Green Plains Inc.
Green Plains Renewable Energy, Inc. (Form: 10-Q, Received: 05/01/2014 17:16:52)

 

 

 

 

 

 

 

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 , 201 4

 

Commission File Number 001-32924

 

Green Plains Renewable Energy, 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.)

 

 

450 Regency Parkway, Suite 400 , Omaha, NE 68114

(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes   No

 

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

 

Large accelerated filer        Accelerated filer      Non-accelerated filer     Smaller reporting company

 

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

 

Yes   No

 

The number of shares of common stock, par value $0.001 per share, outstanding as of April 28, 2014 was   3 7,406, 235   shares.

 

 


 

 

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheets  

2

 

 

 

 

Consolidated Statements of Operations

3

 

 

 

 

Consolidated Statements of Comprehensive Loss  

4

 

 

 

 

Consolidated Statements of Cash Flows  

5

 

 

 

 

Notes to Consolidated Financial Statements  

7

 

 

 

Item 2.

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

25

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk  

37

 

 

 

Item 4.

Controls and Procedures

39

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

40

 

 

 

Item 1A.

Risk Factors

40

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

 

 

 

Item 3.

Defaults Upon Senior Securities

41

 

 

 

Item 4.

Mine Safety Disclosures

41

 

 

 

Item 5.

Other Information

41

 

 

 

Item 6.

Exhibits

41

 

 

 

Signatures  

42

 

 

 

 

1

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

  CONSOLIDATED BALANCE SHEETS

 

(in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

2014

 

2013

 

(unaudited)

 

 

 

ASSETS

Current assets

 

 

 

 

 

Cash and cash equivalents

$

207,034 

 

$

272,027 

Restricted cash

 

22,893 

 

 

26,994 

Accounts receivable, net of allowances of $302 and $308, respectively

 

112,420 

 

 

106,808 

Inventories

 

179,750 

 

 

158,328 

Prepaid expenses and other

 

10,597 

 

 

12,893 

Deferred income taxes

 

46,719 

 

 

7,619 

Derivative financial instruments

 

37,221 

 

 

48,636 

Total current assets

 

616,634 

 

 

633,305 

Property and equipment, net of accumulated depreciation of

 

 

 

 

 

$229,888 and $215,519, respectively

 

804,897 

 

 

806,046 

Goodwill

 

40,877 

 

 

40,877 

Other assets

 

49,961 

 

 

51,817 

Total assets

$

1,512,369 

 

$

1,532,045 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

 

 

 

 

 

Accounts payable

$

84,398 

 

$

112,001 

Accrued and other liabilities

 

67,647 

 

 

38,645 

Unearned revenue

 

15,743 

 

 

4,118 

Short-term notes payable and other borrowings

 

128,429 

 

 

171,500 

Current maturities of long-term debt

 

134,639 

 

 

82,933 

Total current liabilities

 

430,856 

 

 

409,197 

 

 

 

 

 

 

Long-term debt

 

379,431 

 

 

480,746 

Deferred income taxes

 

100,650 

 

 

91,294 

Other liabilities

 

5,680 

 

 

5,450 

Total liabilities

 

916,617 

 

 

986,687 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Common stock, $0.001 par value; 75,000,000 shares authorized;

 

 

 

 

 

44,608,024 and 37,703,946 shares issued, and 37,408,024

 

 

 

 

 

and 30,503,946 shares outstanding, respectively

 

45 

 

 

38 

Additional paid-in capital

 

562,833 

 

 

468,962 

Retained earnings

 

190,312 

 

 

148,505 

Accumulated other comprehensive loss

 

(91,630)

 

 

(6,339)

Treasury stock, 7,200,000 shares

 

(65,808)

 

 

(65,808)

Total stockholders' equity

 

595,752 

 

 

545,358 

Total liabilities and stockholders' equity

$

1,512,369 

 

$

1,532,045 

 

See accompanying notes to the consolidated financial statements.

 

 

2

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(unaudited and in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2014

 

2013

 

 

 

 

 

 

Revenues

$

733,889 

 

$

765,476 

Cost of goods sold

 

633,140 

 

 

738,262 

Gross profit

 

100,749 

 

 

27,214 

Selling, general and administrative expenses

 

22,406 

 

 

14,510 

Operating income

 

78,343 

 

 

12,704 

Other income (expense)

 

 

 

 

 

Interest income

 

113 

 

 

39 

Interest expense

 

(9,759)

 

 

(8,070)

Other, net

 

1,031 

 

 

(520)

Total other income (expense)

 

(8,615)

 

 

(8,551)

Income before income taxes

 

69,728 

 

 

4,153 

Income tax expense

 

26,525 

 

 

1,598 

Net income

$

43,203 

 

