2018 ANNUAL REPORT
Green Plains Inc. (NASDAQ: GPRE) is a diversified commodity-processing
business with operations related to ethanol production, grain handling and
storage, cattle feeding, and commodity marketing and logistics services.
The company is one of the leading producers of ethanol in the world and,
through its adjacent businesses, is focused on the production of high-protein
feed ingredients and export growth opportunities. Green Plains owns a 49.1%
limited partner interest and a 2.0% general partner interest in Green Plains
Partners. For more information about Green Plains, visit www.gpreinc.com.
Forward-Looking Statement
This Annual Report contains “forward-looking statements” within the meaning of the federal securities laws. See the discussion under
“Cautionary Statement Regarding Forward-Looking Statements” in our 2018 Form 10-K for matters to be considered in this regard.
To Our
Shareholders
In May of 2018, we announced our Portfolio Optimization
Plan. A key reason the plan was initiated was because
we did not believe the $2 billion invested in our
platform over the last 10 years was driving value for
our shareholders. The reality was, we were not getting
credit for the total value of the assets in the portfolio,
or the diversification of revenue and income streams
built over our first decade.
In November of 2018, we were successful in completing
several asset sales led by the sale of three ethanol
plants for $319.8 million in cash. The transaction
represented approximately 20 percent of the
company’s reported ethanol production capacity.
We also completed the sale of Fleischmann’s Vinegar
Company, Inc. for $353.9 million in cash and restricted
cash, including preliminary net working capital and
other adjustments. With both of these transactions,
we created value for our shareholders as we sold
these assets for an aggregate amount well in excess
of book value.
the U.S., along with resolution on trade issues with
China and the reduction of tariffs on ethanol with other
trading partners, could significantly boost ethanol
demand and improve the future margin environment
for the industry.
2018 Financial Highlights
We reported net income attributable to the company
of $15.9 million for the year, or $0.39 per diluted share,
down from net income attributable to the company
of $61.1 million, or $1.47 per diluted share for 2017.
Net income for 2018 was positively impacted by the
gain on the sale of assets of $150.4 million, offset by
$13.2 million of deferred debt issuance costs written
off as a result of the term loan pay-off, and $3.4 million
of severance expense, yielding a $133.8 million positive
benefit before tax. Without the sale of assets, we
would have reported a net loss attributable to
the company for 2018 of $84.7 million, reflecting the
difficult margin environment we have been experiencing.
Generating over $670 million of proceeds from asset
sales enabled us to repay our entire obligation of the
$500 million senior secured term loan. As a result, all
of the company’s assets and subsidiaries, not
including Green Plains Partners LP (NASDAQ:GPP),
are unencumbered from term debt for the first time
in Green Plains’ history. Another part of this plan was
to reduce controllable expenses by $10 to $15 million
dollars. I am pleased to report to you we achieved a
nearly $19 million forward run-rate reduction in
annualized controllable expenses at the end of 2018.
The sale of these assets strengthened our balance
sheet by adding approximately $150 million of cash
and reducing our leverage by eliminating our
$500 million term loan. Being proactive was well
planned and well timed, as we identified potential
industry weaknesses earlier given the industry was
overproducing in an already oversupplied market.
The Portfolio Optimization Plan allowed us to get
ahead of these issues and put Green Plains on solid
financial footing as we entered 2019.
In September of 2018, the ethanol margin environment
took a turn for the worse. For the last 100 days of 2018,
the ethanol margin was negative and still remains
challenging in 2019. We have not seen a weak margin
environment like this in the history of the industry or
company. We do believe that year-round E15 sales in
Including the impact of the asset sales, we generated
$224.7 million of EBITDA, or earnings before interest,
income taxes, depreciation and amortization for
2018. Our cash position at the end of the year was
$318.2 million of total cash, cash equivalents and
restricted cash, and we also had $467.0 million
available under revolving credit agreements. Our
balance sheet remains strong, even as the ethanol
margin environment remains under pressure. Our
profitability in 2018 may have been unorthodox, but
sometimes unorthodox is all you have and we believe
making money is still a good thing, no matter how
we got there.
Growing Our Company
Sometimes you need to take a step back, reassess
opportunities and change course. We continue to
work on executing the Portfolio Optimization Plan,
including the potential sale of additional assets as
we believe the company remains undervalued by the
public markets. Any further proceeds will enable us
to more aggressively engage in our capital allocation
plan. This plan includes deploying capital by investing
in high-protein feed technologies, in improving the
cost structure of our non-ICM ethanol plants, and in
repurchasing of Green Plains stock.
Last May, as part of our Portfolio Optimization Plan,
we announced the construction of our first high-
protein feed production facility in Shenandoah, Iowa.
Our plan is to install this type of technology at several
of our ethanol plants over the next two to three years.
We believe that high-protein feed production will
better diversify our revenue and income stream and
take advantage of the growing demand for protein
worldwide. We are confident this technology will
produce a product with 50 percent protein, as
compared to our current offering of 30 percent.
This new product will be an excellent ingredient
for the aquaculture, pet food, swine, and poultry
industries. When implemented, this technology
will convert approximately 20 percent of the feed
ingredient production, while leaving the quality of
the other 80 percent unchanged. This high-protein
product is a direct substitute for high-protein soymeal
and in many cases could bring even higher values in
aquaculture markets and companion animal pet foods.
In December, we announced the formation of
Optimal Aquafeed, a 50/50 joint venture to produce
high-quality aquaculture feeds utilizing proprietary
techniques and high-protein feed ingredients. As we
make the investment in high-protein production at
our facilities, the joint venture will optimize the value
of these products with a different set of customers
than traditional distillers grains.
We continue to focus our team on ways to reduce
operating expenses across our platform. Of the current
1.1 billion gallons of ethanol capacity we own, about
half of those gallons are non-ICM technologies. We
have internally developed an engineered solution to
reduce the operating expense spread between our
highest cost and lowest cost plants with the goal of
equalizing operating expense no matter the technology
or size of plant. Our indications are, we can make a
one-time investment of 10 to 18 cents per gallon of
capacity, depending on location, and narrow the
cost spread by up to nine cents per gallon. We think
this opex equalization project is significant for the
company. We are finalizing the plans to execute our
first project, to prove to the market this works, and
then we will roll this out to the rest of our facilities.
We were successful in expanding our cattle feeding
business in 2018. In July, we acquired two cattle
feeding operations from Bartlett Cattle Company, L.P.
for $16.2 million, plus working capital of approximately
$106.6 million. The transaction included the feed yards
located in Sublette, Kansas and Tulia, Texas, which
added combined feedlot capacity of 97,000 head of
cattle to the company’s operations, now totaling
355,000 head. Over the last five years, we have built
a solid business generating good returns for our
shareholders. We remain very optimistic on the cattle
feeding business and plan to continue to look for
opportunities in and around this platform. However,
the working capital requirements for this business are
considerable. As such, we are considering the option
of taking this business off-balance sheet, which would
free up capital and further simplify our balance sheet.
Green Plains Partners is still a key building block to our
overall business platform and continues to be a vehicle
of growth for us in the future. The Partnership has
excellent liquidity available for growth and acquisitions.
We continue to stress the safety and well-being of our
employees and are committed to keeping Green Plains
an exceptional place to work.
In Closing
As we stated with the Portfolio Optimization Plan last
May, our goal was to sell four to six ethanol plants and
raise $800 million of proceeds from asset dispositions.
Any sales beyond what we have already executed
would put us in a stronger position to finish the plan
and allocate capital to investments in high-protein feed
technologies, our opex equalization project, and stock
buy-backs.
I want to assure you that the Board of Directors and
management team are especially committed to this
strategy as our stock price remains such a discount
to book value.
Sincerely,
Todd Becker
President and Chief Executive Officer
Selected Financial Data
Statement of Income Data
Year Ended December 31,
(in thousands, except per share information)
2018
2017
2016
2015
2014
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)
$ 3,843,353
$ 3,596,166
$ 3,410,8 8 1
$ 2,965,589 $ 3,235,6 1 1
3,72 7,623
3,554,420
3,319,193
2,904,5 1 2
2,949,337
115,730
95,72 2
36,734
15,923
41,746
84,897
81,631
61,061
91,688
53,337
30,49 1
10,663
61,077
39,61 2
15,228
7,064
286,274
35,844
159,504
159,504
$ 0.39
$ 1.56
$ 0.28
$ 0.19
$ 4.37
$ 0.39
$ 1.47
$ 0.28
$ 0.18
$ 3.96
EBITDA (unaudited and in thousands)
$ 224,652
$ 154,370 $ 174,428
$ 127,78 1
$ 352,477
Balance Sheet Data
(in thousands)
2018
2017
2016
2015
2014
December 31,
Cash and cash equivalents
$ 251,683
$ 266,65 1
$ 304, 2 1 1
$ 384,867
$ 425,510
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
1,206,642
1,206,47 1
1,000,576
912,577
903,41 5
2,21 6,432
2,784,650
2,506,492
1,917,920
1,821,062
833,700
886,26 1
594,946
438,669
511,540
298,190
767,396
782,610
432,139
399,440
1,153,443
1,725,514
1,527,301
959, 01 1
1,023,613
Stockholders' equity
1,062,989
1,059,1 3 6
979,1 9 1
958,909
797,449
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,
2018
2017
2016
2015
2014
$ 36,734
$ 81,63 1
$ 30,491
$ 15,228 $ 159,504
101,025
90,160
(16,726)
(124,782)
103,619
107,36 1
51,85 1
7,860
84,226
40,366
6,237
65,950
39,908
90,926
62,1 3 9
EBITDA (unaudited)
$ 224,652
$ 154,370
$ 174,428
$ 127,781
$ 352,477
2018 Form 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
or
o 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 o No x
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 o No x
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 x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes x No o
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. o.
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 x
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth company o
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The aggregate market value of the company’s voting common stock held by non-affiliates of the registrant as of June 29, 2018 (the last business
day of the second quarter), based on the last sale price of the common stock on that date of $18.30, was approximately $711.2 million. For purposes
of this calculation, executive officers and directors are deemed to be affiliates of the registrant.
As of February 14, 2019, there were 41,039,553 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2019 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
1
3
14
28
28
28
28
29
31
32
50
52
52
52
56
56
56
56
56
56
57
72
73
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
MVC
NAFTA
RFS II
RIN
RVO
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
Minimum volume commitment
North American Free Trade Agreement
Renewable Fuels Standard II
Renewable identification number
Renewable volume obligation
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 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.
2
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 ethanol production facilities and adjacent commodity processing businesses. We are focused on generating stable
operating margins through our 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 and cattle feeding operations 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. As of December 31, 2018, we own a 49.1% limited partner interest, a 2.0% general partner interest
and all of the partnership’s incentive distribution rights. The public owns the remaining 48.9% 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 13 ethanol plants in Illinois, Indiana, Iowa, Minnesota, Nebraska, Tennessee and Texas. At capacity, our
facilities are capable of processing approximately 387 million bushels of corn per year and producing approximately
1.1 billion gallons of ethanol, 2.9 million tons of distillers grains and 292 million pounds of industrial grade corn oil,
making us one of the largest ethanol producers in North America. On November 15, 2018, we completed the sale of
three ethanol plants located in Bluffton, Indiana, Lakota, Iowa and Riga, Michigan and announced the permanent
closure of our ethanol plant located in Hopewell, Virginia.
• Agribusiness and Energy Services. Our agribusiness and energy services segment includes grain procurement, with
approximately 47.2 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 six cattle feeding operations with the capacity to
support approximately 355,000 head of cattle and grain storage capacity of approximately 11.7 million bushels and
food-grade corn oil operations. Fleischmann’s Vinegar, one of the world’s largest producers of food-grade industrial
vinegar, was also included in the food and ingredients segment until its sale on November 27, 2018.
• 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 32 ethanol storage facilities, seven fuel terminal facilities and
approximately 2,840 leased railcars.
Risk Management and Hedging Activities
Our profitability is highly dependent on commodity prices, particularly for ethanol, corn, distillers grains, corn oil,
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.
We use forward contracts to sell a portion of our ethanol, distillers grains, and corn oil 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
3
financial impact of these activities depends on the price of the commodities involved and our ability to physically receive or
deliver those 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 a 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, when available,
or temporarily reduce production levels during periods of compressed margins.
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. Additionally, our operational expertise
helps us improve the operating margins of acquired facilities.
Technology Integration. Over our history, we have incorporated new technologies like corn oil extraction and Selective
Milling Technology™ into our manufacturing processes that have enabled us to run more efficiently and improve our financial
results. We continue to evaluate additional technological opportunities to expand our capabilities and product offerings in the
coming years.
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 II, 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.
We also believe that the world will continue to increase its demand for protein for human consumption, driving the need
to produce larger amounts of high protein feed for animals and aquaculture. With new technologies introduced in the ethanol
industry, we believe that ethanol production facilities can increasingly become high-protein feed producers. We have begun
to deploy one of these new technologies in an effort to capture higher co-product returns, which could lead to an accelerated
deployment of additional high-protein process technology installments at a number of our ethanol production facilities to take
advantage of the world’s growing demand for protein.
In light of the ethanol industry’s environment, we are focused on maintaining a low-cost ethanol production platform and
driving costs out where possible. 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
4
corn volume directly from farmers and have 45 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 identifying 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 and other commodity processing operations that maximize our operational and risk management expertise.
Recent Developments
The following is a summary of our significant developments during 2018. Additional information about these items can
be found elsewhere in this report or in previous reports filed with the SEC.
Bartlett Cattle Company, L.P. Acquisition
On July 27, 2018, we entered into an asset purchase agreement to acquire two cattle feeding operations from Bartlett
Cattle Company, L.P. for $16.2 million, plus working capital of approximately $106.6 million. The transaction includes two
feed yards located in Sublette, Kansas and Tulia, Texas which added combined feedlot capacity of 97,000 head of cattle to
the company’s operations. The transaction was financed using cash on hand and proceeds from the Green Plains Cattle senior
secured asset-based revolving credit facility. The transaction closed on August 1, 2018, following receipt of regulatory
approval.
Sixth Amendment to Credit Agreement – Green Plains Cattle Company
On July 31, 2018, we entered into an amendment of the Green Plains Cattle senior secured asset-based revolving credit
facility with a group of lenders led by Bank of the West and ING Capital LLC, increasing the maximum commitment from
$425.0 million to $500.0 million. The amendment was completed to fund the additional working capital requirements related
to the acquisition of the Sublette, Kansas and Tulia, Texas cattle feeding operations. 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.
3.25% Convertible Notes
During the three months ended September 30, 2018, we entered into exchange agreements with certain beneficial owners
of our outstanding 3.25% convertible senior notes due 2018 (the “Old Notes”), pursuant to which such investors exchanged
(the “Exchange”) $56.8 million in aggregate principal amount of the Old Notes for $56.8 million in aggregate principal
amount of notes due October 1, 2019 (the “New Notes”). The New Notes were recorded at fair value at the time of the
exchange, and we recorded a non-cash adjustment to additional paid-in capital of $3.5 million, net of a $1.2 million tax
impact related to the difference in fair value of the embedded conversion option of the Old Notes and the New Notes.
Following the closing of these agreements, $6.9 million aggregate principal of the Old Notes remain outstanding. On October
1, 2018, the maturity date of the Old Notes, the remaining aggregate principal of $6.9 million was paid.
Disposition of Bluffton, Lakota and Riga Ethanol Plants
On October 8, 2018, we, through wholly owned subsidiaries, entered into an asset purchase agreement for the sale of
three ethanol plants located in Bluffton, Indiana, Lakota, Iowa, and Riga, Michigan, and certain related assets from
subsidiaries, to Valero Renewable Fuels Company, LLC (“Valero”) for the sale price of $319.8 million, including net
preliminary working capital and other adjustments (the “Valero Transaction”). Correspondingly, the partnership’s storage
assets located adjacent to such plants were sold to Green Plains Inc. for $120.9 million (the “Partnership Transaction”). On
November 15, 2018, we closed on both the Partnership Transaction and the Valero Transaction. We received as consideration
from Valero approximately $319.8 million, while the partnership received as consideration from the company 8.7 million
partnership units and a portion of the general partner interest equating to 0.2 million equivalent limited partner units to
maintain the general partner’s 2% interest. These units were retired upon receipt. In addition, the partnership also received
cash consideration of $2.7 million from Valero for the assignment of certain railcar operating leases.
5
As part of the Partnership Transaction, we have agreed with the partnership to amend the storage and throughput
agreement with Green Plains Trade to reduce the minimum volume commitment from 296.6 mmg of product per calendar
quarter to 235.7 mmg. In addition, we agreed with the partnership to extend the storage and throughput agreement with Green
Plains Trade an additional three years to June 30, 2028.
Third Amendment to Credit Agreement – Green Plains Operating Company LLC
On October 12, 2018, the partnership amended the revolving credit facility to allow the sale of the ethanol storage assets
of up to six ethanol plants owned by Green Plains with no more than 600 million gallons of production capacity. In addition,
the lenders permitted the exchange of units as consideration for the transaction and also permitted modifications of various
key operating agreements. Upon close of the sale of assets associated with the Bluffton, Indiana, Lakota, Iowa, and Riga,
Michigan ethanol plants, the revolving credit facility available was decreased from $235.0 million to $200.0 million. There
were no other significant changes in other covenants.
Extension of Offer Period – JGP Energy Partners
On October 15, 2018, we agreed with the partnership to extend the offer period related to the potential purchase of the
Green Plains interest in the JGP Energy Partners Beaumont, Texas terminal until June 30, 2019.
Disposition of Fleischmann’s Vinegar
On October 23, 2018, we, along with an indirect wholly-owned subsidiary of the company, entered into a stock purchase
agreement with Kerry Holding Co. (“Kerry”) to sell all of the issued and outstanding capital stock of Fleischmann’s Vinegar
(the “Kerry Transaction”). On November 27, 2018, we closed on the Kerry Transaction and received as consideration from
Kerry $353.9 million in cash and restricted cash, including preliminary net working capital adjustments.
Hopewell, Virginia Permanent Closure
On November 15, 2018, we announced the permanent closure of our ethanol plant located in Hopewell, Virginia. The
closure did not change the partnership’s quarterly storage and throughput minimum volume commitment with Green Plains
Trade or current transload operations at that location.
Term Loan Repayment
In November 2018, we repaid the remaining balance of our $500.0 million term loan due August 29, 2023 using a
portion of the proceeds from the transactions described above. We did not incur any early termination penalties to the lenders
as a result of the repayment.
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 octane
available on the market and its production costs are competitive with gasoline.
6
Ethanol Plants. Following the sale of three ethanol plants located in Bluffton, Indiana, Lakota, Iowa and Riga, Michigan
and the permanent closure of our ethanol plant located in Hopewell, Virginia, we now operate 13 dry mill ethanol production
plants, located in seven states, that produce ethanol, distillers grains and corn oil:
Plant (1)
Atkinson, Nebraska
Central City, Nebraska
Fairmont, Minnesota
Hereford, Texas
Madison, Illinois
Mount Vernon, Indiana
Obion, Tennessee (2)
Ord, Nebraska
Otter Tail, Minnesota
Shenandoah, Iowa (2)
Superior, Iowa (2)
Wood River, Nebraska
York, Nebraska
Total
Initial Operation or
Acquisition Date
June 2013
July 2009
Nov. 2013
Nov. 2015
Sept. 2016
Sept. 2016
Nov. 2008
July 2009
Mar. 2011
Aug. 2007
July 2008
Nov. 2013
Sept. 2016
Technology
Delta-T
ICM
Delta-T
ICM/Lurgi
Vogelbusch
Vogelbusch
ICM
ICM
Delta-T
ICM
Delta-T
Delta-T
Vogelbusch
Plant Production
Capacity (mmgy)
55
116
119
100
90
90
120
65
55
82
60
121
50
1,123
(1) The Hopewell, Virginia plant was permanently closed during the fourth quarter of 2018.
(2) We constructed these three 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 by
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 42 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.
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 11 of our ethanol plants. Most farmers in close proximity of our
plants store corn in their own storage facilities. This allows us to purchase much of the corn we need directly from farmers
throughout the year. At two of our ethanol plants, we contract with a third-party grain originator to supply the corn necessary
for ethanol production. These contracts terminate in 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
7
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 45,000 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.
8
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 37.1 million bushels,
detailed in the following table:
Facility Location
On-Site Grain Storage Capacity
(thousands of bushels)
Grain Elevators
Archer, Nebraska
Essex, Iowa
Hopkins, Missouri
Kismet, Kansas
Ethanol Plants
Atkinson, Nebraska
Central City, Nebraska
Fairmont, Minnesota
Hereford, Texas
Hopewell, Virginia (1)
Madison, Illinois
Mount Vernon, Indiana
Obion, Tennessee
Ord, Nebraska
Otter Tail, Minnesota
Shenandoah, Iowa
Superior, Iowa
Wood River, Nebraska
York, Nebraska
Total
1,246
3,841
2,713
2,328
5,109
1,400
1,611
4,913
1,043
1,015
1,034
8,168
2,571
2,772
886
2,955
3,293
347
47,245
(1) The Hopewell, Virginia plant was permanently closed during the fourth quarter of 2018.
We buy bulk grain, primarily corn and soybeans, from area producers, and provide grain drying and storage services to
those producers. The grain is used as feedstock for our ethanol plants or sold to grain processing companies and area
livestock producers. Bulk grain commodities are traded on commodity exchanges. Inventory values are affected by changes
in these markets and spreads. To mitigate risks related to market fluctuations from purchase and sale commitments of grain,
as well as grain held in inventory, we enter into exchange-traded futures and options contracts that function as economic
hedges at times.
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, China 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 2018, we exported approximately 18% of our distillers grains production,
9
with the largest export markets for distillers grains being Vietnam and Thailand. Access to diversified markets allows us to
sell product to customers offering the highest net price.
Our corn oil is sold primarily to biodiesel plants and, to a lesser extent, feedlot and poultry markets. We transport our
corn oil by truck to locations in a close proximity to our ethanol plants primarily in the southeastern and midwestern regions
of the United States. We also transport corn oil by rail and barges to national markets as well as to exporters for shipment on
vessels to international markets.
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 480 leased hopper cars to
transport distillers grains and approximately 80 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 355,000 head of
cattle and 11.7 million bushels of grain storage capacity.
Facility Location
Kismet, Kansas
Hereford, Texas
Leoti, Kansas
Eckley, Colorado
Sublette, Kansas
Tulia, Texas
Initial Operation or
Acquisition Date
June 2014
March 2017
May 2017
May 2017
August 2018
August 2018
On-Site Cattle
Capacity
(thousands of
cattle)
73
35
106
49
56
36
On-Site Grain Storage
Capacity
(thousands of bushels)
2,193
-
4,345
3,070
1,980
82
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 175 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.
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. Vinegar 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. On November 27, 2018, we sold Fleischmann’s Vinegar.
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) 32 ethanol storage facilities located
at or near our 13 operational ethanol production plants and one non-operational ethanol production plant, (ii) seven fuel
terminal facilities located near major rail lines, and (iii) a leased railcar fleet and other transportation assets.
10
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 2,840 leased tank cars for the transportation of ethanol. The
initial terms of the railcar lease agreements range from one to five 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 owns and operates fuel terminals at seven
locations in six states with combined storage capacity of approximately 7.3 mmg and throughput capacity of approximately
762 mmgy. We also have 32 ethanol storage facilities located at or near our 13 operational ethanol production plants and one
non-operational ethanol production plant with a combined storage capacity of approximately 31.9 mmg to support current
ethanol production capacity of approximately 1.1 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
Oklahoma City, Oklahoma
Ethanol Plants
Atkinson, Nebraska (1)
Central City, Nebraska
Fairmont, Minnesota
Hereford, Texas
Hopewell, Virginia (2)
Madison, Illinois
Mount Vernon, Indiana
Obion, Tennessee
Ord, Nebraska
Otter Tail, Minnesota
Shenandoah, Iowa
Superior, Iowa
Wood River, Nebraska
York, Nebraska
Total
(1) The ethanol storage facilities are located approximately 16 miles from the ethanol plant.
