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2015 ANNUAL REPORT
Green Plains Inc. (NASDAQ: GPRE) is North America’s fourth largest producer of
ethanol. Headquartered in Omaha, Nebraska, Green Plains has grown rapidly,
primarily through acquisitions, and today has operating segments throughout
the ethanol value chain.
Forward-Looking Statements
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 2015 Form 10-K for matters to be considered in
this regard.
PAG E 1
G R E E N P L A I N S I N C .
2 0 1 5 A N N U A L R E P O R T
TO O U R S HAR EH O LD ERS
We continue to look for opportunities to differentiate
Green Plains from other ethanol producers in the industry.
Green Plains took another significant step forward
in 2015 as we launched a new master limited
partnership, Green Plains Partners LP. The
partnership’s initial public offering was completed
on July 1, 2015, and its common units are traded
on Nasdaq under the ticker GPP. Green Plains
owns a 62.5 percent limited partner interest,
a 2.0 percent general partner interest and all of
the incentive distribution rights in the partnership.
We sold 11.5 million common units, representing
limited partner interests, to the public for $15 per
common unit. The partnership received net
proceeds of approximately $158 million from the
offering, $155 million of which was distributed to
Green Plains. In turn, we transferred our ethanol
storage and transportation assets to the
partnership.
We view this transaction as strategic and critical to
the growth of our downstream business. Access to
the master limited partnership equity market will
enable us to finance the growth of our downstream
storage and transportation operations efficiently
and at more favorable terms. Completing the initial
public offering was a major accomplishment for the
company and its shareholders. We firmly believe
this structure will benefit both Green Plains Inc. and
Green Plains Partners and allow us to accelerate
our future growth plans.
2015 FINANCIAL HIGHLIGHTS
We reported net income of $7.1 million for the
year, or $0.18 per diluted share. This was down
from 2014’s net income of $159.5 million, or $3.96
per diluted share. The decline in our financial
results from the year before was driven by a
weaker ethanol margin environment, compounded
by lower energy prices and higher U.S. ethanol
production. For 2015, we generated approximately
$128 million of EBITDA, or earnings before interest,
income taxes, depreciation and amortization.
We achieved a number of milestones in 2015.
We were successful driving our yield to 2.85
gallons of ethanol from each of the 332 million
bushels of corn processed during the year. The
higher yields improved our bottom line, which
can be attributed to our ongoing investments
and efforts to continually enhance our production
processes, both mechanically and enzymatically.
We also attained record yields for corn oil
production, averaging 0.75 pounds per bushel
of corn.
We continue to look for opportunities to
differentiate Green Plains from other ethanol
producers in the industry. For example, we believe
we are one of the only ethanol producers that can
produce every export specification consumed in
fuel markets around the world. We feel this is an
important distinction as flexibility is key to
accessing global demand for ethanol, which
continues to grow alongside domestic demand.
We expanded our annual production capacity by
nearly 200 million gallons in the fourth quarter of
2015. We added 160 million gallons per year by
acquiring two ethanol plants — one in Hopewell,
Virginia and another in Hereford, Texas. We also
added 35 million gallons per year across several
of our existing plants. With these additions, our
ethanol production capacity has reached 1.2 billion
gallons per year, processing over 12 million tons of
corn annually. Furthermore, we have the capacity
PAG E S 2 / 3
Todd Becker
President and Chief Executive Officer
to produce 3.4 million tons of distillers grains and
nearly 280 million pounds of corn oil, both of
which are vital co-products that continue to have
substantial demand on their own in global animal
feed and fuel markets.
Our balance sheet is stronger than ever. We ended
the year with $412 million in total cash. During the
second quarter, we successfully increased our
senior secured credit facility by $120 million,
bringing all of our ethanol plant debt under one
term loan B structure, which lowered our future
annual debt service to approximately 2 cents per
gallon. This will provide us tremendous flexibility
during times when the ethanol margin
environment is weak.
For the second year in a row, we increased our
quarterly cash dividend for Green Plains’
shareholders. The dividend was increased 50
percent to 12 cents per share, and over the course
of 2015, we returned $15.2 million in dividends to
our shareholders.
GROWING MARKETS, GROWING COMPANY
For years, we have believed that ethanol has a
permanent place in the U.S. fuel supply and have
seen ethanol establish itself as the preferred octane
booster and oxygenate enhancer worldwide.
Foreign countries are increasingly establishing
renewable fuel mandates or targets to reduce air
pollution. U.S.-produced ethanol remains the most
economical fuel additive that improves the octane
rating and cleaner-burning properties of gasoline.
In 2015, 850 million gallons were exported to
approximately 70 countries. We currently believe
exports could grow in 2016. At Green Plains, we
want to capture as much of that growth as
possible. Last year, export sales accounted for
20 percent of our ethanol production, affirming
our decision to invest in our plants so we are
capable of producing ethanol for any fuel
market in the world.
We also see global expansion opportunities
for ethanol’s co-products and are continually
exploring new markets or innovative uses for the
distillers grains and corn oil we produce. Distillers
grains are a significant source of livestock feed
supply in the U.S. and foreign markets. Today, the
ethanol industry as a whole produces more than
45 million tons of quality, high-protein feed for
the cattle, poultry and swine industries.
Our strategy for growth has not changed.
We intend to remain acquisitive in our ethanol
production segment as we believe scale has not
yet been achieved by any single industry player.
Incremental ethanol production capacity or
downstream fuel storage and transportation
capabilities will, in turn, grow the partnership.
We will also pursue the growth of our other
businesses when the right opportunity presents
itself, with additional grain storage, other
commodity processing products or cattle feedlots.
We believe the company is well-positioned for
horizontal growth and will look at owning or
investing in processing capacity for other
agricultural and energy commodities. For these
reasons, we have been disciplined about
G R E E N P L A I N S I N C .
2 0 1 5 A N N U A L R E P O R T
On behalf of the management team at Green
Plains, I thank you for your continued support
and trust in us. I would also like to thank our
employees and directors for their efforts in
making Green Plains the company that it is today.
We remain committed, as always, to develop this
business with a keen eye on growing long-term
shareholder value for you.
Sincerely,
Todd Becker
President and Chief Executive Officer
maintaining a significant amount of available
cash so we can move quickly to capitalize on
growth prospects that will be beneficial to
our shareholders.
CONSISTENT, PREDICTABLE EARNINGS
Since 2009, we have generated $1.1 billion of
EBITDA while producing 5 billion gallons of
ethanol with an average EBITDA margin of 22
cents per gallon. In 2016, we are intensifying our
efforts to deliver more consistent, predictable
earnings and cash flow. We believe that adding
adjacent businesses or products can reduce
the volatility in our earnings, lowering our
beta and improving our public market valuation.
This stability can also come through further
development of Green Plains Partners since
the growth of the partnership benefits Green
Plains Inc. shareholders as a 64.5 percent owner
of the partnership.
I am proud of our employees who make safety
and operational excellence part of their day,
every day. Safety remains central to our core values.
Not only do we recognize our role in providing
every employee a safe work environment, we also
expect our employees to be disciplined with our
established safety protocols, no exceptions. Our
hands-on, interactive safety training that we
implemented in 2015 has resulted in a significant
reduction of recordable worker injuries. Since last
year, we have cut the percentage of injury claims
by 37 percent and reduced our average workers’
compensation per employee by 64 percent.
PAG E 4
S ELEC TED FI NAN C IAL DATA
STATEMENT OF OPERATIONS DATA
(in thousands, except per share information)
Revenues
Costs and expenses
Gain on disposal of assets(1)
Operating income
Total other expense
Net income
Net income attributable to Green Plains
Earnings per share attributable to Green Plains:
Basic
Diluted
OTHER DATA
EBITDA (unaudited and in thousands)
BALANCE SHEET DATA
(in thousands)
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Stockholders’ equity
Year Ended December 31,
2015
2014
2013
2012
2011
$ 2,965,589 $ 3,235,6 1 1 $ 3,041,0 1 1 $ 3,476,870 $ 3,553,7 1 2
3,454,699
—
99,0 1 3
37, 1 1 4
38, 2 1 3
38,4 1 8
2,904,51 2
—
61,077
39,612
1 5,228
7,064
3 , 459, 1 1 8
47, 1 33
64,885
39,729
11,763
11,779
2,949,337
—
286,274
35,844
159,504
159,504
2,933,160
—
107,85 1
35,570
43,391
43,391
$
$
0.19 $
0.18 $
4.37 $
3.96 $
1.44 $
1.26 $
0.39 $
0.39 $
1.09
1.01
$
127,781 $
352,477 $
156,492 $
115,505 $
148,620
December 31,
2015
2014
2013
2012
2011
$ 384,867 $ 425,510 $
912,577
1,929,328
438,669
443,547
970,419
958,909
903,4 1 5
1,821,062
511,540
399,440
1,023,6 1 3
797,449
272,027 $
633,305
1,532,045
409,1 97
480,746
986,687
545,358
254,289 $
568,035
1,349,734
432,384
362,549
859,232
490,502
174,988
576,420
1,420,828
360,965
493,407
915,47 1
505,357
(1) In December 2012, we sold 12 grain elevators located in northwestern Iowa and western Tennessee consisting of approximately 32.6 million bushels of grain
storage capacity and all of our agronomy and retail petroleum operations.
The following table reconciles net income to EBITDA for the periods indicated (in thousands):
Net income
Interest expense
Income tax expense
Depreciation and amortization
Year Ended December 31,
2015
2014
$
15,228 $
40,366
6,237
65,950
159,504 $
39,908
90,926
62,139
2013
43,391
33,357
28,890
50,854
2012
$
11,763 $
37,52 1
13,393
52,828
2011
3 8 , 2 1 3
36,645
23,686
50,076
EBITDA
$
127,781 $
352,477 $
156,492 $
115,505 $
148,620
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ____ to _____
Commission file number 001-32924
GREEN PLAINS 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 Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer . Accelerated filer . Non-accelerated filer Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the company’s voting common stock held by non-affiliates of the registrant as of June 30,
2015 (the last business day of the second quarter), based on the last sale price of the common stock on that date of $27.55,
was approximately $980.0 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 12, 2016, there were 38,474,154 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2016 Annual Meeting of Shareholders are incorporated by
reference in Part III herein. The company intends to file such Proxy Statement with the Securities and Exchange Commission
no later than 120 days after the end of the period covered by this report on Form 10-K.
TABLE OF CONTENTS
Commonly Used Defined Terms
Item 1.
Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2.
Properties.
Item 3.
Legal Proceedings.
Item 4.
Mine Safety Disclosures.
PART I
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
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
2
4
17
30
30
31
31
32
34
35
50
51
52
52
54
54
54
54
54
54
55
63
1
Green Plains Inc. and Subsidiaries:
Green Plains; the company
Green Plains Cattle
Green Plains Grain
Green Plains Fairmont
Green Plains Hereford
Green Plains Holdings II
Green Plains Hopewell
Green Plains Obion
Green Plains Operating Company
Green Plains Otter Tail
Green Plains Partners; the partnership
Green Plains Processing
Green Plains Superior
Green Plains Trade
Green Plains Wood River
Accounting Defined Terms:
ASC
EBITDA
EPS
Exchange Act
GAAP
IPO
LIBOR
LTIP
Nasdaq
SEC
Securities Act
Industry Defined Terms:
Bgy
BTU
CAFE
CARB
CBOB
CFTC
DOT
E15
E85
EIA
EISA
EPA
EPMA
EU
FDA
FSMA
ILUC
LCFS
Mmg
Mmgy
MTBE
Commonly Used Defined Terms
Green Plains Inc. and its subsidiaries
Green Plains Cattle Company LLC
Green Plains Grain Company LLC
Green Plains Fairmont LLC
Green Plains Hereford LLC
Green Plains Holdings II LLC
Green Plains Hopewell LLC
Green Plains Obion LLC
Green Plains Operating Company LLC
Green Plains Otter Tail LLC
Green Plains Partners LP
Green Plains Processing LLC and its subsidiaries
Green Plains Superior LLC
Green Plains Trade Group LLC
Green Plains Wood River LLC
Accounting Standards Codification
Earnings before interest, income taxes, depreciation and
amortization
Earnings per share
Securities Exchange Act of 1934, as amended
U.S. Generally Accepted Accounting Principles
Initial public offering of Green Plains Partners LP
London Interbank Offered Rate
Green Plains Partners LP 2015 Long-Term Incentive Plan
The Nasdaq Global Market
Securities and Exchange Commission
Securities Act of 1933, as amended
Billion gallons per year
British Thermal Units
Corporate Average Fuel Economy
California Air Resources Board
Conventional blendstock for oxygenate blending
Commodity Futures Trading Commission
U.S. Department of Transportation
Gasoline blended with up to 15% ethanol by volume
Gasoline blended with up to 85% ethanol by volume
U.S. Energy Information Administration
Energy Independence and Security Act of 2007, as amended
U.S. Environmental Protection Agency
Energy Policy Modernization Act
European Union
U.S. Food and Drug Administration
Food Safety Modernization Act of 2011
Indirect land usage charge
Low Carbon Fuel Standard
Million gallons
Million gallons per year
Methyl tertiary-butyl ether
2
Reform Act
RFS II
RIN
U.S.
USDA
Dodd-Frank Wall Street Reform and Consumer Protection Act
Renewable Fuels Standard II
Renewable identification number
United States
U.S. Department of Agriculture
3
Cautionary Statement Regarding Forward-Looking Statements
The SEC encourages companies to disclose forward-looking information so investors can better understand future
prospects and make informed investment decisions. As such, we have included forward-looking statements in this report or
by reference to other documents filed with the SEC.
Forward-looking statements are made in accordance with safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements are based on current expectations which involve a number of risks and uncertainties
and do not relate strictly to historical or current facts, but rather to plans and objectives for future operations. These
statements include words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “outlook,” “plan,”
“predict,” “may,” “could,” “should,” “will” and similar words and phrases as well as statements regarding future operating or
financial performance or guidance, business strategy, environment, key trends and benefits of actual or planned acquisitions.
Factors that could cause actual results to differ from those expressed or implied are discussed in this report under “Risk
Factors” or incorporated by reference. Specifically, we may experience fluctuations in future operating results due to a
number of economic conditions, including: competition in the ethanol industry and other industries in which we operate;
commodity market risks, including those that may result from weather conditions; financial market risks; counterparty risks;
risks associated with changes to federal policy or regulation; risks related to acquisitions and achieving anticipated results;
risks associated with merchant trading, cattle feed operations, algae production and other factors detailed in reports filed with
the SEC. Additional risks related to our newly formed subsidiary, Green Plains Partners LP include compliance with
commercial contractual obligations, potential tax consequences related to our investment in the partnership and risks
disclosed in the partnership’s SEC filings associated with the operation of the partnership as a separate, publicly traded entity.
We believe our expectations regarding future events are based on reasonable assumptions; however, these assumptions
may not be accurate or account for all risks and uncertainties. Consequently, forward-looking statements are not guaranteed.
Actual results may vary materially from those expressed or implied in our forward-looking statements. In addition, we are not
obligated and do not intend to update our forward-looking statements as a result of new information unless it is required by
applicable securities laws. We caution investors not to place undue reliance on forward-looking statements, which represent
management’s views as of the date of this report or document incorporated by reference.
Item 1. Business.
PART I
References to “we,” “us,” “our,” “Green Plains,” or the “company” refer to Green Plains Inc. and its subsidiaries.
Overview
Green Plains is an Iowa corporation that was founded in June 2004. We are a Fortune 1000, vertically integrated ethanol
producer, marketer and distributor focused on generating stable operating margins through our diversified business segments
and risk management strategy. We have operations throughout the ethanol value chain, beginning upstream with grain
handling and storage, continuing through ethanol, distillers grains and corn oil production and ending downstream with our
marketing and distribution services. We believe owning and operating assets throughout the ethanol value chain enables us to
mitigate volatility in commodity prices, differentiating us from companies focused only on ethanol production.
We group our business activities into four operating segments to manage performance:
Ethanol Production. Our ethanol production segment includes 14 ethanol plants in Indiana, Iowa, Michigan,
Minnesota, Nebraska, Tennessee, Texas and Virginia. At capacity, we expect to process approximately 430 million
bushels of corn per year and produce approximately 1.2 billion gallons of ethanol, 3.4 million tons of distillers
grains and 275 million pounds of industrial grade corn oil, making us the fourth largest ethanol producer in North
America.
Agribusiness. Our agribusiness segment includes grain procurement and storage capacity of approximately 58.6
million bushels and a cattle feedlot operation with the capacity to support 70,000 head of cattle.
4
Marketing and Distribution. Our marketing and distribution segment markets, sells and distributes ethanol, distillers
grains and corn oil produced at our ethanol plants. We also market ethanol for a third-party producer and buy and
sell ethanol, distillers grains, corn oil, grain, natural gas and other commodities in various markets.
Partnership. Our master limited partnership provides fuel storage and transportation services by owning, operating,
developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and
businesses. The partnership’s assets include 30 ethanol storage facilities, 8 fuel terminal facilities and approximately
2,500 leased railcars.
Risk Management and Hedging Activities
Our profitability is highly dependent on commodity prices, particularly for ethanol, distillers grains, corn oil, corn and
natural gas. Since market price fluctuations among these commodities are not always correlated, ethanol production may be
unprofitable at times. We use a variety of risk management tools and hedging strategies to monitor real-time operating price
risk exposure at each of our plants to secure favorable margins, when available, or temporarily reduce production levels
during periods of compressed margins. Our multiple businesses and revenue streams also help to diversify our operations and
profitability.
We use forward contracts to sell a portion of our ethanol, distillers grains and corn oil production or buy some of the
corn or natural gas we need to partially offset commodity price volatility. We also engage in other hedging transactions
involving exchange-traded futures contracts for corn, natural gas, ethanol and other commodities. The financial impact of
these activities depends on price of the commodities involved and our ability to physically receive or deliver those
commodities. We do not speculate on general price movements by taking significant unhedged positions on commodities.
Hedging arrangements expose us to risk of financial loss when the counterparty defaults on its contract or, in the case of
exchange-traded contracts, when the expected differential between the price of the underlying commodity and physical
commodity changes. Hedging activities can result in losses when a position is purchased in a declining market or sold in a
rising market. 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 vary the amount of hedging or other risk mitigation strategies we undertake and
sometimes choose not to engage in hedging transactions at all.
Competitive Strengths
We are focused on managing commodity price risks, improving operational efficiencies and optimizing market
opportunities to create an efficient platform with diversified income streams. Our competitive strengths include:
Disciplined Risk Management. Risk management is our core competency and we use a variety of risk management tools
and hedging strategies to maintain a disciplined approach. Our internally developed operating margin management system
allows us to monitor real-time commodity price risk exposure at each of our plants and focus on locking in favorable margins
or temporarily reducing production levels during periods of compressed margins.
Acquisition and Integration Capabilities. We have the ability to acquire assets that create synergies and enhance our
ability to mitigate risks. Our balance sheet allows us to be opportunistic in that process. Since inception, we built or acquired
14 ethanol plants and installed, or are in the process of installing at the Hopewell plant, corn oil extraction technology at each
of our plants to generate incremental returns. In addition, we purchased or built a grain handling and storage business, a cattle
feedlot operation, and terminal and distribution facilities. Successful integration of these operations has enhanced our overall
returns.
Operational Excellence. Our plants are staffed by experienced industry personnel who share operational knowledge. We
focus on making incremental operational improvements to enhance performance using real-time production data and control
systems to monitor our plants and optimize performance. Our operational expertise provides us a cost advantage over most of
our competitors and helps us improve the operating margins of acquired facilities.
Vertical Integration. Our vertically integrated platform reduces commodity and operational risk and increases pricing
visibility and influence in key markets. Combined, our ethanol production, agribusiness, marketing and distribution, and
partnership segments provide efficiencies which extend across the ethanol value chain.
5
Proven Management Team. Our senior management team averages more than 25 years of commodity risk management
and related industry experience. We have specific expertise across all of our businesses, including plant operations and
management, commodity markets and risk management, and ethanol marketing and distribution. Our management team’s
level of operational and financial expertise is essential to successfully executing our business strategies.
Business Strategy
We believe ethanol could become an increasingly larger portion of the global fuel supply due to factors described below
driven by volatile oil prices, heightened environmental concerns, energy independence goals and national security concerns:
Emissions Reduction. In the 1990’s, federal law required the use of oxygenates in reformulated gasoline to reduce
vehicle emissions in cities with unhealthy levels of air pollution, on a seasonal or year-round basis. Oxygenated
gasoline is used to meet separate federal and state air emission standards. At the time, these oxygenates included
ethanol and MTBE. However, the U.S. refining industry has since abandoned the use of MTBE, making ethanol the
primary clean air oxygenate used.
Octane Enhancer. Ethanol has an octane value of 113 and is the primary additive used by refiners to increase octane
levels, producing regular grade gasoline from lower octane blending stocks and upgrading regular gasoline to
premium grades, to improve engine performance. According to the EIA, refiners are producing more conventional
blendstocks for oxygenate blending, or CBOB, which is an 84 octane sub-grade gasoline which requires ethanol or
another octane source to meet minimum octane requirements for the U.S. gasoline market. CBOB represented
approximately 80% of total conventional gasoline sold in 2015.
Fuel Stock Extender. Ethanol is a valuable blend component used by U.S. refiners to extend fuel supply. According
to the EIA, ethanol as a component of the domestic gasoline supply grew from 1.4% in 2001 to 9.9% in 2015,
replacing the need for approximately 732 million barrels of oil in 2015.
E15 Blending Waiver. Through a series of decisions beginning in October 2010, the EPA granted a waiver which
permitted the use of E15 in model year 2001 and newer passenger vehicles, including cars, sport utility vehicles and
light pickup trucks. In June 2012, the EPA gave final approval for the sale and use of E15 and in July 2012, the
nation’s first retail E15 was sold. On January 5, 2016, there were 189 retail fuel stations in 23 states offering E15 to
consumers.
Mandated Use of Renewable Fuels. The growth in domestic ethanol use has been supported by legislative
requirements. Under the provisions of the EISA, the RFS II was established increasing the required volume of
renewable fuel to be blended with motor gasoline. In November 2015, the EPA announced final volume
requirements for conventional ethanol of 13.61 billion gallons, 14.05 billion gallons and 14.50 billion gallons for
2014, 2015 and 2016, respectively.
Net Ethanol Exports. Prior to 2010, the United States had a long history as a net importer of ethanol. In 2010,
according to the USDA, the United States became the largest exporter of ethanol to world markets and lowest-cost
producer, surpassing Brazil. According to the EIA, U.S. ethanol exports, net of imports, were approximately 730
million gallons in 2015 and 750 million gallons in 2014.
In light of our industry’s environment, we intend to further develop and strengthen our business by pursuing the
following growth strategies:
Grow Organically. We seek expansion projects that leverage our assets’ location and potential production capacity by
maximizing operational capabilities or increasing grain storage capacity. We believe owning grain storage at our near our
plants allows us to develop relationships with local producers and originate corn more effectively at a lower average cost.
Since most of our plants are located in close proximity of our competitors in the Midwest, we believe this provides a
competitive advantage.
Acquire Strategic Assets. We seek acquisitions that allow us to apply our specialized knowledge, existing processes and
expandable infrastructure as a competitive advantage in select agricultural and energy markets. We maintain a disciplined
evaluation process in pursuit of strategic assets, taking into consideration rigorous design, engineering, financial and
geographic criteria, to ensure the assets will generate favorable returns. For our recently formed subsidiary, Green Plains
Partners, our strategy is to acquire additional assets that can be offered to the partnership to generate incremental distributable
cash flow.
6
Conduct Safe, Reliable, Efficient Operations and Improve Operational Efficiency. We are committed to maintaining
safe, reliable and environmentally compliant operations and employ an extensive production control system at each plant to
continuously monitor performance. We use the performance data to develop strategies that can be applied across our
platform. In addition, we research operational processes that may enhance our efficiency by increasing yields, lowering
processing cost per gallon and growing production volumes.
Recent Developments
We are disciplined in evaluating potential acquisitions for growth. Ethanol plants must meet rigorous design,
engineering, valuation and geographic criteria to be considered. The following is a summary of our significant developments
during 2015. Additional information about these items can be found elsewhere in this report or in previous reports filed with
the SEC.
On October 23, 2015, we acquired an ethanol production facility located in Hopewell, Virginia for approximately $18.6
million, including liabilities assumed of approximately $0.4 million. The dry mill ethanol plant’s production capacity is
approximately 60 mmgy. We resumed ethanol production at the plant on February 8, 2016 and corn oil processing is
expected to be operational during the second quarter of 2016.
On November 12, 2015, we acquired Hereford Renewable Energy, LLC located in Hereford, Texas, for approximately
$78.8 million for the ethanol plant assets, as well as working capital acquired or assumed of approximately $19.4 million.
The purchase includes an ethanol plant with production capacity of approximately 100 mmgy, a corn oil extraction system,
working capital and other related assets.
As part of our Phase I ethanol production capacity expansion program, we added 35 mmgy of production capacity at a
cost of $29.6 million through December 31, 2015. We anticipate adding up to 50 mmgy of production capacity over the next
12 months. The total cost of the Phase I expansion is estimated to be approximately $49.0 million.
On November 4, 2015, the partnership announced plans to form a joint venture, as a 50% partner, to build an ethanol unit
train terminal in Maumelle, Arkansas. The terminal will be capable of unloading 110-car unit trains in less than 24 hours and
initially include storage for approximately 4.2 mmg of ethanol. The project, which will allow ethanol to be delivered more
efficiently into Little Rock and surrounding markets, is expected to cost approximately $12 million and be completed during
the fourth quarter of 2016.
Effective January 1, 2016, the partnership acquired the storage and transportation assets of the Hereford, Texas and
Hopewell, Virginia ethanol production facilities from us for an initial consideration of $62.5 million. The partnership used its
revolving credit facility and cash on hand to fund the purchase of the assets. The acquired assets include three ethanol storage
tanks that support the plants’ combined expected production capacity of approximately 160 mmgy and 224 leased railcars
with capacity of approximately 6.7 mmg. The partnership amended the storage and throughput agreement, increasing the
minimum volume commitment to 246.5 mmg per calendar quarter. The partnership also amended the rail transportation
services agreement, increasing the minimum railcar volumetric capacity commitment to 76.3 mmg.
Initial Public Offering of Subsidiary
We formed Green Plains Partners LP, a master limited partnership, to provide fuel storage and transportation services.
We expect the partnership to be our primary downstream logistics provider since its assets are the principal method of storing
and delivering the ethanol we produce.
On July 1, 2015, the partnership completed its IPO. A total of 11,500,000 common units, representing limited partner
interests, were sold to the public for $15.00 per common unit. The partnership received net proceeds of $157.5 million after
deducting underwriting discounts, structuring fees and offering expenses, which it used to make a distribution of $155.3
million to us and pay $0.9 million in origination fees under its new $100.0 million revolving credit facility. The partnership
retained the remaining $1.3 million for general purposes.
We now own a 62.5% limited partner interest consisting of 4,389,642 common units and 15,889,642 subordinated units,
a 2.0% general partner interest in the partnership and all of the partnership’s incentive distribution rights. The public owns
the remaining 35.5% limited partner interest. The partnership is consolidated in our financial statements.
7
During the subordination period, which is described in the partnership agreement, holders of the subordinated units are
not entitled to receive distributions until the common units have received the minimum quarterly distribution plus any
arrearages of the minimum quarterly distribution from prior quarters. If the partnership does not pay distributions on the
subordinated units, the subordinated units will not accrue arrearages for those unpaid distributions. Each subordinated unit
will convert into one common unit at the end of the subordination period.
In conjunction with the IPO, we contributed our downstream ethanol transportation and storage assets to the partnership,
including:
27 ethanol storage facilities located at or near our 12 ethanol production plants,
8 fuel terminal facilities located near major rail lines, and approximately
2,210 leased rail cars and other transportation assets.
A substantial portion of the partnership’s revenue is derived from long-term, fee-based commercial agreements with our
subsidiary, Green Plains Trade, including:
10-year storage and throughput agreement,
6-year rail transportation services agreement, and
1-year trucking transportation agreement.
The partnership also assumed various terminal services agreements, including a 2.5-year agreement for the Birmingham,
Alabama unit train terminal. The partnership’s storage and throughput agreement and some of the terminal services
agreements, including the Birmingham terminal services agreement, are supported by minimum volume commitments. The
rail transportation services agreement is supported by minimum take-or-pay capacity commitments.
We also have agreements with the partnership that establish fees for general and administrative services, and operational
and maintenance services. These transactions are eliminated when we consolidate our financial results.
Operating Segments
Ethanol Production Segment
Industry Overview. Ethanol, also known as ethyl alcohol or grain alcohol, is a colorless liquid produced by fermenting
carbohydrates found in a number of different types of grains, such as corn, wheat and sorghum, and other cellulosic matter
found in plants. Most of the ethanol produced in the United States is made from corn because it contains large quantities of
carbohydrates that convert into glucose more easily than most other kinds of biomass, can be handled efficiently and is in
greater supply than other grains. One bushel, or 56 pounds, of corn, produces approximately 2.8 gallons of ethanol, 16.5
pounds of distillers grains and 0.6 pounds of corn oil. Outside of the Unites States, sugarcane is the primary feedstock used in
ethanol production.
Ethanol is a significant component of the biofuels industry, which includes all transportation fuels derived from
renewable biological materials. Biofuels are an excellent oxygenate and source of octanes. When added to petroleum-based
transportation fuels, oxygenates reduce vehicle emissions. Ethanol is the most economical oxygenate and source of octanes
available on the market and its production costs are competitive with gasoline.
The global ethanol industry has grown significantly over the past decade due to ethanol’s environmental and economic
benefits. Approximately 30 countries including the EU, which is regulated by a single policy with specific national targets for
each country, either mandate or offer incentives for blending ethanol and biodiesel with motor fuels. These policies are
motivated by the desire to reduce pollution, greenhouse gas emissions and dependency on foreign oil. Annual reported
ethanol production worldwide has increased from approximately 5.0 billion gallons in 2001 to 24.6 billion gallons in 2014,
and from 1.8 billion gallons in 2001 to 14.8 billion gallons in 2015 in the United States, according to the EIA. The United
States and Brazil are the two largest producers and exporters of ethanol in the world. In 2015, ethanol comprised
approximately 10% of the U.S. gasoline market.
8
Ethanol Plants. We operate 14 dry mill ethanol production plants, located in eight states, that produce ethanol, distillers
Plant
grains and corn oil:
Atkinson, Nebraska
Bluffton, Indiana (1)
Central City, Nebraska
Fairmont, Minnesota
Hereford, Texas
Hopewell, Virginia (2)
Lakota, Iowa
Obion, Tennessee (1)
Ord, Nebraska
Otter Tail, Minnesota
Riga, Michigan
Shenandoah, Iowa (1)
Superior, Iowa (1)
Wood River, Nebraska
Total
Initial Operation or
Acquisition Date
June 2013
Sept. 2008
July 2009
Nov. 2013
Nov. 2015
Oct. 2015
Oct. 2010
Nov. 2008
July 2009
Mar. 2011
Oct. 2010
Aug. 2007
July 2008
Nov. 2013
Technology
Delta-T
ICM
ICM
Delta-T
ICM/Lurgi
Katzen
ICM/Lurgi
ICM
ICM
Delta-T
Delta-T
ICM
Delta-T
Delta-T
Plant Production
Capacity (mmgy)
53
120
106
119
100
60
112
120
55
60
60
69
60
121
1,215
(1) We constructed these four plants; all other ethanol plants were acquired.
(2) The Hopewell plant resumed ethanol production on February 8, 2016.
The majority of our plants are equipped with industry-leading ICM or Delta-T ethanol processing technology. Our years
of experience building, acquiring and operating these technologies provides us with a deep understanding of how to
effectively and efficiently manage both systems for maximum performance. All of our plants are adjacent to major rail lines.
Corn Feedstock and Ethanol Production. Our plants use corn as feedstock in a dry mill ethanol production process.
Each of our plants requires approximately 20 million to 40 million bushels of corn annually, depending on its production
capacity. The price and availability of corn are subject to significant fluctuations driven by a number of factors that affect
commodity prices in general, including crop conditions, weather, governmental programs, freight costs and global demand.
Ethanol producers are generally unable to pass increased corn costs to customers since ethanol competes with other fuels.