$

2,555 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

Basic

$

1.30 

 

$

0.09 

Diluted

$

1.04 

 

$

0.08 

Weighted average shares outstanding:

 

 

 

 

 

Basic

 

33,153 

 

 

29,933 

Diluted

 

43,251 

 

 

30,210 

 

 

 

 

 

 

Cash dividend declared per share

$

0.04 

 

$

 -

 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

3

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2014

 

2013

 

 

 

 

 

 

Net income

$

43,203 

 

$

2,555 

Other comprehensive loss, net of tax:

 

 

 

 

 

Unrealized losses on derivatives arising during period,

 

 

 

 

 

net of tax benefit of $86,015 and $8,502, respectively

 

(137,287)

 

 

(12,637)

Reclassification of realized losses on derivatives, net

 

 

 

 

 

of tax benefit of $32,577 and $4,509, respectively

 

51,996 

 

 

6,703 

Total other comprehensive loss, net of tax

 

(85,291)

 

 

(5,934)

Comprehensive loss

$

(42,088)

 

$

(3,379)

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(unaudited and in thousands)

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2014

 

2013

Cash flows from operating activities:

 

 

 

 

 

Net income

$

43,203 

 

$

2,555 

Adjustments to reconcile net income to net cash

 

 

 

 

 

provided (used) by operating activities:

 

 

 

 

 

Depreciation and amortization

 

14,627 

 

 

12,609 

Amortization of debt issuance costs

 

966 

 

 

1,055 

Amortization of debt discount

 

1,039 

 

 

34 

Deferred income taxes

 

23,791 

 

 

2,015 

Stock-based compensation

 

2,139 

 

 

883 

Undistributed equity in (income) loss of affiliates

 

(1,031)

 

 

520 

Changes in operating assets and liabilities before

 

 

 

 

 

effects of business combinations:

 

 

 

 

 

Accounts receivable

 

(3,764)

 

 

1,641 

Inventories

 

(21,422)

 

 

6,628 

Derivative financial instruments

 

(127,314)

 

 

(15,277)

Prepaid expenses and other assets

 

2,305 

 

 

4,735 

Accounts payable and accrued liabilities

 

2,806 

 

 

(33,050)

Unearned revenues

 

11,625 

 

 

3,365 

Other

 

814 

 

 

392 

Net cash used by operating activities

 

(50,216)

 

 

(11,895)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(14,777)

 

 

(1,904)

Distributions from (investments in) unconsolidated subsidiaries

 

12 

 

 

(803)

Net cash used by investing activities

 

(14,765)

 

 

(2,707)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from the issuance of long-term debt

 

127,842 

 

 

21,400 

Payments of principal on long-term debt

 

(88,848)

 

 

(32,815)

Proceeds from short-term borrowings

 

802,174 

 

 

847,650 

Payments on short-term borrowings

 

(845,244)

 

 

(860,456)

Payment of cash dividends

 

(1,396)

 

 

 -

Change in restricted cash

 

4,101 

 

 

13,991 

Payments of loan fees

 

(37)

 

 

(40)

Proceeds from exercises of stock options

 

1,396 

 

 

391 

Net cash used by financing activities

 

(12)

 

 

(9,879)

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(64,993)

 

 

(24,481)

Cash and cash equivalents, beginning of period

 

272,027 

 

 

254,289 

Cash and cash equivalents, end of period

$

207,034 

 

$

229,808 

 

 

 

 

 

 

Continued on the following page

 

 

 

 

 

 

 

 

 

 

5

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continued from the previous page

 

 

 

 

 

 

Three Months Ended
March 31,

 

2014

 

2013

 

 

 

 

 

 

Supplemental disclosures of cash flow:

 

 

 

 

 

Cash paid for income taxes

$

547 

 

$

1,289 

Cash paid for interest

$

7,990 

 

$

7,880 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

Common stock issued for conversion of 5.75% Notes

$

89,950 

 

$

 -

 

 

 

See accompanying notes to the consolidated financial statements.

6

 


 

 

GREEN PLAINS RENEWABLE ENERGY, 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 Renewable Energy, Inc., an Iowa corporation, and its subsidiaries.

 

Consolidated Financial Statements

 

The consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All significant intercompany balances and transactions have been eliminated on a consolidated basis for reporting purposes. Unconsolidated entities are included in the financial statements on an equity basis. Results for the interim periods presented are not necessarily indicative of results to be expected for the entire year.

 

The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP, for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. 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, 2013.

 

The unaudited financial information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. The adjustments are of a normal recurring nature, except as otherwise noted.

 

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 and 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. Actual results could differ from those estimates.

