Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Jan. 29, 2018 | Apr. 30, 2017 | |
Entity Registrant Name | Heron Lake BioEnergy, LLC | ||
Entity Central Index Key | 1,286,964 | ||
Current Fiscal Year End Date | --10-31 | ||
Entity Filer Category | Non-accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Oct. 31, 2017 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus (Q1,Q2,Q3,FY) | FY | ||
Amendment Flag | false | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 9,659,704 | ||
Class A units | |||
Common stock, shares outstanding | 62,932,107 | ||
Class B units | |||
Common stock, shares outstanding | 15,000,000 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Oct. 31, 2017 | Oct. 31, 2016 |
Current Assets | ||
Cash | $ 10,065,367 | $ 1,297,644 |
Accounts receivable | 4,031,977 | 4,607,202 |
Inventory | 7,064,344 | 5,864,545 |
Commodity derivative assets | 141,644 | 662,338 |
Prepaid expenses and other current assets | 259,106 | 181,853 |
Total current assets | 21,562,438 | 12,613,582 |
Property and Equipment, net | 46,567,087 | 50,376,210 |
Other Assets | ||
Other intangible assets, net | 45,852 | 84,000 |
Other assets | 697,254 | 697,254 |
Total other assets | 743,106 | 781,254 |
Total Assets | 68,872,631 | 63,771,046 |
Current Liabilities | ||
Current maturities of long-term debt | 432,183 | 490,057 |
Checks drawn in excess of bank balance | 1,866,683 | |
Accounts payable | 4,771,197 | 4,878,210 |
Commodity derivative instruments | 27,630 | |
Accrued expenses | 415,106 | 397,407 |
Total current liabilities | 5,646,116 | 7,632,357 |
Long-Term Debt, less current portion | 965,502 | 1,393,669 |
Commitments and Contingencies | ||
Members' Equity | ||
Members' equity attributable to Heron Lake BioEnergy, LLC consists of 77,932,107 units authorized, issued and outstanding at both October 31, 2017 and 2016 | 60,767,951 | 53,499,596 |
Non-controlling interest | 1,493,062 | 1,245,424 |
Total members' equity | 62,261,013 | 54,745,020 |
Total Liabilities and Members' Equity | $ 68,872,631 | $ 63,771,046 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - shares | Oct. 31, 2017 | Oct. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Members' Equity, units authorized | 77,932,107 | 77,932,107 |
Members' Equity, units issued | 77,932,107 | 77,932,107 |
Members' Equity, units outstanding | 77,932,107 | 77,932,107 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
Income Statement [Abstract] | |||
Revenues | $ 109,917,652 | $ 109,605,544 | $ 115,660,469 |
Cost of Goods Sold | 99,488,370 | 101,112,154 | 105,248,092 |
Gross Profit | 10,429,282 | 8,493,390 | 10,412,377 |
Operating Expenses | (3,124,687) | (2,999,157) | (3,001,095) |
Operating Income | 7,304,595 | 5,494,233 | 7,411,282 |
Other Income (Expense): | |||
Interest income | 24,668 | 712 | 1,312 |
Interest expense | (212,491) | (397,837) | (444,625) |
Other income, net | 399,221 | 97,208 | 11,747 |
Total other income (expense), net | 211,398 | (299,917) | (431,566) |
Net Income | 7,515,993 | 5,194,316 | 6,979,716 |
Less: Net Income Attributable to Non-controlling Interest | (247,638) | (244,616) | (228,483) |
Net Income Attributable to Heron Lake BioEnergy, LLC | $ 7,268,355 | $ 4,949,700 | $ 6,751,233 |
Weighted Average Units Outstanding—Basic and Diluted (Class A and B) (in units) | 77,932,107 | 77,932,107 | 77,932,107 |
Net Income Per Unit Attributable to Heron Lake BioEnergy, LLC—Basic and Diluted (Class A and B) (in dollars per unit) | $ 0.09 | $ 0.06 | $ 0.09 |
Distributions Per Unit (Class A and B) (in dollars per unit) | $ 0.05 | $ 0.12 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Members' Equity - USD ($) | Class A units | Class B units | Parent [Member] | Noncontrolling Interest | Total |
Balance at Oct. 31, 2014 | $ 55,047,120 | $ 853,323 | $ 55,900,443 | ||
Balance (in units) at Oct. 31, 2014 | 62,932,107 | 15,000,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Member Distributions | (9,351,853) | (9,351,853) | |||
Net income attributable to non-controlling interest | 228,483 | 228,483 | |||
Net income attributable to Heron Lake BioEnergy, LLC | 6,751,233 | 6,751,233 | |||
Balance at Oct. 31, 2015 | 52,446,500 | 1,081,806 | 53,528,306 | ||
Balance (in units) at Oct. 31, 2015 | 62,932,107 | 15,000,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Member Distributions | (3,896,604) | (80,998) | (3,977,602) | ||
Net income attributable to non-controlling interest | 244,616 | 244,616 | |||
Net income attributable to Heron Lake BioEnergy, LLC | 4,949,700 | 4,949,700 | |||
Balance at Oct. 31, 2016 | 53,499,596 | 1,245,424 | $ 54,745,020 | ||
Balance (in units) at Oct. 31, 2016 | 62,932,107 | 15,000,000 | 77,932,107 | ||
Increase (Decrease) in Stockholders' Equity | |||||
Net income attributable to non-controlling interest | 247,638 | $ 247,638 | |||
Net income attributable to Heron Lake BioEnergy, LLC | 7,268,355 | 7,268,355 | |||
Balance at Oct. 31, 2017 | $ 60,767,951 | $ 1,493,062 | $ 62,261,013 | ||
Balance (in units) at Oct. 31, 2017 | 62,932,107 | 15,000,000 | 77,932,107 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
Cash Flow From Operating Activities | |||
Net income | $ 7,515,993 | $ 5,194,316 | $ 6,979,716 |
Adjustments to reconcile net income to net cash provided by operations: | |||
Depreciation and amortization | 5,021,798 | 4,781,673 | 4,593,710 |
Gain on sale of asset | (45,000) | ||
Change in fair value of commodity derivative instruments | (728,073) | (1,054,729) | (831,227) |
Changes in operating assets and liabilities: | |||
Restricted cash | 264,086 | ||
Accounts receivable | 575,225 | 1,063,979 | (1,615,200) |
Inventory | (1,199,799) | (605,199) | (72,079) |
Commodity derivative instruments | 1,276,397 | 1,069,540 | 591,578 |
Prepaid expenses and other current assets | (77,253) | (23,380) | 131,267 |
Accounts payable | (107,013) | 1,313,978 | (124,087) |
Accrued expenses | 17,699 | 209,657 | (27,866) |
Net cash provided by operating activities | 12,249,974 | 11,949,835 | 9,889,898 |
Cash Flows from Investing Activities | |||
Capital expenditures | (1,174,527) | (2,484,667) | (6,181,858) |
Proceeds from disposal of asset | 45,000 | ||
Net cash used in investing activities | (1,129,527) | (2,484,667) | (6,181,858) |
Cash Flows from Financing Activities | |||
Proceeds from long-term debt | 9,820,222 | 13,440,990 | |
Checks drawn in excess of bank balance | (1,866,683) | 30,001 | 1,836,682 |
Payments on long-term debt | (486,041) | (15,166,428) | (9,169,704) |
Distributions to Heron Lake BioEnergy, LLC members | (3,896,604) | (9,351,853) | |
Distribution to non-controlling interest | (80,998) | ||
Net cash used in financing activities | (2,352,724) | (9,293,807) | (3,243,885) |
Net increase in cash | 8,767,723 | 171,361 | 464,155 |
Cash - Beginning of period | 1,297,644 | 1,126,283 | 662,128 |
Cash - End of period | 10,065,367 | 1,297,644 | 1,126,283 |
Supplemental Disclosure of Cash Flow Information | |||
Interest expense | $ 212,491 | $ 397,837 | 444,625 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities | |||
Capital expenditures included in accounts payable | $ 349,482 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Oct. 31, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Heron Lake BioEnergy, LLC owns and operates an ethanol plant near Heron Lake, Minnesota with a permitted capacity of approximately 72.3 million gallons per year of undenatured ethanol on a twelve-month rolling sum basis. In addition, Heron Lake BioEnergy, LLC produces and sells distillers’ grains with solubles and corn oil as co-products of ethanol production. Heron Lake BioEnergy, LLC’s wholly owned subsidiary, HLBE Pipeline Company, LLC (“HLBE Pipeline Company”), owns 73% of Agrinatural Gas, LLC (“Agrinatural”). Agrinatural operates a natural gas pipeline that provides natural gas to Heron Lake BioEnergy, LLC’s ethanol production facility and other customers. Principles of Consolidation The consolidated financial statements include the accounts of Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company (collectively, “the Company”). Given the Company’s control over the operations of Agrinatural and its majority voting interest, the Company consolidates the financial statements of Agrinatural with its consolidated financial statements, with the equity and earnings (loss) attributed to the remaining 27% non-controlling interest identified separately in the accompanying consolidated balance sheets and statements of operations. All significant intercompany balances and transactions are eliminated in consolidation. Fiscal Reporting Period The Company’s fiscal year end for reporting financial operations is October 31. Accounting Estimates Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for significant matters including, among others, the economic lives of property and equipment, valuation of commodity derivative instruments and inventory, evaluation of rail car damages contingency, the assumptions used in the impairment analysis of long-lived assets, and inventory purchase and sale commitments. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. Actual results could differ from those estimates. Non-controlling Interest Amounts recorded as non-controlling interest relate to the net investment by an unrelated party in Agrinatural. Income and losses are allocated to the members of Agrinatural based on their respective percentage of membership units held. Pursuant to the firm natural gas transportation agreement with Agrinatural, Agrinatural will provide natural gas to Heron Lake BioEnergy’s plant with a specified price per MMBTU with a term ending on October 31, 2021, with one automatic renewal option to extend the term for an additional five years period. Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. Title is generally assumed by the buyer at the Company’s shipping point. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and commissions due to the marketers are deducted from the gross sales price as earned. These fees and commissions are recorded net of revenues as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Shipping costs incurred by the Company in the sale of ethanol are not specifically identifiable and as a result, are recorded based on the net selling price reported to the Company from the marketer. Shipping costs incurred by the Company in the sale of ethanol related products are included in cost of goods sold. Agrinatural recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee for the arrangement is fixed or determinable and collectability is reasonably assured. Cost of Goods Sold The primary components of cost of goods sold for the production of ethanol and related co-products are corn, energy, raw materials, overhead, depreciation, and direct labor. Operating Expenses The primary components of operating expenses are salaries and expenses for administrative employees, professional fees, board of governor expenses and property taxes. Cash The Company maintains its accounts at multiple financial institutions. At times throughout the year, the Company’s cash balances may exceed amounts insured by the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation. The Company does not believe it is exposed to any significant credit risk on its cash balances. Restricted Cash The Company is periodically required to maintain cash balances at its broker related to derivative instrument positions as discussed in Note 6. Accounts Receivable Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral. Accounts receivable are recorded at their estimated net realizable value. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company’s credit terms. Accounts considered uncollectible are written off. The Company follows a policy of providing an allowance for doubtful accounts; however, based on historical experience, and its evaluation of the current status of receivables, the Company is of the belief that such accounts will be collectible in all material respects and thus an allowance was not necessary at October 31, 2017 or 2016. It is at least possible this estimate will change in the future. Inventory Inventory is stated at the lower of cost or net realizable value. Cost for all inventories is determined using the first in first out method (FIFO). Net realizable value is the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Inventory consists of raw materials, work in process, finished goods, and supplies. Corn is the primary raw material along with other raw materials. Finished goods consist of ethanol, distillers’ grains, and corn oil. Derivative Instruments From time to time, the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives in the balance sheets at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in earnings. Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting and reporting requirements, and therefore, are not marked to market in our consolidated financial statements. In order to reduce the risks caused by market fluctuations, the Company occasionally hedges its anticipated corn, natural gas, and denaturant purchases and ethanol sales by entering into options and futures contracts. These contracts are used with the intention to fix the purchase price of anticipated requirements for corn in the Company’s ethanol production activities and the related sales price of ethanol. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter market conditions. Although the Company believes its commodity derivative positions are economic hedges, none have been formally designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings or losses. The Company does not enter into financial instruments for trading or speculative purposes. The Company has adopted authoritative guidance related to “Derivatives and Hedging,” and has included the required enhanced quantitative and qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. See further discussion in Note 6. Other Intangibles Other intangibles are stated at cost and include road improvements located near the plant in which the Company has a beneficial interest in but does not own the road. The Company amortizes the assets over the economic useful life of 15 years. The Company recorded amortization expense in the amount of approximately $38,000 for each of the fiscal years ended October 31, 2017, 2016, and 2015. Property and Equipment Property and equipment are recorded at cost. Depreciation is provided over an estimated useful life by use of the straight-line deprecation method. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized. Construction in progress expenditures will be depreciated using the straight-line method over their estimated useful lives once the assets are placed into service. Depreciable useful lives are as follows: Land improvements 15 Years Plant building and equipment 7-40 Years Vehicles and other equipment 5-7 Years Office buildings and equipment 3-40 Years Long-Lived Assets Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When determining impairment losses, a long lived asset should be grouped with other assets or liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets or liabilities. If circumstances require a long-lived asset to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including, but not limited to, discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment expense was recorded during fiscal 2017, 2016, and 2015. Fair Value of Financial Instruments The Company follows guidance for accounting for fair value measurements of financial assets and liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the consolidated financial statements on a recurring and nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: · Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2 inputs include: 1. Quoted prices in active markets for similar assets or liabilities. 2. Quoted prices in markets that are observable for the asset or liability either directly or indirectly, for substantially the full term of the asset or liability. 3. Inputs that derived primarily from or corroborated by observable market date by correlation or other means. · Level 3 inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value in our balance sheets, the Company has elected not to record any other assets or liabilities at fair value. No events occurred during the fiscal years ended October 31, 2017, 2016, and 2015 that required adjustment to the recognized balances of assets or liabilities, which are recorded at fair value on a nonrecurring basis. The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short maturity of these instruments. The fair value of debt has been estimated using discounted cash flow analysis based upon the Company’s current incremental borrowing rates for similar types of financing arrangements. The fair value of outstanding debt will fluctuate with changes in applicable interest rates. Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued. The Company believes the carrying amount of its debt facilities approximates the fair value. Income Taxes The Company is treated as a partnership for federal and state income tax purposes and generally does not incur income taxes. Instead, its earnings and losses are included in the income tax returns of the members. Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. Differences between financial statement basis of assets and tax basis of assets is related to capitalization and amortization of organization and start-up costs for tax purposes, whereas these costs are expensed for financial statement purposes. In addition, the Company uses the alternative depreciation system (ADS) for tax depreciation instead of the straight-line method that is used for book depreciation, which also causes temporary differences. The Company’s tax year end is December 31. The Company had no significant uncertain tax positions as of October 31, 2017 or 2016 that would require disclosure, primarily due to the partnership tax status. The Company recognizes and measures tax benefits when realization of the benefits is uncertain under a two-step approach. The first step is to determine whether the benefit meets the more-likely-than-not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. Primarily due to the Company’s tax status as a partnership, the adoption of this guidance had no material impact on the Company’s financial condition or results of operations. The Company files income tax returns in the U.S. federal and Minnesota state jurisdictions. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2014. Net Income per Unit Basic net income per unit is computed by dividing net income by the weighted average number of members’ units outstanding during the period. Diluted net income or loss per unit is computed by dividing net income by the weighted average number of members’ units and members’ unit equivalents outstanding during the period. Environmental Liabilities The Company’s operations are subject to environmental laws and regulations adopted by various governmental entities in the jurisdiction in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its location. 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 liability is probable and the costs can be reasonably estimated. Reportable Operating Segments Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” establishes the standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results criteria set forth in ASC 280, the Company has two reportable operating segments for financial reporting purposes. · Ethanol Production . Based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plant, including the production and sale of ethanol and its co-products, are aggregated into one financial reporting segment. · Natural Gas Pipeline . The Company has majority ownership in Agrinatural, through its wholly owned subsidiary, HLBE Pipeline, LLC, and operations of Agrinatural’s natural gas pipeline are aggregated into another financial reporting segment. Recently Issued Accounting Pronouncements Contract Revenue Recognition (Evaluating) In May 2014 and amended in August 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 which amended the Revenue from Contracts with Customers (Topic 606) of the Accounting Standards Codification. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company beginning November 1, 2018. The Company is currently evaluating the guidance and its effect on its consolidated financial statements. Leases (Evaluating) In February 2016, the FASB adopted ASU No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets, initially measured at the present value of the lease payments. The accounting guidance for lessors is largely unchanged. The guidance will be effective for the Company beginning November 1, 2019. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. Restricted Cash (Evaluating) In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash , which amended Statement of Cash Flows (Topic 230) of the Accounting Standards Codification. The new guidance will require amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statement of cash flows. The amendments will be effective for the Company beginning November 1, 2018. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements. |
RISKS AND UNCERTAINTIES
RISKS AND UNCERTAINTIES | 12 Months Ended |
Oct. 31, 2017 | |
Risks and Uncertainties [Abstract] | |
RISKS AND UNCERTAINTIES | 2. RISKS AND UNCERTAINTIES The Company has certain risks and uncertainties that it experienced during volatile market conditions. These volatilities can have a severe impact on operations. The Company’s revenues are primarily derived from the sale and distribution of ethanol, distillers’ grains and corn oil to customers primarily located in the U.S. Corn for the production process is supplied to the plant primarily from local agricultural producers. Ethanol sales average 75%- 85% of total revenues and corn costs average 70%- 90% 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, the weather, government policies and programs, unleaded gasoline prices and the petroleum markets as a whole. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, the weather, government policies and programs, and a risk management program used to protect against the price volatility of these commodities. Market fluctuations in the price of and demand for these products may have a significant adverse effect on the Company’s operations, profitability and the availability and adequacy of cash flow to meet the Company’s working capital requirements. The supply and demand for ethanol are impacted by federal and state legislation and regulation, most significantly the Renewable Fuels Standard (“RFS”), and any changes in legislation or regulation could cause the demand for ethanol to decline or its supply to increase, which could have a material adverse effect on our business, results of operations and financial condition, and the ability to operate at a profit. On November 30, 2017, the EPA announced the final 2018 renewable volume requirements (“RVOs”) for conventional ethanol at 15.0 billion gallons, with the RVOs for advanced biofuels set at 4.29 billion gallons and cellulosic ethanol at 0.29 billon gallons, reducing overall RVOs to 19.29 billion gallons for 2018. Although this final rule achieves the statutory RVO for conventional corn-based ethanol originally set by Congress when the RFS was enacted, it reduces the overall RVOs below the overall statutory level of 26 billion gallons. According to the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. Since 2018 is the first year the total proposed RVOs were more than 20% below statutory levels, in September 2017, the EPA Administrator directed his staff to initiate the required technical analysis to perform any future reset consistent with the reset rules. If 2019 RVOs are also more than 20% below statutory levels, the RVO reset will be triggered under RFS and the EPA will be required to modify statutory volumes through 2022 within one year of the trigger event, based on the same factors used to set the RVOs post-2022. If the statutory RVOs are reduced as a result of reset, it could have an adverse effect on the market price and demand for ethanol which would negatively impact our financial performance. Additionally, opponents of ethanol such as large oil companies will likely continue their efforts to repeal or reduce the RFS through lawsuits or lobbying of Congress. Successful reduction or repeal of the blending requirements of the RFS could result in a significant decrease in ethanol demand. Current ethanol production capacity is approximately 16.0 billion gallons according to the RFA and may increase during calendar year 2018 as several plants’ expansion projects come online. Although the release of the final 2018 RVOs maintaining the 15 billion gallon RVO for conventional corn-based ethanol together a letter issued by EPA Administrator Pruitt in October 2017 signals support from the EPA and the Trump administration for domestic ethanol production, the EPA and Trump administration could still elect to materially modify, repeal or otherwise invalidate the RFS. It is unclear what regulatory framework and renewable volume requirements, if any, will emerge as a result of such reforms; however, any such reform could adversely affect the demand and price for ethanol and the Company's profitability . |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Oct. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | 3. FAIR VALUE MEASUREMENTS The Company follows accounting guidance related to fair value disclosures. For the Company, this guidance applies to certain derivative investments. The authoritative guidance also clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair measurements. The following table sets forth, by level, the Company assets that were accounted for at fair value on a recurring basis at October 31, 2017: Fair Value Measurement Using Carrying Amount in Quoted Prices Significant Other Significant Consolidated in Active Markets Observable Inputs Unobservable Inputs Financial Assets: Balance Sheet Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 141,644 $ 141,644 $ 141,644 $ — $ — Financial Liabilities: Commodity Derivative instruments - Ethanol $ 12,249 $ 12,249 $ 18,000 $ (5,751) $ — Commodity Derivative instruments - Natural Gas $ 15,381 $ 15,381 $ — $ 15,381 $ — The following table sets forth, by level, the Company assets that were accounted for at fair value on a recurring basis at October 31, 2016: Fair Value Measurement Using Carrying Amount in Quoted Prices in Significant Other Significant Consolidated Active Markets Observable Inputs Unobservable Inputs Financial Assets: Balance Sheet Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 388,525 $ 388,525 $ 388,525 $ — $ — Commodity Derivative instruments - Ethanol $ 273,813 $ 273,813 $ 273,813 $ — $ — We determine the fair value of commodity derivative instruments by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange. We determine the fair value of ethanol and natural gas Level 2 instruments by model-based techniques in which all significant inputs are observable in the markets noted above. |
