10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2018

Commission file number:  000-53957

Golden Growers Cooperative

(Exact name of registrant as specified in its charter)

Minnesota	27-1312571
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1002 Main Avenue West, Suite 5

West Fargo, ND 58078

(Address of principal executive offices)

Telephone Number 701-281-0468

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

YES  ☒ NO  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  

YES  ☒ NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒	(Do not check if a small reporting company)	Smaller reporting company ☐
Emerging growth company ☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act).

YES  ☐ NO  ☒

As of August 13, 2018 the Cooperative had 15,490,480 Units issued and outstanding.

GOLDEN GROWERS COOPERATIVE

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations	6
Item 3. Quantitative and Qualitative Disclosures About Market Risk	9
Item 4. Controls and Procedures	10
PART II. OTHER INFORMATION	10
Item 1. Legal Proceedings	10
Item 1A. Risk Factors	10
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3. Defaults Upon Senior Securities	10
Item 4. Mine Safety Disclosures	10
Item 5. Other Information	10
Item 6. Exhibits	10
SIGNATURES	11

                  PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

GOLDEN GROWERS COOPERATIVE

CONDENSED BALANCE SHEETS

(In Thousands)

	June 30, 2018		December 31, 2017
	(Unaudited)		(Audited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	5,469	$	6,261
Short-Term Investments		219		220
Prepaid Expenses		18		218
Total Current Assets		5,706		6,699
Investment in ProGold Limited Liability Company		19,204		19,773
Total Assets	$	24,910	$	26,472
LIABILITIES AND MEMBERS’ EQUITY
Current Liabilities
Accounts Payable	$	—	$	6
Accrued Liabilities		—		220
Total Current Liabilities		—		226
Members' Equity:
Members’ Equity		24,910		26,246
Membership Units, Authorized 60,000,000 Units, Issued and Outstanding 15,490,480 as of June 30, 2018 and December 31, 2017
Total Members’ Equity		24,910		26,246
Total Liabilities and Members’ Equity	$	24,910	$	26,472

See Notes to Condensed Financial Statements

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GOLDEN GROWERS COOPERATIVE

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In Thousands, Other Than Share and Per-Share Data)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
OPERATIONS
Corn Revenue	$	13,379	$	11,374	$	27,719	$	28,741
Corn Expense		(13,394)		(11,395)		(27,749)		(28,785)
Net Income from ProGold Limited Liability Company		1,912		2,538		3,612		4,893
General & Administrative Expenses		(118)		(132)		(291)		(338)
Net Income from Operations		1,779		2,385		3,291		4,511
Interest Income		19		4		36		6
Net Income Before Income Tax	$	1,798	$	2,389	$	3,327	$	4,517
Net Income	$	1,798	$	2,389	$	3,327	$	4,517
Weighted Average Shares/Units Outstanding		15,490,480		15,490,480		15,490,480		15,490,480
Earnings per Share/Membership Unit
Primary and Fully Diluted	$	0.12	$	0.15	$	0.21	$	0.29

	Three Months Ended				Six Months Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
COMPREHENSIVE INCOME
Net Income	$	1,798	$	2,389	$	3,327	$	4,517
Comprehensive Income	$	1,798	$	2,389	$	3,327	$	4,517

See Notes to Condensed Financial Statements

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GOLDEN GROWERS COOPERATIVE

CONDENSED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	Six Months Ended
	June 30, 2018		June 30, 2017
Cash Flows from Operating Activities
Net Income	$	3,327	$	4,517
Net (Income) from ProGold Limited Liability Company		(3,612)		(4,893)
Depreciation		—		1
Changes in assets and liabilities
Prepaid Expenses		200		342
Accrued liabilities and payables		(226)		(221)
Net cash used in operating activities		(311)		(254)
Cash Flows from Investing Activities
(Purchase) Sale of investments		—		(1)
Distribution received from ProGold LLC		4,182		5,176
Net cash Provided in Investing Activities		4,182		5,175
Cash Flows from Financing Activities
Member distributions paid		(4,663)		(4,384)
Net Cash Used by Financing Activities		(4,663)		(4,384)
Increase (Decrease) in Cash and Cash Equivalents		(792)		537
Cash and Cash Equivalents, Beginning of Period		6,261		2,792
Cash and Cash Equivalents, End of Period	$	5,469	$	3,329

