Green Plains Renewable Energy, Inc. (GPRE)
Q3 2011 Earnings Call
October 27, 2011 11:00 am ET
Todd Becker – President and Chief Executive Officer
Jerry Peters – Chief Financial Officer
Jeff Briggs – Chief Operating Office
Steve Bleyl – Executive Vice President of Ethanol Marketing
Michael Cox – Piper Jaffray
Matt Farwell – Imperial Capital
Brent Rystrom – Feltl
Lawrence Alexander - Jeffries
Patrick Jobin – Credit Suisse
Farha Aslam – Stephens Inc
Luke Beltnick – TPG Credit
Ben Callow – Robert W. Baird
Previous Statements by GPRE
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» Green Plains CEO Discusses Q3 2010 Results - Earnings Call Transcript
At this time, I would now like turn the call over to Mr. Jim Stark. Please go ahead.
Thanks, Nicole. Welcome to our third quarter 2011 earnings call. On the call today is - Todd Becker, President and Chief Executive Officer, Jerry Peters, our Chief Financial Officer, Jeff Briggs, our Chief Operating Officer and Steve Bleyl, Executive Vice President of Ethanol Marketing, on the call today as well for the Q&A session.
We are here to discuss our third quarter 2011 financial results and recent developments for Green Plains Renewable Energy. There is a slide presentation for you to follow along with as we go through our comments today. You can find this presentation on our website – www.gpreinc.com on the investor page under the events and presentations link. 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 involve risks and uncertainties, Green Plains’ actual results could differ materially from management’s expectations.
Please refer to page two of the website presentation, and 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 will now turn the call over to Todd Becker.
Thanks Jim. We’re glad you could join us on the call today. First of all, we had a strong performance from our non-ethanol production segment in Q3, generating $13.7 million or 40% of our segment’s operating income. We have now demonstrated that our goal of $50 million of non-ethanol operating income can be achieved, and we are looking for ways to further increase this contribution to the bottom line.
This is a culmination of our work over the last couple of years to minimize the ups and downs in the cyclical ethanol production segment. This will allow us to remain profitable and continue to service our debt and generate free cash flows during times of margin compression. Ethanol margins did show good improvement in Q3, when compared to Q2 2011, as we generated $20.9 million of operating income from the ethanol production segment; the highest level on a quarterly basis this year. For the tenth consecutive quarter, we reported profitable results with fully diluted earnings of $0.32 a share on net income of $12.4 million.
Corn oil, again, made a significant contribution to our profitability, generating $9.6 million of operating income in Q3. For the last three quarters, corn oil production has generated over $18 million of operating income for our company. The payback on this investment was less than a year, and as a reminder, the cash flow generated by this segment flows freely to the corporate entity and is unencumbered at the ethanol plant subsidiaries. Our Tennessee agribusiness operations have helped reduce some of the seasonality typically seen in this segment.
We saw an improvement in agribusiness in Q3, generating $2 million of operating income, which was $1.5 million better than Q3 2010. The business benefitted from an excellent Tennessee soft wheat harvest. Our grain storage expansion projects have also been completed, bringing our storage capacity to 37 million bushels overall. We are confident this will be an excellent investment for the long term. We produced and sold 185 million gallons of fuel-grade ethanol; 534,000 tons of distiller’s grains; and more than 32 million pounds of corn oil from our plants during Q3 2011.
We have built a foundation of our business on risk management and operational excellence, while operating our facilities in a safe environment. It is our belief that the solid base we have constructed will allow us to sustain our business model for the long term, and it gives us confidence to continue to grow as opportunities come along.
Now I’ll turn the call over to Jerry to review our financials in more detail, and then I’ll come back and cover industry topics, the ethanol margin environment, and our current outlook for the company.
Thanks Todd; good morning everyone. Looking at the consolidated income statement for Q3 2011, our revenues were $957 million for the quarter, up 93% when compared to the comparable quarter in 2010. The increase was mainly due to an increase of ethanol we produced at our own plants, which was $56 million gallons higher than last year; as well as an overall increase in commodity prices. We acquired the Lakota and Riga plants in October of last year, and the Otter Tail plant in March of 2011, which accounts for most of the volume increase between the periods. Corn oil production contributed $15.5 million in revenues in Q3, based on 32.7 million pounds of production.