Green Plains Inc.
Green Plains Inc. (Form: 10-Q, Received: 11/02/2017 16:45:18)





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 September  30, 2017



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 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,  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      (Do not check if a smaller reporting company)



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



The number of shares of common stock, par value $0.001 per share, outstanding as of October 27, 2017, was 41 ,16 2 , 204 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 (Loss)  

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

30



 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk  

42



 

 

Item 4.

Controls and Procedures

44



 

 



 

 

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

47



 

 

Item 3.

Defaults Upon Senior Securities

48



 

 

Item 4.

Mine Safety Disclosures

48



 

 

Item 5.

Other Information

48

 

 

 

Item 6.

Exhibits

49



 

 

 Signatures

51

 



 

1

 


 

 



Commonly Used Defined Terms



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



Green Plains Inc. and Subsidiaries:





 

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

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

R&D Credit s

Rese arch and development tax c redit s

LTIP

Green Plains Partners LP 2015 Long-Term Incentive Plan

SEC

Securities and Exchange Commission

VIE

Variable interest entity



Industry Defined Terms:





 

CAFE

Corporate Average Fuel Economy

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

EISA

Energy Independence and Security Act of 2007, as amended

EPA

U.S. Environmental Protection Agency

MmBTU

Million British Thermal Units

Mmg

Million gallons

Mmgy

Million gallons per year

RFS II

Renewable Fuels Standard II

RVO

Renewable volume obligations

U.S.

United States



 

2

 


 

 

PART I – FINANCIAL INFORMATION



Item 1 Financial Statements

GREEN PLAINS INC. AND SUBSIDIARIES

 

  CONSOLIDATED BALANCE SHEETS





(in thousands , except share amounts)









 

 

 

 

 



September  30,
2017

 

December  31,
2016



(unaudited)

 

 

 

ASSETS

Current assets

 

 

 

 

 

Cash and cash equivalents

$

261,588 

 

$

304,211 

Restricted cash

 

30,773 

 

 

51,979 

Accounts receivable, net of allowances of $234 and $266, respectively

 

114,978 

 

 

147,495 

Income taxes receivable

 

14,145 

 

 

10,379 

Inventories

 

612,447 

 

 

422,181 

Prepaid expenses and other

 

14,895 

 

 

17,095 

Derivative financial instruments

 

51,563 

 

 

47,236 

Total current assets

 

1,100,389 

 

 

1,000,576 

Property and equipment, net of accumulated depreciation of
$489,349 and $417,993, respectively

 

1,188,270 

 

 

1,178,706 

Goodwill

 

182,879 

 

 

183,696 

Other assets

 

156,999 

 

 

143,514 

Total assets

$

2,628,537 

 

$

2,506,492 



 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

 

 

 

 

 

Accounts payable

$

174,788 

 

$

192,275 

Accrued and other liabilities

 

48,500 

 

 

67,473 

Derivative financial instruments

 

12,004 

 

 

8,916 

Short-term notes payable and other borrowings

 

457,764 

 

 

291,223 

Current maturities of long-term debt

 

6,486 

 

 

35,059 

Total current liabilities

 

699,542 

 

 

594,946 

Long-term debt

 

829,923 

 

 

782,610 

Deferred income taxes

 

48,787 

 

 

140,262 

Other liabilities

 

35,892 

 

 

9,483 

Total liabilities

 

1,614,144 

 

 

1,527,301 



 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 



 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Common stock, $0.001 par value; 75,000,000 shares authorized;
46,430,449 and 46,079,108 shares issued, and 41,163,335
and 38,364,118 shares outstanding, respectively

 

46 

 

 

46 

Additional paid-in capital

 

682,073 

 

 

659,200 

Retained earnings

 

283,592 

 

 

283,214 

Accumulated other comprehensive loss

 

(13,607)

 

 

(4,137)

Treasury stock, 5,267,114 and 7,714,990 shares, respectively

 

(54,193)

 

 

(75,816)

Total Green Plains stockholders' equity

 

897,911 

 

 

862,507 

Noncontrolling interests

 

116,482 

 

 

116,684 

Total stockholders' equity

 

1,014,393 

 

 

979,191 

Total liabilities and stockholders' equity

$

2,628,537 

 

$

2,506,492 



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
September  30,

 

Nine Months Ended
September  30,



2017

 

2016

 

2017

 

2016



 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Product revenues

$

899,534 

 

$

839,786 

 

$

2,670,458 

 

$

2,472,741 

Service revenues

 

1,701 

 

 

2,066 

 

 

4,724 

 

 

6,042 

Total revenues

 

901,235 

 

 

841,852 

 

 

2,675,182 

 

 

2,478,783 



 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

815,787 

 

 

758,883 

 

 

2,457,702 

 

 

