Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 11, 2018 | |
Document Information [Line Items] | ||
Entity Registrant Name | LAKE AREA CORN PROCESSORS LLC | |
Entity Central Index Key | 1,156,174 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 29,620,000 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 665,270 | $ 5,102,959 |
Accounts receivable | 1,918,171 | 3,186,530 |
Other receivables | 12,375 | 38,704 |
Inventory | 7,347,914 | 5,526,094 |
Derivative financial instruments | 980,056 | 862,840 |
Prepaid expenses | 235,851 | 219,741 |
Total current assets | 11,159,637 | 14,936,868 |
PROPERTY AND EQUIPMENT | ||
Land | 874,473 | 874,473 |
Land improvements | 8,558,720 | 8,558,720 |
Buildings | 8,955,206 | 8,955,206 |
Equipment | 53,060,482 | 53,060,482 |
Construction in progress | 12,263,630 | 8,475,840 |
Gross Property and Equipment | 83,712,511 | 79,924,721 |
Less accumulated depreciation | (40,671,798) | (39,955,791) |
Net property and equipment | 43,040,713 | 39,968,930 |
OTHER ASSETS | ||
Goodwill | 10,395,766 | 10,395,766 |
Investments | 17,945,645 | 18,739,259 |
Other | 131,797 | 31,417 |
Total other assets | 28,473,208 | 29,166,442 |
TOTAL ASSETS | 82,673,558 | 84,072,240 |
CURRENT LIABILITIES | ||
Outstanding checks in excess of bank balance | 947,715 | 674,936 |
Accounts payable | 3,011,387 | 6,123,995 |
Accrued liabilities | 415,241 | 582,487 |
Derivative financial instruments | 97,314 | 410,785 |
Current maturities of notes payable | 1,000,000 | 1,000,000 |
Other | 13,556 | 13,556 |
Total current liabilities | 5,485,213 | 8,805,759 |
LONG-TERM LIABILITIES | ||
Notes payable | 9,983,111 | 6,971,944 |
Other | 8,000 | 12,000 |
Total long-term liabilities | 9,991,111 | 6,983,944 |
COMMITMENTS AND CONTINGENCIES | ||
MEMBERS' EQUITY (29,620,000 units issued and outstanding) | 67,197,234 | 68,282,537 |
TOTAL LIABILITIES AND MEMBERS' EQUITY | $ 82,673,558 | $ 84,072,240 |
Consolidated Balance Sheets Par
Consolidated Balance Sheets Parenthetical - shares | Mar. 31, 2018 | Dec. 31, 2017 |
MEMBERS' EQUITY, units issued and outstanding | 29,620,000 | 29,620,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
REVENUES | $ 19,804,272 | $ 22,713,628 |
COSTS OF REVENUES | 17,192,151 | 20,493,173 |
GROSS PROFIT | 2,612,121 | 2,220,455 |
OPERATING EXPENSES | 983,243 | 1,006,572 |
INCOME FROM OPERATIONS | 1,628,878 | 1,213,883 |
OTHER INCOME (EXPENSE) | ||
Interest and other income | 38,355 | 13,804 |
Equity in net income of investments | 209,464 | 383,725 |
Interest expense | 0 | (988) |
Total other income | 247,819 | 396,541 |
NET INCOME | $ 1,876,697 | $ 1,610,424 |
BASIC AND DILUTED EARNINGS PER UNIT | $ 0.06 | $ 0.05 |
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING FOR THE CALCULATION OF BASIC & DILUTED EARNINGS PER UNIT | 29,620,000 | 29,620,000 |
DISTRIBUTIONS DECLARED PER UNIT | $ 0.10 | $ 0.10 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
OPERATING ACTIVITIES | ||
Net income | $ 1,876,697 | $ 1,610,424 |
Adjustments to reconcile net income to cash (used in) operating activities | ||
Depreciation and amortization | 718,182 | 750,354 |
Distributions in excess of earnings from investments | 890,536 | 1,116,275 |
(Increase) decrease in | ||
Receivables | 1,313,647 | 507,078 |
Inventory | (1,821,820) | (1,748,501) |
Prepaid expenses | (16,107) | 5,774 |
Derivative financial instruments | (430,687) | (461,312) |
Accounts payable | (3,945,111) | (3,571,000) |
Accrued and other liabilities | (171,246) | (298,872) |
NET CASH (USED IN) OPERATING ACTIVITIES | (1,585,909) | (2,089,780) |
INVESTING ACTIVITIES | ||
Purchase of property and equipment | (3,071,172) | (103,366) |
NET CASH (USED IN) INVESTING ACTIVITIES | (3,071,172) | (103,366) |
FINANCING ACTIVITIES | ||
Increase (decrease) in outstanding checks in excess of bank balance | 272,779 | (78,322) |
Notes Payable Issued | 3,000,000 | 0 |
Financing costs paid | 91,387 | 0 |
Distributions paid to members | (2,962,000) | (2,962,000) |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 219,392 | (3,040,322) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (4,437,689) | (5,233,468) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 5,102,959 | 9,993,335 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 665,270 | 4,759,867 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Cash paid during the period for interest, net of capitalized interest of $98,131 and $0 in 2018 and 2017, respectively | 0 | 988 |
Capital expenditures in accounts payable | $ 924,931 | $ 65,123 |
Consolidated Statements of Cas6
Consolidated Statements of Cash Flows (Unaudited) Cash Flow Supplemental - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Supplemental Cash Flow Elements [Abstract] | ||
Interest Paid, Capitalized | $ 98,131 | $ 0 |
Nature of Operations
Nature of Operations | 3 Months Ended |
Mar. 31, 2018 | |
Nature of Operations [Abstract] | |
Nature of Operations | 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 -gallon (annual nameplate capacity) ethanol plant, located near Wentworth, South Dakota. Dakota Ethanol sells ethanol and related products to customers located in North America. In addition, the Company has investment interests in five companies in ethanol-related industries. See note 4 for further details. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The unaudited financial statements contained herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America although the Company believes that the disclosures are adequate to make the information not misleading. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying financial statements. All adjustments are of a normal and recurring nature. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for a full year. These financial statements should be read in conjunction with the financial statements and notes included in the Company’s audited financial statements for the year ended December 31, 2017 , contained in the annual report on Form 10-K for 2017. 