XNAS:GPRE Green Plains Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,  D.C. 20549 

______________________

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

For the Quarterly Period Ended June 30, 2012

 

Commission File Number 001-32924

 

Green Plains Renewable Energy, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Iowa

84-1652107

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

450 Regency Parkway, Suite 400, Omaha, NE 68114

(402) 884-8700

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

 

 

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.

 

S Yes   £ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

S Yes   £ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer             £      Accelerated filer T      Non-accelerated filer £     Smaller reporting company £

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

 

£ Yes   S No

 

The number of shares of common stock, par value $0.001 per share, outstanding as of July 27, 2012 was 29,655,466 shares.

 

 


 

 

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheets 

2

 

 

 

 

Consolidated Statements of Operations

3

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss)

4

 

 

 

 

Consolidated Statements of Cash Flows 

5

 

 

 

 

Notes to Consolidated Financial Statements 

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk 

38

 

 

 

Item 4.

Controls and Procedures

40

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

41

 

 

 

Item 1A.

Risk Factors

41

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

 

 

 

Item 3.

Defaults Upon Senior Securities

44

 

 

 

Item 4.

Mine Safety Disclosures

44

 

 

 

Item 5.

Other Information

44

 

 

 

Item 6.

Exhibits

45

 

 

 

Signatures 

46

 

 

 

 

1

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

 CONSOLIDATED BALANCE SHEETS

 

(in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

2012

 

2011

 

(unaudited)

 

 

 

ASSETS

Current assets

 

 

 

 

 

Cash and cash equivalents

$

120,683 

 

$

174,988 

Restricted cash

 

16,159 

 

 

19,619 

Accounts receivable, net of allowances of $358 and $263, respectively

 

115,002 

 

 

106,198 

Inventories

 

186,253 

 

 

229,070 

Prepaid expenses and other

 

4,053 

 

 

8,610 

Deferred income taxes

 

2,418 

 

 

14,828 

Deposits

 

3,283 

 

 

5,679 

Derivative financial instruments

 

40,045 

 

 

17,428 

Total current assets

 

487,896 

 

 

576,420 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of

 

 

 

 

 

$152,206 and $125,798, respectively

 

765,784 

 

 

776,789 

Goodwill

 

40,877 

 

 

40,877 

Other assets

 

28,192 

 

 

26,742 

Total assets

$

1,322,749 

 

$

1,420,828 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

 

 

 

 

 

Accounts payable

$

105,210 

 

$

172,328 

Accrued and other liabilities

 

27,891 

 

 

29,825 

Unearned revenue

 

5,893 

 

 

15,453 

Short-term notes payable and other borrowings

 

133,237 

 

 

69,599 

Current maturities of long-term debt

 

75,032 

 

 

73,760 

Total current liabilities

 

347,263 

 

 

360,965 

 

 

 

 

 

 

Long-term debt

 

470,519 

 

 

493,407 

Deferred income taxes

 

37,376 

 

 

55,970 

Other liabilities

 

4,777 

 

 

5,129 

Total liabilities

 

859,935 

 

 

915,471 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Common stock, $0.001 par value; 75,000,000 shares authorized;

 

 

 

 

 

36,855,466 and 36,413,611 shares issued, and 29,655,466

 

 

 

 

 

and 32,913,611 shares outstanding, respectively

 

37 

 

 

36 

Additional paid-in capital

 

442,722 

 

 

440,469 

Retained earnings

 

75,519 

 

 

95,761 

Accumulated other comprehensive income (loss)

 

10,107 

 

 

(2,953)

Treasury stock, 7,200,000 and 3,500,000 shares, respectively

 

(65,808)

 

 

(28,201)

Total Green Plains stockholders' equity

 

462,577 

 

 

505,112 

Noncontrolling interests

 

237 

 

 

245 

Total stockholders' equity

 

462,814 

 

 

505,357 

Total liabilities and stockholders' equity

$

1,322,749 

 

$

1,420,828 

 

See accompanying notes to the consolidated financial statements.

 

2

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(unaudited and in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

870,356 

 

$

861,576 

 

$

1,645,750 

 

$

1,673,903 

Cost of goods sold

 

852,222 

 

 

826,314 

 

 

1,618,846 

 

 

1,601,018 

Gross profit

 

18,134 

 

 

35,262 

 

 

26,904 

 

 

72,885 

Selling, general and administrative expenses

 

19,217 

 

 

17,474 

 

 

39,078 

 

 

35,102 

Operating income (loss)

 

(1,083)

 

 

17,788 

 

 

(12,174)

 

 

37,783 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

58 

 

 

72 

 

 

99 

 

 

164 

Interest expense

 

(9,842)

 

 

(9,867)

 

 

(18,909)

 

 

(17,999)

Other, net

 

(832)

 

 

(122)

 

 

(1,411)

 

 

(186)

Total other expense

 

(10,616)

 

 

(9,917)

 

 

(20,221)

 

 

(18,021)

Income (loss) before income taxes

 

(11,699)

 

 

7,871 

 

 

(32,395)

 

 

19,762 

Income tax expense (benefit)

 

(4,145)

 

 

2,852 

 

 

(12,145)

 

 

7,212 

Net income (loss)

 

(7,554)

 

 

5,019 

 

 

(20,250)

 

 

12,550 

Net (income) loss attributable to noncontrolling interests

 

 

 

(37)

 

 

 

 

172 

Net income (loss) attributable to Green Plains

$

(7,550)

 

$

4,982 

 

$

(20,242)

 

$

12,722 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Income (loss) attributable to Green Plains stockholders - basic

$

(0.25)

 

$

0.14 

 

$

(0.65)

 

$

0.35 

Income (loss) attributable to Green Plains stockholders - diluted

$

(0.25)

 

$

0.14 

 

$

(0.65)

 

$

0.34 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

29,614 

 

 

36,415 

 

 

30,926 

 

 

36,308 

Diluted

 

29,614 

 

 

42,953 

 

 

30,926 

 

 

42,858 

 

 

