EDGAR 10-K Filing

Company CIK: 1309402
Filing Year: 2022
Filename: 1309402_10-K_2022_0001309402-22-000008.json

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ITEM 1. BUSINESS
Item 1. Business.
References to “we,” “us,” “our,” “Green Plains,” or the “company” refer to Green Plains Inc. and its subsidiaries.
Overview
Green Plains is an Iowa corporation founded in June 2004 as a producer of low carbon fuels and has grown to be one of the leading corn processors in the world. We continue the transition from a commodity-processing business to a value-add agricultural technology company focusing on creating diverse, non-cyclical, higher margin products. In addition, we are currently undergoing a number of project initiatives to improve margins. Through our Total Transformation Plan discussed below to a value-add agricultural technology company, we believe we can further increase margin per gallon by producing additional value-added ingredients, such as Ultra-High Protein, while expanding corn oil yields.
In December 2020, we completed the purchase of a majority interest in FQT. The acquisition capitalizes on the core strengths of each company to develop and implement proven, value-added agriculture, food and industrial biotechnology systems and rapidly expand installation and production across Green Plains facilities, as well as offer these technologies to the biofuels industry.
Additionally, we have taken advantage of opportunities to divest certain assets in recent years to reallocate capital toward our current growth initiatives. We are focused on generating stable operating margins through our business segments and risk management strategy. We own and operate assets throughout the ethanol value chain: upstream, with grain handling and storage; through our ethanol production facilities; and downstream, with marketing and distribution services to mitigate commodity price volatility. Our other businesses leverage our supply chain, production platform and expertise.
We formed Green Plains Partners LP, a master limited partnership, to be our primary downstream storage and logistics provider since its assets are the principal method of storing and delivering the ethanol we produce. The partnership completed its initial public offering on July 1, 2015. As of December 31, 2021, we own a 48.9% limited partner interest, a 2.0% general partner interest and all of the partnership’s incentive distribution rights. The public owns the remaining 49.1% limited partner interest. The partnership is consolidated in our financial statements.
We group our business activities into the following three operating segments to manage performance:
Ethanol Production. Our ethanol production segment includes the production of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil at 11 ethanol plants in Illinois, Indiana, Iowa, Minnesota, Nebraska and Tennessee. At capacity, our facilities are capable of processing approximately 330 million bushels of corn per year and producing approximately 1.0 billion gallons of ethanol, 2.5 million tons of distillers grains and Ultra-High Protein and 290 million pounds of industrial grade corn oil, making us one of the largest ethanol producers in North America.
Agribusiness and Energy Services. Our agribusiness and energy services segment includes grain procurement, with approximately 27.0 million bushels of grain storage capacity, and our commodity marketing business, which markets, sells and distributes ethanol, distillers grains, Ultra-High Protein and corn oil produced at our ethanol plants. We also market ethanol for a third-party producer as well as buy and sell ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein, corn oil, grain, natural gas and other commodities in various markets.
Partnership. Our master limited partnership provides fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. The partnership’s assets include 29 ethanol storage facilities, four fuel terminal facilities and approximately 2,300 leased railcars.
Results for our previously reported food and ingredients segment are now included in the agribusiness and energy services segment. The food and ingredients segment had no activity in either 2021 or 2020 and minimal activity in 2019.
Risk Management and Hedging Activities
Our margins are highly dependent on commodity prices, particularly for ethanol, corn, distillers grains, Ultra-High Protein, corn oil and natural gas. Since market price fluctuations among these commodities are not always correlated, ethanol production has been and may continue to be unprofitable at times. We use a variety of risk management tools and hedging
strategies to monitor real-time operating price risk exposure at each of our operations to obtain favorable margins, when available.
We use forward contracts to sell a portion of our ethanol, distillers grains, Ultra-High Protein and corn oil production or buy some of the corn, natural gas, or ethanol we need to partially offset commodity price volatility. We also engage in other hedging transactions involving exchange-traded futures contracts for corn, natural gas, ethanol, soybean meal, soybean oil and other agricultural commodities. The financial impact of these activities depends on the price of the commodities involved and our ability to physically receive or deliver those commodities.
Hedging arrangements expose us to risk of financial loss when the counterparty defaults on its contract or, in the case of exchange-traded contracts, when the expected differential between the price of the underlying commodity and physical commodity changes. Hedging activities can result in losses when a position is purchased in a declining market or sold in a rising market. Hedging losses may be offset by a decreased cash price for corn and natural gas and an increased cash price for ethanol, distillers grains, Ultra-High Protein and corn oil. Depending on the circumstance, we vary the amount of hedging or other risk mitigation strategies we undertake and sometimes choose not to engage in hedging transactions at all.
Competitive Strengths
We are focused on managing commodity price risks, improving operational efficiencies and optimizing market opportunities to create an efficient platform with diversified income streams. Our competitive strengths include:
Disciplined Risk Management. Risk management is a core competency and we use a variety of risk management tools and hedging strategies in an effort to maintain a disciplined approach. Our internally developed operating margin management system allows us to monitor commodity price risk exposure at each of our operations and seeks to lock in favorable margins, when available, or if appropriate, temporarily reduce production levels during periods of compressed margins.
Technology Integration. Over our history, we have incorporated new technologies like corn oil extraction and Selective Milling Technology™ into our manufacturing processes that have enabled us to run more efficiently and improve our financial results. We are currently undergoing a number of project initiatives to improve margins. Through our Project 24 initiative, we have seen reductions in natural gas, electricity and water usage, decreasing our carbon footprint.
We are executing on our Total Transformation Plan by utilizing FQT’s MSC™ protein technology. As this technology is deployed across our platform, we expand our ability to produce value-added ingredients, such as Ultra-High Protein, while expanding corn oil yields.
The acquisition of a majority interest in FQT secures additional intellectual property rights, including those aimed at developing and implementing proven, value-added agriculture, food and industrial biotechnology systems, such as Clean Sugar Technology™ to produce low carbon dextrose for the biochemical and synthetic biology industry. In addition, we have partnered with Novozymes in an exclusive venture to produce higher purity protein and protein meals with nutritional and other feed benefits through non-mechanical methods. We also have an exclusive partnership with Hayashikane Sangyo of Japan, one of the oldest and most successful integrated aquafeed companies in the world, that broadens our access to innovative feed solutions. We continue to evaluate additional technological opportunities to expand our capabilities and product offerings in the coming years.
Proven Management Team. Our senior management team averages approximately 28 years of commodity risk management and related industry experience. We have specific expertise across all of our businesses, including plant operations and management, commodity markets and risk management, quality assurance, quality control, ingredient nutrition, marketing and innovation and ethanol marketing and distribution. Our management team’s level of operational and financial expertise is essential to successfully executing our business strategies.
Operational Excellence. Our facilities are staffed with experienced personnel who are encouraged to share operational knowledge and expertise. We continue to focus on making incremental operational improvements to enhance performance using real-time production data and systems to monitor our operations and optimize performance.
Business Strategy
We believe that the world will continue to increase its demand for protein for human consumption, driving the need to produce larger amounts of high protein feed for animals and aquaculture. With new technologies introduced in the ethanol industry, we believe that ethanol production facilities can increasingly become high-protein feed producers. We began
operations to produce Ultra-High Protein in 2020 and have begun to deploy this technology at additional locations in an effort to capture higher co-product returns. We are striving to deploy the FQT MSC™ Ultra-High Protein process technology across our platform to take advantage of the world’s growing demand for protein feed ingredients.
As part of our transformation to a value-add agricultural technology company, we completed our first FQT 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 under construction and expect to be operational by the middle to last half of 2022, and installation at our remaining biorefineries is expected over the course of the next several years. Through our value-added ingredients initiative, we expect to produce more Ultra-High Protein, a feed ingredient with protein concentrations of 50% or greater, further increase production of corn oil and produce other higher value products, such as post-MSC distillers grains.
We have also upgraded our York facility to include USP grade alcohol capabilities. We began pilot scale batch operations at the CST production facility at our York Innovation Center in the second quarter of 2021, which may allow for the production of both food and industrial grade dextrose to target applications in food production, renewable chemicals and synthetic biology. We anticipate modifying one or more biorefineries to include CST production capabilities to meet anticipated future customer demands.
We continue to believe ethanol could become an increasingly larger portion of the global fuel supply driven by heightened environmental concerns and energy independence goals, supported by government policies and regulations. In the 1990’s, federal law required the use of oxygenates in reformulated gasoline to reduce vehicle emissions in cities with unhealthy levels of air pollution. Today, ethanol is the primary oxygenate used by the U.S. refining industry to meet various federal and state air emission standards. The high octane value of ethanol has also made it the primary additive used by refiners to increase octane value, which improves engine performance. Accordingly, ethanol has become a valuable blend component that comprises approximately 10% of the domestic gasoline supply with the potential to grow with higher blends and increased gasoline demand. Ethanol usage is further supported by federal government mandates under the RFS, which assigns individual refiners, blenders and importers the volume of renewable fuels they are obligated to use based on their percentage of total fuel sales. Advances in domestic corn yields have helped the U.S. ethanol industry become the lowest-cost producer of ethanol, surpassing Brazil, creating demand for U.S. ethanol worldwide.
In light of the ethanol industry’s competitive environment, we are focused on continued improvement of our low-cost ethanol production platform, reducing costs, and maximizing the value achievable from a kernel of corn by deploying new technology to diversify our product mix. Owning grain storage at or near our ethanol plants allows us to develop relationships with local producers and originate corn more effectively at a lower average cost. We purchase approximately 60% of our corn volume directly from farmers and have approximately 28 production days of storage capacity at or near our ethanol plants. We use our performance data to develop strategies that can be applied across our platform and embrace technological advances to improve operational efficiencies and yields, such as Selective Milling Technology™ and Enogen® corn enzyme technology, to lower our processing cost per gallon and increase production volumes. During 2021, we executed on our Project 24 initiative at our non-ICM plants, except our York and Atkinson plants, to reduce energy consumption and increase operational reliability at these plants.
We believe there is untapped value across our businesses and we intend to further develop and strengthen our business by identifying projects that maximize our production capabilities and lower existing costs at our production facilities. We also seek to leverage our core competencies in adjacent businesses such as aquafeeds, high protein animal feed and other commodity processing operations that maximize our operational and risk management expertise.
In August 2021, we announced a turnkey solution for the installation of FQT’s MSC™ protein technology for third party plants and our inaugural project partner, Tharaldson Ethanol, a 175 million-gallon facility in North Dakota.
In February and April 2021, as part of our carbon reduction strategy, we have committed our Nebraska, Iowa and Minnesota plants to the Summit Carbon Solutions Midwest Carbon Express project to capture and store carbon dioxide produced through the fermentation process. 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 anticipated to be completed in 2024.
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Recent Developments
The following is a summary of our significant recent developments. Additional information about these items can be found elsewhere in this report or in previous reports filed with the SEC.
BlackRock Note Facility
On February 9, 2021, Green Plains SPE LLC, our wholly owned subsidiary and a special purpose entity, completed a $125.0 million, 5-year mezzanine note facility with funds and accounts managed by BlackRock. The proceeds will be used initially to support the construction and deployment of FQT’s MSC™ Ultra-High Protein technology and production at the Obion, Tennessee and Mount Vernon, Indiana facilities. See further discussions in Note 12 -Debt of the financial statements.
Investment in FQT
On February 9, 2021, we announced BlackRock has invested alongside Ospraie Management and Green Plains in FQT. As part of the transaction, BlackRock acquired 2,000,000 warrants for Green Plains stock (each warrant equal to one share of stock) with a strike price of $22.00 per share, which expire on April 28, 2026. See further discussions in Note 15 -Stockholders’ Equity of the financial statements.
Carbon Sequestration Offtake Agreement
On February 18, 2021, we announced that three of our biorefineries entered into a long term carbon offtake agreement with Summit Carbon Solutions (SCS), a subsidiary of Summit Agricultural Group. The SCS carbon capture and sequestration project will create the infrastructure to transport carbon dioxide to North Dakota for deposit into geologic storage. Capturing and storing carbon is widely viewed as a key technology for reducing greenhouse gas emissions and combatting climate change. The biorefineries attached to the pipeline can dramatically reduce the carbon footprint of their biofuels. In April 2021, we announced that an additional five of our biorefineries entered into long-term carbon offtake agreements with SCS bringing our total commitment to 658 million gallons of annual capacity, or nearly 70% of our platform.
Public Offering of Common Stock
On March 1, 2021, we completed the public offering of 8,751,500 shares of common stock, par value $0.001 per share, of Green Plains at a public offering price of $23.00 per share. This included the purchase of 1,141,500 shares of common stock by the underwriters pursuant to the full exercise of their overallotment option. This common stock offering resulted in net proceeds to us of $191.1 million, after deducting underwriting discounts and commissions and our offering expenses. See further discussions in Note 15 -Stockholders’ Equity of the financial statements.