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 Effective January 1, 2018, the Company adopted the new guidance of ASC Topic 606, Revenue from Contracts with Customers (Topic 606), using the modified retrospective approach. Topic 606 requires the Company to recognize revenue to depict the transfer of promised 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 new 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 (5) recognize revenue when, or as, the Company satisfies a performance obligation. The Company generally recognizes revenue at a point in time. The majority of the Company’s contracts with customers have one performance obligation and a contract duration of one year or less. The adoption of this new guidance did not result in any changes to our revenue recognition, but did result in expanded disclosures in our consolidated financial statements. The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. • sales of ethanol • 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. The following table depicts the disaggregation of revenue according to product line: Three Months Ended March 31, 2018 2017 Revenues ethanol $ 15,551,566 $ 18,031,330 Revenues distillers grains 3,694,336 2,894,003 Revenues distillers corn oil 558,371 788,295 $ 19,804,273 $ 21,713,628 Contract assets and contract liabilities: The following table provides information about receivables and contract liabilities from contracts with customers: March 31, December 31, 2018 2017* Accounts receivable $ 1,918,171 $ 3,186,530 Short term contract liabilities 124,158 383,338 *Derived from audited financial statements The Company receives payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract. Shipping costs Shipping costs incurred by the Company in the sale of ethanol, dried distillers 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. Operating Segment The Company uses the "management approach" for reporting information about segments in annual and interim financial statements. The management approach is based on the way the chief operating decision-maker organizes segments within a company for making operating decisions and 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, the Company has determined that its business is comprised of a single operating segment. Cost of Revenues The primary components of cost of revenues from the production of ethanol and related co-product 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 distillers 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. 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. 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 as of March 31, 2018 and December 31, 2017 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 or derivative instruments are price risks 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, 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 March 31, 2018 , the Company is committed to purchasing approximately 5 million bushels of corn on a forward contract basis with an average price of $3.45 per bushel. The total corn purchase contracts represent 27% of the annual projected plant corn usage. 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 March 31, 2018 , the Company does not have any firm-price purchase commitments for natural gas. The Company accounts for these transactions as normal purchases, and accordingly, does not mark these transactions to market. 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 March 31, 2018 , the Company is committed to selling approximately 21,000 dry equivalent tons of distillers grains with an average price of $102 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 15% 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 the price is fixed and the time the distillers corn oil is delivered. At March 31, 2018 , the Company is committed to selling approximately 2.3 million pounds of distillers corn oil with an average price of $0.24 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 21% of the projected annual plant production. The Company does not have any firm-priced sales commitments for ethanol as of March 31, 2018 . 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 of the Company's derivatives are designated as non-hedge derivatives, and accordingly are recorded at fair value with changes in fair value recognized in net income. 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, the 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. Derivatives not designated as hedging instruments at March 31, 2018 and December 31, 2017 were as follows: Balance Sheet Classification March 31, 2018 December 31, 2017* Forward contracts in gain position $ 404,977 $ 3,856 Futures contracts in gain position 11,763 119,825 Futures contracts in loss position (512,788 ) (1,363 ) Total forward and futures contracts (96,048 ) 122,318 Cash held by broker 1,076,104 740,522 Current Assets $ 980,056 $ 862,840 Forward contracts in loss position (Current Liabilities) $ (97,314 ) $ (410,785 ) *Derived from audited financial statements Futures 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 Income Three Months Ended March 31, Classification 2018 2017 Net realized and unrealized gains (losses) related to purchase contracts: Futures contracts Cost of Revenues $ (783,845 ) $ 23,287 Forward contracts Cost of Revenues 717,971 (52,026 ) Investments The Company has investment interests in five companies in related industries. All of these interests are at ownership shares less than 20%. These investments are all 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 income 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 from investments based on the most recent reliable data. 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. 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) , requiring 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. Early adoption is not permitted. The updated standard becomes effective for the Company on January 1, 2018. The Company has adopted ASU 2014-09 using the modified retrospective transition method. 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 and Other (Topic 350)" (ASU 2017-04). ASU 2107-04 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 expect this standard to have a material impact on the Company's consolidated financial statements. |
