RED TRAIL ENERGY, LLC Results of Operations for the Years Ended
The following table shows the results of our operations and the percentages of
revenues, cost of goods sold, general and administrative expenses and other
items to total revenues in our statements of operations for the years ended
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Year Ended Year Ended
September 30, 2021 September 30, 2020
Statement of Operations Data Amount
% Amount %
Revenues $ 119,084,611 100.00 $ 94,175,793 100.00
Cost of Goods Sold 104,115,501 87.43 90,134,689 95.71
Gross Profit 14,969,110 12.57 4,041,104 4.29
General and Administrative Expenses 3,239,245 2.72 4,329,824 4.60
Operating Income (Loss) 11,729,865 9.85 (288,720) (0.31)
Other Income 895,814 0.75 295,308 0.31
Net Income $ 12,625,679 10.60 $ 6,588 0.01
The following table shows additional data regarding production and price
levels for our primary inputs and products for the years ended September 30,
2021 and 2020:
Year Ended Year Ended
September 30, 2021 September 30, 2020
Production:
Ethanol sold (gallons) 51,893,094 56,510,517
Industrial ethanol sold (gallons) - 1,130,347
Dried distillers grains sold (tons) 62,904 91,073
Modified distillers grains sold (tons) 127,718 109,691
Corn oil sold (pounds) 12,472,550 15,385,430
Revenues:
Ethanol average price per gallon (net of hedging) $ 1.74 $ 1.20 Industrial ethanol average price per gallon - 3.27 Dried distillers grains average price per ton 178.06 128.63 Modified distillers grains average price per ton 78.46 59.20 Corn oil average price per pound 0.41 0.24 Primary Inputs: Corn ground (bushels) 17,717,130 21,346,380 Natural gas (MMBtu) 1,261,294 1,425,450 Costs of Primary Inputs: Corn average price per bushel (net of hedging) $ 4.46 $ 2.98 Natural gas average price per MMBtu (net of 2.77 2.06
hedging)
Other Costs (per gallon of ethanol sold):
Chemical and additive costs $ 0.083 $ 0.077
Denaturant cost 0.035 0.030
Electricity cost 0.045 0.042
Direct labor cost 0.080 0.067
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Table of Contents Revenue For our 2021 fiscal year, ethanol sales comprised approximately 76.9% of our revenues, distillers grains sales comprised approximately 17.8% of our revenues and corn oil sales comprised approximately 4.4% of our revenues. For our 2020 fiscal year, ethanol sales comprised approximately 76.1% of our revenues, distillers grains sales comprised approximately 19.4% of our revenues and corn oil sales comprised approximately 4.0% of our revenues.
Our total revenue for our 2021 fiscal year was approximately 24.4% more compared to our 2020 fiscal year, which resulted in higher net income during the 2021 period compared to the 2020 period.
Ethanol
The average price we received per gallon of ethanol sold was approximately 42.5% higher during our 2021 fiscal year compared to our 2020 fiscal year. Following reduced gasoline demand in 2020 due to the effects of the COVID-19 pandemic, travel restrictions were lifted and gasoline demand rebounded. During 2021, ethanol stocks remained lower which resulted in increased ethanol demand and prices. In addition to the lower ethanol stocks, gasoline prices were higher during our 2021 fiscal year which positively impacted ethanol demand and prices. Our ethanol revenue during our 2020 fiscal year was supported by industrial ethanol sales. We did not have any industrial ethanol sales during our 2021 fiscal year. We sold approximately 7.3% fewer gallons of ethanol during our 2021 fiscal year compared our 2020 fiscal year as we worked to maximize the amount of ethanol we produced per bushel of corn we ground along with longer plant shutdowns which impacted production. Our efficiency in converting corn to ethanol increased significantly during our 2021 fiscal year which positively impacted our profitability. This improved efficiency was important during our 2021 fiscal year due to the fact that our average cost per bushel of corn ground was higher during our 2021 fiscal year compared to our 2020 fiscal year.
