v2.3.0.11
Document and Entity Information (USD $)
12 Months Ended
Sep. 30, 2011
Nov. 30, 2011
Entity Registrant Name Lincolnway Energy, LLC  
Entity Central Index Key 0001350420  
Current Fiscal Year End Date --09-30  
Entity Filer Category Non-accelerated Filer  
Document Type 10-K  
Document Period End Date Sep. 30, 2011
Document Fiscal Year Focus 2011  
Document Fiscal Period Focus FY  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   42,049
Entity Well-known Seasoned Issuer No  
Entity Voluntary Filers No  
Entity Current Reporting Status Yes  
Entity Public Float    
v2.3.0.11
Balance Sheets Statement (USD $)
Sep. 30, 2011
Sep. 30, 2010
CURRENT ASSETS    
Cash and cash equivalents $ 34,135 $ 2,858,110
Due from broker 227,670 2,305,695
Derivative financial instruments (Note 8 and 9)) 292,375 0
Trade and other accounts receivable (Note 7) 8,041,523 5,880,043
Inventories (Note 3) 6,350,544 3,951,079
Prepaid expenses and other 328,881 298,637
Total current assets 15,275,128 15,293,564
PROPERTY AND EQUIPMENT    
Land and land improvements 7,633,650 7,580,868
Buildings and improvements 1,604,305 1,604,305
Plant and process equipment 76,014,786 75,463,973
Construction in progress 2,562,694 191,764
Office furniture and equipment 407,725 411,177
Property, plant and equipment gross 88,223,160 85,252,087
Accumulated depreciation (43,529,798) (35,430,641)
Property, Plant and Equipment, Net 44,693,362 49,821,446
OTHER ASSETS    
Restricted cash (Note 5) 351,000 351,000
Financing costs, net of amortization of $252,070 and $209,165 219,891 262,797
Deposit 476,437 0
Investments 182,970 170,093
Other Assets, Noncurrent 1,230,298 783,890
Assets 61,198,788 65,898,900
CURRENT LIABILITIES    
Accounts payable 1,359,836 1,088,299
Accounts payable, related party (Note 6) 1,179,981 460,958
Current maturities of long-term debt (Note 4) 1,452,409 76,373
Accrued expenses 879,232 982,432
Derivative financial instruments (Note 8 and 9) 0 1,191,867
Total current liabilities 4,871,458 3,799,929
NONCURRENT LIABILITIES    
Long-term debt, less current maturities (Note 4) 2,738,021 9,409,711
Other 450,000 450,000
Total noncurrent liabilities 3,188,021 9,859,711
Commitments and Contingencies (Notes 5, 7 and 11)    
MEMBERS' EQUITY    
Member contributions, 42,049 units issued and outstanding 38,990,105 38,990,105
Retained Earnings 14,149,204 13,249,155
Members' Equity 53,139,309 52,239,260
Liabilities and Equity $ 61,198,788 $ 65,898,900
v2.3.0.11
Balance Sheets Parenthetical Statement (Parentheticals) (USD $)
12 Months Ended
Sep. 30, 2011
Sep. 30, 2010
OTHER ASSETS    
Financing costs, net of amortization of $ 252,070 $ 209,165
MEMBER'S EQUITY    
Units issued and outstanding 42,049 42,049
v2.3.0.11
Statements of Operations Statement (USD $)
12 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2009
Revenues (Notes 2 and 7) $ 173,951,126 $ 114,373,268 $ 110,223,531
Cost of goods sold ( Notes 6 and 7) 169,817,362 106,744,081 113,576,938
Gross profit (loss) 4,133,764 7,629,187 (3,353,407)
General and administrative expenses 2,649,796 2,440,390 2,366,638
Operating income (loss) 1,483,968 5,188,797 (5,720,045)
Other income (expense):      
Interest income 9,542 25,019 39,743
Interest expense (593,461) (851,358) (860,303)
Other income 0 0 125,264
Other nonoperating income and expense (583,919) (826,339) (695,296)