CONCENTRATIONS
CONCENTRATIONS | 12 Months Ended |
Oct. 31, 2017 | |
CONCENTRATIONS | |
CONCENTRATIONS | 4. CONCENTRATIONS The Company sold all of the ethanol, distillers’ grains, and corn oil produced at its plant to three customers under marketing agreements during the fiscal years ended October 31, 2017, 2016, and 2015. The percentage of total revenues attributable to each of the Company’s three major customers for the fiscal years ended October 31, 2017, 2016, and 2015 were as follows: October 31, 2017 October 31, 2016 October 31, 2015 Eco-Energy, Inc. - Ethanol Gavilon Ingredients, LLC - Distillers' Grains RPMG, Inc. - Corn Oil The percentage of total accounts receivable attributable to each of the Company’s three major customers at October 31, 2017 and 2016 were as follows: October 31, 2017 October 31, 2016 Eco-Energy, Inc. - Ethanol Gavilon Ingredients, LLC - Distillers' Grains RPMG, Inc. - Corn Oil |
INVENTORY
INVENTORY | 12 Months Ended |
Oct. 31, 2017 | |
Inventory Disclosure [Abstract] | |
INVENTORY | 5. INVENTORY Inventory consists of the following at October 31: 2017 2016 Raw materials $ 1,442,844 $ 1,434,854 Work in process 652,296 696,013 Finished goods 3,747,779 2,713,716 Supplies 1,221,425 1,019,962 Totals $ 7,064,344 $ 5,864,545 The Company performs a lower cost or net realizable value analysis on inventory to determine if the market values of certain inventories are less than their carrying value, which is attributable primarily to decreases in market prices of corn and ethanol. Based on the lower of cost or net realizable value analysis, the Company did not record a loss on ethanol inventories for the fiscal years ended October 31, 2017 or 2016. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 12 Months Ended |
Oct. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | 6. DERIVATIVE INSTRUMENTS The Company enters into corn, ethanol, and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in commodity prices for periods up to 24 months. These derivatives are put in place to protect gross profit margins from potentially adverse effects of market and price volatility on ethanol sales and corn purchase commitments where the prices are set at a future date. Although these derivative instruments serve the Company’s purpose as an economic hedge, they are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. As of October 31, 2017, the total notional amount of the Company’s outstanding corn derivative instruments was approximately 1,120,000 bushels, comprised of long corn positions on 215,000 bushels that were entered into to hedge forecasted ethanol sales through December 2017, and short corn positions on 905,000 bushels that were entered into to hedge forecasted corn purchases through July 2018. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding. As of October 31, 2017, the Company had outstanding natural gas derivative instruments totaling 120,000 MMBTU entered into to hedge forecasted natural gas purchases through February 2018. As of October 31, 2017, the total notional amount of the Company’s outstanding ethanol derivative instruments was approximately 420,000 gallons that were entered into to hedge forecasted ethanol sales through November 2017. As of October 31, 2017, the Company had no cash collateral (restricted cash) and approximately $12,000 due to broker related to derivatives held by a broker, recorded as a component of accounts payable. The following table provides detail regarding the Company’s derivative financial instruments at October 31, 2017, none of which were designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 141,644 $ — Ethanol contracts Commodity derivative instruments — 12,249 Natural gas contracts Commodity derivative instruments — 15,381 Totals $ 141,644 $ 27,630 As of October 31, 2016, the total notional amount of the Company’s outstanding corn derivative instruments was approximately 4,285,000 bushels, comprised of long corn positions on 3,100,000 bushels that were entered into to hedge forecasted ethanol sales through March 2017, and short corn positions on 1,185,000 bushels that were entered into to hedge forecasted corn purchases through August 2017. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding. As of October 31, 2016, the Company had no cash collateral (restricted cash) related to derivatives held by a broker. The following table provides detail regarding the Company’s derivative financial instruments at October 31, 2016, none of which were designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 388,525 $ — Ethanol contracts Commodity derivative instruments 273,813 — Totals $ 662,338 $ — The following tables provide details regarding the gains (losses) from the Company’s derivative instruments in consolidated statements of operations, none of which are designated as hedging instruments: Consolidated Statement of Fiscal Year Ended October 31, Operations location 2017 2016 2015 Corn contracts Cost of goods sold $ 962,256 $ 915,555 $ 831,227 Ethanol contracts Revenues (218,802) 117,624 — Natural gas contracts Cost of goods sold (15,381) 21,550 — Total gain $ 728,073 $ 1,054,729 $ 831,227 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Oct. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | 7. PROPERTY AND EQUIPMENT A summary of property and equipment is as follows: October 31, 2017 October 31, 2016 Land and improvements $ 9,111,838 $ 9,111,838 Plant buildings and equipment 85,809,325 84,594,751 Vehicles 682,719 620,323 Office buildings 641,860 641,860 Construction in progress 85,746 315,631 96,331,488 95,284,403 Less: accumulated depreciation (49,764,401) (44,908,193) Net property and equipment $ 46,567,087 $ 50,376,210 Depreciation expense totaled approximately $4,984,000, $4,744,000 and $4,556,000 during the fiscal years ended October 31, 2017, 2016, and 2015, respectively. |
DEBT FACILITIES
DEBT FACILITIES | 12 Months Ended |
Oct. 31, 2017 | |
Debt Facilities | |
Debt Facilities | 8. DEBT FACILITIES Long-term debt consists of the following: October 31, 2017 October 31, 2016 Revolving term note payable to lending institution, see terms below. $ — $ — Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. The Company made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment. 1,241,171 1,517,046 Assessment payable as part of water supply agreement, due in monthly installments of $3,942 with interest at 8.73%, enforceable by statutory lien, with the final payment due in 2019. 56,514 97,930 Note payable to electrical company with monthly payments of $6,250 with interest at 0.00% and a 1.00% maintenance fee due each October. The note was paid in full in September 2017. The electrical company is a member of the Company. — 68,750 Note payable to non-controlling interest member of Agrinatural. Interest is at One Month LIBOR plus 4.0%, which was approximately 5.24% and 4.53% at October 31, 2017 and 2016, respectively. The note is considered due on demand with payments due at Agrinatural Board of Managers discretion. 100,000 200,000 Totals 1,397,685 1,883,726 Less amounts due within one year 432,183 490,057 Net long-term debt $ 965,502 $ 1,393,669 Revolving Term Note The Company has a revolving term loan with a lender under which the Company could initially borrow, repay and re-borrow in an amount up to the aggregate principal commitment at any time prior to the March 1, 2022 maturity date. This initial aggregate principal commitment was $28,000,000, which reduces by $3,500,000 annually, starting March 1, 2015 and continues each anniversary thereafter until maturity. The aggregate principal commitment of this facility at October 31, 2017 was $17,500,000. There was no outstanding balance on the revolving term loan at October 31, 2017 and 2016. Therefore, after accounting for amounts outstanding under this facility at October 31, 2017 and 2016, the aggregate principal amount available to the Company for borrowing was approximately $17,500,000 and $21,000,000, respectively. Interest on the revolving term loan accrues at a variable rate equal to 3.25% above the One-Month London Interbank Offered Rate (“LIBOR”) Index rate, which was 4.49% and 3.45% at October 31, 2017 and 2016, respectively. The Company may elect to enter into a fixed interest rate on this loan at various times throughout the term of the loan as provided in the loan agreements. The Company also agreed to pay an unused commitment fee on the unused portion of the revolving term loan commitment at the rate of 0.50% per annum. The loan is secured by substantially all of the Company assets including a subsidiary guarantee. The credit facility contains customary covenants, including restrictions on the payment of dividends and loans and advances to Agrinatural, and maintenance of certain financial ratios including minimum working capital, minimum net worth and a debt service coverage ratio as defined by the credit facility. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the revolving term loan and/or the imposition of fees, charges or penalties. As part of the credit facility closing, the Company entered into an administrative agency agreement with CoBank, ACP (“CoBank”). CoBank purchased a participation interest in the revolving term loan and was appointed the administrative agent for the purpose of servicing the loan. As a result, CoBank will act as the agent for the lender with respect to the credit facility. The Company agreed to pay CoBank an annual fee of $2,500 as the agent. Based on the most recent debt agreements, estimated maturities of long-term debt at October 31, 2017 are as follows: 2018 $ 432,183 2019 318,883 2020 326,798 2021 319,821 Total debt $ 1,397,685 |
MEMBERS' EQUITY
MEMBERS' EQUITY | 12 Months Ended |
Oct. 31, 2017 | |
Members' Equity [Abstract] | |
MEMBERS' EQUITY | 9. MEMBERS’ EQUITY The Company is authorized to issue 80,000,000 capital units, of which 65,000,000 have been designated Class A units and 15,000,000 have been designated as Class B units. Members of the Company are holders of units who have been admitted as members and who hold at least 2,500 units. Any holder of units who is not a member will not have voting rights. Transferees of units must be approved by our board of governors to become members. Members are entitled to one vote for each unit held. Subject to the Member Control Agreement, all units share equally in the profits and losses and distributions of assets on a per unit basis. On December 18, 2014, the Company’s board of governors declared a distribution of $0.12 per membership unit for a total of approximately $9,352,000 to be paid to members of record as of December 18, 2014. The distribution was paid in January 2015. Based on the covenants contained in the Company’s AgStar credit facilities, the foregoing distribution was approved by its lender prior to distribution. On December 17, 2015, the Company’s board of governors declared a distribution of $0.05 per membership unit for a total of approximately $3,897,000 to be paid to members of record as of December 18, 2015. The distribution was paid in January 2016. Based on the covenants contained in the Company’s credit facilities, the foregoing distribution was approved by its lender prior to distribution. Subsequent to year end, on December 21, 2017, the Company’s board of governors declared a distribution of $0.11 per membership unit for a total of approximately $8,573,000 to be paid to members of record as of December 21, 2017. The distribution was paid in January 2018. Based on the covenants contained in the Company’s lender credit facilities, the foregoing distribution was approved by its lender prior to distribution. |
LEASES
LEASES | 12 Months Ended |
Oct. 31, 2017 | |
Leases [Abstract] | |