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

3

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(7,554)

 

$

5,019 

 

$

(20,250)

 

$

12,550 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on derivatives arising during period, net

 

 

 

 

 

 

 

 

 

 

 

of tax (expense) benefit of $(7,116), $3,193, $(7,106) and $6,264, respectively

 

11,857 

 

 

(5,479)

 

 

11,935 

 

 

(9,961)

Reclassification of realized losses on derivatives included in net

 

 

 

 

 

 

 

 

 

 

 

income (loss), net of tax benefit of $(858), $2,425, $669 and $2,895 respectively

 

(1,430)

 

 

4,161 

 

 

1,125 

 

 

4,603 

Other comprehensive income (loss)

 

10,427 

 

 

(1,318)

 

 

13,060 

 

 

(5,358)

Comprehensive income (loss)

 

2,873 

 

 

3,701 

 

 

(7,190)

 

 

7,192 

Comprehensive loss attributable to noncontrolling interests

 

 

 

(37)

 

 

 

 

172 

Comprehensive income (loss) attributable to Green Plains

$

2,877 

 

$

3,664 

 

$

(7,182)

 

$

7,364 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

June 30,

 

2012

 

2011

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

$

(20,250)

 

$

12,550 

Adjustments to reconcile net income (loss) to net cash

 

 

 

 

 

used by operating activities:

 

 

 

 

 

Depreciation and amortization

 

26,417 

 

 

24,037 

Amortization of debt issuance costs

 

1,553 

 

 

1,188 

Deferred income taxes

 

(10,627)

 

 

1,260 

Stock-based compensation expense

 

2,112 

 

 

1,829 

Undistributed equity in loss of affiliates

 

1,411 

 

 

186 

Allowance for doubtful accounts

 

95 

 

 

91 

Changes in operating assets and liabilities before

 

 

 

 

 

effects of business combinations:

 

 

 

 

 

Accounts receivable

 

(8,815)

 

 

(296)

Inventories

 

43,195 

 

 

30,592 

Deposits

 

2,396 

 

 

1,009 

Derivative financial instruments

 

(3,325)

 

 

(18,613)

Prepaid expenses and other assets

 

4,557 

 

 

(1,259)

Accounts payable and accrued liabilities

 

(69,152)

 

 

(61,302)

Unearned revenues

 

(9,559)

 

 

(10,664)

Other

 

(424)

 

 

(203)

Net cash used by operating activities

 

(40,416)

 

 

(19,595)

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(14,404)

 

 

(27,045)

Acquisition of businesses, net of cash acquired

 

(1,490)

 

 

(8,418)

Other

 

(5,771)

 

 

(797)

Net cash used by investing activities

 

(21,665)

 

 

(36,260)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from the issuance of long-term debt

 

34,000 

 

 

95,239 

Payments of principal on long-term debt

 

(55,680)

 

 

(133,434)

Proceeds from short-term borrowings

 

1,538,854 

 

 

1,687,275 

Payments on short-term borrowings

 

(1,501,905)

 

 

(1,689,456)

Payments for repurchase of common stock

 

(10,445)

 

 

 -

Change in restricted cash

 

3,460 

 

 

(1)

Payments of loan fees

 

(301)

 

 

(674)

Other

 

(207)

 

 

104 

Net cash provided (used) by financing activities

 

7,776 

 

 

(40,947)

Net change in cash and cash equivalents

 

(54,305)

 

 

(96,802)

Cash and cash equivalents, beginning of period

 

174,988 

 

 

233,205 

Cash and cash equivalents, end of period

$

120,683 

 

$

136,403 

 

 

 

 

 

 

Continued on the following page

 

 

 

 

 

 

 

 

 

 

 

5

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

Continued from the previous page

 

 

 

 

 

 

Six Months Ended

June 30,

 

2012

 

2011

 

 

 

 

 

 

Supplemental disclosures of cash flow:

 

 

 

 

 

Cash paid for income taxes

$

457 

 

$

52 

Cash paid for interest

$

17,085 

 

$

18,105 

Supplemental noncash investing and financing activities:

 

 

 

 

 

Assets acquired in acquisitions and mergers

$

1,590 

 

$

63,452 

Less: liabilities assumed

 

(100)

 

 

(55,034)

Net assets acquired

$

1,490 

 

$

8,418 

Short-term note payable issued to repurchase common stock

$

27,162 

 

$

 -

 

 

 

See accompanying notes to the consolidated financial statements.

6

 


 

 

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

(unaudited)

 

1.  BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

References to the Company

 

References to “Green Plains” or the “Company” in the consolidated financial statements and in these notes to the consolidated financial statements refer to Green Plains Renewable Energy, Inc., an Iowa corporation, and its subsidiaries.

 

Consolidated Financial Statements

 

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and entities which it controls. All significant intercompany balances and transactions have been eliminated on a consolidated basis for reporting purposes. Unconsolidated entities are included in the financial statements on an equity basis. Certain amounts previously reported have been reclassified to conform to the current period presentation. Results for the interim periods presented are not necessarily indicative of results to be expected for the entire year.

 

The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP, for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The financial statements should be read in conjunction with the Company’s annual report filed on Form 10-K for the year ended December 31, 2011.

 

The unaudited financial information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. The adjustments are of a normal recurring nature, except as otherwise noted.

 

Use of Estimates in the Preparation of Consolidated Financial Statements

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Description of Business

 

Green Plains is North America’s fourth largest ethanol producer. The Company markets and distributes approximately one billion gallons of ethanol on an annual basis, including production from its nine ethanol plants. The Company also markets corn oil and distillers grains produced at its ethanol plants. Additionally, the Company owns and operates grain handling and storage assets and provides complementary agronomy services to local grain producers through its agribusiness segment. The Company owns and operates nine blending and terminaling facilities with approximately 625 million gallons per year, or mmgy, of total throughput capacity. The Company is a partner in a joint venture that was formed to commercialize advanced photo-bioreactor technologies for the growing and harvesting of algal biomass.

