GPRE Q1 2019 Form 10-Q



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________



FORM 10-Q



Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934



For the Quarterly Period Ended March 31, 2019



Commission File Number 001-32924



Green Plains Inc.

(Exact name of registrant as specified in its charter)





 

Iowa

84-1652107

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)



 

1811 Aksarben Drive, Omaha, NE 68106

(402) 884-8700

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)



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   No



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).



Yes   No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,  a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



 

Large accelerated filer      

Accelerated filer 



 

Non-accelerated filer     



Smaller reporting company 

Emerging growth company 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 



Yes   No



Securities registered pursuant to Section 12(b) of the Act:





 

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

GPRE

The Nasdaq Stock Market LLC



The number of shares of common stock, par value $0.001 per share, outstanding as of May 6, 2019, was 41,386,278 shares.

 

 


 

 

TABLE OF CONTENTS





 

 



 

 



Page

Commonly Used Defined Terms

2

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

 



 

 



Consolidated Balance Sheets 

3



 

 



Consolidated Statements of Operations

4



 

 



Consolidated Statements of Comprehensive Income 

5



 

 



Consolidated Statements of Cash Flows 

6



 

 



Notes to Consolidated Financial Statements 

8



 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32



 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk 

43



 

 

Item 4.

Controls and Procedures

45



 

 



 

 

PART II – OTHER INFORMATION



 

 

Item 1.

Legal Proceedings

46



 

 

Item 1A.

Risk Factors

46



 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46



 

 

Item 3.

Defaults Upon Senior Securities

46



 

 

Item 4.

Mine Safety Disclosures

46



 

 

Item 5.

Other Information

46

 

 

 

Item 6.

Exhibits

47



 

 

Signatures

48



 

1

 


 

 







Commonly Used Defined Terms



The abbreviations, acronyms and industry terminology used in this quarterly report are defined as follows:



Green Plains Inc., Subsidiaries, and Partners:





 

Green Plains; the company

Green Plains Inc. and its subsidiaries

BioProcess Algae

BioProcess Algae LLC

Fleischmann’s Vinegar

Fleischmann’s Vinegar Company, Inc.

Green Plains Cattle

Green Plains Cattle Company LLC

Green Plains Grain

Green Plains Grain Company LLC

Green Plains Partners; the partnership

Green Plains Partners LP

Green Plains Processing

Green Plains Processing LLC and its subsidiaries

Green Plains Trade

Green Plains Trade Group LLC



Accounting Defined Terms:





 

ASC

Accounting Standards Codification

Bgy

Billion gallons per year

EBITDA

Earnings before interest, income taxes, depreciation and amortization

EPS

Earnings per share

Exchange Act

Securities Exchange Act of 1934, as amended

GAAP

U.S. Generally Accepted Accounting Principles

LIBOR

London Interbank Offered Rate

LTIP

Long-Term Incentive Plan

SEC

Securities and Exchange Commission

VIE

Variable interest entity



Industry Defined Terms:





 

CAFE

Corporate Average Fuel Economy

D.C.

District of Columbia

E10

Gasoline blended with up to 10% ethanol by volume

E15

Gasoline blended with up to 15% ethanol by volume

E85

Gasoline blended with up to 85% ethanol by volume

EIA

U.S. Energy Information Administration

EPA

U.S. Environmental Protection Agency

MmBtu

Million British Thermal Units

Mmg

Million gallons

MTBE

Methyl tertiary-butyl ether

RFS II

Renewable Fuels Standard II

RIN

Renewable identification number

RVO

Renewable volume obligation

U.S.

United States

USDA

U.S. Department of Agriculture











2

 


 

 

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements.

GREEN PLAINS INC. AND SUBSIDIARIES

 

 CONSOLIDATED BALANCE SHEETS



(in thousands, except share amounts)









 

 

 

 

 



March 31,
2019

 

December 31,
2018



(unaudited)

 

 

 

ASSETS

Current assets

 

 

 

 

 

Cash and cash equivalents

$

214,068 

 

$

251,683 

Restricted cash

 

59,174 

 

 

66,512 

Accounts receivable, net of allowances of $204 and $194, respectively

 

66,566 

 

 

100,361 

Income taxes receivable

 

12,260 

 

 

12,418 

Inventories

 

707,025 

 

 

734,883 

Prepaid expenses and other

 

12,290 

 

 

14,470 

Derivative financial instruments

 

11,568 

 

 

26,315 

Total current assets

 

1,082,951 

 

 

1,206,642 

Property and equipment, net of accumulated depreciation
and amortization of $448,494 and $430,405, respectively

 

879,046 

 

 

886,576 

Operating lease right-of-use assets

 

56,516 

 

 

 -

Goodwill

 

34,689 

 

 

34,689 

Deferred income taxes

 

7,634 

 

 

 -

Other assets

 

86,744 

 

 

88,525 

Total assets

$

2,147,580 

 

$

2,216,432 



 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

 

 

 

 

 

Accounts payable

$

103,729 

 

$

156,901 

Accrued and other liabilities

 

46,777 

 

 

58,973 

Derivative financial instruments

 

15,951 

 

 

24,776 

Operating lease current liabilities

 

17,219 

 

 

 -

Short-term notes payable and other borrowings

 

526,523 

 

 

538,243 

Current maturities of long-term debt

 

55,740 

 

 

54,807 

Total current liabilities

 

765,939 

 

 

833,700 

Long-term debt

 

301,033 

 

 

298,190 

Deferred income taxes

 

5,845 

 

 

10,123 

Operating lease long-term liabilities

 

