corn oil and carbon dioxide near Union City, Indiana and sells these products throughout the continental United States. During the six months ended March 31, 2019 and 2018, the Company produced approximately 63,685,000 and 64,816,000 gallons of ethanol, respectively. Reportable Segments Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” establishes the standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results criteria set forth in ASC 280, the Company has two reportable operating segments for financial reporting purposes.
Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for the following significant matters, among others; the useful lives of fixed assets, the valuation of inventory purchase and sale commitments derivatives, inventory, patronage dividends, long-lived assets and inventory purchase commitments. Actual results may differ from previously estimated amounts, and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. Restricted Cash As a part of its commodities hedging activities, the Company is required to maintain cash balances with our commodities trading companies for initial and maintenance margins on a per futures contract basis. Changes in the market value of contracts may increase these requirements. As the futures contracts expire, the margin requirements also expire. Accordingly, we record the cash maintained with the traders in the margin accounts as restricted cash. Since this cash is immediately available to us upon request when there is a margin excess, we consider this restricted cash to be a current asset. Trade Accounts Receivable Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral. Accounts receivable are recorded at their estimated net realizable value. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company's credit terms. Amounts considered uncollectible are written off. The Company's estimate of the allowance for doubtful accounts is based on historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any. At March 31, 2019 and September 30, 2018, the Company determined that an allowance for doubtful accounts was not necessary. Contract Liabilities The Company receives cash from time to time from customers before it fulfills its performance obligations to those customers. In those cases, the company records those advance payments as a current liability. The Company has not yet received advances that are expected to remain open beyond one year. Inventories Ethanol production division inventories consist of raw materials, work in process, finished goods and parts. Corn is the primary raw material. Finished goods consist of ethanol, dried distiller grains and corn oil. Inventories are stated at the lower of weighted average cost or net realizable value. Net realizable value is the estimated selling prices in the normal course of business, less reasonably predictable selling costs. Trading division inventories consist of grain. Soybeans were the only grains held and traded at March 31, 2019 and September 30, 2018. These inventories are stated at market value, which may include reductions for quality. Property, Plant and Equipment Property, plant, and equipment are stated at cost. Depreciation is provided over estimated useful lives by use of the straight line depreciation method. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized. Construction in progress expenditures will be depreciated using the straight-line method over their estimated useful lives once the assets are placed into service. On November 6, 2018, we experienced an explosion in one of our distillers grain silos. There were no injuries related to the incident and the damage was limited to the distillers grains silos and the associated materials handling equipment. Operations at the plant were temporarily suspended for four days pending an evaluation and assessment of the situation. The plant resumed operations but did not return to full production rates until mid to late December. The net book value of the damaged silos was approximately $1,200,000 at March 31, 2019. The extent of the monetary damages related to the incident has not yet been determined. We may decide to repair or abandon and replace the silo. We have presently engaged an engineering firm to help us assess the extent of the damage and cost of repairs needed and to assist us with substantiating the claims with the insurance carrier. We believe that our policies cover the damages to the silo and the business interruption costs, net of our policies' deductibles. The company has various capital projects scheduled for the 2019 fiscal year in order to make certain improvements to our ethanol plant. We have executed an agreement with Nelson Engineering to construct an additional liquefaction tank and fermenter which are expected to cost approximately $3,200,000. We expect to use funds from operations and our existing debt facilities to fund these improvements. Long-Lived Assets The Company reviews its long-lived assets, such as property, plant and equipment and financing costs, subject to depreciation and amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Investments Investments consist of the capital stock and patron equities of the Company's distillers grains marketer. The investments are stated at the lower of cost or fair value and adjusted for non cash patronage equities received. Patronage dividends are recognized when received and included within revenue in the condensed statements of operations. Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Our contracts primarily consist of agreements with marketing companies and other customers as described below. Our performance obligations consist of the delivery of ethanol, distillers' grains, corn oil, soybeans and carbon dioxide to our customers. The consideration we receive for these products is fixed based on current observable market prices at the Chicago Mercantile Exchange, generally, and adjusted for local market differentials. Our contracts have specific delivery modes, rail or truck, and dates. Revenue is recognized when the Company delivers the products to the mode of transportation specified in the contract, at the transaction price established in the contract, net of commissions, fees, and freight. We sell each of the products via different marketing channels as described below.