Net income (loss) $ 900,049 $ 4,362,458 $ (6,415,341)
Weighted average units outstanding 42,049 42,049 42,049
Net income (loss) per unit - basic and diluted $ 21.4 $ 103.75 $ (152.57)
v2.3.0.11
Statements of Members' Equity (USD $)
Total
Member Contributions
Retained Earnings
Balance at Sep. 30, 2008 $ 56,394,593 $ 38,990,105 $ 17,404,488
Net income (loss) (6,415,341)   (6,415,341)
Balance at Sep. 30, 2009 49,979,252 38,990,105 10,989,147
Distributions ($50 per unit) $ (2,102,450)   $ (2,102,450)
Net income (loss) 4,362,458   4,362,458
Balance at Sep. 30, 2010 52,239,260 38,990,105 13,249,155
Net income (loss) 900,049   900,049
Balance at Sep. 30, 2011 $ 53,139,309 $ 38,990,105 $ 14,149,204
v2.3.0.11
Members' Equity (Parentheticals) (USD $)
12 Months Ended
Sep. 30, 2010
Distribution per unit $ 50
v2.3.0.11
Statement of Cash Flows Statement (USD $)
12 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income (loss) $ 900,049 $ 4,362,458 $ (6,415,341)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation and amortization 8,232,529 8,378,554 8,367,309
Loss on disposal of property and equipment 62,696 573 3,599
Forgiven loan 0 0 (100,000)
Changes in working capital components:      
Due from broker 2,078,025 (1,740,419) 7,360,928
Trade and other accounts receivable (2,161,480) (2,107,860) (146,589)
Inventories (2,399,465) (1,465,707) 1,508,650
Prepaid expenses and other (30,244) (101,590) (113,282)
Deposits (476,437) 151,036 312,958
Accounts payable 86,760 173,278 (1,254,071)
Accounts payable, related party 719,023 162,425 (811,079)
Accrued expenses (172,428) 31,435 370,316
Accrued loss on firm commitments 0 0 (1,065,000)
Derivative financial instruments (1,484,242) 967,017 (6,440,655)
Noncurrent other liabilities 0 0 118,073
Net cash provided by operating activities 5,354,786 8,811,200 1,695,816
CASH FLOWS FROM INVESTING ACTIVITIES      
Purchase of property and equipment (2,870,231) (823,612) (611,078)
Purchase of investments (12,877) (24,118) (143,975)
Net cash (used in) investing activities (2,883,108) (847,730) (755,053)
CASH FLOWS FROM FINANCING ACTIVITIES      
Member distributions 0 (2,102,450) 0
Proceeds from long-term borrowings 1,000,000 0 0
Payments on long-term borrowings (6,295,653) (8,827,857) (3,826,864)
Net cash (used in) financing activities (5,295,653) (10,930,307) (3,826,864)
Net decrease in cash and cash equivalents (2,823,975) (2,966,837) (2,886,101)
CASH AND CASH EQUIVALENTS      
Beginning 2,858,110 5,824,947 8,711,048
Ending 34,135 2,858,110 5,824,947
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION      
Cash paid for interest including capitalized interest 2011 $42,073; 2010 none; 2009 none 645,013 838,191 1,052,559
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES      
Construction in progress included in accounts payable 184,776 37,805 0
Construction in progress included in accrued expenses $ 69,228 $ 2,688 $ 0
v2.3.0.11
Statements of Cash Flow (Parentheticals) (USD $)
12 Months Ended
Sep. 30, 2011
SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION, cash paid for interest including capitalized interest $ 42,073
v2.3.0.11
Nature of Business and Significant Accounting Policies
12 Months Ended
Sep. 30, 2011
Nature of Business and Significant Accounting Policies [Abstract]  
Business Description and Accounting Policies [Text Block]
Nature of Business and Significant Accounting Policies
 
