What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-02 compared with 2022-05-03 · 200 added, 107 removed, 281 unchanged (52% of the section changed)

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The partnership completed its initial public offering on July 1, 2015.

As of March 31, 2022, we own a 48.9% limited partner interest, a 2.0% general partner interest and all of the partnership’s incentive distribution rights.

As of June 30, 2022, 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.

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The partnership’s assets include 29 ethanol storage facilities, four fuel terminal facilities and approximately 2,530 leased railcars.

As part of our transformation to a value-add agricultural technology company, we completed our first MSC™ Ultra-High Protein installation our Shenandoah biorefinery during the first quarter of 2020.

As part of our transformation to a value-add agricultural technology company, we completed our first MSC™ Ultra-High Protein installation at our Shenandoah biorefinery during the first quarter of 2020.

Our Wood River plant began operations in October 2021.

Three additional locations are slated to begin operating by mid-2022, and installation at our remaining biorefineries is expected over the course of the next several years.

Three additional locations are slated to begin operating in the third and fourth quarter of 2022, and installation at certain of our remaining biorefineries is expected over the course of the next several years.

Through our value-added ingredients initiative, we expect to produce Ultra-High Protein, a feed ingredient with protein concentrations of 50% or greater, increase production of corn oil as well produce other higher value products, such as post-MSC distillers grains.

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In total, eight of our biorefineries have entered into long-term carbon offtake agreements, which will lower greenhouse gas emissions through the capturing and storing of carbon dioxide at each of the biorefineries, significantly lowering their carbon intensity.

This project is expected to be completed in 2024.

The anticipated completion date for this project is 2024.

Our profitability is highly dependent on commodity prices, particularly for ethanol, industrial alcohol, distillers grains, corn oil, soybean meal, corn, and natural gas.

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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.

Our profitability could be significantly impacted by price movements of the aforementioned commodities, specifically including market volatility related to corn as a result of current geopolitical events, including the war in Ukraine.

Our profitability could be significantly impacted by price movements of the aforementioned commodities.

Recent Developments

New Financing to Replace Existing Working Capital Facilities

On March 25, 2022, Green Plains Finance Company, Green Plains Grain and Green Plains Trade, all of which are

wholly owned subsidiaries , together with the company, as guarantor, entered into a five-year, $350.0 million senior secured sustainability-linked revolving Loan and Security Agreement (the “Facility”) with a group of financial institutions led by ING Capital LLC (“ING”) as Agent and ING, PNC Capital Markets LLC, Fifth Third Bank, National Association, Bank of America, N.A.

and BMO Harris Bank, N.A., as Joint Lead Arrangers.

This transaction refinanced the separate credit facilities previously held by Green Plains Grain and Green Plains Trade.

The Facility matures on March 25, 2027.

Convertible Notes Conversion into Common Stock

On May 25, 2022, the company gave notice calling for the redemption of all its outstanding 4.00% Convertible Senior Notes due 2024, totaling an aggregate principal amount of $64.0 million.

The conversion rate was 66.4178 shares of

common stock per $1,000 of principal.

From July 1, 2022 through July 8, 2022, all $64.0 million of the 4.00% convertible notes were converted into approximately 4.3 million shares of common stock.

All $64.0 million were retired effective July 8, 2022.

Results of Operations

During the first quarter of 2022, we experienced a weak ethanol margin environment due to industry overproduction, combined with larger ethanol stocks, and a surge in COVID variants that hindered driving demand.

We maintained an average utilization rate of approximately 83.1% of capacity, resulting in ethanol production of 196.3 mmg for the first quarter of 2022, compared with 178.0 mmg, or 71.1% of capacity, for the same quarter last year.

During the second quarter of 2022, we experienced a stronger ethanol margin environment.

We maintained an average utilization rate of approximately 96.9% of capacity, resulting in ethanol production of 231.4 mmg for the second quarter of 2022, compared with 190.9 mmg, or 79.9% of capacity, for the same quarter last year.

The increase in the average utilization rate was primarily due to nearing the completion of our plant modernization and upgrade program during the current quarter.

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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.

We are currently producing Ultra-High Protein at two locations and have also deployed FQT MSC TM Ultra-High Protein process technology at three additional locations, which we expect to be operational by the middle to last half of 2022.

We are striving to deploy the MSC™ protein technology across our platform to take advantage of the world’s growing demand for protein feed ingredients and low-carbon renewable corn oil.

Ethanol Supply and Demand

According to the EIA, domestic ethanol production averaged 1.02 million barrels per day during the first quarter of 2022, which was 12.5% higher than the 0.91 million barrels per day for the same quarter last year.

Refiner and blender input volume increased 6.1% to 840 thousand barrels per day for the first quarter of 2022, compared with 792 thousand barrels per day for the same quarter last year.

