NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
BASIS OF PRESENTATION and DESCRIPTION OF BUSINESS
References to the Company
References to “Green Plains” or the “company” in the consolidated financial statements and in these notes to the consolidated financial statements refer to Green Plains Inc., an Iowa corporation, and its subsidiaries.
Consolidated Financial Statements
The consolidated financial statements include the company’s accounts and all significant intercompany balances and transactions are eliminated. Unconsolidated entities are included in the financial statements on an equity basis.
Reclassifications
Certain prior year amounts were reclassified to conform to the current year presentation. These reclassifications did not affect total revenues, costs and expenses, net income or stockholders’ equity.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The company bases its estimates on historical experience and assumptions that it believes are proper and reasonable under the circumstances and regularly evaluates the appropriateness of its estimates and assumptions. Actual results could differ from those estimates. Key accounting policies, including but not limited to those relating to revenue recognition, depreciation of property and equipment, impairment of long-lived assets and goodwill, derivative financial instruments, and accounting for income taxes, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements.
Description of Business
The company operates within four
business segments: (1) ethanol production, which includes the production of ethanol, distillers grains and corn oil, (2) agribusiness and energy services, which includes grain handling and storage and marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil
, natural gas
and other commodities, (3) food and
food ingredients, which includes vinegar production and cattle feedlot operations, and (4) partnership, which includes fuel storage and transportation services.
Ethanol Production Segment
Green Plains is North America’s second largest consolidated owner of ethanol plants. The company operates
17
ethanol plants in nine states through separate wholly owned operating subsidiaries. The company’s ethanol plants use a dry mill process to produce ethanol and co-products such as wet, modified wet or dried distillers grains, as well as corn oil. The corn oil systems are designed to extract non-edible corn oil from the whole stillage immediately prior to production of distillers grains. At capacity, the company expects to process approximately
524
million bushels of corn and produce approximately
1.5
billion gallons of ethanol,
4.1
million tons of distillers grains and
340
million pounds of industrial grade corn oil annually.
Agribusiness and Energy Services Segment
The company owns and operates grain handling and storage assets through its agribusiness and energy services segment, which has grain storage capacity of approximately
60.3
million bushels, with
48.7
million bushels of storage capacity at the company’s ethanol plants and
11.6
million bushels of total storage capacity at its
five
separate grain elevators. The company’s agribusiness operations provide synergies with the ethanol production segment as it supplies a portion of the feedstock needed to produce ethanol. The company has an in-house marketing business that is responsible for the sale, marketing and distribution of all ethanol, distillers grains and corn oil produced at its ethanol plants. The company also purchases and sells ethanol, distillers grains, corn oil, grain, natural gas and other commodities and participates in other merchant trading activities in various markets.
Food and Food Ingredients Segment
The company owns a cattle feedlot with the capacity to support 73,000 head of cattle and grain storage capacity of approximately 2.8 million bushels. The company also owns a vinegar operation, which is one of the world’s largest producers of food-grade industrial vinegar and includes seven production facilities
and four distribution warehouses
.
Partnership Segment
The company’s partnership segment provides fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. As of December 31, 2016, the partnership owns (i) 39 ethanol st
orage
facilities
located at or near the company’s 17 ethanol production plants, which have the ability to efficiently and effectively store and load railcars and tanker trucks with all of the ethanol produced at the company’s ethanol production plants, (ii)
eight
fuel terminal facilities, located near major rail lines, which enable the partnership to receive, store and deliver fuels from and to markets that seek access to renewable fuels, and (iii) transportation assets, including a leased railcar fleet of
approximately
3,100
railcars which is
utilized
to transport ethanol from the company’s ethanol production plants to refineries throughout the United States and international export terminals.
2.
SUMMARY OF SIGNIFICANT accounting POLICIES
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents includes bank deposits, as well as, short-term, highly liquid investments with original maturities of three months or
less. The company also has restricted cash, which can only be used for the funding of letters of credit or for payment towards a revolving credit agreement.
Revenue Recognition
The company recognizes revenue when the following criteria are satisfied: persuasive evidence that an arrangement exists, title
of product and risk of loss are transferred to the customer, price is fixed and determinable and collectability is reasonably assured.
Sales of ethanol, distillers grains, corn oil, natural gas and other commodities by the company’s marketing business are recognized when title of product and risk of loss are transferred to an external customer. Revenues related to marketing for third parties are presented on a gross basis when the company takes title of the product and assumes risk of loss. Unearned revenue is recorded for goods in transit when the company has received payment but the title has not yet been transferred to the customer. Revenues for receiving, storing, transferring and transporting ethanol and other fuels are recognized when the product is delivered to the customer.
The company routinely enters into fixed-price, physical-delivery energy commodity purchase and sale agreements. At times, the company settles these transactions by transferring its obligations to other counterparties rather than delivering the physical commodity. These transactions are reported net as a component of revenues. Revenues also include realized gains and losses on related derivative financial instruments, ineffectiveness on cash flow hedges and reclassifications of realized gains and losses on effective cash flow hedges from accumulated other comprehensive income or loss.
Sales of products, including agricultural commodities, cattle and vinegar, are recognized when title of product and risk of loss are transferred to the customer, which depends on the agreed upon terms. The sales terms provide passage of title when shipment is made or the commodity is delivered. Revenues related to grain merchandising are presented gross and include shipping and handling, which is also a component of cost of goods sold. Revenues from grain storage are recognized when services are rendered.
A substantial portion of the partnership revenues are derived from fixed-fee commercial agreements for storage, terminal or transportation services. The partnership recognizes revenue when there is evidence an arrangement exists; risk of loss and title transfer to the customer; the price is fixed or determinable; and collectability is reasonably ensured. Revenues from base storage, terminal or transportation services are recognized once these services are performed, which occurs when the product is delivered to the customer.
Cost of Goods Sold
Cost of goods sold includes direct labor, materials and plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in ethanol plant, vinegar and cattle feedlot operations. Grain purchasing and receiving costs, excluding labor costs for grain buyers and scale operators, are also included in cost of goods sold. Materials include the cost of corn feedstock, denaturant, process chemicals, cattle and veterinary supplies. Corn feedstock costs include unrealized gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight charges, inspection costs and transfer costs as well as realized gains and losses on related derivative financial instruments, ineffectiveness on cash flow hedges and reclassifications of realized gains and losses on effective cash flow hedges from accumulated other comprehensive income or loss. Plant overhead consists primarily of plant and feedlot utilities, repairs and maintenance, yard expenses and outbound freight charges. Shipping costs incurred by the company, including railcar costs, are also reflected in cost of goods sold.
The company uses exchange-traded futures and options contracts to minimize the effect of price changes on the
agribusiness and energy services and food and food ingredients segments’ grain and cattle inventories and forward purchase and sales contracts. Exchange-traded futures and options contracts are valued at quoted market prices and settled predominantly in cash. The company is exposed to loss when counterparties default on forward purchase and sale contracts. Grain inventories held for sale and forward purchase and sale contracts are valued at market prices when available or other market quotes adjusted for differences, primarily in transportation, between the exchange-traded market and local market where the terms of the contract is based. Changes in the fair value of grain inventories held for sale, forward purchase and sale contracts and exchange-traded futures and options contracts are recognized as a component of cost of goods sold.
Operations and Maintenance Expenses
In the partnership segment, transportation expenses represent the primary components of operations and maintenance expenses. Transportation expense includes rail car leases, freight and shipping of the company’s ethanol and co-products, as well as costs incurred in storing ethanol at destination terminals.
Derivative Financial Instruments
The company uses various derivative financial instruments, including exchange-traded futures and exchange-traded and over-the-counter options contracts, to minimize risk and the effect of price changes related to corn, ethanol, cattle and natural gas. The company monitors and manages this exposure as part of its overall risk management policy to reduce the adverse effect market volatility may have on its operating results. The company may hedge these commodities as one way to mitigate risk, however, there may be situations when these hedging activities themselves result in losses.
By using derivatives to hedge exposures to changes in commodity prices, the company is exposed to credit and market risk. The company’s exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the terms of the derivative contract. The company minimizes its credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring their financial condition. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. The company manages market risk by incorporating parameters to monitor exposure within its risk management strategy, which limits the types of derivative instruments and strategies the company can use and the degree of market risk it can take using derivative instruments.
The company evaluates its physical delivery contracts to determine if they qualify for normal purchase or sale exemptions which are expected to be used or sold over a reasonable period in the normal course of business. Contracts that do not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating income unless the contracts qualify for, and the company elects, hedge accounting treatment.
Certain qualifying derivatives related to the ethanol production and agribusiness and energy services segments are designated as cash flow hedges. The company evaluates the derivative instrument to ascertain its effectiveness prior to entering into cash flow hedges. Ineffectiveness is recognized in current period results, while other unrealized gains and losses are reflected in accumulated other comprehensive income until the gain or loss from the underlying hedged transaction is realized. When it becomes
probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued, which affects earnings. These derivative financial instruments are recognized in current assets or other current liabilities at fair value.
At times, the company hedges its exposure to changes in the value of inventories and designates qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted in current period results for changes in fair value.
Ineffectiveness of the hedges is recognized in current period results to the extent the change in fair value of the inventory is not offset by the change in fair value of the derivative.
Concentrations of Credit Risk
The company is exposed to credit risk resulting from the possibility that another party may fail to perform according to the terms of the company’s contract. The company sells ethanol, corn oil and distillers grains and markets products for third parties, which can result in concentrations of credit risk from a variety of customers, including major integrated oil companies, large independent refiners, petroleum wholesalers and other marketers. The company also sells grain to large commercial buyers, including other ethanol plants, and sells cattle to meat processors. Although payments are typically received within fifteen days of the sale, the company continually monitors its exposure. The company is also exposed to credit risk on prepayments of undelivered inventories with a few major suppliers of petroleum products and agricultural inputs.
Inventories
Corn held for ethanol production, ethanol, corn oil and distillers grains inventories are recorded at lower of average cost or market. Fair value hedged inventories are recorded at market.
Other grain inventories include readily marketable grain, forward contracts to buy and sell grain, and exchange traded futures and option contracts, which are all stated at market value. Futures and options contracts, which are used to hedge the value of owned grain and forward contracts, are considered derivatives. All grain inventories held for sale are marked to market. Changes are reflected in cost of goods sold. The forward contracts require performance in future periods. Contracts to purchase grain generally relate to current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of grain to processors or other consumers generally do not extend beyond one year. The terms of the purchase and sale agreements for grain are consistent with industry standards.
Raw materials and finished goods inventories are valued at the lower of average cost or market. In addition to ethanol and related co-products in process, work-in-process inventory includes the cost of acquired cattle and related feed and veterinary supplies, as well as direct labor and feedlot overhead costs, all of which are valued at lower of average cost or market.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is generally calculated using the straight-line method over the following estimated useful life of the assets:
|
|
|
Years
|
Plant, buildings and improvements
|
10-40
|
Ethanol production equipment
|
15-40
|
Other machinery and equipment
|
5-7
|
Land improvements
|
20
|
Railroad track and equipment
|
20
|
Computer and software
|
3-5
|
Office furniture and equipment
|
5-7
|
Property and equipment is capitalized at cost. Land and other property improvements are capitalized and depreciated. Costs of repairs and maintenance are charged to expense when incurred. The company periodically evaluates whether events and circumstances have occurred that warrant a revision of the estimated useful life of its fixed assets.
Intangible Assets
Our intangible assets consist of trademarks, customer relationships, research and development technology and licenses acquired through acquisitions. These assets were capitalized at their fair value at the date of the acquisition and are being amortized over their estimated useful live
s
, with the exception of the vinegar trade name, which has an indefinite life
.
Impairment of
Long-Lived Assets
The company’s long-lived assets consist of property and equipment and intangible assets. The company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability is measured by comparing the carrying amount of the asset to the estimated undiscounted future cash flows the asset is expected to generate. Impairment is recorded when the asset’s carrying amount exceeds its estimated future cash flows. Significant management judgment is required to determine the fair value of long-lived assets, which includes discounted cash flows projections. There were no material impairment charges recorded for the periods reported.
Goodwill
Goodwill represents future economic benefits that are not individually recognized in an acquisition.