 

Revenue Recognition

 

The Company recognizes revenue when all of the following criteria are satisfied: persuasive evidence of an arrangement exists; risk of loss and title transfer to the customer; the price is fixed and determinable; and collectability is reasonably assured.

 

For sales of ethanol, distillers grains and other commodities by the Company’s marketing business, revenue is recognized when title to the product and risk of loss transfer to an external customer. Revenues related to marketing operations for third parties are recorded on a gross basis in the consolidated financial statements as the Company takes title to the product and assumes risk of loss. Unearned revenue is reflected on the consolidated balance sheets for goods in transit for which the Company has received payment and title has not been transferred to the customer. Revenues from the Company’s biofuel terminal operations, which include ethanol transload and splash blending services, are recognized as these services

7

 


 

 

are rendered.

 

The Company routinely enters into fixed-price, physical-delivery ethanol sales agreements. In certain instances, the Company intends to settle the transaction by open market purchases of ethanol rather than by delivery from its own production. These transactions are reported net as a component of revenues. Revenues also include realized gains and losses on related derivative financial instruments, ineffectiveness on cash flow hedges, and reclassifications of realized gains and losses on effective cash flow hedges from accumulated other comprehensive income (loss).

 

Sales of agricultural commodities, fertilizers and other similar products are recognized when title to the product and risk of loss transfer to the customer, which is dependent on the agreed upon sales terms with the customer. These sales terms provide for passage of title either at the time shipment is made or at the time the commodity has been delivered to its destination and final weights, grades and settlement prices have been agreed upon with the customer. Revenues related to grain merchandising are presented gross in the statements of operations with amounts billed for shipping and handling included in revenues and also as a component of cost of goods sold. Revenues from grain storage are recognized as services are rendered.

 

Cost of Goods Sold

 

Cost of goods sold includes costs for direct labor, materials and certain plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in the operation of the Company’s ethanol plants. Grain purchasing and receiving costs, other than labor costs for grain buyers and scale operators, are also included in cost of goods sold. Direct materials consist of the costs of corn feedstock, denaturant, and process chemicals. Corn feedstock costs include unrealized gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight charges, inspection costs and transfer costs. Corn feedstock costs also include realized gains and losses on related derivative financial instruments, ineffectiveness on cash flow hedges, and reclassifications of realized gains and losses on effective cash flow hedges from accumulated other comprehensive income (loss). Plant overhead costs primarily consist of plant utilities, plant depreciation and outbound freight charges. Shipping costs incurred directly by the Company, including railcar lease costs, are also reflected in cost of goods sold.

 

The Company uses exchange-traded futures and options contracts to minimize the effects of changes in the prices of agricultural commodities on its agribusiness segment’s grain inventories and forward purchase and sales contracts. Exchange-traded futures and options contracts are valued at quoted market prices. Grain inventories, forward purchase contracts and forward sale contracts in the agribusiness segment are valued at market prices, where available, or other market quotes adjusted for differences, primarily transportation, between the exchange-traded market and the local markets on which the terms of the contracts are based. Changes in the fair value of grain inventories, forward purchase and sale contracts, and exchange-traded futures and options contracts in the agribusiness segment, are recognized in earnings as a component of cost of goods sold. These contracts are predominantly settled in cash. The Company is exposed to loss in the event of non-performance by the counter-party to forward purchase and forward sales contracts.

 

Derivative Financial Instruments

 

To minimize the risk and the effects of the volatility of commodity price changes primarily related to corn, ethanol and natural gas, the Company uses various derivative financial instruments, including exchange-traded futures, and exchange-traded and over-the-counter options contracts. The Company monitors and manages this exposure as part of its overall risk management policy. As such, the Company seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results. The Company may take hedging positions in these commodities as one way to mitigate risk. While the Company attempts to link its hedging activities to purchase and sales activities, there are situations in which these hedging activities can themselves result in losses.

 

By using derivatives to hedge exposures to changes in commodity prices, the Company has exposures on these derivatives to credit and market risk. The Company is exposed to credit risk that the counterparty might fail to fulfill its performance obligations under the terms of the derivative contract. The Company minimizes its credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring the financial condition of its counterparties. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. The Company manages market risk by incorporating monitoring parameters within its risk management strategy that limit the types of derivative instruments and derivative strategies the Company uses, and the degree of market risk that may be undertaken by the use of derivative instruments.

 

8

 


 

 

The Company evaluates its contracts that involve physical delivery to determine whether they may qualify for the normal purchases or normal sales exemption and are expected to be used or sold over a reasonable period in the normal course of business. Any contracts that do not meet the normal purchase or sales criteria are recorded at fair value with the change in fair value recorded in operating income unless the contracts qualify for, and the Company elects, hedge accounting treatment.

 

Certain qualifying derivatives within the ethanol production segment are designated as cash flow hedges. Prior to entering into cash flow hedges, the Company evaluates the derivative instrument to ascertain its effectiveness. For cash flow hedges, any ineffectiveness is recognized in current period results, while other unrealized gains and losses are reflected in accumulated other comprehensive income until gains and losses from the underlying hedged transaction are realized. In the event that it becomes probable that a forecasted transaction will not occur, the Company would discontinue cash flow hedge treatment, which would affect earnings. These derivative financial instruments are recognized in current assets or other current liabilities at fair value.

 

The Company hedges its exposures to changes in the value of ethanol inventory and designates certain qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted through current period results for changes in the fair value arising from changes in ethanol prices.  Any ineffectiveness is recognized in current period results to the extent that the change in the fair value of the inventory is not offset by the change in the fair value of the derivative.

 

Recent Accounting Pronouncements

 

Effective January 1, 2012, the Company adopted the third phase of amended guidance in ASC Topic 820, Fair Value Measurements and Disclosures. The amended guidance clarifies the application of existing fair value measurement requirements and requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The Company currently is not impacted by the additional disclosure requirements as it does not have any recurring Level 3 measurements.