42,419 

 

 

 -

Other liabilities

 

8,537 

 

 

11,430 

Total liabilities

 

1,123,773 

 

 

1,153,443 



 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 



 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Common stock, $0.001 par value; 75,000,000 shares authorized;
46,922,257 and 46,637,549 shares issued, and 41,386,683
and 41,101,975 shares outstanding, respectively

 

47 

 

 

47 

Additional paid-in capital

 

701,673 

 

 

696,222 

Retained earnings

 

277,082 

 

 

324,728 

Accumulated other comprehensive loss

 

(12,523)

 

 

(16,016)

Treasury stock, 5,535,574 shares

 

(58,162)

 

 

(58,162)

Total Green Plains stockholders' equity

 

908,117 

 

 

946,819 

Noncontrolling interests

 

115,690 

 

 

116,170 

Total stockholders' equity

 

1,023,807 

 

 

1,062,989 

Total liabilities and stockholders' equity

$

2,147,580 

 

$

2,216,432 



See accompanying notes to the consolidated financial statements.

3

 


 

 

GREEN PLAINS INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS



(unaudited and in thousands, except per share amounts)









 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

Revenues

 

 

 

 

 

Product revenues

$

640,010 

 

$

1,043,659 

Service revenues

 

2,305 

 

 

1,628 

Total revenues

 

642,315 

 

 

1,045,287 



 

 

 

 

 

Costs and expenses

 

 

 

 

 

Cost of goods sold (excluding depreciation and amortization expenses reflected below)

 

635,575 

 

 

988,335 

Operations and maintenance expenses

 

6,864 

 

 

8,400 

Selling, general and administrative expenses

 

20,646 

 

 

26,003 

Depreciation and amortization expenses

 

19,235 

 

 

26,474 

Total costs and expenses

 

682,320 

 

 

1,049,212 

Operating loss

 

(40,005)

 

 

(3,925)



 

 

 

 

 

Other income (expense)

 

 

 

 

 

Interest income

 

1,263 

 

 

637 

Interest expense

 

(14,427)

 

 

(22,128)

Other, net

 

838 

 

 

(66)

Total other expense

 

(12,326)

 

 

(21,557)

Loss before income taxes

 

(52,331)

 

 

(25,482)

Income tax benefit

 

14,460 

 

 

6,027 

Net loss

 

(37,871)

 

 

(19,455)

Net income attributable to noncontrolling interests

 

4,928 

 

 

4,662 

Net loss attributable to Green Plains

$

(42,799)

 

$

(24,117)



 

 

 

 

 

Earnings per share:

 

 

 

 

 

Net loss attributable to Green Plains - basic

$

(1.06)

 

$

(0.60)

Net loss attributable to Green Plains - diluted

$

(1.06)

 

$

(0.60)

Weighted average shares outstanding:

 

 

 

 

 

Basic

 

40,315 

 

 

40,164 

Diluted

 

40,315 

 

 

40,164 



 

 

 

 

 

Cash dividend declared per share

$

0.12 

 

$

0.12 



See accompanying notes to the consolidated financial statements.



4

 


 

 

GREEN PLAINS INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



(unaudited and in thousands)









 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

Net loss

$

(37,871)

 

$

(19,455)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

Unrealized gains (losses) on derivatives arising during the period, net of tax benefit (expense) of $2,080 and ($5,116), respectively

 

(6,883)

 

 

17,150 

Reclassification of realized losses (gains) on derivatives, net of tax benefit (expense) of ($3,140) and $180, respectively

 

10,376 

 

 

(603)

Total other comprehensive income, net of tax

 

3,493 

 

 

16,547 

Comprehensive loss

 

(34,378)

 

 

(2,908)

Comprehensive income attributable to noncontrolling interests

 

4,928 

 

 

4,662 

Comprehensive loss attributable to Green Plains

$

(39,306)

 

$

(7,570)





See accompanying notes to the consolidated financial statements.



5

 


 

 

GREEN PLAINS INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS



(unaudited and in thousands)







 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

Net loss

$

(37,871)

 

$

(19,455)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

19,235 

 

 

26,474 

Amortization of debt issuance costs and debt discount

 

3,570 

 

 

3,604 

Deferred income taxes

 

(12,927)

 

 

(12,020)

Stock-based compensation

 

2,485 

 

 

2,439 

Undistributed equity loss of affiliates

 

74 

 

 

137 

Other

 

(81)

 

 

 -

Changes in operating assets and liabilities before effects of business combinations and dispositions:

 

 

 

 

 

Accounts receivable

 

30,811 

 

 

(814)

Inventories

 

28,272 

 

 

54,103 

Derivative financial instruments

 

10,474 

 

 

7,472 

Prepaid expenses and other assets

 

2,534 

 

 

618 

Accounts payable and accrued liabilities

 

(66,391)

 

 

(114,709)

Current income taxes

 

(1,564)

 

 

11,678 

Other

 

596 

 

 

(618)

Net cash used in operating activities

 

(20,783)

 

 

(41,091)



 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment, net

 

(10,809)

 

 

(7,352)

Proceeds from the sale of assets, net

 

3,155 

 

 

 -

Acquisition of businesses, net of cash acquired

 

 -

 

 

(1,006)

Investments in unconsolidated subsidiaries

 

 -

 

 

(14)

Other investing activities

 

 -

 

 

7,500 

Net cash used in investing activities

 

(7,654)

 

 

(872)



 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from the issuance of long-term debt

 

30,600 

 

 

24,400 

Payments of principal on long-term debt

 

