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SOUTH DAKOTA SOYBEAN PROCESSORS LLC - Quarter Report: 2020 March (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2020
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                to
 COMMISSION FILE NO. 000-50253
newsdsbpl1a29.jpg 
South Dakota Soybean Processors, LLC
(Exact name of registrant as specified in its charter)
South Dakota
 
46-0462968
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
100 Caspian Avenue; PO Box 500
Volga, South Dakota
 
57071
(Address of Principal Executive Offices
 
(Zip Code)
(605) 627-9240
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x   Yes        ¨    No
Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
¨     Large Accelerated Filer
¨     Accelerated Filer
x     Non-Accelerated Filer
¨    Smaller Reporting Company
¨    Emerging Growth Company
 
 
(do not check if a smaller reporting company)
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for company with an new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 
¨    Yes       x    No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.     Yes   ¨  No   ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: On May 7, 2020, the registrant had 30,419,000 capital units outstanding.




Table of Contents  
 
 


2



PART I – FINANCIAL INFORMATION
Item 1.    Financial Statements
South Dakota Soybean Processors, LLC
Condensed Financial Statements
March 31, 2020 and 2019

3



South Dakota Soybean Processors, LLC
Condensed Balance Sheets
 
 
March 31, 2020
 
December 31, 2019
 
(Unaudited)
 
Assets
 

 
 

Current assets
 

 
 

Cash and cash equivalents
$
359,863

 
$
624,681

Trade accounts receivable
22,213,649

 
24,420,557

Inventories
58,983,957

 
44,470,052

Margin deposits
6,014,327

 
6,772,160

Prepaid expenses
1,336,886

 
1,884,742

Total current assets
88,908,682

 
78,172,192

 
 
 
 
Property and equipment
120,211,415

 
118,363,393

Less accumulated depreciation
(55,016,671
)
 
(53,846,189
)
Total property and equipment, net
65,194,744

 
64,517,204

 
 
 
 
Other assets
 

 
 

Investments in related parties
8,278,056

 
7,873,727

Investments in cooperatives
1,539,293

 
1,562,098

Right-of-use lease asset, net
8,556,570

 
5,979,771

Total other assets
18,373,919

 
15,415,596

 
 
 
 
Total assets
$
172,477,345

 
$
158,104,992

(continued on following page)

4



South Dakota Soybean Processors, LLC
Condensed Balance Sheets (continued)
 
 
March 31, 2020
 
December 31, 2019
 
(Unaudited)
 
Liabilities and Members' Equity
 

 
 

Current liabilities
 

 
 

Excess of outstanding checks over bank balance
$
5,549,105

 
$
8,164,752

Current maturities of long-term debt
4,603,342

 
4,603,342

Note payable - seasonal loan
19,715,804

 
1,743,029

Current operating lease liabilities
5,746,084

 
2,663,967

Accounts payable
641,640

 
4,904,963

Accrued commodity purchases
29,577,348

 
31,346,533

Accrued expenses
3,278,171

 
2,900,118

Accrued interest
123,869

 
74,770

Deferred liabilities - current
970,344

 
448,458

Total current liabilities
70,205,707

 
56,849,932

 
 
 
 
Long-term liabilities
 
 
 
Long-term debt, net of current maturities and unamortized debt
    issuance costs
19,982,916

 
11,991,923

Long-term operating lease liabilities
2,810,486

 
3,315,804

Total long-term liabilities
22,793,402

 
15,307,727

 
 
 
 
Commitments and contingencies (Notes 6, 7, 8, and 13)


 


 
 
 
 
Members' equity
 

 
 

Class A Units, no par value, 30,419,000 units issued and
    outstanding at March 31, 2020 and December 31, 2019
79,478,236

 
85,947,333

 
 
 
 
Total liabilities and members' equity
$
172,477,345

 
$
158,104,992


The accompanying notes are an integral part of these condensed financial statements.


5



South Dakota Soybean Processors, LLC
Condensed Statements of Operations (Unaudited)
For the Three-Month Periods Ended March 31, 2020 and 2019
 
 
 
 
 
 
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Net revenues
 
 
 
 
 
$
98,723,412

 
$
91,966,807

 
 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 

 
 

Cost of product sold
 
 
 
 
 
80,200,506

 
71,348,550

Production
 
 
 
 
 
7,423,370

 
6,872,980

Freight and rail
 
 
 
 
 
9,211,835

 
8,115,927

Brokerage fees
 
 
 
 
 
163,238

 
169,936

Total cost of revenues
 
 
 
 
 
96,998,949

 
86,507,393

 
 
 
 
 
 
 
 
 
Gross profit (loss)
 
 
 
 
 
1,724,463

 
5,459,414

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 

 
 

Administration
 
 
 
 
 
1,024,729

 
1,005,201

 
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
699,734

 
4,454,213

 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 

 
 

Interest expense
 
 
 
 
 
(349,987
)
 
(192,559
)
Other non-operating income (expense)
 
 
 
 
 
(322,217
)
 
319,367

Patronage dividend income
 
 
 
 
 
195,553

 
169,456

Total other income (expense)
 
 
 
 
 
(476,651
)
 
296,264

 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
 
 
 
 
223,083

 
4,750,477

 
 
 
 
 
 
 
 
 
Income tax benefit (expense)
 
 
 
 
 

 
(600
)
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
$
223,083

 
$
4,749,877

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

Basic and diluted earnings (loss) per capital unit
 
 
 
 
 
$
0.01

 
$
0.16

 
 
 
 
 
 
 
 
 
Weighted average number of capital units outstanding for calculation of basic and diluted earnings (loss) per capital unit
 
 
 
 
 
30,419,000

 
30,419,000


The accompanying notes are an integral part of these condensed financial statements.