LEASES | 10. LEASES The Company has lease agreements with leasing companies for 148 rail cars for the transportation of the Company’s ethanol with various maturity dates through January 2027. The rail car lease payments are due monthly in the aggregate amount of approximately $127,000. The Company has lease agreements with leasing companies for 110 hopper cars to assist in with the transport of the distillers’ grains by rail with various maturity dates through May 2027. During the fiscal year ended October 31, 2017, the Company renewed a lease agreement for 50 hopper cars for an additional 10 years with monthly payments of approximately $25,000. The rail car lease payments are due monthly in the amount of approximately $64,000. Rent expense for the Company’s leases was approximately $2,170,000, $2,571,000 and $1,969,000 for the fiscal years ended October 31, 2017, 2016, and 2015, respectively. At October 31, 2017, the Company had the following minimum future lease payments, which at inception had non‑cancelable terms of more than one year: November 1, 2017 to October 31, 2018 $ 1,896,000 November 1, 2018 to October 31, 2019 1,767,000 November 1, 2019 to October 31, 2020 1,767,000 November 1, 2020 to October 31, 2021 1,767,000 November 1, 2021 to October 31, 2022 1,767,000 Thereafter 7,249,000 Total minimum lease commitments $ 16,213,000 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Oct. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 11. INCOME TAXES The differences between consolidated financial statement basis and tax basis of assets and liabilities are estimated as follows at October 31: 2017 2016 Consolidated financial statement basis of assets $ 68,872,631 $ 63,771,046 Plus: Organization and start-up costs capitalized 775,562 933,291 Less: Unrealized gains on commodity derivative instruments (141,644) (662,338) Less: Accumulated tax depreciation and amortization greater than financial statement basis (60,718,166) (63,051,669) Plus: Impairment charge 27,844,579 27,844,579 Income tax basis of assets $ 36,632,962 $ 28,834,909 There were no significant differences between the consolidated financial statement basis of liabilities and the income tax basis of liabilities at October 31, 2017 and 2016. |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 12 Months Ended |
Oct. 31, 2017 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLANS | 12. EMPLOYEE BENEFIT PLANS The Company has a defined contribution plan available to all of its qualified employees. The Company contributes a match of 50% of the participant’s salary deferral up to a maximum of 4% of the employee’s salary. The Company contributions totaled approximately $90,000, $85,000, and $81,000 for the fiscal years ended October 31, 2017, 2016, and 2015, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Oct. 31, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 13. RELATED PARTY TRANSACTIONS Granite Falls Energy, LLC The Company has a management services agreement with Granite Falls Energy, LLC (“GFE”), a related party. Under the terms of the agreement, GFE supplies its own personnel to act as part-time officers and managers of the Company for the positions of Chief Executive Officer, Chief Financial Officer, and Commodity Risk Manager and the Company pays GFE 50% of the total salary, bonuses and other expenses and costs for the three management positions. The management services agreement automatically renews for successive on-year terms unless the Company or GFE gives the other party 90-day written notice of termination prior to expiration of the then-current term. The management services agreement may also be terminated by either party for cause under certain circumstances. Total expenses under this agreement were $406,000, $375,000 and $414,000 for fiscal years ended October 31, 2017, 2016, and 2015, respectively. Corn Purchase - Members The Company purchased corn from board members of approximately $9,811,000 in fiscal year 2017, $15,008,000 in fiscal year 2016, and $11,032,000 in fiscal year 2015. Agrinatural During 2013, the Company borrowed $300,000 from the non-controlling interest member of Agrinatural. Total interest paid in relation to this note payable amounted to approximately $6,000, $20,000, and $16,000 for each of the fiscal years ended October 31, 2017, 2016, and 2015, respectively. Swan Engineering Agrinatural has a management and operating agreement with Swan Engineering, Inc. (“SEI”). SEI, together with an unrelated third party owns Rural Energy Solutions, LLC (“RES”), the 27% minority owner of Agrinatural. Under the management and operating agreement, SEI provides Agrinatural with day-to-day management and operation of Agrinatural’s pipeline distribution business. In exchange for these services, Agrinatural pays SEI an aggregate management fee equal to the fixed monthly base fee plus the variable customer management fee based on the number of customers served on the pipeline less the agreed monthly fee reduction of $4,500. For the year ended October 31, 2017, the Company paid approximately $36,000 and $157,000 for the monthly base fee and variable customer management fee, respectively. For the year ended October 31, 2016, the Company paid approximately $32,000 and $149,000 for the monthly base fee and variable customer management fee, respectively. For the year ended October 31, 2015, the Company paid approximately $18,000 and $83,000 for the monthly base fee and variable customer management fee, respectively. The management and operating agreement with SEI expires July 1, 2019 unless earlier terminated for cause as defined in the agreement. Agrinatural also has a project management agreement with SEI. Pursuant to the project management agreement, SEI supervises all of Agrinatural’s pipeline construction projects. These projects are constructed by unrelated third-party pipeline construction companies. Under the project management agreement, Agrinatural pays SEI a total of 10% of the actual capital expenditures for construction projects approved by Agrinatural’s Board of Directors, excluding capitalized marketing costs. For the year ended October 31, 2017, the Company incurred approximately $44,000 for project management and capital work fees. For the year ended October 31, 2016, the Company incurred approximately $28,000 for project management and capital work fees. For the year ended October 31, 2015, the Company paid approximately $19,000 for project management fees. The project management with SEI expires June 30, 2019 unless earlier terminated for cause as defined in the agreement. Amounts due to SEI from Agrinatural included in accounts payable on the consolidated balance sheets totaled approximately $16,000 and $131,000 at October 31, 2017 and 2016, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Oct. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 14. COMMITMENTS AND CONTINGENCIES Water Agreements In October 2003, the Company entered into an industrial water supply development and distribution agreement with the City of Heron Lake for 15 years. The Company has the exclusive rights to the first 6,000 gallons per minute of capacity that is available from the well, and provides for the Company, combined with an unrelated company, to approve any other supply contracts that the City may enter into. In consideration, the Company will pay one half of the City’s water well bond payments of $735,000, plus a 5% administrative fee, totaling approximately $594,000, and operating costs, relative to the Company’s water usage, plus a 10% profit. These costs will be paid as water usage fees. The Company recorded an assessment of approximately $367,000 with long-term debt as described in Note 8. The Company pays operating and administrative expenses of approximately $12,000 per year. In May 2006, the Company entered into a water treatment agreement with the City of Heron Lake and Jackson County for 30 years. The Company will pay for operating and maintenance costs of the plant in exchange for receiving treated water. In addition, the Company agreed to an assessment for a portion of the capital costs of the water treatment plant. The Company recorded assessments with long-term debt of $500,000 and $3,550,000 in fiscal 2007 and 2006, respectively, as described in Note 8. The Company paid operating and maintenance expenses of approximately $92,000, $24,000, and $57,000 in fiscal 2017, 2016, and 2015, respectively. Ethanol Marketing Agreement The Company has a marketing agreement (“Eco Agreement”) with Eco-Energy, Inc., an unrelated party (“Eco-Energy”) for the sale of ethanol. Under this ethanol agreement, Eco-Energy purchases, markets and resells 100% of the ethanol produced at the Company’s ethanol production facility and arranges for the transportation of ethanol. The Company pays Eco-Energy a marketing fee per gallon of ethanol sold in consideration of Eco-Energy’s services, as well as a fixed lease fee for rail cars leased from Eco-Energy to the Company. The marketing fee was negotiated based on prevailing market-rate conditions for comparable ethanol marketing services. The initial term of Eco Agreement continued through December 31, 2016, with automatic renewals for additional three terms of three year periods unless terminated by either party by providing written notice to the other party at least 3 months prior to the end of the then current term. During the third fiscal quarter of 2016, the Company amended the Eco Agreement. As amended, the term of the Eco Agreement continues through December 31, 2019. Additionally, the amended Eco Agreement provides for certain negotiated changes to the marketing fees payable to Eco-Energy and payment terms based on prevailing market-rate conditions for comparable ethanol marketed services. Ethanol marketing fees and commissions totaled approximately $587,000, $637,000, and $618,000 for the fiscal years ended October 31, 2017, 2016, and 2015. Ethanol Forward Contracts At October 31, 2017, the Company had fixed and basis contracts to sell approximately $18,414,000 of ethanol for various delivery periods through March 2018, which approximates 52% of its anticipated ethanol sales for that period. Distillers’ Grains Marketing Agreement Gavilon Ingredients, LLC, an unrelated party (“Gavilon”), serves as the distillers’ grains marketer for our plant pursuant to a distillers’ grains off-take agreement. Pursuant to our agreement with Gavilon, Gavilon purchases all of the distillers’ grains produced at our ethanol plant. We pay Gavilon a service fee for its services under this agreement. The contract commenced on November 1, 2013 with an initial term of six months, and will continue to remain in effect until terminated by either party at its unqualified option, by providing written notice of not less than 60 days to the other party. Distillers’ grains commissions totaled approximately $268,000, $283,000, and $308,000 for the fiscal years ended October 31, 2017, 2016, and 2015. Distillers’ Grains Forward Contracts At October 31, 2017, the Company had forward contracts to sell approximately $2,006,000 of distillers’ grains for delivery through March 2018, which approximates 27% of its anticipated distillers’ grains sales during that period. Corn Oil Marketing Agreement RPMG, Inc., an unrelated party, markets the corn oil produced at our ethanol plant pursuant to a corn oil marketing agreement. We pay RPMG a commission based on each pound of corn oil sold by RPMG under the agreement. The contract commenced on November 1, 2013 with an initial term of one year and will continue to remain in effect until terminated by either party at its unqualified option, by providing written notice of not less than 90 days to the other party. Corn oil commissions totaled approximately $89,000, $96,000, and $56,000 for the fiscal years ended October 31, 2017, 2016, and 2015. Corn Oil Forward Contracts At October 31, 2017, the Company had forward contracts to sell approximately $763,000 of corn oil for delivery through December 2017, which approximates 90% of its anticipated corn oil sales for that period. Contract for Natural Gas Pipeline to Plant The Company has a facilities agreement with Northern Border Pipeline Company which allows us access to an existing interstate natural gas pipeline located approximately 16 miles north from the plant. Agrinatural was formed to own and operate the pipeline and transports gas to the Company pursuant to a transportation agreement. The Company also has a base agreement for the sale and purchase of natural gas with Constellation NewEnergy-Gas Division, LLC (“Constellation”), pursuant to which it buys all of its natural gas from Constellation. This agreement runs until March 31, 2019. Corn Forward Contracts At October 31, 2017, the Company had cash and basis contracts for forward corn purchase commitments for approximately 1,769,000 bushels for deliveries through October 2018. Railcar Damages In accordance with certain railcar lease agreements, at expiration, the Company is required to return the railcars in good condition, less normal wear and tear. Primarily due to the ongoing maintenance and repair activities performed on its railcars, the Company has determined that no accrual for leased railcar damages is necessary and an estimate of the possible range of loss cannot be made. |