(29,781)

 

 

(23,630)

Proceeds from short-term borrowings

 

637,057 

 

 

1,010,077 

Payments on short-term borrowings

 

(648,779)

 

 

(1,002,664)

Payments of cash dividends and distributions

 

(10,334)

 

 

(10,251)

Proceeds from disgorgement of shareholder short-swing profits

 

6,699 

 

 

 -

Payments of loan fees

 

 -

 

 

(254)

Payments related to tax withholdings for stock-based compensation

 

(1,978)

 

 

(2,890)

Proceeds from exercise of stock options

 

 -

 

 

50 

Net cash used in financing activities

 

(16,516)

 

 

(5,162)



 

 

 

 

 

Net change in cash, cash equivalents and restricted cash

 

(44,953)

 

 

(47,125)

Cash, cash equivalents and restricted cash, beginning of period

 

318,195 

 

 

312,360 

Cash, cash equivalents and restricted cash, end of period

$

273,242 

 

$

265,235 



 

 

 

 

 

Continued on the following page

 

 

 

 

 

6

 


 

 

GREEN PLAINS INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



(unaudited and in thousands)













 

 

 

 

 

Continued from the previous page

 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

Reconciliation of total cash, cash equivalents and restricted cash:

 

 

 

 

 

Cash and cash equivalents

$

214,068 

 

$

240,964 

Restricted cash

 

59,174 

 

 

24,271 

Total cash, cash equivalents and restricted cash

$

273,242 

 

$

265,235 



 

 

 

 

 

Supplemental disclosures of cash flow:

 

 

 

 

 

Cash paid (refunded) for income taxes

$

29 

 

$

(4,592)

Cash paid for interest

$

11,923 

 

$

19,499 







See accompanying notes to the consolidated financial statements.

7

 


 

 

GREEN PLAINS INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(unaudited)



1.  BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



References to the Company



References to “Green Plains” or the “company” in the consolidated financial statements and in these notes to the consolidated financial statements refer to Green Plains Inc., an Iowa corporation, and its subsidiaries.



Consolidated Financial Statements



The consolidated financial statements include the company’s accounts and all significant intercompany balances and transactions are eliminated. Unconsolidated entities are included in the financial statements on an equity basis. The company owns a 49.1% limited partner interest and a 2.0% general partner interest in Green Plains Partners LP. Public investors own the remaining 48.9% limited partner interest in the partnership. The company determined that the limited partners in the partnership with equity at risk lack the power, through voting rights or similar rights, to direct the activities that most significantly impact partnership’s economic performance; therefore, the partnership is considered a variable interest entity. The company, through its ownership of the general partner interest in the partnership, has the power to direct the activities that most significantly affect economic performance and is obligated to absorb losses and has the right to receive benefits that could be significant to the partnership. Therefore, the company is considered the primary beneficiary and consolidates the partnership in the company’s financial statements. The assets of the partnership cannot be used by the company for general corporate purposes. The partnership’s consolidated total assets as of March 31, 2019 and December 31, 2018, excluding intercompany balances, are $102.8 million and $67.3 million, respectively, and primarily consist of property and equipment, operating lease right-of-use assets and goodwill. The partnership’s consolidated total liabilities as of March 31, 2019 and December 31, 2018, excluding intercompany balances, are $194.3 million and $152.9 million, respectively, which primarily consist of long-term debt as discussed in Note 8 – Debt and operating lease liabilities. The liabilities recognized as a result of consolidating the partnership do not represent additional claims on our general assets. The company also owns a 90.0% interest in BioProcess Algae, a joint venture formed in 2008, and consolidates their results in its consolidated financial statements.



The accompanying unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Because they do not include all of the information and notes required by GAAP, the consolidated financial statements should be read in conjunction with the company’s annual report on Form 10-K for the year ended December 31, 2018, as filed with the SEC on February 20, 2019.



The unaudited financial information reflects adjustments, which are, in the opinion of management, necessary for a fair presentation of results of operations, financial position and cash flows for the periods presented. The adjustments are normal and recurring in nature, unless otherwise noted. Interim period results are not necessarily indicative of the results to be expected for the entire year.



Reclassifications



Certain prior year amounts were reclassified to conform to the current year presentation. These reclassifications did not affect total revenues, costs and expenses, net loss or stockholders’ equity.



Use of Estimates in the Preparation of Consolidated Financial Statements



The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The company bases its estimates on historical experience and assumptions it believes are proper and reasonable under the circumstances and regularly evaluates the appropriateness of its estimates and assumptions. Actual results could differ from those estimates. Key accounting policies, including but not limited to those relating to revenue recognition, depreciation of property and equipment, carrying value of intangible assets, operating leases, impairment of long-lived assets and goodwill, derivative financial instruments, accounting for income taxes and assets acquired and

8

 


 

 

liabilities assumed in acquisitions, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements.



Description of Business



The company operates within four business segments: (1) ethanol production, which includes the production of ethanol, distillers grains and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities, (3) food and ingredients, which includes cattle feeding and food-grade corn oil operations and included vinegar production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018 and (4) partnership, which includes fuel storage and transportation services.



Cash and Cash Equivalents



Cash and cash equivalents includes bank deposits as well as short-term, highly liquid investments with original maturities of three months or less.



Restricted Cash



The company has restricted cash, which can only be used for funding letters of credit or for payment towards a revolving credit agreement. Restricted cash also includes cash margins and securities pledged to commodity exchange clearinghouses and at times, funds in escrow related to acquisition and disposition activities. To the degree these segregated balances are cash and cash equivalents, they are considered restricted cash on the consolidated statements of cash flows.