6



South Dakota Soybean Processors, LLC
Condensed Statements of Changes in Members' Equity (Unaudited)
For the Three Months Ended March 31, 2020 and 2019
 
 
Class A Units
 
Units
 
Amount
 
 
 
 
Balances, December 31, 2018
30,419,000

 
$
90,177,248

Net income

 
4,749,877

Distribution to members

 
(15,209,500
)
Balances, March 31, 2019
30,419,000

 
$
79,717,625

 
 
 
 
Balances, December 31, 2019
30,419,000

 
$
85,947,333

Net income

 
223,083

Distribution to members

 
(6,692,180
)
Balances, March 31, 2020
30,419,000

 
$
79,478,236

The accompanying notes are an integral part of these condensed financial statements.

7



South Dakota Soybean Processors, LLC
Condensed Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2020 and 2019
 
 
2020
 
2019
Operating activities
 

 
 

Net income (loss)
$
223,083

 
$
4,749,877

Charges and credits to net income not affecting cash:
 

 
 

Depreciation and amortization
1,188,309

 
1,067,591

Net (gain) loss recognized on derivative activities
(5,138,750
)
 
(748,368
)
Gain on sales of property and equipment

 
(6,687
)
Loss on equity method investment

 
96,228

Non-cash patronage dividends
(43,405
)
 
(42,364
)
Change in current assets and liabilities
(10,946,028
)
 
(28,244,480
)
Net cash provided by (used for) operating activities
(14,716,791
)
 
(23,128,203
)
 
 
 
 
Investing activities
 

 
 

Purchase of investments
(404,329
)
 

Retirement of patronage dividends
66,210

 
32,288

Proceeds from sales of property and equipment

 
64,800

Purchase of property and equipment
(1,864,856
)
 
(1,413,457
)
Net cash provided by (used for) investing activities
(2,202,975
)
 
(1,316,369
)
 
 
 
 
Financing activities
 

 
 

Change in excess of outstanding checks over bank balances
(2,615,647
)
 
4,534,794

Net proceeds (payments) from seasonal borrowings
17,972,775

 
10,541,986

Distributions to members
(6,692,180
)
 
(15,209,500
)
Payments for debt issue costs
(10,000
)
 

Proceeds from long-term debt
10,000,000

 
33,507,717

Principal payments on long-term debt
(2,000,000
)
 
(15,507,717
)
Net cash provided by (used for) financing activities
16,654,948

 
17,867,280

 
 
 
 
Net change in cash and cash equivalents
(264,818
)
 
(6,577,292
)
 
 
 
 
Cash and cash equivalents, beginning of period
624,681

 
7,197,082

 
 
 
 
Cash and cash equivalents, end of period
$
359,863

 
$
619,790

 
 
 
 
Supplemental disclosures of cash flow information
 

 
 

Cash paid during the period for:
 

 
 

Interest
$
300,888

 
$
90,005

 
 
 
 
Income taxes
$

 
$


The accompanying notes are an integral part of these condensed financial statements. 

8

South Dakota Soybean Processors, LLC
Notes to Condensed Financial Statements
 


Note 1 -         Principal Activity and Significant Accounting Policies
The unaudited condensed financial statements contained herein have been prepared pursuant to the rules and regulations of the Securities Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although South Dakota Soybean Processors, LLC (the “Company”, “LLC”, “we”, “our”, or “us”) believes that the disclosures made are adequate to make the information not misleading.
In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included in the accompanying condensed financial statements. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full year due in part to the seasonal nature of some of the Company’s businesses. The balance sheet data as of December 31, 2019 has been derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.
These statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2019, included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2020.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue
The Company accounts for all of its revenues from contracts with customers under ASC 606, Revenue from Contracts with Customers.
The Company principally generates revenue from merchandising and transporting manufactured agricultural products used as ingredients in food, feed, energy and industrial products. Revenue is measured based on the consideration specified in the contract with a customer, and excludes any amounts collected on behalf of third parties (e.g. - taxes). The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product to a customer. Control transfer typically occurs when goods are shipped from our facilities or at other predetermined control transfer points (for instance, destination terms). Shipping and handling costs related to contracts with customers for sale of goods are accounted for as a fulfillment activity and are included in cost of revenues. Accordingly, amounts billed to customers for such costs are included as a component of revenues.
Payments received in advance to the transfer of goods, or "contract liabilities", are included in "Deferred liabilities - current" on the Company's condensed balance sheets. These customer prepayments totaled $811,244 and $313,347 as of March 31, 2020 and December 31, 2019, respectively. Of the $313,347 balance as of December 31, 2019, contract liabilities recognized as revenues were $224,655 for the three months ended March 31, 2020. During the three months ended March 31, 2019, the Company recognized $15,042 of contract liabilities as revenues.
The following table presents a disaggregation of revenue from contracts with customers for the three month periods ended March 31, 2020 and 2019, by product type:
 
 
 
 
 
2020
 
2019
Soybean meal and hulls
 
 
 
 
$
62,692,880

 
$
59,662,803

Soybean oil and oil byproducts
 
 
 
 
36,030,532

 
32,304,004

 
 
 
 
 
 
 
 
Totals
 
 
 
 
$
98,723,412

 
$
91,966,807


9

South Dakota Soybean Processors, LLC
Notes to Condensed Financial Statements
 

Recent accounting pronouncements
Any recent accounting pronouncements are not expected to have a material impact on our condensed financial statements.
Note 2 -         Accounts Receivable
Accounts receivable are considered past due when payments are not received on a timely basis in accordance with the Company’s credit terms, which is generally 30 days from invoice date. Accounts considered uncollectible are written off. The Company’s estimate of the allowance for doubtful accounts is based on historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any.
The following table presents the aging analysis of trade receivables as of March 31, 2020 and December 31, 2019:
 
March 31,
2020
 
December 31,
2019
Past due:
 

 
 

Less than 30 days past due
$
4,231,734

 
$
4,306,064

30-60 days past due
297,961

 
341,956

60-90 days past due
19,314

 
10,302

Greater than 90 days past due
23,777

 
14,162

Total past due
4,572,786

 
4,672,484

Current
17,640,863

 
19,748,073

 
 
 
 
Totals
$
22,213,649

 
$
24,420,557

In general, cash is applied to the oldest outstanding invoice first, unless payment is for a specified invoice.  The Company, on a case by case basis, may charge a late fee of 1.5% per month on past due receivables.
Note 3 -           Inventories
The Company’s inventories consist of the following at March 31, 2020 and December 31, 2019:
 
March 31,
2020
 
December 31,
2019
Finished goods
$
34,784,325

 
$
26,559,194

Raw materials
23,872,019

 
17,641,335

Supplies & miscellaneous
327,613

 
269,523

 
 
 
 
Totals
$
58,983,957

 
$
44,470,052

Finished goods and raw materials are valued at estimated market value, which approximates net realizable value. In addition, futures and option contracts are marked to market through cost of revenues, with unrealized gains and losses recorded in the above inventory amounts. Supplies and other inventories are stated at net realizable value.
Note 4 -         Investments in Related Parties
The Company accounts for the investments in Prairie AquaTech, LLC, Prairie AquaTech Investments, LLC and Prairie AquaTech Manufacturing, LLC using the fair value method in ASU No. 2016-01. The Company has elected to utilize the measurement alternative for equity investments that do not have readily determinable fair values and measure these investments at their cost less any impairment plus or minus any observable price changes in orderly transactions.
Prior to October 2019, the Company accounted for its investment in Prairie AquaTech, LLC using the equity method due to the Company's ability to exercise significant influence based on its board position. The Company recognized

10

South Dakota Soybean Processors, LLC
Notes to Condensed Financial Statements
 

losses of $0 and $96,228 during the three months ended March 31, 2020 and 2019, respectively, which is included in other non-operating income (expense). In October 2019, the Company ceased the accounting for its investment in Prairie AquaTech, LLC under the equity method, and began accounting for the investment at fair value as a result of its decreased ability to exercise significant influence due to an increased quantity of board positions.
On March 27, 2020, the Company invested in Prairie AquaTech Manufacturing, LLC another $404,329 in cash. The Company also agreed to invest into Prairie AquaTech Manufacturing, LLC an additional $500,000 of soybean meal to be used in the entity's operations.
Note 5 -         Property and Equipment
The following is a summary of the Company's property and equipment at March 31, 2020 and December 31, 2019:
 
2020

2019
 
Cost
 
Accumulated Depreciation
 
Net
 
Net
Land
$
516,326

 
$

 
$
516,326

 
$
516,326

Land improvements
2,158,383

 
(646,615
)
 
1,511,768

 
1,545,088

Buildings and improvements
22,369,519

 
(9,627,132
)
 
12,742,387

 
12,807,844

Machinery and equipment
84,278,193

 
(43,667,603
)
 
40,610,590

 
41,480,121

Railroad cars
1,238,508

 
(37,155
)
 
1,201,353

 
1,207,545

Company vehicles
146,754

 
(115,026
)
 
31,728

 
36,032

Furniture and fixtures
1,363,744

 
(923,140
)
 
440,604

 
459,153

Construction in progress
8,139,988

 

 
8,139,988

 
6,465,095

 
 
 
 
 
 
 
 
Totals
$
120,211,415

 
$
(55,016,671
)
 
$
65,194,744

 
$
64,517,204

Depreciation of property and equipment was $1,187,316 and $1,067,052 for the three months ended March 31, 2020 and 2019, respectively.
Note 6 -         Note Payable – Seasonal Loan
The Company has entered into a revolving credit agreement with CoBank which expires December 1, 2020. The purpose of the credit agreement is to finance the operating needs of the Company. Under this agreement, the Company may borrow up to $28 million, and advances on the revolving credit agreement are secured. Interest accrues at a variable rate (3.19% at March 31, 2020). The Company pays a 0.20% annual commitment fee on any funds not borrowed. There were advances outstanding of $19,715,804 and $1,743,029 at March 31, 2020 and December 31, 2019, respectively. The remaining available funds to borrow under the terms of the revolving credit agreement were $8.3 million as of March 31, 2020.

11

South Dakota Soybean Processors, LLC
Notes to Condensed Financial Statements
 

Note 7 -         Long-Term Debt
The following is a summary of the Company's long-term debt at March 31, 2020 and December 31, 2019:
 
March 31,
2020
 
December 31,
2019
Revolving term loan from CoBank, interest at variable rates (3.44% and 4.24% at March 31, 2020 and December 31, 2019, respectively), secured by substantially all property and equipment. Loan matures September 20, 2023.
$
24,000,000

 
$
16,000,000

Note payable to Brookings Regional Railroad Authority, due in annual principal and interest installments of $75,500, interest rate at 2.00%, secured by railroad track assets. Note matures June 1, 2020.
603,342

 
603,342

Total debt before debt issuance costs
24,603,342

 
16,603,342

Less current maturities
(4,603,342
)
 
(4,603,342
)
Less debt issuance costs, net of amortization of $6,916 and $5,923 as of March 31, 2020 and December 31, 2019, respectively
(17,084
)
 
(8,077
)
 
 
 
 
Total long-term debt
$
19,982,916

 
$
11,991,923

The Company entered into an agreement as of January 28, 2020 with CoBank to amend and restate its Credit Agreement, which includes both the revolving term and seasonal loans. Under the terms and conditions of the Credit Agreement, CoBank agreed to make advances to the Company for up to $26,000,000 on the revolving term loan with a variable effective interest rate of 3.44%. The amount available for borrowing on the revolving term loan, however, will decrease by $2,000,000 every six months beginning on March 20, 2020, with a scheduled balloon payment for the remaining balance on the loan's maturity date of September 20, 2023. The Company pays a 0.40% annual commitment fee on any funds not borrowed. The debt issuance costs of $24,000 paid by the Company on this amendment will be amortized over the term of loan. The principal balance outstanding on the revolving term loan was $24,000,000 and $16,000,000 as of March 31, 2020 and December 31, 2019, respectively. There were no remaining commitments available to borrow on the revolving term loan as of March 31, 2020.
Under this agreement, the Company is subject to compliance with standard financial covenants and the maintenance of certain financial ratios. The Company was in compliance with all covenants and conditions with CoBank as of March 31, 2020.
Effective March 1, 2013, the State of South Dakota Department of Transportation agreed to loan the Brookings County Regional Railway Authority $964,070 for purposes of making improvements to the railway infrastructure near the Company’s soybean processing facility in Volga, South Dakota. In consideration of this secured loan, the Company agreed to provide a guarantee to the State of South Dakota Department of Transportation for the full amount of the loan, plus interest. This guaranty was converted into a direct obligation of the Company’s on October 16, 2013, when the Company received the entire loan proceeds and assumed responsibility for paying the annual principal and interest payments.
The following are minimum principal payments on long-term debt obligations for the twelve-month periods ended March 31:
2021
$
4,603,342

2022
4,000,000

2023
4,000,000

2024
12,000,000

 
 

Total
$
24,603,342


12

South Dakota Soybean Processors, LLC
Notes to Condensed Financial Statements
 

Note 8 -        Operating Leases
The Company has several operating leases for railcars. These leases have terms ranging from 3-18 years and do not have renewal terms provided. The leases require the Company to maintain the condition of the railcars, restrict the use of the railcars to specified products, such as soybean meal, hulls or oil, limit usage to the continental United States, Canada or Mexico, require approval to sublease to other entities, and require the Company's submission of its financial statements. Lease expense for all railcars was $783,210 and $779,119 for the three months ended March 31, 2020 and 2019, respectively.
The following is a schedule of the Company's operating leases for railcars as of March 31, 2020:
Lessor
 
Quantity of
Railcars
 
Commencement
Date
 
Maturity
Date
 
Monthly
Payment
 
 
 
 
 
 
 
 
 
American Railcar Leasing
 
30

 
7/1/2015
 
6/30/2021
 
$
30,780

Andersons Railcar Leasing Co.
 
10

 
7/1/2018
 
6/30/2023
 
5,000

Andersons Railcar Leasing Co.
 
20

 
7/1/2019
 
6/30/2026
 
11,300

GATX Corporation
 
15

 
7/1/2017
 
6/30/2020
 
4,500

Midwest Railcar Corporation
 
64

 
1/1/2015
 
12/31/2021
 
27,200

Trinity Capital
 
88

 
8/1/2002
 
7/31/2020
 
33,704

Trinity Capital
 
29

 
12/1/2015
 
11/30/2020
 
28,536

Trinity Capital
 
20

 
10/1/2015
 
9/30/2020
 
13,600

Wells Fargo Rail
 
112

 
8/1/2017
 
7/31/2022
 
52,557

Wells Fargo Rail
 
107

 
1/1/2018
 
12/31/2022
 
35,845

Wells Fargo Rail
 
7

 
1/1/2004
 
12/31/2021
 
2,926

Wells Fargo Rail
 
15

 
1/1/2004
 
12/31/2021
 
5,850

Wells Fargo Rail
 
8

 
1/1/2015
 
12/31/2021
 
3,600

 
 
 
 
 
 
 
 
 
 
 
525

 
 
 
 
 
$
255,398

The Company also has a number of other operating leases for machinery and equipment. These leases have terms ranging from 3-14 years; however, most of these leases have automatic renewal terms. These leases require monthly payments of $3,912. Rental expense under these other operating leases was $7,681 and $7,923 for the three-month periods ended March 31, 2020 and 2019, respectively.
On March 19, 2020, the Company entered into an agreement with an entity in the western United States to provide storage and handling services for the Company's soybean meal. The Company will pay the entity $3,300,000, which is included in current operating lease liabilities on the Company's balance sheet, after the entity's construction of additional storage and handling facilities. The agreement will mature seven years after completion of the construction but includes an additional seven-year renewal period at the sole discretion of the Company.
Operating leases are included in right-to-use lease assets, current operating lease liabilities, and long-term lease liabilities on the condensed balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company's secured incremental borrowing rates or implicit rates, when readily determinable. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the condensed balance sheet.
Lease expense for these operating leases is recognized on a straight-line basis over the lease terms. The components of lease costs recognized within our condensed statements of operations for the three-month periods ended March 31, 2020 and 2019 were as follows:

13

South Dakota Soybean Processors, LLC
Notes to Condensed Financial Statements
 

 
 
 
 
 
2020
 
2019
 
 
 
 
 
 
 
 
Cost of revenues - Freight and rail
 
 
 
 
$
783,210

 
$
779,119

Cost of revenues - Production
 
 
 
 
4,364

 
4,919

Administration expenses
 
 
 
 
3,317

 
3,004

Total operating lease costs
 
 
 
 
$
790,891

 
$
787,042

The following summarizes the supplemental cash flow information for the three-month period ended March 31, 2020 and 2019:
 
 
 
 
 
2020
 
2019
 
 
 
 
 
 
 
 
Cash paid for amounts included in measurement of lease liabilities
 
 
 
 
$
777,143

 
$
742,911

 
 
 
 
 
 
 
 
Supplemental non-cash information:
 
 
 
 
 
 
 
Right-of-use assets obtained in exchange for lease liabilities
 
 
 
 
$
3,300,000

 
$

The following summarizes the weighted-average remaining lease term and weighted-average discount rate:
 
 
March 31, 2020
 
 
 
Weighted-average remaining lease-term - operating leases (in years)
 
2.8

 
 
 
Weighted-average discount rate - operating leases
 
3.8
%
The following is a maturity analysis of the undiscounted cash flows of the operating lease liabilities as of March 31, 2020:
 
 
Railcars
 
Other
 
Total
Twelve-month periods ended March 31:
 
 
 
 
 
 
2021
 
$
2,506,344

 
$
3,342,702

 
$
5,849,046

2022
 
1,704,949

 
40,211

 
1,745,160

2023
 
780,991

 
39,782

 
820,773

2024
 
150,600

 
28,389

 
178,989

2025
 
135,600

 
15,248

 
150,848

Thereafter
 
169,500

 
4,943

 
174,443

Total lease payments
 
5,447,984

 
3,471,275

 
8,919,259

Less amount of lease payments representing interest
 
(341,420
)
 
(21,269
)
 
(362,689
)
Total present value of lease payments
 
$
5,106,564

 
$
3,450,006

 
$
8,556,570

Note 9 -        Member Distribution
On January 21, 2020, the Company’s Board of Managers approved a cash distribution of approximately $6.7 million, or 22.0¢ per capital unit. The distribution was paid in accordance with the Company’s operating agreement and distribution policy on February 6, 2020.

14

South Dakota Soybean Processors, LLC
Notes to Condensed Financial Statements
 

Note 10 -         Derivative Instruments and Hedging Activities
In the ordinary course of business, the Company enters into contractual arrangements as a means of managing exposure to changes in commodity prices and, occasionally, foreign exchange and interest rates. The Company’s derivative instruments primarily consist of commodity futures, options and forward contracts, and interest rate swaps, caps and floors. Although these contracts may be effective economic hedges of specified risks, they are not designated as, nor accounted for, as hedging instruments. These contracts are recorded on the Company’s condensed balance sheets at fair value as discussed in Note 11, Fair Value.
As of March 31, 2020 and December 31, 2019, the value of the Company’s open futures, options and forward contracts was approximately $902,894 and $(5,955,928), respectively.
 
 
 
As of March 31, 2020
 
Balance Sheet Classification
 
Asset Derivatives
 
Liability Derivatives
Derivatives not designated as hedging instruments:
 
 
 

 
 

Commodity contracts
Current Assets
 
$
11,995,519

 
$
10,328,034

Foreign exchange contracts
Current Assets
 
88,120

 
83,015

Interest rate caps and floors
Current Liabilities
 

 
769,696

 
 
 
 
 
 
Totals
 
 
$
12,083,639

 
$
11,180,745

 
 
 
As of December 31, 2019
 
Balance Sheet Classification
 
Asset Derivatives
 
Liability Derivatives
Derivatives not designated as hedging instruments:
 
 
 

 
 

Commodity contracts
Current Assets
 
$
3,320,161

 
$
8,930,683

Foreign exchange contracts
Current Assets
 
29,696

 
27,582

Interest rate caps and floors
Current Liabilities
 

 
347,520

 
 
 
 
 
 
Totals
 
 
$
3,349,857

 
$
9,305,785

During the three-month periods ended March 31, 2020 and 2019, net realized and unrealized gains (losses) on derivative transactions were recognized in the condensed statements of operations as follows:
 
 
 
 
 
2020
 
2019
Derivatives not designated as hedging instruments:
 
 

 
 

Commodity contracts
 
 
 
 
$
5,626,229

 
$
741,952

Foreign exchange contracts
 
 
 
 
(67,997
)
 
36,482

Interest rate swaps, caps and floors
 
 
 
 
(419,482
)
 
(30,066
)
 
 
 
 
 
 
 
 
Totals
 
 
 
 
$
5,138,750

 
$
748,368

Note 11 -       Fair Value
ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, this guidance establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. The three levels of hierarchy and examples are as follows:

15

South Dakota Soybean Processors, LLC
Notes to Condensed Financial Statements
 

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange and commodity derivative contracts listed on the Chicago Board of Trade (“CBOT”).
Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs, such as commodity prices using forward future prices.
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
The following tables set forth financial assets and liabilities measured at fair value in the condensed balance sheets and the respective levels to which fair value measurements are classified within the fair value hierarchy as of March 31, 2020 and December 31, 2019:
 
Fair Value as of March 31, 2020
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets:
 

 
 

 
 

 
 

Inventory
$
1,667,485

 
$
56,871,858

 
$

 
$
58,539,343

Margin deposits (deficits)
$
6,014,327

 
$

 
$

 
$
6,014,327

 
Fair Value as of December 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets:
 

 
 

 
 

 
 

Inventory
$
(5,610,521
)
 
$
49,717,733

 
$

 
$
44,107,212

Margin deposits
$
6,772,160

 
$

 
$

 
$
6,772,160

The Company enters into various commodity derivative instruments, including futures, options, swaps and other agreements. The fair value of the Company’s commodity derivatives is determined using unadjusted quoted prices for identical instruments on the CBOT. The Company estimates the fair market value of their finished goods and raw materials inventories using the market price quotations of similar forward future contracts listed on the CBOT and adjusts for the local market adjustments derived from other grain terminals in our area. This market adjustment caused a negative balance in the Level 1 inventory amount as of December 31, 2019.
The Company considers the carrying amount of significant classes of financial instruments on the balance sheets, including cash, accounts receivable, and accounts payable, to be reasonable estimates of fair value due to their length or maturity. The fair value of the Company’s long-term debt approximates the carrying value. The interest rates on the long-term debt are similar to rates the Company would be able to obtain currently in the market.
The Company has patronage investments in other cooperatives and common and preferred stock holdings in privately held entities. There is no market for their patronage credits or the entity’s common and preferred holdings, and it is impracticable to estimate the fair value of the Company’s investments. These investments are carried on the balance sheet at original cost plus the amount of patronage earnings allocated to the Company, less any cash distributions received.
Note 12 -       Related Party Transactions
The Company sold soybean products to Prairie AquaTech, LLC and Prairie AquaTech Manufacturing, LLC totaling $2,806 and $108,057 during the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020

