ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATADATA.
We have audited the accompanying consolidated balance sheets of Lake Area Corn Processors, LLC and its subsidiary (the Company) as of December 31, 20172020 and 2016,2019, the related consolidated statements of operations, changes in members’ equity and cash flows for each of the three years in the period ended December 31, 2017,2020, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172020 and 2016,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2020, in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company's auditor since 2007.
LAKE AREA CORN PROCESSORS, LLC
Consolidated Balance Sheets
| | | | | | | | | | | |
| | | |
| December 31, 2020 | | December 31, 2019 |
LIABILITIES AND MEMBERS’ EQUITY | | | |
| | | |
CURRENT LIABILITIES | | | |
Outstanding checks in excess of bank balance | $ | 319,608 | | | $ | 1,155,264 | |
Accounts payable | 18,526,170 | | | 13,812,388 | |
Accrued liabilities | 732,544 | | | 933,668 | |
Derivative financial instruments | 244,181 | | | 698,850 | |
| | | |
Current portion of notes payable | 1,201,628 | | | 1,000,000 | |
Other | 4,000 | | | 4,000 | |
Total current liabilities | 21,028,131 | | | 17,604,170 | |
| | | |
LONG-TERM LIABILITIES | | | |
Notes payable | 35,561,237 | | | 37,989,208 | |
| | | |
Other | 0 | | | 4,000 | |
Total long-term liabilities | 35,561,237 | | | 37,993,208 | |
| | | |
COMMITMENTS AND CONTINGENCIES (Note 10) | 0 | | 0 |
| | | |
MEMBERS' EQUITY (29,620,000 units issued and outstanding) | 65,268,579 | | | 64,212,940 | |
| | | |
TOTAL LIABILITIES AND MEMBERS' EQUITY | $ | 121,857,947 | | | $ | 119,810,318 | |
| | | |
|
| | | | | | | |
|
|
|
|
| December 31, 2017 |
| December 31, 2016 |
LIABILITIES AND MEMBERS’ EQUITY |
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
Outstanding checks in excess of bank balance | $ | 674,936 |
|
| $ | 1,035,671 |
|
Accounts payable | 6,123,995 |
|
| 7,670,550 |
|
Accrued liabilities | 582,487 |
|
| 592,749 |
|
Derivative financial instruments | 410,785 |
|
| 827,786 |
|
Current portion of notes payable | 1,000,000 |
|
| — |
|
Other | 13,556 |
|
| 141,323 |
|
Total current liabilities | 8,805,759 |
|
| 10,268,079 |
|
|
|
|
|
LONG-TERM LIABILITIES |
|
|
|
Notes payable | 6,971,944 |
|
| 1,000 |
|
Other | 12,000 |
| | 25,556 |
|
Total long-term liabilities | 6,983,944 |
|
| 26,556 |
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
MEMBERS' EQUITY (29,620,000 units issued and outstanding) | 68,282,537 |
|
| 67,821,454 |
|
|
|
|
|
TOTAL LIABILITIES AND MEMBERS' EQUITY | $ | 84,072,240 |
|
| $ | 78,116,089 |
|
|
|
|
|
See Notes to Consolidated Financial Statements
LAKE AREA CORN PROCESSORS, LLC
Consolidated Statements of Operations
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 |
| | | | | |
REVENUES | $ | 130,521,814 | | | $ | 115,986,821 | | | $ | 74,703,630 | |
| | | | | |
COSTS OF REVENUES | 124,493,268 | | | 114,687,231 | | | 68,619,694 | |
| | | | | |
GROSS PROFIT | 6,028,546 | | | 1,299,590 | | | 6,083,936 | |
| | | | | |
OPERATING EXPENSES | 4,418,074 | | | 4,060,343 | | | 3,837,659 | |
| | | | | |
INCOME (LOSS) FROM OPERATIONS | 1,610,472 | | | (2,760,753) | | | 2,246,277 | |
| | | | | |
OTHER INCOME (EXPENSE) | | | | | |
Interest and other income | 495,474 | | | 180,801 | | | 67,042 | |
Equity in net income (loss) of investments | 343,728 | | | (60,908) | | | 403,268 | |
Interest expense | (1,394,035) | | | (1,183,324) | | | 0 | |
Total other income (expense) | (554,833) | | | (1,063,431) | | | 470,310 | |
| | | | | |
NET INCOME (LOSS) | $ | 1,055,639 | | | $ | (3,824,184) | | | $ | 2,716,587 | |
| | | | | |
BASIC AND DILUTED EARNINGS (LOSS) PER UNIT | $ | 0.04 | | | $ | (0.13) | | | $ | 0.09 | |
| | | | | |
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING | 29,620,000 | | | 29,620,000 | | | 29,620,000 | |
| | | | | |
|
| | | | | | | | | | | |
| Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 |
| | | | |
|
REVENUES | $ | 84,821,788 |
| | $ | 88,812,550 |
| | $ | 88,997,947 |
|
| | | | |
|
COSTS OF REVENUES | 76,253,945 |
| | 76,097,861 |
| | 81,445,770 |
|
| | | | |
|
GROSS PROFIT | 8,567,843 |
| | 12,714,689 |
| | 7,552,177 |
|
| | | | |
|
OPERATING EXPENSES | 3,717,291 |
| | 3,642,087 |
| | 1,827,789 |
|
| | | | |
|
INCOME FROM OPERATIONS | 4,850,552 |
| | 9,072,602 |
| | 5,724,388 |
|
| | | | |
|
OTHER INCOME (EXPENSE) | | | | |
|
Interest and other income | 77,033 |
| | 40,367 |
| | 117,471 |
|
Business interruption claims recovery | — |
| | — |
| | 617,771 |
|
Equity in net income of investments | 1,459,806 |
| | 2,293,928 |
| | 2,195,535 |
|
Interest expense | (2,308 | ) | | (1,689 | ) | | (1,635 | ) |
Total other income (expense) | 1,534,531 |
| | 2,332,606 |
| | 2,929,142 |
|
| | | | |
|
NET INCOME | $ | 6,385,083 |
| | $ | 11,405,208 |
| | $ | 8,653,530 |
|
| | | | |
|
BASIC AND DILUTED EARNINGS PER UNIT | $ | 0.22 |
| | $ | 0.39 |
| | $ | 0.29 |
|
| | | | |
|
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING FOR THE CALCULATION OF BASIC & DILUTED EARNINGS PER UNIT | 29,620,000 |
| | 29,620,000 |
| | 29,620,000 |
|
| | | | | |
See Notes to Consolidated Financial Statements
LAKE AREA CORN PROCESSORS, LLC
Consolidated Statements of Changes in Members' Equity
Years Ended December 31, 2017, 20162020, 2019 and 20152018
| | | | | | | | |
| | Members' |
| | Equity |
| | |
| | |
| | |
| | |
Balance, December 31, 2017 | | $ | 68,282,537 | |
Net income | | 2,716,587 | |
Distributions ($.10 per capital unit) | | (2,962,000) | |
| | |
Balance, December 31, 2018 | | 68,037,124 | |
Net (loss) | | (3,824,184) | |
| | |
Balance, December 31, 2019 | | 64,212,940 | |
Net income | | 1,055,639 | |
| | |
| | |
| | |
Balance, December 31, 2020 | | $ | 65,268,579 | |
|
| | | | |
| | Members' |
| | Equity |
Balance, December 31, 2014 | | $ | 68,600,228 |
|
Net income | | 8,653,530 |
|
Distributions paid ($.30 per capital unit) | | (8,989,512 | ) |
| | |
Balance, December 31, 2015 | | 68,264,246 |
|
Net income | | 11,405,208 |
|
Distributions paid ($.40 per capital unit) | | (11,848,000 | ) |
| | |
Balance, December 31, 2016 | | 67,821,454 |
|
Net income | | 6,385,083 |
|
Distributions paid ($.20 per capital unit) | | (5,924,000 | ) |
| | |
Balance, December 31, 2017 | | $ | 68,282,537 |
|
| | |
See Notes to Consolidated Financial Statements
LAKE AREA CORN PROCESSORS, LLC
Consolidated Statements of Cash Flows |
| | | | | | | | | | | |
| December 31, 2017 | | December 31, 2016 | | December 31, 2015 |
|
| |
| | |
OPERATING ACTIVITIES |
| |
| | |
Net income | $ | 6,385,083 |
| | $ | 11,405,208 |
| | $ | 8,653,530 |
|
Adjustments to reconcile net income to cash provided by operating activities |
| |
| | |
Depreciation and amortization | 2,977,582 |
| | 3,375,012 |
| | 3,373,935 |
|
Distributions in excess of earnings from investments | 2,598,644 |
| | 4,032,960 |
| | 8,004,464 |
|
(Gain) on insurance proceeds for damage to equipment | — |
| | — |
| | (2,818,955 | ) |
Loss on disposal of property and equipment | — |
| | — |
| | 849,734 |
|
(Increase) decrease in |
| |
| | |
Receivables | 816,730 |
| | (2,432,676 | ) | | 759,945 |
|
Inventory | 686,526 |
| | 1,352,871 |
| | (1,458,844 | ) |
Prepaid expenses | 18,080 |
| | 43,732 |
| | 24,796 |
|
Derivative financial instruments | (222,375 | ) | | (160,259 | ) | | (59,474 | ) |
Increase (decrease) in |
|
| |
| | |
Accounts payable | (1,550,377 | ) | | (2,017,964 | ) | | 2,211,376 |
|
Accrued and other liabilities | (142,029 | ) | | 80,872 |
| | (64,878 | ) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 11,567,864 |
| | 15,679,756 |
| | 19,475,629 |
|
|
| |
| | |
INVESTING ACTIVITIES | | | | | |
Insurance proceeds received for damage to equipment | — |
| | 1,318,955 |
| | 1,500,000 |
|
Purchase of property and equipment | (7,989,022 | ) | | (3,999,128 | ) | | (9,894,309 | ) |
Purchase of investments | (10,145,871 | ) | | — |
| | (15,000 | ) |
NET CASH (USED IN) INVESTING ACTIVITIES | (18,134,893 | ) | | (2,680,173 | ) | | (8,409,309 | ) |
|
| |
| | |
FINANCING ACTIVITIES |
| |
| | |
Increase (decrease) in outstanding checks in excess of bank balance | (360,736 | ) | | 558,505 |
| | 230,319 |
|
Proceeds from issuance of notes payable | 8,000,000 |
| | — |
| | — |
|
Payments for long-term debt | (38,611 | ) | | (45,919 | ) | | (82,344 | ) |
Distributions to members | (5,924,000 | ) | | (11,848,000 | ) | | (8,989,512 | ) |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 1,676,653 |
| | (11,335,414 | ) | | (8,841,537 | ) |
|
|
| |
| | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (4,890,376 | ) | | 1,664,169 |
| | 2,224,783 |
|
|
| |
| | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 9,993,335 |
| | 8,329,166 |
| | 6,104,383 |
|
|
|
| |
| | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 5,102,959 |
| | $ | 9,993,335 |
| | $ | 8,329,166 |
|
|
| |
| | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
| |
| | |
Cash paid during the period for interest, net of capitalized interest of $116,650, $2,940 and $6,175 in 2017, 2016 and 2015, respectively | $ | 2,317 |
| | $ | 1,687 |
| | $ | 1,689 |
|
Capital expenditures in accounts payable | 111,390 |
| | 69,647 |
| | 52,989 |
|
| | | | | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 |
| | | | | |
OPERATING ACTIVITIES | | | | | |
Net income (loss) | $ | 1,055,639 | | | $ | (3,824,184) | | | $ | 2,716,587 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities | | | | | |
Depreciation and amortization | 5,718,454 | | | 4,965,966 | | | 3,173,391 | |
Distributions in excess of earnings from investments | 45,803 | | | 1,252,223 | | | 1,848,747 | |
| | | | | |
Loss on disposal of property and equipment | 0 | | | 0 | | | 38,088 | |
| | | | | |
(Increase) decrease in | | | | | |
Receivables | (642,721) | | | (347,041) | | | 1,996,181 | |
Inventory | 774,506 | | | (2,981,920) | | | (2,035,408) | |
Prepaid expenses | (198,049) | | | (213,629) | | | (46,050) | |
Derivative financial instruments | (2,023,655) | | | 379,355 | | | 266,524 | |
| | | | | |
Increase (decrease) in | | | | | |
Accounts payable | 4,713,782 | | | 8,123,326 | | | (323,542) | |
Accrued and other liabilities | (205,124) | | | 163,674 | | | 169,950 | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 9,238,635 | | | 7,517,770 | | | 7,804,468 | |
| | | | | |
INVESTING ACTIVITIES | | | | | |
| | | | | |
| | | | | |
| | | | | |
Purchase of property and equipment | (359,221) | | | (9,066,179) | | | (25,913,312) | |
Purchase of investments | 0 | | | (633,924) | | | (409,957) | |
NET CASH USED IN INVESTING ACTIVITIES | (359,221) | | | (9,700,103) | | | (26,323,269) | |
| | | | | |
FINANCING ACTIVITIES | | | | | |
Increase (decrease) in outstanding checks in excess of bank balance | (835,656) | | | (1,091,951) | | | 1,572,279 | |
Borrowings on notes payable | 60,770,400 | | | 85,500,000 | | | 26,873,268 | |
Payments on notes payable | (63,000,000) | | | (71,100,000) | | | (10,274,268) | |
Financing costs paid | 0 | | | 0 | | | (95,500) | |
| | | | | |
Distributions to members | 0 | | | 0 | | | (2,962,000) | |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (3,065,256) | | | 13,308,049 | | | 15,113,779 | |
| | | | | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 5,814,158 | | | 11,125,716 | | | (3,405,022) | |
| | | | | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 12,823,653 | | | 1,697,937 | | | 5,102,959 | |
| | | | | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 18,637,811 | | | $ | 12,823,653 | | | $ | 1,697,937 | |
| | | | | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | | | |
Cash paid during the period for interest, net of capitalized interest of $148; $831,170; and $518,703 in 2020, 2019 and 2018, respectively | $ | 1,510,468 | | | $ | 835,236 | | | $ | 0 | |
Capital expenditures in accounts payable | 0 | | | 0 | | | 1,160,834 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See Notes to Consolidated Financial Statements
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 20162020, 2019 AND 20152018
NOTE 1 .- NATURE OF OPERATIONS
Principal Business Activity
Lake Area Corn Processors, LLC and subsidiary (the Company) is a South Dakota limited liability company.