On August 9, 2021, we completed the public offering of 5,462,500 shares of common stock, par value $0.001 per share, of Green Plains at a public offering price of $32.00 per share. This included the purchase of 712,500 shares of common stock by the underwriters pursuant to the full exercise of their overallotment option. This common stock offering resulted in net proceeds to us of $164.9 million, after deducting underwriting discounts and commissions and our offering expenses. See further discussions in Note 15 -Stockholders’ Equity of the financial statements.
The company expects to use the net proceeds from the offerings for growth investments to further accelerate our downstream development opportunities.
Public Offering of Convertible Senior Notes
On March 1, 2021, we completed the public offering of $230.0 million aggregate principal amount of our 2.25% convertible notes due 2027. This included the purchase of $30.0 million notes by the underwriters pursuant to the full exercise of their overallotment option. This convertible notes offering resulted in net proceeds to us of approximately $222.5 million, after deducting the underwriting discounts and commissions and our offering expenses.
We used approximately $156.5 million of the net proceeds of the convertible notes offering to repurchase approximately $135.7 million aggregate principal amount of our 4.125% convertible notes due 2022, in privately negotiated transactions concurrently with the convertible notes offering. We intend to use the balance of the net proceeds from the convertible notes offering to repay the 2022 notes remaining outstanding at their maturity date and for general corporate purposes. See further discussions in Note 12 -Debt of the financial statements.
Impact of COVID-19
The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty, and turmoil across numerous industries. The situation surrounding COVID-19 continues to evolve and the ultimate duration and impact of the outbreak, including resurgences and variants of the virus, remains highly uncertain and subject to change.
We continue to closely monitor the impact of COVID-19 on all aspects of our business, including how it will impact our employees, customers, suppliers, distribution channels and business partners. The pandemic resulted in business disruption and economic uncertainty which impacted our operations, supply chain and distribution channels. While the impacts of COVID-19 have been assessed, the long-term magnitude and duration of the disruption, including supply chain disruption remain uncertain. For the year ended December 31, 2021, while we did experience some supply chain issues, there has been no direct material adverse effects due to COVID-19 on our ability to maintain operations, including our financial reporting systems, our internal controls over financial reporting or our disclosure controls and procedures. We are unable to predict the full impact that COVID-19, or any resurgences and variants of the virus, will have on our future financial position and operating results due to numerous uncertainties.
For further information regarding the impact of COVID-19 on the company, please see Item 1A - Risk Factors, in this report, which is incorporated herein by reference.
Operating Segments
Ethanol Production Segment
Industry Overview. Ethanol, also known as ethyl alcohol or grain alcohol, is a colorless liquid produced by fermenting carbohydrates found in a number of different types of grains, such as corn, wheat and sorghum, and other cellulosic matter found in plants. Most of the ethanol produced in the United States is made from corn, which can be handled efficiently and is in greater supply than other grains. Corn contains large quantities of carbohydrates that convert into glucose more easily than most other kinds of biomass. According to the USDA, on average, a 56 pound bushel of corn produces approximately 2.9 gallons of ethanol, 15 pounds of distillers grains and 0.7 pounds of corn oil. Outside of the United States, sugarcane is the primary feedstock used to produce ethanol.
Ethanol is a significant component of the biofuels industry, which includes all transportation fuels derived from renewable biological materials. Biofuels are an excellent oxygenate and source of octane. When added to petroleum-based transportation fuels, oxygenates reduce vehicle emissions. Ethanol is the most economical oxygenate and source of octane available on the market and its production costs are competitive with gasoline.
Ethanol Plants. We operate 11 dry mill ethanol production plants, located in six states, that produce ethanol, including industrial-grade alcohol, distillers grains, and corn oil.
Plant Location
Initial Operation or
‎Acquisition Date
Technology
Plant Production
‎Capacity (mmgy)
Atkinson, Nebraska
June 2013
Delta-T
Central City, Nebraska
July 2009
ICM
Fairmont, Minnesota
Nov. 2013
Delta-T / ICM
Madison, Illinois
Sept. 2016
Vogelbusch
Mount Vernon, Indiana
Sept. 2016
Vogelbusch
Obion, Tennessee (1)
Nov. 2008
ICM
Otter Tail, Minnesota
Mar. 2011
Delta-T / ICM
Shenandoah, Iowa (1)(2)
Aug. 2007
ICM
Superior, Iowa (1)
July 2008
Delta-T / ICM
Wood River, Nebraska (2)
Nov. 2013
Delta-T / ICM
York, Nebraska
Sept. 2016
Vogelbusch
Total
(1)We constructed these three plants; all other ethanol plants were acquired.
(2)Also produce Ultra-High Protein.
Our business is directly affected by the supply and demand for ethanol and other fuels in the markets served by our assets. Miles driven typically increase during the spring and summer months related to vacation travel, followed closely by the fall season due to holiday travel.
Industrial-Grade Alcohol. Industrial-grade alcohol is produced by further distillation processing of the 200-proof alcohol. Further distillation removes impurities from fuel-grade ethanol to allow for production of industrial-grade alcohol which can be used as an ingredient for sanitation products. Industrial-grade alcohol is currently produced at our Wood River and York facilities, with our Wood River biorefinery producing food chemical codex (FCC) grade industrial alcohol with a portion of its capacity and our York biorefinery capable of producing USP.
Corn Feedstock and Ethanol Production. Our plants use corn as feedstock in a dry mill ethanol production process. Each of our plants requires approximately 17 million to 42 million bushels of corn annually, depending on its production capacity. The price and availability of corn are subject to significant fluctuations driven by a number of factors that affect commodity prices in general, including crop conditions, weather, governmental programs, freight costs and global demand. Ethanol producers are generally unable to pass increased corn costs to customers.
Our corn supply is obtained primarily from local markets. We use cash and forward purchase contracts with grain producers and elevators to buy corn. We maintain direct relationships with local farmers, grain elevators and cooperatives, which serve as our primary sources of grain feedstock, at 9 of our ethanol plants. This allows us to purchase much of the corn we need directly from farmers throughout the year. At two of our ethanol plants, we contract with a third-party grain originator to supply the corn necessary for ethanol production. These contracts terminate in November 2023. Each of our plants is also situated on rail lines or has other logistical solutions to access corn supplies from other regions of the country should local supplies become insufficient.
Corn is received at the plant by truck or rail then weighed and unloaded into a receiving building. Grain storage facilities are used to inventory grain that is passed through a scalper to remove rocks and debris prior to processing. The corn is then transported to a hammer mill where it is ground into flour and conveyed into a slurry tank for enzymatic processing. Water, heat and enzymes are added to convert the complex starch molecules into simpler carbohydrates. The slurry is heated to reduce the potential of microbial contamination and pumped into a liquefaction tank where additional enzymes are added. Next, the grain slurry is pumped into fermenters, where yeast, enzymes, and nutrients are added and the fermentation process is started. A beer column, within the distillation system, separates the alcohol from the spent grain mash. The alcohol is dehydrated to 200-proof alcohol and either pumped into a holding tank and blended with approximately 2% denaturant as it is pumped into finished product storage tanks, or marketed as industrial or undenatured ethanol.
Distillers Grains. The spent grain mash is pumped from the beer column into a decanter-type centrifuge for dewatering. The water, or thin stillage, is pumped from the centrifuge into an evaporator, where it is concentrated into a thick syrup. The solids, or wet cake, that exit the centrifuge are conveyed to the dryer system and dried at varying temperatures to produce distillers grains. Syrup is reapplied to the wet cake prior to drying to provide additional nutrients. Distillers grains, the principal co-product of the ethanol production process, are used as mid-protein, high-energy animal feed and marketed to the dairy, beef, swine and poultry industries.
We can produce three forms of distillers grains, depending on the number of times the solids are passed through the dryer system:
wet distillers grains, which contain approximately 65% to 70% moisture, have a shelf life of approximately three days and is therefore sold to dairies or feedlots within the immediate vicinity;
modified wet distillers grains, which is dried further to approximately 50% to 55% moisture, have a shelf life of approximately three weeks and are marketed to regional dairies and feedlots; and
dried distillers grains, which have been dried more extensively to approximately 10% to 12% moisture, have an almost indefinite shelf life and may be stored, sold and shipped to any market.
Corn Oil. Corn oil systems extract non-edible corn oil from the thin stillage evaporation process immediately before the production of distillers grains. Corn oil is produced by processing the syrup through a decanter-style, or disk-stack, centrifuge. The centrifuges separate the relatively light corn oil from the heavier components of the syrup. We extract approximately 0.8 pounds of corn oil per bushel of corn used to produce ethanol. For our locations that have deployed FQT’s MSC™ technology, we have achieved corn oil yields in excess of 1.2 pounds of corn oil per bushel and anticipate similar yields as we deploy FQT’s MSC™ Ultra-High Protein process technology across our platform. Industrial uses for corn oil include feedstock for renewable diesel, biodiesel and livestock feed additives. The syrup is blended into wet, modified wet or dried distillers grains.
Ultra-High Protein. Ultra-High Protein is fermented corn protein produced by further processing of the spent grain mash from the beer column. The spent grain is processed by the FQT MSCTM system, which contains a series of screening equipment to remove fiber from the spent grain which is sent to the distillers grain dryer. The remaining product is washed
and clarified into a wet protein stream which is dried in a ring dryer to produce Ultra-High Protein meal. The product typically has protein concentration of 50% or greater and yields of approximately 3.5 pounds per bushel have been achieved.
Natural Gas. Depending on production parameters, our ethanol plants use approximately 20,000 to 45,000 BTUs of natural gas per gallon of production. We have service agreements to acquire the natural gas we need and transport the gas through pipelines to our plants.
Electricity. Our plants require between 0.5 and 1.1 kilowatt hours of electricity per gallon of production. Local utilities supply the necessary electricity to all of our ethanol plants.
Water. While some of our plants satisfy a majority of their water requirements from wells located on their respective properties, each plant also obtains drinkable water from local municipal water sources. Each facility either uses city water or operates a filtration system to purify the well water that is used for its operations. Local municipalities supply all of the necessary water for our plants that do not have onsite wells. Most of the water used in an ethanol plant is recycled in the production process.
Agribusiness and Energy Services Segment
Our agribusiness and energy services segment includes grain storage at our ethanol plants of approximately 25.8 million bushels, and one grain elevator with grain storage capacity of approximately 1.2 million bushels, detailed in the following table:
Facility Location
On-Site Grain Storage Capacity
‎(thousands of bushels)
Grain Elevators
Archer, Nebraska
1,246
Ethanol Plants
Atkinson, Nebraska
5,109
Central City, Nebraska
1,400
Fairmont, Minnesota
1,611
Madison, Illinois
1,015
Mount Vernon, Indiana
1,034
Obion, Tennessee
8,168
Otter Tail, Minnesota
Shenandoah, Iowa
Superior, Iowa
2,230
Wood River, Nebraska
3,293
York, Nebraska
Total
26,967
We buy bulk grain, primarily corn and soybeans, from area producers, and provide grain drying and storage services to those producers. The grain is used as feedstock for our ethanol plants or sold to grain processing companies and area livestock producers. Bulk grain commodities are traded on commodity exchanges. Inventory values are affected by changes in these markets and spreads. To mitigate risks related to market fluctuations from purchase and sale commitments of grain, as well as grain held in inventory, we enter into exchange-traded futures and options contracts that function as economic and designated accounting hedges at times.
Seasonality is present within our agribusiness operations. The fall harvest period typically results in higher handling margins and stronger financial results during the fourth quarter of each year.
Through Green Plains Trade, we market the ethanol we and a third party produce to local, regional, national and international customers. We also purchase ethanol from independent producers for pricing arbitrage. We sell to various markets under sales agreements with integrated energy companies; retailers, traders and resellers in the United States and buyers for export to Brazil, Canada, India, Europe and other international markets. Under these agreements, ethanol is priced under both fixed and indexed pricing arrangements.
Also through Green Plains Trade, we market distillers grains to local, national and international markets. The bulk of our demand is delivered to geographic regions that do not have significant local corn or distillers grains production. We sell to international markets indirectly through exporters. Access to diversified markets allows us to sell product to customers offering the highest net price.
Our corn oil is sold primarily to renewable diesel and biodiesel plants and, to a lesser extent, feedlot and poultry markets. We transport our corn oil by truck to locations in a close proximity to our ethanol plants primarily in the southeastern and midwestern regions of the United States. We also transport corn oil by rail and barges to national markets as well as to exporters for shipment on vessels to international markets.
Through Green Plains Trade, we provide marketing services of natural gas to our ethanol plants and to other third parties including the procurement of both the pipeline capacity and natural gas. We also enhance the value by aggregating volumes at various storage facilities which can be sold to either the plants or various intermediary markets and end markets.
Our railcar fleet for the agribusiness and energy services segment consists of approximately 450 leased hopper cars to transport distillers grains, 70 leased hopper cars to transport corn and approximately 100 leased tank cars to transport corn oil. The initial terms of the lease contracts are for periods up to eight years and the weighted average remaining lease terms on these cars was approximately 3 years as of December 31, 2021.
