Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jul. 31, 2020 | Sep. 14, 2020 | |
Document Type | 10-Q | |
Document Period End Date | Jul. 31, 2020 | |
Entity Registrant Name | HERON LAKE BIOENERGY, LLC | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001286964 | |
Current Fiscal Year End Date | --10-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus (Q1,Q2,Q3,FY) | Q3 | |
Amendment Flag | false | |
Class A units | ||
Common stock, shares outstanding | 62,932,107 | |
Class B units | ||
Common stock, shares outstanding | 15,000,000 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 |
Current Assets | ||
Cash | $ 2,119,603 | $ 4,541,295 |
Restricted cash | 227,505 | 52,516 |
Accounts receivable | 273,062 | 4,891,249 |
Inventory | 3,867,419 | 6,276,258 |
Commodity derivative instruments | 28,492 | 95,823 |
Prepaid expenses and other current assets | 586,018 | 408,325 |
Total current assets | 7,102,099 | 16,265,466 |
Property and Equipment, net | 37,602,164 | 39,408,195 |
Operating lease right of use assets | 9,617,229 | |
Other assets | 697,254 | 922,254 |
Total Assets | 55,018,746 | 56,595,915 |
Current Liabilities | ||
Current maturities of long-term debt | 1,241,000 | 333,977 |
Checks drawn in excess of bank balances | 685,724 | |
Accounts payable | 1,834,453 | 5,386,618 |
Commodity derivative instruments | 31,826 | |
Accrued expenses | 1,105,612 | 423,266 |
Operating lease, current liabilities | 1,328,023 | |
Total current liabilities | 6,226,638 | 6,143,861 |
Long-Term Debt, less current portion | 5,092,977 | 300,203 |
Operating Lease, long-term liabilities | 8,289,206 | |
Other Long-Term Liabilities | 585,443 | 551,000 |
Commitments and Contingencies | ||
Members' Equity | ||
Members' equity attributable to Heron Lake BioEnergy, LLC consists of 77,932,107 units issued and outstanding at July 31, 2020 and October 31, 2019 | 34,824,482 | 47,599,276 |
Non-controlling interest | 2,001,575 | |
Total members' equity | 34,824,482 | 49,600,851 |
Total Liabilities and Members' Equity | $ 55,018,746 | $ 56,595,915 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - shares | Jul. 31, 2020 | Oct. 31, 2019 |
Condensed Consolidated Balance Sheets | ||
Members' Equity, units issued | 77,932,107 | 77,932,107 |
Members' Equity, units outstanding | 77,932,107 | 77,932,107 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2020 | Jul. 31, 2019 | Jul. 31, 2020 | Jul. 31, 2019 | |
Condensed Consolidated Statements of Operations | ||||
Revenues | $ 14,165,041 | $ 27,367,787 | $ 56,450,290 | $ 78,560,104 |
Cost of Goods Sold | 17,314,863 | 26,119,684 | 66,494,154 | 78,765,455 |
Gross Profit (Loss) | (3,149,822) | 1,248,103 | (10,043,864) | (205,351) |
Operating Expenses | (769,859) | (866,410) | (2,644,253) | (2,641,692) |
Operating Income (Loss) | (3,919,681) | 381,693 | (12,688,117) | (2,847,043) |
Other Income (Expense): | ||||
Interest income | 740 | 19,475 | 13,147 | 61,875 |
Interest expense | (74,737) | (42,990) | (116,342) | (58,320) |
Other income, net | 33,105 | 3,407 | 239,943 | 228,300 |
Total other income (expense), net | (40,892) | (20,108) | 136,748 | 231,855 |
Net Income (Loss) | (3,960,573) | 361,585 | (12,551,369) | (2,615,188) |
Less: Net Income Attributable to Non-controlling Interest | (35,006) | (67,827) | (197,025) | |
Net Income (Loss) Attributable to Heron Lake BioEnergy, LLC | $ (3,960,573) | $ 326,579 | $ (12,619,196) | $ (2,812,213) |
Weighted Average Units Outstanding—Basic and Diluted (Class A and B) | 77,932,107 | 77,932,107 | 77,932,107 | 77,932,107 |
Net Income (Loss) Per Unit Attributable to Heron Lake BioEnergy, LLC—Basic and Diluted (Class A and B) | $ (0.05) | $ (0.16) | $ (0.04) |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Members' Equity - USD ($) | Class A units | Class B units | Members' Equity attributable to Heron Lake BioEnergy LLC | Noncontrolling Interest | Total |
Balance at Oct. 31, 2018 | $ 53,054,846 | $ 1,723,839 | $ 54,778,685 | ||
Balance (in units) at Oct. 31, 2018 | 62,932,107 | 15,000,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net income attributable to non-controlling interest | 91,406 | 91,406 | |||
Net loss attributable to Heron Lake BioEnergy, LLC | (2,023,640) | (2,023,640) | |||
Balance at Jan. 31, 2019 | 51,031,206 | 1,815,245 | 52,846,451 | ||
Balance (in units) at Jan. 31, 2019 | 62,932,107 | 15,000,000 | |||
Balance at Oct. 31, 2018 | 53,054,846 | 1,723,839 | 54,778,685 | ||
Balance (in units) at Oct. 31, 2018 | 62,932,107 | 15,000,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net loss attributable to Heron Lake BioEnergy, LLC | (2,812,213) | ||||
Balance at Jul. 31, 2019 | 50,242,633 | 1,920,864 | 52,163,497 | ||
Balance (in units) at Jul. 31, 2019 | 62,932,107 | 15,000,000 | |||
Balance at Jan. 31, 2019 | 51,031,206 | 1,815,245 | 52,846,451 | ||
Balance (in units) at Jan. 31, 2019 | 62,932,107 | 15,000,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net income attributable to non-controlling interest | 70,613 | 70,613 | |||
Net loss attributable to Heron Lake BioEnergy, LLC | (1,115,152) | (1,115,152) | |||
Balance at Apr. 30, 2019 | 49,916,054 | 1,885,858 | 51,801,912 | ||
Balance (in units) at Apr. 30, 2019 | 62,932,107 | 15,000,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net income attributable to non-controlling interest | 35,006 | 35,006 | |||
Net loss attributable to Heron Lake BioEnergy, LLC | 326,579 | 326,579 | |||
Balance at Jul. 31, 2019 | 50,242,633 | 1,920,864 | 52,163,497 | ||
Balance (in units) at Jul. 31, 2019 | 62,932,107 | 15,000,000 | |||
Balance at Oct. 31, 2019 | 47,599,276 | 2,001,575 | $ 49,600,851 | ||
Balance (in units) at Oct. 31, 2019 | 62,932,107 | 15,000,000 | 77,932,107 | ||
Increase (Decrease) in Stockholders' Equity | |||||
Acquisition of non-controlling interest | (155,598) | (2,069,402) | $ (2,225,000) | ||
Net income attributable to non-controlling interest | 67,827 | 67,827 | |||
Net loss attributable to Heron Lake BioEnergy, LLC | (2,416,374) | (2,416,374) | |||
Balance at Jan. 31, 2020 | 45,027,304 | 45,027,304 | |||
Balance (in units) at Jan. 31, 2020 | 62,932,107 | 15,000,000 | |||
Balance at Oct. 31, 2019 | 47,599,276 | $ 2,001,575 | $ 49,600,851 | ||
Balance (in units) at Oct. 31, 2019 | 62,932,107 | 15,000,000 | 77,932,107 | ||
Increase (Decrease) in Stockholders' Equity | |||||
Net loss attributable to Heron Lake BioEnergy, LLC | $ (12,619,196) | ||||
Balance at Jul. 31, 2020 | 34,824,482 | $ 34,824,482 | |||
Balance (in units) at Jul. 31, 2020 | 62,932,107 | 15,000,000 | 77,932,107 | ||
Balance at Jan. 31, 2020 | 45,027,304 | $ 45,027,304 | |||
Balance (in units) at Jan. 31, 2020 | 62,932,107 | 15,000,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net loss attributable to Heron Lake BioEnergy, LLC | (6,242,249) | (6,242,249) | |||
Balance at Apr. 30, 2020 | 38,785,055 | 38,785,055 | |||
Balance (in units) at Apr. 30, 2020 | 62,932,107 | 15,000,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net loss attributable to Heron Lake BioEnergy, LLC | (3,960,573) | (3,960,573) | |||
Balance at Jul. 31, 2020 | $ 34,824,482 | $ 34,824,482 | |||
Balance (in units) at Jul. 31, 2020 | 62,932,107 | 15,000,000 | 77,932,107 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Jul. 31, 2020 | Jul. 31, 2019 | |
Cash Flow From Operating Activities: | ||
Net loss | $ (12,551,369) | $ (2,615,188) |
Adjustments to reconcile net loss to net cash provided by (used in) operations: | ||
Depreciation and amortization | 3,936,813 | 3,956,087 |
(Gain) loss on sale of asset | (2,000) | 4,864 |
Change in fair value of commodity derivative instruments | 999,167 | (670,652) |
Change in operating assets and liabilities: | ||
Accounts receivable | 4,618,187 | 3,191,915 |
Inventory | 2,408,839 | (2,431,544) |
Commodity derivative instruments | (900,010) | 810,170 |
Prepaid expenses and other current assets | (177,693) | (297,902) |
Accounts payable | (3,428,588) | (1,192,638) |
Accrued expenses | 682,346 | (332,614) |
Accrued railcar rehabilitation costs | 34,443 | |
Net cash provided by (used in) operating activities | (4,379,865) | 422,498 |
Cash Flows from Investing Activities: | ||
Capital expenditures | (2,252,359) | (206,461) |
Net cash used in investing activities | (2,252,359) | (206,461) |
Cash Flows from Financing Activities: | ||
Checks drawn in excess of bank balance | 685,724 | |
Proceeds from Paycheck Protection Program loan | 595,693 | |
Proceeds from long-term debt | 22,070,984 | |
Payments on long-term debt | (16,966,880) | (168,461) |
Acquisition of non-controlling interest | (2,000,000) | |
Net cash provided by (used in) financing activities | 4,385,521 | (168,461) |
Net increase (decrease) in Cash and Restricted Cash | (2,246,703) | 47,576 |
Cash and Restricted Cash—Beginning of Period | 4,593,811 | 5,995,982 |
Cash and Restricted Cash—End of Period | 2,347,108 | 6,043,558 |
Supplemental Disclosure of Cash Flow Information | ||
Interest expense | 116,342 | $ 58,320 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||
Capital expenditures included in accounts payable | $ 1,609 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 | Jul. 31, 2019 | Oct. 31, 2018 |
Reconciliation of Cash and Restricted Cash | ||||
Cash - Balance Sheet | $ 2,119,603 | $ 4,541,295 | $ 6,043,558 | |
Restricted Cash - Balance Sheet | 227,505 | 52,516 | ||