Principal business activity:  Lincolnway Energy, LLC (the Company), located in Nevada, Iowa, was formed in May 2004 to pool investors to build a 50 million gallon annual production dry mill corn-based ethanol plant.  The Company began making sales on May 30, 2006 and became operational during the quarter ended June 30, 2006. The Company is directly influenced by commodity markets and the agricultural and energy industries and, accordingly, its results of operations and financial condition may be significantly affected by cyclical market trends and the regulatory, political and economic conditions in these industries.

A summary of significant accounting policies follows:

Use of estimates:  The preparation of 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 and disclosure of contingent 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.

Concentration of credit risk:  The Company’s cash balances are maintained in bank deposit accounts which at times may exceed federally insured limits.  The Company has not experienced any losses in such accounts.

Cash and cash equivalents:  For the purposes of reporting the statement of cash flows, the Company includes as cash equivalents all cash accounts and highly liquid debt instruments which are not subject to withdrawal restrictions or penalties.  Certificates of deposit are considered investments as all have been purchased with maturities in excess of ninety days.  Although the Company maintains its cash accounts in one bank, the Company believes it is not exposed to any significant credit risk on cash and cash equivalents.  The Company has repurchase agreements with one bank, which totaled approximately $171,578 at September 30, 2011.  In accordance with the terms of the repurchase agreements, the Company does not take possession of the related securities.  The Company’s agreements also contain provisions to ensure that the market value of the underlying assets remain sufficient to protect the Company in the event of default by the banks by requiring that the underlying securities have a total market value of at least 100% of the bank’s total obligations under the agreements.

Trade accounts receivable:  Trade accounts receivable are recorded at original invoice amounts less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis.  Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering customers financial condition, credit history and current economic conditions.  Receivables are written off when deemed uncollectible.  Recoveries of receivables written off are recorded when received.  A receivable is considered past due if any portion of the receivable is outstanding more than 90 days.

Inventories:  Inventories are stated at the lower of cost or market using the first-in, first-out method.  In the valuation of inventories and purchase and sale commitments, market is based on current replacement values except that it does not exceed net realizable values and is not less than net realizable values reduced by allowances for approximate normal profit margin.

Financing costs:  Financing costs associated with the construction and revolving loans discussed in Note 4 are recorded at cost and include expenditures directly related to securing debt financing.  The Company is amortizing these costs using the effective interest method over the term of the agreement.  The financing costs are included in interest expense on the statement of operations.

Property and equipment:  Property and equipment is stated at cost.  Construction in progress is comprised of costs related to the projects that are not completed.  Depreciation is computed using the straight-line method over the following estimated useful lives:

 
Years
Land improvements
20
Buildings and improvements
40
Plant and process equipment
5 – 20
Office furniture and equipment
3 – 7

Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized.  

Investments:  The Company has investments in financial service cooperatives.  These investments are carried at cost including allocated retained earnings of the cooperatives.

Derivative financial instruments:  The Company enters into derivative contracts to hedge the Company’s exposure to price risk related to forecasted corn needs, forward corn purchase contracts and ethanol sales.  The Company does not typically enter into derivative instruments other than for hedging purposes.  All the derivative contracts are recognized on the balance sheet at their fair market value.  Although the Company believes its derivative positions are economic hedges, none have been designated as a hedge for accounting purposes.   Accordingly, any realized or unrealized gain or loss related to corn derivatives is recorded in the statement of operations as a component of cost of goods sold.  Any realized or unrealized gain or loss related to ethanol derivative instruments is recorded in the statement of operations as a component of revenue.

Deposit:  The Internal Revenue Service (under Section 7519) requires partnerships that elect a fiscal year over a calendar year to make a deposit each year.  The deposit is 25% of annual taxable net income, multiplied by the tax rate of 36% for the reporting fiscal year.

Revenue recognition:  Revenue from the sale of the Company’s ethanol and distillers grains is recognized at the time title and all risks of ownership transfer to the customers.  This generally occurs upon the loading of the product.  For ethanol, title passes at the time the product crosses the loading flange in either a railcar or truck.  For distiller’s grain, title passes upon the loading into trucks.  For railcar shipments, this takes place when the railcar is filled and the marketer receives written notice that they have been loaded and are available for billing.  Shipping and handling costs incurred by the Company for the sale of ethanol and distiller’s grain are included in costs of goods sold. Commissions for the marketing and sale of ethanol and distiller grains are included in costs of goods sold.

Revenue by product is as follows:
(Excludes hedging activity)

(In thousands)
 
2011
 
2010
 
2009
Ethanol
 
$
139,536

 
$
94,612

 
$
88,155

Distiller's Grain
 
31,716

 
19,434

 
20,730

Other
 
3,826

 
1,766

 
1,328


Income taxes:  The Company is organized as a partnership for federal and state income tax purposes and generally does not incur income taxes.  Instead, the Company’s earnings and losses are included in the income tax returns of the members.  Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. Management has evaluated the Company's material tax positions and determined there were no uncertain tax positions that require adjustment to the financial statements. The Company does not currently anticipate significant changes in its uncertain tax positions over the next 12 months. Generally, the Company remains subject to income tax examinations by U.S. federal or state tax authorities for fiscal years 2008 and thereafter.

Earnings per unit:  Basic and diluted earnings per unit have been computed on the basis of the weighted average number of units outstanding during each period presented.

Fair value of financial instruments:  The carrying amounts of cash and cash equivalents, derivative financial instruments, trade accounts receivable, accounts payable and accrued expenses approximate fair value.  The carrying amount of long-term debt approximates fair value because the interest rates are based on current rates offered to the Company for debt with similar terms and maturities.

 
v2.3.0.11
Members' Equity
12 Months Ended
Sep. 30, 2011
Members’ Equity [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
Note 2.    Members' Equity
 
The Company was formed on May 19, 2004.  It was initially capitalized by the issuance of 1,924 membership units totaling $962,000 to the founding members of the Company.  The Company has one class of membership units.  A majority of the Board of Directors owns a membership interest in the Company.  The Company is authorized to issue up to 45,608 membership units without member approval.



Income and losses are allocated to all members based on their pro rata ownership interest. All unit transfers are effective the last day of the month.    Units may be issued or transferred only to persons eligible to be members of the Company and only in compliance with the provisions of the operating agreement.
v2.3.0.11
Inventories
12 Months Ended
Sep. 30, 2011
Inventories [Abstract]  
Inventory Disclosure
Inventories
 
Inventories consist of the following as of September 30, 2011 and 2010:

 
2011
 
2010
Raw materials, including corn, coal, chemicals and supplies
$
3,956,604

 
$
2,496,681

Work in process
1,303,654

 
796,409

Ethanol and distillers grain
1,090,286

 
657,989

Total
$
6,350,544

 
$
3,951,079

 

v2.3.0.11
Long-Term Debt
12 Months Ended
Sep. 30, 2011
Long-term Debt, Unclassified [Abstract]  
Long-term Debt [Text Block]
    Long-Term Debt
 
Long-term debt consists of the following as of September 30, 2011 and 2010:

 
2011
 
2010
Construction term loan.  (A)
$
1,500,000

 
$
6,500,000

 
 
 
 
Construction/revolving term loan.  (C)
1,000,000

 

 
 
 
 
Note payable to contractor, interest-only quarterly payments at 5%
 

 
 

due through maturity date of November 2014, secured by real
 

 
 

estate and subordinate to financial institution debt commitments. (B )

 
1,216,781

 
 
 
 
Note payable to contractor, unsecured, interest-only quarterly
 

 
 

payments at 4% due through maturity date of December 2011
1,250,000

 
1,250,000

 
 
 
 
Note payable to Iowa Department of Economic Development.  (D)
152,500

 
182,500

 
 
 
 
Note payable to Iowa Department of Transportation.  (E)
287,930

 
336,803

 
4,190,430

 
9,486,084

Less current maturities
(1,452,409
)
 
(76,373
)
 
$
2,738,021

 
$
9,409,711








Maturities of long-term debt as of September 30, 2011 are as follows:

Years ending September 30:
 
