Green Plains Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. General The following discussion and analysis provides information we believe is relevant to understand our consolidated financial condition and results of operations. This discussion should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements contained in this report together with our annual report on Form 10-K for the year ended December 31, 2019. Cautionary Information Regarding Forward-Looking Statements Forward-looking statements are made in accordance with safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations that involve a number of risks and uncertainties and do not relate strictly to historical or current facts, but rather to plans and objectives for future operations. These statements may be identified by words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “outlook,” “plan,” “predict,” “may,” “could,” “should,” “will” and similar expressions, as well as statements regarding future operating or financial performance or guidance, business strategy, environment, key trends and benefits of actual or planned acquisitions. Factors that could cause actual results to differ from those expressed or implied in the forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A – Risk Factors of our annual report on Form 10-K for the year ended December 31, 2019, Part II, Item 1A – Risk Factors in this report, or incorporated by reference. Specifically, we may experience fluctuations in future operating results due to a number of economic conditions, including: disruption caused by health epidemics, such as the COVID-19 outbreak; competition in the ethanol industry and other industries in which we operate; commodity market risks, including those that may result from weather conditions; financial market risks; counterparty risks; risks associated with changes to government policy or regulation, including changes to tax laws; risks related to acquisition and disposition activities and achieving anticipated results; risks associated with merchant trading; risks related to our equity method investees and other factors detailed in reports filed with the SEC. Additional risks related to Green Plains Partners LP include compliance with commercial contractual obligations, potential tax consequences related to our investment in the partnership and risks disclosed in the partnership’s SEC filings associated with the operation of the partnership as a separate, publicly traded entity. We believe our expectations regarding future events are based on reasonable assumptions; however, these assumptions may not be accurate or account for all risks and uncertainties. Consequently, forward-looking statements are not guaranteed. Actual results may vary materially from those expressed or implied in our forward-looking statements. In addition, we are not obligated and do not intend to update our forward-looking statements as a result of new information unless it is required by applicable securities laws. 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. Overview 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. We own a 48.9% limited partner interest, a 2.0% general partner interest and all of the partnership’s incentive distribution rights. The public owns the remaining 49.1% limited partner interest. The partnership is consolidated in our financial statements. In addition, until its disposition on October 1, 2020, Green Plains owned a 50% interest in Green Plains Cattle Company. 38 Table of Contents Recent Developments 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 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. 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. For further information regarding the impact of COVID-19 and the decline in oil demand on the company, please see Part II, Item 1A, “Risk Factors,” in this report, which is incorporated herein by reference. Results of Operations 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, 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. U.S. Ethanol Supply and Demand 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. U.S. 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 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. 39 Table of Contents Global Ethanol Supply and Demand 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. On April 1, 2018, China announced it would add an additional 15% tariff to the existing 30% tariff it had earlier imposed on ethanol imports from the United States and Brazil. China later raised the tariff further to 70% as the trade war escalated. 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 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. Legislation and Regulation 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 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 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. Ethanol policies are influenced by concerns for the environment, diversifying our fuel supply, and reducing the country’s dependence on foreign oil. Consumer acceptance of flex-fuel vehicles and higher ethanol blends of ethanol in non-flex-fuel vehicles may be necessary before ethanol can achieve further growth in U.S. 