UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 2004
COMMISSION FILE NO. 333-75804
SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
(Exact Name of Registrant as Specified in its Charter)
South Dakota |
|
46-0462968 |
(State of Other
Jurisdiction of
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(I.R.S. Employer
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100 Caspian Avenue, Post Office Box 500, Volga, South Dakota 57071
(Address of Principal Executive Offices)
(605) 627-9240
(Registrants Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes o No ý
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date:
On July 31, 2004, the registrant had 28,258,500 capital units outstanding.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
AND SUBSIDIARY
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
AND SUBSIDIARY
Table of Contents
FINANCIAL STATEMENTS |
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Consolidated Balance Sheets as of June 30, 2004 (unaudited), and December 31, 2003 |
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SOUTH
DAKOTA SOYBEAN PROCESSORS, LLC
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
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June 30,
|
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December
31,
|
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ASSETS |
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||
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|
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CURRENT ASSETS |
|
|
|
|
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Cash and cash equivalents |
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$ |
208,031 |
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$ |
529,697 |
|
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|
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|
|
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Trade accounts receivable, less allowance for uncollectible accounts - June 30, 2004 - $273,878, December 31, 2003 - $273,878 |
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25,797,041 |
|
23,530,989 |
|
||
|
|
|
|
|
|
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Inventories |
|
14,397,114 |
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10,776,402 |
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||
|
|
|
|
|
|
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Margin deposits |
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1,665,861 |
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|
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||
|
|
|
|
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Prepaid expenses |
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380,756 |
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516,419 |
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||
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Assets held for sale - Building |
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2,322,561 |
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2,322,561 |
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Total current assets |
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44,771,364 |
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37,676,068 |
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||
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|
|
|
|
|
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PROPERTY AND EQUIPMENT |
|
50,652,914 |
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50,250,024 |
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||
Less accumulated depreciation |
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(19,878,780 |
) |
(18,424,405 |
) |
||
|
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30,774,134 |
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31,825,619 |
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||
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OTHER ASSETS |
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|
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Investments |
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4,077,875 |
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3,970,102 |
|
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Notes receivable, members |
|
481,710 |
|
481,710 |
|
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Goodwill |
|
7,401,245 |
|
7,401,245 |
|
||
Patents |
|
296,465 |
|
246,599 |
|
||
Other, net |
|
15,030 |
|
15,721 |
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||
|
|
12,272,325 |
|
12,115,377 |
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||
|
|
|
|
|
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||
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$ |
87,817,823 |
|
$ |
81,617,064 |
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* Derived from audited financial statements
(continued on next page)
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June 30,
|
|
December
31,
|
|
||
LIABILITIES AND MEMBERS EQUITY |
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|
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||
|
|
|
|
|
|
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CURRENT LIABILITIES |
|
|
|
|
|
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Excess of outstanding checks over bank balance |
|
$ |
6,592,487 |
|
$ |
2,388,936 |
|
Current maturities of long-term debt |
|
978,974 |
|
976,117 |
|
||
Note Payable - Seasonal loan |
|
12,864,767 |
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- |
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Accounts payable |
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1,273,021 |
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1,883,200 |
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||
Accrued commodity purchases |
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13,275,877 |
|
21,492,404 |
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Accrued expenses |
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1,690,652 |
|
1,385,864 |
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Accrued interest |
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66,242 |
|
50,316 |
|
||
Total current liabilities |
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36,742,020 |
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28,176,837 |
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||
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LONG-TERM LIABILITIES |
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Long-term debt, less current maturities |
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18,005,342 |
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17,543,141 |
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Deferred compensation |
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122,591 |
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121,301 |
|
||
|
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18,127,933 |
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17,664,442 |
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||
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|
|
|
|
|
||
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY |
|
687,068 |
|
1,045,195 |
|
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COMMITMENTS |
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MEMBERS EQUITY |
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Class A units, no par value 28,258,500 units issued and outstanding |
|
32,260,802 |
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34,730,590 |
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|
|
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|
$ |
87,817,823 |
|
$ |
81,617,064 |
|
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
1
SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2004 AND 2003
|
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Three Months Ended June 30: |
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Six Months Ended June 30: |
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||||||||
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2004 |
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2003 |
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2004 |
|
2003 |
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NET REVENUE |
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$ |
71,177,940 |
|
$ |
60,062,503 |
|
$ |
129,391,116 |
|
$ |
103,996,166 |
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|
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COST OF REVENUE |
|
|
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Cost of product sold |
|
59,891,905 |
|
53,219,521 |
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111,100,916 |
|
88,985,376 |
|
||||
Production |
|
3,589,902 |
|
3,564,203 |
|
7,074,049 |
|
7,331,901 |
|
||||
Freight and rail |
|
4,590,549 |
|
3,498,388 |
|
8,202,212 |
|
6,921,308 |
|
||||
Brokerage fees |
|
84,540 |
|
48,387 |
|
145,811 |
|
114,036 |
|
||||
Total cost of revenue |
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68,156,896 |
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60,330,499 |
|
126,522,988 |
|
103,352,621 |
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GROSS PROFIT (LOSS) |
|
3,021,044 |
|
(267,996 |
) |
2,868,128 |
|
643,545 |
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OPERATING EXPENSES |
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Administration |
|
1,039,594 |
|
1,004,140 |
|
1,964,444 |
|
1,871,904 |
|
||||
|
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|
|
|
|
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||||
OPERATING PROFIT (LOSS) |
|
1,981,450 |
|
(1,272,136 |
) |
903,684 |
|
(1,228,359 |
) |
||||
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|
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OTHER INCOME (EXPENSE) |
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Interest expense |
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(412,649 |
) |
(221,020 |
) |
(616,284 |
) |
(429,511 |
) |
||||
Other non-operating income |
|
(52,572 |
) |
1,113,561 |
|
21,352 |
|
1,903,253 |
|
||||
Patronage dividend income |
|
|
|
99 |
|
153,961 |
|
98,074 |
|
||||
Total other income (expense) |
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(465,221 |
) |
892,640 |
|
(440,971 |
) |
1,571,816 |
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NET INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST IN SUBSIDIARY |
|
1,516,229 |
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(379,496 |
) |
462,713 |
|
343,457 |
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||||
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|
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MINORITY INTEREST IN NET LOSS OF SUBSIDIARY |
|
168,125 |
|
97,041 |
|
358,128 |
|
193,218 |
|
||||
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INCOME TAX REFUND |
|
|
|
131,474 |
|
|
|
131,474 |
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||||
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NET INCOME (LOSS) |
|
$ |
1,684,354 |
|
$ |
(150,981 |
) |
$ |
820,841 |
|
$ |
668,149 |
|
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BASIC AND DILUTED |
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EARNINGS PER CAPITAL UNIT |
|
$ |
0.06 |
|
$ |
(0.01 |
) |
$ |
0.03 |
|
$ |
0.02 |
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WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING FOR CALCULATION OF BASIC AND DILUTED EARNINGS PER CAPITAL UNIT |
|
28,258,500 |
|
28,258,500 |
|
28,258,500 |
|
28,258,500 |
|
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
2
SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2004 AND 2003
|
|
2004 |
|
2003 |
|
||
OPERATING ACTIVITIES |
|
|
|
|
|
||
Net income |
|
$ |
820,841 |
|
$ |
668,149 |
|
Charges and credits to net income not affecting cash: |
|
|
|
|
|
||
Depreciation |
|
1,454,374 |
|
1,509,442 |
|
||
Amortization |
|
4,986 |
|
13,571 |
|
||
Non-cash patronage dividends |
|
(153,961 |
) |
(98,074 |
) |
||
(Gain) loss on retirement of asset |
|
|
|
(9,511 |
) |
||
Minority interest in net loss of subsidiary |
|
(358,128 |
) |
(193,218 |
) |
||
Change in assets and liabilities |
|
(15,923,364 |
) |
84,846 |
|
||
|
|
|
|
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NET CASH USED FOR OPERATING ACTIVITIES |
|
(14,155,252 |
) |
1,975,205 |
|
||
|
|
|
|
|
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INVESTING ACTIVITIES |
|
|
|
|
|
||
Purchase of property and equipment |
|
(402,889 |
) |
(408,444 |
) |
||
Purchase of investments |
|
|
|
(4,076,936 |
) |
||
Patent costs |
|
(52,461 |
) |
(20,335 |
) |
||
Proceeds from sales of property and equipment |
|
|
|
50,546 |
|
||
Retirement of patronage dividends |
|
46,188 |
|
85,585 |
|
||
|
|
|
|
|
|
||
NET CASH USED FOR INVESTING ACTIVITIES |
|
(409,162 |
) |
(4,369,584 |
) |
||
|
|
|
|
|
|
||
FINANCING ACTIVITIES |
|
|
|
|
|
||
Distributions to members |
|
(3,290,629 |
) |
(3,020,537 |
) |
||
Change in excess of outstanding checks over bank balance |
|
4,203,551 |
|
(2,587,638 |
) |
||
Proceeds from note payable - seasonal loan |
|
12,864,767 |
|
|
|
||
Proceeds from long-term debt |
|
3,118,168 |
|
8,632,065 |
|
||
Principal payments on long-term debt |
|
(2,653,109 |
) |
(200,403 |
) |
||
|
|
|
|
|
|
||
NET CASH FROM (USED FOR) FINANCING ACTIVITIES |
|
14,242,748 |
|
2,823,487 |
|
||
|
|
|
|
|
|
||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
(321,666 |
) |
429,108 |
|
||
|
|
|
|
|
|
||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
529,697 |
|
50,159 |
|
||
|
|
|
|
|
|
||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
208,031 |
|
$ |
479,267 |
|
|
|
|
|
|
|
||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
||
Interest |
|
$ |
600,358 |
|
$ |
391,907 |
|
|
|
|
|
|
|
||
SCHEDULE OF NON CASH FINANCING AND INVESTING ACTIVITIES |
|
|
|
|
|
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Long-term debt incurred to acquire common stock |
|
$ |
|
|
$ |
4,050,000 |
|
3
SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The financial statements as of and for the periods ended June 30, 2004 and 2003 reflect, in the opinion of management of South Dakota Soybean Processors, LLC and subsidiary, all normal recurring adjustments necessary for a fair statement of the financial position and results of operations and cash flows for the interim periods presented. The financial statements as of and for the three month and six month periods ended June 30, 2004 include the financial data for the Company and its majority owned subsidiary. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full year due in part to the seasonal nature of some of the Companys businesses. The consolidated balance sheet data as of December 31, 2003 has been derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.
The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary. The effects of all significant intercompany accounts and transactions have been eliminated.
These statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2003, included in the Companys annual report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2004.
NOTE 2 - RECLASSIFICATIONS
The consolidated statement of cash flow as of June 30, 2003 has been reclassified to make the presentation conform to the June 30, 2004 presentation. The change in excess of outstanding checks over bank balance has been reclassified from an operating activity to a financing activity.
NOTE 3 - INVENTORIES
|
|
June 30,
|
|
December
31,
|
|
||
Finished goods: |
|
|
|
|
|
||
Soy processing |
|
$ |
5,337,279 |
|
$ |
(447,404 |
) |
Refined Oil |
|
1,079,081 |
|
313,815 |
|
||
Other |
|
24,852 |
|
34,536 |
|
||
Total |
|
6,441,212 |
|
(99,053 |
) |
||
|
|
|
|
|
|
||
Raw materials: |
|
|
|
|
|
||
|
|
|
|
|
|
||
Soy processing |
|
7,829,087 |
|
10,696,391 |
|
||
Refined Oil |
|
37,785 |
|
46,663 |
|
||
Other |
|
33,498 |
|
78,465 |
|
||
Total |
|
7,900,370 |
|
10,821,519 |
|
||
|
|
|
|
|
|
||
Supplies & Miscellaneous |
|
55,532 |
|
53,936 |
|
||
|
|
|
|
|
|
||
Totals |
|
$ |
14,397,114 |
|
$ |
10,776,402 |
|
Commodity inventories are valued at estimated market value, which approximates net realizable value. In addition, futures and option contracts are marked to market through cost of revenues, with unrealized gains and losses recorded in the above inventory amounts. Supplies and miscellaneous inventories are stated at lower of cost, using the average cost method, or market.
