Green Plains(US:GPRE)2021-05-04 20:07Production and Operations - In Q1 2021, the company maintained an average utilization rate of approximately 71.1%, resulting in ethanol production of 178.0 million gallons, down from 240.5 million gallons or 85.9% of capacity in the same quarter last year [198]. - Domestic ethanol production averaged 0.91 million barrels per day in Q1 2021, a 12% decrease from 1.03 million barrels per day in the same quarter last year [199]. - Ethanol sold decreased by 26.0% to 178,000 thousand gallons for the three months ended March 31, 2021, compared to 240,466 thousand gallons in the same period of 2020 [246]. - The company upgraded its York facility to include USP grade alcohol capabilities, with plans for further upgrades to serve high-value markets [184]. - The company anticipates producing feed ingredients with protein concentration of 50% or greater through its Ultra-High Protein initiative, enhancing margins per gallon [183]. Financial Performance - Ethanol production segment revenues decreased by 10.9% to $423.7 million for the three months ended March 31, 2021, compared to $475.7 million in the same period of 2020 [235]. - Agribusiness and energy services segment revenues decreased by 17.9% to $133.9 million for the three months ended March 31, 2021, compared to $163.2 million in the same period of 2020 [235]. - Total consolidated revenues decreased by $79.2 million, primarily due to lower production volumes of ethanol, distillers grains, and corn oil [242]. - Operating income increased by $85.7 million for the three months ended March 31, 2021, primarily due to a $36.9 million gain on the sale of assets [243]. - Adjusted EBITDA increased by $12.7 million due to improved margins on ethanol production [243]. Investments and Acquisitions - The company completed the purchase of a majority interest in Fluid Quip Technologies, LLC, to expand the production of Ultra-High Protein across its facilities [186]. - The company issued $230.0 million of 2.25% convertible senior notes due in 2027, using approximately $156.5 million of the net proceeds to repurchase $135.7 million of its 4.125% notes due 2022 [193]. - The public offering of 8,751,500 shares of common stock at $23.00 per share resulted in net proceeds of approximately $191.1 million for general corporate purposes [196]. Market and Regulatory Environment - The Renewable Fuel Standard (RFS II) mandated a volume of 15.0 billion gallons of conventional ethanol to be blended with gasoline by 2015, but the EPA has not yet released a draft rule for 2021 volumes [207]. - In 2019, the total Renewable Volume Obligation (RVO) was more than 20% below statutory levels for the second consecutive year, prompting expectations for a reset rulemaking by the EPA [208]. - The EPA granted 790 million gallons of waivers for small refineries in 2016, 1.82 billion gallons in 2017, and 1.43 billion gallons in 2018, significantly reducing mandated volumes [210]. - The One-Pound Waiver allows E15 to be sold year-round in approximately 30 states, although it is currently being challenged in court [211]. - U.S. ethanol exports to Brazil faced a 20% tariff in 2020, with exports totaling 200 million gallons [222]. - The USMCA maintains duty-free access for U.S. agricultural commodities, including ethanol, into Canada and Mexico, with exports of 326 million gallons to Canada and 64 million gallons to Mexico in 2020 [225]. Cash Flow and Debt - As of March 31, 2021, the company had $446.8 million in cash and equivalents, excluding restricted cash, and $207.6 million in restricted cash [257]. - Net cash used in operating activities was $37.0 million for the three months ended March 31, 2021, compared to net cash provided of $17.8 million for the same period in 2020 [258]. - Capital expenditures for the three months ended March 31, 2021, were approximately $31.5 million, with expected capital spending for the remainder of 2021 between $170.0 million and $194.0 million [260]. - The partnership has $773.4 million in total debt, with $235.2 million bearing variable interest rates, exposing it to interest rate risk [289]. - A 10% increase in interest rates would increase interest costs by approximately $0.8 million per year [289]. Risk Management - The partnership uses forward fixed-price contracts and derivatives to manage commodity price risks associated with ethanol, corn, and natural gas [292]. - The estimated net income effect from a hypothetical 10% change in ethanol prices for the next 12 months is $116,059,000 [295]. - The estimated net income effect from a hypothetical 10% change in corn prices for the next 12 months is $129,767,000 [295]. - During the three months ended March 31, 2021, revenues included net losses of $56.0 million from derivative instruments, while cost of goods sold included net gains of $18.5 million [292]. Other Considerations - The COVID-19 pandemic has created significant volatility and uncertainty in the energy industry, although there has been no material adverse effect on the company's operations to date [227][228]. - The company has undergone significant changes, including the sale of its 50% interest in GPCC and the acquisition of a majority interest in FQT, impacting comparability of financial results [229]. - Income tax expense was $1.9 million for the three months ended March 31, 2021, compared to an income tax benefit of $44.3 million for the same period in 2020 [254]. - Income from equity method investees decreased by $7.8 million for the three months ended March 31, 2021, compared to the same period last year, primarily due to the disposition of the GPCC joint venture [255]. - The partnership believes it is probable to source appropriate funding prior to August 2021 due to consistent fee-based cash flows and ongoing profitability [282].