What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-06 compared with 2020-08-05 · 206 added, 181 removed, 356 unchanged (52% of the section changed)

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We caution investors not to place undue reliance on forward-looking statements, which represent management’s views as of the date of this report or documents incorporated by reference.

Green Plains is a diversified commodity-processing business with operations that include corn processing, grain handling and storage and commodity marketing and logistics services.

The company is one of the leading corn processors in the world and, through its adjacent businesses, is focused on the production of high-protein feed ingredients and export growth opportunities.

We are also focused on generating stable operating margins through our risk management strategy.

With the recent disposition of our remaining ownership in GPCC, we continue to transition from a commodity-processing business to a value-add agricultural technology company focusing on creating diverse, non-cyclical, higher margin products.

In addition, we are currently undergoing a number of project initiatives to improve margins.

Through our Project 24 initiative, we anticipate reductions in operating expense per gallon across our non-ICM plants as well with our high-protein initiative, we expect to produce various ultra-high protein feed ingredients further increasing margins per gallon.

Our first ultra-high protein installation was completed at our Shenandoah plant during the first quarter of 2020 with shipments of dried product beginning in April 2020.

Installation at our Wood River plant began during the third quarter 2020 with shipments expected to begin in the second quarter of 2021.

We anticipate that additional locations will be completed over the course of the next several years as we continue to move us toward a true bio-refining platform.

We continue to be one of the leading corn processors in the world and, through our adjacent businesses, are focused on the production of ultra-high protein and export growth opportunities.

Green Plains Partners LP is our primary downstream logistics provider, storing and delivering the ethanol we produce.

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The partnership is consolidated in our financial statements.

In addition, Green Plains owns a 50% interest in Green Plains Cattle Company LLC.

We are currently undergoing a number of project initiatives to improve margins.

Through our Project 24 initiative, we anticipate reductions in operating expense per gallon across our non-ICM plants as a result of these investments.

In addition, through our high-protein initiative, we expect to achieve increased margins per gallon as a result of the ability to produce various high protein animal feed products.

The first high-protein installation was completed at our Shenandoah plant during the first quarter of 2020 with shipments of dried product beginning in April 2020.

We anticipate the remaining locations will be completed over the course of the next several years.

In addition, until its disposition on October 1, 2020, Green Plains owned a 50% interest in Green Plains Cattle Company.

Recent Developments

Approval of Definitive Term Sheet for $75.0 Million Loan Facility

On July 29, 2020, we announced the approval of a definitive term sheet for a $75.0 million loan facility, which will support the execution of our protein strategy .

Upon closing, the loan facility is expected to have a 15-year term and an interest rate with a 5% floor that can be either a fixed rate of 15-year indicative Treasury yield plus 4.00%, or a floating rate of one-month LIBOR plus 4.50%, and will require principal payments of $1.5 million per year beginning 24 months from the closing date .

Closing of the loan facility is expected to occur during the third quarter.

The loan will be secured by the assets of Green Plains Shenandoah LLC and Green Plains Wood River LLC.

Disposition of Equity Interest in Green Plains Cattle Company LLC

On October 9, 2020, pursuant to the Securities Purchase Agreement, we sold our remaining 50% joint venture interest in GPCC to AGR Special Opportunities Fund I, LP, TGAM Agribusiness Fund LP and StepStone (the “Buyers”) for $80.5 million in cash, plus closing adjustments.

The transaction was effective on October 1, 2020, and will result in a reduction in other assets of $69.7 million as a result of removal of the equity method investment in GPCC, and a reduction in accumulated other comprehensive income of $10.7 million as a result of the removal of our share of equity method investees accumulated other comprehensive loss.

Transaction fees related to the disposal were not material.

There was no material gain or loss recorded as part of this transaction.

The Securities Purchase Agreement contains certain earn-out provisions to be paid to or received from the Buyers if certain EBITDA thresholds are met.

The company will record any contingent amounts in the consolidated financial statements when the amount is probable and reasonably determinable or the consideration is realized.

Impact of COVID-19 and Decline in Oil Demand

We continue to closely monitor the impact of COVID-19 on all aspects of our business, including how it will impact our employees, customers, vendors, and business partners.

Although we did not incur significant disruptions during the three and six months ended June 30, 2020 from COVID-19, we are unable to predict the impact that COVID-19 will have on our future financial position and operating results due to numerous uncertainties.

Although we did not incur significant disruptions during the three and nine months ended September 30, 2020 from COVID-19, we are unable to predict the impact that COVID-19 will have on our future financial position and operating results due to numerous uncertainties.

The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty, and turmoil in the energy industry.

The situation surrounding COVID-19 continues to evolve rapidly and the ultimate duration and impact of the outbreak as well as the continued decline in oil demand remains highly uncertain and subject to change.

While we have instituted work from home arrangements for certain staff members, there has been no adverse effect on our ability to maintain operations, including our financial reporting systems, our internal controls over financial reporting or our disclosure controls and procedures.

There has been no material adverse effect on our ability to maintain operations, including our financial reporting systems, our internal controls over financial reporting or our disclosure controls and procedures.

In addition, to date we have not incurred any material COVID-19 related contingencies.

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Results of Operations

During the second quarter of 2020, we continued to experience a weak ethanol margin environment.

We maintained an average utilization rate of approximately 53.5% of capacity, resulting in ethanol production of 149.9 mmg for the second quarter of 2020, compared with 224.0 mmg, or 80.0% of capacity, for the same quarter last year.

The reduction in the average utilization rate was primarily due to poor margins driven in part by a significant reduction in motor fuel demand as a result of the COVID-19 pandemic.

During the third quarter of 2020, we continued to experience a weak ethanol margin environment.

We maintained an average utilization rate of approximately 66.8% of capacity, resulting in ethanol production of 189.2 mmg for the third quarter of 2020, compared with 238.4 mmg, or 84.2% of capacity, for the same quarter last year.

The reduction in the average utilization rate was primarily due to continued poor margins driven in part by a reduction in motor fuel demand as a result of the COVID-19 pandemic.

Our operating strategy is to reduce operating expenses, energy usage and water consumption through our Project 24 initiative while running at higher utilization rates in order to achieve improved margins.

However, in the current environment, given the significant drop in driving and gasoline demand experienced in the second quarter, we may exercise operational discretion that results in reductions in production.

However, in the current environment, we may exercise operational discretion that results in reductions in production.

Additionally, we may experience lower run rates due to the construction of various projects as well as due to delays in receiving the necessary permits required to operate our facilities.

It is possible that production could be below minimum volume commitments in the future, depending on various factors that drive each bio-refineries variable contribution margin, including future driving and gasoline demand for the industry.

Ethanol Supply and Demand

According to the EIA, domestic ethanol production averaged 0.71 million barrels per day during the second quarter of 2020, which was 33% lower than the 1.05 million barrels per day for the same quarter last year.

Refiner and blender input volume decreased 29% to 0.67 million barrels per day for the second quarter of 2020, compared with 0.94 million barrels per day for the same quarter last year.

Gasoline demand for the second quarter of 2020 decreased 2.6 million barrels per day, or 27% compared to the same quarter last year.

domestic ethanol ending stocks decreased by approximately 2.7 million barrels, or 12%, to 20.2 million barrels for the second quarter of 2020.

