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GGRO 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 – Basis of Presentation
Note 2 – Expenses
Note 3 – Progold Limited Liability Company
Note 4 – Investments
Note 5 – Employee Benefit Plans
Note 6 – Recently Issued Accounting Pronouncements
Note 7 – Change in Accounting Standards
Note 8 – Distributions To Members
Note 9 – Commitments and Contingencies
Note 10 – Subsequent Events
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information.
Item 6. Exhibits
EX-31.1 ggro-20160930ex311c2f341.htm
EX-32.1 ggro-20160930ex321e57319.htm

Golden Growers Cooperative Earnings 2016-09-30

Balance SheetIncome StatementCash Flow

10-Q 1 ggro-20160930x10q.htm 10-Q ggrou_Current_Folio_10Q

 

 

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, 2016

 

Commission file number:  000-53957

 

Golden Growers Cooperative

(Exact name of registrant as specified in its charter)

 

 

 

 

Minnesota

 

27-1312571

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

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)

 

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

 

 

 

YES  ☒

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).  

 

 

 

YES  ☒

NO  ☐

 

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

 

 

 

 

 

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☐

 

(Do not check if a small reporting company)

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

 

 

 

YES  ☐

NO  ☒

 

As of November 14, 2016 the Cooperative had 15,490,480 Units issued and outstanding.

 

 

 

 


 

 


 

                  PART I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

GOLDEN GROWERS COOPERATIVE

BALANCE SHEETS

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

    

September 30, 2016

    

December 31, 2015

 

 

 

(Unaudited)

    

(Audited)

 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

3,084

 

$

2,272

 

Short-Term Investments

 

 

220

 

 

220

 

Prepaid Expenses

 

 

590

 

 

287

 

Total Current Assets

 

 

3,894

 

 

2,779

 

 

 

 

 

 

 

 

 

Furniture and Equipment, Net

 

 

1

 

 

3

 

 

 

 

 

 

 

 

 

Investment in ProGold Limited Liability Company

 

 

21,820

 

 

25,831

 

 

 

 

 

 

 

 

 

Total Assets

 

$

25,715

 

$

28,613

 

 

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts Payable

 

$

2

 

$

23

 

Accrued Liabilities

 

 

3,253

 

 

229

 

Total Current Liabilities

 

 

3,255

 

 

252

 

 

 

 

 

 

 

 

 

Non-Current Liabilities

 

 

 —

 

 

48

 

 

 

 

 

 

 

 

 

Members' Equity:

 

 

 

 

 

 

 

Members’ Equity

 

 

22,460

 

 

28,361

 

Membership Units, Authorized 60,000,000 Units, Issued and Outstanding 15,490,480 as of September 30, 2016 and December 31, 2015

 

 

 

 

 

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

 —

 

 

(48)

 

 

 

 

 

 

 

 

 

Total Members’ Equity

 

 

22,460

 

 

28,313

 

 

 

 

 

 

 

 

 

Total Liabilities and Members’ Equity

 

$

25,715

 

$

28,613

 

 

See Notes to Financial Statements

 

 

 

1


 

GOLDEN GROWERS COOPERATIVE

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In Thousands, Other Than Share and Per-Share Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

 

Nine Months Ended

 

 

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

Corn Revenue

 

$

12,664

 

$

11,554

 

$

43,466

 

$

46,469

 

Corn Expense

 

 

(12,699)

 

 

(11,587)

 

 

(43,545)

 

 

(46,546)

 

Net Income from ProGold Limited Liability Company

 

 

1,309

 

 

1,407

 

 

4,068

 

 

3,797

 

General & Administrative Expenses

 

 

(104)

 

 

(138)

 

 

(447)

 

 

(490)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income from Operations

 

 

1,170

 

 

1,236

 

 

3,542

 

 

3,230

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

2

 

 

2

 

 

6

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Before Income Tax

 

$

1,172

 

$

1,238

 

$

3,548

 

$

3,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Provision

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Net Income

 

$

1,172

 

$

1,238

 

$

3,548

 

$

3,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares/Units Outstanding

 

 

15,490,480

 

 

15,490,480

 

 

15,490,480

 

 

15,490,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share/Membership Unit

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary and Fully Diluted

 

$

0.08

 

$

0.08

 

$

0.23

 

$

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

 

Nine Months Ended

 

 

    

September 30, 2016

    

September 30, 2015

    

September 30, 2016

    

September 30, 2015

 

COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

1,172

 

$

1,238

 

$

3,548

 

$

3,236

 

Pension Liability Adjustment

 

 

 —

 

 

 —

 

 

