Golden Growers Cooperative 10-K for FY2021
Golden Growers Cooperative (GGROU)
About this 10-K
Golden Growers Cooperative filed this 10-K on March 8, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $89.57M
- up 77.1% from $50.56M a year earlier
- Net income
- $8.03M
- up 44.0% from net income of $5.58M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
[
For the fiscal year ended
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Commission File No.:
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(Exact name of registrant as specified in its charter)
| (State of incorporation) | (I.R.S. Employer Identification Number) |
| (Address of principal executive offices) | (Registrant’s telephone number) |
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Units
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Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes [ ]
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Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Act. Yes [ ]
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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.
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Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required
to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] | Smaller reporting company | Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extension transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ ]
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Indicate by check mark whether
the registrant is a shell company (as defined in rule 12b-2 of the Act). Yes
[ ]
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As of March 7, 2022, the
registrant had Units issued and outstanding. There is
DOCUMENTS INCORPORATED BY REFERENCE: NONE
TABLE OF CONTENTS
i
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements and information based upon assumptions by Golden Growers Cooperative (“we,” “us,” “our,” and the “Cooperative”), including assumptions about risks and uncertainties faced by the Cooperative. These forward-looking statements can be identified by the use of forward-looking terminology such as “anticipates,” “expects,” “believes,” “will,” or the negative of these terms or similar verbs or expressions. Forward-looking statements in this report generally relate to: our expectations regarding our membership in ProGold Limited Liability Company (“ProGold”) and its distributions to the Cooperative; our beliefs regarding the sufficiency of working capital and cash flows; our expectations regarding our continued ability to renew or obtain financing on reasonable terms when necessary; the impact of recently issued accounting pronouncements; our intentions and beliefs relating to our costs, product developments and business strategies; our expected operating and financial results; our expectations concerning our contract arrangements with members; our beliefs regarding competitive factors and our competitive strengths; our predictions regarding the impact of seasonality; our beliefs regarding the impact of the farming industry on our business; our beliefs regarding our internal controls over financial reporting; and our intentions for paying member distributions. Many of these forward-looking statements are located in this report under “Item 1. BUSINESS” and “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” but they may appear in other sections as well.
This report should be read thoroughly with the understanding that our actual results may differ materially from those set forth in the forward-looking statements for many reasons, including events beyond our control and assumptions that prove to be inaccurate or unfounded. We cannot provide any assurance with respect to our future performance or results. Our actual results or actions could differ materially from those anticipated in the forward-looking statements for many reasons, including, but not limited to, the effect of general economic conditions and the agricultural cycle on the demand for our members’ corn; changes in ProGold’s operating costs, leases, or ownership; changes in our contractual relationships; changes in tax laws; the impact of the novel coronavirus (COVID-19); our ability to retain our key employee; the cost of complying with laws, regulations, and standards relating to corporate governance and public disclosure, and the demand such compliance places on management’s time; and other factors described in this report and from time to time in our other reports filed with the Securities and Exchange Commission. If any of management’s assumptions prove incorrect or should unanticipated circumstances arise, the Cooperative’s actual results could materially differ from those anticipated by such forward-looking statements. The Cooperative undertakes no obligation to update any forward-looking statements in this report to reflect future events or developments. Readers should not place undue reliance on such forward-looking statements. The Cooperative qualifies all of its forward-looking statements by these cautionary statements.
PART I
Item 1. BUSINESS
GENERAL
Golden Growers Cooperative is a value-added agricultural cooperative association owned by 1,489 members primarily from Minnesota, North Dakota and South Dakota, all of whom deliver corn to the Cooperative for processing into a value-added product. The Cooperative was originally formed in 1994 as a North Dakota agricultural cooperative. On September 1, 2009, by way of a series of mergers, the Cooperative changed its domicile and form of entity from a North Dakota cooperative to a Minnesota cooperative association governed under Minnesota Statutes Chapter 308B. A Minnesota cooperative association formed under Minnesota Statutes 308B operates as a cooperative for state law purposes but is treated as a partnership under Subchapter K of the Internal Revenue Code of 1986, as amended (the “Code”) for tax purposes.
Information about the Cooperative can be found on our website, https://goldengrowers.com. We are neither including nor incorporating by reference herein the information contained on our corporate website. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Exchange Act requires us to file periodic reports and other information with the Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov.
1
History
The Cooperative was originally formed in 1994 as a North Dakota cooperative with the goal of allowing its members to receive additional value from the corn that they grow through the processing of that corn into value-added products, such as corn sweeteners. The Cooperative accomplished this purpose by forming a joint venture with American Crystal Sugar Company (“American Crystal”) that formed ProGold Limited Liability Company (“ProGold”), a Minnesota limited liability company that designed and constructed a corn wet-milling facility in Wahpeton, North Dakota to process corn into high fructose corn syrup and related co-products. The Cooperative’s membership in ProGold LLC included a right and obligation for the Cooperative to deliver corn to the ProGold facility for processing. The Cooperative’s members delivered corn to the ProGold facility on the Cooperative’s behalf to meet this delivery obligation.
On November 1, 1997, ProGold entered into an operating lease with Cargill Incorporated (“Cargill”) for the entire ProGold facility. Cargill has operated the facility continually since this time. On April 4, 2017, ProGold and Cargill entered into a Second Amended and Restated Facility Lease (the “Facility Lease”), which commenced on January 1, 2018 and continues through December 31, 2022. In connection with Cargill’s exercise of its Option under the Option Agreement (as described below), the parties entered into that certain First Amendment to Second Amended and Restated Facility Lease, effective March 1, 2022, extending the term of the Facility Lease through December 31, 2026.
While ProGold no longer operates the wet-milling facility, the Cooperative, through its members, continues to have an obligation to deliver corn directly to Cargill at the wet-milling facility for processing into high fructose corn syrup and related co-products. For more information regarding the Facility Lease and the Option Agreement, see “Business Operations” and “Ownership in ProGold.”
The Cooperative’s ownership interest in ProGold creates a value-added relationship between the Cooperative’s members and the facility. When members deliver corn to the Cooperative for processing at the facility, they are paid a market price for the corn that is delivered. In addition, members have a right to receive added value for the efforts in the form of patronage based on each member’s proportionate share of the Cooperative’s income from ProGold that is derived primarily from Cargill’s lease of the facility. For more details regarding the Cooperative’s ownership in ProGold, see “Ownership in ProGold.”
Business Operations
The Cooperative is in the business of providing value to its members by facilitating their delivery of corn to the corn wet-milling facility owned by ProGold. We accomplish our business on behalf of our members not through the ownership of assets such as a plant and equipment, but through our contract relationships with all of the parties involved in the ownership and operation of the facility. From an income production perspective, our membership interest in ProGold is our primary asset that, in addition to giving the Cooperative the right to receive distributions from ProGold, also provides our members with additional value for the delivery of their corn for processing. Annually, the Cooperative is required to deliver approximately 15,490,480 bushels of corn to Cargill for processing at the ProGold facility. We meet this delivery obligation by having our members deliver their corn to the ProGold facility.
Since November 1997, ProGold has leased its corn wet-milling facility to Cargill. Throughout the term of the lease between Cargill and ProGold, our members, on the Cooperative’s behalf, have delivered corn to the facility for processing into high fructose corn syrup and related co-products. It is our ownership interest in ProGold that creates a value-added relationship between our growers and the facility. Notwithstanding this cooperative arrangement, Cargill is an integral part of our financial success. Apart from the lease, Cargill also provides the Cooperative services that allow us to facilitate corn delivery at little or no expense. In addition, the lease payments Cargill makes to ProGold that are in turn distributed to the Cooperative provide us with the cash to make distributions to our members. Under the terms of the Facility Lease, Cargill paid ProGold an annual lease payment of $15.5 million in 2021 and will pay an annual lease payment of $15.5 million in 2022 and 2023, and $16 million in 2024 through 2026. ProGold has agreed to pay at least $750,000 in 2022 and 2023 and $500,000 in 2024 through 2026 for infrastructure maintenance and may also be required to pay additional sums in order to make certain capital improvements. The payments will reduce any income available for ProGold’s members at the time of such expenses. The Cooperative and Cargill would experience any such reduction in ProGold’s income proportionately based on their percentage ownership of ProGold.
2
Any person residing in the United States can own Units in the Cooperative as long as that person delivers or provides for the delivery of corn for processing at the ProGold facility. Ownership of our Units requires our members to deliver corn to the Cooperative in proportion to the number of Units each member holds. Currently 15,490,480 Units are issued and outstanding. The Cooperative’s income and losses are allocated to our members based on the volume of corn a member delivers or has delivered. Subject to certain limitations, as long as a member patronizes the Cooperative by delivering corn in proportion 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 ProGold 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. Apart from leasing the facility from ProGold, Cargill is in the grain services business. In order to provide delivery services to our members in the most cost-effective manner, the Cooperative has entered into an agreement with Cargill whereby 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. The Cooperative pays members who deliver corn under Method A 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 number of bushels of Method A corn to be delivered by each member who has elected to deliver corn by Method A. Once we provide notification to Cargill of the number of bushels of corn, Cargill then confirms the amount of corn with each member and notifies that member with respect to quality specifications, allowances, deductions and premiums to be applicable to that corn. The member with a Method A corn commitment then directly contracts with Cargill for corn delivered by Method A. At the end of each month Cargill reports the number of Method A bushels delivered and the average daily price paid for corn that Cargill purchased from Members on the Cooperative’s behalf. The product of the number of bushels delivered multiplied by the average monthly market price is reported as Method A corn expense. In the event a member who has elected to deliver corn by Method A delivers to Cargill more than its delivery commitment, any corn delivered in excess of that commitment is handled as a direct sale of corn to Cargill. In the event a member who has elected to deliver corn by Method A delivers to Cargill less than its committed amount of corn, the quantity of the shortfall is then purchased and delivered by Cargill on our behalf. The purchase price is equal to the average price reported for Method A corn for the final month of the year. In addition, the Method A member with a shortfall will be charged a purchased corn fee and agency fee determined by the Board of Directors.
