Green Plains(GPRE) - 2023 Q4 - Annual Report

PART I Business Green Plains Inc. is transforming into a value-added agricultural technology firm, focusing on sustainable ingredients and strategic growth - Green Plains is transitioning from a commodity-processing business to a value-added agricultural technology company, focusing on creating sustainable, high-value ingredients like Ultra-High Protein, dextrose, and renewable corn oil[27] - The company is engaged in carbon capture and sequestration projects for seven biorefineries to significantly lower their Carbon Intensity (CI) scores, aiming for completion between 2025 and 2026[35] - In January 2023, Green Plains formed a joint venture, Blue Blade Energy, with United Airlines and Tallgrass to develop and commercialize Alcohol-to-Jet (ATJ) technology for producing Sustainable Aviation Fuel (SAF)[34] - On February 6, 2024, the company entered a Cooperation Agreement with a large shareholder and announced that its Board of Directors is initiating a formal review of strategic alternatives to enhance shareholder value[47][49] Operating Segments The company's operations are divided into three segments: Ethanol Production, Agribusiness and Energy Services, and a Partnership, covering biorefining, grain, and logistics Operating Segments Overview | Segment | Key Activities | Key Assets | | :--- | :--- | :--- | | Ethanol Production | Produces ethanol, distillers grains, Ultra-High Protein, and renewable corn oil | 10 biorefineries, 903 mmgy ethanol capacity | | Agribusiness and Energy Services | Grain procurement, commodity marketing, and distribution | 20.2 million bushels of grain storage capacity | | Partnership | Fuel storage and transportation services | 24 ethanol storage facilities, 2 fuel terminals, ~2,180 leased railcars | Ethanol Plant Production Capacity (million gallons per year) | Plant Location | Production Capacity (mmgy) | | :--- | :--- | | Central City, Nebraska | 116 | | Fairmont, Minnesota | 119 | | Madison, Illinois | 90 | | Mount Vernon, Indiana | 90 | | Obion, Tennessee | 120 | | Otter Tail, Minnesota | 55 | | Shenandoah, Iowa | 82 | | Superior, Iowa | 60 | | Wood River, Nebraska | 121 | | York, Nebraska | 50 | | Total | 903 | Recent Developments Recent developments include a strategic alternatives review, the Green Plains Partners LP acquisition, the Atkinson plant sale, and an operating loss from a facility explosion - The Board of Directors is conducting a formal review of strategic alternatives, which may include acquisitions, divestitures, a merger, or sale[47] - Completed the acquisition of all publicly held common units of Green Plains Partners LP on January 9, 2024[50] - Sold the Atkinson ethanol plant on September 7, 2023, resulting in a pretax gain of $4.1 million[51] - An explosion at the Wood River, Nebraska facility in April 2023 led to an operating loss of approximately $9.5 million for the year, after insurance proceeds[52] Human Capital Resources As of December 31, 2023, Green Plains employed 921 individuals, focusing on talent attraction and retention through competitive compensation, benefits, and workforce well-being - The company employed 921 people as of December 31, 2023, including 170 at its corporate office in Omaha, Nebraska[87] - Compensation programs include competitive base wages, a 2019 Equity Incentive Plan, a company-matched 401(k), and various health and insurance benefits[89] Risk Factors The company faces significant risks from commodity price volatility, government biofuel program changes, uncertain ethanol demand, strategic transformation execution, debt, and its strategic alternatives review - Operating results are highly sensitive to the spread between input costs (corn, natural gas) and output prices (ethanol, distillers grains, Ultra-High Protein, renewable corn oil), which are subject to volatile market forces[93][94] - Government biofuel programs, particularly the Renewable Fuel Standard (RFS), could change, impacting mandated volumes and the overall ethanol market. Future demand is also uncertain due to the rise of electric vehicles and shifts in consumer perception[107][116][119] - The company's transformation strategy, including the deployment of MSC™ and CST™ technologies, involves significant capital expenditure and construction risks, and new products may not achieve projected market acceptance or pricing[105][106] - The company's debt exposes it to risks including dedication of cash flow to debt service, limitations on obtaining additional financing, and vulnerability to interest rate increases[129] - The recently announced review of strategic alternatives may be disruptive to the business, causing uncertainty among employees, suppliers, and customers[184] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[189] Cybersecurity The company has implemented a comprehensive cybersecurity program aligned with NIST and CISA frameworks to manage risks, with Board oversight and no material incidents identified as of year-end 2023 - The cybersecurity program follows frameworks from the National Institute of Standards and Technology (NIST) and the Cybersecurity and Infrastructure Security Agency (CISA)[191] - The Audit Committee of the Board of Directors provides oversight for cybersecurity, with quarterly updates from IT leadership[194] - As of December 31, 2023, the company has not identified any cybersecurity incident that would have a material impact on its business or financial statements[196] Properties The company's properties include leased corporate headquarters, owned and leased land for ethanol production facilities, grain storage, and fuel terminals - The company leases approximately 54,000 square feet for its corporate headquarters in Omaha, Nebraska[198] - The Ethanol Production segment owns approximately 1,569 acres and leases about 78 acres of land for its production facilities[199] Legal Proceedings The company is involved in ordinary course litigation but does not expect a material adverse effect on its financial position, results, or cash flows - The company does not believe any current litigation will have a material adverse effect on its financial position[203] Mine Safety Disclosures This item is not applicable to the company - Not applicable[204] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Green Plains' common stock trades on Nasdaq, with 1,741 holders of record, a suspended dividend, and an authorized $200.0 million share repurchase program - The company's common stock trades on Nasdaq under the symbol "GPRE"[207] - The quarterly cash dividend was suspended in June 2019 to reallocate cash to strategic initiatives[209] - A $200.0 million share repurchase program is authorized. To date, 7.4 million shares have been repurchased for $92.8 million. No shares were repurchased in 2023[210] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transition to a value-added agricultural technology firm, with FY2023 revenues decreasing, net loss improving, adjusted EBITDA reaching $45.5 million, and strong liquidity maintained Consolidated Financial Results (in millions) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Revenues | $3,295.7 | $3,662.8 | | Operating Loss | $(61.6) | $(98.9) | | Net Loss | $(76.3) | $(103.4) | | Adjusted EBITDA | $45.5 | $(0.8) | - The decrease in 2023 consolidated revenues was primarily due to lower average selling prices and volumes for ethanol, distillers grains, and renewable corn oil[283] - The improvement in net loss and Adjusted EBITDA in 2023 was driven by higher margins in the ethanol production segment, despite lower revenues[284] Results of Operations For FY2023, the Ethanol Production segment's operating loss significantly decreased, while Agribusiness and Energy Services' operating income fell, and the Partnership segment's operating income remained stable Operating Income (Loss) by Segment (in millions) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Ethanol production | $(66.9) | $(117.8) | | Agribusiness and energy services | $28.1 | $36.4 | | Partnership | $46.9 | $47.7 | | Corporate activities | $(69.7) | $(68.9) | | Total Operating Loss | $(61.6) | $(98.9) | - The Ethanol Production segment's improved performance was due to a $317.1 million decrease in cost of goods sold, driven by lower corn prices and volumes[288][289] - The Agribusiness and Energy Services segment saw a decrease in operating income primarily due to lower distillers grains trading margins[290] Liquidity and Capital Resources As of December 31, 2023, the company maintained strong liquidity with $349.6 million in cash and $251.0 million available credit, with 2024 capital spending projected at $125-150 million Liquidity and Cash Flow (in millions) | Metric | 2023 | | :--- | :--- | | Cash and Cash Equivalents (Year-End) | $349.6 | | Net Cash from Operating Activities | $56.3 | | Net Cash Used in Investing Activities | $(106.9) | | Net Cash Used in Financing Activities | $(71.0) | | Capital Expenditures | $108.5 | - Projected capital spending for 2024 is estimated to be between $125 million and $150 million[300] - The company was in compliance with its debt covenants at December 31, 2023[304] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate and commodity price risks, with a 10% rate increase impacting interest cost by $1.7 million and a 10% commodity price change significantly affecting net income - The company is exposed to interest rate risk, with $161.9 million of its debt at variable rates as of December 31, 2023. A 10% increase in rates would increase annual interest cost by about $1.7 million[322] Commodity Price Risk Sensitivity (Net Income Effect of 10% Price Change, in millions) | Commodity | Estimated Net Income Effect (in millions) | | :--- | :--- | | Ethanol | $106.8 | | Corn | $114.3 | | Distillers grains | $27.4 | | Renewable corn oil | $10.3 | | Natural gas | $3.9 | Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for FY2023, including the independent auditor's unqualified opinion and notes - The independent auditor, KPMG LLP, issued an unqualified opinion on the consolidated financial statements and on the effectiveness of the company's internal control over financial reporting as of December 31, 2023[341][378][379] - The auditor identified the fair value of forward contracts as a critical audit matter due to the complex and subjective judgment involved in their valuation[382][384] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[332] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified audit opinion from KPMG LLP - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[334] - Management concluded that internal control over financial reporting was effective as of December 31, 2023[336] - No material changes in internal control over financial reporting were identified during the fourth quarter of 2023[338] Other Information No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the year ended December 31, 2023 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the year[348] PART III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[351] Executive Compensation Information regarding executive compensation is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[353] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[354] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[355] Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[356] PART IV Exhibits, Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the annual report, including a detailed index of documents - This section contains the list of consolidated financial statements and notes filed with the report[358] - A detailed Exhibit Index is provided, listing all documents incorporated by reference or filed with the Form 10-K[360][361] Form 10-K Summary No Form 10-K summary is provided - None[371]