2017 ANNUAL REPORT
2016 Annual Report
Green Plains Inc. (NASDAQ: GPRE) is a diversified commodity-processing business with
operations related to ethanol production, grain handling and storage, cattle feedlots, food
ingredients, and commodity marketing and logistics services. The company is the second
largest consolidated owner of ethanol production facilities in the world with 17 dry mill plants,
producing nearly 1.5 billion gallons of ethanol at full capacity. Green Plains owns a 62.5%
limited partner interest and a 2.0% general partner interest in Green Plains Partners LP.
For more information about Green Plains, visit www.gpreinc.com.
Page 1
Green Plains Inc.
2017 Annual Report
To Our
Shareholders
First, let me personally thank you for your unwavering
our product categories, especially antimicrobials and
support of our vision to create a diversified multi-
varietals. With over 100 years of history, combining
commodity processing company over the last ten
old and new cultures is never easy. Yet we are working
years. While ethanol remains firmly at the heart of
together and aligned with a common purpose. These
who we are and what we do, our strategy to leverage
and other investments we made in our Food and
our commodity processing and risk management
Ingredients segment will help reduce our volatility
expertise, and diversify our earnings, is starting to
over the long term — a goal we established two years
transform Green Plains. In 2017, during a weak year for
ago and are executing to deliver greater stability and
ethanol margins, nearly 80 percent of earnings were
more predictable earnings.
generated by our non-ethanol businesses, compared
with 55 percent in 2016, reflecting the impact of our
2017 Financial Highlights
focus and proving the resilience of our platform.
We reported net income of $61.1 million for the year,
This year, we improved operations across the
company, integrated previous acquisitions and set up
Green Plains for the next ten years. We became the
fourth largest cattle feeding operation in the United
States with the acquisition of two cattle feedlots in
May. Our capacity now exceeds a quarter of a million
head, which achieves the original goal we set out for
ourselves in this business. The cattle-feeding business
is a great fit for our company portfolio. We use our
knowledge and experience, managing risk, optimizing
or $1.47 per diluted share, up from net income of $10.7
million, or $0.28 per diluted share for 2016. Excluding
the impact of the debt refinancing costs and research
development (R&D) tax credits, reported in the third
quarter of 2017, and revaluation of deferred tax
liabilities in the fourth quarter of 2017, we reported a
net loss attributable to the company of $33.6 million
for 2017, or $(0.86) per diluted share. We generated
$154.4 million of EBITDA, or earnings before interest,
income taxes, depreciation and amortization.
margins and utilizing our information network in corn
Taxes had a significant, positive impact on our 2017
and distillers grains, to effectively manage our input
results. During the third quarter of 2017, we reported a
costs. This formula is consistent whether we make an
credit of $49.5 million related to investments in R&D
acquisition, organic improvement or expense
activities since the beginning of 2013. At the end of
reduction — we focus on the small details that make
2015, Congress enacted permanent legislation
a difference to our profitability.
2017 also marked our first full year of Fleischmann’s
Vinegar Company results, which exceeded our
expectations. After seamlessly integrating this $250
million acquisition and investing another $9 million in
capacity expansions, the tailwinds are strong in all of
allowing companies to receive R&D tax credits related
to qualified activities. We worked closely with our
third-party tax advisor to identify qualifying activities
eligible for the R&D credit. Tremendous effort was put
forth in the analysis and we believe the benefit will
accrue to our shareholders. In the fourth quarter of
2017, we recognized a one-time tax benefit of $52.8
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 2017 Form 10-K for matters to be considered in this regard.
Page 2
We are looking forward to
the next ten years to be
equally, if not more, exciting.
million related to the revaluation of our deferred tax
2017, up from 1.0 billion gallons last year. At Green
liabilities under the Tax Cuts and Jobs Act of 2017.
Plains, we exported 16 percent of our ethanol
While the benefits of a lower tax rate are apparent,
production in 2017, up from 13 percent in 2016. We
we will continue to assess any implications to our
believe exports will be stronger in 2018 as the world
overall capital structure going forward.
extends their fuel supply while taking steps to
We achieved a milestone in our company’s history
by simplifying our debt structure and entering into
a $500 million term loan agreement in August of
address air quality issues through ethanol produced
in the United States. This gives us great optimism
for the future.
2017. This has been our goal since 2008. The strength
While ethanol production will remain our core
of our portfolio, combined with execution of our
business, we are focused on five strategic areas: the
diversification strategy, allowed this offering to be
partnership, cattle-feeding operations, high-quality
successful. We increased our working capital revolvers
proteins, food and ingredients, and adjacent
for Green Plains Cattle, Green Plains Trade and Green
businesses that complement our existing platform.
Plains Partners to support our growth and working
We are disciplined innovators and rapid adopters of
capital requirements. We also exchanged 2.8 million
proven technologies and practices. We will continue
shares of common stock and $8.5 million in cash for
to drive costs out of our system to maintain a low-cost
approximately $56.3 million in aggregate principal
production platform. We will also invest in Green
of 3.25 percent convertible senior notes due in 2018.
Plains Partners’ downstream distribution capabilities
Finally, we returned $25.6 million to you, our
to support our business and diversify earnings. In
shareholders, through dividends and stock repurchases.
February of this year, the partnership signed an
Our liquidity remained strong with $280 million in
agreement with Delek Logistics Partners to form a
cash on the balance sheet and nearly $400 million
joint venture, which plans to acquire two light
available under our revolving credit agreements as of
products terminals from American Midstream Partners
December 31, 2017. Everything we did this year in the
for $138.5 million. Delek will contribute its North Little
capital markets positions Green Plains for the next
Rock, Arkansas and Caddo Mills, Texas terminals to the
ten years of growth.
The Next Ten
joint venture. This is consistent with our strategy to
diversify earnings at the partnership and a significant
step in that direction. In addition, Green Plains expects
Although 2017 had its challenges, our growth over the
to offer the partnership its 50 percent interest in the
past decade has been nothing short of remarkable.
joint venture with Jefferson Gulf Coast Energy
We are excited about the company we have built and
Partners, a subsidiary of Fortress Transportation and
feel we are well-positioned for the future. We are on
Infrastructure Investors LLC. The newly constructed
the cusp of accelerated global demand for ethanol,
import/export fuels terminal at Jefferson’s existing
which remains the cheapest source of octane in the
Beaumont, Texas terminal loaded its first vessel bound
world. Ethanol exports from the United States of
for an international destination in December of 2017
approximately 1.4 billion gallons grew 31 percent in
and has been operating at nearly full capacity since.
Green Plains Inc.
2017 Annual Report
EBITDA
in millions
$400
$350
$300
$250
$200
$ 1 50
$ 100
$50
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We believe the world is short on protein and want to
synergies. Today, we are more than 1,400 employees
become a leading provider of high-quality sources
strong and working hard to position ourselves for
that leverage our expertise as a commodity processor
future expansion and improved profitability. Our
and risk manager. We will continue to selectively
employees are self-selected overachievers, thought
acquire cattle feeding assets that fit our portfolio.
leaders and difference makers.
We like this business and believe our ability to
manage margins sets us apart in the industry. A new
opportunity we are exploring in 2018 is the production
of high-quality distillers proteins. Advances in
technology are now making it possible to increase
the protein value of distillers grains to a level that is
comparable to soybean meal and commensurate in
price, which trades at a significant premium to
conventional distillers grains. A capital investment
in this technology would differentiate us from other
participants in the ethanol industry and generate
incremental, consistent earnings from the distillers
grains we are producing already. We will also continue
evaluating opportunities to grow our food and
ingredients business in new and on-trend markets.
Seeking businesses that complement our existing
assets and supply chain expertise will continue to
be our goal.
Powered by People
Ten years ago, we began operations of our first
ethanol plant in Shenandoah, Iowa, with production
capacity of 50 million gallons per year and nearly 50
employees. Since that time, we have assembled a
We take very seriously the development, safety and
well-being of our employees and are committed to
ensuring workforce equality, diversity and inclusion.
We work diligently to ensure we maintain an industry-
leading program to protect our employees, assets
and the communities where we live and work. It is
undoubtedly our people, who put in their best efforts
each and every day, that have made Green Plains an
exceptional place to work these first ten years, and
will help make the next ten even more extraordinary.
I am grateful for our board, employees and
stakeholders for their commitment and support over
the last ten years. Together, we have built a company
and a portfolio of assets managed by a talented team
with so much potential for strategic growth. It’s been
an incredible journey so far. We look forward to the
next ten.
Sincerely,
portfolio of some of the highest performing
Todd Becker
production assets and established ourselves as a
President and Chief Executive Officer
leader in the ethanol industry. We are one of the
largest ethanol producers in the world, capable of
producing 1.5 billion gallons of ethanol, which was
nearly ten percent of all domestic production in 2017,
and we’ve added new businesses to our portfolio with
greater earnings consistency and operational
Page 4
Selected Financial Data
STATEMENT OF INCOME DATA
(in thousands, except per share information)
Revenues
Costs and expenses
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)
Year Ended December 31,
2017
2016
2015
2014
2013
$ 3,596,1 6 6 $ 3,410,881 $ 2,965,589
2,904,51 2
61,077
39,61 2
15,228
7,064
3,554,420
41,746
84,897
81, 63 1
61, 061
3,319, 193
91,688
53,337
30,49 1
10,663
$ 3,235, 61 1 $ 3,04 1, 01 1
2,933,160
107,8 51
35,570
43,391
43,391
2,949,337
286,274
35,844
159,504
159,504
$
$
1.56 $
1.47 $
0.28 $
0.28 $
0.19
0.18
$
$
4.37 $
3.96 $
1.44
1.26
EBITDA (unaudited and in thousands)
$
154,370 $
174,428 $
127,78 1
$
352,477 $
156,492
BALANCE SHEET DATA
(in thousands)
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Stockholders’ equity
December 31,
2017
2016
2015
2014
2013
$ 266,65 1 $
1,206, 47 1
2,784,650
886,26 1
767,396
1,725, 5 14
1,059, 1 36
304, 2 1 1 $
1,000,576
2,506,492
594,946
782,610
1,527,3 01
979, 1 9 1
384,867
912,577
1,917,920
438,669
432,1 3 9
959,0 1 1
958,909
$ 425,51 0 $
903,41 5
1,821,062
511,540
399,440
1,023,6 1 3
797,449
272,027
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 (benefit)
Depreciation and amortization
Year Ended December 31,
2017
2016
2015
2014
$
81,631 $
90,160
(124,782)
107,3 61
30,49 1 $
51,8 51
7,860
84,226
15,228 $
40,366
6,237
65,950
159,504 $
39,908
90,926
62,139
2013
43,3 9 1
33,357
28,890
50,854
EBITDA (unaudited)
$
154,370 $
174,428 $
127,781 $
352,477 $
156,492
Ethanol
Production
in millions of gallons
Revenues
in billions
Total Assets
in billions
1,300
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
$3.0
$2.5
$2.0
$1.5
$1.0
$.5
$0
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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, 2017
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, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the 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, 2017 (the last business
day of the second quarter), based on the last sale price of the common stock on that date of $20.55, was approximately $802.4 million. For purposes
of this calculation, executive officers and directors are deemed to be affiliates of the registrant.
As of February 7, 2018, there were 41,053,898 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2018 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.
PART IV
Item 15.
Exhibits, Financial Statement Schedules.
Item 16.
Form 10-K Summary.
Signatures.
Page
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2
13
27
27
28
28
29
31
33
50
52
52
52
56
56
56
56
56
56
57
66
67
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:
the Act
ASC
EBITDA
EPS
Exchange Act
GAAP
IPO
LIBOR
LTIP
Nasdaq
R&D Credits
SEC
Securities Act
Industry Defined Terms:
Bgy
BTU
CAFE
CARB
CFTC
DOT
E15
E85
EIA
EISA
EPA
EU
FDA
FSMA
ILUC
LCFS
MMBTU
Mmg
Mmgy
MTBE
NAFTA
RFS II
RIN
RVO
SQF
TTB
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.
Tax Cuts and Jobs Act of 2017
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
Research and development tax credits
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
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
North American Free Trade Agreement
Renewable Fuels Standard II
Renewable identification number
Renewable volume obligation
Global Food and Safety Initiative program
Alcohol and Tobacco Tax and Trade Bureau
United States
U.S. Department of Agriculture
1
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, including changes to tax laws; 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, including our partnership, cattle
feeding operations and vinegar production, 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.
We 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, our facilities are capable of processing approximately 518 million bushels of corn per year and
2
producing approximately 1.5 billion gallons of ethanol, 4.1 million tons of distillers grains and 359 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 59.6 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 Ingredients. Our food and ingredients segment includes four cattle feeding operations with the capacity to
support approximately 258,000 head of cattle and grain storage capacity of approximately 9.6 million bushels,
Fleischmann’s Vinegar, one of the world’s largest producers of food-grade industrial vinegar, and our food-grade
corn oil operations.
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, eight fuel terminal facilities and
approximately 3,500 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 feeding operations 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 improve 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 the 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, natural gas and feeder cattle and an increased
cash price for ethanol, distillers grains, corn oil and live cattle. Depending on the circumstance, 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 a history of acquiring assets that create synergies and diversifying
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, cattle feeding operations, a vinegar production business, and
terminal and distribution facilities. Successful integration of these operations has enhanced our overall returns.
3
Operational Excellence. Our facilities are staffed with 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 ingredients, and
partnership segments provide efficiencies, which extend both within and outside the ethanol value chain.
Proven Management Team. Our senior management team averages approximately 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 driven by heightened
environmental concerns and energy independence goals, supported by government policies and regulations. 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. Today, ethanol is the primary oxygenate used by the U.S. refining industry to meet various federal and
state air emission standards. The high octane value of ethanol has also made it the primary additive used by refiners to
increase octane value, which improves engine performance. Accordingly, ethanol has become a valuable blend component
that comprises approximately 10% of the domestic gasoline supply with the potential to grow with higher blends and
increased gasoline demand. Ethanol usage is further supported by federal government mandates under RFS, which assigns
individual refiners, blenders and importers the volume of renewable fuels they are obligated to use based on their percentage
of total fuel sales. Advances in domestic corn yields have helped the U.S. ethanol industry become the lowest-cost producer
of ethanol, surpassing Brazil, creating demand for U.S. ethanol worldwide.
In light of the ethanol industry’s environment, we are focused on maintaining a low-cost ethanol production platform and
driving costs out of the value chain through disintermediation. 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 purchase
approximately two-thirds of our corn volume directly from farmers and have 42 production days of storage capacity at or
near our ethanol plants. We use our performance data to develop strategies that can be applied across our platform and
embrace technological advances to improve operational efficiencies and yields, such as Selective Milling Technology™ and
Enogen® corn enzyme technology, to lower our processing cost per gallon and increase production volumes.
We believe there is untapped value across our businesses and we intend to further develop and strengthen our business
by pursuing the following growth strategies:
Grow Organically: We seek to identify expansion projects that maximize our production capabilities and lower existing
costs at our production facilities. We also seek to leverage our core competencies in adjacent businesses such as cattle
feedlots, high protein animal feed, food ingredients and other commodity processing operations that maximize our
operational and risk management expertise.
Acquire Strategic Assets: We intend to invest in downstream distribution services that take advantage of our master
limited partnership structure, leverage our core competencies in adjacent markets or generate attractive margins or
predictable revenue streams. We are disciplined throughout the business development process to ensure our investments
generate favorable returns and are firmly committed to maintaining safe, reliable and environmentally compliant operations.
Recent Developments
The following is a summary of our significant developments during 2017. Additional information about these items can
be found elsewhere in this report or in previous reports filed with the SEC.
On March 10, 2017, we acquired the assets of a cattle-feeding operation located approximately 20 miles from our
Hereford, Texas ethanol facility. The operation has the capacity to support 30,000 head of cattle and is included in our food
and ingredients segment.
4
On April 28, 2017, Green Plains Cattle amended its senior secured asset-based revolving credit facility to finance the
expanded working capital requirements for its cattle feeding operations. The amendment increased the maximum
commitment from $100.0 million to $200.0 million until July 31, 2017, when it was increased again to $300.0 million. The
maturity date was extended from October 31, 2017 to April 30, 2020.
On May 16, 2017, we completed the acquisition of two cattle-feeding operations from Cargill Cattle Feeders, LLC for
$37.2 million, excluding working capital adjustments. The transaction included the feed yards located in Leoti, Kansas and
Eckley, Colorado and added combined feedlot capacity of 155,000 head of cattle to our operations. The transaction was
financed using cash on hand. As part of the transaction, we entered into a long-term cattle supply agreement with Cargill
Meat Solutions Corporation. Under the cattle supply agreement, all cattle placed in the Leoti, Kansas, Eckley, Colorado and
Kismet, Kansas feedlots will be sold exclusively to Cargill Meat Solutions under an agreed upon production and pricing
arrangement.
During the second quarter of 2017, we entered into several privately negotiated agreements with holders, on behalf of
certain beneficial owners, of our 3.25% notes. Under these agreements, 2,783,725 shares of our common stock and
approximately $8.5 million in cash plus accrued but unpaid interest on the 3.25% notes, were exchanged for approximately
$56.3 million in aggregate principal amount of the 3.25% notes. Following the closing of the agreement, $63.7 million
aggregate principal amount of the 3.25% notes remains outstanding. We recorded a charge to interest expense in the
consolidated financial statements for the loss on debt extinguishment of approximately $1.3 million during the three months
ended June 30, 2017.
On July 28, 2017, we amended our Green Plains Trade senior secured asset-based revolving credit facility, to increase
the maximum commitment from $150.0 million to $300.0 million and extend the maturity date to July 28, 2022. The
amended credit facility increases advance rates and modifies the eligible inventory definitions to include additional
commodities and locations. Advances are subject to variable interest rates equal to a daily LIBOR rate plus 2.25% or the base
rate plus 1.25%. The unused portion of the credit facility is also subject to a commitment fee of 0.375% per annum.
On August 29, 2017, the company entered into a $500.0 million term loan agreement which matures on August 29, 2023,
to refinance approximately $405.0 million of total debt outstanding issued by Green Plains Processing and Fleischmann’s
Vinegar, pay associated fees and expenses and for general corporate purposes. The term loan is guaranteed by the company
and substantially all of its subsidiaries, but not Green Plains Partners and certain other entities, and secured by substantially
all of the assets of the company, including 17 ethanol production facilities, vinegar production facilities and a second priority
lien on the assets secured under the revolving credit facilities at Green Plains Trade, Green Plains Cattle and Green Plains
Grain.
On September 11, 2017, John Neppl joined the company as chief financial officer of Green Plains and Green Plains
Partners, replacing Jerry Peters, who retired. Mr. Peters continues as a member of the board of directors of Green Plains
Holdings LLC, the general partner of Green Plains Partners. Mr. Neppl most recently served as chief financial officer of The
Gavilon Group, LLC and brings extensive experience in commodity processing and trading businesses.
On October 27, 2017, the partnership upsized its revolving credit facility by $40.0 million, from $155.0 million to
$195.0 million, accessing a portion of the $100.0 million accordion in place on the facility.
On November 16, 2017, Green Plains Cattle entered into an amendment of its senior secured asset-based revolving credit
facility with a group of lenders led by Bank of the West and ING Capital LLC. This amendment increased the revolving
commitment under the credit facility by $125.0 million, from $300.0 million to $425.0 million, with an additional $75.0
million available accordion feature. Additionally, the amendment increased the swing-line sublimit from $15.0 million to
$20.0 million.
During the fourth quarter of 2017, commercial development of the JGP Energy Partners intermodal export and import
fuels terminal in Beaumont, Texas was completed, with storage capacity of 550 thousand barrels to support various export
and domestic grades of ethanol. On December 4, 2017, the first ethanol shipment departed from the terminal. The company
formed the 50/50 joint venture to construct the terminal in June 2016 with Jefferson Ethanol Holdings LLC, a subsidiary of
Fortress Transportation and Infrastructure Investors LLC. Per the omnibus agreement between Green Plains and the
partnership, Green Plains will offer its interest in the joint venture to the partnership no later than six months after the
completion of construction.
During the year, the company repurchased 394,677 shares of common stock for $6.7 million.
5
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, which can be handled efficiently and is
in greater supply than other grains. According to the USDA, on average, one bushel, or 56 pounds, of corn, produces
approximately 2.7 gallons of ethanol, 17.5 pounds of distillers grains and 0.7 pounds of corn oil. Outside of the United 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
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
Vogelbusch
Plant Production
Capacity (mmgy)
55
120
116
119
100
60
124
90
90
120
65
55
60
82
60
121
50
1,487
(1) We constructed these four plants; all other ethanol plants were acquired.
Our business is directly affected by the supply and demand for ethanol and other fuels in the markets served by our
assets. Miles driven typically increases during the spring and summer months related to vacation travel, followed closely
behind the fall season due to holiday travel.
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 17 million to 43 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
6
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 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.
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 four grain elevators in four states with combined grain storage
capacity of approximately 10.1 million bushels, and grain storage at our ethanol plants of approximately 49.5 million bushels,
detailed in the following table:
7
Facility Location
On-Site Grain Storage Capacity
(thousands of bushels)
Grain Elevators
Archer, Nebraska
Essex, Iowa
Hopkins, Missouri
Kismet, Kansas
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
3,841
2,713
2,328
5,109
4,789
1,400
1,611
4,913
1,043
5,402
1,015
1,034
8,168
2,321
2,772
2,432
886
2,955
3,293
347
59,618
We buy bulk grain, primarily corn and soybeans, from area producers, and provide grain drying and storage services to
those producers. At certain locations, 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.
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 and modified wet 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 wet and modified wet
distillers grains are sold to midwestern feedlot markets. A substantial amount of dried distillers grains are shipped by barge,
containers and rail to regional and national markets, as well as international markets. Our dried distillers grains are shipped to
feedlots and poultry markets, as well as Texas and West Coast rail markets. Some of our distillers grains are shipped by truck
to dairy, beef, and poultry operations in the eastern United States. 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 2017, we exported approximately 9% 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.
8
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.
Through Green Plains Trade, we provide marketing services of natural gas to our ethanol plants and to other third parties
including the procurement of both the pipeline capacity and natural gas. We also enhance the value by aggregating volumes
at various storage facilities which can be sold to either the plants or various intermediary markets and end markets.
Our railcar fleet for the agribusiness and energy services segment consists of approximately 920 leased hopper cars to
transport distillers grains and approximately 100 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 Ingredients Segment
Cattle feeding operations. Our cattle feeding operations have the capacity to support approximately 258,000 head of
cattle and 9.6 million bushels of grain storage capacity.
Facility Location
Kismet, Kansas
Hereford, Texas
Leoti, Kansas
Eckley, Colorado
Initial Operation or
Acquisition Date
June 2014
March 2017
May 2017
May 2017
On-Site Cattle
Capacity
(thousands of
cattle)
73
30
106
49
On-Site Grain Storage
Capacity
(thousands of bushels)
2,193
-
4,345
3,070
We purchase feeder cattle from producers, order buyers and livestock auctions, the majority of which are from Kansas,
Missouri, Oklahoma and Texas. Generally, our feeder cattle are purchased at weights between 650 and 950 pounds. We
typically feed the feeder cattle for approximately 160 days prior to selling to large beef processors at prices determined by the
market, adjusted for quality. Bulk cattle commodities are traded on commodity exchanges. Inventory values are affected by
changes in these markets and the spreads between feeder and live cattle futures. 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.
Vinegar operations. Fleischmann’s Vinegar is a liquid, natural specialty ingredients company serving a range of markets
and end-use applications, including food and beverage flavoring ingredients, meat preservatives, antimicrobials, bio-
herbicides, and cleaning products across the food, beverage, agricultural, industrial and consumer markets. Vinegar is sold
primarily to major food industry participants, including leading branded food companies, private label food manufacturers
and companies serving the foodservice channel. Our products appeal to both food and non-food end market applications and
are comprised of white distilled vinegar and numerous specialty vinegars, including balsamic, red wine, white wine, cider
and other varietals for retail and industrial uses. We have a dedicated research and development team, with extensive
experience in food science and agriculture, that can develop innovative products and technology to meet the needs of
customers for various specialized end-markets.
Our vinegar operations include seven production facilities, which are located in Alabama, California, Illinois, Maryland,
Missouri and New York, and three distribution warehouses, which are located in California, Oregon and Texas. All of our
production facilities use food-grade ethanol as the primary production input.
Food-grade corn oil production. Our food-grade corn oil operations focus on shipping corn oil from facilities across the
Midwest by rail or barge to terminal facilities located in the southern United States. Once the corn oil arrives at the terminal
facility, it is unloaded and consolidated into set volumes and prepared for shipment by vessel. The corn oil is then shipped to
independent refiners outside the United States for refining into a refined, bleached, dewaxed and deodorized food-grade
product. This finished product is then shipped by vessel or container to our various customers. In addition, we also execute
trade volumes of corn oil and soybean oil in both domestic and international markets.
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.
9
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.
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 3,500 leased tank cars for the transportation of ethanol. The
initial terms of the lease contracts are for periods up to ten 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.
10
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
For more information about our segments, refer to Item 7. - Management’s Discussion and Analysis of Financial Condition
and Results of Operations in this report.
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. 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.
In 2017, the top five producers operated 89 plants and accounted for approximately 44% of the domestic production
capacity with production capacities ranging from 800 mmgy to 1,700 mmgy. Approximately half of the 212 plants in the
United States are standalone facilities and accounted for approximately 34% of domestic production capacity.
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 133 operational plants in the states where we have production
facilities, including Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, Tennessee, Texas and Virginia, as of January 23,
2018. The largest concentration of operational plants is located in Illinois, Iowa and Nebraska, where 51% of all operational
production capacity is located.
Foreign Ethanol Competitors
We also compete 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 which could be cost prohibitive.
In addition, we compete with other cattle feeding operations and vinegar producers in competitive markets. Through our
acquisition of Fleischmann’s Vinegar in 2016, we now operate one of the world’s largest manufacturers and marketers of
food-grade industrial vinegar. Additionally, following the acquisitions of the Hereford, Texas; Leoti, Kansas and Eckley,
Colorado cattle-feeding operations, we now operate one of the largest cattle-feeding operations in the United States.
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 30, 2017, the EPA announced the final 2018 renewable
volume obligations for conventional ethanol, which met the 15.0-billion-gallon congressional target.
11
According to RFS II, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the
EPA is required to modify, or reset, statutory volumes through 2022. While conventional ethanol maintained 15 billion
gallons, 2018 is the first year the total proposed RVOs are more than 20% below statutory volumes levels. Thus, the EPA
Administrator directed his staff to initiate the required technical analysis to perform any future reset consistent with the reset
rules. The reset will be triggered if the 2019 RVOs continue to be more than 20% below the statutory levels, and the EPA
will be required to modify statutory volumes through 2022 within one year of the trigger event, based on the same factors
used to set the RVOs post-2022.
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 2017, the EPA denied a petition to change the point of obligation under RFS II to the parties that own
the gasoline before it is sold.
For further discussion see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Environmental and Other Regulation
Our ethanol production, agribusiness and energy services, and food and ingredients segment activities are subject to
environmental and other regulations. We obtain environmental permits to operate our 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.
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.
For further discussion see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
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, 2017, we had 1,427 full-time, part-time, temporary and seasonal employees, including 198 employees
at our corporate office in Omaha, Nebraska.
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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.
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
various 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 and cattle feeding operations 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 cannot be passed on to our
customers which 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
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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
lag behind fluctuations in corn or other feedstock prices, lowering our cost recovery percentage. Additionally, exports of
distiller grains could be impacted by the enactment of foreign policy.
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
spreads between feeder and live cattle futures 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, cattle 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,
cattle 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 and
decisions 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 could change and impact the ethanol market.
Under the provisions of the EISA, Congress established a mandate setting the minimum volume of renewable fuels 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. After 2022, volumes shall be determined by the EPA in coordination with the
Secretaries of Energy and Agriculture, taking into account such factors as impact on environment, energy security, future
rates of production, cost to consumers, infrastructure, and other factors such as impact on commodity prices, job creation,
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rural economic development, or impact on food prices.
Our operations could be adversely impacted by legislation or EPA actions, as set forth below or otherwise, that may
reduce the RFS II mandate. Similarly, should federal mandates regarding oxygenated gasoline be repealed, the market for
domestic ethanol could be adversely impacted. 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, may
affect future demand. A significant increase in supply beyond the RFS II mandate could have an adverse impact on ethanol
prices. Moreover, changes to RFS II could negatively impact the price of ethanol or cause imported sugarcane ethanol to
become more economical than domestic ethanol.
On July 5, 2017, the EPA proposed maintaining the RVOs for conventional ethanol at 15.0 billion gallons while
lowering the volume obligations for advanced alternatives, reducing the overall biofuel target to 19.24 billion gallons for
2018. On September 26, 2017, the EPA issued a Notice of Data Availability for comment, proposing to further reduce the
2018 advanced biofuel volume requirement by 315 mmg, to 3.77 billion gallons, and the total renewable fuel requirement to
18.77 billion gallons, leaving conventional ethanol at 15.0 billion gallons. According to RFS II, if mandatory renewable fuel
volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes
through 2022. While conventional ethanol maintained 15 billion gallons, 2018 is the first year the total proposed RVOs are
more than 20% below statutory volumes levels. Thus, the EPA Administrator directed his staff to initiate the required
technical analysis to perform any future reset consistent with the reset rules. The reset will be triggered if the 2019 RVOs
continue to be more than 20% below the statutory levels, and the EPA will be required to modify statutory volumes through
2022 within one year of the trigger event, based on the same factors used to set the RVOs post-2022.
The U.S. Federal District Court for the D.C. Circuit ruled on July 28, 2017, in favor of the Americans for Clean Energy
and its petitioners against the EPA related to its decision to lower the 2016 volume requirements. The Court concluded the
EPA erred in how it interpreted the “inadequate domestic supply” waiver provision of RFS II, which authorizes the EPA to
consider supply-side factors affecting the volume of renewable fuel available to refiners, blenders, and importers to meet the
statutory volume requirements. The waiver provision does not allow the EPA to consider the volume of renewable fuel
available to consumers or the demand-side constraints that affect the consumption of renewable fuel by consumers. As a
result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through its
waiver authority, which the EPA is expected to address. We believe this decision will benefit the industry overall, with the
EPA's waiver analysis now limited to supply considerations only, and expect the primary impact will be on the RINs market.
On October 19, 2017, the EPA Administrator reiterated his commitment to the text and spirit of the RFS II. In a letter to
seven Senators from the Midwestern states, among other topics, he stated the EPA is actively exploring its authority to issue
an RVP waiver and will not be pursuing action on RINs involving ethanol exports. Moreover, on November 22, 2017, the
EPA issued a Notice of Denial of Petitions for rulemaking to change the RFS point of obligation which resulted in the EPA
confirming the point of obligation will not change.
Valero Energy and refining trade group American Fuel and Petrochemical Manufacturers (AFPM) have challenged the
EPA’s handling of the U.S. biofuel mandate in separate actions on January 26, 2018. AFPM is asking the D.C. U.S. Court of
Appeals to review the EPA’s November 2017 decision to reject proposed changes to the structure of the RFS, including
moving the point of obligation from refiners and importers of fuel to fuel blenders. Valero filed two petitions with the same
court, one seeking review of the annual Renewable Volume Obligation (RVO) rule set by EPA’s for 2018 and 2019, which
dictates the volumes of renewable fuels to be blended in the coming years, and a second arguing against the EPA’s December
2017 assertion that the agency has fulfilled its duty to periodically review the RFS as directed by statute.
Future demand may 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, any
changes to RFS II originating from issues associated with the market price of RINs could negatively impact the demand for
ethanol, discretionary blending of ethanol and/or the price of ethanol.
Flexible-fuel vehicles, which are designed to run on a mixture of fuels such as E85, receive preferential treatment to
meet corporate average fuel economy standards in the form of CAFE credits. Flexible-fuel vehicle credits have been
decreasing since 2014 and will be completely phased out by 2020. Absent CAFE preferences, auto manufacturers may not be
willing to build flexible-fuel vehicles, reducing the growth of E85 markets and resulting in lower ethanol prices.
To the extent federal or state laws or regulations are modified, the demand for ethanol may be reduced, which could
negatively and materially affect our ability to operate profitably.
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If the United States were to withdraw from or materially modify NAFTA or certain other international trade agreements, our
business, financial condition and results of operations could be materially adversely affected.
Ethanol and other products that we produce are sold into Canada, Mexico and other countries with trade agreements with
the United States. The current administration has expressed antipathy towards certain existing international trade agreements,
including NAFTA, and made comments suggesting that they support significantly increasing tariffs on goods imported into
the United States, which in turn may lead to retaliatory actions on US exports. As of the date of this Form 10-K, it remains
unclear what the outcomes may be of NAFTA trade regulations, other international trade agreements and tariffs on various
goods imported into the United States. If the United States were to withdraw from or materially modify NAFTA or other
international trade agreements to which it is a party, or if tariffs were raised on the foreign-sourced goods that lead to
retaliatory actions, it could have material adverse effect on our business, financial condition and results of operations.
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. Additionally, factors such as over-supply of product could negatively impact demand for
ethanol. 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. Additionally, 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:
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
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inability to generate sufficient revenue to offset acquisition and development costs.
The anticipated benefits of these transactions may not be fully realized or take longer to realize than expected.
We may also pursue growth through joint ventures or partnerships, which typically involve restrictions on actions that
the partnership or joint venture may take without the approval of the partners. These provisions could limit our ability to
manage the partnership or joint venture in a manner that serves our best interests.
Future acquisitions may involve issuing equity as payment or to finance the business or assets, which could dilute your
ownership interest. Furthermore, additional debt may be necessary to complete these transactions, which could have a
material adverse effect on our financial condition. Failure to adequately address the risks associated with acquisitions or joint
ventures could have a material adverse effect on our business, results of operations and financial condition.
Our debt exposes us to numerous risks that could have significant consequences to our shareholders.
Risks related to the level of debt we have include:
requiring a substantial portion of cash to be dedicated for debt service, reducing the availability of cash flow for
working capital, capital expenditures, and other general business activities and 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. 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 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, term debt to term total
capitalization, 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
17
sufficient to comply with these covenants or remedy default. We also have an incurrence test that may limit our ability to
make certain restricted equity or debt payments, make acquisitions or investments and take on additional debt.
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. 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 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.
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.
Our ability to maintain the required regulatory permits or manage changes in environmental, safety and TTB regulations is
essential to successfully operating our plants.
Our plants are subject to extensive air, water, environmental and TTB regulations. Our production facilities involve the
emission of various airborne pollutants, including particulate, carbon dioxide, nitrogen oxides, hazardous air pollutants and
volatile organic compounds, which requires numerous environmental permits to operate our plants. Governing state agencies
could impose costly conditions or restrictions that are detrimental to our profitability and have a material adverse effect on
our operations, cash flows and financial position.
Environmental laws and regulations at the federal and state level are subject to change. These changes can also be made
retroactively. It is possible that more stringent federal or state environmental rules or regulations could be adopted, which
could increase our operating costs and expenses. Consequently, even though we currently have the proper permits, we may
be required to invest or spend considerable resources in order to comply with future environmental regulations. Furthermore,
ongoing plant operations, which are governed by the Occupational Safety and Health Administration, may change in a way
that increases the cost of plant operations. Any of these events could have a material adverse effect on our operations, cash
flows and financial position.
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
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environmental regulations may require us to modify existing plant and processing facilities, which could significantly
increase our cost of operations.
TTB regulations apply when producing our undenatured ethanol. These regulations carry substantial penalties for non-
compliance and therefore any non-compliance may adversely affect our financial operations or adversely impact our ability
to produce undenatured ethanol.
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 have 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
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.
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 2017, we exported 13.5% of our ethanol
production and 9% 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. Effective January 1, 2017, China indicated its intention to raise its 5% tariff
on U.S. and Brazil fuel ethanol to 30%. 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 2018. On
September 1, 2017, Brazil’s Chamber of Foreign Trade, or CAMEX, issued an official written resolution, imposing a 20%
tariff on U.S. ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter. The ruling is valid for two
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years.
In 2013, China began rejecting U.S. dried distillers grains because it contained genetically modified corn not yet
approved for import. In early 2015, China lifted this ban 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 2017, approximately 29%
of distillers grain produced in the United States was exported, down from 31% in 2016.
With more tariffs and reduced exports, the value of our distillers grains may be affected, which could have a negative
impact on our profitability. Additionally, tariffs on U.S. ethanol may lead to further industry over-supply and reduce our
profitability. Moreover, the America First trade position has caused more countries to toughen their positions on U.S.
imports.
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 44% of the domestic production capacity with
production capacity ranging from 800 mmgy to 1,700 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.
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
20
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 cattle feeding operations involves numerous external factors that are outside of our control.
Our cattle feeding operations involve numerous risks that could lead to increased costs or decreased demand for beef
products, which could have an adverse effect on our results of operations and financial condition, including:
constantly changing and potentially volatile supply and demand, which affect the cost of livestock and feed
ingredients and the sales price of our cattle;
outbreak of disease in our or other cattle feeding operations 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;
liabilities in excess of our insurance policy limits or related uninsurable risks if outbreaks of disease or other
conditions result in significant losses;
extended periods of bad weather, including the combination of cold temperatures and precipitation, as well as
blizzards or tornados;
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;
the closure or extended shutdown of a major cattle packing plant, leading to depressed cattle prices;
increased water costs due to water use restrictions, including those related to diminishing water table levels;
operational restrictions resulting from government regulations; and
risks relating to environmental hazards.
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;
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;
21
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 as well as SQF, a Global Food and Safety Initiative program related to processing, packaging,
storage, distribution, supply chains, 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 and processes that have advantages over ethanol, such as: lower
vapor pressure, making it easier to add to gasoline; similar energy content as gasoline, reducing any decrease in fuel economy
caused by blending with gasoline; ability to blend at higher concentration levels in standard vehicles; and reduced
susceptibility to separation when water is present. Products offering a competitive advantage over ethanol could reduce our
ability to generate revenue and profits from ethanol production.
New ethanol process technologies could emerge that require less energy per gallon to produce and result in lower
production costs. Our process technologies could become obsolete and place us at a competitive disadvantage, which could
have a material adverse effect on our operations, cash flows and financial position.
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.
22
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.
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.
In the past, we have had 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.
Compliance with and changes in tax laws could adversely affect our performance.
We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect taxes
(excise/duty, sales/use, gross receipts, and value-added taxes), payroll taxes, franchise taxes, withholding taxes, and ad
valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted
or proposed that could result in increased expenditures for tax liabilities in the future. Many of these liabilities are subject to
periodic audits by the respective taxing authority. Subsequent changes to our tax liabilities as a result of these audits may
subject us to interest and penalties.
Federal, state and local jurisdictions may challenge our tax return positions.
The positions taken in our federal and state tax return filings require significant judgments, use of estimates and the
interpretation and application of complex tax laws. Significant judgment is also required in assessing the timing and amounts
of deductible and taxable items. Despite management’s belief that our tax return positions are fully supportable, certain
positions may be successfully challenged by federal, state and local jurisdictions.
23
There have been substantial changes to the Internal Revenue Code, some of which could have an adverse effect on our
shareholders.
The Tax Cuts and Jobs Act was enacted on December 22, 2017 and is effective January 1, 2018 making significant
changes to the Internal Revenue Code. The U.S. Department of Treasury has broad authority to issue regulations and
interpretative guidance that may significantly impact how we will apply the law and impact our results of operations in the
period issued. Among other provisions, the Act reduces the Federal statutory corporate income tax rate from 35% to
21%. Due to the reduction in the federal tax rate to 21%, the Company revalued its deferred liabilities at the new rate at year-
end. The company has not yet evaluated the full impact of the Act as it relates 2018 income, however certain components of
the Act, such as the limits on deductibility of interest expense, may negatively impact us.