2,293,094 

Operations and maintenance expenses

 

8,309 

 

 

8,564 

 

 

25,107 

 

 

25,713 

Selling, general and administrative expenses

 

28,589 

 

 

24,264 

 

 

77,946 

 

 

68,226 

Depreciation and amortization expenses

 

27,834 

 

 

19,286 

 

 

80,105 

 

 

56,132 

Total costs and expenses

 

880,519 

 

 

810,997 

 

 

2,640,860 

 

 

2,443,165 

Operating income

 

20,716 

 

 

30,855 

 

 

34,322 

 

 

35,618 



 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

383 

 

 

484 

 

 

1,061 

 

 

1,263 

Interest expense

 

(31,889)

 

 

(11,819)

 

 

(69,815)

 

 

(33,117)

Other, net

 

1,444 

 

 

(1,553)

 

 

2,811 

 

 

(2,050)

Total other expense

 

(30,062)

 

 

(12,888)

 

 

(65,943)

 

 

(33,904)

Income (loss) before income taxes

 

(9,346)

 

 

17,967 

 

 

(31,621)

 

 

1,714 

Income tax expense (benefit)

 

(48,775)

 

 

5,083 

 

 

(60,905)

 

 

(4,339)

Net income

 

39,429 

 

 

12,884 

 

 

29,284 

 

 

6,053 

Net income attributable to noncontrolling interests

 

5,035 

 

 

4,956 

 

 

14,853 

 

 

14,072 

Net income (loss) attributable to Green Plains

$

34,394 

 

$

7,928 

 

$

14,431 

 

$

(8,019)



 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Green Plains - basic

$

0.83 

 

$

0.21 

 

$

0.36 

 

$

(0.21)

Net income (loss) attributable to Green Plains - diluted

$

0.74 

 

$

0.20 

 

$

0.48 

 

$

(0.21)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

41,348 

 

 

38,282 

 

 

40,008 

 

 

38,301 

Diluted

 

50,647 

 

 

39,136 

 

 

50,693 

 

 

38,301 



 

 

 

 

 

 

 

 

 

 

 

Cash dividend declared per share

$

0.12 

 

$

0.12 

 

$

0.36 

 

$

0.36 



 

 

 

 

 

 

 

 

 

 

 





See accompanying notes to the consolidated financial statements.

 

4

 


 

 

GREEN PLAINS INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



(unaudited and in thousands )







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Three Months Ended
September  30,

 

Nine Months Ended
September  30,



2017

 

2016

 

2017

 

2016



 

 

 

 

 

 

 

 

 

 

 

Net income

$

39,429 

 

$

12,884 

 

$

29,284 

 

$

6,053 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on derivatives arising during period,

net of tax (expense) benefit of $4,575 ,   $(1,331) ,   $5,633

and $762 , respectively

 

(7,660)

 

 

1,919 

 

 

(9,436)

 

 

(1,395)

Reclassification of realized (gains) losses on derivatives, net

of tax expense (benefit) of $(2,650) ,   $(1,144) ,   $21

and $(1,369) , respectively

 

4,453 

 

 

2,150 

 

 

(34)

 

 

2,506 

Total other comprehensive income (loss), net of tax

 

(3,207)

 

 

4,069 

 

 

(9,470)

 

 

1,111 

Comprehensive income

 

36,222 

 

 

16,953 

 

 

19,814 

 

 

7,164 

Comprehensive income attributable to noncontrolling interests

 

5,035 

 

 

4,956 

 

 

14,853 

 

 

14,072 

Comprehensive income (loss) attributable to Green Plains

$

31,187 

 

$

11,997 

 

$

4,961 

 

$

(6,908)





See accompanying notes to the consolidated financial statements.

5

 


 

 

GREEN PLAINS INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS



(unaudited and in thousands )





 

 

 

 

 



 

 

 

 

 



Nine Months Ended
September 30,



2017

 

2016

Cash flows from operating activities:

 

 

 

 

 

Net income

$

29,284 

 

$

6,053 

Adjustments to reconcile net income to net cash provided (used) by operating activities:

 

 

 

 

 

Depreciation and amortization

 

80,105 

 

 

56,132 

Amortization of debt issuance costs and debt discount

 

11,222 

 

 

7,588 

Loss on exchange of 3.25% convertible notes due 2018

 

1,291 

 

 

 -

Gain on disposal of assets

 

(2,439)

 

 

 -

Write-off of deferred financing fees related to extinguishment of debt

 

9,460 

 

 

 -

Deferred income taxes

 

(88,565)

 

 

(16,413)

Other noncurrent assets and liabilities

 

18,062 

 

 

 -

Stock-based compensation

 

8,761 

 

 

7,043 

Undistributed equity in loss of affiliates

 

120 

 