Inventory
Inventory | 3 Months Ended |
Mar. 31, 2018 | |
Inventory [Abstract] | |
Inventory | INVENTORY Inventory consisted of the following as of March 31, 2018 and December 31, 2017 : March 31, 2018 December 31, 2017* Raw materials $ 4,200,481 $ 2,466,493 Finished goods 1,307,121 1,193,552 Work in process 477,343 516,362 Parts inventory 1,362,969 1,349,687 $ 7,347,914 $ 5,526,094 *Derived from audited financial statements. |
Investments (Notes)
Investments (Notes) | 3 Months Ended |
Mar. 31, 2018 | |
Investments [Abstract] | |
Investments | INVESTMENTS Dakota Ethanol has a 6% 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 December 31, 2017 unaudited interim results. The carrying amount of the Company’s investment was approximately $1,214,000 and $1,206,000 as of March 31, 2018 and December 31, 2017 , respectively. Dakota Ethanol has a 10% investment interest in Lawrenceville Tanks, LLC (LT), a partnership to 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 March 31, 2018 unaudited interim results. The carrying amount of the Company’s investment was approximately $320,000 and $327,000 as of March 31, 2018 and December 31, 2017 , 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 March 31, 2018 unaudited interim results. The carrying amount of the Company’s investment was approximately $6,344,000 and $7,151,000 as of March 31, 2018 and December 31, 2017 , respectively. 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 on GEM’s March 31, 2018 unaudited interim results. The carrying amount of the Company’s investment was approximately $33,000 as of March 31, 2018 and December 31, 2017 . Lake Area Corn Processors has an 11% investment interest in Ring-neck Energy and Feeds, 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 March 31, 2018 unaudited interim results. The carrying amount of the Company’s investment was approximately $10,035,000 and $10,053,000 as of March 31, 2018 and December 31, 2017 , respectively. 2017 was the initial year for the investment in REF and the ethanol plant is currently under construction. The carrying amount of the investment exceeds the underlying equity in net assets by approximately $716,000 . The excess will be amortized over 10 years when the plant becomes operational. The amortization will be recorded in equity in net income of investments. Condensed, combined unaudited financial information of the Company’s investments in RPMG, LT, GH, GEM and REF is as follows: Balance Sheet March 31, 2018 December 31, 2017 Current Assets $ 221,638,438 $ 212,154,680 Other Assets 170,646,972 164,254,183 Current Liabilities 142,325,261 131,152,747 Long-term Liabilities 70,707,363 54,754,437 Members' Equity 179,252,786 190,501,679 Three Months Ended Income Statement March 31, 2018 March 31, 2017 Revenue $ 65,898,841 $ 64,456,240 Gross Profit 6,328,577 12,363,675 Net Income 2,733,408 8,083,294 The following table shows the condensed financial information of Guardian Hankinson: Balance Sheet March 31, 2018 December 31, 2017 Current Assets $ 24,548,752 $ 22,771,808 Other Assets 113,996,937 117,344,930 Current Liabilities 7,630,106 17,619,748 Long-term Liabilities 67,479,987 51,352,566 Members' Equity 63,435,596 71,144,424 Three Months Ended Income Statement March 31, 2018 March 31, 2017 Revenue $ 62,773,743 $ 60,377,748 Gross Profit 4,523,337 4,326,567 Net Income 3,291,171 3,191,675 The following table shows the condensed financial information of Ring-neck Energy & Feed: Balance Sheet March 31, 2018 December 31, 2017 Current Assets $ 37,521,167 $ 50,000,088 Other Assets 53,054,791 42,640,650 Current Liabilities 4,314,739 4,716,781 Long-term Liabilities 3,227,376 3,230,871 Members' Equity 83,033,843 84,693,086 Three Months Ended Income Statement March 31, 2018 March 31, 2017 Revenue $ — $ — Gross Profit — — Net Income (744,021 ) — The Company recorded equity in net income of approximately $292,000 and $319,000 from GH for the three months ended March 31, 2018 and 2017 , respectively. The Company recorded equity in net (loss) of approximately ($85,000) and $0 from REF for the three months ended March 31, 2018 and 2017 , respectively. The Company recorded equity in net income of approximately $1,000 and $65,000 from its other investments for the three months ended March 31, 2018 and 2017 , respectively. |
Short Term Note Payable
Short Term Note Payable | 3 Months Ended |
Mar. 31, 2018 | |
Short Term Note Payable [Abstract] | |
Revolving Operating Note | REVOLVING OPERATING NOTE On February 6, 2018, Dakota Ethanol executed a revolving promissory note from 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, whichever is less. Interest on the outstanding principal balance will accrue at 300 basis points above the 1 month LIBOR rate and is not subject to a floor. The rate was 4.65% at March 31, 2018 . There is a non-use fee of 0.25% on the unused portion of the $10,000,000 availability. The note is collateralized by substantially all assets of the Company. The note expires on November 1, 2019. On March 31, 2018 , Dakota Ethanol had $0 outstanding and $6,294,000 available to be drawn on the revolving promissory note under the borrowing base. |
Long Term Notes Payable
Long Term Notes Payable | 3 Months Ended |
Mar. 31, 2018 | |
Long Term Note Payable [Abstract] | |
Long Term Notes Payable | LONG-TERM NOTES PAYABLE 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 notes matures on August 1, 2025. 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 4.90% at March 31, 2018. On March 31, 2018, Dakota Ethanol had $8,000,000 outstanding on the note. 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. The amount Dakota Ethanol can borrow on the note decreases by $1,750,000 semi-annually starting on January 1, 2020 until the maximum balance reaches $26,000,000 on July 1, 2023. The note matures on January 1, 2026. 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 4.90% at March 31, 2018. The note contains a non-use fee of 0.50% on the unused portion of the note. On March 31, 2018, Dakota Ethanol had $3,001,000 outstanding and $26,999,000 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. The note is collateralized by substantially all assets of the Company. The balances of the notes payable are as follows: March 31, 2018 December 31, 2017* Note Payable - FCSA $ 11,001,000 $ 8,001,000 Less unamortized debt issuance costs (17,889 ) (29,056 ) 10,983,111 7,971,944 Less current portion (1,000,000 ) (1,000,000 ) $ 9,983,111 $ 6,971,944 *Derived from audited financial statements Principal and debt issuance cost maturities for the next five years are estimated as follows: Years Ending March 31, Principal 2019 $ 1,000,000 2020 1,000,000 2021 1,000,000 2022 1,000,000 2023 1,000,000 thereafter 6,001,000 |
Fair Value Measurements (Notes)
Fair Value Measurements (Notes) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 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 March 31, 2018 and December 31, 2017 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 March 31, 2018 Assets: Derivative financial instruments, futures contracts $ 11,763 $ 11,763 $ — $ — forward contracts $ 404,977 $ — $ 404,977 — Liabilities: Derivative financial instruments, futures contracts $ (512,788 ) $ (512,788 ) $ — $ — forward contracts $ (97,314 ) $ — $ (97,314 ) $ — 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 ) $ — *Derived from audited financial statements. During the three ended March 31, 2018 , the Company did not make any changes between Level 1 and Level 2 assets and liabilities. As of March 31, 2018 and December 31, 2017 , 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 March 31, 2018 and December 31, 2017. 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 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. The carrying amount of long-term obligations (level 3) at March 31, 2018 of $11,001,000 had an estimated fair value of approximately $11,001,000 based on estimated interest rates for comparable debt. The carrying amount of long-term obligations at December 31, 2017 of $8,001,000 had an estimated fair value of approximately $8,001,000 . |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS Dakota Ethanol has a 6% interest in RPMG, and Dakota Ethanol has entered into marketing agreements for the exclusive rights to market, sell and distribute the entire ethanol, dried distillers grains and corn oil inventories produced by Dakota Ethanol. The marketing fees are included in net revenues. Revenues and marketing fees related to the agreements are as follows: Three Months Ended March 31 2018 2017 Revenues ethanol $ 15,617,431 $ 18,092,590 Revenues distillers dried grains 239,211 1,537,054 Revenues corn oil 563,350 794,516 Marketing fees ethanol 65,865 61,260 Marketing fees distillers dried grains 574 12,475 Marketing fees corn oil 4,980 6,221 March 31, 2018 December 31, 2017* Amounts due included in accounts receivable $ 1,431,535 $ 2,749,502 *Derived from audited financial statements. The Company purchased corn and services from members of its Board of Managers that farm and operate local businesses. The Company also purchased ingredients from RPMG. Purchases during the three months ended March 31, 2018 totaled approximately $423,000 . Purchases during the three months ended March 31, 2017 totaled approximately $163,000 . As of March 31, 2018 and December 31, 2017, the amount we owed to related parties was approximately $22,000 and $45,000 , respectively. |
Commitments (Notes)
Commitments (Notes) | 3 Months Ended |
Mar. 31, 2017 | |
Commitments [Abstract] | |
Commitments Disclosure [Text Block] | 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 $200,000 remaining as of March 31, 2018 . 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 . There is approximately $26.4 million remaining as of March 31, 2018. 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. |
Accounting Policies
Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | 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 | Revenue Recognition Effective January 1, 2018, the Company adopted the new guidance of ASC Topic 606, Revenue from Contracts with Customers (Topic 606), using the modified retrospective approach. Topic 606 requires the Company to recognize revenue to depict the transfer of promised 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 new 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 (5) recognize revenue when, or as, the Company satisfies a performance obligation. The Company generally recognizes revenue at a point in time. The majority of the Company’s contracts with customers have one performance obligation and a contract duration of one year or less. The adoption of this new guidance did not result in any changes to our revenue recognition, but did result in expanded disclosures in our consolidated financial statements. The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. • sales of ethanol • 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. The following table depicts the disaggregation of revenue according to product line: Three Months Ended March 31, 2018 2017 Revenues ethanol $ 15,551,566 $ 18,031,330 Revenues distillers grains 3,694,336 2,894,003 Revenues distillers corn oil 558,371 788,295 $ 19,804,273 $ 21,713,628 Contract assets and contract liabilities: The following table provides information about receivables and contract liabilities from contracts with customers: March 31, December 31, 2018 2017* Accounts receivable $ 1,918,171 $ 3,186,530 Short term contract liabilities 124,158 383,338 *Derived from audited financial statements The Company receives payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract. Shipping costs Shipping costs incurred by the Company in the sale of ethanol, dried distillers 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. Operating Segment The Company uses the "management approach" for reporting information about segments in annual and interim financial statements. The management approach is based on the way the chief operating decision-maker organizes segments within a company for making operating decisions and 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, the Company has determined that its business is comprised of a single operating segment. |
Cost of Revenues | Cost of Revenues The primary components of cost of revenues from the production of ethanol and related co-product 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 distillers grains are included in cost of revenues. |
Inventory Valuation | 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. |
Receivables and credit policies | 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. 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 as of March 31, 2018 and December 31, 2017 respectively. |
Investment in commodities contracts, derivative instruments and hedging activities | 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 or derivative instruments are price risks 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, 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 March 31, 2018 , the Company is committed to purchasing approximately 5 million bushels of corn on a forward contract basis with an average price of $3.45 per bushel. The total corn purchase contracts represent 27% of the annual projected plant corn usage. 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 March 31, 2018 , the Company does not have any firm-price purchase commitments for natural gas. The Company accounts for these transactions as normal purchases, and accordingly, does not mark these transactions to market. 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 March 31, 2018 , the Company is committed to selling approximately 21,000 dry equivalent tons of distillers grains with an average price of $102 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 15% 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 the price is fixed and the time the distillers corn oil is delivered. At March 31, 2018 , the Company is committed to selling approximately 2.3 million pounds of distillers corn oil with an average price of $0.24 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 21% of the projected annual plant production. The Company does not have any firm-priced sales commitments for ethanol as of March 31, 2018 . 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 of the Company's derivatives are designated as non-hedge derivatives, and accordingly are recorded at fair value with changes in fair value recognized in net income. 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, the 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. Derivatives not designated as hedging instruments at March 31, 2018 and December 31, 2017 were as follows: Balance Sheet Classification March 31, 2018 December 31, 2017* Forward contracts in gain position $ 404,977 $ 3,856 Futures contracts in gain position 11,763 119,825 Futures contracts in loss position (512,788 ) (1,363 ) Total forward and futures contracts (96,048 ) 122,318 Cash held by broker 1,076,104 740,522 Current Assets $ 980,056 $ 862,840 Forward contracts in loss position (Current Liabilities) $ (97,314 ) $ (410,785 ) *Derived from audited financial statements Futures 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 Income Three Months Ended March 31, Classification 2018 2017 Net realized and unrealized gains (losses) related to purchase contracts: Futures contracts Cost of Revenues $ (783,845 ) $ 23,287 Forward contracts Cost of Revenues 717,971 (52,026 ) |
Investments | Investments The Company has investment interests in five companies in related industries. All of these interests are at ownership shares less than 20%. These investments are all 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 income 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 from investments based on the most recent reliable data. |
Use of Estimates | 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 |
New Accounting Pronouncements, Policy | 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) , requiring 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. Early adoption is not permitted. The updated standard becomes effective for the Company on January 1, 2018. The Company has adopted ASU 2014-09 using the modified retrospective transition method. 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 and Other (Topic 350)" (ASU 2017-04). ASU 2107-04 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 expect this standard to have a material impact on the Company's consolidated financial statements. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Significant Accounting Policies [Abstract] | |
Disaggregation of Revenue [Table Text Block] | Three Months Ended March 31, 2018 2017 Revenues ethanol $ 15,551,566 $ 18,031,330 Revenues distillers grains 3,694,336 2,894,003 Revenues distillers corn oil 558,371 788,295 $ 19,804,273 $ 21,713,628 |
Contract with Customer, Asset and Liability [Table Text Block] | March 31, December 31, 2018 2017* Accounts receivable $ 1,918,171 $ 3,186,530 Short term contract liabilities 124,158 383,338 *Derived from audited financial statements |
Derivatives Not Designated as Hedging Instruments | Derivatives not designated as hedging instruments at March 31, 2018 and December 31, 2017 were as follows: Balance Sheet Classification March 31, 2018 December 31, 2017* Forward contracts in gain position $ 404,977 $ 3,856 Futures contracts in gain position 11,763 119,825 Futures contracts in loss position (512,788 ) (1,363 ) Total forward and futures contracts (96,048 ) 122,318 Cash held by broker 1,076,104 740,522 Current Assets $ 980,056 $ 862,840 Forward contracts in loss position (Current Liabilities) $ (97,314 ) $ (410,785 ) *Derived from audited financial statements |
Net realized and unrealized gains (losses) related to purchase contracts | Statement of Income Three Months Ended March 31, Classification 2018 2017 Net realized and unrealized gains (losses) related to purchase contracts: Futures contracts Cost of Revenues $ (783,845 ) $ 23,287 Forward contracts Cost of Revenues 717,971 (52,026 ) |
Inventory (Tables)
Inventory (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Inventory [Abstract] | |
Schedule of Inventory | Inventory consisted of the following as of March 31, 2018 and December 31, 2017 : March 31, 2018 December 31, 2017* Raw materials $ 4,200,481 $ 2,466,493 Finished goods 1,307,121 1,193,552 Work in process 477,343 516,362 Parts inventory 1,362,969 1,349,687 $ 7,347,914 $ 5,526,094 *Derived from audited financial statements. |
Investments Investments (Tables
Investments Investments (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investments | Balance Sheet March 31, 2018 December 31, 2017 Current Assets $ 221,638,438 $ 212,154,680 Other Assets 170,646,972 164,254,183 Current Liabilities 142,325,261 131,152,747 Long-term Liabilities 70,707,363 54,754,437 Members' Equity 179,252,786 190,501,679 Three Months Ended Income Statement March 31, 2018 March 31, 2017 Revenue $ 65,898,841 $ 64,456,240 Gross Profit 6,328,577 12,363,675 Net Income 2,733,408 8,083,294 The following table shows the condensed financial information of Guardian Hankinson: Balance Sheet March 31, 2018 December 31, 2017 Current Assets $ 24,548,752 $ 22,771,808 Other Assets 113,996,937 117,344,930 Current Liabilities 7,630,106 17,619,748 Long-term Liabilities 67,479,987 51,352,566 Members' Equity 63,435,596 71,144,424 Three Months Ended Income Statement March 31, 2018 March 31, 2017 Revenue $ 62,773,743 $ 60,377,748 Gross Profit 4,523,337 4,326,567 Net Income 3,291,171 3,191,675 The following table shows the condensed financial information of Ring-neck Energy & Feed: Balance Sheet March 31, 2018 December 31, 2017 Current Assets $ 37,521,167 $ 50,000,088 Other Assets 53,054,791 42,640,650 Current Liabilities 4,314,739 4,716,781 Long-term Liabilities 3,227,376 3,230,871 Members' Equity 83,033,843 84,693,086 Three Months Ended Income Statement March 31, 2018 March 31, 2017 Revenue $ — $ — Gross Profit — — Net Income (744,021 ) — |
Long Term Notes Payable (Tables
Long Term Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Long Term Note Payable [Abstract] | |
Schedule of Long-term Debt Instruments | March 31, 2018 December 31, 2017* Note Payable - FCSA $ 11,001,000 $ 8,001,000 Less unamortized debt issuance costs (17,889 ) (29,056 ) 10,983,111 7,971,944 Less current portion (1,000,000 ) (1,000,000 ) $ 9,983,111 $ 6,971,944 *Derived from audited financial statements |
Schedule of Principal repayment and amortization of debt issuance cost | Years Ending March 31, Principal 2019 $ 1,000,000 2020 1,000,000 2021 1,000,000 2022 1,000,000 2023 1,000,000 thereafter 6,001,000 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value, by Balance Sheet Grouping | The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017 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 March 31, 2018 Assets: Derivative financial instruments, futures contracts $ 11,763 $ 11,763 $ — $ — forward contracts $ 404,977 $ — $ 404,977 — Liabilities: Derivative financial instruments, futures contracts $ (512,788 ) $ (512,788 ) $ — $ — forward contracts $ (97,314 ) $ — $ (97,314 ) $ — 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 ) $ — |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | Three Months Ended March 31 2018 2017 Revenues ethanol $ 15,617,431 $ 18,092,590 Revenues distillers dried grains 239,211 1,537,054 Revenues corn oil 563,350 794,516 Marketing fees ethanol 65,865 61,260 Marketing fees distillers dried grains 574 12,475 Marketing fees corn oil 4,980 6,221 March 31, 2018 December 31, 2017* Amounts due included in accounts receivable $ 1,431,535 $ 2,749,502 |
Nature of Operations (Details)
Nature of Operations (Details) gal in Millions | 3 Months Ended |
Mar. 31, 2018gal | |
Product Information [Line Items] | |
Equity Method Investments, Number of Entities | 5 |
Ethanol [Member] | Product [Member] | |
Product Information [Line Items] | |
Annual production capacity | 40 |
Summary of Significant Accoun24
Summary of Significant Accounting Policies Investments (Details) bu in Millions | Mar. 31, 2018buT$ / usd_per_lb$ / T$ / bu |
Derivative [Line Items] | |
Equity Method Investments, Number of Entities | 5 |
Corn [Member] | |
Derivative [Line Items] | |
Derivative, Nonmonetary Notional Amount | bu | 5 |
Derivative, Average Forward Price | $ / bu | 3.45 |
Derivative, Nonmonetary Notional Amount, Percent of Required Need, Coverage | 27.00% |
Distillers Grain [Member] | |
Derivative [Line Items] | |
Derivative, Nonmonetary Notional Amount | T | 21,000 |
Derivative, Average Forward Price | $ / T | 102 |
Derivative, Nonmonetary Notional Amount, Percent of Required Need, Coverage | 15.00% |
Corn Oil [Member] | |
Derivative [Line Items] | |
Derivative, Nonmonetary Notional Amount | 2,300,000 |
Derivative, Average Forward Price | $ / usd_per_lb | 0.24 |
Derivative, Nonmonetary Notional Amount, Percent of Required Need, Coverage | 21.00% |
Derivative Instruments - Balanc
Derivative Instruments - Balance Sheet (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Derivatives, Fair Value [Line Items] | ||
Derivative Instruments and Hedges, Liabilities | $ 97,314 | $ 410,785 |
Derivative Instruments and Hedges, Assets | 980,056 | 862,840 |
Current Assets [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Cash held by broker | 1,076,104 | 740,522 |
Current Assets [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets, Current | (96,048) | 122,318 |
Derivative Instruments and Hedges, Assets | 980,056 | 862,840 |
Other Current Liabilities [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Instruments and Hedges, Liabilities | 97,314 | 410,785 |
Forward Contracts [Member] | Current Assets [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets, Current | 404,977 | 3,856 |
Futures contracts in gain position [Member] | Future [Member] | Current Assets [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets, Current | 11,763 | 119,825 |
Futures Contracts held in loss position [Member] | Future [Member] | Other Current Liabilities [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Liability, Current | $ 512,788 | $ 1,363 |
