Newsletter June 2014 - Homeland Energy Solutions

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1 Homeland Energy Solutions 2779 Highway 24 Lawler, IA 52154 563-238-5555 May/June 2014 From the President Annual meeting reviews Near-record ethanols impact on ag net income, but Approximately 275 Homeland agriculture. But there are obstacles for bittersweet Energy Solutions members were able to see just what an impact the ethanol to maintaining that positive impact. The EPAs proposal for changes to reasons industry has had on American agri- the Renewable Fuel Standard for culture during the companys annual 2014 may reduce the required us- While, as you will read in Dave membership meeting April 8. age of renewable fuels, potentially Finkes comments on Page 2, Home- CFO Dave Finke shared financial raising pump prices by $7 million, land Energy has enjoyed near-record net income in the first quarter, and the results for 2013, including a net in- shutting down ethanol plants, hurt- positive financial results continue into come of $28,233,908 or $359.48 per ing corn prices and land values, and the second quarter, the reasons for share, of which $172.44 was taxable. increasing gasoline pollution by as that record are not entirely positive. Plant Manager Kevin Howes also much as 5 million metric tons, ac- Two key components increased shared that in five years of produc- cording to Fuels America and ACE. demand and reduced supply were tion (since April 4, 2009), HES has The EPAs 2014 goal is expected to be both impacted through the winter produced 646 million gallons of announced sometime in June. months by the railroad industrys denatured ethanol, 1.7 million tons Another challenge facing the inability to move all of the freight of DDGS, and more than 78 million industry is to bring higher ethanol on its lines. This left fuel retailers, pounds of distillers corn oil, from 226 content fuels to the people and cars especially on the coasts, often short million bushels of corn. that can use them, by increasing on ethanol stocks and willing to pay Company President and CEO Walter outlets for E85 in the states with the top dollar to meet their requirements. Wendland outlined the current status most flex fuel cars and addressing At the same time, some ethanol of the industry, along with highlight- roadblocks to the introduction of E15 plants stopped or reduced production ing some of the following impacts: across the country. because they were unable to get ship- Corn prices which were below the cost Also at the meeting, Mathew ments out on a timely manner, cutting of production from 1995 to 2006; have Driscoll was re-elected to the HES overall supplies. since exceeded the cost of production. Board of Directors, with Randy Conditions have now improved Since 2000, the overall value HOMELAND Bruess elected ENERGY to his first three-year slightly and here at Homeland we of crops in the United States has SOLUTIONS term on the board. havent had to slow down signifi- increased 135%, the value of live- cantly since February, but we are still stock increased 82%, sitting on more inventory than we and net farm income would like. 2013 2012 2011 2010 From an input standpoint, after i n c r e a s e d 1 5 8 % . Revenue $400,211,785 $359,242,777 $419,312,560 $254,480,111 a late spring, it appears that plant- Government payments Gross Profit 31,453,619 3,178,041 40,146,487 15,168,885 ing is finally complete in the area to farmers decreased Operating Income 28,073,153 419,143 37,382,118 12,970,571 around Homeland. We are hoping that from nearly $9 billion Net Income 28,233,908 494,765 36,353,768 11,030,809 2014 will be a better year, following in 2006 to less than $3 Net Income/unit $359.48 $5.47 $401.94 $120.63 drought in 2012 and prevented plant- billion since then. Distributions/unit $131.00 $133.00 $79.00 $68.00 ing due to spring rains in 2013. Obviously, ethanol Taxable Income/unit $172.44 $- $139.27 $- Walter Wendland, CEO is good for American

