Green Plains 2011 Annual Report
Harvesting energy.
SEGMENT OPERATING
INCOME 2011 1
$121.4 Million
60%
Ethanol
Production
10%
Agribusiness
8%
Marketing &
Distribution
40%
22%
Corn Oil
Production
ETHANOL PRODUCTION
(IN MILLIONS OF GALLONS)
TOTAL REVENUES
(IN MILLIONS)
GROSS PROFIT
(IN MILLIONS)
722
$3,554
544
379
$2,134
$1,306
$172
$153
$84
2009
2010
2011
2009
2010
2011
2009
2010
2011
1 Operating income before corporate selling, general and administrative expenses.
1
Green Plains is a company focused on risk
management, operational excellence and
safety, and we are energized by a clear
purpose: harvest the energy locked up in
a single kernel of corn.
Harvesting that energy drives our
diversification. Finding innovative ways
to achieve higher ethanol production,
extracting the oil from corn, producing high-
protein animal feed and recycling carbon
dioxide are just some of the methods we
use to find value up and down the product
chain — from feed to food to fuel. The
results are exciting and so is the potential.
Green Plains — Harvesting Energy.
GREEN PLAINS 2011 ANNUAL REPORT 2
Dear Green Plains Investor:
Harvesting Energy: Green Plains is an enterprise focused on
harvesting the energy out of the commodities we process.
We generated 40% of our segment operating income from
non-ethanol segments. This contribution helped us generate a
By unleashing the energy in the corn kernel, we produce
record amount of operating income last year. More importantly,
feed, food and fuel to extract value for our shareholders.
growing our non-ethanol operating income effectively lowers
We would like to take a few pages of this annual report to
our breakeven for our ethanol production, which is a key factor
show you what we mean by harvesting energy.
in executing our risk management strategy.
A Look at 2011 Performance: We experienced solid growth
last year. Our ethanol production increased 33% over 2010
We ended the year with a strong liquidity position and a
solid capital structure. During 2011, we secured additional
as we produced a record 722 million gallons of fuel ethanol.
financing in our agribusiness segment with a syndicated
This increase was aided by our acquisition of the Otter Tail
$195 million revolving credit facility. We believe this facility
ethanol plant located in Fergus Falls, Minnesota in the first
will provide significant flexibility as well as position this
quarter of last year. We also sold a record two million tons
segment for further growth in the future.
of livestock feed, or distillers grains, in 2011. The marketing
and distribution segment contributed 8% of our segment
operating income for last year. In the third quarter of 2011,
The Fundamentals Driving Our Business: We are in a
new era for the ethanol industry, a time when the buyers
we acquired the remaining interest of BlendStar, as we
of ethanol no longer receive a tax break from the federal
believe that full ownership of BlendStar will allow us to
government. We are optimistic that the long-term
accelerate growth of this ethanol blending terminal business.
fundamentals for ethanol are very strong. Our confidence
comes from what we believe are the demand drivers for
Our agribusiness segment operating income grew
our industry and those are:
significantly last year, increasing by more than 100% over
2010. This result was driven by adding five million bushels
of grain storage and increasing our grain handling volumes
• The renewable fuel standard mandate is 13.2 billion gallons
for 2012, an increase of 600 million gallons over 2011. The
23% over 2010. In a short time, we will have built a substantial
mandate continues to increase 600 million gallons a year
grain handling business with 40 million bushels of storage
until it reaches 15 billion gallons in 2015.
capacity after completing the expansion of our most recently-
acquired elevator in St. Edward, Nebraska. We believe
our grain handling capability positions us in the top
tier of U.S. grain handling companies.
The most important addition to our business
in 2011 was completing the implementation of
corn oil extraction processes at all nine of our
ethanol plants. Our new corn oil production
segment generated $27 million, or 22%,
of segment operating income for all of
last year. Our $21 million investment was
paid back in less than a year and should
contribute significant cash flows for
years to come.
In all, 2011 was a strong growth year and
a year during which our diversification
strategy provided solid results.
• Export markets should remain active as we believe
the U.S. ethanol industry should export over 500
million gallons in 2012. This is down from the record
1.2 billion gallons of ethanol exported in 2011, but
still a key factor driving future ethanol demand.
• The makeup of the domestic gasoline
market has changed over the last two
years. Refiners are producing more
CBOB, a sub-grade 84 octane gasoline,
which requires ethanol, or other octane
sources, to meet the minimum octane
rating requirements for the U.S. gasoline
market. In addition, the reformulated
gasoline market must still have an
oxygenate blended in to comply with
the Clean Air Act. The fact remains
TODD BECKER
President and Chief Executive Officer
GREEN PLAINS 2011 ANNUAL REPORT 3
that U.S. ethanol is the most economical and best source of
octane and oxygenate for our fuel supply.
• Ethanol prices in early 2012 remain at a large discount to
gasoline. In fact, ethanol currently sells at a greater discount
to wholesale gasoline than the blender’s tax credit provided
last year. Accordingly, blenders and refiners have a strong
economic incentive to blend.
• E15. The biggest news our industry has received recently
is that the U.S. Environmental Protection Agency’s (EPA’s)
evaluation of the health effects tests on E15 are complete
and that fuel manufacturers are now able to register E15
with the EPA to sell. The EPA decision clears the path to
introduce E15 into the marketplace and we are working very
quickly to move the fuel registration forward. By allowing
voluntary use of E15 in our domestic fuel supply, E15 could
significantly increase demand for ethanol.
Future Growth: We continue to focus on profitable growth
for 2012. We are building a 96-car unit train terminal
in Birmingham, Alabama on the BNSF Railway that is
expected to be operational in the fourth quarter of 2012.
This BlendStar terminal will have 160,000 barrels of ethanol
“We process over 7 million tons
of corn a year in our ethanol
production segment, more corn
than most countries import from
the U.S. While this is evidence of
our size, the really exciting part of
our story lies in the multiple ways
we have found to extract value out
of a bushel of corn, and that adds
to our financial results.”
Todd Becker, President and Chief Executive Officer
storage, which is significantly larger in capacity than any of
$65.2 million. We believe these repurchases are accretive
our existing blending terminals.
to our shareholders as it removes these shares from our
outstanding common share count. It also demonstrates our
Agribusiness remains a focus for growth. As U.S. farmers
confidence in the business going forward.
continue to produce larger crops, we believe grain handling,
storage and merchandising will be an area where we can
Over the last three years, we have worked steadily on
earn solid returns on our investment.
diversifying our company. We have built a collection of
In February 2012, BioProcess Algae broke ground on a
continue on the path. Our focus on long-term shareholder
five-acre algae production facility at our ethanol plant in
value continues and our core values of disciplined risk
Shenandoah, Iowa. The facility should be completed in the
management, operational excellence and providing our
third quarter. We are excited about the path to profitability
employees with a safe work environment are the foundation
great assets along the ethanol value chain and we plan to
we are on with the Grower HarvesterTM technology. The
of our philosophy.
focus of BioProcess Algae remains on economically
producing algae for feed, food and nutraceutical markets,
Sincerely,
as well as carbon mitigation.
In separate transactions completed in September 2011
and March 2012, we repurchased 7.2 million shares of
Todd Becker
Green Plains’ common stock from NTR plc for a total of
President and Chief Executive Officer
This Annual Report contains “forward-looking statements” within the meaning of the federal securities laws. See the discussion under “Cautionary Information Regarding Forward-Looking Statements”
in our 2011 Form 10-K for matters to be considered in this regard.
GREEN PLAINS 2011 ANNUAL REPORT 4
Extracting Value
The world has changed immensely when we think about
crop production and commodity flows. Twenty-five
years ago, no one was thinking that a single agricultural
commodity — corn — would become a significant fuel
feedstock for our automobiles. Today, ethanol represents
10% of U.S. gasoline demand. This ranks third in supply
sources for the U.S., only behind domestic and Canadian oil
production. As the world population continues to grow, the
need for more renewable sources of fuel will grow. This will
influence world crop production as agricultural crops now
become energy crops.
The challenge in seeing possibilities lies in the perspective
one holds. Green Plains views the corn kernel as a source
of energy, or a BTU generator. This point of view opens up
unlimited possibilities.
BTUs for animals — Feed. BTUs for people — Food.
BTUs for automobiles — Fuel.
By thinking of a kernel of corn in terms of energy or BTUs,
we are able to measure the value we extract. This serves as a
scorecard for our performance — the more BTUs we extract,
the more value we generate. Moreover, keeping score serves
to challenge the competitive spirit of our people.
A question we ask ourselves is: How much energy can
a bushel of corn produce?
Pursuing this answer thus far has produced more than
304,400 BTUs per bushel of corn. Based on our platform,
that is approximately eighty trillion BTUs annually.
Additionally, this “BTU pursuit” has driven Green Plains to
leverage its organizational knowledge in capturing growth
and synergies in three additional business segments:
agribusiness, corn oil and marketing & distribution. But, we
have a lot of opportunity remaining.
We realize that each kernel holds vast and varied options,
not just fuel for vehicles, but fuel in the form of feed and food.
We also know that in the process of extracting this energy,
we generate the customary co-products, such as distillers
grains and corn oil, but also the unconventional and untapped
opportunities from capturing and utilizing the inevitable
production of carbon dioxide that occurs in manufacturing.
When we focus on capturing energy, we discover new
opportunities and harmonize our institutional knowledge
with our infrastructural and people resources. It is a sound
and robust strategy.
TODAY 1 BUSHEL
OF CORN PRODUCES:
235,000 BTUs
of fuel energy
for vehicles
8,500 BTUs
of corn oil energy
for feed or fuel
60,900 BTUs
of distillers grains
for feed
GREEN PLAINS 2011 ANNUAL REPORT 5
By thinking of a kernel of corn as energy or BTUs,
we are able to measure the amount of energy we
produce for consumers. This serves as a scorecard
for our performance — the more BTUs we can
extract, the more value we generate.
GREEN PLAINS 2011 ANNUAL REPORT 6
Expanding the Value Chain
From a growing base of interlinked physical assets, Green
value chain. When we view this, we see clear guidance
Plains has created a chain of synergistic capabilities that
and direction in our relentless pursuit of the BTU.
demonstrate its strategic efforts. This chart is a visual
depiction of Green Plains’ capabilities to extract value from
Feed. Food. Fuel. Green Plains is fully immersed in
a kernel of corn.
identifying, harvesting, marketing and distributing
the energy inherent in a single kernel of corn.
Distillers Grains
Marketing and distribution.
This depiction also serves to map out untapped
Through the Green Plains business model, the
opportunities that are within reach through the innovation
value stream from a single kernel of corn is
and resourcefulness of our associates up and down the
flush with opportunity.
Swine Feed
Pork Products
Packaged Pork Meat
Consumer Use
Chicken Feed
Poultry Products
Packaged Chicken Meat
Consumer Use
Cattle Feed
Beef Products
Packaged Beef Meat
Consumer Use
Dairy Cattle Feed
Dairy Products
Consumer Use
Seed Sales
Green Plains sells
seed to farmers.
Fertilizer Sales
Green Plains aids farmers
by selling fertilizer.
Grain Sales/Marketing
Green Plains buys and sells grain
in several markets and states.
Farmers
Planting
Harvest
Corn Processing
Green Plains processes more
than 7 million tons of corn in
9 ethanol facilities strategically
located around the midwest.
Distillers Grains
Green Plains expects to produce
over 2 million tons of high
quality distillers grains.
Corn Oil
Green Plains expects
to produce 130 million
pounds of corn oil.
Feed Additive
Corn oil provides
fat content to
livestock feed.
Biodiesel
BlendStar
9 blending terminals located in southern
U.S. provide 625 million gallons of
ethanol throughput capacity.
Corporate Fleets
Biodiesel is a viable alternative for corporate
shipping fleets and saves companies money.
BlendStar
Soil Agronomy
Green Plains agronomists analyze
soil, advise about planting and
fertilization strategies, and suggest
ways farmers can boost yields while
taking good care of the land.
Value Capture
When we break
it down, Green
Plains is organized
around a three-
pronged attack on
capturing value.
Corn
Grain Storage
Green Plains has over
48 million bushels of storage
at 15 grain storage facilities
and 9 ethanol plants.
Grain Purchasing
Green Plains purchases grain
for use in its ethanol plants.
Ethanol
Green Plains expects
to produce 740 million
gallons of ethanol.
CO2
Carbon dioxide is a
co-product of processing
corn. Carbon dioxide along
with water, sunlight and a
few nutrients are the key
feedstocks to grow algae.
Algae
Algae is grown in
BioProcess Algae’s
emerging Grower
Harvester technology.
Paste Algae
Paste algae is the
consistency of tooth-
paste and super
concentrated.
1/3
Protein
& Fiber
1/3
Starch
1/3
Carbon
Dioxide
Distillers Grains
Corn Oil
Food Products
Consumer Use
Ethanol
Algae
Ethanol Production
Ethanol Marketing & Distribution
Extraction/Purification
Extraction/Purification of selected
compounds for specific applications.
Ethanol at Gas Stations
Livestock Feed
Paste algae is an additive to
numerous livestock feeds.
Food Products
Consumer Use
Cosmetic Products
Consumer Use
Nutraceutical Products
Consumer Use
Cosmetics
Paste algae is an additive
to many cosmetics.
Nutraceuticals
Paste algae is used in the production
of dietary supplements, herbal
products, and processed foods such
as cereals, soups and beverages.
Dried Algae
Dried algae ships and stores
for a longer period due to
the low water content.
Nutritional Supplement
Dried algae can be made
into human nutritional
products such as vitamins.
Fish Feed
Dried algae is an additive
to fish nutrition in
commercial aquaculture.
Corporate Use
Consumer Use
Consumer Use
Consumer Use
Consumer Use
Biomass
Algae can be used for
energy production.
Livestock Feed
Dried algae is an additive to
numerous livestock feed rations
including chicken, cattle and swine.
Heart Healthy Products
Algae is a supplement to heart-
healthy milk and eggs that include
Omega 3 and DHA.
GREEN PLAINS 2011 ANNUAL REPORT
7
Distillers Grains
Marketing and distribution.
Swine Feed
Pork Products
Packaged Pork Meat
Consumer Use
Chicken Feed
Poultry Products
Packaged Chicken Meat
Consumer Use
Cattle Feed
Beef Products
Packaged Beef Meat
Consumer Use
Dairy Cattle Feed
Dairy Products
Consumer Use
Seed Sales
Green Plains sells
seed to farmers.
Fertilizer Sales
Green Plains aids farmers
by selling fertilizer.
Grain Sales/Marketing
Green Plains buys and sells grain
in several markets and states.
Farmers
Planting
Harvest
Corn Processing
Green Plains processes more
than 7 million tons of corn in
9 ethanol facilities strategically
located around the midwest.
Distillers Grains
Green Plains expects to produce
over 2 million tons of high
quality distillers grains.
Corn Oil
Green Plains expects
to produce 130 million
pounds of corn oil.
Feed Additive
Corn oil provides
fat content to
livestock feed.
Biodiesel
BlendStar
9 blending terminals located in southern
U.S. provide 625 million gallons of
ethanol throughput capacity.
Corporate Fleets
Biodiesel is a viable alternative for corporate
shipping fleets and saves companies money.
BlendStar
Ethanol Production
Ethanol Marketing & Distribution
Extraction/Purification
Extraction/Purification of selected
compounds for specific applications.
Ethanol at Gas Stations
Livestock Feed
Paste algae is an additive to
numerous livestock feeds.
Grain Storage
Green Plains has over
48 million bushels of storage
at 15 grain storage facilities
and 9 ethanol plants.
Grain Purchasing
Green Plains purchases grain
for use in its ethanol plants.
Ethanol
Green Plains expects
to produce 740 million
gallons of ethanol.
Soil Agronomy
Green Plains agronomists analyze
soil, advise about planting and
fertilization strategies, and suggest
ways farmers can boost yields while
taking good care of the land.
CO2
Carbon dioxide is a
co-product of processing
corn. Carbon dioxide along
with water, sunlight and a
few nutrients are the key
feedstocks to grow algae.
Algae
Algae is grown in
BioProcess Algae’s
emerging Grower
Harvester technology.
Paste Algae
Paste algae is the
consistency of tooth-
paste and super
concentrated.
Dried Algae
Dried algae ships and stores
for a longer period due to
the low water content.
Nutritional Supplement
Dried algae can be made
into human nutritional
products such as vitamins.
Corporate Use
Consumer Use
Consumer Use
Food Products
Consumer Use
Cosmetic Products
Consumer Use
Nutraceutical Products
Consumer Use
Consumer Use
Food Products
Consumer Use
Consumer Use
Cosmetics
Paste algae is an additive
to many cosmetics.
Nutraceuticals
Paste algae is used in the production
of dietary supplements, herbal
products, and processed foods such
as cereals, soups and beverages.
Fish Feed
Dried algae is an additive
to fish nutrition in
commercial aquaculture.
Biomass
Algae can be used for
energy production.
Livestock Feed
Dried algae is an additive to
numerous livestock feed rations
including chicken, cattle and swine.
Heart Healthy Products
Algae is a supplement to heart-
healthy milk and eggs that include
Omega 3 and DHA.
GREEN PLAINS 2011 ANNUAL REPORT 8
We produce
enough ethanol to
power 7.4 million
cars using E15.
Building Excellence
Green Plains is built on three mainstays: disciplined risk
little changes might have beneficial effects. In our employees,
management, operational excellence and safety. The
we look for seasoned know-how and a get-it-done spirit.
values embedded in this foundation guide our day-to-day
In our culture, innovation begins with a management
behavior, development of resources, operating practices
expectation that if you can improve a service, product or
and self expectations.
process, then it should happen. It is standard procedure that
we test such new ideas or practices to determine their value
The result of this management philosophy is a high
to the system. If it doesn’t add greater value than it may
performance culture that delivers significant cash flows, a
eventually cost, it goes back to the drawing board.
record of prudent acquisitions and a focus on growth.
Operational Excellence
You do not need permission to make something better
Risk Management
Eliminating risk eliminates opportunity. Managing risk
involves knowing where risk is imminent, evaluating such
at Green Plains; it is expected. Managers are in place to
risk and deliberately taking risk when we are adequately
recognize how the parts and pieces come together and how
compensated to do so.
GREEN PLAINS 2011 ANNUAL REPORT 9
The economic environment and commodity marketplace
have significant influence in every aspect of our business.
The fundamental knowledge we generate flows from our
intimate involvement in the market. Our trading floor is
charged with identifying opportunity when the market
offers it, while protecting our business from risk before it
arises. This requires discipline and oversight on all levels, at
all hours of the day and night.
Safety
A core value at Green Plains is safety. We believe that every
employee should be able to put in an honest day’s work in
a safe environment. This is why, year over year, our safety
records are excellent and motivate us to do better.
10
9
8
7
6
5
4
3
2
1
0
TOTAL GRAIN PROCESSED & MERCHANDISED
(IN MILLIONS OF TONS)
9.2
7.0
4.7
2009
2010
2011
AGRIBUSINESS (MERCHANDISE)
ETHANOL PRODUCTION (PROCESSED)
GREEN PLAINS 2011 ANNUAL REPORT 10
Rapid Growth
Fortune Magazine, The 100 Fastest-Growing Companies 2011
RANK
2011
2010
1
2
3
4
5
6
7
8
9
6
2
SXC HEALTH SOLUTIONS
Lisle, Ill.
GREEN MOUNTAIN COFFEE ROASTERS
Waterbury, Vt.
HI-TECH PHARMACAL
Amityville, N.Y.
BAIDU
Beijing
29
MEDIFAST
Owings Mills, Md.
ALEXION PHARMACEUTICALS
Cheshire, Conn.
DISCOVERY COMMUNICATIONS
Silver Spring, Md.
Omaha
Omaha
HOME INNS & HOTEL MANAGEMENT
Shanghai
10
67
STURM RUGER
Southport, Conn.
8
EARNINGS PER SHARE
REVENUE
Three-year
annual growth
rate (%)
NET INCOME
Past four quarters
($ millions)
Three-year
annual growth
rate (%)
Rank
REVENUE
Past four quarters*
($ millions)
Rank
TOTAL RETURN
Three-year
annual growth
rate (%)
P/E Current
fiscal year
(est.)
Rank
65
69
234
78
87
82
79
94
848
28
25
3
20
15
17
19
13
1
340
2
68.2
151
113.0
41.5
619.7
21.1
102.9
63
51
65
49
75
788.0
105
51.6
27.9
203.5
46
24
24
2
9
11
7
14
5
3
16
70
68
2,593.9
1,912.4
190.9
1,363.8
271.3
589.5
3,855.0
464.6
262.4
369.6
105
120
42
65
65
37
28
26
49
42
4
1
23
11
10
33
48
53
20
24
39.2
62.3
7.9
59.2
10.4
60.4
17.8
49.2
17.9
12.3
Purchase of specialty-drug provider MedFusionRx helped phar-
macy benefit manager profit from spending on such meds.
Coffee roaster also makes single-serve pods called K-cups and
now sells them to ConAgra, Starbucks, and Dunkin’ Donuts.
Nothing to sneeze at: Maker of generic drugs for allergies, diabe-
tes, and pain reported 51% sales growth over the previous year.
Chinese search engine enjoyed a 78% rise in revenue in 2010,
signing digital-music deals and partnering with Microsoft’s Bing.
Profits at this weight-loss meal seller and counselor, whose pro-
grams are sold by local ‘’coaches,’’ beefed up by 73% in 2010.
Sales for this biophamaceutical concern’s first drug---Soliris,
which treats a rare blood disease---are rising.
Shark Week,
Storm Chasers
, and the Casey Anthony trial buoyed
the owner of cable’s Discovery Channel, TLC, and Animal Planet.
With tourism booming in China, this budget-hotel chain has been
expanding rapidly.
Orders have been smoking hot again this year at the gunmaker,
which lagged in 2010 after scorching in 2008 and 2009.
Maker of components for devices such as the iPhone and iPad
more than doubled its revenue over the past two years.
11
CIRRUS LOGIC
Austin
Courtesy: Fortune magazine, The 100 Fastest-Growing Companies. Volume 164, Number 5.
The Harvest
Sustainable Growth
Pursuing a harvest up and down the value chain brings us
Growth is an indication that a firm is doing something right.
the diversification from the products we can produce and
We believe our growth is the result of doing many things
provides consistent results while avoiding “bet the farm”
right. We have a fundamental philosophy that is being
kinds of strategies.
applied to a variety of opportunities within our reach. This
allows us to leverage our core competencies toward the task
Green Plains has grown purposefully into business segments
of creating, capturing and sustaining value for our company,
that play to the core competencies of the company’s people.
our shareholders, our customers and our people.
We are accomplished at handling, storing, merchandising,
marketing and distributing agricultural and energy outputs.
This combined, focused pursuit of extracting energy bolsters
This year, our efforts were recognized when Fortune
magazine put Green Plains on the 100 fastest-growing
our value-generating capabilities.
companies in America list at #8. As noted in the chart, our
Our course of business development, based on the strategy
and total return landed us in the top tier of solid, growing
of having the right technology in the right location and at
companies. Our inclusion on the list is a testament to our
the right price, has produced over $345 million in earnings
hard-working employees whose commitment made this
three-year growth rate for revenue, earnings per share
before interest, taxes, depreciation and amortization over
achievement possible.
the last three years. With a core competency built on
managing risk and a demonstrated record as a cost-efficient
We were certainly honored to be named to the list and while
producer, our earnings have proven to be stable even with
this is a worthy statement of what we have accomplished, it
the cyclicality of the ethanol industry.
also serves as a challenge. Size and scale offer opportunities
that we are in a position to seize, but we always focus on
To Green Plains, the concept of harvesting moves far beyond
sustainability and profitability.
traditional boundaries.
GREEN PLAINS 2011 ANNUAL REPORTGREEN PLAINS RENEWABLE ENERGY1021040.229912,518.722619.3Ethanol maker increased capacity by 42%, making it the U.S.’sfourth-largest producer only four years after starting operations.GREEN PLAINS RENEWABLE ENERGY1021040.229912,518.722619.3Ethanol maker increased capacity by 42%, making it the U.S.’sfourth-largest producer only four years after starting operations.
11
RANK
2011
2010
EARNINGS PER SHARE
REVENUE
TOTAL RETURN
Three-year
annual growth
rate (%)
NET INCOME
Three-year
Past four quarters
annual growth
REVENUE
Three-year
Past four quarters*
annual growth
Rank
($ millions)
rate (%)
Rank
($ millions)
rate (%)
Rank
P/E Current
fiscal year
(est.)
6
2
SXC HEALTH SOLUTIONS
Lisle, Ill.
GREEN MOUNTAIN COFFEE ROASTERS
Waterbury, Vt.
HI-TECH PHARMACAL
Amityville, N.Y.
BAIDU
Beijing
29
MEDIFAST
Owings Mills, Md.
ALEXION PHARMACEUTICALS
Cheshire, Conn.
DISCOVERY COMMUNICATIONS
Silver Spring, Md.
1
2
3
4
5
6
7
8
9
HOME INNS & HOTEL MANAGEMENT
Shanghai
94
13
8
Omaha
Omaha
10
67
STURM RUGER
Southport, Conn.
11
CIRRUS LOGIC
Austin
65
69
234
78
87
82
79
848
340
28
25
3
20
15
17
19
1
2
68.2
151
788.0
105
113.0
41.5
619.7
21.1
102.9
51.6
27.9
203.5
2
9
11
7
14
5
3
16
70
68
63
51
65
49
75
46
24
24
2,593.9
1,912.4
190.9
1,363.8
271.3
589.5
3,855.0
464.6
262.4
369.6
105
120
42
65
65
37
28
26
49
42
4
1
23
11
10
33
48
53
20
24
39.2
62.3
7.9
59.2
10.4
60.4
17.8
49.2
17.9
12.3
Purchase of specialty-drug provider MedFusionRx helped phar-
macy benefit manager profit from spending on such meds.
Coffee roaster also makes single-serve pods called K-cups and
now sells them to ConAgra, Starbucks, and Dunkin’ Donuts.
Nothing to sneeze at: Maker of generic drugs for allergies, diabe-
tes, and pain reported 51% sales growth over the previous year.
Chinese search engine enjoyed a 78% rise in revenue in 2010,
signing digital-music deals and partnering with Microsoft’s Bing.
Profits at this weight-loss meal seller and counselor, whose pro-
grams are sold by local ‘’coaches,’’ beefed up by 73% in 2010.
Sales for this biophamaceutical concern’s first drug---Soliris,
which treats a rare blood disease---are rising.
Shark Week,
, and the Casey Anthony trial buoyed
the owner of cable’s Discovery Channel, TLC, and Animal Planet.
Storm Chasers
With tourism booming in China, this budget-hotel chain has been
expanding rapidly.
Orders have been smoking hot again this year at the gunmaker,
which lagged in 2010 after scorching in 2008 and 2009.
Maker of components for devices such as the iPhone and iPad
more than doubled its revenue over the past two years.
In Front of the Pack
In mid-August 2011, at the famed Watkins Glen International
window. This terminal is expected to be operational in the
Speedway, E15 passed the million-mile marker. E15, a blend
fourth quarter of 2012.
of 15% ethanol and 85% gasoline, was not the number
emblazoned on the side of a car; rather, it was the blend in the
By leveraging our marketing and distribution capabilities
tank that on that day fueled America’s high-performance race
along with our owned assets, during times of full production,
cars through more than a million miles of NASCAR racing.
we have more than a billion gallons of annual ethanol
distribution with the ability to efficiently ship to any
We consider this one more piece of evidence demonstrating
significant marketplace in the U.S.
that ethanol is out in front of the pack and gaining in the
race toward adoption of higher blends of this renewable
We are well positioned by long-term fundamentals driven by
fuel. Right now, E10 is used universally in cars, and
E15 and growing global demand, world demand for octane
expanding to E15 will conceivably expand domestic market
and oxygenate, and our low-cost producer status.
potential by 50%, or an additional 7 billion gallons. That
spells further opportunity in revenue and profits.
Just like the NASCAR team engaged in a 500-mile race, at
Green Plains our opportunity is not, and never was, a sprint.
In 2011, BlendStar became a wholly-owned subsidiary,
Rather, it has been the means to create a unique, integrated
putting us in a position to accelerate our reach into markets
set of assets guided by the power of seasoned know-how to
that currently do not have efficient access to this renewable
harvest energy.
fuel. Also in 2011, we embarked on building a new ethanol
unit train terminal in Birmingham, Alabama. Situated on the
BNSF railroad, the terminal will have the capacity to store
160,000 barrels and will be able to receive full 96-car unit
trains of ethanol that can be off-loaded within a 24-hour
GREEN PLAINS 2011 ANNUAL REPORTGREEN PLAINS RENEWABLE ENERGY1021040.229912,518.722619.3Ethanol maker increased capacity by 42%, making it the U.S.’sfourth-largest producer only four years after starting operations.GREEN PLAINS RENEWABLE ENERGY1021040.229912,518.722619.3Ethanol maker increased capacity by 42%, making it the U.S.’sfourth-largest producer only four years after starting operations.
12
We begin with the vast experience
of our people in sourcing, handling,
storing, processing, marketing
and distributing agricultural
commodities. Then we challenge
them to engage with fresh, new,
innovative perspectives.
Cooperation
We embrace the value inherent in relationships. Not only
the relationships of people — associates, customers and
suppliers — but the relationships between products and
processes. The result is a practical and productive form
of innovation and the cooperation we have amongst
our employees, suppliers and customers. It is a way of
distinguishing Green Plains from traditional businesses.
We begin with the vast experience of our people in sourcing,
handling, storing, processing, marketing and distributing
agricultural commodities. Then we challenge them to
engage with fresh, new, innovative perspectives. We expect
GREEN PLAINS 2011 ANNUAL REPORT
13
our employees to develop new processes and practices that
tap the value chain or chase the BTU opportunity, wherever
it may lead.
By pursuing the BTU opportunity, we discovered that
carbon dioxide, or CO2, an abundant co-product that
flows from the production of ethanol, could be effectively
channeled into commercial-scale algae production utilizing
This practice empowers our people. Further, we hold
BioProcess Algae’s Grower HarvesterTM bioreactors. By
them accountable for results that draw on the value of
challenging our people to embrace collaboration in a
the relationships we build. This dynamic in our workplace
growing open environment, a powerful new value stream is
requires us to work together as we reach out to customers,
emerging for Green Plains, our venture partners, our people,
suppliers and innovators outside of the company to drive
our customers and our suppliers.
performance. After all, the only way a new idea will produce
value is when it is adopted, so why not speed the process
along from the very start?
GREEN PLAINS 2011 ANNUAL REPORT
14
We’re moving out of the
development phase and into
the phase where our algae
will make it into customers’
finished products.
BioProcess Algae: The Value Chain Expands
Algae blooms have flourished in the sea for millions of years.
They formed from the interaction of CO2 and sunlight. When
they died off, they settled on the ocean floor. Through the
millennia, natural geological processes compressed this algal
Omega-3 fatty acids, a product considered necessary for
healthy human nutrition, but which the body is unable to
produce on its own.
biomass into kerogen and eventually into liquid oil. Over
time, the oil seeps up and is trapped in pools under caprock
called shale. Petroleum companies tap into these reserves
The most encouraging news in the BioProcess Algae story is
our pursuit of a co-location strategy, as CO2 was little more
than a necessary result of ethanol production. Instead, Green
by drilling deep into the ocean floor, often at great expense,
Plains is now in a position to pursue full-scale opportunities
and always in a manner that depletes the reserve.
with BioProcess Algae across our asset base.
Today, science has enabled us to shorten the million-year
From a strategic capital point of view, this process
cycle into a matter of days. Further, as we have learned
potentially has a very favorable return. Our BioProcess Algae
through our innovative approach to ethanol production, we
demonstration plant in Shenandoah, Iowa has been funded
can produce energy reserves in a “renewable” fashion by
without any federal loans and rather through a unique
converting ethanol co-products into feed, food and fuel.
partnership between BioProcess Algae and the State of Iowa
As a matter of fact, while the idea of algae production
a very exciting technology. Further, we believe we are on
sprang from a motive to create BTUs to fuel vehicles, ships
the right path to not just revenues, but profitability as we
and planes, the greater opportunities to market algae lie in
continue to scale-up and build out the five-acre production
Power Fund. We believe BioProcess Algae has developed
food and feed.
facility because it is an innovative, patented process
that naturally fits our footprint. In a sense, this positions
For example, dried algae is a suitable substitute to satisfy
BioProcess Algae as the “algae farmer” with room to grow in
the demands of a 10 million ton market currently being
Shenandoah and throughout our platform.
served by fishmeal. Additionally, dried algae is rich in
GREEN PLAINS 2011 ANNUAL REPORT
15
GREEN PLAINS 2011 ANNUAL REPORT 16
Green Plains produces
740 million gallons of
ethanol, two million tons
of distillers grains and 130
million pounds of corn oil
at nine plants. We own 39
million bushels of grain
storage at 15 locations. Our
BlendStar business has 625
million gallons of throughput
capacity at nine terminals.
Golden Opportunities
The only thing certain is uncertainty. Running an enterprise
We plan to answer the challenge as we pursue the question:
in this environment requires nimbleness, agility and an ear
How much energy can we produce from a bushel of corn?
to the ground. We practice this philosophy on a daily basis.
Our challenge is to be in a position to move when the market
delivers opportunity and turn on a dime when the market shifts.
Green Plains is a rare sort of company today. We have built
a sound organization around a simple little seed that holds
unlimited energy possibilities.
It is our view that the golden age of agriculture is coming.
There is a role for us and other companies to supply the U.S.
We think as a company, that through our current products, we
are capturing 80% of the energy in a bushel of corn today. We
will continue to work on how to profitably extract as much of
that remaining 20% as possible.
We appreciate the opportunity to provide renewable motor
fuel to help break our country’s dependence on foreign oil,
produce high-quality animal feed for livestock and to act in
an environmentally-responsible manner.
and the world with more energy or BTUs.
Harvesting energy. We believe the possibilities are golden.
B T U s f o r a n i m a l s — F e e d . B T U s f o r p e o p l e — F o o d . B T U s f o r a u t o m o b i l e s — F u e l .
START OF 10K
GREEN PLAINS 2011 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ____ to _____
Commission file number 001-32924
GREEN PLAINS RENEWABLE ENERGY, INC.
(Exact name of registrant as specified in its charter)
Iowa
(State or other jurisdiction of incorporation or organization)
84-1652107
(I.R.S. Employer Identification No.)
450 Regency Parkway, Suite 400, Omaha, NE 68114
(Address of principal executive offices, including zip code)
(402) 884-8700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.001 par value
Name of exchanges on which registered: NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. .
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 definition 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 Act). Yes No
The aggregate market value of the Company’s voting common stock held by non-affiliates of the registrant as of June 30,
2011 (the last business day of the second quarter), based on the last sale price of the common stock on that date of $10.79,
was approximately $224.2 million. For purposes of this calculation, executive officers, directors and holders of 10% or more
of the registrant’s common stock are deemed to be affiliates of the registrant.
As of February 10, 2012, there were 33,322,581 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2012 Annual Meeting of Shareholders are incorporated by
reference in Part III herein. The Company intends to file such Proxy Statement with the Securities and Exchange
Commission no later than 120 days after the end of the period covered by this report on Form 10-K.
TABLE OF CONTENTS
PART I
Item 1.
Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2.
Properties.
Item 3.
Legal Proceedings.
Item 4. Mine Safety Disclosures.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
PART II
of Equity Securities.
Item 6.
Selected Financial Data.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8.
Financial Statements and Supplementary Data.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information.
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
PART III
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14.
Principal Accounting Fees and Services.
Item 15. Exhibits, Financial Statement Schedules.
Signatures.
PART IV
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FY11 10-K - 2 17 12_js[1].pdf 1 3/6/12 9:01 AM
Cautionary Information Regarding Forward-Looking Statements
The Securities and Exchange Commission, or SEC, encourages companies to disclose forward-looking information so
that investors can better understand a company’s future prospects and make informed investment decisions. This report
contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements may be made directly in this report, and they may also be made a part of this report by reference to other
documents filed with the SEC, which is known as “incorporation by reference.”
This report contains forward-looking statements based on current expectations that involve a number of risks and
uncertainties. Forward-looking statements generally do not relate strictly to historical or current facts, but rather to plans and
objectives for future operations based upon management’s reasonable estimates of future results or trends, and include
statements preceded by, followed by, or that include words such as “anticipates,” “believes,” “continue,” “estimates,”
“expects,” “intends,” “outlook,” “plans,” “predicts,” “may,” “could,” “should,” “will,” and words and phrases of similar
impact, and include, but are not limited to, statements regarding future operating or financial performance, business strategy,
business environment, key trends, and benefits of actual or planned acquisitions. In addition, any statements that refer to
expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions,
are forward-looking statements. The forward-looking statements are made pursuant to safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Although we believe that our expectations regarding future events are based on
reasonable assumptions, any or all forward-looking statements in this report may turn out to be incorrect. They may be based
on inaccurate assumptions or may not account for known or unknown risks and uncertainties. Consequently, no forward-
looking statement is guaranteed, and actual future results may vary materially from the results expressed or implied in our
forward-looking statements. The cautionary statements in this report expressly qualify all of our forward-looking statements.
In addition, we are not obligated, and do not intend, to update any of our forward-looking statements at any time unless an
update is required by applicable securities laws. Factors that could cause actual results to differ from those expressed or
implied in the forward-looking statements include, but are not limited to, those discussed in the section entitled “Risk
Factors” in this report or in any document incorporated by reference. Specifically, we may experience significant fluctuations
in future operating results due to a number of economic conditions, including, but not limited to, competition in the ethanol
and other industries in which we operate, commodity market risks, financial market risks, counter-party risks, risks associated
with changes to federal policy or regulation, risks related to closing and achieving anticipated results from acquisitions, and
other risk factors detailed in our reports filed with the SEC. Actual results may differ from projected results due, but not
limited, to unforeseen developments.
In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements
contained in this report or in any document incorporated by reference might not occur. Investors are cautioned not to place
undue reliance on the forward-looking statements, which speak only as of the date of this report or the date of the document
incorporated by reference in this report. We are not under any obligation, and we expressly disclaim any obligation, to update
or alter any forward-looking statements, whether as a result of new information, future events or otherwise.
PART I
Item 1. Business.
Overview
References to “we,” “us,” “our,” “Green Plains,” or the “Company” in this report refer to Green Plains Renewable
Energy, Inc., an Iowa corporation founded in June 2004, and its subsidiaries.
We are a leading, vertically-integrated producer, marketer and distributer of ethanol. We focus on generating stable
operating margins through our diversified business segments and our risk management strategy. We believe that owning and
operating assets throughout the ethanol value chain enables us to mitigate the effects of changes in commodity prices on our
profitability and differentiates us from companies focused only on ethanol production. We have grown rapidly, primarily
through acquisitions. Today, we have operations throughout the ethanol value chain, beginning upstream with our agronomy
and grain handling operations, continuing through our approximately 740 million gallons per year, or mmgy, of ethanol
production capacity and our corn oil production, and ending downstream with our ethanol marketing, distribution and
blending facilities. Following is our visual presentation of the ethanol value chain:
11
Upstream
Downstream
Seed, Fertilizer and
Chemical Sales
Grain Handling and
Storage
Ethanol Production
and Corn Oil
Production
Marketing,
Transportation
and
Logistics
Blending and
Distribution
Our disciplined risk management strategy is designed to lock in operating margins by forward contracting the primary
commodities involved in or derived from ethanol production: corn, natural gas, ethanol and distillers grains, along with the
corn oil extracted prior to the production of distillers grains. We also seek to maintain an environment of continuous
operational improvement to increase our efficiency and effectiveness as a low-cost producer of ethanol.