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. Flexible-fuel vehicles (FFVs), which are designed to run on a mixture of fuels, including higher blends of ethanol such as E85, receive preferential treatment in the form of CAFE credits. There are approximately 21 million FFVs on the road in the U.S. today, 16 million of which are light duty trucks. FFV credits have been decreasing since 2014 and will be completely phased out in 2020. Absent CAFE preferences, auto manufacturers may not be willing to build flexible-fuel vehicles, which has the potential to slow the growth of E85 markets. 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 D.C. Circuit. 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. When the RFS II was established in 2010, the required volume of “conventional” or corn-based ethanol to be blended with gasoline was to increase each year until it reached 15.0 billion gallons in 2015, which left the EPA to address existing limitations in both supply (ethanol production) and demand (usage of ethanol blends in older vehicles). 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 40 Table of Contents 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 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. These factors include environmental impact, domestic energy security, expected production, infrastructure impact, consumer costs, job creation, price of agricultural commodities, food prices, and rural economic development. 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. Obligated parties use RINs to show compliance with the RFS II mandated volumes. Ethanol producers assign RINs to renewable fuels and the RINs are detached when the renewable fuel is blended with transportation fuel domestically. Market participants can trade the detached RINs in the open market. The market price of detached RINs affects the price of ethanol in certain markets and can influence purchasing decisions by obligated parties. On April 15, 2020, five Governors sent a letter to the EPA requesting a general waiver from the RFS due to the drop in demand caused by COVID-19 travel restrictions. They contend that the compliance costs – i.e. cost to purchase RINs – is onerous and could put some refineries out of business. 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 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. Circuit, challenging the 2019 RVO rule over the EPA’s failure to address small refinery exemptions in the rulemaking. This was the first RFS II rulemaking since the expanded use of the exemptions came to light; however, the EPA had declined to cap the number of waivers it grants, and until late 2019, had declined to alter how it accounts for the retroactive waivers in its annual volume calculations. The EPA has a statutory mandate to ensure the volume requirements are met, which are achieved by setting the percentage standards for obligated parties. The EPA’s recent approach accomplished the opposite. Even if all the obligated parties complied with their respective percentage obligations for 2019, the nation’s overall supply of renewable fuel would not meet the total volume requirements set by the EPA. This undermines Congressional intent to increase the consumption of renewable fuels in the domestic transportation fuel supply. Biofuels groups have argued the EPA must therefore adjust its percentage standard calculations to make up for past retroactive waivers and adjust the standards to account for any waivers it reasonably expects to grant in the future. 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 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 41 Table of Contents 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. Court of Appeals for the 10th Circuit ruled on RFA et. al. vs. EPA in favor of biofuels interests, overturning EPA’s granting of refinery exemptions to three refineries on two separate grounds. The Court agreed that, under the Clean Air Act, refineries are eligible for SREs for a given RVO year only if such exemptions are extensions of exemptions granted in previous RVO years. In this case, the three refineries at issue did not qualify for SREs in the year prior to the year that EPA granted them. They were thus ineligible for additional SRE relief because there were no immediately prior SREs to extend. In addition, the Court agreed that the disproportionate economic hardship prong of SRE eligibility should be determined solely by reference to whether compliance with the RFS II creates such hardship, not whether compliance plus other issues create disproportionate economic hardship. The Court thus vacated EPA's grant of SREs for certain years and remanded the grants back to EPA. The refiners appealed for a rehearing which was denied. 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 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 corn. 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. The Paycheck Protection Program (PPP) was created and made payments to many farmers and ethanol plants with fewer than 1,000 employees. This could create a competitive imbalance in the marketplace, and for farmers, like the CCC funds, incentivize them to delay marketing corn. The PPP had its authorization increased by $321 billion in April. The CARES Act also directed the Treasury Department to create programs to support medium-sized businesses, with fewer than 10,000 employees. The “Main Street” programs provide low interest loans to qualifying companies, though we do not qualify according to the most recent guidance from the Treasury Department. Industrial grade ethanol is the primary ingredient in hand sanitizer. 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 42 Table of Contents 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. ethanol. In September 2017, China’s National Development and Reform Commission, the National Energy Agency and 15 other state departments issued a joint plan to expand the use and production of biofuels containing up to 10% ethanol by 2020. China, the number three importer of U.S. ethanol in 2016, imported negligible volumes during 2018 and 2019 due to a 30% tariff on U.S. ethanol, which increased to 70% in early 2018. There is no assurance that China’s joint plan to expand blending to 10% will be carried to fruition, nor that it will lead to increased imports of U.S. 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. in both 2020 and 2021. To date in 2020, there have been no meaningful purchases of U.S. ethanol by China. 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; however, it was extended at the end of August 2019 for an additional year. On an annual basis, Brazil will now allow into the country 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. 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. Some countries are using the COVID-19 crisis as justification for raising duties on imports of U.S. ethanol, or blocking our imports entirely. In June 2017, the Energy Regulatory Commission of Mexico (CRE) approved the use of 10% ethanol blends, which was challenged by multiple lawsuits, of which several were dismissed. The remaining four cases follow one of two tracks: 1) to determine the constitutionality of the CRE regulation, or 2) to determine the benefits, or lack thereof, of introducing E10 to Mexico. An injunction was granted in October 2017, preventing the blending and selling of E10, but was overturned by a higher court in June 2018 making it legal to blend and sell E10 by PEMEX throughout Mexico except for its three largest metropolitan areas. On January 15, 2020, the Mexican Supreme Court ruled that the expedited process for the CRE regulation was unconstitutional, and that after a 180 day period the maximum ethanol blend allowed in the country would revert to 5.8%. 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. U.S. ethanol exports to Mexico totaled 31.2 mmg in 2019. 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. agricultural commodities, including ethanol, into Canada and Mexico. The USMCA went into effect on July 1, 2020. Colombia banned imports of U.S. fuel ethanol for two months, and on June 30 th extended the ban one additional month. The Columbian President ordered this emergency decree citing COVID-19 as the rationale. This action is WTO compliant under Article 20 of the GATT. In 2019, the U.S. 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, 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. 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. The company concluded that the disposition of GPCC met the requirements under ASC 205-20. Therefore, GPCC results for the three and nine months ended September 30, 2019 are classified as discontinued operations. ‎ 43 Table of Contents During the normal course of business, our operating segments do business with each other. For example, our agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains and corn oil of our ethanol production segment. Our partnership segment provides fuel storage and transportation services for our agribusiness and energy services segment. These intersegment activities are treated like third-party transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment performance; however, they do not impact our consolidated results since the revenues and corresponding costs are eliminated. Corporate activities include selling , general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment. When we evaluate segment performance, we review the following segment information as well as earnings before interest, income taxes, depreciation and amortization, excluding amortization of operating lease right-of-use assets and amortization of debt issuance cost s, or EBITDA. The company also owns a 90.0% interest in BioProcess Algae, a joint venture formed in 2008. 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 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. Segment Results The selected operating segment financial information are as follows (in thousands): Three Months Ended ‎ September 30, % Nine Months Ended ‎ September 30, % 2020 2019 Variance 2020 2019 Variance Revenues: Ethanol production: Revenues from external customers $ 332,953 $ 484,382 (31.3%) $ 1,099,170 $ 1,206,107 (8.9%) Intersegment revenues 25 24 4.2 75 75 * Total segment revenues 332,978 484,406 (31.3) 1,099,245 1,206,182 (8.9) Agribusiness and energy services: Revenues from external customers 90,074 146,650 (38.6) 342,078 488,687 (30.0) Intersegment revenues 5,354 7,293 (26.6) 17,030 19,432 (12.4) Total segment revenues 95,428 153,943 (38.0) 359,108 508,119 (29.3) Food and ingredients: Revenues from external customers - - - - 1,451 * Intersegment revenues - - - - - - Total segment revenues - - - - 1,451 * Partnership: Revenues from external customers 1,035 1,318 (21.5) 3,707 5,315 (30.3) Intersegment revenues 20,347 18,836 8.0 58,327 56,751 2.8 Total segment revenues 21,382 20,154 6.1 62,034 62,066 (0.1) Revenues including intersegment activity 449,788 658,503 (31.7) 1,520,387 1,777,818 (14.5) Intersegment eliminations (25,726) (26,153) (1.6) (75,432) (76,258) (1.1) Revenues as reported $ 424,062 $ 632,350 (32.9%) $ 1,444,955 $ 1,701,560 (15.1%) ‎ 44 Table of Contents Three Months Ended ‎ September 30, % Nine Months Ended ‎ September 30, % 2020 2019 Variance 2020 2019 Variance Cost of goods sold: Ethanol production $ 330,162 $ 512,527 (35.6%) $ 1,103,486 $ 1,289,366 (14.4%) Agribusiness and energy services 87,027 150,465 (42.2) 339,332 486,305 (30.2) Food and ingredients - 3 * - 1,526 * Intersegment eliminations (23,256) (30,866) (24.7) (70,761) (76,716) (7.8) $ 393,933 $ 632,129 (37.7%) $ 1,372,057 $ 1,700,481 (19.3%) Three Months Ended ‎ September 30, % Nine Months Ended ‎ September 30, % 2020 2019 Variance 2020 2019 Variance Operating income (loss): Ethanol production (1) $ (21,351) $ (49,289) (56.7%) $ (100,924) $ (147,366) (31.5%) Agribusiness and energy services 4,296 (461) * 7,207 9,184 (21.5) Food and ingredients - (6) * - (76) * Partnership 12,986 12,322 5.4 37,641 38,029 (1.0) Intersegment eliminations (2,447) 4,738 * (4,597) 533 * Corporate activities (7,689) (9,669) (20.5) (27,228) (27,952) (2.6) $ (14,205) $ (42,365) (66.5%) $ (87,901) $ (127,648) (31.1%) (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 ‎ September 30, % Nine Months Ended ‎ September 30, % 2020 2019 Variance 2020 2019 Variance Depreciation and amortization: Ethanol production $ 17,493 $ 15,547 12.5% $ 50,575 $ 46,324 9.2% Agribusiness and energy services 655 541 21.1 1,764 1,642 7.4 Partnership 940 991 (5.1) 2,867 2,747 4.4 Corporate activities 665 749 (11.2) 2,002 2,250 (11.0) $ 19,753 $ 17,828 10.8% $ 57,208 $ 52,963 8.0% * Percentage variance not considered meaningful. We use EBITDA and adjusted EBITDA as segment measures of profitability to compare the financial performance of our reportable segments and manage those segments. EBITDA is defined as earnings before interest expense, income tax expense, including related tax expense of equity method investments, depreciation and amortization excluding the change in right-of-use assets and debt issuance costs. Adjusted EBITDA includes adjustments related to operational results of GPCC prior to its disposition which are recorded as discontinued operations, our proportional share of EBITDA adjustments of our equity method investees and noncash goodwill impairment. We believe EBITDA and adjusted EBITDA are useful measures to compare our performance against other companies. EBITDA and adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, which is prepared in accordance with GAAP. EBITDA and adjusted EBITDA calculations may vary from company to company. Accordingly, our computation of EBITDA and adjusted EBITDA may not be comparable with a similarly titled measure of other companies. ‎ 45 Table of Contents The following table reconciles net loss from continuing operations including noncontrolling interest to adjusted EBITDA (in thousands): Three Months Ended ‎ September 30, Nine Months Ended ‎ September 30, 2020 2019 2020 2019 Net loss from continuing operations including noncontrolling interest $ (30,733) $ (38,884) $ (46,554) $ (114,507) Interest expense 10,169 10,548 29,536 31,528 Income tax expense (benefit), net of equity method income tax expense 7,518 (12,530) (41,957) (40,692) Depreciation and amortization (1) 19,753 17,828 57,208 52,963 EBITDA 6,707 (23,038) (1,767) (70,708) EBITDA adjustments related to discontinued operations - 8,469 - 17,703 Proportional share of EBITDA adjustments to equity method investees 2,071 1,186 7,049 1,827 Noncash goodwill impairment - - 24,091 - Adjusted EBITDA $ 8,778 $ (13,383) $ 29,373 $ (51,178) (1) Excludes the change in operating lease right-of-use assets and amortization of debt issuance costs. The following table reconciles segment EBITDA to consolidated adjusted EBITDA (in thousands): Three Months Ended ‎ September 30, % Nine Months Ended ‎ September 30, % 2020 2019 Variance 2020 2019 Variance Adjusted EBITDA: Ethanol production $ (3,856) $ (33,787) 88.6% $ (49,588) $ (101,027) 50.9% Agribusiness and energy services 4,950 (75) * 9,115 10,686 (14.7) Food and ingredients - (7) * - (76) * Partnership 14,082 13,594 3.6 40,996 41,382 (0.9) Intersegment eliminations (2,447) 4,738 * (4,597) 533 * Corporate activities (1) (6,022) (7,501) 19.7 2,307 (22,206) 110.4 EBITDA 6,707 (23,038) 129.1 (1,767) (70,708) 97.5 EBITDA adjustments related to discontinued operations - 8,469 * - 17,703 * Proportional share of EBITDA adjustments to equity method investees 2,071 1,186 * 7,049 1,827 * Noncash goodwill impairment - - * 24,091 - * Adjusted EBITDA $ 8,778 $ (13,383) 165.6% $ 29,373 $ (51,178) 157.4% (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 September 30, 2020 Compared with the Three Months Ended September 30, 2019 Consolidated Results 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 46 Table of Contents 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 Key operating data for our ethanol production segment is as follows: Three Months Ended ‎ September 30, 2020 2019 % Variance Ethanol sold (thousands of gallons) 189,202 238,473 (20.7) Distillers grains sold (thousands of equivalent dried tons) 479 617 (22.4) Corn oil sold (thousands of pounds) 50,953 60,607 (15.9) Corn consumed (thousands of bushels) 65,284 82,730 (21.1) 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 $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 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 September 30, 2020. Partnership Segment 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 $0.4 million for the three months ended September 30, 2020 compared with the same period in 2019. ‎ 47 Table of Contents Corporate Activities 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. Income Taxes 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 $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 As previously discussed, we sold an aggregate 50% membership interest in GPCC to TGAM and StepStone during the third quarter of 2019. 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 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 $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 $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. ‎ 48 Table of Contents The following discussion provides greater detail about our year-to-date segment performance. Ethanol Production Segment Key operating data for our ethanol production segment is as follows: Nine Months Ended ‎ September 30, 2020 2019 % Variance Ethanol sold (thousands of gallons) 579,540 617,536 (6.2) Distillers grains sold (thousands of equivalent dried tons) 1,504 1,601 (6.1) Corn oil sold (thousands of pounds) 153,001 148,630 2.9 Corn consumed (thousands of bushels) 201,075 214,734 (6.4) 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 $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 nine months ended September 30, 2020. Partnership Segment 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 $0.8 million for the nine months ended September 30, 2020 compared with the same period in 2019. 49 Table of Contents Corporate Activities 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. Income Taxes 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 $20.4 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 As previously discussed, we sold an aggregate 50% membership interest in GPCC to TGAM and StepStone during the third quarter of 2019. 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 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 Our principal sources of liquidity include cash generated from operating activities and bank credit facilities. We fund our operating expenses and service debt primarily with operating cash flows. Capital resources for maintenance and growth expenditures are funded by a variety of sources, including cash generated from operating activities, borrowings under bank credit facilities, or issuance of senior notes or equity. Our ability to access capital markets for debt under reasonable terms depends on our financial condition, credit ratings and market conditions. 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 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 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 $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 50 Table of Contents 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 $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. We use derivative financial instruments to reduce the market risk associated with fluctuations in commodity prices. Sudden changes in commodity prices may require cash deposits with brokers for margin calls or significant liquidity with little advanced notice to meet margin calls, depending on our open derivative positions. We continuously monitor our exposure to margin calls and believe we will continue to maintain adequate liquidity to cover margin calls from our operating results and borrowings. For each calendar quarter commencing with the quarter ended September 30, 2015, the partnership agreement requires the partnership to distribute all available cash, as defined, to its partners, including us, within 45 days after the end of each calendar quarter. 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 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. Under the program, we may repurchase shares in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers or by other means. The timing and amount of repurchase transactions are determined by our management based on market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice . 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. We believe we have sufficient working capital for our existing operations. A continued sustained period of unprofitable operations, however, may strain our liquidity. We may sell additional assets or equity or borrow capital to improve or preserve our liquidity, expand our business or acquire businesses. We cannot provide assurance that we will be able to secure funding necessary for additional working capital or these projects at reasonable terms, if at all. Debt 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 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. We cannot provide assurance that actual results will approximate our forecasts or that we will inject the necessary capital into a subsidiary to maintain compliance with its respective covenants. In the event a subsidiary is unable to comply with its debt covenants, the subsidiary’s lenders may determine that an event of default has occurred, and following notice, the lenders may terminate the commitment and declare the unpaid balance due and payable. As outlined in Note 9 - Debt , we use LIBOR as a reference rate for certain revolving credit facilities. 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 51 Table of Contents 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. As such, the potential effect of any such event on interest expense cannot yet be determined. Corporate Activities In 2019, we issued $115.0 million of 4.00% convertible senior notes due in 2024, or the 4.00% notes. The 4.00% notes are senior, unsecured obligations, with interest payable on January 1 and July 1 of each year, beginning January 1, 2020, at a rate of 4.00% per annum. The initial conversion rate will be 64.1540 shares of our common stock per $1,000 principal amount of the 4.00% notes, which is equivalent to an initial conversion price of approximately $15.59 per share of our common stock. The conversion rate will be subject to adjustment upon the occurrence of certain events. In addition, we may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including our calling the 4.00% notes for redemption. We may settle the 4.00% notes in cash, common stock or a combination of cash and common stock. 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. Prior to March 1, 2022, the 4.125% notes are not convertible unless certain conditions are satisfied. The initial conversion rate is 35.7143 shares of common stock per $1,000 of principal which is equal to a conversion price of approximately $28.00 per share. The conversion rate is subject to adjustment upon the occurrence of certain events, including when the quarterly cash dividend exceeds $0.12 per share. We may settle the 4.125% notes in cash, common stock or a combination of cash and common stock. At September 30, 2020, the outstanding principal balance was $154.6 million on the 4.125% notes. Agribusiness and Energy Services Segment Green Plains Trade has a $300.0 million senior secured asset-based revolving credit facility to finance working capital up to the maximum commitment based on eligible collateral, which matures in July of 2022. This facility can be increased by up to $70.0 million with agent approval. Advances are subject to variable interest rates equal to a daily LIBOR rate plus 2.25% or the base rate plus 1.25%. The unused portion of the credit facility is also subject to a commitment fee of 0.375% per annum. 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. This facility can be increased by up to $75.0 million with agent approval and up to $50.0 million for seasonal borrowings. Total commitments outstanding under the facility cannot exceed $225.0 million. 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 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 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 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. 52 Table of Contents Partnership Segment 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 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. If at any time our cash balance exceeds $2.5 million for more than five consecutive business days, prepayments of outstanding principal are required in an amount equal to the excess cash. We are also required to prepay outstanding principal on the credit facility with 100% of net cash proceeds from any asset disposition or recovery event. Any prepayments on the term loan are applied to the remaining principal balance in inverse order of maturity, including the final payment. Contractual Obligations Contractual obligations as of September 30, 2020 were as follows (in thousands): Payments Due By Period Contractual Obligations Total Less Than ‎ 1 Year 1-3 Years 3-5 Years More Than ‎ 5 Years Long-term and short-term debt obligations (1) $ 575,826 $ 180,992 $ 257,811 $ 118,623 $ 18,400 Interest and fees on debt obligations (2) 51,411 23,502 17,551 4,433 5,925 Operating lease obligations (3) 71,859 16,822 24,426 13,880 16,731 Other 22,404 4,311 4,246 5,469 8,378 Purchase obligations: Forward grain purchase contracts (4) 99,945 97,571 2,232 142 - Other commodity purchase contracts (5) 87,918 70,440 17,449 29 - Other 348 204 144 - - Total contractual obligations $ 909,711 $ 393,842 $ 323,859 $ 142,576 $ 49,434 (1) Includes the current portion of long-term debt and future finance lease obligations and excludes the effect of any debt discounts and issuance costs. (2) Interest amounts are calculated over the terms of the loans using current interest rates, assuming scheduled principal and interest amounts are paid pursuant to the debt agreements. Includes administrative and/or commitment fees on debt obligations. (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. Index purchase contracts are valued at current quarter-end prices. (5) Includes fixed-price ethanol, dried distillers grains and natural gas purchase contracts. Critical Accounting Policies and Estimates Key accounting policies, including those relating to revenue recognition, impairment of long-lived assets and goodwill, derivative financial instruments, and accounting for income taxes, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements. Information about our critical accounting policies and estimates are included in our annual report on Form 10-K for the year ended December 31, 2019. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. ‎ 53 Table of Contents