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requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable
inputs and any interrelationships between those inputs. We currently would not be impacted by the additional disclosure
requirements as we do not have any recurring Level 3 measurements.
Effective January 1, 2012, we will be required to adopt the amended guidance in ASC Topic 220,
Comprehensive
Income
. This accounting standards update, which helps to facilitate the convergence of GAAP and IFRS, is aimed at
increasing the prominence of other comprehensive income in the financial statement by eliminating the option to present
other comprehensive income in the statement of stockholders’ equity, and
requiring comprehensive income to be reported in
either a single continuous statement or in two separate but consecutive statements reporting net income and other comprehensive
income. This amended guidance will be implemented retroactively
. We have determined that the changes to the accounting
standards will affect the presentation of consolidated financial information but will not have a material effect on the
Company’s financial position or results of operations.
Effective January 1, 2012, we will be permitted to adopt the amended guidance in ASC Topic 350,
Intangibles –
Goodwill and Other.
The amended guidance permits an entity to first assess qualitative factors to determine whether it is
more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it
is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a
likelihood of more than 50 percent. We have determined that the changes to the accounting standards will not impact our
disclosure or reporting requirements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material
effect on our consolidated financial condition, results of operations or liquidity.
Components of Revenues and Expenses
Revenues
. In our ethanol production segment, our revenues are derived primarily from the sale of ethanol and distillers
grains, which is a co-product of the ethanol production process. In our corn oil production segment, our revenues are derived
from the sale of corn oil, which is extracted from the whole stillage process immediately prior to the production of distillers
grains. In our agribusiness segment, the sale of grain, fertilizer and petroleum products are our primary sources of revenue. In
our marketing and distribution segment, the sale of ethanol, distillers grains and corn oil that we market for our nine ethanol
plants and the sale of ethanol we market for the ethanol plants owned by third parties represent our primary sources of
revenue. Revenues also include net gains or losses from derivatives.
Cost of Goods Sold.
Cost of goods sold in our ethanol production and corn oil production segments includes costs for
direct labor, materials and certain plant overhead costs. Direct labor includes all compensation and related benefits of non-
management personnel involved in the operation of our ethanol plants. Plant overhead costs primarily consist of plant
utilities, plant depreciation and outbound freight charges. Our cost of goods sold is mainly affected by the cost of ethanol,
corn, natural gas and transportation. In these segments, corn is our most significant raw material cost. We purchase natural
gas to power steam generation in our ethanol production process and to dry our distillers grains. Natural gas represents our
second largest cost in this business segment. Cost of goods sold also includes net gains or losses from derivatives.
Grain, fertilizer and petroleum acquisition costs represent the primary components of cost of goods sold in our
agribusiness segment. Grain inventories, forward purchase contracts and forward sale contracts are valued at market prices,
where available, or other market quotes adjusted for differences, primarily transportation, between the exchange-traded
market and the local markets on which the terms of the contracts are based. Changes in the market value of grain inventories,
forward purchase and sale contracts, and exchange-traded futures and options contracts are recognized in earnings as a
component of cost of goods sold.
In our marketing and distribution segment, purchases of ethanol, distillers grains and corn oil represent the largest
components of cost of goods sold. Transportation expense represents an additional major component of our cost of goods
sold in this segment. Transportation expense includes rail car leases, freight and shipping of our ethanol and co-products, as
well as costs incurred in storing ethanol at destination terminals.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses are recognized at the
operating segment level, as well as at the corporate level. These expenses consist of employee salaries, incentives and
benefits; office expenses; board fees; and professional fees for accounting, legal, consulting, and investor relations activities.