Partnership Segment
Our partnership segment provides fuel storage and transportation services through (i) 29 ethanol storage facilities located at or near our 11 operational ethanol production plants and one near the prior Hopewell, VA non-operational ethanol production plant, (ii) four fuel terminal facilities located near major rail lines, and (iii) a leased railcar fleet and other transportation assets.
Transportation and Delivery. Most of our ethanol plants are situated near major highways or rail lines to ensure efficient movement. We are able to move product from our ethanol plants to bulk terminals via truck, railcar or barge. We also manage the logistics and transportation requirements of our customers to improve our fleet’s efficiency and reduce operating costs.
Deliveries within 150 miles of our plants and the partnership’s fuel terminal facilities are generally transported by truck. Deliveries to distant markets are shipped using major U.S. rail carriers that can switch cars to other major railroads, allowing our plants to ship product throughout the United States.
To meet the challenge of marketing ethanol and distillers grains to diverse market segments, several of our plants are capable of simultaneously handling more than 150 railcars. Some of our locations have large loop tracks with unit train loading capabilities for both ethanol and dried distillers grains and spurs to connect the loop to the mainline or allow the movement and storage of railcars on site.
As of December 31, 2021, the partnership’s leased railcar fleet consisted of approximately 2,300 railcars with an aggregate capacity of 69.0 mmg. We expect the partnership’s railcar volumetric capacity to fluctuate over the normal course of business as the existing railcar leases expire and we enter into or acquire new railcar leases.
To optimize the partnership’s railcar assets, we transport products other than ethanol depending on market opportunities and have used a portion of our railcar fleet to transport crude oil for third parties and to lease railcars to other users.
Terminal and Distribution Services. Ethanol is transported from the partnership’s terminals to third-party terminal racks where it is blended with gasoline and transferred to the loading rack for delivery by truck to retail gas stations. The partnership owns and operates fuel holding tanks and terminals, and provides terminal services and logistics solutions to markets that do not have efficient access to renewable fuels. The partnership owns and operates fuel terminals at four locations in four states with combined storage capacity of approximately 6.9 mmg and throughput capacity of approximately 564 mmgy. We also have 29 ethanol storage facilities located at or near our 11 operational ethanol production plants and one non-operational ethanol production plant with a combined storage capacity of approximately 25.8 mmg to support current ethanol production capacity of approximately 1.0 bgy.
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Facility Location
Storage Capacity
‎(thousands of gallons)
Fuel Terminals
Birmingham, Alabama - Unit Train Terminal
6,542
Other Fuel Terminal Facilities (1)
Ethanol Plants
Atkinson, Nebraska (2)
2,074
Central City, Nebraska
2,250
Fairmont, Minnesota
3,124
Hopewell, Virginia (3)
Madison, Illinois
2,855
Mount Vernon, Indiana
2,855
Obion, Tennessee
3,000
Otter Tail, Minnesota
2,000
Shenandoah, Iowa
1,524
Superior, Iowa
1,238
Wood River, Nebraska
3,124
York, Nebraska
1,100
Total
32,777
(1)Represents two fuel terminals located in Mississippi and Oklahoma.
(2)The ethanol storage facilities are located approximately 16 miles from the ethanol plant.
(3)Production at the Hopewell, Virginia facility ceased during the fourth quarter of 2018, however, the storage and terminal assets remain in operating condition.
For more information about our segments, refer to Item 7. - Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.
Our Competition
Domestic Ethanol Competitors
We are one of the largest consolidated owners of ethanol plants in the United States. We compete with other domestic ethanol producers in a highly fragmented industry. Our competitors also include plants owned by farmers, cooperatives, oil refiners and retail fuel operators. These competitors may continue to operate their plants even when market conditions are not favorable due to the benefits realized from their other operations.
As of December 31, 2021, the top four producers accounted for approximately 41% of the domestic production capacity with production capacities ranging from 958 mmgy to 2,867 mmgy. Demand for corn from ethanol plants and other corn consumers exists in all areas and regions in which we operate. According to the Renewable Fuels Association, there were 120 operational plants in the states where we have production facilities, including Illinois, Indiana, Iowa, Minnesota, Nebraska, and Tennessee, as of December 31, 2021. The largest concentration of operational plants is located in Iowa, Nebraska and Illinois, where 50% of all operational production capacity is located.
Foreign Ethanol Competitors
We also compete globally with production from other countries. Brazil is the second largest ethanol producer in the world after the United States. Brazil primarily produces ethanol made from sugarcane, which may be less expensive to produce than ethanol made from corn depending on feedstock prices. Under the RFS, certain parties are obligated to meet an advanced biofuel standard. In recent years, sugarcane ethanol imported from Brazil has been one of the most economical means for obligated parties to meet this standard. Any significant additional ethanol production capacity could create excess supply in world markets, resulting in lower ethanol prices throughout the world, including the United States.
Other Competition
Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development. Ethanol production technologies also continue to evolve. We expect changes to occur primarily in the area of cellulosic ethanol, which is made from biomass such as switch grass or fast-growing poplar trees. Since all of our plants are designed as single-feedstock facilities, adapting our plants for a different feedstock or process system would require additional capital investments and retooling which could be cost prohibitive.
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Regulatory Matters
Government Ethanol Programs and Policies
We are sensitive to government programs and policies that affect the supply and demand for ethanol and other fuels, which in turn may impact the volume of ethanol and other fuels we handle. Over the 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. We believe it is unlikely that any of these bills will become law in the current Congress. In addition, the manner in which the EPA administers the RFS and related regulations can have a significant impact on the actual amount of ethanol blended into the domestic fuel supply.
Federal mandates and state-level clean fuel programs supporting the use of renewable fuels are a significant driver of ethanol demand in the U.S. Ethanol policies are influenced by concerns for the environment, diversifying the fuel supply, 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 U.S. market share. In addition, expansion of clean fuel programs in other states, or a national low carbon fuel standard could increase the demand for ethanol, depending on how it is structured.
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 15.0 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.
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. While conventional ethanol maintained 15 billion gallons, 2019 was the second consecutive year that the total RVO was more than 20% below the statutory volumes levels. Thus, the EPA was expected to initiate a reset rulemaking, and modify statutory volumes through 2022, and do so based on the same factors they are to use in setting the RVOs post 2022. These factors include environmental impact, domestic energy security, expected production, infrastructure impact, consumer costs, job creation, price of agricultural commodities, food prices, and rural economic development. However, in late 2019, the EPA announced it would not be moving forward with a reset rulemaking in 2020. It is unclear when or if the current EPA will propose a reset rulemaking, though they have stated an intention to propose a post 2022 set rulemaking as required by law.
Under the RFS, RINs and SREs are important tools impacting supply and demand. The EPA assigns individual refiners, blenders, and importers the volume of renewable fuels they are obligated to use in each annual RVO based on their percentage of total domestic transportation fuel sales. Obligated parties use RINs to show compliance with the RFS mandated volumes. Ethanol producers assign RINs to renewable fuels and the RINs are detached when the renewable fuel is blended with transportation fuel domestically. Market participants can trade the detached RINs in the open market. The market price of detached RINs can affect the price of ethanol in certain markets and can influence purchasing decisions by obligated parties. As it relates to SREs, a small refinery is defined as one that processes fewer than 75,000 barrels of petroleum per day. Small refineries can petition the EPA for a SRE which, if approved, waives their portion of the annual RVO requirements. The EPA, through consultation with the DOE and the USDA, can grant them a full or partial waiver, or deny it outright within 90 days of submittal. The EPA granted significantly more of these waivers for 2016, 2017 and 2018 than they had in the past, totaling 790 mmg of waived requirements for the 2016 compliance year, 1.82 billion gallons for 2017 and 1.43 billion gallons for 2018. In doing so, the EPA effectively reduced the RFS mandated volumes for those compliance years by those amounts respectively, and as a result, RIN values declined significantly. In the waning days of the Trump administration, the EPA approved three additional SREs, reversing one denial from 2018 and granting two from 2019. A total of 88 SREs were granted under the Trump Administration, totaling 4.3 billion gallons of potential blending demand erased. The 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. There are multiple legal challenges to how the EPA has handled SREs and RFS rulemakings.
The One-Pound Waiver that was extended in May 2019 to allow E15 to be sold year-round to all vehicles model year 2001 and newer was challenged in an action filed in Federal District Court for the D.C. Circuit. 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. The Supreme Court declined to hear a challenge to this ruling. As of this filing E15 is sold year-round in approximately 30 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. This includes funding for infrastructure, labeling changes and allowing E15 to be sold through E10 infrastructure. The USDA rolled out the Higher Blend Infrastructure Incentive Program in the summer of 2020, providing competitive grants to fuel terminals and retailers for installing equipment for dispensing higher blends of ethanol and biodiesel. In December 2021, the USDA announced it 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.
To respond to the COVID-19 health crisis and attempt to offset the subsequent economic damage, Congress passed multiple relief measures, most notably the CARES Act in March 2020, which created and funded multiple programs that have impacted our industry. The USDA was given additional resources for the Commodity Credit Corporation (CCC) and they are using those funds to provide direct payments to farmers, including corn farmers from whom we purchase most of our feedstock for ethanol production. Similar to the trade aid payments made by the USDA over the past two years, this cash injection for farmers could cause them to delay marketing decisions and increase the price we have to pay to purchase corn. The CARES Act also allowed for certain net operating loss carrybacks, which has allowed us to receive certain tax refunds. In December 2020, Congress passed and then President Trump signed into law an annual spending package coupled with another COVID relief bill which included additional funds for the Secretary of Agriculture to distribute to those impacted by the pandemic. The language of the bill specifically includes biofuels producers as eligible for some of this aid, and in March of 2021, the USDA indicated that biofuels would be able to apply for a portion of these funds in a forthcoming rulemaking. On June 15, 2021, the USDA indicated that $700 million would be made available to biofuels producers, and in December 2021, they released details for the program, specifying that domestic biofuel producers must apply for market losses due to COVID by February 11, 2022, with payments announced by March 12, 2022. It is not possible to predict the amount we would receive, if any, from this program.
The CARES Act provided a tax exclusion on the shipment of undenatured ethanol for use in manufacturing hand sanitizer, a key ingredient of which is undenatured ethanol of specific grades. The FDA announced that it is ending, effective December 31, 2021, the expanded guidance, which allowed for more denaturants to be used in ethanol intended for hand sanitizer production, and expanded the grades of ethanol for the duration of the public health crisis.
See further discussion in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Environmental and Other Regulation
Our ethanol production, agribusiness and energy services, and partnership segment activities are subject to various and extensive environmental and other regulations. We obtain and maintain various environmental permits to operate our plants and other facilities. Ethanol production involves the emission of various airborne pollutants, including particulate, carbon dioxide, oxides of nitrogen, hazardous air pollutants and volatile organic compounds. In 2007, the U.S. Supreme Court classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon dioxide in vehicle emissions, which the EPA later addressed in the RFS. While some of our plants operate as grandfathered at their current authorized capacity under the RFS mandate, expansion above these capacities at grandfathered plants will require a 20% reduction in greenhouse gas emissions from a 2005 baseline measurement.
In addition, various states and countries are adopting regulatory schemes similar to what California has adopted. Specifically, CARB adopted LCFS requiring a 10% reduction in average carbon intensity of gasoline and diesel transportation fuels in California from 2010 to 2020.
We employ maintenance and operations personnel at each of our plants. In addition to the attention we place on the health and safety of our employees, the operations of our facilities are regulated by the Occupational Safety and Health Administration.
See further discussion in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Exclusive Partnerships and Joint Ventures
In 2021, we formed a 50/50 JV with Tharaldson Ethanol, which will own the FQT MSC™ Ultra-High Protein technology assets added adjacent to the Tharaldson Ethanol plant in North Dakota to produce Ultra-High Protein.
In 2020, we acquired a majority interest in FQT. The acquisition capitalizes on the core strengths of each company to develop and implement proven, value-added agriculture, food and industrial biotechnology systems and rapidly expand
installation and production of FQT’s MSC™ Ultra-High Protein technology across our facilities, as well as offer these technologies to partnering biofuel facilities.
In 2020, we formed an exclusive partnership with Hayashikane Sangyo of Japan, one of the oldest and most successful integrated aquafeed companies in the world. The companies have come together to deliver innovative solutions for fast-growing global aquaculture markets using technology developed and successfully deployed in Japanese production. These technologies complement our FQT MSC™ Ultra-High Protein production technology.
In 2019, we joined with Novozymes in an exclusive venture to produce higher purity protein and protein meals with nutritional and other feed benefits through non-mechanical methods.
We are the majority owner of the BioProcess Algae joint venture, which was formed in 2008. The joint venture is focused on growing algae in commercially viable quantities using feedstocks that are created as part of our ethanol production process. We are currently focused on animal nutrition, using proprietary technology to customize specific products, based on proven benefits, for relevant markets.
Human Capital Resources
The attraction, retention and development of employees is critical to our success. We accomplish this, in part, by our competitive compensation practices, training initiatives, and growth opportunities within the company. On December 31, 2021, we had 859 full-time, part-time, temporary and seasonal employees, including 136 employees at our corporate office in Omaha, Nebraska.
Workforce Health and Safety
We take workplace safety very seriously and our robust safety program means that we are constantly evaluating our safety protocols in an effort to keep our facilities safe for our workers.
Throughout the COVID-19 pandemic, we have remained focused on protecting the health and safety of our team members while meeting the needs of our customers. We were an early adopter of enhanced safety measures and practices across our facilities to protect employee health and safety and ensure a reliable supply of products to our customers. This included the purchasing of masks, temperature check machines and hand sanitizer at all locations. In 2020, we donated industrial-grade alcohol, which can be used as an ingredient for sanitation products, to both the State of Nebraska and the State of Iowa, as well as the University of Nebraska.
We monitor and track the impact of the pandemic on our teammates and within our operations, and proactively modify or adopt new practices to promote their health and safety.
Compensation and Benefits
As part of our compensation philosophy, we believe that we must offer and maintain market competitive compensation and benefit programs for our employees in order to attract and retain superior talent. In addition to competitive base wages, additional programs include the 2019 Equity Incentive Plan, a company matched 401(k) Plan, healthcare and insurance benefits, flexible spending accounts, paid time off, family leave, and employee assistance programs.
Diversity and Inclusion
We are committed to our continued efforts to increase diversity and foster an inclusive work environment that supports the workforce and the communities we serve. We recruit the best qualified employees regardless of gender, ethnicity or other protected traits and it is our policy to fully comply with all laws applicable to discrimination in the workplace.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available on our website at www.gpreinc.com shortly after we file or furnish the information with the SEC. You can also find the charters of our audit, compensation and nominating committees, as well as our code of ethics in the corporate governance section of our website. The information found on our website is not part of this or any other report we file with or furnish to the SEC. For more information on our partnership, please visit www.greenplainspartners.com. Alternatively, investors may visit the SEC website at www.sec.gov to access our reports, proxy and information statements filed with the SEC.

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ITEM 1A. RISK FACTORS
Item 1A. Risk F actors.
We operate in an industry that has numerous risks, many of which are beyond our control or are driven by factors that cannot always be predicted. Investors should carefully consider all of the risk factors in conjunction with the other information included in this report as our financial results and condition or market value could be adversely affected if any of these risks were to occur.
Risks Related to our Business and Industry
Our margins are dependent on managing the spread between the price of corn, natural gas, ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil.
Our operating results are highly sensitive to the spread between the corn and natural gas we purchase, and the ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil we sell. Price and supply are subject to various market forces, such as weather, domestic and global demand, shortages, export prices, crude oil prices, currency valuations and government policies in the United States and around the world, over which we have no control. Price volatility of these commodities may cause our operating results to fluctuate substantially. Increases in corn or natural gas prices or decreases in ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil prices may make it unprofitable to operate. No assurance can be given that we will purchase corn and natural gas or sell ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil at or near prices which would provide us with positive margins. Consequently, our results of operations and financial position may be adversely affected by increases in corn or natural gas prices or decreases in ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil prices.
We continuously monitor the margins at our ethanol plants using a variety of risk management tools and hedging strategies when appropriate. In recent years, the spread between ethanol and corn prices has fluctuated widely, narrowed significantly and been negative at times. Fluctuations are likely to continue. A sustained narrow spread or further reduction in the spread between ethanol and corn prices as a result of increased corn prices or decreased ethanol prices, would adversely affect our results of operations and financial position. Should our combined revenue from ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil fall below our cost of production, we could decide to slow or suspend production at some or all of our ethanol plants, which also could adversely affect our results of operations and financial position.
The products we buy and sell are subject to price volatility and uncertainty.
Our operating results are highly sensitive to commodity prices.
Corn. We are generally unable to pass increased corn costs to our customers since ethanol competes with other fuels. We have seen considerable price volatility in corn prices not experienced in recent years. At certain corn prices, ethanol may be uneconomical to produce. Ethanol plants, livestock industries and other corn-consuming enterprises put significant price pressure on local corn markets. In addition, local corn supplies and prices could be adversely affected by, but not limited to, prices for alternative crops, increasing input costs, changes in government policies, shifts in global markets, supply or demand, global political or economic issues, or damaging growing conditions, such as plant disease or adverse weather, including drought.
Ethanol. Our revenues are dependent on market prices for ethanol which can be volatile as a result of a number of factors, including but not limited to: the price and availability of competing fuels; the overall supply and demand for ethanol and corn; the price of gasoline, crude oil and corn; global political or economic issues and government policies.
Ethanol is marketed as a fuel additive that reduces vehicle emissions, an economical source of octanes and, to a lesser extent, a gasoline substitute. Consequently, gasoline supply and demand affect the price of ethanol. Should gasoline prices or demand decrease significantly, our results of operations could be materially impacted.
Ethanol imports also affect domestic supply and demand. Imported ethanol is not subject to an import tariff and, under the RFS, sugarcane ethanol from Brazil is one of the most economical means for obligated parties to meet the advanced biofuel standard.
Industrial-grade alcohol is produced by further distillation processing of 200-proof alcohol. Further distillation removes impurities which allows it to be used as an ingredient for sanitation products. Should industrial-grade alcohol prices or demand decrease significantly, or competition and supply increase, our results of operations could be negatively impacted.
Distillers Grains. Increased U.S. dry mill ethanol production has resulted in increased distillers grains production. Should this trend continue, distillers grains prices could fall unless demand increases or other market sources are found. The price of distillers grains has historically been correlated with the price of corn. Occasionally, the price of distillers grains will lag behind fluctuations in corn or other feedstock prices, lowering our cost recovery percentage. Additionally, exports of distiller grains could be impacted by the enactment of foreign policy.
Distillers grains compete with other protein-based animal feed products. Downward pressure on other commodity prices, such as corn and soybeans, will generally cause the price of competing animal feed products to decline, resulting in downward pressure on the price of distillers grains.
Natural Gas. The price and availability of natural gas are subject to volatile market conditions. These market conditions are often affected by factors beyond our control, such as weather, drilling economics, overall economic conditions and government regulations. Significant disruptions in natural gas supply could impair our ability to produce ethanol. Furthermore, increases in natural gas prices or changes in our cost relative to our competitors cannot be passed on to our customers, which may adversely affect our results of operations and financial position.
Corn Oil. Industrial corn oil is generally marketed as a renewable diesel and biodiesel feedstock; therefore, the price of corn oil is affected by demand for renewable diesel and biodiesel. Expanded profitability in the renewable diesel and biodiesel industry due to the extended blending tax credit and low carbon fuels standards could impact corn oil demand. In general, corn oil prices follow the prices of heating oil and soybean oil. Decreases in the price of or demand for corn oil could have an adverse impact on our business and profitability.
Ultra High Protein. Our Ultra-High Protein has unique nutritional advantages and a higher protein concentration than soybean meal and can be included in a variety of feed rations in the pet, dairy, swine, poultry and aquaculture industries. As a value-added feed ingredient, quality control is imperative. Demand for feed products and pricing pressure from competing feed products may result in downward pressure on the price of Ultra-High Protein. Reliable production of Ultra-High Protein from both consistent operations of the biorefinery as well as the FQT MSC™ technology is necessary to produce anticipated volumes. Inconsistency in volumes, quality or downward pressure on prices could result in adverse impact on our business and profitability.
We may be affected by or unable to fulfill our total transformation strategies.
In May 2018, we announced that we were evaluating the performance of our entire portfolio of assets and businesses. As part of that process, during the fourth quarter of 2018, we sold three ethanol plants, permanently closed one ethanol plant and sold Fleischmann’s Vinegar Company, Inc. Furthermore, we sold our 50% interest in JGP Energy Partners during the fourth quarter of 2019. We sold a 50% interest in GPCC during the third quarter of 2019 and the remaining 50% interest in GPCC during the fourth quarter of 2020. In December 2020, we sold the Hereford, Texas ethanol plant and in March 2021, we sold our Ord, Nebraska ethanol plant.
As we continue to evaluate our portfolio, we may sell additional assets or businesses or exit particular markets that are no longer a strategic fit or no longer meet their growth or profitability targets. Depending on the nature of the assets sold, our profitability may be impacted by lost operating income or cash flows from such businesses. In addition, divestitures we complete may not yield the targeted improvements in our business and may divert management’s attention from our day-to-day operations.
We also undertook a number of project initiatives to improve margins, including our Project 24 initiative and Total Transformation Plan focused on expanding the products and value we can extract from a kernel of corn. The Ultra-High Protein strategy includes substantial construction projects and cost to deploy FQT’s MSC™ protein systems at our biorefineries.
We may not achieve our construction goals on time or our budget, we may not achieve the operating yields we project, we may not achieve product market sales, margins, or pricing we project, and our operating cost goals may not be achieved due to a variety of factors. Our failure to achieve any of these intended constructive, yield, sales, margin, pricing, or financial results associated with our total transformation strategies could have an adverse effect on our business, financial condition or results of operations.
Our risk management and commodity trading strategies could be ineffective and expose us to decreased liquidity.
As market conditions warrant, we use forward contracts to sell some of our ethanol, distillers grains, Ultra-High Protein, and corn oil, or buy some of the corn, and natural gas we need to partially offset commodity price volatility. We also engage in other hedging transactions and other commodity trading involving exchange-traded futures contracts for corn, natural gas,
ethanol, soybean meal, soybean oil and other agricultural commodities. The financial impact of these activities depends on the price of the commodities involved and/or our ability to physically receive or deliver the commodities.
Hedging arrangements expose us to risk of financial loss when the counterparty defaults on its contract or, in the case of exchange-traded contracts, when the expected differential between the price of the underlying and physical commodity changes. Hedging activities can result in losses when a position is purchased in a declining market or sold in a rising market. Hedging losses may be offset by a decreased cash price for corn, and natural gas and an increased cash price for ethanol, distillers grains, Ultra-High Protein and corn oil. We vary the amount of hedging and other risk mitigation strategies we undertake and sometimes choose not to engage in hedging transactions at all. We cannot provide assurance that our risk management and commodity trading strategies and decisions will be profitable or effectively offset commodity price volatility. If they are not, our results of operations and financial position may be adversely affected.
The use of derivative financial instruments frequently involves cash deposits with brokers, or margin calls. Sudden changes in commodity prices may require additional cash deposits immediately. Depending on our open derivative positions, we may need additional liquidity with little advance notice to cover margin calls. While we continuously monitor our exposure to margin calls, we cannot guarantee we will be able to maintain adequate liquidity to cover margin calls in the future.
Government mandates affecting ethanol could change and impact the ethanol market.
Under the provisions of the Energy Independence and Security Act of 2007, as amended, Congress expanded the RFS. The RFS mandates the minimum volume of renewable fuels that must be blended into the transportation fuel supply each year which affects the domestic market for ethanol. Each year the Environmental Protection Agency (EPA) is supposed to undertake rulemaking to set the RVO for the following year, though at times months or years pass without a finalized RVO. Further, the EPA has the authority to waive the requirements, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms the economy or the environment. After 2022, volumes shall be determined by the EPA in coordination with the Secretaries of Energy and Agriculture, taking into account such factors as impact on environment, energy security, future rates of production, cost to consumers, infrastructure, and other factors such as impact on commodity prices, job creation, rural economic development, or impact on food prices.
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. While conventional ethanol maintained 15 billion gallons, 2019 was the second consecutive year that the total RVO was more than 20% below the statutory volumes levels. Thus, the EPA was expected to initiate a reset rulemaking, and modify statutory volumes through 2022, and do so based on the same factors they are to use in setting the RVOs post-2022. However, on December 19, 2019, the EPA announced it would not be moving forward with a reset rulemaking. It is unclear when or if they will propose a reset rulemaking. The EPA has stated an intention to propose a post-2022 ‘set’ rulemaking as required by statute.
Volumes can also be impacted as small refineries can petition the EPA for an SRE which, if approved, waives their portion of the annual RVO requirements. The EPA, through consultation with the DOE and the USDA, can grant them a full or partial waiver, or deny it outright within 90 days of submittal. A small refinery is defined as one that processes fewer than 75,000 barrels of petroleum per day.
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Our operations could be adversely impacted by legislation, administration actions, EPA actions, or lawsuits that may reduce the RFS mandated volumes of conventional ethanol and other biofuels through the annual RVO, the 2022 set rulemaking, the point of obligation for blending, or SREs. A recent Supreme Court ruling held that the small refineries can continue to apply for an extension of their waivers from the RFS, even if they have not been awarded a continuous string of exemptions, though the EPA has proposed denying all SRE applications. A recent D.C. Circuit Court of Appeals ruling held that the EPA overstepped its authority in extending the one pound Reid Vapor Pressure waiver for 10% ethanol blends to 15% ethanol blends in the summer, effectively limiting summertime sales of ethanol blends above 10% to FFVs from June 1 to September 15 each year.
Similarly, should federal mandates regarding oxygenated gasoline be repealed, the market for domestic ethanol could be adversely impacted. Economic incentives to blend based on the relative value of gasoline versus ethanol, taking into consideration the octane value of ethanol, environmental requirements and the RFS mandate, may affect future demand. A significant increase in supply beyond the RFS mandate could have an adverse impact on ethanol prices. Moreover, changes to RFS could negatively impact the price of ethanol or cause imported sugarcane ethanol to become more economical than domestic ethanol. Likewise, national, state and regional LCFS like that of California, Oregon, Brazil or Canada could be favorable or harmful to conventional ethanol, depending on how the regulations are crafted, enforced and modified.
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﻿ ﻿ Future demand may be influenced by economic incentives to blend based on the relative value of gasoline versus ethanol, taking into consideration the octane value of ethanol, environmental requirements and the value of RFS credits or RINs. A significant increase in supply beyond the RFS mandate could have an adverse impact on ethanol prices. Moreover, any changes to RFS, whether by legislation, EPA action or lawsuit, originating from issues associated with the market price of RINs could negatively impact the demand for ethanol, discretionary blending of ethanol and/or the price of ethanol. Recent actions by the EPA to grant SREs without accounting for the lost gallons, for example, resulted in lower RIN prices. Similarly, proposals from the current EPA to reduce annual RVO levels could also lead to lower RIN prices.
To the extent federal or state laws or regulations are modified and/or enacted, it may result in the demand for ethanol being reduced, which could negatively and materially affect our financial performance.
Future demand for ethanol is uncertain and changes in public perception, consumer acceptance and overall consumer demand for transportation fuel could affect demand.
While many trade groups, academics and government agencies support ethanol as a fuel additive that promotes a cleaner environment, others claim ethanol production consumes considerably more energy, emits more greenhouse gases than other fuels and depletes water resources. While we do not agree, some studies suggest ethanol produced from corn is less efficient than ethanol produced from switch grass or wheat grain. Others claim corn-based ethanol negatively impacts consumers by causing the prices of meat and other food derived from corn-consuming livestock to increase. Ethanol critics also contend the industry redirects corn supplies from international food markets to domestic fuel markets, and contributes to land use change domestically and abroad.
There are limited markets for ethanol beyond the federal mandates. We believe further consumer acceptance of E15 and E85 fuels may be necessary before ethanol can achieve significant market share growth. Discretionary and E85 blending are important secondary markets. Discretionary blending is often determined by the price of ethanol relative to gasoline, and availability to consumers. When discretionary blending is financially unattractive, the demand for ethanol may be reduced.
Demand for ethanol is also affected by overall demand for transportation fuel, which is affected by cost, number of miles traveled and vehicle fuel economy. Miles traveled typically increases during the spring and summer months related to vacation travel, followed closely behind the fall season due to holiday travel. Global events, such as COVID-19, have greatly decreased miles traveled and in turn, the demand for ethanol. Consumer demand for gasoline may be impacted by emerging transportation trends, such as electric vehicles or ride sharing. In January 2021, General Motors announced a target date of 2035 for phasing out the production of gasoline and diesel powered vehicles. Similarly, Nissan has stated that their entire fleet will be electric vehicles by the early 2030s. These announcements coincide with pledges to ban the sale of internal combustion engines in countries such as Japan and the United Kingdom by 2035, as well as a statewide ban in California. While aspirational, if realized, these bans would accelerate the decline of liquid fuel demand and by extension demand for ethanol, biodiesel and renewable diesel.
Additionally, factors such as over-supply of ethanol, which has been the case for some time, could continue to negatively impact our business. Reduced demand for ethanol may depress the value of our products, erode its margins, and reduce our ability to generate revenue or operate profitably.
Our business is directly affected by the supply and demand for ethanol and other fuels in the markets served by our assets. Reduced demand for ethanol, regardless of cause, may erode our margins and reduce our ability to generate revenue and operate profitably.
In the past, we have had operating losses and could incur future operating losses.
In the last five years, we incurred operating losses during certain quarters and could incur operating losses in the future that are substantial. Although we have had periods of sustained profitability, we may not be able to maintain or increase profitability on a quarterly or annual basis, which could impact the market price of our common stock and the value of your investment. In addition, periods of sustained losses create uncertainty as to whether some or all of our deferred tax assets will be realizable in the future.
If the United States were to withdraw from or materially modify certain international trade agreements, our business, financial condition and results of operations could be materially adversely affected.
Ethanol and other products that we produce are or have been exported to Canada, Mexico, Brazil, China and other countries. The previous administration expressed antipathy towards certain existing international trade agreements and has significantly increased tariffs on goods imported into the United States, which in turn has led to retaliatory actions on U.S.
exports. The outcome of trade negotiations or lack thereof, has had and/or may continue to have a material effect on our business, financial condition and results of operations.
Our ability to access the partnership’s terminals adjacent to our ethanol plants could cause disruptions in our operations and adversely affect our production levels, profitability and needed capital expenditures.
We are party to the storage and throughput agreement with our partnership, under which we access the storage and throughput services offered by the partnership. In the event of a default by either party under that agreement, our ability to throughput our ethanol may be disrupted, which in turn could adversely affect our production levels, operating expenses, profitability and our need for capital expenditures for alternative throughput arrangements.
Our debt exposes us to numerous risks that could have significant consequences to our shareholders.
Risks related to the level of debt we have include: (1) requiring a sizeable portion of cash to be dedicated for debt service, reducing the availability of cash flow for working capital, capital expenditures, and other general business activities and limiting our ability to invest in new growth opportunities; (2) limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other activities; (3) limiting our flexibility to plan for or react to changes in the businesses and industries in which we operate; (4) increasing our vulnerability to general and industry-specific adverse economic conditions; (5) being at a competitive disadvantage against less leveraged competitors; and (6) being vulnerable to increases in prevailing interest rates.
A portion of our debt bears interest at variable rates, which creates exposure to interest rate risk. If interest rates increase, our debt service obligations at variable rates would increase even though the amount borrowed remained the same, decreasing net income.
Our ability to make scheduled payments on or to refinance our debt obligations and to fund our planned capital expenditures, acquisitions and other ongoing liquidity needs depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions as well as certain financial, business and other factors which are beyond our control. There can be no assurance that we will maintain a level of cash flow from operating activities in an amount sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to seek additional capital or restructure our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.
We are required to comply with a number of covenants under our existing loan agreements that could hinder our growth.
We are required to maintain specified financial ratios, including minimum cash flow coverage, working capital and tangible net worth under certain loan agreements. A breach of these covenants could result in default, and if such default is not cured or waived, our lenders could accelerate our debt and declare it immediately due and payable. If this occurs, we may not be able to repay or borrow sufficient funds to refinance the debt. Even if financing is available, it may not be on acceptable terms. No assurance can be given that our future operating results will be sufficient to comply with these covenants or remedy default.
In the past, we have received waivers from our lenders for failure to meet certain financial covenants and amended our loan agreements to change these covenants. In the event we are unable to comply with these covenants in the future, we cannot provide assurance that we will be able to obtain the necessary waivers or amend our loan agreements to prevent default. Under our convertible senior notes, default on any loan in excess of $20.0 million could result in the notes being declared due and payable, which would have a material and adverse effect on our ability to operate.
We operate in a capital intensive business and rely on cash generated from operations and external financing, which could be limited.
Increased commodity prices could increase liquidity requirements. Our operating cash flow is dependent on overall commodity market conditions as well as our ability to operate profitably. In addition, we may need to raise additional financing to fund growth. In some market environments, we may have limited access to incremental financing, which could defer or cancel growth projects, reduce business activity or cause us to default on our existing debt agreements if we are unable to meet our payment schedules. These events could have an adverse effect on our operations and financial position.
Our ability to repay current and anticipated future debt will depend on our financial and operating performance and successful implementation of our business strategies. Our financial and operational performance will depend on numerous factors including prevailing economic conditions, commodity prices, and financial, business and other factors beyond our control. If we cannot repay, refinance or extend our current debt at scheduled maturity dates, we could be forced to reduce or delay capital expenditures, sell assets, restructure our debt or seek additional capital. If we are unable to restructure our debt or raise funds, our operations and growth plans could be harmed and the value of our stock could be significantly reduced.
Disruptions in the credit market could limit our access to capital.
We may need additional capital to fund our growth or other business activities in the future. The cost of capital under our existing or future financing arrangements could increase and affect our ability to trade with various commercial counterparties or cause our counterparties to require additional forms of credit support. If capital markets are disrupted, we may not be able to access capital at all or capital may only be available under less favorable terms.
We are required to continue to make payments to the partnership to the minimum volume commitment regardless of our production levels.
We are party to the storage and throughput agreement with our partnership, under which we are obligated to pay a minimum volume commitment regardless of whether or not we operate. We may not run our plants at volumes sufficient enough to cover the MVC resulting in payments being made to the partnership. In times of sustained negative margins, our volumes may be insufficient to recover these MVC payments in the following four quarters as outlined in the partnership agreement.
Our ability to maintain the required regulatory permits or manage changes in environmental, safety and TTB regulations is essential to successfully operating our plants.
Our plants are subject to extensive air, water, environmental and TTB regulations. Our production facilities involve the emission of various airborne pollutants, including particulate, carbon dioxide, nitrogen oxides, hazardous air pollutants and volatile organic compounds, which requires numerous environmental permits to operate our plants. Governing state agencies could impose costly conditions or restrictions that are detrimental to our profitability and have a material adverse effect on our operations, cash flows and financial position.
Environmental laws and regulations at the federal and state level are subject to change. These changes can also be made retroactively. It is possible that more stringent federal or state environmental rules or regulations could be adopted, which could increase our operating costs and expenses. Consequently, even though we currently have the proper permits, we may be required to invest or spend considerable resources in order to comply with future environmental regulations. Furthermore, ongoing plant operations, which are governed by the Occupational Safety and Health Administration, may change in a way that increases the cost of plant operations. Any of these events could have a material adverse effect on our operations, cash flows and financial position.
Part of our business is regulated by environmental laws and regulations governing the labeling, use, storage, discharge and disposal of hazardous materials. Since we handle and use hazardous substances, changes in environmental requirements or an unanticipated significant adverse environmental event could have a negative impact on our business. While we strive to comply with all environmental requirements, we cannot provide assurance that we have been in compliance at all times or will not incur material costs or liabilities in connection with these requirements. Private parties, including current and former employees, could bring personal injury or other claims against us due to the presence of hazardous substances. We are also exposed to residual risk by our land and facilities which may have environmental liabilities from prior use. Changes in environmental regulations may require us to modify existing plant and processing facilities, which could significantly increase our cost of operations.
TTB regulations apply when producing our undenatured ethanol. These regulations carry substantial penalties for non-compliance and therefore any non-compliance may adversely affect our financial operations or adversely impact our ability to produce undenatured ethanol.
Any inability to generate or obtain RINs could adversely affect our operating margins.
Nearly all of our ethanol production is sold with RINs that are used by our customers to comply with the RFS. Should our production not meet the EPA’s requirements for RIN generation in the future, we would need to purchase RINs in the open market or sell our ethanol at lower prices to compensate for the absence of RINs. The price of RINs depends on a variety of factors, including the availability of qualifying biofuels and RINs for purchase, production levels of transportation fuel and percentage mix of ethanol with other fuels, and cannot be predicted. Failure to obtain sufficient RINs or reliance on
invalid RINs could subject us to fines and penalties imposed by the EPA which could adversely affect our results of operations, cash flows and financial condition.
As we trade ethanol acquired from third-parties, should it be discovered the RINs associated with the ethanol we purchased are invalid, albeit unknowingly, we could be subject to substantial penalties if we are assessed the maximum amount allowed by law. Based on EPA penalties assessed on RINS violations in the past few years, in the event of a violation, the EPA could assess penalties, which could have an adverse impact on our profitability.
Compliance with evolving environmental, health and safety laws and regulations, particularly those related to climate change, could be costly.
Our plants emit carbon dioxide as a by-product of ethanol production. In February 2010, the EPA released its final regulations on RFS, grandfathering our plants at their current authorized capacity. While some of our plants have received efficient producer status and no longer rely on grandfathered status, for those still reliant upon it, expansion above these levels will require a 20% reduction in greenhouse gas emissions from the 2005 baseline measurement. Separately, CARB adopted a LCFS that took effect in January 2013, which requires a 10% reduction in the average carbon intensity of gasoline and diesel transportation fuels from 2010 to 2020. An ILUC component is included in the greenhouse gas emission calculation, which may have an adverse impact on the market for corn-based ethanol in California.