 

Description of Business

 

Green Plains is North America’s fourth largest ethanol producer. The Company operates its business within four segments: (1) production of ethanol and distillers grains, collectively referred to as ethanol production, (2) corn oil production, (3) grain handling and storage, collectively referred to as agribusiness, and (4) marketing, merchant trading and logistics services for Company-produced and third-party ethanol, distillers grains, corn oil and other commodities, and the operation of blending and terminaling facilities, collectively referred to as marketing and distribution. The Company also is a partner in a joint venture to commercialize advanced technologies for growing and harvesting of algal biomass.

 

Revenue Recognition

 

The Company recognizes revenue when all of the following criteria are satisfied: persuasive evidence of an arrangement exists; risk of loss and title transfer to the customer; the price is fixed and determinable; and collectability is reasonably assured.

 

For sales of ethanol, distillers grains and other commodities by the Company’s marketing business, revenue is recognized when title to the product and risk of loss transfer to an external customer. Revenues related to marketing operations for third parties are recorded on a gross basis as the Company takes title to the product and assumes risk of loss. Unearned revenue is reflected on the consolidated balance sheets for goods in transit for which the Company has received payment and title has not been transferred to the customer. Revenues from the Company’s biofuel terminal operations, which include ethanol transload and splash blending services, are recognized as these services are rendered.

 

7

 


 

 

The Company routinely enters into fixed-price, physical-delivery ethanol sales agreements. In certain instances, the Company intends to settle the transaction by open market purchases of ethanol rather than by delivery from its own production. These transactions are reported net as a component of revenues. Revenues also include realized gains and losses on related derivative financial instruments, ineffectiveness on cash flow hedges, and reclassifications of realized gains and losses on effective cash flow hedges from accumulated other comprehensive income (loss).

 

Sales of agricultural commodities are recognized when title to the product and risk of loss transfer to the customer, which is dependent on the agreed upon sales terms with the customer. These sales terms provide for passage of title either at the time shipment is made or at the time the commodity has been delivered to its destination and final weights, grades and settlement prices have been agreed upon with the customer. Revenues related to grain merchandising are presented gross in the statements of operations with amounts billed for shipping and handling included in revenues and also as a component of cost of goods sold.   Revenues from grain storage are recognized as services are rendered.

 

Cost of Goods Sold

 

Cost of goods sold includes costs for direct labor, materials and certain plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in the operation of the Company’s ethanol plants. Grain purchasing and receiving costs, other than labor costs for grain buyers and scale operators, are also included in cost of goods sold. Direct materials consist of the costs of corn feedstock, denaturant, and process chemicals. Corn feedstock costs include unrealized gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight charges, inspection costs and transfer costs. Corn feedstock costs also include realized gains and losses on related derivative financial instruments, ineffectiveness on cash flow hedges, and reclassifications of realized gains and losses on effective cash flow hedges from accumulated other comprehensive income (loss). Plant overhead costs primarily consist of plant utilities, plant depreciation and outbound freight charges. Shipping costs incurred directly by the Company, including railcar lease costs, are also reflected in cost of goods sold.

 

The Company uses exchange-traded futures and options contracts to minimize the effects of changes in the prices of agricultural commodities on its agribusiness segment’s grain inventories and forward purchase and sale contracts. Exchange-traded futures and options contracts are valued at quoted market prices. These contracts are predominantly settled in cash. The Company is exposed to loss in the event of non-performance by the counter-party to forward purchase and forward sale contracts. Grain inventories held for sale, forward purchase contracts and forward sale contracts in the agribusiness segment are valued at market prices, where available, or other market quotes adjusted for differences, primarily transportation, between the exchange-traded market and the local markets on which the terms of the contracts are based. Changes in the fair value of grain inventories held for sale, forward purchase and sale contracts, and exchange-traded futures and options contracts in the agribusiness segment are recognized in earnings as a component of cost of goods sold.

 

Derivative Financial Instruments

 

To minimize the risk and the effects of the volatility of commodity price changes primarily related to corn, ethanol and natural gas, the Company uses various derivative financial instruments, including exchange-traded futures, and exchange-traded and over-the-counter options contracts. The Company monitors and manages this exposure as part of its overall risk management policy. As such, the Company seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results. The Company may take hedging positions in these commodities as one way to mitigate risk. While the Company attempts to link its hedging activities to purchase and sales activities, there are situations in which these hedging activities can themselves result in losses.

 

By using derivatives to hedge exposures to changes in commodity prices, the Company has exposures on these derivatives to credit and market risk. The Company is exposed to credit risk that the counterparty might fail 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 the financial condition of its counterparties. 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 monitoring parameters within its risk management strategy that limit the types of derivative instruments and derivative strategies the Company uses, and the degree of market risk that may be undertaken by the use of derivative instruments.

