GPRE

Green Plains, Inc. (GPRE)

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Green Plains Renewable Energy Inc. (GPRE)

Q2 2013 Earnings Call

July 31, 2013 11:00 AM ET

Executives

Jim Stark – VP, Investor and Media Relations

Todd Becker – President and CEO

Jerry Peters – CFO and Treasurer

Jeff Briggs – COO

Steve Bleyl – EVP, Ethanol Marketing

Analysts

Laurence Alexander – Jefferies

Brett Wong – Piper Jaffray

Patrick Jobin – Credit Suisse

Nathan Weiss – Unit Economics

Craig Irwin – Wedbush Securities

Farha Aslam – Stephens Inc

Matt Farwell – Imperial Capital

John Segrich – Restorative

Presentation

Operator

Please standby we’re about to begin. Good day everyone and welcome to the Green Plains Second Quarter 2013 Financial Results Conference Call. Today’s call is being recorded. And at this time, I’d like to turn the call over to Mr. Jim Stark. Please go ahead sir.

Jim Stark

Thanks, Jamie. Good morning and welcome to our second quarter 2013 earnings conference call. On the call today are Todd Becker, President and CEO, Jerry Peters, our CFO, and Jeff Briggs, our Chief Operating Officer, along with Steve Bleyl, who is Executive Vice President of Ethanol Marketing.

We are here to discuss our quarterly financial results and recent developments for Green Plains Renewable Energy.

Our comments today will contain forward-looking statements which are any statements made that are not historical facts. These forward-looking statements are based on the current expectations of Green Plains’ management team, and there can be no assurance that such expectations will prove to be correct because forward-looking statements involves risk and uncertainties. Green Plains’ actual results could differ materially from management’s expectations.

Please refer to our 10-K and other periodic SEC filings for information about factors that could cause different outcomes. The information presented today is time sensitive and is accurate only at this time. If any portion of this presentation is rebroadcast, retransmitted, or redistributed at a later date, Green Plains will not be reviewing, or updating this material.

I’d like to turn the call over to Todd Becker now.

Todd Becker

Thanks, Jim. And thanks for joining our call this morning. Green Plains as you know is a growing commodity processing business that manages $1 billion worth of assets in the fuel ethanol industry. Within our ethanol production segment we can produce 790 million gallons of ethanol which will consume nearly 8 million tons of corn. We also produce over 2 million tons of livestock feed and can extract over 165 million pounds of corn oil.

We generated $805 million of revenue this quarter, operating income of $18.6 million and net income of $6 million or $0.19 a share. There was a $20 million improvement in operating income compared to a year ago in all business segments at a positive contribution to our profits this quarter.

Our non-ethanol segment generated $17.3 million in operating income in the second quarter, and we have generated $38 million in the first six months of 2013.

Jerry will talk more about our balance sheet but our multi-year focus on paying down debt continues to show solid progress. In 2013, we will pay more than $50 million in principal on our term debt. When you look forward, we expect to do the same in 2014.

More importantly the stock price has been trading above described price and the convertible debt outstanding. And if we stay there, we’ll have another $90 million of debt fall off in 2015, not including other scheduled principal payments. We feel our goal of zero net term debt in three years is attainable, apps and additional growth opportunities that may arise.

In our ethanol production segment, we generated $7 million of operating income on 172 million gallons of ethanol production in the second quarter, which is approximately 93% of our stated operating capacity. We anticipate running our nine legacy plants at a slightly higher level in the third quarter and last week we started producing ethanol at our plant in Atkinson, Nebraska.

We bought the plant with the expectation, we can get it up and running very quickly, and we have achieved that with very little additional capital needed, the plant was a very familiar size and technologies where operators and engineers, corn oil extraction will be installed at this plant by the end of the year.

Our ethanol yield in the quarter was 2.83 gallons of ethanol per bushel of corn. We had some scheduled maintenance in the quarter which had a slight impact on yields, our trailing 12-month average yield remains at 2.84.

Corn oil production was 0.65 pounds per bushel in this quarter, and we have produced 151 million pounds over the last 12 months generating $30 million in operating income.

Marketing and distribution segment had another solid quarter generating $9.2 in operating income. BlendStar terminals have performed through the year and we are seeing new opportunity take shape throughout our system. We are not only handling ethanol but have expanded to bio diesel, methanol and looking at other specialty liquid chemicals.

We continue to focus on expanding our merchant trading programs and to date have hired 10 new employees to work in the trading and in and around our physicals flows and logistical assets. We expect to start ramping this opportunity up as new crop supplies will be much more abundant.

Agro business generated, a small operating income as we continue to transition of our grain handling and storage business into the supply chain with our ethanol production segment.

We purchased a small elevator in Argyle, Nebraska in June that had 200 bushels of upright storage and we are in process of adding an additional 1 million bushels of flat storage to this location.

Including the 11 million bushels of storage at our ethanol plants, we now have 19 million bushels of storage, and with the expansion plans we have in place to be completed in the next several months, our total grain storage will be approximately 27 million bushels by this harvest. In all, we’re glad to see a steady improvement in the ethanol industry margin environment over the last 90 days. There is still work to do in the third quarter, I will talk more about the third and fourth quarter outlook in our call.

I’d like to now turn the call over to Jerry, to run through the second quarter financial performance. And I’ll come back, add to the call with some company and industry comments.

Jerry Peters

Thanks Todd, and good morning everyone. On a consolidated basis, for the second quarter we reported revenues of $805 million which was down 8% from a year ago, primarily as a result of lower grain and agronomy sales and lower ethanol volumes sold. Partially offset by higher average prices for ethanol and distillers grains.

Our operating income for the quarter was $18.6 million, which was a significant improvement compared to a year ago and all business segments had a positive contribution to the quarter.

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