At the end of May 2019, the EPA finalized regulations applying the one pound per square inch Reid Vapor Pressure (RVP) waiver that applied to E10 during summer months to apply to E15 as well.

According to the EIA, domestic ethanol production averaged 0.92 million barrels per day during the third quarter of 2020, which was 10% lower than the 1.02 million barrels per day for the same quarter last year.

Refiner and blender input volume decreased 10% to 0.85 million barrels per day for the third quarter of 2020, compared with 0.94 million barrels per day for the same quarter last year.

Gasoline demand for the third quarter of 2020 decreased 0.87 million barrels per day, or 9% compared to the same quarter last year.

domestic ethanol ending stocks decreased by approximately 3.5 million barrels, or 15%, to 19.7 million barrels for the third quarter of 2020.

At the end of May 2019, the EPA finalized regulations applying the one pound per square inch Reid Vapor Pressure (RVP), waiver which applied to E10 during summer months, to apply to E15 as well.

This removed a significant barrier to wider sales of E15 in the summer months, thus expanding the market for ethanol in transportation fuel.

As of June 30, 2020, there were approximately 2,194 retail stations selling E15 in 30 states, up from 2,080 at the beginning of the year, according to Growth Energy.

In March 2020, members of the Organization of Petroleum Exporting Countries and their allies (collectively, OPEC+) failed to reach an agreement on production levels which led to a substantial decrease in oil prices and an increasingly volatile market.

While OPEC+ agreed in April to cut production, downward pressure on prices has continued and could continue for

the foreseeable future.

In addition, with the widespread shutdowns and “shelter in place” orders across the United States also beginning in March 2020 related to the COVID-19 pandemic, driving miles and fuel consumption have been reduced significantly.

This has had a similar impact on ethanol demand resulting in the shutdown of approximately 50% of total industry production capacity.

During the quarter, as economies began to open up from the COVID-19 pandemic, driving demand began to recover and was approximately 90% of prior year levels for the month of July.

As of September 30, 2020, according to Prime the Pump, there were approximately 2,250 retail stations selling E15 in 30 states, up from 2,080 at the beginning of the year, as well as 203 pipeline terminal locations now offering E15 to wholesale customers.

Global Ethanol Supply and Demand

According to the USDA Foreign Agriculture Service, domestic ethanol exports through May 31, 2020 were approximately 0.65 bgy, up 1.6% from 0.64 bgy for the same period of 2019 .

Brazil remained the largest export destination for U.S.

ethanol, which accounted for 27% of domestic ethanol export volume despite the 20% tariff on U.S.

ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter, imposed in September 2017 by Brazil’s Chamber of Foreign Trade, or CAMEX.

In a resolution published August 31, 2019, Brazil raised the annual import quota to 750 million duty free liters distributed on a quarterly basis as follows:

September to November 100 million liters, December to February 100 million liters, March to May 275 million liters and June to August 275 million liters.

In addition, India, Canada, and South Korea accounted for 17%, 16%, and 8%, respectively, of U.S.

According to the USDA Foreign Agriculture Service, domestic ethanol exports through August 31, 2020 were approximately 0.9 bgy, down 10% from 1.00 bgy for the same period of 2019 .

Canada moved ahead of Brazil as the largest export destination for U.S.

ethanol, which accounted for 22% of domestic ethanol export volume.

Brazil, India, and South Korea accounted for 20%, 16%, and 8%, respectively, of U.S.

ethanol exports.

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China later raised the tariff further to 70% as the trade war escalated.

In January 2020, China and the United States agreed to certain trade agreements, the impact of which on ethanol are yet to be determined.

In January 2020, China and the United States struck a “Phase I” trade agreement, which included commitments on agricultural commodity purchases.

Ethanol, corn and distillers grains were included as potential purchases in the agreement.

China has been purchasing large quantities of corn, which has raised domestic prices of this feedstock for our ethanol production process.

In addition, China has started purchasing more distillers grains than last year, and in October 2020, it was announced that China had purchased a shipment of U.S.

ethanol for the first time since March 2018.

The cost to produce the equivalent amount of starch found in sugar from $3.50-per-bushel corn is 7 cents per pound.

The average price of sugar was approximately 10.9 cents per pound during the second quarter of 2020.

We currently estimate that net ethanol exports will range from 1.1 billion to 1.5 billion gallons in 2020, excluding any potential exports to China, based on historical demand from a variety of countries and certain countries who seek to improve their air quality and eliminate MTBE from their own fuel supplies.

Y ear-to-date U.S.

distillers grains exports through May 2020, were 4.1 million metric tons, or 6.6% lower than the same period last year, a ccording to the USDA Foreign Agriculture Service .

Mexico, South Korea, Vietnam, Indonesia, Thailand, and Japan, accounted for approximately 65.6% of total U.S.

The average price of sugar was approximately 12.4 cents per pound during the third quarter of 2020.

We currently estimate that net ethanol exports will range from 1.2 billion to 1.4 billion gallons in 2020, excluding any significant exports to China, based on historical demand from a variety of countries and certain countries who seek to improve their air quality and eliminate MTBE from their own fuel supplies.

Year-to-date U.S.

distillers grains exports through August 31, 2020, were 7.1 million metric tons, or 3.1% lower than the same period last year, according to the USDA Foreign Agriculture Service.

Mexico, South Korea, Vietnam, Thailand, Indonesia, and Turkey, accounted for approximately 64.3% of total U.S.

distillers export volumes.

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We are sensitive to government programs and policies that affect the supply and demand for ethanol and other fuels, which in turn may impact the volume of ethanol and other fuels we handle.

Various bills have been discussed in the House and Senate which would eliminate the RFS II entirely, eliminate the corn based ethanol portion of the mandate, or make it more difficult to sell fuel blends with higher levels of ethanol.

Various bills and amendments have been proposed in the House and Senate which would eliminate the RFS II entirely, eliminate the corn based ethanol portion of the mandate, and make it more difficult to sell fuel blends with higher levels of ethanol.

We believe it is unlikely that any of these bills will become law in the current Congress.

In addition, the manner in which the EPA administers the RFS II can have a significant impact on the actual amount of ethanol blended into the domestic fuel supply.

In addition, the manner in which the EPA administers the RFS II and related regulations can have a significant impact on the actual amount of ethanol blended into the domestic fuel supply.

Federal mandates and state-level clean fuel programs supporting the use of renewable fuels are a significant driver of ethanol demand in the U.S.

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market share.

In addition, expansion of clean fuel programs in other states, or a national low carbon fuel standard could increase the demand for ethanol, depending on how it is structured.

Congress first enacted CAFE in 1975 to reduce energy consumption by increasing the fuel economy of cars and light trucks.

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However, California’s Low Carbon Fuel Standard program (LCFS) has driven growth in E85 usage, and other state/regional LCFS programs have the potential to do the same.

The One-Pound Waiver that was extended in May 2019 to allow E15 to be sold year-round to all vehicles model year 2001 and newer is being challenged in an action filed in Federal District Court for the DC Circuit.

However, the One-Pound Waiver remains in effect.

However, the One-Pound Waiver remains in effect, and E15 is sold year round in a number of states.

The RFS II has been a driving factor in the growth of ethanol usage in the United States.

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On December 19, 2019, the EPA announced the final 2020 RVO for conventional ethanol, which met the 15.0-billion-gallon congressional target.