48

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Income

 

$

1,172

 

$

1,238

 

$

3,596

 

$

3,236

 

 

 

 

 

See Notes to Financial Statements

 

2


 

GOLDEN GROWERS COOPERATIVE

STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

    

September 30, 2016

    

September 30, 2015

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

Net Income

 

$

3,548

 

$

3,236

 

Net (Income) from ProGold Limited Liability Company

 

 

(4,068)

 

 

(3,797)

 

Depreciation

 

 

2

 

 

1

 

Changes in assets and liabilities

 

 

 

 

 

 

 

Short-Term Investments

 

 

 

 

(2)

 

Prepaid Expenses and Other Current Assets

 

 

(303)

 

 

216

 

Accrued liabilities and Payables

 

 

(248)

 

 

(213)

 

Net cash used in operating activities

 

 

(1,069)

 

 

(559)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

Distribution received from ProGold LLC

 

 

8,077

 

 

8,109

 

Net cash Provided in Investing Activities

 

 

8,077

 

 

8,109

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

Member distributions paid

 

 

(6,196)

 

 

(6,662)

 

Net Cash Used by Financing Activities

 

 

(6,196)

 

 

(6,662)

 

 

 

 

 

 

 

 

 

Increase (Decrease) in Cash and Cash Equivalents

 

 

812

 

 

888

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Period

 

 

2,272

 

 

2,483

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Period

 

$

3,084

 

$

3,371

 

 

 

 

 

 

 

 

 

Non-Cash Financing Activity

 

 

 

 

 

 

 

Accrued Dividend Payable to Members

 

$

3,253

 

$

3,563

 

 

See Notes to Financial Statements

 

 

 

 

 

3


 

GOLDEN GROWERS COOPERATIVE

NOTES TO FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

 

NOTE 1 – BASIS OF PRESENTATION

 

The financial statements of the Golden Growers Cooperative (the “Cooperative”) for the nine-month periods ended September 30, 2016 and 2015 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, 2015. The results of operations for the periods ended September 30, 2016 are not necessarily indicative of the results for the entire fiscal year ending December 31, 2016.

 

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 $92,000, which is paid by the Cooperative to Cargill in quarterly installments and terminates on December 31, 2017.

 

NOTE 3 – PROGOLD LIMITED LIABILITY COMPANY

 

The Cooperative has a 49% ownership interest in ProGold Limited Liability Company (“ProGold LLC”).  Following is summary financial information for ProGold LLC, which were derived from the monthly unaudited financial statements of ProGold LLC:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

(In Thousands)

    

2016

    

2015

    

2015

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

$

137

 

$

151

 

$

133

 

Long-Term Assets

 

 

44,906

 

 

55,928

 

 

53,386

 

Total Assets

 

$

45,043

 

$

56,079

 

$

53,519

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

$

412

 

$

411

 

$

404

 

Long-Term Liabilities

 

 

100

 

 

500

 

 

400

 

Total Liabilities

 

 

512

 

 

911

 

 

804

 

 

 

 

 

 

 

 

 

 

 

 

Members’ Equity

 

 

44,531

 

 

55,168

 

 

52,715

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Members’ Equity

 

$

45,043

 

$

56,079

 

$

53,519

 

 

 

 

 

 

 

 

 

 

 

 

Rent Revenue on Operating Lease

 

$

17,226

 

$

17,222

 

$

23,106

 

Expenses

 

 

8,922

 

 

9,472

 

 

12,392

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

8,304

 

$

7,750

 

$

10,714

 

 

 

 

NOTE 4 – INVESTMENTS

 

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Quoted market prices are generally not available for the Company’s financial instruments.  Fair values are based on judgments regarding anticipated cash flows, future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.  These estimates involve uncertainties and matters of judgment, and therefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

 

4


 

The Cooperative has determined fair value of its investments held to maturity based on Level 1 inputs.  The Cooperative’s investments held to maturity are as follows as of September 30, 2016 and December 31, 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Gross 

    

Gross 

    

 

 

 

 

 

Amortized 

 

Unrealized 

 

Unrealized 

 

 

 

 

 

 

Cost

 

Gains

 

Losses

 

Fair Value

 

September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market & CD’s

 

$

220

 

$

 

$

 

$

220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market & CD’s

 

$

220

 

$

 

$

 

$

220

 

 

 

 

NOTE 5 – EMPLOYEE BENEFIT PLANS

 

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

 

The following schedules provide the components of Net Periodic Benefit Cost for the nine-months ended September 30, 2016 and September 30, 2015 (in thousands):  

 

 

 

 

 

 

 

 