BUSINESS SEGMENTS
BUSINESS SEGMENTS | 12 Months Ended |
Oct. 31, 2017 | |
Segment Reporting [Abstract] | |
BUSINESS SEGMENTS | 15. BUSINESS SEGMENTS The Company groups its operations into the following two business segments: Ethanol Production: Ethanol and co-product production and sales Natural gas pipeline: Ownership and operations of natural gas pipeline Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The accounting policies for each segment are the same as those described in the summary of significant accounting policies in Note 1. Segment income or loss does not include any allocation of shared-service costs. Segment assets are those that are directly used in or identified with segment operations. Inter-segment balances and transactions have been eliminated. The following tables summarize financial information by segment and provide a reconciliation of segment revenue, contribution to operating income and total assets for the fiscal years ended October 31: Revenue: 2017 2016 2015 Ethanol production $ 108,709,255 $ 108,577,171 $ 114,669,831 Natural gas pipeline 2,946,438 2,770,310 2,761,042 Eliminations (1,738,041) (1,741,937) (1,770,404) Total Revenue $ 109,917,652 $ 109,605,544 $ 115,660,469 Operating Income: 2017 2016 2015 Ethanol production $ 6,821,779 $ 5,057,258 $ 8,106,105 Natural gas pipeline 1,177,251 1,177,158 1,075,581 Eliminations (694,435) (740,183) (1,770,404) Operating Income $ 7,304,595 $ 5,494,233 $ 7,411,282 Assets: 2017 2016 2015 Ethanol production $ 56,373,335 $ 51,080,443 $ 53,663,064 Natural gas pipeline 12,499,296 12,690,603 13,033,320 Total Assets $ 68,872,631 $ 63,771,046 $ 66,696,384 |
QUARTERLY FINANCIAL DATA (UNAUD
QUARTERLY FINANCIAL DATA (UNAUDITED) | 12 Months Ended |
Oct. 31, 2017 | |
QUARTERLY FINANCIAL DATA (UNAUDITED) | |
QUARTERLY FINANCIAL DATA (UNAUDITED) | 16. QUARTERLY FINANCIAL DATA (UNAUDITED) Summary quarterly results are as follows: First Second Third Fourth Fiscal year ended October 31, 2017 Quarter Quarter Quarter Quarter Revenues $ 27,390,074 $ 25,990,784 $ 28,541,889 $ 27,994,905 Gross profit 3,414,231 1,850,266 2,251,294 2,913,491 Operating income 2,567,534 1,080,594 1,518,888 2,137,579 Net income attributable to Heron Lake BioEnergy, LLC 2,832,413 1,019,120 1,414,752 2,002,070 Basic and diluted earnings per unit (Class A and B) $ 0.04 $ 0.01 $ 0.02 $ 0.02 First Second Third Fourth Fiscal year ended October 31, 2016 Quarter Quarter Quarter Quarter Revenues $ 26,588,565 $ 25,241,981 $ 30,365,123 $ 27,409,875 Gross profit 857,581 920,070 3,730,408 2,985,331 Operating income 48,947 108,111 2,983,648 2,353,527 Net income (loss) attributable to Heron Lake BioEnergy, LLC (25,555) 13,258 2,810,607 2,177,906 Basic and diluted earnings per unit (Class A and B) $ — $ — $ 0.03 $ 0.03 First Second Third Fourth Fiscal year ended October 31, 2015 Quarter Quarter Quarter Quarter Revenues $ 27,177,449 $ 29,813,571 $ 30,192,430 $ 28,477,019 Gross profit 1,847,050 2,673,825 4,755,934 1,135,568 Operating income 966,668 1,891,732 4,014,168 538,714 Net income attributable to Heron Lake BioEnergy, LLC 879,256 1,733,837 3,808,820 329,320 Basic and diluted earnings per unit (Class A and B) $ 0.01 $ 0.02 $ 0.05 $ 0.01 The above quarterly financial data is unaudited, but in the opinion of management, all adjustments necessary for a fair presentation of the selected data for these periods presented have been included. |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Oct. 31, 2017 | |
Accounting Policies [Abstract] | |
Nature of Business | Nature of Business Heron Lake BioEnergy, LLC owns and operates an ethanol plant near Heron Lake, Minnesota with a permitted capacity of approximately 72.3 million gallons per year of undenatured ethanol on a twelve-month rolling sum basis. In addition, Heron Lake BioEnergy, LLC produces and sells distillers’ grains with solubles and corn oil as co-products of ethanol production. Heron Lake BioEnergy, LLC’s wholly owned subsidiary, HLBE Pipeline Company, LLC (“HLBE Pipeline Company”), owns 73% of Agrinatural Gas, LLC (“Agrinatural”). Agrinatural operates a natural gas pipeline that provides natural gas to Heron Lake BioEnergy, LLC’s ethanol production facility and other customers. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company (collectively, “the Company”). Given the Company’s control over the operations of Agrinatural and its majority voting interest, the Company consolidates the financial statements of Agrinatural with its consolidated financial statements, with the equity and earnings (loss) attributed to the remaining 27% non-controlling interest identified separately in the accompanying consolidated balance sheets and statements of operations. All significant intercompany balances and transactions are eliminated in consolidation. |
Fiscal Reporting Period | Fiscal Reporting Period The Company’s fiscal year end for reporting financial operations is October 31. |
Accounting Estimates | Accounting Estimates Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for significant matters including, among others, the economic lives of property and equipment, valuation of commodity derivative instruments and inventory, evaluation of rail car damages contingency, the assumptions used in the impairment analysis of long-lived assets, and inventory purchase and sale commitments. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. Actual results could differ from those estimates. |
Noncontrolling Interest | Non-controlling Interest Amounts recorded as non-controlling interest relate to the net investment by an unrelated party in Agrinatural. Income and losses are allocated to the members of Agrinatural based on their respective percentage of membership units held. Pursuant to the firm natural gas transportation agreement with Agrinatural, Agrinatural will provide natural gas to Heron Lake BioEnergy’s plant with a specified price per MMBTU with a term ending on October 31, 2021, with one automatic renewal option to extend the term for an additional five years period. |
Revenue Recognition | Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. Title is generally assumed by the buyer at the Company’s shipping point. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and commissions due to the marketers are deducted from the gross sales price as earned. These fees and commissions are recorded net of revenues as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Shipping costs incurred by the Company in the sale of ethanol are not specifically identifiable and as a result, are recorded based on the net selling price reported to the Company from the marketer. Shipping costs incurred by the Company in the sale of ethanol related products are included in cost of goods sold. Agrinatural recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee for the arrangement is fixed or determinable and collectability is reasonably assured. |
Cost of Goods Sold | Cost of Goods Sold The primary components of cost of goods sold for the production of ethanol and related co-products are corn, energy, raw materials, overhead, depreciation, and direct labor. |
Operating Expenses | Operating Expenses The primary components of operating expenses are salaries and expenses for administrative employees, professional fees, board of governor expenses and property taxes. |
Cash | Cash The Company maintains its accounts at multiple financial institutions. At times throughout the year, the Company’s cash balances may exceed amounts insured by the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation. The Company does not believe it is exposed to any significant credit risk on its cash balances. |
Restricted Cash | Restricted Cash The Company is periodically required to maintain cash balances at its broker related to derivative instrument positions as discussed in Note 6. |
Accounts Receivable | Accounts Receivable Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral. Accounts receivable are recorded at their estimated net realizable value. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company’s credit terms. Accounts considered uncollectible are written off. The Company follows a policy of providing an allowance for doubtful accounts; however, based on historical experience, and its evaluation of the current status of receivables, the Company is of the belief that such accounts will be collectible in all material respects and thus an allowance was not necessary at October 31, 2017 or 2016. It is at least possible this estimate will change in the future. |
Inventory | Inventory Inventory is stated at the lower of cost or net realizable value. Cost for all inventories is determined using the first in first out method (FIFO). Net realizable value is the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Inventory consists of raw materials, work in process, finished goods, and supplies. Corn is the primary raw material along with other raw materials. Finished goods consist of ethanol, distillers’ grains, and corn oil. |
Derivative Instruments | Derivative Instruments From time to time, the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives in the balance sheets at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in earnings. Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting and reporting requirements, and therefore, are not marked to market in our consolidated financial statements. In order to reduce the risks caused by market fluctuations, the Company occasionally hedges its anticipated corn, natural gas, and denaturant purchases and ethanol sales by entering into options and futures contracts. These contracts are used with the intention to fix the purchase price of anticipated requirements for corn in the Company’s ethanol production activities and the related sales price of ethanol. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter market conditions. Although the Company believes its commodity derivative positions are economic hedges, none have been formally designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings or losses. The Company does not enter into financial instruments for trading or speculative purposes. The Company has adopted authoritative guidance related to “Derivatives and Hedging,” and has included the required enhanced quantitative and qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. See further discussion in Note 6. |
Other Intangibles | Other Intangibles Other intangibles are stated at cost and include road improvements located near the plant in which the Company has a beneficial interest in but does not own the road. The Company amortizes the assets over the economic useful life of 15 years. The Company recorded amortization expense in the amount of approximately $38,000 for each of the fiscal years ended October 31, 2017, 2016, and 2015. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost. Depreciation is provided over an estimated useful life by use of the straight-line deprecation method. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized. Construction in progress expenditures will be depreciated using the straight-line method over their estimated useful lives once the assets are placed into service. Depreciable useful lives are as follows: Land improvements 15 Years Plant building and equipment 7-40 Years Vehicles and other equipment 5-7 Years Office buildings and equipment 3-40 Years |
Long-Lived Assets | Long-Lived Assets Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When determining impairment losses, a long lived asset should be grouped with other assets or liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets or liabilities. If circumstances require a long-lived asset to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including, but not limited to, discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment expense was recorded during fiscal 2017, 2016, and 2015. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company follows guidance for accounting for fair value measurements of financial assets and liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the consolidated financial statements on a recurring and nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: · Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2 inputs include: 1. Quoted prices in active markets for similar assets or liabilities. 2. Quoted prices in markets that are observable for the asset or liability either directly or indirectly, for substantially the full term of the asset or liability. 3. Inputs that derived primarily from or corroborated by observable market date by correlation or other means. · Level 3 inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value in our balance sheets, the Company has elected not to record any other assets or liabilities at fair value. No events occurred during the fiscal years ended October 31, 2017, 2016, and 2015 that required adjustment to the recognized balances of assets or liabilities, which are recorded at fair value on a nonrecurring basis. The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short maturity of these instruments. The fair value of debt has been estimated using discounted cash flow analysis based upon the Company’s current incremental borrowing rates for similar types of financing arrangements. The fair value of outstanding debt will fluctuate with changes in applicable interest rates. Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued. The Company believes the carrying amount of its debt facilities approximates the fair value. |
