Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of the Company. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes to Financial Statements (Part II, Item 8 of this Form 10-K). This section generally discusses the results of our operations for the year ended December 31, 2025, compared to the year ended December 31, 2024. For a discussion of the year ended December 31, 2024, compared to the year ended December 31, 2023, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 19, 2025.
Executive Overview
Effective January 1, 2025, the Company realigned its organizational structure to better reflect updates in management reporting resulting in a change in reportable segments. As a result, the former Trade segment was combined with the former Nutrient & Industrial segment in the newly formed Agribusiness segment along with several smaller business lines being moved between the Agribusiness and Renewables segments. All prior period segment information has been recast to conform to the current year presentation.
The agricultural commodity-based business is one in which changes in selling prices generally move in relationship to changes in purchase prices. Therefore, increases or decreases in prices of the commodities that the business deals in will have a relatively equal impact on sales and merchandising revenues and cost of sales and merchandising revenues and a much less significant impact on gross profit. As a result, changes in sales and merchandising revenues between periods may not necessarily be indicative of the overall performance of the business and greater emphasis should be placed on changes in gross profit.
Agribusiness
The Agribusiness segment's operating results declined from the prior year as the segment faced difficult market conditions, including an oversupplied market, low commodity prices, and muted volatility through much of the year. These conditions kept commercial activity more short-term in nature, creating margin pressure in our merchandising business. We saw improvement through the record fall corn harvest, as our western footprint was able to accumulate good volumes at favorable values. In addition, our eastern footprint was able to recognize good elevation margins on corn from strong export and ethanol demand in the last part of the year. The premium ingredient business continued its steady performance, leveraging recent investments into this space. The fertilizer business benefited a large spring application season with the highest corn plantings in recent history.
Our complementary asset footprint should provide some uplift in 2026, with more traditional basis appreciation opportunities in the west, while continued export demand would benefit elevation margins for the eastern assets. Sorghum exports remained strong into early 2026 which we expect will benefit our Skyland Grain, LLC ("Skyland") and Houston port export assets. As on-farm grain volumes come to market, merchandising opportunities may arise. Domestic premium ingredient demand is also expected to stay solid and should continue to support recent capital growth investments. Expected corn plantings are higher than historical average, which may drive demand for nitrogen products, but volumes will be dependent on farmer economics.
Total Agribusiness grain storage space capacity at company-owned or leased grain facilities, including temporary pile storage, was approximately 271 million and 291 million bushels at December 31, 2025, and 2024, respectively. The decrease in grain storage capacity from the same period of the prior year was due to a current year incident at a grain terminal in Sunray, Texas, as well as the closing of several smaller underperforming grain locations. The storage capacity at our nutrient facilities was evenly split between dry and liquid storage with a total capacity of approximately one million tons at December 31, 2025, and 2024, respectively.
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Renewables
The Renewables segment had another solid performance in 2025 led by strong operations at the Company's ethanol plants. Our plants had another outstanding production year, once again setting a record for gallons produced. Ethanol board crush improved $0.02 per gallon over 2024, which was more than offset by higher corn basis in the east and higher natural gas cost. We acquired 100% of our ethanol plants at the end of July, which generated nearly $40 million of incremental plant income before income taxes attributable to the company in the back half of the year. Finally, with our focus on running efficient ethanol plants, we were able to qualify for and realize $35 million of Section 45Z clean fuel production tax credits in 2025.
Favorable biofuels policies, continuing elevated export demand, upcoming planned industry maintenance, and the summer gasoline demand should all support ethanol fundamentals this year. Renewable feedstocks merchandising should also benefit this year with the proposed robust Renewable Volume Obligations establishing the volume of renewable fuels that must be blended into transportation fuels.
Volumes shipped were as follows:
Year Ended December 31,
(in thousands)
Ethanol (gallons shipped)
E-85 (gallons shipped)
Renewable feedstocks (pounds shipped) (a)
Dried distillers grains (tons shipped) (b)
(a) Includes corn oil, soybean oil, and other fats, oils, and greases.
(b) Dried distillers grains ("DDG") tons shipped converts wet tons to a dry ton equivalent amount.
Other
The Company's “Other” activities include corporate income and expense and cost for functions that provide support and services to the operating segments. The results include expenses and benefits not allocated to the operating segments and other elimination and consolidation adjustments.
