10-Q
Golden Growers Cooperative (GGROU)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2021
Commission file number: 000-53957
Golden Growers Cooperative(Exact name of registrant as specified in its charter)
| Minnesota | 27-1312571 |
|---|---|
| (State or other jurisdiction of incorporation or<br> organization) | (I.R.S. Employer Identification No.) |
1002 Main Avenue West, Suite 5 West Fargo, ND 58078(Address of principal executive offices)
Telephone Number 701-281-0468
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
[X] No [ ]
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).
Yes
[X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
|---|---|
| Non-accelerated filer [X] | Smaller reporting company [X] |
| Emerging growth company [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act).
YES [ ] NO [X]
As of November 8, 2021 the Cooperative had 15,490,480 Units
issued and outstanding.
GOLDEN GROWERS COOPERATIVE
FORM 10-Q
INDEX
| PART<br> I. FINANCIAL INFORMATION | 1 | |
|---|---|---|
| Item<br> 1. | Financial<br> Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 7 |
| Item<br> 3. | Quantitative<br> and Qualitative Disclosures About Market Risk | 10 |
| Item<br> 4. | Controls<br> and Procedures | 10 |
| PART<br> II. OTHER INFORMATION | 11 | |
| Item<br> 1. | Legal<br> Proceedings | 11 |
| Item<br> 1A. | Risk Factors | 11 |
| Item<br> 2. | Unregistered<br> Sales of Equity Securities and Use of Proceeds | 11 |
| Item<br> 3. | Defaults<br> Upon Senior Securities | 11 |
| Item<br> 4. | Mine<br> Safety Disclosures | 11 |
| Item<br> 5. | Other<br> Information | 11 |
| Item<br> 6. | Exhibits | 11 |
| SIGNATURES | 12 |
Item 1. Financial Statements
| GOLDEN GROWERS COOPERATIVE | ||||
|---|---|---|---|---|
| CONDENSED BALANCE SHEETS | ||||
| (In Thousands) | ||||
| September 30, 2021 | December 31, 2020 | |||
| --- | --- | --- | --- | --- |
| (Unaudited) | (Audited) | |||
| ASSETS | ||||
| Current Assets: | ||||
| Cash and<br> Cash Equivalents | $ | 3,178 | $ | 3,547 |
| Short-Term Investments | 3,772 | 3,438 | ||
| Other<br> Current Assets | 46 | 258 | ||
| Total Current Assets | 6,996 | 7,243 | ||
| Long-Term Investments | 1,490 | 1,743 | ||
| Investment in ProGold LLC | 19,062 | 16,976 | ||
| Total Assets | $ | 27,548 | $ | 25,962 |
| LIABILITIES AND MEMBERS’<br> EQUITY | ||||
| Current Liabilities | ||||
| Accounts Payable | $ | — | $ | 2 |
| Accrued<br> Liabilities | 2,014 | 202 | ||
| Total Current Liabilities | 2,014 | 204 | ||
| Members' Equity: | ||||
| Members’<br> Equity <br> Membership<br> Units, Authorized 60,000,000 Units, Issued<br> and <br><br> Outstanding<br> 15,490,480 as of September 30, 2021<br> and <br> December<br> 31, 2020 | 25,534 | 25,758 | ||
| Total Members’ Equity | 25,534 | 25,758 | ||
| Total Liabilities and Members’ Equity | $ | 27,548 | $ | 25,962 |
See Notes to Condensed Financial Statements
| GOLDEN GROWERS COOPERATIVE | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||||||||||
| (In Thousands, Other Than Share and Per-Share Data) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||
| OPERATIONS | ||||||||||||
| Corn Revenue | $ | 19,554 | $ | 10,236 | $ | 69,389 | $ | 36,162 | ||||
| Corn Expense | (19,568 | ) | (10,252 | ) | (69,433 | ) | (36,207 | ) | ||||
| Net Income from ProGold LLC | 1,790 | 1,523 | 6,136 | 4,550 | ||||||||
| General & Administrative<br> Expenses | (108 | ) | (110 | ) | (378 | ) | (397 | ) | ||||
| Net Income from Operations | 1,668 | 1,397 | 5,714 | 4,108 | ||||||||
| Other Income | 18 | 44 | 103 | 142 | ||||||||
| Net Income Before Income Tax | $ | 1,686 | $ | 1,441 | $ | 5,817 | $ | 4,250 | ||||
| Net Income | $ | 1,686 | $ | 1,441 | $ | 5,817 | $ | 4,250 | ||||
| Weighted Average Shares/Units<br> Outstanding | 15,490,480 | 15,490,480 | 15,490,480 | 15,490,480 | ||||||||
| Earnings per Share/Membership<br> Unit | ||||||||||||
| Primary and Fully Diluted | $ | 0.11 | $ | 0.09 | $ | 0.38 | $ | 0.27 | ||||
| Three Months Ended | Nine Months Ended | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||
| COMPREHENSIVE INCOME | ||||||||||||
| Net Income | $ | 1,686 | $ | 1,441 | $ | 5,817 | $ | 4,250 | ||||
| Comprehensive Income | $ | 1,686 | $ | 1,441 | $ | 5,817 | $ | 4,250 | ||||
| GOLDEN GROWERS COOPERATIVE | ||||||||||||
| --- | ||||||||||||
| STATEMENTS OF CHANGES IN MEMBERS’ EQUITY | ||||||||||||
| (In Thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||
| Changes in Members' Equity | ||||||||||||
| Balance, Beginning of the<br> Period | $ | 25,862 | $ | 25,006 | $ | 25,758 | $ | 26,379 | ||||
| Net<br> Income | 1,686 | 1,441 | 5,817 | 4,250 | ||||||||
| Distributions to Members | (2,014 | ) | (2,014 | ) | (6,041 | ) | (6,196 | ) | ||||
| Balance,<br> End of the Period | $ | 25,534 | $ | 24,433 | $ | 25,534 | $ | 24,433 |
See Notes to Condensed Financial Statements
| GOLDEN GROWERS COOPERATIVE | ||||||
|---|---|---|---|---|---|---|
| CONDENSED STATEMENTS OF CASH FLOWS | ||||||
| (In Thousands) | ||||||
| (Unaudited) | ||||||
| Nine Months Ended | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| September 30, 2021 | September 30, 2020 | |||||
| Cash Flows from Operating<br> Activities | ||||||
| Net Income | $ | 5,817 | $ | 4,250 | ||
| Net<br> (Income) from ProGold LLC | (6,136 | ) | (4,550 | ) | ||
| Changes in assets and liabilities | ||||||
| Other Current Assets | 212 | 216 | ||||
| Accrued liabilities and payables | (204 | ) | (209 | ) | ||
| Net Cash Used in Operating<br> Activities | (311 | ) | (293 | ) | ||
| Cash Flows from Investing<br> Activities | ||||||
| (Purchase) Sale of<br> investments | (81 | ) | (108 | ) | ||
| Distribution received from ProGold LLC | 4,050 | 5,031 | ||||
| Net Cash Provided by<br> Investing Activities | 3,969 | 4,923 | ||||
| Cash Flows from Financing<br> Activities | ||||||
| Member distributions paid | (4,027 | ) | (4,182 | ) | ||
| Net Cash Used in Financing<br> Activities | (4,027 | ) | (4,182 | ) | ||
| Increase (Decrease) in Cash<br> and Cash Equivalents | (369 | ) | 448 | |||
| Cash and Cash Equivalents,<br> Beginning of Period | 3,547 | 3,228 | ||||
| Cash and Cash Equivalents,<br> End of Period | $ | 3,178 | $ | 3,676 | ||
| Non-Cash Financing Activity | ||||||
| Accrued Distributions Payable to Members | $ | 2,014 | $ | 2,014 |
See Notes to Condensed Financial Statements
GOLDEN GROWERS COOPERATIVE NOTES TO CONDENSEDFINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND2020
NOTE 1 –
BASIS OF PRESENTATION
The condensed financial statements of Golden Growers Cooperative (the “Cooperative”) for the three and nine months ended September 30, 2021 and 2020 are unaudited and reflect all adjustments consisting of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim period. The condensed financial statements should be read in conjunction with the financial statements and notes thereto, contained in the Cooperative’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results for the entire fiscal year ending December 31, 2021.
NOTE 2 –
EXPENSES
The Cooperative contracts with Cargill, Incorporated (“Cargill”) in connection with the procurement of corn
and other agency services for an annual fee of $60,000, which is paid by the Cooperative to Cargill in quarterly 4 installments. The agreements between Cargill and the Cooperative terminate concurrently with Cargill’s Second Amended and Restated Facility Lease with ProGold Limited Liability Company (“ProGold LLC”), which terminates on December 31, 2022, but may be extended through 2023 under certain conditions.
NOTE 3 –
PROGOLD LIMITED LIABILITY COMPANY
The Cooperative has a 49% ownership interest in ProGold LLC.
Following is summary financial information for ProGold LLC, which was derived from the monthly unaudited financial statements of ProGold LLC:
| September 30, | December 31, | |||||
|---|---|---|---|---|---|---|
| (In Thousands) | 2021 | 2020 | 2020 | |||
| Current Assets | $ | 3,048 | $ | 236 | $ | 216 |
| Long-Term Assets | 41,959 | 40,123 | 39,700 | |||
| Total Assets | $ | 45,007 | $ | 40,359 | $ | 39,916 |
| Current Liabilities | $ | 4,186 | $ | 263 | $ | 3,106 |
| Long-Term Liabilities | 1,917 | 4,224 | 2,167 | |||
| Total<br> Liabilities | 6,103 | 4,487 | 5,273 | |||
| Members’ Equity | 38,904 | 35,872 | 34,643 | |||
| Total Liabilities and<br> Members’ Equity | $ | 45,007 | $ | 40,359 | $ | 39,916 |
| Rent Revenue on Operating<br> Lease | $ | 15,176 | $ | 12,037 | $ | 16,293 |
| Expenses | 2,654 | 2,751 | 4,179 | |||
| Net Income | $ | 12,522 | $ | 9,286 | $ | 12,114 |
NOTE 4 –
INVESTMENTS
The Cooperative has determined fair value of its investments held to maturity based on Level 2 inputs (in thousands):
| September 30, 2021: | Level 1 | Level 2 | Level 3 | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Corporate Bonds | $ | **** — | $ | **** 5,175 | $ | **** — | $ | **** 5,175 |
| Money Market & CD’s | — | 133 | — | 133 | ||||
| $ | — | $ | 5,308 | $ | — | $ | 5,308 | |
| December 31, 2020: | ||||||||
| Corporate Bonds | $ | **** — | $ | **** 4,848 | $ | **** — | $ | **** 4,848 |
| Money Market & CD’s | — | 441 | — | 441 | ||||
| $ | — | $ | 5,289 | $ | — | $ | 5,289 |
Maturities are as follows as of September 30, 2021 (in thousands):
| Net Carrying | Fair | |||
|---|---|---|---|---|
| Amount | Value | |||
| Due in 1 year or less | $ | 3,639 | $ | 3,624 |
| Due in 2 to 5 years | 1,300 | 1,362 | ||
| Due in 6 to 10 years | 190 | 189 | ||
| $ | 5,129 | $ | 5,175 |
The Coopertive’s investments held to maturity are as follows as of September 30, 2021 and December 31, 2020 (in thousands):
| Amortized | Unrealized | Unrealized | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Cost | Gains | Losses | Fair Value | ||||||
| September 30, 2021: | |||||||||
| Corporate Bonds | $ | **** 5,129 | $ | **** 66 | $ | **** (20 | ) | $ | **** 5,175 |
| Money Market & CD’s | 133 | — | — | 133 | |||||
| $ | **** 5,262 | $ | **** 66 | $ | **** (20 | ) | $ | 5,308 | |
| December 31, 2020: | |||||||||
| Corporate Bonds | $ | **** 4,740 | $ | **** 113 | $ | **** (5 | ) | $ | **** 4,848 |
| Money Market & CD’s | 441 | — | — | 441 | |||||
| $ | **** 5,181 | $ | **** 113 | $ | **** (5 | ) | $ | 5,289 |
NOTE 5 –
EMPLOYEE BENEFIT PLANS
Pension Plan – In December 2012, the Cooperative approved a change to freeze the Cooperative’s defined benefit plan as of January 1, 2013. As a result, no additional benefits will accrue to participants in the plan and no new employees are eligible for the plan.
The plan’s fair value and benefit obligation will vary
over time as a result of changes in market interest rates, the life expectancy of plan participants, and benefit payments. As of December 31, 2020, the plan had a total fair value of $935,000 and a benefit obligation of $752,000. For the same period in 2019, the plan had a total fair value of $844,000 and a benefit obligation of $784,000.
For the nine month periods ended September 30, 2021 and 2020,
the Cooperative made $0 in contributions. The Cooperative does not anticipate making a contribution in 2021. Contributions in 2020 totaled $1,000.
NOTE 6 –
REVENUE RECOGNITION
The Cooperative derives revenue from two sources: operations related to the marketing of members’ corn and income derived from the Cooperative’s membership interest in ProGold LLC. The Cooperative recognizes revenue from its corn marketing operations equal to the value of the corn that is delivered to Cargill and certain purchased corn and agency fees paid by members.
Annually, the Cooperative is required to deliver approximately 15,490,480
bushels of corn to Cargill for processing at the ProGold LLC wet-milling facility. To fulfill that requirement, the Cooperative’s members are contractually obligated to annually deliver corn to the Cooperative by either Method A or Method B or a combination of both. Under Method A, a member is required to physically deliver corn to the Cooperative and under Method B a member appoints the Cooperative as its agent to arrange for the acquisition and delivery of corn on the member’s behalf. The Cooperative contractually appoints Cargill as its agent to arrange for the delivery of the corn by its members who elect to deliver corn using Method A and to acquire corn on its behalf for its members who elect to deliver corn using Method B. In exchange for these services, the Cooperative pays an annual fee of $60,000, paid in quarterly 4 installments.
Members who deliver corn under Method A are paid the market price or contracted price for their corn at the time of
delivery, as well as an incentive payment of $.05 per bushel. Cargill pays the aggregate purchase price for corn purchased from the Cooperative’s members to the Cooperative and then, on the Cooperative’s behalf, makes individual payments for corn and incentive payments directly to the Cooperative’s members. In the event a member who has elected to deliver corn by Method A delivers to Cargill less than its committed amount of corn, the quantity of the shortfall is then purchased and delivered by Cargill on the Cooperative’s behalf. The purchase price is equal to the average price reported for Method A corn for the final month of the year. In addition, the Method A member with a shortfall will be charged a purchased corn fee and agency fee determined by the Cooperative’s Board of Directors. The aggregate purchase price for corn purchased from the Cooperative’s members, plus any applicable purchased corn fee and agency fee comprise Method A corn revenue. At the end of each month, Cargill reports the number of Method A bushels delivered and the average daily price paid for corn that Cargill purchased from Members on the Cooperative’s behalf. The product of the number of bushels delivered multiplied by the average monthly market price is reported as Method A corn expense. The incentive payment is also a component of Method A corn expense.
Members who elect Method B to deliver corn pay the Cooperative a $.02 per bushel agency fee for the cost of having the
Cooperative deliver corn on their behalf. Cargill acquires the corn as the Cooperative’s agent. Method B corn revenue will be equal to the price paid by Cargill to acquire the corn from the Cooperative, plus the member agency fee. Corn expense for Method B deliveries will be the weighted average price for Method A corn during the quarter multiplied by the number of Method B bushels purchased during the quarter.
The Cooperative’s Board of Directors has the discretion to change the member incentive payment, purchased corn and agency fees based on the Cooperative’s corn delivery needs. The Cargill agency fee is also a component of corn expense.
For the nine month periods ended September 30, 2021 and 2020, the Cooperative recognized corn revenue of $69.4
million and $36.2 million, respectively. Disaggregated revenue for the nine month periods ended September 30, 2021 and 2020 is as follows: revenue from Method A deliveries totaled $19.9 million and $10.4 million, respectively; and revenue from Method B deliveries totaled $49.5 million and $25.8 million, respectively.
NOTE 7 –
DISTRIBUTIONS TO MEMBERS
On February 26, 2021, the Cooperative made distributions to its
members totaling $2,013,762, or $0.13 per outstanding membership unit. On June 29, 2021, the Cooperative made distributions to its members totaling $2,013,762 or $0.13 per outstanding membership unit. At its September meeting, the Cooperative’s Board of Directors authorized a distribution to its members totaling $2,013,762, or $0.13 per outstanding membership unit, to be paid in October 2021. On October 14, 2021 the Cooperative made the distribution to its members.
NOTE 8 –
LINE OF CREDIT
The Cooperative has a $2,000,000 line of credit with a variable
interest rate. This line of credit matures on October 16, 2022. The line of credit is secured by the investment management agency account for the Cooperative maintained by Bell Bank. There was no outstanding balance as of September 30, 2021 or December 31, 2020.
NOTE 9 –
COMMITMENTS AND CONTINGENCIES
The Cooperative contracts with Cargill in connection with the procurement of corn and other agency services
for an annual fee of $60,000, which is paid by the Cooperative to Cargill in quarterly 4 installments. The agreements between Cargill and the Cooperative terminate concurrently with Cargill’s Second Amended and Restated Facility Lease with ProGold LLC, which terminates on December 31, 2022, but may be extended through 2023 under certain conditions.
NOTE 10 –
SUBSEQUENT EVENTS
The Cooperative has evaluated events through the date the financial statements were issued for potential recognition or disclosure in the September 30, 2021 financial statements and concluded that no subsequent events have occurred that would require recognition in the September 30, 2021 financial statements.
Item 2. Management’s Discussion and Analysis of FinancialCondition and Results of Operations ****
Forward Looking Statements
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes thereto and Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations, included in the Cooperative’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements include, among others, those statements including the words “expect”, “anticipate”, “believe”, “may” and similar expressions. The Cooperative’s actual results could differ materially from those indicated in the forward-looking statements for many reasons, including events beyond the Cooperative’s control and assumptions that prove to be inaccurate or unfounded. The Cooperative’s actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including but not limited to: (i) the impact of the Cooperative’s minority ownership interest in ProGold LLC; (ii) fluctuations in the market price per bushel of corn; (iii) the unknown impact of the novel coronavirus (COVID-19); and (iv) other factors described from time to time in the Cooperative’s Securities and Exchange Commission filings. The Cooperative does not intend to update the forward-looking statements contained in this Quarterly Report on Form 10-Q other than as required by law and qualifies all of its forward-looking statements by these cautionary statements.
Overview
Golden Growers Cooperative is a value-added agricultural cooperative association governed under Minnesota Statutes Chapter 308B owned by 1,499 members in the business of providing value to its members by facilitating their delivery of corn to the corn wet-milling facility owned by ProGold Limited Liability Company (“ProGold LLC”), a Minnesota limited liability company in which the Cooperative owns a 49% membership interest. ProGold LLC leases its corn wet milling facility to Cargill Incorporated (“Cargill”), which uses the facility to process corn into high fructose corn syrup. The Cooperative accomplishes its business on behalf of its members through its contractual relationships with all of the parties involved in the ownership and operation of the facility. From an income production perspective, the Cooperative’s membership interest in ProGold LLC is its primary asset that, in addition to giving the Cooperative the right to receive distributions from ProGold LLC, also provides the Cooperative’s members with additional value for the delivery of their corn for processing. Annually, the Cooperative is required to deliver approximately 15,490,480 bushels of corn to Cargill for processing at the ProGold LLC facility.
Any person residing in the United States can own membership units of the Cooperative (“Units”) as long as that person delivers or provides for the delivery of corn for processing at the ProGold LLC facility. Ownership of Units requires members to deliver corn to the Cooperative for processing in proportion to the number of Units each member holds. Currently, 15,490,480 Units are issued and outstanding. The Cooperative’s income and losses are allocated to its members based on the volume of corn they deliver. Subject to certain limitations, as long as a member patronizes the Cooperative by delivering corn equal to the number of Units held by the member, the member will be allocated a corresponding portion of the Cooperative’s income (or loss). In this way, the Cooperative operates on a cooperative basis.
To hold Units, a member is required to execute a Uniform Member Agreement that obligates the member to deliver corn to the Cooperative and an Annual Delivery Agreement by which each member annually elects the member’s method to deliver corn - either Method A or Method B, or a combination of both. Under Method A, a member is required to physically deliver the required bushels of corn to the Cooperative either at the facility or another location designated by the Cooperative. Under Method B, a member appoints the Cooperative as its agent to arrange for the acquisition and delivery of the required bushels of corn on the member’s behalf. The Cooperative appoints Cargill as its agent to arrange for the delivery of the corn by members who elect to deliver corn using Method A, and the Cooperative appoints Cargill as its agent to acquire corn on the Cooperative’s behalf for members who elect to deliver corn using Method B. If a member elects to deliver corn using Method B, the price per bushel the Cooperative pays to the member is equal to the price per bushel paid by Cargill to acquire the corn as its agent. Members who deliver corn under Method A are paid the market price or contracted price for their corn at the time of delivery. Members who deliver corn under Method A receive from the Cooperative an incentive payment of $.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 the Cooperative deliver corn on their behalf. The incentive payment for Method A deliveries and the agency fee for Method B deliveries are subject to annual adjustment at the sole discretion of the Cooperative’s Board of Directors. While the Cooperative is financially responsible for the various payments to the members for corn, Cargill, serving as the Cooperative’s administrative agent, issues payments to members for corn on the Cooperative’s behalf.
Annually, the Cooperative notifies Cargill of the number of bushels of Method A corn to be delivered by each member who has elected to deliver corn by Method A. Once the Cooperative provides notification to Cargill of the number of bushels of corn, Cargill then confirms the amount of corn with each member and notifies that member with respect to quality specifications, allowances, deductions and premiums to be applicable to that corn. The member with a Method A corn commitment then directly contracts with Cargill for corn delivered by Method A. At the end of each month, Cargill reports the number of Method A bushels delivered and the average daily price paid for corn that Cargill purchased from members on the Cooperative’s behalf. The product of the number of bushels delivered multiplied by the average monthly market price is reported as Method A corn expense. In the event a member who has elected to deliver corn by Method A delivers to Cargill more than its delivery commitment, any corn delivered in excess of that commitment is handled as a direct sale of corn to Cargill. In the event a member who has elected to deliver corn by Method A delivers to Cargill less than its committed amount of corn, the quantity of the shortfall is then purchased and delivered by Cargill on 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 Cooperative’s Board of Directors.
Cargill then purchases the remainder of the corn to be delivered by the Cooperative on behalf of the Method B delivering members at such time and in such quantities as it deems appropriate and in the best interest of the Cooperative and Cargill. The Cooperative notifies Cargill of the number of Method B bushels to be purchased during the quarter. Cargill will certify to the Cooperative that it has purchased the necessary Method B bushels. The price paid will be the weighted average price for Method A corn during the quarter multiplied by the number of Method B bushels. Method B corn revenue will be equal to the price paid.
The Cooperative’s Second Amended and Restated Bylaws (“Bylaws”) establish a Method A delivery pool and a Method B delivery pool. Generally, The Cooprative’s income and/or losses are allocated annually based on the percentage of bushels of corn the members elect to deliver using either Method A or Method B. Regardless of the actual percentage allocation between the members who deliver bushels of corn using Method A or Method B, the Bylaws require the Cooperative to annually allocate at least 25% of its 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 members using Method A.
For fiscal year 2021, members elected to deliver 27% of their corn by Method A and members elected to deliver 73% of their corn by Method B. This election will result in 27% of the Cooperative’s income and/or losses and 27% of any cash distributions being allocated to the Method A pool in fiscal year 2021, which reflects the actual percentage of corn members elected to deliver using Method A and does not result in reallocation to meet the 25% requirement set forth in the Cooperative’s Bylaws.
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. Demand for high fructose corn syrup in food service and entertainment sectors declined. Corn millers idled ethanol plants in response to a depressed demand for ethanol. Improved ethanol demand has resulted in increased production for 2021. With improving conditions for 2021, food service and entertainment sectors are likely to increase high fructose corn syrup demand through the end of 2021. The ProGold facility currently continues to operate in the ordinary course and the Cooperative’s overall business has not been impacted; however, the Cooperative is unable to predict the long-term impact of COVID-19 on its business or the impact on the future operations of the ProGold facility.
Results of Operations
Revenues. The Cooperative derives revenue from two sources: operations related to the marketing of members’ corn and income derived from the Cooperative’s membership interest in ProGold LLC. The corn marketing operations generate revenue for the Cooperative equal to the value of the corn that is delivered to Cargill. The Cooperative recognizes expense equal to this same amount, which results in the corn marketing operations being revenue neutral to the Cooperative, except for revenue from the Method B agency fee and expenses related to the Method A incentive payments and the service fee paid to Cargill.
For the three and nine-month periods ended September 30, 2021, the Cooperative sold approximately 3.4 and 12.0 million bushels of corn compared to approximately 3.4 and 11.9 million bushels of corn sold during the three and nine-month periods ended September 30, 2020. For the three and nine-month periods ended September 30, 2021, the members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility approximately 0.6 and 3.5 million bushels of corn using Method A and 2.8 and 8.5 million bushels of corn using Method B. In the same respective periods in 2020, its members, on the Cooperative’s behalf, delivered to Cargill for processing at the facility 0.6 and 3.4 million bushels of corn using Method A and 2.8 and 8.5 million bushels of corn using Method B.
For the three and nine-month periods ended September 30, 2021, the Cooperative recognized corn revenue of $19,554,000 and $69,389,000 compared to $10,236,000 and $36,162,000, during the same respective periods in 2020, an increase of 91% for the third quarter and an increase of 92% year to date due primarily to an increase in the price per bushel of corn sold year to date in 2021 compared to 2020.
Expenses. The Cooperative recognized corn expense of $19,568,000 and $69,433,000 for the three and nine-month periods ended September 30, 2021, respectively, compared to $10,252,000 and $36,207,000 during the same respective periods in 2020, an increase of 91% for the third quarter, and an increase of 92% year to date due primarily to an increase in the price per bushel of corn purchased in 2021 compared to 2020.
The Cooperative recognized expense of $15,000 and $45,000 for the three and nine-month periods ended September 30, 2021, respectively, and during the same respective periods in 2020 in connection with costs incurred to Cargill related to the Cooperative’s corn marketing operation.
Income from ProGold LLC. The Cooperative derived income from ProGold LLC for the three and nine-month periods ended September 30, 2021 of $1,790,000 and $6,136,000, respectively, compared to $1,523,000 and $4,550,000 during the same respective periods in 2020, an increase of 18% for the third quarter and an increase of 35% year to date due primarily to an increase in ProGold LLC’s lease income in 2021 compared to 2020.
General and AdministrativeExpenses. The Cooperative’s general and administrative expenses include salaries and benefits, professional fees and fees paid to its Board of Directors. The general and administrative expenses for the three and nine-month periods ended September 30, 2021 were $108,000 and $378,000, respectively, compared to $111,000 and $397,000 during the same respective periods in 2020. The decrease in administrative expenses for the nine month period ended September 30, 2021 compared to the nine month period ended September 30, 2020 is primarily due to the reduced legal and financial services expenses.
Other Income. Interest income for the three and nine-month periods ended September 30, 2021 was $18,000 and $103,000 compared to $44,000 and $142,000 during the same respective periods in 2020. The decrease is primarily due to lower interest on investments.
Liquidity and Capital Resources
The Cooperative’s working capital at September 30, 2021 was $4,982,000 compared to $3,988,000 at September 30, 2020. The increased working capital at the end of the third quarter of 2021 as compared to the same period in 2020 was the result of changes in the timing of maturities of the Cooperative’s investments. The Cooperative received cash distributions from ProGold LLC totaling $4,050,000 for the nine-month period ended September 30, 2021 compared $5,031,000 for the nine-month period ended September 30, 2020. Reduced ProGold LLC distributions are primarily related to increased capital expenditures by ProGold LLC.
In fiscal year 2018, the Cooperative invested a portion of its cash reserves in bonds. To ensure that the Cooperative would have access to cash if needed before the maturity of the bonds, the Cooperative also established a $2,000,000 line of credit at a variable interest rate based on the prime rate. The line of credit will terminate on October 16, 2022. The line of credit is secured by the investment management agency account for the Cooperative maintained by Bell Bank. There was no outstanding balance as of September 30, 2021 or December 31, 2020.
The Cooperative had no long-term debt as of September 30, 2021 and September 30, 2020 and used operating cash flows of $311,000 for the nine-month period ended September 30, 2021 compared to used cash flows of $293,000 for the nine-month period ended September 30, 2020. The increase in operating cash flows for the nine month period ended September 30, 2021 compared to the nine month period ended September 30, 2020 is primarily due to a change in the timing of expenses.
Management believes that non-cash working capital levels, together with the Cooperative’s cash and cash equivalents, are appropriate in the current business environment and does not expect a significant increase or reduction of non-cash working capital in the next twelve months. Management expects that the Cooperative’s cash and cash equivalents, together with available borrowings under the line of credit, will be sufficient to fund its operations for the foreseeable future, including at least the next twelve months.
Significant Accounting Estimates and Policies
The Cooperative generally does not pay out Method A incentive payments or collect Method B agency fees until the end of its fiscal year. The total annual Method B agency fee was determinable once the members completed their delivery method determination prior to January 1, 2021. The quarterly Method B bushel delivery and agency fee revenue is calculated by allocating the portion of the total annual agency fee for that particular quarter or cumulating it for the particular period. The Cooperative tracks Method A corn deliveries throughout the year so it can report the bushels of corn delivered by its members as well as the corresponding Method A incentive fees earned. The final amounts owed by or due to Cargill and/or the Cooperative’s members who elect to deliver using Method A is not calculated until after December 31 in order to account for any failures to deliver or over-deliveries of corn.
The remainder of the Cooperative’s significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, of the Notes to the Financial Statements in the Cooperative’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The Cooperative’s critical accounting estimates are discussed in Item 7, Management’s Discussion and Analysis of FinancialConditions and Results of Operations, in the Cooperative’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. There have been no other significant changes in the Cooperative’s significant accounting policies or critical accounting estimates since December 31, 2020.
Off Balance Sheet Arrangements
None.
Item 3. Quantitative and Qualitative Disclosures AboutMarket Risk
As a smaller reporting company, the Cooperative is not required to provide disclosure pursuant to this item.
Item 4. Controls and Procedures
The Cooperative’s Chief Executive Officer and Chief Financial Officer has reviewed and evaluated the effectiveness of the Cooperative’s disclosure controls and procedures (as defined in Rules 240.13a -15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of September 30, 2021. Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that the Cooperative’s current disclosure controls and procedures, as designed and implemented, are effective and provide reasonable assurance that information relating to the Cooperative required to be disclosed in the reports the Cooperative files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Cooperative’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Cooperative’s internal controls over financial reporting that occurred during the Cooperative’s most recent fiscal quarter that may have materially affected, or are reasonably likely to materially affect, the Cooperative’s internal control over financial reporting.
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As a smaller reporting company, the Cooperative is not required to provide disclosure pursuant to this item.
Item 2. Unregistered Sales of Equity Securities and Use ofProceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information.
None.
Item 6. Exhibits
| Exhibit No. | Exhibit Description |
|---|---|
| 31.1 | Certification of Chief<br> Executive Officer and Chief Financial Officer pursuant to Securities<br> Exchange Act Rule 17 CFR 13a-14(a) – filed herewith. |
| 32.1 | Certification of Chief<br> Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.<br> Section 1350 – filed herewith. |
| 99.1 | Audited Financial Statements of<br> ProGold Limited Liability Company for the years ended August 31, 2021 and<br> 2020 – filed herewith. |
| 101 | The following materials from<br> this report, formatted in XBRL (Extensible Business Reporting Language)<br> are filed herewith: (i) balance sheets, (ii) statements of operations and<br> comprehensive income, (iii) statements of cash flows, and (iv) the notes<br> to the financial statements. |
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GOLDEN GROWERS COOPERATIVE | |
|---|---|
| (Registrant) | |
| Date: November 9, 2021 | /s/<br> Scott Stofferahn |
| Scott Stofferahn | |
| Executive Vice President, | |
| Chief Financial Officer | |
| Duly Authorized Officer |
Golden Growers Cooperative: Exhibit 99.1 - Filed by EDGARhub LLC
| CliftonLarsonAllen LLP<br> <br>CLAconnect.com |
|---|
INDEPENDENT AUDITORS’ REPORT
| Board of Governors |
|---|
| ProGold Limited Liability Company |
| Moorhead, Minnesota |
We have audited the accompanying financial statements of ProGold Limited Liability Company, which comprise the balance sheets as of August 31, 2021 and 2020, and the related statements of operations, cash flows, and changes in members’ equity for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the FinancialStatements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of ProGold
Limited Liability Company as of August 31, 2021 and 2020, and the results of its
operations and its cash flows for the years then ended in accordance with
accounting principles generally accepted in the United States of
America.
| CliftonLarsonAllen LLP | ||||||
|---|---|---|---|---|---|---|
| Stevens Point, Wisconsin | ||||||
| September 29, 2021 | ||||||
| CLA is an independent member of Nexia International, a<br> leading, global network of independent accounting and consulting firms. See nexia.com/member-firm-disclaimer for details. | ||||||
| --- | ||||||
| PROGOLD LIMITED LIABILITY COMPANY | ||||||
| --- | ||||||
| FINANCIAL STATEMENTS | ||||||
| FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020 | ||||||
| ProGold Limited Liability Company | ||||||
| --- | ||||||
| Balance Sheets | ||||||
| August 31 | ||||||
| (In Thousands) | ||||||
| Assets | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| 2021 | 2020 | |||||
| Current Assets: | ||||||
| Cash and<br> Cash Equivalents | $ | 2,129 | $ | 1,999 | ||
| Prepaid Expenses | 72 | 43 | ||||
| Total Current Assets | 2,201 | 2,042 | ||||
| Property and Equipment Held for Lease: | ||||||
| Land and Land Improvements | 9,268 | 9,128 | ||||
| Buildings<br> and Equipment | 258,294 | 257,470 | ||||
| Construction in Progress | 5,758 | 2,123 | ||||
| Less<br> Accumulated Depreciation | (231,324 | ) | (228,685 | ) | ||
| Net Property and Equipment<br> Held for Lease | 41,996 | 40,036 | ||||
| Total Assets | $ | 44,197 | $ | 42,078 | ||
| Liabilities and Members' Equity | ||||||
| Liabilities: | ||||||
| Current Liabilities: | ||||||
| Other Accrued Liabilities | $ | 3,845 | $ | 1,654 | ||
| Deferred Revenues | 333 | 222 | ||||
| Total Current Liabilities | 4,178 | 1,876 | ||||
| Long Term Liabilites: | ||||||
| Other Long<br> Term Liabilites | - | 1,883 | ||||
| Deferred Revenues | 1,944 | 2,223 | ||||
| Total Long Term Liabilities | 1,944 | 4,106 | ||||
| TotalLiabilities | 6,122 | 5,982 | ||||
| Members' Equity: | ||||||
| Investments | 38,075 | 36,096 | ||||
| Retained<br> Earnings | - | - | ||||
| Total Members' Equity | 38,075 | 36,096 | ||||
| Total Liabilities and Members'<br> Equity | $ | 44,197 | $ | 42,078 |
The Accompanying Notes are an Integral Part of TheseFinancial Statements.
| ProGold Limited Liability Company | ||||
|---|---|---|---|---|
| Statements of Operations | ||||
| For the Years Ended August 31 | ||||
| (In Thousands) | ||||
| 2021 | 2020 | |||
| --- | --- | --- | --- | --- |
| Rental Revenue on Operating Lease | $ | 19,414 | $ | 16,461 |
| Expenses: | ||||
| Depreciation | 2,640 | 2,621 | ||
| Maintenance | 1,150 | 785 | ||
| General and<br> Administrative | 280 | 117 | ||
| Loss on Disposition of Property and Equipment Held for Lease | - | 67 | ||
| Total Expenses | 4,070 | 3,590 | ||
| Net Income | $ | 15,344 | $ | 12,871 |
The Accompanying Notes are an Integral Part of TheseFinancial Statements.
| ProGold Limited Liability Company | ||||||
|---|---|---|---|---|---|---|
| Statements of Cash Flows | ||||||
| For the Years Ended August 31 | ||||||
| (In Thousands) | ||||||
| 2021 | 2020 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| Cash Provided By (Used In) Operating Activities: | ||||||
| Net Income | $ | 15,344 | $ | 12,871 | ||
| Add (Deduct) Non-Cash Items: | ||||||
| Depreciation | 2,640 | 2,621 | ||||
| Loss on<br> Disposition of Property and Equipment Held for Lease | - | 67 | ||||
| Changes in<br> Assets and Liabilities: | ||||||
| Accounts<br> Receivable | - | 1 | ||||
| Prepaid Expenses | (29 | ) | 12 | |||
| Other Accrued<br> Liabilities | 81 | 11 | ||||
| Deferred Revenues | (168 | ) | 501 | |||
| Net Cash Provided By Operating Activities | 17,868 | 16,084 | ||||
| Cash Provided By (Used In) Investing Activities: | ||||||
| Expenditures for<br> Property and Equipment Held For Lease | (4,373 | ) | (399 | ) | ||
| Net Cash (Used In) Investing Activities | (4,373 | ) | (399 | ) | ||
| Cash Provided By (Used In) Financing Activities: | ||||||
| Distributions to<br> Members | (13,365 | ) | (13,857 | ) | ||
| Net Cash (Used In) Financing Activities | (13,365 | ) | (13,857 | ) | ||
| Increase (Decrease) inCash and Cash<br> Equivalents | 130 | 1,828 | ||||
| Cash and Cash Equivalents, Beginning of Year | 1,999 | 171 | ||||
| Cash and Cash Equivalents, End of Year | $ | 2,129 | $ | 1,999 |
Non-Cash Investing Activities: Expenditures for Property and Equipment Held for Lease include changes in Other Accrued Liabilities of $2,110 and changes in Other Long Term Liabilities of ($1,883) related to these purchases for the year ended August 31, 2021. Expenditures for Property and Equipment Held for Lease include changes in Other Accrued Liabilities of $1,189 and changes in Other Long TermLiabilities of $1,883 related to these purchases for the year ended August 31, 2020.
The Accompanying Notes are an Integral Part of TheseFinancial Statements.
| ProGold Limited Liability Company | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Statements of Changes in Members' Equity | ||||||||||||
| Forthe Years Ended August 31 | ||||||||||||
| (In Thousands) | ||||||||||||
| American | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Crystal | Golden | Total | ||||||||||
| Sugar | Growers | Retained | Members' | |||||||||
| Company | Cooperative | Earnings | Equity | |||||||||
| Balance, August 31, 2019 | $ | 18,912 | $ | 18,170 | $ | - | $ | 37,082 | ||||
| Net Income | - | - | 12,871 | 12,871 | ||||||||
| Distributions to Members | (503 | ) | (483 | ) | (12,871 | ) | (13,857 | ) | ||||
| Balance, August 31, 2020 | 18,409 | 17,687 | - | 36,096 | ||||||||
| Net Income | - | - | 15,344 | 15,344 | ||||||||
| Distributions to Members | 1,009 | 970 | (15,344 | ) | (13,365 | ) | ||||||
| Balance, August 31, 2021 | $ | 19,418 | $ | 18,657 | $ | - | $ | 38,075 |
The Accompanying Notes are an Integral Part of TheseFinancial Statements.
ProGold Limited Liability Company
Notes to the Financial Statements
(1) NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTINGPOLICIES:
Organization
ProGold Limited Liability Company (ProGold) is organized as a Minnesota limited liability company. ProGold is owned by American Crystal Sugar Company (51%) and Golden Growers Cooperative (49%). Transfer of ownership in ProGold to another party not already a member is allowed only with the consent of the other Members and the plant’s lessee, Cargill, Incorporated. ProGold has been organized with a life of 50 years and its legal existence will terminate on July 13, 2044, absent a business continuation agreement.
Operating Lease
ProGold leases a corn wet milling facility to Cargill, Incorporated under an operating lease which runs through December 31, 2022 with an automatic one year extension if certain conditions are not met. Payments are to be received monthly under the lease. The operating lease revenue is recognized as earned ratably over the term of the lease and to the extent that amounts received exceed amounts earned, deferred revenue is recorded. The Company generates lease revenue which is recognized under ACS Topic 840, Leases, which falls outside the scope of ACS topic 606. Expenses (including depreciation and interest) are charged against such revenue as incurred. The lease contains provisions for increased payments to be received during the lease period related to the plant’s capital additions and also requires ProGold to pay at least $750,000 annually, on a calendar year basis, to fund infrastructure maintenance.
Included in the lease agreement, there is an option agreement allowing Cargill to purchase a 50% interest in ProGold from American Crystal Sugar Company. If this option is exercised, American Crystal Sugar Company also agrees to sell the remaining 1% interest to Golden Growers Cooperative, resulting in a 50/50 venture between Cargill and Golden Growers Cooperative.
Cash and Cash Equivalents
ProGold considers all highly liquid debt and equity instruments purchased with a maturity of three months or less to be cash equivalents. ProGold places its temporary cash investments with high-credit-quality financial institutions. At times, such investments may be in excess of the applicable insurance limit.
Property and Equipment Held for Lease
Property and equipment held for lease are stated at cost. Depreciation on assets placed in service is provided using the straight-line method over the estimated useful lives of the individual assets, ranging from 5 to 40 years.
Impairment of Long Lived Assets
ProGold reviews its property and equipment for impairment whenever events indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recorded when the sum of the future cash flows is less than the carrying amount of the asset. An impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. There were no impairment losses incurred for the years ended August 31, 2021 or 2020.
Related Parties
American Crystal Sugar Company and Golden Growers Cooperative are considered related parties for financial reporting purposes.
Income Taxes
ProGold is treated in a manner similar to a partnership for federal and state income tax purposes, based upon its current organization. Accordingly, the financial statements do not include any provision for income taxes.
Accounting Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued an update to the authoritative guidance to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The guidance provided by this update becomes effective for ProGold in fiscal 2023. The effect on the Company’s financial statements has not been evaluated as of the issuance date.
(2) LEASE WITH CARGILL, INCORPORATED:
Future minimum payments to be received under the lease are as follows:
| Fiscal Year ending August 31 (In Thousands) | ||
|---|---|---|
| 2022 | $ | 15,500 |
| 2023 | 14,500 | |
| 2024 | 4,667 | |
| Total | $ | 34,667 |
(3) CAPITAL EXPENDITURES AGREEMENT WITH CARGILL,INCORPORATED
ProGold entered into Capital Expenditures Agreement with Cargill, Incorporated in which ProGold agreed to reimburse Cargill, Incorporated for costs incurred relating to specific capital projects. The agreements also provide that ProGold will receive monthly incremental lease payments from Cargill, Incorporated upon completion of the project equal to an amount necessary for the reimbursement amount together with interest to be fully amortized over a specified period of time. The incremental lease payments for these agreements are shown in the table below and will continue during the term of the lease shown in Note 2, including any extension(s) of the lease term if applicable, but not to exceed the period of time specified in each Capital Expenditure Agreement. These incremental lease payments are not included in the amounts in Note 2.
Future incremental lease payments to be received under the Capital Expenditure Agreements are as follows:
| Fiscal Year Ending August 31 (In Thousands) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Project | Project Cost | 2022 | 2023 | 2024 | ||||
| Cooling Tower<br> Project | $ | 2.2 million | $ | 229 | $ | 229 | $ | 76 |
| Fiber Finish Dryer | $ | 1.6 million | 181 | 181 | 60 | |||
| $ | 410 | $ | 410 | $ | 137 |
In addition to the above, ProGold has entered into a Capital Expenditure Agreements with Cargill, Incorporated for a distributive control system project as well as a pre-dryer project. Both agreements require ProGold to reimburse Cargill, Incorporated for project costs incurred upon project completion and provide that ProGold will receive monthly incremental lease payments equal to an amount necessary for the reimbursement amount together with interest to be fully amortized over a specified period of time. ProGold has agreed to reimburse Cargill, Incorporated up to $8.3 million for the distributive control system project, with incremental lease payments to take place over a period of 15 years, and to reimburse Cargill, Incorporated up to $2.2 million for the pre-dryer project, with incremental lease payments to take place over a period of 10 years. As of August 31, 2021, $3.3 million in capital expenditures relating to these projects is accrued in construction in progress, with the distributive control system project phase 1 to be completed in fiscal 2022 and phase 2 in fiscal 2023, and the pre-dryer project to be completed in fiscal 2022.
(4) RELATED PARTY TRANSACTIONS:
ProGold has an administrative services agreement with American Crystal Sugar Company. Amounts incurred under the terms of the American Crystal Sugar Company agreement totaled approximately $32,000 and $17,000 in the years ended August 31, 2021 and 2020, respectively.
(5) OPERATING LEASES:
ProGold is a party to an operating lease for rail cars, which expires in December 2022. Cargill, Incorporated has assumed responsibility for the payments on the rail car lease for the duration of this lease.
(6) DISTRIBUTIONS TO MEMBERS:
In 2008, ProGold began to make cash distributions to its members. The ProGold Board of Governors has authorized the monthly distribution of cash to the members through December 31, 2021, to the extent that the available cash balance exceeds $200,000.
Available cash in the amount of $2.1 million as of August 31, 2021 and $2.0 million as of August 31, 2020 was in excess of $200,000. This excess cash was held for the purpose of funding upcoming capital expenditures as agreed upon with Cargill, Incorporated and described in Note 3.
(7) ENVIRONMENTAL MATTERS:
ProGold is subject to extensive federal and state environmental laws and regulations with respect to water and air quality, solid waste disposal and odor and noise control. The operating lease with Cargill, Incorporated provides that ProGold may be responsible for claims arising for occurrences prior to the execution of the original operating lease, December 1, 1997. ProGold believes that it was in substantial compliance with applicable environmental laws and regulations prior to that time. The operating lease also provides that Cargill, Incorporated operate the corn wet milling facility in compliance with all applicable federal and state environmental laws and regulations during the term of the lease.
(8) INCOME TAXES:
ProGold conducts an annual analysis of its various tax positions, assessing the likelihood of those positions being upheld upon examination with relevant tax authorities. ProGold has determined that it has no unrecognized tax benefits. No interest or penalties are recognized in the statements of operations. ProGold is no longer subject to U.S. Federal or state income tax examinations by tax authorities for fiscal years 2017 and earlier.
(9) SUBSEQUENT EVENTS:
ProGold has evaluated events through the date that the financial statements were available to be issued, September 29, 2021, for potential recognition or disclosure in the August 31, 2021 financial statements.
These notes are an integral part of the accompanyingfinancial statements.
Golden Growers Cooperative: Exhibit 32.1 - Filed by EDGARhub LLC
Exhibit 32.1
| CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 |
|---|
| AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 |
In connection with the quarterly report on Form 10-Q of Golden Growers Cooperative (the ?Company?) for the fiscal quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the ?Report?), I, Scott Stofferahn, Executive Vice President, serving as Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of<br> Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;<br> and |
|---|---|
| 2. | The information contained in the Report fairly presents,<br> in all material respects, the financial condition and results of<br> operations of the Company. |
| GOLDEN GROWERS COOPERATIVE | |
| --- | --- |
| November 9, 2021 | /s/<br> Scott Stofferahn |
| Scott Stofferahn | |
| Executive Vice President, Chief Executive<br> Officer and | |
| Chief Financial Officer |
Golden Growers Cooperative: Exhibit 31.1 - Filed by EDGARhub LLC
Exhibit 31.1
| CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a) |
|---|
| (SECTION 302 CERTIFICATION) |
I, Scott Stofferahn, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of<br> Golden Growers Cooperative (the registrant); |
|---|---|
| 2. | Based on my knowledge, this report does not contain any<br> untrue statement of a material fact or omit to state a material fact<br> necessary to make the statements made, in light of the circumstances under<br> which such statements were made, not misleading with respect to the period<br> covered by this report; |
| 3. | Based on my knowledge, the financial statements, and<br> other financial information included in this report, fairly present in all<br> material respects the financial condition, results of operations and cash<br> flows of the registrant as of, and for, the periods presented in this<br> report; |
| 4. | I am responsible for establishing and maintaining<br> disclosure controls and procedures (as defined in Exchange Act Rules 13a-<br> 15(e) and 15d-15(e)) and internal control over financial reporting (as<br> defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant<br> and have: |
| a) | designed such disclosure controls and procedures, or<br> caused such disclosure controls and procedures to be designed under my<br> supervision, to ensure that material information relating to the<br> registrant, including its consolidated subsidiaries, is made known to me<br> by others within those entities, particularly during the period in which<br> this report is being prepared; |
| --- | --- |
| b) | designed such internal control over financial reporting,<br> or caused such internal control over financial reporting to be designed<br> under my supervision, to provide reasonable assurance regarding the<br> reliability of financial reporting and the preparation of financial<br> statements for external purposes in accordance with generally accepted<br> accounting principles; |
| c) | evaluated the effectiveness of the registrant?s<br> disclosure controls and procedures and presented in this report my<br> conclusions about the effectiveness of the disclosure controls and<br> procedures, as of the end of the period covered by this report based on<br> such evaluation; and |
| d) | disclosed in this report any changes in the registrant?s<br> internal control over financial reporting that occurred during the<br> registrant?s most recent fiscal quarter (the registrant?s fourth fiscal<br> quarter in the case of an annual report) that has materially affected, or<br> is reasonably likely to materially affect, the registrant?s internal<br> control over financial reporting; and |
| 5. | I have disclosed, based on my most recent evaluation of<br> internal control over financial reporting, to the registrant?s audito rs<br> and the audit committee of the registrant?s board of directors (or persons<br> performing the equivalent functions): |
| --- | --- |
| a) | all significant deficiencies and material weaknesses in<br> the design or operation of internal control over financial reporting which<br> are reasonably likely to adversely affect the registrant?s ability to<br> record, process, summarize and report financial information; and |
| --- | --- |
| b) | any fraud, whether or not material, that involves<br> management or other employees who have a significant role in the<br> registrant?s internal control over financial<br>reporting. |
| GOLDEN GROWERS COOPERATIVE | |
| --- | --- |
| November 9, 2021 | /s/<br> Scott Stofferahn |
| Scott Stofferahn | |
| Executive Vice President, Chief Executive<br> Officer and | |
| Chief Financial Officer |