Cargill purchases the remainder of the corn to be delivered by us on behalf of our Method B delivering members at such time and in such quantities as it deems appropriate and in the best interest of the Cooperative and Cargill. Each quarter, the Cooperative notifies Cargill of the number of Method B bushels to be purchased during the quarter. Cargill will certify to the Cooperative that it has purchased the necessary Method B bushels. The price paid is reported as the Method B corn revenue, calculated by multiplying the weighted average price for Method A corn delivered during the quarter by the number of Method B bushels delivered during the quarter.
Our members can change their delivery method annually, so the number of members delivering by Method A or Method B changes each year.
In exchange for the services set forth above with respect to handling our member’s delivery of corn to the wet-milling facility, we paid Cargill an annual fee of $60,000 in 2021. This fee was paid in quarterly installments. In addition, we also pay Cargill a per-bushel fee if a Method A member fails to deliver corn. This amount is in addition to any reimbursement we are required to pay Cargill for a Method A member’s failure to deliver.
3
All of our agreements with Cargill terminate at the expiration of the lease between Cargill and ProGold. Effective March 1, 2022, the term of the Facility Lease was extended through December 31, 2026.
Our Second Amended and Restated Bylaws (“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.
If less than 25% of the bushels of corn are delivered by members using Method A, the members who do use Method A will be allocated 25% of our income and/or losses even though they deliver less than 25% of the bushels of corn obligated to be delivered by us to Cargill. As a result of this requirement, a Method A member may receive a greater proportionate allocation of our income and/or losses than a Method B member who contracted to have the same amount of corn delivered.
For each of the 2020 and 2021 fiscal years, our members elected to and delivered 27% of the bushels of corn by Method A and 73% of the bushels of corn by Method B. For each year, this resulted in 27% of our income and/or losses and 27% of any cash distributions being allocated to the Method A pool. This 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.
Ownership in ProGold
Prior to March 1, 2022, the Cooperative and American Crystal owned a 49% interest and 51% in ProGold, respectively. In connection with its interest in ProGold, the Cooperative has the right and obligation to deliver corn to be processed at the wet-mining facility. On April 4, 2017, the Cooperative, Cargill, and American Crystal entered into a Consent Agreement, effective on January 1, 2018 (the “Consent Agreement”), relating to the lease of ProGold’s wet-milling facility to Cargill and the Cooperative’s interest in ProGold. On the same day, Cargill and American Crystal entered into an Option Agreement, effective on January 1, 2018 (the “Option Agreement”), detailing the price, term and other conditions under which American Crystal granted to Cargill an exclusive option (the “Option”) to purchase a 50% interest in ProGold from American Crystal during the first four years of the lease. Under the Consent Agreement, the Cooperative approves and consents to the transfer of the 50% interest in ProGold from American Crystal to Cargill in the event Cargill exercises its option. The Cooperative also secures the right to purchase American Crystal’s remaining 1% interest in ProGold for a base price ranging from $1.7 million to $1.3 million, depending on when Cargill notifies American Crystal of its intention to exercise its option. The Cooperative would also be required to pay to American Crystal a capital adjustment in an amount equal to 1% of the portion of costs that have not been paid by Cargill to ProGold through additional rent with respect to certain projects at the facility.
Cargill exercised its Option under the Option Agreement to purchase a 50% interest in ProGold from American Crystal. Simultaneously with the exercise of the Option, the Cooperative, pursuant to the Consent Agreement, elected to purchase American Crystal’s remaining 1% interest in ProGold. As a result of these transactions, effective March 1, 2022, the Cooperative and Cargill each own a 50% interest in ProGold. In connection with the Option exercise, ProGold and Cargill entered into that certain First Amended to Second Amended and Restated Facility Lease, effective March 1, 2022, which extended the term of the Facility Lease through December 31, 2026.
Also in connection with the Option exercise, the Cooperative, Cargill and ProGold entered into that certain ProGold Limited Liability Company Agreement (the “Operating Agreement”), effective March 1, 2022, in order to set forth the structure, governance and operation of ProGold according to certain operational principles and other guidelines described in the Consent Agreement. Beginning March 1, 2022, the Cooperative will be allocated 50% of the profits and losses of ProGold and will be entitled to receive 50% of any cash that is distributed to ProGold’s members.
Under the Operating Agreement, ProGold’s board of governors is comprised of six members (each, a “Governor”), with three members appointed by each of the Cooperative and Cargill. The affirmative vote of a majority of the Governors is required to, among other actions, approve capital projects in excess of $1 million, approve infrastructure projects, approve any changes to current and future leases, and appoint one or more Managers of ProGold. In addition to the affirmative vote of a majority of the Governors, certain fundamental actions, such as a merger or consolidation, sale or liquidation of substantially all of the assets of ProGold, a dissolution of ProGold, the approval of new Members, or the approval of loans to ProGold by Members requires the unanimous approval of the Members. Neither the Cooperative nor Cargill may sell or transfer its interest in ProGold to any third party without the other party’s consent. Additionally, each party has a right of first refusal to purchase the other’s interest in ProGold if such party receives an offer for or desires to sell its interest.
4
In the event any Cargill Competitor (as defined in the Operating Agreement) acquires an equity interest in the Cooperative, Cargill will have a sixty-day option to purchase all of the membership interest in ProGold held by the Cooperative for a purchase price of $81 million plus 50% of the remaining lease payments due under the Facility Lease between ProGold and Cargill through the closing date of such sale. Further, if a Triggering Event (as defined in the Operating Agreement) occurs, the Cooperative and Cargill will expeditiously and in good faith work together to finalize a joint venture agreement for the structure, governance and operation of ProGold according to certain operating principles and other guideline terms. If a joint venture agreement is agreed to, the Cooperative will reimburse Cargill for 50% of the undepreciated capital expense associated with approved projects. If the Cooperative and Cargill are unable to agree on terms for a joint venture agreement, Cargill agrees to purchase the Cooperative’s 50% interest in ProGold for $81 million and half of any remaining lease payments due through December 31, 2026.
Effective March 1, 2022, the term of the Facility Lease is extended to December 31, 2026. Under the terms of the Facility Lease, Cargill will pay ProGold annual rent of $15.5 million in 2022 and 2023, and $16 million in 2024, through 2026. Additionally, ProGold has agreed to pay at least $750,000 for infrastructure maintenance for the years 2022 and 2023 and $500,000 for the years 2024 through 2026. Cargill also agreed to pay Golden Growers $1.29 million at closing as an early buyout of previously committed and deployed capital projects. During the term of the Facility Lease, Cargill will deploy capital for several approved projects estimated at $25 million. Cargill will have a leasehold interest in these capital projects and will receive the benefit of depreciation during the term of the Facility Lease.
The wet-milling facility was built in 1995. As processing facilities age, more extensive maintenance becomes necessary to keep the facility in good working order. ProGold has agreed to pay at least $750,000 in 2022 and 2023, and $500,000 in 2024 through 2026, for infrastructure maintenance and may also be required to pay additional sums in order to make certain capital improvements. The payments will reduce any income available for ProGold’s members at the time of such expenses. The Cooperative and Cargill would experience any such reduction in ProGold’s income proportionately based on their percentage ownership of ProGold.
Seasonality
Cargill operates the ProGold facility year-round, but the facility only has enough corn storage on-site for approximately five days of operations. Corn deliveries to the facility are typically required four or five days each week of the year. Farmers harvest corn in October and November, although weather conditions have occasionally delayed harvest for some farmers into winter or spring. Corn can be stored in storage facilities for a long period of time after it is harvested.
The Cooperative does not control when members deliver corn to Cargill for processing at the facility. Some members may elect to deliver higher volumes of corn immediately following harvest in October and November, while others prefer to deliver at times when local market prices are higher, typically in the spring and late summer months. Corn price contracts that members and Cargill enter into each year typically anticipate these delivery trends and incent members to store their corn on their farms until fewer farmers wish to deliver to the plant. As a result, while there is some seasonality to corn deliveries, members deliver corn every week of the year, and the Cooperative monitors and makes payments for those deliveries every week.
Government Regulations and Environmental Compliance
The Cooperative does not anticipate any material effects of governmental regulations on its business. To the extent government regulations, including environmental regulations, require certain capital improvements to the ProGold facility, ProGold may be required to pay for such improvements. The payments would reduce any income available for the Cooperative, as a member of ProGold, at the times of such expenses. We do not expect that the cost of complying with these regulations will have a material impact on our distribution from ProGold for the current fiscal year.
5
Employees
As of December 31, 2021, the Cooperative had 1 full-time employee, Executive Vice President, Scott Stofferahn, who serves in the capacity of chief executive officer and chief financial officer.
Competition
As a grower-owned cooperative whose members are contractually obligated to deliver corn, the Cooperative generally does not face competition in the marketplace for corn. More importantly, its governing documents and contractual arrangements with Cargill contain contractual incentives for growers to deliver corn to the Cooperative and not to another processor. Even if members do not fully satisfy their delivery commitments, there are sufficient supplies of corn to be purchased in the open market to meet any contract obligations to Cargill, with any costs to be charged to the defaulting member.
The Cooperative was formed in 1994 by a group of corn growers with a goal of adding value to the corn they delivered for processing. Members invested in the Cooperative with the goal of creating a facility where they could not only find a certain market for their corn but where they could also benefit from a long term investment in a value added enterprise such as the ProGold facility. There is no competition in attracting members to the Cooperative and its services. Other grain shippers and corn processing facilities in the region provide competition for the purchase of corn from members, but most do not provide the opportunity for membership or partial ownership and any resulting additional profits from the operation or lease of their facilities.
Item 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
Item 1B. UNRESOLVED STAFF COMMENTS
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
Item 2. PROPERTIES
We lease executive office space at 1002 Main Avenue West, Suite 5, West Fargo, ND 58078. The Cooperative’s office space needs are limited and easily met by a market rate lease.
