President and Chief Executive Officer
Dear Green Plains Shareholder:
Green Plains reached a number of operational and financial milestones in 2013 that make us very proud. Most significant was becoming an ethanol producer with over one billion gallons of annual production capability. This important step positions us as one of the world’s largest corn processors. We have the potential to handle and process over ten million tons of corn in 2014. That is an average of 1,400 trucks rolling across our scales every day delivering corn to our twelve refineries. Our focus on harvesting the energy in the commodities we process has never been more important. We plan to take advantage of the opportunities that our leadership position brings to Green Plains and to our shareholders.
A Look Back at 2013:
After navigating challenging times in 2012 resulting from the drought in the Midwest, 2013 was a year of recovery for our industry. Our financial performance showed steady improvement throughout the year. We reported $51 million of operating income for the fourth quarter and $108 million for the full year of 2013, which was a record for Green Plains.
These results were made possible by the hard work and dedication of our employees. This group remains committed to the core competencies previously outlined for you. Risk management drives our discipline in how we approach commodity processing each and every day. Our traders, marketers and risk managers work cohesively to lock in profitable margins. Our employees dedicate themselves to operational excellence and safety in everything they do. We have also demonstrated the ability to efficiently integrate accretive, synergistic acquisitions. Getting more out of the assets we own has made Green Plains one of the best, low-cost, efficient producers in the industry.
We added three ethanol plants in 2013, or approximately 280 million gallons of annual production capacity. These acquisitions give us the ability to produce over one billion gallons per year, which was an increase of 38% year over year. We also expanded our grain storage capacity in 2013, adding 9.4 million bushels of storage at our ethanol plants and grain elevators. We intend to continue to add grain storage capacity with the goal of owning approximately 50 million bushels of total storage capacity by the end of 2015. This additional capacity increases our ability to take advantage of "first handle" margins when the crop is harvested, which historically has been the best time to procure for internal or external needs. We also plan continued support of the joint venture investment related to the commercialization of advanced photo-bioreactor technologies for the growing and harvesting of algal biomass.
"Getting more out of the assets we own has made green plains one of the best, low-cost, efficient producers in the industry."
Our non-ethanol operating income for 2013 was approximately $81 million, representing a 30% increase over 2012, excluding the gain on sale of certain agribusiness assets in the fourth quarter of 2012. Our marketing and distribution segment showed the most significant growth. This segment more than doubled its operating income from 2012 with a $41 million contribution, or 51% of non-ethanol operating income. Growing our marketing and distribution segment was a major initiative that we embarked on early in 2013. At the end of the year, we had 19 traders working in 10 different commodities in 16 distinct businesses that operate on our merchant platform. We benefited from this diversification in 2013 and believe we will continue to see positive contributions to operating income from this segment in the future. While the opportunities and results may vary from quarter to quarter, over time these businesses should provide predictable cash flows as we become more established in each market. We now have merchant activities in agriculture, energy and food ingredients, all centered on monetizing the intellectual capital and commodity flows embedded in our supply chain.
We finished 2013 on a positive note with $299 million in cash and ethanol plant debt at $367 million, or $0.36 per gallon of capacity, our lowest level ever. During 2013, we repaid more than $128 million of term debt on our legacy ethanol plant facilities. We remain focused on growth and diversification of our revenue and income streams, supported by our current liquidity position. Our goal of zero net debt by the end of 2015 is in clear sight.
The demand for our products has never been stronger. American ethanol has typically been the cheapest molecule in the fuel tank over the last five years, both domestically and globally. We produce both high-octane and protein-rich energy for feed, food and fuel. Our products help meet growing global energy demands—for livestock, people and automobiles.
"Our products help meet growing energy demands—for livestock, people and automobiles."
In 2014 and beyond, we plan to do more of the same. We will continue to expand along our supply chain and also focus on adjacencies where we can apply our core competencies that have been the cornerstone of our strategy. The processing assets we have built or acquired should enable us to expand and prosper. We understand the cyclicality of what we do every day; over the past six years, we have shown resilience and the flexibility to react to different market pressures and opportunities that we may encounter.
In closing, the fundamentals of our business have never been better. During 2013 and continuing into 2014, the ethanol industry is proving to world markets that it can compete head-to-head with oil, increase share in the fuel tank globally and operate profitably without government subsidies.
We will continue to execute our growth strategy by strengthening and diversifying our business through organic growth and accretive acquisitions, as well as focusing on opportunities that leverage our expertise in risk management and operational excellence. Last year marked our fifth consecutive year of profitable operations. We have always emphasized long-term shareholder value; accordingly, we were pleased to initiate payment of quarterly cash dividends to our shareholders in 2013.
Thank you for your continued belief in Green Plains. We will work diligently to sustain your trust in us.
President and Chief Executive Officer
This Annual Report contains ”forward-looking statements” within the meaning of the federal securities laws. See the discussion under “Cautionary Information Regarding Forward-Looking Statements” in our 2013 Form 10-K for matters to be considered in this regard.