The company records goodwill when the purchase price for an acquisition exceeds the fair value of its identified net tangible and intangible assets
. The company’s goodwill currently consists of amounts related to the acquisition of
five
ethanol plants, its fuel terminal and distribution business and Fleischmann’s Vinegar.
Goodwill is reviewed for impairment at least annually. The qualitative factors of goodwill are assessed to determine whether it is necessary to perform a two-step goodwill impairment test. Under the first step, the estimated fair value of the reporting unit is compared with its carrying value, including goodwill. If the estimated fair value is less than the carrying value, the company completes a second step to determine the amount of goodwill impairment that should be recorded. In the second step, the reporting unit’s fair value is allocated to all of its assets and liabilities other than goodwill to determine the implied fair value. The result is compared with the carrying amount and an impairment charge is recorded for the difference. The company performs an annual impairment review on October 1 and when a triggering event occurs between annual impairment tests. No impairment losses were recorded for the periods reported.
Financing Costs
Fees and costs related to securing debt are recorded as financing costs. Debt issuance costs are stated at cost and are amortized using the effective
interest method for term loans and the straight-line basis over the life of the agreements for revolving credit arrangements and convertible notes. During periods of construction, amortization is capitalized in construction-in-progress.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consists of various expenses including employee salaries, incentives and benefits; office expenses; director compensation; professional fees for accounting, legal, consulting, and investor relations activities; and non-plant depreciation and amortization costs.
Environmental Expenditures
Environmental expenditures that pertain to current operations and relate to future revenue are expensed or capitalized. Probable liabilities that can be reasonably estimated are expensed or capitalized and disclosed in the company’s quarterly and annual filings, if material. Expenditures resulting from the remediation of an existing condition caused by past operations which do not contribute to future revenue are expensed when incurred.
Stock-Based Compensation
The company recognizes compensation cost using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.
Income Taxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial reporting carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measure
d using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
operating results in the period of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The company recognizes uncertainties in income taxes within the financial statements under a process by which the likelihood of a tax position is gauged based upon the technical merits of the position, and then a subsequent measurement relates the maximum benefit and the degree of likelihood to determine the amount of benefit recognized in the financial statements.
Recent Accounting Pronouncements
Effective January 1, 2016, the company adopted the amended guidance in ASC Topic 835-30,
Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs
, which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a deduction from the carrying amount of the debt, consistent with debt discounts. The amended guidance has been applied on a retrospective basis, and the balance sheet of each individual period presented has been adjusted to reflect the period-specific effects of the new guidance.
Effective January 1, 2017, the company will adopt the amended guidance in ASC Topic 330,
Inventory: Simplifying the Measurement of Inventory
, which requires inventory to be measured at lower of cost or net realizable value. Net realizable value is the estimated selling prices during the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amended guidance will be applied prospectively.
Effective January 1, 2017, the company will adopt the amended guidance in ASC Topic 718,
Compensation – Stock Compensation
, which requires all income tax effects of awards to be recognized in the income statement when the awards vest or settle. The amended guidance also will allow an employer to repurchase more of an employee’s shares than it can currently for tax withholding purposes without triggering liability accounting and make a policy election to account for forfeitures as they occur.
The amended guidance related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value will be applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. The amended guidance related to the presentation of employee taxes paid on the statement of cash flows will be applied retrospectively. The amended guidance requiring recognition of excess tax benefits and tax deficiencies in the income statement and practical expedient for estimating expected term will be applied prospectively.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 230,
Statement of Cash Flows: Restricted Cash
, which requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amended guidance will be applied retrospectively.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 606,
Revenue from Contracts with Customers
, which requires revenue recognition to reflect the transfer of promised goods or services to customers. The updated standard permits either the retrospective or cumulative effect transition method. Early application beginning January 1, 2017, is permitted. The company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 740,
Income Taxes: Intra-Entity Transfers of Assets other than Inventory
, which requires the recognition of current and deferred income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amended guidance will be applied on a
modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption.
Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 805,
Business Combinations: Clarifying the Definition of a Business
, which clarifies the definition of a business with the objective of adding guidance to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The amended guidance will be applied prospectively.
Effective January 1, 2019, the company will adopt the amended guidance in ASC Topic 842,
Leases
, which aims to make leasing activities more transparent and comparable and requires substantially all leases to be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. Early application is permitted. The company is currently evaluating the impact the adoption of the amended guidance will have on the consolidated financial statements and related disclosures.
3. GREEN PLAINS PARTNERS LP
Initial Public Offering of Subsidiary
On July 1, 2015, Green Plains Partners LP closed its initial public offering, or the IPO. In conjunction with the IPO, the company contributed its downstream ethanol transportation and storage assets to the partnership. A total of 11,500,000 common units, representing limited partner interests including 1,500,000 common units pursuant to the underwriters’ overallotment option, were sold to the public for $15.00 per common unit. The partnership received net proceeds of approximately $157.5 million, after deducting underwriting discounts, structuring fees and offering expenses. The partnership used the proceeds to make a distribution to the company of $155.3 million and to pay approximately $0.9 million in origination fees under its new $100.0 million revolving credit facility. The remaining $1.3 million was retained for general partnership purposes. The company now owns a 62.5% limited partner interest, consisting of 4,389,642 common units and 15,889,642
subordinated units, and a 2.0% general partner interest in the partnership. The public owns the remaining 35.5% limited partner interest in the partnership. As such, the partnership is consolidated in the company’s financial statements.
During the subordination period, which is described in the partnership agreement for Green Plains Partners, holders of the subordinated units are not entitled to receive distributions until the common units have received the minimum quarterly distribution plus any arrearages of the minimum quarterly distribution from prior quarters. If the partnership does not pay distributions on the subordinated units, the subordinated units will not accrue arrearages for those unpaid distributions. Each subordinated unit will convert into one common unit at the end of the subordination period.
The partnership is a fee-based master limited partnership formed by Green Plains to provide fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. The partnership’s assets currently include (i) 39 ethanol storage facilities, located at or near the company’s
17
ethanol production plants, which have the ability to efficiently and effectively store and load railcars and tanker trucks with all of the ethanol produced at the company’s ethanol production plants, (ii) eight fuel terminal facilities, located near major rail lines, which enable the partnership to receive, store and deliver fuels from and to markets that seek access to renewable fuels, and (iii) transportation assets, including a leased railcar fleet of approximately 3,100 railcars, which are contracted to transport ethanol from the company’s ethanol production plants to refineries throughout the United States and international export terminals. The partnership expects to be the company’s primary downstream logistics provider to support its approximately 1.5 bgy ethanol marketing and distribution business since the partnership’s assets are the principal method of storing and delivering the ethanol the company produces.
A substantial portion of the partnership’s revenues is derived from long-term, fee-based commercial agreements with Green Plains Trade, a subsidiary of the company. In connection with the IPO, the partnership (1) entered into (i) a ten-year fee-based storage and throughput agreement; (ii) an amended ten-year fee-based rail transportation services agreement; and (iii) a one-year fee-based trucking transportation agreement, and (2) assumed (i) an approximately 2.5-year terminal services agreement for the partnership’s Birmingham, Alabama-unit train terminal; and (ii) various other terminal services agreements for its other fuel terminal facilities, each with Green Plains Trade. The partnership’s storage and throughput agreement, and certain terminal services agreements, including the terminal services agreement for the Birmingham facility, are supported by minimum volume commitments. The partnership’s rail transportation services agreement is supported by minimum take-or-pay capacity commitments. The company also has agreements which establish fees for general and administrative, and operational and maintenance services it provides. These transactions are eliminated when the company consolidates its financial results.
The company consolidates the financial results of the partnership and records a noncontrolling interest in the partnership held by public common u
nitholders. Noncontrolling interest on the consolidated statements of income includes the portion of net income attributable to the economic interest held by the partnership’s public common unitholders. Noncontrolling interest on the consolidated balance sheets includes the portion of net assets attributable to the partnership’s public common unitholders.
4. ACQUISITIONS
Acquisition of
Fleischmann’s Vinegar Company
On October 3, 2016, the company acquired all of the issued and outs
tanding stock of SCI Ingredients
, the holding company of Fleischmann’s Vinegar Company, Inc
., for $258.3 million in cash. Fleischmann’s
Vinegar is
one of
the world’s la
rgest producers
of food-grade industrial
vinegar. The company recorded
$2.3
million of acquisition
costs for Fleischmann’s Vinegar to selling, general and administrativ
e expenses during the year
ended December 31, 2016.
The purchase price allocation is based o
n the preliminary results of
independent valuation
s
. The purchase price and purchase price allocation are preliminary until contractual post-closing working capital adjustments are finalized and the final independent valuation report
s
are
issued.
The following is a summary of the preliminary purchase price of assets acquired and liabilities assumed (in thousands):
|
|
|
|
|
Amounts of Identifiable Assets Acquired
and Liabilities Assumed
|
Cash
|
|
$
|
4,148
|
Inventory
|
|
|
9,308
|
Accounts receivable, net
|
|
|
13,919
|
Prepaid expenses and other
|
|
|
1,054
|
Property and equipment
|
|
|
43,011
|
Intangible assets
|
|
|
94,500
|
|
|
|
|
|
Current liabilities
|
|
|
(9,689)
|
Income taxes payable
|
|
|
(330)
|
Deferred tax liabilities
|
|
|
(40,421)
|
|
Total identifiable net assets
|
|
115,500
|
|
|
|
|
|
Goodwill
|
|
142,819
|
|
Purchase price
|
$
|
258,319
|
As of December 31, 2016, based on t
he preliminary valuations, the c
ompany’s customer relationship intangible asset recognized in connection with the Fleischmann’s acquisition is
$82.6
million, net of
$1.4
million of accumulated amortization, and has a
15
year weighte
d-average amortization period. As of December 31, 2016, the c
ompany also has an indefinite-lived trade name intangib
le asset of
$10.5
million. The c
ompany recognized
$1.4
million of amortization expense associated with the amortizing customer relationship intangible asset during the year ended
December
31
,
2016
and estimated amortization expense for the next
five
years is
$5.6
million per annum.
The excess of the purchase price over the intangibles fair values was allocated to goodwill, none of which is expected to be deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to arise after the acquisition.
Acquisition of Abengoa Ethanol Plants
On September 23, 2016, the company acquired three ethanol plants located in Madison, Illinois, Mount Vernon, Indiana, and York, Nebraska from subsidiaries of Ab
engoa 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 administ
rative expenses during the year
ended
December 31
, 2016.
The purchase price allocation is based on the preliminary results of an independent valuation. The purchase price and purchase price allocation are preliminary until contractual post-closing working capital adjustments are finalized and the final independent valuation report is issued.
The following is a summary of the preliminary purchase price of assets acquired and liabilities assumed (in thousands):
|
|
|
|
|
Amounts of Identifiable Assets Acquired
and Liabilities Assumed
|
Inventory
|
|
$
|
16,904
|
Accounts receivable, net
|
|
1,826
|
Prepaid expenses and other
|
|
|
2,224
|
Property and equipment
|
|
234,947
|
Other assets
|
|
|
3,885
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
(406)
|
Current liabilities
|
|
(2,580)
|
Long-term debt
|
|
|
(2,763)
|
|
Total identifiable net assets
|
$
|
254,037
|
Concurrently with the company’s acquisition of the Abengoa ethanol plants, on September 23, 2016, the partnership acquired the storage assets of the Abengoa ethanol plants from the company for
$90.0
million in a transfer between entities under
common control and entered into amendments to the related commercial agreements with Green Plains Trade.
The operating results of the Abengoa ethanol plant have been included in the company’s consolidated financial statements since September 23, 2016. The operating results of Fle
is
chmann’s Vinegar have been included in the company’s consolidated financial statements since October 4, 2016. Pro forma revenue and net loss, had the acquisitions occurred on January 1, 2016, would have been $3.8 billion and $9.1 million, respectively, for the year ended December 31, 2016. Diluted loss per share would have been $0.24 for the year ended December 31, 2016. This information is based on historical results of operations, and, in the company’s opinion, is not necessarily indicative of the results that would have been achieved had the company operated the ethanol plant acquired since such date.
Acquisition of Hereford Ethanol Plant
On November 12, 2015, the company acquired an ethanol production facility in Hereford, Texas, with an annual production capacity of approximately
100
mmgy for approximately $78.8 million for the ethanol plant assets, as well as working capital acquired or assumed of approximately $19.4 million.