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 have limitations, as a holding company, in our ability to receive distributions from a small number of 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 fully rely on the cash flow
from one subsidiary to satisfy the loan obligations of another subsidiary. As a result, if a subsidiary is unable to satisfy its
loan obligations, we may not be able to prevent default by providing additional cash to that subsidiary, even if sufficient cash
exists elsewhere within our organization.
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
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.
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.
24
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
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.
25
Cash available for distributions could be reduced and likely cause a substantial reduction in unit value if the partnership
became subject to entity-level taxation for federal income tax purposes.
The present federal income tax treatment of publicly traded partnerships or investments in its units could be modified, at
any time, by administrative, legislative or judicial changes and interpretations. From time to time, members of Congress
propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships.
Should any legislative proposal eliminate the qualifying income exception, all publicly traded partnerships would be treated
as corporations for federal income tax purposes. The partnership would be required to pay federal income tax on its taxable
income at the corporate tax rate and likely state and local income taxes at varying rates as well. Distributions to unitholders
would be taxed as corporate distributions. The partnership’s cash available for distributions and the value of the units would
be substantially reduced.
Risks Related to our Common Stock
The price of our common stock may be highly volatile and subject to factors beyond our control.
Some of the many factors that can influence the price of our common stock include:
our results of operations and the performance of our competitors;
public’s reaction to our press releases, public announcements and filings with the SEC;
changes in earnings estimates or recommendations by equity research analysts who follow us or other companies in
our industry;
changes in general economic conditions;
changes in market prices for our products or raw materials and related substitutes;
sales of common stock by our directors, executive officers and significant shareholders;
actions by institutional investors trading in our stock;
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.
26
Provisions in the convertible notes could also make it more difficult or too expensive for a third party to acquire us. If a
takeover constitutes a fundamental change, holders of the notes have the right to require us to repurchase their notes in cash.
If a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders
who convert their notes. In either case, the obligation under the notes could increase the acquisition cost and discourage a
third party from acquiring us.
These items discourage transactions that could otherwise command a premium over prevailing market prices and may
limit the price investors are willing to pay for our stock.
Non-U.S. shareholders may be subject to U.S. income tax on gains related to the sale of their common stock.
If we are a U.S. real property holding corporation during the shorter of the five-year period before the stock was sold or
the period the stock was held by a non-U.S. shareholder, the non-U.S. shareholder could be subject to U.S federal income tax
on gains related to the sale of their common stock. Whether we are a U.S. real property holding corporation depends on the
fair market value of our U.S. real property interests relative to our other trade or business assets and non-U.S. real property
interests. We cannot provide assurance that we are not a U.S. real property holding corporation or will not become one in the
future.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We believe 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 54 acres of land at our four grain elevators. As detailed in our discussion in Item 1 – Business,
our agribusiness and energy services segment facilities include four grain elevators with combined grain storage capacity of
approximately 10.1 million bushels, and grain storage capacity at our ethanol plants of approximately 49.5 million bushels.
Our marketing operations are conducted primarily at our corporate office, in Omaha, Nebraska.
Food and Ingredients Segment
We own approximately 6,576 acres of land at our four cattle feeding operations. We also own approximately 67 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 Montreal, Canada. As detailed in our discussion of the food and ingredients segment in
Item 1 – Business, our cattle feeding operations have the capacity to support approximately 258,000 head of cattle and 9.6
million bushels of grain storage capacity, and our vinegar operation has seven production facilities and three distribution
warehouses.
27
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 59 acres of land
and leases approximately two acres of land 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, 2017
Three months ended December 31, 2017 (1)
Three months ended September 30, 2017
Three months ended June 30, 2017
Three months ended March 31, 2017
Year Ended December 31, 2016
Three months ended December 31, 2016
Three months ended September 30, 2016
Three months ended June 30, 2016
Three months ended March 31, 2016
$
$
High
Low
$
20.90
21.00
26.05
28.15
15.60
16.35
18.98
21.52
High
Low
$
29.85
26.82
20.86
23.26
22.40
19.73
14.46
12.39
$
$
Quarterly
Cash Dividend
Per Share
0.12
0.12
0.12
0.12
Quarterly
Cash Dividend
Per Share
0.12
0.12
0.12
0.12
(1) The closing price of our common stock on December 29, 2017 was $16.85.
Holders of Record
We had 2,085 holders of record of our common stock, not including beneficial holders whose shares are held in names
other than their own, on February 7, 2018. This figure does not include approximately 37.9 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 7, 2018, our board of directors declared a quarterly cash dividend of $0.12
per share. The dividend is payable on March 15, 2018, to shareholders of record at the close of business on February 23,
2018. 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.
The following table lists the shares that were surrendered during the fourth quarter of 2017.
Month
October 1 - October 31
November 1 - November 30
December 1 - December 31
Total
Total Number of Shares
Withheld
Average Price Paid per
Share
4,462
-
17,883
22,345
$
$
20.59
-
16.85
17.60
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.
29
The following table lists the shares repurchased under the share repurchase program during the fourth quarter of 2017.
Month
October 1 - October 31
November 1 - November 30
December 1 - December 31
Total
Number of
Shares
Repurchased
Average Price
Paid per Share
-
-
16.84
16.84
- $
-
58,828
58,828 $
Total Number of
Shares Repurchased as
Part of Repurchase
Program
Approximate Dollar Value
of Shares that may yet be
Repurchased under the
Program (in thousands)
850,839 $
850,839
909,667
909,667 $
84,260
84,260
83,268
83,268
Since inception, the company has repurchased 909,667 shares of common stock for approximately $16.7 million under
the program.
Recent Sales of Unregistered Securities
None.
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.
30
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, 2017. The graph assumes a $100
investment in our common stock and each index at December 31, 2012, and that all dividends were reinvested.
Green Plains Inc.
S&P SmallCap 600
Nasdaq Clean Edge Green Energy
$
12/12
100.00 $
100.00
100.00
12/13
246.18 $
141.31
196.27
12/14
317.03 $
149.45
208.69
12/15
298.26 $
146.50
232.98
12/16
371.61 $
185.40
222.42
12/17
230.50
209.94
295.91
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.
Item 6. Selected Financial Data.
The statement of income data for the years ended December 31, 2017, 2016 and 2015 and the balance sheet data as of
December 31, 2017 and 2016 are derived from our audited consolidated financial statements and should be read together with
the accompanying notes included elsewhere in this report.
31
The statement of income data for the years ended December 31, 2014 and 2013 and the balance sheet data as of
December 31, 2015, 2014 and 2013 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.
2017
Year Ended December 31,
2015
2014
2016
2013
Statement of Income Data:
(in thousands, except per share information)
Revenues
Costs and expenses
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)
$ 3,596,166 $ 3,410,881 $ 2,965,589 $ 3,235,611 $ 3,041,011
2,933,160
2,904,512
107,851
61,077
35,570
39,612
43,391
15,228
43,391
7,064
3,554,420
41,746
84,897
81,631
61,061
3,319,193
91,688
53,337
30,491
10,663
2,949,337
286,274
35,844
159,504
159,504
$
$
1.56 $
1.47 $
0.28 $
0.28 $
0.19 $
0.18 $
4.37 $
3.96 $
1.44
1.26
EBITDA (unaudited and in thousands)
$
154,370 $
174,428 $
127,781 $
352,477 $
156,492
2017
2016
December 31,
2015
2014
2013
Balance Sheet Data (in thousands):
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Stockholders' equity
$
266,651 $
304,211 $
1,206,471
2,784,650
886,261
767,396
1,725,514
1,059,136
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
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.
The following table reconciles net income to EBITDA for the periods indicated (in thousands):
Net income
Interest expense
Income tax expense (benefit)
Depreciation and amortization
EBITDA (unaudited)
2017
81,631 $
90,160
(124,782)
107,361
154,370 $
$
$
32
Year Ended December 31,
2015
15,228 $
40,366
6,237
65,950
127,781 $
2016
30,491 $
51,851
7,860
84,226
174,428 $
2014
159,504 $
39,908
90,926
62,139
352,477 $
2013
43,391
33,357
28,890
50,854
156,492
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, including our partnership, cattle
feeding operations and vinegar production, 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
Daily ethanol production increased 4% on average to 1.03 million barrels per day in 2017 compared with 0.99 million
barrels per day in 2016 due to incremental expansion by existing facilities to optimize production. Weekly refiner and
blender input volume, which is linked to consumer gasoline demand, increased 1% year-over-year, helped by the growing
number of retail stations offering higher ethanol blends. Increased export volumes only partially offset the difference between
increased production and consistent blending volumes year-over-year. As a result, domestic ethanol inventory rose by 3.9
million barrels to 22.6 million barrels at December 31, 2017, compared with the same time last year.
Total domestic ethanol production increased approximately 500 million gallons to 15.8 billion gallons in 2017, from 15.3
billion gallons in 2016, according to the EIA. There were 212 ethanol plants with production capacity of 16.1 bgy as of
January 23, 2018, compared with 213 ethanol plants with production capacity of 15.8 bgy one year ago, according to the
Renewable Fuels Association.
Ethanol consumption is correlated with consumer gasoline demand, which is projected to increase slightly from the ten-
year high of 143.2 billion gallons in 2016, to an estimated 143.3 billion gallons in 2017. Ethanol is used by oil refiners,
integrated oil companies and gasoline retailers to reduce vehicle emissions and increase octane levels. Ethanol continues to
account for approximately 10% of the U.S. gasoline market in 2017, or an estimated 14.3 billion gallons, up from 14.2 billion
gallons in 2016. In 2017, ethanol futures traded at an average discount of $0.14 per gallon to gasoline, positioning ethanol as
the most affordable source of octane over Gulf Coast 93 and toluene substitutes.
Increased automaker approval, consumer acceptance and availability of higher ethanol blends continue to support
domestic demand. Automakers have explicitly approved the use of E15 in nearly 90% of 2018 model year vehicles sold in
the United States. In addition, the number of retail stations selling higher ethanol blends tripled in 2017 due to investments in
the retail gasoline infrastructure provided by private and public funding.
33
Global Ethanol Supply and Demand
The United States and Brazil produce 86% of the world’s ethanol supply, according to the USDA Foreign Agriculture
Service. Global production increased slightly to 26.7 billion gallons in 2017 from approximately 26.6 billion gallons in 2016
due to increased U.S. production, which made up for reduced volumes from Brazil, according to the EIA. The United States
has been the world’s largest producer and consumer of ethanol since 2010. In 2017, approximately 8% of the ethanol
produced domestically competed globally with other sources of octane and oxygenates and was marketed and sold
worldwide. Global production is expected to increase 10% in the next five years.
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.
Overall, the U.S. ethanol industry is producing at levels to meet current domestic and export demand. According to the
EIA, U.S. exports were approximately 1.4 billion gallons in 2017, up 31% from 1.0 billion gallons last year. Brazil and
Canada remained the two largest export destinations for U.S. ethanol, which accounted for 33% and 24%, respectively, of
domestic ethanol export volume. India, the Philippines and South Korea accounted for 13%, 5% and 3%, respectively, of
U.S. ethanol exports.
Co-Product Supply and Demand
According to the USDA, the United States produced approximately 50 million tons of distillers grains resulting from
ethanol production in 2017, of which approximately 11 million tons were exported. The 3% reduction, year over year in
exports was due in part to a suspension by the Minister of Agriculture and Rural Development of Vietnam, which blocked
imports of U.S. dried distillers grains from January 2017 to September 2017. Mexico, Turkey, South Korea, China, Thailand
and Canada accounted for 61% of total U.S. distillers export volumes, according to the USDA.
World demand for U.S. beef has risen as diets continue to improve worldwide to include increased animal protein. In
June of 2017, the U.S. resumed exporting beef to China, following a 13-year ban the Trump Administration lifted as part of a
new bilateral agreement between the countries.
Legislation and Regulation
We are sensitive to government programs and policies that affect the supply and demand for ethanol and other fuels,
which in turn may impact the volume of ethanol and other fuels we handle. Federal mandates supporting the use of renewable
fuels are 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 ethanol production and usage of ethanol
blends in older vehicles. The EPA met the congressional target for the first time in November 2016 when it set the renewable
volume obligations for conventional ethanol at 15.0 billion gallons for 2017. In November 2017, the EPA announced it
would maintain the 15.0 billion gallon mandate for conventional ethanol in 2018.
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. According to RFS II, if mandatory renewable fuel
volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes
through 2022. While conventional ethanol maintained 15 billion gallons, 2018 is the first year the total proposed RVOs are
more than 20% below statutory volumes levels. Thus, the EPA Administrator directed his staff to initiate the required
technical analysis to perform any future reset consistent with the reset rules. The reset will be triggered if the 2019 RVOs
continue to be more than 20% below the statutory levels, and the EPA will be required to modify statutory volumes through
2022 within one year of the trigger event, based on the same factors used to set the RVOs post-2022.
The EPA assigns individual refiners, blenders and importers the volume of renewable fuels they are obligated to use
based on their percentage of total fuel sales. Obligated parties use RINs to show compliance with RFS-mandated volumes.
RINs are attached to renewable fuels by producers and detached when the renewable fuel is blended with transportation fuel
or traded in the open market. The market price of detached RINs affects the price of ethanol in certain markets and influences
34
the purchasing decisions by obligated parties. In November 2017, the EPA denied a petition to change the point of obligation
under RFS II to the parties that own the gasoline before it is sold.
Consumer acceptance of flex-fuel vehicles and higher ethanol blends are factors that may be necessary before ethanol
can achieve significant growth in U.S. market share. CAFE, which was first enacted by Congress in 1975 to reduce energy
consumption by increasing the fuel economy of cars and light trucks, provides a 54% efficiency bonus to flexible-fuel
vehicles running on E85, which is sold at more than 3,400 fuel stations in 45 states. According to IHS Automotive, there are
nearly 20 million flexible fuel vehicles on U.S. roads today. The number of retail stations selling E15 has tripled during the
year to more than 1,300 stations on January 31, 2018, up from 431 stations on December 31, 2016, according to Growth
Energy. Another important factor is a waiver in the Clean Air Act, known as the One-Pound Waiver, which allows E10 to be
sold between June and September, even though it exceeds the Reid vapor pressure limitation of nine 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 through the legislative process.
On January 18, 2017, Valero Energy Corporation filed an action against the EPA regarding certain non-discretionary
duties required by the RFS program under the Clean Air Act. Within the filed action, Valero claimed the EPA failed to
periodically review the feasibility of RFS compliance and the impact of the requirements on individuals and entities regulated
under the program, i.e., the point of obligation, since 2010. The EPA moved to dismiss this suit, which the court granted on
November 28, 2017.
On July 28, 2017, the U.S. Federal District Court for the D.C. Circuit ruled in favor of the Americans for Clean Energy
and its petitioners against the EPA related to its decision to lower the 2016 volume requirements. The Court concluded the
EPA erred in how it interpreted the “inadequate domestic supply” waiver provision of RFS II, which authorizes the EPA to
consider supply-side factors affecting the volume of renewable fuel available to refiners, blenders and importers to meet
statutory volume requirements. The waiver provision does not allow the EPA to consider the volume of renewable fuel
available to consumers or the demand-side constraints that affect the consumption of renewable fuel by consumers. As a
result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through its
waiver authority, which the EPA is expected to address. We believe this decision to confine the EPA’s waiver analysis to
supply considerations benefits the industry overall and expect the primary impact will be on the RINs market.
On October 19, 2017, the EPA Administrator reiterated his commitment to the text and spirit of the RFS II. In a letter to
seven senators from the Midwestern states, he stated the EPA is actively exploring its authority to issue an RVP waiver and
will not pursue action on RINs involving ethanol exports. Moreover, on November 22, 2017, the EPA issued a Notice of
Denial of Petitions for rulemaking to change the RFS point of obligation, confirming the point of obligation will not change.
Valero Energy and refining trade group American Fuel and Petrochemical Manufacturers (AFPM) have challenged the
EPA’s handling of the U.S. biofuel mandate in separate actions on January 26, 2018. AFPM is asking the D.C. U.S. Court of
Appeals to review the EPA’s November 2017 decision to reject proposed changes to the structure of the RFS, including
moving the point of obligation from refiners and importers of fuel to fuel blenders. Valero filed two petitions with the same
court, one seeking review of the annual Renewable Volume Obligation (RVO) rule set by EPA’s for 2018 and 2019, which
dictates the volumes of renewable fuels to be blended in the coming years, and a second arguing against the EPA’s December
2017 assertion that the agency has fulfilled its duty to periodically review the RFS as directed by statute.
Government actions abroad can significantly impact the ethanol industry. In September 2017, China’s National
Development and Reform Commission, the National Energy Board and 15 other state departments issued a joint plan to
expand the use and production of biofuels containing up to 10% ethanol by 2020. China, the number three importer of U.S.
ethanol in 2016, imported negligible volumes during the year due to a 30% tariff imposed on U.S. and Brazil fuel ethanol,
which took effect in January 2017. There is no assurance the recently issued joint plan will lead to increased imports of U.S.
ethanol. Brazil’s Chamber of Foreign Trade, or CAMEX, issued an official written resolution, imposing a 20% tariff on U.S.
ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter in September 2017. The ruling is valid for
two years. In Mexico, four lawsuits challenging the June 2017 decision by the Energy Regulatory Commission of Mexico
(CRE) to approve the use of 10% ethanol blends were dismissed. A fifth lawsuit was allowed to proceed for judicial review,
despite precedent set by the Mexico Supreme Court for dismissal. The CRE is expected to defend its position before the
judge makes a final decision. Should the judge rule in favor of the plaintiff, the case will go to the Supreme Court. U.S.
ethanol exports to Mexico totaled 30 mmg in 2017. In December 2017, the USDA Foreign Agricultural Service announced
that Japan is expected to allow the use of corn-based ethanol in 2018.
The Tax Cuts and Jobs Act was enacted on December 22, 2017 and is effective January 1, 2018. Among other
provisions, the Act reduces the Federal statutory corporate income tax rate from 35% to 21%. Due to the reduction in the
35
federal tax rate to 21%, the Company revalued its deferred liabilities at the new rate at year-end. An unintended consequence
of the Act under section 199A allows cooperative associations with a potential marketplace advantage versus other
agribusiness companies related to how sales from farmers to such entities are treated for purposes of farmers’ income. While
we believe that Congress intends to correct these provisions, we have established a cooperative entity and are currently
evaluating the use of such structure for grain origination for our ethanol plants should Congress not provide a timely fix for
this issue.
Environmental and Other Regulation
Our ethanol production, agribusiness and energy services, and food and ingredients segment activities are also subject to
environmental and other regulations. We obtain environmental permits to construct and operate our ethanol plants and other
facilities. Parts of our business are regulated by environmental laws and regulations governing the labeling, use, storage,
discharge and disposal of hazardous materials or conformity with official grade standards. Our business may also be
impacted by government policies, such as tariffs, duties, subsidies, import and export restrictions and outright embargos. 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.
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. Ethanol
production involves the emission of various airborne pollutants, including particulate, carbon dioxide, oxides of nitrogen,
hazardous air pollutants and volatile organic compounds. While some of our plants are grandfathered at authorized capacities
under the RFS II mandate, expansion 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 to achieve a 20% reduction in greenhouse gas emissions from the 2005 baseline measurement. 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 continue and have the potential to
further reduce greenhouse gas emissions up to 76% compared with gasoline.
The U.S. ethanol industry relies heavily on tank cars to deliver its product to market. 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 deadline for compliance with DOT
specification 117 is May 1, 2023. The 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 and have commenced transition of our fleet to DOT 117 compliant railcars. We anticipate approximately 20% of
our railcar fleet will be DOT 117 compliant by the end of 2018.
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
that include 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
in livestock feed under the October 2015 revised Veterinary Feed Directive rule. Our cattle feeding operations obtained all
necessary prescriptions from a licensed veterinarian to use certain veterinary feed directive drugs, as appropriate.
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.
36
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 2017, our ethanol facilities ran at approximately 85.0% 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.
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 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 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 we have received payment but the title has not yet been transferred to the customer. Revenues related to ethanol,
distillers grains, corn oil, natural gas and other commodities are presented gross and include shipping and handling, which is
also a component of cost of goods sold. 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 commodity purchase and sale agreements. At times, we settle these
transactions by transferring its obligations to other counterparties rather than delivering the physical commodity. Energy
trading transactions are reported net as a component of revenue. All other transactions are reported net as either a component
of revenue or cost of goods sold, depending on their position as a gain or loss. Revenues also include realized gains and
losses on related derivative financial instruments 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 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. 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 50 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.
37
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.
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 ingredients 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 utilizing assumed margins, cost of capital, inflation and
other inputs, sales of comparable properties and third-party independent appraisals. Changes in estimated fair value as a
result of declining ethanol margins, loss of significant customers or other factors could result in a write-down of the asset.
Derivative Financial Instruments
We use various derivative financial instruments, including exchange-traded futures and exchange-traded and over-the-
counter options contracts, to minimize risk and the effect of price changes related to corn, ethanol, cattle, natural gas and
crude oil. We monitor and manage this exposure as part of our 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, we are exposed 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 our 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. We
manage market risk by incorporating parameters to monitor exposure within our risk management strategy, which limits the
types of derivative instruments and strategies we can use and the degree of market risk we can take using derivative
instruments.
We evaluate our 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 we elect, hedge accounting treatment.
38
Certain qualifying derivatives related to ethanol production, agribusiness and energy services and food and ingredients
segments are designated as cash flow hedges. We evaluate the derivative instrument to ascertain its effectiveness prior to
entering into cash flow hedges. 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.
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, and earn a marketing fee, 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 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 ingredients segment, the cattle feeding operations 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
39
when the cattle are sold. Direct labor includes compensation and related benefits of non-management personnel involved in
the feedlot operations. 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
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:
July 2015
October 2015
November 2015
January 2016
April 2016
September 2016
October 2016
March 2017
May 2017
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 was acquired
Hereford, Texas cattle feeding operation was acquired
Leoti, Kansas and Eckley, Colorado cattle feeding operations were acquired
The year ended December 31, 2015, includes approximately two months of operations at our Hereford ethanol 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. The year ended December 31, 2017, includes approximately nine months of operations at our Texas cattle feeding
business and six months of operations at our Kansas and Colorado cattle feeding businesses.
Segment Results
We 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, commodity marketing and merchant trading for company-produced and third-party ethanol,
distillers grains, corn oil, natural gas and other commodities, (3) food and ingredients, which includes cattle feeding, vinegar
production and food-grade corn oil operations and (4) partnership, which includes fuel storage and transportation services.
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
40
amendments to the related commercial agreements with Green Plains Trade. The transferred assets and liabilities are
recognized at our historical cost and reflected retroactively in the segment information of the consolidated financial
statements presented in this Form 10-K. The partnership’s assets were previously included in the ethanol production and
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.
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.
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.
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 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
2017
Year Ended December 31,
2016
2015
$
$
2,497,360
10,313
2,507,673
$
2,409,102
-
2,409,102
2,063,172
-
2,063,172
621,223
47,538
668,761
471,398
383
471,781
6,185
100,808
106,993
3,755,208
(159,042)
3,596,166
$
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
$
(1) Revenues from external customers include realized gains and losses from derivative financial instruments.
41
Cost of goods sold:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Intersegment eliminations
Operating income (loss):
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Intersegment eliminations
Corporate activities
EBITDA:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Intersegment eliminations
Corporate activities
2017
Year Ended December 31,
2016
2015
2,434,001
614,582
411,781
-
(158,777)
3,301,587
$
$
2,280,906
650,538
294,396
-
(129,761)
3,096,079
$
$
1,939,824
639,470
216,661
-
(66,588)
2,729,367
2017
Year Ended December 31,
2016
2015
(45,074)
30,443
35,961
65,709
(61)
(45,232)
41,746
$
$
28,125
34,039
16,436
60,903
(170)
(47,645)
91,688
$
$
43,266
37,253
(952)
12,990
-
(31,480)
61,077
2017
Year Ended December 31,
2016
2015
40,069
33,906
49,803
71,041
(61)
(40,388)
154,370
$
$
97,113
34,209
20,190
66,633
(732)
(42,985)
174,428
$
$
100,002
40,655
218
18,903
(71)
(31,926)
127,781
$
$
$
$
$
$
Total assets by segment are as follows (in thousands):
Total assets (1):
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Corporate assets
Intersegment eliminations
Year Ended December 31,
2017
2016
$
$
1,144,459
554,981
725,232
74,935
295,217
(10,174)
2,784,650
$
$
1,206,155
579,977
406,429
74,999
257,652
(18,720)
2,506,492
(1) Asset balances by segment exclude intercompany payable and receivable balances.
Year Ended December 31, 2017 Compared with the Year Ended December 31, 2016
Consolidated Results
Consolidated revenues increased $185.3 million in 2017, compared with 2016. Revenues were impacted by the
acquisition of the Madison, Mount Vernon and York ethanol plants and Fleischmann’s Vinegar during the third and fourth
quarters of 2016, respectively, and cattle feeding operations during the first and second quarters of 2017, plus an increase in
ethanol and corn oil volumes sold. This was partially offset by a decrease in grain trading activity volumes and lower average
realized prices for ethanol, grain and distillers grains.
Operating income decreased $49.9 million in 2017, compared with 2016 primarily due to a decrease in ethanol margins
42
as well as a decrease in grain trading volume and price, partially offset by the acquisitions of Fleischmann’s Vinegar and the
cattle feeding operations. EBITDA decreased $20.1 million in 2017 due to decreased ethanol margins as well as decreased
grain trading volume and price, partially offset by the acquisitions of Fleischmann’s Vinegar and the cattle feeding
operations. Interest expense increased $38.3 million in 2017, compared with 2016 primarily due to higher average debt
outstanding and borrowing costs, $12.3 million in expense associated with the termination of previous credit facilities, and a
$1.3 million charge related to the extinguishment of a portion of the 3.25% convertible notes. Income tax benefit was
$124.8 million in 2017, compared with income tax expense of $7.9 million in 2016 primarily due to the company’s
recognition of tax benefits related to enactment of the Tax Cuts and Jobs Act and Research and Development credits, or R&D
Credits.
The following discussion provides greater detail about our 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,
2017
2016
1,256,361
1,147,630
3,314
301,920
437,373
3,064
273,901
401,065
Revenues in the ethanol production segment increased $98.6 million in 2017 compared with 2016 primarily due to
higher volumes of ethanol, distillers grains and corn oil produced, primarily due to the acquisition of the Madison, Mount
Vernon and York ethanol plants.
Cost of goods sold in the ethanol production segment increased $153.1 million for 2017 compared with 2016 due to
higher production volumes associated with the acquisition of the Madison, Mount Vernon and York ethanol plants and
increased prices. Operating income for the ethanol production segment decreased $73.2 million for 2017 as a result of the
factors identified above, as well as additional general and administrative expenses due to the additional ethanol plants
acquired. EBITDA decreased $57.0 million for 2017, compared to 2016 due to decreased margins in ethanol production.
Depreciation and amortization expense for the ethanol production segment was $82.0 million for 2017, compared with $68.7
million during 2016.
Agribusiness and Energy Services Segment
Revenues in the agribusiness and energy services segment decreased $41.1 million and operating income decreased $3.6
million in 2017 compared with 2016. The decrease in revenues was primarily due to a decrease in grain trading volumes,
partially offset by increased intersegment distillers grain, marketing and corn revenues. The decrease in operating income
was the result of lower margins on merchant trading activity, partially offset by increased intersegment marketing and corn
origination fees. EBITDA decreased $0.3 million for 2017, compared to 2016 due to decreased trading volume.
Food and Ingredients Segment
Revenues in our food and ingredients segment increased $153.6 million in 2017 compared with 2016. The increase in
revenues was primarily due to the acquisitions of Fleischmann’s Vinegar and the cattle feeding operations. The daily average
company-owned cattle on feed for the years ended December 31, 2017 and 2016 was approximately 130,000 and 65,000
head, respectively, and the daily average third-party owned cattle on feed for the years ended December 31, 2017 and 2016
was approximately 46,000 and 1,400, respectively.
Operating income for the food and ingredients segment increased $19.5 million in 2017 compared with 2016, primarily
due to an increase in cattle volumes due to the acquisition of the cattle feeding operations in the first and second quarters of
2017, as well as Fleischmann’s Vinegar being included for the entire year. EBITDA for the food and ingredients segment
increased by $29.6 million in 2017 compared with 2016, primarily due to an increase in cattle margins, as well as the
acquisition of Fleischmann’s Vinegar.
43
Partnership Segment
Revenues generated from the partnership segment increased $3.2 million for the year ended December 31, 2017 as
compared to the year ended December 31, 2016. Revenues generated from the partnership’s storage and throughput
agreement increased $4.6 million primarily due to higher throughput volumes related to ethanol storage assets acquired in
September 2016. Other revenue increased $0.6 million primarily due to the expansion of the partnership’s truck fleet. These
increases were partially offset by revenues generated from the partnership’s rail transportation services agreement with Green
Plains Trade, which decreased $1.4 million due to lower average rates charged for the railcar volumetric capacity provided,
and revenues generated from the partnership’s terminal services agreements, which decreased $0.6 million due to lower
biodiesel throughput volumes at our terminals.
General and administrative expenses decreased $0.2 million in 2017 compared with 2016 primarily due to a decrease in
transaction costs associated with the acquisition of ethanol storage assets in 2016.
Operating income for the partnership segment increased $4.8 million in 2017 compared to 2016 due to the changes in
revenues discussed above, as well as a decrease in operations and maintenance expenses of $0.7 million for 2017. EBITDA
increased $4.4 million for 2017 compared with 2016 due to the increased storage and throughput revenues, as well as a
decrease in operations and maintenance expenses of $0.7 million for 2017 compared with 2016.
Intersegment Eliminations
Intersegment eliminations of revenues increased by $29.0 million for 2017 compared with 2016, due to increased
intersegment distillers grain and corn revenues paid to the ethanol production and agribusiness and energy services segments
and the increase in storage and throughput fees paid to the partnership segment. Intersegment eliminations of operating
income remained relatively unchanged in 2017 compared with 2016.
Corporate Activities
Operating income was impacted by a decrease in operating expenses for corporate activities of $2.4 million for 2017
compared with 2016, primarily due to decreases in selling, general and administrative expenses largely driven by acquisition
costs incurred in 2016.
Income Taxes
We recorded income tax benefit of $124.8 million for 2017 compared with income tax expense of $7.9 million in 2016.
The change in income taxes was primarily due to the company’s recognition of tax benefits related to recently enacted Tax
Cuts and Jobs Act and R&D Credits. The effective tax rate (calculated as the ratio of income tax expense to income before
income taxes) was approximately 289.2% for 2017 compared with 20.5% for 2016.
A study was conducted to determine whether certain activities the company performs qualify for the R&D Credit
allowed by the Internal Revenue Code Section 41. As a result of this study, the company concluded these activities do qualify
for the credit and determined it was appropriate to claim the benefit of these credits for all open tax years. The company
recognized these credits during the second half of 2017, along with an estimate of the credit for qualified activities year-to-
date. The company will continue to evaluate eligibility for R&D Credits on a regular basis.
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.
44
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,
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 Ingredients Segment
Revenues in our food and 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 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
45
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.
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, 2017, we had $266.7 million in cash and equivalents, excluding restricted cash, consisting of $198.3
million available to our parent company and the remainder at our subsidiaries. We also had $391.9 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,
2017, our subsidiaries had approximately $142.8 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. As a result of the August 29, 2017 $500 million term
loan agreement and related debt extinguishment at Green Plains Processing and Fleischmann’s Vinegar, we no longer
consider certain subsidiaries to have restrictions on cash and asset distributions.
Net cash used in operating activities was $159.8 million in 2017 compared with net cash provided by operating activities
of $85.2 million in 2016. Operating activities compared to the prior year were primarily affected by an increase in inventories
and decreases in deferred and current income taxes. The changes in deferred and current income taxes were driven by the
R&D Credits recognized during the second half of 2017, as well as newly enacted tax reform. Net cash used in investing
activities was $128.5 million in 2017, compared to $572.6 million in 2016, due primarily to acquisitions of the cattle feeding
operations, as well as capital expenditures at our existing ethanol plants and our vinegar operations and investments in joint
ventures. Net cash provided by financing activities was $250.7 million in 2017 primarily due to the net proceeds from the
term loan refinancing and additional working capital financing related to the growth in our cattle feeding operations. The
decrease in net cash provided by financing activities in 2017 compared to 2016 was primarily due to the issuance of $170
million of 4.125% convertible senior notes in August 2016 and $135 million of debt to partially fund the acquisition of
Fleischmann’s Vinegar. In addition, the partnership made net borrowings of $129 million during 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.
46
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 $52.3 million in 2017 for projects, including expansion projects of approximately
$13.1 million for ethanol production capacity and $13.5 million for vinegar production capacity and various other projects.
The current projected estimate for capital spending for 2018 is approximately $80.0 million, which is subject to review prior
to the initiation of any project. The budget includes additional expenditures for expansion projects at our operations,
investments in joint ventures, 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, 2017, we had $18.2 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 7, 2018, our board of directors declared a quarterly cash dividend
of $0.12 per share. The dividend is payable on March 15, 2018, to shareholders of record at the close of business on February
23, 2018.
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 18, 2018, the board of directors of the general partner of the partnership declared a cash
distribution of $0.47 per unit on outstanding common and subordinated units. The distribution is payable on February 9,
2018, to unitholders of record at the close of business on February 2, 2018.
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. During 2017, we purchased a total of 394,677 shares of common
stock for approximately $6.7 million. To date, we have repurchased 909,667 shares of common stock for approximately
$16.7 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 June 23, 2017, we filed an automatically effective registration statement on Form S-8 with the SEC, registering
1,110,000 shares of common stock for issuance under the 2009 Equity Incentive Plan.
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.
47
Debt
We were in compliance with our debt covenants at December 31, 2017. 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.
Corporate Activities
On August 29, 2017, the company and substantially all of the company’s subsidiaries, but not including Green Plains
Partners and certain other entities as guarantors, entered into a $500 million term loan agreement (the “Term Loan
Agreement”) with BNP Paribas, as administrative agent and collateral agent (the “Term Loan Agent”) and certain other
financial institutions, which matures on August 29, 2023, and may be prepaid at any time without premium or penalty other
than customary breakage costs with respect to Eurodollar-based loans or certain other limited circumstances in which event a
1.0% prepayment premium would be due.
The Term Loan Agreement requires principal payments of $1.25 million on the last day of each quarter, beginning on
December 31, 2017, with a final installment payable on August 29, 2023, equal to the unpaid principal and interest balances
of the Term Loan Agreement. Beginning in 2018, the credit facility also has a provision requiring the company to make
special annual payments of 50% or 75% of its available free cash flow, subject to certain limitations. The term loan bears
interest at a floating rate of a base rate plus a margin of 4.50% or LIBOR plus a margin of 5.50%.
The Term Loan Agreement is guaranteed by the Company and the Term Loan Obligors, and secured by substantially all
of the assets of the Company and the Term Loan Obligors, including 17 ethanol production facilities with annual capacity of
approximately 1.5 billion gallons, as well as the vinegar production facilities. The covenants of the Term Loan Agreement
require the Company to maintain a maximum term debt to total term capitalization, each as defined in the Term Loan
Agreement, at the end of each fiscal quarter of not more than 55.0% and a minimum interest coverage ratio, as defined, at the
end of each fiscal quarter of not less than 1.25 to 1.0.
The Term Loan Agreement provides for customary events of default, which include (subject in certain cases to
customary grace and cure periods), among others, the following: nonpayment of principal or interest; breach of covenants or
other agreements in the Term Loan Agreement; defaults in failure to pay certain other indebtedness; and certain events of
bankruptcy or insolvency. If any event of default occurs, the remaining principal balance and accrued interest on the Term
Loan Agreement will become immediately due and payable.
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, 2017 to 50.2408 shares of common stock per $1,000 of principal, which is equal to a
conversion price of approximately $19.90 per share. We may settle the 3.25% notes in cash, common stock or a combination
of cash and common stock.
During the second quarter of 2017, we entered into several privately negotiated agreements with holders, on behalf of
certain beneficial owners of our 3.25% notes. Under these agreements, 2,783,725 shares of our common stock and
approximately $8.5 million in cash plus accrued but unpaid interest on the 3.25% notes, were exchanged for approximately
$56.3 million in aggregate principal amount of the 3.25% notes. Common stock held as treasury shares were exchanged for
the 3.25% notes. Following the closings of the agreements, $63.7 million aggregate principal amount of the 3.25% notes
remain outstanding.
48
At issuance, we separately accounted for the liability and equity components of the convertible notes by bifurcating the
gross proceeds between the indebtedness, or liability component, and the embedded conversion option, or equity component.
This bifurcation was done by estimating an effective interest rate on the date of issuance for similar notes. The embedded
conversion option was recorded in stockholders’ equity. Since we did not exercise the embedded conversion option
associated with the notes, pursuant to the guidance within ASC Topic 470, Debt, we recorded a loss upon extinguishment
measured by the difference between the fair value and carrying value of the liability portion of the notes. As a result, we
recorded a charge to interest expense in the consolidated financial statements of approximately $1.3 million during the three
months ended June 30, 2017. This charge also included $0.6 million of unamortized debt issuance costs related to the
principal balance extinguished. The remaining settlement consideration transferred was allocated to the reacquisition of the
embedded conversion option and recognized as a reduction of additional paid-in capital.
Ethanol Production Segment
We 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, 2017, the outstanding principal balance was $75.0 million
on the facility and the interest rate was 4.62%.
Green Plains Trade has a $300.0 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 2022. This facility can be increased
by up to $70.0 million with agent approval. At December 31, 2017, the outstanding principal balance was $180.3 million on
the facility and the interest rate was 3.77%.
On July 28, 2017, we amended the credit facility, to increase the maximum commitment from $150.0 million to
$300.0 million and extend the maturity date to July 28, 2022. The amended credit facility increases advance rates and
modifies the eligible inventory definitions to include additional commodities and locations. Advances are subject to variable
interest rates equal to a daily LIBOR rate plus 2.25% or the base rate plus 1.25%. The unused portion of the credit facility is
also subject to a commitment fee of 0.375% per annum.
Food and Ingredients Segment
Green Plains Cattle has a $425.0 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 April of 2020. This facility can be
increased by up to $75.0 million with agent approval. At December 31, 2017, the outstanding principal balance was
$270.9 million on the facility and our interest rate was 4.07%.
On April 28, 2017, we amended the revolving credit facility to fund the additional working capital requirements related
to the acquisition of two cattle feeding operations located in Leoti, Kansas and Eckley, Colorado. The amendment increased
the maximum commitment from $100.0 million to $200.0 million until July 31, 2017, at which time it increased to
$300.0 million. The maturity date was extended from October 31, 2017 to April 30, 2020.
Advances under the revolving credit facility, as amended, are subject to variable interest rates equal to LIBOR plus 2.0%
to 3.0% or the base rate plus 1.0% to 2.0%, depending on the preceding three months’ excess borrowing availability. The
amended credit facility also includes an accordion feature that enables the credit facility to be increased by up to
$100.0 million with agent approval. The unused portion of the credit facility is also subject to a commitment fee of 0.20% to
0.30% per annum, depending on the preceding three months’ excess borrowing availability. Interest is payable as required,
but not less than quarterly in arrears and principal is due upon maturity.
The amended terms impose affirmative and negative covenants, including maintaining working capital of 15% of the
commitment amount, tangible net worth of 20% of the commitment amount and a total debt to tangible net worth ratio of
3.50x. Capital expenditures are limited to $10.0 million per year under the credit facility, plus $10.0 million per year if
funded by a contribution from the parent, plus unused amounts from the previous year.
49
On November 16, 2017, we amended the revolving credit facility, to increase the maximum commitment from
$300.0 million to $425.0 million, with an additional $75.0 million available to Green Plains Cattle under an accordion
feature. Additionally, the amendment increased the swing-line sublimit from $15.0 million to $20.0 million. All other terms
and conditions of the credit facility remain the same.
Partnership Segment
Green Plains Partners, through a wholly owned subsidiary, has a $195.0 million revolving credit facility, which matures on
July 1, 2020, to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes. On
October 27, 2017, Green Plains Operating Company accessed a portion of its available $100.0 million accordion feature to
increase the revolving credit facility by $40.0 million, from $155.0 million to $195.0 million. At December 31, 2017, the
outstanding principal balance of the facility was $126.9 million and our interest rate was 4.07%.
Refer to Note 11 – Debt included as part of the notes to consolidated financial statements for more information about our
debt.
Contractual Obligations
Contractual obligations as of December 31, 2017 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
Forward grain purchase contracts (4)
Other commodity purchase contracts (5)
Other
Total contractual obligations
Payments Due By Period
Total
$ 1,413,309
281,231
109,147
9,071
Less than 1
year
$ 596,395
72,190
30,966
2,722
1-3 years
$ 139,620
94,828
41,584
1,403
3-5 years
$ 182,023
82,706
18,085
2,398
More than 5
years
$ 495,271
31,507
18,512
2,548
132,391
170,777
301
$ 2,116,227
122,217
170,777
299
$ 995,566
7,257
-
2
$ 284,694
2,000
-
-
$ 287,212
917
-
-
$ 548,755
(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 the majority of our business in U.S. dollars and are not currently exposed to
material 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 $6.2 million per year. At December 31, 2017, we had $1.4 billion in debt, $1.2 billion of
which had variable interest rates.
Refer to 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
50
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. Cattle
prices are impacted by availability of feeder cattle, weather conditions, overall economic conditions, government regulations
and packer processing disruptions.
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
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. Our results are impacted by 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, 2017, revenues included net gains of $3.9 million and cost of goods sold included net gains of $23.7 million
associated with derivative instruments.
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.
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, 2017, 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
518,000
4,100
359,000
41,700
Unit of Measure
Gallons
Bushels
Tons (2)
Pounds
MMBTU
Net Income Effect of
Approximate 10% Change
in Price
$
$
$
$
$
158,378
143,409
34,617
7,100
6,675
(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, a portion of 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 operations.
51
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 $243 thousand for grain at December 31, 2017. Our market risk
at that date, based on the estimated net income effect resulting from a hypothetical 10% change in price, was approximately
$18 thousand.
Food and Ingredients Segment
In the food and ingredients segment, certain 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
follow historical patterns. We manage this less volatile risk by constantly monitoring our position relative to the price
changes in the market. Inventory values are affected by the month-to-month spread in the futures markets. These spreads are
also less volatile than overall market value of our inventory and tend to follow historical patterns, but cannot be mitigated
directly. Our accounting policy for futures and options, as well as the underlying inventory held for sale and purchase and
sale contracts, is to reflect their current market values and include gains and losses in the consolidated statement of
operations.
Our daily net commodity position consists of inventories related to purchase and sale contracts and exchange-traded
contracts. The fair value of our position subject to market risk was approximately $2.8 million for cattle based on market
prices at December 31, 2017. Our market risk at that date, based on the estimated net income effect resulting from a
hypothetical 10% change in price, was approximately $0.2 million.
Our daily net commodity position consists of inventories related to purchase and sale contracts and exchange-traded
contracts. The fair value of our position subject to market risk was approximately $10.0 million for grain and other cattle feed
based on market prices at December 31, 2017. Our market risk at that date, based on the estimated net income effect resulting
from a hypothetical 10% change in price, was approximately $0.8 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, 2017, 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.
52
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, 2017, based on the
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. We completed the acquisition of a cattle feeding operation near Hereford, Texas on March 10, 2017 and two
cattle feeding operations in Leoti, Kansas and Eckley, Colorado on May 16, 2017. Our management excluded from its
assessment of the effectiveness of the company’s internal control over financial reporting as of December 31, 2017, the
acquired businesses’ internal control over financial reporting associated with the acquired assets which represent
approximately 8% of the company’s consolidated total assets and approximately 3% of the company’s consolidated total
revenues as of and for the year ended December 31, 2017. Based on this assessment, management concluded that our internal
control over financial reporting was effective as of December 31, 2017.
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. We have not identified any 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.
53
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Green Plains Inc. and subsidiaries:
Opinion on Internal Control Over Financial Reporting
We have audited Green Plains Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of
December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, 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, 2017, and the related notes and financial statement schedule listed in the Index in Item 15
(collectively, the consolidated financial statements), and our report dated February 14, 2018 expressed an unqualified opinion
on those consolidated financial statements.
The Company completed the acquisition of a cattle feeding operation near Hereford, Texas on March 10, 2017 and two cattle
feeding operations in Leoti, Kansas and Eckley, Colorado on May 16, 2017 (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, 2017, the acquired businesses’ internal control over financial reporting associated with approximately 8% of the
Company’s consolidated total assets and approximately 3% of the Company’s consolidated total revenues as of and for the
year ended December 31, 2017. 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.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
54
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.
Omaha, Nebraska
February 14, 2018
/s/ KPMG LLP
55
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Information in our Proxy Statement for the 2018 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.
56
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, 2017 and 2016
Consolidated Statements of Income for the years-ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income for the years-ended December 31, 2017, 2016 and 2015
Consolidated Statements of Stockholders’ Equity for the years-ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years-ended December 31, 2017, 2016 and 2015
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-39
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)
2.4(b)
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)
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
(Incorporated by reference to Exhibit 2.2 to the company’s Current Report on Form 8-K dated
September 26, 2016)
57
2.5
2.6
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)
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)
Asset Purchase Agreement, dated as of April 25, 2017, by and among Green Plains Cattle Company
LLC, and Cargill Cattle Feeders, LLC. (Incorporated by reference to Exhibit 2.1 to the company’s
Current Report on Form 8-K dated April 26, 2017)
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)
58
*10.5(d)
*10.5(e)
*10.5(f)
*10.5(g)
10.6(a)
10.6(b)
10.6(c)
10.6(d)
10.6(e)
10.6(f)
10.6(g)
10.6(h)
10.6(i)
10.6(j)
10.6(k)
*10.7
*10.8
Amended and Restated 2009 Equity Incentive Plan (Incorporated by reference to Exhibit 99.1 of the
company’s Registration Statement on Form S-8 filed June 23, 2017)
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)
Fourth Amended and Restated Revolving Credit and Security Agreement dated July 28, 2017, among
Green Plains Trade Group LLC, the Lenders and PNC Bank, National Association as Lender and
Agent (Incorporated by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated
July 31, 2017)
First Amendment to Fourth Amended and Restated Revolving Credit and Security Agreement, dated
as of August 29, 2017, among Green Plains Trade Group LLC and PNC Bank, National Association,
as agent, and the lenders party to the Credit and Security Agreement (Incorporated by reference to
Exhibit 10.4(a) to the company’s Current Report on Form 8-K dated August 29, 2017)
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)
Second Amended and Restated 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)
ABL Intercreditor Agreement, dated as of August 29, 2017, among PNC Bank, National Association,
as ABL Collateral Agent, and BNP Paribas, as Term Loan Collateral Agent, and acknowledged by
Green Plains Trade Group LLC and the other ABL Grantors (Incorporated by reference to Exhibit
10.4(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
Guaranty, dated as of August 29, 2017, in favor of PNC Bank, National Association, as agent
(Incorporated by reference to Exhibit 10.4(c) to the company’s Current Report on Form 8-K dated
August 29, 2017)
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)
*10.9
Director Compensation effective November 14, 2017
59
*10.10
*10.11
10.12(a)
10.12(b)
10.12(c)
10.12(d)
10.12(e)
10.12(f)
10.12(g)
10.12(h)
10.12(i)
10.12(j)
10.12(k)
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)
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)
60
10.12(l)
10.12(m)
10.12(n)
10.12(o)
*10.13
*10.14
10.15(a)
10.15(b)
10.15(c)
10.15(d)
10.15(e)
10.15(f)
10.15(g)
10.15(h)
10.15(i)
10.15(j)
10.15(k)
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)
Eighth Amendment to Credit Agreement, dated as of August 29, 2017, among Green Plains Grain
Company and BNP Paribas, as Administrative Agent, and the lenders party to the Credit Agreement
(Incorporated by reference to Exhibit 10.3(a) to the company’s Current Report on Form 8-K dated
August 29, 2017)
ABL Intercreditor Agreement, dated as of August 29, 2017, among BNP Paribas, as ABL Collateral
Agent, and BNP Paribas, as Term Loan Collateral Agent, and acknowledged by Green Plains Grain
Company LLC and the other ABL Grantors (Incorporated by reference to Exhibit 10.3(b) to the
company’s Current Report on Form 8-K dated August 29, 2017)
Guaranty, dated as of August 29, 2017, in favor of BNP Paribas, as administrative agent (Incorporated
by reference to Exhibit 10.3(c) to the company’s Current Report on Form 8-K dated August 29, 2017)
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)
Employment Agreement with John Neppl (Incorporated by reference to Exhibit 10.1 to the company’s
Current Report on Form 8-K dated September 5, 2017)
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)
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)
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)
61
10.15(l)
10.15(m)
10.15(n)
10.15(o)
10.15(p)
10.15(q)
10.15(r)
10.15(s)
10.15(t)
10.15(u)
10.15(v)
10.15(w)
10.15(x)
10.15(y)
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)
Incremental Joinder Agreement, dated October 27, 2017, among Green Plains Operating Company
LLC and Bank of America, as Administrative (Incorporated by reference to Exhibit 10.8 to the
company’s Quarterly Report on Form 10-Q dated November 2, 2017)
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)
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)
62
10.15(z)
10.15(aa)
10.16(a)
10.16(b)
10.16(c)
10.16(d)
10.16(e)
10.16(f)
10.16(g)
10.16(h)
10.17
10.18(a)
10.18(b)
10.18(c)
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)
Second Amendment to the Credit Agreement, dated as of April 28, 2017, by and among Green Plains
Cattle Company LLC and Bank of the West and ING Capital LLC. (joint administrative agents for
lenders). (Incorporated by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K
dated May 1, 2017)
Third Amendment to the Credit Agreement, dated June 29, 2017, 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 10.2 of the company’s
Quarterly Report on Form 10-Q filed August 3, 2017)
Fourth Amendment to the Credit Agreement, dated as of August 29, 2017, 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 10.2(a) to the company’s
Current Report on Form 8-K dated August 29, 2017)
Fifth Amendment to the Credit Agreement, dated as of November 16, 2017, 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 November 17, 2017)
ABL Intercreditor Agreement, dated as of August 29, 2017, among Bank of the West and ING Capital
LLC, as Joint ABL Collateral Agent, and BNP Paribas, as Term Loan Collateral Agent, and
acknowledged by Green Plains Cattle Company LLC and the other ABL Grantors (Incorporated by
reference to Exhibit 10.2(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
Guaranty, dated as of August 29, 2017, in favor of Bank of the West and ING Capital LLC, as joint
administrative agents (Incorporated by reference to Exhibit 10.2(c) to the company’s Current Report
on Form 8-K dated August 29, 2017)
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)
63
10.19(a)
10.19(b)
10.19(c)
10.20(a)
10.20(b)
10.20(c)
10.20(d)
10.21(a)
10.21(b)
10.21(c)
10.21(d)
10.22
10.23
10.24(a)
10.24(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)
64
10.24(c)
10.24(d)
10.24(e)
10.24(f)
10.24(g)
10.24(h)
10.24(i)
10.24(j)
10.24(k)
10.24(l)
10.24(m)
10.24(n)
10.24(o)
10.25(a)
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) (Incorporated by reference to Exhibit 10.22(j) to the company’s Annual Report on
Form 10-K for the year ended December 31, 2016)
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) (Incorporated by reference to Exhibit 10.22(k) to the company’s Annual Report
on Form 10-K for the year ended December 31, 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 Illinois) (Incorporated by reference to Exhibit 10.22(l) to the company’s Annual Report on
Form 10-K for the year ended December 31, 2016)
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) (Incorporated by reference to Exhibit 10.22(m) to the company’s Annual Report
on Form 10-K for the year ended December 31, 2016)
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) (Incorporated by reference to Exhibit 10.22(n) to the company’s Annual Report on
Form 10-K for the year ended December 31, 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 New York) (Incorporated by reference to Exhibit 10.22(o) to the company’s Annual Report
on Form 10-K for the year ended December 31, 2016)
Term Loan Agreement, dated as of August 29, 2017, among Green Plains Inc., BNP Paribas, as
administrative agent and collateral agent and BNP Paribas Securities Corp., BMO Capital Markets
Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and joint book
runners (Incorporated by reference to Exhibit 10.1(a) to the company’s Current Report on Form 8-K
dated August 29, 2017)
65
10.25(b)
10.25(c)
10.25(d)
10.25(e)
10.25(f)
21.1
23.1
31.1
31.2
32.1
32.2
101
First Amendment to Term Loan Agreement, dated October 16, 2017, among Green Plains, Inc. and
BNP Paribas, as administrative agent and collateral agent (Incorporated by reference to Exhibit 10.7 to
the company’s Quarterly Report on Form 10-Q dated November 2, 2017)
Guaranty, dated as of August 29, 2017, in favor of BNP Paribas, as collateral agent and administrative
agent, and the other lenders party to the Term Loan Agreement (Incorporated by reference to Exhibit
10.1(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
Pledge Agreement, dated as of August 29, 2017, among Green Plains Inc., its subsidiaries and BNP
Paribas, as collateral agent (Incorporated by reference to Exhibit 10.1(c) to the company’s Current
Report on Form 8-K dated August 29, 2017)
Security Agreement, dated as of August 29, 2017, among Green Plains Inc., its subsidiaries and BNP
Paribas, as collateral agent (Incorporated by reference to Exhibit 10.1(d) to the company’s Current
Report on Form 8-K dated August 29, 2017)
Term Loan Intercreditor and Collateral Agency Agreement, dated as of August 29, 2017, among BNP
Paribas, as Term Loan Collateral Agent, BNP Paribas, as Pari Passu Collateral Agent, Bank of the
West and ING Capital LLC, as ABL-Cattle Agent, BNP Paribas, as ABL-Grain Agent, PNC Bank,
National Association, as ABL-Trade Agent, and acknowledged by Green Plains Inc. and new grantors
(Incorporated by reference to Exhibit 10.1(e) to the company’s Current Report on Form 8-K dated
August 29, 2017)
Schedule of Subsidiaries
Consent of KPMG LLP
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
The following information from Green Plains Inc.’s Annual Report on Form 10-K for the annual
period ended December 31, 2017, 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
Item 16. Form 10-K Summary.
None.
66
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 14, 2018 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 14, 2018
February 14, 2018
/s/ Todd A. Becker
Todd A. Becker
/s/ John W. Neppl
John W. Neppl
/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 14, 2018
February 14, 2018
February 14, 2018
February 14, 2018
February 14, 2018
February 14, 2018
February 14, 2018
February 14, 2018
February 14, 2018
Director
Director
Director
Director
Director
Director
Director
Director
67
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Green Plains Inc. and subsidiaries:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Green Plains Inc. and subsidiaries (the “Company”) as of
December 31, 2017 and 2016, 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, 2017, and the related notes and financial
statement schedule listed in the Index in Item 15 (collectively, the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three-year period
ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 14, 2018 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis for Opinion
These consolidated financial statements 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 are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We
believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2009.
Omaha, Nebraska
February 14, 2018
F-1
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31,
2017
2016
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowances of $217 and $266, respectively
Income taxes receivable
Inventories
Prepaid expenses and other
Derivative financial instruments
Total current assets
Property and equipment, net
Goodwill
Other assets
Total assets
$
$
266,651
13,810
151,122
6,413
711,878
17,808
38,789
1,206,471
1,176,707
182,879
218,593
2,784,650
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued and other liabilities
Derivative financial instruments
Income taxes payable
Short-term notes payable and other borrowings
Current maturities of long-term debt
Total current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Total liabilities
Commitments and contingencies (Note 16)
Stockholders' equity
$
205,479
63,886
12,884
9,909
526,180
67,923
886,261
767,396
56,801
15,056
1,725,514
$
$
$
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
Common stock, $0.001 par value; 75,000,000 shares authorized; 46,410,405 and
46,079,108 shares issued, and 41,084,463 and 38,364,118 shares
outstanding, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, 5,325,942 and 7,714,990 shares, respectively
Total Green Plains stockholders' equity
Noncontrolling interests
Total stockholders' equity
Total liabilities and stockholders' equity
46
685,019
325,411
(13,110)
(55,184)
942,182
116,954
1,059,136
2,784,650
46
659,200
283,214
(4,137)
(75,816)
862,507
116,684
979,191
2,506,492
$
$
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,
2016
2017
2015
Revenues
Product revenues
Service revenues
Total revenues
Costs and expenses
Cost of goods sold (excluding depreciation and amortization expenses
reflected below)
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 (loss) before income taxes
Income tax (expense) benefit
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
$ 3,589,981 $ 3,402,579 $ 2,957,201
8,388
2,965,589
8,302
3,410,881
6,185
3,596,166
3,301,587
33,448
112,024
107,361
3,554,420
41,746
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
1,597
(90,160)
3,666
(84,897)
(43,151)
124,782
81,631
20,570
61,061 $
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
1.56 $
1.47 $
0.28 $
0.28 $
0.19
0.18
39,247
50,240
38,318
38,573
37,947
39,028
$
$
$
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,
2016
2017
2015
Net income
Other comprehensive income (loss), net of tax:
$
81,631
$
30,491
$
15,228
Unrealized gains (losses) on derivatives arising during period, net of tax
(expense) benefit of $2,967, $10,494, and $(4,413), respectively
Reclassification of realized (gains) losses on derivatives, net of tax expense
(benefit) of $2,306, $(8,830), and $1,855, respectively
Total other comprehensive income (loss), net of tax
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Green Plains
(5,048)
(18,744)
7,169
(3,925)
(8,973)
72,658
20,570
52,088
$
15,772
(2,972)
27,519
19,828
7,691
$
(3,014)
4,155
19,383
8,164
11,219
$
See accompanying notes to the consolidated financial statements.
F-4
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
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
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
Repurchase of common stock
Exchange of 3.25%
convertible notes due 2018
Stock-based compensation
Stock options exercised
Balance, December 31, 2017
Common
Stock
Additional
Paid-in
Shares Amount Capital
44,809 $
-
45 $
-
569,431 $
-
Accum. Other
Green Plains Non-
Total
Total
Retained Comp. Income Treasury Stock Stockholders' Control. Stockholders'
Earnings
Shares Amount
Interests
Equity
Equity
(Loss)
299,101 $
7,064
(5,320) 7,200 $
-
-
(65,808) $
-
797,449 $
7,064
- $
8,164
797,449
15,228
-
-
-
-
-
-
-
-
-
-
-
(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
61,061
-
-
-
-
-
-
(4,137) 7,715
-
-
-
-
-
(75,816)
-
24,492
6,847
1,757
862,507
61,061
-
143
-
116,684
20,570
24,492
6,990
1,757
979,191
81,631
-
(18,864)
(20,519)
(39,383)
-
-
-
-
-
-
-
-
-
-
-
(18,864)
-
-
-
-
-
-
-
-
-
-
-
(5,048)
-
-
(3,925)
(8,973)
-
-
-
395
-
-
(6,724)
-
(8,973)
(6,724)
-
-
-
-
-
-
(8,973)
(6,724)
45,682
7,443
50
45,682
7,662
50
942,182 $ 116,954 $ 1,059,136
-
219
-
-
326
5
46,410 $
-
-
-
46 $
18,326
7,443
50
685,019 $
-
-
-
325,411 $
- (2,784)
-
-
-
-
(13,110) 5,326 $
27,356
-
-
(55,184) $
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 by (used in)
operating activities:
Year Ended December 31,
2016
2015
2017
$
81,631 $
30,491 $
15,228
Depreciation and amortization
Amortization of debt issuance costs and debt discount
Loss on exchange of 3.25% convertible notes due 2018
Write-off of deferred financing fees related to extinguishment of debt
Gain on disposal of assets
Deferred income taxes
Other noncurrent assets and liabilities
Stock-based compensation
Undistributed equity in loss of affiliates
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
Change in restricted cash
Other
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchases of property and equipment, net
Acquisition of businesses, net of cash acquired
Investments in unconsolidated subsidiaries
Net cash used in investing activities
Continued on the following page
107,361
14,758
1,291
9,460
(3,250)
(81,077)
(7,869)
12,161
274
3,624
(268,219)
(1,820)
(794)
6,500
(40,866)
3,641
3,374
(159,820)
(46,467)
(61,727)
(20,286)
(128,480)
84,226
11,488
-
-
-
4,910
-
9,491
3,055
(36,888)
(42,012)
(20,581)
(4,092)
49,077
(1,887)
-
(2,085)
85,193
65,950
7,853
-
-
-
(27,513)
-
8,752
1,519
41,923
(78,410)
15,148
7,851
(33,212)
(9,586)
-
(1,633)
13,870
(58,113)
(508,143)
(6,342)
(572,598)
(63,350)
(116,796)
(3,055)
(183,201)
F-6
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Continued from the previous page
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
Cash payment for exchange of 3.25% convertible notes due 2018
Proceeds from issuance of Green Plains Partners common units, net
Payments for repurchase of common stock
Payments of cash dividends and distributions
Payment penalty on early extinguishment of debt
Change in restricted cash
Payments of loan fees
Payments related to tax withholdings for stock-based compensation
Proceeds from exercises of stock options
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Non-cash financing activity:
Exchange of 3.25% convertible notes due 2018 for shares of
common stock
Exchange of common stock held in treasury stock for 3.25%
convertible notes due 2018
Supplemental disclosures of cash flow:
Cash paid (refunded) for income taxes
Cash paid for interest
Supplemental investing and financing activities:
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
$
$
$
$
$
$
$
$
Year Ended December 31,
2016
2015
2017
570,600 $
(510,209)
4,385,446
(4,150,994)
(8,523)
-
(6,724)
(39,383)
(2,881)
34,528
(16,671)
(4,499)
50
250,740
524,000 $
(106,803)
4,130,946
(4,066,968)
-
-
(6,005)
(37,278)
-
(18,641)
(12,053)
(2,206)
1,757
406,749
178,400
(195,810)
3,237,477
(3,219,566)
-
157,452
(4,003)
(19,795)
-
2,725
(5,314)
(3,644)
766
128,688
(37,560)
304,211
266,651 $
(80,656)
384,867
304,211 $
(40,643)
425,510
384,867
47,743 $
27,356 $
- $
- $
-
-
(3,768) $
54,213 $
4,692 $
38,245 $
43,833
32,753
63,670 $
(1,943)
568,383 $
(57,433)
120,910
(4,114)
-
61,727 $
(2,807)
508,143 $
-
116,796
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. The company
owns a 62.5% limited partner interest and a 2.0% general partner interest in Green Plains Partners LP. Public investors own
the remaining 35.5% limited partner interest in the partnership. The company determined that the limited partners in the
partnership with equity at risk lack the power, through voting rights or similar rights, to direct the activities that most
significantly impact partnership’s economic performance; therefore, the partnership is considered a VIE. The company,
through its ownership of the general partner interest in the partnership, has the power to direct the activities that most
significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be
potentially significant to the partnership; therefore, the company is considered the primary beneficiary and consolidates the
partnership. The assets of the partnership cannot be used by the company for general corporate purposes. The partnership’s
consolidated total assets as of December 31, 2017 and 2016 are $74.9 million and $75.0 million, respectively, and primarily
consist of property and equipment and goodwill. The partnership’s consolidated total liabilities as of December 31, 2017 and
2016 are $153.0 million and $156.0 million, respectively, which primarily consist of long-term debt as discussed in Note 11 –
Debt. The liabilities recognized as a result of consolidating the partnership do not represent additional claims on our general
assets. The partnership is consolidated in the company’s financial statements. Effective April 1, 2016, the company increased
its ownership of BioProcess Algae, a joint venture formed in 2008, to 82.8% and consolidated BioProcess Algae in its
consolidated financial statements beginning on that date.
Reclassifications
Certain prior year amounts have been 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, carrying value of intangible assets, 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, commodity
marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and
other commodities, (3) food and ingredients, which includes cattle feeding, vinegar production and food-grade corn oil
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
F-8
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 518 million bushels of corn and produce approximately
1.5 billion gallons of ethanol, 4.1 million tons of distillers grains and 359 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 59.6 million bushels, with 49.5 million bushels of storage capacity at the
company’s ethanol plants and 10.1 million bushels of total storage capacity at its four 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.
Food and Ingredients Segment
The company owns four cattle feeding operations with the capacity to support approximately 258,000 head of cattle and
grain storage capacity of approximately 9.6 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 three 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, 2017, 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 3,500 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 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.
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.
F-9
The company routinely enters into fixed-price, physical-delivery 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. Energy trading transactions are reported net as a component of revenue. All other transactions are reported net
as either a component of revenue or cost of goods sold, depending on their position as a gain or loss. Revenues also include
realized gains and losses on related derivative financial instruments and reclassifications of realized gains and losses on cash
flow hedges from accumulated other comprehensive income or loss.
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 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.
Cost of Goods Sold
Cost of goods sold includes direct labor, materials, shipping costs and plant overhead costs. Direct labor includes all
compensation and related benefits of non-management personnel involved in ethanol plant, vinegar production and cattle
feeding 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 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 reclassifications of gains and
losses on cash flow hedges from accumulated other comprehensive income or loss. Plant overhead consists primarily of plant
and feedlot utilities, repairs and maintenance, yard expenses and outbound freight charges. Shipping costs incurred by the
company, including railcar costs, are also reflected in cost of goods sold.
The company uses exchange-traded futures and options contracts to minimize the effect of price changes on grain and
cattle inventories and forward purchase and sales contracts. Exchange-traded futures and options contracts are valued at
quoted market prices and settled predominantly in cash. The company is exposed to loss when counterparties default on
forward purchase and sale contracts. Grain inventories held for sale and forward purchase and sale contracts are valued at
market prices when available or other market quotes adjusted for differences, primarily in transportation, between the
exchange-traded market and local market where the terms of the contract is based. Changes in forward purchase contracts and
exchange-traded futures and options contracts are recognized as a component of cost of goods sold.
Operations and Maintenance Expenses
In the partnership segment, transportation expenses represent the primary component of operations and maintenance
expenses. Transportation expenses includes railcar leases, freight and shipping of the company’s ethanol and co-products, as
well as costs incurred storing ethanol at destination terminals.
Derivative Financial Instruments
The company uses various derivative financial instruments, including exchange-traded futures and exchange-traded and
over-the-counter options contracts, to minimize risk and the effect of price changes related to various commodities including
but not limited to, corn, ethanol, cattle, natural gas and crude oil. The company monitors and manages this exposure as part of
its overall risk management policy to reduce the adverse effect market volatility may have on its operating results. The
company may hedge these commodities as one way to mitigate risk, however, there may be situations when these hedging
activities themselves result in losses.
By using derivatives to hedge exposures to changes in commodity prices, the company is exposed to credit and market
risk. The company’s exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the
terms of the derivative contract. The company minimizes its credit risk by entering into transactions with high quality
counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring their financial
condition. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in
commodity prices or interest rates. The company manages market risk by incorporating parameters to monitor exposure
within its risk management strategy, which limits the types of derivative instruments and strategies the company can use and
the degree of market risk it can take using derivative instruments.
The company evaluates its physical delivery contracts to determine if they qualify for normal purchase or sale
exemptions which are expected to be used or sold over a reasonable period in the normal course of business. Contracts that
do not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating
income unless the contracts qualify for, and the company elects, hedge accounting treatment.
F-10
Certain qualifying derivatives related to ethanol production, agribusiness and energy services and food and ingredients
segments are designated as cash flow hedges. The company evaluates the derivative instrument to ascertain its effectiveness
prior to entering into cash flow hedges. Unrealized gains and losses are reflected in accumulated other comprehensive income
or loss 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.
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.
The company has master netting arrangements with various counterparties. On the consolidated balance sheets, the
associated net amount for each counterparty is reflected as either an accounts receivable or accounts payable. If the amount
for each counterparty were reflected on a gross basis, the company’s accounts receivable and accounts payable would
increase by $23.4 million and $24.6 million at December 31, 2017 and 2016, respectively.
Inventories
Corn held for ethanol production, ethanol, corn oil and distillers grains inventories are recorded at lower of average cost
or 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. 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
Production equipment
Other machinery and equipment
Land improvements
Railroad track and equipment
Computer hardware and software
Office furniture and equipment
Years
10-40
15-50
5-7
20
20
3-5
5-7
Property and equipment is capitalized at cost. Land improvements 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.
F-11
Intangible Assets
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.
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 is an asset representing the future economic benefits arising from other assets acquired in a business
combination that are not individually identified and separately recognized. The determination of goodwill takes into
consideration the fair value of 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 the reporting unit level at least annually, as of October 1, or more frequently
when events or changes in circumstances indicate that impairment may have occurred. The qualitative factors of goodwill are
assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount
as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Under the first step, the
fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit
is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the entity must perform
step two of the impairment test. Under the second step, an impairment charge is recognized for any excess of the carrying
amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is
determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual
fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is
determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, no further
analysis is necessary. No impairment charges were recorded for the periods reported. For additional information, please refer
to Note 9 - Goodwill.
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.
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
F-12
liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial
reporting carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
operating results in the period of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely
than not that some portion or all of the deferred tax assets will not be realized.
The company recognizes uncertainties in income taxes within the financial statements under a process by which the
likelihood of a tax position is gauged based upon the technical merits of the position, and then a subsequent measurement
relates the maximum benefit and the degree of likelihood to determine the amount of benefit recognized in the financial
statements.
Recent Accounting Pronouncements
Effective January 1, 2017, the company adopted the amended guidance in ASC Topic 330, Inventory: Simplifying the
Measurement of Inventory, which requires inventory to be measured at the lower of cost or net realizable value. Net
realizable value is the estimated selling prices during the ordinary course of business, less reasonably predictable costs of
completion, disposal and transportation. The amended guidance was applied prospectively.
Effective January 1, 2017, the company adopted the amended guidance in ASC Topic 718, Compensation – Stock
Compensation: Improvements to Employee Share-Based Payment Accounting, which requires all income tax effects related
to awards to be recognized in the income statement when the awards vest or settle. The amended guidance also allows an
employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting
and make a policy election to account for forfeitures as they occur. The amended guidance requiring recognition of excess tax
benefits and tax deficiencies in the income statement was applied prospectively. The amended guidance related to the timing
of when excess tax benefits are recognized, did not have an impact on the consolidated financial statements. The amended
guidance related to the presentation of employee taxes paid on the statement of cash flows was applied retrospectively. This
change resulted in a $2.2 million and $3.6 million increase in cash flows from operating activities and a decrease in cash
flows from financing activities for the twelve months ended December 31, 2016 and 2015, respectively. The company has
elected to account for forfeitures as they occur. This change did not have a material impact on the financial statements.
During the fourth quarter of 2017, the company early adopted the amended guidance in ASC Topic 815, Derivatives and
Hedging: Targeted Improvements to Accounting for Hedging Activities, which is designed to improve the alignment of risk
management activities and financial reporting for hedging relationships through changes to both the designation and
measurement guidance for qualifying hedging relationships and the presentation of hedging results. The provisions of ASC
Topic 815 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition
and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amended
guidance was applied prospectively and did not have a material impact on the financial statements.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 230, Statement of Cash Flows:
Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents to be included
with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the
statement of cash flows. The amended guidance will be applied retrospectively. Upon adoption, the company will include
restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and
end-of-period total amounts on the statement of cash flows.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 606, Revenue from Contracts
with Customers. ASC Topic 606 is designed to create improved revenue recognition and disclosure comparability in financial
statements. The provisions of ASC Topic 606 include a five-step process by which an entity will determine revenue
recognition, depicting the transfer of goods or services to customers in amounts which reflect the payment an entity expects
to be entitled to in exchange for goods or services. The new guidance requires the company to apply the following steps: (1)
identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction
price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as,
the company satisfies the performance obligation. In addition, ASC Topic 606 requires certain disclosures about contracts
with customers and provides comprehensive guidance for transactions such as service revenue, contract modifications and
multiple-element arrangements. The new standard is effective for fiscal years and interim periods within those years,
beginning after December 15, 2017, and allows for early adoption.
The company completed a comparison of the current revenue recognition policies to the ASC Topic 606 requirements
for each of the company’s major revenue categories. Results indicate that the amended guidance will not materially change
F-13
the amount or timing of revenues recognized by the company and the majority of the company's contracts will continue to be
recognized at a point in time and that the number of performance obligations and the accounting for variable consideration
are not expected to be significantly different from current practice. In addition, a portion of the company's sales contracts are
considered derivatives under ASC Topic 815, Derivatives and Hedging, and are therefore excluded from the scope of Topic
606. ASC Topic 606 also requires disclosure of significant changes in contract asset and contract liability balances between
periods and the amount of the transaction price allocated to performance obligations that are unsatisfied or partially
unsatisfied as of the end of the reporting period, when applicable. ASC Topic 606 may be adopted retrospectively to each
prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. The company will adopt the
amended guidance using the modified retrospective transition method.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 740, Income Taxes: Intra-Entity
Transfers of Assets other than Inventory, which requires the recognition of current and deferred income tax consequences of
an intra-entity transfer of an asset other than inventory when the transfer occurs. The amended guidance will be applied on a
modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of
adoption. The company does not expect adoption of the guidance to have a material impact to the financial statements.
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, 2018, the company will early adopt the amended guidance in ASC Topic 350, Intangibles –
Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the measurement of goodwill by
eliminating Step 2 from the goodwill impairment test. The annual goodwill impairment test will be performed by comparing
the fair value of a reporting unit with its carrying amount. An impairment charge equal to the amount by which the carrying
amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit,
would be recognized. The amended guidance will be applied prospectively.
Effective January 1, 2019, the company will adopt the amended guidance in ASC Topic 842, Leases, which aims to
make leasing activities more transparent and comparable, requiring substantially all leases to be recognized by lessees on the
balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating
leases. The new standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those
years, and allows for early adoption. The company has established an implementation team to evaluate the impact of the new
standard. The new standard will significantly increase right-of-use assets and lease liabilities on the company’s consolidated
balance sheet, primarily due to operating leases that are currently not recognized on the balance sheet. The company
anticipates adopting the amended guidance using the modified retrospective transition method.
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,
F-14
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 3,500 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 is 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 are derived from long-term, fee-based commercial agreements with
Green Plains Trade, a subsidiary of the company. In connection with the IPO, the partnership (1) entered into (i) a ten-year
fee-based storage and throughput agreement; (ii) 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 Cattle Feeding Operations
On May 16, 2017, the company acquired two cattle-feeding operations from Cargill Cattle Feeders, LLC for
$57.7 million, including certain working capital adjustments. The transaction included the feed yards located in Leoti, Kansas
and Eckley, Colorado, which added combined feedlot capacity of 155,000 head of cattle to the company’s operations. The
transaction was financed using cash on hand. There were no material acquisition costs recorded for the acquisition.
As part of the transaction, the company also entered into a long-term cattle supply agreement with Cargill Meat
Solutions Corporation. Under the cattle supply agreement, all cattle placed in the Leoti, Eckley and the company’s existing
Kismet, Kansas feedlots will be sold exclusively to Cargill Meat Solutions under an agreed upon pricing arrangement.
The purchase price allocation is based on the preliminary results of an external valuation. The purchase price and
purchase price allocation are preliminary until contractual post-closing working capital adjustments and valuations are
finalized.
The following is a summary of the preliminary purchase price of assets acquired and liabilities assumed (in thousands):
Amounts of Identifiable Assets Acquired
and Liabilities Assumed
Inventory
Prepaid expenses and other
Property and equipment, net
Current liabilities
Total identifiable net assets
Acquisition of Fleischmann’s Vinegar
$
$
20,576
52
37,205
(180)
57,653
F-15
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.
The following is a summary of the 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
49,175
90,500
(9,689)
(216)
(41,882)
116,317
142,002
258,319
The amounts above reflect the final purchase price allocation. As of September 30, 2017, based on the final valuations,
assets acquired and liabilities assumed were adjusted from the prior quarter to reflect an increase in the fair value of property
and equipment of $6.2 million, a decrease in accumulated depreciation of $0.5 million, a decrease in the fair value of
intangible assets of $4.0 million, a decrease in accumulated amortization of $0.3 million, a decrease in the fair value of
goodwill of $0.8 million, a decrease of $0.1 million in income taxes payable and an increase in deferred tax liabilities of
$1.5 million.
As of December 31, 2017, based on the final valuations, the company’s customer relationship intangible asset recognized
in connection with the Fleischmann’s acquisition is $73.3 million, net of $6.7 million of accumulated amortization, and has a
remaining 14 year weighted-average amortization period. As of December 31, 2017, the company also has an indefinite-lived
trade name intangible asset of $10.5 million. The company recognized $5.3 million of amortization expense associated with
the amortizing customer relationship intangible asset during the year ended December 31, 2017 and estimated amortization
expense for the next five years is $5.3 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.
F-16
The following is a summary 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
$
$
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 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.
F-17
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 2 – directly or indirectly observable inputs such as quoted prices for similar assets or liabilities in active markets
other than quoted prices included within Level 1, quoted prices for identical or similar assets in markets that are not active,
and other inputs that are observable or can be substantially corroborated by observable market data through correlation or
other means. Grain inventories held for sale in the agribusiness segment are valued at nearby futures values, plus or minus
nearby basis.
Level 3 – unobservable inputs that are supported by little or no market activity and comprise a significant component of
the fair value of the assets or liabilities. The company currently does not have any recurring Level 3 financial instruments.
Derivative contracts include exchange-traded commodity futures and options contracts and forward commodity purchase
and sale contracts. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active
markets and are classified in Level 1. The majority of the company’s exchange-traded futures and options contracts are cash-
settled on a daily basis and, therefore, are not included in the 2017 table.
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, 2017
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
-
-
26,834
12,045
-
38,879
$
$
Total
266,651
13,810
26,834
12,045
115
319,455
37,401
12,884
92
50,377
$
$
37,401
12,884
92
50,377
Assets:
Cash and cash equivalents
Restricted cash
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
$
$
$
$
266,651
13,810
-
-
115
280,576
-
-
-
-
$
$
$
$
F-18
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
(1) Accounts payable is generally stated at historical amounts with the exception of $37.4 million and $35.3 million at December 31, 2017 and 2016,
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 approximated book value, which was approximately $1.4 billion at
December 31, 2017, and $1.1 billion at December 31, 2016. The company estimated the fair value of its outstanding debt
using Level 2 inputs. The company believes the fair values of its accounts receivable approximated book value, which was
$151.1 million and $147.5 million, respectively, at December 31, 2017 and 2016.
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
The company 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, commodity marketing and merchant trading for company-produced and third-
party ethanol, distillers grains, corn oil and other commodities, (3) food and ingredients, which includes cattle feeding,
vinegar production and food-grade corn oil operations and (4) partnership, which includes fuel storage and transportation
services.
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.
F-19
Corporate activities include selling, general and administrative expenses, consisting primarily of compensation,
professional fees and overhead costs not directly related to a specific operating segment.
During the normal course of business, the operating segments conduct business with each other. For example, the
agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers
grains and corn oil for the ethanol production segment. The partnership segment provides fuel storage and transportation
services for the agribusiness and energy services segment. These intersegment activities are treated like third-party
transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these
transactions affect segment performance; however, they do not impact the company’s consolidated results since the revenues
and corresponding costs are eliminated.
The following tables set forth certain financial data for the company’s operating segments (in thousands):
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 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
2017
Year Ended December 31,
2016
2015
$
$
2,497,360
10,313
2,507,673
$
2,409,102
-
2,409,102
2,063,172
-
2,063,172
621,223
47,538
668,761
471,398
383
471,781
6,185
100,808
106,993
3,755,208
(159,042)
3,596,166
$
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
$
(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 ingredients
Partnership
Intersegment eliminations
Operating income (loss):
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Intersegment eliminations
Corporate activities
2017
Year Ended December 31,
2016
2015
2,434,001
614,582
411,781
-
(158,777)
3,301,587
$
$
2,280,906
650,538
294,396
-
(129,761)
3,096,079
$
$
1,939,824
639,470
216,661
-
(66,588)
2,729,367
2017
Year Ended December 31,
2016
2015
(45,074)
30,443
35,961
65,709
(61)
(45,232)
41,746
$
$
28,125
34,039
16,436
60,903
(170)
(47,645)
91,688
$
$
43,266
37,253
(952)
12,990
-
(31,480)
61,077
$
$
$
$
F-20
EBITDA:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Intersegment eliminations
Corporate activities
Income (loss) before income taxes:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Intersegment eliminations
Corporate activities
Depreciation and amortization:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Corporate activities
Capital expenditures:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Corporate activities
2017
Year Ended December 31,
2016
2015
40,069
33,906
49,803
71,041
(61)
(40,388)
154,370
$
$
97,113
34,209
20,190
66,633
(732)
(42,985)
174,428
$
$
100,002
40,655
218
18,903
(71)
(31,926)
127,781
2017
Year Ended December 31,
2016
2015
(63,569)
21,460
13,512
60,527
(61)
(75,020)
(43,151)
$
$
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
2017
Year Ended December 31,
2016
2015
81,987
3,462
13,103
5,111
3,698
107,361
$
$
68,746
2,536
3,705
5,647
3,592
84,226
$
$
55,604
1,542
1,004
5,828
1,972
65,950
2017
Year Ended December 31,
2016
2015
28,996
397
17,772
2,024
3,115
52,304
$
$
39,555
2,340
2,479
400
11,638
56,412
$
$
48,881
12,552
1,049
1,496
1,589
65,567
$
$
$
$
$
$
$
$
The following table reconciles net income to EBITDA (in thousands):
Net income:
Interest expense
Income tax expense (benefit)
Depreciation and amortization
EBITDA
2017
Year Ended December 31,
2016
2015
$
$
81,631
90,160
(124,782)
107,361
154,370
$
$
30,491
51,851
7,860
84,226
174,428
$
$
15,228
40,366
6,237
65,950
127,781
F-21
The following table sets forth revenues by product line (in thousands):
Revenues:
Ethanol
Distillers grains
Corn oil
Grain
Food and ingredients
Service revenues
Other
2017
Year Ended December 31,
2016
2015
$
$
2,409,073
430,699
160,447
81,193
444,625
6,185
63,944
3,596,166
$
$
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
The following table sets forth total assets by operating segment (in thousands):
Total assets (1):
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Corporate assets
Intersegment eliminations
Year Ended December 31,
2017
2016
$
$
1,144,459
554,981
725,232
74,935
295,217
(10,174)
2,784,650
$
$
1,206,155
579,977
406,429
74,999
257,652
(18,720)
2,506,492
(1) Asset balances by segment exclude intercompany payable and receivable balances.
7. INVENTORIES
Inventories are carried at lower of cost or market, except for grain held for sale, which are reported at net realizable
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,
2017
2016
146,269
65,693
144,520
320,664
34,732
711,878
$
$
99,009
65,926
135,516
91,093
30,637
422,181
$
$
F-22
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
Computer hardware and software
Office furniture and equipment
Leasehold improvements and other
Total property and equipment
Less: accumulated depreciation and amortization
Property and equipment, net
9. GOODWILL
December 31,
2017
2016
1,232,724
212,426
136,274
42,149
17,019
19,653
3,854
27,193
1,691,292
(514,585)
1,176,707
$
$
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
$
$
The company currently has three reporting units, to which goodwill is assigned. For the year ended December 31, 2016,
we qualitatively assessed whether it was more likely than not that the respective fair value of each reporting unit was less
than its carrying amount, including goodwill. Based on that assessment, we determined that this condition did not exist. As
such, performing the first step of the two-step impairment test was unnecessary.
For the year ended December 31, 2017, the company determined a step one analysis was appropriate due to the passage
of time since the last quantitative analysis was performed. A cash flow and valuation analysis was performed to estimate the
fair value of each reporting unit. Significant assumptions inherent in the valuation methodologies for goodwill are employed
and include, but are not limited to, prospective financial information, growth rates, discount rates, inflationary factors, and
cost of capital. Based on this quantitative test, we determined that the fair value of each reporting unit exceeded its carrying
amount and, therefore, step two of the two-step goodwill impairment test was unnecessary. The annual goodwill impairment
reviews for the years ended December 31, 2017 and 2016, concluded that goodwill was not impaired in either of these years.
Changes in the carrying amount of goodwill attributable to each business segment during the years ended December 31,
2017 and 2016 were as follows (in thousands):
Balance, December 31, 2015
Acquisition of Fleischmann's Vinegar
Balance, December 31, 2016
Adjustment to preliminary Fleischmann's Vinegar
Valuation
Balance, December 31, 2017
Ethanol
Production
Food and
Ingredients
Partnership
Total
$
30,279 $
-
30,279
- $
10,598 $
142,819
142,819
-
10,598
40,877
142,819
183,696
-
$
30,279 $
(817)
142,002 $
-
10,598 $
(817)
182,879
As of December 31, 2017, based on the final valuations in connection with the Fleischmann’s acquisition, the fair value
of goodwill was reduced by $0.8 million.
10. DERIVATIVE FINANCIAL INSTRUMENTS
At December 31, 2017, the company’s consolidated balance sheet reflected unrealized losses of $13.1 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-23
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):
Asset Derivatives'
Fair Value at December 31,
2017
2016
Derivative financial instruments (1)
Other liabilities
Total
$
$
12,045 (2) $
-
12,045
$
14,818
-
14,818
(3) $
$
Liability Derivatives'
Fair Value at December 31,
2017
12,884
92
12,976
2016
27,099
81
27,180
$
(1) At December 31, 2017, derivative financial instruments, as reflected on the balance sheet, includes margin deposits of $18.2 million and net
unrealized gains on exchange traded futures and options contracts of $8.5 million. At December 31, 2016, derivative financial instruments
includes margin deposits of $50.6 million and net unrealized losses on exchange traded futures and options contracts of $18.2 million.
(2) Balance at December 31, 2017, includes $0.3 million of net unrealized gains on derivative financial instruments designated as cash flow hedging
instruments.
(3) Balance at December 31, 2016, includes $17.0 million of net unrealized losses on derivative financial instruments designated as cash flow
hedging instruments.
Refer to Note 5 - Fair Value Disclosures, which contains fair value information related to derivative financial
instruments.
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):
Location of Gain or (Loss) Reclassified from
Accumulated Other Comprehensive Income into Income
Revenues
Cost of goods sold
Net increase (decrease) recognized in earnings before tax
Gain or (Loss) Recognized in
Other Comprehensive Income on Derivatives
Commodity Contracts
$
$
$
Amount of Gain or (Loss) Reclassified from
Accumulated Other Comprehensive Income into
Income
Year Ended December 31,
2016
2015
2017
18,167
(11,936)
6,231
$
$
(8,094)
(16,508)
(24,602)
$
$
8,420
(3,551)
4,869
Amount of Gain or (Loss) Recognized in Other
Comprehensive Income on Derivatives
Year Ended December 31,
2016
(29,238)
(8,015)
2017
2015
$
$
11,582
Amount of Gain or (Loss) Recognized in
Income on Derivatives
Year Ended December 31,
2016
6,071
11
6,082
2015
$ (12,995)
10,492
(2,503)
2017
$ (12,583)
27,078
$ 14,495
$
$
$
Derivatives Not Designated
as Hedging Instruments
Commodity Contracts
Commodity Contracts
Location of Gain or
(Loss Recognized in
Income on Derivatives
Revenues
Costs of goods sold
F-24
The Effect of Cash Flow and Fair Value Hedge Accounting on the Statement of Financial Performance
For the Years Ended December 31,
Location and Amount of Gain or (Loss) Recognized in Income on
Cash Flow and Fair Value Hedging Relationships
2016
2015
2017
Gain or (loss) on cash flow hedging relationships:
Cost of
Goods
Sold
Revenue
Cost of
Goods
Sold
Revenue
Cost of
Goods
Sold
Revenue
Commodity contracts:
Amount of gain or loss reclassified from
accumulated other comprehensive income into
income
$
18,167 $
(11,936) $
(8,094) $
(16,508) $
8,420 $
(3,551)
Gain or (loss) on fair value hedging relationships:
Commodity contracts:
Hedged item
1,451
(6,229)
1,388
21,430
-
(7,819)
Derivatives designated as hedging instruments
(1,734)
8,530
(1,388)
(16,219)
-
12,045
Total amounts of income and expense line items
presented in the statement of financial
performance in which the effects of cash flow or
fair value hedges are recorded
$
17,884 $ (9,635) $
(8,094) $
(11,297) $
8,420 $
675
F-25
There were no gains or losses from discontinuing cash flow hedge treatment during the years ended December 31, 2017,
2016 and 2015.
The open commodity derivative positions as of December 31, 2017, are as follows (in thousands):
Exchange Traded
Non-Exchange Traded
December 31, 2017
Derivative
Instruments
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Options
Options
Options
Options
Forwards
Forwards
Forwards
Forwards
Forwards
Net Long &
(Short) (1)
Long (2)
(Short) (2)
(43,340)
5,880 (3)
10,826
(130,494) (3)
(14,620)
100
(300,480) (3)
(44)
3,108 (3)
1,841
(35)
15,088
19
15,784
61,635
217
10,196
12,919
(460)
(353,129)
(306)
(86,729)
(1,861)
Unit of
Measure
Bushels
Bushels
Gallons
Gallons
mmBTU
Pounds
Pounds
Barrels
Gallons
Gallons
mmBTU
Pounds
Barrels
Bushels
Gallons
Tons
Pounds
mmBTU
Commodity
Corn, Soybeans and Wheat
Corn
Ethanol
Ethanol
Natural Gas
Livestock
Livestock
Crude Oil
Natural Gasoline
Ethanol
Natural Gas
Livestock
Crude Oil
Corn and Soybeans
Ethanol
Distillers Grains
Corn Oil
Natural Gas
(1) Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.
(2) Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts.
(3) Futures used for cash flow hedges.
Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated
statements of income. Included in revenues are net gains of $35.4 million, $11.6 million, and $9.6 million for the years ended
December 31, 2017, 2016, and 2015 respectively, on energy trading contracts.
F-26
11. DEBT
The components of long-term debt are as follows (in thousands):
Corporate:
$500.0 million term loan
$120.0 million convertible notes due 2018
$170.0 million convertible notes due 2022
Green Plains Partners:
$195.0 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
Other
Total face value of long-term debt
Unamortized debt issuance costs
Less: current portion of long-term debt
Total long-term debt
December 31,
2017
2016
$
$
498,750
61,442
136,739
126,900
-
-
-
27,744
851,575
(16,256)
(67,923)
767,396
$
$
-
110,328
131,300
129,000
301,095
129,675
4,000
29,167
834,565
(16,896)
(35,059)
782,610
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
2018
2019
2020
2021
2022
Thereafter
Total
$
$
70,214
6,582
133,038
6,007
176,016
495,271
887,128
Short-term notes payable and other borrowings at December 31, 2017 include working capital revolvers at Green Plains
Cattle, Green Plains Grain and Green Plains Trade with outstanding balances of $270.9 million, $75.0 million, and $180.3
million, respectively. 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.
Corporate Activities
In August 2016, the company issued $170.0 million of 4.125% convertible senior notes due in 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.
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
F-27
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
50.2408 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $19.90 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.
During the second quarter of 2017, the company entered into several privately negotiated agreements with holders, on
behalf of certain beneficial owners of the company’s 3.25% notes. Under these agreements, 2,783,725 shares of the
company’s common stock and approximately $8.5 million in cash plus accrued but unpaid interest on the 3.25% notes, were
exchanged for approximately $56.3 million in aggregate principal amount of the 3.25% notes. Common stock held as
treasury shares were exchanged for the 3.25% notes. Following the closings of the agreements, $63.7 million aggregate
principal amount of the 3.25% notes remain outstanding.
At issuance, the company separately accounted for the liability and equity components of the convertible notes by
bifurcating the gross proceeds between the indebtedness, or liability component, and the embedded conversion option, or
equity component. This bifurcation was done by estimating an effective interest rate on the date of issuance for similar notes.
The embedded conversion option was recorded in stockholders’ equity. Since the company did not exercise the embedded
conversion option associated with the notes, pursuant to the guidance within ASC Topic 470, Debt, the company recorded a
loss upon extinguishment measured by the difference between the fair value and carrying value of the liability portion of the
notes. As a result, the company recorded a charge to interest expense in the consolidated financial statements of
approximately $1.3 million during the three months ended June 30, 2017. This charge included $0.6 million of unamortized
debt issuance costs related to the principal balance extinguished. The remaining settlement consideration transferred was
allocated to the reacquisition of the embedded conversion option and recognized as a reduction of additional paid-in capital.
On August 29, 2017, the company entered into a $500.0 million term loan agreement, which matures on August 29,
2023, to refinance approximately $405.0 million of total debt outstanding issued by Green Plains Processing and
Fleischmann’s Vinegar, pay associated fees and expenses and for general corporate purposes. The term loan is guaranteed by
the company and substantially all of its subsidiaries, but not Green Plains Partners and certain other entities, and secured by
substantially all of the assets of the company, including 17 ethanol production facilities, vinegar production facilities and a
second priority lien on the assets secured under the revolving credit facilities at Green Plains Trade, Green Plains Cattle and
Green Plains Grain.
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. At the end of each fiscal quarter, the covenants of the credit agreement require the company to maintain a
maximum term debt to total term capitalization of not more than 55% and a minimum interest coverage ratio of not less than
1.25x, as defined in the credit agreement. Beginning in 2018, the credit facility also has a provision requiring the company to
make special annual payments of 50% or 75% of its available free cash flow, subject to certain limitations. Voluntary term
loan prepayments are subject to prepayment fees of 1.0% if prepaid before the eighteen month anniversary of the credit
F-28
agreement. Beginning in the fourth quarter of 2017, scheduled principal payments are $1.25 million until maturity. The term
loan bears interest at a floating rate of a base rate plus a margin of 4.50% or LIBOR plus a margin of 5.50%.
Ethanol Production Segment
Green Plains Processing had a $345.0 million senior secured credit facility, which was guaranteed by the company and
certain subsidiaries of Green Plains Processing and secured by the stock and substantially all of the assets of Green Plains
Processing. The interest rate was LIBOR, subject to a 1.00% floor, plus 5.50% and was scheduled to mature on June 30,
2020. The terms of the credit facility required 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.
This senior secured credit facility was extinguished in full on August 29, 2017 with the proceeds from the new $500.0 million
secured term loan facility. In connection with the extinguishment of the senior secured credit facility, the company wrote off
deferred financing fees of $5.9 million which were recorded as interest expense in the consolidated statement of operations
during the three months ended September 30, 2017.
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 matures on July 26, 2019. Advances 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
minimum working capital of $20.0 million and tangible net worth of $26.3 million for 2017. 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 and a maximum annual leverage ratio of 6.00 to 1.00 at the end of each quarter. The fixed
charge coverage ratio and long-term capitalization ratio apply only if Green Plains Grain has long-term indebtedness on the
date of calculation. As of December 31, 2017, Green Plains Grain had no long-term indebtedness. 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.
Green Plains Trade has a senior secured asset-based revolving credit facility, which was amended on July 28, 2017, to
increase the maximum commitment from $150 million to $300 million and extend the maturity date to July 28, 2022. The
revolving credit facility finances working capital for marketing and distribution activities based on eligible collateral equal to
the sum of percentages of eligible receivables and inventories, less miscellaneous adjustments. The amended $300 million
maximum commitment consists of a $285 million credit facility and a $15 million first-in-last-out (FILO) credit facility. The
amended credit facility also includes an accordion feature that enables the credit facility to be increased by up to
$70.0 million with agent approval. Advances are subject to variable interest rates equal to daily LIBOR plus 2.25% on the
credit facility and daily LIBOR plus 3.25% on the FILO credit facility. The total unused portion of the $300 million
revolving credit facility is also subject to a commitment fee of 0.375% 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.
At December 31, 2017, Green Plains Trade had $0.5 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 Ingredients Segment
Green Plains Cattle has a $425.0 million senior secured asset-based revolving credit facility, which matures on April 30,
2020, to finance working capital for the cattle feeding 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, as amended, are subject to variable interest rates equal to LIBOR plus 2.00% to 3.00%, or the base rate plus
F-29
1.00% to 2.00%, depending upon the preceding three months’ excess borrowing availability. The amended credit facility also
includes an accordion feature that enables the credit facility to be increased by up to $75.0 million with agent approval. The
unused portion of the credit facility is also subject to a commitment fee of 0.20% to 0.30% 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 amended terms impose affirmative and negative
covenants, including maintaining working capital of 15% of the commitment amount, tangible net worth of 20% of the
commitment amount, plus 50% of net profit from the previous year, and a total debt to tangible net worth ratio of 3.50x.
Capital expenditures are limited to $10.0 million per year under the credit facility, plus $10.0 million per year if funded by a
contribution from parent, plus any unused amounts from the previous year.
On April 28, 2017, we amended the revolving credit facility to fund the additional working capital requirements related
to the acquisition of two cattle feeding operations. The amendment increased the maximum commitment from $100.0 million
to $200.0 million until July 31, 2017, when it increased to $300.0 million. The maturity date was extended from October 31,
2017 to April 30, 2020.
On November 16, 2017, we amended the revolving credit facility, to increase the maximum commitment from
$300.0 million to $425.0 million, with an additional $75.0 million available to Green Plains Cattle under an accordion
feature. Additionally, the amendment increased the swing-line sublimit from $15.0 million to $20.0 million. All other terms
and conditions of the credit facility remain the same.
Fleischmann’s Vinegar had a $130.0 million senior secured term loan and a $15.0 million senior secured revolving credit
facility, which were used to finance the purchase of Fleischmann’s Vinegar and to fund working capital for its vinegar
manufacturing operations, and were scheduled to mature on October 3, 2022. Beginning January 1, 2017, the term loan was
subject to mandatory prepayments based on the preceding fiscal year’s excess cash flow. Term loan prepayments were
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 bore 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 credit facility was also
subject to a commitment fee of 0.5% per annum.
This senior secured credit term loan and senior secured revolving credit facility were extinguished in full on August 29,
2017 with the proceeds from the new $500.0 million secured term loan facility. In connection with the extinguishment of the
senior secured credit facility, the company wrote off deferred financing fees of $3.5 million and paid a prepayment penalty of
$2.9 million. These expenses were recorded as interest expense in the consolidated statement of operations during the three
months ended September 30, 2017.
Partnership Segment
Green Plains Partners, through a wholly owned subsidiary, has a $195.0 million revolving credit facility, as amended,
which matures on July 1, 2020, to fund working capital, acquisitions, distributions, capital expenditures and other general
partnership purposes. Advances under the 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 credit facility
may be increased up to $60.0 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.
On October 27, 2017, the partnership upsized its revolving credit facility by $40.0 million, from $155.0 million to
$195.0 million, by accessing a portion of the $100.0 million incremental commitment in place on the facility.
F-30
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.
Covenant Compliance
The company was in compliance with its debt covenants as of December 31, 2017.
Capitalized Interest
The company had $0.1 million, $0.8 million, and $1.1 million in capitalized interest during the years ended December
31, 2017, 2016 and 2015, respectively.
Restricted Net Assets
At December 31, 2017, there were approximately $142.8 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 4,110,000 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 is 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, 2017, 2016 and 2015.
F-31
The activity related to the exercisable stock options for the year ended December 31, 2017, is as follows:
Outstanding at December 31, 2016
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2017
Exercisable at December 31, 2017 (1)
Weighted-
Average
Exercise Price
12.36
-
10.00
-
-
12.44
12.44
Shares
148,750 $
-
(5,000)
-
-
143,750 $
143,750 $
Weighted-Average
Remaining
Contractual Term
(in years)
2.8
-
-
-
-
1.8
1.8
Aggregate
Intrinsic Value
(in thousands)
2,305
-
78
-
-
635
635
$
$
$
(1)
Includes in-the-money options totaling 133,750 shares at a weighted-average exercise price of $12.10.
Option awards allow employees to exercise options through cash payment for the shares of common stock or
simultaneous broker-assisted transactions in which the employee authorizes the exercise and immediate sale of the option in
the open market. The company uses newly issued shares of common stock to satisfy its stock-based payment obligations.
The non-vested stock award and deferred stock unit activity for the year ended December 31, 2017, are as follows:
Nonvested at December 31, 2016
Granted
Forfeited
Vested
Nonvested at December 31, 2017
Green Plains Partners
Non-Vested
Shares and
Deferred
Stock Units
Weighted-
Average Grant-
Date Fair Value
Weighted-Average
Remaining
Vesting Term
(in years)
1,139,560 $
569,290
(43,254)
(596,649)
1,068,947 $
17.65
23.98
19.18
18.64
20.41
1.8
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, 2017, are as follows:
Non-Vested at December 31, 2016
Granted
Forfeited
Vested
Nonvested at December 31, 2017
Non-Vested
Shares and
Deferred
Stock Units
Weighted-
Average
Grant-Date
Fair Value
Weighted-Average
Remaining
Vesting Term
(in years)
15,009 $
15,827
(4,278)
(15,009)
11,549 $
15.99
18.96
18.70
15.99
19.06
0.5
Compensation costs for stock-based and unit-based payment plans during the years ended December 31, 2017, 2016 and
2015, were approximately $12.2 million, $9.5 million and $8.8 million, respectively. At December 31, 2017, there were
$13.0 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 1.8 years. The
potential tax benefit related to stock-based payment is approximately 24.3% of these expenses.
F-32
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.
During 2016, diluted EPS was computed using the treasury stock method for the convertible debt instruments, by
dividing net income by the weighted average number of common shares outstanding during the period, adjusted for the
dilutive effect of the convertible debt instruments and any other outstanding dilutive securities. During the first quarter of
2017, the company changed its method for calculating dilutive EPS related to its convertible debt instruments from the
treasury stock method to the if-converted method, as the company changed its financial strategy with respect to cash
settlement of these instruments. As such, the company computed diluted EPS for 2017 by dividing net income on an if-
converted basis, adjusted to add back net interest expense related to the convertible debt instruments, by the weighted average
number of common shares outstanding during the period, adjusted to include the shares that would be issued if the
convertible debt instruments were converted to common shares and the effect of any outstanding dilutive securities.
The basic and diluted EPS are calculated as follows (in thousands):
Basic EPS:
Net income attributable to Green Plains
Weighted average shares outstanding - basic
EPS - basic
Diluted EPS:
Net income attributable to Green Plains
Interest and amortization on convertible debt, net of tax effect:
3.25% notes
4.125% notes
Net income attributable to Green Plains - diluted
Weighted average shares outstanding - basic
Effect of dilutive convertible debt:
3.25% notes
4.125% notes
Effect of dilutive stock-based compensation awards
Weighted average shares outstanding - diluted
$
$
$
$
Year Ended December 31,
2016
2017
2015
61,061 $
39,247
1.56 $
10,663 $
38,318
0.28 $
7,064
37,947
0.19
61,061 $
10,663 $
7,064
4,433
8,159
73,653 $
-
-
10,663 $
-
-
7,064
39,247
38,318
37,947
4,209
6,071
713
50,240
155
-
100
38,573
939
-
142
39,028
EPS - diluted
$
1.47 $
0.28 $
0.18
14. STOCKHOLDERS’ EQUITY
Treasury Stock
The company holds 5.3 million shares of its common stock at a cost of $55.2 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 394,677 shares of common
F-33
stock for approximately $6.7 million during 2017. Since inception, the company has repurchased 909,667 shares of common
stock for approximately $16.7 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 7, 2018, the company’s board of directors
declared a quarterly cash dividend of $0.12 per share. The dividend is payable on March 15, 2018, to shareholders of record
at the close of business on February 23, 2018.
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 18, 2018, the board of directors of the general partner of
the partnership declared a cash distribution of $0.47 per unit on outstanding common and subordinated units. The distribution
is payable on February 9, 2018, to unitholders of record at the close of business on February 2, 2018.
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
$
18,167 $
(11,936)
(8,094) $
(16,508)
8,420 Revenues
(3,551) Cost of goods sold
Year Ended December 31,
2016
2017
2015
Statements of Income
Classification
Total
Income tax expense (benefit)
Amounts reclassified from
accumulated other comprehensive
income (loss)
6,231
2,306
(24,602)
(8,830)
4,869
1,855
Income (loss) before income
taxes
Income tax expense (benefit)
$
3,925 $
(15,772) $
3,014
At December 31, 2017 and 2016, the company’s consolidated balance sheets reflected unrealized losses of $13.1 million
and $4.1 million, net of tax, in accumulated other comprehensive loss, respectively.
15. INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their
respective tax bases, and net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured
using enacted rates expected to be applicable to taxable income in the years those temporary differences are recovered or
settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income during the period
that includes the enactment date. The Tax Cuts and Jobs Act was enacted on December 22, 2017 and is effective January 1,
2018. The Act reduced the federal tax rate to 21%. The company revalued its deferred liabilities at the new rate, resulting in
a tax benefit of $52.8 million recorded during the fourth quarter of 2017. Due to the significance of the legislation, the SEC
issued Staff Accounting Bulletin 118 (SAB 118), which provides for a measurement period to complete the accounting for
certain elements of the tax reform. The company is still analyzing certain other provisions of the legislation and its impact to
income taxes in the future, including interest expense deduction limitation to 30% of adjusted taxable income, use of AMT
credit carryforwards, limitation of net operating loss carryforwards to 80% of taxable income, immediate expensing of capital
assets acquired after September 27, 2017, and deducibility of officer compensation. Any subsequent adjustments will be
recorded as tax expense during the period in which the analysis is complete.
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.
F-34
Income tax expense (benefit) consists of the following (in thousands):
Current
Deferred
Total
2017
Year Ended December 31,
2016
$
$
(43,705)
(81,077)
(124,782)
$
$
2,950
4,910
7,860
$
$
2015
33,750
(27,513)
6,237
The variation in tax expense was due primarily to the company’s recognition of tax benefits related to research and
development credits, or R&D Credits, and revaluing deferred balances to reflect the reduced tax rate per the Tax Cuts and
Jobs Act. A study was conducted to determine whether certain activities the company performs qualify for the R&D Credit
allowed by the Internal Revenue Code Section 41. As a result of this study, the company concluded these activities do qualify
for the credit and determined it was appropriate to claim the benefit of these credits for all open tax years.
During the year ended December 31, 2017, the company recognized a net income tax benefit of $48.1 million for federal
and state R&D Credits relating to tax years 2013 to 2016 as well as an estimated year-to-date tax benefit for federal and state
R&D Credits for the 2017 tax year. Of this amount, a net benefit of $16.4 million is expected for previously filed tax returns,
recorded as a $28.8 million non-current asset and a $12.4 million tax liability. The remaining $31.7 million is expected to
offset future income tax and is recorded as a deferred tax asset. In addition, $9.2 million, net, in refundable credits not
dependent upon taxable income was recorded as a reduction of cost of goods sold in the current year.
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
Nondeductible compensation
Noncontrolling interests
Unrecognized tax benefits
R&D Credits
Tax Cuts and Jobs Act impact
Other
Income tax expense
2017
Year Ended December 31,
2016
2015
$
(15,103)
$
13,423
$
7,513
(915)
222
(7,199)
25,720
(74,033)
(54,485)
1,011
(124,782)
$
$
323
185
(6,940)
-
-
-
869
7,860
$
1,397
-
(2,857)
-
-
-
184
6,237
F-35
Significant components of deferred tax assets and liabilities are as follows (in thousands):
December 31,
2017
2016
Deferred tax assets:
Net operating loss carryforwards - Federal
Net operating loss carryforwards - State
Tax credit carryforwards - Federal
Tax credit carryforwards - State
Derivative financial instruments
Investment in partnerships
Inventory valuation
Stock-based compensation
Accrued expenses
Capital leases
Other
Total deferred tax assets
Deferred tax liabilities:
Convertible debt
Fixed assets
Organizational and start-up costs
Total deferred tax liabilities
Valuation allowance
Deferred income taxes
$
12,767 $
5,291
30,783
5,342
2,592
55,956
1,941
2,468
5,541
2,426
969
126,076
(8,350)
(149,746)
(20,947)
(179,043)
(3,834)
$
(56,801) $
2,112
1,290
-
3,701
1,218
91,951
1,042
3,535
10,722
3,764
1,959
121,294
(17,593)
(205,189)
(36,464)
(259,246)
(2,310)
(140,262)
The company maintains a valuation allowance for its net deferred tax assets due to uncertainty that it will realize these
assets in the future. The deferred tax valuation allowance of $3.8 million as of December 31, 2017, relates to Iowa and
Indiana tax credits that are not expected to be realized prior to expiration. 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, 2014, and later are still subject to audit. A
reconciliation of unrecognized tax benefits is as follows (in thousands):
Balance at January 1, 2017
Additions for prior year tax positions
Additions for current year tax positions
Balance at December 31, 2017
Unrecognized Tax Benefits
$
$
194
5
25,777
25,976
Recognition of these tax benefits would favorably impact the company’s effective tax rate. Unrecognized tax benefits of
$26.0 million include $24.5 million recorded as a reduction of the deferred asset associated with the federal tax credit
carryforwards. 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 $45.8 million, $38.0 million and $33.2 million during the years ended December 31,
2017, 2016 and 2015, respectively.
F-36
Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in thousands):
Year Ending December 31,
Amount
2018
2019
2020
2021
2022
Thereafter
Total
Commodities
$
$
30,966
23,549
18,035
10,097
7,988
18,512
109,147
As of December 31, 2017, the company had contracted future purchases of grain, corn oil, natural gas, crude oil, ethanol,
distillers grains and cattle, valued at approximately $303.5 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 represented
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. Per the court’s direction,
the company and the seller have retained an independent accounting firm to determine if a shortfall exists and the precise
shortfall due to Green Plains. The accounting firm’s determination of the existence and amount of the shortfall will be
submitted to the court for guidance in entering its order. 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 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.
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,
2017, 2016 and 2015 were $2.1 million, $1.6 million and $1.4 million, respectively.
The company contributes to a defined benefit pension plan. Since January of 2009, the benefits under the plan were
frozen; however, the company remains obligated to ensure the plan is funded according to its requirements. As of December
31, 2017, the plan’s assets were $5.8 million and liabilities were $6.4 million. At December 31, 2017 and 2016, net liabilities
of $0.6 million and $1.1 million were included in other liabilities on the consolidated balance sheets, respectively.
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 member of the company’s board of directors, is a shareholder of Amur Equipment Finance. In
March 2014, a subsidiary of the company entered into $1.4 million of new equipment financing agreements with Amur
Equipment Finance. Balances of $0.6 million and $0.8 million related to these financing arrangements were included in debt
F-37
at December 31, 2017 and 2016, respectively. Payments, including principal and interest, totaled $0.3 million for each of the
years ended December 31, 2017, 2016 and 2015. 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. During the years ended December 31, 2017, 2016 and 2015, payments related to these leases
totaled $182 thousand, $190 thousand and $270 thousand, respectively. The company had $2 thousand in outstanding
payables related to these agreements at December 31, 2017, and no outstanding payable related to these agreements at
December 31, 2016.
19. QUARTERLY FINANCIAL DATA (Unaudited)
The following table includes unaudited financial data for each of the quarters within the years ended December 31, 2017
and 2016 (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 benefit (1)
Net income (loss) attributable to Green Plains
Basic earnings (loss) per share attributable to Green
Plains
Diluted earnings (loss) per share attributable to Green
Plains
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
Plains
Diluted earnings (loss) per share attributable to Green
Plains
$
December 31,
2017
920,984 $
913,560
7,424
(18,954)
63,877
46,630
September 30,
2017
June 30,
2017
886,263 $
890,049
(3,786)
(17,759)
9,749
(16,366)
March 31,
2017
887,684
870,292
17,392
(18,122)
2,381
(3,597)
901,235 $
880,519
20,716
(30,062)
48,775
34,394
1.16
0.99
0.83
(0.41)
(0.09)
0.74
(0.41)
(0.09)
Three Months Ended
$
December 31,
2016
932,098 $
876,028
56,070
(19,433)
(12,199)
18,682
September 30,
2016
June 30,
2016
887,727 $
860,318
27,409
(8,953)
(5,471)
8,191
March 31,
2016
749,204
771,850
(22,646)
(12,063)
14,893
(24,138)
841,852 $
810,997
30,855
(12,888)
(5,083)
7,928
0.49
0.47
0.21
0.21
(0.63)
0.20
0.21
(0.63)
(1) The third and fourth quarters of 2017 reflect adjustments for R&D Credits and the reduced tax rate due to the Tax Cuts and Jobs Act.
F-38
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,
2017
2016
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable
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
Income tax payable
Current maturities of long-term debt
Total current liabilities
Long-term debt
Other liabilities
Total liabilities
Stockholders' equity
Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
147,928
13,306
7,962
6,413
1,593
58,290
235,492
13,869
1,467,244
69,998
55,330
1,841,933
3,421
178,982
22,682
9,909
66,442
281,436
614,358
3,957
899,751
46
685,019
325,411
(13,110)
(55,184)
942,182
1,841,933
$
$
$
$
188,953
16,947
285
10,379
1,199
48,785
266,548
12,900
912,943
87,310
9,642
1,289,343
6,916
160,486
20,488
-
-
187,890
236,056
2,890
426,836
46
659,200
283,214
(4,137)
(75,816)
862,507
1,289,343
See accompanying notes to the condensed financial statements.
F-39
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF INCOME – PARENT COMPANY ONLY
(in thousands)
2017
Year Ended December 31,
2016
2015
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 (expense) benefit
Loss before equity in earnings of subsidiaries
Equity in earnings of consolidated subsidiaries
Net income
977 $
(977)
1,390
(30,934)
(244)
(29,788)
(30,765)
(22,796)
(53,561)
114,622
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
$
61,061 $
See accompanying notes to the condensed financial statements.
F-40
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF COMPREHENSIVE INCOME – PARENT COMPANY ONLY
(in thousands)
Year Ended December 31,
2016
2017
2015
Net income
Other comprehensive income (loss), net of tax:
$
61,061
$
10,663
$
7,064
Unrealized gains (losses) on derivatives arising during period, net of tax
(expense) benefit of $2,967, $10,494, and $(4,413), respectively
Reclassification of realized (gains) losses on derivatives, net of tax expense
(benefit) of $2,306, $(8,830), and $1,855, respectively
Total other comprehensive income (loss), net of tax
Comprehensive income
(5,048)
(18,744)
7,169
(3,925)
(8,973)
52,088
$
15,772
(2,972)
7,691
$
(3,014)
4,155
11,219
$
F-41
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
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
Cash payment for exchange of 3.25% convertible notes due 2018
Payments related to tax withholdings for stock-based compensation
Proceeds from the exercise of stock options
Net cash provided (used) by financing activities
Year Ended December 31,
2016
2015
2017
$
(27,619) $
(27,619)
74,378 $
74,378
23,488
23,488
(2,905)
(61,727)
-
26,133
-
(18,039)
(56,538)
500,000
(405,335)
(6,724)
(18,864)
(12,978)
(8,523)
(4,494)
50
43,132
(11,556)
(512,356)
152,312
77,615
3,000
(7,206)
(298,191)
170,000
-
(6,005)
(18,423)
(5,651)
-
(2,206)
1,757
139,472
(1,191)
(116,796)
-
143,151
(3,000)
(2,975)
19,189
-
-
(4,003)
(15,191)
-
-
(3,644)
766
(22,072)
Net change in cash and equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
(41,025)
188,953
147,928 $
(84,341)
273,294
188,953 $
20,605
252,689
273,294
$
See accompanying notes to the condensed financial statements.
F-42
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 $2.0 million, $1.1 million and $1.1 million during the years ended December 31, 2017, 2016 and
2015, respectively. Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in
thousands):
Year Ending December 31,
Amount
2018
2019
2020
2021
2022
Thereafter
Total
Parent Guarantees
$
$
2,069
1,897
1,372
1,332
1,388
13,295
21,353
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, 2017, the parent
company had $309.3 million in guarantees of subsidiary contracts and indebtedness.
F-43
3. DEBT
Parent company debt as of December 31, 2017, consists of a $500.0 million term loan agreement which matures in 2023,
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
2018
2019
2020
2021
2022
Thereafter
Total
$
$
68,734
5,000
5,000
5,000
175,000
473,750
732,484
F-44
Corporate Information
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
WAYNE HOOVESTOL, Chairman
Owner and President
Hoovestol Inc. | Lone Mountain Truck Leasing
JIM ANDERSON1,2
Chief Executive Officer
Moly-Cop
TODD BECKER
President and Chief Executive Officer
Green Plains Inc. | Green Plains Holdings LLC
JAMES CROWLEY1
Chairman and Managing Partner
Old Strategic, LLC
GENE EDWARDS1,2
Retired Executive Vice President and
Chief Development Officer
Valero Energy Corporation
GORDON GLADE1,3
Director
Heartland Agriculture, LLC | Brunswick State Bank
Vice President and Director
Edgar and Frances Reynolds Foundation, Inc.
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
TODD BECKER
President and Chief Executive Officer
JOHN NEPPL
Chief Financial Officer
JEFF BRIGGS
Chief Operating Officer and
President, Green Plains Ethanol
PATRICH SIMPKINS
Chief Development Officer
MICHELLE MAPES
Chief Legal and Administration Officer
WALTER CRONIN
Executive Vice President
Commercial Operations
MARK HUDAK
Executive Vice President
Human Resources
PAUL KOLOMAYA
Executive Vice President
Commodity Finance
MICHAEL METZLER
Executive Vice President
Natural Gas and Power
KENNETH SIMRIL
President
Fleischmann’s Vinegar
TONY VOJSLAVEK
Executive Vice President
Risk Management
CORPORATE OFFICE
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
STOCK EXCHANGE LISTING
The Nasdaq Global Market
Stock Ticker Symbol: GPRE
STOCK TRANSFER AGENT
Correspondence should be mailed to:
Computershare
P.O. Box 505000
Louisville, KY 40233
Overnight correspondence should be sent to:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Shareholder services: 1.800.962.4284
Investor Centre™ portal:
www.computershare.com/investor