Derivative Instruments From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives in the balance sheet at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in the statement of operations, depending on the item being hedged. Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting and reporting requirements, and therefore, are not marked to market in our financial statements. The Company has elected for its Ethanol Division to apply the normal purchase normal sale exemption to all forward commodity contracts. For the Trading Division, the Company has elected not to apply the normal purchase normal sale exemption to its forward purchase and sales contracts and therefore marks these derivative instruments to market. Net (Loss) per Unit Basic net (loss) per unit is computed by dividing net (loss) by the weighted average number of members' units outstanding during the period. Diluted net (loss) per unit is computed by dividing net (loss) by the weighted average number of members' units and members' unit equivalents outstanding during the period. There were no member unit equivalents outstanding during the periods presented; accordingly, the Company's basic and diluted net (loss) per unit are the same. Recently Issued or Adopted Accounting Pronouncements Accounting for Leases (Evaluating) In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets, initially measured at the present value of the lease payments. The accounting guidance for lessors is largely unchanged. The ASU is effective for the Company beginning in October 2019. It is to be adopted using a modified retrospective approach. The Company is currently evaluating the impact that the adoption of this guidance will have on the Company’s financial statements and anticipates the new guidance will significantly impact its financial statements given the Company has leased a significant number of rail cars for transporting ethanol and Dried Distillers' Grains with Solubles (DDGS) to its customers. Revenue Recognition (Adopted) Effective October 1, 2018, the Company adopted the amended guidance in ASC Topic 606, Revenue from Contracts with Customers. Refer to Note 1 - Accounting policies and Note 2 - Revenue for further details. |
Revenue |
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Revenue | REVENUE Adoption of ASC Topic 606 On October 1, 2018, the Company adopted the amended guidance in ASC Topic 606, Revenue from Contracts with Customers, and all related amendments (“new revenue standard”) and applied it to all contracts using the modified retrospective transition method. There were no adjustments to the October 1, 2018 balance sheet for the adoption of the new revenue standard. As such, comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. In addition, there was no impact of adoption on the statements of operations or balance sheets for the three and six months ended March 31, 2019 and 2018. Revenue Recognition Revenue is recognized at a single point in time when the Company satisfies its performance obligation under the terms of a contract with a customer. Generally, this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected, as specified in the contract with a customer, to be received in exchange for transferring goods or providing services. Revenue by Source All revenues from contracts with customers under ASC Topic 606 are recognized at a point in time. The following tables disaggregate revenue by major source for the three and six month periods ended March 31, 2019: Three Months Ended March 31, 2019
Six Months Ended March 31, 2019
(1) Revenues from contracts accounted for as derivatives represent physically settled derivative sales that are outside the scope of ASC Topic 606, Revenue from Contracts with Customers (ASC Topic 606), where the company recognizes revenue when control of the inventory is transferred within the meaning of ASC Topic 606 as required by ASC Topic 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. Payment Terms The Company has contractual payment terms with each respective marketer that sells ethanol and distillers grains. These terms are generally 10 - 20 days after the week of the transfer of control. The Company has standard payment terms of net 10 days for its invoices for corn oil. The Company has standard payments terms due upon delivery for its invoices of soybeans. The contractual terms with the carbon dioxide customer calls for an annual settlement. Shipping and Handling Costs Shipping and handling costs related to contracts with customers for sale of goods are accounted for as a fulfillment activity and are included in cost of goods sold. Accordingly, amounts billed to customers for such costs are included as a component of revenue. Contract Liabilities The Company records unearned revenue when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of its contracts with customers. |
Concentrations |
6 Months Ended |
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Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Concentrations | CONCENTRATIONS Two major customers accounted for approximately 88% of the outstanding accounts receivable balance at March 31, 2019 and 87% at September 30, 2018. These same two customers accounted for approximately 87.9% of revenue for the three and six month periods ended March 31, 2019 and 81.5% of revenue for the three and six month periods ended March 31, 2018. UNCERTAINTIES IMPACTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS The Company has certain risks and uncertainties that it experiences during volatile market conditions, which can have a severe impact on operations. The Company's revenues are primarily derived from the sale and distribution of ethanol, distillers grains and corn oil to customers primarily located in the U.S. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. Ethanol sales average approximately 68% of total revenues and corn costs average 69% of total cost of goods sold. The Company's operating and financial performance is largely driven by prices at which the Company sells ethanol, distillers grains and corn oil, and the related cost of corn. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and programs, and the unleaded gasoline and the petroleum markets, although, since 2005, the prices of ethanol and gasoline began a divergence with ethanol selling for less than gasoline at the wholesale level. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company's largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, weather, government policies and programs. The Company's risk management program is used to protect against the price volatility of these commodities. |
Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | INVENTORIES Inventories consist of the following as of:
The Company had a net realizable value write-down of Ethanol Division inventory of approximately $167,000 and $0 for the three months ended March 31, 2019, and 2018, respectively and $784,000 and $83,000 for the six months ended March 31, 2019, and 2018. In the ordinary course of business, the Company enters into forward purchase contracts for its commodity purchases and sales. Certain contracts that literally meet the definition of a derivative may be exempted from derivative accounting as normal purchases or normal sales. At March 31, 2019, the Company had forward corn purchase contracts at various fixed prices for various delivery periods through May 2020 for approximately 6.6% of expected production needs for the next 14 months. Approximately 5.6% of the forward corn purchases were with related parties. Given the uncertainty of future ethanol and corn prices, the Company could incur a loss on the outstanding corn purchase contracts in future periods. Management has evaluated these forward contracts using a methodology similar to that used in the lower of cost or net realizable value evaluation with respect to inventory valuation, and has determined that no impairment existed at March 31, 2019 or September 30, 2018. The Company has elected not to apply the normal purchase and sale exemption to its forward soybean contracts and therefore treats them as derivative instruments. At March 31, 2019, the Ethanol Division had forward dried distiller grains sales contracts for approximately 40.9% of expected production for the next 3 months at various fixed prices for delivery periods through June 2019. At March 31, 2019, the Company had forward corn oil contracts for approximately 76.1% of expected production for the next 2 months at various fixed prices for delivery through May 2019. Also, at March 31, 2019, the Company had forward natural gas contracts for approximately 21.8% of expected purchases for the next 19 months at various prices for various delivery periods through October 2020. Additionally, at March 31, 2019, the Trading Division had forward soybean purchase contracts for various delivery periods through March 2020 . Approximately 7.2% of the forward soybean purchases were with related parties. |
Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | DERIVATIVE INSTRUMENTS The Company enters into corn, ethanol, natural gas and soybean derivative instruments, which are required to be recorded as either assets or liabilities at fair value in the balance sheet. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. The Company must designate the hedging instruments based upon the exposure being hedged as a fair value hedge, a cash flow hedge or a hedge against foreign currency exposure. The Company formally documents, designates, and assesses the effectiveness of transactions that receive hedge accounting initially and on an on-going basis. Commodity Contracts The Company enters into commodity-based derivatives, for corn, ethanol, natural gas and soybeans in order to protect cash flows from fluctuations caused by volatility in commodity prices. This is also done to protect gross profit margins from potentially adverse effects of market and price volatility on commodity based purchase commitments where the prices are set at a future date. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. The changes in the fair market value of ethanol derivative instruments are included as a component of revenue. The changes in the fair market value of corn, natural gas, and soybean derivative instruments are included as a component of cost of goods sold. At March 31, 2019, the Ethanol Division had a net short (selling) position of 2,527,676 bushels of corn under derivative contracts used to hedge its forward corn contracts, corn inventory and ethanol sales. These corn derivatives are traded on the Chicago Board of Trade as of March 31, 2019 and are forecasted to settle for various delivery periods through May 2020. At March 31, 2019, the Company had a net short (selling) position of 6,930,000 gallons of ethanol under derivative contracts used to hedge its future ethanol sales. These ethanol derivatives are traded on the New York Mercantile Exchange and are forecasted to settle for various delivery periods through December 2019. At March 31, 2019, the Trading Division also had a net short (selling) position of 2,167,955 bushels of soybeans under derivative contracts used to hedge its forward soybean contract purchases. These soybean derivatives are traded on the Chicago Board of Trade and are, as of March 31, 2019, forecasted to settle for various delivery periods through March 2020. These derivatives have not been designated as effective hedges for accounting purposes. The following table provides balance sheet details regarding the Company's derivative financial instruments at March 31, 2019:
As of March 31, 2019, the Company had approximately $1,241,000 cash collateral (restricted cash) related to ethanol, corn, and soybean derivatives held by four brokers. The following table provides balance sheet details regarding the Company's futures and options derivative financial instruments at September 30, 2018:
As of September 30, 2018, the Company had approximately $1,249,000 of cash collateral (restricted cash) related to ethanol, corn and soybean derivatives held by two brokers. The following table provides details regarding the gains and (losses) from the Company's derivative instruments in the statements of operations, none of which are designated as hedging instruments:
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Fair Value Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of March 31, 2019:
The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of September 30, 2018:
We determine the fair value of commodity futures derivative instruments utilizing Level 1 inputs by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange. Corn and soybean futures and options and soybean forward purchase contracts are reported at fair value utilizing Level 2 inputs from current contract prices that are being issued by the Company. Estimated fair values for inventories carried at market are based on exchange-quoted prices, adjusted for differences in local markets and quality. |
Bank Financing |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Bank Financing | BANK FINANCING The Company has a loan agreement consisting of three loans, the Declining Revolving Loan (Declining Loan), the Revolving Credit Loan and the Grain Loadout Facility Loan (formerly the Construction Loan) in exchange for liens on all property (real and personal, tangible and intangible) which include, among other things, a mortgage on the property, a security interest on commodity trading accounts and assignment of material contracts. The loan agreement assigns an interest rate of LIBOR plus 290 basis points (2.9%) to each of the individual loans. The Revolving Credit Loan is assigned the one month LIBOR rate which changes on the first day of every month. The Declining Loan and the Grain Loadout Facility Loan each have interest charged based on the ninety day (three month) LIBOR rate. The interest rate is assigned at the beginning of the ninety day period and not all of the loans have the same interest rate beginning and ending dates. The Company amended the loan agreement effective as of February 28, 2019, to extend the termination date of the Revolving Credit Loan from February 28, 2019 to February 28, 2020. Declining Note The maximum availability of the Declining Loan is $5,000,000 with such amount to be available for working capital purposes. The interest rate on the Declining Loan at March 31, 2019 was 5.30% and at September 30, 2018 was 5.24%. There were no borrowings outstanding on the Declining Loan at March 31, 2019 or at September 30, 2018. Revolving Credit Loan The Revolving Credit Loan has a limit of $15,000,000 supported by a borrowing base made up of the Company's corn, ethanol, dried distillers grain, corn oil and soybean inventories reduced by accounts payable associated with those inventories having a priority. It is also supported by the eligible accounts receivable and commodity trading account excess margin funds.The interest rate at March 31, 2019 was 5.39% and at September 30, 2018 was 5.01%. There were no borrowings outstanding on the Revolving Credit Loan at March 31, 2019 or at September 30, 2018. Grain Loadout Facility Loan The Grain Loadout Facility Loan (formerly Construction Loan) had a limit of $10,000,000. The interest rate at March 31, 2019 was 5.53% and at September 30, 2018 was 5.23%. There were borrowings in the amount of approximately $7,735,000 and $8,743,000 outstanding on the Grain Loadout Facility Loan at March 31, 2019 and September 30, 2018, respectively. The principal balance on the Construction Loan of $10,000,000 was converted to term debt effective December 31, 2017. The Grain Loadout Facility Loan requires monthly installment payments of principal of approximately $119,000 plus interest accrued in arrears from the date of the last payment, such payments commenced on February 1, 2018, with a final maturity date of February 28, 2023. These loans are subject to protective covenants, which require the Company to maintain various financial ratios. The covenants include a working capital requirement of $15,000,000, and a capital expenditures covenant that allows the Company $5,000,000 of expenditures per year without prior approval. There is also a requirement to maintain a minimum fixed charge coverage ratio of no less than 1.15:1.0 measured quarterly on a rolling four quarter basis. Long-term debt, as discussed above, consists of the following at March 31, 2019:
The estimated maturities of long-term debt at March 31, 2019 are as follows:
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||
Leases | LEASES At March 31, 2019, the Company had entered into an agreement with its ethanol marketer to lease 225 tank cars needed for ethanol rail transportation at a rate up to current market rates per tank car per month through November 2022. The ethanol purchase and sale agreement was amended from the previous agreement which charged the Company a fixed price per gallon of ethanol through July 27, 2018. This amendment results in a commitment classified as an operating lease as reported in the table below. At March 31, 2019, the Company had the following operating lease minimum commitments for payments of rentals under leases which at inception had a non-cancellable term of more than one year:
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Commitments and Contingencies |
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Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Legal Proceedings Patent Infringement In February 2010, a lawsuit against the Company was filed by an unrelated party claiming the Company's operation of the oil separation system in a patent infringement. In connection with the lawsuit, in February 2010, the agreement for the construction and installation of the tricanter oil separation system was amended. In this amendment the manufacturer and installer of the tricanter oil separation system indemnifies the Company against all claims of infringement of patents, copyrights or other intellectual property rights from the Company's purchase and use of the tricanter oil system and agrees to defend the Company in the lawsuit filed at no expense to the Company. On October 23, 2014, the court granted summary judgment finding that all of the patents claimed were invalid and that the Company had not infringed. In addition, on September 15, 2016, the United States District Court granted summary judgment finding that the patents were invalid due to inequitable conduct before the US Patent and Trademark Office by the inventors and their attorneys. The Company has since settled with the attorneys for the inventors. A motion to reconsider the decision regarding inequitable conduct is pending. In addition, an appeal regarding the current ruling on inequitable conduct has been filed. The manufacturer has, and the Company expects it will continue, to vigorously defend itself and the Company in these lawsuits and in any appeal filed. If the ruling was to be successfully appealed, the Company estimates that damages sought in this litigation if awarded would be based on a reasonable royalty to, or lost profits of, the plaintiff. If the court deems the case exceptional, attorney's fees may be awarded and are likely to be $1,000,000 or more. The manufacturer has also agreed to indemnify the Company for these fees. However, in the event that damages are awarded and if the manufacturer is unable to fully indemnify the Company for any reason, the Company could be liable. In addition, the Company may need to cease use of its current oil separation process and seek out a replacement or cease oil production altogether. Air Permit On January 4, 2018, the Company received a letter from the Indiana Department of Environmental Management, Office of Air Quality (“IDEM”) alleging violations of the Company's air permit. IDEM alleges that we (i) constructed and operated a fermenter without previous construction or operational approval; (ii) constructed and operated emission units (conveyors and legs) without the appropriate emission controls (two bag houses instead of one larger bag house); (iii) constructed and operated emission units (steel bins) without emission controls; and (iv) operated emission units above the emission limits. The Company entered into a settlement of this matter with IDEM in April 2019 and as part of that settlement paid a civil penalty in the amount of $27,000. |
Uncertainties Impacting the Ethanol Industry and Our Future Operations |
6 Months Ended |
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Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Uncertainties Impacting the Ethanol Industry and Our Future Operations | CONCENTRATIONS Two major customers accounted for approximately 88% of the outstanding accounts receivable balance at March 31, 2019 and 87% at September 30, 2018. These same two customers accounted for approximately 87.9% of revenue for the three and six month periods ended March 31, 2019 and 81.5% of revenue for the three and six month periods ended March 31, 2018. UNCERTAINTIES IMPACTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS The Company has certain risks and uncertainties that it experiences during volatile market conditions, which can have a severe impact on operations. The Company's revenues are primarily derived from the sale and distribution of ethanol, distillers grains and corn oil to customers primarily located in the U.S. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. Ethanol sales average approximately 68% of total revenues and corn costs average 69% of total cost of goods sold. The Company's operating and financial performance is largely driven by prices at which the Company sells ethanol, distillers grains and corn oil, and the related cost of corn. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and programs, and the unleaded gasoline and the petroleum markets, although, since 2005, the prices of ethanol and gasoline began a divergence with ethanol selling for less than gasoline at the wholesale level. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company's largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, weather, government policies and programs. The Company's risk management program is used to protect against the price volatility of these commodities. |
Business Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments | BUSINESS SEGMENTS Based on the growth of the Company's Trading Division during the first quarter of fiscal 2018 and operations in fiscal 2018, the Company has determined it now has two reportable operating segments. Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The accounting policies for each segment are the same as those described in the summary of significant accounting policies. Segment income or loss does not include any allocation of shared-service costs. Segment assets are those that are directly used in or identified with segment operations. Inter-segment balances and transactions have been eliminated. The following tables summarize financial information by segment and provide a reconciliation of segment revenue, gross profit, grain inventories, operating income, and total assets:
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||
Reportable Segments | Reportable Segments Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” establishes the standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results criteria set forth in ASC 280, the Company has two reportable operating segments for financial reporting purposes.
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Accounting Estimates | Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for the following significant matters, among others; the useful lives of fixed assets, the valuation of inventory purchase and sale commitments derivatives, inventory, patronage dividends, long-lived assets and inventory purchase commitments. Actual results may differ from previously estimated amounts, and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. |
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Restricted Cash | Restricted Cash As a part of its commodities hedging activities, the Company is required to maintain cash balances with our commodities trading companies for initial and maintenance margins on a per futures contract basis. Changes in the market value of contracts may increase these requirements. As the futures contracts expire, the margin requirements also expire. Accordingly, we record the cash maintained with the traders in the margin accounts as restricted cash. Since this cash is immediately available to us upon request when there is a margin excess, we consider this restricted cash to be a current asset. |
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Trade Accounts Receivable | Trade Accounts Receivable Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral. Accounts receivable are recorded at their estimated net realizable value. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company's credit terms. Amounts considered uncollectible are written off. The Company's estimate of the allowance for doubtful accounts is based on historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any. At March 31, 2019 and September 30, 2018, the Company determined that an allowance for doubtful accounts was not necessary. |
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Revenue Recognition | Contract Liabilities The Company receives cash from time to time from customers before it fulfills its performance obligations to those customers. In those cases, the company records those advance payments as a current liability. The Company has not yet received advances that are expected to remain open beyond one year. Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Our contracts primarily consist of agreements with marketing companies and other customers as described below. Our performance obligations consist of the delivery of ethanol, distillers' grains, corn oil, soybeans and carbon dioxide to our customers. The consideration we receive for these products is fixed based on current observable market prices at the Chicago Mercantile Exchange, generally, and adjusted for local market differentials. Our contracts have specific delivery modes, rail or truck, and dates. Revenue is recognized when the Company delivers the products to the mode of transportation specified in the contract, at the transaction price established in the contract, net of commissions, fees, and freight. We sell each of the products via different marketing channels as described below.
Payment Terms The Company has contractual payment terms with each respective marketer that sells ethanol and distillers grains. These terms are generally 10 - 20 days after the week of the transfer of control. The Company has standard payment terms of net 10 days for its invoices for corn oil. The Company has standard payments terms due upon delivery for its invoices of soybeans. The contractual terms with the carbon dioxide customer calls for an annual settlement. Shipping and Handling Costs Shipping and handling costs related to contracts with customers for sale of goods are accounted for as a fulfillment activity and are included in cost of goods sold. Accordingly, amounts billed to customers for such costs are included as a component of revenue. Contract Liabilities The Company records unearned revenue when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of its contracts with customers. Revenue Recognition Revenue is recognized at a single point in time when the Company satisfies its performance obligation under the terms of a contract with a customer. Generally, this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected, as specified in the contract with a customer, to be received in exchange for transferring goods or providing services. |
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Inventories | Inventories Ethanol production division inventories consist of raw materials, work in process, finished goods and parts. Corn is the primary raw material. Finished goods consist of ethanol, dried distiller grains and corn oil. Inventories are stated at the lower of weighted average cost or net realizable value. Net realizable value is the estimated selling prices in the normal course of business, less reasonably predictable selling costs. Trading division inventories consist of grain. Soybeans were the only grains held and traded at March 31, 2019 and September 30, 2018. These inventories are stated at market value, which may include reductions for quality. |
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Property, Plant and Equipment | Property, Plant and Equipment Property, plant, and equipment are stated at cost. Depreciation is provided over estimated useful lives by use of the straight line depreciation method. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized. Construction in progress expenditures will be depreciated using the straight-line method over their estimated useful lives once the assets are placed into service. |
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Long-Lived Assets | Long-Lived Assets The Company reviews its long-lived assets, such as property, plant and equipment and financing costs, subject to depreciation and amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. |
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Investments | Investments Investments consist of the capital stock and patron equities of the Company's distillers grains marketer. The investments are stated at the lower of cost or fair value and adjusted for non cash patronage equities received. Patronage dividends are recognized when received and included within revenue in the condensed statements of operations. |
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Derivative Instruments | Derivative Instruments From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives in the balance sheet at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in the statement of operations, depending on the item being hedged. Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting and reporting requirements, and therefore, are not marked to market in our financial statements. The Company has elected for its Ethanol Division to apply the normal purchase normal sale exemption to all forward commodity contracts. For the Trading Division, the Company has elected not to apply the normal purchase normal sale exemption to its forward purchase and sales contracts and therefore marks these derivative instruments to market. |
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Net Income per Unit | Net (Loss) per Unit Basic net (loss) per unit is computed by dividing net (loss) by the weighted average number of members' units outstanding during the period. Diluted net (loss) per unit is computed by dividing net (loss) by the weighted average number of members' units and members' unit equivalents outstanding during the period. There were no member unit equivalents outstanding during the periods presented; accordingly, the Company's basic and diluted net (loss) per unit are the same. |
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Recently Issued or Adopted Accounting Pronouncements | Recently Issued or Adopted Accounting Pronouncements Accounting for Leases (Evaluating) In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets, initially measured at the present value of the lease payments. The accounting guidance for lessors is largely unchanged. The ASU is effective for the Company beginning in October 2019. It is to be adopted using a modified retrospective approach. The Company is currently evaluating the impact that the adoption of this guidance will have on the Company’s financial statements and anticipates the new guidance will significantly impact its financial statements given the Company has leased a significant number of rail cars for transporting ethanol and Dried Distillers' Grains with Solubles (DDGS) to its customers. Revenue Recognition (Adopted) Effective October 1, 2018, the Company adopted the amended guidance in ASC Topic 606, Revenue from Contracts with Customers. Refer to Note 1 - Accounting policies and Note 2 - Revenue for further details. Adoption of ASC Topic 606 On October 1, 2018, the Company adopted the amended guidance in ASC Topic 606, Revenue from Contracts with Customers, and all related amendments (“new revenue standard”) and applied it to all contracts using the modified retrospective transition method. There were no adjustments to the October 1, 2018 balance sheet for the adoption of the new revenue standard. As such, comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. In addition, there was no impact of adoption on the statements of operations or balance sheets for the three and six months ended March 31, 2019 and 2018. |
Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following tables disaggregate revenue by major source for the three and six month periods ended March 31, 2019: Three Months Ended March 31, 2019
Six Months Ended March 31, 2019
(1) Revenues from contracts accounted for as derivatives represent physically settled derivative sales that are outside the scope of ASC Topic 606, Revenue from Contracts with Customers (ASC Topic 606), where the company recognizes revenue when control of the inventory is transferred within the meaning of ASC Topic 606 as required by ASC Topic 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. |
Inventories (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | Inventories consist of the following as of:
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Derivative Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location | The following table provides balance sheet details regarding the Company's derivative financial instruments at March 31, 2019:
As of March 31, 2019, the Company had approximately $1,241,000 cash collateral (restricted cash) related to ethanol, corn, and soybean derivatives held by four brokers. The following table provides balance sheet details regarding the Company's futures and options derivative financial instruments at September 30, 2018:
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Derivatives Not Designated as Hedging Instruments | The following table provides details regarding the gains and (losses) from the Company's derivative instruments in the statements of operations, none of which are designated as hedging instruments:
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Fair Value Instruments (Tables) |
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Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of March 31, 2019:
The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of September 30, 2018:
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Bank Financing (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | Long-term debt, as discussed above, consists of the following at March 31, 2019:
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Schedule of Maturities of Long-term Debt | The estimated maturities of long-term debt at March 31, 2019 are as follows:
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||
Schedule of Future Minimum Payments for Capital and Operating Leases | At March 31, 2019, the Company had the following operating lease minimum commitments for payments of rentals under leases which at inception had a non-cancellable term of more than one year:
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Business Segments (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | The following tables summarize financial information by segment and provide a reconciliation of segment revenue, gross profit, grain inventories, operating income, and total assets:
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Summary of Significant Accounting Policies - Narrative (Details) gal in Thousands |
6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019
USD ($)
segment
gal
|
Mar. 31, 2018
USD ($)
gal
|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2018
USD ($)
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Product Information [Line Items] | ||||
Number of reportable segments | segment | 2 | |||
Number of operating segments | segment | 2 | |||
Net book value | $ 93,002,332 | $ 96,948,671 | ||
Payments to Acquire Property, Plant, and Equipment | $ 1,437,278 | $ 1,749,054 | ||
Ethanol [Member] | ||||
Product Information [Line Items] | ||||
Annual production capacity | gal | 63,685 | 64,816 | ||
Damage from explosion [Member] | Distillers grain silos [Member] | ||||
Product Information [Line Items] | ||||
Net book value | $ 1,200,000 | |||
Scenario, Forecast [Member] | Liquefaction tank and fermenter [Member] | ||||
Product Information [Line Items] | ||||
Payments to Acquire Property, Plant, and Equipment | $ 3,200,000 |
Concentrations (Details) - Customer Concentration Risk [Member] |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Mar. 31, 2019 |
Mar. 31, 2018 |
Sep. 30, 2018 |
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Accounts Receivable [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 88.00% | 87.00% | |||
Sales Revenue, Goods, Net [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 87.90% | 81.50% | 87.90% | 81.50% |
Inventories - Schedule of Inventory (Details) - USD ($) |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|
Inventory [Line Items] | ||
Raw materials | $ 22,149,671 | $ 10,396,269 |
Total Inventories | 28,895,643 | 16,552,600 |
Ethanol Segment [Member] | ||
Inventory [Line Items] | ||
Raw materials | 9,939,823 | 7,053,371 |
Work in progress | 1,374,080 | 1,299,716 |
Finished goods | 2,124,018 | 1,929,177 |