Our corn supply is obtained primarily from local markets by our agribusiness segment and subsequently provided to our
ethanol production segment. We use cash and forward purchase contracts with grain producers and elevators to buy corn. At
ten of our ethanol plants, we maintain direct relationships with local farmers, grain elevators and cooperatives, which serve as
our primary sources of grain feedstock. Most farmers in the area where these plants are located store corn in their own
storage facilities. This allows us to purchase much of the corn needed to supply our plants directly from farmers throughout
the year. At four of our ethanol plants, we contract with third-party grain originators to supply the corn necessary for ethanol
production. These contracts terminate between October 2016 and November 2023. Each of our plants is also situated on rail
lines or has other logistical solutions to access corn supplies from other regions of the country should local supplies become
insufficient.
Corn is received at the plant by truck or rail then weighed and unloaded into a receiving building. Storage bins are used
to inventory grain that is passed through a scalper to remove rocks and debris prior to processing. The corn is then
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 into a liquefaction tank where additional enzymes are added.
Next, the grain slurry is pumped into fermenters, where yeast, enzymes, and nutrients are added and the batch fermentation
process is started. A beer column, within the distillation system, separates the alcohol from the spent grain mash. The alcohol
is dehydrated to 200-proof alcohol and either pumped into a holding tank and blended with approximately two percent
denaturant as it is pumped into finished product storage tanks, or marketed as undenatured ethanol.
Distillers Grains. The spent grain mash is pumped from the beer column into a decanter-type centrifuge for dewatering.
The water, or thin stillage, is pumped from the centrifuge into an evaporator, where it is dried into a thick syrup. The solids,
or wet cake, that exit the centrifuge are conveyed to the dryer system and dried at varying temperatures to produce distillers
9
grains. Syrup might be reapplied to the wet cake prior to drying to provide additional nutrients. Distillers grains, the principal
co-product of the ethanol production process, are used as high-protein, high-energy animal feed and marketed to the dairy,
beef, swine and poultry industries.
We can produce three forms of distillers grains, depending on the number of times the solids are passed through the
dryer system:
wet distillers grains, which contain approximately 65% to 70% moisture, have a shelf life of approximately three
days and is therefore sold only to dairies or feedlots within the immediate vicinity,
modified wet distillers grains, which is dried further to approximately 50% to 55% moisture, have a shelf life of
approximately three weeks and are marketed to regional dairies and feedlots, and
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.
Corn Oil. Corn oil systems extract non-edible corn oil from the thin stillage evaporation process immediately before the
production of distillers grains. Corn oil is produced by processing the syrup and evaporated thin stillage through a decanter-
style, or disk-stack, centrifuge. The centrifuges separate the relatively light corn oil from the heavier components of the
syrup, eliminating the need for significant retention time. We extract approximately 0.7 pounds of corn oil per bushel of corn
used to produce ethanol. Industrial uses for corn oil include feedstock for biodiesel, livestock feed additives, rubber
substitutes, rust preventatives, inks, textiles, soaps and insecticides. The syrup is blended into wet, modified wet or dried
distillers grains.
Utilities. The production of ethanol requires significant amounts of natural gas, electricity and water.
Natural Gas. Depending on production parameters, our ethanol plants use approximately 22,000 to 33,000 BTUs of
natural gas per gallon of production. We have service agreements for the natural gas we need and pay tariff fees to providers
that transport the gas through pipelines to our plants.
Electricity. Our plants require between 0.5 and 1.2 kilowatt hours of electricity per gallon of production. Local utilities
supply the necessary electricity to all of our ethanol plants.
Water. While some of our plants satisfy a majority of their water requirements from wells located on their respective
properties, each plant also obtains drinkable water from local municipal water sources. Each facility operates a filtration
system to purify the well water that is used 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 in the production process.
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Agribusiness Segment
Our agribusiness segment facilities include five grain elevators in four states with combined grain storage capacity of
approximately 11.6 million bushels, a cattle feedlot operation with the capacity to support 70,000 head of cattle and 2.8
million bushels of grain storage capacity, and grain storage at our ethanol plants of approximately 44.2 million bushels,
detailed in the following table:
Facility Location
On-Site Grain Storage Capacity
(thousands of bushels)
Grain Elevators
Archer, Nebraska
Essex, Iowa
Hopkins, Missouri
Kismet, Kansas
St. Edward, Nebraska
Feedlot Operation
Kismet, Kansas
Ethanol Plants
Atkinson, Nebraska
Bluffton, Indiana
Central City, Nebraska
Fairmont, Minnesota
Hereford, Texas
Hopewell, Virginia
Lakota, Iowa
Obion, Tennessee
Ord, Nebraska
Otter Tail, Minnesota
Riga, Michigan
Shenandoah, Iowa
Superior, Iowa
Wood River, Nebraska
Total
1,246
3,651
3,007
1,650
2,110
2,785
3,716
4,789
1,400
1,611
4,800
1,000
4,952
8,261
2,266
2,504
2,321
636
2,477
3,459
58,641
We buy bulk grain, primarily corn and soybeans, from area producers, and provide grain drying and storage services to
those producers. We buy cattle from producers and order buyers, the majority of which are from Kansas, Missouri, Oklahoma
and Texas. The grain is used as feedstock for our ethanol plants or sold to grain processing companies and area livestock
producers. The cattle are sold to meat processors. Bulk grain and cattle commodities are traded on commodity exchanges.
Inventory values are affected by changes in these markets and spreads. To mitigate risks related to market fluctuations from
purchase and sale commitments of grain and cattle, as well as grain and cattle held in inventory, we enter into exchange-
traded futures and options contracts that function as economic hedges at times.
Seasonality is present within our agribusiness operations. The fall harvest period typically results in higher handling
margins and stronger financial results during the fourth quarter of each year.
Marketing and Distribution Segment
Through Green Plains Trade, we market the ethanol we produce and a third-party produces to local, regional, national
and international customers. We also purchase ethanol from independent producers for pricing arbitrage. To achieve the best
price for the ethanol we market, we sell to various markets under sales agreements with integrated energy companies;
retailers, traders and resellers in the United States and buyers for export to Brazil, Canada, Europe and other international
markets. Under these agreements, ethanol is priced under fixed and indexed pricing arrangements.
We market wet, modified wet and dried distillers grains to local markets and dried distillers grains to local, national and
international markets. The bulk of our demand is for deliveries to geographic regions that do not have significant local corn
or distillers grains production.
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Our markets can be further segmented by geographic region and livestock industry. Most of our modified wet distillers
grains are sold to midwestern feedlot markets. Our dried distillers grains are shipped to feedlots and poultry markets, as well
as Texas and West Coast rail markets. A substantial amount of dried distillers grains are shipped by barge and rail to regional
and national markets. Some of our distillers grains are shipped by truck to dairy, beef, and poultry operations in the eastern
United States. We also ship by railcar to Eastern and Southeastern feed mills, poultry and dairy operations, and domestic
trade companies. Dried distillers grains are also sold to exporters for shipment to international markets. Our largest export
markets in 2015 included Vietnam, Thailand, Korea and Mexico. Access to diversified markets allows us to sell product to
customers offering the highest net price.
Our corn oil is sold primarily to biodiesel manufactures and, to a lesser extent, feedlot and poultry markets. We 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. We also transport corn oil by rail to national markets as well as to exporters for shipment to
international markets.
Our railcar fleet for the marketing and distribution segment consists of approximately 900 leased hopper cars for the
transportation of distillers grains and approximately 100 leased tank cars for the transportation of corn oil. The initial terms of
the lease contracts are for periods up to ten years.
Partnership Segment
Our partnership segment provides fuel storage and transportation services through its (i) 30 ethanol storage facilities
located at or near our 14 ethanol production plants, (ii) eight fuel terminal facilities located near major rail lines, and (iii) a
leased railcar fleet and other transportation assets.
Transportation and Delivery. Most ethanol plants are situated near major highways or rail lines to ensure efficient
movement. We distribute ethanol by moving product from our ethanol plants to bulk terminals by railcar or truck. We also
manage the logistics and transportation requirements of our customers to improve our fleet’s efficiency and reduce operating
costs.
Deliveries within 150 miles of the partnership’s fuel terminal facilities and our plants are generally transported by truck.
Deliveries to distant markets are shipped using major U.S. rail carriers that can switch cars to other major railroads, allowing
our plants to ship product throughout the United States.
To meet the challenge of marketing ethanol and distillers grains to diverse market segments, several of our plants are
capable of handling more than 150 railcars. Some of our locations have large loop tracks with unit train loading capabilities
for both ethanol and dried distillers grains and spurs to connect the loop to the mainline or allow the movement and storage of
railcars on site.
The partnership’s railcar fleet consists of approximately 2,500 leased tank cars for the transportation of ethanol. The
initial terms of the lease contracts are for periods up to ten years.
We seek to optimize the partnership’s railcar assets and will transport products other than ethanol and distillers grains
depending on market opportunities and have used a portion of our railcar fleet to transport crude oil for third parties and to
lease railcars to other users.
Terminal and Distribution Services. Ethanol is transported from the partnership’s terminals to third-party terminal racks
where it is blended with gasoline and transferred to the loading rack for delivery by truck to retail gas stations. The
partnership owns and operates fuel holding tanks and terminals, and provide terminal services and logistics solutions to
markets that do not have efficient access to renewable fuels. The partnership operates fuel terminals at one owned and seven
leased locations in seven states with a combined storage capacity of approximately 7.4 mmg and throughput capacity of
approximately 822 mmgy. We also have 30 ethanol storage facilities located at or near our 14 ethanol production plants with
a combined storage capacity of approximately 31.8 million gallons and throughput capacity of approximately 1.7 bgy.
12
Facility Location
Storage Capacity
(thousands of gallons)
Fuel Terminals
Birmingham, Alabama - Unit Train Terminal
Birmingham, Alabama - Other
Bossier City, Louisiana
Collins, Mississippi
Little Rock, Arkansas
Louisville, Kentucky
Nashville, Tennessee
Oklahoma City, Oklahoma
Ethanol Plants
Atkinson, Nebraska
Bluffton, Indiana
Central City, Nebraska
Fairmont, Minnesota
Hereford, Texas
Hopewell, Virginia
Lakota, Iowa
Obion, Tennessee
Ord, Nebraska
Otter Tail, Minnesota
Riga, Michigan
Shenandoah, Iowa
Superior, Iowa
Wood River, Nebraska
Total
Our Competition
Domestic Ethanol Competitors
6,542
120
180
180
30
60
160
150
2,074
3,000
2,250
3,124
4,406
761
2,500
3,000
1,550
2,000
1,239
1,524
1,238
3,124
39,212
We compete with other domestic ethanol producers. According to Ethanol Producer magazine, there were 216 ethanol-
producing plants in the United States capable of producing 15.7 billion gallons of ethanol annually as of December 31, 2015.
The industry does not typically operate at 100% of capacity. Historical annual production rates to total plant capacity
averages between the high 80 percent to low 90 percent range. The three largest ethanol producers by capacity in North
America are: Archer Daniels Midland Company, POET and Valero Energy Corporation. We are the fourth largest producer
by capacity, followed by Flint Hills Resources. The top five producers’ annual production capacity ranges between
approximately 800 mmgy and 1,800 mmgy.
In addition, our competitors include plants owned by farmers, oil refiners and retail fuel operators. These competitors
may continue to operate their plants even when market conditions are not favorable due to the benefits realized from their
other operations.
Demand for corn from ethanol plants and other corn consumers exists in all areas and regions in which we operate. At
December 31, 2015, Iowa, Indiana, Michigan, Minnesota, Nebraska and Tennessee had a total of 111 operational ethanol
plants, according to Ethanol Producer magazine. Iowa and Nebraska have the largest concentration of operational plants,
including 42 primarily in the northern and central Iowa and 26 in Nebraska.
Foreign Ethanol Competitors
We also complete globally with production from other countries. Brazil is the second largest ethanol producer in the
world after the United States. Brazil’s ethanol production is made from sugarcane and, depending on feedstock prices, may
be less expensive to produce than ethanol made from corn. Under RFS II, certain parties are obligated to meet an advanced
biofuel standard. In recent years, sugarcane ethanol imported from Brazil has been one of the most economical means for
13
obligated parties to meet this standard. Any significant additional ethanol production capacity could create excess supply in
world markets, resulting in lower ethanol prices throughout the world, including the United States.
Other Competition
Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development. Ethanol
production technologies also continue to evolve. We expect changes to occur primarily in the area of ethanol made from
other sources of biomass, such as switch grass or fast-growing poplar trees. Since all of our plants are designed as single-
feedstock facilities, adapting our plants for a different feedstock or process system would require additional capital
investments and retooling.
Regulatory Matters
Government Ethanol Programs and Policies
Demand for cleaner, more sustainable transportation fuel is growing worldwide. Growth in ethanol demand has been
driven by policies, adopted by more than 30 countries including the EU, which is regulated by a single policy with specific
national targets for each country, calling for increased ethanol in motor fuel. Ethanol has become a crucial component of the
global fuel supply as an economical oxygenate and source of octanes.
In an effort to reduce the United States’ dependence on foreign oil, federal and state governments enacted numerous
policies, incentives and subsidies to encourage use of domestically produced alternative fuels. While the ethanol industry has
benefited significantly as a result, the need for economic incentives may diminish as ethanol continues to gain acceptance as
a primary fuel and fuel extender.
In the United States, the federal government mandates the use of renewable fuels under RFS II. The EPA assigns
individual refiners, blenders and importers the volume of renewable fuels they are obligated to use based on their percentage
of total fuel sales. Obligated parties use RINs to show compliance with RFS-mandated volumes. RINs are attached to
renewable fuels by producers and detached when the renewable fuel is blended with transportation fuel or traded in the open
market. The market price of detached RINs affects the price of ethanol in certain markets and influences the purchasing
decisions by obligated parties.
RFS II has been a driving factor in the growth of ethanol usage in the United States. RFS II increased the required
volume of renewable fuel to be blended with transportation fuel, mandating a minimum of 12.0 billion gallons of corn-based
renewable fuel in 2010 and increasing that requirement by 600 million gallons each year to 15.0 billion gallons in 2015.
The EPA also has the authority to waive the mandates in whole or in part if one of two conditions are met: (1) there is
inadequate domestic renewable fuel supply, or (2) implementation of the requirement severely harms the economy or
environment of a state, region or the United States. During the third quarter of 2012, several waiver requests were filed with
the EPA due to drought conditions, which were subsequently denied.
Several amendments to the Energy Policy Modernization Act were introduced in the U.S. Senate that were removed
from consideration in early February 2016, including amendments to repeal RFS II, eliminate the corn ethanol mandate in
RFS II and prohibit the U.S. Secretary of Agriculture from using Commodity Credit Corporation or other funds to construct
blender pumps. It is not known if a vote on the numerous amendments to the EPMA or senate passage of the EPMA will take
place.
In November 2013, the EPA released its Notice of Proposed Rulemaking for the 2014 Renewable Fuel Standard, seeking
comment on a range of total renewable fuel volumes and proposing a level within the range of 15.2 billion gallons, including
approximately 13.0 billion gallons of corn-derived renewable fuel. The proposal included a variety of approaches for setting
the 2014 standard and a number of production and consumption ranges of biofuels covered by RFS II to address two
constraints of RFS II: (1) the volume limitations of ethanol given the practical constraints of vehicles that can use higher
ethanol blends, and (2) the industry’s ability to produce sufficient volumes of qualifying renewable fuel. In November 2014,
the EPA rescinded its 2013 proposal. Furthermore, the EPA did not finalize the 2014 standard under the RFS program before
the end of the year.
On June 10, 2015, the EPA proposed volume targets for conventional ethanol of 13.25 billion gallons, 13.40 billion
gallons and 14.00 billion gallons for 2014, 2015 and 2016, respectively. On November 30, 2015, the EPA announced final
14
volume requirements for conventional ethanol that were higher than levels proposed in June of 13.61 billion gallons, 14.05
billion gallons and 14.50 billion gallons for 2014, 2015 and 2016, respectively.
On January 6, 2015, H.R. 21 was introduced to provide a comprehensive assessment of the scientific and technical
research on the implications of mid-level ethanol blends, seeking to eliminate the waiver granted by the EPA allowing E15 in
2001 and newer cars and light trucks. On January 21, 2015, H.R. 434 was introduced, seeking to modify the Clean Air Act by
limiting or removing the authority of the EPA to grant waivers for higher blends of ethanol in the U.S. gasoline supply and
repeal existing waivers that the EPA previously granted. On February 4, 2015, H.R.704 was introduced to limit ethanol
blends greater than 10% in the U.S. fuel supply and repeal the renewable fuel standard.
CAFE was first enacted by Congress in 1975 to reduce energy consumption by increasing the fuel economy of cars and
light trucks. CAFE has helped the ethanol industry by encouraging the use of E85. CAFE provides a 54% efficiency bonus to
flexible-fuel vehicles running on E85. According to the U.S. Department of Energy, there are 17.4 million flexible fuel
vehicles on U.S. roads today. E85 is sold at more than 3,000 fuel stations in 47 states.
In April 2013, the Master Limited Partnership Parity Act was introduced in the U.S. House of Representatives as H.R.
1696 to extend the publicly traded partnership ownership structure to renewable energy projects, including ethanol
production. The legislation was proposed to provide a more level financing system and tax burden for renewable energy
equal to fossil energy projects. H.R. 1696 did not advance out of committee during the 113th Congress and its co-sponsors
have not re-introduced the bill.
In addition to these federal standards, many states have taken steps to encourage ethanol consumption including tax
credits, mandated blend rates and subsidies.
In July 2010, President Obama signed the Reform Act to improve transparency and accountability in the derivative
markets. The Reform Act increases the regulatory authority of the CFTC regarding over-the-counter derivatives; however,
there is uncertainty remaining on several issues related to market clearing, market participants and capital requirements.
Although only some of the issues have been addressed, we do not anticipate any material impact to our risk management
strategy.
In January 2012, the Domestic Alternative Fuels Act of 2012 was introduced in the U.S. House of Representatives and
re-introduced in March 2013 as H.R. 1214 to protect consumers who unintentionally use an alternative fuel that is not
approved for use by the automobile manufacturer. Some automobile manufacturers have stated that any damage resulting
from misfueling is not covered under warranty. In June 2013, the American Fuel Protection Act of 2013, or H.R. 2267, was
introduced in the U.S. House of Representatives to make the United States exclusively liable for damages resulting from, or
aggravated by, the inclusion of ethanol in transportation fuel. Both bills failed to advance out of congressional committee and
were not enacted into law.
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, which the EPA later addressed in RFS II.
While our plants our grandfathered at their current authorized capacity under the RFS II mandate, expansion above these
levels will require a 20% reduction in greenhouse gas emissions from a 2005 baseline measurement. This may require us to
obtain additional permits, achieve the EPA’s efficient producer status under the pathway petition program, install advanced
technology or reduce drying distillers grains.
CARB adopted 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 in November 2012, and revised LCFS regulations took effect in
January 2013.
15
The U.S. ethanol industry relies heavily on tank cars to deliver its product to market. As of January 1, 2016, the company
leases approximately 2,600 tank cars, including 2,500 leased by our partnership to transport ethanol. In July 2014, the DOT
proposed new regulations to improve the transportation of flammable materials by rail, which it finalized on May 1, 2015.
The Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains calls for an enhanced tank
car standard known as the DOT specification 117 and establishes a schedule to retrofit or replace older tank cars that carry
crude oil and ethanol. The rule also establishes braking standards intended to reduce the severity of accidents and new
operational protocols.
Parts of our business are 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
private sector associations. Our production levels are indirectly affected by federal government programs, which include the
USDA, acreage control and price support programs. In addition, the grain we sell must conform to official grade standards
imposed by the USDA. Other examples of government policies that may impact our business include tariffs, duties,
subsidies, import and export restrictions and outright embargos.
In September 2015, in response to FSMA, the FDA issued rules for Current Good Manufacturing Practice, Hazard
Analysis and Risk-Based Preventative Controls for food for animals. The rules require FDA-registered food facilities to
address safety concerns for sourcing, manufacturing and shipping food products through food safety programs and plans,
which includes conducting hazard analyses, developing risk-based preventative controls and monitoring, and addressing
intentional adulteration, recalls, sanitary transportation and supplier verification. While we are still reviewing the regulation,
we may need additional resources to comply with the new requirements since our distillers grains are used as feed for
animals. Our cattle feedlot operation is included under the FDA’s definition of “farm” and is exempt from the FSMA
requirements.
We also employ maintenance and operations personnel at each of our ethanol plants. In addition to the attention we place
on the health and safety of our employees, the operations of our facilities are regulated by the Occupational Safety and Health
Administration.
BioProcess Algae Joint Venture
We are a majority owner of the BioProcess Algae joint venture that was formed in 2008. The joint venture is focused on
developing technology to grow and harvest algae in commercially viable quantities, using the carbon dioxide that is created
as part of the ethanol production process. Through multiple stages of expansion, BioProcess Algae constructed a five-acre
algae farm next to our Shenandoah, Iowa ethanol plant and has operated its Grower Harvesters™ bioreactors since 2011. The
joint venture continues to take critical steps towards commercialization, including verifying growth rates, energy balances,
capital requirements and operating expenses of the technology. In 2015, we narrowed our focus on human nutrition,
concentrating on protein value and EPA omega-3 fatty acids, and acquired a second production location, located in Texas, to
further support our research and development efforts.
Employees
On December 31, 2015, we had approximately 995 full-time, part-time, temporary and seasonal employees, including
163 employees at our corporate office in Omaha, Nebraska.
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 are available on our website at www.gpreinc.com shortly after we file or furnish the information with the SEC.
You can also find the charters of our audit, compensation and nominating committees, as well as our code of ethics in the
corporate governance section of our website. The information found on our website is not part of this or any other report we
file with or furnish to the SEC. For more information on our partnership, please visit www.greenplainspartners.com.
Alternatively, investors 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 or visit the SEC website at www.sec.gov to access our reports, proxy and information
statements filed with the SEC.
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Item 1A. Risk Factors.
We operate in an industry that has numerous risks, many of which are beyond our control or are driven by factors that
cannot always be predicted. Investors should carefully consider all of the risk factors in conjunction with the other
information included in this report as our financial results and condition or market value could be adversely affected if any of
these risks were to occur.
Risks Related to our Business and Industry
Our profitability is dependent on managing the spread between the price of corn, natural gas, ethanol, distillers grains and
corn oil.
Our ethanol production results are highly sensitive to commodity prices, including the spread between the corn and
natural gas we purchase, and the ethanol, distillers grains and corn oil we sell. Price and supply are subject to market forces,
such as weather, domestic and global demand, shortages, export prices, crude oil prices, currency valuations and government
policies in the United States and around the world, over which we have no control. Price volatility of these commodities may
cause our operating results to fluctuate substantially. Increases in corn or natural gas prices or decreases in ethanol, distillers
grains and corn oil prices may make it unprofitable to operate our plants. No assurance can be given that we will purchase
corn and natural gas or sell ethanol, distillers grains and corn oil at or near current prices. Consequently, our results of
operations and financial position may be adversely affected by increases in corn or natural gas prices or decreases in ethanol,
distillers grains and corn oil prices.
We continuously monitor the profitability of our ethanol plants using a variety of risk management tools and hedging
strategies, when appropriate. In recent years, the spread between ethanol and corn prices has fluctuated widely and narrowed
significantly. Fluctuations are likely to continue. A sustained narrow spread or further reduction in the spread between
ethanol and corn prices as a result of increased corn prices or decreased ethanol prices, would adversely affect our results of
operations and financial position. Should our combined revenue from ethanol, distillers grains and corn oil fall below our cost
of production, we could decide to slow or suspend production at some or all of our plants.
The commodities we buy and sell are subject to price volatility and uncertainty.
Corn. We are generally unable to pass increased corn costs to our customers since ethanol competes with other fuels. At
certain corn prices, ethanol may be uneconomical to produce. Ethanol plants, livestock industries and other corn-consuming
enterprises put significant price pressure on local corn markets. In addition, local corn supplies and prices could be adversely
affected by 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 drought.
Natural Gas. The price and availability of natural gas are subject to volatile market conditions. These market conditions
are often affected by factors beyond our control, such as weather, overall economic conditions and government regulations.
Significant disruptions in natural gas supply could impair our ability to produce ethanol. Furthermore, increases in natural gas
price or changes in our cost relative to our competitors may adversely affect our results of operations and financial position.
Ethanol. Our revenues are dependent on market prices for ethanol which can be volatile as a result of a number of
factors, including: the price and availability of competing fuels; the overall supply and demand for ethanol and corn; the price
of gasoline, crude oil and corn; and government policies. The low margin environment for 2015 was impacted by the energy
market which saw historic low crude oil prices as world supply reached record levels.
Ethanol is marketed as a fuel additive that reduces vehicle emissions, an economical source of octanes and, to a lesser
extent, a gasoline substitute. Consequently, gasoline supply and demand affect the price of ethanol. Should gasoline prices or
demand decrease significantly, our results of operations could be materially harmed.
Ethanol imports also affect domestic supply and demand. Imported ethanol is not subject to an import tariff and, under
RFS II, sugarcane ethanol from Brazil is one of the most economical means for obligated parties to meet the advanced
biofuel standard.
Distillers Grains. Increased U.S. dry mill ethanol production has resulted in increased distillers grains production.
Should this trend continue, distillers grains prices could fall unless demand increases or other market sources are found. The
price of distillers grains has historically been correlated with the price of corn. Occasionally, the price of distillers grains will
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lag behind fluctuations in corn or other feedstock prices, lowering our cost recovery percentage.
Distillers grains compete with other protein-based animal feed products. 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.
Corn Oil. Industrial corn oil is generally marketed as a biodiesel feedstock; therefore, the price of corn oil is affected by
demand for biodiesel. In general, corn oil prices follow the prices of heating oil and soybean oil. Decreases in the price of
corn oil could have an unfavorable impact on our business.
Our risk management strategies could be ineffective and expose us to decreased liquidity.
As market conditions warrant, we use forward contracts to sell some of our ethanol, distillers grains and corn oil
production or buy some of the corn or natural gas we need to partially offset commodity price volatility. We also engage in
other hedging transactions involving exchange-traded futures contracts for corn, natural gas and ethanol. The financial impact
of these activities depends on the price of the commodities involved and our ability to physically receive or deliver the
commodities.
Hedging arrangements expose us to risk of financial loss when the counterparty defaults on its contract or, in the case of
exchange-traded contracts, when the expected differential between the price of the underlying and physical commodity
changes. Hedging activities can result in losses when a position is purchased in a declining market or sold in a rising market.
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 vary the amount of hedging and other risk mitigation strategies we undertake and sometimes
choose not to engage in hedging transactions at all. We cannot provide assurance that our risk management strategies
effectively offset commodity price volatility. If we fail to offset such volatility, our results of operations and financial
position may be adversely affected.
The use of derivative financial instruments frequently involves cash deposits with brokers, or margin calls. Sudden
changes in commodity prices may require additional cash deposits immediately. Depending on our open derivative positions,
we may need additional liquidity with little advance notice to cover margin calls. While we continuously monitor our
exposure to margin calls, we cannot guarantee we will be able to maintain adequate liquidity to cover margin calls in the
future.
Government mandates affecting ethanol usage could change and impact the ethanol market.
Under the provisions of the EISA, the EPA established a mandate setting the minimum volume of ethanol that must be
blended with gasoline under the RFS II, which affects the domestic market for ethanol. The EPA has the authority to waive
the requirements, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms
the economy or the environment.
Our operations could be adversely impacted by legislation that reduces the RFS II mandate. Such legislation has been
introduced in Congress, including the Renewable Fuel Standard Elimination Act, RFS Reform Bill and Domestic
Alternatives Fuels Act; however, these bills failed to make it out of congressional committee and were not enacted into law.
Similarly, should federal mandates regarding oxygenated gasoline be repealed, the market for domestic ethanol could
diminish.
Future demand will be influenced by economic incentives to blend based on the relative value of gasoline versus ethanol,
taking into consideration the octane value of ethanol, environmental requirements and the RFS II mandate. A significant
increase in supply beyond the RFS II mandate could have an adverse impact on ethanol prices. Moreover, changes to RFS II
which significantly affect the market price of RINs could negatively impact the price of ethanol or cause imported sugarcane
ethanol to become more economical than domestic ethanol.
Flexible-fuel vehicles, which are designed to run on a mixture of fuels such as E85, receive preferential treatment to
meet corporate average fuel economy standards. Absent CAFE preferences, auto manufacturers may not be willing to build
flexible-fuel vehicles, reducing the growth of E85 markets and resulting in lower ethanol prices.
To the extent 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.
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Future demand for ethanol is uncertain and changes in public perception, consumer acceptance and overall consumer
demand for transportation fuel could affect demand.
Ethanol production has not been without controversy. While many trade groups, academics and government agencies
support ethanol as a fuel additive that promotes a cleaner environment, others criticize the ethanol industry claiming
production consumes considerably more energy, emits more greenhouse gases than other biofuels and depletes water
resources. Some studies suggest ethanol produced from corn is less efficient than ethanol produced from switch grass or
wheat grain. Others claim corn-based ethanol negatively impacts consumers by causing the prices of dairy, meat and other
food derived from corn-consuming livestock to increase. Ethanol critics also contend the industry redirects corn supplies
from international food markets to domestic fuel markets.
If negative views of corn-based ethanol production persist and gain acceptance, support for existing measures promoting
domestic production and its use could decline and lead to reduction or repeal of federal mandates, which could adversely
affect ethanol demand. These views could also have a negative impact on public perception and overall acceptance of ethanol
as an alternative fuel.
There are limited markets for ethanol beyond the federal mandates. Consumer acceptance of E15 and E85 fuels may be
necessary before ethanol can achieve significant market share growth. Discretionary and E85 blending are important
secondary markets. Discretionary blending is often determined by the price of ethanol relative to gasoline. When
discretionary blending is financially unattractive, the demand for ethanol may be reduced. Demand for ethanol is also
affected by overall demand for transportation fuel, which is affected by cost, number of miles traveled and vehicle fuel
economy. Reduced demand for ethanol may depress the value of our products, erode our margins, and reduce our ability to
generate revenue or operate profitably.
Increased federal support of cellulosic ethanol could result in increased competition to corn-based ethanol producers.
Recent legislation, including the American Recovery and Reinvestment Act of 2009 and EISA, provides numerous
funding opportunities to support cellulosic ethanol production. In addition, RFS II mandates an increasing level of biofuel
production that is not derived from corn. Federal policies suggest a long-term political preference for cellulosic processing
using feedstocks such as switch grass, silage, wood chips or other forms of biomass. Cellulosic ethanol may be viewed more
favorably since the feedstock is not likely diverted from food production. In addition, cellulosic ethanol may have a smaller
carbon footprint because the feedstock does not require energy-intensive fertilizers or industrial production processes. Several
cellulosic ethanol plants are currently under development. As research and development programs persist, there is risk that
cellulosic ethanol could displace corn ethanol.
Any changes in federal mandates 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 investments to convert
production to cellulosic ethanol. Furthermore, 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 could have a significant adverse impact on our business.
Our ability to maintain the required regulatory permits or manage changes in environmental and safety regulations is
essential to successfully operating our plants.
Our ethanol production and agribusiness segments are subject to extensive air, water and other environmental
regulations. Ethanol production involves the emission of various airborne pollutants, including particulate, carbon dioxide,
nitrogen oxides, hazardous air pollutants and volatile organic compounds, which requires numerous environmental permits to
operate our plants. Governing state agencies could impose costly conditions or restrictions that are detrimental to our
profitability and have a material adverse effect on our operations, cash flows and financial position.
Environmental laws and regulations at the federal and state level are subject to change. These changes can also 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 though we currently have the proper permits, we may
be required to invest or spend considerable resources in order to comply with future environmental regulations. Furthermore,
ongoing plant operations, which are governed by the Occupational Safety and Health Administration, may change in a way
that increases the cost of plant operations. Any of these events could have a material adverse effect on our operations, cash
flows and financial position.
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Part of our business is regulated by environmental laws and regulations governing the labeling, use, storage, discharge
and disposal of hazardous materials. Since we handle and use hazardous substances, changes in environmental requirements
or an unanticipated significant adverse environmental event could have a negative impact on our business. While we strive to
comply with all environmental requirements, we cannot provide assurance that we have been in compliance at all times or
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 hazardous substances. We are also
exposed to residual risk by our land and facilities which may have environmental liabilities from prior use. Changes in
environmental regulations may require us to modify existing plant and processing facilities, which could significantly
increase our cost of operations.
The distillers grains that we produce as part of the ethanol production process are used as feed for animals. Should the
regulations under the FSMA regarding preventive controls for animal food apply to us, we may need additional resources to
comply with the newly established requirements.
Any inability to generate or obtain RINs could adversely affect our operating margins.