Income Taxes | Income Taxes The Company is treated as a partnership for federal and state income tax purposes and generally does not incur income taxes. Instead, its earnings and losses are included in the income tax returns of the members. Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. Differences between financial statement basis of assets and tax basis of assets is related to capitalization and amortization of organization and start-up costs for tax purposes, whereas these costs are expensed for financial statement purposes. In addition, the Company uses the alternative depreciation system (ADS) for tax depreciation instead of the straight-line method that is used for book depreciation, which also causes temporary differences. The Company’s tax year end is December 31. The Company had no significant uncertain tax positions as of October 31, 2017 or 2016 that would require disclosure, primarily due to the partnership tax status. The Company recognizes and measures tax benefits when realization of the benefits is uncertain under a two-step approach. The first step is to determine whether the benefit meets the more-likely-than-not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. Primarily due to the Company’s tax status as a partnership, the adoption of this guidance had no material impact on the Company’s financial condition or results of operations. The Company files income tax returns in the U.S. federal and Minnesota state jurisdictions. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2014. |
Net Income per Unit | Net Income per Unit Basic net income per unit is computed by dividing net income by the weighted average number of members’ units outstanding during the period. Diluted net income or loss per unit is computed by dividing net income by the weighted average number of members’ units and members’ unit equivalents outstanding during the period. |
Environmental Liabilities | Environmental Liabilities The Company’s operations are subject to environmental laws and regulations adopted by various governmental entities in the jurisdiction in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its location. 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 liability is probable and the costs can be reasonably estimated. |
Reportable Operating Segments | Reportable Operating Segments Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” establishes the standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results criteria set forth in ASC 280, the Company has two reportable operating segments for financial reporting purposes. · Ethanol Production . Based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plant, including the production and sale of ethanol and its co-products, are aggregated into one financial reporting segment. · Natural Gas Pipeline . The Company has majority ownership in Agrinatural, through its wholly owned subsidiary, HLBE Pipeline, LLC, and operations of Agrinatural’s natural gas pipeline are aggregated into another financial reporting segment. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Contract Revenue Recognition (Evaluating) In May 2014 and amended in August 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 which amended the Revenue from Contracts with Customers (Topic 606) of the Accounting Standards Codification. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company beginning November 1, 2018. The Company is currently evaluating the guidance and its effect on its consolidated financial statements. Leases (Evaluating) In February 2016, the FASB adopted ASU No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets, initially measured at the present value of the lease payments. The accounting guidance for lessors is largely unchanged. The guidance will be effective for the Company beginning November 1, 2019. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. Restricted Cash (Evaluating) In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash , which amended Statement of Cash Flows (Topic 230) of the Accounting Standards Codification. The new guidance will require amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statement of cash flows. The amendments will be effective for the Company beginning November 1, 2018. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN24
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of depreciable useful lives of property and equipment | Land improvements 15 Years Plant building and equipment 7-40 Years Vehicles and other equipment 5-7 Years Office buildings and equipment 3-40 Years |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of assets measured on a recurring basis | The following table sets forth, by level, the Company assets that were accounted for at fair value on a recurring basis at October 31, 2017: Fair Value Measurement Using Carrying Amount in Quoted Prices Significant Other Significant Consolidated in Active Markets Observable Inputs Unobservable Inputs Financial Assets: Balance Sheet Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 141,644 $ 141,644 $ 141,644 $ — $ — Financial Liabilities: Commodity Derivative instruments - Ethanol $ 12,249 $ 12,249 $ 18,000 $ (5,751) $ — Commodity Derivative instruments - Natural Gas $ 15,381 $ 15,381 $ — $ 15,381 $ — The following table sets forth, by level, the Company assets that were accounted for at fair value on a recurring basis at October 31, 2016: Fair Value Measurement Using Carrying Amount in Quoted Prices in Significant Other Significant Consolidated Active Markets Observable Inputs Unobservable Inputs Financial Assets: Balance Sheet Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 388,525 $ 388,525 $ 388,525 $ — $ — Commodity Derivative instruments - Ethanol $ 273,813 $ 273,813 $ 273,813 $ — $ — |
CONCENTRATIONS (Tables)
CONCENTRATIONS (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Customer | Total revenues | |
CONCENTRATIONS | |
Schedule of concentration risk | October 31, 2017 October 31, 2016 October 31, 2015 Eco-Energy, Inc. - Ethanol Gavilon Ingredients, LLC - Distillers' Grains RPMG, Inc. - Corn Oil |
Credit | Accounts receivable | |
CONCENTRATIONS | |
Schedule of concentration risk | October 31, 2017 October 31, 2016 Eco-Energy, Inc. - Ethanol Gavilon Ingredients, LLC - Distillers' Grains RPMG, Inc. - Corn Oil |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | 2017 2016 Raw materials $ 1,442,844 $ 1,434,854 Work in process 652,296 696,013 Finished goods 3,747,779 2,713,716 Supplies 1,221,425 1,019,962 Totals $ 7,064,344 $ 5,864,545 |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of derivative financial instruments | The following table provides detail regarding the Company’s derivative financial instruments at October 31, 2017, none of which were designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 141,644 $ — Ethanol contracts Commodity derivative instruments — 12,249 Natural gas contracts Commodity derivative instruments — 15,381 Totals $ 141,644 $ 27,630 As of October 31, 2016, the total notional amount of the Company’s outstanding corn derivative instruments was approximately 4,285,000 bushels, comprised of long corn positions on 3,100,000 bushels that were entered into to hedge forecasted ethanol sales through March 2017, and short corn positions on 1,185,000 bushels that were entered into to hedge forecasted corn purchases through August 2017. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding. As of October 31, 2016, the Company had no cash collateral (restricted cash) related to derivatives held by a broker. The following table provides detail regarding the Company’s derivative financial instruments at October 31, 2016, none of which were designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 388,525 $ — Ethanol contracts Commodity derivative instruments 273,813 — Totals $ 662,338 $ — |
Schedule of gains (losses) from derivative instruments | Consolidated Statement of Fiscal Year Ended October 31, Operations location 2017 2016 2015 Corn contracts Cost of goods sold $ 962,256 $ 915,555 $ 831,227 Ethanol contracts Revenues (218,802) 117,624 — Natural gas contracts Cost of goods sold (15,381) 21,550 — Total gain $ 728,073 $ 1,054,729 $ 831,227 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | October 31, 2017 October 31, 2016 Land and improvements $ 9,111,838 $ 9,111,838 Plant buildings and equipment 85,809,325 84,594,751 Vehicles 682,719 620,323 Office buildings 641,860 641,860 Construction in progress 85,746 315,631 96,331,488 95,284,403 Less: accumulated depreciation (49,764,401) (44,908,193) Net property and equipment $ 46,567,087 $ 50,376,210 |
DEBT FACILITIES (Tables)
DEBT FACILITIES (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Debt Facilities | |
Schedule of long-term debt | October 31, 2017 October 31, 2016 Revolving term note payable to lending institution, see terms below. $ — $ — Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. The Company made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment. 1,241,171 1,517,046 Assessment payable as part of water supply agreement, due in monthly installments of $3,942 with interest at 8.73%, enforceable by statutory lien, with the final payment due in 2019. 56,514 97,930 Note payable to electrical company with monthly payments of $6,250 with interest at 0.00% and a 1.00% maintenance fee due each October. The note was paid in full in September 2017. The electrical company is a member of the Company. — 68,750 Note payable to non-controlling interest member of Agrinatural. Interest is at One Month LIBOR plus 4.0%, which was approximately 5.24% and 4.53% at October 31, 2017 and 2016, respectively. The note is considered due on demand with payments due at Agrinatural Board of Managers discretion. 100,000 200,000 Totals 1,397,685 1,883,726 Less amounts due within one year 432,183 490,057 Net long-term debt $ 965,502 $ 1,393,669 |
Schedule of estimated maturities of long-term debt | 2018 $ 432,183 2019 318,883 2020 326,798 2021 319,821 Total debt $ 1,397,685 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Leases [Abstract] | |
Schedule of minimum future lease payments | November 1, 2017 to October 31, 2018 $ 1,896,000 November 1, 2018 to October 31, 2019 1,767,000 November 1, 2019 to October 31, 2020 1,767,000 November 1, 2020 to October 31, 2021 1,767,000 November 1, 2021 to October 31, 2022 1,767,000 Thereafter 7,249,000 Total minimum lease commitments $ 16,213,000 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of differences between financial statement basis and tax basis of assets | 2017 2016 Consolidated financial statement basis of assets $ 68,872,631 $ 63,771,046 Plus: Organization and start-up costs capitalized 775,562 933,291 Less: Unrealized gains on commodity derivative instruments (141,644) (662,338) Less: Accumulated tax depreciation and amortization greater than financial statement basis (60,718,166) (63,051,669) Plus: Impairment charge 27,844,579 27,844,579 Income tax basis of assets $ 36,632,962 $ 28,834,909 |
BUSINESS SEGMENTS (Tables)
BUSINESS SEGMENTS (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
Segment Reporting [Abstract] | |
Schedule of primary business segments | Ethanol Production: Ethanol and co-product production and sales Natural gas pipeline: Ownership and operations of natural gas pipeline |
Financial information by segment | Revenue: 2017 2016 2015 Ethanol production $ 108,709,255 $ 108,577,171 $ 114,669,831 Natural gas pipeline 2,946,438 2,770,310 2,761,042 Eliminations (1,738,041) (1,741,937) (1,770,404) Total Revenue $ 109,917,652 $ 109,605,544 $ 115,660,469 Operating Income: 2017 2016 2015 Ethanol production $ 6,821,779 $ 5,057,258 $ 8,106,105 Natural gas pipeline 1,177,251 1,177,158 1,075,581 Eliminations (694,435) (740,183) (1,770,404) Operating Income $ 7,304,595 $ 5,494,233 $ 7,411,282 Assets: 2017 2016 2015 Ethanol production $ 56,373,335 $ 51,080,443 $ 53,663,064 Natural gas pipeline 12,499,296 12,690,603 13,033,320 Total Assets $ 68,872,631 $ 63,771,046 $ 66,696,384 |
QUARTERLY FINANCIAL DATA (UNA34
QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables) | 12 Months Ended |
Oct. 31, 2017 | |
QUARTERLY FINANCIAL DATA (UNAUDITED) | |