We review our operations within the following four separate operating segments:
• Ethanol Production. We operate a total of nine ethanol plants in Indiana, Iowa, Michigan, Minnesota, Nebraska and
Tennessee, with approximately 740 mmgy of total ethanol production capacity. At capacity, these plants collectively
will consume approximately 265 million bushels of corn and produce approximately 2.1 million tons of distillers
grains annually.
• Corn Oil Production. We operate corn oil extraction systems at all nine of our ethanol plants, with the capacity to
produce approximately 130 million pounds annually. The corn oil systems are designed to extract non-edible corn
oil from the whole stillage process immediately prior to production of distillers grains. Industrial uses for corn oil
include feedstock for biodiesel, livestock feed additives, rubber substitutes, rust preventatives, inks, textiles, soaps
and insecticides.
• Agribusiness. We operate three lines of business within our agribusiness segment: bulk grain, agronomy and
petroleum. We believe our bulk grain business provides synergies with our ethanol production segment as it supplies
a portion of the feedstock for our ethanol plants. In our bulk grain business, we have 15 grain elevators with
approximately 39.1 million bushels of total storage capacity. We sell fertilizer and other agricultural inputs and
provide application services to area producers through our agronomy business. Additionally, we sell petroleum
products including diesel, soydiesel, blended gasoline and propane, primarily to agricultural producers and
consumers.
• Marketing and Distribution. Our in-house marketing business is responsible for the sales, marketing and
distribution of all ethanol, distillers grains and corn oil produced at our nine ethanol plants. We also market and
distribute ethanol for third-party ethanol producers. Production capacity of these third-party producers is
approximately 260 mmgy. Additionally, we own and operate nine blending or terminaling facilities with
approximately 625 mmgy of total throughput capacity in seven south central U.S. states.
We intend to continue to take a disciplined approach in evaluating new opportunities related to potential acquisition of
additional ethanol plants by considering whether the plants fit within the design, engineering and geographic criteria we have
developed. In our marketing and distribution segment, our strategy is to renew existing marketing contracts, as well as enter
new contracts with other ethanol producers. We also intend to pursue opportunities to develop or acquire additional grain
elevators and agronomy businesses, specifically those located near our ethanol plants. We believe that owning additional
agribusiness operations in close proximity to our ethanol plants enables us to strengthen relationships with local corn
producers, allowing us to source corn more effectively and at a lower average cost. We also plan to continue to grow our
downstream access to customers and are actively seeking new marketing opportunities with other ethanol producers.
Additionally, we are a partner in a joint venture, BioProcess Algae LLC, formed to commercialize advanced photo-bioreactor
technologies for the growing and harvesting of algal biomass.
Our Competitive Strengths
We believe we have created an efficient platform with diversified revenues and income streams. Fundamentally, we
focus on managing commodity price risks, improving operating efficiencies and optimizing market opportunities. We believe
our competitive strengths include:
2
2
Disciplined Risk Management. We believe risk management is a core competency of ours. Our primary focus is to lock
in favorable operating margins whenever possible. We do not speculate on general price movements by taking unhedged
positions on commodities such as corn, ethanol or natural gas. Our comprehensive risk management platform allows us to
monitor real-time commodity price risk exposure at each of our plants, and to respond quickly to lock in acceptable margins
or to temporarily reduce production levels at our ethanol plants during periods of compressed margins. By using a variety of
risk management tools and hedging strategies, including our internally-developed real-time operating margin management
system, we believe we are able to maintain a disciplined approach to risk management.
Demonstrated Asset Acquisition and Integration Capabilities. We have demonstrated the ability to make strategic
acquisitions that we believe create synergies within our vertically-integrated platform. We believe acquiring and developing
complementary businesses enhances our ability to mitigate risks. Our balance sheet allows us to be selective in that process.
Since our inception, we have acquired or developed nine ethanol plants in addition to upstream grain elevators and agronomy
businesses and downstream blending and distribution businesses. We installed corn oil extraction technology at each of our
ethanol plants to generate incremental returns from this value-added product. We believe these acquisitions and
improvements have been successfully integrated into our business and have enhanced our overall returns.
Focus on Operational Excellence. All of our plants are staffed by experienced industry personnel. We focus on
incremental operational improvements to enhance overall production efficiencies and we share operational knowledge across
our plants. Using real-time production data and control systems, we continually monitor our plants in an effort to optimize
performance. We believe our ability to improve operating efficiencies provides an operating cost advantage over most of our
competitors. In turn, we believe we are well positioned to increase operating margins for any facilities that we may acquire in
the future.
Leading Vertically-Integrated Ethanol Producer. We believe our operations throughout the ethanol value chain reduce
our commodity and operating risks, and increase our pricing visibility and influence in key markets. Combined, we believe
our agribusiness, ethanol production, corn oil production, and marketing and distribution segments provide efficiencies
across the ethanol value chain, from grain procurement to blending fuel. Our agribusiness operations help to reduce our
supply risk by providing grain handling and storage capabilities for approximately 39.1 million bushels. Assuming full
production capacity at each of our plants and those of our third-party ethanol producers, we would market and distribute
approximately one billion gallons of ethanol per year from twelve plants. Our corn oil systems are designed to extract non-
edible corn oil that has multiple industrial uses. Our blending or terminaling facilities allow us to source, store, blend and
distribute ethanol and biodiesel across multiple states.
Proven Management Team. Our senior management team averages over 20 years of commodity risk management and
related industry experience. We have specific expertise across all aspects of the ethanol supply, production, and distribution
chain – from agribusiness, to plant operations and management, to commodity markets and risk management, to ethanol
marketing.
Our Growth Strategy
We intend to continue our focus on strengthening and diversifying our vertically-integrated platform by implementing or
further acting upon the following growth strategies:
Expand Marketing and Distribution Activities. We plan to continue expanding our downstream access to customers and
seeking opportunities to arbitrage markets with minimal risk allocation. We currently participate in ethanol transload and
splash blending services and have begun to expand the capacity of these facilities through organic growth. The expansion of
our capacity will encourage the distribution of blended fuel. We believe that further growth of our distribution efforts will
enable us to continue to capitalize on our vertically-integrated platform.
Develop or Acquire Strategically-Located Grain Elevators. We intend to pursue opportunities to develop or acquire
additional grain elevators within the agribusiness segment, specifically those located near our ethanol plants. We believe that
owning additional grain elevators in close proximity to our ethanol plants enables us to strengthen relationships with local
corn producers, allowing us to source corn more effectively and at a lower average cost. Since all of our plants are located
within or near the corn belt where a number of competitors also have ethanol facilities, we believe that owning grain
elevators provides us with a competitive advantage in the origination of corn.
3
3
Pursue Consolidation Opportunities within the Ethanol Industry. We continue to focus on the potential acquisition of
additional ethanol plants. In the past several years, we have been approached with opportunities to acquire existing ethanol
plants. We believe those plants were available for a number of reasons including financial distress of a particular facility, a
lack of operational expertise or a desire by existing owners to exit their original investment. We take a disciplined approach
in evaluating new opportunities by considering whether the plants fit within the design, engineering and geographic criteria
we have developed. We acquired one additional ethanol plant during 2011 that met our criteria. We believe that our
integrated platform, plant operations experience and disciplined risk management approach give us the ability to generate
favorable returns from our acquisitions.
Improve Operational Efficiency. We seek to enhance profitability at each of our plants by increasing our production
volumes through operational improvements. We continually research operational processes that may increase our efficiency
by increasing yields, lowering our processing cost per gallon and increasing our production volumes. Additionally, we
employ an extensive cost control system at each of our plants to continuously monitor our plants’ performance. We are able
to use performance data from our plants to develop strategies for cost reduction and efficiency that can be applied across our
platform.
Invest in Next Generation Biofuel Opportunities. We plan to continue our investment in the BioProcess Algae joint
venture, which is focused on commercialization of advanced photo-bioreactor technologies for the growing and harvesting of
algal biomass which can be used as high-quality, low-cost feedstocks for human nutrition, animal feed and biofuels. We
believe this technology has specific applications with facilities that emit carbon dioxide, including ethanol plants. Algae are
currently grown in BioProcess Algae's Grower HarvesterTM reactors co-located with our Shenandoah, Iowa ethanol plant.
Ethanol Industry Overview
The ethanol industry has grown significantly over the past decade, with annual reported production increasing from 1.6
billion gallons in 2000 to 13.2 billion gallons in 2010, according to the U.S. Energy Information Administration, or EIA. As
of February 13, 2012, the Renewable Fuels Association, or RFA, estimated that there were 209 ethanol production facilities
in the United States with capacity to produce approximately 14.8 billion gallons of ethanol per year. Annual ethanol
production for 2011, based upon average monthly production in the first ten months of the year, was expected to be 13.8
billion gallons. While the market prices for our feedstock commodities are volatile and at times result in unprofitable ethanol
operations, during the past three years, there have been few occasions where the simple crush spread, which we define as the
market value of 2.8 gallons of ethanol less the cost of one bushel of corn (which represents the typical industry yield), has
dropped to below $0.10 per gallon. We believe that ethanol, as a proportion of total transportation fuels, will continue to
experience increased demand in the United States as there remains a focus on reducing reliance on petroleum-based
transportation fuels due to high and volatile oil prices, heightened environmental concerns, and energy independence and
national security concerns. We believe ethanol’s environmental benefits, ability to improve gasoline performance, fuel supply
extender capabilities, attractive production economics and favorable government incentives could enable ethanol to comprise
an increasingly larger portion of the U.S. fuel supply as more fully described below:
• Emissions Reduction. Ethanol demand increased substantially in the 1990’s, when federal law began requiring the
use of oxygenates in reformulated gasoline in cities with unhealthy levels of air pollution on a seasonal or year-
round basis. These oxygenates included ethanol and MTBE which, when blended with gasoline, reduce vehicle
emissions. Although the federal oxygenate requirement was eliminated in 2006, oxygenated gasoline continues to be
used in order to help meet separate federal and state air emission standards. The refining industry has all but
abandoned the use of MTBE making ethanol the primary clean air oxygenate currently used.
• Octane Enhancer. Ethanol, with an octane rating of 113, is used to increase the octane value of gasoline with which
it is blended, thereby improving engine performance. It is used as an octane enhancer both for producing regular
grade gasoline from lower octane blending stocks and for upgrading regular gasoline to premium grades. According
to the EIA, approximately 75% of the conventional gasoline market (which is approximately 60% of the total
gasoline market) has switched to producing a lower grade of gasoline, commonly referred to as CBOB. CBOB is an
84 octane sub-grade gasoline that is economical to produce. As a result, octane must be added to the fuel prior to
sale to consumers. Ethanol has become the primary additive used by refiners to increase octane levels.
• Fuel Stock Extender. Ethanol is a valuable blend component that is used by refiners in the United States to extend
fuel supplies. According to the EIA, from 2000 to 2010, ethanol as a component of the United States gasoline supply
has grown from 1.3% to 9.0%. In 2011 alone, ethanol replaced the need for approximately 329 million barrels of oil
in the United States (based upon monthly average production for the first ten months of the year).
4
4
• E15 Blending Waiver. In October 2010, the U.S. Environmental Protection Agency, or EPA, granted a partial
waiver for the use of up to 15% ethanol blended with gasoline, or E15, in model year 2007 and newer passenger
vehicles, including cars, SUVs and light pickup trucks. In January 2011, the EPA granted a second partial waiver for
E15 in model year 2001 to 2006 passenger vehicles. On February 17, 2012, the EPA announced that evaluation of
the health effects tests on E15 are complete and that fuel manufacturers are now able to register E15 with the EPA to
sell. Over 141 million vehicles or 60% of the passenger vehicles in service would be eligible to use E15. We also
believe that ethanol blended in the U.S. gasoline supply is an important step towards the long-term introduction of
more renewable fuels into the transportation sector and that increasing the ethanol blend percentage in the domestic
gasoline supply could have a positive impact on the demand for ethanol.
• Economics of Ethanol Blending. We believe that ethanol is cheaper to produce than petroleum-based gasoline.
Ethanol’s favorable production economics were previously enhanced in the United States by the Volumetric Ethanol
Excise Tax Credit, or VEETC (commonly referred to as the “blender’s credit”), which was realized by refiners and
blenders and was generally passed on to consumers for a benefit of $0.45 per gallon of ethanol used. The blender’s
credit expired on December 31, 2011. Ethanol is currently priced in wholesale markets at a sufficient discount to
petroleum-based gasoline to provide fuel blenders with a strong economic incentive to blend with ethanol, even
without the blender’s credit.
• Mandated Use of Renewable Fuels. The growth in ethanol usage has also been supported by legislative
requirements dictating the use of renewable fuels, including ethanol. The Energy Independence and Security Act of
2007, confirmed by the EPA regulations on the Renewable Fuel Standard, or RFS 2, issued in February 2010
mandated a minimum usage of corn-derived renewable fuels of 12.0 billion gallons in 2010, increasing annually by
0.6 million gallons to 15.0 billion gallons in 2015.
• Ethanol Exports. The United States has a long history as a net importer of ethanol. According to the U.S.
Department of Agriculture, or USDA, Brazil has historically been the world’s low-cost supplier of ethanol.
However, the USDA stated that in 2010, the United States became the global low-cost ethanol producer, generating
a trade surplus of $556.0 million. According to the RFA, U.S. ethanol exports in 2011 exceeded the volume of
exports in 2010, generating approximately 1.2 billion gallons in ethanol exports in 2011.
Our Operating Segments
Ethanol Production Segment
We have the capacity to produce approximately 740 mmgy of ethanol within our ethanol production segment. Our plants
use a dry mill process to produce ethanol and co-products such as wet, modified wet or dried distillers grains. Processing at
full capacity, our plants will consume approximately 265 million bushels of corn and produce approximately 2.1 million tons
of distillers grains annually. We operate all of our ethanol plants through wholly-owned operating subsidiaries. A summary
of these plants is outlined below:
Plant
Bluffton, Indiana
Central City, Nebraska(1)
Fergus Falls, Minnesota(1)
Lakota, Iowa(1)
Obion, Tennessee(2)
Ord, Nebraska(1)
Riga, Michigan(1)
Shenandoah, Iowa
Superior, Iowa
Plant
Production
Capacity
(mmgy)
120
100
60
100
120
55
60
65
60
Start or
Acquisition
Date
Sept. 2008
July 2009
Mar. 2011
Oct. 2010
Nov. 2008
July 2009
Oct. 2010
Aug. 2007
July 2008
Technology
ICM
ICM
Delta-T
ICM/Lurgi
ICM
ICM
Delta-T
ICM
Delta-T
Land
Owned
(acres)
420
40
114
93
230
170
138
123
238
On-Site Corn
Storage
Capacity
(bushels)
1,040,000
1,200,000
1,325,000
1,410,000
2,100,000
400,000
525,000
500,000
525,000
On-Site Ethanol
Storage
Capacity
(gallons)
2,800,000
2,250,000
2,000,000
2,500,000
2,894,000
1,500,000
1,239,140
1,500,000
1,226,406
(1) These plants operated under different ownership prior to the stated start date.
(2) We lease an additional 129 acres of land near the Obion, Tennessee plant.
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Corn Feedstock and Ethanol Production
Ethanol is a chemical produced by the fermentation of carbohydrates found in grains and other biomass. Ethanol can be
produced from a number of different types of grains, such as corn, wheat and sorghum, as well as from agricultural waste
products such as rice hulls, cheese whey, potato waste, brewery and beverage wastes and forestry and paper wastes. At
present, the majority of ethanol in the United States is produced from corn because corn contains large quantities of
carbohydrates, can be handled efficiently and is in greater supply than other grains. Such carbohydrates convert into glucose
more easily than most other kinds of biomass. Outside the United States, sugarcane is the primary feedstock used in ethanol
production.
Our plants use corn as feedstock in the dry mill ethanol production process. Each of our plants requires, depending on
their production capacity, approximately 20 million to 40 million bushels of corn annually. The price and availability of corn
are subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including
crop conditions, weather, governmental programs and foreign purchases. Because the market price of ethanol is not directly
related to corn prices, ethanol producers are generally not able to compensate for increases in the cost of corn feedstock
through adjustments to prices charged for their ethanol.
Our corn supply is obtained primarily from local markets. We utilize cash and forward purchase contracts with grain
producers and elevators for the physical delivery of corn to our plants. At our Iowa (except Lakota), Minnesota, Nebraska
and Tennessee plants, we maintain relationships with local farmers, grain elevators and cooperatives which serve as our
primary sources of grain feedstock. Most farmers in the areas where our plants are located have stored their corn in their own
dry storage facilities, which allows us to purchase much of the corn needed to supply our plants directly from farmers
throughout the year. At our Indiana, Michigan and Lakota, Iowa plants, we have contracted with third-party grain originators
to supply all of our corn requirements for ethanol production. These contracts terminate between November 2012 and
September 2015. Each of our plants is also situated on rail lines that we can use to receive corn from other regions of the
country, if local corn supplies are insufficient.
Corn is received at the plant by truck or rail, which is then weighed and unloaded in a receiving building. Storage bins
are utilized to inventory grain, which is passed through a scalper to remove rocks and debris prior to processing. Thereafter,
the corn is transported to a hammer mill where it is ground into coarse flour and conveyed into a slurry tank for enzymatic
processing. Water, heat and enzymes are added to convert the complex starch molecules into simpler carbohydrates. The
slurry is heated to reduce the potential of microbial contamination and pumped to a liquefaction tank where additional
enzymes are added. Next, the grain slurry is pumped into fermenters, where yeast, enzymes, and nutrients are added, to begin
a batch fermentation process. A beer column, within the distillation system, separates the alcohol from the spent grain mash.
Alcohol is then transported through a rectifier column, a side stripper and a molecular sieve system where it is dehydrated to
200 proof. The 200 proof alcohol is then pumped to a holding tank and then blended with approximately two percent
denaturant (usually natural gasoline) as it is pumped into finished product storage tanks.
Distillers Grains
The spent grain mash from the beer column is pumped into one of several decanter type centrifuges for dewatering. The
water, or thin stillage, is pumped from the centrifuges and then to an evaporator where it is dried into a thick syrup. The
solids, or wet cake, that exits the centrifuge are conveyed to the dryer system. The wet cake is dried at varying temperatures,
resulting in the production of distillers grains. Syrup might be reapplied to the wet cake prior to drying, providing additional
nutrients to the distillers grains. Distillers grains, the principal co-product of the ethanol production process, are principally
used as high-protein, high-energy animal fodder and feed supplements marketed to the dairy, beef, swine and poultry
industries.
Dry mill ethanol processing potentially creates three forms of distillers grains, depending on the number of times the
solids are passed through the dryer system; wet, modified wet and dried distillers grains. Wet distillers grains are processed
wet cake that contains approximately 65% to 70% moisture. Wet distillers grains have a shelf life of approximately three
days and can be sold only to dairies or feedlots within the immediate vicinity of an ethanol plant. Modified wet distillers
grains, which have been dried further to approximately 50% to 55% moisture, have a slightly longer shelf life of
approximately three weeks and are marketed to regional dairies and feedlots. Dried distillers grains, which have been dried
more extensively to approximately 10% to 12% moisture, have an almost indefinite shelf life and may be stored, sold and
shipped to any market regardless of its proximity to an ethanol plant.
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Utilities
The production of ethanol requires significant amounts of natural gas, electricity and water.
Natural Gas. Ethanol plants produce process steam from their own boiler systems and dry the distillers grains co-
product via a direct gas-fired dryer. Depending on certain production parameters, our ethanol plants are expected to use
approximately 22,000 to 32,000 British Thermal Units of natural gas per gallon of production. The price of natural gas can be
volatile; therefore, we use hedging strategies to mitigate increases in gas prices. We have entered into certain service
agreements for the natural gas required by our ethanol plants and pay tariff fees to these providers for transporting the gas
through their pipelines to our plants.
Electricity. Our plants require between 0.5 and 1.0 kilowatt hours of electricity per gallon of production. Local utilities
supply necessary electricity to all of our ethanol plants at market-based rates.
Water. Although some of our plants satisfy the majority of their water requirements from wells located on their
respective properties, each plant also obtains potable water from local municipal water sources at prevailing rates. Each
facility operates a filtration system to purify the well water that is utilized for its operations. Local municipalities supply all
of the necessary water for our plants that do not have onsite wells. Water quality is very important. Much of the water used in
an ethanol plant is recycled back into the process. The plants require boiler makeup water and cooling tower water. Boiler
makeup water is treated on-site to minimize minerals and substances that would harm the boiler. Recycled process water
cannot be used for this purpose. Cooling tower water is deemed non-contact water (it does not come in contact with the
mash) and, therefore, can be regenerated back into the cooling tower process.
Corn Oil Production Segment
We operate corn oil extraction systems at all nine of our ethanol plants. The corn oil systems are designed to extract
non-edible corn oil from the thin stillage evaporation process immediately prior to production of distillers grains. Corn oil is
produced by processing syrup and evaporated thin stillage, through a decanter style centrifuge or a disk stack style centrifuge.
Corn oil has a lower density than water or solids which make up the syrup. The centrifuges separate the relatively light oil
from the heavier components of the syrup, eliminating the need for significant retention time. De-oiled syrup is returned to
the process for blending into wet, modified, or dry distillers grains.
Industrial uses for corn oil include feedstock for biodiesel, livestock feed additives, rubber substitutes, rust preventatives,
inks, textiles, soaps and insecticides. Our corn oil is primarily sold to biodiesel manufactures and, to a lesser extent, feed lot
and poultry markets. We generally transport our corn oil by truck to locations in a close proximity to our ethanol plants,
primarily in the southeastern and midwestern regions of the United States.
Agribusiness Segment
We operate our agribusiness segment primarily through our wholly-owned subsidiary, Green Plains Grain Company
LLC, which is a grain and farm supply business with three primary operating lines of business: bulk grain, agronomy and
petroleum. We have seven locations in northwestern Iowa with approximately 19.6 million bushels of grain storage capacity,
3.6 million gallons of liquid fertilizer storage and 12,000 tons of dry fertilizer storage. We operate at five locations in western
Tennessee with grain storage capacity of approximately 13.7 million bushels. We also own and operate grain elevators in
Essex, Iowa, Hopkins, Missouri and St. Edward, Nebraska, with grain storage capacities of approximately 1.9 million, 2.0
million and 1.9 million bushels, respectively. We believe our agribusiness operations increase our operational efficiency,
reduce commodity price and supply risks, and diversify our revenue streams.
Bulk Grain. We buy bulk grain, primarily corn, wheat, and soybeans, from area producers and provide grain drying and
storage services to those producers. The grain is then sold to grain processing companies and area livestock producers. We
have grain storage capacity of approximately 39.1 million bushels, not including the on-site storage capacity at each of our
ethanol plants. This capacity supports the grain merchandising activities at our Central City, Lakota, Obion, Ord, Shenandoah
and Superior ethanol plants. These bulk grain commodities are readily traded on commodity exchanges and inventory values
are affected by market changes and spreads. To attempt to reduce risk due to market fluctuations from purchase and sale
commitments, we enter into exchange-traded futures and options contracts designed to serve as economic hedges.
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Agronomy. We have agronomists on staff who consult and provide services to our customers. The agronomy division
also sells dry and liquid fertilizer and agricultural inputs, such as chemicals, seed and supplies that we buy wholesale, and
provides application services to area producers. Having these experts on staff, coupled with the wide variety of agricultural
products we offer, allows us to provide customized attention and build long-term relationships with our customers.
Petroleum. A portion of our business consists of selling diesel, soydiesel, blended gasoline and propane that we buy
wholesale, primarily to agricultural producers and consumers. We believe this business line demonstrates our ability to
provide a range of fuel products that support the local communities in which we are located.
Seasonality is present within our agribusiness operations. The spring planting and fall harvest periods have the largest
seasonal impact, directly impacting the quarterly operating results of our agribusiness segment. This seasonality generally
results in higher revenues and stronger financial results for this segment during the second and fourth quarters while the
financial results of the first and third quarters generally will reflect periods of lower activity with low to negative margins.
Marketing and Distribution Segment
We have an in-house marketing business responsible for the sale, marketing and distribution of all ethanol, distillers
grains and corn oil produced at our nine ethanol plants. We also market and distribute ethanol for third-party ethanol
producers. Assuming full production capacity at each of our plants and those of our third-party ethanol producers, we would
market and distribute more than one billion gallons of ethanol on an annual basis. Additionally, within the marketing and
distribution segment, we operate nine blending or terminaling facilities, with approximately 625 mmgy of total throughput
capacity, allowing us to source, store, blend and distribute biodiesel and ethanol, including our production and that of other
producers, across multiple states.
Marketing
We market our ethanol and that of our third-party producers to many different customers on a local, regional and national
basis. In addition, we purchase ethanol from other independent producers to realize price arbitrages that may exist. To
achieve the best prices for the ethanol that we market, we sell into local, regional and national markets under sales
agreements with integrated energy companies, jobbers, retailers, traders and resellers. Under these agreements, ethanol is
priced under fixed and indexed pricing arrangements. Local markets are the easiest to service because of their close proximity
to the related production facility. Deliveries to the majority of the local markets, within 150 miles of the plants, are generally
transported by truck, and deliveries to more distant markets are shipped by rail using major U.S. rail carriers.
The market for distillers grains generally consists of local markets for wet, modified wet and dried distillers grains, and
national markets for dried distillers grains. If our plants operate at full capacity and all of our distillers grains were marketed
in the form of dried distillers grains, we expect that our ethanol plants would produce approximately 2.1 million tons of
distillers grains annually. In addition, the market can be segmented by geographic region and livestock industry. The bulk of
the current demand is for dried distillers grains delivered to geographic regions without significant local corn or ethanol
production. Our market strategy includes shipping a substantial amount of distillers grains as dried distillers grains to regional
and national markets by rail.
Most of our modified wet distillers grains are sold to midwestern feedlot markets. Our dried distillers grains are
generally shipped to feedlot and poultry markets, as well as to Texas and west coast rail markets. Some of our distillers grains
are shipped by truck to dairy, beef, and poultry operations in the eastern United States. Also, at certain times of the year, we
transport product to the Mississippi River to be loaded on barges. We also ship by railcars into Eastern and Southeastern feed
mill, poultry and dairy operations, as well as to domestic trade companies. Access to these markets allows us to move product
into markets that are offering the highest net price.
Transportation and Delivery
To meet the challenge of marketing ethanol and distillers grains to diverse market segments, five of our plants have
extensive rail siding capable of handling more than 150 railcars at their production facilities and the other four plants have
rail siding that can accommodate approximately 90 railcars at their locations. At certain of our locations, we have large loop
tracks which enable loading of unit trains of both ethanol and dried distillers grains, as well as spurs connecting the site’s rail
loop to the railroad mainline or spurs that allow movement and storage of railcars on-site. These rail lines allow us to sell our
products to various regional and national markets. The rail providers for our ethanol plants can switch cars to most of the
other major railroads, allowing the plants to easily ship ethanol and distillers grains throughout the United States. Our railcar
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fleet is comprised of approximately 1,790 leased tank cars for the transportation of ethanol and approximately 770 leased
hopper cars for the transportation of distillers grains. The lease contract terms range from six months to ten years. We seek to
optimize the utilization of our rail assets, including potential use for transportation of products other than ethanol and
distillers grains, depending on market opportunities.
Ethanol Blending and Distribution
We own and operate biofuel holding tanks and terminals, and provide terminaling, splash blending and logistics
solutions through our wholly-owned subsidiary, BlendStar LLC, to markets that currently do not have efficient access to
renewable fuels. BlendStar operates blending and terminaling facilities at one owned and eight leased locations on
approximately 19 acres in seven states with a combined total storage capacity of approximately 820,000 gallons and
throughput capacity of approximately 625 mmgy. The BlendStar facilities are summarized below:
Facility Location
Birmingham, Alabama
Little Rock, Arkansas
Louisville, Kentucky
Bossier City, Louisiana(1)
Collins, Mississippi
Oklahoma City, Oklahoma
Tulsa, Oklahoma
Knoxville, Tennessee
Nashville, Tennessee
Storage Capacity
(gallons)
120,000
30,000
60,000
60,000
180,000
150,000
-
60,000
160,000
Throughput Capacity
(mmgy)
130
36
30
60
180
84
24
21
60
(1) Five-acre facility is owned by BlendStar.
In November 2011, we announced plans to build, own and operate a new ethanol unit train terminal in Birmingham,
Alabama on the BNSF Railway. The new terminal will have 160,000 barrels, or approximately 6.7 million gallons, of storage
capacity and will be able to receive full 96-car unit trains of ethanol, which can be offloaded within 24 hours. The terminal is
expected to be completed in the fourth quarter of 2012. BlendStar’s existing Birmingham terminal will be retrofitted to
handle other biofuels and liquid products when construction of the new unit train terminal facility is complete.
Risk Management and Hedging Activities
The profitability of our operations and our industry are highly dependent on commodity prices, especially prices for
corn, ethanol, distillers grains and natural gas. Because market price fluctuations among these commodities are not always
correlated, at times ethanol production may be unprofitable.
We enter into forward contracts to supply a portion of our respective ethanol and distillers grains production or to
purchase a portion of our respective corn or natural gas requirements in an attempt to partially offset the effects of volatility
of ethanol, distillers grains, corn and natural gas prices. To a much lesser extent, we also engage in other hedging transactions
involving exchange-traded futures contracts for corn, natural gas and ethanol from time to time. The financial statement
impact of these activities is dependent upon, among other things, the prices involved and our ability to physically receive or
deliver the commodities involved. Hedging arrangements also expose us to the risk of financial loss in situations where the
counterparty to the hedging contract defaults on its contract or, in the case of exchange-traded contracts, where there is a
change in the expected differential between the price of the commodity underlying the hedging agreement and the actual
prices paid or received by us for the physical commodity bought or sold. Hedging activities can themselves result in losses
when a position is purchased in a declining market or a position is sold in a rising market. A hedge position is often settled in
the same time frame as the physical commodity is either purchased (corn and natural gas) or sold (ethanol, distillers grains
and corn oil). Hedging losses may be offset by a decreased cash price for corn and natural gas and an increased cash price for
ethanol, distillers grains and corn oil. We also vary the amount of hedging or other risk mitigation strategies we undertake,
and we may choose not to engage in hedging transactions at all. By using a variety of risk management tools and hedging
strategies, including our internally-developed real-time operating margin management system, we believe our approach to
risk management allows us to monitor real-time operating price risk exposure at each of our plants and to respond quickly to
lock in acceptable margins when they are available or temporarily reduce production levels at our ethanol plants during
periods in which we have identified compressed margins. In addition, our multiple business lines and revenue streams help
diversify our operations and profitability.
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Merger and Acquisition Activity
In January 2009, we acquired a controlling interest in biofuel terminal operator BlendStar LLC. The acquisition of
BlendStar was a strategic investment within the ethanol value chain whose operations are included in our marketing and
distribution segment.
In July 2009, we acquired the membership interests in two limited liability companies that owned ethanol plants in
Central City and Ord, Nebraska. These plants, which are a part of our ethanol production segment, were acquired to add to
our overall ethanol and distillers grains production. Following implementation of process improvements, collectively they
have production capacity of approximately 155 mmgy.
In April 2010, we acquired agribusiness operations in western Tennessee which included five grain elevators with
federally licensed grain storage capacity of 11.7 million bushels. The five grain elevators and other assets acquired are
included in our agribusiness segment.
In October 2010, we acquired Global Ethanol, LLC, which owned ethanol plants in Lakota, Iowa and Riga, Michigan.
These plants have production capacity of approximately 160 mmgy and are part of our ethanol production segment, were
acquired to add to our overall ethanol, distillers grains and corn oil production.
In March 2011, we acquired an ethanol plant and certain other assets near Fergus Falls, Minnesota. The plant has
production capacity of approximately 60 mmgy, adding to our ethanol, distillers grains and corn oil production and is part of
our ethanol production segment. We are constructing 1.6 million bushels of additional grain storage capacity at the Otter Tail
plant with completion expected in 2012.
In June 2011, we acquired 2.0 million bushels of grain storage capacity located in Hopkins, Missouri. The grain elevator
is located approximately 45 miles from our Shenandoah, Iowa ethanol plant and is included in our agribusiness segment.
In July 2011, we acquired the 49% interest in biofuel terminal operator BlendStar LLC that we did not previously own.
BlendStar, whose operations are included in our marketing and distribution segment, provides ethanol transload and splash
blending services.
In January 2012, we acquired 1.9 million bushels of grain storage capacity located in St. Edward, Nebraska. The grain
elevator is located approximately 40 miles from our Central City, Nebraska ethanol plant and is included in our agribusiness
segment.
Algae Joint Venture
In November 2008, we formed a joint venture, BioProcess Algae LLC, between us, Clarcor Inc., BioHoldings, Ltd. and
NTR plc, to commercialize algae production as part of our commitment to next-generation biofuels. BioProcess Algae is
focused on developing technology to grow and harvest algae, which consume carbon dioxide in commercially viable
quantities. We believe algae production fits well into our business model since we already engage in the business of
marketing biofuel and feed products. The algae produced have the potential to be used for advanced bio-fuel production, high
quality animal feed, or as biomass for energy production, but the current primary focus is on efficiently capturing carbon
dioxide to grow and harvest algae. Using advanced photobioreactor technology developed from base technology licensed
from BioProcessH2O LLC, BioProcess Algae currently is producing algae at a pilot plant located at our ethanol plant in
Shenandoah, Iowa, sustained by the plant's recycled heat, water and carbon dioxide. Construction of Phase II was completed
and the Grower Harvesters™ bioreactors were successfully started up in January 2011. Phase II allows for verification of
growth rates, energy balances and operating expenses, which are considered to be some of the key steps to
commercialization. The cost of the Phase II project was shared by the joint venture partners. As part of the Phase II funding,
we increased our ownership in BioProcess Algae to 35%.
During the third quarter of 2011, BioProcess Algae constructed an outdoor Grower Harvester system next to our
Shenandoah ethanol plant, and began successfully producing algae. BioProcess Algae also successfully completed its first
round of algae-based poultry feed trials, in conjunction with the University of Illinois. The algae strains produced by the
Grower Harvester system for the feed trials demonstrated high energy and protein content that was readily available, similar
to other high value feed products used in the feeding of poultry today.
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BioProcess Algae broke ground on a five acre algae farm in the first quarter of 2012 at the same location. If we and the
other BioProcess Algae members determine that the venture can achieve the desired economic performance from the five
acre farm, a build-out of 400 acres of Grower Harvester reactors will be considered. The cost of such a build-out is estimated
at $40 million to $60 million and could take up to a year to complete. Funding for BioProcess Algae for such a project would
come from a variety of sources including current partners, new equity investors, debt financing or a combination thereof. If a
decision was made to replicate such a 400 acre algae farm at all of our ethanol plants, we estimate that the required
investment could range from $300 million to $500 million. BioProcess Algae currently is exploring potential algae markets
including animal feeds, nutraceuticals and biofuels.
Our Competition
Domestic Ethanol Competitors
We compete with numerous other ethanol producers located throughout the United States, several of which have much
greater resources, in the sales of ethanol and distillers grains. In 2011, the three largest ethanol producers in North America
were Archer-Daniels-Midland Company, POET, LLC and Valero Energy Corporation. We believe that our principal
competitors’ expected managed production capacity and ethanol marketed ranges between approximately 200 mmgy and
approximately 1,800 mmgy. Based on production capacity as reported by Ethanol Producer Magazine, we believe we are the
fourth largest ethanol producer in North America. According to Ethanol Producer Magazine, as of December 31, 2011, there
were 218 ethanol-producing plants within the United States, capable of producing 14.8 billion gallons of ethanol annually, as
well as several new plants that were under construction or expanding their capacity. The industry typically does not operate at
100% of capacity with historical rates of annual production to available plant capacity averaging in the high 80 percent to the
low 90 percent range. We believe that by the end of 2012, annual U.S. ethanol production capacity could reach 15.0 billion
gallons.
Competition for corn supply from other ethanol plants and other corn consumers exists in all areas and regions in which
our plants operate. According to Ethanol Producer Magazine, as of December 31, 2011, the states of Iowa, Indiana,
Michigan, Minnesota, Nebraska and Tennessee had a total of 107 operating ethanol plants. The state of Iowa had 42
operating ethanol plants concentrated, for the most part, in the northern and central regions of the state where a majority of
the corn is produced. The state of Nebraska had 25 operating ethanol plants.
Foreign Ethanol Competitors
We also face competition from foreign producers of ethanol and such competition may increase significantly in the
future. Large international companies with much greater resources than ours have developed, or are developing, increased
foreign ethanol production capacities. Brazil is the world’s second largest ethanol producer. Brazil makes ethanol primarily
from sugarcane. Several large companies produce ethanol in Brazil. For example, in August 2010, Royal Dutch Shell formed
a joint venture with Cosan, which produces approximately 450 mmgy of sugarcane-based ethanol per year.
Other Competition
Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development by ethanol
and oil companies. Ethanol production technologies continue to evolve, and changes are expected to occur primarily in the
area of ethanol made from cellulose obtained from other sources of biomass such as switchgrass or fast growing poplar trees.
Because our plants are designed as single-feedstock facilities, we have limited ability to adapt the plants to a different
feedstock or process system without additional capital investment and retooling.
Regulatory Matters
Government Ethanol Programs, Policies and Subsidies
In an effort to reduce this country’s dependence on foreign oil, federal and state governments have enacted numerous
policies, incentives and subsidies to encourage the usage of domestically-produced alternative fuel solutions. The U.S.
ethanol industry has benefited significantly as a direct result of these policies. While historically the ethanol industry has
been dependent on economic incentives, the need for such incentives has and may continue to diminish as the acceptance of
ethanol as a primary fuel and as a fuel extender continues to increase.
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Passed in 2007 as part of the Energy Independence and Security Act, a federal Renewable Fuels Standard, or RFS, has
been and will continue to be a driving factor in the growth of ethanol usage. As mandated by the RFS, 12.6 billion gallons of
conventional biofuels, which corn-based ethanol falls under, were required to be blended into the U.S. fuel supply in 2011,
increasing to 15.0 billion gallons per year by the year 2015. The RFS Flexibility Act was introduced on October 5, 2011 in
the U.S. House of Representatives to reduce or eliminate the volumes of renewable fuel use required by RFS based upon corn
stocks-to-use ratios. The Domestic Alternative Fuels Act of 2012 was introduced on January 18, 2012 in the U.S. House of
Representatives to modify the RFS to include ethanol and other fuels produced from fossil fuels like coal and natural gas. We
believe the RFS is a significant component of national energy policy that reduces dependence on foreign oil by the United
States. As a result, we believe that the RFS Flexibility Act and the Domestic Alternative Fuels Act will not garner sufficient
support to be enacted; however, no assurance can be provided.
To further drive growth in the increased adoption of ethanol, Growth Energy, an ethanol industry trade association, and a
number of ethanol producers requested a waiver from the EPA to increase the amount of ethanol blended into gasoline from
the current 10% level, or E10, to a 15% level, or E15. In October 2010, the EPA granted a partial waiver for E15 for use in
model year 2007 and newer model passenger vehicles, including cars, SUVs and light pickup trucks. In January 2011, the
EPA granted a second partial waiver for E15 for use in model year 2001 through 2006 passenger vehicles. On February 17,
2012, the EPA announced that evaluation of the health effects tests on E15 are complete and that fuel manufacturers are now
able to register E15 with the EPA to sell. Over 141 million vehicles, or 60% of the passenger vehicles in service, would be
eligible to use E15.
Another previous benefit to the industry was the Volumetric Ethanol Excise Tax Credit, or VEETC (often commonly
referred to as the “blender’s credit”) created by the American Jobs Creation Act of 2004. This credit allowed gasoline
distributors who blend ethanol with gasoline to receive a federal excise tax credit of $0.45 per gallon of pure ethanol used, or
$0.045 per gallon for E10 and $0.3825 per gallon for E85. The credit expired on December 31, 2011 and the impact on
ethanol demand is uncertain at this time.
Ethanol produced in foreign countries, from sugarcane or other feed stocks imported into the United States, was
previously subject to an import tariff of $0.54 per gallon. The import tariff expired on December 31, 2011. Production
imported from the Caribbean region was eligible for tariff reduction or elimination under a program known as the Caribbean
Basin Initiative. Depending on feed stock prices, ethanol imported from foreign countries may be less expensive than
domestically-produced ethanol though foreign demand, transportation costs and infrastructure constraints may temper the
market impact on the United States. However, the impact of the expired tariff on the demand for domestically-produced
ethanol is uncertain at this time.
Changes in corporate average fuel economy, or CAFE, standards have also benefited the ethanol industry by encouraging
use of E85 fuel products. CAFE provides an effective 54% efficiency bonus to flexible-fuel vehicles running on E85. Though
E85 is not in widespread use today, auto manufacturers may find it attractive to build more flexible-fuel trucks and sport
utility vehicles that are otherwise unlikely to meet CAFE standards.
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the
Reform Act, which, among other things, aims to improve transparency and accountability in derivative markets. While the
Reform Act increases the regulatory authority of the Commodity Futures Trading Commission, or CFTC, regarding over-the-
counter derivatives, there is uncertainty on several issues related to market clearing, definitions of market participants,
reporting, and capital requirements. While many details remain to be addressed in CFTC rulemaking proceedings, at this time
we do not anticipate any material impact to our risk management strategy.
In addition to these federal standards, many states have taken other steps to encourage ethanol consumption including tax
credits, mandated blend rates and subsidies.
Environmental and Other Regulation
Our ethanol production and agribusiness activities are subject to environmental and other regulations. We obtain
environmental permits to construct and operate our ethanol plants.
Ethanol production involves the emission of various airborne pollutants, including particulate, carbon dioxide, oxides of
nitrogen, hazardous air pollutants and volatile organic compounds. In 2007, the U.S. Supreme Court classified carbon dioxide
as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon dioxide in vehicle
emissions. In February 2010, the EPA released its final regulations on the Renewable Fuels Standard, or RFS 2. We believe
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these final regulations grandfather our plants at their current operating capacity, though expansion of our plants will need to
meet a threshold of a 20% reduction in greenhouse gas, or GHG emissions from a 2005 baseline measurement to produce
ethanol eligible for the RFS 2 mandate. In order to expand capacity at our plants, we may be required to obtain additional
permits, install advanced technology, or reduce drying of certain amounts of distillers grains.
Separately, the California Air Resources Board, or CARB, has adopted a Low Carbon Fuel Standard, or LCFS, requiring
a 10% reduction in GHG emissions from transportation fuels by 2020. An Indirect Land Use Change component is included
in this lifecycle GHG emissions calculation, though this standard is being challenged by numerous lawsuits. On December
29, 2011, the U.S. District Court for the Eastern District of California issued several rulings in federal lawsuits challenging
the LCFS. One of the rulings preliminarily prevents CARB from enforcing these regulations during the pending litigation. On
January 23, 2012, CARB unsuccessfully attempted to appeal these rulings in the U.S. District Court for the Eastern District
of California and on January 26, 2012 filed another appeal with the Ninth Circuit Court of Appeals.
Part of our business is regulated by environmental laws and regulations governing the labeling, use, storage, discharge
and disposal of hazardous materials. Our agribusiness operations are subject to government regulation and regulation by
certain private sector associations. Production levels, markets and prices of the grains we merchandise are affected by federal
government programs, which include acreage control and price support programs of the U.S. Department of Agriculture, or
USDA. In addition, grain that we sell must conform to official grade standards imposed by the USDA. Other examples of
government policies that can have an impact on our business include tariffs, duties, subsidies, import and export restrictions
and outright embargos.
We also employ maintenance and operations personnel at each of our ethanol plants. In addition to the attention that we
place on the health and safety of our employees, the operations at our facilities are governed by the regulations of the
Occupational Safety and Health Administration, or OSHA.
Employees
As of December 31, 2011, we had 665 full-time, part-time and temporary or seasonal employees. At that date, we
employed 100 people, including 44 employees of our subsidiary, Green Plains Trade Group LLC, at our corporate office in
Omaha, 152 employees at our agribusiness operations, 5 employees at BlendStar and the remainder at our nine ethanol
plants.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange
Act) are available free of charge on our website at www.gpreinc.com as soon as reasonably practicable after we file or furnish
such information electronically with the SEC. Also available on our website in our corporate governance section are the
charters of our audit, compensation, and nominating committees, and a copy of our code of conduct and ethics that applies to
our directors, officers and other employees, including our Chief Executive Officer and all senior financial officers. The
information found on our website is not part of this or any other report we file with or furnish to the SEC.
The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street,
NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
Item 1A. Risk Factors.
We operate in an evolving industry that presents numerous risks. Many of these risks are beyond our control and are
driven by factors that often cannot be predicted. Investors should carefully consider the risk factors set forth below, as well as
the other information appearing in this report, before making any investment in our securities. If any of the risks described
below or in the documents incorporated by reference in this report actually occur, our financial results, financial condition or
stock price could be materially adversely affected. These risk factors should be considered in conjunction with the other
information included in this report.
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Risks relating to our business and industry
Our results of operations and ability to operate at a profit is largely dependent on managing the spread among the prices of
corn, natural gas, ethanol and distillers grains, the prices of which are subject to significant volatility and uncertainty.
The results of our ethanol production business are highly impacted by commodity prices, including the spread between
the cost of corn and natural gas that we must purchase, and the price of ethanol and distillers grains that we sell. Prices and
supplies are subject to and determined by market forces over which we have no control, such as weather, domestic and global
demand, shortages, export prices, and various governmental policies in the United States and around the world. As a result of
price volatility for these commodities, our operating results may fluctuate substantially. Increases in corn or natural gas prices
or decreases in ethanol or distillers grains prices may make it unprofitable to operate our plants. No assurance can be given
that we will be able to purchase corn and natural gas at, or near, current prices and that we will be able to sell ethanol or
distillers grains at, or near, current prices. Consequently, our results of operations and financial position may be adversely
affected by increases in the price of corn or natural gas or decreases in the price of ethanol or distillers grains.
We continuously monitor the profitability of our ethanol plants with a variety of risk management tools, including our
internally-developed real-time operating margin management system. In recent years, the spread between ethanol and corn
prices has fluctuated widely and narrowed significantly. Fluctuations are likely to continue to occur. A sustained narrow
spread or any further reduction in the spread between ethanol and corn prices, whether as a result of sustained high or
increased corn prices or sustained low or decreased ethanol prices, would adversely affect our results of operations and
financial position. Further, combined revenues from sales of ethanol and distillers grains could decline below our marginal
cost of production, which could cause us to reduce or suspend production at some or all of our plants. A decrease in
production volumes could adversely impact our overall profitability.
Our risk management strategies, including hedging transactions, may be ineffective and may expose us to decreased
liquidity.
In an attempt to partially offset the effects of volatility of ethanol, distillers grains, corn oil, corn and natural gas prices,
we enter into forward contracts to sell a portion of our respective ethanol, distillers grains and corn oil production or to
purchase a portion of our respective corn or natural gas requirements. To a much lesser extent, we also engage in other
hedging transactions involving exchange-traded futures contracts for corn, natural gas, ethanol and unleaded gasoline from
time to time. The financial statement impact of these activities is dependent upon, among other things, the prices involved
and our ability to physically receive or deliver the commodities involved. Hedging arrangements also expose us to the risk of
financial loss in situations where the counterparty to the hedging contract defaults on its contract or, in the case of exchange-
traded contracts, where there is a change in the expected differential between the price of the commodity underlying the
hedging agreement and the actual prices paid or received by us for the physical commodity bought or sold. Hedging activities
can themselves result in losses when a position is purchased in a declining market or a position is sold in a rising market. A
hedge position is often settled in the same time frame as the physical commodity is either expensed as a cost of goods sold
(corn and natural gas) or sold (ethanol, distillers grains and corn oil). Hedging losses may be offset by a decreased cash price
for corn and natural gas and an increased cash price for ethanol, distillers grains and corn oil. We also vary the amount of
hedging or other risk mitigation strategies we undertake, and we may choose not to engage in hedging transactions at all. We
cannot assure you that our risk management and hedging activities will be effective in offsetting the effects of volatility. If
we fail to offset such volatility, our results of operations and financial position may be adversely affected.
We also attempt to reduce the market risk associated with fluctuations in commodity prices through the use of derivative
financial instruments. Sudden changes in commodity prices may require cash deposits with brokers, or margin calls.
Depending on our open derivative positions, we may require additional liquidity with little advance notice to meet margin
calls. As part of our risk management strategy, we have routinely had to, and in the future will likely be required to, cover
margin calls. While we continuously monitor our exposure to margin calls, we cannot guarantee you that we will be able to
maintain adequate liquidity to cover margin calls in the future.
Price volatility of each commodity that we buy and sell could each adversely affect our results of operations and our ability
to operate at a profit.
Corn. Because ethanol competes with non-corn derived fuels, we generally are unable to pass along increases in corn
costs to our customers. At certain levels, corn prices may make ethanol uneconomical to produce. There is significant price
pressure on local corn markets caused by nearby ethanol plants, livestock industries and other corn consuming enterprises.
Additionally, local corn supplies and prices could be adversely affected by rising prices for alternative crops, increasing input
costs, changes in government policies, shifts in global markets, or damaging growing conditions such as plant disease or
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adverse weather.
Natural Gas. The prices for and availability of natural gas are subject to volatile market conditions. These market
conditions often are affected by factors beyond our control, such as weather conditions, overall economic conditions, and
foreign and domestic governmental regulation and relations. Significant disruptions in the supply of natural gas could impair
our ability to manufacture ethanol for our customers. Furthermore, increases in natural gas prices or changes in our natural
gas costs relative to natural gas costs paid by competitors may adversely affect our results of operations and financial
position.
Ethanol. Our revenues are dependent on market prices for ethanol. These market prices can be volatile as a result of a
number of factors, including, but not limited to, the availability and price of competing fuels, the overall supply and demand
for ethanol and corn, the price of gasoline and corn, and the level of government support.
Ethanol is marketed as a fuel additive to reduce vehicle emissions from gasoline, as an octane enhancer to improve the
octane rating of the gasoline with which it is blended and, to a lesser extent, as a gasoline substitute. As a result, ethanol
prices are influenced by the supply of and demand for gasoline. Our results of operations may be materially harmed if the
demand for, or the price of, gasoline decreases. Conversely, a prolonged increase in the price of, or demand for, gasoline
could lead the U.S. government to avoid limiting imported ethanol; the import tariff of $0.54 per gallon was allowed to
expire on December 31, 2011.
Distillers Grains. Distillers grains compete with other protein-based animal feed products. The price of distillers grains
may decrease when the prices of competing feed products decrease. The prices of competing animal feed products are based
in part on the prices of the commodities from which these products are derived. Downward pressure on commodity prices,
such as soybeans, will generally cause the price of competing animal feed products to decline, resulting in downward
pressure on the price of distillers grains.
Historically, sales prices for distillers grains has tracked along with the price of corn. However, there have been
occasions when the price increase for this co-product has lagged behind increases in corn prices. In addition, our distillers
grains co-product competes with products made from other feedstocks, the cost of which may not have risen as corn prices
have risen. Consequently, the price we may receive for distillers grains may not rise as corn prices rise, thereby lowering our
cost recovery percentage relative to corn.
Due to industry increases in U.S. dry mill ethanol production, the production of distillers grains in the United States has
increased dramatically, and this trend may continue. This may cause distillers grains prices to fall in the United States, unless
demand increases or other market sources are found. To date, demand for distillers grains in the United States has increased
roughly in proportion to supply. We believe this is because U.S. farmers use distillers grains as a feedstock, and distillers
grains are slightly less expensive than corn, for which it is a substitute. However, if prices for distillers grains in the United
States fall, it may have an adverse effect on our business.
Corn Oil. Industrial uses for corn oil include feedstock for biodiesel, livestock feed additives, rubber substitutes, rust
preventatives, inks, textiles, soaps and insecticides. Corn oil is generally marketed as a feedstock for biodiesel and, therefore,
the price of corn oil is affected by demand for biodiesel. In general, corn oil prices follow the same price trends as heating oil
and soybean oil. Corn oil revenues historically have not been significant to our business; however, our business may be
materially affected by price volatility of corn oil in the future as we expand our corn oil production.
Our existing debt arrangements require us to abide by certain restrictive loan covenants that may hinder our ability to
operate and reduce our profitability.
The loan agreements governing secured debt financing at our subsidiaries, and the convertible debt issued in November
2010 contain a number of restrictive affirmative and negative covenants. These covenants limit the ability of our subsidiaries
to, among other things, incur additional indebtedness, make capital expenditures above certain limits, pay dividends or
distributions, merge or consolidate, or dispose of substantially all of their assets.
We are also required to maintain specified financial ratios, including minimum cash flow coverage, minimum working
capital and minimum net worth. Some of our loan agreements require us to utilize a portion of any excess cash flow
generated by operations to prepay the respective term debt. A breach of any of these covenants or requirements could result
in a default under our loan agreements. If any of our subsidiaries default, and if such default is not cured or waived, our
lenders could, among other remedies, accelerate their debt and declare that debt immediately due and payable. If this occurs,
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we may not be able to repay such debt or borrow sufficient funds to refinance. Even if new financing is available, it may not
be on terms that are acceptable. No assurance can be given that the future operating results of our subsidiaries will be
sufficient to achieve compliance with such covenants and requirements, or in the event of a default, to remedy such default.
In the past, we have received waivers from our lenders for failure to meet certain financial covenants and have amended
our subsidiary loan agreements to change these covenants. For example, during 2011, the Green Plains Bluffton loan
agreement was amended to include equity contributions in the denominator of the fixed coverage ratio and increase the
capital expenditures limit. No assurance can be given that, if we are unable to comply with these covenants in the future, we
will be able to obtain the necessary waivers or amend our subsidiary loan agreements to prevent a default. Default by us or
any of our subsidiaries with respect to any loan in excess of $10.0 million constitutes an event of default under our
convertible senior notes, which could result in the convertible senior notes being declared due and payable.
Additionally, in October 2010 we acquired Global Ethanol, LLC, which we renamed Green Plains Holdings II LLC, or
Holdings II. Global Ethanol’s lenders had agreed, during a specified forbearance period, to not exercise any right or remedy
under its credit agreement for specified defaults related to certain loan covenants that it had been unable to satisfy. Upon
closing of the Global Ethanol acquisition, Holdings II entered into an amendment to the existing credit agreement which
modifies existing covenants and extends the forbearance period to April 1, 2013. If any future defaults under Holdings II’s
credit agreement occur, the lenders are permitted to accelerate the maturity date on the outstanding balance. Notwithstanding
these actions, we cannot assure you that Holdings II will be able to comply with the new covenants going forward or obtain
additional waivers for non-compliance.
We may fail to realize all of the anticipated benefits of mergers and acquisitions that we have undertaken or may undertake
because of integration challenges.
We have increased the size of our operations significantly through mergers and acquisitions and intend to continue to
explore potential merger or acquisition opportunities. For example, in March 2011, we acquired our Otter Tail ethanol plant
with an annual production capacity of approximately 60 million gallons of ethanol, in June 2011, we acquired 2.0 million
bushels of grain storage capacity located in Hopkins, Missouri and in January 2012, we acquired 1.9 million bushels of grain
storage capacity located in St. Edward, Nebraska. The anticipated benefits and cost savings of such mergers and acquisitions
may not be realized fully, or at all, or may take longer to realize than expected. Acquisitions involve numerous risks, any of
which could harm our business, including:
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difficulties in integrating the operations, technologies, products, existing contracts, accounting processes and
personnel of the target and realizing the anticipated synergies of the combined businesses;
risks relating to environmental hazards on purchased sites;
risks relating to acquiring or developing the infrastructure needed for facilities or acquired sites, including access to
rail networks;
difficulties in supporting and transitioning customers, if any, of the target company;
diversion of financial and management resources from existing operations;
the purchase price or other devoted resources may exceed the value realized, or the value we could have realized if
the purchase price or other resources had been allocated to another opportunity;
risks of entering new markets or areas in which we have limited or no experience, or are outside our core
competencies;
potential loss of key employees, customers and strategic alliances from either our current business or the business of
the target;
assumption of unanticipated problems or latent liabilities, such as problems with the quality of the target company’s
products; and
inability to generate sufficient revenue to offset acquisition costs and development costs.
We also may pursue growth through joint ventures or partnerships. Partnerships and joint ventures typically involve
restrictions on actions that the partnership or joint venture may take without the approval of the partners. These types of
provisions may limit our ability to manage a partnership or joint venture in a manner that is in our best interest but is opposed
by our other partner or partners.
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Future acquisitions may involve the issuance of equity securities as payment or in connection with financing the business
or assets acquired and, as a result, could dilute your ownership interest. In addition, additional debt may be necessary in order
to complete these transactions, which could have a material adverse effect on our financial condition. The failure to
successfully evaluate and execute acquisitions or joint ventures or otherwise adequately address the risks associated with
acquisitions or joint ventures could have a material adverse effect on our business, results of operations and financial
condition.
The ethanol industry is highly dependent on government usage mandates affecting ethanol production and favorable tax
benefits for ethanol blending and any changes to such regulation could adversely affect the market for ethanol and our
results of operations.
The domestic market for ethanol is largely dictated by federal mandates for blending ethanol with gasoline. The RFS
mandate level for conventional biofuels for 2012 of 13.2 billion gallons approximates current domestic production levels.
Future demand will be largely dependent upon the economic incentives to blend based upon the relative value of gasoline
versus ethanol, taking into consideration the relative octane value of ethanol, environmental requirements and the RFS. Any
significant increase in production capacity beyond the RFS level might have an adverse impact on ethanol prices.
Additionally, the RFS mandate with respect to ethanol derived from grain could be reduced or waived entirely. A reduction
or waiver of the RFS mandate could adversely affect the prices of ethanol and our future performance. The RFS Flexibility
Act was introduced on October 5, 2011 in the U.S. House of Representatives to reduce or eliminate the volumes of renewable
fuel use required by RFS based upon corn stocks-to-use ratios. The Domestic Alternative Fuels Act of 2012 was introduced
on January 18, 2012 in the U.S. House of Representatives to modify the RFS to include ethanol and other fuels produced
from fossil fuels like coal and natural gas. We believe the RFS is a significant component of national energy policy that
reduces dependence on foreign oil by the United States. Our operations could be adversely impacted if the RFS Flexibility
Act or the Domestic Alternative Fuels Act of 2012 are enacted.
Referred to as the blender’s credit, the Volumetric Ethanol Excise Tax Credit, or VEETC, provided companies with a tax
credit to blend ethanol with gasoline. The Food, Conservation and Energy Act of 2008, or the 2008 Farm Bill, amended the
amount of tax credit provided under VEETC to 45 cents per gallon of pure ethanol and 38 cents per gallon for E85, a blended
motor fuel containing 85% ethanol and 15% gasoline. The blender’s credit expired on December 31, 2011.
Federal law mandates the use of oxygenated gasoline. If these mandates are repealed, the market for domestic ethanol
would be diminished significantly. Additionally, flexible-fuel vehicles receive preferential treatment in meeting corporate
average fuel economy, or CAFE, standards. However, high blend ethanol fuels such as E85 result in lower fuel efficiencies.
Absent the CAFE preferences, it may be unlikely that auto manufacturers would build flexible-fuel vehicles. Any change in
these CAFE preferences could reduce the growth of E85 markets and result in lower ethanol prices, which could adversely
impact our operating results.
To the extent that such federal or state laws are modified, the demand for ethanol may be reduced, which could
negatively and materially affect our ability to operate profitably.
Future demand for ethanol is uncertain and may be affected by changes to federal mandates, public perception and
consumer acceptance, any of which could negatively affect demand for ethanol and our results of operations.
Ethanol production from corn has not been without controversy. Although many trade groups, academics and
governmental agencies have supported ethanol as a fuel additive that promotes a cleaner environment, others have criticized
ethanol production as consuming considerably more energy and emitting more greenhouse gases than other biofuels and
potentially depleting water resources. Some studies have suggested that corn-based ethanol is less efficient than ethanol
produced from switchgrass or wheat grain and that it negatively impacts consumers by causing prices for dairy, meat and
other foodstuffs from livestock that consume corn to increase. Additionally, ethanol critics contend that corn supplies are
redirected from international food markets to domestic fuel markets. If negative views of corn-based ethanol production gain
acceptance, support for existing measures promoting use and domestic production of corn-based ethanol could decline,
leading to reduction or repeal of federal mandates which would adversely affect the demand for ethanol. These views could
also negatively impact public perception of the ethanol industry and acceptance of ethanol as an alternative fuel.
Beyond the federal mandates, there are limited markets for ethanol. Discretionary blending and E85 blending are
important secondary markets. Discretionary blending is often determined by the price of ethanol versus the price of gasoline.
In periods when discretionary blending is financially unattractive, the demand for ethanol may be reduced. A reduction in the
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demand for our products may depress the value of our products, erode our margins, and reduce our ability to generate
revenue or to operate profitably. Consumer acceptance of E85 fuels and flexible-fuel technology vehicles is needed before
ethanol can achieve any significant growth in market share.
Increased federal support of cellulosic ethanol may result in reduced incentives to corn-derived ethanol producers.
Recent legislation, such as the American Recovery and Reinvestment Act of 2009 and the Energy Independence and
Security Act of 2007, provides numerous funding opportunities in support of cellulosic ethanol, which is obtained from other
sources of biomass such as switchgrass and fast growing poplar trees. In addition, the amended RFS mandates an increasing
level of production of biofuels that are not derived from corn. Federal policies suggest a long-term political preference for
cellulosic processes using alternative feedstocks such as switchgrass, silage, wood chips or other forms of biomass.
Cellulosic ethanol may have a smaller carbon footprint because the feedstock does not require energy-intensive fertilizers and
industrial production processes. Additionally, cellulosic ethanol is favored because it is unlikely that foodstuff is being
diverted from the market. Several cellulosic ethanol plants are under development. As research and development programs
persist, there is the risk that cellulosic ethanol could displace corn ethanol. In addition, any replacement of federal incentives
from corn-based to cellulosic-based ethanol production may reduce our profitability.
Our plants are designed as single-feedstock facilities and would require significant additional investment to convert to
the production of cellulosic ethanol. Additionally, our plants are strategically located in high-yield, low-cost corn production
areas. At present, there is limited supply of alternative feedstocks near our facilities. As a result, the adoption of cellulosic
ethanol and its use as the preferred form of ethanol would have a significant adverse impact on our business.
Any inability to maintain required regulatory permits may impede or completely prohibit our ability to successfully operate
our plants. Additionally, any change in environmental and safety regulations, or violations thereof, could impede our ability
to successfully operate our businesses.
Our ethanol production and agribusiness segments are subject to extensive air, water and other environmental regulation.
We have had to obtain a number of environmental permits to construct and operate our plants. Ethanol production involves
the emission of various airborne pollutants, including particulate, carbon dioxide, oxides of nitrogen, hazardous air pollutants
and volatile organic compounds. In addition, the governing state agencies could impose conditions or other restrictions in the
permits that are detrimental to us or which increase our costs above those required for profitable operations. Any such event
could have a material adverse effect on our operations, cash flows and financial position.
Environmental laws and regulations, both at the federal and state level, are subject to change and changes can be made
retroactively. It is possible that more stringent federal or state environmental rules or regulations could be adopted, which
could increase our operating costs and expenses. Consequently, even if we have the proper permits at the present time, we
may be required to invest or spend considerable resources to comply with future environmental regulations. Furthermore,
ongoing plant operations are governed by OSHA. OSHA regulations may change in a way that increases the costs of
operations at our plants. If any of these events were to occur, they could have an adverse impact on our operations, cash
flows and financial position.
Part of our business is regulated by environmental laws and regulations governing the labeling, use, storage, discharge
and disposal of hazardous materials. Because we use and handle hazardous substances in our businesses, changes in
environmental requirements or an unanticipated significant adverse environmental event could have an adverse effect on our
business. We cannot assure you that we have been, or will at all times be, in compliance with all environmental requirements,
or that we will not incur material costs or liabilities in connection with these requirements. Private parties, including current
and former employees, could bring personal injury or other claims against us due to the presence of, or exposure to,
hazardous substances used, stored or disposed of by us, or contained in its products. We are also exposed to residual risk
because some of our facilities and land may have environmental liabilities arising from their prior use. In addition, changes to
environmental regulations may require us to modify existing plant and processing facilities and could significantly increase
the cost of those operations.
Our business is affected by the regulation of greenhouse gases, or GHG, and climate change. New climate change
regulations could impede our ability to successfully operate our business.
Our plants emit carbon dioxide as a by-product of the ethanol production process. In 2007, the U.S. Supreme Court
classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon
dioxide in vehicle emissions. On February 3, 2010, the EPA released its final regulations on RFS 2. We believe these final
regulations grandfather our plants at their current operating capacity, though expansion of our plants will need to meet a
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threshold of a 20% reduction in GHG emissions from a 2005 baseline measurement for the ethanol over current capacity to
be eligible for the RFS 2 mandate. The EPA issued its final rule on GHG emissions from stationary sources under the Clean
Air Act in May 2010. These final rules may require us to apply for additional permits for our ethanol plants. In order to
expand capacity at our plants, we may have to apply for additional permits, install advanced technology, or reduce drying of
certain amounts of distillers grains. We may also be required to install carbon dioxide mitigation equipment or take other
steps unknown to us at this time in order to comply with other future law or regulation. Compliance with future law or
regulation of carbon dioxide, or if we choose to expand capacity at certain of our plants, compliance with then-current
regulation of carbon dioxide, could be costly and may prevent us from operating our plants as profitably, which may have an
adverse impact on our operations, cash flows and financial position.
The California Air Resources Board, or CARB, has adopted a Low Carbon Fuel Standard, or LCFS, requiring a 10%
reduction in GHG emissions from transportation fuels by 2020. Additionally, an Indirect Land Use Change, or ILUC,
component is included in the lifecycle GHG emissions calculation. On December 29, 2011, the U.S. District Court for the
Eastern District of California issued several rulings in federal lawsuits challenging the LCFS. One of the rulings preliminarily
prevents CARB from enforcing these regulations during the pending litigation. On January 23, 2012, CARB unsuccessfully
attempted to appeal these rulings in the U.S. District Court for the Eastern District of California and on January 26, 2012 filed
another appeal with the Ninth Circuit Court of Appeals. While this standard is currently being challenged by various lawsuits,
implementation of such a standard may have an adverse impact on our market for corn-based ethanol in California if it is
determined that corn-based ethanol fails to achieve lifecycle GHG emission reductions.
Our agribusiness business is subject to significant governmental and private sector regulations.
Our agribusiness operations are subject to government regulation and regulation by certain private sector associations,
compliance with which can impose significant costs on our business. Failure to comply with such regulations can result in
additional costs, fines or criminal action. Production levels, markets and prices of the grains we merchandise are affected by
federal government programs, which include acreage control and price support programs of the USDA. In addition, grain that
we sell must conform to official grade standards imposed by the USDA. Other examples of government policies that can
have an impact on our business include tariffs, duties, subsidies, import and export restrictions and outright embargos.
Changes in government policies and producer supports may impact the amount and type of grains planted, which in turn, may
impact our ability to buy grain in our market region. Because a portion of our grain sales are to exporters, the imposition of
export restrictions or tariffs could limit our sales opportunities.
Our agribusiness segment is affected by the supply and demand of commodities, and is sensitive to factors that are often
outside of our control.
Within our agribusiness segment, we compete with other grain merchandisers, grain processors and end-users for the
purchase of grain, as well as with other grain merchandisers, private elevator operators and cooperatives for the sale of grain.
Many of our grain competitors are significantly larger and compete in more diverse markets, and our failure to compete
effectively would impact our profitability.
We buy and sell various other commodities within our agribusiness division, some of which are readily traded on
commodity futures exchanges. For example, we sell agronomy products to producers which necessitate the purchase of large
volumes of fertilizer and chemicals for retail sale. Fixed-price purchase obligations and carrying inventories of these products
subject us to the risk of market price fluctuations for periods of time between the time of purchase and final sale. Weather,
economic, political, environmental and technological conditions and developments, both local and worldwide, as well as
other factors beyond our control, can affect the supply and demand of these commodities and expose them to liquidity
pressures due to rapidly rising or falling market prices. Changes in the supply and demand of these commodities can also
affect the value of inventories held for resale, as well as the price of raw materials. Fluctuating costs of inventory and prices
of raw materials could decrease operating margins and adversely affect profitability.
While our grain business hedges the majority of its grain inventory positions with derivative instruments to manage risk
associated with commodity price changes, including purchase and sale contracts, we are unable to hedge all of the price risk
of each transaction due to timing, unavailability of hedge contract counterparties and third-party credit risk. Furthermore,
there is a risk that the derivatives we employ will not be effective in offsetting the changes associated with the risks we are
attempting to manage. This can happen when the derivative and the hedged item are not perfectly matched. Our grain
derivatives, for example, do not hedge the basis pricing component of our grain inventory and contracts. Basis is defined as
the difference between the cash price of a commodity in one of our grain facilities and the nearest in time exchange-traded
futures price. Differences can reflect time periods, locations or product forms. Although the basis component is smaller and
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generally less volatile than the futures component of grain market prices, significant unfavorable basis movement on grain
positions as large as ours may significantly impact our profitability.
Our debt level could negatively impact our financial condition, results of operations and business prospects.
As of December 31, 2011, our total debt was $636.8 million. Our level of debt could have significant consequences to
our shareholders, including the following:
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requiring the dedication of a substantial portion of cash flow from operations to make payments on debt, thereby
reducing the availability of cash flow for working capital, capital expenditures and other general business activities;
requiring a substantial portion of our corporate cash reserves to be held as a reserve for debt service, limiting our
ability to invest in new growth opportunities;
limiting the ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions
and general corporate and other activities;
limiting the flexibility in planning for, or reacting to, changes in the business and industry in which we operate;
increasing our vulnerability to both general and industry-specific adverse economic conditions;
being at a competitive disadvantage against less leveraged competitors;
being vulnerable to increases in prevailing interest rates;
subjecting all or substantially all of our assets to liens, which means that there may be no assets left for shareholders
in the event of a liquidation; and
limiting our ability to make business and operational decisions regarding our business and subsidiaries, including,
among other things, limiting our subsidiary’s ability to pay dividends, make capital improvements, sell or purchase
assets or engage in transactions deemed appropriate and in our best interest.
Most of our debt bears interest at variable rates, which creates exposure to interest rate risk. If interest rates increase, our
debt service obligations with respect to the variable rate indebtedness would increase even though the amount borrowed
remained the same, and our net income would decrease.
Our ability to make scheduled payments of principal and interest, or to refinance our indebtedness, depends on our future
performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may
not continue to generate cash flow in the future sufficient to service our debt because of factors beyond our control, including
but not limited to the spread between corn prices and ethanol and distillers grains prices. If we are unable to generate
sufficient cash flows, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or
obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness
will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these
activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Despite our current debt levels, we and our subsidiaries may incur substantially more debt or take other actions which would
intensify the risks discussed above.
Despite our current debt levels, we and our subsidiaries may incur additional debt in the future, including secured debt.
We and certain of our subsidiaries are not currently restricted under the terms of our debt from incurring additional debt,
pledging assets, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the debt but
that could diminish our ability to make payments thereunder.
We operate in capital intensive businesses and rely on cash generated from operations and external financing. Limitations on
access to external financing could adversely affect our operating results.
Some ethanol producers have faced financial distress, culminating with bankruptcy filings by several companies over the
past four years. This, in combination with continued volatility in the capital markets has resulted in reduced availability of
capital for the ethanol industry generally. Construction of our plants and anticipated levels of required working capital were
funded under long-term credit facilities. Increases in liquidity requirements could occur due to, for example, increased
commodity prices. Our operating cash flow is dependent on our ability to profitably operate our businesses and overall
commodity market conditions. In addition, we may need to raise additional financing to fund growth of our businesses. In
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this market environment, we may experience limited access to incremental financing. This could cause us to defer or cancel
growth projects, reduce our business activity or, if we are unable to meet our debt repayment schedules, cause a default in our
existing debt agreements. These events could have an adverse effect on our operations and financial position.
Our subsidiaries’ debt facilities have ongoing payment requirements which we generally expect to meet from their
operating cash flow. Our ability to repay current and anticipated future indebtedness will depend on our financial and
operating performance and on the successful implementation of our business strategies. Our financial and operational
performance will depend on numerous factors including prevailing economic conditions, volatile commodity prices, and
financial, business and other factors beyond our control. If we cannot pay our debt service, we may be forced to reduce or
delay capital expenditures, sell assets, restructure our indebtedness or seek additional capital. If we are unable to restructure
our indebtedness or raise funds through sales of assets, equity or otherwise, our ability to operate could be harmed and the
value of our stock could be significantly reduced.
We are a holding company, and there are limitations on our ability to receive distributions from our subsidiaries.
We conduct most of our operations through subsidiaries and are dependent upon dividends or other intercompany
transfers of funds from our subsidiaries to generate free cash flow. Moreover, some of our subsidiaries are currently, or are
expected in the future to be, limited in their ability to pay dividends or make distributions to us by the terms of their financing
agreements. Consequently, we are not able to rely on the cash flow from one subsidiary to satisfy the loan obligations of
another subsidiary. As a result, if a subsidiary is unable to satisfy its loan obligations, we may not be able to prevent a default
on the loan by providing additional cash to that subsidiary, even if sufficient cash exists elsewhere in our consolidated
organization.
Increased ethanol industry penetration by oil companies or other multinational companies may adversely impact our
margins.
We operate in a very competitive environment. The ethanol industry is primarily comprised of smaller entities that
engage exclusively in ethanol production and large integrated grain companies that produce ethanol along with their base
grain businesses. We face competition for capital, labor, corn and other resources from these companies. Until recently, oil
companies, petrochemical refiners and gasoline retailers have not been engaged in ethanol production to a large extent. These
companies, however, form the primary distribution networks for marketing ethanol through blended gasoline. During the past
few years, several large oil companies have entered the ethanol production market. If these companies increase their ethanol
plant ownership or other oil companies seek to engage in direct ethanol production, there will be less of a need to purchase
ethanol from independent ethanol producers like us. Such a structural change in the market could result in an adverse effect
on our operations, cash flows and financial position.
We operate in a highly competitive industry.
In the United States, we compete with other corn processors and refiners, including Archer-Daniels-Midland Company,
POET, LLC and Valero Energy Corporation. Some of our competitors are divisions of larger enterprises and have greater
financial resources than we do. Although some of our competitors are larger than we are, we also have many smaller
competitors. Farm cooperatives comprised of groups of individual farmers have been able to compete successfully. As of
December 31, 2011, the top ten domestic producers accounted for approximately 48.6% of all production, with production
capacities ranging from approximately 200 mmgy to 1,800 mmgy. If our competitors consolidate or otherwise grow and we
are unable to similarly increase our size and scope, our business and prospects may be significantly and adversely affected.
Our competitors also include plants owned by farmers who earn their livelihood through the sale of corn, and
competitors whose primary business is oil refining and retail gasoline sales. These competitors may continue to operate their
plants when market conditions are uneconomic due to benefits realized in other operations.
Depending on commodity prices, foreign producers may produce ethanol at a lower cost than we can, which may result in
lower ethanol prices which would adversely affect our financial results.
There is a risk of foreign competition in the ethanol industry. Brazil is currently the second largest ethanol producer in
the world. Brazil’s ethanol production is sugarcane based, as opposed to corn based, and has historically been less expensive
to produce. Other foreign producers may be able to produce ethanol at lower input costs, including costs of feedstock,
facilities and personnel, than we can.
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While foreign demand, transportation costs and infrastructure constraints may temper the market impact throughout the
United States, competition from imported ethanol may affect our ability to sell our ethanol profitably, which may have an
adverse effect on our operations, cash flows and financial position.
If significant additional foreign ethanol production capacity is created, such facilities could create excess supplies of
ethanol on world markets, which may result in lower prices of ethanol throughout the world, including the United States.
Such foreign competition is a risk to our business. Any penetration of ethanol imports into the domestic market may have a
material adverse effect on our operations, cash flows and financial position.
Our success may depend on our ability to manage our growing and changing operations.
Since our formation in 2004, our business has grown significantly in size and complexity. This growth has placed, and is
expected to continue to place, significant demands on our management, systems, internal controls and financial and physical
resources. In addition, if we acquire additional operations, we expect that we will need to further develop our financial and
managerial controls and reporting systems to accommodate future growth. This will require us to incur expenses related to
hiring additional qualified personnel, retaining professionals to assist in developing the appropriate control systems and
expanding our information technology infrastructure. Our inability to manage growth effectively could have an adverse effect
on our results of operations, financial position and cash flows.
Future acquisitions may involve the issuance of equity securities as payment or in connection with financing the business
or assets acquired and, as a result, could dilute your ownership interest. In addition, additional debt may be necessary in order
to complete these transactions, which could have a material adverse effect on our financial condition. The failure to
successfully evaluate and execute acquisitions or joint ventures or otherwise adequately address the risks associated with
acquisitions or joint ventures could have a material adverse effect on our business, results of operations and financial
condition.
We may fail to realize the anticipated benefits of our joint venture to commercialize algae production.
We have 35% ownership in a joint venture that is focused on developing technology to grow and harvest algae, which
consume carbon dioxide, in commercially viable quantities. The algae produced have the potential to be used for advanced
bio-fuel production, high quality animal feed, or as biomass for energy production, but our current primary focus is on
efficiently growing, and developing primary markets for, algae on a large scale. We believe this technology has specific
applications with facilities, including ethanol plants that emit carbon dioxide. We may fail to realize the expected benefits of
capturing carbon dioxide to grow and harvest algae as acceptable production rates, operating costs, capital requirements and
product market prices may not be achieved.
We have had a history of operating losses and may incur future operating losses.
We have had a history of operating losses from 2006 to 2008, and may incur operating losses in the future, which could
be substantial. Although we have sustained profitability from 2009 to 2011, we may not be able to continue to sustain or
increase profitability on a quarterly or annual basis, which could result in a decrease in the trading price of our common
stock.
Our ability to successfully operate is dependent on the availability of energy and water at anticipated prices.
Our plants require a significant and uninterrupted supply of natural gas, electricity and water to operate. We rely on third
parties to provide these resources. We cannot assure you that we will be able to secure an adequate supply of energy or water
to support current and expected plant operations. If there is an interruption in the supply of energy or water for any reason,
such as supply, delivery or mechanical problems, we may be required to halt production. If production is halted for an
extended period of time, it may have a material adverse effect on our operations, cash flows and financial position.
Replacement technologies are under development that might result in the obsolescence of corn-derived ethanol or our
process systems.
Ethanol is primarily an additive and oxygenate for blended gasoline. Although use of oxygenates is currently mandated,
there is always the possibility that a preferred alternative product will emerge and eclipse the current market. Critics of
ethanol blends argue that ethanol decreases fuel economy, causes corrosion of ferrous components and damages fuel pumps.
Any alternative oxygenate product would likely be a form of alcohol (like ethanol) or ether (like MTBE). Prior to federal
restrictions and ethanol mandates, MTBE was the dominant oxygenate. It is possible that other ether products could enter the
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market and prove to be environmentally or economically superior to ethanol. It is also possible that alternative biofuel
alcohols such as methanol and butanol could evolve into ethanol replacement products.
Research is currently underway to develop other products that could directly compete with ethanol and may have more
potential advantages than ethanol. Advantages of such competitive products may include, but are not limited to: lower vapor
pressure, making it easier to add gasoline; energy content closer to or exceeding that of gasoline, such that any decrease in
fuel economy caused by the blending with gasoline is reduced; an ability to blend at a higher concentration level for use in
standard vehicles; reduced susceptibility to separation when water is present; and suitability for transportation in petroleum
pipelines. Such products could have a competitive advantage over ethanol, making it more difficult to market our ethanol,
which could reduce our ability to generate revenue and profits.
New ethanol process technologies may emerge that require less energy per gallon produced. The development of such
process technologies would result in lower production costs. Our process technologies may become outdated and obsolete,
placing us at a competitive disadvantage against competitors in the industry. The development of replacement technologies
may have a material adverse effect on our operations, cash flows and financial position.
We may be required to provide remedies for the delivery of off-specification ethanol, distillers grains or corn oil.
If we produce and deliver ethanol, distillers grains or corn oil that does not meet the specifications defined by the sales
contract, we may be subject to quality claims requiring us to refund the purchase price of any non-conforming product or
replace any non-conforming product at our expense. We may be forced to purchase replacement quantities of ethanol,
distillers grains or corn oil at higher prices to fulfill these contractual obligations. In addition, ethanol, distillers grains or corn
oil purchased from other producers, including producers that we provide marketing and distribution services for, and
subsequently sold to others may result in similar claims if the product does not meet applicable contract specifications.
Our revenue from the sale of distillers grains depends upon its continued market acceptance as an animal feed.
Distillers grains is a co-product from the fermentation of various crops, including corn, to produce ethanol. Antibiotics
may be utilized during the fermentation process to control bacterial contamination; therefore antibiotics may be present in
small quantities in distillers grains marketed as animal feed. The U.S. Food and Drug Administration’s, or FDA’s, Center for
Veterinary Medicine has expressed concern about potential animal and human health hazards from the use of distillers grains
as an animal feed due to the possibility of antibiotic residues. As a result, the market value of this co-product could be
diminished if the FDA were to introduce regulations that limit the sale of distillers grains in the domestic market or for export
to international markets, which in turn would have a negative impact on our profitability. If public perception of distillers
grains as an acceptable animal feed were to change or if the public became concerned about the impact of distillers grains in
the food supply, the market for distillers grains would be negatively impacted, which would have a negative impact on our
profitability.
We extract non-edible corn oil from the whole stillage process immediately prior to the production of distillers grains.
Several universities are trying to determine how corn oil extraction may affect nutritional energy values of the resulting
distillers grains. If it is determined that corn oil extraction adversely affects the digestible energy content of distillers grains,
the value of our distillers grains may be affected, which could have a negative impact on our profitability.
Our operating results may suffer if our marketing and sales efforts are not effective.
We have established our own marketing, transportation and storage infrastructure. We lease tanker railcars and have
contracted with storage depots near our customers and at strategic locations for efficient delivery of our finished ethanol
product. We have also hired a marketing and sales force, as well as logistical and other operational personnel to staff our
distribution activities. The marketing, sales, distribution, transportation, storage or administrative efforts we have
implemented may not achieve expected results. Any failure to successfully execute these efforts would have a material
adverse effect on our results of operations and financial position. Our financial results also may be adversely affected by our
need to establish inventory in storage locations to fulfill our marketing and distribution contracts.
We are exposed to credit risk resulting from the possibility that a loss may occur from the failure of our contractual
counterparties to perform according to the terms of our agreements.
In selling ethanol, distillers grains and corn oil we may experience concentrations of credit risk from a variety of
customers, including major integrated oil companies, large independent refiners, petroleum wholesalers, other marketers and
jobbers. We are also exposed to credit risk resulting from sales of grain to large commercial buyers, including other ethanol
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plants. Our fixed-price forward contracts also result in credit risk when prices change significantly prior to delivery. In
addition, we may prepay for or make deposits on undelivered inventories. Concentrations of credit risk with respect to
inventory advances are primarily with a few major suppliers of petroleum products and agricultural inputs. The inability of a
third party to make payments to us for our sales, to provide product to us on advances made, or to perform on fixed-price
contracts may cause us to experience losses and may adversely impact our liquidity and our ability to make our payments
when due.
A loss may occur from the failure of our counterparties to perform according to the terms of their marketing agreements.
Under our third-party marketing agreements, we purchase all of our third-party producers’ ethanol production. In turn,
we sell the ethanol in various markets for future deliveries. Under these marketing agreements, the third-party producers are
not obligated to produce any minimum amount of ethanol and we cannot assure you that we will receive the full amount of
ethanol that these third-party plants are expected to produce. The interruption or curtailment of production by any of our
third-party producers for any reason could cause us to be unable to deliver quantities of ethanol sold under the contracts. As a
result, we may be forced to purchase replacement quantities of ethanol at higher prices to fulfill these contractual obligations.
However, these recoveries would be dependent on our third-party producer’s ability to pay, and in the event they were unable
to pay, our profitability could be materially and adversely impacted.
We are exposed to potential business disruption from factors outside our control, including natural disasters, seasonality,
severe weather conditions, accidents, and unforeseen plant operational failures due to faulty construction design or other
factors, any of which could adversely affect our cash flows and operating results.
Potential business disruption in available transportation due to natural disasters, significant track damage resulting from
a train derailment, or strikes by our transportation providers could result in delays in procuring and supplying raw materials
to our ethanol or grain facilities, or transporting ethanol and distillers grains to our customers. We also run the risk of
unforeseen operational issues, due to faulty construction design or other factors, that may result in an extended plant
shutdown. Such business disruptions would cause the normal course of our business operations to stall and may result in our
inability to meet customer demand or contract delivery requirements, as well as the potential loss of customers.
Many of our grain business activities, as well as corn procurement for our ethanol plants, are dependent on weather
conditions. Adverse weather may result in a reduction in the sales of fertilizer or pesticides during typical application periods,
a reduction in grain harvests caused by inadequate or excessive amounts of rain during the growing season, or by overly wet
conditions, an early freeze or snowy weather during the harvest season. Additionally, corn stored in an open pile may become
damaged by too much rain and warm weather before the corn is dried, shipped, consumed or moved into a storage structure.
Casualty losses may occur for which we have not secured adequate insurance.
We have acquired insurance that we believe to be adequate to prevent loss from foreseeable risks. However, events occur
for which no insurance is available or for which insurance is not available on terms that are acceptable to us. Loss from such
an event, such as, but not limited to, earthquake, tornado, war, riot, terrorism or other risks, may not be insured and such a
loss may have a material adverse effect on our operations, cash flows and financial position.
Our Obion, Tennessee plant is located within a recognized seismic zone. The design of this facility has been modified to
fortify it to meet structural requirements for that region of the country. We have also obtained additional insurance coverage
specific to earthquake risk for this plant. However, there is no assurance that this facility would remain in operation if a
seismic event were to occur.
If our internal computer network and applications suffer disruptions or fail to operate as designed, our operations will be
disrupted and our business may be harmed.
We rely on network infrastructure and enterprise applications, and internal technology systems for our operational,
marketing support and sales, and product development activities. The hardware and software systems related to such
activities are subject to damage from earthquakes, floods, lightning, tornados, fire, power loss, telecommunication failures
and other similar events. They are also subject to acts such as computer viruses, physical or electronic vandalism or other
similar disruptions that could cause system interruptions and loss of critical data, and could prevent us from fulfilling our
customers’ orders. We cannot assure you that any of our backup systems would be sufficient. Any event that causes failures
or interruption in our hardware or software systems could result in disruption of our business operations, have a negative
impact on our operating results, and damage our reputation.
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We may not be able to hire and retain qualified personnel to operate our ethanol plants.
Our success depends, in part, on our ability to attract and retain competent personnel. For each of our plants, qualified
managers, engineers, operations and other personnel must be hired. Competition for both managers and plant employees in
the ethanol industry can be intense, and we may not be able to attract and retain qualified personnel. If we are unable to hire
and retain productive and competent personnel, the amount of ethanol we produce may decrease and we may not be able to
efficiently operate our ethanol plants and execute our business strategy.
Risks relating to ownership of our common stock
The price of our common stock may be volatile.
The trading price of our common stock may be highly volatile and could be subject to fluctuations in response to a
number of factors beyond our control. Some of these factors are:
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our results of operations and the performance of our competitors;
the public’s reaction to our press releases, other public announcements and filings with the SEC;
changes in earnings estimates or recommendations by research analysts who follow us or other companies in our
industry;
changes in general economic conditions;
changes in market prices for our products or for our raw materials;
actions of our historical equity investors, including sales of common stock by our directors, executive officers and
significant shareholders;
actions by institutional investors trading in our stock;
disruption of our operations;
any major change in our management team;
other developments affecting us, our industry or our competitors; and
• U.S. and international economic, legal and regulatory factors unrelated to our performance.
In recent years the stock market has experienced significant price and volume fluctuations. These fluctuations may be
unrelated to the operating performance of particular companies. These broad market fluctuations may cause declines in the
market price of our common stock. The price of our common stock could fluctuate based upon factors that have little or
nothing to do with our Company or its performance, and those fluctuations could materially reduce our common stock price.
Our principal shareholders have substantial influence over us and they may make decisions with which you disagree.
As of December 31, 2011, subsidiaries of NTR plc, Wilon Holdings, S.A., and Wayne Hoovestol, a director and our
former Chief Executive Officer, beneficially own approximately 23.5%, 6.3% and 2.8%, respectively, of our outstanding
common stock. NTR, Wilon and Mr. Hoovestol have entered into a Shareholders’ Agreement with us in which Wilon has the
right to designate one individual to be nominated to our board so long it holds more than 2.5% of our outstanding stock.
NTR, Wilon and Mr. Hoovestol have agreed to vote for Wilon’s nominee at any meeting of shareholders for the purpose of
electing directors. As a result of the share ownership by NTR, Wilon and Mr. Hoovestol, these shareholders have the ability
to significantly influence the composition of our Board of Directors and other matters requiring shareholder approval
including mergers and other significant transactions. These shareholders may have interests that differ from yours, and they
may vote in a way with which you disagree and that may be adverse to your interests. This concentration of ownership could
present or delay a change of control of us or deprive shareholders of a right to receive a premium for their shares as part of
our sale, which could also affect the market price of our common stock.
A significant percentage of our outstanding voting stock is held by a concentrated number of shareholders which could
impact your liquidity.
As of December 31, 2011, approximately 36.8% of our outstanding common stock is held by NTR, Wilon, and our
executive officers and directors. Continued concentrated ownership could result in fewer shares being available to be traded
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in the market, resulting in reduced liquidity. In addition, a decision by one or more large shareholder to liquidate its holdings
could adversely affect the trading price of our stock. On August 11, 2010, the SEC declared effective the S-3 Registration
Statement we had filed at the request of NTR to register the resale of 11,227,653 shares of our common stock representing all
of NTR’s shares held at that date, as permitted under the Shareholders’ Agreement. The registration statement permits NTR
to sell some or all of its shares without restriction. On September 9, 2011, we repurchased 3.5 million shares of common
stock from NTR plc reducing their ownership to 7,727,653 shares. The registration of the remaining shares of common stock
does not necessarily mean that NTR will offer or sell any more of these shares.
Anti-takeover provisions could make it difficult for a third party to acquire us.
Our second amended and restated articles of incorporation, our amended and restated bylaws and Iowa law contain anti-
takeover provisions that could have the effect of delaying or preventing changes in control of us or our management. These
provisions could also discourage proxy contests and make it more difficult for our shareholders to elect directors and take
other corporate actions without the concurrence of our Board of Directors. The provisions in our charter documents include
the following:
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a classified Board of Directors pursuant to which our directors are divided into three classes, with three-year
staggered terms;
• members of our Board of Directors can only be removed for cause by shareholders with the affirmative vote of not
less than two-thirds of the outstanding shares of capital stock;
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shareholder action may be taken only at a special or annual meeting, and not by any written consent, except where
required by Iowa law;
our bylaws restrict our shareholders’ ability to make proposals at shareholder meetings; and
our Board of Directors has the ability to cause us to issue authorized and unissued shares of stock from time to time.
We are subject to the provisions of the Iowa Business Corporations Act, or IBCA, under which, certain business
combinations between an Iowa corporation whose stock is publicly traded or held by more than 2,000 shareholders and an
interested shareholder are prohibited for a three-year period following the date that such a shareholder became an interested
shareholder unless certain exemption requirements are met. In addition, certain other provisions of the IBCA may have anti-
takeover effects in certain situations.
Certain provisions in the convertible notes and the related indenture could make it more difficult or more expensive for a
third party to acquire us. For example, if a takeover would constitute a fundamental change, holders of the notes will have the
right to require us to repurchase their notes in cash. In addition, if a takeover constitutes a make-whole fundamental change,
we may be required to increase the conversion rate for holders who convert their notes in connection with such takeover. In
either case, and in other cases, our obligations under the notes and the related indenture could increase the cost of acquiring
us or otherwise discourage a third party from acquiring us or removing incumbent management.
The foregoing items may discourage transactions that otherwise could provide for the payment of a premium over
prevailing market prices of our common stock and also could limit the price that investors are willing to pay in the future for
shares of our common stock.
Non-U.S. holders may be subject to U.S. income tax with respect to gain on disposition of their common stock.
If we are or have been a U.S. real property holding corporation at any time within the shorter of the five-year period
preceding a disposition of common stock by a non-U.S. holder or such holder’s holding period of the stock disposed of, such
non-U.S. holder may be subject to United States federal income tax with respect to gain on such disposition. Because the
determination of whether we are a USRPHC depends on the fair market value of our United States real property interests
relative to the fair market value of our other trade or business assets and our non-U.S. real property interests, there can be no
assurance that we are not a USRPHC or will not become one in the future.
Item 1B. Unresolved Staff Comments.
None.
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Item 2. Properties.
Our loan agreements grant a security interest in substantially all of our owned real property. See Note 10 – Debt included
herein as part of the Notes to Consolidated Financial Statements for a discussion of our loan agreements.
Corporate
We currently lease approximately 29,857 square feet of office space at 450 Regency Parkway in Omaha, Nebraska for
our corporate headquarters, which houses our corporate administrative functions and commodity trading operations.
Ethanol Production Segment
As disclosed and detailed in our discussion of the ethanol production segment, we own a total of approximately 1,530
acres of land in nine locations with a combined plant production capacity of 740 mmgy. We also lease approximately 129
acres of land near our Obion plant. We believe that the property owned and leased at the sites of our nine ethanol plants will
be adequate to accommodate our current needs, as well as potential expansion, at those sites.
Agribusiness Segment
We own approximately 134 acres of land at seven locations in northwest Iowa for our agribusiness operations with grain
storage capacity of approximately 19.6 million bushels, 3.6 million gallons of liquid fertilizer storage and 12,000 tons of dry
fertilizer storage. We also own approximately 11 acres of land at our grain elevator in Essex, Iowa, with grain storage
capacity of approximately 1.9 million bushels at this site. In west Tennessee, we own 38 acres of land with grain storage
capacity of approximately 13.7 million bushels. In June 2011, we acquired approximately 5.1 acres of land in Hopkins,
Missouri with licensed grain storage capacity of approximately 2.0 million bushels and in January 2012, we acquired
approximately 5.8 acres of land in St. Edward, Nebraska with grain storage capacity of approximately 1.9 million bushels.
We believe that the property owned at these sites will be adequate to accommodate our current needs, as well as potential
expansion.
Marketing and Distribution Segment
Our ethanol, distillers grains and corn oil marketing operations are located at our corporate office, which is discussed
above. BlendStar owns nine acres and leases approximately 19 acres of land in ten locations (with one owned location
currently in development) throughout the south central United States, as disclosed in Item 1 – Business, for its blending and
terminaling operations. We believe that the property owned and leased at the locations will be adequate to accommodate our
current needs, as well as potential expansion.
Item 3. Legal Proceedings.
In April 2011, Aventine Renewable Energy, Inc. filed a complaint in the United States Bankruptcy Court for the District
of Delaware in connection with its Chapter 11 bankruptcy naming as defendants Green Plains Renewable Energy, Inc., Green
Plains Obion LLC, Green Plains Bluffton LLC, Green Plains VBV LLC and Green Plains Trade Group LLC. This action
alleges $24.4 million of damages from preferential transfers or, in the alternative, $28.4 million of damages from fraudulent
transfers under an ethanol marketing agreement and an unspecified amount of damages for a continuing breach of a
termination agreement related to rail cars. We are unable to predict the outcome of these matters at this time, and any views
formed as to the viability of these claims or the financial exposure which could result may change as the matters proceed
through their course. We intend to defend these claims vigorously.
Green Plains Bluffton LLC was issued a notice of violation under Section 113(a)(1) of the Clean Air Act by the EPA on
July 1, 2011 for violations of the Indiana State Implementation Plan for exceeding NOx emission limits per hour and for
operation of the thermal oxidizer below the required average temperature pursuant to the Federally Enforceable State
Operating Permit issued to the facility by the Indiana Department of Environmental Management. The EPA has proposed a
fine of approximately $197 thousand though we believe there are mitigating factors that may reduce this amount below such
level once resolved. Furthermore, we believe we may have recourse to the vendor who installed the continuous emissions
monitoring system, the operation of which was the source of the violation.
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 2:50 PM
In addition to the above-described proceedings, we are currently involved in other litigation that has arisen in the
ordinary course of business; however, we do not believe that any of this other litigation will have a material adverse effect on
our financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosures.
Not Applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our common stock trades under the symbol “GPRE” on The NASDAQ Global Market, or NASDAQ. The following
table sets forth, for the periods indicated, the high and low common stock sale prices as reported by NASDAQ.
Year Ended December 31, 2011
High
Low
Three months ended December 31, 2011 (1)
Three months ended September 30, 2011
Three months ended June 30, 2011
Three months ended March 31, 2011
$
11.48
12.06
12.80
13.00
Year Ended December 31, 2010
High
Three months ended December 31, 2010
Three months ended September 30, 2010
Three months ended June 30, 2010
Three months ended March 31, 2010
(1) T he closing price of our common stock on December 31, 2011 was $9.76
13.64
12.35
16.25
17.97
$
$
$
8.34
9.06
9.87
10.97
Low
10.53
8.12
10.12
11.23
Holders of Record
As of December 31, 2011, as reported to us by our transfer agent, there were 2,673 holders of record of our common
stock, not including beneficial holders whose shares are held in names other than their own. This figure does not include
17,871,407 shares held in depository trusts.
Dividend Policy
To date, we have not paid dividends on our common stock. The payment of dividends on our common stock in the
future, if any, is at the discretion of the Board of Directors and will depend upon our earnings, capital requirements, financial
condition and other factors our board views as relevant. The payment of dividends may also effectively be limited by
covenants in our subsidiaries’ loan agreements. Our board does not intend to declare any dividends in the foreseeable future.
Issuer Purchases of Equity Securities
Employees surrender shares upon the vesting of restricted stock grants to satisfy payroll tax withholding obligations. The
following table sets forth the shares that were surrendered by month during the fourth quarter of 2011.
Month
October
November
December
Total Number of
Shares Withheld
Average Price
Paid per Share
9,626
3,771
-
9.94
$
$
10.43
$
-
Total
13,397
$
10.08
28
28
FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 2:51 PM
On September 9, 2011, we repurchased 3.5 million shares of common stock at a price of $8.00 per share from a subsidiary
of NTR plc, which is a principal shareholder. We do not have a share repurchase program and do not intend to retire the
repurchased shares.
Recent Sales of Unregistered Securities
None.
Equity Compensation Plans
Refer to Part III, Item 12, contained herein, for information regarding shares authorized for issuance under equity
compensation plans.
Performance Graph
The following line-graph compares our cumulative stockholder return on an indexed basis with the NASDAQ Composite
Index (IXIC) and the NASDAQ Clean Edge Green Energy Index (CELS) for the fiscal year ended November 30, 2007, for
the 13-month period ended December 31, 2008, and for the years ended December 31, 2009, 2010 and 2011. The graph
assumes that the value of the investment in our common stock and each index was $100 at November 30, 2006, and that all
dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Green Plains Renewable Energy, the NASDAQ Composite Index,
and the NASDAQ Clean Edge Green Energy Index
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
11/30/06
11/30/07
12/31/08
12/31/09
12/31/10
12/31/11
Green Plains Renewable Energy
NASDAQ Composite
NASDAQ Clean Edge Green Energy
*$100 invested on 11/30/06 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
11/06
11/07
12/08
12/09
12/10
12/11
Green Plains Renewable Energy, Inc.
NASDAQ Composite
NASDAQ Clean Edge Green Energy
$
$
$
100.00
100.00
100.00
$
$
$
36.09
110.40
179.32
$
$
$
6.64
65.47
71.67
$
$
$
53.66
94.93
106.31
$
$
$
40.64
111.79
109.08
$
$
$
35.22
110.50
60.73
29
29
FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 2:53 PM
The information contained in the Performance Graph will not be deemed to be soliciting material or to be filed with the
SEC, nor will such information be incorporated by reference into any future filing under the Securities Act of 1933, as
amended, or the Securities Act, or under the Securities Exchange Act of 1934, except to the extent that we specifically
incorporate it by reference into any such filing.
Item 6. Selected Financial Data.
The following selected financial data have been derived from our consolidated financial statements. The statement of
operations data for the years ended December 31, 2011, 2010 and 2009, and the balance sheet data as of December 31, 2011
and 2010 are derived from and should be read in conjunction with our audited consolidated financial statements, including
accompanying notes, included elsewhere in this report. The statement of operations data for the nine-month transition period
ended December 31, 2008 and the fiscal year ended March 31, 2008, and the balance sheet data as of December 31, 2009,
December 31, 2008 and March 31, 2008 were derived from our audited consolidated financial statements not included in this
report, which also contain a description of a number of matters that materially affect the comparability of the periods
presented. The data should be read together with Item 7 – Management’s Discussion and Analysis of Financial Condition and
Results of Operations of this report. The financial information below is not necessarily indicative of results to be expected for
any future period. Future results could differ materially from historical results due to many factors, including those discussed
in Item 1A – Risk Factors of this report.
Year Ended
December 31,
2011
Year Ended
December 31,
2010
Year Ended
December 31,
2009
Nine-Month
Transition
Period Ended
December 31,
2008 (1)
$
3,553,712
3,381,480
172,232
73,219
99,013
(37,114)
38,213
38,418
$
2,133,922
1,981,396
152,526
60,475
92,051
(26,000)
48,162
48,012
$
1,305,793
1,221,745
84,048
44,923
39,125
(18,880)
20,154
19,790
$
188,758
175,444
13,314
18,467
(5,153)
(2,896)
(8,049)
(6,897)
Year Ended
March 31,
2008 (1)
-
$
-
-
5,423
(5,423)
1,423
(4,000)
(3,520)
$
$
1.09
1.01
$
$
1.55
1.51
$
$
0.79
0.79
$
$
(0.56)
(0.56)
$
$
(0.47)
(0.47)
Statement of Operations Data:
(in thousands , except per share information)
Revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Operating income (loss)
Total other income (expense)
Net income (loss)
Net income (loss) attributable to Green Plains
Earnings (loss) per share attributable to Green Plains:
Basic
Diluted
Other Data:
EBITDA (unaudited and in thousands) (2)
$
148,620
$
129,550
$
67,707
$
601
$
(3,980)
Balance Sheet Data (in thousands):
2011
2010
2009
2008
December 31,
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Stockholders' equity
$
174,988
576,420
1,420,828
360,965
493,407
915,471
505,357
$
233,205
606,686
1,397,779
342,503
527,900
900,137
497,642
$
89,779
252,446
878,081
174,332
388,573
567,373
310,708
$
62,294
190,797
693,263
108,446
299,011
413,278
279,985
March 31,
2008
$
538
5,285
254,175
26,856
80,711
107,567
107,986
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30
FY11 10-K - 2 17 12_js[1].pdf 1 3/5/12 9:24 AM
FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 2:54 PM
(1) T he October 15, 2008 merger with VBV, LLC was accounted for as a reverse acquisition. Although VBV was considered the acquiring entity for accounting
purposes, the merger was structured so that VBV became our wholly-owned subsidiary. As a result, our assets and liabilities as of October 15, 2008, the date of the
merger closing, were incorporated into VBV’s balance sheet based on the fair values of the net assets, which equaled the consideration paid in the merger. U.S.
generally accepted accounting principles, or GAAP, also requires an allocation of the acquisition consideration to individual assets and liabilities including tangible
assets, financial assets, separately-recognized intangible assets and goodwill. Pursuant to reverse merger accounting rules, our consolidated financial statements
and results of operations for the nine-month transition period ended December 31, 2008, the year ended March 31, 2008 and the period from September 29,
2006 (date of inception) to March 31, 2007 reflect the historical financial results of VBV and its subsidiaries for these periods, along with the acquired fair value
of our assets and liabilities as of October 15, 2008 and our financial results since October 15, 2008.
(2) Management uses earnings before interest, income taxes, noncontrolling interests, depreciation and amortization, or EBIT DA, to compare the financial
performance of our business segments and to internally manage those segments. Management believes that EBIT DA provides useful information to investors as
a measure of comparison with peer and other companies. EBIT DA should not be considered an alternative to, or more meaningful than, net income or cash flow
as determined in accordance with generally accepted accounting principles. EBIT DA calculations may vary from company to company. Accordingly, our
computation of EBIT DA may not be comparable with a similarly titled measure of another company. T he following sets forth the reconciliation of net income
to EBIT DA for the periods indicated (in thousands):
Year Ended
December 31,
2011
Year Ended
December 31,
2010
Year Ended
December 31,
2009
Nine-Month
Transition
Period Ended
December 31,
2008
Year Ended
March 31,
2008
Net income (loss) attributable to Green Plains
Interest expense
Depreciation and amortization
Net income (loss) attributable to noncontrolling interests
Income taxes
EBITDA
38,418
36,645
50,076
(205)
23,686
148,620
48,012
26,144
37,355
150
17,889
129,550
19,790
18,827
28,635
364
91
67,707
(6,897)
4,119
4,531
(1,152)
-
601
(3,520)
-
20
(480)
-
(3,980)
$
$
$
$
$
$
$
$
$
$
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
The following discussion and analysis provides information which management believes is relevant to an assessment and
understanding of our consolidated financial condition and results of operations. This discussion should be read in conjunction
with the consolidated financial statements included herewith and notes to the consolidated financial statements thereto and
the risk factors contained herein.
Overview
We were formed in June 2004, incurring development costs until our first two plants were completed. Our plant in
Shenandoah, Iowa commenced operations in August 2007 and our plant in Superior, Iowa commenced operations in July
2008. To complement and enhance our ethanol production facilities, in April 2008, we acquired Great Lakes Cooperative, a
full-service farm cooperative in northwestern Iowa and southwestern Minnesota. As a result of our October 2008 merger with
VBV LLC, we acquired two additional ethanol plants, located in Bluffton, Indiana and Obion, Tennessee, that commenced
operations in September 2008 and November 2008, respectively. In January 2009, we acquired a majority interest in
BlendStar which operates nine blending or terminaling facilities with approximately 625 mmgy of total throughput capacity
in seven states in the south central United States. In July 2009, we acquired two limited liability companies that owned
ethanol plants in Central City and Ord, Nebraska that added operating capacity totaling 150 mmgy. In April 2010, we
acquired five grain elevators with federally licensed grain storage capacity of 11.7 million bushels, all located in western
Tennessee, within 50 miles of our Obion ethanol plant. In October 2010, we acquired Global Ethanol, LLC, adding two
ethanol plants with a combined annual production capacity of approximately 160 million gallons. In March 2011, we
acquired an ethanol plant near Fergus Falls, Minnesota with an annual production capacity of approximately 60 million
gallons. In June 2011, we acquired 2.0 million bushels of grain storage capacity located in Hopkins, Missouri, which is
approximately 45 miles from our Shenandoah, Iowa ethanol plant. In July 2011, we acquired all remaining noncontrolling
interests in BlendStar. In January 2012, we acquired 1.9 million bushels of grain storage capacity located in St. Edward,
Nebraska, which is approximately 40 miles from our Central City, Nebraska ethanol plant.
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31
We are a leading, vertically-integrated producer, marketer and distributer of ethanol. We focus on generating stable
operating margins through our diversified business segments and our risk management strategy. We believe that owning and
operating assets throughout the ethanol value chain enables us to mitigate changes in commodity prices and differentiates us
from companies focused only on ethanol production. Today, we have operations throughout the ethanol value chain,
beginning upstream with our agronomy and grain handling operations, continuing through our approximately 740 million
gallons per year, or mmgy, of ethanol production capacity and ending downstream with our ethanol marketing, distribution
and blending facilities.
Our management reviews our operations in four separate operating segments:
• Ethanol Production. We operate a total of nine ethanol plants in Indiana, Iowa, Michigan, Minnesota, Nebraska and
Tennessee, with approximately 740 mmgy of total ethanol production capacity. At capacity, these plants collectively
will consume approximately 265 million bushels of corn and produce approximately 2.1 million tons of distillers
grains annually.
• Corn Oil Production. We operate corn oil extraction systems at all nine of our ethanol plants, with the capacity to
produce approximately 130 million pounds annually. The corn oil systems are designed to extract non-edible corn
oil from the whole stillage process immediately prior to production of distillers grains. Industrial uses for corn oil
include feedstock for biodiesel, livestock feed additives, rubber substitutes, rust preventatives, inks, textiles, soaps
and insecticides.
• Agribusiness. We operate three lines of business within our agribusiness segment: bulk grain, agronomy and
petroleum. In our bulk grain business, we have 15 grain elevators with approximately 39.1 million bushels of total
storage capacity. We sell fertilizer and other agricultural inputs and provide application services to area producers,
through our agronomy business. Additionally, we sell petroleum products including diesel, soydiesel, blended
gasoline and propane, primarily to agricultural producers and consumers. We believe our bulk grain business
provides synergies with our ethanol production segment as it supplies a portion of the feedstock for our ethanol
plants.
• Marketing and Distribution. Our in-house marketing business is responsible for the sales, marketing and
distribution of all ethanol, distillers grains and corn oil produced at our nine ethanol plants. We also market and
distribute ethanol for third-party ethanol producers with production capacity totaling approximately 260 mmgy.
Additionally, our wholly-owned subsidiary, BlendStar LLC, operates nine blending or terminaling facilities with
approximately 625 mmgy of total throughput capacity in seven states in the south central United States.
We have redefined our operating segments to segregate corn oil production as a reportable segment to reflect the manner
by which executive management manages, allocates resources to, and measures the performance of our businesses. We
initiated corn oil production in October 2010, with implementation of such extraction technology at all of our ethanol plants
completed during 2011. Corn oil production was previously reported as a component of our marketing and distribution
segment; however, all prior period segment results have been restated to reflect this change.
We intend to continue to take a disciplined approach in evaluating new opportunities related to potential acquisition of
additional ethanol plants by considering whether the plants fit within the design, engineering and geographic criteria we have
developed. In our marketing and distribution segment, our strategy is to renew existing marketing contracts, as well as enter
new contracts with other ethanol producers. We also intend to pursue opportunities to develop or acquire additional grain
elevators and agronomy businesses, specifically those located near our ethanol plants. We believe that owning additional
agribusiness operations in close proximity to our ethanol plants enables us to strengthen relationships with local corn
producers, allowing us to source corn more effectively and at a lower average cost. We also plan to continue to grow our
downstream access to customers and are actively seeking new marketing opportunities with other ethanol producers.
We continue our support of the BioProcess Algae joint venture, which is focused on developing technology to grow and
harvest algae, which consume carbon dioxide, in commercially viable quantities. Construction of Phase II was completed and
the Grower Harvesters™ bioreactors were successfully started up in January 2011. Phase II allows for verification of growth
rates, energy balances and operating expenses, which are considered to be some of the key steps to commercialization. The
cost of the Phase II project was shared by the joint venture partners. As part of the Phase II funding, we increased our
ownership in BioProcess Algae to 35%. During the third quarter of 2011, BioProcess Algae constructed an outdoor Grower
Harvester system next to our Shenandoah ethanol plant, which is successfully producing algae. BioProcess Algae
successfully completed its first round of algae-based poultry feed trials, in conjunction with the University of Illinois. The
32
32
algae strains produced by the Grower Harvester system for the feed trials demonstrated high energy and protein content that
was readily available, similar to other high value feed products used in the feeding of poultry today. BioProcess Algae broke
ground on a five acre algae farm in the first quarter of 2012 at the same location. If we and the other BioProcess Algae
members determine that the venture can achieve the desired economic performance from the five acre farm, a build-out of
400 acres of Grower Harvester reactors will be considered. The cost of such a build-out is estimated at $40 million to $60
million and could take up to a year to complete. Funding for BioProcess Algae for such a project would come from a variety
of sources including current partners, new equity investors, debt financing or a combination thereof. If a decision was made
to replicate such a 400 acre algae farm at all of our ethanol plants, we estimate that the required investment could range from
$300 million to $500 million. BioProcess Algae currently is exploring potential algae markets including animal feeds,
nutraceuticals and biofuels.
Industry Factors Affecting our Results of Operations
Variability of Commodity Prices. Our operations and our industry are highly dependent on commodity prices, especially
prices for corn, ethanol, distillers grains and natural gas. Because the market prices of these commodities are not always
correlated, at times ethanol production may be unprofitable. As commodity price volatility poses a significant threat to our
margin structure, we have developed a risk management strategy focused on locking in favorable operating margins when
they are available. We continually monitor market prices of corn, natural gas and other input costs relative to the prices for
ethanol and distillers grains at each of our production facilities. We create offsetting positions by using a combination of
derivative instruments, fixed-price purchases and sales contracts, or a combination of strategies within strict limits. Our
primary focus is not to manage general price movements of individual commodities, for example to minimize the cost of corn
consumed, but rather to lock in favorable profit margins whenever possible. By using a variety of risk management tools and
hedging strategies, including our internally-developed real-time margin management system, we believe we are able to
maintain a disciplined approach to risk.
There may be periods of time that, due to the variability of commodity prices and compressed margins identified by our
risk management system, we make a decision to reduce or cease ethanol production operations at certain of our ethanol
plants. In the first quarter of 2012, we have reduced production volumes at two of our ethanol plants by approximately 30%,
or about 5% of our total production, in direct response to unfavorable operating margins. In response to relatively strong
margins in the fourth quarter of 2011, the ethanol industry increased production and ended the year with excess inventories,
which has adversely affected the margin environment in the beginning of 2012.
Reduced Availability of Capital. Some ethanol producers have faced financial distress over the past few years,
culminating with bankruptcy filings by several companies. This, in combination with continued volatility in the capital
markets has resulted in reduced availability of capital for the ethanol industry generally. In this market environment, we may
experience limited access to incremental financing.
Legislation. Federal and state governments have enacted numerous policies, incentives and subsidies to encourage the
usage of domestically-produced alternative fuel solutions. Passed in 2007 as part of the Energy Independence and Security
Act, a federal Renewable Fuels Standard, or RFS, has been and we expect will continue to be a driving factor in the growth
of ethanol usage. The RFS Flexibility Act was introduced on October 5, 2011 in the U.S. House of Representatives to reduce
or eliminate the volumes of renewable fuel use required by RFS based upon corn stocks-to-use ratios. The Domestic
Alternative Fuels Act of 2012 was introduced on January 18, 2012 in the U.S. House of Representatives to modify the RFS to
include ethanol and other fuels produced from fossil fuels like coal and natural gas.
To further drive growth in the increased adoption of ethanol, Growth Energy, an ethanol industry trade association, and a
number of ethanol producers requested a waiver from the EPA to increase the allowable amount of ethanol blended into
gasoline from the current 10% level, or E10, to a 15% level, or E15. In October 2010, the EPA granted a partial waiver for
E15 for use in model year 2007 and newer model passenger vehicles, including cars, SUVs, and light pickup truck. In
January 2011, the EPA granted a second partial waiver for E15 for use in model year 2001 to 2006 passenger vehicles. On
February 17, 2012, the EPA announced that evaluation of the health effects tests on E15 are complete and that fuel
manufacturers are now able to register E15 with the EPA to sell. Another major benefit to the industry was the blender’s
credit, which allowed gasoline distributors who blended ethanol with gasoline to receive a federal excise tax credit of $0.45
per gallon of pure ethanol used, or $0.045 per gallon for E10 and $0.3825 per gallon for E85. The blender’s credit expired on
December 31, 2011; however, even without the blender’s credit, ethanol remains at a discount to gasoline.
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the
Reform Act, which, among other things, aims to improve transparency and accountability in derivative markets. While the
33
33
Reform Act increases the regulatory authority of the Commodity Futures Trading Commission, or CFTC, regarding over-the-
counter derivatives, there is uncertainty on several issues related to market clearing, definitions of market participants,
reporting, and capital requirements. While many details remain to be addressed in CFTC rulemaking proceedings, at this time
we do not anticipate any material impact to our risk management strategy.
Critical Accounting Policies and Estimates
This disclosure is based upon our consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these financial statements requires that we
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we
believe are proper and reasonable under the circumstances. We continually evaluate the appropriateness of estimates and
assumptions used in the preparation of our consolidated financial statements. Actual results could differ materially from those
estimates. Key accounting policies, including but not limited to those relating to revenue recognition, 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.
Revenue Recognition
We recognize 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, corn oil and distillers grains, we recognize revenue when title to the product and risk of loss transfer to an
external customer.
We routinely enter into fixed-price, physical-delivery ethanol sales agreements. In certain instances, we intend to settle
the transaction by open market purchases of ethanol rather than by delivery from our own production. These transactions are
reported net as a component of revenues.
Revenue from sales of agricultural commodities, fertilizers and other similar products is 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. Shipping and
handling costs are recorded on a gross basis in the statements of operations with amounts billed included in revenues and also
as a component of cost of goods sold. Revenue from grain storage is recognized as services are rendered. Revenue related to
grain merchandising is recorded on a gross basis.
Revenue related to our marketing operations for third parties is recorded on a gross basis in the consolidated financial
statements, as we take title to the product and assume risk of loss. Unearned revenue is reflected on our consolidated balance
sheet for goods in transit for which we have received payment and title has not been transferred to the external customer.
Revenue from ethanol transload and splash blending services is recognized as these services are rendered.
Intercompany revenues are eliminated on a consolidated basis for reporting purposes.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation on our ethanol production
facilities, grain storage facilities, railroad track, computer equipment and software, office furniture and equipment, vehicles,
and other fixed assets has been provided on the straight-line method over the estimated useful lives of the assets, which
currently range from 3 to 40 years.
Land improvements are capitalized and depreciated. Expenditures for property betterments and renewals are capitalized.
Costs of repairs and maintenance are charged to expense as incurred.
We periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated
useful life of fixed assets, which is accounted for prospectively.
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34
Impairment of Long-Lived Assets and Goodwill
Our long-lived assets consist of property and equipment. We review long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. We measure
recoverability of assets to be held and used by comparing the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash
flows, we record an impairment charge in the amount by which the carrying amount of the asset exceeds the fair value of the
asset. No impairment charges have been recorded during the periods presented.
Our goodwill consists of amounts relating to our acquisitions of Green Plains Ord, Green Plains Central City, Green
Plains Holdings II, Green Plains Otter Tail and BlendStar. We review goodwill at an individual plant or subsidiary level for
impairment at least annually, as of October 1, or more frequently whenever events or changes in circumstances indicate that
impairment may have occurred. We perform a two-step impairment test to evaluate goodwill. Under the first step, we
compare the estimated fair value of the reporting unit with its carrying value (including goodwill). If the estimated fair value
of the reporting unit is less than its carrying value, we complete a second step to determine the amount of the goodwill
impairment that we should record. In the second step, we determine an implied fair value of the reporting unit’s goodwill by
allocating the reporting unit’s fair value to all of its assets and liabilities other than goodwill. We compare the resulting
implied fair value of the goodwill to the carrying amount and record an impairment charge for the difference. As of our most
recent annual review of goodwill, we have determined that the estimated fair value of each reporting unit substantially
exceeds each of their respective carrying values.
The reviews of long-lived assets and goodwill require making estimates regarding amount and timing of projected cash
flows to be generated by an asset or asset group over an extended period of time. Management judgment regarding the
existence of circumstances that indicate impairment is based on numerous potential factors including, but not limited to, a
decline in our future projected cash flows, a decision to suspend operations at a plant for an extended period of time, a
sustained decline in our market capitalization, a sustained decline in market prices for similar assets or businesses, or a
significant adverse change in legal or regulatory factors or the business climate. Significant management judgment is
required in determining the fair value of our long-lived assets and goodwill to measure impairment, including projections of
future cash flows. Fair value is determined through various valuation techniques including discounted cash flow models,
market values and third-party independent appraisals, as considered necessary. Changes in estimates of fair value could result
in a write-down of the asset in a future period. Given the current economic and regulatory environment and uncertainties
regarding the impact on our business, there are no assurances that our estimates and assumptions will prove to be an accurate
prediction of the future.
Derivative Financial Instruments
We use various financial instruments, including derivatives, to minimize the effects of the volatility of commodity price
changes primarily related to corn, natural gas and ethanol. We monitor and manage this exposure as part of our overall risk
management policy. As such, we seek to reduce the potentially adverse effects that the volatility of these markets may have
on our operating results. We may take hedging positions in these commodities as one way to mitigate risk. We have put in
place commodity price risk management strategies that seek to reduce significant, unanticipated earnings fluctuations that
may arise from volatility in commodity prices, principally through the use of derivative instruments. While we attempt to link
our hedging activities to our purchase and sales activities, there are situations where these hedging activities can themselves
result in losses.
By using derivatives to hedge exposures to changes in commodity prices, we have exposures on these derivatives to
credit and market risk. We are exposed to credit risk that the counterparty might fail to fulfill its performance obligations
under the terms of the derivative contract. We minimize our credit risk by entering into transactions with high quality
counterparties, limiting the amount of financial exposure we have with each counterparty and monitoring the financial
condition of our 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. We manage market risk by incorporating monitoring parameters within our
risk management strategy that limit the types of derivative instruments and derivative strategies we use, and the degree of
market risk that may be undertaken by the use of derivative instruments.
We evaluate our contracts to determine whether the contracts are derivatives as certain derivative contracts that involve
physical delivery may qualify for the normal purchases or normal sales exemption as they will be expected to be used or sold
over a reasonable period in the normal course of business. Any derivative contracts that do not meet the normal purchase or
35
35
sales criteria are recorded at fair value with the unrealized gains and losses from the change in fair value recorded in
operating income unless the contracts qualify for hedge accounting treatment.
Certain qualifying derivatives within our ethanol production segment are designed as cash flow hedges. Prior to entering
into cash flow hedges, we evaluate 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, we would discontinue cash flow hedge treatment, which would
affect earnings. These derivative financial instruments are recognized in other current assets or liabilities at fair value.
We use exchange-traded futures and options contracts to minimize the effects of changes in the prices of agricultural
commodities on our grain inventories and forward purchase and sales contracts within our agribusiness segment. Exchange-
traded futures and options contracts are valued at unadjusted prices in an active market. Grain inventories held for sale,
forward purchase contracts and forward sale contracts of this 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, are recognized in earnings as a component of cost of
goods sold. We are exposed to loss in the event of non-performance by the counter-party to forward purchase and forward
sales contracts.
Accounting for Income Taxes
Income taxes are accounted for under the asset and liability method in accordance with GAAP. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying
amount of existing assets and liabilities and their respective tax basis and for net operating loss and tax credit carry-forwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which
those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets
and liabilities is recognized in operations in the period that includes the enactment date. The realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Management’s evaluation of the need for a valuation allowance must consider
positive and negative evidence, and the weight given to the potential effects of such positive and negative evidence is based
on the extent to which it can be objectively verified.
Related to accounting for uncertainty in income taxes, we follow a process by which the likelihood of a tax position is
gauged based upon the technical merits of the position, perform a subsequent measurement related to the maximum benefit
and the degree of likelihood, and determine the amount of benefit to be recognized in the financial statements, if any.
Recently Issued Accounting Pronouncements
Effective January 1, 2011, we adopted the amended guidance in ASC Topic 805, Business Combinations, which, if we
complete a business combination during the reporting period, requires us to disclose our pro forma revenue and earnings as
though the business combinations that occurred during the current period had occurred as of the beginning of the comparable
prior annual reporting period. The amended guidance also requires us to include a description of the nature and amount of
material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro
forma revenue and earnings.
Effective January 1, 2011, we adopted the second phase of the amended guidance in ASC Topic 820, Fair Value
Measurements and Disclosures, which requires us to disclose information in the reconciliation of recurring Level 3
measurements regarding purchases, sales, issuances and settlements on a gross basis, with a separate reconciliation for assets
and liabilities. We did not experience an impact from the additional disclosure requirements as we do not have any recurring
Level 3 measurements.
Effective January 1, 2012, we will be required to adopt the third phase of amended guidance in ASC Topic 820, Fair
Value Measurements and Disclosures. The purpose of the amendment is to achieve common fair value measurement and
disclosure requirements by improving comparability of fair value measurements presented and disclosed in financial
statements prepared in accordance with GAAP and those prepared in conformity with International Financial Reporting
Standards, or IFRS. The amended guidance clarifies the application of existing fair value measurement requirements and
36
36
requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable
inputs and any interrelationships between those inputs. We currently would not be impacted by the additional disclosure
requirements as we do not have any recurring Level 3 measurements.
Effective January 1, 2012, we will be required to adopt the amended guidance in ASC Topic 220, Comprehensive
Income. This accounting standards update, which helps to facilitate the convergence of GAAP and IFRS, is aimed at
increasing the prominence of other comprehensive income in the financial statement by eliminating the option to present
other comprehensive income in the statement of stockholders’ equity, and requiring comprehensive income to be reported in
either a single continuous statement or in two separate but consecutive statements reporting net income and other comprehensive
income. This amended guidance will be implemented retroactively. We have determined that the changes to the accounting
standards will affect the presentation of consolidated financial information but will not have a material effect on the
Company’s financial position or results of operations.
Effective January 1, 2012, we will be permitted to adopt the amended guidance in ASC Topic 350, Intangibles –
Goodwill and Other. The amended guidance permits an entity to first assess qualitative factors to determine whether it is
more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it
is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a
likelihood of more than 50 percent. We have determined that the changes to the accounting standards will not impact our
disclosure or reporting requirements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material
effect on our consolidated financial condition, results of operations or liquidity.
Components of Revenues and Expenses
Revenues. In our ethanol production segment, our revenues are derived primarily from the sale of ethanol and distillers
grains, which is a co-product of the ethanol production process. In our corn oil production segment, our revenues are derived
from the sale of corn oil, which is extracted from the whole stillage process immediately prior to the production of distillers
grains. In our agribusiness segment, the sale of grain, fertilizer and petroleum products are our primary sources of revenue. In
our marketing and distribution segment, the sale of ethanol, distillers grains and corn oil that we market for our nine ethanol
plants and the sale of ethanol we market for the ethanol plants owned by third parties represent our primary sources of
revenue. Revenues also include net gains or losses from derivatives.
Cost of Goods Sold. Cost of goods sold in our ethanol production and corn oil production segments 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 our ethanol plants. Plant overhead costs primarily consist of plant
utilities, plant depreciation and outbound freight charges. Our cost of goods sold is mainly affected by the cost of ethanol,
corn, natural gas and transportation. In these segments, corn is our most significant raw material cost. We purchase natural
gas to power steam generation in our ethanol production process and to dry our distillers grains. Natural gas represents our
second largest cost in this business segment. Cost of goods sold also includes net gains or losses from derivatives.
Grain, fertilizer and petroleum acquisition costs represent the primary components of cost of goods sold in our
agribusiness segment. Grain inventories, forward purchase contracts and forward sale contracts 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 market value of grain inventories,
forward purchase and sale contracts, and exchange-traded futures and options contracts are recognized in earnings as a
component of cost of goods sold.
In our marketing and distribution segment, purchases of ethanol, distillers grains and corn oil represent the largest
components of cost of goods sold. Transportation expense represents an additional major component of our cost of goods
sold in this segment. Transportation expense includes rail car leases, freight and shipping of our ethanol and co-products, as
well as costs incurred in storing ethanol at destination terminals.
Selling, General and Administrative Expenses. Selling, general and administrative expenses are recognized at the
operating segment level, as well as at the corporate level. These expenses consist of employee salaries, incentives and
benefits; office expenses; board fees; and professional fees for accounting, legal, consulting, and investor relations activities.
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37
Personnel costs, which include employee salaries, incentives and benefits, are the largest single category of expenditures in
selling, general and administrative expenses. We refer to selling, general and administrative expenses that are not allocable to
a segment as corporate activities.
Other Income (Expense). Other income (expense) includes interest earned, interest expense, amortization of debt
financing costs and other non-operating items.
Results of Operations –
Comparability
The following summarizes various events that affect the comparability of our operating results for the past three years:
•
July 2009
• April 2010
• October 2010
• October 2010
• March 2011
•
June 2011
•
July 2011
•
January 2012
Green Plains Central City and Green Plains Ord were acquired
Green Plains Grain Company TN assets were acquired
Green Plains acquired the Lakota and Riga ethanol plants
Green Plains Commodities LLC began corn oil extraction
Green Plains Otter Tail was acquired
Green Plains Grain Company acquired Hopkins, Missouri grain elevator
Green Plains acquired remaining 49% noncontrolling interests in BlendStar
Green Plains Grain Company acquired St. Edward, Nebraska grain elevator
The year ended December 31, 2010 includes a full year of operations at our Central City and Ord ethanol plants,
approximately eight months of operations at our Tennessee agribusiness operations, and two months of operations, including
corn oil extraction, at our Lakota and Riga ethanol plants. The year ended December 31, 2011 includes a full year of
operations at our Tennessee agribusiness operations and our Lakota and Riga ethanol plants, approximately nine months of
operations at our Otter Tail ethanol plant, and the deployment of corn oil extraction technology at all remaining ethanol
plants.
Segment Results
Our operations fall within the following four segments: (1) production of ethanol and related distillers grains,
collectively referred to as ethanol production, (2) corn oil production, (3) grain warehousing and marketing, as well as sales
and related services of agronomy and petroleum products, collectively referred to as agribusiness, and (4) marketing and
distribution of Company-produced and third-party ethanol, distillers grains and corn oil, 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. When the Company’s management evaluates segment performance, they review the information
provided below, as well as segment earnings before interest, income taxes, noncontrolling interest, depreciation and
amortization.
During the normal course of business, our operating segments enter into transactions with one another. For example, our
ethanol production and corn oil production segments sell ethanol, distillers grains and corn oil to our marketing and
distribution segment and our agribusiness segment sells grain to our 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, intersegment revenues and corresponding costs are
eliminated in consolidation, and do not impact our consolidated results.
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 2:57 PM
The table below reflects selected operating segment financial information for the periods indicated (in thousands):
The table below reflects selected operating segment financial information for the periods indicated (in thousands):
Revenue:
Revenue:
Ethanol production
Ethanol production
Corn oil production
Corn oil production
Revenue from external customers
Intersegment revenue
Revenue from external customers
Intersegment revenue
Total segment revenue
Total segment revenue
Revenue from external customers
Intersegment revenue
Revenue from external customers
Intersegment revenue
Total segment revenue
Total segment revenue
Revenue from external customers
Intersegment revenue
Revenue from external customers
Total segment revenue
Intersegment revenue
Marketing and distribution
Total segment revenue
Revenue from external customers
Marketing and distribution
Intersegment revenue
Revenue from external customers
Intersegment revenue
Total segment revenue
Total segment revenue
Agribusiness
Agribusiness
Revenue including intersegment activity
Intersegment elimination
Revenue including intersegment activity
Revenue as reported
Intersegment elimination
Revenue as reported
Gross profit:
Gross profit:
Ethanol production
Corn oil production
Ethanol production
Agribusiness
Corn oil production
Marketing and distribution
Agribusiness
Intersegment eliminations
Marketing and distribution
Intersegment eliminations
Operating income:
Operating income:
Ethanol production
Corn oil production
Ethanol production
Agribusiness
Corn oil production
Marketing and distribution
Agribusiness
Intersegment eliminations
Marketing and distribution
Corporate activities
Intersegment eliminations
Corporate activities
2011
2011
Year Ended December 31,
2010
Year Ended December 31,
2010
$
$
$
$
128,780
2,005,141
128,780
2,133,921
2,005,141
2,133,921
1,466
43,391
1,466
44,857
43,391
44,857
358,968
195,172
358,968
554,140
195,172
554,140
3,064,498
467
3,064,498
3,064,965
467
3,064,965
5,797,883
(2,244,171)
5,797,883
3,553,712
(2,244,171)
3,553,712
$
$
$
$
63,001
1,052,424
63,001
1,115,425
1,052,424
1,115,425
995
707
995
1,702
707
1,702
248,619
122,133
248,619
370,752
122,133
370,752
1,821,307
293
1,821,307
1,821,600
293
1,821,600
3,309,479
(1,175,557)
3,309,479
2,133,922
(1,175,557)
2,133,922
$
$
$
$
2009
2009
61,629
669,708
61,629
731,337
669,708
731,337
-
-
-
-
-
-
147,890
74,076
147,890
221,966
74,076
221,966
1,096,274
-
1,096,274
1,096,274
-
1,096,274
2,049,577
(743,784)
2,049,577
1,305,793
(743,784)
1,305,793
87,010
27,067
87,010
34,749
27,067
23,112
34,749
294
23,112
172,232
294
172,232
73,242
26,999
73,242
11,721
26,999
9,475
11,721
334
9,475
(22,758)
334
99,013
(22,758)
99,013
$
$
$
$
$
$
$
$
105,079
878
105,079
25,199
878
21,192
25,199
178
21,192
152,526
178
152,526
93,410
878
93,410
5,614
878
9,673
5,614
188
9,673
(17,712)
188
92,051
(17,712)
92,051
$
$
$
$
$
$
$
$
47,825
-
47,825
22,561
-
13,572
22,561
90
13,572
84,048
90
84,048
38,778
-
38,778
8,847
-
4,843
8,847
85
4,843
(13,428)
85
39,125
(13,428)
39,125
$
$
$
$
$
$
$
$
39
39
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 2:56 PM
The table below shows total assets for our operating segments as of the periods indicated (in thousands):
Total assets:
Ethanol production
Corn oil production
Agribusiness
Marketing and distribution
Corporate assets
Intersegment eliminations
December 31,
2011
2010
$
$
879,500
24,601
233,201
181,466
121,429
(19,369)
1,420,828
$
$
850,049
7,204
239,595
169,148
142,666
(10,883)
1,397,779
Year ended December 31, 2011 Compared to the Year ended December 31, 2010
Consolidated Results
Revenues increased $1.4 billion for the year ended December 31, 2011 compared to the same period in 2010 as a result
of acquired operations and changes in commodity prices. We acquired our western Tennessee agribusiness operations in
April 2010, our Lakota and Riga ethanol plants in October 2010, and our Otter Tail ethanol plant in March 2011. Revenue
from existing operations was also impacted by increases in commodity prices, production efficiencies at our ethanol plants
and the increase in the volume of corn oil extracted in 2011 compared to 2010. Gross profit increased $19.7 million
compared to the same period in 2010. Gross profit increases in the corn oil production, agribusiness and market and
distribution segments were partially offset by a decrease in gross profit in the ethanol production segment. Operating income
increased $7.0 million compared to the same period in 2010. In addition to the factors identified above, selling, general and
administrative expenses increased $12.7 million compared to the same period in 2010 due to the expanded scope of our
operations.
Income before taxes was also affected by an increase in interest expense of $10.5 million due to debt issued to finance
the acquisitions and $90.0 million of convertible notes issued in November 2010. Income tax expense for the year ended
December 31, 2011 increased compared to 2010 due to an increase in income before taxes and additional state filing
requirements resulting from acquired operations. In addition, income tax expense for the year ended December 31, 2010 was
favorably impacted by the release of a portion of valuation allowances against certain deferred tax assets, established in prior
years due to the uncertainty of realization.
The following discussion of segment results provides greater detail on period to period results.
Ethanol Production Segment
The table below presents key operating data within our ethanol production segment for the periods indicated:
Ethanol sold
(thousands of gallons)
Distillers grains sold
(thousands of equivalent dried tons)
Corn consumed
(thousands of bushels)
Year Ended December 31,
2011
2010
721,535
544,388
2,047
1,566
255,437
194,327
Revenues for the ethanol production segment increased $1.0 billion for the year ended December 31, 2011 compared to
the same period in 2010. Revenues for the year ended December 31, 2011 included production of an additional 170 million
gallons from our Lakota and Riga ethanol plants which were acquired in October 2010, as well as production from our Otter
Tail ethanol plant, which was acquired in late March 2011. The Lakota, Riga and Otter Tail plants contributed an additional
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 2:58 PM
$516.0 million in combined revenues for the year ended December 31, 2011. The remaining increase in revenues was due to
increased volume from production efficiencies at our other ethanol plants and increases in ethanol and distillers grains prices.
Cost of goods sold in the ethanol production segment increased $1.0 billion for the year ended December 31, 2011
compared to the same period in 2010. The increase was due primarily to the consumption of 61.1 million additional bushels
of corn and a 56.9% increase in the average cost per bushel during 2011 compared to 2010. The volume increase was due to a
full year of production at our Lakota and Riga plants and three quarters of production at our newly-acquired Otter Tail plant.
Gross profit and operating income for the ethanol production segment decreased by $18.1 million and $20.2 million,
respectively, for the year ended December 31, 2011 compared to 2010 primarily due to a greater increase in the average cost
per bushel of corn than the average price per gallon of ethanol, which increased by 43.1%. In addition, depreciation and
amortization expense for the ethanol production segment increased to $43.2 million during 2011 compared to $32.6 million
in 2010 due to the acquisitions of the plants noted above in the fourth quarter of 2010 and first quarter of 2011.
Corn Oil Production Segment
We initiated corn oil production in the fourth quarter of 2010 with the acquisition of our Lakota and Riga ethanol plants
and installation and deployment of corn oil extraction technology at our Obion and Ord ethanol plants. In 2011, we deployed
corn oil extraction technology at our other ethanol plants. We currently have the capacity to produce approximately 130.0
million pounds of corn oil annually. During the year ended December 31, 2011, we sold 96.3 million pounds of corn oil
compared to 5.0 million pounds in 2010.
Agribusiness Segment
The table below presents key operating data within our agribusiness segment for the periods indicated:
Year Ended December 31,
2010
2011
69,336
64,749
56,215
60,653
Grain sold
(thousands of bushels)
Fertilizer sold
(tons)
Our agribusiness segment had an increase of $183.4 million in revenues, an increase of $9.6 million in gross profit, and
an increase in operating income of $6.1 million for the year ended December 31, 2011 compared to 2010. Revenue, gross
profit and operating income increased primarily due to an increase in fertilizer volumes from our agribusiness operations in
Iowa, the sale of an additional 12.4 million bushels of grain from our western Tennessee agribusiness operations acquired in
April 2010 and increases in average grain prices. The Tennessee agribusiness operations contributed $289.0 million in
revenue in 2011 compared with $141.6 million in 2010. The agribusiness segment’s quarterly performance fluctuates on a
seasonal basis with generally stronger results expected in the second and fourth quarters each year.
Marketing and Distribution Segment
Marketing and distribution revenues increased $1.2 billion for the year ended December 31, 2011 compared to the same
period in 2010. The increase in revenues was primarily due to an increase in ethanol revenues of $1.1 billion and an increase
in distillers grains revenues of $124.0 million. The remainder of the increase in revenue is attributable to sales of corn oil,
which we began producing in October 2010. During 2011, we sold 96.3 million pounds of corn oil. We sold 1,064 million
gallons of ethanol within the marketing and distribution segment during 2011 compared to 917 million gallons sold during
the same period in 2010 and experienced an increase in revenue per gallon of ethanol sold due to higher prices. The increase
in ethanol volumes is due to the expanded production of our own plants as a result of efficiency improvements and additional
capacity from recently acquired operations. Marketing and distribution volumes from third-party ethanol producers decreased
when comparing the year ended December 31, 2011 to the same period in 2010 due to the termination of a third-party
marketing contract with expected production of 110 mmgy in May 2011.
Gross profit for the marketing and distribution segment increased $1.9 million and operating income decreased by $0.2
million for the year ended December 31, 2011 compared to 2010. The increase in gross profit was due primarily to increased
ethanol and distillers grains volumes sold. Operating income was affected by an increase in selling, general and
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 2:59 PM
administrative expenses compared to 2010 due to an increase in personnel costs as a result of our growth and expanded
operations.
Intersegment Eliminations
Intersegment eliminations of revenues increased $1.1 billion for year ended December 31, 2011 compared to the same
period in 2010 due to an increase of $845.2 million, $107.6 million and $42.7 million in ethanol, distillers grains and corn oil,
respectively, sold from our ethanol production and corn oil segments to our marketing and distribution segment. In addition,
corn sales from our agribusiness segment to our ethanol production segment increased $72.8 million between the periods.
Corporate Activities
Operating income was impacted by an increase in operating expenses for corporate activities of $5.0 million for the year
ended December 31, 2011 compared to the same period in 2010, primarily due to an increase in general and administrative
expenses and personnel costs related to expanded operations.
Year ended December 31, 2010 Compared to the Year ended December 31, 2009
Consolidated Results
Several events that occurred during 2010 account for the overall increase in our revenues of $828.1 million, an increase
in our gross profit of $68.5 million and an increase in operating income of $52.9 million. Our business activity increased
primarily as a result of including a full year of operations from the Central City and Ord ethanol plants acquired in July 2009,
additional agribusiness operations in western Tennessee acquired in April 2010 and additional ethanol plants acquired in
October 2010. Selling, general and administrative expenses increased $15.6 million during 2010 due to the events described
above. Interest expense increased $7.3 million during 2010 as compared to 2009 due to additional debt issued to finance
these acquisitions and a convertible debt offering completed in November 2010. Income tax expenses of $17.9 million during
2010 were significantly higher than the expense of $0.1 million in 2009. Prior to 2009, we had losses before income taxes
and the resulting potential tax benefits were fully reserved with a valuation allowance. A portion of those valuation
allowances were released in 2009, resulting in an income tax provision of $0.1 million.
Management views our results on a segment level. See segment discussions below for more detail on period -to-period
increases in revenues, gross profit and operating income.
Ethanol Production Segment
The table below presents key operating data within our ethanol production segment for the periods indicated:
Ethanol sold
(thousands of gallons)
Distillers grains sold
(thousands of equivalent dried tons)
Corn consumed
(thousands of bushels)
Year Ended December 31,
2010
2009
544,388
379,393
1,566
1,098
194,327
136,569
Revenue for the ethanol production segment increased $384.1 million for the year ended December 31, 2010, compared
to the year ended December 31, 2009 due to increased ethanol production and an increase in the average revenue per gallon
of ethanol sold. Revenues for the year ended December 31, 2009, included five months of revenues from our Central City
and Ord plants since their acquisition in July 2009 compared to a full year of revenues from these two plants in 2010.
Additional revenues earned in 2010 compared to 2009 at the Central City and Ord plants were $195.1 million. In addition,
2010 results included approximately two months of revenues from our Lakota and Riga plants acquired in October 2010,
contributing combined revenue of $80.6 million.
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Cost of goods sold in the ethanol production segment increased $326.8 million, for the year ended December 31, 2010 as
compared to the year ended December 31, 2009, primarily due to increased sales volumes as a result of the additional
production discussed above. Our largest component of cost of goods sold is corn, which increased due to the increased
volumes of production and an increase in average cost per bushel of approximately 21% compared to the prior year. Included
in the ethanol production segment’s cost of goods sold during the year ended December 31, 2009 is a one-time charge of $4.6
million related to the cancellation of third-party ethanol marketing arrangements. Gross profit for the ethanol production
segment increased $57.3 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009
due primarily to the additional operations discussed above as well as an increase in the ethanol yield per bushel of corn
consumed.
Operating income increased $54.6 million for the year ended December 31, 2010, compared to the year ended December
31, 2009 due to the factors discussed above.
Corn Oil Production Segment
We initiated corn oil production in the fourth quarter of 2010 and therefore did not have any corn oil operations in 2009.
During the year ended December 31, 2010, we had revenues of $1.7 million from the sale of corn oil.
Agribusiness Segment
The table below presents key operating data within our agribusiness segment for the periods indicated:
Year Ended December 31,
2010
2009
56,215
60,653
32,780
48,108
Grain sold
(thousands of bushels)
Fertilizer sold
(tons)
Our agribusiness segment had increases of $148.8 million in revenue, $2.6 million in gross profit, and a decrease of $3.2
million in operating income for the year ended December 31, 2010 compared to the year ended December 31, 2009. These
revenue and gross profit increases are primarily attributable to the acquisition of agribusiness operations in western
Tennessee in April 2010. The 2010 results included eight months of activity from the acquired operations, contributing
$141.6 million to 2010 revenue. The decrease in operating income is primarily due to an increase in selling, general and
administrative expenses of $5.9 million as a result of additional expenses related to the Tennessee operations. Also, operating
income was affected by a decrease in grain drying income in Iowa as a result of a considerably drier harvest in 2010
compared with 2009. These negative effects on operating income were greater than the additional operating income
attributable to the Tennessee acquisition.
Marketing and Distribution Segment
Marketing and distribution revenues increased $725.3 million for the year ended December 31, 2010, as compared to the
year ended December 31, 2009. The Company sold 917 million gallons of ethanol within the marketing and distribution
segment during the 2010, compared to 653 million gallons sold during 2009. The increase in revenues was primarily due to
an increase in ethanol-related marketing and distribution of $710.6 million and an increase in marketing and distribution for
distillers grains of $12.4 million. Gross profit for the marketing and distribution segment increased $7.6 million for the year
ended December 31, 2010 as compared to the year ended December 31, 2009. As described above, the increase in gross
profit was due to greater volume of marketing and distribution as compared to the prior year.
Initially, our Superior, Bluffton and Obion ethanol plants sold our ethanol production exclusively to outside marketers at
a price per gallon based on a market price at the time of sale, less certain marketing, storage, and transportation costs, as well
as a profit margin for each gallon sold. We stopped selling our ethanol production to outside marketers during the first
quarter of 2009. Following completion of the VBV merger and prior to the termination of the agreements, nearly all of our
ethanol that was sold to one of the outside marketers was repurchased by Green Plains Trade, reflected in the marketing and
distribution segment, and resold to other customers. Corresponding revenues and related costs of goods sold were eliminated
in consolidation.
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Operating income for the marketing and distribution segment increased $4.8 million for the year ended December 31,
2010 as compared to the year ended December 31, 2009. The increase in operating income was due to greater volume of
marketing and distribution as compared to the prior year.
Intersegment Eliminations
Intersegment eliminations of revenues increased $431.8 million in 2010 due to a $363.7 million increase in ethanol sold
from our ethanol production segment to our marketing and distribution segment and a $19.3 million increase in distillers
grains sold from our ethanol production segment to our marketing and distribution segment. These increases are a result of
the expanded scope of our operations in 2010.
Corporate Activities
Operating income was impacted by an increase in expenses for corporate activities of $4.3 million for the year ended
December 31, 2010 as compared to the year ended December 31, 2009, primarily due to an increase in compensation, which
was largely attributable to an increase in short-term incentive compensation based on the achievement of certain performance
goals during 2010 and an increase in number of corporate employees resulting from expanded operations. Income before
taxes related to corporate activities was affected by an increase in interest expense of $0.9 million and an increase in
amortization of debt issuance costs of $0.1 million, related to $90 million of convertible debt issued early in November 2010.
Liquidity and Capital Resources
On December 31, 2011, we had $175.0 million in cash and equivalents, excluding restricted cash, comprised of $71.5
million held at the parent entity and the remainder at our subsidiaries. We had an additional $221.6 million available under
our revolving credit agreements at our subsidiaries, some of which was subject to borrowing base restrictions or other
specified lending conditions at December 31, 2011. Funds held at our subsidiaries are generally required for their ongoing
operational needs and distributions from our subsidiaries are restricted per the loan agreements. Additionally, at December
31, 2011, there were approximately $528.6 million of net assets at our subsidiaries that were not available to be transferred to
the parent company in the form of dividends, loans or advances due to restrictions contained in the credit facilities of these
subsidiaries.
We incurred capital expenditures of $42.5 million in the year ended December 31, 2011 primarily for the installation of
corn oil extraction facilities and expansions of grain storage capacity. Capital spending for 2012 is expected to be
approximately $31.3 million, including the construction of a new ethanol unit train terminal in Birmingham, Alabama within
our marketing and distribution segment, expected to be completed in the third quarter of 2012. The remainder of our capital
spending primarily relates to other recurring capital expenditures in the ordinary course of business. We believe available
borrowings under our credit facilities and cash provided by operating activities will be sufficient to support our working
capital, capital expenditures and debt service requirements for the foreseeable future.
In March 2010, we sold approximately 6.3 million newly-issued shares of our common stock at a price of $13.50 per
share. The net proceeds of this equity offering totaled approximately $79.7 million. We used the net proceeds of this offering
for general corporate purposes and to acquire or invest in additional facilities.
In November 2010, we issued $90.0 million in 5.75% convertible senior notes due November 2015. The notes bear
interest at a fixed rate of 5.75% per year, payable on May 1 and November 1 of each year, beginning May 1, 2011. The net
proceeds of this issuance totaled approximately $86.6 million. We used the net proceeds for general corporate purposes and
to acquire or invest in additional facilities.
On August 15, 2011, we entered into two short-term inventory financing arrangements with a financial institution. Under
the terms of the financing agreements, we sold grain for $10.0 million, issued warehouse receipts to the financial institution
and simultaneously entered into agreements to repurchase the grain in future periods. The agreements mature in January and
February of 2012. We accounted for the agreements as short-term notes rather than sales, and recorded our repurchase
obligation at fair value at the end of each period. At December 31, 2011, the grain inventory and short-term notes payable
were valued at $8.9 million.
On September 9, 2011, we repurchased 3.5 million shares of common stock at a price of $8.00 per share from a
subsidiary of NTR plc, which is a principal shareholder. We do not have a share repurchase program and do not intend to
retire the repurchased shares.
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Net cash provided by operating activities was $108.9 million for the year ended December 31, 2011 compared to $34.8
million in 2010. Cash provided by operating activities for the year ended December 31, 2011 was affected by an increase in
accounts payable and a decrease in derivative financial instruments offset partially by increases in accounts receivable and
inventory. Net cash used by investing activities was $54.5 million for the year ended December 31, 2011, primarily due to the
acquisition of our Otter Tail ethanol plant, the construction of additional grain storage and the installation of corn oil
extraction equipment. Net cash used by financing activities was $112.6 million for the year ended December 31, 2011 due to
the repayment of debt, net of proceeds from new issuances, of $68.8 million and $28.2 million in cash outflows for the
repurchase of treasury stock. We made scheduled principal payments and $13.1 million in free cash flow payments for a total
of $206.9 million in debt reduction on our term debt facilities and long-term revolving credit facilities, offset by advances of
$138.1 million from long-term revolving credit facilities, during the year ended December 31, 2011. Green Plains Trade and
Green Plains Grain utilize short-term revolving credit facilities to finance working capital requirements. These facilities are
frequently drawn upon and repaid resulting in significant cash movements that are reflected on a gross basis within financing
activities as proceeds from and payments on short-term notes payable and other borrowings.
Our business is highly impacted by commodity prices, including prices for corn, ethanol, distillers grains and natural gas.
We attempt to reduce the market risk associated with fluctuations in commodity prices through the use of derivative financial
instruments. Sudden changes in commodity prices may require cash deposits with brokers, or margin calls. Depending on our
open derivative positions, we may require significant liquidity with little advanced notice to meet margin calls. We
continuously monitor our exposure to margin calls and believe that we will continue to maintain adequate liquidity to cover
such margin calls from operating results and borrowings. Increases in grain prices and our expanded grain handling capacity
have led to more frequent and larger margin calls.
We are in compliance with our debt covenants related to the period ended December 31, 2011. Based upon our current
forecasts, we believe we will maintain compliance at each of our subsidiaries for the upcoming twelve months, or if
necessary have sufficient liquidity available on a consolidated basis to resolve a subsidiary’s noncompliance; however, no
obligation exists to provide such liquidity for a subsidiary’s compliance. No assurance can be provided that actual operating
results will approximate our forecasts or that we will inject the necessary capital into a subsidiary to maintain compliance
with its respective covenants. In the event actual results differ significantly from our forecasts and a subsidiary is unable to
comply with its respective debt covenants, the subsidiary’s lenders may determine that an event of default has occurred.
Upon the occurrence of an event of default, and following notice, the lenders may terminate any commitment and declare the
entire unpaid balance due and payable.
We believe that we have sufficient working capital for our existing operations. However, we can provide no assurance
that we will be able to secure additional funding for any of our operations. A sustained period of unprofitable operations may
strain our liquidity and make it difficult to maintain compliance with our financing arrangements. While we may seek
additional sources of working capital in response, we can provide no assurance that we will be able to secure this funding if
necessary. We may sell additional equity or borrow additional amounts to improve or preserve our liquidity; expand our
ethanol plants; build additional or acquire existing ethanol plants; or build additional or acquire existing agribusiness and
ethanol distribution facilities. We can provide no assurance that we will be able to secure the funding necessary for these
additional projects or for additional working capital needs at reasonable terms, if at all.
Debt
For additional information related to our debt, see Note 10 – Debt included herein as part of the Notes to Consolidated
Financial Statements.
Ethanol Production Segment
Each of our ethanol production segment subsidiaries have credit facilities with lender groups that provide for term and
revolving term loans to finance construction and operation of the production facilities.
The Green Plains Bluffton loan is comprised of a $70.0 million amortizing term loan and a $20.0 million revolving term
loan. At December 31, 2011, $48.0 million related to the term loan was outstanding, along with the entire revolving term
loan. The term loan requires monthly principal payments of approximately $0.6 million. The loans mature on November 19,
2013.
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45
The Green Plains Central City loan is comprised of a $55.0 million amortizing term loan and a $30.5 million revolving
term loan as well as a revolving credit supplement of up to $11.0 million. At December 31, 2011, $46.6 million related to the
term loan was outstanding, along with $24.7 million on the revolving term loan. The term loan requires monthly payments of
$0.6 million. The term loan and the revolving term loan mature on July 1, 2016 and the revolver matures on June 29, 2012
with an option to renew.
The Green Plains Holdings II loan is comprised of a $34.1 million amortizing term loan, a $42.6 million revolving term
loan and a $15.0 million revolving line of credit loan. At December 31, 2011, $27.9 million was outstanding on the term
loan, along with $35.7 million on the revolving term loan and $15.0 million on the revolving line of credit loan. The term
loan requires quarterly principal payments of $1.5 million. The revolving term loan requires semi-annual principal payments
of approximately $2.7 million. The amortizing term loan will mature on January 1, 2015. The revolving term loan will
mature on April 1, 2016. The revolving line of credit will mature on April 30, 2013.
On February 9, 2012, Green Plains Holdings II entered into an amended and restated credit agreement comprised of a
$26.4 million amortizing term loan and a $51.1 million revolving term loan. The final maturity dates of the amortizing term
loan and revolving term loan are July 1, 2016 and October 1, 2018, respectively.
The Green Plains Obion loan is comprised of a $60.0 million amortizing term loan and a revolving term loan of $37.4
million. At December 31, 2011, $25.7 million related to the term loan and $36.2 million on the revolving term loan was
outstanding. The term loan requires quarterly principal payments of $2.4 million. The term loan matures on August 20, 2014
and the revolving term loan matures on September 1, 2018.
The Green Plains Ord loan is comprised of a $25.0 million amortizing term loan and a $13.0 million revolving term loan
as well as a statused revolving credit supplement of up to $5.0 million. At December 31, 2011, $21.3 million related to the
term loan was outstanding, $12.2 million on the revolving term loan, along with $3.3 million on the revolver. The term loan
requires monthly payments of $0.3 million. The term loan and the revolving term loan mature on July 1, 2016 and the
revolver matures on June 29, 2012 with an option to renew.
The Green Plains Otter Tail loan is comprised of a $30.3 million amortizing term loan, a $4.7 million revolver and a
$19.2 million note payable. At December 31, 2011, $27.4 million related to the term loan, $4.7 million on the revolver and
$18.9 million on the note payable were outstanding. The term loan requires monthly principal and interest payments of $0.5
million and the note payable requires monthly principal payments of $0.3 million beginning October 1, 2014. The term loan
matures on September 1, 2018 and the revolver matures on March 23, 2012. We are currently in negotiations and expect to
renew this revolver on or before its maturity date.
The Green Plains Shenandoah loan is comprised of a $30.0 million amortizing term loan and a $17.0 million revolving
term loan. At December 31, 2011, $6.1 million related to the term loan was outstanding along with the entire $17.0 million
on the revolving term loan. The term loan requires quarterly principal payments of $1.2 million. The term loan matures on
May 20, 2013 and the revolving term loan matures on November 1, 2016.
The Green Plains Superior loan is comprised of a $23.5 million amortizing term loan and a $10.0 million revolving term
loan. At December 31, 2011, $20.8 million related to the term loan was outstanding, along with the entire $10.0 million on
the revolving term loan. The term loan requires quarterly principal payments of $1.375 million. The term loan matures on
July 20, 2015 and the revolving term loan matures on July 1, 2017.
Each term loan, except for the Green Plains Holdings II and Green Plains Otter Tail agreements, has a provision that
requires us to make annual special payments equal to a percentage ranging from 65% to 75% of the available free cash flow
from the related entity’s operations (as defined in the respective loan agreements), subject to certain limitations. During the
year ended December 31, 2011, $13.1 million was paid under these requirements.
With certain exceptions, the revolving term loans within this segment are generally available for advances throughout the
life of the commitment. Interest-only payments are due each month on all revolving term facilities until the final maturity
date, with the exception of the Green Plains Obion loan, which requires additional semi-annual payments of $4.675 million
beginning March 1, 2015.
The term loans and revolving term loans bear interest at LIBOR plus 3.00% to 4.50% or lender-established prime rates.
Some have established a floor on the underlying LIBOR index. In some cases, the lender may allow us to elect to pay interest
at a fixed interest rate to be determined. As security for the loans, the lenders received a first-position lien on all personal
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property and real estate owned by the respective entity borrowing the funds, including an assignment of all contracts and
rights pertinent to construction and on-going operations of the plant. Additionally, debt facilities of Green Plains Central City
and Green Plains Ord are cross-collateralized. These borrowing entities are also required to maintain certain combined
financial and non-financial covenants during the terms of the loans.
Green Plains Bluffton also received $22.0 million in Subordinate Solid Waste Disposal Facility Revenue Bond funds
from the city of Bluffton, Indiana, of which $19.1 million remained outstanding at December 31, 2011. The revenue bond
requires: semi-annual principal and interest payments of approximately $1.5 million through March 1, 2019; and a final
principal and interest payment of $3.745 million on September 1, 2019. The revenue bond bears interest at 7.50% per annum.
Agribusiness Segment
The Green Plains Grain loans, executed on October 28, 2011, are comprised of a $30.0 million amortizing term loan and
a $195.0 million revolving credit facility with various lenders to provide the agribusiness segment with additional term and
working capital funding. The term loan and revolving credit facility mature on November 1, 2021 and October 28, 2013,
respectively. Equal payments of principal sufficient to amortize the term loan in full over a 15-year period, plus interest, are
due on the first day of every month with the remaining outstanding balance and all accrued interest due on the loan maturity
date. The principal balance of each advance of the revolving credit facility shall be due and payable on the respective
maturity date but no later than October 28, 2013. The term loan bears interest at a fixed rate of 6.00% per annum. Advances
of the revolving credit facility are subject to interest charges at a rate per annum equal to the LIBOR rate for the outstanding
period, or the base rate, plus the respective applicable margin. At December 31, 2011, $27.8 million on the term loan and
$27.0 million on the various revolving loans were outstanding. As security for the amortizing term loan the lender received a
first priority lien on certain real estate and other property owned by the subsidiaries within the agribusiness segment. As
security for the revolving credit facility, the lender received a first priority lien on certain cash, inventory, machinery,
accounts receivable and other assets owned by subsidiaries of the agribusiness segment.
On August 15, 2011, we entered into two short-term inventory financing arrangements with a financial institution. Under
the terms of the financing agreements, we sold quantities of grain totaling $10.0 million, issued warehouse receipts to the
financial institution and simultaneously entered into agreements to repurchase the grain in future periods. The agreements
mature in January and February of 2012. We have accounted for the agreements as short-term notes, rather than sales, and
have recorded our repurchase obligation at fair value at the end of each period. At December 31, 2011, grain inventory and
the short-term notes payable were valued at $8.9 million.
Marketing and Distribution Segment
The Green Plains Trade loan is comprised of a senior secured revolving credit facility of up to $70.0 million, subject to a
borrowing base of 85% of eligible receivables. At December 31, 2011, $33.7 million was outstanding on the revolving credit
facility. The revolving credit facility expires on March 31, 2014 and bears interest at the lender’s commercial floating rate
plus 2.5% or LIBOR plus 3.5%. As security for the loan, the lender received a first-position lien on accounts receivable,
inventory and other collateral owned by Green Plains Trade.
Corporate Activities
We also have $90.0 million of 5.75% Convertible Senior Notes due 2015. The Notes represent senior, unsecured
obligations, with interest payable on May 1 and November 1 of each year. The Notes may be converted into shares of
common stock and cash in lieu of fractional shares of the common stock based on a conversion rate initially equal to 69.7788
shares of the common stock per $1,000 principal amount of Notes, which is equal to an initial conversion price of $14.33 per
share. The conversion rate is subject to adjustment upon the occurrence of specified events. We may redeem for cash all, but
not less than all, of the Notes at any time on and after November 1, 2013, if the last reported sale price of our common stock
equals or exceeds 140% of the applicable conversion price for a specified time period, at a redemption price equal to 100% of
the principal amount of the Notes, plus accrued and unpaid interest. Default with respect to any loan in excess of $10.0
million constitutes an event of default under the convertible senior notes, which could result in the convertible senior notes
being declared due and payable.
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 3:01 PM
Contractual Obligations
Our contractual obligations as of December 31, 2011 were as follows (in thousands):
Contractual Obligations
Long-term and short-term debt obligations (1)
Interest and fees on debt obligations (2)
Operating lease obligations (3)
Deferred tax liabilities
Purchase obligations
Forward grain purchase contracts (4)
Other commodity purchase contracts (5)
Other
$
Total
637,058
104,795
52,686
55,875
237,594
22,519
3,698
Payments Due By Period
$
Less than 1
year
143,359
29,609
16,566
-
235,747
22,519
3,315
1-3 years
165,875
$
42,662
22,252
-
1,847
-
383
3-5 years
203,706
$
23,668
11,010
-
-
-
-
More than
5 years
124,118
$
8,856
2,858
55,875
-
-
-
Total contractual obligations
$
1,114,225
$
451,115
$
233,019
$
238,384
$
191,707
(1)
(2)
(3)
(4)
(5)
Includes the current portion of long-term debt and excludes the discount on long-term debt of $292 thousand.
Interest amounts are calculated over the terms of the loans using current interest rates, assuming scheduled principle and
interest amounts are paid pursuant to the debt agreements. Includes administrative and/or commitment fees on debt
obligations.
Operating lease costs are primarily for railcars and office space.
Purchase contracts represent index-priced and fixed-price contracts. Index purchase contracts are valued at current quarter-
end prices.
Includes fixed-price ethanol, dried distillers grains and natural gas purchase contracts.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk.
We are exposed to various market risks, including changes in commodity prices and interest rates. Market risk is the
potential loss arising from adverse changes in market rates and prices. In the ordinary course of business, we enter into
various types of transactions involving financial instruments to manage and reduce the impact of changes in commodity
prices and interest rates. At this time, we do not expect to have exposure to foreign currency risk as we expect to conduct all
of our business in U.S. dollars.
Interest Rate Risk
We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from holding
term and revolving loans that bear variable interest rates. Specifically, we have $636.8 million outstanding in debt as of
December 31, 2011, $400.0 million of which is variable-rate in nature. Interest rates on our variable-rate debt are determined
based upon the market interest rate of either the lender’s prime rate or LIBOR, as applicable. A 10% change in interest rates
would affect our interest cost on such debt by approximately $1.7 million per year in the aggregate. Other details of our
outstanding debt are discussed in the notes to the consolidated financial statements included as a part of this report.
Commodity Price Risk
We produce ethanol, distillers grains and corn oil from corn and our business is sensitive to changes in the prices of each
of these commodities. The price of corn is subject to fluctuations due to unpredictable factors such as weather; corn planted
and harvested acreage; changes in national and global supply and demand; and government programs and policies. We use
natural gas in the ethanol production process and, as a result, our business is also sensitive to changes in the price of natural
gas. The price of natural gas is influenced by such weather factors as extreme heat or cold in the summer and winter, or other
natural events like hurricanes in the spring, summer and fall. Other natural gas price factors include North American
exploration and production, and the amount of natural gas in underground storage during both the injection and withdrawal
seasons. Ethanol prices are sensitive to world crude-oil supply and demand; crude-oil refining capacity and utilization;
government regulation; and consumer demand for alternative fuels. Distillers grains prices are sensitive to various demand
factors such as numbers of livestock on feed, prices for feed alternatives, and supply factors, primarily production by ethan ol
plants and other sources.
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 3:01 PM
We attempt to reduce the market risk associated with fluctuations in the price of corn, natural gas, ethanol, distillers
grains and corn oil by employing a variety of risk management and economic hedging strategies. Strategies include the use of
forward fixed-price physical contracts and derivative financial instruments, such as futures and options executed on the
Chicago Board of Trade and the New York Mercantile Exchange.
We focus on locking in operating margins based on a model that continually monitors market prices of corn, natural gas
and other input costs against prices for ethanol and distillers grains at each of our production facilities. We create offsetting
positions by using a combination of forward fixed-price physical purchases and sales contracts and derivative financial
instruments. As a result of this approach, we frequently have gains on derivative financial instruments that are conversely
offset by losses on forward fixed-price physical contracts or inventories and vice versa. In our ethanol production segment,
gains and losses on derivative financial instruments are recognized each period in operating results while corresponding gains
and losses on physical contracts are generally designated as normal purchases or normal sales contracts and are not
recognized until quantities are delivered or utilized in production. 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, we would discontinue cash flow hedge treatment, which would affect earnings. During the year
ended December 31, 2011, revenues and cost of goods sold included net losses from derivative financial instruments of $45.3
million and $39.5 million respectively. To the extent the net gains or losses from settled derivative instruments are related to
hedging current period production, they are generally offset by physical commodity purchases or sales resulting in the
realization of the intended operating margins. However, our results of operations are impacted when there is a mismatch of
gains or losses associated with the change in fair value of derivative instruments at the reporting period when the physical
commodity purchase or sales has not yet occurred since they are designated as a normal purchase or normal sale.
In our agribusiness segment, inventory positions, physical purchase and sale contracts, and financial derivatives are
marked to market with gains and losses included in results of operations. The market value of derivative financial instruments
such as exchange-traded futures and options has a high, but not perfect, correlation to the underlying market value of grain
inventories and related purchase and sale contracts.
Ethanol Production Segment
A sensitivity analysis has been prepared to estimate our ethanol production segment exposure to ethanol, corn, distillers
grains and natural gas price risk. Market risk related to these factors is estimated as the potential change in net income
resulting from hypothetical 10% changes in prices of our expected corn and natural gas requirements, and ethanol and
distillers grains output for a one-year period from December 31, 2011. This analysis excludes the impact of risk management
activities that result from our use of fixed-price purchase and sale contracts and derivatives. The results of this analysis,
which may differ from actual results, are as follows (in thousands):
Estimated Total
Volume
Requirements for
the Next 12 Months
740,000
265,000
2,100
20,300
Net Income Effect
of Approximate
10% Change
in Price
$
$
$
$
102,154
102,445
17,396
3,638
Unit of
Measure
Gallons
Bushels
Tons (1)
MMBTU (2)
Commodity
Ethanol
Corn
Distillers grains
Natural gas
(1) Distillers grains quantities are stated on an equivalent dried ton basis.
(2) Millions of British T hermal Units
Corn Oil Production Segment
A sensitivity analysis has been prepared to estimate our corn oil production segment exposure to corn oil price risk.
Market risk related to these factors is estimated as the potential change in net income resulting from hypothetical 10%
changes in prices of our expected corn oil output for a one-year period from December 31, 2011. This analysis includes the
impact of risk management activities that result from our use of fixed-price sale contracts. Market risk at December 31, 2011,
based on the estimated net income effect resulting from a hypothetical 10% change in such prices, was approximately $0.4
million.
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Agribusiness Segment
The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such
as weather, plantings, foreign and domestic government farm programs and policies, changes in global demand created by
population changes and changes in standards of living, and global production of similar and competitive crops. To reduce
price risk caused by market fluctuations in purchase and sale commitments for grain and grain held in inventory, we enter
into exchange-traded futures and options contracts that function as economic hedges. The market value of exchange-traded
futures and options used for economic hedging has a high, but not perfect correlation, to the underlying market value of grain
inventories and related purchase and sale contracts. The less correlated portion of inventory and purchase and sale contract
market value, known as basis, is much less volatile than the overall market value of exchange-traded futures and tends to
follow historical patterns. We manage this less volatile risk by constantly monitoring our position relative to the price
changes in the market. In addition, inventory values are affected by the month-to-month spread relationships in the regulated
futures markets, as we carry inventories over time. These spread relationships are also less volatile than the overall market
value and tend to follow historical patterns, but also represent a risk that cannot be directly offset. Our accounting policy for
our futures and options, as well as the underlying inventory positions and purchase and sale contracts, is to mark them to the
market and include gains and losses in the consolidated statement of operations in sales and merchandising revenues.
A sensitivity analysis has been prepared to estimate agribusiness segment exposure to market risk of our commodity
position (exclusive of basis risk). Our daily net commodity position consists of inventories related to purchase and sale
contracts and exchange-traded contracts. The fair value of our position, which is a summation of the fair values calculated for
each commodity by valuing each net position at quoted futures market prices, is approximately $484 thousand at December
31, 2011. Market risk at that date, based on the estimated net income effect resulting from a hypothetical 10% change in such
prices, was approximately $30 thousand.
Item 8. Financial Statements and Supplementary Data.
The required consolidated financial statements and notes thereto are included in this report and are listed in Part IV, Item
15.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in
the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the
Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required financial disclosure.
As of the end of the period covered by this report, our management carried out an evaluation, under the supervision of
and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
SEC rules and forms. These disclosure controls and procedures are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required financial disclosure. Based upon that evaluation, our management, including the Chief Executive Officer
and the Chief Financial Officer, concluded that our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting, as
defined in Exchange Act Rule 13a-15(f). Our internal control system is designed to provide reasonable assurance regarding
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the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted
accounting principles.
Under the supervision of and with the participation of management, including our Chief Executive Officer and Chief
Financial Officer, our management assessed the design and operating effectiveness of internal control over financial reporting
as of December 31, 2011 based on the framework set forth in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, management concluded that our internal control over financial reporting was effective as of
December 31, 2011. KMPG LLP, an independent registered accounting firm, has audited and issued a report on the
Company’s internal control over financial reporting as of December 31, 2011. That report is included herein.
Changes in Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting to
provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our consolidated
financial statements for external purposes in accordance with generally accepted accounting principles. In the fourth quarter
of 2011, we implemented a process and information system enhancement, principally related to contract and risk
management activities, in our trade operations that are reported as a part of the marketing and distribution segment. The
process and information system resulted in modification to internal controls over the purchases, sales, accounts payable,
accounts receivable, cash receipts and inventory management related to distillers grains. There were no other material
changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Green Plains Renewable Energy, Inc.:
We have audited Green Plains Renewable Energy, Inc. and subsidiaries (the Company) internal control over financial
reporting as of December 31, 2011, based on criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2011, based on criteria established in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of the Company as of December 31, 2011 and 2010, and the related consolidated statements
of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year
period ended December 31, 2011, and our report dated February 17, 2012 expressed an unqualified opinion on those
consolidated financial statements and related financial statement schedule.
/s/ KPMG LLP
Omaha, NE
February 17, 2012
Item 9B. Other Information.
None.
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Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Information included in the sections entitled “Information about the Board of Directors and Corporate Governance,”
“Proposal 1 – Election of Directors,” “Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting Compliance”
in our Proxy Statement for the 2012 Annual Meeting of Stockholders (the “Proxy Statement”) is incorporated herein by
reference.
The Company has adopted a Code of Ethics that applies to our Chief Executive Officer and all senior financial officers,
including the Chief Financial Officer, principal accounting officer, other senior financial officers and persons performing
similar functions. The full text of the Code of Ethics is published on our website at www.gpreinc.com in the “Investors –
Corporate Governance” section. We intend to disclose future amendments to, or waivers from, certain provisions of the Code
of Ethics on our website within five business days following the adoption of such amendment or waiver.
Item 11. Executive Compensation.
Information included in the sections entitled “Information about the Board of Directors and Corporate Governance,”
“Director Compensation” and “Executive Compensation” in the Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information included in the sections entitled “Principal Shareholders,” “Equity Compensation Plans” and “Executive
Compensation” in the Proxy Statement is incorporated herein by reference. Information concerning our equity compensation
plans is set forth in Item 5 of this report.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information included in the sections entitled “Information about the Board of Directors and Corporate Governance” and
“Certain Relationships and Related Party Transactions,” if any, in the Proxy Statement is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
Information included in the section entitled “Independent Public Accountants” in the Proxy Statement is incorporated
herein by reference.
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Item 15. Exhibits, Financial Statement Schedules.
PART IV
(1) Financial Statements. The following index lists consolidated financial statements and notes thereto filed as part of this
annual report on Form 10-K.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2011 and 2010
Consolidated Statements of Operations for the years-ended December 31, 2011, 2010 and 2009
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the years-ended
December 31, 2011, 2010 and 2009
Consolidated Statements of Cash Flows for the years-ended December 31, 2011, 2010 and 2009
Notes to Consolidated Financial Statements
Page
F-1
F-2
F-3
F-4
F-5
F-7
(2) Financial Statement Schedules. The following condensed financial information and notes thereto are filed as part of
this annual report on Form 10-K.
Schedule I – Condensed Financial Information of the Registrant
Page
F-38
All other schedules have been omitted because they are not applicable or the required information is included in the
consolidated financial statements or notes thereto.
(3) Exhibits. The following exhibit index lists exhibits incorporated herein by reference, filed as a part of this annual report
on Form 10-K, or furnished as part of this annual report on Form 10-K.
Exhibit
No.
2.1
3.1(a)
3.1(b)
3.2(a)
3.2(b)
4.1
4.2
4.3
4.4
Exhibit Index
Description of Exhibit
Agreement and Plan of Merger among the Company, GPMS, Inc., Global Ethanol, LLC and Global
Ethanol, Inc. dated September 28, 2010 (Incorporated by reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K, dated October 22, 2010)
Second Amended and Restated Articles of Incorporation of the Company (Incorporated by reference
to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed October 15, 2008)
Articles of Amendment to Second Amended and Restated Articles of Incorporation of Green Plains
Renewable Energy, Inc. (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report
on Form 8-K, filed May 9, 2011)
Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.2 of the
Company’s Current Report on Form 8-K filed on October 15, 2008)
First Amendment to the Amended and Restated Bylaws of the Company (Incorporated by reference
to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on March 13, 2009)
Shareholders’ Agreement by and among Green Plains Renewable Energy, Inc., each of the investors
listed on Schedule A, and each of the existing shareholders and affiliates identified on Schedule B,
dated May 7, 2008 (Incorporated by reference to Appendix F of the Company’s Registration
Statement on Form S-4/A filed September 4, 2008)
Form of Senior Indenture (Incorporated by reference to Exhibit 4.5 of the Company’s Registration
Statement on Form S-3/A filed December 30, 2009)
Form of Subordinated Indenture (Incorporated by reference to Exhibit 4.6 of the Company’s
Registration Statement on Form S-3/A filed December 30, 2009)
Indenture relating to the 5.75% Convertible Senior Notes due 2015, dated as of November 3, 2010,
between the Company and Wilmington Trust FSB, including the form of Global Note attached as
Exhibit A thereto (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on
Form 8-K filed November 3, 2010)
54
54
4.5
*10.1
*10.2
10.3
*10.4(a)
*10.4(b)
10.5(a)
10.5(b)
10.5(c)
10.6(a)
10.6(b)
10.6(c)
*10.7
*10.8
*10.9
Form of Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K filed October 22, 2010)
Amended and Restated Employment Agreement dated October 24, 2008, by and between the
Company and Jerry L. Peters (Incorporated by reference to Exhibit 10.1 of the Company’s Current
Report on Form 8-K, dated October 28, 2008)
2007 Equity Incentive Plan (Incorporated by reference to Appendix A of the Company’s Definitive
Proxy Statement filed March 27, 2007)
Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.53 of the Company’s
Registration Statement on Form S-4/A filed August 1, 2008)
Employment Agreement with Todd Becker (Incorporated by reference to Exhibit 10.54 of the
Company’s Registration Statement on Form S-4/A filed August 1, 2008)
Amendment No. 1 to Employment Agreement with Todd Becker, dated December 18, 2009.
(Incorporated by reference to Exhibit 10.7(b) of the Company’s Annual Report on Form 10-K filed
February 24, 2010)
Construction/Permanent Mortgage Security Agreement, Assignment of Leases and Rents, Financing
Statement and Fixture Filing dated as of February 27, 2007 by Green Plains Bluffton LLC (f/k/a
Indiana Bio-Energy, LLC) in favor of AgStar Financial Services, PCA (Incorporated by reference to
Exhibit 10.48 of the Company’s Annual Report on Form 10-KT, dated March 31, 2009)
Amended and Restated Master Loan Agreement, dated September 30, 2011, by and among Green
Plains Bluffton LLC and AgStar Financial Services, PCA (Incorporated by reference to Exhibit
10.06 of the Company’s Quarterly Report on Form 10-Q, filed November 1, 2011)
First Amendment to Amended and Restated Master Loan Agreement, dated February 16, 2012, by
and among Green Plains Bluffton LLC and AgStar Financial Services, PCA
Loan Agreement between City of Bluffton, Indiana and Green Plains Bluffton LLC (f/k/a Indian
Bio-Energy, LLC) dates as of March 1, 2007 (Incorporated by reference to Exhibit 10.46 of the
Company’s Annual Report on Form 10-KT, dated March 31, 2009)
Indenture of Trust dated as of March 1, 2007 by and between the City of Bluffton, Indiana, Indiana
Bio-Energy, LLC (n/k/a Green Plains Bluffton LLC) and U.S. Bank National Association
(Incorporated by reference to Exhibit 10.47 of the Company’s Annual Report on Form 10-KT, dated
March 31, 2009)
Subordinate Construction/Permanent Mortgage, Security Agreement, Assignment of Leases and
Rents, Financing Statement and Fixture Filing dated as of March 1, 2007 between Green Plains
Bluffton LLC (f/k/a Indiana Bio-Energy, LLC) and U.S. Bank National Association (Incorporated by
reference to Exhibit 10.49 of the Company’s Annual Report on Form 10-KT, dated March 31, 2009)
Non-Statutory Stock Option Agreement between Steve Bleyl and Green Plains Renewable Energy,
Inc. dated October 15, 2008 (Incorporated by reference to Exhibit 10.50 of the Company’s Annual
Report on Form 10-KT, dated March 31, 2009)
Non-Statutory Stock Option Agreement between Edgar Seward and Green Plains Renewable Energy,
Inc. dated October 15, 2008 (Incorporated by reference to Exhibit 10.51 of the Company’s Annual
Report on Form 10-KT, dated March 31, 2009)
Non-Statutory Stock Option Agreement between Michael Orgas and Green Plains Renewable
Energy, Inc. dated November 1, 2008 (Incorporated by reference to Exhibit 10.52 of the Company’s
Annual Report on Form 10-KT, dated March 31, 2009)
*10.10
*10.11
*10.12(a)
Employment Agreement by and between Green Plains Renewable Energy, Inc. and Michael C.
Orgas dated November 1, 2008 (Incorporated by reference to Exhibit 10.1 of the Company’s
Quarterly Report on Form 10-Q filed May 15, 2009)
Employment Offer Letter to Edgar Seward dated October 15, 2008 (Incorporated by reference to
Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed May 15, 2009)
2009 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 of the Company’s Current
Report on Form 8-K dated May 11, 2009)
55
55
*10.12(b)
*10.12(c)
*10.12(d)
10.13(a)
10.13(b)
10.13(c)
10.13(d)
10.13(e)
10.14(a)
10.14(b)
10.14(c)
10.14(d)
10.14(e)
10.14(f)
10.14(g)
Form of Stock Option Award Agreement for 2009 Equity Incentive Plan (Incorporated by reference
to Exhibit 10.19(b) of the Company’s Annual Report on Form 10-K filed February 24, 2010)
Form of Restricted Stock Award Agreement for 2009 Equity Incentive Plan (Incorporated by
reference to Exhibit 10.19(c) of the Company’s Annual Report on Form 10-K/A (Amendment No. 1)
filed February 25, 2010)
Form of Deferred Stock Unit Award Agreement for 2009 Equity Incentive Plan (Incorporated by
reference to Exhibit 10.19(d) of the Company’s Annual Report on Form 10-K filed February 24,
2010)
Credit Agreement by and among Green Plains Ord LLC, Green Plains Holdings LLC, AgStar
Financial Services, PCA as Administrative Agent and the Banks named therein, dated July 2, 2009
(Incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q filed
August 10, 2009)
Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing by and
among Green Plains Ord LLC, Ticor Title Insurance Company and AgStar Financial Services, PCA,
dated July 2, 2009 (Incorporated by reference to Exhibit 10.22(b) of the Company’s Annual Report
on Form 10-K filed February 24, 2010)
Security Agreement by and among Green Plains Ord LLC, Green Plains Holdings LLC and AgStar
Financial Services, PCA, dated July 2, 2009 (Incorporated by reference to Exhibit 10.22(c) of the
Company’s Annual Report on Form 10-K filed February 24, 2010)
Affiliate Security Agreement between Green Plains Central City LLC and AgStar Financial Services,
PCA, dated July 2, 2009 (Incorporated by reference to Exhibit 10.22(d) of the Company’s Annual
Report on Form 10-K filed February 24, 2010)
Affiliate Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing
between Green Plains Central City LLC, Ticor Title Insurance Company, and AgStar Financial
Services, PCA, dated July 2, 2009 (Incorporated by reference to Exhibit 10.22(e) of the Company’s
Annual Report on Form 10-K filed February 24, 2010)
Credit Agreement by and among Green Plains Central City LLC, Green Plains Holdings LLC,
AgStar Financial Services, PCA as Administrative Agent, and the Banks named therein, dated July 2,
2009 (Incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q
filed August 10, 2009)
Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing by and
among Green Plains Central City LLC, Ticor Title Insurance Company, and AgStar Financial
Services, PCA, dated July 2, 2009 (Incorporated by reference to Exhibit 10.23(b) of the Company’s
Annual Report on Form 10-K filed February 24, 2010)
Security Agreement by and among Green Plains Central City LLC, Green Plains Holdings LLC and
AgStar Financial Services, PCA, dated July 2, 2009 (Incorporated by reference to Exhibit 10.23(c) of
the Company’s Annual Report on Form 10-K filed February 24, 2010)
Affiliate Security Agreement between Green Plains Ord LLC and AgStar Financial Services, PCA,
dated July 2, 2009 (Incorporated by reference to Exhibit 10.23(d) of the Company’s Annual Report
on Form 10-K filed February 24, 2010)
Affiliate Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing
between Green Plains Ord LLC, Ticor Title Insurance Company, and AgStar Financial Services,
PCA, dated July 2, 2009 (Incorporated by reference to Exhibit 10.23(e) of the Company’s Annual
Report on Form 10-K filed February 24, 2010)
First Amendment to Credit Agreement by and among Green Plains Central City LLC, Green Plains
Holdings LLC, AgStar Financial Services, PCA as Administrative Agent, and the Banks named
therein, dated December 31, 2010 (Incorporated by reference to Exhibit 10.23(f) of the Company’s
Annual Report on Form 10-K filed March 4, 2011)
Second Amendment dated June 30, 2011 to the Credit Agreement dated July 2, 2009 by and among
Green Plains Central City LLC, Green Plains Holdings LLC, AgStar Financial Services, PCA as
Administrative Agent and the Banks named therein (Incorporated by reference to Exhibit 10.5 of the
Company’s Quarterly Report on Form 10-Q filed August 3, 2011)
56
56
10.14(h)
10.14(i)
10.14(j)
10.15(a)
10.15(b)
10.15(c)
10.15(d)
*10.16
*10.17
10.18
10.19
*10.20
*10.21
10.22
Third Amendment dated June 30, 2011 to the Credit Agreement dated July 2, 2009 by and among
Green Plains Central City LLC, Green Plains Holdings LLC, AgStar Financial Services, PCA as
Administrative Agent and the Banks named therein (Incorporated by reference to Exhibit 10.6 of the
Company’s Quarterly Report on Form 10-Q filed August 3, 2011)
First Amendment dated June 30, 2011 to Credit Agreement dated July 2, 2009 by and among Green
Plains Ord LLC, Green Plains Holdings LLC, AgStar Financial Services, PCA as Administrative
Agent and the Banks named therein (Incorporated by reference to Exhibit 10.7 of the Company’s
Quarterly Report on Form 10-Q filed August 3, 2011)
Second Amendment dated June 30, 2011 to Credit Agreement dated July 2, 2009 by and among
Green Plains Ord LLC, Green Plains Holdings LLC, AgStar Financial Services, PCA as
Administrative Agent and the Banks named therein (Incorporated by reference to Exhibit 10.8 of the
Company’s Quarterly Report on Form 10-Q filed August 3, 2011)
Amended and Restated Revolving Credit and Security Agreement dated January 21, 2011 by and
between PNC Bank, National Association (as Lender and Agent) and Green Plains Trade Group
LLC (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed
January 27, 2011)
Amended and Restated Revolving Credit Note dated January 21, 2011 by and among Green Plains
Trade Group LLC, the Lenders and PNC Bank, National Association (as Lender and Agent)
(Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed
January 27, 2011)
Revolving Credit Note dated January 21, 2011 by and among Green Plains Trade Group LLC, the
Lenders and PNC Bank, National Association (as Lender and Agent) (Incorporated by reference to
Exhibit 10.3 of the Company’s Current Report on Form 8-K filed January 27, 2011)
Revolving Credit Note dated January 21, 2011 by and among Green Plains Trade Group LLC, the
Lenders and PNC Bank, National Association (as Lender and Agent) (Incorporated by reference to
Exhibit 10.4 of the Company’s Current Report on Form 8-K filed January 27, 2011)
Short-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 of the Company’s Current
Report on Form 8-K filed January 27, 2010)
Director Compensation effective January 1, 2009 (Incorporated by reference to Exhibit 10.26 of the
Company’s Annual Report on Form 10-K filed February 24, 2010)
Asset Purchase Agreement dated as of April 19, 2010 by and among Green Plains Grain Company
TN LLC, as the Buyer, and Union City Grain Company LLC, Dyer Gin Company, Inc. and Thomas
W. Wade, Jr. Living Trust dated July 25, 2002, collectively as the Seller, and Wade Gin Company,
LLC (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed
April 22, 2010)
Asset Purchase Agreement dated as of April 19, 2010 by and among Green Plains Grain Company
TN LLC, as the Buyer, and Farmers Grain of Trenton LLC, Farmers Grain Crop Insurance, LLC and
Wilson Street Properties L.L.C., collectively as the Seller (Incorporated by reference to Exhibit 10.2
of the Company’s Current Report on Form 8-K filed April 22, 2010)
Employment Agreement dated March 4, 2011 by and between the Company and Jeffrey S. Briggs
(Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed
March 8, 2011)
Employment Agreement dated March 4, 2011 by and between the Company and Carl S. (Steve)
Bleyl (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K,
filed March 8, 2011)
Master Loan Agreement dated June 13, 2011 by and among Green Plains Obion LLC and Farm
Credit Services of Mid-America, FLCA (Incorporated by reference to Exhibit 10.12 of the
Company’s Quarterly Report on Form 10-Q, filed August 3, 2011)
10.23(a)
Master Loan Agreement dated June 20, 2011 by and among Green Plains Superior LLC and Farm
Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.9 of the Company’s
Quarterly Report on Form 10-Q, filed August 3, 2011)
57
57
10.23(b)
10.23(c)
10.24
10.25(a)
10.25(b)
10.25(c)
10.26(a)
10.26(b)
10.26(c)
10.26(d)
10.26(e)
10.26(f)
10.26(g)
10.26(h)
Term Loan Supplement dated June 20, 2011 by and among Green Plains Superior LLC and Farm
Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.10 of the Company’s
Quarterly Report on Form 10-Q, filed August 3, 2011)
Revolving Term Loan Supplement dated June 20, 2011 by and among Green Plains Superior LLC
and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.11 of the
Company’s Quarterly Report on Form 10-Q, filed August 3, 2011)
Stock Repurchase Agreement between Greenstar North America Holdings Inc. and Green Plains
Renewable Energy. Inc. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report
on Form 8-K, filed September 14, 2011)
Master Loan Agreement, dated September 28, 2011, by and among Green Plains Shenandoah LLC
and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.3 of the
Company’s Quarterly Report on Form 10-Q, filed November 1, 2011)
Revolving Term Loan Supplement, dated September 28, 2011, by and among Green Plains
Shenandoah LLC and Farm Credit Services of America, FLCA (Incorporated by reference to
Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q, filed November 1, 2011)
Multiple Advance Term Loan Supplement, dated September 28, 2011, by and among Green Plains
Shenandoah LLC and Farm Credit Services of America, FLCA (Incorporated by reference to
Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q, filed November 1, 2011)
Credit Agreement dated October 28, 2011 by and among Green Plains Grain Company LLC, Green
Plains Grain Company TN LLC, Green Plains Essex Inc., BNP Paribas Securities Corp. as Lead
Arranger, Rabo Agrifinance, Inc. as Syndication Agent, ABN AMRO Capital USA LLC as
Documentation Agent and BNP Paribas as Administrative Agent (Incorporated by reference to
Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed November 3, 2011)
Security Agreement dated October 28, 2011 by and among Green Plains Grain Company LLC,
Green Plains Grain Company TN LLC, Green Plains Essex Inc. and BNP Paribas (Incorporated by
reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed November 3, 2011)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green
Plains Grain Company TN LLC, Green Plains Essex Inc. and Bank of Oklahoma (Incorporated by
reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed November 3, 2011)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green
Plains Grain Company TN LLC, Green Plains Essex Inc. and U.S. Bank National
Association(Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-
K, filed November 3, 2011)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green
Plains Grain Company TN LLC, Green Plains Essex Inc. and Farm Credit Bank of
Texas(Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K,
filed November 3, 2011)
Loan Agreement dated October 28, 2011 by and among Green Plains Grain Company LLC, Green
Plains Grain Company TN LLC, Green Plains Essex Inc. and Metropolitan Life Insurance Company
(Incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K, filed
November 3, 2011)
Secured Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC,
Green Plains Grain Company TN LLC, Green Plains Essex Inc. and Metropolitan Life Insurance
Company (Incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K,
filed November 3, 2011)
Deed of Trust, Security Agreement, Fixture Filing and Assignment of Leases and Rents (Missouri)
dated October 28, 2011 by Green Plains Grain Company LLC, Green Plains Grain Company TN
LLC, Green Plains Essex Inc. for the benefit of Metropolitan Life Insurance Company (Incorporated
by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K, filed November 3,
2011)
58
58
10.26(i)
10.26(j)
10.26(k)
10.27(a)
10.27(b)
10.27(c)
10.27(d)
10.27(e)
21.1
23.1
31.1
31.2
32.1
32.2
101
Deed of Trust, Security Agreement, Fixture Filing and Assignment of Leases and Rents (Tennessee)
dated October 28, 2011 by Green Plains Grain Company LLC, Green Plains Grain Company TN
LLC, Green Plains Essex Inc. for the benefit of Metropolitan Life Insurance Company (Incorporated
by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K, filed November 3,
2011)
Mortgage, Security Agreement, Fixture Filing and Assignment of Leases and Rents (Iowa) dated
October 28, 2011 by Green Plains Grain Company LLC, Green Plains Grain Company TN LLC,
Green Plains Essex Inc. for the benefit of Metropolitan Life Insurance Company (Incorporated by
reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K, filed November 3, 2011)
First Amendment to Credit Agreement dated January 6, 2012 by and among Green Plains Grain
Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc., BNP Paribas and
the Required Lenders
Amended and Restated Credit Agreement, dated February 9, 2012 by and among Green Plains
Holdings II, various lenders and CoBank, ACB (as Administrative Agent, Syndication Agent and
Lead Arranger)
Amended and Restated Support and Subordination Agreement, dated February 9, 2012 by and
among Green Plains Holdings II, as Borrower, Green Plains Renewable Energy, Inc., as Parent, and
CoBank, ACB, as Administrative Agent
Security Agreement, dated February 9, 2012 by and among Green Plains Holdings II (the Grantor)
and CoBank, ACB (the Secured Party)
Second Amendment to Mortgage, dated February 9, 2012 by and among, Green Plains Holdings II
and CoBank ACB
Second Amendment to Amended and Restated Real Estate Mortgage, dated February 9, 2012 by and
among Green Plains Holdings II and CoBank, ACB
Schedule of Subsidiaries
Consent of KPMG LLP
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
The following information from Green Plains Renewable Energy, Inc.’s Annual Report on Form 10-
K for the annual period ended December 31, 2011, formatted in Extensible Business Reporting
Language (XBRL): (i) the Consolidated Balance Sheet, (ii) the Consolidated Statement of
Operations, (iii) the Consolidated Statements of Stockholders’ Equity and Comprehensive Income
(Loss) (iv) the Consolidated Statement of Cash Flows and (v) the Notes to Consolidated Financial
Statements and Financial Statement Schedules (tagged as blocks of text).
* Represents management compensatory contracts
59
59
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 17, 2012
GREEN PLAINS RENEWABLE ENERGY, INC.
(Registrant)
By: /s/ Todd A. Becker
Todd A. Becker
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Todd A. Becker
Todd A. Becker
/s/ Jerry L. Peters
Jerry L. Peters
/s/ Wayne B. Hoovestol
Wayne B. Hoovestol
/s/ Jim Anderson
Jim Anderson
/s/ Jim Barry
Jim Barry
/s/ James F. Crowley
James F. Crowley
/s/ Gordon F. Glade
Gordon F. Glade
/s/ Michael McNicholas
Michael McNicholas
/s/ Gary R. Parker
Gary R. Parker
/s/ Brian D. Peterson
Brian D. Peterson
/s/ Alain Treuer
Alain Treuer
President and Chief Executive Officer
(Principal Executive Officer) and Director
February 17, 2012
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
February 17, 2012
Chairman of the Board
February 17, 2012
February 17, 2012
February 17, 2012
February 17, 2012
February 17, 2012
February 17, 2012
February 17, 2012
February 17, 2012
February 17, 2012
Director
Director
Director
Director
Director
Director
Director
Director
60
60
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Green Plains Renewable Energy, Inc.:
We have audited the accompanying consolidated balance sheets of Green Plains Renewable Energy, Inc. and subsidiaries (the
Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity
and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2011. In
connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule
listed in the Index in Item 15. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements and related financial statement schedule
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of
the years in the three year period ended December 31, 2011 in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated February 17, 2012, expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
February 17, 2012
/s/ KPMG LLP
F-1
F-1
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GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowances of $263 and $121
Inventories
Prepaid expenses and other
Deferred income taxes
Deposits
Derivative financial instruments
Total current assets
Property and equipment, net
Goodwill
Other assets
Total assets
$
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued and other liabilities
Unearned revenue
Short-term borrowings
Current maturities of long-term debt
Total current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Total liabilities
Stockholders' equity
Common stock, $0.001 par value; 75,000,000 and 50,000,000 shares
authorized; 36,413,611 and 35,793,501 shares issued and
32,913,611 and 35,793,501 shares outstanding, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock, 3,500,000 and 0 shares, respectively
Total Green Plains stockholders' equity
Noncontrolling interests
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
December 31,
2011
2010
174,988
19,619
106,198
229,070
8,610
14,828
5,679
17,428
576,420
776,789
40,877
26,742
1,420,828
172,328
29,825
15,453
69,599
73,760
360,965
493,407
55,970
5,129
915,471
36
440,469
95,761
(2,953)
(28,201)
505,112
245
505,357
1,420,828
$
$
$
$
233,205
27,783
89,170
184,888
7,222
8,463
11,091
44,864
606,686
747,421
23,125
20,547
1,397,779
151,112
27,742
22,581
89,183
51,885
342,503
527,900
25,079
4,655
900,137
36
431,289
57,343
(420)
-
488,248
9,394
497,642
1,397,779
See accompanying notes to the consolidated financial statements.
F-2
F-2
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GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Operating income
Other income (expense)
Interest income
Interest expense
Other, net
Total other expense
Income before income taxes
Income tax expense
Net income
Net (income) loss attributable to noncontrolling interests
Net income attributable to Green Plains
Earnings per share:
Year Ended December 31,
2010
2011
2009
$
3,553,712
3,381,480
172,232
73,219
99,013
$
2,133,922
1,981,396
152,526
60,475
92,051
$
1,305,793
1,221,745
84,048
44,923
39,125
310
(36,645)
(779)
(37,114)
313
(26,144)
(169)
(26,000)
225
(18,827)
(278)
(18,880)
61,899
23,686
38,213
205
38,418
$
66,051
17,889
48,162
(150)
48,012
$
20,245
91
20,154
(364)
19,790
$
Income attributable to Green Plains stockholders - basic
$
1.09
$
1.55
$
0.79
Income attributable to Green Plains stockholders - diluted
$
1.01
$
1.51
$
0.79
Weighted average shares outstanding:
Basic
Diluted
35,276
41,808
31,032
32,347
24,895
25,069
See accompanying notes to the consolidated financial statements.
F-3
F-3
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 3:06 PM
GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME (LOSS)
(in thousands)
Common Stock
Shares Amount
25
24,659
-
-
-
$
-
-
-
Additional
Paid-in
Capital
290,421
$
-
-
-
Retained
Earnings
$
(10,459)
19,790
-
-
Accum. Other
Comp.
Income (Loss)
(298)
$
-
175
-
65
263
-
(30)
24,957
-
-
-
102
23
6,325
4,386
-
35,793
-
-
-
-
-
593
28
-
-
-
-
25
-
-
-
-
-
6
5
36
-
-
-
-
-
-
-
-
1,208
176
-
426
292,231
-
-
-
2,124
200
79,726
56,964
44
431,289
-
-
-
-
5,572
3,429
179
-
-
-
-
9,331
48,012
-
-
-
-
-
-
-
57,343
38,418
-
-
-
-
-
-
-
-
-
-
(123)
-
(297)
-
-
-
-
-
-
(420)
-
(2,533)
-
-
-
-
-
Total
Green Plains
Stockholders' controlling
Non-
Equity
$
279,689
19,790
175
19,965
Interest
$
296
364
-
364
Total
Stockholders’
Equity
$
279,985
20,154
175
20,329
1,208
176
-
426
301,464
48,012
(297)
47,715
2,124
200
79,732
56,969
44
488,248
38,418
(2,533)
35,885
-
-
8,584
-
9,244
150
-
150
-
-
-
-
-
9,394
(205)
-
(205)
1,208
176
8,584
426
310,708
48,162
(297)
47,865
2,124
200
79,732
56,969
44
497,642
38,213
(2,533)
35,680
Treasury Stock
Shares Amount
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,500
(28,201)
(28,201)
-
(28,201)
-
-
-
-
-
-
5,572
3,429
179
(8,944)
-
-
(3,372)
3,429
179
Balance, December 31, 2008
Net income
Unrealized gain on derivatives
Total comprehensive income
Stock-based compensation
Stock options exercised
Acquisition
Other
Balance, December 31, 2009
Net income
Unrealized loss on derivatives
Total comprehensive income
Stock-based compensation
Stock options exercised
Share issuance
Acquisition related issuance
Other
Balance, December 31, 2010
Net income
Unrealized loss on derivatives,
net of tax effect of $1,700
Total comprehensive income
Repurchase of common stock
Purchase of noncontrolling
interest in BlendStar, net of tax
Stock-based compensation
Stock options exercised
Balance, December 31, 2011
36,414
$
36
$
440,469
$
95,761
$
(2,953)
3,500
$
(28,201)
$
505,112
$
245
$
505,357
See accompanying notes to the consolidated financial statements.
F-4
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GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Amortization of debt issuance costs
Loss on sale of property and equipment
Deferred income taxes
Stock-based compensation expense
Undistributed equity in loss of affiliates
Allowance for doubtful accounts
Changes in operating assets and liabilities before
effects of business combinations:
Accounts receivable
Inventories
Deposits
Derivative financial instruments
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Unearned revenues
Other
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Acquisition of businesses, net of cash acquired
Other
Net cash used by investing activities
Cash flows from financing activities:
Proceeds from the issuance of long-term debt
Payments of principal on long-term debt
Proceeds from short-term borrowings
Payments on short-term borrowings
Proceeds from issuance of common stock
Payments for repurchase of common stock
Acquisition of noncontrolling interest
Change in restricted cash
Payments of loan fees
Other
Net cash provided (used) by financing activities
Year Ended December 31,
2010
2009
2011
$
38,213
$
48,162
$
20,154
50,076
2,449
106
22,710
3,429
779
142
(17,059)
(38,837)
5,412
26,429
(1,354)
23,408
(7,128)
114
108,889
(42,483)
(8,115)
(3,923)
(54,521)
37,355
1,476
-
16,520
2,124
169
79
(30,023)
(83,497)
2,073
(46,424)
860
74,642
13,046
(1,746)
34,816
(20,030)
(41,871)
(665)
(62,566)
138,088
(206,866)
3,525,923
(3,543,798)
-
(28,201)
(3,125)
8,164
(3,648)
878
(112,585)
128,982
(75,058)
2,133,335
(2,076,537)
79,732
-
-
(15,229)
(4,249)
200
171,176
28,635
778
-
-
1,208
-
55
13,493
(35,724)
(2,740)
424
4,537
18,830
5,130
(1,353)
53,427
(13,788)
(3,101)
(895)
(17,784)
30,661
(37,730)
679,720
(667,334)
-
-
-
(12,323)
(1,328)
176
(8,158)
Net change in cash and equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
(58,217)
233,205
174,988
$
143,426
89,779
233,205
$
27,485
62,294
89,779
$
Continued on the following page
F-5
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GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Continued from the previous page
Supplemental disclosures of cash flow:
Cash paid for income taxes
Cash paid for interest
Year Ended December 31,
2010
2009
2011
$
$
971
35,217
$
9
$
25,828
$
$
167
13,930
Supplemental noncash investing and financing activities:
Common stock issued for merger and acquisition activities
$
-
$
56,969
$
-
Assets acquired in acquisitions and mergers
Less: liabilities assumed
Net assets acquired
$
62,686
(54,571)
8,115
$
$
214,299
(115,459)
98,840
$
$
141,001
(129,316)
11,685
$
See accompanying notes to the consolidated financial statements.
F-6F-6
GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
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, its wholly-owned subsidiaries, and entities
which it controls. 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.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles,
or 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.
Reclassifications
Certain amounts previously reported within the consolidated financial statements have been reclassified to conform to
the current year presentation. The Company previously reported margin deposits required for exchange-traded activity as
deposits on the consolidated balance sheets. The liabilities associated with this exchange-traded activity were previously
reported as a derivative financial instrument liability. Since this activity has a right of offset, the Company reclassified cash
deposits of approximately $43.4 million at December 31, 2010, and derivative liabilities of approximately $32.1 million at
December 31, 2010, to derivative financial instruments in current assets.
Description of Business
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 warehousing and marketing, as well as sales and related
services of agronomy and petroleum products, collectively referred to as agribusiness, and (4) marketing and distribution of
Company-produced and third-party ethanol, distillers grains and corn oil, collectively referred to as marketing and
distribution. Additionally, the Company is a partner in a joint venture that was formed to commercialize advanced photo-
bioreactor technologies for the growing and harvesting of algal biomass.
Ethanol Production Segment
Green Plains is North America’s fourth largest ethanol producer. The Company operates its nine ethanol plants, which
have the capacity to produce approximately 740 million gallons per year, or mmgy, of ethanol, through separate wholly-
owned operating subsidiaries. The Company’s ethanol plants also produce co-products such as wet, modified wet or dried
distillers grains, as well as corn oil which is included in a separate segment. The Company’s plants use a dry mill process to
produce ethanol and co-products. At capacity, the Company’s plants consume approximately 265 million bushels of corn and
produce approximately 2.1 million tons of distillers grains annually.
Corn Oil Production Segment
The Company produces corn oil at all nine of its ethanol plants within the corn oil production segment, which have the
capacity to produce approximately 130 million pounds annually. The Company operates its corn oil extraction systems
through its wholly-owned subsidiary, Green Plains Commodities LLC. The corn oil systems are designed to extract non-
edible corn oil from the whole silage process immediately prior to production of distillers grains. Industrial uses for corn oil
include feedstock for biodiesel, livestock feed additives, rubber substitutes, rust preventatives, inks, textiles, soaps and
insecticides.
F-7
F-7
Marketing and Distribution Segment
The Company has an in-house marketing business, Green Plains Trade Group LLC, that is responsible for the sales,
marketing and distribution of all ethanol, distillers grains and corn oil produced at the Company’s nine ethanol plants. This
marketing business also markets and distributes ethanol for third-party ethanol producers. At capacity, the Company would
market approximately 740 mmgy of ethanol from its nine ethanol plants along with approximately 260 mmgy from third-
party producers. Additionally, through its wholly-owned subsidiary, BlendStar LLC, the Company operates nine blending or
terminaling facilities with approximately 625 mmgy of total throughput capacity in seven south central U.S. states.
Agribusiness Segment
The Company owns and operates grain handling and storage assets and provides complementary agronomy services to
local grain producers through its agribusiness segment, primarily through its wholly-owned subsidiary, Green Plains Grain
Company LLC, which has three primary operating lines of business: bulk grain, agronomy and petroleum. In addition to
storage capacity at the Company’s ethanol plants, Green Plains Grain has 15 grain elevators with approximately 39.1 million
bushels of total storage capacity, which supplies a portion of the feedstock for the Company’s ethanol plants; sells fertilizer
and other agricultural inputs and provides application services to area producers through its agronomy business; and sells
petroleum products including diesel, soydiesel, blended gasoline and propane, primarily to agricultural producers and
consumers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents and Restricted Cash
The Company considers short-term highly liquid investments with original maturities of three months or less to be cash
equivalents. Cash and cash equivalents as of December 31, 2011 and 2010 included bank deposits. The Company also has
restricted cash which is comprised of cash restricted as to use for payment towards a revenue bond and cash restricted as to
use for payment towards a revolving credit agreement.
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 and distillers grains 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 in the consolidated financial statements as Green Plains Trade 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 BlendStar’s biofuel terminal operations,
which include ethanol transload and splash blending services, are recognized as these services are rendered.
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, fertilizers and other similar products 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. Shipping and handling
costs are presented gross in the statements of operations with amounts billed included in revenues and also as a component of
cost of goods sold. Revenues from grain storage are recognized as services are rendered. Revenues related to grain
merchandising are presented gross.
F-8
F-8
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 sales contracts.
Exchange-traded futures and options contracts are valued at quoted market prices. Commodity inventories, 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 market value of grain inventories, 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. 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 sales contracts.
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 where
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
purchases or normal sales 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 sales 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.
Certain qualifying derivatives within the ethanol production segment 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.
Concentrations of Credit Risk
In the normal course of business, the Company is exposed to credit risk resulting from the possibility that a loss may
occur from the failure of another party to perform according to the terms of a contract. The Company transacts sales of
F-9
F-9
FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 3:10 PM
ethanol and distillers grains and is marketing products for third parties, which may result in concentrations of credit risk from
a variety of customers, including major integrated oil companies, large independent refiners, petroleum wholesalers, other
marketers and jobbers. The Company is also exposed to credit risk resulting from sales of grain to large commercial buyers,
including other ethanol plants, which it continually monitors. Although payments are typically received within fifteen days of
sale for ethanol and distillers grains, the Company continually monitors this credit risk exposure. In addition, the Company
may prepay for or make deposits on undelivered inventories. Concentrations of credit risk with respect to inventory advances
are primarily with a few major suppliers of petroleum products and agricultural inputs.
Inventories
Corn to be used in ethanol production, ethanol and distillers grains inventories are stated at the lower of average cost or
market.
Other grain inventories include readily-marketable physical quantities of grain, forward contracts to buy and sell grain,
and exchange traded futures and option contracts (all stated at market value). The futures and options contracts, which are
used to hedge the value of both owned grain and forward contracts, are considered derivatives. All agribusiness segment
grain inventories are marked to the market price with changes reflected in cost of goods sold. The forward contracts require
performance in future periods. Contracts to purchase grain from producers generally relate to the current or future crop years
for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of grain to processors or other
consumers generally do not extend beyond one year. The terms of contracts for the purchase and sale of grain are consistent
with industry standards.
Fertilizer inventories are valued at the lower of cost (weighted average) or market.
Finished goods inventory consists of denatured ethanol and its related co-products and is valued at the lower of cost
(first-in, first-out) or market.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation of these assets is generally
computed using the straight-line method over the following estimated useful lives of the assets:
Plant, buildings and improvements
Ethanol production equipment
Other machinery and equipment
Land improvements
Railroad track and equipment
Computer and software
Office furniture and equipment
Years
10-40
15-40
5-7
20
20
3-5
5-7
Property and equipment is capitalized at cost. Land improvements are capitalized and depreciated. Expenditures for
property betterments and renewals are capitalized. Costs of repairs and maintenance are charged to expense as incurred.
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the
estimated useful life of its fixed assets.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets, currently consisting of property and equipment, for impairment whenever
events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable.
Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Significant management judgment is required in determining the fair value of long-lived assets to
measure impairment, including projections of future discounted cash flows. No impairment charges were recorded for the
periods reported.
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Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business
combination that are not individually identified and separately recognized. The Company has recorded goodwill for business
combinations to the extent the purchase price exceeded the fair value of the net identifiable tangible and intangible assets of
each acquired company. The Company’s goodwill currently is comprised of amounts relating to its acquisitions of Green
Plains Ord, Green Plains Central City, Green Plains Holdings II (Global), Green Plains Otter Tail and BlendStar.
Goodwill is reviewed for impairment at least annually. The goodwill impairment test is a two-step test. Under the first
step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the
reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the entity
must perform step two of the impairment test. Under the second step, an impairment loss is recognized for any excess of the
carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of
goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and
the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting
unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, no
further analysis is necessary.
The Company performs its annual impairment review of goodwill at October 1, and when a triggering event occurs
between annual impairment tests. No impairment losses were recorded for the periods reported.
Financing Costs
Fees and costs related to securing debt financing are recorded as financing costs. Debt issuance costs are stated at cost
and are amortized utilizing the effective interest method for term loans and on a straight-line basis for revolving credit
arrangements over the life of the agreements. However, during periods of construction, amortization of such costs is
capitalized in construction-in-progress.
Noncontrolling Interests
Noncontrolling interests represent the minority partners’ shares of the equity and income of a majority-owned and
consolidated subsidiary of Green Plains Grain at December 31, 2011; and in prior periods also included the minority
partners’ share of the equity and income of BlendStar. The Company acquired all remaining noncontrolling interests in
BlendStar in 2011. Noncontrolling interests are classified on the consolidated statements of operations as a part of net income
and the accumulated amount of noncontrolling interests are classified on the consolidated balance sheets as a part of
stockholders’ equity.
Selling, General and Administrative Expenses
Selling, general and administrative expenses are primarily general and administrative expenses for employee salaries,
incentives and benefits; office expenses; director compensation; and professional fees for accounting, legal, consulting, and
investor relations activities; as well as non-plant depreciation and amortization costs.
Environmental Expenditures
Environmental expenditures that pertain to current operations and relate to future revenue are expensed or capitalized
consistent with its capitalization policy. Probable liabilities incurred that are reasonably estimable are also expensed or
capitalized according to this policy and if material, would be disclosed in the Company’s quarterly and annual filings.
Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to
future revenue are expensed as incurred.
Stock-Based Compensation
The Company recognizes compensation cost using a fair value based method whereby compensation cost is measured at
the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.
The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both
employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the
related agreement.
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Income Taxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and
liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial
reporting carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
operating results in the period of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely
than not that some portion or all of the deferred tax assets will not be realized.
The Company recognizes uncertainties in income taxes within the financial statements based on FASB Accounting
Standards Codification (ASC) 740. The standard prescribes a process by which the likelihood of a tax position is gauged
based upon the technical merits of the position, and then a subsequent measurement relates the maximum benefit and the
degree of likelihood to determine the amount of benefit recognized in the financial statements. The Company excludes
interest and penalties on tax uncertainties from the computation of income tax expense. These costs are treated as pre-tax
expenses.
Business Combinations
The Company accounts for business combinations based on the guidance within ASC 805, which generally requires an
acquirer to recognize the identifiable assets acquired, liabilities assumed, contingent purchase consideration and any
noncontrolling interest in the acquiree at fair value on the date of acquisition. It also requires an acquirer to recognize as
expense most transaction and restructuring costs as incurred, rather than include such items in the cost of the acquired entity.
Recent Accounting Pronouncements
Effective January 1, 2011, the Company adopted the amended guidance in ASC Topic 805, Business Combinations,
which, if the company completes a business combination during the reporting period, requires the Company to disclose pro
forma revenue and earnings of the combined entity as though the business combinations that occurred during the current
period had occurred as of the beginning of the comparable prior annual reporting period. The amended guidance also requires
the Company to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the reported pro forma revenue and earnings.
Effective January 1, 2011, the Company adopted the second phase of the amended guidance in ASC Topic 820, Fair
Value Measurements and Disclosures, which requires the Company to disclose information in the reconciliation of recurring
Level 3 measurements regarding purchases, sales, issuances and settlements on a gross basis, with a separate reconciliation
for assets and liabilities. The Company did not experience an impact from the additional disclosure requirements as the
Company does not have any recurring Level 3 measurements.
Effective January 1, 2012, the Company will be required to adopt the third phase of amended guidance in ASC Topic
820, Fair Value Measurements and Disclosures. The purpose of the amendment is to achieve common fair value
measurement and disclosure requirements by improving comparability of fair value measurements presented and disclosed in
financial statements prepared in accordance with GAAP and those prepared in conformity with International Financial
Reporting Standards, or IFRS. The amended guidance clarifies the application of existing fair value measurement
requirements and requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in
unobservable inputs and any interrelationships between those inputs. The Company currently would not be impacted by the
additional disclosure requirements as the Company does not have any recurring Level 3 measurements.
Effective January 1, 2012, the Company will be required to adopt the amended guidance in ASC Topic 220,
Comprehensive Income. This accounting standards update, which helps to facilitate the convergence of GAAP and IFRS, is
aimed at increasing the prominence of other comprehensive income in the financial statements by eliminating the option to
present other comprehensive income in the statement of stockholders’ equity, and requiring that net income and other
comprehensive income be presented in either a single continuous statement or in two separate but consecutive statements.
This amended guidance will be implemented retroactively. The Company has determined that the changes to the accounting
standards will affect the presentation of consolidated financial information but will not have a material effect on the
Company’s financial position or results of operations.
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Effective January 1, 2012, the Company will be permitted to adopt the amended guidance in ASC Topic 350, Intangibles
– Goodwill and Other. The amended guidance permits an entity to first assess qualitative factors to determine whether it is
more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it
is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a
likelihood of more than 50 percent. The Company has determined that the changes to the accounting standards will not
impact its disclosure or reporting requirements.
3. ACQUISITIONS
Acquisition of Otter Tail
In March 2011, the Company acquired an ethanol plant with an expected annual production capacity of 60 mmgy and
certain other assets near Fergus Falls, Minnesota from Otter Tail Ag Enterprises, LLC, or Otter Tail, for $59.7 million.
Consideration included $19.2 million of indebtedness to MMCDC New Markets Fund II, LLC, valued at $18.8 million, and
$35.0 million in financing from a group of nine lenders, led by AgStar Financial Services, with the remaining $5.9 million
paid in cash. The operating results of Otter Tail have been included in the Company’s consolidated financial statements since
March 24, 2011, providing revenue and operating income of $33.6 million and $0.1 million, respectively, for the year ended
December 31, 2011.
Amounts of identifiable assets acquired
and liabilities assumed
(in thousands)
Inventory
Other current assets
Property and equipment, net
$
Current liabilities
Other
4,986
738
51,925
(409)
(138)
Total identifiable net assets
57,102
Goodwill
Purchase price
2,600
59,702
$
The amounts above reflect final purchase price allocations. Goodwill related to the acquisition is tax deductible and
results largely from economies of scale expected to be realized in the Company’s operations.
Consolidated pro forma revenue and operating income, had the acquisition of the Otter Tail ethanol plants occurred on
January 1, 2010, would have been $3.6 billion and $99.1 million, respectively, for the year ended December 31, 2011 and
$2.2 billion and $92.1 million, respectively, for the year ended December 31, 2010. This unaudited information is based on
historical results of operations and is not necessarily indicative of the results that would have been achieved had the
acquisitions occurred on such date.
Acquisition of Remaining Interest in BlendStar
In January 2009, the Company acquired a 51% ownership interest in BlendStar, which operates nine blending and
terminaling facilities with approximately 625 mmgy of total throughput capacity in seven states in the south central U.S. On
July 19, 2011, the Company acquired the remaining 49% of BlendStar from the noncontrolling holders. BlendStar’s
operations are included in the marketing and distribution segment.
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4. GOODWILL
Changes in the carrying amount of goodwill attributable to each business segment during the years ended December 31,
2011 and 2010 were as follows (in thousands):
Ethanol
Production
Marketing and
Distribution
Total
Balance, December 31, 2009
Acquisiton of Global Ethanol
Balance, December 31, 2010
Adjustment to Global purchase price allocation
Acquisition of Otter Tail
Balance, December 31, 2011
3,945
8,582
12,527
15,152
2,600
30,279
10,598
-
10,598
-
-
10,598
$
$
$
$
$
$
14,543
8,582
23,125
15,152
2,600
40,877
Revisions were made during 2011 to the preliminary purchase price allocation for the acquisition of Global Ethanol. The
revisions resulted in a reduction of net property and equipment and an increase in goodwill of $15.2 million. Goodwill related
to the acquisition is tax deductible and results largely from economies of scale expected to be realized in the Company’s
operations.
5. 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.
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 that were accounted for at fair value as of December 31, 2011 and 2010 (in
thousands):
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Fair Value Measurements at
December 31, 2011
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Reclassification for
Balance Sheet
Presentation
Total
Assets
Cash and cash equivalents
Restricted cash
Inventories carried at market
Unrealized gains on derivatives
Total assets measured at fair value
Liabilities
Unrealized losses on derivatives
Margin deposits
Inventory financing arrangements
Other
Total liabilities measured at fair value
Assets
Cash and cash equivalents
Restricted cash
Margin deposits
Inventories carried at market
Unrealized gains on derivatives
Total assets measured at fair value
Liabilities
$
$
174,988
21,820
-
15,710
212,518
-
$
-
112,948
6,010
118,958
$
-
$
-
-
(4,292)
(4,292)
$
$
$
174,988
21,820
112,948
17,428
327,184
$
$
$
$
2,828
1,594
-
71
4,493
5,287
-
8,894
-
14,181
(2,698)
(1,594)
-
-
(4,292)
5,417
-
8,894
71
14,382
$
$
$
$
Fair Value Measurements at
December 31, 2010
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Reclassification for
Balance Sheet
Presentation
Total
$
$
233,205
32,183
43,394
-
3,303
312,085
-
$
-
-
96,916
30,663
127,579
$
-
$
-
(43,394)
-
11,307
(32,087)
$
$
$
233,205
32,183
-
96,916
45,273
407,577
Unrealized losses on derivatives
Total liabilities measured at fair value
$
$
32,317
32,317
$
$
2,569
2,569
$
$
(32,087)
(32,087)
$
$
2,799
2,799
The Company believes the fair value of its debt approximates book value, which is $636.8 million and $669.0 million at
December 31, 2011 and 2010, respectively. The Company also believes the fair value of its accounts receivable and accounts
payable approximate book value, which were $106.2 million and $172.3 million, respectively, at December 31, 2011 and
$89.2 and $151.1 million, respectively, at December 31, 2010.
Although the Company currently does not have any recurring Level 3 financial measurements, the fair values of the
tangible assets and goodwill acquired 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 being valued.
6. 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
warehousing and marketing, as well as sales and related services of agronomy and petroleum products, collectively referred
to as agribusiness, and (4) marketing and distribution of Company-produced and third-party ethanol, distillers grains and corn
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oil, 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.
In the second quarter of 2011, the Company redefined its operating segments to include corn oil production as a
reportable segment. Corn oil production, which the Company initiated in October 2010, was previously reported as a
component of the marketing and distribution segment. The Company added the corn oil production segment to reflect the
manner in which the Company’s executive management currently manages, allocates resources, and measures performance
of its businesses. Prior period segment results have been reclassified to reflect this change.
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 are certain financial data for the Company’s operating segments for the periods indicated (in thousands):
Revenue:
Ethanol production
Revenue from external customers
Intersegment revenue
Total segment revenue
Corn oil production
Revenue from external customers
Intersegment revenue
Total segment revenue
Agribusiness
Revenue from external customers
Intersegment revenue
Total segment revenue
Marketing and distribution
Revenue from external customers
Intersegment revenue
Total segment revenue
Revenue including intersegment activity
Intersegment elimination
Revenue as reported
Gross profit:
Ethanol production
Corn oil production
Agribusiness
Marketing and distribution
Intersegment eliminations
2011
Year Ended December 31,
2010
2009
$
128,780
2,005,141
2,133,921
$
63,001
1,052,424
1,115,425
$
61,629
669,708
731,337
1,466
43,391
44,857
358,968
195,172
554,140
3,064,498
467
3,064,965
5,797,883
(2,244,171)
3,553,712
87,010
27,067
34,749
23,112
294
172,232
$
$
$
995
707
1,702
248,619
122,133
370,752
1,821,307
293
1,821,600
3,309,479
(1,175,557)
2,133,922
105,079
878
25,199
21,192
178
152,526
$
$
$
-
-
-
147,890
74,076
221,966
1,096,274
-
1,096,274
2,049,577
(743,784)
1,305,793
47,825
-
22,561
13,572
90
84,048
$
$
$
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Operating income:
Ethanol production
Corn oil production
Agribusiness
Marketing and distribution
Intersegment eliminations
Corporate activities
Income before income taxes
Ethanol production
Corn oil production
Agribusiness
Marketing and distribution
Intersegment eliminations
Corporate activities
Depreciation and amortization:
Ethanol production
Corn oil production
Agribusiness
Marketing and distribution
Corporate activities
Interest expense:
Ethanol production
Corn oil production
Agribusiness
Marketing and distribution
Intersegement eliminations
Corporate activities
Capital expenditures:
Ethanol production
Corn oil production
Agribusiness
Marketing and distribution
Corporate activities
2011
Year Ended December 31,
2010
2009
$
$
$
$
$
$
$
$
$
$
73,242
26,999
11,721
9,475
334
(22,758)
99,013
49,612
26,998
6,170
6,760
334
(27,975)
61,899
43,169
859
3,975
1,623
450
50,076
23,725
-
5,569
2,716
(849)
5,484
36,645
11,416
15,375
8,977
2,476
4,239
42,483
$
$
$
$
$
$
$
$
$
$
93,410
878
5,614
9,673
188
(17,712)
92,051
72,903
878
2,464
8,330
188
(18,712)
66,051
32,619
44
3,070
1,383
239
37,355
20,572
-
3,169
1,344
(95)
1,154
26,144
6,763
6,277
4,525
2,275
190
20,030
$
$
$
$
$
$
$
$
$
$
38,778
-
8,847
4,843
85
(13,428)
39,125
22,235
-
7,223
4,323
85
(13,621)
20,245
25,872
-
2,009
602
152
28,635
16,633
-
1,634
546
(22)
36
18,827
7,449
-
955
4,926
458
13,788
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The following are total assets for the Company’s operating segments for the periods indicated (in thousands):
The following are total assets for the Company’s operating segments for the periods indicated (in thousands):
Total assets:
Total assets:
Ethanol production
Ethanol production
Corn oil production
Corn oil production
Agribusiness
Agribusiness
Marketing and distribution
Marketing and distribution
Corporate assets
Corporate assets
Intersegment eliminations
Intersegment eliminations
December 31,
December 31,
2010
2010
2011
2011
$
$
$
$
879,500
879,500
24,601
24,601
233,201
233,201
181,466
181,466
121,429
121,429
(19,369)
(19,369)
1,420,828
1,420,828
$
$
$
$
850,049
850,049
7,204
7,204
239,595
239,595
169,148
169,148
142,666
142,666
(10,883)
(10,883)
1,397,779
1,397,779
The following table sets forth revenues by product line for the periods indicated (in thousands):
The following table sets forth revenues by product line for the periods indicated (in thousands):
Revenues
Revenues
Ethanol
Ethanol
Distillers grains
Distillers grains
Corn Oil
Corn Oil
Grain
Grain
Agronomy products
Agronomy products
Other
Other
Total revenues
Total revenues
2011
2011
2,720,918
2,720,918
405,094
405,094
44,857
44,857
290,538
290,538
61,174
61,174
31,131
31,131
3,553,712
3,553,712
$
$
Year Ended December 31,
Year Ended December 31,
2010
2010
1,692,450
1,692,450
179,868
179,868
1,702
1,702
193,792
193,792
48,881
48,881
17,229
17,229
2,133,922
2,133,922
$
$
2009
2009
1,000,878
1,000,878
146,941
146,941
-
-
92,341
92,341
46,792
46,792
18,841
18,841
1,305,793
1,305,793
$
$
$
$
$
$
$
$
7. INVENTORIES
7. INVENTORIES
Inventories are carried at the lower of cost or market, except grain held for sale, which is valued at market value. The
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):
components of inventories are as follows (in thousands):
December 31,
December 31,
2011
2011
57,882
57,882
112,948
112,948
23,215
23,215
14,206
14,206
11,418
11,418
9,401
9,401
229,070
229,070
2010
2010
38,231
38,231
96,916
96,916
23,306
23,306
9,011
9,011
9,408
9,408
8,016
8,016
184,888
184,888
$
$
$
$
Finished goods
Finished goods
Grain held for sale
Grain held for sale
Raw materials
Raw materials
Petroleum & agronomy items held for sale
Petroleum & agronomy items held for sale
Work-in-process
Work-in-process
Supplies and parts
Supplies and parts
$
$
$
$
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8. PROPERTY AND EQUIPMENT
The components of property and equipment are as follows (in thousands):
Plant equipment
Plant, buildings and improvements
Land and improvements
Railroad track and equipment
Construction-in-progress
Computers and software
Office furniture and equipment
Leasehold improvements and other
Total property and equipment
Less: accumulated depreciation
Property and equipment, net
December 31,
2011
2010
$
$
690,092
112,895
53,647
28,225
5,573
4,688
1,716
5,751
902,587
(125,798)
776,789
$
$
621,826
106,550
51,971
26,525
7,918
4,038
1,098
3,558
823,484
(76,063)
747,421
9. DERIVATIVE FINANCIAL INSTRUMENTS
At December 31, 2011, the consolidated balance sheets reflect unrealized losses, net of tax, of $3.0 million in
accumulated other comprehensive loss. The Company expects all of the unrealized losses at December 31, 2011 will be
reclassified into income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount
ultimately realized in 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).
Derivative Instruments
Asset Derivatives
Fair Value at December 31,
Consolidated Balance Sheet Location
2011
2010
Liability Derivatives
Fair Value at December 31,
2011
2010
Derivative financial instruments (1)
$
19,022
(2) $
1,470
(3) $
-
$
Financing costs and other
Accrued and other liabilities
Other liabilities
-
-
-
409
-
-
Total
$
19,022
$
1,879
$
-
5,280
137
5,417
$
-
-
2,570
229
2,799
(1) Derivative financial instruments per the balance sheet include a margin deposit liability of $1.6 million and a margin deposit asset
of $43.4 million at December 31, 2011 and 2010, respectively.
(2) Balance at December 31, 2011, includes $12.2 million of net unrealized gains on derivative financial instruments designated as
cash flow hedging instruments.
(3) Balance at December 31, 2010, includes $477 thousand of net unrealized gains on derivative financial instruments designated as
cash flow hedging instruments.
Refer to Note 5 - Fair Value Disclosures, which also contains fair value information related to derivative financial
instruments.
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Effect of Derivative Instruments on Consolidated Statements of Operations and Consolidated Statements of Stockholders’
Equity and Comprehensive Income
The following tables provide information about the gain or loss 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
Designated in a Hedging Relationship
Consolidated Statements of Operations Location
2011
Year Ended December 31,
2010
2009
Revenue
Cost of goods sold
Net increase (decrease) recognized in earnings
$
$
1,595
(35,013)
(33,418)
$
$
2,480
(28,057)
(25,577)
$
$
(6,675)
15,602
8,927
Locations of Gain (Loss) Due to Ineffectiveness
of Cash Flow Hedges
Consolidated Statements of Operations Location
2011
Year Ended December 31,
2010
2009
Revenue
Cost of goods sold
Net decrease recognized in earnings
Location of Gains (Losses) Reclassified
from Accumulated Other Comprehensive
Income (Loss) into Net Income
Consolidated Statements of Operations Location
Revenue
Cost of goods sold
Net decrease recognized in earnings
$
$
$
$
(201)
(30)
(231)
$
$
(100)
30
(70)
$
$
Year Ended December 31,
2010
2009
2011
(46,686)
(4,437)
(51,123)
$
$
(11,135)
4,629
(6,506)
$
$
-
-
-
-
-
-
Effective Portion of Cash Flow Hedges
Recognized in
Other Comprehensive Income (Loss)
2011
Year Ended December 31,
2010
2009
Commodity Contracts
$
(55,356)
$
(6,803)
$
175
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The table below summarizes the volumes of open commodity derivative positions as of December 31, 2011 (in
thousands):
Derivative
Instruments
Exchange Traded
Net Long &
(Short) (1)
Futures
Futures
Futures
Futures
Options
Options
Options
Forwards
Forwards
Forwards
(19,416)
35
9,336
(34,566)
(216)
(2,611)
(8,340)
(3)
(3)
(4)
December 31, 2011
Non-Exchange Traded
Long (2)
(Short) (2)
12,274
11,780
4
(7,236)
(257,128)
(104)
Unit of
Measure
Bushels
Bushels
Gallons
Gallons
Bushels
Gallons
Pounds
Bushels
Gallons
Tons
Commodity
Corn, Soybeans and Wheat
Corn
Ethanol
Ethanol
Corn
Ethanol
Soybean Oil
Corn, Soybeans, Wheat and Milo
Ethanol
Distillers Grains
(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.
(3) Futures used for cash flow hedges.
(4) Soybean oil options are used to hedge corn oil.
Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated statements o f
operations. Revenues and cost of goods sold under such contracts are summarized in the table below for the periods indicated
(in thousands).
Year Ended December 31,
2010
2009
2011
Revenue
$
Cost of goods sold $
133,619
132,234
$
$
30,252
30,283
$
$
122,018
117,247
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10. DEBT
The principal balances of the components of debt are as follows (in thousands):
Green Plains Bluffton:
$70.0 million term loan
$20.0 million revolving term loan
$22.0 million revenue bond
Green Plains Central City:
$55.0 million term loan
$30.5 million revolving term loan
$11.0 million revolver
Equipment financing loan
Green Plains Holdings II:
$34.1 million term loan
$42.6 million revolving term loan
$15.0 million revolver
Other
Green Plains Obion:
$60.0 million term loan
$37.4 million revolving term loan
Note payable
Equipment financing loan
Economic development grant
Green Plains Ord:
$25.0 million term loan
$13.0 million revolving term loan
$5.0 million revolver
Green Plains Otter Tail:
$30.3 million term loan
$4.7 million revolver
$19.2 million note payable
Capital lease payable
Green Plains Shenandoah:
$30.0 million term loan
$17.0 million revolving term loan
Economic development loan
Green Plains Superior:
$23.5 million term loan
$10.0 million revolving term loan
Equipment financing loan
Continued on the following page
$
December 31,
2011
2010
$
48,018
20,000
19,120
46,558
24,739
-
170
27,914
35,679
15,000
194
25,670
36,200
85
445
1,424
21,300
12,151
3,349
27,386
4,675
18,883
166
6,068
17,000
-
20,750
10,000
156
56,000
20,000
20,615
52,200
30,500
6,239
230
34,136
42,214
15,000
387
40,930
36,200
124
591
1,514
23,800
13,000
2,500
-
-
-
-
13,368
17,000
45
26,250
10,000
219
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Continued from the previous page
Green Plains Grain:
$30.0 million term loan
$195.0 revolving loan
$20.0 million term loan
$100.0 million revolving loan
Inventory financing arrangements
Equipment financing loans
Notes payable
Green Plains Trade:
$70.0 million revolving loan
Corporate:
$90.0 million convertible notes
Note Payable
Capital Lease
Other
Total debt
Less: current portion of long-term debt
Less: short-term notes payble and other
Long-term debt
$
Scheduled long-term debt repayments, are as follows (in thousands):
Year Ending December 31,
2012
2013
2014
2015
2016
Thereafter
Debt discount
Total
December 31,
2011
2010
-
-
19,000
68,004
-
915
3,288
21,179
90,000
-
-
3,520
668,968
(51,885)
(89,183)
527,900
$
27,833
27,000
-
-
8,894
311
2,000
33,705
90,000
1,625
606
1,692
636,766
(73,760)
(69,599)
493,407
Amount
$ 143,359
123,703
42,172
133,451
70,255
124,118
(292)
$ 636,766
Loan Terminology
Related to loan covenant discussions below, the following definitions generally apply to the Company’s loans (all
calculated in accordance with GAAP consistently applied):
• Working capital – current assets less current liabilities.
• Net worth – total assets less total liabilities plus subordinated debt.
• Tangible Net worth – total assets less intangible assets less total liabilities plus subordinated debt.
• Tangible owner’s equity ratio – tangible net worth divided by total assets.
• Debt service coverage ratio* – (1) net income (after taxes), plus depreciation and amortization, divided by (2) all
current portions of regularly scheduled long-term debt for the prior period (previous year end).
• Fixed charge coverage ratio* –
(1) adjusted EBITDA divided by (2) fixed charges, which are generally the sum of interest expense, scheduled
•
principal payments, distributions, and maintenance capital, within the ethanol production segment.
•
(1) EBITDA, plus cash equity investments by the parent company, less capital expenditures and interest
expense of working capital financings divided by (2) scheduled principal payments and interest expense on long-
term indebtedness, within the agribusiness segment.
•
previous four quarters, on a trailing quarter basis, within the marketing and distribution segment.
(1) EBITDA less capital expenditures less distributions less cash taxes, divided by (2) all debt payments for the
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• Leverage ratio – total liabilities divided by tangible net worth.
*Certain credit agreements allow for the inclusion of equity contributions from the parent company in the
calculations of the debt service and fixed charge coverage ratios.
Ethanol Production Segment
Loan Repayment Terms
• Term Loans –
o Scheduled principal payments are as follows:
Green Plains Bluffton
Green Plains Central City
Green Plains Holdings II
Green Plains Obion
Green Plains Ord
Green Plains Otter Tail
Green Plains Shenandoah
Green Plains Superior
$0.6 million per month
$0.4 million per month
$1.5 million per quarter
$2.4 million per quarter
$0.2 million per month
$0.4 million per month
$1.2 million per quarter
$1.4 million per quarter
o Final maturity dates (at the latest) are as follows:
Green Plains Bluffton
Green Plains Central City
Green Plains Holdings II
Green Plains Obion
Green Plains Ord
Green Plains Otter Tail
Green Plains Shenandoah
Green Plains Superior
November 19, 2013
July 1, 2016
January 1, 2015
August 20, 2014
July 1, 2016
September 1, 2018
May 20, 2013
July 20, 2015
o Each term loan, except for the Green Plains Holdings II and Green Plains Otter Tail term loans, has a
provision that requires the respective subsidiary to make annual special payments equal to a percentage
ranging from 65% to 75% of the available free cash flow from the related entity’s operations (as defined in
the respective loan agreements), subject to certain limitations and provided that if such payment would
result in a covenant default under the respective loan agreements, the amount of the payment shall be
reduced to an amount which would not result in a covenant default.
o As of December 31, 2011, free cash flow payments are discontinued when the aggregate of such future
payments meets the following amounts:
Green Plains Bluffton
Green Plains Central City and
Green Plains Ord combined
Green Plains Obion
Green Plains Shenandoah
Green Plains Superior
$15.0 million
$16.0 million
$10.1 million
$ 2.1 million
$10.0 million
o Free cash flow payments currently are not to exceed the following amounts in any given year:
Green Plains Bluffton
Green Plains Central City and
Green Plains Ord combined
Green Plains Obion
Green Plains Shenandoah
$4.0 million
$4.0 million
$8.0 million
$2.5 million
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F-24
• 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 $2.4 million each six-month period commencing on the first day of the
month beginning approximately six months after repayment of the term loan, but in no event later than November 1,
2014. 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 approximately 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. Allowable advances
under the Green Plains Holdings II loan agreement are reduced by $2.7 million on a semi-annual basis. 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 Otter Tail, Green Plains Shenandoah, and Green Plains
Superior loan agreements.
o Final maturity dates (at the latest) are as follows:
Green Plains Bluffton
Green Plains Central City
Green Plains Holdings II
Green Plains Obion
Green Plains Ord
Green Plains Shenandoah
Green Plains Superior
November 19, 2013
July 1, 2016
April 1, 2016
September 1, 2018
July 1, 2016
November 1, 2016
July 1, 2017
• Revolvers – The revolvers generally support the working capital needs of the respective facilities and are subject to
borrowing base requirements of between 60% and 85% of eligible inventory and receivables.
o Final maturity dates are as follows:
Green Plains Central City
Green Plains Holdings II
Green Plains Ord
Green Plains Otter Tail
June 29, 2012
April 30, 2012
June 29, 2012
March 23, 2012
Interest and Fees
• The term loans bear interest at LIBOR plus 3.00% to 4.50% or lender-established prime rates. Some have
established a 2% floor on the underlying LIBOR index. A portion of the Green Plains Holdings II term loan is fixed
at 8.22%
• The revolving term loans bear interest at LIBOR plus 1.5% to 4.50% or lender-established prime rates. Some have
established a 2% floor on the underlying LIBOR index.
• The revolver loans for Green Plains Ord and Green Plains Central City bear interest at the greater of LIBOR or
2.0%, plus 4.0%. The revolver loan for Green Plains Holdings II bears interest at LIBOR, plus 4.50% or at lender-
established prime rates.
• Unused commitment fees, when charged, are 0.25% to 0.75%.
Security
As security for the loans, the lenders received a first-position lien on all personal property and real estate owned by the
respective entity borrowing the funds, including an assignment of all contracts and rights pertinent to construction and on-
going operations of the plant. These borrowing entities are also required to maintain certain financial and non-financial
covenants during the terms of the loans. In addition, the debt facilities within Green Plains Central City and Green Plains Ord
loans are cross-collateralized.
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Covenants
The loan agreements contain affirmative covenants (including financial covenants) and negative covenants including:
• Maintenance of working capital, including unused portion of revolver, as follows:
o Green Plains Bluffton
o Green Plains Central City
and Green Plains Ord
o Green Plains Holdings II
$12.0 million
$10.0 million, combined, excluding current maturities of long-term debt.
$1.0 million (increasing periodically until reaching $7.5 million by March 31,
2013)
$9.0 million
o Green Plains Obion
o Green Plains Otter Tail
$8.0 million
o Green Plains Shenandoah $6.0 million
o Green Plains Superior
$0.0 million (increasing periodically until reaching $3.0 million by December
1, 2012)
• Maintenance of net worth as follows:
$70.0 million
o Green Plains Holdings II
o Green Plains Obion
$90.0 million
o Green Plains Shenandoah $54.0 million
$23.0 million
o Green Plains Superior
• Maintenance of tangible net worth as follows:
o Green Plains Bluffton
o Green Plains Otter Tail
$82.5 million
$8.0 million
• Maintenance of tangible owner’s equity as follows:
o Green Plains Bluffton
at least 50%
• Maintenance of certain annual coverage ratios as follows:
Fixed charge coverage ratios:
o Green Plains Bluffton
o Green Plains Central City
and Green Plains Ord
o Green Plains Otter Tail
1.25 to 1.0
1.15 to 1.0, combined
1.15 to 1.0
Debt service coverage ratios:
1.25 to 1.0
o Green Plains Holdings II
o Green Plains Obion
1.25 to 1.0
o Green Plains Shenandoah 1.25 to 1.0
1.25 to 1.0
o Green Plains Superior
• Annual capital expenditures will be limited as follows:
o Green Plains Bluffton
$2.0 million
o Green Plains Central City $2.0 million
o Green Plains Holdings II $2.0 million
$2.0 million
o Green Plains Obion
$2.0 million
o Green Plains Ord
$5.0 million
o Green Plains Otter Tail
o Green Plains Shenandoah $1.3 million
$0.6 million
o Green Plains Superior
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• Allowable dividends or other annual distributions from each respective subsidiary, subject to certain additional
restrictions including compliance with all loan covenants, terms and conditions, are as follows:
o Green Plains Bluffton
Up to 35% of net profit before tax, and up to an additional 15% of net profit
before tax, after free cash flow payment is made
o Green Plains Central City
and Green Plains Ord
o Green Plains Obion
o Green Plains Otter Tail
Up to 35% of net profit before tax, and an unlimited amount may be distributed
after free cash flow payment is made, provided maintenance of 70%
tangible owner equity
Up to 40% of net profit before tax, and unlimited after free cash flow payment
is made
Up to 40% of net profit before tax, and a reasonable amount may be distributed
provided maintenance of 40% tangible owner equity
o Green Plains Shenandoah Up to 40% of net profit before tax and unlimited after free cash flow payment
o Green Plains Superior
is made
Up to 40% of net profit before tax and unlimited after free cash flow payment
is made
All of the Company’s ethanol production subsidiaries were in compliance with their respective debt covenants at
December 31, 2011.
Bluffton Revenue Bond
• Green Plains Bluffton also received $22.0 million in Subordinate Solid Waste Disposal Facility Revenue Bond
funds from the City of Bluffton, Indiana. The revenue bond requires: (1) semi-annual principal and interest
payments of approximately $1.5 million through March 1, 2019, and (2) a final principal and interest payment of
$3.745 million on September 1, 2019.
• The revenue bond bears interest at 7.50% per annum.
• At December 31, 2011, Green Plains Bluffton had $3.2 million of cash that was restricted as to use for payment
towards the current maturity and interest of the revenue bond.
Subsequent Amendments
On February 9, 2012, Green Plains Holdings II entered into an amended and restated credit agreement comprised of a
$26.4 million amortizing term loan and a $51.1 million revolving term loan. The final maturity dates of the amortizing term
loan and revolving term loan are July 1, 2016 and October 1, 2018, respectively. The amended and restated credit agreement
requires the Company to maintain certain affirmative and negative covenants including maintaining minimum working
capital of $16.0 million (increasing periodically until reaching $22.5 million by March 31, 2013), maintaining minimum net
worth of $80.0 million, and limiting annual capital expenditures to $5.0 million in 2012 (increasing to $6.0 million in 2013).
On February 16, 2012, Green Plains Bluffton entered into an amendment of its master loan agreement to decrease the
minimum fixed charge coverage ratio, or FCCR, from 1.25 to 1.0 to a ratio of 1.15 to 1.0. The amendment required a $3.0
million capital injection from the parent entity and waives any potential noncompliance related to covenants of Green Plains
Bluffton to that date. Without the amendment, the parent entity had the ability and intent to meet the FCCR covenant by
injecting the necessary capital into Green Plains Bluffton prior to filing the compliance certificate. The Company believes it
will maintain compliance with the FCCR, and all other covenants, related to the Green Plains Bluffton loan agreement going
forward.
Agribusiness Segment
The Green Plains Grain loans, executed on October 28, 2011, are comprised of a $30.0 million amortizing term loan and
a $195.0 million revolving credit facility with various lenders. The term loan and revolving credit facility mature on
November 1, 2021 and October 28, 2013, respectively.
The $30.0 million amortizing term loan was disbursed in an initial advance in the amount of $28.0 million on October
31, 2011. The remaining $2.0 million amount may be requested on or before May 1, 2012. Equal payments of principal
sufficient to amortize the loan in full over a 15-year period, plus interest, are due on the first day of every month with the
remaining outstanding balance and all accrued interest due on November 1, 2021, the loan maturity date. The loan bears
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F-27
interest at a fixed rate of 6.00% per annum. As security for the loan, the lender received a first priority lien on certain real
estate and other property owned by the subsidiaries within the agribusiness segment.
The revolving credit facility includes total revolving credit commitments of $195.0 million and an accordion feature
whereby amounts available under the facility may be increased by up to $55.0 million of new lender commitments upon
agent approval. As security for the revolving credit facility, the lender received a first priority lien on certain cash, inventory,
machinery, accounts receivable and other assets owned by subsidiaries of the agribusiness segment. Advances are subject to
interest charges at a rate per annum equal to the LIBOR rate for the outstanding period plus the applicable margin or a rate
per annum equal to the base rate plus the applicable margin. The principal balance of each advance shall be due and payable
on the respective maturity date but no later than October 28, 2013.
The term loan and revolving credit facility agreements contain certain financial covenants and restrictions, including the
following:
• The consolidated total fixed charge coverage ratio shall not at the end of any fiscal quarter, for the rolling four fiscal
quarters then ending, be less than 1.25 to 1.00.
• Working capital shall not be less than $30.0 million as of the end of each fiscal quarter.
• The consolidated long-term indebtedness to consolidated net fixed assets ratio shall not exceed 0.70 to 1.00.
• Total tangible net worth shall not be less than $50.0 million, with such minimum amount being increased by an
amount equal to 50% of the consolidated net income for each fiscal year, without reduction for losses.
• The leverage ratio shall be not greater than 5.5 to 1.0 as of the last day of any fiscal quarter.
• Annual capital expenditures are limited to $5.0 million.
The agribusiness segment was in compliance with its respective debt covenants at December 31, 2011.
Inventory Financing Arrangements
On August 15, 2011, the Company entered into two short-term inventory financing arrangements with a financial
institution. Under the terms of the financing agreements, the Company sold quantities of grain totaling $10.0 million, issued
warehouse receipts to the financial institution and simultaneously entered into agreements to repurchase the grain in future
periods. The agreements mature on January 11, 2012 and February 10, 2012. The Company has accounted for the agreements
as short-term notes, rather than sales, and has elected the fair value option to offset fluctuations in market prices of the
inventory. At December 31, 2011, grain inventory and the short-term note payable were valued at $8.9 million and were
measured using Level 2 inputs.
Equipment Financing Loans
Green Plains Grain has two separate equipment financing agreements with AXIS Capital Inc. initially totaling $1.75
million (individually and collectively, the “Equipment Financing Loans”). The Equipment Financing Loans provide
financing for designated vehicles, implements and machinery. Pursuant to the terms of the agreements, Green Plains Grain is
required to make 48 monthly principal and interest payments of $43 thousand, which commenced in April 2008. See Note 17
– Related Party Transactions for further discussion.
Marketing and Distribution Segment
The Green Plains Trade loan is comprised of a senior secured revolving credit facility. Under the loan agreement, as
amended, the lender will loan up to $70.0 million, subject to a borrowing base equal to 85% of eligible receivables. The
balance is subject to interest charges of either: (1) Base Rate (lender’s commercial floating rate plus 2.5%); or, (2) LIBOR
plus 3.5%. At December 31, 2011, Green Plains Trade had $18.5 million in cash that was restricted as to use for payment
towards the loan agreement. Such cash is presented in restricted cash on the consolidated balance sheets. The amended
revolving credit facility expires on March 31, 2014. As of December 31, 2011, Green Plains Trade was in compliance with
all debt covenants.
The loan agreement contains certain financial covenants and restrictions, including the following:
• Maintenance of a fixed charge coverage ratio not less than 1.15 to 1.0.
• Capital expenditures for Green Plains Trade are restricted to $0.5 million per year.
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Corporate Activities
In November 2010, the Company issued $90 million of 5.75% Convertible Senior Notes due 2015. The notes represent
senior, unsecured obligations of the Company, with interest payable on May 1 and November 1 of each year. The notes may
be converted into shares of the Company’s common stock and cash in lieu of fractional shares of the common stock based on
a conversion rate initially equal to 69.7788 shares of the common stock per $1,000 principal amount of Notes, which is equal
to an initial conversion price of $14.33 per share. The conversion rate is subject to adjustment upon the occurrence of
specified events. The Company may redeem for cash all but not less than all, of the Notes at any time on and after November
1, 2013, if the last reported sale price of the Company’s common stock equals or exceeds 140% of the applicable conversion
price for a specified time period, at a redemption price equal to 100% of the principal amount of the Notes, plus accrued and
unpaid interest. Default by the Company with respect to any loan in excess of $10.0 million constitutes an event of default
under the convertible senior notes, which could result in the convertible senior notes being declared due and payable.
Capitalized Interest
The Company had no capitalized interest for years ended December 31, 2011, 2010 and 2009.
Restricted Net Assets
At December 31, 2011, there were approximately $528.6 million of net assets at the Company’s subsidiaries that were
not available to be transferred to the parent company in the form of dividends, loans, or advances due to restrictions
contained in the credit facilities of these subsidiaries.
11. STOCK-BASED COMPENSATION
The Company has 2007 and 2009 Equity Incentive Plans which reserve a combined total of 3.5 million shares of
common stock for issuance pursuant to the terms of the plans. The plans provide for the granting of shares of stock, including
options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, non-vested stock
and non-vested stock unit awards to eligible employees, non-employee directors and consultants. The Company measures
share-based compensation grants at fair value on the grant date, adjusted for estimated forfeitures. The Company records
noncash compensation expense related to equity awards in its financial statements over the requisite service period on a
straight-line basis. All of the Company’s existing share-based compensation awards have been determined to be equity
awards.
Grants under the 2007 and 2009 Equity Incentive Plans may include:
• Options – Stock options may be granted that are currently exercisable, that become exercisable in installments, or
that are not exercisable until a fixed future date. Certain options that have been issued are exercisable during their
term regardless of termination of employment while other options have been issued that terminate at a designated
time following the date employment is terminated. Options issued to date may be exercised immediately and/or at
future vesting dates, and must be exercised no later than five to eight years after the grant date or they will expire.
• Stock Awards – Stock awards may be granted to directors and employees with ownership of the common stock
vesting immediately or over a period determined by the Compensation Committee and stated in the award. Stock
awards granted to date vested in some cases immediately and at other times over a period determined by the
Compensation Committee and were restricted as to sales for a specified period. Compensation expense was
recognized upon the grant award date if fully vested, or over the requisite vesting period.
• Deferred Stock Units – Deferred stock units (“DSU”) may be granted to directors and employees with ownership of
the common stock vesting immediately or over a period determined by the Compensation Committee and stated in
the award. As determined by the Compensation Committee, deferred stock units granted to date vest over a specific
period with underlying shares of common stock issuable in a period beyond the vesting date. Compensation expense
was recognized upon the grant award date if fully vested, or over the requisite vesting period.
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For stock options granted during the periods indicated below, the fair value of options granted was estimated on the date
of grant using the Black-Scholes option-pricing model, a pricing model acceptable under GAAP, with the following
weighted-average assumptions:
Year Ended
December 31,
2011
Year Ended
December 31,
2010
Year Ended
December 31,
2009
Expected life
Interest rate
Volatility
Dividend yield
* T he Company did not grant any stock option awards during the year ended December 31, 2011.
6.2
2.85%
67.80%
-
6.0
2.32%
63.13%
-
*
*
*
*
The expected life of options granted represents the period of time in years that options granted are expected to be
outstanding. The Company uses a simplified method to estimate the expected life of options due to lack of historical
experience. The interest rate represents the annual interest rate a risk-free investment could potentially earn during the
expected life of the option grant. Expected volatility is based on weighted-average historical volatility of the Company’s
common stock and a peer group.
All of the Company’s existing share-based compensation awards have been determined to be equity awards. The
Company recognizes compensation costs for stock option awards which vest with the passage of time with only service
conditions on a straight-line basis over the requisite service period.
A summary of stock option activity for the year ended December 31, 2011 is as follows:
Weighted-
Average
Exercise
Weighted-
Average
Remaining
Aggregate
Intrinsic Value
(in thousands)
Shares
Outstanding at December 31, 2010
1,170,500
Granted
Exercised
Forfeited
Expired
-
(27,499)
(13,251)
(7,251)
Outstanding at December 31, 2011
1,122,499
Exercisable at December 31, 2011 (1)
1,052,249
$
$
$
$
15.42
-
6.51
11.26
17.41
15.68
15.89
5.1
3.8
3.5
$
$
$
$
2,349
121
1,374
1,360
(1) Includes in-the-money options totaling 357,499 shares at a weighted-average exercise price of $5.68.
The Company’s option awards allow employees to exercise options through cash payment to the Company for the shares
of common stock or through a simultaneous broker-assisted cashless exercise of a share option, through which the employee
authorizes the exercise of an option and the immediate sale of the option shares in the open market. The Company uses
newly-issued shares of common stock to satisfy its share-based payment obligations.
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 3:25 PM
The following table summarizes non-vested stock activity and DSU activity for the year ended December 31, 2011:
Weighted-
Average
Grant-
Date Fair
Value
Weighted-
Average
Remaining
Vesting Term
(in years)
Non-vested
Shares and
DSU's
Nonvested at December 31, 2010
Granted
Forfeited
Vested
$
371,486
392,056
(2,500)
(275,030)
10.15
12.01
16.95
9.80
Nonvested at December 31, 2011
486,012
$
11.81
1.8
Compensation costs expensed for share-based payment plans described above were approximately $4.4 million, $2.9
million and $1.6 million for the years ended December 31, 2011, 2010 and 2009, respectively. At December 31, 2011, there
was $4.0 million of unrecognized compensation costs from share-based compensation arrangements, which is related to non-
vested shares. This compensation is expected to be recognized over a weighted-average period of approximately 1.7 years.
The potential tax benefit realizable for the anticipated tax deductions of the exercise of share-based payment arrangements
generally would approximate 37.5% of these expense amounts.
12. EARNINGS PER SHARE
Basic earnings per common shares (“EPS”) is calculated by dividing net income available to common stockholders by
the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net
income on an as-if-converted basis available to common stockholders by the weighted average number of common shares
outstanding during the period, adjusted for the dilutive effect of any outstanding dilutive securities. The calculation of diluted
earnings per share gives effect to common stock equivalents. The reconciliations of net income to net income on an as-if-
converted basis and basic and diluted earnings per share are as follows (in thousands):
Net income attributable to Green Plains
Weighted average shares outstanding - basic
$
38,418
35,276
$
48,012
31,032
$
19,790
24,895
Income attributable to Green Plains stockholders - basic
$
1.09
$
1.55
$
0.79
Year Ended December 31,
2010
2009
2011
Net income attributable to Green Plains
Interest and amortization on convertible debt
Tax effect of interest on convertible debt
Net income attributable to Green Plains on an as-if-converted basis
$
$
$
38,418
5,776
(2,166)
42,028
48,012
960
(260)
48,712
$
$
$
19,790
-
-
19,790
Weighted average shares outstanding - basic
Effect of dilutive convertible debt
Effect of dilutive stock options
Total potential shares outstanding
35,276
6,280
252
41,808
31,032
1,015
300
32,347
24,895
-
174
25,069
Income attributable to Green Plains stockholders - diluted
$
1.01
$
1.51
$
0.79
Excluded from the computations of diluted EPS for the years ended December 31, 2011, 2010 and 2009, were stock
options, stock awards and DSUs totaling 0.9 million, 0.7 million and 1.0 million shares, respectively, because the exercise
prices or the grant-date fair value, as applicable, of the corresponding awards were greater than the average market price of
the Company’s common stock during the respective periods. As consideration for the Global acquisition in October 2010, the
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FY11 10-K - 2 17 12 - CLEAN - FINAL DRAFT (as filed) JS 1 3/2/12 3:28 PM
Company issued warrants for 700,000 shares of its restricted stock at a price of $14.00 per share. The warrants are excluded
from the computations of diluted EPS as the exercise price was greater than the average market price of the Company’s
common stock for the years ended December 31, 2011 and 2010.
13. TREASURY STOCK
On September 9, 2011, the Company repurchased 3.5 million shares of common stock at a price of $8.00 per share from
a subsidiary of NTR plc, which is a principal shareholder of the Company. Shares of common stock repurchased by the
Company are recorded at cost as treasury stock and result in a reduction of stockholders’ equity on the consolidated balance
sheets. When shares are reissued, the Company will use the weighted average cost method for determining the cost basis. The
difference between the cost of the shares and the issuance price will be added or deducted from additional paid-in capital. The
Company does not have a share repurchase program and does not intend to retire the repurchased shares.
14. INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and for net operating loss and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Income tax expense consists of the following (in thousands):
Year Ended December 31,
2010
2009
2011
$
$
$
Current
Deferred
Total
(612)
24,298
23,686
1,369
16,520
17,889
$
$
$
438
(347)
91
Deferred income tax provisions for the year ended December 31, 2009 reflect the Company’s determination that any
benefit from net deferred tax assets related to net operating losses for tax purposes may not be realized. As a result, valuation
allowances were provided. In 2010, due to profitability, the valuation allowances were released, except for those related to
specific federal and state tax credits.
Differences between the income tax expense (benefit) computed at the statutory federal income tax rate and as presented
on the consolidated statements of operations are summarized as follows (in thousands):
Year Ended December 31,
2010
2009
2011
Tax expense (benefit) at federal statutory
rate of 35%
$
21,737
$
23,118
$
7,063
State income tax expense (benefit), net
of federal expense
Tax credits
Decrease in valuation allowance against
deferred tax assets
Other
Income tax expense
2,989
-
(1,883)
-
(2,411)
(439)
(2,084)
1,044
23,686
$
(3,749)
403
17,889
$
(3,004)
(1,118)
91
$
The Company’s state income tax benefit for the years ended December 31, 2010 and 2009 includes state income tax
expense on income which was more than offset by certain state tax benefits and credits that will expire in years 2014 through
2023.
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Significant components of deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
December 31,
2011
2010
Net operating loss carryforwards - Federal
Net operating loss carryforwards - State
Tax credit carryforwards - Federal
Tax credit carryforwards - State
Derivatives
Organizational and start-up costs
Stock-based compensation
Inventory valuation
Accrued Expenses
Deferred Revenue
Other
Total deferred tax assets
$
14,863
671
1,354
6,193
1,540
6,373
3,283
711
4,857
590
189
40,624
$
12,915
1,736
1,340
7,312
5,749
4,606
2,528
3,258
3,526
616
144
43,730
Deferred tax liabilities:
Fixed assets
Investment in partnerships
Total deferred tax liabilities
Valuation allowance
Deferred income taxes
$
$
(76,250)
(946)
(77,196)
(2,754)
(39,326)
(54,356)
-
(54,356)
(5,990)
(16,616)
$
$
The deferred tax valuation allowance of $2.8 million includes federal and state valuation allowances of $0.7 million and
$2.1 million, respectively. The state valuation allowance is related to certain Iowa and Tennessee tax credits that have a
remaining life between 3 and 13 years.
As of December 31, 2011 and 2010, the Company had federal net operating loss carryforwards of $42.5 million and
$36.9 million, respectively, which are available to reduce future federal income tax, if any, through 2031. In determining
these net operating loss carryforwards, the Company considered future taxable income and possible limitations on net
operating losses.
The Company continues to maintain a valuation allowance against some of its net deferred tax assets at December 31,
2011, due to the uncertainty of realizing these assets in the future. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some or all of the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in making this assessment.
The Company conducts business and files tax returns in several states within the U.S. The Company’s federal and state
returns for the tax years ended November 30, 2008 and later are still subject to audit.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Unrecognized Tax Benefits
Balance at January 1, 2011
Gross increases from tax positions in prior periods
Settlements
Balance at December 31, 2011
$
1,061
1,629
(2,583)
107
$
During 2011, the Company reached a settlement with the IRS with respect to the audit of the November 30, 2006 and
2007 tax returns. Unrecognized tax benefits related to federal and state net operating loss carryforwards were affected by the
non-cash settlement. The unrecognized tax benefits, if recognized, would favorably impact the Company’s effective tax rate.
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The Company accrues interest and penalties associated with uncertain tax positions as part of selling, general and
administrative expense.
15. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases certain facilities and parcels of land under agreements that expire at various dates. For accounting
purposes, rent expense is based on a straight-line amortization of the total payments required over the lease term. The
Company incurred lease expenses of $16.8 million, $11.3 million and $9.4 million during the years ended December 31,
2011, 2010 and 2009, respectively. Aggregate minimum lease payments under these agreements for future fiscal years are as
follows (in thousands):
Year Ending December 31,
Amount
2012
2013
2014
2015
2016
Thereafter
Total
$
$
16,566
14,496
7,922
5,877
5,057
2,768
52,686
Commodities
As of December 31, 2011, the Company had contracted for future grain deliveries valued at $237.6 million, natural gas
deliveries valued at approximately $8.3 million, ethanol product deliveries valued at approximately $12.5 million and
distillers grains product deliveries valued at approximately $1.8 million.
Legal
In April 2011, Aventine Renewable Energy, Inc. filed a complaint in the United States Bankruptcy Court for the District
of Delaware in connection with its Chapter 11 bankruptcy naming as defendants Green Plains Renewable Energy, Inc., Green
Plains Obion LLC, Green Plains Bluffton LLC, Green Plains VBV LLC and Green Plains Trade Group LLC. This action
alleges $24.4 million of damages from preferential transfers or, in the alternative, $28.4 million of damages from fraudulent
transfers under an ethanol marketing agreement and an unspecified amount of damages for a continuing breach of a
termination agreement related to rail cars. The Company is unable to predict the outcome of these matters at this time, and
any views formed as to the viability of these claims or the financial exposure which could result may change as the matters
proceed through their course. The Company intends to defend these claims vigorously.
In addition to the above-described proceeding, the Company is currently involved in other litigation that has arisen in the
ordinary course of business, but it does not believe that any other pending litigation will have a material adverse effect on its
financial position, results of operations or cash flows.
16. EMPLOYEE BENEFIT PLANS
The Company offers eligible employees a comprehensive employee benefits plan that includes health, dental, vision, life
and accidental death, short-term disability, long-term disability, and flexible spending accounts. Additionally, the Company
offers a 401(k) retirement plan that enables eligible employees to save on a tax-deferred basis up to the limits allowable under
the Internal Revenue Code. The Company matches up to 4% of eligible employee contributions. Employee and employer
contributions are 100% vested immediately. Employer contributions to the 401(k) plan were $ 0.9 million, $0.6 million and
$0.5 for the years ended December 31, 2011, 2010 and 2009 respectively.
Green Plains Grain contributes to a defined benefit pension plan. Although benefits under the plan were frozen as of
January 1, 2009, Green Plains Grain remains obligated to ensure that the plan is funded in accordance with applicable
requirements. As of December 31, 2011, the assets of the plan were $5.6 million and liabilities of the plan were $6.3 million.
Excess plan liabilities over plan assets of $0.7 million and $0.2 million are included in other liabilities on the consolidated
F-34
F-34
balance sheets at December 31, 2011 and 2010, respectively. Minimum funding standards generally require a plan’s
underfunding to be made up over a seven-year period. The amount of underfunding could increase or decrease, based on
investment returns of the plan’s assets or changes in the assumed discount rate used to value benefit obligations.
17. RELATED PARTY TRANSACTIONS
Commercial Contracts
Three subsidiaries have executed separate financing agreements for equipment with AXIS Capital Inc. Gordon F. Glade,
President and Chief Executive Officer of AXIS Capital is a member of the Company’s Board of Directors. Totals of $0.5
million and $1.1 million were included in debt at December 31, 2011 and 2010, respectively, under these financing
arrangements. Payments, including principal and interest, totaled $0.7 million, $0.7 million and $0.6 million for the years
ended December 31, 2011, 2010 and 2009, respectively. The highest amount outstanding during the fiscal year ended
December 31, 2011 was $1.1 million and the weighted average interest rate for all financing agreements is 6.9%.
The Company has entered into ethanol purchase and sale agreements and throughput agreements with Center Oil
Company. Gary R. Parker, President and Chief Executive Officer of Center Oil, is a member of the Company’s Board of
Directors. During the year ended December 31, 2011, cash receipts from Center Oil totaled $146.9 million and payments to
Center Oil totaled $8.7 million on these contracts. During the year ended December 31, 2010, cash receipts from Center Oil
totaled $81.6 million and payments to Center Oil totaled $6.3 million on these contracts. During the year ended December
31, 2009, cash receipts and payments totaled $112.0 million and $15.5 million, respectively, on these contracts. The
Company had $1.0 million and $6.1 million included in accounts receivable at December 31, 2011 and 2010, respectively,
$69 thousand in outstanding payables at December 31, 2011 and no outstanding payables under these agreements at
December 31, 2010.
Aircraft Lease
The Company has entered into an agreement with Hoovestol, Inc. for the lease of an aircraft. Wayne B. Hoovestol,
President of Hoovestol Inc., is Chairman of the Company’s Board of Directors. The Company has agreed to pay $6,667 per
month for use of up to 100 hours per year of the aircraft. Any flight time in excess of 100 hours per year will incur additional
hourly-based charges. For the years ended December 31, 2011, 2010 and 2009, payments related to this lease totaled $149
thousand, $67 thousand and $6 thousand, respectively, and at December 31, 2011 and 2010, the Company did not have any
outstanding payables related to this lease.
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18. QUARTERLY FINANCIAL DATA (Unaudited)
The following table sets forth certain unaudited financial data for each of the quarters within the years ended December
31, 2011 and 2010. This information has been derived from the Company’s consolidated financial statements and in
management’s opinion, reflects all adjustments necessary for a fair presentation of the information for the quarters presented.
The operating results for any quarter are not necessarily indicative of results for any future period.
(Amounts in thousands, except per share amounts)
Revenues
Cost of goods sold
Operating income
Other expense
Income tax expense
Net income attributable to Green Plains
Basic earnings per share attributable to Green Plains
Diluted earnings per share attributable to Green Plains
Revenues
Cost of goods sold
Operating income
Other expense
Income tax expense
Net income attributable to Green Plains
Basic earnings per share attributable to Green Plains
Diluted earnings per share attributable to Green Plains
Three Months Ended
December 31,
2011
September 30,
2011
June 30,
2011
March 31,
2011
$
922,791
$
957,018
$
861,576
$
812,327
870,738
909,725
32,184
(9,428)
9,495
13,266
0.40
0.36
29,045
(9,665)
6,979
12,429
0.35
0.32
826,314
17,788
(9,917)
2,852
4,982
0.14
0.14
774,703
19,996
(8,104)
4,361
7,741
0.21
0.20
Three Months Ended
December 31,
2010
September 30,
2010
June 30,
2010
March 31,
2010
$
757,032
$
496,252
$
453,748
$
426,890
705,414
32,722
(8,450)
7,900
16,384
0.47
0.44
464,295
16,942
(6,445)
3,083
7,366
0.23
0.23
422,687
17,465
(6,060)
2,516
8,685
0.28
0.27
389,000
24,922
(5,045)
4,390
15,577
0.59
0.58
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Schedule I – Condensed Financial Information of the Registrant (Parent Company Only)
GREEN PLAINS RENEWABLE ENERGY, INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF BALANCE SHEET – PARENT COMPANY ONLY
(in thousands)
ASSETS
December 31,
2011
2010
Current assets
Cash and cash equivalents
Accounts receivable, including amounts from related parties of
$
71,547
$
114,565
$51 and $2,520, respectively
Prepaid expenses and other
Due from subsidiaries
Total current assets
Property and equipment, net
Investment in consolidated subsidiaries
Other assets
Total assets
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued liabilities
Due to subsidiaries
Current maturities of long-term debt
Total current liabilities
Long-term debt
Other liabilities
Total liabilities
Stockholders' equity
Common stock, $0.001 par value; 75,000,000 and 50,000,000 shares
authorized; 36,413,611 and 35,793,501 shares issued and
32,913,611 and 35,793,501 shares outstanding, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, 3,500,000 and 0 shares, respectively
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
202
698
-
72,447
4,425
526,470
13,121
616,463
1,600
7,808
8,947
204
18,559
92,028
764
111,351
36
440,469
95,761
(2,953)
(28,201)
505,112
616,463
$
$
$
2,556
555
16,066
133,742
688
443,231
9,318
586,979
1,223
7,016
-
492
8,731
90,000
-
98,731
36
431,289
57,343
(420)
-
488,248
586,979
See accompanying notes to the condensed financial statements.
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39 1 3/6/12 2:28 PM
GREEN PLAINS RENEWABLE ENERGY, INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF OPERATIONS – PARENT COMPANY ONLY
(in thousands)
Selling, general and administrative expenses
Operating income (loss)
Other income (expense)
Interest income
Interest expense
Other, net
Total other expense
Income before income taxes
Income tax benefit
Income before equity in earnings of subsidiaries
Equity in earnings of consolidated subsidiaries
Net income
Year Ended December 31,
2010
2011
2009
471
(471)
197
(5,484)
(779)
(6,066)
(6,537)
(2,462)
(4,075)
-
-
324
(1,154)
(169)
(999)
(999)
(976)
(23)
-
-
122
(36)
(277)
(191)
(191)
(34)
(157)
42,493
38,418
$
48,035
48,012
$
19,947
19,790
$
See accompanying notes to the condensed financial statements.
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GREEN PLAINS RENEWABLE ENERGY, INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF CASH FLOWS – PARENT COMPANY ONLY
(in thousands)
Year Ended December 31,
2010
2009
2011
Cash flows from operating activities:
Net cash provided (used) by operating activities
$
36,400
36,400
$
(10,616)
(10,616)
$
30,853
30,853
Cash flows from investing activities:
Purchases of property and equipment
Investment in subsidiaires
Issuance of notes receivable from subsidiaries,
net of payments received
Dividends received
Other, net
Net cash used by investing activities
Cash flows from financing activities:
Proceeds from the issuance of long-term debt
Payments of principal on long-term debt
Purchase of noncontrolling interests
Proceeds from issuance of common stock
Payments for repurchase of common stock
Other, net
Net cash provided (used) by financing activities
(4,239)
(32,651)
(9,011)
-
(4,162)
(50,063)
-
(535)
(3,125)
-
(28,201)
2,506
(29,355)
(189)
(46,459)
(8,550)
-
(665)
(55,863)
90,000
(500)
-
79,732
-
221
169,453
(458)
(63,288)
(500)
914
(1,173)
(64,505)
-
-
-
-
-
717
717
Net change in cash and equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
(43,018)
114,565
71,547
$
102,974
11,591
114,565
$
(32,935)
44,526
11,591
$
See accompanying notes to the condensed financial statements.
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GREEN PLAINS RENEWABLE ENERGY, INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS – PARENT COMPANY ONLY
1. BASIS OF PRESENTATION
Green Plains Renewable Energy, Inc., the Parent Company, is a holding company that conducts substantially all of its
business operations through its subsidiaries. As specified in certain of its subsidiaries’ debt agreements, there are restrictions
on the Parent Company’s ability to obtain funds from certain of its subsidiaries through dividends, loans or advances. See
Note 10 – Debt in the Notes to the Consolidated Financial Statements for further information. Accordingly, these condensed
financial statements have been presented on a “parent-only” basis. Under a parent-only presentation, the Parent Company’s
investments in its consolidated subsidiaries are presented under the equity method of accounting. These parent-only financial
statements should be read in conjunction with Green Plains Renewable Energy, Inc.’s audited consolidated financial
statements included elsewhere herein.
2. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Parent Company leases certain facilities under agreements that expire at various dates. For accounting purposes, rent
expense is based on a straight-line amortization of the total payments required over the lease term. The Parent Company
incurred lease expenses of $1.0 million and $1.2 million during the years ended December 31, 2011 and 2010, respectively.
Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in thousands):
Year Ending December 31,
Amount
2012
2013
2014
2015
2016
Thereafter
Total
$
$
847
725
751
763
788
247
4,121
Parent Guarantees
The various operating subsidiaries of the Parent Company enter into contracts as a routine part of their business
activities. Examples of these contracts include financing and lease arrangements, commodity purchase and sale agreements,
and agreements with vendors. In certain instances, the contractual obligations of such subsidiaries are guaranteed by, or
otherwise supported by the Parent Company. As of December 31, 2011, the Parent Company had $48.9 million in guarantees
of subsidiary contracts and indebtedness.
3. LONG-TERM DEBT
Parent Company only debt is comprised of future payments related to the convertible notes issued in November 2010,
notes payable and capital leases obligations.
Scheduled long-term debt repayments are as follows (in thousands):
Year Ending December 31,
Amount
2012
2013
2014
2015
2016
Thereafter
Total
$
$
204
1,839
188
90,000
-
-
92,231
F-41
F-41
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
WAYNE HOOVESTOL, Chairman
Owner/President
Hoovestol Inc./Lone Mountain Truck Leasing
JIM ANDERSON 1,2
Chief Operating Officer, Fertilizer
The Gavilon Group, LLC
JIM BARRY 2,3
Chief Investment Officer
Renewable Power Investment Team
BlackRock, Inc.
TODD BECKER
President and Chief Executive Officer
Green Plains Renewable Energy, Inc.
JAMES CROWLEY 1
Chairman and Managing Partner
Old Strategic, LLC
GORDON GLADE 1,3
President and Chief Executive Officer
AXIS Capital, Inc.
GARY PARKER 2,3
President and Chief Executive Officer
GP&W Inc. (d/b/a Center Oil Company)
BRIAN PETERSON 1
Agricultural Producer
ALAIN TREUER 2
Chairman and Chief Executive Officer
Tellac Reuert Partners SA
Member of: (1) Audit Committee, (2) Compensation Committee
and/or (3) Nominating Committee
TODD BECKER
President and Chief Executive Officer
JEFF BRIGGS
Chief Operating Officer
JERRY PETERS
Chief Financial Officer
STEVE BLEYL
Executive Vice President
Ethanol Marketing
PAUL KOLOMAYA
Executive Vice President
Commodity Finance
MICHELLE MAPES
Executive Vice President
General Counsel and Corporate Secretary
MIKE ORGAS
Executive Vice President
Commercial Operations
TOM PAULDINE
Executive Vice President
Human Resources
EDGAR SEWARD, JR.
Executive Vice President
Plant Operations
CORPORATE OFFICE
STOCK TRANSFER AGENT
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Green Plains Renewable Energy, Inc.
450 Regency Parkway, Suite 400
Omaha, NE 68114
402.884.8700
www.gpreinc.com
INVESTOR RELATIONS
JIM STARK
Vice President
Investor and Media Relations
jim.stark@gpreinc.com
Computershare Investor Services, LLC
P.O. Box 43078
Providence, RI 02940
800.962.4284 (U.S., Canada, Puerto Rico)
781.575.3120 (non U.S.)
web.queries@computershare.com
STOCK EXCHANGE LISTING
The NASDAQ Global Select Market
Stock Ticker Symbol: GPRE
450 Regency Parkway, Suite 400
Omaha, NE 68114
(402) 884-8700
www.gpreinc.com