Operating Results
The following discussion focuses on the operating results as shown in the Consolidated Statements of Operations with a separate discussion by segment. Additional segment information is included in Note 10 to the Company's Consolidated Financial Statements in Item 8.
Year Ended December 31, 2025
(in thousands)
Agribusiness
Renewables
Other
Total
Sales and merchandising revenues
Cost of sales and merchandising revenues
Gross profit
Operating, administrative and general expenses
Asset impairment
Interest expense (income)
Other income (expense), net
Income (loss) before income taxes
Income (loss) before income taxes attributable to the noncontrolling interests
Non-GAAP Income (loss) before income taxes attributable to the Company
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Year Ended December 31, 2024
(in thousands)
Agribusiness
Renewables
Other
Total
Sales and merchandising revenues
Cost of sales and merchandising revenues
Gross profit
Operating, administrative and general expenses
Interest expense (income)
Other income, net
Income (loss) before income taxes
Income before income taxes attributable to the noncontrolling interests
Non-GAAP Income (loss) before income taxes attributable to the Company
The Company uses Non-GAAP Income (loss) before income taxes attributable to the Company, a non-GAAP financial measure as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.
Management believes that Non-GAAP Income (loss) before income taxes attributable to the Company is a useful measure of the Company’s performance as it provides investors additional information about the Company's operations allowing better evaluation of underlying business performance and better period-to-period comparability. This measure is not intended to replace or be an alternative to Income (loss) before income taxes, the most directly comparable amount reported under GAAP, which is also presented in the table above.
Comparison of 2025 with 2024
Agribusiness
Operating results for the Agribusiness segment decreased by $52.2 million from the prior year results. Sales and merchandising revenues decreased $196.4 million and cost of sales and merchandising revenues decreased by $230.3 million resulting in a $33.9 million increase in gross profit. The decrease in sales and merchandising revenues and cost of sales and merchandising revenues can be attributed to both reduced commodity prices and volumes in the Company's legacy footprint. This decrease in the legacy business was partially offset by the increase in sales and merchandising revenues and cost of sales and merchandising revenues from the full year impact of our Skyland investment, which we acquired in November 2024 and added $468.0 million and $392.0 million, respectively in 2025. Gross profit increased by $33.9 million from the prior year with $76.0 million of the increase as a result of additional Skyland gross profit, which was partially offset by reduced results from our legacy asset and merchandising businesses from limited trade flows due to a surplus of grain supplies and weak customer demand.
Operating, administrative and general expenses increased $68.8 million compared to prior year, with substantially all of the increase related to the acquired Skyland business.
Asset impairment charges of $14.8 million were related to closing several smaller underperforming grain and nutrient locations along with a facility that was damaged from a grain explosion.
Interest expense increased by $12.6 million, with substantially all of the increase due to increased borrowing related to the acquired Skyland business.
Other income, net increased by $9.7 million primarily driven by $16.8 million of additional property insurance recoveries that were partially offset by less interest income from less cash on hand.
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Renewables
Operating results for the Renewables segment were consistent with the prior year before consideration of the noncontrolling interest share. Sales and merchandising revenues, as well as the related cost of sales and merchandising revenues, remained largely in line with the prior year, with a decrease of less than 2%. The slight decline was primarily driven by lower renewable feedstock volumes, while sales prices remained consistent with the prior year. The $14.2 million decrease in gross profit was mainly attributable to an $11.1 million decrease in results of the ethanol plants. Although the plants operated efficiently with improved yields and higher production, they were unable to overcome market pressures stemming from elevated corn basis and natural gas costs in the current year.
Operating, administrative and general expenses increased by $5.7 million, primarily due to $5.9 million in costs associated with the acquisition of the remaining equity interests in TAMH in 2025.
Asset impairment charges increased by $3.4 million from the prior year due to a charge related to equipment used in corn oil refinement.
Interest expense, net increased by $2.9 million from greater borrowings due to less cash on hand as a result of the acquisition of the remaining interest in TAMH.
Other income increased by $26.4 million from prior year as the Company recognized $35.0 million of clean fuel production credits in the current year. This is partially offset by a $3.4 million decline in interest income and the absence of a $3.1 million gain recorded in the prior year related to the deconsolidation of the ELEMENT ethanol plant.
Other
Corporate expenses increased by $7.1 million and were primarily driven by increased long-term incentive costs driven by improved Renewables performance, along with a $1.4 million pension plan settlement charge.
