Golden Growers Cooperative - Quarter Report: 2013 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2013
Commission file number: 000-53957
Golden Growers Cooperative
(Exact name of registrant as specified in its charter)
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Minnesota |
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27-1312571 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
112 Roberts Street North, Suite 111
Fargo, ND 58102
(Address of principal executive offices)
Telephone Number 701-281-0468
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer x |
Smaller reporting company o |
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(Do not check if a smaller reporting company) | |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act). YES o NO x
As of November 14, 2013 the Cooperative had 15,490,480 Units issued and outstanding.
GOLDEN GROWERS COOPERATIVE
FORM 10-Q
GOLDEN GROWERS COOPERATIVE
BALANCE SHEETS
(In Thousands)
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September 30, |
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December 31, 2012 |
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ASSETS |
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Current Assets: |
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Cash and Cash Equivalents |
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$ |
3,818 |
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$ |
2,698 |
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Short-Term Investments |
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218 |
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218 |
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Prepaid Expenses |
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1 |
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1 |
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Total Current Assets |
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4,037 |
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2,917 |
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Property and Equipment, Net |
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7 |
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8 |
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Investment in ProGold Limited Liability Company |
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36,192 |
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40,070 |
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Total Assets |
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$ |
40,236 |
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$ |
42,995 |
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LIABILITIES AND MEMBERS’ EQUITY |
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Current Liabilities: |
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Accounts Payable |
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$ |
— |
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$ |
67 |
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Accrued Liabilities |
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4 |
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5 |
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Accrued Dividend |
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3,098 |
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— |
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Total Current Liabilities |
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3,102 |
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72 |
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Non-Current Liability |
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38 |
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179 |
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Members’ Equity |
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Members’ Equity |
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37,134 |
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42,923 |
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Membership Units, Authorized 60,000,000 Units, Issued and Outstanding 15,490,480 as of September 30, 2013 and December 31, 2012 |
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Accumulated Other comprehensive Income |
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(38 |
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(179 |
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Total Members’ Equity |
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37,096 |
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42,744 |
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Total Liabilities and Members’ Equity |
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$ |
40,236 |
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$ |
42,995 |
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See Notes to Financial Statements
GOLDEN GROWERS COOPERATIVE
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, 2013 |
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September 30, 2012 |
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September 30, 2013 |
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September 30, 2012 |
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OPERATIONS |
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Corn Revenue |
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$ |
20,666 |
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$ |
21,162 |
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$ |
71,515 |
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$ |
69,449 |
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Corn Expense |
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(20,697 |
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(21,192 |
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(71,588 |
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(69,523 |
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Net Income from ProGold Limited Liability Company |
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1,563 |
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1,667 |
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4,279 |
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5,003 |
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General & Administrative Expenses |
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(148 |
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(226 |
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(699 |
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(597 |
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Net Income from Operations |
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1,384 |
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1,411 |
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3,507 |
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4,332 |
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Interest Income |
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3 |
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3 |
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8 |
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10 |
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Net Income Before Income Tax |
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1,387 |
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1,414 |
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3,515 |
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4,342 |
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Income Tax Provision |
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— |
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— |
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— |
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— |
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Net Income |
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$ |
1,387 |
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$ |
1,414 |
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$ |
3,515 |
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$ |
4,342 |
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Weighted Average Units Outstanding |
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15,490,480 |
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15,490,480 |
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15,490,480 |
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15,490,480 |
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Earnings per Membership Unit |
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Primary and Fully Diluted |
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$ |
0.09 |
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$ |
0.09 |
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$ |
0.23 |
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$ |
0.28 |
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COMPREHENSIVE INCOME |
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Net Income |
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$ |
1,387 |
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$ |
1,414 |
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$ |
3,515 |
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$ |
4,342 |
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Pension Liability Adjustment |
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56 |
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(20 |
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141 |
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(5 |
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Comprehensive Income |
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$ |
1,443 |
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$ |
1,394 |
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$ |
3,656 |
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$ |
4,337 |
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See Notes to Financial Statements
GOLDEN GROWERS COOPERATIVE
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
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Nine Months Ended |
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September 30, 2013 |
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September 30, 2012 |
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Cash Flows from Operating Activities |
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Net Income |
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$ |
3,515 |
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$ |
4,342 |
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Net (Income) from ProGold Limited Liability Company |
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(4,279 |
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(5,003 |
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Depreciation |
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1 |
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2 |
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Changes in Assets and Liabilities |
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Accounts Receivable |
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— |
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— |
