Green Plains Renewable Energy, Inc. — FY 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013; the filing also reports unaudited fourth-quarter results. The company is a vertically integrated ethanol producer, marketer and distributor, with grain handling, corn oil, and fuel blending operations.
Financial performance and liquidity
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Revenue | $3,041.0 million | $3,476.9 million |
| Gross profit / margin | $173.0 million / 5.7% | $96.8 million / 2.8% |
| Operating income / margin | $107.9 million / 3.5% | $64.9 million / 1.9% |
| Net income attributable to Green Plains | $43.4 million | $11.8 million |
| Diluted EPS | $1.26 | $0.39 |
| EBITDA (unaudited, company measure) | $156.6 million | $115.5 million |
| Cash from operating activities | $107.3 million | $(13.7) million |
- Revenue declined 12.5%, primarily because of lower grain and agronomy sales after the 2012 divestiture and lower ethanol volumes; higher average ethanol and distillers-grain prices partly offset the decline. Improved ethanol margins drove higher gross profit and earnings.
- FY 2013 revenue included $2.339 billion from ethanol, $488.4 million from distillers grains, $74.3 million from corn oil, and $92.5 million from grain. Figures are affected by substantial intersegment transactions and eliminations.
- Fourth-quarter 2013 revenue was $712.9 million, operating income $51.1 million, and net income attributable to Green Plains $25.5 million. In Q4 2012, those figures were $883.7 million, $68.4 million, and $33.0 million, respectively; Q4 2012 operating income included a $47.1 million asset-sale gain.
- At year-end, cash and cash equivalents were $272.0 million, plus $27.0 million of restricted cash. Current assets were $633.3 million and current liabilities $409.2 million. Subsidiary revolvers had up to $135.4 million of additional availability, subject to borrowing-base and other conditions.
- Total debt was $735.2 million, including $198.3 million of short-term notes and other borrowings and $536.9 million of long-term debt before current classification. Variable-rate debt was $467.1 million. The company reported covenant compliance at year-end.
- Capital expenditures were $19.8 million in 2013; management expected approximately $44 million in 2014. Operating cash flow improved substantially from 2012, while investing cash outflow was $147.6 million, mainly reflecting $123.3 million of net cash used for plant acquisitions.
Material changes and business developments
- Acquired Atkinson, Nebraska, in June and Wood River, Nebraska, and Fairmont, Minnesota, in November. The acquired plants added 280 mmgy of combined capacity; Fairmont, which was not operating at acquisition, restarted in January 2014. Wood River contributed about five weeks of 2013 results.
- Production was 729.2 million gallons in 2013, about 94% of average daily capacity, versus 676.8 million gallons and about 91% in 2012. Fourth-quarter 2013 utilization reached approximately 100%.
- The 2012 sale of 12 grain elevators and the agronomy and retail petroleum operations generated a $47.1 million gain and materially reduced external agribusiness sales in 2013. The company shifted its grain business toward supplying its ethanol plants.
- Started Green Plains Asset Management, a commodity trading advisor, in 2013. Also expanded grain storage, including a stated goal of approximately 50 million bushels of total storage capacity by end-2015.
- Issued $120 million of 3.25% convertible senior notes due 2018. The company also had $90 million of 5.75% convertible notes due 2015.
- Initiated a quarterly dividend of $0.04 per share; two payments were made in 2013. Future dividends remain subject to board approval, liquidity, business needs, market conditions, and debt covenants.
Outlook, risks and unusual items
- Management reported stronger ethanol margins in 2013, particularly in the fourth quarter, citing lower corn prices, lower industry inventories, and improved supply-demand conditions. It said production could be reduced or suspended if margins compress; no specific earnings or revenue guidance was provided.
- The EPA had proposed 2014 Renewable Fuel Standard volumes, including approximately 13.0 billion gallons of corn-derived renewable fuel; the proposal was not a final rule. Changes to mandates, blending constraints, RIN prices, or consumer acceptance of E15/E85 could affect demand and margins.
- Results remain highly exposed to volatile, imperfectly correlated prices for corn, natural gas, ethanol, distillers grains, and corn oil. Hedging may be ineffective, create accounting volatility, or require cash margin deposits on short notice. The filing reports substantial derivative gains and losses; reported fair-value movements can differ in timing from related physical transactions.
- Debt covenants restrict subsidiary distributions and certain activities. Approximately $636.9 million of subsidiary net assets were not available for transfer to the parent under financing restrictions. Debt maturities, including subsidiary facilities and the $90 million convertible notes due 2015, warrant attention.
- Other risks include acquisition integration and financing, variable interest rates, counterparty and credit exposure, plant interruptions and input availability, environmental and greenhouse-gas regulation, and possible changes to federal biofuel policy. The company identified no litigation it believed would materially affect its financial position, results, or cash flows.
- A New Markets Tax Credits transaction included a guarantee of approximately $5.0 million of tax credits against recapture or reduction; management considered recapture unlikely and recorded no liability. Internal-control audits were unqualified, but management and the auditor excluded the acquired Fairmont and Wood River plants from the 2013 internal-control assessment.
Important facts for investors to verify
- Whether 2013 margin improvement and near-full fourth-quarter utilization persisted after year-end, and how acquired plants performed, particularly Fairmont after its restart.
- Cash available at the parent versus restricted subsidiary cash, revolver availability, covenant headroom, and refinancing plans for near-term maturities.
- The economic exposure behind derivative positions and cash-flow hedge reclassifications, including potential margin calls and the timing of physical offsets.
- Final EPA renewable-fuel requirements and the resulting implications for ethanol demand, RIN markets, and industry capacity.
- Progress toward the 2014 capital-spending plan and the 2015 grain-storage target, as well as the sustainability of the quarterly dividend.