Income Taxes
In 2025, the Company recorded income tax expense of $22.2 million. The Company's effective rate for 2025 was 15.7% on Income before income taxes of $141.5 million. The difference between the 15.7% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to the tax impact of noncontrolling interest, nontaxable clean fuel production credits and the reversal of certain unrecognized tax benefits, partially offset by state and local taxes, nondeductible compensation, and valuation allowances on losses in foreign tax jurisdictions.
In 2024, the Company recorded income tax expense of $30.1 million. The Company’s effective rate for 2024 was 15.0% on Income before income taxes of $200.8 million. The difference between the 15.0% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to the tax impact of noncontrolling interest and U.S. federal tax credits partially offset by state and local income taxes, tax impacts of foreign operations, and nondeductible compensation.
The Company’s subsidiary partnership returns are under U.S. federal and certain state tax examinations for tax years 2018 through 2022. The Company’s subsidiary is under federal tax examination by the Mexican tax authorities for tax year 2015. The U.S. federal, state, and Mexican tax authorities’ examinations could potentially be resolved within the next 12 months. The resolution of these examinations could change our unrecognized tax benefits and favorably impact income tax expense by a range of zero to $2.8 million.
On December 20, 2021, the Organization for Economic Co-operation and Development ("OECD") issued Pillar Two model rules introducing a global minimum tax of 15% on large corporations. Although the U.S. has not adopted the Pillar Two model rules, several foreign countries have enacted legislation which closely follows OECD’s Pillar Two guidance. The impact of Pillar Two legislation in our relevant jurisdictions is immaterial to the Company's 2025 effective tax rate.
On July 4, 2025, the United States passed the One Big Beautiful Bill Act ("OBBBA"), which modified the existing international tax framework and permanently extended select provisions of the Tax Cuts and Jobs Act. This legislation did not materially affect the Company's effective tax rate for 2025 and is not expected to impact the Company's effective tax rate for 2026, with the exception of clean fuel production credits. The bill provides for changes in the calculation of the carbon intensity score which may significantly favorably affect credits, recorded as Other income, and extended the credits through 2029.
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Liquidity and Capital Resources
Working Capital
At December 31, 2025, the Company had working capital of $690.0 million, a decrease of $429.1 million from the prior year. This decrease was attributable to changes in the following components of current assets and current liabilities:
(in thousands)
December 31, 2025
December 31, 2024
Variance
Current Assets
Cash and cash equivalents
Accounts receivable, net
Inventories
Commodity derivative assets – current
Other current assets
Total current assets
Current Liabilities
Short-term debt
Trade and other payables
Customer prepayments and deferred revenue
Commodity derivative liabilities – current
Current maturities of long-term debt
Accrued expenses and other current liabilities
Total current liabilities
Working Capital
Current assets decreased $473.9 million in comparison to prior year. The primary driver behind the decline was the $425.0 million of cash used to acquire the remaining interest in TAMH in 2025.
Current liabilities decreased $44.8 million in comparison to the prior year. The decrease in current liabilities was mainly driven by the decrease in trade payables from a decrease in commodity prices, partially offset by increased borrowings on the Company's revolver in 2025 to acquire the remaining equity in TAMH.
Sources and Uses of Cash in 2025 Compared to 2024
Year Ended
(in thousands)
December 31, 2025
December 31, 2024
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Operating Activities
Operating activities provided cash of $177.0 million in 2025 compared to $331.5 million in 2024. The majority of the decrease in cash provided by operating activities was due to unfavorable changes in operating assets and liabilities that resulted in $109.4 million additional cash used. Although cash generation remains strong, earnings fell behind the prior year results leading to the remainder of the decrease in cash provided by operating activities.
Net income taxes paid were $16.2 million and $31.5 million in the years ended December 31, 2025, and 2024, respectively. The decrease in the current year is generally driven by U.S. Federal and state net operating losses incurred in 2025.
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Investing Activities
Investing activities used cash of $195.3 million in the current year compared to $163.1 million used in the prior year. The $32.2 million increase was primarily driven by $83.9 million in higher capital expenditures to support previously announced growth initiatives. This was partially offset by additional insurance proceeds received in the current year and the impact of a business acquisition that occurred in the prior year.
Capital expenditures of $233.1 million for 2025 on property, plant and equipment and capitalized software includes: Agribusiness - $176.9 million; Renewables - $49.2 million; and $7.1 million in Other.
We expect to invest between $200 to $225 million in property, plant and equipment in 2026; roughly split 50% between growth and maintenance capital.
Financing Activities
Net cash used in financing activities was $447.1 million in 2025, compared to $250.4 million used in 2024. The $196.8 million increase in cash used in financing activities from the prior year was mainly due to the $425.0 million of cash used to purchase the remaining interest in TAMH. This was partially offset by a $171.8 million change in borrowings on the Company's revolving credit facilities and a $68.5 million decrease in distributions to noncontrolling interest shareholders from the prior year.
The Company commenced another common share repurchase plan on August 15, 2024, which authorized $100 million of common share repurchases to be made on or before August 15, 2027. As of December 31, 2025, approximately $17.7 million of the Repurchase Plan had been utilized.
As of December 31, 2025, the Company was party to borrowing arrangements with a syndicate of banks that provide a total borrowing capacity of $2,054.8 million. There was $1,802.6 million available for borrowing at December 31, 2025. The Company's highest levels of borrowing typically occur in the late winter and early spring due to seasonal inventory requirements in the fertilizer and grain businesses. At December 31, 2025, the Company had total available liquidity of $1,900.9 million comprised of cash and cash equivalents and unused lines of credit.
The Company paid $26.8 million in dividends in 2025 compared to $26.3 million in 2024. The Company paid $0.195 per common share for the dividends paid in January, April, July and October 2025, and $0.190 per common share for the dividends paid in January, April, July and October 2024. On December 11, 2025, the Company declared a cash dividend of $0.20 per common share, payable on January 23, 2026, to shareholders of record on January 2, 2026.
Certain of our long-term borrowings include covenants that, among other things, impose minimum levels of working capital and various debt leverage ratios. The Company is in compliance with all covenants as of December 31, 2025. In addition, certain of our long-term borrowings are collateralized by first mortgages on various facilities.
The Company is typically in a net short-term borrowing position in the first two quarters of the year. The majority of these short-term borrowings bear interest at variable rates, and an increase in interest rates could have a significant impact on our profitability. In addition, periods of high grain prices could require us to make additional margin deposits on our exchange traded futures contracts. Conversely, in periods of declining prices, the Company could receive a return of cash.
Management believes the sources of liquidity will be adequate to fund operations, capital expenditures and payments of dividends in the foreseeable future.
Contractual Obligations
Long-term Debt
As of December 31, 2025, the Company had total outstanding long-term debt with both floating and fixed rates of varying maturities for an aggregate principal amount outstanding of $625.4 million, of which $63.4 million of the outstanding principal of the long-term debt is payable within 12 months. See Note 4 to the Consolidated Financial Statements for additional information.
Future interest payments associated with the long-term debt total $120.3 million, with $31.2 million payable within 12 months. See Note 4 to the Consolidated Financial Statements for additional information.
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Operating Leases
The Company has lease arrangements for certain equipment and facilities, including grain facilities, fertilizer facilities and equipment. As of December 31, 2025, the Company had fixed operating lease payment obligations of $144.9 million, with $32.3 million payable within 12 months. See Note 11 to the Consolidated Financial Statements for additional information.
Commodity Purchase Obligations
The Company enters into forward purchase contracts of commodities with producers through the normal course of business. These forward purchase contracts are largely offset by forward sales contracts of commodities and the net of these forward contracts are offset by exchange-traded futures and options contracts or over-the-counter contracts. As of December 31, 2025, the Company had forward purchase contracts of $2,126.0 million, with $2,025.5 million payable within 12 months. See Note 5 to the Consolidated Financial Statements for additional information.
Postretirement Healthcare Program
The Company has a postretirement health care benefit plan that covers substantially all of its full-time employees hired prior to January 1, 2003. Obligations under the retiree healthcare programs are not fixed commitments and will vary depending on multiple factors, including the level of participant utilization and inflation. Our estimates of postretirement payments have considered recent payment trends and actuarial assumptions. As of December 31, 2025, the Company had outstanding benefit obligations of $16.1 million, with $1.3 million payable within 12 months.
Off-Balance Sheet Transactions
During the periods presented we did not have, nor do we currently have, any off-balance sheet transactions as defined under SEC rules, with the exception of standby letters of credit through banking institutions. At December 31, 2025, the Company had standby letters of credit outstanding of $2.8 million.
Critical Accounting Estimates
The process of preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Management evaluates these estimates and assumptions on an ongoing basis. Estimates and assumptions are based on historical experience and management's knowledge and understanding of current facts and circumstances. Actual results, under conditions and circumstances different from those assumed, may change from these estimates.
Certain of our accounting estimates are considered critical, as they are important to the depiction of the Company's Consolidated Financial Statements and/or require significant or complex judgment by management. There are other items within the Company's Consolidated Financial Statements that require estimation, however, they are not deemed critical as defined above. Note 1 to the Consolidated Financial Statements in Item 8 describes the Company's significant accounting policies which should be read in conjunction with our critical accounting estimates.
Management believes that the accounting for readily marketable inventories and commodity derivative contracts, including adjustments for counterparty risk, impairment of long-lived assets and goodwill, and uncertain tax positions involve significant estimates and assumptions in the preparation of the Consolidated Financial Statements.
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Readily Marketable Inventories and Derivative Contracts
Readily Marketable Inventories ("RMI") are stated at their net realizable value, which approximates fair value based on their commodity characteristics, widely available markets, and pricing mechanisms. The Company marks to market all forward purchase and sale contracts for commodities and ethanol, over-the-counter commodity and ethanol contracts, and exchange-traded futures and options contracts. The overall market for commodity inventories is very liquid and active; market value is determined by reference to prices for identical commodities on regulated commodity exchange (adjusted primarily for transportation costs); and the Company's RMI may be sold without significant additional processing. The Company uses forward purchase and sale contracts and both exchange traded and over-the-counter contracts (such as derivatives generally used by the International Swap Dealers Association). Management estimates fair value based on exchange-quoted prices, adjusted for differences in local markets, as well as counterparty non-performance risk in the case of forward and over-the-counter contracts. The amount of risk, and therefore the impact to the fair value of the contracts, varies by type of contract and type of counterparty. With the exception of specific customers thought to be at higher risk, the Company looks at the contracts in total, segregated by contract type, in its quarterly assessment of non-performance risk. For those customers that are thought to be at higher risk, the Company makes assumptions as to performance based on past history and facts about the current situation. Changes in fair value are recorded as a component of Cost of sales and merchandising revenues in the Consolidated Statements of Operations.
Impairment of Long-Lived Assets and Goodwill
The Company's segments are each highly capital intensive and require significant investment. Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset groups may not be recoverable. This is done by evaluating the recoverability based on undiscounted projected cash flows. If an asset group is considered impaired, the impairment loss to be recognized is measured as the amount by which the asset group's carrying amount exceeds its fair value.
Goodwill is tested for impairment at the reporting unit level, which is the operating segment or one level below the operating segment. Our annual goodwill impairment test is performed as of October 1 each year.
During the year ended December 31, 2025, the Company evaluated goodwill for impairment using a quantitative assessment in two reporting units and a qualitative assessment in one reporting unit. The quantitative review for impairment takes into account an income approach using estimates of future cash flows, as well as a market-based approach. Critical estimates in the determination of the fair value of each reporting unit include, but are not limited to, future expected cash flows, estimated gross margins, and discount rates based on a reporting unit's weighted average cost of capital. Our estimates of future cash flows are based upon a number of assumptions including: gross margins, operating costs, budgets, capital expenditures, working capital needs, and long-range plans. The market-based approach uses an analysis of valuation metrics based upon results of publicly traded companies that reflect economic conditions and risks that are similar to the reporting unit to determine a market multiple to be applied to the reporting unit's past operating performance and estimated future results to calculate a fair value. These factors are discussed in more detail in Note 14 to the Consolidated Financial Statements.
Management considers several factors to be significant when estimating fair value including expected financial outlook of the reporting unit, the impact of changing market conditions on financial performance and expected future cash flows, the geopolitical environment and other factors. Deterioration in any of these factors may result in a lower fair value assessment, which could lead to impairment charges in the future. Specifically, actual results may vary from the Company's forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions could result in non-cash impairment charges.
Uncertain Tax Positions
Conclusions on recognizing and measuring uncertain tax positions involve significant estimates and management judgment and include complex considerations of the Internal Revenue Code, related regulations, tax case laws, and prior year audit settlements. To account for uncertainty in income taxes, the Company evaluates the likelihood of a tax position based on the technical merits of the position, performs a subsequent measurement related to the maximum benefit and degree of likelihood, and determines the benefits to be recognized in the Consolidated Financial Statements, if any.
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