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Operating income for the marketing and distribution segment increased $4.8 million for the year ended December 31,
2010 as compared to the year ended December 31, 2009. The increase in operating income was due to greater volume of
marketing and distribution as compared to the prior year.
Intersegment Eliminations
Intersegment eliminations of revenues increased $431.8 million in 2010 due to a $363.7 million increase in ethanol sold
from our ethanol production segment to our marketing and distribution segment and a $19.3 million increase in distillers
grains sold from our ethanol production segment to our marketing and distribution segment. These increases are a result of
the expanded scope of our operations in 2010.
Corporate Activities
Operating income was impacted by an increase in expenses for corporate activities of $4.3 million for the year ended
December 31, 2010 as compared to the year ended December 31, 2009, primarily due to an increase in compensation, which
was largely attributable to an increase in short-term incentive compensation based on the achievement of certain performance
goals during 2010 and an increase in number of corporate employees resulting from expanded operations. Income before
taxes related to corporate activities was affected by an increase in interest expense of $0.9 million and an increase in
amortization of debt issuance costs of $0.1 million, related to $90 million of convertible debt issued early in November 2010.
Liquidity and Capital Resources
On December 31, 2011, we had $175.0 million in cash and equivalents, excluding restricted cash, comprised of $71.5
million held at the parent entity and the remainder at our subsidiaries. We had an additional $221.6 million available under
our revolving credit agreements at our subsidiaries, some of which was subject to borrowing base restrictions or other
specified lending conditions at December 31, 2011. Funds held at our subsidiaries are generally required for their ongoing
operational needs and distributions from our subsidiaries are restricted per the loan agreements. Additionally, at December
31, 2011, there were approximately $528.6 million of net assets at our subsidiaries that were not available to be transferred to
the parent company in the form of dividends, loans or advances due to restrictions contained in the credit facilities of these
subsidiaries.
We incurred capital expenditures of $42.5 million in the year ended December 31, 2011 primarily for the installation of
corn oil extraction facilities and expansions of grain storage capacity. Capital spending for 2012 is expected to be
approximately $31.3 million, including the construction of a new ethanol unit train terminal in Birmingham, Alabama within
our marketing and distribution segment, expected to be completed in the third quarter of 2012. The remainder of our capital
spending primarily relates to other recurring capital expenditures in the ordinary course of business. We believe available
borrowings under our credit facilities and cash provided by operating activities will be sufficient to support our working
capital, capital expenditures and debt service requirements for the foreseeable future.
In March 2010, we sold approximately 6.3 million newly-issued shares of our common stock at a price of $13.50 per
share. The net proceeds of this equity offering totaled approximately $79.7 million. We used the net proceeds of this offering
for general corporate purposes and to acquire or invest in additional facilities.
In November 2010, we issued $90.0 million in 5.75% convertible senior notes due November 2015. The notes bear
interest at a fixed rate of 5.75% per year, payable on May 1 and November 1 of each year, beginning May 1, 2011. The net
proceeds of this issuance totaled approximately $86.6 million. We used the net proceeds for general corporate purposes and
to acquire or invest in additional facilities.
On August 15, 2011, we entered into two short-term inventory financing arrangements with a financial institution. Under
the terms of the financing agreements, we sold grain for $10.0 million, issued warehouse receipts to the financial institution
and simultaneously entered into agreements to repurchase the grain in future periods. The agreements mature in January and
February of 2012. We accounted for the agreements as short-term notes rather than sales, and recorded our repurchase
obligation at fair value at the end of each period. At December 31, 2011, the grain inventory and short-term notes payable
were valued at $8.9 million.
On September 9, 2011, we repurchased 3.5 million shares of common stock at a price of $8.00 per share from a
subsidiary of NTR plc, which is a principal shareholder. We do not have a share repurchase program and do not intend to
retire the repurchased shares.