Sales Commitments – At September 30, 2018, the Company had entered into sales contracts with its major customers to sell certain quantities of ethanol and co-products. The Company had open ethanol indexed-price contracts for 199,732,000 gallons of ethanol as of September 30, 2018 and open fixed-price ethanol sales contracts totaling $74,502,000 as of September 30, 2018. The Company had open fixed-price co-product sales contracts totaling $53,365,000 and open indexed-price co-product sales contracts for 736,000 tons as of September 30, 2018. These sales contracts are scheduled to be completed over the next twelve months.

Purchase Commitments – At September 30, 2018, the Company had indexed-price purchase contracts to purchase 9,329,000 gallons of ethanol and fixed-price purchase contracts to purchase $5,614,000 of ethanol from its suppliers. The Company had fixed-price purchase contracts to purchase $13,038,000 of corn from its suppliers as of September 30, 2018. These purchase commitments are scheduled to be satisfied over the next twelve months.

Property Tax Assessment – In September 2016, the Company signed an agreement to finance and construct a 5 megawatt solar project at its Madera facility. The amount financed is for up to $10,000,000, to be amortized over twenty years as part of the facility’s property tax assessments. As of September 30, 2018, the Company had incurred approximately $9,600,000 in project costs, which is recorded in construction in progress and in other liabilities in the accompanying consolidated balance sheets. The Company expects to pay approximately an additional $900,000 per year in connection with its property tax payments, which includes an interest component based upon a 5.6% interest rate on the outstanding balance of the assessment.

Litigation – General – The Company is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related matters, environmental regulations and others. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. While there can be no assurances, the Company does not expect that any of its pending legal proceedings will have a material impact on the Company’s financial condition or results of operations.

The Company assumed certain legal matters which were ongoing at July 1, 2015, the date of the Company’s acquisition of Aventine Renewable Energy Holdings, Inc. (“PE Central”). Among them were lawsuits between Aventine Renewable Energy, Inc. (now known as Pacific Ethanol Pekin, LLC) and Glacial Lakes Energy, Aberdeen Energy and Redfield Energy, together, the “Defendants,” in which PE Pekin sought damages for breach of termination agreements that wound down ethanol marketing arrangements between PE Pekin and each of the Defendants. In February and March 2017, the Company and the Defendants entered into settlement agreements and the Defendants paid in cash to the Company $3.9 million in final resolution of these matters. The Company did not assign any value to the claims against the Defendants in its accounting for the PE Central acquisition as of July 1, 2015. The Company recorded a gain, net of legal fees, of $3.6 million upon receipt of the cash settlement and recognized the gain as a reduction to selling, general and administrative expenses in the consolidated statements of operations for the nine months ended September 30, 2017.