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Prepaid Expenses |
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— |
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— |
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Accounts Payable |
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(67 |
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(1 |
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Accrued Liabilities |
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(1 |
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1 |
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Net Cash Used in Operating Activities |
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(831 |
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(659 |
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Cash Flows from Investing Activities |
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— |
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— |
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Distribution received from ProGold LLC |
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8,157 |
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8,226 |
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Net Cash Provided by Investing Activities |
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8,157 |
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8,226 |
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Cash Flows from Financing Activities |
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Member distributions paid |
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(6,206 |
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(6,351 |
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Net Cash Used by Financing Activities |
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(6,206 |
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(6,351 |
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Increase in Cash and Cash Equivalents |
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1,120 |
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1,216 |
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Cash and Cash Equivalents, Beginning of Period |
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2,698 |
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2,203 |
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Cash and Cash Equivalents, End of Period |
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$ |
3,818 |
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$ |
3,419 |
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Non Cash Financing Activity |
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Accrued Dividend payable to Members |
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$ |
3,098 |
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$ |
3,098 |
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See Notes to Financial Statements
GOLDEN GROWERS COOPERATIVE
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
NOTE 1 — BASIS OF PRESENTATION
The financial statements of the Golden Growers Cooperative (the “Cooperative”) for the nine-month periods ended September 30, 2013 and 2012 are unaudited and reflect all adjustments consisting of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim period. The condensed financial statements should be read in conjunction with the financial statements and notes thereto, contained in the Cooperative’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012. The results of operations for the nine-month period ended September 30, 2013, are not necessarily indicative of the results for the entire fiscal year ending December 31, 2013.
NOTE 2 — EXPENSES
The Cooperative contracts with Cargill, Incorporated in connection with the procurement of corn and other agency services which includes payments of $92,000 annually and terminates on December 31, 2017.
NOTE 3 — PROGOLD LIMITED LIABILITY COMPANY
The Cooperative has a 49% ownership interest in ProGold Limited Liability Company (“ProGold LLC”). Following is summary financial information for ProGold LLC, which were derived from the monthly unaudited financial statements of ProGold LLC:
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September 30, |
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December 31, |
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(In Thousands) |
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2013 |
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2012 |
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2012 |
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Current Assets |
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$ |
168 |
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$ |
130 |
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$ |
111 |
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Long-Term Assets |
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75,405 |
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85,874 |
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83,669 |
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Total Assets |
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$ |
75,573 |
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$ |
86,004 |
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$ |
83,780 |
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Current Liabilities |
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$ |
414 |
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$ |
419 |
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$ |
405 |
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Long-Term Liabilities |
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1,300 |
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1,700 |
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1,600 |
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Total Liabilities |
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1,714 |
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2,119 |
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2,005 |
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Members’ Equity |
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73,859 |
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83,885 |
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81,775 |
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Total Liabilities and Members’ Equity |
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$ |
75,573 |
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$ |
86,004 |
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$ |
83,780 |
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Rent Revenue on Operating Lease |
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$ |
17,726 |
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$ |
19,088 |
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$ |
25,223 |
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Expenses |
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8,995 |
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8,877 |
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11,762 |
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Net Income |
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$ |
8,731 |
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$ |
10,211 |
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$ |
13,461 |
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NOTE 4 — INVESTMENTS
Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Quoted market prices are generally not available for the Company’s financial instruments. Fair values are based on judgments regarding anticipated cash flows, future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates involve uncertainties and matters of judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
The Cooperative has determined fair value of its investments held to maturity based on Level 1 inputs. The Cooperative’s investments held to maturity are as follows as of September 30, 2013 and December 31, 2012 (in thousands):
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Amortized |
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Gross |
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Gross |
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Fair |
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September 30, 2013: |
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Money Market & CD’s |
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$ |
218 |
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$ |
— |
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$ |
— |
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$ |
218 |
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December 31, 2012 |
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Money Market & CD’s |
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$ |
218 |
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$ |
— |
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$ |
— |
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$ |
218 |
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NOTE 5 — EMPLOYEE BENEFIT PLANS
The Cooperative sponsors a defined benefit pension plan for former employees of the Cooperative who met eligibility requirements of age and length of service. The plan was frozen effective January 1, 2013 and no current employees of the Cooperative will participate in the plan in the future. While the plan is frozen, the Cooperative will continue to fund the plan until it is fully funded. Components of Net Periodic Benefit Cost for the nine-months ended September 30, 2013 and September 30, 2012:
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September 30, |
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September 30, |
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2013 |
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2012 |
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Service Cost |
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$ |
— |
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$ |
39 |
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Interest Cost |
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32 |
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44 |
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Expected return on plan assets |
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(36 |
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(40 |
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Amortization of net (gain) loss |
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57 |
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7 |
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Net periodic pension cost |
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$ |
53 |
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$ |
50 |
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Through the nine-months ended September 30, 2013, the Cooperative has made $117,000 in contributions as compared to $40,000 through the nine-months ended September 30, 2012. Even though the plan is frozen, the Cooperative anticipates contributing $24,000 in additional funds to its pension plan in 2013, for a total of $141,000. Contributions in 2012 totaled $75,500.
NOTE 6 — RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Cooperative has not been impacted by any new Accounting Pronouncements since the filing of its most recent Annual Report on Form 10-K.
NOTE 7 — CHANGE IN ACCOUNTING STANDARDS
The Cooperative has not been impacted by any changes in Accounting Standards since the filing of its most recent 10-K.
NOTE 8 — DISTRIBUTIONS TO MEMBERS
On February 12, 2013, the Cooperative made distributions to its members totaling $3,098,000 or $.20 per outstanding membership unit. On June 9, 2013, the Cooperative made a distribution to its members totaling $3,098,000 or $.20 per outstanding membership unit. At its September meeting, the Cooperative’s board authorized a distribution to its members totaling $3,098,000, or $.20 per outstanding membership unit to be paid out in October 2013. On October 10, 2013, the Cooperative made the distribution to its members.
NOTE 9 — COMMITMENTS AND CONTINGENCIES
The ProGold LLC has informed the Cooperative that it anticipates an estimated $2,300,000 capital expenditure related to facility repairs that may reduce income allocations and distributions to its members proportionately. In anticipation of such an expenditure and a corresponding reduction in distributions from ProGold LLC, the Cooperative has increased the amount of cash it has available.
NOTE 10 — SUBSEQUENT EVENTS
The Cooperative has evaluated events through the date the financial statements were issued for potential recognition or disclosure in the September 30, 2013 financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This report contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements include, among others, those statements including the words “expect”, “anticipate”, “believe”, “may” and similar expressions. The Cooperative’s actual results could differ materially from those indicated. See the discussion of “Risk Factors” in the Cooperative’s Annual Report for the 2012 fiscal year on Form 10-K.
Overview
Golden Growers Cooperative is a value added agricultural cooperative association governed under Minnesota Statutes Chapter 308B owned by 1,582 members in the business of providing value to our members by facilitating their delivery of corn to the corn wet-milling facility owned by ProGold Limited Liability Company (“ProGold”), a Minnesota limited liability company in which the Cooperative owns a 49% membership interest. ProGold leases its corn wet milling facility to Cargill Incorporated who uses the facility to process corn into high fructose corn syrup. We accomplish our business on behalf of our members through our contract relationships with all of the parties involved in the ownership and operation of the facility. From an income production perspective our membership interest in ProGold is our primary asset that, in addition to giving us the right to receive distributions from ProGold, also provides our members with additional value for the delivery of their corn for processing. Annually we are required to deliver approximately 15,490,480 bushels of corn to Cargill for processing at the ProGold facility.
Ownership of our membership units requires our members to deliver corn to the Cooperative for processing in proportion to the number of units each member holds. A member is required to deliver one bushel of corn for each of our units held by the member. Currently 15,490,480 of our units are issued and outstanding. Income and losses are allocated to our members based on the volume of corn they deliver. Subject to certain limitations, as long as a member patronizes the Cooperative by delivering corn equal to the number of units held by the member, the member will be allocated a corresponding portion of our income. In this way, we continue to operate on a cooperative basis.
To hold our units a member is required to execute a Uniform Member Agreement that obligates the member to deliver corn to us and an Annual Delivery Agreement by which each member annually elects the method the member would like to use to deliver corn — either Method A or Method B, or a combination of both. Under Method A, a member is required to physically deliver corn to us either at the facility or another location reasonably designated by us. Under Method B, a member appoints us as its agent to arrange for the acquisition and delivery of corn on the member’s behalf. We appoint Cargill as our agent to arrange for the delivery of the corn by our members who elect to deliver corn using Method A, and we appoint Cargill as our agent to acquire corn on our behalf for our members who elect to deliver corn using Method B. If a member elects to deliver corn using Method B, the price per bushel paid to the member is equal to the price per bushel paid by Cargill to acquire the corn as our agent. Members who deliver corn under Method A are paid the market price or contracted price for their corn at the time of delivery. Members who deliver corn under Method A receive from the Cooperative an incentive payment of $.05 per bushel on the corn that they deliver while members who elect Method B to deliver corn pay to the Cooperative a $.02 per bushel agency fee for the cost of having us deliver corn on their behalf. The incentive payment for Method A deliveries and the agency fee for Method B deliveries are subject to annual adjustment at the sole discretion of our Board of Directors.
A Method A member directly contracts with Cargill for the contract price agreed upon for the corn or, in the absence of an agreed upon price, the market price per bushel for corn delivered on the day on which the corn is delivered and accepted at the facility. With respect to all Method A corn that is delivered, Cargill pays to the Cooperative the aggregate purchase price for corn purchased from the member, and then, on the Cooperative’s behalf, makes individual payments for corn directly to the member. In the event a Method A member delivers more than its delivery commitment to Cargill, any corn delivered in excess of that commitment is handled as a direct sale of corn to Cargill and is priced at the current closing delivery corn price established by Cargill at the facility on the day it is unloaded. In the event a Method A member delivers less than its committed amount of corn to Cargill, the quantity of the shortfall is then purchased and delivered by Cargill on the Cooperative’s behalf, but this purchased corn is not credited to the Method A member’s account. If a Method A member fails to fully satisfy the corn delivery requirement, Cargill purchases replacement corn for which we reimburse Cargill the amount by which the underlying contracted corn price is less than the price of buying the replacement corn that was due on the delivery date. The Method A member who fails to deliver corn is then invoiced for the price of the corn. In addition, if a Method A member fails to deliver all of the corn it was obligated to deliver, that member’s allocation of our profit or losses and any cash distributions is proportionately reduced and we may terminate the member’s membership.
According to the Cooperative’s governing documents, income and/or losses are allocated and distributed to its members on a patronage basis based on each member’s volume of corn deliveries. The governing documents establish a Method A delivery pool and a Method B delivery pool. Prior to January 1 of each new fiscal year, members are required to elect whether they will deliver corn using Method A or Method B. Regardless of the actual percentage allocation between members who deliver using Method A or Method B, the Cooperative’s governing documents require the Cooperative to annually allocate at least 25% of its income and/or losses to the Method A pool. The amount of income and/or losses actually allocated to the Method A pool is a percentage equal to the greater of 25% or the actual percentage of corn delivered by members under Method A. For the 2013 fiscal year, 28% of members elected to deliver corn by Method A and 72% elected to deliver corn by Method B. This election will result in 28% of the Cooperative’s income and/or losses and 28% of any cash distributions being allocated to the Method A pool in fiscal year 2013, which reflects the actual percentage of members who elected to deliver corn using Method A and does not result in reallocation to meet the 25% requirement set forth in the Cooperative’s governing documents.
Results of Operations
Comparison of the Nine Months Ended September 30, 2013 and 2012
Revenues. The Cooperative derives revenue from two sources: operations related to the marketing of members’ corn and income derived from the Cooperative’s membership interest in ProGold. The corn marketing operations generate revenue for the Cooperative equal to the value of the corn that is delivered to Cargill. The Cooperative recognizes expense equal to this same amount which results in the corn marketing operations being revenue neutral to the Cooperative, except for revenue from the Method B agency fee and expenses related to the Method A incentive payments, required licensing and bonding expenses, and the service fee paid to Cargill.