The EPA has not yet released a draft RVO rule for the 2021volumes, though it typically does so in June or July, and aims to finalize the rule by November 30 each year.

The EPA has the authority to waive the mandates, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms the economy or environment.

The EPA has not yet

released a draft RVO rule for the 2021 volumes.

They typically do so in June or July, and aim to finalize the rule by November 30 each year.

It is unclear when they will release the RVO for 2021, if at all.

The EPA has the authority to waive the biofuel mandate, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms the domestic economy or environment.

According to the RFS II, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022 – the year through which the statutorily prescribed volumes run.

While conventional ethanol maintained 15 billion gallons, 2019 was the second consecutive year that the total proposed RVO was more than 20% below statutory volumes levels.

While conventional ethanol maintained 15 billion gallons, 2019 was the second consecutive year that the total proposed RVO was more than 20% below the statutory volumes levels.

Thus, the EPA was expected to initiate a reset rulemaking, and modify statutory volumes through 2022, and do so based on the same factors they are to use in setting the RVOs post-2022.

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However, on December 19, 2019, the EPA announced it would not be moving forward with a reset rulemaking in 2020.

It is unclear when or if they will propose a reset rulemaking.

The EPA assigns individual refiners, blenders, and importers the volume of renewable fuels they are obligated to use based on their percentage of total domestic transportation fuel sales.

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The EPA has 90 days to respond, and as of this filing had indicated only that they are “watching the situation closely, and reviewing the governors’ letter.”

On October 21, 2020, 15 Senate Republicans sent a letter to the EPA requesting a general waiver from the RFS to reduce the 2021 RVO, which has not yet been proposed, citing the reduced demand for fuels due to COVID-19.

The letter also asked that the 500 million gallon court-ordered remand be ignored, and that any gallons previously exempted through small refineries exemptions not be reallocated among obligated parties.

Under the RFS II, a small refinery is defined as one that processes fewer than 75,000 barrels of petroleum per day.

Small refineries can petition the EPA for a SRE which, if approved, waives their portion of the annual RVO requirements.

The EPA, through consultation with the Department of Energy and the Department of Agriculture, can grant them a full or partial waiver, or deny it outright within 90 days of submittal.

The EPA granted significantly more of these waivers for 2016, 2017 and 2018 than they had in the past, totaling 790 million gallons of waived requirements for the 2016 compliance year, 1.82 billion gallons for 2017 and 1.43 billion gallons for 2018.

In doing so, the EPA effectively reduced the RFS II mandated volumes for those compliance years by those amounts respectively, and as a result, RIN values have declined significantly.

The EPA, through consultation with the DOE and the USDA can grant them a full or partial waiver, or deny it outright within 90 days of submittal.

The EPA granted significantly more of these waivers for 2016, 2017 and 2018 than they had in the past, totaling 790 mmg of waived requirements for the 2016 compliance year, 1.82 billion gallons for 2017 and 1.43 billion gallons for 2018.

In doing so, the EPA effectively reduced the RFS II mandated volumes for those compliance years by those amounts respectively, and as a result, RIN values declined significantly.

Biofuels groups have filed a lawsuit in the Court of Appeals for the D.C.

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In a supplemental rulemaking to the 2020 RVO rule, the EPA changed their approach, and for the first time accounted for the gallons that they anticipate they will be waiving from the blending requirements due to small refinery exemptions.

To accomplish this, they are adding in the trailing three year average of gallons the Department of Energy recommended be waived, in effect raising the blending volumes across the board in anticipation of waiving the obligations in whole or in part for certain refineries that qualify for the exemptions.

Though the EPA has often disregarded the recommendations of the Department of Energy in years past, they stated in the rule their intent to adhere to these recommendations going forward, including granting partial waivers rather than an all or nothing approach.

The EPA will be adjudicating the 2020 compliance

year small refinery exemption applications in early 2021, but have indicated they will adhere to Department of Energy recommendations for the 2019 compliance year applications as well, which should be adjudicated in 2020.

There were 26 applications pending as of this filing.

To accomplish this, they are adding in the trailing three year average of gallons the DOE recommended be waived, in effect raising the blending volumes across the board in anticipation of waiving the obligations in whole or in part for certain refineries that qualify for the exemptions.

Though the EPA has often disregarded the recommendations of the DOE in years past, they stated in the rule their intent to adhere to these recommendations going forward, including granting partial waivers rather than an all or nothing approach.

The EPA will be adjudicating the 2020 compliance year small refinery exemption

applications in early 2021, but have indicated they will adhere to the DOE recommendations for the 2019 compliance year applications as well, which should be adjudicated in 2020.

On January 24, 2020, the U.S.

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The refiners appealed for a rehearing which was denied.

It is possible the decision will be appealed to the U.S.

Two of the refiners appealed the decision to the U.S.

Supreme Court.

If the decision against the EPA is upheld by the Supreme Court, it is uncertain how the EPA will propose to remedy the situation.

In light of the 10 th Circuit ruling, a number of refineries have applied for “gap year” SREs in an effort to establish a continuous string of relief and to ensure they are able to qualify for SREs going forward.

A total of 64 gap year requests were filed with the EPA and reviewed by the DOE.

On September 14, 2020 the EPA announced that they were denying 54 of the gap year requests that had been scored and returned by DOE, regardless of how they had been scored.

We believe that they will apply the same standard and deny the remaining ten gap year requests.

Without a string of continuous SRE approvals, almost every small refinery would no longer be able to apply for hardship relief in this manner, unless the Supreme Court takes up and overturns the 10th Circuit ruling, which we believe is unlikely.

In October 2019, the White House directed the USDA and EPA to move forward with rulemaking to expand access to higher blends of biofuels.

This includes funding for infrastructure, labeling changes and allowing E15 to be sold through E10 infrastructure.

The USDA rolled out the Higher Blend Infrastructure Incentive Program in the summer of 2020, providing competitive grants to fuel terminals and retailers for installing equipment for dispensing higher blends of ethanol and biodiesel.

The EPA has indicated it could soon move forward with notice of proposed rulemaking on E15 labeling reforms.

On September 12, 2020 President Trump announced his support for amending federal regulations to allow for E15 to be sold through E10 pumps, however federal agencies have yet to take formal action on this directive.

In 2017, the D.C.

Circuit ruled in favor of biofuel groups against the EPA related to its decision to lower the 2016 volume requirements by 500 million gallons.

As a result, the Court remanded to the EPA to make up for the 500 million gallons.

Despite this, in the proposed 2020 RVO rulemaking released in July 2019, the EPA stated it does not intend to make up the 500 million gallons as the court directed, citing potential burden on obligated parties.

The EPA has indicated that it plans to address this court ordered remand in conjunction with the 2021 RVO rulemaking.

To respond to the COVID-19 health crisis and attempt to offset the subsequent economic damage, Congress passed multiple relief measures, most notably the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in March 2020, which created and funded multiple programs that have impacted or could impact our industry.

Circuit ruled in favor of biofuel groups against the EPA related to its decision to lower the 2016 volume requirements by 500 mmg.

As a result, the Court remanded to the EPA to make up for the 500 mmg.

Despite this, in the proposed 2020 RVO rulemaking released in July 2019, the EPA stated it does not intend to make up the 500 mmg as the court directed, citing potential burden on obligated parties.