2012
$
1,452,409

2013
1,550,968

2014
52,049

2015
53,153

2016
1,054,280

Thereafter
27,571

 
$
4,190,430

 
(A)
The Company has a construction and term loan with a financial institution.  Borrowings under the term loan include a variable interest rate based on the one-month LIBOR index rate plus 3.30%.  The rate will be reset automatically without notice to the Company, on the first “US Banking Day” of each succeeding week, and each change shall be applicable to all outstanding balances as of that date.  The agreement requires 30 principal payments of $1,250,000 per quarter commencing in December 2006 through March 2013.  The agreement requires the maintenance of certain financial and nonfinancial covenants.  Borrowings under this agreement are collateralized by substantially all of the Company’s assets.  As of September 30, 2011 the Company has made principal payments of $37,500,000, since the inception of the loan, which under the terms of the agreement have been applied to scheduled payments in order of their maturity.  The Company’s next schedule payment under this agreement is due in December 2012.

(B)
The Company had a $1,216,781 subordinate note payable dated November 17, 2004 to an unrelated third party.  Quarterly interest payments began on March 31, 2007.  On August 26, 2011, the third party allowed the Company to pay the note in full before its maturity.
   
(C)
The Company has a $10,000,000 construction/revolving term credit facility with a financial institution which expires on September 1, 2016.  Borrowings under the credit facility agreement include a variable interest rate based on the one-month LIBOR index rate plus 3.30%.  The rate will be reset automatically without notice to the Company, on the first “US Banking Day” of each succeeding week, and each change shall be applicable to all outstanding balances as of that date.  Borrowings are subject to borrowing base restrictions as defined in the agreement.  The credit facility and revolving credit agreement require the maintenance of certain financial and nonfinancial covenants.  Borrowings under this agreement are collateralized by substantially all of the Company’s assets.  There was a $1,000,000 balance outstanding as of September 30, 2011.

(D)
The Company also has a $300,000 loan agreement with the Iowa Department of Economic Development (IDED).  The $300,000 loan is noninterest-bearing and due in monthly payments of $2,500 beginning December 2006 and a final payment of $152,500 due November 2011.  Borrowings under this agreement are collateralized by substantially all of the Company’s assets and subordinate to the above financial institution debt and construction and revolving loan/credit agreements included in (A) and (C).  On October 5, 2011, the final payment of $152,500 was made by the Company.

(E)
The Company entered into a $500,000 loan agreement with the Iowa Department of Transportation (IDOT) in February 2005.  The proceeds were disbursed upon submission of paid invoices.  Interest at 2.11% began accruing on January 1, 2007.  Principal payments will be due semiannually through July 2016.  The loan is secured by all rail track material constructed as part of the plan construction.  The debt is subordinate to the above $39,000,000 financial institution debt and construction and revolving loan/credit agreements included in (A) and (C).
 
v2.3.0.11
Lease Commitments
12 Months Ended
Sep. 30, 2011
Lease Commitments [Abstract]  
Leases of Lessee Disclosure [Text Block]
Lease Commitments
 
The Company entered into a lease agreement with an unrelated third party to lease 90 hopper rail cars for the purpose of transporting distiller’s grain.  The five-year term of the lease commenced March 2006 and ended March 2011.  On March 26, 2011 the Company extended this lease with a rider. The rider calls for monthly payments of $56,700 plus applicable taxes.  There was also an additional usage rental of 2.5 cents per mile for each car that exceeds 30,000 miles.  The amendment that was made to the lease agreement on June 19, 2007, allowed the Company to purchase a certificate of deposit for $351,000 in lieu of the letter of credit that was required as partial security for the Company’s obligation under the lease.  The Company has classified this certificate of deposit as restricted cash in other assets. The lease term on the rider is for three years commencing March 2011 and expiring March 2014.
 In conjunction with a change in the Company’s ethanol marketer, on September 21, 2009, the Company was assigned a lease that was previously between the Company’s previous ethanol marketer and an unrelated third party.  The lease includes 100 tank rail cars for the purpose of transporting ethanol.  The lease calls for monthly payments of $52,500 plus applicable taxes, beginning October 1, 2009.  There is also an additional usage rental of 3 cents per mile for each car that exceeds 35,000 miles.  The lease has an expiration date of September 2016.
 
On February 2, 2010, the Company entered into a lease agreement with an unrelated third party to lease an additional 30 ethanol tank rail cars.  The one-year term of the lease ended on February 2011.  On March 8, 2011 the Company extended this lease with two riders for 15 railcars each. Each rider calls for monthly payments of $9,750 plus applicable taxes. There was also an additional usage rental of 3 cents per mile for each car that exceeds 30,000 miles.  The lease term on the riders is for three years commencing March 2011 and expiring March 2014.
 
 The Company also leases office equipment and other equipment under operating leases that will expire at various dates through March 2015.

Approximate minimum lease payments under these operating leases for future years are as follows:

Years ending Sept 30:
 
2012
$
1,591,000

2013
1,589,000

2014
1,070,000

2015
633,000

2016
630,000

 
$
5,513,000


Rent expense under the above operating leases totaled approximately, $1,745,000, $1,597,000 and $741,000 for the years ended September 30, 2011, 2010 and 2009, respectively.
 
v2.3.0.11
Related-Party Transactions
12 Months Ended
Sep. 30, 2011
Related Party Transactions [Abstract]  
Related Party Transactions Disclosure
    Related-Party Transactions
 
The Company has an agreement with the Heart of Iowa Coop (HOIC), dba Key Cooperative, a member of the Company, to provide 100% of the requirement of corn for use in the operation of the ethanol plant.  The agreement became effective when the Company began accepting corn for the use at the ethanol plant in May 2006 and will continue for a period of 20 years.  The Company pays a handling fee of $.0675 per bushel of corn.  If the Company chooses to buy corn that is not elevated by HOIC, and is inside a 60-mile radius of Nevada, Iowa, the Company will be required to pay HOIC $.04 per bushel of corn, outside a 60-mile radius, $.03 per bushel of corn.  The agreement may be terminated before the end of the term by providing six months’ notice of termination and paying the other party $2,000,000, reduced by $50,000 for each completed year of the agreement.  The amount is payable over four years with interest at the prime rate on the date of termination.  The Company purchased corn totaling $127,764,206, $71,804,446 and $69,259,682 for the years ended September 30, 2011, 2010 and 2009, respectively.  As of September 30, 2011, the Company has several corn cash forward contracts with HOIC amounting to 723,317 bushels, for a commitment of approximately $4,444,830 and several basis forward contracts representing 600,000 bushels of corn.  The contracts mature on various dates through December 2011.  The Company also has made some miscellaneous purchases from HOIC (fuel costs) amounting to $84,739, $96,392 and $84,255 for the years ended September 30, 2011, 2010 and 2009, respectively. As of September 30, 2011 and 2010 the amount due to HOIC is $1,179,981 and $460,226, respectively.

The Company is also purchasing propane from Prairie Land Cooperative, a member of the Company. In September 2011, Prairie Land Cooperative merged with Innovative Ag Services Co (IAS). They are now doing business under the name of IAS.  Total purchases for the years ended September 30, 2011, 2010 and 2009 were $16,402, $21,714 and $860,884, respectively.
 
v2.3.0.11
Commitments and Major Customer
12 Months Ended
Sep. 30, 2011
Commitments and Major Customer [Abstract]  
Commitments and Major Customer
Commitments and Major Customer
 
The Company had an agreement with an unrelated entity and major customer for marketing, selling, and distributing all of the ethanol produced by the Company.  Under such pooling arrangements, the Company paid the entity $.01 (one cent) per gallon for each gallon of ethanol sold.    Marketing expense for the years ended September 30, 2011, 2010 and 2009 were none, none and $528,215, respectively, under this agreement. Revenues with this customer were none, none, and $88,155,144 for the years ended September 30, 2011, 2010 and 2009, respectively.  

On September 25, 2009, the Company entered into a new agreement with an unrelated entity.  The agreement became effective on October 1, 2009.  The unrelated entity is responsible for marketing and purchasing all of the ethanol produced by the company.  For the years ended September 30, 2011 and 2010, the Company has expensed $712,258 and $695,945, under this agreement for marketing fees, respectively.  Revenues with this customer were $139,535,766 and $94,611,865 for the years ended September 30, 2011 and 2010, respectively.  Trade accounts receivable of $ 6,129,247 and $4,550,445 was due from the customer as of September 30, 2011 and 2010, respectively.  As of September 30, 2011, the Company has ethanol sales commitments with the unrelated entity of 3,485,000 gallons for an approximate total sales commitment of $8,997,000.

 The Company has entered into an agreement with an unrelated entity for marketing, selling and distributing the distiller’s grains as of October 1, 2007.   For the years ended September 30, 2011, 2010 and 2009, the Company has expensed marketing fees of $535,226, $295,353 and $337,760, respectively, under this agreement.  Revenues with this customer were $31,715,564, $19,434,064 and $20,729,951 for the years ended September 30, 2011, 2010 and 2009, respectively.  Trade accounts receivable of $1,083,695 and $922,754 was due from the customer as of September 30, 2011 and 2010, respectively.  As of September 30, 2011, the Company has distiller’s grains sales commitments with the unrelated entity of 8,244 tons for a total sales commitment of $1,588,199.
 
The Company has an agreement with an unrelated party to provide the coal supply for the ethanol plant.  The agreement includes the purchase of coal at a cost per ton and a transportation cost per ton as defined in the agreement.  The cost is subject to price adjustments on a monthly basis.  If the Company fails to purchase the minimum number of tons of coal for the calendar year , the Company shall pay an amount per ton multiplied by the difference of the minimum requirement and actual quantity purchased.  That agreement expired as of January 1, 2008.   On October 1, 2007 the Company entered into an amended agreement to the original cost supply agreement.  The term of the agreement has been extended from the original expiration date to January 1, 2013.  The same minimum purchase commitment is required from the Company as the previous agreement.  The calendar years , 2011 and 2012 estimated purchase commitments total $212,150 and $5,930,400.  For the years ended September 30, 2011, 2010 and 2009, the Company has purchased coal of $7,001,676, $5,989,438 and $5,580,495 respectively.

The Company has entered into two variable contracts with a supplier of denaturant.  One variable contract is for a minimum purchase of 72,000 gallons at $2.30 per net gallon. The term of the contract is from September 1, 2011 through December 31, 2011.   The estimated future purchase commitment on this contract is approximately $165,600. The second variable contract is for a minimum purchase of 144,000 gallons at the average of the OPIS Conway In-Well Natural Gasoline High and Low prices on the date of loading plus $0.1175 per net gallon. The term of the contract is from September 1, 2011 through December 31, 2011.   The estimated future purchase commitment on this contract is approximately $283,320.

The Company has entered into a fixed contract with a supplier of anhydrous ammonia. The contract is for a minimum purchase of 360 tons at the rate of $775 per delivered ton. The term of the contract is from October 1, 2011 through December 31, 2011. The minimum future purchase commitment is $279,000.

On June 30, 2011, the Company entered into an agreement with an unrelated entity to perform the rail construction for the additional rail spur that is being added to the Company's existing track. The total future purchase commitment is $639,393.

 

v2.3.0.11
Risk Management
12 Months Ended
Sep. 30, 2011
Risk Management [Abstract]  
Derivative Instruments and Hedging Activities Disclosure
Risk Management
 
The Company’s activities expose it to a variety of market risks, including the effects of changes in commodity prices.  These financial exposures are monitored and managed by the Company as an integral part of its overall risk management program.  The Company’s risk management program focuses on the unpredictability of commodity markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.


The Company maintains a risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by market fluctuations.  The Company’s specific goal is to protect the Company from large moves in the commodity costs.




To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward purchases and sales contracts.  Exchange traded futures and options contracts are designated as non-hedge derivatives and are valued at market price with changes in market price recorded in operating income through cost of goods sold for corn derivatives and through revenue for ethanol derivatives.
 
The effects on operating income from derivative activities is as follows for the years ending September 30, are as follows:

 
2011
 
2010
 
2009
Increase (decrease) in revenue due to derivatives related to ethanol sales:
 
 
 
 
 
Realized
$
(2,655,034
)
 
$
45,434

 
$
10,440

Unrealized
1,528,367

 
(1,483,997
)
 

Total effect on revenue
(1,126,667
)
 
(1,438,563
)
 
10,440

 
 
 
 
 
 
(Increase) decrease in cost of goods sold due to derivatives related to corn costs:
 

 
 

 
 

Realized
(2,946,138
)
 
604,475

 
(3,783,088
)
Unrealized
(44,125
)
 
849,475

 
(72,350
)
Total effect on cost of goods sold
(2,990,263
)
 
1,453,950

 
(3,855,438
)
 
 
 
 
 
 
Total (decrease) increase  to operating income due to derivative activities
$
(4,116,930
)
 
$
15,387

 
$
(3,844,998
)

Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales”, and therefore are not marked to market in the Company’s financial statements, but are subject to a lower of cost or market assessment.   
 
v2.3.0.11
Fair Value Measurements
12 Months Ended
Sep. 30, 2011
Fair Value Measurements [Abstract]  
Fair Value Disclosures
Fair Value Measurements
 
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  In determining fair value, the Company uses various methods including market, income and cost approaches.  Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique.  These inputs can be readily observable, market-corroborated, or generally unobservable inputs.  The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.  Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy.  The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.  Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2Valuations for assets and liabilities traded in less active dealer or broker markets.  Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
 
A description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value.
 
Derivative financial instruments:  Commodity futures and exchange-traded commodity options contracts are reported at fair value utilizing Level 1 inputs.  For these contracts, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes and live trading levels from the CBOT and NYMEX markets.  The fair value measurements consider observable data that may include dealer quotes and live trading levels from the over-the-counter markets.

The following table summarizes the financial liabilities measured at fair value on a recurring basis as of September 30, 2011 and 2010, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

 
2011
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets, derivative financial instruments
$
292,375

 
$
292,375

 
$

 
$

 
 
 
 
 
 
 
 
 
2010
 
Total
 
Level 1
 
Level 2
 
Level 3
Liabilities, derivative financial instruments
$
1,191,867

 
$
1,191,867

 
$

 
$


Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  Financial assets and financial liabilities measured at fair value on a nonrecurring basis were not significant at September 30, 2011 and 2010.
 
v2.3.0.11
Contingency
12 Months Ended
Sep. 30, 2011
Contingency [Abstract]  
Legal Matters and Contingencies
Contingency
 
In May 2010, a lawsuit was filed against the Company and approximately 20 other ethanol plants by an unrelated party claiming the Company’s operation of the corn oil extraction system is a patent infringement. The plaintiff seeks injunctive relief, an award of damages with interest and any other remedies available under certain patent statutes or otherwise under law.  The Company is currently reviewing the lawsuit with legal counsel.  The Company is unable to determine at this time if the lawsuit will have a material adverse affect on the Company.
v2.3.0.11
Retirement Plan
12 Months Ended
Sep. 30, 2011
Retirement Plan [Abstract]  
Compensation and Employee Benefit Plans [Text Block]
Plan
 
The Company adopted a 401(k) plan covering substantially all employees effective February 1, 2006.  The Company provides matching contributions of 50% for up to 6% of employee compensation.  Company contributions and plan expenses for the years ended September 30, 2011, 2010 and 2009 totaled $65,495, $69,069 and $68,032, respectively.
v2.3.0.11
Subsequent Events
12 Months Ended
Sep. 30, 2011
Subsequent Events [Abstract]  
Subsequent Events [Text Block]
Subsequent Events
 
On October 5, 2011 the Company completed the sale of a land parcel adjacent to its primary site for a sales price of $1,181,000. The Company anticipates recognizing other income of approximately $500,000 in the first quarter of fiscal year 2012 for the gain on sale of the property.