16

South Dakota Soybean Processors, LLC
Notes to Condensed Financial Statements
 

and December 31, 2019, Prairie AquaTech, LLC and Prairie AquaTech Manufacturing, LLC owed the Company $7,000 and $104,947, respectively.
The Company has entered into agreements with Prairie AquaTech Manufacturing, LLC to perform various management services and to serve as the owner's representative during the construction of its new manufacturing facility adjacent to the Company's plant in Volga, South Dakota. The Company received a total of $1.72 million in compensation for those services, which was recorded in deferred liabilities on the Company's condensed balance sheet. As of March 31, 2020 and December 31, 2019, the balance remaining in deferred liabilities was $25,278 and $101,111, respectively. The Company recognized revenues from management services of $85,833 and $344,756 during the three months ended March 31, 2020 and 2019, respectively.
Note 13 -       Commitments and Contingencies
As of March 31, 2020, the Company had unpaid commitments of approximately $286,000 for construction and acquisition of property and equipment, all of which is expected to be incurred by December 2020.
From time to time in the ordinary course of our business, the Company may be named as a defendant in legal proceedings related to various issues, including without limitation, workers’ compensation claims, tort claims, or contractual dispute. The Company carries insurance that provides protection against general commercial liability claims, claims against our directors, officer and employees, business interruption, automobile liability, and workers' compensation. The Company is not currently involved in any material legal proceedings and are not aware of any potential claims.
Note 14 -       Subsequent Event
The Company evaluated all of its activities and, except for the event listed below, concluded that no subsequent events have occurred that would require recognition in its financial statements or disclosed in the notes to its financial statements.
On April 20, 2020, the Company entered into an agreement with the U.S Small Business Administration for a loan of $1.2 million under the Paycheck Protection Program. The loan bears a 1.0% interest rate and matures on April 20, 2022. Principal and interest is due at maturity.


17



Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
The information in this quarterly report on Form 10-Q for the three-month period ended March 31, 2020, (including reports filed with the Securities and Exchange Commission (the “SEC” or “Commission”), contains “forward-looking statements” that deal with future results, expectations, plans and performance, and should be read in conjunction with the financial statements and Annual Report on Form 10-K for the year ended December 31, 2019. Forward-looking statements may include statements which use words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “predict,” “hope,” “will,” “should,” “could,” “may,” “future,” “potential,” or the negatives of these words, and all similar expressions. Forward-looking statements involve numerous assumptions, risks and uncertainties. Actual results or actual business or other conditions may differ materially from those contemplated by any forward-looking statements. Factors that could cause actual results to differ materially from the forward-looking statements are identified in our Form 10-K for the year ended December 31, 2019.
We are not under any duty to update the forward-looking statements contained in this report, nor do we guarantee future results or performance or what future business conditions will be like. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report.
Executive Overview and Summary
We reported a net income of $223,000 during the three-month period ended March 31, 2020, compared to $4.7 million during the same period in 2019. The decrease in profitability is due to several factors including increased soybean procurement costs, deterioration in soybean quality, and increased soybean processing capacity by other U.S. processors. During the spring and 2019 growing season, South Dakota experienced excessive rainfall and moisture which resulted in many unplanted fields. The unplanted fields along with a corresponding drop in soybean production forced us to acquire soybeans outside of our typical soybean market, increasing our costs. In addition, the soybeans harvested in 2019 were generally higher in moisture and lower in oil and protein content which decreased our production yield and increased production costs. Processing margins, moreover, were lower than in previous years due to U.S. processors operating at record rates along with new capacity coming on line.
The recent COVID-19 pandemic has created a significant level of uncertainty for the rest of 2020. The pandemic has caused a major disruption to the food supply chain, and consumer habits are changing rapidly. A heavy portion of our customer base on which we rely is in the food industry and with hog producers where we sell soybean oil and meal, respectively. To date, our oil customers have delayed shipments due to a substantial slowdown in the restaurant industry, and our meal customers have reduced shipments due to recent hog processing plant shutdowns. If these trends continue, our result of operations could be materially affected. We are optimistic, however, that these trends are only short-term in nature and that our current operational and marketing positions will allow us to withstand a short-term disruption.

18



RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 2020 and 2019
 
Three Months Ended March 31, 2020
 
Three Months Ended March 31, 2019
 
$
 
% of Revenue
 
$
 
% of Revenue
Revenue
$
98,723,412

 
100.0

 
$
91,966,807

 
100.0

Cost of revenues
(96,998,949
)
 
(98.3
)
 
(86,507,393
)
 
(94.1
)
Operating expenses
(1,024,729
)
 
(1.0
)
 
(1,005,201
)
 
(1.1
)
Other income (expense)
(476,651
)
 
(0.5
)
 
296,264

 
0.3

Income tax benefit (expense)

 

 
(600
)
 

 
 
 
 
 
 
 
 
Net income
$
223,083

 
0.2

 
$
4,749,877

 
5.2

Revenue – Revenue increased $6.8 million, or 7.3%, for the three-month period ended March 31, 2020, compared to the same period in 2019. The increase in revenues is primarily due to an 8.9% increase in the average sales price of soybean oil following increased consumption in the biofuels' sector and strong global demand from the food industry prior to the COVID-19 pandemic.
Gross Profit/Loss – Gross profit decreased $3.7 million for the three months ended March 31, 2020, compared to the same period in 2019. The decrease in gross profit is primarily due to adverse weather in our soybean procurement area and increased soybean processing in the U.S. Severe flooding from heavy snow and rainfall in the spring of 2019 caused local farmers to delay or reduce planting, or elect not to plant at all. Consequently, soybean production in South Dakota decreased by nearly 50% from 2018 to 2019, which increased soybean prices and reduced our soybean crush margins. Crush margins were also adversely affected by increased production capacity from soybean processors throughout the U.S. which, after experiencing decent crush margins, increased their production capacity.
Operating Expenses – Administrative expenses, including all selling, general and administrative expenses, remained relatively constant for the three-month period ended March 31, 2020, compared to the same period in 2019.
Interest Expense – Interest expense increased $157,000, or 81.8%, during the three months ended March 31, 2020, compared to the same period in 2019. The increase in interest expense is due primarily to an increase in borrowings from our lines of credit, as we borrowed more to pay for capital improvements. The average debt level during the three-month period ended March 31, 2020 was approximately $36.6 million, compared to $15.1 million for the same period in 2019. Partially offsetting the increase in borrowings is a decrease in interest rates on our senior debt with CoBank. As of March 31, 2020, the interest rate on our revolving long-term loan was 3.44%, compared to 4.94% as of March 31, 2019.
Other Non-Operating Income – Other non-operating income (expense), including patronage dividend income, decreased $615,000 during the three-month period ended March 31, 2020, compared to the same period in 2019. The decrease in other non-operating income is due to a $389,000 increase in losses on our interest rate hedges and a $259,000 decrease in compensation from management services. During the three-month period ended March 31, 2020, losses on interest rate caps and floors totaled $419,000, compared to $30,000 during the same period in 2019. Compensation from management services decreased from 2019 to 2020 due to the completion of construction services for Prairie AquaTech Manufacturing, LLC in 2019.
Net Income/Loss – During the three-month period ended March 31, 2020, we generated a net income of $0.2 million, compared to $4.7 million for the same period in 2019. The $4.5 million decrease is primarily attributable to decreases in gross profit and other non-operating income.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash provided by operations and borrowings under our two lines of credit which are discussed below under “Indebtedness.” On March 31, 2020, we had working capital, defined as current assets less current liabilities, of approximately $18.7 million, compared to $22.7 million on March 31, 2019. Working capital

19



decreased $4.0 million between periods primarily due to capital expenditures of $10.5 million and a $6.7 million distribution to members. Based on our current plans, we believe that we will continue funding our capital and operating needs from cash from operations and revolving lines of credit.
Comparison of the Three Months Ended March 31, 2020 and 2019
 
2020
 
2019
Net cash provided by (used for) operating activities
$
(14,716,791
)
 
$
(23,128,203
)
Net cash provided by (used for) investing activities
(2,202,975
)
 
(1,316,369
)
Net cash provided by (used for) financing activities
16,654,948

 
17,867,280

Cash Flows Used For Operations
The $8.4 million decrease in cash flows used for operating activities is due to a $10.9 million decrease in accrued commodity purchases in 2020, compared to the same period in 2019. During the three-month period ended March 31, 2020, we reduced accrued commodity purchases by $1.8 million, compared to $12.7 million during the same period in 2019.
Cash Flows Used For Investing Activities
The $0.9 million increase in cash flows used for investing activities during the three-month period ended March 31, 2020, compared to the same period in 2019, is due to increases in capital improvements and investment purchases. During the three months ended March 31, 2020, we spent approximately $1.9 million on capital improvements to help improve the quality and efficiency of operations, compared to $1.4 million during the same period in 2019. We invested an additional $0.4 million in cash in Prairie AquaTech Manufacturing, LLC, compared to $0 during the same period in 2019.
Cash Flows Provided By (Used For) Financing Activities
The $1.2 million decrease in cash flows provided by financing activities is principally due to an $18.4 million increase in net proceeds on borrowings. During the three months ended March 31, 2020, net proceeds on borrowings increased $23.3 million , compared to $33.1 million during the same period in 2019. Partially offsetting the decrease in borrowings was an $8.5 million decrease in cash distributions to our members. Cash distributions to our members totaled approximately $6.7 million during the three-month period ended March 31, 2020, compared to $15.2 million during the same period in 2019.
Indebtedness
We have two lines of credit with CoBank, our primary lender, to meet the short and long-term needs of our operations. The first credit line is a revolving long-term loan. Under the terms of this loan, we may borrow funds as needed up to the credit line maximum, or $26.0 million, and then pay down the principal whenever excess cash is available. Repaid amounts may be borrowed up to the available credit line. On March 20, 2020, the available credit line decreased by $2.0 million, and decreases continually by the same amount every six months until the credit line’s maturity on September 20, 2023 at which time there will be a balloon payment for the remaining balance. We pay a 0.40% annual commitment fee on any funds not borrowed. The principal balance outstanding on the revolving term loan is $24.0 million and $16.0 million as of March 31, 2020 and December 31, 2019. Under this loan, there were no additional funds available to be borrowed as of March 31, 2020.
The second credit line is a revolving working capital (seasonal) loan. The primary purpose of this loan is to finance our operating needs. The maximum we may borrow under this credit line is $28 million until the loan's maturity on December 1, 2020. We pay a 0.20% annual commitment fee on any funds not borrowed; however, we have the option to reduce the credit line during any given commitment period listed in the credit agreement to avoid the commitment fee. As of March 31, 2020 and December 31, 2019, there were advances outstanding on the seasonal loan of $19.7 million and $1.7 million, respectively. Under this loan, there was $8.3 million in available funds to borrow as of March 31, 2020.

