Green Plains
Annual Report 2012

Plain-text annual report

HARVESTING ENERGY 2 0 1 2 A N N UA L R E P O R T Financial Highlights SEGMENT OPERATING INCOME 2009–2012 Our Vision of VALUE Value at Green Plains comes from our people. Our human capital enhances the value of our physical assets which makes us stronger every day. It takes dedicated, knowledgeable employees to navigate through the vol- atility inherent in commodity markets. We approach this with steadiness and market insight required to manage the various businesses that make up our value chain. 50% ETHANOL PRODUCTION 11% MARKETING AND DISTRIBUTION 23% AGRIBUSINESS 16% CORN OIL PRODUCTION 725.000 634.375 543.750 453.125 362.500 271.875 181.250 90.625 0.000 3600 3150 2700 2250 1800 1350 900 450 0 50 40 30 20 10 0 ETHANOL PRODUCTION (millions of gallons) TOTAL REVENUES (in millions) NET INCOME (in millions) 722 677 $3,554 $3,477 $48.0 544 379 $2,134 $1,306 $38.4 $19.8 $11.8 ’09 ’10 ’11 ’12 ’09 ’10 ’11 ’12 ’09 ’10 ’11 ’12 TODD BECKER President and Chief Executive Officer Dear Green Plains Shareholder: Green Plains is an enterprise that remains focused on harvesting energy out of the commodities we process. The U.S. ethanol industry is in a solid position to continue to reduce our depen- dence on foreign sources of oil, clean the air we breathe and produce feed, fuel and food for the world. Harvesting energy is what we do. A REVIEW OF OUR 2012 PERFORMANCE: In early June of 2012, it stopped raining in the corn belt. For the rest of the summer, rain was scarce and the Midwest suffered through the worst drought experienced in recent history. In spite of these conditions, corn producers harvested the eighth largest corn crop in U.S. history. The 2012 drought had an impact on prices of agricultural commodities around the globe and when combined with the end of the ethanol tax credit, the uncertainty in the U.S. economy and lower demand for motor fuels, the industry suffered through an extended compressed margin environment. We battled through this situation, keeping all nine of our ethanol plants running, producing 677 million gallons, or approximately 91% of our operating capacity, during the year. Over the last four years, we have grown organically and through acquisitions in order to reduce our reliance on ethanol production and become more diversified. Our non-ethanol businesses provided a significant contribution in 2012 as we generated a record $62 million in non-ethanol operating income, excluding the gain on the sale of agribusiness assets, from the corn oil produc- tion, marketing and distribution, and agribusiness segments. Operating income in our marketing and distribution segment grew 82% last year over 2011. This was a result of new initiatives and the discovery of opportu- nities that exist through the optionality of our platform. We redeployed railcar assets that we have under long-term leases as they had more value in moving other products. This initiative generated $7.5 million in operating income for 2012 and we believe it will generate about $15 million in 2013, temporarily replacing the operating income lost due to the sale of a significant portion of our agribusiness assets. We also opened our BlendStar unit train terminal in Birmingham, Alabama in the fourth quarter. Our initial customer response has been strong and we anticipate generating approximately $4 million in operating income in 2013 as a result of this investment. We are evaluating similar opportunities at our other BlendStar terminal locations. GREEN PLAINS 2012 ANNUAL REPORT PAGE 1 In the fourth quarter of 2012, we completed the sale of 12 grain elevators and the associated agronomy and petroleum business. Net cash proceeds from the sale were approximately $118 million and the buyer assumed $28 million of debt in the transaction. This sale significantly improved our balance sheet resulting in a $200 million positive swing when you include the reduction in working capital required to manage this business. I believe the transaction unlocked real value for our shareholders. I also want to be very clear that by no means should the sale of these assets be taken as an exit from U.S. agribusiness. We ended 2012 with the strongest financial position we have had in our young company’s history. We had $280 million in cash, or $9.30 in gross cash per share, and our ethanol plant debt was just under $400 million, or $0.54 per gallon of capacity. Our current liquidity position can provide Green Plains with significant flexibility to sustain a prolonged compressed ethanol margin environment and provide growth capital to continue our strategy to diversify the company. We firmly believe that ethanol is a permanent part of the fuel supply for the U.S. and a growing part of the world’s fuel usage. Ethanol is the best, most economical source of octane and oxygenate for transportation fuel. In 2009, we supported the Green Jobs Waiver Act put forward to the U.S. Environmental Protection Agency seeking approval to blend up to 15 percent “We ended 2012 with the strongest financial position we have had in our young company’s history.” ethanol in gasoline. It is our belief that the introduction of E15 to the market will provide the needed impetus to expand ethanol’s share of the consumer’s gas tank. OUR FUTURE: We are well positioned to take advantage of our situation in the marketplace. Everything we do at Green Plains is an evolution of our long-term strategy of monetizing all aspects of the value chain. We are still very committed to the handling of agricultural commodities. Last year, we tested a new grain storage strategy at three of our ethanol locations. We added one million bushels of flat storage at each plant. This turned out to be a great success as we originated first handle harvest corn that we were able to segregate and capture margins normally reserved for commercial grain companies. The storage build was executed at well below $1 per bushel of capital cost and it leverages our etha- nol plant’s infrastructure of roads, scales and people. In 2013, we plan to roll out this strategy broadly across our ethanol platform with the goal to add an additional 25 million bushels of capacity at multiple locations over the next two years. When combined with our existing storage, we will have 42 million bushels in total capacity. As a point of reference, we currently process 260 million bushels, or 7 million tons, of corn at our nine ethanol plants which gives us great confidence we can compete for harvest corn from local farmers. PAGE 2 Another major initiative that we are embarking on is to monetize our trade flows around our supply chain. We plan to hire between 10 and 20 physical cross country grain traders and marketers to leverage our logistics infrastructure. We want to be able to take advantage of all of the investments we have made over the last several years and stop allowing others to profit off of our trade flows. BioProcess Algae is making solid progress. We are expanding the footprint of this joint venture by building additional commercial scale 900-foot Grower Harvester™ reactors which are in final engineering and procurement phase, and we expect the completion of these reactors later this year. When completed and combined with our existing algae reactors, we expect our total annual capacity will be between 350 and 400 tons of dry wholesale algae, or approxi- mately one ton per day. There are multiple initiatives underway with various large strategic partners for joint development in the feed, food and pharma- ceutical sectors. As I have written to you in the past, risk management, operational excellence and operating our facilities in a safe manner have never wavered as our core fundamental values. This past year has shown that our business has been built to take a punch in the form of an extended compressed margin environment. As we enter 2013 with the best balance sheet position in our history, we will continue to manage all aspects around the commodities we process as well as carry on with diversifying Green Plains even more. We do this because our focus firmly remains on long-term shareholder value. If that means selling assets when values are high, we will do it. If that means heading down a new path into other businesses that allow us to utilize our expertise to earn a return for our shareholders, we will not hesitate to do that as well. Thank you for keeping up-to-date on our growth, progress and performance. Sincerely, TODD BECKER President andChief Executive Officer Forward-Looking Statement 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 2012 Form 10-K for matters to be considered in this regard. “ Everything we do at Green Plains is an evolution of our long-term strategy of monetizing all aspects of the value chain.” GREEN PLAINS 2012 ANNUAL REPORT PAGE 3 Our People Home to our team stretches across the Midwest from Minnesota to Texas and across Nebraska to Michigan. It is their hard work and dedication that make Green Plains the company it is today. John Felger Francisco Flores Nathan Forrester Scot Fredrickson Danny Frerichs Adam Gapinski Trista Gayer Kenneth Gilgen Rachelle Glancy Angela Glover Barry Gordon Ned Gordon Jason Hansbrough Paul Henderson Kevin Holcomb Frederick Hutson BJ Jacobs Kevin James Dawniel Johnson Andrew Jump Phillip Kleinknight Paul Kolomaya Lindsay Kousgaard Ken Kozlik Brent Lorensen Shanin Marinus James Mays Nathan Meyer Amanda Miller Michael Mingus Sharon Mize Richie Mooney William Morey Kevin Myers Shane Newgard Nathan Nowlin Courtney Obermann Mike Orgas Anthony Patterson Ryan Petersen Chet Pyawasit James Ragg, Jr. Sonja Rasmussen Kevin Reed Tammie Roberson Todd Rockwell Curtis Sain Brandon Schaaf James Schomaker Robert Sheridan Corey Siglow Tod Smith Frank Stockdale David Stover Shayna Stucky Patricia Sullivan Ryan Towne David Uptgraft Carl Vestal Tina Vinson Brian Wafford Karen Warnes Amos Wayman Jeffrey Whitacre Rodney Will Jimmy Young Adam Zelt Gene Zenk 2009 (90) Timothy Aldridge Steven Anderson Jay Bahl Tim Bandiera Jay Beaver Scott Becker Mark Bellairs Joseph Berner Gary Bialas Kelly Blair Glen Bogatz Phil Boggs Dwayne Braun Jeff Briggs Ryan Brock Heather Burnham William Chesnut Toria Clausen Chuck Collins Richard Collins Todd Condon William Cox Jennifer Cutler Andrew Dahlke Brian Douglas John Ellwood Michael Endorf Grant Enevoldsen Scott Erickson Dustin Fielder Bobby Foster Leland Foulk Leslie Glinsmann Robert Gregoski Thomas Gregoski Reid Hagstrom Mikole Henrickson Sandra Hulinsky Corbin Jensen Kirk Johnson Anthony Kaslon Shawn Koelling Susan Krohn Jonon Kusek Brian Larchick Richard Larson Larry Larson Roger Lawson Andrea Linberg Jeffrey Liss Jared Mandelkow Michelle Mapes Kenneth Meyer Galen Michalski Carri Miller Jennifer Murray Craig Nelson Harold Nelson Greg Nielsen Dawn Odell Tyler Oneel Ross Parrott Craig Quick Elizabeth Reilly Joan Rezac James Riley Solomon Robles Larry Royle Josh Sandmeier Mindi Sawyers Kevin Senkbile Jeffrey Sims Jenny Smith Jim Stark Rodney Steinke William Stewart David Supik William Teichert Robert Todsen Robert Visek Lee Werling Matthew Werner Jason Wert Marc Wharton Robert White Randall Whitt Lisa Woitalewicz Lawrence Wood Michael Yepes Brenda Zimbelman 2010 (106) Rachel Allan Michael Anderson Kayla Batts Stanley Beckey Jerry Bellinghausen Robert Brammer Michael Brooks Shane Burt Sivaraj Chokkaram Duane Cooper Rhonda Couch Donald Cox William Cross Adam Crotteau Sallie Deseranno Lorne Dowhy John Duitsman Brian Durham Jessica Eggers Lucas Erdman Joel Evans Sasha Forsen Dustin Frank Kevin Fredrickson Bradley Geyman Adam Gibbins Rick Gibbs Brian Grabianowski Chad Gray Brendan Greensky Lance Greenwood Charles Griffith Abbie Grimm Gregory Heuer Robert Hilliker Kerry Holland Robert Horton Bill Humphrey Julius Jacobs Lisa Johnson Todd Kamler Mark Kamper Melinda Kendall Leo King Ashley Kinstler Kenneth Knierim Dustin Kufeldt Deborah Laake Mary Lammers Garrett Landel Daniel Lappe Brian Latour Randy Lawson Karen Lubenow Brian Mains Cole Marlow Barbara Mathis Nathan Mcvay Keith Mills Brian Montefusco Scott Mosloski Mark Munyer Jason Murra Brett Negus Ronald Nyman Kevin O’Leary Dale Overstreet Daniel Parker Bryan Paul Cary Paulin Donovan Petersen Andrew Price John Priester Joseph Puckett Dean Reaume Heather Reid John Reischl Brad Richards Sandra Robertson James Roebbeke Michael Root Jeanne Ross- Bowerman Justin Rush William Sabatin Benjamin Sauke Cedrick Scates Gregory Schiefelbein Gregory Schlender Chad Settles Timothy Settles Shawn Sikora Justin Sorensen Donald Stace James Thomas Brandon Thomas Kathy Thomsen Marcus Valvick Richard Wadas William Welever Justin Welton Erin Wilcox Patrick Willy Clint Wilson Matthew Wilson Anthony Wittlieff Kendal Zwiefel 2011 (109) Ernest Adamec Lindsey Anderson Gregory Arthur Edward Asche Jess Baker Robyn Barnes David Beason Evan Beckner Bodey Bell Michael Benedict Erica Bonkosky- Montefusco David Borcyk Mike Browder Debora Bueltel Paul Burkey Cindy Cass Jason Clark David Clay Dustin Claypool Jesse Cochran Robert Coleman John Crockett Brandon Crowser Shannon Danker Henry Davis Shannon Dirkes Steven Duhn Lisa Eaton Justin Engelby William England Shannon Farmer Christopher Fowler Steven Frendin Lynn Fruchey Gary Gage Derek Graham Keith Gravert Katie Griffin Casey Grismer Jon Gutzmer Darren Hall Barry Halvorson Thomas Harm Anthony Hicks Paul Hicks Kevin Holtorf Gary Humbert Cole Jansen Eric Jaros Robert Johnson Jordan Jones Teresa Keefer Brandon Keeney Julia Kolar Amy Kopperud Brandon Kreps Todd Kvern Nathan Lakers Clayton Larmie Mark Larson Leroy Leth Paul Lindner Jeffrey Linn Dewayne Malleck Connie Martin Jonathan Martinson Douglas Melaas Paul Melton Carol Meyer William Miller Chelsea Minor Kevin Nickell Scott Norman Brandon Nusbaumer Harold Ogden Dean Osmondson Duane Palubicki Adam Papiernik Alisha Payson Glenn Petersen David Pierce William Pitts Gregory Pyawasit Daniel Riedel Amos Robles Daniel Roehl Jamy Rogers Gary Rugroden Suchir Saraf Joseph Schiltz Cory Sheda Ronald Shepardson Meera Singh Laura Smith Sean Steinke Stephanie Stelzer Drake Stinson Andrea Stork Laith Stundahl Kyle Sturm Jason Sytsma David Taylor Danny Thompson Kristi Tostenson Brad Velasquez Elizabeth Watters Keith Wetzel Kelli Wood Eric Zhang 2012 (69) Clare Ackroyd Todd Ashenfelter Kathy Austin Timothy Beaubien Alexander Bradley Christopher Bruce Klint Camp Kari Chesher Gary Cho Scott Clarke Juliann Cole Clark Cook Keith Cooper Clinton Criger Derrick Dahl Perry Dargitz Timothy Eckert Ryan Fajman Michael Finch Donna Fox Aaron Glidden Jason Gorney Cherish Gregory Jay Hagedorn Issac Helget Dan Hernandez James Hickok Justin Holden Dereck Houge Timothy Hudson Lucas James Bryon Jokumsen Michael Kearney Zachary Kemp Dale Krueger Gary Kruger Cameron Long Jasper Longhurst David Lueken Luis Maldonado Jeffery Malmberg Leonardo McClain Brian Milner Lance Morrow Jee Park Calder Parrott Ty Ragsdale Daniel Ristau Michael Robison Isaiah Robles Hankang Sheng Lance Shepherd Patrich Simpkins Daniel Simpson Allison Smalley Adam Smith Brandon Smith William Sorensen Jacob Starkey Edwin Steinke Cal Stoner David Thomas Tina Timberman Brady Tostenson Kelly Urbanovsky Charles Webb Sara Werner Ning Zhang Nicole Zielinski 2013 (24) Patrick Brennan Jeffrey Caldwell Ryan Carlson Wes Durham Russell Flesch Travis Frankford Jennifer Fuller Marcus Harrison Kevin Hatland Mark Hudak Brett Jacobs Walt Keeling Blane Konwinski Christopher Most James Perry Megan Pike Katie Privitera Dana Salmon Christopher Shockley Bikash Shrestha Todd Sonnigsen Paul Stevens Amanda Wahl Justin Young *Director 2005 (1) Brian Peterson* 2006 (4) Jim Barry* Wayne Hoovestol* Cory Scamman Alain Treuer* 2007 (35) Dan Abboud David Alexander Stanley Archer Todd Bain Joni Beason Todd Becker* Steve Bleyl Darla Bowers Leslie Bowers Todd Calfee Troy Clodfelter Douglas Craven Marian Durfey Brian Foote David Gaffney Lynn Gittins Gordon Glade* Timothy Heese Kent Hiser Kelly Hughes Emily Johnston Glen Kampschneider Curtis Kelley Joseph Martin Jerry Martin Albert Meister Shana Moore Eric Nelson Gary Parker* Jerry Peters Scott Schoonover Tony Shirley Chris Stanley David Stevens James Williams 2008 (102) Angela Akers David Alexander Jim Anderson* Shaun Bailey Daniel Baker Charles Baller IV Kimberly Barger Richard Batts Gary Beasley Shawna Bishop Keith Bittner Allisen Boone Larry Boots James Breeden Steven Briede Tracy Brown Spencer Call Chris Cavender Jason Cleveland Brian Constable James Crowley* Jonathan Daugherty Joshua Daugherty Jeremy Daugherty Steven Davis David Devoe Connie Ditto Allan Dotson Jacob Duke Mark Durr Jason Elzey Michael Engel Mark Favell Brent Fechter PAGE 4 This line represents final trim and will not print UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (cid:54) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 or (cid:133) 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 (cid:133) No (cid:54) 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 (cid:133) No (cid:54) 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 (cid:54) No (cid:133) 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 (cid:54) No (cid:133) 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. (cid:133). 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 (cid:133). Accelerated filer (cid:54). Non-accelerated filer (cid:133) Smaller reporting company (cid:133) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:133) No (cid:54) The aggregate market value of the Company’s voting common stock held by non-affiliates of the registrant as of June 29, 2012 (the last business day of the second quarter), based on the last sale price of the common stock on that date of $6.24, was approximately $155.9 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 11, 2013, there were 30,102,595 shares of the registrant’s common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive Proxy Statement for the 2013 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. This proof is printed at 96% of original size This line represents final trim and will not print 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 Page 1 13 25 25 26 26 27 28 30 46 48 48 49 50 51 51 51 51 51 52 59 This proof is printed at 96% of original size This line represents final trim and will not print 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 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 grain handling and storage operations, continuing through our ethanol, distillers grains and corn oil production operations and ending downstream with our ethanol marketing, distribution and blending facilities. Following is our visual presentation of the ethanol value chain: This proof is printed at 96% of original size 1 This line represents final trim and will not print Upstream Downstream Grain Handling and Storage Ethanol 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: (cid:120) Ethanol Production. We are North America’s fourth largest ethanol producer. We operate a total of nine ethanol plants in Indiana, Iowa, Michigan, Minnesota, Nebraska and Tennessee, with approximately 740 million gallons per year, or mmgy, of total ethanol production capacity. At capacity, these plants collectively consume approximately 265 million bushels of corn and produce approximately 2.1 million tons of distillers grains annually. (cid:120) Corn Oil Production. We operate corn oil extraction systems at all nine of our ethanol plants, with the capacity to produce approximately 155 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. (cid:120) Agribusiness. Within our bulk grain business, we have three grain elevators with approximately 5.8 million bushels of total storage capacity. Our ethanol production segment has approximately 11.0 million bushels of additional storage capacity at our ethanol plants. 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. (cid:120) 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 provide logistical services for ethanol and other commodities for third-party producers. Additionally, our wholly- owned subsidiary, BlendStar LLC, operates nine blending or terminaling facilities with approximately 846 mmgy of total throughput capacity in seven south central U.S. states. In December 2012, we sold 12 grain elevators located in northwestern Iowa and western Tennessee consisting of approximately 32.6 million bushels of our grain storage capacity and all of our agronomy and retail petroleum operations. We believe the sale of assets, previously included in our agribusiness segment, represented an opportunity to maximize shareholder value. We will continue to participate in grain handling and storage activities through our remaining grain handling assets and future grain storage expansion at or near our ethanol plants. 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 expand our marketing efforts by entering into new or renewal contracts with other ethanol producers. We also intend to pursue opportunities to develop or acquire additional grain elevators, specifically those located near our ethanol plants. We believe that owning additional grain handling and storage 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 also own 49% interest in BioProcess Algae LLC, which was formed to commercialize advanced photo-bioreactor technologies for growing and harvesting algal biomass. We continue our support of the BioProcess Algae joint venture. To optimize the value of our assets, we began utilizing a portion of our railcar fleet to transport crude oil for third parties and to lease railcars to other users. At the end of 2012, we had 632 railcars leased to other users. This proof is printed at 96% of original size 2 This line represents final trim and will not print 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: 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 handling and storage 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. We market and distribute approximately one billion gallons of internally-produced and third-party ethanol annually. 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 logistic, 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 Storage. We intend to pursue opportunities to develop or acquire additional grain elevators within the agribusiness segment, specifically those located near our ethanol plants. We also intend to increase the grain storage capacity at our ethanol plants to take advantage of our current infrastructure. We believe that owning additional grain storage in close proximity to our ethanol plants enables us to strengthen relationships with local corn This proof is printed at 96% of original size 3 This line represents final trim and will not print 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. 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 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 Advanced Technology for Growing and Harvesting Algae. 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 feedstocks for human nutrition, pharmaceutical applications, 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 1.8 billion gallons in 2001 to 13.3 billion gallons in 2012, according to the U.S. Energy Information Administration, or EIA. According to Ethanol Producer Magazine, as of December 31, 2012, there were 218 ethanol 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. We believe ethanol, as a proportion of total transportation fuels, will continue to experience consistent, to possibly increased, demand in the United States due to a continuing focus on reducing reliance on petroleum- based transportation fuels. Contributing factors include 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: (cid:120) 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. (cid:120) 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. The domestic gasoline market continues to evolve as refiners are producing more conventional blendstocks for oxygenate blending, or CBOB. According to data gathered by the EIA, CBOB represents approximately 85% of total conventional gasoline sold in 2012. CBOB is an 84 octane sub-grade gasoline, which requires ethanol or other octane sources to meet the minimum octane rating requirements for the U.S. gasoline market. Ethanol has become the primary additive used by refiners to increase octane levels. (cid:120) 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 2001 to 2012, ethanol as a component of the United States gasoline supply This proof is printed at 96% of original size 4 This line represents final trim and will not print has grown from 1.4% to 10.0%. In 2012 alone, ethanol replaced the need for approximately 316 million barrels of oil in the United States. (cid:120) E15 Blending Waiver. Through a series of decisions beginning in October 2010, the U.S. Environmental Protection Agency, or EPA, has granted a waiver for the use of up to 15% ethanol blended with gasoline, or E15, in model year 2001 and newer passenger vehicles, including cars, SUVs and light pickup trucks. In June 2012, the EPA gave final approval for the sale and use of E15 ethanol blends. The nation’s first retail E15 ethanol blends were sold in July 2012. As of December 31, 2012, the EPA had reported 79 fuel manufacturers that were registered to sell E15. (cid:120) 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 II, 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. (cid:120) Net 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 EIA, U.S. ethanol exports in 2011 and 2012 of approximately 1.2 billion gallons and 725 million gallons, respectively, exceeded imports of 174 million gallons and 533 million gallons, respectively. 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 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 Start or Acquisition Date Technology Sept. 2008 July 2009 ICM ICM Mar. 2011 Delta-T Oct. 2010 ICM/Lurgi Nov. 2008 July 2009 ICM ICM Oct. 2010 Delta-T 114 93 230 170 138 Land Owned (acres) 420 40 On-Site Corn Storage Capacity (bushels) 2,040,000 1,200,000 On-Site Ethanol Storage Capacity (gallons) 2,800,000 2,250,000 1,325,000 1,410,000 2,100,000 400,000 1,525,000 500,000 525,000 2,000,000 2,500,000 2,894,000 1,500,000 1,239,000 1,500,000 1,226,000 65 60 (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. Aug. 2007 July 2008 Delta-T ICM 123 238 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. This proof is printed at 96% of original size 5 This line represents final trim and will not print 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 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 September 2013 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. 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. This proof is printed at 96% of original size 6 This line represents final trim and will not print 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. Much of the water used in an ethanol plant is recycled back into the 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 bulk grain business. We 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 buy bulk grain, primarily corn 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. These bulk grain commodities are readily traded on commodity exchanges and inventory values are affected by market changes and spreads. In an 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. We believe our agribusiness operations increase our operational efficiency, reduce commodity price and supply risks, and diversify our revenue streams. Seasonality is present within our agribusiness operations. The fall harvest period generally results in higher revenues and stronger financial results for this segment during the fourth quarter. 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 provide logistical services for ethanol and other commodities for third-party ethanol producers. Additionally, our wholly-owned subsidiary, BlendStar LLC, operates nine blending or terminaling facilities, with approximately 846 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 a third-party producer 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 This proof is printed at 96% of original size 7 This line represents final trim and will not print 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 ship ethanol and distillers grains throughout the United States. Our railcar fleet is comprised of approximately 1,626 leased tank cars for the transportation of ethanol and approximately 719 leased hopper cars for the transportation of distillers grains. The lease contract terms range from approximately 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. To optimize the value of our assets, we began utilizing a portion of our railcar fleet to transport crude oil for third parties and to lease railcars to other users. At December 31, 2012, we had 632 railcars leased to other users. 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 7.6 million gallons and throughput capacity of approximately 846 mmgy. The BlendStar facilities are summarized below: Facility Location Birmingham, Alabama - Unit Train Terminal Birmingham, Alabama - Other Little Rock, Arkansas Louisville, Kentucky Bossier City, Louisiana Collins, Mississippi Oklahoma City, Oklahoma Tulsa, Oklahoma Nashville, Tennessee Storage Capacity (gallons) 6,720,000 120,000 30,000 60,000 180,000 180,000 150,000 - 160,000 Throughput Capacity (mmgy) 300 72 36 30 60 180 84 24 60 In December 2012, we completed construction and began operations at a 96-car unit train terminal in Birmingham, Alabama. The new terminal is served by the BNSF Railway and has a throughput capacity of 300 million gallons of ethanol annually. This proof is printed at 96% of original size 8 This line represents final trim and will not print 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 sell 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. Recent Acquisition and Disposition Activity 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 were included in our agribusiness segment prior to their sale in December 2012. In October 2010, we acquired Global Ethanol, LLC, which owned ethanol plants in Lakota, Iowa and Riga, Michigan. These plants, which are part of our ethanol production segment and have production capacity totaling approximately 160 mmgy, 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, which is part of our ethanol production segment, has production capacity of approximately 60 mmgy, adding to our ethanol, distillers grains and corn oil production. We are constructing 0.6 million bushels of additional grain storage capacity at the plant with completion expected in 2013. 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. In December 2012, we sold 12 grain elevators located in northwestern Iowa and western Tennessee. The sale of assets, previously included in our agribusiness segment, consisted of approximately 32.6 million bushels of our grain storage capacity and all of our agronomy and retail petroleum operations. This proof is printed at 96% of original size 9 This line represents final trim and will not print BioProcess Algae Joint Venture The BioProcess Algae joint venture is focused on developing technology to grow and harvest algae, which consume carbon dioxide, in commercially viable quantities. Construction of Phase II next to our Shenandoah ethanol plant was completed and the Grower Harvesters™ bioreactors were successfully started up in January 2011. Phase II allowed for verification of growth rates, energy balances and operating expenses, which are considered to be some of the key steps to commercialization. In April 2012, we increased our ownership of BioProcess Algae to 49% pursuant to our purchase of ownership interests previously held by NTR plc. In June 2012, BioProcess Algae and a subsidiary of Bioseutica BV, a leading producer of highly purified pharmaceutical-grade Omega-3 fatty acids, entered into a commercial supply agreement for the production of EPA-rich Omega-3 oils for use in concentrated EPA products for nutritional and/or pharmaceutical applications. BioProcess Algae continues to explore additional potential algae markets including animal feeds, nutraceuticals and biofuels. BioProcess Algae initiated Phase III and broke ground on a five-acre algae farm at the Shenandoah ethanol plant in the first quarter of 2012. Construction is complete on approximately three acres of the algae farm and the facilities were inoculated with algae in October 2012. Construction of Phase IV, involving an additional 4.25 acres of reactors and a new downstream processing facility has begun with completion expected in September 2013. If we and the other BioProcess Algae members determine that the venture can achieve the desired economic performance from Phases III and IV, a larger build-out, possibly as large as 200 to 400 acres, of Grower Harvester reactors at the Shenandoah ethanol plant will be considered. Such a build-out may be completed in stages and could take up to two years 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. 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 2012, 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, 2012, 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. 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, 2012, the states of Iowa, Indiana, Michigan, Minnesota, Nebraska and Tennessee had a total of 110 operational ethanol plants. The state of Iowa had 42 operational 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 operational 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 have developed, or are developing, increased foreign ethanol production capacities. Brazil is the world’s second largest ethanol producer. Brazil’s ethanol production is sugarcane based, as opposed to corn based, and has historically been less expensive to produce. Under RFS II, certain parties were obligated to meet an advanced biofuel standard calling for 2.0 billion gallons of biofuels in 2012. During 2012, sugarcane ethanol imported from Brazil totaling approximately 530 million gallons has been one of the most economical means for obligated parties to meet this standard. Other Competition Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development by ethanol This proof is printed at 96% of original size 10 This line represents final trim and will not print 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 fuels. 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. Passed in 2007 as part of the Energy Independence and Security Act, RFS II 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 II 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 II to include ethanol and other fuels produced from fossil fuels like coal and natural gas. Due to drought conditions, the possibility of further legislation aimed at reducing or eliminating the renewable fuel use required by RFS II may also be heightened. Under the provisions of the Energy Independence and Security Act, the EPA has the authority to waive the mandated RFS II requirements in whole or in part. To grant the waiver, the EPA administrator must determine, in consultation with the Secretaries of Agriculture and Energy, that one of two conditions has been met: (1) there is inadequate domestic renewable fuel supply or (2) implementation of the requirement would severely harm the economy or environment of a state, region or the United States. In the third quarter of 2012, several waiver requests were filed with the EPA based on drought conditions, which were subsequently denied by the EPA. 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. In June 2012, the EPA gave final approval for the sale and use of E15 ethanol blends. The nation’s first retail E15 ethanol blends were sold in July 2012. According to the EPA, as of December 31, 2012, 79 fuel manufacturers were registered to sell E15. Approximately 72% of the passenger vehicles in service would be eligible to use E15. 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. In addition to these federal standards, many states have taken other steps to encourage ethanol consumption including tax credits, mandated blend rates and subsidies. 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 some of the details have been addressed in CFTC regulations, others remain and at this time we do not anticipate any material impact to our risk management strategy. This proof is printed at 96% of original size 11 This line represents final trim and will not print 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 II. We believe 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 II 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 average carbon intensity of gasoline and diesel transportation fuels from 2010 to 2020. After a series of rulings that temporarily prevented CARB from enforcing these regulations, the State of California Office of Administrative Law approved the LCFS on November 26, 2012, and revised LCFS regulations take effect in January 2013. An Indirect Land Use Change, or ILUC, component is included in this lifecycle GHG emissions calculation which may have an adverse impact on the market for corn-based ethanol in California. CARB has stated that in 2013 it plans to revise the ILUC and the annual standards related to ethanol that is produced from corn or sugarcane to reflect the lower carbon intensity of ethanol in the 10% blends used during the 2010 baseline year. 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, 2012, we had 529 full-time, part-time and temporary or seasonal employees. At that date, we employed 86 people, including 42 employees of our subsidiary, Green Plains Trade Group LLC, at our corporate office in Omaha, 20 employees at our agribusiness operations, 6 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. This proof is printed at 96% of original size 12 This line represents final trim and will not print 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. 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 This proof is printed at 96% of original size 13 This line represents final trim and will not print 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 adverse weather, including but not limited to drought. 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. Market prices for ethanol produced in the U.S. are also influenced by the supply of and demand for imported ethanol. Imported ethanol is not subject to an import tariff and under RFS II sugarcane ethanol imported from Brazil has been one of the most economical means for obligated parties to meet an advanced biofuel standard. 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 have been correlated with prices 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. If the price for corn oil fluctuates, it may have an adverse effect on our business. Our existing debt arrangements require us to abide by certain restrictive loan covenants that may hinder our ability to operate and reduce our profitability. This proof is printed at 96% of original size 14 This line represents final trim and will not print 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, 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. 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. 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. 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: (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) 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 (cid:120) 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. 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 This proof is printed at 96% of original size 15 This line represents final trim and will not print 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 II mandate level for conventional biofuels for 2013 of 13.8 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 II mandate. Any significant increase in production capacity beyond the RFS II mandated level might have an adverse impact on ethanol prices. Additionally, under the provisions of the Energy Independence and Security Act, the EPA has the authority to waive the mandated RFS II requirements in whole or in part. To grant the waiver, the EPA administrator must determine, in consultation with the Secretaries of Agriculture and Energy, that one of two conditions has been met: (1) there is inadequate domestic renewable fuel supply or (2) implementation of the requirement would severely harm the economy or environment of a state, region or the United States. In the third quarter of 2012, the governors of North Carolina and Arkansas, as well as a number of livestock groups, filed waiver requests with the EPA based on drought conditions. In November 2012, the agency decided not to grant the requested waiver. Our operations could be adversely impacted if a waiver is requested and granted in the future. 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 the RFS II mandate 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 II mandate to include ethanol and other fuels produced from fossil fuels like coal and natural gas. Due to drought conditions in 2012, the possibility of further legislation aimed at reducing or eliminating the renewable fuel use required by the RFS II mandate may also be heightened. We believe the RFS II mandate 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. 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 or regulations 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, consumer acceptance and overall consumer demand for transportation fuel, 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. This proof is printed at 96% of original size 16 This line represents final trim and will not print 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. Also, the demand for ethanol is affected by the overall demand for transportation fuel, which peaked in 2007 and has been declining steadily since then. Demand for transportation fuel is affected by the number of miles traveled by consumers and the fuel economy of vehicles. Market acceptance of E15 may partially offset the effects of decreases in transportation fuel demand. A reduction in the 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 E15 and E85 fuels 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 RFS II 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. This proof is printed at 96% of original size 17 This line represents final trim and will not print 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 II. We believe 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 GHG emissions from a 2005 baseline measurement for the ethanol over current capacity to be eligible for the RFS II mandate. The EPA issued its final rule on GHG emissions from stationary sources under the Clean Air Act in May 2010. Separately, CARB has adopted a LCFS requiring a 10% reduction in average carbon intensity of gasoline and diesel transportation fuels from 2010 to 2020. After a series of rulings that temporarily prevented CARB from enforcing these regulations, the State of California Office of Administrative Law approved the LCFS on November 26, 2012, and revised LCFS regulations take effect in January 2013. An ILUC component is included in this lifecycle GHG emissions calculation which may have an adverse impact on the market for corn-based ethanol in California. CARB has stated that in 2013 it plans to revise the ILUC and the annual standards related to ethanol that is produced from corn or sugarcane to reflect the lower carbon intensity of ethanol in the 10% blends used during the 2010 baseline year. These federal and state regulations 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. Our agribusiness operations are 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. A portion of our grain sales may be to exporters. Therefore, 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. Fixed-price purchase obligations and carrying grain inventories 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. Fluctuating costs of grain inventory could decrease operating margins and adversely affect profitability of the agribusiness segment. 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, This proof is printed at 96% of original size 18 This line represents final trim and will not print 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 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, 2012, our total debt was $663.3 million. Our level of debt could have significant consequences to our shareholders, including the following: (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) 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 This proof is printed at 96% of original size 19 This line represents final trim and will not print past five 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 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 five 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, 2012, the top ten domestic producers accounted for approximately 48.7% 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 This proof is printed at 96% of original size 20 This line represents final trim and will not print the world. Brazil’s ethanol production is sugarcane based, as opposed to corn based, and, depending on feedstock prices, may be less expensive to produce. Under RFS II, certain parties were obligated to meet an advanced biofuel standard calling for 2.0 billion gallons of biofuels in 2012. During 2012, sugarcane ethanol imported from Brazil has been one of the most economical means for obligated parties to meet this standard. The advanced biofuel standard increases to 2.75 billion gallons for 2013. Other foreign producers may be able to produce ethanol at lower input costs, including costs of feedstock, facilities and personnel, than we can. 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 49% 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 high-quality feedstocks for human nutrition, pharmaceutical applications, animal feed and biofuels, 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 that emit carbon dioxide, including ethanol plants. 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 incurred operating losses from 2006 to 2008, as well as during the first three quarters of 2012, and may incur operating losses in the future, which could be substantial. Although we have had periods of sustained profitability, we may not be able to maintain 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. This proof is printed at 96% of original size 21 This line represents final trim and will not print 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 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 or purchase ethanol, distillers grains or corn oil that does not meet the specifications defined by our 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 This proof is printed at 96% of original size 22 This line represents final trim and will not print 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 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 agreement, we purchase all of a third-party producer’s ethanol production. In turn, we sell the ethanol in various markets for future deliveries. Under this marketing agreement, the third-party producer is not obligated to produce any minimum amount of ethanol and we cannot assure you that we will receive the full amount of ethanol that this third-party plant is expected to produce. The interruption or curtailment of production by this third-party producer for any reason could cause us to be unable to deliver quantities of ethanol sold under the contract. As a result, we may be forced to purchase replacement quantities of ethanol at higher prices to fulfill this contractual obligation. 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 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 facility 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 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. This proof is printed at 96% of original size 23 This line represents final trim and will not print 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. 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: (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) 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 (cid:120) 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. 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: This proof is printed at 96% of original size 24 This line represents final trim and will not print (cid:120) a classified Board of Directors pursuant to which our directors are divided into three classes, with three-year staggered terms; (cid:120) 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; (cid:120) (cid:120) (cid:120) 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. 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 detailed in our discussion of the ethanol production segment, we own a total of 1,566 acres of land in nine locations with a combined plant production capacity of 740 mmgy. We also lease 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. This proof is printed at 96% of original size 25 This line represents final trim and will not print Agribusiness Segment We 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. We also own approximately 5.1 acres of land in Hopkins, Missouri with licensed grain storage capacity of approximately 2.0 million bushels. We own 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 will be adequate to accommodate our current needs, as well as potential expansion, at those sites. 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 in seven south central U.S. 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. We are currently involved in litigation that has arisen in the ordinary course of business; however, we do not believe that any of this litigation will have a material adverse effect on our financial position, results of operations or cash flows. Item 4. Mine Safety Disclosures. Not applicable. This proof is printed at 96% of original size 26 This line represents final trim and will not print 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, 2012 Three months ended December 31, 2012 (1) Three months ended September 30, 2012 Three months ended June 30, 2012 Three months ended March 31, 2012 Year Ended December 31, 2011 Three months ended December 31, 2011 Three months ended September 30, 2011 Three months ended June 30, 2011 Three months ended March 31, 2011 (1) The closing price of our common stock on December 31, 2012 was $7.91. High Low $ $ 8.42 6.50 10.95 12.00 High 11.48 12.06 12.80 13.00 $ $ 5.59 3.57 6.13 9.60 Low 8.34 9.06 9.87 10.97 Holders of Record As of December 31, 2012, as reported to us by our transfer agent, there were 2,821 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 approximately 22.5 million 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 generally surrender shares upon the vesting of restricted stock grants to satisfy payroll tax withholding obligations. No shares were surrendered during the fourth quarter of 2012. On March 9, 2012, we repurchased 3.7 million shares of common stock for $37.2 million from a subsidiary of NTR plc, which was previously our largest 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 13-month period ended December 31, 2008, and for the years ended December 31, 2009, 2010, 2011 and 2012. The graph assumes that the value of the investment in our common stock and each index was $100 at November 30, 2007, and that all dividends were reinvested. This proof is printed at 96% of original size 27 This line represents final trim and will not print Green Plains Renewable Energy, NASDAQ Composite NASDAQ Clean Edge Green $ 11/07 100.00 $ 100.00 100.00 12/08 18.40 $ 58.69 31.44 12/09 148.70 $ 81.77 104.28 12/10 112.60 $ 96.75 95.97 12/11 12/12 97.60 $ 98.05 40.43 79.10 110.14 35.76 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, 2012, 2011 and 2010, and the balance sheet data as of December 31, 2012 and 2011 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 year ended December 31, 2009 and the nine-month transition period ended December 31, 2008, and the balance sheet data as of December 31, 2010, December 31, 2009 and December 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. This proof is printed at 96% of original size 28 This line represents final trim and will not print Year Ended December 31, 2012 2011 2010 2009 Nine-Month Transition Period December 2008 (1) $ 3,476,870 $ 3,553,712 $ 2,133,922 $ 1,305,793 $ 3,380,099 96,771 (79,019) 47,133 64,885 (39,729) 11,763 11,779 3,381,480 172,232 (73,219) - 99,013 (37,114) 38,213 38,418 1,981,396 152,526 (60,475) - 92,051 (26,000) 48,162 48,012 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) $ $ 0.39 $ 0.39 $ 1.09 $ 1.01 $ 1.55 $ 1.51 $ 0.79 $ 0.79 $ (0.56) (0.56) Statement of Operations Data: (in thousands, except per share information) Revenues Cost of goods sold Gross profit Selling, general and administrative expenses Gain on disposal of assets (2) Operating income (loss) Total other 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) (3) $ 115,505 $ 148,620 $ 129,550 $ 67,707 $ 601 Balance Sheet Data (in thousands): Cash and cash equivalents Current assets Total assets Current liabilities Long-term debt Total liabilities Stockholders' equity $ 2012 254,289 $ 568,035 1,349,734 432,384 362,549 859,232 490,502 2011 174,988 $ 576,420 1,420,828 360,965 493,407 915,471 505,357 December 31, 2010 233,205 $ 606,686 1,397,779 342,503 527,900 900,137 497,642 2009 89,779 $ 252,446 878,081 174,332 388,573 567,373 310,708 2008 62,294 190,797 693,263 108,446 299,011 413,278 279,985 (1) The 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 reflect the historical financial results of VBV and its subsidiaries for this period, 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) In December 2012, we sold 12 grain elevators located in northwestern Iowa and western Tennessee consisting of approximately 32.6 million bushels of our grain storage capacity and all of our agronomy and retail petroleum operations. (3) Management uses earnings before interest, income taxes, noncontrolling interests, depreciation and amortization, or EBITDA, to compare the financial performance of our business segments and to internally manage those segments. Management believes that EBITDA provides useful information to investors as a measure of comparison with peer and other companies. EBITDA 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. EBITDA calculations may vary from company to company. Accordingly, our computation of EBITDA may not be comparable with a similarly titled measure of another company. The following sets forth the reconciliation of net income to EBITDA for the periods indicated (in thousands): This proof is printed at 96% of original size 29 This line represents final trim and will not print Year Ended December 31, Nine-Month Transition Period December Net income (loss) attributable to Green Plains Net income (loss) attributable to noncontrolling interests Interest expense Income tax expense Depreciation and amortization EBITDA 2012 2011 2010 2009 2008 (1) $ 11,779 $ 38,418 $ 48,012 $ 19,790 $ (6,897) (16) 37,521 13,393 52,828 115,505 $ (205) 36,645 23,686 50,076 148,620 $ 150 26,144 17,889 37,355 129,550 $ 364 18,827 91 28,635 67,707 $ $ (1,152) 4,119 - 4,531 601 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 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 grain handling operations, continuing through our approximately 740 mmgy, of ethanol production capacity and ending downstream with our ethanol marketing, distribution and blending facilities. 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 were included in our agribusiness segment prior to their sale in December 2012. 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. 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. In June 2011, we acquired 2.0 million bushels of grain storage capacity located in Hopkins, Missouri. The grain elevator 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 included in our agribusiness segment. This proof is printed at 96% of original size 30 This line represents final trim and will not print In December 2012, we sold 12 grain elevators located in northwestern Iowa and western Tennessee consisting of approximately 32.6 million bushels of our grain storage capacity and all of our agronomy and retail petroleum operations. We believe the sale of assets represented an opportunity to maximize shareholder value. Revenues and gross profit generated by the sold operations represented approximately 91% and 93%, respectively, of 2012 agribusiness segment results. We will continue to participate in grain handling and storage activities through our remaining grain handling assets and future grain storage expansion at or near our ethanol plants. Over the next two years, we plan to realign our agribusiness operations by adding between five and ten million bushels of grain storage capacity per year. These assets will be located around our ethanol plants to take advantage of our current infrastructure and enhance our corn origination and trading capabilities. Our management reviews our operations in four separate operating segments: (cid:120) 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 consume approximately 265 million bushels of corn and produce approximately 2.1 million tons of distillers grains annually. (cid:120) Corn Oil Production. We operate corn oil extraction systems at all nine of our ethanol plants, with the capacity to produce approximately 155 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. (cid:120) Agribusiness. Within our bulk grain business, we have three grain elevators with approximately 5.8 million bushels of total storage capacity. Our ethanol production segment has approximately 11.0 million bushels of additional storage capacity at our ethanol plants. 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. (cid:120) 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 provide logistical services for ethanol and other commodities for third-party producers. Additionally, our wholly- owned subsidiary, BlendStar LLC, operates nine blending or terminaling facilities with approximately 846 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 construct additional grain storage capacity or acquire additional grain elevators, specifically those located near our ethanol plants. We believe that owning additional grain handling and storage 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 also own 49% interest in BioProcess Algae LLC, which was formed to commercialize advanced photo-bioreactor technologies for growing and harvesting algal biomass. We continue our support of the BioProcess Algae joint venture. 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 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 price risks. This proof is printed at 96% of original size 31 This line represents final trim and will not print A combination of factors resulted in compressed ethanol margins in 2012. The ethanol industry increased production in the fourth quarter of 2011 to meet demand from ethanol blenders seeking to take advantage of the volumetric ethanol excise tax credit prior to its expiration on December 31, 2011. As a result, ethanol stocks at the end of 2011 exceeded normal market levels which caused ethanol margins to compress to near break-even levels in the first half of 2012. Additionally, corn prices traded to all-time highs during 2012 due to drought conditions in the midwestern region of the United States. According to the Energy Information Administration, or EIA, as an industry, ethanol producers have responded to these factors by reducing production by approximately 4.9% in 2012 compared to 2011. EIA data also show ethanol imports increased from 174 million gallons in 2011 to 533 million gallons in 2012. Under the Renewable Fuels Standard II, or RFS II, certain parties are obligated to blend, in the aggregate, 2.0 billion gallons of advanced biofuels in 2012. During 2012, sugarcane ethanol imported from Brazil, which totaled approximately 530 million gallons, has been one of the most economical means for obligated parties to meet this standard. We believe the Brazilian government may increase the required percentage of ethanol in vehicle fuel sold in Brazil to 25 percent (from 20 percent) as sugarcane production rises, which would likely limit ethanol exports from Brazil into the U.S. Further, during 2012, corn prices traded to all-time highs due to drought conditions in the midwestern region of the U.S. resulting in reduced demand levels. Consumers of corn, including ethanol producers, are competing for reduced domestic supplies. These factors, in combination with reduced demand for motor fuels in the U.S. resulting from higher gasoline prices and more fuel-efficient vehicles, have adversely affected the margin environment in 2012. Also, the Company experienced a decline in market capitalization as its stock price reached a 52-week low in the third quarter of 2012. As a result of these two adverse factors, we performed an interim review of goodwill for potential impairment as of September 30, 2012 for our ethanol production reporting units. As a result of this interim review, we determined that the estimated fair value of each of these reporting units substantially exceeded each of their respective carrying values and no goodwill impairment charge was deemed to be required. The margin environment in 2013 will likely be affected by these factors as well. We believe that U.S. ethanol production levels will continue to adjust to supply and demand factors for ethanol and corn. Extended periods of depressed ethanol margins or market capitalization could lead to potential impairment of certain assets, including goodwill, in the future, which would adversely affect our operating results and certain leverage ratios for lending purposes. There may be periods of time that, due to the variability of commodity prices and compressed margins, we reduce or cease ethanol production operations at certain of our ethanol plants. In 2012, we reduced production volumes at several of our ethanol plants in direct response to unfavorable operating margins, resulting in an aggregate reduction of approximately 9% of our total capacity. 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, RFS II 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 II 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 II to include ethanol and other fuels produced from fossil fuels like coal and natural gas. Due to drought conditions, the possibility of further legislation aimed at reducing or eliminating the renewable fuel use required by RFS II may also be heightened. Under the provisions of the Energy Independence and Security Act, the EPA has the authority to waive the mandated RFS II requirements in whole or in part. To grant the waiver, the EPA administrator must determine, in consultation with the Secretaries of Agriculture and Energy, that one of two conditions has been met: (1) there is inadequate domestic renewable fuel supply or (2) implementation of the requirement would severely harm the economy or environment of a state, region or the United States. In the third quarter of 2012, several waiver requests were filed with the EPA based on drought conditions, which were subsequently denied by the EPA. To further drive 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. Through a series of decisions beginning in October 2010, the EPA has granted a waiver for the use of E15 for use in model year 2001 and newer passenger vehicles, including cars, SUVs, This proof is printed at 96% of original size 32 This line represents final trim and will not print and light pickup trucks. In June 2012, the EPA gave final approval for the sale and use of E15 ethanol blends. The nation’s first retail E15 ethanol blends were sold in July 2012. According to the EPA, as of December 31, 2012, 79 fuel manufacturers were registered to sell E15. Approximately 72% of the passenger vehicles in service are eligible to use E15. Industry Fundamentals. The ethanol industry is supported by a number of market fundamentals that drive its long-term outlook and extend beyond the short-term margin environment. Following the EPA’s approval, the industry is working to broadly introduce E15 into the retail fuel market. The RFS II mandate increased to 13.8 billion gallons for 2013, 600 million gallons over the mandated volume in 2012, and continues to increase each year through 2015; however, the EPA has the authority to waive the mandate in whole or in part. The domestic gasoline market continues to evolve as 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. The demand for ethanol is also affected by the overall demand for transportation fuel, which peaked in 2007 and has been declining steadily since then. Demand for transportation fuel is affected by the number of miles traveled by consumers and the fuel economy of vehicles. Market acceptance of E15 may partially offset the effects of this decrease. Consumer acceptance of E15 and E85 fuels is needed before ethanol can achieve any significant growth in market share. In addition, ethanol export markets, although affected by competition from other ethanol exporters, mainly from Brazil, are expected to remain active in 2013. Overall, the industry is operating at the mandated levels and ethanol prices have continued to remain at a large discount to gasoline, providing blenders and refiners with a strong economic incentive to blend. 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, depreciation of property and equipment, impairment of long-lived assets and goodwill, derivative financial instruments, and accounting for income taxes, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements. 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 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. This proof is printed at 96% of original size 33 This line represents final trim and will not print 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. 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 assess the qualitative factors of goodwill 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 a two-step goodwill impairment test. 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. 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. This proof is printed at 96% of original size 34 This line represents final trim and will not print 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 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 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, or reversal of, 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, 2012, we adopted the third phase of amended guidance in ASC Topic 820, Fair Value Measurements and Disclosures. 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. We currently are not impacted by the additional disclosure requirements as we do not have any recurring Level 3 measurements. This proof is printed at 96% of original size 35 This line represents final trim and will not print Effective January 1, 2012, we adopted the amended guidance in ASC Topic 220, Comprehensive Income. The amended guidance 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. We elected to present net income and other comprehensive income in two separate but consecutive statements. The updated presentation, which has been implemented retroactively for all comparable periods presented, did not impact our financial position or results of operations. Effective January 1, 2012, we adopted 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 amended guidance did not impact our financial position or results of operations. Effective January 1, 2013, we will adopt the amended guidance in ASC Topic 210, Balance Sheet. The amended guidance addresses disclosure of offsetting financial assets and liabilities. It requires entities to add disclosures showing both gross and net information about instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. The updated disclosures will be implemented retrospectively and will not impact our financial position or results of operations. 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 is 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, the sale of ethanol we market for third-party ethanol plants and the sale of other commodities purchased in the open market 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 in these segments is mainly affected by the cost of corn, natural gas, purchased distillers grains and transportation. In the ethanol production segment, 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 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. 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. This proof is printed at 96% of original size 36 This line represents final trim and will not print Other Income (Expense). Other income (expense) includes interest earned, interest expense 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: (cid:120) April 2010 (cid:120) October 2010 (cid:120) October 2010 (cid:120) March 2011 (cid:120) June 2011 (cid:120) July 2011 (cid:120) January 2012 (cid:120) December 2012 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 Green Plains Grain Company sold 12 grain elevators located in northwestern Iowa and western Tennessee and all of its agronomy and retail petroleum operations 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. The year ended December 31, 2012 includes a full year of operations at our grain elevators in Hopkins, Missouri and St. Edwards, Nebraska as well as a full year of operations with BlendStar as a wholly-owned subsidiary. Also, the year ended December 31, 2012 only included eleven months of operations at our Tennessee and Iowa agribusiness operations that were divested in December 2012. 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 handling and storage, 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. This proof is printed at 96% of original size 37 This line represents final trim and will not print The table below reflects selected operating segment financial information for the periods indicated (in thousands): Revenues: Ethanol production: Revenues from external customers Intersegment revenues Total segment revenues Corn oil production: Revenues from external customers Intersegment revenues Total segment revenues Agribusiness: Revenues from external customers Intersegment revenues Total segment revenues Marketing and distribution: Revenues from external customers Intersegment revenues Total segment revenues Revenues including intersegment activity Intersegment eliminations Revenues as reported Gross profit (loss): Ethanol production Corn oil production Agribusiness Marketing and distribution Intersegment eliminations Operating income (loss): Ethanol production Corn oil production Agribusiness Marketing and distribution Intersegment eliminations Corporate activities 2012 Year Ended December 31, 2011 2010 $ $ 200,443 1,708,800 1,909,243 128,780 2,005,141 2,133,921 $ 63,001 1,052,424 1,115,425 529 57,315 57,844 408,622 176,062 584,684 2,867,276 355 2,867,631 5,419,402 (1,942,532) 3,476,870 (4,895) 32,388 35,973 32,362 943 96,771 (20,393) 32,140 60,030 17,290 977 (25,159) 64,885 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 73,242 26,999 11,721 9,475 334 (22,758) 99,013 995 707 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 93,410 878 5,614 9,673 188 (17,712) 92,051 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 38 This proof is printed at 96% of original size This line represents final trim and will not print 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 Year Ended December 31, 2011 2012 $ $ 831,939 27,751 179,930 184,541 150,797 (25,224) 1,349,734 $ $ 879,500 24,601 233,201 181,466 121,429 (19,369) 1,420,828 Year ended December 31, 2012 Compared to the Year ended December 31, 2011 Consolidated Results Revenues decreased by $76.8 million in 2012 compared to 2011. Revenue was affected by lower average prices of ethanol and lower volumes of distillers grains sold partially offset by an increase in revenues from grain merchandising and corn oil production. Revenues from grain merchandising increased primarily due to higher grain prices in 2012 offset partially by lower volumes purchased and sold. Revenues from corn oil production increased due to an increase in volume sold. Gross profit decreased by $75.5 million compared to 2011 primarily as a result of unfavorable ethanol production margins. Operating income decreased by $34.1 million compared to 2011 as a result of the factors discussed above and a $5.8 million increase in selling, general and administrative expenses, partially offset by a $47.1 million gain on the sale of twelve grain elevators in December 2012. The increase in selling, general and administrative expenses is primarily due to the expanded scope of our operations including our acquisition of the Otter Tail ethanol plant in March 2011. Interest expense increased by $0.9 million due to debt issued to finance the Otter Tail acquisition. Income tax expense for the year ended December 31, 2012 decreased compared to 2011 due to a decrease in income before taxes. The effective tax rate increased in 2012 as a result of adjustments in state tax rates and tax credits primarily as a result of the sale of certain agribusiness assets. In addition, income tax expense for the year ended December 31, 2012 was unfavorably impacted by the increase in valuation allowances against certain deferred tax assets 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) Ethanol produced (thousands of gallons) Distillers grains sold Year Ended December 31, 2011 2012 677,082 721,535 676,834 721,348 (thousands of equivalent dried tons) 1,882 2,047 Corn consumed (thousands of bushels) 238,740 255,437 Revenues in the ethanol production segment decreased by $224.7 million in 2012 compared to 2011. The decrease in revenue was due to lower average prices for ethanol and the decision, in direct response to unfavorable operating margins, to temporarily reduce production at our ethanol plants. The ethanol production segment produced 676.8 million gallons of ethanol, which represents approximately 91 percent of production capacity, during 2012. Revenues in 2012 included This proof is printed at 96% of original size 39 This line represents final trim and will not print production from our Otter Tail ethanol plant, which was acquired in March 2011. The Otter Tail plant contributed an additional $1.1 million in revenues in 2012 compared to 2011. Cost of goods sold in the ethanol production segment decreased by $132.8 million in 2012 compared to 2011. Consumption of corn decreased by 16.7 million bushels and the average cost per bushel increased by 5.2% during 2012 compared to 2011. Average ethanol yield increased to 2.84 gallons per bushel in 2012 compared to 2.82 gallons per bushel in 2011 due primarily to process improvements implemented and slowed production rates at some of our plants. Cost of goods sold also included a charge related to the settlement of a legal claim in 2012. As a result of the factors identified above, gross profit and operating income in the ethanol production segment decreased by $91.9 million and $93.6 million, respectively, in 2012 compared to 2011, resulting in an operating loss of $20.4 million for the segment. Corn Oil Production Segment Revenues in the corn oil production segment increased by $13.0 million in 2012 compared to 2011. During 2012, we sold 145.8 million pounds of corn oil compared to 96.3 million pounds 2011. The increase in volume was offset by a 15% decrease in average price in 2012 compared to 2011. Average corn oil yield increased to 0.61 pounds per bushel in 2012 compared to 0.50 pounds per bushel in 2011 due primarily to process improvements implemented at our plants. We began extracting corn oil in the fourth quarter of 2010 and had deployed corn oil extraction technology at four of our ethanol plants by December 31, 2010. In 2011, we began extracting corn oil at our other five ethanol plants with the last implementation, which was at the Otter Tail plant completed during the third quarter of 2011. Gross profit and operating income in the corn oil production segment increased by $5.3 million and $5.1 million, respectively, in 2012 compared to 2011. The increases are primarily attributable to the increase in production volumes discussed above. Agribusiness Segment The table below presents key operating data within our agribusiness segment for the periods indicated: Grain sold (thousands of bushels) Fertilizer sold (tons) Year Ended December 31, 2011 2012 60,826 55,514 69,336 64,749 Our agribusiness segment had increases of $30.5 million in revenues, $1.2 million in gross profit, and $48.3 million in operating income in 2012 compared to 2011. Revenues and gross profit increased primarily due to higher grain prices as a result of the 2012 drought offset partially by lower volumes purchased and sold. Operating income was also affected by the gain on sale of the grain elevators of $47.1 million. The agribusiness segment included eleven months of operations in 2012 from the twelve grain elevators sold in December 2012 compared to twelve months of operations from these assets in 2011. Marketing and Distribution Segment Revenues in our marketing and distribution segment decreased by $197.3 million in 2012 compared to 2011. The decrease in revenue was primarily due to lower average prices of ethanol and corn oil sold and lower volumes of distillers grains sold. Ethanol and distillers grains revenues decreased by $231.8 million and $13.7 million, respectively, partially offset by increases in corn oil and crude oil revenues of $15.1 million and $41.3 million, respectively. We sold 1,066 million gallons of ethanol within the marketing and distribution segment during 2012 compared to 1,064 million gallons in 2011. In 2012, the marketing and distribution segment also entered into purchases and sales of crude oil and redeployed a portion of its railcar fleet for the transportation or crude oil by third parties. Gross profit and operating income for the marketing and distribution segment increased by $9.3 million and $7.8 million, respectively, in 2012 compared to 2011. The increases in gross profit and operating income were due primarily to profits realized from ethanol, distillers grains and crude oil marketing and distribution. This proof is printed at 96% of original size 40 This line represents final trim and will not print Intersegment Eliminations Intersegment eliminations of revenues decreased by $301.6 million in 2012 compared to 2011 due to decreases of $295.1 million and $1.3 million in ethanol and distillers grains, respectively, and an increase of $13.9 million in corn oil sold from our ethanol production and corn oil segments to our marketing and distribution segment. In addition, corn sales from our agribusiness segment decreased $19.0 million between the periods. Corporate Activities Operating income was impacted by an increase in operating expenses for corporate activities of $2.4 million in 2012 compared to 2011, primarily due to an increase in general and administrative expenses and personnel costs related to expanded operations. Year ended December 31, 2011 Compared to the Year ended December 31, 2010 Consolidated Results Revenues increased by $1.4 billion in 2011 compared to 2010 as a result of acquired operations and changes in commodity prices. We acquired agribusiness operations located in western Tennessee 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 by $19.7 million compared to 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 by $7.0 million compared to 2010. In addition to the factors identified above, selling, general and administrative expenses increased by $12.7 million compared to 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 in 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 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) Ethanol produced (thousands of gallons) Distillers grains sold Year Ended December 31, 2010 2011 721,535 544,388 721,348 545,252 (thousands of equivalent dried tons) 2,047 1,566 Corn consumed (thousands of bushels) 255,437 194,327 Revenues for the ethanol production segment increased by $1.0 billion in 2011 compared to 2010. Revenues in 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 $516.0 million in combined revenues in 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. This proof is printed at 96% of original size 41 This line represents final trim and will not print Cost of goods sold in the ethanol production segment increased by $1.0 billion in 2011 compared to 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, in 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 had the capacity to produce approximately 130.0 million pounds of corn oil annually. During 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: Grain sold (thousands of bushels) Fertilizer sold (tons) Year Ended December 31, 2010 2011 69,336 64,749 56,215 60,653 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 in 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 by $1.2 billion in 2011 compared to 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 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 2011 to 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 by $1.9 million and operating income decreased by $0.2 million in 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 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 by $1.1 billion in 2011 compared to 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 This proof is printed at 96% of original size 42 This line represents final trim and will not print 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 in 2011 compared to 2010 primarily due to an increase in general and administrative expenses and personnel costs related to expanded operations. Liquidity and Capital Resources On December 31, 2012, we had $254.3 million in cash and equivalents, excluding restricted cash, comprised of $100.1 million held at the parent entity and the remainder at our subsidiaries. We had an additional $121.4 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, 2012. Funds held at our subsidiaries are generally required for their ongoing operational needs and distributions from our subsidiaries are restricted per the loan agreements. At December 31, 2012, there were approximately $481.4 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 $26.8 million in the year ended December 31, 2012 for various projects, including the construction of a new BlendStar unit train terminal in Birmingham, Alabama which was completed and operational in the fourth quarter of 2012. Capital spending for 2013 is expected to be approximately $20 million, primarily for grain storage expansion. The remainder of our capital spending 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. On March 9, 2012, we repurchased 3.7 million shares of common stock from a subsidiary of NTR plc, which was previously a principal shareholder. In conjunction with the repurchase, the Company signed a one-year promissory note bearing 5% interest per annum in the amount of $27.2 million. We do not have a share repurchase program and do not intend to retire the repurchased shares. At December 31, 2012, we had $171.3 million in short-term notes payable and other borrowings and $129.4 million in current maturities of long-term debt. Short-term notes payable and other borrowings include working capital revolvers of $144.1 million at December 31, 2012. Current maturities of long-term debt includes $81.0 million of 2013 maturities we expect to extend or refinance prior to their respective maturity dates for credit facilities at Green Plains Bluffton, Green Plains Central City, Green Plains Ord and Green Plains Otter Tail. In addition we expect to renew our revolving credit facility for Green Plains Grain prior to its maturity in October 2013. Net cash used by operating activities was $10.7 million for the year ended December 31, 2012 compared to net cash provided of $108.9 million in 2011. Cash used by operating activities for 2012 was affected by lower ethanol production margins and greater cash outflows for inventory purchases than 2011. Net cash provided by investing activities was $81.4 million for the year ended December 31, 2012, due primarily to proceeds of $117.7 million from the sale of twelve grain elevators in December partially offset by capital expenditures and the increase of our ownership interest in BioProcess Algae. Net cash provided by financing activities was $8.5 million for the year ended December 31, 2012 due primarily to net cash receipts from short-term borrowings of $72.1 million, used to finance grain contract settlements and inventory purchases, partially offset by $47.1 million in net principal repayments on long-term debt and $10.4 million in cash used to repurchase treasury stock. Green Plains Trade and Green Plains Grain utilize 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 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 have led to more frequent and larger margin calls. This proof is printed at 96% of original size 43 This line represents final trim and will not print We are in compliance with our debt covenants related to the period ended December 31, 2012. Based upon our forecasts and the current margin environment, 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 existing businesses; build additional or acquire existing businesses. 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, 2012, $41.0 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 with expected outstanding balances upon maturity of $34.6 million and $20.0 million on the amortizing term loan and revolving term loan, respectively. We expect to extend or refinance these facilities prior to maturity. 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 line of credit of up to $11.0 million. At December 31, 2012, $38.6 million related to the term loan was outstanding, along with $28.6 million on the revolving term loan and $10.6 million on the revolving line of credit. The term loan requires monthly principal payments of $0.5 million. The term loan and the revolving term loan mature on July 1, 2016 with expected outstanding balances upon maturity of $17.9 million and $28.6 million, respectively, and the revolving line of credit matures on June 27, 2013. We expect to extend or refinance the revolving credit facility prior to maturity. The Green Plains Holdings II loan is comprised of a $26.4 million amortizing term loan and a $51.1 million revolving term loan. At December 31, 2012, $21.9 million was outstanding on the amortizing term loan, along with $45.3 million on the revolving term 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 maturity dates of the amortizing term loan and revolving term loan are July 1, 2016 and October 1, 2018, respectively, with no outstanding balance expected upon maturity on the amortizing term loan and an expected outstanding balance upon maturity of $15.8 million on the revolving term loan. 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, 2012, $13.5 million related to the term loan was outstanding along with the entire revolving term loan. 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 with no expected outstanding balances upon maturity on the term loan or the revolving term loan. 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 revolving line of credit of up to $5.0 million. At December 31, 2012, $17.7 million related to the term loan was outstanding, $12.2 million on the revolving term loan, along with $4.7 million on the revolving line of credit. The term loan requires monthly principal payments of approximately $0.2 million. The term loan and the revolving term loan mature on This proof is printed at 96% of original size 44 This line represents final trim and will not print July 1, 2016 with expected outstanding balances upon maturity of $8.2 million and $12.2 million, respectively, and the revolving line of credit matures on June 27, 2013. We expect to extend or refinance the revolving credit facility prior to maturity. The Green Plains Otter Tail loan is comprised of a $30.3 million amortizing term loan and a $4.7 million revolver. At December 31, 2012, $22.8 million related to the term loan and the entire revolver were outstanding. The term loan requires monthly principal payments of approximately $0.4 million. The term loan matures on September 1, 2018 with an expected outstanding balance of $4.8 million and the revolver matures on March 19, 2013. We expect to extend or refinance the revolver prior to maturity. The Green Plains Shenandoah loan is comprised of a $17.0 million revolving term loan. At December 31, 2012, the entire $17.0 million on the revolving term loan was outstanding. The revolving term loan matures on March 1, 2018 with an expected outstanding balance upon maturity of $7.0 million. The Green Plains Superior loan is comprised of a $40.0 million amortizing term loan and a $10.0 million revolving term loan. At December 31, 2012, $15.3 million related to the term loan was outstanding, along with the entire revolving term loan. The term loan requires quarterly principal payments of $1.4 million. The term loan matures on July 20, 2015 and the revolving term loan matures on July 1, 2017 with an expected outstanding balance upon maturity of $1.5 million on the term loan and no expected outstanding balance upon maturity on the revolving term loan. 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. With certain exceptions, the revolving term loans within this segment are generally available for advances throughout the life of the commitment with interest-only payments due each month until the final maturity date. 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 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 $17.5 million remained outstanding at December 31, 2012. 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. Green Plains Otter Tail also issued $19.2 million in senior notes under New Market Tax Credits financing of which $19.0 million remained outstanding at December 31, 2012. The notes bear interest at 4.75% per annum, payable monthly and require monthly principal payments of approximately $0.3 million beginning in October 2014. The notes mature on September 1, 2018 with an expected outstanding balance of $4.7 million upon maturity. Agribusiness Segment The Green Plains Grain loan is comprised of a $195.0 million revolving credit facility with various lenders to provide the agribusiness segment with working capital funding. The revolving credit facility matures on October 28, 2013. 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, 2012, $105.0 million on the revolving credit facility was outstanding. As security for the revolving credit facility, the lender receives a first priority lien on certain cash, inventory, accounts receivable and other assets owned by subsidiaries of the agribusiness segment. Green Plains Grain maintained ownership of 6.7 million bushels, valued at $47.8 million, of corn inventory held in the facilities divested in December 2012. We expect to extend or refinance the revolving credit facility on or before its maturity date. This proof is printed at 96% of original size 45 This line represents final trim and will not print 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, 2012, $39.1 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 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. In conjunction with the repurchase of common stock on March 9, 2012, the Company signed a one-year promissory note bearing 5% interest per annum in the amount of $27.2 million with a subsidiary of NTR plc. The $27.2 million note is secured by the shares repurchased and the Company’s interest in Green Plains Shenandoah LLC. Contractual Obligations Our contractual obligations as of December 31, 2012 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 Payments Due By Period Total $ 663,277 77,800 54,305 60,082 Less than 1 year $ 300,728 29,746 18,942 - 1-3 years $ 177,217 33,433 22,038 - 3-5 years $ 134,914 11,320 11,573 - More than 5 years $ 50,418 3,301 1,752 60,082 Forward grain purchase contracts (4) Other commodity purchase contracts (5) Other Total contractual obligations 273,103 20,459 730 $ 1,149,756 272,523 20,459 727 $ 643,125 580 - 3 $ 233,271 - - - $ 157,807 - - - $ 115,553 (1) Includes the current portion of long-term debt. (2) 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. (3) Operating lease costs are primarily for railcars and office space. (4) Purchase contracts represent index-priced and fixed-price contracts. Index purchase contracts are valued at current year-end prices. (5) 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. This proof is printed at 96% of original size 46 This line represents final trim and will not print Interest Rate Risk We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from issuing term and revolving loans that bear variable interest rates. Specifically, we had $663.3 million outstanding in debt as of December 31, 2012, $513.3 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 $2.0 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 ethanol plants and other sources. 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, 2012, revenues included net losses of $23.5 million and cost of goods sold included net gains of $44.8 million from derivative financial instruments. 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, 2012. This analysis excludes the impact of risk management This proof is printed at 96% of original size 47 This line represents final trim and will not print 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): Commodity Ethanol Corn Distillers grains Natural gas Estimated Total Volume Requirements for the Next 12 Months (1) 740,000 265,000 2,100 20,300 Unit of Measure Gallons Bushels Tons (2) MMBTU (3) Net Income Effect of Approximate 10% Change in Price $ $ $ $ 69,071 76,955 20,255 3,213 (1) Volume requirements assume production at full capacity. (2) Distillers grains quantities are stated on an equivalent dried ton basis. (3) Millions of British Thermal 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, 2012. This analysis excludes the impact of risk management activities that result from our use of fixed-price sale contracts. Market risk at December 31, 2012, based on the estimated net income effect resulting from a hypothetical 10% change in such prices, was approximately $1.0 million. 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 $111 thousand at December 31, 2012. Market risk at that date, based on the estimated net income effect resulting from a hypothetical 10% change in such prices, was approximately $5 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. This proof is printed at 96% of original size 48 This line represents final trim and will not print 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 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, 2012 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, 2012. KMPG LLP, an independent registered public accounting firm, has audited and issued a report on the Company’s internal control over financial reporting as of December 31, 2012. 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. There were no 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. This proof is printed at 96% of original size 49 This line represents final trim and will not print 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, 2012, 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, 2012, 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, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2012, and our report dated February 15, 2013 expressed an unqualified opinion on those consolidated financial statements. /s/ KPMG LLP Omaha, NE February 15, 2013 Item 9B. Other Information. None. This proof is printed at 96% of original size 50 This line represents final trim and will not print 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 2013 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. 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. This proof is printed at 96% of original size 51 This line represents final trim and will not print 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, 2012 and 2011 Consolidated Statements of Operations for the years-ended December 31, 2012, 2011 and 2010 Consolidated Statements of Comprehensive Income for the years-ended December 31, 2012, 2011 and 2010 Consolidated Statements of Stockholders’ Equity for the years-ended December 31, 2012, 2011 and 2010 Consolidated Statements of Cash Flows for the years-ended December 31, 2012, 2011 and 2010 Notes to Consolidated Financial Statements Page F-1 F-2 F-3 F-4 F-5 F-6 F-8 (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-37 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 2.2(a) 2.2(b) 3.1(a) 3.1(b) 3.2 4.1 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) Asset Purchase Agreement among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Renewable Energy, Inc. and The Andersons, Inc. dated October 26, 2012 (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed October 29, 2012) First Amendment to Asset Purchase Agreement among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Renewable Energy, Inc. and The Andersons, Inc. effective as of November 30, 2012 (Incorporate by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K filed December 6, 2012) 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) Second Amended and Restated Bylaws of Green Plains Renewable Energy, Inc., dated August 14, 2012 (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed August 15, 2012) 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) This proof is printed at 96% of original size 52 This line represents final trim and will not print 4.2 4.3 4.4 4.5 *10.1 *10.2 10.3 *10.4(a) *10.4(b) 10.5(a) 10.5(b) 10.5(c) 10.5(d) 10.6(a) 10.6(b) 10.6(c) *10.7 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) 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) (cid:3) 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 (Incorporated by reference to Exhibit 10.5(c) of the Company’s Annual Report on Form 10-K, filed February 17, 2012) Second Amendment to Amended and Restated Master Loan Agreement, dated September 28, 2012, by and among Green Plains Bluffton LLC and AgStar Financial Services, PCA (Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, filed November 1, 2012) 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) This proof is printed at 96% of original size 53 This line represents final trim and will not print *10.8 *10.9 *10.10(a) *10.10(b) *10.10(c) *10.10(d) 10.11(a) 10.11(b) 10.11(c) 10.11(d) 10.11(e) 10.12(a) 10.12(b) 10.12(c) 10.12(d) 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) 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) 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) 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) This proof is printed at 96% of original size 54 This line represents final trim and will not print 10.12(e) 10.12(f) 10.12(g) 10.12(h) 10.12(i) 10.12(j) 10.12(k) 10.12(l) 10.12(m) 10.12(n) 10.13(a) 10.13(b) 10.13(c) 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) 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) Fourth Amendment dated June 28, 2012 to the Credit Agreement, as amended, dated June 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 10.1 of the Company’s Quarterly Report on Form 10-Q filed July 31, 2012) Fifth Amendment dated September 28, 2012 to the Credit Agreement, as amended, dated June 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 10.3 of the Company’s Quarterly Report on Form 10-Q filed November 1, 2012) 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) Third Amendment dated June 28, 2012 to the Credit Agreement, as amended, dated June 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 10.2 of the Company’s Quarterly Report on Form 10-Q filed July 31, 2012) Fourth Amendment dated September 28, 2012 to the Credit Agreement, as amended, dated June 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 10.2 of the Company’s Quarterly Report on Form 10-Q filed November 1, 2012) 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) This proof is printed at 96% of original size 55 This line represents final trim and will not print 10.13(d) 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) *10.14 *10.15 *10.16 *10.17 10.18(a) 10.18(b) 10.18(c) 10.19(a) 10.19(b) 10.19(c) 10.19(d) 10.20 10.21(a) 10.21(b) 10.21(c) 10.21(d) 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) 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) Amendment to the Master Loan Agreement, dated October 24, 2012, by and among Green Plains Obion LLC, Farm Credit Services of Mid-America, FLCA and Farm Credit Services of Mid- America, PCA (Incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q, filed November 1, 2012) Real Estate Deed of Trust dated January 18, 2007 by and among Ethanol Grain Processors, LLC (n/k/a Green Plains Obion LLC) , Farm Credit Services of Mid-America, FLCA and Farm Credit Services of Mid-America, PCA 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) Amendment dated December 21, 2012 to the Master Loan Agreement dated June 20, 2011 by and among Green Plains Superior LLC and Farm Credit Services of America, FLCA 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) Amendment to the Master Loan Agreement, dated February 5, 2013, between Green Plains Shenandoah LLC and Farm Credit Services of America, FLCA Revolving Term Loan Supplement, dated February 5, 2013, by and among Green Plains Shenandoah LLC and Farm Credit Services of America, FLCA 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) This proof is printed at 96% of original size 56 This line represents final trim and will not print 10.22(a) 10.22(b) 10.22(c) 10.22(d) 10.22(e) 10.22(f) 10.22(g) 10.23(a) 10.23(b) 10.23(c) 10.23(d) 10.23(e) 10.23(f) 10.24 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) 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 (Incorporated by reference to Exhibit 10.26(k) of the Company’s Annual Report on Form 10-K, filed February 17, 2012) Second Amendment to Credit Agreement, dated October 26, 2012, by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex, Inc., BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (Incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q filed November 1, 2012) 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) (Incorporated by reference to Exhibit 10.27(a) of the Company’s Annual Report on Form 10-K, filed February 17, 2012) First Amendment to Amended and Restated Credit Agreement, dated October 16, 2012, by and between Green Plains Holdings II LLC and CoBank, ACB (Incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed November 1, 2012) 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 (Incorporated by reference to Exhibit 10.27(b) of the Company’s Annual Report on Form 10-K, filed February 17, 2012) Security Agreement, dated February 9, 2012 by and among Green Plains Holdings II (the Grantor) and CoBank, ACB (the Secured Party) (Incorporated by reference to Exhibit 10.27(c) of the Company’s Annual Report on Form 10-K, filed February 17, 2012) Second Amendment to Mortgage, dated February 9, 2012 by and among, Green Plains Holdings II and CoBank ACB (Incorporated by reference to Exhibit 10.27(d) of the Company’s Annual Report on Form 10-K, filed February 17, 2012) Second Amendment to Amended and Restated Real Estate Mortgage, dated February 9, 2012 by and among Green Plains Holdings II and CoBank, ACB (Incorporated by reference to Exhibit 10.27(e) of the Company’s Annual Report on Form 10-K, filed February 17, 2012) Stock Repurchase Agreement dated February 28, 2012 between Greenstar Investments LLC, 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 March 2, 2012) 21.1 Schedule of Subsidiaries This proof is printed at 96% of original size 57 This line represents final trim and will not print 23.1 31.1 31.2 32.1 32.2 101 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, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (iv) the Consolidated Statements of Stockholders’ Equity (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements and Financial Statement Schedule. * Represents management compensatory contracts This proof is printed at 96% of original size 58 This line represents final trim and will not print 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 15, 2013 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/ 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 15, 2013 Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 15, 2013 Chairman of the Board February 15, 2013 Director Director Director Director Director Director Director February 15, 2013 February 15, 2013 February 15, 2013 February 15, 2013 February 15, 2013 February 15, 2013 February 15, 2013 This proof is printed at 96% of original size 59 This line represents final trim and will not print 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, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2012. 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 and financial statement schedule 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, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2012 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, 2012, 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 15, 2013, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. February 15, 2013 /s/ KPMG LLP This proof is printed at 96% of original size F-1 This line represents final trim and will not print GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) December 31, 2012 2011 ASSETS Current assets Cash and cash equivalents Restricted cash Accounts receivable, net of allowances of $219 and $263, respectively Inventories Prepaid expenses and other Deferred income taxes Derivative financial instruments Total current assets Property and equipment, net Goodwill Other assets Total assets $ $ 254,289 25,815 80,537 172,009 12,314 2,133 20,938 568,035 708,110 40,877 32,712 1,349,734 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable Accrued and other liabilities Unearned revenue Short-term notes payable and other 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 shares authorized; 36,903,777 and 36,413,611 shares issued, and 29,703,777 and 32,913,611 shares outstanding, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Treasury stock, 7,200,000 and 3,500,000 shares, respectively Total Green Plains stockholders' equity Noncontrolling interests Total stockholders' equity Total liabilities and stockholders' equity $ $ See accompanying notes to the consolidated financial statements. This proof is printed at 96% of original size F-2 $ $ $ 174,988 19,619 106,198 229,070 14,289 14,828 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 95,564 32,475 3,617 171,302 129,426 432,384 362,549 60,082 4,217 859,232 37 445,198 107,540 3,535 (65,808) 490,502 - 490,502 1,349,734 36 440,469 95,761 (2,953) (28,201) 505,112 245 505,357 1,420,828 $ This line represents final trim and will not print GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December 31, 2011 2010 2012 Revenues Cost of goods sold Gross profit Selling, general and administrative expenses Gain on disposal of assets Operating income Other income (expense) Interest income Interest expense Other, net Total other income (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: Income attributable to Green Plains stockholders - basic Income attributable to Green Plains stockholders - diluted Weighted average shares outstanding: Basic Diluted $ 3,476,870 $ 3,553,712 $ 3,380,099 96,771 (79,019) 47,133 64,885 3,381,480 172,232 (73,219) - 99,013 2,133,922 1,981,396 152,526 (60,475) - 92,051 191 (37,521) (2,399) (39,729) 25,156 13,393 11,763 16 11,779 $ 310 (36,645) (779) (37,114) 61,899 23,686 38,213 205 38,418 $ 0.39 $ 0.39 $ 1.09 $ 1.01 $ 30,296 30,463 35,276 41,808 $ $ $ 313 (26,144) (169) (26,000) 66,051 17,889 48,162 (150) 48,012 1.55 1.51 31,032 32,347 See accompanying notes to the consolidated financial statements. This proof is printed at 96% of original size F-3 This line represents final trim and will not print GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2011 2010 2012 Net income Other comprehensive income: $ 11,763 $ 38,213 $ 48,162 Unrealized gains (losses) on derivatives arising during period Reclassification of realized (gains) losses on derivatives Income tax (expense) benefit related to other comprehensive income Other comprehensive income (loss) Comprehensive income Comprehensive (income) loss attributable to noncontrolling interests Comprehensive income attributable to Green Plains $ 49,999 (39,530) (3,981) 6,488 18,251 16 18,267 $ (55,356) 51,123 1,700 (2,533) 35,680 205 35,885 $ (6,803) 6,506 - (297) 47,865 (150) 47,715 See accompanying notes to the consolidated financial statements. This proof is printed at 96% of original size F-4 This line represents final trim and will not print GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Additional Common Stock Paid-in Shares Amount Capital 24,957 $ 25 $ - Balance, December 31, 2009 Net income Other comprehensive loss, net of tax Stock-based compensation Stock options exercised Share issuance Acquisition related issuance Other Balance, December 31, 2010 Net income Other comprehensive loss, net of tax Repurchase of common stock Purchase of noncontrolling interest in BlendStar, net Stock-based compensation Stock options exercised Balance, December 31, 2011 Net income Other comprehensive income, net of tax Repurchase of common stock Stock-based compensation Stock options exercised Other - - 102 23 6,325 4,386 - 35,793 - - - - 593 28 36,414 - - - 421 69 - - - - 6 5 - 36 - - - - - - 36 - - - 1 - - (in thousands) Accum. Other Comp Income (Loss) Retained Earnings Total Green Plains Non- Total Treasury Stock Stockholders' Controlling Stockholders' Shares Amount - $ - - $ - Equity Interests Equity 301,464 $ 48,012 9,244 $ 150 310,708 48,162 - - - - - - - - - - - - - - - - (297) 2,124 200 79,732 56,969 44 488,248 38,418 - - - - - - 9,394 (205) (297) 2,124 200 79,732 56,969 44 497,642 38,213 (123) - (297) - - - - - (420) - 292,231 $ 9,331 $ - 48,012 - 2,124 200 79,726 56,964 44 431,289 - - - - - - - 57,343 38,418 - - - - (2,533) - - 3,500 - (28,201) (2,533) (28,201) - - (2,533) (28,201) 5,572 3,429 179 440,469 - - - - 95,761 11,779 - - - (2,953) - - - - 3,500 - - - - (28,201) - - - 4,290 452 (13) - - - - - 6,488 - - - - - 3,700 - - - - (37,607) - - - 5,572 3,429 179 505,112 11,779 6,488 (37,607) 4,291 452 (13) (8,944) - - 245 (16) - - - - (229) (3,372) 3,429 179 505,357 11,763 6,488 (37,607) 4,291 452 (242) Balance, December 31, 2012 36,904 $ 37 $ 445,198 $ 107,540 $ 3,535 7,200 $ (65,808) $ 490,502 $ - $ 490,502 See accompanying notes to the consolidated financial statements. This proof is printed at 96% of original size F-5 This line represents final trim and will not print 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 (used) by operating activities: Depreciation and amortization Amortization of debt issuance costs Gain on disposal of assets Deferred income taxes Stock-based compensation expense Undistributed equity in loss of affiliates Allowance for doubtful accounts Other Changes in operating assets and liabilities before effects of business combinations and dispositions: Accounts receivable Inventories Derivative financial instruments Prepaid expenses and other assets Accounts payable and accrued liabilities Unearned revenues Other Net cash provided (used) by operating activities Cash flows from investing activities: Purchases of property and equipment Acquisition of businesses, net of cash acquired Proceeds on disposal of assets, net Other Net cash provided (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 Change in restricted cash Payments of loan fees Other Net cash provided (used) by financing activities Year Ended December 31, 2011 2010 2012 $ 11,763 $ 38,213 $ 48,162 52,828 3,069 (47,133) 10,704 4,291 2,398 - 2,309 7,538 (63,739) 2,594 (671) 15,045 (10,295) (1,352) (10,651) (26,776) (1,490) 117,711 (7,998) 81,447 50,076 2,449 - 24,298 3,429 779 142 - (17,059) (38,837) 24,841 4,058 23,408 (7,128) 220 108,889 (42,483) (8,115) - (3,923) (54,521) 37,355 1,476 - 16,520 2,124 169 79 - (30,023) (83,497) (46,424) 2,933 74,642 13,046 (1,746) 34,816 (20,030) (41,871) - (665) (62,566) 73,100 (120,153) 3,324,523 (3,252,444) - (10,445) (6,196) (332) 452 8,505 138,088 (206,866) 3,525,923 (3,543,798) - (28,201) 8,164 (3,648) (2,247) (112,585) 128,982 (75,058) 2,133,335 (2,076,537) 79,732 - (15,229) (4,249) 200 171,176 Net change in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period 79,301 174,988 254,289 $ (58,217) 233,205 174,988 $ 143,426 89,779 233,205 $ Continued on the following page This proof is printed at 96% of original size F-6 This line represents final trim and will not print 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 Supplemental noncash investing and financing activities: Common stock issued for merger and acquisition activities Assets acquired in acquisitions and mergers Less: liabilities assumed Net assets acquired Assets disposed of in sale Less: liabilities disposed Net assets disposed Short-term note payable issued to repurchase common stock Year Ended December 31, 2011 2010 2012 $ $ $ $ $ $ $ $ 737 $ 33,276 $ 971 $ 35,217 $ 9 25,828 - $ - $ 56,969 1,590 $ (100) 1,490 $ 62,686 $ (54,571) 8,115 $ 214,299 (115,459) 98,840 191,167 $ (120,589) 70,578 $ 27,162 $ - $ - - $ - $ - - - - See accompanying notes to the consolidated financial statements. This proof is printed at 96% of original size F-7 This line represents final trim and will not print 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. 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 handling and storage, collectively referred to as agribusiness, and (4) marketing and distribution of Company-produced and third-party ethanol, distillers grains, corn oil and other commodities, 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 reported 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 155 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 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 Segment The Company owns and operates grain handling and storage assets through its agribusiness segment, primarily through its wholly-owned subsidiary, Green Plains Grain Company LLC. Green Plains Grain, after selling a substantial portion of its assets in late 2012, has three grain elevators with approximately 5.8 million bushels of total storage capacity, which supplies a portion of the feedstock for the Company’s ethanol plants. The Company’s ethanol production segment has approximately 11.0 million bushels of storage capacity at its ethanol plants. This proof is printed at 96% of original size F-8 This line represents final trim and will not print 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 provides logistical services for ethanol and other commodities for third party producers. Additionally, through its wholly-owned subsidiary, BlendStar LLC, the Company operates nine blending or terminaling facilities with approximately 846 mmgy of total throughput capacity in seven south central U.S. states. 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 include 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, distillers grains and other commodities by the Company’s marketing business, revenue is recognized when title to the product and risk of loss transfer to an external customer. Revenues related to marketing operations for third parties are recorded on a gross basis as the Company takes title to the product and assumes risk of loss. Unearned revenue is reflected on the consolidated balance sheets for goods in transit for which the Company has received payment and title has not been transferred to the customer. Revenues from the Company’s biofuel terminal operations, which include ethanol transload and splash blending services, are recognized as these services are rendered. The Company routinely enters into fixed-price, physical-delivery ethanol sales agreements. In certain instances, the Company intends to settle the transaction by open market purchases of ethanol rather than by delivery from its own production. These transactions are reported net as a component of revenues. Revenues also include realized gains and losses on related derivative financial instruments, ineffectiveness on cash flow hedges, and reclassifications of realized gains and losses on effective cash flow hedges from accumulated other comprehensive income (loss). Sales of agricultural commodities are recognized when title to the product and risk of loss transfer to the customer, which is dependent on the agreed upon sales terms with the customer. These sales terms provide for passage of title either at the time shipment is made or at the time the commodity has been delivered to its destination and final weights, grades and settlement prices have been agreed upon with the customer. Revenues related to grain merchandising are presented gross in the statements of operations with amounts billed for shipping and handling included in revenues and also as a component of cost of goods sold. Revenues from grain storage are recognized as services are rendered. Cost of Goods Sold Cost of goods sold includes costs for direct labor, materials and certain plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in the operation of the Company’s ethanol plants. Grain purchasing and receiving costs, other than labor costs for grain buyers and scale operators, are also included in cost of goods sold. Direct materials consist of the costs of corn feedstock, denaturant, and process chemicals. Corn feedstock costs include unrealized gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight charges, inspection costs and transfer costs. Corn feedstock costs also include realized gains and losses on related derivative financial instruments, ineffectiveness on cash flow hedges, and reclassifications of realized gains and losses on effective cash flow hedges from accumulated other comprehensive income (loss). Plant overhead costs primarily consist of plant utilities, plant depreciation and outbound freight charges. Shipping costs incurred directly by the Company, including railcar lease costs, are also reflected in cost of goods sold. The Company uses exchange-traded futures and options contracts to minimize the effects of changes in the prices of agricultural commodities on its agribusiness segment’s grain inventories and forward purchase and sales contracts. This proof is printed at 96% of original size F-9 This line represents final trim and will not print Exchange-traded futures and options contracts are valued at quoted market prices. Grain 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 fair 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 in which these hedging activities can themselves result in losses. By using derivatives to hedge exposures to changes in commodity prices, the Company has exposures on these derivatives to credit and market risk. The Company is exposed to credit risk that the counterparty might fail to fulfill its performance obligations under the terms of the derivative contract. The Company minimizes its credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring the financial condition of its counterparties. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. The Company manages market risk by incorporating monitoring parameters within its risk management strategy that limit the types of derivative instruments and derivative strategies the Company uses, and the degree of market risk that may be undertaken by the use of derivative instruments. The Company evaluates its contracts that involve physical delivery to determine whether they may qualify for the normal 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. At times, the Company hedges its exposures to changes in the value of inventories and designates certain qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted through current period results for changes in the fair value arising from changes in underlying prices. Any ineffectiveness is recognized in current period results to the extent that the change in the fair value of the inventory is not offset by the change in the fair value of the derivative. 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 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. This proof is printed at 96% of original size F-10 This line represents final trim and will not print 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. 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. 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, Green Plains Otter Tail and BlendStar. Goodwill is reviewed for impairment at least annually. The qualitative factors of goodwill are assessed 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 This proof is printed at 96% of original size F-11 This line represents final trim and will not print determining whether it is necessary to perform the two-step goodwill impairment 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 in all periods presented include the minority partners’ shares of the equity and income of a majority-owned and consolidated subsidiary of Green Plains Grain and in periods prior to 2012 also included the minority partners’ share of the equity and income of BlendStar. In conjunction with the sale of twelve grain elevators in December 2012, the Company divested its interest in the majority-owned subsidiary of Green Plains Grain. The Company also acquired all remaining noncontrolling interests in BlendStar in July 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. 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 This proof is printed at 96% of original size F-12 This line represents final trim and will not print 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 under 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. Recent Accounting Pronouncements Effective January 1, 2012, the Company adopted the third phase of amended guidance in ASC Topic 820, Fair Value Measurements and Disclosures. 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 is not impacted by the additional disclosure requirements as it does not have any recurring Level 3 measurements. Effective January 1, 2012, the Company adopted the amended guidance in ASC Topic 220, Comprehensive Income. This accounting standards update 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. The Company has elected to present net income and other comprehensive income in two separate but consecutive statements. The updated presentation, which has been implemented retroactively for all comparable periods presented, did not impact the Company’s financial position or results of operations. Effective January 1, 2012, the Company adopted 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 amended guidance did not impact the Company’s financial position or results of operations. Effective January 1, 2013, the Company will adopt the amended guidance in ASC Topic 210, Balance Sheet. The amended guidance addresses disclosure of offsetting financial assets and liabilities. It requires entities to add disclosures showing both gross and net information about instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. The updated disclosures will be implemented retrospectively and will not impact the Company’s financial position or results of operations. 3. ACQUISITIONS AND DISPOSITIONS Sale of Grain Assets In December 2012, the Company sold twelve grain elevators located in northwestern Iowa and western Tennessee. The transaction involved approximately 32.6 million bushels, or 83%, of the Company’s reported agribusiness grain storage capacity and all of its agronomy and retail petroleum operations. The divested assets were reported within the Company’s agribusiness segment. The gross proceeds from the sale, including assumption of debt, current liabilities and fees, were $241.0 million. Cash proceeds from the sale totaled $117.7 million and a pre-tax gain from the sale of $47.1 million was included in operating income in the consolidated statement of operations for the year ended December 31, 2012. The following is a summary of divested assets and liabilities (in thousands): Amounts of Disposed Assets and Liabilities Current assets Property and equipment, net Current liabilities Long-term debt, net $ 146,527 44,640 92,386 27,974 This proof is printed at 96% of original size F-13 This line represents final trim and will not print 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 for $59.7 million. Consideration included $19.2 million of indebtedness, valued at $18.8 million, and $35.0 million in financing from a group of nine lenders with the remaining $5.9 million paid in cash. The following is a summary of assets acquired and liabilities assumed (in thousands): Amounts of identifiable assets acquired and liabilities assumed Inventory Other current assets Property and equipment, net Current liabilities Other Total identifiable net assets Goodwill Purchase price $ $ 4,986 738 51,925 (409) (138) 57,102 2,600 59,702 Acquisition of Tennessee Grain Elevators In April 2010, the Company acquired agribusiness operations in western Tennessee which included five grain elevators with federally licensed grain storage capacity of 11.7 million bushels. All of the grain elevators acquired are located within 50 miles of the Company’s Obion, Tennessee ethanol plant. Also acquired were grain and fertilizer inventories and other agribusiness assets. The agribusiness assets were acquired for consideration totaling approximately $25.7 million, consisting of cash and $3.3 million in notes to the sellers. The five grain elevators and other assets acquired were owned by Green Plains Grain Company TN LLC, a wholly-owned subsidiary of the Company, and were included in the Company’s agribusiness segment until sold in December 2012. The following is a summary of assets acquired and liabilities assumed (in thousands): Amounts of identifiable assets acquired and liabilities assumed Inventory Other current assets Property and equipment, net Other noncurrent assets Current liabilities Total identifiable net assets $ 6,545 1,679 19,968 21 (2,537) 25,676 Purchase price $ 25,676 Acquisition of Global Ethanol, LLC In October 2010, the Company acquired Global Ethanol, LLC. Global owned two operating ethanol plants which have an estimated combined annual production capacity of approximately 160 million gallons. The Company valued the transaction at approximately $174.2 million, including approximately $147.6 million for the ethanol production facilities and the balance in working capital. The value of the transaction includes the assumption of outstanding debt, which totaled approximately $97.7 million at that time. Upon closing, Global was renamed Green Plains Holdings II LLC, or Holdings II. At closing of the transaction, all outstanding units of Global were exchanged for aggregate consideration consisting of 4,386,027 shares of restricted Company common stock valued at $53.9 million, warrants to purchase 700,000 shares of restricted Company common stock, valued at $3.1 million and $19.5 million in cash. The warrants, recorded as a component of additional paid-in capital, are not transferable, except in certain limited circumstances, and are exercisable for a period of three years from the This proof is printed at 96% of original size F-14 This line represents final trim and will not print closing date at a price of $14.00. In conjunction with the transaction, Holdings II entered into an amendment to its existing credit agreement and the Company contributed $10.0 million of cash equity to Holdings II, $6.0 million of which was utilized to reduce outstanding debt. The following is a summary of assets acquired and liabilities assumed (in thousands): Amounts of identifiable assets acquired and liabilities assumed Inventory Other current assets Property and equipment, net Current liabilities Other Total identifiable net assets Goodwill Purchase price $ $ 12,749 15,005 133,970 (11,143) (110) 150,471 23,734 174,205 4. GOODWILL Changes in the carrying amount of goodwill attributable to each business segment during the years ended December 31, 2012 and 2011 were as follows (in thousands): Balance, December 31, 2010 Adjustment to Global purchase price Acquisition of Otter Tail Balance, December 31, 2011 Balance, December 31, 2012 Ethanol Production Marketing and Distribution $ $ 12,527 $ 15,152 2,600 30,279 30,279 $ 10,598 $ - - 10,598 10,598 $ Total 23,125 15,152 2,600 40,877 40,877 The Company reviews goodwill for impairment at least annually, as of October 1, or more frequently whenever events or changes in circumstances indicate that impairment may have occurred. In 2012, ethanol production experienced a compressed commodity margin environment which adversely affected the business climate in which the Company operates. Also, during 2012, the Company experienced a decline in market capitalization as its stock price reached a 52-week low in the third quarter. As a result of these two adverse factors, the Company performed an interim review of goodwill for potential impairment for its ethanol production reporting units as of September 30, 2012. The Company determined the fair value of the applicable ethanol production reporting units using a combination of the income approach (discounted cash flows of future benefit streams) and market approach (market prices from recent comparable sales transactions). Judgments and assumptions related to revenue, operating income, future short-term and long-term growth rates, weighted average cost of capital, interest, capital expenditures, cash flows, and market conditions are inherent in developing the discounted cash flow model. As a result of the interim review, the Company determined that the estimated fair value of its ethanol production reporting units substantially exceeded each of their respective carrying values and no goodwill impairment charge was deemed to be required. The Company updated its goodwill impairment analysis during the fourth quarter of 2012 to test goodwill within the ethanol production segment in connection with its annual impairment testing and no goodwill impairment charge was deemed to be required. Additionally, qualitative factors were assessed during the fourth quarter of 2012 related to goodwill within the Company’s marketing and distribution segment. Based upon this analysis, the Company determined that it was more likely than not that the fair value of the reporting unit was more than its carrying amount and the performance of the two-step goodwill impairment test was not necessary. This proof is printed at 96% of original size F-15 This line represents final trim and will not print 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, 2012 and 2011 (in thousands): Fair Value Measurements at December 31, 2012 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 Margin deposits Inventories carried at market Unrealized gains on derivatives $ Total assets measured at fair value $ Liabilities: Unrealized losses on derivatives Other $ Total liabilities measured at fair value $ 254,289 28,015 12,847 - 7,337 302,488 $ $ 2,544 107 2,651 $ $ - - - 61,763 3,254 65,017 $ $ 2,103 - 2,103 $ $ $ - - (12,847) - 10,347 (2,500) $ 254,289 28,015 - 61,763 20,938 365,005 (2,500) $ - (2,500) $ 2,147 107 2,254 This proof is printed at 96% of original size F-16 This line represents final trim and will not print 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 $ 174,988 21,820 - 15,710 212,518 2,828 1,594 - 71 4,493 $ $ $ $ - - 112,948 6,010 118,958 5,287 - 8,894 - 14,181 $ $ $ $ $ - - - (4,292) (4,292) $ 174,988 21,820 112,948 17,428 327,184 (2,698) $ (1,594) - - (4,292) $ 5,417 - 8,894 71 14,382 The Company believes the fair value of its debt approximates book value, which was $663.3 million and $636.8 million at December 31, 2012 and 2011, respectively. The Company estimates the fair value of its outstanding debt using Level 2 inputs. The Company also believes the fair values of its accounts receivable and accounts payable approximate book value, which were $80.5 million and $95.6 million, respectively, at December 31, 2012 and $106.2 million and $172.3 million, respectively, at December 31, 2011. 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 handling and storage, collectively referred to as agribusiness, and (4) marketing and logistics services for Company-produced and third-party ethanol, distillers grains, corn oil and other commodities, and the operation of blending and terminaling facilities, collectively referred to as marketing and distribution. Selling, general and administrative expenses, primarily consisting of compensation of corporate employees, professional fees and overhead costs not directly related to a specific operating segment, are reflected in the table below as corporate activities. During the normal course of business, the Company enters into transactions between segments. Examples of these intersegment transactions include, but are not limited to, the ethanol production segment selling ethanol to the marketing and distribution segment and the agribusiness segment selling grain to the ethanol production segment. These intersegment activities are recorded by each segment at prices approximating market and treated as if they are third-party transactions. Consequently, these transactions impact segment performance. However, revenues and corresponding costs are eliminated in consolidation and do not impact the Company’s consolidated results. The following are certain financial data for the Company’s operating segments for the periods indicated (in thousands): This proof is printed at 96% of original size F-17 This line represents final trim and will not print Revenues: Ethanol production: Revenues from external customers Intersegment revenues Total segment revenues Corn oil production: Revenues from external customers Intersegment revenues Total segment revenues Agribusiness: Revenues from external customers Intersegment revenues Total segment revenues Marketing and distribution: Revenues from external customers Intersegment revenues Total segment revenues Revenues including intersegment activity Intersegment eliminations Revenues as reported Gross profit (loss): Ethanol production Corn oil production Agribusiness Marketing and distribution Intersegment eliminations Operating income (loss): Ethanol production Corn oil production Agribusiness Marketing and distribution Intersegment eliminations Corporate activities Income (loss) before income taxes: Ethanol production Corn oil production Agribusiness Marketing and distribution Intersegment eliminations Corporate activities 2012 Year Ended December 31, 2011 2010 $ $ 200,443 1,708,800 1,909,243 128,780 2,005,141 2,133,921 $ 63,001 1,052,424 1,115,425 529 57,315 57,844 408,622 176,062 584,684 2,867,276 355 2,867,631 5,419,402 (1,942,532) 3,476,870 (4,895) 32,388 35,973 32,362 943 96,771 (20,393) 32,140 60,030 17,290 977 (25,159) 64,885 (42,430) 32,142 54,172 13,768 977 (33,473) 25,156 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 73,242 26,999 11,721 9,475 334 (22,758) 99,013 49,612 26,998 6,170 6,760 334 (27,975) 61,899 995 707 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 93,410 878 5,614 9,673 188 (17,712) 92,051 72,903 878 2,464 8,330 188 (18,712) 66,051 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ This proof is printed at 96% of original size F-18 This line represents final trim and will not print 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 Intersegment eliminations Corporate activities Capital expenditures: Ethanol production Corn oil production Agribusiness Marketing and distribution Corporate activities 2012 Year Ended December 31, 2011 2010 44,239 1,156 4,209 1,942 1,282 52,828 22,081 - 5,881 3,532 (1,137) 7,164 37,521 7,637 725 2,006 15,791 617 26,776 $ $ $ $ $ $ 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 $ $ $ $ $ $ 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 $ $ $ $ $ $ The following are total assets for the Company’s operating segments for the periods indicated (in thousands): Total assets: Ethanol production Corn oil production Agribusiness Marketing and distribution Corporate assets Intersegment eliminations Year Ended December 31, 2011 2012 $ $ 831,939 27,751 179,930 184,541 150,797 (25,224) 1,349,734 $ $ 879,500 24,601 233,201 181,466 121,429 (19,369) 1,420,828 The following table sets forth revenues by product line for the periods indicated (in thousands): Revenues: Ethanol Distillers grains Corn oil Grain Agronomy Other Year Ended December 31, 2011 2010 2012 $ $ 2,507,119 433,088 58,640 348,413 58,641 70,969 3,476,870 $ $ 2,720,918 405,094 44,857 290,538 61,174 31,131 3,553,712 $ $ 1,692,450 179,868 1,702 193,792 48,881 17,229 2,133,922 This proof is printed at 96% of original size F-19 This line represents final trim and will not print 7. INVENTORIES Inventories are carried at the lower of cost or market, except grain held for sale, which is valued at market value. During the year ended December 31, 2012, the Company recorded a $2.8 million lower of cost or market adjustment and reclassified $2.4 million of net gains from accumulated other comprehensive income into earnings related to this inventory. Both amounts are reflected in cost of goods sold within the ethanol production segment. The components of inventories are as follows (in thousands): Finished goods Grain held for sale Raw materials Petroleum & agronomy products held for sale Work-in-process Supplies and parts December 31, 2012 2011 $ $ 58,080 61,763 28,494 - 13,326 10,346 172,009 $ $ 57,882 112,948 23,215 14,206 11,418 9,401 229,070 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, 2012 2011 $ $ 673,454 90,240 57,491 34,070 3,499 6,228 1,636 5,937 872,555 (164,445) 708,110 $ $ 690,092 112,895 53,647 28,225 5,573 4,688 1,716 5,751 902,587 (125,798) 776,789 9. DERIVATIVE FINANCIAL INSTRUMENTS At December 31, 2012, the consolidated balance sheets reflect unrealized gains, net of tax, of $3.5 million in accumulated other comprehensive income. The Company expects all of the unrealized gains at December 31, 2012 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). This proof is printed at 96% of original size F-20 This line represents final trim and will not print Asset Derivatives' Fair Value at December 31, 2012 2011 Liability Derivatives' Fair Value at December 31, 2012 2011 Derivative financial instruments (1) Accrued and other liabilities Other liabilities - 5,280 137 5,417 (1) Derivative financial instruments as reflected on the balance sheet include a margin deposit asset of $12.8 million and a margin deposit liability of 19,022 (3) $ - - 19,022 8,091 (2) $ - - 8,091 - 2,103 44 2,147 Total $ $ $ $ $ $ $1.6 million at December 31, 2012 and 2011, respectively. (2) Balance at December 31, 2012, includes $2.1 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments. (3) Balance at December 31, 2011, includes $12.2 million 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. 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 Revenue Cost of goods sold Net decrease recognized in earnings before tax Gain (Loss) Due to Ineffectiveness of Cash Flow Hedges Revenue Cost of goods sold Net decrease recognized in earnings before tax Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Net Income (Loss) Revenue Cost of goods sold Net increase (decrease) recognized in earnings before tax Effective Portion of Cash Flow Hedges Recognized in Other Comprehensive Income (Loss) Commodity Contracts $ $ $ $ $ $ $ Year Ended December 31, 2011 2010 $ $ 1,595 (35,013) (33,418) $ $ 2,480 (28,057) (25,577) 2012 (6,206) (12,050) (18,256) Year Ended December 31, 2011 2010 2012 (10) - (10) $ $ (201) (30) (231) $ $ (100) 30 (70) Year Ended December 31, 2011 (46,686) (4,437) (51,123) 2012 (17,318) 56,848 39,530 $ $ $ $ Year Ended December 31, 2011 (55,356) $ $ 2012 49,999 2010 (11,135) 4,629 (6,506) 2010 (6,803) There were no gains or losses due to the discontinuance of cash flow hedge treatment or fair value hedge exposure during the year ended December 31, 2012. This proof is printed at 96% of original size F-21 This line represents final trim and will not print The table below summarizes the volumes of open commodity derivative positions as of December 31, 2012 (in thousands): Exchange Traded Non-Exchange Traded December 31, 2012 Derivative Instruments Futures Futures Futures Futures Options Options Forwards Forwards Forwards Forwards Net Long & (Short) (1) Long (2) (Short) (2) (7,835) 1,250 (3) (44,294) (54,012) (3) 10,024 1,240 622 15,801 6 - (251) (284,487) (71) (28,992) Unit of Measure Bushels Bushels Gallons Gallons Bushels Gallons Bushels Gallons Tons Pounds Commodity Corn, Soybeans and Wheat Corn Ethanol Ethanol Corn, Soybeans and Wheat Ethanol Corn and Soybeans Ethanol Distillers Grains Corn Oil (1) Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis. (2) Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts. (3) Futures used for cash flow hedges. Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated statements of operations. Revenues and cost of goods sold under such contracts are summarized in the table below for the periods indicated (in thousands). Revenue Cost of goods sold $ $ 26,563 26,072 $ $ 133,619 132,234 $ $ 2012 Year Ended December 31, 2011 2010 30,252 30,283 This proof is printed at 96% of original size F-22 This line represents final trim and will not print 10. DEBT The principal balances of the components of long-term debt are as follows (in thousands): December 31, 2012 2011 $ $ 41,018 20,000 17,510 38,635 28,639 10,600 105 - - - 21,914 45,320 - 13,479 37,400 - 334 1,335 17,675 12,151 4,749 22,791 4,675 19,014 53 - 17,000 15,250 10,000 89 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 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 revolving line of credit Equipment financing loan Green Plains Holdings II: $34.1 million term loan $42.6 million revolving term loan $15.0 million revolver $26.4 million term loan $51.1 million revolving term loan 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 revolving line of credit 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 Green Plains Superior: $40.0 million term loan $10.0 million revolving term loan Equipment financing loan Continued on the following page (cid:3)(cid:3) F-23 This proof is printed at 96% of original size This line represents final trim and will not print Continued from the previous page Green Plains Grain: $30.0 million term loan Equipment financing loans Notes payable Corporate: $90.0 million convertible notes Notes Payable Capital Lease Other Total long-term debt Less: current portion of long-term debt Long-term debt $ Scheduled long-term debt repayments are as follows (in thousands): December 31, 2012 2011 - - - 90,000 1,625 403 211 491,975 (129,426) 362,549 $ 27,833 311 2,000 90,000 1,625 606 1,692 567,167 (73,760) 493,407 129,426 40,160 137,057 106,315 28,599 50,418 491,975 Year Ending December 31, Amount 2013 2014 2015 2016 2017 Thereafter Total $ $ Short-term notes payable and other borrowings at December 31, 2012 included working capital revolvers at Green Plains Grain and Green Plains Trade with outstanding balances of $105.0 million and $39.1 million, respectively, and a $27.2 million short-term note payable issued in conjunction with the March 2012 repurchase of common stock. Short-term notes payable and other borrowings at December 31, 2011 included working capital revolvers at Green Plains Grain and Green Plains Trade with outstanding balances of $27.0 million and $33.7 million, respectively, and an inventory financing arrangement at Green Plains Grain of $8.9 million. 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): (cid:120) Working capital – current assets less current liabilities. (cid:120) Net worth – total assets less total liabilities plus subordinated debt. (cid:120) Tangible Net worth – total assets less intangible assets less total liabilities plus subordinated debt. (cid:120) Tangible owner’s equity ratio – tangible net worth divided by total assets. (cid:120) 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). (cid:120) Fixed charge coverage ratio* – (1) adjusted EBITDA divided by (2) fixed charges, which are generally the sum of interest expense, scheduled (cid:120) principal payments, distributions, and maintenance capital, within the ethanol production segment. (cid:120) (1) EBITDA, 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. (cid:120) 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 This proof is printed at 96% of original size F-24 This line represents final trim and will not print (cid:120) 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 (cid:120) 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 Superior 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 Superior $0.6 million per month $0.5 million per month $1.5 million per quarter $2.4 million per quarter $0.2 million per month $0.4 million per month $1.4 million per quarter November 19, 2013 July 1, 2016 July 1, 2016 August 20, 2014 July 1, 2016 September 1, 2018 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, 2012, 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 Superior $15.0 million $16.0 million $10.1 million $10.0 million This proof is printed at 96% of original size F-25 This line represents final trim and will not print 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 $4.0 million $4.0 million $8.0 million (cid:120) 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 $1.0 million each six-month period commencing on June 1, 2013. Allowable advances under the Green Plains Superior loan agreement are reduced by $2.5 million each six-month period commencing on the first day of the month beginning six months after repayment of the term loan, but in no event later than January 1, 2016. Allowable advances under the Green Plains Obion loan agreement are reduced by $4.7 million on a semi-annual basis commencing on March 1, 2015. Allowable advances under the Green Plains Holdings II loan agreement are reduced by $2.7 million on a semi-annual basis commencing on April 1, 2012 and are reduced by $5.7 million on a semi-annual basis commencing on October 1, 2016. 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 October 1, 2018 September 1, 2018 July 1, 2016 March 1, 2018 July 1, 2017 (cid:120) 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 Ord • Green Plains Otter Tail June 27, 2013 June 27, 2013 March 19, 2013 Interest and Fees (cid:120) 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% (cid:120) 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. (cid:120) 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. (cid:120) Unused commitment fees, when charged, are 0.25% to 0.75%. This proof is printed at 96% of original size F-26 This line represents final trim and will not print 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. Covenants The loan agreements contain affirmative covenants (including financial covenants) and negative covenants including: (cid:120) Maintenance of working capital, including unused portion of revolver, as follows: o Green Plains Bluffton o Green Plains Central City $12.0 million and Green Plains Ord combined $10.0 million excluding current maturities of long-term debt. o Green Plains Holdings II $20.0 million (increasing periodically until reaching $22.5 million by o Green Plains Obion o Green Plains Otter Tail o Green Plains Shenandoah o Green Plains Superior March 31, 2013) $9.0 million $8.0 million $8.0 million $3.0 million (cid:120) Maintenance of net worth as follows: o Green Plains Holdings II o Green Plains Obion o Green Plains Shenandoah o Green Plains Superior $80.0 million $90.0 million $60.0 million $23.0 million (cid:120) Maintenance of tangible net worth as follows: o Green Plains Bluffton o Green Plains Otter Tail $82.5 million $8.0 million (cid:120) Maintenance of tangible owner’s equity as follows: o Green Plains Bluffton at least 50% (cid:120) Maintenance of certain annual coverage ratios as follows: Fixed charge coverage ratios: o Green Plains Bluffton o Green Plains Central City 1.15 to 1.0 and Green Plains Ord combined 1.15 to 1.0 1.15 to 1.0 o Green Plains Otter Tail Debt service coverage ratios: o Green Plains Holdings II o Green Plains Obion o Green Plains Shenandoah o Green Plains Superior 1.0 to 1.0 increasing to 1.25 to 1.0 in 2013 1.0 to 1.0 in 2013 1.0 to 1.0 in 2013 1.0 to 1.0 (cid:120) Annual capital expenditures will be limited as follows: o Green Plains Bluffton o Green Plains Central City $2.0 million $2.0 million This proof is printed at 96% of original size F-27 This line represents final trim and will not print o Green Plains Holdings II o Green Plains Obion o Green Plains Ord o Green Plains Otter Tail o Green Plains Shenandoah o Green Plains Superior $5.0 million (increasing to $6.0 million in 2013) $2.0 million $2.0 million $5.0 million (decreasing to $2.0 million in 2014) $1.3 million $0.6 million (cid:120) 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 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 o Green Plains Otter Tail 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 is made o Green Plains Superior Up to 40% of net profit before tax and unlimited after free cash flow payment is made Subsidiaries within the ethanol production segment were in compliance with their debt covenants as of December 31, 2012. Bluffton Revenue Bond (cid:120) 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. (cid:120) The revenue bond bears interest at 7.50% per annum. (cid:120) At December 31, 2012, 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. Otter Tail Revenue Bond Green Plains Otter Tail also issued $19.2 million in senior notes under New Market Tax Credits financing. The notes bear interest at 4.75% per annum, payable monthly and require monthly principal payments of approximately $0.3 million beginning in October 2014. The notes mature on September 1, 2018 with an expected outstanding balance of $4.7 million upon maturity. Agribusiness Segment The Green Plains Grain loan is comprised of a $195.0 million revolving credit facility with various lenders. The revolving credit facility matures on October 28, 2013. 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 receives a first priority lien on certain cash, inventory, 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. This proof is printed at 96% of original size F-28 This line represents final trim and will not print The revolving credit facility agreement contains certain financial covenants and restrictions, including the following: (cid:120) 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. (cid:120) Working capital shall not be less than $30.0 million as of the end of each fiscal quarter. (cid:120) 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. (cid:120) The leverage ratio shall be not greater than 5.5 to 1.0 as of the last day of any fiscal quarter. (cid:120) Annual capital expenditures are limited to $5.0 million. Subsidiaries within the agribusiness segment were in compliance with their debt covenants at December 31, 2012. 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, 2012, Green Plains Trade had $24.8 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. The loan agreement contains certain financial covenants and restrictions, including the following: (cid:120) Maintenance of a fixed charge coverage ratio not less than 1.15 to 1.0. (cid:120) Capital expenditures for Green Plains Trade are restricted to $0.5 million per year. Green Plains Trade was in compliance with its debt covenants at December 31, 2012. Corporate Activities In November 2010, the Company issued $90.0 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. In conjunction with the March 9, 2012 repurchase of its common stock from a subsidiary of NTR plc, which was previously the Company’s largest shareholder, the Company signed a one-year promissory note bearing 5% interest per annum in the amount of $27.2 million. The $27.2 million note is secured by the shares repurchased and the Company’s interest in Green Plains Shenandoah LLC. Capitalized Interest The Company had $285 thousand in capitalized interest during the year ended December 31, 2012 and no capitalized interest for years ended December 31, 2011 and 2010. Restricted Net Assets At December 31, 2012, there were approximately $481.4 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. This proof is printed at 96% of original size F-29 This line represents final trim and will not print 11. STOCK-BASED COMPENSATION The Company has equity incentive plans which reserve a combined total of 3.5 million shares of common stock for issuance pursuant to their terms. 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 equity incentive plans may include: (cid:120) 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. (cid:120) 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. (cid:120) Deferred Stock Units – Deferred stock units 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. 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: Expected life Interest rate Volatility Dividend yield Year Ended December 31, 2011 * * * * 2010 6.0 2.32% 63.13% - 2012 6.0 0.63% 76.26% - * The Company did not grant any stock option awards during the year ended December 31, 2011. The expected life of options granted represents the period of time in years that options granted are expected to be outstanding. 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. 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. This proof is printed at 96% of original size F-30 This line represents final trim and will not print A summary of stock option activity for the year ended December 31, 2012 is as follows: Outstanding at December 31, 2011 Granted Exercised Forfeited Expired Outstanding at December 31, 2012 Exercisable at December 31, 2012 (1) Weighted- Average Exercise Price Weighted-Average Remaining Contractual Term (in years) 3.8 Aggregate Intrinsic Value (in thousands) 1,374 $ 98 625 625 4.3 4.2 $ $ 15.68 4.32 6.57 4.32 29.81 10.10 10.04 Shares 1,122,499 $ 10,000 (68,832) (7,500) (329,417) 726,750 $ 713,750 $ (1) Includes in-the-money options totaling 267,500 shares at a weighted-average exercise price of $5.50. 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. The following table summarizes non-vested stock activity and deferred stock unit activity for the year ended December 31, 2012: Nonvested at December 31, 2011 Granted Forfeited Vested Nonvested at December 31, 2012 Non-Vested Shares and Deferred Stock Units Weighted-Average Grant-Date Fair Value Weighted-Average Remaining Vesting Term (in years) 486,012 $ 550,011 (13,117) (394,816) 628,090 $ 11.81 10.57 11.85 10.72 11.41 1.7 Compensation costs expensed for share-based payment plans described above were approximately $5.5 million, $4.4 million and $2.9 million for the years ended December 31, 2012, 2011 and 2010, respectively. At December 31, 2012, there were $4.2 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 38% of these expense amounts. 12. EARNINGS PER SHARE Basic earnings per common shares, or 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): This proof is printed at 96% of original size F-31 This line represents final trim and will not print Year Ended December 31, 2011 2010 2012 Basic EPS: Net income attributable to Green Plains Weighted average shares outstanding - basic Income attributable to Green Plains stockholders - basic Diluted EPS: $ $ 11,779 $ 30,296 38,418 $ 35,276 0.39 $ 1.09 $ 48,012 31,032 1.55 Net income attributable to Green Plains Interest and amortization on convertible debt, net of tax effect $ 11,779 $ - Net income attributable to Green Plains on an as-if-converted basis $ 11,779 $ 38,418 $ 3,610 42,028 $ 48,012 700 48,712 Weighted average shares outstanding - basic Effect of dilutive convertible debt Effect of dilutive stock-based compensation awards Total potential shares outstanding 30,296 - 167 30,463 35,276 6,280 252 41,808 31,032 1,015 300 32,347 Income attributable to Green Plains stockholders - diluted $ 0.39 $ 1.01 $ 1.51 Excluded from the computations of diluted EPS for the years ended December 31, 2012, 2011 and 2010, were stock options, stock awards and DSUs totaling 0.8 million, 0.9 million and 0.7 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. Also, the effect of the convertible debt is excluded from the computation of diluted EPS for the year ended December 31, 2012 as inclusion would be antidilutive. As consideration for the Global acquisition in October 2010, the Company issued warrants for 700,000 shares of its restricted stock at a price of $14.00 per share exercisable for a period of three years from the closing date. 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, 2012, 2011 and 2010. 13. TREASURY STOCK In March 2012 and September 2011, the Company repurchased 3.7 million shares and 3.5 million shares of its common stock for $37.2 million and $28.0 million, respectively. Shares of repurchased common stock are recorded at cost as treasury stock and result in a reduction of stockholders’ equity in the accompanying 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, 2011 2010 2012 Current Deferred Total $ $ 2,689 $ 10,704 13,393 $ (612) $ 24,298 23,686 $ 1,369 16,520 17,889 This proof is printed at 96% of original size F-32 This line represents final trim and will not print 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): Tax expense at federal statutory rate of 35% State income tax expense (benefit), net of federal expense Increase (decrease) in valuation allowance against deferred tax assets Other Income tax expense Year Ended December 31, 2011 2010 2012 $ 8,810 $ 21,737 $ 23,118 1,970 2,989 (1,883) 2,086 527 13,393 $ (2,084) 1,044 23,686 $ (3,749) 403 17,889 $ The Company’s state income tax benefit for the year ended December 31, 2010 includes state income tax expense on income which was more than offset by certain state tax benefits and credits that will expire in years 2013 through 2023. Significant components of deferred tax assets and liabilities are as follows (in thousands): Deferred tax assets: Net operating loss carryforwards - Federal Net operating loss carryforwards - State Tax credit carryforwards - Federal Tax credit carryforwards - State Derivative financial instruments Organizational and start-up costs Stock-based compensation Inventory valuation Accrued Expenses Deferred Revenue Other Total deferred tax assets Deferred tax liabilities: Derivative financial instruments Fixed assets Investment in partnerships Total deferred tax liabilities Valuation allowance Deferred income taxes December 31, 2012 2011 $ $ $ 10,688 $ 1,275 2,354 5,637 - 4,245 4,031 613 6,361 509 101 35,814 (2,074) $ (82,867) (45) (84,986) (4,840) (54,012) $ 14,863 671 1,354 6,193 1,540 6,373 3,283 711 4,857 590 189 40,624 - (76,250) (946) (77,196) (2,754) (39,326) As of December 31, 2012 and 2011, the Company had federal net operating loss carryforwards of $30.5 million and $42.5 million, respectively, which are available to reduce future federal income tax, if any, through 2031. In addition, the Company has state net operating losses, and federal and state tax credit carryforwards. The deferred tax valuation allowance of $4.8 million as of December 31, 2012 includes federal and state valuation allowances of $0.7 million and $4.1 million, respectively. The state valuation allowance is related to certain Iowa and Tennessee tax credits that will expire in years 2013 through 2023. The Company continues to maintain a valuation allowance against some of its net deferred tax assets at December 31, 2012 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 and other tax attributes 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. This proof is printed at 96% of original size F-33 This line represents final trim and will not print 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, 2012 Gross increases from tax positions in prior periods Settlements Balance at December 31, 2012 $ $ 107 - - 107 The unrecognized tax benefits, if recognized, would favorably impact the Company’s effective tax rate. 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 $18.3 million, $16.8 million and $11.3 million during the years ended December 31, 2012, 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 2013 2014 2015 2016 2017 Thereafter Total Commodities $ $ 18,942 12,046 9,992 8,087 3,486 1,752 54,305 As of December 31, 2012 the Company had contracted for future purchases of grain, natural gas, ethanol and distillers grains valued at approximately $273.1 million, $2.9 million, $15.4 million and $2.1 million, respectively. 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 alleged $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. In April 2012, the parties mutually agreed to a negotiated settlement whereby the Company agreed to a cash payment and the purchase of 20 million gallons of ethanol from Aventine over a four-month period beginning in May 2012. An after-tax charge of $2.4 million for the settlement was reflected in operations for the year ended December 31, 2012. 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. This proof is printed at 96% of original size F-34 This line represents final trim and will not print 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, $0.9 million and $0.6 million for the years ended December 31, 2012, 2011 and 2010, 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, 2012, 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 $0.7 million are included in other liabilities on the consolidated balance sheets at December 31, 2012 and 2011, 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 Short-Term Note Payable On March 9, 2012, the Company repurchased 3.7 million shares of its common stock from a subsidiary of NTR plc, which was previously the largest shareholder of the Company, for $37.2 million. The Company paid $10.0 million in cash and issued a secured note bearing 5% interest per annum for $27.2 million that is due on March 9, 2013. The $27.2 million note is secured by the shares repurchased and the Company’s interest in Green Plains Shenandoah LLC. At December 31, 2012, $27.2 million was outstanding on the note payable. Commercial Contracts Two 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 $0.2 million and $0.5 million were included in debt at December 31, 2012 and 2011, respectively, under these financing arrangements. Payments, including principal and interest, totaled $0.3 million, $0.7 million and $0.7 million for the years ended December 31, 2012, 2011 and 2010, respectively, and the weighted average interest rate for all outstanding financing agreements is 6.1%. The Company has entered into ethanol purchase, sale 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, 2012, cash receipts from Center Oil totaled $20.6 million and payments to Center Oil totaled $5.3 million on these contracts. 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 and payments totaled $81.6 million and $6.3 million, respectively, on these contracts. The Company had $14 thousand and $1.0 million included in accounts receivable, net of any outstanding payables, from Center Oil at December 31, 2012 and 2011, respectively. 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, 2012, 2011 and 2010, payments related to this lease totaled $121 thousand, $149 thousand and $67 thousand, respectively. The Company did not have any payables to Hoovestol Inc at December 31, 2012 or 2011. This proof is printed at 96% of original size F-35 This line represents final trim and will not print 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, 2012 and 2011 (in thousands, except per share amounts). 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. Three Months Ended Revenues Cost of goods sold Operating income (loss) (1) Other expense Income tax expense (benefit) Net income (loss) attributable to Green Plains Basic earnings (loss) per share attributable to Green Plains Diluted earnings (loss) per share attributable to Green $ December 31, 2012 883,707 $ 841,736 68,435 (9,273) 26,142 33,023 1.11 September 30, 2012 947,413 $ 919,516 8,624 (10,234) (604) (1,002) (0.03) June 30, 2012 870,356 $ 852,222 (1,083) (10,616) (4,145) (7,550) (0.25) March 31, 2012 775,395 766,625 (11,091) (9,606) (8,001) (12,692) (0.39) Plains (0.39) (1) Operating income for the three months ended December 31, 2012, included a $47.1 million gain on the disposal of assets. Refer to Note 3 – Acquisitions and Dispositions for further detail of the transaction. (0.25) (0.03) 0.94 Three Months Ended 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 $ December 31, 2011 922,791 $ 870,738 32,184 (9,428) 9,495 13,266 0.40 0.36 September 30, 2011 June 30, 2011 861,576 $ 826,314 17,788 (9,917) 2,852 4,982 0.14 0.14 March 31, 2011 812,327 774,703 19,996 (8,104) 4,361 7,741 0.21 0.20 957,018 $ 909,725 29,045 (9,665) 6,979 12,429 0.35 0.32 This proof is printed at 96% of original size F-36 This line represents final trim and will not print 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 December 31, 2012 2011 $ 100,051 $ 71,547 (in thousands) ASSETS Current assets Cash and cash equivalents Accounts receivable, including amounts from related parties of $30 and $51, 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 Short term notes payable Current maturities of long-term debt Total current liabilities Long-term debt Other liabilities Total liabilities Stockholders' equity Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Treasury stock Total stockholders' equity Total liabilities and stockholders' equity $ $ 88 728 8,284 109,151 3,759 493,057 19,225 625,192 1,516 13,354 - 27,162 1,840 43,872 90,188 630 134,690 37 445,198 107,540 3,535 (65,808) 490,502 625,192 $ $ $ 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 See accompanying notes to the condensed financial statements. This proof is printed at 96% of original size F-37 This line represents final trim and will not print 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 Loss before income taxes Income tax benefit Loss before equity in earnings of subsidiaries Equity in earnings of consolidated subsidiaries Net income $ 2012 Year Ended December 31, 2011 2010 - $ - 112 (7,165) (2,399) (9,452) (9,452) 218 (9,234) 21,013 11,779 $ 471 $ (471) 197 (5,484) (779) (6,066) (6,537) 2,462 (4,075) 42,493 38,418 $ - - 324 (1,154) (169) (999) (999) 976 (23) 48,035 48,012 See accompanying notes to the condensed financial statements. This proof is printed at 96% of original size F-38 This line represents final trim and will not print GREEN PLAINS RENEWABLE ENERGY, INC. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT STATEMENTS OF CASH FLOWS – PARENT COMPANY ONLY (in thousands) Cash flows from operating activities: $ Net cash provided (used) by operating activities 2012 Year Ended December 31, 2011 $ (279) (279) 36,400 36,400 $ 2010 (10,616) (10,616) Cash flows from investing activities: Purchases of property and equipment Investment in subsidiaires, net Issuance of notes receivable from subsidiaries, net of payments 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 (616) 54,426 (6,832) (7,998) 38,980 - (204) - - (10,445) 452 (10,197) (4,239) (32,651) (9,011) (4,162) (50,063) - (535) (3,125) - (28,201) 2,506 (29,355) Net change in cash and equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period 28,504 71,547 100,051 $ (43,018) 114,565 71,547 $ $ See accompanying notes to the condensed financial statements. (189) (46,459) (8,550) (665) (55,863) 90,000 (500) - 79,732 - 221 169,453 102,974 11,591 114,565 This proof is printed at 96% of original size F-39 This line represents final trim and will not print 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 $0.9 million, $1.0 million and $1.2 million during the years ended December 31, 2012, 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 2013 2014 2015 2016 2017 Thereafter Total $ $ 908 751 763 788 121 126 3,457 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, 2012, the Parent Company had $66.3 million in guarantees of subsidiary contracts and indebtedness. This proof is printed at 96% of original size F-40 This line represents final trim and will not print 3. DEBT Parent Company debt is comprised of 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 2013 2014 2015 2016 2017 Thereafter Total $ $ 1,840 188 90,000 - - - 92,028 In conjunction with the March 9, 2012 repurchase of its common stock from a subsidiary of NTR plc, which was previously the Company’s largest shareholder, the Company signed a one-year promissory note bearing 5% interest per annum in the amount of $27.2 million. The $27.2 million note is included as a short term note payable and is secured by the shares repurchased and the Company’s interest in Green Plains Shenandoah LLC. This proof is printed at 96% of original size F-41 [ this page intentionally left blank ] Corporate Information BOARD OF DIRECTORS EXECUTIVE OFFICERS WAYNE HOOVESTOL, Chairman TODD BECKER Owner/President 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 PATRICH SIMPKINS Executive Vice President Finance and Treasurer 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 and Governance Committee CORPORATE OFFICE STOCK TRANSFER AGENT 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 Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com Green Plains Renewable Energy, Inc. 450 Regency Parkway, Suite 400 Omaha, NE 68114 www.gpreinc.com 

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