The following is a summary of the final purchase price of assets acquired and liabilities assumed (in thousands):
|
|
|
|
|
Amounts of Identifiable Assets Acquired
and Liabilities Assumed
|
Inventory
|
|
$
|
20,487
|
Derivative financial instruments
|
|
|
2,625
|
Property and equipment
|
|
|
78,786
|
|
|
|
|
|
Current liabilities
|
|
(2,542)
|
Other liabilities
|
|
|
|
(1,128)
|
Total identifiable net assets
|
|
$
|
98,228
|
Effective January 1, 2016, the partnership acquired the storage and transportation assets of the Hereford and Hopewell production facilities in a transfer between entities under common control for approximately
$62.3
million and entered into amendments to the related commercial agreements with Green Plains Trade.
The operating results of the Hereford ethanol plant have been included in the company’s consolidated financial statements since November 12, 2015. Pro forma revenue and net income, had the acquisition occurred on January 1, 2015, would have been
$3.1
billion and
$10.8
million, respectively, for the year ended December 31, 2015.
Diluted earnings per share would have been
$0.28
for the year ended December 31, 2015.
This information is based on historical results of operations, and, in the company’s opinion, is not necessarily indicative of the results that would have been achieved had the company operated the ethanol plant acquired since such da
te.
5. FAIR VALUE DISCLOSURES
The following methods, assumptions and valuation techniques were used in estimating the fair value of the company’s financial instruments:
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities the company can access at the measurement date. Level 1 unrealized gains and losses on commodity derivatives relate to exchange-traded open trade equity and option values in the company’s brokerage accounts.
Level 2 – directly or indirectly observable inputs such as quoted prices for similar assets or liabilities in active markets other than quoted prices included within Level 1, quoted prices for identical or similar assets in markets that are not active, and other inputs that are observable or can be substantially corroborated by observable market data through correlation or other means. Grain inventories held for sale in the agribusiness and energy services segment are valued at nearby futures values, plus or minus nearby basis.
Level 3 – unobservable inputs that are supported by little or no market activity and comprise a significant component of the fair value of the assets or liabilities. The company currently does not have any recurring Level 3 financial instruments.
There have been no changes in valuation techniques and inputs used in measuring fair value. The company’s assets and liabilities by level are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016
|
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Reclassification for
Balance Sheet
|
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
Presentation
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
304,211
|
|
$
|
-
|
|
$
|
-
|
|
$
|
304,211
|
Restricted cash
|
|
51,979
|
|
|
-
|
|
|
-
|
|
|
51,979
|
Margin deposits
|
|
50,601
|
|
|
-
|
|
|
(50,601)
|
|
|
-
|
Inventories carried at market
|
|
-
|
|
|
77,043
|
|
|
-
|
|
|
77,043
|
Unrealized gains on derivatives
|
|
8,272
|
|
|
14,818
|
|
|
24,146
|
|
|
47,236
|
Other assets
|
|
116
|
|
|
-
|
|
|
-
|
|
|
116
|
Total assets measured at fair value
|
$
|
415,179
|
|
$
|
91,861
|
|
$
|
(26,455)
|
|
$
|
480,585
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
(1)
|
$
|
-
|
|
$
|
35,288
|
|
$
|
-
|
|
$
|
35,288
|
Unrealized losses on derivatives
|
|
26,455
|
|
|
8,916
|
|
|
(26,455)
|
|
|
8,916
|
Other liabilities
|
|
-
|
|
|
81
|
|
|
-
|
|
|
81
|
Total liabilities measured at fair value
|
$
|
26,455
|
|
$
|
44,285
|
|
$
|
(26,455)
|
|
$
|
44,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2015
|
|
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
|
$
|
384,867
|
|
$
|
-
|
|
$
|
-
|
|
$
|
384,867
|
Restricted cash
|
|
27,018
|
|
|
-
|
|
|
-
|
|
|
27,018
|
Margin deposits
|
|
7,658
|
|
|
-
|
|
|
(7,658)
|
|
|
-
|
Inventories carried at market
|
|
-
|
|
|
43,936
|
|
|
-
|
|
|
43,936
|
Unrealized gains on derivatives
|
|
19,756
|
|
|
7,145
|
|
|
3,639
|
|
|
30,540
|
Other assets
|
|
117
|
|
|
-
|
|
|
-
|
|
|
117
|
Total assets measured at fair value
|
$
|
439,416
|
|
$
|
51,081
|
|
$
|
(4,019)
|
|
$
|
486,478
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
(1)
|
$
|
-
|
|
$
|
25,935
|
|
$
|
-
|
|
$
|
25,935
|
Unrealized losses on derivatives
|
|
4,492
|
|
|
7,772
|
|
|
(4,019)
|
|
|
8,245
|
Total liabilities measured at fair value
|
$
|
4,492
|
|
$
|
33,707
|
|
$
|
(4,019)
|
|
$
|
34,180
|
|
(1)
|
|
Accounts payable is generally stated at historical amounts with the exception of $35.3 million and $25.9 million at December 31, 2016 and 2015, respectively
,
related to certain delivered inventory for which the payable fluctuates based on changes in commodity prices. These payables are hybrid financial instruments for which the company has elected the fair value option.
|
The company believes the fair value of its debt was
approximately
$1.1
billion compared
wit
h a book value of
$1.1
billion at December
31, 2016, and the fair value of its debt was approximately $
661.8
million compared with a book value of
$663.6
million at December 31, 2015. The company estimated the fair value of its outstanding debt using Level 2 inputs. The company believes the fair values of its accoun
ts receivable approximated book value, which was $
147.5
million
and $
96.2
million, respectively,
at December 31, 2016, and 2015.
Although the company currently does not have any recurring Level 3 financial measurements, the fair values of tangible assets and goodwill acquired and the equity component of convertible debt represent Level 3 measurements which were derived using a combination of the income approach, market approach and cost approach for the specific assets or liabilities being valued.
6. SEGMENT INFORMATION
As a result of acquisitions during the year, the company implemented organizational changes during the fourth quarter of 2016
, whereby the c
ompany management now reports the financial and operating performance for the following
four
operating segments: (1) ethanol production, which includes the production of ethanol, distillers grains and corn oil, (2) agribusiness and energy services, which includes grain handling and storage and marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil and other commodities, (3) food and food ingredients, which includes the vinegar operations and cattle feedlot operations and (4) partnership, which includes fuel storage and transportation services. Prior periods have been reclassified to conform to the revised segment presentation.
Under GAAP, w
hen transferring assets between entities under common control, the entity receiving the net assets initially recognizes the carrying amounts of the assets and liabilities at the date of transfer. The transferee’s prior period financial statements are restated for all periods its operations were part of the parent’s consolidated financial statements. On July 1, 2015, Green Plains Partners received ethanol storage and railcar assets and liabilities in a transfer between entities under common control. Effective January 1, 2016, the partnership acquired the storage and transportation assets of the Hereford and Hopewell production facilities in a transfer between entities under common control and entered into amendments to the related commercial agreements with Green Plains Trade. The transferred assets and liabilities are recognized at the company’s historical cost and reflected retroactively in the segment information of the consolidated financial statements presented in this Form 10-K. The partnership’s assets were previously included in the ethanol production and agribusiness and energy services segments. Expenses related to the ethanol storage and railcar assets, such as depreciation, amortization and railcar lease expenses, are also reflected retroactively in the following segment information. There
were
no revenues r
elated to the operation of the
ethanol storage and railcar assets in the partnership segment prior to
their respective transfers to the partnership, when the related commercial agreements with
Green Plains Trade became effective.
Corporate activities include selling, general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment.
During the normal course of business, the operating segments do business with each other. For example, the agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, d
istillers grains and corn oil for
the ethanol production segment. The partnership segment provides fuel storage and transportation services for the agribusiness and energy services segment. These intersegment activities are treated like third-party transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment performance; however, they do not impact the company’s consolidated results since the revenues and corresponding costs are eliminated.
The following tables set forth certain financial data for the company’s operating segments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Ethanol production:
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
(1)
|
|
$
|
2,409,102
|
|
$
|
2,063,172
|
|
$
|
2,590,428
|
Intersegment revenues
|
|
|
-
|
|
|
-
|
|
|
-
|
Total segment revenues
|
|
|
2,409,102
|
|
|
2,063,172
|
|
|
2,590,428
|
Agribusiness and energy services:
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
(1)
|
|
|
675,446
|
|
|
674,719
|
|
|
607,323
|
Intersegment revenues
|
|
|
34,461
|
|
|
24,114
|
|
|
24,535
|
Total segment revenues
|
|
|
709,907
|
|
|
698,833
|
|
|
631,858
|
Food and food ingredients:
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
(1)
|
|
|
318,031
|
|
|
219,310
|
|
|
29,376
|
Intersegment revenues
|
|
|
150
|
|
|
75
|
|
|
-
|
Total segment revenues
|
|
|
318,181
|
|
|
219,385
|
|
|
29,376
|
Partnership:
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
|
8,302
|
|
|
8,388
|
|
|
8,484
|
Intersegment revenues
|
|
|
95,470
|
|
|
42,549
|
|
|
4,359
|
Total segment revenues
|
|
|
103,772
|
|
|
50,937
|
|
|
12,843
|
Revenues including intersegment activity
|
|
|
3,540,962
|
|
|
3,032,327
|
|
|
3,264,505
|
Intersegment eliminations
|
|
|
(130,081)
|
|
|
(66,738)
|
|
|
(28,894)
|
Revenues as reported
|
|
$
|
3,410,881
|
|
$
|
2,965,589
|
|
$
|
3,235,611
|
|
(1)
|
|
Revenues from external customers include realized gains and losses from derivative financial instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Cost of goods sold:
|
|
|
|
|
|
|
|
|
|
Ethanol production
|
|
$
|
2,280,906
|
|
$
|
1,939,824
|
|
$
|
2,230,141
|
Agribusiness and energy services
|
|
|
650,538
|
|
|
639,470
|
|
|
555,200
|
Food and food ingredients
|
|
|
294,396
|
|
|
216,661
|
|
|
26,538
|
Partnership
|
|
|
-
|
|
|
-
|
|
|
-
|
Intersegment eliminations
|
|
|
(129,761)
|
|
|
(66,588)
|
|
|
(28,834)
|
|
|
$
|
3,096,079
|
|
$
|
2,729,367
|
|
$
|
2,783,045
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
Ethanol production
|
|
$
|
28,125
|
|
$
|
43,266
|
|
$
|
285,579
|
Agribusiness and energy services
|
|
|
34,039
|
|
|
37,253
|
|
|
52,176
|
Food and food ingredients
|
|
|
16,436
|
|
|
(952)
|
|
|
1,200
|
Partnership
|
|
|
60,903
|
|
|
12,990
|
|
|
(19,975)
|
Intersegment eliminations
|
|
|
(170)
|
|
|
-
|
|
|
-
|
Corporate activities
|
|
|
(47,645)
|
|
|
(31,480)
|
|
|
(32,706)
|
|
|
$
|
91,688
|
|
$
|
61,077
|
|
$
|
286,274
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
Ethanol production
|
|
$
|
5,862
|
|
$
|
21,582
|
|
$
|
269,604
|
Agribusiness and energy services
|
|
|
24,368
|
|
|
33,952
|
|
|
45,423
|
Food and food ingredients
|
|
|
10,950
|
|
|
(3,585)
|
|
|
847
|
Partnership
|
|
|
58,441
|
|
|
12,695
|
|
|
(20,038)
|
Intersegment eliminations
|
|
|
(170)
|
|
|
-
|
|
|
-
|
Corporate activities
|
|
|
(61,100)
|
|
|
(43,179)
|
|
|
(45,406)
|
|
|
$
|
38,351
|
|
$
|
21,465
|
|
$
|
250,430
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
Ethanol production
|
|
$
|
68,746
|
|
$
|
55,604
|
|
$
|
53,465
|
Agribusiness and energy services
|
|
|
2,536
|
|
|
1,542
|
|
|
926
|
Food and food ingredients
|
|
|
3,705
|
|
|
1,004
|
|
|
528
|
Partnership
|
|
|
5,647
|
|
|
5,828
|
|
|
5,544
|
Corporate activities
|
|
|
3,592
|
|
|
1,972
|
|
|
1,676
|
|
|
$
|
84,226
|
|
$
|
65,950
|
|
$
|
62,139
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
Ethanol production
|
|
$
|
22,505
|
|
$
|
22,816
|
|
$
|
22,830
|
Agribusiness and energy services
|
|
|
7,305
|
|
|
5,161
|
|
|
7,196
|
Food and food ingredients
|
|
|
5,536
|
|
|
2,799
|
|
|
443
|
Partnership
|
|
|
2,545
|
|
|
381
|
|
|
138
|
Intersegment eliminations
|
|
|
(562)
|
|
|
(71)
|
|
|
(238)
|
Corporate activities
|
|
|
14,522
|
|
|
9,280
|
|
|
9,539
|
|
|
$
|
51,851
|
|
$
|
40,366
|
|
$
|
39,908
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
Ethanol production
|
|
$
|
39,555
|
|
$
|
48,881
|
|
$
|
40,991
|
Agribusiness and energy services
|
|
|
2,340
|
|
|
12,552
|
|
|
16,771
|
Food and food ingredients
|
|
|
2,479
|
|
|
1,049
|
|
|
395
|
Partnership
|
|
|
400
|
|
|
1,496
|
|
|
547
|
Corporate activities
|
|
|
11,638
|
|
|
1,589
|
|
|
2,829
|
|
|
$
|
56,412
|
|
$
|
65,567
|
|
$
|
61,533
|
The following table sets forth total assets by operating segment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
Total assets
(1)
:
|
|
|
|
|
|
|
Ethanol production
|
|
$
|
1,206,155
|
|
$
|
1,004,342
|
Agribusiness and energy services
|
|
|
579,977
|
|
|
418,168
|
Food and food ingredients
|
|
|
406,429
|
|
|
110,775
|
Partnership
|
|
|
74,999
|
|
|
81,430
|
Corporate assets
|
|
|
257,652
|
|
|
314,068
|
Intersegment eliminations
|
|
|
(18,720)
|
|
|
(10,863)
|
|
|
$
|
2,506,492
|
|
$
|
1,917,920
|
|
(1)
|
|
Asset balances by segment exclude intercompany payable and receivable balances.
|
The following table sets forth revenues by product line (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Ethanol
|
|
$
|
2,258,575
|
|
$
|
1,868,043
|
|
$
|
2,362,812
|
Distillers grains
|
|
|
488,297
|
|
|
474,699
|
|
|
531,696
|
Corn oil
|
|
|
152,075
|
|
|
101,126
|
|
|
99,167
|
Grain
|
|
|
174,525
|
|
|
240,466
|
|
|
174,997
|
Food and food ingredients
|
|
|
279,039
|
|
|
219,046
|
|
|
29,262
|
Service revenues
|
|
|
8,302
|
|
|
8,388
|
|
|
8,484
|
Other
|
|
|
50,068
|
|
|
53,821
|
|
|
29,193
|
|
|
$
|
3,410,881
|
|
$
|
2,965,589
|
|
$
|
3,235,611
|
7. INVENTORIES
Inventories are carried at lower of cost or market, except for commodities held for sale and fair value hedged inventories, which are reported at market value.
The components of inventories are as follows (in thousands):
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
Finished goods
|
$
|
99,009
|
|
$
|
71,595
|
Commodities held for sale
|
|
65,926
|
|
|
43,936
|
Raw materials
|
|
135,516
|
|
|
116,673
|
Work-in-process
|
|
91,093
|
|
|
96,950
|
Supplies and parts
|
|
30,637
|
|
|
24,803
|
|
$
|
422,181
|
|
$
|
353,957
|
8. PROPERTY AND EQUIPMENT
The components of property and equipment are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
Plant equipment
|
$
|
1,167,914
|
|
$
|
892,915
|
Buildings and improvements
|
|
205,806
|
|
|
176,094
|
Land and improvements
|
|
126,088
|
|
|
84,257
|
Railroad track and equipment
|
|
42,234
|
|
|
41,732
|
Construction-in-progress
|
|
13,745
|
|
|
38,200
|
Computers and software
|
|
15,000
|
|
|
11,115
|
Office furniture and equipment
|
|
3,503
|
|
|
2,492
|
Leasehold improvements and other
|
|
22,409
|
|
|
13,823
|
Total property and equipment
|
|
1,596,699
|
|
|
1,260,628
|
Less: accumulated depreciation
|
|
(417,993)
|
|
|
(338,558)
|
Property and equipment, net
|
$
|
1,178,706
|
|
$
|
922,070
|
9. GOODWILL
Changes in the carrying amount of goodwill attributable to each business segment during the years ended December 31, 2016 and 2015 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Ethanol Production
|
|
Food and Food
|
|
|
|
|
|
Production
|
|
Ingredients
|
|
Partnership
|
|
Total
|
Balance, December 31, 2014 and 2015
|
$
|
30,279
|
|
$
|
-
|
|
$
|
10,598
|
|
$
|
40,877
|
Acquisition of Fleischmann's Vinegar
|
|
-
|
|
|
142,819
|
|
|
-
|
|
|
142,819
|
Balance, December 31, 2016
|
$
|
30,279
|
|
$
|
142,819
|
|
$
|
10,598
|
|
$
|
183,696
|
Goodwill re
lated to the acquisition
results largely from economies of scale expected to be realized in the Company’s operations.
10. DERIVATIVE FINANCIAL INSTRUMENTS
At December 31, 2016, the company’s consolidated balance sheet reflected unre
alized losses of $4.1 million, net of tax, in accumulated other comprehensive loss. The company expects these losses will be
reclassified as operating income over the next 12 months as a result of hedged transactions that are forecasted to occur.
The amount realized in operating income will differ as commodity prices change.
Fair Values of Derivative Instruments
The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets where they are reported are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives'
|
|
Liability Derivatives'
|
|
Fair Value at December 31,
|
|
Fair Value at December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Derivative financial instruments
(1)
|
$
|
14,818
|
(2)
|
$
|
22,882
|
(3)
|
$
|
-
|
|
$
|
-
|
Accrued and other liabilities
|
|
-
|
|
|
-
|
|
|
27,099
|
|
|
8,245
|
Other liabilities
|
|
-
|
|
|
-
|
|
|
81
|
|
|
-
|
Total
|
$
|
14,818
|
|
$
|
22,882
|
|
$
|
27,180
|
|
$
|
8,245
|
|
(1)
|
|
Derivative financial
instruments as reflected on the balance sheet include a margin deposit assets of $
50.6
million and $
7.7
million at December 31, 2016 and 2015, respectively.
|
|
(2)
|
|
Balance at December 31, 2016, includes $
17.0
million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.
|
|
(3)
|
|
Balance at December 31, 2015, includes $
2.3
million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.
|
Refer to
Note 5 - Fair Value Disclosures
, which contains fair value information related to derivative financial instruments.
Effect of Derivative Instruments on Conso
lidated Statements of Income
and Consolidated Statements of Stockholders’ Equity and Comprehensive Income
The gains or losses recognized in income and other comprehensive income related to the company’s derivative financial instruments and the line items on the consolidated financial statements where they are reported are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Gains (Losses) on Derivative Instruments Not
|
|
Year Ended December 31,
|
Designated in a Hedging Relationship
|
|
2016
|
|
2015
|
|
2014
|
Revenues
|
|
$
|
6,112
|
|
$
|
(12,952)
|
|
$
|
13,369
|
Cost of goods sold
|
|
|
11
|
|
|
10,492
|
|
|
165
|
Net increase (decrease) recognized in earnings before tax
|
|
$
|
6,123
|
|
$
|
(2,460)
|
|
$
|
13,534
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses) Due to Ineffectiveness
|
|
Year Ended December 31,
|
of Cash Flow Hedges
|
|
2016
|
|
2015
|
|
2014
|
Revenues
|
|
$
|
(41)
|
|
$
|
(43)
|
|
$
|
(326)
|
Cost of goods sold
|
|
|
-
|
|
|
-
|
|
|
481
|
Net increase (decrease) recognized in earnings before tax
|
|
$
|
(41)
|
|
$
|
(43)
|
|
$
|
155
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses) Reclassified from Accumulated
Other Comprehensive Income (Loss)
|
|
Year Ended December 31,
|
into Net Income
|
|
2016
|
|
2015
|
|
2014
|
Revenues
|
|
$
|
(8,094)
|
|
$
|
8,420
|
|
$
|
(257,730)
|
Cost of goods sold
|
|
|
(16,508)
|
|
|
(3,551)
|
|
|
(43,853)
|
Net increase (decrease) recognized in earnings before tax
|
|
$
|
(24,602)
|
|
$
|
4,869
|
|
$
|
(301,583)
|
|
|
|
|
|
|
|
|
|
|
Effective Portion of Cash Flow
Hedges Recognized in
|
|
Year Ended December 31,
|
Other Comprehensive Income (Loss)
|
|
2016
|
|
2015
|
|
2014
|
Commodity Contracts
|
|
$
|
(29,238)
|
|
$
|
11,582
|
|
$
|
(299,684)
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses) from Fair Value
|
|
Year Ended December 31,
|
Hedges of Inventory
|
|
2016
|
|
2015
|
|
2014
|
Revenues (effect of change in inventory value)
|
|
$
|
1,388
|
|
$
|
-
|
|
$
|
-
|
Cost of goods sold (effect of change in inventory value)
|
|
|
21,430
|
|
|
(7,819)
|
|
|
304
|
Revenues (effect of fair value hedge)
|
|
|
(1,388)
|
|
|
-
|
|
|
-
|
Cost of goods sold (effect of fair value hedge)
|
|
|
(16,219)
|
|
|
12,045
|
|
|
2,612
|
Ineffectiveness recognized in earnings before tax
|
|
$
|
5,211
|
|
$
|
4,226
|
|
$
|
2,916
|
There
were no gains or losses from discontinuing
cash flow or fair value hedge treatment during the years ended December 31, 2016, 2015 and 2014.
The open commodity derivative positions as of December 31, 2016, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
Exchange Traded
|
|
Non-Exchange Traded
|
|
|
|
|
Derivative Instruments
|
|
Net Long & (Short)
(1)
|
|
Long
(2)
|
|
(Short)
(2)
|
|
Unit of Measure
|
|
Commodity
|
Futures
|
|
(88,850)
|
|
|
|
|
|
Bushels
|
|
Corn, Soybeans and Wheat
|
Futures
|
|
18,185
|
(3)
|
|
|
|
|
Bushels
|
|
Corn
|
Futures
|
|
22,515
|
(4)
|
|
|
|
|
Bushels
|
|
Corn
|
Futures
|
|
109,536
|
|
|
|
|
|
Gallons
|
|
Ethanol
|
Futures
|
|
(213,570)
|
(3)
|
|
|
|
|
Gallons
|
|
Ethanol
|
Futures
|
|
(4,778)
|
|
|
|
|
|
mmBTU
|
|
Natural Gas
|
Futures
|
|
2,310
|
(3)
|
|
|
|
|
Gallons
|
|
Natural Gasoline
|
Futures
|
|
(8,320)
|
(4)
|
|
|
|
|
mmBTU
|
|
Natural Gas
|
Futures
|
|
(1,250)
|
|
|
|
|
|
Pounds
|
|
Livestock
|
Futures
|
|
(85,480)
|
(3)
|
|
|
|
|
Pounds
|
|
Livestock
|
Futures
|
|
(3,150)
|
(4)
|
|
|
|
|
Pounds
|
|
Livestock
|
Futures
|
|
(483)
|
|
|
|
|
|
Barrels
|
|
Crude Oil
|
Futures
|
|
(43)
|
(4)
|
|
|
|
|
Barrels
|
|
Crude Oil
|
Futures
|
|
(71,580)
|
|
|
|
|
|
Pounds
|
|
Soybean Oil
|
Futures
|
|
14,896
|
|
|
|
|
|
Pounds
|
|
Sugar
|
Options
|
|
2,664
|
|
|
|
|
|
Bushels
|
|
Corn, Soybeans and Wheat
|
Options
|
|
(38,767)
|
|
|
|
|
|
Gallons
|
|
Ethanol
|
Options
|
|
41
|
|
|
|
|
|
mmBTU
|
|
Natural Gas
|
Options
|
|
(3,086)
|
|
|
|
|
|
Pounds
|
|
Livestock
|
Options
|
|
331
|
|
|
|
|
|
Barrels
|
|
Crude Oil
|
Options
|
|
(14,224)
|
|
|
|
|
|
Pounds
|
|
Sugar
|
Forwards
|
|
|
|
27,604
|
|
(1,146)
|
|
Bushels
|
|
Corn and Soybeans
|
Forwards
|
|
|
|
36,410
|
|
(360,796)
|
|
Gallons
|
|
Ethanol
|
Forwards
|
|
|
|
112
|
|
(322)
|
|
Tons
|
|
Distillers Grains
|
Forwards
(4)
|
|
|
|
35,465
|
|
(40,616)
|
|
Pounds
|
|
Corn Oil
|
Forwards
|
|
|
|
-
|
|
(34,104)
|
|
Pounds
|
|
Corn Oil
|
Forwards
|
|
|
|
15,932
|
|
(1,462)
|
|
mmBTU
|
|
Natural Gas
|
Forwards
|
|
|
|
1,376
|
|
(1,146)
|
|
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 including both fixed-price and basis contracts.
|
|
(3)
|
|
Futures used for cash flow hedges.
|
|
(4)
|
|
Futures used for fair value hedges
|
Energy trading contracts that do not involve physical delivery are presented net in revenues on the conso
lidated statements of income
. Included in revenues
are net gains of
$11.6
million,
$9.6
million
, and
$8.0
million for the years ended December 31, 2016, 2015 and 2014, respectively, on energy trading contracts
.
11. DEBT
The
components
of long-term
debt are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
Green Plains Partners:
|
|
|
|
|
|
$155.0
million
revolving credit facility
|
$
|
129,000
|
|
$
|
-
|
Green Plains Processing:
|
|
|
|
|
|
$345.0
million term loan
|
|
294,011
|
|
|
306,439
|
Fleischmann's Vinegar:
|
|
|
|
|
|
$130.0
million term loan
|
|
125,609
|
|
|
-
|
$15.0
million revolving credit facility
|
|
4,000
|
|
|
-
|
Corporate:
|
|
|
|
|
|
$120.0
million convertible notes due 2018
|
|
108,817
|
|
|
103,072
|
$170.0
million convertible notes due 2022
|
|
127,239
|
|
|
-
|
Other
|
|
28,993
|
|
|
27,135
|
Total long-term debt
|
|
817,669
|
|
|
436,646
|
Less: current portion of long-term debt
|
|
(35,059)
|
|
|
(4,507)
|
Long-term debt
|
$
|
782,610
|
|
$
|
432,139
|
Scheduled long-term debt repayments, including full accretion of the
$120.0
million convertible notes due 2018 and of the
$170.0
million convertible notes due 2022 at maturity but excluding the effects of any debt discounts and debt issuance costs, are as follows (in thousands):
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Amount
|
2017
|
|
$
|
39,058
|
2018
|
|
|
126,193
|
2019
|
|
|
6,215
|
2020
|
|
|
393,363
|
2021
|
|
|
2,307
|
Thereafter
|
|
|
315,801
|
Total
|
|
$
|
882,937
|
Short-term notes payable and other borrowings at December 31, 2016 include working capital revolvers at Green Pl
ains Cattle, Green Plains Gr
ain and Green Plains Trade with outstanding balances of
$63.5
million,
$102.0
million, and
$125.7
million, respectively. Short
-term notes payable and other borrowings at December 31, 2015 include working capital revolvers at Green Plains Cattle, Green Plains Grain and Green Plains Trade with outstanding balances of
$69.7
million,
$77.0
million and
$80.2
million, respectively.
Effective January 1, 2016, the company adopted ASC 835-30,
Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs
, which resulted in the reclassification of approximately
$11.4
million from other assets to long-term debt within the balance sheet as of December 31
, 2015. As of December 31, 2016, there was
$16.9
million of debt issuance costs recorded as a reduction of the carrying value of the company’s long-term debt.
Ethanol Production Segment
Green Plains Processing has a
$345.0
million senior secured credit facility, which is guaranteed by the company and subsidiaries of Green Plains Processing and secured by the stock
and substantially all of the assets of Green Plains Processing. The interest rate is
5.50% plus LIBOR, subject to a 1.00% floor
and matures on June 30, 2020. The terms of the credit facility require the borrower to maintain a maximum total leverage ratio of
4.00x
at the end of each quarter, decreasing to
3.25x
over the life of the credit facility and a minimum fixed charge coverage ratio of
1.25
x
.
As of December 31, 2016, the maximum total leverage ratio was
3.75x
.
The credit facility also has a provision requiring the company to make special quarterly payments of
50%
to
75%
of its available free cash flow, subject to certain limitations.
The total leverage ratio is calculated by dividing total debt by the sum of the eight preceding fiscal quarters’ adjusted EBITDA, divided by two. The fixed charge coverage ratio is calculated by dividing the sum of the four preceding fiscal quarters’ adjusted EBITDA by the
sum of four preceding fiscal quarters scheduled principal payments and interest expense. The credit agreement also allows the inclusion of net equity contributions made by the parent company in the calculation of adjusted EBITDA.
At December 31, 2016, the interest rate on this term debt was
6.50%
. Scheduled principal payments are
$0.9
million each quarter.
Agribusiness and Energy Services Segment
Green Plains Grain has a
$125.0
million senior secured asset-based revolving credit facility, to finance working capital up to the maximum commitment based on eligible collateral equal to the sum of percentages of eligible cash, receivables and inventories, less miscellaneous adjustments. The credit facility was amended on July 27, 2016, extending the maturity date to July 26, 2019. Advances under the amended credit facility are subject to an interest rate equal to
LIBOR plus 3.00%
or the lenders’
base rate plus 2.00%
. The credit facility also includes an accordion feature that enables the facility to be increased by up to
$75.0
million with agent approval. The credit facility can also be increased by up to
$50.0
million for seasonal borrowings. Total commitments outstanding cannot exceed
$250.0
million.
Lenders receive a first priority lien on certain cash, inventory, accounts receivable and other assets owned by Green Plains Grain as security on the credit facility. The terms impose affirmative and negative covenants, including maintaining working capital of
$20.3
million and tangible net worth of
$26.3
million for 2016. Capital expenditures are limited to
$8.0
million per year under the credit facility, plus equity contributions from the company and unused amounts of up to
$8.0
million from the previous year. In addition, the credit facility requires the company to maintain a minimum fixed charge coverage ratio of
1.25
to 1.00 for long-term indebtedness and a maximum annual leverage ratio of
6.00
to 1.00 at the end of each quarter. The credit facility also contains restrictions on distributions related to capital stock, with exceptions for distributions up to
50%
of net profit before tax, subject to certain conditions. Working capital is defined as current assets minus current liabilities and tangible net worth is defined as total assets minus total liabilities, subject to certain limitations. The leverage ratio is calculated by dividing total liabilities by tangible net worth. The fixed charge coverage ratio and long-term capitalization ratio apply only if the company has incurred long-term indebtedness on the date of calculation. As of December 31, 2016, Green Plains Grain had not incurred long-term indebtedness.
Green Plains Trade has
a
$150.0
million senior secured asset-based revolving credit facility, which matures on November 26, 2019, to finance working capital for marketing and distribution activities up to $150.0 million based on eligible collateral equal to the sum of percentages of eligible receivables and inventories, less miscellaneous adjustments.
Advances are subject to variable interest rates equal to
LIBOR plus 2.50%
or the
base rate plus 1.50%
. The unused portion of the credit
facility is also subject to a commitment fee of
0.5%
per annum.
The terms impose affirmative and negative covenants, including maintaining a fixed charge coverage ratio of
1.15
x. Capital expenditures are limited to
$1.5
million per year under the credit facility. The credit facility also restricts distributions related to capital stock, with an exception for distributions up to
50%
of net income if, on a pro forma basis, (a) availability has been greater than
$10.0
million for the last 30 days and (b) the borrower would be in compliance with the fixed charge coverage ratio on the distribution date. The fixed charge coverage ratio is calculated by summing the four preceding fiscal quarters’ EBITDA less capital expenditures, distributions and cash taxes, and dividing that sum by all debt payments made over the prior four quarters.
At December 31, 2016, Green Plains Trade had
$35.0
million presented as restricted cash on the consolidated balance sheet, the use of which was restricted for repayment towards the outstanding loan balance.
Food and Food Ingredients Segment
Green Plains Cattle has a
$100.0
million senior secured asset-based revolving credit facility, which matures on October 31, 2017, to finance working capital for the cattle feedlot operations up to the maximum commitment based on eligible collateral equal to the sum of percentages of eligible receivables, inventories and other current assets, less miscellaneous adjustments. Advances are subject to variable interest rates equal to
LIBOR plus 2.00% to 3.00%
, or the
base rate plus 0.00% to 0.25%
, depending upon the preceding three months’ excess borrowing availability. The credit facility also includes an accordion feature that enables the credit facility to be increased by up to
$50.0
million with agent approval. The unused portion of the credit facility is also subject to a commitment fee of
0.20%
to
0.25%
per annum, depending on the preceding three months’ excess borrowing availability.
Lenders receive a first priority lien on certain cash, inventory, accounts receivable, property and equipment and other assets owned by Green Plains Cattle as security on the credit facility. The terms impose affirmative and negative covenants, including maintaining working capital of
$15.0
million and tangible net worth of
$20.3
million
for 2016 and a total debt to
tangible net worth
ratio of
3.50
x
. Capital
expenditures are limited to
$3.0
million per year under the credit facility, plus
$5.0
million per year if funded by a contribution from parent, plus any
unused amounts from the previous year.
Working capital is defined as current assets minus current liabilities and tangible net worth is defined as total tangible assets minus total liabilities, plus subordinated debt. The total debt to tangible net worth ratio is calculated by dividing total liabilities by tangible net worth.
Fleischmann’s Vinegar has a $130.0 mil
lion senior secured
term loan
and a
$15.0 million senior secured revolving credit facility, which mat
ure
on October 3, 2022, to finance the purchase of Fleischmann’s Vinegar and to fund working capital for its vinegar manufacturing operations.
Beginning January 1, 2017,
the term loan
is
subject to mandatory prepayments based on
the preceding fiscal year’s
excess cash flow. Term loan prepayments are generally subject to prepayment fees of 1.0% to 2.0% if prepaid before the second anniversary of the credit agreement. The term loan and loans under the revolving credit facility each bear interest at a floating rate based on
the
consolidated total net leverage ratio, adjusted quarterly
beginning September 30, 2017
, to either a base rate plus an applicable margin of 5.0% to 6.0%
or to
LIBOR
plus an applicable margin of 6.0% to 7.0%. The unused portion of the Revolving Loan Commitment is also subject to a commitment fee of 0.5% per annum.
The credit agreement contains certain customary representations and warranties, affirmative covenants, negative covenants, financial covenants and events of default. The negative covenants include restrictions on the ability to incur additional indebtedness, acquire and sell assets, create liens, make investments, make distributions and enter into transactions with affiliates. The financial covenants include requirements to maintain a minimum consolidated fixed charge coverage
ratio ranging from 1.00x
to 1.10
x
and a maximum consolidated total net leverage ratio ranging from
5
.00
x
to
7
.00
x
.
The consolidated fixed charge coverage ratio is calculated by summing the four preceding fiscal quarters’ EBITDA less capital expenditures and dividing that sum by the sum of the four preceding fiscal quarters’ cash interest and taxes, scheduled principal payments and parent management fees. The consolidated total net leverage ratio is calculated by dividing total net indebtedness by
the sum of the four preceding fiscal quarters’ EBITDA.
Partnership Segment
Green Plains Partners, through a wholly owned subsidiary, has a
$155.0
million revolving credit facility, which matures on July 1, 2020, to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes. The credit facility was amended on September 16, 2016, increasing the
total amount
available from $100.0 million to $155.0 million. Advances under the amended credit facility are subject to a floating interest rate based on the preceding fiscal quarter’s consolidated leverage ratio at a base rate plus 1.25% to 2.00% or LIBOR plus 2.25% to 3.00%. The amended credit facility may be increased up to $100.0 million without the consent of the lenders. The unused portion of the credit facility is also subject to a commitment fee of 0.35% to 0.50%, depending on the preceding fiscal quarter’s consolidated leverage ratio.
The partnership’s obligations under the credit facility are secured by a first priority lien on (i) the capital stock of the partnership’s present and future subsidiaries, (ii) all of the partnership’s present and future personal property, such as investment property, general intangibles and contract rights, including rights under agreements with Green Plains Trade, and (iii) all proceeds and products of the equity interests of the partnership’s present and future subsidiaries and its personal property. The terms impose affirmative and negative covenants, including restricting the partnership’s ability to incur additional debt, acquire and sell assets, create liens, invest capital, pay distributions and materially amend the partnership’s commercial agreements with Green Plains Trade. The credit facility also requires the partnership to maintain a maximum consolidated net leverage ratio
of no more than
3.50x
, and a minimum consolidated interest coverage ratio of no less than
2.75x
, each of which
is calculated on a pro forma basis with respect to acquisitions and divestitures occurring during the applicable period.
The consolidated interest coverage ratio is calculated by dividing the sum of the four preceding fiscal quarters’ consolidated EBITDA by the sum of the four preceding fiscal quarters’ interest charges. The consolidated leverage ratio is calculated by dividing total funded indebtedness minus the lesser of cash in excess of
$5.0
million or
$30.0
million by the sum of the four preceding fiscal quarters’ consolidated EBITDA.
In June 2013, the company issued promissory notes payable of
$10.0
million and a note receivable of
$8.1
million to execute a New Markets Tax Credit transaction related to the Birmingham, Alabama terminal. Beginning in March 2020, the promissory notes and note receivable each require quarterly principal and interest payments of approximately
$0.2
million. The company retains the right to call
$8.1
million of the promissory notes in 2020. The promissory notes payable and note receivable will be fully amortized upon maturity in September 2031. Income tax credits were generated for the lender, which the company has guaranteed over their statutory
life of
seven
years in the event the credits are recaptured or reduced. At the time of the transaction, the income tax credits were valued at
$5.0
million. The company has not established a liability in connection with the guarantee because it believes the likelihood of recapture or reduction is remote.
Corporate Activities
In August 2016, the company issued $170.0 million of 4.125% convertible senior notes due 2022, or the 4.125% notes. The 4.125% notes are senior, unsecured obligations of the company, with interest payable on March 1 and September 1 of each year. The company may settle the 4.125% notes in cash, common stock or a combination of cash and common stock.
The 4.125% notes contain liability and equity components which were bifurcated and accounted for separately. The liability component of the 4.125% notes, as of the issuance date, was calculated by estimating the fair value of a similar liability i
ssued at a 9.31% effective interest rate, which was determined by considering the rate of return investors would require for comparable debt of the company without conversion rights. The amount of the equity component was calculated by deducting the fair value of the liability component from the principal amount of the 4.125% notes, resulting in the initial recognition of $40.6 million as debt discount costs recorded in additional paid-in capital. The carrying amount of the 4.125% notes will be accreted to the principal amount over the remaining term to maturity, and the company will record a corresponding amount of noncash interest expense. Additionally, the company incurred debt issuance costs of $5.7 million related to the 4.125% notes and allocated $4.3 million of debt issuance costs to the liability component of the 4.125% notes. These costs will be amortized to noncash interest expense over the six-year term of the 4.125%
notes.
Prior to March 1, 2022, the 4.125% notes are not convertible unless certain conditions are satisfied. The conversion rate is subject to adjustment upon the occurrence of certain events, including when the quarterly cash dividend exceeds $0.12 per share and upon redemption of the 4.125% notes. The initial conversion rate is 35.7143 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $28.00 per share.
The company may redeem all, but not less than all, of the 4.125% notes at any time on or after September 1, 2020, if the company’s common stock equals or exceeds 140% of the applicable conversion price for a specified time period ending on the
trading day immediately prior to the date the company delivers notice of the redemption. The redemption price will equal 100% of the principal plus any accrued and unpaid interest. Holders of the 4.125% notes have the option to require the company to repurchase the 4.125% notes in cash at a price equal to 100% of the principal plus accrued and unpaid interest when there is a fundamental change, such as change in control. If an event of default occurs, it could result in the 4.125% notes being declared due and payable.
In September 2013, the company issued
$120.0
million of
3.25%
convertible senior notes due 2018, or the 3.25% notes. The 3.25% notes are senior, unsecured obligations of the company, with interest payable on April 1 and October 1 of each year. The Company may settle the 3.25% notes in cash, common stock or a combination of cash and common stock.
Prior to April 1, 2018, the 3.25% notes are not convertible unless certain conditions are satisfied. The conversion rate is subject to adjustment when the quarterly cash dividend exceeds
$0.04
per share. The conversion rate was recently adjusted to
49.4123
shares
of common
stock per
$1,000
of principal
,
which is equal to a conversion price of
approximately
$20.24
per
share. The company may be obligated to increase the conversion rate in certain events, including redemption of the 3.25% notes.
The company may redeem all of the 3.25% notes at any time on or after October 1, 2016, if the company's common stock equals or exceeds
140%
of the applicable conversion price for a specified time period ending on the trading day immediately prior to the date the company delivers notice of the redemption. The redemption price will equal
100%
of the principal plus any accrued and unpaid interest. Holders of the 3.25% notes have the option to require the company to repurchase the 3.25% notes in cash at a price equal to 100% of the principal plus accrued and unpaid interest when there is a fundamental change, such as change in control.
If an event of default occurs, it could result in the 3.25% notes being declared due and payable.
Covenant Compliance
The company was in compliance with its debt covenants as of December 31, 2016.
Capitalized Interest
The company had
$0.8
million, $
1.1
million, and
$191
thousand in capitalized interest during the years ended December 31, 2016, 2015 and 2014, respectively.
Restricted Net Assets
At December 31, 2016, there were
approximately $
835.0
million of
net
assets at the company’s subsidiaries that could not be transferred to the parent company in the form of dividends, loans or advances due to restrictions contained in the credit facilities of these subsidiaries.
12.
STOCK-BASED COMPENSATION
The
company has an equity incentive plan that reserves
3,500,000
shares of common stock for issuance to its directors and employees. The plan provides for shares, including options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, restricted stock, and restricted and deferred stock unit awards, to be granted to eligible employees, non-employee directors and consultants. The company measures stock-based compensation at fair value on the grant date, adjusted for estimated forfeitures. The company records noncash compensation expense related to equity awards in its consolidated financial statements over the requisite period on a straight-line basis. Substantially all of the existing stock-based
compensation has been equity awards.
Grants under the equity incentive plans may include options, stock awards or deferred stock units:
|
·
|
|
Options
– Stock options may be granted that can be exercised immediately in installments or at a fixed future date. Certain options are exercisable regardless of employment status while others expire following termination. Options issued to date may be exercised immediately or at future vesting dates, and expire
five
to
eight
years after the grant date. Compensation expense for stock options that vest over time is recognized on a straight-line basis over the requisite service period.
|
|
·
|
|
Stock Awards
– Stock awards may be granted to directors and employees that vest immediately or over a period of time as determined by the compensation committee. Stock awards granted to date vested immediately and over a period of time, and included sale restrictions. Compensation expense is recognized on the grant date if fully vested or over the requisite vesting period.
|
|
·
|
|
Deferred Stock Units
– Deferred stock units may be granted to directors and employees that vest immediately or over a period of time as determined by the compensation committee. Deferred stock units granted to date vest over a period of time with underlying shares of common stock that are issuable after the vesting date. Compensation expense is recognized on the grant date if fully vested, or over the requisite vesting period.
|
The fair value of the stock options is estimated on the date of the grant using the Black
‑Scholes option
‑pricing model, a pricing model acceptable under GAAP. The expected life of the options in the period of time the options are expected to be outstanding. The
company did
no
t grant any stock option awards during the years ended December 31, 2016, 2015
and 2014.
The activity related to the exercisable stock options for the year ended December 31, 2016, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-
Average
Exercise Price
|
|
Weighted-Average
Remaining
Contractual Term
(in years)
|
|
Aggregate
Intrinsic Value
(in thousands)
|
Outstanding at December 31, 2015
|
298,750
|
|
$
|
9.81
|
|
2.4
|
|
$
|
3,866
|
Granted
|
-
|
|
|
-
|
|
-
|
|
|
-
|
Exercised
|
(150,000)
|
|
|
7.28
|
|
-
|
|
|
2,250
|
Forfeited
|
-
|
|
|
-
|
|
-
|
|
|
-
|
Expired
|
-
|
|
|
-
|
|
-
|
|
|
-
|
Outstanding at December 31, 2016
|
148,750
|
|
$
|
12.36
|
|
2.8
|
|
$
|
2,305
|
Exercisable at December 31, 2016
(1)
|
148,750
|
|
$
|
12.36
|
|
2.8
|
|
$
|
2,305
|
|
(1)
|
|
Includes in-the-money options
totaling
148,750
shares at a weighted-average exercise price of $
12.36
.
|
Option awards allow employees to exercise options through cash payment for the shares of common stock or simultaneous broker-assisted transactions in which the employee authorizes the exercise and immediate sale of the option in the open market. The company uses newly issued shares of common stock to satisfy its stock-based payment obligations.
The non-vested stock award and deferred stock unit activity for the year ended December 31, 2016, are as follows:
|
|
|
|
|
|
|
|
Non-Vested
Shares and
Deferred
Stock Units
|
|
Weighted-
Average Grant-
Date Fair Value
|
|
Weighted-Average
Remaining
Vesting Term
(in years)
|
Nonvested at December 31, 2015
|
736,728
|
|
$
|
22.96
|
|
|
Granted
|
825,246
|
|
|
14.20
|
|
|
Forfeited
|
(49,149)
|
|
|
18.59
|
|
|
Vested
|
(373,265)
|
|
|
20.36
|
|
|
Nonvested at December 31, 2016
|
1,139,560
|
|
$
|
17.65
|
|
1.7
|
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 stock award and deferred stock unit activity for the year ended December 31, 2016, are as follows:
|
|
|
|
|
|
|
|
Non-Vested
Shares and
Deferred
Stock Units
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Weighted-Average
Remaining
Vesting Term
(in years)
|
Non-Vested at December 31, 2015
|
10,089
|
|
$
|
14.93
|
|
|
Granted
|
16,260
|
|
|
15.82
|
|
|
Forfeited
|
(5,333)
|
|
|
14.93
|
|
|
Vested
|
(6,007)
|
|
|
14.69
|
|
|
Nonvested at December 31, 2016
|
15,009
|
|
$
|
15.99
|
|
0.5
|
Compensation costs for stock-based and unit-based payment plans during the years ended
December 31, 2016, 2015 and 2014, were
approximately $
9.5
million, $
8.8
million and $
7.2
million, respectively. At December 31, 2016, there were $
11.6
million of unrecognized compensation costs from stock-based and unit-based compensation related to non-vested awards. This compensation is expected to be recognized over a weighted-average period of approximately
1.7
years. The potential
tax benefit related to stock-based payment is approximately
37.7
% of these expenses.
13. EARNINGS PER SHARE
Basic earnings per share, or EPS, is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the
period. Diluted EPS is computed by dividing net income on an if-converted basis for the first quarter of 2014, associated with the
3.25%
notes and
5.75%
convertible senior notes due 2015, or the 5.75% notes, by the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of any outstanding dilutive securities. All of the 5.75% notes were retired during the first quarter of 2014. During the second quarter of 2014, shareholders approved flexible settlement, which gives the company the option to settle the 3.25% notes
and the
4.125%
notes
in cash, common stock or a combination of cash and common stock. The company intend
s to settle
the 3.25% notes
and the 4.125% notes
with cash for the principal and cash or common stock the conversion premium. Accordingly, diluted EPS is computed using the treasury stock method by dividing net income by the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of any outstanding dilutive securities
.
The basic and diluted EPS are calculated as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Basic EPS:
|
|
|
|
|
|
|
|
|
Net income attributable to Green Plains
|
$
|
10,663
|
|
$
|
7,064
|
|
$
|
159,504
|
Weighted average shares outstanding - basic
|
|
38,318
|
|
|
37,947
|
|
|
36,467
|
EPS - basic
|
$
|
0.28
|
|
$
|
0.19
|
|
$
|
4.37
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
Net income attributable to Green Plains
|
$
|
10,663
|
|
$
|
7,064
|
|
$
|
159,504
|
Interest and amortization on convertible debt, net of tax effect:
|
|
|
|
|
|
|
|
|
5.75% notes
|
|
-
|
|
|
-
|
|
|
576
|
3.25% notes
|
|
-
|
|
|
-
|
|
|
1,379
|
Net income attributable to Green Plains - diluted
|
$
|
10,663
|
|
$
|
7,064
|
|
$
|
161,459
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic
|
|
38,318
|
|
|
37,947
|
|
|
36,467
|
Effect of dilutive convertible debt:
|
|
|
|
|
|
|
|
|
5.75% notes
|
|
-
|
|
|
-
|
|
|
1,006
|
3.25% notes
|
|
155
|
|
|
939
|
|
|
3,040
|
Effect of dilutive stock-based compensation awards
|
|
100
|
|
|
142
|
|
|
217
|
Weighted average shares outstanding - diluted
|
|
38,573
|
|
|
39,028
|
|
|
40,730
|
|
|
|
|
|
|
|
|
|
EPS - diluted
|
$
|
0.28
|
|
$
|
0.18
|
|
$
|
3.96
|
|
|
|
|
|
|
|
|
|
14. STOCKHOLDERS’ EQUITY
Treasury Stock
The company
holds 7.7 million shares
of its common stock at a cost
of $75.8 million. Treasury stock is recorded at cost and reduces stockholders’ equity in the consolidated balance sheets. When shares are reissued, the
company will use the weighted average cost method for determining the cost basis. The difference between the cost and the issuance price is added or deducted from additional paid-in capital.
Share Repurchase
Program
In August 2014, the company announced a share repurchase program of up to
$100
million of its common stock. Under the program, the company may repurchase shares in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers or by other means. The timing and amount of repurchase transactions are determined by its management based on market conditions, share price, legal requirements and other factors. The program may be suspended, modified or
discontinued at any time without prior notice. The company repurchased 323,290 shares of common stock for approximately $6.0 million during the second quarter of 2016.
Since inception
, the company has repurchased 514,990 shares of common stock for approximately $10.0 million under the program.
Dividends
The company has paid a quarterly cash dividend since August 2013 and anticipates declaring a cash dividend in future quarters on a regular basis. Future declarations of dividends, however, are subject to board approval and may be adjusted as the company’s liquidity, business needs or market conditions change. On February 8, 2017, the company’s board of directors declared a quarterly cash dividend of $0.12 per share. The dividend is payable on March 17, 2017, to shareholders of record at the close of business on February 24, 2017.
For each calendar quarter commencing with the quarter ended September 30, 2015, the partnership agreement requires the partnership to distribute
all available cash, as defined, to its partners within 45 days after the end of each calendar quarter. Available cash generally means all cash and cash equivalents on hand at the end of that quarter less cash reserves established by the general partner of the
partnership plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the end of that quarter. On January 23, 2017, the board of directors of the general partner of
the partnership
declared a cash distribution of $0.43 per unit on outstanding common and subordinated units. The distribution is payable on February 14, 2017, to unitholders of record at the close of business on February 3, 2017.
Accumulated Other
Comprehensive
Income
Changes in accumulated other comprehensive income are associated primarily with gains and losses on derivative financial instruments. Amounts reclassified from accumulated other comprehensive income
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Statements of Income
|
|
2016
|
|
2015
|
|
2014
|
|
Classification
|
Gains (losses) on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
(8,094)
|
|
$
|
8,420
|
|
$
|
(257,730)
|
|
Revenues
|
Commodity derivatives
|
|
(16,508)
|
|
|
(3,551)
|
|
|
(43,853)
|
|
Cost of goods sold
|
Total
|
|
(24,602)
|
|
|
4,869
|
|
|
(301,583)
|
|
Income (loss) before income taxes
|
Income tax expense (benefit)
|
|
(8,830)
|
|
|
1,855
|
|
|
(139,754)
|
|
Income tax expense (benefit)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
$
|
(15,772)
|
|
$
|
3,014
|
|
$
|
(161,829)
|
|
|
15. INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases, and net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted rates
expected to be applicable to taxable income in the years those temporary differences are recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income during the period that includes the enactment date.
Green Plains Partners is a limited partnership, which is treated as a flow-through entity for federal income tax purposes and is not subject to federal income taxes. As a result, the consolidated financial statements do not reflect such income taxes on pre-tax income or
loss attributable to the noncontrolling interest in the partnership.
Income tax expense consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
Current
|
|
$
|
2,950
|
|
$
|
33,750
|
|
$
|
67,389
|
Deferred
|
|
|
4,910
|
|
|
(27,513)
|
|
|
23,537
|
Total
|
|
$
|
7,860
|
|
$
|
6,237
|
|
$
|
90,926
|
Differences between income tax expense at the statutory federal income tax rate and as presented on the consolidated statements of income are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Tax expense at federal statutory
|
|
|
|
|
|
|
|
|
rate of 35%
|
$
|
13,423
|
|
$
|
7,513
|
|
$
|
87,650
|
State income tax expense, net
|
|
|
|
|
|
|
|
|
of federal benefit
|
|
323
|
|
|
1,397
|
|
|
6,810
|
Qualified production activities deduction
|
|
-
|
|
|
-
|
|
|
(4,637)
|
Nondeductible compensation
|
|
185
|
|
|
-
|
|
|
848
|
Noncontrolling interests
|
|
(6,940)
|
|
|
(2,857)
|
|
|
-
|
Other
|
|
869
|
|
|
184
|
|
|
255
|
Income tax expense
|
$
|
7,860
|
|
$
|
6,237
|
|
$
|
90,926
|
Significant components of deferred tax assets and liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
Deferred tax assets:
|
|
|
|
|
|
Net operating loss carryforwards - Federal
|
$
|
2,112
|
|
$
|
-
|
Net operating loss carryforwards - State
|
|
1,290
|
|
|
337
|
Tax credit carryforwards - State
|
|
3,701
|
|
|
4,348
|
Derivative financial instruments
|
|
1,218
|
|
|
-
|
Investment in partnerships
|
|
91,951
|
|
|
46,519
|
Organizational and start-up costs
|
|
-
|
|
|
26
|
Stock-based compensation
|
|
3,535
|
|
|
3,080
|
Accrued expenses
|
|
10,722
|
|
|
10,649
|
Capital leases
|
|
3,764
|
|
|
3,800
|
Other
|
|
3,001
|
|
|
1,858
|
Total deferred tax assets
|
|
121,294
|
|
|
70,617
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
Convertible debt
|
|
(17,593)
|
|
|
(5,329)
|
Fixed assets
|
|
(205,189)
|
|
|
(139,383)
|
Derivative financial instruments
|
|
-
|
|
|
(4,542)
|
Organizational and start-up costs
|
|
(36,464)
|
|
|
-
|
Total deferred tax liabilities
|
|
(259,246)
|
|
|
(149,254)
|
Valuation allowance
|
|
(2,310)
|
|
|
(3,160)
|
Deferred income taxes
|
$
|
(140,262)
|
|
$
|
(81,797)
|
The company maintains a valuation allowance for its net deferred tax assets due to uncertainty that it will realize these assets in the future.
The deferred tax valuation allowance
of $
2.3
million as of December 31, 2016, relates to Iowa tax credits that started expiring in 2013 and will continue to expire through 2018. M
anagement
considers whether it is more likely than not that some or all of the deferred tax assets will be realized, which is dependent on the generation of future taxable income and other tax attributes during the periods those temporary differences become deductible. Scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies are considered to make this assessment.
The company’s federal and state returns for the tax years
ended December 31, 2013, and later
are still subject to audit.
A reconciliation of unrecognized tax benefits is as follows (in thousands):
|
|
|
|
|
|
Unrecognized Tax Benefits
|
Balance at January 1, 2016
|
$
|
189
|
Additions for prior year tax positions
|
|
5
|
Reductions for prior year tax positions
|
|
-
|
Balance at December 31, 2016
|
$
|
194
|
Recognition of these tax benefits would favorably impact the company’s effective tax rate. Interest and penalties associated with uncertain tax positions are accrued as part of income taxes payable
.
16. COMMITMENTS AND CONTINGENCIES
Operating Leases
The company leases certain facilities, equipment and parcels of land under agreements that expire at various dates. For accounting purposes, rent expense is based on a straight-line amortization of the total payments required over the lease. The company incurred lease expenses
of
$38.0
million, $
33
.2
million and $
31.8
million during the years ended December 31, 2016, 2015 and 2014, respectively.
Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in thousands):
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Amount
|
2017
|
|
$
|
35,170
|
2018
|
|
|
25,959
|
2019
|
|
|
16,991
|
2020
|
|
|
11,442
|
2021
|
|
|
5,042
|
Thereafter
|
|
|
20,653
|
Total
|
|
$
|
115,257
|
Commodities
As
of December 31, 2016, the company had contracted future purchases of grain, corn oil, natural gas, crude oil, ethanol, distillers
grains and cattle, valued at approximately $504.4 million.
Legal
In November 2013, the company acquired
two
ethanol plants located in Fairmont, Minnesota and Wood River, Nebraska. There is ongoing litigation related to the consideration for this acquisition. On August 19, 2016, the Delaware Superior Court granted Green Plains’ motion for summary judgment in part and held that the seller’s attempt to disclaim liability for certain shortfall amounts through the use of a disclaimer provision was ineffective. Based on the court order, the company determined that previously accrued contingent liabilities of approximately $6.3 million no longer represent probable losses. These accruals were reversed as a reduction of cost of goods sold during the year ended December 31, 2016, because the adjustment relates to a reduction in the cost of inventory purchased in the acquisitions. The court has directed the company and the seller to work together to determine the precise total of the shortfall amount due to Green Plains. The company believes the remaining amount due to Green Plains is approximately $5.5 million; however, the seller has the right to dispute the details of the calculation and appeal the underlying Superior Court order. Accordingly, the total amount Green Plains may receive is yet to be determined. The remaining amount due to the company represents a gain contingency, which will not be recorded until all contingencies are resolved.
In addition to the above-described proceeding, the company is currently involved in other litigation that has arisen in the ordinary course of business, but does not believe any pending litigation will have a material adverse effect on its financial position, results of operations or cash flows.
Insurance Recoveries
In March 2014, the Green Plains Otter Tail ethanol plant was damaged by a fire, which caused substantial property damage and business interruption costs. The company had property damage and business interruption insurance coverage and, as a result, the incident did not have a material adverse impact on the company’s financial results. As of December 31, 2014, the company had received
$7.8
million for the property damage portion of the claim, representing reimbursement, net of deductible, for the replacement value of the damaged property and equipment. This recovery was in excess of the book value of the damaged assets, resulting in a gain of
$4.2
million, which was recorded in other income during the year ended December 31, 2014. The company had also received insurance proceeds of
$10.5
million as of December 31, 2014 related to the business interruption portion of the claim, reimbursing a substantial majority of lost profits, net of deductible, during the repair of this equipment. These proceeds were recorded as a reduction of cost of goods sold. The amounts above for both property damage and business interruption insurance claims are final
.
17. EMPLOYEE BENEFIT PLANS
The company offers eligible employees a comprehensive employee benefits plan that includes health, dental, vision, life and accidental death, short-term disability and long-term disability insurance, and flexible spending accounts. The company also offers a 401(k) plan enabling eligible employees to save for retirement on a tax-deferred basis up to the limits allowed under the
Internal Revenue Code and matches up to 4% of eligible employee contributions. Employee and employer contributions are 100% vested immediately. Employer contributions to the 401(k) plan for the years ended December 31, 2016, 2015 and 2014 were $1.6 million, $1.4 million and $1.1 million, respectively.
The company contributes to a defined benefit pension plan. Since January of 2009, the benefits under the plan were frozen; however, the c
ompany remains obligated to ensure the plan is funded according to its requirements. As of December
31, 2016, the plan’s assets
were $
5.5
million and liabilities were $
6.6
million. At December 31, 2016 and 2015, net liabilities of $
1.1
million were included
in other liabilities on the consolidated balance
sheet
.
18. RELATED PARTY TRANSACTIONS
Commercial Contracts
Three subsidiaries of the company have executed separate financing agreements for equipment with Amur Equipment Finance. Gordon Glade, a director of Amur Equipment Finance, is a member of the company’s board of directors. In March 2014, a subsidiary of the company entered into
$1.4
million of new equipment financing agreements with Amur Equipment Finance.
Balances of
$0.8
million and $
1.0
million related to these financing arrangements were included in debt at
December 31, 2016 and 2015, respectively. Payments, including principal and interest, totaled
$0.3
million for each of the years ended December 31, 2016, 2015 and 2014. The weighted average interest rate for the financing agreements with Amur Equipment Finance was
6.8
%.
Aircraft Leases
Effective January 1, 2015, the company entered into
two
agreements with an entity controlled by Wayne Hoovestol for the lease of
two
aircrafts. Mr. Hoovestol is chairman of the company’s board of directors. The company agreed to pay
$9,766
per month for
the combined use of up to 125 hours per year of the aircrafts. Flight time in excess of 125 hours per year will incur additional hourly charges. These agreements replaced prior agreements with entities controlled by Mr. Hoovestol for the lease of two aircrafts for
$15,834
per month for use of up to
125
hours per year, with flight time in excess of 125 hours per year incurring additional hourly charges. During the years ended December 31, 2016, 2015 and 2014, payments related to these leases
totaled $
190
thousand, $
270
thousand and $
187
thousand, respectively. The company had
no
outstanding payables related to these agreements at December 31, 2016 or 2015
.
19. QUARTERLY FINANCIAL DATA (Unaudited)
The following table includes unaudited financial data for each of the quarters within the years ended December 31, 2016, and 2015 (in thousands, except per share amounts), which is derived from the company’s consolidated financial statements. In management’s opinion, the financial data reflects all of the adjustments necessary for a fair presentation of the quarters presented. The operating results for any quarter
are not necessarily indicative of results for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
December 31,
2016
|
|
September 30,
2016
|
|
June 30,
2016
|
|
March 31,
2016
|
Revenues
|
|
$
|
932,098
|
|
$
|
841,852
|
|
$
|
887,727
|
|
$
|
749,204
|
Costs and expenses
|
|
|
876,028
|
|
|
810,997
|
|
|
860,318
|
|
|
771,850
|
Operating income (loss)
|
|
|
56,070
|
|
|
30,855
|
|
|
27,409
|
|
|
(22,646)
|
Other expense
|
|
|
(19,433)
|
|
|
(12,888)
|
|
|
(8,953)
|
|
|
(12,063)
|
Income tax expense (benefit)
|
|
|
12,199
|
|
|
5,083
|
|
|
5,471
|
|
|
(14,893)
|
Net income (loss) attributable to Green Plains
|
|
|
18,682
|
|
|
7,928
|
|
|
8,191
|
|
|
(24,138)
|
Basic earnings (loss) per share attributable to Green Plains
|
|
|
0.49
|
|
|
0.21
|
|
|
0.21
|
|
|
(0.63)
|
Diluted earnings (loss) per share attributable to Green Plains
|
|
|
0.47
|
|
|
0.20
|
|
|
0.21
|
|
|
(0.63)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
December 31,
2015
|
|
September 30,
2015
|
|
June 30,
2015
|
|
March 31,
2015
|
Revenues
|
|
$
|
739,914
|
|
$
|
742,797
|
|
$
|
744,490
|
|
$
|
738,388
|
Costs and expenses
|
|
|
727,176
|
|
|
722,964
|
|
|
720,088
|
|
|
734,284
|
Operating income
|
|
|
12,738
|
|
|
19,833
|
|
|
24,402
|
|
|
4,104
|
Other expense
|
|
|
(7,959)
|
|
|
(10,396)
|
|
|
(11,388)
|
|
|
(9,869)
|
Income tax expense (benefit)
|
|
|
4,066
|
|
|
(604)
|
|
|
5,222
|
|
|
(2,447)
|
Net income (loss) attributable to Green Plains
|
|
|
(3,589)
|
|
|
6,179
|
|
|
7,792
|
|
|
(3,318)
|
Basic earnings (loss) per share attributable to Green Plains
|
|
|
(0.09)
|
|
|
0.16
|
|
|
0.20
|
|
|
(0.09)
|
Diluted earnings (loss) per share attributable to Green Plains
|
|
|
(0.09)
|
|
|
0.16
|
|
|
0.19
|
|
|
(0.09)
|
Schedule I – Co
ndensed Financial Information of the Registrant (Parent Company Only)
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF BALANCE SHEET – PARENT COMPANY ONLY
(in thousands)
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2016
|
|
2015
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
188,953
|
|
$
|
273,294
|
Restricted cash
|
|
|
16,947
|
|
|
10,130
|
Accounts receivable, including amounts from relate
d parties
of
$0
and
$1,080
, respectively
|
|
|
285
|
|
|
1,188
|
Income tax receivable
|
|
|
10,379
|
|
|
9,104
|
Prepaid expenses and other
|
|
|
1,199
|
|
|
1,189
|
Due from subsidiaries
|
|
|
48,785
|
|
|
26,109
|
Total current assets
|
|
|
266,548
|
|
|
321,014
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
12,900
|
|
|
3,811
|
Investment in consolidated subsidiaries
|
|
|
916,138
|
|
|
549,642
|
Deferred income taxes
|
|
|
87,310
|
|
|
53,273
|
Other assets
|
|
|
9,642
|
|
|
14,846
|
Total assets
|
|
$
|
1,292,538
|
|
$
|
942,586
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
6,916
|
|
$
|
1,889
|
Due to subsidiaries
|
|
|
160,486
|
|
|
25,973
|
Accrued liabilities
|
|
|
20,488
|
|
|
12,511
|
Total current liabilities
|
|
|
187,890
|
|
|
40,373
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
236,056
|
|
|
103,072
|
Other liabilities
|
|
|
2,890
|
|
|
146
|
Total liabilities
|
|
|
426,836
|
|
|
143,591
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
|
|
Common stock
|
|
|
46
|
|
|
45
|
Additional paid-in capital
|
|
|
658,258
|
|
|
577,787
|
Retained earnings
|
|
|
283,214
|
|
|
290,974
|
Treasury stock
|
|
|
(75,816)
|
|
|
(69,811)
|
Total stockholders' equity
|
|
|
865,702
|
|
|
798,995
|
Total liabilities and stockholders' equity
|
|
$
|
1,292,538
|
|
$
|
942,586
|
See accompanying notes to the condensed financial statements.
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF INCOME
– PARENT COMPANY ONLY
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Selling, general and administrative expenses
|
$
|
3,174
|
|
$
|
-
|
|
$
|
-
|
Operating (loss)
|
|
(3,174)
|
|
|
-
|
|
|
-
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest income
|
|
1,193
|
|
|
838
|
|
|
462
|
Interest expense
|
|
(14,511)
|
|
|
(9,280)
|
|
|
(9,539)
|
Other, net
|
|
(8,072)
|
|
|
(3,366)
|
|
|
(3,860)
|
Total other expense
|
|
(21,390)
|
|
|
(11,808)
|
|
|
(12,937)
|
Loss before income taxes
|
|
(24,564)
|
|
|
(11,808)
|
|
|
(12,937)
|
Income tax benefit
|
|
12,381
|
|
|
4,106
|
|
|
4,361
|
Loss before equity in earnings of subsidiaries
|
|
(12,183)
|
|
|
(7,702)
|
|
|
(8,576)
|
Equity in earnings of consolidated subsidiaries
|
|
22,846
|
|
|
14,766
|
|
|
168,080
|
Net income
|
$
|
10,663
|
|
$
|
7,064
|
|
$
|
159,504
|
See accompanying notes to the condensed financial statements.
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
STATEMENTS OF CASH FLOWS – PARENT COMPANY ONLY
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Cash flows from operating activities:
|
$
|
72,172
|
|
$
|
19,844
|
|
$
|
(13,962)
|
Net cash provided (used) by operating activities
|
|
72,172
|
|
|
19,844
|
|
|
(13,962)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
(11,556)
|
|
|
(1,191)
|
|
|
(2,829)
|
Acquisition of businesses
|
|
(512,356)
|
|
|
(116,796)
|
|
|
-
|
Transfer of assets to Green Plains Partners LP
|
|
152,312
|
|
|
-
|
|
|
-
|
Investment in consolidated subsidiaries, net
|
|
77,615
|
|
|
143,151
|
|
|
125,179
|
Issuance of notes receivable from subsidiaries,
net of payments received
|
|
3,000
|
|
|
(3,000)
|
|
|
9,500
|
Investments in unconsolidated subsidiaries
|
|
(7,206)
|
|
|
(2,975)
|
|
|
(4,309)
|
Net cash provided (used) by investing activities
|
|
(298,191)
|
|
|
19,189
|
|
|
127,541
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of long-term debt
|
|
170,000
|
|
|
-
|
|
|
-
|
Payments of principal on long-term debt
|
|
-
|
|
|
-
|
|
|
(238)
|
Payments for repurchase of common stock
|
|
(6,005)
|
|
|
(4,003)
|
|
|
-
|
Payment of cash dividends
|
|
(18,423)
|
|
|
(15,191)
|
|
|
(8,908)
|
Payment of loan fees
|
|
(5,651)
|
|
|
-
|
|
|
-
|
Proceeds from the exercise of stock options
|
|
1,757
|
|
|
766
|
|
|
4,404
|
Net cash provided (used) by financing activities
|
|
141,678
|
|
|
(18,428)
|
|
|
(4,742)
|
|
|
|
|
|
|
|
|
|
Net change in cash and equivalents
|
|
(84,341)
|
|
|
20,605
|
|
|
108,837
|
Cash and cash equivalents, beginning of period
|
|
273,294
|
|
|
252,689
|
|
|
143,852
|
Cash and cash equivalents, end of period
|
$
|
188,953
|
|
$
|
273,294
|
|
$
|
252,689
|
See accompanying notes to the condensed financial statements.
GREEN PLAINS INC.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS – PARENT COMPANY ONLY
1.
BASIS OF PRESENTATION
References to “parent company” refer to Green Plains Inc., a holding company that conducts substantially all of its business operations through its subsidiaries. The parent company is restricted from obtaining funds from certain subsidiaries through dividends, loans or advances
.
See
Note 11 – Debt
in the
notes to the consolidated financial statements for additional information. Accordingly, these condensed financial statements are presented on a “parent-only” basis, in which the parent company’s investments in its consolidated subsidiaries are presented under the equity method of accounting. These financial statements should be read in conjunction with Green Plains Inc.’s audited consolidated financial statements included in this report.
Reclassifications
Certain prior year amounts were reclassified to conform to the current year presentation. These reclassifications did not affect total revenues, costs and expenses, net income or stockholders’ equity.
2. COMMITMENTS AND CONTINGENCIES
Operating Leases
The parent company leases certain facilities under agreements that expire at various dates. For accounting purposes, rent expense is based on a straight-line amortization of the total payments required over the lease term. The parent company incurred lease
expenses of $
1.1
million, $
1.1
million and $
1.0
million during the years ended December 31, 2016, 2015 and 2014, respectively.
Aggregate minimum lease payments under these agreements for future fiscal years are as follows (in thousands):
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Amount
|
2017
|
|
$
|
1,951
|
2018
|
|
|
1,919
|
2019
|
|
|
1,897
|
2020
|
|
|
1,372
|
2021
|
|
|
1,333
|
Thereafter
|
|
|
14,682
|
Total
|
|
$
|
23,154
|
Parent Guarantees
The various operating subsidiaries of the parent company enter into contracts as a routine part of their business activities, which are guaranteed by the parent company in certain instances. Examples of these contracts include financing and lease arrangements, commodity purchase and sale agreements, and agreements with vendors. As of December 31, 2016, the parent company
had $
275.9
million in
guarantees of subsidiary contracts and indebtedness.
3. DEBT
Parent company debt as of December 31, 2016, consists of the
3.25%
convertible senior notes due 2018 and
4.125%
convertible senior notes due 2022.
Scheduled long-term debt repayments, including full accretion at their maturity but excluding the effects of the debt discounts, are as follows (in thousands):
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Amount
|
2017
|
|
$
|
-
|
2018
|
|
|
120,000
|
2019
|
|
|
-
|
2020
|
|
|
-
|
2021
|
|
|
-
|
Thereafter
|
|
|
170,000
|
Total
|
|
$
|
290,000
|