Green Plains Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed February 16, 2021. The filing also reports unaudited fourth-quarter results. Green Plains produces ethanol and co-products, markets agricultural commodities, and operates fuel storage and transportation assets. Its strategy is shifting toward higher-value protein ingredients, specialty alcohols and agricultural technology.
Financial and operating performance
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $1.924 billion | $2.417 billion |
| Operating loss | $122.7 million | $142.6 million |
| Net loss attributable to Green Plains | $108.8 million | $166.9 million |
| Basic and diluted loss per share | $3.14 | $4.38 |
| Adjusted EBITDA (non-GAAP) | $36.7 million | $(39.9) million |
| Cash from continuing operating activities | $98.9 million | $(27.0) million |
| Capital expenditures | $111.8 million | $76.5 million |
Fourth-quarter 2020 revenue was $478.8 million, compared with $715.7 million in fourth-quarter 2019. Fourth-quarter operating loss was $34.8 million and net loss attributable to Green Plains was $49.6 million, or $1.43 per share; comparable 2019 figures were an operating loss of $14.9 million and a net loss attributable to Green Plains of $39.7 million, or $1.13 per share.
- Margins and volumes: Ethanol production averaged approximately 71% of capacity in 2020, versus 76% in 2019, amid weak margins and lower gasoline demand. Ethanol sold declined to 793.7 million gallons from 856.6 million; distillers grains sold declined to 2.054 million equivalent dried tons from 2.234 million.
- Balance sheet and liquidity: At year-end, cash and cash equivalents were $233.9 million and restricted cash was $41.0 million. Current assets were $642.4 million and current liabilities $452.6 million. Total debt, including short-term borrowings and current maturities, was approximately $526.2 million; long-term debt was $287.3 million. The company reported $332.0 million available under committed revolving facilities and a delayed-draw loan, some subject to restrictions or conditions. Approximately $77.7 million of subsidiary net assets was restricted from transfer to the parent.
- Cash flow and spending: Continuing operating cash flow improved by $125.9 million year over year. Investing activities used $11.5 million, including increased capital spending; financing activities used $82.5 million. Management estimated 2021 capital spending of $200–$225 million, subject to project review.
- Debt and distributions: The partnership’s $100 million term-loan balance was due under a facility maturing December 31, 2021; refinancing had not yet been completed at the filing date. Green Plains suspended its common-stock dividend in 2019. It repurchased 880,979 shares for $11.5 million in 2020.
Material changes and unusual items
- Revenue fell about 20% year over year, mainly from lower ethanol and distillers-grains volumes and reduced commodity-trading revenue. Ethanol-production revenue declined $198.1 million; agribusiness and energy-services revenue declined $291.6 million.
- Adjusted EBITDA improved by $76.7 million, reflecting improved margins and increased industrial-grade alcohol and Ultra-High Protein sales. This non-GAAP measure excludes or adjusts for specified items and is not a substitute for GAAP results.
- FY2020 included a $24.1 million noncash goodwill impairment, a $22.4 million pretax loss on the Hereford plant sale, and a $1.5 million gain from the GPCC disposition. The company also recorded a $50.4 million income-tax benefit, primarily associated with CARES Act net operating loss carrybacks and valuation-allowance changes.
- Green Plains sold its remaining 50% interest in Green Plains Cattle Company for $80.5 million in October 2020, with no material gain or loss. It sold the Hereford, Texas ethanol plant for $39.0 million plus working capital in December, recording the loss noted above. In December it acquired a majority interest in Fluid Quip Technologies (FQT); preliminary purchase accounting included $30.8 million of identifiable intangible assets.
Outlook, commentary and principal risks
Management is pursuing Project 24 cost and efficiency improvements and expanding Ultra-High Protein production, USP/GNS specialty alcohols and corn-starch technology. Shenandoah began Ultra-High Protein shipments in April 2020; Wood River shipments were expected in the third quarter of 2021. York GNS upgrades and its corn-starch facility were expected to be completed in 2021. These are plans and expectations, not guarantees.
- COVID-19 reduced gasoline and ethanol demand, especially early in 2020; the timing of a sustained recovery remained uncertain. Management reported no material disruption to operations or financial-reporting controls during 2020.
- Profitability remains sensitive to the spread between corn and natural-gas input costs and prices for ethanol and co-products. Commodity volatility, hedging outcomes, counterparty performance and sudden margin-related collateral calls can affect earnings and liquidity.
- Regulatory uncertainty includes EPA renewable-fuel volumes, small-refinery exemptions, RIN prices, E15 policy and potential changes to federal or state low-carbon fuel programs. Trade barriers and export-market conditions are additional risks.
- Debt, covenant compliance, variable-rate exposure and access to refinancing are important risks. The partnership’s 2021 facility maturity and LIBOR transition require attention. The company reported covenant compliance at December 31, 2020, but cautioned actual results may differ from forecasts.
- After year-end, Green Plains closed a $125 million, five-year mezzanine note facility at an 11.75% annual rate to fund Ultra-High Protein expansion; interest may be partly paid in kind. BlackRock also received 2 million warrants with a $22 exercise price. Green Plains had agreed to sell the Ord plant for $64 million plus estimated working capital; closing was expected within 45 days and remained subject to conditions.
KPMG issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting. Management also concluded disclosure controls were effective. The filing states ordinary-course litigation is not expected to have a material adverse effect.
Investor verification priorities
- Track ethanol margins, plant utilization and gasoline-demand recovery, including the extent to which higher-value co-products offset commodity pressure.
- Confirm delivery and economics of the planned Ultra-High Protein, Project 24, GNS and corn-starch projects, and compare actual capital spending with the $200–$225 million 2021 estimate.
- Verify refinancing or repayment plans for the partnership facility maturing December 31, 2021, and review the covenants, cash-pay/PIK terms and collateral for the new 11.75% mezzanine notes.
- Check whether the Ord sale closed on the stated terms and how the transaction affects capacity, minimum-volume commitments, debt and liquidity.
- Review the quality and repeatability of operating cash flow and adjusted EBITDA, and distinguish operating performance from tax benefits, impairments and asset-sale effects.