We experienced a gain of approximately
Distillers Grains
The average price we received for our dried distillers grains during our 2021 fiscal year was approximately 38.4% greater than the average price we received during our 2020 fiscal year primarily due to higher average corn prices during our 2021 fiscal year which typically impacts distillers grains prices. The average price we received from our modified distillers grains during our 2021 fiscal year was approximately 32.5% higher compared to our 2020 fiscal year due to stronger local demand for distillers grains along with higher corn prices. Our modified distillers grains are primarily sold in our local market. Management anticipates higher distillers grains prices during our 2022 fiscal year due to continued higher corn prices. Further,the United States experienced strong distillers grains export demand during 2021 which increased domestic distillers grains prices. If export demand for distillers grains increases during our 2022 fiscal year, it could result in significantly higher distillers grains prices. We produced approximately 28.5% fewer tons of dried distillers grains and approximately 14.2% more tons of modified distillers grains during our 2021 fiscal year compared to our 2020 fiscal year. Our overall decreased production had a corresponding impact on distillers grains production. We produced more modified distillers grains due to strong local demand for distillers grains which favors the modified distillers grains product. In addition, we produced less corn oil per bushel of corn used during the 2021 period which resulted in more total distillers grains we produced during the 2021 fiscal year. When we produce more corn oil, it results in fewer tons of distillers grains produced. We decide whether to produce dried distillers grains versus modified/wet distillers grains based on market conditions and the relative cost of producing each form of distillers grains. Management anticipates that distillers grains production will remain at its current mix during our 2022 fiscal year unless distillers grains exports increase significantly which could favor producing more dried distillers grains. Corn Oil The average price we received for our corn oil was approximately 73.9% higher during our 2021 fiscal year compared to our 2020 fiscal year primarily due to additional corn oil demand from the biodiesel industry along with higher corn and soybean oil prices which positively impact market corn oil prices. OnDecember 17, 2019 ,Congress renewed the biodiesel blenders' credit retroactively for 2019 and for a total of five years. This certainty for the biodiesel blenders' credit has positively impacted demand for corn oil during that time period which has supported market corn oil prices. If the biodiesel blenders' credit expires in the future, we anticipate that corn oil demand will be lower. 21
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Table of Contents Our corn oil sales decreased by approximately 27.2% during our 2021 fiscal year compared to our 2020 fiscal year due to reduced overall production at the ethanol plant along with lower corn oil extraction efficiency during our 2021 fiscal year. Management anticipates that corn oil production will continue to be higher during our 2022 fiscal year.
Cost of Goods Sold
Our cost of goods sold is primarily made up of corn and energy expenses. Our total cost of goods sold was approximately 10.7% higher for our 2021 fiscal year compared to our 2020 fiscal year due primarily to higher corn and natural gas costs during our 2021 fiscal year, partially offset by lower corn and natural gas consumption. Corn Costs Our cost of goods sold related to corn was approximately 18.8% higher during our 2021 fiscal year compared to our 2020 fiscal year due to higher average corn costs per bushel partially offset by fewer bushels of corn used during our 2021 fiscal year. Our average cost per bushel of corn used, without including our derivative instrument gains and losses, was approximately 49.7% higher during our 2021 fiscal year compared to our 2020 fiscal year. Management attributes this increase in corn costs to higher corn demand from the ethanol industry during our 2021 fiscal year along with a smaller corn crop which was harvested in the fall of 2020 which reduced corn availability. The corn crop harvested in the fall of 2021 was larger than in 2020 which may have a positive impact on corn prices during our 2022 fiscal year. Management believes that there will be sufficient corn in our local market to continue to operate the ethanol plant at capacity during our 2022 fiscal year but we may experience higher prices in order to purchase the corn we need. Our corn use decreased by approximately 17.0% during our 2021 fiscal year compared to our 2020 fiscal year due to decreased overall production at the ethanol plant. Management anticipates that we will use a comparable amount of corn in the future provided operating margins remain favorable. From time to time we enter into forward purchase contracts for our commodity purchases and sales. AtSeptember 30, 2021 , we had forward corn purchase contracts for various delivery periods throughMarch 2022 for a total commitment of approximately$34.5 million for a total of approximately 5.7 million bushels of corn. We had a gain of approximately$1,367,000 related to our corn derivative instruments which decreased our cost of goods sold during our 2021 fiscal year. We had a loss of approximately$455,000 related to our corn derivative instruments during our 2020 fiscal year which increased our cost of goods sold. We recognize the gains or losses that result from the changes in the value of our derivative instruments from corn in cost of goods sold as the changes occur. As corn prices fluctuate, the value of our derivative instruments is impacted, which affects our financial performance.
Natural Gas Costs
Our total natural gas costs to operate the ethanol plant were higher for our 2021 fiscal year compared to our 2020 fiscal year due primarily to increased natural gas costs per MMBtu during the 2021 period partially offset by decreased natural gas consumption. Our average cost per MMBtu of natural gas was approximately 34.5% higher during our 2021 fiscal year compared to our 2020 fiscal year. Management believes this increase in natural gas costs during our 2021 fiscal year was due to higher energy prices generally during our 2021 fiscal year. We used approximately 11.5% fewer MMBtu of natural gas during our 2021 fiscal year compared to our 2020 fiscal year due to reduced overall production at the ethanol plant. Management expects that natural gas prices will increase during our 2022 fiscal year due to strong energy markets and the amount of natural gas available in the market, particularly during the winter months when natural gas demand for heating needs is higher.
General and Administrative Expenses
Our general and administrative expense was lower during our 2021 fiscal year and our 2020 fiscal year due to less labor and consulting costs during the 2021 period. During our 2020 fiscal year we had increased labor and consulting costs associated with our carbon capture and storage project which is designed to decrease the carbon intensity of our ethanol, making it more valuable in theCalifornia fuel market. Other Income/Expense We had less interest income during our 2021 fiscal year compared to our 2020 fiscal year due to having less cash on hand during the 2021 period. Our other income was higher during our 2021 fiscal year compared to our 2020 fiscal year due to a gain on the sale of used equipment no longer needed for operations and the PPP loan forgiveness. 22
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Results of Operations for the Years Ended
The following table shows the results of our operations and the percentages of revenues, cost of goods sold, general and administrative expenses and other items to total revenues in our statements of operations for the years endedSeptember 30, 2020 and 2019: Year Ended Year EndedSeptember 30, 2020 September 30, 2019 Statement of Operations Data Amount
% Amount % Revenues$ 94,175,793 100.00$ 103,697,726 100.00 Cost of Goods Sold 90,134,689 95.71 104,690,474 100.96 Gross Profit (Loss) 4,041,104 4.29 (992,748) (0.96) General and Administrative Expenses 4,329,824 4.60 3,135,825 3.02 Operating Loss (288,720) (0.31) (4,128,573) (3.98) Other Income (Expense) 295,308 0.31 385,884 0.37 Net Profit (Loss)$ 6,588 0.01$ (3,742,689) (3.61) The following table shows additional data regarding production and price levels for our primary inputs and products for the years endedSeptember 30, 2020 and 2019: Year Ended Year Ended September 30, 2020 September 30, 2019 Production: Ethanol sold (gallons) 56,510,517 63,401,876 Industrial ethanol sold (gallons) 1,130,347 - Dried distillers grains sold (tons) 91,073 98,758 Modified distillers grains sold (tons) 109,691 127,310 Corn oil sold (pounds) 15,385,430 10,697,030
Revenues:
Ethanol average price per gallon (net of hedging) $ 1.20 $ 1.27 Industrial ethanol average price per gallon 3.27 - Dried distillers grains average price per ton 128.63 135.15 Modified distillers grains average price per ton 59.20 52.73 Corn oil average price per pound 0.24 0.23 Primary Inputs: Corn ground (bushels) 21,346,380 22,641,392 Natural gas (MMBtu) 1,425,450 1,630,853 Costs of Primary Inputs: Corn average price per bushel (net of hedging) $ 2.98 $ 3.56 Natural gas average price per MMBtu (net of 2.06 2.42
hedging)
Other Costs (per gallon of ethanol sold):
Chemical and additive costs $ 0.077 $ 0.080
Denaturant cost 0.030 0.034
Electricity cost 0.042 0.038
Direct labor cost 0.067 0.062
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Table of Contents Revenue For our 2020 fiscal year, ethanol sales comprised approximately 76.1% of our revenues, distillers grains sales comprised approximately 19.4% of our revenues and corn oil sales comprised approximately 4.0% of our revenues. For our 2019 fiscal year, ethanol sales comprised approximately 77.7% of our revenues, distillers grains sales comprised approximately 19.3% of our revenues and corn oil sales comprised approximately 2.5% of our revenues. Our total revenue for our 2020 fiscal year was approximately 9.6% less compared to our 2019 fiscal year, however, our cost of goods sold was less during our 2020 fiscal year compared to our 2019 fiscal year which resulted in positive net income during the 2020 period compared to a net loss during the 2019 period. Ethanol The average price we received per gallon of ethanol sold was approximately 5.5% less during our 2020 fiscal year compared to our 2019 fiscal year. The ethanol industry struggled during both our 2020 fiscal year and 2019 fiscal year with lower ethanol prices due to decreased domestic demand. This decreased domestic demand was due to small refinery waivers from the ethanol use requirements under the RFS granted by the EPA which reduced the volume of ethanol which was required to be used inthe United States . Early in 2020, lower oil prices resulted in decreased gasoline and ethanol prices. In addition, starting inMarch 2020 , social distancing measures resulted in significant decreases in ethanol demand. Many states instituted social distancing measures which resulted in less gasoline demand as people stayed home to avoid infection. While we were able to maintain production due to commitments we had in place during our second quarter of 2020, we saw a 40% decrease in ethanol demand and a 32% decrease in ethanol price during that time due to the COVID-19 pandemic. Approximately 3.9% of our ethanol sales were from industrial alcohol sales made during our 2020 fiscal year due to shortages experienced early in the COVID-19 pandemic. We sold approximately 11.1% fewer gallons of ethanol during our 2020 fiscal year compared our 2019 fiscal year due to significantly lower gasoline demand due to the COVID-19 social distances measures which were implemented during our 2020 fiscal year. We experienced a gain of approximately$383,000 related to our ethanol derivative instruments during our 2020 fiscal year which increased our revenue. We had no soybean oil derivative instruments during our 2020 fiscal year. We held no ethanol or soybean oil derivative instruments during our 2019 fiscal year. Distillers Grains The average price we received for our dried distillers grains during our 2020 fiscal year was approximately 4.8% less than the average price we received during our 2019 fiscal year primarily due to lower average corn prices during our 2020 fiscal year which typically impacts distillers grains prices. The average price we received from our modified distillers grains during our 2020 fiscal year was approximately 12.3% more compared to our 2019 fiscal year due to stronger local demand for distillers grains. Our modified distillers grains are primarily sold in our local market. We produced approximately 7.0% fewer tons of dried distillers grains and approximately 16.4% fewer tons of modified distillers grains during our 2020 fiscal year compared to our 2019 fiscal year due to decreased overall production during our 2020 fiscal year because of market disruptions from COVID-19. We significantly reduced production during March andApril 2020 which negatively impacted our production for the year. In addition, we produced more corn oil during the 2020 period which resulted in a net decrease in the total distillers grains we produced during the 2020 fiscal year. When we produce more corn oil, it results in fewer tons of distillers grains produced. We decide whether to produce dried distillers grains versus modified/wet distillers grains based on market conditions and the relative cost of producing each form of distillers grains. Corn Oil The average price we received for our corn oil was approximately 4.0% greater during our 2020 fiscal year compared to our 2019 fiscal year primarily due to additional corn oil demand from the biodiesel industry. In addition, due to reductions in the amount of ethanol produced during our 2020 fiscal year, the supply of corn oil in the market was lower during our 2020 fiscal year. OnDecember 17, 2019 ,Congress renewed the biodiesel blenders' credit retroactively for 2019 and for a total of five years. This certainty for the biodiesel blenders' credit has positively impacted demand for corn oil during that time period which has supported market corn oil prices. 24
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Our corn oil sales increased by approximately 37.2% during our 2020 fiscal year compared to our 2019 fiscal year due to increased corn oil production per bushel of corn we ground. This increase in the amount of corn oil we produced per bushel of corn we ground was due to a change in chemicals used during the production process which resulted in more corn oil being extracted.