For the nine-months ended September 30, 2013, the Cooperative sold approximately 12.2 million bushels of corn compared to 12.1 million bushels of corn sold during the nine-months ended September 30, 2012. For the nine months ended September 30, 2013 and 2012, the Cooperative recognized corn revenue of $71,515,000 and $69,449,000, respectively, an increase of 3% due primarily to an increase in the selling price per bushel of corn sold in 2013 compared to 2012. The Cooperative recognized corn expense of $71,588,000 and $69,523,000 in 2013 and 2012 respectively, an increase of 3% due primarily
to an increase in the cost per bushel of corn purchased in 2013 compared to 2012. For the nine-months ended September 30, 2013 and 2012, its members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility 3,664,636 and 3,559,751, bushels of corn respectively using Method A, and 8,536,863 and 8,577,248 bushels of corn respectively, using Method B. For the nine-months ended September 30, 2013 and 2012, the Cooperative recognized expense of $69,000 and $69,000, respectively, in connection with costs incurred to Cargill in connection with the Cooperative’s corn marketing operation.
The Cooperative derived income from ProGold for the nine-months ended September 30, 2013, of $4,279,000 compared to $5,003,000 for the nine-months ended September 30, 2012, a decrease of 14.5% due primarily to decreased rent revenue recognized by ProGold.
General and Administrative Expenses. The Cooperative’s general and administrative expenses include salaries and benefits, professional fees and fees paid to our board of directors. The general and administrative expenses for the nine-months ended September 30, 2013, was $699,000 compared to $597,000 for the nine-months ended September 30, 2012, an increase of 17%, primarily due to pension plan expenses, as well as expenses incurred in connection with the Cooperative’s Services Agreement with its former executive vice president and chief executive officer, Mark Dillon.
Interest Income. Interest income for the nine-months ended September 30, 2013, was $8,000 compared to $10,000 for the nine-months ended September 30, 2012.
Comparison of the Three Months Ended September 30, 2013 and 2012
Revenues. For the three months ended September 30, 2013, the Cooperative sold approximately 3.6 million bushels of corn compared to 3.8 million bushels of corn sold during the three months ended September 30, 2012. For the three months ended September 30, 2013 and 2012, the Cooperative recognized corn revenue of $20,666,000 and $21,162,000, respectively, a decrease of 2% due primarily to the difference in the selling price per bushel of corn sold in 2013 compared to 2012. The Cooperative recognized corn expense of $20,697,000 and $21,192,000 in 2013 and 2012 respectively, an decrease of 2% due primarily to the difference in the cost per bushel of corn purchased in 2013 compared to 2012. For the three months ended September 30, 2013 and 2012, its members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility 816,823 and 887,921, respectively, bushels of corn using Method A and 2,808,296 and 2,898,433, respectively, bushels of corn using Method B. For the three months ended September 30, 2013 and 2012, the Cooperative recognized expense of $23,000, in connection with costs incurred to Cargill in connection with the Cooperative’s corn marketing operation.
The Cooperative derived income from ProGold for the three months ended September 30, 2013, of $1,563,000 compared to $1,667,000 for the three months ended September 30, 2012.
General and Administrative Expenses. The general and administrative expenses for the three months ended September 30, 2013, was $148,000 compared to $226,000 for the three months ended September 30, 2012, a decrease of 53% due primarily to a reduction of salaries expense and a reduction of expenses incurred in connection with the hiring of the Cooperative’s chief executive officer.
Interest Income. Interest income for the three months ended September 30, 2013, was $3,000 compared to $3,000 for the three months ended September 30, 2012.
Liquidity and Capital Resources
The Cooperative’s working capital at September 20, 2013 was $935,000 compared to $512,000 at September 30, 2012.
The Cooperative had no long-term debt as of September 30, 2013 or September 30, 2012.
The Cooperative used operating cash flows of $831,000 for the nine-month period ended September 30, 2013 compared to $659,000 for the nine-month period ended September 30, 2012.
The Cooperative received cash distributions from ProGold totaling $8,157,000 for the nine-month period ended September 30, 2013 compared to $8,226,000 for the nine-month period ended September 30, 2012.
The Cooperative paid cash distributions to its members totaling $6,206,000 for the nine-month period ended September 30, 2013 compared to $6,351,000 for the nine-month period ended September 30, 2012.
The Cooperative allowed its $1,000,000 line of credit to terminate on July 16, 2013. The Cooperative had maintained the line of credit for several years but never drawn on it.
Management believes that non-cash working capital levels are appropriate in the current business environment and does not expect a significant increase or reduction of non-cash working capital in the next 12-months.
Recent Developments
On October 10, 2013, the Cooperative paid cash distributions to its members totaling $3,098,000.
In October ProGold entered into an agreement with Cargill, as the lessee of its corn wet milling facility, to complete certain capital repairs to the facility. Under the terms of the lease between ProGold and Cargill, these capital repairs are more than likely the financial responsibility of ProGold. The cost of these repairs is estimated at $2,300,000 and in accordance with the agreement, Cargill will manage the repair project and pay for the repairs. ProGold has agreed to reimburse Cargill for the actual cost of the repairs. As a result of these expenses, the Cooperative anticipates that ProGold’s income may be reduced. Any income reduction experienced by ProGold results in a proportional reduction in the amount income allocated and distributed to the Cooperative. ProGold has indicated that the facility’s corn processing capacity will not be impacted by this repair project and the Cooperative’s members’ delivery of corn will not be reduced or disrupted by this project.
Effective as of January 1, 2013, the Cooperative froze all benefit accruals towards its defined benefit pension plan. Current and future employees of the Cooperative will not participate in a defined benefit pension plan sponsored by the Cooperative. Even though the plan is now frozen, the Cooperative is obligated to continue to make contributions to this plan until it is fully funded.
Significant Accounting Estimates and Policies
The Cooperative generally does not pay out Method A incentive payments or collect Method B agency fees until the end of its fiscal year. These amounts are accrued quarterly and then confirmed at the end of the fiscal year. The total annual Method B agency fee was determinable once the members completed their delivery method determination prior to January 1, 2013. The quarterly Method B bushel delivery and agency fee revenue is calculated by allocating the portion of the total annual agency fee for
that particular quarter or cumulating it for the particular period. The Cooperative tracks Method A corn deliveries throughout the year so it can report the bushels of corn delivered by its members as well as the corresponding Method A incentive fees earned. The final amounts owed by or due to Cargill and/or the Cooperative’s members who elect to deliver using Method A is not calculated until after December 31 in order to account for any failures to deliver or over-deliveries of corn.
The remainder of the Cooperative’s significant accounting policies are described in Note 2, Summary of Significant Accounting Polices, of the Notes to the Financial Statements included in the Cooperative’s Annual Report on Form 10-K for the fiscal year ending December 31, 2012. The Cooperative’s critical accounting estimates are discussed in Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations, included in the Cooperative’s Annual Report Form 10-K for the fiscal year ended December 31, 2012. There has been no significant change in the Cooperative’s significant accounting policies or critical accounting estimates since the end of fiscal 2012.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, exchange rates, commodity prices, equity prices and other market changes. Market risk is attributed to all market-risk sensitive financial instruments, including long term debt.
Due to the pass through nature of the Cooperative’s marketing of its members’ corn, the Cooperative does not believe that it is subject to any material market risk exposure with respect to interest rates, exchange rates, commodity prices, equity prices and other market changes that would require disclosure under this item.
Item 4. Controls and Procedures
The Cooperative’s Chief Executive Officer and Chief Financial Officer has reviewed and evaluated the effectiveness of the Cooperative’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of September 30, 2013. Based on that review and evaluation, the chief executive officer and chief financial officer has concluded that the Cooperative’s current disclosure controls and procedures, as designed and implemented, are effective in ensuring that information relating to the Cooperative required to be disclosed in the reports the Cooperative files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Cooperative’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There were no changes in the Cooperative’s internal controls over financial reporting that occurred during the Cooperative’s most recent fiscal quarter that may have materially affected, or are reasonably likely to materially affect, the Cooperative’s internal control over financial reporting.
None
For a detailed discussion of certain risk factors that could affect the Cooperative’s operations, financial condition or results for future periods, see Item 1A, Risk Factors, in the Cooperative’s Annual Report for the fiscal year ended December 31, 2012 on Form 10-K.
ProGold may need to pay for maintenance to the facility.