20



Both loans with CoBank are set up with a variable rate option. The variable rate is set by CoBank and changes weekly on the first business day of each week. We also have a fixed rate option on both loans, allowing us to fix rates for any period between one day and the entire commitment period. The annual interest rate on the revolving term loan is 3.44% and 4.24% as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020 and December 31, 2019, the interest rate on the seasonal loan is 3.19% and 3.99%, respectively. We were in compliance with all covenants and conditions under the loans as of March 31, 2020.
We also have a loan with the State of South Dakota Department of Transportation in connection with previous improvements made to the railway infrastructure near our soybean processing facility in Volga, South Dakota. Under this loan, which matures on June 1, 2020, we make annual principal and interest payments of $75,500. The principal balance outstanding on this loan was $603,342 as of March 31, 2020 and December 31, 2019.
OFF BALANCE SHEET FINANCING ARRANGEMENTS
We do not utilize variable interest entities or other off-balance sheet financial arrangements.
Contractual Obligations
The following table shows our contractual obligations for the periods presented:
 
 
Payment due by period
CONTRACTUAL
OBLIGATIONS
 
Total
 
Less than
1 year
 
1-3 years
 
3-5 years
 
More than
5 years
Long-Term Debt Obligations (1)
 
$
19,347,000

 
$
5,562,000

 
$
9,360,000

 
$
4,425,000

 
$

 
 
 
 
 
 
 
 
 
 
 
Operating Lease Obligations
 
8,914,000

 
5,849,000

 
2,566,000

 
330,000

 
169,000

 
 
 
 
 
 
 
 
 
 
 
Totals
 
$
28,261,000

 
$
11,411,000

 
$
11,926,000

 
$
4,755,000

 
$
169,000

(1)
Represents principal and interest payments on our notes payable, which are included on our Balance Sheet.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 of our Financial Statements under Part I, Item 1, for a discussion on the impact, if any, of the recently pronounced accounting standards.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no material changes to our critical accounting policies and estimates from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2019.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
Commodities Risk & Risk Management. To reduce the price change risks associated with holding fixed price commodity positions, we generally take opposite and offsetting positions by entering into commodity futures contracts (either a straight or options futures contract) on a regulated commodity futures exchange, the Chicago Board of Trade. While hedging activities reduce the risk of loss from changing market prices, such activities also limit the gain potential which otherwise could result from these significant fluctuations in market prices. Our policy is generally to maintain a hedged position within limits, but we can be long or short at any time. Our profitability is primarily derived from margins on soybeans processed, not from hedging transactions. Our management does not anticipate that hedging activities will have a significant impact on future operating results or liquidity. Hedging arrangements do not protect against nonperformance of a cash contract.
At any one time, our inventory and purchase contracts for delivery to our facility may be substantial. We have risk management policies and procedures that include net position limits. They are defined by commodity, and include both trader and management limits. This policy and procedure triggers a review by management when any trader is outside

21



of position limits. The position limits are reviewed at least annually with the board of managers. We monitor current market conditions and may expand or reduce the limits in response to changes in those conditions.
An adverse change in market prices would not materially affect our profitability since we generally take opposite and offsetting positions by entering into commodity futures and forward contracts as economic hedges of price risk.
Foreign Currency Risk. We conduct essentially all of our business in U.S. dollars and have minimal direct risk regarding foreign currency fluctuations. Foreign currency fluctuations do, however, impact the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of and demand for U.S. agricultural products compared to the same products offered by foreign suppliers.
An adverse change in market prices would not materially affect our profitability since we generally take opposite and offsetting positions by entering into commodity futures and forward contracts as economic hedges of price risk.
Interest Rate Risk. We manage exposure to interest rate changes by using variable rate loan agreements with fixed rate options. Long-term loan agreements can utilize the fixed option through maturity; however, the revolving ability to pay down and borrow back would be eliminated once the funds were fixed.
As of March 31, 2020, we had $603,342 in fixed rate debt outstanding and $52 million of variable rate lines of credit. Interest rate changes impact the amount of our interest payments and, therefore, our future earnings and cash flows. Assuming other variables remain constant, a 1.0% increase in interest rates on our variable rate debt could have an estimated impact on profitability of approximately $520,000 per year.
Item 4.    Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Changes in Internal Control Over Financial Reporting. There were no changes to our internal controls over financial reporting that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting during the quarter ended March 31, 2020.
PART II – OTHER INFORMATION
Item 1.    Legal Proceedings.
From time to time in the ordinary course of our business, we may be named as a defendant in legal proceedings related to various issues, including without limitation, workers’ compensation claims, tort claims, or contractual dispute. We carry insurance that provides protection against general commercial liability claims, claims against our directors, officer and employees, business interruption, automobile liability, and workers' compensation. We are not currently involved in any material legal proceedings and are not aware of any potential claims.
Item 1A. Risk Factors.
During the quarter ended March 31, 2020, there were no material changes to the Risk Factors disclosed in Item 1A (Part I) of our 2019 Annual Report on Form 10-K.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3.    Defaults Upon Senior Securities.
None.

22



Item 4.    Mine Safety Disclosures.
None.
Item 5.    Other Information.
None.
Item 6.    Exhibits. 
____________________________________________________________________________

(1) Incorporated by reference from Appendix B to the information statement/prospectus filed as a part of the issuer’s Registration Statement on Form S-4 (File No. 333-75804).
(2) Incorporated by reference from the same numbered exhibit to the issuer’s Form 8-K filed on June 22, 2017.
(3) Incorporated by reference from the same numbered exhibit to the issuer’s Form 10-Q filed on August 14, 2002.
(4) Incorporated by reference from the same numbered exhibit to the issuer’s Registration Statement on Form S-4 (File No. 333-75804).
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
 
 
 
 
Dated:
May 7, 2020
By
/s/ Thomas Kersting
 
 
 
Thomas Kersting, Chief Executive Officer
 
 
 
(Principal Executive Officer)
 
 
 
 
Dated:
May 7, 2020
By
/s/ Mark Hyde
 
 
 
Mark Hyde, Chief Financial Officer
 
 
 
(Principal Financial Officer)

23