Green Plains Inc.

Good morning, and welcome to the Green Plains, Inc. and Green Plains Partners first quarter earnings conference call. Following the company's prepared remarks, instructions will be provided for Q&A. At this time, all participants are in a listen-only mode. I will now turn the conference call over to your host, Phil Boggs, Senior Vice President, Investor Relations, and Treasurer. Mr. Boggs, please go ahead.

Welcome to Green Plains, Inc. and Green Plains Partners first quarter 2020 earnings call. Participants on today's call are Todd Becker, President and Chief Executive Officer, Patrick Simpkins, Chief Financial Officer, and Walter Cronin, Chief Commercial Officer. There is a slide presentation available, and you can find the presentation on the investor page under the Events and Presentations link on both corporate websites. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press releases, in the comments made during this conference call, and in the risk factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now, I'd like to turn the call over to Todd Becker.

Thanks, Phil, and good morning, everyone, and thanks for joining our call today. For the quarter, we reported a net loss of $16.4 million, or 47 cents a diluted share, which includes a write-off of goodwill of $24.1 million that affected EPS negatively, as well as a tax benefit related to the CARES Act. The goodwill write-off was a non-cash adjustment and has no impact on our financial liquidity, and at this point, we have no goodwill associated with Green Plains, Inc., left on the balance sheet. In addition, we expect the tax benefit to result in a cash refund of $40 to $50 million late in the third quarter or early in the fourth quarter. This will surely be a benefit to Green Plains liquidity as well. We reported $2.7 million in adjusted EBITDA for the quarter. The only impact that was adjusted was goodwill, so the adjusted EBITDA is an operational number the business achieved. The financial results greatly exceeded the negative market during the quarter due to our risk management program, where we were able to lock in margins. We are continuing with this program in the second quarter, which we are achieving better margins than the current market as a result. We produced approximately 240.5 million gallons of ethanol, which put us at an 85.9% utilization rate for the quarter. While this was lower than our stated goal of 90%, it was the highest utilization rate in the past nine quarters. January ran at a record rate, but the back half of the quarter was impacted slightly by plant maintenance and downtime to complete planned Project 24 technology upgrades. Superior and Fergus Falls are running well and have shown reduced energy and water usage and a lower operating cost per gallon than we expected, so we're very happy with these results. Due to the current margin environment, which has been negatively impacted by the ongoing COVID-19 pandemic, much of the industry has gone offline or reduced their run rates. We are proactively managing our current utilization, but will not reveal our run rates during the quarter, as in the past, the quote-unquote green plane slowdown was used by others to determine their own run rates and proved to be a disadvantage for us. The industry has reduced its run rate at a record pace never seen before, and quite frankly, it's about time. We will exercise our operational discretion at each of our plants in order to maximize our variable contribution margin, and we will make decisions at each facility that best maintains our cash liquidity going forward. Since we have done this many times before, our ability to be agile and maintain strong liquidity is our advantage in times like this. The consolidated crush margin for the first quarter was negative one cent per gallon, with the spot crush declining sharply late in the quarter as the crude oil war ensued and the COVID-19 began to impact fuel demand. While certainly not a number we strive for, it was certainly better than the daily average market. While the industry production levels have dropped to almost 500,000 barrels per day, Inventory levels continue to be at near or record highs. We will continue to focus on the things within our control, reducing operating expenses through our Project 24 initiative and driving additional value through our protein transformation and other product development. I'm very happy to report that our first high-protein facility in our Shenandoah, Iowa location started up during the first quarter, and we have been scaling up to full production rates within the past week or two. Our partners at Fluidquip, the various contractors, and our internal team have done a phenomenal job completing this project on budget, and we are setting the standard for quality control for the customers of this valuable product. Green Plains has a new high-value product that is being used in companion animals and aquaculture markets. As we continue to line out the plan, we will quickly be involving our biotechnology partner to continue to upgrade the nutritional properties in order to move up the price curve. Project 24 modifications at our Fergus Falls, Minnesota, and Superior, Iowa locations were completed, and their results mirror the success we had at Wood River. We continue to be excited about this project and are anxious to roll it out across our remaining non-ICM plants. The operating expense reduction puts these two plants squarely in the top quartile of the industry and leaves us confident in our ability to reach our goals for the platform to be at or below 24 cents a gallon once all are completed. Most interesting is that these were both original Delta T plants 50 million gallon plants, and are now each below 24 cents operating cost per gallon, actually at par or below some best-in-class ICM 100 million gallon plus facilities. We are operating these plants much like an ICM plant as we speak. We are currently evaluating our capital expenditure plan for the remainder of the year, and Patrick will have a little more on this later in the call. Green Plains Partners reported 13.4 million of adjusted EBITDA for the quarter last The recent 75% reduction in the distribution results in a coverage ratio of four times for the first quarter and 1.24 times for the trailing 12 months. This distribution cut was to support a more rapid paydown of our debt, as we have the goal of being debt-free in 18 months, at which time we will look to increase cash returns to unit holders again. Lastly, Green Plains Cattle Company had another record quarter, and we expect the remainder of the year to be strong as well. This allowed a dividend to be paid to all partners in the second quarter, another factor strengthening our liquidity. We are closely monitoring the current situation with packing capacity being slowed or shut, but since we have supply agreements in place, we have not seen material impacts to our business. So as you can see, our theme is to constantly focus on liquidity, and we believe we are in a good position to weather this market as a result of our risk management programs, reducing our operating costs per gallon, new products like high-protein cornmeal, and our great results from our cattle investment. Now I'll turn the call over to Patrick to review both Green Plains Inc. and Green Plains Partners' financial performance, and I'll come back on the call to talk about the remainder of the year, some policy updates, and provide some more details on our protein initiatives.