The Company owns and manages Dakota Ethanol, LLC (Dakota Ethanol), a 40 million-gallon90 million-gallon (annual nameplate capacity) ethanol plant located near Wentworth, South Dakota. Dakota Ethanol sells ethanol and related products to customers located primarily in North America.
In addition, the Company has investment interests in six5 companies in related industries. See note 45 for further details.
NOTE 2.2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of its wholly owned subsidiary, Dakota Ethanol. All significant inter-company transactions and balances have been eliminated in consolidation.
Revenue Recognition
The Company has adopted the guidance of ASC Topic 606, Revenue from Contracts with Customers (Topic 606). Topic 606 requires the productionCompany to recognize revenue to depict the transfer of ethanolpromised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires the Company to apply the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and related products(5) recognize revenue when, or as, the Company satisfies a performance obligation. The Company generally recognizes revenue at a point in time. The Company’s contracts with customers have one performance obligation and a contract duration of one year or less.
The following is recordeda description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when title transferscontrol of the promised goods or services are transferred to customers.our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. Generally, ethanol and related products are shipped FOB shipping point and control of the goods transfers to customers when the goods are loaded into trucks or when rail cars are shipped. Consideration is based on written contract terms between Dakotapredetermined contractual prices or on current market prices.
•Sales of Ethanol and its
•Sales of Distillers Grains
•Sales of Distillers Corn Oil
Disaggregation of Revenue:
All revenue recognized in the income statement is considered to be revenue from contracts with customers. CollectabilityThe following table depicts the disaggregation of revenue is reasonably assuredaccording to product line:
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| | | | | | |
Revenues ethanol | | $ | 99,077,363 | | | $ | 90,415,936 | | | $ | 57,705,675 | |
Revenues distillers grains | | 25,519,999 | | | 21,200,904 | | | 14,677,962 | |
Revenues distillers corn oil | | 5,924,452 | | | 4,369,981 | | | 2,319,993 | |
| | $ | 130,521,814 | | | $ | 115,986,821 | | | $ | 74,703,630 | |
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
Contract Assets and Contract Liabilities:
The Company has no significant contract assets or contract liabilities from contracts with customers.
The Company receives payments from customers based on historical evidenceupon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include payments received in advance of collectability between Dakota Ethanolperformance under the contract, and its customers. Interest income isare realized with the associated revenue recognized as earned.under the contract.
Shipping Costs
Shipping costs incurred by the Company in the sale of ethanol, dried distillersdistiller's grains and corn oil are not specifically identifiable and as a result, revenue from the sale of those products is recorded based on the net selling price reported to the Company from the marketer.
When the Company performs shipping and handling activities after the transfer of control to the customers (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized.
Cost of Revenues
The primary components of cost of revenues from the production of ethanol and related co-productco-products are corn expense, energy expense (natural gas and electricity), raw materials expense (chemicals and denaturant), and direct labor costs.
Shipping costs on modified and wet distillersdistiller's grains are included in cost of revenues.
Inventory Valuation
Inventories are generally valued using methods which approximate the lower of cost (first-in, first-out) or net realizable value. In the valuation of inventories, and purchase commitments, net realizable value is based on estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand accounts and other accounts with original maturities of three months or less that provide withdrawal privileges.
Receivables and Credit Policies
Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within fifteen days from the invoice date. Unpaid accounts receivable with invoice dates over thirty days old bear interest at 1.5% per month. Accounts receivable are stated at the amount billed to the customer. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
The carrying amount of trade receivables is reduced by a valuation allowance that reflects management’s best estimate of the amounts that will not be collected. Management regularly reviews trade receivable balances and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. The valuation allowance was $2,131$0 and $51,791$0 as of December 31, 20172020 and 20162019 respectively.
Investment in commodities contracts, derivative instruments and hedging activities
The Company is exposed to certain risks related to our ongoing business operations. The primary risks that the Company manages by using forward contracts or derivative instruments are price risk on anticipated purchases of corn and natural gas and the sale of ethanol, distillers grains and distillers corn oil.
The Company is subject to market risk with respect to the price and availability of corn, the principal raw material the Company uses to produce ethanol and ethanol by-products. In general, rising corn prices result in lower profit margins and, therefore,
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
represent unfavorable market conditions. This is especially true when market conditions do not allow us to pass along increased corn costs to our customers. The availability and price of corn is subject to wide fluctuations due to unpredictable factors such as weather conditions, farmer planting decisions, governmental policies with respect to agriculture and international trade and global demand and supply.
Certain contracts that literally meet the definition of a derivative may be exempted from derivative accounting 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 the accounting and reporting requirements of derivative accounting.
The Company does not apply the normal purchase and sales exemption for forward corn purchase contracts. As of December 31, 2017,2020, the Company is committed to purchasing approximately 2.55.2 million bushels of corn on a forward contract basis with an average price of $3.30$4.19 per bushel. The total corn purchase contracts represent 14%17% of the projected annual plant corn usage.
The Company has 289,000 bushels of corn inventory delivered under delayed-pricing contracts. The contracts have various pricing deadlines through October 29, 2021. The Company is subject to risk of changes in the corn market until they are priced.
The Company enters into firm-price purchase commitments with natural gas suppliers under which the Company agrees to buy natural gas at a price set in advance of the actual delivery. Under these arrangements, the Company assumes the risk of a price decrease in the market price of natural gas between the time the price is fixed and the time the natural gas is delivered. At December 31, 2017,2020, the Company is committed to purchasing approximately 40,000 MMBtus301,000 MMBtu's of natural gas with an average price of $3.10$2.90 per MMBtu. The Company accounts for these transactions as normal purchases, and accordingly, does not mark these transactions to market. The natural gas purchases represent approximately 3%15% of the projected annual plant requirements.
The Company enters into firm-price sales commitments with distillers grains customers under which the Company agrees to sell distillers grains at a price set in advance of the actual delivery. Under these arrangements, the Company assumes the risk of a price increase in the market price of distillers grain between the time the price is fixed and the time the distillers grains are delivered. At December 31, 2017,2020, the Company is committed to selling approximately 38,000 dry equivalent tons of distillers grains with an average price of $101$148 per ton. The Company accounts for these transactions as normal sales, and accordingly, does not mark these transactions to market. The distillers grains sales represent approximately 26%18% of the projected annual plant production.
The Company enters into firm-price sales commitments with distillers corn oil customers under which the Company agrees to sell distillers corn oil at a price set in advance of the actual delivery. Under these arrangements, the Company assumes the risk of a price increase in the market price of distillers corn oil between the time thethis price is fixed and the time the distillers corn oil is delivered. At December 31, 2017,2020, the Company is committed to selling approximately 770,0001,681,000 pounds of distillers corn oil with an average price of $0.24$0.36 per pound. The Company accounts for these transactions as normal sales, and accordingly, does not mark these transactions to market. The distillers corn oil sales represent approximately 7% of the projected annual plant production.
The Company does not have any firm-priced sales commitments for ethanol as of December 31, 2017.2020.
The Company enters into short-term forward, option and futures contracts for ethanol, corn and natural gas as a means of managing exposure to changes in commodity and energy prices. All contracts of the Company's derivativesCompany are designated as non-hedge derivatives
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
and accordingly are recorded at fair value with changes in fair valuebeing recognized in net income.income, or are designated as normal purchases and normal sales and are evaluated for inherent losses. Although the contracts are considered economic hedges of specified risks, they are not designated as and accounted for as hedging instruments.
As part of our trading activity, Thethe Company uses futures and option contracts offered through regulated commodity exchanges to reduce risk of loss in the market value of inventories and purchase commitments. To reduce that risk, the Company generally takes positions using forward and futures contracts and options.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
Derivatives not designated as hedging instruments at December 31, 20172020 and December 31, 20162019 were as follows:
|
| | | | | | | | | | |
| | Balance Sheet Classification | | December 31, 2017 | | December 31, 2016 |
| | | | | | |
Forward contracts in gain position | | | | $ | 3,856 |
| | $ | 6,491 |
|
Futures contracts in gain position | | | | 119,825 |
| | 246,900 |
|
Futures contracts in loss position | | | | (1,363 | ) | | (12,575 | ) |
Total forward and futures contracts | | | | 122,318 |
| | 240,816 |
|
Cash held by broker | | | | 740,522 |
| | 816,649 |
|
| | Current Assets | | $ | 862,840 |
| | $ | 1,057,465 |
|
| | | | | | |
Forward contracts in loss position | | (Current Liabilities) | | $ | (410,785 | ) | | $ | (827,786 | ) |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Balance Sheet Classification | | December 31, 2020 | | December 31, 2019 |
| | | | | | |
Corn forward contracts in gain position | | | | $ | 1,742,054 | | | $ | 160,687 | |
Futures and options contracts in gain position | | | | 0 | | | 33,338 | |
Futures and options contracts in loss position | | | | (1,799,688) | | | (1,500) | |
Total forward, futures and options contracts | | | | (57,634) | | | 192,525 | |
Cash held by broker | | | | 2,131,644 | | | 312,500 | |
| | Current Assets | | $ | 2,074,010 | | | $ | 505,025 | |
| | | | | | |
Corn forward contracts in loss position | | Current Liabilities | | $ | (244,181) | | | $ | (698,850) | |
| | | | | | |
Futures and options contracts and cash held by broker are all with one party and the right of offset exists. Therefore, on the balance sheet, these items are netted in one balance regardless of position.