Gasoline demand increased 0.5 million barrels per day, or 6.3% during the first quarter of 2022 compared to the prior year.

domestic ethanol ending stocks increased by approximately 5.4 million barrels compared to the prior year, or 25.6%, to 26.5 million barrels as of March 31, 2022.

As of March 31, 2022, according to Prime the Pump, there were approximately 2,630 retail stations selling E15 in 31 states, up from 2,555 at the beginning of the year, and 267 pipeline terminal locations now offering E15 to wholesale customers.

According to the EIA, domestic ethanol production averaged 1.01 million barrels per day during the second quarter of 2022, which was 1.1% higher than the 1.0 million barrels per day for the same quarter last year.

Refiner and blender input volume was steady 898 thousand barrels per day for the second quarter of 2022, compared with 903 thousand barrels per day for the same quarter last year.

Gasoline demand decreased 0.2 million barrels per day, or 2.3% during the second quarter of 2022 compared to the prior year.

domestic ethanol ending stocks increased by approximately 1.2 million barrels compared to the prior year, or 5.4%, to 22.7 million barrels as of June 30, 2022.

As of this filing, according to Prime the Pump, there were approximately 2,690 retail stations selling E15 in 31 states, up from 2,555 at the beginning of the year, and approximately 390 suppliers at 113 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, 2022, were approximately 267 mmg, in line with the 266 mmg for the same period of 2021.

According to the USDA Foreign Agriculture Service, domestic ethanol exports through May 31, 2022, were approximately 726 mmg, up from the 582 mmg for the same period of 2021.

Canada was the largest export destination for U.S.

ethanol accounting for 25% of domestic ethanol export volume.

India, South Korea, Brazil and Mexico accounted for 17%, 11%, 8% and 7%, respectively, of U.S.

India, Brazil, and the Netherlands accounted for 11%, 8%, and 7%, respectively, of U.S.

ethanol exports.

We currently estimate that net ethanol exports will range from 1.3 to 1.5 billion gallons in 2022, based on historical demand from a variety of countries and certain countries that seek to improve their air quality and eliminate MTBE from their own fuel supplies.

We currently estimate that net ethanol exports will range from 1.4 to 1.6 billion gallons in 2022, based on historical demand from a variety of countries and certain countries that seek to improve their air quality, reduce GHG emissions through low carbon fuel programs and eliminate MTBE from their own fuel supplies.

Legislation and Regulation

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

Bills have also been introduced to require higher levels of octane blending, and require car manufacturers to produce vehicles that can operate on higher ethanol blends.

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

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Ethanol policies are influenced by concerns for the environment, diversifying the fuel supply, and reducing the country’s dependence on foreign oil.

Consumer acceptance of FFV and higher ethanol blends in non-FFVs 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 LCFS could increase the demand for ethanol, depending on how it is structured.

Consumer acceptance of FFVs and higher ethanol blends in non-FFVs may be necessary before ethanol can achieve further growth in U.S.

surface transportation fleet market share.

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

The Inflation Reduction Act of 2022, which was introduced on July 27, 2022, is a broad budget reconciliation bill that has many potential impacts on our business which we are still evaluating.

As proposed, the legislation would (a) create a new Clean Fuel Production Credit which could impact our fuel ethanol, depending on the level of GHG reduction for each gallon;

(b) create a new tax credit for sustainable aviation fuel, that could possibly involve some of our low carbon ethanol through an alcohol to jet pathway, depending on the life cycle analysis model being used;

(c) expand the carbon capture and sequestration credit, section 45Q, to $85 for each ton of carbon sequestered, which could impact our carbon partnership;

(d) extend the biodiesel tax credit which could impact our renewable corn oil values, as this co-product serves as a low-carbon feedstock for renewable diesel and biomass based diesel production;

(e) fund biofuel refueling infrastructure, which could impact the availability of higher level ethanol blended fuel;

and (f) provide for the production and purchase credits for electric vehicles could impact the amount of internal combustion engines on the road longer term, and by extension impact the demand for liquid fuels including ethanol.

The RFS sets a floor for biofuels use in the United States.

When the RFS 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 billion gallons in 2015, which left the EPA to address existing limitations in both supply and demand.

As of this filing, the EPA has proposed reducing the conventional ethanol RVOs for 2020 and 2021 to reflect lower fuel demand during the pandemic, and proposed the statutory 15 billion gallons for 2022.

As of this filing, the EPA has finalized RVOs reducing the conventional ethanol levels for 2020 and 2021 to reflect lower fuel demand during the pandemic, and finalized an RVO at the statutory 15 billion gallons for 2022, with an additional 250 million gallons of supplemental volume to reflect a court-ordered remand of a previously-lowered RVO.

According to the RFS, 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.

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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, though they have stated an intention to propose a post 2022 set rulemaking as required by law.

The current EPA has indicated they will not propose a reset rulemaking, though they have stated an intention to propose a post-2022 "set" rulemaking by November 16, 2022, and finalize by June 14, 2023, in compliance with a consent decree from the U.S.

District Court for D.C.

Under the RFS, RINs and SREs are important tools impacting supply and demand.

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Obligated parties use RINs to show compliance with the RFS mandated volumes.

Ethanol producers assign RINs to renewable fuels and the RINs are detached when the renewable fuel is blended with transportation fuel domestically.

Ethanol producers assign a RIN to each gallon of renewable fuel they produce 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.

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In the waning days of the previous 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 EPA, under the current administration, reversed the three SREs issued in the final weeks of the previous administration, and in the RVO rulemaking they proposed denying all pending SREs.

A total of 88 SREs were granted under the Trump Administration, erasing a total of 4.3 billion gallons of potential blending demand.

The EPA, under the current administration, reversed the three SREs issued in the final weeks of the previous administration, and in conjunction with the RVO rulemaking for 2020, 2021 and 2022, they denied all pending SREs.

There are multiple legal challenges to how the EPA has handled SREs and RFS rulemakings.

On April 22, 2022, the U.S.

District Court for D.C.

approved a consent decree agreement between Growth Energy and EPA that requires the agency to finalize the RVO proposals by no later than June 3, 2022.

The One-Pound Waiver, which was extended in May 2019 to allow E15 to be sold year-round to all vehicles model year 2001 and newer, was challenged in an action filed in Federal District Court for the D.C.

On July 2, 2021, the Circuit Court vacated the EPA’s rule so the future of summertime, defined as June 1 to September 15, sales of E15 to non-FFVs is uncertain.

On July 2, 2021, the Circuit Court vacated the EPA’s rule so the future of summertime, defined as June 1 to September 15, sales of E15 is uncertain.

The Supreme Court declined to hear a challenge to this ruling.

On April 12, 2022, the President announced that he has directed the EPA to issue an emergency waiver to allow for the continued sale of E15 during the summer months, and that the temporary waiver should be extended as long as the gasoline supply emergency lasts.

As of this filing, E15 is sold year-round in 31 states.

As of this filing, E15 is sold year-round at approximately 2,690 stations in 31 states.

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

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In December 2021, the USDA announced they would administer another infrastructure grant program.

Congress is considering legislation that would provide for an additional $1 billion in USDA grants for biofuel infrastructure from 2022 to 2031.

Congress is considering legislation that would provide for an additional $500 million in USDA grants for biofuel infrastructure from 2022 to 2031.

To respond to 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 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 then 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 June of 2021, USDA announced a $700.0 million Biofuel Producer Program to distribute these funds to impacted producers of ethanol, biodiesel and other renewable fuels, and they provided the specifics for the application process in December of 2021.

Applications were due in February 2022, and the USDA has indicated they will calculate and distribute payments in the first half of 2022.

The language of the bill specifically included biofuels producers as eligible for some of this aid, and in June of 2021, USDA announced a $700.0 million Biofuel Producer Program to distribute these funds to impacted producers of ethanol, biodiesel and other renewable fuels, and they provided the specifics for the application process in December of 2021.

Applications were due in February 2022, and the USDA distributed funds to us in the amount of $27.7 million in May 2022.

Comparability of our Financial Results

As of June 30, 2022, 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.

There are various events that affect comparability of our operating results from 2022 to 2021, including ethanol production rates and the disposition of our Ord, Nebraska plant in March 2021.

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When we evaluate segment performance, we review the following segment information as well as earnings before interest, income taxes, depreciation and amortization, or EBITDA, and adjusted EBITDA.

As of March 31, 2022, 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

1 unchanged sentence

Three Months Ended

Variance Six Months Ended

2022 2021 2022 2021

Ethanol production:

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Intersegment eliminations (25,985) (24,043) 8.1 (49,915) (48,475) 3.0

Revenues as reported

$ 1,012,394 $ 724,418 39.8% $ 1,793,829 $ 1,278,058 40.4%

Three Months Ended

Variance Six Months Ended

2022 2021 2022 2021

Cost of goods sold:

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Intersegment eliminations (27,163) (24,429) 11.2 (50,653) (46,795) 8.2

$ 921,314 $ 639,408 44.1% $ 1,693,823 $ 1,148,641 47.5%

Three Months Ended

Variance Six Months Ended

2022 2021 2022 2021

Gross margin:

Ethanol production $ 56,345 $ 61,617 (8.6)% $ 32,338 $ 69,814 (53.7)%

Agribusiness and energy services 13,903 3,306 320.5 28,176 21,176 33.1

Partnership 19,654 19,701 (0.2) 38,754 40,107 (3.4)

Intersegment eliminations 1,178 386 205.2 738 (1,680) (143.9)

$ 91,080 $ 85,010 7.1% $ 100,006 $ 129,417 (22.7)%

Three Months Ended

Variance Six Months Ended

2022 2021 2022 2021

Operating income (loss):

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Agribusiness and energy services 10,281 (851) * 20,689 12,495 65.6

Partnership 12,104 11,916 1.6 23,913 24,787 (3.5)

Intersegment eliminations 1,178 386 205.2 738 (1,680) (143.9)

Corporate activities (1)

(1) Operating loss for ethanol production includes an inventory lower of cost or net realizable value adjustment of $13.2 million for the three months ended March 31, 2022.

