Cover
Cover - shares | 9 Months Ended | |
Jul. 31, 2020 | Sep. 11, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jul. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 000-53588 | |
Entity Registrant Name | HIGHWATER ETHANOL, LLC | |
Entity Incorporation, State or Country Code | MN | |
Entity Tax Identification Number | 20-4798531 | |
Entity Address, Address Line One | 24500 US Highway 14, | |
Entity Address, City or Town | Lamberton, | |
Entity Address, State or Province | MN | |
Entity Address, Postal Zip Code | 56152 | |
City Area Code | 507 | |
Local Phone Number | 752-6160 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 4,798 | |
Entity Central Index Key | 0001371451 | |
Current Fiscal Year End Date | --10-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 1,359,664 | $ 1,639,114 |
Derivative instruments | 202,933 | 469,740 |
Accounts receivable | 2,673,121 | 2,961,977 |
Inventories | 9,298,538 | 7,367,356 |
Prepaids and other | 218,959 | 166,243 |
Total current assets | 13,753,215 | 12,604,430 |
Property and Equipment | ||
Land and land improvements | 12,836,332 | 12,836,332 |
Buildings | 38,818,532 | 38,818,532 |
Office equipment | 1,164,313 | 1,151,330 |
Plant and process equipment | 78,844,067 | 78,050,785 |
Vehicles | 123,779 | 123,779 |
Construction in progress | 669,217 | 278,333 |
Gross property and equipment | 132,456,240 | 131,259,091 |
Less accumulated depreciation | (79,586,029) | (72,784,587) |
Net property and equipment | 52,870,211 | 58,474,504 |
Other Assets | ||
Investments | 3,080,324 | 2,752,266 |
Right of use asset - operating leases | 592,430 | |
Right of use asset - finance leases | 1,269,969 | |
Deposits | 409,283 | 191,457 |
Total other assets | 5,352,006 | 2,943,723 |
Total Assets | 71,975,432 | 74,022,657 |
Current Liabilities | ||
Accounts payable | 5,296,341 | 6,908,305 |
Accrued expenses | 1,111,556 | 1,156,038 |
Current maturities of long-term debt | 1,598,516 | 2,729,739 |
Current portion of operating lease liability | 139,375 | |
Current portion of finance lease liability | 110,383 | |
Total Current Liabilities | 8,256,171 | 10,794,082 |
Long-Term Liabilities | ||
Long Term Debt | 12,355,100 | 7,244,124 |
Operating lease liability | 453,055 | |
Finance lease liability | 1,183,654 | |
Total Long-Term Liabilities | 13,991,809 | 7,244,124 |
Commitments and Contingencies | 0 | 0 |
Members' Equity | ||
Members' equity, 4,798 and 4,807 units outstanding | 49,727,452 | 55,984,451 |
Total Liabilities and Members’ Equity | $ 71,975,432 | $ 74,022,657 |
Condensed Balance Sheets Parent
Condensed Balance Sheets Parenthetical - shares | Jul. 31, 2020 | Oct. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Members' equity, units outstanding (in shares) | 4,798 | 4,807 |
Condensed Unaudited Statements
Condensed Unaudited Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2020 | Jul. 31, 2019 | Jul. 31, 2020 | Jul. 31, 2019 | |
Income Statement [Abstract] | ||||
Revenues | $ 24,238,999 | $ 25,605,525 | $ 71,680,252 | $ 71,233,646 |
Cost of Goods Sold | 22,963,801 | 25,781,008 | 74,697,964 | 74,824,640 |
Gross Profit (Loss) | 1,275,198 | (175,483) | (3,017,712) | (3,590,994) |
Operating Expenses | 777,714 | 902,582 | 2,864,042 | 2,475,470 |
Operating Profit (Loss) | 497,484 | (1,078,065) | (5,881,754) | (6,066,464) |
Other Income (Expense) | ||||
Interest income | 31 | 3,071 | 3,268 | 6,352 |
Other income | 57,917 | 23,964 | 159,060 | 76,881 |
Interest expense | (172,493) | (226,640) | (531,271) | (642,804) |
Income (loss) from equity method investments | (16,665) | 29,128 | 48,698 | 78,280 |
Total other income (expense), net | (131,210) | (170,477) | (320,245) | (481,291) |
Net Income (Loss) | $ 366,274 | $ (1,248,542) | $ (6,201,999) | $ (6,547,755) |
Weighted Average Units Outstanding (in shares) | 4,801 | 4,808 | 4,805 | 4,810 |
Net Income (Loss) Per Unit, Basic and Diluted (in dollars per share) | $ 76.29 | $ (259.68) | $ (1,290.74) | $ (1,361.28) |
Distributions Per Unit (in dollars per share) | $ 0 | $ 0 | $ 0 | $ 0 |
Statements of Changes in Member
Statements of Changes in Members' Equity (Unaudited) | USD ($) |
Members' Equity, beginning balance at Oct. 31, 2018 | $ 64,297,887 |
Members' Equity [Roll Forward] | |
Net Loss | (2,719,712) |
Members' Equity, ending balance at Jan. 31, 2019 | 61,578,175 |
Members' Equity, beginning balance at Oct. 31, 2018 | 64,297,887 |
Members' Equity [Roll Forward] | |
Net Loss | (6,547,755) |
Members' Equity, ending balance at Jul. 31, 2019 | 57,718,132 |
Members' Equity, beginning balance at Jan. 31, 2019 | 61,578,175 |
Members' Equity [Roll Forward] | |
Net Loss | (2,579,501) |
Member unit repurchase | (32,000) |
Members' Equity, ending balance at Apr. 30, 2019 | 58,966,674 |
Members' Equity [Roll Forward] | |
Net Loss | (1,248,542) |
Members' Equity, ending balance at Jul. 31, 2019 | 57,718,132 |
Members' Equity, beginning balance at Oct. 31, 2019 | 55,984,451 |
Members' Equity [Roll Forward] | |
Net Loss | (2,616,683) |
Members' Equity, ending balance at Jan. 31, 2020 | 53,367,768 |
Members' Equity, beginning balance at Oct. 31, 2019 | 55,984,451 |
Members' Equity [Roll Forward] | |
Net Loss | (6,201,999) |
Members' Equity, ending balance at Jul. 31, 2020 | 49,727,452 |
Members' Equity, beginning balance at Jan. 31, 2020 | 53,367,768 |
Members' Equity [Roll Forward] | |
Net Loss | (3,951,590) |
Member unit repurchase | (13,000) |
Members' Equity, ending balance at Apr. 30, 2020 | 49,403,178 |
Members' Equity [Roll Forward] | |
Net Loss | 366,274 |
Member unit repurchase | (42,000) |
Members' Equity, ending balance at Jul. 31, 2020 | $ 49,727,452 |
Statements of Changes in Memb_2
Statements of Changes in Members' Equity (Unaudited) (Parenthetical) - shares | 3 Months Ended | ||
Jul. 31, 2020 | Apr. 30, 2020 | Apr. 30, 2019 | |
Members' Equity [Abstract] | |||
Member unit repurchase (in units) | 7 | 2 | 4 |
Condensed Unaudited Statement_2
Condensed Unaudited Statements of Cash Flows - USD ($) | 9 Months Ended | |
Jul. 31, 2020 | Jul. 31, 2019 | |
Cash Flows from Operating Activities | ||
Net loss | $ (6,201,999) | $ (6,547,755) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Depreciation and amortization | 6,921,965 | 6,686,250 |
Distributions in excess of earnings from equity method investments | 95,348 | 313,039 |
Non-cash patronage income | (423,406) | (236,761) |
Changes in assets and liabilities | ||
Accounts receivable | 288,856 | (856,810) |
Inventories | (1,931,182) | (3,776,633) |
Derivative instruments | 266,807 | 700,239 |
Prepaids and other | (270,544) | (102,829) |
Accounts payable | (1,654,271) | (475,325) |
Accrued expenses | (44,482) | 572,291 |
Net cash used in operating activities | (2,952,908) | (3,724,294) |
Cash Flows from Investing Activities | ||
Capital expenditures | (1,154,840) | (1,322,708) |
Net cash used in investing activities | (1,154,840) | (1,322,708) |
Cash Flows from Financing Activities | ||
Payments on long-term debt | (8,750,000) | (2,251,000) |
Proceeds from long-term debt | 12,712,200 | 8,000,000 |
Member unit repurchases | (55,000) | (32,000) |
Payment on finance lease liability | (78,902) | |
Net cash provided by financing activities | 3,828,298 | 5,717,000 |
Net (Decrease) Increase in Cash and Cash Equivalents | (279,450) | 669,998 |
Cash and Cash equivalents – Beginning of Period | 1,639,114 | 430,702 |
Cash and Cash equivalents – End of Period | 1,359,664 | 1,100,700 |
Supplemental Cash Flow Information | ||
Cash paid for interest | 451,443 | 555,819 |
Supplemental Disclosure of Noncash Financing and Investing Activities | ||
Capital expenditures included in accounts payable | 55,523 | $ 107,567 |
Establishment of lease liability and right of use asset | $ 2,064,994 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Jul. 31, 2020 | |
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, 2019 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, 2019 , 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 July 31, 2020 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 nameplate per year ethanol plant in Lamberton, Minnesota. The Company produces and sells, primarily through third-party professional marketers, fuel ethanol and co-products of the fuel ethanol production process in the continental United States. 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 ASC Topic 606, Revenue from Contracts with Customers, further details the Company’s requirement to recognize revenue of transferred goods or services to customers in an amount which is expected to be received in exchange for those goods or services. Five steps were required as part of the new guidance: 1. Identify the contract 2. Identify the performance obligations 3. Determine the transaction price 4. Allocate the transaction price to the performance obligation 5. Recognize revenue when each performance obligation is satisfied. The adoption of this new guidance did not result in any material changes to our revenue recognition. The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. The Company recognizes revenue when control of goods is transferred, which is consistent with the Company's previous policy where revenues were 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 and distillers grains sales, control transfers when loaded into the rail car. 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. The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. • ethanol sales • modified distillers grains sales • dried distillers grains sales • corn oil sales Disaggregation of revenue: All revenue recognized in the statement of operations is considered to be revenue from contracts with customers. The following table depicts the disaggregation of revenue according to product line for the three and nine months ended July 31, 2020 and 2019 : Three Months Ended July 31, 2020 Three Months Ended July 31, 2019 Nine Months Ended July 31, 2020 Nine Months Ended July 31, 2019 Revenue Sources Amount Amount Amount Amount Ethanol Sales $ 18,995,177 $ 20,374,721 $ 55,131,182 $ 54,657,405 Modified Distillers Grains Sales 882,235 892,835 3,337,040 3,003,391 Dried Distillers Grains Sales 3,254,884 3,428,947 10,464,513 11,279,498 Corn Oil Sales 1,106,703 909,022 2,747,517 2,293,352 Total Revenues $ 24,238,999 $ 25,605,525 $ 71,680,252 $ 71,233,646 Contract assets and contract liabilities: The Company had short term contract liabilities from contracts with customers of $0 at July 31, 2020 and $4,947 at October 31, 2019 . The Company receives payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract. Shipping Costs Shipping costs incurred by the Company in the sale of ethanol, dried distillers grains and corn oil are not specifically identifiable and as a result, revenue from the sale of those products is recorded based on the net selling price reported to the Company from the marketer. Operating Segment The Company uses the "management approach" for reporting information about segments in annual and interim financial statements. The management approach is based on the way the chief operating decision-maker organizes segments within a company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure and any other manner in which management disaggregates a company. Based on the "management approach" model, the Company has determined that its business is comprised of a single operating segment. Derivative Instruments Derivatives are recognized in the balance sheets and the measurement of these instruments are 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. Contracts are evaluated to determine whether the contracts are derivatives. Certain contracts that 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 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. Corn and natural gas derivative changes in fair market value are included in costs of goods sold. Carrying Value of 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. If circumstances require a long-lived asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset group to the carrying value of the asset group. If the carrying value of the long-lived asset group 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 discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. In accordance with the Company’s policy for evaluating impairment of long-lived assets described above, when a triggering event occurs management evaluates the recoverability of the facilities based on projected future cash flows from operations over the facilities’ estimated useful lives. In determining the projected future undiscounted cash flows, the Company makes significant assumptions concerning the future viability of the ethanol industry, the future price of corn in relation to the future price of ethanol and the overall demand in relation to production and supply capacity. The Company has not recorded any impairment as of July 31, 2020 and 2019. Fair Value of Financial Instruments The carrying value of accounts receivable, accounts payable, and other financial instrument working capital items approximate fair value at July 31, 2020 due to the short maturity nature of these instruments (Level 2). Commodities contracts are carried at fair value, based on dealer quotes and live trading levels (Level 1) (Note 5). The Company believes the carrying amount of the long-term debt approximates fair value due to a significant portion of total indebtedness containing variable interest rates and this rate is a market interest rate for these borrowings (Level 2). Investments The Company has a 5.6% 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 (loss) from equity method investments based on the most recent reliable data. Therefore, the net income (loss) which is reported in the Company's statement of operations for the period ended July 31, 2020 is based on the investee’s results of operations for the period ended June 30, 2020. Recently Issued or Adopted Accounting Pronouncements Accounting for Leases (Adopted): In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right of use asset for all leases with a lease term greater than twelve months on its balance sheet. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company |
Uncertainties
Uncertainties | 9 Months Ended |
Jul. 31, 2020 | |
Risks and Uncertainties [Abstract] | |
Uncertainties | UNCERTAINTIES The Company derives substantially all of its revenues from the sale of ethanol, distillers grains and corn oil. 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. The ethanol industry experienced adverse conditions throughout most of 2018 and 2019 as a result of industry-wide record low ethanol prices due to reduced demand and high industry inventory levels. These adverse conditions continued into 2020 and were compounded by the COVID-19 pandemic. As a result, the Company has experienced negative operating margins, lower cash flow from operations and net operating losses. In response, the Company reduced its ethanol production levels by up to 25% . As conditions improved in June 2020, the Company began increasing its ethanol production rate to approximately 65 million |
Inventories
Inventories | 9 Months Ended |
Jul. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | INVENTORIES Inventories consisted of the following at: July 31, 2020 October 31, 2019 Raw materials $ 4,223,954 $ 2,801,255 Spare parts and supplies 3,965,222 3,384,360 Work in process 735,586 743,850 Finished goods 373,776 437,891 Total $ 9,298,538 $ 7,367,356 The Company recorded a lower of cost or net realizable value write-down on distillers grains inventory of approximately $17,000 and $21,000 at July 31, 2020 and October 31, 2019 , respectively. |
Derivative Instruments
Derivative Instruments | 9 Months Ended |
Jul. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | DERIVATIVE INSTRUMENTS As of July 31, 2020 , the Company had entered into corn and ethanol 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. 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 or a cash flow hedge. The derivative instruments outstanding at July 31, 2020 are not designated as hedges for accounting purposes. Commodity Contracts Management expects all open futures positions outstanding as of July 31, 2020 to be realized within the next twelve months. The following tables provide details regarding the Company's derivative instruments at July 31, 2020 and October 31, 2019 : Instrument Balance Sheet location July 31, 2020 October 31, 2019 Corn, natural gas and ethanol contracts In gain position $ 103,924 $ 124,069 In loss position (316,091 ) (775,887 ) Deposits with broker 415,100 1,121,558 Current assets $ 202,933 $ 469,740 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 July 31, Operations location 2020 2019 Ethanol contracts Revenues (530,492 ) $ (162,349 ) Corn contracts Cost of goods sold 159,640 (785,094 ) Natural gas contracts Cost of goods sold — 588 Statement of Nine Months Ended July 31, Operations location 2020 2019 Ethanol contracts Revenues $ (482,571 ) $ (257,408 ) Corn contracts Cost of goods sold (264,733 ) (877,213 ) Natural gas contracts Cost of goods sold 11,240 20,394 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Jul. 31, 2020 | |
Fair Value Disclosures [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 July 31, 2020 Level 1 Level 2 Level 3 Derivative instruments - commodities In gain position $ 103,924 $ 600 $ 103,324 $ — In loss position (316,091 ) (500 ) (315,591 ) — Fair Value as of Fair Value Measurement Using October 31, 2019 Level 1 Level 2 Level 3 Derivative instruments - commodities In gain position $ 124,069 $ 4,538 $ 119,531 $ — In loss position (775,887 ) (4,375 ) (771,512 ) — |
Debt Financing
Debt Financing | 9 Months Ended |
Jul. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt Financing | DEBT FINANCING Long-term debt consists of the following at: July 31, 2020 October 31, 2019 Term Loan $ 1,250,000 $ 3,500,000 Term Revolving Loan 11,999,000 6,499,000 PPP Loan 712,200 — Total 13,961,200 9,999,000 Less Debt Issuance Costs (7,584 ) (25,137 ) Less amounts due within one year (1,598,516 ) (2,729,739 ) Net long-term debt $ 12,355,100 $ 7,244,124 Bank Financing On January 22, 2016, the Company entered into a Second Amended and Restated Credit Agreement with Compeer Financial PCA f/k/a AgStar Financial Services, PCA, as administrative agent for several financial institutions ("Compeer") which amended the Amended and Restated Credit Agreement dated September 22, 2014. The Second Amended and Restated Credit Agreement decreased the Term Loan to $15,000,000 , increased the Term Revolving Loan to $15,000,000 and eliminated the Revolving Line of Credit. Effective April 20, 2018, the Company executed a First Amendment to the Second Amended and Restated Credit Agreement with Compeer Financial which increased the availability under the Term Revolving Loan to $20,000,000 . In connection therewith, as of the same date, the Company executed a Third Amended and Restated Term Revolving Note and a Third Amended and Restated Mortgage, Security Agreement, Assignment of Leases and Fixture Financing Statement. On December 17, 2019, Compeer waived the Company's violation at October 31, 2019 of the minimum debt service coverage ratio set forth in the Second Amended and Restated Credit Agreement. Term Loan The Term Loan had an original balance of $15,000,000 with a variable interest rate based on the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The applicable interest rate at July 31, 2020 was 3.44% . Monthly principal payments are due on the Term Loan of approximately $250,000 plus accrued interest. Payments of all amounts outstanding are due on January 22, 2021. The outstanding balance on this note was $1,250,000 at July 31, 2020 . 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 Compeer. Term Revolving Loan The Term Revolving Loan is for $20,000,000 with a variable interest rate based on the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The applicable interest rate at July 31, 2020 was 3.44% . The Term Revolving Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Term Revolving Loan. Payment of all amounts outstanding are due on January 22, 2023. The outstanding balance on this note was $11,999,000 at July 31, 2020 . The Company pays interest at a rate of 1.50% on amounts outstanding for letters of credit which also reduce the amount available under the Term Revolving Loan. The Company has no letters of credit outstanding at July 31, 2020 . 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 Compeer is secured by substantially all business assets. The Company executed a mortgage creating a first lien on its real estate and plant and a security interest in all personal property located on the premises and assigned all rents and leases to property, 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 Second Amended and Restated Credit Agreement without prior approval of Compeer. 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 . PPP Loan In March 2020, Congress passed a stimulus bill called the CARES Act to provide economic relief related to the COVID-19 pandemic. One of the programs established by the Cares Act is the Paycheck Protection Program ("PPP"), authorizing loans to small business for use in paying employees that continue to work throughout the COVID-19 pandemic and for rent, utilities and interest on mortgages. Loans obtained through the PPP are administered by the Small Business Administration and eligible to be forgiven as long as the proceeds are used for qualifying purposes and other conditions are met. On April 14, 2020, the Company was awarded a PPP loan in the amount of $712,200 . The entire loan is expected to be used to pay employees and for other qualifying costs and be substantially forgiven. To the extent it is not forgiven, the Company would be required to repay that portion at an interest rate of 1% over twelve months beginning on May 1, 2021. The estimated maturities of the long-term debt at July 31, 2020 are as follows: Principal Debt Issuance Costs Total July 2021 1,606,100 (7,584 ) 1,598,516 July 2022 356,100 — 356,100 July 2023 11,999,000 — 11,999,000 Long-term debt $ 13,961,200 $ (7,584 ) $ 13,953,616 |
Leases
Leases | 9 Months Ended |
Jul. 31, 2020 | |
Leases [Abstract] | |
Lesses | LEASES Adoption of ASC 842 As discussed in Note 1, on November 1, 2019, the Company adopted the provisions of ASC 842 using the modified retrospective approach and elected the option to apply the transition provisions at adoption date instead of the earliest period presented in the financial statements. Due to this election, the Company is not required to retrospectively apply the standard to previous periods presented. This adoption resulted in the Company recognizing initial right of use assets and lease liabilities of approximately $692,000 and $1,373,000 , operating leases and finance leases, respectively. The adoption did not have a significant impact on the Company’s statement of operations. The Company leases rail cars for its facility to transport dried distillers grains to its end customers. We classified these identified assets as operating leases after assessing the terms under lease classification guidance. The Company has a contract for use of a natural gas pipeline which transports natural gas from the Northern Natural Gas pipeline to the Company’s facility. This natural gas line has no alternate use and is specifically for the benefit of the Company. The contract has minimum volume requirements as well as a fixed monthly fee. This contract meets the definition of a lease and is classified as a finance lease. Right of use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used in determining the lease liability for each individual lease is the Company's estimated incremental borrowing rate. An incremental borrowing rate of 5.5% was utilized for each of the Company's leases. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s operating and finance leases have remaining lease terms of approximately 5 years and 10 years , respectively. These leases include options to extend the lease when it is reasonably certain the Company will exercise those options. The Company does not have lease arrangements with residual value guarantees, sale leaseback terms or material restrictive covenants. The following table summarizes the remaining maturities of the Company’s operating and finance lease liabilities as of July 31, 2020: For the Period Ending July 31, Operating Leases Finance Leases 2021 $ 168,480 $ 178,800 2022 168,480 178,800 2023 168,480 178,800 2024 154,440 178,800 2025 — 178,800 Thereafter — 759,900 Totals 659,880 1,653,900 Amount representing interest (67,450 ) (359,863 ) Lease liability $ 592,430 $ 1,294,037 Lease Cost Three Months ended July 31, 2020 Nine Months ended July 31, 2020 Operating lease cost $ 42,120 $ 126,360 Finance lease cost Amortization of leased assets 34,323 102,969 Interest on lease liabilities 18,038 55,198 Net lease cost $ 94,481 $ 284,527 |
Lesses | LEASES Adoption of ASC 842 As discussed in Note 1, on November 1, 2019, the Company adopted the provisions of ASC 842 using the modified retrospective approach and elected the option to apply the transition provisions at adoption date instead of the earliest period presented in the financial statements. Due to this election, the Company is not required to retrospectively apply the standard to previous periods presented. This adoption resulted in the Company recognizing initial right of use assets and lease liabilities of approximately $692,000 and $1,373,000 , operating leases and finance leases, respectively. The adoption did not have a significant impact on the Company’s statement of operations. The Company leases rail cars for its facility to transport dried distillers grains to its end customers. We classified these identified assets as operating leases after assessing the terms under lease classification guidance. The Company has a contract for use of a natural gas pipeline which transports natural gas from the Northern Natural Gas pipeline to the Company’s facility. This natural gas line has no alternate use and is specifically for the benefit of the Company. The contract has minimum volume requirements as well as a fixed monthly fee. This contract meets the definition of a lease and is classified as a finance lease. Right of use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used in determining the lease liability for each individual lease is the Company's estimated incremental borrowing rate. An incremental borrowing rate of 5.5% was utilized for each of the Company's leases. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s operating and finance leases have remaining lease terms of approximately 5 years and 10 years , respectively. These leases include options to extend the lease when it is reasonably certain the Company will exercise those options. The Company does not have lease arrangements with residual value guarantees, sale leaseback terms or material restrictive covenants. The following table summarizes the remaining maturities of the Company’s operating and finance lease liabilities as of July 31, 2020: For the Period Ending July 31, Operating Leases Finance Leases 2021 $ 168,480 $ 178,800 2022 168,480 178,800 2023 168,480 178,800 2024 154,440 178,800 2025 — 178,800 Thereafter — 759,900 Totals 659,880 1,653,900 Amount representing interest (67,450 ) (359,863 ) Lease liability $ 592,430 $ 1,294,037 Lease Cost Three Months ended July 31, 2020 Nine Months ended July 31, 2020 Operating lease cost $ 42,120 $ 126,360 Finance lease cost Amortization of leased assets 34,323 102,969 Interest on lease liabilities 18,038 55,198 Net lease cost $ 94,481 $ 284,527 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Jul. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Marketing Agreements The Company has an ethanol marketing agreement with a marketer (RPMG) to purchase, market, and distribute ethanol produced by the Company. The Company also entered into a member control agreement with the marketer whereby the Company made capital contributions and became a minority owner of the marketer. The member control agreement became effective on February 1, 2011 and provides the Company a membership interest with voting rights. The marketing agreement will terminate if the Company ceases to be a member. The Company will assume certain of the member’s rail car leases if the agreement is terminated. The Company can sell its ethanol either through an index arrangement or at an agreed upon fixed price. The marketing agreement is perpetual until terminated according to the agreement. The Company may be obligated to continue to market its ethanol through the marketer for a period of time. The amended agreement requires minimum capital amounts invested as required under the agreement. The Company has a distillers grains marketing agreement with a marketer to market all the dried distillers grains produced at the plant. Under the agreement the marketer charges a maximum of $2.00 per ton and a minimum of $1.50 per ton using 2% of the FOB plant price actually received by them for all dried distillers grains removed. The agreement will remain in effect unless otherwise terminated by either party with 120 days notice. Under the agreement, the marketer is responsible for all transportation arrangements for the distribution of the dried distillers grains. The Company markets and sells its modified and wet distillers grains. The Company has a corn oil marketing agreement with a marketer (RPMG) which became effective November 15, 2018. The agreement provides for an exclusive marketing arrangement with RPMG for the purposes of marketing and distributing our corn oil in exchange for payment of a marketing fee to RPMG. We may immediately terminate the agreement upon written notice to RPMG if: (1) RPMG fails on three separate occasions within a 12-month period to purchase corn oil or market corn oil, as not otherwise excused under the Agreement; or (2) upon RPMG's insolvency. RPMG may immediately terminate the agreement upon written notice if: (A) during any consecutive three (3) months the actual production or inventory of any corn oil product at the plant varies by twenty ( 20% ) or more from the monthly production and inventory estimates provided to RPMG (other than for reasons permitted under the RPMG Agreement); or (B) upon our insolvency. Construction Agreement The Company entered into an agreement with a contractor for the installation of a system to produce 20MGY Hydrous USP Grade Ethanol which is used in the sanitizer market. The agreement provides for a fixed price which includes design, engineering and construction management. Monthly applications for payment are issued based on progress and final payment is due upon final completion of the work. The agreement provides that the Company may suspend work for a period of not more than 60 days , subject to a potential adjustment in price and contract time, and may terminate for cause after notice and opportunity to cure. The contractor may stop work or terminate the agreement if work is suspended for more than 60 days or for payment default after notice and opportunity to cure. 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 In the ordinary course of business, we enter into forward contracts for our commodity purchases and sales. Forward contracts are as follows at July 31, 2020 : Quantity Average Price Delivery Date Purchase of corn (in bushels): Basis Contracts 653,546 By 12/31/21 Priced Contracts 1,008,159 $ 3.01 By 7/31/21 Total 1,661,705 Purchase of natural gas (in dekatherms): Index contracts — Priced contracts 2,877,000 $ 2.41 By 3/31/23 Total 2,877,000 Purchase of denaturant (in gallons): Index contracts — Priced contracts 846,400 $ 1.23 By 3/31/21 Total 846,400 Sales of dry distillers grains (in tons): Index contracts — Priced contracts 3,850 $ 114.99 By 8/31/20 Total 3,850 Sales of modified distillers grains (in tons) Index contracts — Priced contracts 2,700 $ 69.33 By 1/31/21 Total 2,700 Sales of corn oil (in pounds) Index contracts — Priced contracts 2,544,000 $ 0.24 By 9/30/20 Total 2,544,000 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Jul. 31, 2020 | |
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 ASC Topic 606, Revenue from Contracts with Customers, further details the Company’s requirement to recognize revenue of transferred goods or services to customers in an amount which is expected to be received in exchange for those goods or services. Five steps were required as part of the new guidance: 1. Identify the contract 2. Identify the performance obligations 3. Determine the transaction price 4. Allocate the transaction price to the performance obligation 5. Recognize revenue when each performance obligation is satisfied. The adoption of this new guidance did not result in any material changes to our revenue recognition. The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. The Company recognizes revenue when control of goods is transferred, which is consistent with the Company's previous policy where revenues were 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 and distillers grains sales, control transfers when loaded into the rail car. 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. The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. • ethanol sales • modified distillers grains sales • dried distillers grains sales • corn oil sales Disaggregation of revenue: All revenue recognized in the statement of operations is considered to be revenue from contracts with customers. The following table depicts the disaggregation of revenue according to product line for the three and nine months ended July 31, 2020 and 2019 : Three Months Ended July 31, 2020 Three Months Ended July 31, 2019 Nine Months Ended July 31, 2020 Nine Months Ended July 31, 2019 Revenue Sources Amount Amount Amount Amount Ethanol Sales $ 18,995,177 $ 20,374,721 $ 55,131,182 $ 54,657,405 Modified Distillers Grains Sales 882,235 892,835 3,337,040 3,003,391 Dried Distillers Grains Sales 3,254,884 3,428,947 10,464,513 11,279,498 Corn Oil Sales 1,106,703 909,022 2,747,517 2,293,352 Total Revenues $ 24,238,999 $ 25,605,525 $ 71,680,252 $ 71,233,646 Contract assets and contract liabilities: The Company had short term contract liabilities from contracts with customers of $0 at July 31, 2020 and $4,947 at October 31, 2019 . The Company receives payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract. Shipping Costs Shipping costs incurred by the Company in the sale of ethanol, dried distillers grains and corn oil are not specifically identifiable and as a result, revenue from the sale of those products is recorded based on the net selling price reported to the Company from the marketer. |
Operating Segment | Operating Segment The Company uses the "management approach" for reporting information about segments in annual and interim financial statements. The management approach is based on the way the chief operating decision-maker organizes segments within a company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure and any other manner in which management disaggregates a company. Based on the "management approach" model, the Company has determined that its business is comprised of a single operating segment. |
Derivative Instruments | Derivative Instruments Derivatives are recognized in the balance sheets and the measurement of these instruments are 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. Contracts are evaluated to determine whether the contracts are derivatives. Certain contracts that 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 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. Corn and natural gas derivative changes in fair market value are included in costs of goods sold. |
Carrying Value of Long-Lived Assets | Carrying Value of 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. If circumstances require a long-lived asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset group to the carrying value of the asset group. If the carrying value of the long-lived asset group 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 discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. In accordance with the Company’s policy for evaluating impairment of long-lived assets described above, when a triggering event occurs management evaluates the recoverability of the facilities based on projected future cash flows from operations over the facilities’ estimated useful lives. In determining the projected future undiscounted cash flows, the Company makes significant assumptions concerning the future viability of the ethanol industry, the future price of corn in relation to the future price of ethanol and the overall demand in relation to production and supply capacity. The Company has not recorded any impairment as of July 31, 2020 and 2019. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value of accounts receivable, accounts payable, and other financial instrument working capital items approximate fair value at July 31, 2020 due to the short maturity nature of these instruments (Level 2). Commodities contracts are carried at fair value, based on dealer quotes and live trading levels (Level 1) (Note 5). The Company believes the carrying amount of the long-term debt approximates fair value due to a significant portion of total indebtedness containing variable interest rates and this rate is a market interest rate for these borrowings (Level 2). |
Investments | Investments The Company has a 5.6% 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 (loss) from equity method investments based on the most recent reliable data. Therefore, the net income (loss) which is reported in the Company's statement of operations for the period ended July 31, 2020 is based on the investee’s results of operations for the period ended June 30, 2020. |
Recently Issued or Adopted Accounting Pronouncements | Recently Issued or Adopted Accounting Pronouncements Accounting for Leases (Adopted): In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right of use asset for all leases with a lease term greater than twelve months on its balance sheet. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company has elected the practical expedient to not record a right of use asset or lease liability for leases with a term of 12 months or less. See Note 7 for further information. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
Accounting Policies [Abstract] | |
Disaggregation of Revenue | The following table depicts the disaggregation of revenue according to product line for the three and nine months ended July 31, 2020 and 2019 : Three Months Ended July 31, 2020 Three Months Ended July 31, 2019 Nine Months Ended July 31, 2020 Nine Months Ended July 31, 2019 Revenue Sources Amount Amount Amount Amount Ethanol Sales $ 18,995,177 $ 20,374,721 $ 55,131,182 $ 54,657,405 Modified Distillers Grains Sales 882,235 892,835 3,337,040 3,003,391 Dried Distillers Grains Sales 3,254,884 3,428,947 10,464,513 11,279,498 Corn Oil Sales 1,106,703 909,022 2,747,517 2,293,352 Total Revenues $ 24,238,999 $ 25,605,525 $ 71,680,252 $ 71,233,646 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventories consisted of the following at: July 31, 2020 October 31, 2019 Raw materials $ 4,223,954 $ 2,801,255 Spare parts and supplies 3,965,222 3,384,360 Work in process 735,586 743,850 Finished goods 373,776 437,891 Total $ 9,298,538 $ 7,367,356 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivatives Instruments | The following tables provide details regarding the Company's derivative instruments at July 31, 2020 and October 31, 2019 : Instrument Balance Sheet location July 31, 2020 October 31, 2019 Corn, natural gas and ethanol contracts In gain position $ 103,924 $ 124,069 In loss position (316,091 ) (775,887 ) Deposits with broker 415,100 1,121,558 Current assets $ 202,933 $ 469,740 |
Schedule of Gains (Losses) From Derivative Instruments | 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 July 31, Operations location 2020 2019 Ethanol contracts Revenues (530,492 ) $ (162,349 ) Corn contracts Cost of goods sold 159,640 (785,094 ) Natural gas contracts Cost of goods sold — 588 Statement of Nine Months Ended July 31, Operations location 2020 2019 Ethanol contracts Revenues $ (482,571 ) $ (257,408 ) Corn contracts Cost of goods sold (264,733 ) (877,213 ) Natural gas contracts Cost of goods sold 11,240 20,394 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities Measured at Fair Value | 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 July 31, 2020 Level 1 Level 2 Level 3 Derivative instruments - commodities In gain position $ 103,924 $ 600 $ 103,324 $ — In loss position (316,091 ) (500 ) (315,591 ) — Fair Value as of Fair Value Measurement Using October 31, 2019 Level 1 Level 2 Level 3 Derivative instruments - commodities In gain position $ 124,069 $ 4,538 $ 119,531 $ — In loss position (775,887 ) (4,375 ) (771,512 ) — |
Debt Financing (Tables)
Debt Financing (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt | Long-term debt consists of the following at: July 31, 2020 October 31, 2019 Term Loan $ 1,250,000 $ 3,500,000 Term Revolving Loan 11,999,000 6,499,000 PPP Loan 712,200 — Total 13,961,200 9,999,000 Less Debt Issuance Costs (7,584 ) (25,137 ) Less amounts due within one year (1,598,516 ) (2,729,739 ) Net long-term debt $ 12,355,100 $ 7,244,124 |
Schedule of Maturities of Long-term Debt | The estimated maturities of the long-term debt at July 31, 2020 are as follows: Principal Debt Issuance Costs Total July 2021 1,606,100 (7,584 ) 1,598,516 July 2022 356,100 — 356,100 July 2023 11,999,000 — 11,999,000 Long-term debt $ 13,961,200 $ (7,584 ) $ 13,953,616 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
Leases [Abstract] | |
Maturities of Operating Lease Liabilities | The following table summarizes the remaining maturities of the Company’s operating and finance lease liabilities as of July 31, 2020: For the Period Ending July 31, Operating Leases Finance Leases 2021 $ 168,480 $ 178,800 2022 168,480 178,800 2023 168,480 178,800 2024 154,440 178,800 2025 — 178,800 Thereafter — 759,900 Totals 659,880 1,653,900 Amount representing interest (67,450 ) (359,863 ) Lease liability $ 592,430 $ 1,294,037 |
Maturities of Financing Lease Liabilities | The following table summarizes the remaining maturities of the Company’s operating and finance lease liabilities as of July 31, 2020: For the Period Ending July 31, Operating Leases Finance Leases 2021 $ 168,480 $ 178,800 2022 168,480 178,800 2023 168,480 178,800 2024 154,440 178,800 2025 — 178,800 Thereafter — 759,900 Totals 659,880 1,653,900 Amount representing interest (67,450 ) (359,863 ) Lease liability $ 592,430 $ 1,294,037 |
Lease Cost | Lease Cost Three Months ended July 31, 2020 Nine Months ended July 31, 2020 Operating lease cost $ 42,120 $ 126,360 Finance lease cost Amortization of leased assets 34,323 102,969 Interest on lease liabilities 18,038 55,198 Net lease cost $ 94,481 $ 284,527 |
Commitments and Contingencies (
Commitments and Contingencies (Table) | 9 Months Ended |
Jul. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Forward Contracts | Forward contracts are as follows at July 31, 2020 : Quantity Average Price Delivery Date Purchase of corn (in bushels): Basis Contracts 653,546 By 12/31/21 Priced Contracts 1,008,159 $ 3.01 By 7/31/21 Total 1,661,705 Purchase of natural gas (in dekatherms): Index contracts — Priced contracts 2,877,000 $ 2.41 By 3/31/23 Total 2,877,000 Purchase of denaturant (in gallons): Index contracts — Priced contracts 846,400 $ 1.23 By 3/31/21 Total 846,400 Sales of dry distillers grains (in tons): Index contracts — Priced contracts 3,850 $ 114.99 By 8/31/20 Total 3,850 Sales of modified distillers grains (in tons) Index contracts — Priced contracts 2,700 $ 69.33 By 1/31/21 Total 2,700 Sales of corn oil (in pounds) Index contracts — Priced contracts 2,544,000 $ 0.24 By 9/30/20 Total 2,544,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Narrative (Details) gal in Millions | 2 Months Ended | 7 Months Ended | 9 Months Ended | |
Jul. 31, 2020USD ($)gal | May 31, 2020gal | Jul. 31, 2020USD ($)segment | Oct. 31, 2019USD ($) | |
Product Information [Line Items] | ||||
Short term contract liabilities from contracts with customers | $ | $ 0 | $ 0 | $ 4,947 | |
Number of operating segments | segment | 1 | |||
Renewable Fuels Marketing Group (RPMG) | ||||
Product Information [Line Items] | ||||
Ownership percentage | 5.60% | 5.60% | ||
Lawrenceville Tank, LLC | ||||
Product Information [Line Items] | ||||
Ownership percentage | 7.00% | 7.00% | ||
Ethanol | ||||
Product Information [Line Items] | ||||
Annual production capacity (in gallons) | gal | 65 | 50 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2020 | Jul. 31, 2019 | Jul. 31, 2020 | Jul. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 24,238,999 | $ 25,605,525 | $ 71,680,252 | $ 71,233,646 |
Ethanol Sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 18,995,177 | 20,374,721 | 55,131,182 | 54,657,405 |
Modified Distillers Grains Sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 882,235 | 892,835 | 3,337,040 | 3,003,391 |
Dried Distillers Grains Sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 3,254,884 | 3,428,947 | 10,464,513 | 11,279,498 |
Corn Oil Sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 1,106,703 | $ 909,022 | $ 2,747,517 | $ 2,293,352 |
Uncertainties (Details)
Uncertainties (Details) - gal gal in Millions | 2 Months Ended | 7 Months Ended |
Jul. 31, 2020 | May 31, 2020 | |
Concentration Risk [Line Items] | ||
Decrease of production levels, percentage (up to) | 25.00% | |
Ethanol | ||
Concentration Risk [Line Items] | ||
Annual production capacity (in gallons) | 65 | 50 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventory (Details) - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 4,223,954 | $ 2,801,255 |
Spare parts and supplies | 3,965,222 | 3,384,360 |
Work in process | 735,586 | 743,850 |
Finished goods | 373,776 | 437,891 |
Total | $ 9,298,538 | $ 7,367,356 |
Inventories - Narrative (Detail
Inventories - Narrative (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Jul. 31, 2020 | Oct. 31, 2019 | |
Distillers Grains | ||
Inventory [Line Items] | ||
Inventory write-down | $ 17 | $ 21 |
Derivative Instruments - Schedu
Derivative Instruments - Schedule of Derivatives Instruments (Details) - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 |
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | $ 202,933 | $ 469,740 |
Not designated as hedging instrument | Commodity Contract | ||
Derivatives, Fair Value [Line Items] | ||
In gain position | 103,924 | 124,069 |
In loss position | (316,091) | (775,887) |
Deposits with broker | $ 415,100 | $ 1,121,558 |
Derivative Instruments - Sche_2
Derivative Instruments - Schedule of Gains (Losses) From Derivative Instruments (Details) - Not designated as hedging instrument - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2020 | Jul. 31, 2019 | Jul. 31, 2020 | Jul. 31, 2019 | |
Ethanol contracts | Revenues | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) on derivative | $ (530,492) | $ (162,349) | $ (482,571) | $ (257,408) |
Corn contracts | Cost of goods sold | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) on derivative | 159,640 | (785,094) | (264,733) | (877,213) |
Natural gas contracts | Cost of goods sold | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) on derivative | $ 0 | $ 588 | $ 11,240 | $ 20,394 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - Commodity Contract - Fair Value, measurements, recurring - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 |
Derivative instruments - commodities | ||
In gain position | $ 103,924 | $ 124,069 |
In loss position | (316,091) | (775,887) |
Level 1 | ||
Derivative instruments - commodities | ||
In gain position | 600 | 4,538 |
In loss position | (500) | (4,375) |
Level 2 | ||
Derivative instruments - commodities | ||
In gain position | 103,324 | 119,531 |
In loss position | (315,591) | (771,512) |
Level 3 | ||
Derivative instruments - commodities | ||
In gain position | 0 | 0 |
In loss position | $ 0 | $ 0 |
Debt Financing - Schedule of Lo
Debt Financing - Schedule of Long-term Debt (Details) - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 |
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 13,961,200 | $ 9,999,000 |
Less Debt Issuance Costs | (7,584) | (25,137) |
Less amounts due within one year | (1,598,516) | (2,729,739) |
Net long-term debt | 12,355,100 | 7,244,124 |
PPP Loan | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 712,200 | |
AgStar Financial Services, PCA | Notes payable to banks | Term Loan | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 1,250,000 | 3,500,000 |
AgStar Financial Services, PCA | Notes payable to banks | Term Revolving Loan | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 11,999,000 | $ 6,499,000 |
Debt Financing - Narrative (Det
Debt Financing - Narrative (Details) - USD ($) | 9 Months Ended | |||
Jul. 31, 2020 | Apr. 14, 2020 | Apr. 20, 2018 | Jan. 22, 2016 | |
Debt Instrument [Line Items] | ||||
Outstanding balance | $ 13,953,616 | |||
Debt covenant, minimum debt service coverage ratio | 1.25 | |||
PPP Loan | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, face amount | $ 712,200 | |||
Debt stated interest rate | 1.00% | |||
AgStar Financial Services, PCA | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate (as a percent) | 3.25% | |||
AgStar Financial Services, PCA | Letter of Credit | ||||
Debt Instrument [Line Items] | ||||
Letter of credit, interest rate at period end | 1.50% | |||
Letters of credit outstanding balance | $ 0 | |||
Notes payable to banks | AgStar Financial Services, PCA | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate (as a percent) | 3.25% | |||
Notes payable to banks | AgStar Financial Services, PCA | Term Loan | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, face amount | $ 15,000,000 | |||
Effective interest rate | 3.44% | |||
Periodic principal payment | $ 250,000 | |||
Outstanding balance | 1,250,000 | |||
Notes payable to banks | AgStar Financial Services, PCA | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | $ 15,000,000 | |||
Capacity available for trade purchases | 20,000,000 | $ 20,000,000 | ||
Working capital requirement | 8,250,000 | |||
Annual capital expenditure limit | $ 5,000,000 | |||
Term Revolving Loan | AgStar Financial Services, PCA | ||||
Debt Instrument [Line Items] | ||||
Effective interest rate | 3.44% | |||
Line of credit outstanding balance | $ 11,999,000 | |||
75 percent of net income | Notes payable to banks | AgStar Financial Services, PCA | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Working capital requirement | $ 8,250,000 | |||
Restrictive covenants (as a percent) | 75.00% | |||
100 percent of net income | Notes payable to banks | AgStar Financial Services, PCA | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Working capital requirement | $ 11,000,000 | |||
Restrictive covenants (as a percent) | 100.00% | |||
100 percent of net income | Notes payable to banks | AgStar Financial Services, PCA | Term Revolving Loan | ||||
Debt Instrument [Line Items] | ||||
Line of credit, outstanding balance | $ 0 | |||
Unlimited | Notes payable to banks | AgStar Financial Services, PCA | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Working capital requirement | $ 11,000,000 |
Debt Financing - Schedule of Ma
Debt Financing - Schedule of Maturities of Long-term Debt (Details) - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 |
Principal | ||
July 2021 | $ 1,606,100 | |
July 2022 | 356,100 | |
July 2023 | 11,999,000 | |
Long-term debt, principal | 13,961,200 | $ 9,999,000 |
Debt Issuance Costs | ||
July 2021 | (7,584) | |
July 2022 | 0 | |
July 2023 | 0 | |
Long-term debt, debt issuance costs | (7,584) | $ (25,137) |
Total | ||
July 2021 | 1,598,516 | |
July 2022 | 356,100 | |
July 2023 | 11,999,000 | |
Long-term debt, total | $ 13,953,616 |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) | Jul. 31, 2020 | Nov. 01, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Right of use asset - operating leases | $ 592,430 | |
Lease liability | $ 592,430 | |
Operating lease discount rate | 5.50% | |
Operating leases remaining lease terms | 5 years | |
Finance leases remaining lease terms | 10 years | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Right of use asset - operating leases | $ 692,000 | |
Lease liability | $ 1,373,000 |
Leases - Maturities of Operatin
Leases - Maturities of Operating and Financing Lease Liabilities (Details) | Jul. 31, 2020USD ($) |
Operating Leases | |
2021 | $ 168,480 |
2022 | 168,480 |
2023 | 168,480 |
2024 | 154,440 |
2025 | 0 |
Thereafter | 0 |
Totals | 659,880 |
Amount representing interest | (67,450) |
Lease liability | 592,430 |
Finance Leases | |
2021 | 178,800 |
2022 | 178,800 |
2023 | 178,800 |
2024 | 178,800 |
2025 | 178,800 |
Thereafter | 759,900 |
Totals | 1,653,900 |
Amount representing interest | (359,863) |
Lease liability | $ 1,294,037 |
Leases - Lease Cost (Details)
Leases - Lease Cost (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Jul. 31, 2020 | Jul. 31, 2020 | |
Leases [Abstract] | ||
Operating lease cost | $ 42,120 | $ 126,360 |
Amortization of leased assets | 34,323 | 102,969 |
Interest on lease liabilities | 18,038 | 55,198 |
Net lease cost | $ 94,481 | $ 284,527 |
Commitments and Contingencies -
Commitments and Contingencies - Marketing Agreements (Details) | 9 Months Ended |
Jul. 31, 2020USD ($)failure | |
Related Party Transaction [Line Items] | |
Related party contract termination notice | 120 days |
Affiliated Entity | |
Related Party Transaction [Line Items] | |
Related party transaction, fees, percentage of total | 2.00% |
Number of corn oil purchase failures | failure | 3 |
Affiliated Entity | Maximum | |
Related Party Transaction [Line Items] | |
Related party transaction, marketing expense (in dollars per ton) | $ 2 |
Percentage of variation | 20.00% |
Affiliated Entity | Minimum | |
Related Party Transaction [Line Items] | |
Related party transaction, marketing expense (in dollars per ton) | $ 1.50 |
Commitments and Contingencies_2
Commitments and Contingencies - Construction Agreement (Details) | 9 Months Ended |
Jul. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Termination period of agreement | 60 days |
Commitments and Contingencies_3
Commitments and Contingencies - Forward Contracts (Details) | Jul. 31, 2020bugalTlbMMBTU$ / lb$ / T$ / gal$ / bu$ / MMBTU |
Distillers Grains | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | 3,850 |
Modified Distillers Grains | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | 2,700 |
Corn Oil | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | lb | 2,544,000 |
Corn contracts | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | bu | 1,661,705 |
Natural gas | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | MMBTU | 2,877,000 |
Denaturant | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | gal | 846,400 |
Basis Contracts | Corn contracts | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | bu | 653,546 |
Priced Contracts | Distillers Grains | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | 3,850 |
Derivative, average forward price | $ / T | 114.99 |
Priced Contracts | Modified Distillers Grains | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | 2,700 |
Derivative, average forward price | $ / T | 69.33 |
Priced Contracts | Corn Oil | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | lb | 2,544,000 |
Derivative, average forward price | $ / lb | 0.24 |
Priced Contracts | Corn contracts | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | bu | 1,008,159 |
Derivative, average forward price | $ / bu | 3.01 |
Priced Contracts | Natural gas | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | MMBTU | 2,877,000 |
Derivative, average forward price | $ / MMBTU | 2.41 |
Priced Contracts | Denaturant | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | gal | 846,400 |
Derivative, average forward price | $ / gal | 1.23 |
Index contracts | Distillers Grains | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | 0 |
Index contracts | Modified Distillers Grains | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | 0 |
Index contracts | Corn Oil | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | lb | 0 |
Index contracts | Natural gas | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | MMBTU | 0 |
Index contracts | Denaturant | |
Supply Commitment [Line Items] | |
Derivative, nonmonetary notional amount | gal | 0 |