Golden Growers Cooperative - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2023

Commission file number: 000-53957

Golden Growers Cooperative
(Exact name of registrant as specified in its charter)

1002 Main Avenue West, Suite 5
West Fargo, ND 58078
(Address of principal executive offices)

Telephone Number 701-281-0468
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of November 12, 2023 the Cooperative had 15,490,480 Units issued and outstanding.

GOLDEN GROWERS COOPERATIVE

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GOLDEN GROWERS COOPERATIVE
CONDENSED BALANCE SHEETS
(In Thousands)

See Notes to Condensed Financial Statements

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GOLDEN GROWERS COOPERATIVE
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In Thousands, Other Than Share and Per-Share Data)
(Unaudited)

See Notes to Condensed Financial Statements

2

GOLDEN GROWERS COOPERATIVE
STATEMENTS OF CHANGES IN MEMBERS’ EQUITY
(In Thousands)
(Unaudited)

See Notes to Condensed Financial Statements

3

GOLDEN GROWERS COOPERATIVE
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

See Notes to Condensed Financial Statements

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GOLDEN GROWERS COOPERATIVE
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

NOTE 1 – BASIS OF PRESENTATION

The condensed financial statements of Golden Growers Cooperative (the “Cooperative”) for the three and nine month periods ended September 30, 2023 and 2022 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, 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results for the entire fiscal year ending December 31, 2023.

NOTE 2 – EXPENSES

The Cooperative contracts with Cargill, Incorporated (“Cargill”) in connection with the procurement of corn and other agency services for an annual fee of $60,000, which is paid by the Cooperative to Cargill in quarterly installments. The agreements between Cargill and the Cooperative terminate concurrently with Cargill’s Second Amended and Restated Facility Lease, effective April 4, 2017, with ProGold Limited Liability Company (“ProGold LLC”), as amended, which terminates on December 31, 2026. 4

NOTE 3 – PROGOLD LIMITED LIABILITY COMPANY

Prior to March 1, 2022, the Cooperative and American Crystal Sugar Company (“American Crystal”) held a 49% and 51% interest in ProGold LLC, respectively. 0% On March 1, 2022, pursuant to an Option Agreement by and between Cargill and American Crystal, and a Consent Agreement by and among the Cooperative, Cargill, and American Crystal, each effective January 1, 2018, Cargill purchased a 50% interest in ProGold LLC from American Crystal, while the Cooperative purchased the remaining 1% of ProGold LLC held by American Crystal. As a result of these transactions, the Cooperative and Cargill each hold a 50% interest in ProGold LLC. Please refer to Part I, Item 2 of this Quarterly Report on Form 10-Q for more information regarding the Cooperative’s ownership interest in ProGold LLC. Following is summary financial information for ProGold LLC, which was derived from the September 30th unaudited and December 31^st audited financial statements of ProGold LLC:

NOTE 4 – INVESTMENTS

The Cooperative has determined fair value of its investments based on Level 2 inputs (in thousands):

Maturities of corporate bonds are as follows as of September 30, 2023 (in thousands):

The Cooperative’s investments are as follows as of September 30, 2023 and December 31, 2022 (in thousands):

The following table shows the gross unrealized losses and fair value of the Cooperative’s securities with unrealized losses that are not deemed to have credit losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022.

NOTE 5 – EMPLOYEE BENEFIT PLANS

Pension Plan – In December 2012, the Cooperative approved a change to freeze the Cooperative’s defined benefit plan as of January 1, 2013. As a result, no additional benefits will accrue to participants in the plan and no new employees are eligible for the plan.

In December 2022, the Cooperative approved a resolution to terminate the plan on March 31, 2023. The process of terminating the plan includes the purchase of annuities from the assets of the plan to satisfy payment of vested benefits to participants as prescribed by the Pension Benefit Guarantee Corporation’s standard termination process. As of December 31, 2022, the pension plan was funded as required by the funding standards set forth by the Employee Retirement Income Security Act (ERISA). While there are currently sufficient funds to purchase annuities for the plan’s two (2) participants to pay all of the benefits owed under the plan, if conditions worsen, the Cooperative is liable to pay the difference between the pension assets and the cost of annuities for participants to cover all benefit liabilities. The Cooperative anticipates that the process of terminating the plan will conclude in July 2024.