Forward contracts are with multiple parties and the right of offset does not exist. Therefore, these contracts are reported at the gross amounts on the balance sheet.
Realized and unrealized gains and losses related to derivative contracts related to corn and natural gas purchases are included as a component of cost of revenues and derivative contracts related to ethanol sales are included as a component of revenues in the accompanying financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Statement of Operations | | Years Ended December 31, |
| | Classification | | 2020 | | 2019 | | 2018 |
| | | | | | | | |
| | | | | | | | |
Net realized and unrealized gains (losses) related to purchase contracts: | | | | | | | | |
Futures and options contracts | | Cost of Revenues | | $ | (1,211,861) | | | $ | (8,631) | | | $ | 1,544,635 | |
Forward contracts | | Cost of Revenues | | (415,420) | | | (897,283) | | | (994,854) | |
|
| | | | | | | | | | | | | | |
| | Statement of Operations | | Years Ended December 31, |
| | Classification | | 2017 | | 2016 | | 2015 |
Net realized and unrealized gains (losses) related to purchase contracts: | | | | | | | | |
Futures contracts | | Cost of Revenues | | $ | 608,250 |
| | $ | 1,874,523 |
| | $ | 1,325,265 |
|
Forward contracts | | Cost of Revenues | | (1,423,330 | ) | | (1,707,414 | ) | | (994,242 | ) |
Investments
The Company has investment interests in six5 companies in related industries. All of these interests are at ownership shares less than 20%. These investments are flow-through entities. Per ASC 323-30-S99-1, they are being accounted for by the equity method of accounting under which the Company’s share of net income is recognized as income in the Company’s statements of operations and added to the investment account. Distributions or dividends received from the investments are treated as a reduction of the investment account. The Company consistently follows the practice of recognizing the net income based on the most recent reliable data.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the fair value of derivative financial instruments, lower of cost or net realizable value accounting for inventory and forward purchase contracts and goodwill impairment evaluation.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
Concentrations of Credit Risk
The Company’s cash balances are maintained in bank depositories and regularly exceed federally insured limits. The Company has not experienced any losses in connection with these balances.
Property and Equipment
Property and equipment is stated at cost. Significant additions and betterments are capitalized, while expenditures for maintenance, repairs and minor renewals are charged to operations when incurred. Depreciation on assets placed in service is computed using the straight-line method over estimated useful lives as follows:
•Land improvements 20-40 years |
| | |
| Minimum | Maximum |
Land improvements | 20 years | 40 years |
Equipment | 5 years | 20 years |
Buildings | 15 years | 40 years |
•Equipment 5-20 years
•Buildings 15-40 years
Equipment relates to two general categories: mechanical equipment and administrative and maintenance equipment. Mechanical equipment generally relates to equipment for handling inventories and the production of ethanol and related products, with useful lives of 15 to 20 years, including boilers, cooling towers, grain bins, centrifuges, conveyors, fermentation tanks, pumps and drying equipment. Administrative and maintenance equipment is equipment with useful lives of 5 to 15 years, including vehicles, computer systems, security equipment, testing devices and shop equipment.
The Company reviews its property and equipment for impairment whenever events indicate that the carrying amount of an asset group may not be recoverable. An impairment loss is recorded when the sum of the undiscounted future cash flows is less than the carrying amount of the asset group. An impairment loss is measured as the amount by which the carrying amount of the asset group exceeds its fair value. During the first quarter of 2020, the COVID-19 pandemic represented a change in circumstance that indicated the carrying value of property and equipment may not be recoverable. The Company calculated the undiscounted future cash flows of the property and equipment and determined them to be recoverable. Accordingly, no impairment was recorded. No indicators of impairment were identified at December 31, 20172020 and 2016.2019.
Goodwill
Annually, as well as when an event triggering impairment may have occurred, the Company performs an impairment test on goodwill. The Company performs a quantitative analysis that tests for impairment. The second step, if necessary, measures the impairment. During the first quarter of 2020 a triggering event was determined to have occurred and an impairment test was performed as of March 31, 2020. The Company determined there was no impairment at that time. The Company performs the annual analysis on December 31 of each fiscal year. The Company determined that there was no0 impairment of goodwill at December 31, 20172020 and 2016.2019.
Earnings Per Unit
For purposes of calculating basic earnings per unit, units issued are considered outstanding on the effective date of issuance. Diluted earnings per unit are calculated by including dilutive potential equity units in the denominator. There were no dilutive equity units for the years ending December 31, 2017, 2016,2020, 2019, and 2015.2018.
Income Taxes
The Company is taxed as a limited liability company under the Internal Revenue Code. The income of the Company flows through to the members to be taxed at the member level rather than the corporate level. Accordingly, the Company has no tax liability.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
Management has evaluated the Company’s tax positions under the Financial Accounting Standards Board issued guidance on accounting for uncertainty in income taxes and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. Generally, the Company is no longer subject to income tax examinations by the U.S. federal, state or local authorities for the years before 2014.2016.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
Environmental Liabilities
The Company’s operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its locations. Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, occupational health and the production, handling, storage and use of hazardous materials to prevent material environmental or other damage, and to limit the financial liability which could result from such events. Environmental liabilities are recorded when the Company’s liability is probable and the costs can be reasonably estimated.
Reporting Segment
Operating Segment
The Company uses the “management approach”segments are defined as components of an enterprise for reportingwhich separate financial information about segments in annual and interim financial statements. The management approach is based on the wayavailable that is evaluated regularly by the chief operating decision-maker organizes segments within a company fordecision maker or decision making operating decisionsgroup in deciding how to allocate resources and in assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure and any other manner in which management disaggregates a company. Based on the “management approach” model, theThe Company has determined that its business is comprised of a singleit has six operating segment.segments that give rise to two reportable segments. See "Note 3 - Segments" in our Notes to Consolidated Financial Statements included elsewhere in this report for financial information about our segment reporting.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)" (ASU 2014-09). ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. Generally Accepted Accounting Principles (GAAP) when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. The updated standard becomes effective for the Company in the first quarter of fiscal year 2018. The Company has completed a comparison of the current revenue recognition policies to the ASU 2014-09 requirements for each of the Company’s major revenue categories. Results indicate that the guidance will not materially change the amount or timing of revenues recognized by the Company. The Company will adopt ASU 2014-09 using the retrospective with cumulative effect transition method. The Company expects to have enhanced disclosures but does not expect this standard to have a material impact on the Company's consolidated financial statements.
In February 2016, FASB issued ASU No. 2016-02, "Leases (Topic 842)” (ASU 2016-02). ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases greater than one year in duration and classified as operating leases under previous GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and for interim periods within that fiscal year. The Company does not expect this standard to have a material impact on the Company's consolidated financial statements.
In January 2017, FASB issued ASU No. 2017-04, “Intangibles-Goodwill"Intangibles-Goodwill and Other (Topic 350)”" (ASU 2017-04). ASU 2107-042017-04 simplifies the test for goodwill impairment. It eliminates the two-step process of assessing goodwill impairment and replaces it with one step which compares the fair value of the reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the fair value up to the amount of the goodwill attributed to the reporting unit. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, and for interim periods within that fiscal year. The Company does not expectadopted ASU 2017-04 for the fiscal year 2020. The Company found it preferable to adopt ASU 2017-04 because the benefits of this standard to haveusers of the financial statements will outweigh the costs of following the pre-existing guidance. The standard has not had a material impact on the Company's consolidated financial statements.
In August 2018, FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" (ASU 2018-13). ASU 2018-13 improves the effectiveness of the fair value disclosures in the financial statements. It adds, removes and modifies various disclosure requirements relating to the fair value hierarchy. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and for interim periods within that fiscal year. The Company adopted ASU 2018-13 for the fiscal year 2020. The standard has not had a material impact on the Company's consolidated financial statements.
Risks and Uncertainties
The Company has certain risks and uncertainties that it will experience during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol and distiller grains to customers
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
primarily located in the United States. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. For the twelve months ended December 31, 2017,2020, ethanol sales averaged approximately 79%76% of total revenues, while approximately 17%20% of revenues were generated from the sale of distillerdistillers grains and 4% of revenues were generated from the sale of corn oil. For the twelve months ended December 31, 2017,2020, corn costs averaged approximately 71%77% of cost of goods sold.
The Company's operating and financial performance is largely driven by the prices at which it sells ethanol and the net expense of corn. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and programs, and unleaded gasoline and the petroleum markets. 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, and government policies and programs. The Company's risk management program is used to protect against the price volatility of these commodities.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
On January 30, 2020, the World Health Organization declared the coronavirus outbreak (COVID-19) a “Public Health Emergency of International Concern” and on March 11, 2020, declared COVID-19 a pandemic. The impact of COVID-19 negatively impacted the Company’s operations, suppliers or other vendors, and customer base. Gasoline demand has been reduced in the United States which temporarily forced the Company to reduce ethanol production in 2020. Any quarantines, labor shortages or other disruptions to the Company’s operations, or those of their customers, may adversely impact the Company’s revenues, ability to provide its services and operating results. In addition, a significant outbreak of epidemic, pandemic or contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, including the geographical area in which the Company operates, resulting in an economic downturn that could affect demand for its goods and services. The extent to which the coronavirus impacts the Company’s long-term results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and actions taken to contain the coronavirus or its impact, among others.
NOTE 3.3 - SEGMENTS
The Company reports its financial and operating performance in 2 segments: (1) production, which includes the manufacture and marketing of fuel-grade ethanol and co-products of the ethanol production process and (2) ethanol producing equity method investments, which consists of the aggregation of the Company's two equity method operating segments of investment in Guardian Hankinson, LLC and investment in Ring-neck Energy & Feed, LLC. The Company discloses its other identified operating segments in an all other category, which consists of the Company's investments in RPMG, LLC, Lawrenceville Tank, LLC, and Guardian Energy Management, LLC.
The Company’s two reportable segments have been identified based on their unique characteristics. Our production segment is the Company’s ethanol plant that is operated in a manner chosen by our chief decision making team. The ethanol producing equity method segment are aggregated operating segments investments that have exceeded the quantitative thresholds for reportable segments which have similar economic characteristics but our chief decision making team does not have input into the daily operations of those entities. The all other category is comprised of investments that fall below the quantitative thresholds for reporting segments and the Company's chief decision making team has no input into their daily operations. Production includes the core operating drivers of the Company’s consolidated financial statements which consist of the production and sale of ethanol and its co-products. Ethanol producing equity method investments derive their revenues from the production and sale of ethanol and its co-products. The all other category receives its revenues from marketing fees, management fees, and storage fees. The reconciliation item is necessary due to reportable segments not being consolidated in the financial statements, but rather are reflected as equity method investments.
The Company re-evaluated its reported segments during the year and identified two reporting segments in accordance with that review. The segments were identified using standards under ASC 280-10-50. They each engage in business activities, the operating results are reviewed by the Company’s chief operating decision maker, and discrete financial information is available for each segment.
The following tables set forth certain financial data for the Company's operating segments:
| | | | | | | | | | | | | | | | | |
| Year Ended | | Year Ended | | Year Ended |
| December 31, 2020 | | December 31, 2019 | | December 31, 2018 |
Net Sales | | | | | |
Production | $ | 130,521,814 | | | $ | 115,986,821 | | | $ | 74,703,630 | |
Ethanol Producing Equity Method Investments | 325,954,417 | | | 321,321,517 | | | 242,531,567 | |
All Other | 14,200,489 | | | 19,180,356 | | | 17,077,039 | |
Total | 470,676,720 | | | 456,488,694 | | | 334,312,236 | |
Reconciliation | (340,154,906) | | | (340,501,873) | | | (259,608,606) | |
Consolidated | $ | 130,521,814 | | | $ | 115,986,821 | | | $ | 74,703,630 | |
| | | | | |
Gross Profit | | | | | |
Production | $ | 6,028,546 | | | $ | 1,299,590 | | | $ | 6,083,936 | |
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
| | | | | | | | | | | | | | | | | |
Ethanol Producing Equity Method Investments | 11,976,243 | | | 12,354,418 | | | 8,798,849 | |
All Other | 8,840,138 | | | 13,024,964 | | | 10,986,461 | |
Total | 26,844,927 | | | 26,678,972 | | | 25,869,246 | |
Reconciliation | (20,816,381) | | | (25,379,382) | | | (19,785,310) | |
Consolidated | $ | 6,028,546 | | | $ | 1,299,590 | | | $ | 6,083,936 | |
| | | | | |
Net Income (Loss) | | | | | |
Production | $ | 1,055,639 | | | $ | (3,824,184) | | | $ | 2,716,587 | |
Ethanol Producing Equity Method Investments | 307,019 | | | (708,491) | | | 2,797,756 | |
All Other | 2,411,213 | | | 2,562,676 | | | 2,563,348 | |
Total | 3,773,871 | | | (1,969,999) | | | 8,077,691 | |
Reconciliation | (2,718,232) | | | (1,854,185) | | | (5,361,104) | |
Consolidated | $ | 1,055,639 | | | $ | (3,824,184) | | | $ | 2,716,587 | |
| | | | | |
Interest Income | | | | | |
Production | $ | 3,615 | | | $ | 11,876 | | | $ | 11,657 | |
Ethanol Producing Equity Method Investments | 21,902 | | | 23,104 | | | 89,190 | |
All Other | 2,395,057 | | | 2,810,198 | | | 2,639,671 | |
Total | 2,420,574 | | | 2,845,178 | | | 2,740,518 | |
Reconciliation | (2,416,959) | | | (2,833,302) | | | (2,728,861) | |
Consolidated | $ | 3,615 | | | $ | 11,876 | | | $ | 11,657 | |
| | | | | |
Interest Expense | | | | | |
Production | $ | 1,394,035 | | | $ | 1,183,324 | | | $ | 0 | |
Ethanol Producing Equity Method Investments | 4,276,226 | | | 5,673,185 | | | 3,530,500 | |
All Other | 2,469,656 | | | 3,337,002 | | | 2,120,931 | |
Total | 8,139,917 | | | 10,193,511 | | | 5,651,431 | |
Reconciliation | (6,745,882) | | | (9,010,187) | | | (5,651,431) | |
Consolidated | $ | 1,394,035 | | | $ | 1,183,324 | | | $ | 0 | |
| | | | | |
Depreciation and Amortization | | | | | |
Production | $ | 5,718,454 | | | $ | 4,965,966 | | | $ | 3,173,391 | |
Ethanol Producing Equity Method Investments | 26,742,646 | | | 23,314,542 | | | 18,486,710 | |
All Other | 235,325 | | | 871,269 | | | 990,583 | |
Total | 32,696,425 | | | 29,151,777 | | | 22,650,684 | |
Reconciliation | (26,977,971) | | | (24,185,811) | | | (19,477,293) | |
Consolidated | $ | 5,718,454 | | | $ | 4,965,966 | | | $ | 3,173,391 | |
| | | | | |
Expenditures for Additions to Long-lived Assets | | | | | |
Production | $ | 359,221 | | | $ | 9,066,179 | | | $ | 25,913,312 | |
Ethanol Producing Equity Method Investments | 2,431,446 | | | 22,592,254 | | | 89,378,887 | |
All Other | 47,650 | | | 50,176 | | | 14,800 | |
Total | 2,838,317 | | | 31,708,609 | | | 115,306,999 | |
Reconciliation | (2,479,096) | | | (22,642,430) | | | (89,393,687) | |
Consolidated | $ | 359,221 | | | $ | 9,066,179 | | | $ | 25,913,312 | |
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Total Assets | | | |
Production | $ | 121,857,947 | | | $ | 119,810,318 | |
Ethanol Producing Equity Method Investments | 244,353,900 | | | 259,662,054 | |
All Other | 175,909,073 | | | 186,431,339 | |
Total | 542,120,920 | | | 565,903,711 | |
Reconciliation | (420,262,973) | | | (446,093,393) | |
Consolidated | $ | 121,857,947 | | | $ | 119,810,318 | |
| | | |
Equity Method Investments | | | |
Production | $ | 16,636,367 | | | $ | 16,682,169 | |
Ethanol Producing Equity Method Investments | 2,206,234 | | | 2,411,119 | |
All Other | 189,347 | | | 220,077 | |
Total | 19,031,948 | | | 19,313,365 | |
Reconciliation | (2,395,581) | | | (2,631,196) | |
Consolidated | $ | 16,636,367 | | | $ | 16,682,169 | |
NOTE 4 - INVENTORY
Inventory consisted of the following as of December 31, 20172020 and 2016:2019:
| | | | | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
Raw materials | | $ | 5,096,067 | | | $ | 4,968,731 | |
Finished goods | | 2,474,638 | | | 3,505,224 | |
Work in process | | 1,090,893 | | | 952,319 | |
Parts inventory | | 1,107,318 | | | 1,117,148 | |
| | $ | 9,768,916 | | | $ | 10,543,422 | |
|
| | | | | | | | |
| | December 31, 2017 | | December 31, 2016 |
Raw materials | | $ | 2,466,493 |
| | $ | 3,217,822 |
|
Finished goods | | 1,193,552 |
| | 1,124,660 |
|
Work in process | | 516,362 |
| | 593,197 |
|
Parts inventory | | 1,349,687 |
| | 1,276,940 |
|
| | $ | 5,526,094 |
| | $ | 6,212,619 |
|
As of December 31, 2020 and December 31, 2019, the Company recorded a lower of cost or net realizable value write-down on corn inventory of approximately $0 and $424,000, ethanol inventory of approximately $0 and $167,000, distillers grains inventory of approximately $13,000 and $72,000, and corn oil inventory of approximately $0 and $0, respectively.
NOTE 4.5 - INVESTMENTS
Dakota Ethanol has a 7%5% investment interest in the Company’s ethanol marketer, Renewable Products Marketing Group, LLC (RPMG). The net income which is reported in the Company’s income statement for RPMG is based on RPMG’s September 30, 2017, 20162020, 2019 and 20152018 audited results. The carrying amount of the Company’s investment was approximately $1,206,000$1,208,000 and $1,283,000$1,295,000 as of December 31, 20172020 and 2016,2019, respectively.
Dakota Ethanol has a 6% investment interest in Prairie Gold Venture Partnership, LLC (PGVP), a venture capital fund investing in cellulosic ethanol production. The net income which is reported in the Company’s income statement for PGVP is based on PGVP’s June 30, 2017, 2016 and 2015 unaudited interim results. The carrying amount of the Company’s investment was approximately $0 and $308,000 as of December 31, 2017 and 2016, respectively. During 2017, Dakota Ethanol determined an other than temporary decline in value had occurred and wrote off the remaining $308,000 balance of the investment as it was considered impaired and worthless. This charge in included in the equity in net income of investments on the consolidated statements of operations for the year ended December 31, 2017.
Dakota Ethanol has a 10% investment interest in Lawrenceville Tanks, LLC (LT), a partnership to construct and operate an ethanol storage terminal in Georgia. The net income which is reported in the Company’s income statement for LT is based on LT’s December 31, 2017, 20162020, 2019 and 20152018 unaudited results. The carrying amount of the Company’s investment was approximately $327,000$194,000 and $460,000$251,000 as of December 31, 20172020 and 20162019, respectively.
Lake Area Corn Processors has a 10% investment interest in Guardian Hankinson, LLC (GH), a partnership to operate an ethanol plant in North Dakota. The net income which is reported in the Company’s income statement for GH is based on GH’s December 31, 2017, 20162020, 2019 and 20152018 audited results. The carrying amount of the Company’s investment was approximately $7,151,000$5,012,000 and $9,108,000$4,991,000 as of December 31, 20172020 and 20162019, respectively.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
Lake Area Corn Processors has a 17% investment interest in Guardian Energy Management, LLC (GEM), a partnership to provide management services to ethanol plants. The net income which is reported in the Company’s income statement for GEM is based
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
on GEM’s December 31, 2017, 20162020, 2019 and 20152018 unaudited interim results. The carrying amount of the Company’s investment was approximately $33,000$90,000 and $33,000$53,000 as of December 31, 20172020 and 2016.2019, respectively.
Lake Area Corn Processors has an 11% investment interest in Ring-neck Energy & Feed, LLC (REF), a partnership to operate an ethanol plant in South Dakota. The net income which is reported in the Company’s income statement for REF is based on REF’s December 31, 2017 unaudited interim2020 and 2019 audited results. The carrying amount of the Company’s investment was approximately $10,023,000$10,134,000 and $10,093,000 as of December 31, 2017. 2017 is2020 and 2019, respectively. REF commenced operations during the initial year for the investment in REF andsecond quarter of 2019. Prior to then, the ethanol plant is currentlywas under construction. The carrying amount of the investment exceeds the underlying equity in net assets by approximately $619,000.$1,057,000. The excess will beis comprised of a basis adjustment of approximately $434,000 and capitalized interest of $623,000. The excess is amortized over 10 years when the plant becomes operational.20 years. The amortization will beis recorded in equity in net income of investments.