See Notes to Condensed Financial Statements

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GOLDEN GROWERS COOPERATIVE

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017

NOTE 1 – BASIS OF PRESENTATION

The condensed financial statements of Golden Growers Cooperative (the “Cooperative”) for the three and six-month periods ended June 30, 2018 and 2017 are unaudited and reflect all adjustments consisting of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim period. The condensed financial statements should be read in conjunction with the financial statements and notes thereto, contained in the Cooperative’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. The results of operations for the three and six-month periods ended June 30, 2018 are not necessarily indicative of the results for the entire fiscal year ending December 31, 2018.

NOTE 2 – EXPENSES

The Cooperative contracts with Cargill, Incorporated (“Cargill”) in connection with the procurement of corn and other agency services for an annual fee of $60,000, which is paid by the Cooperative to Cargill in quarterly installments.  The agreements between Cargill and the Cooperative terminate concurrently with Cargill’s Second Amended and Restated Facility Lease with ProGold Limited Liability Company (“ProGold LLC”), which terminates on December 31, 2022, but may be extended through 2023 under certain conditions.

NOTE 3 – PROGOLD LIMITED LIABILITY COMPANY

The Cooperative has a 49% ownership interest in ProGold LLC.  Following is summary financial information for ProGold LLC, which were derived from the monthly unaudited financial statements of ProGold LLC:

	June 30,				December 31,
(In Thousands)	2018		2017		2017
Current Assets	$	583	$	551	$	514
Long-Term Assets		39,192		40,875		39,843
Total Assets	$	39,775	$	41,426	$	40,357
Current Liabilities	$	1	$	201	$	5
Long-Term Liabilities		583		—		—
Total Liabilities		584		201		5
Members’ Equity		39,191		41,225		40,352
Total Liabilities and Members’ Equity	$	39,775	$	41,426	$	40,357
Rent Revenue on Operating Lease	$	8,787	$	11,520	$	22,873
Expenses		1,417		1,534		2,905
Net Income	$	7,370	$	9,986	$	19,968

NOTE 4 – INVESTMENT SECURITIES

The Cooperative’s investment securities consist of certificates of deposit. The certificates of deposit are carried at cost which approximates fair value as of June 30, 2018 and 2017.

NOTE 5 – EMPLOYEE BENEFIT PLANS

Pension Plan –In December 2012, the Cooperative approved a change to freeze the Cooperative’s defined benefit plan. As a result, no additional benefits will accrue to participants in the plan and no new employees are eligible for the plan.

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The following schedules provide the components of Net Periodic Benefit Cost for the six months ended June 30, 2018 and June 30, 2017 (in thousands):  

	June 30,		June 30,
	2018		2017
Interest Cost	$	17	$	35
Expected Return on Plan Assets		(26)		(49)
Amortization of Net (Gain) Loss		—		—
Net Periodic Pension Cost	$	(9)	$	(14)

Through the six months ended June 30, 2018, the Cooperative has made $4,000 in contributions as compared to $0 through the six months ended June 30, 2017.  The Cooperative anticipates making a total of $4,000 in contributions in 2018. Contributions in 2017 totaled $6,000.

NOTE 6 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Leases - In February 2016, the Financial Accounting Standards Board (“FASB”) issued a standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use assets and lease liabilities on the balance sheet. The standard will be effective for the Cooperative beginning January 1, 2019. The Cooperative anticipates that the standard will not have a significant impact on its financial statements.

NOTE 7 – CHANGE IN ACCOUNTING STANDARDS

Revenue Recognition - On January 1, 2018, the Cooperative adopted ASU 2014-09, Revenues from Contracts with Customers. The core principle of the revenue guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Cooperative determined that the timing, pattern and amount of revenue recognized under the new standard is substantially the same as previously recognized by the Cooperative.

Annually, the Cooperative is required to deliver approximately 15,490,480 bushels of corn to Cargill for processing at the ProGold LLC wet-milling facility. To fulfill that requirement, the Cooperative’s members are contractually obligated to annually deliver corn to the Cooperative by either Method A or Method B or a combination of both. Under Method A, a member is required to physically deliver corn to the Cooperative and under Method B a member appoints the Cooperative as its agent to arrange for the acquisition and delivery of corn on the member’s behalf. The Cooperative contractually appoints Cargill as its agent to arrange for the delivery of the corn by its members who elect to deliver corn using Method A and to acquire corn on its behalf for its members who elect to deliver corn using Method B. In exchange for these services, the Cooperative paid Cargill an annual fee of $70,000 in 2017. Commencing on January 1, 2018, the Cooperative will pay an annual fee of $60,000, paid in quarterly installments.

Members who deliver corn under Method A are paid the market price or contracted price for their corn at the time of delivery, as well as an incentive payment of $.05 per bushel. Cargill pays the aggregate purchase price for corn purchased from the Cooperative’s members to the Cooperative and then, on the Cooperative’s behalf, makes individual payments for corn and incentive payments directly to the Cooperative’s members. If a Method A member fails to fully satisfy the corn delivery requirement, Cargill purchases replacement corn. If the market price or contracted price for corn at the time delivery was due was less than the price of the replacement corn, the Cooperative reimburses Cargill for the difference. The Method A member who fails to deliver corn is then invoiced by the Cooperative for the price of the replacement corn.

Members who elect Method B to deliver corn pay the Cooperative a $.02 per bushel agency fee for the cost of having the Cooperative deliver corn on their behalf. The price per bushel paid to such member is equal to the price per bushel paid by Cargill to acquire the corn as the Cooperative’s agent. Because Cargill purchases the corn on behalf of Method B delivering members, the purchase price for the corn that would be paid to the Cooperative’s members if they actually delivered the corn offsets against the payment to be made by the Cooperative to Cargill for the cost to purchase the corn, thus no payment is made from Cargill to the Cooperative for corn delivered using Method B.

The Cooperative has determined Corn Expense for Method B deliveries based on the average quarterly cost per bushel paid by Cargill to the Cooperative’s members for Method A quarterly deliveries. The incentive payment and agency fee

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are also a component of Corn Expense. The board has the discretion to change the incentive payment and the agency fee based on the Cooperative’s corn delivery needs.

For the three month periods ended June 30, 2018 and 2017, the Cooperative recognized corn revenue of $13.4 million and $11.4 million, respectively. For the six month periods ended June 30, 2018 and 2017, the Cooperative recognized corn revenue of $27.7 million and $28.7 million, respectively. Disaggregated revenue for the three month periods ended June 30, 2018 and 2017 is as follows: revenue from Method A deliveries totaled $3.8 million and $2.9 million respectively; revenue from Method B deliveries totaled $9.6 million and $8.5 million, respectively. Disaggregated revenue for the six month periods ended June 30, 2018 and 2017 is as follows: revenue from Method A deliveries totaled $9.2 million and $9.1 million respectively; revenue from Method B deliveries totaled $18.5 million and $19.6 million, respectively.

Financial Instruments – Recognition, Measurement, Presentation, and Disclosure – On January 1, 2018, the Cooperative adopted ASU 2016-01 related to certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The adoption of the standard did not have a significant impact on the Cooperative’s financial statements.

NOTE 8 – DISTRIBUTIONS TO MEMBERS

On February 21, 2018, the Cooperative made distributions to its members totaling $2,493,967 or $0.161 per outstanding membership unit.  On June 27, 2018, the Cooperative made distributions to its members totaling $2,168,667 or $0.14 per outstanding membership unit.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

The Cooperative contracts with Cargill in connection with the procurement of corn and other agency services for an annual fee of $60,000, which is paid by the Cooperative to Cargill in quarterly installments. The agreements between Cargill and the Cooperative terminate concurrently with Cargill’s Second Amended and Restated Facility Lease with ProGold LLC, which terminates on December 31, 2022, but may be extended through 2023 under certain conditions.

NOTE 10 – SUBSEQUENT EVENTS

The Cooperative has evaluated events through the date the financial statements were issued for potential recognition or disclosure in the June 30, 2018 financial statements and concluded that no subsequent events have occurred that would require recognition in the June 30, 2018 financial statements.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto included in Item 1 of Part I of this report and the audited consolidated financial statements and related notes thereto and Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations, included in the Cooperative’s Annual Report Form 10-K for the fiscal year ended December 31, 2017.  This report contains forward-looking statements that involve risks and uncertainties.  Such forward-looking statements include, among others, those statements including the words “expect”, “anticipate”, “believe”, “may” and similar expressions.  The Cooperative’s actual results could differ materially from those indicated.  See the discussion of risk factors in Item 1A, Risk Factors, included in the Cooperative’s Annual Report for the 2017 fiscal year on Form 10-K.  The Cooperative does not intend to update the forward-looking statements contained in this report other than as required by law and qualifies all of its forward-looking statements by these cautionary statements.

Overview

Golden Growers Cooperative is a value added agricultural cooperative association governed under Minnesota Statutes Chapter 308B owned by 1,544 members in the business of providing value to its members by facilitating their delivery of corn to the corn wet-milling facility owned by ProGold Limited Liability Company (“ProGold LLC”), a Minnesota limited liability company in which the Cooperative owns a 49% membership interest.  ProGold LLC leases its corn wet milling facility to Cargill Incorporated (“Cargill”) which uses the facility to process corn into high fructose corn syrup.  The Cooperative accomplishes its business on behalf of its members through its contract relationships with all of the parties involved in the ownership and operation of the facility.  From an income production perspective, the Cooperative’s membership interest in ProGold LLC is its primary asset that, in addition to giving the Cooperative the

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right to receive distributions from ProGold LLC, also provides the Cooperative’s members with additional value for the delivery of their corn for processing.  Annually, the Cooperative is required to deliver approximately 15,490,480 bushels of corn to Cargill for processing at the ProGold LLC facility.

Any person residing in the United States can own membership units of the Cooperative (“Units”) as long as that person delivers or provides for the delivery of corn for processing at the ProGold LLC facility. Ownership of Units requires members to deliver corn to the Cooperative for processing in proportion to the number of Units each member holds. Currently, 15,490,480 Units are issued and outstanding.  The Cooperative’s income and losses are allocated to its members based on the volume of corn they deliver.  Subject to certain limitations, as long as a member patronizes the Cooperative by delivering corn equal to the number of Units held by the member, the member will be allocated a corresponding portion of the Cooperative’s income (or loss).  In this way, the Cooperative operates on a cooperative basis.

To hold Units, a member is required to execute a Uniform Member Agreement that obligates the member to deliver corn to the Cooperative and an Annual Delivery Agreement by which each member annually elects the member’s method to deliver corn — either Method A or Method B, or a combination of both.  Under Method A, a member is required to physically deliver the required bushels of corn to the Cooperative either at the facility or another location designated by the Cooperative.  Under Method B, a member appoints the Cooperative as its agent to arrange for the acquisition and delivery of the required bushels of corn on the member’s behalf.  The Cooperative appoints Cargill as its agent to arrange for the delivery of the corn by members who elect to deliver corn using Method A, and the Cooperative appoints Cargill as its agent to acquire corn on the Cooperative’s behalf for members who elect to deliver corn using Method B.  If a member elects to deliver corn using Method B, the price per bushel the Cooperative pays to the member is equal to the price per bushel paid by Cargill to acquire the corn as its agent.  Members who deliver corn under Method A are paid the market price or contracted price for their corn at the time of delivery.  Members who deliver corn under Method A receive from the Cooperative an incentive payment of $.05 per bushel on the corn that they deliver while members who elect Method B to deliver corn pay to the Cooperative a $.02 per bushel agency fee for the cost of having the Cooperative deliver corn on their behalf.  The incentive payment for Method A deliveries and the agency fee for Method B deliveries are subject to annual adjustment at the sole discretion of the Cooperative’s Board of Directors. While the Cooperative is financially responsible for the various payments to the members for corn, Cargill, serving as the Cooperative’s administrative agent, issues payments to members for corn on the Cooperative’s behalf.

Annually, the Cooperative notifies Cargill of the volume of Method A corn to be delivered by each Method A member.  Once the Cooperative provides notification to Cargill of the volume of corn, Cargill then confirms the amount of corn with each member and notifies that member with respect to quality specifications, allowances, deductions and premiums to be applicable to that corn.  The Method A member then directly contracts with Cargill for the contract price agreed upon for the corn or, in the absence of an agreed upon price, the market price per bushel for corn delivered on the day on which the corn is delivered and accepted at the facility.  With respect to all Method A corn that is delivered, Cargill pays to the Cooperative the aggregate purchase price for corn purchased from the members, and then, on behalf of the Cooperative, makes individual payments for corn directly to the members.  In the event a Method A member delivers to Cargill more than its delivery commitment, any corn delivered in excess of that commitment is handled as a direct sale of corn to Cargill and is priced at the current closing delivery corn price established by Cargill at the facility on the day it is unloaded.  In the event a Method A member delivers to Cargill less than its committed amount of corn, the quantity of the shortfall is then purchased and delivered by Cargill on behalf of the Cooperative, but this purchased corn is not credited to the Method A member’s account.  If a Method A member fails to fully satisfy the corn delivery requirement, Cargill purchases replacement corn for which the Cooperative reimburses Cargill the amount by which the underlying contracted corn price is less than the price of buying the replacement corn that was due on the delivery date.  In addition, if a Method A member fails to deliver all of the corn it was obligated to deliver, that member’s allocation of profit or losses and any cash distributions are proportionately reduced, and the Cooperative may terminate the member’s membership.

The Cooperative’s Bylaws establish a Method A delivery pool and a Method B delivery pool.  Generally, the Cooperative’s income and/or losses are allocated annually based on the percentage of bushels of corn that members elect to deliver using either Method A or Method B.  Regardless of the actual percentage allocation between the members who deliver bushels of corn using Method A or Method B, the Bylaws require the Cooperative to annually allocate at least 25% of its income and/or losses to the Method A pool.  The amount of income and/or losses actually allocated to the Method A pool is a percentage equal to the greater of 25% or the actual percentage of bushels of corn delivered by the members using Method A.

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For the 2018 fiscal year, members elected to deliver 28% of their corn by Method A and members elected to deliver 72% of their corn by Method B.  This election will result in 28% of the Cooperative’s income and/or losses and 28% of any cash distributions being allocated to the Method A pool in fiscal year 2018, which reflects the actual percentage of corn members elected to deliver using Method A and does not result in reallocation to meet the 25% requirement set forth in the Cooperative’s governing documents.

Results of Operations

Revenues. The Cooperative derives revenue from two sources: operations related to the marketing of members’ corn and income derived from the Cooperative’s membership interest in ProGold LLC.  The corn marketing operations generate revenue for the Cooperative equal to the value of the corn that is delivered to Cargill. The Cooperative recognizes expense equal to this same amount which results in the corn marketing operations being revenue neutral to the Cooperative, except for revenue from the Method B agency fee and expenses related to the Method A incentive payments and the service fee paid to Cargill.

For the three and six-month periods ended June 30, 2018, the Cooperative sold approximately 3.9 and 8.4 million bushels of corn compared to approximately 3.8 and 8.1 million bushels of corn sold during the three and six-month periods ended June 30, 2017. For the three and six-month periods ended June 30, 2018 and 2017, the members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility approximately 1.1 and 2.8 million bushels of corn using Method A and 2.8 and 5.6 million bushels of corn using Method B. In the same respective periods in 2017, its members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility 0.9 and 2.5 million bushels of corn using Method A and 2.8 and 5.6 million bushels of corn using Method B.

For the three and six-month periods ended June 30, 2018, the Cooperative recognized corn revenue of $13,379,000 and $27,719,000 compared to $11,374,000 and $28,741,000, during the same respective periods in 2017, an increase of 18% for the second quarter and a decrease of 4% year to date due primarily to an increase in bushels delivered in the second quarter and a decrease in the price per bushel of corn sold year to date in 2018 compared to 2017.

Expenses. The Cooperative recognized corn expense of $13,394,000 and $27,749,000 for the three and six-month periods ended June 30, 2018 compared to $11,379,000 and $28,787,000 during the same respective periods in 2017, an increase of 18% for the second quarter, and a decrease of 4% year to date due primarily to an increase in bushels delivered in the second quarter and a decrease in the price per bushel of corn purchased year to date in 2018 compared to 2017.

The Cooperative recognized expense of $15,000 and $23,000 for the three and six-month periods ended June 30, 2018 compared to $23,000, and $46,000 during the same respective periods in 2017 in connection with costs incurred to Cargill related to the Cooperative’s corn marketing operation.

Income from ProGold LLC. The Cooperative derived income from ProGold LLC for the three and six-month periods ended June 30, 2018 of $1,912,000 and $3,612,000 compared to $2,538,000 and $4,893,000 during the same respective periods in 2017, a decrease of 25% for the second quarter and a decrease of 26% year to date due primarily to a reduction in ProGold LLC lease revenue in 2018 compared to 2017.

General and Administrative Expenses. The Cooperative’s general and administrative expenses include salaries and benefits, professional fees and fees paid to its Board of Directors. The general and administrative expenses for the three and six-month periods ended June 30, 2018 was $118,000 and $291,000 compared to $132,000 and $338,000  during the same respective periods in 2017. The decrease in administrative expenses for the three month period ended June 30, 2018 compared to the three month period ended June 30, 2017 is primarily due to the timing of expenses.

Interest Income. Interest income for the three and six-month periods ended June 30, 2018 was $19,000 and $36,000 compared to $4,000 and $6,000 during the same respective periods in 2017.  The increase is primarily due to a larger interest-earning cash reserve.

Liquidity and Capital Resources

The Cooperative’s working capital at June 30, 2018 was $5,706,000 compared to $3,548,000 at June 30, 2017. The increased working capital at the end of the second quarter of 2018 as compared to the same period in 2017 was a result of a strategic decision by the Cooperative to build a cash reserve, as well as to the lack of ProGold LLC

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distributions in the first quarter of 2017.  The Cooperative received cash distributions from ProGold LLC totaling $4,182,000 for the six-month period ended June 30, 2018 compared $5,176,000 for the six-month period ended June 30, 2017. 

In its decision to build a cash reserve, the Cooperative evaluated revenue and cash flows for the current year and through the end of ProGold LLC facility lease with Cargill, including the potential for reduced distributions from ProGold LLC due to payments ProGold LLC must make for infrastructure maintenance and certain capital improvements under the lease. The Cooperative also considered its potential purchase and payment obligations under the Consent Agreement among the Cooperative, Cargill and American Crystal Sugar Company. For more information regarding the lease and Consent Agreement, see the Cooperative’s Current Report on Form 8-K filed April 4, 2017.

The Cooperative had no long-term debt as of June 30, 2018 and June 30, 2017 and used operating cash flows of $311,000 for the six-month period ended June 30, 2018 compared to $254,000 for the six-month period ended June 30, 2017.  The increase in operating cash flows for the six month period ended June 30, 2018 compared to the six month period ended June 30, 2017 is primarily due to a reduction of current liabilities.

Management believes that non-cash working capital levels, together with the Cooperative’s cash and cash equivalents, are appropriate in the current business environment and does not expect a significant increase or reduction of non-cash working capital in the next 12-months.

Significant Accounting Estimates and Policies

The Cooperative generally does not pay out Method A incentive payments or collect Method B agency fees until the end of its fiscal year.  These amounts are accrued quarterly and then confirmed at the end of the fiscal year.  The total annual Method B agency fee was determinable once the members completed their delivery method determination prior to January 1, 2018.  The quarterly Method B bushel delivery and agency fee revenue is calculated by allocating the portion of the total annual agency fee for that particular quarter or cumulating it for the particular period.  The Cooperative tracks Method A corn deliveries throughout the year so it can report the bushels of corn delivered by its members as well as the corresponding Method A incentive fees earned.  The final amounts owed by or due to Cargill and/or the Cooperative’s members who elect to deliver using Method A is not calculated until after December 31 in order to account for any failures to deliver or over-deliveries of corn.

As indicated in Note 7 to the Financial Statements contained in Part I, Item 1, the Cooperative adopted ASU 2014-09, Revenues from Contracts with Customers and ASU 2016-01 regarding financial instruments beginning January 1, 2018.

The remainder of the Cooperative’s significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, of the Notes to the Financial Statements included in the Cooperative’s Annual Report on Form 10-K for the fiscal year ending December 31, 2017.  The Cooperative’s critical accounting estimates are discussed in Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations, included in the Cooperative’s Annual Report Form 10-K for the fiscal year ended December 31, 2017.  There have been no other significant changes in the Cooperative’s significant accounting policies or critical accounting estimates since the end of fiscal 2017.

Off Balance Sheet Arrangements

None.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument.  The value of a financial instrument may change as a result of changes in the interest rates, exchange rates, commodity prices, equity prices and other market changes.  Market risk is attributed to all market risk-sensitive financial instruments, including long term debt.

Due to the pass through nature of the Cooperative’s marketing of its members’ corn, the Cooperative does not believe that it is subject to any material market risk exposure with respect to interest rates, exchange rates, commodity prices, equity prices and other market changes that would require disclosure under this item.

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Item 4.  Controls and Procedures

The Cooperative’s Chief Executive Officer and Chief Financial Officer has reviewed and evaluated the effectiveness of the Cooperative’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of June 30, 2018.  Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that the Cooperative’s current disclosure controls and procedures, as designed and implemented, are effective and provide reasonable assurance that information relating to the Cooperative required to be disclosed in the reports the Cooperative files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Cooperative’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. 

There were no changes in the Cooperative’s internal controls over financial reporting that occurred during the Cooperative’s most recent fiscal quarter that may have materially affected, or are reasonably likely to materially affect, the Cooperative’s internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

None.

Item 1A.  Risk Factors

For a detailed discussion of certain risk factors that could affect the Cooperative’s operations, financial condition or results for future periods, see Item 1A, Risk Factors, in the Cooperative’s Annual Report for the fiscal year ended December 31, 2017 on Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

None.

Item 5.  Other Information.

None.

Item 6.  Exhibits

Exhibit No.	Exhibit Description
31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Securities Exchange Act Rule 17 CFR 13a-14(a) – filed herewith.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 – filed herewith.
101	The following materials from this report, formatted in XBRL (Extensible Business Reporting Language) are filed herewith: (i) balance sheets, (ii) statements of operations and comprehensive income, (iii) statements of cash flows, and (iv) the notes to the financial statements.

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SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GOLDEN GROWERS COOPERATIVE
	(Registrant)
Date: August 13, 2018	/s/ Scott Stofferahn
	Scott Stofferahn
	Executive Vice President,
	Chief Financial Officer
	Duly Authorized Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)

(SECTION 302 CERTIFICATION)

I, Scott Stofferahn, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Golden Growers Cooperative (the registrant);

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.I am 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 my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me 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 my 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 my 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 changes 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.I have disclosed, based on my 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.

	GOLDEN GROWERS COOPERATIVE
August 13, 2018	/s/ Scott Stofferahn
	Scott Stofferahn
	Executive Vice President, Chief Executive Officer and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Golden Growers Cooperative (the “Company”) for the fiscal quarter ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott Stofferahn, Executive Vice President, serving as Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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.

	GOLDEN GROWERS COOPERATIVE
August 13, 2018	/s/ Scott Stofferahn
	Scott Stofferahn
	Executive Vice President, Chief Executive Officer and Chief Financial Officer