Document and Entity Information
Document and Entity Information Document - shares | 6 Months Ended | |
Apr. 30, 2016 | Jun. 09, 2016 | |
Entity Information [Line Items] | ||
Entity Registrant Name | HIGHWATER ETHANOL LLC | |
Entity Central Index Key | 1,371,451 | |
Current Fiscal Year End Date | --10-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Apr. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 4,936 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Apr. 30, 2016 | Oct. 31, 2015 |
Current Assets | ||
Cash and cash equivalents | $ 2,281,037 | $ 9,205,643 |
Derivative instruments | 323,178 | 499,202 |
Accounts receivable | 3,181,145 | 2,977,132 |
Inventories | 5,162,812 | 5,107,401 |
Prepaids and other | 102,617 | 98,381 |
Total current assets | 11,050,789 | 17,887,759 |
Property and Equipment | ||
Land and land improvements | 12,490,153 | 6,907,577 |
Buildings | 38,564,730 | 38,564,729 |
Office equipment | 765,133 | 624,094 |
Equipment | 67,033,033 | 65,193,412 |
Vehicles | 74,094 | 52,994 |
Construction in Progress | 2,417,333 | 5,846,005 |
Gross property and equipment | 121,344,476 | 117,188,811 |
Less accumulated depreciation | (43,328,520) | (39,730,669) |
Net property and equipment | 78,015,956 | 77,458,142 |
Other Assets | ||
Investments | 2,269,658 | 2,492,910 |
Debt issuance costs, net | 159,636 | 166,156 |
Deposits | 191,457 | 191,457 |
Total other assets | 2,620,751 | 2,850,523 |
Total Assets | 91,687,496 | 98,196,424 |
Current Liabilities | ||
Accounts payable | 2,275,149 | 1,577,588 |
Accrued expenses | 928,606 | 1,013,127 |
Customer deposits | 201,228 | 0 |
Current maturities of long-term debt | 3,560,139 | 4,329,854 |
Total current liabilities | 6,965,122 | 6,920,569 |
Long-Term Debt | $ 16,326,053 | $ 18,663,726 |
Commitments and Contingencies | ||
Members' Equity | ||
Members' equity, 4,953 units outstanding | $ 68,396,321 | $ 72,612,129 |
Total Liabilities and Members’ Equity | $ 91,687,496 | $ 98,196,424 |
Condensed Balance Sheets Parent
Condensed Balance Sheets Parenthetical - shares | Apr. 30, 2016 | Oct. 31, 2015 |
Members' equity, units outstanding | 4,936 | 4,936 |
Condensed Statements of Operati
Condensed Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2016 | Apr. 30, 2015 | Apr. 30, 2016 | Apr. 30, 2015 | |
Revenues | $ 23,074,068 | $ 25,824,583 | $ 47,273,892 | $ 55,905,954 |
Cost of Goods Sold | 23,190,188 | 25,553,203 | 47,955,401 | 52,369,089 |
Gross Profit (Loss) | (116,120) | 271,380 | (681,509) | 3,536,865 |
Operating Expenses | 785,987 | 673,059 | 1,479,889 | 1,326,393 |
Operating Profit (Loss) | (902,107) | (401,679) | (2,161,398) | 2,210,472 |
Other Income (Expense) | ||||
Interest income | 596 | 3,160 | 2,251 | 7,382 |
Other income | 136,957 | 73,938 | 142,893 | 82,233 |
Interest expense | (209,728) | (293,014) | (344,271) | (564,415) |
Income from equity method investments | 57,067 | 114,454 | 119,117 | 139,264 |
Total other income (expense), net | (15,108) | (101,462) | (80,010) | (335,536) |
Net Income (Loss) | $ (917,215) | $ (503,141) | $ (2,241,408) | $ 1,874,936 |
Weighted Average Units Oustanding | 4,936 | 4,953 | 4,936 | 4,953 |
Net Income (Loss) Per Unit | $ (185.82) | $ (101.58) | $ (454.09) | $ 378.55 |
Distributions Per Unit | $ 0 | $ 0 | $ 400 | $ 1,125 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows - USD ($) | 6 Months Ended | |
Apr. 30, 2016 | Apr. 30, 2015 | |
Cash Flows from Operating Activities | ||
Net Income (loss) | $ (2,241,408) | $ 1,874,936 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||
Depreciation and amortization | 3,604,371 | 3,438,908 |
Income from equity method investments | (119,117) | (139,264) |
Non-cash patronage income | (56,049) | 0 |
Change in assets and liabilities | ||
Accounts receivable | (204,013) | 1,137,319 |
Inventories | (55,411) | (258,219) |
Derivative instruments | 176,025 | (213,786) |
Prepaids and other | (4,236) | (8,529) |
Customer deposits | 201,228 | 241,258 |
Accounts payable | 259,377 | (315,724) |
Accrued expenses | (84,521) | 43,764 |
Net cash provided by operating activities | 1,476,246 | 5,800,663 |
Cash Flows from Investing Activities | ||
Capital expenditures | (3,717,482) | (986,142) |
Dividends received from equity method investment | 398,418 | 347,400 |
Net cash used in investing activities | (3,319,064) | (638,742) |
Cash Flows from Financing Activities | ||
Payments on long-term debt | (3,107,388) | (1,984,859) |
Member distributions | (1,974,400) | (5,572,125) |
Net cash used in financing activities | (5,081,788) | (7,556,984) |
Net Decrease in Cash and Cash Equivalents | (6,924,606) | (2,395,063) |
Cash and cash equivalents – Beginning of Period | 9,205,643 | 15,511,589 |
Cash and cash equivalents – End of Period | 2,281,037 | 13,116,526 |
Supplemental Cash Flow Information | ||
Cash paid for interest expense | 392,014 | 406,286 |
Supplemental Disclosure of Noncash Financing and Investing Activities | ||