Summary of quarterly results | First Second Third Fourth Fiscal year ended October 31, 2017 Quarter Quarter Quarter Quarter Revenues $ 27,390,074 $ 25,990,784 $ 28,541,889 $ 27,994,905 Gross profit 3,414,231 1,850,266 2,251,294 2,913,491 Operating income 2,567,534 1,080,594 1,518,888 2,137,579 Net income attributable to Heron Lake BioEnergy, LLC 2,832,413 1,019,120 1,414,752 2,002,070 Basic and diluted earnings per unit (Class A and B) $ 0.04 $ 0.01 $ 0.02 $ 0.02 First Second Third Fourth Fiscal year ended October 31, 2016 Quarter Quarter Quarter Quarter Revenues $ 26,588,565 $ 25,241,981 $ 30,365,123 $ 27,409,875 Gross profit 857,581 920,070 3,730,408 2,985,331 Operating income 48,947 108,111 2,983,648 2,353,527 Net income (loss) attributable to Heron Lake BioEnergy, LLC (25,555) 13,258 2,810,607 2,177,906 Basic and diluted earnings per unit (Class A and B) $ — $ — $ 0.03 $ 0.03 First Second Third Fourth Fiscal year ended October 31, 2015 Quarter Quarter Quarter Quarter Revenues $ 27,177,449 $ 29,813,571 $ 30,192,430 $ 28,477,019 Gross profit 1,847,050 2,673,825 4,755,934 1,135,568 Operating income 966,668 1,891,732 4,014,168 538,714 Net income attributable to Heron Lake BioEnergy, LLC 879,256 1,733,837 3,808,820 329,320 Basic and diluted earnings per unit (Class A and B) $ 0.01 $ 0.02 $ 0.05 $ 0.01 |
SUMMARY OF SIGNIFICANT ACCOUN35
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Nature of Business (Details) gal in Millions | 12 Months Ended |
Oct. 31, 2017itemgal | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Operating capacity of Ethanol plant owned and operated | gal | 72.3 |
Agrinatural, LLC | |
Noncontrolling interest | |
Number of renewal options | item | 1 |
Term of renewed contract | 5 years |
Agrinatural, LLC | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Noncontrolling interest, ownership percentage by noncontrolling owners | 27.00% |
HLBE Pipeline Company, LLC | Agrinatural, LLC | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Ownership percentage | 73.00% |
SUMMARY OF SIGNIFICANT ACCOUN36
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other intangibles (Details) - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
Other Intangibles | |||
Economic useful life of other intangibles | 15 years | ||
Amortization of intangible assets | $ 38,000 | $ 38,000 | $ 38,000 |
SUMMARY OF SIGNIFICANT ACCOUN37
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) | 12 Months Ended |
Oct. 31, 2017 | |
Land improvements | |
Property and Equipment | |
Depreciable useful life | 15 years |
Plant building and equipment | Minimum | |
Property and Equipment | |
Depreciable useful life | 7 years |
Plant building and equipment | Maximum | |
Property and Equipment | |
Depreciable useful life | 40 years |
Vehicles and other equipment | Minimum | |
Property and Equipment | |
Depreciable useful life | 5 years |
Vehicles and other equipment | Maximum | |
Property and Equipment | |
Depreciable useful life | 7 years |
Office buildings and equipment | Minimum | |
Property and Equipment | |
Depreciable useful life | 3 years |
Office buildings and equipment | Maximum | |
Property and Equipment | |
Depreciable useful life | 40 years |
SUMMARY OF SIGNIFICANT ACCOUN38
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Long-Lived Assets (Details) - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
Long-Lived Assets | |||
Impairment charge | $ 0 | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN39
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment (Details) | 12 Months Ended |
Oct. 31, 2017segment | |
Segment Reporting Information | |
Number of reportable segments | 2 |
Ethanol production | |
Segment Reporting Information | |
Number of reportable segments | 1 |
RISKS AND UNCERTAINTIES (Detail
RISKS AND UNCERTAINTIES (Details) gal in Millions | 12 Months Ended | |||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017Ygal | Nov. 30, 2017gal | |
Ethanol production | ||||
RISKS AND UNCERTAINTIES | ||||
Ethanol production capacity | 16,000 | |||
Conventional ethanol | ||||
RISKS AND UNCERTAINTIES | ||||
Renewable volume obligation | 15,000 | |||
Advanced biofuels | ||||
RISKS AND UNCERTAINTIES | ||||
Renewable volume obligation | 4,290 | |||
Cellulosic ethanol | ||||
RISKS AND UNCERTAINTIES | ||||
Renewable volume obligation | 290 | |||
Renewable fuels | ||||
RISKS AND UNCERTAINTIES | ||||
Renewable volume obligation | 26,000 | |||
Percentage mandatory renewable fuel volumes are reduced | 20.00% | |||
Number of consecutive years | Y | 2 | |||
Period to modify volumes after trigger event | 1 year | |||
Renewable fuels | Proposed plan | ||||
RISKS AND UNCERTAINTIES | ||||
Renewable volume obligation | 19,290 | |||
Renewable fuels | Minimum | ||||
RISKS AND UNCERTAINTIES | ||||
Percentage below statutory levels | 20.00% | 20.00% | ||
Total revenues | Customer | Ethanol production | Minimum | ||||
RISKS AND UNCERTAINTIES | ||||
Concentration percentage | 75.00% | |||
Total revenues | Customer | Ethanol production | Maximum | ||||
RISKS AND UNCERTAINTIES | ||||
Concentration percentage | 85.00% | |||
Cost of goods sold | Product | Corn | Minimum | ||||
RISKS AND UNCERTAINTIES | ||||
Concentration percentage | 70.00% | |||
Cost of goods sold | Product | Corn | Maximum | ||||
RISKS AND UNCERTAINTIES | ||||
Concentration percentage | 90.00% |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - Recurring basis - USD ($) | Oct. 31, 2017 | Oct. 31, 2016 |
Corn contracts | Carrying Amount | ||
Fair value measurements | ||
Derivative Assets | $ 141,644 | $ 388,525 |
Corn contracts | Fair Value | ||
Fair value measurements | ||
Derivative Assets | 141,644 | 388,525 |
Corn contracts | Level 1 | Fair Value | ||
Fair value measurements | ||
Derivative Assets | 141,644 | 388,525 |
Ethanol contracts | Carrying Amount | ||
Fair value measurements | ||
Derivative Assets | 273,813 | |
Derivative Liability | 12,249 | |
Ethanol contracts | Fair Value | ||
Fair value measurements | ||
Derivative Assets | 273,813 | |
Derivative Liability | 12,249 | |
Ethanol contracts | Level 1 | Fair Value | ||
Fair value measurements | ||
Derivative Assets | $ 273,813 | |
Derivative Liability | 18,000 | |
Ethanol contracts | Level 2 | Fair Value | ||
Fair value measurements | ||
Derivative Liability | (5,751) | |
Natural gas contracts | Carrying Amount | ||
Fair value measurements | ||
Derivative Liability | 15,381 | |
Natural gas contracts | Fair Value | ||
Fair value measurements | ||
Derivative Liability | 15,381 | |
Natural gas contracts | Level 2 | Fair Value | ||
Fair value measurements | ||
Derivative Liability | $ 15,381 |
CONCENTRATIONS (Details)
CONCENTRATIONS (Details) - customer | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
CONCENTRATIONS | |||
Number of major customers | 3 | 3 | 3 |
Total revenues | Customer | Eco-Energy, Inc. | Ethanol production | |||
CONCENTRATIONS | |||
Concentration percentage | 81.30% | 78.50% | 76.90% |
Total revenues | Customer | Gavilon Ingredients, LLC | Distiller's Grains | |||
CONCENTRATIONS | |||
Concentration percentage | 13.70% | 15.40% | 19.20% |
Total revenues | Customer | RPMG, Inc. | Corn Oil | |||
CONCENTRATIONS | |||
Concentration percentage | 4.50% | 4.40% | 2.40% |
Accounts receivable | Credit | Eco-Energy, Inc. | Ethanol production | |||
CONCENTRATIONS | |||
Concentration percentage | 86.80% | 78.60% | |
Accounts receivable | Credit | Gavilon Ingredients, LLC | Distiller's Grains | |||
CONCENTRATIONS | |||
Concentration percentage | 7.00% | 11.10% | |
Accounts receivable | Credit | RPMG, Inc. | Corn Oil | |||
CONCENTRATIONS | |||
Concentration percentage | 4.30% | 3.30% |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Oct. 31, 2017 | Oct. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 1,442,844 | $ 1,434,854 |
Work in process | 652,296 | 696,013 |
Finished goods | 3,747,779 | 2,713,716 |
Supplies | 1,221,425 | 1,019,962 |
Totals | $ 7,064,344 | $ 5,864,545 |
DERIVATIVE INSTRUMENTS (Details
DERIVATIVE INSTRUMENTS (Details) | 12 Months Ended | |
Oct. 31, 2017USD ($)MMBTUbugal | Oct. 31, 2016USD ($)bu | |
Derivative instruments | ||
Assets | $ 141,644 | $ 662,338 |
Liabilities | $ 27,630 | |
Corn contracts | ||
Derivative instruments | ||
Notional volume | bu | 1,120,000 | 4,285,000 |
Restricted cash | $ 0 | |
Corn contracts | Long/Purchase | ||
Derivative instruments | ||
Notional volume | bu | 215,000 | 3,100,000 |
Corn contracts | Short/Sale | ||
Derivative instruments | ||
Notional volume | bu | 905,000 | 1,185,000 |
Ethanol contracts | ||
Derivative instruments | ||
Notional volume | gal | 420,000 | |
Natural gas contracts | ||
Derivative instruments | ||
National Energy | MMBTU | 120,000 | |
Derivatives held by a broker | ||
Derivative instruments | ||
Restricted cash | $ 0 | |
Derivatives held by a broker | Accounts Payable | ||
Derivative instruments | ||
Liabilities | 12,000 | |
Derivatives not designated as hedging instruments | ||
Derivative instruments | ||
Assets | 141,644 | $ 662,338 |
Liabilities | $ 27,630 | |
Derivatives not designated as hedging instruments | Commodity Contract | Maximum | ||
Derivative instruments | ||
Derivative term | 24 months | |
Derivatives not designated as hedging instruments | Corn contracts | ||
Derivative instruments | ||
Assets | $ 141,644 | 388,525 |
Derivatives not designated as hedging instruments | Ethanol contracts | ||
Derivative instruments | ||
Assets | $ 273,813 | |
Liabilities | 12,249 | |
Derivatives not designated as hedging instruments | Natural gas contracts | ||
Derivative instruments | ||
Liabilities | $ 15,381 |
DERIVATIVE INSTRUMENTS, Gains (
DERIVATIVE INSTRUMENTS, Gains (losses) (Details) - Derivatives not designated as hedging instruments - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
Derivative Instruments | |||
Gains and (losses) from derivative instruments | $ 728,073 | $ 1,054,729 | $ 831,227 |
Corn contracts | Cost of goods sold. | |||
Derivative Instruments | |||
Gains and (losses) from derivative instruments | 962,256 | 915,555 | $ 831,227 |
Ethanol contracts | Revenues. | |||
Derivative Instruments | |||
Gains and (losses) from derivative instruments | (218,802) | 117,624 | |
Natural gas contracts | Cost of goods sold. | |||
Derivative Instruments | |||
Gains and (losses) from derivative instruments | $ (15,381) | $ 21,550 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
Property and Equipment | |||
Property and equipment, gross | $ 96,331,488 | $ 95,284,403 | |
Less accumulated depreciation | (49,764,401) | (44,908,193) | |
Net, property and equipment | 46,567,087 | 50,376,210 | |
Depreciation | 4,984,000 | 4,744,000 | $ 4,556,000 |
Land and improvements | |||
Property and Equipment | |||
Property and equipment, gross | 9,111,838 | 9,111,838 | |
Plant building and equipment | |||
Property and Equipment | |||
Property and equipment, gross | 85,809,325 | 84,594,751 | |
Vehicles | |||
Property and Equipment | |||
Property and equipment, gross | 682,719 | 620,323 | |
Office buildings | |||
Property and Equipment | |||
Property and equipment, gross | 641,860 | 641,860 | |
Construction in progress | |||
Property and Equipment | |||
Property and equipment, gross | $ 85,746 | $ 315,631 |
DEBT FACILITIES (Details)
DEBT FACILITIES (Details) - USD ($) | 12 Months Ended | |
Oct. 31, 2017 | Oct. 31, 2016 | |
DEBT FACILITIES | ||
Long-term debt | $ 1,397,685 | $ 1,883,726 |
Less amounts due on demand or within one year | 432,183 | 490,057 |
Net long term debt | $ 965,502 | $ 1,393,669 |
Revolving term note payable to lending institution | ||
DEBT FACILITIES | ||
Interest rate at end of period (as a percent) | 4.49% | 3.45% |
Revolving term note payable to lending institution | One-Month LIBOR | ||
DEBT FACILITIES | ||
Spread above variable interest rate (as a percent) | 3.25% | |
Assessments payable as part of water treatment agreement, with interest at 6.55%, due in 2021 | ||
DEBT FACILITIES | ||
Long-term debt | $ 1,241,171 | $ 1,517,046 |
Payment | $ 189,393 | $ 189,393 |
Frequency of payment | semi-annual | semi-annual |
Interest rate (as a percent) | 6.55% | 6.55% |
Period of worth of debt | 1 year | 1 year |
Deposit on debt service payments | $ 364,000 | $ 364,000 |
Assessments payable as part of water supply agreement, with interest at 8.73%, due in 2019 | ||
DEBT FACILITIES | ||
Long-term debt | 56,514 | 97,930 |
Payment | $ 3,942 | $ 3,942 |
Frequency of payment | monthly | monthly |
Interest rate (as a percent) | 8.73% | 8.73% |
Note payable to electrical company, due September 2017 | ||
DEBT FACILITIES | ||
Long-term debt | $ 68,750 | |
Payment | $ 6,250 | |
Frequency of payment | monthly | |
Interest rate (as a percent) | 0.00% | |
Maintenance fee (as a percent) | 1.00% | |
Note payable to noncontrolling interest member of Agrinatural, Interest One Month LIBOR plus 4.0 % | ||
DEBT FACILITIES | ||
Long-term debt | $ 100,000 | $ 200,000 |
Interest rate at end of period (as a percent) | 5.24% | 4.53% |
Note payable to noncontrolling interest member of Agrinatural, Interest One Month LIBOR plus 4.0 % | One-Month LIBOR | ||
DEBT FACILITIES | ||
Spread above variable interest rate (as a percent) | 4.00% | 4.00% |
DEBT FACILITIES - Additional in
DEBT FACILITIES - Additional information (Details) - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Feb. 28, 2015 | |
Revolving term note payable to lending institution | |||
Debt financing | |||
Maximum borrowing capacity | $ 28,000,000 | ||
Line of credit future reduction amounts | $ 3,500,000 | ||
Current borrowing capacity | 17,500,000 | ||
Outstanding balance on credit facility | 0 | $ 0 | |
Aggregate principal amount available for borrowing | $ 17,500,000 | $ 21,000,000 | |
Interest rate at end of period (as a percent) | 4.49% | 3.45% | |
Unused commitment fee per annum on the unused portion of debt (as a percent) | 0.50% | ||
Revolving term note payable to lending institution | One-Month LIBOR | |||
Debt financing | |||
Spread above variable interest rate (as a percent) | 3.25% | ||
CoBank | |||
Debt financing | |||
Annual fee | $ 2,500 |
DEBT FACILITIES - Estimated ann
DEBT FACILITIES - Estimated annual maturities (Details) - USD ($) | Oct. 31, 2017 | Oct. 31, 2016 |
Estimated maturities of long-term debt | ||
2,018 | $ 432,183 | |
2,019 | 318,883 | |
2,020 | 326,798 | |
2,021 | 319,821 | |
Long-term debt | $ 1,397,685 | $ 1,883,726 |
MEMBERS' EQUITY (Details)
MEMBERS' EQUITY (Details) | Dec. 21, 2017USD ($)$ / shares | Dec. 17, 2015USD ($)$ / shares | Dec. 18, 2014USD ($)$ / shares | Oct. 31, 2017Vote / sharesshares | Oct. 31, 2016shares |
Members' Equity | |||||
Common Unit, Authorized | 77,932,107 | 77,932,107 | |||
Minimum number of units held to be member | 2,500 | ||||
Number of votes per unit | Vote / shares | 1 | ||||
Distribution declared, per membership unit (in dollars per unit) | $ / shares | $ 0.11 | $ 0.05 | $ 0.12 | ||
Amount of distribution declared | $ | $ 8,573,000 | $ 3,897,000 | $ 9,352,000 | ||
Class A units | |||||
Members' Equity | |||||
Common Unit, Authorized | 65,000,000 | ||||
Class B units | |||||
Members' Equity | |||||
Common Unit, Authorized | 15,000,000 |
LEASES (Details)
LEASES (Details) | 12 Months Ended | ||
Oct. 31, 2017USD ($)item | Oct. 31, 2016USD ($) | Oct. 31, 2015USD ($) | |
Leases | |||
Rent expense | $ 2,170,000 | $ 2,571,000 | $ 1,969,000 |
Minimum | |||
Leases | |||
Lease term | 1 year | ||
Rail Cars | |||
Leases | |||
Equipment lease, quantity | item | 148 | ||
Monthly lease payment | $ 127,000 | ||
Hopper Cars | |||
Leases | |||
Equipment lease, quantity | item | 110 | ||
Monthly lease payment | $ 64,000 | ||
Hopper Cars Renewed | |||
Leases | |||
Equipment lease, quantity | item | 50 | ||
Monthly lease payment | $ 25,000 | ||
Lease term | 10 years |
LEASES, Future minimum lease pa
LEASES, Future minimum lease payments (Details) | Oct. 31, 2017USD ($) |
Minimum future lease payments | |
November 1, 2017 to October 31, 2018 | $ 1,896,000 |
November 1, 2018 to October 31, 2019 | 1,767,000 |
November 1, 2019 to October 31, 2020 | 1,767,000 |
November 1, 2020 to October 31, 2021 | 1,767,000 |
November 1, 2021 to October 31, 2022 | 1,767,000 |
Thereafter | 7,249,000 |
Total minimum lease commitments | $ 16,213,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
Income Tax Disclosure [Abstract] | |||
Consolidated financial statement basis of assets | $ 68,872,631 | $ 63,771,046 | $ 66,696,384 |
Plus: Organization and start-up costs capitalized | 775,562 | 933,291 | |
Less: Unrealized gains on commodity derivative instruments | (141,644) | (662,338) | |
Less: Accumulated tax depreciation and amortization greater than financial statement basis | (60,718,166) | (63,051,669) | |
Plus: Impairment charge | 27,844,579 | 27,844,579 | |
Income tax basis of assets | $ 36,632,962 | $ 28,834,909 |
EMPLOYEE BENEFIT PLANS (Details
EMPLOYEE BENEFIT PLANS (Details) - USD ($) | 12 Months Ended | ||
Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
Defined Contribution Plan | |||
Employer match as a percentage of employee deferral | 50.00% | ||
Company contributions to the plan | $ 90,000 | $ 85,000 | $ 81,000 |
Maximum | |||
Defined Contribution Plan | |||
Maximum contribution as a percentage of employee salary | 4.00% |
RELATED PARTY TRANSACTIONS - (D
RELATED PARTY TRANSACTIONS - (Details) | 12 Months Ended | |||
Oct. 31, 2017USD ($)itemshares | Oct. 31, 2016USD ($)shares | Oct. 31, 2015USD ($) | Dec. 31, 2013USD ($) | |
RELATED PARTY TRANSACTIONS | ||||
Number of units sold (in shares) | shares | 77,932,107 | 77,932,107 | ||
Agrinatural, LLC | ||||
RELATED PARTY TRANSACTIONS | ||||
Noncontrolling interest, ownership percentage by noncontrolling owners | 27.00% | |||
Board Members | Corn | ||||
RELATED PARTY TRANSACTIONS | ||||
Amount purchased from related party | $ 9,811,000 | $ 15,008,000 | $ 11,032,000 | |
Granite Falls Energy, LLC | ||||
RELATED PARTY TRANSACTIONS | ||||
Percentage of costs for three management positions incurred by GFE paid by the Company | 50.00% | |||
Number of management positions of GFE partially paid for by the Company | item | 3 | |||
Period of written notice for termination prior to renewal of agreement | 90 days | |||
Amount of related party transaction | $ 406,000 | 375,000 | 414,000 | |
Agrinatural, LLC | ||||
RELATED PARTY TRANSACTIONS | ||||
Proceeds from noncontrolling interest | $ 300,000 | |||
Interest paid | 6,000 | 20,000 | 16,000 | |
Swan Engineering Inc (SEI) | ||||
RELATED PARTY TRANSACTIONS | ||||
Accounts payable, related parties | 16,000 | 131,000 | ||
Swan Engineering Inc. Management And Operating Agreement | ||||
RELATED PARTY TRANSACTIONS | ||||
Monthly base fee paid | 36,000 | 32,000 | 18,000 | |
Monthly variable fee paid | 157,000 | 149,000 | 83,000 | |
Swan Engineering Inc. Project Management Agreement | ||||
RELATED PARTY TRANSACTIONS | ||||
Project management and capital work fees | 44,000 | $ 28,000 | ||
Project management fees | $ 19,000 | |||
Agrinatural, LLC | Swan Engineering Inc. Management And Operating Agreement | ||||
RELATED PARTY TRANSACTIONS | ||||
Management fee reduction | $ 4,500 | |||
Agrinatural, LLC | Swan Engineering Inc. Project Management Agreement | ||||
RELATED PARTY TRANSACTIONS | ||||
Percentage of capital expenditures reimbursed to related parties | 10.00% | |||
Swan Engineering Inc. And Unrelated Third Party | Agrinatural, LLC | ||||
RELATED PARTY TRANSACTIONS | ||||
Noncontrolling interest, ownership percentage by noncontrolling owners | 27.00% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | Nov. 01, 2013 | May 31, 2006 | Oct. 31, 2003USD ($)gal | Oct. 31, 2017USD ($)mibu | Dec. 31, 2016item | Oct. 31, 2016USD ($) | Oct. 31, 2015USD ($) | Oct. 31, 2007USD ($) | Oct. 31, 2006USD ($) |
Water Supply Development and Distribution Agreement | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Term of agreement | 15 years | ||||||||
Initial volume per minute of capacity that is available from the well for which the entity has exclusive rights (in gallons) | gal | 6,000 | ||||||||
Percentage of water well bond payments entity to pay | 50.00% | ||||||||
City's water well bond payments | $ 735,000 | ||||||||
Administrative fee to be paid as water usage fees (as a percent) | 5.00% | ||||||||
Administrative fee to be paid as water usage fees | $ 594,000 | ||||||||
Percentage of profit to be paid as water usage fees | 10.00% | ||||||||
Assessment | $ 367,000 | ||||||||
Operating and administrative/maintenance expenses paid | $ 12,000 | ||||||||
Water Treatment Agreement | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Term of agreement | 30 years | ||||||||
Assessment | $ 500,000 | $ 3,550,000 | |||||||
Operating and administrative/maintenance expenses paid | $ 92,000 | $ 24,000 | $ 57,000 | ||||||
Ethanol Marketing Agreement | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Percentage of ethanol and distillers grains products produced by the entity to be purchased, marketed and resold by Gavilon | 100.00% | ||||||||
Number of terms agreement automatically renews | item | 3 | ||||||||
Term of renewal periods | 3 years | ||||||||
Fees and commissions | $ 587,000 | 637,000 | 618,000 | ||||||
Distillers Grains Marketing Agreement | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Term of agreement | 6 months | ||||||||
Fees and commissions | 268,000 | 283,000 | 308,000 | ||||||
Corn Oil Marketing Agreement | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Term of agreement | 1 year | ||||||||
Fees and commissions | $ 89,000 | $ 96,000 | $ 56,000 | ||||||
Contract For Natural Gas Pipeline To Plant | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Distance of the natural gas pipeline from the ethanol plant | mi | 16 | ||||||||
Short/Sale | Ethanol Forward Contracts | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Notional value | $ 18,414,000 | ||||||||
Anticipated sales (as a percent) | 52.00% | ||||||||
Short/Sale | Distillers Grains Forward Contracts | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Notional value | $ 2,006,000 | ||||||||
Anticipated sales (as a percent) | 27.00% | ||||||||
Short/Sale | Corn Oil Forward Contract | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Notional value | $ 763,000 | ||||||||
Anticipated sales (as a percent) | 90.00% | ||||||||
Long/Purchase | Corn Forward Contracts | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Notional volume | bu | 1,769,000 | ||||||||
Minimum | Ethanol Marketing Agreement | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Written notice for termination of agreement | 3 months | ||||||||
Minimum | Distillers Grains Marketing Agreement | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Written notice for termination of agreement | 60 days | ||||||||
Minimum | Corn Oil Marketing Agreement | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
Written notice for termination of agreement | 90 days |
BUSINESS SEGMENTS (Details)
BUSINESS SEGMENTS (Details) | 3 Months Ended | 12 Months Ended | |||||||||||||
Oct. 31, 2017USD ($) | Jul. 31, 2017USD ($) | Apr. 30, 2017USD ($) | Jan. 31, 2017USD ($) | Oct. 31, 2016USD ($) | Jul. 31, 2016USD ($) | Apr. 30, 2016USD ($) | Jan. 31, 2016USD ($) | Oct. 31, 2015USD ($) | Jul. 31, 2015USD ($) | Apr. 30, 2015USD ($) | Jan. 31, 2015USD ($) | Oct. 31, 2017USD ($)segment | Oct. 31, 2016USD ($) | Oct. 31, 2015USD ($) | |
Segment Reporting Information | |||||||||||||||
Number of operating segments | segment | 2 | ||||||||||||||
Revenue | $ 27,994,905 | $ 28,541,889 | $ 25,990,784 | $ 27,390,074 | $ 27,409,875 | $ 30,365,123 | $ 25,241,981 | $ 26,588,565 | $ 28,477,019 | $ 30,192,430 | $ 29,813,571 | $ 27,177,449 | $ 109,917,652 | $ 109,605,544 | $ 115,660,469 |
Operating income | 2,137,579 | $ 1,518,888 | $ 1,080,594 | $ 2,567,534 | 2,353,527 | $ 2,983,648 | $ 108,111 | $ 48,947 | 538,714 | $ 4,014,168 | $ 1,891,732 | $ 966,668 | 7,304,595 | 5,494,233 | 7,411,282 |
Assets | 68,872,631 | 63,771,046 | 66,696,384 | 68,872,631 | 63,771,046 | 66,696,384 | |||||||||
Operating Segments | Ethanol production | |||||||||||||||
Segment Reporting Information | |||||||||||||||
Revenue | 108,709,255 | 108,577,171 | 114,669,831 | ||||||||||||
Operating income | 6,821,779 | 5,057,258 | 8,106,105 | ||||||||||||
Assets | 56,373,335 | 51,080,443 | 53,663,064 | 56,373,335 | 51,080,443 | 53,663,064 | |||||||||
Operating Segments | Natural gas pipeline | |||||||||||||||
Segment Reporting Information | |||||||||||||||
Revenue | 2,946,438 | 2,770,310 | 2,761,042 | ||||||||||||
Operating income | 1,177,251 | 1,177,158 | 1,075,581 | ||||||||||||
Assets | $ 12,499,296 | $ 12,690,603 | $ 13,033,320 | 12,499,296 | 12,690,603 | 13,033,320 | |||||||||
Intersegment Eliminations | |||||||||||||||
Segment Reporting Information | |||||||||||||||
Revenue | (1,738,041) | (1,741,937) | (1,770,404) | ||||||||||||
Operating income | $ (694,435) | $ (740,183) | $ (1,770,404) |
QUARTERLY FINANCIAL DATA (UNA58
QUARTERLY FINANCIAL DATA (UNAUDITED) (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||||||
Oct. 31, 2017 | Jul. 31, 2017 | Apr. 30, 2017 | Jan. 31, 2017 | Oct. 31, 2016 | Jul. 31, 2016 | Apr. 30, 2016 | Jan. 31, 2016 | Oct. 31, 2015 | Jul. 31, 2015 | Apr. 30, 2015 | Jan. 31, 2015 | Oct. 31, 2017 | Oct. 31, 2016 | Oct. 31, 2015 | |
QUARTERLY FINANCIAL DATA (UNAUDITED) | |||||||||||||||
Revenues | $ 27,994,905 | $ 28,541,889 | $ 25,990,784 | $ 27,390,074 | $ 27,409,875 | $ 30,365,123 | $ 25,241,981 | $ 26,588,565 | $ 28,477,019 | $ 30,192,430 | $ 29,813,571 | $ 27,177,449 | $ 109,917,652 | $ 109,605,544 | $ 115,660,469 |
Gross Profit | 2,913,491 | 2,251,294 | 1,850,266 | 3,414,231 | 2,985,331 | 3,730,408 | 920,070 | 857,581 | 1,135,568 | 4,755,934 | 2,673,825 | 1,847,050 | 10,429,282 | 8,493,390 | 10,412,377 |
Operating income | 2,137,579 | 1,518,888 | 1,080,594 | 2,567,534 | 2,353,527 | 2,983,648 | 108,111 | 48,947 | 538,714 | 4,014,168 | 1,891,732 | 966,668 | 7,304,595 | 5,494,233 | 7,411,282 |
Net income (loss) attributable to Heron Lake BioEnergy, LLC | $ 2,002,070 | $ 1,414,752 | $ 1,019,120 | $ 2,832,413 | $ 2,177,906 | $ 2,810,607 | $ 13,258 | $ (25,555) | $ 329,320 | $ 3,808,820 | $ 1,733,837 | $ 879,256 | $ 7,268,355 | $ 4,949,700 | $ 6,751,233 |
Basic and diluted earnings per unit (Class A and B) | $ 0.02 | $ 0.02 | $ 0.01 | $ 0.04 | $ 0.03 | $ 0.03 | $ 0.01 | $ 0.05 | $ 0.02 | $ 0.01 | $ 0.09 | $ 0.06 | $ 0.09 |