 

Effective January 1, 2012, the Company adopted the amended guidance in ASC Topic 220, Comprehensive Income. This accounting standards update is aimed at increasing the prominence of other comprehensive income in the financial statements by eliminating the option to present other comprehensive income in the statement of stockholders’ equity. The Company has elected to present net income and other comprehensive income in two separate but consecutive statements. The updated presentation, which has been implemented retroactively for all comparable periods presented, did not impact the Company’s financial position or results of operations.

 

            Effective January 1, 2012, the Company adopted the amended guidance in ASC Topic 350, Intangibles – Goodwill and Other. The amended guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The amended guidance did not impact the Company’s disclosure or reporting requirements.

 

2.  FAIR VALUE DISCLOSURES

 

The following methods, assumptions and valuation techniques were used in estimating the fair value of the Company’s financial instruments:

 

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 1 unrealized gains and losses on commodity derivatives relate to exchange-traded open trade equity and option values in the Company’s brokerage accounts.

 

Level 2 – directly or indirectly observable inputs such as quoted prices for similar assets or liabilities in active markets other than quoted prices included within Level 1; quoted prices for identical or similar assets in markets that are not active; and other inputs that are observable or can be substantially corroborated by observable market data by correlation or other means. Grain inventories held for sale in the agribusiness segment are valued at nearby futures values, plus or minus nearby basis levels.

 

Level 3 – unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. The Company currently does not have any recurring Level 3 financial instruments.

9

 


 

 

 

There have been no changes in valuation techniques and inputs used in measuring fair value. The following tables set forth the Company’s assets and liabilities by level that were accounted for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at June 30, 2012

 

Quoted Prices in Active Markets for Identical Assets

 

Significant Other Observable Inputs

 

Reclassification for Balance Sheet

 

 

 

 

(Level 1)

 

(Level 2)

 

Presentation

 

Total

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

120,683 

 

$

 -

 

$

 -

 

$

120,683 

Restricted cash

 

18,359 

 

 

 -

 

 

 -

 

 

18,359 

Margin deposits

 

18,594 

 

 

 -

 

 

(18,594)

 

 

 -

Inventories carried at market

 

 -

 

 

61,985 

 

 

 -

 

 

61,985 

Unrealized gains on derivatives

 

31,596 

 

 

13,862 

 

 

(5,413)

 

 

40,045 

Total assets measured at fair value

$

189,232 

 

$

75,847 

 

$

(24,007)

 

$

241,072 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses on derivatives

$

24,095 

 

$

10,075 

 

$

(24,007)

 

$

10,163 

Other

 

65 

 

 

 -

 

 

 -

 

 

65 

Total liabilities measured at fair value

$

24,160 

 

$

10,075 

 

$

(24,007)

 

$

10,228 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2011

 

Quoted Prices in Active Markets for Identical Assets

 

Significant Other Observable Inputs

 

Reclassification for Balance Sheet

 

 

 

 

(Level 1)

 

(Level 2)

 

Presentation

 

Total

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

174,988 

 

$

 -

 

$

 -

 

$

174,988 

Restricted cash

 

21,820 

 

 

 -

 

 

 -

 

 

21,820 

Inventories carried at market

 

 -

 

 

112,948 

 

 

 -

 

 

112,948 

Unrealized gains on derivatives

 

15,710 

 

 

6,010 

 

 

(4,292)

 

 

17,428 

Total assets measured at fair value

$

212,518 

 

$

118,958 

 

$

(4,292)

 

$

327,184 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses on derivatives

$

2,828 

 

$

5,287 

 

$

(2,698)

 

$

5,417 

Margin deposits

 

1,594 

 

 

 -

 

 

(1,594)

 

 

 -

Inventory financing arrangements

 

 -

 

 

8,894 

 

 

 -

 

 

8,894 

Other

 

71 

 

 

 -

 

 

 -

 

 

71 

Total liabilities measured at fair value

$

4,493 

 

$

14,181 

 

$

(4,292)

 

$

14,382 

 

The Company believes the fair value of its debt approximates book value, which was $678.8 million and $636.8 million at June 30, 2012 and December 31, 2011, respectively. The Company also believes the fair value of its accounts receivable and accounts payable approximate book value, which were $115.0 million and $105.2 million, respectively, at June 30, 2012 and $106.2 million and $172.3 million, respectively, at December 31, 2011.

 

            Although the Company currently does not have any Level 3 financial measurements, the fair values of the tangible assets and goodwill acquired in previous reporting periods represent Level 3 measurements and were derived using a combination of the income approach, the market approach and the cost approach as considered appropriate for the specific assets being valued.

 

3.  SEGMENT INFORMATION

 

Company management reviews financial and operating performance in the following four separate operating segments: (1) production of ethanol and distillers grains, collectively referred to as ethanol production, (2) corn oil production, (3) grain warehousing and marketing, as well as sales and related services of agronomy and petroleum products, collectively referred

10

 


 

 

to as agribusiness, and (4) marketing and distribution of Company-produced and third-party ethanol, distillers grains and corn oil, and the operation of blending and terminaling facilities, collectively referred to as marketing and distribution. Selling, general and administrative expenses, primarily consisting of compensation of corporate employees, professional fees and overhead costs not directly related to a specific operating segment, are reflected in the table below as corporate activities.

 

During the normal course of business, the Company enters into transactions between segments. Examples of these intersegment transactions include, but are not limited to, the ethanol production segment selling ethanol to the marketing and distribution segment and the agribusiness segment selling grain to the ethanol production segment. These intersegment activities are recorded by each segment at prices approximating market and treated as if they are third-party transactions. Consequently, these transactions impact segment performance. However, revenues and corresponding costs are eliminated in consolidation and do not impact the Company’s consolidated results.