Spare parts | 3,247,874 | 2,927,438 |
Total Inventories | 16,685,795 | 13,209,702 |
Grain Trading Segment [Member] | ||
Inventory [Line Items] | ||
Raw materials | 12,209,848 | 3,342,898 |
Total Inventories | $ 12,209,848 | $ 3,342,898 |
Derivative Instruments - Narrative (Details) gal in Thousands, $ in Thousands |
6 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
broker
bu
gal
|
Sep. 30, 2018
USD ($)
broker
|
|
Derivative [Line Items] | ||
Cash collateral | $ | $ 1,241 | $ 1,249 |
Number of brokers, cash collateral | broker | 4 | 2 |
Ethanol Segment [Member] | Corn [Member] | Short [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivative [Line Items] | ||
Derivative, nonmonetary notional amount, volume (in bushels or gallons) | 2,527,676 | |
Ethanol Segment [Member] | Ethanol [Member] | Short [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivative [Line Items] | ||
Derivative, nonmonetary notional amount, volume (in bushels or gallons) | gal | 6,930 | |
Grain Trading Segment [Member] | Soybean [Member] | Short [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivative [Line Items] | ||
Derivative, nonmonetary notional amount, volume (in bushels or gallons) | 2,167,955 |
Derivative Instruments - Balance Sheet (Details) - Not Designated as Hedging Instrument [Member] - USD ($) |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Assets | $ 642,404 | $ 330,740 |
Liabilities | 826,663 | 1,913,913 |
Future [Member] | Ethanol [Member] | Futures & options derivatives [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Assets | 0 | 0 |
Liabilities | 3,486 | 118,062 |
Future [Member] | Corn [Member] | Futures & options derivatives [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Assets | 0 | 0 |
Liabilities | 541,361 | 156,056 |
Future [Member] | Soybean [Member] | Futures & options derivatives [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Assets | 619,113 | 281,438 |
Liabilities | 0 | 0 |
Forward Contracts [Member] | Soybean [Member] | Forward purchase/sales derivatives [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Assets | 23,291 | 49,302 |
Liabilities | $ 281,816 | $ 1,639,795 |
Bank Financing - Schedule of Long-term Debt (Details) - USD ($) |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|
Debt Disclosure [Abstract] | ||
Total long-term debt | $ 7,734,580 | |
Less amounts due within one year | 1,428,571 | $ 1,428,571 |
Net long-term debt | $ 6,306,009 | $ 7,314,867 |
Bank Financing - Schedule of Debt Maturities (Details) |
Mar. 31, 2019
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
April 1, 2019 to March 31, 2020 | $ 1,428,571 |
April 1, 2020 to March 31, 2021 | 1,428,571 |
April 1, 2021 to March 31, 2022 | 1,428,571 |
April 1, 2022 to March 31, 2023 | 3,448,867 |
Total long-term debt | $ 7,734,580 |
Leases (Details) |
Mar. 31, 2019
USD ($)
tank_car
|
---|---|
Operating Leased Assets [Line Items] | |
Number of tank cars leased | tank_car | 225 |
Transportation Equipment [Member] | |
Operating Leased Assets [Line Items] | |
April 1, 2019 to March 31, 2020 | $ 3,227,112 |
April 1, 2020 to March 31, 2021 | 3,227,112 |
April 1, 2021 to March 31, 2022 | 2,844,612 |
April 1, 2022 to March 31, 2023 | 1,539,408 |
Total minimum lease commitments | $ 10,838,244 |
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
1 Months Ended | |
---|---|---|
Apr. 30, 2019 |
Mar. 31, 2019 |
|
Pending Litigation [Member] | ||
Loss Contingencies [Line Items] | ||
Estimated litigation liability | $ 1,000 | |
Subsequent Event [Member] | Settled Litigation [Member] | ||
Loss Contingencies [Line Items] | ||
Settlement amount | $ 27 |
Uncertainties Impacting the Ethanol Industry and Our Future Operations (Details) |
6 Months Ended |
---|---|
Mar. 31, 2019 | |
Sales Revenue, Goods, Net [Member] | Ethanol [Member] | |
Concentration Risk [Line Items] | |
Concentration risk | 68.00% |
Cost of Goods, Segment [Member] | Corn [Member] | |
Concentration Risk [Line Items] | |
Concentration risk | 69.00% |
Business Segments - Narrative (Details) |
6 Months Ended |
---|---|
Mar. 31, 2019
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Number of operating segments | 2 |
Business Segments - Schedule of Business Segments (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
Sep. 30, 2018 |
|
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||
Revenues | $ 64,371,953 | $ 65,712,336 | $ 114,506,420 | $ 121,567,824 | |
Gross profit (loss) | 1,964,202 | 3,142,752 | 1,103,814 | 6,544,103 | |
Operating income (loss) | 28,308 | 1,455,485 | (2,572,859) | 3,218,087 | |
Grain inventories | 22,149,671 | 22,149,671 | $ 10,396,269 | ||
Total assets | 140,045,351 | 140,045,351 | 144,594,876 | ||
Ethanol Segment [Member] | |||||
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||
Revenues | 58,600,101 | 55,705,899 | 103,300,613 | 106,424,886 | |
Gross profit (loss) | 1,895,445 | 3,167,673 | 1,185,882 | 6,219,334 | |
Operating income (loss) | 276,794 | 1,676,267 | (1,856,306) | 3,273,745 | |
Grain inventories | 9,939,823 | 9,939,823 | 7,053,371 | ||
Total assets | 115,233,230 | 115,233,230 | 128,960,169 | ||
Grain Trading Segment [Member] | |||||
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||
Revenues | 5,771,852 | 10,006,437 | 11,205,807 | 15,142,938 | |
Gross profit (loss) | 68,757 | (24,921) | (82,068) | 324,769 | |
Operating income (loss) | (248,486) | $ (220,782) | (716,553) | $ (55,658) | |
Grain inventories | 12,209,848 | 12,209,848 | 3,342,898 | ||
Total assets | $ 24,812,121 | $ 24,812,121 | $ 15,634,707 |
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