| Organization and Significant Accounting Policies | 1. Organization and Significant Accounting Policies The consolidated financial statements include the accounts of Advanced BioEnergy, LLC (“ABE” or the “Company”) and its wholly owned subsidiary, ABE South Dakota, LLC (“ABE South Dakota”). All intercompany balances and transactions have been eliminated in consolidation. Advanced BioEnergy, LLC is organized as a Delaware limited liability company. Members’ liability is limited pursuant to the Delaware Limited Liability Company Act. As noted below, the Company has adopted a Plan of Liquidation and has been dissolved under Delaware law. The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP, for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2019. In the opinion of management, the interim financial statements reflect all normal recurring adjustments necessary for fair presentation. Asset Sale Until December 19, 2019, the Company owned two ethanol production facilities in Aberdeen and Huron, South Dakota with a combined production capacity of 80 million gallons per year. On August 1, 2019, the Company and ABE South Dakota entered into an asset purchase agreement (the “Asset Purchase Agreement ”) with Glacial Lakes Energy, LLC (“GLE”), under which ABE South Dakota agreed to sell its Aberdeen and Huron, South Dakota ethanol plants and related businesses to GLE (the “Asset Sale”). On December 19, 2019, Advanced BioEnergy, ABE South Dakota and GLE closed the Asset Sale. At the closing, ABE South Dakota sold to GLE substantially all of the assets related to its business of producing ethanol and co-products, including wet, modified and dried distillers’ grains and corn oil, through its plants located in Aberdeen, South Dakota and Huron, South Dakota. Under the Asset Purchase Agreement, the purchase price was $47.5 million, plus the value of the Company’s inventory at closing, which was approximately $2.3 million. At the closing, Buyer paid to ABE South Dakota a total of $8.3 million in cash, which reflects the purchase price, less the approximately $31.0 million to repay the AgCountry Master Credit Agreement obligations, less the amount of certain accrued contract liabilities, and less $4.75 million of the purchase price that was deposited into an indemnity escrow account. The indemnity escrow account will be used to satisfy any of Buyer’s claims for indemnification under the Asset Purchase Agreement and any amounts remaining after the eighteen (18)-month anniversary of the closing will be released to the Company. The Company also paid approximately $0.7 million in transaction expenses at closing Plan of Liquidation and Dissolution At a Special Meeting of Members held on September 19, 2019, the Company’s members approved a Plan of Liquidation and Dissolution (the “Plan of Liquidation”) for the voluntary liquidation and dissolution of the Company following the consummation of the Asset Sale to GLE. Upon the closing of the Asset Sale, the Company commenced its liquidation in accordance with the Plan of Liquidation. Liquidation Basis of Accounting As a result of the approval of the Plan of Liquidation and Dissolution and the consummation of the Asset Sale on December 19, 2019, the Company adopted the Liquidation Basis of Accounting, using a convenience date of December 31, 2019. This basis of accounting is considered appropriate when, among other things, liquidation of the Company is imminent, as defined in ASC 205-30 “Presentation of Financial Statements – Liquidation Basis of Accounting.” The consolidated statement of net assets in liquidation is the principal financial statement presented under the Liquidation Basis of Accounting. A statement of changes in net assets in liquidation was not required due to the adoption of the Liquidation Basis of Accounting using a convenience date of December 31, 2019. A reconciliation of the effects of adopting the Liquidation Basis of Accounting and estimated costs during liquidation are provided in Notes 2 and 3 to the Consolidated Financial Statements, respectively. Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s cash balances are maintained in bank depositories and periodically exceed federally insured limits. The Company has not experienced losses in these accounts. Restricted cash at December 31, 2019 included an amount in and indemnity escrow account as part of the Asset Sale of the Company by Glacial Lakes Energy (“GLE”) as noted above. The Company does not expect any indemnification claims and expects the full amount to be available for distribution upon its release. The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts in the consolidated statement of cash flows (in thousands):
December 31,
December 31,
2019
2018
Cash and cash equivalents
$
12,575
$
7,719
Restricted cash
4,750
-
Total cash, cash equivalents and restricted cash shown in the statement of cash flows
$
17,325
$
7,719
Fair Value of Financial Instruments Financial instruments include cash, cash equivalents and restricted cash, accounts receivable, accounts payable, accrued expenses, and long-term debt. The fair value of the long-term debt is estimated based on level 3 inputs based on current anticipated interest rates that management believes would currently be available to the Company for similar debt, taking into account the current credit risk of the Company and other market factors. Based on these factors, the fair value of the long-term debt carried at September 30, 2019 was estimated at carrying value. Excluding cash and cash equivalents, the fair value of the other financial instruments is estimated to approximate carrying value due to the short-term nature of these instruments, which the Company considers to be Level 3 inputs. Deferred Financing Costs Deferred financing costs are recorded at cost and include expenditures related to secure debt financing. Deferred financing costs at September 30, 2019 are shown as contra debt and were being amortized into interest expense over the term of the agreement using the straight-line method, which approximates the effective interest method. Upon the closing of the Asset Sale On December 19, 2019, the Company’s outstanding debt was paid in full and all remaining deferred financing costs were expensed. Receivables Credit sales are made to a relatively small number of customers with no collateral required. Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual receivables and considering a customer’s financial condition, credit history and current economic conditions. Receivables are written off if deemed uncollectible. Recoveries of receivables previously written off are recorded when received. There was no allowance for doubtful accounts recorded at December 31, 2019 or September 30, 2019. Inventories Ethanol inventory, raw materials, work-in-process and parts inventory are valued using methods that approximate the lower of cost (first-in, first-out) or net realizable value (NRV). Distillers grains and related products are stated at NRV. In the valuation of inventories and purchase and sale commitments, the Company determines NRV by estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Property and Equipment Property and equipment is carried at cost less accumulated depreciation computed using the straight-line method over the estimated useful lives:
Office equipment
3-7 Years
Other equipment
1-5 Years
Process equipment
15 Years
Buildings
40 Years Interest capitalized in property and equipment was $80,000 and $43,000 for the three months ended December 31, 2019 and 2018, respectively. Maintenance and repairs are charged to expense as incurred; major improvements and betterments are capitalized. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows from operations are less than the carrying value of the asset group. An impairment loss is measured by the amount by which the carrying value of the asset group exceeds the estimated fair value on that date. Commodity Sales and Purchase Contracts, Derivative Instruments The Company entered into forward sales contracts for ethanol, distillers and corn oil, and purchase contracts for corn and natural gas. The Company classified these sales and purchase contracts as normal sales and purchase contracts and accordingly these contracts were not marked to market. These contracts provided for the sale or purchase of an item other than a financial instrument or derivative instrument to be delivered in quantities expected to be sold or used over a reasonable period in the normal course of business. In addition, certain derivative financial instruments that meet the criteria for derivative accounting treatment also qualify for a scope exception to derivative accounting, as they are considered normal purchases and sales. The availability of this exception was based on the assumption that the Company had the ability and it was probable that it would deliver or take delivery of the underlying item. Derivatives that are considered to be normal purchases and sales are exempt from derivative accounting treatment, and are accounted for under accrual accounting. Revenue Recognition Effective October 1, 2018, the Company adopted the new guidance of ASC Topic 606, Revenue from Contracts with Customers (Topic 606) using the modified retrospective approach. Topic 606 requires the Company to recognize revenue to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which ABE expects to be entitled in exchange for those goods or services. The new guidance requires the Company to apply the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the Company satisfies a performance obligation. The Company generally recognizes revenue at a point in time. The majority of the Company’s contracts with customers have one performance obligation and a contract duration of one year or less. The adoption of this new guidance did not result in any change to our recognition of revenue. The following is a description of principal activities from which we generated revenue. Revenues from contracts with customers are recognized when control of the promised goods are services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.
•
Sales of ethanol
•
Sales of distillers grains
•
Sales of distillers corn oil We disclose disaggregation of revenue according to product line, along with accounts receivable from contracts with customers, in Note 7. Income ( Loss) per Unit Basic and diluted income (loss) per unit is computed using the weighted-average number of vested units outstanding during the period. Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with 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. Actual results could differ from those estimates. Income Taxes The Company has elected to be treated as a partnership for tax purposes and generally does not incur income taxes. Instead, the Company’s earnings and losses are included in the income tax returns of its members. Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. The Company files income tax returns in the U.S. federal and various state jurisdictions. Recent Accounting Pronouncements In February 2016, the ASC was amended and a new accounting standard, ASC Topic 842, “Leases,” was issued to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In order to meet that objective, the new standard requires recognition of the assets and liabilities that arise from leases. Accordingly, a lessee will recognize a right-of-use (ROU) asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. The lease liability will initially be measured at the present value of the future minimum lease payments over the lease term. The ROU asset will initially be measured as the sum of the initial lease liability, initial costs directly attributable to negotiating and arranging the lease, and payments made by a lessee to the lessor at or before the lease commencement date less any lease incentives received. Lessees can make an accounting policy election by class of underlying asset not to recognize a ROU asset and corresponding lease liability for leases with a term of 12 months or less. Accounting by lessors will remain largely unchanged from current U.S. GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that companies may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases, leveraged leases, and amounts previously recognized in accordance with the business combinations guidance for leases. The new standard is effective for public companies for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. The Company sold substantially all of its assets on December 19, 2019 in the Asset Sale described above. When the Company adopted the ASU 842 guidance, a right-of-use asset and related liability of approximately $9.0 million were created. However, due to the Asset Sale, the ending effect of adopting this standard did not have a material impact on these consolidated financial statements and related disclosures. |