The EPA had indicated that it plans to address this court ordered remand in conjunction with the 2021 RVO rulemaking, however that rulemaking has been delayed indefinitely for political reasons.

To respond to the COVID-19 health crisis and attempt to offset the subsequent economic damage, Congress passed multiple relief measures, most notably the CARES Act in March 2020, which created and funded multiple programs that have impacted or could impact our industry.

The USDA was given additional resources for the Commodity Credit Corporation (CCC) and they are using those funds to provide direct payments to farmers, including corn farmers from whom we purchase most of our feedstock for ethanol production.

Similar to the trade aid payments made by the USDA over the past two years, this cash injection for farmers could cause them to delay marketing decisions and increase the price we have to pay to purchase the corn.

The USDA did not include any CCC funds for ethanol plants as of this filing.

The USDA did not include any CCC program funds for supporting ethanol plants as of this filing.

The CARES Act provided for the Small Business Administration (SBA) to assist companies with fewer than 500 employees, and for some North American Industry Classification System (NAICS) codes, 1,000 employees, and keep them from laying off workers.

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The CARES Act provided a tax exclusion on the shipment of un-denatured ethanol for use in manufacturing hand sanitizer.

The FDA has provided expanded guidance to allow for more denaturants to be used in ethanol intended for hand sanitizer production, and has expanded the grades of ethanol allowed for the duration of the public health crisis which on July 25, 2020 was extended another 90 days by the U.S.

The FDA has provided expanded guidance to

allow for more denaturants to be used in ethanol intended for hand sanitizer production, and has expanded the grades of ethanol allowed for the duration of the public health crisis which on July 25, 2020 was extended another 90 days by the U.S.

Secretary of Health and Human Services.

We believe it is likely the public health crisis declaration will be extended again.

Government actions abroad can significantly impact the demand for U.S.

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ethanol in the near term.

Ethanol is included as an agricultural commodity under

the “Phase I” agreement with China, wherein they are to purchase upwards of $40 billion in agricultural commodities from the U.S.

Ethanol is included as an agricultural commodity under the “Phase I” agreement with China, wherein they are to purchase upwards of $40 billion in agricultural commodities from the U.S.

in both 2020 and 2021.

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ethanol by China.

In Brazil, the Secretary of Foreign Trade issued an official written resolution, imposing a 20% tariff on U.S.

ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter in September 2017.

In Brazil, the Secretary of Foreign Trade issued an official written resolution, imposing a 20% tariff rate quota on U.S.

ethanol imports in excess of 150 million liters, or 39.6 mmg per quarter in September 2017.

The initial ruling was valid for two years;

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September to November 100 million liters, December to February 100 million liters, March to May 275 million liters and June to August 275 million liters.

After briefly expiring on September 1, 2020, the tariff rate quota was extended for 90 days on September 14, 2020.

Our exports also face tariffs, rate quotas, countervailing duties, and other hurdles in the European Union, India, Peru, Columbia and elsewhere, which limits the ability to compete in some markets.

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There is an effort underway to go through the full regulatory process to allow for 10% blends countrywide, including in the three major metropolitan areas.

The 180 day window was extended due to COVID-19, and the new deadline is March 26, 2021.

ethanol exports to Mexico totaled 31.2 mmg in 2019.

On January 29, 2020, the President signed into law the updated North American Free Trade Agreement, known as the United States Mexico Canada Agreement or USMCA.

On January 29, 2020, President Trump signed into law the updated North American Free Trade Agreement, known as the United States Mexico Canada Agreement or USMCA.

The pact maintains the duty free access of U.S.

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In 2019, the U.S.

shipped Columbia 80.2 million gallons of ethanol.

shipped Columbia 80.2 mmg of ethanol.

Comparability of our Financial Results

We report the financial and operating performance for the following four operating segments:

(1) ethanol production, which includes the production of ethanol, including industrial-grade alcohol, distillers grains and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities, (3) food and ingredients, which includes food-grade corn oil and (4) partnership, which includes fuel storage and transportation services.

(1) ethanol production, which includes the production of ethanol, including industrial-grade alcohol, distillers grains, ultra-high protein and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities, (3) food and ingredients, which includes food-grade corn oil and (4) partnership, which includes fuel storage and transportation services.

We sold an aggregate 50% membership interest in GPCC to TGAM and StepStone during the third quarter of 2019.

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The company concluded that the disposition of GPCC met the requirements under ASC 205-20.

Therefore, GPCC results for the three and six months ended June 30, 2019 are classified as discontinued operations.

Therefore, GPCC results for the three and nine months ended September 30, 2019 are classified as discontinued operations.

During the normal course of business, our operating segments do business with each other.

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We consolidate the financial results of BioProcess Algae, and record a noncontrolling interest for the economic interest in the joint venture held by others.

As of June 30, 2020, we, together with our subsidiaries, own a 49.0% limited partner interest and a 2.0% general partner interest in the partnership and own all of the partnership’s incentive distribution rights, with the remaining 49.0% limited partner interest owned by public common unitholders.

As of September 30, 2020, we, together with our subsidiaries, own a 48.9% limited partner interest and a 2.0% general partner interest in the partnership and own all of the partnership’s incentive distribution rights, with the remaining 49.1% limited partner interest owned by public common unitholders.

We consolidate the financial results of the partnership, and record a noncontrolling interest for the economic interest in the partnership held by the public common unitholders.

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Three Months Ended

Six Months Ended

‎ September 30,

Nine Months Ended

‎ September 30,

Ethanol production:

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Revenues as reported

(1) Revenues include certain items which were previously considered intercompany transactions prior to the disposition of GPCC and therefore eliminated upon consolidation.

These revenue transactions are now presented on a gross basis in product revenues.

These revenue transactions total $5.7 million and $9.1 million for the three and six months ended June 30, 2019, respectively.

Three Months Ended

Six Months Ended

‎ September 30,

Nine Months Ended

‎ September 30,

Cost of goods sold:

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Intersegment eliminations

(1) Cost of goods sold include certain items which were previously considered intercompany transactions prior to the disposition of GPCC and therefore eliminated upon consolidation.

These cost of goods sold transactions are now presented on a gross basis in cost of goods sold.

These costs of goods sold transactions total $5.6 million and $9.0 million for the three and six months ended June 30, 2019, respectively.

Three Months Ended

Six Months Ended

‎ September 30,

Nine Months Ended

‎ September 30,

Operating income (loss):

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Corporate activities

(1) Operating loss for ethanol production includes a goodwill impairment charge of $24.1 million for the six months ended June 30, 2020.

(1) Operating loss for ethanol production includes a goodwill impairment charge of $24.1 million for the nine months ended September 30, 2020.

Three Months Ended

Six Months Ended

‎ September 30,

Nine Months Ended

‎ September 30,

Depreciation and amortization:

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Three Months Ended

Six Months Ended

‎ September 30,

Nine Months Ended

‎ September 30,

Net loss from continuing operations including noncontrolling interest

Interest expense

Income tax benefit, net of equity method income tax expense

Income tax expense (benefit), net of equity method income tax expense

Depreciation and amortization (1)

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Three Months Ended

Six Months Ended

‎ September 30,

Nine Months Ended

‎ September 30,

Adjusted EBITDA:

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Adjusted EBITDA

(1) Includes corporate expenses, offset by earnings from equity method investments of $12.0 million and $19.8 million for the three and six months ended June 30, 2020, respectively.

(1) Includes corporate expenses, offset by earnings from equity method investments of $0.6 million and $20.4 million for the three and nine months ended September 30, 2020, respectively.

* Percentage variance not considered meaningful.

Three Months Ended June 30, 2020 Compared with the Three Months Ended June 30, 2019

Three Months Ended September 30, 2020 Compared with the Three Months Ended September 30, 2019

Consolidated Results

Consolidated revenues decreased $212.6 million for the three months ended June 30, 2020 compared with the same period in 2019 primarily due to lower production volumes of ethanol, distillers grains and corn oil.

Operating loss decreased $27.3 million and adjusted EBITDA increased $37.4 million for the three months ended June 30, 2020 compared with the same period last year primarily due to improved margins on ethanol production as well as equity earnings from the GPCC joint venture.

Interest expense decreased $1.6 million for the three months ended June 30, 2020 compared with the same period in 2019.

Income tax benefit was $11.5 million for the three months ended June 30, 2020 compared with $15.3 million for the same period in 2019.

The decrease in the income tax benefit was primarily due to a decrease in pre-tax loss for the three months ended June 30, 2020 as compared to the same period in 2019 offset by the tax benefit for the utilization of previously recorded tax NOLs in the three month period ended June 30, 2020 as allowed under the provisions of the recently enacted CARES Act.

The following discussion provides greater detail about our second quarter segment performance.

Consolidated revenues decreased $208.3 million for the three months ended September 30, 2020 compared with the same period in 2019 primarily due to lower production volumes of ethanol, distillers grains and corn oil and decreased trading revenues within our agribusiness and energy services segment.

Operating loss decreased $28.2 million and adjusted EBITDA increased $22.2 million for the three months ended September 30, 2020 compared with the same period last year primarily due to improved margins on ethanol production.

Interest expense decreased $0.4 million for the three months ended September 30, 2020 compared with the same period in 2019.

Income tax expense was $7.3 million for the three months ended September 30, 2020 compared with income tax

benefit of $12.5 million for the same period in 2019 due to the recording of a valuation allowance against tax NOLs arising during the three months ended September 30, 2020 and a decrease in pre-tax loss in the same period in 2019.

The following discussion provides greater detail about our third quarter segment performance.

Ethanol Production Segment

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Three Months Ended

‎ September 30,

(thousands of gallons)

5 unchanged sentences

(thousands of bushels)

Revenues in our ethanol production segment decreased $160.4 million for the three months ended June 30, 2020 compared with the same period in 2019 primarily due to lower production volumes of ethanol, distillers grains and corn oil.

Cost of goods sold for our ethanol production segment decreased $199.2 million for the three months ended June 30, 2020 compared with the same period last year primarily due to lower production volumes.

Operating loss decreased $35.1 million and EBITDA increased $37.1 million for the three months ended June 30, 2020 compared with the same period in 2019 primarily due to improved margins on ethanol production, specifically related to the sale of high protein animal feed products and industrial-grade alcohol.

Depreciation and amortization expense for the ethanol production segment was $17.2 million for the three months ended June 30, 2020 compared with $15.4 million for the same period last year.

Revenues in our ethanol production segment decreased $151.4 million for the three months ended September 30, 2020 compared with the same period in 2019 primarily due to lower production volumes of ethanol, distillers grains and corn oil.

Cost of goods sold for our ethanol production segment decreased $182.4 million for the three months ended September 30, 2020 compared with the same period last year primarily due to lower production volumes, as well as lower production costs.

Operating loss decreased $27.9 million and EBITDA increased $29.9 million for the three months ended September 30, 2020 compared with the same period in 2019 primarily due to improved margins, primarily related to the sale of industrial-grade alcohol and ultra-high protein.

Depreciation and amortization expense for the ethanol production segment was $17.5 million for the three months ended September 30, 2020 compared with $15.5 million for the same period last year.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased $54.5 million while operating income decreased $4.0 million and EBITDA decreased by $3.9 million for the three months ended June 30, 2020 compared with the same period in 2019.

Revenues in our agribusiness and energy services segment decreased $58.5 million while operating income increased $4.8 million and EBITDA increased by $5.0 million for the three months ended September 30, 2020 compared with the same period in 2019.

The decrease in revenues was primarily due to a decrease in ethanol, distillers grain and corn oil trading activity driven by lower production volumes, as well as lower average realized prices for ethanol.

Operating income and EBITDA decreased primarily as a result of lower margins.

Operating income and EBITDA increased primarily as a result of higher margins.

Food and Ingredients Segment

The food and ingredients segment, which now represents food-grade corn oil production had no activity during the three months ended June 30, 2020.

The food and ingredients segment, which now represents food-grade corn oil production had no activity during the three months ended September 30, 2020.

Partnership Segment

Revenues generated by our partnership segment decreased $0.4 million for the three months ended June 30, 2020, compared with the same period for 2019.

Terminal services revenue decreased $0.3 million primarily as result of a decrease in fees associated with minimum volume commitments.

Revenues generated from railcar transportation services decreased $0.1 million primarily due to lower sublease revenue.

Operating income decreased $0.9 million and EBITDA decreased $0.7 million for the three months ended June 30, 2020 compared with the same period in 2019.

Revenues generated by our partnership segment increased $1.2 million for the three months ended September 30, 2020, compared with the same period for 2019.

Storage and throughput service revenue increased $0.7 million due to an increase in the rate per gallon charged to Green Plains Trade beginning July 1, 2020.

Railcar transportation service revenue increased $0.5 million primarily due to an increase in average volumetric capacity provided and the average capacity fee charged.

Operating income increased $0.7 million and EBITDA increased $0.5 million for the three months ended September 30, 2020 compared with the same period in 2019.

Intersegment Eliminations

Intersegment eliminations of revenues decreased by $2.8 million for the three months ended June 30, 2020 compared with the same period in 2019 due to decreased marketing and corn origination fees within the agribusiness and energy services segment.

Intersegment eliminations of revenues decreased by $0.4 million for the three months ended September 30, 2020 compared with the same period in 2019.

Corporate Activities

Operating income was impacted by a decrease in operating expenses for corporate activities, primarily related to travel and entertainment, of $0.9 million for the three months ended June 30, 2020 compared with the same period in 2019.

We recorded income tax benefit of $11.5 million for the three months ended June 30, 2020, compared with $15.3 million for the same period in 2019.

The decrease in the amount of tax benefit recorded for the three months ended June 30, 2020 compared to the same period in 2019 was due to a decrease in pre-tax loss for the three months ended June 30, 2020 as compared to the same period in 2019 offset by the tax benefit associated with the carry back of the tax NOL generated in 2019 to the 2014 tax year under the CARES Act, as well as the release of a previously recorded valuation allowance against the 2019 NOL and other deferred tax assets.

Operating income was impacted by a decrease in operating expenses for corporate activities, primarily related to the recognition of earn-out provisions related to the initial sale of GPCC in the amount of $2.0 million for the three months ended September 30, 2020.

We recorded income tax expense of $7.3 million for the three months ended September 30, 2020, compared with income tax benefit of $12.5 million for the same period in 2019.

The decrease in the amount of tax benefit recorded for the three months ended September 30, 2020 compared to the same period in 2019 was due to the recording of a valuation allowance against increases in deferred tax assets in the third quarter.

Income from Equity Method Investees

Income from equity method investees increased $12.1 million for the three months ended June 30, 2020 compared with the same period last year due to earnings from our GPCC joint venture during the current period.

Prior to its disposition during the third quarter of 2019, GPCC was a consolidated entity.

Income from equity method investees increased $0.3 million for the three months ended September 30, 2020 compared with the same period last year due primarily to increased earnings from our GPCC joint venture during the current period.

Net Income from Discontinued Operations

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After closing, GPCC is no longer consolidated in the company’s consolidated financial statements and the GPCC investment is accounted for using the equity method of accounting.

GPCC results for the three months ended June 30, 2019 are classified as discontinued operations.

Net income from discontinued operations was $1.9 million for the three months ended June 30, 2019.

Six Months Ended June 30, 2020 Compared with the Six Months Ended June 30, 2019

GPCC results for the three months ended September 30, 2019 are classified as discontinued operations.

Net income from discontinued operations, net of income taxes, was $3.4 million for the three months ended September 30, 2019.

Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019

Consolidated Results

Consolidated revenues decreased $18.4 million for the six months ended June 30, 2020 compared with the same period in 2019 primarily due to decreased trading revenues within our agribusiness and energy services segment, offset slightly by higher production volumes of ethanol, distillers grains and corn oil in our ethanol production segment.

Operating loss decreased $11.6 million for the six months ended June 30, 2020 compared with the same period last year primarily due to the sale of industrial-grade alcohol and high protein animal feed products, offset by the pre-tax write-off of the goodwill in the ethanol production segment.

Consolidated revenues decreased $256.6 million for the nine months ended September 30, 2020 compared with the same period in 2019 primarily due to lower production volumes of ethanol and distillers grains in our ethanol production segment and decreased trading revenues within our agribusiness and energy services segment.

Operating loss decreased $39.7 million for the nine months ended September 30, 2020 compared with the same period last year primarily due to the sale of industrial-grade alcohol and ultra-high protein feed ingredients, offset by the pre-tax write-off of the goodwill in the ethanol production segment.

Adjusted EBITDA increased $80.6 million due to higher earnings from our ethanol production segment, excluding the goodwill impairment, driven by the sale of industrial-grade alcohol and high protein animal feed products as well as equity earnings from the GPCC joint venture.

Interest expense decreased $1.6 million for the three months ended June 30, 2020 compared with the same period in 2019.

Income tax benefit was $55.7 million for the six months ended June 30, 2020 compared with $28.3 million for the same period in 2019.

The increase in income tax benefit was primarily due to the utilization of previously recorded tax NOLS during the six month period ended June 30, 2020 as allowed under the provisions of the recently enacted CARES Act.

Interest expense decreased $2.0 million for the nine months ended September 30, 2020 compared with the same period in 2019.

Income tax benefit was $48.5 million for the nine months ended September 30, 2020 compared with $40.7 million for the same period in 2019.

The increase in income tax benefit was primarily due to the utilization of previously recorded tax NOLs during the nine month period ended September 30, 2020 as allowed under the provisions of the recently enacted CARES Act.

The following discussion provides greater detail about our year-to-date segment performance.

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Key operating data for our ethanol production segment is as follows:

Six Months Ended

Nine Months Ended

‎ September 30,

(thousands of gallons)

5 unchanged sentences

(thousands of bushels)

Revenues in our ethanol production segment increased $44.5 million for the six months ended June 30, 2020 compared with the same period in 2019 primarily due to higher production volumes of ethanol, distillers grains and corn oil.

Cost of goods sold for our ethanol production segment decreased $3.5 million for the six months ended June 30, 2020 compared with the same period last year primarily due to lower costs on high protein animal feed products and industrial-grade alcohol, offset by higher production volumes.

Operating loss decreased $18.5 million and EBITDA increased $21.5 million for the six months ended June 30, 2020 compared with the same period in 2019 primarily due to the sale of high protein animal feed products and industrial-grade alcohol, offset by the goodwill impairment charge recognized in the first quarter of 2020.

Depreciation and amortization expense for the ethanol production segment was $33.1 million for the six months ended June 30, 2020 compared with $30.8 million for the same period last year.

Revenues in our ethanol production segment decreased $106.9 million for the nine months ended September 30, 2020 compared with the same period in 2019 primarily due to lower production volumes of ethanol and distillers grains.

Cost of goods sold for our ethanol production segment decreased $185.9 million for the nine months ended September 30, 2020 compared with the same period last year primarily due to lower production volumes.

Operating loss decreased $46.4 million and EBITDA increased $51.4 million for the nine months ended September 30, 2020 compared with the same period in 2019 primarily due to improved margins as well as the sale of industrial-grade alcohol and ultra-high protein.

Operating income and EBITDA were also impacted by the $24.1 million goodwill impairment charge recognized in the first quarter of 2020.

Depreciation and amortization expense for the ethanol production segment was $50.6 million for the nine months ended September 30, 2020 compared with $46.3 million for the same period last year.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased $60.5 million while operating income decreased $6.7 million and EBITDA decreased by $6.6 million for the six months ended June 30, 2020 compared with the same period in 2019.

The decrease in revenues was primarily due to a decrease in ethanol, distillers grain and corn oil trading activity, as well as lower average realized prices for ethanol.

Operating income and EBITDA decreased primarily as a result of decreased margins.

Revenues in our agribusiness and energy services segment decreased $149.0 million while operating income decreased $2.0 million and EBITDA decreased by $1.6 million for the nine months ended September 30, 2020 compared with the same period in 2019.

The decrease in revenues was primarily due to a decrease in ethanol and distillers grain trading activity, as well as lower average realized prices for ethanol.

Operating income and EBITDA decreased primarily as a result of decreased margins during the first quarter.

Food and Ingredients Segment

The food and ingredients segment, which now represents food-grade corn oil production had no activity during the six months ended June 30, 2020.

The food and ingredients segment, which now represents food-grade corn oil production had no activity during the nine months ended September 30, 2020.

Partnership Segment

Revenues generated by our partnership segment decreased $1.3 million for the six months ended June 30, 2020, compared with the same period for 2019.

Terminal services revenue decreased $0.9 million primarily as result of a decrease in fees associated with minimum volume commitments.

Revenues generated from railcar transportation services decreased $0.6 million due to a reduction in average volumetric capacity provided, as well as lower sublease revenue.

These decreases were partially offset by an increase of $0.2 million in trucking and other revenue associated with an increase in volumes transported for Green Plains Trade.

Operating income decreased $1.1 million and EBITDA decreased $0.9 million for the six months ended June 30, 2020 compared with the same period in 2019.

Revenues generated by our partnership segment for the nine months ended September 30, 2020 were comparable with the same period for 2019.

Storage and throughput services revenue increased $0.7 million due to an increase in the rate per gallon charged to Green Plains Trade beginning on July 1, 2020.

Trucking and other revenue increased $0.2 million due to an increase in volumes transported for Green Plains Trade.

Terminal services revenue decreased $0.9 million primarily as a result of a decrease in fees associated with minimum volume commitments.

Revenues generated from railcar transportation services decreased $0.1 million primarily due to lower sublease revenue, partially offset by an increase in revenue due to an increase in the average capacity fee charged.

Operating income and EBITDA decreased $0.4 million for the nine months ended September 30, 2020 compared with the same period in 2019.

Intersegment Eliminations

Intersegment eliminations of revenues decreased by $0.4 million for the six months ended June 30, 2020 compared with the same period in 2019.

Intersegment eliminations of revenues decreased by $0.8 million for the nine months ended September 30, 2020 compared with the same period in 2019.

Corporate Activities

Operating income was impacted by an increase in operating expenses for corporate activities of $1.3 million for the six months ended June 30, 2020 compared with the same period in 2019 due to increased selling, general and administrative expenses primarily as a result of personnel costs.

We recorded income tax benefit of $55.7 million for the six months ended June 30, 2020, compared with $28.3 million for the same period in 2019.

The increase in the amount of tax benefit recorded for the six months ended June 30, 2020 compared to the same period in 2019 was due to the tax benefit associated with the carry back of the tax NOL generated in 2019 to the 2014 tax year under the newly enacted CARES Act, as well as the release of a previously recorded valuation allowance against the 2019 NOL and other deferred tax assets.

Operating income was impacted by a decrease in operating expenses for corporate activities of $0.7 million for the nine months ended September 30, 2020 compared with the same period in 2019 due primarily to the $2.0 million gain on the initial sale of GPCC related to the earn-out provision recognized in 2020, offset by slightly increased selling, general and administrative expenses primarily as a result of personnel costs.

We recorded income tax benefit of $48.5 million for the nine months ended September 30, 2020, compared with $40.7 million for the same period in 2019.

The increase in the amount of tax benefit recorded for the nine months ended September 30, 2020 compared to the same period in 2019 was due to the increased tax benefit in 2020 associated with the carry back of the tax NOL generated in 2019 to the 2014 tax year under the newly enacted CARES Act, offset by the release of a previously recorded valuation allowance against the 2019 NOL and other deferred tax assets.

Income from Equity Method Investees

Income from equity method investees increased $20.1 million for the six months ended June 30, 2020 compared with the same period last year due to earnings from our GPCC joint venture during the current period.

Prior to its disposition during the third quarter of 2019, GPCC was a consolidated entity.

Income from equity method investees increased $20.4 million for the nine months ended September 30, 2020 compared with the same period last year due to earnings from our GPCC joint venture during the current period.

Net Income from Discontinued Operations

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After closing, GPCC is no longer consolidated in the company’s consolidated financial statements and the GPCC investment is accounted for using the equity method of accounting.

GPCC results for the six months ended June 30, 2019 are classified as discontinued operations.

Net loss from discontinued operations was $2.5 million for the six months ended June 30, 2019 primarily due to severe winter weather and abnormally negative basis during the first quarter of 2019.

GPCC results for the nine months ended September 30, 2019 are classified as discontinued operations.

Net income from discontinued operations, net of income taxes, was $1.0 million for the nine months ended September 30, 2019 .

Liquidity and Capital Resources

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We believe that our ability to obtain financing at reasonable rates and history of consistent cash flow from operating activities provide a solid foundation to meet our future liquidity and capital resource requirements.

On June 30, 2020, we had $163.4 million in cash and equivalents, excluding restricted cash, consisting of $72.1 million held at our parent company and the remainder held at our subsidiaries.

Additionally, we had $20.2 million in restricted cash at June 30, 2020.

We also had $294.0 million available under our committed revolving credit agreements, including $5.0 million available under the partnership’s revolving credit facility, some of which were subject to restrictions or other lending conditions.

On September 30, 2020, we had $150.4 million in cash and equivalents, excluding restricted cash, consisting of $70.5 million held at our parent company and the remainder held at our subsidiaries.

Additionally, we had $31.9 million in restricted cash at September 30, 2020.

We also had $349.8 million available under our committed revolving credit and term loan agreements, including $4.3 million available under the partnership’s revolving credit facility, some of which were subject to restrictions or other lending conditions.

Funds at certain subsidiaries are generally required for their ongoing operational needs and restricted from distribution.

At June 30, 2020, our subsidiaries had approximately $66.4 million of net assets that were not available to us in the form of dividends, loans or advances due to restrictions contained in their credit facilities.

Net cash provided by operating activities for continuing operations was $65.9 million for the six months ended June 30, 2020 compared with net cash used in operating activities for continuing operations of $43.1 million for the same period in 2019.

At September 30, 2020, our subsidiaries had approximately $67.5 million of net assets that were not available to us in the form of dividends, loans or advances due to restrictions contained in their credit facilities.

Additionally, with the sale of our remaining ownership in GPCC in October 2020 for $80.5 million, the remaining availability on our $75.0 million delayed draw loan and $56.0 million in expected tax refund proceeds, we will have sufficient liquidity at our disposal to support our long-term objective of building a technology focused bio-refining platform, producing sustainable, high-value, ultra-high protein feed ingredients.

Net cash provided by operating activities for continuing operations was $76.4 million for the nine months ended September 30, 2020 compared with net cash used in operating activities for continuing operations of $17.8 million for the same period in 2019.

Operating activities compared to the prior year were primarily affected by a decrease in the operating loss, goodwill impairment and changes in working capital when compared to the same period of the prior year.

Net cash used in investing activities for continuing operations was $68.0 million for the six months ended June 30, 2020 compared with net cash used in investing activities for continuing operations of $16.9 million for the same period in 2019, due primarily to an increase capital expenditures during 2020.

Net cash used in financing activities for continuing operations was $84.3 million for the six months ended June 30, 2020 compared with net cash provided by financing activities for continuing operations of $8.0 million for the same period in 2019, primarily due to changes in borrowing activity, a decrease in share repurchases and a decrease in cash dividends and distributions during 2020.

Additionally, Green Plains Trade and Green Plains Grain use revolving credit facilities to finance working capital requirements.

Net cash used in investing activities for continuing operations was $89.5 million for the nine months ended September 30, 2020 compared with net cash provided by investing activities for continuing operations of $37.2 million for the same period in 2019.

Investing activities compared to the prior year were primarily affected by an increase in capital expenditures during 2020

compared to proceeds from the partial sale of GPCC during the nine months ended September 30, 2019.

Net cash used in financing activities for continuing operations was $74.6 million for the nine months ended September 30, 2020 compared with $46.4 million for the same period in 2019, primarily due to changes in borrowing activity, a decrease in share repurchases and a decrease in cash dividends and distributions during 2020.

Additionally, Green Plains Trade, Green Plains Grain and Green Plains Commodity Management use revolving credit facilities to finance working capital requirements.

We frequently draw from and repay these facilities which results in significant cash movements reflected on a gross basis within financing activities as proceeds from and payments on short-term borrowings.

We incurred capital expenditures of $64.6 million in the first half of 2020 primarily for Project 24 operating expense reduction and high-protein expansion projects at various ethanol plants, and for various maintenance projects.

Capital spending for the remainder of 2020 is expected to be between $40.0 million and $55.0 million for various projects, including the high-protein expansion at Wood River, which are expected to be financed with available borrowings under our credit facilities and cash provided by operating activities, as well as borrowings under our recently secured project based financing of $75.0 million.

We incurred capital expenditures of $87.3 million during the nine months ended September 30, 2020, primarily for Project 24 operating expense reduction and high-protein expansion projects at various ethanol plants, and for various maintenance projects.

Capital spending for the remainder of 2020 is expected to be between $30.0 million and $35.0 million for various projects, including the high-protein expansion at Wood River, which are expected to be financed with cash provided by operating activities, as well as borrowings under our recently secured project based financing of $75.0 million.

Our business is highly sensitive to the price of commodities, particularly for corn, ethanol, distillers grains, corn oil and natural gas.

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Available cash generally means all cash and cash equivalents on hand at the end of that quarter less cash reserves established by the general partner, including those for future capital expenditures, future acquisitions and anticipated future debt service requirements, plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the end of that quarter.

On July 16, 2020, the board of directors of the general partner of the partnership declared a cash distribution of $0.12 per unit on outstanding common and subordinated units.

The distribution is payable on August 7, 2020, to unitholders of record at the close of business on July 31, 2020.

On October 15, 2020, the board of directors of the general partner of the partnership declared a cash distribution of $0.12 per unit on outstanding common and subordinated units.

The distribution is payable on November 13, 2020, to unitholders of record at the close of business on November 6, 2020.

Our board of directors authorized a share repurchase program of up to $200 million of our common stock.

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The program may be suspended, modified or discontinued at any time without prior notice .

We did not repurchase any shares during the second quarter of 2020.

We did not repurchase any shares during the third quarter of 2020.

To date, we have repurchased 7,396,936 of common stock for approximately $92.8 million under the program.

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For additional information related to our debt, see Note 9 – Debt included as part of the notes to consolidated financial statements and Note 12 – Debt included as part of the notes to consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2019.

We were in compliance with our debt covenants at June 30, 2020.

We were in compliance with our debt covenants at September 30, 2020.

Based on our forecasts, we believe we will maintain compliance at each of our subsidiaries for the next twelve months or have sufficient liquidity available on a consolidated basis to resolve noncompliance.

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LIBOR is currently set to be phased out at the end of 2021.

At this time, it is not possible to predict the effect of this change or the alternative reference rate to be used.

At this time, it is not possible to predict the effect of this change or the alternative

reference rate to be used.

We will need to renegotiate certain credit facilities to determine the interest rate to replace LIBOR with the new standard that is established.

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We may settle the 4.00% notes in cash, common stock or a combination of cash and common stock.

At June 30, 2020, the outstanding principal balance was $86.2 million on the 4.00% notes.

At September 30, 2020, the outstanding principal balance was $87.7 million on the 4.00% notes.

In August 2016, we issued $170.0 million of 4.125% convertible senior notes due in 2022, or 4.125% notes, which are senior, unsecured obligations with interest payable on March 1 and September 1 of each year.

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We may settle the 4.125% notes in cash, common stock or a combination of cash and common stock.

At June 30, 2020, the outstanding principal balance was $152.8 million on the 4.125% notes.

Ethanol Production Segment

We have small equipment financing loans, finance leases on equipment or facilities, and other forms of debt financing.

At September 30, 2020, the outstanding principal balance was $154.6 million on the 4.125% notes.

Agribusiness and Energy Services Segment

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The unused portion of the credit facility is also subject to a commitment fee of 0.375% per annum.

At June 30, 2020, the outstanding principal balance was $50.2 million on the facility and the interest rate was 2.42%.

At September 30, 2020, the outstanding principal balance was $79.5 million on the facility and the interest rate was 2.40%.

Green Plains Grain has a $100.0 million senior secured asset-based revolving credit facility to finance working capital up to the maximum commitment based on eligible collateral, which matures in June of 2022.

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Total commitments outstanding under the facility cannot exceed $225.0 million.

At June 30, 2020, the outstanding principal balance was $60.8 million on the facility and the interest rate was 3.31%.

At September 30, 2020, the outstanding principal balance was $40.0 million on the facility and the interest rate was 4.22%.

Green Plains Grain has entered into short-term inventory financing agreements with a financial institution.

At June 30, 2020, 2.3 million bushels of corn had been designated as collateral under these agreements at initial values totaling $9.0 million.

At September 30, 2020, 1.3 million bushels of corn had been designated as collateral under these agreements at initial values totaling $5.6 million.

The company has accounted for the agreements as short-term notes, rather than sales, and has elected the fair value option to offset fluctuations in market prices of the inventory.

At June 30, 2020, the short-term notes payable were valued at $9.5 million and our interest rate was 3.04%.

At September 30, 2020, the short-term notes payable were valued at $5.9 million and our interest rate was 2.99%.

Green Plains Commodity Management has an uncommitted $30.0 million revolving credit facility which matures April 30, 2023 to finance margins related to its hedging programs.

Advances are subject to variable interest rates equal to LIBOR plus 1.75%.

At June 30, 2020, the outstanding principal balance was $10.9 million on the facility and the interest rate was 1.85%.

At September 30, 2020, the outstanding principal balance was $21.2 million on the facility and the interest rate was 1.85%.

Ethanol Production Segment

On September 3, 2020, Green Plains Wood River and Green Plains Shenandoah, wholly-owned subsidiaries of the company, entered into a $75.0 million delayed draw loan agreement, which matures on September 1, 2035.

At September 30, 2020, the outstanding principal balance was $10.0 million on the loan and the interest rate was 6.52%.

We also have small equipment financing loans, finance leases on equipment or facilities, and other forms of debt financing.

Partnership Segment

Green Plains Partners, through a wholly owned subsidiary, has a $135.0 million credit facility comprised of a $130.0 million term loan and a $5.0 million revolving credit facility to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes.

Green Plains Partners, through a wholly owned subsidiary, has a credit facility to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes.

The credit facility was amended on June 4, 2020, decreasing the total amount available from $200.0 million to $135.0 million.

The amended credit facility matures on December 31, 2021.

At June 30, 2020, the outstanding principal balance of the facility was $130.0 million, with $5.0 million available on the revolver, and an interest rate was 6.25%.

The amended credit facility includes a $130.0 million term loan and a $5.0 million revolving credit facility, maturing on December 31, 2021.

Payments of $12.5 million were made on the term loan principal during the three and nine months ended September 30, 2020.

The term loan requires monthly principal payments of $2.5 million, with a step up to monthly payments of $3.2 million beginning May 15, 2021 through maturity.

As of September 30, 2020, the term loan had a balance of $117.5 million and an interest rate of 6.00%, and there was a swing line loan outstanding of $0.7 million at an interest rate of 7.25%.

In certain situations we are required to make prepayments on the outstanding principal balance on the credit facility.

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Any prepayments on the term loan are applied to the remaining principal balance in inverse order of maturity, including the final payment.

We use LIBOR as a reference rate for our credit facility.

LIBOR is set to be phased out at the end of 2021.

It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

We may need to amend our credit facility to determine the interest rate to replace LIBOR with the new standard that is established.

The potential effect of any such event on interest expense cannot yet be determined.

Contractual Obligations

Contractual obligations as of June 30, 2020 were as follows (in thousands):

Contractual obligations as of September 30, 2020 were as follows (in thousands):

Payments Due By Period

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Includes administrative and/or commitment fees on debt obligations.

(3) Operating lease costs are primarily for railcars and office space.

(3) Operating lease costs are primarily for railcars and office space and exclude leases not yet commenced with undiscounted future lease payments of approximately $25.7 million.

(4) Purchase contracts represent index-priced and fixed-price contracts.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis