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, 2020. 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, 2020, 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 Green Plains is an Iowa corporation, founded in June 2004 as a producer of low carbon fuels and has grown to be one of the leading corn processors in the world. We continue the 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 and with our high-protein initiative, we expect to produce various Ultra-High Protein feed ingredients and greater amounts of corn oil 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 third quarter of 2021. We anticipate that additional locations will be completed over the course of the next several years beginning with the Mount Vernon and Obion locations. Through our Ultra-High Protein initiative we expect to produce feed ingredients with protein concentration of 50% or greater, increase production of corn oil as well produce other higher value products, such as post-MSC distillers grains. We have upgraded our York facility to include USP grade alcohol capabilities and continue to review the timing of upgrading to GNS grade alcohol at York and USP grade alcohol at Wood River by adding additional distillation and processing capabilities to serve other high-value markets. The CST production facility at the York Innovation Center was installed during the first quarter and came online in the second quarter of 2021, which now allows for the production of industrial grade dextrose with the addition of food grade production near-term. We are working with a number of prospective 32 Table of Contents customers on product validation and anticipate modifying one or more biorefineries with CST production capabilities to meet anticipated future demand. We recently completed the purchase of a majority interest in Fluid Quip Technologies, LLC. The acquisition capitalizes on the core strengths of each company to develop and implement proven, value-added agriculture, food and industrial biotechnology systems and rapidly expand installation and production of Ultra-High Protein across Green Plains facilities, as well as offer these technologies to partnering biofuel facilities. Through developmental efforts with Fluid Quip and other innovation partners, the company continues to develop capabilities to produce higher protein concentration and purity levels on a full commercial scale. In February 2021, we announced a carbon sequestration partnership with Summit Carbon Solutions. Eight of our biorefineries have entered into long term carbon offtake agreements, which will lower greenhouse gas emissions at each of the biorefineries through the capturing and storing of carbon dioxide, significantly lowering their carbon footprint. The project is anticipated to be begin operation in late 2024. Additionally, we have taken advantage of opportunities to divest certain assets in recent years. We are focused on generating stable operating margins through our business segments and risk management strategy. We own and operate assets throughout the ethanol value chain: upstream, with grain handling and storage; through our ethanol production facilities; and downstream, with marketing and distribution services to mitigate commodity price volatility. Our other businesses leverage our supply chain, production platform and expertise. Our profitability is highly dependent on commodity prices, particularly for ethanol, distillers grains, corn oil, corn, and natural gas. Since market price fluctuations of these commodities are not always correlated, our operations may be unprofitable at times. We use a variety of risk management tools and hedging strategies to monitor price risk exposure at our ethanol plants and lock in favorable margins or reduce production when margins are compressed. 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. Recent Developments Disposition of Ord Ethanol Plant On March 22, 2021, Green Plains Ord LLC, a wholly owned subsidiary of the company, entered into an asset purchase agreement to sell the plant located in Ord, Nebraska to GreenAmerica Biofuels Ord LLC (the “Ord Transaction”) for a sale price of $64.0 million, plus working capital of $9.8 million. Correspondingly, we entered into a separate asset purchase agreement with the Partnership to acquire the storage assets and assign the rail transportation assets to be disposed of in the Ord Transaction for $27.0 million, which were used to pay down a portion of the Partnership’s credit facility. In addition, as of March 31, 2021, the company had a payable of $0.5 million for amounts owed to the Partnership as a result of a purchase price adjustment based on additional railcars transferred as part of the transaction. The divested assets were reported within the company’s ethanol production, agribusiness and energy services and partnership segments. We recorded a pretax gain on the sale of the Ord plant of $36.9 million recorded within corporate activities. For additional information related to the disposition of the Ord ethanol plant, see Note 3 – Acquisition and Dispositions included as part of the notes to consolidated financial statements. 2.25% Convertible Notes due in 2027 On March 1, 2021, we issued $230.0 million of 2.25% convertible senior notes due in 2027, or the 2.25% notes. Concurrent with the issuance of the 2.25% notes, we used approximately $156.5 million of the net proceeds of the 2.25% notes to repurchase approximately $135.7 million aggregate principal amount of its 4.125% notes due 2022. We intend to use the proceeds from the 2.25% notes to repurchase the remaining 4.125% notes remaining outstanding at their maturity and for general corporate purposes. The 2.25% notes are convertible, at the option of the holders, into consideration consisting of, at our election, cash, shares of our common stock, or a combination of cash and stock (and cash in lieu of fractional shares). However, before September 15, 2026, the 2.25% notes will not be convertible unless certain conditions are satisfied. The initial conversion 33 Table of Contents rate is 31.6206 shares of the company’s common stock per $1,000 principal amount of 2.25% notes (equivalent to an initial conversion price of approximately $31.62 per share of the company’s common stock), representing an approximately 37.5% premium over the offering price of the company’s common stock. The conversion rate is 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 2.25% notes for redemption. For additional information related to the 2.25% notes, see Note 8 – Debt included as part of the notes to consolidated financial statements. Public Offering of Common Stock On March 1, 2021, we completed the public offering of 8,751,500 shares of our common stock, par value $0.001 per share, at a public offering price of $23.00 per share (the “Common Stock Offering”). The Common Stock Offering resulted in net proceeds of approximately $191.1 million, after deducting underwriting discounts and commissions and the company’s estimated offering expenses. We intend to use the proceeds from the Common Stock Offering for general corporate purposes. For additional information related to the Common Stock Offering, see Note 11 – Stockholders’ Equity included as part of the notes to consolidated financial statements. Junior Secured Mezzanine Notes due 2026 On February 9, 2021, Green Plains SPE LLC, a wholly-owned special purpose subsidiary and parent of Green Plains Obion and Green Plains Mount Vernon issued $125.0 million of junior secured mezzanine notes due 2026 (the “Junior Notes”) with four funds and accounts managed by BlackRock for the purchase of all notes issued. The Junior Notes will mature on February 9, 2026 and are secured by a pledge of the membership interests in and the real property owned by Green Plains Obion and Green Plains Mount Vernon. For additional information related to the Junior Notes, see Note 8 – Debt included as part of the notes to consolidated financial statements. Results of Operations During the first quarter of 2021, we continued to experience a weak ethanol margin environment. We maintained an average utilization rate of approximately 71.1% of capacity, resulting in ethanol production of 178.0 mmg for the first quarter of 2021, compared with 240.5 mmg, or 85.9% of capacity, for the same quarter last year. The reduction in the average utilization rate was primarily due to capacity offline due to Project 24 construction and permitting as compared to the prior year. 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 continue to exercise operational discretion that results in reductions in production. Additionally, we may experience lower run rates due to the construction of various projects. It is possible that production could be below minimum volume commitments in the future, depending on various factors that drive each biorefineries 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 0.91 million barrels per day during the first quarter of 2021, which was 12% lower than the 1.03 million barrels per day for the same quarter last year. Refiner and blender input volume decreased 8% to 792 thousand barrels per day for the first quarter of 2021, compared with 858 thousand barrels per day for the same quarter last year. Gasoline demand decreased 0.6 million barrels per day, or 7% during the first quarter of 2021. U.S. domestic ethanol ending stocks decreased by approximately 4.6 million barrels, or 18%, to 21.1 million barrels during the first quarter of 2021. As of March 31, 2021, according to Prime the Pump, there were approximately 2,360 retail stations selling E15 in 30 states, up from 2,300 at the beginning of the year, and over 200 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 February 28, 2021 were approximately 266 mmg, down 22.9% from 345 mmg for the same period of 2020. India was the largest export destination for U.S. ethanol accounting for 25% of domestic ethanol export volume. Canada, South Korea, China and Brazil accounted for 14%, 12%, 10% and 10%, respectively, of U.S. ethanol exports. We currently estimate that net ethanol exports will range from 1.2 to 1.4 billion gallons in 2021, 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. 34 Table of Contents 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, in October 2020 it was announced that China had purchased a shipment of U.S. ethanol for the first time since March 2018. Total ethanol exports to China in 2020 were 21.3 million gallons, and through February 2021 were 27.4 million gallons, according to the USDA Foreign Agriculture Service. Y ear -to-date U.S. distillers grains exports through February 28, 2021, were 1.7 million metric tons, or 7% lower than the same period last year, according to the USDA Foreign Agriculture Service. Mexico, South Korea, Indonesia, Vietnam, Ireland and Japan accounted for approximately 58.5% 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. Over the past few years, 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, used to 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 were 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 RFS II sets a floor for biofuels use 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 and demand. The EPA has not yet released a draft RVO rule for the 2021 volumes, even though they typically release a draft mid-year and finalize the rule by November 30 of the preceding year. It is unclear when the EPA will release the RVO for 2021. 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 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, in late 2019, the EPA announced it would not be moving forward with a reset rulemaking in 2020. It is unclear when or if the current EPA will propose a reset rulemaking. Under the RFS, RINs and SREs are important tools impacting supply and demand. The EPA assigns individual refiners, blenders, and importers the volume of renewable fuels they are obligated to use in each annual RVO 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 35 Table of Contents obligated parties. As it relates to SREs, 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. In the waning days of the Trump administration, the EPA approved three additional SREs, reversing one denial from 2018 and granting two from 2019. A total of 88 SREs were granted under the Trump Administration, totaling 4.3 billion gallons of potential blending demand erased. 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 approximately 30 states. In January 2021, the EPA announced it intended to begin a rulemaking regarding E15 labels and underground storage tank compatibility. 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 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, and whether these gallons will be accounted for is unclear. In 2019, 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 will be waived from the blending requirements due to small refinery exemptions. To accomplish this, they added 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. In January 2020, the U.S. Court of Appeals for the 10 th 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 and in January 2021, the Supreme Court announced they would hear the case, and oral arguments were held in late April 2021. If the decision against the EPA is upheld by the Supreme Court, it is uncertain how the EPA will propose to remedy the situation. The current EPA has indicated that they intend to adhere to the 10 th Circuit ruling. 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 36 Table of Contents filed with the EPA and reviewed by the DOE. In September 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. Without a string of continuous SRE approvals, we believe that almost no small refinery would be eligible to apply for hardship relief in this manner, unless the Supreme Court overturns the 10 th Circuit ruling. 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. In 2020, five Governors and 15 Republican Senators sent letters to the EPA requesting a general waiver from the RFS due to the drop in demand caused by COVID-19 travel restrictions. Since then there have been additional petitions for waivers from the RFS requirements. As of this filing the EPA had indicated only that they are watching the situation closely and reviewing the various requests. 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 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 CARES Act also allowed for certain net operating loss carrybacks, which has allowed us to receive certain tax refunds. In December 2020, Congress passed and the President signed into law an annual spending package coupled with another COVID relief bill which included additional funds for the Secretary of Agriculture to distribute to those impacted by the pandemic. The language of the bill specifically includes biofuels producers as eligible for some of this aid, and in March of 2021, the USDA indicated that biofuels would be able to apply for a portion of these funds in a forthcoming rulemaking. The CARES Act provided a tax exclusion on the shipment of undenatured ethanol for use in manufacturing hand sanitizer, a key ingredient of which is undenatured ethanol of specific grades. The FDA has also 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. 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. In Brazil, the Secretary of Foreign Trade had issued a tariff rate quota which expired in December of 2020. All U.S. ethanol gallons now face a 20% tariff into Brazil. Exports to Brazil were 200 mmg in 2020. Our exports also face tariffs, rate quotas, countervailing duties, and other hurdles in the European Union, India, Peru, Colombia and elsewhere, which limits the ability to compete in some markets. We believe 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 has been extended multiple times due to COVID-19, and the new deadline is May 27, 2021. ‎ 37 Table of Contents In January 2020, the updated North American Free Trade Agreement, known as the United States Mexico Canada Agreement or USMCA was signed. The USMCA went into effect on July 1, 2020, and maintains the duty free access of U.S. agricultural commodities, including ethanol, into Canada and Mexico. According to the Department of Commerce, exports to Canada were 326 mmg and exports to Mexico were 64 mmg in 2020. 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 months ended March 31, 2021 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 I, Item 1A, “Risk Factors,” of our 2020 annual report. Comparability of our Financial Results There are various events that affect comparability of our operating results from 2021 to 2020, including the sale of our 50% interest of GPCC in October 2020, the sale of our Hereford, Texas plant in December 2020, the acquisition of a majority interest in FQT in December 2020 and the disposition of our Ord, Nebraska plant in March 2021. 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. The food and ingredients segment had no activity during the three months ended March 31, 2021 and 2020. 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. As of March 31, 2021, 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. ‎ 38 Table of Contents Segment Results The selected operating segment financial information are as follows (in thousands): Three Months Ended March 31, % 2021 2020 Variance Revenues: Ethanol production: Revenues from external customers $ 423,722 $ 475,700 (10.9%) Intersegment revenues - 25 * Total segment revenues 423,722 475,725 (10.9) Agribusiness and energy services: Revenues from external customers 128,821 155,881 (17.4) Intersegment revenues 5,123 7,308 (29.9) Total segment revenues 133,944 163,189 (17.9) Partnership: Revenues from external customers 1,097 1,288 (14.8) Intersegment revenues 19,309 18,983 1.7 Total segment revenues 20,406 20,271 0.7 Revenues including intersegment activity 578,072 659,185 (12.3) Intersegment eliminations (24,432) (26,316) (7.2) Revenues as reported $ 553,640 $ 632,869 (12.5%) Three Months Ended March 31, % 2021 2020 Variance Cost of goods sold: Ethanol production $ 415,525 $ 489,150 (15.1%) Agribusiness and energy services 116,074 156,502 (25.8) Intersegment eliminations (22,366) (28,424) (21.3) $ 509,233 $ 617,228 (17.5%) Three Months Ended March 31, % 2021 2020 Variance Operating income (loss): Ethanol production (1) $ (20,320) $ (60,781) (66.6%) Agribusiness and energy services 13,346 2,560 * Partnership 12,871 12,430 3.5 Intersegment eliminations (2,066) 2,133 * Corporate activities (2) 27,516 (10,670) * $ 31,347 $ (54,328) 157.7% (1) Operating loss for ethanol production includes a goodwill impairment charge of $24.1 million for the three months ended March 31, 2020. (2) Corporate activities for the three months ended March 31, 2021 included a $36.9 million pretax gain on sale of assets. Three Months Ended March 31, % 2021 2020 Variance Depreciation and amortization: Ethanol production $ 18,528 $ 15,898 16.5% Agribusiness and energy services 607 553 9.8 Partnership 887 961 (7.7) Corporate activities 659 668 (1.3) $ 20,681 $ 18,080 14.4% * 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 amortization of right-of-use assets and debt issuance costs. Adjusted EBITDA includes adjustments related to gains on sale of 39 Table of Contents assets, 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. The following table reconciles net loss including noncontrolling interest to adjusted EBITDA (in thousands): Three Months Ended ‎ March 31, 2021 2020 Net loss $ (1,979) $ (10,347) Interest expense (1) 31,679 9,697 Income tax expense (benefit), net of equity method income tax expense 1,862 (41,798) Depreciation and amortization (2) 20,681 18,080 EBITDA 52,243 (24,368) Gain on sale of assets, net (36,893) - Proportional share of EBITDA adjustments to equity method investees 44 2,937 Noncash goodwill impairment - 24,091 Adjusted EBITDA $ 15,394 $ 2,660 (1) Interest expense for the three months ended March 31, 2021 includes a loss upon extinguishment of convertible notes of $22.1 million. (2) 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 March 31, 2021 2020 Adjusted EBITDA: Ethanol production $ (1,789) $ (44,125) Agribusiness and energy services 13,951 3,128 Partnership 13,933 13,548 Intersegment eliminations (2,066) 2,133 Corporate activities (1) 28,214 948 EBITDA 52,243 (24,368) Gain on sale of assets, net (36,893) - Proportional share of EBITDA adjustments to equity method investees 44 2,937 Noncash goodwill impairment - 24,091 Adjusted EBITDA $ 15,394 $ 2,660 (1) Includes corporate expenses, offset by the gain on sale of assets of $36.9 million for the three months ended March 31, 2021 and earnings from equity method investments of $7.8 million for the three months ended March 31, 2020. * Percentage variance not considered meaningful. Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020 Consolidated Results Consolidated revenues decreased $79.2 million for the three months ended March 31, 2021 compared with the same period in 2020 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 income increased $85.7 million and for the three months ended March 31, 2021 compared with the same period last year primarily due to the $36.9 million gain on sale of assets as well as improved margins on ethanol production. Adjusted EBITDA increased $12.7 million due to improved margins on ethanol production. Interest expense increased $22.0 million for the three months ended March 31, 2021 compared with the same period in 2020 due to the loss upon extinguishment of convertible notes of $22.1 million recorded during the quarter . Income tax expense was $1.9 million for the three months ended March 31, 2021 compared with income tax benefit of $44.3 million for the same period in 2020 primarily due to benefits recorded related to the CARES Act during the three months ended March 31, 2020. 40 Table of Contents The following discussion provides greater detail about our first quarter segment performance. Ethanol Production Segment Key operating data for our ethanol production segment is as follows: Three Months Ended March 31, 2021 2020 % Variance Ethanol sold (thousands of gallons) 178,000 240,466 (26.0) Distillers grains sold (thousands of equivalent dried tons) 465 642 (27.6) Corn oil sold (thousands of pounds) 46,563 62,552 (25.6) Corn consumed (thousands of bushels) 62,505 83,883 (25.5) Revenues in our ethanol production segment decreased $52.0 million for the three months ended March 31, 2021 compared with the same period in 2020 primarily due to lower production volumes of ethanol, distillers grains and corn oil. Cost of goods sold for our ethanol production segment decreased $73.6 million for the three months ended March 31, 2021 compared with the same period last year primarily due to lower production volumes, as well as lower production costs. Operating loss decreased $40.5 million and EBITDA increased $42.3 million for the three months ended March 31, 2021 compared with the same period in 2020 primarily due to the $24.1 million noncash impairment charge recorded during the three months ended March 31, 2020, as well as improved margins. Depreciation and amortization expense for the ethanol production segment was $18.5 million for the three months ended March 31, 2021 compared with $15.9 million for the same period last year. Agribusiness and Energy Services Segment Revenues in our agribusiness and energy services segment decreased $29.2 million while operating income and EBITDA increased $10.8 million for the three months ended March 31, 2021 compared with the same period in 2020. The decrease in revenues was primarily due to a decrease in ethanol, distillers grain and corn oil trading activity driven by lower production volumes. Operating income and EBITDA increased primarily as a result of higher trading 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 March 31, 2021 and 2020. Partnership Segment Revenues generated by our partnership segment increased $0.1 million for the three months ended March 31, 2021, compared with the same period for 2020. Storage and throughput services revenue increased $0.5 million due to an increase in the rate per gallon charged to Green Plains Trade beginning on July 1, 2020. Terminal services revenue decreased $0.2 million as a result of lower throughput volume. Railcar transportation services revenue decreased $0.1 million primarily due to a decrease in railcar sublease revenue. Trucking and other revenue decreased $0.1 million due to a reduction in freight loads. Operating income increased and EBITDA increased $0.4 million for the three months ended March 31, 2021 compared with the same period in 2020. Intersegment Eliminations Intersegment eliminations of revenues decreased by $1.9 million for the three months ended March 31, 2021 compared with the same period in 2020 primarily due to decreased intersegment marketing and service fees within the agribusiness and energy services segment as a result of lower production volumes. ‎ 41 Table of Contents Corporate Activities Operating income was impacted by a decrease in corporate activities of $38.2 million for the three months ended March 31, 2021 compared to the same period in 2020 primarily due to the gain on sale of assets recorded during the current quarter. Income Taxes We recorded income tax expense of $1.9 million for the three months ended March 31, 2021, compared with income tax benefit of $44.3 million for the same period in 2020. The decrease in the amount of tax benefit recorded for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to the recording of a valuation allowance against increases in deferred tax assets for the three months ended March 31, 2021 compared to the tax benefit recorded for the same period in 2020 to reflect the benefit associated with the carry back of the 2019 tax NOLs to the 2014 tax year under the CARES Act of 2020, as well as 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 decreased $7.8 million for the three months ended March 31, 2021 compared with the same period last year due primarily to the disposition of our GPCC joint venture during the fourth quarter of 2020. 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 positive cash flow from operating activities, which have been positive for seven of the previous ten years, provide a solid foundation to meet our future liquidity and capital resource requirements. On March 31, 2021, we had $446.8 million in cash and equivalents, excluding restricted cash, consisting of $405.0 million held at our parent company and the remainder held at our subsidiaries. Additionally, we had $207.6 million in restricted cash at March 31, 2021. We also had $330.4 million available under our committed revolving credit and term loan agreements, including $4.7 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 March 31, 2021, our subsidiaries had approximately $152.7 million of net assets that were not available to use in the form of dividends, loans or advances due to restrictions contained in their credit facilities. Net cash used in operating activities was $37.0 million for the three months ended March 31, 2021 compared with net cash provided by operating activities of $17.8 million for the same period in 2020. Operating activities compared to the prior year were primarily affected by changes in working capital and deferred taxes when compared to the same period of the prior year. Net cash provided by investing activities was $42.3 million for the three months ended March 31, 2021 compared with net cash used in investing activities of $39.9 million for the same period in 2020. Investing activities compared to the prior year were primarily affected by proceeds from the sale of assets during 2021. Net cash provided by financing activities was $374.3 million for the three months ended March 31, 2021 compared with net cash used in financing activities of $42.3 million for the same period in 2020, primarily due to proceeds from the issuance of common stock and debt offerings during 2021. 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 approximately $31.5 million during the three months ended March 31, 2021, primarily for Ultra High-Protein expansion projects at various facilities, Project 24 operating expense reduction and for various maintenance projects. Capital spending for the remainder of 2021 is expected to be between $170.0 million and $194.0 million for various projects, including the Ultra High-Protein expansion at our Wood River, Obion and Mount Vernon locations, 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 and $125.0 million junior secured mezzanine notes. 42 Table of Contents 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 April 22, 2021, 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 May 14, 2021, to unitholders of record at the close of business on May 7, 2021. 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 first quarter of 2021. 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 8 – 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, 2020. We were in compliance with our debt covenants at March 31, 2021. 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 8 - Debt , we use LIBOR as a reference rate for our credit facility. The administrator of LIBOR has announced it will cease the publication of the one week and two month LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. It is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will be established by the applicable phase out dates. 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. Corporate Activities In March 2021, we issued $230.0 million of 2.25% convertible senior notes due in 2027, or the 2.25% notes. The 2.25% notes bear interest at a rate of 2.25% per year, payable on March 15 and September 15 of each year, beginning September 15, 2021. The initial conversion rate is 31.6206 shares of the company’s common stock per $1,000 principal amount of 2.25% notes (equivalent to an initial conversion price of approximately $31.62 per share of the company’s common stock), representing an approximately 37.5% premium over the offering price of the company’s common stock. The conversion rate is subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. In addition, the company may be obligated to increase the conversion rate for 43 Table of Contents any conversion that occurs in connection with certain corporate events, including the company’s calling the 2.25% notes for redemption. We may settle the 2.25% notes in cash, common stock or a combination of cash and common stock. At March 31, 2021, the outstanding principal balance on the 2.25% notes was $230.0 million. In June 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, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. 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 March 31, 2021, the outstanding principal balance on the 4.00% notes was $115.0 million. 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. In March 2021, concurrent with the issuance of the 2.25% notes, we used approximately $156.5 million of the net proceeds of the 2.25% notes to repurchase approximately $135.7 million aggregate principal amount of its 4.125% notes due 2022, in privately negotiated transactions. 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 will be subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. We may settle the 4.125% notes in cash, common stock or a combination of cash and common stock. At March 31, 2021, the outstanding principal balance on the 4.125% notes was $34.3 million. 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 March 31, 2021, the outstanding principal balance was $70.3 million on the facility and the interest rate was 2.43%. 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 March 31, 2021, the outstanding principal balance was $49.0 million on the facility and the interest rate was 3.13%. Green Plains Grain has entered into short-term inventory financing agreements with a financial institution. At March 31, 2021, 5.5 million bushels of corn had been designated as collateral under these agreements at initial values totaling $32.3 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 March 31, 2021, the short-term notes payable were valued at $32.3 million and the interest rate was 2.93%. 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 March 31, 2021, the outstanding principal balance was $22.6 million on the facility and the interest rate was 1.84%. Ethanol Production Segment On February 9, 2021, Green Plains SPE LLC, a wholly-owned special purpose subsidiary and parent of Green Plains Obion and Green Plains Mount Vernon issued $125.0 million of junior secured mezzanine notes due 2026 with four funds and accounts managed by BlackRock for the purchase of all notes issued. At March 31, 2021, the outstanding principal balance was $125.0 million on the loan and the interest rate was 11.75%. 44 Table of Contents Green Plains Wood River and Green Plains Shenandoah, wholly-owned subsidiaries of the company, has a $75.0 million delayed draw loan agreement, which matures on September 1, 2035. At March 31, 2021, the outstanding principal balance was $30.0 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 to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes. The credit facility includes a $130.0 million term loan and a $5.0 million revolving credit facility, maturing on December 31, 2021. During the three months ended March 31, 2021, principal payments of $37.5 million were made on the term loan, including $7.5 million of scheduled repayments, $27.0 million related to the sale of the storage assets located adjacent to the Ord, Nebraska ethanol plant and a $3.0 million prepayment made with excess cash. As of March 31, 2021, no additional prepayments on the term loan were required or paid. The term loan requires monthly principal payments of $2.5 million, with a step up to monthly payments of $3.2 million through maturity beginning May 15, 2021. As of March 31, 2021, the term loan had a balance of $62.5 million and an interest rate of 5.75% and the revolver had a balance outstanding of $0.3 million at an interest rate of 7.00%. 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. While the partnership has not yet renegotiated the credit facility or secured additional funding necessary to repay the loan, the partnership believes it is probable that it will source appropriate funding prior to August 2021 given the partnership’s consistent and stable fee-based cash flows, ongoing profitability, low leverage and history of obtaining financing on reasonable commercial terms. In the unlikely scenario that the partnership is unable to refinance its debt with the lenders prior to its maturity, the partnership will consider other financing sources, including but not limited to, the restructuring or issuance of new debt with a different lending group, the issuance of additional partnership units, other strategic actions to extinguish the debt, or support from the company. Contractual Obligations Contractual obligations as of March 31, 2021 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) $ 787,014 $ 237,242 $ 37,969 $ 348,636 $ 163,167 Interest and fees on debt obligations (2) 157,173 35,820 55,260 46,245 19,848 Operating lease obligations (3) 79,895 18,575 29,256 17,259 14,805 Other 20,309 4,019 3,379 6,648 6,263 Purchase obligations: Forward grain purchase contracts (4) 271,752 269,472 2,280 - - Other commodity purchase contracts (5) 128,996 104,387 20,065 4,544 - Other 280 210 70 - - Total contractual obligations $ 1,445,419 $ 669,725 $ 148,279 $ 423,332 $ 204,083 (1) Includes the current portion of long-term debt and future finance lease obligations and excludes the effect of any debt 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 $1.7 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. 45 Table of Contents 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, 2020. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements.