Green Plains Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Green Plains produces ethanol and related coproducts and operates agribusiness and energy services businesses. On January 9, 2024, it completed the merger to acquire publicly held Green Plains Partners units, issuing about 4.7 million shares and paying $29.2 million cash. The transaction was accounted for as an equity transaction; no gain or loss was recognized.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $597.2 million | $832.9 million; down 28.3% |
| Gross margin | $8.4 million | $0.7 million |
| Operating loss | $44.9 million | $56.5 million loss |
| Net loss attributable to Green Plains | $51.4 million | $70.3 million loss |
| EPS, basic and diluted | $(0.81) | $(1.20) |
| Adjusted EBITDA | $(21.5) million | $(27.7) million |
| Cash from operating activities | $(50.6) million | $(117.0) million |
| Capital expenditures | $21.8 million | $32.6 million |
Revenue fell primarily due to lower selling prices for ethanol, distillers grains and renewable corn oil, lower coproduct volumes, and lower natural gas prices and trading volumes. Improved ethanol production margins helped reduce the net loss. Ethanol production was 208.0 million gallons, versus 206.7 million gallons, with utilization of about 92.4%, versus 87.5%. Ethanol production segment operating loss improved to $33.7 million from $42.0 million; agribusiness and energy services operating income rose to $6.0 million from $4.1 million.
At March 31, 2024, cash and cash equivalents were $237.3 million, restricted cash was $40.1 million, and total current assets and liabilities were $588.4 million and $336.4 million, respectively. Total debt was reported as $622.2 million; $184.5 million was variable-rate debt. The company had $230.0 million available under its committed revolver and was in compliance with debt covenants. Cash and cash equivalents declined $112.3 million from year-end. Total assets were $1.80 billion and stockholders’ equity was $900.5 million.
Material changes and unusual items
- The Partners merger increased outstanding shares and eliminated the public partnership interest. The company recorded the $133.8 million public-unit noncontrolling interest as a reduction of noncontrolling interest and corresponding increase to additional paid-in capital.
- Q1 included a $4.2 million inventory valuation adjustment in ethanol production cost of goods sold.
- The company reclassified certain operating and maintenance costs to cost of goods sold; this changed segment gross-margin presentation but did not affect total revenue, total costs or net income.
- Operating cash use improved year over year, with working-capital changes—including accounts payable and inventory—important to the comparison. Financing cash flow included $29.2 million of merger cash consideration and $6.0 million of transaction costs.
Outlook, commentary and risks
- Management expects 2024 capital spending of $95–$115 million, excluding anticipated carbon-capture project expenditures, which it expects to finance through project-related financing. Spending includes Clean Sugar Technology deployment and other projects.
- Management reported that the Shenandoah commercial-scale Clean Sugar Technology facility was mechanically complete and commissioning, with customer shipments beginning in Q2 2024. Tharaldson’s protein-processing assets were commissioning, with first commercial shipments anticipated in Q2 2024.
- The company estimates 2024 net ethanol exports of 1.6–1.8 billion gallons. It does not provide a clear company-level earnings or revenue forecast in the filing.
- Management identifies the board’s ongoing review of strategic alternatives as a factor that could affect future results. It cautions that sustained unprofitable operations could strain liquidity, and that commodity prices, operating margins, weather, customer performance, regulation, interest rates and access to financing are material risks.
- Commodity price volatility can trigger margin calls and unexpected cash needs. A 10% increase in interest rates was estimated to increase annual interest cost by about $1.8 million. Inflation in labor, equipment and other inputs may hurt margins, particularly where customer prices are fixed.
- About $131.4 million of subsidiary net assets were restricted from transfer to the parent. The company says it expects to maintain covenant compliance, but actual results may differ from forecasts. It reported no litigation it believed would have a material adverse effect.
Important facts for investors to verify
- Whether improved production margins persist despite lower commodity selling prices and the Q1 inventory adjustment.
- Liquidity trends, operating cash generation, revolver availability, margin-call exposure and compliance with subsidiary debt covenants.
- Progress, commissioning, customer shipments and funding needs for Clean Sugar Technology, protein initiatives and carbon-capture projects.
- Actual capital expenditures against the $95–$115 million estimate and any additional project financing requirements.
- Developments in the board’s strategic-alternatives review and any regulatory changes affecting ethanol, clean-fuel credits, carbon capture or E15 sales.
- Debt servicing and refinancing exposure, including the 11.75% junior notes due in 2026, the 13.59% partnership term loan due in 2026 and $230 million of convertible notes due in 2027.