Condensed, combined unaudited financial information of the Company's investments in RPMG, PGVP, LT, GH, GEM and REF are as follows:
| | | | | | | | | | | | | | | | | | | | |
Balance Sheet | | 12/31/2020 | | 12/31/2019 | | 12/31/2018 |
| | | | | | |
Current assets | | $ | 218,336,920 | | | $ | 219,618,012 | | | $ | 189,839,430 | |
Other assets | | 201,926,053 | | | 226,475,381 | | | 234,748,455 | |
Current liabilities | | 209,538,950 | | | 187,381,453 | | | 175,836,322 | |
Long-term liabilities | | 48,854,217 | | | 95,219,540 | | | 78,589,892 | |
Member's equity | | 161,869,806 | | | 163,492,402 | | | 170,161,671 | |
Revenue | | 340,154,906 | | | 340,501,873 | | | 259,608,606 | |
Gross Profit | | 20,816,381 | | | 25,379,382 | | | 19,785,310 | |
Net Income | | 2,718,232 | | | 1,854,185 | | | 5,361,104 | |
|
| | | | | | | | | | | | |
Balance Sheet | | 12/31/2017 | | 12/31/2016 | | 12/31/2015 |
| | | | | | |
Current assets | | $ | 212,154,680 |
| | $ | 178,539,108 |
| | $ | 157,550,341 |
|
Other assets | | 164,254,183 |
| | 151,378,628 |
| | 163,122,840 |
|
Current liabilities | | 131,152,747 |
| | 140,898,148 |
| | 115,222,336 |
|
Long-term liabilities | | 54,754,437 |
| | 49,924,355 |
| | 37,502,031 |
|
Member's equity | | 190,501,679 |
| | 139,095,233 |
| | 167,948,814 |
|
Revenue | | 255,154,945 |
| | 255,245,069 |
| | 259,096,005 |
|
Gross Profit | | 33,033,635 |
| | 42,635,837 |
| | 35,135,377 |
|
Net Income | | 19,482,340 |
| | 29,555,855 |
| | 25,650,869 |
|
The following table shows the condensed financial information of Guardian Hankinson; the earnings in which represents greater than 10% of the Company's net income for the year ended December 31, 2017.
|
| | | | | | | | | | | | |
Balance Sheet | | 12/31/2017 | | 12/31/2016 | | 12/31/2015 |
| | | | | | |
Current assets | | $ | 22,771,808 |
| | $ | 31,337,860 |
| | $ | 30,957,066 |
|
Other assets | | 117,344,930 |
| | 133,415,881 |
| | 144,336,737 |
|
Current liabilities | | 17,619,748 |
| | 23,822,812 |
| | 21,819,143 |
|
Long-term liabilities | | 51,352,566 |
| | 49,856,355 |
| | 37,502,031 |
|
Members' equity | | 71,144,424 |
| | 91,074,574 |
| | 115,972,629 |
|
Revenue | | 239,421,949 |
| | 237,885,377 |
| | 240,928,085 |
|
Gross Profit | | 22,456,677 |
| | 30,731,135 |
| | 21,352,587 |
|
Net Income | | 17,422,533 |
| | 25,601,946 |
| | 19,838,398 |
|
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
The following table shows the condensed financial information of Ring-neck Energy & Feed; the investment in which represents greater than 10% of the Company's assets as of December 31, 2017.
|
| | | | |
Balance Sheet | | 12/31/2017 |
| | |
Current assets | | $ | 50,000,088 |
|
Other assets | | 42,640,650 |
|
Current liabilities | | 4,716,781 |
|
Long-term liabilities | | 3,230,871 |
|
Members' equity | | 84,693,086 |
|
Revenue | | — |
|
Gross Profit | | — |
|
Net Income | | (253,522 | ) |
The Company recorded equity in net income of approximately $1,742,000, $2,561,000 and $1,984,000 from GH for the years ended December 31, 2017, 2016 and 2015 respectively. The Company recorded equity in net (loss) of approximately ($123,000) from REF for the year ended December 31, 2017. The Company recorded equity in net income (loss) of approximately $(160,000), $267,000$344,000, $(61,000) and $212,000$403,000 from our other investments for the years ended December 31, 2017, 20162020, 2019 and 20152018 respectively. The Company received distributions of approximately $390,000, $1,191,000 and $2,290,000 for our investments for the years ended December 31, 2020, 2019 and 2018 respectively. The Company has undistributed net earnings in investees of approximately $627,000$662,000 and $680,000$713,000 as of December 31, 20172020 and 2016,2019, respectively.
NOTE 5.6 - REVOLVING OPERATING NOTE
On November 1, 2016,February 6, 2018, Dakota Ethanol executed a revolving promissory note with Farm Credit Services of America (FCSA) in the amount up to $10,000,000 or the amount available in accordance with the borrowing base calculation.calculation, whichever is less. Dakota Ethanol amended the note agreement with FCSA in June of 2020. Under the amendment, the available credit under the revolving operating note was reduced to $2,000,000. Interest on the outstanding principal balances will accrue at 300 basis points above the 1 monthone-month LIBOR rate and is not subject to a floor. The rate was 4.35%3.15% at December 31, 2017.2020. There is a non-use fee of 0.25% on the unused portion of the $10,000,000$2,000,000 availability. The note is collateralized by substantially all assets of the Company. The note expires on November 1, 2019.2021. On December 31, 2017,2020, Dakota Ethanol had $00 outstanding and approximately $2,047,0000 available to be drawn on the revolving promissory note under the borrowing base.
NOTE 6.7 - LONG-TERM NOTES PAYABLE
On November 11, 2014, Dakota Ethanol executed a reducing revolving promissory note from FCSA in the amount of $15,000,000. The amount Dakota Ethanol can borrow on the note decreases by $750,000 semi-annually starting on April 1, 2015 until the maximum balance reaches $7.5 million on October 1, 2019. The note matures on October 1, 2024. Interest on the outstanding principal balance will accrue at 325 basis points above the 1 month LIBOR rate and is not subject to a floor. The rate was 4.60% at December 31, 2017. The note contains a non-use fee of 0.50% on the unused portion of the note. On December 31, 2017, Dakota Ethanol had $1,000 outstanding and $10,499,000 available to be drawn on the note.
On August 1, 2017, Dakota Ethanol executed a term note from FCSA in the amount of $8,000,000. Dakota Ethanol agreed to make monthly interest payments starting September 1, 2017 and annual principal payments of $1,000,000 starting on August 1, 2018. The payment on August 1, 2020 was deferred after the note was amended with FCSA and is now due on August 1, 2025. The notes matures on August 1, 2025. Interest on the outstanding principal balance will accrue at 325 basis points above the 1 monthone-month LIBOR rate until February 1, 2023 and is not subjectincreases to a floor.350 basis points thereafter until maturity. The rate was 4.60%3.40% at December 31, 2017.2020. On December 31, 2017,2020, Dakota Ethanol had $8,000,000$6,000,000 outstanding on the note.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
On February 6, 2018, Dakota Ethanol executed a reducing revolving promissory note from FCSA in the amount up to $40,000,000 or the amount available in accordance with the borrowing availability under the credit agreement. Dakota Ethanol amended the note agreement with FCSA in June of 2020. Under the amendment, the available credit on the reducing revolving note was increased to $48,000,000. The amount Dakota Ethanol can borrow on the note decreases by $1,750,000 semi-annually starting on July 1, 2021 until the maximum balance reaches $32,250,000 on July 1, 2025. The note matures on January 1, 2026. Interest on the outstanding principal balance will accrue at 325 basis points above the one-month LIBOR rate until February 1, 2023 and increases to 350 basis points thereafter until maturity. The rate was 3.40% at December 31, 2020. The note contains a non-use fee of 0.50% on the unused portion of the note. On December 31, 2020, Dakota Ethanol had $30,000,000 outstanding and $18,000,000 available to be drawn on the note.
As part of the note payable agreement, Dakota Ethanol is subject to certain restrictive covenants establishing financial reporting requirements, distribution and capital expenditure limits, minimum debt service coverage ratios, net worth and working capital requirements. Dakota Ethanol is also restricted from making distributions to Lake Area Corn Processors without the consent of the lender. The note is collateralized by substantially all assets of the Company. The note payable agreement was amended in June 2020 with modifications to the requirements. The working capital covenant was reduced to $11,000,000 and the net worth covenant was reduced to $18,000,000. The next measurement date for the debt service coverage ratio was deferred until December 31, 2021. Management's current financial projections indicate that we will be in compliance with our revised financial covenants for the next 12 months and we expect to remain in compliance thereafter.
The Company entered into a loan agreement with the Small Business Association through First State Bank, Gothenburg, NE on April 4, 2020 for $760,400 as part of the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The loan matures in January 2023 and has an interest rate of 1%. Proceeds of the loan are restricted for use towards payroll costs and other allowable uses such as covered utilities for incurred before December 31, 2020 under the Paycheck Protection Program Rules. Provisions of the agreement allow for a portion of the loan to be forgiven if certain qualifications are met. The Company has applied for forgiveness of this loan. The Paycheck Protection Program Flexibility Act, which was put into effect on June 5, 2020, may effect the terms of our loan.
The Company also received an Economic Injury Disaster Loan (EIDL) in the amount of $10,000 in June 2020. Repayment of the loan will begin in June 2021 and has a 30 year term at 3.75% interest.
The balance of the notes payable as of December 31, 2020 and 2019 is as follows:
| | | | | | | | | | | | | | |
| | 2020 | | 2019 |
| | | | |
Note Payable - FCSA | | $ | 36,000,000 | | | $ | 39,000,000 | |
Note Payable - Other | | 770,400 | | | 0 | |
Less unamortized debt issuance costs | | (7,535) | | | (10,792) | |
| | 36,762,865 | | | 38,989,208 | |
Less current portion | | (1,201,628) | | | (1,000,000) | |
| | $ | 35,561,237 | | | $ | 37,989,208 | |
Principal maturities for the next five years are estimated as follows:
| | | | | | | | | | |
| | | | |
Years Ending December 31, | | Principal | | |
2021 | | $ | 1,201,628 | | | |
2022 | | 1,510,504 | | | |
2023 | | 1,048,847 | | | |
2024 | | 1,000,208 | | | |
2025 | | 2,000,215 | | | |
thereafter | | 30,008,998 | | | |
| | $ | 36,770,400 | | | |
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 20162020, 2019 AND 20152018
The balances of the notes payable are as follows:
|
| | | | | | | | |
| | December 31, 2017 |
| | December 31, 2016* |
| | | | |
Note Payable - FCSA | | $ | 8,001,000 |
| | $ | 1,000 |
|
Less unamortized debt issuance costs
| | (29,056 | ) | | — |
|
| | 7,971,944 |
| | 1,000 |
|
Less current portion | | (1,000,000 | ) | | — |
|
| | $ | 6,971,944 |
| | $ | 1,000 |
|
*Derived from audited financial statements | | | | |
Principal maturities for the next five years are estimated as follows:
|
| | | | |
| | |
Years Ending December 31, | | Principal |
2018 | | $ | 1,000,000 |
|
2019 | | 1,000,000 |
|
2020 | | 1,000,000 |
|
2021 | | 1,000,000 |
|
2022 | | 1,000,000 |
|
thereafter | | 3,001,000 |
|
NOTE 7.8 - EMPLOYEE BENEFIT PLANS
Dakota Ethanol maintains a 401(k) plan for the employees who meet the eligibility requirements set forth in the plan documents. Dakota Ethanol matches a percentage of the employees' contributed earnings. Employer contributions to the plan totaled approximately $104,000, $103,000$133,000, $123,000 and $103,000$113,000 for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively.
NOTE 9 - FAIR VALUE MEASUREMENTS
The Company complies with the fair value measurements and disclosures standard which defines fair value, establishes a framework for measuring fair value, and expands disclosure for those assets and liabilities carried on the balance sheet on a fair value basis.
The Company’s balance sheet contains derivative financial instruments that are recorded at fair value on a recurring basis. Fair value measurements and disclosures require that assets and liabilities carried at fair value be classified and disclosed according to the process for determining fair value. There are three levels of determining fair value.
Level 1 uses quoted market prices in active markets for identical assets or liabilities.
Level 2 uses observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3 uses unobservable inputs that are not corroborated by market data.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
Derivative financial instruments. Commodity futures and options contracts are reported at fair value utilizing Level 1 inputs. For these contracts, the Company obtains 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 CBOT and NYMEX markets. Over-the-counter commodity options contracts are reported at fair value utilizing Level 2 inputs. For these contracts, the Company obtains 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 over-the-counter markets. Forward purchase contracts are reported at fair value utilizing Level 2 inputs. For these contracts, the Company obtains fair value measurements from local grain terminal bid values. The fair value measurements consider observable data that may include live trading bids from local elevators and processing plants which are based off the CBOT markets.
The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total | | Level 1 | | Level 2 | | Level 3 |
December 31, 2020 | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
| | | | | | | | |
Forward contracts | | $ | 1,742,054 | | | $ | 0 | | | $ | 1,742,054 | | | $ | 0 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Derivative financial instruments, futures and options contracts | | $ | 1,799,688 | | | $ | 1,799,688 | | | $ | 0 | | | $ | 0 | |
Forward contracts | | 244,181 | | | 0 | | | 244,181 | | | 0 | |
| | | | | | | | |
December 31, 2019 | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Derivative financial instruments, futures and options contracts | | $ | 33,338 | | | $ | 33,338 | | | $ | 0 | | | $ | 0 | |
Forward contracts | | 160,687 | | | 0 | | | 160,687 | | | 0 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Derivative financial instruments, futures and options contracts | | $ | 1,500 | | | $ | 1,500 | | | $ | 0 | | | $ | 0 | |
Forward contracts | | 698,850 | | | 0 | | | 698,850 | | | 0 | |
During the years ended December 31, 2020 and 2019, the Company did not make any changes between Level 1 and Level 2 assets and liabilities. As of December 31, 2020 and 2019, the Company did not have any Level 3 assets or liabilities.
Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and financial liabilities measured at fair value on a non-recurring basis were not significant at December 31, 2020 and 2019.
Disclosure requirements for fair value of financial instruments require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above.
The Company believes the carrying amount of cash and cash equivalents (level 1), accounts receivable (level 2), accounts payable and accruals (level 2) and short-term debt (level 2) approximates fair value.
The carrying amount of long-term obligations (level 3) at December 31, 2020 of $36,770,400 had an estimated fair value of approximately $36,770,400 based on estimated interest rates for comparable debt. The carrying amount of long-term obligations at December 31, 2019 of $39,000,000 had an estimated fair value of approximately $39,000,000.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company complies with the fair value measurements and disclosures standard which defines fair value, establishes a framework for measuring fair value, and expands disclosure for those assets and liabilities carried on the balance sheet on a fair value basis.
The Company’s balance sheet contains derivative financial instruments that are recorded at fair value on a recurring basis. Fair value measurements and disclosures require that assets and liabilities carried at fair value be classified and disclosed according to the process for determining fair value. There are three levels of determining fair value.
Level 1 uses quoted market prices in active markets for identical assets or liabilities.
Level 2 uses observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3 uses unobservable inputs that are not corroborated by market data.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
Derivative financial instruments. Commodity futures and options contracts are reported at fair value utilizing Level 1 inputs. For these contracts, the Company obtains 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 CBOT and NYMEX markets. Over-the-counter commodity options contracts are reported at fair value utilizing Level 2 inputs. For these contracts, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
include dealer quotes and live trading levels from the over-the-counter markets. Forward purchase contracts are reported at fair value utilizing Level 2 inputs. For these contracts, the Company obtains fair value measurements from local grain terminal bid values. The fair value measurements consider observable data that may include live trading bids from local elevators and processing plants which are based off the CBOT markets.
The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2017 and 2016, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
|
| | | | | | | | | | | | | | | | |
| | Total | | Level 1 | | Level 2 | | Level 3 |
December 31, 2017 | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Derivative financial instruments, futures contracts | | $ | 119,825 |
| | $ | 119,825 |
| | $ | — |
| | $ | — |
|
forward contracts | | 3,856 |
| | — |
| | 3,856 |
| | — |
|
| | | | | | | | |
Liabilities: | | | | | | | | |
Derivative financial instruments, futures contracts | | $ | (1,363 | ) | | $ | (1,363 | ) | | $ | — |
| | $ | — |
|
forward contracts | | (410,785 | ) | | — |
| | (410,785 | ) | | — |
|
| | | | | | | | |
December 31, 2016 | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Derivative financial instruments, futures contracts | | $ | 246,900 |
| | $ | 246,900 |
| | $ | — |
| | $ | — |
|
forward contracts | | 6,491 |
| | — |
| | 6,491 |
| | — |
|
| | | | | | | | |
Liabilities: | | | | | | | | |
Derivative financial instruments, futures contracts | | $ | (12,575 | ) | | $ | (12,575 | ) | | $ | — |
| | $ | — |
|
forward contracts | | (827,786 | ) | | — |
| | (827,786 | ) | | — |
|
During the years ended December 31, 2017 and 2016, the Company did not make any changes between Level 1 and Level 2 assets and liabilities. As of December 31, 2017 and 2016, the Company did not have any Level 3 assets or liabilities.
Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and financial liabilities measured at fair value on a non-recurring basis were not significant at December 31, 2017 and 2016.
Disclosure requirements for fair value of financial instruments require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non recurring basis are discussed above. The methodologies for other financial assets and financial liabilities are discussed below.
The Company believes the carrying amount of cash and cash equivalents (level 1), accounts receivable (level 2), other receivables (level 2), accounts payable and accruals (level 2) and short-term debt (level 3) approximates fair value due to the short maturity of these instruments.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
The carrying amount of long-term obligations (level 3) at December 31, 2017 of $8,001,000 had an estimated fair value of approximately $8,001,000 based on estimated interest rates for comparable debt. The carrying amount of long-term obligations at December 31, 2016 of $1,000 had an estimated fair value of approximately $1,000 based on estimated interest rates for comparable debt.
NOTE 9.10 - COMMITMENTS, CONTINGENCIES AND AGREEMENTS
Dakota Ethanol has entered into contracts and agreements regarding the operation of the ethanol plant as follows:
Natural Gas - The agreement providesagreements provide Dakota Ethanol with a fixed transportation rateand distribution services for natural gas for a ten-year term through August 2021,October 2028, and is renewable annually thereafter. Fees for the services are at tariff rates approved by regulatory agencies. The agreement does not require minimum purchases of natural gas during their initial term.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
Electricity - The agreement provides Dakota Ethanol with electric service for a term of one year.through June 2029. The contract automatically renews unless prior notice of cancellation is given. The agreement sets rates for energy usage based on market rates and requires a minimum purchase of electricitycharge each month during the term of the agreement.
Expenses related to the agreementagreements for the purchase of electricity and natural gas were approximately $7,259,000, $6,510,000,$8,899,000, $8,157,000, and $7,013,000,$6,322,000, for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively.
Minimum annual payments during the term of the electricity agreement are as follows:
| | | | | | | | |
Years Ending December 31, | | Amount |
2021 | | $184,800 |
2022 | | 184,800 |
2023 | | 184,800 |
2024 | | 184,800 |
2025 | | 184,800 |
thereafter | | 646,800 |
|
| | |
Years Ending December 31, | | Amount |
2018 | | $584,280 |
Ethanol Fuel Marketing Agreement - Dakota Ethanol has an agreement with RPMG (a related party, see note 10)11), a joint venture of ethanol producers, for the sale, marketing, billing and receipt of payment and other administrative services for all ethanol produced by the plant. The agreement continues indefinitely unless terminated under terms set forth in the agreement.
DistillersDistiller's Grain Marketing Agreement - Dakota Ethanol has an agreement with RPMG (a related party, see note 10)11), for the marketing of all distillersdistiller's dried grains produced by the plant. The agreement expires on July 15, 2018 and is automatically renewed for successive one year termscontinues indefinitely unless terminated 180 days prior to expiration.under terms set forth in the agreement.
Corn Oil Marketing Agreement - Dakota Ethanol has an agreement with RPMG (a related party, see note 10)11), for the marketing of all corn oil produced by the plant. The agreement expires on August 11, 2018 and is automatically renewed for successive one year termscontinues indefinitely unless terminated 180 days prior to expiration.under terms set forth in the agreement.
During the years ended December 31, 2016 and 2015, Dakota Ethanol received an incentive payment from the State of South Dakota to produce ethanol. In accordance with the terms of this arrangement, revenue is recorded based on gallons of ethanol sold. Incentive revenue of $0, $378,307 and $416,667, was recorded for the years ended December 31, 2017, 2016 and 2015, respectively. Dakota Ethanol reached the lifetime maximum under the program during 2016 and will no longer receive funds under the program.
From time to time in the normal course of business, the Company can be subject to litigation based on its operations. There is no current litigation nor any litigation that is considered probable at this time.
NOTE 11 - RELATED PARTY TRANSACTIONS
Dakota Ethanol has a 5% interest in RPMG, and Dakota Ethanol has entered into marketing agreements for the exclusive rights to market, sell and distribute the entire ethanol, dried distiller's grains, and corn oil inventories produced by Dakota Ethanol. The marketing fees are included in net revenues. Dakota Ethanol also purchases denaturant from RPMG. Amounts due from RPMG are presented as accounts receivable (related party) on the balance sheet.
Revenues and marketing fees related to the agreements are as follows:
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | | | | | |
Revenues ethanol | | $ | 99,280,464 | | | $ | 90,555,111 | | | $ | 57,876,705 | |
Revenues distillers grains | | 9,541,074 | | | 5,108,266 | | | 1,801,956 | |
Revenues corn oil | | 5,969,230 | | | 4,406,438 | | | 2,334,245 | |
| | | | | | |
Marketing fees ethanol | | $ | 203,101 | | | $ | 242,607 | | | $ | 254,555 | |
Marketing fees distillers grains | | 68,354 | | | 36,935 | | | 12,294 | |
Marketing fees corn oil | | 44,778 | | | 36,457 | | | 18,824 | |
Denaturant purchases | | 1,503,071 | | | 918,071 | | | 755,521 | |
| | | | | | |
| | | | | | |
Amounts due to RPMG | | 47,073 | | | 46,234 | | | 36,586 | |
The Company purchased corn and services from members of its Board of Directors that farm and operate local businesses. Corn purchases from these related parties during the fiscal years ended December 31, 2020, 2019 and 2018 totaled approximately $1,022,000, $1,084,000 and $604,000, respectively. As of December 31, 2020 and 2019, the Company did not have any outstanding obligations to these related parties.
NOTE 10. RELATED PARTY TRANSACTIONS12 - CAPTIVE INSURANCE
Dakota Ethanol hasThe Company participates, along with other plants in the industry, in a 7% interestgroup captive insurance company (Captive). The Captive insures losses related to workman's compensation, commercial property and general liability. The Captive reinsures catastrophic losses for all participants, including the Company, in RPMG, and Dakota Ethanol has entered into marketing agreementsexcess of predetermined amounts. The Company's premiums are accrued by a charge to income for the exclusive rightsperiod to market, sellwhich the premium relates and distributeis remitted by the entire ethanol, dried distillers grains,Company's insurer to the captive reinsurer. These premiums are structured such that the Company has made a prepaid collateral deposit estimated for losses related to the above coverage. The Captive insurer has estimated and corn oil inventories producedcollected an amount in excess of the estimated losses but less than the catastrophic loss limit insured by Dakota Ethanol.the Captive. The marketing fees are includedCompany cannot be assessed over the amount in net revenues.the collateral fund.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 20162020, 2019 AND 20152018
NOTE 13 - QUARTERLY FINANCIAL REPORTING (UNAUDITED)
Revenues and marketing fees related to the agreements
Summary quarterly results are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter |
Year ended December 31, 2020 | | | | | | | |
Total revenues | $ | 32,456,238 | | | $ | 25,424,832 | | | $ | 33,917,787 | | | $ | 38,722,957 | |
Gross profit (loss) | (7,849,642) | | | 5,611,925 | | | 6,046,492 | | | 2,219,771 | |
Income (loss) from operations | (9,189,480) | | | 4,666,216 | | | 5,054,469 | | | 1,079,267 | |
Net income (loss) | (10,475,043) | | | 4,213,375 | | | 5,810,426 | | | 1,506,881 | |
Basic and diluted earnings (loss) per unit | (0.35) | | | 0.14 | | | 0.20 | | | 0.05 | |
| | | | | | | |
Year ended December 31, 2019 | | | | | | | |
Total revenues | $ | 21,613,298 | | | $ | 26,096,989 | | | $ | 32,441,510 | | | $ | 35,835,024 | |
Gross profit (loss) | 2,450,262 | | | 1,298,964 | | | (1,815,202) | | | (634,434) | |
Income (loss) from operations | 1,440,935 | | | 372,585 | | | (2,786,864) | | | (1,787,409) | |
Net income (loss) | 1,790,204 | | | (192,897) | | | (3,599,789) | | | (1,821,702) | |
Basic and diluted earnings (loss) per unit | 0.06 | | | (0.01) | | | (0.12) | | | (0.06) | |
| | | | | | | |
Year ended December 31, 2018 | | | | | | | |
Total revenues | $ | 19,804,272 | | | $ | 20,077,335 | | | $ | 18,796,356 | | | $ | 16,025,667 | |
Gross profit | 2,612,121 | | | 2,065,457 | | | 718,120 | | | 688,238 | |
Income (loss) from operations | 1,628,878 | | | 1,073,009 | | | (153,933) | | | (301,677) | |
Net income (loss) | 1,876,697 | | | 1,466,978 | | | (182,218) | | | (444,870) | |
Basic and diluted earnings (loss) per unit | 0.06 | | | 0.05 | | | (0.01) | | | (0.01) | |
NOTE 14 - PARENT FINANCIAL STATEMENTS
|
| | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| | | | | | |
Revenues ethanol | | $ | 67,186,350 |
| | $ | 69,398,350 |
| | $ | 67,581,517 |
|
Revenues distillers grains | | 4,225,707 |
| | 5,254,492 |
| | 6,205,391 |
|
Revenues corn oil | | 3,088,510 |
| | 2,860,912 |
| | 2,979,581 |
|
| | | | | | |
Marketing fees ethanol | | 249,645 |
| | 187,431 |
| | 168,796 |
|
Marketing fees distillers grains | | 31,993 |
| | 32,979 |
| | 35,289 |
|
Marketing fees corn oil | | 19,481 |
| | 18,239 |
| | 29,724 |
|
| | | | | | |
Accounts receivable balance at period end | | 2,749,502 |
| | 3,695,561 |
| | 939,705 |
|
The Company purchased cornfollowing financial information represents the unconsolidated financial statements of Lake Area Corn Processors, LLC as of December 31, 2020 and services from members of its Board of Directors that farm2019, and operate local businesses. The Company also purchased ingredients from RPMG. Purchases from these related parties duringfor the fiscal years ended December 31, 2017, 20162020, 2019 and 2015 totaled approximately $1,099,000, $1,890,000 and $1,694,000, respectively. As of December 31, 2017 and 2016, the amount we owed2018. The Company’s ability to related parties was approximately $45,000 and $40,000, respectively.
NOTE 11. TIF BOND GUARANTEE
During December 2003,receive distributions from its wholly owned subsidiary, Dakota Ethanol, entered into an agreement to guarantee a bond issued by Lake County, South Dakota. The bond issue was in conjunction with the refunding of the tax increment financing (TIF) bond issued by Lake County in 2001, of which Dakota Ethanol was the recipient of the proceeds. During 2003, Lake County became aware that the taxes collectedLLC, is based on the incremental tax would not be sufficientterms and conditions set forth in the Third Amendment to coverits credit agreement with Farm Credit Services of America, PCA and Farm Credit Services of America, FLCA. Under the debt serviceThird Amendment, Dakota Ethanol is restricted from making distributions to the Company without the consent of the 2001 bond issue. Based on the aforementioned deficiency and changes in interest rate during Decemberlender.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
The taxes levied on Dakota Ethanol's property will first go towards the semiannual debt service of the tax-exempt bonds and any remaining taxes will be used for the debt service of the taxable bonds. Dakota Ethanol guarantees any shortfall in debt service for the taxable bonds. The guarantee expires in December 2018.
The maximum amount of estimated future payments on the taxable bond debt service is $152,217 as of December 31, 2017. The carrying amount of the guarantee liability on Dakota Ethanol'sunconsolidated balance sheet at December 31, 2017 is$9,555, which represents the estimated shortfall between the taxable bond amount and the amount of taxes estimated to be collected on Dakota Ethanol's property.
Estimated maturities of the guarantee are as follows:
| | | | | | | | | | | |
LAKE AREA CORN PROCESSORS, LLC | | | |
UNCONSOLIDATED BALANCE SHEETS | | | |
| | | |
| December 31, 2020 | | December 31, 2019 |
ASSETS | | | |
| | | |
CURRENT ASSETS | | | |
Cash and cash equivalents | $ | 58,505 | | | $ | 33,473 | |
Prepaid expenses | 24,542 | | | 17,084 | |
Total current assets | 83,047 | | | 50,557 | |
| | | |
OTHER ASSETS | | | |
Goodwill | 10,395,766 | | | 10,395,766 | |
Investment in Dakota Ethanol | 39,554,776 | | | 38,630,542 | |
Investments - other | 15,234,990 | | | 15,136,075 | |
Total other assets | 65,185,532 | | | 64,162,383 | |
| | | |
TOTAL ASSETS | $ | 65,268,579 | | | $ | 64,212,940 | |
| | | |
LIABILITIES AND MEMBERS' EQUITY | | | |
| | | |
CURRENT LIABILITIES | | | |
Total current liabilities | 0 | | | 0 | |
| | | |
LONG-TERM LIABILITIES | | | |
Total long-term liabilities | 0 | | | 0 | |
| | | |
MEMBERS' EQUITY (29,620,000 units issued and outstanding) | 65,268,579 | | | 64,212,940 | |
| | | |
TOTAL LIABILITIES AND MEMBERS' EQUITY | $ | 65,268,579 | | | $ | 64,212,940 | |
| | | |
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
|
| | | | |
Years Ending December 31, | | Amount |
2018 | | $ | 9,555 |
|
The unconsolidated statement of operation is as follows:
Dakota Ethanol has no recourse to third parties or collateral held by third parties related to the guarantee. | | | | | | | | | | | | | | | | | |
LAKE AREA CORN PROCESSORS, LLC | | | | | |
UNCONSOLIDATED STATEMENTS OF OPERATIONS | | | | | |
| Year Ended | | Year Ended | | Year Ended |
| December 31, 2020 | | December 31, 2019 | | December 31, 2018 |
EQUITY IN NET INCOME (LOSS) OF CONSOLIDATED SUBSIDIARY | $ | 1,073,965 | | | $ | (3,298,638) | | | $ | 2,785,397 | |
OPERATING EXPENSES | 127,978 | | | 311,001 | | | 337,000 | |
INCOME (LOSS) FROM OPERATIONS | 945,987 | | | (3,609,639) | | | 2,448,397 | |
OTHER INCOME (EXPENSE) | | | | | |
Interest and other income | 10,737 | | | 5,949 | | | 33 | |
Equity in net income (loss) of investments | 98,915 | | | (220,494) | | | 268,157 | |
Total other income (expense) | 109,652 | | | (214,545) | | | 268,190 | |
NET INCOME (LOSS) | $ | 1,055,639 | | | $ | (3,824,184) | | | $ | 2,716,587 | |
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019 AND 2018
The unconsolidated statement of cash flows is as follows:
| | | | | | | | | | | | | | | | | |
LAKE AREA CORN PROCESSORS, LLC | | | | | |
UNCONSOLIDATED STATEMENTS OF CASH FLOWS | | | | | |
| Year Ended | | Year Ended | | Year Ended |
| December 31, 2020 | | December 31, 2019 | | December 31, 2018 |
OPERATING ACTIVITIES | | | | | |
Net income (loss) | $ | 1,055,639 | | | $ | (3,824,184) | | | $ | 2,716,587 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities | | | | | |
Distributions in excess of earnings from investments | (98,915) | | | 1,220,493 | | | 1,893,858 | |
Equity in (earnings) losses of consolidated subsidiary | (1,073,965) | | | 3,298,638 | | | (2,785,397) | |
(Increase) decrease in | | | | | |
Prepaid expenses | (7,456) | | | (275) | | | 0 | |
Increase (decrease) in | | | | | |
Accounts payable | 0 | | | 0 | | | (42,227) | |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | (124,697) | | | 694,672 | | | 1,782,821 | |
| | | | | |
INVESTING ACTIVITIES | | | | | |
Distributions received from consolidated subsidiary | 100,000 | | | 750,000 | | | 2,000,000 | |
Investment in consolidated subsidiary | 0 | | | (1,000,000) | | | (1,100,000) | |
Purchase of investments | 0 | | | (500,000) | | | (10,000) | |
Other investing cash inflow (outflow) | 49,729 | | | 41,338 | | | 280,686 | |
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | 149,729 | | | (708,662) | | | 1,170,686 | |
| | | | | |
FINANCING ACTIVITIES | | | | | |
Distributions to members | 0 | | | 0 | | | (2,962,000) | |
NET CASH USED FOR FINANCING ACTIVITIES | 0 | | | 0 | | | (2,962,000) | |
| | | | | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 25,032 | | | (13,990) | | | (8,493) | |
| | | | | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 33,473 | | | 47,463 | | | 55,956 | |
| | | | | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 58,505 | | | $ | 33,473 | | | $ | 47,463 | |
NOTE 12. CAPTIVE INSURANCE
The Company participates, along with other plants in the industry, in a group captive insurance company (Captive). The Captive insures losses related to workman's compensation, commercial property and general liability. The Captive reinsures catastrophic losses for all participants, including the Company, in excess of predetermined amounts. The Company's premiums are accrued by a charge to income for the period to which the premium relates and is remitted by the Company's insurer to the captive reinsurer.
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
These premiums are structured such that the Company has made a prepaid collateral deposit estimated for losses related to the above coverage. The Captive insurer has estimated and collected an amount in excess of the estimated losses but less than the catastrophic loss limit insured by the Captive. The Company cannot be assessed over the amount in the collateral fund.
NOTE 13. INSURANCE CLAIMS
Dakota Ethanol experienced property damage to grain handling equipment in June 2014. The damages were covered by property and business interruption insurance policies. The Company continued to use the equipment through May 2015, at which time the equipment was disposed of resulting in a loss of approximately $674,000. Insurance proceeds of $3,436,727, consisting of $2,818,955 from the property insurance claim and $617,771 from the business interruption claim were paid. The loss on disposal of damaged assets and property insurance proceeds are both recorded in operating expenses in the statements of operations.
NOTE 14 - COMMITMENTS
Dakota Ethanol has committed to a contract for the design and construction of a new regenerative thermal oxidizer (RTO) to replace its existing RTO. The value of the contract is approximately $4.6 million. There is approximately $1.7 million remaining as of December 31, 2017. The project is expected to be completed in the second quarter of 2018. The Company will pay for the project with cash flows from operations and the long-term revolving debt currently in place.
Dakota Ethanol entered into a design-build agreement with Nelson Engineering Co. for the design and construction of the plant expansion to increase its production capacity to approximately 90 million gallons of ethanol per year. The cost of the expansion is expected to be approximately $33 million. The Company has commenced engineering work with the contractor and has secured financing with its lender for the expansion project. The Company anticipates that the expansion will be complete during the Company's second quarter of 2019. The Company will pay for the project with cash flows from operations and the long-term revolving debt as amended on February 6, 2018.
NOTE 15. QUARTERLY FINANCIAL REPORTING (UNAUDITED)
Summary quarterly results are as follows:
|
| | | | | | | | | | | | | | | |
| First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter |
Year ended December 31, 2017 | | | | | | | |
Total revenues | $ | 22,713,628 |
| | $ | 21,612,598 |
| | $ | 19,479,798 |
| | $ | 21,015,764 |
|
Gross profit | 2,220,455 |
| | 2,015,355 |
| | 1,968,680 |
| | 2,363,353 |
|
Income from operations | 1,213,883 |
| | 1,151,750 |
| | 1,134,221 |
| | 1,350,698 |
|
Net income | 1,610,424 |
| | 1,314,299 |
| | 1,815,347 |
| | 1,645,013 |
|
Basic and diluted earnings per unit | 0.05 |
| | 0.04 |
| | 0.06 |
| | 0.07 |
|
| | | | | | | |
Year ended December 31, 2016 | | | | | | | |
Total revenues | $ | 21,623,796 |
| | $ | 21,944,230 |
| | $ | 20,983,806 |
| | $ | 24,260,718 |
|
Gross profit | 1,254,612 |
| | 2,839,644 |
| | 2,806,148 |
| | 5,814,285 |
|
Income from operations | 319,378 |
| | 1,979,265 |
| | 1,927,830 |
| | 4,846,129 |
|
Net income | 659,621 |
| | 2,529,919 |
| | 2,610,395 |
| | 5,605,273 |
|
Basic and diluted earnings per unit | 0.02 |
| | 0.09 |
| | 0.09 |
| | 0.19 |
|
| | | | | | | |
Year ended December 31, 2015 | | | | | | | |
Total revenues | $ | 20,715,145 |
| | $ | 23,680,338 |
| | $ | 22,038,423 |
| | $ | 22,564,041 |
|
Gross profit | 709,131 |
| | 2,860,830 |
| | 2,221,102 |
| | 1,761,114 |
|
Income (loss) from operations | (367,802 | ) | | 2,816,205 |
| | 1,448,138 |
| | 1,827,847 |
|
Net income | 238,949 |
| | 4,572,389 |
| | 1,850,884 |
| | 1,991,308 |
|
Basic and diluted earnings per unit | 0.01 |
| | 0.15 |
| | 0.06 |
| | 0.07 |
|
LAKE AREA CORN PROCESSORS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 2016 AND 2015
NOTE 16. SUBSEQUENT EVENTS
On February 6, 2018, Dakota Ethanol executed an Amended and Restated Credit Agreement (the "Credit Agreement") with FCSA. Pursuant to the Credit Agreement, Dakota Ethanol increased the total credit availability to $40 million. Further, the maturity date of this increased credit availability under the Credit Agreement was extended to January 1, 2026. Until February 1, 2023, interest will accrue pursuant to the Credit Agreement on the increased credit availability at the one month London Interbank Offered Rate ("LIBOR") plus 3.25% per year. The note contains a non-use fee of 0.50% on the unused portion of the note.
During February 2018, the Company declared a distribution to its members of $2,962,000, or $0.10 per capital unit, to unit holders of record as of January 1, 2018.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Our management, including our President and Chief Executive Officer (the principal executive officer), Scott Mundt, along with our Chief Financial Officer (the principal financial officer), Rob Buchholtz, have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of December 31, 2017.2020. Based on this review and evaluation, these officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission; and to ensure that the information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
Inherent Limitations Over Internal Controls
Our internal control over financial reporting is designed 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. Our internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods is subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management's Annual Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in 2013. Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2017.2020.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. As we are a non-accelerated filer, management's report is not subject to attestation by our registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act of 2002 that permits us to provide only management's report in this annual report.
Changes in Internal Control Over Financial Reporting.
There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 20172020 which were identified in connection with management's evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. MANAGERS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEGOVERNANCE.
The information required by this Item is incorporated by reference to the definitive information statement from our 20182021 annual meeting of members to be filed with the Securities and Exchange Commission within 120 days after our 20172020 fiscal year end on December 31, 2017.2020. This information statement is referred to in this report as the 20182021Information Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference to the 20182021 Information Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED MEMBER MATTERS.
The information required by this Item is incorporated by reference to the 20182021 Information Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND MANAGER INDEPENDENCE.
The information required by this Item is incorporated by reference to the 20182021Information Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item is incorporated by reference to the 20182021Information Statement.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits and financial statements are filed as part of, or are incorporated by reference into, this report:
(1)The financial statements appear beginning on page 32 of33 of this report.
(2)All supplemental schedules are omitted because of the absence of conditions under which they are required or because the information is shown in the Consolidated Financial Statements or notes thereto.
(3)The exhibits we have filed herewith or incorporated by reference herein are identified in the Exhibit Index set forth below.
The following exhibits are filed as part of this report. Exhibits previously filed are incorporated by reference, as noted.
|
| | | | | | | | | | | | | | | | |
Exhibit No. | Exhibit | | Filed Herewith | | Incorporated by Reference |
3.2 |
| | | | | Filed as Exhibit 3.6 on the registrant's Form 10-K filed with the Commission on March 31, 2005 and incorporated by reference herein. |
3.3 |
| | | | | Filed as Exhibit 99.1 on the registrant's Form 8-K filed with the Commission on March 19, 2007 and incorporated by reference herein. |
3.4 |
| | | | | Filed as Exhibit 99.1 on the registrant's Form 8-K filed with the Commission on January 10, 2018 and incorporated by reference herein. |
10.1 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on August 14, 2008 and incorporated by reference herein. |
10.2 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on August 14, 2007 and incorporated by reference herein. |
10.3 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-K filed with the Commission on March 30, 2007. |
10.4 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 8-K filed with the Commission on December 2, 2005 and incorporated by reference herein. |
10.5 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on May 15, 2009 and incorporated by reference herein. |
10.6 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on August 12, 2009 and incorporated by reference herein. |
10.7 |
| | | | | Filed as Exhibit 10.2 on the registrant's Form 10-Q filed with the Commission on August 12, 2009 and incorporated by reference herein. |
10.8 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on August 13, 2010 and incorporated by reference herein. |
10.9 |
| | | | | Filed as Exhibit 10.2 on the registrant's Form 10-Q filed with the Commission on August 13, 2010 and incorporated by reference herein. |
10.10 |
| | | | | Filed as Exhibit 10.3 on the registrant's Form 10-Q filed with the Commission on August 13, 2010 and incorporated by reference herein. |
10.11 |
| | | | | Filed as Exhibit 10.22 on the registrant's Form 10-K filed with the Commission on March 30, 2011 and incorporated by reference herein. |
| | | | | | | | | | | | | | | | | |
10.12 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on August 11, 2011 and incorporated by reference herein. |
10.13 |
| | | | | Filed as Exhibit 10.2 on the registrant's Form 10-Q filed with the Commission on August 11, 2011 and incorporated by reference herein. |
|
10.14 | | | | | | |
10.14 |
| | | | | Filed as Exhibit 10.3 on the registrant's Form 10-Q filed with the Commission on August 11, 2011 and incorporated by reference herein. |
10.15 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on May 14, 2012 and incorporated by reference herein. |
10.16 |
| | | | | Filed as Exhibit 10.2 on the registrant's Form 10-Q filed with the Commission on May 14, 2012 and incorporated by reference herein. |
10.17 |
| | | | | Filed as Exhibit 10.3 on the registrant's Form 10-Q filed with the Commission on May 14, 2012 and incorporated by reference herein. |
10.18 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on November 13, 2012 and incorporated by reference herein. |
10.19 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on May 13, 2013 and incorporated by reference herein. |
10.20 |
| | | | | Filed as Exhibit 10.2 on the registrant's Form 10-Q filed with the Commission on May 13, 2013 and incorporated by reference herein. |
10.21 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on August 13, 2013 and incorporated by reference herein. |
10.22 |
| | | | | Filed as Exhibit 10.22 on the registrant's Form 10-K filed with the Commission on February 27, 2014 and incorporated by reference herein. |
10.23 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on November 13, 2014 and incorporated by reference herein. |
10.24 |
| | | | | Filed as Exhibit 10.24 on the registrant's Form 10-K filed with the Commission on February 26, 2015 and incorporated by reference herein. |
10.25 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on May 14, 2015 and incorporated by reference herein. |
10.26 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on November 14, 2016 and incorporated by reference herein. |
| | | | | | | | | | | | | | | | | |
10.27 |
| | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on August 11, 2017 and incorporated by reference herein. |
10.28 |
| | | X | | Filed herewithas Exhibit 10.28 on the registrant's Form 10-K filed with the Commission on March 2, 2018 and incorporated by reference herein. |
10.2810.29 |
| | | X | | Filed herewithas Exhibit 10.29 on the registrant's Form 10-K filed with the Commission on March 2, 2018 and incorporated by reference herein. |
31.1 | 10.30 | | | | | Filed as Exhibit 10.30 on the registrant's Form 10-K filed with the Commission on February 28, 2019 and incorporated by reference herein. |
10.31 | | | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on November 14, 2019 and incorporated by reference herein. |
10.32 | | | | | | Filed as Exhibit 10.1 on the registrant's Form 10-Q filed with the Commission on August 14, 2020 and incorporated by reference herein. |
31.1 | | | | X | | Filed herewith |
31.2 |
| | | X | | Filed herewith |
|
32.1 | | | | | | |
32.1 |
| | | X | | Filed herewith |
32.2 |
| | | X | | Filed herewith |
101 |
| The following financial information from Lake Area Corn Processors, LLC's Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 20172020 and December 31, 2016,2019, (ii) Consolidated Statements of Income for the fiscal years ended December 31, 2017, 20162020, 2019 and 2015,2018, (iii) Statement of Changes in Members' Equity, (iv) Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2017, 20162020, 2019 and 2015,2018, and (v) the Notes to Consolidated Financial Statements.** | | | | |
+ Confidential Treatment Requested
** Furnished herewith.
ITEM 16. FORM 10-K SUMMARYSUMMARY.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | | | | | | | | | |
| LAKE AREA CORN PROCESSORS, LLC |
| |
Date: | March 2, 201812, 2021 | | /s/ Scott Mundt |
| Scott Mundt |
| President and Chief Executive Officer (Principal Executive Officer)
|
| |
Date: | March 2, 201812, 2021 | | /s/ Rob Buchholtz |
| Rob Buchholtz |
| Chief Financial Officer (Principal Financial and Accounting Officer)
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | |
Date: | March 12, 2021 | | /s/ Ronald Alverson |
| | | Ronald Alverson, Manager |
| | | |
Date: | March 2, 201812, 2021 | | /s/ Ronald Alverson |
| | | Ronald Alverson, Manager |
| | | |
Date: | March 2, 2018 | | /s/ Todd Brown |
| | | Todd Brown, Manager |
| | | |
Date: | March 2, 201812, 2021 | | /s/ Randy Hansen |
| | | Randy Hansen, Manager |
| | | |
Date: | March 2, 201812, 2021 | | /s/ Rick Kasperson |
| | | Rick Kasperson, Manager |
| | | |
Date: | March 2, 201812, 2021 | | /s/ Marty Thompson |
| | | Marty Thompson, Manager |
| | | |
Date: | March 2, 201812, 2021 | | /s/ Wayne Backus |
| | | Wayne Backus, Manager |
| | | |
Date: | March 2, 201812, 2021 | | /s/ Dave Wolles |
| | | Dave Wolles, Manager |
| | | |