Derivative Instruments - Income
Derivative Instruments - Income Statement (Details) - Not Designated as Hedging Instrument [Member] - Cost of Sales [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Forward Contracts [Member] | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative, Gain (Loss) on Derivative, Net | $ 717,971 | $ (52,026) |
Future [Member] | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative, Gain (Loss) on Derivative, Net | $ (783,845) | $ 23,287 |
Summary of Significant Accoun27
Summary of Significant Accounting Policies Receivables and Credit Policies (Details) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Receivables [Abstract] | |
Trade Receivable, Unpaid Balance, Interest Rate | 1.50% |
Valuation Allowances and Reserves, Balance | $ 2,131 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies Revenue from customers (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Disaggregation of Revenue [Line Items] | |||
Revenue from Contract with Customer, Including Assessed Tax | $ 19,804,273 | $ 21,713,628 | |
Contract with Customer, Asset, Gross | 1,918,171 | $ 3,186,530 | |
Contract with Customer, Liability, Current | 124,158 | $ 383,338 | |
Ethanol [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from Contract with Customer, Including Assessed Tax | 15,551,566 | 18,031,330 | |
Distillers Grain [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from Contract with Customer, Including Assessed Tax | 3,694,336 | 2,894,003 | |
Corn Oil [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from Contract with Customer, Including Assessed Tax | $ 558,371 | $ 788,295 |
Inventory (Details)
Inventory (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Inventory [Abstract] | ||
Raw Materials | $ 4,200,481 | $ 2,466,493 |
Finished Goods | 1,307,121 | 1,193,552 |
Work in Process | 477,343 | 516,362 |
Parts Inventory | 1,362,969 | 1,349,687 |
Inventory | $ 7,347,914 | $ 5,526,094 |
Investments (Details)
Investments (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Schedule of Equity Method Investments [Line Items] | |||
Investments | $ 17,945,645 | $ 18,739,259 | |
Equity in net income of investments | 209,464 | $ 383,725 | |
Equity Method Investment, Summarized Financial Information, Current Assets | 221,638,438 | 212,154,680 | |
Equity Method Investment, Summarized Financial Information, Noncurrent Assets | 170,646,972 | 164,254,183 | |
Equity Method Investment, Summarized Financial Information, Current Liabilities | 142,325,261 | 131,152,747 | |
Equity Method Investment, Summarized Financial Information, Noncurrent Liabilities | 70,707,363 | 54,754,437 | |
Equity Method Investment Summarized Financial Information, Equity | 179,252,786 | 190,501,679 | |
Equity Method Investment, Summarized Financial Information, Revenue | 65,898,841 | 64,456,240 | |
Equity Method Investment, Summarized Financial Information, Gross Profit (Loss) | 6,328,577 | 12,363,675 | |
Equity Method Investment, Summarized Financial Information, Net Income (Loss) | $ 2,733,408 | 8,083,294 | |
Renewable Products Marketing Group, LLC (RPMG) [Member] | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity Method Investment, Ownership Percentage | 6.00% | ||
Investments | $ 1,214,000 | 1,206,000 | |
Lawrenceville Tanks, LLC [Member] | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity Method Investment, Ownership Percentage | 10.00% | ||
Investments | $ 320,000 | 327,000 | |
Guardian Hankinson, LLC [Member] | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity Method Investment, Ownership Percentage | 10.00% | ||
Investments | $ 6,344,000 | 7,151,000 | |
Equity in net income of investments | 292,000 | 319,000 | |
Equity Method Investment, Summarized Financial Information, Current Assets | 24,548,752 | 22,771,808 | |
Equity Method Investment, Summarized Financial Information, Noncurrent Assets | 113,996,937 | 117,344,930 | |
Equity Method Investment, Summarized Financial Information, Current Liabilities | 7,630,106 | 17,619,748 | |
Equity Method Investment, Summarized Financial Information, Noncurrent Liabilities | 67,479,987 | 51,352,566 | |
Equity Method Investment Summarized Financial Information, Equity | 63,435,596 | 71,144,424 | |
Equity Method Investment, Summarized Financial Information, Revenue | 62,773,743 | 60,377,748 | |
Equity Method Investment, Summarized Financial Information, Gross Profit (Loss) | 4,523,337 | 4,326,567 | |
Equity Method Investment, Summarized Financial Information, Net Income (Loss) | 3,291,171 | 3,191,675 | |
GEM, LT, PGVP, RPMG Combined [Domain] | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity in net income of investments | $ 1,000 | 65,000 | |
Guardian Energy Management [Member] | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity Method Investment, Ownership Percentage | 17.00% | ||
Investments | 33,000 | ||
Ring-Neck Energy and Feeds, LLC [Domain] | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity Method Investment, Ownership Percentage | 11.00% | ||
Investments | $ 10,035,000 | $ 10,053,000 | |
Ring-neck Energy and Feeds [Member] | |||
Schedule of Equity Method Investments [Line Items] | |||
Amortization period for amortization of investment premium | 10 years | ||
Accretion (Amortization) of Discounts and Premiums, Investments | $ 716,000 | ||
Equity in net income of investments | (85,000) | 0 | |
Equity Method Investment, Summarized Financial Information, Current Assets | 37,521,167 | 50,000,088 | |
Equity Method Investment, Summarized Financial Information, Noncurrent Assets | 53,054,791 | 42,640,650 | |
Equity Method Investment, Summarized Financial Information, Current Liabilities | 4,314,739 | 4,716,781 | |
Equity Method Investment, Summarized Financial Information, Noncurrent Liabilities | 3,227,376 | 3,230,871 | |
Equity Method Investment Summarized Financial Information, Equity | 83,033,843 | $ 84,693,086 | |
Equity Method Investment, Summarized Financial Information, Revenue | 0 | 0 | |
Equity Method Investment, Summarized Financial Information, Gross Profit (Loss) | 0 | 0 | |
