Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2013 |
Accounting Policies [Abstract] | ' |
Principles Of Consolidation and Noncontrolling Interest [Policy Text Block] | ' |
Principles of Consolidation and Noncontrolling Interest |
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The accompanying consolidated financial statements include the Company, the LLC and its wholly-owned subsidiaries: BFE Holdings, LLC; BFE Operating Company, LLC; Buffalo Lake Energy, LLC; and Pioneer Trail Energy, LLC. All inter-company balances and transactions have been eliminated in consolidation. The Company treats all exchanges of LLC membership units for Company common stock as equity transactions, with any difference between the fair value of the Company’s common stock and the amount by which the noncontrolling interest is adjusted being recognized in equity. |
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Use of Estimates, Policy [Policy Text Block] | ' |
Use of Estimates |
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Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosures in the accompanying notes at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Revenue Recognition, Policy [Policy Text Block] | ' |
Revenue Recognition |
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The Company sells its ethanol, distillers grain and corn oil products under the terms of marketing agreements. Revenue is recognized when risk of loss and title transfers upon shipment of ethanol, distillers grain or corn oil. In accordance with our marketing agreements, the Company records its revenues based on the amounts payable to us at the time of our sales of ethanol, distillers grain or corn oil. For our ethanol that is sold within the United States, the amount payable is equal to the average delivered price per gallon received by the marketing pool from Cargill’s customers, less average transportation and storage charges incurred by Cargill, and less a commission. We also sell a portion of our ethanol production to Cargill for export, which sales are shipped undenatured and are excluded from the marketing pool. For exported ethanol sales, the amount payable is equal to the contracted delivered price per gallon, less transportation and storage charges, and less a commission. The amount payable for distillers grain and corn oil is generally equal to the market price at the time of sale less a commission. |
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Cost of Sales, Policy [Policy Text Block] | ' |
Cost of goods sold |
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Cost of goods sold primarily includes costs of materials (primarily corn, natural gas, chemicals and denaturant), electricity, purchasing and receiving costs, inspection costs, shipping costs, lease costs, plant management, certain compensation costs and general facility overhead charges, including depreciation expense. |
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Selling, General and Administrative Expenses, Policy [Policy Text Block] | ' |
General and administrative expenses |
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General and administrative expenses consist of salaries and benefits paid to our management and administrative employees, expenses relating to third party services, travel, office rent, marketing and other expenses, including certain expenses associated with being a public company, such as fees paid to our independent auditors associated with our annual audit and quarterly reviews, directors’ fees, and listing and transfer agent fees. |
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Cash and Cash Equivalents, Policy [Policy Text Block] | ' |
Cash and Cash Equivalents |
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Cash and cash equivalents include highly-liquid investments with an original maturity of three months or less. Cash equivalents are currently comprised of money market mutual funds. At September 30, 2013, we had $17.3 million held at three financial institutions, which is in excess of FDIC insurance limits. |
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Receivables, Policy [Policy Text Block] | ' |
Accounts Receivable |
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Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. The Company does not charge interest for any past due accounts receivable. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as a reduction to bad debt expense when received. As of September 30, 2013 and December 31, 2012, no allowance was considered necessary. |
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Concentrations Of Credit Risk [Policy Text Block] | ' |
Concentrations of Credit Risk |
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Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk, whether on- or off-balance sheet, that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions described below. |
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During the three and nine months ended September 30, 2013, the Operating Subsidiaries recorded sales to Cargill representing 76% and 75%, respectively, of total net sales. During the three and nine months ended September 30, 2012, the Operating Subsidiaries recorded sales to Cargill representing 74% and 76%, respectively, of total net sales. As of September 30, 2013 and December 31, 2012, the Operating Subsidiaries, had receivables from Cargill of $6.1 million and $7.5 million, respectively, representing 85% and 81% of total accounts receivable, respectively. |
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The Operating Subsidiaries purchase corn, its largest cost component in producing ethanol, from Cargill. During the three and nine months ended September 30, 2013, corn purchases from Cargill totaled $61.1 million and $203.7 million, respectively. During the three and nine months ended September 30, 2012, corn purchases from Cargill totaled $95.4 million and $310.8 million, respectively. As of September 30, 2013 and December 31, 2012, the Operating Subsidiaries, had payables to Cargill of $0.8 million and $9.0 million, respectively, related to corn purchases. |
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Inventory, Policy [Policy Text Block] | ' |
Inventories |
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Raw materials inventories, which consist primarily of corn, denaturant, supplies and chemicals, and work in process inventories are valued at the lower-of-cost-or-market, with cost determined on a first-in, first-out basis. Finished goods inventories consist of ethanol and distillers grain and are stated at lower of average cost or market. |
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A summary of inventories is as follows (in thousands): |
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| | September 30, | | December 31, | |
2013 | 2012 |
Raw materials | | $ | 5,902 | | $ | 8,198 | |
Work in process | | | 2,096 | | | 2,831 | |
Finished goods | | | 3,194 | | | 2,414 | |
| | $ | 11,192 | | $ | 13,443 | |
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Derivatives, Policy [Policy Text Block] | ' |
Derivative Instruments and Hedging Activities |
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Derivatives are recognized on the balance sheet at their fair value and are included in the accompanying balance sheets as “derivative financial instruments”. On the date the derivative contract is entered into, the Company may designate the derivative as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge). Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income, net of tax effect, until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable rate asset or liability are recorded in earnings). Changes in the fair value of undesignated derivative instruments or derivatives that do not qualify for hedge accounting are recognized in current period operations. |
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Accounting guidance for derivatives requires a company to evaluate contracts 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. The Company’s contracts for corn and natural gas purchases and ethanol sales that meet these requirements and are designated as either normal purchase or normal sale contracts are exempted from the derivative accounting and reporting requirements. |
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Property, Plant and Equipment, Policy [Policy Text Block] | ' |
Property, Plant and Equipment |
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Property, plant and equipment is recorded at cost. All costs related to purchasing and developing land or the engineering, design and construction of a plant are capitalized. Maintenance, repairs and minor replacements are charged to operating expenses while major replacements and improvements are capitalized. Depreciation is computed by the straight line method over the following estimated useful lives: |
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| | Years | | | | | |
Land improvements | | 20 – 30 | | | | | |
Buildings and improvements | | 7 – 40 | | | | | |
Machinery and equipment: | | | | | | | |
Railroad equipment | | 20 – 39 | | | | | |
Facility equipment | | 20 – 39 | | | | | |
Other | | 5 – 7 | | | | | |
Office furniture and equipment | | 3 – 10 | | | | | |
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Debt, Policy [Policy Text Block] | ' |
Debt Issuance Costs |
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Debt issuance costs are stated at cost, less accumulated amortization. Debt issuance costs included in noncurrent assets at September 30, 2013 and December 31, 2012 represent costs incurred related to the Operating Subsidiaries Senior Debt Facility and tax increment financing agreements. These costs are being amortized, using an effective interest method, through interest expense over the term of the related debt. Estimated future debt issuance cost amortization as of September 30, 2013 is as follows (in thousands): |
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Remainder of 2013 | | $ | 240 | | | | |
2014 | | | 704 | | | | |
2015 | | | 8 | | | | |
2016 | | | 8 | | | | |
2017 | | | 8 | | | | |
Thereafter | | | 33 | | | | |
Total | | $ | 1,001 | | | | |
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Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | ' |
Impairment of Long-Lived Assets |
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The Company has two asset groups, its ethanol facility in Fairmont and its ethanol facility in Wood River, which are evaluated separately when considering whether the carrying value of these assets has been impaired. The Company continually monitors whether or not events or circumstances exist that would warrant impairment testing of its long-lived assets. In evaluating whether impairment testing should be performed, the Company considers several factors including the carrying value of the long-lived assets, projected production volumes at its facilities, projected ethanol and distillers grain prices that we expect to receive, and projected corn and natural gas costs we expect to incur. In the ethanol industry, operating margins, and consequently undiscounted future cash flows, are primarily driven by the crush spread. In the event that the crush spread is sufficiently depressed to result in negative operating cash flow at its facilities for an extended time period, the Company will evaluate whether an impairment of its long-lived assets may have occurred. |
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Recoverability is measured by comparing the carrying value of an asset with the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the carrying value of an asset exceeds the undiscounted future cash flows, then the asset is measured for impairment. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the present value of estimated expected future cash flows using a discount rate commensurate with the risk involved, quoted market prices or appraised values, depending on the nature of the asset. As of September 30, 2013, the Company performed an impairment evaluation of the recoverability of its long-lived assets, which included the assessment of the likelihood of possible outcomes that existed at the balance sheet date, including continued operation of the assets and the assessment of the likelihood of a future sale of the asset, whether by the Company or by the lenders through foreclosure. As a result of the impairment evaluation, it was determined that the undiscounted future cash flows from the assets exceeded the carrying values, and therefore no further analysis was necessary and no impairment was recorded. In accordance with accounting pronouncements, the recoverability assessment made as of September 30, 2013 was not revised as a result of the decision by the lenders to transfer or sell both of the plants that occurred subsequent to September 30, 2013. See Note 1 – Organization, Nature of Business, Basis of Presentation, Liquidity, Going Concern, and Subsequent Event. |
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Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | ' |
Stock-Based Compensation |
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Expense associated with stock-based awards and other forms of equity compensation is based on fair value at grant and recognized on a straight line basis in the financial statements over the requisite service period for those awards that are expected to vest. |
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Asset Retirement Obligations, Policy [Policy Text Block] | ' |
Asset Retirement Obligations |
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Asset retirement obligations are recognized when a contractual or legal obligation exists and a reasonable estimate of the amount can be made. Changes to the asset retirement obligation resulting from revisions to the timing or the amount of the original undiscounted cash flow estimates shall be recognized as an increase or decrease to both the carrying amount of the asset retirement obligation and the related asset retirement cost capitalized as part of the related property, plant and equipment. At September 30, 2013, the Operating Subsidiaries had accrued asset retirement obligation liabilities of $153,000 and $193,000 for its plants at Wood River and Fairmont, respectively. At December 31, 2012, the Operating Subsidiaries had accrued asset retirement obligation liabilities of $149,000 and $188,000 for its plants at Wood River and Fairmont, respectively. |
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The asset retirement obligations accrued for Wood River relate to the obligations in our contracts with Cargill and Union Pacific Railroad (“Union Pacific”). According to the grain elevator lease with Cargill, the equipment that is adjacent to the grain elevator may be required at Cargill’s discretion to be removed at the end of the lease. In addition, according to the contract with Union Pacific, the buildings that are built near their land in Wood River may be required at Union Pacific’s request to be removed at the end of our contract with them. The asset retirement obligations accrued for Fairmont relate to the obligations in our contracts with Cargill and in our water permit issued by the state of Minnesota. According to the grain elevator lease with Cargill, the equipment that is adjacent to the grain elevator being leased may be required at Cargill’s discretion to be removed at the end of the lease. In addition, the water permit in Fairmont requires that we secure all above ground storage tanks whenever we discontinue the use of our equipment for an extended period of time in Fairmont. The estimated costs of these obligations have been accrued at the current net present value of these obligations at the end of an estimated 20 year life for each of the plants. These liabilities have corresponding assets recorded in property, plant and equipment, which are being depreciated over 20 years. |
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Income Tax, Policy [Policy Text Block] | ' |
Income Taxes |
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The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company regularly reviews historical and anticipated future pre-tax results of operations to determine whether the Company will be able to realize the benefit of its deferred tax assets. A valuation allowance is required to reduce the potential deferred tax asset when it is more likely than not that all or some portion of the potential deferred tax asset will not be realized due to the lack of sufficient taxable income. The Company establishes reserves for uncertain tax positions that reflect its best estimate of deductions and credits that may not be sustained on a more likely than not basis. As the Company has incurred tax losses since its inception and expects to continue to incur tax losses for the foreseeable future, we will continue to provide a valuation allowance against deferred tax assets until the Company believes that such assets will be realized. |
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Fair Value of Financial Instruments, Policy [Policy Text Block] | ' |
Fair Value of Financial Instruments |
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The Company’s financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments. Any derivative financial instruments are carried at fair value. The fair value of the Company’s capital lease and notes payable are not materially different from their carrying amounts based on anticipated interest rates that management believes would currently be available to the Company for similar issues of debt, taking into account the current credit risk of the Company and other market factors. The fair value of the Operating Subsidiaries senior debt is not materially different from its carrying amount because of the short-term maturity of the instrument |
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Segment Reporting, Policy [Policy Text Block] | ' |
Segment Reporting |
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Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. Each of our plants is considered its own unique operating segment under these criteria. However, when two or more operating segments have similar economic characteristics, accounting guidance allows for them to be aggregated into a single operating segment for purposes of financial reporting. Our two plants are very similar in all characteristics and accordingly, the Company presents a single reportable segment, the manufacture of fuel-grade ethanol and the co-products of the ethanol production process. |
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Recent Accounting Pronouncements [Policy Text Block] | ' |
Recent Accounting Pronouncements |
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From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standards setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, our management believes that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption. |
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