 

2,067 

Other

 

 -

 

 

57 

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

 

 

 

 

 

Accounts receivable

 

32,267 

 

 

(36,431)

Inventories

 

(168,788)

 

 

46,126 

Derivative financial instruments

 

(16,430)

 

 

6,279 

Prepaid expenses and other assets

 

2,180 

 

 

(849)

Accounts payable and accrued liabilities

 

(34,278)

 

 

(23,704)

Current income taxes

 

(1,540)

 

 

8,089 

Other

 

1,361 

 

 

1,150 

Change in restricted cash

 

(4,289)

 

 

 -

Net cash provided (used) by operating activities

 

(122,216)

 

 

63,187 



 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment, net

 

(36,475)

 

 

(35,658)

Acquisition of a business, net of cash acquired

 

(61,727)

 

 

(252,488)

Investments in unconsolidated subsidiaries

 

(12,033)

 

 

(1,388)

Net cash used by investing activities

 

(110,235)

 

 

(289,534)



 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from the issuance of long-term debt

 

551,500 

 

 

337,000 

Payments of principal on long-term debt

 

(487,450)

 

 

(40,578)

Proceeds from short-term borrowings

 

3,301,630 

 

 

2,969,034 

Payments on short-term borrowings

 

(3,135,347)

 

 

(2,967,191)

Cash payment for exchange of 3.25% convertible notes due 2018

 

(8,523)

 

 

 -

Payments for repurchase of common stock

 

(5,733)

 

 

(6,005)

Payments of cash dividends and distributions

 

(29,267)

 

 

(27,837)

Payment penalty on early extinguishment of debt

 

(2,881)

 

 

 -

Change in restricted cash

 

25,495 

 

 

(7,200)

Payments of loan fees

 

(15,541)

 

 

(7,810)

Payments related to tax withholdings for stock-based compensation

 

(4,105)

 

 

(2,206)

Proceeds from exercise of stock options

 

50 

 

 

1,632 

Net cash provided by financing activities

 

189,828 

 

 

248,839 



 

 

 

 

 

Net change in cash and cash equivalents

 

(42,623)

 

 

22,492 

Cash and cash equivalents, beginning of period

 

304,211 

 

 

384,867 

Cash and cash equivalents, end of period

$

261,588 

 

$

407,359 

6

 


 

 



 

 

 

 

 

Continued on the following page

 

 

 

 

 



7

 


 

 

GREEN PLAINS INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



(unaudited and in thousands )





 

 

 

 

 



 

 

 

 

 

Continued from the previous page

 

 

 

 

 



Nine Months Ended
September  30,



2017

 

2016

Non-cash financing activity:

 

 

 

 

 

Exchange of 3.25% convertible notes due 2018 for shares of
common stock

$

47,743 

 

$

 -

Exchange of common stock held in treasury stock for 3.25%

convertible notes due 2018

$

27,356 

 

$

 -



 

 

 

 

 

Supplemental disclosures of cash flow:

 

 

 

 

 

Cash paid for income taxes

$

2,062 

 

$

3,348 

Cash paid for interest

$

39,984 

 

$

24,280 



 

 

 

 

 

Supplemental investing and financing activities:

 

 

 

 

 

Assets acquired in acquisitions and mergers, net of cash

$

62,209 

 

$

257,942 

Less: liabilities assumed

 

(482)

 

 

(2,647)

Less: allocation of noncontrolling interest in
consolidation of BioProcess Algae

 

 -

 

 

(2,807)

Net assets acquired

$

61,727 

 

$

252,488 



 

 

 

 

 







See accompanying notes to the consolidated financial statements.

8

 


 

 

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 62.5% limited partner interest and a 2.0% general partner interest in Green Plains Partners LP. Public investors own the remaining 35.5% 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 VIE. 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 the obligation to absorb losses or the right to receive benefits that could be potentially significant to the partnership; therefore, the company is considered the primary beneficiary and consolidates the partnership. The assets of the partnership cannot be used by the company for general corporate purposes. The partnership’s consolidated total assets as of September 30, 2017 and December 31, 2016 are $73.0 million and $75.0 million, respectively, and primarily consist of property and equipment and goodwill. The partnership’s consolidated total liabilities as of September 30, 2017 and December 31, 2016 are $155.8 million and $156.0 million, respectively, which primarily consist of long-term debt as discussed in Note 8 – Debt. The liabilities recognized as a result of consolidating the partnership do not represent additional claims on our general assets. The partnership is consolidated in the company’s financial statements. Effective April  1, 2016, the company increased its ownership of BioProcess Algae, a joint venture formed in 2008, to 82.8% and consolidated BioProcess Algae in its consolidated financial statements beginning on that date.



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 footnotes 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, 2016 .



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 income or stockholders’ equity.



Use of Estimates in the Preparation of Consolidated Financial Statements



The preparation of the 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. 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, impairment of long-lived assets and goodwill, derivative financial instruments, and accounting for income taxes, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements.



9

 


 

 

Description of Business



Green Plains is North America’s second largest consolidated owner of ethanol plants. The company operates 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 and 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 feedlots, vinegar production and food-grade corn oil operations, and (4) partnership, which includes fuel storage and transportation services.



Revenue Recognition



The company recognizes revenue when the following criteria are satisfied: persuasive evidence that an arrangement exists, title of product and risk of loss are transferred to the customer, price is fixed and determinable and collectability is reasonably assured.



Sales of ethanol, distillers grains, corn oil, natural gas and other commodities by the company’s marketing business are recognized when title of product and risk of loss are transferred to an external customer. Revenues related to marketing for third parties are presented on a gross basis when the company takes title of the product and assumes risk of loss. Unearned revenue is recorded for goods in transit when the company has received payment but the title 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 fixed-price, 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. 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 or loss.



Sales of products, including agricultural commodities, cattle and vinegar, are recognized when title of product and risk of loss are transferred to the customer, which depends on the agreed upon terms. The sales terms provide passage of title when shipment is made or the commodity is delivered. 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 when there is evidence an arrangement exists, risk of loss and title transfer to the customer, the price is fixed or determinable, and collectability is reasonably ensured. Revenues from base storage, terminal or transportation services are recognized once these services are performed, which occurs when the product is delivered to the customer.



Cost of Goods Sold



Cost of goods sold includes direct labor, materials and plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in ethanol plant, vinegar and cattle feedlot operations. 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 unrealized 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 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 or loss. Plant overhead consists primarily of plant and feedlot utilities, repairs and maintenance, yard 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 to minimize the effect of price changes on grain and cattle inventories and forward purchase and sales contracts. 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 the fair value of grain

10

 


 

 

inventories held for sale, forward purchase and sale 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 includes 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 minimize risk and the effect of price changes related 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, 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 prior to entering into cash flow hedges. Ineffectiveness is recognized in current period results, while other unrealized gains and losses are reflected in accumulated other comprehensive income 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 the value of inventories and designates qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted in current period results for changes in fair value. Ineffectiveness of the hedges is recognized in current period results 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, 2017, the company adopted the amended guidance in ASC Topic 330, Inventory: Simplifying the Measurement of Inventory , which requires inventory to be measured at lower of cost or net realizable value. Net realizable value is the estimated selling prices during the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amended guidance was applied prospectively.



Effective January  1, 2017, the company adopted the amended guidance in ASC Topic 718, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting , which requires all income tax effects related to awards to be recognized in the income statement when the awards vest or settle. The amended guidance also allows an employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting and make a policy election to account for forfeitures as they occur. The amended guidance requiring recognition of excess tax benefits and tax deficiencies in the income statement was applied prospectively. The amended guidance related to the timing of when excess tax benefits are recognized, did not have an impact on the consolidated financial statements. The amended guidance related to the presentation of employee taxes paid on the statement of cash flows was applied retrospectively. This change resulted in a   $2.2  million   increase in cash flows from operating activities and a decrease in cash flows from financing

11

 


 

 

activities for the nine months ended September  30, 2016 . The company has elected to account for forfeitures as they occur. This change did not have a material impact on the financial statements.



Effective January  1, 2018, the company will adopt the amended guidance in ASC Topic 230, Statement of Cash Flows: Restricted Cash , which requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amended guidance will be applied retrospectively.  



Effective January  1, 2018, the company will adopt the amended guidance in ASC Topic 606, Revenue from Contracts with Customers .   ASC Topic 606 is designed to create improved revenue recognition and disclosure comparability in financial statements. The provisions of ASC Topic 606 include a five-step process by which an entity will determine revenue recognition, depicting the transfer of goods or services to customers in amounts which reflect the payment an entity expects to be entitled to in exchange for goods or services. The new guidance requires the company to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the company satisfies the performance obligation. In addition, ASC Topic 606 requires certain disclosures about contracts with customers and provides comprehensive guidance for transactions such as service revenue, contract modifications and multiple-element arrangements. The new standard is effective for fiscal years and interim periods within those years, beginning after December  15, 2017, and allows for early adoption.  



The company completed a comparison of the current revenue recognition policies to ASC Topic 606 requirements for each of the comp any’s major revenue categories. Results indicate that the amended guidance will not materially change the amount or timing of revenues recognized by the company and the majority of the company's contracts will continue to be recognized at a point in time and that the number of performance obligations and the accounting for variable consideration are not expected to be significantly different from current practice. In addition, many of the company's sales contracts are considered derivatives under ASC Topic 815, Derivatives and Hedging , and are therefore excluded from the scope of Topic 606. ASC Topic 606 also requires disclosure of significant changes in contract asset and contract liability balances between periods and the amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period, when applicable. ASC Topic 606 may be adopted retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. The company anticipates adopting the amended guidance using the modified retrospective transition method.



Effective January  1, 2018, the company will adopt the amended guidance in ASC Topic 740, Income Taxes: Intra-Entity Transfers of Assets other than Inventory , which requires the recognition of current and deferred income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amended guidance will be applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption.



Effective January  1, 2018, the company will adopt the amended guidance in ASC Topic 805, Business Combinations: Clarifying the Definition of a Business , which clarifies the definition of a business with the objective of adding guidance to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The amended guidance will be applied prospectively.



Effective January  1, 2019, the company will adopt the amended guidance in ASC Topic 842, Leases , which aims to make leasing activities more transparent and comparable, requiring substantially all leases to be recognized by lessees on the balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. The new standard is effective for fiscal years beginning after December  15, 2018 and interim periods within those years, and allows for early adoption.  The company has established an implementation team to evaluate the impact of the new standard. The new standard will significantly increase right-of-use assets and lease liabilities on the company’s consolidated balance sheet, primarily due to operating leases that are currently not recognized on the balance sheet. The company anticipates adopt ing the amended guidance using the modified retrospective transition method.



Effective January  1, 2019, the amended guidance in ASC Topic 815, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities , becomes effective. ASC Topic 815 is designed to improve the alignment of risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the pr esentation of hedging results. The provisions of Topic 815 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to

12

 


 

 

eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the amendments in this u pdate. Early adoption is permitted and the amended presentation and disclosure guidance is required only prospectively. Based on the company’s initial assessment, no ma terial changes are anticipated and t he company intends to implement the amended guidance in ASC Topic 815 in either the fourth quarter of fiscal 2017 or the first quarter of fiscal 2018. 



Effective January  1, 2020, the company will adopt the amended guidance in ASC Topic 350, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment , which simplifies the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The annual goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge equal to the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit, would be recognized. The amended guidance will be applied prospectively.

 

2.  ACQUISITIONS



Acquisition of Cattle Feedlots



On May  16, 2017 , the company acquired two cattle-feeding operations from Cargill Cattle Feeders, LLC for $57.7  million , including certain working capital adjustments. The transaction included the feed yards located in Leoti, Kansas and Yuma, Colorado , which added combined feedlot capacity of 155,000 head of cattle to the company’s operations. The transaction was financed using cash on hand.   There were no material acquisition costs recorded for the acquisition.



As part of the transaction, the company also entered into a long-term cattle supply agreement with Cargill Meat Solutions Corporation. Under the cattle supply agreement, all cattle placed in the Leoti, Yuma and the company’s existing Kismet, Kansas feedlots will be sold exclusively to Cargill Meat Solutions under an agreed upon pricing arrangement.



The purchase price allocation is based on the preliminary results of internal valuations. The purchase price and purchase price allocation are preliminary until contractual post-closing working capital adjustments and valuations are finalized.



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







 

 

 

 

Amounts of Identifiable Assets Acquired
and Liabilities Assumed

Inventory

 

$

20,576 

Prepaid expenses and other

 

 

52 

Property and equipment, net

 

37,205 



 

 

 

 

Current liabilities

 

(180)



Total identifiable net assets

$

57,653 



13

 


 

 

Acquisition of Fleischmann’s Vinegar Company



On October 3, 2016 , the company acquired all of the issued and outstanding stock of SCI Ingredients Holdings, Inc. , the holding company of Fleischmann’s Vinegar Company, Inc., for $258.3  million in cash. A portion of the purchase price was used to repay existing debt. Fleischmann’s Vinegar is one of the world’s largest producers of food-grade industrial vinegar.

 

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







 

 

 

 

Amounts of Identifiable Assets Acquired
and Liabilities Assumed

Cash

 

$

4,148 

Inventory

 

 

9,308 

Accounts receivable, net

 

 

13,919 

Prepaid expenses and other

 

 

1,054 

Property and equipment

 

 

49,175 

Intangible assets

 

 

90,500 



 

 

 

 

Current liabilities

 

 

(9,689)

Income taxes payable

 

 

(216)

Deferred tax liabilities

 

 

(41,882)



Total identifiable net assets

 

116,317 



 

 

 

 

Goodwill

 

142,002 



Purchase price

$

258,319 



The amounts above reflect the final purchase price allocation. As of September  30, 2017 , based on the final valuations , assets acquired and liabilities assumed were adjusted from the prior quarter to reflect an increase in the fair value of property and equipment of $6.2  million , a decrease in accumulated depreciation of $0.5  million , a decrease in the fair value of intangible assets of $4.0  million ,   a   de crease in accumulated amortization of $0.3  million , a decrease in the fair value of goodwill of $0.8  million , a   de crease of $0.1  million in income taxes payable and a n   in crease in deferred tax liabilities of $1.5  million .



As of September  30, 2017 , based on the final valuations , the company’s custome r relationship intangible asset recognized in connection with the Fleischmann’s acquisition is $74.7  million , net of   $5.3  million   of accumulated amortization, and has a remaining 1 4 -year weighted-average amortization period. As of September  30, 2017 , the company also has an indefinite-lived trade name intangible asset of $10.5  million . The company recognized $1.1  million and $3.9  million   of amortization expense associated with the amortizing customer relationship intangible asset during the three and nine months ended September  30, 2017 , respectively, and expects estimated amortization expense for the next five years of $5.6  million per annum. The excess purchase price over the intangibles fair values was allocated to goodwill, none of which is expected to be deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to arise after the acquisition.



Acquisition of Ethanol Plants



On September  23, 2016 , the company acquired three ethanol plants located in Madison, Illinois, Mount Vernon, Indiana, and York, Nebraska from subsidiaries of Abengoa S.A. for approximatel y $234.9  million for the ethanol plant assets, and $19.1  million for working capital acquired and liabilities assumed. These ethanol facilities have a combined annual production capacity of approximately 230 mmgy.



14

 


 

 

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







 

 

 

 

Amounts of Identifiable Assets Acquired
and Liabilities Assumed

Inventory

 

$

16,904 

Accounts receivable, net

 

1,826 

Prepaid expenses and other

 

 

2,224 

Property and equipment, net

 

234,947 

Other assets

 

 

3,885 



 

 

 

 

Current maturities of long-term debt

 

(406)

Current liabilities

 

(2,580)

Long-term debt

 

(2,763)



Total identifiable net assets

$

254,037 



The amounts above reflect the final purchase price allocation, which did not change materially from the initial allocation.



Concurrently with the company’s acquisition of the Abengoa ethanol plants, on September  23, 2016, the partnership acquired the storage assets of the Abengoa ethanol plants from the company for $90.0  million in a transfer between entities under common control and entered into amendments to the related commercial agreements with Green Plains Trade

 

3 .  FAIR VALUE DISCLOSURES



The following methods, assumptions and valuation techniques were used to estimate 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 1 unrealized gains and losses on commodity derivatives relate to exchange-traded open trade equity and option values in the company’s brokerage accounts.



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 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.



15

 


 

 

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 September  30, 2017



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

$

261,588 

 

$

 -

 

$

 -

 

$

261,588 

Restricted cash

 

30,773 

 

 

 -

 

 

 -

 

 

30,773 

Margin deposits

 

52,527 

 

 

 -

 

 

(52,527)

 

 

 -

Inventories carried at market

 

 -

 

 

114,410 

 

 

 -

 

 

114,410 

Unrealized gains on derivatives

 

14,690 

 

 

5,061 

 

 

31,812 

 

 

51,563 

Other assets

 

115 

 

 

 -

 

 

 -

 

 

115 

Total assets measured at fair value

$

359,693 

 

$

119,471 

 

$

(20,715)

 

$

458,449 



 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable (1)

$

 -

 

$

31,377 

 

$

 -

 

$

31,377 

Unrealized losses on derivatives

 

20,715 

 

 

12,004 

 

 

(20,715)

 

 

12,004 

Other

 

 -

 

 

15 

 

 

 -

 

 

15 

Total liabilities measured at fair value

$

20,715 

 

$

43,396 

 

$

(20,715)

 

$

43,396 







 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December  31, 2016



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

$

304,211 

 

$

 -

 

$

 -

 

$

304,211 

Restricted cash

 

51,979 

 

 

 -

 

 

 -

 

 

51,979 

Margin deposits

 

50,601 

 

 

 -

 

 

(50,601)

 

 

 -

Inventories carried at market (2)

 

 -

 

 

154,022 

 

 

 -

 

 

154,022 

Unrealized gains on derivatives

 

8,272 

 

 

14,818 

 

 

24,146 

 

 

47,236 

Other assets

 

116 

 

 

 -

 

 

 -

 

 

116 

Total assets measured at fair value

$

415,179 

 

$

168,840 

 

$

(26,455)

 

$

557,564 



 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable (1)

$

 -

 

$

35,288 

 

$

 -

 

$

35,288 

Unrealized losses on derivatives

 

26,455 

 

 

8,916 

 

 

(26,455)

 

 

8,916 

Other liabilities

 

 -

 

 

81 

 

 

 -

 

 

81 

Total liabilities measured at fair value

$

26,455 

 

$

44,285 

 

$

(26,455)

 

$

44,285 



(1)

Accounts payable is generally stated at historical amounts with the exception of $ 31.4  million and $35.3  million at September  30, 2017 and December  31, 2016, respectively, related to certain delivered inventory subject to changes in commodity prices. These payables are hybrid financial instruments for which the company has elected the fair value option.

(2)

Inventories carried at market have been revised from previously reported results to include   $77.0  million of inventories held under a fair value hedging relationship .   T here wa s no impact to the financial s tatements resulting from this revision.



The company believes the fair value of its debt was approximately $1.3  billion compared with a book value of $1.3  billion at September  30, 2017 , and approximately $1.1  billion compared with a book value of $1.1  billion at   December  31, 2016 .   The company estimated the fair value of its outstanding debt using Level 2 inputs. The company believes the fair values of its accounts receivable app roximated book value, which was  $ 115.0  million   and $ 147.5  million at September  30, 2017 ,   and December  31, 2016 , 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 issued repr esent Level 3 measurements that were

16

 


 

 

derived using a combination of the income approach, market approach and cost approach for the specific assets or liabilities being valued .

 

4.  SEGMENT INFORMATION



As a result of acquisitions during 2016, the company implemented organizational segment changes during the fourth quarter of 2016, whereby the company management now reports the financial and operating performance in 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 and 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 feedlots, vinegar production and food-grade corn oil operations and (4) partnership, which includes fuel storage and transportation services. Prior periods have been reclassified to conform to the revised segment presentation.



T he company has re-evaluated the profitability measure of its reportable segments’ operating performance and has determined that segment EBITDA (earnings before interest, taxes, depreciation and amortization) is primarily used by the company’s management to evaluate segment operating activities, and therefore is a more meaningful profitability measure than the previously r eported segment operating income .   In addition, EBITDA is a financial measure that is widely used by analysts and investors in the company’s industries. As a result, the company is now including segment EBITDA as a performance measure.



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 agribusiness and energy services 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
September 30,

 

Nine Months Ended
September 30,



2017

 

2016

 

2017

 

2016

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Ethanol production:

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

$

620,180 

 

$

586,988 

 

$

1,857,356 

 

$

1,710,484 

Intersegment revenues

 

3,579 

 

 

 -

 

 

6,624 

 

 

 -

Total segment revenues

 

623,759 

 

 

586,988 

 

 

1,863,980 

 

 

1,710,484 

Agribusiness and energy services:

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

164,604 

 

 

168,143 

 

 

483,670 

 

 

531,445 

Intersegment revenues

 

14,406 

 

 

8,936 

 

 

33,679 

 

 

24,934 

Total segment revenues

 

179,010 

 

 

177,079 

 

 

517,349 

 

 

556,379 

Food and ingredients:

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

114,750 

 

 

84,655 

 

 

329,432 

 

 

230,812 

Intersegment revenues

 

38 

 

 

37 

 

 

113 

 

 

112 

Total segment revenues

 

114,788 

 

 

84,692 

 

 

329,545 

 

 

230,924 

Partnership:

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

1,701 

 

 

2,066 

 

 

4,724 

 

 

6,042 

Intersegment revenues

 

24,748 

 

 

24,139 

 

 

74,019 

 

 

69,445 

Total segment revenues

 

26,449 

 

 

26,205 

 

 

78,743 

 

 

75,487 

Revenues including intersegment activity

 

944,006 

 

 

874,964 

 

 

2,789,617 

 

 

2,573,274 

Intersegment eliminations

 

(42,771)

 

 

(33,112)

 

 

(114,435)

 

 

(94,491)

Revenues as reported

$

901,235 

 

$

841,852 

 

$

2,675,182 

 

$

2,478,783 









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Three Months Ended
September 30,

 

Nine Months Ended
September 30,



2017

 

2016

 

2017

 

2016

Cost of goods sold:

 

 

 

 

 

 

 

 

 

 

 

Ethanol production

$

590,904 

 

$

549,705 

 

$

1,802,688 

 

$

1,649,641 

Agribusiness and energy services

 

168,735 

 

 

163,643 

 

 

487,239 

 

 

518,135 

Food and ingredients

 

98,854 

 

 

78,792 

 

 

281,898 

 

 

219,087 

Partnership

 

 -

 

 

 -

 

 

 -

 

 

 -

Intersegment eliminations

 

(42,706)

 

 

(33,257)

 

 

(114,123)

 

 

(93,769)



$

815,787 

 

$

758,883 

 

$

2,457,702 

 

$

2,293,094 









 

 

 

 

 

 

 

 

 

 

 



Three Months Ended
September 30,

 

Nine Months Ended
September 30,



2017

 

2016

 

2017

 

2016

EBITDA:

 

 

 

 

 

 

 

 

 

 

 

Ethanol production

$

25,570 

 

$

30,155 

 

$

38,521 

 

$

39,164 

Agribusiness and energy services

 

5,150 

 

 

6,310 

 

 

15,910 

 

 

21,246 

Food and ingredients

 

13,272 

 

 

5,465 

 

 

39,741 

 

 

10,430 

Partnership

 

17,589 

 

 

16,620 

 

 

51,549 

 

 

47,241 

Intersegment eliminations

 

 

 

(39)

 

 

(147)

 

 

(1,174)

Corporate activities

 

(11,212)

 

 

(9,439)

 

 

(27,275)

 

 

(25,944)



$

50,377 

 

$

49,072 

 

$

118,299 

 

$

90,963 









 

 

 

 

 

 

 

 

 

 

 



Three Months Ended
September 30,

 

Nine Months Ended
September 30,



2017

 

2016

 

2017

 

2016

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

Ethanol production

$

20,959 

 

$

15,725 

 

$

61,443 

 

$

46,655 

Agribusiness and energy services

 

1,457 

 

 

628 

 

 

2,776 

 

 

1,882 

Food and ingredients

 

3,139 

 

 

257 

 

 

9,259 

 

 

802 

Partnership

 

1,280 

 

 

1,515 

 

 

3,781 

 

 

4,220 

Corporate activities

 

999 

 

 

1,161 

 

 

2,846 

 

 

2,573 



$

27,834 

 

$

19,286 

 

$

80,105 

 

$

56,132 



The following tab le reconciles net income to EBITDA for the periods indicated (in thousands ):







 

 

 

 

 

 

 

 

 

 

 



Three Months Ended
September 30,

 

Nine Months Ended
September 30,



2017

 

2016

 

2017

 

2016

Net income

$

39,429 

 

$

12,884 

 

$

29,284 

 

$

6,053 

Interest expense

 

31,889 

 

 

11,819 

 

 

69,815 

 

 

33,117 

Income tax expense (benefit)

 

(48,775)

 

 

5,083 

 

 

(60,905)

 

 

(4,339)

Depreciation and amortization

 

27,834 

 

 

19,286 

 

 

80,105 

 

 

56,132 

EBITDA

$

50,377 

 

$

49,072 

 

$

118,299 

 

$

90,963 



18

 


 

 

The following table sets forth third-party revenues by product line (in thousands ):







 

 

 

 

 

 

 

 

 

 

 



Three Months Ended
September 30,

 

Nine Months Ended
September 30,



2017

 

2016

 

2017

 

2016

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Ethanol

$

625,787 

 

$

550,724 

 

$

1,830,887 

 

$

1,622,168 

Distillers grains

 

97,136 

 

 

129,345 

 

 

303,527 

 

 

357,070 

Corn oil

 

33,678 

 

 

49,844 

 

 

121,166 

 

 

111,727 

Grain

 

19,338 

 

 

30,003 

 

 

73,860 

 

 

145,800 

Food and ingredients

 

112,697 

 

 

70,012 

 

 

305,211 

 

 

201,423 

Service revenues

 

1,701 

 

 

2,066 

 

 

4,724 

 

 

6,042 

Other

 

10,898 

 

 

9,858 

 

 

35,807 

 

 

34,553 



$

901,235 

 

$

841,852 

 

$

2,675,182 

 

$

2,478,783 



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





 

 

 

 

 



September 30,
2017

 

December 31,
2016

Total assets (1) :

 

 

 

 

 

Ethanol production

$

1,137,903 

 

$

1,206,155 

Agribusiness and energy services

 

467,955 

 

 

579,977 

Food and ingredients

 

691,663 

 

 

406,429 

Partnership

 

72,965 

 

 

74,999 

Corporate assets

 

272,844 

 

 

257,652 

Intersegment eliminations

 

(14,793)

 

 

(18,720)



$

2,628,537 

 

$

2,506,492 



(1)

Asset balances by segment exclude intercompany receivable balances.

 

5.  INVENTORIES



Inventories are carried at lower of cost or net realizable value, except for commodities held for sale and fair-value hedged inventories. Commodities held for sale are reported at market value.  



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











 

 

 

 

 



September  30,
2017

 

December  31,
2016

Finished goods

$

123,860 

 

$

99,009 

Commodities held for sale

 

42,783 

 

 

65,926 

Raw materials

 

128,072 

 

 

135,516 

Work-in-process

 

283,936 

 

 

91,093 

Supplies and parts

 

33,796 

 

 

30,637 



$

612,447 

 

$

422,181 

 

6.  GOODWILL



Changes in carrying amount of goodwill attributable to each business segment for the nine months ended September  30, 2017 , were as follows (in thousands ):