The plan’s fair value and benefit obligation will vary over time as a result of changes in market interest rates, the life expectancy of plan participants, and benefit payments. As of December 31, 2022, the plan had a total fair value of $704,000 and a benefit obligation of $636,000. As of December 31, 2021, the plan had a total fair value of $910,000 and a benefit obligation of $718,000.

For the nine-month periods ended September 30, 2023 and 2022, the Cooperative made $0 in contributions. The Cooperative does not anticipate making a contribution in 2023. Contributions in 2022 totaled $0.

NOTE 6 – REVENUE RECOGNITION

The Cooperative derives revenue from two sources: operations related to the marketing of members’ corn and income derived from the Cooperative’s membership interest in ProGold LLC. The Cooperative recognizes revenue from its corn marketing operations equal to the value of the corn that is delivered to Cargill and certain purchased corn and agency fees paid by members.

Identify Contracts with Customers

The Cooperative is required to annually deliver approximately 15,490,480 bushels of corn to Cargill for processing at the ProGold LLC wet-milling facility. To fulfill this requirement, the Cooperative’s members are contractually obligated to annually deliver corn to the Cooperative by either Method A or Method B or a combination of both. Under Method A, a member is required to physically deliver corn to the Cooperative and under Method B a member appoints the Cooperative as its agent to arrange for the acquisition and delivery of corn on the member’s behalf. The Cooperative contractually appoints Cargill as its agent to arrange for the delivery of the corn by its members who elect to deliver corn using Method A and to acquire corn on its behalf for its members who elect to deliver corn using Method B. In exchange for these services, the Cooperative pays an annual fee of $60,000, paid in quarterly installments. 4

Performance Obligations

Members who deliver corn under Method A are paid the market price or contracted price for their corn at the time of delivery, as well as an incentive payment of $.10 per bushel. Cargill pays the aggregate purchase price for corn purchased from the Cooperative’s members to the Cooperative and then, on the Cooperative’s behalf, makes individual payments for corn and incentive payments directly to the Cooperative’s members. In the event a member who has elected to deliver corn by Method A delivers to Cargill less than its committed amount of corn, the quantity of the shortfall is then purchased and delivered by Cargill on the Cooperative’s behalf. The purchase price is equal to the average price reported for Method A corn for the final month of the year. In addition, the Method A member with a shortfall will be charged a purchased corn fee and agency fee determined by the Cooperative’s Board of Directors. The aggregate purchase price for corn purchased from the Cooperative’s members, plus any applicable purchased corn fee and agency fee comprise Method A corn revenue. At the end of each month, Cargill reports the number of Method A bushels delivered and the average daily price paid for corn that Cargill purchased from Members on the Cooperative’s behalf. The product of the number of bushels delivered multiplied by the average monthly market price is reported as Method A corn expense. The incentive payment is also a component of Method A corn expense.

Members who elect Method B to deliver corn pay the Cooperative a $.02 per bushel agency fee for the cost of having the Cooperative deliver corn on their behalf. Cargill acquires the corn as the Cooperative’s agent. Method B corn revenue is equal to the price paid by Cargill to acquire the corn from the Cooperative, plus the member agency fee. Corn expense for Method B deliveries is the weighted average price for Method A corn during the quarter multiplied by the number of Method B bushels purchased during the quarter.

Variable Consideration

The Cooperative’s Board of Directors has the discretion to change the member incentive payment, purchased corn and agency fees based on the Cooperative’s corn delivery needs. The Cargill agency fee is also a component of corn expense.

Significant Judgments

The evaluation of contracts with customers, performance obligations, and variable consideration requires significant judgment; the decision to combine contracts or separate a combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period.

For the nine-month periods ended September 30, 2023 and 2022, the Cooperative recognized corn revenue under ASC 606 of $71.8 million and $82.7 million, respectively. Disaggregated revenue for the nine-month periods ended September 30, 2023 and 2022 is as follows: revenue from Method A deliveries totaled $21.4 million and $22.9 million, respectively; and revenue from Method B deliveries totaled $50.4 million and $59.8 million, respectively.

