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plants. Our fixed-price forward contracts also result in credit risk when prices change significantly prior to delivery. In
addition, we may prepay for or make deposits on undelivered inventories. Concentrations of credit risk with respect to
inventory advances are primarily with a few major suppliers of petroleum products and agricultural inputs. The inability of a
third party to make payments to us for our sales, to provide product to us on advances made, or to perform on fixed-price
contracts may cause us to experience losses and may adversely impact our liquidity and our ability to make our payments
when due.
A loss may occur from the failure of our counterparties to perform according to the terms of their marketing agreements.
Under our third-party marketing agreements, we purchase all of our third-party producers’ ethanol production. In turn,
we sell the ethanol in various markets for future deliveries. Under these marketing agreements, the third-party producers are
not obligated to produce any minimum amount of ethanol and we cannot assure you that we will receive the full amount of
ethanol that these third-party plants are expected to produce. The interruption or curtailment of production by any of our
third-party producers for any reason could cause us to be unable to deliver quantities of ethanol sold under the contracts. As a
result, we may be forced to purchase replacement quantities of ethanol at higher prices to fulfill these contractual obligations.
However, these recoveries would be dependent on our third-party producer’s ability to pay, and in the event they were unable
to pay, our profitability could be materially and adversely impacted.
We are exposed to potential business disruption from factors outside our control, including natural disasters, seasonality,
severe weather conditions, accidents, and unforeseen plant operational failures due to faulty construction design or other
factors, any of which could adversely affect our cash flows and operating results.
Potential business disruption in available transportation due to natural disasters, significant track damage resulting from
a train derailment, or strikes by our transportation providers could result in delays in procuring and supplying raw materials
to our ethanol or grain facilities, or transporting ethanol and distillers grains to our customers. We also run the risk of
unforeseen operational issues, due to faulty construction design or other factors, that may result in an extended plant
shutdown. Such business disruptions would cause the normal course of our business operations to stall and may result in our
inability to meet customer demand or contract delivery requirements, as well as the potential loss of customers.
Many of our grain business activities, as well as corn procurement for our ethanol plants, are dependent on weather
conditions. Adverse weather may result in a reduction in the sales of fertilizer or pesticides during typical application periods,
a reduction in grain harvests caused by inadequate or excessive amounts of rain during the growing season, or by overly wet
conditions, an early freeze or snowy weather during the harvest season. Additionally, corn stored in an open pile may become
damaged by too much rain and warm weather before the corn is dried, shipped, consumed or moved into a storage structure.
Casualty losses may occur for which we have not secured adequate insurance.
We have acquired insurance that we believe to be adequate to prevent loss from foreseeable risks. However, events occur
for which no insurance is available or for which insurance is not available on terms that are acceptable to us. Loss from such
an event, such as, but not limited to, earthquake, tornado, war, riot, terrorism or other risks, may not be insured and such a
loss may have a material adverse effect on our operations, cash flows and financial position.
Our Obion, Tennessee plant is located within a recognized seismic zone. The design of this facility has been modified to
fortify it to meet structural requirements for that region of the country. We have also obtained additional insurance coverage
specific to earthquake risk for this plant. However, there is no assurance that this facility would remain in operation if a
seismic event were to occur.
If our internal computer network and applications suffer disruptions or fail to operate as designed, our operations will be
disrupted and our business may be harmed.
We rely on network infrastructure and enterprise applications, and internal technology systems for our operational,
marketing support and sales, and product development activities. The hardware and software systems related to such
activities are subject to damage from earthquakes, floods, lightning, tornados, fire, power loss, telecommunication failures
and other similar events. They are also subject to acts such as computer viruses, physical or electronic vandalism or other
similar disruptions that could cause system interruptions and loss of critical data, and could prevent us from fulfilling our
customers’ orders. We cannot assure you that any of our backup systems would be sufficient. Any event that causes failures
or interruption in our hardware or software systems could result in disruption of our business operations, have a negative
impact on our operating results, and damage our reputation.