Item 3. LEGAL PROCEEDINGS
The Cooperative is not currently involved in any legal proceedings. In addition, we are not aware of any potential claims that could result in the commencement of legal proceedings.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
There is no established trading market for our Units. To maintain our partnership tax status, members may not trade their Units on an established securities market or readily trade Units on a secondary market (or the substantial equivalent thereof). All transfers are subject to approval by the Board of Directors and a determination that the transfer will not cause us to be deemed a publicly traded partnership. In accordance with the publicly traded partnership rules, the Cooperative has made arrangements with FNC Ag Stock, LLC to serve as a qualified matching service for our members.
Our Bylaws restrict the ability of our members to transfer their Units. To help ensure that a secondary market does not develop, our Bylaws prohibit transfers without the approval of our Board of Directors. The Board of Directors will not approve transfers unless they fall within “safe harbors” contained in the publicly traded partnership rules under the Code and the related rules and regulations. Any transfers of Units in violation of the publicly traded partnership rules or without the prior consent of the Board of Directors will be invalid.
6
There are no outstanding warrants or options to purchase, or securities convertible into, our Units. As of the date hereof, there are 15,490,480 Units that are eligible for sale pursuant to Rule 144. We have not agreed to register any Units under the Securities Act for sale by members.
Holders
As of the date hereof, there are 1,489 holders of the Cooperative’s Units determined by an examination of the Cooperative’s equity records that the Cooperative maintains. Our Units are uncertificated.
Distributions
The Cooperative, to the extent cash is available, generally plans to make distributions to its members. The Cooperative may make cash distributions at such time and in such amounts as determined from time to time by our Board of Directors in its sole discretion; provided that we must annually, on or before March 1 of each year, make a cash distribution to our then current members equal to at least thirty percent (30%) of the income allocated to members for the prior year. Any such cash distributions shall be made in a uniform and equitable basis among the members within a particular allocation pool on the basis of patronage. Such cash distributions will be reduced by any tax withholding payments that are made on the member’s behalf. For the fiscal year ended December 31, 2020, the Cooperative made aggregate cash distributions to members of $6,196,000. For the fiscal year ended December 31, 2021, the Cooperative made aggregate cash distributions to members of $6,041,000. For more information regarding factors considered by the Board of Directors in determining the amount of cash distributions, see the section entitled “Liquidity and Capital Resources” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Securities Authorized for Issuance under Equity Compensation Plans
The Cooperative currently has no equity compensation plan.
Purchases of Equity Securities by Golden Growers Cooperative
None.
Recent Sales of Unregistered Securities
None.
Item 6. [RESERVED]
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Cooperative’s financial statements, the notes thereto and the other financial data included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements. Such statements are based on assumptions by the Cooperative’s management as of the date of this report and are subject to risks and uncertainties, as discussed in the section entitled “Forward Looking Statements.” Readers should not place undue reliance on such forward-looking statements.
7
Impact of COVID-19
The Cooperative continues to monitor the global outbreak of the novel coronavirus (COVID-19) and its impact on the Cooperative’s results of operations and financial condition. Corn millers are reporting that demand for high fructose corn syrup in food service and entertainment sectors improved in 2021 compared to 2020. Starch demand continues to be strong and ethanol demand improved as COVID-19 restrictions were lifted regionally. The ProGold facility currently continues to operate in the ordinary course and the Cooperative’s overall business has not been impacted. Although demand for products from the corn milling sector have stabilized or improved, the Cooperative is unable to predict the impact of COVID-19 on the future operations of the ProGold facility.
Results of Operations
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 for processing at the facility. 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.
The Cooperative sold approximately 15.5 million bushels of corn on behalf of its members in each of fiscal 2020 and 2021. The Cooperative recognized corn revenue of $89,565,000 in fiscal 2021 as compared to $50,563,000 in fiscal 2020, an increase of 77.1% due primarily to an increase in the price of corn sold. The Cooperative recognized corn expense of $89,605,000 in fiscal 2021 and $50,606,000 in fiscal 2020, an increase of 77.1% due primarily to an increase in the price of corn purchased.
In fiscal 2021, the Cooperative’s members, on the Cooperative’s behalf, delivered to Cargill 4,141,000 bushels of corn using Method A and 11,349,000 bushels of corn using Method B. In fiscal 2020, the Cooperative’s members, on the Cooperative’s behalf, delivered to Cargill 4,179,000 bushels of corn using Method A and 11,311,000 bushels of corn using Method B. In each of fiscal 2021 and 2020, the Cooperative recognized incentive fee expense of $206,000 and agency fee income of $229,000 for this period as well as $60,000 of expense for Cargill’s services as our agent in connection with the Cooperative’s corn marketing operation.
The Cooperative derived $8,418,000 of income from ProGold in fiscal year 2021, an increase of $2,482,000 or 41.8% as compared to $5,936,000 of income in fiscal 2020. The increase in income received from ProGold was due primarily to an increase in supplemental lease revenue in 2021 compared to 2020.
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 fiscal 2021 were $485,000, a decrease of $15,000 or 3% as compared to fiscal 2020. The decrease was due primarily to decreased meeting and board expenses and general administrative costs.
Other Income
Interest income for the fiscal year ended December 31, 2021, was $141,000 compared to $181,000 for the fiscal year ended December 31, 2020. The decrease was due primarily to decreased investment income. Realized gain/loss on investments for the fiscal year ended December 31, 2021, was ($4,000) as compared to $1,000 for the same respective period in 2020.
Liquidity and Capital Resources
The Cooperative’s working capital was $5,935,000 at December 31, 2021 and $7,039,000 at December 31, 2020. The decreased working capital in 2021 as compared to 2020 was primarily a result of reduced ProGold distributions received during 2021 as compared to 2020.
The Cooperative received cash distributions from ProGold totaling $4,589,000 in fiscal 2021 and $7,019,000 in fiscal 2020. The decrease was primarily related to saving for anticipated major capital expense by ProGold in 2021 compared to 2020. The Cooperative paid cash distributions to its members totaling $6,041,000 in fiscal 2021 and $6,196,000 in fiscal 2020.
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In fiscal 2018, the Cooperative invested a portion of its cash reserves in bonds. To ensure that the Cooperative would have access to cash if needed before the maturity of the bonds, the Cooperative also established a $2,000,000 line of credit with a variable interest rate based on the prime rate that terminates on October 16, 2022. The line of credit is secured by the Investment Management Agency account for Golden Growers maintained by Bell Bank. There was no outstanding balance as of December 31, 2021.
The Cooperative had no long-term debt as of December 31, 2021 and December 31, 2020.
The Cooperative used operating cash flows of $384,000 for the fiscal year ended December 31, 2021 and $350,000 for the fiscal year ended December 31, 2020. The increased use of operating cash flows is primarily due to reduced investment income.
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.
Critical Accounting Estimates
Management’s estimate of the carrying value of the investment in ProGold is based on historical cost plus its pro-rata share of ProGold’s net income and additional paid-in capital less distributions received from ProGold.
The Cooperative 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, 2021. The quarterly Method B bushel delivery and agency fee revenue was calculated by allocating the portion of the total annual agency fee for a particular quarter or cumulating it for the particular period. The annual Method B bushel delivery and agency fee revenue is confirmed at the conclusion of the fiscal year. The Cooperative tracks Method A corn deliveries throughout the year so it can report the bushels of corn delivered by its members as well as the corresponding Method A incentive fees earned. The final amounts owed by or due to Cargill and/or the Cooperative’s members who elect to deliver using Method A is not calculated until after December 31 in order to account for any failures to deliver or over-deliveries of corn.
The Cooperative has determined corn revenue and corn expense for Method B deliveries based on the average quarterly cost per bushel paid by Cargill to the Cooperative’s members for Method A quarterly deliveries.
Recent Accounting Pronouncements
There are no recent accounting pronouncements issued or adopted that have a significant impact to the cooperative.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Cooperative’s financial statements for the fiscal years ended December 31, 2020 and 2021 have been audited to the extent indicated in this report by Widmer Roel PC, an independent registered public accounting firm. The financial statements have been prepared in accordance with generally accepted accounting principles and are included in Appendix A of this report.
Item 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Exchange Act, the person serving as the Cooperative’s chief executive officer and chief financial officer has reviewed and evaluated, as of the end of the period covered by this report, the effectiveness of the Cooperative’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act). Based on that review and evaluation, the chief executive officer and chief financial officer has concluded that the Cooperative’s current disclosure controls and procedures, as designed and implemented, are effective in ensuring that information relating to the Cooperative required to be disclosed in the reports the Cooperative files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Security 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 the chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, because of changes in conditions, the effectiveness of internal control may vary over time.
Management assessed the effectiveness of the Cooperative’s internal control over financial reporting as of December 31, 2021, using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework) and concluded that the Company maintained effective internal control over financial reporting as of December 31, 2021 based on these criteria.
This annual report does not include an attestation report of the Cooperative’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Cooperative’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Cooperative to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in the Cooperative’s internal control 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 Company’s internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
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PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Cooperative’s Board of Directors consists of nine directors, including two directors from each of three geographic districts, North, Central and South. Except as further described herein, directors are elected to serve three-year terms. A director cannot serve more than four consecutive full three-year terms on the Board.
On March 28, 2019, the Cooperative’s members approved amendments to the Cooperative’s Bylaws. Those amendments reduced the number of election districts for purposes of nominating and electing directors from five to three geographic districts and reduced the total number of directors from fifteen to twelve in 2020 and from twelve to nine in 2021 as three directors in each of 2020 and 2021 reach their term limitations for serving on the Board. The amendments also created two different types of directors: District Directors and Directors-at-Large. District Directors must belong to the district they represent and be elected by a majority of the members from their geographic district present at a members’ meeting for that purpose. Directors-at-Large may come from any district, but must be elected by a majority of all members present at a members’ meeting for that purpose. Regardless of the type of directorship, director nominees must be members of the Cooperative holding Units of the Cooperative. In the case of a holder of Units who is other than a natural person, a duly appointed or elected representative of such member may serve as a director.
Each year, three directors are elected at our Annual Member Meeting. However, pursuant to transitional voting as set forth in our Bylaws, in 2022 members will elect five Directors. Members from the North district will elect one District Director to serve a two-year term, and members from the Central district will elect one District Director for a one-year term and one District Director for a three-year term. All members present will elect one Director-at-Large to serve a one year term and one Director-at-Large to serve a three-year term. At the 2023 Annual Members’ Meeting, members from the North district will elect one District Director to serve a two-year term, members from the Central district will elect a District Director for a three-year term, and members from the South district will elect a District Director for a three-year term. All members present will elect one Director-at-Large for a three-year term.
Each person’s experience, qualifications, attributes or skills to serve as a director are determined by the members voting at the Annual Member Meeting at which the election occurs and are not reviewed or otherwise considered by the Cooperative before any election. The Cooperative does not have a nominating committee. A qualified member indicates his or her interest to serve in advance of the meeting or candidates are nominated from the floor at the meetings. If a member from a particular district, or from the general pool, does not come forward indicating a desire to run for election to serve as a director, then that seat on the Board of Directors becomes or remains unfilled.
The Cooperative’s Board officers consist of a Chairperson, First Vice Chairperson, Second Vice Chairperson, Treasurer and Secretary of the Board. These board offices are populated by members of the Board of Directors who are elected by and at the discretion of the Board of Directors. Each of these individual’s experience, qualifications, attributes and skills to serve in their capacity as a board officer are determined by the members of the Board of Directors who are voting to place these individuals in these offices.
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The name, age, position, district and term details of each of the directors and the Cooperative’s Named Executive Officer are as follows:
| Director | Term Expires | |||||||
| Name and Position | Age | District | Since | |||||
| Mark Harless (Chairman) | 65 | North | 2011 | 2023 | ||||
| Nicolas Pyle (1st Vice Chairman) | 42 | Central | 2010 | 2022 | ||||
| Brett Johnson (2nd Vice Chairman) | 54 | Central | 2013 | 2022 | ||||
| David Benedict (Director) | 55 | North | 2010 | 2022 | ||||
| Richard Bot (Director) | 67 | South | 2017 | 2023 | ||||
| Matthew Hasbargen (Secretary) | 50 | At Large | 2013 | 2022 | ||||
| Scott Jetvig (Treasurer) | 55 | At Large | 2015 | 2024 | ||||
| Byron Koehl (Director) | 56 | At Large | 2010 | 2022 | ||||
| Larry Vipond (Director) | 71 | South | 2015 | 2024 | ||||
| Executive Officer | ||||||||
| Scott Stofferahn | 64 | — | — |
Below is the biographical information of each director and our Named Executive Officer.
David Benedict. Mr. Benedict has been a director since 2010. Mr. Benedict farmed in the Sabin, Minnesota area between 1987 to 2014. Mr. Benedict is employed with Steffes Group Auction Service. Mr. Benedict took accounting classes at Moorhead State University and later received a Farm Business Management Degree from Minnesota State Community and Technical College. Mr. Benedict has reached the term limitation for serving on the Cooperative’s Board of Directors and, therefore, is not eligible to stand for reelection at the Cooperative’s 2022 Annual Member Meeting. The Cooperative thanks Mr. Benedict for his years of service.
Richard Bot. Mr. Bot has been a director since 2017. Mr. Bot farms in partnership with his brother near Minneota, MN where he raises feed grains and feeder lambs. From 1990 to 1996, Mr. Bot served on the Yellow Medicine Watershed board. Mr. Bot has been a clerk of the Westerheim Township Board since 2002. Mr. Bot is currently a member of the of the Minnesota Rotary Club where he has served as President and as Assistant District Governor. Mr. Bot has a Bachelor of Science degree in Animal Science from South Dakota State University.
Mark L. Harless. Mr. Harless has been a director since March of 2011 and Chairperson since March 2015. He previously served as Vice Chairperson from March 2013 to March 2015. Mr. Harless has farmed near Moorhead, Minnesota, since 1985. Mr. Harless serves as President of the Lee Bean and Seed, Inc., an edible bean elevator located in Borup, Minnesota, where he has been employed since 1985. Mr. Harless received his Bachelor of Science degree in Communications from Concordia College.
Matt Hasbargen. Mr. Hasbargen has been a director since March 2013 and Secretary since March 2015. He farms near Breckenridge, Minnesota with his father and brother. In the winter months he works for AgCountry Farm Credit Services as a Senior Insurance Specialist, Trainer. Prior to returning home to farm in 1999, Mr. Hasbargen worked for Minnesota Life in St. Paul, Minnesota where he managed life insurance accounts for Farm Credit districts throughout the United States. Mr. Hasbargen holds an Economics degree from Concordia College.
Scott Jetvig. Mr. Jetvig has been a director since March 2015. Mr. Jetvig has farmed near Hawley, Minnesota since 1987. In addition to his individual farming operation, Mr. Jetvig is President of SKJ Investments, Inc., an incorporated farming operation. Mr. Jetvig served on Halstad Mutual Fire Insurance Company and Hawley Lutheran Church boards. Mr. Jetvig holds Business Administration and Economics degrees from Moorhead State University.
Brett Johnson. Mr. Johnson has been a director since March 2013. He farms in partnership with his brother near Mooreton, ND where they raise corn, soybeans, and sunflowers. Mr. Johnson previously served twenty one years as a Township Officer, twelve years on the Wyndmere, ND School Board, and six years on the North Dakota Soybean Council. He holds a Bachelor of Science degree in Agricultural Economics from North Dakota State University.
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Byron Koehl. Mr. Koehl has been a director since March 2010. Mr. Koehl has been a partner in his family’s farming operation near Hancock, Minnesota, since 1984. Mr. Koehl serves as President of Outback Five, Inc., of Hancock, Minnesota. Mr. Koehl is past President of the Stevens County Pork Producers. Mr. Koehl has reached the term limitation for serving on the Cooperative’s Board of Directors and, therefore, is not eligible to stand for reelection at the Cooperative’s 2022 Annual Member Meeting. The Cooperative thanks Mr. Koehl for his years of service.
Nicolas A. Pyle. Mr. Pyle has been a director since 2010 and First Vice Chairperson since March 2015. He previously served as Secretary from March 2013 to March 2015. He has been farming since 2002 near Casselton, North Dakota. Mr. Pyle serves as a director of McIntyre-Pyle, Inc. Mr. Pyle is President and serves as a director of Unity Seed Company, a member of Global Soy Genetics LLC and Director of McIntyre Farms Partnership. Mr. Pyle holds a Bachelor of Science in Business degree in finance from the University of Minnesota Carlson School of Management. Mr. Pyle has reached the term limitation for serving on the Cooperative’s Board of Directors and, therefore, is not eligible to stand for reelection at the Cooperative’s 2022 Annual Member Meeting. The Cooperative thanks Mr. Pyle for his years of service.
Lawrence A. Vipond. Mr. Vipond has been a director since March 2015. Mr. Vipond has been farming since 1971 and is a partner in Vipond Farms of Norcross, MN. Mr. Vipond previously served on the New Horizons Board of Directors and the St. Charles Church Board. Mr. Vipond also served as Chairman of the Herman Community Center Capital Fund Drive. Mr. Vipond attended Fergus Falls Community College.
Scott Stofferahn. Mr. Stofferahn was elected Executive Vice President, Chief Executive Officer and Chief Financial Officer of the Cooperative effective October 15, 2012. Starting in March 2001, Mr. Stofferahn worked as State Director for North Dakota Senator Kent Conrad. Prior to that, he was the State Executive Director for the North Dakota Farm Service Agency from 1993 to 2001. Mr. Stofferahn has extensive public service experience including serving in the North Dakota State House of Representatives from 1982 to 1992. Mr. Stofferahn received his Bachelor of Science Degree from North Dakota State University.
Audit Committee and Audit Committee Financial Expert
The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the Cooperative’s financial reporting and controls, the annual independent audit of the Cooperative’s financial statements and the legal compliance and ethics programs as established by management and the Board of Directors. The Audit Committee selects the independent public accountants and approves the fees, scope and procedural plans of the audits of the Cooperative’s financial statements. The Audit Committee administers the Cooperative’s employee complaint program and handles, on behalf of the full Board of Directors, any issues that arise under the Cooperative’s Code of Ethics. The Audit Committee has a charter that is available from the Cooperative upon request.
As of December 31, 2021, the Board of Directors of the Cooperative has determined that there is no audit committee financial expert serving on the Audit Committee. The Cooperative is a cooperative association formed in accordance with the Minnesota cooperative law of the State of Minnesota. In accordance with the Minnesota cooperative association law, and the Cooperative’s Amended and Restated Bylaws, the Board of Directors must be composed of members of the Cooperative. Based on the state law requirements for both membership and board service, the Cooperative is unable to recruit outside of its membership to elect to its Board of Directors and its audit committee an individual that possesses the attributes of an “audit committee financial expert” as defined by the Securities and Exchange Commission. To date, the Cooperative has been unable to recruit from its membership an individual to serve on the Board of Directors that possesses the attributes of an “audit committee financial expert.”
The Audit Committee has reviewed and discussed with management and Widmer Roel our audited financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The Audit Committee also discussed with Widmer Roel the matters required to be discussed pursuant to SAS No.114 (Codification of Statements of Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the audit of the Cooperative’s financial statements.
The Audit Committee has received and reviewed the written disclosures and the letter from Widmer Roel required by the applicable requirements of the Public Company Accounting Oversight Board regarding Widmer Roel’s communications with the Audit Committee concerning its independence from the Cooperative and has discussed with Widmer Roel its independence from the Cooperative.
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Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for our fiscal year ended December 31, 2021 for filing with the Securities and Exchange Commission.
The members of the Audit Committee at the time of the foregoing review, discussions and recommendation were Nicolas Pyle, chair, Richard Bot, Scott Jetvig, Brett Johnson, and Mark Harless.
Code of Ethics
The Cooperative has adopted a code of ethics that applies to its executive officer and directors of the Cooperative. The Cooperative’s code of ethics is posted on its website. The Cooperative intends to include on its website, within the time period required by Form 8-K, any amendment to, or waiver from, a provision of our Code of Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions, that relates to any element of the Code of Ethics definition enumerated in Item 406(b) of Regulation S-K.
Item 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Cooperative only has a single employee who serves in the capacity of its chief executive officer and chief financial officer (our Named Executive Officer). The primary objective of the Cooperative’s executive compensation program is to maintain a compensation program that will fairly compensate the Named Executive Officer. In determining the compensation of the Named Executive Officer, the Personnel and Compensation Committee of the Board of Directors considers the financial condition and operational performance of the Cooperative during the prior year.
The Personnel and Compensation Committee may review the compensation practices of other companies, based in part on market survey data and other statistical data relating to executive compensation obtained through industry publications and other sources. The Personnel and Compensation Committee does not intend to benchmark executive compensation directly with other publicly traded companies or other companies with which we may compete for potential executives since some of these competitors are privately held companies for which executive compensation information may not be available. However, the Personnel and Compensation Committee may compare executive compensation as a whole with the compensation packages of other companies for which survey data is available, and may also compare the pay of individual executives if the jobs are sufficiently similar to make the comparison meaningful.
Perquisites and Other Benefits
401(k) Plan
The Cooperative makes available a 401(k) plan for its Named Executive Officer. The Cooperative pays four percent (4%) of employee’s annual salary into the plan, and the employee may make additional contributions up to the lawful limits.
Employment Agreements
Mr. Stofferahn is not party to an employment agreement with the Cooperative.
Deferred Compensation Agreement
The Cooperative has not adopted any bonus, profit sharing, or deferred compensation plans other than a pension plan for which accruals were frozen as of January 1, 2013 and under which one former employee receives benefits.
Compensation Policies and Practices and Risk Management
Mr. Stofferahn’s compensation is set by the Board. In the event it is modified, such a modification is based on a performance evaluation conducted by our Personnel and Compensation Committee that consists solely of members of the Board. As discussed throughout this report, the revenue and expenses of the Cooperative directly relate to the price of corn as well as the rental income received by ProGold and capital improvement expenditures made by ProGold for the facility. Mr. Stofferahn has no control over these factors. Based on this reality, no risks arise from the Cooperative’s compensation policies and practices that are reasonably likely to have a material adverse effect on its business operations.
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Summary Executive Compensation Table
The following table sets forth, for the last three calendar years, the dollar value of all compensation awarded to, earned by or paid to Mr. Stofferahn.
| All Other | ||||||||||||
| Salary | Compensation | Total | ||||||||||
| Name and Principal Position | Year | ($) | ($) (1) | ($) | ||||||||
| Scott Stofferahn, Executive Vice President** | 2021 | 173,986 | 21,734 | 195,720 | ||||||||
| 2020 | 170,731 | 21,600 | 192,331 |
_____________________
** Mr. Stofferahn commenced his
employment on October 15, 2012.
(1) All Other Compensation is comprised of
premiums paid for life and disability insurance, company contributions to the
401(k) plan and reimbursements from the health reimbursement account.
Director Compensation
The Cooperative reimburses our directors for expenses incurred in connection with board service. The Cooperative’s directors are paid $150 per month and the Chairperson is paid $375 per month. In addition, directors and the Chairperson receive a per diem of:
| • | $300 per meeting they attend when the meeting plus their travel time exceeds 4 hours; | |
| • | $150 per meeting they attend when the meeting plus their travel time is more than 2 but less than 4 hours; | |
| • | $100 per meeting they attend when the meeting plus their travel time is more than 1 but less than 2 hours. |
The following table sets forth for the year ending December 31, 2021 the dollar value of all cash and non-cash compensation paid to individuals serving as directors of the Cooperative during fiscal year 2021.
| Fees | |||||||
| Earned or | |||||||
| Paid in | |||||||
| Name | Cash | Total | |||||
| David Benedict | $ | 3,800 | $ | 3,800 | |||
| Richard Bot | $ | 4,000 | $ | 4,000 | |||
| Mark Harless | $ | 9,950 | $ | 9,950 | |||
| Matt Hasbargen | $ | 5,250 | $ | 5,250 | |||
| Scott Jetvig | $ | 4,850 | $ | 4,850 | |||
| Gary L. Jirak * | $ | 1,300 | $ | 1,300 | |||
| Brett Johnson | $ | 5,550 | $ | 5,550 | |||
| Byron Koehl | $ | 3,700 | $ | 3,700 | |||
| Leslie Nesvig * | $ | 1,400 | $ | 1,400 | |||
| Nicolas A. Pyle | $ | 4,850 | $ | 4,850 | |||
| Bruce Speich * | $ | 1,000 | $ | 1,000 | |||
| Larry Vipond | $ | 3,350 | $ | 3,350 |
* Gary L Jirak, Leslie Nesvig, and Bruce Speich retired effective after the 2021 Annual Member Meeting.
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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of March 7, 2021 the number of Units beneficially owned and the percent so owned by (1) each of our directors as of such date, (2) Scott Stofferahn, our Executive Vice President (our Named Executive Officer) and (3) all of our Directors and the Named Executive Officer as a group. The number of Units owned by each person are those beneficially owned, as determined under the rules of the SEC, and such information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any Units as to which a person has sole or shared voting power or investment power and any Units which the person has the right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement. The applicable percentage ownership is based on 15,490,480 Units outstanding held by 1,491 members. Each member of the Cooperative is allowed to cast one vote at any meeting of the members, regardless of the number of Units actually held by that member. Some of our directors hold their Units through more than one entity which allows those directors to cast a vote for each one of those members. The address of each director and our Named Executive Officer is 1002 Main Avenue W, Suite 5, West Fargo, ND 58078.
| Amount and Nature of | |||||||||
| Beneficial Ownership | |||||||||
| Number of | |||||||||
| Number of | Membership | Percentage | |||||||
| Name of Beneficial Owner | Units (1) | Votes(2) | of Class | ||||||
| Benedict, David | 15,000 | 1 | 0.10 | % | |||||
| Bot, Richard | 204,700 | (3) | 1 | 1.32 | % | ||||
| Harless, Mark | 28,000 | 1 | 0.18 | % | |||||
| Hasbargen, Matt | 8,000 | (4) | 1 | 0.05 | % | ||||
| Jetvig, Scott | 30,000 | 1 | 0.19 | % | |||||
| Johnson, Brett | 25,000 | 1 | 0.16 | % | |||||
| Koehl, Byron | 8,000 | (5) | 2 | 0.05 | % | ||||
| Pyle, Nicolas | 60,000 | (6) | 3 | 0.39 | % | ||||
| Vipond, Larry | 77,000 | (7) | 1 | 0.50 | % | ||||
| Stofferahn, Scott | 16,667 | (8) | 1 | 0.11 | % | ||||
| All directors and executive officers as a group (10 people) | 472,367 | 3.05 | % | ||||||
________________________
| (1) |
Membership interests are measured Units which equal the holder’s proportionate financial right but not a governance right. |
| (2) |
Voting rights are based on one member one vote. Each person or entity that holds units is a member for voting purposes. Some officers and directors own their units through multiple entities resulting in multiple membership votes. |
| (3) |
Includes 102,350 Units owned directly by Mr. Bot’s Revocable Living Trust and 102,350 Units owned by Mr. Bot’s spouse’s Revocable Living Trust. |
| (4) |
Included 8,000 Units owned by Matthew Hasbargen Farm LLC of which Mr. Hasbargen is President. |
| (5) |
Includes 4,000 Units as of C R Koehl & Sons, Inc. of which Mr. Koehl is a 9.4% owner. |
| (6) |
Includes 40,000 Units held by McIntyre Farms of which Mr. Pyle is a 25% owner and 10,000 Units held by HarMar LLC of which Mr. Pyle is a 33% owner. |
| (7) |
Includes 8,000 Units held by Mr. Vipond and 69,000 Units owned by Vipond Farms of which Mr. Vipond is a 20% owner. |
| (8) |
Includes indirect interest in 16,667 Units owned by Mr. Stofferahn’s spouse. |
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
In accordance with the Cooperative’s Bylaws, only people who are members of the Cooperative or representatives of members can serve on our Board of Directors. As members of the Cooperative (or representatives of members), all of our directors have a contractual patronage relationship with the Cooperative that obligates them to deliver or contract to deliver corn to the Cooperative for processing. As a result of this patronage relationship, the Cooperative’s directors, like all other member of the Cooperative, receive allocations of profit/loss and cash distributions.
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The Cooperative has developed its own definition of “Independent Director” that takes into account the patronage relationship that exists between the Cooperative and each director. Under the Cooperative’s definition, the patronage relationship is not considered for purposes of determining “independence.” However, other relevant relationships between the Cooperative and the directors, and certain family members, are considered in assessing “independence.” Except with respect to the patronage relationship that exists, the Cooperative’s definition is consistent with the definition of an independent director found in Section 303A.02 of the New York Stock Exchange Listed Company Manual. Below please find the Cooperative’s definition of an independent director:
A director of the Cooperative shall be considered an “Independent Director” unless:
| • | The director has a material financial relationship with the Cooperative (either directly or as a partner, shareholder or officer of an organization that has a relationship with a company) other than the patronage relationship that exists between the Cooperative and each of its members. | |
| • | The director is, or has been within the last 3 years, an employee of the Cooperative; or immediate family member is, or has been within the last 3 years, an employee, of the Cooperative. | |
| • | The director has received, or an immediate family member has received, during any 12-month period within the last 3 years, more than $120,000 in direct compensation from the Cooperative, other than director or committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). | |
| • | (i) the director is a current partner or employee of a firm that is the Cooperative’s internal or external auditor; (ii) the director has an immediate family member who is a current partner of such firm; (iii) the director has an immediate family member who is a current employee of such a firm and personally works on the Cooperative’s audits; or (iv) the director or an immediate family member was, within the last 3 years, a partner or employee of such a firm and personally worked on the Cooperative’s audit within that timeframe. | |
| • | The director or an immediate family member is, or has been within the last 3 years, employed as an executive officer of another company, or any of the Cooperative’s present executive officers, at the same time serves or served on that company’s compensation committee. | |
| • | The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Cooperative for property or services in an amount which, in any of the last 3 fiscal years, exceeds the greater of $1,000,000 or 2% of such company’s consolidated gross revenues, other than as a result of such person’s patronage relationship with the Cooperative. | |
| Based on the above definition, all of our directors are independent of management and of the Cooperative. |
17
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table presents fees for professional audit services rendered by Widmer Roel for the audits of the Cooperative’s annual financial statements for the years ended December 31, 2021 and 2020 and fees, if any, for other services rendered by Widmer Roel during those periods.
| 2021 | 2020 | |||||
| Audit Fees | $ | 36,490 | $ | 44,840 | ||
| Audit-Related Fees | — | — | ||||
| Tax Fees | — | — | ||||
| All Other Fees | — | — | ||||
| Total | $ | 36,490 | $ | 44,840 |
Audit Fees. The Audit Fees set forth above include the aggregate fees billed by Widmer Roel to the Cooperative for audit services related to the audit of the Cooperative’s annual financial statements and review of the statements included in the Cooperative’s quarterly reports on Form 10-Q for fiscal 2021 and 2020.
Audit-Related Fees. No additional Audit-Related Fees were billed by Widmer Roel to the Cooperative for assurance and related services provided by Widmer Roel related to the performance of the audit or review of the Cooperative’s financial statements for fiscal 2021 and 2020.
Tax Fees. No Tax Fees were billed by Widmer Roel to the Cooperative for professional services rendered by Widmer Roel for tax compliance, tax advice and tax planning for fiscal 2021 and 2020.
All Other Fees. No Other Fees were billed by Widmer Roel to the Cooperative for professional services provided by Widmer Roel to the Cooperative for fiscal 2021 and 2020.
The Cooperative’s Audit Committee pre-approves all professional services provided by Widmer Roel to the Cooperative. The Audit Committee approved all of the services and the fees billed for such services to the Cooperative. The Audit Committee makes its decisions on the approval of services with due consideration given to maintaining the independence of the principal accountant. None of the hours expended on the audit of the 2021 financial statements were attributed to work performed by persons who were not employed full time on a permanent basis by Widmer Roel.
18
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report.
| 1. | Financial Statements | |
| Report of Independent Registered Public Accounting Firm. | ||
| Balance Sheets as of December 31, 2021 and 2020. | ||
| Statements of Operations and Comprehensive Income for the Years Ended December 31, 2021, 2020 and 2019. | ||
| Statements of Changes in Members’ Equity for the Years Ended December 31, 2021, 2020 and 2019. | ||
| Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019. | ||
| Notes to the Financial Statements. | ||
| 2. | Financial Statement Schedules | |
| Not applicable. | ||
| 3. | 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 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 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 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 filed April 30, 2010. | |
| 3.3 | Second Amended and Restated Bylaws of Golden Growers Cooperative dated March 28, 2019 is incorporated by reference to Exhibit 3.2 from the Cooperative’s Form 8-K filed April 2, 2019. | |
| 4.1 | Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 – filed herewith. | |
| 10.1 | Form of Uniform Member Agreement is incorporated by reference to Exhibit 10.2 from the Cooperative’s Registration Statement on Form 10 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 filed April 30, 2010. | |
| 10.3 | ProGold Limited Liability Company Amended and Restated Member Control Agreement between Golden Growers Cooperative and American Crystal Sugar Company dated September 1, 2009 is incorporated by reference to Exhibit 10.4 from the Cooperative’s Registration Statement on Form 10 filed April 30, 2010. | |
| 10.4 | Operating Agreement of ProGold Limited Liability Company is incorporated by reference to Exhibit 10.5 from the Cooperative’s Registration Statement on Form 10 filed April 30, 2010. |
19
| Exhibit No. | Exhibit Description | |
| 10.5 | Amendment to ProGold Limited Liability Company Member Control Agreement between Golden Growers Cooperative and American Crystal Sugar Company dated April 4, 2017 is incorporated by reference to Exhibit 10.7 from the Cooperative’s Form 10-Q filed May 12, 2017. | |
| 10.6 | Second Amended and Restated Grain Services Agreement between Golden Growers Cooperative and Cargill, Incorporated dated July 1, 2017 is incorporated by reference to Exhibit 10.6 from the Cooperative’s Form 10-K filed March 9, 2018. | |
| 10.7 | Second Amended and Restated Corn Supply Agreement between Golden Growers Cooperative and Cargill, Incorporated dated July 1, 2017 is incorporated by reference to Exhibit 10.7 from the Cooperative’s Form 10-K filed March 9, 2018. | |
| 10.8 | Consent Agreement among Golden Growers Cooperative, Cargill Incorporated, and American Crystal Sugar Company dated April 4, 2017 is incorporated by reference to Exhibit 10.1 from the Cooperative’s Current Report on Form 8-K filed April 10, 2017. | |
| 24.1 | Power of Attorney (included on the “Signatures” page of this Annual Report on Form 10-K). | |
| 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, 2021 and August 31, 2020 is incorporated by reference to Exhibit 99.1 from the Cooperative’s Form 10-Q filed November 9, 2021. | |
| 101 | The following materials from this report, formatted in Extensible Business Reporting Language (XBRL), are filed herewith: (i) Balance Sheets at December 31, 2021 and December 31, 2020; (ii) Statements of Operations for the years ended December 31, 2021, 2020 and 2019; (iii) Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020 and 2019; (iv) Statement of Changes in Members’ Equity and Comprehensive Income for the years ended December 31, 2021, 2020 and 2019; (v) Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019; and (vi) Notes to Financial Statements. |
Item 16. FORM 10-K SUMMARY
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15 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, on March 8, 2022.
| GOLDEN GROWERS COOPERATIVE | |
| By: | /S/ Scott Stofferahn |
| Scott Stofferahn | |
| Dated: March 8, 2022 | |
Power of Attorney
Each person whose signature appears below appoints Scott Stofferahn as their true and lawful attorney-in fact and agent, with full power of substitution and resubstitution, for the undersigned and in the undersigned’s name, place and stead, to perform all acts and execution of all documents which such attorney and agent may deem necessary or desirable to enable Golden Growers Cooperative to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with filing with the Commission the Annual Report on Form 10-K of Golden Growers Cooperative for the fiscal year ended December 31, 2021 and any and all amendments and exhibits thereto, and other documents in connection therewith, including specifically, but without limiting the generality of the foregoing, power and authority to sign the names of the undersigned to the Form 10-K and to any instruments and documents filed as part of or in connection with the Form 10-K or any amendments thereto; and the undersigned hereby ratify and confirm all actions taken and documents signed by said attorney and agent as provided herein.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and as of March 8, 2022.
| /S/ Mark Harless | /S/ Nicolas Pyle | |
| Mark Harless (Chairperson) | Nicolas Pyle (1st Vice Chairperson) | |
| /S/ David Benedict | /S/ Richard Bot | |
| David Benedict (Director) | Richard Bot (Director) | |
| /S/ Matthew Hasbargen | /S/ Scott Jetvig | |
| Matthew Hasbargen (Director, Secretary) | Scott Jetvig (Director) | |
| /S/ Brett Johnson | /S/ Byron Koehl | |
| Brett Johnson (Director) | Byron Koehl (Director) | |
| /S/ Larry Vipond | ||
| Larry Vipond (Director) | ||
| /S/ Scott Stofferahn | ||
| Scott Stofferahn (principal executive, | ||
| financial and accounting officer) |
21
APPENDIX A
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
GOLDEN GROWERS COOPERATIVE FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee and Board of Directors
Golden
Growers Cooperative
West Fargo, North Dakota
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Golden Growers Cooperative as of December 31, 2021 and 2020, and the related statements of operations, comprehensive income, changes in members’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of Golden Growers Cooperative as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Cooperative’s management. Our responsibility is to express an opinion on the Cooperative’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to Golden Growers Cooperative in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Golden Growers Cooperative is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Cooperative’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
A-1
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Carrying Value of the Investment in ProGold LLC
As described further in Notes 2 and 3 to the financial statements, the investment in ProGold LLC is recorded at historical cost plus its pro-rata share of ProGold LLC’s net income and additional paid-in capital less distributions received from ProGold LLC. Management evaluates the investment in ProGold LLC for impairment on an annual basis, or more frequently if impairment indicators exist. The determination of the carrying value of the investment in ProGold LLC requires management to make significant estimates and assumptions. Changes in these assumptions could materially affect the determination of the fair value of the investment in ProGold LLC.
We identified the carrying value of the investment in ProGold LLC as the critical audit matter. The principal consideration for this determination is that management utilized significant judgment when evaluating the investment in ProGold LLC for impairment. In turn, auditing management’s judgments regarding the key factors and assumptions, involved a high degree of subjectivity due to the uncertainty of management’s significant judgments.
Our audit procedures related to the carrying value of the investment in ProGold LLC included the following, among others:
| • | We recalculated the carrying value using ProGold LLC’s August 31, 2021 audited financial statements and subsequent unaudited internal financial statements. | |
| • | We reviewed audit working papers from ProGold LLC’s August 31, 2021 Audit. | |
| • | We tested managements assertion that there was no impairment on the investment in ProGold LLC by independently assessing the assertion by performing the following procedures: |
| o | Reviewing current and previous operating conditions for indication of impairment | |
| o | Reviewing board minutes and news for indications of impairment | |
| o | Reviewing professional industry reports for indications of impairment |
| /s/ |
| We have served as the Cooperative’s auditor since 2008. |
| March 8, 2022 |
A-2
| GOLDEN GROWERS COOPERATIVE |
| BALANCE SHEETS |
| DECEMBER 31, 2021 AND 2020 |
| (Dollars In Thousands) |
| ASSETS | 2021 | 2020 | ||||
| Current Assets: | ||||||
| Cash and Cash Equivalents | $ | |
$ | |
||
| Short-Term Investments | ||||||
| Other Current Assets | ||||||
| Total Current Assets | ||||||
| Long-Term Investments | ||||||
| Investment in ProGold LLC | ||||||
| Total Assets | $ | |
$ | |
||
| LIABILITIES AND MEMBERS’ EQUITY | ||||||
| Current Liabilities | ||||||
| Accounts Payable | $ | |
$ | |
||
| Accrued Liabilities | ||||||
| Total Current Liabilities | ||||||
| Members' Equity: | ||||||
| Members’
Equity Membership Units, Authorized Outstanding December 31, 2020 |
||||||
| Total Members’ Equity | ||||||
| Total Liabilities and Members’ Equity | $ | |
$ | |
See accompanying Report of Independent Registered Public Accounting Firm and Notes to the Financial Statements.
A-3
| GOLDEN GROWERS COOPERATIVE |
| STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME |
| FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 |
| (Dollars In Thousands) |
| December 31, | December 31, | December 31, | |||||||
| 2021 | 2020 | 2019 | |||||||
| OPERATIONS | |||||||||
| Corn Revenue | $ | |
$ | |
$ | |
|||
| Corn Expense | ( |
) | ( |
) | ( |
) | |||
| Net Income from ProGold LLC | |||||||||
| General & Administrative Expenses | ( |
) | ( |
) | ( |
) | |||
| Net Income from Operations | |||||||||
| Other Income | |||||||||
| Net Income | $ | |
$ | |
$ | |
|||
| Weighted Average Shares/Units Outstanding | |||||||||
| Earnings per Share/Membership Unit | |||||||||
| Primary and Fully Diluted | $ | |
$ | |
$ | |
See accompanying Report of Independent Registered Public Accounting Firm and Notes to the Financial Statements.
A-4
| GOLDEN GROWERS COOPERATIVE |
| STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME |
| FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 |
| (Dollars In Thousands) |
| December 31, | December 31, | December 31, | |||||||
| 2021 | 2020 | 2019 | |||||||
| COMPREHENSIVE INCOME | |||||||||
| Net Income | $ | |
$ | |
$ | |
|||
| Comprehensive Income | $ | |
$ | |
$ | |
See accompanying Report of Independent Registered Public Accounting Firm and Notes to the Financial Statements.
A-5
| GOLDEN GROWERS COOPERATIVE |
| STATEMENTS OF CHANGES IN MEMBERS’ EQUITY |
| FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 |
| (Dollars In Thousands) |
| Total | |||
| Members’ | |||
| Equity | |||
| BALANCE December 31, 2018 | $ | |
|
| Net income | |||
| Member distributions | ( |
) | |
| Pension liability adjustment | |||
| BALANCE December 31, 2019 | $ | |
|
| Net income | |||
| Member distributions | ( |
) | |
| Pension liability adjustment | |||
| BALANCE December 31, 2020 | $ | |
|
| Net income | |||
| Member distributions | ( |
) | |
| Pension liability adjustment | |||
| BALANCE December 31, 2021 | $ | |
See accompanying Report of Independent Registered Public Accounting Firm and Notes to the Financial Statements.
A-6
| GOLDEN GROWERS COOPERATIVE |
| STATEMENTS OF CASH FLOWS |
| FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 |
| (Dollars In Thousands) |
| December 31, | December 31, | December 31, | |||||||
| 2021 | 2020 | 2019 | |||||||
| Cash Flows from Operating Activities | |||||||||
| Net Income | $ | |
$ | |
$ | |
|||
| Net (Income) from ProGold LLC | ( |
) | ( |
) | ( |
) | |||
| Changes in assets and liabilities | |||||||||
| Other Current Assets | ( |
) | |||||||
| Accrued liabilities and payables | ( |
) | ( |
) | |||||
| Net Cash Used in Operating Activities | ( |
) | ( |
) | ( |
) | |||
| Cash Flows from Investing Activities | |||||||||
| (Purchase) Sale of investments | ( |
) | ( |
) | ( |
) | |||
| Distribution received from ProGold LLC | |||||||||
| Net Cash Provided in Investing Activities | |||||||||
| Cash Flows from Financing Activities | |||||||||
| Member distributions paid | ( |
) | ( |
) | ( |
) | |||
| Net Cash Used by Financing Activities | ( |
) | ( |
) | ( |
) | |||
| Increase (Decrease) in Cash and Cash Equivalents | ( |
) | |||||||
| Cash and Cash Equivalents, Beginning of Year | |||||||||
| Cash and Cash Equivalents, End of Year | $ | |
$ | |
$ | |
See accompanying Report of Independent Registered Public Accounting Firm and Notes to the Financial Statements.
A-7
| GOLDEN GROWERS COOPERATIVE |
| NOTES TO FINANCIAL STATEMENTS |
| DECEMBER 31, 2021, 2020 AND 2019 |
NOTE 1 — NATURE OF OPERATIONS
Organization - Golden Growers Cooperative was initially
organized as a North Dakota member-owned cooperative incorporated on January 19,
1994 (“GG-ND”). GG-ND and other partners, one of whom was American Crystal
Sugar Company (“ACSC”) entered into a joint venture that formed ProGold Limited
Liability Company, a Minnesota limited liability company (“ProGold”) which
designed and constructed a corn wet-milling facility in Wahpeton, North Dakota
(the “Facility”). Effective March 1, 2022, Cargill exercised its Option to
purchase
On July 29, 2009 GG-ND formed a wholly owned cooperative subsidiary in the state of Minnesota (GG-MN), organized under Minnesota Statutes chapter 308A, solely for the purpose of reincorporating into the state of Minnesota. On September 1, 2009, GG-ND merged into GG-MN and reincorporated into the state of Minnesota. Immediately after the merger, GG-MN statutorily converted into a cooperative association governed under Minnesota Statutes 308B. As a result of its reincorporation and reorganization Golden Growers — North Dakota, a North Dakota cooperative association historically taxed as a tax-exempt cooperative under Subchapter T of the Internal Revenue Code, became Golden Growers Cooperative, a Minnesota cooperative association governed by Minnesota Statutes chapter 308B as a cooperative for state law purposes but taxed as a partnership under Subchapter K of the Internal Review Code for tax purposes. Golden Growers Cooperative succeeded to the business of Golden Growers — North Dakota and except for changes to the structure and operations as a result of the re incorporation and statutory conversion, continues to operate the business of Golden Growers — North Dakota.
As part of the Conversion, GG-ND’s members exchanged their shares of Class A Common Voting Membership Stock and Class B Non-Voting Equity Stock for identical and equal shares of such stock in GG-MN. Each member’s single share of Class A Common Voting Membership Stock was redeemed for and each member received membership units in GG-MN equal to the number of shares of Class B Non-Voting Equity Stock each member held in GG-ND prior to the Merger.
Prior to September 1, 2009, ownership of membership stock, which signified membership in the Cooperative, was restricted to producers of agricultural products. The ownership of equity stock was restricted to members of the Cooperative. Preferred stock could be held by persons who were not members of the Cooperative. At August 31, 2009 and 2008, the Cooperative had shares of non-voting, par-value preferred stock authorized, of which were issued or outstanding. Equity requirements, as determined by the board of directors, could be retained from amounts due to patrons and credited to members’ equity in the form of unit retains or allocated patronage.
The Cooperative reserved the right to acquire any of its stock offered for sale and the right to recall the stock of any member. In the event this right was exercised, the consideration paid for such stock was of its book value.
Beginning September 1, 2009, ownership of membership units is available to any person or entity residing in the United States of America. Net proceeds or losses will be allocated to members on the basis of their patronage of the Cooperative.
In connection with the Conversion, the Cooperative changed its fiscal year end to December 31.
A-8
| GOLDEN GROWERS COOPERATIVE |
| NOTES TO FINANCIAL STATEMENTS |
| DECEMBER 31, 2021, 2020 AND 2019 |
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies:
Investments —The Cooperative’s investment in corporate bonds are held to maturity and recorded at amortized cost. The Cooperative’s investment in fixed income funds are recorded at fair value. The Cooperative’s investment in ProGold is recorded at historical cost plus its pro-rata share of ProGold’s net income and additional paid-in capital less distributions received from ProGold. Gains and losses are determined using the specific identification method.
Cash and Cash Equivalents — The Cooperative considers all demand accounts and overnight sweep accounts to be cash equivalents. Cash equivalents do not include money market accounts maintained by the Cooperative’s investment managers. Cash equivalents do not include any investment with a stated maturity date, regardless of the term to maturity.
Income Taxes –Golden Growers Cooperative is taxed as a limited liability company under Subchapter K of the Internal Revenue Code. As such, the Cooperative is generally not subject to income taxes. Instead, net income is reported by its members who will be responsible for any income taxes which may be due. The Cooperative’s net financial basis in its assets and liabilities exceeded its tax basis by approximately and million as of December 31, 2021 and 2020, respectively.
Property and Equipment — Property and equipment are stated at cost. Depreciation on assets placed in service is provided using the straight-line method over estimated useful lives ranging from to years.
Accounting Estimates — The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition — Revenue from marketing of members’ corn is recognized as a point in time upon delivery of the corn to the cooperative.
The Cooperative’s members are contractually obligated to
annually deliver corn to the Cooperative by either Method A or Method B or a
combination of both. Under Method A, a member is required to physically deliver
corn to the cooperative and under Method B a member appoints the cooperative as
its agent to arrange for the acquisition and delivery of corn on the member’s
behalf. The Cooperative contractually appoints Cargill as its agent to arrange
for the delivery of the corn by its members who elect to deliver corn using
Method A and to acquire corn on its behalf for its members who elect to deliver
corn using Method B. In exchange for these services, the Cooperative paid
Cargill an annual fee of $
With respect to all Method A corn that is delivered, Cargill reports the purchase price as the product of Method A bushels delivered during a month and the average purchase price for the month. If at the conclusion of the year, a Method A member fails to fully satisfy the corn delivery requirement, Cargill will purchase replacement corn. The member with a Method A shortfall will be responsible for a purchased corn fee payable to Cargill and an agency fee determined by the Board of Directors for all bushels needed to complete their annual Method A delivery.
A-9
| GOLDEN GROWERS COOPERATIVE |
| NOTES TO FINANCIAL STATEMENTS |
| DECEMBER 31, 2021, 2020 AND 2019 |
The Cooperative shall notify Cargill of the number of Method B bushels to be purchased during the quarter. Cargill will certify to the Cooperative that it has purchased the necessary Method B bushels. Method B corn revenue will be determined to be equal to the price paid. The Cooperative has determined Corn Expense for Method B deliveries based on the average quarterly cost per bushel paid by Cargill to the Cooperative’s members for Method A quarterly deliveries.
Concentrations - Several times during the year, the Cooperative maintained a cash balance in excess of the Federal Deposit Insurance Corporation (“FDIC”) limits. At December 31, 2021, the Cooperative’s cash balance exceeded the FDIC insurance limits by approximately .
Fair Value Measurements - The Cooperative has determined the fair value of certain assets and liabilities in accordance with the provisions of Accounting Standards Codification (“ASC”) 820-10, which provides a framework for measuring fair value under generally accepted accounting principles.
ASC 820-10 defines fair value as the exchange 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. ASC 820-10 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820-10 also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels.
Level 1 inputs consist of quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the related asset or liability. Level 3 inputs are unobservable inputs related to the asset or liability.
A-10
| GOLDEN GROWERS COOPERATIVE |
| NOTES TO FINANCIAL STATEMENTS |
| DECEMBER 31, 2021, 2020 AND 2019 |
NOTE 3 — PROGOLD LIMITED LIABILITY COMPANY
For the years 2019, 2020, and 2021 the Cooperative had a
| December 31, | ||||||||||
| (In Thousands) | 2021 | 2020 | 2019 | |||||||
| Current Assets | $ | |
$ | |
$ | |
||||
| Long-Term Assets | ||||||||||
| Total Assets | $ | |
$ | |
$ | |
||||
| Current Liabilities | $ | |
$ | |
$ | |
||||
| Long-Term Liabilities | ||||||||||
| Total Liabilities | ||||||||||
| Members’ Equity | ||||||||||
| Total Liabilities and Members’ Equity | $ | |
$ | |
$ | |
||||
| Rent Revenue on Operating Lease | $ | |
$ | |
$ | |
||||
| Expenses | ||||||||||
| Net Income | $ | |
$ | |
$ | |
||||
A-11
| GOLDEN GROWERS COOPERATIVE |
| NOTES TO FINANCIAL STATEMENTS |
| DECEMBER 31, 2021, 2020 AND 2019 |
NOTE 4 — INVESTMENTS
The Cooperative has determined fair value of its investments based on Level 2 inputs.
| December 31, 2021: | Level 1 | Level 2 | Level 3 | Total | ||||||||
| Corporate Bonds | $ | — | $ | |
$ | — | $ | |
||||
| Fixed Income Funds | — | — | ||||||||||
| Money Market & CD’s | — | — | ||||||||||
| $ | — | $ | |
$ | — | $ | |
|||||
| December 31, 2020: | ||||||||||||
| Corporate Bonds | $ | — | $ | |
$ | — | $ | |
||||
| Fixed Income Funds | — | — | ||||||||||
| Money Market & CD’s | — | — | ||||||||||
| $ | — | $ | |
$ | — | $ | |
The Cooperative’s investments held to maturity are as follows as of December 31, 2021 and 2020 (in thousands):
| Amortized | Unrealized | Unrealized | ||||||||||
| Cost | Gains | Losses | Fair Value | |||||||||
| December 31, 2021: | ||||||||||||
| Corporate Bonds | $ | |
$ | |
$ | ) | $ | |
||||
| Money Market & CD’s | — | — | ||||||||||
| $ | |
$ | |
$ | ) | $ | |
|||||
| December 31, 2020: | ||||||||||||
| Corporate Bonds | $ | |
$ | |
$ | ) | $ | |
||||
| Money Market & CD’s | — | — | ||||||||||
| $ | |
$ | |
$ | ) | $ | |
Corporate bond maturities are as follows as of December 31, 2021 (in thousands):
| Net | ||||||
| Carrying | ||||||
| Amount | Fair Value | |||||
| Due in 1 year or less | $ | |
$ | |
||
| Due in 2 to 5 years | ||||||
| Due in 6 to 10 years | ||||||
| $ | |
$ | |
A-12
| GOLDEN GROWERS COOPERATIVE |
| NOTES TO FINANCIAL STATEMENTS |
| DECEMBER 31, 2021, 2020 AND 2019 |
NOTE 5 — INCOME TAXES
The Cooperative follows the provisions of ASC 740-10 related to accounting for uncertainty in income taxes.
The Cooperative had
The Cooperative recognized
NOTE 6 — EMPLOYEE BENEFIT PLANS
Pension Plan — In December 2012,
the Cooperative approved a change to freeze the Cooperative’s defined benefit
pension plan as of January 1, 2013. As a result, no additional benefits will
accrue to participants in the plan and no new employees are eligible for the
plan. During the year ended December 31, 2021, 2020 and 2019, the pension
expenses were $
As of December 31, 2021, the pension plan was funded as required by the funding standards set forth by the Employee Retirement Income Security Act (ERISA).
The Cooperative’s Compensation Committee has the responsibility
of managing the operations and administration of the Cooperative’s retirement
plans. The Cooperative has an investment policy that establishes target asset
allocations to reduce the risk of large losses. Asset classes are diversified to
reduce risk, and equity exposure is limited to
Substantially all of the Plan’s assets consist of Collective Investment Trusts or Mutual Funds (Fund) and are valued based on Level I or Level II inputs, as determined from the Fund’s ASC 715-30 footnote included in the Fund’s audited financial statements. The Fund’s valuation techniques include market matrix pricing and market inputs, including bench mark yields, reported trades, broker/dealer quotes and others. There has been no changes in valuation techniques and inputs in 2021, 2020 and 2019.
The assumptions used in the measurement of the Cooperative’s benefit obligations are shown below:
| 2021 | 2020 | |||||
| Discount Rate | ||||||
| Expected Return on Plan Assets | ||||||
| Rate of Compensation Increase |
A-13
| GOLDEN GROWERS COOPERATIVE |
| NOTES TO FINANCIAL STATEMENTS |
| DECEMBER 31, 2021, 2020 AND 2019 |
The following schedule reflects the expected pension benefit payments during each of the next five years and the aggregate for the following five years (in thousands):
| Expected | |||
| Benefit | |||
| Payments | |||
| 2022 | $ | |
|
| 2023 | |||
| 2024 | |||
| 2025 | |||
| 2026 | |||
| 2027-2031 | |||
| Total | $ | |
The Cooperative does not expect to contribute to the defined benefit pension plan during the next fiscal year.
The following schedules provide the components of the Net Periodic Pension Costs for the periods ended December 31, 2021, 2020 and 2019 (in thousands):
| 2021 | 2020 | 2019 | |||||||
| Interest Cost | $ | |
$ | |
$ | |
|||
| Expected Return on Plan Assets | ( |
) | ( |
) | ( |
) | |||
| Amortization of Net (Gain) Loss | |||||||||
| Net Periodic Pension Cost | $ | ( |
) | $ | ( |
) | $ | ( |
) |
A-14
| GOLDEN GROWERS COOPERATIVE |
| NOTES TO FINANCIAL STATEMENTS |
| DECEMBER 31, 2021, 2020 AND 2019 |
The following schedules set forth a reconciliation of the changes in the plan’s benefit obligation and fair value of assets for the periods ending December 31, 2021 and 2020 and a statement of the funded status and amounts recognized in the Balance Sheets and Accumulated Other Comprehensive Income as of December 31, 2021 and 2020 (in thousands):
| December 31, | December 31, | |||||
| 2021 | 2020 | |||||
| Change in Benefit Obligation | ||||||
| Obligation at the Beginning of the Period | $ | |
$ | |
||
| Service Cost | ||||||
| Interest Cost | ||||||
| Actuarial (Gain) Loss | ( |
) | ( |
) | ||
| Benefits Paid | ( |
) | ( |
) | ||
| Obligation at the End of the Period | $ | |
$ | |
||
| Change in Plan Assets | ||||||
| Fair Value at the Beginning of the Period | $ | |
$ | |
||
| Actual Returns on Plan Assets | ||||||
| Employer Contributions | ||||||
| Benefits Paid | ( |
) | ( |
) | ||
| Fair Value at the End of the Period | $ | |
$ | |
||
| Funded Status | ||||||
| Funded Status as of Period Ended | $ | |
$ | |
||
| Net Amount Recognized | $ | $ |
401(k) Plan — The Cooperative has a 401(k) plan that
covers employees that meet eligibility requirements. The Cooperative’s
contributions to the plan totaled $
NOTE 7 — COMMITMENTS AND CONTINGENCIES
The Cooperative contracted with Cargill, Incorporated in
connection with the procurement of corn which includes payments of $
On February 28, 2022, the Cooperative and Cargill entered into
an operating agreement for ProGold. If a defined triggering event occurs, the
Cooperative and Cargill will expeditiously and in good faith work together to
finalize a joint venture agreement for the structure, governance and operation
of ProGold according to certain operating principles and other guideline terms.
If a joint venture agreement is agreed to, the Cooperative will reimburse
Cargill for
A-15
| GOLDEN GROWERS COOPERATIVE |
| NOTES TO FINANCIAL STATEMENTS |
| DECEMBER 31, 2021, 2020 AND 2019 |
NOTE 8 – LINE OF CREDIT
The Cooperative established a $
NOTE 9 - SUBSEQUENT EVENTS
In February of 2022, the Cooperative declared a distribution of
$
Management has reviewed subsequent events through March 8, 2022 the date to which the financial statements were available to be issued and concluded that, other than the matters described in footnotes 1 and 7, no other subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements.
A-16