This report contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, among others, those
statements including the words "expect", "anticipate", "believe", "may" and
similar expressions. The Cooperative's actual results could differ materially
from those indicated. See the discussion of "Risk Factors" in the Cooperative's
Annual Report for the 2013 fiscal year on Form 10-K.
Ownership of our membership units requires our members to deliver corn to the Cooperative for processing in proportion to the number of units each member holds. A member is required to deliver one bushel of corn for each of our units held by the member. Currently 15,490,480 of our units are issued and outstanding. Income and losses are allocated to our members based on the volume of corn they deliver. Subject to certain limitations, as long as a member patronizes the Cooperative by delivering corn equal to the number of units held by the member, the member will be allocated a corresponding portion of our income. In this way, we continue to operate on a cooperative basis.
To hold our units a member is required to execute a Uniform Member Agreement that obligates the member to deliver corn to us and an Annual Delivery Agreement by which each member annually elects the method the member would like to use to deliver corn - either Method A or Method B, or a combination of both. Under Method A, a member is required to physically deliver corn to us either at the facility or another location reasonably designated by us. Under Method B, a member appoints us as its agent to arrange for the acquisition and delivery of corn on the member's behalf. We appoint Cargill as our agent to arrange for the delivery of the corn by our members who elect to deliver corn using Method A, and we appoint Cargill as our agent to acquire corn on our behalf for our members who elect to deliver corn using Method B. If a member elects to deliver corn using Method B, the price per bushel paid to the member is equal to the price per bushel paid by Cargill to acquire the corn as our agent. Members who deliver corn under Method A are paid the market price or contracted price for their corn at the time of delivery. Members who deliver corn under Method A receive from the Cooperative an incentive payment of
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A Method A member directly contracts with Cargill for the contract price agreed upon for the corn or, in the absence of an agreed upon price, the market price per bushel for corn delivered on the day on which the corn is delivered and accepted at the facility. With respect to all Method A corn that is delivered, Cargill pays to the Cooperative the aggregate purchase price for corn purchased from the member, and then, on the Cooperative's behalf, makes individual payments for corn directly to the member. In the event a Method A member delivers more than its delivery commitment to Cargill, any corn delivered in excess of that commitment is handled as a direct sale of corn to Cargill and is priced at the current closing delivery corn price established by Cargill at the facility on the day it is unloaded. In the event a Method A member delivers less than its committed amount of corn to Cargill, the quantity of the shortfall is then purchased and delivered by Cargill on the Cooperative's behalf, but this purchased corn is not credited to the Method A member's account. If a Method A member fails to fully satisfy the corn delivery requirement, Cargill purchases replacement corn for which we reimburse Cargill the amount by which the underlying contracted corn price is less than the price of buying the replacement corn that was due on the delivery date. The Method A member who fails to deliver corn is then invoiced for the price of the corn. In addition, if a Method A member fails to deliver all of the corn it was obligated to deliver, that member's allocation of our profit or losses and any cash distributions is proportionately reduced and we may terminate the member's membership.
According to the Cooperative's governing documents, income and/or losses are allocated and distributed to its members on a patronage basis based on each member's volume of corn deliveries. The governing documents establish a Method A delivery pool and a Method B delivery pool. Prior to
For the 2014 fiscal year, 28% of members elected to deliver corn by Method A and 72% elected to deliver corn by Method B. This election will result in 28% of the Cooperative's income and/or losses and 72% of any cash distributions being allocated to the Method A pool in fiscal year 2014, which reflects the actual percentage of members who elected to deliver corn using Method A and does not result in reallocation to meet the 25% requirement set forth in the Cooperative's governing documents.
Results of Operations
Comparison of the Six Months Ended
Revenues. The Cooperative derives revenue from two sources: operations related to the marketing of members' corn and income derived from the Cooperative's membership interest in ProGold. The corn marketing operations generate revenue for the Cooperative equal to the value of the corn that is delivered to Cargill. The Cooperative recognizes expense equal to this same amount which results in the corn marketing operations being revenue neutral to the Cooperative, except for revenue from the Method B agency fee and expenses related to the Method A incentive payments, required licensing and bonding expenses, and the service fee paid to Cargill.
For the six-months ended
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The Cooperative derived income from ProGold for the six-months ended
General and Administrative Expenses. The Cooperative's general and administrative expenses include salaries and benefits, professional fees and fees paid to our board of directors. The general and administrative expenses for the six-months ended
Interest Income. Interest income for the six-months ended
Comparison of the Three Months Ended
Revenues. For the three months ended
The Cooperative derived income from ProGold for the three months ended
General and Administrative Expenses. The general and administrative expenses for the three months ended
Interest Income. Interest income for the three months ended
Liquidity and Capital Resources
The Cooperative's working capital at
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The Cooperative had no long-term debt as of
The Cooperative used operating cash flows of
The Cooperative received cash distributions from ProGold totaling
The Cooperative paid cash distributions to its members totaling
Management believes that non-cash working capital levels are appropriate in the current business environment and does not expect a significant increase or reduction of non-cash working capital in the next 12-months.
Significant Accounting Estimates and Policies
The Cooperative generally does not pay out Method A incentive payments or collect Method B agency fees until the end of its fiscal year. These amounts are accrued quarterly and then confirmed at the end of the fiscal year. The total annual Method B agency fee was determinable once the members completed their delivery method determination prior to
The remainder of the Cooperative's significant accounting policies are described in Note 2, Summary of Significant Accounting Polices, of the Notes to the Financial Statements included in the Cooperative's Annual Report on Form 10-K for the fiscal year ending