Cash and Restricted Cash | $ 2,347,108 | $ 4,593,811 | $ 6,043,558 | $ 5,995,982 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Jul. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. Nature of Business Heron Lake BioEnergy, LLC’s wholly owned subsidiary, HLBE Pipeline Company, LLC (“HLBE Pipeline Company”), is the sole owner of Agrinatural Gas, LLC (“Agrinatural”). Agrinatural is a natural gas pipeline company that was formed to construct, own, and operate the natural gas pipeline that provides natural gas to the Company’s ethanol production facility and other customers through a connection with the natural gas pipeline facilities of Northern Border Pipeline Company in Cottonwood County, Minnesota. Beginning as of December 11, 2019, HLBE holds a 100% interest in Agrinatural. At October 31, 2019, HLBE held a 73% interest in Agrinatural. Basis of Presentation and Principles of Consolidation The condensed consolidated unaudited financial statements as of July 31, 2020 include the accounts of Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company (collectively, the “Company”). Given the Company’s control over the operations of Agrinatural and its majority voting interest, the Company consolidates the unaudited financial statements of Agrinatural with its consolidated unaudited financial statements, with the equity and earnings attributed to the remaining 27% non-controlling interest identified separately in the accompanying condensed consolidated balance sheets and statements of operations through December 11, 2019, when the remaining non-controlling interest was acquired. All significant intercompany balances and transactions are eliminated in consolidation. The condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and 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. These condensed consolidated unaudited financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s audited consolidated financial statements for the year ended October 31, 2019, contained in the Company’s annual report on Form 10-K. In the opinion of management, the condensed consolidated unaudited financial statements reflect all adjustments consisting of normal recurring accruals that we consider necessary to present fairly the Company’s results of operations, financial position, and cash flows. The results reported in these condensed consolidated unaudited financial statements should not be regarded as necessarily indicative of results that may be expected for any other fiscal period or for the fiscal year. Accounting Estimates Management uses estimates and assumptions in preparing these condensed consolidated unaudited 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 including, among others, the economic lives of property and equipment, the assumptions used in the analysis of impairment of long-lived assets, valuation of commodity derivative instruments, inventory, inventory purchase and sales commitments, and evaluation of railcar rehabilitation costs. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. Actual results could differ from those estimates. Non-controlling Interest Amounts recorded as non-controlling interest on the October 31, 2019 balance sheet relates to the net investment by an unrelated party in Agrinatural through December 11, 2019 when the remaining non-controlling interest was acquired. Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Our contracts primarily consist of agreements with marketing companies and other customers as described below. Our performance obligations consist of the delivery of ethanol, distillers' grains, and corn oil to our customers. Our customers primarily consist of three distinct marketing companies as discussed below. The consideration we receive for these products reflects an amount that the Company expects to be entitled to in exchange for those products, based on current observable market prices at the Chicago Mercantile Exchange, generally, and adjusted for local market differentials. Our contracts have specific delivery modes, rail or truck, and dates. Revenue is recognized when the Company delivers the products to the mode of transportation specified in the contract, at the transaction price established in the contract, net of commissions, fees, and freight. We sell each of the products via different marketing channels as described below. · Ethanol. The Company sells its ethanol via a marketing agreement with Eco-Energy, Inc. Eco-Energy sells one hundred percent of the Company’s ethanol production based on agreements with end users at prices agreed upon mutually among the end user, Eco-Energy and the Company. Our performance obligations consist of our obligation to deliver ethanol to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. The marketing agreement calls for control and title to pass to Eco-Energy once a rail car is released to the railroad or a truck is released from the Company’s scales. Revenue is recognized then at the price in the agreement with the end user, net of commissions, freight, and fees. · Distillers’ grains. The Company engages another third-party marketing company, Gavilon, Inc, to sell one hundred percent of the distillers’ grains it produces at the plant. Gavilon takes title and control once a rail car is released to the railroad or a truck is released from the Company’s scales. Prices are agreed upon between Gavilon and the Company. Our performance obligations consist of our obligation to deliver distillers grains to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. Revenue is recognized net of commissions, freight and fees. · Distillers’ corn oil (corn oil). The Company sells one hundred percent of its corn oil production to RPMG, Inc. The process for selling corn oil is the same as our distillers’ grains. RPMG takes title and control once a rail car is released to the railroad or a truck is released from the Company's scales. Prices are agreed upon between RPMG and the Company. Our performance obligations consist of our obligation to deliver corn oil to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. Revenue is recognized net of commissions, freight and fees. · Agrinatural generates revenue from the transportation of natural gas to residential and commercial customers. Revenue is recognized at the point when natural gas is delivered at the transaction price established in the contract. Inventory Inventory is stated at the lower of cost or net realizable value. Cost for all inventories is determined using the first in first out method. Net realizable value is the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Inventory consists of raw materials, work in process, finished goods, and supplies. Corn is the primary raw material along with other raw materials. Finished goods consist of ethanol, distillers’ grains, and corn oil. Derivative Instruments From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives on the balance sheets at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in earnings. Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally 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 and reporting requirements, and therefore, are not marked to market in our condensed consolidated unaudited financial statements. In order to reduce the risks caused by market fluctuations, the Company occasionally hedges its anticipated corn, natural gas, and denaturant purchases and ethanol sales by entering into options and futures contracts. These contracts are used with the intention to fix the purchase price of anticipated requirements for corn in the Company's ethanol production activities and the related sales price of ethanol. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter market conditions. Although the Company believes its commodity derivative positions are economic hedges, none have been formally designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings or losses. The Company does not enter into financial instruments for trading or speculative purposes. The Company has adopted authoritative guidance related to “Derivatives and Hedging,” and has included the required enhanced quantitative and qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. See further discussion in Note 5. Property and Equipment In July 2020, the Company experienced major issues with its boiler, which negatively impacted production. The Company ordered a temporary boiler, which allowed operations to continue in August 2020 until repair or replacement of the boiler could be completed. The Company determined that the purchase and installation of a new boiler would be more economical and efficient than attempted repairs to the failing boiler. The new boiler is expected to be installed in October 2020. On September 2, 2020, the Company received notice of approval of the new boiler from the Minnesota Pollution Control Agency. As a result, the Company abandoned the failing boiler, is currently operating with the temporary boiler, and plans to operate with the new boiler upon its completed installation. The Company will record the cost for the abandonment during the fourth fiscal quarter once it has determined the asset value, and what, if any, of the existing equipment can be salvaged. The Company anticipates a loss of approximately $1.8 million in the fourth fiscal quarter of 2020 due to the abandonment of the failing boiler. The estimated cost of the new boiler is approximately $5.2 million. Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued new guidance on accounting for leases under Accounting Standards Codification 842 (ASC 842). Under the new guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted cash flow basis; and (2) a “right of use” asset, which is an asset that represents the lessee’s right to use the specified asset for the lease term. Lease expense under the new guidance is substantially the same as prior to the adoption. See Note 8 for further information. Reportable Operating Segments Accounting Standards Codification (“ASC”) 280, “Segment Reporting”, establishes the standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results criteria set forth in ASC 280, the Company has two reportable operating segments for financial reporting purposes. · Ethanol Production . Based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plant, including the production and sale of ethanol and its co-products, are aggregated into one financial reporting segment. · Natural Gas Pipeline . The Company has majority ownership in Agrinatural, through its wholly owned subsidiary, HLBE Pipeline, LLC, and operations of Agrinatural’s natural gas pipeline are aggregated into another financial reporting segment. |
