2016 Annual Report
Green Plains Inc. (NASDAQ: GPRE) is the second largest owner of
ethanol production facilities in the world. Headquartered in Omaha,
Nebraska, Green Plains has grown rapidly, primarily through
acquisitions, and today has operating segments throughout the
energy and agriculture value chains.
Forward-Looking Statement
This Annual Report contains “forward-looking statements” within the meaning of the federal securities laws. See the discussion under “Cautionary Information
Regarding Forward-Looking Statements” in our 2016 Form 10-K for matters to be considered in this regard.
Page 1
Green Plains Inc.
2016 Annual Report
To Our
Shareholders
2016 marks our 8th consecutive year of profitability.
1.1 billion gallons of ethanol, 21% more than we
It was also a year Green Plains made significant
produced in 2015. For 2016, we generated
investments in our business. We invested over $500
approximately $174.4 million of EBITDA, or earnings
million, expanding our ethanol production capacity
before interest, income taxes, depreciation
and adding a new adjacent business, Fleischmann’s
and amortization.
Vinegar Company.
The Fleischmann’s acquisition is consistent with our
We were successful increasing our yield to 2.86 gallons
strategy of moving into adjacent businesses that
of ethanol from each of the 401.1 million bushels of
leverage our core capabilities between distribution,
corn processed during the year. The higher yield means
transportation, logistics, production and risk
we lowered our corn usage by 1.5 million bushels
management. The primary raw material in vinegar
compared with the 2.85 yield achieved in 2015.
We also achieved a number of other milestones in 2016.
production is food grade ethanol. This business will
also broaden our reach into food ingredient markets,
building our higher-margin production capabilities
and adding value to our end products.
We expanded our production capacity by nearly
260 million gallons per year in 2016. Most of this increase
came by acquiring three ethanol plants — Madison,
Illinois; Mount Vernon, Indiana and York, Nebraska.
The value proposition we continue to pursue for our
We also added production capacity at several of our
shareholders is the same — reduce volatility over the
existing plants. With these additions, our ethanol
long-term to give you a stable and predictable earnings
production capacity has reached nearly 1.5 billion
stream. We believe this investment is an important step
gallons per year, processing over 14 million tons of
towards that objective with a non-cyclical market that
corn annually. Furthermore, we have the capacity to
allows the company to maintain consistent margins in
produce 4.1 million tons of distillers grains and nearly
volatile commodity environments backed by a history
340 million pounds of corn oil, both of which are vital
of stability.
2016 Financial Highlights
co-products that continue to have substantial demand
in global animal feed, food and fuel markets.
Our liquidity remains strong with $356 million in cash
We reported net income of $10.7 million for the year,
on the balance sheet as of December 31, 2016, along
or $0.28 per diluted share. This was up from 2015’s net
with $121 million available under our revolving credit
income of $7.1 million, or $0.18 per diluted share. The
agreements. During 2016, we returned $18.4 million
improvement can be attributed to a stronger energy
in dividends to our shareholders and repurchased
climate in 2016 and Green Plains’ record production of
$6.0 million of Green Plains shares.
Page 2
2016 marks our 8th
consecutive year
of profitability.
Approaching Scale
For several years, we have talked about reaching scale
in the ethanol industry. Two years ago, at the start of
2015, Green Plains had a little over one billion gallons
of ethanol production. Earlier that year, we told investors
we wanted to be a 2+ billion-gallon production
terminal. This project is on schedule to begin exporting
ethanol in the third quarter of 2017. The terminal is
also capable of managing multiple other products
for import and export, including liquid hydrocarbons,
vegetable oils and other non-liquid commodities.
Once commercial development is complete, Green
Plains will offer its interest in the joint venture to Green
company. Today, we are a 1.5-billion-gallon production
company, approaching scale with our current platform.
Plains Partners.
Having almost 10 percent of the ethanol industry’s
This terminal will be a key asset going forward. We
domestic production capability positions Green Plains
are seeing greater demand growth for the products
as a leader in the ethanol industry and provides added
we produce around the world. Ethanol exports out
benefits in all of the commodities that are a part of our
of the U.S. increased 25% in 2016 over 2015. Last
supply chain.
year, export sales accounted for 13% of our ethanol
production, affirming our decision to launch the joint
Our growth to reaching scale is enhanced by our
master limited partnership, Green Plains Partners LP.
venture with Jefferson.
The partnership provides us with a lower cost of capital
We continue to evaluate opportunities to grow our
that enables us to be more competitive as an acquirer
new food and ingredients business. We believe
of ethanol production assets. In fact, the partnership
opportunities exist for ongoing consolidation in a
provided approximately 38% of the funding for the
relatively fragmented global vinegar market. Moreover,
three ethanol plants acquired in September 2016,
we believe this supports our expansion into developing
giving us an advantage over other potential acquirers
markets off the Fleischmann’s Vinegar platform,
for these types of assets.
specifically in food, pharmaceuticals, food
We are also focused on downstream
distribution that supports our business. In
June 2016, we formed a joint venture with
Jefferson Gulf Coast Energy Partners, a
subsidiary of Fortress Transportation and
preservation and agriculture.
While we are still very much a growth
company, we are mindful of the growth
avenues we pursue. We have increased
ethanol production by 350% since the
Infrastructure Investors LLC to construct and
beginning of 2009 with our platform of 17
operate an intermodal export and import
ethanol plants. We would still like to add
fuels terminal at Jefferson’s
existing Beaumont, Texas
production capacity; however, we also
want to continue diversifying our
Todd Becker
President and
Chief Executive Officer
Green Plains Inc.
2016 Annual Report
EBITDA
in millions
$400
$350
$300
$250
$200
$150
$100
$50
‘12
‘13
‘14
‘15
‘16
revenue and income streams to provide more
beginning of 2009. As we think about Green Plains
consistent and predictable earnings and cash
today, we are not your average ethanol
flow. These opportunities could be realized in
producer anymore, but a Fortune 1000 diversified
related commodity-processing products that utilize
commodity processor.
our experience and expertise in commodity and
risk management.
Over the last five years, our total return performance
has averaged 24.6% on an annualized basis, including
We continually evaluate and reexamine all aspects of
the reinvestment of dividends, which we began paying
our business as operational excellence is still a key part
in August of 2013. Our focus is to continue to drive
of our core competencies. A good example of this is
growth across the top line, bottom line and to you
the development and implementation of our customer
our shareholders.
relationship management (“CRM”) system. This
program was brought about to bring us closer to
farmers and interact directly with the primary
source of corn in the U.S. Our goal is to achieve 65%
origination from the farmer in 2017, an increase of
eight percentage points from 2016.
Steady Grows the Bottom Line
Our growth has led us to a new location in Omaha.
We now call 1811 Aksarben Drive our new home
and are excited to be in this new neighborhood with
other vibrant and growing companies in Omaha’s
Aksarben area.
The management team and directors of Green Plains
appreciate your continued support and confidence,
Since the beginning of 2009 to the end of 2016, we
taking a longer-term view in valuing our company. We
have generated $1.3 billion of EBITDA and produced
believe the company is well-positioned to serve both
over 6 billion gallons of ethanol with an average EBITDA
the agriculture and energy industries for years to come.
margin of 21 cents per gallon. With a much bigger
platform, we believe we are well-positioned for 2017
and beyond. We plan to intensify our efforts to deliver
more consistent, predictable earnings and cash flow.
This can be done adding adjacent businesses like
Fleischmann’s Vinegar, which can reduce earnings
volatility and improve our public market valuation.
All of this growth would not have been accomplished
without the support of our 1,294 employees. That is
nearly 1,000 more employees than we had at the
Sincerely,
Todd Becker
President and Chief Executive Officer
Page 4
Selected Financial Data
STATEMENT OF INCOME 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 (NON-GAAP)
EBITDA (unaudited and in thousands)
Year Ended December 31,
2016
2015
2014
2013
201 2
$ 3,410,881 $ 2,965,589
2,904,512
—
61,077
39,612
15,228
7,064
3,319, 193
—
91,6 8 8
53,337
30,4 9 1
10,6 6 3
$ 3,235,611 $ 3,041,011 $ 3,476,870
3,459,118
47,133
64,885
39,729
11,763
11,779
2,933,160
—
107,851
35,570
43,391
43,391
2,949,337
—
286,274
35,844
159,504
159,504
$
$
0.28 $
0.28 $
0.19 $
0.18 $
4.37
3.96
$
$
1.44
1.26
$
$
0.39
0.39
$
174,428 $
127,781 $
352,477
$
156,492
$
115,505
(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.
BALANCE SHEET DATA
(in thousands)
Total cash and cash equivalents
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Stockholders’ equity
December 31,
2016
2015
2014
2013
201 2
$
356,190 $
1,000,576
2,506,4 92
594,94 6
782,6 10
1,527,3 01
979,19 1
411,885 $
912,577
1,917,920
438,669
432,139
959,011
958,909
455,252
903,415
1,821,062
511,540
399,440
1,023,613
797,449
$
299,021
633,305
1,532,045
409,197
480,746
986,687
545,358
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,
$
$
2016
30,491
51,851
7,860
84,226
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
EBITDA (unaudited)
$
174,428
$
127,781 $
352,477
$
156,492
$
115,505
Ethanol
Production
in millions of gallons
Revenues
in millions
Total Cash and
Cash Equivalents
in millions
1,200
1,100
1,000
900
800
700
600
500
400
300
200
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$450
$400
$350
$300
$250
$200
$150
$100
‘12
‘13
‘14
‘15
‘16
‘12
‘13
‘14
‘15
‘16
‘12
‘13
‘14
‘15
‘16
$
$
280,104
568,035
1,349,734
432,384
362,549
859,232
490,502
201 2
11,763
37,521
13,393
52,828
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, 2016
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.)
1811 Aksarben Drive, Omaha, NE 68106
(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, 2016
(the last business day of the second quarter), based on the last sale price of the common stock on that date of $19.72, was
approximately $694.7 million. For purposes of this calculation, executive officers and directors are deemed to be affiliates of
the registrant.
As of February 14, 2017, there were 38,181,626 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2017 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
3
15
28
28
28
28
29
31
32
47
49
49
49
52
52
52
52
52
52
53
62
1
Green Plains Inc. and Subsidiaries:
Green Plains; the company
BioProcess Algae
Fleischmann’s Vinegar
Green Plains Cattle
Green Plains Grain
Green Plains Partners; the partnership
Green Plains Processing
Green Plains Trade
SCI Ingredients
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
EU
FDA
FSMA
ILUC
LCFS
MMBTU
Mmg
Mmgy
MTBE
RFS II
RIN
U.S.
USDA
Commonly Used Defined Terms
Green Plains Inc. and its subsidiaries
BioProcess Algae LLC
Fleischmann’s Vinegar Company, Inc.
Green Plains Cattle Company LLC
Green Plains Grain Company LLC
Green Plains Partners LP and its subsidiaries
Green Plains Processing LLC and its subsidiaries
Green Plains Trade Group LLC
SCI Ingredients Holdings, Inc.
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, an 84 octane sub-
grade gasoline
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
European Union
U.S. Food and Drug Administration
Food Safety Modernization Act of 2011
Indirect land usage charge
Low Carbon Fuel Standard
Million British Thermal Units
Million gallons
Million gallons per year
Methyl tertiary-butyl ether
Renewable Fuels Standard II
Renewable identification number
United States
U.S. Department of Agriculture
2
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, forward-looking statements are included in this report or
incorporated 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 government policy or regulation; risks related to acquisitions and achieving anticipated
results; risks associated with merchant trading, cattle feeding operations, vinegar production and other factors detailed in
reports filed with the SEC. Additional risks related to 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 documents 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, founded in June 2004 as an ethanol producer. We have grown through acquisitions
of operationally efficient ethanol production facilities and adjacent commodity processing businesses. We are focused on
generating stable operating margins through our diversified business segments and risk management strategy. We own and
operate assets throughout the ethanol value chain: upstream, with grain handling and storage; through our ethanol production
facilities; and downstream, with marketing and distribution services to mitigate commodity price volatility, which
differentiates us from companies focused only on ethanol production. Our other businesses leverage our supply chain,
production platform and expertise.
We formed Green Plains Partners LP, a master limited partnership, to be our primary downstream storage and logistics
provider since its assets are the principal method of storing and delivering the ethanol we produce. The partnership completed
its IPO on July 1, 2015. We own a 62.5% limited partner interest, a 2.0% general partner interest 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.
As a result of acquisitions during the year, we implemented organizational segment changes during the fourth quarter of
2016. We now group our business activities into the following four operating segments to manage performance:
• Ethanol Production. Our ethanol production segment includes the production of ethanol, distillers grains and corn
oil at 17 ethanol plants in Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, Tennessee, Texas and Virginia.
At capacity, we expect to process approximately 524 million bushels of corn per year and produce approximately
3
1.5 billion gallons of ethanol, 4.1 million tons of distillers grains and 340 million pounds of industrial grade corn oil,
making us the second largest consolidated owner of ethanol plants in North America.
• Agribusiness and Energy Services. Our agribusiness and energy services segment includes grain procurement, with
approximately 60.3 million bushels of grain storage capacity, and our commodity marketing business, which
markets, sells and distributes ethanol, distillers grains and corn oil produced at our ethanol plants. We also market
ethanol for a third-party producer as well as buy and sell ethanol, distillers grains, corn oil, crude oil, grain, natural
gas and other commodities in various markets.
• Food and Food Ingredients. Our food and food ingredients segment includes a cattle feedlot operation with the
capacity to support 73,000 head of cattle and grain storage capacity of approximately 2.8 million bushels, and
Fleischmann’s Vinegar, one of the world’s largest producers of food-grade industrial vinegar.
• 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 39 ethanol storage facilities, 8 fuel terminal facilities and approximately
3,100 leased railcars.
Risk Management and Hedging Activities
Our profitability is highly dependent on commodity prices, particularly for ethanol, distillers grains, corn oil, corn,
natural gas and cattle. Since market price fluctuations among these commodities are not always correlated, ethanol
production or our cattle feedlot operation 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 operations to obtain 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, corn oil and vinegar production or buy some
of the corn, natural gas, cattle, or ethanol 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, cattle 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 commodity price risk exposure at each of our operations and lock in favorable margins or temporarily
reduce 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
17 ethanol plants and installed corn oil extraction technology at each of our ethanol plants to generate incremental returns. In
addition, we purchased or built a grain handling and storage business, a cattle feedlot operation, a vinegar production
business, and terminal and distribution facilities. Successful integration of these operations has enhanced our overall returns.
4
Operational Excellence. Our operations are staffed by experienced industry personnel who share operational knowledge
and expertise. We focus on making incremental operational improvements to enhance performance using real-time
production data and systems to monitor our operations 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 in key markets. Combined, our ethanol production, agribusiness and energy services, food and food ingredients, and
partnership segments provide efficiencies, which extend both within and outside the ethanol value chain.
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 blend stocks and upgrading regular gasoline to premium
grades, to improve engine performance. Refiners are producing more conventional blendstocks for oxygenate
blending, or CBOB, which is an 84 octane sub-grade gasoline that requires ethanol or another octane source to meet
the 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 comprised approximately 9.9% of the domestic gasoline supply, replacing nearly 750 million
barrels of crude oil in 2016.
• E15 Blending Waiver. In October 2010, the EPA granted a waiver that 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
approved the sale and use of E15 and in July 2012, the nation’s first retail E15 was sold. On January 24, 2017, there
were 627 retail fuel stations in 28 states offering E15 to consumers.
• Mandated Use of Renewable Fuels. In the United States, the federal government mandates the use of renewable
fuels under RFS II, which has been a driving factor in the growth of domestic ethanol usage. 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. In November 2016, the EPA announced the final 2017 renewable volume obligations
for conventional ethanol of 15.0 billion gallons, which is currently on hold pending final review by the incoming
presidential administration.
• 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 1.0
billion gallons in 2016 and 730 million gallons in 2015.
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 continually leverage our operational expertise to identify expansion projects that maximize our
production capabilities at our ethanol and vinegar plants, and cattle feedlot operations. Owning grain storage at or near our
ethanol plants allows us to develop relationships with local producers and originate corn more effectively at a lower average
cost. We also seek organic growth projects in adjacent businesses and downstream distribution services that take advantage
5
of our existing assets’ locations.
Acquire Strategic Assets. 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. We seek acquisitions that leverage our core competencies in adjacent markets, products and services with attractive
margins or more predictable revenue streams.
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 ethanol
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
The following is a summary of our significant developments during 2016. Additional information about these items can
be found elsewhere in this report or in previous reports filed with the SEC.
Effective January 1, 2016, we sold the storage and transportation assets of the Hereford, Texas and Hopewell, Virginia
ethanol production facilities to the partnership for $62.3 million. The partnership used its revolving credit facility and cash on
hand to fund the purchase of the assets, which included three ethanol storage facilities that support the plants’ combined
production capacity of 160 mmgy and 224 leased railcars. In connection with this transaction, Green Plains and the
partnership amended the omnibus agreement, operational services agreement, and ethanol storage and throughput agreement.
Effective April 1, 2016, the company increased its ownership of BioProcess Algae to 82.8% and began consolidating the
joint venture in its consolidated financial statements. Our ownership in BioProcess Algae is currently at 90.0% as of
December 31, 2016. The joint venture is focused on growing algae in commercially viable quantities using feedstocks that
are created as part of the ethanol production process.
On June 14, 2016, we announced the formation of a 50/50 joint venture with Jefferson Gulf Coast Energy Partners, a
subsidiary of Fortress Transportation and Infrastructure Investors LLC, to construct and operate an intermodal export and
import fuels terminal at Jefferson’s existing Beaumont, Texas terminal. The joint venture is expected to invest approximately
$55 million in its Phase I development, which will initially focus on storage and throughput capabilities for multiple grades
of ethanol. The terminal will have direct access to multiple transportation options, including Aframax vessels, inland and
coastwise barges, trucks, and unit trains with direct mainline service from the Union Pacific, BNSF and Kansas City
Southern railroads. Commercial development is expected to be complete during the second half of 2017, at which time we
will offer our interest in the joint venture to the partnership.
On August 15, 2016, we completed a private offering of 4.125% convertible senior notes for an aggregate principal
amount of $170 million that will mature on September 1, 2022. The net proceeds from the offering were used to finance
subsequent acquisitions.
On August 25, 2016, the partnership filed a shelf registration statement on Form S-3 with the SEC, which was declared
effective September 2, 2016, registering an indeterminate number of debt and equity securities with a total offering price not
to exceed $500,000,250. The partnership also registered 13,513,500 common units, consisting of 4,389,642 common units
and 9,123,858 common units that may be issued upon conversion of subordinated units, in each case, currently held by Green
Plains.
On September 23, 2016, we acquired three ethanol plants located in Madison, Illinois; Mount Vernon, Indiana; and
York, Nebraska, from subsidiaries of Abengoa S.A. for approximately $234.9 million in cash, plus certain working capital
adjustments. The plants have combined production capacity of approximately 230 mmgy. Concurrently, the partnership
acquired the ethanol storage assets related to these production facilities from us for $90 million. The partnership used its
revolving credit facility to fund the purchase of the assets. In connection with this transaction, Green Plains and the
partnership amended the omnibus agreement, operational services agreement, and ethanol storage and throughput agreement.
On October 3, 2016, we acquired Fleischmann’s Vinegar, one of the world’s largest producers of food-grade industrial
vinegar, for $258.3 million in cash, including certain post-closing adjustments. A portion of the purchase price was used to
repay existing debt. The transaction was partially financed using $135 million of debt under a new credit agreement,
6
consisting of a $130 million term loan and $5 million borrowed under a $15 million revolving credit facility. The balance of
the transaction was paid from cash on hand.
We filed a shelf registration statement on Form S-3 with the SEC effective December 22, 2016, registering an
indeterminate number of shares of common stock, warrants and debt securities.
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. According to the USDA, one bushel, or 56 pounds, of corn, produces approximately 2.8
gallons of ethanol, 15.5 pounds of distillers grains and 0.7 pounds of corn oil, on average. Outside of the Unites States,
sugarcane is the primary feedstock used to produce ethanol.
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 octane. 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.
Ethanol Plants. We operate 17 dry mill ethanol production plants, located in nine states, that produce ethanol, distillers
grains and corn oil:
Plant
Atkinson, Nebraska
Bluffton, Indiana (1)
Central City, Nebraska
Fairmont, Minnesota
Hereford, Texas
Hopewell, Virginia (2)
Lakota, Iowa
Madison, Illinois
Mount Vernon, Indiana
Obion, Tennessee (1)
Ord, Nebraska
Otter Tail, Minnesota
Riga, Michigan
Shenandoah, Iowa (1)
Superior, Iowa (1)
Wood River, Nebraska
York, Nebraska
Total
Initial Operation or
Acquisition Date
June 2013
Sept. 2008
July 2009
Nov. 2013
Nov. 2015
Oct. 2015
Oct. 2010
Sept. 2016
Sept. 2016
Nov. 2008
July 2009
Mar. 2011
Oct. 2010
Aug. 2007
July 2008
Nov. 2013
Sept. 2016
Technology
Delta-T
ICM
ICM
Delta-T
ICM/Lurgi
Katzen
ICM/Lurgi
Vogelbusch
Vogelbusch
ICM
ICM
Delta-T
Delta-T
ICM
Delta-T
Delta-T
Katzen
Plant Production
Capacity (mmgy)
55
120
110
119
100
60
124
90
90
120
61
55
60
75
60
121
50
1,470
(1) We constructed these four plants; all other ethanol plants were acquired.
(2) The Hopewell plant resumed ethanol production on February 8, 2016.
Our business is directly affected by the supply and demand for ethanol and other fuels in the markets served by our
assets. Miles traveled typically increases during the spring and summer months related to vacation travel, followed closely
behind the fall season due to holiday travel.
7
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 platforms for maximum performance.
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 44 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. We use cash and forward purchase contracts with grain
producers and elevators to buy corn. We maintain direct relationships with local farmers, grain elevators and cooperatives,
which serve as our primary sources of grain feedstock, at 14 of our ethanol plants. Most farmers in close proximity of our
plants store corn in their own storage facilities. This allows us to purchase much of the corn we need directly from farmers
throughout the year. At three of our ethanol plants, we contract with a third-party grain originator to supply the corn
necessary for ethanol production. These contracts terminate between August 2019 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. Grain storage facilities
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 2% 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
grains. Syrup may 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 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.
8
Natural Gas. Depending on production parameters, our ethanol plants use approximately 20,000 to 40,000 BTUs of
natural gas per gallon of production. We have service agreements to acquire the natural gas we need and transport the gas
through pipelines to our plants.
Electricity. Our plants require between 0.5 and 1.5 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 either uses city water or
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.
Agribusiness and Energy Services Segment
Our agribusiness and energy services segment includes five grain elevators in four states with combined grain storage
capacity of approximately 11.6 million bushels, and grain storage at our ethanol plants of approximately 48.7 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
Ethanol Plants
Atkinson, Nebraska
Bluffton, Indiana
Central City, Nebraska
Fairmont, Minnesota
Hereford, Texas
Hopewell, Virginia
Lakota, Iowa
Madison, Illinois
Mount Vernon, Indiana
Obion, Tennessee
Ord, Nebraska
Otter Tail, Minnesota
Riga, Michigan
Shenandoah, Iowa
Superior, Iowa
Wood River, Nebraska
York, Nebraska
Total
1,246
3,651
2,713
1,928
2,110
5,109
4,789
1,400
1,611
4,913
1,043
4,752
1,015
1,034
8,168
2,571
2,504
2,432
886
2,804
3,293
347
60,319
We buy bulk grain, primarily corn and soybeans, from area producers, and provide grain drying and storage services to
those producers. The grain is used as feedstock for our ethanol plants or sold to grain processing companies and area
livestock producers. Bulk grain 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,
as well as grain held in inventory, we enter into exchange-traded futures and options contracts that function as economic
hedges at times.
9
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.
Through Green Plains Trade, we market the ethanol we and a third party produce to local, regional, national and
international customers. We also purchase ethanol from independent producers for pricing arbitrage. 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.
Also through Green Plains Trade, 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 delivered to geographic regions that
do not have significant local corn or distillers grains production.
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. We sell dried distillers grains directly to international markets and indirectly to exporters for shipment. In 2016,
we exported approximately 10% of our distillers grains production, with the largest export markets for distillers grains being
Vietnam and Thailand. Access to diversified markets allows us to sell product to customers offering the highest net price.
Our corn oil is sold primarily to biodiesel plants 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 and barges to national markets as well as to exporters for shipment on
vessels to international markets.
Our railcar fleet for the agribusiness and energy services segment consists of approximately 950 leased hopper cars to
transport distillers grains and approximately 180 leased tank cars to transport corn oil and crude oil. The initial terms of the
lease contracts are for periods up to ten years.
Food and Food Ingredients Segment
Our cattle feedlot operation has the capacity to support 73,000 head of cattle and 2.8 million bushels of grain storage
capacity. We buy feeder cattle from producers, order buyers and livestock auctions, the majority of which are from Kansas,
Missouri, Oklahoma and Texas. The finished cattle are then sold to meat processors. Bulk 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 cattle and cattle held in inventory, we enter into exchange-traded
futures and options contracts that function as economic hedges at times.
Our vinegar operation includes seven production facilities. Vinegar is sold primarily to major food industry participants,
including leading branded food companies, private label food manufacturers and companies serving the foodservice channel.
Products include white distilled vinegar and numerous specialty vinegars for retail and industrial uses. Vinegar is distributed
primarily in bulk using 5,600 gallon tanker trailers. We also have four distribution warehouses located in California, Oregon,
Texas and Quebec, Canada.
Partnership Segment
Our partnership segment provides fuel storage and transportation services through (i) 39 ethanol storage facilities located
at or near our 17 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 of our ethanol plants are situated near major highways or rail lines to ensure efficient
movement. We are able to move product from our ethanol plants to bulk terminals via truck, railcar or barge. We also
manage the logistics and transportation requirements of our customers to improve our fleet’s efficiency and reduce operating
costs.
10
Deliveries within 150 miles of our plants and the partnership’s fuel terminal facilities 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 simultaneously 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 3,100 leased tank cars for the transportation of ethanol. The
initial terms of the lease contracts are for periods up to seven years.
To optimize the partnership’s railcar assets, we transport products other than ethanol 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 combined storage capacity of approximately 7.4 mmg and throughput capacity of
approximately 822 mmgy. We also have 39 ethanol storage facilities located at or near our 17 ethanol production plants with
a combined storage capacity of approximately 38.6 mmg to support current ethanol production capacity of approximately 1.5
bgy.
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 (1)
Bluffton, Indiana
Central City, Nebraska
Fairmont, Minnesota
Hereford, Texas
Hopewell, Virginia
Lakota, Iowa
Madison, Illinois
Mount Vernon, Indiana
Obion, Tennessee
Ord, Nebraska
Otter Tail, Minnesota
Riga, Michigan
Shenandoah, Iowa
Superior, Iowa
Wood River, Nebraska
York, Nebraska
Total
(1) The ethanol storage facilities are located approximately 16 miles from the ethanol plant.
11
6,542
120
180
180
30
60
160
150
2,074
3,000
2,250
3,124
4,406
761
2,500
2,855
2,855
3,000
1,550
2,000
1,239
1,524
1,238
3,124
1,100
46,022
Our Competition
Domestic Ethanol Competitors
We are the second largest consolidated owner of ethanol plants in the United States. We compete with other domestic
ethanol producers in a relatively fragmented industry. The top five producers account for approximately 45% of the domestic
production capacity with production capacity ranging from 800 mmgy to 1,800 mmgy.
Our competitors also 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.
According to the Renewable Fuels Association, there were 127 operational plants in the states where we have production
facilities, including Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, Tennessee, Texas and Virginia, as of December
1, 2016. The largest concentration of operational plants is located in Illinois, Iowa and Nebraska, where 50% of all
operational production capacity is located.
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 produces ethanol made from sugarcane, which may be less expensive to produce than
ethanol made from corn depending on feedstock prices. 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. 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 cellulosic ethanol,
which is made from 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.
In addition, we compete with other cattle feedlots and vinegar producers in competitive markets.
Regulatory Matters
Government Ethanol Programs and Policies
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. The EPA has the authority to waive the mandates in whole or in part if there is inadequate domestic
renewable fuel supply or the requirement severely harms the economy or environment.
RFS II has been a driving factor in the growth of ethanol usage in the United States. When RFS II was established in
October 2010, the required volume of renewable fuel to be blended with gasoline was to increase each year until it reached
15.0 billion gallons in 2015, which left the EPA to address existing limitations in both supply (ethanol production) and
demand (usage of ethanol blends in older vehicles). On November 23, 2016, the EPA announced the final 2017 renewable
volume obligations for conventional ethanol, which met the 15.0-billion-gallon congressional target for the first time, up
from 14.50 billion gallons in 2016 and 14.05 billion gallons in 2015.
In January 2017, the Trump administration imposed a government-wide freeze on new and pending regulations, which
included the 2017 renewable volume obligations that was originally intended to go into effect on February 10, 2017.
Regulatory freezes are a common practice during a change in administration and we currently believe the new presidential
administration will continue to be supportive of ethanol in accordance with the current laws.
12
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. In November 2016, the EPA proposed denying a petition to change the point of obligation under RFS II to the parties
that own the gasoline before it is sold. In December 2016, the EPA extended the comment period to February 2017. The point
of obligation does not directly impact ethanol producers; however, moving the point of obligation could indirectly affect
ethanol producers.
On January 18, 2017, Valero Energy Corporation filed an action against the EPA, seeking to compel the EPA to perform
certain non-discretionary duties required by the RFS program under the Clean Air Act. Within the filed action, Valero claims
the EPA has failed to perform these duties, namely periodic reviews of the feasibility of achieving compliance with the
requirements and the impact of the requirements on each individual and entity regulated under the program, i.e, point of
obligation, since 2010. Valero has requested an injunction, which if granted would require the EPA to promptly conduct
rulemaking to ensure the requirements of the program are met.
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.
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 HIS Automotive, there are nearly 20 million flexible fuel vehicles on
U.S. roads today. In addition, E85 is sold at more than 3,100 fuel stations in 46 states.
Demand for cleaner, more sustainable transportation fuel is growing worldwide. Ethanol has become a crucial
component of the global fuel supply as an economical oxygenate and source of octanes. According to the Global Renewable
Fuels Alliance, 35 countries, including the EU which is regulated by a single policy with specific national targets for each
country, have mandates or planned targets in place for blending ethanol and biodiesel with transportation fuels to reduce
harmful emissions.
Government actions abroad can have significant impact on the ethanol industry. For example, China raised its 5% tariff
on U.S. and Brazil fuel ethanol to 30%, effective January 1, 2017.
Environmental and Other Regulation
Our ethanol production, agribusiness and energy services, and food and food ingredients segment activities are subject to
environmental and other regulations. We obtain environmental permits to construct and operate our ethanol plants and other
facilities.
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 some of our plants operate as grandfathered at their current authorized capacity under the RFS II mandate,
expansion above these capacities 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 for our grandfathered plants, 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.
In January 2017, the USDA released a report providing evidence that greenhouse gas emissions associated with corn-
based ethanol are 43% lower than gasoline. Numerous factors have led to improvements over the past ten years, including
conservation practices by farmers, higher corn yields and advances in production technologies, which are expected to
13
continue and has the potential to further reduce greenhouse gas emissions up to a 76% as compared with gasoline.
The U.S. ethanol industry relies heavily on tank cars to deliver its product to market. As of December 31, 2016, the
company leases approximately 3,300 tank cars, including 3,100 leased by our partnership to transport ethanol. On May 1,
2015, the DOT finalized the Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains, or
DOT specification 117, which established a schedule to retrofit or replace older tank cars that carry crude oil and ethanol,
braking standards intended to reduce the severity of accidents and new operational protocols. We intend to strategically
manage our leased railcar fleet to comply with these regulations. Currently, all of our railcar leases expire prior to the retrofit
deadline of May 1, 2023.
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 also subject to government regulation. 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, the FDA issued rules for Current Good Manufacturing Practice, Hazard Analysis and Risk-Based
Preventative Controls for food for animals in response to FSMA. The rules require FDA-registered food facilities to address
safety concerns for sourcing, manufacturing and shipping food products and food for animals 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. We believe we have taken
sufficient measures to comply with these regulations.
On January 1, 2017, all medically important antimicrobials intended for use in animal feed that were once available over-
the-counter became veterinary feed directive drugs, requiring written orders from a licensed veterinarian to purchase and use
on or in livestock feed under the October 2015 revised Veterinary Feed Directive rule. Our cattle feedlot operation obtained
all necessary prescriptions from a licensed veterinarian to use certain veterinary feed directive drugs, as appropriate.
We employ maintenance and operations personnel at each of our 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 the majority owner of the BioProcess Algae joint venture, which was formed in 2008. The joint venture is
focused on growing algae in commercially viable quantities using feedstocks that are created as part of our ethanol
production process. The joint venture continues to take steps towards commercialization. We are currently focused on human
and animal nutrition, using proprietary technology to customize specific products, based on proven benefits, for relevant
markets.
Employees
On December 31, 2016, we had 1,294 full-time, part-time, temporary and seasonal employees, including 177 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, corn
oil, cattle and vinegar.
Our operating results are highly sensitive to commodity prices, including the spread between the corn, natural gas, cattle
and ethanol we purchase, and the ethanol, distillers grains, corn oil and vinegar 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 ethanol plants. No assurance can be given
that we will purchase corn and natural gas or sell ethanol, distillers grains, corn oil and cattle 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, corn oil and cattle 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 ethanol 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, drilling economics, 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.
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.
Cattle. The price and availability of feeder cattle 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 feeder cattle supply could impair our ability to produce consistent results. Furthermore, increases in
feeder cattle price or changes in our cost relative to our competitors may adversely affect our results of operations and
financial position. In addition, a significant disruption in cattle processing capacity could impair our ability to market cattle at
favorable prices which would affect our profitability.
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, corn oil and vinegar
production or buy some of the corn, natural gas, cattle or ethanol 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.
In January 2017, the Trump administration imposed a government-wide freeze on new and pending regulations, which
included the 2017 renewable volume obligations that was originally intended to go into effect on February 10, 2017. Our
operations could be adversely impacted by legislation that reduces the RFS II mandate. Similarly, should federal mandates
regarding oxygenated gasoline be repealed, the market for domestic ethanol could be adversely impacted.
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 could significantly affect the market price of RINs could in turn negatively impact the price of ethanol or cause
imported sugarcane ethanol to become more economical than domestic ethanol.
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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.
While we currently believe the new presidential administration will support the environmental laws that are currently in
place, 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.
Future demand for ethanol is uncertain and changes in public perception, consumer acceptance and overall consumer
demand for transportation fuel could affect demand.
While many trade groups, academics and government agencies support ethanol as a fuel additive that promotes a cleaner
environment, others claim ethanol 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.
There are limited markets for ethanol beyond the federal mandates. Further 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. Consumer demand for gasoline may be impacted by emerging transportation trends, such
as electric vehicles or ride sharing. Reduced demand for ethanol may depress the value of our products, erode our margins,
and reduce our ability to generate revenue or operate profitably.
Our business is directly affected by the supply and demand for ethanol and other fuels in the markets served by our
assets. Miles traveled typically increases during the spring and summer months related to vacation travel, followed closely
behind the fall season due to holiday travel. Reduced demand for ethanol may erode our margins and reduce our ability to
generate revenue and operate profitably.
We may fail to realize the anticipated benefits of mergers, acquisitions, joint ventures or partnerships.
We have increased the size and diversity 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:
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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;
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.
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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.
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:
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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.
Increased federal support of cellulosic ethanol could result in increased competition to corn-based ethanol producers.
Legislation, including the American Recovery and Reinvestment Act of 2009 and EISA, provides numerous funding
opportunities supporting 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 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. While these have had limited success to date, as research and
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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 and energy services 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, particularly following a change in
the presidential administration. 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.
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.
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 acquired from third-parties. Should it be discovered the RINs associated with the ethanol we purchased
are 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, based on EPA penalties assessed
on RINS violations in the past few years, in the event of a violation, the EPA could assess penalties, 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. While some of our plants received
efficient producer status and no longer rely on grandfathered status, for those still reliant upon it, 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
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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.
Increased ethanol industry penetration by oil and other multinational companies could impact our margins.
We operate in a very competitive environment and compete with other domestic ethanol producers in a relatively
fragmented industry. The top five producers account for approximately 45% of the domestic production capacity with
production capacity ranging from 800 mmgy to 1,800 mmgy. The remaining ethanol producers consist 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 oil
refiners have acquired ethanol production plants. 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. 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, trade policies and compliance matters, may have an
adverse effect on our results of operations.
Government actions abroad can have a significant impact on our business. In 2016, we exported 13% of our ethanol
production and 10% of our distillers grains production. In 2013, the EU imposed a five-year tariff of $83.33 per metric ton on
U.S. ethanol to discourage foreign competition. China raised its 5% tariff on U.S. and Brazil fuel ethanol to 30%, effective
January 1, 2017.
In 2013, China began rejecting U.S. dried distillers grains because it contained genetically modified corn not yet
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approved for import. In early 2015, China lifted this ban and imported 6.3 million metric tons of U.S. distillers grains that
year. 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. In January of 2017, the Ministry of Commerce of China announced it increased anti-
dumping duties on U.S. distillers grains, ranging from 42.2% to 53.7%. According to the USDA, in 2016, approximately 31%
of distillers grain produced in the United States was exported, down from 34% in 2015. With reduced exports, the value of
our distillers grains may be affected, which could have a negative impact on our profitability.
Our agribusiness operations are subject to significant government regulations.
Our agribusiness operations are regulated by various government entities 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.
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 are 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. 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:
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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;
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
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risks relating to environmental hazards.
Owning and operating a vinegar production business involves numerous external factors that are outside of our control.
Our Fleischmann’s Vinegar operations involve numerous risks that could lead to increased costs or decreased demand
for products, which could have an adverse effect on our results of operations and financial condition, including:
• we use many different products in the production of vinegar, which are subject to price volatility caused by market
fluctuations, and potentially volatile supply and demand. Commodity price increases may increase raw material,
packaging, energy and operating costs. We may not be able to increase our product prices to fully offset these
increased costs, which may result in reduced sales volume, margins and profitability;
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changes in our relationships with significant customers or suppliers could adversely affect us, as the loss of a
significant customer or a material reduction in sales to a significant customer could materially and adversely affect
our product sales and results of operations;
our ability to manufacture, transport and sell our products is critical to our success and any disruptions in our supply
chain could have an adverse impact on our business and results of operations;
the food ingredients industry is highly competitive and further consolidation in the industry would likely increase
competition;
our customers have continued to consolidate, resulting in fewer customers upon which we can rely for
business. These consolidations have produced large sophisticated customers with increased buying power and
negotiating strength, which could have a negative impact on profits;
consumer preferences evolve over time and the success of our products depends on our ability to identify the tastes
of consumers and work with manufacturers to develop products that appeal to those preferences;
food ingredients used in products for human consumption may be subject to product liability claims and product
recalls which could negatively impact our profitability;
our facilities and products are subject to many laws and regulations administered by various federal, state and local
government agencies related to processing, packaging, storage, distribution, quality and safety of food products, the
health and safety of our employees and the protection of the environment. Failure to comply with applicable laws
and regulations could subject us to lawsuits, administrative penalties and civil remedies including fines, injunctions
and recalls of our products; and
• A portion of our workforce is unionized and we may face labor disruptions that may interfere with our operations.
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, products 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.
Replacement technologies could make corn-based ethanol or our process technology obsolete.
Ethanol is used primarily as an octane 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.
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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.
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.
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, distillers grains, corn oil, cattle and vinegar to
our customers. 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.
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. A
direct attack on our ethanol production plants, or our partnership’s 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 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 security measures to protect us against cyber-based attacks and
disaster recovery plans for our critical systems. 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.
23
We may not be able to hire and retain qualified personnel to operate our facilities.
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. If we are unable to hire and retain productive,
skilled personnel, we may not be able to maximize production, optimize plant operations or execute our business strategy.
We have had a history of operating losses and could incur future operating losses.
In the last five years, we incurred operating losses during certain quarters 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.
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 our convertible senior notes 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
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 convertible senior notes, default on any loan in excess of $10.0 million could result in the notes being
declared due and payable, which would have a material and adverse effect on our ability to operate.
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 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 and growth plans 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
24
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.
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, cattle packers, food companies 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, which could negatively impact our profitability.
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.
Certain of our ethanol production plants, fuel terminals and vinegar operations are located within recognized seismic and
flood zones. We modified our facilities to comply with regional structural requirements for those regions of the country and
obtained additional insurance coverage specific to earthquake and flood risks for the applicable plants and fuel terminals. We
cannot provide assurance that these facilities would remain in operation should a seismic or flood event occur, which would
adversely affect our operations.
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.
Risks Related to the 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
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
25
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, which could negatively impact our liquidity.
A majority of the executive officers and directors of the partnership are also officers of our company, which could result in
conflicts of interest.
We indirectly own and control the partnership and appoint all of its officers and directors. A majority of the executive
officers and directors of the partnership are also officers or directors of our company. 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, which could
adversely affect our profitability.
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:
26
•
•
•
•
•
•
•
•
•
•
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;
disruptions in our operations;
changes 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 members have 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
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
27
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 the property owned and leased at our locations is sufficient to accommodate our current needs, as well as
potential expansion.
A substantial portion 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 54,000 square feet of office space at 1811 Aksarben Drive in Omaha, Nebraska for our
corporate headquarters, which houses our corporate administrative functions and commodity trading operations.
Ethanol Production Segment
We own approximately 2,800 acres of land and lease approximately 78 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 1.5 billion gallons of ethanol per year.
Agribusiness and Energy Services Segment
We own approximately 63 acres of land at our five grain elevators. As detailed in our discussion in Item 1 – Business,
our agribusiness and energy services segment facilities include five grain elevators with combined grain storage capacity of
approximately 11.6 million bushels, and grain storage capacity at our ethanol plants of approximately 48.7 million bushels.
Our marketing operations are conducted primarily at our corporate office, in Omaha, Nebraska.
Food and Food Ingredients Segment
We own approximately 2,590 acres of land at our cattle feedlot operation. We also own approximately 64 acres of land
and lease approximately three acres of land at our vinegar operation. We also lease office space for our vinegar operation in
Cerritos, California and Quebec, Canada. As detailed in our discussion of the food and food ingredients segment in Item 1 –
Business, our cattle feedlot operation has the capacity to support 73,000 head of cattle and 2.8 million bushels of grain
storage capacity, and our vinegar operation has seven production facilities and four distribution warehouses.
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 and owns approximately 54 acres and
leases approximately two acres where its storage facilities are located at our ethanol production facilities.
Item 3. Legal Proceedings.
We are currently involved in litigation that has occurred in 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.
28
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our common stock trades under the symbol “GPRE” on Nasdaq. The following table lists the common stock’s highest
and lowest price and quarterly cash dividends per share for the periods indicated:
Year Ended December 31, 2016
Three months ended December 31, 2016 (1)
Three months ended September 30, 2016
Three months ended June 30, 2016
Three months ended March 31, 2016
Year Ended December 31, 2015
Three months ended December 31, 2015
Three months ended September 30, 2015
Three months ended June 30, 2015
Three months ended March 31, 2015
$
$
High
Low
$
29.85
26.82
20.86
23.26
22.40
19.73
14.46
12.39
High
Low
$
24.42
28.16
34.05
30.20
18.52
17.13
26.60
20.31
$
$
Quarterly
Cash Dividend
Per Share
0.12
0.12
0.12
0.12
Quarterly
Cash Dividend
Per Share
0.12
0.12
0.08
0.08
(1) The closing price of our common stock on December 30, 2016 was $27.85.
Holders of Record
We had 2,160 holders of record of our common stock, not including beneficial holders whose shares are held in names
other than their own, on February 14, 2017. This figure does not include approximately 35.0 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. On February 8, 2017, our board of directors declared a quarterly cash dividend of $0.12
per share. The dividend is payable on March 17, 2017, to shareholders of record at the close of business on February 24,
2017. 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 2016.
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 2016. Approximately $90.0 million of shares are remaining to be repurchased under the program.
Recent Sales of Unregistered Securities
None.
29
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 and the Nasdaq Clean Edge
Green Energy Index (CELS) for each of the five years ended December 31, 2016. The graph assumes a $100 investment in
our common stock and each index at December 31, 2011, and that all dividends were reinvested.
Green Plains Inc.
S&P Smallcap 600
Nasdaq Clean Edge Green Energy
$
12/11
100.00 $
100.00
100.00
12/12
81.05 $
116.33
107.45
12/13
199.52 $
164.38
212.14
12/14
256.94 $
173.84
223.41
12/15
241.72 $
170.41
241.05
12/16
301.17
215.67
227.07
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.
30
Item 6. Selected Financial Data.
The statement of income data for the years ended December 31, 2016, 2015 and 2014 and the balance sheet data as of
December 31, 2016 and 2015 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 income data for the years ended December 31, 2013 and 2012 and the balance sheet data as of
December 31, 2014, 2013 and 2012 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.
2016
Year Ended December 31,
2014
2013
2015
2012
Statement of Income 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: (Non-GAAP)
$ 3,410,881 $ 2,965,589 $ 3,235,611 $ 3,041,011 $ 3,476,870
3,459,118
2,949,337
47,133
-
64,885
286,274
39,729
35,844
11,763
159,504
11,779
159,504
2,904,512
-
61,077
39,612
15,228
7,064
2,933,160
-
107,851
35,570
43,391
43,391
3,319,193
-
91,688
53,337
30,491
10,663
$
$
0.28 $
0.28 $
0.19 $
0.18 $
4.37 $
3.96 $
1.44 $
1.26 $
0.39
0.39
EBITDA (unaudited and in thousands)
$
174,428 $
127,781 $
352,477 $
156,492 ` $
115,505
2016
2015
December 31,
2014
2013
2012
Balance Sheet Data (in thousands):
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Stockholders' equity
$
304,211 $
1,000,576
2,506,492
594,946
782,610
1,527,301
979,191
384,867 $
912,577
1,917,920
438,669
432,139
959,011
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
(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.
31
The following table reconciles net income to EBITDA for the periods indicated (in thousands):
2016
Year Ended December 31,
2014
2013
2015
2012
Net income
Interest expense
Income tax expense
Depreciation and amortization
EBITDA (unaudited)
$
$
30,491 $
51,851
7,860
84,226
174,428 $
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
The following discussion and analysis includes information management believes is relevant to understand and assess
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, founded in June 2004 as an ethanol producer. We have grown through acquisitions
of operationally efficient ethanol production facilities and adjacent commodity processing businesses, and are focused on
generating stable operating margins through our diversified business segments and risk management strategy. We own and
operate assets throughout the ethanol value chain: upstream, with grain handling and storage; through our ethanol production
facilities; and downstream, with marketing and distribution services, to mitigate commodity price volatility, which
differentiates us from companies focused only on ethanol production. Our other businesses leverage our supply chain,
production platform and expertise.
Our profitability is highly dependent on commodity prices, particularly for ethanol, distillers grains, corn oil, corn,
natural gas and cattle. Since market price fluctuations of these commodities are not always correlated, our operations may be
unprofitable at times. We use a variety of risk management tools and hedging strategies to monitor price risk exposure at
each of our plants and lock in favorable margins or reduce production when margins are compressed. Our adjacent businesses
integrate complementary but more predictable revenue streams that 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 increased to an estimated 15.3 billion gallons in 2016 from 14.8 billion gallons in 2015,
according to the EIA. Production capacity grew predominantly through plant optimization and expansions versus new
construction projects. There were 213 ethanol plants with total production capacity of 15.8 bgy as of December 1, 2016,
compared with 216 ethanol plants with production capacity of 15.7 bgy one year ago according to the Renewable Fuels
Association.
Ethanol consumption is correlated with consumer gasoline demand, which reached a ten-year high in 2016 in the U.S. of
143.2 billion gallons. Ethanol accounted for approximately 10% of the U.S. gasoline market in 2016, or 14.2 billion gallons,
up from 13.9 billion gallons in 2015. Ethanol is used by oil refiners, integrated oil companies and gasoline retailers to reduce
vehicle emissions and increase octane levels. Despite trading at a premium to gasoline for most of 2016, 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.
Increased automaker approval, consumer acceptance and availability of higher ethanol blends such as E15 also helped to
support domestic demand. Automakers have explicitly approved the use of E15 in more than 70% of 2016 models sold in the
32
United States. In 2014, a broad U.S. ethanol industry group formed Prime the Pump, a nonprofit organization, to invest
private funds into retail gasoline infrastructure to increase the number of retail outlets offering higher blends of ethanol. In
2015, the USDA provided funding through the Biofuel Infrastructure Partnership, adding to the private funds provided by
ethanol industry participants. There were 627 retail fuel stations in 28 states offering E15 to consumers as of January 24,
2017.
Federal mandates supporting the use of renewable fuels are also a significant driver of ethanol demand in the United
States. Ethanol policies are influenced by environmental concerns and an interest in reducing the country’s dependence on
foreign oil. When RFS II was established in October 2010, the required volume of conventional renewable fuel to be blended
with gasoline was to increase each year until it reached 15.0 billion gallons in 2015, which left the EPA to address existing
limitations in both supply (ethanol production) and demand (usage of ethanol blends in older vehicles). On November 23,
2016, the EPA announced the final 2017 renewable volume obligations for conventional ethanol, which met the 15.0-billion-
gallon congressional target for the first time, up from 14.5 billion gallons in 2016 and 14.05 billion gallons in 2015. The 2017
renewable volume obligations are pending final review by the incoming presidential administration.
Global Ethanol Supply and Demand
The United States and Brazil account for more than 80% of all ethanol production worldwide, according to the USDA.
Global production increased to 25.7 billion gallons in 2015 from approximately 24.6 billion gallons in 2014, according to the
Renewable Fuels Association. The United States has been the world’s largest producer and consumer of ethanol since 2010.
Approximately 7% of the ethanol produced domestically is marketed worldwide and competes globally with other sources of
octane and oxygenates.
Demand for cleaner, more sustainable transportation fuel is growing worldwide. Ethanol has become a crucial
component of the global fuel supply as an economical oxygenate and source of octanes. According to the Global Renewable
Fuels Alliance, 35 countries, including the EU which is regulated by a single policy with specific national targets for each
country, have mandates or planned targets in place for blending ethanol and biodiesel with transportation fuels to reduce
harmful emissions. As countries establish mandates or raise their required blend percentages, new export opportunities for
U.S. producers are likely to emerge.
Government actions abroad can have a significant impact on the ethanol industry. For example, China indicated its
intention to raise its 5% tariff on U.S. and Brazil fuel ethanol to 30%, effective January 1, 2017. Although the ethanol export
markets are affected by competition from other ethanol exporters, particularly Brazil, and in spite of the actions by China, we
believe exports will remain active in 2017.
Overall, the U.S. ethanol industry is producing at levels to meet current domestic and export demand. According to the
EIA, in 2016, U.S. net exports were approximately 1.0 billion gallons. Brazil and Canada remained the two largest export
destinations for U.S. ethanol, which accounted for 26% and 25%, respectively, of U.S. ethanol exports. China, India and the
Philippines accounted for 17%, 8% and 5%, respectively, of U.S. ethanol exports.
Co-Product Supply and Demand
According to the USDA, the United States produced approximately 48 million tons of distillers grains resulting from
ethanol production in 2016, of which 11.5 million tons were exported. Approximately 70% of the volume went to the
following six countries, China, Mexico, Vietnam, South Korea, Turkey and Thailand, which accounted for 21%, 17% 10%,
8%, 7% and 7% of domestic exports, respectively.
Legislation and Regulation
In the United States, the federal government mandates the use of renewable fuels under RFS II, which has been a driving
factor in the growth of domestic ethanol usage. 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. In November 2016, the EPA announced
the final 2017 renewable volume obligations for conventional ethanol of 15.0 billion gallons.
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. In November 2016, the EPA also proposed denying a petition to change the point of obligation under RFS II to the
parties that own the gasoline before it is sold. In December 2016, the EPA extended the comment period to February 2017.
33
The point of obligation does not directly impact ethanol producers; however, moving the point of obligation could indirectly
affect ethanol producers.
In January 2017, the Trump administration imposed a government-wide freeze on new and pending regulations, which
included the 2017 renewable volume obligations that was originally intended to go into effect on February 10, 2017.
Regulatory freezes are a common practice during a change in administration and we believe the current administration will
continue to be supportive of ethanol in accordance with the current laws.
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. Another important factor is a waiver in the Clean Air Act, known as the
“One-Pound Waiver,” which allows E10 blends during the summer months, even though it exceeds the Reid vapor pressure
limitation of 9 pounds per square inch. The One-Pound Waiver does not apply to E15, even though it has similar physical
properties to E10. Industry groups are focused on securing the One-Pound Waiver for E15.
The U.S. ethanol industry relies heavily on tank cars to deliver its product to market. The company leases approximately
3,300 tank cars, including 3,100 leased by our partnership to transport ethanol. On May 1, 2015, the DOT finalized the
Enhanced Tank Car Standard and Operational Controls for High-Hazard and Flammable Trains, or DOT specification 117,
which established a schedule to retrofit or replace older tank cars that carry crude oil and ethanol, braking standards intended
to reduce the severity of accidents and new operational protocols. The final rule may increase our lease costs for railcars over
the long term. Additionally, existing railcars may be out of service for a period of time while upgrades are made, tightening
supply in an industry that is highly dependent on railcars to transport product. We intend to strategically manage our leased
railcar fleet to comply with the new regulations. Currently, all of our railcar leases expire prior to the retrofit deadline of May
1, 2023.
In September 2015, the FDA issued rules for Current Good Manufacturing Practice, Hazard Analysis and Risk-Based
Preventative Controls for food for animals in response to FSMA. The rules require FDA-registered food facilities to address
safety concerns for sourcing, manufacturing and shipping food products and food for animals 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. We believe we have taken
sufficient measures to comply with these regulations.
On January 1, 2017, all medically important antimicrobials intended for use in animal feed that were once available over-
the-counter became veterinary feed directive drugs, requiring written orders from a licensed veterinarian to purchase and use
on or in livestock feed under the October 2015 revised Veterinary Feed Directive rule. Our cattle feedlot operation obtained
all necessary prescriptions from a licensed veterinarian to use certain veterinary feed directive drugs, as appropriate.
On January 18, 2017, Valero Energy Corporation filed an action against the EPA, seeking to compel the EPA to perform
certain non-discretionary duties required by the RFS program under the Clean Air Act. Within the filed action, Valero claims
the EPA has failed to perform these duties, namely periodic reviews of the feasibility of achieving compliance with the
requirements and the impact of the requirements on each individual and entity regulated under the program, i.e, point of
obligation, since 2010. Valero has requested an injunction, which if granted would require the EPA to promptly conduct
rulemaking to ensure the requirements of the program are met.
Variability of Commodity Prices
Our business is highly sensitive to commodity price fluctuations, particularly for corn, ethanol, corn oil, distillers grains,
natural gas and cattle, 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.
During periods of commodity price variability or compressed margins, we may reduce or cease operations at certain
ethanol plants. Slowing down production increases the ethanol yield per bushel of corn, optimizing cash flow in lower margin
environments. In 2016, our ethanol facilities ran at approximately 90% of our daily average capacity, largely due to the low
margin environment during the first half of the year driven by historically low crude oil prices resulting from record world
supply.
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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.
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 products including agricultural commodities, cattle and vinegar, are recognized when title of product and risk of
loss are transferred to the customer, which depends on the 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
prices. 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.
Carrying Value of Intangible Assets
Our intangible assets consist of trademarks, customer relationships, research and development technology and licenses
acquired through acquisitions. These assets were capitalized at their fair value at the date of the acquisition and are being
amortized over their estimated useful lives.
35
Impairment of Long-Lived Assets and Goodwill
Our long-lived assets consist of property and equipment and intangible assets. 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. There were no material impairment charges recorded for the
periods reported.
Our goodwill is related to certain acquisitions within our ethanol production, food and food ingredient and partnership
segments. We review goodwill at the segment 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
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,
natural gas and cattle 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 and energy services 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
36
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.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements other than the operating leases, which are entered into during the
ordinary course of business and disclosed in the Contractual Obligations section below.
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 and energy services 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 grain and 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 food and food ingredients segment, the sale of cattle and vinegar are our primary sources of
revenue. 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 and energy services segment, purchases of ethanol, distillers grains, corn oil and grain are 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 our food and food ingredients segment, the cattle feedlot operation includes costs of cattle, feed and veterinary
supplies, direct labor and feedlot overhead, which 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 the
vinegar operation, cost of goods sold includes direct labor, materials and plant overhead costs. Direct labor includes
37
compensation and related benefits of non-management personnel involved in vinegar operations. Overhead consists primarily
of plant utilities and outbound freight charges. Food-grade ethanol is the most significant raw material cost.
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.
Results of Operations
Comparability
The following summarizes various events that affect the comparability of our operating results for the past three years:
• June 2014
• July 2015
• October 2015
• November 2015
• January 2016
• April 2016
• September 2016
• October 2016
Kismet, Kansas cattle feedlot business was acquired
Green Plains Partners completed its 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
Increased ownership of BioProcess Algae and began consolidating within our
consolidated financial statements
Madison, Illinois, Mount Vernon, Indiana, and York, Nebraska ethanol plants were
acquired and the partnership acquired certain storage assets of the these plants
Fleischmann’s Vinegar Company was acquired
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.
The year ended December 31, 2016, includes approximately nine months of consolidated operations of BioProcess Algae,
and approximately three months of operations at the Madison, Mount Vernon, and York ethanol plants and Fleischmann’s
Vinegar Company.
Segment Results
As a result of acquisitions during the year, we implemented segment organizational changes during the fourth quarter of
2016, whereby 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 and energy services,
which includes grain handling and storage and marketing and merchant trading for company-produced and third-party
ethanol, distillers grains, corn oil, natural gas and other commodities, (3) food and food ingredients, which includes the
vinegar operations and cattle feedlot operations and (4) partnership, which includes fuel storage and transportation services.
Prior periods have been reclassified to conform to the revised segment presentation.
Under GAAP, when transferring assets between entities under common control, 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. Effective January 1, 2016, the partnership acquired the storage and transportation assets of the
Hereford and Hopewell production facilities in a transfer between entities under common control and entered into
amendments to the related commercial agreements with Green Plains Trade. The transferred assets and liabilities are
38
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
agribusiness and energy services 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 the ethanol storage and railcar assets in the partnership segment prior to their respective
transfers to the partnership, when the related commercial agreements with Green Plains Trade became effective.
Corporate activities incudes selling, general and administrative expenses, consisting primarily of 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
agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers
grains and corn oil of our ethanol production segment. Our partnership segment provides fuel storage and transportation
services for our agribusiness and energy services segment. These intersegment activities are treated like third-party
transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these
transactions affect segment performance; however, they do not impact our consolidated results since the revenues and
corresponding costs are eliminated.
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 and energy services:
Revenues from external customers (1)
Intersegment revenues
Total segment revenues
Food and food ingredients:
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
2016
Year Ended December 31,
2015
2014
$
$
2,409,102
-
2,409,102
$
2,063,172
-
2,063,172
2,590,428
-
2,590,428
675,446
34,461
709,907
318,031
150
318,181
8,302
95,470
103,772
3,540,962
(130,081)
3,410,881
$
674,719
24,114
698,833
219,310
75
219,385
8,388
42,549
50,937
3,032,327
(66,738)
2,965,589
$
607,323
24,535
631,858
29,376
-
29,376
8,484
4,359
12,843
3,264,505
(28,894)
3,235,611
$
(1) Revenues from external customers include realized gains and losses from derivative financial instruments.
39
Cost of goods sold:
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Intersegment eliminations
Operating income (loss):
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Intersegment eliminations
Corporate activities
2016
Year Ended December 31,
2015
2014
2,280,906
650,538
294,396
-
(129,761)
3,096,079
$
$
1,939,824
639,470
216,661
-
(66,588)
2,729,367
$
$
2,230,141
555,200
26,538
-
(28,834)
2,783,045
2016
Year Ended December 31,
2015
2014
28,125
34,039
16,436
60,903
(170)
(47,645)
91,688
$
$
43,266
37,253
(952)
12,990
-
(31,480)
61,077
$
$
285,579
52,176
1,200
(19,975)
-
(32,706)
286,274
$
$
$
$
Total assets by segment are as follows (in thousands):
Total assets (1):
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Corporate assets
Intersegment eliminations
Year Ended December 31,
2016
2015
$
$
1,206,155
579,977
406,429
74,999
257,652
(18,720)
2,506,492
$
$
1,004,342
418,168
110,775
81,430
314,068
(10,863)
1,917,920
(1) Asset balances by segment exclude intercompany payable and receivable balances.
Year Ended December 31, 2016 Compared with the Year Ended December 31, 2015
Consolidated Results
Consolidated revenues increased by $445.3 million in 2016 compared with 2015. Revenues were impacted by an
increase in ethanol volumes sold, along with an increase in volumes of cattle sold, plus the addition of Fleischmann’s
Vinegar during the fourth quarter. The increase in ethanol revenues was partially offset by a decrease in merchant trading
activity volumes and lower average realized prices for grain.
Operating income increased by $30.6 million in 2016 compared with 2015 primarily due to increased cattle margins,
partially offset by lower margins in ethanol production and an increase in corporate expenses. Interest expense increased by
$11.5 million compared with 2015 due to higher average debt balances outstanding and higher average borrowing costs.
Income tax expense increased by $1.6 million to $7.9 million in 2016 compared with 2015 due to higher pre-tax income.
The following discussion provides greater detail about our year-to-date segment performance.
40
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,
2016
2015
1,147,630
3,064
273,901
401,065
947,557
2,540
244,047
332,417
Revenues in the ethanol production segment increased by $345.9 million in 2016 compared with 2015 primarily due to
an increase in ethanol and corn oil volumes sold. The average price realized for ethanol was relatively unchanged in 2016
compared with 2015. The increased volumes produced was primarily due to increased production at our existing ethanol
plants and the acquisition of the Hereford, Hopewell, Madison, Mount Vernon, and York ethanol plants, which produced
approximately 185.3 mmg of ethanol and 26.0 million pounds of corn oil during the year ended December 31, 2016.
Cost of goods sold in the ethanol production segment increased by $341.1 million for 2016 compared with 2015 due to
higher production volumes. Operating income for the ethanol production segment decreased by $15.1 million for 2016
compared with the same period in 2015 as a result of the factors identified above, as well as additional general and
administrative expenses due to the additional ethanol plants acquired. Depreciation and amortization expense for the ethanol
production segment was $68.7 million for the year ended December 31, 2016, compared with $55.6 million during 2015.
Agribusiness and Energy Services Segment
Revenues in the agribusiness and energy services segment increased by $11.1 million and operating income decreased by
$3.2 million in 2016 compared with 2015. The increase in revenues was primarily due to an increase in ethanol and distillers
grain trading activity, partially offset by a decrease in grain trading activity volumes and lower average realized prices.
Operating income decreased primarily as a result of lower margins on merchant trading activity, partially offset by increased
intersegment marketing and corn origination fees.
Food and Food Ingredients Segment
Revenues in our food and food ingredients segment increased by $98.8 million in 2016 compared with 2015. The
increase in revenues was primarily due to an increase in cattle volumes sold as well as the acquisition of Fleischmann’s
Vinegar, partially offset by lower average realized cattle prices.
Operating income for the food and food ingredients segment increased by $17.4 million in 2016 compared with 2015,
primarily due to an increase in cattle margins, as well as the acquisition of Fleischmann’s Vinegar.
Partnership Segment
Revenues generated from the partnership’s storage and throughput agreement and rail transportation services agreement
with Green Plains Trade, executed in connection with the IPO and effective beginning July 1, 2015, were $89.1 million for
2016 compared with $36.9 million for 2015. Increased revenues were attributable to a full year of commercial operations in
2016, as well as higher throughput volumes due to acquired ethanol storage assets and higher railcar volumetric capacity
provided by the partnership to transport incremental production volumes. Revenues generated by trucking and terminal
services increased $0.7 million in 2016 compared with 2015, primarily due to increased trucking volumes with Green Plains
Trade and third parties.
Operating income for the partnership segment increased by approximately $47.9 million due to the increase in revenues
above, partially offset by an increase in operations and maintenance expenses of $4.6 million for 2016, compared with the
same period for 2015. The increase was primarily due to higher railcar lease expense as a result of an increased railcar fleet,
partially offset by rate reductions; higher wages as a result of an increased railcar fleet and plant acquisitions; and higher
41
general repairs and maintenance expense. General and administrative expenses increased $1.3 million in 2016 compared with
2015, primarily due to administrative costs incurred as a publicly traded entity.
Intersegment Eliminations
Intersegment eliminations of revenues increased by $63.3 million for 2016 compared with 2015, due to the increase in
transportation and storage fees paid to the partnership segment by the agribusiness and energy services segment of $52.2
million, as well as increased intersegment marketing and corn origination fees paid to the agribusiness and energy services
segment by the ethanol production segment. Intersegment eliminations of operating income remained relatively unchanged in
2016 compared with 2015.
Corporate Activities
Operating income was impacted by an increase in operating expenses for corporate activities of $16.2 million for 2016
compared with 2015, primarily due to an increase in personnel costs, an increase in transaction costs due to the acquisitions
of the Abengoa ethanol plants and Fleischmann’s Vinegar and the consolidation of BioProcess Algae in the corporate
activities’ segment.
Income Taxes
We recorded income tax expense of $7.9 million for 2016 compared with $6.2 million in 2015. The effective tax rate
(calculated as the ratio of income tax expense to income before income taxes) was approximately 20.5% for 2016 compared
with 29.1% for 2015. 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, as well as a change in estimate related to our filing positions in various
jurisdictions.
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 were impacted by a decrease
in ethanol, distillers grains, and other grains average realized prices, partially offset by increased merchant trading activity
volumes of grains and the acquisition of the cattle feedlot operation in June 2014.
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
343,892
Revenues in the ethanol production segment decreased by $527.3 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
42
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 $290.3 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
ethanol production segment decreased by $242.3 million for 2015 compared with the same period in 2014. Depreciation and
amortization expense for the ethanol production segment was $55.6 million for the year ended December 31, 2015, compared
with $53.5 million during 2014.
Agribusiness and Energy Services Segment
Revenues in the agribusiness and energy services segment increased by $67.0 million and operating income decreased by
$14.9 million in 2015 compared with 2014. Revenues were impacted by an increase in distillers grains, other grains and
natural gas revenues, partially offset by a decrease in ethanol revenues. Distillers grains, other grains, and natural gas
revenues increased as a result of increased volumes sold, partially offset by lower average realized prices. Ethanol revenues
decreased as a result of lower average realized prices, partially offset by an increase in volumes sold. Operating income
decreased primarily as a result of lower margins on merchant trading activity.
Food and Food Ingredients Segment
Revenues in our food and food ingredients segment increased by $190.0 million and operating income decreased by $2.2
million in 2015 compared with 2014. Revenues increased as a result of the cattle feedlot operation that was acquired during
the second quarter of 2014. Operating income decreased as a result of a decrease in cattle margins.
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 $33.0 million due to the increase in revenues
above, partially offset by an increase in operations and maintenance expenses of $3.2 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 increased by $37.8 million for 2015 compared with 2014, due to the transportation
and storage fees paid to the partnership segment by the agribusiness and energy services segment of $36.9 million as a result
of the IPO. There were no intersegment eliminations of operating income for 2015 or 2014.
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
43
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.
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 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, 2016, we had $304.2 million in cash and equivalents, excluding restricted cash, consisting of $189.0
million held at our parent company and the remainder at our subsidiaries. We also had $120.8 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,
2016, our subsidiaries had approximately $835.0 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.
Net cash provided by operating activities was $83.0 million in 2016 compared with $10.2 million in 2015. Operating
activities compared to the prior year were primarily affected by changes in working capital and higher adjustments for
deferred income tax expense in the comparable period of the prior year. Working capital increased for the twelve months
ended December 31, 2016, as an increase in accounts receivable, inventories, and derivative financial instruments were
partially offset by an increase in accounts payable and accrued liabilities. Net cash used by investing activities was $572.6
million in 2016, due primarily to the acquisitions of the Abengoa ethanol plants and Fleischmann’s Vinegar, along with
capital expenditures at our existing ethanol plants. Net cash provided by financing activities was $409.0 million in 2016 due
primarily to our issuance of $170 million of 4.125% convertible senior notes in August 2016 and a new $130 million term
loan and $5 million borrowed under a new $15 million revolving credit facility to partially fund the acquisition of
Fleischmann’s Vinegar. In addition, the partnership has made net borrowings of $129 million during the twelve months
ended December 31, 2016, primarily to finance the acquisitions of the storage and transportation assets of the Hereford and
Hopewell ethanol plants on January 1, 2016, and the Mount Vernon, Madison and York ethanol plants on September 23,
2016. Additionally, Green Plains Trade, Green Plains Cattle and Green Plains Grain use revolving credit facilities to finance
working capital requirements. We frequently draw on and repay these facilities, which results in significant cash movements
reflected on a gross basis within financing activities as proceeds from and payments on short-term borrowings.
We incurred capital expenditures of $56.4 million in 2016 for projects, including expansion projects of approximately
$16.0 million for ethanol production capacity, leasehold improvements for the new corporate headquarters and various other
maintenance projects. The current projected estimate for capital spending for 2017 is approximately $55.0 million, which is
subject to review prior to the initiation of any projects. The budget includes additional expenditures for expansion projects at
our operations, as well as expenditures for various other maintenance projects, and is expected to be financed with available
borrowings under our credit facilities and cash provided by operating activities.
Our business is highly sensitive to the price of commodities, particularly for corn, ethanol, distillers grains, corn oil,
natural gas and cattle. 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, 2016, we had $50.6 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 have paid a quarterly cash dividend since August 2013 and anticipate declaring a cash dividend in future quarters on
a regular basis. Future declarations of dividends, however, are subject to board approval and may be adjusted as our liquidity,
business needs or market conditions change. On February 8, 2017, our board of directors declared a quarterly cash dividend
of $0.12 per share. The dividend is payable on March 17, 2017, to shareholders of record at the close of business on February
24, 2017.
44
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 23, 2017, the board of directors of the general partner of the partnership declared a cash
distribution of $0.43 per unit on outstanding common and subordinated units. The distribution is payable on February 14,
2017, to unitholders of record at the close of business on February 3, 2017.
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 323,290 shares of common stock for
approximately $6.0 million during the second quarter of 2016. To date, we have repurchased 514,990 shares of common
stock for approximately $10.0 million under the program.
On August 25, 2016, the partnership filed a shelf registration statement on Form S-3 with the SEC, declared effective
September 2, 2016, registering an indeterminate number of debt and equity securities with a total offering price not to exceed
$500,000,250. The partnership also registered 13,513,500 common units, consisting of 4,389,642 common units and
9,123,858 common units that may be issued upon conversion of subordinated units, in each case, currently held by Green
Plains.
On December 22, 2016, we filed an automatically effective shelf registration statement on Form S-3 with the SEC,
registering an indeterminate number of shares of common stock, warrants and debt securities.
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.
We were in compliance with our debt covenants at December 31, 2016. 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.
Effective January 1, 2016, we adopted ASC 835-30, Interest - Imputation of Interest: Simplifying the Presentation of
Debt Issuance Costs, which resulted in the reclassification of approximately $11.4 million from other assets to long-term debt
within the balance sheet as of December 31, 2015. As of December 31, 2016, there was $16.9 million of debt issuance costs
recorded as a direct reduction of the carrying value of our long-term debt.
Ethanol Production Segment
Green Plains Processing has a $345 million senior secured credit facility. The term loan is secured by twelve of our
ethanol production facilities and matures in June of 2020. At December 31, 2016, the outstanding principal balance was
$301.1 million and our interest rate was 6.5%. Our scheduled principal payments are $0.9 million each quarter. Available
excess cash flow may be distributed to us after a quarterly excess cash flow payment is made to the lenders, subject to certain
limitations, as defined in the loan agreement.
45
We also have small equipment financing loans, capital leases on equipment or facilities, and other forms of debt
financing.
Agribusiness and Energy Services 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. The facility matures in July of 2019. 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. At December 31, 2016, the outstanding principal balance was $102.0 million
and our interest rate was 4.5%.
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. This facility can be
increased by up to $75.0 million with agent approval. At December 31, 2016, the outstanding principal balance was $125.7
million and our interest rate was 3.7%.
Food and Food Ingredients Segment
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. This facility can be
increased by up to $50.0 million with agent approval. At December 31, 2016, the outstanding principal balance was $63.5
million and our interest rate was 2.9%.
On October 3, 2016, through certain of our subsidiaries, we partially financed our acquisition of Fleischmann’s Vinegar
using borrowings under a new credit agreement with a group of lenders, consisting of a term loan and a revolving loan
commitment. We borrowed $130.0 million under the term loan. The term loan principal is scheduled to be repaid in
installments of $325,000 per quarter beginning December 31, 2016 through September 30, 2022, with a final balloon
payment of $122.2 million on October 3, 2022. The revolving loan commitment provides for principal borrowings of up to
$15 million through October 3, 2022. We initially borrowed $5.0 million under the revolving loan commitment. At
December 31, 2016, the outstanding principal balances were $129.7 million and $4.0 million on the term loan and revolving
loan, respectively, and our interest rate on each of the loans was 8.0%.
Partnership Segment
Green Plains Partners, through a wholly owned subsidiary, has a $155.0 million secured revolving credit facility to fund
working capital, acquisitions, distributions, capital expenditures and other general partnership purposes. This credit facility
was amended on September 16, 2016, increasing the revolving credit facility available from $100.0 million to $155.0 million.
The amended facility can be increased by up to $100.0 million without the consent of the lenders. The facility matures in July
of 2020. At December 31, 2016, the outstanding principal balance was $129.0 million on the facility and our interest rate was
3.4%.
Corporate Activities
In August 2016, we issued $170.0 million of 4.125% convertible senior notes due in 2022, or 4.125% notes, which are
senior, unsecured obligations with interest payable on March 1 and September 1 of each year. Prior to March 1, 2022, the
4.125% notes are not convertible unless certain conditions are satisfied. The initial conversion rate is 35.7143 shares of
common stock per $1,000 of principal which is equal to a conversion price of approximately $28.00 per share. The
conversion rate is subject to adjustment upon the occurrence of certain events, including when the quarterly cash dividend
exceeds $0.12 per share. We may settle the 4.125% notes in cash, common stock or a combination of cash and common
stock.
In September 2013, we issued $120.0 million of 3.25% convertible senior notes due in 2018, or 3.25% notes, which are
senior, unsecured obligations with interest payable on April 1 and October 1 of each year. Prior to April 1, 2018, the 3.25%
notes are not convertible unless certain conditions are satisfied. The conversion rate is subject to adjustment upon the
occurrence of certain events, including when the quarterly cash dividend exceeds $0.04 per share. The conversion rate was
recently adjusted as of December 31, 2016 to 49.4123 shares of common stock per $1,000 of principal, which is equal to a
conversion price of approximately $20.24 per share. We may settle the 3.25% notes in cash, common stock or a combination
of cash and common stock.
46
Contractual Obligations
Contractual obligations as of December 31, 2016 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)
Other
Purchase obligations
Payments Due By Period
Total
$ 1,174,160
215,935
115,257
8,678
Less than 1
year
$ 330,281
58,285
35,170
1,744
1-3 years
$ 132,408
87,797
42,950
1,621
3-5 years
$ 395,670
47,342
16,484
2,319
More than 5
years
$ 315,801
22,511
20,653
2,994
Forward grain purchase contracts (4)
Other commodity purchase contracts (5)
Other
Total contractual obligations
298,077
206,352
28,106
$ 2,046,565
287,506
206,352
9,880
$ 929,218
6,654
-
18,226
$ 289,656
2,000
-
-
$ 463,815
1,917
-
-
$ 363,876
(1)
(2)
Includes the current portion of long-term debt and excludes the effect of any debt discounts and issuance costs.
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 $4.6 million per year. At December 31, 2016, we had $1.1 billion in debt, $843.8 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 price risk, particularly for ethanol, distillers grains, corn oil, corn, natural
gas and cattle. 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 energy 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, corn oil and
cattle, 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
47
using a combination 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, 2016, revenues included net losses of $2.0 million and cost of
goods sold included net losses of $32.7 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, 2016, are as follows (in thousands):
Commodity
Ethanol
Corn
Distillers grains
Corn Oil
Natural gas
Estimated Total Volume
Requirements for the Next
12 Months (1)
1,470,000
524,000
4,100
340,000
41,700
Unit of Measure
Gallons
Bushels
Tons (2)
Pounds
MMBTU
Net Income Effect of
Approximate 10% Change
in Price
$
$
$
$
$
136,768
116,325
22,241
6,547
6,622
(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.
Agribusiness and Energy Services Segment
In the agribusiness and energy services 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 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. 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 income.
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 $537 thousand for grain at December 31, 2016. Our market risk
at that date, based on the estimated net income effect resulting from a hypothetical 10% change in price, was approximately
$33 thousand.
Food and Food Ingredients Segment
In the food and food ingredients 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
cattle, 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 purchase and sale contracts for 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
48
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 income.
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 $5.6 million for cattle at December 31, 2016. Our market risk at
that date, based on the estimated net income effect resulting from a hypothetical 10% change in price, was approximately
$0.4 million.
Item 8. Financial Statements and Supplementary Data.
The required consolidated financial statements and accompanying notes are listed in Part IV, Item 15.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures 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, 2016, 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, 2016, based on the
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. We completed the acquisition of three ethanol plants from Abengoa S.A. on September 23, 2016 and the
acquisition of SCI, the holding company of Fleischmann’s Vinegar Company Inc., on October 3, 2016 (collectively, the
acquired businesses), and management excluded from its assessment of the effectiveness of the company’s internal control
over financial reporting as of December 31, 2016, the acquired businesses’ internal control over financial reporting associated
with the acquired assets which represent approximately 22% of the company’s consolidated total assets and approximately
4% of the company’s consolidated total revenues as of and for the year ended December 31, 2016. Our audit of internal
control over financial reporting of the company also excluded an evaluation of the internal control over financial reporting of
the acquired businesses.
Based on this assessment, management concluded that our internal control over financial reporting was effective as of
December 31, 2016. 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, 2016, which is included in this report.
49
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 GAAP. During the three months ended December 31, 2016, we acquired
Fleischmann’s Vinegar, resulting in process changes and, therefore, changes in internal control over financial reporting. We
have not identified any other 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.
50
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, 2016, 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, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
The company completed the acquisition of three ethanol plants from Abengoa S.A. on September 23, 2016 and the acquisition
of SCI, the holding company of Fleischmann’s Vinegar Company Inc., on October 3, 2016 (collectively, the acquired
businesses), and management excluded from its assessment of the effectiveness of the company’s internal control over financial
reporting as of December 31, 2016, the acquired businesses’ internal control over financial reporting associated with the
acquired assets which represent approximately 22% of the company’s consolidated total assets and approximately 4% of the
company’s consolidated total revenues as of and for the year ended December 31, 2016. Our audit of internal control over
financial reporting of the company also excluded an evaluation of the internal control over financial reporting of the acquired
businesses.
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, 2016 and 2015, and the related consolidated statements of
income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2016, and our report dated February 22, 2017 expressed an unqualified opinion on those consolidated financial
statements.
Omaha, Nebraska
February 22, 2017
/s/ KPMG LLP
51
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Information in our Proxy Statement for the 2017 Annual Meeting of Stockholders (“Proxy Statement”) 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, chief financial officer and all other senior
financial officers. 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.
52
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, 2016 and 2015
Consolidated Statements of Income for the years-ended December 31, 2016, 2015 and 2014
Consolidated Statements of Comprehensive Income for the years-ended December 31, 2016, 2015 and 2014
Consolidated Statements of Stockholders’ Equity for the years-ended December 31, 2016, 2015 and 2014
Consolidated Statements of Cash Flows for the years-ended December 31, 2016, 2015 and 2014
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-36
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.
2.1(a)
2.1(b)
2.2
2.3(a)
2.3(b)
2.4(a)
Exhibit Index
Description of Exhibit
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)
Asset Purchase Agreement, dated June 12, 2016, by and among Green Plains Inc. and Abengoa
Bioenergy of Illinois, LLC and Abengoa Bioenergy of Indiana, LLC (Incorporated by reference to
Exhibit 2.1 to the company’s Current Report on Form 8-K dated June 13, 2016)
Amended and Restated Asset Purchase Agreement, dated August 25, 2016, by and among Green
Plains Inc. and Abengoa Bioenergy Company, LLC (Incorporated by reference to Exhibit 2.1 to the
company’s Current Report on Form 8-K dated September 1, 2016)
Asset Purchase Agreement, dated September 23, 2016, by and among Green Plains Inc., Green Plains
Madison LLC, Green Plains Mount Vernon LLC, Green Plains York LLC, Green Plains Holdings
LLC, Green Plains Partners LP, Green Plains Operating Company LLC, Green Plains Ethanol Storage
LLC and Green Plains Logistics LLC (Incorporated by reference to Exhibit 2.1 to the company’s
Current Report on Form 8-K dated September 26, 2016)
2.4(b)
Amended and Restated Asset Purchase Agreement, dated August 25, 2016, by and among Green
Plains Inc., Abengoa BioEnergy of Illinois, LLC and Abengoa BioEnergy of Indiana, LLC
53
2.5
3.1(a)
3.1(b)
3.1(c)
3.2
4.1
4.2
4.3
4.4
4.5
*10.1
*10.2
10.3
*10.4(a)
*10.4(b)
*10.5(a)
*10.5(b)
*10.5(c)
(Incorporated by reference to Exhibit 2.2 to the company’s Current Report on Form 8-K dated
September 26, 2016)
Stock Purchase Agreement, dated as of October 3, 2016, by and among Green Plains Inc., Green
Plains II LLC, SCI Ingredients Holdings, Inc., Stone Canyon Industries LLC and other selling
shareholders (Incorporated by reference to Exhibit 2.1 to the company’s Current Report on Form 8-K
dated October 3, 2016)
Second Amended and Restated Articles of Incorporation of the Company (Incorporated by reference
to Exhibit 3.1 of the company’s Current Report on Form 8-K filed October 15, 2008)
Articles of Amendment to Second Amended and Restated Articles of Incorporation of Green Plains
Renewable Energy, Inc. (Incorporated by reference to Exhibit 3.1 of the company’s Current Report on
Form 8-K filed May 9, 2011)
Second 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)
Indenture relating to the 4.125% Convertible Senior Notes due 2022, dated as of August 15, 2016,
between Green Plains Inc. and Wilmington 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 August 15, 2016)
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)
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)
54
*10.5(d)
*10.5(e)
*10.5(f)
10.6(a)
10.6(b)
10.6(c)
10.6(d)
10.6(e)
10.6(f)
10.6(g)
*10.7
*10.8
*10.9
*10.10
10.11(a)
10.11(b)
10.11(c)
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)
Umbrella Short-Term Incentive Plan (Incorporated by reference to Appendix A of the company’s
Proxy Statement filed April 3, 2014)
Director Compensation effective May 11, 2016 (Incorporated by reference to Exhibit 10.4 of the
company’s Quarterly Report on Form 10-Q filed August 3, 2016)
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)
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)
55
10.11(d)
10.11(e)
10.11(f)
10.11(g)
10.11(h)
10.11(i)
10.11(j)
10.11(k)
10.11(l)
*10.12
10.13(a)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green
Plains Grain Company TN LLC, Green Plains Essex Inc. and U.S. Bank National Association
(Incorporated by reference to Exhibit 10.4 of the company’s Current Report on Form 8-K filed
November 3, 2011)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green
Plains Grain Company TN LLC, Green Plains Essex Inc. and Farm Credit Bank of Texas
(Incorporated by reference to Exhibit 10.5 of the company’s Current Report on Form 8-K filed
November 3, 2011)
First Amendment to Credit Agreement dated January 6, 2012 by and among Green Plains Grain
Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc., BNP Paribas and the
Required Lenders (Incorporated by reference to Exhibit 10.26(k) of the company’s Annual Report on
Form 10-K filed February 17, 2012)
Second Amendment to Credit Agreement, dated October 26, 2012, by and among Green Plains Grain
Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex, Inc., BNP Paribas, as the
administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement
(Incorporated by reference to Exhibit 10.5 of the company’s Quarterly Report on Form 10-Q filed
November 1, 2012)
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)
Fifth Amendment to Credit Agreement, dated June 1, 2015, 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 10.5
of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
Sixth Amendment to Credit Agreement, dated January 5, 2016, 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 10.6
of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
Seventh Amendment to Credit Agreement, dated July 27, 2016, 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 10.7
of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
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)
10.13(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)
56
10.13(c)
10.13(d)
10.13(e)
10.13(f)
10.13(g)
10.13(h)
10.13(i)
10.13(j)
10.13(k)
10.13(l)
10.13(m)
10.13(n)
10.13(o)
10.13(p)
10.13(q)
10.13(r)
10.13(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)
57
10.13(t)
10.13(u)
10.13(v)
10.13(w)
10.13(x)
10.13(y)
10.13(z)
10.14(a)
10.14(b)
10.15
10.16(a)
10.16(b)
10.16(c)
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
(Incorporated by reference to Exhibit 10.22(b) to the company’s Annual Report on Form 10-K for the
year ended December 31, 2015)
Second Amendment to the Omnibus Agreement, dated September 23, 2016, by and among Green
Plains Inc., Green Plains Partners LP, Green Plains Holdings LLC and Green Plains Operating
Company LLC (Incorporated by reference to Exhibit 10.1 to the company’s Current Report on Form
8-K dated September 26, 2016)
58
10.17(a)
10.17(b)
10.17(c)
10.18(a)
10.18(b)
10.18(c)
10.18(d)
10.19(a)
10.19(b)
10.19(c)
10.19(d)
10.20
10.21
10.22(a)
10.22(b)
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 (Incorporated by reference to Exhibit
10.23(b) to the company’s Annual Report on Form 10-K for the year ended December 31, 2015)
Amendment No. 2 to Operational Services and Secondment Agreement, dated September 23, 2016,
between Green Plains Inc. and Green Plains Holdings LLC (Incorporated by reference to Exhibit 10.2
to the company’s Current Report on Form 8-K dated September 26, 2016)
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)
Amendment No. 1 to Rail Transportation Services Agreement, dated September 1, 2015, by and
between Green Plains Logistics LLC and Green Plains Trade Group LLC (Incorporated by reference
to Exhibit 10.1 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
Correction to Rail Transportation Services Agreement, dated May 12, 2016, by and between Green
Plains Logistics LLC and Green Plains Trade Group LLC (Incorporated by reference to Exhibit 10.3
of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
Amendment No. 2 to Rail Transportation Services Agreement, dated November 30, 2016
(Incorporated by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated
December 1, 2016)
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 (Incorporated by
reference to Exhibit 10.25(b) to the company’s Annual Report on Form 10-K for the year ended
December 31, 2015)
Clarifying Amendment to Ethanol Storage and Throughput Agreement, dated January 4, 2016, by and
between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (Incorporated by
reference to Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
Amendment No. 2 to Ethanol Storage and Throughput Agreement, dated September 23, 2016, by and
between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (Incorporated by
reference to Exhibit 10.3 to the company’s Current Report on Form 8-K dated September 26, 2016)
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 (Incorporated by reference to Exhibit 10.27 to the company’s Annual Report on Form 10-K for
the year ended December 31, 2015)
Credit Agreement, dated as of October 3, 2016, by and among Green Plains II LLC, Green Plains I
LLC (as borrower and guarantor) and Maranon Capital, L.P. (as agent for lenders). (Incorporated by
reference to Exhibit 10.1(a) to the company’s Current Report on Form 8-K dated October 3, 2016)
Term Notes, dated as of October 3, 2016, by and among Green Plains II LLC (as borrower),
Northwestern Mutual Life Insurance Company, Axa Equitable Life Insurance Company, Metropolitan
Life Insurance Company and MetLife Insurance Company USA (as lenders) and Maranon Capital,
L.P. (as agent for lenders). (Incorporated by reference to Exhibit 10.1(b) to the company’s Current
Report on Form 8-K dated October 3, 2016)
59
10.22(c)
10.22(d)
10.22(e)
10.22(f)
10.22(g)
10.22(h)
10.22(i)
10.22(j)
10.22(k)
10.22(l)
10.22(m)
10.22(n)
10.22(o)
21.1
23.1
31.1
31.2
32.1
Revolving Notes, dated as of October 3, 2016, by and among Green Plains II LLC (as borrower),
Northwestern Mutual Life Insurance Company, Metropolitan Life Insurance Company (as lenders)
and Maranon Capital, L.P. (as agent for lenders). (Incorporated by reference to Exhibit 10.1(c) to the
company’s Current Report on Form 8-K dated October 3, 2016)
Borrower Joinder to Credit Agreement and Notes, dated as of October 3, 2016, by and among SCI
Ingredients Holdings, Inc., FVC Intermediate Holdings, Inc., Fleischmann’s Vinegar Company, Inc.,
FVC Houston, Inc. (as new borrowers) and Maranon Capital, L.P. (as agent for lenders). (Incorporated
by reference to Exhibit 10.1(d) to the company’s Current Report on Form 8-K dated October 3, 2016)
Security Agreement, dated as of October 3, 2016, by and among Green Plains II LLC, Green Plains I
LLC (as borrowers and guarantor) and Maranon Capital, L.P. (as agent for lenders). (Incorporated by
reference to Exhibit 10.1(e) to the company’s Current Report on Form 8-K dated October 3, 2016)
Joinder Agreement to Security Agreement, dated as of October 3, 2016, by and among SCI
Ingredients Holdings, Inc., FVC Intermediate Holdings, Inc., Fleischmann’s Vinegar Company, Inc.,
FVC Houston, Inc. and Maranon Capital, L.P. (as agent for lenders). (Incorporated by reference to
Exhibit 10.1(f) to the company’s Current Report on Form 8-K dated October 3, 2016)
Pledge Agreement, dated as of October 3, 2016, by and among Green Plains II LLC, Green Plains I
LLC (as pledgors) and Maranon Capital, L.P. (as agent for lenders). (Incorporated by reference to
Exhibit 10.1(g) to the company’s Current Report on Form 8-K dated October 3, 2016)
Pledge Supplement, dated as of October 3, 2016, by and among Green Plains II LLC and each Pledgor
and Maranon Capital, L.P. (as agent for lenders). (Incorporated by reference to Exhibit 10.1(h) to the
company’s Current Report on Form 8-K dated October 3, 2016)
Joinder to Pledge Agreement, dated as of October 3, 2016, by and among SCI Ingredients Holdings,
Inc., FVC Intermediate Holdings, Inc., Fleischmann’s Vinegar Company, Inc., FVC Houston, Inc. (as
new pledgers) and Maranon Capital, L.P. (as agent for lenders). (Incorporated by reference to Exhibit
10.1(i) to the company’s Current Report on Form 8-K dated October 3, 2016)
Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing Statement by
Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of Maranon Capital, L.P.
(State of Alabama)
Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing by
Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of Maranon Capital, L.P.
(State of California)
Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing Statement by
Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of Maranon Capital, L.P.
(State of Illinois)
Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing by
Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of Maranon Capital, L.P.
(State of Maryland)
Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing by
Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of Maranon Capital, L.P.
(State of Missouri)
Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing Statement by
Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of Maranon Capital, L.P.
(State of New York)
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
60
32.2
101
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, 2016, formatted in Extensible Business Reporting Language (XBRL): (i)
the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (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
61
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 22, 2017 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
President and Chief Executive Officer
(Principal Executive Officer) and Director
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Date
February 22, 2017
February 22, 2017
/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/ Ejnar A. Knudsen III
Ejnar A. Knudsen III
/s/ Thomas L. Manuel
Thomas L. Manuel
/s/ Brian D. Peterson
Brian D. Peterson
/s/ Alain Treuer
Alain Treuer
Chairman of the Board
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
February 22, 2017
Director
Director
Director
Director
Director
Director
Director
Director
62
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, 2016 and 2015, and the related consolidated statements of income, comprehensive income, stockholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2016. 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, 2016 and 2015, and the results of their operations and their
cash flows for each of the years in the three year period ended December 31, 2016, 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, 2016, 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 22, 2017 expressed an unqualified opinion on the effectiveness of the company’s
internal control over financial reporting.
Omaha, Nebraska
February 22, 2017
/s/ KPMG LLP
F-1
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowances of $266 and $285, respectively
Income taxes receivable
Inventories
Prepaid expenses and other
Derivative financial instruments
Total current assets
Property and equipment, net
Goodwill
Other assets
Total assets
$
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued and other liabilities
Derivative financial instruments
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
Commitments and contingencies (Note 16)
Stockholders' equity
Common stock, $0.001 par value; 75,000,000 shares authorized; 46,079,108 and
45,281,571 shares issued, and 38,364,118 and 37,889,871 shares
outstanding, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, 7,714,990 and 7,391,700 shares, respectively
Total Green Plains stockholders' equity
Noncontrolling interests
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
December 31,
2016
2015
304,211
51,979
147,495
10,379
422,181
17,095
47,236
1,000,576
1,178,706
183,696
143,514
2,506,492
192,275
67,473
8,916
291,223
35,059
594,946
782,610
140,262
9,483
1,527,301
$
$
$
384,867
27,018
96,150
9,104
353,957
10,941
30,540
912,577
922,070
40,877
42,396
1,917,920
166,963
32,026
8,245
226,928
4,507
438,669
432,139
81,797
6,406
959,011
46
659,200
283,214
(4,137)
(75,816)
862,507
116,684
979,191
2,506,492
45
577,787
290,974
(1,165)
(69,811)
797,830
161,079
958,909
1,917,920
$
See accompanying notes to the consolidated financial statements.
F-2
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Year Ended December 31,
2015
2014
2016
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 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 - basic
Net income attributable to Green Plains - diluted
Weighted average shares outstanding:
Basic
Diluted
$ 3,402,579 $ 2,957,201 $ 3,227,127
8,484
3,235,611
8,388
2,965,589
8,302
3,410,881
3,096,079
34,211
104,677
84,226
3,319,193
91,688
2,729,367
29,601
79,594
65,950
2,904,512
61,077
2,783,045
26,424
77,729
62,139
2,949,337
286,274
1,541
(51,851)
(3,027)
(53,337)
38,351
7,860
30,491
19,828
10,663 $
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
0.28 $
0.28 $
0.19 $
0.18 $
4.37
3.96
38,318
38,573
37,947
39,028
36,467
40,730
$
$
$
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,
2015
2014
2016
Net income
Other comprehensive income (loss), net of tax:
$
30,491
$
15,228
$
159,504
Unrealized gains (losses) on derivatives arising during period, net of tax
(expense) benefit of $10,494, $(4,413), and $138,874, respectively
Reclassification of realized (gains) losses on derivatives, net of tax expense
(benefit) of $(8,830), $1,855, and $(139,754), respectively
Total other comprehensive income (loss), net of tax
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Green Plains
(18,744)
7,169
(160,810)
15,772
(2,972)
27,519
19,828
7,691
$
(3,014)
4,155
19,383
8,164
11,219
$
161,829
1,019
160,523
-
160,523
$
See accompanying notes to the consolidated financial statements.
F-4
Balance, December 31, 2013
Net income
Cash dividends declared
Other comp. loss before
reclassification
Amounts reclassified from
accum. other comp. loss
Other comp. income, net of tax
Stock-based compensation
Stock options exercised
Conversion of 5.75% Notes
Balance, December 31, 2014
Net income
Cash dividends and
distributions declared
Other comp. income before
reclassification
Amounts reclassified from
accum. other comp. income
Other comp. income, net of tax
Repurchase of common stock
Net proceeds from issuance of
common units - Green Plains
Partners LP
Stock-based compensation
Stock options exercised
Balance, December 31, 2015
Net income
Cash dividends and
distributions declared
Other comp. loss before
reclassification
Amounts reclassified from
accum. other comp. loss
Other comp. loss, net of tax
Transfer of assets to Green
Plains Partners LP
Consolidation of BioProcess
Algae
Investment in BioProcess
Algae
Repurchase of common stock
Issuance of 4.125%
convertible notes due 2022,
net of tax
Stock-based compensation
Stock options exercised
Balance, December 31, 2016
- $
-
-
-
545,358
159,504
(8,908)
-
-
1,019
5,729
4,404
90,343
797,449
15,228
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common
Additional
Stock
Paid-in
Shares Amount Capital
37,704 $
-
-
38 $
-
-
468,962 $
-
-
(in thousands)
Accum. Other
Comp.
Income
(Loss)
Retained
Earnings
Total
Green Plains
Non-
Total
Treasury Stock Stockholders' Control. Stockholders'
Shares Amount
Equity
Interests
Equity
148,505 $
159,504
(8,908)
(6,339) 7,200 $
-
-
-
-
(65,808) $
-
-
545,358 $
159,504
(8,908)
-
-
-
-
(160,810)
-
-
-
-
-
302
270
6,533
44,809
-
-
-
-
-
7
45
-
-
-
5,729
4,404
90,336
569,431
-
-
-
-
-
-
299,101
7,064
161,829
1,019
-
-
-
-
-
-
-
-
(5,320) 7,200
-
-
-
-
-
-
-
(65,808)
-
-
1,019
5,729
4,404
90,343
797,449
7,064
-
-
-
-
-
-
8,164
-
-
-
-
-
-
-
-
-
-
-
(15,191)
-
-
(15,191)
(4,604)
(19,795)
-
-
-
-
-
-
-
-
7,169
-
-
(3,014)
4,155
-
-
-
192
-
-
(4,003)
-
4,155
(4,003)
-
-
-
-
-
-
4,155
(4,003)
-
-
-
432
41
45,282
-
-
-
-
45
-
-
7,590
766
577,787
-
-
-
-
290,974
10,663
-
-
-
-
-
-
(1,165) 7,392
-
-
-
-
-
(69,811)
-
-
7,590
766
797,830
10,663
157,452
67
-
161,079
19,828
157,452
7,657
766
958,909
30,491
-
(18,423)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,390
-
-
-
-
928
-
-
-
-
-
-
-
-
(18,744)
15,772
(2,972)
-
-
-
-
-
-
-
-
-
-
-
(18,423)
(18,855)
(37,278)
-
-
-
-
-
-
-
(2,972)
-
-
-
-
-
(2,972)
47,390
(47,390)
-
-
2,807
2,807
-
323
-
(6,005)
928
(6,005)
(928)
-
-
(6,005)
-
647
150
46,079 $
-
1
-
46 $
24,492
6,846
1,757
659,200 $
-
-
-
283,214 $
-
-
-
-
-
-
(4,137) 7,715 $
-
-
-
(75,816) $
24,492
6,847
1,757
-
143
-
862,507 $ 116,684 $
24,492
6,990
1,757
979,191
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:
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,
2015
2014
2016
$
30,491 $
15,228 $
159,504
84,226
11,488
-
4,910
7,285
3,055
-
(36,888)
(42,012)
(20,581)
(4,092)
49,077
(1,887)
(2,085)
82,987
(58,171)
(508,143)
58
(6,342)
(572,598)
524,000
(106,803)
4,130,946
(4,066,968)
-
(6,005)
(37,278)
(18,641)
(12,053)
1,757
408,955
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
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
(80,656)
384,867
304,211 $
(40,643)
425,510
384,867 $
153,483
272,027
425,510
$
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, net of cash
Less: liabilities assumed
Less: allocation of noncontrolling interest in
consolidation of BioProcess Algae
Net assets acquired
Common stock issued for conversion of 5.75% Notes
Year Ended December 31,
2015
2014
2016
$
$
$
$
$
4,692 $
38,245 $
43,833 $
32,753 $
61,817
34,756
568,383 $
(57,433)
120,910 $
(4,114)
25,611
(1,711)
(2,807)
508,143 $
-
116,796 $
-
23,900
- $
- $
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 to the current year presentation. These reclassifications did not
affect total revenues, costs and expenses, net income or stockholders’ equity.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the
reporting period. The company bases its estimates on historical experience and assumptions that it believes are proper and
reasonable under the circumstances and regularly evaluates the appropriateness of its estimates and assumptions. Actual
results could differ from those estimates. Key accounting policies, including but not limited to those relating to revenue
recognition, depreciation of property and equipment, impairment of long-lived assets and goodwill, derivative financial
instruments, and accounting for income taxes, are impacted significantly by judgments, assumptions and estimates used in
the preparation of the consolidated financial statements.
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 and energy services, which includes grain handling and storage and marketing
and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other
commodities, (3) food and food ingredients, which includes vinegar production and cattle feedlot operations, and (4)
partnership, which includes fuel storage and transportation services.
Ethanol Production Segment
Green Plains is North America’s second largest consolidated owner of ethanol plants. The company operates 17 ethanol
plants in nine 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 524 million bushels of corn and produce approximately
1.5 billion gallons of ethanol, 4.1 million tons of distillers grains and 340 million pounds of industrial grade corn oil annually.
Agribusiness and Energy Services Segment
The company owns and operates grain handling and storage assets through its agribusiness and energy services segment,
which has grain storage capacity of approximately 60.3 million bushels, with 48.7 million bushels of storage capacity at the
company’s ethanol plants and 11.6 million bushels of total storage capacity at its five separate grain elevators. The
company’s agribusiness operations provide synergies with the ethanol production segment as it supplies a portion of the
feedstock needed to produce ethanol. 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.
F-8
Food and Food Ingredients Segment
The company owns a cattle feedlot with the capacity to support 73,000 head of cattle and grain storage capacity of
approximately 2.8 million bushels. The company also owns a vinegar operation, which is one of the world’s largest producers
of food-grade industrial vinegar and includes seven production facilities and four distribution warehouses.
Partnership Segment
The company’s partnership segment 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
December 31, 2016, the partnership owns (i) 39 ethanol storage facilities located at or near the company’s 17 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 approximately 3,100 railcars which is utilized 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
Cash and cash equivalents includes bank deposits, as well as, short-term, highly liquid investments with original
maturities of three months or less. The company also has restricted cash, which can only be used for the funding of letters of
credit or 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, natural gas and other commodities by the company’s marketing business are
recognized when title of product and risk of loss are transferred to an external customer. Revenues related to marketing for
third parties are presented on a gross basis when the company takes title of the product and assumes risk of loss. Unearned
revenue is recorded for goods in transit when the company has received payment but the title has not yet been transferred to
the customer. Revenues for receiving, storing, transferring and transporting ethanol and other fuels are recognized when the
product is delivered to the customer.
The company routinely enters into fixed-price, physical-delivery energy commodity purchase and sale agreements. At
times, the company settles these transactions by transferring its obligations to other counterparties rather than delivering the
physical commodity. These transactions are reported net as a component of revenues. Revenues also include realized gains
and losses on related derivative financial instruments, ineffectiveness on cash flow hedges and reclassifications of realized
gains and losses on effective cash flow hedges from accumulated other comprehensive income or loss.
Sales of products, including agricultural commodities, cattle and vinegar, are recognized when title of product and risk of
loss are transferred to the customer, which depends on the agreed upon terms. The sales terms provide passage of title when
shipment is made or the commodity is delivered. Revenues related to grain merchandising are presented gross and include
shipping and handling, which is also a component of cost of goods sold. Revenues from grain storage are recognized when
services are rendered.
A substantial portion of the partnership revenues are derived from fixed-fee commercial agreements for storage, terminal
or transportation services. The partnership recognizes revenue when there is evidence an arrangement exists; risk of loss and
title transfer to the customer; the price is fixed or determinable; and collectability is reasonably ensured. Revenues from base
storage, terminal or transportation services are recognized once these services are performed, which occurs when the product
is delivered to the customer.
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, vinegar and cattle feedlot operations. Grain
purchasing and receiving costs, excluding labor costs for grain buyers and scale operators, are also included in cost of goods
sold. Materials include the cost of corn feedstock, denaturant, process chemicals, cattle and veterinary supplies. Corn
feedstock costs include unrealized gains and losses on related derivative financial instruments not designated as cash flow
hedges, inbound freight charges, inspection costs and transfer costs as well as realized gains and losses on related derivative
financial instruments, ineffectiveness on cash flow hedges and reclassifications of realized gains and losses on effective cash
flow hedges from accumulated other comprehensive income or loss. Plant overhead consists primarily of plant and feedlot
utilities, repairs and maintenance, yard expenses and outbound freight charges. Shipping costs incurred by the company,
including railcar costs, are also reflected in cost of goods sold.
The company uses exchange-traded futures and options contracts to minimize the effect of price changes on the
agribusiness and energy services and food and food ingredients segments’ grain and cattle inventories and forward purchase
and sales contracts. Exchange-traded futures and options contracts are valued at quoted market prices and settled
predominantly in cash. The company is exposed to loss when counterparties default on forward purchase and sale contracts.
Grain inventories held for sale and forward purchase and sale contracts are valued at market prices when available or other
market quotes adjusted for differences, primarily in transportation, between the exchange-traded market and local market
where the terms of the contract is based. Changes in the fair value of grain 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 is exposed to credit and market
risk. The company’s exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the
terms of the derivative contract. The company minimizes its credit risk by entering into transactions with high quality
counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring their financial
condition. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in
commodity prices or interest rates. The company manages market risk by incorporating parameters to monitor exposure
within its risk management strategy, which limits the types of derivative instruments and strategies the company can use and
the degree of market risk it can take using derivative instruments.
The company evaluates its physical delivery contracts to determine if they qualify for normal purchase or sale
exemptions which are expected to be used or sold over a reasonable period in the normal course of business. Contracts that
do not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating
income unless the contracts qualify for, and the company elects, hedge accounting treatment.
Certain qualifying derivatives related to the ethanol production and agribusiness and energy services 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 of the hedges is recognized in current period results to the extent the change in fair value of the inventory is
not offset by the change in fair value of the derivative.
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.
Raw materials and finished goods inventories 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 and other property improvements are capitalized and depreciated.
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.
Intangible Assets
Our intangible assets consist of trademarks, customer relationships, research and development technology and licenses
acquired through acquisitions. These assets were capitalized at their fair value at the date of the acquisition and are being
amortized over their estimated useful lives, with the exception of the vinegar trade name, which has an indefinite life.
F-11
Impairment of Long-Lived Assets
The company’s long-lived assets consist of property and equipment and intangible assets. 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. There were no material impairment charges recorded for the periods
reported.
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 net tangible and intangible
assets. The company’s goodwill currently consists of amounts related to the acquisition of five ethanol plants, its fuel
terminal and distribution business and Fleischmann’s Vinegar.
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 and convertible notes. During periods of construction, amortization is capitalized in
construction-in-progress.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consists of various expenses including 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
F-12
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.
Recent Accounting Pronouncements
Effective January 1, 2016, the company adopted the amended guidance in ASC Topic 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 deduction from the carrying amount of the debt, consistent with debt
discounts. The amended guidance has been applied on a retrospective basis, and the balance sheet of each individual period
presented has been adjusted to reflect the period-specific effects of the new guidance.
Effective January 1, 2017, the company will adopt the amended guidance in ASC Topic 330, Inventory: Simplifying the
Measurement of Inventory, which requires inventory to be measured at lower of cost or net realizable value. Net realizable
value is the estimated selling prices during the ordinary course of business, less reasonably predictable costs of completion,
disposal and transportation. The amended guidance will be applied prospectively.
Effective January 1, 2017, the company will adopt the amended guidance in ASC Topic 718, Compensation – Stock
Compensation, which requires all income tax effects of awards to be recognized in the income statement when the awards
vest or settle. The amended guidance also will allow an employer to repurchase more of an employee’s shares than it can
currently for tax withholding purposes without triggering liability accounting and make a policy election to account for
forfeitures as they occur. The amended guidance related to the timing of when excess tax benefits are recognized, minimum
statutory withholding requirements, forfeitures, and intrinsic value will be applied on a modified retrospective basis, with a
cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. The amended guidance related
to the presentation of employee taxes paid on the statement of cash flows will be applied retrospectively. The amended
guidance requiring recognition of excess tax benefits and tax deficiencies in the income statement and practical expedient for
estimating expected term will be applied prospectively.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 230, Statement of Cash Flows:
Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents to be included
with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the
statement of cash flows. The amended guidance will be applied retrospectively.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 606, Revenue from Contracts
with Customers, 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.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 740, Income Taxes: Intra-Entity
Transfers of Assets other than Inventory, which requires the recognition of current and deferred income tax consequences of
an intra-entity transfer of an asset other than inventory when the transfer occurs. The amended guidance will be applied on a
modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of
adoption.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 805, Business Combinations:
Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to
assist companies and other reporting organizations with evaluating whether transactions should be accounted for as
acquisitions or disposals of assets or businesses. The amended guidance will be applied prospectively.
Effective January 1, 2019, the company will adopt the amended guidance in ASC Topic 842, Leases, which aims to
make leasing activities more transparent and comparable and requires substantially all leases to be recognized by lessees on
their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as
operating leases. Early application is permitted. The company is currently evaluating the impact the adoption of the amended
guidance will have on the consolidated financial statements and related disclosures.
F-13
3. GREEN PLAINS PARTNERS LP
Initial Public Offering of Subsidiary
On July 1, 2015, Green Plains Partners LP 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 assets currently include (i) 39 ethanol storage
facilities, located at or near the company’s 17 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
approximately 3,100 railcars, which are contracted to transport ethanol from the company’s ethanol 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 approximately 1.5 bgy ethanol marketing and distribution business since
the partnership’s assets are the principal method of storing and delivering the ethanol the company produces.
A substantial portion of the partnership’s revenues is 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) an amended ten-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 income 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 Fleischmann’s Vinegar Company
On October 3, 2016, the company acquired all of the issued and outstanding stock of SCI Ingredients, the holding
company of Fleischmann’s Vinegar Company, Inc., for $258.3 million in cash. Fleischmann’s Vinegar is one of the world’s
largest producers of food-grade industrial vinegar. The company recorded $2.3 million of acquisition costs for Fleischmann’s
Vinegar to selling, general and administrative expenses during the year ended December 31, 2016.
F-14
The purchase price allocation is based on the preliminary results of independent valuations. The purchase price and
purchase price allocation are preliminary until contractual post-closing working capital adjustments are finalized and the final
independent valuation reports are issued. The following is a summary of the preliminary purchase price of assets acquired
and liabilities assumed (in thousands):
Amounts of Identifiable Assets Acquired
and Liabilities Assumed
Cash
Inventory
Accounts receivable, net
Prepaid expenses and other
Property and equipment
Intangible assets
Current liabilities
Income taxes payable
Deferred tax liabilities
Total identifiable net assets
Goodwill
Purchase price
$
$
4,148
9,308
13,919
1,054
43,011
94,500
(9,689)
(330)
(40,421)
115,500
142,819
258,319
As of December 31, 2016, based on the preliminary valuations, the company’s customer relationship intangible asset
recognized in connection with the Fleischmann’s acquisition is $82.6 million, net of $1.4 million of accumulated
amortization, and has a 15 year weighted-average amortization period. As of December 31, 2016, the company also has an
indefinite-lived trade name intangible asset of $10.5 million. The company recognized $1.4 million of amortization expense
associated with the amortizing customer relationship intangible asset during the year ended December 31, 2016 and estimated
amortization expense for the next five years is $5.6 million per annum. The excess of the purchase price over the intangibles
fair values was allocated to goodwill, none of which is expected to be deductible for tax purposes. The goodwill is primarily
attributable to the synergies expected to arise after the acquisition.
Acquisition of Abengoa Ethanol Plants
On September 23, 2016, the company acquired three ethanol plants located in Madison, Illinois, Mount Vernon, Indiana,
and York, Nebraska from subsidiaries of Abengoa S.A. for approximately $234.9 million for the ethanol plant assets, and
$19.1 million for working capital acquired and liabilities assumed, subject to certain post-closing adjustments. These ethanol
facilities have a combined annual production capacity of 230 mmgy. The company recorded $1.3 million of acquisition costs
for the Abengoa ethanol plants to selling, general and administrative expenses during the year ended December 31, 2016.
The purchase price allocation is based on the preliminary results of an independent valuation. The purchase price and
purchase price allocation are preliminary until contractual post-closing working capital adjustments are finalized and the final
independent valuation report is issued. The following is a summary of the preliminary purchase price of assets acquired and
liabilities assumed (in thousands):
Amounts of Identifiable Assets Acquired
and Liabilities Assumed
Inventory
Accounts receivable, net
Prepaid expenses and other
Property and equipment
Other assets
Current maturities of long-term debt
Current liabilities
Long-term debt
Total identifiable net assets
F-15
$
$
16,904
1,826
2,224
234,947
3,885
(406)
(2,580)
(2,763)
254,037
Concurrently with the company’s acquisition of the Abengoa ethanol plants, on September 23, 2016, the partnership
acquired the storage assets of the Abengoa ethanol plants from the company for $90.0 million in a transfer between entities
under common control and entered into amendments to the related commercial agreements with Green Plains Trade.
The operating results of the Abengoa ethanol plant have been included in the company’s consolidated financial
statements since September 23, 2016. The operating results of Fleischmann’s Vinegar have been included in the company’s
consolidated financial statements since October 4, 2016. Pro forma revenue and net loss, had the acquisitions occurred on
January 1, 2016, would have been $3.8 billion and $9.1 million, respectively, for the year ended December 31, 2016. Diluted
loss per share would have been $0.24 for the year ended December 31, 2016. 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.
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 mmgy 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 the final purchase price of assets acquired and liabilities assumed (in thousands):
Amounts of Identifiable Assets Acquired
and Liabilities Assumed
Inventory
Derivative financial instruments
Property and equipment
Current liabilities
Other liabilities
Total identifiable net assets
$
$
20,487
2,625
78,786
(2,542)
(1,128)
98,228
Effective January 1, 2016, the partnership acquired the storage and transportation assets of the Hereford and Hopewell
production facilities in a transfer between entities under common control for approximately $62.3 million and entered into
amendments to the related commercial agreements with Green Plains Trade.
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. Diluted earnings per
share would have been $0.28 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.
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 and energy services segment are valued at nearby futures
values, plus or minus nearby basis.
F-16
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.
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, 2016
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Reclassification for
Balance Sheet
Presentation
Total
Assets:
Cash and cash equivalents
Restricted cash
Margin deposits
Inventories carried at market
Unrealized gains on derivatives
Other assets
$
Total assets measured at fair value
$
Liabilities:
Accounts payable (1)
Unrealized losses on derivatives
Other liabilities
$
Total liabilities measured at fair value $
304,211
51,979
50,601
-
8,272
116
415,179
-
26,455
-
26,455
$
$
$
$
-
-
-
77,043
14,818
-
91,861
35,288
8,916
81
44,285
$
$
$
$
$
-
-
(50,601)
-
24,146
-
(26,455) $
304,211
51,979
-
77,043
47,236
116
480,585
-
$
(26,455)
-
(26,455) $
35,288
8,916
81
44,285
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
Total
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
$
Liabilities:
Accounts payable (1)
Unrealized losses on derivatives
$
Total liabilities measured at fair value $
384,867
27,018
7,658
-
19,756
117
439,416
$
$
-
4,492
4,492
$
$
-
-
-
43,936
7,145
-
51,081
$
$
25,935
7,772
33,707
$
$
$
-
-
(7,658)
-
3,639
-
(4,019) $
384,867
27,018
-
43,936
30,540
117
486,478
$
-
(4,019)
(4,019) $
25,935
8,245
34,180
(1) Accounts payable is generally stated at historical amounts with the exception of $35.3 million and $25.9 million at December 31, 2016 and 2015,
respectively, related to certain delivered inventory for which the payable fluctuates based on changes in commodity prices. These payables are
hybrid financial instruments for which the company has elected the fair value option.
The company believes the fair value of its debt was approximately $1.1 billion compared with a book value of $1.1
billion at December 31, 2016, and the fair value of its debt was approximately $661.8 million compared with a book value of
$663.6 million at December 31, 2015. The company estimated the fair value of its outstanding debt using Level 2 inputs. The
company believes the fair values of its accounts receivable approximated book value, which was $147.5 million and $96.2
million, respectively, at December 31, 2016, and 2015.
F-17
Although the company currently does not have any recurring Level 3 financial measurements, the fair values of tangible
assets and goodwill acquired and the equity component of convertible debt 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.
6. SEGMENT INFORMATION
As a result of acquisitions during the year, the company implemented organizational changes during the fourth quarter of
2016, whereby the company management now reports 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 and energy services, which includes grain handling and storage and marketing and merchant trading for
company-produced and third-party ethanol, distillers grains, corn oil and other commodities, (3) food and food ingredients,
which includes the vinegar operations and cattle feedlot operations and (4) partnership, which includes fuel storage and
transportation services. Prior periods have been reclassified to conform to the revised segment presentation.
Under GAAP, when transferring assets between entities under common control, 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. Effective January 1, 2016, the partnership acquired the storage and transportation assets of the
Hereford and Hopewell production facilities in a transfer between entities under common control and entered into
amendments to the related commercial agreements with Green Plains Trade. 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 partnership’s assets were previously included in the ethanol production
and agribusiness and energy services 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 were no revenues related to the operation of the ethanol storage and railcar assets in the partnership segment prior to
their respective transfers to the partnership, when the related commercial agreements with Green Plains Trade became
effective.
Corporate activities include selling, general and administrative expenses, consisting primarily of compensation,
professional fees and overhead costs not directly related to a specific operating segment.
During the normal course of business, the operating segments do business with each other. For example, the agribusiness
and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains and corn oil
for the ethanol production segment. The partnership segment provides fuel storage and transportation services for the
agribusiness and energy services segment. These intersegment activities are treated like third-party transactions with
origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment
performance; however, they do not impact the company’s consolidated results since the revenues and corresponding costs are
eliminated.
F-18
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 and energy services:
Revenues from external customers (1)
Intersegment revenues
Total segment revenues
Food and food ingredients:
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
2016
Year Ended December 31,
2015
2014
$
$
2,409,102
-
2,409,102
$
2,063,172
-
2,063,172
2,590,428
-
2,590,428
675,446
34,461
709,907
318,031
150
318,181
8,302
95,470
103,772
3,540,962
(130,081)
3,410,881
$
674,719
24,114
698,833
219,310
75
219,385
8,388
42,549
50,937
3,032,327
(66,738)
2,965,589
$
607,323
24,535
631,858
29,376
-
29,376
8,484
4,359
12,843
3,264,505
(28,894)
3,235,611
$
(1) Revenues from external customers include realized gains and losses from derivative financial instruments.
Cost of goods sold:
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Intersegment eliminations
Operating income (loss):
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Intersegment eliminations
Corporate activities
2016
Year Ended December 31,
2015
2014
2,280,906
650,538
294,396
-
(129,761)
3,096,079
$
$
1,939,824
639,470
216,661
-
(66,588)
2,729,367
$
$
2,230,141
555,200
26,538
-
(28,834)
2,783,045
2016
Year Ended December 31,
2015
2014
28,125
34,039
16,436
60,903
(170)
(47,645)
91,688
$
$
43,266
37,253
(952)
12,990
-
(31,480)
61,077
$
$
285,579
52,176
1,200
(19,975)
-
(32,706)
286,274
$
$
$
$
F-19
Income (loss) before income taxes:
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Intersegment eliminations
Corporate activities
Depreciation and amortization:
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Corporate activities
Interest expense:
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Intersegment eliminations
Corporate activities
Capital expenditures:
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Corporate activities
2016
Year Ended December 31,
2015
2014
5,862
24,368
10,950
58,441
(170)
(61,100)
38,351
$
$
21,582
33,952
(3,585)
12,695
-
(43,179)
21,465
$
$
269,604
45,423
847
(20,038)
-
(45,406)
250,430
2016
Year Ended December 31,
2015
2014
68,746
2,536
3,705
5,647
3,592
84,226
$
$
55,604
1,542
1,004
5,828
1,972
65,950
$
$
53,465
926
528
5,544
1,676
62,139
2016
Year Ended December 31,
2015
2014
22,505
7,305
5,536
2,545
(562)
14,522
51,851
$
$
22,816
5,161
2,799
381
(71)
9,280
40,366
$
$
22,830
7,196
443
138
(238)
9,539
39,908
2016
Year Ended December 31,
2015
2014
39,555
2,340
2,479
400
11,638
56,412
$
$
48,881
12,552
1,049
1,496
1,589
65,567
$
$
40,991
16,771
395
547
2,829
61,533
$
$
$
$
$
$
$
$
F-20
The following table sets forth total assets by operating segment (in thousands):
Total assets (1):
Ethanol production
Agribusiness and energy services
Food and food ingredients
Partnership
Corporate assets
Intersegment eliminations
Year Ended December 31,
2016
2015
$
$
1,206,155
579,977
406,429
74,999
257,652
(18,720)
2,506,492
$
$
1,004,342
418,168
110,775
81,430
314,068
(10,863)
1,917,920
(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
Food and food ingredients
Service revenues
Other
7. INVENTORIES
2016
Year Ended December 31,
2015
2014
$
$
2,258,575
488,297
152,075
174,525
279,039
8,302
50,068
3,410,881
$
$
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
Inventories are carried at lower of cost or market, except for commodities 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
Commodities held for sale
Raw materials
Work-in-process
Supplies and parts
December 31,
2016
2015
99,009
65,926
135,516
91,093
30,637
422,181
$
$
71,595
43,936
116,673
96,950
24,803
353,957
$
$
F-21
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,
2016
2015
1,167,914
205,806
126,088
42,234
13,745
15,000
3,503
22,409
1,596,699
(417,993)
1,178,706
$
$
892,915
176,094
84,257
41,732
38,200
11,115
2,492
13,823
1,260,628
(338,558)
922,070
$
$
Changes in the carrying amount of goodwill attributable to each business segment during the years ended December 31,
2016 and 2015 were as follows (in thousands):
Balance, December 31, 2014 and 2015
Acquisition of Fleischmann's Vinegar
Balance, December 31, 2016
$
$
30,279 $
-
30,279 $
- $
142,819
142,819 $
10,598 $
-
10,598 $
40,877
142,819
183,696
Ethanol
Production
Food and Food
Ingredients
Partnership
Total
Goodwill related to the acquisition results largely from economies of scale expected to be realized in the Company’s
operations.
10. DERIVATIVE FINANCIAL INSTRUMENTS
At December 31, 2016, the company’s consolidated balance sheet reflected unrealized losses of $4.1 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.
F-22
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)
Accrued and other liabilities
Other liabilities
Total
Asset Derivatives'
Fair Value at December 31,
2016
2015
Liability Derivatives'
Fair Value at December 31,
2016
2015
$
$
14,818
-
-
14,818
(2) $
$
22,882
-
-
22,882
(3) $
$
-
27,099
81
27,180
$
$
-
8,245
-
8,245
(1) Derivative financial instruments as reflected on the balance sheet include a margin deposit assets of $50.6 million and $7.7 million at December
31, 2016 and 2015, respectively.
(2) Balance at December 31, 2016, includes $17.0 million of net unrealized losses on derivative financial instruments designated as cash flow
hedging instruments.
(3) Balance at December 31, 2015, includes $2.3 million of net unrealized gains 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.
Effect of Derivative Instruments on Consolidated Statements of Income 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
2016
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
Year Ended December 31,
2015
(12,952)
10,492
(2,460)
$
$
$
$
6,112
11
6,123
2014
13,369
165
13,534
Year Ended December 31,
2015
2016
2014
(41)
-
(41)
$
$
(43)
-
(43)
$
$
(326)
481
155
$
$
$
$
Year Ended December 31,
2015
2016
$
$
(8,094)
(16,508)
(24,602)
$
$
8,420
(3,551)
4,869
$
$
2014
(257,730)
(43,853)
(301,583)
Effective Portion of Cash Flow
Hedges Recognized in
Other Comprehensive Income (Loss)
Commodity Contracts
$
F-23
Year Ended December 31,
2015
11,582
$
$
2016
(29,238)
2014
(299,684)
Gains (Losses) from Fair Value
Hedges of Inventory
Revenues (effect of change in inventory value)
Cost of goods sold (effect of change in inventory value)
Revenues (effect of fair value hedge)
Cost of goods sold (effect of fair value hedge)
Ineffectiveness recognized in earnings before tax
Year Ended December 31,
2015
2016
2014
$
$
1,388
21,430
(1,388)
(16,219)
5,211
$
$
-
$
(7,819)
-
12,045
4,226
$
-
304
-
2,612
2,916
There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the years ended
December 31, 2016, 2015 and 2014.
The open commodity derivative positions as of December 31, 2016, are as follows (in thousands):
Exchange Traded
Non-Exchange Traded
December 31, 2016
Derivative
Instruments
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Options
Options
Options
Options
Options
Options
Forwards
Forwards
Forwards
Forwards (4)
Forwards
Forwards
Forwards
Net Long &
(Short) (1)
Long (2)
(Short) (2)
(88,850)
18,185 (3)
22,515 (4)
109,536
(213,570) (3)
(4,778)
2,310 (3)
(8,320) (4)
(1,250)
(85,480) (3)
(3,150) (4)
(483)
(43) (4)
(71,580)
14,896
2,664
(38,767)
41
(3,086)
331
(14,224)
27,604
36,410
112
35,465
-
15,932
1,376
(1,146)
(360,796)
(322)
(40,616)
(34,104)
(1,462)
(1,146)
Unit of
Measure
Bushels
Bushels
Bushels
Gallons
Gallons
mmBTU
Gallons
mmBTU
Pounds
Pounds
Pounds
Barrels
Barrels
Pounds
Pounds
Bushels
Gallons
mmBTU
Pounds
Barrels
Pounds
Bushels
Gallons
Tons
Pounds
Pounds
mmBTU
Barrels
Commodity
Corn, Soybeans and Wheat
Corn
Corn
Ethanol
Ethanol
Natural Gas
Natural Gasoline
Natural Gas
Livestock
Livestock
Livestock
Crude Oil
Crude Oil
Soybean Oil
Sugar
Corn, Soybeans and Wheat
Ethanol
Natural Gas
Livestock
Crude Oil
Sugar
Corn and Soybeans
Ethanol
Distillers Grains
Corn Oil
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 income. Included in revenues are net gains of $11.6 million, $9.6 million, and $8.0 million for the years ended
December 31, 2016, 2015 and 2014, respectively, on energy trading contracts.
F-24
11. DEBT
The components of long-term debt are as follows (in thousands):
Green Plains Partners:
$155.0 million revolving credit facility
Green Plains Processing:
$345.0 million term loan
Fleischmann's Vinegar:
$130.0 million term loan
$15.0 million revolving credit facility
Corporate:
$120.0 million convertible notes due 2018
$170.0 million convertible notes due 2022
Other
Total long-term debt
Less: current portion of long-term debt
Long-term debt
December 31,
2016
2015
$
129,000
$
-
294,011
125,609
4,000
108,817
127,239
28,993
817,669
(35,059)
782,610
$
306,439
-
-
103,072
-
27,135
436,646
(4,507)
432,139
$
Scheduled long-term debt repayments, including full accretion of the $120.0 million convertible notes due 2018 and of
the $170.0 million convertible notes due 2022 at maturity but excluding the effects of any debt discounts and debt issuance
costs, are as follows (in thousands):
Year Ending December 31,
Amount
2017
2018
2019
2020
2021
Thereafter
Total
$
$
39,058
126,193
6,215
393,363
2,307
315,801
882,937
Short-term notes payable and other borrowings at December 31, 2016 include working capital revolvers at Green Plains
Cattle, Green Plains Grain and Green Plains Trade with outstanding balances of $63.5 million, $102.0 million, and $125.7
million, respectively. 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.
Effective January 1, 2016, the company adopted ASC 835-30, Interest - Imputation of Interest: Simplifying the
Presentation of Debt Issuance Costs, which resulted in the reclassification of approximately $11.4 million from other assets
to long-term debt within the balance sheet as of December 31, 2015. As of December 31, 2016, there was $16.9 million of
debt issuance costs recorded as a reduction of the carrying value of the company’s long-term debt.
Ethanol Production Segment
Green Plains Processing has a $345.0 million senior secured credit facility, which 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 4.00x at the end of each quarter, decreasing
to 3.25x over the life of the credit facility and a minimum fixed charge coverage ratio of 1.25x. As of December 31, 2016, the
maximum total leverage ratio was 3.75x. 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. The total leverage ratio is
calculated by dividing total debt by the sum of the eight preceding fiscal quarters’ adjusted EBITDA, divided by two. The
fixed charge coverage ratio is calculated by dividing the sum of the four preceding fiscal quarters’ adjusted EBITDA by the
F-25
sum of four preceding fiscal quarters scheduled principal payments and interest expense. The credit agreement also allows
the inclusion of net equity contributions made by the parent company in the calculation of adjusted EBITDA.
At December 31, 2016, the interest rate on this term debt was 6.50%. Scheduled principal payments are $0.9 million
each quarter.
Agribusiness and Energy Services 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 equal to the sum of percentages of eligible cash, receivables and
inventories, less miscellaneous adjustments. The credit facility was amended on July 27, 2016, extending the maturity date to
July 26, 2019. Advances under the amended credit facility are subject to an interest rate equal to LIBOR plus 3.00% or the
lenders’ base rate plus 2.00%. 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 Green
Plains Grain as security on the credit facility. The terms impose affirmative and negative covenants, including maintaining
working capital of $20.3 million and tangible net worth of $26.3 million for 2016. Capital expenditures are limited to $8.0
million per year under the credit facility, plus equity contributions from the company and unused amounts of up to $8.0
million from the previous year. In addition, the credit facility requires the company to maintain a minimum fixed charge
coverage ratio of 1.25 to 1.00 for long-term indebtedness and a maximum 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 50% of net profit before tax, subject to certain conditions. Working capital is defined as current assets
minus current liabilities and tangible net worth is defined as total assets minus total liabilities, subject to certain limitations.
The leverage ratio is calculated by dividing total liabilities by tangible net worth. The fixed charge coverage ratio and long-
term capitalization ratio apply only if the company has incurred long-term indebtedness on the date of calculation. As of
December 31, 2016, Green Plains Grain had not incurred long-term indebtedness.
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.
Advances are subject to variable interest rates equal to LIBOR plus 2.50% or the base rate plus 1.50%. The unused portion of
the credit facility is also subject to a commitment fee of 0.5% per annum.
The terms impose affirmative and negative covenants, including maintaining a fixed charge coverage ratio of 1.15x.
Capital expenditures are limited to $1.5 million per year under the credit facility. The credit facility also restricts distributions
related to capital stock, with an exception 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. The fixed charge coverage ratio is calculated by summing the four preceding fiscal
quarters’ EBITDA less capital expenditures, distributions and cash taxes, and dividing that sum by all debt payments made
over the prior four quarters.
At December 31, 2016, Green Plains Trade had $35.0 million presented as restricted cash on the consolidated balance
sheet, the use of which was restricted for repayment towards the outstanding loan balance.
Food and Food Ingredients Segment
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 operations 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 interest rates equal to LIBOR plus 2.00% to 3.00%, or the base rate plus 0.00%
to 0.25%, depending upon the preceding three months’ excess borrowing 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. The unused
portion of the credit facility is also subject to a commitment fee of 0.20% to 0.25% per annum, depending on the preceding
three months’ excess borrowing availability.
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 2016 and a total debt to
F-26
tangible net worth ratio of 3.50x. Capital expenditures are limited to $3.0 million per year under the credit facility, plus $5.0
million per year if funded by a contribution from parent, plus any unused amounts from the previous year. Working capital is
defined as current assets minus current liabilities and tangible net worth is defined as total tangible assets minus total
liabilities, plus subordinated debt. The total debt to tangible net worth ratio is calculated by dividing total liabilities by
tangible net worth.
Fleischmann’s Vinegar has a $130.0 million senior secured term loan and a $15.0 million senior secured revolving credit
facility, which mature on October 3, 2022, to finance the purchase of Fleischmann’s Vinegar and to fund working capital for
its vinegar manufacturing operations. Beginning January 1, 2017, the term loan is subject to mandatory prepayments based
on the preceding fiscal year’s excess cash flow. Term loan prepayments are generally subject to prepayment fees of 1.0% to
2.0% if prepaid before the second anniversary of the credit agreement. The term loan and loans under the revolving credit
facility each bear interest at a floating rate based on the consolidated total net leverage ratio, adjusted quarterly beginning
September 30, 2017, to either a base rate plus an applicable margin of 5.0% to 6.0% or to LIBOR plus an applicable margin
of 6.0% to 7.0%. The unused portion of the Revolving Loan Commitment is also subject to a commitment fee of 0.5% per
annum.
The credit agreement contains certain customary representations and warranties, affirmative covenants, negative
covenants, financial covenants and events of default. The negative covenants include restrictions on the ability to incur
additional indebtedness, acquire and sell assets, create liens, make investments, make distributions and enter into transactions
with affiliates. The financial covenants include requirements to maintain a minimum consolidated fixed charge coverage ratio
ranging from 1.00x to 1.10x and a maximum consolidated total net leverage ratio ranging from 5.00x to 7.00x. The
consolidated fixed charge coverage ratio is calculated by summing the four preceding fiscal quarters’ EBITDA less capital
expenditures and dividing that sum by the sum of the four preceding fiscal quarters’ cash interest and taxes, scheduled
principal payments and parent management fees. The consolidated total net leverage ratio is calculated by dividing total net
indebtedness by the sum of the four preceding fiscal quarters’ EBITDA.
Partnership Segment
Green Plains Partners, through a wholly owned subsidiary, has a $155.0 million revolving credit facility, which matures
on July 1, 2020, to fund working capital, acquisitions, distributions, capital expenditures and other general partnership
purposes. The credit facility was amended on September 16, 2016, increasing the total amount available from $100.0 million
to $155.0 million. Advances under the amended credit facility are subject to a floating interest rate based on the preceding
fiscal quarter’s consolidated leverage ratio at a base rate plus 1.25% to 2.00% or LIBOR plus 2.25% to 3.00%. The amended
credit facility may be increased up to $100.0 million without the consent of the lenders. The unused portion of the credit
facility is also subject to a commitment fee of 0.35% to 0.50%, depending on the preceding fiscal quarter’s consolidated
leverage ratio.
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 terms impose affirmative and negative covenants, including 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 also requires the partnership to maintain a maximum
consolidated net leverage ratio of no more than 3.50x, and a minimum consolidated interest coverage ratio of no less than
2.75x, each of which is calculated on a pro forma basis with respect to acquisitions and divestitures occurring during the
applicable period. The consolidated interest coverage ratio is calculated by dividing the sum of the four preceding fiscal
quarters’ consolidated EBITDA by the sum of the four preceding fiscal quarters’ interest charges. The consolidated leverage
ratio is calculated by dividing total funded indebtedness minus the lesser of cash in excess of $5.0 million or $30.0 million by
the sum of the four preceding fiscal quarters’ consolidated EBITDA.
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 valued 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.
F-27
Corporate Activities
In August 2016, the company issued $170.0 million of 4.125% convertible senior notes due 2022, or the 4.125% notes.
The 4.125% notes are senior, unsecured obligations of the company, with interest payable on March 1 and September 1 of
each year. The company may settle the 4.125% notes in cash, common stock or a combination of cash and common stock.
The 4.125% notes contain liability and equity components which were bifurcated and accounted for separately. The
liability component of the 4.125% notes, as of the issuance date, was calculated by estimating the fair value of a similar
liability issued at a 9.31% effective interest rate, which was determined by considering the rate of return investors would
require for comparable debt of the company without conversion rights. The amount of the equity component was calculated
by deducting the fair value of the liability component from the principal amount of the 4.125% notes, resulting in the initial
recognition of $40.6 million as debt discount costs recorded in additional paid-in capital. The carrying amount of the 4.125%
notes will be accreted to the principal amount over the remaining term to maturity, and the company will record a
corresponding amount of noncash interest expense. Additionally, the company incurred debt issuance costs of $5.7 million
related to the 4.125% notes and allocated $4.3 million of debt issuance costs to the liability component of the 4.125% notes.
These costs will be amortized to noncash interest expense over the six-year term of the 4.125% notes.
Prior to March 1, 2022, the 4.125% notes are not convertible unless certain conditions are satisfied. The conversion rate
is subject to adjustment upon the occurrence of certain events, including when the quarterly cash dividend exceeds $0.12 per
share and upon redemption of the 4.125% notes. The initial conversion rate is 35.7143 shares of common stock per $1,000 of
principal, which is equal to a conversion price of approximately $28.00 per share.
The company may redeem all, but not less than all, of the 4.125% notes at any time on or after September 1, 2020, 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 4.125% notes have the option to require the
company to repurchase the 4.125% 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. If an event of default occurs, it could result in the 4.125%
notes being declared due and payable.
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. The Company may settle the 3.25% notes in cash, common stock or a combination of cash and common stock.
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
49.4123 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $20.24 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. If an event of default occurs, it 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, 2016.
Capitalized Interest
The company had $0.8 million, $1.1 million, and $191 thousand in capitalized interest during the years ended December
31, 2016, 2015 and 2014, respectively.
F-28
Restricted Net Assets
At December 31, 2016, there were approximately $835.0 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 3,500,000 shares of common stock for issuance to its directors
and employees. 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
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, 2016, 2015 and 2014.
The activity related to the exercisable stock options for the year ended December 31, 2016, is as follows:
Outstanding at December 31, 2015
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2016
Exercisable at December 31, 2016 (1)
Weighted-
Average
Exercise Price
9.81
-
7.28
-
-
12.36
12.36
Shares
298,750 $
-
(150,000)
-
-
148,750 $
148,750 $
Weighted-Average
Remaining
Contractual Term
(in years)
2.4
-
-
-
-
2.8
2.8
Aggregate
Intrinsic Value
(in thousands)
3,866
-
2,250
-
-
2,305
2,305
$
$
$
(1)
Includes in-the-money options totaling 148,750 shares at a weighted-average exercise price of $12.36.
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.
F-29
The non-vested stock award and deferred stock unit activity for the year ended December 31, 2016, are as follows:
Nonvested at December 31, 2015
Granted
Forfeited
Vested
Nonvested at December 31, 2016
Green Plains Partners
Non-Vested
Shares and
Deferred
Stock Units
Weighted-
Average Grant-
Date Fair Value
Weighted-Average
Remaining
Vesting Term
(in years)
736,728 $
825,246
(49,149)
(373,265)
1,139,560 $
22.96
14.20
18.59
20.36
17.65
1.7
Green Plains Partners has adopted the LTIP, an incentive plan 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 2,500,000 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.
The non-vested stock award and deferred stock unit activity for the year ended December 31, 2016, are as follows:
Non-Vested at December 31, 2015
Granted
Forfeited
Vested
Nonvested at December 31, 2016
Non-Vested
Shares and
Deferred
Stock Units
Weighted-
Average
Grant-Date
Fair Value
Weighted-Average
Remaining
Vesting Term
(in years)
10,089 $
16,260
(5,333)
(6,007)
15,009 $
14.93
15.82
14.93
14.69
15.99
0.5
Compensation costs for stock-based and unit-based payment plans during the years ended December 31, 2016, 2015 and
2014, were approximately $9.5 million, $8.8 million and $7.2 million, respectively. At December 31, 2016, there were $11.6
million of unrecognized compensation costs from stock-based and unit-based compensation related to non-vested awards.
This compensation is expected to be recognized over a weighted-average period of approximately 1.7 years. The potential tax
benefit related to stock-based payment is approximately 37.7% of these expenses.
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 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 and the 4.125% notes in cash, common stock or a combination of cash and common stock. The company intends to
settle the 3.25% notes and the 4.125% 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.
F-30
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
Year Ended December 31,
2015
2016
2014
10,663 $
38,318
0.28 $
7,064 $
37,947
0.19 $
159,504
36,467
4.37
10,663 $
7,064 $
159,504
$
$
$
-
-
-
-
7,064 $
576
1,379
161,459
Net income attributable to Green Plains - diluted
$
10,663 $
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
38,318
37,947
36,467
-
155
100
38,573
-
939
142
39,028
1,006
3,040
217
40,730
EPS - diluted
$
0.28 $
0.18 $
3.96
14. STOCKHOLDERS’ EQUITY
Treasury Stock
The company holds 7.7 million shares of its common stock at a cost of $75.8 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 323,290 shares of common
stock for approximately $6.0 million during the second quarter of 2016. Since inception, the company has repurchased
514,990 shares of common stock for approximately $10.0 million under the program.
Dividends
The company has paid a quarterly cash dividend since August 2013 and anticipates declaring a cash dividend in future
quarters on a regular basis. Future declarations of dividends, however, are subject to board approval and may be adjusted as
the company’s liquidity, business needs or market conditions change. On February 8, 2017, the company’s board of directors
declared a quarterly cash dividend of $0.12 per share. The dividend is payable on March 17, 2017, to shareholders of record
at the close of business on February 24, 2017.
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 23, 2017, the board of directors of the general partner of
F-31
the partnership declared a cash distribution of $0.43 per unit on outstanding common and subordinated units. The distribution
is payable on February 14, 2017, to unitholders of record at the close of business on February 3, 2017.
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):
Gains (losses) on cash flow hedges:
Commodity derivatives
Commodity derivatives
Total
$
Income tax expense (benefit)
Amounts reclassified from accumulated
other comprehensive income (loss)
$
15. INCOME TAXES
Year Ended December 31,
2015
2016
2014
Statements of Income
Classification
(8,094) $
(16,508)
(24,602)
(8,830)
8,420 $
(3,551)
4,869
1,855
(257,730) Revenues
(43,853) Cost of goods sold
(301,583)
(139,754)
Income (loss) before income
Income tax expense (benefit)
(15,772) $
3,014 $
(161,829)
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
that includes the enactment date.
Green Plains Partners is a limited partnership, which is treated as a flow-through entity for federal income tax purposes
and is not subject to federal income taxes. As a result, the consolidated financial statements do not reflect such 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
2016
Year Ended December 31,
2015
2014
$
$
2,950
4,910
7,860
$
$
33,750
(27,513)
6,237
$
$
67,389
23,537
90,926
Differences between income tax expense at the statutory federal income tax rate and as presented on the consolidated
statements of income 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
Nondeductible compensation
Noncontrolling interests
Other
Income tax expense
Year Ended December 31,
2016
2015
2014
$
13,423
$
7,513
$
87,650
323
-
185
(6,940)
869
7,860
$
1,397
-
-
(2,857)
184
6,237
$
6,810
(4,637)
848
-
255
90,926
$
F-32
Significant components of deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards - Federal
Net operating loss carryforwards - State
Tax credit carryforwards - 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
Organizational and start-up costs
Total deferred tax liabilities
Valuation allowance
Deferred income taxes
December 31,
2016
2015
2,112 $
1,290
3,701
1,218
91,951
-
3,535
10,722
3,764
3,001
121,294
(17,593)
(205,189)
-
(36,464)
(259,246)
(2,310)
(140,262) $
-
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)
$
$
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 $2.3 million as of December 31, 2016, relates to Iowa tax credits
that started expiring in 2013 and will continue to expire through 2018. 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 December 31, 2013, and later are still subject to audit. A
reconciliation of unrecognized tax benefits is as follows (in thousands):
Balance at January 1, 2016
Additions for prior year tax positions
Reductions for prior year tax positions
Balance at December 31, 2016
Unrecognized Tax Benefits
$
$
189
5
-
194
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, equipment 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 $38.0 million, $33.2 million and $31.8 million during the years ended December 31,
2016, 2015 and 2014, respectively.
F-33
Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in thousands):
Year Ending December 31,
Amount
2017
2018
2019
2020
2021
Thereafter
Total
Commodities
$
$
35,170
25,959
16,991
11,442
5,042
20,653
115,257
As of December 31, 2016, the company had contracted future purchases of grain, corn oil, natural gas, crude oil, ethanol,
distillers grains and cattle, valued at approximately $504.4 million.
Legal
In November 2013, the company acquired two ethanol plants located in Fairmont, Minnesota and Wood River,
Nebraska. There is ongoing litigation related to the consideration for this acquisition. On August 19, 2016, the Delaware
Superior Court granted Green Plains’ motion for summary judgment in part and held that the seller’s attempt to disclaim
liability for certain shortfall amounts through the use of a disclaimer provision was ineffective. Based on the court order, the
company determined that previously accrued contingent liabilities of approximately $6.3 million no longer represent
probable losses. These accruals were reversed as a reduction of cost of goods sold during the year ended December 31, 2016,
because the adjustment relates to a reduction in the cost of inventory purchased in the acquisitions. The court has directed the
company and the seller to work together to determine the precise total of the shortfall amount due to Green Plains. The
company believes the remaining amount due to Green Plains is approximately $5.5 million; however, the seller has the right
to dispute the details of the calculation and appeal the underlying Superior Court order. Accordingly, the total amount Green
Plains may receive is yet to be determined. The remaining amount due to the company represents a gain contingency, which
will not be recorded until all contingencies are resolved.
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 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,
2016, 2015 and 2014 were $1.6 million, $1.4 million and $1.1 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
F-34
31, 2016, the plan’s assets were $5.5 million and liabilities were $6.6 million. At December 31, 2016 and 2015, net liabilities
of $1.1 million were included in other liabilities on the consolidated balance sheet.
18. RELATED PARTY TRANSACTIONS
Commercial Contracts
Three subsidiaries of the company have executed separate financing agreements for equipment with Amur Equipment
Finance. Gordon Glade, a director of Amur Equipment Finance, 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 Amur Equipment
Finance. Balances of $0.8 million and $1.0 million related to these financing arrangements were included in debt at
December 31, 2016 and 2015, respectively. Payments, including principal and interest, totaled $0.3 million for each of the
years ended December 31, 2016, 2015 and 2014. The weighted average interest rate for the financing agreements with Amur
Equipment Finance 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, 2016, 2015 and 2014, payments related to
these leases totaled $190 thousand, $270 thousand and $187 thousand, respectively. The company had no outstanding
payables related to these agreements at December 31, 2016 or 2015.
19. QUARTERLY FINANCIAL DATA (Unaudited)
The following table includes unaudited financial data for each of the quarters within the years ended December 31, 2016,
and 2015 (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.
Three Months Ended
Revenues
Costs and expenses
Operating income (loss)
Other expense
Income tax expense (benefit)
Net income (loss) attributable to Green Plains
Basic earnings (loss) per share attributable to Green
Diluted earnings (loss) per share attributable to Green
Revenues
Costs and expenses
Operating income
Other expense
Income tax expense (benefit)
Net income (loss) attributable to Green Plains
Basic earnings (loss) per share attributable to Green
Diluted earnings (loss) per share attributable to Green
$
December 31,
2016
932,098 $
876,028
56,070
(19,433)
12,199
18,682
0.49
0.47
$
December 31,
2015
739,914 $
727,176
12,738
(7,959)
4,066
(3,589)
(0.09)
(0.09)
September 30,
2016
June 30,
2016
887,727 $
860,318
27,409
(8,953)
5,471
8,191
0.21
0.21
March 31,
2016
749,204
771,850
(22,646)
(12,063)
(14,893)
(24,138)
(0.63)
(0.63)
841,852 $
810,997
30,855
(12,888)
5,083
7,928
0.21
0.20
Three Months Ended
September 30,
2015
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)
742,797 $
722,964
19,833
(10,396)
(604)
6,179
0.16
0.16
F-35
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,
2016
2015
$
188,953
16,947
$
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, including amounts from related parties
of $0 and $1,080, respectively
Income tax receivable
Prepaid expenses and other
Due from subsidiaries
Total current assets
Property and equipment, net
Investment in consolidated subsidiaries
Deferred income taxes
Other assets
Total assets
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Due to subsidiaries
Accrued liabilities
Total current liabilities
Long-term debt
Other liabilities
Total liabilities
Stockholders' equity
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
273,294
10,130
1,188
9,104
1,189
26,109
321,014
3,811
549,642
53,273
14,846
942,586
1,889
25,973
12,511
40,373
103,072
146
143,591
45
577,787
290,974
(69,811)
798,995
942,586
285
10,379
1,199
48,785
266,548
12,900
916,138
87,310
9,642
1,292,538
6,916
160,486
20,488
187,890
236,056
2,890
426,836
46
658,258
283,214
(75,816)
865,702
1,292,538
$
$
$
See accompanying notes to the condensed financial statements.
F-36
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF INCOME – 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
$
2016
Year Ended December 31,
2015
2014
3,174 $
(3,174)
1,193
(14,511)
(8,072)
(21,390)
(24,564)
12,381
(12,183)
22,846
10,663 $
- $
-
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
See accompanying notes to the condensed financial statements.
F-37
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
2016
Year Ended December 31,
2015
72,172
72,172
$
19,844
19,844
$
2014
(13,962)
(13,962)
Cash flows from investing activities:
Purchases of property and equipment
Acquisition of businesses
Transfer of assets to Green Plains Partners LP
Investment in consolidated 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 for repurchase of common stock
Payment of cash dividends
Payment of loan fees
Proceeds from the exercise of stock options
Net cash provided (used) by financing activities
(11,556)
(512,356)
152,312
77,615
3,000
(7,206)
(298,191)
170,000
-
(6,005)
(18,423)
(5,651)
1,757
141,678
(1,191)
(116,796)
-
143,151
(3,000)
(2,975)
19,189
-
-
(4,003)
(15,191)
-
766
(18,428)
(2,829)
-
-
125,179
9,500
(4,309)
127,541
-
(238)
-
(8,908)
-
4,404
(4,742)
Net change in cash and equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
(84,341)
273,294
188,953
$
20,605
252,689
273,294
$
108,837
143,852
252,689
$
See accompanying notes to the condensed financial statements.
F-38
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.
Reclassifications
Certain prior year amounts were reclassified to conform to the current year presentation. These reclassifications did not
affect total revenues, costs and expenses, net income or stockholders’ equity.
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, $1.1 million and $1.0 million during the years ended December 31, 2016, 2015 and
2014, respectively. Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in
thousands):
Year Ending December 31,
Amount
2017
2018
2019
2020
2021
Thereafter
Total
Parent Guarantees
$
$
1,951
1,919
1,897
1,372
1,333
14,682
23,154
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, 2016, the parent
company had $275.9 million in guarantees of subsidiary contracts and indebtedness.
F-39
3. DEBT
Parent company debt as of December 31, 2016, consists of the 3.25% convertible senior notes due 2018 and 4.125%
convertible senior notes due 2022. 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
2017
2018
2019
2020
2021
Thereafter
Total
$
$
-
120,000
-
-
-
170,000
290,000
F-40
Corporate Information
BOARD OF DIRECTORS
WAYNE HOOVESTOL, Chairman
Owner/President
Hoovestol Inc./Lone Mountain Truck Leasing
JIM ANDERSON1,2
Managing Director and Operating Partner
CHAMP Private Equity
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
Director
Amur Equipment Finance
EJNAR KNUDSEN1
Founder and Managing Partner
AGR Partners
THOMAS MANUEL2,3
Founder and Chief Executive Officer
Nu-Tek Salt, LLC
BRIAN PETERSON3
President and Chief Executive Officer
Whiskey Creek Enterprises
ALAIN TREUER,2,3 Vice Chairman
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.
1811 Aksarben Drive
Omaha, NE 68106
402.884.8700
www.gpreinc.com
INVESTOR RELATIONS
JIM STARK
Vice President
Investor and Media Relations
jim.stark@gpreinc.com
EXECUTIVE OFFICERS
TODD BECKER
President and Chief Executive Officer
JEFF BRIGGS
Chief Operating Officer
JERRY PETERS
Chief Financial Officer
PATRICH SIMPKINS
Chief Development 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
KENNETH SIMRIL
President
Fleischmann’s Vinegar
TONY VOJSLAVEK
Executive Vice President
Risk Management
STOCK TRANSFER AGENT
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P.O. Box 43078
Providence, RI 02940
800.962.4284 (U.S., Canada, Puerto Rico)
781.575.3120 (non-U.S.)
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