(2) This facility was permanently closed during the fourth quarter of 2018.
11
6,542
120
180
180
30
60
150
2,074
2,250
3,124
4,406
761
2,855
2,855
3,000
1,550
2,000
1,524
1,238
3,124
1,100
39,123
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 one of the largest consolidated owners’ 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, cooperatives,
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.
As of January 15, 2019, the top five producers operated 69 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 204
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 123 operational plants in the states where we have production
facilities, including Illinois, Indiana, Iowa, Minnesota, Nebraska, Tennessee and Texas, as of January 15, 2019. The largest
concentration of operational plants is located in Iowa, Nebraska and Illinois, where approximately 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 in competitive markets. Following the recent acquisitions of
the Leoti, Kansas, Eckley, Colorado, Sublette, Kansas and Tulia, Texas cattle-feeding operations, we now operate the fourth
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 the 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.
The RFS II has been a driving factor in the growth of ethanol usage in the United States. When the RFS II was
established in October 2010, the required volume of “conventional” corn-based ethanol 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, 2018, the EPA
announced the final 2019 renewable volume obligations for conventional ethanol, which met the 15.0-billion-gallon
congressional target.
12
According to the 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, 2019 is the second consecutive year the total proposed RVOs are more than 20% below statutory volumes
levels. Thus, the EPA Administrator has directed his staff to initiate the reset rulemaking process, and the EPA will modify
statutory volumes through 2022 based on the same factors used to set the RVOs post-2022. These factors include
environmental impact, domestic energy security, expected production, infrastructure impact, consumer costs, job creation,
price of ag commodities, food prices, and rural economic development.
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. Higher RIN prices encourage more blending of ethanol.
Under the RFS II, a small refinery, that processes less than 75,000 barrels per day, can petition the EPA for a waiver of
their requirement to submit RINs. The EPA, through consultation with the Department of Energy and the Department of
Agriculture, can grant them a full or partial waiver, or deny it within 90 days of submittal. The EPA granted significantly
more of these waivers in 2016 and 2017 than they had in previous years, totaling 790 million gallons of waived requirements
for 2016 and 1.46 billion gallons for 2017. This effectively reduced the RFS II mandated volumes for those compliance years
by those amounts, and has lowered RIN values significantly over the past calendar year.
Biofuels groups have filed a lawsuit in the U.S. Federal District Court for the D.C. Circuit, challenging the 2019 RVO
rule over the EPA’s failure to address small refinery exemptions in the rulemaking. This is the first RFS rulemaking since the
expanded use of the exemptions came to light, however the EPA has refused to cap the number of waivers it grants or how it
accounts for the retroactive waivers in its percentage standard calculations. The EPA has a statutory mandate to ensure the
volume requirements are met, which are achieved by setting the percentage standards for obligated parties. The current
approach accomplishes the opposite. Even if all the obligated parties comply with their respective percentage obligations for
2019, the nation’s overall supply of renewable fuel will not meet the total volume requirements set by the EPA. This
undermines Congressional intent of demand pressure creation and an increased consumption of renewable fuels. Biofuels
groups argue the EPA must therefore adjust its percentage standard calculations to make up for past retroactive waivers and
adjust the standards to account for any waivers it reasonably expects to grant in the future.
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, food and ingredients, and partnership segment activities are
subject to various and extensive 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.
13
For further discussion see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
BioProcess Algae and Optimal Aquafeed Joint Ventures
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 animal
nutrition, using proprietary technology to customize specific products, based on proven benefits, for relevant markets.
In 2018, we formed Optimal Aquafeed, a 50/50 joint venture to produce high-quality aquaculture feeds utilizing
proprietary techniques and high-protein feed ingredients. The joint venture brings together Green Plains’ production
capabilities, commodity expertise, and infrastructure and combines that with Optimal Fish Food LLC’s intellectual property,
industry expertise and customer relationships.
Employees
On December 31, 2018, we had 1,194 full-time, part-time, temporary and seasonal employees, including 148 employees
at our corporate office in Omaha, Nebraska.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports are available on our website at www.gpreinc.com shortly after we file or furnish the information with the SEC.
You can also find the charters of our audit, compensation and nominating committees, as well as our code of ethics in the
corporate governance section of our website. The information found on our website is not part of this or any other report we
file with or furnish to the SEC. For more information on our partnership, please visit www.greenplainspartners.com.
Alternatively, investors may 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, and cattle.
Our operating results are highly sensitive to commodity prices, including the spread between the corn, natural gas, and
feeder cattle we purchase, and the ethanol, distillers grains, corn oil and live cattle 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, corn oil and cattle prices may make it unprofitable to operate. No assurance can be
given that we will purchase corn and natural gas or sell ethanol, distillers grains, corn oil and live 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 live 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, narrowed significantly and been negative at times. 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, which also could adversely affect our results of operations and financial position.
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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.
Ethanol. Our revenues are dependent on market prices for ethanol which can be volatile as a result of a number of
factors, including: the price and availability of competing fuels; the overall supply and demand for ethanol and corn; the price
of gasoline, crude oil and corn; and government policies.
Ethanol is marketed as a fuel additive that reduces vehicle emissions, an economical source of octanes and, to a lesser
extent, a gasoline substitute. Consequently, gasoline supply and demand affect the price of ethanol. Should gasoline prices or
demand decrease significantly, our results of operations could be materially impacted.
Ethanol imports also affect domestic supply and demand. Imported ethanol is not subject to an import tariff and, under
the 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 other commodity prices,
such as corn and soybeans, will generally cause the price of competing animal feed products to decline, resulting in
downward pressure on the price of distillers grains.
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.
Corn Oil. Industrial corn oil is generally marketed as a biodiesel feedstock; therefore, the price of corn oil is affected by
demand for biodiesel. Reduced profitability in the biodiesel industry due to the lapsed blending tax credit could impact corn
oil demand. 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 live cattle at favorable prices which would affect our profitability.
Our risk management strategies could be ineffective and expose us to decreased liquidity.
As market conditions warrant, we use forward contracts to sell some of our ethanol, distillers grains, corn oil, and live
cattle or buy some of the corn, natural gas, or feeder cattle 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, natural gas and feeder cattle and an increased cash price for
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ethanol, distillers grains, live cattle 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,
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 mandated volumes of conventional ethanol and other biofuels. 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.
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. As the 2018 and 2019 total RVOs are more than 20%
below statutory levels, the RVO reset has been triggered under the RFS II. The EPA Administrator has initiated the required
technical analysis to address the reset rules which will require the EPA 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. 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 as a part of the expected reset rule
in 2019.
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. However, 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 the EPA 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. Recent actions by the EPA to grant small refiner
exemptions as well as the Philadelphia Energy Solutions Bankruptcy Court’s decision to grant RIN relief have resulted in
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lower RIN prices. The Acting EPA Administrator has indicated that the EPA is looking at taking a more structured approach
to granting refinery exemptions, possibly granting partial waivers.
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 and/or enacted, the demand for ethanol may be reduced,
which could negatively and materially affect our financial performance.
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
fuels and depletes water resources. While we do not agree, 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, and contributes to land
use change domestically and abroad.
There are limited markets for ethanol beyond the federal mandates. We believe 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, and
availability to consumers. 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. Miles traveled typically increases during the spring and summer months related to
vacation travel, followed closely behind the fall season due to holiday travel. 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 ethanol, which has been the case in 2018, could negatively impact our business. Reduced demand for ethanol may
depress the value of our products, erode 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.
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:
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constantly changing and potentially volatile supply and demand, which affect the cost of feeder cattle 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;
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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.
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 or have been exported to Canada, Mexico, China and other countries.
The current administration has expressed antipathy towards certain existing international trade agreements, including China
NAFTA, and has significantly increased tariffs on goods imported into the United States, which in turn has led 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, other
international trade agreements and tariffs on various goods. The President has threatened to withdraw the U.S. from NAFTA
in order to leverage support for his updated version, the United States Mexico Canada Agreement or USMCA. The
administration has also expressed a desire to negotiate new free trade agreements with China, Japan, the UK, the EU, and
others. The current trade situation, the outcome of these negotiations or lack thereof, has had and/or may continue to have a
material effect on our business, financial condition and results of operations.
Our debt exposes us to numerous risks that could have significant consequences to our shareholders.
Risks related to the level of debt we have include:
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requiring a sizeable 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; and
being vulnerable to increases in prevailing interest rates.
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 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.
We are required to maintain specified financial ratios, including minimum cash flow coverage, working capital and
tangible net worth under certain loan agreements. A breach of these covenants could result in default, and if such default is
not cured or waived, our lenders could accelerate our debt and declare it immediately due and payable. If this occurs, we may
not be able to repay or borrow sufficient funds to refinance the debt. Even if financing is available, it may not be on
acceptable terms. No assurance can be given that our future operating results will be sufficient to comply with these
covenants or remedy default.
In the past, we have received waivers from our lenders for failure to meet certain financial covenants and amended our
loan agreements to change these covenants. In the event we are unable to comply with these covenants in the future, we
cannot provide assurance that we will be able to obtain the necessary waivers or amend our loan agreements to prevent
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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.
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 could limit our access to capital.
We may need additional capital to fund our growth or other business activities in the future. The cost of capital under our
existing or future financing arrangements could increase and affect our ability to trade with various commercial
counterparties or cause our counterparties to require additional forms of credit support. If capital markets are disrupted, we
may not be able to access capital at all or capital may only be available under less favorable terms.
We are required to continue to make payments to the partnership to the minimum volume commitment regardless of our
production levels.
We are party to the storage and throughput agreement with our partnership, under which we are obligated to pay a
minimum volume commitment regardless of whether or not we operate. We may not run our plants at volumes sufficient
enough to cover the MVC resulting in payments being made to the partnership. In times of sustained negative margins, our
volumes may be insufficient to recover these MVC payments in the following four quarters as outlined in the partnership
agreement.
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 RFS II. 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.
As 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.
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 through mergers and acquisitions and intend to continue
exploring potential growth opportunities. Acquisitions involve numerous risks that could harm our business, including:
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difficulties integrating the operations, technologies, products, existing contracts, accounting processes and personnel
and realizing anticipated synergies of the combined business;
risks relating to environmental hazards on purchased sites;
risks relating to developing the necessary infrastructure for facilities or acquired sites, including access to rail
networks;
difficulties supporting and transitioning customers;
diversion of financial and management resources from existing operations;
the purchase price exceeding the value realized;
risks of entering new markets or areas outside of our core competencies;
potential loss of key employees, customers and strategic alliances from our existing or acquired business;
unanticipated problems or underlying liabilities; and
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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.
We may be affected by our portfolio optimization strategy.
In May 2018, we announced that we were evaluating the performance of our entire portfolio of assets and businesses. As
part of that process, during the fourth quarter of 2018, we sold three ethanol plants, permanently closed one ethanol plant and
sold Fleischmann’s Vinegar. As we continue to evaluate our portfolio, we may sell additional assets or businesses or exit
particular markets that are no longer a strategic fit or no longer meet their growth or profitability targets. Depending on the
nature of the assets sold, our profitability may be impacted by lost operating income or cash flows from such businesses. In
addition, divestitures we complete may not yield the targeted improvements in our business and may divert management’s
attention from our day-to-day operations. Our failure to achieve the intended financial results associated with our portfolio
optimization strategy could have an adverse effect on our business, financial condition or results of operations.
Future events could result in impairment of long-lived assets, which may result in charges that adversely affect our results of
operations.
Long-lived assets, including property, plant and equipment, intangible assets, goodwill and equity method investments,
are evaluated for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Our impairment evaluations are sensitive to changes in key assumptions used in our analysis
and may require use of financial estimates of future cash flows. Application of alternative assumptions could produce
significantly different results. We may be required to recognize impairments of long-lived assets based on future economic
factors such as unfavorable changes in estimated future undiscounted cash flows of an asset group.
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 2018, we exported 19% of our ethanol
production and 18% 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%. On April 1, 2018, China raised their tariff rate to 45%, and later raised it further to
70% in the tit for tat trade war. On December 1, 2018, following a meeting between Chinese President Xi and U.S. President
Trump, the two countries announced they would be discussing a possible trade agreement over the next 90 days. Progress on,
or success of these talks could lead to these ethanol tariffs being reduced or eliminated.
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 going forward. 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 years.
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In January 2016, China’s Ministry of Commerce 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 2018, approximately 31%
of distillers grain produced in the United States was exported, up from 29% in 2017.
With more tariffs and reduced exports, the value of our products 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. Over the past decade, several oil
refiners have acquired ethanol production plants, and now account for almost 1/5 of domestic ethanol production. 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.
Our agribusiness operations are subject to significant government regulations.
Our agribusiness operations are regulated by various government entities that can impose significant costs on our
business. Failure to comply could result in additional expenditures, fines or criminal action. Our production levels, markets
and grains we merchandise are affected by federal government programs, which include USDA acreage control and price
support programs. Government policies such as tariffs, duties, subsidies, import and export restrictions and embargos can
also impact our business. Changes in government policies and producer support could impact the type and amount of grains
planted, which could affect our ability to buy grain. Export restrictions or tariffs could limit sales opportunities outside of the
United States.
Commodities futures trading is subject to extensive regulations.
The futures industry is subject to extensive regulation. Since we use exchange-traded futures contracts as part of our
business, we are required to comply with a wide range of requirements imposed by the CFTC, National Futures Association
and the exchanges on which we trade. These regulatory bodies are responsible for safeguarding the integrity of the futures
markets and protecting the interests of market participants. As a market participant, we are subject to regulation concerning
trade practices, business conduct, reporting, position limits, record retention, the conduct of our officers and employees, and
other matters.
Failure to comply with the laws, rules or regulations applicable to futures trading could have adverse consequences. Such
claims could result in fines, settlements or suspended trading privileges, which could have a material adverse impact on our
business, financial condition or operating results.
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,
22
methyl tertiary-butyl ether, or MTBE, was the leading oxygenate. Other oxygenate 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.
In the past, we have had operating losses and could incur future operating losses.
In the last four 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.
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 and cattle to our
customers. If we are unable to meet customer demand or contract delivery requirements due to stalled operations caused by
business disruptions, we could potentially lose customers.
Adverse weather conditions, such as inadequate or excessive amounts of rain during the growing season, overly wet
conditions, an early freeze or snowy weather during harvest could impact the supply of corn that is needed to produce
ethanol. Corn stored in an open pile may be damaged by rain or warm weather before the corn is dried, shipped or moved
into a storage structure.
Our ethanol-related assets may be at greater risk of terrorist attacks, threats of war or actual war, than other possible
targets.
Terrorist attacks in the United States, including threats of war or actual war, may adversely affect our operations. A
direct attack on our ethanol production plants, or our partnership’s storage facilities, fuel terminals and railcars could have a
material adverse effect on our financial condition, results of operations and cash flows. Furthermore, a terrorist attack could
have an adverse impact on ethanol prices. Disruption or significant increases in ethanol prices could result in government-
imposed price controls.
Our network infrastructure, enterprise applications and internal technology systems could be damaged or otherwise fail and
disrupt business activities.
Our network infrastructure, enterprise applications and internal technology systems are instrumental to the day-to-day
operations of our business. Numerous factors outside of our control, including earthquakes, floods, lightning, tornados, fire,
power loss, telecommunication failures, computer viruses, physical or electronic vandalism or similar disruptions could result
in system failures, interruptions or loss of critical data and prevent us from fulfilling customer orders. We cannot provide
23
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.
We rely on network infrastructure and enterprise applications, and internal technology systems for operational,
marketing support and sales, and product development activities. The hardware and software systems related to such
activities are subject to damage from earthquakes, floods, lightning, tornados, fire, power loss, telecommunication failures,
cyber-attacks and other similar events. They are also subject to acts such as computer viruses, physical or electronic
vandalism or other similar disruptions that could cause system interruptions and loss of critical data, and could prevent us
from fulfilling customers’ orders. Cybersecurity threats and incidents can range from uncoordinated individual attempts to
gain unauthorized access to information technology networks and systems to more sophisticated and targeted measures,
known as advanced persistent threats, directed at the company, its products, its customers and/or its third-party service
providers. Despite the implementation of cybersecurity measures (including access controls, data encryption, vulnerability
assessments, employee training, continuous monitoring, and maintenance of backup and protective systems), the company’s
information technology systems may still be vulnerable to cybersecurity threats and other electronic security breaches. While
we have taken reasonable efforts to protect ourselves, and to date, we have not experienced any material breaches or material
losses related to cyber-attacks, we cannot assure our shareholders that any of our security measures would be sufficient in the
future. Any event that causes failures or interruption in such hardware or software systems could result in disruption of our
business operations, have a negative impact on our operating results, and damage our reputation, which could negatively
affect our financial condition, results of operation, cash flows.
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.
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.
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 enacted on December 22, 2017 and effective January 1, 2018 made 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.
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 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
24
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, though this will be amended lower by the EPA in the reset rulemaking. 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 is viewed more favorably since the feedstock is not diverted from food production and
has a smaller carbon footprint. 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, and fuel terminals 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.
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
25
expenses, capital expenditures, acquisitions and organic growth projects, debt service requirements, working capital needs,
ability to borrow funds and access capital markets, revolving credit facility restrictions, cash reserves and other risks affecting
cash levels. Increasing the partnership’s borrowings or other debt to finance its growth strategy could increase interest
expense, which could impact the amount of cash available for distributions.
There are no limitations in the partnership agreement regarding its ability to issue additional units. Should the partnership
issue additional units in connection with an acquisition or expansion, the distributions on the incremental units will increase
the risk that the partnership will be unable to maintain or increase distributions on a per unit basis.
Increases in interest rates could adversely impact the partnership’s unit price, ability to issue equity or incur debt, and pay
cash distributions at intended levels.
The partnership’s cash distributions and implied distribution yield affect its unit price. Distributions are often used by
investors to compare and rank yield-oriented securities when making investment decisions. A rising interest rate environment
could have an adverse impact on the partnership’s unit price, ability to issue equity or incur debt or pay cash distributions at
intended levels, which could adversely impact the value of our investment in the partnership.
We may be required to pay taxes on our share of the partnership’s income that are greater than the cash distributions we
receive from the partnership.
The unitholders of the partnership generally include, for purposes of calculating their U.S. federal, state and local income
taxes, their share of the partnership’s taxable income, whether they have received cash distributions from the partnership. We
ultimately may not receive cash distributions from the partnership equal to our share of taxable income or the taxes that are
due with respect to that income, which could negatively impact our liquidity.
A majority of the executive officers and directors of the partnership are also officers of our company, which could result in
conflicts of interest.
We indirectly own and control the partnership and appoint all of its officers and directors. A majority of the executive
officers and directors of the partnership are also officers or directors of our company. Although our directors and officers
have a fiduciary responsibility to manage the company in a manner that is beneficial to us, as directors and officers of the
partnership, they also have certain duties to the partnership and its unitholders. Conflicts of interest may arise between us and
our affiliates, and the partnership and its unitholders, and in resolving these conflicts, the partnership may favor its own
interests over the company’s interests. In certain circumstances, the partnership may refer conflicts of interest or potential
conflicts of interest to its conflicts committee, which must consist entirely of independent directors, for resolution. The
conflicts committee must act in the best interests of the public unitholders of the partnership. As a result, the partnership may
manage its business in a manner that differs from the best interests of the company or our stockholders, which could
adversely affect our profitability.
Cash available for distributions could be reduced and likely cause a substantial reduction in unit value if the partnership
became subject to entity-level taxation for federal income tax purposes.
The present federal income tax treatment of publicly traded partnerships or investments in its units could be modified, at
any time, by administrative, legislative or judicial changes and interpretations. From time to time, members of Congress
propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships.
Should any legislative proposal eliminate the qualifying income exception, all publicly traded partnerships would be treated
as corporations for federal income tax purposes. The partnership would be required to pay federal income tax on its taxable
income at the corporate tax rate and likely state and local income taxes at varying rates as well. Distributions to unitholders
would be taxed as corporate distributions. The partnership’s cash available for distributions and the value of the units would
be substantially reduced.
Risks Related to our Common Stock
The price of our common stock may be highly volatile and subject to factors beyond our control.
Some of the many factors that can influence the price of our common stock include:
•
•
our results of operations and the performance of our competitors;
public’s reaction to our press releases, public announcements and filings with the SEC;
26
•
•
•
•
•
•
•
•
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 unrelated to the
operating performance of any particular company. These broad market fluctuations could materially reduce the price of our
common stock price based on factors that have little or nothing to do with our company or its performance.
Anti-takeover provisions could make it difficult for a third party to acquire us.
Our restated articles of incorporation, restated bylaws and Iowa’s law contain anti-takeover provisions that could delay
or prevent change in control of us or our management. These provisions discourage proxy contests, making it difficult for our
shareholders to elect directors or take other corporate actions without the consent of our board of directors, which include:
•
•
•
•
•
board members have three-year staggered terms;
board members can only be removed for cause with an affirmative vote of no less than two-thirds of the outstanding
shares;
shareholder action can only be taken at a special or annual meeting, not by written consent except where required by
Iowa law;
shareholders are restricted from making proposals at shareholder meetings; and
the board of directors can issue authorized or unissued shares of stock.
We are subject to the provisions of the Iowa Business Corporations Act, which prohibits combinations between an Iowa
corporation whose stock is publicly traded or held by more than 2,000 shareholders and an interested shareholder for three
years unless certain exemption requirements are met.
Provisions in the convertible notes could also make it more difficult or too expensive for a third party to acquire us. If a
takeover constitutes a fundamental change, holders of the notes have the right to require us to repurchase their notes in cash.
If a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders
who convert their notes. In either case, the obligation under the notes could increase the acquisition cost and discourage a
third party from acquiring us.
These items discourage transactions that could otherwise command a premium over prevailing market prices and may
limit the price investors are willing to pay for our stock.
Non-U.S. shareholders may be subject to U.S. income tax on gains related to the sale of their common stock.
If we are a U.S. real property holding corporation during the shorter of the five-year period before the stock was sold or
the period the stock was held by a non-U.S. shareholder, the non-U.S. shareholder could be subject to U.S federal income tax
on gains related to the sale of their common stock. Whether we are a U.S. real property holding corporation depends on the
fair market value of our U.S. real property interests relative to our other trade or business assets and non-U.S. real property
interests. We cannot provide assurance that we are not a U.S. real property holding corporation or will not become one in the
future.
27
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 portion of our owned real property is used to secure our loans. See Note 12 – 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 2,150 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 1.1 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 37.1 million bushels.
Our marketing operations are conducted primarily at our corporate office, in Omaha, Nebraska.
Food and Ingredients Segment
We own approximately 8,770 acres of land at our six cattle feeding operations. 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
355,000 head of cattle and 11.7 million bushels of grain storage capacity.
Partnership Segment
Our partnership owns approximately five acres of land and leases approximately 18 acres of land at seven locations in
six states, as disclosed in Item 1 – Business, where its fuel terminals are located and owns approximately 47 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
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
PART II
Securities.
Common Stock
Our common stock trades under the symbol “GPRE” on Nasdaq.
Holders of Record
We had 2,023 holders of record of our common stock, not including beneficial holders whose shares are held in names
other than their own, on February 14, 2019. This figure does not include approximately 38.2 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 6, 2019, our board of directors declared a quarterly cash dividend of $0.12
per share. The dividend is payable on March 15, 2019, to shareholders of record at the close of business on February 22,
2019. 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 2018.
Month
October 1 - October 31
November 1 - November 30
December 1 - December 31
Total
Total Number of Shares
Withheld
Average Price Paid per
Share
6,058
14,270
1,009
21,337
$
$
18.47
15.86
15.68
16.59
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.
The following table lists the shares repurchased under the share repurchase program during the fourth quarter of 2018.