Revenue Recognition



The company recognizes revenue when obligations under the terms of a contract with a customer are satisfied. Generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects concurrent with revenue-producing activities are excluded from revenue.



Sales of ethanol, distillers grains, corn oil, natural gas and other commodities by the company’s marketing business are recognized when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs with the transfer of control of products or services. Revenues related to marketing for third parties are presented on a gross basis as the company controls the product prior to the sale to the end customer, takes title of the product and has inventory risk. Unearned revenue is recorded for goods in transit when the company has received payment but control has not yet been transferred to the customer. Revenues for receiving, storing, transferring and transporting ethanol and other fuels are recognized when the product is delivered to the customer.



The company routinely enters into physical-delivery energy commodity purchase and sale agreements. At times, the company settles these transactions by transferring its obligations to other counterparties rather than delivering the physical commodity. Energy trading transactions are reported net as a component of revenue. Revenues include net gains or losses from derivatives related to products sold while cost of goods sold includes net gains or losses from derivatives related to commodities purchased. Revenues also include realized gains and losses on related derivative financial instruments and reclassifications of realized gains and losses on cash flow hedges from accumulated other comprehensive income or loss.



Sales of products, including agricultural commodities, cattle and vinegar, are recognized when control of the product is transferred to the customer, which depends on the agreed upon shipment or delivery terms. Revenues related to grain merchandising are presented gross and include shipping and handling, which is also a component of cost of goods sold. Revenues from grain storage are recognized when services are rendered.



A substantial portion of the partnership revenues are derived from fixed-fee commercial agreements for storage, terminal or transportation services. The partnership recognizes revenue upon transfer of control of product from its storage tanks and fuel terminals, when railcar volumetric capacity is provided, and as truck transportation services are performed. To the extent shortfalls associated with minimum volume commitments in the previous four quarters continue to exist, volumes in excess of the minimum volume commitment are applied to those shortfalls. Remaining excess volumes generating operating lease revenue are recognized as incurred.



9

 


 

 

Shipping and Handling Costs



The company accounts for shipping and handling activities related to contracts with customers as costs to fulfill its promise to transfer the associated products. Accordingly, the company records customer payments associated with shipping and handling costs as a component of revenue, and classifies such costs as a component of cost of goods sold.



Cost of Goods Sold



Cost of goods sold includes direct labor, materials, shipping and plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in ethanol production cattle feeding operations and vinegar production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018. Grain purchasing and receiving costs, excluding labor costs for grain buyers and scale operators, are also included in cost of goods sold. Materials include the cost of corn feedstock, denaturant, process chemicals, cattle and veterinary supplies. Corn feedstock costs include gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight charges, inspection costs and transfer costs, as well as reclassifications of gains and losses on cash flow hedges from accumulated other comprehensive income or loss. Plant overhead consists primarily of plant and feedlot utilities, repairs and maintenance, feedlot expenses and outbound freight charges. Shipping costs incurred by the company, including railcar costs, are also reflected in cost of goods sold.



The company uses exchange-traded futures and options contracts and forward purchase and sales contracts to attempt to minimize the effect of price changes on ethanol, grain, natural gas and cattle inventories. Exchange-traded futures and options contracts are valued at quoted market prices and settled predominantly in cash. The company is exposed to loss when counterparties default on forward purchase and sale contracts. Grain inventories held for sale and forward purchase and sale contracts are valued at market prices when available or other market quotes adjusted for differences, primarily in transportation, between the exchange-traded market and local market where the terms of the contract is based. Changes in forward purchase contracts and exchange-traded futures and options contracts are recognized as a component of cost of goods sold.



Operations and Maintenance Expenses



In the partnership segment, transportation expenses represent the primary component of operations and maintenance expenses. Transportation expenses include railcar leases, freight and shipping of the company’s ethanol and co-products, as well as costs incurred storing ethanol at destination terminals.



Derivative Financial Instruments



The company uses various derivative financial instruments, including exchange-traded futures and exchange-traded and over-the-counter options contracts, to attempt to minimize risk and the effect of commodity price changes including but not limited to, corn, ethanol, cattle, natural gas and crude oil. The company monitors and manages this exposure as part of its overall risk management policy to reduce the adverse effect market volatility may have on its operating results. The company may hedge these commodities as one way to mitigate risk; however, there may be situations when these hedging activities themselves result in losses.



By using derivatives to hedge exposures to changes in commodity prices, the company is exposed to credit and market risk. The company’s exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the terms of the derivative contract. The company minimizes its credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring their financial condition. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. The company manages market risk by incorporating parameters to monitor exposure within its risk management strategy, which limits the types of derivative instruments and strategies the company can use and the degree of market risk it can take using derivative instruments.



The company evaluates its physical delivery contracts to determine if they qualify for normal purchase or sale exemptions which are expected to be used or sold over a reasonable period in the normal course of business. Contracts that do not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating income unless the contracts qualify for, and the company elects, cash flow hedge accounting treatment.



Certain qualifying derivatives related to ethanol production, agribusiness and energy services, and food and ingredients segments are designated as cash flow hedges. The company evaluates the derivative instrument to ascertain its effectiveness

10

 


 

 

prior to entering into cash flow hedges. Unrealized gains and losses are reflected in accumulated other comprehensive income or loss until the gain or loss from the underlying hedged transaction is realized. When it becomes probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued, which affects earnings. These derivative financial instruments are recognized in current assets or other current liabilities at fair value.