NOTE 7 – DISTRIBUTIONS TO MEMBERS

On February 24, 2023, the Cooperative made distributions to its members totaling $2,478,477, or $0.16 per outstanding membership unit. On June 30, 2023, the Cooperative made distributions to its members totaling $2,168,667, or $0.14 per outstanding membership unit. At its September meeting, the Cooperative’s Board of Directors authorized a distribution to its members totaling $2,168,667, or $0.14 per outstanding membership unit, which was distributed to the Cooperative’s members on October 13, 2023.

NOTE 8 – LINE OF CREDIT

The Cooperative has a $2,000,000 line of credit with a variable interest rate based in Prime minus 0.5%, which was 8.00% as of September 30, 2023. This line of credit matures on October 16, 2024. The line of credit is secured by the investment management agency account for the Cooperative maintained by Bell Bank. There was no outstanding balance as of September 30, 2023 or December 31, 2022.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

The Cooperative contracts with Cargill in connection with the procurement of corn and other agency services for an annual fee of $60,000, which is paid by the Cooperative to Cargill in quarterly installments. 4 The agreements between Cargill and the Cooperative terminate concurrently with Cargill’s Second Amended and Restated Facility Lease with ProGold LLC, as amended, which terminates on December 31, 2026.

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, 2023 financial statements and concluded that no subsequent events have occurred that would require recognition in the September 30, 2023 financial statements.

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

Forward Looking Statements

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited financial statements and related notes thereto and Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations, included in the Cooperative’s Annual Report Form on 10-K for the fiscal year ended December 31, 2022. This Quarterly Report on Form 10-Q 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 or actions could differ materially from those anticipated in the forward-looking statements for many reasons, including but not limited to: (i) the impact of the Cooperative’s joint ownership interest in ProGold LLC following Cargill’s acquisition of a 50% interest in ProGold LLC; (ii) fluctuations in the market price per bushel of corn; (iii) the continued impact of the novel coronavirus (COVID-19); (iv) the impact of the war in Ukraine; (v) the effect of inflation as well as general economic conditions; and (vi) other factors described from time to time in the Cooperative’s Securities and Exchange Commission filings. The Cooperative does not intend to update the forward-looking statements contained in this Quarterly Report on Form 10-Q other than as required by law and qualifies all of its forward-looking statements by these cautionary statements.

Overview

Golden Growers Cooperative, a value-added agricultural cooperative association governed under Minnesota Statutes Chapter 308B, is in the business of providing value to its 1,463 members by facilitating their delivery of corn to the corn wet-milling facility owned by ProGold Limited Liability Company (“ProGold LLC”), a Minnesota limited liability company in which the Cooperative and Cargill Incorporated (“Cargill”) each own a 50% membership interest. The Cooperative accomplishes its business on behalf of its members through its contractual relationships with all of the parties involved in the ownership and operation of the facility. Annually, the Cooperative is required to deliver approximately 15,490,480 bushels of corn to Cargill for processing at the ProGold LLC facility.

Ownership in ProGold. From an income production perspective, the Cooperative’s membership interest in ProGold LLC is its primary asset that, in addition to giving the Cooperative the right to receive distributions from ProGold LLC, also provides the Cooperative’s members with additional value for the delivery of their corn for processing. Prior to March 1, 2022, the Cooperative and American Crystal Sugary Company (“American Crystal”) owned a 49% interest and 51% in ProGold LLC, respectively. In connection with its interest in ProGold LLC, the Cooperative has the right and obligation to deliver corn to be processed at the wet-milling facility. On April 4, 2017, the Cooperative, Cargill, and American Crystal entered into a Consent Agreement, effective on January 1, 2018 (the “Consent Agreement”), relating to the lease of ProGold LLC’s wet-milling facility to Cargill and the Cooperative’s interest in ProGold LLC. On the same day, Cargill and American Crystal entered into an Option Agreement, effective on January 1, 2018 (the “Option Agreement”), detailing the price, term and other conditions under which American Crystal granted to Cargill an exclusive option (the “Option”) to purchase a 50% interest in ProGold LLC from American Crystal during the first four years of the lease. Under the Consent Agreement, the Cooperative approved and consented to the transfer of the 50% interest in ProGold LLC from American Crystal to Cargill in the event Cargill exercised its option. The Cooperative also secured the right to purchase American Crystal’s remaining 1% interest in ProGold LLC for a base price ranging from $1.3 million to $1.7 million, depending on when Cargill notified American Crystal of its intention to exercise its option. The Cooperative would also be required to pay to American Crystal a capital adjustment in an amount equal to 1% of the portion of costs that had not been paid by Cargill to ProGold LLC through additional rent with respect to certain projects at the facility.