 

 

 

 

    

September 30, 

    

September 30, 

 

 

 

2016

    

2015

 

 

 

 

 

 

 

 

 

Service Cost

 

$

 

$

 

Interest Cost

 

 

28

 

 

39

 

Expected Return on Plan Assets

 

 

(33)

 

 

(44)

 

Amortization of Net (Gain) Loss

 

 

8

 

 

2

 

Net Periodic Pension Cost

 

$

3

 

$

(3)

 

 

Through the nine-months ended September 30, 2016, the Cooperative has made $12,000 in contributions as compared to $19,500 through the nine-months ended September 30, 2015.  The Cooperative does not anticipate making additional contributions in 2016. Contributions in 2015 totaled $25,000.

 

NOTE 6 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

The Cooperative has not been impacted by any new Accounting Pronouncements since the filing of its most recent Annual Report on Form 10-K.

 

NOTE 7 – CHANGE IN ACCOUNTING STANDARDS

 

The Cooperative has not been impacted by any changes in Accounting Standards since the filing of its most recent 10-K.

 

NOTE 8 – DISTRIBUTIONS TO MEMBERS

 

On February 12, 2016, the Cooperative made distributions to its members totaling $3,098,096 or $0.20 per outstanding membership unit. On June 28, 2016, the Cooperative made distributions to its members totaling $3,098,034 or $0.20 per outstanding unit. At its September meeting, the Cooperative’s board authorized a distribution to its members totaling $3,253,000 or $0.21 per outstanding membership unit to be paid in October 2016.  On October 5th, the Cooperative made the distribution to its members.

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

The Cooperative contracted with Cargill in connection with the procurement of corn which includes an annual fee of $92,000 paid by the Cooperative to Cargill in quarterly installments and terminates December 31, 2017.

 

5


 

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, 2016 financial statements and concluded that no subsequent events have occurred that would require recognition in the September 30, 2016 financial statements.

6


 

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

 

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 report and the audited consolidated 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 10-K for the fiscal year ended December 31, 2015.  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 Item 1A, Risk Factors, included in the Cooperative’s Annual Report for the 2015 fiscal year on Form 10-K.  The Cooperative does not intend to update the forward-looking statements contained in this report other than as required by law and qualifies all of its forward-looking statements by these cautionary statements.

 

Overview

 

Golden Growers Cooperative is a value added agricultural cooperative association governed under Minnesota Statutes Chapter 308B owned by 1,547 members in the business of providing value to our members by facilitating their delivery of corn to the corn wet-milling facility owned by ProGold Limited Liability Company (“ProGold LLC”), a Minnesota limited liability company in which the Cooperative owns a 49% membership interest.  ProGold LLC leases its corn wet milling facility to Cargill Incorporated (“Cargill”) who uses the facility to process corn into high fructose corn syrup.  We accomplish our business on behalf of our members through our contract relationships with all of the parties involved in the ownership and operation of the facility.  From an income production perspective, our membership interest in ProGold LLC is our primary asset that, in addition to giving us the right to receive distributions from ProGold LLC, also provides our members with additional value for the delivery of their corn for processing.  Annually, we are required to deliver approximately 15,490,480 bushels of corn to Cargill for processing at the ProGold LLC facility.

 

Any person residing in the United States can own our Units as long as that person delivers or provides for the delivery of corn for processing at the ProGold LLC facility. Ownership of our membership units requires our members to deliver corn to the Cooperative for processing in proportion to the number of units each member holds. Currently, 15,490,480 of our units are issued and outstanding.  The Cooperative’s 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 (or loss).  In this way, we 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 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 us either at the facility or another location designated by the Cooperative.  Under Method B, a member appoints us as its agent to arrange for the acquisition and delivery of the required bushels 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 the Cooperative pays to the member is equal to the price per bushel paid by Cargill to acquire the corn as our agent.  Members who deliver corn under Method A are paid the market price or contracted price for their corn at the time of delivery.  Members who deliver corn under Method A receive from the Cooperative an incentive payment of $.05 per bushel on the corn that they deliver while members who elect Method B to deliver corn pay to the Cooperative a $.02 per bushel agency fee for the cost of having us deliver corn on their behalf.  The incentive payment for Method A deliveries and the agency fee for Method B deliveries are subject to annual adjustment at the sole discretion of our Board of Directors. 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, we notify Cargill of the volume of Method A corn to be delivered by each Method A member.  Once we provide notification to Cargill of the volume 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 Method A member then 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

7


 

Cooperative the aggregate purchase price for corn purchased from our members, and then, on our behalf, makes individual payments for corn directly to our members.  In the event a Method A member 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 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 to Cargill less than its committed amount of corn, the quantity of the shortfall is then purchased and delivered by Cargill on our 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.  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.

 

Our Bylaws establish a Method A delivery pool and a Method B delivery pool.  Generally, our income and/or losses are allocated annually based on the percentage of bushels of corn our members elect to deliver using either Method A or Method B.  Regardless of the actual percentage allocation between our members who deliver bushels of corn using Method A or Method B, our Bylaws require us to annually allocate at least 25% of our income and/or losses to the Method A pool.  The amount of our income and/or losses actually allocated to the Method A pool is a percentage equal to the greater of 25% or the actual percentage of bushels of corn delivered by our members using Method A.

 

For the 2016 fiscal year, 29% of members elected to deliver corn by Method A and 71% elected to deliver corn by Method B.  This election will result in 29% of the Cooperative’s income and/or losses and 29% of any cash distributions being allocated to the Method A pool in fiscal year 2016, 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 our governing documents.

 

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, required licensing and bonding expenses, and the service fee paid to Cargill.

 

For the three and nine-month period ended September 30, 2016, the Cooperative sold approximately 3.7 million and 11.8 million bushels of corn compared to 3.6 million and 11.7 million bushels of corn sold during the same respective periods in 2015.  For the three and nine-month period ended September 30, 2016, the Cooperative recognized corn revenue of $12,664,000 and $43,466,000 compared to $11,554,000 and $46,469,000 during the same respective periods in 2015, an increase of 10% for the third quarter, and a decrease of 6% year-to-date due primarily to changes in the selling price per bushel of corn sold in 2016 compared to 2015.

 

Expenses. The Cooperative recognized corn expense of $12,699,000 and $43,545,000 for the three and nine-month period ended September 30, 2016 compared to $11,587,000 and $46,546,000 during the same respective periods in 2015, an increase of 10% for the third quarter, and a decrease of 6% year-to-date due primarily to changes in the cost per bushel of corn purchased in 2016 compared to 2015.  For the three and nine-month period ended September 30, 2016, the Cooperative’s members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility 935,827 and 3,458,984 bushels of corn using Method A and 2,772,586 and 8,359,928 bushels of corn using Method B. In the same respective periods in 2015, the Cooperative’s members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility 880,144 and 3,396,746 bushels of corn using Method A and 2,765,546 and 8,352,763 bushels of corn using Method B. The Cooperative recognized expense of $23,000 and $69,000 for the three and nine-month period ended September 30, 2016 compared to $23,000 and $69,000 during the same respective periods in 2015 in connection with costs incurred to Cargill related to the Cooperative’s corn marketing operation.

 

Income from ProGold LLC. The Cooperative derived income from ProGold LLC for the three and nine-month period ended September 30, 2016 of $1,309,000 and $4,068,000 compared to $1,407,000 and $3,797,000 during the same respective periods in 2015.

 

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

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three and nine-month period ended September 30, 2016 were $104,000 and $447,000 compared to $138,000 and $490,000 during the same respective periods in 2015.

 

Interest Income. Interest income for the three and nine-month period ended September 30, 2016 was $2,000 and $6,000 compared to $2,000 and $6,000 during the same respective periods in 2015.

 

Liquidity and Capital Resources

 

The Cooperative’s working capital at September 30, 2016 was $639,000 compared to $29,000 at September 30, 2015.

 

The Cooperative had no long-term debt as of September 30, 2016 and September 30, 2015.

 

The Cooperative used operating cash flows of $1,069,000 for the nine-month period ended September 30, 2016 compared to $559,000 for the nine-month period ended September 30, 2015. The increase in cash used for operating activities related to the timing of cash receipts for corn purchases and sales.

 

The Cooperative received cash distributions from ProGold LLC totaling $8,077,000 for the nine-month period ended September 30, 2016 compared to $8,109,000 for the nine-month period ended September 30, 2015.

 

The Cooperative paid cash distributions to its members totaling $6,196,000 for the nine-month period ended September 30, 2016 compared to $6,662,000 for the nine-month period ended September 30, 2015.

 

Management believes that non-cash working capital levels are appropriate in the current business environment and will satisfy our foreseeable working capital requirements for at least the next 12 months. Management 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 January 1, 2016.  The quarterly Method B bushel delivery and agency fee revenue is calculated by allocating the portion of the total annual agency fee for that particular quarter or cumulating it for the particular period.  The Cooperative tracks Method A corn deliveries throughout the year so it can report the bushels of corn delivered by its members as well as the corresponding Method A incentive fees earned.  The final amounts owed by or due to Cargill and/or the Cooperative’s members who elect to deliver using Method A is not calculated until after December 31 in order to account for any failures to deliver or over-deliveries of corn.

 

The remainder of the Cooperative’s significant accounting policies are described in Note 2, Summary of Significant Accounting Polices, of the Notes to the Financial Statements included in the Cooperative’s Annual Report on Form 10-K for the fiscal year ending December 31, 2015.  The Cooperative’s critical accounting estimates are discussed in Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations, included in the Cooperative’s Annual Report Form 10-K for the fiscal year ended December 31, 2015.  There has been no significant change in the Cooperative’s significant accounting policies or critical accounting estimates since the end of fiscal 2015.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument.  The value of a financial instrument may change as a result of changes in the interest rates, exchange rates, commodity prices, equity prices and other market changes.  Market risk is attributed to all market risk-sensitive financial instruments, including long term debt.

 

Due to the pass through nature of the Cooperative’s marketing of its members’ corn, the Cooperative does not believe that it is subject to any material market risk exposure with respect to interest rates, exchange rates, commodity prices, equity prices and other market changes that would require disclosure under this item.

 

Item 4.  Controls and Procedures

 

The Cooperative’s Chief Executive Officer and Chief Financial Officer has reviewed and evaluated the effectiveness of the Cooperative’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of September 30, 2016.  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

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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.

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PART II.  OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

None.

 

Item 1A.  Risk Factors

 

For a detailed discussion of certain risk factors that could affect the Cooperative’s operations, financial condition or results for future periods, see Item 1A, Risk Factors, in the Cooperative’s Annual Report for the fiscal year ended December 31, 2015 on Form 10-K.

 

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

 

 

 

 

Exhibit No.

    

Exhibit Description

 

 

 

2.1

 

Articles of Merger of Golden Growers Cooperative and Golden Growers Cooperative is incorporated by reference to Exhibit 2.1 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

2.2

 

Certificate of Conversion of Golden Growers Cooperative is incorporated by reference to Exhibit 2.2 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

3.1

 

Amended and Restated Articles of Organization of Golden Growers Cooperative is incorporated by reference to Exhibit 3.1 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

3.2

 

Amended and Restated Bylaws of Golden Growers Cooperative dated September 1, 2009 is incorporated by reference to Exhibit 3.2 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

10.1

 

Form of Uniform Member Agreement is incorporated by reference to Exhibit 10.2 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

10.2

 

Form of Annual Delivery Agreement is incorporated by reference to Exhibit 10.3 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

10.3

 

Amended and Restated Member Control Agreement between Golden Growers Cooperative, Golden Growers Cooperative and ProGold Limited Liability Company dated September 1, 2009 is incorporated by reference to Exhibit 10.4 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

10.4

 

Operating Agreement between Golden Growers Cooperative, Golden Growers Cooperative and ProGold Limited Liability Company is incorporated by reference to Exhibit 10.5 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

10.5

 

Amended and Restated Grain Services Agreement between Golden Growers Cooperative and Cargill, Incorporated is incorporated by reference to Exhibit 10.6 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

10.6

 

Amended and Restated Corn Supply Agreement between Golden Growers Cooperative and Cargill, Incorporated is incorporated by reference to Exhibit 10.7 from the Cooperative’s Registration Statement on Form 10 (File No. 10783579) filed April 30, 2010.

 

 

 

31.1

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Securities Exchange Act Rule 17 CFR 13a-14(a) – filed herewith.

 

 

 

32.1

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 – filed herewith.

 

 

 

99.1

 

Audited Financial Statements of ProGold Limited Liability Company for the years ended August 31, 2014 and August 31, 2015 is incorporated by reference to Exhibit 99.1 from the Cooperative’s Quarterly Report on Form 10-Q (File No. 151232579) filed on November 16, 2015.

 

 

 

101

 

The following materials from this report, formatted in Extensible Business Reporting Language (XBRL) are filed herewith: (i) Balance Sheet for at September 30, 2016 and December 31, 2015, (ii) Statements of Operations and Comprehensive Income for the nine-month periods ended September 30, 2016 and 2015, (iii) Statement of Cash Flows for the nine-month periods ended September 30, 2016 and 2015, and (iv) Notes to Financial Statements.

 

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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.

 

 

 

 

GOLDEN GROWERS COOPERATIVE

 

(Registrant)

 

 

Date: November 14, 2016

/s/ Scott Stofferahn

 

Scott Stofferahn

 

Executive Vice President,

 

Chief Financial Officer

 

Duly Authorized Officer

 

 

 

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