Month
October 1 - October 31
November 1 - November 30
December 1 - December 31
Total
Number of
Shares
Repurchased
Average Price
Paid per Share
-
-
14.18
14.18
- $
-
209,682
209,682 $
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)
909,667 $
909,667
1,119,349
1,119,349 $
83,268
83,268
80,290
80,290
Since inception, the company has repurchased 1,119,349 shares of common stock for approximately $19.7 million under
the program.
29
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Item 6. Selected Financial Data.
The statement of income data for the years ended December 31, 2018, 2017 and 2016 and the balance sheet data as of
December 31, 2018 and 2017 are derived from our audited consolidated financial statements and should be read together with
the accompanying notes included elsewhere in this report.
The statement of income data for the years ended December 31, 2015 and 2014 and the balance sheet data as of
December 31, 2016, 2015 and 2014 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.
2018 (1)
Year Ended December 31,
2016
2015
2017
2014
Statement of Income Data:
(in thousands, except per share information)
Revenues
Costs and expenses
Operating income (2)
Total other expense
Net income
Net income attributable to Green Plains
Earnings per share attributable to Green Plains:
Basic
Diluted
Other Data: (Non-GAAP)
$ 3,843,353 $ 3,596,166 $ 3,410,881 $ 2,965,589 $ 3,235,611
2,949,337
3,319,193
286,274
91,688
35,844
53,337
159,504
30,491
159,504
10,663
3,554,420
41,746
84,897
81,631
61,061
2,904,512
61,077
39,612
15,228
7,064
3,727,623
115,730
95,722
36,734
15,923
$
$
0.39 $
0.39 $
1.56 $
1.47 $
0.28 $
0.28 $
0.19 $
0.18 $
4.37
3.96
EBITDA (unaudited and in thousands)
$
224,652 $
154,370 $
174,428 $
127,781 $
352,477
2018
Year Ended December 31,
2016
2015
2017
2014
Balance Sheet Data (in thousands):
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Stockholders' equity
$
251,683 $
266,651 $
304,211 $
1,206,642
2,216,432
833,700
298,190
1,153,443
1,062,989
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
(1) Fiscal year 2018 includes approximately eleven months of operations of the Bluffton, Indiana, Lakota, Iowa, Riga, Michigan and the Hopewell, Virginia
ethanol plants, as well as Fleischmann’s Vinegar.
(2) Fiscal year 2018 includes the $150.4 million gain on the sale of the Bluffton, Indiana, Lakota, Iowa, and Riga, Michigan ethanol plants, as well as
Fleischmann’s Vinegar during the fourth quarter.
Management uses earnings before interest, income taxes, depreciation and amortization, or EBITDA, to compare the
financial performance of our business segments and manage those segments. Management believes EBITDA is a useful
measure to compare our performance against other companies. EBITDA should not be considered an alternative to, or more
meaningful than, net income or cash flow, which are determined in accordance with GAAP. EBITDA calculations may vary
from company to company. Accordingly, our computation of EBITDA may not be comparable with a similarly titled
measure of another company.
31
The following table reconciles net income to EBITDA for the periods indicated (in thousands):
Net income
Interest expense
Income tax expense (benefit)
Depreciation and amortization
EBITDA (unaudited)
2018
36,734 $
101,025
(16,726)
103,619
224,652 $
$
$
Year Ended December 31,
2016
30,491 $
51,851
7,860
84,226
174,428 $
2017
81,631 $
90,160
(124,782)
107,361
154,370 $
2015
15,228 $
40,366
6,237
65,950
127,781 $
2014
159,504
39,908
90,926
62,139
352,477
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. 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, which was sold during the fourth quarter of 2018, 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 both
our ethanol plants and cattle feedlots 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
According to the EIA, domestic ethanol production increased an average of 1% to 1.05 million barrels per day in 2018,
compared with 1.03 million barrels per day in 2017. Refiner and blender input volume increased slightly to 914 thousand
barrels per day for 2018, compared with 913 thousand barrels per day in 2017. Gasoline demand increased 49 thousand
barrels per day, or 1% in 2018. U.S. domestic ethanol ending stocks increased by approximately 0.5 million barrels year over
year to 23.2 million barrels. As of December 31, 2018, there were approximately 1,700 retail stations selling E15 in 30 states,
up from 1,210 at the beginning of the year, according to Growth Energy.
Global Ethanol Supply and Demand
According to the USDA Foreign Agriculture Service, domestic ethanol exports for the eleven months ended November
30, 2018, were approximately 1.56 bg, up 31% from 1.19 bg for the same perod in 2017. Brazil remained the largest export
destination for U.S. ethanol, which accounted for 30% of domestic ethanol export volume despite the 20% tariff on U.S.
ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter, imposed in September 2017 by Brazil’s
Chamber of Foreign Trade, or CAMEX. Canada, India and the Netherlands accounted for 21%, 9% and 5%, respectively, of
U.S. ethanol exports.
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On April 1, 2018, China announced it would add an additional 15% tariff to the existing 30% tariff it had earlier imposed
on ethanol imports from the United States and Brazil. China later raised the tariff further to 70% as the trade war escalated.
On December 1, 2018, following a meeting between Chinese President Xi and U.S. President Trump, the two countries
announced they would be discussing a possible trade agreement over the next 90 days.
The cost to produce the equivalent amount of starch found in sugar from $3.50-per-bushel corn is 7 cents per pound. The
average price of sugar was approximately 12 cents per pound during 2018, compared with an average of 16 cents per pound
for 2017.
We currently estimate that net ethanol exports will reach between 1.6 billion gallons and 1.7 billion gallons in 2019
based on historical demand from a variety of countries and certain countries who seek to improve their air quality and
eliminate MTBE from their own fuel supplies.
Co-Product Supply and Demand
During the fourth quarter of 2018, the market sentiment for cattle continued to be optimistic due to anticipated lower cost
of feed, strong domestic beef consumption and robust export demand for beef. Corn prices remained on the lower end of their
2018 range, according to the Chicago Mercantile Exchange. Domestic beef consumption per capita in 2018 is projected to
increase 1.2 pounds to 58.3 pounds per person compared with 2017. Export demand for beef is forecasted to increase
approximately 2.3% in 2018 compared with 2017 according to the USDA.
Cow-calf operations continue to be profitable, which has supported a period of expansion. Drought has become less of a
worry for continued feeder cattle production due to precipitation throughout 2018. Year-to-date domestic cattle on feed
increased 3% to 11.7 million head through December 1, 2018, compared to the same period last year.
Packer demand was driven by strong domestic and international beef demand. Total steer and heifer slaughter through
the end of November of 2018 increased 2.1% compared with the first eleven months 2017. Slaughter capacity constraints,
primarily due to labor shortages, have limited the packers’ ability to increase slaughter rates at the same pace as cattle on feed
inventories, resulting in higher packer margins. However, these higher margins should incentivize the packers to increase
slaughter capacity, which will be crucial for cattle feeding margins moving forward.
The U.S. looks poised to grow its global market share for animal protein while Australia continues to struggle with
drought conditions, and Asian swine flu issues in China should result in larger world export demand for animal protein from
the U.S.
Year-to-date U.S. distillers grains exports through November 30, 2018, were 11.0 million metric tons, or 8.8% higher
than the same period last year, according to the USDA Foreign Agriculture Service. Shipments of distillers grains to
Southeast Asia increased 76% year over year due to growing demand for protein, which helped keep export volumes in line
with last year. Mexico, South Korea, Vietnam, Turkey, Thailand and Indonesia, accounted for approximately 61% of total
U.S. distillers export volumes.
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. Congress may also consider legislation that
would impact the RFS. Bills have been introduced in the House and Senate, which would either eliminate the RFS entirely or
eliminate the corn based ethanol portion of the mandate, though they have failed to gain traction heretofore.
Federal mandates supporting the use of renewable fuels are a significant driver of ethanol demand in the U.S. Ethanol
policies are influenced by environmental concerns, diversifying our fuel supply, and an interest in reducing the country’s
dependence on foreign oil. Consumer acceptance of flex-fuel vehicles and higher ethanol blends of ethanol in non-flex-fuel
vehicles 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. Another important factor is a waiver in the Clean Air Act,
known as the One-Pound Waiver, which allows E10 to be sold year-round, even though it exceeds the Reid Vapor Pressure
limitation of nine pounds per square inch. However, the One-Pound Waiver does not currently apply to E15 or higher blends,
even though it has similar physical properties to E10, so its sale is limited to flex-fuel vehicles only during the June 1 to
September 15 summer driving season.
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On October 8, 2018, President Trump directed the EPA to begin rulemaking to expand the One-Pound Waiver to E15 so
it can be sold year round. The EPA will follow the Administrative Procedure Act in proposing a rule, accepting public
comment, and then issuing a final rule. The President has stated a goal of having a final rule out before the start of summer
driving season on June 1, 2019. Any final rule from the agency is susceptible to legal challenges. A government shutdown or
staffing shortfalls could delay a final rule.
When the RFS II was passed in 2007 and rulemaking finalized 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. In
November 2018, the EPA announced it would maintain the 15.0 billion gallon mandate for conventional ethanol in 2019.
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 the 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, 2019 is the second year that the total proposed
RVOs are more than 20% below statutory volumes levels. Thus, the EPA Administrator has directed his staff to initiate a
reset rulemaking, wherein the EPA will modify statutory volumes through 2022, based on the same factors used to set the
RVOs post-2022. These factors, detailed in 42 U.S.C. 7545(o)(2)(B)(ii), are environmental impact, domestic energy security,
expected production, infrastructure impact, consumer costs, job creation, price of ag commodities, food prices, and rural
economic development.
The EPA assigns individual refiners, blenders, and importers the volume of renewable fuels they are obligated to use
based on their percentage of total domestic transportation fuel sales. Obligated parties use RINs to show compliance with
RFS-mandated volumes. RINs are attached to renewable fuels by producers and detached when the renewable fuel is blended
with transportation fuel or traded in the open market. The market price of detached RINs affects the price of ethanol in
certain markets and influences the purchasing decisions by obligated parties.
The EPA can, in consultation with the Department of Energy, waive the obligation for individual refineries that are
suffering “disproportionate economic hardship” due to compliance with the RFS. To qualify, the refineries must be under
75,000 barrels per day and state their case for an exemption in an application to the EPA each year.
The Trump administration waived the obligation for 19 of 20 applicants for compliance year 2016, totaling 790 million
gallons, and 29 of 33 for compliance year 2017, totaling 1.46 billion gallons. This effectively reduces the annual RVO by that
amount, since the waived gallons are not reallocated to other obligated parties at this time. The resulting surplus of RINs in
the market has brought values down significantly, from the mid $0.80 range early in the year to under $0.20. Since the RIN
value helps to make higher blends of ethanol more cost effective, lower RIN values could negatively impact retailer and
consumer adoption of E15 and higher blends.
Biofuels groups have filed a lawsuit in the U.S. Federal District Court for the D.C. Circuit, challenging the 2019 RVO
rule over the EPA’s failure to address small refinery exemptions in the rulemaking. This is the first RFS rulemaking since the
expanded use of the exemptions came to light, however the EPA has refused to cap the number of waivers it grants or how it
accounts for the retroactive waivers in its percentage standard calculations. The EPA has a statutory mandate to ensure the
volume requirements are met, which are achieved by setting the percentage standards for obligated parties. The current
approach accomplishes the opposite. Even if all the obligated parties comply with their respective percentage obligations for
2019, the nation’s overall supply of renewable fuel will not meet the total volume requirements set by the EPA. This
undermines Congressional intent of demand pressure creation and an increased consumption of renewable fuels. Biofuels
groups argue the EPA must therefore adjust its percentage standard calculations to make up for past retroactive waivers and
adjust the standards to account for any waivers it reasonably expects to grant in the future.
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. The EPA has
34
not yet accounted for the 500 million gallons that the court in the Americans for Clean Energy case directed, though they
have indicated they will include it in the reset rulemaking.
Government actions abroad can significantly impact the demand for U.S. ethanol. 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, and recent trade tensions have caused China to raise their tariff on ethanol to 45% and then to 70%. Our exports also
face tariff rate quotas, countervailing duties, and other hurdles in Brazil, the European Union, India, Peru, and elsewhere,
which limits our ability to compete in some markets.
In Brazil, the Secretary of Foreign Trade 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 June 2017, the Energy Regulatory Commission of Mexico (CRE) approved the use of 10% ethanol blends, which
was challenged by nine lawsuits. Four cases were dismissed. The five remaining cases follow one of two tracks: 1) to
determine the constitutionality of the CRE regulation, or 2) to determine the benefits, or lack thereof, of introducing E10 to
Mexico. Five of these cases were initially denied and are going through the appeals process. An injunction was granted in
October 2017, preventing the blending and selling of E10, but was overturned by a higher court in June 2018 making it legal
to blend and sell E10 by PEMEX throughout Mexico except for its three largest metropolitan areas. U.S. ethanol exports to
Mexico totaled 27.6 mmg for the eleven months ended November 30, 2018.
The Tax Cuts and Jobs Act was enacted on December 22, 2017 and is effective January 1, 2018. Among other
provisions, the new law reduced the federal statutory corporate income tax rate from 35% to 21%. We have completed our
analysis of the Act’s impact and have included the tax impacts in our financial statements.
Environmental and Other Regulation
Our operations are subject to environmental regulations, including those that govern the handling and release of ethanol,
crude oil and other liquid hydrocarbon materials. Compliance with existing and anticipated environmental laws and
regulations may increase our overall cost of doing business, including capital costs to construct, maintain, operate, and
upgrade equipment and facilities. 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
its facilities, which are regulated by the Occupational Safety and Health Administration.
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. As of December 31, 2018,
approximately 20% of our railcar fleet was DOT 117 compliant. We anticipate that an additional 20% of our railcar fleet will
be DOT 117 compliant by the end of 2019, and that our entire fleet will be fully compliant by 2023.
In September 2015, the FDA issued rules for Current Good Manufacturing Practice, Hazard Analysis and Risk-Based
Preventative Controls for food for animals in response to FSMA. The rules require FDA-registered food facilities to address
safety concerns for sourcing, manufacturing and shipping food products and food for animals through food safety programs
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.
35
Variability of Commodity Prices
Our business is highly sensitive to commodity price fluctuations, particularly for corn, ethanol, corn oil, distillers grains,
natural gas and cattle, which are impacted by factors that are outside of our control, including weather conditions, corn yield,
changes in domestic and global ethanol supply and demand, government programs and policies and the price of crude oil,
gasoline and substitute fuels. We use various financial instruments to manage and reduce our exposure to price variability.
For more information about our commodity price risk, refer to Item 7A. - Qualitative and Quantitative Disclosures About
Market Risk, Commodity Price Risk in this report.
During periods of commodity price variability or compressed margins, we may reduce or cease operations at certain
ethanol plants. Slowing down production increases the ethanol yield per bushel of corn, optimizing cash flow in lower margin
environments. In 2018, our ethanol facilities ran at approximately 75% of our daily average capacity, largely due to the low
margin environment during the year driven by higher domestic ethanol supplies resulting from weak refiner and blender input
volume.
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 at the point in time when the product or service is transferred to the customer.
Sales of ethanol, distillers grains, corn oil, natural gas and other commodities by the company’s marketing business are
recognized when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs with the
transfer of control of products or services. Revenues related to marketing for third parties are presented on a gross basis as we
control the product prior to the sale to the end customer, take title of the product and have inventory risk. Unearned revenue
is recorded for goods in transit when we have received payment but control has not yet been transferred to the customer.
Revenues for receiving, storing, transferring and transporting ethanol and other fuels are recognized when the product is
delivered to the customer.
We routinely enter into physical-delivery energy commodity purchase and sale agreements. At times, we settle these
transactions by transferring obligations to other counterparties rather than delivering the physical commodity. Energy trading
transactions are reported net as a component of revenue. Revenues include net gains or losses from derivatives related to
products sold while cost of goods sold includes net gains or losses from derivatives related to commodities purchased.
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.
Sales of products, including agricultural commodities, cattle and vinegar, are recognized when control of the product is
transferred to the customer, which depends on the agreed upon shipment or delivery terms. 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 upon transfer of control of product from its storage tanks and
fuel terminals, when railcar volumetric capacity is provided, and as truck transportation services are performed. To the extent
shortfalls associated with minimum volume commitments in the previous four quarters continue to exist, volumes in excess of
the minimum volume commitment are applied to those shortfalls. Remaining excess volumes generating operating lease
revenue are recognized as incurred.
Intercompany revenues are eliminated on a consolidated basis for reporting purposes.
36
Depreciation of Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation on our ethanol production and
grain storage facilities, railroad tracks, computer equipment and software, office furniture and equipment, vehicles, and other
fixed assets is provided using the straight-line method over the estimated useful life of the asset, which currently ranges from
3 to 40 years.
Land improvements are capitalized and depreciated. Expenditures for property betterments and renewals are capitalized.
Costs of repairs and maintenance are charged to expense when incurred.
We periodically evaluate whether events and circumstances have occurred that warrant a revision of the estimated useful
life of the asset, which is accounted for prospectively.
Carrying Value of Intangible Assets
Our intangible assets consist of research and development technology and licenses that were capitalized at their fair
value at the time of consolidation of BioProcess Algae, 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, intangible assets and equity method investments. 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 and partnership segments. We review
goodwill for impairment at least annually, as of October 1, or more frequently whenever events or changes in circumstances
indicate that an impairment may have occurred.
Effective January 1, 2018, we early adopted 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. Under the amended guidance, an entity may first assess qualitative factors to determine
whether it is necessary to perform a quantitative goodwill impairment test. If determined to be necessary, the quantitative
impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be
recognized (if any).
We performed our annual goodwill assessment as of October 1, 2018, using a qualitative assessment, which resulted in
no goodwill impairment.
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 attempt to minimize risk and the effect of commodity price changes including but not limited 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 our operating results. We may hedge these commodities as
one way to mitigate risk; however, there may be situations when these hedging activities themselves result in losses.
37
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, cash flow hedge accounting treatment.
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 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 current liabilities at fair value.
At times, we hedge our exposure to changes in inventory values and designate qualifying derivatives as fair value
hedges. The carrying amount of the hedged inventory is adjusted in the current period for changes in fair value.
Ineffectiveness of the hedges is recognized in the current period to the extent the change in fair value of the inventory is not
offset by the change in fair value of the derivative.
Accounting for Income Taxes
Income taxes are accounted for under the asset and liability method in accordance with GAAP. Deferred tax assets and
liabilities are recognized for future tax consequences between existing assets and liabilities and their respective tax basis, and
for net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to be applied to taxable income in years temporary differences are expected to be recovered or settled. The effect of
a tax rate change is recognized in the period that includes the enactment date. The realization of deferred tax assets depends
on the generation of future taxable income during the periods in which temporary differences become deductible.
Management considers scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning
strategies to make this assessment. Management considers the positive and negative evidence to support the need for, or
reversal of, a valuation allowance. The weight given to the potential effects of positive and negative evidence is based on the
extent it can be objectively verified.
To account for uncertainty in income taxes, we gauge the likelihood of a tax position based on the technical merits of the
position, perform a subsequent measurement related to the maximum benefit and degree of likelihood, and determine the
benefit to be recognized in the financial statements, if any.
Recently Issued Accounting Pronouncements
For information related to recent accounting pronouncements, see Note 2 – Summary of Significant Accounting Policies
included as part of the notes to consolidated financial statements in this report.
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. For our food and ingredients
segment, the sale of cattle, and vinegar prior to the sale of Fleischmann’s Vinegar during the fourth quarter of 2018, are our
38
primary sources of revenue. For our partnership segment, our revenues consist primarily of fees for receiving, storing,
transferring and transporting ethanol and other fuels. Revenues include net gains or losses from derivatives related to
products sold.
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
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 our
vinegar operation, which was sold during the fourth quarter of 2018, cost of goods sold included direct labor, materials and
plant overhead costs. Direct labor included compensation and related benefits of non-management personnel involved in
vinegar operations. Overhead consisted primarily of plant utilities and outbound freight charges. Food-grade ethanol was 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, as well as severance and separation costs, are the largest expenditure.
Selling, general and administrative expenses that cannot be allocated to an operating segment are referred to as corporate
activities.
Gain on Sale of Assets, Net. The company completed the sale of the three ethanol plants located in Bluffton, Indiana,
Lakota, Iowa and Riga, Michigan, as well as Fleischmann’s Vinegar during the fourth quarter of 2018. Proceeds from these
sales, offset by related expenses, were recorded primarily at the corporate level, with only the gain on the assignment of
operating leases of $2.7 million being recorded at the partnership level.
Other Income (Expense). Other income (expense) includes interest earned, interest expense, equity earnings in
nonconsolidated subsidiaries and other non-operating items.
39
Results of Operations
Comparability
The following summarizes various events that affect the comparability of our operating results for the past three years:
• April 2016
• September 2016
• October 2016
• March 2017
• May 2017
• August 2018
• November 2018
• November 2018
• November 2018
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 these plants.
Fleischmann’s Vinegar was acquired.
Hereford, Texas cattle feeding operation was acquired.
Leoti, Kansas and Eckley, Colorado cattle feeding operations were acquired.
Sublette, Kansas and Tulia, Texas cattle feeding operations were acquired.
Bluffton, Indiana, Lakota, Iowa and Riga, Michigan ethanol plants were sold and certain
storage assets of these plants were acquired from the partnership prior to being sold.
Hopewell, Virginia ethanol plant was permanently closed.
Fleischmann’s Vinegar was sold.
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
Hereford cattle feeding business and six months of operations at our Leoti and Eckley cattle feeding operations. The year
ended December 31, 2018, includes approximately five months of operations at our Sublette and Tulia cattle feeding
businesses, eleven months of operations at our Bluffton, Lakota, Hopewell and Riga ethanol plants and eleven months of our
Fleischmann’s Vinegar operations.
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 and
food-grade corn oil operations and included vinegar production until the sale of Fleischmann’s Vinegar during the fourth
quarter of 2018 and (4) partnership, which includes fuel storage and transportation services.
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 include selling, general and administrative expenses, consisting primarily of compensation,
professional fees and overhead costs not directly related to a specific operating segment and the gain on sale of assets, net
recorded during the fourth quarter of 2018. When we evaluate segment performance, we review the following segment
information as well as earnings before interest, income taxes, depreciation and amortization, or EBITDA.
40
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
2018
Year Ended December 31,
2017
2016
$
$
2,109,079
11,582
2,120,661
$
2,497,360
10,313
2,507,673
2,409,102
-
2,409,102
722,756
46,200
768,956
1,005,037
156
1,005,193
6,481
94,267
100,748
3,995,558
(152,205)
3,843,353
$
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
$
(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
EBITDA:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Intersegment eliminations
Corporate activities
2018
Year Ended December 31,
2017
2016
2,118,787
717,772
939,838
-
(148,764)
3,627,633
$
$
2,434,001
614,582
411,781
-
(158,777)
3,301,587
$
$
2,280,906
650,538
294,396
-
(129,761)
3,096,079
2018
Year Ended December 31,
2017
2016
(111,823)
29,076
40,130
64,770
(3,110)
96,687
115,730
$
$
(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
2018
Year Ended December 31,
2017
2016
(31,623)
31,583
55,805
69,399
(3,110)
102,598
224,652
$
$
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
$
$
$
$
$
$
41
Total assets by segment are as follows (in thousands):
Total assets:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Corporate assets
Intersegment eliminations
Year Ended December 31,
2018
2017
$
$
872,845
399,633
552,459
67,297
334,236
(10,038)
2,216,432
$
$
1,144,459
554,981
725,232
74,935
295,217
(10,174)
2,784,650
Year Ended December 31, 2018 Compared with the Year Ended December 31, 2017
Consolidated Results
Consolidated revenues increased $247.2 million in 2018, compared with 2017, primarily as a result of the acquisitions of
cattle feeding operations during the first and second quarters of 2017 and in the third quarter of 2018. The increase was also
driven by higher average realized prices for distillers grains and additional natural gas volumes sold, partially offset by a
decrease in volumes for ethanol and distillers grains and lower average realized prices for ethanol and corn oil. The increase
was also partially offset by lower revenues as a result of the disposition of three ethanol plants and Fleischmann’s Vinegar in
November of 2018.
Operating income increased $74.0 million and EBITDA increased $70.3 million in 2018, compared with 2017 primarily
due to gain on the sale of assets related to the sale of three ethanol plants and Fleischmann’s Vinegar during the fourth
quarter, which resulted in a net gain of $150.4 million. This increase was partially offset by decreased margins in our ethanol
production segment. Interest expense increased $10.9 million in 2018, compared with 2017 primarily due to the $13.2 million
write-off of deferred debt issuance costs related to repayment of the $500 million senior secured term loan due 2023, as well
as higher average debt borrowings and higher borrowing costs during the year, partially offset by lower expense associated
with termination of previous credit facilities during the fourth quarter of 2018. Income tax benefit was $16.7 million in 2018,
compared to $124.8 million in 2017. The benefit reflected in 2018 is primarily due to the company’s recognition of tax
benefits related to the completion of the 2017 study for R&D credits and an estimate for 2018, as well as the effect of a lower
tax rate on pre-tax income. The benefit reflected in 2017 is due to the company’s recognition of tax benefits related to
enactment of the Tax Cuts and Jobs Act and for the completion of a multi-year study for R&D Credits in 2017, as well as
pre-tax losses at a higher tax rate.
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
2018
1,086,633
1,256,361
2,815
276,299
377,084
3,314
301,920
437,373
Revenues in the ethanol production segment decreased $387.0 million in 2018 compared with 2017 primarily due to
lower volumes of ethanol and distillers grains sold in addition to lower average ethanol and corn oil prices realized, partially
offset by higher average distillers grains prices realized.
42
Cost of goods sold in the ethanol production segment decreased $315.2 million for 2018 compared with 2017 due to
lower production volumes. As a result of the factors identified above, operating income decreased $66.7 million and
EBITDA decreased $71.7 million during 2018. Depreciation and amortization expense for the ethanol production segment
was $80.2 million for 2018, compared with $82.0 million during 2017 due to the sale of the three ethanol plants.
Agribusiness and Energy Services Segment
Revenues in the agribusiness and energy services segment increased $100.2 million while operating income decreased
$1.4 million and EBITDA decreased $2.3 million in 2018 compared with 2017. The increase in revenues was primarily due
to an increase in natural gas and ethanol trading activity, partially offset by lower average realized prices for corn oil.
Operating income and EBITDA decreased primarily as a result of decreased trading activity margins.
Food and Ingredients Segment
Revenues in our food and ingredients segment increased $533.4 million in 2018 compared with 2017. The increase in
revenues was primarily due to an increase in cattle volumes sold as a result of the acquisitions of cattle feeding operations
during the first and second quarters of 2017 and in the third quarter of 2018. Cattle head sold during fiscal year 2018 and
2017, was approximately 547,600 and 199,500, respectively.
Operating income increased by $4.2 million and EBITDA increased $6.0 million during 2018, compared with 2017
primarily due to the increase in cattle volumes outlined above.
In addition, during 2018, the company recognized a gain within other income of $4.5 million related to business
interruption and property insurance proceeds received in excess of the book value of certain fixed assets that were damaged at
the Hereford cattle feed yard.
Partnership Segment
Revenues generated from the partnership segment decreased $6.2 million in 2018 compared with 2017. Revenues
generated from rail transportation services decreased $3.9 million due to lower average rates charged for the railcar
volumetric capacity provided, as well as the reduction in volumetric capacity associated with the assignment of railcar
operating leases to Valero in the fourth quarter of 2018. Storage and throughput revenue decreased $3.2 million primarily due
to a decrease in throughput volumes which was driven by lower capacity utilization, as well as the sale of the Bluffton,
Indiana, Lakota, Iowa, and Riga Michigan ethanol plants. Revenues generated from terminal services decreased $0.8 million
due to reduced throughput at our fuel terminals. These decreases were partially offset by an increase in trucking and other
revenue of $1.6 million due to expansion of our truck fleet.
General and administrative expenses increased $1.0 million in 2018 compared with 2017 primarily due to higher
transaction costs and professional fees, as well as an increase in expenses allocated to the partnership under the secondment
agreement.
Operating income for the partnership segment decreased $0.9 million while EBITDA decreased $1.6 million in 2018
compared to 2017 due to the changes in revenues discussed above, partially offset by a decrease in operations and
maintenance expenses of $2.6 million as a result of the factors identified above.
Intersegment Eliminations
Intersegment eliminations of revenues decreased by $6.8 million for 2018 compared with 2017, primarily due to a
decrease in storage and throughput fees paid to the partnership as a result of the sale of three ethanol plants in November
2018.
Corporate Activities
Operating income was impacted by a decrease in operating expenses for corporate activities of $141.9 million for 2018
compared with 2017, primarily due to the gain on sale of assets recorded during the fourth quarter of 2018.
43
Income Taxes
We recorded income tax benefit of $16.7 million for 2018 compared to $124.8 million in 2017. The benefit reflected in
2018 is primarily due to the company’s recognition of tax benefits related to the completion of the 2017 study for R&D
credits and an estimate for 2018, as well as the effect of a lower tax rate on pre-tax income. The benefit reflected in 2017 is
primarily due to the company’s recognition of tax benefits related to enactment of the Tax Cuts and Jobs Act and for the
completion of a multi-year study for R&D Credits in 2017, as well as pre-tax losses at a higher tax rate. The effective tax rate
(calculated as the ratio of income tax expense to income before income taxes) was approximately (83.6)% for 2018 compared
with 289.2% for 2017.
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
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
Year Ended December 31,
2017
2016
1,256,361
1,147,630
(thousands of equivalent dried tons)
3,314
3,064
Corn oil sold
(thousands of pounds)
Corn consumed
(thousands of bushels)
301,920
273,901
437,373
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.
44
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.
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.
45
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.
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, 2018, we had $251.7 million in cash and equivalents, excluding restricted cash, consisting of $226.0
million available to our parent company and the remainder at our subsidiaries. Additionally, we had $66.5 million in
restricted cash at December 31, 2018. We also had $467.0 million available under our revolving credit agreements, some of
which were subject to restrictions or other lending conditions. Funds held by our subsidiaries are generally required for their
ongoing operational needs and restricted from distribution. At December 31, 2018, our subsidiaries had approximately
$243.4 million of net assets that were not available to use in the form of dividends, loans or advances due to restrictions
contained in their credit facilities.
Net cash provided by operating activities was $39.0 million in 2018 compared with net cash used in operating activities
of $182.2 million in 2017. Operating activities compared to the prior year were primarily affected by a decrease in the year
over year change in inventories as well as decreases in deferred and current income taxes, offset by the gain on sale of assets
recognized in 2018. Net cash provided by investing activities was $507.5 million in 2018, compared to net cash used in
investing activities of $128.5 million in 2017, due primarily to the proceeds from the sale of the three ethanol plants and
Fleischmann’s Vinegar partially offset by the acquisition of additional cattle feeding operations. Net cash used in financing
activities was $540.6 million in 2018 primarily due to the repayment of the term loan.
Additionally, Green Plains Trade, Green Plains Cattle and Green Plains Grain use revolving credit facilities to finance
working capital requirements. We frequently draw from and repay these facilities which 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 $44.2 million in 2018 for projects, including expansion projects of approximately
$27.3 million for ethanol production capacity and $6.4 million for cattle capacity and various other projects. The current
projected estimate for capital spending for 2019 is approximately $50 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, 2018, we had $42.2 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 6, 2019, our board of directors declared a quarterly cash dividend
of $0.12 per share. The dividend is payable on March 14, 2019, to shareholders of record at the close of business on February
22, 2019.
46
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 2018, we purchased a total of 209,682 shares of common
stock for approximately $3.0 million. To date, we have repurchased 1,119,349 of common stock for approximately $19.7
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 held by Green Plains, consisting of 4,389,642
common units and 9,123,858 common units that could be issued upon conversion of subordinated units. In the fourth quarter
of 2018, the partnership retired units received from Green Plains for the sale of storage assets, resulting in 11,586,548 units
held by Green Plains that could be sold under the shelf as of December 31, 2018.
The requirements under the partnership agreement for the conversion of all of the outstanding subordinated units into
common units were satisfied upon the payment of the distribution with respect to the quarter ended June 30, 2018.
Accordingly, the subordination period ended on August 13, 2018, the first business day after the date of the distribution
payment, and all of the 15,889,642 outstanding subordinated units were converted into common units on a one-for-one basis.
The conversion of the subordinated units does not impact the amount of cash distributions paid or the total number of
outstanding units.
We have an effective shelf registration statement on Form S-3 on file with the SEC that was initially filed on December
22, 2016, registering an indeterminate number of shares of common stock, warrants and debt securities up to $250,000,000.
We believe we have sufficient working capital for our existing operations. Furthermore, our liquidity position was
improved as a result of the sale of three of our ethanol plants located in Bluffton, Indiana, Lakota, Iowa, and Riga, Michigan
as well as the sale of Fleischmann’s Vinegar. The majority of net cash proceeds from the sales, net of fees and taxes, was
used to pay off the outstanding term loan balance. 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 assets, equity or
borrow capital to improve or preserve our liquidity, expand our business or acquire existing businesses. We cannot provide
assurance that we will be able to secure funding necessary for additional working capital or these projects at reasonable
terms, if at all.
Debt
We were in compliance with our debt covenants at December 31, 2018. Based on our forecasts, 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, we and substantially all of the our subsidiaries, but not including Green Plains Partners and certain
other entities as guarantors, entered into a $500.0 million term loan agreement, which was to mature 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. In November 2018, we repaid the remaining
outstanding balance of our $500.0 million term loan using a portion of the proceeds from the sales of the three ethanol plants
and Fleischmann’s Vinegar. We did not incur any early termination penalties to the lenders as a result of the repayment.
In September 2013, we issued $120.0 million of 3.25% convertible senior notes due in 2018, or 3.25% notes, which were
senior, unsecured obligations with interest payable on April 1 and October 1 of each year. Prior to April 1, 2018, the 3.25%
notes were not convertible unless certain conditions are satisfied. The conversion rate was 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 September 30, 2018, to 50.8753 shares of common stock per $1,000 of principal, which is equal to a
conversion price of approximately $19.66 per share. We could have settled the 3.25% notes in cash, common stock or a
47
combination of cash and common stock. For all conversions of notes which occur on or after April 1, 2018, we elected to
convert for whole shares of common stock with any fractional share being settled with cash in lieu.
During the second quarter of 2018, an additional 50 shares of our common stock were exchanged for approximately $1
thousand in aggregate principal amount of the 3.25% notes. Following the closing of this agreement, $63.7 million aggregate
principal amount of the 3.25% notes remained outstanding.
During the three months ended September 30, 2018, we entered into exchange agreements with certain beneficial owners
of our outstanding 3.25% convertible senior notes due 2018 (the “Old Notes”), pursuant to which such investors exchanged
(the “Exchange”) $56.8 million in aggregate principal amount of the Old Notes for $56.8 million in aggregate principal
amount of notes due October 1, 2019 (the “New Notes”). We evaluated the Exchange in accordance with ASC 470-50 and
concluded that the Exchange qualified as a debt modification as the cash flows and fair value of the embedded conversion
option of the New Notes were not substantially different from the Old Notes. As a result, the New Notes were recorded at fair
value at the time of the exchange, and the company recorded a non-cash adjustment to additional paid-in capital of $3.5
million, net of a $1.2 million tax impact, related to the difference in fair value of the embedded conversion option of the Old
Notes and the New Notes. Following the closing of these agreements, $6.9 million aggregate principal of the Old Notes
remained outstanding which was paid on October 1, 2018, the maturity date of the Old Notes.
The New Notes are senior, unsecured obligations of the company and bear interest at a rate of 3.25% per annum, payable
semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2018. Interest on the New Notes
will accrue from, and including, April 1, 2018. The New Notes will mature on October 1, 2019, unless earlier converted.
Holders of New Notes may convert their New Notes, at their option, in integral multiples of $1,000 principal amount, at any
time prior to the close of business on the scheduled trading day immediately preceding the maturity date of the New Notes.
The conversion rate for the New Notes will initially be 50.6481 shares of the company’s common stock per $1,000 principal
amount of New Notes, which corresponds to an initial conversion price of approximately $19.74 per share of the company’s
common stock. The conversion rate will be subject to adjustment upon the occurrence of certain events. Upon conversion of
the convertible notes, the company will settle its conversion obligation by delivering shares of its common stock at the
applicable conversion rate, together with cash in lieu of any fractional share.
We do not have the right to redeem the New Notes at its election before their maturity. The New Notes are subject to
customary provisions providing for the acceleration of their principal and interest upon the occurrence of events that
constitute an “event of default.” Events of default include, among other events, certain payment defaults, defaults in settling
conversions, certain defaults under the company’s other indebtedness and certain insolvency-related events. Upon maturity,
we will settle the New Notes in cash.
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.
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, which 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, 2018, the outstanding principal balance was $41.0 million on the
facility and the interest rate was 5.53%.
48
Green Plains Grain has entered into short-term inventory financing agreements with a financial institution. The company
has accounted for the agreements as short-term notes, rather than sales, and has elected the fair value option to offset
fluctuations in market prices of the inventory. The company had no short-term notes payable related to these inventory
financing agreements as of December 31, 2018.
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, which matures in July of 2022. This facility can be increased by up
to $70.0 million with agent approval. 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. At December 31, 2018, the outstanding principal balance was $108.5 million on the facility and the interest rate was
4.72%.
Green Plains Commodity Management has an uncommitted $20.0 million revolving credit facility which matures April
30, 2023 to finance margins related to its hedging programs. Advances are subject to variable interest rates equal to LIBOR
plus 1.75%. At December 31, 2018, the outstanding principal balance was $14.3 million on the facility and the interest rate
was 4.16%.
Food and Ingredients Segment
Green Plains Cattle has a $500.0 million senior secured asset-based revolving credit facility to finance working capital
up to the maximum commitment based on eligible collateral, which matures in April of 2020. This facility can be increased
by up to $100.0 million with agent approval and includes a swing-line sublimit of $20.0 million. On July 31, 2018, the
company amended the credit facility, to increase the maximum commitment from $425.0 million to $500.0 million. At
December 31, 2018, the outstanding principal balance was $374.5 million on the facility and our interest rate was 4.41%.
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
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.
Partnership Segment
Green Plains Partners, through a wholly owned subsidiary, has a $200.0 million revolving credit facility, which matures on
July 1, 2020, to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes. On
February 20, 2018, the partnership accessed an additional $40.0 million to increase the revolving credit facility from $195.0
million to $235.0 million. On November 15, 2018, the revolving credit facility available was decreased from $235.0 million
to $200.0 million. In addition, the lenders permitted the exchange of units as consideration for the transaction and also
permitted modifications of various key operating agreements. There were no other significant changes in other covenants.
The credit facility can be increased by an additional $20.0 million without the consent of the lenders. At December 31, 2018,
the outstanding principal balance of the facility was $134.0 million and our interest rate was 5.03%.
Refer to Note 12 – Debt included as part of the notes to consolidated financial statements for more information about our
debt.
49
Contractual Obligations
Contractual obligations as of December 31, 2018 were as follows (in thousands):
Payments Due By Period
Contractual Obligations
Long-term and short-term debt obligations (1)
Interest and fees on debt obligations (2)
Operating lease obligations (3)
Other
Purchase obligations
$
$
Total
925,102
76,254
90,298
8,925
Less than 1
year
596,428
41,444
23,552
1,722
$
Forward grain purchase contracts (4)
Other commodity purchase contracts (5)
Other
Total contractual obligations
161,378
127,905
120
1,389,982
$
$
157,194
117,505
79
937,924
$
1-3 years
3-5 years
136,225
19,860
27,285
4,033
2,267
7,939
41
197,650
$
$
172,012
6,935
10,919
1,860
1,917
2,461
-
196,104
$
$
More than
5 years
20,437
8,015
28,542
1,310
-
-
-
58,304
(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 $3.2 million per year. At December 31, 2018, we had $891.2 million in debt, $672.2 million of
which had variable interest rates.
Refer to Note 12 – 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, corn, distillers grains, corn oil, natural
gas, and cattle. 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. Corn prices are affected by weather conditions, yield, changes in domestic and global supply and demand, and
government programs and policies. Distillers grains prices are impacted by livestock numbers on feed, prices for feed
alternatives and supply, which is associated with ethanol plant production. Natural gas prices are influenced by severe
weather in the summer and winter and hurricanes in the spring, summer and fall. Other factors include North American
energy exploration and production, and the amount of natural gas in underground storage during injection and withdrawal
seasons. Cattle prices are impacted by weather conditions, overall economic conditions and government regulations and
packer processing disruptions.
To reduce the risk associated with fluctuations in the price of ethanol, corn, distillers grains, corn oil, natural gas 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, the New York Mercantile Exchange and the Chicago 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
50
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, 2018, revenues included net losses of $0.7 million and cost of goods sold
included net gains of $7.9 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. To reduce commodity price risk caused by market
fluctuations, we enter into exchange-traded futures and options contracts that serve as economic hedges. 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, 2018, are as follows (in thousands):
Commodity
Ethanol
Corn
Distillers grains
Corn Oil
Natural gas
Estimated Total Volume
Requirements for the Next
12 Months (1)
1,123,000
387,000
2,900
292,000
31,200
Unit of Measure
Gallons
Bushels
Tons (2)
Pounds
MMBTU
Net Income Effect of
Approximate 10% Change
in Price
105,205
110,616
31,849
6,145
5,067
$
$
$
$
$
(1) Estimated volumes reflect anticipated expansion of production capacity at our ethanol plants and assumes production at full capacity.
(2) Distillers grains quantities are stated on an equivalent dried ton basis.
Agribusiness and Energy Services Segment
In the agribusiness and energy services segment, our inventories, physical purchase and sale contracts and derivatives are
marked to market. To reduce commodity price risk caused by market fluctuations for purchase and sale commitments of grain
and grain held in inventory, we enter into exchange-traded futures and options contracts that serve as economic hedges.
The market value of exchange-traded futures and options used for hedging are highly correlated with the underlying
market value of grain inventories and related purchase and sale contracts for grain. The less correlated portion of inventory
and purchase and sale contract market values, known as basis, is much less volatile than the overall market value of
exchange-traded futures and tends to follow historical patterns. We manage this less volatile risk by constantly monitoring
our position relative to the price changes in the market. Inventory values are affected by the month-to-month spread in the
futures markets. These spreads are also less volatile than overall market value of our inventory and tend to follow historical
patterns, but cannot be mitigated directly. Our accounting policy for futures and options, as well as the underlying inventory
held for sale and purchase and sale contracts, is to reflect their current market values and include gains and losses in the
consolidated statement of operations.
Our daily net commodity position consists of inventories related to purchase and sale contracts and exchange-traded
contracts. The fair value of our position was approximately $3.5 million for grain at December 31, 2018. Our market risk at
that date, based on the estimated net income effect resulting from a hypothetical 10% change in price, was approximately
$0.3 million.
Food and Ingredients Segment
In the food and ingredients segment, our physical cattle 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 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
51
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 $4.6 million for cattle based on market
prices at December 31, 2018. Our market risk at that date, based on the estimated net income effect resulting from a
hypothetical 10% change in price, was approximately $0.3 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 $17.5 million for grain and other cattle feed
based on market prices at December 31, 2018. Our market risk at that date, based on the estimated net income effect resulting
from a hypothetical 10% change in price, was approximately $1.3 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. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives. Management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
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, 2018, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and concluded that our disclosure controls
and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining effective internal control over financial reporting, as defined
in Exchange Act Rule 13a-15(f). Our internal control system is designed to provide reasonable assurance regarding the
reliability of financial reporting and preparation of financial statements in accordance with GAAP.
Under the supervision and participation of our chief executive officer and chief financial officer, management assessed
the design and operating effectiveness of our internal control over financial reporting as of December 31, 2018, based on the
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. We completed the acquisition of two cattle feeding operations in Sublette, Kansas and Tulia, Texas on August
1, 2018. Our management excluded from its assessment of the effectiveness of the company’s internal control over financial
reporting as of December 31, 2018, the acquired businesses’ internal control over financial reporting associated with the
acquired assets which represent approximately 5% 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, 2018. Based on this assessment,
management concluded that our internal control over financial reporting was effective as of December 31, 2018.
52
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 Stockholders and Board of Directors
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, 2018, 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, 2018, 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, 2018 and 2017, and the related consolidated
statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year
period ended December 31, 2018, and related notes (collectively, the consolidated financial statements), and our report dated
February 20, 2019 expressed an unqualified opinion on those consolidated financial statements.
The Company completed the acquisition of two cattle feeding operations in Sublette, Kansas and Tulia, Texas on August 1,
2018 (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, 2018, the acquired businesses’ internal control over financial reporting
associated with approximately 5% 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, 2018. 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 20, 2019
/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 2019 Annual Meeting of Stockholders (“Proxy Statement”) under “Corporate
Governance,” “Proposal 1 – Election of Directors,” “Our Management,” 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 “Corporate Governance” 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 “Security Ownership of Certain Beneficial Owners and Management” and
“Executive Compensation” is incorporated by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information in the Proxy Statement under “Transactions with Related Persons, Promoters and Certain Control Persons”
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, 2018 and 2017
Consolidated Statements of Income for the years-ended December 31, 2018, 2017 and 2016
Consolidated Statements of Comprehensive Income for the years-ended December 31, 2018, 2017 and 2016
Consolidated Statements of Stockholders’ Equity for the years-ended December 31, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years-ended December 31, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
Page
F-1
F-2
F-3
F-4
F-5
F-6
F-8
(2) Financial Statement Schedules. All 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)
2.5
Description of Exhibit
Exhibit Index
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 herein 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 herein 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 herein
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 herein 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 herein 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 herein 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 herein
by reference to Exhibit 2.2 to the company’s Current Report on Form 8-K dated September 26, 2016)
Stock Purchase Agreement, dated as of October 3, 2016, by and among Green Plains Inc., Green Plains II
LLC, SCI Ingredients Holdings, Inc., Stone Canyon Industries LLC and other selling shareholders
(incorporated herein by reference to Exhibit 2.1 to the company’s Current Report on Form 8-K dated
October 3, 2016)
57
2.6(a)
2.6(b)
2.6(c)
2.6(d)
2.7
2.8(a)
2.8(b)
2.9
3.1(a)
3.1(b)
3.1(c)
3.2
4.1
4.2
4.3
4.4
Membership Interest Purchase Agreement, dated as of February 16, 2018, by and between AMID Merger
LP and DKGP Energy Terminals LLC (incorporated herein by reference to Exhibit 2.1(a) of the
company’s Current Report on Form 8-K filed on February 20, 2018)
Guaranty Agreement (Buyer), dated as of February 16, 2018, by and between Delek Logistics Partners,
LP and Green Plains Partners LP (incorporated herein by reference to Exhibit 2.1(b) of the company’s
Current Report on Form 8-K filed on February 20, 2018)
Guaranty Agreement (Seller), dated as of February 16, 2018, by and between American Midstream
Partners, LP and DKGP Energy Terminals LLC (incorporated herein by reference to Exhibit 2.1(c) of the
company’s Current Report on Form 8-K filed on February 20, 2018)
Limited Liability Agreement of DKGP Energy Terminals LLC (incorporated herein by reference to
Exhibit 10.1 of the company’s Current Report on Form 8-K filed on February 20, 2018)
Asset Purchase Agreement, dated as of July 27, 2018, by and among Green Plains Cattle Company LLC,
and Bartlett Cattle Company, L.P. (incorporated herein by reference to Exhibit 2.1 of the company’s
Current Report on Form 8-K filed on August 1, 2018)
Asset Purchase Agreement among Green Plains Bluffton LLC, Green Plains Holdings II LLC, Green
Plains Inc. and Valero Renewable Fuels Company, LLC, dated October 8, 2018. (incorporated by
reference to Exhibit 2.1 of our Current Report on Form 8-K filed on October 10, 2018). (The schedules to
the Asset Purchase Agreement have been omitted. The company will furnish such schedules to the SEC
upon request.)
Asset Purchase Agreement among Green Plains Partners LP, Green Plains Holdings LLC, Green Plains
Operating Company LLC, Green Plains Ethanol Storage LLC, Green Plains Logistics LLC, Green Plains
Inc., Green Plains Trade Group LLC, Green Plains Bluffton LLC and Green Plains Holdings II LLC
(incorporated by reference to Exhibit 2.2 of our Current Report on Form 8-K filed on October 10, 2018).
(The schedules to the Asset Purchase Agreement have been omitted. The Partnership will furnish such
schedules to the SEC upon request).
Asset Purchase Agreement, dated as of April 25, 2017, by and among Green Plains Cattle Company
LLC, and Cargill Cattle Feeders, LLC. (incorporated herein 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 herein 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 herein 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 herein 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 herein 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 herein 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 herein 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 herein 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 herein by reference to Exhibit 4.1 to the
company’s Current Report on Form 8-K filed September 20, 2013)
58
4.5
4.6
*10.1
10.2
*10.3(a)
*10.3(b)
*10.3(c)
*10.4
*10.5(a)
*10.5(b)
*10.5(c)
*10.5(d)
*10.5(e)
*10.5(f)
*10.5(g)
*10.5(h)
*10.5(i)
10.6(a)
10.6(b)
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 herein by reference to Exhibit 4.1 to the company’s
Current Report on Form 8-K filed August 15, 2016)
Indenture relating to the 3.25% Convertible Senior Notes due 2019, dated as of August 14, 2018,
between Green Plains Inc. and Wilmington Trust, National Association, as trustee (including therein
Form of 3.25% Convertible Senior Notes Due 2019) (incorporated herein by reference to Exhibit 4.1 to
the company’s Current Report on Form 8-K filed August 14, 2018)
2007 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive
Proxy Statement filed March 27, 2007)
Form of Indemnification Agreement (incorporated herein 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 herein 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 herein by reference to Exhibit 10.7(b) of the company’s Annual Report on Form 10-K filed
February 24, 2010)
Amendment No. 2 to Employment Agreement with Todd Becker, dated 27, 2018 (incorporated herein by
reference to Exhibit 10.52 of the company’s Quarterly Report on Form 10-Q filed on May 7, 2018)
Employment Agreement dated September 27, 2016 by and between the company and Kenneth M. Simril
(incorporated herein by reference to Exhibit 10.51 of the company’s Quarterly Report on Form 10-Q
filed on May 7, 2018)
2009 Equity Incentive Plan (incorporated herein 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 herein 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 herein by reference to Appendix A of
the company’s Definitive Proxy Statement filed March 29, 2013)
Amended and Restated 2009 Equity Incentive Plan (incorporated herein 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 herein 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 herein 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)
Amended Form of Restricted Stock Award agreement for 2009 Equity Incentive Plan (incorporated
herein by reference to Exhibit 10.53 of the company’s Quarterly Report on Form 10-Q filed on May 7,
2018)
Form of Deferred Stock Unit Award Agreement for 2009 Equity Incentive Plan (incorporated herein by
reference to Exhibit 10.19(d) of the company’s Annual Report on Form 10-K filed February 24, 2010)
Form of Performance Share Unit Award agreement for 2009 Equity Incentive Plan (incorporated herein
by reference to Exhibit 10.54 of the company’s Quarterly Report on Form 10-Q filed on May 7, 2018)
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 herein 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 herein by reference to Exhibit 10.1 of the company’s Current Report on Form
8-K filed December 2, 2014)
59
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)
10.6(l)
*10.7
*10.8
*10.9
*10.10
*10.11
10.12(a)
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 herein 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 herein by reference to
Exhibit 10.4(a) to the company’s Current Report on Form 8-K dated August 29, 2017)
Second Amendment to Fourth Amended and Restated Revolving Credit and Security Agreement, dated
as of March 15, 2018, by and among Green Plains Trade Group LLC and PNC Bank, National
Association (incorporated herein by reference to Exhibit 10.1 to the company’s Quarterly Report on
Form 10-Q dated May 7, 2018)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and Citibank,
N.A. (incorporated herein 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 herein 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 herein by reference to Exhibit 10.2(d) 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)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and Bank of
America (incorporated here by reference to Exhibit 10.2(e) 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 herein 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 herein 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 herein by reference to Appendix A of the company’s
Proxy Statement filed April 3, 2014)
Director Compensation effective May 11, 2016 (incorporated herein by reference to Exhibit 10.4 of the
company’s Quarterly Report on Form 10-Q filed August 3, 2016)
Director Compensation effective November 14, 2017 (incorporated herein by reference to Exhibit 10.9 of
the company’s Annual Report on Form 10-K filed February 15, 2018)
Employment Agreement dated March 4, 2011 by and between the company and Jeffrey S. Briggs
(incorporated herein 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 herein 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 herein by reference to
Exhibit 10.1 of the company’s Current Report on Form 8-K filed November 3, 2011)
60
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)
10.12(l)
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 herein 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 herein 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
herein 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 herein
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 herein 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 herein 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 herein 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 herein 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 herein 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 herein by reference to Exhibit 10.6 of the
company’s Quarterly Report on Form 10-Q filed August 3, 2016)
Seventh Amendment to Credit Agreement, dated July 27, 2016, by and among Green Plains Grain
Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green
Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit Agreement,
and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.7 of the
company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.12(m)
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 herein by reference to Exhibit 10.3(a) to the company’s Current Report on Form 8-K dated
August 29, 2017)
61
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(k)
10.15(l)
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 herein 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
herein 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 herein 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 herein 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 herein 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 herein 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 herein by reference to Exhibit 10.3 to the
company’s Current Report on Form 8-K dated June 12, 2014)
Pledge Agreement (incorporated herein by reference to Exhibit 10.4 to the company’s Current Report on
Form 8-K dated June 12, 2014)
Security Agreement (incorporated herein 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 (State of Nebraska) (incorporated herein by reference to Exhibit 10.6 to the
company’s Current Report on Form 8-K dated June 12, 2014)
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 (State of Nebraska) (incorporated herein by reference to Exhibit 10.12 to the company’s
Current Report on Form 8-K dated June 16, 2015)
First Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Green Plains Atkinson LLC, as grantor, to the trustee named therein for the benefit of BNP
Paribas (State of Nebraska) (incorporated herein by reference to Exhibit 10.37 to the company’s
Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Green Plains Atkinson LLC, as grantor, to the trustee named therein for the benefit of BNP
Paribas (State of Nebraska) (incorporated herein by reference to Exhibit 10.38 to the company’s
Quarterly Report on Form 10-Q dated May 7, 2018)
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by
Green Plains Central City LLC (State of Nebraska) (incorporated herein by reference to Exhibit 10.7 to
the company’s Current Report on Form 8-K dated June 12, 2014)
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 (State of Nebraska) (incorporated herein by reference to Exhibit 10.13 to the
company’s Current Report on Form 8-K dated June 16, 2015)
10.15(m)
First Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Central City LLC, as grantor, to the trustee named therein for the
benefit of BNP Paribas (State of Nebraska) (incorporated herein by reference to Exhibit 10.39 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
62
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)
10.15(z)
10.15(aa)
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Central City LLC, as grantor, to the trustee named therein for the
benefit of BNP Paribas (State of Nebraska) (incorporated herein by reference to Exhibit 10.40 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by
Green Plains Ord LLC (State of Nebraska) (incorporated herein by reference to Exhibit 10.8 to the
company’s Current Report on Form 8-K dated June 12, 2014)
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 (State of Nebraska) (incorporated herein by reference to Exhibit 10.14 to the company’s
Current Report on Form 8-K dated June 16, 2015)
First Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Ord LLC, as grantor, to the trustee named therein for the benefit of
BNP Paribas (State of Nebraska) (incorporated herein by reference to Exhibit 10.21 to the company’s
Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Ord LLC, as grantor, to the trustee named therein for the benefit of
BNP Paribas (State of Nebraska) (incorporated herein by reference to Exhibit 10.22 to the company’s
Quarterly Report on Form 10-Q dated May 7, 2018)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by Green
Plains Bluffton LLC (State of Indiana) (incorporated herein by reference to Exhibit 10.9 to the
company’s Current Report on Form 8-K dated June 12, 2014)
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 (State of
Indiana) (incorporated herein by reference to Exhibit 10.11 to the company’s Current Report on Form 8-
K dated June 16, 2015)
First Lien 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 (State of Indiana)
(incorporated herein by reference to Exhibit 10.27 to the company’s Quarterly Report on Form 10-Q
dated May 7, 2018)
Second Lien 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 (State of
Indiana) (incorporated herein by reference to Exhibit 10.28 to the company’s Quarterly Report on Form
10-Q dated May 7, 2018)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by Green
Plains Otter Tail LLC (State of Minnesota) (incorporated herein by reference to Exhibit 10.10 to the
company’s Current Report on Form 8-K dated June 12, 2014)
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 (State of
Minnesota) (incorporated herein by reference to Exhibit 10.10 to the company’s Current Report on Form
8-K dated June 16, 2015)
First Lien 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 (State of Minnesota)
(incorporated herein by reference to Exhibit 10.13 to the company’s Quarterly Report on Form 10-Q
dated May 7, 2018)
Second Lien 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 (State of
Minnesota) (incorporated herein by reference to Exhibit 10.14 to the company’s Quarterly Report on
Form 10-Q dated May 7, 2018)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by Green
Plains Shenandoah LLC (State of Iowa) (incorporated herein by reference to Exhibit 10.11 to the
company’s Current Report on Form 8-K dated June 12, 2014)
63
10.15(bb)
10.15(cc)
10.15(dd)
10.15(ee)
10.15(ff)
10.15(gg)
10.15(hh)
10.15(ii)
10.15(jj)
10.15(kk)
10.15(ll)
10.15(mm)
10.15(nn)
10.15(oo)
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 (State
of Iowa) (incorporated herein by reference to Exhibit 10.15 to the company’s Current Report on Form 8-
K dated June 16, 2015)
First Lien 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 (State of Iowa)
(incorporated herein by reference to Exhibit 10.11 to the company’s Quarterly Report on Form 10-Q
dated May 7, 2018)
Second Lien 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 (State
of Iowa) (incorporated herein by reference to Exhibit 10.12 to the company’s Quarterly Report on Form
10-Q dated May 7, 2018)
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 herein 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
herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated June 16, 2015)
Joinder Agreement (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on
Form 8-K dated June 16, 2015)
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement by Green
Plains Fairmont LLC, as mortgagor, to and for the benefit of BNP Paribas (State of Minnesota)
(incorporated herein by reference to Exhibit 10.4 to the company’s Current Report on Form 8-K dated
June 16, 2015)
First Lien 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 (State of Minnesota)
(incorporated herein by reference to Exhibit 10.25 to the company’s Quarterly Report on Form 10-Q
dated May 7, 2018)
Second Lien 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 (State of
Minnesota) (incorporated herein by reference to Exhibit 10.26 to the company’s Quarterly Report on
Form 10-Q dated May 7, 2018)
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 (State of Iowa)
(incorporated herein by reference to Exhibit 10.5 to the company’s Current Report on Form 8-K dated
June 16, 2015)
First Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement
by and from Green Plains Holdings II LLC, as mortgagor, to and for the benefit of BNP Paribas (State of
Iowa) (incorporated herein by reference to Exhibit 10.5 to the company’s Quarterly Report on Form 10-
Q dated May 7, 2018)
Second Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Holdings II LLC, as mortgagor, to and for the benefit of BNP
Paribas (State of Iowa) (incorporated herein by reference to Exhibit 10.6 to the company’s Quarterly
Report on Form 10-Q dated May 7, 2018)
Mortgage by and from Green Plains Holdings II LLC, as mortgagor, to and for the benefit of BNP
Paribas (State of Michigan) (incorporated herein by reference to Exhibit 10.6 to the company’s Current
Report on Form 8-K dated June 16, 2015)
First Lien 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 (State of
Michigan) (incorporated herein by reference to Exhibit 10.43 to the company’s Quarterly Report on
Form 10-Q dated May 7, 2018)
64
10.15(pp)
10.15(qq)
10.15(rr)
10.15(ss)
10.15(tt)
10.15(uu)
10.15(vv)
Second Lien 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 (State
of Michigan) (incorporated herein by reference to Exhibit 10.44 to the company’s Quarterly Report on
Form 10-Q dated May 7, 2018)
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 (State of
Tennessee) (incorporated herein by reference to Exhibit 10.7 to the company’s Current Report on Form
8-K dated June 16, 2015)
First Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Obion LLC, as grantor, to the trustee named therein for the benefit
of BNP Paribas (State of Tennessee) (incorporated herein by reference to Exhibit 10.35 to the company’s
Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Obion LLC, as grantor, to the trustee named therein for the benefit
of BNP Paribas (State of Tennessee) (incorporated herein by reference to Exhibit 10.36 to the company’s
Quarterly Report on Form 10-Q dated May 7, 2018)
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 (State of Iowa) (incorporated
herein by reference to Exhibit 10.8 to the company’s Current Report on Form 8-K dated June 16, 2015)
First Lien 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 (State of Iowa)
(incorporated herein by reference to Exhibit 10.17 to the company’s Quarterly Report on Form 10-Q
dated May 7, 2018)
Second Lien 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 (State of
Iowa) (incorporated herein by reference to Exhibit 10.18 to the company’s Quarterly Report on Form 10-
Q dated May 7, 2018)
10.15(ww)
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 (State of Nebraska) (incorporated herein by reference to Exhibit 10.9 to the company’s Current
Report on Form 8-K dated June 16, 2015)
10.15(xx)
10.15(yy)
10.15(zz)
10.15(ab)
10.15(ac)
First Lien Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing Statement by and from Green Plains Wood River LLC, as grantor, to the trustee named
therein for the benefit of BNP Paribas (State of Nebraska) (incorporated herein by reference to Exhibit
10.19 to the company’s Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Wood River LLC, as grantor, to the trustee named therein for the
benefit of BNP Paribas (State of Nebraska) (incorporated herein by reference to Exhibit 10.20 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
Second Amendment to Second Amended and Restated Security Agreement, dated as of April 13, 2018,
by and among Green Plains Commodity Management LLC and PNC Bank, National Association
(incorporated herein by reference to Exhibit 10.2 to the company’s Quarterly Report on Form 10-Q dated
May 7, 2018)
First Lien Deed of Trust Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Fleischmann’s Vinegar Company, Inc., as grantor, to the trustee names therein for the
benefit of BNP Paribas (Montebello, California) (incorporated herein by reference to Exhibit 10.9 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Deed of Trust Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Fleischmann’s Vinegar Company, Inc., as grantor, to the trustee names therein for the
benefit of BNP Paribas (Montebello California) (incorporated herein by reference to Exhibit 10.10 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
65
10.15(ad)
10.15(ae)
10.15(af)
10.15(ag)
10.15(ah)
10.15(ai)
10.15(aj)
10.15(ak)
10.15(al)
10.15(am)
10.15(an)
10.15(ao)
10.16(a)
First Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement
by and from Green Plains Mount Vernon LLC, as mortgagor, to and for the benefit of BNP Paribas (State
of Indiana) (incorporated herein by reference to Exhibit 10.15 to the company’s Quarterly Report on
Form 10-Q dated May 7, 2018)
Second Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Mount Vernon LLC, as mortgagor, to and for the benefit of BNP
Paribas (State of Indiana) (incorporated herein by reference to Exhibit 10.16 to the company’s Quarterly
Report on Form 10-Q dated May 7, 2018)
First Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains York LLC, as grantor, to the trustee named therein for the benefit of
BNP Paribas (State of Nebraska) (incorporated herein by reference to Exhibit 10.23 to the company’s
Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains York LLC, as grantor, to the trustee named therein for the benefit of
BNP Paribas (State of Nebraska) (incorporated herein by reference to Exhibit 10.24 to the company’s
Quarterly Report on Form 10-Q dated May 7, 2018)
First Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Hopewell LLC, as grantor, to the trustee named therein for the
benefit of BNP Paribas (State of Virginia) (incorporated herein by reference to Exhibit 10.29 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Hopewell LLC, as grantor, to the trustee named therein for the
benefit of BNP Paribas (State of Virginia) (incorporated herein by reference to Exhibit 10.30 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
First Lien Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Madison LLC, as mortgagor, to and for the benefit of BNP Paribas
(State of Illinois) (incorporated herein by reference to Exhibit 10.31 to the company’s Quarterly Report
on Form 10-Q dated May 7, 2018)
Second Lien Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Statement by and from Green Plains Madison LLC, as mortgagor, to and for the benefit of BNP
Paribas (State of Illinois) (incorporated herein by reference to Exhibit 10.32 to the company’s Quarterly
Report on Form 10-Q dated May 7, 2018)
First Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement
by Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of BNP Paribas (State of
Illinois) (incorporated herein by reference to Exhibit 10.41 to the company’s Quarterly Report on Form
10-Q dated May 7, 2018)
Second Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of BNP Paribas
(State of Illinois) (incorporated herein by reference to Exhibit 10.42 to the company’s Quarterly Report
on Form 10-Q dated May 7, 2018)
First Lien Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing Statement by and from Green Plains Hereford LLC, as grantor, to the trustee named
therein for the benefit of BNP Paribas (State of Texas) (incorporated herein by reference to Exhibit 10.49
to the company’s Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by and from Green Plains Hereford LLC, as grantor, to the trustee named therein for the
benefit of BNP Paribas (State of Texas) (incorporated herein by reference to Exhibit 10.50 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
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 herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated
December 5, 2014)
66
10.16(b)
10.16(c)
10.16(d)
10.16(e)
10.16(f)
10.16(g)
10.16(h)
10.16(i)
10.16(j)
10.17
10.18(a)
10.18(b)
10.18(c)
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
herein 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 herein 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 herein 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 herein 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 herein by reference to Exhibit 10.1 to the company’s Current
Report on Form 8-K dated November 17, 2017)
Replacement Page for 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, originally filed as Exhibit 10.1 to
the company’s Current Report on Form 8-K dated November 17, 2017 (incorporated herein by reference
to Exhibit 10.1 to the company’s Quarterly Report on Form 10-Q dated August 2, 2018)
Sixth Amendment to the Credit Agreement, dated as of July 31, 2018, by and among Green Plains Cattle
Company LLC and Bank of the West and ING Capital LLC, as Joint Administrative Agents, and the
lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.4 to the company’s
Quarterly Report on Form 10-Q dated August 2, 2018)
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 herein
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 herein 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 herein 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 herein 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 herein 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 herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated
September 26, 2016)
10.18(d)
Third Amendment to the Omnibus Agreement, dated November 15, 2018, by and among Green Plains
Inc., Green Plains Partners LP, Green Plains Holdings LLC and Green Plains Operating Company LLC
67
10.19(a)
10.19(b)
10.19(c)
10.19(d)
10.20(a)
10.20(b)
10.20(c)
10.20(d)
10.20(e)
10.20(f)
10.21(a)
10.21(b)
10.21(c)
10.21(d)
10.21(e)
10.22(a)
10.22(b)
Operational Services and Secondment Agreement, dated July 1, 2015, by and between Green Plains Inc.
and Green Plains Holdings LLC (incorporated herein 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 herein 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 herein by reference to Exhibit
10.2 to the company’s Current Report on Form 8-K dated September 26, 2016)
Amendment No. 3 to Operational Services and Secondment Agreement, dated November 15, 2018,
between Green Plains Inc. and Green Plains Holdings LLC
Rail Transportation Services Agreement, dated July 1, 2015, by and between Green Plains Logistics LLC
and Green Plains Trade Group LLC (incorporated herein 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 herein 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 herein 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
herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated December 1,
2016)
Amendment No. 2 to Rail Transportation Services Agreement, dated November 15, 2018 (incorporated
herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated November 15,
2018)
Corrective Amendment to Rail Transportation Services Agreement, dated November 15, 2018, by and
between Green Plains Logistics LLC and Green Plains Trade Group LLC
Ethanol Storage and Throughput Agreement, dated July 1, 2015, by and between Green Plains Ethanol
Storage LLC and Green Plains Trade Group LLC (incorporated herein 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 herein 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 herein 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 herein by
reference to Exhibit 10.3 to the company’s Current Report on Form 8-K dated September 26, 2016)
Amendment No. 3 to Ethanol Storage and Throughput Agreement, dated November 15, 2018, by and
between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by
reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated November 15, 2018) (The
exhibits to Amendment No. 3 have been omitted. The company will furnish such schedules to the SEC
upon request).
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 herein by reference to Exhibit 10.6 to the company’s Current Report
on Form 8-K dated July 6, 2015)
First Amendment to Credit Agreement, dated September 16, 2016 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
68
10.22(c)
10.22(d)
10.22(e)
10.22(f)
10.23
10.24(a)
10.24(b)
10.24(c)
10.24(d)
10.24(e)
10.24(f)
10.24(g)
10.24(h)
10.24(i)
Incremental Joinder Agreement, dated October 27, 2017, among Green Plains Operating Company LLC
and Bank of America, as Administrative (incorporated herein by reference to Exhibit 10.8 to the
company’s Quarterly Report on Form 10-Q dated November 2, 2017)
Second Amendment to Credit Agreement, dated February 16, 2018 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
Incremental Joinder Agreement, dated February 20, 2018, among Green Plains Operating Company LLC
and Bank of America, as Administrative
Third Amendment to Credit Agreement, dated October 12, 2018 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
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 herein 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 herein 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 herein by reference to Exhibit 10.1(b) to the company’s Current
Report on Form 8-K dated October 3, 2016)
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 herein 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
herein 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 herein
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 herein 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 herein 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 herein 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 herein by reference to Exhibit
10.1(i) to the company’s Current Report on Form 8-K dated October 3, 2016)
69
10.24(j)
10.24(k)
10.24(l)
10.24(m)
10.24(n)
10.24(o)
10.24(p)
10.24(q)
10.24(r)
10.24(s)
10.24(t)
10.24(u)
10.24(v)
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 herein by reference to Exhibit 10.22(j) to the company’s Annual Report
on Form 10-K for the year ended December 31, 2016)
First Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement
by Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of BNP Paribas (State of
Alabama) (incorporated herein by reference to Exhibit 10.7 to the company’s Quarterly Report on Form
10-Q dated May 7, 2018)
Second Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of BNP Paribas
(State of Alabama) (incorporated herein by reference to Exhibit 10.8 to the company’s Quarterly Report
on Form 10-Q dated May 7, 2018)
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 herein by reference to Exhibit 10.22(k) to the company’s Annual
Report on Form 10-K for the year ended December 31, 2016)
First Lien Deed of Trust Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Fleischmann’s Vinegar Company, Inc., as grantor, to the trustee names therein for the
benefit of BNP Paribas (Cerritos, California) (incorporated herein by reference to Exhibit 10.45 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Deed of Trust Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Fleischmann’s Vinegar Company, Inc., as grantor, to the trustee names therein for the
benefit of BNP Paribas (Cerritos, California) (incorporated herein by reference to Exhibit 10.46 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
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 herein 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 herein by reference to Exhibit 10.22(m) to the company’s Annual
Report on Form 10-K for the year ended December 31, 2016)
First Lien Indemnity Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Statement by Fleischmann’s Vinegar Company, Inc., as grantor, to the trustee named therein for
the benefit of BNP Paribas (State of Maryland) (incorporated herein by reference to Exhibit 10.33 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
Second Lien Indemnity Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Statement by Fleischmann’s Vinegar Company, Inc., as grantor, to the trustee named therein for
the benefit of BNP Paribas (State of Maryland) (incorporated herein by reference to Exhibit 10.34 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
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 herein 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 herein by reference to Exhibit 10.22(o) to the company’s Annual
Report on Form 10-K for the year ended December 31, 2016)
First Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement
by Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of BNP Paribas (State of
New York) (incorporated herein by reference to Exhibit 10.47 to the company’s Quarterly Report on
Form 10-Q dated May 7, 2018)
70
10.24(w)
10.25(a)
10.25(b)
10.25(c)
10.25(d)
10.25(e)
10.25(f)
10.25(g)
10.26
10.27
21.1
23.1
31.1
31.2
32.1
32.2
Second Lien Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
Statement by Fleischmann’s Vinegar Company, Inc., as mortgagor, to and for the benefit of BNP Paribas
(State of New York) (incorporated herein by reference to Exhibit 10.48 to the company’s Quarterly
Report on Form 10-Q dated May 7, 2018)
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 herein by reference to Exhibit 10.1(a) to the company’s Current Report on Form 8-K dated
August 29, 2017)
First Amendment to Term Loan Agreement, dated October 16, 2017, among Green Plains, Inc. and BNP
Paribas, as administrative agent and collateral agent (incorporated herein by reference to Exhibit 10.7 to
the company’s Quarterly Report on Form 10-Q dated November 2, 2017)
Second Amendment to Term Loan Agreement, dated July 13, 2018, among Green Plains Inc. and BNP
Paribas, as administrative agent and collateral agent (incorporated herein by reference to Exhibit 10.3 to
the company’s Quarterly Report on Form 10-Q dated August 2, 2018)
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 herein 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 herein 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 herein 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 herein by reference to Exhibit 10.1(e) to the company’s Current Report on Form 8-K dated
August 29, 2017)
Partial Release of Security Interest, dated as of April 30, 2018, by and among Green Plains Inc., its
subsidiaries and BNP Paribas, as collateral agent (incorporated herein by reference to Exhibit 10.3 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
Revolving Credit Facility, dated as of April 30, 2018, by and among Green Plains Commodity
Management LLC and Macquarie Bank Limited (incorporated herein by reference to Exhibit 10.4 to the
company’s Quarterly Report on Form 10-Q dated May 7, 2018)
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
71
101
The following information from Green Plains Inc.’s Annual Report on Form 10-K for the annual period
ended December 31, 2018, 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.
72
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 20, 2019 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 20, 2019
February 20, 2019
/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 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
February 20, 2019
Director
Director
Director
Director
Director
Director
Director
Director
73
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
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, 2018 and 2017, 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, 2018, and the related notes (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, 2018 and 2017, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31, 2018, 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, 2018, 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 20, 2019 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 4 to the consolidated financial statements, the Company has changed its method of accounting for
revenue recognition in 2018 due to the adoption of ASC Topic 606, Revenue from Contracts with Customers, and all related
amendments.
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 20, 2019
F-1
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowances of $194 and $217, respectively
Income taxes receivable
Inventories
Prepaid expenses and other
Derivative financial instruments
Total current assets
Property and equipment, net
Goodwill
Other assets
Total assets
$
$
LIABILITIES AND STOCKHOLDERS' EQUITY
$
Current liabilities
Accounts payable
Accrued and other liabilities
Derivative financial instruments
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 18)
Stockholders' equity
December 31,
2018
2017
251,683
66,512
100,361
12,418
734,883
14,470
26,315
1,206,642
886,576
34,689
88,525
2,216,432
156,901
58,973
24,776
-
538,243
54,807
833,700
298,190
10,123
11,430
1,153,443
$
$
$
266,651
45,709
151,122
6,413
711,878
17,808
6,890
1,206,471
1,176,707
182,879
218,593
2,784,650
205,479
63,886
12,884
9,909
526,180
67,923
886,261
767,396
56,801
15,056
1,725,514
Common stock, $0.001 par value; 75,000,000 shares authorized; 46,637,549 and
46,410,405 shares issued, and 41,101,975 and 41,084,463 shares
outstanding, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, 5,535,574 and 5,325,942 shares, respectively
Total Green Plains stockholders' equity
Noncontrolling interests
Total stockholders' equity
Total liabilities and stockholders' equity
47
696,222
324,728
(16,016)
(58,162)
946,819
116,170
1,062,989
2,216,432
46
685,019
325,411
(13,110)
(55,184)
942,182
116,954
1,059,136
2,784,650
$
$
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,
2017
2018
2016
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
Gain on sale of assets, net
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 benefit (expense)
Net income
Net income attributable to noncontrolling interests
Net income attributable to Green Plains
Earnings per share:
Net income attributable to Green Plains - basic
Net income attributable to Green Plains - diluted
Weighted average shares outstanding:
Basic
Diluted
$ 3,836,872 $ 3,589,981 $ 3,402,579
8,302
3,410,881
6,185
3,596,166
6,481
3,843,353
3,627,633
30,844
115,878
(150,351)
103,619
3,727,623
115,730
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
3,108
(101,025)
2,195
(95,722)
20,008
16,726
36,734
20,811
15,923 $
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
0.39 $
0.39 $
1.56 $
1.47 $
0.28
0.28
40,320
41,254
39,247
50,240
38,318
38,573
$
$
$
Cash dividend declared per share
$
0.48 $
0.48 $
0.40
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,
2017
2018
2016
Net income
Other comprehensive income (loss), net of tax:
Unrealized losses on derivatives arising during period, net of tax
(expense) benefit of $2,854, $2,967, and $10,494, respectively
Reclassification of realized (gains) losses on derivatives, net of tax expense
(benefit) of $(2,887), $2,306, and $(8,830), respectively
Total other comprehensive loss, net of tax
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Green Plains
$
36,734
$
81,631
$
30,491
(6,788)
(5,048)
(18,744)
6,669
(119)
36,615
20,811
15,804
$
(3,925)
(8,973)
72,658
20,570
52,088
$
15,772
(2,972)
27,519
19,828
7,691
$
See accompanying notes to the consolidated financial statements.
F-4
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Common Additional
Stock
Paid-in
Shares Amount Capital
Accum. Other
Green Plains Non-
Total
Total
Retained Comp. Income Treasury Stock Stockholders' Control. Stockholders'
Earnings
Shares Amount
Interests
Equity
Equity
(Loss)
45 $
-
577,787 $
-
290,974 $
10,663
(1,165)
-
7,392 $ (69,811) $
-
-
797,830 $ 161,079 $
19,828
10,663
958,909
30,491
-
-
-
-
-
-
-
-
-
-
Balance, December 31, 2015 45,282 $
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
647
Stock-based compensation
150
Stock options exercised
Balance, December 31, 2016 46,079
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
326
Stock-based compensation
Stock options exercised
5
Balance, December 31, 2017 46,410
Reclassification of certain
tax effects from other
comprehensive loss (Note 1)
Balance, January 1, 2018
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
Modification of 3.25%
convertible
notes due 2019
Exchange of 3.25%
convertible
-
notes due 2018
213
Stock-based compensation
Stock options exercised
15
Balance, December 31, 2018 46,638 $
-
-
-
-
-
-
46,410
-
-
-
-
-
-
(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)
-
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
-
143
-
862,507 116,684
20,570
61,061
24,492
6,990
1,757
979,191
81,631
-
-
-
-
-
-
(18,864)
-
-
-
-
-
-
-
-
-
(5,048)
(3,925)
(8,973)
-
-
(18,864)
(20,519)
(39,383)
-
-
-
-
395
-
-
(6,724)
-
(8,973)
(6,724)
-
-
-
-
-
-
(8,973)
(6,724)
-
-
-
46
18,326
7,443
50
685,019
-
-
-
325,411
-
-
-
(13,110)
(2,784)
-
-
5,326
27,356
-
-
(55,184)
45,682
7,443
50
45,682
7,662
50
942,182 116,954 1,059,136
-
219
-
-
-
2,787
46
685,019
328,198
-
15,923
(2,787)
(15,897)
-
-
-
-
-
5,326
(55,184)
942,182
116,954
-
15,923
20,811
-
1,059,136
36,734
-
(19,393)
-
-
(19,393)
(21,872)
(41,265)
-
-
-
-
-
(6,788)
6,669
(119)
-
-
-
-
-
210
-
-
(2,979)
-
(119)
(2,979)
-
-
-
-
-
-
(119)
(2,979)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,480
-
-
-
3,480
-
3,480
-
1
-
47 $
-
7,573
150
696,222 $
-
-
-
324,728 $
-
-
-
(16,016)
-
-
-
1
-
-
5,536 $ (58,162) $
1
7,574
150
1
7,851
150
946,819 $ 116,170 $ 1,062,989
-
277
-
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,
2017
2016
2018
$
36,734 $
81,631 $
30,491
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 the disposal of assets
Gain from insurance proceeds
Deferred income taxes
Stock-based compensation
Undistributed equity in loss of affiliates
Other
Changes in operating assets and liabilities before effects of
business combinations and dispositions:
Accounts receivable
Inventories
Derivative financial instruments
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Current income taxes
Other
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchases of property and equipment, net
Proceeds from the sale of assets, net
Acquisition of businesses, net of cash acquired
Investments in unconsolidated subsidiaries
Other investing activities
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from the issuance of long-term debt
Payments of principal on long-term debt
Proceeds from short-term borrowings
Payments on short-term borrowings
Cash payment for exchange of 3.25% convertible notes due 2018
Payments for repurchase of common stock
Payments of cash dividends and distributions
Payment penalty on early extinguishment of debt
Payments of loan fees
Payments related to tax withholdings for stock-based compensation
Proceeds from exercises of stock options
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Continued on the following page
F-6
103,619
14,311
-
13,178
(150,351)
(2,591)
(24,484)
11,420
595
(11,612)
39,695
31,284
(7,709)
1,848
(49,929)
31,991
968
38,967
107,361
14,758
1,291
9,460
-
(3,250)
(81,077)
12,161
274
(7,869)
3,624
(268,219)
(20,522)
(794)
6,500
(40,866)
3,374
(182,163)
84,226
11,488
-
-
-
4,910
9,491
3,055
-
(36,888)
(42,012)
(11,393)
(4,092)
49,077
(1,887)
4,235
100,701
$
(44,187) $
671,650
(124,407)
(3,091)
7,500
507,465
(46,467) $
-
(61,727)
(20,286)
-
(128,480)
(58,113)
-
(508,143)
(6,342)
-
(572,598)
$
83,100 $
(576,427)
3,897,225
(3,892,438)
-
(2,978)
(41,265)
-
(4,395)
(3,569)
150
(540,597)
570,600 $
(510,209)
4,385,446
(4,150,994)
(8,523)
(6,724)
(39,383)
(2,881)
(16,671)
(4,499)
50
216,212
524,000
(106,803)
4,130,946
(4,066,968)
-
(6,005)
(37,278)
-
(12,053)
(2,206)
1,757
425,390
5,835
312,360
318,195 $
(94,431)
406,791
312,360 $
(46,507)
453,298
406,791
$
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Continued from the previous page
Reconciliation of total cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
Non-cash financing activity:
Modification of 3.25% convertible notes due 2019, net
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
Assets disposed of in sale
Less: liabilities disposed
Net assets disposed
Year Ended December 31,
2017
2016
2018
251,683 $
66,512
318,195 $
266,651 $
45,709
312,360 $
304,211
102,580
406,791
3,480 $
- $
- $
47,743 $
1 $
27,356 $
-
-
-
(22,478) $
73,145 $
(3,768) $
54,213 $
4,692
38,245
124,525 $
(118)
63,670 $
(1,943)
568,383
(57,433)
-
124,407 $
-
61,727 $
(2,807)
508,143
550,648 $
(41,276)
509,372 $
- $
-
- $
-
-
-
$
$
$
$
$
$
$
$
$
$
$
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. As of
December 31, 2018, the company owns a 49.1% limited partner interest and a 2.0% general partner interest in Green Plains
Partners LP. Public investors own the remaining 48.9% 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
variable interest entity. 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 is obligated to absorb losses and has the right
to receive benefits that could be significant to the partnership. Therefore, the company is considered the primary beneficiary
and consolidates the partnership in the company’s financial statements. 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, 2018 and 2017 are
$67.3 million and $74.9 million, respectively, and primarily consist of property and equipment and goodwill. The
partnership’s consolidated total liabilities as of December 31, 2018 and 2017 are $152.9 million and $153.0 million,
respectively, which primarily consist of long-term debt as discussed in Note 12 – Debt. The liabilities recognized as a result
of consolidating the partnership do not represent additional claims on our general assets. The company also owns a 90.0%
interest in BioProcess Algae, a joint venture formed in 2008, and consolidates their results in its consolidated financial
statements.
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, 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 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, accounting for income taxes and assets acquired and liabilities assumed in
acquisitions, 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
and distillers grains, and recovery of 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 and food-grade corn oil operations
and included vinegar production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018 and (4)
partnership, which includes fuel storage and transportation services.
F-8
Ethanol Production Segment
Green Plains is one of the largest ethanol producers in North America. The company operates 13 ethanol plants in seven
states through separate wholly owned operating subsidiaries. The company’s ethanol plants use a dry mill process to produce
ethanol and co-products such as wet, modified wet or dried distillers grains, as well as corn oil. The corn oil systems are
designed to extract non-edible corn oil from the whole stillage immediately prior to production of distillers grains. At
capacity, the company expects to process approximately 387 million bushels of corn and produce approximately 1.1 billion
gallons of ethanol, 2.9 million tons of distillers grains and 292 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 47.2 million bushels, with 37.1 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 six cattle feeding operations with the capacity to support approximately 355,000 head of cattle and
grain storage capacity of approximately 11.7 million bushels. The company also has food-grade corn oil operations which
focuses on shipping corn oil from facilities across the Midwest by rail or barge to terminal facilities located in the southern
United States. Until its sale on November 27, 2018, the company also owned Fleischmann’s Vinegar, which is one of the
world’s largest producers of food-grade industrial vinegar.
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, 2018, the partnership owns (i) 32 ethanol storage facilities located at or near the company’s 13 operational
ethanol production plants and one non-operational ethanol production plant, 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) seven 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 2,840 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
Cash and cash equivalents includes bank deposits, as well as, short-term, highly liquid investments with original
maturities of three months or less.
Restricted Cash
The company has restricted cash, which can only be used for funding letters of credit or for payment towards a revolving
credit agreement. Restricted cash also includes cash margins and securities pledged to commodity exchange clearinghouses
and at times, funds in escrow related to disposition activities. To the degree these segregated balances are cash and cash
equivalents, they are considered restricted cash on the consolidated statements of cash flows.
Revenue Recognition
The company recognizes revenue when obligations under the terms of a contract with a customer are satisfied. Generally
this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected
to be received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects
concurrent with revenue-producing activities are excluded from revenue.
F-9
Sales of ethanol, distillers grains, corn oil, natural gas and other commodities by the company’s marketing business are
recognized when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs with the
transfer of control of products or services. Revenues related to marketing for third parties are presented on a gross basis as the
company controls the product prior to the sale to the end customer, takes title of the product and has inventory risk. Unearned
revenue is recorded for goods in transit when the company has received payment but control has not yet been transferred to
the customer. Revenues for receiving, storing, transferring and transporting ethanol and other fuels are recognized when the
product is delivered to the customer.
The company routinely enters into physical-delivery energy commodity purchase and sale agreements. At times, the
company settles these transactions by transferring its obligations to other counterparties rather than delivering the physical
commodity. Energy trading transactions are reported net as a component of revenue. Revenues include net gains or losses
from derivatives related to products sold while cost of goods sold includes net gains or losses from derivatives related to
commodities purchased. 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.
Sales of products, including agricultural commodities, cattle and vinegar, are recognized when control of the product is
transferred to the customer, which depends on the agreed upon shipment or delivery terms. 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 upon transfer of control of product from its storage tanks and
fuel terminals, when railcar volumetric capacity is provided, and as truck transportation services are performed. To the extent
shortfalls associated with minimum volume commitments in the previous four quarters continue to exist, volumes in excess
of the minimum volume commitment are applied to those shortfalls. Remaining excess volumes generating operating lease
revenue are recognized as incurred.
Shipping and Handling Costs
The company accounts for shipping and handling activities related to contracts with customers as costs to fulfill its
promise to transfer the associated products. Accordingly, the company records customer payments associated with shipping
and handling costs as a component of revenue, and classifies such costs as a component of cost of goods sold.
Cost of Goods Sold
Cost of goods sold includes direct labor, materials, shipping and plant overhead costs. Direct labor includes all
compensation and related benefits of non-management personnel involved in ethanol production cattle feeding operations and
vinegar production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018. 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,
feedlot 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 and forward purchase and sales contracts to attempt to
minimize the effect of price changes on ethanol, grain, natural gas and cattle inventories. 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.
F-10
Operations and Maintenance Expenses
In the partnership segment, transportation expenses represent the primary component of operations and maintenance
expenses. Transportation expenses include 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 attempt to minimize risk and the effect of commodity price changes 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, cash flow hedge accounting treatment.
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.
At times, the company hedges its exposure to changes in inventory values and designates qualifying derivatives as fair
value hedges. The carrying amount of the hedged inventory is adjusted in the current period for changes in fair value.
Ineffectiveness of the hedges is recognized in the current period to the extent the change in fair value of the inventory is not
offset by the change in fair value of the derivative.
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 $13.7 million and $23.4 million at December 31, 2018 and 2017, respectively.
F-11
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
15-40
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.
Intangible Assets
Our intangible assets consist of research and development technology and licenses that were capitalized at fair value at
the time of consolidation of BioProcess Algae, and are being amortized over their estimated useful lives. Prior to the sale of
Fleischmann’s Vinegar during the fourth quarter, our intangible assets also included the vinegar trade name and customer
relationships.
Impairment of Long-Lived Assets
The company reviews its long-lived assets, currently consisting of property and equipment, intangible assets and equity
method investments, for impairment whenever events or changes in circumstances indicate the carrying amount of the asset
may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an
asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of
the asset exceeds the fair value of the asset. Significant management judgment is required 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 and its fuel terminal and distribution business.
F-12
Effective January 1, 2018, the company early adopted 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. Under the amended guidance, an entity may first assess qualitative factors to determine
whether it is necessary to perform a quantitative goodwill impairment test. If determined to be necessary, the quantitative
impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be
recognized (if any).
We performed our annual goodwill assessment as of October 1, 2018, using a qualitative assessment, which resulted in
no goodwill impairment.
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, sustained decline in our
market capitalization or 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, which includes projected cash flows. Fair value is determined by using various
valuation techniques, including discounted cash flow models, sales of comparable properties and third-party independent
appraisals. Changes in estimated fair value could result in a write-down of the asset. For additional information, please refer
to Note 10 – Goodwill and Intangible Assets.
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. The company used the Monte Carlo valuation model to estimate the fair value of
performance shares issued to employees. Stock issued for compensation is valued using the market price of the stock on the
date of the related agreement.
Income Taxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and
liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial
reporting carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
operating results in the period of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely
than not that some portion or all of the deferred tax assets will not be realized.
The company recognizes uncertainties in income taxes within the financial statements under a process by which the
likelihood of a tax position is gauged based upon the technical merits of the position, and then a subsequent measurement
relates the maximum benefit and the degree of likelihood to determine the amount of benefit recognized in the financial
statements.
F-13
Recent Accounting Pronouncements
Effective January 1, 2018, the company adopted the amended guidance in ASC Topic 606, Revenue from Contracts with
Customers. Please refer to Note 4 – Revenue for further details.
Effective January 1, 2018, the company adopted 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 was applied retrospectively. As a result, net cash used in operating activities
for the twelve months ended December 31, 2017, was adjusted to exclude the change in restricted cash and increased the
previously reported balance by $22.3 million. Net cash provided by financing activities for the twelve months ended
December 31, 2017, was adjusted to exclude the change in restricted cash and decreased the previously reported balance by
$34.5 million. Additionally, net cash provided by operating activities for the twelve months ended December 31, 2016, was
adjusted to exclude the change in restricted cash and increased the previously reported balance by $15.5 million. Net cash
provided by financing activities for the twelve months ended December 31, 2016, was adjusted to exclude the change in
restricted cash and increased the previously reported balance by $18.6 million.
Effective January 1, 2018, the company adopted 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 is required on a
modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of
adoption. The adoption of the guidance did not have an impact to the financial statements.
Effective January 1, 2018, the company adopted the amended guidance in ASC Topic 805, Business Combinations:
Clarifying the Definition of a Business, which clarifies the definition of a business and provides guidance to assist companies
and other reporting organizations evaluate 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 partnership early adopted 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. Under the amended guidance, an entity may first assess qualitative
factors to determine whether it is necessary to perform a quantitative goodwill impairment test. If determined to be necessary,
the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill
impairment loss to be recognized (if any). The amended guidance was applied prospectively when the annual impairment
testing was performed in the current year. The new guidance did not have a material impact on the consolidated financial
statements.
Effective January 1, 2018, the company early adopted the amended guidance in ASC Topic 220, Income Statement –
Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,
which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects
resulting from the Tax Cuts and Jobs Act. The amendment eliminates the stranded tax effects resulting from the Tax Cuts and
Jobs Act and is intended to improve the usefulness of information reported. As a result, the company recorded a $2.8 million
reclassification from accumulated other comprehensive income to retained earnings during the first quarter of 2018. It is the
company’s policy to release income tax effects from accumulated other comprehensive income using the portfolio approach.
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 and interim periods within those years, beginning after December 15,
2018. The standard requires a modified retrospective transition approach and allows for early adoption. In July 2018, the
FASB issued Accounting Standards Update, Leases (Topic 842): Targeted Improvements, which provides an option to apply
the transition provisions of the new standard at adoption date instead of the earliest comparative period presented in the
financial statements. The company will elect to use this optional transition method.
The company has implemented a lease accounting system, which will assist in delivering the required accounting
changes and disclosures under ASC Topic 842, Leases. The company expects the adoption of the new standard to result in
recognition of approximately $60 million in 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 impact to revenue streams
reported as operating lease revenue under GAAP is expected to be immaterial. The company plans to elect the lessee non-
F-14
lease component separation practical expedient to include both the lease and non-lease components as a single component
and account for them as a lease. In addition, the company expects to make an accounting policy election that will keep certain
leases with a term of 12 months or less off the balance sheet and result in recognizing those lease payments on a straight-line
basis over the lease term.
3. GREEN PLAINS PARTNERS LP
The partnership is a fee-based master limited partnership formed by Green Plains to provide fuel storage and
transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals,
transportation assets and other related assets and businesses. The partnership’s assets currently include (i) 32 ethanol storage
facilities, located at or near the company’s 13 operational ethanol production plants and one non-operational ethanol plant,
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) seven 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 2,840 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 1.1 bgy ethanol marketing
and distribution business since the partnership’s assets are the principal method of storing and delivering the ethanol the
company produces.
As of December 31, 2018, the company owns a 49.1% limited partner interest, consisting of 11,586,548 common units,
and a 2.0% general partner interest in the partnership. The public owns the remaining 48.9% limited partner interest in the
partnership. As such, the partnership is consolidated in the company’s financial statements.
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. The partnership’s agreements with Green Plains Trade include the
following:
•
•
•
10-year storage and throughput agreement, originally expiring on June 30, 2025, extended to June 30, 2028;
10-year rail transportation services agreement, expiring on June 30, 2025;
1-year trucking transportation agreement, expiring on May 31, 2019;
• Terminal services agreement for the Birmingham, Alabama unit train terminal, expiring December 31, 2019; and
• Various other terminal services agreements for 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. REVENUE
Adoption of ASC Topic 606
On January 1, 2018, the company adopted the amended guidance in ASC Topic 606, Revenue from Contracts with
Customers, and all related amendments (“new revenue standard”) and applied it to all contracts using the modified
retrospective transition method. There were no adjustments to the consolidated January 1, 2018 balance sheet for the
adoption of the new revenue standard. As such, comparative information has not been restated and continues to be reported
under the accounting standards in effect for those periods. In addition, there was no impact of adoption on the consolidated
statements of operations or balance sheets for the year ended December 31, 2018.
F-15
Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Generally this occurs
with the transfer of control of products or services. Revenue is measured as the amount of consideration expected to be
received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects
concurrent with revenue-producing activities are excluded from revenue.
Revenue by Source
The following table disaggregates revenue by major source for the year ended December 31, 2018 (in thousands):
Twelve Months Ended December 31, 2018
Ethanol
Production
Agribusiness
& Energy
Services
Food &
Ingredients Partnership Eliminations
Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol
Distillers grains
Cattle and vinegar
Service revenues
Other
Intersegment revenues
Total revenues from contracts with customers
Revenues from contracts accounted for as derivatives under
ASC 815 (1):
Ethanol
Distillers grains
Corn oil
Grain
Cattle and vinegar
Other
Intersegment revenues
Total revenues from contracts accounted for as derivatives
Leasing revenues under ASC 840 (2)
Total Revenues
$
3,803 $
195,509
-
-
5,369
2,914
207,595
1,618,319
198,738
66,567
520
-
20,254
8,668
1,913,066
-
- $
-
-
-
3,014
23
3,037
- $
-
1,007,833
-
-
156
1,007,989
- $
-
-
5,180
-
9,030
14,210
- $
-
-
-
-
(12,123)
(12,123)
3,803
195,509
1,007,833
5,180
8,383
-
1,220,708
418,956
136,461
22,623
73,754
-
67,948
46,177
765,919
-
-
-
13,110
-
(15,906)
-
-
(2,796)
-
-
-
-
-
-
-
-
-
86,538
100,748 $
-
-
-
-
-
-
(54,845)
(54,845)
(85,237)
(152,205) $
2,037,275
335,199
102,300
74,274
(15,906)
88,202
-
2,621,344
1,301
3,843,353
$
2,120,661 $
768,956 $ 1,005,193 $
(1) Revenues from contracts accounted for as derivatives represent physically settled derivative sales that are outside the scope of ASC 606, Revenue
from Contracts with Customers (ASC 606), where the company recognizes revenue when control of the inventory is transferred within the
meaning of ASC 606 as required by ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets.
(2) Leasing revenues do not represent revenues recognized from contracts with customers under ASC 606, and continue to be accounted for under
ASC 840, Leases.
Payment Terms
The company has standard payment terms, which vary depending upon the nature of the services provided, with the
majority falling within 10 to 30 days after transfer of control or completion of services. In instances where the timing of
revenue recognition differs from the timing of invoicing, the company has determined that contracts generally do not include
a significant financing component.
Contract Liabilities
The company records unearned revenue when consideration is received, or such consideration is unconditionally due,
from a customer prior to transferring goods or services to the customer under the terms of service and lease agreements.
Unearned revenue from service agreements, which represents a contract liability, is recorded for fees that have been charged
to the customer prior to the completion of performance obligations. Unearned revenue is generally recognized in the
subsequent quarter and are not material to the company. The company expects to recognize all of the unearned revenue
associated with service agreements as of December 31, 2018, in the subsequent quarter when the inventory is withdrawn
from the partnership’s tank storage.
F-16
Practical Expedients
Under the new revenue standard, companies may elect various practical expedients upon adoption. As a result, the
company elected to recognize the cost for shipping and handling activities that occur after the customer obtains control of the
promised goods as fulfillment activities and not when performance obligations are met. The company also elected to exclude
sales taxes from transaction prices.
5. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
Acquisition of Cattle Feeding Operations – Bartlett Cattle Company, L.P.
On August 1, 2018, the company acquired two cattle-feeding operations from Bartlett Cattle Company, L.P. for
$16.2 million, plus working capital of approximately $106.6 million primarily consisting of work-in-process inventory. The
transaction included the feed yards located in Sublette, Kansas and Tulia, Texas, which added combined feedlot capacity of
97,000 head of cattle to the company’s operations. The transaction was financed using cash on hand and proceeds from the
Green Plains Cattle senior secured asset-based revolving credit facility. There were no material acquisition costs recorded for
the acquisition.
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
Accounts receivable
Inventory
Property and equipment, net
Current liabilities
Total identifiable net assets
$
$
1,897
104,809
16,190
(118)
122,778
The amounts above reflect a working capital payment by the company of $0.9 million made during 2018.
Acquisition of Cattle Feeding Operations – Cargill Cattle Feeders, LLC
On May 16, 2017, the company acquired two cattle-feeding operations from Cargill Cattle Feeders, LLC for
$59.3 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 and Eckley feedlots are sold
exclusively to Cargill Meat Solutions under an agreed upon pricing arrangement.
The following is a summary of the 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
$
$
22,450
52
36,960
(180)
59,282
The amounts above reflect the final purchase price allocation, which included working capital true-up payments by the
company of $1.6 million made during 2018.
F-17
Acquisition of Fleischmann’s Vinegar
On October 3, 2016, the company acquired all of the issued and outstanding stock of SCI Ingredients, the holding
company of Fleischmann’s Vinegar, 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 operating results of
Fleischmann’s Vinegar have been included in the company’s consolidated financial statements since October 4, 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
Acquisition of Abengoa Ethanol Plants
$
$
4,148
9,308
13,919
1,054
49,175
90,500
(9,689)
(216)
(41,882)
116,317
142,002
258,319
On September 23, 2016, the company acquired three ethanol plants located in Madison, Illinois, Mount Vernon, Indiana,
and York, Nebraska from subsidiaries of Abengoa S.A. for approximately $234.9 million for the ethanol plant assets, and
$19.1 million for working capital acquired and liabilities assumed, subject to certain post-closing adjustments. These ethanol
facilities have a combined annual production capacity of 230 mmgy. The company recorded $1.3 million of acquisition costs
for the Abengoa ethanol plants to selling, general and administrative expenses during the year ended December 31, 2016. The
operating results of Abengoa ethanol plants have been included in the company’s consolidated financial statements since
September 23, 2016.
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.
F-18
DISPOSITIONS
Disposition of Fleischmann’s Vinegar
On November 27, 2018, the company and Green Plains II LLC, an indirect wholly-owned subsidiary of the company,
completed the sale of Fleischmann’s Vinegar Company, Inc. to Kerry Holding Co. (“Kerry”). The company received as
consideration from Kerry $353.9 million in cash and restricted cash, including net working capital adjustments. The divested
assets were reported within the company’s food and ingredients segment. The company recorded a pre-tax gain on the sale of
Fleischmann’s Vinegar of $58.2 million, including offsetting related transaction costs of $7.4 million within the corporate
segment.
The assets and liabilities of Fleischmann’s Vinegar at closing on November 27, 2018 were as follows (in thousands):
Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Cash
Accounts receivable, net
Inventory
Prepaid expenses and other
Property and equipment
Other assets
Current liabilities
Deferred tax liabilities
Total identifiable net assets
Goodwill
Net assets disposed
$
$
2,107
15,935
15,167
853
64,552
79,389
(8,587)
(26,617)
142,799
142,002
284,801
The amounts reflected above represent working capital estimates which are considered preliminary until contractual
post-closing working capital adjustments are finalized.
Disposition of Bluffton, Lakota and Riga Ethanol Plants
On November 15, 2018, the company completed the sale of three ethanol plants located in Bluffton, Indiana, Lakota,
Iowa, and Riga, Michigan, and certain related assets from subsidiaries, to Valero Renewable Fuels Company, LLC
(“Valero”) for the sale price of $319.8 million, including preliminary net working capital and other adjustments.
Correspondingly, the partnership’s storage assets located adjacent to such plants were sold to Green Plains Inc. for $120.9
million. The company received as consideration from Valero approximately $319.8 million, while the partnership received as
consideration from the company 8.7 million partnership units and a portion of the general partner interest equating to 0.2
million equivalent limited partner units to maintain the general partner’s 2% interest. In addition, the partnership also
received additional consideration of approximately $2.7 million from Valero for the assignment of certain railcar operating
leases. The divested assets were reported within the company’s ethanol production, agribusiness and energy services and
partnership segments. The company recorded a pre-tax gain on the sale of the three ethanol plants of $92.2 million, of which
$89.5 million was recorded within the corporate segment and $2.7 million was recorded within the partnership segment,
including offsetting transaction costs of $4.2 million, of which $3.7 million were recorded within the corporate segment and
$0.5 million were recorded within the partnership segment.
F-19
The assets and liabilities of the Bluffton, Lakota and Riga ethanol plants at closing on November 15, 2018 were as
follows (in thousands):
Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Inventory
Prepaid expenses and other
Property and equipment
Other assets
Current liabilities
Other liabilities
Total identifiable net assets
Goodwill
Net assets disposed
$
$
37,227
542
184,969
1,717
(1,366)
(4,706)
218,383
6,188
224,571
The amounts reflected above represent working capital estimates which are considered preliminary until contractual
post-closing working capital adjustments are finalized. The company recorded a receivable of $3.1 million as of December
31, 2018 to reflect the estimated working capital true-up primarily related to additional inventory transferred.
The company determined that the dispositions noted above did not meet the criteria for discontinued operations
presentation as the disposition of these businesses did not represent a strategic shift that will have a major effect on its
operations and financial results.
6. 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 and energy services 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.
F-20
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, 2018
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
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
$
$
$
$
251,683
66,512
-
-
114
318,309
-
-
-
-
$
$
$
$
-
-
111,960
9,976
1
121,937
$
$
16,573
7,852
2
24,427
$
$
Total
251,683
66,512
111,960
9,976
115
440,246
16,573
7,852
2
24,427
Fair Value Measurements at December 31, 2017
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
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
45,709
-
-
115
312,475
-
-
-
-
$
$
$
$
-
-
26,834
12,045
-
38,879
$
$
Total
266,651
45,709
26,834
12,045
115
351,354
37,401
12,884
92
50,377
$
$
37,401
12,884
92
50,377
(1) Accounts payable is generally stated at historical amounts with the exception of $16.6 million and $37.4 million at December 31, 2018 and 2017,
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 $891.2 million at
December 31, 2018, and $1.4 billion at December 31, 2017. 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
$100.4 million and $151.1 million, respectively, at December 31, 2018 and 2017.
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.
F-21
7. 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 and
food-grade corn oil operations and included vinegar production until the sale of Fleischmann’s Vinegar during the fourth
quarter of 2018 and (4) partnership, which includes fuel storage and transportation services.
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 ethanol production 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
2018
Year Ended December 31,
2017
2016
$
$
2,109,079
11,582
2,120,661
$
2,497,360
10,313
2,507,673
2,409,102
-
2,409,102
722,756
46,200
768,956
1,005,037
156
1,005,193
6,481
94,267
100,748
3,995,558
(152,205)
3,843,353
$
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
$
(1) Revenues from external customers include realized gains and losses from derivative financial instruments.
Refer to Note 4 – Revenue, for further disaggregation of revenue by operating segment.
Cost of goods sold:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Intersegment eliminations
2018
Year Ended December 31,
2017
2016
$
$
2,118,787
717,772
939,838
-
(148,764)
3,627,633
$
$
2,434,001
614,582
411,781
-
(158,777)
3,301,587
$
$
2,280,906
650,538
294,396
-
(129,761)
3,096,079
F-22
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
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
2018
Year Ended December 31,
2017
2016
(111,823)
29,076
40,130
64,770
(3,110)
96,687
115,730
$
$
(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
2018
Year Ended December 31,
2017
2016
(31,623)
31,583
55,805
69,399
(3,110)
102,598
224,652
$
$
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
2018
Year Ended December 31,
2017
2016
80,227
2,470
12,914
4,442
3,566
103,619
$
$
81,987
3,462
13,103
5,111
3,698
107,361
$
$
68,746
2,536
3,705
5,647
3,592
84,226
2018
Year Ended December 31,
2017
2016
27,322
277
15,452
1,268
451
44,770
$
$
28,996
397
17,772
2,024
3,115
52,304
$
$
39,555
2,340
2,479
400
11,638
56,412
$
$
$
$
$
$
$
$
The following table reconciles net income to EBITDA (in thousands):
Net income:
Interest expense
Income tax expense (benefit)
Depreciation and amortization
EBITDA
2018
Year Ended December 31,
2017
2016
$
$
36,734
101,025
(16,726)
103,619
224,652
$
$
81,631
90,160
(124,782)
107,361
154,370
$
$
30,491
51,851
7,860
84,226
174,428
F-23
The following table sets forth total assets by operating segment (in thousands):
Total assets:
Ethanol production
Agribusiness and energy services
Food and ingredients
Partnership
Corporate assets
Intersegment eliminations
Year Ended December 31,
2018
2017
$
$
872,845
399,633
552,459
67,297
334,236
(10,038)
2,216,432
$
$
1,144,459
554,981
725,232
74,935
295,217
(10,174)
2,784,650
(1) Asset balances by segment exclude intercompany payable and receivable balances.
8. INVENTORIES
Inventories are carried at the lower of cost or net realizable value, except grain held for sale and fair-value hedged
inventories. Commodities held for sale are reported at market value. As of December 31, 2018, the company recorded a $6.0
million lower of cost or market inventory adjustment reflected in cost of goods sold within the ethanol production segment.
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,
2018
2017
99,765
62,980
119,014
423,840
29,284
734,883
$
$
146,269
65,693
144,520
320,664
34,732
711,878
$
$
9. 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
December 31,
2018
2017
931,321
176,279
115,503
34,163
12,484
19,082
3,733
24,416
1,316,981
(430,405)
886,576
$
$
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
$
$
F-24
10. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The company currently has two reporting units, to which goodwill is assigned. 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.
Effective January 1, 2018, the company early adopted 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. Under the amended guidance, an entity may first assess qualitative factors to determine
whether it is necessary to perform a quantitative goodwill impairment test. If determined to be necessary, the quantitative
impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be
recognized (if any).
The annual goodwill impairment review for the year ended December 31, 2018, was a qualitative assessment that
showed no indications of impairment.
Changes in the carrying amount of goodwill attributable to each business segment during the years ended December 31,
2018 and 2017 were as follows (in thousands):
Balance, December 31, 2016
Adjustment to preliminary Fleischmann's Vinegar
valuation
Balance, December 31, 2017
Dispositions
Balance, December 31, 2018
$
$
$
Ethanol
Production
Food and
Ingredients
Partnership
Total
30,279 $
142,819 $
10,598 $
183,696
-
30,279 $
(6,188)
24,091 $
(817)
142,002 $
(142,002)
-
10,598 $
-
- $
10,598 $
(817)
182,879
(148,190)
34,689
As of December 31, 2018, in connection with the sale of the Bluffton, Lakota and Riga ethanol plants and Fleischmann’s
Vinegar, the fair value of goodwill was reduced by $6.2 million and $142.0 million, respectively.
Intangible Assets
As of November 27, 2018, the company’s customer relationship intangible asset recognized in connection with the
Fleischmann’s Vinegar acquisition of $68.9 million, net of $11.1 million of amortization, was disposed of in connection with
the Fleischmann’s Vinegar sale. As of November 27, 2018, the company’s indefinite-lived trade name intangible asset of
$10.5 million was disposed of as part of the Fleischmann’s Vinegar sale. Prior to its disposition, the company recognized
$4.4 million, $5.3 million and $1.4 million, respectively, of amortization expense associated with amortizing the customer
relationship intangible asset during the years ended December 31, 2018, 2017 and 2016.
11. DERIVATIVE FINANCIAL INSTRUMENTS
At December 31, 2018, the company’s consolidated balance sheet reflected unrealized losses of $16.0 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-25
Fair Values of Derivative Instruments
The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets
where they are reported are as follows (in thousands):
Derivative financial instruments
Other assets
Other liabilities
Total
Asset Derivatives'
Fair Value at December 31,
2018
2017
Liability Derivatives'
Fair Value at December 31,
2018
2017
$
$
9,976 (1)
1
-
9,977
$
12,045 (2)
$
-
-
12,045
$
$
7,852 (3)
-
2
7,854
$
$
12,884
-
92
12,976
(1) At December 31, 2018, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded
futures and options contracts of $16.3 million.
(2) At December 31, 2017, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded
futures and options contracts of $8.5 million, which included $0.3 million of net unrealized gains on derivative financial instruments designated
as cash flow hedging instruments.
(3) At December 31, 2018, derivative financial instruments, as reflected on the balance sheet, includes net unrealized losses on exchange traded
futures and options contracts of $16.9 million, which included $16.5 million of net unrealized losses on derivative financial instruments
designated as cash flow hedging instruments.
Refer to Note 6 - 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
Loss Recognized in
Other Comprehensive Income on Derivatives
Amount of Gain or (Loss) Reclassified from
Accumulated Other Comprehensive Income into
Income
Year Ended December 31,
2017
18,167
(11,936)
6,231
2018
(10,808)
1,252
(9,556)
(8,094)
(16,508)
(24,602)
2016
$
$
$
$
$
$
Amount of Loss Recognized in Other Comprehensive
Income on Derivatives
Year Ended December 31,
2017
2018
2016
(29,238)
Commodity Contracts
$
(9,642)
$
(8,015)
$
Amount of Gain Recognized in Income on
Derivatives
Year Ended December 31,
2017
$ (12,583)
27,078
$ 14,495
2018
$ 10,115
18,944
$ 29,059
2016
6,071
11
6,082
$
$
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-26
Line Item in the Consolidated Balance Sheet in
Which the Hedged Item is Included
Carrying Amount of the
Hedged Assets
Cumulative Amount of Fair
Value Hedging Adjustment
Included in the Carrying Amount
of the Hedged Assets
Inventories
$
89,188
$
2,430
Effect of Cash Flow and Fair Value Hedge Accounting on the Statements of Operations
Location and Amount of Gain or (Loss) Recognized in Income on
Cash Flow and Fair Value Hedging Relationships
Year Ended December 31,
2017
2018
2016
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
$
(10,808) $
1,252 $
18,167 $
(11,936) $
(8,094) $
(16,508)
Gain or (loss) on fair value hedging relationships:
Commodity contracts:
Hedged item
-
13,681
1,451
(6,229)
1,388
21,430
Derivatives designated as hedging instruments
-
(12,304)
(1,734)
8,530
(1,388)
(16,219)
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
$
(10,808) $
2,629 $
17,884 $ (9,635) $
(8,094) $
(11,297)
There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the years ended
December 31, 2018, 2017 and 2016.
F-27
The open commodity derivative positions as of December 31, 2018, are as follows (in thousands):
Exchange Traded
Non-Exchange Traded
December 31, 2018
Derivative
Instruments
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Futures
Options
Options
Options
Options
Options
Options
Forwards
Forwards
Forwards
Forwards
Forwards
Net Long &
(Short) (1)
Long (2)
(Short) (2)
(23,025)
750 (3)
(14,500) (4)
(80,850)
(2,275)
(13,888) (4)
(39,600)
(402,840) (3)
116
5,519
13,146
(2,015)
(18,628)
19
25,071
567
131
14,160
15,422
(2,299)
(256,596)
(207)
(43,426)
(8,696)
Unit of
Measure
Bushels
Bushels
Bushels
Gallons
mmBTU
mmBTU
Pounds
Pounds
Tons
Bushels
Gallons
mmBTU
Pounds
Barrels
Bushels
Gallons
Tons
Pounds
mmBTU
Commodity
Corn and Soybeans
Corn
Corn
Ethanol
Natural Gas
Natural Gas
Livestock
Cattle
Soybean Meal
Corn and Soybeans
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.
(4) Futures or non-exchange traded forwards used for fair value hedges.
Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated
statements of income. Included in revenues are net gains of $23.1 million, $35.4 million, and $11.6 million for the years
ended December 31, 2018, 2017, and 2016 respectively, on energy trading contracts.
12. DEBT
The components of long-term debt are as follows (in thousands):
Corporate:
$500.0 million term loan
3.25% convertible notes due 2018
3.25% convertible notes due 2019
4.125% convertible notes due 2022
Green Plains Partners:
$200.0 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,
2018
2017
-
-
53,457
142,708
134,000
26,022
356,187
(3,190)
(54,807)
298,190
$
$
498,750
61,442
-
136,739
126,900
27,744
851,575
(16,256)
(67,923)
767,396
$
$
F-28
Scheduled long-term debt repayments, including full accretion of the 3.25% convertible notes due 2019 and of the
4.125% 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
2019
2020
2021
2022
2023
Thereafter
Total
$
$
58,185
1,218
135,007
171,006
1,006
20,437
386,859
The components of short-term notes payable and other borrowings are as follows (in thousands):
Green Plains Cattle:
$500.0 million revolver
Green Plains Grain:
$125.0 million revolver
$50.0 million inventory financing
Green Plains Trade:
$300.0 million revolver
Green Plains Commodity Management:
$20.0 million hedge line
December 31,
2018
2017
$
374,492
$
270,860
41,000
-
108,485
14,266
538,243
$
75,000
-
180,320
-
526,180
Total short-term notes payable and other borrowings
$
Corporate Activities
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. In November 2018, we repaid
the remaining outstanding balance of our $500.0 million term loan using a portion of the proceeds from the sales of the three
ethanol plants and Fleischmann’s Vinegar. We did not incur any early termination penalties to the lenders as a result of the
repayment.
Prior to the repayment of the $500.0 million term loan on November 27, 2018, the term loan was guaranteed by the
company and substantially all of its subsidiaries, except for 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 contained certain customary representations and warranties, affirmative covenants,
negative covenants, financial covenants and events of default. The negative covenants included restrictions on the ability to
incur additional indebtedness, acquire and sell assets, create liens, make investments, pay distributions and enter into
transactions with affiliates. At the end of each fiscal quarter, the covenants of the credit agreement required the company to
maintain a maximum term debt to total term capitalization of 55% and a minimum interest coverage ratio of 1.25 to 1.00, as
defined in the credit agreement. Beginning in 2018, the credit facility also had 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 were subject to prepayment fees of 1.0% if prepaid before the eighteen-month anniversary of the credit
agreement. Scheduled principal payments were $1.25 million each quarter until maturity. The term loan bore interest at a
floating rate of a base rate plus a margin of 4.50% or LIBOR plus a margin of 5.50%.
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. Prior to close of the exchange agreements on October 1, 2018, the company could 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 were not convertible
unless certain conditions were satisfied. The conversion rate was 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
F-29
September 30, 2018, to 50.8753 shares of common stock per $1,000 of principal, which is equal to a conversion price of
approximately $19.66 per share. For all conversions of notes which occur on or after April 1, 2018, the company has elected
to convert for whole shares of common stock with any fractional share being settled with cash in lieu.
Prior to the close of the exchange agreements on October 1, 2018, the company could redeem all of the 3.25% notes at
any time on or after October 1, 2016, if the company’s common stock equaled or exceeded 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 would equal 100% of the principal plus any accrued and unpaid interest.
Holders of the 3.25% notes had 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 was a fundamental change, such as change in control. If an
event of default occurred, it could result in the 3.25% notes being declared due and payable.
During the second quarter of 2018, the company entered into a privately negotiated agreement with a certain holder, on
behalf of a certain beneficial owner of the company’s 3.25% notes. Under this agreement, 50 shares of the company’s
common stock were exchanged for approximately $1 thousand in aggregate principal amount of the 3.25% notes. Common
stock held as treasury shares were exchanged for the 3.25% notes. Following the closing of this agreement, $63.7 million
aggregate principal amount of the 3.25% notes remained outstanding.
During the three months ended September 30, 2018, the company entered into exchange agreements with certain
beneficial owners of the company’s outstanding 3.25% convertible senior notes due 2018 (the “Old Notes”), pursuant to
which such investors exchanged (the “Exchange”) $56.8 million in aggregate principal amount of the Old Notes for $56.8
million in aggregate principal amount of notes due 2019 (the “New Notes”). The company evaluated the Exchange in
accordance with ASC 470-50 and concluded that the Exchange qualified as a debt modification as the cash flows and fair
value of the embedded conversion option of the New Notes were not substantially different from the Old Notes. As a result,
the New Notes were recorded at fair value at the time of the exchange, and the company recorded a non-cash adjustment to
additional paid-in capital of $3.5 million, net of a $1.2 million tax impact, related to the difference in fair value of the
embedded conversion option of the Old Notes and the New Notes. Following the closing of these agreements, $6.9 million
aggregate principal of the Old Notes remained outstanding. On October 1, 2018, the maturity date of the Old Notes, the
remaining aggregate principal of $6.9 million was paid.
The New Notes are the senior, unsecured obligations of the company and bear interest at a rate of 3.25% per annum,
payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2018. Interest on the New
Notes will accrue from, and including, April 1, 2018. The New Notes will mature on October 1, 2019, unless earlier
converted. Holders of New Notes may convert their New Notes, at their option, in integral multiples of $1,000 principal
amount, at any time prior to the close of business on the scheduled trading day immediately preceding the maturity date of
the New Notes. The conversion rate for the New Notes was initially 50.6481 shares of the company’s common stock per
$1,000 principal amount of New Notes, which corresponded to an initial conversion price of approximately $19.74 per share
of the company’s common stock. The conversion rate will be subject to adjustment upon the occurrence of certain events.
Upon conversion of the convertible notes, the company will settle its conversion obligation by delivering shares of its
common stock at the applicable conversion rate, together with cash in lieu of any fractional share.
The company does not have the right to redeem the New Notes at its election before their maturity. The New Notes are
subject to customary provisions providing for the acceleration of their principal and interest upon the occurrence of events
that constitute an “event of default.” Events of default include, among other events, certain payment defaults, defaults in
settling conversions, certain defaults under the company’s other indebtedness and certain insolvency-related events. Upon
maturity, the company will settle the New Notes in cash.
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.
F-30
The company may redeem all, but not less than all, of the 4.125% notes at any time on or after September 1, 2020, if the
company’s common stock equals or exceeds 140% of the applicable conversion price for a specified time period ending on
the trading day immediately prior to the date the company delivers notice of the redemption. The redemption price will equal
100% of the principal plus any accrued and unpaid interest. Holders of the 4.125% notes have the option to require the
company to repurchase the 4.125% notes in cash at a price equal to 100% of the principal plus accrued and unpaid interest
when there is a fundamental change, such as change in control. If an event of default occurs, it could result in the 4.125%
notes being declared due and payable.
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 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. The total
unused portion of the $125.0 million revolving credit facility is also subject to a commitment fee ranging from 0.375% to
0.50% per annum depending on utilization.
Lenders receive a first priority lien on certain cash, inventory, accounts receivable and other assets owned by Green
Plains Grain. The terms impose affirmative and negative covenants for Green Plains Grain, including maintaining minimum
working capital of $22.0 million and tangible net worth of $27.0 million. 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 the company has long-term indebtedness on the date of calculation. As of
December 31, 2018, 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 $300.0 million senior secured asset-based revolving credit facility to finance 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 credit facility matures on July 28, 2022 and consists of a $285 million
credit facility and a $15 million first-in-last-out (FILO) credit facility, and 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 revolving credit facility is also subject to a commitment fee of 0.375% per annum.
The terms impose affirmative and negative covenants for Green Plains Trade, including maintaining a minimum fixed
charge coverage ratio of 1.15 to 1.00. Capital expenditures are limited to $1.5 million per year under the credit facility. The
credit facility also 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.
Green Plains Grain has entered into short-term inventory financing agreements with a financial institution. The company
has accounted for the agreements as short-term notes, rather than sales, and has elected the fair value option to offset
fluctuations in market prices of the inventory. The company had no short-term notes payable related to these inventory
financing agreements as of December 31, 2018.
Green Plains Commodity Management has an uncommitted $20.0 million revolving credit facility which matures April
30, 2023 to finance margins related to its hedging programs. Advances are subject to variable interest rates equal to LIBOR
plus 1.75%. At December 31, 2018, the company had $14.3 million outstanding on this facility.
F-31
Food and Ingredients Segment
Green Plains Cattle has a senior secured asset-based revolving credit facility, which was amended on July 31, 2018, to
increase the maximum commitment from $425.0 million to $500.0 million and can be increased by an additional $100.0
million with agent approval. On October 5, 2018, the company amended its revolving credit facility to provide the Joint
Administrator, at its sole discretion, irrevocable authorization to (1) release any term loan priority collateral; (2) release any
guarantor related to any release of any term loan priority collateral and/or (3) release the guaranty upon termination of the
term loan agreement and repayment of all obligations owed by the company under the term loan agreement. The credit
facility, which matures on April 30, 2020, finances 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 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. The amended terms impose affirmative and negative covenants, including maintaining a
minimum working capital of 15% of the commitment amount, minimum tangible net worth of 20% of the commitment
amount, plus 50% of net profit from the previous year, and a maximum total debt to tangible net worth ratio of 3.50 to 1.00.
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.
Partnership Segment
Green Plains Partners, through a wholly owned subsidiary, has a $200.0 million revolving credit facility, 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%. On February 20, 2018, the
partnership accessed an additional $40.0 million to increase the revolving credit facility from $195.0 million to $235.0
million. On November 15, 2018, the partnership decreased the revolving credit facility from $235.0 million to $200.0
million. The credit facility can be increased by an additional $20.0 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. There were no other significant changes in other covenants.
The partnership’s obligations under the credit facility are secured by a first priority lien on (i) the capital stock of the
partnership’s present and future subsidiaries, (ii) all of the partnership’s present and future personal property, such as
investment property, general intangibles and contract rights, including rights under agreements with Green Plains Trade, and
(iii) all proceeds and products of the equity interests of the partnership’s present and future subsidiaries and its personal
property. The terms impose affirmative and negative covenants including restricting the partnership’s ability to incur
additional debt, acquire and sell assets, create liens, invest capital, pay distributions and materially amend the partnership’s
commercial agreements with Green Plains Trade. The credit facility also requires the partnership to maintain a maximum
consolidated net leverage ratio of no more than 3.50x and a minimum consolidated interest coverage ratio of no less than
2.75x, each of which is calculated on a pro forma basis with respect to acquisitions and divestitures occurring during the
applicable period. The consolidated leverage ratio is calculated by dividing total funded indebtedness minus the lesser of cash
in excess of $5.0 million or $30.0 million by the sum of the four preceding fiscal quarters’ consolidated EBITDA. The
consolidated interest coverage ratio is calculated by dividing the sum of the four preceding fiscal quarters’ consolidated
EBITDA by the sum of the four preceding fiscal quarters’ interest charges.
In June 2013, the company issued promissory notes payable of $10.0 million, which is recorded in long-term debt, and a
note receivable of $8.1 million, which is recorded in other assets, to execute a New Markets Tax Credit transaction related to
the Birmingham, Alabama terminal. Beginning in March 2020, the promissory notes and note receivable each require
quarterly principal and interest payments of approximately $0.2 million. The company retains the right to call $8.1 million of
the promissory notes in 2020. The promissory notes payable and note receivable will be fully amortized upon maturity in
September 2031. Income tax credits were generated for the lender, which the company has guaranteed over their statutory life
of seven years in the event the credits are recaptured or reduced. At the time of the transaction, the income tax credits were
valued at $5.0 million. The company has not established a liability in connection with the guarantee because it believes the
likelihood of recapture or reduction is remote.
F-32
Covenant Compliance
The company was in compliance with its debt covenants as of December 31, 2018 and 2017.
Restricted Net Assets
At December 31, 2018, there were approximately $243.4 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.
13. 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, performance share awards, 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, with no adjustments 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 stock options, stock awards, performance share awards or deferred
stock units:
• Stock 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.
• Restricted Stock Awards – Restricted 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.
• Performance Share Awards – Performance share awards may be granted to directors and employees that cliff-vest
after a period of time as determined by the compensation committee. Performance share awards granted to date cliff-
vest after a period of time, and included sale restrictions. Compensation expense is recognized 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.
Stock Options
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, 2018, 2017, and 2016.
F-33
The activity related to the exercisable stock options for the year ended December 31, 2018, is as follows:
Outstanding at December 31, 2017
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2018
Exercisable at December 31, 2018 (1)
Weighted-
Average
Exercise Price
12.44
-
10.00
-
-
12.72
12.72
Shares
143,750 $
-
(15,000)
-
-
128,750 $
128,750 $
Weighted-Average
Remaining
Contractual Term
(in years)
1.8
-
-
-
-
1.0
1.0
Aggregate
Intrinsic Value
(in thousands)
635
-
120
-
-
89
89
$
$
$
(1)
Includes in-the-money options totaling 118,750 shares at a weighted-average exercise price of $12.36.
Option awards allow employees to exercise options through cash payment for the shares of common stock or
simultaneous broker-assisted transactions in which the employee authorizes the exercise and immediate sale of the option in
the open market. The company uses newly issued shares of common stock to satisfy its stock-based payment obligations.
Restricted Stock Awards and Deferred Stock Units
The non-vested restricted stock award and deferred stock unit activity for the year ended December 31, 2018, are as
follows:
Nonvested at December 31, 2017
Granted
Forfeited
Vested
Nonvested at December 31, 2018
Performance Share Awards
Non-Vested
Shares and
Deferred
Stock Units
Weighted-
Average Grant-
Date Fair Value
Weighted-Average
Remaining
Vesting Term
(in years)
1,068,947 $
519,876
(109,996)
(596,539)
882,288 $
20.41
18.24
19.59
20.57
19.12
1.7
On March 19, 2018, the board of directors granted 153,030 performance shares to be awarded in the form of common
stock to certain participants of the plan. Performance shares vest based on the company's average return on net assets
(RONA) and the company’s total shareholder return (TSR), as further described herein. The performance shares vest on
March 19, 2021, if the RONA and TSR criteria are achieved and the participant is then employed by the company. Fifty
percent of the performance shares vest based upon the company’s ability to achieve a predetermined RONA during the three
year performance period. The remaining fifty percent of the performance shares vest based upon the company’s total TSR
during the three year performance period relative to that of the company’s performance peer group.
The performance shares were granted at a target of 100%, but each performance share will increase or decrease
depending on results for the performance period for the company's RONA, and the company’s TSR relative to that of the
performance peer group. If the company’s RONA and TSR achieve the maximum goals, the maximum amount of shares
available to be issued pursuant to this award is 201,033 performance shares or 150% of the 134,022 performance shares
outstanding as of December 31, 2018. The actual number of performance shares that will ultimately vest is based on the
actual percentile ranking of the company’s RONA, and the company’s TSR compared to the peer performance at the end of
the performance period.
F-34
The company used the Monte Carlo valuation model to estimate the fair value of the performance shares on the date of
the grant. The weighted average assumptions used by the company in applying the Monte Carlo valuation model for
performance share grants during the twelve months ended December 31, 2018, are illustrated in the following table:
Risk-free interest rate
Dividend yield
Expected volatility
2018
2.44 %
2.64 %
45.11 %
The Monte Carlo valuation also estimated the number of performance shares that would be awarded which is reflected in
the fair value on the grant date. The Monte Carlo valuation assumed 97.39% of the performance shares granted on March 19,
2018, would be awarded on March 19, 2021, based upon the estimated company’s total shareholder return relative to peer
performance. The company’s closing stock price was $18.15 on the date of the grant.
The non-vested performance share award activity for the year ended December 31, 2018, are as follows:
Nonvested at December 31, 2017
Granted
Forfeited
Nonvested at December 31, 2018
Performance
Shares
-
153,030
(19,008)
134,022
At December 31, 2018, unrecognized stock compensation expense of $1.8 million, excluding any potential forfeitures,
will be recognized over the vesting period of these performance share awards on a straight-line basis.
Green Plains Partners
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 unit-based awards activity for the year ended December 31, 2018, are as follows:
Nonvested at December 31, 2017
Granted
Forfeited
Vested
Nonvested at December 31, 2018
Stock-Based and Unit-Based Compensation Expense
Non-Vested
Shares and
Deferred
Stock Units
Weighted-
Average
Grant-Date
Fair Value
Weighted-Average
Remaining
Vesting Term
(in years)
11,549 $
18,582
-
(11,549)
18,582 $
19.06
16.96
-
19.06
16.96
0.5
Compensation costs for stock-based and unit-based payment plans during the years ended December 31, 2018, 2017 and
2016, were approximately $11.4 million, $12.2 million and $9.5 million, respectively. The decrease in stock compensation
for the year ended December 31, 2018 was largely due to current year forfeitures, offset by additional expense recorded due
to the accelerated vesting of stock awards during the year. At December 31, 2018, there were $9.9 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 1.6 years. The potential tax benefit related to
stock-based payment is approximately 25.2% of these expenses.
F-35
14. 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. Beginning in 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 and 2018 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
Year Ended December 31,
2017
2018
2016
15,923 $
40,320
0.39 $
61,061 $
39,247
1.56 $
10,663
38,318
0.28
15,923 $
61,061 $
10,663
$
$
$
-
-
4,433
8,159
73,653 $
-
-
10,663
Net income attributable to Green Plains - diluted
$
15,923 $
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
40,320
39,247
38,318
-
-
934
41,254
4,209
6,071
713
50,240
155
-
100
38,573
EPS - diluted
$
0.39 $
1.47 $
0.28
Excluded from the calculation of diluted EPS for the twelve months ended December 31, 2018 were 7.3 million shares
related to the effect of the convertible debt, as the inclusion of these shares would have been dilutive.
15. STOCKHOLDERS’ EQUITY
Treasury Stock
The company holds 5.5 million shares of its common stock at a cost of $58.2 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 209,682 shares of common
F-36
stock for approximately $3.0 million during 2018. Since inception, the company has repurchased 1,119,349 shares of
common stock for approximately $19.7 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 6, 2019, the company’s board of directors
declared a quarterly cash dividend of $0.12 per share. The dividend is payable on March 15, 2019, to shareholders of record
at the close of business on February 22, 2019.
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 17, 2019, the board of directors of the general partner of
the partnership declared a cash distribution of $0.475 per unit on outstanding common units. The distribution is payable on
February 8, 2019, to unitholders of record at the close of business on February 1, 2019.
Accumulated Other Comprehensive Income
Changes in accumulated other comprehensive income are associated primarily with gains and losses on derivative
financial instruments. Amounts reclassified from accumulated other comprehensive income are as follows (in thousands):
Year Ended December 31,
2017
2018
2016
Statements of Income
Classification
Gains (losses) on cash flow hedges:
Commodity derivatives
Commodity derivatives
Total
Income tax expense (benefit)
Amounts reclassified from
accumulated other comprehensive
income (loss)
$
(10,808) $
1,252
(9,556)
(2,887)
18,167 $
(11,936)
6,231
2,306
(8,094) Revenues
(16,508) Cost of goods sold
(24,602)
(8,830)
Income (loss) before income taxes
Income tax expense (benefit)
$
(6,669) $
3,925 $
(15,772)
At December 31, 2018 and 2017, the company’s consolidated balance sheets reflected unrealized losses of $16.0 million
and $13.1 million, net of tax, in accumulated other comprehensive loss, respectively.
Hereford and Hopewell Drop-Down
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.
16. RESTRUCTURING ACTIVITIES
In the second quarter of 2018, the company announced its portfolio optimization program of which one of the five
strategic objectives was to reduce controllable expenses. As part of the program, the company implemented a workforce
reduction at certain of its facilities, including its corporate location. The associated severance costs were recognized at the
time both the employee and employer were irrevocably committed to the terms of the separation. As of December 31, 2018,
the company recognized a $4.2 million charge for such workforce reductions it had implemented through that date with $3.8
million classified as selling, general and administrative expense and $0.4 million classified as costs of goods sold. Of the $4.2
million charge, $3.1 million was recorded in the corporate segment, $0.7 million was recorded in the agribusiness and energy
services segment, $0.4 million was recorded in the ethanol production segment. Approximately $2.7 million of the total
charge was included in accrued liabilities as of December 31, 2018.
F-37
17. 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 was effective January 1,
2018. 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. We have completed the analysis of
the legislation and its impact to the financial statements. The company has determined that the deductibility of certain officer
compensation is now limited under the new legislation. The tax impact of $0.7 million for the amount that is not expected to
be realized has been recorded to tax expense. This adjustment had an immaterial impact to the effective tax rate.
Green Plains Partners is a limited partnership, which is treated as a flow-through entity for federal income tax purposes
and is not subject to federal income taxes. As a result, the consolidated financial statements do not reflect such income taxes
on pre-tax income or loss attributable to the noncontrolling interest in the partnership.
Income tax expense (benefit) consists of the following (in thousands):
Current
Deferred
Total
2018
Year Ended December 31,
2017
2016
$
$
7,758
(24,484)
(16,726)
$
$
(43,705)
(81,077)
(124,782)
$
$
2,950
4,910
7,860
The reduced benefit in 2018 compared to 2017 is primarily due to the company’s recognition of tax benefits related to
enactment of the Tax Cuts and Jobs Act and for the completion of a multi-year study for Research and Development credits,
or R&D Credits in 2017.
During the years ended December 31, 2018 and 2017, the company recognized a net income tax benefit of $19.6 million
and $48.1 million, respectively, for federal and state R&D Credits. In addition, $2.3 million and $9.2 million, net, in
refundable credits not dependent upon taxable income was recorded as a reduction of cost of goods sold during the years
ended December 31, 2018 and 2017, respectively. R&D Credits recorded during 2017 related 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.
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
State income tax expense, net of federal benefit
Nondeductible compensation
Noncontrolling interests
Unrecognized tax benefits
R&D credits
Disposition of subsidiary
Tax Cuts and Jobs Act impact
Stock compensation
Audit adjustments
Amended return adjustments
Other
Income tax expense (benefit)
2018
Year Ended December 31,
2017
2016
4,202
981
921
(4,370)
15,148
(34,979)
(1,022)
278
993
559
374
189
(16,726)
$
$
(15,103)
(915)
222
(7,199)
25,720
(74,033)
-
(54,485)
-
-
-
1,011
(124,782)
$
$
13,423
323
185
(6,940)
-
-
-
-
-
-
-
869
7,860
$
$
F-38
Significant components of deferred tax assets and liabilities are as follows (in thousands):
December 31,
2018
2017
Deferred tax assets:
Net operating loss carryforwards - Federal
Net operating loss carryforwards - State
Tax credit carryforwards - Federal
Tax credit carryforwards - State
Derivative financial instruments
Deferred revenue
Interest expense carryforward
Investment in partnerships
Inventory valuation
Stock-based compensation
Accrued expenses
Capital leases
Other
Total deferred tax assets
Deferred tax liabilities:
Convertible debt
Fixed assets
Derivative financial instruments
Organizational and start-up costs
Total deferred tax liabilities
Valuation allowance
Deferred income taxes
$
- $
4,004
47,956
9,369
-
2,236
2,048
50,009
3,603
1,458
5,439
2,516
43
128,681
(7,508)
(118,330)
(1,573)
(3,980)
(131,391)
(7,413)
(10,123) $
$
12,767
5,291
30,783
5,342
2,592
919
-
55,956
1,944
2,468
5,541
2,426
47
126,076
(8,350)
(149,746)
-
(20,947)
(179,043)
(3,834)
(56,801)
At December 31, 2018, the company has federal R&D credits of $48.0 million which will begin to expire in 2033. The
company also has $9.4 million of state credits which will expire beginning in 2021.
The company has state net operating losses of $4.0 million which will begin to expire in 2022.
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 $7.4 million as of December 31, 2018, relates to state tax credits
that are not expected to be realized prior to expiration starting in 2021. The deferred tax valuation allowance as of December
31, 2017 was $3.8 million. The increase in the deferred tax valuation allowance was primarily due to state R&D credits
generated 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):
Unrecognized Tax Benefits
Balance at January 1, 2018
Additions for prior year tax positions
Additions for current year tax positions
Settlements of prior year tax positions
Reductions for prior year tax positions
Balance at December 31, 2018
$
$
25,976
5,980
20,922
(1,149)
(171)
51,558
Recognition of these tax benefits would favorably impact the company’s effective tax rate. Unrecognized tax benefits of
$51.6 million include $40.8 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.
F-39
18. COMMITMENTS AND CONTINGENCIES
Operating Leases
The company leases certain facilities, equipment and parcels of land under agreements that expire at various dates. For
accounting purposes, rent expense is based on a straight-line amortization of the total payments required over the lease. The
company incurred lease expenses of $38.8 million, $45.8 million and $38.0 million during the years ended December 31,
2018, 2017 and 2016, respectively.
Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in thousands):
Year Ending December 31,
Amount
2019
2020
2021
2022
2023
Thereafter
Total
Commodities
$
$
23,552
17,473
9,812
7,325
3,594
28,542
90,298
As of December 31, 2018, the company had contracted future purchases of grain, corn oil, natural gas, ethanol, distillers
grains and cattle, valued at approximately $289.3 million.
Legal
In November 2013, the company acquired two ethanol plants located in Fairmont, Minnesota and Wood River,
Nebraska. There was 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. On October 30, 2018, the
ongoing litigation was settled and an adjustment to reduce the cost of inventory purchased in the acquisition was recorded in
the fourth quarter as a reduction of costs of goods sold.
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.
19. 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,
2018, 2017 and 2016 were $2.2 million, $2.1 million and $1.6 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, 2018, the plan’s assets were $4.9 million and liabilities were $6.5 million. At December 31, 2018 and 2017, net liabilities
of $1.6 million and $0.6 million were included in other liabilities on the consolidated balance sheets, respectively.
F-40
20. RELATED PARTY TRANSACTIONS
Commercial Contracts
In March 2014, a subsidiary of the company entered into $1.4 million of new equipment financing agreements with
Amur Equipment Finance, whom Gordon Glade, a member of the company’s board of directors, was formerly a shareholder.
Amur Equipment Finance is no longer considered a related party as of the third quarter of 2018. There was $0.6 million
related to these financing arrangements included in debt at December 31, 2017. Payments, including principal and interest,
totaled $0.2 million for the year ended December 31, 2018 and $0.3 million for the years ended December 31, 2017 and
2016.
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, 2018, 2017 and 2016, payments related to these leases
totaled $159 thousand, $182 thousand and $190 thousand, respectively. The company had no outstanding payables related to
these agreements at December 31, 2018, and $2 thousand in outstanding payables related to these agreements at December
31, 2017.
21. QUARTERLY FINANCIAL DATA (Unaudited)
The following table includes unaudited financial data for each of the quarters within the years ended December 31, 2018
and 2017 (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 (1)
Operating income (loss)
Other expense
Income tax benefit (expense)
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 (loss)
Other expense
Income tax benefit (2)
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,
2018
811,129 $
703,888
107,241
(32,672)
(14,712)
53,503
1.32
1.13
September 30,
2018
1,000,100 $
999,451
649
(22,726)
14,658
(12,469)
(0.31)
(0.31)
March 31,
2018
June 30,
2018
986,837 $ 1,045,287
1,049,212
975,072
(3,925)
11,765
(21,557)
(18,767)
6,027
10,753
(24,117)
(994)
(0.60)
(0.02)
(0.60)
(0.02)
Three Months Ended
$
December 31,
2017
920,984 $
913,560
7,424
(18,954)
63,877
46,630
1.16
0.99
September 30,
2017
June 30,
2017
886,263 $
890,049
(3,786)
(17,759)
9,749
(16,366)
(0.41)
(0.41)
March 31,
2017
887,684
870,292
17,392
(18,122)
2,381
(3,597)
(0.09)
(0.09)
901,235 $
880,519
20,716
(30,062)
48,775
34,394
0.83
0.74
(1) The fourth quarter of 2018 includes the net gain on the sale of assets of $150.4 million related to the sale of three ethanol plants and Fleischmann’s
Vinegar.
(2) 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-41
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
Founding 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
TODD BECKER
President and Chief Executive Officer
JOHN NEPPL
Chief Financial Officer
MICHELLE MAPES
Chief Legal and Administration Officer
PATRICH SIMPKINS
Chief Development Officer
WALTER CRONIN
Executive Vice President
Commercial Operations
MARK HUDAK
Executive Vice President
Human Resources
JOEL JARNAGIN
Executive Vice President
Cattle
PAUL KOLOMAYA
Executive Vice President
Commodity Finance
MICHAEL METZLER
Executive Vice President
Natural Gas and Power
TONY VOJSLAVEK
Executive Vice President
Trading and Risk
Member of: (1) Audit Committee, (2) Compensation
Committee and/or (3) Nominating and Governance Committee
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
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Louisville, KY 40233
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