 

The following are certain financial data for the Company’s operating segments for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2012

 

2011

 

2012

 

2011

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Ethanol production

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

50,776 

 

$

27,181 

 

$

96,133 

 

$

62,301 

Intersegment revenues

 

 

416,114 

 

 

516,360 

 

 

828,934 

 

 

949,043 

Total segment revenues

 

 

466,890 

 

 

543,541 

 

 

925,067 

 

 

1,011,344 

Corn oil production

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

 

 

 

 -

 

 

516 

 

 

1,071 

Intersegment revenues

 

 

15,463 

 

 

10,520 

 

 

28,474 

 

 

13,771 

Total segment revenues

 

 

15,470 

 

 

10,520 

 

 

28,990 

 

 

14,842 

Agribusiness

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

 

101,782 

 

 

75,040 

 

 

174,606 

 

 

138,894 

Intersegment revenues

 

 

39,068 

 

 

50,549 

 

 

84,470 

 

 

100,813 

Total segment revenues

 

 

140,850 

 

 

125,589 

 

 

259,076 

 

 

239,707 

Marketing and distribution

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

 

717,791 

 

 

759,355 

 

 

1,374,495 

 

 

1,471,637 

Intersegment revenues

 

 

124 

 

 

164 

 

 

191 

 

 

276 

Total segment revenues

 

 

717,915 

 

 

759,519 

 

 

1,374,686 

 

 

1,471,913 

Revenues including intersegment activity

 

 

1,341,125 

 

 

1,439,169 

 

 

2,587,819 

 

 

2,737,806 

Intersegment eliminations

 

 

(470,769)

 

 

(577,593)

 

 

(942,069)

 

 

(1,063,903)

Revenues as reported

 

$

870,356 

 

$

861,576 

 

$

1,645,750 

 

$

1,673,903 

 

11

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2012

 

2011

 

2012

 

2011

Gross profit (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Ethanol production

 

$

(6,875)

 

$

15,721 

 

$

(16,910)

 

$

39,034 

Corn oil production

 

 

9,405 

 

 

6,365 

 

 

17,340 

 

 

8,456 

Agribusiness

 

 

8,599 

 

 

6,187 

 

 

14,845 

 

 

12,203 

Marketing and distribution

 

 

6,603 

 

 

5,589 

 

 

10,790 

 

 

12,263 

Intersegment eliminations

 

 

402 

 

 

1,400 

 

 

839 

 

 

929 

 

 

$

18,134 

 

$

35,262 

 

$

26,904 

 

$

72,885 

Operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Ethanol production

 

$

(11,034)

 

$

11,708 

 

$

(24,914)

 

$

31,243 

Corn oil production

 

 

9,351 

 

 

6,339 

 

 

17,200 

 

 

8,408 

Agribusiness

 

 

2,398 

 

 

812 

 

 

3,067 

 

 

1,783 

Marketing and distribution

 

 

2,874 

 

 

2,517 

 

 

3,384 

 

 

5,156 

Intersegment eliminations

 

 

402 

 

 

1,410 

 

 

873 

 

 

954 

Corporate activities

 

 

(5,074)

 

 

(4,998)

 

 

(11,784)

 

 

(9,761)

 

 

$

(1,083)

 

$

17,788 

 

$

(12,174)

 

$

37,783 

 

The following table sets forth revenues by product line for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2012

 

2011

 

2012

 

2011

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Ethanol

 

$

632,088 

 

$

664,138 

 

$

1,215,057 

 

$

1,318,622 

Corn oil

 

 

15,632 

 

 

10,520 

 

 

28,786 

 

 

14,843 

Distillers grains

 

 

98,936 

 

 

105,952 

 

 

199,531 

 

 

193,225 

Grain

 

 

74,704 

 

 

49,700 

 

 

138,923 

 

 

104,988 

Agronomy products

 

 

25,200 

 

 

23,690 

 

 

32,318 

 

 

31,147 

Other

 

 

23,796 

 

 

7,576 

 

 

31,135 

 

 

11,078 

 

 

$

870,356 

 

$

861,576 

 

$

1,645,750 

 

$

1,673,903 

 

 

 

 

The following are total assets for our operating segments for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

2012

 

2011

Total assets:

 

 

 

 

 

 

Ethanol production

 

$

842,722 

 

$

879,500 

Corn oil production

 

 

25,005 

 

 

24,601 

Agribusiness

 

 

169,139 

 

 

233,201 

Marketing and distribution

 

 

213,743 

 

 

181,466 

Corporate assets

 

 

94,881 

 

 

121,429 

Intersegement eliminations

 

 

(22,741)

 

 

(19,369)

 

 

$

1,322,749 

 

$

1,420,828 

 

 

 

 

 

 

 

12

 


 

 

4.  INVENTORIES

 

Inventories are carried at the lower of cost or market, except grain held for sale, which is valued at market value. During the six months ended June 30, 2012, the Company recorded a $0.2 million lower of cost or market adjustment in cost of goods sold within the ethanol production segment. The components of inventories are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

2012

 

2011

Finished goods

$

72,195 

 

$

57,882 

Grain held for sale

 

61,985 

 

 

112,948 

Raw materials

 

23,988 

 

 

23,215 

Petroleum & agronomy items held for sale

 

6,931 

 

 

14,206 

Work-in-process

 

11,312 

 

 

11,418 

Supplies and parts

 

9,842 

 

 

9,401 

 

$

186,253 

 

$

229,070 

 

 

 

5.  GOODWILL

 

The Company did not have any changes in the total carrying amount of goodwill during the six months ended June 30, 2012, which was $40.9 million. Goodwill of $30.3 million is attributable to the ethanol production segment and $10.6 million is attributable to the marketing and distribution segment.

 

 

6.  DERIVATIVE FINANCIAL INSTRUMENTS

 

At June 30, 2012, the Company’s consolidated balance sheet reflects deferred gains, net of tax, of $10.1 million in accumulated other comprehensive income. The Company expects all of the deferred gains at June 30, 2012 will be reclassified into income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount ultimately realized in income, however, will differ as commodity prices change.

 

Fair Values of Derivative Instruments

 

The following table provides information about the fair values of our derivative financial instruments and the line items in the consolidated balance sheets in which the fair values are reflected:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Derivatives'

 

Liability Derivatives'

 

Fair Value

 

Fair Value

 

June 30,

 

December 31,

 

June 30,

 

December 31,

 

2012

 

2011

 

2012

 

2011

Derivative financial instruments (1)

$

21,451 
(2)

$

19,022 
(3)

$

 -

 

$

 -

Accrued and other liabilities

 

 -

 

 

 -

 

 

10,074 

 

 

5,280 

Other liabilities

 

 -

 

 

 -

 

 

89 

 

 

137 

Total

$

21,451 

 

$

19,022 

 

$

10,163 

 

$

5,417 

 

(1)

Derivative financial instruments as reflected on the balance sheet include a margin deposit asset of $18.6 million and a margin deposit liability of $1.6 million at June 30, 2012 and December 31, 2011, respectively.

(2)

Balance at June 30, 2012, includes $19.1 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.

(3)

Balance at December 31, 2011, includes $12.2 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.

 

 

Refer to Note 2 - Fair Value Disclosures, which also contains fair value information related to derivative financial instruments.

 

13

 


 

 

Effect of Derivative Instruments on Consolidated Statements of Operations and Consolidated Statements of Stockholders’ Equity and Comprehensive Income

 

The following tables provide information about the gain or loss recognized in income and other comprehensive income on our derivative financial instruments and the line items in the financial statements in which such gains and losses are reflected:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) on Derivative Instruments Not

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Designated in a Hedging Relationship

 

2012

 

2011

 

2012

 

2011

Revenue

 

$

1,605 

 

$

(1,533)

 

$

(1,280)

 

$

(918)

Cost of goods sold

 

 

(5,510)

 

 

5,128 

 

 

(4,325)

 

 

(20,112)

Net increase (decrease) recognized in earnings before tax

 

$

(3,905)

 

$

3,595 

 

$

(5,605)

 

$

(21,030)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (Loss) Due to Ineffectiveness

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

of Cash Flow Hedges

 

2012

 

2011

 

2012

 

2011

Revenue

 

$

 

$

99 

 

$

12 

 

$

(19)

Cost of goods sold

 

 

439 

 

 

(675)

 

 

376 

 

 

(656)

Net increase (decrease) recognized in earnings before tax

 

$

446 

 

$

(576)

 

$

388 

 

$

(675)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss)

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

into Net Income (Loss)

 

2012

 

2011

 

2012

 

2011

Revenue

 

$

2,941 

 

$

(17,033)

 

$

3,558 

 

$

(21,489)

Cost of goods sold

 

 

(653)

 

 

10,447 

 

 

(5,352)

 

 

13,991 

Net increase (decrease) recognized in earnings before tax

 

$

2,288 

 

$

(6,586)

 

$

(1,794)

 

$

(7,498)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Portion of Cash Flow

Hedges Recognized in

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Other Comprehensive Income (Loss)

 

2012

 

2011

 

2012

 

2011

Commodity Contracts

 

$

18,973 

 

$

(8,672)

 

$

19,041 

 

$

(16,225)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (Loss) from Fair Value

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Hedges of Ethanol Inventory

 

2012

 

2011

 

2012

 

2011

Revenue (effect of change in inventory value)

 

$

(1,218)

 

$

 -

 

$

 -

 

$

 -

Revenue (effect of fair value hedge)

 

 

1,218 

 

 

 -

 

 

 -

 

 

 -

Ineffectiveness recognized in earnings before tax

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

14

 


 

 

 

There were no gains or losses due to the discontinuance of cash flow hedge treatment during the six months ended June 30, 2012.

 

The table below summarizes the volumes of open commodity derivative positions as of June 30, 2012 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

 

Exchange Traded

 

Non-Exchange Traded

 

 

 

 

Derivative Instruments

 

Net Long & (Short) (1)

 

Long (2)

 

(Short) (2)

 

Unit of Measure

 

Commodity

Futures

 

(18,355)

 

 

 

 

 

Bushels

 

Corn, Soybeans and Wheat

Futures

 

29,920 

(3)

 

 

 

 

Bushels

 

Corn

Futures

 

(32,720)

 

 

 

 

 

Gallons

 

Ethanol

Futures

 

(100,800)

(3)

 

 

 

 

Gallons

 

Ethanol

Futures

 

(30)

 

 

 

 

 

Barrels

 

Crude Oil

Options

 

(2,004)

 

 

 

 

 

Bushels

 

Corn and Soybeans

Options

 

(9,889)

 

 

 

 

 

Gallons

 

Ethanol

Options

 

(35)

 

 

 

 

 

Barrels

 

Crude Oil

Forwards

 

 

 

19,263 

 

(8,768)

 

Bushels

 

Corn, Soybeans, Wheat and Milo

Forwards

 

 

 

52,420 

 

(202,806)

 

Gallons

 

Ethanol

Forwards

 

 

 

17 

 

(142)

 

Tons

 

Distillers Grains

Forwards

 

 

 

30 

 

 -

 

Barrels

 

Crude Oil

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.

(2)

Non-exchange traded forwards are presented on a gross long and (short) position basis.

(3)

Futures used for cash flow hedges.

 

 

 

Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated statements of operations. Revenues and cost of goods sold under such contracts are summarized in the table below for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2012

 

2011

 

2012

 

2011

Revenue

$

5,988 

 

$

12,538 

 

$

12,563 

 

$

23,812 

Cost of goods sold

 

6,008 

 

 

11,927 

 

 

12,493 

 

 

22,799 

 

 

 

15

 


 

 

7.  DEBT

 

The principal balances of the components of debt are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

2012

 

December 31,

2011

Green Plains Bluffton:

 

 

 

 

 

$70.0 million term loan

$

44,518 

 

$

48,018 

$20.0 million revolving term loan

 

20,000 

 

 

20,000 

$22.0 million revenue bond

 

18,330 

 

 

19,120 

Green Plains Central City:

 

 

 

 

 

$55.0 million term loan

 

41,291 

 

 

46,558 

$30.5 million revolving term loan

 

28,081 

 

 

24,739 

$11.0 million revolving line of credit

 

10,658 

 

 

 -

Equipment financing loan

 

138 

 

 

170 

Green Plains Holdings II:

 

 

 

 

 

$34.1 million term loan

 

 -

 

 

27,914 

$42.6 million revolving term loan

 

 -

 

 

35,679 

$15.0 million revolver

 

 -

 

 

15,000 

$26.4 million term loan

 

24,914 

 

 

 -

$51.1 million revolving term loan

 

48,000 

 

 

 -

Other

 

194 

 

 

194 

Green Plains Obion:

 

 

 

 

 

$60.0 million term loan

 

18,280 

 

 

25,670 

$37.4 million revolving term loan

 

36,200 

 

 

36,200 

Note payable

 

65 

 

 

85 

Equipment financing loan

 

368 

 

 

445 

Economic development grant

 

1,379 

 

 

1,424 

Green Plains Ord:

 

 

 

 

 

$25.0 million term loan

 

18,890 

 

 

21,300 

$13.0 million revolving term loan

 

12,151 

 

 

12,151 

$5.0 million revolving line of credit

 

3,349 

 

 

3,349 

Green Plains Otter Tail:

 

 

 

 

 

$30.3 million term loan

 

25,117 

 

 

27,386 

$4.7 million revolver

 

4,675 

 

 

4,675 

$19.2 million note payable

 

18,948 

 

 

18,883 

Capital lease payable

 

110 

 

 

166 

Green Plains Shenandoah:

 

 

 

 

 

$30.0 million term loan

 

1,600 

 

 

6,068 

$17.0 million revolving term loan

 

17,000 

 

 

17,000 

Green Plains Superior:

 

 

 

 

 

$23.5 million term loan

 

18,000 

 

 

20,750 

$10.0 million revolving term loan

 

10,000 

 

 

10,000 

Equipment financing loan

 

123 

 

 

156 

 

 

 

 

 

 

Continued on the following page

 

 

 

            

16

 


 

 

 

 

 

 

 

 

 

 

 

 

 

Continued from the previous page

 

 

 

 

 

 

 

June 30,

2012

 

December 31,

2011

Green Plains Grain:

 

 

 

 

 

$30.0 million term loan

 

28,833 

 

 

27,833 

$195.0 revolving loan

 

55,000 

 

 

27,000 

Inventory financing arrangements

 

 -

 

 

8,894 

Equipment financing loans

 

142 

 

 

311 

Notes payable

 

1,000 

 

 

2,000 

Green Plains Trade:

 

 

 

 

 

$70.0 million revolving loan

 

51,076 

 

 

33,705 

Corporate:

 

 

 

 

 

$90.0 million convertible notes

 

90,000 

 

 

90,000 

Notes Payable

 

28,787 

 

 

1,625 

Capital Lease

 

506 

 

 

606 

Other

 

1,065 

 

 

1,692 

Total debt

 

678,788 

 

 

636,766 

Less: current portion of long-term debt

 

(75,032)

 

 

(73,760)

Less: short-term notes payable and other

 

(133,237)

 

 

(69,599)

Long-term debt

$

470,519 

 

$

493,407 

 

 

 

 

 

 

Ethanol Production Segment

 

·

Term Loans

 

Scheduled principal payments are as follows:

 

 

 

 

•  

Green Plains Bluffton

$0.6 million per month

•  

Green Plains Central City

$0.4 million per month

•  

Green Plains Holdings II

$1.5 million per quarter

•  

Green Plains Obion

$2.4 million per quarter

•  

Green Plains Ord

$0.2 million per month

•  

Green Plains Otter Tail

$0.4 million per month

•  

Green Plains Shenandoah

$1.2 million per quarter

•  

Green Plains Superior

$1.4 million per quarter

 

Final maturity dates (at the latest) are as follows:

 

 

 

 

•  

Green Plains Bluffton

November 19, 2013

•  

Green Plains Central City

July 1, 2016

•  

Green Plains Holdings II

July 1, 2016

•  

Green Plains Obion

August 20, 2014

•  

Green Plains Ord

July 1, 2016

•  

Green Plains Otter Tail

September 1, 2018

•  

Green Plains Shenandoah

May 20, 2013

•  

Green Plains Superior

July 20, 2015

·

Revolving Term LoansThe revolving term loans are generally available for advances throughout the life of the commitment, subject, in certain cases, to borrowing base restrictions. Allowable advances under the Green Plains Shenandoah loan agreement are reduced by $2.4 million each six-month period commencing on June 1, 2013.  

17

 


 

 

Allowable advances under the Green Plains Superior loan agreement are reduced by $2.5 million each six-month period commencing on the first day of the month beginning six months after repayment of the term loan, but in no event later than January 1, 2016. Allowable advances under the Green Plains Obion loan agreement are reduced by $4.7 million on a semi-annual basis commencing on March 1, 2015. Allowable advances under the Green Plains Holdings II loan agreement are reduced by $2.7 million on a semi-annual basis commencing on April 1, 2012 and are reduced by $5.7 million on a semi-annual basis commencing on October 1, 2016. Interest-only payments are due each month on all revolving term loans until the final maturity date for the Green Plains Bluffton, Green Plains Central City, Green Plains Ord, Green Plains Otter Tail, Green Plains Shenandoah, and Green Plains Superior loan agreements.

 

Final maturity dates (at the latest) are as follows:

 

 

 

 

•  

Green Plains Bluffton

November 19, 2013

•  

Green Plains Central City

July 1, 2016

•  

Green Plains Holdings II

October 1, 2018

•  

Green Plains Obion

September 1, 2018

•  

Green Plains Ord

July 1, 2016

•  

Green Plains Otter Tail

March 19, 2013

•  

Green Plains Shenandoah

November 1, 2016

•  

Green Plains Superior

July 1, 2017

 

Green Plains Bluffton also received $22.0 million in Subordinate Solid Waste Disposal Facility Revenue Bond funds from the City of Bluffton, Indiana. The revenue bond requires: (1) semi-annual principal and interest payments of approximately $1.5 million through March 1, 2019, and (2) a final principal and interest payment of $3.745 million on September 1, 2019. At June 30, 2012, Green Plains Bluffton had $3.2 million of cash that was restricted as to use for payment towards the current maturity and interest of the revenue bond. Such cash is presented as restricted cash on the consolidated balance sheet.

 

The subsidiaries within the ethanol production segment were in compliance with its respective debt covenants as of June 30, 2012.

 

Agribusiness Segment

 

The Green Plains Grain loans, executed on October 28, 2011, are comprised of a $30.0 million amortizing term loan and a $195.0 million revolving credit facility with various lenders. The term loan and revolving credit facility mature on November 1, 2021 and October 28, 2013, respectively.

 

The $30.0 million amortizing term loan requires equal monthly payments of principal sufficient to amortize the loan in full over a 15-year period, plus interest, with the remaining outstanding balance and all accrued interest due on November 1, 2021, the loan maturity date. The loan bears interest at a fixed rate of 6.0% per annum. As security for the loan, the lender received a first priority lien on certain real estate and other property owned by the subsidiaries within the agribusiness segment.

 

The revolving credit facility includes total revolving credit commitments of $195.0 million and an accordion feature whereby amounts available under the facility may be increased by up to $55.0 million of new lender commitments upon agent approval. As security for the revolving credit facility, the lender received a first priority lien on certain cash, inventory, machinery, accounts receivable and other assets owned by subsidiaries of the agribusiness segment. Advances are subject to interest charges at a rate per annum equal to the LIBOR rate for the outstanding period plus the applicable margin or a rate per annum equal to the base rate plus the applicable margin. The principal balance of each advance shall be due and payable on the respective maturity date but no later than October 28, 2013.

 

The subsidiaries within the agribusiness segment were in compliance with its respective debt covenants at June 30, 2012.

 

18

 


 

 

Marketing and Distribution Segment

 

The Green Plains Trade loan is comprised of a senior secured revolving credit facility. Under the loan agreement, as amended, the lender will loan up to $70.0 million, subject to a borrowing base equal to 85% of eligible receivables. The balance is subject to interest charges of either: (1) base rate (lender’s commercial floating rate plus 2.5%); or, (2) LIBOR plus 3.5%. At June 30, 2012, Green Plains Trade had $15.1 million in cash that was restricted as to use for payment towards the loan agreement. Such cash is presented in restricted cash on the consolidated balance sheets. The amended revolving credit facility expires on March 31, 2014.

 

The subsidiaries within the marketing and distribution segment were in compliance with its respective debt covenants at June 30, 2012.

 

Corporate Activities

 

            In November 2010, the Company issued $90.0 million of 5.75% Convertible Senior Notes due 2015. The Notes represent senior, unsecured obligations of the Company, with interest payable on May 1 and November 1 of each year. The Notes may be converted into shares of the Company’s common stock and cash in lieu of fractional shares of the common stock based on a conversion rate initially equal to 69.7788 shares of the common stock per $1,000 principal amount of Notes, which is equal to an initial conversion price of $14.33 per share. The conversion rate is subject to adjustment upon the occurrence of specified events. The Company may redeem for cash all, but not less than all, of the Notes at any time on and after November 1, 2013, if the last reported sale price of the Company’s common stock equals or exceeds 140% of the applicable conversion price for a specified time period, at a redemption price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest.

 

In conjunction with the March 9, 2012 repurchase of its common stock from a subsidiary of NTR plc, which was previously the Company’s largest shareholder, the Company signed a one-year promissory note bearing 5% interest per annum in the amount of $27.2 million. The $27.2 million note is secured by the shares repurchased and the Company’s interest in Green Plains Shenandoah LLC.

 

Capitalized Interest

 

The Company had $78 thousand and $116 thousand in capitalized interest during the three and six months ended June 30, 2012, respectively.

 

Restricted Net Assets

 

            At June 30, 2012, there were approximately $475.6 million of net assets at the Company’s subsidiaries that were not available to be transferred to the parent company in the form of dividends, loans or advances due to restrictions contained in the credit facilities of these subsidiaries.

 

8.  STOCK-BASED COMPENSATION

 

The Company has equity incentive plans which reserve a combined total of 3.5 million shares of common stock for issuance pursuant to their terms. The plans provide for the granting of shares of stock, including options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, non-vested stock and non-vested stock unit awards to eligible employees, non-employee directors and consultants. The Company measures share-based compensation grants at fair value on the grant date, adjusted for estimated forfeitures. The Company records noncash compensation expense related to equity awards in its financial statements over the requisite service period on a straight-line basis. All of the Company’s existing share-based compensation awards have been determined to be equity awards.

 

19

 


 

 

A summary of stock option activity for the six months ended June 30, 2012 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

Weighted-Average Exercise Price

 

Weighted-Average Remaining Contractual Term (in years)

 

Aggregate Intrinsic Value (in thousands)

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2011

1,122,499 

 

$

15.68 

 

3.8

 

$

1,374 

Granted

 -

 

 

 -

 

 

 

 

 

Exercised

(16,332)

 

 

8.71 

 

 

 

 

45 

Forfeited

 -

 

 

 -

 

 

 

 

 

Expired

(325,000)

 

 

30.00 

 

 

 

 

 

Outstanding at June 30, 2012

781,167 

 

$

9.86 

 

4.5

 

$

216 

Exercisable at June 30, 2012 (1)

720,167 

 

$

9.67 

 

4.3

 

$

216 
(1)

Includes in-the-money options totaling 312,500 shares at a weighted-average exercise price of $5.55.

 

The Company’s option awards allow employees to exercise options through cash payment to the Company for the shares of common stock or through a simultaneous broker-assisted cashless exercise of a share option, through which the employee authorizes the exercise of an option and the immediate sale of the option shares in the open market. The Company uses newly-issued shares of common stock to satisfy its share-based payment obligations. 

 

The following table summarizes non-vested stock award and deferred stock unit activity for the six months ended June 30, 2012: