Green Plains Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020. Amounts are in U.S. dollars and millions unless otherwise noted.
Business context
Green Plains produces ethanol and related co-products, provides agribusiness and energy services, and operates fuel storage and transportation through its consolidated partnership. Management describes a strategic shift toward higher-value products, including Ultra-High Protein, industrial-grade alcohol and corn oil. Results remain highly sensitive to commodity prices and ethanol demand.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $553.6 | $632.9 |
| Operating income (loss) | $31.3 | $(54.3) |
| Net loss attributable to Green Plains | $(6.5) | $(16.4) |
| Basic and diluted loss per share | $(0.17) | $(0.47) |
| Adjusted EBITDA, a non-GAAP measure | $15.4 | $2.7 |
| Cash from (used in) operating activities | $(37.0) | $17.8 |
Revenue declined 12.5%. Operating income included a $36.9 million gain on the Ord plant sale; adjusted EBITDA excludes that gain. Interest expense was $31.7 million, including a $22.1 million loss on extinguishing convertible notes. Q1 2020 results included a $44.3 million income tax benefit, largely related to CARES Act tax provisions, and a $24.1 million goodwill impairment charge.
At March 31, cash and cash equivalents were $446.8 million, with another $207.6 million restricted. Management reported $330.4 million available under committed revolving credit and term loan agreements, some subject to restrictions or lending conditions. Net cash used in investing was $37.0 million? The filing reports $42.3 million provided by investing activities, principally reflecting asset-sale proceeds, and $374.3 million provided by financing activities, principally equity and debt issuance. Capital expenditures were $31.5 million.
Total debt was reported as $773.4 million in the market-risk disclosure; balance-sheet debt presentation includes $174.1 million of short-term notes and borrowings and $599.3 million of current and long-term debt, net of issuance costs. Variable-rate debt was $235.2 million. The company said it was in compliance with debt covenants at quarter-end. Approximately $152.7 million of subsidiary net assets were restricted from transfer to the parent.
Material changes versus the prior comparable period
- Ethanol production volume fell 26.0% to 178.0 million gallons; average capacity utilization was 71.1%, down from 85.9%. Management attributed lower utilization mainly to Project 24 construction and permitting, as well as operational discretion in a weak margin environment.
- Ethanol production segment operating loss narrowed to $20.3 million from $60.8 million, while agribusiness and energy services operating income rose to $13.3 million from $2.6 million. Partnership operating income was $12.9 million versus $12.4 million.
- The March sale of the Ord, Nebraska plant generated a $36.9 million pretax gain. The company also sold storage assets and assigned rail assets to its partnership for $27.0 million; proceeds were used to reduce partnership debt.
- Financing changed materially: Green Plains issued $230.0 million of 2.25% convertible notes due 2027 and used about $156.5 million of proceeds to repurchase $135.7 million principal of 4.125% notes due 2022. It also issued $125.0 million of secured mezzanine notes at 11.75% to fund high-protein projects and raised $191.1 million net through a common-stock offering of 8.75 million shares.
- Operating cash flow shifted from $17.8 million provided to $37.0 million used, with management citing working-capital and deferred-tax changes. The 2020 comparison also reflects prior-period CARES Act tax benefits and goodwill impairment.
Outlook, commentary and risks
- Management gave no consolidated earnings guidance in the provided filing text. It expected 2021 capital spending of $170–$194 million, focused on high-protein expansion, Project 24 and maintenance; planned projects were expected to be funded by cash flow and project-related financing.
- Management said ethanol margins remained weak and that production could be reduced further if margins, demand or plant projects warrant. Wood River high-protein shipments were expected to begin in Q3 2021; additional installations, including at Mount Vernon and Obion, were planned over the following years.
- The partnership’s $135 million credit facility matures December 31, 2021. The partnership had not finalized refinancing or secured replacement funding by the filing date, but management considered appropriate funding probable. Failure to refinance could require alternative financing, unit issuance, other strategic actions or support from Green Plains.
- Commodity-price swings can affect margins and prompt substantial, short-notice margin calls. The filing reports that Q1 revenues included $56.0 million of derivative losses and cost of goods sold included $18.5 million of derivative gains. COVID-19, fuel demand, weather, counterparty performance and government policy are additional uncertainties.
- Renewable Fuel Standard volumes, small-refinery exemptions, E15 policy and related litigation create demand uncertainty. The EPA had not issued the 2021 RVO rule by the filing date. Management estimated U.S. net ethanol exports of 1.2–1.4 billion gallons for 2021.
- The company reported ordinary-course litigation but did not expect pending matters to materially affect its financial position, results or cash flows. Disclosure controls were assessed as effective, with no material change in internal control reported.
Most important facts for investors to verify
- Progress, cost and expected returns for high-protein projects and the $170–$194 million 2021 capital-spending plan.
- Whether the partnership refinances or repays its December 2021 facility maturity, and the effect of subsidiary-level cash restrictions.
- Whether ethanol utilization and unit margins recover, given lower production and continued commodity and fuel-demand volatility.
- The sustainability of reported operating improvement after excluding the Ord sale gain, debt-extinguishment loss and unusual prior-year tax and impairment items.
- Cash availability after restricted balances, working-capital needs, potential derivative margin calls and scheduled debt service.