Acquisition (Notes)

9 Months Ended

Jul. 31, 2013

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The acquisition date fair value of the consideration transferred consisted of the following:

Cash	$	8,000,000
Note payable	4,024,500
Assumption of note payable to Granite Falls Bank	5,000,000
Total Consideration	$	17,024,500

BUSINESS COMBINATION

On July 31, 2013, the Company acquired 63.3% of the outstanding membership units of Heron Lake BioEnergy, LLC (“HLBE”) through its purchase of 100% of the membership units of Project Viking, L.L.C. (“Project Viking”), for a total purchase price of $17,024,500. HLBE is a 50 million gallon per year ethanol plant located in Heron Lake, Minnesota. Project Viking was formed by the previous investor to only hold equity interests in HLBE and the debt incurred to obtain those interests and did not have any other assets or liabilities. The previous owner of Project Viking also owned approximately 12.82% of the outstanding membership units of the Company at July 31, 2013.

Immediately following the closing, the Company, through its 100% ownership of Project Viking, owned 24,080,949 Class A units and 15,000,000 Class B units of HLBE, for a total of 39,080,949 units, or 63.3% of the 61,697,104 units. As a result, under HLBE's member control agreement, Project Viking is entitled to appoint five (5) of the nine (9) governors to HLBE's board of governors.

On July 31, 2013, the Company entered into a Management Services Agreement with HLBE. Under the Management Services Agreement, the Company agreed to supply its own personnel to act as part-time officers and managers of HLBE for the positions of Chief Executive Officer, Chief Financial Officer, and Commodity Risk Manager. The initial term of the Management Services Agreement is three years. The Company will be paid $35,000 per month by HLBE for the first year of the Management Services Agreement. During years two and three of the agreement, HLBE agreed to pay the Company 50% of the total salary, bonuses, and other expenses and costs incurred by the Company for the three management positions. At the expiration of the initial term, the Management Services Agreement will automatically renew for successive one-year terms unless and until the Company or HLBE gives the other party 90-days written notice of termination prior to expiration of the initial term or the start of a renewal term.

The acquisition date fair value of the consideration transferred consisted of the following:

Cash	$	8,000,000
Note payable	4,024,500
Assumption of note payable to Granite Falls Bank	5,000,000
Total Consideration	$	17,024,500

The assets and liabilities of Project Viking were recorded at their respective estimated fair values as of the date of the acquisition using generally accepted accounting principles for business combinations. The Company used a combination of the market and cost approaches and unobservable level 3 inputs, to estimate the fair values of the assets acquired and liabilities assumed. The fair value of the long-term debt acquired was determined based on the present value of future contractual cash flows discounted at an interest rate that reflects the current borrowing rates available to the Company for loans with similar terms. The value of the 36.66% noncontrolling interest was determined by using the fair value method by using the most recent arms-length transaction of HLBE's units that did not include a control premium. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

Cash	$	1,022,764
Restricted cash	510,955
Accounts receivable	3,005,121
Inventory	2,303,157
Prepaid expenses	1,107,025
Property, plant, and equipment	51,625,774
Other assets	924,252
Goodwill	1,099,579
Total assets acquired	$	61,598,627
Accounts payable	$	(936,893	)
Accrued expenses	(399,623		)
Notes payable	(36,452,764		)
Non-controlling interest	(6,784,847		)
Net purchase price	$	17,024,500

Since the acquisition occurred on the last day of the Company's fiscal third quarter, there were no revenues or expenses consolidated in the Company's statement of operations. As such, there was also no portion of the Company's net income attributable to non-controlling interests during the three or nine month periods ended July 31, 2013. The following represents the pro forma consolidated statement of operations as if the transaction occurred at the beginning of the following periods:

	For the three month periods ended
	July 31, 2013		July 31, 2012
Revenues	$	94,461,603	$	83,407,497
Net income (loss), including portion attributable to noncontrolling interest of $834,036 and $171,232, respectively	$	4,446,282	$	(99,065	)
Earnings per share (30,606 weighted average units outstanding - basic and diluted)	$	118.02	$	(8.83	)

	For the nine month periods ended
	July 31, 2013		July 31, 2012
Revenues	$	269,219,558	$	246,226,425
Net income, including portion attributable to noncontrolling interest of $191,471 and $1,150,813, respectively	$	5,948,791	$	5,728,847
Earnings per share (30,606 weighted average units outstanding - basic and diluted)	$	188.11	$	149.58

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of each of the periods presented.