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this market environment, we may experience limited access to incremental financing. This could cause us to defer or cancel
growth projects, reduce our business activity or, if we are unable to meet our debt repayment schedules, cause a default in our
existing debt agreements. These events could have an adverse effect on our operations and financial position.
Our subsidiaries’ debt facilities have ongoing payment requirements which we generally expect to meet from their
operating cash flow. Our ability to repay current and anticipated future indebtedness will depend on our financial and
operating performance and on the successful implementation of our business strategies. Our financial and operational
performance will depend on numerous factors including prevailing economic conditions, volatile commodity prices, and
financial, business and other factors beyond our control. If we cannot pay our debt service, we may be forced to reduce or
delay capital expenditures, sell assets, restructure our indebtedness or seek additional capital. If we are unable to restructure
our indebtedness or raise funds through sales of assets, equity or otherwise, our ability to operate could be harmed and the
value of our stock could be significantly reduced.
We are a holding company, and there are limitations on our ability to receive distributions from our subsidiaries.
We conduct most of our operations through subsidiaries and are dependent upon dividends or other intercompany
transfers of funds from our subsidiaries to generate free cash flow. Moreover, some of our subsidiaries are currently, or are
expected in the future to be, limited in their ability to pay dividends or make distributions to us by the terms of their financing
agreements. Consequently, we are not able to rely on the cash flow from one subsidiary to satisfy the loan obligations of
another subsidiary. As a result, if a subsidiary is unable to satisfy its loan obligations, we may not be able to prevent a default
on the loan by providing additional cash to that subsidiary, even if sufficient cash exists elsewhere in our consolidated
Increased ethanol industry penetration by oil companies or other multinational companies may adversely impact our
We operate in a very competitive environment. The ethanol industry is primarily comprised of smaller entities that
engage exclusively in ethanol production and large integrated grain companies that produce ethanol along with their base
grain businesses. We face competition for capital, labor, corn and other resources from these companies. Until recently, oil
companies, petrochemical refiners and gasoline retailers have not been engaged in ethanol production to a large extent. These
companies, however, form the primary distribution networks for marketing ethanol through blended gasoline. During the past
few years, several large oil companies have entered the ethanol production market. If these companies increase their ethanol
plant ownership or other oil companies seek to engage in direct ethanol production, there will be less of a need to purchase
ethanol from independent ethanol producers like us. Such a structural change in the market could result in an adverse effect
on our operations, cash flows and financial position.
We operate in a highly competitive industry.
In the United States, we compete with other corn processors and refiners, including Archer-Daniels-Midland Company,
POET, LLC and Valero Energy Corporation. Some of our competitors are divisions of larger enterprises and have greater
financial resources than we do. Although some of our competitors are larger than we are, we also have many smaller
competitors. Farm cooperatives comprised of groups of individual farmers have been able to compete successfully. As of
December 31, 2011, the top ten domestic producers accounted for approximately 48.6% of all production, with production
capacities ranging from approximately 200 mmgy to 1,800 mmgy. If our competitors consolidate or otherwise grow and we
are unable to similarly increase our size and scope, our business and prospects may be significantly and adversely affected.
Our competitors also include plants owned by farmers who earn their livelihood through the sale of corn, and
competitors whose primary business is oil refining and retail gasoline sales. These competitors may continue to operate their
plants when market conditions are uneconomic due to benefits realized in other operations.
Depending on commodity prices, foreign producers may produce ethanol at a lower cost than we can, which may result in
lower ethanol prices which would adversely affect our financial results.
There is a risk of foreign competition in the ethanol industry. Brazil is currently the second largest ethanol producer in
the world. Brazil’s ethanol production is sugarcane based, as opposed to corn based, and has historically been less expensive
to produce. Other foreign producers may be able to produce ethanol at lower input costs, including costs of feedstock,
facilities and personnel, than we can.