x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended July 31, 2018 | |
OR | |
o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the transition period from to . | |
COMMISSION FILE NUMBER 000-53588 |
Minnesota | 20-4798531 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
24500 US Highway 14, Lamberton, MN 56152 | ||||
(Address of principal executive offices) | ||||
(507) 752-6160 | ||||
(Registrant's telephone number, including area code) |
Large Accelerated Filer o | Accelerated Filer o |
Non-Accelerated Filer x | Smaller Reporting Company o |
Emerging Growth Company o | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Page Number | |
ASSETS | July 31, 2018 | October 31, 2017 | |||||
(Unaudited) | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 748,601 | $ | 738,209 | |||
Derivative instruments | 719,992 | 800,199 | |||||
Accounts receivable | 2,878,947 | 2,838,154 | |||||
Inventories | 7,145,483 | 7,380,706 | |||||
Prepaids and other | 144,320 | 90,133 | |||||
Total current assets | 11,637,343 | 11,847,401 | |||||
Property and Equipment | |||||||
Land and land improvements | 12,647,512 | 12,647,512 | |||||
Buildings | 38,818,532 | 38,811,666 | |||||
Office equipment | 1,151,330 | 1,151,330 | |||||
Equipment | 75,139,893 | 74,364,700 | |||||
Vehicles | 74,094 | 74,094 | |||||
Construction in progress | 795,220 | 256,923 | |||||
128,626,581 | 127,306,225 | ||||||
Less accumulated depreciation | (61,683,787 | ) | (55,254,778 | ) | |||
Net property and equipment | 66,942,794 | 72,051,447 | |||||
Other Assets | |||||||
Investments | 2,665,483 | 2,641,755 | |||||
Deposits | 191,457 | 191,457 | |||||
Total other assets | 2,856,940 | 2,833,212 | |||||
Total Assets | $ | 81,437,077 | $ | 86,732,060 |
LIABILITIES AND MEMBERS' EQUITY | July 31, 2018 | October 31, 2017 | |||||
(Unaudited) | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 3,601,743 | $ | 2,765,060 | |||
Accrued expenses | 1,134,536 | 1,175,100 | |||||
Current maturities of long-term debt | 2,711,861 | 2,715,528 | |||||
Total current liabilities | 7,448,140 | 6,655,688 | |||||
Long-Term Debt | 5,464,244 | 7,942,403 | |||||
Commitments and Contingencies | |||||||
Members' Equity | |||||||
Members' equity, 4,813.50 units issued and outstanding | 68,524,693 | 72,133,969 | |||||
Total Liabilities and Members’ Equity | $ | 81,437,077 | $ | 86,732,060 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 31, 2018 | July 31, 2017 | July 31, 2018 | July 31, 2017 | ||||||||||||
Revenues | $ | 25,888,608 | $ | 25,368,884 | $ | 73,131,232 | $ | 76,146,120 | |||||||
Cost of Goods Sold | 27,415,993 | 24,173,347 | 72,426,988 | 70,167,316 | |||||||||||
Gross Profit (Loss) | (1,527,385 | ) | 1,195,537 | 704,244 | 5,978,804 | ||||||||||
Operating Expenses | 658,967 | 599,291 | 2,192,660 | 2,077,353 | |||||||||||
Operating Profit (Loss) | (2,186,352 | ) | 596,246 | (1,488,416 | ) | 3,901,451 | |||||||||
Other Income (Expense) | |||||||||||||||
Interest income | 1,665 | 218 | 2,360 | 994 | |||||||||||
Other income | 548 | 4,025 | 26,457 | 7,575 | |||||||||||
Interest expense | (167,413 | ) | (131,568 | ) | (523,841 | ) | (498,369 | ) | |||||||
Income from equity method investments | 20,647 | 34,555 | 34,822 | 73,717 | |||||||||||
Total other income (expense), net | (144,553 | ) | (92,770 | ) | (460,202 | ) | (416,083 | ) | |||||||
Net Income (Loss) | $ | (2,330,905 | ) | $ | 503,476 | $ | (1,948,618 | ) | $ | 3,485,368 | |||||
Weighted Average Units Outstanding | 4,814 | 4,814 | 4,814 | 4,840 | |||||||||||
Net Income (Loss) Per Unit, Basic and Diluted | $ | (484.19 | ) | $ | 104.59 | $ | (404.78 | ) | $ | 720.12 | |||||
Distributions Per Unit | $ | — | $ | — | $ | 345 | $ | 345 |
Nine Months Ended | |||||||
July 31, 2018 | July 31, 2017 | ||||||
Cash Flows from Operating Activities | |||||||
Net income (Loss) | $ | (1,948,618 | ) | $ | 3,485,368 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | |||||||
Depreciation and amortization | 6,447,183 | 5,980,099 | |||||
Distributions in excess of earnings from equity method investments | 329,828 | 267,867 | |||||
Gain on sale of asset | — | (9,093 | ) | ||||
Non-cash patronage income | (353,557 | ) | (97,184 | ) | |||
Changes in assets and liabilities | |||||||
Accounts receivable | (40,793 | ) | 1,166,320 | ||||
Inventories | 235,223 | (2,155,024 | ) | ||||
Derivative instruments | 80,207 | 226,606 | |||||
Prepaids and other | (54,187 | ) | (47,257 | ) | |||
Accounts payable | 795,592 | (289,110 | ) | ||||
Accrued expenses | (40,564 | ) | 130,772 | ||||
Net cash provided by operating activities | 5,450,314 | 8,659,364 | |||||
Cash Flows from Investing Activities | |||||||
Capital expenditures | (1,279,264 | ) | (3,529,222 | ) | |||
Proceeds from sale of asset | — | 28,777 | |||||
Net cash used in investing activities | (1,279,264 | ) | (3,500,445 | ) | |||
Cash Flows from Financing Activities | |||||||
Payments on long-term debt | (3,500,000 | ) | (2,725,769 | ) | |||
Proceeds from long-term debt | 1,000,000 | — | |||||
Member unit repurchase, 78.5 units | — | (550,000 | ) | ||||
Member distributions | (1,660,658 | ) | (1,687,740 | ) | |||
Net cash used in financing activities | (4,160,658 | ) | (4,963,509 | ) | |||
Net Increase in Cash and Cash Equivalents | 10,392 | 195,410 | |||||
Cash and Cash equivalents – Beginning of Period | 738,209 | 2,129,800 | |||||
Cash and Cash equivalents – End of Period | $ | 748,601 | $ | 2,325,210 | |||
Supplemental Cash Flow Information | |||||||
Cash paid for interest | $ | 414,633 | $ | 410,066 | |||
Supplemental Disclosure of Noncash Financing and Investing Activities | |||||||
Capital expenditures included in accounts payable | $ | 85,309 | $ | 238,886 |
July 31, 2018 | October 31, 2017 | |||||||
Raw materials | $ | 1,499,009 | $ | 2,130,668 | ||||
Spare parts and supplies | 3,236,321 | 2,938,262 | ||||||
Work in process | 666,883 | 729,167 | ||||||
Finished goods | 1,743,270 | 1,582,609 | ||||||
Total | $ | 7,145,483 | $ | 7,380,706 |
Instrument | Balance Sheet location | July 31, 2018 | October 31, 2017 | |||||
Corn, futures and option contracts | ||||||||
In gain position | $ | 76,689 | $ | 66,438 | ||||
In loss position | (2,473,683 | ) | (1,668,043 | ) | ||||
Deposits with broker | 3,116,986 | 2,401,804 | ||||||
Current assets | $ | 719,992 | $ | 800,199 |
Statement of | Three Months Ended July 31, | ||||||||
Operations location | 2018 | 2017 | |||||||
Ethanol contracts | Revenues | $ | 50,668 | $ | 117,268 | ||||
Corn contracts | Cost of goods sold | (1,369,076 | ) | 595,680 | |||||
Natural gas contracts | Cost of goods sold | — | (1,844 | ) | |||||
Statement of | Nine Months Ended July 31, | ||||||||
Operations location | 2018 | 2017 | |||||||
Ethanol contracts | Revenues | $ | 14,480 | $ | 539,478 | ||||
Corn contracts | Cost of goods sold | 289,267 | 1,446,496 | ||||||
Natural gas contracts | Cost of goods sold | 35,332 | 9,903 |
Fair Value as of | Fair Value Measurement Using | |||||||||||||
July 31, 2018 | Level 1 | Level 2 | Level 3 | |||||||||||
Derivative instruments - commodities | ||||||||||||||
In gain position | $ | 76,689 | $ | — | $ | 76,689 | ||||||||
In loss position | $ | (2,473,683 | ) | $ | (51,625 | ) | $ | (2,422,058 | ) |
Fair Value as of | Fair Value Measurement Using | |||||||||||||
October 31, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||
Derivative instruments - commodities | ||||||||||||||
In gain position | $ | 66,438 | $ | — | $ | 66,438 | ||||||||
In loss position | $ | (1,668,043 | ) | $ | (3,750 | ) | $ | (1,664,293 | ) |
July 31, 2018 | October 31, 2017 | ||||||
Variable Rate Term Loan | $ | 7,250,000 | $ | 9,750,000 | |||
Term Revolving Loan | 1,000,000 | 1,000,000 | |||||
Total | 8,250,000 | 10,750,000 | |||||
Less Debt Issuance Costs | (73,895 | ) | (92,069 | ) | |||
Less amounts due within one year | (2,711,861 | ) | (2,715,528 | ) | |||
Net long-term debt | $ | 5,464,244 | $ | 7,942,403 |
Principal | Debt Issuance Costs | Total | |||||||||
July 2019 | $ | 2,750,000 | $ | (38,139 | ) | $ | 2,711,861 | ||||
July 2020 | 3,000,000 | (26,654 | ) | 2,973,346 | |||||||
July 2021 | 1,500,000 | (9,102 | ) | 1,490,898 | |||||||
July 2022 | — | — | — | ||||||||
July 2023 | 1,000,000 | — | 1,000,000 | ||||||||
Long-term debt | $ | 8,250,000 | $ | (73,895 | ) | $ | 8,176,105 |
| Changes in the availability and price of corn and natural gas; |
| Reduction or elimination of the Renewable Fuel Standard; |
| Volatile commodity and financial markets; |
| Changes in legislation benefiting renewable fuels; |
| Our ability to comply with the financial covenants contained in our credit agreements with our lenders; |
| Our ability to profitably operate the ethanol plant and maintain a positive spread between the selling price of our products and our raw material costs; |
| Results of our hedging activities and other risk management strategies; |
| Ethanol and distillers grains supply exceeding demand and corresponding price reductions; |
| Our ability to generate cash flow to invest in our business and service our debt; |
| Changes in the environmental regulations that apply to our plant operations and changes in our ability to comply with such regulations; |
| Changes in our business strategy, capital improvements or development plans; |
| Changes in plant production capacity or technical difficulties in operating the plant; |
| Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries; |
| Lack of transportation, storage and blending infrastructure preventing ethanol from reaching high demand markets; |
| Changes in federal and/or state laws or policies impacting the ethanol industry; |
| Changes and advances in ethanol production technology and the development of alternative fuels and energy sources and advanced biofuels; |
| Competition from alternative fuel additives; |
| Changes in interest rates and lending conditions; |
| Decreases in the price we receive for our ethanol and distillers grains; |
| Our inability to secure credit or obtain additional equity financing we may require in the future; |
| Our ability to retain key employees and maintain labor relations; and |
| Changes in the price of oil and gasoline. |
2018 | 2017 | ||||||||||||
Statements of Operations Data | Amount (unaudited) | % | Amount (unaudited) | % | |||||||||
Revenues | $ | 25,888,608 | 100.00 | % | $ | 25,368,884 | 100.00 | % | |||||
Cost of Goods Sold | 27,415,993 | 105.90 | % | 24,173,347 | 95.29 | % | |||||||
Gross Profit (Loss) | (1,527,385 | ) | (5.90 | )% | 1,195,537 | 4.71 | % | ||||||
Operating Expenses | 658,967 | 3.26 | % | 599,291 | 3.18 | % | |||||||
Operating Profit (Loss) | (2,186,352 | ) | (8.45 | )% | 596,246 | 2.35 | % | ||||||
Other Income (Expense) | (144,553 | ) | (0.56 | )% | (92,770 | ) | (0.37 | )% | |||||
Net Income (Loss) | $ | (2,330,905 | ) | (9.00 | )% | $ | 503,476 | 1.98 | % |
2018 | 2017 | ||||||||||||
Revenue Sources | Amount (Unaudited) | % | Amount (Unaudited) | % | |||||||||
Ethanol Sales | $ | 19,861,538 | 76.72 | % | $ | 20,643,483 | 81.37 | % | |||||
Modified Distillers Grains Sales | 882,493 | 3.41 | % | 636,034 | 2.51 | % | |||||||
Dried Distillers Grains Sales | 4,221,135 | 16.30 | % | 3,020,991 | 11.91 | % | |||||||
Corn Oil Sales | 923,442 | 3.57 | % | 1,068,376 | 4.21 | % | |||||||
Total Revenues | $ | 25,888,608 | 100.00 | % | $ | 25,368,884 | 100.00 | % |
2018 | 2017 | ||||||||||||
Statements of Operations Data | Amount (unaudited) | % | Amount (unaudited) | % | |||||||||
Revenues | $ | 73,131,232 | 100.00 | % | $ | 76,146,120 | 100.00 | % | |||||
Cost of Goods Sold | 72,426,988 | 99.04 | % | 70,167,316 | 92.15 | % | |||||||
Gross Profit | 704,244 | 0.96 | % | 5,978,804 | 7.85 | % | |||||||
Operating Expenses | 2,192,660 | 3.24 | % | 2,077,353 | 2.73 | % | |||||||
Operating Profit (Loss) | (1,488,416 | ) | (2.04 | )% | 3,901,451 | 5.12 | % | ||||||
Other Income (Expense) | (460,202 | ) | (0.63 | )% | (416,083 | ) | (0.55 | )% | |||||
Net Income | $ | (1,948,618 | ) | (2.66 | )% | $ | 3,485,368 | 4.58 | % |
2018 | 2017 | ||||||||||||
Revenue Sources | Amount (Unaudited) | % | Amount (Unaudited) | % | |||||||||
Ethanol Sales | $ | 56,458,905 | 77.20 | % | $ | 62,419,575 | 81.97 | % | |||||
Modified Distillers Grains Sales | 2,635,981 | 3.60 | % | 1,749,334 | 2.30 | % | |||||||
Dried Distillers Grains Sales | 11,724,714 | 16.03 | % | 9,344,297 | 12.27 | % | |||||||
Corn Oil Sales | 2,311,632 | 3.17 | % | 2,632,914 | 3.46 | % | |||||||
Total Revenues | $ | 73,131,232 | 100.00 | % | $ | 76,146,120 | 100.00 | % |
July 31, 2018 | October 31, 2017 | ||||||
Current Assets | $ | 11,637,343 | $ | 11,847,401 | |||
Current Liabilities | 7,448,140 | 6,655,688 | |||||
Long-Term Debt | 5,464,244 | 7,942,403 |
2018 | 2017 | |||||
(unaudited) | (unaudited) | |||||
Net cash provided by operating activities | $ | 5,450,314 | $ | 8,659,364 | ||
Net cash used in investing activities | (1,279,264 | ) | (3,500,445 | ) | ||
Net cash used in financing activities | (4,160,658 | ) | (4,963,509 | ) |
Estimated Volume Requirements for the next 12 months (net of forward and futures contracts) | Unit of Measure | Hypothetical Adverse Change in Price as of July 31, 2018 | Approximate Adverse Change to Income | ||||||
Natural Gas | 1,499,390 | MMBTU | 10 | % | $ | 417,000 | |||
Ethanol | 59,500,000 | Gallons | 10 | % | $ | 7,735,000 | |||
Corn | 20,376,712 | Bushels | 10 | % | $ | 6,806,000 | |||
DDGs | 141,312 | Tons | 10 | % | $ | 1,837,000 |
(a) | The following exhibits are filed as part of this report. |
Exhibit No. | Exhibit | ||
10.1 | |||
10.2 | |||
31.1 | |||
31.2 | |||
32.1 | |||
32.2 | |||
101 | The following financial information from Highwater Ethanol, LLC's Quarterly Report on Form 10-Q for the quarter ended July 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of July 31, 2018 and October 31, 2017, (ii) Condensed Statements of Operations for the three and nine months ended July 31, 2018 and 2017, (iii) Statements of Cash Flows for the nine months ended July 31, 2018 and 2017, and (iv) the Notes to Condensed Financial Statements.** |
HIGHWATER ETHANOL, LLC | |||
Date: | September 10, 2018 | /s/ Brian Kletscher | |
Brian Kletscher | |||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: | September 10, 2018 | /s/ Lucas Schneider | |
Lucas Schneider | |||
Chief Financial Officer | |||
(Principal Financial and Accounting Officer) | |||
A. | RPMG markets corn oil (as hereinafter defined). |
B. | Producer produces or shall produce corn oil at Producer’s ethanol production facility located at Lamberton, Minnesota (the “Ethanol Facility”). |
C. | The Parties desire that RPMG shall market corn oil produced at the Ethanol Facility. |
1. | Marketing of Corn Oil. Producer shall sell to RPMG, and RPMG shall purchase and market, all of Producer’s production of corn oil produced at the Ethanol Facility, including any expansion or increase in capacity at the Ethanol Facility. RPMG shall be the exclusive marketer of corn oil and Producer shall not, either itself or through any affiliate or any third party, market any corn oil during the term of this Agreement. Except as otherwise provided in this Agreement, RPMG shall provide management resources to market and sell corn oil, including the management of logistics and collection. |
(a) | Payments to Producer. Subject to the other terms of this Agreement, RPMG shall pay Producer for its corn oil in accordance with the terms set forth in Exhibit A. RPMG shall use commercially reasonable efforts to make such payments to Producer on an average net ten (10) days. |
(b) | RPMG Commission. Producer shall pay RPMG commissions equal to *** each pound of corn oil sold to third party end purchasers (each, an “End Customer”). |
(c) | Accessorial Charges. As set forth on Exhibit A, RPMG shall be responsible for payment of Accessorial Charges (as defined in Exhibit A) to third parties; provided, however, that Producer agrees (i) to promptly reimburse RPMG for such Accessorial Charges upon submission to Producer of an invoice itemizing such Accessorial Charges, and (ii) that RPMG may deduct and setoff the Accessorial Charges from and against payments due to Producer by RPMG. |
(d) | Late Payments. Overdue amounts not disputed in good faith payable to either Party shall be subject to late payment fees equal to interest accrued on such amounts at the maximum rate permitted by applicable law. |
(e) | No Warranty as to Prices. RPMG shall market Producer’s corn oil using commercially reasonable efforts and the same standards it uses to market the corn oil production of third parties for whom RPMG provides corn oil marketing services. RPMG shall endeavor to (i) maximize the corn oil price and minimize freight and other costs relevant to corn oil sales and (ii) achieve the best available return to Producer, subject to relevant market conditions. Producer acknowledges that RPMG makes no representations, guarantees or warranties of any nature whatsoever as to the prices at which it SHALL be able to sell PRODUCER’S CORN OIL TO END CUSTOMERS. |
(f) | Waiver of Certain Claims. Producer acknowledges (i) that RPMG shall use its reasonable judgment in making decisions related to the quantity and price of corn oil marketed under this Agreement, in light of varying freight and other costs, and (ii) that RPMG may sell and market corn oil of third parties into the same markets where RPMG sells Producer’s corn oil. Producer waives any claim of conflict of interest against RPMG or for failure by RPMG to maximize the economic benefits of this Agreement for Producer in light of the foregoing. |
(g) | Audit Rights. Within ninety (90) days following the end of RPMG’s fiscal year end, Producer shall give written notice to RPMG of its desire to conduct an audit of its corn oil payments to Producer for the preceding year and RPMG shall provide reasonable access to all financial information necessary to complete such audit. The audit shall be conducted by an accounting firm agreeable to both Parties and shall be completed within forty-five (45) days after the completion of RPMG’s annual audit, but no later than one hundred and fifty (150) days following RPMG’s fiscal year end. The cost of the audit shall be the responsibility of Producer unless the auditor determines that RPMG underpaid Producer by more than three percent (3%) for the period audited, in which case RPMG shall pay the cost of the audit. If the auditor determines that RPMG underpaid Producer, RPMG shall promptly pay such underpayment to Producer and if the auditor determines that RPMG overpaid Producer, Producer shall promptly pay the overpayment to RPMG. The determination of the auditor shall be final and binding on both Parties. If Producer fails to exercise its right to audit as provided in this Section 2(g) for any year, it shall be deemed to have waived any rights to dispute payments made to Producer for that year. |
3. | Scheduled Production |
(a) | Notice of First Delivery. RPMG may begin to market Producer’s corn oil upon the Effective Date. If Producer is not producing corn oil as of the Effective Date, Producer shall, on the Effective Date, provide RPMG with the projected date on which Producer will first deliver corn oil produced at the Ethanol Facility to RPMG (the “Projected Date of First Delivery”). Producer shall notify RPMG as soon as possible of any revisions to the Projected Date of First Delivery. |
(b) | Notices of Scheduled Production. Beginning on the Effective Date, and on the 1st and 15th of each month thereafter, Producer shall provide to RPMG a rolling best estimate of production and inventory of corn oil product for that month and each of the following twelve (12) months. Beginning on the Effective Date and each Wednesday thereafter, Producer shall provide to RPMG a best estimate of production and inventory by corn oil product for that day and the next seven days. |
(c) | Additional Production Notices. Producer shall notify RPMG of anticipated production downtime or disruption in corn oil availability at least one (1) month in advance of such outage. Producer shall timely inform RPMG of daily inventories, plant shutdowns, daily production projections, and any other information (i) to facilitate RPMG’s performance of the Agreement or (ii) that may have a material adverse effect on RPMG’s ability to perform the Agreement. |
(d) | RPMG Entitled to Rely on Producer Estimates and Notices. RPMG, in marketing and selling Producer’s corn oil, is entitled to rely upon the production estimates and other notices provided by Producer, including without limitation those described in Sections 3(a), (b), and (c). Producer’s failure to provide accurate information to facilitate RPMG’s performance of the Agreement may negatively impact RPMG’s ability to market and sell corn oil at prevailing prices. Producer’s failure to provide accurate information to facilitate RPMG’s performance of the Agreement may be deemed by RPMG, in its sole but reasonable discretion, a material breach of the Agreement by Producer. |
(e) | Sale Commitments. From time to time during the term of this Agreement and in order to maximize the sales price of corn oil, RPMG may enter sales contracts or other agreements with End Customers for future delivery of corn oil. In the event Producer fails to produce corn oil in accordance with the information provided to RPMG under Sections 3(a), (b), or (c) above for reasons other than Force Majeure (as defined in Section 10 herein), and as a result RPMG is required to purchase corn oil from third parties to meet previous corn oil sale commitments that are based upon such information, RPMG may charge Producer the amount (if any) that the price of such replacement corn oil exceeded the price that RPMG would have paid to Producer for the applicable corn oil under this Agreement. |
4. | Logistics and Transportation |
(a) | No Liens, Title and Risk of Loss. Producer warrants that corn oil delivered to RPMG hereunder shall be free and clear of all liens and encumbrances of any nature whatsoever other than liens in favor of RPMG. Title to and risk of loss of each load of corn oil shall pass to RPMG at the time such load passes across the scale into rail cars or trucks at the Ethanol Facility (the “Title Transfer Point”). Until such time, Producer shall be deemed to be in control of and in possession of the corn oil. |
(b) | Loading. RPMG shall schedule the loading and shipping of all outbound corn oil purchased hereunder, but all labor and equipment necessary to load trucks and rail cars and other associated costs shall be supplied and borne by Producer without charge to RPMG. Producer shall handle the corn oil in a good and workmanlike manner in accordance with RPMG’s written requirements and normal industry practice. Producer shall maintain the truck and rail loading facilities in safe operating condition in accordance with normal industry standards and shall visually inspect all trucks and rail cars to assure (i) cleanliness so as to avoid contamination, and (ii) that such trucks and railcars are in a condition suitable for transporting the corn oil. RPMG and RPMG’s agents shall have adequate access to the Ethanol Facility |
(c) | Transportation and Certain Transportation Costs. RPMG shall perform certain logistics functions for Producer, including the arranging of rail and truck freight, inventory management, contract management, bills of lading, and scheduling pick-up appointments. RPMG shall determine the method of transporting corn oil to End Customers. Notwithstanding any provision to the contrary herein, Producer shall be solely responsible for any damage to any trucks, railcars, equipment, or vessels caused by acts or omissions of Producer and its consignees. All truck freight charges and rail tariff rate charges shall be billed directly to RPMG and, as set forth in Exhibit A, be recouped by RPMG from the proceeds of RPMG’s sales of corn oil to End Customers. Notwithstanding the foregoing, rail cars required to transport the corn oil will be leased directly by Producer. If requested in writing by Producer, RPMG will make lease payments for such rail cars on behalf of Producer, and in such event RPMG shall recoup lease payments from the proceeds of RPMG’s sales of corn oil to End Customers. |
(d) | Weight. The quantity of corn oil delivered to RPMG at the Ethanol Facility shall be established by weight certificates obtained from Producer’s scales or from such other scales as the Parties shall mutually agree, which are certified as of the time of weighing and which comply with all applicable laws, rules and regulations. Producer shall provide RPMG with a fax/emailed copy of the outbound weight certificates on a daily basis and, except as otherwise expressly agreed upon, such outbound weight certificates shall be determinative of the quantity of corn oil for which RPMG is obligated to pay Producer pursuant to this Agreement. |
(e) | Corn oil Storage at Ethanol Facility. The estimated storage capacity of the Ethanol Facility, is as follows: |
5. | Specifications; Quality. |
(a) | Corn oil Specifications. Producer covenants that it shall produce corn oil that, upon delivery to RPMG at the Ethanol Facility, meets the respective specifications (“Specifications”) set forth in Exhibit B and such other specifications that may be, from time-to-time, promulgated by the industry for corn oil. RPMG shall have the right to test each shipment of corn oil to ascertain that the Specifications are being met. If the corn oil provided by Producer to RPMG is shown, by independent testing or analysis of a representative sample or samples taken consistent with industry standards, to not meet the Specifications through no fault of RPMG or any third party engaged by RPMG, then RPMG may, in its sole discretion, (i) reject such corn oil and require Producer to promptly replace such non-conforming corn oil with corn oil |
(b) | Trade Rules. This Agreement shall be governed by the then-current Feed Trade Rules of the National Grain and Feed Association (the “Trade Rules”), unless otherwise specified. In the event the Trade Rules and the terms and conditions of this Agreement conflict, this Agreement shall control. |
(c) | Compliance With FDA and Other Standards. Producer warrants that, unless caused by the negligence or intentional misconduct of RPMG or a third party engaged by RPMG, corn oil provided by Producer to RPMG (i) shall not be “adulterated” or “misbranded” within the meaning of the Federal Food, Drug and Cosmetic Act (the “Act”), (ii) may lawfully be introduced into interstate commerce under the Act, and (iii) shall comply with all state and federal laws, rules and regulations (including without limitation the Trade Rules) including those governing quality, naming and labeling of bulk product. If Producer knows or reasonably suspects that any corn oil produced at the Ethanol Facility is adulterated or misbranded, or otherwise not in compliance with the terms of the Agreement, Producer shall immediately so notify RPMG in writing. |
(d) | Regulatory Seizure. Should any corn oil provided by Producer to RPMG hereunder be seized or condemned by any federal or state department or agency as a result of its failure to conform to any applicable law, rule or regulation prior to delivery to an End Customer, such seizure or condemnation shall operate as a rejection by RPMG of the goods seized or condemned and RPMG shall not be obligated to offer any defense in connection with such seizure or condemnation. When such rejection occurs, RPMG shall deliver written notice to Producer within a reasonable time of the rejection and identify the deficiency that resulted in such rejection. In addition to other obligations under this Agreement or at law, Producer shall reimburse RPMG for all out-of-pocket costs reasonably incurred by RPMG in storing, transporting, returning and disposing of the rejected goods in accordance with this Agreement. |
(e) | Sampling. Producer shall take one representative origin sample (pint size) from each lot of the corn oil before it leaves the Ethanol Facility (each, a “Sample”). RPMG shall be entitled to witness the taking of Sample. Producer shall label Sample to indicate the applicable corn oil lot numbers, date of shipment, and the truck or railcar number. Producer shall send half of Sample to RPMG promptly upon RPMG’s request. Producer may request that RPMG test results be provided to it at any time after the tests are completed. Producer shall retain corn oil Sample for no less than three (3) months or any longer period required by law. If RPMG knows or reasonably suspects that any corn oil produced by Producer at the Ethanol Facility is not in compliance with the terms of this Agreement, then RPMG may obtain independent laboratory tests of such corn oil, and, if such corn oil is found not to be in compliance with the terms of this Agreement, Producer shall, in addition to its other obligations hereunder, pay all such testing costs. |
6. | Term and Termination |
(a) | Term. This Agreement shall have an initial term of ***, commencing on the Effective Date. This Agreement shall be automatically extended for an additional *** term following the end |
(b) | Producer Termination Right. Producer may immediately terminate this Agreement upon written notice to RPMG if RPMG fails on three (3) separate occasions within any 12-month period to purchase corn oil or to market corn oil under circumstances where such breach or failure is not excused by this Agreement. |
(c) | RPMG Termination Right. RPMG may immediately terminate this Agreement upon written notice to Producer, if, for reasons other than a Force Majeure (as defined in Section 10 herein) event, during any consecutive three (3) months, Producer’s actual production or inventory of any corn oil product at the Ethanol Facility varies by twenty percent (20%) or more from the monthly production and inventory estimates provided by Producer to RPMG pursuant to Section 3(b) hereunder. |
(d) | Termination for Insolvency. Either Party may immediately terminate the Agreement upon written notice to the other Party if the other Party files a voluntary petition in bankruptcy, has filed against it an involuntary petition in bankruptcy, makes an assignment for the benefit of creditors, has a trustee or receiver appointed for any or all of its assets, is insolvent or fails or is generally unable to pay its debts when due, in each case where such petition, appointment or insolvency is not dismissed, discharged or remedied, as applicable, within sixty (60) days. |
7. | Indemnification; Limitation on Liability |
(a) | Producer’s Indemnification Obligation. Producer shall indemnify, defend and hold harmless RPMG and its shareholders, directors, officers, employees, agents and representatives, from and against any and all Damage (as defined in Section 7(c) herein) to the extent arising out of (i) any fraud, negligence or willful misconduct of Producer or any of its directors/governors, officers, employees, agents, representatives or contractors or (ii) any breach of this Agreement by Producer. RPMG shall promptly notify Producer of any suit, proceeding, action or claim for which Producer may have liability pursuant to this Section 7(a). |
(b) | RPMG’s Indemnification Obligation. RPMG shall indemnify, defend and hold harmless Producer and its shareholders/members, directors/governors, officers, employees, agents and representatives from and against any and all Damages to the extent arising out of (i) any fraud, negligence or willful misconduct of RPMG or any of its directors, officers, employees, agents, representatives or contractors or (ii) any breach of this Agreement by RPMG. Producer shall promptly notify RPMG of any suit, proceeding, action or claim for which Producer may have liability pursuant to this Section 7(b). |
(c) | Definition of Damages. As used in this Agreement, the capitalized term “Damages” means any and all losses, costs, damages, expenses, obligations, injuries, liabilities, insurance deductibles and excesses, claims, proceedings, actions, causes of action, demands, deficiencies, lawsuits, judgments or awards, fines, penalties and interest, including reasonable attorneys’ fees, but excluding any indirect, incidental, special, exemplary, consequential or punitive damages. |
(d) | Limitation on Liability. NEITHER PARTY MAKES ANY GUARANTEE, WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROFIT, |
8. | Insurance. During the term of this Agreement, each party shall maintain insurance coverage that is standard for a company of its type and size that is engaged in the production and/or selling of corn oil. At a minimum, each party’s insurance coverage shall include: (i) comprehensive general product and public liability insurance, with liability limits of at least $5 million in the aggregate; (ii) property and casualty insurance adequately insuring its facilities and its other assets against theft, damage and destruction on a replacement cost basis; and (iii) workers’ compensation insurance to the extent required by law. RPMG, or Producer, as the case may be, shall be added as a loss payee under the comprehensive general product and public liability insurance policy and the property and casualty insurance policy. In relation to insurance requirements on the corn oil leased railcars, (a) the Producer will be responsible for the liability insurance on the corn oil leased railcars in the form and amount as required by the railcar lessor’s contract, or at a minimum in the amounts required by this Article 8 and (b) RPMG will carry property/physical damage insurance for the corn oil railcars for loss or destruction, but will not be responsible for the insurance deductible, maintenances (scheduled or otherwise), including normal wear and tear related to such corn oil railcars. The Producer will be listed as a Loss Payee on RPMG’s Rolling Stock Policy in relation to the corn oil leased railcars. A party shall not change its insurance coverage during the term of this Agreement, except to increase it or enhance it, without the prior written consent of the other Party which consent shall not be unreasonably withheld. |
9. | Confidentiality |
(a) | Confidential Information. As used in this Agreement, the capitalized term “Confidential Information” means (i) the terms and conditions of this Agreement and (ii) any information disclosed by one Party to the other, including, without limitation, trade secrets, strategies, marketing and/or development plans, End Customer lists and other End Customer information, prospective End Customer lists and other prospective End Customer information, vendor lists and other vendor information, pricing information, financial information, production or inventory information, and/or other information with respect to the operation of its business and assets, in whatever form or medium provided. |
(b) | Nondisclosure. Each Party shall maintain all Confidential Information of the other in trust and confidence and shall not without the prior written consent of the other Party: |
(i) | disclose, disseminate or publish Confidential Information to any person or entity without the prior written consent of the disclosing Party, except to employees of the receiving Party who have a need to know, who have been informed of the receiving Party’s obligations hereunder, and who have agreed not to disclose Confidential Information or to use Confidential Information except as permitted herein, or |
(ii) | use Confidential Information for any purpose other than the performance of its obligations under the Agreement. |
(c) | Standard of Care. The receiving Party shall protect the Confidential Information of the disclosing Party from inadvertent disclosure with the same level of care (but in no event less than reasonable care) with which the receiving Party protects its own Confidential Information from inadvertent disclosure. |
(d) | Exceptions. The receiving Party shall have no obligation under this Agreement to maintain in confidence any information which it can prove: |
(i) | is in the public domain at the time of disclosure or subsequently becomes part of the public domain through no act or failure to act on the part of the receiving Party or persons or entities to whom the receiving Party has disclosed such information; |
(ii) | is in the possession of the receiving Party prior to the time of disclosure by the disclosing Party and is not subject to any duty of confidentiality; |
(iii) | the receiving Party obtains from any third party not under any obligation to keep such information confidential; or |
(iv) | the receiving Party is compelled to disclose or deliver in response to a law, regulation, or governmental or court order (to the least extent necessary to comply with such order), provided that the receiving Party notifies the disclosing Party promptly after receiving such order to give the disclosing Party sufficient time to contest such order and/or to seek a protective order. |
(e) | Ownership of Confidential Information. All Confidential Information shall remain the exclusive property of the disclosing Party. |
(f) | Injunctive Relief for Breach. The receiving Party acknowledges that monetary damages are an inadequate remedy at law for unauthorized disclosure or use of Confidential Information, and that the disclosing Party may be entitled, in addition to all other rights or remedies in law and equity, to obtain injunctive or other equitable relief, without the necessity of posting bond in connection therewith. Any action to seek injunctive or other equitable relief shall not be subject to the Dispute Resolution provision in Section 11 herein to the extent that such relief cannot be obtained through NGFA arbitration. |
10. | Force Majeure. In the event either Party is unable by Force Majeure (as defined below) to carry out its obligations under this Agreement, it is agreed that on such Party’s giving notice in writing, or by telephone and confirmed in writing, to the other Party as soon as possible after the commencement of such Force Majeure event, the obligations of the Party giving such notice, so far as and to the extent they are affected by such Force Majeure, shall be suspended from the commencement of such Force Majeure and during the remaining period of such Force Majeure, but for no longer period, and such Force Majeure shall so far as possible be remedied with all reasonable dispatch; provided, however, the obligation to make payments then accrued hereunder prior to the occurrence of such Force Majeure shall not be suspended and Producer shall remain obligated for any loss or expense to the extent otherwise provided in this Agreement. The capitalized term “Force Majeure” as used in this Agreement shall mean events beyond the reasonable control and without the fault of the Party claiming Force Majeure, including acts of God, war, riots, insurrections, laws, proclamations, regulations, strikes of a regional or national nature, acts of terrorism, sabotage, and acts of any government body. |
11. | Dispute Resolution. In the event a dispute arises under this Agreement that cannot be resolved by those with direct responsibility for the matter in dispute, such dispute shall be resolved by way of the following process: |
(a) | Senior management from Producer and from RPMG shall meet to discuss the basis for the dispute and shall use their best efforts to reach a reasonable resolution to the dispute. |
(b) | If negotiations pursuant to Section 11(a) are unsuccessful, the matter shall promptly be submitted by either Party to arbitration in accordance with NGFA® ARBITRATION OF DISPUTES: The parties to this contract agree that the sole remedy for resolution of any and all disagreements or disputes arising under or related to this contract shall be through arbitration proceedings before the National Grain and Feed Association (NGFA) pursuant to the NGFA® Arbitration Rules. The decision and award determined through such arbitration shall be final and binding upon the Buyer and Seller. Judgment upon the arbitration award may be entered and enforced in any court having jurisdiction thereof. (Copies of the NGFA® Arbitration Rules are available from the National Grain and Feed Association, 1250 Eye Street, N.W., Suite 1003, Washington, D.C. 20005; Telephone: 202-289-0873; Website: http://www.ngfa.org). If the Parties reach agreement pertaining to any dispute pursuant to the procedures set forth in this Section 11, such agreement shall be reduced to writing, signed by authorized representatives of each Party, and shall be final and binding upon the Parties. |
(a) | Successors and Assigns; Assignment. All of the terms, covenants, and conditions of this Agreement shall be binding upon, and inure to the benefit of and be enforceable by the Parties and their respective successors, heirs, executors and permitted assigns. No Party may assign its rights, duties or obligations under this Agreement to any other person or entity without the prior written consent of the other Party, such consent not to be unreasonably withheld or delayed; notwithstanding the foregoing, a Party may, without the consent of the other Party, assign its rights and obligations under this Agreement to (i) its parent, a subsidiary, or affiliate under common control with the Party or (ii) a third party acquiring all or substantially all of the assets or business of such Party. |
(b) | Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be considered delivered in all respects when delivered by hand, mailed by first class mail postage prepaid, or sent by facsimile with delivery confirmed, addressed as follows: |
To RPMG: | RPMG, Inc. |
To Producer: | Highwater Ethanol, LLC |
(c) | Applicable Law. This Agreement shall be governed in all respects by the laws of the State of Minnesota, except with respect to its choice of law provisions. |
(d) | Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, either in whole or in part, this Agreement shall continue in full force and effect without said provision. |
(e) | No Third Party Beneficiaries. No provision of this Agreement is intended, or shall be construed, to be for the benefit of any third party. |
(f) | Entire Agreement; Amendment. This Agreement constitutes the entire understanding and agreement between the Parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous understandings and/or agreements, written or oral, regarding the subject matter of this Agreement. No amendment or modification to this Agreement shall be binding unless in writing and signed by a duly authorized officer of both Parties. |
(g) | Counterparts. This Agreement may be executed in counterparts, including facsimile counterparts, each of which shall be deemed an original but together shall constitute but one and the same instrument. |
(h) | Waiver. The failure of either Party at any time to require performance of any provision of the Agreement or to exercise any right provided for in the Agreement shall not be deemed a waiver of such provision or right unless made in writing and executed by the Party waiving such performance or right. No waiver by either Party of any breach of any provision of the Agreement or of any right provided for in the Agreement shall be construed as a waiver of any continuing or succeeding breach of such provision or right or a waiver of the provision or right itself. |
(i) | Independent Contractors. The Parties to this Agreement are independent contractors. There is no relationship of partnership, joint venture, employment, franchise, or agency between the Parties, and no Party shall make any representation to the contrary. |
(j) | Additional Rules of Interpretation. |
(i) | The words “include,” “includes” and “including” as used in this Agreement shall be deemed to be followed by the phrase “without limitation” and shall not be construed to mean that the examples given are an exclusive list of the topics covered. |
(ii) | The headings as to contents of particular sections of this Agreement are inserted for convenience and shall not be construed as part of the Agreement or as a limitation on the scope of any terms or provisions of this Agreement. |
(k) | Survival. The following provisions of this Agreement shall survive its termination: (i) to the extent of outstanding payment obligations, Sections 2(a), 2(b), 2(c), and 2(d) and (ii) Sections 2(e), 2(f), 7, 9, 11, and 12. |
Component | Maximum % | Minimum % |
Moisture; wt% | *** | |
MIU | *** | |
FFA; wt% | *** | |
Unsaponifiable Matter | *** | |
Insoluable Matter | *** | |
Total Fatty Acids | *** | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | September 10, 2018 | /s/ Brian Kletscher | |
Brian Kletscher, Chief Executive Officer (Principal Executive Officer) |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | September 10, 2018 | /s/ Lucas Schneider | |
Lucas Schneider, Chief Financial Officer (Principal Financial and Accounting Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Brian Kletscher | ||
Brian Kletscher, Chief Executive Officer | ||
Dated: | 9/10/2018 |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Lucas Schneider | ||
Lucas Schneider, Chief Financial Officer | ||
Dated: | 9/10/2018 |
Document and Entity Information Document - shares |
9 Months Ended | |
---|---|---|
Jul. 31, 2018 |
Sep. 10, 2018 |
|
Entity Information [Line Items] | ||
Entity Registrant Name | HIGHWATER ETHANOL LLC | |
Entity Central Index Key | 0001371451 | |
Current Fiscal Year End Date | --10-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jul. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 4,814 |
Condensed Balance Sheets Parenthetical - shares |
Jul. 31, 2018 |
Oct. 31, 2017 |
---|---|---|
Members' equity, units outstanding | 4,813.5 | 4,813.5 |
Condensed Statements of Operations - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2018 |
Jul. 31, 2017 |
Jul. 31, 2018 |
Jul. 31, 2017 |
|
Revenues | $ 25,888,608 | $ 25,368,884 | $ 73,131,232 | $ 76,146,120 |
Cost of Goods Sold | 27,415,993 | 24,173,347 | 72,426,988 | 70,167,316 |
Gross Profit (Loss) | (1,527,385) | 1,195,537 | 704,244 | 5,978,804 |
Operating Expenses | 658,967 | 599,291 | 2,192,660 | 2,077,353 |
Operating Profit (Loss) | (2,186,352) | 596,246 | (1,488,416) | 3,901,451 |
Other Income (Expense) | ||||
Interest income | 1,665 | 218 | 2,360 | 994 |
Other income | 548 | 4,025 | 26,457 | 7,575 |
Interest expense | (167,413) | (131,568) | (523,841) | (498,369) |
Income from equity method investments | 20,647 | 34,555 | 34,822 | 73,717 |
Total other income (expense), net | (144,553) | (92,770) | (460,202) | (416,083) |
Net Income (Loss) | $ (2,330,905) | $ 503,476 | $ (1,948,618) | $ 3,485,368 |
Weighted Average Units Oustanding | 4,814 | 4,814 | 4,814 | 4,840 |
Net Income (Loss) Per Unit, Basic and Diluted | $ (484.19) | $ 104.59 | $ (404.78) | $ 720.12 |
Distributions Per Unit | $ 0 | $ 0 | $ 345 | $ 345 |
Condensed Statements of Cash Flows Parenthetical - shares |
9 Months Ended | |
---|---|---|
Jul. 31, 2018 |
Jul. 31, 2017 |
|
Statement of Cash Flows [Abstract] | ||
Member units repurchase | 78.5 | 78.5 |
Summary of Significant Accounting Policies |
9 Months Ended |
---|---|
Jul. 31, 2018 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. The accompanying balance sheet and related notes as of October 31, 2017 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, 2017, 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, 2018 and the results of operations and cash flows for all periods presented. Nature of Business Highwater Ethanol, LLC, (a Minnesota Limited Liability Company) operates a 50 million gallon per year ethanol plant in Lamberton, Minnesota. The Company produces and sells, primarily through third-party professional marketers, fuel ethanol and co-products of the fuel ethanol production process in the continental United States, Mexico and Canada. Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for significant matters, among others, the carrying value of property and equipment and related impairment testing, inventory valuation, and derivative instruments. Actual results could differ from those estimates and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions and the effects of revisions are reflected in the period in which the revision is made. Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. Revenues are recognized when the customer has taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. For ethanol sales, title transfers when loaded into the rail car and for distiller’s grains when the loaded rail cars leave the plant facility. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and freight due to the marketers are deducted from the gross sales price at the time incurred. Revenue is recorded net of these marketing fees and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Derivative Instruments Derivatives are recognized in the balance sheet and the measurement of these instruments is at fair value. Margin amounts required by the broker are classified as deposits with broker within derivative instruments and any excess is classified as cash equivalents in the balance sheets. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recognized currently in earnings. Contracts are evaluated to determine whether the contracts are derivatives. Certain contracts that meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting as derivatives, therefore, are not marked to market in our financial statements. The Company enters into corn and ethanol commodity-based and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in prices. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in fair market value of ethanol derivatives are included in revenues. Changes in fair market value of corn and natural gas derivatives are included in costs of goods sold. Fair Value of Financial Instruments The carrying value of accounts receivable, accounts payable, and other working capital items approximate fair value at July 31, 2018 due to the short maturity nature of these instruments. The Company believes the carrying value of the derivative instruments approximates fair value based on quoted market prices or widely accepted valuation techniques including discounted cash flow analysis which includes observable market-based inputs. The Company believes the carrying amount of the long-term debt approximates the fair value due to a significant portion of total indebtedness containing variable interest rates and that rate is a market interest rate for these borrowings. Equity Method Investments The Company has a 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 from equity method investments based on the most recent reliable data. Therefore, the net income which is reported in the Company's statement of operations for the period ended July 31, 2018 is based on the investee’s results of operations for the period ended June 30, 2018. Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, which is the Company’s first quarter of fiscal year 2019. Early application is permitted one year earlier. The new standard allows for the amendment to be applied either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures, including which transition method it will adopt. The Company has completed its initial evaluation and believes that there will be no material affect to the financial statements. The Company will complete its final evaluation by October 31, 2018. In January 2016, the FASB issued ASU No. 2016-01 (ASU2016-01), Financial Instruments-Overall (Subtopic 825-10), which is intended to make financial statement information on recognition, measurement, presentation, and disclosure of financial instrument more useful. ASU 2016-01 is effective for fiscal periods beginning after December 15, 2017. The Company is currently in the process of evaluating the impact that this new guidance will have on the financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than twelve months on its balance sheet. This ASU is effective in annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is currently in the process of evaluating the impact that this new guidance will have on the financial statements. In August 2016, the FASB issued ASU No. 2016-15 (ASU 2016-15), Statement of Cash Flows (Topic 230), which clarifies and provides guidance for specific cash flow issues. ASU 2016-15 is effective for fiscal periods beginning after December 15, 2017. The Company implemented ASU 2016-15 effective November 1, 2017. The effect was reclassifying Distributions from Equity Method Investments from Cash Flows from Investing Activities to Cash Flows from Operating Activities. |
Uncertainties |
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Jul. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
Uncertainties | UNCERTAINTIES The Company derives substantially all of its revenues from the sale of ethanol and distillers grains. These products are commodities and the market prices for these products display substantial volatility and are subject to a number of factors which are beyond the control of the Company. The Company’s most significant manufacturing inputs are corn and natural gas. The price of these commodities is also subject to substantial volatility and uncontrollable market factors. In addition, these input costs do not necessarily fluctuate with the market prices for ethanol and distillers grains. As a result, the Company is subject to significant risk that its operating margins can be reduced or eliminated due to the relative movements in the market prices of its products and major manufacturing inputs. As a result, market fluctuations in the price of or demand for these commodities can have a significant adverse effect on the Company’s operations, profitability, and availability of cash flows to make loan payments and maintain compliance with the loan agreement. |
Inventories |
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Inventories | INVENTORIES Inventories consisted of the following at:
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Derivative Instruments |
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Derivative Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | DERIVATIVE INSTRUMENTS As of July 31, 2018, the Company had entered into corn, ethanol and natural gas 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, 2018 are not designated as effective hedges for accounting purposes. Commodity Contracts As of July 31, 2018, the Company has open futures and option positions for 2,100,000 bushels of corn. Management expects all open positions outstanding as of July 31, 2018 to be realized within the next twelve months. The following tables provide details regarding the Company's derivative instruments at July 31, 2018 and October 31, 2017:
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:
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Fair Value Measurements |
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Fair Value Measurements | FAIR VALUE MEASUREMENTS The following table provides information on those assets (liabilities) measured at fair value on a recurring basis.
The Company determines the fair values of commodities by obtaining the fair value measurements from an independent pricing service based on dealer quotes and live trading levels from the Chicago Board of Trade. |
Debt Financing |
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Debt Financing [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Financing | DEBT FINANCING Long-term debt consists of the following at:
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 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. Term Loan The Term Loan is for $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, 2018 was 5.30%. 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 $7,250,000 at July 31, 2018. 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 was previously for $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, 2018 was 5.30%. Effective April 20, 2018, the availability under the Term Revolving Loan was increased to $20,000,000. 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 $1,000,000 at July 31, 2018. The Company also has $500,000 in letters of credit outstanding at July 31, 2018 which reduce the amount available under the Term Revolving Loan. The Company pays interest at a rate of 1.50% on amounts outstanding for the letters of credit. The Company is also required to pay unused commitment fees for the Term Revolving Loan as defined in the Second Amended and Restated Credit Agreement. Debt Issuance Costs Costs associated with the issuance of debt are recorded as debt issuance costs and are amortized over the term of the related debt by use of the effective interest method. 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 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. The estimated maturities of the long-term debt at July 31, 2018 are as follows:
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Commitments and Contingencies |
9 Months Ended |
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Jul. 31, 2018 | |
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 all the 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 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 currently has a crude corn oil marketing agreement with a marketer to market all corn oil to be produced at the plant. Under the agreement, the marketer will execute contracts with buyers after giving prior notice of the terms and conditions thereof to the Company and receiving direction from the Company to accept such contracts. The Company receives the actual price received from buyers less a marketing fee, actual freight and transportation costs and certain taxes related to the purchase, delivery or sale. The Company is required to provide corn oil meeting certain specifications as provided in the agreement and the agreement provides for a process for rejection of nonconforming corn oil. The agreement automatically renews for successive one-year terms unless terminated in accordance with the agreement. The Company terminated our marketing agreement with our current marketer such termination to become effective November 14, 2018, or on a mutually agreed upon earlier date. The Company entered into a new corn oil marketing agreement with a marketer (RPMG) which will become 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. Regulatory Agencies The Company is subject to oversight from regulatory agencies regarding environmental concerns which arise in the ordinary course of its business. Forward Contracts At July 31, 2018, the Company had purchase commitments of approximately 337,000 bushels of forward fixed basis corn contracts and 2,197,000 bushels of forward fixed price corn contracts totaling approximately $7,644,000. These purchase contracts are for various delivery periods through October 2019. At July 31, 2018, the Company had approximately 2,493,000 MMBTUs of forward fixed price natural gas purchase contracts totaling approximately $6,268,000 for various delivery periods through September 2020. In addition, at July 31, 2018, the Company had approximately 110,000 gallons of forward fixed price denaturant purchase contracts totaling approximately $163,000 for various delivery periods through September 2018. At July 31, 2018, the Company had approximately 4,360 tons of forward fixed price dried distillers grains sales contracts totaling approximately $603,000 for various delivery periods through December 2018. In addition, at July 31, 2018, the Company had approximately 2,000 tons of forward fixed price modified distillers grains sales contracts totaling approximately $121,000 for delivery periods through December 2018. In addition, at July 31, 2018, the Company had approximately 245,000 pounds of forward fixed price corn oil sales contracts totaling approximately $57,000 for delivery periods through August 2018. |
Accounting Policies |
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Jul. 31, 2018 | |
Summary of Significant Accounting Policies [Abstract] | |
Accounting Estimates | Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for significant matters, among others, the carrying value of property and equipment and related impairment testing, inventory valuation, and derivative instruments. Actual results could differ from those estimates and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions and the effects of revisions are reflected in the period in which the revision is made. |
Revenue Recognition | Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. Revenues are recognized when the customer has taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. For ethanol sales, title transfers when loaded into the rail car and for distiller’s grains when the loaded rail cars leave the plant facility. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and freight due to the marketers are deducted from the gross sales price at the time incurred. Revenue is recorded net of these marketing fees and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. |
Derivative Instruments | Derivative Instruments Derivatives are recognized in the balance sheet and the measurement of these instruments is at fair value. Margin amounts required by the broker are classified as deposits with broker within derivative instruments and any excess is classified as cash equivalents in the balance sheets. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recognized currently in earnings. Contracts are evaluated to determine whether the contracts are derivatives. Certain contracts that meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting as derivatives, therefore, are not marked to market in our financial statements. The Company enters into corn and ethanol commodity-based and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in prices. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in fair market value of ethanol derivatives are included in revenues. Changes in fair market value of corn and natural gas derivatives are included in costs of goods sold. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value of accounts receivable, accounts payable, and other working capital items approximate fair value at July 31, 2018 due to the short maturity nature of these instruments. The Company believes the carrying value of the derivative instruments approximates fair value based on quoted market prices or widely accepted valuation techniques including discounted cash flow analysis which includes observable market-based inputs. The Company believes the carrying amount of the long-term debt approximates the fair value due to a significant portion of total indebtedness containing variable interest rates and that rate is a market interest rate for these borrowings. |
Investments | Equity Method Investments The Company has a 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 from equity method investments based on the most recent reliable data. Therefore, the net income which is reported in the Company's statement of operations for the period ended July 31, 2018 is based on the investee’s results of operations for the period ended June 30, 2018. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, which is the Company’s first quarter of fiscal year 2019. Early application is permitted one year earlier. The new standard allows for the amendment to be applied either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures, including which transition method it will adopt. The Company has completed its initial evaluation and believes that there will be no material affect to the financial statements. The Company will complete its final evaluation by October 31, 2018. In January 2016, the FASB issued ASU No. 2016-01 (ASU2016-01), Financial Instruments-Overall (Subtopic 825-10), which is intended to make financial statement information on recognition, measurement, presentation, and disclosure of financial instrument more useful. ASU 2016-01 is effective for fiscal periods beginning after December 15, 2017. The Company is currently in the process of evaluating the impact that this new guidance will have on the financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than twelve months on its balance sheet. This ASU is effective in annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is currently in the process of evaluating the impact that this new guidance will have on the financial statements. In August 2016, the FASB issued ASU No. 2016-15 (ASU 2016-15), Statement of Cash Flows (Topic 230), which clarifies and provides guidance for specific cash flow issues. ASU 2016-15 is effective for fiscal periods beginning after December 15, 2017. The Company implemented ASU 2016-15 effective November 1, 2017. The effect was reclassifying Distributions from Equity Method Investments from Cash Flows from Investing Activities to Cash Flows from Operating Activities. |
Inventories (Tables) |
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Schedule of Inventory |
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Derivative Instruments (Tables) |
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Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position | The following tables provide details regarding the Company's derivative instruments at July 31, 2018 and October 31, 2017:
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Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position | 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:
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Fair Value Measurements (Tables) |
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table provides information on those assets (liabilities) measured at fair value on a recurring basis.
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Debt Financing (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Financing [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt | Long-term debt consists of the following at:
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Schedule of Maturities of Long-term Debt | The estimated maturities of the long-term debt at July 31, 2018 are as follows:
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Summary of Significant Accounting Policies (Details) gal in Millions |
9 Months Ended |
---|---|
Jul. 31, 2018
gal
| |
Ethanol [Member] | |
Product Information [Line Items] | |
Annual Production Capacity | 50 |
Summary of Significant Accounting Policies Investment (Details) |
Jul. 31, 2018 |
---|---|
Renewable Fuels Marketing Group (RPMG) [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 6.00% |
Lawrenceville Tank, LLC [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investment, Ownership Percentage | 7.00% |
Inventories (Details) - USD ($) |
Jul. 31, 2018 |
Oct. 31, 2017 |
---|---|---|
Inventories [Abstract] | ||
Raw Materials | $ 1,499,009 | $ 2,130,668 |
Spare parts and supplies | 3,236,321 | 2,938,262 |
Work in process | 666,883 | 729,167 |
Finished goods | 1,743,270 | 1,582,609 |
Total | $ 7,145,483 | $ 7,380,706 |
Derivative Instruments Balance Sheet (Details) |
9 Months Ended | |
---|---|---|
Jul. 31, 2018
USD ($)
bu
|
Oct. 31, 2017
USD ($)
|
|
Derivatives, Fair Value [Line Items] | ||
Deposits with broker | $ 3,116,986 | $ 2,401,804 |
Derivative instruments | 719,992 | 800,199 |
Commodity [Member] | ||
Derivatives, Fair Value [Line Items] | ||
In gain position | 76,689 | 66,438 |
In loss position | $ (2,473,683) | $ (1,668,043) |
Corn [Member] | Commodity Contract [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, nonmonetary notional amount, mass | bu | 2,100,000 |
Derivative Instruments Income Statement (Details) - Not Designated as Hedging Instrument [Member] - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2018 |
Jul. 31, 2017 |
Jul. 31, 2018 |
Jul. 31, 2017 |
|
Ethanol [Member] | Sales [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative instruments, gain (loss) recognized in income, net | $ 50,668 | $ 117,268 | $ 14,480 | $ 539,478 |
Corn [Member] | Cost of Sales [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative instruments, gain (loss) recognized in income, net | (1,369,076) | 595,680 | 289,267 | 1,446,496 |
Natural Gas [Member] | Cost of Sales [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative instruments, gain (loss) recognized in income, net | $ 0 | $ (1,844) | $ 35,332 | $ 9,903 |
Commitments and Contingencies Marketing Agreements (Details) |
9 Months Ended |
---|---|
Jul. 31, 2018
USD ($)
failure
| |
Related Party Transaction [Line Items] | |
Related party contract termination notice | 120 days |
Affiliated Entity [Member] | |
Related Party Transaction [Line Items] | |
Related party transaction, fees, percentage of total | 2.00% |
Number of corn oil purchase failures | failure | 3 |
Affiliated Entity [Member] | Maximum [Member] | |
Related Party Transaction [Line Items] | |
Related party transaction, marketing expense, per unit | $ 2.00 |
Percentage of variation | 20.00% |
Affiliated Entity [Member] | Minimum [Member] | |
Related Party Transaction [Line Items] | |
Related party transaction, marketing expense, per unit | $ 1.50 |
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