We prepared the following discussion and analysis to help you better
understand our financial condition, changes in our financial condition, and
results of operations for the three and six month period ended
Forward Looking Statements
This report contains forward-looking statements that involve future events, our
future performance and our expected future operations and actions. In some
cases you can identify forward-looking statements by the use of words such as
"may," "will," "should," "anticipate," "believe," "expect," "plan," "future,"
"intend," "could," "estimate," "predict," "hope," "potential," "continue," or
the negative of these terms or other similar expressions. These forward-looking
statements are only our predictions and involve numerous assumptions, risks and
uncertainties, including, but not limited to those listed below and those
business risks and factors described elsewhere in this report and our other
•Reduction, delay, or elimination of the Renewable Fuel Standard; •Changes in the availability and price of corn, natural gas and other grains; •Our inability to secure credit or obtain additional equity financing we may require in the future to continue our operations; •Decreases in the price we receive for our ethanol, distiller grains, corn oil and other grains; •Our ability to satisfy the financial covenants contained in our credit agreements with our senior lender; •Our ability to profitably operate the ethanol plant and maintain a positive spread between the selling price of our products and our raw material costs; •Negative impacts that our hedging activities may have on our operations; •Ethanol and distiller grains supply exceeding demand and corresponding price reductions; •Our ability to generate free cash flow to invest in our business and service our debt; •Changes in the environmental regulations that apply to our plant operations; •Changes in our business strategy, capital improvements or development plans; •Changes in plant production capacity or technical difficulties in operating the plant; •Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries; •Lack of transport, storage and blending infrastructure preventing our products from reaching high demand markets; •Changes in federal and/or state laws; •Changes and advances in ethanol production technology; •Competition from alternative fuel additives; •Changes in interest rates or the lack of credit availability; •Changes in legislation benefiting renewable fuels; •Competition from the increased use of electric vehicles; •Our ability to retain key employees and maintain labor relations; •Volatile commodity and financial markets; •Limitations and restrictions contained in the instruments and agreements governing our indebtedness; •Decreases in export demand due to the imposition of tariffs by foreign governments on ethanol, distillers grains and soybeans produced inthe United States ; •Use by the EPA of small refinery exemptions; and •A slowdown in global and regional economic activity, demand for our products and the potential for labor shortages and shipping disruptions resulting from COVID-19.
The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no duty to update these forward-looking statements even though our situation may change in the future. We cannot guarantee future
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results, levels of activity, performance or achievements. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits, completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements with these cautionary statements.
Overview
The ethanol industry experienced industry-wide record low ethanol prices throughout most of 2018 and 2019 due to reduced demand and high industry inventory levels. This continued into 2020 and the situation was compounded by the impact of the COVID-19 pandemic. In response to these unfavorable operating conditions and a slowdown in global and regional economic activity resulting from COVID-19, we reduced our ethanol production rate by approximately 20% in March of 2020. However, beginning in May of 2020, we returned to full production and are currently operating at an ethanol production rate of approximately 140 million gallons annually which is approximately 40% above the nameplate capacity for the plant.
On
On
On
We expect to fund our operations during the next 12 months using cash flow from our continuing operations and our current credit facilities as amended. If market conditions worsen affecting our ability to profitably operate the plant or if we are unable to transport ethanol, we may be forced to further reduce our ethanol production rate or even temporarily shut down ethanol production altogether.
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