Capital expenditures included in accounts payable | $ 699,618 | $ 87,824 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Apr. 30, 2016 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. The accompanying balance sheet and related notes as of October 31, 2015 are derived from the audited financial statements as of that date. These condensed financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s audited financial statements for the year ended October 31, 2015 , contained in the Company’s Form 10-K. In the opinion of management, the interim condensed financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation of the Company's financial position as of April 30, 2016 and the results of operations and cash flows for all periods presented. Nature of Business Highwater Ethanol, LLC, (a Minnesota Limited Liability Company) operates a 50 million gallon per year ethanol plant in Lamberton, Minnesota. The Company produces and sells fuel ethanol and co-products of the fuel ethanol production process, in the continental United States, Mexico and Canada. 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. The Company uses estimates and assumptions in accounting for significant matters, among others, the carrying value of property and equipment and related impairment testing, inventory valuation, and derivative instruments. Actual results could differ from those estimates and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions and the effects of revisions are reflected in the period in which the revision is made. Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. Revenues are recognized when the customer has taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. For ethanol sales, title transfers when loaded into the rail car and for distiller’s grains when the loaded rail cars leave the plant facility. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and freight due to the marketers are deducted from the gross sales price at the time incurred. Revenue is recorded net of these marketing fees and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Derivative Instruments Derivatives are recognized in the balance sheet and the measurement of these instruments is 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 recognized currently in earnings. Contracts are evaluated 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 as derivatives, therefore, are not marked to market in our financial statements. The Company enters into corn and ethanol commodity-based and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in prices. These derivatives 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. Changes in fair market value of ethanol derivatives are included in revenues. Changes in fair market value of corn and natural gas derivatives are included in costs of goods sold. Fair Value of Financial Instruments The carrying value of cash and cash equivalents, accounts receivable, and accounts payable, and other working capital items approximate fair value at April 30, 2016 due to the short maturity nature of these instruments. The Company believes the carrying value of the derivative instruments approximates fair value based on quoted market prices or widely accepted valuation techniques including discounted cash flow analysis which includes observable market-based inputs. The Company believes the carrying amount of the long-term debt approximates the fair value due to a significant portion of total indebtedness containing variable interest rates and that this rate is a market interest rate for these borrowings. Equity Method Investments The Company has a 7% investment interest in an unlisted company, Renewable Products Marketing Group, LLC (RPMG), who markets the Company’s ethanol. The Company also has a 7% ownership interest in Lawrenceville Tank, LLC (LT), which owns and operates a trans load/tank facility near Atlanta, Georgia. These investments are flow-through entities and are being accounted for by the equity method of accounting under which the Company’s share of net income is recognized as income in the Company’s statements of operations and added to the investment account. Distributions or dividends received from the investment are treated as a reduction of the investment account. The Company consistently follows the practice of recognizing the net income from equity method investments based on the most recent reliable data. Therefore, the net income which is reported in the Company's statement of operations for the quarter ended April 30, 2016 is based on the investee’s results of operations for the three month period ended March 31, 2016. Railcar Damages Accrual In accordance with the Company's railcar lease agreements, the Company is required to pay for damages considered to be in excess of normal wear and tear at the termination of the lease. The Company accrues the estimated cost for railcar damages over the term of the lease. Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than twelve months on its balance sheet. This ASU is effective in annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is currently in the process of evaluating the impact that this new guidance will have on the Financial Statements. |
Uncertainties
Uncertainties | 6 Months Ended |
Apr. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Uncertainties | UNCERTAINTIES The Company derives substantially all of its revenues from the sale of ethanol and distillers grains. These products are commodities and the market prices for these products display substantial volatility and are subject to a number of factors which are beyond the control of the Company. The Company’s most significant manufacturing inputs are corn and natural gas. The price of these commodities is also subject to substantial volatility and uncontrollable market factors. In addition, these input costs do not necessarily fluctuate with the market prices for ethanol and distillers grains. As a result, the Company is subject to significant risk that its operating margins can be reduced or eliminated due to the relative movements in the market prices of its products and major manufacturing inputs. As a result, market fluctuations in the price of or demand for these commodities can have a significant adverse effect on the Company’s operations, profitability, and availability of cash flows to make loan payments and maintain compliance with the loan agreement. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Apr. 30, 2016 | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements | FAIR VALUE MEASUREMENTS The following table provides information on those assets (liabilities) measured at fair value on a recurring basis. Fair Value as of Fair Value Measurement Using April 30, 2016 Level 1 Level 2 Level 3 Derivative instruments - commodities $ (514,768 ) $ (514,768 ) $ — $ — Fair Value as of Fair Value Measurement Using October 31, 2015 Level 1 Level 2 Level 3 Derivative instruments - commodities $ (953,862 ) $ (953,862 ) $ — $ — The Company determines the fair values of commodities by obtaining the fair value measurements from an independent pricing service based on dealer quotes and live trading levels from the Chicago Board of Trade. |
Inventories
Inventories | 6 Months Ended |
Apr. 30, 2016 | |
Inventories [Abstract] | |
Inventories | INVENTORIES Inventories consisted of the following at: April 30, 2016 October 31, 2015 Raw materials $ 1,845,882 $ 1,987,840 Spare parts and supplies 2,027,842 1,841,343 Work in process 805,753 774,910 Finished goods 483,335 503,308 Total $ 5,162,812 $ 5,107,401 |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Apr. 30, 2016 | |
Derivative Instruments [Abstract] | |
Derivative Instruments | DERIVATIVE INSTRUMENTS As of April 30, 2016 , the Company had entered into corn derivative instruments, which are required to be recorded as either assets or liabilities at fair value in the balance sheet. The Company uses these instruments to manage risks from changes in market rates and prices. They are not used for speculative purposes. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. The Company may designate the hedging instruments based upon the exposure being hedged as a fair value hedge, a cash flow hedge or a hedge against foreign currency exposure. The derivative instruments outstanding at April 30, 2016 are not designated as effective hedges for accounting purposes. Commodity Contracts As of April 30, 2016 , the Company has open positions for 100,000 dekatherms of natural gas. Management expects all open positions outstanding as of April 30, 2016 to be realized within the next twelve months. The following tables provide details regarding the Company's derivative instruments at April 30, 2016 and October 31, 2015 : Instrument Balance Sheet location April 30, 2016 October 31, 2015 Corn, natural gas and ethanol contracts In gain position $ 86,106 $ — In loss position (600,874 ) (953,862 ) Deposits with broker 837,946 1,453,064 Current assets $ 323,178 $ 499,202 The following tables provide details regarding the gains (losses) from the Company's derivative instruments in the statements of operations, none of which are designated as hedging instruments: Statement of Three Months Ended April 30, Operations location 2016 2015 Ethanol contracts Revenues $ 5,645 $ 2,494 Corn contracts Cost of goods sold (47,252 ) 220,714 Natural gas contracts Cost of goods sold 15,954 6,210 Statement of Six Months Ended April 30, Operations location 2016 2015 Ethanol contracts Revenues $ 35,147 $ (32,458 ) Corn contracts Cost of goods sold 110,918 392,016 Natural gas contracts Cost of goods sold (96,700 ) (35,573 ) |
Debt Financing
Debt Financing | 6 Months Ended |
Apr. 30, 2016 | |
Debt Financing [Abstract] | |
Debt Financing | DEBT FINANCING Long-term debt consists of the following at: April 30, 2016 October 31, 2015 Variable Rate Term Loan $ 14,250,000 $ 21,652,129 Term Revolving Loan 4,687,839 — Capital lease 948,353 1,341,451 Total 19,886,192 22,993,580 Less amounts due within one year 3,560,139 4,329,854 Net long-term debt $ 16,326,053 $ 18,663,726 Bank Financing On February 27, 2014, the Company entered into a Credit Agreement with AgStar Financial Services, PCA, as administrative agent for several financial institutions ("AgStar") for the purpose of refinancing the debt facility previously held by First National Bank of Omaha ("FNBO"). AgStar's Credit Agreement provided for a $20,000,000 Term Loan, a $5,000,000 Term Revolving Loan, and a $5,000,000 Revolving Line of Credit. The availability under the Term Revolving Loan would be reduced by the issuance of letters of credit. On September 22, 2014, the Company entered into an Amended and Restated Credit Agreement with AgStar which amended the Credit Agreement originally dated February 27, 2014. The purpose for the amendment was to refinance a portion of a credit arrangement previously held by U.S. Bank National Association, as trustee, and the City of Lamberton, Minnesota (the “City”). The Amended and Restated Credit Agreement increased the Term Loan to $27,000,000 and provided for a $5,000,000 Term Revolving Loan and a $5,000,000 Revolving Line of Credit. The Company agreed to pay an annual facility fee of $10,000 to AgStar. Effective February 26, 2015, the Company entered into a First Amendment to Amended and Restated Credit Agreement with AgStar extending the maturity date on the Revolving Line of Credit until March 1, 2016. On January 22, 2016, the Company entered into a Second Amended and Restated Credit Agreement with AgStar which amended the Amended and Restated Credit Agreement dated September 22, 2014. The Second Amended and Restated Credit Agreement decreases the Term Loan to $15,000,000 , increases the Term Revolving Loan to $15,000,000 and eliminates the Revolving Line of Credit. Term Loan The Term Loan is for $15,000,000 with a variable interest rate that is equal to 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The applicable interest rate at April 30, 2016 was 3.69% . Monthly principal payments are due on the Term Loan of approximately $250,000 plus accrued interest. Payments are based upon a five year amortization and the Term Loan is fully amortized. The outstanding balance on this note was $14,250,000 at April 30, 2016 . The Company may convert the Term Loan to a fixed rate loan, subject to certain conditions as described in the Second Amended and Restated Credit Agreement and with the consent of AgStar. Term Revolving Loan The Term Revolving Loan is for up to $15,000,000 with a variable interest rate that is the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The applicable interest rate at April 30, 2016 was 3.69% . The availability under the Term Revolving Loan increases to $20,000,000 after the Term Loan is paid down to $10,000,000 so long as at least one or more of the participating banks agrees to raise its commitment. The Term Revolving Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Term Revolving Loan with payment of all amounts outstanding due on January 22, 2023. The outstanding balance on this note was $4,687,839 at April 30, 2016 . The Company also has $1,500,000 in letters of credit outstanding at April 30, 2016 which reduce the amount available under the Term Revolving Loan. The Company pays interest at a rate of 1.50% on amounts outstanding for the letters of credit. The Company is also required to pay unused commitment fees for the Term Revolving Loan as defined in the Second Amended and Restated Credit Agreement. Covenants and other Miscellaneous Terms The loan facility with AgStar is secured by substantially all business assets. The Company executed a mortgage in favor of AgStar creating a first lien on real estate and plant and a security interest in all personal property located on the premises and assigned in favor of AgStar, all rents and leases to the Company's property, the Company's marketing contracts, risk management services contract, and natural gas, electricity, water service and grain procurement agreements. The Company is also subject to various financial and non-financial covenants that limit distributions and debt and require minimum debt service coverage, tangible net worth, and working capital requirements. The debt service coverage ratio is no less than 1.25:1.00 measured annually by comparing adjusted EBITDA to scheduled payments of principal and interest. The minimum working capital is $8,250,000 , which is calculated as current assets plus the amount available for drawing under the Term Revolving Loan and undrawn amounts on outstanding letters of credit, less current liabilities, and is measured quarterly. The Company is limited to annual capital expenditures of $5,000,000 without prior approval, incurring additional debt over certain amounts without prior approval, and making additional investments as described in the Amended and Restated Credit Agreement without prior approval of AgStar. The Company is allowed to make cash distributions to members as frequently as monthly in an amount equal to 75% of net income if working capital is greater than or equal to $8,250,000 , or 100% of net income if working capital is greater than or equal to $11,000,000 , or an unlimited amount if working capital is greater than or equal to $11,000,000 and the outstanding balance on the Term Loan is $0 . Capital Lease The Company entered into a series of related definitive agreements, dated September 26, 2013, with Butamax which include an Easement for Construction and Process Demonstration Agreement, an Equipment Lease Agreement, a Technology License Agreement, a Technology Demonstration Risk Reduction Agreement and a Security Agreement (collectively, the "Agreements") pursuant to which Butamax has agreed to construct, install and lease its corn oil separation system and license to the Company its proprietary, patent-protected corn oil separation technology. Pursuant to the Agreements, the Company agreed to give Butamax access to the plant in order to construct, install, operate, test and commercially validate a corn oil separation system. Butamax retains ownership of the corn oil separation system and technology but agrees to lease it to the Company for a term of 120 months subject to Butamax's right to remove the system if the Company is in breach of the Agreements. The term of the lease may also be extended or terminated pursuant to the terms of the Agreements. The Company is responsible for repairs and maintenance of the system and bear the risk of loss. In return, the Company agrees to payment of certain license fees which are subject to being reduced under the terms of the Agreements if the corn oil separation system does not meet certain performance goals. The Agreements provide that the corn oil separation system shall be conveyed to the Company at the end of the term so long as the Company is not in breach of the Agreements. The Company granted a security interest to Butamax in the corn oil separation system to secure its obligations under the Agreements. Pursuant to the Agreements, the Company agreed, subject to certain obligations of confidentiality, to provide Butamax with Company information on a monthly basis including business and financial information and have granted Butamax the option to have a representative present in board and committee meetings as an observer. The Company also agreed to give Butamax notice in the event of an issuance or sale of membership interests or convertible debt instruments. The Company recorded this as a capital lease in April 2014, and the balance as of April 30, 2016 was $948,353 . The estimated maturities of the long-term debt at April 30, 2016 are as follows: 2016 $ 3,560,139 2017 3,138,214 2018 3,000,000 2019 3,000,000 2020 3,000,000 2021 and thereafter 4,187,839 Long-term debt $ 19,886,192 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Apr. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Regulatory Agencies The Company is subject to oversight from regulatory agencies regarding environmental concerns which arise in the ordinary course of its business. Forward Contracts At April 30, 2016 , the Company has approximately 1,772,000 MMBTUs of forward fixed price natural gas purchase contracts for various delivery periods through March 2018. The Company also has approximately 967,000 gallons of forward fixed price denaturant purchase contracts for various delivery periods through December 2016. In addition, the Company has forward dried distiller grains sales contracts of approximately 10,000 tons at various fixed prices for various delivery periods through July 2016 and 600,000 pounds of forward corn oil sales contracts at various fixed prices for various delivery periods through May 2016. Construction The Company has entered into agreements for the construction of additional grain storage which is expected to add 600,000 bushels of storage. The project is expected to be completed during the third quarter of the Company's 2016 fiscal year. The Company's total commitment is approximately $1,900,000 . The Company has installed a precondenser which has had a positive affect on ethanol yields. The precondenser became operational during the second quarter of the Company's 2016 fiscal year at a cost of approximately $1,100,000 . |
Accounting Policies
Accounting Policies | 6 Months Ended |
Apr. 30, 2016 | |
Summary of Significant Accounting Policies [Abstract] | |
Accounting Estimates | 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. The Company uses estimates and assumptions in accounting for significant matters, among others, the carrying value of property and equipment and related impairment testing, inventory valuation, and derivative instruments. Actual results could differ from those estimates and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions and the effects of revisions are reflected in the period in which the revision is made. |
Revenue Recognition | Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. Revenues are recognized when the customer has taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. For ethanol sales, title transfers when loaded into the rail car and for distiller’s grains when the loaded rail cars leave the plant facility. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and freight due to the marketers are deducted from the gross sales price at the time incurred. Revenue is recorded net of these marketing fees and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. |
Derivative Instruments | Derivative Instruments Derivatives are recognized in the balance sheet and the measurement of these instruments is 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 recognized currently in earnings. Contracts are evaluated 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 as derivatives, therefore, are not marked to market in our financial statements. The Company enters into corn and ethanol commodity-based and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in prices. These derivatives 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. Changes in fair market value of ethanol derivatives are included in revenues. Changes in fair market value of corn and natural gas derivatives are included in costs of goods sold. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value of cash and cash equivalents, accounts receivable, and accounts payable, and other working capital items approximate fair value at April 30, 2016 due to the short maturity nature of these instruments. The Company believes the carrying value of the derivative instruments approximates fair value based on quoted market prices or widely accepted valuation techniques including discounted cash flow analysis which includes observable market-based inputs. The Company believes the carrying amount of the long-term debt approximates the fair value due to a significant portion of total indebtedness containing variable interest rates and that this rate is a market interest rate for these borrowings. |
Investments | Equity Method Investments The Company has a 7% investment interest in an unlisted company, Renewable Products Marketing Group, LLC (RPMG), who markets the Company’s ethanol. The Company also has a 7% ownership interest in Lawrenceville Tank, LLC (LT), which owns and operates a trans load/tank facility near Atlanta, Georgia. These investments are flow-through entities and are being accounted for by the equity method of accounting under which the Company’s share of net income is recognized as income in the Company’s statements of operations and added to the investment account. Distributions or dividends received from the investment are treated as a reduction of the investment account. The Company consistently follows the practice of recognizing the net income from equity method investments based on the most recent reliable data. Therefore, the net income which is reported in the Company's statement of operations for the quarter ended April 30, 2016 is based on the investee’s results of operations for the three month period ended March 31, 2016. |
Railcar Damages Accrual | Railcar Damages Accrual In accordance with the Company's railcar lease agreements, the Company is required to pay for damages considered to be in excess of normal wear and tear at the termination of the lease. The Company accrues the estimated cost for railcar damages over the term of the lease. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than twelve months on its balance sheet. This ASU is effective in annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is currently in the process of evaluating the impact that this new guidance will have on the Financial Statements. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Apr. 30, 2016 | |
Fair Value Measurements [Abstract] | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table provides information on those assets (liabilities) measured at fair value on a recurring basis. Fair Value as of Fair Value Measurement Using April 30, 2016 Level 1 Level 2 Level 3 Derivative instruments - commodities $ (514,768 ) $ (514,768 ) $ — $ — Fair Value as of Fair Value Measurement Using October 31, 2015 Level 1 Level 2 Level 3 Derivative instruments - commodities $ (953,862 ) $ (953,862 ) $ — $ — |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Apr. 30, 2016 | |
Inventories [Abstract] | |
Schedule of Inventory | April 30, 2016 October 31, 2015 Raw materials $ 1,845,882 $ 1,987,840 Spare parts and supplies 2,027,842 1,841,343 Work in process 805,753 774,910 Finished goods 483,335 503,308 Total $ 5,162,812 $ 5,107,401 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 6 Months Ended |
Apr. 30, 2016 | |
Derivative Instruments [Abstract] | |
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position | Instrument Balance Sheet location April 30, 2016 October 31, 2015 Corn, natural gas and ethanol contracts In gain position $ 86,106 $ — In loss position (600,874 ) (953,862 ) Deposits with broker 837,946 1,453,064 Current assets $ 323,178 $ 499,202 |
Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position | Statement of Three Months Ended April 30, Operations location 2016 2015 Ethanol contracts Revenues $ 5,645 $ 2,494 Corn contracts Cost of goods sold (47,252 ) 220,714 Natural gas contracts Cost of goods sold 15,954 6,210 Statement of Six Months Ended April 30, Operations location 2016 2015 Ethanol contracts Revenues $ 35,147 $ (32,458 ) Corn contracts Cost of goods sold 110,918 392,016 Natural gas contracts Cost of goods sold (96,700 ) (35,573 ) |
Debt Financing (Tables)
Debt Financing (Tables) | 6 Months Ended |
Apr. 30, 2016 | |
Debt Financing [Abstract] | |
Schedule of Long-term Debt | April 30, 2016 October 31, 2015 Variable Rate Term Loan $ 14,250,000 $ 21,652,129 Term Revolving Loan 4,687,839 — Capital lease 948,353 1,341,451 Total 19,886,192 22,993,580 Less amounts due within one year 3,560,139 4,329,854 Net long-term debt $ 16,326,053 $ 18,663,726 |
Schedule of Maturities of Long-term Debt | 2016 $ 3,560,139 2017 3,138,214 2018 3,000,000 2019 3,000,000 2020 3,000,000 2021 and thereafter 4,187,839 Long-term debt $ 19,886,192 |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Details) gal in Millions | 6 Months Ended |
Apr. 30, 2016gal | |
Ethanol [Member] | |
Product Information [Line Items] | |
Annual Production Capacity | 50 |
Summary of Significant Accoun19
Summary of Significant Accounting Policies Investment (Details) | Apr. 30, 2016 |
Renewable Fuels Marketing Group (RPMG) [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 7.00% |
Lawrenceville Tank, LLC [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 7.00% |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - Commodity [Member] - Fair Value, Measurements, Recurring [Member] - USD ($) | Apr. 30, 2016 | Oct. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative Instruments - commodities | $ (514,768) | $ (953,862) |
Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative Instruments - commodities | (514,768) | (953,862) |
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative Instruments - commodities | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative Instruments - commodities | $ 0 | $ 0 |
Inventories (Details)
Inventories (Details) - USD ($) | Apr. 30, 2016 | Oct. 31, 2015 |
Inventories [Abstract] | ||
Raw Materials | $ 1,845,882 | $ 1,987,840 |
Spare parts and supplies | 2,027,842 | 1,841,343 |
Work in Process | 805,753 | 774,910 |
Finished Goods | 483,335 | 503,308 |
Total | $ 5,162,812 | $ 5,107,401 |
Derivative Instruments Balance
Derivative Instruments Balance Sheet (Details) | Apr. 30, 2016USD ($)dekatherms | Oct. 31, 2015USD ($) |
Derivatives, Fair Value [Line Items] | ||
Deposits with broker | $ 837,946 | $ 1,453,064 |
Derivative instruments | 323,178 | 499,202 |
Commodity [Member] | ||
Derivatives, Fair Value [Line Items] | ||
In gain position | 86,106 | 0 |
In loss position | $ (600,874) | $ (953,862) |
Natural Gas [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Open Positions | dekatherms | 100,000 |
Derivative Instruments Income S
Derivative Instruments Income Statement (Details) - Not Designated as Hedging Instrument [Member] - USD ($) | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2016 | Apr. 30, 2015 | Apr. 30, 2016 | Apr. 30, 2015 | |
Ethanol [Member] | Sales [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative Instruments, Gain (Loss) Recognized in Income, Net | $ 5,645 | $ 2,494 | $ 35,147 | $ (32,458) |
Corn [Member] | Cost of Sales [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative Instruments, Gain (Loss) Recognized in Income, Net | (47,252) | 220,714 | 110,918 | 392,016 |
Natural Gas [Member] | Cost of Sales [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative Instruments, Gain (Loss) Recognized in Income, Net | $ 15,954 | $ 6,210 | $ (96,700) | $ (35,573) |
Debt Financing (Details)
Debt Financing (Details) | 6 Months Ended | 12 Months Ended | |
Apr. 30, 2016USD ($) | Oct. 31, 2015USD ($) | Oct. 31, 2014USD ($) | |
Debt Instrument [Line Items] | |||
Capital Lease Obligations | $ 948,353 | $ 1,341,451 | |
Long-term Debt and Capital Lease Obligations | 19,886,192 | 22,993,580 | |
Current maturities of long-term debt | 3,560,139 | 4,329,854 | |
Long-Term Debt | $ 16,326,053 | 18,663,726 | |
Annual facility fee for long term debt | 10,000 | ||
Lease term | 120 | ||
Ratio of Indebtedness to Net Capital | 1.25 | ||
Capital Lease Obligations, Current | $ 948,353 | ||
AgStar Financial Services, PCA [Member] | Letter of Credit [Member] | |||
Debt Instrument [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 3.25% | ||
Letters of Credit Outstanding, Amount | $ 1,500,000 | ||
Letter of Credit, Interest Rate at Period End | 1.50% | ||
AgStar Financial Services, PCA [Member] | Revolving Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Debt Instrument, Face Amount | 5,000,000 | ||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000,000 | ||
Debt Instrument, Basis Spread on Variable Rate | 3.25% | ||
Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member] | |||
Debt Instrument [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 3.25% | ||
Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member] | Term Loan [Member] | |||
Debt Instrument [Line Items] | |||
Long-term Debt | $ 14,250,000 | 21,652,129 | |
Debt Instrument, Face Amount | 15,000,000 | 27,000,000 | 20,000,000 |
Debt Instrument Conditional balance | 10,000,000 | ||
Debt Instrument, Periodic Payment, Principal | 250,000 | ||
Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member] | Revolving Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Long-term Debt | 4,687,839 | 0 | |
Debt Instrument, Face Amount | $ 15,000,000 | $ 5,000,000 | |
Line of Credit Facility, Interest Rate at Period End | 3.69% | ||
Debt Instrument, conditional credit line availability | $ 20,000,000 | ||
Line of Credit Facility, Maximum Borrowing Capacity | 15,000,000 | $ 5,000,000 | |
Working Capital Requirement | 8,250,000 | ||
Debt Instrument, Annual Capital Expenditure Limit | 5,000,000 | ||
Long-term Line of Credit, Noncurrent | 4,687,839 | ||
Minimum [Member] | Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member] | Revolving Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Working Capital Requirement | $ 8,250,000 | ||
Debt Instrument, Restrictive Covenants | 0.75 | ||
Maximum [Member] | Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member] | Revolving Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Working Capital Requirement | $ 11,000,000 | ||
Debt Instrument, Restrictive Covenants | 1 |
Debt Financing Short Term Debt
Debt Financing Short Term Debt (Details) - AgStar Financial Services, PCA [Member] - USD ($) | 6 Months Ended | ||
Apr. 30, 2016 | Oct. 31, 2015 | Oct. 31, 2014 | |
Letter of Credit [Member] | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 3.25% | ||
Revolving Credit Facility [Member] | |||
Line of Credit Facility [Line Items] | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000,000 | ||
Debt Instrument, Basis Spread on Variable Rate | 3.25% | ||
Notes Payable to Banks [Member] | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 3.25% | ||
Notes Payable to Banks [Member] | Revolving Credit Facility [Member] | |||
Line of Credit Facility [Line Items] | |||
Working Capital Requirement | $ 8,250,000 | ||
Line of Credit Facility, Maximum Borrowing Capacity | $ 15,000,000 | $ 5,000,000 | |
Line of Credit Facility, Interest Rate at Period End | 3.69% | ||
Line of Credit Facility, Current Borrowing Capacity | $ 0 |
Debt Financing Schedule of Matu
Debt Financing Schedule of Maturities of Long-Term Debt (Details) - USD ($) | Apr. 30, 2016 | Oct. 31, 2015 |
Debt Financing [Abstract] | ||
Long-term Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months | $ 3,560,139 | |
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Two | 3,138,214 | |
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Three | 3,000,000 | |
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Four | 3,000,000 | |
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Five | 3,000,000 | |
Long-term Debt, Maturities, Repayments of Principal in Rolling after Year Five | 4,187,839 | |
Long-term Debt and Capital Lease Obligations | $ 19,886,192 | $ 22,993,580 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Apr. 30, 2016MMBTUTlbgal |
Supply Commitment [Line Items] | |
Purchase Commitment, Remaining Minimum Amount Committed, Volume | gal | 967,000 |
Distillers Grain [Member] | |
Supply Commitment [Line Items] | |
Supply Commitment, Remaining Minimum Amount Committed, Mass | T | 10,000 |
Corn Oil [Member] | |
Supply Commitment [Line Items] | |
Supply Commitment, Remaining Minimum Amount Committed, Mass | lb | 600,000 |
Natural Gas [Member] | |
Supply Commitment [Line Items] | |
Purchase Commitment, Remaining Minimum Amount Committed, Energy | MMBTU | 1,772,000 |
Commitments and Contingencies O
Commitments and Contingencies Other Commitments (Details) | 6 Months Ended |
Apr. 30, 2016USD ($)bu | |
Grain Bin [Member] | |
Other Commitments [Line Items] | |
Additional Storage Capacity | bu | 600,000 |
Other Construction Costs | $ 1,900,000 |
Precondenser [Member] | |
Other Commitments [Line Items] | |
Other Construction Costs | $ 1,100,000 |