4
NOTE 4 - NOTE PAYABLE SEASONAL LOAN
The Company has entered into a revolving credit agreement with CoBank, which expires April 1, 2005. The purpose of the credit agreement is to finance the inventory and accounts receivable of the Company. The Company may borrow up to $16,000,000. Interest is at a variable rate (3.71% at June 30, 2004). There were advances of $12,864,767 outstanding as of June 30, 2004. There were no advances outstanding at December 31, 2003.
Advances on the revolving credit agreement are limited based upon inventory and accounts receivable, net of soybean accounts payable.
NOTE 5 - EARNINGS PER CAPITAL UNIT
The ownership structure of the Company is made up of Class A capital units. Earnings per capital unit are calculated based on the number of Class A capital units held.
NOTE 6 - MEMBER DISTRIBUTION
During the six month period ended June 30, 2004, the Company distributed $3,290,629 or approximately $0.12 per Class A capital unit to its members.
NOTE 7 - LEGAL PROCEEDINGS
From time-to-time in the ordinary course of the Companys business, the Company may be named as a defendant in legal proceedings related to various issues, including without limitation, workers compensation claims, tort claims, or contractual disputes. The Company carries insurance that provides protection against general commercial liability claims, claims against directors, officers and employees, business interruption, automobile liability, and workers compensation claims.
The Company has been named as a defendant in a breach of contract suit alleging various compensatory and punitive damages.
NOTE 8 - STOCK OFFERING
The Board of Directors approved a registration statement to be filed with the Securities and Exchange Commission for the sale of additional units in a public offering. The maximum offering under the statement will be $11,250,000. The Company is waiting to commence sales of the capital units until the Securities and Exchange Commission declares the registration statement effective and the offering is approved by the regulatory authorities in the respective states where the offering is planned to occur.
NOTE 9 - LOAN COVENANTS
The Company was in violation of one of its loan covenants with CoBank as of March 31, 2004. The loan covenants required the Company to maintain minimum working capital of $7.0 million. At March 31, 2004, working capital was approximately $6.0 million. CoBank granted a temporary waiver of this working capital requirement for March 31, 2004. As of June 30, 2004 the Company has working capital of approximately $8.0 million and is in compliance with the working capital covenant of its loan agreements. In addition, the Company negotiated the minimum working capital level for future periods to be $6.0 million.
5
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
The information in this quarterly report on Form 10-Q for the three-month and six-month period ended June 30, 2004, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the business and operations of South Dakota Soybean Processors and our affiliates. In addition, we and our representatives and agents may from time to time make other written or oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to members and security holders. Words and phrases such as believe, expect, anticipate, intend, plan, estimate, predict, hope, will, should, could, may, future, potential, or the negatives of these words, and all similar expressions identify forward-looking statements. We wish to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made.
Our forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks related to the level of commodity prices, loss of member business, competition in our industry, changes in the taxation of limited liability companies, compliance with laws and regulations, perceptions of food quality and safety, business interruptions and casualty losses, access to equity capital, consolidation of producers and customers, alternative energy sources, and the performance of our polyurethane operations. Other risks or uncertainties may be described from time to time in the companys future filings with the Securities and Exchange Commission.
We undertake no obligation to revise any forward-looking statements to reflect future events or circumstances.
6
Item 2. Managements Discussion and Analysis of Results of Operations
You should read the following discussion along with our financial statements and the notes to our financial statements included elsewhere in this report, and our audited financial statements for our most recently completed fiscal year included in our latest annual report on Form 10-K. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance, and achievements may differ materially from those expressed in, or implied by, any forward-looking statements. See Cautionary Statement Regarding Forward-Looking Information.
Executive Overview
We generated a net profit of $1.7 million in the second quarter of 2004 ending June 30 and have recorded a net profit of $0.8 million for the first six months of 2004. Margins in the soybean complex improved in the second quarter due to rationing of the short U.S. soybean crop reducing the supply, and increasing the price, of soybean meal and soybean oil. Despite the improving margins of the second quarter, management anticipates that the soybean market will continue to be one of our most difficult challenges until harvest of the 2004 soybean crop begins in late September. The soy market is currently benefiting from growing demand with improving world economies.
We expect to continue to make progress towards our long-term objectives of delivering high quality products and services at the lowest possible costs and adding value to our products by investing in further processing of our products and developing and reviewing new applications for our products in the plastics and energy fields. During the second quarter of 2004, we continued to expend capital to fund the operations of Urethane Soy Systems Company, Inc. (USSC), our majority-owned subsidiary which produces SoyOyl Ò , a bio-based polyurethane product made from soybean oil. USSC has used these funds to raise the level of industry experience of its staff, target its marketing and sales, increase its product lines, improve quality control and relocate its research facilities to our Volga, South Dakota plant site. USSC achieved a significant milestone in the second quarter 2004 in having a fully operating and staffed chemical and machine lab. In addition, during the second quarter of 2004, USSCs marketing efforts were highlighted by the following achievements:
In the carpet industry, the largest supplier of carpet backing polyurethane systems has agreed to market USSCs products;
In the automotive industry, USSC successfully produced seat cushions for Ford Motor and Volvo;
In the polyurethane bed-liner market, USSC completed product testing and began marketing of its Bio Tuff bed-liner system, a USSC trademark; and
In the pulltrussion industry, USSC conducted a successful first test in a customers plant.
In addition, USSC has developed three new product uses for SoyOyl and major progress has been made to reduce the odor of SoyOyl in polyurethane products. We believe that during the last half of 2004 and throughout 2005 we will see growth in demand for SoyOyl as customers in
7
the carpet, rigid foam, flex foam, pulltrusion and automotive industries complete their testing of SoyOyl. We, however, do not anticipate that USSC will generate net income until at least 2005 because USSC is not able to pass on the current high price of soybean oil to its customers under the current pricing and marketing structure for SoyOyl.
As a result of the difficulties in managing the soybean market and our continued capital investment in USSC, we encountered some cash flow constraints in the first half of 2004. In order to provide additional working capital and finance our capital investment in USSC, our Board has authorized the sale and issuance of up to 5,625,000 new SDSP capital units as part of an offering to raise up to $11.25 million if the offering is completed. To conduct the offering, we filed a registration statement on Form S-1 with the Securities and Exchange Commission on April 15, 2004 and Amendment No. 1 to Form S-1 on June 8, 2004, but we may only proceed with the offer and sale of capital units after the registration statement is declared effective by the SEC and regulatory authorities in states where the offering is to be conducted. For additional information regarding the terms of the offering, please see Liquidity and Capital Resources. Nothing in this paragraph or report constitutes an offer to sell capital units or other securities of SDSP.
Company Profile
We own and operate a soybean processing plant, a SoyOyl Ò production facility and a soybean oil refinery in Volga, South Dakota. We were originally organized as a South Dakota cooperative, and reorganized into a South Dakota limited liability company effective July 1, 2002. We began producing crude soybean oil and soybean meal in late 1996, and since then we have expanded our business to include the development of new product lines and management services. In 2000, we began providing management services to Minnesota Soybean Processors (MnSP) and will obtain a minority interest in MnSP in 2004. In 2002, we began refining crude soybean oil into a product known as refined and bleached oil, and in early 2003, we became the majority owner and assumed management control of USSC.
When we began refining operations in 2002, we started reporting our results by operational segments because we anticipated that those components of our business would be managed and evaluated independently; however, since then we have been processing most of the crude oil we produce into refined and bleached oil or SoyOyl ® instead of selling it, and the production, sales and marketing of our products have been substantially integrated. Accordingly, in late 2003, we began the process of reevaluating whether segment reporting is necessary and along with our auditors have since concluded that segment reporting is not necessary under the applicable accounting rules. We therefore discontinued segment reporting of our business operations beginning in 2004.
RESULTS OF OPERATIONS
Comparison of the three months ended June 30, 2004 and 2003
Revenue Revenue increased from $60.1 million for the second quarter of 2003 to $71.2 million for the second quarter of 2004, an increase of approximately $11.1 million, or 18.5%. The
8
improvement was a result of higher soybean meal and soybean oil prices, offset by a decrease in crude soybean oil sales volume. Higher soybean meal and soybean oil prices were the result of a reduced supply of soybean meal and soybean oil due to the reduced U.S. soybean crop in 2003. The average sales prices for soybean meal, crude soybean oil, and refined and bleached soybean oil increased by 57.6%, 21.2%, and 42.6%, respectively. Sales volume of crude soybean oil decreased by 92.3%, which resulted from the fact that during the second quarter of 2003 we sold significant volumes of crude soybean oil that we had in storage, but we have since been refining the majority of the crude soybean oil that we produce.
Gross Profit/Loss During the second quarter of 2004, we generated a gross profit of approximately $3 million, compared to a gross loss of $267,996 for the second quarter of 2003. While revenues increased by $11.1 million, cost of revenues increased only $7.8 million, or 13.0%, for the second quarter of 2004 as compared to the second quarter of 2003. The improvement in revenue was a result of higher soybean meal and soybean oil prices, offset by a decrease in crude soybean oil sales volume. The increased cost of revenue was caused by a $6.7 million (12.5%) increase in cost of product sold and a $1.1 million (31.2%) increase in freight expense for the second quarter of 2004 compared to the second quarter of 2003. The increased cost of product sold was due to higher soybean prices, which increased approximately 52.9% from the second quarter of 2003. The increased freight cost resulted from higher product volumes delivered to customers and higher freight rates.
Administrative Expense Administrative expense, including all selling, general and administrative expenses, increased by only $35,000, or 3.5%, for the second quarter of 2004 compared to the same period in 2003. This increase results from additional expenses incurred in connection with the management and operation of USSC. USSC remains in the developmental stage and we continue to incur marketing and research and development expenses to develop a market for SoyOyl ® . Some of the increase in administrative expenses associated with USSC has been offset by lower general and administrative expenses that we are incurring on our crushing and refining operations as a result of our cost-sharing arrangement with MnSP.
Interest Expense Interest expense increased $191,629, or 86.7%, for the second quarter of 2004 compared to the same period in 2003. The increase was due to approximately $12.7 million of additional debt financing drawn on our seasonal loan as a result of the increase in soybean prices along with higher interest rates on the borrowing. At the end of the second quarter of 2004, we had outstanding debt of $31.8 million, most of which consists of our senior debt which bore interest at an annual rate of 3.71% interest as of June 30, 2004. At June 30, 2003, we had outstanding debt of $19.1 million, the majority of which bore interest at an annual rate of 3.44%.
Net Income/Loss We recorded net income of approximately $1.7 million for the second quarter of 2004, compared to net loss of $150,981 for the same period in 2003. The increase of $1.8 million in net income is primarily attributable to increased revenue as a result of higher soybean meal and soybean oil prices, offset by a decrease in other non-operating income. Other non-operating income decreased by $1.2 million for the quarter ending June 30, 2004, compared to the same period in 2003. The primary reasons for this decrease are due to a decrease of $373,000 in construction management income and a $1.1 million decrease in soybean oil storage income.
9
Comparison of the six months ended June 30, 2004 and 2003
Revenue Revenue increased from $104 million for the six months ended June 30, 2003 to $129.4 million for the six months ended June 30, 2004, an increase of approximately $25.4 million, or 24.4%. The improvement was a result of several factors. Principally, the increase in revenues is primarily a result of higher soybean meal and soybean oil prices along with higher sales volume of refined and bleached oil. Average sales prices for soybean meal, crude soybean oil, and refined and bleached soybean oil increased by 51.2%, 20.0%, and 32.4%, respectively. In addition, sales volume of refined and bleached soybean oil increased by 5.3% in the six months ended June 30, 2004 versus the same period in 2003. The increases attributable to these factors were offset by a decrease of 87.3% in sales volume of crude soybean oil during the first half of 2004. Lower sales volume of crude soybean oil during the latter period resulted from the fact that we sold crude soybean oil we held in storage in 2003.
Gross Profit/Loss During the six months ended June 30, 2004, we generated a gross profit of $2.9 million , compared to a gross profit of $643,545 for the six months ended June 30, 2003. While revenues increased by $25.4 million, cost of revenues increased only $23.2 million for the first six months of 2004 as compared to the same period in 2003. Revenues increased due to higher soybean meal and soybean oil prices offset by a decrease in crude soybean oil volume. The increased cost of revenue was caused by a $22 million (24.8%) increase in cost of product sold and a $1.3 million (18.5%) increase in freight expense for the six months ended June 30, 2004 compared to the same period in 2003. The increased cost of product sold was due to higher soybean prices, which increased approximately 50.8% from the six months ended June 30, 2003. The increased freight cost resulted from higher product volumes delivered to customers and higher freight rates.
Administrative Expense Administrative expense, including all selling, general and administrative expenses, increased by $92,540, or 4.9%, for the six months ended June 30, 2004 compared to the same period in 2003. This increase results from additional expenses incurred in connection with the management and operation of USSC. USSC remains in the developmental stage and we continue to incur marketing and research and development expenses to develop a market for SoyOyl ® . Some of the increase in administrative expenses associated with USSC has been offset by lower general and administrative expenses that we are incurring on our crushing and refining operations as a result of our cost-sharing arrangement with MnSP.
Interest Expense Interest expense increased $164,910, or 85.3%, for the first half of 2004 compared to the same period in 2003. The increase was due to approximately $12.7 million of additional debt financing drawn on our seasonal loan as a result of the increase in soybean prices along with higher interest rates on the borrowing. On June 30, 2004, we had outstanding debt of $31.8 million, most of which consists of the our senior debt which bore interest at an annual rate of 3.71% interest as of June 30, 2004. At June 30, 2003, we had outstanding debt of $19.1 million, the majority of which bore interest at an annual rate of 3.44%.
Net Income/Loss We recorded net profit of $820,841 for the six months ended June 30, 2004, compared to net income of $668,149 for the same period in 2003. The increase of $153,000 in
10
net income is primarily attributable to increased revenue as a result of higher soybean meal and soybean oil prices, offset by a decrease in other non-operating income. Other non-operating income decreased by $1.7 million for the six-month period ending June 30, 2004, compared to the same period in 2003. The primary reasons for this decrease are due to a decrease of $749,000 in construction management income and a $573,000 decrease in soybean oil storage income.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operations
Operating activities used $14.2 million for the six months ended June 30, 2004, compared to generating $2.0 million for the six months ended June 30, 2003. The funds used in the six months ended June 30, 2004 consisted primarily of $15.9 million change in current net assets and liabilities, $358,128 of minority interest in the net loss of USSC and non-cash patronage dividends of $153,961 offset by depreciation expense of $1.5 million and cash from operating income of $820,841.
Cash Flows from Investing Activity
Investing activities used $409,162 during the six-month period ending June 30, 2004 compared to $4.4 million in the six-month period ending June 30, 2003. We purchased $403,000 of property and equipment during the period ending June 30, 2004 compared to $408,000 purchased in the period ending June 30, 2003. The $403,000 spent on property and equipment during the six months ended June 30, 2004 consisted of equipment to increase the energy efficiency of the boiler, improvements in our crushing operations, and increased storage for SoyOyl ® .
Cash Flows from Financing Activity
Net cash provided by financing activities for the six-month period ending June 30, 2004 and 2003 was $14.2 million and $2.8 million, respectively. During the six months ended June 30, 2004, we made a distribution to our members of $3.3 million. Payments of $2.7 million were made on long-term debt commitments, and we increased our borrowings by $16.0 million.
CoBank is our primary lender. Effective June 17, 2004, we modified the two lines of credit with CoBank to meet the needs of our operations. The first is a revolving long-term loan agreement. Under the terms of this loan, we began with a $18.4 million credit line. It now reduces by $1.3 million approximately every six months thereafter. The final payment will be equal to the remaining unpaid principal balance of the loan on March 20, 2011. The revolving loan is set up so that we may borrow funds as needed up to the credit line maximum, and then pay down the principal whenever excess cash is available. Repaid amounts may be reborrowed up to the available credit line. We pay a 0.50% annual commitment fee on any funds not borrowed.
The second credit line is a revolving working capital loan, with an agreement that expires on April 1, 2005, unless extended by CoBank. The primary purpose of this loan is to finance inventory and receivables. The maximum availability under this credit line is $16 million.
11
Borrowing base reports and financial statements are required monthly to justify the balance borrowed on this line. We pay a 0.25% annual commitment fee on any funds not borrowed.
Both CoBank loans are set up with a variable rate option. The variable rate is set by CoBank and changes weekly on the first business day of each week. We also have a fixed rate option on both loans allowing us to fix rates for any period between one day and the entire commitment period. We can get a fixed rate quote from CoBank at any time and lock-in the interest rate on all or a part of our borrowings that are available for fixing. Both CoBank loans are secured by substantially all of our assets and are subject to compliance with standard financial covenants and the maintenance of certain financial ratios. The balance borrowed on the revolving term loan was $15.8 million and $14.5 million as of June 30, 2004 and 2003, respectively. As of June 30, 2004 and 2003, we owed $12.9 million and $0, respectively, on the working capital loan with CoBank. The annual interest rate on both the working capital and revolving term loans as of June 30, 2004 was 3.71%.
We also have other long-term contracts and notes totaling approximately $3.2 million, with a weighted average annual interest rate of 0.86% as of June 30, 2004. These arrangements include a no interest $2.67 million long-term payable to the other USSC shareholders relating to SDSPs purchase of their tendered USSC shares in January 2003. The obligation is secured by the purchased shares, with final payment due on October 31, 2006. Our highest interest payable is on a $250,000 loan held by USSC at 15% per annum which becomes due February 13, 2005. We made principal payments of $2.7 million and $200,000 on these additional long-term obligations during the six-month periods ended June 30, 2004 and 2003, respectively.
Our board of managers has authorized the sale and issuance of up to 5,625,000 new capital units. If the offering is completed, we would use the proceeds primarily to finance the acquisition of USSC and for additional working capital. We plan to offer the capital units first to our current members for $2.00 per capital unit, and then, if after 45 days we have not raised the total $11.25 million, the remaining capital units would be offered to the general public for $2.50 per unit. Nothing in this paragraph or report constitutes an offer to sell capital units or other securities. To conduct the offering, we filed a registration statement on Form S-1 with the Securities and Exchange Commission on April 15, 2004 and Amendment No. 1 to Form S-1 on June 8, 2004, and we may only proceed with the offer and sale of capital units after the registration statement is declared effective by the SEC and regulatory authorities in states where the offering is to be conducted.
OFF BALANCE SHEET FINANCING ARRANGEMENTS
Lease Commitments
We have commitments under various operating leases for rail cars, various types of vehicles, lab and office equipment, and oil storage tanks. Our most significant lease commitments are our rail car leases which allow us to distribute our products. We have a number of long-term leases with GE Capital and Trinity Capital for hopper rail cars and oil tank cars. Total lease expense under these arrangements was approximately $1,037,000 and $973,000 for the six-month periods ending June 30, 2004 and 2003, respectively. The hopper rail cars earn mileage credit from the
12
railroad through a sublease program which totaled $897,000 and $727,000 for the six-month periods ending June 30, 2004 and 2003, respectively.
In addition to the rail car leases, we have several operating leases for various equipment and storage facilities. Total lease expense under these arrangements was $35,000 and $140,000 for the six-month periods ending June 30, 2004 and 2003, respectively. The reason for the decrease in other lease expense for the first half of 2004 is the expiration of leases for off-site oil storage facilities during 2003. Some of our leases include purchase options; however, none are for a value less than fair market value at the end of the lease.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Preparation of our financial statements require estimates and judgments to be made that affect the amounts of assets, liabilities, revenues and expenses reported. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. Management continually evaluates these estimates based on historical experience and other assumptions we believe to be reasonable under the circumstances.
The difficulty in applying these policies arises from the assumptions, estimates, and judgments that have to be made currently about matters that are inherently uncertain, such as future economic conditions, operating results and valuations as well as management intentions. As the difficulty increases, the level of precision decreases, meaning that actual results can and probably will be different from those currently estimated.
Of the significant accounting policies described in the notes to the financial statements, we believe that the following may involve a higher degree of estimates, judgments, and complexity:
Commitments and Contingencies
Contingencies, by their nature relate to uncertainties that require management to exercise judgment both in assessing the likelihood that a liability has been incurred, as well as in estimating the amount of the potential expense. In conformity with accounting principles generally accepted in the United States, we accrue an expense when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Inventory Valuation
We account for our inventories at estimated net realizable market value. These inventories are agricultural commodities that are freely traded, have quoted market prices, may be sold without significant further processing and have predictable and insignificant costs of disposal. We derive our estimates from local market prices determined by grain terminals in our area. Processed product price estimates are determined by the ending sales contract price as of the close of the final day of the period. This price is determined by the closing price on the Chicago Board of Trade, net of the local basis. Changes in the market values of these inventories are recognized as a component of cost of goods sold.
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Long-Lived Assets
Depreciation and amortization of our property, plant, and equipment is provided on the straight-lined method by charges to operations at rates based upon the expected useful lives of individual or groups of assets. Economic circumstances or other factors may cause managements estimates of expected useful lives to differ from actual.
Long-lived assets, including property, plant and equipment and investments are evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its estimated fair market value based on the best information available. Considerable management judgment is necessary to estimate discounted future cash flows and may differ from actual.
Accounting for Derivative Instruments and Hedging Activities
We minimize the effects of changes in the price of agricultural commodities by using exchange-traded futures and options contracts to minimize our net positions in these inventories and contracts. We account for changes in market value on exchange-traded futures and option contracts at exchange prices and account for changes in value of forward purchase and sales contracts at local market prices determined by grain terminals in the area. Changes in the market value of all these contracts are recognized in earnings as a component of cost of goods sold.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Commodities Risk & Risk Management. To reduce the price change risks associated with holding fixed price commodity positions, we generally take opposite and offsetting positions by entering into commodity futures contracts (either a straight or options futures contract) on a regulated commodity futures exchange, the Chicago Board of Trade. While hedging activities reduce the risk of loss from increasing market prices of soybeans, such activities also limit the gain potential which otherwise could result from significant decreases in market prices of soybeans. Our policy is generally to maintain a hedged position within limits, but we can be long or short at any time. Our profitability is primarily derived from margins on soybeans processed, not from hedging transactions. Management does not anticipate that its hedging activity will have a significant impact on future operating results or liquidity. Hedging arrangements do not protect against nonperformance of a cash contract.
At any one time, our inventory and purchase contracts for delivery to the plant may be substantial. We have risk management policies and procedures that include net position limits. They are defined by commodity, and include both trader and management limits. This policy and procedure triggers a review by management when any trader is outside of position limits. The position limits are reviewed at least annually with the Board of Directors. We monitor current market conditions and may expand or reduce the limits in response to changes in those conditions.
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Foreign Currency Risk. We conduct essentially all of our business in U.S. dollars and have no direct risk regarding foreign currency fluctuations. Foreign currency fluctuations do, however, impact the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of and demand for U.S. agricultural products compared to the same products offered by foreign suppliers.
Interest Rate Risk. We manage exposure to interest rate changes by using variable rate loan agreements with fixed rate options. Long-term loan agreements can utilize the fixed option through maturity; however, the revolving ability to pay down and borrow back would be eliminated once the funds were fixed.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our chief executive officer and our controller, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, have concluded that our disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in the reports that we file with the Securities and Exchange Commission within the time periods specified in Securities and Exchange Commission rules and forms.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation of disclosure controls and procedures that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
From time to time in the ordinary course of our business, we may be named as a defendant in legal proceedings related to various issues, including without limitation, workers compensation claims, tort claims, or contractual disputes. We carry insurance that provides protection against general commercial liability claims, claims against our directors, officers and employees, business interruption, automobile liability, and workers compensation claims. Except as described in our periodic reports on file with the SEC, we are not currently involved in any material legal proceedings and are not aware of any potential claims.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
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Item 4. Submission of Matters to a Vote of Security Holders
On June 29, 2004, we held an annual meeting of members. At the meeting, two member proposals regarding amendments to our Operating Agreement to extend or eliminate the existing term limit restrictions on members of the Board of Managers were voted upon by the members present at the meeting. Both of these proposals failed.
VOTE TABULATION FOR MEMBER PROPOSALS
|
|
For |
|
Against |
|
Abstentions |
|
Proposal to Remove Term Limit Provision |
|
61 |
|
107 |
|
5 |
|
Proposal to Extend Term Limit Provision |
|
81 |
|
79 |
|
3 |
|
From Three to Four Three-Year Terms |
|
|
|
|
|
|
|
At the meeting, Dean Christopherson, Wayne Enger, Peter Kontz, Laron Krause, Bryce Loomis, and Anthony Van Uden were elected to the Board of Managers. Paul Barthel, Dan Feige, Marvin Goplen, Ryan Hill, Marvin Hope, James Jepsen, Gerald Moe, Dale Murphy, Maurice Odenbrett, Daniel Potter, Rodney Sklabeck, Lyle Trautman, Delbert Tschakert, and Ardon Wek will remain on the board until their terms expire, they are reelected, or their earlier death, resignation or removal. The District 3 board seat is currently vacant because Corey Schnabel was the only nominee for that seat and he could not be re-elected because his term limit had expired and neither of the member proposals regarding the term limit restrictions passed. The Board of Managers intends to appoint someone to fill that vacancy on the Board of Managers during the third quarter of 2004.
VOTE TABULATION FOR BOARD OF MANAGER NOMINEES
Nominee |
|
For |
|
Abstentions |
|
District One |
|
|
|
|
|
Bryce Loomis |
|
16 |
|
0 |
|
District 2 |
|
|
|
|
|
Dale Williams |
|
2 |
|
0 |
|
Larry Goodroad |
|
7 |
|
0 |
|
Laron Krause |
|
30 |
|
0 |
|
District 3 |
|
|
|
|
|
|
|
|
|
|
|
District 4 |
|
|
|
|
|
Peter Kontz |
|
9 |
|
1 |
|
District 5 |
|
|
|
|
|
Glen Talsma |
|
3 |
|
0 |
|
Dean Christopherson |
|
13 |
|
0 |
|
Irwin Raak |
|
7 |
|
0 |
|
District 6 |
|
|
|
|
|
Anthony Van Uden |
|
16 |
|
3 |
|
District 7 |
|
|
|
|
|
Wayne Enger |
|
21 |
|
0 |
|
Bryan Bursack |
|
16 |
|
0 |
|
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In addition, at the meeting, the members ratified two amendments to the Operating Agreement that had been previously adopted by the Board of Managers. These two amendments clarified the provisions in the Operating Agreement regarding the treatment of a members capital account upon a transfer of capital units and the member voting provisions.
VOTE TABULATION FOR RATIFICATION OF
OPERATING AGREEMENT AMENDMENTS
|
|
For |
|
Against |
|
Abstentions |
|
Clarification Regarding Dispositions |
|
157 |
|
8 |
|
5 |
|
Clarification Regarding Member Voting |
|
165 |
|
1 |
|
3 |
|
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) |
Exhibits. |
See Exhibit Index. |
|
|
|
||
(b) |
Reports on Form 8-K . |
None. |
|
17
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
SOUTH DAKOTA |
||
|
SOYBEAN PROCESSORS, LLC |
||
|
|
||
|
|
||
Dated: August 16, 2004 |
|
||
|
By |
/s/ Rodney G. Christianson |
|
|
|
Rodney G. Christianson |
|
|
|
Chief Executive Officer |
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EXHIBIT INDEX
TO
FORM 10-Q
OF
SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
Exhibit
|
|
Description |
3.1(i) |
|
Articles of Organization (1) |
3.1(ii) |
|
Operating Agreement, as amended (2) |
3.1(iii) |
|
Articles of Amendment to Articles of Organization (3) |
4.1 |
|
Form of Class A Unit Certificate (4) |
10.1 |
|
Security Agreement with CoBank dated June 17, 2004 |
10.2 |
|
Master Loan Agreement with CoBank dated June 17, 2004 |
10.3 |
|
Revolving Term Loan Supplement with CoBank dated June 17, 2004 |
10.4 |
|
Statused Revolving Credit Supplement with CoBank dated June 17, 2004 |
31 |
|
Rule 13a-14(a)/15d-14(a) Certification |
32 |
|
Section 1350 Certification |
(1) Incorporated by reference from Appendix B to the information statement/prospectus filed as a part of the issuers Registration Statement on Form S-4 (File No. 333-75804).
(2) Incorporated by reference from Appendix A to the prospectus filed as a part of the issuers Registration Statement on Form S-1 (File No. 333-114508).
(3) Incorporated by reference from the same numbered exhibit to the issuers Form 10-Q filed on August 14, 2002.
(4) Incorporated by reference from the same numbered exhibit to the issuers Registration Statement on Form S-4 (File No. 333-75804).
19
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is executed and delivered by SOUTH DAKOTA SOYBEAN PROCESSORS, LLC (the Debtor), a South Dakota limited liability company, having its place of business (or chief executive office if more than one place of business) located at 100 Caspian Avenue, Volga, South Dakota 57071, and whose taxpayer identification number is 46-0462968, to CoBank, ACB (the Secured Party), a federally chartered instrumentality of the United States, whose mailing address is P.O. Box 5110, Denver, Colorado 80217.
SECTION 1. GRANT OF SECURITY INTEREST. For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Debtor hereby grants to the Secured Party a security interest in all of the personal property of the Debtor, wherever located and whether now existing or hereafter acquired, together with all accessions and additions thereto, and all products and proceeds thereof, including:
accounts; inventory (including without limitation, returned or repossessed goods); chattel paper; electronic chattel paper; instruments; investment property (including, without limitation, certificated and uncertificated securities, security entitlements, securities accounts, commodity contracts, and commodity accounts); letters of credit; letter-of-credit rights; documents; equipment; farm products; fixtures; general intangibles (including, without limitation, payment intangibles, choses or things in action, litigation rights and resulting judgments, goodwill, patents, trademarks and other intellectual property, tax refunds, miscellaneous rights to payment, investments and other interests in entities not included in the definition of investment property (including, without limitation, all equities and patronage rights in all cooperatives and all interests in partnerships and joint ventures), margin accounts, computer programs, software, invoices, books, records and other information relating to or arising out of the Debtors business); and, to the extent not covered by the above, ail other personal property of the Debtor of every type and description, including, without limitation, supporting obligations, interests to claims in or under any policy of insurance, commercial tort claims, deposit accounts, money, and judgments (the Collateral).
Where applicable, all terms used herein shall have the same meaning as presently and as hereafter defined in the Uniform Commercial Code (the UCC).
SECTION 2. THE OBLIGATIONS. The security interest granted hereunder shall secure the payment of all indebtedness and the performance of all obligations of the Debtor to the Secured Party of every type and description, whether now existing or hereafter arising, fixed or contingent, as primary obligor or as guarantor or surety, acquired directly or by assignment or otherwise, liquidated or unliquidated, regardless of how they arise or by what agreement or instrument they may be evidenced, including, without limitation, all loans, advances and other extensions of credit, and all covenants, agreements, and provisions contained in all loan and other agreements between the parties (the Obligations).
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Debtor represents, warrants and covenants as follows:
A. Title to Collateral. Except as permitted by any other written agreement between the parties and except for any security interest in favor of the Secured Party, the Debtor has clear title to all Collateral, free of all adverse claims, interests, liens, or encumbrances. Without the prior written
consent of the Secured Party, the Debtor shall not create or permit the existence of any adverse claims, interests, liens, or other encumbrances against any of the Collateral. The Debtor shall provide prompt written notice to the Secured Party of any future adverse claims, interests, liens, or encumbrances against all Collateral, and shall defend diligently the Debtors and the Secured Partys interests in all Collateral.
B. Validity of Security Agreement; Corporate Authority. This Security Agreement is the valid and binding obligation of the Debtor, enforceable in accordance with its terms. The Debtor has the corporate power to execute, deliver and carry out the terms and provisions of this Security Agreement and all related documents, and has taken all necessary corporate action to authorize the execution,, delivery and performance or this Security Agreement and all related documents.
C. Location of the Debtor . The Debtors place of business (or chief executive office if more than one place of business) is located at the address shown above. The Debtors state of incorporation or formation is as shown above.
D. Location of Collateral. All equipment and inventory are now at the location or locations specified on Schedule A attached hereto and made a part hereof. All farm products and fixtures are now at the location or locations specified on Schedule B attached hereto and made a part hereof.
E. Name, Identity, and Corporate Structure. The Debtors exact legal name is as set forth above. Except as otherwise disclosed to the Secured Party in writing, the Debtor has not within the past ten years changed its name, identity or corporate structure through incorporation, merger, consolidation, joint venture or otherwise.
F. Change in Name, State of Debtors Location, Location of Collateral, Etc. Without giving at least thirty days prior written notice to the Secured Party, the Debtor shall not change its name, identity or corporate structure, the location of its place of business (or chief executive office if more than one place of business), its state of incorporation or formation, or the location of the Collateral.
G. Further Assurances. Upon the request of the Secured Party, the Debtor shall do all acts and things as the Secured Party may from time to time deem necessary or advisable to enable it to perfect, maintain, and continue the perfection and priority of the security interest of the Secured Party in the Collateral, or to facilitate the exercise by the Secured Party of any rights or remedies granted to the Secured Parry hereunder or provided by law. Without limiting the foregoing, the Debtor agrees to execute, in form and substance satisfactory to the Secured Party, such financing statements, amendments thereto, supplemental agreements, assignments, notices of assignments, and other instruments and documents as the Secured Party may from time to time request. In addition, in the event the Collateral or any part thereof consists of instruments, documents, chattel paper or money (whether or not proceeds of the Collateral), the Debtor shall, upon the request of the Secured Party, deliver possession thereof to the Secured Party (or to an agent of the Secured Party retained for that purpose), together with any appropriate endorsements and/or assignments. Where Collateral is in the possession of a third party, the Debtor will join with the Secured Party in notifying the third party of the Secured Partys security interest and obtaining an acknowledgment from the third party that it is holding the Collateral for the benefit of the Secured Party. The Debtor will cooperate with the Secured Party in obtaining control with respect to Collateral consisting of deposit accounts (that are not held by the Secured Party as depositary institution), investment property, letter-of-credit rights and electronic chattel paper. The Secured Party shall use reasonable care in the custody and preservation of such Collateral in its possession, but shall not be required to take any steps necessary to preserve rights against prior parties. All costs and expenses incurred by the Secured Party to establish, perfect, maintain, determine the priority of, or release the security interest granted hereunder (including the cost of all filings, recordings, and taxes thereon and the
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fees and expenses of any agent retained by Secured Party) shall become part of the Obligations secured hereby and be paid by the Debtor on demand.
H. Insurance. The Debtor shall maintain such property and casualty insurance with such insurance companies in such amounts and covering such risks as are at all times satisfactory to the Secured Party. All such policies shall provide for loss payable clauses or endorsement in form and content acceptable to the Secured Party. Upon the request of the Secured Party, all policies (or such other proof of compliance with this Section as may be satisfactory to the Secured Party) shall be delivered to the Secured Party. The Debtor shall pay all insurance premiums when due. In the event of loss, damage, or injury to any insured Collateral, the Secured Party shall have full power to collect any and all insurance proceeds due under any of such policies, and may, at its option, apply such proceeds to the payment of any of the Obligations secured hereby, or may apply such proceeds to the repair or replacement of such Collateral.
I. Taxes, Levies, Etc. The Debtor has paid and shall continue to pay when due all taxes, levies, assessments, or other charges which may become an enforceable lien against the Collateral.
J. Disposition and Use of Collateral by the Debtor. Without the prior written consent of the Secured Party and provided the Debtor is not in default hereunder, the Debtor shall not at any time sell, transfer, lease, abandon, or otherwise dispose of any Collateral except in the ordinary course of its business. The Debtor shall not use any of the Collateral in any manner which violates any statute, regulation, ordinance, rule, decree, order, or insurance policy.
K. Receivables. The Debtor shall preserve, enforce, and collect all accounts, chattel paper, electronic chattel paper, instruments, documents and general intangibles, whether now owned or hereafter acquired or arising (the Receivables), in a diligent fashion and, upon the request of the Secured Party, the Debtor shall execute an agreement in form and substance satisfactory to the Secured Party by which the Debtor shall direct all account debtors and obligors on instruments to make payment to a lock box deposit account under the exclusive control of the Secured Party.
L. Condition of Collateral. All tangible Collateral is now in good repair and condition and the Debtor shall at all times hereafter, at its own expense, maintain all such Collateral in good repair and condition.
M. Condition of Books and Records. The Debtor has maintained and shall maintain complete, accurate and up-to-date books, records, accounts, and other information relating to all Collateral in such form and in such detail as may be satisfactory to the Secured Party, and shall allow the Secured Party or its representatives at any reasonable time to examine and copy such books, records, accounts, and other information.
N. Right of Inspection. At all reasonable times upon the request of the Secured Party, the Debtor shall allow the Secured Party or its representatives to visit any of the Debtors properties or locations so that the Secured Party or its representatives may confirm, inspect and appraise any of the Collateral.
SECTION 4. DEFAULT. The breach of any of the Obligations secured hereby, and/or the breach of any representation, warranty, covenant, or agreement contained in this Security Agreement, shall constitute default hereunder.
SECTION 5. RIGHTS AND REMEDIES. Upon the Debtors default, and at any time thereafter, the Secured Party may declare all Obligations to be immediately due and payable, and may
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exercise any and all rights and remedies of the Secured Party in the enforcement of its security interest under the UCC, this Security Agreement, or any other applicable law. Without limiting the foregoing:
A. Disposition of Collateral. The Secured Party may sell, lease, or otherwise dispose of all or any part of the Collateral in its then present condition or following any commercially reasonable preparation or processing thereof, whether by public or private sale, or at any brokers board, in lots or in bulk, for cash, on credit or otherwise, with or without representations or warranties, and upon such other terms as may he acceptable to the Secured Party, and the Secured Party may purchase at any public sale. At any time when advance notice of sale is required, the Debtor agrees that ten days prior written notice shall be reasonable. In connection with the foregoing, the Secured Party may:
1. require the Debtor to assemble the Collateral and all records pertaining thereto and make such Collateral and records available to the Secured Party at a place to be designated by the Secured Party which is reasonably convenient to both parties;
2. enter the premises of the Debtor or premises under the Debtors control and take possession of the Collateral;
3. without charge, use or occupy the premises of the Debtor or premises under the Debtors control, including, without limitation, warehouse and other storage facilities;
4. without charge, use any patent, trademark, tradename, or other intellectual property or technical process used by the Debtor in connection with any of the Collateral; and
5. rely conclusively upon the advice or instructions of any one or more brokers or other experts selected by the Secured Party to determine the method or manner of disposition of any of the Collateral and, in such event, any disposition of the Collateral by the Secured Party in accordance with such advice or instructions shall be deemed to be commercially reasonable.
B. Collection of Receivables. The Secured Party may, but shall not be obligated to, take all actions reasonable or necessary to preserve, enforce or collect the Receivables, including, without limitation, the right to notify account debtors and obligors on instruments to make direct payment to the Secured Party, to permit any extension, compromise, or settlement of any of the Receivables for less than face value, or to sue on any Receivable, all without prior notice to the Debtor.
C. Proceeds. The Secured Party may collect and apply all proceeds of the Collateral and may endorse the name of the Debtor in favor of the Secured Party on any and all checks, drafts, money orders, notes, acceptances, or other instruments of the same or a different nature, constituting, evidencing, or relating to the Collateral. The Secured Party may receive and open all mail addressed to the Debtor and remove therefrom any cash or non-cash items of payment constituting proceeds of the Collateral.
D. Insurance Adjustments. The Secured Party may adjust, settle, and cancel any and all insurance covering any Collateral, endorse the name of the Debtor on any and all checks or drafts drawn by any insurer, whether representing payment for a loss or a return of unearned premium, and execute any and all proofs of claim and other documents or instruments of every kind required by any insurer in connection with any payment by such insurer.
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The net proceeds of any disposition of the Collateral may be applied by the Secured Party, after deducting its reasonable expenses incurred in such disposition, to the payment in whole or in part of the Obligations in such order as the Secured Party may elect. The enumeration of the foregoing rights and remedies is not intended to be exhaustive, and the exercise of any right and/or remedy shall not preclude the exercise of any other rights or remedies, all of which are cumulative and non-exclusive.
SECTION 6. OTHER PROVISIONS.
A. Amendment, Modification, and Waiver. Without the prior written consent of the Secured Party, no amendment, modification, or waiver of, or consent to any departure by the Debtor from any provision hereunder shall be effective. Any such amendment, modification, waiver, or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or failure by the Secured Party to exercise any remedy hereunder shall be deemed a waiver thereof or of any other remedy hereunder. A waiver on any one occasion shall not be construed as a bar to or waiver of any remedy on any subsequent occasion.
B. Costs and Attorneys Fees. Except as prohibited by law, if at any time the Secured Party employs counsel in connection with the creation, perfection, preservation, or release of the Secured Partys security interest in the Collateral or the enforcement of any of the Secured Partys rights or remedies hereunder, all of the Secured Partys reasonable attorneys fees arising from such services and all expenses, costs, or charges relating thereto shall become part of the Obligations secured hereby and be paid by the Debtor on demand.
C. No Obligation to Make Loans. Nothing contained herein or in any financing statement or other document executed or filed in connection herewith shall be construed to obligate the Secured Party to make any loans or advances to the Debtor, whether pursuant to a commitment or otherwise.
D. Revival of Obligations. To the extent the Debtor or any third party makes a payment or payments to the Secured Party, or the Secured Party enforces its security interest or exercises any right of setoff, and such payment or payments or the proceeds thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, and/or required to be repaid to a trustee, receiver, or any other party under any bankruptcy, insolvency or other law or in equity, then, to the extent of such recovery, the Obligations or any part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment or payments had not been made, or such enforcement or setoff had not occurred.
E. Performance by the Secured Party. In the event the Debtor shall at any time fail to pay or perform punctually any of its duties hereunder, the Secured Party may, at its option and without notice to or demand upon the Debtor, without obligation and without waiving or diminishing any of its other rights or remedies hereunder, fully perform or discharge any of such duties. All costs and expenses incurred by the Secured Party in connection therewith, together with interest thereon at the Secured Partys National Variable Rate plus four percent per annum, shall become part of the Obligations secured hereby and be paid by the Debtor upon demand.
F. Indemnification, Etc. The Debtor hereby expressly indemnifies and holds the Secured Party harmless from any and all claims, causes of action, or other proceedings, and from any and all liability, loss, damage and expense of every nature, arising by reason of the Secured Partys enforcement of its rights and remedies hereunder, or by reason of the Debtors failure to comply with any environmental or other law or regulation. As to any action taken by the Secured Party hereunder, the
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Secured Party shall not be liable for any error of judgment or mistake of fact or law, absent gross negligence or willful misconduct on its part.
G. Power of Attorney. The Debtor hereby appoints the Secured Party or the Secured Partys designee as its attorney-in-fact, which appointment is irrevocable, durable, and coupled with an interest, with full power of substitution, in its name of the Debtor or in the name of the Secured Party, to take any action which the Debtor is obligated to perform hereunder or which the Secured Party may deem necessary or advisable to accomplish the purposes of this Security Agreement. In taking any action in accordance with this Section, the Secured Party shall not be deemed to be the agent of the Debtor. The powers conferred upon the Secured Party in this Section are solely to protect its interest in the Collateral and shall not impose any duty upon the Secured Party to exercise any such powers.
H. Continuing Effect. This Security Agreement, the Secured Partys security interest in the Collateral, and all other documents or instruments contemplated hereby shall continue in full force and effect until all of the Obligations have been satisfied in full, the Secured Party has no commitment to make any further advances to the Debtor, and the Debtor has sent a valid written demand to the Secured Party for termination of this Security Agreement.
I. Binding Effect. This Security Agreement shall be binding upon and inure to the benefit of the Debtor and the Secured Party and their respective successors and assigns.
J. Security Agreement as Financing Statement and Authorization to File. A photographic copy or other reproduction of this Security Agreement may be used as a financing statement. In addition, the Debtor authorizes the Secured Party to prepare and file financing statements describing the Collateral, amendments thereto and continuation statements, and file any financing statement, amendment thereto or continuation statement electronically. In addition, the Debtor authorizes the Secured Party to file financing statements describing any agricultural liens or other statutory liens held by the Secured Party.
K. Governing Law. Subject to any applicable federal law, this Security Agreement shall be construed in accordance with and governed by the laws of the State of Colorado, except to the extent that the UCC provides for the application of the law of another state.
L. Notices. All notices, requests, demands, or other communications required or permitted hereunder shall be in writing and shall be deemed to have been given when sent by registered or certified mail, return receipt requested, addressed to the other party at the respective addresses given above, or to such other person or addresses as either party designates to the other in the manner herein prescribed.
M. Severability. The determination that any term or provision of this Security Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other term or provision hereof.
IN WITNESS WHEREOF , the Debtor has executed this Security Agreement by its duly authorized officer as of the day and year shown below.
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DEBTOR: |
SOUTH DAKOTA SOYBEAN PROCESSORS, LLC |
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a South Dakota limited liability company |
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By: |
/s/ Rodney Christianson |
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Date: |
June 17, 2004 |
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Title: |
Chief Executive Officer |
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SCHEDULE A
To Security Agreement Dated: June 17, 2004
Executed By: |
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SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
(Name
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Set forth below are the present locations (by county and state) of the Debtors inventory and equipment.
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SCHEDULE B
To Security Agreement Dated: June 17, 2004
Executed By: |
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SOUTH DAKOTA SOYBEAN PROCESSORS, LLC
(Name
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Set forth below are the present locations (by county and state) of the Debtors fixtures and farm products.
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Exhibit 10.2
MLA No. B0511
MASTER LOAN AGREEMENT
THIS MASTER LOAN AGREEMENT is entered into as of June 17, 2004, between CoBANK ACB (CoBank) and SOUTH DAKOTA SOYBEAN PROCESSORS, LLC, Volga, South Dakota (the Company).
BACKGROUND
CoBank and the Company (by virtue of the Company having assumed all obligations of South Dakota Soybean Processors to CoBank) are parties to a Master Loan Agreement dated February 26, 2002 (the Existing Agreement). Pursuant to the terms of the Existing Agreement, the parties entered into one or more Supplements thereto. CoBank and the Company now desire to amend and restate the Existing Agreement and to apply such new agreement to the existing Supplements, as well as any new Supplements that may be issued thereunder. For that reason and for valuable consideration (the receipt and sufficiency of which are hereby acknowledged), CoBank and the Company hereby agree that the Existing Agreement shall be amended and restated to read as follows:
SECTION 1. Supplements . In the event the Company desires to borrow from CoBank and CoBank is willing to lend to the Company, or in the event CoBank and the Company desire to consolidate any existing loans hereunder, the parties will enter into a Supplement to this agreement (a Supplement). Each Supplement will set forth the amount of the loan, the purpose of the loan, the interest rate or rate options applicable to that loan, the repayment terms of the loan, and any other terms and conditions applicable to that particular loan. Each loan will be governed by the terms and conditions contained in this agreement and in the Supplement relating to the loan. As of the date hereof, the following Supplements are outstanding hereunder and shall be governed by the terms and conditions hereof: (1) the Statused Revolving Credit Supplement dated June 17, 2004 and numbered B051S01G; and (2) the Revolving Term Loan Supplement dated June 17, 2004 and numbered B051T05E.
SECTION 2. Availability . Loans will be made available on any day on which CoBank and the Federal Reserve Banks are open for business upon the telephonic or written request of the Company. Requests for loans must be received no later than 12:00 Noon Companys local time on the date the loan is desired. Loans will be made available by wire transfer of immediately available funds to such account or accounts as may be authorized by the Company. The Company shall furnish to CoBank a duly completed and executed copy of a CoBank Delegation and Wire and Electronic Transfer Authorization Form, and CoBank shall be entitled to rely on (and shall incur no liability to the Company in acting on) any request or direction furnished in accordance with the term thereof.
SECTION 3. Repayment . The Companys obligation to repay each loan shall be evidenced by the promissory note set forth in the Supplement relating to that loan or by such replacement note as CoBank may require. CoBank shall maintain a record of all loans, the interest accrued thereon, and all payments made with respect thereto, and such record shall,
absent proof of manifest error, be conclusive evidence of the outstanding principal and interest on the loans. All payments shall be made by wire transfer of immediately available funds, by check, or by automated clearing house or other similar cash handling processes as specified by separate agreement between the Company and CoBank. Wire transfers shall be made to ABA No. 307088754 for advice to and credit of CoBANK (or to such other account as CoBank may direct by notice). The Company shall give CoBank telephonic notice no later than 12:00 noon Companys local time of its intent to pay by wire and funds received after 3:00 p.m. Companys local time shall be credited on the next business day. Checks shall be mailed to CoBank, Department 167, Denver, Colorado 80291-0167 (or to such other place as CoBank may direct by notice). Credit for payment by check will not be given until the latter of: (a) the day on which CoBank receives immediately available funds; or (b) the next business day after receipt of the check.
SECTION 4. Security . The Companys obligations under this agreement, all Supplements (whenever executed), and all instruments and documents contemplated hereby or thereby, shall be secured by a statutory first lien on all equity which the Company may now own or hereafter acquire in CoBank and by a first lien (subject only to exceptions approved in writing by CoBank) pursuant to all security agreements, mortgages, and deeds of trust executed by the Company (including those executed by South Dakota Soybean Processors, whose obligations to CoBank have been assumed by the Company) in favor of CoBank, whether now existing or hereafter entered into. As additional security for those obligations, the Company agrees to grant to CoBank, by means of such instruments and documents as CoBank shall require, a first lien on such of its other assets, whether now existing or hereafter acquired, as CoBank may from time to time require, including an Assignment of project Documents Agreement in form and substance satisfactory to CoBank.
SECTION 5. Conditions Precedent . CoBanks obligation to extend credit under the initial Supplement hereto is subject to the receipt by CoBank of a duly executed copy of this agreement and all instruments and documents contemplated hereby. CoBanks obligation to extend credit under each Supplement is subject to the condition that CoBank receive, in form and substance satisfactory to CoBank: (a) a duly executed copy of the Supplement and all instruments and documents contemplated thereby; (b) such certified board resolutions, evidence of incumbency, and other evidence as CoBank may require that the Supplement, all instruments and documents executed in connection therewith, and (in the case of the initial Supplement hereto) this agreement and all instruments and documents executed in connection herewith, have been duly authorized and executed; (c) all fees and other charges provided for herein or in the Supplement; and (d) such evidence as CoBank may require that CoBank has, as of the date of the Supplement, a duly perfected first priority lien on all security for the Companys obligations. In addition, CoBanks obligation to extend or to continue to extend credit under each Supplement is subject to the Company being in compliance with the terms of this agreement, the Supplements, and all security and other instruments and documents related hereto or thereto (collectively, at any time, the Loan Documents).
SECTION 6. Representations and Warranties . The execution by the Company of each Supplement shall constitute a representation and warranty to CoBank that: (a) each representation and warranty and all information set forth in any application or other document
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submitted in connection with, or to induce CoBank to enter into, such Supplement, is correct in all material respects as of the date of such Supplement; (b) the Loan Documents do not conflict with any other agreement to which the Company is a party or with any provision of the Companys bylaws, articles of incorporation or other organizational documents; (c) the Company is in compliance with all of the terms of the Loan Documents (including, without limitation, Section 7(a) of this agreement on eligibility to borrow from CoBank); and (d) the Loan Documents create legal, binding, and enforceable obligations of the Company, except as enforceability may be limited by bankruptcy and similar laws affecting creditors rights generally.
SECTION 7. Affirmative Covenants . Unless CoBank otherwise consents in writing, while this agreement is in effect, the Company agrees to: (a) maintain its status as an entity eligible to borrow from CoBank and its existence and good standing in the jurisdiction of its incorporation or formation; (b) qualify and remain qualified to transact business wherever such qualification is required and obtain and maintain all licenses, certificates, permits, and like authorizations which are material to its businesses or required by law, rule, regulation, code, orders or the like (collectively, Laws); (c) comply in all material respects with all applicable Laws, including all environmental Laws and all Laws relating to any patron or member investment program that the Company may have; (d) cause all persons occupying or present on any property of the Company to comply in all material respects with all environmental laws; (e) maintain insurance with companies satisfactory to CoBank in such amounts and covering such risks as an customarily carried by companies engaged in the same or similar business and similarly situated, and make such increases in the amount or type of coverage as CoBank may request; (f) cause all policies covering any collateral provided for herein or in any Supplement to have loss payable clauses or endorsements in form and content acceptable to CoBank; (g) maintain its property in good working condition, ordinary wear and tear excepted; (h) keep books of account in accordance with generally accepted accounting principles (GAAP) consistently applied; (i) permit CoBank or its agents to inspect the Companys properties, books, and records, and to discuss the Companys affairs, finances, and accounts with its directors, employees, and independent certified public accountants; (j) purchase such equity in CoBank as CoBank may from time to time require in accordance with its bylaws (except that the maximum amount of equity which the Company may be required to purchase in connection with any loan may not exceed the amount permitted by the bylaws at the time the Supplement relating to that loan is entered into or such loan is renewed or refinanced by CoBank); (k) have an excess of current assets over current liabilities (both as determined in accordance with GAAP consistently applied) of not less than $5,000,000.00 at the end of each period for which financial statements are required to be furnished pursuant to Section 8 hereof through and including August 2004, and of not less than $6,000,000.00 at the end of each such period thereafter, except that in determining current assets, any amount available under the Revolving Term Loan Supplement hereto may be included, and except that in determining current liabilities, any outstanding principal balance under the Statused Revolving Credit Supplement hereto shall be included; (l) have at the end of each fiscal year of the Company a Debt Service Coverage Quotient (as defined below) of not less than 1.2 to 1; (m) pay or cause to be removed by the initiation of legal proceedings or otherwise, within sixty (60) days after notice from CoBank, any lien on the Improvements or Property subject to any security document unless said lien is covered by insurance or bond; and (n) comply with and keep in effect all permits and approvals obtained
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from any governmental bodies that relate to the lawful construction of the Improvements, as well as with all existing and future laws, regulations, orders and requirements of all governmental, judicial or legal authorities having jurisdiction over the Property or Improvements, and with all recorded restrictions affecting the Property. For purposes of subsection (1) above, Debt Service Coverage Quotient shall mean the following (all as calculated for the most current year end in accordance with GAAP consistently applied, except as otherwise specifically indicated): (i) net income (after taxes) plus depreciation and amortization, minus non-cash patronage income, minus cash patronage paid or scheduled to be paid, based on the most recent prior fiscal year, minus extraordinary gains (plus losses); divided by (ii) all principal payments due within one year on all long-term debt as of the prior fiscal year-end, but in no event including any current portion of the Statused Revolving Credit Supplement hereto.
SECTION 8. Reporting Covenants. Unless CoBank otherwise consents in writing, while this agreement is in effect, the Company agrees to furnish to CoBank:
(a) Annual Financial Statements. Within 120 days after the end of each fiscal year of the Company occurring during the term hereof: (i) annual financial statements prepared in accordance with GAAP consistently applied and audited by independent certified public accountants selected by the Company and acceptable to CoBank; and (ii) a report of such accountants on such statements containing an opinion acceptable to CoBank.
(b) Interim Financial Statements. Within 45 days after the end of each month (other than the last month in each fiscal year), a balance sheet, a statement of income for such month and for the period year to date, and such other monthly statements as CoBank may specifically request, all prepared in reasonable detail and in form and substance satisfactory to CoBank.
(c) Notice of Default. Promptly after becoming aware thereof, notice of the occurrence of a default or of any event which with the giving of notice and the passage of time would become a default hereunder.
(d) Notice of Litigation, Environmental Matters, Etc. Promptly after becoming aware thereof: (i) notice of the commencement of all actions, suits, or proceedings affecting the Company which, if determined adversely to the Company, could have a material adverse effect on the Company; and (ii) notice of the receipt of all pleadings, orders, complaints, indictments, or any other communication alleging a condition that may require the Company to undertake or to contribute to a cleanup or other response under environmental Laws, or which seek penalties, damages, injunctive relief, or criminal sanctions related to alleged violations of such Laws, or which claim personal injury or property damage to any person as a result of environmental factors or conditions.
(e) Bylaws and Articles. Promptly after any change in the Companys bylaws or articles of incorporation (or like documents), copies of all such changes, certified by the Companys Secretary.
(f) Other Information. Such other information as CoBank may from time to time request.
4
SECTION 9. Negative Covenants. Unless CoBank otherwise consents in writing, while this agreement is in effect, the Company will not: (a) create, assume or allow to exist any indebtedness or liability for borrowed money or for the deferred purchase price of property or services (including capitalized leases not otherwise permitted hereunder), except for indebtedness to CoBank, indebtedness under the Companys member or patron investment program (provided such indebtedness is expressly stated to be subordinated to all indebtedness to CoBank), indebtedness to any local, state or federally sponsored developmental agencies in an aggregate principal amount not to exceed $1,000,000.00, but no extensions and refinancings thereof, miscellaneous indebtedness not to exceed $500,000.00 at any one time outstanding, indebtedness to Urethane Soy Systems Companys shareholders in an aggregate principal amount not to exceed $2,673,000.00, but no extensions and refinancings thereof, accounts payable to trade creditors; and current operating liabilities (other than for borrowed money) incurred in the ordinary course of business; (b) grant, assume or allow to exist any security interest, mortgage, deed of trust or other consensual lien on any of its property, except liens in favor of CoBank, liens in existence on the date hereof in favor of any local, state or federally sponsored developmental agencies to secure indebtedness permitted hereunder, liens securing miscellaneous indebtedness permitted under subsection (a) above; and liens in existence on the date hereof in favor of Urethane Soy Systems Companys shareholders to secure indebtedness permitted hereunder, (c) allow to exist any non-consensual or statutory liens that secure obligations that are past due or any judgment liens; unless said liens are subject to and covered by insurance or bonds or are being contested by the Company in legal proceedings or on appeal; (d) merge or consolidate with any other entity, or form or create any new subsidiary, or purchase all or a material part of the assets of any person or entity, or commence operations under any other name or organization; (e) sell, lease, or otherwise dispose of any assets, except in the ordinary course of business; (f) lend money or otherwise extend credit, except for trade credit extended in the ordinary course of business; (g) assume, guarantee, or otherwise become liable (directly or indirectly) for the debts of another; (h) engage in any business activities substantially different from the Companys present business activities; (i) declare or pay any dividends or retire capital equities or other written notices of allocation, or make any other distribution or allocation of its earnings, surplus or assets to any holder of stock, allocated equities or other written notices of allocation, except that the Company may distribute earnings annually in the form of cash value-added payments and qualified written notices of allocation, so long as the Company is operating on a profitable basis and is in full compliance with all loan covenants, and such written notices constitute equity and not debt; (j) create, incur, assume, or permit to exist any obligation as lessee except (1) operating leases for the rental or hire of any real or personal property (excluding railroad cars) which do not in the aggregate require the Company to make scheduled payments to the lessors in any fiscal year of the Company occurring during the term hereof in excess of $350,000.00, (2) leases which should be capitalized in accordance with GAAP for the rental or hire of any real or personal property which do not in the aggregate require the Company to make scheduled payments to the lessors in any fiscal year of the company occurring during the term hereof in excess of $200,000.00, (3) leases for the rental or hire of up to 400 tanker and/or hopper railroad cars under terms and conditions acceptable to CoBank (4) other leases of railroad cars with original maturities of less than 18 months, at the Companys discretion, and (3) leases of soybean oil storage tank space with aggregate annual payments not to exceed $400,000.00; or (1) purchase or install any materials, equipment, fixture,
5
or articles of personal property of the Company placed in the Improvements if such shall be covered under any security agreement or other agreement where the seller reserves or purports to reserve title or the right of removal or repossession, or the right to consider them personal property after their incorporation in the work of construction, unless authorized by CoBank in writing, except in support of financing permitted under Sections 9(a) and 9(j).
SECTION 10. Events of Default. The Company shall be in default hereunder if any of the following occur: (a) any payment required to be made hereunder or under any Supplement is not made when due; (b) any representation or warranty made or deemed made by the Company herein or in any other Loan Document shall prove to have been false or misleading in any material respect on the date made or deemed made; (c) the Company should fail to comply with Subsection (7)(a) through (7)(i) hereof or Subsections 8(a), (b), (e), and (f) hereof or any reporting covenant set forth in any Supplement hereto, and such breach continues for 15 days after written notice thereof shall have been given to the Company; (d) any other covenant or agreement set forth herein or in any other Loan Document is breached or the Company uses the proceeds of any loan for any unauthorized purpose; (e) the Company should breach or be in default under any other agreement between the Company and CoBank; (f) the Company should fail to pay when due any indebtedness to any other person or entity for borrowed money or any long-term obligation for the deferred purchase price of the property (including any capitalized lease), or any other event occurs which constitutes or would, with the giving of notice and/or the passage of time, constitute a default under any agreement relating to such indebtedness or obligation; (g) the Company becomes insolvent or does not pay its debts as they come due or suspends its business operations or a material part thereof or makes an assignment for the benefit of creditors or commences or has commenced against it any proceeding for the appointment of a receiver, trustee, or other custodian for it or any of its property or any proceeding under any bankruptcy, reorganization, dissolution, or similar law; and (h) any material adverse change occurs in the Companys financial condition, results of operation, or ability to perform its obligations to CoBank under this agreement and the other Loan Documents.
SECTION 11. Remedies. Upon the occurrence of a default or of any event which with the giving of notice and the passage of time would become a default hereunder, CoBank shall have no obligation to continue to extend credit to the Company and may discontinue doing so at any time without prior notice. In addition, upon the occurrence of each and every default hereunder, CoBank may, upon notice to the Company: (a) terminate any commitment; (b) declare the unpaid principal of the loans, all accrued interest thereon, and all other amounts payable under this agreement and the other Loan Documents to be immediately due and payable (whereupon the same shall become immediately due and payable without presentment, demand, or further notice of any kind, all of which are hereby waived); (c) proceed to protect, exercise, and enforce such rights and remedies as may be provided by agreement or under Law; (d) apply all payments received by CoBank to the Companys obligations in such order and manner as CoBank may elect; and (e) hold and/or set off and apply against the Companys obligations to CoBank, the proceeds of any equity in CoBank, any cash collateral held by CoBank, or any balances held by CoBank for the Companys account (whether or not such balances are then due). The Company acknowledges that each and every one of CoBanks rights and remedies shall be cumulative and may be exercised from time to time, and no failure on the part of CoBank to exercise, and no delay in exercising, any right or remedy shall operate as a waiver thereof, nor
6
shall any single or partial exercise of any right or remedy preclude any other or future exercise thereof or the exercise of any other right or remedy.
In addition to the rights and remedies set forth above: (i) if the Company fails to purchase any equity in CoBank when required or fails to make any payment to CoBank when due, then at CoBanks option in each instance, such payment shall bear interest from the date due to the date paid at 4% per annum in excess of the rate(s) of interest that would otherwise be in effect on that loan; and (ii) after the maturity of any loan (whether as a result of acceleration or otherwise), the unpaid principal balance of such loan (including without limitation, principal, interest, fees and expenses) shall automatically bear interest at 4% per annum in excess of the rate(s) of interest that would otherwise be in effect on that loan. All interest provided for herein shall be payable on demand and shall be calculated on the basis of a year consisting of 360 days.
SECTION 12. Broken Funding Surcharge. Notwithstanding any provision contained in any Supplement giving the Company the right to repay any loan prior to the date it would otherwise be due and payable, the Company agrees that in the event it repays any fixed rate balance prior to its scheduled due date or prior to the last day of the fixed rate period applicable thereto (whether such payment is made voluntarily, as a result of an acceleration, or otherwise), the Company will pay to CoBank a surcharge in an amount which would result in CoBank being made whole (on a present value basis) for the actual or imputed funding losses incurred by CoBank as a result thereof. Notwithstanding the foregoing, in the event any fixed rate balance is repaid as a result of the Company refinancing the loan with another lender or by other means, then in lieu of the foregoing, the Company shall pay to CoBank a surcharge in an amount sufficient (on a present value basis) to enable CoBank to maintain the yield it would have earned during the fixed rate period on the amount repaid. Such surcharges will be calculated in accordance with methodology established by CoBank (a copy of which will be made available to the Company upon request).
SECTION 13. Other Types of Credit. From time to time, CoBank may issue letters of credit or extend other types of credit to or for the account of the Company. In the event the parties desire to do so under the terms of this agreement, such extensions of credit may be set forth in any Supplement hereto and this agreement shall be applicable thereto.
SECTION 14. Miscellaneous. The Loan Documents are intended by the parties to be a complete and final expression of their agreement. No amendment, modification, or waiver of any provision nor any consent to any departure therefrom, shall be effective unless in writing and signed by CoBank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which granted. In the event this agreement is amended or restated, each such amendment and restatement shall be applicable to all Supplements hereto. This agreement shall continue in effect until all indebtedness or obligations of the Company shall have been paid, CoBank has no further commitment to extend credit to or for the account of the Company under any Supplement, and either party furnishes notice of termination to the other. Except to the extent governed by applicable federal law, this agreement and cash Supplement shall be governed by the haws of the State of Colorado, without reference to choice of law doctrine. Any provision of this agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent thereof
7
without invalidating the remaining provisions hereof or thereof. The Loan Documents shall be binding upon and inure to the benefit of the Company and CoBank and their respective successors and assigns, except that the Company may not assign or transfer its rights or obligations under the Loan Documents without the prior written consent of CoBank.
SECTION 15. Notices. All notices provided for herein shall be in writing (including facsimile) and shall be mailed or delivered to the Following addresses or facsimile numbers or to such other address or facsimile number as either party may specify by notice to the other: (a) If to CoBank, to Attention: Credit Information Services, P.O. Box 5101, Denver, Colorado 80217, Fax No: (303) 224-6101; and (b) if to the Company, to Attention: President, 100 Caspain Ave., Volga, South Dakota 57071, Fax No: (605) 627-5869.
SECTION 16. Taxes and Expenses. To the extent allowed by law, the Company agrees to pay all reasonable out-of-pocket costs and expenses (including the fees and expenses of counsel retained by CoBank) incurred by CoBank in connection with the origination, administration, collection, and enforcement of this agreement and the other Loan Documents, including, without limitation, all costs and expenses incurred in perfecting, maintaining, determining the priority of; and releasing any security for the Companys obligations hereunder or under any Supplement and any stamp, intangible, transfer, or similar tax payable in connection with this agreement or any other Loan Document.
SECTION 17. Notice of Completion. The Company irrevocably appoints CoBank as the Companys agent to file of record any notice of completion, cessation of labor or any other notice that CoBank deems necessary to file to protect any of the interests of CoBank. CoBank, however, shall have no duty to make such filing.
SECTION 18. Signs and Publicity. At CoBanks request, the Company will allow CoBank to post signs on the Property at the construction site for the purpose of identifying CoBank as the Construction Lender. At the request of CoBank, the Company will use its best efforts to identify CoBank as the construction lender in publicity concerning the project.
SECTION 19. Cooperation. The Company will cooperate at all times with CoBank in bringing about the timely completion of the Improvements, and the Company will resolve all disputes arising during the work of construction in a manner which will allow work to proceed expeditiously.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed by their duly authorized officers as of the date shown above.
COBANK, ACB |
SOUTH DAKOTA SOYBEAN
|
||||||
By: |
/s/ Teresa L. |
|
By: |
/s/ Rodney Christianson |
|
||
|
|
||||||
Title: |
Assistant Corporate Secretary |
|
Title: |
Chief Executive Officer |
|
||
8
Exhibit 10.3
REVOLVING TERM LOAN SUPPLEMENT
THIS SUPPLEMENT to the Master Loan Agreement dated June 17, 2004 (the MLA), is entered into as of June 17, 2004 between CoBANK, ACB (CoBank) and SOUTH DAKOTA SOYBEAN PROCESSORS, LLC, VOLGA, SOUTH DAKOTA (the Company), and amends and restates the Supplement dated February 26, 2002 and numbered BO5IT05D executed by South Dakota Soybean Processors and assumed by the Company.
SECTION 1. The Revolving Term Loan Commitment . On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company from the date hereof, up to and including March 20, 2011, in an aggregate principal amount not to exceed, at any one time outstanding, $18,400,000.00 less the amounts scheduled to be repaid during the period set forth below in Section 5 (the Commitment). Within the limits of the Commitment, the Company may borrow, repay and reborrow.
The Company may, in its sole discretion, elect to permanently reduce the amount of the Commitment by giving CoBank ten days prior written notice. Said election shall be made only if the Company is not in default at the time of the election and will remain in compliance with all financial covenants after such reduction. Any such reduction shall be treated as an early, voluntary reduction of the Commitment amount pursuant to the repayment schedule set out in Section 5.
SECTION 2. Purpose . The purpose of the Commitment is to provide working capital to the Company and to finance the construction of a soybean refinery.
SECTION 3. Term . Intentionally Omitted.
SECTION 4. Interest . The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:
(A) Weekly Quoted Variable Rate . At a rate per annum equal at all times to the rate of interest established by CoBank on the first Business day of each week. The rate established by CoBank shall be effective until the first Business Day of the next week. Each change in the rate shall be applicable to all balances subject to this option and information about the then current rate shall be made available upon telephonic request.
(B) Quoted Fixed Rate . At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to CoBank in its sole discretion in each instance.
The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the
foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank consents to one or more balances being fixed for a period or periods extending beyond the maturity date of the loans and the Commitment is not renewed, then each such balance shall be due and payable on the last day of its fixed rate period and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or it writing and must be received by 12:00 Noon Companys local time. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following mouth.
SECTION 5. Promissory Note . The Company promises to repay on the dates set forth below, the outstanding principal, if any, that is in excess of the available Commitment, which shall be reduced in scheduled periodic increments of $1,300,000.00 as follows:
Payment Date |
|
Reducing Commitment Amount* |
|
|
|
|
|
|
|
September 20, 2004 |
|
$ |
17,100,000.00 |
|
March 20, 2005 |
|
$ |
15,800,000.00 |
|
September 20, 2005 |
|
$ |
14,500,000.00 |
|
March 20, 2006 |
|
$ |
13,200,000.00 |
|
September 20, 2006 |
|
$ |
11,900,000.00 |
|
March 20, 2007 |
|
$ |
10,600,000.00 |
|
September 20, 2007 |
|
$ |
9,300,000.00 |
|
March 20, 2008 |
|
$ |
8,000,000.00 |
|
September 20, 2008 |
|
$ |
6,700,000.00 |
|
March 20, 2009 |
|
$ |
5,400,000.00 |
|
September 20, 2009 |
|
$ |
4,100,000.00 |
|
March 20, 2010 |
|
$ |
2,800,000.00 |
|
September 20, 2010 |
|
$ |
1,500,000.00 |
|
March 20, 2011 |
|
0.00 |
|
If any installment due date is not a day on which CoBank is open for business, then such payment shall be made on the next day on which CoBank is open for business. In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 4 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.
SECTION 6. Prepayment . Subject to the broken funding surcharge provision of the MLA, the Company may on one Business Days prior written notice prepay all or any portion of the loan(s). During the term of the Commitment, prepayments shall be applied to such balances, fixed or variable, as the Company shall specify. After the expiration of the term of the Commitment, prepayments shall, unless CoBank otherwise agrees, be applied to principal
2
installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.
SECTION 7. Commitment Fee . In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of 1/2 of 1% per annum (calculated on a 360 day basis), payable monthly in arrears by the 20th day following each month. Such fee shall be payable for each month (or portion thereof) occurring during the original or any extended term of the Commitment.
IN WITNESS WHEREOF , the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.
CoBANK, ACB |
SOUTH DAKOTA SOYBEAN PROCESSORS,
|
|||||
|
|
|||||
By: |
/s/ Teresa L. |
|
By: |
/s/ Rodney Christianson |
|
|
|
|
|||||
Title: |
Assistant Corporate Secretary |
|
Title: |
Chief Executive Officer |
|
|
3
Exhibit 10.4
STATUSED REVOLVING CREDIT SUPPLEMENT
THIS SUPPLEMENT to the Master Loan Agreement dated June 17, 2004 (the MLA), is entered into as of June 17, 2004 between CoBANK, ACB (CoBank) and SOUTH DAKOTA SOYBEAN PROCESSORS, LLC, VOLGA, SOUTH DAKOTA (the Company), and amends and restates the Supplement dated February 26, 2002 and numbered BO51S01F executed by South Dakota Soybean Processors and assumed by the Company.
SECTION 1. The Revolving Credit Facility . On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed, at any one time outstanding, the lesser of $16,000,000.00 (the Commitment), or the Borrowing Base (as calculated pursuant to the Borrowing Base Report attached hereto as Exhibit A). Within the limits of the Commitment, the Company may borrow, repay and reborrow.
SECTION 2. Purpose . The purpose of the Commitment is to finance the inventory and receivables referred to in the Borrowing Base Report.
SECTION 3. Term . The term of the Commitment shall be from the date hereof, up to and including March 3l, 2005, or such late date as CoBank may, in its sole discretion, authorize in writing.
SECTION 4. Interest. The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:
(A) Weekly Quoted Variable Rate . At a rate per annum equal at all times to the rate of interest established by CoBank on the first Business Day of each week. The rate established by CoBank shall be effective until the first Business Day of the next week. Each change in the rate shall be applicable to all balances subject to this option and information about the then current rate shall be made available upon telephonic request.
(B) Quoted Fixed Rate . At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to CoBank in its sole discretion in each instance.
The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank
consents to one or more balances being fixed for a period or periods extending beyond the maturity date of the loans and the Commitment is not renewed, then each such balance shall be due and payable on the last day of its fixed rate period and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or in writing and must be received by 12:00 Noon Companys local time. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month.
SECTION 5. Promissory Note . The Company promises to repay the unpaid principal balance of the loans on the last day of the term of the Commitment. In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loans at the times and in accordance with the provisions set forth in Section 4 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.
SECTION 6. Borrowing Base Reports, Etc . The Company agrees to furnish a Borrowing Base Report to CoBank at such times or intervals as CoBank may from time to time request. Until receipt of such a request, the Company agrees to furnish a Borrowing Base Report to CoBank within 45 days after each month end calculating the Borrowing Base as of the last day of the month for which the Report is being furnished. However, if no balance is outstanding hereunder on the last day of such month, then no Report need be furnished. Regardless of the frequency of the reporting, if at any time the amount outstanding under the Commitment exceeds the Borrowing Base, the Company shall immediately notify CoBank and repay so much of the loans as is necessary to reduce the amount outstanding under the Commitment to the limits of the Borrowing Base.
SECTION 7. Letters of Credit . In addition to loans and if agreeable to CoBank in its sole discretion in each instance, the Company may utilize the Commitment to open irrevocable letters of credit for its account. Each letter of credit shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder. The rights and obligations of the parties with respect to each letter of credit will be governed by the Reimbursement Agreement attached hereto as Exhibit B (which rights and obligations shall be in addition to the rights and obligations of the parties hereunder and under the MLA). Notwithstanding the foregoing or any other provision hereof, the maximum amount capable of being drawn under each letter of credit must be statused against the Borrowing Base in the same manner as if it were a loan, and in the event that (after repaying all loans) the maximum amount capable of being drawn under the letters of credit exceeds the Borrowing Base, then the Company shall immediately notify CoBank and pay to CoBank (to be held as cash collateral) an amount equal to such excess.
SECTION 8. Commitment Fee . In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of 1/4 of 1% per annum (calculated on a 360 day basis), payable monthly in arrears by the 20th day following each month. Such fee shall be payable for each month (or portion thereof) occurring during the original or any extended term of the
2
Commitment. For purposes of calculating the commitment fee only, the Commitment shall mean the dollar amount specified in Section 1 hereof, irrespective of the Borrowing Base.
SECTION 9. Amendment Fee . In consideration of the amendment, the Company agrees to pay to CoBank on the execution hereof a fee in the amount of $2,500.00.
IN WITNESS WHEREOF , the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.
CoBANK, ACB |
|
SOUTH DAKOTA SOYBEAN PROCESSORS,
|
||||
|
|
|
||||
|
|
|
||||
By: |
/s/ Teresa L. |
|
By: |
/s/ Rodney Christianson |
|
|
|
|
|
||||
Title: |
Assistant Corporate Secretary |
|
Title: |
Chief Executive Officer |
|
|
3
South Dakota Soybean Processors, LLC
BORROWING BASE REPORT
CoBank ACB
mm/dd/yy
Eligible Inventory |
|
Quantity |
|
Unit |
|
Unit
|
|
Market
|
|
Advance
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybeans * |
|
|
|
Bushels |
|
|
|
0 |
|
90 |
% |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean Meal ** |
|
|
|
Tons |
|
|
|
0 |
|
90 |
% |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean Oil |
|
|
|
Pounds |
|
|
|
0 |
|
90 |
% |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SoyOyl ** |
|
|
|
Pounds |
|
|
|
0 |
|
90 |
% |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refined Oil ** |
|
|
|
Pounds |
|
|
|
0 |
|
90 |
% |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean Hulls ** |
|
|
|
Tons |
|
|
|
0 |
|
90 |
% |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
0 |
|
* Valued at Bid Price FOB Volga, SD
** Valued at Market FOB Volga, SD
|
|
|
|
|
|
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade Receivables |
|
|
|
0-10 Days |
|
|
|
|
|
90 |
% |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-30 Days |
|
|
|
|
|
50 |
% |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over 30 days |
|
|
|
|
|
0 |
% |
0 |
|
|
|
|
|
|
|
|
|
0 |
|
|
|
0 |
|
A. Maximum Advance Values of Inventory & Receivables |
|
|
|
|
|
|
|
0 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Less: Any Amount owed for the purchase of Soybeans |
|
|
|
|
|
100 |
% |
0 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Borrowing Base |
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Outstanding Balance of Loan at mm/dd/yy |
|
|
|
|
|
|
|
|
|
0 |
|
||
|
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E. Excess / (Deficit) |
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0 |
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Note: If a deficit exists, please remit amount to CoBank unless remitted since period ending date
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Authorized Signature |
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Title |
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Date |
Exhibit B
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
In consideration of CoBank issuing one or more letters of credit (each a Credit) for the Companys account under the Supplement to which this agreement is attached (the Supplement), the Company agrees as follows:
1. The Company will pay to CoBank in United States currency and in immediately available funds the amount of each draft drawn or instrument paid under a Credit. In addition, the Company agrees to pay to CoBank such fee for issuing each Credit as CoBank shall prescribe, as well as all customary charges associated with the issuance of a Credit. If a Credit is payable in a foreign currency, the Company will pay to CoBank an amount in United States currency equivalent to CoBanks selling rate of exchange for that currency. In addition to the amounts set forth above, the Company shall pay to CoBank such amounts as CoBank shall determine arc necessary to compensate CoBank for any cost attributable to CoBank issuing or having outstanding any Credit resulting from the application of any taw or regulation concerning any reserve, assessment, capital adequacy or similar requirement relating to letters of credit, reimbursement agreements with respect thereto, or to similar liabilities or assets of banks, whether existing at the time of the issuance of a Credit or adopted thereafter. Each payment hereunder shall be payable on demand at the place and manner set forth in the Master Loan Agreement between the parties (the MLA) and with interest from the date of demand to the date paid at CoBanks National Variable Rate. The Company hereby authorizes CoBank to create a loan under the Supplement bearing interest at the variable rate set forth therein for any sums owing hereunder.
2. Neither CoBank nor any of its correspondents shall in any way be responsible for the performance by any beneficiary of its obligations to the Company nor for the form, sufficiency, correctness, genuineness, authority of the person signing, falsification or legal effect of any documents called for under a Credit if such documents on their face appear to be in order. In addition, CoBank and its correspondents may receive and accept or pay as complying with the terms of a Credit any drafts, documents, or certificates, otherwise in order, signed by any person purporting to be an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, or other legal representative of the party authorized under a Credit to draw or issue such instruments or other documents.
3. In the event the Credit is a commercial Credit, then, is addition to the other provisions hereof, the Company: (i) agrees to obtain or cause to be in existence insurance on any merchandise described in the Credit against fire and other usual risks and against any additional risks which CoBank may request, and (ii) authorizes and empowers CoBank to collect the amount due under any such insurance and apply the same against any of the Companys obligations to CoBank arising under the Credit or otherwise. In addition, whether the Credit is a commercial or a standby Credit, the Company represents and warrants that any required import, export or foreign exchange licenses or other governmental approvals relevant to the Credit and the merchandise described therein have been obtained and that the transactions contemplated thereby are not prohibited under any law, rule, regulation, order or the like, including the Foreign Assets Control Regulations of the U.S. Department of Treasury.
4. All directors and correspondence relating to a Credit are to be sent at the Companys risk and CoBank does not assume any responsibility for any inaccuracy, interruption, error, or delay in transmission or delivery by post, telegraph, cable or other electronic means, or for any inaccuracy of translation.
5. CoBank shall not be responsible for my act, error, neglect, default, omission, insolvency or failure in business of any of its correspondents, and any action taken or omitted by CoBank or its correspondents under or in connection with a Credit shall, if taken or omitted with honesty in fact, be binding on the Company and shall not put CoBank or its correspondents under any resulting liability to the Company. In no event shall CoBank be liable for special, consequential or punitive damages.
6. The Company will indemnify CoBank against and hold it harmless from all loss, damage, cost, and expense (including attorneys fees and expenses) arising out of (i) its issuance of or any other action taken by CoBank in connection with a Credit, other than loss or damage resulting from its gross negligence or willful misconduct, and (ii) claims or legal proceedings incident to the collection of amounts owed by the Company hereunder, or the enforcement of CoBanks rights or the rights of others under a Credit, including, without limitation, legal
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proceedings relating to any court order, injunction or other process or decree restraining or seeking to restrain CoBank from paying any amount under a Credit.
7. In the event (i) the Company fails to make any payment owing hereunder when the same shall become due and payable; (ii) any covenant or representation or warranty set forth herein is breached; (iii) the Commitment (as defined in the Supplement) expires prior to the expiration date of any Credit; or (iv) an Event of Default (as defined in the MLA) occurs under the MLA, then, in any such event, the amount of each Credit, together with any amounts payable by the Company in connection therewith, shall, at CoBanks option, become immediately due and payable. To the extent that any amount paid by the Company pursuant to this Section 7 shall not then be due under the terms of a Credit, such payment shall serve as security for the Companys obligation to indemnify CoBank for any amounts subsequently disbursed by CoBank pursuant to a Credit. Furthermore, upon the institution of any legal proceeding described is Section 6(ii) hereof, the Company will, on demand, assign and deliver to CoBank, as security for the Companys obligation to indemnify CoBank, cash collateral in an amount satisfactory to CoBank.
8. CoBank shall be fully protected in, and shall incur no liability to the Company for acting upon, any oral, telephonic, facsimile, cable or other electronic instructions which CoBank in good faith believes to have been given by any authorized person. CoBank may, at its option, use any means of verifying any instructions received by it and may also, at its option, refuse to act on any oral, telephonic, facsimile, cable or other electronic instructions or any part thereof, without incurring any responsibility for any loss, liability or expenses arising out of such refusal.
9. The Uniform Customs and Practice as most recently published by the International Chamber of Commerce (hereafter called the UCP) shall in all respects be deemed a part hereof as fully as if incorporated herein, and shall apply to the Credits. To the extent the UCP is inconsistent with the governing law set forth in the MLA, the UCP shall control.
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Exhibit 31
CERTIFICATION
I, Rodney Christianson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of South Dakota Soybean Processors, LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 16, 2004 |
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/s/ Rodney Christianson |
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Rodney Christianson |
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Chief Executive Officer (Principal Executive Officer) |
CERTIFICATION
I, Mark Hyde, certify that:
1. I have reviewed this quarterly report on Form 10-Q of South Dakota Soybean Processors, LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 16, 2004 |
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/s/ Mark Hyde |
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Mark Hyde |
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Controller (Principal Accounting Officer) |
Exhibit 32
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of South Dakota Soybean Processors, LLC (the Company) on Form 10-Q for the period ending June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the Report), each of the undersigned, Rodney G. Christianson and Mark Hyde, the Chief Executive Officer (Principal Executive Officer) and Controller (Principal Accounting Officer), respectively, of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of June 30, 2004 (the last date of the period covered by the Report).
Dated: August 16, 2004 |
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By |
/s/ Rodney G. Christianson |
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Rodney G. Christianson |
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Chief Executive Officer |
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By |
/s/ Mark Hyde |
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Mark Hyde |
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Controller |
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