Page 68 - New8814 GP 2011_AR-fnl

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Contractual Obligations
Our contractual obligations as of December 31, 2011 were as follows (in thousands):
Total
Less than 1
year
1-3 years
3-5 years
More than
5 years
Long-term and short-term debt obligations
(1)
637,058
$
143,359
$
165,875
$
203,706
$
124,118
$
Interest and fees on debt obligations
(2)
104,795
29,609
42,662
23,668
8,856
Operating lease obligations
(3)
52,686
16,566
22,252
11,010
2,858
Deferred tax liabilities
55,875
-
-
-
55,875
Purchase obligations
Forward grain purchase contracts
(4)
237,594
235,747
1,847
-
-
Other commodity purchase contracts
(5)
22,519
22,519
-
-
-
Other
3,698
3,315
383
-
-
Total contractual obligations
1,114,225
$
451,115
$
233,019
$
238,384
$
191,707
$
(1)
(2)
(3)
(4)
(5)
Includes fixed-price ethanol, dried dist illers grains and natural gas purchase cont ract s.
Payments Due By Period
Contractual Obligations
Includes the current port ion of long-term debt and excludes the discount on long-term debt of $292 thousand.
Interest amount s are calculated over the terms of the loans using current interest rates, assuming scheduled principle and
interest amount s are paid pursuant to the debt agreement s. Includes administ rat ive and/or commitment fees on debt
obligat ions.
Operat ing lease cost s are primarily for railcars and office space.
Purchase cont ract s represent index-priced and fixed-price cont ract s. Index purchase cont ract s are valued at current quarter-
end prices.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk.
We are exposed to various market risks, including changes in commodity prices and interest rates. Market risk is the
potential loss arising from adverse changes in market rates and prices. In the ordinary course of business, we enter into
various types of transactions involving financial instruments to manage and reduce the impact of changes in commodity
prices and interest rates. At this time, we do not expect to have exposure to foreign currency risk as we expect to conduct all
of our business in U.S. dollars.
Interest Rate Risk
We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from holding
term and revolving loans that bear variable interest rates. Specifically, we have $636.8 million outstanding in debt as of
December 31, 2011, $400.0 million of which is variable-rate in nature. Interest rates on our variable-rate debt are determined
based upon the market interest rate of either the lender’s prime rate or LIBOR, as applicable. A 10% change in interest rates
would affect our interest cost on such debt by approximately $1.7 million per year in the aggregate. Other details of our
outstanding debt are discussed in the notes to the consolidated financial statements included as a part of this report.
Commodity Price Risk
We produce ethanol, distillers grains and corn oil from corn and our business is sensitive to changes in the prices of each
of these commodities. The price of corn is subject to fluctuations due to unpredictable factors such as weather; corn planted
and harvested acreage; changes in national and global supply and demand; and government programs and policies. We use
natural gas in the ethanol production process and, as a result, our business is also sensitive to changes in the price of natural
gas. The price of natural gas is influenced by such weather factors as extreme heat or cold in the summer and winter, or other
natural events like hurricanes in the spring, summer and fall. Other natural gas price factors include North American
exploration and production, and the amount of natural gas in underground storage during both the injection and withdrawal
seasons. Ethanol prices are sensitive to world crude-oil supply and demand; crude-oil refining capacity and utilization;
government regulation; and consumer demand for alternative fuels. Distillers grains prices are sensitive to various demand
factors such as numbers of livestock on feed, prices for feed alternatives, and supply factors, primarily production by ethanol
plants and other sources.