2 Page 2 Homeland Energy Solutions May/June 2014 First quarter among companys best; another distribution to members coming During the first quarter of 2014, Homeland Energy I am happy to announce that the HES Board of Directors Solutions, LLC (HES) produced and sold approximately recently declared a $52/unit distribution to members as 30 million gallons of ethanol, 83 thousand tons of distillers of May 21, 2014. These funds will be paid to grains and 6 million pounds of corn oil. This type of plant members May 30th. performance combined with favorable operating margins Since inception, HES has now paid $613/unit in distri- to make the first three months of 2014 some of the most butions. In terms of total dollars, I am proud to say that profitable in company history. Reported net profits thus far the company has been able to pay more than $46.8 million in 2014 are just shy of $14.7 million, or roughly $227.54 back to its members. per outstanding share. Highlights for the fiscal quarter are listed below. A HES has made a conscientious effort to share the more detailed version of the financial results is currently financial success of 2014 with its members in the form available on the HES or SEC website. of distributions. A $150/unit distribution was declared to David Finke, members as of March 19, 2014 and paid to shareholders Chief Financial Officer Homeland Energy Solutions shortly before the companys annual meeting. In addition, INCOME STATEMENT If you would like Qtr Ended Qtr Ended Qtr Ended to receive future 03/31/14 03/31/13 03/31/12 newsletters by Revenue $ 81,752,306 97,975,795 92,011,614 email instead of Cost of Goods Sold 66,312,455 94,817,826 89,644,605 mail, please send Operating Expenses 1,002,759 717,414 772,408 your email Operating Income 14,437,092 2,440,555 1,594,601 address to Other Income (Expenses) 258,271 37,742 51,058 [email protected] Net Income $ 14,695,363 2,478,297 1,645,659 Thanks. Net Income Per Unit $ 227.54 27.40 18.20 BALANCE SHEET 3/31/14 12/31/13 9/30/13 6/30/13 3/31/13 Current Assets $ 70,822,389 56,456,056 31,975,247 42,690,536 22,1925,876 Property & Equipment 111,262,493 113,502,166 115,738,869 118,057,856 118,483,452 Other Assets 4,311,018 4,119,90 4,130,067 3,722,825 3,488,115 Total Assets $ 186,395,900 174,078,126 151,844,183 164,471,217 144,167,443 Current Liabilities $ 50,114,591 39,627,710 36,789,472 4,478,824 4,713,108 Long-term Liabilities 12,126,806 15,303,526 102,421 20,102,421 7,602,421 Total Members Equity 124,154,503 119,146,890 114,952,290 139,889,972 131,851,914 Total Liabilities & $ 186,395,900 174,078,126 151,844,183 164,471,217 144,167,443 Equity Book Value per $ 1,922 1,845 1,780 1,547 1,458 membership unit

3 May/June 2014 Homeland Energy Solutions Page 3 Ethanol OKd for Iowa enhances E15 credit for retailers JOHNSTON, IOWA The Iowa We commend Gov. Branstad, Lt. export marketing Renewable Fuels Association (IRFA) Gov. Reynolds, and the entire Iowa fund support in May joined Iowa Governor Terry legislature for standing beside re- Homeland Energy Solutions Presi- Branstad, Lt. Governor Kim Reyn- newable fuels, protecting Iowa jobs, dent and CEO Walter Wendland is olds and several renewable fuels and safeguarding consumer access to one of eight people who will help and agriculture industry leaders at low-cost, homegrown biofuels. We guide development of ethanols in- POET Biorefining Coon Rapids to also extend a sincere thank you to the clusion in the US Department of Ag- celebrate the signing of Senate File 17 companies and organizations that ricultures Market Access Programs. 2344. This bill helps move Iowas worked together in support of S.F. The industry was recently designated renewable fuels industry forward dur- 2344. The success of this bill was as an agricultural commodity, mak- ing a time of unprecedented federal truly a team effort. ing it eligible for the MAP program policy uncertainty by extending the Renewable fuels producers are through an affiliation with the US states biodiesel production tax credit currently facing unparalleled fed- Grains Council. and enhancing the states E15 retailer eral policy uncertainty, and S.F. Wendland is representing produc- tax credit. 2344 helps to ensure Iowa preserves ers through the Renewable Fuels Im proud to sign this renewable its biofuels leadership, stated IRFA Association; other committee mem- fuels bill that received such wide, bi- Executive Director Monte Shaw. bers include staff representative partisan support from the entire Iowa Consumers deserve low-cost, clean- from RFA and Growth Energy and legislature and promotes E15, bio- burning fueling options, and this USDA staff. Members of the group diesel and bio-butanol stated Iowa legislation will help ensure that Iowa were part of a recent trade mission to China, which along with places like Gov. Terry Branstad. I have been a motorists can continue to benefit from India and Japan, could be substantial staunch supporter of protecting Iowa competition at the pump, while also users of ethanol in the future. jobs and Iowa motorists access to protecting Iowa biodiesel jobs. There is a lot of potential there, cleaner, locally-produced renewable With biofuels producers facing a but it could take some time to break fuels, and this bill does exactly that. precarious federal policy landscape, down the barriers, Wendland says. Iowa is the number one renew- S.F. 2344 protects Iowas renewable However, ethanols low cost, along able fuels producing state, and the fuels industry by extending the states with increasing awareness in those Governor and I are happy to support biodiesel production tax credit that is countries of environmental concerns, legislation that helps continue this set to expire at the end of this year, makes it a suitable fuel to feed the leadership, stated Lt. Gov. Kim and enhancing the states E15 retailer growing demand. Reynolds. Renewable fuels like tax credit to help alleviate extra costs Under MAP, the USDAs Foreign ethanol and biodiesel are a vital part to Iowa retailers who want to offer Agricultural Service partners with of Iowas economy, and S.F. 2344 E15 as a registered fuel during the US agricultural trade associations, will help ensure they continue to be summer driving season. The bill also cooperatives, state regional trade for years to come. updates Iowa Code to define biobu- groups and small businesses to share Today is a great day for Iowas tanol as a renewable fuel option for the costs of overseas marketing and renewable fuels community, stated Iowans. promotional activities that help build IRFA Policy Director Grant Menke. commercial export markets for U.S. agricultural products and commodi- ties. Ethanol projects now also can be considered for USDAs Foreign Mar- ket Development Program, which focuses on trade servicing and trade capacity building by helping to cre- ate, expand and maintain long-term export markets for U.S. agricultural products.

4 Page 4 Homeland Energy Solutions May/June 2014 Homeland Energy Solutions Board of Directors HES team earns safety awards Pat Boyle (elected), Chairman Maintaining our Freedom to Op- received the Award of Excellence for Maurice Hyde (elected), Vice erate is more than an expectation, being in the top 10% of the group. Chairman it is a value within the entire HES HES received the Canadian Christine Marchand (elected), team. If safety and environmental Pacific Safe Shipper Award for the Secretary compliance is not at the forefront fifth year in a row. To qualify for this Randy Bruess (elected) of our actions and the decisions we award, a facility must have shipped Mathew Driscoll (elected) make on a daily basis, OSHA, DNR, more than 500 freight carload ship- Keith Eastman (elected) IDNR, or the EPA could step in and ments of regulated chemicals or *Steve Eastman (appointed by shutdown the facility and thus take hazardous material on the CP railway Steve Retterath) away this freedom. without a non-accidental release in- Leslie Hansen (appointed by Recently, our team was recognized cident in the previous calendar year. Golden Grain Energy) for its safety efforts by three parties: HES was awarded a Hazard *Ed Hatten (appointed by HES received the Award of Merit Control Excellence Award from the Steve Retterath) for being in the top 25% (12th to be Iowa Illinois Safety Council for its Chad Kuhlers (elected) exact) of the 67-plant member group efforts in not only identifying po- Bernard Retterath (elected) from ERI Solutions. This is the third tential hazards but also successfully *Still serving on the board time in the past 4 years HES has mitigating them. despite repurchase received this award. In 2013, HES Kyle Guertin, EH&S Coordinator agreement with Retterath Management Team Meet your team members Walter Wendland, President & CEO Becky Woller, Financial Accountant David Finke, Q. What do you like most about tax industries. Chief Financial Officer working at Homeland? Q. Tell us about Stan Wubbena, Grain A. The first thing that impressed your family. Merchandiser me about Homeland, and the ethanol A. Most of Kevin Howes, Plant Manager industry in general, is how great it is my family lives for local economies. We are decreas- in north-central 2779 Highway 24 ing dependence on foreign oil while Wisconsin, so I Lawler, IA 52154 using a renewable resource. I was travel there often. 563-238-5555 also impressed that we use the entire My son, Uriah, kernel of corn in the process. What is 15 and will be This newsletter contains forward- isnt used for ethanol is made into a sophomore at looking statements. We undertake no corn oil and feed by-products that is Sumner-Fredericksburg High School. responsibility to update any forward sold back to farmers or turned into My daughter, Tori, is 13 and will be a looking statement. When used, the more bio-fuels. It is an amazing pro- freshman. I keep busy going to their words believe, hope, expect, cess! Homeland specifically is a great activities including cross country, anticipate and similar expressions company to work for because of its volleyball, speech and music. are intended to identify forward-look- employee support. Homeland is very Q. Any hobbies or interests? ing statements. Readers should not family-oriented, and we really rally A. Ive been involved with the place undue reliance on any forward- around each other in times of need. Fredericksburg Friends of the Library looking statements and recognize that the statements are not predictions of Q. Tell us about your background. for four years and as treasurer for the actual future results, which could and A. I was born and raised in north- last three years. I am treasurer for likely will differ materially from those central Wisconsin and graduated the Sumner-Fredericksburg Friends anticipated in the forward-looking from University of WisconsinSte- of Music. This winter I will finish statements due to risks and uncertain- vens Point with a bachelor of science classes for my MBA with a specialty ties, including those described in our degree in managerial accounting and in accounting. I am also a substitute Securities and Exchange Commission business administration. I have held pianist at my church and enjoy trav- filings, copies of which are available various accounting jobs in the bank- eling and cheering on my favorite through our web site or upon request. ing, medical dictation systems, pay- sports teams. roll processing, and personal income [email protected]

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