(2) Corporate activities for the three months ended March 31, 2021 included a $36.9 million pretax gain on sale of assets.

(17,228) (13,961) 23.4 (35,749) 13,555 (363.7)

$ 33,841 $ 31,033 9.0% $ (14,061) $ 62,380 (122.5)%

(1) Corporate activities for the three and six months ended June 30, 2021, includes a $3.8 million loss on sale of assets and a $33.1 million gain on sale of assets, respectively.

Three Months Ended

Variance Six Months Ended

2022 2021 2022 2021

Depreciation and amortization:

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Agribusiness and energy services 470 595 (21.0) 934 1,202 (22.3)

Partnership 823 795 3.5 1,721 1,682 2.3

Corporate activities 560 659 (15.0) 1,165 1,318 (11.6)

$ 20,967 $ 20,532 2.1 % $ 41,366 $ 41,213 0.4 %

* 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.

We use EBITDA, adjusted EBITDA, and segment EBITDA as 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, depreciation and amortization excluding the amortization of right-of-use assets and debt issuance costs.

Adjusted EBITDA includes adjustments related to gains or losses on sale of assets and our proportional share of EBITDA adjustments of our equity method investees.

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):

Adjusted EBITDA includes adjustments related to gains or losses on sale of assets, other income associated with the USDA COVID-19 relief grant, and our proportional share of EBITDA adjustments of our equity method investees.

We believe EBITDA, adjusted EBITDA and segment EBITDA are useful measures to compare our performance against other companies.

These measures should not be considered an alternative to, or more meaningful than, net income, which is prepared in accordance with GAAP.

EBITDA, adjusted EBITDA, and segment EBITDA calculations may vary from company to company.

Accordingly, our computation of EBITDA, adjusted EBITDA, and segment EBITDA may not be comparable with a similarly titled measure of other companies.

The following table reconciles net income (loss) including noncontrolling interest to adjusted EBITDA (in thousands):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net income (loss) $ 52,720 $ 16,117 $ (3,152) $ 14,138

Interest expense (1)

7,800 19,058 16,606 50,737

Income tax expense (benefit) 2,895 (4,783) 1,742 (2,921)

Depreciation and amortization (2)

Gain on sale of assets, net

20,967 20,532 41,366 41,213

EBITDA 84,382 50,924 56,562 103,167

Other income (3)

(27,712) — (27,712) —

Loss (gain) on sale of assets, net — 3,825 — (33,068)

Proportional share of EBITDA adjustments to equity method investees 45 50 90 94

Adjusted EBITDA $ 56,715 $ 54,799 $ 28,940 $ 70,193

(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.

(1) Interest expense for the three and six months ended June 30, 2021, includes losses on settlement of convertible notes of $9.5 million and $31.6 million, respectively.

(2) Excludes amortization of operating lease right-of-use assets and amortization of debt issuance costs.

(3) Other income for the three and six months ended June 30, 2022 includes a grant received from the USDA related to the Biofuel Producer Program of $27.7 million.

The following table reconciles segment EBITDA to consolidated adjusted EBITDA (in thousands):

Three Months Ended

Variance Six Months Ended

2022 2021 2022 2021

Adjusted EBITDA:

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Agribusiness and energy services 10,750 (254) * 21,473 13,697 56.8

Partnership 13,123 12,880 1.9 26,005 26,813 (3.0)

Intersegment eliminations 1,657 386 329.3 738 (1,680) (143.9)

Corporate activities (1)

Gain on sale of assets, net

(15,828) (14,140) 11.9 (33,608) 14,074 (338.8)

EBITDA 84,382 50,924 65.7 56,562 103,167 (45.2)

Other income (2)

(27,712) — * (27,712) — *

Loss (gain) on sale of assets, net — 3,825 * — (33,068) *

Proportional share of EBITDA adjustments to equity method investees 45 50 (10.0) 90 94 (4.3)

Adjusted EBITDA

(1) Includes an inventory lower of cost or net realizable value adjustment of $13.2 million for the three months ended March 31, 2022.

(2) Includes corporate expenses, offset by the gain on sale of assets of $36.9 million for the three months ended March 31, 2021.

$ 56,715 $ 54,799 3.5% $ 28,940 $ 70,193 (58.8)%

(1) Includes corporate expenses, offset by a loss on sale of assets of $3.8 million and a $33.1 million gain on sale of assets for the three and six months ended June 30, 2021, respectively.

(2) Other income for the three and six months ended June 30, 2022 includes a grant received from the USDA related to the Biofuel Producer Program of $27.7 million.

* Percentage variance not considered meaningful.

Three Months Ended March 31, 2022 Compared with the Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 Compared with the Three Months Ended June 30, 2021

Consolidated Results

Consolidated revenues increased $227.8 million for the three months ended March 31, 2022 compared with the same period in 2021 primarily due to higher prices on ethanol, distillers grains and corn oil and increased trading revenues within our agribusiness and energy services segment.

Operating loss increased $79.2 million and adjusted EBITDA decreased $43.2 million for the three months ended March 31, 2022 compared with the same period last year primarily due to decreased margins on ethanol production.

Interest expense decreased $22.9 million for the three months ended March 31, 2022 compared with the same period in 2021 primarily due to the loss upon extinguishment of convertible notes of $22.1 million for the three months ended March 31, 2021.

Income tax benefit was $1.2 million for the three months ended March 31, 2022, compared with income tax expense of $1.9 million for the same period in 2021 primarily due to the release of a valuation allowance against decreases in certain deferred tax assets for the three months ended March 31, 2022, compared to a decrease of the valuation allowance recorded against certain deferred tax assets during the three months ended March 31, 2021.

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

Consolidated revenues increased $288.0 million for the three months ended June 30, 2022 compared with the same period in 2021 primarily due to higher prices and higher volumes sold on ethanol, distillers grains, and corn oil.

Net income increased $36.6 million and adjusted EBITDA increased $1.9 million for the three months ended June 30, 2022, compared with the same period last year primarily due to the $27.7 million USDA COVID-19 relief grant received, which is excluded from adjusted EBITDA, and also higher margins on agribusiness and energy services offset by slightly lower ethanol crush margins.

Interest expense decreased $11.3 million for the three months ended June 30, 2022, compared with the same period in 2021 primarily due to a loss on settlement of convertible notes of $9.5 million for the three months ended June 30, 2021.

Income tax expense was $2.9 million for the three months ended June 30, 2022, compared with income tax benefit of $4.8 million for the same period in 2021 primarily due to an increase of a valuation allowance against deferred tax assets included in AOCI for the three months ended June 30, 2022, compared to a decrease of the valuation allowance recorded against deferred tax assets included in AOCI during the three months ended June 30, 2021.

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

Ethanol Production Segment

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Three Months Ended

2022 2021 % Variance

(thousands of gallons) 231,413 190,913 21.2%

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(thousands of bushels) 80,218 65,424 22.6%

Revenues in our ethanol production segment increased $213.8 million for the three months ended March 31, 2022 compared with the same period in 2021, primarily due to higher volumes sold and higher prices of ethanol, distillers grains and corn oil.

Cost of goods sold for our ethanol production segment increased $246.0 million for the three months ended March 31, 2022 compared with the same period last year primarily due to higher volumes sold and corn costs.

Operating loss increased $30.8 million and EBITDA decreased $30.9 million for the three months ended March 31, 2022 compared with the same period in 2021 primarily due to decreased margins on ethanol production as well as an inventory lower of cost or net realizable value adjustment of $13.2 million.

Depreciation and amortization expense for the ethanol production segment was $18.4 million for the three months ended March 31, 2022, compared with $18.5 million for the same period last year.

Revenues in our ethanol production segment increased $305.9 million for the three months ended June 30, 2022, compared with the same period in 2021, primarily due to higher prices and higher volumes sold of ethanol, distillers grains and corn oil.

Cost of goods sold for our ethanol production segment increased $311.2 million for the three months ended June 30, 2022, compared with the same period last year primarily due to higher volumes sold and corn costs.

Operating income decreased $6.0 million for the three months ended June 30, 2022, compared with the same period in 2021 primarily due to decreased margins on ethanol production.

Depreciation and amortization expense for the ethanol production segment was $19.1 million for the three months ended June 30, 2022, compared with $18.5 million for the same period last year.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment increased $14.8 million while operating income decreased $2.9 million and EBITDA decreased $3.2 million for the three months ended March 31, 2022 compared with the same period in 2021.

The increase in revenues was primarily due to an increase in ethanol, distillers grain and corn oil trading activity driven by higher prices.

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

Revenues in our agribusiness and energy services segment decreased $15.9 million while operating income increased $11.1 million and EBITDA increased $11.0 million for the three months ended June 30, 2022, compared with the same period in 2021.

The decrease in revenues was primarily due to a decrease in ethanol and corn oil trading volume.

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

Partnership Segment

Revenues generated by our partnership segment decreased $1.3 million for the three months ended March 31, 2022, compared with the same period for 2021.

Revenues generated by our partnership segment decreased $47 thousand for the three months ended June 30, 2022, compared with the same period for 2021.

Storage and throughput services revenue was consistent with the prior year.

Railcar transportation services revenue increased $0.3 million primarily due to an increase in average volumetric capacity provided.

Terminal services revenue decreased $0.2 million due to lower minimum volume commitments.

Trucking and other revenue decreased $0.2 million primarily as a result of lower non-affiliate freight volume.

Operating income and EBITDA both increased $0.2 million for the three months ended June 30, 2022 compared with the same period in 2021.

Intersegment Eliminations

Intersegment eliminations of revenues increased by $1.9 million for the three months ended June 30, 2022, compared with the same period in 2021 primarily due to increased intersegment marketing and services fees within the agribusiness and energy services segment as a result of higher production volumes.

Corporate Activities

Operating income was impacted by an increase in corporate activities of $3.3 million for the three months ended June 30, 2022, compared to the same period in 2021, primarily due to increased personnel costs and professional fees during the three months ended June 30, 2022.

We recorded income tax expense of $2.9 million for the three months ended June 30, 2022, compared with income tax benefit of $4.8 million for the same period in 2021.

The increase in the amount of tax expense recorded for the three months ended June 30, 2022 was primarily due to an increase in the valuation allowance recorded against deferred tax assets included in AOCI, compared to a decrease of the valuation allowance recorded against deferred tax assets included in AOCI during the three months ended June 30, 2021.

Six Months Ended June 30, 2022 Compared with the Six Months Ended June 30, 2021

Consolidated Results

Consolidated revenues increased $515.8 million for the six months ended June 30, 2022, compared with the same period in 2021 primarily due to higher prices and higher sales volumes on ethanol, distillers grains and corn oil.

Net loss increased $17.3 million and adjusted EBITDA decreased $41.3 million for the six months ended June 30, 2022, compared with the same period last year primarily due to decreased margins on ethanol production.

Interest expense decreased $34.1 million for the six months ended June 30, 2022, compared with the same period in 2021 primarily due to the loss upon extinguishment of convertible notes of $31.6 million for the six months ended June 30, 2021.

Income tax expense was $1.7 million for the six months ended June 30, 2022, compared with income tax benefit of $2.9 million for the same period in 2021 primarily due to the increase of a valuation allowance recorded against increases in deferred tax assets included in AOCI for the six months ended June 30, 2022, compared to a decrease of the valuation allowance recorded against decreases in deferred tax assets included in AOCI during the six months ended June 30, 2021.

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:

Six Months Ended

2022 2021 % Variance

(thousands of gallons) 427,761 368,913 16.0%

Distillers grains sold

(thousands of equivalent dried tons) 1,109 967 14.7

Corn oil sold

(thousands of pounds) 131,527 101,438 29.7

Corn consumed

(thousands of bushels) 148,522 127,020 16.9%

Revenues in our ethanol production segment increased $519.7 million for the six months ended June 30, 2022, compared with the same period in 2021, primarily due to higher prices and higher volumes sold of ethanol, distillers grains and corn oil.

Cost of goods sold for our ethanol production segment increased $557.2 million for the six months ended June 30, 2022, compared with the same period last year primarily due to higher corn prices and volumes sold.

Operating loss increased $36.9 million and EBITDA decreased $8.3 million for the six months ended June 30, 2022 compared with the same period in 2021 primarily due to decreased margins on ethanol production.

Depreciation and amortization expense for the ethanol production segment was $37.5 million for the six months ended June 30, 2022, compared with $37.0 million for the same period last year.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased $1.2 million while operating income increased

$8.2 million and EBITDA increased $7.8 million for the six months ended June 30, 2022, compared with the same period in 2021.

The decrease in revenues was primarily due to a decrease in ethanol and corn oil trading volume.

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

Partnership Segment

Revenues generated by our partnership segment decreased $1.4 million for the six months ended June 30, 2022, compared with the same period for 2021.

Storage and throughput services revenue decreased $0.7 million due to a reduction in the contracted minimum volume commitment as a result of the sale of the Ord ethanol plant in the first quarter of 2021.

Railcar transportation services revenue decreased $0.4 million primarily due to a reduction in average volumetric capacity provided.

Trucking and other revenue decreased $0.3 million primarily as a result of lower affiliate freight volume.

Operating income and EBITDA both decreased $1.1 million for the three months ended March 31, 2022 compared with the same period in 2021.

Railcar transportation services revenue decreased $0.1 million primarily due to slightly lower capacity fees.

Terminal services revenue decreased $0.1 million due to lower minimum volume commitments.

Trucking and other revenue decreased $0.5 million primarily as a result of lower non-affiliate freight volume.

Operating income decreased $0.9 million and EBITDA decreased $0.8 million for the six months ended June 30, 2022, compared with the same period in 2021.

Intersegment Eliminations

Intersegment eliminations of revenues decreased by $0.5 million for the three months ended March 31, 2022 compared with the same period in 2021 primarily due to decreased partnership revenues.

Intersegment eliminations of revenues increased by $1.4 million for the six months ended June 30, 2022, compared with the same period in 2021 primarily due to increased intersegment marketing and service fees within the agribusiness and energy services segment as a result of higher production volumes.

Corporate Activities

Operating income was impacted by a decrease in corporate activities of $46.0 million for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to the $36.9 million gain on sale of assets recorded in the same period last year as well as increased personnel costs and professional fees during the three months ended March 31, 2022.

We recorded income tax benefit of $1.2 million for the three months ended March 31, 2022, compared with income tax expense of $1.9 million for the same period in 2021.

The decrease in the amount of tax expense recorded for the three months ended March 31, 2022 was primarily due to a decrease in the valuation allowance recorded against certain deferred tax assets in the period.

Income (Loss) from Equity Method Investees

Income (loss) from equity method investees decreased $1.0 million for the three months ended March 31, 2022 compared with the same period last year.

Operating income was impacted by an increase in corporate activities of $49.3 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to the $33.1 million gain on sale of assets recorded in the same period last year and the $3.8 million loss on sale of assets in 2021, as well as increased personnel costs and professional fees during the six months ended June 30, 2022.

We recorded income tax expense of $1.7 million for the six months ended June 30, 2022, compared with income tax benefit of $2.9 million for the same period in 2021 primarily due to the increase of a valuation allowance recorded against increases in deferred tax assets included in AOCI for the six months ended June 30, 2022, compared to a decrease of the valuation allowance recorded against decreases in deferred tax assets included in AOCI during the six months ended June 30, 2021.

Liquidity and Capital Resources

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We believe that our ability to obtain financing based on these factors remains sufficient and provides a solid foundation to meet our future liquidity and capital resource requirements.

On March 31, 2022, we had $509.2 million in cash and equivalents, excluding restricted cash.

Additionally, we had $95.1 million in restricted cash and $24.9 million in marketable securities at March 31, 2022.

On June 30, 2022, we had $508.2 million in cash and equivalents, excluding restricted cash.

Additionally, we had $71.1 million in restricted cash and $25.0 million in marketable securities at June 30, 2022.

We also had $70.0 million available under our committed revolving credit agreement, subject to restrictions and other lending conditions.

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

At March 31, 2022, our subsidiaries had approximately $108.8 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 $162.5 million for the three months ended March 31, 2022 compared with net cash provided used in operating activities of $37.0 million for the same period in 2021.

Operating activities compared to the prior year were primarily affected by a higher net loss due to weak ethanol crush margins as well as increases in inventory of $46.1 million primarily due to higher ethanol inventory when compared to the same period of the prior year.

Net cash provided by investing activities was $37.9 million for the three months ended March 31, 2022 compared with net cash provided by investing activities of $42.3 million for the same period in 2021.

Investing activities compared to the prior year were primarily affected by proceeds from the sale of marketable securities during the first quarter of 2022, and proceeds from the sale of assets during the same period in 2021.

Net cash provided by financing activities was $167.9 million for the three months ended March 31, 2022 compared with net cash used in financing activities of $374.3 million for the same period in 2021, primarily due to proceeds from the issuance of common stock and debt offerings during 2021.

At June 30, 2022, our subsidiaries had approximately $109.6 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 $106.6 million for the six months ended June 30, 2022, compared with net cash used in operating activities of $30.2 million for the same period in 2021.

Operating activities compared to the prior year were primarily affected by a higher net loss as well as increases in inventory of approximately $31.3 million primarily due to higher trade and ethanol inventory as a result of higher production volumes when compared to the same period of the prior year.

Net cash used by investing activities was $35.3 million for the six months ended June 30, 2022, compared with net cash provided by investing activities of $9.9 million for the same period in 2021.

Investing activities compared to the prior year were primarily affected by the purchases of fixed assets offset by proceeds from the sale of marketable

securities during the first quarter of 2022.

Net cash provided by financing activities was $160.3 million for the six months ended June 30, 2022, compared with net cash provided by financing activities of $360.8 million for the same period in 2021, primarily due to proceeds from the issuance of common stock and debt offerings during the same period in 2021.

Additionally, Green Plains Finance Company, 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 $62.0 million during the three months ended March 31, 2022, primarily for Ultra High-Protein expansion projects at various facilities and for various maintenance projects.

We paid capital expenditures of approximately $128.3 million during the six months ended June 30, 2022, primarily for Ultra High-Protein expansion projects at various facilities and for various maintenance projects.

Capital spending for the remainder of 2022 is expected to be between $120.0 million and $170.0 million for various projects, including the Ultra High-Protein expansion at our Obion, Central City and Mount Vernon locations, which are expected to be financed with cash on hand and by cash provided by operating activities.

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

We did not repurchase any shares during the first quarter of 2022.

We did not repurchase any shares during the second quarter of 2022.

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

On May 25, 2022, the Company gave notice calling for the redemption of all its outstanding 4.00% convertible notes, totaling an aggregate principal amount of $64.0 million.

The conversion rate was 66.4178 shares of common stock per $1,000 of principal.

From July 1, 2022 through July 8, 2022, the remaining $64.0 million of the 4.00% convertible notes were converted into shares of common stock and were retired effective July 8, 2022.

We believe we have sufficient working capital for our existing operations.

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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, 2021.

We were in compliance with our debt covenants at March 31, 2022.

We were in compliance with our debt covenants at June 30, 2022.

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

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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 various credit facilities.

As outlined in Note 8 - Debt , we use LIBOR as a reference rate for our Green Plain Partners term loan and our inventory financing agreement with Macquarie.

The administrator of LIBOR ceased 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.

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We may settle the 2.25% notes in cash, common stock or a combination of cash and common stock.

At March 31, 2022, the outstanding principal balance on the 2.25% notes was $230.0 million.

At June 30, 2022, 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;

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At March 31, 2022, the outstanding principal balance on the 4.00% notes was $64.0 million.

On May 25, 2022, we gave notice calling for the redemption of all our outstanding 4.00% convertible notes, totaling an aggregate principal amount of $64.0 million.

The conversion rate was 66.4178 shares of common stock per $1,000 of principal.

From July 1, 2022 through July 8, 2022, the remaining $64.0 million of the 4.00% convertible notes were converted into approximately 4.3 million shares of common stock and were retired effective July 8, 2022.

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

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or a tender or exchange offering.

We anticipate we will settle the 4.125% notes in a combination of cash and common stock.

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.

At March 31, 2022, the outstanding principal balance on the 4.125% notes was $34.3 million.

At June 30, 2022, the outstanding principal balance on the 4.125% notes was $34.3 million.

We anticipate we will settle the 4.125% notes in a combination of cash and common stock.

Agribusiness and Energy Services Segment

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The unused portion of the Facility is also subject to a commitment fee of 0.275% to 0.375%, dependent on undrawn availability.

At March 31, 2022, the outstanding principal balance was $305.0 million on the facility and the interest rate was 3.67%.

At June 30, 2022, the outstanding principal balance was $280.0 million on the facility and the interest rate was 4.69%.

Green Plains Grain has entered into a $50.0 million short-term inventory financing agreement with a financial institution.

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

This agreement is subject to negotiated variable interest rates, which equaled 4.66% as of June 30, 2022.

The company had $17.5 million short-term notes payable related to the inventory financing agreement as of June 30, 2022.

Green Plains Commodity Management has an uncommitted $40.0 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 SOFR plus 1.75%.

At March 31, 2022, the outstanding principal balance was $5.2 million on the facility and the interest rate was 1.83%.

At June 30, 2022, the outstanding principal balance was $10.9 million on the facility and the interest rate was 3.25%.

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 BlackRock for the purchase of all notes issued.

At March 31, 2022, the outstanding principal balance was $125.0 million on the loan and the interest rate was 11.75%.

At June 30, 2022, the outstanding principal balance was $125.0 million on the loan and the interest rate was 11.75%.

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

At March 31, 2022, the outstanding principal balance was $75.0 million on the loan and the interest rate was 6.52%.

At June 30, 2022, the outstanding principal balance was $75.0 million on the loan and the interest rate was 5.02%.

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

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On July 20, 2021, the partnership entered into an Amended and Restated Credit Agreement (“Amended Credit Agreement”) with funds and accounts managed by BlackRock and TMI Trust Company as administrative agent creating a $60.0 million term loan to fund working capital, capital expenditures and other general partnership purposes.

term loan matures July 20, 2026.

The amended term loan matures July 20, 2026.

The amended term loan does not require any principal payments;

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On the same day, the partnership purchased $1.0 million of the outstanding notes from accounts and funds managed by BlackRock and subsequently retired the notes.

As of March 31, 2022, the term loan had a balance of $59.0 million and an interest rate of 8.83%.

As of June 30, 2022, the term loan had a balance of $59.0 million and an interest rate of 9.83%.

Contractual Obligations and Commitments

In addition to debt, our material future obligations include certain lease agreements and contractual and purchase commitments related to commodities, storage and transportation.

Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of March 31, 2022 totaled $76.1 million.

As of March 31, 2022, we had contracted future purchases of grain, natural gas, and distillers grains valued at approximately $532.4 million and future commitments for storage and transportation valued at approximately $31.4 million.

Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of June 30, 2022 totaled $78.7 million.

As of June 30, 2022, we had contracted future purchases of grain, natural gas, and distillers grains valued at approximately $511.9 million and future commitments

for storage and transportation valued at approximatel y $25.6 million.

Refer to Note 13 – Commitments and Contingencies included in the notes to consolidated financial statements for more information.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis