What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-31 compared with 2023-08-04 · 165 added, 128 removed, 356 unchanged (45% of the section changed)

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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, 2022 and in 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:

Specifically, we may experience fluctuations in future operating results due to a number of economic conditions and other factors, including:

competition in the ethanol industry and other industries in which we operate;

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disruption caused by health epidemics, such as the COVID-19 outbreak;

our ability to consummate the transactions contemplated by the Merger Agreement;

the anticipated completion of the Merger and the timing thereof;

the failure to realize any anticipated cost savings or other benefits of the Merger;

the possible diversion of management time on Merger-related issues;

and other factors detailed in reports filed with the SEC.

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Green Plains Partners LP, a master limited partnership, is our primary downstream storage and logistics provider since its assets are the principal method of storing and delivering the ethanol we produce.

As of June 30, 2023, we own a 48.8% limited partner interest, a 2.0% general partner interest and all of the partnership’s incentive distribution rights.

The public owns the remaining 49.2% limited partner interest.

As of September 30, 2023, we own a 48.8% limited partner interest, a 2.0% general partner interest and all of the partnership’s incentive distribution rights.

public owns the remaining 49.2% limited partner interest.

The partnership is consolidated in our financial statements, and we record a noncontrolling interest for the economic interest in the partnership held by the public common unitholders.

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• Ethanol Production.

Our ethanol production segment includes the production of ethanol, distillers grains, Ultra-High Protein and renewable corn oil at eleven ethanol plants in Illinois, Indiana, Iowa, Minnesota, Nebraska and Tennessee.

Our ethanol production segment includes the production of ethanol, distillers grains, Ultra-High Protein and renewable corn oil at ten ethanol plants in Illinois, Indiana, Iowa, Minnesota, Nebraska and Tennessee.

At capacity, our facilities are capable of processing approximately 310 million bushels of corn per year and producing approximately 903 million gallons of ethanol, 2.2 million tons of distillers grains and Ultra-High Protein, and 300 million pounds of renewable corn oil, a low-carbon feedstock for biodiesel and renewable diesel.

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We are focused on generating stable and growing operating margins through our business segments and risk management strategy.

Eight biorefineries have committed to carbon capture and sequestration through carbon pipeline transport, five with Summit Carbon Solutions and three with another provider, which will lower GHG emissions through the capture of carbon dioxide at each of these biorefineries, significantly lowering their CI.

The anticipated completion for these projects is in 2025.

In addition, we are exploring innovative options for carbon use at Madison and Obion, such as synthetic methane production, with global partners, and intend to sequester the carbon from fermentation at Mount Vernon as well.

Seven biorefineries have committed to carbon capture and sequestration through carbon pipeline transport, four with Summit Carbon Solutions and three with another provider, which will lower GHG emissions through the capture of carbon dioxide at each of these biorefineries, significantly lowering their CI.

We anticipate completion of the Summit Carbon Solutions projects in 2026, and the remainder in 2025.

In addition, we are collaborating with global partners to explore innovative options for carbon use, such as synthetic methane production at Madison and Obion.

We intend to sequester the carbon from fermentation at Mount Vernon as well.

Reducing the CI of our fuel ethanol could allow us to benefit from state and federal clean fuel programs, including LCFS and federal tax credits under the Inflation Reduction Act, and could position our low-carbon ethanol as a potential feedstock for ATJ pathways to produce SAF.

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Recent Developments

On May 3, 2023, the company submitted a non-binding, preliminary proposal to the Board of Directors of Green Plains Holdings LLC, the general partner of Green Plains Partners LP, to acquire all of the publicly held common units of the partnership not already owned by the company.

The conflicts committee of the Board of Directors of the general partner (the "Conflicts Committee") has been delegated the authority to evaluate and is negotiate, the possible terms of a proposed transaction.

Any transaction involving the company and the partnership is subject to the execution of a mutually

satisfactory definitive agreement and approval of such definitive agreement and the transactions contemplated by the boards of directors of the company and the general partner, the Conflicts Committee, as well as the majority of the partnership's unitholders.

There can be no assurance that the parties will reach an agreement on the terms of a transaction, that a definitive agreement will be executed or that a transaction will be approved or consummated.

On April 17, 2023, during routine maintenance on a whole stillage tank, we experienced an explosion at our Wood River, Nebraska facility.

We have been working with various regulatory agencies, state and local authorities, and our insurance providers to evaluate the financial impact of the incident.

We estimate there was a loss during the second quarter of 2023 of $15 million to $20 million related to this incident, which we anticipate insurance proceeds will partially offset in future quarters.

The Partnership Merger

On September 16, 2023, the company, Holdings, Merger Sub, the partnership, and the General Partner, entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the partnership, with the partnership surviving as an indirect, wholly owned subsidiary of the company.

Refer to Note 3 - Merger and Disposition included in the notes to the unaudited consolidated financial statements included herein for more information.

Disposition of Atkinson Ethanol Plant

On July 25, 2023, Green Plains Atkinson LLC, a wholly owned subsidiary of the company, entered into an asset purchase agreement to sell the plant located in Atkinson, Nebraska (the “Atkinson Transaction”).

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 Atkinson Transaction.

The Atkinson Transaction is expected to close in the next 30 days.

The assets to be divested are currently reported within our ethanol production, agribusiness and energy services and partnership segments.

Correspondingly, we entered into a separate asset purchase agreement with the partnership to acquire the storage assets and the associated railcar operating leases.

On September 7, 2023, we completed the Atkinson Transaction and sale of certain related assets and transfer of certain related liabilities.

The divested assets were reported within our ethanol production, agribusiness and energy services and partnership segments.

The company recorded a pretax gain on the sale of the Atkinson plant of $4.6 million recorded within corporate activities.

Refer to Note 3 - Merger and Disposition included in the notes to the unaudited consolidated financial statements included herein for more information.

Wood River Incident

On April 17, 2023, during routine maintenance on a whole stillage tank, we experienced an explosion at our Wood River, Nebraska facility.

We worked with various regulatory agencies, state and local authorities, and our insurance providers to evaluate the financial impact of the incident.

We estimate there was a loss during the second and third quarters of 2023 of approximately $15 million to $17 million related to this incident, before insurance proceeds, which covered a portion of the estimated loss.

Results of Operations

During the second quarter of 2023, we experienced plant down time as a result of planned and unplanned occurrences at multiple plants along with the explosion at our Wood River facility.

We maintained an average utilization rate of approximately 81.5% of capacity, resulting in ethanol production of 194.7 mmg for the second quarter of 2023, compared with 231.4 mmg, or 96.9% of capacity, for the same quarter last year.

During the third quarter of 2023, we maintained an average utilization rate of approximately 93.9% of capacity, resulting in ethanol production of 223.4 mmg for the third quarter of 2023, compared with 219.4 mmg, or 90.9% of capacity, for the same quarter last year.

Our operating strategy is to transform our company to a value-add agricultural technology company.

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Ethanol Supply and Demand

According to the EIA, domestic ethanol production averaged 1.01 million barrels per day during the second quarter of 2023, which was consistent with the same quarter last year.

Refiner and blender input volume was 905 thousand barrels per day for the second quarter of 2023, compared with 898 thousand barrels per day for the same quarter last year.

Gasoline demand increased 0.3 million barrels per day, or 3.5% during the second quarter of 2023 compared to the prior year.

domestic ethanol ending stocks decreased by approximately 0.4 million barrels compared to the prior year, or 1.8%, to 22.3 million barrels as of June 30, 2023.

According to the EIA, domestic ethanol production averaged 1.04 million barrels per day during the third quarter of 2023, which was 6.2% higher than the 979 thousand barrels per day for the same quarter last year.

Refiner and blender input volume was 907 thousand barrels per day for the third quarter of 2023, compared with 902 thousand barrels per day for the same quarter last year.

Gasoline demand was in line with the prior year at 8.8 million barrels per day during the third quarter of 2023.

domestic ethanol ending stocks increased by approximately 0.2 million barrels compared to the prior year, or 0.9%, to 21.9 million barrels as of September 30, 2023.

As of this filing, according to Prime the Pump, there were approximately 3,244 retail stations selling E15 year-round in 31 states, and approximately 386 suppliers at 113 pipeline terminal locations now offer E15 to wholesale customers.

Global Ethanol Supply and Demand

According to the USDA Foreign Agriculture Service, domestic ethanol exports through May 31, 2023, were approximately 593 mmg, down from the 726 mmg for the same period of 2022.

Canada was the largest export destination for U.S.

ethanol accounting for 41% of domestic ethanol export volume, driven in part by their national clean fuel standard.

The Netherlands, the United Kingdom, South Korea, and India accounted for 10%, 10%, 8% and 8%, respectively, of U.S.

According to the USDA Foreign Agriculture Service, domestic ethanol exports through August 31, 2023, were approximately 921 mmg, down from the 1,012 mmg for the same period of 2022.

Canada was the largest export destination

ethanol accounting for approximately 46% of domestic ethanol export volume, driven in part by their national clean fuel standard.

The United Kingdom, the Netherlands, South Korea, and India accounted for approximately 11%, 9%, 8% and 5%, respectively, of U.S.

ethanol exports.

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

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, lower the price of RINs and make it more difficult to sell fuel blends with higher levels of ethanol.

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, lower the price of RINs 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, allow for year-round sales of higher blends of ethanol and require car manufacturers to produce vehicles that can operate on higher ethanol blends.

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Federal mandates and state-level clean fuel standards 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 the fuel supply, supporting agricultural production and reducing the country’s dependence on foreign oil.

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

Ethanol policies are influenced by concerns for the environment, diversifying the fuel supply, supporting U.S.

farmers and reducing the country’s dependence on foreign oil.

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

light duty surface transportation fleet market share.

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

Incentives for automakers to produce FFVs phased out in 2020, and the EPA's recently proposed Corporate Average Fuel Economy (CAFE) standards further incentivize EV production, with the administration's stated goal of having two-thirds of vehicles sold in 2032 be EVs.

Sales of EVs in the U.S.

were close to 300,000 vehicles during the second quarter of 2023, which represented approximately 7.2% of new vehicles sales.

were approximately 313,000 vehicles during the third quarter of 2023, which represented approximately 7.9% of new vehicles sales.

Transition of the light duty surface transportation fleet from internal combustion engines to EVs could decrease the demand for ethanol.

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

On June 21, 2023, the EPA finalized RVOs for 2023, 2024 and 2025, setting the implied conventional ethanol levels at 15.25 billion gallons for 2023, and 15 billion for 2024 and 2025, inclusive of 250 million gallons of supplemental volume in 2023 to reflect a court-ordered remand of a previously lowered RVO.

The EPA also proposed a modest increase in biomass based diesel volumes over the three years, setting the volumes at 2.82 billion for 2023, 3.04 billion for 2024 and 3.35 billion for 2025.

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Market participants can trade the detached RINs in the open market.

The market price of detached RINs can affect the price of ethanol in certain markets

and can influence purchasing decisions by obligated parties.

The market price of detached RINs can affect the price of ethanol in certain markets and can influence purchasing decisions by obligated parties.

Of note, the RIN mechanism for proposed e-RINs could vary from the traditional process.

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however, the EPA allowed for so-called "alternative compliance" for these refineries, which in practice waived their blending obligations for those years.

The EPA has reiterated its stance on denying all SRE applications in the final 2023, 2024 and 2025 RVO rulemaking, and there are multiple on-going legal challenges to how it has handled SREs and RFS rulemakings.

The EPA reiterated its stance of denying all SRE applications in the final 2023, 2024 and 2025 RVO rulemaking, and on July 14, 2023 announced that they had denied 26 SREs for the 2016-2018 and 2021-2023 compliance years, leaving only two SREs pending.

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

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.

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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 then 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.

to distribute to those impacted by the pandemic.

The language of the bill specifically included biofuels producers as eligible for some of this aid, and in May 2022, the USDA distributed funds to us in the amount of $27.7 million pursuant to this bill.

In July 2023, the USDA distributed supplemental program funds to us in the amount of $3.4 million.

Environmental and Other Regulation

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Comparability

There are various events that could affect comparability of our operating results, including decreased production rates in 2023 from 2022.

There are various events that could affect comparability of our operating results, including increased production rates in 2023 from 2022.

Segment Results

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Three Months Ended

Variance Six Months Ended

September 30, %

Variance Nine Months Ended

September 30, %

2023 2022 2023 2022

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Three Months Ended

Variance Six Months Ended

September 30, %

Variance Nine Months Ended

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2023 2022 2023 2022

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Three Months Ended

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Variance Nine Months Ended

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(14,070) (15,999) (12.1) (52,300) (51,748) 1.1

(1) Operating loss for ethanol production includes an inventory lower of cost or net realizable value adjustment of $9.5 million for the three and six months ended June 30, 2023.

$ 21,174 $ (61,880) 134.2% $ (77,846) $ (75,941) 2.5%

(1) Operating income (loss) for ethanol production includes an inventory lower of cost or net realizable value adjustment of $1.7 million for the three and nine months ended September 30, 2023, and $11.2 million for the three and nine months ended September 30, 2022.

(2) Corporate activities for the three and nine months ended September 30, 2023 includes a $5.7 million pretax gain on sale of assets.

Three Months Ended

Variance Six Months Ended

September 30, %

Variance Nine Months Ended

September 30, %

2023 2022 2023 2022

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$ 23,899 $ 24,647 (3.0 %) $ 73,911 $ 66,013 12.0 %

* Percentage variance not considered meaningful.

* Percentage variances not considered meaningful.

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.

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Three Months Ended

Variance Six Months Ended

September 30, %

Variance Nine Months Ended

September 30, %

2023 2022 2023 2022

Net loss $ (48,320) $ 52,720 (191.7)% $ (114,569) $ (3,152) *

Net income (loss) $ 26,292 $ (67,903) 138.7% $ (88,277) $ (71,055) 24.2%

Interest expense 9,550 9,576 (0.3) 29,029 26,182 10.9

Income tax expense (benefit) (1,019) 2,895 (135.2) 2,410 1,742 38.3

Income tax benefit (7,763) (1,888) 311.2 (5,353) (146) *

Depreciation and amortization (1)

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(3,440) — * (3,440) (27,712) (87.6)

Gain on sale of assets (5,651) — * (5,651) — *

Proportional share of EBITDA adjustments to equity method investees 45 45 — 135 135 —

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

(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.

(2) Other income includes grants received from the USDA related to the Biofuel Producer Program of $3.4 million for the three and nine months ended September 30, 2023 and $27.7 million for the nine months ended September 30, 2022.

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

Three Months Ended

Variance Six Months Ended

September 30, %

Variance Nine Months Ended

September 30, %

2023 2022 2023 2022

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Corporate activities (2)

(11,165) (13,945) (19.9) (42,986) (47,553) (9.6)

EBITDA 51,978 (35,568) 246.1 9,310 20,994 (55.7)

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(3,440) — * (3,440) (27,712) (87.6)

Gain on sale of assets (5,651) — * (5,651) — *

Proportional share of EBITDA adjustments to equity method investees 45 45 — 135 135 —

$ 42,932 $ (35,523) 220.9% $ 354 $ (6,583) 105.4%

(1) Ethanol production includes an inventory lower of cost or net realizable value adjustment of $9.5 million for the three and six months ended June 30, 2023.

(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 June 30, 2023 Compared with the Three Months Ended June 30, 2022

(1) Ethanol production includes an inventory lower of cost or net realizable value adjustment of $1.7 million for the three and nine months ended September 30, 2023, and $11.2 million for the three and nine months ended September 30, 2022.

(2) Includes corporate expenses, offset by a gain on sale of assets of $5.7 million for the three and nine months ended September 30, 2023.

(3) Other income includes grants received from the USDA related to the Biofuel Producer Program of $3.4 million for the three and nine months ended September 30, 2023 and $27.7 million for the nine months ended September 30, 2022.

* Percentage variances not considered meaningful.

Three Months Ended September 30, 2023 Compared with the Three Months Ended September 30, 2022

Consolidated Results

Consolidated revenues decreased $154.8 million for the three months ended June 30, 2023 compared with the same period in 2022 primarily due to lower volumes sold on ethanol, distillers grains, and renewable corn oil, as well as lower weighted average selling prices on distillers grains and renewable corn oil, offset by higher weighted average selling prices on ethanol within our ethanol production segment as described below.

Revenues were also lower within our agribusiness and energy services segment as a result of decreased trading volumes.

Net loss increased $101.0 million for the three months ended June 30, 2023 compared with the same period last year primarily due to decreased volumes and margins in our ethanol production segment, lower trading volumes and margins in our agribusiness and energy services segment, and the $27.7 million USDA COVID-19 relief grant received in the second quarter of 2022.

Adjusted EBITDA decreased $71.6 million for the three months ended June 30, 2023 compared with the same period last year primarily due to decreased volumes and margins in our ethanol production segment and lower trading volumes and margins in our agribusiness and energy services segment.

Interest expense increased $1.9 million for the three months ended June 30, 2023 compared with the same period in 2022 primarily due to reduced capitalized interest as certain projects have been completed.

Income tax benefit was $1.0 million for the three months ended June 30, 2023 compared with income tax expense of $2.9 million for the same period in 2022 primarily due to a decrease in the valuation allowance recorded against certain deferred tax assets for the three months ended June 30, 2023.

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

Consolidated revenues decreased $62.2 million for the three months ended September 30, 2023 compared with the same period in 2022 primarily due to lower weighted average selling prices on ethanol and distillers grains, as well as lower volumes sold on distillers grains, partially offset by higher volumes sold on ethanol and renewable corn oil, as well

as higher weighted average selling prices on renewable corn oil within our ethanol production segment as described below.

Revenues were also lower within our agribusiness and energy services segment as a result of decreased ethanol and distillers grains trading volumes.

Net income increased $94.2 million and adjusted EBITDA increased $78.5 million for the three months ended September 30, 2023 compared with the same period last year primarily due to higher margins in our ethanol production segment and to a lesser extent in our agribusiness and energy services segment.

Interest expense was consistent for the three months ended September 30, 2023 compared with the same period in 2022.

Income tax benefit was $7.8 million for the three months ended September 30, 2023 compared with income tax benefit of $1.9 million for the same period in 2022 primarily due to a decrease in the valuation allowance recorded against certain deferred tax assets for the three months ended September 30, 2023.

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

Ethanol Production Segment

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Three Months Ended

September 30,

2023 2022 % Variance

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(thousands of bushels) 76,544 75,308 1.6%

Revenues in our ethanol production segment decreased $134.4 million for the three months ended June 30, 2023 compared with the same period in 2022, primarily due to lower ethanol, distillers grains and renewable corn oil volumes sold resulting in decreased revenues of $101.2 million, $22.7 million and $5.4 million, respectively, as well as lower weighted average selling prices on distillers grains and renewable corn oil resulting in decreased revenues of $5.4 million and $8.8 million, respectively, offset by higher weighted average selling prices on ethanol resulting in increased revenues of $14.2 million.

Revenues in our ethanol production segment decreased $37.6 million for the three months ended September 30, 2023 compared with the same period in 2022, primarily due to lower weighted average selling prices on ethanol and distillers grains resulting in decreased revenues of $20.3 million and $23.3 million, respectively, as well as lower distillers grains volumes sold resulting in decreased revenues of $2.5 million, partially offset by higher ethanol and renewable corn oil volumes sold resulting in increased revenues of $12.0 million and $0.8 million, respectively, as well as higher weighted average selling prices on renewable corn oil resulting in increased revenues of $1.4 million.

Revenues also decreased as a result of hedging activities by $1.7 million.

Cost of goods sold in our ethanol production segment decreased $73.9 million for the three months ended June 30, 2023 compared with the same period last year primarily due to lower volumes processed and lower weighted average prices, resulting in decreased costs of $110.7 million and $4.7 million, respectively, partially offset by hedging activities of $5.0 million and higher chemical, utilities and other costs of $31.9 million.

Operating loss in our ethanol production segment increased $63.9 million for the three months ended June 30, 2023 compared with the same period in 2022 primarily due to decreased margins as outlined above.

Depreciation and amortization expense for the ethanol production segment was $22.4 million for the three months ended June 30, 2023, compared with $19.1 million for the same period last year, with the increase primarily due to Ultra-High Protein assets placed in service.

Cost of goods sold in our ethanol production segment decreased $115.5 million for the three months ended September 30, 2023 compared with the same period last year primarily due to lower weighted average corn prices resulting in decreased costs of $102.3 million, as well as lower chemicals and other costs of $30.2 million, partially offset by higher corn volumes processed resulting in increased costs of $11.1 million.

Costs also increased as a result of hedging activities of $10.1 million.

Operating income in our ethanol production segment increased $76.1 million for the three months ended September 30, 2023 compared with the same period in 2022 primarily due to increased margins as outlined above.

Depreciation and amortization expense for the ethanol production segment was $21.8 million for the three months ended September 30, 2023, compared with $21.6 million for the same period last year.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased $21.7 million while operating income also decreased $8.1 million for the three months ended June 30, 2023 compared with the same period in 2022.

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

Operating income decreased primarily as a result of lower trading volumes driven by market volatility in our natural gas storage.

Revenues in our agribusiness and energy services segment decreased $24.7 million while operating income increased $6.1 million for the three months ended September 30, 2023 compared with the same period in 2022.

The decrease in

revenues was primarily due to a decrease in ethanol and distillers grains trading volumes, partially offset by an increase in renewable corn oil trading volumes.

Operating income increased primarily as a result of higher renewable corn oil trading margins and higher trading margins in natural gas driven by market volatility.

Partnership Segment

Revenues generated by our partnership segment increased $0.9 million for the three months ended June 30, 2023 compared with the same period for 2022.

Storage and throughput services revenue and terminal services revenue were consistent with the prior year.

Revenues generated by our partnership segment increased $0.1 million for the three months ended September 30, 2023 compared with the same period for 2022.

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

Railcar transportation services revenue increased $0.7 million primarily due to an increase in transportation services fees charged as a result of our partnership upgrading its leased railcar fleet to comply with DOT 117 regulations.

Trucking and other revenue decreased $0.5 million compared to the prior year primarily due to the discontinuance of trucking operations that occurred during the period.

Operating income decreased $0.7 million for the three months ended June 30, 2023 compared with the same period in 2022 primarily due to transaction costs related to our proposal to acquire all outstanding shares of the partnership.

Terminal services revenue increased $0.3 million due to higher throughput at our partnership's terminals.

Trucking and other revenue decreased $1.0 million compared to the prior year primarily due to the discontinuance of trucking operations that occurred in May of 2023.

Operating income decreased $0.6 million for the three months ended September 30, 2023 compared with the same period in 2022 primarily due to the transaction costs related to the Merger Agreement, offset by gains realized on the sale of trucking assets.

Intersegment Eliminations

Intersegment eliminations of revenues decreased by $0.5 million for the three months ended June 30, 2023 compared with the same period in 2022 primarily due to decreased intersegment marketing and services fees within the agribusiness and energy services segment as a result of lower production volumes, offset by increased railcar fees paid to the partnership segment.

Intersegment eliminations of revenues was consistent for the three months ended September 30, 2023 compared with the same period in 2022.

Corporate Activities

Operating loss was impacted by an increase in corporate activities of $2.3 million for the three months ended June 30, 2023 compared to the same period in 2022, primarily due to increased personnel costs during the three months ended June 30, 2023.

We recorded income tax benefit of $1.0 million for the three months ended June 30, 2023, compared with income tax expense of $2.9 million for the same period in 2022.

The increase in the amount of tax benefit recorded for the three months ended June 30, 2023 was primarily due to a decrease in the valuation allowance recorded against certain deferred tax assets.

Six Months Ended June 30, 2023 Compared with the Six Months Ended June 30, 2022

Operating income was impacted by a decrease in corporate activities of $1.9 million for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to the gain on sale of assets, partially offset by increased personnel costs and transaction costs related to the Merger Agreement during the three months ended September 30, 2023.

We recorded income tax benefit of $7.8 million for the three months ended September 30, 2023, compared with income tax benefit of $1.9 million for the same period in 2022.

The increase in the amount of tax benefit recorded for the three months ended September 30, 2023 was primarily due to a decrease in the valuation allowance recorded against certain deferred tax assets.

Nine Months Ended September 30, 2023 Compared with the Nine Months Ended September 30, 2022

Consolidated Results

Consolidated revenues decreased $103.2 million for the six months ended June 30, 2023 compared with the same period in 2022 primarily due to lower volumes sold on ethanol and distiller grains, as well as lower weighted average selling prices on renewable corn oil, partially offset by higher volumes sold on renewable corn oil, as well as higher weighted average selling prices on ethanol and distillers grains within our ethanol production segment as described below.

Revenues were also lower within our agribusiness and energy services segment as a result of decreased trading volumes and margins.

Net loss increased $111.4 million for the six months ended June 30, 2023 compared with the same period last year primarily due to decreased volumes and margins in our ethanol production segment, lower trading margins in our agribusiness and energy services segment, increased depreciation expense, and the $27.7 million USDA COVID-19 relief grant received in the second quarter of 2022.

Adjusted EBITDA decreased $71.5 million for the six months ended June 30, 2023 compared with the same period last year primarily due to decreased volumes and margins in our ethanol production segment and lower margins in our agribusiness and energy services segment.

Interest expense increased $2.9 million for the six months ended June 30, 2023 compared with the same period in 2022 primarily due to higher interest rates on floating rate debt and reduced capitalized interest as certain projects have been completed.

Income tax expense was $2.4 million for the six months ended June 30, 2023, compared with income tax expense of $1.7 million for the same period in 2022 primarily due to an increase in the valuation allowance recorded against increases in certain deferred tax assets for both the six months ended June 30, 2023 and 2022.

Consolidated revenues decreased $165.5 million for the nine months ended September 30, 2023 compared with the same period in 2022 primarily due to lower volumes sold on ethanol and distiller grains, as well as lower weighted average selling prices on ethanol, distillers grains, and renewable corn oil, partially offset by higher volumes sold on renewable corn oil within our ethanol production segment as described below.

Revenues were also lower within our agribusiness and energy services segment as a result of decreased trading volumes.

Net loss increased $17.2 million for the nine months ended September 30, 2023 compared with the same period last year primarily due to decreased volumes and margins in our ethanol production segment, lower trading margins in our agribusiness and energy services segment, increased depreciation expense, and the $27.7 million USDA COVID-19 relief grant received in the second quarter of 2022.

Adjusted EBITDA increased $6.9 million for the nine months ended September 30, 2023 compared with the same period last year primarily due to higher margins in our ethanol production segment exclusive of the USDA COVID-19 relief grants, partially offset by lower trading margins in our agribusiness and energy services segment.

Interest expense increased $2.8 million for the nine months ended September 30, 2023 compared with the same period in 2022 primarily due to higher interest rates on floating rate debt and reduced capitalized interest as certain projects have been completed.

Income tax benefit was $5.4 million for the nine months ended September 30, 2023, compared with income tax benefit of $0.1 million for the same period in 2022 primarily due to a decrease in the valuation allowance recorded against certain deferred tax assets for the nine months ended September 30, 2023.

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

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

Six Months Ended

Nine Months Ended

September 30,

2023 2022 % Variance

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(thousands of bushels) 215,115 223,830 (3.9)%

Revenues in our ethanol production segment decreased $76.5 million for the six months ended June 30, 2023 compared with the same period in 2022, primarily due to lower ethanol and distillers grains volumes sold resulting in decreased revenues of $68.4 million and $16.6 million, respectively, as well as lower weighted average selling prices on renewable corn oil resulting in decreased revenues of $11.7 million, offset by higher renewable corn oil volumes sold resulting in increased revenues of $0.8 million, as well as higher weighted average selling prices on ethanol and distillers grains resulting in increased revenues of $4.3 million and $19.2 million, respectively.

Revenues in our ethanol production segment decreased $114.1 million for the nine months ended September 30, 2023 compared with the same period in 2022, primarily due to lower ethanol and distillers grains volumes sold resulting in decreased revenues of $58.5 million and $19.0 million, respectively, as well as lower weighted average selling prices on ethanol, distillers grains, and renewable corn oil resulting in decreased revenues of $13.9 million, $4.1 million, and $10.3 million, respectively, partially offset by higher renewable corn oil volumes sold resulting in increased revenues of $1.7 million.

Revenues also decreased as a result of hedging activities by $7.4 million.

Cost of goods sold in our ethanol production segment decreased $18.5 million for the six months ended June 30, 2023 compared with the same period last year primarily due to lower volumes processed resulting in decreased costs of $76.8 million and hedging activities of $54.3 million, offset by higher weighted average prices of $98.0 million, as well as higher utilities and freight costs of $19.9 million.

Operating loss increased $66.1 million for the six months ended June 30, 2023 compared with the same period in 2022 primarily due to decreased margins on ethanol production as outlined above.

Depreciation and amortization expense for the ethanol production segment was $45.4 million for the six months ended June 30, 2023, compared with $37.5 million for the same period last year, with the increase primarily due to Ultra-High Protein assets placed in service.

Cost of goods sold in our ethanol production segment decreased $134.0 million for the nine months ended September 30, 2023 compared with the same period last year primarily due to lower weighted average corn prices resulting in $135.3 million in decreased costs, lower corn volumes processed resulting in decreased corn costs of $63.1 million and hedging activities of $44.3 million, as well as lower chemical and other costs of $29.0 million, partially offset by higher ethanol volumes purchased of $124.3 million, as well as higher utilities and freight costs of $20.8 million.

Operating loss decreased $10.0 million for the nine months ended September 30, 2023 compared with the same period in 2022 primarily due to increased margins on ethanol production as outlined above.

Depreciation and amortization expense for the ethanol production segment was $67.2 million for the nine months ended September 30, 2023, compared with $59.1 million for the same period last year, with the increase primarily due to Ultra-High Protein assets placed in service.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased $28.1 million while operating income decreased $14.4 million for the six months ended June 30, 2023, compared with the same period in 2022.

The decrease in revenues was primarily due to a decrease in ethanol, distillers grains, and renewable corn oil trading margins.

Operating income decreased primarily as a result of lower trading margins driven by market volatility in our natural gas storage and distillers grains.

Revenues in our agribusiness and energy services segment decreased $52.7 million while operating income also decreased $8.3 million for the nine months ended September 30, 2023 compared with the same period in 2022.

The decrease in revenues was primarily due to a decrease in ethanol and distillers grains trading volumes, partially offset by an increase in renewable corn oil trading volumes.

Operating income decreased primarily as a result of lower distillers grains trading margins and lower trading margins in natural gas driven by market volatility.

Partnership Segment

Revenues generated by our partnership segment increased $2.5 million for the six months ended June 30, 2023 compared with the same period for 2022.

Storage and throughput services revenue and terminal services revenue were consistent with the prior year.

Revenues generated by our partnership segment increased $2.6 million for the nine months ended September 30, 2023 compared with the same period for 2022.

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

Railcar transportation services revenue increased $3.6 million primarily due to an increase in transportation service fees charged as a result of our partnership upgrading its leased railcar fleet to comply with DOT 117 regulations.

Trucking and other revenue decreased $0.5 million primarily due to the discontinuance of trucking operations that occurred during the period.

Operating income decreased $0.6 million for the six months ended June 30, 2023 compared with the same period in 2022 primarily due to transaction costs related to our proposal to acquire all outstanding shares of the partnership.

Terminal services revenue increased $0.4 million due to higher throughput at our partnership's terminals.

Trucking and other revenue decreased $1.4 million primarily due to the discontinuance of trucking operations that occurred in May of 2023.

income decreased $1.2 million for the nine months ended September 30, 2023 compared with the same period in 2022 primarily due to the transaction costs related to the Merger Agreement.

Intersegment Eliminations

Intersegment eliminations of revenues increased by $1.2 million for the six months ended June 30, 2023 compared with the same period in 2022 primarily due to increased railcar fees paid to the partnership segment, offset by decreased intersegment marketing and service fees within the agribusiness and energy services segment as a result of lower production volumes.

Intersegment eliminations of revenues increased by $1.2 million for the nine months ended September 30, 2023 compared with the same period in 2022 primarily due to increased railcar fees paid to the partnership segment, partially offset by decreased intersegment marketing and service fees within the agribusiness and energy services segment as a result of lower production volumes.

Corporate Activities

Operating loss was impacted by an increase in corporate activities of $2.5 million for the six months ended June 30, 2023 compared to the same period in 2022, primarily due to increased personnel and insurance costs during the six months ended June 30, 2023.

We recorded income tax expense of $2.4 million for the six months ended June 30, 2023 compared with income tax expense of $1.7 million for the same period in 2022 primarily due to an increase in the valuation allowance recorded against certain deferred tax assets for both the six months ended June 30, 2023 and 2022.

Operating loss was impacted by an increase in corporate activities of $0.6 million for the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to increased personnel costs and transaction costs related to the Merger Agreement, partially offset by the gain on the sale of assets during the nine months ended September 30, 2023.

We recorded income tax benefit of $5.4 million for the nine months ended September 30, 2023 compared with income tax benefit of $0.1 million for the same period in 2022 primarily due to a decrease in the valuation allowance recorded against certain deferred tax assets for the nine months ended September 30, 2023.

Liquidity and Capital Resources

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

On June 30, 2023, we had $312.9 million in cash and cash equivalents and $46.9 million in restricted cash.

On September 30, 2023, we had $326.7 million in cash and cash equivalents and $39.5 million in restricted cash.

We also had $200.0 million available under our committed revolving credit agreement, subject to restrictions or other lending conditions.

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

At June 30, 2023, our subsidiaries had approximately $119.4 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 $168.4 million for the six months ended June 30, 2023, compared with net cash used in operating activities of $106.6 million for the same period in 2022.

Net cash used in operating activities compared to the prior year were primarily affected by a higher net loss as well as increases in cash used related to higher payments of accounts payables, partially offset by higher derivative financial instruments as well as decreases in cash used related to accounts receivable and inventory when compared to the same period of the prior year.

Net cash used in investing activities was $57.6 million for the six months ended June 30, 2023 compared with net cash used in investing activities of $35.3 million for the same period in 2022.

Investing activities compared to the prior year were primarily affected by the proceeds from the sale of marketable securities during the same period in 2022, offset by increased cash provided by lower purchases of fixed assets compared to the same period in the prior year.

Net cash provided by financing activities was $85.5 million for the six months ended June 30, 2023 compared with net cash provided by financing activities of $160.3 million for the same period in 2022, primarily due to higher debt proceeds as a result of changes in our debt structure during the same period in 2022.

At September 30, 2023, our subsidiaries had approximately $121.9 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 $55.4 million for the nine months ended September 30, 2023, compared with net cash used in operating activities of $34.5 million for the same period in 2022.

Net cash used in operating activities compared to the prior year was primarily affected by a higher net loss as well as increases in cash used related to higher payments of accounts payables and higher accounts receivable, partially offset by higher derivative financial instruments as well as decreases in cash used related to inventory when compared to the same period of the prior year.

Net cash used in investing activities was $69.1 million for the nine months ended September 30, 2023 compared with net cash used in investing activities of $90.3 million for the same period in 2022.

Investing activities compared to the prior year were primarily affected by the proceeds from the sale of marketable securities during the same period in 2022, partially offset by increased cash provided by lower purchases of fixed assets and cash provided by the disposition of assets when compared to the same period in the prior year.

Net cash used in financing activities was $9.7 million for the nine months ended September 30, 2023 compared with net cash provided by financing activities of $51.2 million for the same period in 2022, primarily due to higher debt proceeds as a result of changes in our debt structure during the same period in 2022.

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 $48.9 million during the six months ended June 30, 2023, primarily for Ultra-High Protein expansion projects at Mount Vernon and Obion, the clean sugar expansion project at Shenandoah and for various other capital projects.

Capital spending for the remainder of 2023 is expected to be between $100.0 million and $150.0 million, which is subject to review prior to the initiation of any project.

The estimate includes additional expenditures to deploy FQT's MSC TM and FQT's CST TM technology, as well as expenditures for various other capital projects, which are expected to be financed with cash on hand and by cash provided by operating activities.

We incurred capital expenditures of approximately $78.2 million during the nine months ended September 30, 2023, primarily for Ultra-High Protein expansion projects at Mount Vernon and Obion, the clean sugar expansion project at Shenandoah and for various other capital projects.

Capital spending for the remainder of 2023 is expected to be between

$25.0 million and $45.0 million, which is subject to review prior to the initiation of any project.

The estimate includes additional expenditures to deploy FQT's MSC™ and FQT's CST™ technology, as well as expenditures for various other capital projects, which are expected to be financed with cash on hand and with cash provided by operating activities.

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

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

We did not repurchase any shares of common stock during the second quarter of 2023.

To date, we have repurchased 7.4 million shares of common stock for approximately $92.8 million under the program.

We did not repurchase any shares of common stock during the third quarter of 2023.

To date, we have repurchased approximately 7.4 million shares of common stock for approximately $92.8 million under the program.

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 the unaudited consolidated financial statements included herein 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, 2022.

We were in compliance with our debt covenants at June 30, 2023.

We were in compliance with our debt covenants at September 30, 2023.

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

At June 30, 2023, the outstanding principal balance on the 2.25% notes was $230.0 million.

At September 30, 2023, 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 were 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 was 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 initial conversion rate was 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.

During May 2021, we entered into a privately negotiated agreement with certain noteholders of our 4.00% notes.

Under this agreement, 3.6 million shares of our common stock were exchanged for $51.0 million in aggregate principal amount of the 4.00% notes.

Under this agreement, approximately 3.6 million shares of our common stock were exchanged for $51.0 million in aggregate principal amount of the 4.00% notes.

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

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These 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.

At June 30, 2023, 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 June 30, 2023, the outstanding principal balance was $73.9 million on the loan and the interest rate was 6.52%.

At September 30, 2023, 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 us, have a $75.0 million loan agreement, which matures on September 1, 2035.

At September 30, 2023, the outstanding principal balance was $73.5 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.

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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 June 30, 2023, the outstanding principal balance was $222.0 million on the facility and the interest rate was 8.48%.

At September 30, 2023, the outstanding principal balance was $150.0 million on the facility and the interest rate was 8.74%.

Green Plains Commodity Management has an uncommitted $40.0 million revolving credit facility to finance margins related to its hedging programs.

During the first quarter of 2023, this revolving credit facility was extended five years to mature on April 30, 2028.

During the first quarter of 2023, this revolving credit facility was extended five years to

mature on April 30, 2028.

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

At June 30, 2023, the outstanding principal balance was $25.1 million on the facility and the interest rate was 6.81%.

At September 30, 2023, the outstanding principal balance was $9.7 million on the facility and the interest rate was 7.06%.

Green Plains Grain has a short-term inventory financing agreement with a financial institution.

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This agreement is subject to negotiated variable interest rates.

The company had no outstanding short-term notes payable related to the inventory financing agreement as of June 30, 2023.

The company had no outstanding short-term notes payable related to the inventory financing agreement as of September 30, 2023.

Partnership Segment

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however, the partnership has the option to prepay $1.5 million per quarter.

The partnership repurchased $1.0 million of the outstanding notes during the six months ended June 30, 2022.

Prepayments totaling $1.5 million were made during the three and six months ended June 30, 2023.

The partnership repurchased $1.0 million of the outstanding notes during the nine months ended September 30, 2022.

Prepayments totaling $1.5 million and $3.0 million were made during the three and nine months ended September 30, 2023, respectively.

On April 19, 2023, the term loan was amended to change the underlying floating interest rate to a SOFR-based rate from a LIBOR-based rate.

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The term loan is secured by substantially all of the assets of the partnership.

As of June 30, 2023, the term loan had a balance of $57.5 million and an interest rate of 13.52%.

As of September 30, 2023, the term loan had a balance of $56.0 million and an interest rate of 13.67%.

Effects of Inflation

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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 June 30, 2023 totaled $100.3 million.

As of June 30, 2023, we had contracted future purchases of grain, ethanol, distillers grains, and natural gas valued at approximately $335.2 million and future commitments for storage and transportation valued at approximately $26.8 million.

Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of September 30, 2023 totaled $93.3 million.

As of September 30, 2023, we had contracted future purchases of grain, ethanol, distillers grains, and natural gas valued at approximately $205.8 million and future commitments for storage and transportation valued at approximately $27.2 million.

Refer to Note 13 – Commitments and Contingencies included in the notes to the unaudited consolidated financial statements included herein 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