At times, the company hedges its exposure to changes in inventory values and designates qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted in the current period for changes in fair value. Ineffectiveness of the hedges is recognized in the current period to the extent the change in fair value of the inventory is not offset by the change in fair value of the derivative. 



Recent Accounting Pronouncements

 

Effective January 1, 2019, the company adopted the amended guidance in ASC 842, Leases. Please refer to Note 13 – Commitments and Contingencies for further details.



2.  REVENUE



Revenue Recognition



Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects concurrent with revenue-producing activities are excluded from revenue.



Revenue by Source



The following table disaggregates revenue by major source for the three months ended March 31, 2019 and 2018 (in thousands):



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Three Months Ended March 31, 2019



Ethanol Production

 

Agribusiness & Energy Services

 

Food & Ingredients

 

Partnership

 

Eliminations

 

Total

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from contracts with customers under ASC 606:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Ethanol

$

620 

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

620 

 Distillers grains

 

17,678 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

17,678 

 Cattle

 

 -

 

 

 -

 

 

222,904 

 

 

 -

 

 

 -

 

 

222,904 

 Service revenues

 

 -

 

 

 -

 

 

 -

 

 

2,083 

 

 

 -

 

 

2,083 

 Other

 

235 

 

 

178 

 

 

 -

 

 

 -

 

 

 -

 

 

413 

 Intersegment revenues

 

28 

 

 

 -

 

 

38 

 

 

1,392 

 

 

(1,458)

 

 

 -

Total revenues from contracts with customers

 

18,561 

 

 

178 

 

 

222,942 

 

 

3,475 

 

 

(1,458)

 

 

243,698 

Revenues from contracts accounted for as derivatives under ASC 815 (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Ethanol

 

201,158 

 

 

77,077 

 

 

 -

 

 

 -

 

 

 -

 

 

278,235 

 Distillers grains

 

34,646 

 

 

15,409 

 

 

 -

 

 

 -

 

 

 -

 

 

50,055 

 Corn oil

 

8,614 

 

 

6,971 

 

 

1,451 

 

 

 -

 

 

 -

 

 

17,036 

 Grain

 

 -

 

 

20,749 

 

 

 -

 

 

 -

 

 

 -

 

 

20,749 

 Cattle

 

 -

 

 

 -

 

 

(15,856)

 

 

 -

 

 

 -

 

 

(15,856)

 Other

 

5,765 

 

 

42,411 

 

 

 -

 

 

 -

 

 

 -

 

 

48,176 

 Intersegment revenues

 

2,089 

 

 

6,413 

 

 

 -

 

 

 -

 

 

(8,502)

 

 

 -

Total revenues from contracts accounted for as derivatives

 

252,272 

 

 

169,030 

 

 

(14,405)

 

 

 -

 

 

(8,502)

 

 

398,395 

 Leasing revenues under ASC 842 (2):

 

 -

 

 

 -

 

 

 -

 

 

17,612 

 

 

(17,390)

 

 

222 

Total Revenues

$

270,833 

 

$

169,208 

 

$

208,537 

 

$

21,087 

 

$

(27,350)

 

$

642,315 











(1)

Revenues from contracts accounted for as derivatives represent physically settled derivative sales that are outside the scope of ASC 606, Revenue from Contracts with Customers (ASC 606), where the company recognizes revenue when control of the inventory is transferred within the meaning of ASC 606 as required by ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets.

(2)

Leasing revenues do not represent revenues recognized from contracts with customers under ASC 606, and are accounted for under ASC 842, Leases.













 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 


 

 



Three Months Ended March 31, 2018



Ethanol Production

 

Agribusiness & Energy Services

 

Food & Ingredients

 

Partnership

 

Eliminations

 

Total

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from contracts with customers under ASC 606:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Ethanol

$

2,466 

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

2,466 

 Distillers grains

 

29,997 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

29,997 

 Cattle and vinegar

 

 -

 

 

 -

 

 

267,416 

 

 

 -

 

 

 -

 

 

267,416 

 Service revenues

 

 -

 

 

 -

 

 

 -

 

 

1,218 

 

 

 -

 

 

1,218 

 Other

 

131 

 

 

677 

 

 

 -

 

 

 -

 

 

 -

 

 

808 

 Intersegment revenues

 

662 

 

 

 -

 

 

42 

 

 

 -

 

 

(704)

 

 

 -

Total revenues from contracts with customers

 

33,256 

 

 

677 

 

 

267,458 

 

 

1,218 

 

 

(704)

 

 

301,905 

Revenues from contracts accounted for as derivatives under ASC 815 (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Ethanol

 

442,573 

 

 

122,541 

 

 

 -

 

 

 -

 

 

 -

 

 

565,114 

 Distillers grains

 

67,709 

 

 

21,212 

 

 

 -

 

 

 -

 

 

 -

 

 

88,921 

 Corn oil

 

16,470 

 

 

8,670 

 

 

2,287 

 

 

 -

 

 

 -

 

 

27,427 

 Grain

 

133 

 

 

14,286 

 

 

 -

 

 

 -

 

 

 -

 

 

14,419 

 Cattle and vinegar

 

 -

 

 

 -

 

 

8,406 

 

 

 -

 

 

 -

 

 

8,406 

 Other

 

4,284 

 

 

34,401 

 

 

 -

 

 

 -

 

 

 -

 

 

38,685 

 Intersegment revenues

 

1,291 

 

 

11,429 

 

 

 -

 

 

2,172 

 

 

(14,892)

 

 

 -

Total revenues from contracts accounted for as derivatives

 

532,460 

 

 

212,539 

 

 

10,693 

 

 

2,172 

 

 

(14,892)

 

 

742,972 

 Leasing revenues under ASC 840 (2):

 

 -

 

 

 -

 

 

 -

 

 

22,495 

 

 

(22,085)

 

 

410 

Total Revenues

$

565,716 

 

$

213,216 

 

$

278,151 

 

$

25,885 

 

$

(37,681)

 

$

1,045,287 



(1)

Revenues from contracts accounted for as derivatives represent physically settled derivative sales that are outside the scope of ASC 606, Revenue from Contracts with Customers (ASC 606), where the company recognizes revenue when control of the inventory is transferred within the meaning of ASC 606 as required by ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets.

(2)

Leasing revenues do not represent revenues recognized from contracts with customers under ASC 606, and are accounted for under ASC 840,  Leases.



Payment Terms



The company has standard payment terms, which vary depending upon the nature of the services provided, with the majority falling within 10 to 30 days after transfer of control or completion of services. In instances where the timing of revenue recognition differs from the timing of invoicing, the company has determined that contracts generally do not include a significant financing component.



Contract Liabilities



The company records unearned revenue when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of service and lease agreements. Unearned revenue from service agreements, which represents a contract liability, is recorded for fees that have been charged to the customer prior to the completion of performance obligations. Unearned revenue is generally recognized in the subsequent quarter and is not material to the company. The company expects to recognize all of the unearned revenue associated with service agreements as of March 31, 2019, in the subsequent quarter when the inventory is withdrawn from the partnership’s tank storage.







3.  ACQUISITIONS AND DISPOSITIONS



ACQUISITIONS



Acquisition of Cattle Feeding Operations – Bartlett Cattle Company, L.P.



On August 1, 2018, the company acquired two cattle-feeding operations from Bartlett Cattle Company, L.P. for $16.2 million, plus working capital of approximately $106.6 million primarily consisting of work-in-process inventory. The transaction included the feed yards located in Sublette, Kansas and Tulia, Texas, which added combined feedlot capacity of 97,000 head of cattle to the company’s operations. The transaction was financed using cash on hand and proceeds from the Green Plains Cattle senior secured asset-based revolving credit facility. There were no material acquisition costs recorded for the acquisition.

 



12

 


 

 

The following is a summary of the assets acquired and liabilities assumed (in thousands):







 

 

 

 

Amounts of Identifiable Assets Acquired and Liabilities Assumed

Accounts receivable

 

$

1,897 

Inventory

 

 

104,809 

Property and equipment, net

 

16,190 



 

 

 

 

Current liabilities

 

(118)



Total identifiable net assets

$

122,778 



The amounts above reflect the final purchase price allocation, which included working capital true-up payments by the company of $0.9 million made during the third quarter of 2018.

 

DISPOSITIONS



Disposition of Fleischmann’s Vinegar



On November 27, 2018, the company and Green Plains II LLC, an indirect wholly-owned subsidiary of the company, completed the sale of Fleischmann’s Vinegar Company, Inc. to Kerry Holding Co. (“Kerry”). The company received as net consideration from Kerry $353.7 million in cash and restricted cash, including net working capital adjustments. The divested assets were reported within the company’s food and ingredients segment. The company recorded a pre-tax gain on the sale of Fleischmann’s Vinegar of $58.2 million, including offsetting related transaction costs of $7.4 million within the corporate segment.



The assets and liabilities of Fleischmann’s Vinegar at closing on November 27, 2018 were as follows (in thousands):







 

 

 

 

Amounts of Identifiable Assets Disposed and Liabilities Relinquished

Cash

 

$

2,107 

Accounts receivable, net

 

 

15,935 

Inventory

 

 

15,167 

Prepaid expenses and other

 

 

853 

Property and equipment

 

 

64,552 

Other assets

 

 

79,389 



 

 

 

 

Current liabilities

 

 

(8,587)

Deferred tax liabilities

 

 

(26,617)



Total identifiable net assets

 

142,799 



 

 

 

 

Goodwill

 

142,002 



Net assets disposed

$

284,801 



The amounts above reflect the preliminary working capital true-up payments made to and received from Kerry.



Disposition of Bluffton, Lakota and Riga Ethanol Plants



On November 15, 2018, the company completed the sale of three ethanol plants located in Bluffton, Indiana, Lakota, Iowa, and Riga, Michigan, and certain related assets from subsidiaries, to Valero Renewable Fuels Company, LLC (“Valero”) for the sale price of $323.2 million, including net working capital and other adjustments. Correspondingly, the partnership’s storage assets located adjacent to such plants were sold to Green Plains Inc. for $120.9 million. The company received as consideration from Valero approximately $323.2 million, while the partnership received as consideration from the company 8.7 million partnership units and a portion of the general partner interest equating to 0.2 million equivalent limited partner units to maintain the general partner’s 2% interest. In addition, the partnership also received additional consideration of approximately $2.7 million from Valero for the assignment of certain railcar operating leases. The divested assets were reported within the company’s ethanol production, agribusiness and energy services and partnership segments. The company recorded a pre-tax gain on the sale of the three ethanol plants of $92.2 million, of which $89.5 million was recorded within the corporate segment and $2.7 million was recorded within the partnership segment, including offsetting transaction costs of $4.2 million, of which $3.7 million were recorded within the corporate segment and $0.5 million were recorded within the partnership segment.

13

 


 

 

The assets and liabilities of the Bluffton, Lakota and Riga ethanol plants are as follows (in thousands):







 

 

 

 

Amounts of Identifiable Assets Disposed and Liabilities Relinquished

Inventory

 

$

36,812 

Prepaid expenses and other

 

 

189 

Property and equipment

 

 

184,970 

Other assets

 

 

1,717 



 

 

 

 

Current liabilities

 

 

(746)

Other liabilities

 

 

(4,706)



Total identifiable net assets

 

218,236 



 

 

 

 

Goodwill

 

6,188 



Net assets disposed

$

224,424 



The amounts above reflect the final working capital true-up payments by Valero of $3.4 million received during the first quarter of 2019.











4.  FAIR VALUE DISCLOSURES



The following methods, assumptions and valuation techniques were used in estimating the fair value of the company’s financial instruments:



Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities the company can access at the measurement date.



Level 2 – directly or indirectly observable inputs such as quoted prices for similar assets or liabilities in active markets other than quoted prices included within Level 1, quoted prices for identical or similar assets in markets that are not active, and other inputs that are observable or can be substantially corroborated by observable market data through correlation or other means. Grain inventories held for sale in the agribusiness and energy services segment are valued at nearby futures values, plus or minus nearby basis.



Level 3 – unobservable inputs that are supported by little or no market activity and comprise a significant component of the fair value of the assets or liabilities. The company currently does not have any recurring Level 3 financial instruments.



Derivative contracts include exchange-traded commodity futures and options contracts and forward commodity purchase and sale contracts. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1. The majority of the company’s exchange-traded futures and options contracts are cash-settled on a daily basis.



14

 


 

 

There have been no changes in valuation techniques and inputs used in measuring fair value. The company’s assets and liabilities by level are as follows (in thousands):







 

 

 

 

 

 

 

 



Fair Value Measurements at March 31, 2019



Quoted Prices in
Active Markets for
Identical Assets

 

Significant Other
Observable Inputs

 

 

 



(Level 1)

 

(Level 2)

 

Total

Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

214,068 

 

$

 -

 

$

214,068 

Restricted cash

 

59,174 

 

 

 -

 

 

59,174 

Inventories carried at market

 

 -

 

 

65,340 

 

 

65,340 

Unrealized gains on derivatives

 

 -

 

 

7,428 

 

 

7,428 

Other assets

 

113 

 

 

 -

 

 

113 

Total assets measured at fair value

$

273,355 

 

$

72,768 

 

$

346,123 



 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Accounts payable (1)

$

 -

 

$

20,619 

 

$

20,619 

Unrealized losses on derivatives

 

 -

 

 

8,117 

 

 

8,117 

Total liabilities measured at fair value

$

 -

 

$

28,736 

 

$

28,736 







 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2018



Quoted Prices in
Active Markets for
Identical Assets

 

Significant Other
Observable Inputs

 

 

 



(Level 1)

 

(Level 2)

 

Total

Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

251,683 

 

$

 -

 

$

251,683 

Restricted cash

 

66,512 

 

 

 -

 

 

66,512 

Inventories carried at market

 

 -

 

 

111,960 

 

 

111,960 

Unrealized gains on derivatives

 

 -

 

 

9,976 

 

 

9,976 

Other assets

 

114 

 

 

 

 

115 

Total assets measured at fair value

$

318,309 

 

$

121,937 

 

$

440,246 



 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Accounts payable (1)

$

 -

 

$

16,573 

 

$

16,573 

Unrealized losses on derivatives

 

 -

 

 

7,852 

 

 

7,852 

Other liabilities

 

 -

 

 

 

 

Total liabilities measured at fair value

$

 -

 

$

24,427 

 

$

24,427 



(1)

Accounts payable is generally stated at historical amounts with the exception of $20.6 million and $16.6 million at March 31, 2019 and December 31, 2018, respectively, related to certain delivered inventory for which the payable fluctuates based on changes in commodity prices. These payables are hybrid financial instruments for which the company has elected the fair value option.



The company believes the fair value of its debt approximated book value, which was $883.3 million at March 31, 2019 and $891.2 million at December 31, 2018. The company estimated the fair value of its outstanding debt using Level 2 inputs. The company believes the fair values of its accounts receivable approximated book value, which was $66.6 million and $100.4 million at March 31, 2019 and December 31, 2018, respectively.



Although the company currently does not have any recurring Level 3 financial measurements, the fair values of tangible assets and goodwill acquired and the equity component of convertible debt represent Level 3 measurements which were derived using a combination of the income approach, market approach and cost approach for the specific assets or liabilities being valued.





15

 


 

 

5.  SEGMENT INFORMATION



The company reports the financial and operating performance for the following four operating segments: (1) ethanol production, which includes the production of ethanol, distillers grains and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil and other commodities, (3) food and ingredients, which includes cattle feeding and food-grade corn oil operations and included vinegar production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018 and (4) partnership, which includes fuel storage and transportation services.



Corporate activities include selling, general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment.



During the normal course of business, the operating segments conduct business with each other. For example, the agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains and corn oil for the ethanol production segment. The partnership segment provides fuel storage and transportation services for the ethanol production segment. These intersegment activities are treated like third-party transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment performance; however, they do not impact the company’s consolidated results since the revenues and corresponding costs are eliminated.



The following tables set forth certain financial data for the company’s operating segments (in thousands):







 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

Revenues:

 

 

 

 

 

Ethanol production:

 

 

 

 

 

Revenues from external customers

$

268,716 

 

$

563,763 

Intersegment revenues

 

2,117 

 

 

1,953 

Total segment revenues

 

270,833 

 

 

565,716 

Agribusiness and energy services:

 

 

 

 

 

Revenues from external customers

 

162,795 

 

 

201,787 

Intersegment revenues

 

6,413 

 

 

11,429 

Total segment revenues

 

169,208 

 

 

213,216 

Food and ingredients:

 

 

 

 

 

Revenues from external customers

 

208,499 

 

 

278,109 

Intersegment revenues

 

38 

 

 

42 

Total segment revenues

 

208,537 

 

 

278,151 

Partnership:

 

 

 

 

 

Revenues from external customers

 

2,305 

 

 

1,628 

Intersegment revenues

 

18,782 

 

 

24,257 

Total segment revenues

 

21,087 

 

 

25,885 

Revenues including intersegment activity

 

669,665 

 

 

1,082,968 

Intersegment eliminations

 

(27,350)

 

 

(37,681)

Revenues as reported

$

642,315 

 

$

1,045,287 



Refer to Note 2 - Revenue, for further disaggregation of revenue by operating segment.







 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

Cost of goods sold:

 

 

 

 

 

Ethanol production

$

293,487 

 

$

564,559 

Agribusiness and energy services

 

159,626 

 

 

201,712 

Food and ingredients

 

206,073 

 

 

259,765 

Partnership

 

 -

 

 

 -

Intersegment eliminations

 

(23,611)

 

 

(37,701)



$

635,575 

 

$

988,335 

16

 


 

 







 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

Operating income (loss):

 

 

 

 

 

Ethanol production

$

(44,192)

 

$

(27,529)

Agribusiness and energy services

 

5,304 

 

 

7,064 

Food and ingredients

 

(1,432)

 

 

12,585 

Partnership

 

12,551 

 

 

15,360 

Intersegment eliminations

 

(3,677)

 

 

68 

Corporate activities

 

(8,559)

 

 

(11,473)



$

(40,005)

 

$

(3,925)







 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

EBITDA:

 

 

 

 

 

Ethanol production

$

(28,503)

 

$

(7,095)

Agribusiness and energy services

 

5,862 

 

 

7,702 

Food and ingredients

 

257 

 

 

15,997 

Partnership

 

13,771 

 

 

16,623 

Intersegment eliminations

 

(3,677)

 

 

68 

Corporate activities

 

(6,379)

 

 

(10,175)



$

(18,669)

 

$

23,120 







 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

Depreciation and amortization:

 

 

 

 

 

Ethanol production

$

15,340 

 

$

20,436 

Agribusiness and energy services

 

549 

 

 

630 

Food and ingredients

 

1,611 

 

 

3,404 

Partnership

 

985 

 

 

1,181 

Corporate activities

 

750 

 

 

823 



$

19,235 

 

$

26,474 



The following table reconciles net loss to EBITDA (in thousands):







 

 

 

 

 



Three Months Ended
March 31,



2019

 

2018

Net loss

$

(37,871)

 

$

(19,455)

Interest expense

 

14,427 

 

 

22,128 

Income tax benefit

 

(14,460)

 

 

(6,027)

Depreciation and amortization (1)

 

19,235 

 

 

26,474 

EBITDA

$

(18,669)

 

$

23,120 



(1)

Excludes the amortization of operating lease right-of-use assets and amortization of debt issuance costs.



17

 


 

 

The following table sets forth total assets by operating segment (in thousands):







 

 

 

 

 



March 31,
2019

 

December 31,
2018

Total assets (1):

 

 

 

 

 

Ethanol production

$

876,306 

 

$

872,845 

Agribusiness and energy services

 

325,226 

 

 

399,633 

Food and ingredients

 

550,700 

 

 

552,459 

Partnership

 

102,805 

 

 

67,297 

Corporate assets

 

306,617 

 

 

334,236 

Intersegment eliminations

 

(14,074)

 

 

(10,038)



$

2,147,580 

 

$

2,216,432 



(1)

Asset balances by segment exclude intercompany balances.  





6.  INVENTORIES



Inventories are carried at the lower of cost or net realizable value, except grain held for sale and fair-value hedged inventories. Commodities held for sale are reported at market value. As of March 31, 2019, the company recorded a $3.3 million lower of cost or market inventory adjustment reflected in cost of goods sold within the ethanol production segment.



The components of inventories are as follows (in thousands):









 

 

 

 

 



March 31,
2019

 

December 31,
2018

Finished goods

$

111,900 

 

$

99,765 

Commodities held for sale

 

27,222 

 

 

62,980 

Raw materials

 

98,250 

 

 

119,014 

Work-in-process

 

439,917 

 

 

423,840 

Supplies and parts

 

29,736 

 

 

29,284 



$

707,025 

 

$

734,883 





7.  DERIVATIVE FINANCIAL INSTRUMENTS



At March 31, 2019, the company’s consolidated balance sheet reflected unrealized losses of $12.5 million, net of tax, in accumulated other comprehensive income. The company expects these losses will be reclassified as operating income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount realized in operating income will differ as commodity prices change



18

 


 

 

Fair Values of Derivative Instruments



The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets where they are reported are as follows (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 

 



 

Asset Derivatives'

 

Liability Derivatives'

 



 

Fair Value

 

Fair Value

 



 

March 31,
2019

 

December 31,
2018

 

March 31,
2019

 

December 31,
2018

 

Derivative financial instruments

 

$

7,428 

(1)

$

9,976 

(2)

$

8,117 

(3)

$

7,852 

(4)

Other assets

 

 

 -

 

 

 

 

 -

 

 

 -

 

Other liabilities

 

 

 -

 

 

 -