v2.4.0.6
Document and Entity Information
3 Months Ended
Dec. 31, 2011
Feb. 01, 2012
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-Q  
Document Period End Date Dec. 31, 2011  
Document Fiscal Year Focus 2012  
Document Fiscal Period Focus Q1  
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  
v2.4.0.6
Balance Sheets Statement (USD $)
Dec. 31, 2011
Sep. 30, 2011
CURRENT ASSETS    
Cash and cash equivalents $ 4,196,768 $ 34,135
Due from broker 1,032,971 227,670
Derivative financial instruments (Note 8) 0 292,375
Trade and other accounts receivable (Note 6) 6,465,821 8,041,523
Inventories (Note 3) 5,972,503 6,350,544
Prepaid expenses and other 255,919 328,881
Total current assets 17,923,982 15,275,128
PROPERTY AND EQUIPMENT    
Land and land improvements 6,949,062 7,633,650
Buildings and improvements 1,604,305 1,604,305
Plant and process equipment 79,364,152 76,014,786
Office furniture and equipment 406,093 407,725
Construction in progress 41,589 2,562,694
Property, Plant and Equipment, Gross 88,365,201 88,223,160
Accumulated depreciation (45,460,373) (43,529,798)
Property, Plant and Equipment, Net 42,904,828 44,693,362
OTHER ASSETS    
Restricted cash 351,000 351,000
Financing costs, net of amortization of $265,813 and $252,070 206,148 219,891
Deposit 476,437 476,437
Investments 182,970 182,970
Other Assets, Noncurrent 1,216,555 1,230,298
Assets 62,045,365 61,198,788
CURRENT LIABILITIES    
Accounts payable 1,503,605 1,359,836
Accounts payable, related party (Note 5) 914,897 1,179,981
Current maturities of long-term debt (Note 4) 1,299,909 1,452,409
Accrued expenses 1,335,236 879,232
Derivative financial instruments (Note 8) 408,150 0
Total current liabilities 5,461,797 4,871,458
NONCURRENT LIABILITIES    
Long-term debt, less current maturities (Note 4) 488,021 2,738,021
Other 450,000 450,000
Total noncurrent liabilities 938,021 3,188,021
COMMITMENTS AND CONTINGENCY (Notes 6 and 9)      
MEMBERS' EQUITY    
Member contributions, 42,049 units issued and outstanding 38,990,105 38,990,105
Retained Earnings 16,655,442 14,149,204
Members' Equity 55,645,547 53,139,309
Liabilities and Equity $ 62,045,365 $ 61,198,788
v2.4.0.6
Balance Sheets Parenthetical Statement (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
OTHER ASSETS    
Financing costs, net of amortization of $ 265,813 $ 252,070
MEMBER'S EQUITY    
Units issued and outstanding 42,049 42,049
v2.4.0.6
Statements of Operations Statement (USD $)
3 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Revenues (Notes 2 and 6) $ 43,261,476 $ 33,836,601
Cost of goods sold 40,531,955 33,415,040
Gross profit 2,729,521 421,561
General and administrative expenses 673,142 674,841
Gain on sale of property (Note10) 496,098 0
Operating income (loss) 2,552,477 (253,280)
Other income (expense):    
Interest income 2,249 2,285
Interest expense (48,488) (180,485)
Other nonoperating income and expense (46,239) (178,200)
Net income (loss) $ 2,506,238 $ (431,480)
Weighted average units outstanding 42,049 42,049
Net income (loss) per unit - basic and diluted $ 59.6 $ (10.26)
v2.4.0.6
Statement of Cash Flows Statement (USD $)
3 Months Ended
Dec. 31, 2011
Dec. 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income (loss) $ 2,506,238 $ (431,480)
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 1,947,070 2,134,041
Gain on sale of property (496,098) 0
Changes in working capital components:    
Due from broker (805,301) 738,637
Trade and other accounts receivable 1,575,702 475,664
Inventories 378,041 (1,567,718)
Prepaid expenses and other 72,962 17,389
Accounts payable 142,382 8,802
Accounts payable, related party (265,084) 211,646
Accrued expenses 436,004 (113,197)
Derivative financial instruments 700,525 (1,288,710)
CASH FLOWS FROM OPERATING ACTIVITIES 6,192,441 185,074
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchase of property and equipment (808,308) (548,208)
Proceeds from sale of property 1,181,000 0
Net Cash Provided by (Used in) Investing Activities 372,692 (548,208)
CASH FLOWS FROM FINANCING ACTIVITIES    
Payments on long-term borrowings (2,402,500) (31,808)
Net cash (used in) financing activities (2,402,500) (31,808)
Net increase in cash and cash equivalents 4,162,633 (394,942)
CASH AND CASH EQUIVALENTS    
Beginning 34,135 2,858,110
Ending 4,196,768 2,463,168
SUPPLEMENTAL DISCLOSURE OF CASH FLOW    
INFORMATION, cash paid for interest 81,458 205,138
Construction in progress included in accounts payable 1,387 16,500
Construction in progress included in accrued expenses $ 20,000 $ 0
v2.4.0.6
Nature of Business and Significant Accounting Policies
3 Months Ended
Dec. 31, 2011
Nature of Business and Significant Accounting Policies [Abstract]  
Business Description and Accounting Policies
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.

Basis of presentation and other information: The balance sheet as of September 30, 2011 was derived from the Company's audited balance sheet as of that date.  The accompanying financial statements as of and for the three months ended December 31, 2011 and 2010 are unaudited and reflect all adjustments (consisting only 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 periods.  These unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto, for the year ended September 30, 2011 contained in the Company's Annual Report  on Form 10-K.  The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year.

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.

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.
  
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.

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 fluctuate with market rates or the fixed rates are based on current rates offered to the Company for debt with similar terms and maturities.
v2.4.0.6
Revenue by product
3 Months Ended
Dec. 31, 2011
Revenue by product [Abstract]  
Revenue by product
Revenue

Components of revenue are as follows:

(Excludes hedging activity)
 
Three Months
 
Three Months
 
 
 Ended
 
 Ended
(In thousands)
 
December 31, 2011
 
December 31, 2010
Ethanol
 
$
33,713

 
$
27,982

Distillers Grains
 
8,138

 
6,388

Other
 
1,410

 
438

v2.4.0.6
Inventories
3 Months Ended
Dec. 31, 2011
Inventories [Abstract]  
Inventory Disclosure
Inventories

Inventories consist of the following as of:
 
December 31,
2011
 
September 30,
2011
 
 
 
 
Raw materials, including corn, coal, chemicals and supplies
$
3,052,877

 
$
3,956,604

Work in process
1,188,694

 
1,303,654

Ethanol and distillers grains
1,730,932

 
1,090,286

Total
$
5,972,503

 
$
6,350,544

v2.4.0.6
Long-Term Debt
3 Months Ended
Dec. 31, 2011
Long-term Debt, Unclassified [Abstract]  
Debt Disclosure
Long-Term Debt

Long-term debt consists of the following as of:
 
December 31, 2011
 
September 30, 2011
 
 
 
 
Construction term loan. (A)
$
1,500,000

 
$
1,500,000

 
 

 
 

Construction/revolving term loan. (B)

 
1,000,000

 
 

 
 

Note payable to contractor. (C)

 
1,250,000

 
 

 
 

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

 
152,500

 
 

 
 

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

 
287,930

 
 
 
 

 
1,787,930

 
4,190,430

Less current maturities
(1,299,909
)
 
(1,452,409
)
 
$
488,021

 
$
2,738,021


(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 December 31, 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 the agreement is due in December 2012.

(B)
The Company has a $10,000,000 construction/revolving term credit facility with a financial institution which expires on September 1, 2015.  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 no balance outstanding as of December 31, 2011.

(C)
The Company had a $1,125,000 subordinated note payable dated May 22, 2006 to an unrelated third party.  The note payable was paid in full during the quarter ended December 31, 2011.

(D)
The Company also had a $300,000 loan agreement with the Iowa Department of Economic Development (IDED).  The $300,000 loan was 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 were 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 (B). 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 plant construction.  The debt is subordinate to the above financial institution debt and construction and revolving loan/credit agreements included in (A) and (B).
v2.4.0.6
Related-Party Transactions
3 Months Ended
Dec. 31, 2011
Related Party Transactions [Abstract]  
Related Party Transactions Disclosure
Related-Party Transactions

The Company has an agreement with the Heart of Iowa Coop , dba Key Cooperative (Key), a member of the Company, to provide 100% of the requirement of corn for use in the operation of the ethanol plant.  The Company purchased corn totaling $29,791,413 for the three months ended December 31, 2011.  There were corn purchases of $23,251,901 for the three months ended December 31, 2010. As of December 31, 2011, the Company had a corn cash contract with Key amounting to approximately 322,793 bushels, for a commitment of $1,885,111 and a basis forward contract representing 100,000 bushels of corn.  The contracts mature on various dates through January 2012.  The Company also has made some miscellaneous purchases from Key (storage fees, fuel, and propane costs) amounting to $30,068 and $10,165 for the three months ended December 31, 2011 and 2010, respectively. As of December 31, 2011 the amount due to Key is $914,897.

The Company is also purchasing anhydrous ammonia and propane from Innovative Ag Services, formerly Prairie Land Cooperative, a member of the Company.  Total purchases for the three months ended December 31, 2011 and 2010 is $16,520 and $12,563 respectively.  As of December 31, 2011 there is no amount due to Innovative Ag Services.
v2.4.0.6
Commitments and Major Customer
3 Months Ended
Dec. 31, 2011
Commitments and Major Customer [Abstract]  
Commitments and Major Customer
Commitments and Major Customer

The Company has an agreement with an unrelated entity for marketing , selling and distributing all of the ethanol produced by the Company. For the three months ended December 31, 2011 and 2010 the Company has expensed $170,383 and $163,310, respectively, under this agreement for marketing fees. Revenues with this customer were $33,713,458 and $27,981,645 for the three months ended December 31, 2011 and 2010, respectively. Trade accounts receivable of $4,799,194 was due from the customer as of December 31, 2011.

The Company has an agreement with an unrelated entity for marketing, selling and distributing the distiller's grains. For three months ended December 31, 2011 and 2010, the Company has expensed marketing fees of $138,288 and $100,720, respectively, under this agreement. Revenues with this customer were $8,138,333 and $6,387,571 for the three months ended December 31, 2011 and 2010, respectively. Trade accounts receivable of $1,101,365 was due from the customer as of December 31, 2011.

The Company has an agreement with an unrelated party to provide the coal supply for the ethanol plant. The agreement expires on January 1, 2013. The agreement is subject to a minimum purchase requirement. For the calendar year 2012 the estimated purchase commitment totals $5,930,400, respectively.

The Company has entered into a variable contract with a supplier of denaturant. The variable contract is for a minimum purchase of 648,000 gallons at the average of the OPIS Conway In-Well Natural Gasoline High and Low price for the full calendar month of date of loading plus $.1925 per net gallon The term of the contract is from January 1, 2012 through June 30, 2012. The minimum future purchase commitment is $1,440,828.
v2.4.0.6
Risk Management
3 Months Ended
Dec. 31, 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:

 
Three Months
 
Three Months
 
Ended
 
Ended
 
December 31, 2011
 
December 31, 2010
 
 
 
 
(Decrease) in revenue due to derivatives related to ethanol sales:
Realized
$

 
$
(936,302
)
Unrealized

 
(33,983
)
Total effect on revenue

 
(970,285
)
 
 
 
 

(Increase) decrease in cost of goods sold due to derivatives related to corn costs:
Realized
79,563

 
(2,776,963
)
Unrealized
(408,150
)
 
1,054,575

Total effect on cost of goods sold
(328,587
)
 
(1,722,388
)
 
 
 
 

Total (decrease) to operating income due to derivative activities
$
(328,587
)
 
$
(2,692,673
)

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.
v2.4.0.6
Fair Value Measurements
3 Months Ended
Dec. 31, 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 2 -
Valuations 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 3 -
Valuations 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 CME 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 December 31, 2011 and September 30, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

 
 
December 31, 2011
 
 
Total
 
Level 1
 
Level 2
 
Level 3
Liabilities, derivative financial instruments
 
$
408,150

 
$
408,150

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
September 30, 2011
 
 
Total

 
Level 1

 
Level 2

 
Level 3

Assets, derivative financial instruments
 
$
292,375

 
$
292,375

 
$

 
$


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 December 31, 2011.
v2.4.0.6
Contingency
3 Months Ended
Dec. 31, 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 defending 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.
v2.4.0.6
Sale of Property
3 Months Ended
Dec. 31, 2011
Sale of Property [Abstract]  
Sale of Property [Text Block]
Sale of Property

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. A gain of $496,098 was recognized for the sale of the property for the three months ended December 31, 2011.