Cost of Goods Sold
Our cost of goods sold is primarily made up of corn and energy expenses. Our total cost of goods sold was approximately 14.0% less for our 2020 fiscal year compared to our 2019 fiscal year due primarily to lower corn and natural gas costs during our 2020 fiscal year.
Corn Costs
Our cost of goods sold related to corn was approximately 22.5% lower during our 2020 fiscal year compared to our 2019 fiscal year due to lower average corn costs per bushel along with slightly fewer bushels of corn used during our 2020 fiscal year. Our average cost per bushel of corn used, without including our derivative instrument gains and losses, was approximately 16.3% lower during our 2020 fiscal year compared to our 2019 fiscal year. Management attributes this decrease in corn costs to lower corn demand from the ethanol industry during our 2020 fiscal year. Our corn use decreased by approximately 5.7% during our 2020 fiscal year compared to our 2019 fiscal year due to decreased overall production at the ethanol plant. From time to time we enter into forward purchase contracts for our commodity purchases and sales. AtSeptember 30, 2020 , we had forward corn purchase contracts for various delivery periods throughMarch 2021 for a total commitment of approximately$9.42 million for a total of approximately 2.8 million bushels of corn. We had a loss of approximately$455,000 related to our corn derivative instruments which increased our cost of goods sold during our 2020 fiscal year. We had a gain of approximately$4.4 million related to our corn derivative instruments during our 2019 fiscal year which decreased our cost of goods sold. We recognize the gains or losses that result from the changes in the value of our derivative instruments from corn in cost of goods sold as the changes occur. As corn prices fluctuate, the value of our derivative instruments is impacted, which affects our financial performance.
Natural Gas Costs
Our total natural gas costs to operate the ethanol plant were lower for our 2020 fiscal year compared to our 2019 fiscal year due primarily to decreased natural gas costs per MMBtu during the 2020 period. Our average cost per MMBtu of natural gas was approximately 14.9% lower during our 2020 fiscal year compared to our 2019 fiscal year. Management believes this decrease in natural gas costs during our 2020 fiscal year was due to lower energy prices generally during our 2020 fiscal year. We used approximately the same amount of natural gas during both our 2020 fiscal year and our 2019 fiscal year. Management expects that natural gas prices will remain steady during our 2021 fiscal year unless we experience supply disruptions which impact the amount of natural gas available in the market, particularly during the winter months when natural gas demand for heating needs is higher.
General and Administrative Expenses
Our general and administrative expense was higher during our 2020 fiscal year and our 2019 fiscal year due to increased labor and consulting costs related to the carbon capture and storage project which is designed to decrease the carbon intensity of our ethanol, making it more valuable in theCalifornia fuel market.
Other Income/Expense
We had more interest income during our 2020 fiscal year compared to our 2019 fiscal year due to having more cash on hand during the 2020 period. Our other income was lower during our 2020 fiscal year compared to our 2019 fiscal year due to a lower capital account distribution from RPMG, our marketer. Changes in Financial Condition for the Year EndedSeptember 30, 2021 and 2020 Current Assets. We had less cash and equivalents on our balance sheet atSeptember 30, 2021 compared toSeptember 30, 2020 due to cash we used for capital expenditures for our carbon sequestration project along with an increase in restricted cash related to our derivative instruments atSeptember 30, 2021 compared toSeptember 30, 2020 . We had more restricted cash atSeptember 30, 2021 compared toSeptember 30, 2020 as a result of having more cash deposited in our margin 25
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account with our commodities broker related to our risk management positions. We had less accounts receivable atSeptember 30, 2021 compared toSeptember 30, 2020 due primarily to the timing of payments from our product marketers at the end of our 2021 fiscal year compared to the end of our 2020 fiscal year. We had more inventory on hand atSeptember 30, 2021 compared toSeptember 30, 2020 due to more finished goods inventory atSeptember 30, 2021 due in part to higher ethanol prices which are used to value our inventory. Property, Plant and Equipment. The gross value of our property, plant and equipment was higher atSeptember 30, 2021 compared toSeptember 30, 2020 due primarily to the start of construction on our carbon capture and storage project during our 2021 fiscal year. The carbon capture and storage project, which was started during our 2019 fiscal year, will inject CO2 from the fermentation process into a saline formation to lower the carbon intensity value of our ethanol so it qualifies for the west coast clean fuels programs. Other Assets. Our other assets were higher atSeptember 30, 2021 than atSeptember 30, 2020 due primarily to an increase in our patronage equity with Roughrider Electric Cooperative The net right of use asset related to our operating leases was lower atSeptember 30, 2021 than atSeptember 30, 2020 due to amortization of our operating leases during our 2021 fiscal year. Current Liabilities. We had checks issued in excess of our bank balances atSeptember 30, 2021 . When checks are presented for payment which exceed our cash balances, we use our revolving loan to pay the amounts owed. Our accounts payable was higher atSeptember 30, 2021 and atSeptember 30, 2020 due to deferred corn payments. Our accrued expenses were lower atSeptember 30, 2021 compared toSeptember 30, 2020 due to having fewer corn payables atSeptember 30, 2021 compared toSeptember 30, 2020 . We had a larger accrued loss on our firm corn purchase commitments atSeptember 30, 2021 compared toSeptember 30, 2020 due to corn price increases. The current maturities of our long-term debt was lower atSeptember 30, 2021 compared toSeptember 30, 2020 due to forgiveness of our Paycheck Protection Program ("PPP") loan during our 2021 fiscal year. The current portion of our operating lease liability was higher atSeptember 30, 2021 compared toSeptember 30, 2020 due to increased amortization of our operating leases. Long-term Liabilities. We had less long-term liabilities atSeptember 30, 2021 compared toSeptember 30, 2020 due to forgiveness of our PPP loan along with payments on our long term debt during our 2021 fiscal year. We had a smaller long-term liability related to operating leases atSeptember 30, 2021 compared toSeptember 30, 2020 due to regular amortization of our operating leases.
Critical Accounting Policies
Management uses estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Of the significant accounting policies described in the notes to our financial statements, we believe that the following are the most critical.
Inventory
Corn is the primary raw material and, along with other raw materials and supplies, is stated at the lower of cost or net realizable value on a first-in, first-out (FIFO) basis. Work in process and finished goods, which consists of ethanol, distillers grains and corn oil produced, is stated at the lower of average cost or net realizable value. Spare parts inventory is valued at lower of cost or net realizable value on a FIFO basis.
Allowance for Doubtful Accounts
Management's estimate of the Allowance for Doubtful Accounts is based on management's estimate of the collectability of identified receivables, as well as the aging of customer accounts. A 10% change in management's estimate regarding the Allowance for Doubtful Accounts as ofSeptember 30, 2021 could impact net income by approximately$38,000 for our 2022 fiscal year.
Revenue Recognition
The Company sells ethanol and related products pursuant to marketing
agreements. The Company recognizes revenue from sales of ethanol and co-products
at the point in time when the performance obligations in the contract are met,
which is when the customer obtains control of such products and typically occurs
upon shipment depending on the terms of the underlying contracts. Revenue is
measured as the amount of consideration expected to be received in exchange for
transferring
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goods or providing services. In some instances, the Company enters into contracts with customers that contain multiple performance obligations to deliver volumes of co-products over a contractual period of less than 12 months. The Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices and recognizes the related revenue as control of each individual product is transferred to the customer in satisfaction of the corresponding performance obligation. Revenues are shown net of any fees incurred under the terms of the Company's agreements for the marketing and sale of ethanol and related products.
Long Lived Assets
Property, plant, and equipment are stated at cost. Depreciation is provided over estimated useful lives by use of the straight line method. Maintenance and repairs are expensed as incurred. Major improvements and betterments are capitalized. The present values of finance lease obligations are classified as long-term debt and the related assets are included in property, plant and equipment. Amortization of equipment under finance leases is included in depreciation expense. Management does not believe it is reasonably likely that the valuation of its property, plant and equipment will change in any material manner in future estimates.
Liquidity and Capital Resources
Based on financial forecasts performed by our management, we anticipate that we will have sufficient cash from our expected credit facilities and cash from our operations to continue to operate the ethanol plant for the next 12 months. Should we experience unfavorable operating conditions in the future, we may have to secure additional debt or equity sources for working capital or other purposes. We do not have any planned capital projects for which we anticipate requiring additional borrowing.
The following table shows cash flows for the years ended
2021 2020
Net cash provided by operating activities$ 19,721,836
Net cash (used in) investing activities (23,053,910)
(8,871,441)
Net cash provided by (used in) financing activities (2,565,171)
6,168,912
Net increase (decrease) in cash$ (5,897,245)
Cash and equivalents, end of period$ 5,215,244 $ 11,112,489 Cash Flow from Operations Our operations provided more cash during our 2021 fiscal year compared to our 2020 fiscal year due primarily to a larger net income we generated during the 2021 period compared. We had a significant increase in accounts payable and accrued expenses related to deferred corn payments which provided more cash during our 2021 fiscal year.
Cash Flow from Investing Activities
We used more cash for capital expenditures during our 2021 fiscal year compared to our 2020 fiscal year. During our 2021 fiscal year, we had capital expenditures primarily related to our carbon sequestration project. During our 2020 fiscal year, we also had capital expenditures related to our carbon sequestration project and our industrial alcohol project.
Cash Flow from Financing Activities
Our financing activities used cash during our 2021 fiscal year due primarily to
a dividend we paid during our 2021 fiscal year. We also used more cash for debt
and lease repayments during our 2021 fiscal year compared to our 2020 fiscal
year.
Our liquidity, results of operations and financial performance will be impacted
by many variables, including the market price for commodities such as, but not
limited to, corn, ethanol and other energy commodities, as well as the market
price for any co-products generated by the facility and the cost of labor and
other operating costs. Assuming future relative price levels for corn, ethanol
and distillers grains remain consistent, we expect operations to generate
adequate cash flows to maintain operations.
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The following table shows cash flows for the years ended
2020 2019
Net cash provided by operating activities
378,740
Net cash (used in) investing activities (8,871,441) (725,559)
Net cash (used in) financing activities 6,168,912 (4,451)
Net increase (decrease) in cash $ 590,420 $ (351,270)
Cash and equivalents, end of period $ 11,112,489 $10,522,069 Cash Flow from Operations Our operations provided more cash during our 2020 fiscal year compared to our 2019 fiscal year due to net income we generated during the 2020 period compared to a net loss during the 2019 period. Our derivative instruments, accounts receivable and accounts payable positively impacted the cash generated by our operating activities during our 2020 fiscal year.
Cash Flow from Investing Activities
We used more cash for capital expenditures during our 2020 fiscal year compared to our 2019 fiscal year. During our 2020 fiscal year, we had capital expenditures primarily related to our carbon sequestration project. During our 2019 fiscal year, we had capital expenditures primarily related to improvements to our centrifuges and heat exchangers.
Cash Flow from Financing Activities
Our financing activities provided cash during our 2020 fiscal year due to increased cash from our debt instruments. We used cash during our 2019 fiscal year for lease repayments.
Capital Expenditures
We had approximately
Capital Resources
OnJanuary 22, 2020 , we entered into a series of loans withCornerstone Bank ("Cornerstone"), described below. OnFebruary 1, 2021 we renewed our$10 million Revolving Loan withCornerstone Bank . In addition, onFebruary 1, 2021 we entered into a$28 million construction loan withCornerstone Bank for the carbon capture and storage project described below.
Revolving Loan
OnJanuary 22, 2020 , we entered into a new$10 million revolving loan (the "Revolving Loan") with Cornerstone which was renewed onFebruary 1, 2021 . Interest accrues on any outstanding balance on the Revolving Loan at a rate of 1.2% less than the prime rate as published by theWall Street Journal , adjusted monthly. The Revolving Loan has a minimum interest rate of 3.0%. The maturity date of the Revolving Loan isJanuary 21, 2022 . The Revolving Loan is secured by a lien on all of our assets. AtSeptember 30, 2021 , we had$10 million available on the Revolving Loan. The variable interest rate onSeptember 30, 2021 was 3.00%.
Construction Loan
OnJanuary 22, 2020 , we entered into a new$7 million construction loan (the "Construction Loan") with Cornerstone to finance our carbon capture and storage project. Interest accrues on any outstanding balance on the Construction Loan at a rate of 1.2% less than the prime rate as published by theWall Street Journal , adjusted monthly. The maturity date of the Construction Loan isFebruary 1, 2022 . The Construction Loan is secured by a lien on all of our assets. AtSeptember 30, 2021 , we had$7 million available on the Construction Loan. The variable interest rate onSeptember 30, 2021 was 3.00%. OnFebruary 1, 2021 , we entered into a new$28 million construction loan (the "CCS Construction Loan") with Cornerstone to finance our carbon capture and storage project. Interest accrues on any outstanding balance on the CCS Construction Loan at a rate of 1.2% less than the prime rate as published by theWall Street Journal , adjusted monthly. The 28
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CCS Construction Loan has a minimum interest rate of 3.0%. The maturity date of the CCS Construction Loan isJanuary 31, 2022 . The CCS Construction Loan is secured by a lien on substantially all of our assets. AtSeptember 30, 2021 , we had$28 million available under the CCS Construction Loan. The variable interest rate onSeptember 30, 2021 was 3.00%.
Paycheck Protection Program Loan
OnApril 16, 2020 , we entered into a new$873,400 Paycheck Protection Program Loan (the "PPP Loan) with Cornerstone. Interest accrued on any outstanding balance on the PPP Loan at a rate of 1.0%. The maturity date of the PPP Loan wasApril 16, 2022 . Under the terms of the loan, the Company applied for forgiveness of the entire amount of the PPP Loan onOctober 31, 2020 , in accordance with PPP regulations, which provided for the possibility of loan forgiveness because the Company used all the proceeds of the PPP Loan for qualifying expenses in accordance with PPP requirements. The entire amount of the PPP Loan was forgiven onJanuary 20, 2021 . The forgiven amount was recorded as other income.
Ethanol Recovery Program
OnJuly 13, 2020 , we entered into a loan with theBank of North Dakota Ethanol Recovery Program and Cornerstone for$5.41 million . The Ethanol Recovery Program was developed by theNorth Dakota Ethanol Producers Association and theBank of North Dakota to use the existing Biofuels Pace program and value-added loan guarantee program to help ethanol production facilities weather the pandemic economic challenges. Ethanol producers could qualify for up to$15 million dollars of a low interest loan of 1% based on the amount of annual corn grind. The maturity date of the loan isJuly 13, 2025 . The fixed interest rate as ofSeptember 30, 2021 was 3.75% with an interest rate buy down through theBank of North Dakota to 1%. We make monthly payments of approximately$74,000 per month with the balance outstanding onSeptember 30, 2021 of approximately$4,600,000 .
Contractual Obligations and Commercial Commitments
We have the following contractual obligations as of
Contractual Obligations: Total Less than 1 Yr
1-3 Years 3-5 Years
Long-term debt obligations *
Corn purchases * 5,686,021 5,686,021 Water purchases 1,908,000 424,000
1,272,000 212,000
Operating lease obligations 762,847 372,987 389,860 Finance leases 14,409 4,542 9,867 Total$ 12,978,883 $ 7,206,783 $ 5,560,100 $ 212,000
* - Amounts determined assuming prices, including freight costs, at which corn
had been contracted for cash corn contracts and current market prices as of
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