Mail Stop 0510
April 7, 2005
Via U.S. mail and facsimile
Robert Narem, Chief Executive Officer
Northern Growers, LLC
48416 144th Street P.O. Box 356
Big Stone City, SD 57216
RE: Form 10-K for the fiscal year ended December 31, 2004
File No. 0-50711
Dear Mr. Narem:
We have reviewed this filing and have the following
comments. If you disagree with a comment, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004
Comment applicable to your overall filing
1. Where a comment below requests additional disclosures or other
revisions to be made, please show us in your supplemental response
what the revisions will look like. With the exception of the
comments below that specifically request an amendment, all other
revisions may be included in your future filings.
Cover
2. Based upon our records, you filed a Form 8-A12G on April 28,
2004
and were assigned a 1934 Act file number of 0-50711. Your Form
10-K
for the year ended December 31, 2004 does not include the correct
file number. Please revise.
Item 3. Legal Proceedings, page 16
3. Your disclosure includes information relating to an inquiry by
the
Environmental Protection Agency relating to certain emissions
data.
Please expand your disclosure to include whether any amounts have
been accrued relating to this inquiry, if so, state the line item
in
which this was recorded in your statements of operations and the
period in which it was recorded. Please also include your
conclusion
and the related assumptions used to determine your conclusion
based
on the guidance in paragraphs 3 and 8-10 of SFAS 5 relating to
this
matter.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operation
Results of Operations, page 23
4. Please expand your disclosure to include a discussion comparing
the results of operations for the years ended December 31, 2003
and
December 31, 2002. Refer to the instructions for Item 303(a) of
Regulation S-X.
Liquidity and Capital Resources, page 25
5. You have disclosed on page 15 that you are currently conducting
negotiations with Broin Management regarding a new management
agreement. Please expand your liquidity discussion to include
information regarding how this could affect your liquidity and
future
results of operations if an agreement is not reached before July
1,
2005.
6. Please expand your disclosure to discuss in more detail the
limitations imposed on you by US Bank relating to your ability to
make distributions.
7. Please revise your table of contractual payment obligations to
include estimated interest payments on your debt. Because the
table
is aimed at increasing transparency of cash flow, we believe these
payments should be included in the table. Please also disclose
any
assumptions you made to derive these amounts.
Item 9A. Controls and Procedures, page 34
8. Disclosure controls and procedures are now defined in Exchange
Act
Rules 13a-15(e) and 15d-15(e), rather than Rule 13a-14(e). In
addition, you should disclose whether there were any changes in
your
internal controls during the quarter. See Item 308 of Regulation
S-
K. Please revise your disclosure accordingly.
Financial Statements
Statements of Operations, page F-4
9. Your disclosure on page 25 states that Big Stone Plant
inadvertently overcharged you for steam in 2003 and 2004, totaling
approximately $1.5 million. You disclosed on page 22 that steam
is a
component of your cost of revenues. Based on the aforementioned,
please tell us how you determined the $1.5 million should be
recorded
as other income (expenses) rather than a component of cost of
revenues with appropriate footnote disclosure. If after
reconsidering, you conclude that this should have been recorded as
a
component of cost of revenues, please file an amendment for this
restatement.
Notes to Financial Statements
Note 2 - Summary of Significant Accounting Policies
Revenue Recognition, page F-9
10. You disclosed on page 4, the price you receive from the sale
of
ethanol is based on the price that Ethanol Products receives from
their sale of ethanol to its customers, less a fee. Please expand
you disclosure to discuss how this affects your timing and ability
to
recognize revenue, specifically, but not limited to, the criteria
in
SAB 104 regarding the seller`s price to the buyer is fixed or
determinable. Refer to SAB 104.
Shipping Costs, page F-9
11. You have disclosed that freight charges you incur are included
in
cost of revenues. Please expand your disclosure to include the
other
types of expenses that you include in the cost of revenues line
item
and the types of expenses that you include in the general and
administrative expenses line item. Please also disclose whether
you
include inbound freight charges, purchasing and receiving costs,
inspection costs, warehousing costs, internal transfer costs, and
the
other costs of your distribution network in the cost of revenues
line
item. With the exception of warehousing costs, if you currently
exclude a portion of these costs from cost of revenues, please
disclose:
* in a footnote the line items that these excluded costs are
included
in and the amounts included in each line item for each period
presented, and
* in MD&A that your gross margins may not be comparable to those
of
other entities, since some entities include all of the costs
related
to their distribution network in cost of revenues and others like
you
exclude a portion of them from gross margin, including them
instead
in a line item, such as general and administrative expenses.
Property and Equipment, page F-11
12. The categories you have shown have very broad useful lives.
Please separately discuss the types of assets that fall in each
part
of the range.
Note 6 - Commitments, Contingencies and Agreements, page F-15
13. You disclosed revenues and expenses related to agreements with
related parties for the years ended December 31, 2004 and 2003.
Please expand your disclosure to include the cost of revenues
relating to the corn provided to you by your members for the
periods
mentioned above.
* * * *
Please respond to these comments within 10 business days, or
tell us when you will provide us with a response. Please provide
us
with a supplemental response letter that keys your responses to
our
comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Meagan Caldwell, Staff Accountant, at (202) 824-
5578
or, in her absence, to the undersigned at (202) 942-1774.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Mr. Robert Narem
April 7, 2005
Page 1 of 5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0510
DIVISION OF
CORPORATION FINANCE