The facility has been operated by Cargill since 1997. While the facility has been maintained by Cargill pursuant to the terms of the lease, ProGold is responsible for the cost of any extraordinary capital expenditures. In the event ProGold has to pay for any such capital expenditure, the amount of income available for distribution to its members would be reduced, which would in turn reduce amounts paid to our members. No extraordinary capital expenditures are expected in the immediate future, but based on the age of the facility it can be expected that such expenditures may be forthcoming. The Board of Governors of ProGold would make the decision to incur such capital expenditure.
As mentioned above, ProGold has entered into an agreement with Cargill to undertake repairs to the facility that are anticipated to be extraordinary capital expenditures totally approximately $2,300,000. The Cooperative cannot predict with certainty how much the final amount of the expense to ProGold will be nor can it predict how much this expense will impact its 49% allocation of ProGold’s income and losses. In anticipation of such an expense and the corresponding reduction in the amount of income distributed from ProGold to the Cooperative, the Cooperative has reduced its recent distributions to its members in order to accumulate cash reserves to somewhat offset the impact this expense will have on the distributions made to the Cooperative’s members. The Cooperative cannot predict the final extent to which this expense will impact distributions to its members.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
None.
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Exhibit No. |
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Exhibit Description |
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2.1 |
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Articles of Merger of Golden Growers Cooperative and Golden Growers Cooperative is incorporated by reference to Exhibit 2.1 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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2.2 |
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Certificate of Conversion of Golden Growers Cooperative is incorporated by reference to Exhibit 2.2 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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3.1 |
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Amended and Restated Articles of Organization of Golden Growers Cooperative is incorporated by reference to Exhibit 3.1 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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3.2 |
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Amended and Restated Bylaws of Golden Growers Cooperative dated September 1, 2009 is incorporated by reference to Exhibit 3.2 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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10.1 |
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Form of Uniform Member Agreement is incorporated by reference to Exhibit 10.2 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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10.2 |
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Form of Annual Delivery Agreement is incorporated by reference to Exhibit 10.3 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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10.3 |
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Amended and Restated Member Control Agreement between Golden Growers Cooperative, Golden Growers Cooperative and ProGold Limited Liability Company dated September 1, 2009 is incorporated by reference to Exhibit 10.4 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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10.4 |
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Operating Agreement between Golden Growers Cooperative, Golden Growers Cooperative and ProGold Limited Liability Company is incorporated by reference to Exhibit 10.5 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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10.5 |
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Amended and Restated Grain Services Agreement between Golden Growers Cooperative and Cargill, Incorporated is incorporated by reference to Exhibit 10.6 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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10.6 |
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Amended and Restated Corn Supply Agreement between Golden Growers Cooperative and Cargill, Incorporated is incorporated by reference to Exhibit 10.7 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010. |
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10.7* |
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Services Agreement between Mark Dillon and Golden Growers Cooperative dated July 10, 2012 is incorporated by reference to Exhibit 10.8 from the Cooperative’s Quarterly Report on Form 10-Q (File No. 121030939) filed on August 14, 2012. |
Filed herewith electronically
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Exhibit No. |
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Exhibit Description |
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31.1 |
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Certification of Chief Executive Officer and Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
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Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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99.1 |
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Audited Financial Statements of ProGold Limited Liability Company for the years ended August 31, 2012 and August 31, 2013. |
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101 |
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The following materials from Golden Growers Cooperative’s Quarterly Report on Form 10-Q for the period ended September 30, 2013, filed with the SEC on November 14, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) Balance Sheet for at September 30, 2013 and December 31, 2012, (ii) Statements of Operations and Comprehensive Income for the nine-month periods ended September 30, 2013 and 2012, (iii) Statement of Cash Flows for the nine-month periods ended September 30, 2013 and 2012, and (iv) Notes to Financial Statements.** |
* A management contract or compensatory plan required to be filed with this report.
**Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act of the Exchange Act, except as shall be expressly set forth by specific reference to such filings.
Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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GOLDEN GROWERS COOPERATIVE |
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(Registrant) |
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Date: November 14, 2013 |
/s/ Scott Stofferahn |
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Scott Stofferahn |
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Executive Vice President, |
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Chief Financial Officer |
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Duly Authorized Officer |