Note 11 - Significant Estimates And Concentrations

12 Months Ended

Dec. 31, 2012

Concentration Risk Disclosure [Text Block]

NOTE 11:                    SIGNIFICANT ESTIMATES AND CONCENTRATIONS

Business combination –On December 27, 2011, the Company acquired LDI’s Distillery Business for approximately $11,041, which equals the current assets minus the current liabilities on that date.  The Company has recorded, at the acquisition date, purchased assets and assumed liabilities at their estimated fair values.  Significant estimates and assumptions used in valuing the acquisition of LDI’s Distillery Business and allocating purchase price include: (a) the business enterprise value, which is based on estimated future cash flows (including timing) which are estimated using the income approach and discount rates reflecting the risk inherent in the future cash flows, and (b) the values of land, buildings and improvements and machinery and equipment, which are estimated using the cost and market approaches as determined by the Company with the assistance of an independent third party.

Defined benefit pension and post-retirement benefit obligations.  The Company accrues amounts for defined benefit pension and post-retirement benefit obligations as discussed in Note 8. Employee Benefit Plans.  An accrual of $2,690 for defined benefit pension obligations and $5,700 for post-retirement benefit obligations is included in the accompanying consolidated balance sheet at December 31, 2012.  Claim payments and pension obligations based upon actual experience could ultimately differ materially from these estimates.

Inventory valuation.  The Company has recorded the carrying value of its inventories at the lower of cost or market based upon management estimates.  Actual results could differ significantly in the near term.  Inventory valuations are impacted significantly by constantly changing prices paid for our key raw materials, primarily corn.

Impairment.  The Company reviewslong-lived assets, mainly equipment, for impairment at year end or if events or circumstances indicate that usage may be limited and carrying values may not be recoverable.  Should events indicate the assets cannot be used as planned, the realization from alternative uses or disposal is compared to the carrying value.  If an impairment loss is measured, this estimate is recognized.  During the six month transition period ended December 31, 2011, the significant estimates and assumptions used in determining fair value included undiscounted future cash flows.  Third party appraisals may be used when cash flows are uncertain.  Undiscounted future cash flow estimates were determined based on estimated business to develop, and the timing of the estimated business development.   Considerable judgment is used in these measurements, and a change in the assumptions could result in a different determination of impairment loss and/or the amount of any impairment.  The Company recognized a non-cash impairment loss of $1,301 for the six month transition period ended December 31, 2011.  The Company may incur further impairment losses with respect to these assets if the estimates that it made when it performed its analysis prove to be inaccurate or if it determines that it needs to change its assumptions.  See Note 1. Nature of Operations and Summary of Significant Accounting Policies and Note 9. Restructuring Costs and Loss on Impairment of Assets.

The Company also reviews its investments in non-consolidated subsidiaries for impairment whenever events or changes in business circumstances indicate that the carrying amount of the investments may not be fully recoverable. Evidence of a loss in value that is other than temporary include, but are not limited to, the absence of an ability to recover the carrying amount of the investment, the inability of the investee to sustain an earnings capacity which would justify the carrying amount of the investment, or, where applicable, estimated sales proceeds which are insufficient to recover the carrying amount of the investment. If the fair value of the investment is determined to be less than the carrying value and the decline in value is considered to be other than temporary, an appropriate write-down is recorded based on the excess of the carrying value over the best estimate of fair value of the investment.  See Note 1. Nature of Operations and Summary of Significant Accounting Policies and Note 3. Equity Method Investments.

Significant customers.  For the year ended December 31, 2012, the Company did not have sales to any individual customer that accounted for more than 10 percent of consolidated net sales.  During the year ended December 31, 2012, the Company’s ten largest customers accounted for approximately 36 percent of consolidated net sales.

For the six month transition period ended December 31, 2011, the Company did not have sales to any individual customer that accounted for more than 10 percent of consolidated net sales.  During the six month transition period ended December 31, 2011, the Company’s ten largest customers accounted for approximately 46 percent of consolidated net sales.

For the year ended June 30, 2011, the Company did not have sales to any individual customer that accounted for more than 10 percent of consolidated net sales.  During the year end June 30, 2011, the Company’s ten largest customers accounted for approximately 45 percent of consolidated net sales.

Significant suppliers. For the year ended December 31, 2012, the Company had purchases from one grain supplier that approximated 42 percent of consolidated purchases.  In addition, the Company’s 10 largest suppliers accounted for approximately 86 percent of consolidated purchases.

For the six month transition period ended December 31, 2011, the Company had purchases from one grain supplier that approximated 36 percent of consolidated purchases and from a flour supplier that accounted for 10 percent of consolidated purchases.  In addition, the Company’s 10 largest suppliers accounted for approximately 86 percent of consolidated purchases.

For the year ended June 30, 2011, the Company had purchases from one grain supplier that approximated 38 percent of consolidated purchases and from a flour supplier that accounted for 26 percent of consolidated purchases.  In addition, the Company’s 10 largest suppliers accounted for approximately 90 percent of consolidated purchases.

Tax Valuation Allowance.  The Company establishes a valuation allowance for deferred income tax assets if management believes, based on its assessment of historical and projected operating results and other available facts and circumstances, that it is  more-likely-than-not that all or a portion of the deferred income tax assets will not be realized.  Management has determined that a valuation allowance was appropriate on its net deferred income tax assets of $9,053 and $9,840 at December 31, 2012 and December 31, 2011.

Workforce subject to collective bargaining.  As of December 31, 2012, the Company had 267 employees, 142 of whom are covered by collective bargaining agreements with two labor unions.  As of December 31, 2011, the Company had 256 employees, 97 of whom are covered by collective bargaining agreements with one labor union.  The agreements, which expire December 31, 2017 and August 31, 2014, cover employees at the Indiana Distillery and Atchison Plant, respectively.