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Cargill exercised its Option under the Option Agreement to purchase a 50% interest in ProGold LLC from American Crystal. Simultaneously with the exercise of the Option, the Cooperative, pursuant to the Consent Agreement, elected to purchase American Crystal’s remaining 1% interest in ProGold LLC. As a result of these transactions, effective March 1, 2022, the Cooperative and Cargill each own a 50% interest in ProGold LLC.

In connection with the Option exercise, the Cooperative, Cargill and ProGold LLC entered into that certain ProGold Limited Liability Company Agreement (the “Operating Agreement”), effective March 1, 2022, in order to set forth the structure, governance and operation of ProGold LLC according to certain operational principles and other guidelines described in the Consent Agreement. Beginning March 1, 2022, the Cooperative will be allocated 50% of the profits and losses of ProGold LLC and will be entitled to receive 50% of any cash that is distributed to ProGold LLC’s members.

For more information relating to the Cooperative’s ownership interest in ProGold LLC, please refer to Part I, Item 1 of the Cooperative’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

ProGold Facility Lease. ProGold LLC leases its corn wet milling facility to Cargill, which uses the facility to process corn into high fructose corn syrup. In connection with the Option exercise, ProGold LLC and Cargill entered into that certain First Amendment to Second Amended and Restated Facility Lease, effective March 1, 2022, which extended the term of the Facility Lease through December 31, 2026.

Membership and Delivery Obligations. Any person residing in the United States can own membership units of the Cooperative (“Units”) as long as that person delivers or provides for the delivery of corn for processing at the ProGold LLC facility. Ownership of Units requires members to deliver bushels of corn to the Cooperative for processing in proportion to the number of Units each member holds. Currently, 15,490,480 Units are issued and outstanding. The Cooperative’s income and losses are allocated to its members based on the volume of corn they deliver. Subject to certain limitations, as long as a member patronizes the Cooperative by delivering one (1) bushel of corn for each Unit held by the member, the member will be allocated a corresponding portion of the Cooperative’s income (or loss). In this way, the Cooperative operates on a cooperative basis.

To hold Units, a member is required to execute a Uniform Member Agreement that obligates the member to deliver corn to the Cooperative and an Annual Delivery Agreement by which each member annually elects the member’s method to deliver corn - either Method A or Method B, or a combination of both. Under Method A, a member is required to physically deliver the required bushels of corn to the Cooperative either at the facility or another location designated by the Cooperative. Under Method B, a member appoints the Cooperative as its agent to arrange for the acquisition and delivery of the required bushels of corn on the member’s behalf. The Cooperative appoints Cargill as its agent to arrange for the delivery of the corn by members who elect to deliver corn using Method A, and the Cooperative appoints Cargill as its agent to acquire corn on the Cooperative’s behalf for members who elect to deliver corn using Method B. If a member elects to deliver corn using Method B, the price per bushel the Cooperative pays to the member is equal to the price per bushel paid by Cargill to acquire the corn as its agent. Members who deliver corn under Method A are paid the market price or contracted price for their corn at the time of delivery. Members who deliver corn under Method A receive from the Cooperative an incentive payment of $.10 per bushel on the corn that they deliver while members who elect Method B to deliver corn pay to the Cooperative a $.02 per bushel agency fee for the cost of having the Cooperative deliver corn on their behalf. The incentive payment for Method A deliveries and the agency fee for Method B deliveries are subject to annual adjustment at the sole discretion of the Cooperative’s Board of Directors. While the Cooperative is financially responsible for the various payments to the members for corn, Cargill, serving as the Cooperative’s administrative agent, issues payments to members for corn on the Cooperative’s behalf.