Equity Method Investment, Summarized Financial Information, Net Income (Loss) | $ (744,021) | $ 0 |
Short Term Note Payable (Detail
Short Term Note Payable (Details) - Farm Credit Services of America [Member] - Line of Credit [Member] | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Line of Credit Facility [Line Items] | |
Debt Instrument, Basis Spread on Variable Rate | 3.00% |
Line of Credit Facility, Maximum Borrowing Capacity | $ 10,000,000 |
Line of Credit Facility, Interest Rate at Period End | 4.65% |
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.25% |
Line of Credit Facility, Amount Outstanding | $ 0 |
Line of Credit Facility, Remaining Borrowing Capacity | $ 6,294,000 |
Long Term Note Payable (Details
Long Term Note Payable (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Debt Instrument [Line Items] | ||
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months | $ 1,000,000 | |
Long-term Debt, Gross | 11,001,000 | $ 8,001,000 |
Long-term Debt | 10,983,111 | 7,971,944 |
Unamortized Debt Issuance Expense | (17,889) | (29,056) |
Long-term Debt, Current Maturities | (1,000,000) | (1,000,000) |
Long-term Debt, Excluding Current Maturities | 9,983,111 | $ 6,971,944 |
Long-term Debt, Maturities, Repayments of Principal in Year Two | 1,000,000 | |
Long-term Debt, Maturities, Repayments of Principal in Year Three | 1,000,000 | |
Long-term Debt, Maturities, Repayments of Principal in Year Four | 1,000,000 | |
Long-term Debt, Maturities, Repayments of Principal in Year Five | 1,000,000 | |
Long-term Debt, Maturities, Repayments of Principal after Year Five | 6,001,000 | |
Farm Credit Services of America [Member] | Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Line of Credit Facility, Current Borrowing Capacity | 40,000,000 | |
Periodic decrease in line of credit availability | 1,750,000 | |
Line of Credit Facility, Maximum Borrowing Capacity | $ 26,000,000 | |
Line of Credit Facility, Interest Rate at Period End | 4.90% | |
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.50% | |
Line of Credit Facility, Amount Outstanding | $ 3,001,000 | |
Line of Credit Facility, Remaining Borrowing Capacity | $ 26,999,000 | |
Debt Instrument, Basis Spread on Variable Rate | 3.25% | |
Farm Credit Services of America [Member] | Medium-term Notes [Member] | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Basis Spread on Variable Rate | 3.25% | |
Medium-term Notes | $ 8,000,000 | |
Debt Instrument, Annual Principal Payment | $ 1,000,000 | |
Debt Instrument, Interest Rate During Period | 4.90% | |
Medium-term Notes, Current | $ 8,000,000 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term Debt, Gross | $ 11,001,000 | $ 8,001,000 |
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term Debt, Gross | 11,001,000 | 8,001,000 |
Fair Value, Measurements, Recurring [Member] | Future [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative Asset | 11,763 | 119,825 |
Derivative Liability | 512,788 | 1,363 |
Fair Value, Measurements, Recurring [Member] | Future [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative Asset | 11,763 | 119,825 |
Derivative Liability | 512,788 | 1,363 |
Fair Value, Measurements, Recurring [Member] | Future [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative Asset | 0 | 0 |
Derivative Liability | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Future [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative Asset | 0 | 0 |
Derivative Liability | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Forward Contracts [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative Asset | 404,977 | 3,856 |
Derivative Liability | 97,314 | 410,785 |
Fair Value, Measurements, Recurring [Member] | Forward Contracts [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative Asset | 0 | 0 |
Derivative Liability | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Forward Contracts [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative Asset | 404,977 | 3,856 |
Derivative Liability | 97,314 | 410,785 |
Fair Value, Measurements, Recurring [Member] | Forward Contracts [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative Asset | 0 | 0 |
Derivative Liability | $ 0 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Related Party Transaction [Line Items] | |||
Related Party Transaction, Purchases from Related Party | $ 423,000 | $ 163,000 | |
Due from Related Parties, Current | 1,431,535 | $ 2,749,502 | |
Due to Related Parties | $ 22,000 | $ 45,000 | |
Renewable Products Marketing Group, LLC (RPMG) [Member] | |||
Related Party Transaction [Line Items] | |||
Equity Method Investment, Ownership Percentage | 6.00% | ||
Ethanol [Member] | Renewable Products Marketing Group, LLC (RPMG) [Member] | |||
Related Party Transaction [Line Items] | |||
Revenue from Related Parties | $ 15,617,431 | 18,092,590 | |
Marketing Expenses from Transactions with Related Party | 65,865 | 61,260 | |
Distillers Grain [Member] | Renewable Products Marketing Group, LLC (RPMG) [Member] | |||
Related Party Transaction [Line Items] | |||
Revenue from Related Parties | 239,211 | 1,537,054 | |
Marketing Expenses from Transactions with Related Party | 574 | 12,475 | |
Corn Oil [Member] | Renewable Products Marketing Group, LLC (RPMG) [Member] | |||
Related Party Transaction [Line Items] | |||
Revenue from Related Parties | 563,350 | 794,516 | |
Marketing Expenses from Transactions with Related Party | $ 4,980 | $ 6,221 |
Commitments (Details)
Commitments (Details) gal in Millions | 12 Months Ended | |
Dec. 31, 2017USD ($)gal | Mar. 31, 2018USD ($) | |
Capital Addition Purchase Commitments [Member] | ||
Long-term Purchase Commitment [Line Items] | ||
Purchase Commitment, Remaining Minimum Amount Committed | $ 200,000 | |
Other Commitment | 4,600,000 | |
Product [Member] | Ethanol [Member] | ||
Long-term Purchase Commitment [Line Items] | ||
Purchase Commitment, Remaining Minimum Amount Committed | $ 26,400,000 | |
Annual production capacity after expansion | gal | 90 | |
Estimated Expansion Costs | $ 33,000,000 |