 

The Company evaluates its contracts that involve physical delivery to determine whether they may qualify for the normal purchase or normal sale exemption and are expected to be used or sold over a reasonable period in the normal course of business. Any contracts that do not meet the normal purchase or sale criteria are recorded at fair value with the change in fair value recorded in operating income unless the contracts qualify for, and the Company elects, hedge accounting treatment.

8

 


 

 

 

Certain qualifying derivatives related to ethanol production are designated as cash flow hedges. Prior to entering into cash flow hedges, the Company evaluates the derivative instrument to ascertain its effectiveness. For cash flow hedges, any ineffectiveness is recognized in current period results, while other unrealized gains and losses are reflected in accumulated other comprehensive income until gains and losses from the underlying hedged transaction are realized. In the event that it becomes probable that a forecasted transaction will not occur, the Company would discontinue cash flow hedge treatment, which would affect earnings. These derivative financial instruments are recognized in current assets or other current liabilities at fair value.

 

At times, the Company hedges its exposures to changes in the value of inventories and designates certain qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted through current period results for changes in the fair value arising from changes in underlying prices. Any ineffectiveness is recognized in current period results to the extent that the change in the fair value of the inventory is not offset by the change in the fair value of the derivative.

 

2 .  ACQUISITION

 

Acquisition of Fairmont and Wood River Ethanol Plants

 

In November 2013, the Company acquired two ethanol plants, located in Fairmont, Minnesota and Wood River, Nebraska, with a combined annual production capacity of 230 million gallons, from Ethanol Holding Company, LLC, an entity composed of the predecessor owners’ lender group. Consideration of $108.0 million, which included a preliminary amount for working capital, was paid in cash and acquisition-related costs of $0.8 million were recorded in selling, general and administrative expenses. The Company issued approximately $77.0 million of short-term notes payable and term debt shortly after the acquisition, with the acquired assets serving as collateral for these loans, and entered into capital leases totaling $10.0 million for grain facilities that were previously leased by the predecessor owner of the acquired assets. At the time of acquisition, the ethanol plant in Fairmont, Minnesota was not operational; however, upon completion of certain maintenance and enhancement projects, the Company began operations at the plant in early January 2014. The following is a summary of assets acquired and liabilities assumed (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Amounts of Identifiable Assets Acquired
and Liabilities Assumed

Accounts receivable

 

$

119 

Inventory

 

 

8,680 

Prepaid expenses and other

 

 

2,696 

Property and equipment, net

 

105,956 

Other assets

 

 

4,193 

 

Current liabilities

 

(4,260)

Long-term portion of capital leases and

 

tax increment financing bond

(7,895)

Other liabilities

 

 

 

(1,489)

Total identifiable net assets

 

$

108,000 

 

The amounts above reflect an updated preliminary purchase price allocation, which did not change materially from the initial allocation.  Later this year, upon finalization of the purchase price, including working capital adjustments, the Company will complete the allocation, which it does not expect to differ materially from the preliminary amounts shown above.

 

3 .  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 that the Company has the ability to access at the measurement date. Level 1 unrealized gains and losses on commodity derivatives relate to exchange-traded open trade equity and option values in the Company’s brokerage accounts.

9

 


 

 

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 by correlation or other means. Grain inventories held for sale in the agribusiness segment are valued at nearby futures values, plus or minus nearby basis levels.

 

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

 

There have been no changes in valuation techniques and inputs used in measuring fair value. The following tables set forth the Company’s assets and liabilities by level for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at March 31, 2014

 

Quoted Prices in Active Markets for Identical Assets

 

Significant Other Observable Inputs

 

Reclassification for Balance Sheet

 

 

 

 

(Level 1)

 

(Level 2)

 

Presentation

 

Total

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

207,034 

 

$

 -

 

$

 -

 

$

207,034 

Restricted cash

 

22,893 

 

 

 -

 

 

 -

 

 

22,893 

Margin deposits

 

130,425 

 

 

 -

 

 

(130,425)

 

 

 -

Inventories carried at market

 

 -

 

 

24,959 

 

 

 -

 

 

24,959 

Unrealized gains on derivatives

 

58,091 

 

 

10,783 

 

 

(31,653)

 

 

37,221 

Other assets (1)

 

2,319 

 

 

 -

 

 

 -

 

 

2,319 

Total assets measured at fair value

$

420,762 

 

$

35,742 

 

$

(162,078)

 

$

294,426 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses on derivatives

$

162,078 

 

$

37,793 

 

$

(162,078)

 

$

37,793 

Other

 

25 

 

 

 -

 

 

 -

 

 

25 

Total liabilities measured at fair value

$

162,103 

 

$

37,793 

 

$

(162,078)

 

$

37,818 

(1) Represents long-term restricted cash   related to the $22.0 million revenue bond of Green Plains Bluffton.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2013