Annually, the Cooperative notifies Cargill of the number of bushels of Method A corn to be delivered by each member who has elected to deliver corn by Method A. Once the Cooperative provides notification to Cargill of the number of bushels of corn, Cargill then confirms the amount of corn with each member and notifies that member with respect to quality specifications, allowances, deductions and premiums to be applicable to that corn. The member with a Method A corn commitment then directly contracts with Cargill for corn delivered by Method A. At the end of each month, Cargill reports the number of Method A bushels delivered and the average daily price paid for corn that Cargill purchased from members on the Cooperative’s behalf. The product of the number of bushels delivered multiplied by the average monthly market price is reported as Method A corn expense. In the event a member who has elected to deliver corn by Method A delivers to Cargill more than its delivery commitment, any corn delivered in excess of that commitment is handled as a direct sale of corn to Cargill. In the event a member who has elected to deliver corn by Method A delivers to Cargill less than its committed amount of corn, the quantity of the shortfall is then purchased and delivered by Cargill on the Cooperative’s behalf. The purchase price is equal to the average price reported for Method A corn for the final month of the year. In addition, the Method A member with a shortfall will be charged a purchased corn fee and agency fee determined by the Cooperative’s Board of Directors.

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Cargill then purchases the remainder of the corn to be delivered by the Cooperative on behalf of the Method B delivering members at such time and in such quantities as it deems appropriate and in the best interest of the Cooperative and Cargill. The Cooperative notifies Cargill of the number of Method B bushels to be purchased during the quarter. Cargill will certify to the Cooperative that it has purchased the necessary Method B bushels. The price paid is the weighted average price for Method A corn during the quarter multiplied by the number of Method B bushels. Method B corn revenue is equal to the price paid.

The Cooperative’s Fourth Amended and Restated Bylaws (“Bylaws”) establish a Method A delivery pool and a Method B delivery pool. Generally, the Cooperative’s income and/or losses are allocated annually based on the percentage of bushels of corn the members elect to deliver using either Method A or Method B. Regardless of the actual percentage allocation between the members who deliver bushels of corn using Method A or Method B, the Bylaws require the Cooperative to annually allocate at least 15% of its income and/or losses to the Method A pool. The amount of the Cooperative’s income and/or losses actually allocated to the Method A pool is a percentage equal to the greater of 15% or the actual percentage of bushels of corn delivered by members using Method A.

For fiscal year 2023, members elected to deliver 27.5% of their corn by Method A and members elected to deliver 72.5% of their corn by Method B. This election will result in 27.5% of the Cooperative’s income and/or losses and 27.5% of any cash distributions being allocated to the Method A pool in fiscal year 2023, which reflects the actual percentage of corn members elected to deliver using Method A and does not result in reallocation to meet the 15% requirement set forth in the Cooperative’s Bylaws.

Results of Operations

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

For the three and nine-month periods ended September 30, 2023, the Cooperative sold approximately 3.4 and 11.8 million bushels of corn, respectively, compared to approximately 3.3 and 11.8 million bushels of corn sold during the three and nine-month periods ended September 30, 2022. For the three and nine-month periods ended September 30, 2023, the members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility approximately 0.6 and 3.4 million bushels of corn using Method A and 2.8 and 8.4 million bushels of corn using Method B. In the same respective periods in 2022, its members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility 0.5 and 3.3 million bushels of corn using Method A and 2.8 and 8.5 million bushels of corn using Method B.

For the three and nine-month periods ended September 30, 2023, the Cooperative recognized corn revenue of $17,476,000 and $71,781,000, respectively, compared to $22,891,000 and $82,706,000, during the same respective periods in 2022, a decrease of 24% for the third quarter and a decrease of 13% year to date due primarily to a decrease in the price per bushel of corn sold year to date in 2023 compared to the same respective period in 2022.

Expenses. The Cooperative recognized corn expense of $17,493,000 and $71,837,000 for the three and nine-month periods ended September 30, 2023, respectively, compared to $22,908,000 and $82,754,000 during the same respective periods in 2022, a decrease of 24% for the third quarter, and a decrease of 13% year to date due primarily to a decrease in the price per bushel of corn purchased in 2023 compared to 2022.

The Cooperative recognized expense of $15,000 and $45,000 for the three and nine-month periods ended September 30, 2023, respectively, and during the same respective periods in 2022 in connection with costs incurred to Cargill related to the Cooperative’s corn marketing operation.

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Income from ProGold LLC. The Cooperative derived income from ProGold LLC for the three and nine-month periods ended September 30, 2023 of $1,351,000 and $4,511,000, respectively, compared to $1,343,000 and $5,227,000 during the same respective periods in 2022, an increase of 1% for the third quarter and a decrease of 14% year to date due primarily to a decrease in ProGold’s lease revenue related to ProGold’s Seconded Amended and Restated Facility lease with Cargill, dated April 4, 2017, as amended.

General and Administrative Expenses. The Cooperative’s general and administrative expenses include salaries and benefits, professional fees and fees paid to its Board of Directors. The general and administrative expenses for the three and nine-month periods ended September 30, 2023 were $138,000 and $479,000, respectively, compared to $113,000 and $421,000 during the same respective periods in 2022. The increase in administrative expenses for the nine-month period ended September 30, 2023 compared to the nine-month period ended September 30, 2022 is primarily due to additional accounting and consulting expenses in 2023 compared to 2022.

Other Income. Interest and investment income (loss) for the three and nine-month periods ended September 30, 2023 was ($89,000) and $57,000, respectively, compared to $101,000 and $156,000 during the same respective periods in 2022. The decrease is primarily due to realized losses on the sale of investments in 2023.

Liquidity and Capital Resources

The Cooperative’s working capital at September 30, 2023 was $4,739,000 compared to $5,414,000 at September 30, 2022. The decreased working capital at the end of the third quarter of fiscal 2023 as compared to the end of the third quarter of fiscal 2022 was the result of changes in the timing of maturities of the Cooperative’s investments. The Cooperative received cash distributions from ProGold LLC totaling $5,791,000 for the nine-month period ended September 30, 2023 compared $8,039,000 for the nine-month period ended September 30, 2022. Decreased ProGold LLC distributions are related to the distribution of ProGold reserves prior to the change in ownership of ProGold on March 1, 2022.

In fiscal year 2018, the Cooperative invested a portion of its cash reserves in bonds. To ensure that the Cooperative would have access to cash if needed before the maturity of the bonds, the Cooperative also established a $2,000,000 line of credit at a variable interest rate based on the prime rate. The line of credit will terminate on October 16, 2024. The line of credit is secured by the investment management agency account for the Cooperative maintained by Bell Bank. There was no outstanding balance as of September 30, 2023 or December 31, 2022.

The Cooperative had no long-term debt as of September 30, 2023 or September 30, 2022 and used operating cash flows of $242,000 for the nine-month period ended September 30, 2023 compared to used cash flows of $374,000 for the nine-month period ended September 30, 2022. The increase in operating cash flows for the nine-month period ended September 30, 2023 compared to the nine-month period ended September 30, 2022 is primarily due to decreased receivables from ProGold in 2023 compared to 2022.

Management believes that non-cash working capital levels, together with the Cooperative’s cash and cash equivalents, are appropriate in the current business environment and does not expect a significant increase or reduction of non-cash working capital in the next twelve months. Management expects that the Cooperative’s cash and cash equivalents, together with available borrowings under the line of credit, will be sufficient to fund its operations for the foreseeable future, including at least the next twelve months.

Significant Accounting Estimates and Policies

The Cooperative generally does not pay out Method A incentive payments or collect Method B agency fees until the end of its fiscal year. The total annual Method B agency fee was determinable once the members completed their delivery method determination prior to January 1, 2023. 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 Cooperative’s significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, of the Notes to the Financial Statements in the Cooperative’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The Cooperative’s critical accounting estimates are discussed in Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations, in the Cooperative’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no other significant changes in the Cooperative’s significant accounting policies or critical accounting estimates since December 31, 2022.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, the Cooperative is not required to provide disclosure pursuant to 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, 2022. Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that the Cooperative’s current disclosure controls and procedures, as designed and implemented, are effective and provide reasonable assurance that information relating to the Cooperative required to be disclosed in the reports the Cooperative files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Cooperative’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

As a smaller reporting company, the Cooperative is not required to provide disclosure pursuant to this item.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information.

None.

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Item 6. Exhibits

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SIGNATURES

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

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