Note 3 - Equity Method Investments

12 Months Ended

Dec. 31, 2012

Equity Method Investments and Joint Ventures Disclosure [Text Block]

NOTE 3: EQUITY METHOD INVESTMENTS

 As of December 31, 2012, the Company’s investments accounted for on the equity method of accounting consist of the following: (1) 30 percent interest in Illinois Corn Processing, LLC (“ICP”), which manufactures alcohol for fuel, industrial and beverage applications, and (2) 50 percent interest in D.M. Ingredients, GmbH, (“DMI”), which produces certain specialty starch and protein ingredients.   

Processing completed a series of related transactions on November 20, 2009 pursuant to which Processing contributed its Pekin plant and certain maintenance and repair materials to a newly-formed company, ICP, and then sold 50 percent of the membership interest in ICP to ICP Holdings.  In connection with these transactions, Processing entered into various agreements with ICP and ICP Holdings, including a Contribution Agreement, an LLC Interest Purchase Agreement, a Limited Liability Company Agreement and a Marketing Agreement, which are discussed in greater detail Note 3.  Investment in Joint Ventures in Item 8 of Form 10-K for the six month transition period ended December 31, 2011.

On February 1, 2012, Illinois Corn Processing Holdings (“ICP Holdings”), an affiliate of SEACOR Energy Inc., exercised its option to purchase an additional 20 percent of the membership interest in ICP.  The sales price was $9,103 and was determined in accordance with the LLC Interest Purchase Agreement.  Following its exercise, ICP Holdings owns 70 percent of ICP, is entitled to name 4 of ICP’s 6 advisory board members, and generally has control of ICP’s day to day operations.  Processing owns 30 percent of ICP and is entitled to name 2 of ICP’s 6 advisory board members.  

Certain Rights of Joint Venture Partners and ICP’s lender

- Marketing Agreement

Under the Marketing Agreement, ICP manufactured and supplied food grade and industrial-use alcohol products for the Company and the Company purchased, marketed and sold such products for a marketing fee.  Effective January 1, 2013, the Marketing Agreement expired.  The Company does not plan to source products from ICP after March 2013.

- ICP’s lender

The ICP Limited Liability Company Agreement gives the Company and its joint venture partner, ICP Holdings certain rights to shut down the Pekin plant if ICP operates at an EBITDA loss of $500 in any quarter.  Such rights are conditional in certain instances but are absolute if EBITDA losses aggregate $1,500 over any three consecutive quarters or if ICP’s net working capital is less than $2,500.  ICP Holdings also has the right to shut down the plant if ICP is in default under its loan agreement for failure to pay principal or interest for two months.  For the three consecutive quarters ending both September 30, 2011 and June 30, 2011, ICP experienced an EBITDA loss in excess of the $1,500 aggregate loss threshold amount permitted over any three consecutive quarters, however both partners have agreed to waive rights related to EBITDA losses through September 30, 2011.

Losses of such nature are also events of default under ICP’s term loan and revolving credit agreements with its lender, an affiliate (sister company) of SEACOR Energy Inc., which, upon any requisite notice and/or lapse of time, would entitle the lender to impose a default rate of interest, foreclose on ICP’s assets and, in the case of the working capital deficiency or successive losses, enforce the closure provisions referred to above.  During the six month transition period ended December 31, 2011, ICP experienced an EBITDA loss in excess of the $500 threshold amount in the quarter ended September 30, 2011.  During fiscal year 2011, ICP experienced EBITDA losses in excess of the $500 threshold amount in the quarters ended December 31, 2010 and June 30, 2011.  ICP Holdings permanently waived its rights for covenant violations related to these EBITDA losses.    ICP’s revolving credit facility with an affiliate of SEACOR Energy Inc. was expired as of December 31, 2012 and has not been renewed.  The Company has no further funding requirement to ICP.

Related Party Transactions

See Note 15. Related Party Transactions for discussion related to related party transactions with ICP.

Realizability of ICP investment

Based on the facts and circumstances that existed at December 31, 2012, including recurring losses experienced, forecasted losses expected for 2013, the expiration of ICP’s revolving credit agreement resulting in no assured liquidity source and the Company’s plan to substantially reduce the sourcing of their product from ICP, the Company’s management decided to assess their investment in ICP for impairment.

The Company’s impairment evaluation of ICP included a specific assessment of the fair value of ICP’s net assets, after considering ICP capitalization, sales proceeds of other similar plants that have been sold, and expected net sales proceeds that the Company would expect to be realized if ICP were sold to a third party.  Given this specific situation, the Company’s management has concluded the fair value of the Company’s 30% interest in ICP is greater than the $6,898 carrying value of the ICP investment at December 31, 2012.   

Summary Financial Information

Condensed financial information of the Company’s non-consolidated equity method investment in ICP is shown below.

	Year Ended December 31, 2012			Six Months Ended December 31, 2011			Year Ended June 30, 2011
ICP’s Operating results:
Net sales (a)	$	207,084		$	131,181		$	193,825
Cost of sales and expenses (b)		(208,623	)		(132,421	)		(196,964	)
Net loss	$	(1,539	)	$	(1,240	)	$	(3,139	)

ICP’s Balance Sheet:	December 31, 2012		December 31, 2011
Current assets	$	19,972	$	30,483
Noncurrent assets		19,856		24,769
Total assets	$	39,828	$	55,252
Current liabilities	$	16,631	$	12,769
Noncurrent liabilities		203		18,929
Equity		22,994		23,554
Total liabilities and equity	$	39,828	$	55,252

(a)   Includes related party sales of $48,611 for the year ended December 31, 2012, $40,159 for the six month transition period ended December 31, 2011 and $57,482 for the year ended June 30, 2011.

(b)   Includes depreciation and amortization of $5,008 for the year ended December 31, 2012, $2,709 for the six month transition period ended December 31, 2011 and $5,103 for the year ended June 30, 2011.

The Company’s equity in earnings (loss) is as follows:

	Year Ended December 31, 2012			Six Months Ended December 31, 2011			Year Ended June 30, 2011
ICP (30% interest) (a)	$	(327	)	$	(620	)	$	(1,570	)
DMI (50% interest)		26			69			30
	$	(301	)	$	(551	)	$	(1,540	)

(a)   The Company’s ownership percentage of ICP was 50 percent through February 1, 2012, when the Company sold a 20 percent interest of its investment.  From February 2, 2012 through December 31, 2012, the Company’s ownership percentage in ICP was 30 percent.

The Company’s investment in the non-consolidated subsidiary is as follows:

	December 31,
	2012		2011
ICP (30% interest) (a)	$	6,898	$	11,777
DMI (50% interest)		403		370
	$	7,301	$	12,147

(a)   The Company’s ownership percentage of ICP was 50 percent through February 1, 2012, when the Company sold a 20 percent interest of its investment.  From February 2, 2012 through December 31, 2012, the Company’s ownership percentage in ICP was 30 percent.