 

Quoted Prices in Active Markets for Identical Assets

 

Significant Other Observable Inputs

 

Reclassification for Balance Sheet

 

 

 

 

(Level 1)

 

(Level 2)

 

Presentation

 

Total

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

272,027 

 

$

 -

 

$

 -

 

$

272,027 

Restricted cash

 

26,994 

 

 

 -

 

 

 -

 

 

26,994 

Margin deposits

 

77,102 

 

 

 -

 

 

(77,102)

 

 

 -

Inventories carried at market

 

 -

 

 

23,782 

 

 

 -

 

 

23,782 

Unrealized gains on derivatives

 

3,629 

 

 

18,712 

 

 

26,295 

 

 

48,636 

Other assets (1)

 

2,200 

 

 

 -

 

 

 -

 

 

2,200 

Total assets measured at fair value

$

381,952 

 

$

42,494 

 

$

(50,807)

 

$

373,639 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses on derivatives

$

50,807 

 

$

4,612 

 

$

(50,807)

 

$

4,612 

Other

 

 

 

 -

 

 

 -

 

 

Total liabilities measured at fair value

$

50,816 

 

$

4,612 

 

$

(50,807)

 

$

4,621 

(1) Represents long-term restricted cash related to the $22.0 million revenue bond of Green Plains Bluffton.

 

10

 


 

 

The Company believes the fair value of its debt approximated its   book value of $64 2 . 5 million at March 31 , 201 4 and the fair value of its debt approximated $775.7 million compared to a book value of $ 735.2 million at December 31, 2013 . The Company estimates the fair value of its outstanding debt using Level 2 inputs. The Company believes the fair values of its accounts receivable and accounts payable approximated book value ,   which were   $ 112.4   million and $ 84.4   million , respectively, at March 31 , 201 4 and  $ 106.8 million and $ 112.0 million, respectively ,   at December 31, 201 3 .  

 

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

 

4 .  SEGMENT INFORMATION

 

Company management reviews financial and operating performance in the following four separate operating segments: (1) production of ethanol and distillers grains, collectively referred to as ethanol production, (2) corn oil production, (3) grain handling and storage, collectively referred to as agribusiness, and (4) marketing , merchant trading and logistics services for Company-produced and third-party ethanol, distillers grains, corn oil and other commodities, and the operation of blending and terminaling facilities, collectively referred to as marketing and distribution. Selling, general and administrative expenses, primarily consisting of compensation of corporate employees, professional fees and overhead costs not directly related to a specific operating segment, are reflected in the table below as corporate activities.

 

During the normal course of business, the Company enters into transactions between segments. Examples of these intersegment transactions include, but are not limited to, the ethanol production segment selling ethanol to the marketing and distribution segment and the agribusiness segment selling grain to the ethanol production segment. These intersegment activities are recorded by each segment at prices approximating market and treated as if they are third-party transactions. Consequently, these transactions impact segment performance. However, revenues and corresponding costs are eliminated in consolidation and do not impact the Company’s consolidated results.

 

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

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2014

 

2013

Revenues:

 

 

 

 

 

Ethanol production:

 

 

 

 

 

Revenues from external customers (1)

$

(27,431)

 

$

44,408 

Intersegment revenues

 

565,803 

 

 

464,651 

Total segment revenues

 

538,372 

 

 

509,059 

Corn oil production:

 

 

 

 

 

Revenues from external customers (1)

 

 

 

 -

Intersegment revenues

 

16,384 

 

 

15,699 

Total segment revenues

 

16,391 

 

 

15,699 

Agribusiness:

 

 

 

 

 

Revenues from external customers (1)

 

18,241 

 

 

22,125 

Intersegment revenues

 

304,238 

 

 

64,919 

Total segment revenues

 

322,479 

 

 

87,044 

Marketing and distribution:

 

 

 

 

 

Revenues from external customers (1)

 

743,072 

 

 

698,943 

Intersegment revenues

 

33,465 

 

 

1,289 

Total segment revenues

 

776,537 

 

 

700,232 

Revenues including intersegment activity

 

1,653,779 

 

 

1,312,034 

Intersegment eliminations

 

(919,890)

 

 

(546,558)

Revenues as reported

$

733,889 

 

$

765,476 

 

 

 

(1)

Revenues from external customers include realized gains and losses from derivative financial instruments.

11

 


 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2014

 

2013

Gross profit:

 

 

 

 

 

Ethanol production

$

71,688 

 

$

1,230 

Corn oil production

 

7,815 

 

 

7,909 

Agribusiness

 

2,976 

 

 

1,226 

Marketing and distribution

 

40,716 

 

 

17,055 

Intersegment eliminations

 

(22,446)

 

 

(206)

 

$

100,749 

 

$

27,214 

Operating income (loss):

 

 

 

 

 

Ethanol production

$

66,226 

 

$

(2,349)

Corn oil production

 

7,708 

 

 

7,810 

Agribusiness

 

935 

 

 

369 

Marketing and distribution

 

32,494 

 

 

12,986 

Intersegment eliminations

 

(22,386)

 

 

(161)

Corporate activities

 

(6,634)

 

 

(5,951)

 

$

78,343 

 

$

12,704 

 

The following table sets forth revenues by product line for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2014

 

2013

Revenues:

 

 

 

 

 

Ethanol

$

530,039 

 

$

579,493 

Distillers grains

 

136,992 

 

 

131,548 

Corn oil

 

17,132 

 

 

17,096 

Grain

 

29,201 

 

 

26,320 

Other

 

20,525 

 

 

11,019 

 

$

733,889 

 

$

765,476 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

2014

 

2013

Total assets:

 

 

 

 

 

Ethanol production

$

879,027 

 

$

911,315 

Corn oil production

 

35,197 

 

 

28,569 

Agribusiness

 

101,255 

 

 

165,570 

Marketing and distribution

 

308,802 

 

 

258,361 

Corporate assets

 

217,456 

 

 

175,210 

Intersegment eliminations

 

(29,368)

 

 

(6,980)

 

$

1,512,369 

 

$

1,532,045 

 

 

 

 

12

 


 

 

5 .  INVENTORIES

 

Inventories are carried at the lower of cost or market, except grain held for sale, which is valued at market value. The components of inventories are as follows (in thousands):

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

2014

 

2013

Finished goods

$

70,325 

 

$

56,664 

Grain held for sale

 

24,959 

 

 

23,782 

Raw materials

 

54,885 

 

 

51,726 

Work-in-process

 

13,156 

 

 

11,506 

Supplies and parts

 

16,425 

 

 

14,650 

 

$

179,750 

 

$

158,328 

 

 

6 .  GOODWILL

 

The Company did not have any changes in the total carrying amount of goodwill, which was $ 40.9 million during the three months ended March 31, 2014 . Goodwill of $ 30.3 million is attributable to the ethanol production segment and $ 10.6 million is attributable to the marketing and distribution segment.

 

 

7 .  DERIVATIVE FINANCIAL INSTRUMENTS

 

At March 31 , 201 4 , the Company’s consolidated balance sheet reflects unrealized losses , net of tax, of $ 91.6   million in accumulated other comprehensive loss . The Company expects that all of the unrealized losses   at March 31, 2014 will be reclassified into operating income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount ultimately realized in operating income, however, will differ as commodity prices change.

 

Fair Values of Derivative Instruments

 

The following table provides information about the fair values of the Company’s derivative financial instruments and the line items on the consolidated balance sheets in which the fair values are reflected (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Derivatives'

 

Liability Derivatives'

 

 

Fair Value

 

Fair Value

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

 

2014

 

2013

 

2014

 

2013

Derivative financial instruments (1)

 

$

(93,204)

(2)

$

(28,466)

(3)

$

 -

 

$

 -

Accrued and other liabilities

 

 

 -

 

 

 -

 

 

37,794 

 

 

4,612 

Total

 

$

(93,204)

 

$

(28,466)

 

$

37,794 

 

$

4,612 

 

(1) Derivative financial instruments as reflected on the consolidated balance sheets are net of related margin deposit assets of $ 130.4 million and $ 77.1 million at March 31, 2014 and December 31, 201 3 , respectively.

(2) Balance at March 31, 2014 includes $ 150.6 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.

(3) Balance at December 31, 201 3 includes $ 47.1 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.

 

 

Refer to Note 3   - Fair Value Disclosures , which also contains fair value information related to derivative financial instruments.

 

13

 


 

 

Effect of Derivative Instruments on Consolidated Statements of Operations and Consolidated Statements of Stockholders’ Equity and Comprehensive Income

 

The following tables provide information about gain s or loss es recognized in income and other comprehensive income on the Company’s derivative financial instruments and the line items in the financial statements in which such gains and losses are reflected (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) on Derivative Instruments Not

 

Three Months Ended
March 31,

Designated in a Hedging Relationship

 

2014

 

2013

Revenues

 

$

18,250 

 

$

(11,669)

Cost of goods sold

 

 

(1,163)

 

 

11,017 

Net increase (decrease) recognized in earnings before tax

 

$

17,087 

 

$

(652)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) Due to Ineffectiveness

 

Three Months Ended
March 31,

of Cash Flow Hedges

 

2014

 

2013

Revenues

 

$

(346)

 

$

(6)

Cost of goods sold

 

 

860 

 

 

(25)

Net increase (decrease) recognized in earnings before tax

 

$

514 

 

$

(31)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) Reclassified from Accumulated
Other Comprehensive Loss

 

Three Months Ended
March 31,

into Net Income

 

2014

 

2013

Revenues

 

$

(88,146)

 

$

(10,379)

Cost of goods sold

 

 

3,573 

 

 

(833)

Net decrease recognized in earnings before tax

 

$

(84,573)

 

$

(11,212)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Portion of Cash Flow
Hedges Recognized in

 

Three Months Ended
March 31,

Other Comprehensive Loss

 

2014

 

2013

Commodity Contracts

 

$

(223,302)

 

$

(21,139)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) from Fair Value

 

Three Months Ended
March 31,

Hedges of Inventory

 

2014

 

2013

Revenues (effect of change in inventory value)

 

$

 -

 

$

301 

Revenues (effect of fair value hedge)

 

 

 -

 

 

(301)

Cost of goods sold (effect of change in inventory value)

 

 

3,146 

 

 

 -

Cost of goods sold (effect of fair value hedge)

 

 

(2,778)

 

 

 -

Ineffectiveness recognized in earnings before tax

 

$

368 

 

$

 -

 

There were no gains or losses due to the discontinuance of cash flow hedge or fair value hedge treatment   during the three months ended March 31, 2014 and 2013 .  

 

14

 


 

 

The following table summarizes volumes of open commodity derivative positions as of March 31, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2014

 

 

Exchange Traded

 

Non-Exchange Traded

 

 

 

 

Derivative Instruments

 

Net Long & (Short) (1)

 

Long (2)

 

(Short) (2)

 

Unit of Measure

 

Commodity

Futures

 

(5,345)

 

 

 

 

 

Bushels

 

Corn, Soybeans and Wheat

Futures

 

63,950 

(3)

 

 

 

 

Bushels

 

Corn

Futures

 

(3,315)

(4)

 

 

 

 

Bushels

 

Corn

Futures

 

54,684 

 

 

 

 

 

Gallons

 

Ethanol

Futures

 

(235,620)

(3)

 

 

 

 

Gallons

 

Ethanol

Futures

 

98 

 

 

 

 

 

mmBTU

 

Natural Gas

Options

 

7,242 

 

 

 

 

 

Bushels

 

Corn, Soybeans and Wheat

Options

 

6,659 

 

 

 

 

 

Gallons

 

Ethanol

Options

 

(42)

 

 

 

 

 

mmBTU

 

Natural Gas

Forwards

 

 

 

10,127 

 

(4,709)

 

Bushels

 

Corn and Soybeans

Forwards

 

 

 

5,386 

 

(129,584)

 

Gallons

 

Ethanol

Forwards

 

 

 

91 

 

(399)

 

Tons

 

Distillers Grains

Forwards

 

 

 

(37,491)

 

3,408 

 

Pounds

 

Corn Oil

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.

(2)

Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts.

(3)

Futures used for cash flow hedges.

(4)

Futures used for fair value hedges .

 

 

E nergy trading contracts that do not involve physical delivery are presented net in revenue s on the consolidated statements of operations . Revenues and cost of goods sold under such contracts are summarized in the table below for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

2014

 

2013

Revenues

$

3,620 

 

$

1,982 

Cost of goods sold

 

4,744 

 

 

1,962 

 

 

 

 

 

 

 

 

 

 

15

 


 

 

8 .  DEBT

 

The principal balances of the components of long- term debt are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

2014

 

2013

Green Plains Bluffton:

 

 

 

 

 

$70.0 million term loan

$

25,847 

 

$

26,621 

$20.0 million revolving term loan

 

20,000 

 

 

15,000 

$22.0 million revenue bond

 

14,865 

 

 

15,780 

Green Plains Central City:

 

 

 

 

 

$55.0 million term loan

 

31,668 

 

 

33,100 

$30.5 million revolving term loan

 

28,639 

 

 

17,739 

Equipment financing loan

 

18 

 

 

36 

Green Plains Fairmont and Green Plains Wood River:

 

 

 

 

 

$50.0 million term loan

 

47,500 

 

 

50,000 

$27.0 million term loan

 

26,270 

 

 

26,756 

Tax increment financing bond

 

4,199 

 

 

3,626 

Capital leases on grain facilities

 

9,994 

 

 

9,994 

Capital leases on equipment and other

 

4,439 

 

 

5,489 

Green Plains Holdings II:

 

 

 

 

 

$46.8 million term loans

 

34,760 

 

 

15,914 

$20.0 million revolving term loan

 

19,954 

 

 

31,960 

Green Plains Obion:

 

 

 

 

 

$60.0 million term loan

 

1,479 

 

 

3,879 

$37.4 million revolving term loan

 

37,400 

 

 

28,400 

Equipment financing loan

 

83 

 

 

126 

Economic development grant

 

1,223 

 

 

1,245 

Green Plains Ord:

 

 

 

 

 

$25.0 million term loan

 

14,488 

 

 

15,143 

$13.0 million revolving term loan

 

12,151 

 

 

2,151 

Green Plains Otter Tail:

 

 

 

 

 

$30.3 million term loan

 

16,926 

 

 

17,960 

$19.2 million note payable

 

19,175 

 

 

19,151 

Equipment financing loan

 

13 

 

 

 -

Green Plains Shenandoah:

 

 

 

 

 

$17.0 million revolving term loan

 

15,200 

 

 

9,000 

Green Plains Superior:

 

 

 

 

 

$40.0 million term loan

 

8,375 

 

 

9,750 

$10.0 million revolving term loan

 

10,000 

 

 

8,000 

Equipment financing loan

 

 -

 

 

18 

Corporate:

 

 

 

 

 

$90.0 million convertible notes

 

 -

 

 

90,000 

$120.0 million convertible notes

 

97,670 

 

 

96,653 

Capital lease

 

133 

 

 

188 

Other

 

11,601 

 

 

10,000 

Total long-term debt

 

514,070 

 

 

563,679 

Less: current portion of long-term debt

 

(134,639)

 

 

(82,933)

Long-term debt

$

379,431 

 

$

480,746 

 

Short-term notes payable and other borrowings at March 31, 2014 included working capital revolvers at Green Plains Grain and Green Plains Trade with outstanding balances of $ 55.0   million and $ 61.5   million , respectively. Green Plains Grain also had $11.9 million in outstanding short-term inventory financing arrangements at March 31, 2014. Short-term notes payable and other borrowings at December 31, 2013 included working capital revolvers at Green Plains Grain and Green

16

 


 

 

Plains Trade with outstanding balances of $ 95.0 million and $ 76.5 million, respectively.

 

Ethanol Production Segment

 

·

Term Loans

 

o

Scheduled principal payments are as follows:

 

 

 

 

 

•  

Green Plains Bluffton

$0.3 million per month

•  

Green Plains Central City

$0.5 million per month

•  

Green Plains Fairmont and Green Plains

$2.5 million per quarter, decreasing

 

Wood River $50.0 million term loan

to $1.3 million per quarter in 2015

•  

Green Plains Fairmont and Green Plains

 

 

Wood River $27.0 million term loan

$0.2 million per month

•  

Green Plains Holdings II

$1.8 million per quarter

•  

Green Plains Obion

$2.4 million per quarter

•  

Green Plains Ord

$0.2 million per month

•  

Green Plains Otter Tail

$0.4 million per month

•  

Green Plains Superior

$1.4 million per quarter

 

o

Final maturity dates (at the latest) are as follows:

 

 

 

 

 

•  

Green Plains Bluffton

January 31, 2015

•  

Green Plains Central City

July 1, 2016

•  

Green Plains Fairmont and Green Plains

 

 

Wood River $50.0 million term loan

November 27, 2015

•  

Green Plains Fairmont and Green Plains

 

 

Wood River $27.0 million term loan

November 27, 2014

•  

Green Plains Holdings II

July 1, 2019

•  

Green Plains Obion

May 20, 2014

•  

Green Plains Ord

July 1, 2016

•  

Green Plains Otter Tail

September 1, 2018

•  

Green Plains Superior

July 20, 2015

·

Revolving Term Loans The revolving term loans are generally available for advances throughout the life of the commitment, subject, in certain cases, to borrowing base restrictions. Allowable advances under the Green Plains Shenandoah loan agreement are reduced by $ 0.4 million each quarter. Allowable advances under the Green Plains Superior loan agreement are reduced by $ 2.5 million each six-month period commencing on the first day of the month beginning six months after repayment of the term loan, but in no event later than January 1, 2016. Allowable advances under the Green Plains Obion loan agreement are reduced by $ 4.7 million on a semi-annual basis commencing on March 1, 2015. Interest-only payments are due each month on all revolving term loans until the final maturity date for the Green Plains Bluffton, Green Plains Central City, Green Plains Ord, Green Plains Shenandoah, and Green Plains Superior loan agreements.

 

o

Final maturity date s (at the latest) are as follows:

 

 

 

 

 

•  

Green Plains Bluffton

January 31, 2015

•  

Green Plains Central City

July 1, 2016

•  

Green Plains Holdings II

July 1, 2019

•  

Green Plains Obion

June 1, 2018

•  

Green Plains Ord

July 1, 2016

•  

Green Plains Shenandoah

September 20, 2018

•  

Green Plains Superior

July 1, 2017

 

17