Nearly all of our ethanol production is sold with RINs that are used by our customers to comply with the Renewable Fuel
Standard. Should our production not meet the EPA’s requirements for RIN generation in the future, we would need to
purchase RINs in the open market or sell our ethanol at lower prices to compensate for the absence of RINs. The price of
RINs depends on a variety of factors, including the availability of qualifying biofuels and RINs for purchase, production
levels of transportation fuel and percentage mix of ethanol with other fuels, and cannot be predicted. Failure to obtain
sufficient RINs or reliance on invalid RINs could subject us to fines and penalties imposed by the EPA, which could
adversely affect our results of operations, cash flows and financial condition.
We trade ethanol and associated RINs acquired from third-parties. Should it be discovered the associated RINs we
purchased were invalid, albeit unknowingly, we could be subject to substantial penalties if we are assessed the maximum
amount allowed by law. Prior to 2013, the EPA assessed only modest penalties for RIN violations; however, with the
industry now on notice of the possibility of invalid RINs, the EPA could assess much higher penalties going forward, which
could have an adverse impact on our profitability.
Compliance with evolving environmental, health and safety laws and regulations, particularly those related to climate
change, could be costly.
Our plants emit carbon dioxide as a by-product of ethanol production. In February 2010, the EPA released its final
regulations on RFS II, grandfathering our plants at their current authorized capacity. Expansion above these levels will
require a 20% reduction in greenhouse gas emissions from the 2005 baseline measurement. Separately, CARB adopted a
LCFS that took effect in January 2013, which requires a 10% reduction in the average carbon intensity of gasoline and diesel
transportation fuels from 2010 to 2020. An ILUC component is included in the greenhouse gas emission calculation, which
may have an adverse impact on the market for corn-based ethanol in California.
To expand our production capacity, federal and state regulations may require us to obtain additional permits, achieve
EPA’s efficient producer status under the pathway petition program, install advanced technology or reduce drying distillers
grains. Compliance with future laws or regulations to decrease 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.
Global competition could affect our profitability.
We compete with producers in the United States and abroad. Depending on feedstock, labor and other production costs,
producers in other countries, such as Brazil, may be able to produce ethanol cheaper than we can. Under RFS II, certain
parties are obligated to meet an advanced biofuel standard. In recent years, sugarcane ethanol imported from Brazil has been
one of the most economical means for obligated parties to meet this standard. While transportation costs, infrastructure
constraints and demand may temper the impact of ethanol imports, foreign competition remains a risk to our business.
Moreover, significant additional foreign ethanol production could create excess supply, which could result in lower ethanol
prices throughout the world, including the United States. Any penetration of ethanol imports into the domestic market may
have a material adverse effect on our operations, cash flows and financial position.
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Increased ethanol industry penetration by oil and other multinational companies could impact our margins.
We operate in a very competitive environment. The ethanol industry consists primarily of smaller entities engaged
exclusively in ethanol production and large integrated grain companies that produce ethanol in addition to their base grain
businesses. We compete for capital, labor, corn and other resources with these companies.
Until recently, oil companies, petrochemical refiners and gasoline retailers were not engaged in ethanol production even
though they form the primary distribution network for ethanol blended with gasoline. During the past five years, several large
oil companies have started producing ethanol. If these companies increase their ethanol plant ownership or additional
companies commence production, the need to purchase ethanol from independent producers like us could diminish and
adversely effect on our operations, cash flows and financial position.
Sales of distillers grains depend on its continued market acceptance as livestock feed.
Antibiotics may be used during the fermentation process to control bacterial contamination; therefore, it is possible for
antibiotics to be present in small quantities in our distillers grains, which is a co-product of the fermentation process and
marketed as an animal feed. The FDA has expressed concern about potential animal and human health hazards using
distillers grains with antibiotic residue as an animal feed. Should the FDA introduce regulations limiting the sale of such
distillers grains in domestic or international markets, the market value of our distillers grains could be diminished, which
would negatively impact our profitability.
Independently, if public perception regarding 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 could be
negatively impacted, which would adversely affect our profitability.
We extract industrial grade corn oil from the whole stillage process before producing distillers grains. Several
universities are trying to determine how corn oil extraction affects 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.
International activities such as boycotts, embargoes, product rejection, and compliance matters, may have an adverse effect
on our results of operations.
In 2010, the market share of U.S. ethanol exports to the EU began to increase significantly while the market share of
European ethanol production began to modestly decline. In October 2011, the European Commission initiated anti-dumping
and anti-subsidy investigations. In 2013, the EU imposed a five-year tariff of $83.33 per metric ton on U.S. ethanol to
discourage foreign competition.
Since 2010, approximately 25% of distillers grains produced in the United States have been exported. China has been the
largest importer of distillers grains in the world, importing approximately 50% of the world exports in 2015. In 2013, China
began rejecting U.S. dried distillers grains because it contained genetically modified corn not yet approved for import. In
early 2015, China lifted this ban, allowing distillers grains into their country. In January 2016, China’s Ministry of
Commerce once again initiated an anti-dumping investigation into U.S.-produced dried distillers grains exported to China.
Should the investigation result in additional findings, the market for distillers grains could be negatively impacted in the
future and may affect our profitability.
Our agribusiness operations are subject to significant government and private sector regulations.
Our agribusiness operations are regulated by government and private sector associations that can impose significant costs
on our business. Failure to comply could result in additional expenditures, fines or criminal action. Our production levels,
markets and grains we merchandise are affected by federal government programs, which include USDA acreage control and
price support programs. Government policies such as tariffs, duties, subsidies, import and export restrictions and embargos
can also impact our business. Changes in government policies and producer support could impact the type and amount of
grains planted, which could affect our ability to buy grain. Export restrictions or tariffs could limit sales opportunities outside
of the United States.
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Our agribusiness segment is affected by the supply and demand for grain, and is sensitive to factors that are often outside of
our control.
Within our agribusiness segment, we compete with grain merchandisers, processors and end-users to buy grain, and
grain merchandisers, private elevator operators and cooperatives to sell it. Many of our competitors are significantly larger
than us and compete in more diverse markets. Failure to compete effectively would impact our profitability.
Fixed-price purchase obligations and grain inventories expose us to market price risk between the time of purchase and
final sale. Weather, economic, political, environmental and technological conditions and developments, as well as other
factors beyond our control, local and worldwide, can affect supply, demand and consequently, the value of our inventories
held for sale and adversely affect profitability of the agribusiness segment.
We hedge the majority of our grain inventory with derivative instruments to manage the risk associated with commodity
price changes. However, we are unable to hedge all of the risk due to timing, availability of hedge contract counterparties and
third-party credit risk. Furthermore, it is possible that the derivatives we employ are not effective in offsetting price changes.
This can happen when the derivative and the hedged item are not perfectly matched. Our grain derivatives, for example, do
not hedge the basis component, or the difference between the cash price at one of our grain facilities and the soonest
exchange-traded futures price, of our grain inventory and contracts. Although the basis component is smaller and generally
less volatile than the futures component of grain market prices, significant unfavorable movement in basis on grain positions
as large as ours may significantly impact our profitability.
Commodities futures trading is subject to extensive regulations.
The futures industry is subject to extensive regulation. Since we use exchange-traded futures contracts as part of our
business, we are required to comply with a wide range of requirements imposed by the CFTC, National Futures Association
and the exchanges on which we trade. These regulatory bodies are responsible for safeguarding the integrity of the futures
markets and protecting the interests of market participants. As a market participant, we may be subject to regulation
concerning trade practices, business conduct, reporting, position limits, record retention, the conduct of our officers and
employees, and other matters.
Failure to comply with the laws, rules or regulations applicable to futures trading could have adverse consequences. It is
possible for us, an officer or one of our employees to be subject to claims arising from acts that regulators assert violated
these laws, rules or regulations. Such claims could result in fines, settlements or suspended trading privileges, which could
have a material adverse impact on our business, financial condition or operating results.
Owning and operating a cattle feedlot operation involves numerous external factors that are outside of our control.
Our cattle feedlot operation involves numerous risks that could lead to increased costs or decreased demand for beef
products, which could have an adverse effect on our results of operations and financial condition, including:
constantly changing and potentially volatile supply and demand, which affect the cost of livestock and feed
ingredients and the sales price of our cattle;
outbreak of disease in our feedlot or public perception that an outbreak has occurred, which could lead to inadequate
supply, reduced consumer confidence in the safety and quality of beef products, adverse publicity, cancellation of
orders and import or export restrictions;
contamination or allegations of contamination of our products or our competitors’ products, which could subject us
to product liability claims or product recalls;
liabilities in excess of our insurance policy limits or related uninsurable risks if outbreaks of disease or other
conditions result in significant losses;
inability to attract sufficient customers to maximize operational efficiencies;
loss of one or more major customers, a substantial decline in customer orders or a significant decrease in beef prices
for a sustained period of time;
customer defaults on cattle, feed or other input financing;
diminished access to international markets, including import trade restrictions due to disease or other perceived
health or food safety issues, or changes in political or economic conditions;
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reduced red meat consumption due to dietary changes or other issues, leading to depressed cattle prices;
increased water costs due to water use restrictions, including those related to diminishing water table levels;
operational restrictions resulting from government regulations; and
risks relating to environmental hazards.
Our debt exposes us to numerous risks that could have significant consequences to our shareholders.
Risks related to the level of debt we have include:
requiring a substantial portion of cash to be dedicated for debt payments, reducing the availability of cash flow for
working capital, capital expenditures and other general business activities;
requiring a substantial portion of cash reserves to be held for debt service, limiting our ability to invest in new
growth opportunities;
limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other
activities;
limiting our flexibility to plan for or react to changes in the businesses and industries in which we operate;
increasing our vulnerability to 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 there may be no assets left for shareholders in
the event of a liquidation; and
limiting our ability to make operational decisions regarding our business, including limiting our 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 at variable rates would increase even though the amount borrowed remained the same, decreasing net
income.
Our ability to make scheduled payments of principal and interest, to make additional payments required under financial
covenants, or to refinance our debt depends on our future performance, which is subject to economic, financial, competitive
and other factors beyond our control. Our business may not continue generating cash flow sufficient to service our debt
because of such factors, including the spread between corn prices and ethanol, corn oil and distillers grains prices. If we are
unable to generate sufficient cash flows, we may be required to sell assets, restructure debt or obtain additional equity capital
on terms that are onerous or highly dilutive. Our ability to refinance our debt will depend on capital markets and our financial
condition at that 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 default on our debt obligations.
We are not restricted from incurring additional debt, pledging assets, recapitalizing our debt or taking a number of other
actions that could diminish our ability to make payments.
We are required to comply with a number of covenants under our existing loan agreements that could hinder our growth.
The loan agreements governing our secured debt financing and the 3.25% convertible senior notes due 2018 contain a
number of restrictive affirmative and negative covenants, which limit our ability to incur additional debt; exceed certain
limits; pay dividends or distributions; or merge, consolidate or dispose of substantially all of our assets.
We are required to maintain specified financial ratios, including minimum cash flow coverage, working capital and
tangible net worth under certain loan agreements. Other agreements require us to use a portion of excess cash flow generated
by our operations to prepay the respective term debt. A breach of these covenants could result in default, and if such default
is not cured or waived, our lenders could accelerate our debt and declare it immediately due and payable. If this occurs, we
may not be able to repay or borrow sufficient funds to refinance the debt. Even if financing is available, it may not be on
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acceptable terms. No assurance can be given that our future operating results will be sufficient to comply with these
covenants or remedy default.
In the past, we have received waivers from our lenders for failure to meet certain financial covenants and amended our
loan agreements to change these covenants. In the event we are unable to comply with these covenants in the future, we
cannot provide assurance that we will be able to obtain the necessary waivers or amend our loan agreements to prevent
default. Under our 3.25% convertible senior notes, default on any loan in excess of $10.0 million could result in the notes
being declared due and payable.
We operate in a capital intensive business and rely on cash generated from operations and external financing, which could
be limited.
Some ethanol producers have faced financial distress, culminating to bankruptcy filings by several companies over the
past seven years. This, combined with capital market volatility, has resulted in reduced available capital for the ethanol
industry in general. The majority of our ethanol plants’ operations and related levels of working capital are funded by long-
term credit facilities. Increased commodity prices could increase liquidity requirements. Our operating cash flow is dependent
on overall commodity market conditions as well as our ability to operate profitably. In addition, we may need to raise
additional financing to fund growth. In some market environments, we may have limited access to incremental financing,
which could defer or cancel growth projects, reduce business activity or cause us to default on our existing debt agreements if
we are unable to meet our payment schedules. These events could have an adverse effect on our operations and financial
position.
Our subsidiaries’ debt facilities have ongoing payment requirements that we generally expect to meet from their
operating cash flow. Our ability to repay current and anticipated future debt will depend on our financial and operating
performance and successful implementation of our business strategies. Our financial and operational performance will
depend on numerous factors including prevailing economic conditions, commodity prices, and financial, business and other
factors beyond our control. If we cannot repay, refinance or extend our current debt at scheduled maturity dates, we could be
forced to reduce or delay capital expenditures, sell assets, restructure our debt or seek additional capital. If we are unable to
restructure our debt or raise funds, our operations could be harmed and the value of our stock could be significantly reduced.
We have limitations, as a holding company, in our ability to receive distributions from our subsidiaries.
We conduct most of our operations through our subsidiaries and rely on dividends or intercompany transfers of funds to
generate free cash flow. Some of our subsidiaries are currently, or are expected to be, limited in their ability to pay dividends
or make distributions under the terms of their financing agreements. Consequently, we cannot 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 default by providing additional cash to that subsidiary, even if sufficient cash
exists elsewhere within our organization.
Our success depends 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 places substantial
demands on our management, systems, internal controls, and financial and physical resources. If we acquire additional
operations, we may need to further develop our financial and managerial controls and reporting systems, and could incur
expenses related to hiring additional qualified personnel and expanding our information technology infrastructure. Our ability
to manage growth effectively could impact our results of operations, financial position and cash flows.
We may fail to realize the anticipated benefits of mergers, acquisitions, joint ventures or partnerships.
We have increased the size of our operations significantly through mergers and acquisitions and intend to continue
exploring potential growth opportunities. Acquisitions involve numerous risks that could harm our business, including:
difficulties integrating the operations, technologies, products, existing contracts, accounting processes and personnel
and realizing anticipated synergies of the combined business;
risks relating to environmental hazards on purchased sites;
risks relating to developing the necessary infrastructure for facilities or acquired sites, including access to rail
networks;
difficulties supporting and transitioning customers;
24
diversion of financial and management resources from existing operations;
the purchase price exceeding the value realized;
risks of entering new markets or areas outside of our core competencies;
potential loss of key employees, customers and strategic alliances from our existing or acquired business;
unanticipated problems or underlying liabilities; and
inability to generate sufficient revenue to offset acquisition and development costs.
The anticipated benefits of these transactions may not be fully realized or take longer to realize than expected.
We may also pursue growth through joint ventures or partnerships, which typically involve restrictions on actions that
the partnership or joint venture may take without the approval of the partners. These provisions could limit our ability to
manage the partnership or joint venture in a manner that serves our best interests.
Future acquisitions may involve issuing equity as payment or to finance the business or assets, which could dilute your
ownership interest. Furthermore, additional debt may be necessary to complete these transactions, which could have a
material adverse effect on our financial condition. Failure to 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 own a majority of a joint venture that is focused on developing technology to grow and harvest algae in
commercially viable quantities. The algae we produce have the potential to be used for high-quality feedstocks for human
nutrition, pharmaceutical applications, animal feed and biofuels. Our primary focus is to grow algae efficiently on a large
scale and further develop markets for algae. We believe this technology has specific applications for our ethanol plants that
emit carbon dioxide. If we are unable to achieve acceptable production rates, operating costs, capital requirements and
product market prices, we could fail to realize any benefit from capturing carbon dioxide to grow and harvest algae.
We depend on a continuous supply of energy and water to operate our plants.
Our plants require a substantial, uninterrupted supply of natural gas, electricity and water to operate. We rely on third
parties to provide these resources. We cannot provide assurance that we will be able to secure an adequate supply of energy
or water to support current or expected plant operations. If there is an interruption in the supply any reason, we may be
required to halt production. Halting production for an extended period of time could have a material adverse effect on our
operations, cash flows and financial position.
Replacement technologies could make corn-based ethanol or our process technology obsolete.
Ethanol is used primarily as an additive and oxygenate blended with gasoline. Critics of ethanol blends argue that it
decreases fuel economy, causes corrosion and damages fuel pumps. Prior to federal restrictions and ethanol mandates, methyl
tertiary-butyl ether, or MTBE, was the leading oxygenate. Other ether products could enter the market and prove to be
environmentally or economically superior to ethanol. Alternative biofuel alcohols, such as methanol and butanol, could
evolve and replace ethanol.
Research is currently underway to develop products that have advantages over ethanol, such as: lower vapor pressure,
making it easier to add to gasoline; similar energy content as gasoline, reducing any decrease in fuel economy caused by
blending with gasoline; ability to blend at higher concentration levels in standard vehicles; and reduced susceptibility to
separation when water is present. Products offering a competitive advantage over ethanol could reduce our ability to generate
revenue and profits from ethanol production.
New ethanol process technologies could emerge that require less energy per gallon to produce and result in lower
production costs. Our process technologies could become obsolete and place us at a competitive disadvantage, which could
have a material adverse effect on our operations, cash flows and financial position.
25
We may be required to provide remedies for ethanol, distillers grains or corn oil that does not meet the specifications defined
in our sales contracts.
If we produce or purchase ethanol, distillers grains or corn oil that does not meet the specifications defined in our sales
contracts, we may be subject to quality claims. We could be required to refund the purchase price of any non-conforming
product or replace the non-conforming product at our expense. Ethanol, distillers grains or corn oil that we purchase or
market and subsequently sell to others could result in similar claims if the product does not meet applicable contract
specifications, which could have an adverse impact on our profitability.
We are exposed to credit risk that could result in losses or affect our ability to make payments should a counterparty fail to
perform according to the terms of our agreement.
We are exposed to credit risk from a variety of customers, including major integrated oil companies, large independent
refiners, petroleum wholesalers, commercial grain buyers and other ethanol plants. We are also exposed to credit risk with
major suppliers of petroleum products and agricultural inputs when we make payments for undelivered inventories. Our
fixed-price forward contracts are subject to credit risk when prices change significantly prior to delivery. The inability by a
third party to pay us for our sales, provide product that was paid for in advance or deliver on a fixed-price contract could
result in a loss and adversely impact our liquidity and ability to make our own payments when due.
We may incur a loss should our counterparty fail to perform under a third-party marketing agreement.
Under a third-party marketing agreement, we purchase their ethanol production and sell it in various markets for future
deliveries. Under the terms of the agreement, the third-party is not obligated to produce a minimum volume, therefore, we
may not receive the full amount of ethanol the third-party plant is expected to produce. Any interruption or curtailment of
production could force us to purchase ethanol at higher prices to meet contractual obligations. Recoveries would be
dependent on the third party’s ability to pay, and in the event they were unable to pay, our profitability could be materially
and adversely impacted.
Business disruptions due to unforeseen operational failures or factors outside of our control could impact our ability to fulfill
contractual obligations.
Natural disasters, significant track damage resulting from a train derailment or strikes by our transportation providers
could delay shipments of raw materials to our plants or deliveries of ethanol and distillers grains to our customers.
Unforeseen operational issues due to faulty construction design or other factors could result in an extended facility shutdown.
If we are unable to meet customer demand or contract delivery requirements due to stalled operations caused by business
disruptions, we could potentially lose customers.
Adverse weather conditions, such as inadequate or excessive amounts of rain during the growing season, overly wet
conditions, an early freeze or snowy weather during harvest could impact the supply of corn that is needed to produce
ethanol. Corn stored in an open pile may be damaged by rain or warm weather before the corn is dried, shipped or moved
into a storage structure.
We may not have adequate insurance to cover losses from certain events.
Losses related to risks that are not covered by insurance or available under acceptable terms such as war, riots or
terrorism could have a material adverse effect on our operations, cash flows and financial position.
Our Obion, Tennessee plant and certain fuel terminals are located within a recognized seismic zone. We modified our
Obion facility to comply with regional structural requirements and obtained additional insurance coverage specific to
earthquake risk for this particular plant and these fuel terminals. We cannot provide assurance that these facilities would
remain in operation should a seismic event occur.
Our ethanol-related assets may be at greater risk of terrorist attacks, threats of war or actual war, than other possible
targets.
Terrorist attacks in the United States, including threats of war or actual war, may adversely affect our operations. We
believe energy-related assets are at greater risk than other possible targets due to the level of disruption it could cause. A
direct attack on our ethanol production plants, storage facilities, fuel terminals and railcars could have a material adverse
effect on our financial condition, results of operations and cash flows. Furthermore, a terrorist attack could have an adverse
26
impact on ethanol prices. Disruption or significant increases in ethanol prices could result in government-imposed price
controls.
Our network infrastructure, enterprise applications and internal technology systems could be damaged or otherwise fail and
disrupt business activities.
Our network infrastructure, enterprise applications and internal technology systems are instrumental to the day-to-day
operations of our business. Numerous factors outside of our control, including earthquakes, floods, lightning, tornados, fire,
power loss, telecommunication failures, computer viruses, physical or electronic vandalism or similar disruptions could result
in system failures, interruptions or loss of critical data and prevent us from fulfilling customer orders. We cannot provide
assurance that our backup systems are sufficient to mitigate hardware or software failures, which could result in business
disruptions that negatively impact our operating results and damage our reputation.
We could be adversely affected by cyber-attacks, data security breaches and significant information technology systems
interruptions.
Information security risks have generally increased in recent years as a result of the proliferation of new technologies and
the increased sophistication and frequency of cyber-attacks and data security breaches. To manage the risk associated with
potential technology security breaches, we have implemented disaster recovery plans for our critical systems and security
measures to protect us against cyber-based attacks. However, our information technology systems and network infrastructure
may be subject to unauthorized access or attack at any time and there can be no assurances that our infrastructure protection
technologies and disaster recovery plans are sufficient to prevent a technology systems breach, systems failure, business
interruption or loss of sensitive data. The potential impact of any of these incidents, should they occur, could be material and
have an adverse impact to our revenues, operating results, financial condition or 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 employees. Qualified managers, engineers,
merchandisers and other personnel must be hired for each of our locations and competition for suitable candidates in the
ethanol industry can be intense. If we are unable to hire and retain productive, skilled personnel, we may not be able to
maximize ethanol production, optimize plant operations or execute our business strategy.
Disruptions in the credit market or a downgrade in our credit rating could limit our access to capital.
We may need additional capital to fund our growth or other business activities in the future. If our credit rating is
downgraded, the cost of capital under our existing or future financing arrangements could increase and affect our ability to
trade with various commercial counterparties or cause our counterparties to require additional forms of credit support. If
capital markets are disrupted, we may not be able to access capital at all or capital may only be available under less favorable
terms.
We have had a history of operating losses and could incur future operating losses.
We incurred operating losses in 2006, 2007, 2008 and during certain quarters of 2012 and 2015, and could incur
operating losses in the future that are 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 impact the market price of our common stock
and the value of your investment.
Risks Related to our Partnership
We depend on the partnership to provide fuel storage and transportation services.
The partnership’s operations are subject to all of the risks and hazards inherent in the storage and transportation of fuel,
including: damages to storage facilities, railcars and surrounding properties caused by floods, fires, severe weather,
explosions, natural disasters or acts of terrorism; mechanical or structural failures at the partnership’s facilities or at third-
party facilities at which its operations are dependent; curtailments of operations relative to severe weather; and other hazards,
resulting in severe damage or destruction of the partnership’s assets or temporary or permanent shut-down of the
partnership’s facilities. If the partnership is unable to serve our storage and transportation needs, our ability to operate our
business could be adversely impacted, which could adversely affect our financial condition and results of operations. The
inability of the partnership to continue operations, for any reason, could also impact the value of our investment in the
27
partnership and, because the partnership is a consolidated entity, our business, financial condition and results of operations.
The partnership may not have sufficient available cash to pay quarterly distributions on its units.
The amount of cash the partnership can distribute depends on how much cash is generated from operations, which can
fluctuate from quarter to quarter based on ethanol and other fuel volumes, handling fees, payments associated with minimum
volume commitments, timely payments by subsidiaries and other third parties, and prevailing economic conditions. The
amount of cash available for distribution also depends on the partnership’s operating and general and administrative
expenses, capital expenditures, acquisitions and organic growth projects, debt service requirements, working capital needs,
ability to borrow funds and access capital markets, revolving credit facility restrictions, cash reserves and other risks affecting
cash levels. Increasing the partnership’s borrowings or other debt to finance its growth strategy could increase interest
expense, which could impact the amount of cash available for distributions.
There are no limitations in the partnership agreement regarding its ability to issue additional units. Should the partnership
issue additional units in connection with an acquisition or expansion, the distributions on the incremental units will increase
the risk that the partnership will be unable to maintain or increase distributions on a per unit basis.
Increases in interest rates could adversely impact the partnership’s unit price, ability to issue equity or incur debt, and pay
cash distributions at intended levels.
The partnership’s cash distributions and implied distribution yield affect its unit price. Distributions are often used by
investors to compare and rank yield-oriented securities when making investment decisions. A rising interest rate environment
could have an adverse impact on the partnership’s unit price, ability to issue equity or incur debt or pay cash distributions at
intended levels, which could adversely impact the value of our investment in the partnership.
We may be required to pay taxes on our share of the partnership’s income that are greater than the cash distributions we
receive from the partnership.
The unitholders of the partnership generally include, for purposes of calculating their U.S. federal, state and local income
taxes, their share of the partnership’s taxable income, whether they have received cash distributions from the partnership. We
ultimately may not receive cash distributions from the partnership equal to our share of taxable income or the taxes that are
due with respect to that income.
We will incur increased costs as a result of owning and operating a publicly traded partnership.
We expect to incur an estimated $2.0 million of incremental costs each year associated with the partnership being
publicly traded. It is possible, however, that the actual costs will be higher than currently estimated. Some of the costs include
increased legal and financial expenses related to complying with SEC and Nasdaq requirements. The partnership is required
to have at least three independent directors, create an audit committee and adopt policies regarding internal controls and
disclosure controls and procedures within one year of its initial listing on Nasdaq. We will also incur additional costs
associated with officer liability insurance under a separate policy from our corporate director and officer insurance.
All of the executive officers and a majority of the initial directors of the partnership are also officers of Green Plains Inc.,
which could result in conflicts of interest.
We indirectly own and control the partnership and appoint all of its officers and directors. All of the executive officers
and a majority of the initial directors of the partnership are also an officer or director. Although our directors and officers
have a fiduciary responsibility to manage the company in a manner that is beneficial to us, as directors and officers of the
partnership, they also have certain duties to the partnership and its unitholders. Conflicts of interest may arise between us and
our affiliates, and the partnership and its unitholders, and in resolving these conflicts, the partnership may favor its own
interests over the company’s interests. In certain circumstances, the partnership may refer conflicts of interest or potential
conflicts of interest to its conflicts committee, which must consist entirely of independent directors, for resolution. The
conflicts committee must act in the best interests of the public unitholders of the partnership. As a result, the partnership may
manage its business in a manner that differs from the best interests of the company or our stockholders.
28
Cash available for distributions could be reduced and likely cause a substantial reduction in unit value if the partnership
became subject to entity-level taxation for federal income tax purposes.
The present federal income tax treatment of publicly traded partnerships or investments in its units could be modified, at
any time, by administrative, legislative or judicial changes and interpretations. From time to time, members of Congress
propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships.
Should any legislative proposal eliminate the qualifying income exception, all publicly traded partnerships would be treated
as corporations for federal income tax purposes. The partnership would be required to pay federal income tax on its taxable
income at the corporate tax rate and likely state and local income taxes at varying rates as well. Distributions to unitholders
would be taxed as corporate distributions. The partnership’s cash available for distributions and the value of the units would
be substantially reduced.
Risks Related to our Common Stock
The price of our common stock may be highly volatile and subject to factors beyond our control.
Some of the many factors that can influence the price of our common stock include:
our results of operations and the performance of our competitors;
public’s reaction to our press releases, public announcements and filings with the SEC;
changes in earnings estimates or recommendations by equity research analysts who follow us or other companies in
our industry;
changes in general economic conditions;
changes in market prices for our products or raw materials and related substitutes;
sales of common stock by our directors, executive officers and significant shareholders;
actions by institutional investors trading in our stock;
disruption of our operations;
any major change in our management team;
other developments affecting us, our industry or our competitors; and
U.S. and international economic, legal and regulatory factors unrelated to our performance.
In recent years the stock market has experienced significant price and volume fluctuations, which are sometimes
unrelated to the operating performance of any particular company. These broad market fluctuations could materially reduce
the price of our common stock price based on factors that have little or nothing to do with our company or its performance.
Anti-takeover provisions could make it difficult for a third party to acquire us.
Our restated articles of incorporation, restated bylaws and Iowa’s law contain anti-takeover provisions that could delay
or prevent change in control of us or our management. These provisions discourage proxy contests, making it difficult for our
shareholders to elect directors or take other corporate actions without the consent of our board of directors, which include:
board of directors with three-year staggered terms;
board members can only be removed for cause with an affirmative vote of no less than two-thirds of the outstanding
shares;
shareholder action can only be taken at a special or annual meeting, not by written consent except where required by
Iowa law;
shareholders are restricted from making proposals at shareholder meetings; and
the board of directors can issue authorized or unissued shares of stock.
We are subject to the provisions of the Iowa Business Corporations Act, which prohibits combinations between an Iowa
29
corporation whose stock is publicly traded or held by more than 2,000 shareholders and an interested shareholder for three
years unless certain exemption requirements are met.
Provisions in the convertible notes could also make it more difficult or too expensive for a third party to acquire us. If a
takeover constitutes a fundamental change, holders of the notes have the right to require us to repurchase their notes in cash.
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 either case, the obligation under the notes could increase the acquisition cost and discourage a
third party from acquiring us.
These items discourage transactions that could otherwise command a premium over prevailing market prices and may
limit the price investors are willing to pay for our stock.
Non-U.S. shareholders may be subject to U.S. income tax on gains related to the sale of their common stock.
If we are a U.S. real property holding corporation during the shorter of the five-year period before the stock was sold or
the period the stock was held by a non-U.S. shareholder, the non-U.S. shareholder could be subject to U.S federal income tax
on gains related to the sale of their common stock. Whether we are a U.S. real property holding corporation depends on the
fair market value of our U.S. real property interests relative to our other trade or business assets and non-U.S. real property
interests. We cannot provide assurance that we are not a U.S. real property holding corporation or will not become one in the
future.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We believe that the property owned and leased at our locations is sufficient to accommodate our current needs, as well as
potential expansion.
Substantially all of our owned real property is used to secure our loans. See Note 11 – Debt included as part of the notes
to consolidated financial statements for information about our loan agreements.
Corporate
We lease approximately 30,000 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. This lease
expires on January 31, 2017. In October 2015, we signed a lease for new office space of approximately 54,000 square feet at
1811 Aksarben Drive in Omaha, Nebraska for our corporate headquarters. Payments on this lease begin in February 2017.
Ethanol Production Segment
We own approximately 2,400 acres of land at and around our ethanol production facilities. As detailed in our discussion
of the ethanol production segment in Item 1 – Business, our ethanol plants have the capacity to produce approximately 1.2
billion gallons of ethanol per year.
Agribusiness Segment
We own approximately 60 acres of land at our five grain elevators and approximately 2,590 acres of land at our cattle
feedlot operation. As detailed in our discussion in Item 1 – Business, our agribusiness segment facilities include five grain
elevators with combined grain storage capacity of approximately 11.6 million bushels, a cattle feedlot operation with the
capacity to support 70,000 head of cattle and 2.8 million bushels of grain storage capacity, and grain storage capacity at our
ethanol plants of approximately 44.2 million bushels.
Marketing and Distribution Segment
Our marketing operations are conducted primarily at our corporate office, in Omaha, Nebraska. We also lease office
space in McKinney, Texas and Des Moines, Iowa for these operations.
30
Partnership Segment
Our partnership owns approximately five acres of land and leases approximately 19 acres of land at eight locations in
seven states, as disclosed in Item 1 – Business, where its fuel terminals are located. The partnership also owns approximately
50 acres where its storage tanks are located at our ethanol production facilities.
Item 3. Legal Proceedings.
We are currently involved in litigation that has occurred over the ordinary course of doing business. We do not believe
this will have a material adverse effect on our financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosures.
Not applicable.
31
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 Nasdaq. The following table lists the common stock’s highest
PART II
and lowest price for the periods indicated:
Year Ended December 31, 2015
Three months ended December 31, 2015 (1)
Three months ended September 30, 2015
Three months ended June 30, 2015
Three months ended March 31, 2015
Year Ended December 31, 2014
Three months ended December 31, 2014
Three months ended September 30, 2014
Three months ended June 30, 2014
Three months ended March 31, 2014
High
Low
$
$
24.42
28.16
34.05
30.20
High
37.77
46.28
33.52
31.57
$
$
18.52
17.13
26.60
20.31
Low
21.19
32.56
25.62
18.02
(1) The closing price of our common stock on December 31, 2015 was $22.90.
Holders of Record
We had 2,225 holders of record of our common stock, not including beneficial holders whose shares are held in names
other than their own, on February 12, 2016. This figure does not include approximately 34.3 million shares held in depository
trusts.
Dividend Policy
In August 2013, our board of directors initiated a quarterly cash dividend, which we have paid every quarter since and
anticipate paying in future quarters. In August 2015 and November 2015, our board of directors declared a quarterly cash
dividend of $0.12 per share, which represents a 50% increase from the quarterly dividends declared in the first and second
quarter of 2015 and the second annual increase in quarterly dividends paid to shareholders. On February 10, 2016, our board
of directors declared a quarterly cash dividend of $0.12 per share. The dividend is payable on March 18, 2016, to
shareholders of record at the close of business on February 26, 2016. Future declarations are subject to board approval and
may be adjusted as our cash position, business needs or market conditions change.
Issuer Purchases of Equity Securities
Employees surrender shares when restricted stock grants are vested to satisfy statutory minimum required payroll tax
withholding obligations. There were no shares that were surrendered during the fourth quarter of 2015.
In August 2014, we announced a share repurchase program of up to $100 million of our common stock. Under this
program, we may repurchase shares in open market transactions, privately negotiated transactions, accelerated buyback
programs, tender offers or by other means. The timing and amount of the transactions are determined by management based
on its evaluation of market conditions, share price, legal requirements and other factors. The program may be suspended,
modified or discontinued at any time, without prior notice. There were no shares repurchased under the program during the
fourth quarter of 2015. Approximately $96.0 million of shares are remaining to be repurchased under the program.
Recent Sales of Unregistered Securities
None.
32
Equity Compensation Plans
Refer to Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
for information regarding shares authorized for issuance under equity compensation plans.
Performance Graph
The following graph compares our cumulative total return with the S&P Smallcap 600 Index, Nasdaq Composite Index
(IXIC) and the Nasdaq Clean Edge Green Energy Index (CELS) for each of the five years ended December 31, 2015. Green
Plains’ stock is included in the S&P Smallcap 600 Index, which measures the small-cap segment of the U.S. equity market.
The S&P Smallcap 600 Index may be considered more reflective of our stock’s performance than the Nasdaq Composite
Index; therefore, the S&P Smallcap 600 Index was added into the performance graph this year. The graph assumes a $100
investment in our common stock and each index at December 31, 2010, and that all dividends were reinvested.
Green Plains Inc.
Nasdaq Composite
S&P Smallcap 600
Nasdaq Clean Edge Green Energy
$
12/10
100.00 $
100.00
100.00
100.00
12/11
12/12
86.68 $
100.53
101.02
62.01
70.25 $
116.92
117.51
64.84
12/13
172.94 $
166.19
166.05
121.94
12/14
222.71 $
188.78
175.61
127.90
12/15
209.52
199.95
172.14
126.21
The information in the graph will not be considered solicitation material, nor will it be filed with the SEC or incorporated
by reference into any future filing under the Securities Act or the Exchange Act, unless we specifically incorporate it by
reference into our filing.
33
Item 6. Selected Financial Data.
The statement of operations data for the years ended December 31, 2015, 2014 and 2013 and the balance sheet data as of
December 31, 2015 and 2014 are derived from our audited consolidated financial statements and should be read together with
the accompanying notes included elsewhere in this report.
The statement of operations data for the years ended December 31, 2012 and 2011 and the balance sheet data as of
December 31, 2013, 2012 and 2011 are derived from our audited consolidated financial statements that are not included in
this report, which describe a number of matters that materially affect the comparability of the periods presented.
The following selected financial 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 numerous
factors, including those discussed in Item 1A – Risk Factors of this report.
2015
Year Ended December 31,
2013
2012
2014
2011
Statement of Operations Data:
(in thousands, except per share information)
Revenues
Costs and expenses
Gain on disposal of assets (1)
Operating income
Total other expense
Net income
Net income attributable to Green Plains
Earnings per share attributable to Green Plains:
Basic
Diluted
Other Data:
$ 2,965,589 $ 3,235,611 $ 3,041,011 $ 3,476,870 $ 3,553,712
3,454,699
-
99,013
37,114
38,213
38,418
2,933,160
-
107,851
35,570
43,391
43,391
3,459,118
47,133
64,885
39,729
11,763
11,779
2,904,512
-
61,077
39,612
15,228
7,064
2,949,337
-
286,274
35,844
159,504
159,504
$
$
0.19 $
0.18 $
4.37 $
3.96 $
1.44 $
1.26 $
0.39 $
0.39 $
1.09
1.01
EBITDA (unaudited and in thousands)
$
127,781 $
352,477 $
156,492 $
115,505 $
148,620
Balance Sheet Data (in thousands):
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Stockholders' equity
2015
2014
December 31,
2013
2012
2011
$
384,867 $
912,577
1,929,328
438,669
443,547
970,419
958,909
425,510 $
903,415
1,821,062
511,540
399,440
1,023,613
797,449
272,027 $
633,305
1,532,045
409,197
480,746
986,687
545,358
254,289 $
568,035
1,349,734
432,384
362,549
859,232
490,502
174,988
576,420
1,420,828
360,965
493,407
915,471
505,357
(1)
In December 2012, we sold 12 grain elevators located in northwestern Iowa and western Tennessee consisting of approximately 32.6 million
bushels of grain storage capacity and all of our agronomy and retail petroleum operations.
Management uses earnings before interest, income taxes, depreciation and amortization, or EBITDA, to compare the
financial performance of our business segments and manage those segments. Management believes EBITDA is a useful
measure to compare our performance against other companies. EBITDA should not be considered an alternative to, or more
meaningful than, net income or cash flow, which are determined in accordance with GAAP. 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.
34
The following table reconciles net income to EBITDA for the periods indicated (in thousands):
2015
Year Ended December 31,
2013
2012
2014
Net income
Interest expense
Income tax expense
Depreciation and amortization
EBITDA
$
$
15,228 $
40,366
6,237
65,950
127,781 $
159,504 $
39,908
90,926
62,139
352,477 $
43,391 $
33,357
28,890
50,854
156,492 $
11,763 $
37,521
13,393
52,828
115,505 $
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
2011
38,213
36,645
23,686
50,076
148,620
The following discussion and analysis includes information management believes is relevant to assess and understand
our consolidated financial condition and results of operations. This section should be read in conjunction with our
consolidated financial statements, accompanying notes and the risk factors contained in this report.
Overview
Green Plains is an Iowa corporation that was founded in June 2004. As a vertically integrated ethanol producer, marketer
and distributor, we focus on generating stable operating margins through our diversified business segments and risk
management strategy. 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 marketing, terminal and distribution services. We believe owning and operating assets throughout the
ethanol value chain enables us to mitigate volatility in commodity prices, differentiating us from companies focused only on
ethanol production.
Our profitability is highly dependent on commodity prices, particularly for ethanol, distillers grains, corn oil, corn and
natural gas. Since market price fluctuations among these commodities are not always correlated, ethanol production may be
unprofitable at times. We use a variety of risk management tools and hedging strategies to monitor real-time operating price
risk exposure at each of our plants and lock in favorable margins or temporarily reduce production levels during periods of
compressed margins. Our multiple businesses and revenue streams also help to diversify our operations and profitability.
More information about our business, properties and strategy can be found under Item 1 – Business and a description of
our risk factors can be found under Item 1A – Risk Factors.
Industry Factors Affecting our Results of Operations
U.S. Ethanol Supply and Demand
Domestic ethanol production has increased from 1.8 billion gallons in 2001 to 14.8 billion gallons in 2015, according to
EIA. Domestic ethanol consumption has increased more than 15% per year, from 1.7 billion gallons in 2001 to more than
13.9 billion gallons in 2015, accounting for approximately 10% of the U.S. gasoline market.
Federal mandates supporting the production and use of renewable fuels have been a major driver in the demand for
ethanol in the United States. Ethanol policies are influenced by the desire to reduce fuel emissions and our dependency on
foreign oil. Under RFS II, the required volume of renewable fuel to be blended with transportation fuel was to increase each
year to 15.0 billion gallons in 2015 when it was established in October 2010. Since that time, the EPA has sought to address
the volume limitations of ethanol given that not all vehicles can use higher ethanol blends and the industry’s ability to
produce sufficient volumes of the qualifying renewable fuel. On November 30, 2015, the EPA announced final volume
requirements for conventional ethanol that were higher than levels proposed in June of 13.61 billion gallons, 14.05 billion
gallons and 14.50 billion gallons for 2014, 2015 and 2016, respectively. Significant increases in production capacity beyond
the RFS II mandated level could negatively impact the ethanol industry. Reductions in governmental usage mandates could
adversely affect the market for ethanol and our results of operations. The results of the 2016 presidential election could
impact federal policies regarding renewable fuels.
35
Domestic demand has also been influenced by incentives to blend based on economics for refiners and blenders to use
ethanol as an additive to reduce vehicle emissions and increase octane levels. Even though gasoline traded at a discount to
ethanol during the year, ethanol continued to be the most economical oxygenate over Gulf Coast alkylate and reformate
substitutes, and the most affordable source of octane over Gulf Coast 93 and toluene substitutes. These incentives may be
affected by the price of crude oil, which decreased in price per barrel by approximately 43% during 2015. Increased
consumer acceptance and availability of higher blends, such as E15, at retail fuel stations also helped to support domestic
demand. There are now 189 retail fuel stations in 23 states offering E15 to consumers as of January 5, 2016.
Global Ethanol Supply and Demand
Since 2010, the United States has been the world’s largest producer and consumer of ethanol. Approximately 6% of the
ethanol produced domestically is marketed worldwide and competes with other sources, including Brazil. The United States
and Brazil account for more than 80% of all ethanol production worldwide, according to the USDA Foreign Agriculture
Service. Global production has increased from approximately 5.0 billion gallons in 2001 to approximately 24.6 billion
gallons in 2014, according to the EIA. Increased ethanol production capacity could create excess supply in world markets,
resulting in lower ethanol prices throughout the world, including the United States.
A significant change in feedstock prices, transportation rates, foreign exchange rates and government policies could also
alter the global supply dynamics in the top producing countries. In the United States, the primary feedstock for ethanol is
corn; in Brazil, the primary feedstock for ethanol is sugarcane. In March 2015, the Brazilian government increased their
required ethanol blend to 27% from 25% which, along with more competitively priced ethanol produced from corn,
significantly reduced U.S. ethanol imports from Brazil.
There are nearly 30 countries including the EU, which is regulated by a single policy with specific national targets for
each country, mandating ethanol and biodiesel usage to reduce fuel emissions. As countries establish mandates or raise their
required blend percentages, new export opportunities for U.S. producers are likely to emerge. In 2015, U.S. net exports were
approximately 730 million gallons. Canada and Brazil remained the two largest export destinations for U.S. ethanol,
importing 29.8% and 13.9%, respectively, in 2015, followed by the Philippines, China and South Korea, which imported
8.6%, 8.4% and 7.1%, respectively.
Variability of Commodity Prices
Our business is highly sensitive to commodity price fluctuations, particularly for corn, ethanol, corn oil, distillers grains
and natural gas, which are impacted by factors that are outside of our control, including weather conditions, corn yield,
changes in domestic and global ethanol supply and demand, government programs and policies and the price of crude oil,
gasoline and substitute fuels. We use various financial instruments to manage and reduce our exposure to price variability.
For more information about our commodity price risk, refer to Item 7A. - Qualitative and Quantitative Disclosures About
Market Risk, Commodity Price Risk in this report.
There may be periods of time that, due to the variability of commodity prices and compressed margins, we reduce or
cease operations at certain of our ethanol plants. The reduced production rates increase ethanol yields and optimize cash flow
in lower margin environments. In 2012, we reduced production volumes at several of our ethanol plants which resulted in
total production of approximately 91% of our daily average capacity in direct response to unfavorable operating margins.
During 2015 and 2014 we produced at approximately 91% and 96% of our daily average capacity, respectively. The low
margin environment was impacted by the energy market which saw historic low crude oil prices as world supply reached
record levels.
Reduced Availability of Capital
Some ethanol producers have faced financial distress over the past several 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 in general. In this market environment, we may experience limited access to incremental
financing.
Legislation
Federal and state governments have enacted numerous policies and incentives to encourage the use of domestically
produced alternative fuels. RFS II has been, and we expect will continue to be, a driver in the growth of ethanol usage. Due
36
to drought conditions in 2012 and claims that the market will be unwilling to accept greater than 10% ethanol blends,
legislation aimed at reducing or eliminating the use of renewable fuels required by RFS II has been introduced to Congress.
The U.S. ethanol industry relies heavily on tank cars to deliver its product to market. The company leases approximately
2,600 tank cars, including 2,500 leased by our partnership to transport ethanol. On May 1, 2015, the DOT finalized an
enhanced tank car standard and established a schedule to retrofit or replace older tank cars, among other safety protocols.
Adoption of the new standard will take existing railcars out of service for a period of time while these upgrades are made,
tightening supply in our industry that is highly dependent on railcars to transport its product. In addition, companies that
transport hazardous materials must develop more accurate classification protocols.
In September 2015, in response to FSMA, the FDA issued rules for Current Good Manufacturing Practice, Hazard
Analysis and Risk-Based Preventative Controls for food for animals. The rules require FDA-registered food facilities to
address safety concerns for sourcing, manufacturing and shipping food products through food safety programs and plans,
which includes conducting hazard analyses, developing risk-based preventative controls and monitoring, and addressing
intentional adulteration, recalls, sanitary transportation and supplier verification. While we are still reviewing the regulation,
we may need additional resources to comply with the new requirements since our distillers grains are used as feed for
animals. Our cattle feedlot operation is included under the FDA’s definition of “farm” and is exempt from the FSMA
requirements.
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. Domestic ethanol production continues to be fairly fragmented. As of January
23, 2016, there were 216 ethanol plants capable of producing 15.7 bgy, according to Ethanol Producer magazine. The top five
producers account for 43% of the domestic production capacity. In seven years, we have more than tripled our daily
production capacity through strategic acquisitions and intend to continue pursuing both organic and acquisitive growth
opportunities.
The domestic gasoline market continues to evolve as refiners produce 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. Currently, total U.S. gasoline demand
is approximately 139.0 billion gallons annually, according to the EIA. The ethanol blend rate in 2015 was approximately
9.9% of total gasoline demand, or 13.9 billion gallons. Demand for transportation fuel is affected by the number of miles
traveled by businesses and consumers and the fuel economy of vehicles. Consumer acceptance of E15 and E85 fuels and
flex-fuel vehicles is one factor that may be necessary before ethanol can achieve significant growth in U.S. market share.
Although the ethanol export markets are affected by competition from other ethanol exporters, mainly Brazil, we expect
exports to remain active in 2016. Overall, the U.S. ethanol industry is producing at levels to meet current domestic and export
demand and ethanol prices have remained at a discount to octane substitutes, providing blenders and refiners an economic
incentive to blend.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires that we use estimates that affect the reported assets,
liabilities, revenue and expense and related disclosures for contingent assets and liabilities. We base our estimates on
experience and assumptions we believe are proper and reasonable. While we regularly evaluate the appropriateness of these
estimates, actual results could differ materially from our estimates. The following accounting policies, in particular, may be
impacted by judgments, assumptions and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
We recognize revenues when there is evidence that an arrangement exists, title of product and risk of loss are transferred
to the customer, the price is fixed and determinable, and collectability is reasonably assured.
Sales of ethanol, distillers grains, corn oil and other commodities by our marketing business are recognized when title of
product and risk of loss are transferred to an external customer. Revenues related to third-party marketing are presented on a
gross basis when we take title of the product and assumes risk of loss. Unearned revenue is recorded for goods in transit
when we have received payment but the title has not yet been transferred to the customer. Revenues for receiving, storing,
transferring and transporting ethanol and other fuels are recognized when the product is delivered to the customer.
37
We routinely enter into fixed-price, physical-delivery energy commodity purchase and sale agreements. At times, we
settle these transactions by transferring our obligation to another counterparty rather than delivering the physical commodity.
These transactions are reported net as a component of revenue. Revenues also include realized gains and losses on related
derivative financial instruments, ineffectiveness on cash flow hedges and reclassifications of realized gains and losses on
effective cash flow hedges from accumulated other comprehensive income or loss.
Sales of agricultural commodities, including cattle, are recognized when title of product and risk of loss are transferred to
the customer, which depends on the terms of the agreement. The sales terms provide passage of title when shipment is made
or the commodity is delivered and the customer has agreed to final weights, grades and settlement price. Revenues related to
grain merchandising are presented gross and include shipping and handling, which is also a component of cost of goods sold.
Revenue from grain storage is recognized when services are rendered.
A substantial portion of our partnership revenues are derived from fixed-fee commercial agreements for storage, terminal
or transportation services. The partnership recognizes revenues when there is evidence an arrangement exists; risk of loss and
title transfer to the customer; the price is fixed or determinable; and collectability is reasonably ensured. Revenues from base
storage, terminal or transportation services are recognized once these services are performed, which occurs when the product
is delivered to the customer.
Intercompany revenues are eliminated on a consolidated basis for reporting purposes.
Depreciation of Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation on our ethanol production and
grain storage facilities, railroad tracks, computer equipment and software, office furniture and equipment, vehicles, and other
fixed assets is provided using the straight-line method over the estimated useful life of the asset, which currently ranges 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 when incurred.
We periodically evaluate whether events and circumstances have occurred that warrant a revision of the estimated useful
life of the asset, 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 the carrying amount of the asset may not be recoverable. We measure recoverability by
comparing the carrying amount of the asset with the estimated undiscounted future cash flows the asset is expected to
generate. If the carrying amount of the asset exceeds its estimated future cash flows, we record an impairment charge for the
amount in excess of the fair value. No impairment charges have been recorded during the periods presented.
Our goodwill is related to certain acquisitions within our ethanol production and partnership segments. We review
goodwill at the individual plant or subsidiary level for impairment at least annually or more frequently whenever events or
changes in circumstances indicate that an impairment may have occurred.
We assess the qualitative factors of goodwill to determine 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 is less than the carrying value, we complete a second step to determine the
amount of the goodwill impairment that we should record. In the second step, we allocate the reporting unit’s fair value to all
of its assets and liabilities other than goodwill to determine an implied fair value. We compare the result with the carrying
amount and record an impairment charge for the difference.
We estimate the amount and timing of projected cash flows that will be generated by an asset over an extended period of
time when we review our long-lived assets and goodwill. Circumstances that may indicate impairment include: a decline in
future projected cash flows, a decision to suspend plant operations 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 matters, or business climate. Significant management judgment is required to determine the fair value of
38
our long-lived assets and goodwill and measure impairment, including projected cash flows. Fair value is determined through
various valuation techniques, including discounted cash flow models, sales of comparable properties and third-party
independent appraisals. Changes in estimated fair value could result in a write-down of the asset.
Derivative Financial Instruments
We use various derivative financial instruments to minimize the adverse effect price changes related to corn, ethanol,
cattle and natural gas may have on our operating results. We monitor and manage this exposure as part of our overall risk
management policy. These commodities may be hedged to mitigate risk, however, there may be situations when these
hedging activities themselves result in losses.
Using derivatives exposes us to credit and market risk. Our exposure to credit risk includes the counterparty’s failure to
fulfill its performance obligations under the terms of the derivative contract. We minimize this risk by entering into
transactions with high quality counterparties, limiting the amount of financial exposure we have with each counterparty and
monitoring their financial condition. We manage the risk that the value of the financial instrument is exposed to by a change
in commodity prices or interest rates, or market risk, by incorporating parameters to monitor our exposure within our risk
management strategy. These parameters limit the types of derivative instruments and strategies we can use and the degree of
market risk we can take by using derivative instruments.
We evaluate our physical delivery contracts to determine if they qualify for normal purchase or sale exemptions and are
expected to be used or sold over a reasonable period in the normal course of business. Contracts that do not meet the normal
purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating income unless the contracts
qualify for, and we elect, hedge accounting treatment.
Certain qualifying derivatives related to the ethanol production and agribusiness segments are designated as cash flow
hedges. We evaluate the derivative instrument to determine its effectiveness prior to entering into cash flow hedges.
Ineffectiveness is recognized in current period results, while other unrealized gains and losses are reflected in accumulated
other comprehensive income until the gain or loss from the underlying hedged transaction is realized. When it becomes
probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued. These derivative financial
instruments are recognized in current assets or other current liabilities at fair value.
At times, we hedge our exposure to changes in inventory value and designate qualifying derivatives as fair value hedges.
The carrying amount of the hedged inventory is adjusted in current period results for changes in fair value. Ineffectiveness is
recognized in the current period to the extent the change in fair value of the inventory is not offset by the change in fair value
of the derivative.
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 future tax consequences between 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 be applied to taxable income in years temporary differences are expected to be recovered or settled. The effect of
a tax rate change is recognized in the period that includes the enactment date. The realization of deferred tax assets depends
on 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 to make this assessment. Management considers the positive and negative evidence to support the need for, or
reversal of, a valuation allowance. The weight given to the potential effects of positive and negative evidence is based on the
extent it can be objectively verified.
To account for uncertainty in income taxes, we gauge the likelihood of a tax position based on the technical merits of the
position, perform a subsequent measurement related to the maximum benefit and degree of likelihood, and determine the
benefit to be recognized in the financial statements, if any.
Recently Issued Accounting Pronouncements
For information related to recent accounting pronouncements, see Note 2 – Summary of Significant Accounting Policies
included as part of the notes to consolidated financial statements in this report.
39
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Components of Revenues and Expenses
Revenues. For our ethanol production segment, our revenues are derived primarily from the sale of ethanol, distillers
grains and corn oil. For our agribusiness segment, the sale of grain and cattle are our primary sources of revenue. For our
marketing and distribution segment, sales of ethanol, distillers grains and corn oil that we market for our ethanol plants, sales
of ethanol we market for a third-party and sales of other commodities purchased in the open market represent our primary
sources of revenue. Revenues include net gains or losses from derivatives related to the products sold. For our partnership
segment, our revenues consist primarily of fees for receiving, storing, transferring and transporting ethanol and other fuels.
Cost of Goods Sold. For our ethanol production segment, cost of goods sold includes direct labor, materials and plant
overhead costs. Direct labor includes compensation and related benefits of non-management personnel involved in ethanol
plant operations. Plant overhead consists primarily of plant utilities and outbound freight charges. Corn is the most significant
raw material cost followed by natural gas, which is used to power steam generation in the ethanol production process and dry
distillers grains. Cost of goods sold also includes net gains or losses from derivatives related to commodities purchased.
For our agribusiness segment, the cost of grain is the primary component of cost of goods sold. Grain inventories held
for sale and forward purchase and sale contracts are valued at market prices when available or other market quotes adjusted
for differences, such as transportation, between the exchange-traded market and local markets where 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 as a component of cost of goods sold. For the cattle feedlot operation, the
costs of cattle, feed and veterinary supplies, direct labor and feedlot overhead are accumulated as inventory and included as a
component of cost of goods sold when the cattle are sold. Direct labor includes compensation and related benefits of non-
management personnel involved in the feedlot operation. Feedlot overhead costs include feedlot utilities, repairs and
maintenance and yard expenses.
For our marketing and distribution segment, purchases of ethanol, distillers grains and corn oil is the largest component
of cost of goods sold.
Operations and Maintenance Expense. For our partnership segment, transportation expense is the primary component of
operations and maintenance expense. Transportation expense includes rail car leases, shipping and freight and costs incurred
for storing ethanol at destination terminals.
Selling, General and Administrative Expense. Selling, general and administrative expenses are recognized at the
operating segment and corporate level. These expenses consist of employee salaries, incentives and benefits; office expenses;
director fees; and professional fees for accounting, legal, consulting and investor relations services. Personnel costs, which
include employee salaries, incentives and benefits, are the largest expenditure. Selling, general and administrative expenses
that cannot be allocated to an operating segment are referred to as corporate activities.
Other Income (Expense). Other income (expense) includes interest earned, interest expense, equity earnings in
nonconsolidated subsidiaries and other non-operating items.
40
Results of Operations
Comparability
The following summarizes various events that affect the comparability of our operating results for the past three years:
June 2013
June 2013
November 2013
June 2014
July 2015
October 2015
November 2015
January 2016
i d
Atkinson, Nebraska ethanol plant was acquired
Archer, Nebraska grain elevator was acquired
Fairmont, Minnesota and Wood River, Nebraska ethanol plants were
Kismet, Kansas cattle feedlot business was acquired
Partnership completed IPO
Hopewell, Virginia ethanol plant was acquired
Hereford, Texas ethanol plant was acquired
Partnership acquired certain storage and transportation assets of the Hereford
and Hopewell ethanol plants
The year ended December 31, 2013, includes approximately seven months of operations at our Atkinson plant and a little
more than five weeks of operations at our Wood River plant. Our Fairmont plant, which was not operational at the time of its
acquisition, began production in early January 2014. The year ended December 31, 2014, includes approximately six months
of operations at our Kansas cattle feedlot business. The year ended December 31, 2015, includes approximately two months
of operations at our Hereford plant. Our Hopewell plant, which was not operational at the time of its acquisition, resumed
ethanol production on February 8, 2016.
Segment Results
As a result of the IPO, we implemented organizational changes during the third quarter of 2015. We now report the
financial and operating performance for the following four operating segments: (1) ethanol production, which includes the
production of ethanol, distillers grains and corn oil, (2) agribusiness, which includes grain handling and storage and cattle
feedlot operations, (3) marketing and distribution, which includes marketing and merchant trading for company-produced and
third-party ethanol, distillers grains, corn oil and other commodities and (4) partnership, which includes fuel storage and
transportation services. Prior periods have been reclassified to conform to the revised segment presentation.
When transferring assets between entities under common control under GAAP, the entity receiving the net assets initially
recognizes the carrying amounts of the assets and liabilities at the date of transfer. The transferee’s prior period financial
statements are restated for all periods its operations were part of the parent’s consolidated financial statements. On July 1,
2015, the partnership received ethanol storage and railcar assets and liabilities in a transfer between entities under common
control. The transferred assets and liabilities are recognized at our historical cost and reflected retroactively in the segment
information of the consolidated financial statements presented in this Form 10-K. The partnership’s assets were previously
included in the ethanol production and marketing and distribution segments. Expenses related to the ethanol storage and
railcar assets, such as depreciation, amortization and railcar lease expenses, are also reflected retroactively in the following
segment information. There are no revenues related to the operation of these ethanol storage and railcar assets in the
partnership segment prior July 1, 2015, the date the related commercial agreements with Green Plains Trade became
effective.
Corporate activities incudes selling, general and administrative expenses, consisting primarily of employee
compensation, professional fees and overhead costs not directly related to a specific operating segment. When we evaluate
segment performance, we review the following operating segment information as well as earnings before interest, income
taxes, depreciation and amortization, or EBITDA.
During the normal course of business, our operating segments do business with each other. For example, our ethanol
production segment sells ethanol to our marketing and distribution segment, our agribusiness segment sells grain to our
ethanol production segment and our partnership segment provides fuel storage and transportation services for our marketing
and distribution segment. These intersegment activities are treated like third-party transactions and recorded at market values.
Consequently, these transactions affect segment performance; however, they do not impact our consolidated results since the
revenues and corresponding costs are eliminated.
41
The selected operating segment financial information are as follows (in thousands):
Revenues:
Ethanol production:
Revenues from external customers (1)
Intersegment revenues
Total segment revenues
Agribusiness:
Revenues from external customers (1)
Intersegment revenues
Total segment revenues
Marketing and distribution:
Revenues from external customers (1)
Intersegment revenues
Total segment revenues
Partnership:
Revenues from external customers
Intersegment revenues
Total segment revenues
Revenues including intersegment activity
Intersegment eliminations
Revenues as reported
2015
Year Ended December 31,
2014
2013
$
$
196,443
1,549,884
1,746,327
$
(51,424)
2,286,452
2,235,028
128,395
1,972,550
2,100,945
249,834
1,131,466
1,381,300
2,510,924
120,687
2,631,611
8,388
42,549
50,937
5,810,175
(2,844,586)
2,965,589
$
100,436
1,208,120
1,308,556
3,178,115
171,372
3,349,487
8,484
4,359
12,843
6,905,914
(3,670,303)
3,235,611
$
(1) Revenues from external customers include realized gains and losses from derivative financial instruments.
Cost of goods sold:
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Intersegment eliminations
Operating income (loss):
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Intersegment eliminations
Corporate activities
$
$
$
$
1,626,327
1,362,001
2,588,738
-
(2,847,467)
2,729,599
40,568
10,206
25,560
13,263
2,960
(31,480)
61,077
$
$
$
$
1,879,547
1,293,274
3,281,191
-
(3,670,967)
2,783,045
281,332
8,497
48,460
(19,975)
666
(32,706)
286,274
42
51,883
761,835
813,718
2,853,554
33,932
2,887,486
7,179
3,853
11,032
5,813,181
(2,772,170)
3,041,011
1,926,098
807,459
2,840,840
-
(2,765,583)
2,808,814
113,645
3,324
38,192
(11,285)
(6,588)
(29,437)
107,851
$
$
$
$
$
Total assets by segment are as follows (in thousands):
Total assets (1):
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Corporate assets
Intersegment eliminations
Year Ended December 31,
2015
2014
$
$
1,017,584
300,364
230,651
75,203
316,389
(10,863)
1,929,328
$
$
991,260
234,626
259,246
76,762
282,628
(23,460)
1,821,062
(1) Asset balances by segment exclude intercompany payable and receivable balances.
Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Consolidated Results
Consolidated revenues decreased by $270.0 million in 2015 compared with 2014. Revenues from sales of ethanol and
distillers grains decreased by $494.8 million and $57.0 million, respectively, partially offset by an increase in revenues from
the sales of cattle, due to the acquisition of the cattle feedlot operation in June 2014, and other grains of $189.8 million and
$65.5 million, respectively. Ethanol and distillers grains revenues were affected by a decrease in average realized prices.
Grain revenues were impacted by an increase in merchant trading activities. Operating income decreased by $225.2 million in
2015 compared with 2014 as a result of the factors discussed above, partially offset by a decrease in cost of goods sold, due
to lower corn and other commodity prices. Interest expense increased by $0.5 million compared with 2014 due to higher
average debt balances outstanding, partially offset by lower average borrowing costs. Income tax expense was $6.2 million in
2015 compared with $90.9 million in 2014.
The following discussion provides greater detail about our year-to-date segment performance.
Ethanol Production Segment
Key operating data for our ethanol production segment is as follows:
Ethanol sold
(thousands of gallons)
Distillers grains sold
(thousands of equivalent dried tons)
Corn oil sold
(thousands of pounds)
Corn consumed
(thousands of bushels)
Year Ended December 31,
2015
2014
947,557
2,540
244,047
332,417
966,176
2,670
234,632
343,982
Revenues in the ethanol production segment decreased by $488.7 million in 2015 compared with 2014 primarily due to
lower average ethanol and distillers grains prices, as well as lower volumes produced and sold. The average price realized for
ethanol was 32% lower in 2015 compared with 2014. The ethanol production segment produced 947.6 mmg of ethanol,
representing approximately 91% of daily average production capacity, during 2015. During 2015, we sold 244.0 million
pounds of corn oil compared with 234.6 million pounds in 2014. The average price realized for corn oil was 21% lower in
2015 compared with 2014.
Cost of goods sold in the ethanol production segment decreased by $253.2 million for 2015 compared with 2014. The
decrease is due to a decrease in corn consumption of approximately 11.5 million bushels, as well as a 10% decrease in the
average cost per bushel during 2015 compared with 2014. As a result of the factors identified above, operating income for the
43
ethanol production segment decreased by $240.8 million for 2015 compared with the same period in 2014. Depreciation and
amortization expense for the ethanol production segment was $55.3 million for the year ended December 31, 2015, compared
with $53.1 million during 2014.
Agribusiness Segment
Revenues in the agribusiness segment increased by $72.7 million and operating income increased by $1.7 million in
2015 compared with 2014. We sold 300.1 million bushels of grain, including 292.5 million bushels to our ethanol production
segment in 2015, compared with sales of 298.2 million bushels of grain, including 288.1 million bushels to our ethanol
production segment, during 2014. Revenues were impacted by an increase in revenues of $189.8 million due to the cattle
feedlot operation that was acquired during the second quarter of 2014, partially offset by a decrease in average realized prices
of grain sold. Operating income increased as a result of higher volumes of grain storage and margins, partially offset by a
decrease in cattle margins.
Marketing and Distribution Segment
Revenues in our marketing and distribution segment decreased by $717.9 million in 2015 compared with 2014. The
decrease in revenues was primarily due to an $805.9 million decrease in ethanol and distillers grains revenues, partially offset
by an increase in other grain revenues of $94.4 million. The decrease in ethanol and distillers grains revenues is due to lower
average realized prices. Grain revenues were impacted by increased volume activity as well as higher average realized prices.
The marketing and distribution segment sold approximately 1.2 billion gallons of ethanol during both 2015 and 2014.
Operating income for the marketing and distribution segment decreased by $22.9 million in 2015 compared with 2014,
primarily due to the decrease in average realized prices and margins for ethanol activity.
Partnership Segment
As a result of the IPO on July 1, 2015, we contributed downstream ethanol transportation and storage assets to the
partnership. Expenses related to these contributed assets, such as depreciation, amortization and railcar lease expenses, are
reflected in the partnership segment. No revenues related to the operation of the ethanol storage and railcar contributed assets
are reflected in this segment for periods prior July 1, 2015, the date the related commercial agreements with Green Plains
Trade became effective, which impacts the comparability between periods. Revenues generated by the partnership segment
from the new storage and railcar commercial agreements were approximately $36.9 million for the six months ended
December 31, 2015.
Operating income for the partnership segment increased by approximately $33.2 million due to the increase in revenues
above, partially offset by an increase in operations and maintenance expenses of $2.9 million for 2015, compared with the
same period for 2014. The increase was primarily due to increased railcar lease expenses, wages and fuel costs associated
with our partnership’s trucking company, related to an increase in the number of trucks in service and locations where our
partnership’s trucking company does business. This was partially offset by a decrease in throughput unloading fees.
Intersegment Eliminations
Intersegment eliminations of revenues decreased by $825.7 million for 2015 compared with 2014 due to the following
factors: decreased sales of ethanol from the ethanol production segment to the marketing and distribution segment of $677.9
million, decreased sales of distillers grains from the ethanol production segment to the marketing and distribution segment of
$61.4 million, decreased corn sales from the agribusiness segment to the ethanol production segment of $88.2 million and
decreased natural gas sales from the marketing and distribution segment to the ethanol production segment of $34.3 million,
partially offset by increased transportation and storage fees paid to the partnership segment by the marketing and distribution
segment of $36.9 million.
Intersegment eliminations of operating income decreased by $2.3 million for 2015 compared with 2014 due primarily to
decreased average margins eliminated during 2015 compared with 2014. Ethanol is sold from the ethanol production segment
to the marketing and distribution segment as it is produced and transferred into storage tanks located at each respective plant.
The finished product is then sold by the marketing and distribution segment to external customers. Profit is recognized by the
ethanol production segment upon sale to the marketing and distribution segment, and is eliminated from consolidated results
when the title to the product has been transferred to a third party.
44
Corporate Activities
Operating income was impacted by a decrease in operating expenses for corporate activities of $1.2 million for 2015
compared with 2014, primarily due to a decrease in personnel costs.
Income Taxes
We recorded income tax expense of $6.2 million for 2015 compared with $90.9 million in 2014. The effective tax rate
(calculated as the ratio of income tax expense to income before income taxes) was approximately 29.1% for 2015 compared
with 36.3% for 2014. The decrease in the effective tax rate was due primarily to the impact of the noncontrolling interest in
the partnership on the consolidated financial results. This was partially offset by a change in estimate related to our filing
positions in various jurisdictions as well as comparable permanent differences on lower amounts of income before taxes for
the 2015 period compared with the 2014 period.
Noncontrolling Interest
As a result of the IPO, we currently own a 62.5% limited partner interest, a 2.0% general partner interest in the
partnership and all of the partnership’s incentive distribution rights, with the remaining 35.5% limited partner interest owned
by public common unitholders. We consolidate the financial results of the partnership, and record a noncontrolling interest
for the portion of the partnership’s net income attributable to the economic interest in the partnership held by the public
common unitholders. Noncontrolling interest on the consolidated balance sheets includes the portion of net assets of the
partnership attributable to the public common unitholders.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Consolidated Results
Consolidated revenues increased by $194.6 million in 2014 compared with 2013. Revenues from sales of ethanol,
distillers grain and other grains increased by $23.3 million, $43.3 million and $82.5 million, respectively. Ethanol revenues
were affected by an increase in volumes, offset by a decrease in revenue per gallon. Distillers grains revenues were affected
by an increase in volumes produced and merchant trading activities, offset partially by a decrease in average realized prices.
Grain revenues were impacted by an increase in merchant trading activities. Operating income increased by $178.4 million in
2014 compared with 2013 as a result of the increase in revenues, as well as improved margins for ethanol production,
partially offset by an increase in selling, general and administrative expenses of $23.4 million. Selling, general and
administrative expenses were higher in 2014 compared with 2013 due most significantly to an increase in personnel costs and
the expanded scope of operations following the acquisitions of the Atkinson, Fairmont and Wood River ethanol plants in the
second and fourth quarters of 2013. Interest expense increased by $6.6 million compared with 2013 due to higher average
debt balances outstanding, as well as higher average borrowing costs. Income tax expense was $90.9 million in 2014
compared with $28.9 million in 2013.
The following discussion provides greater detail about our year-to-date segment performance.
Ethanol Production Segment
Key operating data for our ethanol production segment is as follows:
Ethanol sold
(thousands of gallons)
Distillers grains sold
(thousands of equivalent dried tons)
Corn oil sold
(thousands of pounds)
Corn consumed
(thousands of bushels)
45
Year Ended December 31,
2014
2013
966,176
2,670
234,632
343,892
734,483
2,038
170,440
257,663
Revenues in the ethanol production segment increased by $134.1 million in 2014 compared with 2013 primarily due to
higher volumes produced and sold, partially offset by lower average ethanol and distillers grains prices. The ethanol
production segment produced 966.2 mmg of ethanol, representing approximately 95.6% of daily average production capacity,
during 2014. During 2014, we sold 234.6 million pounds of corn oil compared with 170.4 million pounds in 2013. The
average price realized for corn oil was 15% lower in 2014 compared with 2013. Revenues in 2014 included a full year of
production from our Atkinson, Fairmont and Wood River plants, which were acquired in the second and fourth quarters of
2013 and contributed an additional combined 214.0 mmg of ethanol production, 54.3 million pounds of corn oil production
and $455.9 million in revenue.
Cost of goods sold in the ethanol production segment decreased by $46.6 million for 2014 compared with 2013. Corn
consumption increased by 86.2 million bushels, offset by a 33% decrease in the average cost per bushel during 2014
compared with 2013. As a result of the factors identified above, operating income for the ethanol production segment
increased by $167.7 million for 2014 compared with the same period in 2013.
Agribusiness Segment
Revenues in the agribusiness segment increased by $494.8 million and operating income increased by $5.2 million in
2014 compared with 2013. We sold 298.2 million bushels of grain, including 288.1 million to our ethanol production
segment in 2014, compared with sales of 142.8 million bushels of grain, including 137.3 million bushels to our ethanol
production segment, during 2013. The increase in grain sold during 2014 compared with 2013 is due to an increase in the
number of ethanol plants in our ethanol production segment to which the agribusiness segment supplied corn, including our
ethanol plants in Atkinson, Fairmont and Wood River, which were acquired in the second and fourth quarters of 2013.
Additionally, $29.4 million of the increase in revenues is due to the cattle feedlot operation that was acquired during the
second quarter of 2014.
Marketing and Distribution Segment
Revenues in our marketing and distribution segment increased by $462.0 million in 2014 compared with 2013. The
increase in revenues was primarily due to a $315.9 million increase in ethanol, distillers grain and other grain revenues due to
additional volumes produced by our recently acquired ethanol plants and an increase in merchant trading of distillers grains
and other grains. In addition, revenues from the sale of natural gas to our ethanol production segment increased by $120.7
million. The marketing and distribution segment sold approximately 1.2 billion and 1.0 billion gallons of ethanol during 2014
and 2013, respectively.
Operating income for the marketing and distribution segment increased by $10.3 million in 2014 compared with 2013,
primarily due to increased merchant trading activities for ethanol, distillers grain and other grains, partially offset by reduced
crude oil transportation activities.
Partnership Segment
Revenues generated by trucking and terminal services increased $1.8 million year ended December 31, 2014, compared
with the same period in 2013, due to increased non-affiliate throughput revenues across the terminal facilities.
Operating income for the partnership segment decreased by $8.7 million due to an increase in operations and
maintenance expenses of $8.6 million for the year ended December 31, 2014, compared with the same period in 2013. The
increase in operations and maintenance expense was primarily due to increased railcar lease expenses.
Intersegment Eliminations
Intersegment eliminations of revenues increased by $898.1 million for 2014 compared with 2013 due to the following
factors: increased corn sales from the agribusiness segment to the ethanol production segment of $453.5 million, increased
natural gas sales from the marketing and distribution segment to the ethanol production segment of $120.7 million, and
increased sales of ethanol from the ethanol production segment to the marketing and distribution segment of $319.0 million,
which is primarily due to the ethanol plants acquired in the second and fourth quarters of 2013.
Intersegment eliminations of operating income decreased by $7.3 million for 2014 compared with 2013 due primarily to
reduced quantities of ethanol in transit to customers and decreased average margins eliminated. Beginning in October, 2013,
ethanol is sold from the ethanol production segment to the marketing and distribution segment as it is produced and
transferred into storage tanks located at each respective plant. The finished product is then sold by the marketing and
46
distribution segment to external customers. Profit is recognized by the ethanol production segment upon sale to the marketing
and distribution segment, but is eliminated from consolidated results until title to the product has been transferred to a third
party. Ethanol quantities held as inventory by the marketing and distribution segment declined during 2014 and the average
margin per gallon realized by the ethanol production segment decreased, resulting in a reduction in deferred intersegment
profits during 2014. This was partially offset by increased intersegment profits eliminated for corn oil and distillers grains in
transit to customers at the end of 2014 which will be recognized in future periods.
Corporate Activities
Operating income was impacted by an increase in operating expenses for corporate activities of $3.3 million for 2014
compared with 2013, primarily due to an increase in personnel costs.
Income Taxes
We recorded income tax expense of $90.9 million for 2014 compared with $28.9 million in 2013. The effective tax rate
(calculated as the ratio of income tax expense to income before income taxes) was approximately 36.3% for 2014 compared
with 40.0% for 2013. The annual effective tax rate was favorably impacted primarily by an income tax deduction for
qualified production activities. The annual effective tax rate for 2013 reflects a change in estimate related to nondeductible
compensation expense and an increase in the accrual for uncertain tax positions partially offset by an increase in tax benefits.
Liquidity and Capital Resources
Our principal sources of liquidity include cash generated from operating activities and bank credit facilities. We fund our
operating expenses and service debt primarily with operating cash flows. Capital resources for maintenance and growth
expenditures are funded by a variety of sources, including cash generated from operating activities, borrowings under bank
credit facilities, or issuance of senior unsecured notes or equity. Our ability to access capital markets for debt under
reasonable terms depends on our financial condition, credit ratings and market conditions. We believe that our ability to
obtain financing at reasonable rates and history of consistent cash flow from operating activities provide a solid foundation to
meet our future liquidity and capital resource requirements.
On December 31, 2015, we had $384.9 million in cash and equivalents, excluding restricted cash, consisting of $273.3
million held at our parent company and the remainder at our subsidiaries. We also had $248.0 million available under our
revolving credit agreements, some of which were subject to restrictions or other lending conditions. Funds held by our
subsidiaries are generally required for their ongoing operational needs and restricted from distribution. At December 31,
2015, our subsidiaries had approximately $751.0 million of net assets that were not available to us in the form of dividends,
loans or advances due to restrictions contained in their credit facilities.
In conjunction with the IPO on July 1, 2015, the partnership received net proceeds of $157.5 million, of which $155.3
million was paid to us as a distribution. In addition, the partnership entered into a new $100.0 million revolving credit facility
to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes. The company
also recognized an income tax gain on assets contributed to the partnership which resulted in higher cash outflows for
estimated tax payments during 2015.
We incurred capital expenditures of $65.6 million in 2015 for various projects, including expansion projects of
approximately $28.8 million for ethanol production capacity and $10.4 million for grain storage capacity. The current budget
for capital spending for 2016 is approximately $75.0 million, which is subject to review prior to the initiation of any projects.
The budget includes additional expenditures for the expansion project for ethanol production capacity, as well as
expenditures for various other projects, and is expected to be financed with available borrowings under our credit facilities
and cash provided by operating activities.
Net cash provided by operating activities was $10.2 million in 2015 compared with $221.6 million in 2014. Operating
activities were affected by decreased operating profits and an increase in working capital for 2015, primarily consisting of an
increase in inventories and a decrease in accrued liabilities, partially offset by a decrease in accounts receivable. In 2015, we
had net income of $15.2 million compared with $159.5 million in 2014. Net cash used by investing activities was $183.2
million in 2015, due primarily to capital expenditures at our ethanol plants, as well as the acquisitions of the Hereford and
Hopewell ethanol plants. Net cash provided by financing activities was $132.3 million in 2015 primarily due to the proceeds
received from the IPO of the partnership. Additionally, Green Plains Trade, Green Plains Cattle and Green Plains Grain use
revolving credit facilities to finance working capital requirements. We frequently draw from and repay these facilities which
47
results in significant cash movements reflected on a gross basis within financing activities as proceeds from and payments on
short-term borrowings.
Our business is highly sensitive to the price of commodities, particularly for corn, ethanol, distillers grains, corn oil and
natural gas. We use derivative financial instruments to reduce the market risk associated with fluctuations in commodity
prices. Sudden changes in commodity prices may require cash deposits with brokers for margin calls or significant liquidity
with little advanced notice to meet margin calls, depending on our open derivative positions. On December 31, 2015, we had
$7.7 million in margin deposits for broker margin requirements. We continuously monitor our exposure to margin calls and
believe we will continue to maintain adequate liquidity to cover margin calls from our operating results and borrowings.
We were in compliance with our debt covenants at December 31, 2015. Based on our forecasts and the current margin
environment, we believe we will maintain compliance at each of our subsidiaries for the next twelve months or have
sufficient liquidity available on a consolidated basis to resolve noncompliance. We cannot provide assurance that actual
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 a subsidiary is unable to comply with its debt covenants, the subsidiary’s lenders
may determine that an event of default has occurred, and following notice, the lenders may terminate the commitment and
declare the unpaid balance due and payable.
In August 2013, our board of directors initiated a quarterly cash dividend. We have paid a quarterly cash dividend since
this initial authorization and anticipate declaring a cash dividend in future quarters on a regular basis. In August 2015, our
board of directors declared a quarterly cash dividend of $0.12 per share. The cash dividend represents a 50% increase from
the previous dividend and the second annual increase in the cash dividend paid to shareholders. Future declarations of
dividends, however, are subject to board approval and may be adjusted as our cash position, business needs or market
conditions change. On February 10, 2016, our board of directors declared a quarterly cash dividend of $0.12 per share. The
dividend is payable on March 18, 2016, to shareholders of record at the close of business on February 26, 2016.
For each calendar quarter commencing with the quarter ended September 30, 2015, the partnership agreement requires us
to distribute all available cash, as defined, to our partners within 45 days after the end of each calendar quarter. Available
cash generally means all cash and cash equivalents on hand at the end of that quarter less cash reserves established by our
general partner plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the
end of that quarter. On January 21, 2016, the board of directors of the general partner of the partnership declared a cash
distribution of $0.4025 per unit on outstanding common and subordinated units. The distribution is payable on February 12,
2016, to unitholders of record at the close of business on February 5, 2016.
In August 2014, we announced a share repurchase program of up to $100 million of our common stock. Under the
program, we may repurchase shares in open market transactions, privately negotiated transactions, accelerated share buyback
programs, tender offers or by other means. The timing and amount of repurchase transactions are determined by our
management based on market conditions, share price, legal requirements and other factors. The program may be suspended,
modified or discontinued at any time without prior notice. We repurchased 191,700 shares of common stock for
approximately $4.0 million during the third quarter of 2015.
We believe we have sufficient working capital for our existing operations. A sustained period of unprofitable operations,
however, may strain our liquidity making it difficult to maintain compliance with our financing arrangements. We may sell
additional equity or borrow capital to improve or preserve our liquidity, expand our business or build additional or acquire
existing businesses. We cannot provide assurance that we will be able to secure funding necessary for additional working
capital or these projects at reasonable terms, if at all.
Debt
See Note 11 – Debt included as part of the notes to consolidated financial statements for more information about our
debt.
Ethanol Production Segment
Green Plains Processing amended its senior secured credit facility during the second quarter of 2015 to increase the
outstanding borrowings by $120 million, bringing its total commitment to $345 million. The proceeds were used to repay
existing term loans and revolving term loans with a combined outstanding balance of $117.3 million. The term loan is
secured by twelve of our ethanol production facilities and matures in June of 2020. At December 31, 2015, $315.3 million
48
was outstanding and our interest rate was 6.5%. Our scheduled principal payments are $0.9 million each quarter. Available
free cash flow may be distributed to us after a quarterly free cash flow payment is made to the lenders, subject to certain
limitations, as defined in the loan agreement.
We also have small equipment financing loans, capital leases on equipment or facilities, and other forms of debt
financing.
Agribusiness Segment
Green Plains Grain has a $125.0 million senior secured asset-based revolving credit facility to finance working capital up
to the maximum commitment based on eligible collateral. This facility can be increased by up to $75.0 million with agent
approval and up to $50.0 million for seasonal borrowings. Total commitments outstanding under the facility cannot exceed
$250.0 million. The facility matures in August of 2016. At December 31, 2015, $77.0 million was outstanding on the facility
and our interest rate was 3.9%.
Green Plains Cattle has a $100.0 million senior secured asset-based revolving credit facility to finance working capital
up to the maximum commitment based on eligible collateral. The facility matures in October of 2017. At December 31, 2015,
$69.7 million was outstanding on the facility and our interest rate was 3.2%.
Marketing and Distribution Segment
Green Plains Trade has a $150.0 million senior secured asset-based revolving credit facility to finance working capital up
to the maximum commitment based on eligible collateral. The facility matures in November of 2019. At December 31, 2015,
$80.2 million was outstanding on the facility and our interest rate was 2.9%.
Partnership Segment
Green Plains Operating Company has a $100.0 million revolving credit facility to fund working capital, acquisitions,
distributions, capital expenditures and other general partnership purposes. This facility can be increased by up to $50.0
million without the consent of the lenders. The facility matures in July of 2020. We had no outstanding balance on this credit
facility at December 31, 2015. Effective January 1, 2016, the partnership acquired the storage and transportation assets of the
Hereford, Texas and Hopewell, Virginia ethanol production facilities from us for an initial consideration of $62.5 million.
The partnership borrowed $48.0 million on the revolving credit facility and used cash on hand to fund the purchase of the
assets and the interest rate was 2.18%.
Corporate Activities
In September 2013, we issued $120.0 million of 3.25% convertible senior notes due in 2018, which are senior, unsecured
obligations with interest payable on April 1 and October 1 of each year. Prior to April 1, 2018, the notes are not convertible
unless certain conditions are satisfied. The conversion rate is subject to adjustment when the quarterly cash dividend exceeds
$0.04 per share. The conversion rate was recently adjusted as of December 31, 2015 to 48.6097 shares of common stock per
$1,000 of principal, which is equal to a conversion price of approximately $20.57 per share. We intend to convert the notes
with cash for the principal, and cash or common stock for the conversion premium.
49
Contractual Obligations
Contractual obligations as of December 31, 2015 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
Other
Purchase obligations
Payments Due By Period
Total
$ 689,589
126,448
109,172
81,797
6,655
Less than 1
year
$ 231,435
33,624
31,098
-
1,616
1-3 years
$ 129,111
50,137
38,046
-
736
3-5 years
$ 306,976
31,256
23,025
-
2,659
More than 5
years
$ 22,067
11,431
17,003
81,797
1,644
Forward grain purchase contracts (4)
Other commodity purchase contracts (5)
Other
Total contractual obligations
224,069
98,220
130
$ 1,336,080
214,234
98,220
55
$ 610,282
4,251
-
70
$ 222,351
2,667
-
5
$ 366,588
2,917
-
-
$ 136,859
(1)
(2)
Includes the current portion of long-term debt and excludes the effect of any debt discounts.
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 use various financial instruments to manage and reduce our exposure to various market risks, including changes in
commodity prices and interest rates. We conduct all of our business in U.S. dollars and are not currently exposed to foreign
currency risk.
Interest Rate Risk
We are exposed to interest rate risk through our loans which bear interest at variable rates. Interest rates on our variable-
rate debt are based on the market rate for the lender’s prime rate or LIBOR. A 10% increase in interest rates would affect our
interest cost by approximately $2.8 million per year. At December 31, 2015, we had $675.0 million in debt, $542.2 million of
which had variable interest rates.
See Note 11 – Debt included as part of the notes to consolidated financial statements for more information about our
debt.
Commodity Price Risk
Our business is highly sensitive to commodity prices risk, particularly for ethanol, distillers grains, corn oil, corn and
natural gas. Corn prices are affected by weather conditions, yield, changes in domestic and global supply and demand, and
government programs and policies. Natural gas prices are influenced by severe weather in the summer and winter and
hurricanes in the spring, summer and fall. Other factors include North American exploration and production, and the amount
of natural gas in underground storage during injection and withdrawal seasons. Ethanol prices are sensitive to world crude oil
supply and demand, the price of crude oil, gasoline and corn, the price of substitute fuels, refining capacity and utilization,
government regulation and consumer demand for alternative fuels. Distillers grains prices are impacted by livestock numbers
on feed, prices for feed alternatives and supply, which is associated with ethanol plant production.
To reduce the risk associated with fluctuations in the price of corn, natural gas, ethanol, distillers grains and corn oil, at
times we use 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 favorable operating margins,
when available, using a model that continually monitors market prices for corn, natural gas and other inputs relative to the
price for ethanol and distillers grains at each of our production facilities. We create offsetting positions using a combination
50
of forward fixed-price purchases, sales contracts and derivative financial instruments. As a result, we frequently have gains
on derivative financial instruments that are offset by losses on forward fixed-price physical contracts or inventories and vice
versa.
Ethanol Production Segment
In the ethanol production segment, net gains and losses from settled derivative instruments are offset by physical
commodity purchases or sales to achieve the intended operating margins. Our results are impacted when there is a mismatch
of gains or losses associated with the derivative instrument during a reporting period when the physical commodity purchases
or sale has not yet occurred. For the year ended December 31, 2015, revenues included net losses of $4.6 million and cost of
goods sold included net gains of $19.0 million associated with derivative instruments.
Our exposure to market risk, which includes the impact of our risk management activities resulting from our fixed-price
purchase and sale contracts and derivatives, is based on the estimated net income effect resulting from a hypothetical 10%
change in price for the next 12 months starting on December 31, 2015, are as follows (in thousands):
Commodity
Ethanol
Corn
Distillers grains
Corn Oil
Natural gas
Estimated Total Volume
Requirements for the
Next 12 Months (1)
1,215,000
430,000
3,400
275,000
33,300
Unit of Measure
Gallons
Bushels
Tons (2)
Pounds
MMBTU (3)
Net Income Effect of
Approximate 10% Change
in Price
106,861
101,845
19,651
2,873
4,609
$
$
$
$
$
(1) Estimated volumes reflect anticipated expansion of production capacity at our ethanol plants and assumes production at full capacity.
(2) Distillers grains quantities are stated on an equivalent dried ton basis.
(3) Millions of British Thermal Units
Agribusiness Segment
In the agribusiness segment, our inventories, physical purchase and sale contracts and derivatives are marked to market.
To reduce commodity price risk caused by market fluctuations for purchase and sale commitments of grain and cattle, and
grain held in inventory, we enter into exchange-traded futures and options contracts that serve as economic hedges.
The market value of exchange-traded futures and options used for hedging are highly correlated with the underlying
market value of grain inventories and related purchase and sale contracts for grain and cattle. The less correlated portion of
inventory and purchase and sale contract market values, 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. Inventory values are affected by the month-to-month spread in the
futures markets. These spreads are also less volatile than overall market value of our inventory and tend to follow historical
patterns, but cannot be mitigated directly. Our accounting policy for futures and options, as well as the underlying inventory
held for sale and purchase and sale contracts, is to reflect their current market values and include gains and losses in the
consolidated statement of operations.
Our daily net commodity position consists of inventories related to purchase and sale contracts and exchange-traded
contracts. The fair value of our position was approximately $2.0 million for grain and $13.9 million for cattle at December
31, 2015. Our market risk at that date, based on the estimated net income effect resulting from a hypothetical 10% change in
price, was approximately $0.1 million for grain and $0.9 million for cattle.
Item 8. Financial Statements and Supplementary Data.
The required consolidated financial statements and accompanying notes are listed in Part IV, Item 15.
51
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure information that must be disclosed in the reports 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 management, as appropriate, to
allow timely decisions regarding required financial disclosure.
Under the supervision of and participation of our chief executive officer and chief financial officer, management carried
out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December
31, 2015, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and concluded that our disclosure controls
and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
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 preparation of financial statements in accordance with GAAP.
Under the supervision and participation of our chief executive officer and chief financial officer, management assessed
the design and operating effectiveness of our internal control over financial reporting as of December 31, 2015, based on the
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. During the fourth quarter of 2015, we acquired two ethanol plants, one located in Hereford, Texas on
November 12, 2015, and one located in Hopewell, Virginia on October 23, 2015. Our management excluded the acquired
ethanol plants from its assessment of the effectiveness of our internal control over financial reporting as of December 31,
2015. The acquired ethanol plants represent approximately 6% of our total assets at December 31, 2015, and they contributed
approximately 1% of our total revenues in 2015.
Based on this assessment, management concluded that our internal control over financial reporting was effective as of
December 31, 2015. KMPG LLP, an independent registered public accounting firm, has audited and issued a report on our
internal control over financial reporting as of December 31, 2015, which is included in this report.
Changes in Internal Control over Financial Reporting
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 U.S. generally accepted accounting principles. There were no material
changes in our internal control over financial reporting that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
52
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Green Plains Inc. and subsidiaries:
We have audited Green Plains Inc. and subsidiaries’ (the company) internal control over financial reporting as of December
31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) 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, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The company acquired two ethanol plants, one located in Hereford, Texas on November 12, 2015 and one located in
Hopewell, Virginia on October 23, 2015 (collectively referred to as the ethanol plants), and management excluded from its
assessment of the effectiveness of the company’s internal control over financial reporting as of December 31, 2015, internal
control over financial reporting associated with the ethanol plants which represent approximately 6% of the company’s
consolidated total assets and approximately 1% of the company’s consolidated total revenues as of and for the year ended
December 31, 2015. Our audit of internal control over financial reporting of the company also excluded an evaluation of the
internal control over financial reporting of the ethanol plants.
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, 2015 and 2014, 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, 2015, and our report dated February 18, 2016 expressed an unqualified opinion on those consolidated
financial statements.
Omaha, Nebraska
February 18, 2016
/s/ KPMG LLP
53
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Information in our Proxy Statement for the 2016 Annual Meeting of Stockholders under “Information about the Board of
Directors and Corporate Governance,” “Proposal 1 – Election of Directors,” “Executive Officers,” and “Section 16(a)
Beneficial Ownership Reporting Compliance” is incorporated by reference.
We have 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, senior financial officers and other persons performing similar functions.
Our code of ethics is available on our website at www.gpreinc.com in the “Investors – Corporate Governance” section.
Amendments or waivers are disclosed within five business days following its adoption.
Item 11. Executive Compensation.
Information included in the Proxy Statement under “Information about the Board of Directors and Corporate
Governance,” “Director Compensation” and “Executive Compensation” is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information in the Proxy Statement under “Principal Shareholders,” “Equity Compensation Plans” and “Executive
Compensation” is incorporated by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information in the Proxy Statement under “Information about the Board of Directors and Corporate Governance” and
“Certain Relationships and Related Party Transactions” is incorporated by reference.
Item 14. Principal Accounting Fees and Services.
Information in the Proxy Statement under “Independent Public Accountants” is incorporated by reference.
54
Item 15. Exhibits, Financial Statement Schedules.
PART IV
(1) Financial Statements. The following consolidated financial statements and notes are 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, 2015 and 2014
Consolidated Statements of Operations for the years-ended December 31, 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income for the years-ended December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders’ Equity for the years-ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the years-ended December 31, 2015, 2014 and 2013
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 are filed as part of this annual
report on Form 10-K.
Schedule I – Condensed Financial Information of the Registrant
Page
F-35
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 exhibits are incorporated by reference, filed or furnished as part of this annual report on Form
10-K.
Exhibit No.
Description of Exhibit
Exhibit Index
2.1
2.2(a)
2.2(b)
2.3(a)
2.3(b)
2.4
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 (Incorporated by reference to Exhibit 2.2 of the company’s
Current Report on Form 8-K filed December 6, 2012)
Asset Purchase Agreement by and among Ethanol Holding Company, LLC, Green Plains
Renewable Energy, Inc., Green Plains Wood River LLC and Green Plains Fairmont LLC dated
November 1, 2013 (Incorporated by reference to Exhibit 2.1 of the company’s Current Report on
Form 8-K filed November 25, 2013)
Amendment to Asset Purchase Agreement by and among Ethanol Holding Company, LLC, Green
Plains Renewable Energy, Inc., Green Plains Wood River LLC and Green Plains Fairmont LLC
dated November 22, 2013 (Incorporated by reference to Exhibit 2.2 of the company’s Current
Report on Form 8-K filed November 25, 2013)
Membership Interest Purchase Agreement between Murphy Oil USA, Inc. and Green Plains Inc.
dated October 28, 2015 (certain exhibits and disclosure schedules to this agreement have been
omitted; Green Plains will furnish such exhibits and disclosure schedules to the SEC upon request)
(Incorporated by reference to Exhibit 2.1 to the company’s Current Report on Form 8-K dated
November 12, 2015)
3.1(a)
Second Amended and Restated Articles of Incorporation of the Company (Incorporated by
55
3.1(b)
3.1(c)
3.2
4.1
4.2
4.3
4.4
*10.1
*10.2
10.3
*10.4(a)
*10.4(b)
*10.5
*10.6
*10.7
*10.8(a)
*10.8(b)
*10.8(c)
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 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 16, 2014)
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)
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 3.25% Convertible Senior Notes due 2018, dated as of September 20,
2013, between Green Plains Renewable Energy, Inc. and Willington Trust, National Association,
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 September 20, 2013)
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)
Non-Statutory Stock Option Agreement between Steve Bleyl and Green Plains Renewable Energy,
Inc. dated October 15, 2008 (Incorporated by reference to Exhibit 10.50 of the company’s Annual
Report on Form 10-KT dated March 31, 2009)
Non-Statutory Stock Option Agreement between 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)
Amendment No. 1 to the 2009 Equity Incentive Plan (Incorporated by reference to Appendix A of
the company’s Definitive Proxy Statement filed March 25, 2011)
Amendment No. 2 to the 2009 Equity Incentive Plan (Incorporated by reference to Appendix A of
the company’s Definitive Proxy Statement filed March 29, 2013)
56
*10.8(d)
*10.8(e)
*10.8(f)
10.9(a)
10.9(b)
10.9(c)
10.9(d)
10.9(e)
10.9(f)
10.9(g)
*10.10
*10.11
*10.12
*10.13
10.14(a)
10.14(b)
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)
Second Amended and Restated Revolving Credit and Security Agreement dated April 26, 2013 by
and among Green Plains Trade Group LLC and PNC Bank, National Association (as Lender and
Agent) (Incorporated by reference to Exhibit 10.2 of the company’s Quarterly Report on Form 10-
Q filed May 2, 2013)
Third Amended and Restated Revolving Credit and Security Agreement dated November 26, 2014
by and among Green Plains Trade Group LLC, the Lenders and PNC Bank, National Association
(as Lender and Agent) (Incorporated by reference to Exhibit 10.1 of the company’s Current Report
on Form 8-K filed December 2, 2014)
Second Amended and Restated Revolving Credit Note dated April 26, 2013 by and among Green
Plains Trade Group LLC and PNC Bank, National Association (Incorporated by reference to
Exhibit 10.2(a) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and
Citibank, N.A. (Incorporated by reference to Exhibit 10.2(b) of the company’s Quarterly Report on
Form 10-Q filed May 2, 2013)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and
BMO Harris Bank N.A. (Incorporated by reference to Exhibit 10.2(c) of the company’s Quarterly
Report on Form 10-Q filed May 2, 2013)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and
Alostar Bank of Commerce (Incorporated by reference to Exhibit 10.2(d) of the company’s
Quarterly Report on Form 10-Q filed May 2, 2013)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and
Bank of America (Incorporated by reference to Exhibit 10.2(e) of the company’s Quarterly Report
on Form 10-Q filed May 2, 2013)
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 April 1, 2014 (Incorporated by reference to Exhibit 10.15 of the
company’s Annual Report on Form 10-K filed February 10, 2014)
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)
57
10.14(c)
10.14(d)
10.14(e)
10.15(a)
10.15(b)
10.15(c)
10.15(d)
10.15(e)
10.15(f)
10.16(a)
10.16(b)
10.16(c)
10.16(d)
10.16(e)
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 (Incorporated by reference to Exhibit 10.18(c) of the company’s
Annual Report on Form 10-K filed February 15, 2013)
Amendment to the Master Loan Agreement, dated November 13, 2013, 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 10.18(d) of the company’s Annual Report on
Form 10-K filed February 10, 2014)
Revolving Term Loan Supplement, dated June 26, 2014, by and between Green Plains Obion LLC
and Farm Credit Mid-America, FLCA (Incorporated by reference to Exhibit 10.1 of the company’s
Quarterly Report on Form 10-Q filed July 31, 2014)
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 (Incorporated by
reference to Exhibit 10.19(b) of the company’s Annual Report on Form 10-K filed February 15,
2013)
Amendment dated October 24, 2013 to the Master Loan Agreement, as amended, dated June 20,
2011 by and among Green Plains Superior 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
October 31, 2013)
Amendment dated August 18, 2014 to the Master Loan Agreement, as amended, dated June 20,
2011 by and among Green Plains Superior LLC and Farm Credit Services of America, FLCA
(Incorporated by reference to Exhibit 10.1 of the company’s Quarterly Report on Form 10-Q filed
October 30, 2014)
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)
Revolving Term Loan Supplement dated August 18, 2014 to the Master Loan Agreement, as
amended, dated June 20, 2011 by and among Green Plains Superior LLC and Farm Credit Services
of America, FLCA (Incorporated by reference to Exhibit 10.2 of the company’s Quarterly Report
on Form 10-Q filed October 30, 2014)
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)
58
10.16(f)
10.16(g)
10.16(h)
10.16(i)
10.17(a)
10.17(b)
10.17(c)
10.17(d)
10.17(e)
10.17(f)
10.17(g)
*10.18
10.19(a)
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)
Third Amendment to Credit Agreement, dated August 27, 2013, 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 10.3 of the company’s Quarterly Report on Form 10-Q filed
October 31, 2013)
Fourth Amendment to Credit Agreement, dated August 8, 2014, by and among Green Plains Grain
Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green
Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit
Agreement, and the lenders party to the Credit Agreement (Incorporated by reference to Exhibit
10.3 of the company’s Quarterly Report on Form 10-Q filed October 30, 2014)
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)
Second Amendment to Amended and Restated Credit Agreement, dated February 28, 2014, by and
between Green Plains Holdings II LLC and CoBank ACB (Incorporated by reference to Exhibit
10.1 of the company’s Quarterly Report on Form 10-Q filed May 1, 2014)
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)
Employment Agreement by and between Green Plains Renewable Energy, Inc. and Patrich
Simpkins dated April 1, 2012 (Incorporated by reference to Exhibit 10.2 of the company’s
Quarterly Report on Form 10-Q filed May 1, 2014)
Term Loan Agreement, dated as of June 10, 2014, among Green Plains Processing, LLC, as
Borrower, the Lenders Party Hereto, BNP Paribas, as Administrative Agent and as Collateral
Agent, and BMO Capital Markets and BNP Paribas Securities Corp., as Joint Lead Arrangers and
Joint Book Runners (Incorporated by reference to Exhibit 10.1 to the company’s Current Report on
Form 8-K dated June 12, 2014)
10.19(b)
Guaranty - Green Plains Inc. (Incorporated by reference to Exhibit 10.2 to the company’s Current
Report on Form 8-K dated June 12, 2014)
59
10.19(c)
10.19(d)
10.19(e)
10.19(f)
10.19(g)
10.19(h)
10.19(i)
10.19(j)
10.19(k)
10.19(l)
10.19(m)
10.19(n)
10.19(o)
10.19(p)
10.19(q)
10.19(r)
10.19(s)
Guaranty - Green Plains Processing Subsidiaries (Incorporated by reference to Exhibit 10.3 to the
company’s Current Report on Form 8-K dated June 12, 2014)
Pledge Agreement (Incorporated by reference to Exhibit 10.4 to the company’s Current Report on
Form 8-K dated June 12, 2014)
Security Agreement (Incorporated by reference to Exhibit 10.5 to the company’s Current Report on
Form 8-K dated June 12, 2014)
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement
by Green Plains Atkinson LLC (Incorporated by reference to Exhibit 10.6 to the company’s
Current Report on Form 8-K dated June 12, 2014)
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement
by Green Plains Central City LLC (Incorporated by reference to Exhibit 10.7 to the company’s
Current Report on Form 8-K dated June 12, 2014)
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement
by Green Plains Ord LLC (Incorporated by reference to Exhibit 10.8 to the company’s Current
Report on Form 8-K dated June 12, 2014)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by
Green Plains Bluffton LLC (Incorporated by reference to Exhibit 10.9 to the company’s Current
Report on Form 8-K dated June 12, 2014)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by
Green Plains Otter Tail LLC (Incorporated by reference to Exhibit 10.10 to the company’s Current
Report on Form 8-K dated June 12, 2014)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by
Green Plains Shenandoah LLC (Incorporated by reference to Exhibit 10.11 to the company’s
Current Report on Form 8-K dated June 12, 2014)
First Amendment to Term Loan Agreement, dated as of June 11, 2015, among Green Plains as
Borrower, the Lenders Party Hereto, BNP Paribas, as Administrative Agent and as Collateral
Agent, and BMO Capital Markets and BNP Paribas Securities Corp., as Joint Lead Arrangers and
Joint Book Runners (Incorporated by reference to Exhibit 10.1 to the company’s Current Report on
Form 8-K dated June 16, 2015)
Second Amendment to Term Loan Agreement, dated as of June 11, 2015, by and between Green
Plains Processing, BNP Paribas, as Administrative Agent and Collateral Agent and as a Lender
(Incorporated by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated
June 16, 2015)
Joinder Agreement (Incorporated by reference to Exhibit 10.3 to the company’s Current Report on
Form 8-K dated June 16, 2015)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by
Green Plains Fairmont LLC, as mortgagor, to and for the benefit of BNP Paribas (Incorporated by
reference to Exhibit 10.4 to the company’s Current Report on Form 8-K dated June 16, 2015)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by
Green Plains Holdings II LLC, as mortgagor, to and for the benefit of BNP Paribas (Incorporated
by reference to Exhibit 10.5 to the company’s Current Report on Form 8-K dated June 16, 2015)
Mortgage by and from Green Plains Holdings II LLC, as mortgagor, to and for the benefit of BNP
Paribas (Incorporated by reference to Exhibit 10.6 to the company’s Current Report on Form 8-K
dated June 16, 2015)
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing by and
from Green Plains Obion LLC, as trustor, to the trustee named therein for the benefit of BNP
Paribas (Incorporated by reference to Exhibit 10.7 to the company’s Current Report on Form 8-K
dated June 16, 2015)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by
Green Plains Superior LLC, as mortgagor, to and for the benefit of BNP Paribas (Incorporated by
reference to Exhibit 10.8 to the company’s Current Report on Form 8-K dated June 16, 2015)
60
10.19(t)
10.19(u)
10.19(v)
10.19(w)
10.19(x)
10.19(y)
10.19(z)
10.20(a)
10.20(b)
10.21
10.22(a)
10.22(b)
10.23(a)
10.23(b)
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement
by and from Green Plains Wood River LLC, as trustor, to the trustee named therein for the benefit
of BNP Paribas (Incorporated by reference to Exhibit 10.9 to the company’s Current Report on
Form 8-K dated June 16, 2015)
Amendment to Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Green Plains Otter Tail LLC, as mortgagor, to and for the benefit of BNP Paribas
(Incorporated by reference to Exhibit 10.10 to the company’s Current Report on Form 8-K dated
June 16, 2015)
Amendment to Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Green Plains Bluffton LLC, as mortgagor, to and for the benefit of BNP Paribas
(Incorporated by reference to Exhibit 10.11 to the company’s Current Report on Form 8-K dated
June 16, 2015)
Amendment to Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Statement by and from Green Plains Atkinson LLC, as trustor, to the trustee named therein
for the benefit of BNP Paribas (Incorporated by reference to Exhibit 10.12 to the company’s
Current Report on Form 8-K dated June 16, 2015)
Amendment to Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Statement by and from Green Plains Central City LLC, as trustor, to the trustee named
therein for the benefit of BNP Paribas (Incorporated by reference to Exhibit 10.13 to the
company’s Current Report on Form 8-K dated June 16, 2015)
Amendment to Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Statement by and from Green Plains Ord LLC, as trustor, to the trustee named therein for the
benefit of BNP Paribas (Incorporated by reference to Exhibit 10.14 to the company’s Current
Report on Form 8-K dated June 16, 2015)
Amendment to Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Green Plains Shenandoah LLC, as mortgagor, to and for the benefit of BNP Paribas
(Incorporated by reference to Exhibit 10.15 to the company’s Current Report on Form 8-K dated
June 16, 2015)
Credit Agreement dated December 3, 2014 among Green Plains Cattle Company, LLC, Bank of the
West and ING Capital LLC, as Joint Administrative Agents, and the lenders party to the Credit
Agreement (Incorporated by reference to Exhibit 10.1 to the company’s Current Report on Form 8-
K dated December 5, 2014)
Security and Pledge Agreement dated December 3, 2014 among Green Plains Cattle Company,
LLC, and Bank of the West and ING Capital LLC in their capacity as Joint Administrative Agents
(Incorporated by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated
December 5, 2014)
Contribution, Conveyance and Assumption Agreement, dated July 1, 2015, by and among Green
Plains Inc., Green Plains Obion LLC, Green Plains Trucking LLC, Green Plains Holdings LLC,
Green Plains Partners LP and Green Plains Operating Company LLC (Incorporated by reference to
Exhibit 10.1 to the company’s Current Report on Form 8-K dated July 6, 2015)
Omnibus Agreement, dated July 1, 2015, by and among Green Plains Inc., Green Plains Holdings
LLC, Green Plains Partners LP and Green Plains Operating Company LLC (Incorporated by
reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated July 6, 2015)
First Amendment to the Omnibus Agreement, dated January 1, 2016, by and among Green Plains
Inc., Green Plains Holdings LLC, Green Plains Partners LP and Green Plains Operating Company
LLC
Operational Services and Secondment Agreement, dated July 1, 2015, by and between Green
Plains Inc. and Green Plains Holdings LLC (Incorporated by reference to Exhibit 10.3 to the
company’s Current Report on Form 8-K dated July 6, 2015)
Amendment No. 1 to the Operational Services and Secondment Agreement, dated January 1, 2016,
by and between Green Plains Inc. and Green Plains Holdings LLC
61
10.24
10.25(a)
10.25(b)
10.26
10.27
21.1
23.1
31.1
31.2
32.1
32.2
101
Rail Transportation Services Agreement, dated July 1, 2015, by and between Green Plains
Logistics LLC and Green Plains Trade Group LLC (Incorporated by reference to Exhibit 10.4 to
the company’s Current Report on Form 8-K dated July 6, 2015)
Ethanol Storage and Throughput Agreement, dated July 1, 2015, by and between Green Plains
Ethanol Storage LLC and Green Plains Trade Group LLC (Incorporated by reference to Exhibit
10.5 to the company’s Current Report on Form 8-K dated July 6, 2015)
Amendment No. 1 to the Ethanol Storage and Throughput Agreement, dated January 1, 2016, by
and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC
Credit Agreement, dated July 1, 2015, by and among Green Plains Operating Company LLC, as the
Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A., and the other
lenders party thereto (Incorporated by reference to Exhibit 10.6 to the company’s Current Report
on Form 8-K dated July 6, 2015)
Asset Purchase Agreement, dated January 1, 2016, by and among Green Plains Inc., Green Plains
Hereford LLC, Green Plains Hopewell LLC, Green Plains Holdings LLC, Green Plains Partners
LP, Green Plains Operating Company LLC, Green Plains Ethanol Storage LLC and Green Plains
Logistics LLC
Schedule of Subsidiaries
Consent of KPMG LLP
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Section 302 of the
Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Section 302 of the
Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
The following information from Green Plains Inc.’s Annual Report on Form 10-K for the annual
period ended December 31, 2015, 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
62
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
GREEN PLAINS INC.
(Registrant)
Date: February 18, 2016 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/ James F. Crowley
James F. Crowley
/s/ S. Eugene Edwards
S. Eugene Edwards
/s/ Gordon F. Glade
Gordon F. Glade
/s/ Thomas L. Manuel
Thomas L. Manuel
/s/ Brian D. Peterson
Brian D. Peterson
/s/ Alain Treuer
Alain Treuer
President and Chief Executive Officer
(Principal Executive Officer) and Director
February 18, 2016
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
February 18, 2016
Chairman of the Board
February 18, 2016
February 18, 2016
February 18, 2016
February 18, 2016
February 18, 2016
February 18, 2016
February 18, 2016
February 18, 2016
Director
Director
Director
Director
Director
Director
Director
63
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Green Plains Inc. and subsidiaries:
We have audited the accompanying consolidated balance sheets of Green Plains Inc. and subsidiaries (the company) as of
December 31, 2015 and 2014, 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, 2015. In connection with our audits
of the consolidated financial statements, we have also 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 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 Green Plains Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of its operations and its cash
flows for each of the years in the three year period ended December 31, 2015, 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, present fairly, in all material respects, the information set forth therein.
We also have 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, 2015, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated February 18, 2016 expressed an unqualified opinion on the effectiveness of the company’s
internal control over financial reporting.
Omaha, Nebraska
February 18, 2016
/s/ KPMG LLP
F-1
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31,
2015
2014
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowances of $285 and $1,231, respectively
Income taxes receivable
Inventories
Prepaid expenses and other
Derivative financial instruments
Total current assets
Property and equipment, net
Goodwill
Other assets
Total assets
$
$
384,867
27,018
96,150
9,104
353,957
10,941
30,540
912,577
922,070
40,877
53,804
1,929,328
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued and other liabilities
Income taxes payable
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; 45,281,571 and
44,808,982 shares issued, and 37,889,871 and 37,608,982 shares outstanding,
respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock, 7,391,700 and 7,200,000 shares, respectively
Total Green Plains stockholders' equity
Noncontrolling interest
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
168,528
38,706
-
226,928
4,507
438,669
443,547
81,797
6,406
970,419
45
577,787
290,974
(1,165)
(69,811)
797,830
161,079
958,909
1,929,328
$
$
$
$
425,510
29,742
138,073
-
254,967
18,776
36,347
903,415
825,210
40,877
51,560
1,821,062
170,199
65,083
2,907
209,886
63,465
511,540
399,440
107,740
4,893
1,023,613
45
569,431
299,101
(5,320)
(65,808)
797,449
-
797,449
1,821,062
See accompanying notes to the consolidated financial statements.
F-2
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31,
2014
2013
2015
Revenues
Product revenues
Service revenues
Total revenues
Costs and expenses
Cost of goods sold
Operations and maintenance expenses
Selling, general and administrative expenses
Depreciation and amortization expenses
Total costs and expenses
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 attributable to noncontrolling interests
Net income attributable to Green Plains
Earnings per share:
Net income attributable to Green Plains stockholders - basic
Net income attributable to Green Plains stockholders - diluted
Weighted average shares outstanding:
Basic
Diluted
$ 2,957,201 $ 3,227,127 $ 3,033,832
7,179
3,041,011
8,484
3,235,611
8,388
2,965,589
2,729,599
29,369
79,594
65,950
2,904,512
61,077
2,783,045
26,424
77,729
62,139
2,949,337
286,274
2,808,814
17,854
55,638
50,854
2,933,160
107,851
1,211
(40,366)
(457)
(39,612)
21,465
6,237
15,228
8,164
7,064 $
635
(39,908)
3,429
(35,844)
250,430
90,926
159,504
-
159,504 $
294
(33,357)
(2,507)
(35,570)
72,281
28,890
43,391
-
43,391
0.19 $
$
0.18
4.37 $
3.96 $
1.44
1.26
37,947
39,028
36,467
40,730
30,183
38,304
$
$
$
See accompanying notes to the consolidated financial statements.
F-3
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Year Ended December 31,
2014
2013
2015
Net income
Other comprehensive income (loss), net of tax:
$
15,228
$
159,504
$
43,391
Unrealized gains (losses) on derivatives arising during period, net of tax
(expense) benefit of $(4,413), $138,874 and $53,068, respectively
Reclassification of realized (gains) losses on derivatives, net of tax expense
(benefit) of $1,855, $(139,754) and $(46,941), respectively
Total other comprehensive income (loss), net of tax
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Green Plains
7,169
(160,810)
(85,521)
(3,014)
4,155
19,383
8,164
11,219
$
161,829
1,019
160,523
-
160,523
$
75,647
(9,874)
33,517
-
33,517
$
See accompanying notes to the consolidated financial statements.
F-4
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Accum.
Other
Comp.
Income
(Loss)
Retained
Earnings
107,540 $
3,535
43,391
(2,426)
-
-
-
(85,521)
-
75,647
-
-
-
-
148,505
159,504
(8,908)
(9,874)
-
-
-
-
-
(160,810)
-
161,829
1,019
-
-
-
-
-
299,101
Balance, December 31, 2012
Net income
Cash dividends declared
Other comprehensive loss
before reclassification
Amounts reclassified from
accumulated other
comprehensive loss
Other comprehensive loss, net
of tax
Stock-based compensation
Stock options and warrants
exercised
Issuance of 3.25% notes due
2018, net of tax
Balance, December 31, 2013
Net income
Cash dividends declared
Other comprehensive loss
before reclassification
Amounts reclassified from
accumulated other
comprehensive loss
Other comprehensive income,
net of tax
Stock-based compensation
Stock options exercised
Conversion of 5.75% Notes
Balance, December 31, 2014
302
270
6,533
44,809
Net income
Cash dividends and
distributions declared
Other comprehensive loss
before reclassification
Amounts reclassified from
accumulated other
comprehensive loss
Other comprehensive income,
net of tax
Repurchase of common stock
Net proceeds from issuance of
common units - Green Plains
Partners LP
-
-
-
-
-
-
-
Stock-based compensation
432
Common
Stock
Additional
Paid-in
Shares Amount Capital
36,904 $
37 $
445,198 $
-
-
-
-
-
419
-
-
-
-
-
1
-
-
-
-
-
4,703
381
-
4,498
-
37,704
-
38
14,563
468,962
-
-
-
-
-
5,729
4,404
90,336
569,431
-
-
-
-
-
-
-
-
-
-
-
-
7
45
-
-
-
-
-
-
-
-
-
-
-
-
7,590
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Green Plains
Non-
Total
Treasury Stock Stockholders' Control. Stockholders'
Shares Amount
7,200 $ (65,808) $
Equity
Interests
Equity
490,502 $
43,391
(2,426)
-
-
(9,874)
4,704
- $
-
-
-
-
-
-
490,502
43,391
(2,426)
-
-
(9,874)
4,704
-
-
-
-
-
-
-
4,498
-
4,498
-
(6,339) 7,200
-
-
(65,808)
14,563
545,358
159,504
(8,908)
-
-
1,019
5,729
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,320) 7,200
-
-
-
-
(65,808)
4,404
90,343
797,449
-
-
-
-
-
-
-
-
-
-
-
14,563
545,358
159,504
(8,908)
-
-
1,019
5,729
4,404
90,343
797,449
-
-
4,155
(4,003)
-
-
-
-
7,064
-
(15,191)
-
-
-
-
7,169
-
7,064
8,164
15,228
-
(15,191)
(4,604)
(19,795)
-
-
-
-
-
(3,014)
-
4,155
-
4,155
-
192
(4,003)
(4,003)
-
-
-
-
-
-
-
157,452
157,452
7,590
67
7,657
Stock options exercised
Balance, December 31, 2015
41
45,282 $
-
45 $
766
577,787 $
-
290,974 $
-
-
-
(1,165) 7,392 $ (69,811) $
766
-
797,830 $ 161,079 $
766
958,909
See accompanying notes to the consolidated financial statements.
F-5
GREEN PLAINS 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 and debt discount
Gain on disposal of assets
Deferred income taxes
Stock-based compensation
Undistributed equity in loss of affiliates
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
Current income taxes
Other
Net cash provided 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
Investments in unconsolidated subsidiaries
Net cash used by investing activities
Cash flows from financing activities:
Proceeds from the issuance of long-term debt
Payments of principal on long-term debt
Proceeds from short-term borrowings
Payments on short-term borrowings
Proceeds from issuance of Green Plains Partners common units, net
Payments for repurchase of common stock
Payments of cash dividends and distributions
Change in restricted cash
Payments of loan fees
Proceeds from exercises of stock options
Net cash provided by financing activities
Year Ended December 31,
2014
2013
2015
15,228 $
159,504 $
43,391
65,950
7,853
-
(27,513)
5,108
1,519
-
41,923
(78,410)
15,148
7,851
(33,212)
(9,586)
(1,633)
10,226
(63,418)
(116,796)
68
(3,055)
(183,201)
178,400
(195,810)
3,237,477
(3,219,566)
157,452
(4,003)
(19,795)
2,725
(5,314)
766
132,332
62,139
8,766
(4,658)
23,537
3,440
4,129
923
(28,145)
(90,910)
14,184
(5,391)
72,606
4,417
(2,991)
221,550
(59,547)
(23,900)
9,258
(4,406)
(78,595)
542,692
(557,850)
3,708,896
(3,670,529)
-
-
(8,908)
(547)
(7,630)
4,404
10,528
50,854
4,827
-
27,493
3,928
2,507
89
(25,448)
22,759
(44,746)
(445)
22,243
(1,497)
1,381
107,336
(19,764)
(123,301)
245
(4,764)
(147,584)
343,799
(303,495)
3,348,510
(3,321,556)
-
-
(2,426)
(1,298)
(10,046)
4,498
57,986
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Continued on the following page
(40,643)
425,510
384,867 $
153,483
272,027
425,510 $
17,738
254,289
272,027
$
F-6
GREEN PLAINS 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
Assets acquired in acquisitions and mergers
Less: liabilities assumed
Net assets acquired
Common stock issued for conversion of 5.75% Notes
Year Ended December 31,
2014
2013
2015
$
$
$
$
$
43,833 $
$
38,065
61,817 $
38,244 $
2,667
30,633
120,910 $
(4,114)
116,796 $
25,611 $
(1,711)
23,900 $
136,934
(13,633)
123,301
- $
89,950 $
-
See accompanying notes to the consolidated financial statements.
F-7
GREEN PLAINS 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 Inc., an Iowa corporation, and its subsidiaries.
Consolidated Financial Statements
The consolidated financial statements include the company’s accounts and all significant intercompany balances and
transactions are eliminated. Unconsolidated entities are included in the financial statements on an equity basis.
Reclassifications
Certain prior year amounts were reclassified to conform with the current year presentation. These reclassifications did
not affect total revenues, costs and expenses, net income or stockholders’ equity.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the
reporting period. The company bases its estimates on historical experience and other assumptions that it believes are proper
and reasonable under the circumstances. The company regularly evaluates the appropriateness of estimates and assumptions
used in the preparation of its consolidated financial statements. Actual results could differ from those estimates. Key
accounting policies, including but not limited to those relating to revenue recognition, depreciation of property and
equipment, impairment of long-lived assets and goodwill, derivative financial instruments, and accounting for income taxes,
are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial
statements.
Description of Business
The company operates within four business segments: (1) ethanol production, which includes the production of ethanol,
distillers grains and corn oil, (2) agribusiness, which includes grain handling and storage and cattle feedlot operations, (3)
marketing and distribution, which includes marketing and merchant trading for company-produced and third-party ethanol,
distillers grains, corn oil and other commodities, and (4) partnership, which includes fuel storage and transportation services.
The company is also a partner in a joint venture focused on developing technology to grow and harvest algae in commercially
viable quantities.
Ethanol Production Segment
Green Plains is North America’s fourth largest ethanol producer. The company operates 14 ethanol plants in eight states
through separate wholly owned operating subsidiaries. The company’s ethanol plants use a dry mill process to produce
ethanol and co-products such as wet, modified wet or dried distillers grains, as well as corn oil. The corn oil systems are
designed to extract non-edible corn oil from the whole stillage immediately prior to production of distillers grains. At
capacity, the company expects to process approximately 430 million bushels of corn and produce approximately 1.2 billion
gallons of ethanol, 3.4 million tons of distillers grains and 275 million pounds of industrial grade corn oil annually.
Agribusiness Segment
The company owns and operates grain handling and storage assets through its agribusiness segment, which has grain
storage capacity of approximately 58.6 million bushels, with 44.2 million bushels of storage capacity at the company’s
ethanol plants, 11.6 million bushels of total storage capacity at its four separate grain elevators and 2.8 million bushels of
storage capacity at its cattle feedlot operation. The company owns a feedlot with the capacity to support 70,000 head of cattle.
The company’s agribusiness operations provide synergies with the ethanol production segment as it supplies a portion of the
feedstock needed to produce ethanol and uses a portion of the distillers grains that are outputs from the company’s ethanol
F-8
plants.
Marketing and Distribution Segment
The company has an in-house marketing business that is responsible for the sale, marketing and distribution of all
ethanol, distillers grains and corn oil produced at its ethanol plants. The company also purchases and sells ethanol, distillers
grains, corn oil, grain, natural gas and other commodities and participates in other merchant trading activities in various
markets.
Partnership Segment
The company’s master limited partnership provides fuel storage and transportation services by owning, operating,
developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and
businesses. As of January 1, 2016, subsequent to the acquisition of the storage and transportation assets of the Hereford,
Texas and Hopewell, Virginia ethanol plants, the partnership owns (i) 30 ethanol storage facilities located at or near the
company’s 14 ethanol production plants, which have the ability to efficiently and effectively store and load railcars and
tanker trucks with all of the ethanol produced at the company’s ethanol production plants, (ii) eight fuel terminal facilities,
located near major rail lines, which enable the partnership to receive, store and deliver fuels from and to markets that
otherwise lack efficient access to renewable fuels, and (iii) transportation assets, including a leased railcar fleet of
approximately 2,500 railcars with an aggregate capacity of 76.3 mmg which is contracted to transport ethanol from the
company’s ethanol production plants to refineries throughout the United States and international export terminals.
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 can only be used
for payment towards a revolving credit agreement.
Revenue Recognition
The company recognizes revenue when the following criteria are satisfied: persuasive evidence that an arrangement
exists, title of product and risk of loss are transferred to the customer, price is fixed and determinable and collectability is
reasonably assured.
Sales of ethanol, distillers grains, corn oil and other commodities by the company’s marketing business are recognized
when title of product and risk of loss are transferred to an external customer. Revenues related to marketing for third parties
are presented on a gross basis when the company takes title of the product and assumes risk of loss. Unearned revenue is
recorded for goods in transit when the company has received payment but the title has not yet been transferred to the
customer. Revenues for receiving, storing, transferring and transporting ethanol and other fuels are recognized when the
product is delivered to the customer.
The company routinely enters into fixed-price, physical-delivery energy commodity purchase and sale agreements. At
times, the company settles these transactions by transferring its obligations to other counterparties rather than delivering the
physical commodity. These transactions are reported net as a component of revenues. Revenues also include realized gains
and losses on related derivative financial instruments, ineffectiveness on cash flow hedges and reclassifications of realized
gains and losses on effective cash flow hedges from accumulated other comprehensive income or loss.
Sales of agricultural commodities, including cattle, are recognized when title of product and risk of loss are transferred to
the customer, which depends on the agreed upon terms. The sales terms provide passage of title when shipment is made or
the commodity is delivered and the customer has agreed to final weights, grades and settlement prices. Revenues related to
grain merchandising are presented gross and include shipping and handling, which is also a component of cost of goods sold.
Revenues from grain storage are recognized when services are rendered.
A substantial portion of the partnership revenues are derived from fixed-fee commercial agreements for storage, terminal
or transportation services. The partnership recognizes revenue when there is evidence an arrangement exists; risk of loss and
title transfer to the customer; the price is fixed or determinable; and collectability is reasonably ensured. Revenues from base
storage, terminal or transportation services are recognized once these services are performed, which occurs when the product
is delivered to the customer.
F-9
Cost of Goods Sold
Cost of goods sold includes direct labor, materials and plant overhead costs. Direct labor includes all compensation and
related benefits of non-management personnel involved in ethanol plant and cattle feedlot operations. Grain purchasing and
receiving costs, excluding labor costs for grain buyers and scale operators, are also included in cost of goods sold. Materials
include the cost of corn feedstock, denaturant, process chemicals, cattle and veterinary supplies. Corn feedstock costs include
unrealized gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight
charges, inspection costs and transfer costs as well as realized gains and losses on related derivative financial instruments,
ineffectiveness on cash flow hedges and reclassifications of realized gains and losses on effective cash flow hedges from
accumulated other comprehensive income or loss. Plant overhead consists primarily of plant and feedlot utilities, repairs and
maintenance, yard expenses and outbound freight charges. Shipping costs incurred by the company, including railcar lease
costs, are also reflected in cost of goods sold.
The company uses exchange-traded futures and options contracts to minimize the effect of price changes on the
agribusiness segment’s grain and cattle inventories and forward purchase and sales contracts. Exchange-traded futures and
options contracts are valued at quoted market prices and settled predominantly in cash. The company is exposed to loss when
counterparties default on forward purchase and sale contracts. Grain inventories held for sale and forward purchase and sale
contracts are valued at market prices when available or other market quotes adjusted for differences, primarily in
transportation, between the exchange-traded market and local markets where 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 as a component of cost of goods sold.
Operations and Maintenance Expenses
In the partnership segment, transportation expenses represent the primary components of operations and maintenance
expenses. Transportation expense includes rail car leases, freight and shipping of the company’s ethanol and co-products, as
well as costs incurred in storing ethanol at destination terminals.
Derivative Financial Instruments
The company uses various derivative financial instruments, including exchange-traded futures and exchange-traded and
over-the-counter options contracts, to minimize risk and the effect of price changes related to corn, ethanol, cattle and natural
gas. The company monitors and manages this exposure as part of its overall risk management policy to reduce the adverse
effect market volatility may have on its operating results. The company may hedge these commodities as one way to mitigate
risk, however, there may be situations when these hedging activities themselves result in losses.
By using derivatives to hedge exposures to changes in commodity prices, the company has exposures on these
derivatives to credit and market risk. The company’s exposure to credit risk includes the counterparty’s failure to fulfill its
performance obligations under the terms of the derivative contract. The company minimizes its credit risk by entering into
transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and
monitoring their financial condition. Market risk is the risk that the value of the financial instrument might be adversely
affected by a change in commodity prices or interest rates. The company manages market risk by incorporating parameters to
monitor exposure within its risk management strategy which limits the types of derivative instruments and derivative
strategies the company can use and the degree of market risk it can take by the use of derivative instruments.
The company evaluates its physical delivery contracts to determine if they qualify for normal purchase or sale
exemptions and are expected to be used or sold over a reasonable period in the normal course of business. Contracts that do
not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating
income unless the contracts qualify for, and the company elects, hedge accounting treatment.
Certain qualifying derivatives related to the ethanol production and agribusiness segments are designated as cash flow
hedges. The company evaluates the derivative instrument to ascertain its effectiveness prior to entering into cash flow hedges.
Ineffectiveness is recognized in current period results, while other unrealized gains and losses are reflected in accumulated
other comprehensive income until the gain or loss from the underlying hedged transaction is realized. When it becomes
probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued, which affects earnings. These
derivative financial instruments are recognized in current assets or other current liabilities at fair value.
At times, the company hedges its exposure to changes in the value of inventories and designates qualifying derivatives as
fair value hedges. The carrying amount of the hedged inventory is adjusted in current period results for changes in fair value.
F-10
Ineffectiveness is recognized in current period results to the extent the change in fair value of the inventory is not offset by
the change in fair value of the derivative.
Concentrations of Credit Risk
The company is exposed to credit risk resulting from the possibility that another party may fail to perform according to
the terms of the company’s contract. The company sells ethanol, corn oil and distillers grains and markets products for third
parties, which can result in concentrations of credit risk from a variety of customers, including major integrated oil
companies, large independent refiners, petroleum wholesalers and other marketers. The company also sells grain to large
commercial buyers, including other ethanol plants, and sells cattle to meat processors. Although payments are typically
received within fifteen days of the sale, the company continually monitors its exposure. The company is also exposed to
credit risk on prepayments of undelivered inventories with a few major suppliers of petroleum products and agricultural
inputs.
Inventories
Corn held for ethanol production, ethanol, corn oil and distillers grains inventories are recorded at lower of average cost
or market. Fair value hedged inventories are recorded at market.
Other grain inventories include readily marketable grain, forward contracts to buy and sell grain, and exchange traded
futures and option contracts, which are all stated at market value. Futures and options contracts, which are used to hedge the
value of owned grain and forward contracts, are considered derivatives. All grain inventories held for sale are marked to
market. Changes are reflected in cost of goods sold. The forward contracts require performance in future periods. Contracts to
purchase grain generally relate to 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 the
purchase and sale agreements for grain are consistent with industry standards.
Finished goods inventory consists of denatured ethanol and related co-products, which are valued at the lower of average
cost or market. In addition to ethanol and related co-products in process, work-in-process inventory includes the cost of
acquired cattle and related feed and veterinary supplies, as well as direct labor and feedlot overhead costs, all of which are
valued at lower of average cost or market.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is generally calculated using the
straight-line method over the following estimated useful life 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 improvements are capitalized. Costs of repairs and maintenance are charged to expense when incurred. The
company periodically evaluates whether events and circumstances have occurred that warrant a revision of the estimated
useful life of its fixed assets.
Impairment of Long-Lived Assets
The company’s long-lived assets consist of property and equipment. The company reviews its long-lived assets for
impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable.
Recoverability is measured by comparing the carrying amount of the asset to the estimated undiscounted future cash flows
the asset is expected to generate. Impairment is recorded when the asset’s carrying amount exceeds its estimated future cash
flows. Significant management judgment is required to determine the fair value of long-lived assets, which includes
discounted cash flows projections. No impairment charges were recorded for the periods reported.
F-11
Goodwill
Goodwill represents future economic benefits that are not individually recognized in an acquisition. The company
records goodwill when the purchase price for an acquisition exceeds the fair value of its identified tangible and intangible
assets. The company’s goodwill currently consists of amounts related to the acquisition of five ethanol plants and its fuel
terminal and distribution business.
Goodwill is reviewed for impairment at least annually. The qualitative factors of goodwill are assessed to determine
whether it is necessary to perform a two-step goodwill impairment test. Under the first step, the estimated fair value of the
reporting unit is compared with its carrying value, including goodwill. If the estimated fair value is less than the carrying
value, the company completes a second step to determine the amount of goodwill impairment that should be recorded. In the
second step, the reporting unit’s fair value is allocated to all of its assets and liabilities other than goodwill to determine the
implied fair value. The result is compared with the carrying amount and an impairment charge is recorded for the difference.
The company performs an annual impairment review on 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 are recorded as financing costs. Debt issuance costs are stated at cost and are
amortized using the effective interest method for term loans and the straight-line basis over the life of the agreements for
revolving credit arrangements. During periods of construction, amortization is capitalized in construction-in-progress.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consists of employee salaries, incentives and benefits; office expenses;
director compensation; professional fees for accounting, legal, consulting, and investor relations activities; and non-plant
depreciation and amortization costs.
Environmental Expenditures
Environmental expenditures that pertain to current operations and relate to future revenue are expensed or capitalized.
Probable liabilities that can be reasonably estimated are expensed or capitalized and disclosed in the company’s quarterly and
annual filings, if material. Expenditures resulting from the remediation of an existing condition caused by past operations
which do not contribute to future revenue are expensed when 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
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.
F-12
Recent Accounting Pronouncements
Effective January 1, 2015, the company early adopted the amended guidance in ASC 740, Income Taxes: Balance Sheet
Classification of Deferred Taxes, which requires entities with a classified balance sheet to present all deferred tax assets and
liabilities as noncurrent. The consolidated balance sheets reflect the retrospective adjustment for the amended guidance.
Effective January 1, 2016, the company will adopt the amended guidance in ASC 835-30, Interest - Imputation of
Interest: Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs related to a recognized debt
liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent
with debt discounts. The amended guidance will be applied on a retrospective basis, and the balance sheet of each individual
period presented will be adjusted to reflect the period-specific effects of the new guidance.
Effective January 1, 2016, the company will adopt the amended guidance in ASC 810, Consolidation: Amendments to
the Consolidation Analysis, which reduces the number of consolidation models and simplifies the guidance by placing more
emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of related-party guidance
when determining a controlling financial interest in a variable interest entity, and changing consolidation conclusions for
companies in industries that typically make use of limited partnerships or variable interest entities. The amended guidance
will be applied prospectively.
Effective January 1, 2017, the company will adopt the amended guidance in ASC 330, Inventory: Simplifying the
Measurement of Inventory, which requires inventory to be measured at lower of cost or net realizable value. Net realizable
value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion,
disposal and transportation. The amended guidance will be applied prospectively.
Effective January 1, 2018, the company will adopt the amended guidance in ASC 606, Revenue from Contracts with
Customers, which requires revenue recognition to reflect the transfer of promised goods or services to customers. The
updated standard permits either the retrospective or cumulative effect transition method. Early application beginning January
1, 2017 is permitted. The company does not expect the adoption of this guidance to have a material impact on its
consolidated financial statements and related disclosures.
3. GREEN PLAINS PARTNERS LP
Initial Public Offering of Subsidiary
On July 1, 2015, Green Plains Partners LP, or the partnership, a newly formed subsidiary of the company, closed its
initial public offering, or the IPO. In conjunction with the IPO, the company contributed its downstream ethanol
transportation and storage assets to the partnership. A total of 11,500,000 common units, representing limited partner
interests including 1,500,000 common units pursuant to the underwriters’ overallotment option, were sold to the public for
$15.00 per common unit. The partnership received net proceeds of approximately $157.5 million, after deducting
underwriting discounts, structuring fees and offering expenses. The partnership used the proceeds to make a distribution to
the company of $155.3 million and to pay approximately $0.9 million in origination fees under its new $100.0 million
revolving credit facility. The remaining $1.3 million was retained for general partnership purposes. The company now owns a
62.5% limited partner interest, consisting of 4,389,642 common units and 15,889,642 subordinated units, and a 2.0% general
partner interest in the partnership. The public owns the remaining 35.5% limited partner interest in the partnership. As such,
the partnership is consolidated in the company’s financial statements.
During the subordination period, which is described in the partnership agreement for Green Plains Partners, holders of
the subordinated units are not entitled to receive distributions until the common units have received the minimum quarterly
distribution plus any arrearages of the minimum quarterly distribution from prior quarters. If the partnership does not pay
distributions on the subordinated units, the subordinated units will not accrue arrearages for those unpaid distributions. Each
subordinated unit will convert into one common unit at the end of the subordination period.
The partnership is a fee-based master limited partnership formed by Green Plains to provide fuel storage and
transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals,
transportation assets and other related assets and businesses. The partnership’s initial assets included (i) 27 ethanol storage
facilities, located at or near the company’s 12 ethanol production plants, which have the ability to efficiently and effectively
store and load railcars and tanker trucks with all of the ethanol produced at the company’s ethanol production plants, (ii)
eight fuel terminal facilities, located near major rail lines, which enable the partnership to receive, store and deliver fuels
from and to markets that seek access to renewable fuels, and (iii) transportation assets, including a leased railcar fleet of
2,210 railcars with an aggregate capacity of 66.3 mmg, which is contracted to transport ethanol from the company’s ethanol
F-13
production plants to refineries throughout the United States and international export terminals. The partnership expects to be
the company’s primary downstream logistics provider to support its over one billion gallons per year ethanol marketing and
distribution business since the partnership’s assets are the principal method of storing and delivering the ethanol the company
produces. The partnership’s assets, subsequent to the acquisition of storage tanks and transportation assets from the Hereford
and Hopewell ethanol plants on January 1, 2016, include (i) 30 ethanol storage facilities, located at or near the company’s 14
ethanol production plants, (ii) eight fuel terminal facilities, and (iii) transportation assets, including a leased railcar fleet of
approximately 2,500 railcars with an aggregate capacity of 76.3 mg.
A substantial portion of the partnership’s revenues are derived from long-term, fee-based commercial agreements with
Green Plains Trade, a subsidiary of the company. In connection with the IPO, the partnership (1) entered into (i) a ten-year
fee-based storage and throughput agreement; (ii) a six-year fee-based rail transportation services agreement; and (iii) a one-
year fee-based trucking transportation agreement, and (2) assumed (i) an approximately 2.5-year terminal services agreement
for the partnership’s Birmingham, Alabama-unit train terminal; and (ii) various other terminal services agreements for its
other fuel terminal facilities, each with Green Plains Trade. The partnership’s storage and throughput agreement, and certain
terminal services agreements, including the terminal services agreement for the Birmingham facility, are supported by
minimum volume commitments. The partnership’s rail transportation services agreement is supported by minimum take-or-
pay capacity commitments. The company also has agreements which establish fees for general and administrative, and
operational and maintenance services it provides. These transactions are eliminated when the company consolidates its
financial results.
The company consolidates the financial results of the partnership and records a noncontrolling interest in the partnership
held by public common unitholders. Noncontrolling interest on the consolidated statements of operations includes the portion
of net income attributable to the economic interest held by the partnership’s public common unitholders. Noncontrolling
interest on the consolidated balance sheets includes the portion of net assets attributable to the partnership’s public common
unitholders.
4. ACQUISITIONS
Acquisition of Hereford Ethanol Plant
On November 12, 2015, the company acquired an ethanol production facility in Hereford, Texas, with an annual
production capacity of approximately 100 million gallons for approximately $78.8 million for the ethanol plant assets, as well
as working capital acquired or assumed of approximately $19.4 million. The following is a summary of assets acquired and
liabilities assumed (in thousands):
Amounts of Identifiable Assets Acquired
Inventory
Derivative financial instruments
Property and equipment, net
Current liabilities
Other
Total identifiable net assets
$
$
20,487
2,625
78,786
(2,542)
(1,128)
98,228
The operating results of the Hereford ethanol plant have been included in the company’s consolidated financial
statements since November 12, 2015. Pro forma revenue and net income, had the acquisition occurred on January 1, 2015,
would have been $3.1 billion and $10.8 million, respectively, for the year ended December 31, 2015. This information is
based on historical results of operations, and, in the company’s opinion, is not necessarily indicative of the results that would
have been achieved had the company operated the ethanol plant acquired since such date.
F-14
Acquisition of Fairmont and Wood River Ethanol Plants
In November 2013, the company acquired ethanol plants located in Fairmont, Minnesota and Wood River, Nebraska,
with a combined annual production capacity of 230 million gallons. Total consideration was $114.3 million and acquisition-
related costs of $0.8 million were recorded in selling, general and administrative expenses. The company issued
approximately $77.0 million of short-term notes payable and term debt shortly after the acquisition, with the acquired assets
serving as collateral for these loans, and entered into capital leases totaling $10.0 million for grain facilities that were
previously leased by the predecessor owner of the acquired assets. The following is a summary of assets acquired and
liabilities assumed (in thousands):
Amounts of Identifiable Assets Acquired
and Liabilities Assumed
Accounts receivable
Inventory
Prepaid expenses and other
Property and equipment, net
Other assets
Current liabilities
Long-term portion of capital leases and tax increment financing bond
Other
Total identifiable net assets
$
$
119
8,680
2,696
112,274
4,193
(4,260)
(7,895)
(1,489)
114,318
The operating results of the Wood River ethanol plant have been included in the company’s consolidated financial
statements since November 22, 2013. At the time of acquisition, the Fairmont ethanol plant was not operational; however,
upon completion of certain maintenance and enhancement projects, operations began at the plant in early January 2014. Pro
forma revenue and net income, had the acquisition of these two plants occurred on January 1, 2013, would have been $3.3
billion and $47.7 million, respectively, for the year ended December 31, 2013. This information is based on historical results
of operations, and, in the company’s opinion, is not necessarily indicative of the results that would have been achieved had
the company operated the two ethanol plants acquired since such dates.
There is ongoing litigation related to the consideration for this acquisition. To the extent that this litigation is resolved
favorably for the company, it will result in a gain in a future period with no impact in the event of a negative outcome.
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 the company can access at the
measurement date. Level 1 unrealized gains and losses on commodity derivatives relate to exchange-traded open trade equity
and option values in the company’s brokerage accounts.
Level 2 – directly or indirectly observable inputs such as quoted prices for similar assets or liabilities in active markets
other than quoted prices included within Level 1, quoted prices for identical or similar assets in markets that are not active,
and other inputs that are observable or can be substantially corroborated by observable market data through correlation or
other means. Grain inventories held for sale in the agribusiness segment are valued at nearby futures values, plus or minus
nearby basis.
Level 3 – unobservable inputs that are supported by little or no market activity and comprise a significant component of
the fair value of the assets or liabilities. The company currently does not have any recurring Level 3 financial instruments.
F-15
There have been no changes in valuation techniques and inputs used in measuring fair value. The company’s assets and
liabilities by level are as follows (in thousands):
Fair Value Measurements at December 31, 2015
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Reclassification for
Balance Sheet
Presentation
Assets:
Cash and cash equivalents
Restricted cash
Margin deposits
Inventories carried at market
Unrealized gains on derivatives
Other assets
$
Total assets measured at fair value
$
384,867
27,018
7,658
-
19,756
117
439,416
Liabilities:
Unrealized losses on derivatives
$
Total liabilities measured at fair value $
4,492
4,492
$
$
$
$
-
-
-
43,936
7,145
-
51,081
7,772
7,772
$
$
$
$
Fair Value Measurements at December 31, 2014
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Reclassification for
Balance Sheet
Presentation
Assets:
Cash and cash equivalents
Restricted cash
Margin deposits
Inventories carried at market
Unrealized gains on derivatives
Other assets
$
Total assets measured at fair value
$
425,510
29,742
24,488
-
11,877
118
491,735
Liabilities:
Unrealized losses on derivatives
$
Total liabilities measured at fair value $
18,129
18,129
$
$
$
$
-
-
-
36,411
18,111
3
54,525
28,082
28,082
$
$
$
$
Total
384,867
27,018
-
43,936
30,540
117
486,478
- $
-
(7,658)
-
3,639
-
(4,019) $
(4,019) $
(4,019) $
8,245
8,245
Total
425,510
29,742
-
36,411
36,347
121
528,131
- $
-
(24,488)
-
6,359
-
(18,129) $
(18,129) $
(18,129) $
28,082
28,082
The company believes the fair value of its debt was approximately $673.2 million compared with a book value of $675.0
million at December 31, 2015, and the fair value of its debt was approximately $676.5 million compared with a book value of
$672.8 million at December 31, 2014. The company estimated the fair value of its outstanding debt using Level 2 inputs. The
company believes the fair values of its accounts receivable and accounts payable approximated book value, which were $96.2
million and $168.5 million, respectively, at December 31, 2015, and $138.1 and $170.2 million, respectively, at December
31, 2014.
Although the company currently does not have any recurring Level 3 financial measurements, the fair values of tangible
assets and goodwill acquired and equity component of convertible debt represent Level 3 measurements which were derived
using a combination of the income approach, market approach and cost approach for the specific assets or liabilities being
valued.
F-16
6. SEGMENT INFORMATION
As a result of the IPO, the company implemented organizational changes during the third quarter of 2015. Company
management now reports the financial and operating performance in the following four operating segments: (1) ethanol
production, which includes the production of ethanol, distillers grains and corn oil, (2) agribusiness, which includes grain
handling and storage and cattle feedlot operations, (3) marketing and distribution, which includes marketing and merchant
trading for company-produced and third-party ethanol, distillers grains, corn oil and other commodities, and (4) partnership,
which includes fuel storage and transportation services. Prior periods have been reclassified to conform to the revised
segment presentation.
When transferring assets between entities under common control under GAAP, the entity receiving the net assets initially
recognizes the carrying amounts of the assets and liabilities at the date of transfer. The transferee’s prior period financial
statements are restated for all periods its operations were part of the parent’s consolidated financial statements. On July 1,
2015, Green Plains Partners received ethanol storage and railcar assets and liabilities in a transfer between entities under
common control. The transferred assets and liabilities are recognized at the company’s historical cost and reflected
retroactively in the segment information of the consolidated financial statements presented in this Form 10-K. The assets of
Green Plains Partners were previously included in the ethanol production and marketing and distribution segments. Expenses
related to the ethanol storage and railcar assets, such as depreciation, amortization and railcar lease expenses, are also
reflected retroactively in the following segment information. There are no revenues related to the operation of these ethanol
storage and railcar assets in the partnership segment prior to July 1, 2015, the date the related commercial agreements with
Green Plains Trade became effective.
Corporate activities include selling, general and administrative expenses, consisting primarily of corporate employee
compensation, professional fees and overhead costs not directly related to a specific operating segment.
During the normal course of business, the operating segments do business with each other. For example, the ethanol
production segment sells ethanol to the marketing and distribution segment, the agribusiness segment sells grain to the
ethanol production segment and the partnership segment provides fuel storage and transportation services for the marketing
and distribution segment. These intersegment activities are treated like third-party transactions and recorded at market values.
Consequently, these transactions affect segment performance; however, they do not impact the company’s consolidated
results since the revenues and corresponding costs are eliminated in consolidation.
The following tables set forth certain financial data for the company’s operating segments (in thousands):
Revenues:
Ethanol production:
Revenues from external customers (1)
Intersegment revenues
Total segment revenues
Agribusiness:
Revenues from external customers (1)
Intersegment revenues
Total segment revenues
Marketing and distribution:
Revenues from external customers (1)
Intersegment revenues
Total segment revenues
Partnership:
Revenues from external customers
Intersegment revenues
Total segment revenues
Revenues including intersegment activity
Intersegment eliminations
Revenues as reported
2015
Year Ended December 31,
2014
2013
$
$
196,443
1,549,884
1,746,327
$
(51,424)
2,286,452
2,235,028
128,395
1,972,550
2,100,945
249,834
1,131,466
1,381,300
2,510,924
120,687
2,631,611
8,388
42,549
50,937
5,810,175
(2,844,586)
2,965,589
$
100,436
1,208,120
1,308,556
3,178,115
171,372
3,349,487
8,484
4,359
12,843
6,905,914
(3,670,303)
3,235,611
$
51,883
761,835
813,718
2,853,554
33,932
2,887,486
7,179
3,853
11,032
5,813,181
(2,772,170)
3,041,011
$
(1) Revenues from external customers include realized gains and losses from derivative financial instruments.
F-17
Cost of goods sold:
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Intersegment eliminations
Operating income (loss):
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Intersegment eliminations
Corporate activities
Income (loss) before income taxes:
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Intersegment eliminations
Corporate activities
Depreciation and amortization:
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Corporate activities
Interest expense:
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Intersegment eliminations
Corporate activities
Capital expenditures:
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Corporate activities
1,879,547
1,293,274
3,281,191
-
(3,670,967)
2,783,045
281,332
8,497
48,460
(19,975)
666
(32,706)
286,274
265,437
5,996
43,775
(20,038)
666
(45,406)
250,430
53,141
1,441
337
5,544
1,676
62,139
22,749
2,591
5,129
138
(238)
9,539
39,908
40,203
17,166
788
547
2,829
61,533
$
$
$
$
$
$
$
$
$
$
$
$
1,926,098
807,459
2,840,840
-
(2,765,583)
2,808,814
113,645
3,324
38,192
(11,285)
(6,588)
(29,437)
107,851
94,695
793
35,037
(12,003)
(6,588)
(39,653)
72,281
45,595
362
8
3,572
1,317
50,854
18,988
2,531
3,311
768
(982)
8,741
33,357
10,251
6,514
1,225
1,122
652
19,764
1,626,327
1,362,001
2,588,738
-
(2,847,467)
2,729,599
40,568
10,206
25,560
13,263
2,960
(31,480)
61,077
18,973
5,807
23,937
12,967
2,960
(43,179)
21,465
55,283
2,532
375
5,787
1,973
65,950
22,727
4,565
3,483
381
(70)
9,280
40,366
48,691
13,601
190
1,496
1,589
65,567
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
F-18
The following table sets forth total assets by operating segment (in thousands):
Total assets (1):
Ethanol production
Agribusiness
Marketing and distribution
Partnership
Corporate assets
Intersegment eliminations
Year Ended December 31,
2015
2014
$
$
1,017,584
300,364
230,651
75,203
316,389
(10,863)
1,929,328
$
$
991,260
234,626
259,246
76,762
282,628
(23,460)
1,821,062
(1) Asset balances by segment exclude intercompany payable and receivable balances.
The following table sets forth revenues by product line (in thousands):
Revenues:
Ethanol
Distillers grains
Corn oil
Grain
Cattle
Service revenues
Other
7. INVENTORIES
2015
Year Ended December 31,
2014
2013
$
$
1,868,043
474,699
101,126
240,466
219,046
8,388
53,821
2,965,589
$
$
2,362,812
531,696
99,167
174,997
29,262
8,484
29,193
3,235,611
$
$
2,330,884
488,376
74,251
92,487
-
7,179
47,834
3,041,011
Inventories are carried at lower of cost or market, except for grain held for sale and fair value hedged inventories, which
are reported at market value.
The components of inventories are as follows (in thousands):
Finished goods
Grain held for sale
Raw materials
Work-in-process
Supplies and parts
December 31,
2015
2014
71,595
22,518
138,091
96,950
24,803
353,957
$
$
34,639
23,027
78,095
100,221
18,985
254,967
$
$
F-19
8. PROPERTY AND EQUIPMENT
The components of property and equipment are as follows (in thousands):
Plant equipment
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
9. GOODWILL
December 31,
2015
2014
892,915
176,094
84,257
41,732
38,200
11,115
2,492
13,823
1,260,628
(338,558)
922,070
$
$
777,987
159,178
73,819
40,882
23,276
9,305
2,127
13,179
1,099,753
(274,543)
825,210
$
$
The company did not have any changes in the carrying amount of goodwill, which was $40.9 million during the years
ended December 31, 2015 and 2014. Goodwill of $30.3 million is attributable to the ethanol production segment and $10.6
million is attributable to the partnership segment.
10. DERIVATIVE FINANCIAL INSTRUMENTS
At December 31, 2015, the company’s consolidated balance sheet reflected unrealized losses of $1.2 million, net of tax,
in accumulated other comprehensive loss. The company expects these losses will be reclassified as operating income over the
next 12 months as a result of hedged transactions that are forecasted to occur. The amount realized in operating income will
differ as commodity prices change.
Fair Values of Derivative Instruments
The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets
where they are reported are as follows (in thousands):
Derivative financial instruments (1)
Other assets
Accrued and other liabilities
Total
Asset Derivatives'
Fair Value at December 31,
2015
2014
Liability Derivatives'
Fair Value at December 31,
2015
2014
$
$
22,882 (2) $
-
-
22,882
$
11,859 (3) $
3
-
11,862
$
-
-
8,245
8,245
$
$
-
-
28,082
28,082
(1) Derivative financial instruments as reflected on the balance sheet include a margin deposit assets of $7.7 million and $24.5 million at December
31, 2015 and 2014, respectively.
(2) Balance at December 31, 2015, includes $2.3 million of net unrealized gains on derivative financial instruments designated as cash flow hedging
instruments.
(3) Balance at December 31, 2014, includes $0.6 million of net unrealized losses on derivative financial instruments designated as cash flow
hedging instruments.
Refer to Note 5 - Fair Value Disclosures, which contains fair value information related to derivative financial
instruments.
F-20
Effect of Derivative Instruments on Consolidated Statements of Operations and Consolidated Statements of Stockholders’
Equity and Comprehensive Income
The gains or losses recognized in income and other comprehensive income related to the company’s derivative financial
instruments and the line items on the consolidated financial statements where they are reported are as follows (in thousands):
Gains (Losses) on Derivative Instruments Not
Designated in a Hedging Relationship
Revenues
Cost of goods sold
Net increase (decrease) recognized in earnings before tax
Gains (Losses) Due to Ineffectiveness
of Cash Flow Hedges
Revenues
Cost of goods sold
Net increase (decrease) recognized in earnings before tax
Gains (Losses) Reclassified from Accumulated
Other Comprehensive Income (Loss)
into Net Income
Revenues
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
Gains (Losses) from Fair Value
Hedges of Inventory
Cost of goods sold (effect of change in inventory value)
Cost of goods sold (effect of fair value hedge)
Ineffectiveness recognized in earnings before tax
$
$
$
$
$
$
$
$
$
Year Ended December 31,
2014
13,369
165
13,534
2015
(12,952)
10,492
(2,460)
$
$
$
$
2013
(10,855)
12,701
1,846
Year Ended December 31,
2014
2015
2013
(43)
-
(43)
$
$
(326)
481
155
$
$
(84)
(490)
(574)
2015
Year Ended December 31,
2014
$ (257,730)
(43,853)
$ (301,583)
8,420
(3,551)
4,869
$
2013
(96,736)
(25,852)
$ (122,588)
Year Ended December 31,
2014
$ (299,684)
2015
11,582
2013
$ (138,589)
Year Ended December 31,
2014
2015
2013
(7,819)
12,045
4,226
$
$
304
2,612
2,916
$
$
102
674
776
There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the years ended
December 31, 2015, 2014 and 2013.
F-21
The open commodity derivative positions as of December 31, 2015, are as follows (in thousands):
Exchange Traded
Non-Exchange Traded
December 31, 2015
Derivative
Instruments
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Options
Options
Options
Options
Options
Options
Forwards
Forwards
Forwards
Forwards
Forwards
Forwards
Net Long &
(Short) (1)
Long (2)
(Short) (2)
(16,795)
(5,710) (3)
(19,890) (4)
48,300
(5,670) (3)
(3,190)
(8,528) (4)
490
(55,330) (3)
(382)
(32,400)
(7,348)
(1,956)
837
(9,936)
(15)
(1,422)
27,044
17,212
90
18,028
6,817
780
(6,094)
(188,127)
(250)
(110,980)
(3,065)
(62)
Unit of
Measure
Bushels
Bushels
Bushels
Gallons
Gallons
mmBTU
mmBTU
Pounds
Pounds
Barrels
Pounds
Bushels
Gallons
mmBTU
Pounds
Barrels
Pounds
Bushels
Gallons
Tons
Pounds
mmBTU
Barrels
Commodity
Corn, Soybeans and Wheat
Corn
Corn
Ethanol
Ethanol
Natural Gas
Natural Gas
Cattle
Cattle
Crude Oil
Soybean Oil
Corn, Soybeans and Wheat
Ethanol
Natural Gas
Cattle
Crude Oil
Soybean Oil
Corn and Soybeans
Ethanol
Distillers Grains
Corn Oil
Natural Gas
Crude Oil
(1) Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.
(2) Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts.
(3) Futures used for cash flow hedges.
(4) Futures used for fair value hedges
Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated
statements of operations. Included in revenues are net gains of $9.6 million, net gains of $8.0 million, and net losses of $1.2
million for the years ended December 31, 2015, 2014 and 2013, respectively, on energy trading contracts.
F-22
11. DEBT
The principal balances of the components of long-term debt are as follows (in thousands):
Green Plains Fairmont and Green Plains Wood River:
December 31,
2015
2014
$
-
$
$62.5 million term loan
Green Plains Holdings II:
$46.8 million term loans
$20.0 million revolving term loan
Green Plains Obion:
$37.4 million revolving term loan
Green Plains Processing:
$345.0 million term loan
Green Plains Superior:
$15.6 million revolving term loan
Corporate:
$120.0 million convertible notes
Other
Total long-term debt
-
-
-
315,305
-
105,393
27,356
448,054
(4,507)
443,547
$
40,000
29,510
6,000
27,400
213,775
15,025
100,845
30,350
462,905
(63,465)
399,440
Less: current portion of long-term debt
Long-term debt
$
Scheduled long-term debt repayments, including full accretion of the $120.0 million convertible notes due 2018 at
maturity but excluding the effects of any debt discounts, are as follows (in thousands):
Year Ending December 31,
Amount
2016
2017
2018
2019
2020
Thereafter
Total
$
$
4,507
4,563
124,548
4,594
302,382
22,067
462,661
Short-term notes payable and other borrowings at December 31, 2015 include working capital revolvers at Green Plains
Cattle, Green Plains Grain and Green Plains Trade with outstanding balances of $69.7 million, $77.0 million and $80.2
million, respectively. Short-term notes payable and other borrowings at December 31, 2014 include working capital revolvers
at Green Plains Cattle, Green Plains Grain and Green Plains Trade with outstanding balances of $77.0 million, $37.0 million
and $95.9 million, respectively.
Loan Terminology
The following definitions apply to the company’s loan covenants, which are calculated in accordance with GAAP:
Working capital – current assets less current liabilities
Tangible net worth – total assets less intangible assets less total liabilities plus subordinated debt
Fixed charge coverage ratio* –
For the ethanol production segment: adjusted EBITDA, less the sum of capital expenditures and permitted tax
sharing payments, divided by fixed charges, which are generally the sum of interest expense and scheduled principal
payments
capital financings divided by scheduled principal payments and interest expense on long-term debt
divided by all debt payments for the previous four quarters
For the agribusiness segment: EBITDA less maintenance capital expenditures and interest expense of working
For the marketing and distribution segment: EBITDA less capital expenditures, distributions and cash taxes,
F-23
Leverage ratio –
For the ethanol production segment: total debt divided by the sum of the eight preceding fiscal quarters’
For the agribusiness segment: total debt divided by the sum of tangible net worth and subordinated debt
For the partnership segment: total debt less the lesser of unrestricted cash or $30.0 million divided by the sum
EBITDA divided by two
of the trailing four quarters’ EBITDA
Interest coverage ratio – trailing four fiscal quarters EBITDA to trailing four fiscal quarters interest charges
Long-term capitalization ratio – long-term debt divided by the sum of long-term debt and tangible net worth
*Certain credit agreements allow the inclusion of equity contributions from the parent company to calculate debt service and
fixed charge coverage ratios.
Ethanol Production Segment
Green Plains Processing amended its senior secured credit facility during the second quarter of 2015 to increase the
outstanding borrowings by $120.0 million, bringing its total commitment to $345.0 million. The proceeds were used to repay
existing term loans and revolving term loans with maturity dates ranging from November 2015 to May 2020. The term loan
is guaranteed by the company and subsidiaries of Green Plains Processing and secured by the stock and substantially all of
the assets of Green Plains Processing. The interest rate is 5.50% plus LIBOR, subject to a 1.00% floor and matures on June
30, 2020. The terms of the credit facility require the borrower to maintain a maximum total leverage ratio of 4.00 to 1.00 at
the end of each quarter, decreasing to 3.25 to 1.00 over the life of the credit facility and a minimum fixed charge coverage
ratio of 1.25 to 1.00. The credit facility also has a provision requiring the company to make special quarterly payments of
50% to 75% of its available free cash flow, subject to certain limitations.
At December 31, 2015, the interest rate on this term debt was 6.50%. Commencing in the third quarter of 2015,
scheduled principal payments are $0.9 million each quarter.
Agribusiness Segment
Green Plains Grain has a $125.0 million senior secured asset-based revolving credit facility, which matures on August
26, 2016, to finance working capital up to the maximum commitment based on eligible collateral equal to the sum of
percentages of eligible cash, receivables and inventories, less miscellaneous adjustments. Advances are subject to an annual
interest rate equal to LIBOR plus 2.25% or the base rate plus 3.25%. The credit facility also includes an accordion feature
that enables the facility to be increased by up to $75.0 million with agent approval. The credit facility can also be increased
by up to $50.0 million for seasonal borrowings. Total commitments outstanding cannot exceed $250.0 million.
Lenders receive a first priority lien on certain cash, inventory, accounts receivable and other assets owned by subsidiaries
in the agribusiness segment as security on the credit facility. The terms impose affirmative and negative covenants, including
maintaining working capital of $23.0 million and tangible net worth of $26.3 million for 2015. Capital expenditures are
limited to $15.0 million per year under the credit facility, plus equity contributions from the company and unused amounts
from the previous year. In addition, the credit facility requires the company to maintain a fixed charge coverage ratio of 1.25
to 1.00 and an annual leverage ratio of 6.00 to 1.00 at the end of each quarter. The credit facility also contains restrictions on
distributions related to capital stock, with exceptions for distributions up to 40% of net profit before tax, subject to certain
conditions.
Green Plains Cattle has a $100.0 million senior secured asset-based revolving credit facility, which matures on October
31, 2017, to finance working capital for the cattle feedlot operation up to the maximum commitment based on eligible
collateral equal to the sum of percentages of eligible receivables, inventories and other current assets, less miscellaneous
adjustments. Advances are subject to variable annual interest rates equal to LIBOR plus 3.00%, 2.50%, or 2.00%, depending
upon availability. The credit facility also includes an accordion feature that enables the credit facility to be increased by up to
$50.0 million with agent approval.
Lenders receive a first priority lien on certain cash, inventory, accounts receivable, property and equipment and other
assets owned by Green Plains Cattle as security on the credit facility. The terms impose affirmative and negative covenants,
including maintaining working capital of $15.0 million and tangible net worth of $20.3 million for 2015 and maintain a total
debt to tangible net worth ratio of 3.50 to 1.00. Capital expenditures are limited to $3.0 million per year under the credit
facility, plus unused amounts from the previous year.
F-24
Marketing and Distribution Segment
Green Plains Trade has a $150.0 million senior secured asset-based revolving credit facility, which matures on
November 26, 2019, to finance working capital for marketing and distribution activities up to $150.0 million based on
eligible collateral equal to the sum of percentages of eligible receivables and inventories, less miscellaneous adjustments. The
outstanding balance is subject to the lender’s floating base rate plus the applicable margin or LIBOR plus the applicable
margin.
The terms impose affirmative and negative covenants, including maintaining a fixed charge coverage ratio of 1.15 to
1.00. Capital expenditures are limited to $1.5 million per year under the credit facility. The credit facility also contains
restrictions on distributions related to capital stock, with exceptions for distributions up to 50% of net income if on a pro
forma basis, (a) availability has been greater than $10.0 million for the last 30 days and (b) the borrower would be in
compliance with the fixed charge coverage ratio on the distribution date.
At December 31, 2015, Green Plains Trade had $16.4 million presented as restricted cash on the consolidated balance
sheet, the use of which was restricted for repayment towards the outstanding loan balance.
Partnership Segment
On July 1, 2015, the partnership’s primary operating subsidiary, Green Plains Operating Company, entered into a five-
year $100.0 million revolving credit facility to fund working capital, acquisitions, distributions, capital expenditures and
other general partnership purposes, which matures in July 2020. The credit facility contains customary representations and
warranties, affirmative and negative covenants and events of default. The negative covenants include restricting the
partnership’s ability to incur additional debt, acquire and sell assets, create liens, invest capital, pay distributions and
materially amend the partnership’s commercial agreements with Green Plains Trade. The credit facility may be increased up
to $50.0 million without the consent of the lenders. The credit facility is available for revolving loans with sublimits of $15.0
million for swing line loans and $15.0 million for letters of credit. The partnership’s obligations under the credit facility are
secured by a first priority lien on (i) the capital stock of the partnership’s present and future subsidiaries, (ii) all of the
partnership’s present and future personal property, such as investment property, general intangibles and contract rights,
including rights under agreements with Green Plains Trade, and (iii) all proceeds and products of the equity interests of the
partnership’s present and future subsidiaries and its personal property. The partnership and its existing and future domestic
subsidiaries also guarantee the credit facility.
Loans under this credit facility are subject to a floating interest rate based on the partnership’s maximum consolidated
net leverage ratio equal to (a) a base rate plus 75 to 175 basis points per year or (b) a LIBOR rate plus 175 to 275 basis
points. The unused portion of the credit facility is subject to a commitment fee based on the maximum consolidated net
leverage ratio ranging from 30 to 50 basis points per year. The credit facility requires the partnership to maintain a maximum
consolidated net leverage ratio of no more than 3.50 to 1.00, and a minimum consolidated interest coverage ratio of no less
than 2.75 to 1.00.
In June 2013, the company issued promissory notes payable of $10.0 million and a note receivable of $8.1 million to
execute a New Markets Tax Credit transaction related to the Birmingham, Alabama terminal. Beginning in March 2020, the
promissory notes and note receivable each require quarterly principal and interest payments of approximately $0.2 million.
The company retains the right to call $8.1 million of the promissory notes in 2020. The promissory notes payable and note
receivable will be fully amortized upon maturity in September 2031. Income tax credits were generated for the lender, which
the company has guaranteed over their statutory life of seven years in the event the credits are recaptured or reduced. At the
time of the transaction, the income tax credits were value at $5.0 million. The company has not established a liability in
connection with the guarantee because it believes the likelihood of recapture or reduction is remote.
Corporate Activities
In September 2013, the company issued $120.0 million of 3.25% convertible senior notes due 2018, or the 3.25% notes.
The 3.25% notes are senior, unsecured obligations of the company, with interest payable on April 1 and October 1 of each
year. At the time the company issued the 3.25% notes, it was only permitted to settle conversions with shares of its common
stock. At the 2014 annual meeting, shareholders approved flexible settlement, which gives the company the option to settle
the 3.25% notes in cash, common stock or a combination of cash and common stock. The company intends to convert the
3.25% notes with cash for the principal and cash or common stock for the conversion premium.
The 3.25% notes contain liability and equity components that are bifurcated and accounted for separately. The liability
component, as of the issuance date, was calculated by estimating the fair value of a similar liability issued at an 8.21%
F-25
effective interest rate. The equity component was calculated by deducting the fair value of the liability component from the
principal, which resulted in debt discount costs of $24.5 million recorded as additional paid-in capital. The carrying amount
of the 3.25% notes will accrete to the principal over the remaining term to maturity, and the company will record a
corresponding noncash interest expense. Additionally, the company incurred $5.1 million of debt issuance costs and allocated
$4.0 million to the liability component of the 3.25% notes. These costs will be amortized as noncash interest expense over the
five-year term of the 3.25% notes. Prior to April 1, 2018, the 3.25% notes are not convertible unless certain conditions are
satisfied. The conversion rate is subject to adjustment when the quarterly cash dividend exceeds $0.04 per share. The
conversion rate was recently adjusted to 48.6097 shares of common stock per $1,000 of principal which is equal to a
conversion price of approximately $20.57 per share. The company may be obligated to increase the conversion rate in certain
events, including redemption of the 3.25% notes.
The company may redeem all of the 3.25% notes at any time on or after October 1, 2016 if the company's common stock
equals or exceeds 140% of the applicable conversion price for a specified time period ending on the trading day immediately
prior to the date the company delivers notice of the redemption. The redemption price will equal 100% of the principal plus
any accrued and unpaid interest. Holders of the 3.25% notes have the option to require the company to repurchase the 3.25%
notes in cash at a price equal to 100% of the principal plus accrued and unpaid interest when there is a fundamental change,
such as change in control. Default on any loan in excess of $10.0 million constitutes an event of default, which could result in
the 3.25% notes being declared due and payable.
Covenant Compliance
The company was in compliance with its debt covenants as of December 31, 2015.
Capitalized Interest
The company had $1.1 million and $191 thousand in capitalized interest during the years ended December 31, 2015 and
2014, respectively, and no capitalized interest during the year ended December 31, 2013.
Restricted Net Assets
At December 31, 2015, there were approximately $751.0 million of net assets at the company’s subsidiaries that could
not 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.
12. STOCK-BASED COMPENSATION
The company has an equity incentive plan that reserves 3.5 million shares of common stock for issuance. The plan
provides for shares, including options to purchase shares of common stock, stock appreciation rights tied to the value of
common stock, restricted stock, and restricted and deferred stock unit awards, to be granted to eligible employees, non-
employee directors and consultants. The company measures stock-based compensation at fair value on the grant date,
adjusted for estimated forfeitures. The company records noncash compensation expense related to equity awards in its
consolidated financial statements over the requisite period on a straight-line basis. Substantially all of the existing stock-
based compensation has been equity awards.
Grants under the equity incentive plans may include options, stock awards or deferred stock units:
Options – Stock options may be granted that can be exercised immediately in installments or at a fixed future date.
Certain options are exercisable regardless of employment status while others expire following termination. Options
issued to date may be exercised immediately or at future vesting dates, and expire five to eight years after the grant
date. Compensation expense for stock options that vest over time is recognized on a straight-line basis over the
requisite service period.
Stock Awards – Stock awards may be granted to directors and employees that vest immediately or over a period of
time as determined by the compensation committee. Stock awards granted to date vested immediately and over a
period of time, and included sale restrictions. Compensation expense is recognized on the grant date if fully vested
or over the requisite vesting period.
Deferred Stock Units – Deferred stock units may be granted to directors and employees that vest immediately or
over a period of time as determined by the compensation committee. Deferred stock units granted to date vest over a
F-26
period of time with underlying shares of common stock that are issuable after the vesting date. Compensation
expense is recognized on the grant date if fully vested, or over the requisite vesting period.
The fair value of the stock options is estimated on the date of the grant using the Black-Scholes option-pricing model, a
pricing model acceptable under GAAP. The expected life of the options in the period of time the options are expected to be
outstanding. The company did not grant any stock option awards during the years ended December 31, 2015, 2014 and 2013.
The activity related to the exercisable stock options for the year ended December 31, 2015, is as follows:
Outstanding at December 31, 2014
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2015
Exercisable at December 31, 2015 (1)
Weighted-
Average
Exercise Price
10.82
-
18.24
-
-
9.81
9.81
Shares
339,750 $
-
(41,000)
-
-
298,750 $
$
298,750
Weighted-Average
Remaining
Contractual Term
(in years)
3.1
-
-
-
-
2.4
2.4
Aggregate
Intrinsic Value
(in thousands)
4,763
-
363
-
-
3,866
3,866
$
$
$
(1)
Includes in-the-money options totaling 298,750 shares at a weighted-average exercise price of $9.81.
Option awards allow employees to exercise options through cash payment for the shares of common stock or
simultaneous broker-assisted transactions in which the employee authorizes the exercise and immediate sale of the option in
the open market. The company uses newly issued shares of common stock to satisfy its stock-based payment obligations.
The non-vested stock award and deferred stock unit activity for the year ended December 31, 2015, are as follows:
Nonvested at December 31, 2014
Granted
Forfeited
Vested
Nonvested at December 31, 2015
Non-Vested
Shares and
Deferred Stock
Units
Weighted-Average
Grant-Date Fair
Value
Weighted-Average
Remaining Vesting Term
(in years)
678,504 $
483,289
(6,605)
(418,460)
736,728 $
16.18
26.94
22.24
16.58
22.96
1.8
Compensation costs for stock-based payment plans during the years ended December 31, 2015, 2014 and 2013, were
approximately $8.7 million, $7.2 million and $5.5 million, respectively. At December 31, 2015, there were $10.6 million of
unrecognized compensation costs from stock-based compensation related to non-vested awards. This compensation is
expected to be recognized over a weighted-average period of approximately 1.8 years. The potential tax benefit related to
stock-based payment is approximately 38.0% of these expenses.
Green Plains Partners
The board of directors of the general partner adopted Green Plains Partners’ 2015 LTIP upon completion of the IPO. The
incentive plan is intended to promote the interests of the partnership, its general partner and affiliates by providing incentive
compensation based on units to employees, consultants and directors to encourage superior performance. The incentive plan
reserves 2.5 million common units for issuance in the form of options, restricted units, phantom units, distributable
equivalent rights, substitute awards, unit appreciation rights, unit awards, profits interest units or other unit-based awards.
The partnership measures unit-based compensation related to equity awards in its consolidated financial statements over the
requisite service period on a straight-line basis.
In August 2015, the partnership granted 10,089 restricted unit awards, vesting on July 1, 2016, with a weighted average
price of $14.93 to certain directors of the general partner as compensation under the incentive plan. Compensation costs of
approximately $67 thousand were expensed during the year ended December 31, 2015. At December 31, 2015, there were
$83 thousand of unrecognized compensation costs from unit-based compensation.
F-27
13. EARNINGS PER SHARE
Basic earnings per share, 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 if-
converted basis for 2013 and the first quarter of 2014, associated with the 3.25% notes and 5.75% convertible senior notes
due 2015, or the 5.75% notes, by the weighted average number of common shares outstanding during the period, adjusted for
the dilutive effect of any outstanding dilutive securities. All of the 5.75% notes were retired during the first quarter of 2014.
During the second quarter of 2014, shareholders approved flexible settlement, which gives the company the option to settle
the 3.25% notes in cash, common stock or a combination of cash and common stock. The company intends to convert the
3.25% notes with cash for the principal and cash or common stock the conversion premium. Accordingly, diluted EPS is
computed using the treasury stock method by dividing net income by the weighted average number of common shares
outstanding during the period, adjusted for the dilutive effect of any outstanding dilutive securities.
The basic and diluted EPS are calculated as follows (in thousands):
Basic EPS:
Net income attributable to Green Plains
Weighted average shares outstanding - basic
EPS - basic
Diluted EPS:
Net income attributable to Green Plains
Interest and amortization on convertible debt, net of tax effect:
5.75% notes
3.25% notes
Net income attributable to Green Plains - diluted
Weighted average shares outstanding - basic
Effect of dilutive convertible debt:
5.75% notes
3.25% notes
Effect of dilutive stock-based compensation awards
Weighted average shares outstanding - diluted
$
$
$
$
Year Ended December 31,
2014
2015
2013
7,064 $
37,947
0.19 $
159,504 $
36,467
4.37 $
43,391
30,183
1.44
7,064 $
159,504 $
43,391
-
-
7,064 $
576
1,379
161,459 $
3,578
1,473
48,442
37,947
36,467
30,183
-
939
142
39,028
1,006
3,040
217
40,730
6,286
1,624
211
38,304
EPS - diluted
$
0.18 $
3.96 $
1.26
Excluded from the computation of diluted EPS for the year ended December 31, 2013, was stock-based compensation
awards totaling 14 thousand shares, because the exercise price or the grant-date fair value, as applicable, of the corresponding
awards was greater than the average market price of the company’s common stock during the period.
F-28
14. STOCKHOLDERS’ EQUITY
Treasury Stock
The company holds 7.4 million shares of its common stock at a cost of $69.8 million. Treasury stock is recorded at cost
and reduces stockholders’ equity in the consolidated balance sheets. When shares are reissued, the company will use the
weighted average cost method for determining the cost basis. The difference between the cost and the issuance price is added
or deducted from additional paid-in capital.
Share Repurchase Program
In August 2014, the company announced a share repurchase program of up to $100 million of its common stock. Under
the program, the company may repurchase shares in open market transactions, privately negotiated transactions, accelerated
share buyback programs, tender offers or by other means. The timing and amount of repurchase transactions are determined
by its management based on market conditions, share price, legal requirements and other factors. The program may be
suspended, modified or discontinued at any time without prior notice. The company repurchased 191,700 shares of common
stock for approximately $4.0 million during the third quarter of 2015.
Dividends
In August 2013, the company’s board of directors initiated a quarterly cash dividend, which the company has paid every
quarter since. In August 2015, the board of directors declared a quarterly cash dividend of $0.12 per share, representing a
50% increase over the previous quarterly dividend and second annual increase paid to shareholders. Future declarations of
dividends are subject to board approval and may be adjusted as the company’s cash position, business needs or market
conditions change. On February 10, 2016, the company’s board of directors declared a quarterly cash dividend of $0.12 per
share. The dividend is payable on March 18, 2016, to shareholders of record at the close of business on February 26, 2016.
For each calendar quarter commencing with the quarter ended September 30, 2015, the partnership agreement requires
the partnership to distribute all available cash, as defined, to its partners within 45 days after the end of each calendar quarter.
Available cash generally means all cash and cash equivalents on hand at the end of that quarter less cash reserves established
by the general partner of the partnership plus all or any portion of the cash on hand resulting from working capital
borrowings made subsequent to the end of that quarter. On January 21, 2016, the board of directors of the general partner of
the partnership declared a cash distribution of $0.4025 per unit on outstanding common and subordinated units of the
partnership, for the quarter ended December 31, 2015. The distribution is payable on February 12, 2016 to unitholders of
record at the close of business on February 5, 2016.
Accumulated Other Comprehensive Income
Changes in accumulated other comprehensive income are associated primarily with gains and losses on derivative
financial instruments. Amounts reclassified from accumulated other comprehensive income are as follows (in thousands):
Year Ended December 31,
2014
2015
2013
Statements of Operations
Classification
Gains (losses) on cash flow hedges:
Ethanol commodity derivatives
Corn commodity derivatives
$
Total
Income tax benefit
8,420 $ (257,730) $
(3,551)
4,869
1,855
(43,853)
(301,583)
(139,754)
(96,736) Revenues
(25,852) Cost of goods sold
(122,588)
(46,941)
Income (loss) before income
Income tax expense (benefit)
Amounts reclassified from accumulated
other comprehensive income (loss)
$
3,014 $ (161,829) $
(75,647)
15. 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 carrying amounts of existing assets and liabilities and their
respective tax bases, and net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured
using enacted rates expected to be applicable to taxable income in the years those temporary differences are recovered or
settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income during the period
F-29
that includes the enactment date.
Green Plains Partners is a master limited partnership, which is treated as a flow-through entity for federal income tax
purposes and is not subject to income taxes. As a result, the company’s consolidated financial statements do not reflect any
benefit or provision for income taxes on pre-tax income or loss attributable to the noncontrolling interest in the partnership.
Income tax expense consists of the following (in thousands):
Current
Deferred
Total
2015
Year Ended December 31,
2014
2013
$
$
33,750
(27,513)
6,237
$
$
67,389
23,537
90,926
$
$
1,397
27,493
28,890
Differences between income tax expense 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, net
of federal benefit
Qualified production activities deduction
Increase (decrease) in valuation allowance
against deferred tax assets
Nondeductible compensation
Noncontrolling interests
Other
Income tax expense
Year Ended December 31,
2015
2014
2013
$
7,513
$
87,650
$
25,299
1,397
-
-
-
(2,857)
184
6,237
$
6,810
(4,637)
-
848
-
255
90,926
$
2,002
-
(709)
1,491
-
807
28,890
$
F-30
Significant components of deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards - State
Tax credit carryforwards - State
Derivative financial instruments
Investment in partnerships
Organizational and start-up costs
Stock-based compensation
Accrued expenses
Capital leases
Other
Total deferred tax assets
Deferred tax liabilities:
Convertible debt
Fixed assets
Derivative financial instruments
Investment in partnerships
Total deferred tax liabilities
Valuation allowance
Deferred income taxes
December 31,
2015
2014
$
337 $
4,348
-
46,519
26
3,080
10,649
3,800
1,858
70,617
(5,329)
(139,383)
(4,542)
-
(149,254)
(3,160)
(81,797) $
$
471
4,910
975
-
851
2,868
7,196
3,743
1,532
22,546
(6,878)
(118,132)
(1,534)
(126,544)
(3,742)
(107,740)
The company maintains a valuation allowance for its net deferred tax assets due to uncertainty that it will realize these
assets in the future. The deferred tax valuation allowance of $3.2 million as of December 31, 2015, relates to Iowa tax credits
that started expiring in 2014 and will continue to expire through 2016. Management considers whether it is more likely than
not that some or all of the deferred tax assets will be realized, which is dependent on the generation of future taxable income
and other tax attributes during the periods those temporary differences become deductible. Scheduled reversals of deferred
tax liabilities, projected future taxable income, and tax planning strategies are considered to make this assessment.
The company’s federal and state returns for the tax years ended November 30, 2012, and later are still subject to audit. A
reconciliation of unrecognized tax benefits is as follows (in thousands):
Balance at January 1, 2015
Additions for prior year tax positions
Reductions for prior year tax positions
Balance at December 31, 2015
Unrecognized Tax Benefits
$
$
312
7
(130)
189
Recognition of these tax benefits would favorably impact the company’s effective tax rate. Interest and penalties
associated with uncertain tax positions are accrued as part of income taxes payable.
16. 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. The company
incurred lease expenses of $33.2 million, $31.8 million and $19.9 million during the years ended December 31, 2015, 2014
and 2013, respectively.
F-31
Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in thousands):
Year Ending December 31,
Amount
2016
2017
2018
2019
2020
Thereafter
Total
Commodities
$
$
31,098
20,997
17,049
12,802
10,223
17,003
109,172
As of December 31, 2015, the company had contracted future purchases of grain, corn oil, natural gas, crude oil, ethanol,
distillers grains and cattle, valued at approximately $322.3 million.
Legal
In November 2013, the company acquired ethanol plants located in Fairmont, Minnesota and Wood River, Nebraska.
There is ongoing litigation related to the consideration for this acquisition. If the litigation is resolved favorably, the company
will recognize a gain in a future period. In the event of a negative outcome, there will be no impact to the company.
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 does not believe any current or pending litigation will have a material adverse effect on its
financial position, results of operations or cash flows.
Insurance Recoveries
In March 2014, the Green Plains Otter Tail ethanol plant was damaged by a fire, which caused substantial property
damage and business interruption costs. The company had property damage and business interruption insurance coverage
and, as a result, the incident did not have a material adverse impact on the company’s financial results. As of December 31,
2014, the company had received $7.8 million for the property damage portion of the claim, representing reimbursement, net
of deductible, for the replacement value of the damaged property and equipment. This recovery was in excess of the book
value of the damaged assets, resulting in a gain of $4.2 million, which was recorded in other income during the year ended
December 31, 2014. The company had also received insurance proceeds of $10.5 million as of December 31, 2014 related to
the business interruption portion of the claim, reimbursing a substantial majority of lost profits, net of deductible, during the
repair of this equipment. These proceeds were recorded as a reduction of cost of goods sold. The amounts above for both
property damage and business interruption insurance claims are final.
17. 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 and long-term disability insurance, and flexible spending accounts. The company
also offers a 401(k) plan enabling eligible employees to save for retirement on a tax-deferred basis up to the limits allowed
under the Internal Revenue Code and matches up to 4% of eligible employee contributions. Employee and employer
contributions are 100% vested immediately. Employer contributions to the 401(k) plan for the years ended December 31,
2015, 2014 and 2013 were $1.4 million, $1.1 million and $0.9 million, respectively.
The company contributes to a defined benefit pension plan. Since January of 2009, the benefits under the plan were
frozen; however, the company remains obligated to ensure the plan is funded according to its requirements. As of December
31, 2015, the plan’s assets were $5.7 million and liabilities were $6.8 million. At December 31, 2015, net liabilities of $1.1
million were included in other liabilities on the consolidated balance sheet and at December 31, 2014, net assets of $0.4
million were included in other assets on the consolidated balance sheet.
F-32
18. RELATED PARTY TRANSACTIONS
Commercial Contracts
Three subsidiaries of the company have executed separate financing agreements for equipment with AXIS Capital Inc.
Gordon Glade, president and chief executive officer of AXIS Capital, is a member of the company’s board of directors. In
March 2014, a subsidiary of the company entered into $1.4 million of new equipment financing agreements with AXIS
Capital with monthly payments beginning in April 2014. Balances of $1.0 million and $1.2 million related to these financing
arrangements were included in debt at December 31, 2015 and 2014, respectively. Payments, including principal and interest,
totaled $0.3 million, $0.3 million and $0.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. The
weighted average interest rate for the financing agreements with AXIS Capital was 6.8%.
Aircraft Leases
Effective January 1, 2015, the company entered into two agreements with an entity controlled by Wayne Hoovestol for
the lease of two aircrafts. Mr. Hoovestol is chairman of the company’s board of directors. The company agreed to pay $9,766
per month for the combined use of up to 125 hours per year of the aircrafts. Flight time in excess of 125 hours per year will
incur additional hourly charges. These agreements replaced prior agreements with entities controlled by Mr. Hoovestol for
the lease of two aircrafts for $15,834 per month for use of up to 125 hours per year, with flight time in excess of 125 hours
per year incurring additional hourly charges. During the years ended December 31, 2015, 2014 and 2013, payments related to
these leases totaled $270 thousand, $187 thousand and $136 thousand, respectively. The company had no outstanding
payables related to these agreements at December 31, 2015, and approximately $2 thousand in outstanding payables at
December 31, 2014.
19. QUARTERLY FINANCIAL DATA (Unaudited)
The following table includes unaudited financial data for each of the quarters within the years ended December 31, 2015,
and 2014 (in thousands, except per share amounts), which is derived from the company’s consolidated financial statements.
In management’s opinion, the financial data reflects all of the adjustments necessary for a fair presentation of the quarters
presented. The operating results for any quarter are not necessarily indicative of results for any future period.
Revenues
Costs and expenses
Operating income
Other expense
Income tax expense (benefit)
Net income attributable to Green Plains
Basic earnings (loss) per share attributable to Green
Diluted earnings per share attributable to Green Plains
$
December 31,
2015
739,914 $
727,176
12,738
(7,959)
4,066
(3,589)
(0.09)
(0.09)
Revenues
Costs and expenses
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,
2014
829,939 $
756,010
73,929
(9,315)
22,377
42,237
1.12
1.07
Three Months Ended
September 30,
2015
742,797 $
722,964
19,833
(10,396)
(604)
6,179
0.16
0.16
June 30,
2015
744,490 $
720,088
24,402
(11,388)
5,222
7,792
0.20
0.19
March 31,
2015
738,388
734,284
4,104
(9,869)
(2,447)
(3,318)
(0.09)
(0.09)
Three Months Ended
September 30,
2014
833,925 $
758,870
75,055
(9,056)
24,250
41,749
1.11
1.03
June 30,
2014
837,858 $
778,912
58,946
(8,857)
17,775
32,314
0.86
0.82
March 31,
2014
733,889
655,546
78,343
(8,615)
26,525
43,203
1.30
1.04
F-33
20. SUBSEQUENT EVENTS
Drop Down of Assets
On October 23, 2015, the company acquired an ethanol production facility in Hopewell, Virginia, with production
capacity of approximately 60 mmgy. Ethanol production resumed on February 8, 2016, and corn oil extraction is expected to
be operational during the second quarter of 2016.
On November 12, 2015, the company acquired an ethanol production facility in Hereford, Texas. The facility includes an
ethanol plant with approximately 100 mmgy of production capacity, a corn oil extraction system and other related assets.
Effective January 1, 2016, the partnership acquired the storage and transportation assets of the Hereford, Texas and
Hopewell, Virginia ethanol production facilities from the company for an initial consideration of $62.5 million. The
partnership used its revolving credit facility and cash on hand to fund the purchase of the assets. The acquired assets include
three ethanol storage tanks that support the plants’ combined expected production capacity of approximately 160 mmgy and
224 leased railcars with capacity of approximately 6.7 mmg. The partnership amended the storage and throughput agreement,
increasing the minimum volume commitment to 246.5 mmg per calendar quarter. The partnership also amended the rail
transportation services agreement, increasing the minimum railcar volumetric capacity commitment to 76.3 mmg.
F-34
Schedule I – Condensed Financial Information of the Registrant (Parent Company Only)
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF BALANCE SHEET – PARENT COMPANY ONLY
(in thousands)
ASSETS
December 31,
2015
2014
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, including amounts from related parties of $1,080 and
$196, respectively
Income tax receivable
Prepaid expenses and other
Due from subsidiaries
Total current assets
$
273,294
10,130
$
Property and equipment, net
Investment in consolidated subsidiaries
Other assets
Total assets
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued liabilities
Income tax payable
Current maturities of long-term debt
Total current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Total liabilities
Stockholders' equity
Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
See accompanying notes to the condensed financial statements.
F-35
252,689
6,309
268
-
893
30,823
290,982
4,147
611,311
18,323
924,763
2,098
17,150
2,907
-
22,155
100,845
4,010
304
127,314
45
569,431
299,101
(5,320)
(65,808)
797,449
924,763
1,188
9,104
1,189
136
295,041
3,811
605,042
17,167
921,061
1,889
12,511
-
-
14,400
105,393
2,250
23
122,066
45
577,787
290,974
-
(69,811)
798,995
921,061
$
$
$
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF OPERATIONS – PARENT COMPANY ONLY
(in thousands)
Selling, general and administrative expenses
Operating (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
2015
Year Ended December 31,
2014
2013
- $
-
838
(9,280)
(3,366)
(11,808)
(11,808)
4,106
(7,702)
14,766
7,064 $
- $
-
462
(9,539)
(3,860)
(12,937)
(12,937)
4,361
(8,576)
168,080
159,504 $
88
(88)
192
(8,742)
(2,647)
(11,197)
(11,285)
5,018
(6,267)
49,658
43,391
$
$
See accompanying notes to the condensed financial statements.
F-36
GREEN PLAINS 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
$
23,665
23,665
$
(7,653)
(7,653)
$
(1,924)
(1,924)
2015
Year Ended December 31,
2014
2013
Cash flows from investing activities:
Purchases of property and equipment
Proceeds on disposal of assets, net
Investment in subsidiaries, net
Issuance of notes receivable from subsidiaries, net of
payments received
Investments in unconsolidated subsidiaries
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
Payments on short-term borrowings
Payments for repurchase of common stock
Change in restricted cash
Payment of cash dividends
Payment of loan fees
Proceeds from the exercise of stock options
Net cash provided (used) by financing activities
(1,191)
-
26,355
(3,000)
(2,975)
19,189
-
-
-
(4,003)
(3,821)
(15,191)
-
766
(22,249)
(2,829)
-
125,179
9,500
(4,309)
127,541
-
(238)
-
-
(6,309)
(8,908)
-
4,404
(11,051)
Net change in cash and equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
20,605
252,689
273,294
$
108,837
143,852
252,689
$
$
See accompanying notes to the condensed financial statements.
(652)
42
(53,754)
15,356
(3,264)
(42,272)
120,000
(1,841)
(27,162)
-
-
(2,426)
(5,072)
4,498
87,997
43,801
100,051
143,852
F-37
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS – PARENT COMPANY ONLY
1. BASIS OF PRESENTATION
References to “parent company” refer to Green Plains Inc., a holding company that conducts substantially all of its
business operations through its subsidiaries. The parent company is restricted from obtaining funds from certain subsidiaries
through dividends, loans or advances. See Note 11 – Debt in the notes to the consolidated financial statements for additional
information. Accordingly, these condensed financial statements are presented on a “parent-only” basis, in which the parent
company’s investments in its consolidated subsidiaries are presented under the equity method of accounting. These financial
statements should be read in conjunction with Green Plains Inc.’s audited consolidated financial statements included in this
report.
2. COMMITMENTS AND CONTINGENCIES
Operating Leases
The parent company leases certain facilities under agreements that expire at various dates. For accounting purposes, rent
expense is based on a straight-line amortization of the total payments required over the lease term. The parent company
incurred lease expenses of $1.1 million, $1.0 million and $0.9 million during the years ended December 31, 2015, 2014 and
2013, respectively. Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in
thousands):
Year Ending December 31,
Amount
2016
2017
2018
2019
2020
Thereafter
Total
Parent Guarantees
$
$
1,118
1,920
1,887
1,889
1,372
16,015
24,201
The various operating subsidiaries of the parent company enter into contracts as a routine part of their business activities,
which are guaranteed by the parent company in certain instances. Examples of these contracts include financing and lease
arrangements, commodity purchase and sale agreements, and agreements with vendors. As of December 31, 2015, the parent
company had $337.5 million in guarantees of subsidiary contracts and indebtedness.
3. DEBT
Parent company debt as of December 31, 2015, consists of the 3.25% convertible senior notes due 2018. Scheduled long-
term debt repayments, including full accretion at their maturity but excluding the effects of the debt discounts, are as follows
(in thousands):
Year Ending December 31,
Amount
2016
2017
2018
2019
2020
Thereafter
Total
$
$
-
-
120,000
-
-
-
120,000
F-38
CO R P O R ATE I N FO R MATI O N
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
WAYNE HOOVESTOL, Chairman
TODD BECKER
Owner/President
President and Chief Executive Officer
Hoovestol Inc./Lone Mountain Truck Leasing
JIM ANDERSON1,2
Owner
Anderson AG Investments
TODD BECKER
President and Chief Executive Officer
Green Plains Inc.
JAMES CROWLEY1
Chairman and Managing Partner
Old Strategic, LLC
GENE EDWARDS1,2
Retired Executive Vice President and
Chief Development Officer
Valero Corporation
GORDON GLADE1,3
President and Chief Executive Officer
AXIS Capital, Inc.
THOMAS MANUEL2,3
Founder and Chief Executive Officer
Nu-Tek Salt, LLC
BRIAN PETERSON1,3
President and Chief Executive Officer
Whiskey Creek Entities
ALAIN TREUER2,3
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
Green Plains 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
JEFF BRIGGS
Chief Operating Officer
JERRY PETERS
Chief Financial Officer
PATRICH SIMPKINS
Chief Development and Risk Officer
STEVE BLEYL
Executive Vice President
Ethanol Marketing
WALTER CRONIN
Executive Vice President
Commercial Operations
MARK HUDAK
Executive Vice President
Human Resources
PAUL KOLOMAYA
Executive Vice President
Commodity Finance
MICHELLE MAPES
Executive Vice President
General Counsel and Corporate Secretary
MICHAEL METZLER
Executive Vice President
Gas and Power
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STOCK EXCHANGE LISTING
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Stock Ticker Symbol: GPRE
2015 ANNUAL REPORT