RISKS AND UNCERTAINTIES
RISKS AND UNCERTAINTIES | 9 Months Ended |
Jul. 31, 2020 | |
RISKS AND UNCERTAINTIES | |
RISKS AND UNCERTAINTIES | 2. The Company has certain risks and uncertainties that it experiences during volatile market conditions. These volatilities can have a severe impact on operations. The Company’s revenues are derived from the sale and distribution of ethanol and distillers’ grains to customers primarily located in the U.S. Corn for the production process is supplied to the plant primarily from local agricultural producers. Ethanol sales average 70% to 90% of total revenues and corn costs average 70% to 90% of cost of goods sold. The Company’s operating and financial performance is largely driven by the prices at which it sells ethanol, distillers’ grains, and corn oil and the related costs of corn. The price of ethanol is influenced by factors such as supply and demand, the weather, government policies and programs, unleaded gasoline prices, and the petroleum markets as a whole. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company's largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, the weather, government policies and programs, and a risk management program used to protect against the price volatility of these commodities. Market fluctuations in the price of and demand for these commodities may have a significant adverse effect on the Company’s operations, profitability and the availability and adequacy of cash flow to meet the Company’s working capital requirements. The Company's risk management program is used to protect against the price volatility of these commodities. The Company, and the ethanol industry as a whole, experienced significant adverse conditions throughout most of 2018 and 2019, and thus far into 2020, as a result of industry-wide record low ethanol prices due to reduced demand and high industry inventory levels. These factors, which are compounded by the recent impact of the novel coronavirus (“COVID-19”), resulted and continue to result in negative operating margins, lower cash flow from operations and net operating losses, which included write downs of inventory and impairment of corn forward purchase contracts of approximately $1 million for the nine months ended July 31, 2020. In response to the low margin environment, the Company idled its ethanol production from on or about March 30, 2020 through approximately May 31, 2020 and continues to monitor COVID-19 developments in order to determine whether further adjustments to production are warranted. The Company believes its cash on hand and available debt from its lender will provide sufficient liquidity to meets its anticipated working capital, debt service and other liquidity needs through the next twelve months. If market conditions worsen affecting our ability to profitably operate the plant or if we are unable to transport ethanol, we may be forced to further idle ethanol production altogether. |
REVENUE
REVENUE | 9 Months Ended |
Jul. 31, 2020 | |
REVENUE | |
REVENUE | 3. Revenue by Source All revenues from contracts with customers under ASC Topic 606 are recognized at a point in time. The following table disaggregates revenue by major source for the three and nine months ended July 31, 2020 and 2019: Three Months Ended July 31, 2020 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $ Nine Months Ended July 31, 2020 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $ Three Months Ended July 31, 2019 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $ Nine Months Ended July 31, 2019 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $ Payment Terms The Company has contractual payment terms with each respective marketer that sells ethanol, distillers’ grains and corn oil. These terms are 10 calendar days after the transfer of control date. The Company has contractual payment terms with the natural gas customers of 20 days. Shipping and Handling Costs Shipping and handling costs related to contracts with customers for sale of goods are accounted for as a fulfillment activity and are included in cost of goods sold. Accordingly, amounts billed to customers for such costs are included as a component of revenue. |
INVENTORY
INVENTORY | 9 Months Ended |
Jul. 31, 2020 | |
INVENTORY | |
INVENTORY | 4. Inventory consisted of the following: July 31, 2020 October 31, 2019 (unaudited) Raw materials $ 1,575,307 $ 932,503 Work in process 599,085 732,243 Finished goods 358,621 3,157,429 Supplies 1,334,406 1,454,083 Totals $ 3,867,419 $ 6,276,258 The Company performs a lower of cost or net realizable value analysis on inventory to determine if the market values of certain inventories are less than their carrying value, which is attributable primarily to decreases in market prices of corn and ethanol. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 9 Months Ended |
Jul. 31, 2020 | |
DERIVATIVE INSTRUMENTS | |
DERIVATIVE INSTRUMENTS | 5. DERIVATIVE INSTRUMENTS As of July 31, 2020, the total notional amount of the Company’s outstanding corn derivative instruments was approximately 3,355,000 bushels, comprised of long corn futures positions on 2,055,000 bushels that were entered into to hedge forecasted ethanol sales through December 2020, and short corn futures positions on 1,085,000 bushels that were entered into to hedge forecasted corn purchases through December 2021. Additionally, there are corn options positions of 215,000 bushels through December 2020. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding. As of July 31, 2020, the Company had approximately $228,000 of cash collateral (restricted cash) related to derivatives held by a broker. The following table provides detail regarding the Company’s derivative instruments at July 31, 2020, none of which are designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 28,492 $ — Ethanol contracts Commodity derivative instruments — 31,826 Totals $ 28,492 $ 31,826 As of October 31, 2019, the total notional amount of the Company’s outstanding corn derivative instruments was approximately 5,398,000 bushels, comprised of long corn futures positions on 2,131,000 bushels that were entered into to hedge forecasted ethanol sales through July 2020, and short corn futures positions on 3,267,000 bushels that were entered into to hedge forecasted corn purchases through December 2021. Additionally, there are corn options positions of 4,000,000 bushels through March 2020. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding. As of October 31, 2019, the Company had a $52,000 in cash collateral (restricted cash) related to derivatives held by a broker. The following table provides detail regarding the Company’s derivative financial instruments at October 31, 2019, none of which were designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 20,060 $ — Ethanol contracts Commodity derivative instruments 75,763 — Totals $ 95,823 $ — The following tables provide detail regarding the gains (losses) from the Company’s derivative financial instruments in its condensed consolidated unaudited statements of operations, none of which are designated as hedging instruments: Consolidated Statement of Three Months Ended July 31, Nine Months Ended July 31, Operations Location 2020 2019 2020 2019 Corn contracts Cost of goods sold $ (287,301) $ 409,362 $ (803,632) $ 638,832 Ethanol contracts Revenues (31,945) 31,820 (195,535) 31,820 Total gain (loss) $ (319,246) $ 441,182 $ (999,167) $ 670,652 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Jul. 31, 2020 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 6. The following table sets forth, by level, the Company assets that were accounted for at fair value on a recurring basis at July 31, 2020: Fair Value Measurement Using Carrying Amount in Quoted Prices Significant Other Significant Consolidated Balance Sheet Active Markets Observable Inputs Unobservable inputs Financial Assets: Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 28,492 $ 28,492 $ 28,492 $ — $ — Financial Liabilities: Commodity Derivative instruments - Ethanol $ 31,826 $ 31,826 $ 31,826 $ — $ — The following table sets forth, by level, the Company assets and liabilities that were accounted for at fair value on a recurring basis at October 31, 2019: Fair Value Measurement Using Carrying Amount in Quoted Prices in Significant Other Significant Consolidated Active Markets Observable Inputs Unobservable Inputs Financial Assets: Balance Sheet Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 20,060 $ 20,060 $ 20,060 $ — $ — Commodity Derivative instruments - Ethanol $ 75,763 $ 75,763 $ 75,763 $ — $ — We determine the fair value of commodity derivative instruments by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange. |
DEBT FINANCING
DEBT FINANCING | 9 Months Ended |
Jul. 31, 2020 | |
DEBT FINANCING | |
DEBT FINANCING | 7. Long-term debt consists of the following: July 31, 2020 October 31, 2019 (unaudited) Amended revolving term note payable to lending institution, see terms below. $ 2,270,918 $ — Single advance term note payable to lending institution, see terms below. 3,000,000 — Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. The Company made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment. 467,366 634,180 SBA Paycheck Protection Program Loan 595,693 — Totals 6,333,977 634,180 Less amounts due within one year 1,241,000 333,977 Net long-term debt $ 5,092,977 $ 300,203 Revolving Term Note The 2020 Credit Facility includes an amended and restated revolving term loan with a $8,000,000 principal commitment, which was increased to a $13,000,000 principal commitment in June 2020. This loan replaces the amended revolving term note and seasonal revolving loan made under the 2018 Credit Facility. The loan is secured by substantially all of the Company’s assets, including a subsidiary guarantee. The 2020 Credit Facility contains customary covenants, including restrictions on the payment of dividends and loans and advances to Agrinatural, and maintenance of certain financial ratios including minimum working capital, minimum net worth and a debt service coverage ratio as defined by the credit facility. During the second fiscal quarter of 2020, the 2020 Credit Facility was amended to reduce the working capital covenant to $8 million, from the original $10 million working capital covenant, for the period of April 30, 2020 through December 31, 2020, and increasing to $10 million beginning January 1, 2021. Additionally, the current portion of leases will be excluded from the calculation of current liabilities. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the revolving term loan and/or the imposition of fees, charges, or penalties. In May 2020, the Company had an event of non-compliance related to the minimum working capital requirement as defined in the amended credit facility. The Company has obtained a waiver from its lender for this event of non-compliance. The Company was in compliance with all covenants on July 31, 2020. However, the Company anticipates an event of non-compliance with respect to our debt service coverage ratio for the period ended October 31, 2020. The Company intends to obtain a waiver from its lender for this anticipated event of noncompliance. As part of the 2020 Credit Facility closing, the Company entered into an amended administrative agency agreement with CoBank, ACP (“CoBank”). As a result, CoBank will continue to act as the agent for the lender with respect to the 2020 Credit Facility. The Company agreed to pay CoBank an annual fee of $2,500 for its services as administrative agent. Under the terms of the amended revolving term loan, the Company may borrow, repay, and reborrow up to the aggregate principal commitment amount of $13,000,000. Final payment of amounts borrowed under the amended revolving term loan is due December 1, 2022. Interest on the amended revolving term loan accrues at a variable weekly rate equal to 3.35% above the higher of 0.00% or the One-Month London Interbank Offered Rate (“LIBOR”) Index rate, which totaled 3.50% at July 31, 2020 . The Company also agreed to pay an unused commitment fee on the unused available portion of the amended revolving term loan commitment at the rate of 0.500% per annum, payable monthly in arrears. Single Advance Term Note In June 2020, the Company entered into a single advance term note with a $3,000,000 principal commitment, with the purpose to finance the construction of a new grain bin and provide principal reduction on the Revolving Term Note. The interest rate is fixed at 3.80%. Principal with interest is to be paid in 10 consecutive, semi-annual installments, with the first installment due on December 20, 2020 and the last installment due on June 20, 2025. The note is secured as provided in the 2020 Credit Facility. SBA Paycheck Protection Program Loan In March 2020, Congress passed the Paycheck Protection Program, authorizing loans to small businesses for use in paying employees that they continue to employ throughout the COVID-19 pandemic and for rent, utilities and interest on mortgages. Loans obtained through the Paycheck Protection Program are eligible to be forgiven as long as the proceeds are used for qualifying purposes and certain other conditions are met. On April 18, 2020, the Company received a loan in the amount of $595,693 through the Paycheck Protection Program. Management expects that the entire loan will be used for payroll, utilities and interest; therefore, management anticipates that the loan will be substantially forgiven. To the extent it is not forgiven, the Company would be required to repay that portion at an interest rate of 1% Estimated annual maturities of long-term debt at July 31, 2020 are as follows based on the most recent debt agreements, for the twelve months ended July 31: 2021 $ 1,241,000 2022 3,292,977 2023 600,000 2024 600,000 2025 600,000 Total debt $ 6,333,977 |
LEASES
LEASES | 9 Months Ended |
Jul. 31, 2020 | |
LEASES | |
LEASES | 8. Adoption of ASC 842 As discussed in Note 1, on November 1, 2019, the Company adopted the provisions of ASC 842 using the modified retrospective approach, which applies the provisions of ASC 842 upon adoption, with no change to prior periods. This adoption resulted in the Company recognizing initial right of use assets and lease liabilities of approximately $10.9 million at November 1, 2019. The adoption did not have a significant impact on the Company’s statement of operations. Upon the initial adoption of ASC 842, the Company elected the following practical expedients allowable under the guidance: not to reassess whether any expired or existing contracts are or contain leases; not to reassess the lease classification for any expired or existing leases; not to reassess initial direct costs for any existing leases. Additionally, the Company elected the short-term lease exemption policy, applying the requirements of ASC 842 to only long-term (greater than one year) leases. The Company leases rail cars for its facility to transport ethanol and dried distillers’ grains to its end customers. Operating lease right of use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate, unless an implicit rate is readily determinable, as the discount rate for each lease in determining the present value of lease payments. For the nine months ended July 31, 2020, the Company’s weighted average discount rate was 4.87%. Operating lease expense is recognized on a straight-line basis over the lease term. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s leases have remaining terms of approximately one to seven years. For the nine months ended July 31, 2020, the weighted average remaining lease term was four years. The Company elected to use a portfolio approach for lease classification, which allows for an entity to group together leases with similar characteristics provided that its application does not create a material difference when compared to accounting for the leases at a contract level. For railcar leases, the Company elected to combine the railcars within each rider and account for each rider as an individual lease. The following table summarizes the remaining maturities of the Company’s operating lease liabilities as of July 31, 2020: Twelve Months Ended July 31, 2021 $ 1,767,000 2022 1,767,000 2023 1,767,000 2024 1,698,750 2025 1,650,000 Thereafter 2,575,000 Totals 11,224,750 Less: Amount representing interest 1,607,521 Lease liabilities $ 9,617,229 For the three months ended July 31, 2020, the Company recorded operating lease costs of approximately $591,000 in cost of goods sold in the Company’s statement of operations, which approximates the cash paid for the period. For the nine months ended July 31, 2020, the Company recorded operating lease costs of approximately $1,731,000 in cost of goods sold in the Company’s statement of operations, which approximates the cash paid for the period. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Jul. 31, 2020 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | 9. Corn Forward Contracts At July 31, 2020, the Company had cash and basis contracts for forward corn purchase commitments for approximately 4,613,000 bushels for deliveries through March 2021. Given the uncertainty of future ethanol and corn prices, the Company could incur a loss on the outstanding corn purchase contracts in future periods. Management has evaluated these forward contracts and its inventories using the lower of cost or net realizable value evaluation, similar to the method used on its inventory, and has determined that an impairment loss of $824,000 existed at July 31, 2020, and no impairment loss existed at or October 31, 2019. Ethanol Forward Contracts At July 31, 2020, the Company had forward contracts to sell approximately $6,069,000 of ethanol for various periods through September 2020. Distillers’ Grains Forward Contracts At July 31, 2020, the Company had forward contracts to sell approximately $325,000 of distillers’ grains for delivery through December 2020. Corn Oil Forward Contracts At July 31, 2020, the Company had contracts to sell approximately $701,000 of corn oil for delivery through September 2020. Rail Car Rehabilitation Costs The Company leases 50 hopper rail cars under a multi-year agreement which ends in May 2027. Under the agreement, the Company is required to pay to rehabilitate each car for “damage” that is considered to be other than normal wear and tear upon turn in of the car(s) at the termination of the lease. Prior to the year ending October 31, 2019, the Company believed ongoing repairs resulted in an insignificant future rehabilitation expense. During the year ending October 31, 2019, based on new information, we re-evaluated our assumptions and believe that it is probable that we may be assessed for damages incurred. Company management has estimated total costs to rehabilitate the cars at July 31, 2020 and October 31, 2019 to be approximately $585,000 and $551,000, respectively. During the three and nine months ended July 31, 2020, the Company has recorded an expense in cost of goods of approximately $16,000 and $70,000, respectively. |
MEMBERS' EQUITY
MEMBERS' EQUITY | 9 Months Ended |
Jul. 31, 2020 | |
MEMBERS' EQUITY. | |
MEMBERS' EQUITY | 10. Heron Lake BioEnergy, LLC is authorized to issue up to 80,000,000 capital units, of which 65,000,000 have been designated Class A units and 15,000,000 have been designated as Class B units. Members of Heron Lake BioEnergy, LLC are holders of units who have been admitted as members and who hold at least 2,500 units. Any holder of units who is not a member will not have voting rights. Transferees of units must be approved by Heron Lake BioEnergy, LLC’s Board of Governors to become members. Members are entitled to one vote for each unit held. Subject to Heron Lake BioEnergy, LLC’s Member Control Agreement, all units share equally in the profits and losses and distributions of assets on a per unit basis. Heron Lake BioEnergy, LLC has a total of 62,932,107 Class A units and 15,000,000 Class B units issued and outstanding, for an aggregate total of 77,932,107 units issued and outstanding at July 31, 2020 and October 31, 2019. On December 11, 2019, HLBE Pipeline Company acquired the remaining non-controlling interest of Agrinatural for a total price of $2.225 million. A deposit of $225,000 was paid in October 2019 and recorded within other assets at October 31, 2019, and the remaining amount was paid on December 11, 2019. The change of interest is recorded as an equity transaction in accordance with ASC 805. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Jul. 31, 2020 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 11. Granite Falls Energy, LLC The Company has a management services agreement with Granite Falls Energy, LLC (“GFE”, a related party). Under the terms of the management services agreement, GFE supplies its own personnel to act as part-time officers and managers of the Company for the positions of Chief Executive Officer, Chief Financial Officer, and Commodity Risk Manager and the Company pays GFE 50% of the total salary, bonuses, and other expenses and costs incurred by GFE for the three management positions. The management services agreement automatically renews for successive one-year terms unless and until the Company or GFE gives the other party 90-days written notice of termination prior to expiration of the then current term. The management services agreement may also be terminated by either party for cause under certain circumstances. Total expenses under this agreement were approximately $122,000 and $116,000 for the three months ended July 31, 2020 and 2019, respectively, and approximately $380,000 and $337,000 for the nine months ended July 31, 2020 and 2019, respectively . Agrinatural has a natural gas local distribution company management agreement with GFE for, among other purposes, the purpose of sharing certain management employees. The agreement automatically renews for successive one-year terms unless and until Agrinatural or GFE gives the other party 30 days’ written notice of termination prior to expiration of the initial term or the start of a renewal term. The agreement may also be terminated by either party for cause under certain circumstances. Under the agreement, GFE supplies its personnel to act as part-time officers of Agrinatural for the positions of chief executive officer and chief financial officer. In return, Agrinatural pays GFE $9,000 per month, excluding fees for third-party services. GFE responsible for and agreed to directly pay salary, wages, and/or benefits to the persons providing management services under the agreement. Total expenses under this agreement were $27,000 for the three months ended July 31, 2020, and $54,000 for the nine months ended July 31, 2020. Corn Purchases - Members The Company purchased corn from board members of approximately $57,000 and $2,633,000 for the three months ended July 31, 2020 and 2019, respectively, and approximately $5,872,000 and $7,219,000 for the nine months ended July 31, 2020 and 2019, respectively. |
BUSINESS SEGMENTS
BUSINESS SEGMENTS | 9 Months Ended |
Jul. 31, 2020 | |
BUSINESS SEGMENTS | |
BUSINESS SEGMENTS | 12. The Company groups its operations into the following two business segments: Ethanol Production Ethanol and co-product production and sales Natural gas pipeline Ownership and operations of natural gas pipeline Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The accounting policies for each segment are the same as those described in the summary of significant accounting policies. Segment income or loss does not include any allocation of shared-service costs. Segment assets are those that are directly used in or identified with segment operations. Inter-segment balances and transactions have been eliminated. The following tables summarize financial information by segment and provide a reconciliation of segment revenue, contribution to operating income (loss), and total assets: Three Months Ended Nine Months Ended July 31, 2020 July 31, 2019 July 31, 2020 July 31, 2019 Revenue: (unaudited) (unaudited) (unaudited) (unaudited) Ethanol production $ 14,039,050 $ 27,267,156 $ 55,398,271 $ 77,487,200 Natural gas pipeline 439,448 541,283 2,182,563 2,398,915 Eliminations (313,457) (440,652) (1,130,544) (1,326,011) Total Revenue $ 14,165,041 $ 27,367,787 $ 56,450,290 $ 78,560,104 Three Months Ended Nine Months Ended July 31, 2020 July 31, 2019 July 31, 2020 July 31, 2019 Operating Income (Loss): (unaudited) (unaudited) (unaudited) (unaudited) Ethanol production $ (4,033,933) $ 208,535 $ (13,414,332) $ (3,720,809) Natural gas pipeline 203,565 322,222 1,102,387 1,356,744 Eliminations (89,313) (149,064) (376,172) (482,978) Operating Income (Loss) $ (3,919,681) $ 381,693 $ (12,688,117) $ (2,847,043) July 31, 2020 October 31, 2019 Assets: (unaudited) Ethanol production $ 42,192,322 $ 44,097,379 Natural gas pipeline 12,826,424 12,498,536 Total Assets $ 55,018,746 $ 56,595,915 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Jul. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Nature of Business | Nature of Business Heron Lake BioEnergy, LLC’s wholly owned subsidiary, HLBE Pipeline Company, LLC (“HLBE Pipeline Company”), is the sole owner of Agrinatural Gas, LLC (“Agrinatural”). Agrinatural is a natural gas pipeline company that was formed to construct, own, and operate the natural gas pipeline that provides natural gas to the Company’s ethanol production facility and other customers through a connection with the natural gas pipeline facilities of Northern Border Pipeline Company in Cottonwood County, Minnesota. Beginning as of December 11, 2019, HLBE holds a 100% interest in Agrinatural. At October 31, 2019, HLBE held a 73% interest in Agrinatural. |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The condensed consolidated unaudited financial statements as of July 31, 2020 include the accounts of Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company (collectively, the “Company”). Given the Company’s control over the operations of Agrinatural and its majority voting interest, the Company consolidates the unaudited financial statements of Agrinatural with its consolidated unaudited financial statements, with the equity and earnings attributed to the remaining 27% non-controlling interest identified separately in the accompanying condensed consolidated balance sheets and statements of operations through December 11, 2019, when the remaining non-controlling interest was acquired. All significant intercompany balances and transactions are eliminated in consolidation. The condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and 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. These condensed consolidated unaudited financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s audited consolidated financial statements for the year ended October 31, 2019, contained in the Company’s annual report on Form 10-K. In the opinion of management, the condensed consolidated unaudited financial statements reflect all adjustments consisting of normal recurring accruals that we consider necessary to present fairly the Company’s results of operations, financial position, and cash flows. The results reported in these condensed consolidated unaudited financial statements should not be regarded as necessarily indicative of results that may be expected for any other fiscal period or for the fiscal year. |
Accounting Estimates | Accounting Estimates Management uses estimates and assumptions in preparing these condensed consolidated unaudited 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 including, among others, the economic lives of property and equipment, the assumptions used in the analysis of impairment of long-lived assets, valuation of commodity derivative instruments, inventory, inventory purchase and sales commitments, and evaluation of railcar rehabilitation costs. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. Actual results could differ from those estimates. |
Non-controlling Interest | Non-controlling Interest Amounts recorded as non-controlling interest on the October 31, 2019 balance sheet relates to the net investment by an unrelated party in Agrinatural through December 11, 2019 when the remaining non-controlling interest was acquired. |
Revenue Recognition | Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Our contracts primarily consist of agreements with marketing companies and other customers as described below. Our performance obligations consist of the delivery of ethanol, distillers' grains, and corn oil to our customers. Our customers primarily consist of three distinct marketing companies as discussed below. The consideration we receive for these products reflects an amount that the Company expects to be entitled to in exchange for those products, based on current observable market prices at the Chicago Mercantile Exchange, generally, and adjusted for local market differentials. Our contracts have specific delivery modes, rail or truck, and dates. Revenue is recognized when the Company delivers the products to the mode of transportation specified in the contract, at the transaction price established in the contract, net of commissions, fees, and freight. We sell each of the products via different marketing channels as described below. · Ethanol. The Company sells its ethanol via a marketing agreement with Eco-Energy, Inc. Eco-Energy sells one hundred percent of the Company’s ethanol production based on agreements with end users at prices agreed upon mutually among the end user, Eco-Energy and the Company. Our performance obligations consist of our obligation to deliver ethanol to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. The marketing agreement calls for control and title to pass to Eco-Energy once a rail car is released to the railroad or a truck is released from the Company’s scales. Revenue is recognized then at the price in the agreement with the end user, net of commissions, freight, and fees. · Distillers’ grains. The Company engages another third-party marketing company, Gavilon, Inc, to sell one hundred percent of the distillers’ grains it produces at the plant. Gavilon takes title and control once a rail car is released to the railroad or a truck is released from the Company’s scales. Prices are agreed upon between Gavilon and the Company. Our performance obligations consist of our obligation to deliver distillers grains to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. Revenue is recognized net of commissions, freight and fees. · Distillers’ corn oil (corn oil). The Company sells one hundred percent of its corn oil production to RPMG, Inc. The process for selling corn oil is the same as our distillers’ grains. RPMG takes title and control once a rail car is released to the railroad or a truck is released from the Company's scales. Prices are agreed upon between RPMG and the Company. Our performance obligations consist of our obligation to deliver corn oil to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. Revenue is recognized net of commissions, freight and fees. · Agrinatural generates revenue from the transportation of natural gas to residential and commercial customers. Revenue is recognized at the point when natural gas is delivered at the transaction price established in the contract. |
Inventory | Inventory Inventory is stated at the lower of cost or net realizable value. Cost for all inventories is determined using the first in first out method. Net realizable value is the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Inventory consists of raw materials, work in process, finished goods, and supplies. Corn is the primary raw material along with other raw materials. Finished goods consist of ethanol, distillers’ grains, and corn oil. |
Derivative Instruments | Derivative Instruments From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives on the balance sheets at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in earnings. Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally 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 and reporting requirements, and therefore, are not marked to market in our condensed consolidated unaudited financial statements. In order to reduce the risks caused by market fluctuations, the Company occasionally hedges its anticipated corn, natural gas, and denaturant purchases and ethanol sales by entering into options and futures contracts. These contracts are used with the intention to fix the purchase price of anticipated requirements for corn in the Company's ethanol production activities and the related sales price of ethanol. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter market conditions. Although the Company believes its commodity derivative positions are economic hedges, none have been formally designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings or losses. The Company does not enter into financial instruments for trading or speculative purposes. The Company has adopted authoritative guidance related to “Derivatives and Hedging,” and has included the required enhanced quantitative and qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. See further discussion in Note 5. |
Property and Equipment | Property and Equipment In July 2020, the Company experienced major issues with its boiler, which negatively impacted production. The Company ordered a temporary boiler, which allowed operations to continue in August 2020 until repair or replacement of the boiler could be completed. The Company determined that the purchase and installation of a new boiler would be more economical and efficient than attempted repairs to the failing boiler. The new boiler is expected to be installed in October 2020. On September 2, 2020, the Company received notice of approval of the new boiler from the Minnesota Pollution Control Agency. As a result, the Company abandoned the failing boiler, is currently operating with the temporary boiler, and plans to operate with the new boiler upon its completed installation. The Company will record the cost for the abandonment during the fourth fiscal quarter once it has determined the asset value, and what, if any, of the existing equipment can be salvaged. The Company anticipates a loss of approximately $1.8 million in the fourth fiscal quarter of 2020 due to the abandonment of the failing boiler. The estimated cost of the new boiler is approximately $5.2 million. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued new guidance on accounting for leases under Accounting Standards Codification 842 (ASC 842). Under the new guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted cash flow basis; and (2) a “right of use” asset, which is an asset that represents the lessee’s right to use the specified asset for the lease term. Lease expense under the new guidance is substantially the same as prior to the adoption. See Note 8 for further information. |
Reportable Operating Segments | Reportable Operating Segments Accounting Standards Codification (“ASC”) 280, “Segment Reporting”, establishes the standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results criteria set forth in ASC 280, the Company has two reportable operating segments for financial reporting purposes. · Ethanol Production . Based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plant, including the production and sale of ethanol and its co-products, are aggregated into one financial reporting segment. · Natural Gas Pipeline . The Company has majority ownership in Agrinatural, through its wholly owned subsidiary, HLBE Pipeline, LLC, and operations of Agrinatural’s natural gas pipeline are aggregated into another financial reporting segment. |
REVENUE (Tables)
REVENUE (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
REVENUE | |
Schedule of disaggregated revenue by source | Three Months Ended July 31, 2020 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $ Nine Months Ended July 31, 2020 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $ Three Months Ended July 31, 2019 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $ Nine Months Ended July 31, 2019 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $ |
INVENTORY (Tables)
INVENTORY (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
INVENTORY | |
Schedule of inventory | July 31, 2020 October 31, 2019 (unaudited) Raw materials $ 1,575,307 $ 932,503 Work in process 599,085 732,243 Finished goods 358,621 3,157,429 Supplies 1,334,406 1,454,083 Totals $ 3,867,419 $ 6,276,258 |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
DERIVATIVE INSTRUMENTS | |
Schedule of derivative instruments | The following table provides detail regarding the Company’s derivative instruments at July 31, 2020, none of which are designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 28,492 $ — Ethanol contracts Commodity derivative instruments — 31,826 Totals $ 28,492 $ 31,826 The following table provides detail regarding the Company’s derivative financial instruments at October 31, 2019, none of which were designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 20,060 $ — Ethanol contracts Commodity derivative instruments 75,763 — Totals $ 95,823 $ — |
Schedule of gains (losses) from derivative instruments | Consolidated Statement of Three Months Ended July 31, Nine Months Ended July 31, Operations Location 2020 2019 2020 2019 Corn contracts Cost of goods sold $ (287,301) $ 409,362 $ (803,632) $ 638,832 Ethanol contracts Revenues (31,945) 31,820 (195,535) 31,820 Total gain (loss) $ (319,246) $ 441,182 $ (999,167) $ 670,652 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
FAIR VALUE MEASUREMENTS | |
Schedule of assets and liabilities accounted for on a recurring basis | The following table sets forth, by level, the Company assets that were accounted for at fair value on a recurring basis at July 31, 2020: Fair Value Measurement Using Carrying Amount in Quoted Prices Significant Other Significant Consolidated Balance Sheet Active Markets Observable Inputs Unobservable inputs Financial Assets: Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 28,492 $ 28,492 $ 28,492 $ — $ — Financial Liabilities: Commodity Derivative instruments - Ethanol $ 31,826 $ 31,826 $ 31,826 $ — $ — The following table sets forth, by level, the Company assets and liabilities that were accounted for at fair value on a recurring basis at October 31, 2019: Fair Value Measurement Using Carrying Amount in Quoted Prices in Significant Other Significant Consolidated Active Markets Observable Inputs Unobservable Inputs Financial Assets: Balance Sheet Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 20,060 $ 20,060 $ 20,060 $ — $ — Commodity Derivative instruments - Ethanol $ 75,763 $ 75,763 $ 75,763 $ — $ — |
DEBT FINANCING (Tables)
DEBT FINANCING (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
DEBT FINANCING | |
Schedule of long-term debt | July 31, 2020 October 31, 2019 (unaudited) Amended revolving term note payable to lending institution, see terms below. $ 2,270,918 $ — Single advance term note payable to lending institution, see terms below. 3,000,000 — Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. The Company made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment. 467,366 634,180 SBA Paycheck Protection Program Loan 595,693 — Totals 6,333,977 634,180 Less amounts due within one year 1,241,000 333,977 Net long-term debt $ 5,092,977 $ 300,203 |
Schedule of estimated maturities of long-term debt | 2021 $ 1,241,000 2022 3,292,977 2023 600,000 2024 600,000 2025 600,000 Total debt $ 6,333,977 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
LEASES | |
Summary of maturities of operating lease liabilities | Twelve Months Ended July 31, 2021 $ 1,767,000 2022 1,767,000 2023 1,767,000 2024 1,698,750 2025 1,650,000 Thereafter 2,575,000 Totals 11,224,750 Less: Amount representing interest 1,607,521 Lease liabilities $ 9,617,229 |
BUSINESS SEGMENTS (Tables)
BUSINESS SEGMENTS (Tables) | 9 Months Ended |
Jul. 31, 2020 | |
BUSINESS SEGMENTS | |
Schedule of business segments | Ethanol Production Ethanol and co-product production and sales Natural gas pipeline Ownership and operations of natural gas pipeline |
Reconciliation of segment revenue | Three Months Ended Nine Months Ended July 31, 2020 July 31, 2019 July 31, 2020 July 31, 2019 Revenue: (unaudited) (unaudited) (unaudited) (unaudited) Ethanol production $ 14,039,050 $ 27,267,156 $ 55,398,271 $ 77,487,200 Natural gas pipeline 439,448 541,283 2,182,563 2,398,915 Eliminations (313,457) (440,652) (1,130,544) (1,326,011) Total Revenue $ 14,165,041 $ 27,367,787 $ 56,450,290 $ 78,560,104 |
Schedule of operating income (loss) and total assets | Three Months Ended Nine Months Ended July 31, 2020 July 31, 2019 July 31, 2020 July 31, 2019 Operating Income (Loss): (unaudited) (unaudited) (unaudited) (unaudited) Ethanol production $ (4,033,933) $ 208,535 $ (13,414,332) $ (3,720,809) Natural gas pipeline 203,565 322,222 1,102,387 1,356,744 Eliminations (89,313) (149,064) (376,172) (482,978) Operating Income (Loss) $ (3,919,681) $ 381,693 $ (12,688,117) $ (2,847,043) July 31, 2020 October 31, 2019 Assets: (unaudited) Ethanol production $ 42,192,322 $ 44,097,379 Natural gas pipeline 12,826,424 12,498,536 Total Assets $ 55,018,746 $ 56,595,915 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Nature of Business (Details) - gal gal in Millions | Jul. 31, 2020 | Dec. 11, 2019 | Oct. 31, 2019 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Operating capacity of Ethanol plant owned and operated | 72.3 | ||
Agrinatural, LLC | |||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Noncontrolling interest, ownership percentage by noncontrolling owners | 27.00% | ||
HLBE Pipeline Company, LLC | Agrinatural, LLC | |||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Ownership percentage | 100.00% | 73.00% |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) | 9 Months Ended |
Jul. 31, 2020company | |
CONCENTRATIONS | |
Number of distinct marketing companies | 3 |
Ethanol | Eco-Energy, Inc. | Revenue from product line | |
CONCENTRATIONS | |
Concentration percentage | 100.00% |
Distillers' Grains | Gavilon, Inc. | Revenue from product line | |
CONCENTRATIONS | |
Concentration percentage | 100.00% |
Corn Oil | RPMG, Inc. | Revenue from product line | |
CONCENTRATIONS | |
Concentration percentage | 100.00% |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Oct. 31, 2020 | Jul. 31, 2020 | |
Estimated cost of replacement of boiler | $ 5.2 | |
Forecast [Member] | ||
Gain (Loss) on Disposition of Property Plant Equipment | $ 1.8 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reportable Operating Segments (Details) | 9 Months Ended |
Jul. 31, 2020segment | |
Segment Reporting Information | |
Number of reportable segments | 2 |
Ethanol production | |
Segment Reporting Information | |
Number of reportable segments | 1 |
RISKS AND UNCERTAINTIES (Detail
RISKS AND UNCERTAINTIES (Details) $ in Millions | 9 Months Ended |
Jul. 31, 2020USD ($) | |
RISKS AND UNCERTAINTIES | |
Impairment charge | $ 1 |
Total revenues | Customer | Ethanol | Minimum | |
RISKS AND UNCERTAINTIES | |
Concentration percentage | 70.00% |
Total revenues | Customer | Ethanol | Maximum | |
RISKS AND UNCERTAINTIES | |
Concentration percentage | 90.00% |
Cost of goods sold | Product | Corn | Minimum | |
RISKS AND UNCERTAINTIES | |
Concentration percentage | 70.00% |
Cost of goods sold | Product | Corn | Maximum | |
RISKS AND UNCERTAINTIES | |
Concentration percentage | 90.00% |
REVENUE - Revenue (Details)
REVENUE - Revenue (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2020 | Jul. 31, 2019 | Jul. 31, 2020 | Jul. 31, 2019 | |
Revenue Recognition | ||||
Total Revenues | $ 14,165,041 | $ 27,367,787 | $ 56,450,290 | $ 78,560,104 |
Payment terms | 10 days | |||
Ethanol production | ||||
Revenue Recognition | ||||
Total Revenues | 14,039,050 | 27,267,156 | $ 55,398,270 | 77,487,200 |
Natural gas pipeline | ||||
Revenue Recognition | ||||
Total Revenues | 125,991 | 100,631 | 1,052,020 | 1,072,904 |
Ethanol | ||||
Revenue Recognition | ||||
Total Revenues | 11,920,049 | 21,645,992 | 43,306,209 | 60,083,968 |
Ethanol | Ethanol production | ||||
Revenue Recognition | ||||
Total Revenues | 11,920,049 | 21,645,992 | 43,306,209 | 60,083,968 |
Distillers' Grains | ||||
Revenue Recognition | ||||
Total Revenues | 1,645,859 | 4,371,122 | 9,481,770 | 13,939,013 |
Distillers' Grains | Ethanol production | ||||
Revenue Recognition | ||||
Total Revenues | 1,645,859 | 4,371,122 | 9,481,770 | 13,939,013 |
Corn Oil | ||||
Revenue Recognition | ||||
Total Revenues | 401,623 | 930,041 | 2,051,049 | 2,619,651 |
Corn Oil | Ethanol production | ||||
Revenue Recognition | ||||
Total Revenues | 401,623 | 930,041 | 2,051,049 | 2,619,651 |
Other | ||||
Revenue Recognition | ||||
Total Revenues | 71,519 | 320,001 | 559,242 | 844,568 |
Other | Ethanol production | ||||
Revenue Recognition | ||||
Total Revenues | 71,519 | 320,001 | 559,242 | 844,568 |
Natural Gas | ||||
Revenue Recognition | ||||
Total Revenues | 125,991 | 100,631 | $ 1,052,020 | 1,072,904 |
Payment terms | 20 days | |||
Natural Gas | Natural gas pipeline | ||||
Revenue Recognition | ||||
Total Revenues | $ 125,991 | $ 100,631 | $ 1,052,020 | $ 1,072,904 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | 9 Months Ended | ||
Jul. 31, 2020 | Jul. 31, 2019 | Oct. 31, 2019 | |
Inventory | |||
Raw materials | $ 1,575,307 | $ 932,503 | |
Work in process | 599,085 | 732,243 | |
Finished goods | 358,621 | 3,157,429 | |
Supplies | 1,334,406 | 1,454,083 | |
Totals | 3,867,419 | $ 6,276,258 | |
Ethanol | |||
Inventory | |||
Loss on inventory | 155,000 | $ 581,000 | |
Corn | |||
Inventory | |||
Loss on inventory | $ 184,000 | $ 21,000 |
DERIVATIVE INSTRUMENTS (Details
DERIVATIVE INSTRUMENTS (Details) | 9 Months Ended | 12 Months Ended |
Jul. 31, 2020USD ($)bu | Oct. 31, 2019USD ($)bu | |
Derivative instruments | ||
Financial Assets | $ 28,492 | $ 95,823 |
Financial Liabilities | $ 31,826 | |
Corn contracts | ||
Derivative instruments | ||
Notional volume | bu | 3,355,000 | 5,398,000 |
Corn contracts | Commodity Option [Member] | ||
Derivative instruments | ||
Notional volume | bu | 215,000 | 4,000,000 |
Corn contracts | Long/Purchase | ||
Derivative instruments | ||
Notional volume | bu | 2,055,000 | 2,131,000 |
Corn contracts | Short/Sale | ||
Derivative instruments | ||
Notional volume | bu | 1,085,000 | 3,267,000 |
Derivatives held by a broker | ||
Derivative instruments | ||
Restricted cash | $ 228,000 | $ 52,000 |
Derivatives not designated as hedging instruments | ||
Derivative instruments | ||
Financial Assets | 28,492 | 95,823 |
Financial Liabilities | 31,826 | |
Derivatives not designated as hedging instruments | Corn contracts | ||
Derivative instruments | ||
Financial Assets | 28,492 | 20,060 |
Derivatives not designated as hedging instruments | Ethanol contracts | ||
Derivative instruments | ||
Financial Assets | $ 75,763 | |
Financial Liabilities | $ 31,826 |
DERIVATIVE INSTRUMENTS, Gains (
DERIVATIVE INSTRUMENTS, Gains (losses) (Details) - Derivatives not designated as hedging instruments - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2020 | Jul. 31, 2019 | Jul. 31, 2020 | Jul. 31, 2019 | |
Derivative Instruments | ||||
Total gain (loss) | $ (319,246) | $ 441,182 | $ (999,167) | $ 670,652 |
Corn contracts | Cost of goods sold | ||||
Derivative Instruments | ||||
Total gain (loss) | (287,301) | 409,362 | (803,632) | 638,832 |
Ethanol contracts | Revenues. | ||||
Derivative Instruments | ||||
Total gain (loss) | $ (31,945) | $ 31,820 | $ (195,535) | $ 31,820 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 |
Fair value measurements | ||
Financial Assets | $ 28,492 | $ 95,823 |
Financial Liabilities | 31,826 | |
Corn contracts | Carrying Amount | ||
Fair value measurements | ||
Financial Assets | 28,492 | 20,060 |
Corn contracts | Recurring basis | Fair Value. | ||
Fair value measurements | ||
Financial Assets | 28,492 | 20,060 |
Corn contracts | Level 1 | Recurring basis | Fair Value. | ||
Fair value measurements | ||
Financial Assets | 28,492 | 20,060 |
Ethanol contracts | Carrying Amount | ||
Fair value measurements | ||
Financial Assets | 75,763 | |
Financial Liabilities | 31,826 | |
Ethanol contracts | Recurring basis | Fair Value. | ||
Fair value measurements | ||
Financial Assets | 75,763 | |
Financial Liabilities | 31,826 | |
Ethanol contracts | Level 1 | Recurring basis | Fair Value. | ||
Fair value measurements | ||
Financial Assets | $ 75,763 | |
Financial Liabilities | $ 31,826 |
DEBT FINANCING (Details)
DEBT FINANCING (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Jul. 31, 2020 | Oct. 31, 2019 | Jun. 30, 2020 | |
DEBT FACILITIES | |||
Long-term debt | $ 6,333,977 | $ 634,180 | |
Less amounts due on demand or within one year | 1,241,000 | 333,977 | |
Net long term debt | 5,092,977 | 300,203 | |
Amended revolving term note payable to lending institution | |||
DEBT FACILITIES | |||
Long-term debt | 2,270,918 | ||
Single advance term note payable to lending institution | |||
DEBT FACILITIES | |||
Long-term debt | 3,000,000 | ||
Interest rate (as a percent) | 3.80% | ||
Assessments payable as part of water treatment agreement, with interest at 6.55%, due in 2021 | |||
DEBT FACILITIES | |||
Long-term debt | 467,366 | 634,180 | |
Payment | $ 189,393 | $ 189,393 | |
Interest rate (as a percent) | 6.55% | 6.55% | |
Period of worth of debt | 1 year | 1 year | |
Deposit on debt service payments | $ 364,000 | $ 364,000 | |
SBA Paycheck Protection Program Loan | |||
DEBT FACILITIES | |||
Long-term debt | $ 595,693 |
DEBT FINANCING - Additional inf
DEBT FINANCING - Additional information (Details) | Jan. 01, 2021USD ($) | Apr. 18, 2020USD ($) | Jun. 30, 2020USD ($)installment | Apr. 30, 2020USD ($) | Jan. 31, 2020USD ($) | Jul. 31, 2020USD ($) |
Debt financing | ||||||
Long-term debt | $ 595,693 | |||||
CoBank | 2020 Credit Facility | ||||||
Debt financing | ||||||
Annual fee | 2,500 | |||||
Amended revolving term note payable to lending institution | 2020 Credit Facility | ||||||
Debt financing | ||||||
Maximum borrowing capacity | $ 13,000,000 | $ 8,000,000 | ||||
Working capital covenant | $ 10,000,000 | $ 8,000,000 | $ 10,000,000 | |||
Spread above variable interest rate (as a percent) | 0.00% | |||||
Interest rate at end of period (as a percent) | 3.50% | |||||
Unused commitment fee per annum on the unused portion of debt (as a percent) | 0.50% | |||||
Amended revolving term note payable to lending institution | One-Month LIBOR | 2020 Credit Facility | ||||||
Debt financing | ||||||
Spread above variable interest rate (as a percent) | 3.35% | |||||
SBA Paycheck Protection Program Loan | ||||||
Debt financing | ||||||
Long-term debt | $ 595,693 | |||||
Single advance term note payable to lending institution | ||||||
Debt financing | ||||||
Debt Instrument, Face Amount | $ 3,000,000 | |||||
Interest rate (as a percent) | 3.80% | |||||
Number of Installments | installment | 10 |
DEBT FINANCING - Estimated annu
DEBT FINANCING - Estimated annual maturities (Details) - USD ($) | Jul. 31, 2020 | Oct. 31, 2019 |
Estimated maturities of long-term debt | ||
2021 | $ 1,241,000 | |
2022 | 3,292,977 | |
2023 | 600,000 | |
2024 | 600,000 | |
2025 | 600,000 | |
Long-term debt | $ 6,333,977 | $ 634,180 |
LEASES (Details)
LEASES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Jul. 31, 2020 | Jul. 31, 2020 | Nov. 01, 2019 | |
Leases | |||
Right of use assets | $ 9,617,229 | $ 9,617,229 | |
Lease liabilities | $ 9,617,229 | $ 9,617,229 | |
Lease, Practical Expedients, Package [true false] | true | ||
Weighted average discount rate | 4.87% | 4.87% | |
Weighted average remaining lease term | 4 years | 4 years | |
Cost of goods sold | |||
Leases | |||
Operating lease costs | $ 591,000 | $ 1,731,000 | |
Minimum | |||
Leases | |||
Remaining term | 1 year | ||
Maximum | |||
Leases | |||
Remaining term | 7 years | ||
ASU 2016-02 | Restatement | |||
Leases | |||
Right of use assets | $ 10,900,000 | ||
Lease liabilities | $ 10,900,000 |
LEASES - Future minimum lease p
LEASES - Future minimum lease payments (Details) | Jul. 31, 2020USD ($) |
Maturities of operating lease liabilities | |
2021 | $ 1,767,000 |
2022 | 1,767,000 |
2023 | 1,767,000 |
2024 | 1,698,750 |
2025 | 1,650,000 |
Thereafter | 2,575,000 |
Totals | 11,224,750 |
Less: Amount representing interest | 1,607,521 |
Lease liabilities | $ 9,617,229 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Jul. 31, 2020USD ($) | Jul. 31, 2020USD ($)itembu | Oct. 31, 2019USD ($) | |
COMMITMENTS AND CONTINGENCIES | |||
Impairment charge | $ 1,000,000 | ||
Commodity Contract | |||
COMMITMENTS AND CONTINGENCIES | |||
Impairment charge | $ 824,000 | $ 0 | |
Corn Forward Contracts | Long/Purchase | |||
COMMITMENTS AND CONTINGENCIES | |||
Notional volume | bu | 4,613,000 | ||
Ethanol Forward Contracts | Short/Sale | |||
COMMITMENTS AND CONTINGENCIES | |||
Notional value | $ 6,069,000 | $ 6,069,000 | |
Distillers Grains Forward Contracts | Short/Sale | |||
COMMITMENTS AND CONTINGENCIES | |||
Notional value | 325,000 | 325,000 | |
Corn Oil Forward Contract | Short/Sale | |||
COMMITMENTS AND CONTINGENCIES | |||
Notional value | 701,000 | $ 701,000 | |
Rail Car Rehabilitation Agreement | |||
COMMITMENTS AND CONTINGENCIES | |||
Number of hopper rail cars leased | item | 50 | ||
Estimated total costs to rehabilitate the cars | $ 585,000 | $ 551,000 | |
Rail Car Rehabilitation Agreement | Cost of goods sold | |||
COMMITMENTS AND CONTINGENCIES | |||
Rehabilitation Cost | $ 16,000 | $ 70,000 |
MEMBERS' EQUITY (Details)
MEMBERS' EQUITY (Details) | Dec. 11, 2019USD ($) | Jan. 31, 2020USD ($) | Jul. 31, 2020Vote / sharesshares | Oct. 31, 2019USD ($)shares |
Members' Equity | ||||
Common Unit, Issued | 77,932,107 | 77,932,107 | ||
Minimum number of units held to be member | 2,500 | |||
Number of votes per unit | Vote / shares | 1 | |||
Remaining non-controlling interest | $ | $ 2,225,000 | $ 2,225,000 | ||
Other assets | ||||
Members' Equity | ||||
Deposit Assets | $ | $ 225,000 | |||
Maximum | ||||
Members' Equity | ||||
Common Unit, Authorized | 80,000,000 | |||
Class A units | ||||
Members' Equity | ||||
Common Unit, Authorized | 65,000,000 | |||
Common Unit, Issued | 62,932,107 | 62,932,107 | ||
Class B units | ||||
Members' Equity | ||||
Common Unit, Authorized | 15,000,000 | |||
Common Unit, Issued | 15,000,000 | 15,000,000 |
RELATED PARTY TRANSACTIONS - (D
RELATED PARTY TRANSACTIONS - (Details) | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2020USD ($) | Jul. 31, 2019USD ($) | Jul. 31, 2020USD ($)item | Jul. 31, 2019USD ($) | |
Board Members | Corn | ||||
RELATED PARTY TRANSACTIONS | ||||
Amount purchased from related party | $ 57,000 | $ 2,633,000 | $ 5,872,000 | $ 7,219,000 |
Granite Falls Energy LLC Excluding Heron Lake Bioenergy LLC | ||||
RELATED PARTY TRANSACTIONS | ||||
Percentage of costs for three management positions incurred by GFE paid by the Company | 50.00% | |||
Number of management positions of GFE partially paid for by the Company | item | 3 | |||
Renewal term | 1 year | |||
Period of written notice for termination prior to renewal of agreement | 90 days | |||
Amount of related party transaction | 122,000 | $ 116,000 | $ 380,000 | $ 337,000 |
Agrinatural, LLC | ||||
RELATED PARTY TRANSACTIONS | ||||
Renewal term | 1 year | |||
Period of written notice for termination prior to renewal of agreement | 30 days | |||
Amount paid excluding fees and third party services | $ 9,000 | |||
Amount of related party transaction | $ 27,000 | $ 54,000 |
BUSINESS SEGMENTS (Details)
BUSINESS SEGMENTS (Details) | 3 Months Ended | 9 Months Ended | |||
Jul. 31, 2020USD ($) | Jul. 31, 2019USD ($) | Jul. 31, 2020USD ($)segment | Jul. 31, 2019USD ($) | Oct. 31, 2019USD ($) | |
Segment Reporting Information | |||||
Number of operating segments | segment | 2 | ||||
Total Revenues | $ 14,165,041 | $ 27,367,787 | $ 56,450,290 | $ 78,560,104 | |
Operating Income (Loss) | (3,919,681) | 381,693 | (12,688,117) | (2,847,043) | |
Assets | 55,018,746 | 55,018,746 | $ 56,595,915 | ||
Ethanol production | |||||
Segment Reporting Information | |||||
Total Revenues | 14,039,050 | 27,267,156 | 55,398,270 | 77,487,200 | |
Assets | 42,192,322 | 42,192,322 | 44,097,379 | ||
Natural gas pipeline | |||||
Segment Reporting Information | |||||
Total Revenues | 125,991 | 100,631 | 1,052,020 | 1,072,904 | |
Assets | 12,826,424 | 12,826,424 | $ 12,498,536 | ||
Operating Segments | Ethanol production | |||||
Segment Reporting Information | |||||
Total Revenues | 14,039,050 | 27,267,156 | 55,398,271 | 77,487,200 | |
Operating Income (Loss) | (4,033,933) | 208,535 | (13,414,332) | (3,720,809) | |
Operating Segments | Natural gas pipeline | |||||
Segment Reporting Information | |||||
Total Revenues | 439,448 | 541,283 | 2,182,563 | 2,398,915 | |
Operating Income (Loss) | 203,565 | 322,222 | 1,102,387 | 1,356,744 | |
Intersegment Eliminations | |||||
Segment Reporting Information | |||||
Total Revenues | (313,457) | (440,652) | (1,130,544) | (1,326,011) | |
Operating Income (Loss) | $ (89,313) | $ (149,064) | $ (376,172) | $ (482,978) |