To expand our production capacity, federal and state regulations may require us to obtain additional permits, achieve EPA’s efficient producer status under the pathway petition program, install advanced technology or reduce drying distillers grains. Compliance with future laws or regulations to decrease carbon dioxide could be costly and may prevent us from operating our plants as profitably, which may have an adverse impact on our operations, cash flows and financial position.
We may fail to realize the anticipated benefits of mergers, acquisitions, joint ventures or partnerships.
We have increased the size and diversity of our operations through mergers, acquisitions and joint ventures or partnerships and intend to continue exploring potential growth opportunities. Acquisitions involve numerous risks that could harm our business, including: (1) difficulties integrating the operations, technologies, products, existing contracts, accounting processes and personnel and realizing anticipated synergies of the combined business; (2) risks relating to environmental hazards on purchased sites; (3) risks relating to developing the necessary infrastructure for facilities or acquired sites, including access to rail networks; (4) difficulties supporting and transitioning customers; (5) diversion of financial and management resources from existing operations; (6) the purchase price exceeding the value realized; (7) risks of entering new markets or areas outside of our core competencies; (8) potential loss of key employees, customers and strategic alliances from our existing or acquired business; (9) unanticipated problems or underlying liabilities; and (10) inability to generate sufficient revenue to offset acquisition and development costs.
The anticipated benefits of these transactions may not be fully realized or could take longer to realize than expected.
We have also pursued growth through joint ventures or partnerships, which typically involve restrictions on actions that the partnership or joint venture may take without the approval of the partners. These provisions could limit our ability to manage the partnership or joint venture in a manner that serves our best interests.
Future acquisitions may involve issuing equity as payment or to finance the business or assets, which could dilute your ownership interest. Furthermore, additional debt may be necessary to complete these transactions, which could have a material adverse effect on our financial condition. Failure to adequately address the risks associated with acquisitions or joint ventures could have a material adverse effect on our business, results of operations and financial condition.
Future events could result in impairment of long-lived assets, which may result in charges that adversely affect our results of operations.
Long-lived assets, including property, plant and equipment, intangible assets, goodwill and equity method investments, are evaluated for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Our impairment evaluations are sensitive to changes in key assumptions used in our analysis and may require use of financial estimates of future cash flows. Application of alternative assumptions could produce significantly different results. We may be required to recognize impairments of long-lived assets based on future economic factors such as unfavorable changes in estimated future undiscounted cash flows of an asset group.
Global competition could affect our profitability.
We compete with producers in the United States and abroad. Depending on feedstock, labor and other production costs, producers in other countries, such as Brazil, may be able to produce ethanol cheaper than we can. Under the RFS, certain parties are obligated to meet an advanced biofuel standard. In recent years, sugarcane ethanol imported from Brazil has been one of the most economical means for obligated parties to meet this standard. While transportation costs, infrastructure constraints and demand may temper the impact of ethanol imports, foreign competition remains a risk to our business. Moreover, significant additional foreign ethanol production could create excess supply, which could result in lower ethanol prices throughout the world, including the United States. Any penetration of ethanol imports into the domestic market may have a material adverse effect on our operations, cash flows and financial position.
International activities such as boycotts, embargoes, product rejection, trade policies and compliance matters, may have an adverse effect on our results of operations.
Government actions abroad can have a significant impact on our business. In 2021, we exported 23% of our ethanol production. In 2013, the European Union imposed a five-year tariff of $83.33 per metric ton on U.S. ethanol to discourage foreign competition. Effective January 1, 2017, China indicated its intention to raise its 5% tariff on U.S. and Brazil fuel ethanol to 30%. On April 1, 2018, China raised their tariff rate to 45%, and later raised it further to 70%. In January 2020, the two countries announced a “Phase I” trade deal with agricultural commodity purchase commitments, including ethanol; however, these ethanol tariffs have not been reduced or eliminated.
Although the ethanol export markets are affected by competition from other ethanol exporters, particularly Brazil, and in spite of the actions by China, we believe exports will remain active going forward. On September 1, 2017, Brazil’s Chamber of Foreign Trade, or CAMEX, issued an official written resolution, imposing a 20% tariff on U.S. ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter. The ruling was extended for a year in 2019, and again by 90 days in 2020, but was allowed to lapse in December 2020, and a 20% duty now applies to all U.S. ethanol imports into Brazil.
In January 2016, China’s Ministry of Commerce initiated an anti-dumping investigation into U.S.-produced dried distillers grains exported to China. In January of 2017, the Ministry of Commerce of China announced it increased anti-dumping duties on U.S. distillers grains, ranging from 42.2% to 53.7%.
With more tariffs and reduced exports, the value of our products may be affected, which could have a negative impact on our profitability. Additionally, tariffs on U.S. ethanol may lead to further industry over-supply and reduce our profitability. Moreover, the America First trade position has caused more countries to toughen their positions on U.S. imports.
The ability or willingness of OPEC and other oil exporting nations to set and maintain production levels has a significant impact on oil and natural gas commodity prices.
The Organization of Petroleum Exporting Countries and their allies (collectively, OPEC+), is an intergovernmental organization that seeks to manage the price and supply of oil on the global energy market. Actions taken by OPEC+ members, including those taken alongside other oil exporting nations, have a significant impact on global oil supply and pricing. For example, OPEC+ and certain other oil exporting nations have previously agreed to take measures, including production cuts, to support crude oil prices. In March 2020, members of OPEC+ considered extending and potentially increasing these oil production cuts, however these negotiations were unsuccessful. As a result, Saudi Arabia announced an immediate reduction in export prices and Russia announced that all previously agreed oil production cuts will expire on April 1, 2020. These actions led to an immediate and steep decrease in oil prices. There can be no assurance that OPEC+ members and other oil exporting nations will agree to future production cuts or other actions to support and stabilize oil prices, nor can there be any assurance that they will not further reduce oil prices or increase production. Uncertainty regarding future actions to be taken by OPEC+ members or other oil exporting countries could lead to increased volatility in the price of oil, which could adversely affect our business, future financial condition and results of operations.
Increased ethanol industry penetration by oil and other multinational companies could impact our margins.
We operate in a very competitive environment and compete with other domestic ethanol producers in a relatively fragmented industry. The top four producers account for approximately 41% of the domestic production capacity with production capacity ranging from 958 mmgy to 2,867 mmgy. The remaining ethanol producers consist of smaller entities engaged exclusively in ethanol production and large integrated grain companies that produce ethanol in addition to their base grain businesses. We compete for capital, labor, corn and other resources with these companies. Historically, oil companies, petrochemical refiners and gasoline retailers were not engaged in ethanol production even though they form the primary distribution network for ethanol blended with gasoline. Over the past decade, several oil refiners have acquired ethanol production plants, and at one point accounted for almost 20% of domestic ethanol production, however divestments in 2021
have brought this closer to 10%. If these companies increase their ethanol plant ownership or additional companies commence production, the need to purchase ethanol from independent producers like us or at pricing that provides us an acceptable margin could diminish and adversely effect on our operations, cash flows and financial position.
Our agribusiness operations are subject to significant government regulations.
Our agribusiness operations are regulated by various government entities that can impose significant costs on our business. Failure to comply could result in additional expenditures, fines or criminal action. Our production levels, markets and grains we merchandise are affected by federal government programs, which include USDA acreage control and price support programs. Government policies such as tariffs, duties, subsidies, import and export restrictions and embargos can also impact our business. Changes in government policies and producer support could impact the type and amount of grains planted, which could affect our ability to buy grain. Export restrictions or tariffs could limit sales opportunities outside of the United States.
Commodities futures trading is subject to extensive regulations.
The futures industry is subject to extensive regulation. Since we use exchange-traded futures contracts as part of our business, we are required to comply with a wide range of requirements imposed by the Commodity Futures Trading Commission, National Futures Association and the exchanges on which we trade. These regulatory bodies are responsible for safeguarding the integrity of the futures markets and protecting the interests of market participants. As a market participant, we are subject to regulation concerning trade practices, business conduct, reporting, position limits, record retention, the conduct of our officers and employees, and other matters.
Failure to comply with the laws, rules or regulations applicable to futures trading could have adverse consequences. Such claims could result in fines, settlements or suspended trading privileges, which could have a material adverse impact on our business, financial condition or operating results.
Our success depends on our ability to manage our growing and changing operations.
Since our formation in 2004, our business has grown significantly in size, products and complexity. This growth places substantial demands on our management, systems, internal controls, and financial and physical resources. If we acquire or develop additional operations, we may need to further develop our financial and managerial controls and reporting systems, and could incur expenses related to hiring additional qualified personnel and expanding our information technology infrastructure. Our ability to manage growth effectively could impact our results of operations, financial position and cash flows.
Replacement technologies could make corn-based ethanol or our process technology obsolete.
Ethanol is used primarily as an octane additive and oxygenate blended with gasoline. Critics of ethanol blends argue that it decreases fuel economy, causes corrosion and damages fuel pumps. Prior to federal restrictions and ethanol mandates, methyl tertiary-butyl ether, or MTBE, was the leading oxygenate. Other oxygenate products could enter the market and prove to be environmentally or economically superior to ethanol. Alternative biofuel alcohols, such as methanol and butanol, could evolve and replace ethanol.
Research is currently underway to develop products and processes that have advantages over ethanol, such as: lower vapor pressure, making it easier to add to gasoline; similar energy content as gasoline, reducing any decrease in fuel economy caused by blending with gasoline; ability to blend at higher concentration levels in standard vehicles; and reduced susceptibility to separation when water is present. Products offering a competitive advantage over ethanol could reduce our ability to generate revenue and profits from ethanol production.
New ethanol process technologies could emerge that require less energy per gallon to produce and result in lower production costs. Our process technologies could become less effective or competitive than competing technologies or obsolete and place us at a competitive disadvantage, which could have a material adverse effect on our operations, cash flows and financial position.
We may be required to provide remedies for ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein or corn oil that does not meet the specifications defined in our sales contracts.
If we produce or purchase ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein or corn oil that does not meet the specifications defined in our sales contracts, we may be subject to quality claims. We could be required to refund the purchase price of any non-conforming product or replace the non-conforming product at our expense. Ethanol,
including industrial-grade alcohol, distillers grains, Ultra-High Protein or corn oil that we purchase or market and subsequently sell to others could result in similar claims if the product does not meet applicable contract specifications, which could have an adverse impact on our profitability.
Business disruptions due to unforeseen operational failures or factors outside of our control could impact our ability to fulfill contractual obligations.
Natural disasters, pandemics, transportation issues, significant track damage resulting from a train derailment or strikes by our transportation providers could delay shipments of raw materials to our plants or deliveries of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil to our customers. If we are unable to meet customer demand or contract delivery requirements due to stalled operations caused by business disruptions, we could potentially lose customers.
Shifts in global markets, supply or demand changes, as well as adverse weather conditions, such as inadequate or excessive amounts of rain during the growing season, overly wet conditions, an early freeze or snowy weather during harvest could impact the supply of corn that is needed to produce ethanol. Corn stored in an open pile may be damaged by rain or warm weather before the corn is dried, shipped or moved into a storage structure.
Our business may be adversely impacted by the continued impact of the COVID-19 outbreak.
The outbreak of the coronavirus, or COVID-19, including resurgences and variants of the virus, and which was declared by the World Health Organization to be a pandemic in March 2020, has spread across the globe and continues to impact worldwide economic activity. COVID-19 has created risk on all aspects of our business, including its impact on our employees, customers, vendors, and business partners. There are uncertainties from COVID-19 that continue, and include but are not limited to (1) the health of our workforce, and our ability to meet staffing needs which are vital to our operations; (2) the duration of additional outbreaks; (3) federal, state or local governmental regulations or other actions which could include limitations on our operations or mandating vaccination against COVID-19; (4) the effect on customer demand resulting in a decline in the demand for our products; (5) impacts on our supply chain and potential limitations of supply of our feedstocks, chemicals and other products utilized as well as supply chain impacts on construction equipment, supplies and/or labor; (6) interruptions of our rail and distribution systems and delays in the delivery of our product; and (7) volatility in the credit and financial markets. Specifically, we have experienced demand fluctuations for our products, and rail disruptions. Any of the foregoing may have an adverse impact our business, operations and/or profitability.
We continue to actively manage our response in collaboration with customers, government officials, and business partners and assess potential impacts to our future financial position and operating results, as well as adverse developments in our business. While many restrictions have been lifted, it is not possible for us to predict whether there will be additional government-mandated orders that could affect our business, or how any additional measures could impact our operations. We are unable to predict the overall impact these events will have on our future financial position and operations and it could have a material adverse impact on our business, operations and/or profitability.
Our ethanol-related assets may be at greater risk of terrorist attacks, threats of war or actual war, than other possible targets.
Terrorist attacks in the United States, including threats of war or actual war, may adversely affect our operations. A direct attack on our ethanol production plants, or our partnership’s storage facilities, fuel terminals and railcars could have a material adverse effect on our financial condition, results of operations and cash flows. Furthermore, a terrorist attack could have an adverse impact on ethanol prices. Disruption or significant increases in ethanol prices could result in government-imposed price controls.
Our network infrastructure, enterprise applications and internal technology systems could be damaged or otherwise fail and disrupt business activities.
Our network infrastructure, enterprise applications and internal technology systems are instrumental to the day-to-day operations of our business. Numerous factors outside of our control, including earthquakes, floods, lightning, tornados, fire, power loss, telecommunication failures, computer viruses, physical or electronic vandalism or similar disruptions could result in system failures, interruptions or loss of critical data and prevent us from fulfilling customer orders. We cannot provide assurance that our backup systems are sufficient to mitigate hardware or software failures, which could result in business disruptions that negatively impact our operating results and damage our reputation.
We could be adversely affected by cyber-attacks, data security breaches and significant information technology systems interruptions.
We rely on network infrastructure and enterprise applications, and internal technology systems for operational, marketing support and sales, and product development activities. The hardware and software systems related to such activities are subject to damage from earthquakes, floods, lightning, tornados, fire, power loss, telecommunication failures, cyber-attacks and other similar events. They are also subject to acts such as computer viruses, physical or electronic vandalism or other similar disruptions that could cause system interruptions and loss of critical data, and could prevent us from fulfilling customers’ orders. The Company and its vendors have experienced diverse cyber-attacks, with minimal consequences on our business to date. As examples, we have experienced attempts to gain access to systems, denial of service attacks, attempted malware infections, account takeovers, scanning activity and phishing emails. Attacks can originate from external criminals, terrorists, nation states or internal actors. We will continue to dedicate resources and incur expenses to maintain and update on an ongoing basis the systems and processes that are designed to mitigate the information security risks we face and protect the security of our computer systems, software, networks and other technology assets against attempts by unauthorized parties to obtain access to confidential information, disrupt or degrade service or cause other damage. Despite the implementation of cybersecurity measures (including access controls, data encryption, vulnerability assessments, employee training, continuous monitoring, and maintenance of backup and protective systems), our information technology systems may still be vulnerable to cybersecurity threats and other electronic security breaches. While we have taken reasonable efforts to protect ourselves, and to date, we have not experienced any material losses related to cyber-attacks, we cannot assure our shareholders that any of our security measures would be sufficient in the future. Any event that causes failures or interruption in such hardware or software systems could result in disruption of our business operations, have a negative impact on our operating results, and damage our reputation, which could negatively affect our financial condition, results of operation, cash flows.
We may not be able to hire and retain qualified personnel to operate our facilities.
Our success depends, in part, on our ability to attract and retain competent employees. Qualified employees, including but not limited to finance and accounting, managers, engineers, merchandisers, and other personnel must be hired for each of our locations and our corporate office. If we are unable to hire and retain productive, skilled personnel, we may not be able to maximize production, optimize plant operations or execute our business strategy.
Compliance with and changes in tax laws could adversely affect our performance.
We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect taxes (excise/duty, sales/use, gross receipts, and value-added taxes), payroll taxes, franchise taxes, withholding taxes, and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted or proposed that could result in increased expenditures for tax liabilities in the future. Many of these liabilities are subject to periodic audits by the respective taxing authority. Subsequent changes to our tax liabilities as a result of these audits may subject us to interest and penalties.
Federal, state and local jurisdictions may challenge our tax return positions.
The positions taken in our federal and state tax return filings require significant judgments, use of estimates and the interpretation and application of complex tax laws. Significant judgment is also required in assessing the timing and amounts of deductible and taxable items. Despite management’s belief that our tax return positions are fully supportable, certain positions may be successfully challenged by federal, state and local jurisdictions.
Financial performance of our equity method investments are subject to risks beyond our control and can vary substantially from period to period.
The company invests in certain limited liability companies, which are accounted for using the equity method of accounting. This means that the company’s share of net income or loss in the investee increases or decreases, as applicable, the carrying value of the investment. By operating a business through this arrangement, we do not have control over operating decisions as we would if we owned the business outright. Specifically, we cannot act on major business initiatives without the consent of the other investors.
The company recognizes these investments within other assets on the consolidated balance sheets and its proportionate share of earnings on a separate line item in the consolidated statements of operations. As a result, the amount of net investment income recognized from these investments can vary substantially from period to period. Any losses experienced by these entities could adversely impact our results of operations and the value of our investment.
We are exposed to credit risk that could result in losses or affect our ability to make payments should a counterparty fail to perform according to the terms of our agreement.
We are exposed to credit risk from a variety of customers, including major integrated oil companies, large independent refiners, petroleum wholesalers and other ethanol plants. We are also exposed to credit risk with major suppliers of petroleum products and agricultural inputs when we make payments for undelivered inventories. Our fixed-price forward contracts are subject to credit risk when prices change significantly prior to delivery. The inability by a third party to pay us for our sales, provide product that was paid for in advance or deliver on a fixed-price contract could result in a loss and adversely impact our liquidity and ability to make our own payments when due.
The interest rates under our credit facilities may be impacted by the phase-out of LIBOR.
LIBOR is the basic rate of interest widely used as a reference for setting the interest rates on loans globally. We use LIBOR as a reference rate for some of our credit facilities. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, ceased the publication of the one week and two month LIBOR settings immediately following the LIBOR publication on December 31, 2021, and will cease the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new reference rate, the SOFR, calculated using short-term repurchase agreements backed by Treasury securities. The potential effect of any such event on interest expense cannot yet be determined.
We have limitations, as a holding company, in our ability to receive distributions from a small number of our subsidiaries.
We conduct most of our operations through our subsidiaries and rely on dividends or intercompany transfers of funds to generate free cash flow. Some of our subsidiaries are currently, or are expected to be, limited in their ability to pay dividends or make distributions under the terms of their financing agreements. Consequently, we cannot fully rely on the cash flow from one subsidiary to satisfy the loan obligations of another subsidiary. As a result, if a subsidiary is unable to satisfy its loan obligations, we may not be able to prevent default by providing additional cash to that subsidiary, even if sufficient cash exists elsewhere within our organization.
The ability of suppliers to deliver inputs, parts, components and equipment to our facilities, and our ability to construct our facilities without disruption, could affect our business performance.
We use a wide range of materials and components in the production of our products and our transformation construction, which come from numerous suppliers. Also, key parts may be available only from a single or a limited group of suppliers, and we are subject to supply and pricing risk. Our operations and those of our suppliers are subject to disruption for a variety of reasons, including COVID-19-related supplier plant shutdowns or slowdowns, transportation delays, work stoppages, labor relations, governmental regulatory and enforcement actions, disputes with suppliers, distributors or transportation providers, information technology failures, and natural hazards, including due to climate change. We may be impacted by supply chain issues, due to factors largely beyond our control, which could escalate in future quarters. Any of the foregoing factors may result in higher costs or operational disruptions, which could have an adverse impact on our business and financial statements. Such disruption has in the past and could in the future interrupt our ability to manufacture certain products. Any significant disruption could have a material adverse impact on our financial statements.
Inflation may impact the cost and/or availability of materials, inputs and labor, which could adversely affect our operating results.
We have experienced inflationary impacts on raw materials, labor costs, wages, components, equipment, other inputs and services across our business and inflation and its impact could escalate in future quarters, many of which are beyond our control. Moreover, we may not be able to pass those costs along in the products we sell. As such, inflationary pressures could have a material adverse effect on our performance and financial statements.
Environmental, social and corporate governance matters and uncertainty regarding regulation of such matters may increase our operating costs, impact our capital markets and potentially reduce the value of our products and assets.
The issue of global climate change continues to attract considerable public and scientific attention with widespread concern about the impacts of human activity, especially the emissions of greenhouse gases such as carbon dioxide and methane. With the current administration, climate change legislation in the U.S. is likely to receive increased focus and consideration over the next several years, with numerous proposals having been made and are likely to continue to be made at the international, national, regional and state levels of government that are intended to limit emissions of greenhouse gases and capture carbon. Several states have already adopted measures requiring reduction of greenhouse gases within state
boundaries. Other states have elected to participate in voluntary regional cap-and-trade programs. While we believe our products are low carbon and result in a reduction of greenhouse gas emissions compared to alternatives, any significant legislative changes at the international, national, state or local levels could significantly affect our ability to produce and sell our products, could increase the cost of the production and sale of our products and could materially reduce the value of our products.
Apart from governmental regulation, some investment banks based both domestically and internationally have announced that they have adopted environmental, social and corporate governance guidelines (ESG). There have also been efforts in recent years affecting the investment community, including investment advisers, sovereign wealth funds, public pension funds, universities and other groups, promoting the divestment of fossil fuel equities, and encouraging the consideration of ESG practices of companies in a manner that could negatively affect us. The impact of such efforts may adversely affect the demand for and price of securities issued by us, and impact our access to the capital and financial markets.
Further, it is believed by some that climate change itself may cause more extreme weather conditions such as more intense hurricanes, thunderstorms, tornadoes and snow or ice storms, as well as rising sea levels and increased volatility in seasonal temperatures. Extreme weather conditions can interfere with our operations and increase our costs, and damage resulting from extreme weather may not be fully insured. However, at this time, we are unable to determine the extent to which any potential climate change may lead to increased weather hazards affecting our operations.
Our insurance policies do not cover all losses, costs or liabilities that we may experience, and insurance companies that currently insure companies in the energy industry may cease to do so or substantially increase premiums.
We are insured under property, liability and business interruption policies, subject to the deductibles and limits under those policies. We have acquired insurance that we believe to be adequate to prevent loss from material foreseeable risks. However, events may occur for which no insurance is available or for which insurance is not available on terms that are acceptable. Loss from an event, such as, but not limited to war, riots, pandemics, terrorism or other risks, may not be insured and such a loss may have a material adverse effect on our operations, cash flows and financial position. Certain of our ethanol production plants and our related storage tanks, as well as certain of our fuel terminal facilities are located within recognized seismic and flood zones. We believe that the design of these facilities have been modified to fortify them to meet structural requirements for those regions of the country. We have also obtained additional insurance coverage specific to earthquake and flood risks for the applicable plants and fuel terminals. However, there is no assurance that any such facility would remain in operation if a seismic or flood event were to occur.
Additionally, our ability to obtain and maintain adequate insurance may be adversely affected by conditions in the insurance market over which we have no control. In addition, if we experience insurable events, our annual premiums could increase further or insurance may not be available at all. If significant changes in the number or financial solvency of insurance underwriters for the ethanol industry occur, we may be unable to obtain and maintain adequate insurance at a reasonable cost. We cannot assure our unitholders that we will be able to renew our insurance coverage on acceptable terms, if at all, or that we will be able to arrange for adequate alternative coverage in the event of non-renewal. The occurrence of an event that is not fully covered by insurance, the failure by one or more insurers to honor its commitments for an insured event or the loss of insurance coverage could have a material adverse effect on our financial condition, results of operations, cash flows and ability of the partnership to make distributions to its unitholders.
Risks Related to the Partnership
We depend on the partnership to provide fuel storage and transportation services.
The partnership’s operations are subject to all of the risks and hazards inherent in the storage and transportation of fuel, including: damages to storage facilities, railcars and surrounding properties caused by floods, fires, severe weather, explosions, natural disasters or acts of terrorism; mechanical or structural failures at the partnership’s facilities or at third-party facilities at which its operations are dependent; curtailments of operations relative to severe weather; and other hazards, resulting in severe damage or destruction of the partnership’s assets or temporary or permanent shut-down of the partnership’s facilities. If the partnership is unable to serve our storage and transportation needs, our ability to operate our business could be adversely impacted, which could adversely affect our financial condition and results of operations. The inability of the partnership to continue operations, for any reason, could also impact the value of our investment in the partnership and, because the partnership is a consolidated entity, our business, financial condition and results of operations.
The partnership’s credit facility includes restrictions that may limit its ability to finance future operations, meet its capital needs or expand its business. If the partnership fails to comply with covenants in its credit facility, the partnership may be required to repay its indebtedness thereunder, which may have an adverse effect on the partnership’s liquidity and its ability
to operate and provide services to us.
The partnership is dependent upon the earnings and cash flow generated by its operations in order to meet its debt service obligations and to allow the partnership to pay cash distributions to its unitholders. The operating and financial restrictions and covenants in the partnership’s credit facility or in any future financing agreements could restrict its ability to finance future operations or capital needs or to expand or pursue its business activities, which may, in turn, limit its ability to pay cash distributions to unitholders. For example, the partnership’s credit facility restricts its ability to, among other things: (1) make certain cash distributions; (2) incur certain indebtedness; (3) create certain liens; (4) make certain investments; (5) merge or sell certain of our assets; and (6) expand the nature of our business.
Furthermore, the partnership’s credit facility contains covenants requiring it to maintain certain financial ratios.
A failure to comply with the provisions of the partnership’s credit facility could result in an event of default that could enable the partnership’s lenders, subject to the terms and conditions of the partnership’s credit facility, to declare the outstanding principal of that debt, together with accrued interest, to be immediately due and payable and/or to proceed against the collateral granted to them to secure such debt. If there is a default or event of default, the payment of the partnership’s debt is accelerated, defaults under its other debt instruments, if any, may be triggered, and its assets may be insufficient to repay such debt in full. Therefore, the holders of its units could experience a partial or total loss of their investment.
The partnership may not have sufficient available cash to pay quarterly distributions on its units.
The amount of cash the partnership can distribute depends on how much cash is generated from operations, which can fluctuate from quarter to quarter based on ethanol and other fuel volumes, handling fees, payments associated with minimum volume commitments, timely payments by subsidiaries, and other third parties, and prevailing economic conditions. The amount of cash available for distribution also depends on the partnership’s operating and general and administrative expenses, capital expenditures, acquisitions and organic growth projects, debt service requirements, working capital needs, ability to borrow funds and access capital markets, credit facility restrictions, cash reserves and other risks affecting cash levels. Increasing the partnership’s borrowings or other debt to finance certain projects could increase interest expense, which could impact the amount of cash available for distributions. There are no limitations in the partnership agreement regarding its ability to issue additional units. Should the partnership issue additional units in connection with an acquisition or expansion, the distributions on the incremental units will increase the risk that the partnership will be unable to maintain or increase distributions on a per unit basis.
Increases in interest rates could adversely impact the partnership’s unit price, ability to issue equity or incur debt, and pay cash distributions at intended levels.
The partnership’s cash distributions and implied distribution yield affect its unit price. Distributions are often used by investors to compare and rank yield-oriented securities when making investment decisions. A rising interest rate environment could have an adverse impact on the partnership’s unit price, ability to issue equity or incur debt or pay cash distributions at intended levels, which could adversely impact the value of our investment in the partnership.
We may be required to pay taxes on our share of the partnership’s income that are greater than the cash distributions we receive from the partnership.
The unitholders of the partnership generally include, for purposes of calculating their U.S. federal, state and local income taxes, their share of the partnership’s taxable income, whether they have received cash distributions from the partnership. We ultimately may not receive cash distributions from the partnership equal to our share of taxable income or the taxes that are due with respect to that income, which could negatively impact our liquidity.
A majority of the executive officers and directors of the partnership are also officers of our company, which could result in conflicts of interest.
We indirectly own and control the partnership and appoint all of its officers and directors. A majority of the executive officers and directors of the partnership are also officers or directors of our company. Although our directors and officers have a fiduciary responsibility to manage the company in a manner that is beneficial to us, as directors and officers of the partnership, they also have certain duties to the partnership and its unitholders. Conflicts of interest may arise between us and our affiliates, and the partnership and its unitholders, and in resolving these conflicts, the partnership may favor its own interests over the company’s interests. In certain circumstances, the partnership may refer conflicts of interest or potential conflicts of interest to its conflicts committee, which must consist entirely of independent directors, for resolution. The conflicts committee must act in the best interests of the public unitholders of the partnership. As a result, the partnership may
manage its business in a manner that differs from the best interests of the company or our stockholders, which could adversely affect our profitability.
Cash available for distributions could be reduced and likely cause a substantial reduction in unit value if the partnership became subject to entity-level taxation for federal income tax purposes.
The present federal income tax treatment of publicly traded partnerships or investments in its units could be modified, at any time, by administrative, legislative or judicial changes and interpretations. From time to time, members of Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships. Should any legislative proposal eliminate the qualifying income exception, all publicly traded partnerships would be treated as corporations for federal income tax purposes. The partnership would be required to pay federal income tax on its taxable income at the corporate tax rate and likely state and local income taxes at varying rates as well. Distributions to unitholders would be taxed as corporate distributions. The partnership’s cash available for distributions and the value of the units would be substantially reduced.
Risks Related to our Common Stock
The price of our common stock may be highly volatile and subject to factors beyond our control.
Some of the many factors that can influence the price of our common stock include: (1) our results of operations and the performance of our competitors; (2) public’s reaction to our press releases, public announcements and filings with the SEC;
(3) changes in earnings estimates or recommendations by equity research analysts who follow us or other companies in our industry; (4) changes in general economic conditions; (5) changes in market prices for our products or raw materials and related substitutes; (6) sales of common stock by our directors, executive officers and significant shareholders; (7) actions by institutional investors trading in our stock; (8) disruptions in our operations; (9) changes in our management team; (10) other developments affecting us, our industry or our competitors; and (11) U.S. and international economic, legal and regulatory factors unrelated to our performance. In recent years the stock market has experienced significant price and volume fluctuations, which are unrelated to the operating performance of any particular company. These broad market fluctuations could materially reduce the price of our common stock price based on factors that have little or nothing to do with our company or its performance.
Anti-takeover provisions could make it difficult for a third party to acquire us.
Our restated articles of incorporation, restated bylaws and Iowa’s law contain anti-takeover provisions that could delay or prevent change in control of us or our management. These provisions discourage proxy contests, making it difficult for our shareholders to take other corporate actions without the consent of our board of directors, which include: (1) board members can only be removed for cause with an affirmative vote of no less than two-thirds of the outstanding shares; (2) shareholder action can only be taken at a special or annual meeting, not by written consent except where required by Iowa law; (3) shareholders are restricted from making proposals at shareholder meetings; and (4) the board of directors can issue authorized or unissued shares of stock. We are subject to the provisions of the Iowa Business Corporations Act, which prohibits combinations between an Iowa corporation whose stock is publicly traded or held by more than 2,000 shareholders and an interested shareholder for three years unless certain exemption requirements are met.
Provisions in the convertible notes could also make it more difficult or too expensive for a third party to acquire us. If a takeover constitutes a fundamental change, holders of the notes have the right to require us to repurchase their notes in cash. If a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their notes. In either case, the obligation under the notes could increase the acquisition cost and discourage a third party from acquiring us. These items discourage transactions that could otherwise command a premium over prevailing market prices and may limit the price investors are willing to pay for our stock.
Non-U.S. shareholders may be subject to U.S. income tax on gains related to the sale of their common stock.
If we are a U.S. real property holding corporation during the shorter of the five-year period before the stock was sold or the period the stock was held by a non-U.S. shareholder, the non-U.S. shareholder could be subject to U.S federal income tax on gains related to the sale of their common stock. Whether we are a U.S. real property holding corporation depends on the fair market value of our U.S. real property interests relative to our other trade or business assets and non-U.S. real property interests. We cannot provide assurance that we are not a U.S. real property holding corporation or will not become one in the future.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. U nresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Prope rties.
We believe the property owned and leased at our locations is sufficient to accommodate our current needs, as well as potential expansion.
Corporate
We lease approximately 54,000 square feet of office space at 1811 Aksarben Drive in Omaha, Nebraska for our corporate headquarters, which houses our corporate administrative functions and commodity trading operations.
Ethanol Production Segment
We own approximately 1,611 acres of land and lease approximately 78 acres of land at and around our ethanol production facilities. As detailed in our discussion of the ethanol production segment in Item 1 - Business, our ethanol plants have the capacity to produce approximately 1.0 billion gallons of ethanol per year.
Agribusiness and Energy Services Segment
We own approximately 12 acres of land at our grain elevator. As detailed in our discussion in Item 1 - Business, our agribusiness and energy services segment facilities include grain storage capacity at our ethanol plants of approximately 25.8 million bushels, and one grain elevator with grain storage capacity of approximately 1.2 million bushels.
We lease approximately 50,500 square feet of manufacturing space at 4500 S. 76th Circle in Omaha, Nebraska for our Optimal Aquafeed LLC operations which manufactures and stores fish food, feed ingredients and other related products.
Our marketing operations are conducted primarily at our corporate office, in Omaha, Nebraska.
Partnership Segment
Our partnership owns approximately five acres of land and leases approximately 16 acres of land at four locations in four states, as disclosed in Item 1 - Business, where its fuel terminals are located and owns approximately 41 acres of land and leases approximately two acres of land where its storage facilities are located at our ethanol production facilities.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proc eedings. We are currently involved in litigation that has occurred in the ordinary course of doing business. We do not believe this will have a material adverse effect on our financial position, results of operations or cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market fo r Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock
Our common stock trades under the symbol “GPRE” on Nasdaq.
Holders of Record
We had 1,917 holders of record of our common stock, not including beneficial holders whose shares are held in names other than their own, on February 14, 2022. This figure does not include approximately 51.0 million shares held in depository trusts.
Dividend Policy
On June 18, 2019, the company announced that its board of directors decided to suspend its future quarterly cash dividend following the June 14, 2019 dividend payment, in order to retain and redirect cash flow to the company’s Project 24 operating expense equalization plan, the deployment of high-protein technology and its stock repurchase program.
Issuer Purchases of Equity Securities
Employees surrender shares when restricted stock grants are vested to satisfy statutory minimum required payroll tax withholding obligations. No restricted stock vested during the fourth quarter of 2021 and therefore no shares were surrendered.
Our board of directors authorized a share repurchase program of up to $200.0 million of our common stock. Under this program, we may repurchase shares in open market transactions, privately negotiated transactions, accelerated buyback programs, tender offers or by other means. The timing and amount of the transactions are determined by management based on its evaluation of market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time, without prior notice. We did not repurchase any shares during the fourth quarter of 2021. Since inception, the company has repurchased 7,396,936 shares of common stock for approximately $92.8 million under the program.
Recent Sales of Unregistered Securities
None.
Equity Compensation Plans
Refer to Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for information regarding shares authorized for issuance under equity compensation plans.
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Performance Graph
The following graph compares our cumulative total return with the S&P SmallCap 600 Index and the Nasdaq Clean Edge Green Energy Index (CELS) for each of the five years ended December 31, 2021. The graph assumes a $100 investment in our common stock and each index at December 31, 2016, and that all dividends were reinvest ed.
12/16
12/17
12/18
12/19
12/20
12/21
Green Plains Inc.
$
100.00
$
62.03
$
49.55
$
59.26
$
50.58
$
133.50
S&P SmallCap 600
100.00
113.23
103.63
127.24
141.60
179.58
Nasdaq Clean Edge Green Energy
100.00
132.05
116.05
165.57
471.59
459.13
The information in the graph will not be considered solicitation material, nor will it be filed with the SEC or incorporated by reference into any future filing under the Securities Act or the Exchange Act, unless we specifically incorporate it by reference into our filing.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Managem ent’s Discussion and Analysis of Financial Condition and Results of Operations.
General
The following discussion and analysis includes information management believes is relevant to understand and assess our consolidated financial condition and results of operations. This section should be read in conjunction with our consolidated financial statements, accompanying notes and the risk factors contained in this report.
Overview
Green Plains is an Iowa corporation, founded in June 2004 as a producer of low carbon fuels and has grown to be one of the leading corn processors in the world. We continue the transition from a commodity-processing business to a value-add agricultural technology company focusing on creating diverse, non-cyclical, higher margin products. In addition, we are currently undergoing a number of project initiatives to improve margins. Through our Total Transformation Plan to a value-add agricultural technology company, we believe we can further increase margin per gallon by producing additional value-added ingredients such as Ultra-High Protein while expanding corn oil yields.
Our first FQT MSC™ Ultra-High Protein installation was completed at our Shenandoah plant during the first quarter of 2020. Our Wood River plant began operations in October 2021. Three additional locations are under construction and expect to be operational by the middle to last half of 2022. We anticipate that additional locations will be completed over the course of the next several years.
We have also upgraded our York facility to include USP grade alcohol capabilities. We began pilot scale batch operations at the CST production facility at our York Innovation Center in the second quarter of 2021, which may allow for the production of both food and industrial grade dextrose to target applications in food production, renewable chemicals and synthetic biology. We anticipate modifying one or more biorefineries to include CST production capabilities to meet anticipated future customer demands.
In December 2020, we completed the purchase of a majority interest in FQT. The acquisition capitalizes on the core strengths of each company to develop and implement proven, value-added agriculture, food and industrial biotechnology systems and rapidly expand installation and production of Ultra-High Protein across Green Plains facilities, as well as offer these technologies to partnering biofuel facilities.
Additionally, we have taken advantage of opportunities to divest certain assets in recent years. We are focused on generating stable operating margins through our business segments and risk management strategy. We own and operate assets throughout the ethanol value chain: upstream, with grain handling and storage; through our ethanol production facilities; and downstream, with marketing and distribution services to mitigate commodity price volatility. Our other businesses leverage our supply chain, production platform and expertise.
Our profitability is highly dependent on commodity prices, particularly for ethanol, distillers grains, Ultra-High Protein, corn oil, corn, and natural gas. Since market price fluctuations of these commodities are not always correlated, our operations may be unprofitable at times. We use a variety of risk management tools and hedging strategies to monitor price risk exposure at our ethanol plants and lock in favorable margins or reduce production when margins are compressed.
More information about our business, properties and strategy can be found under Item 1 - Business and a description of our risk factors can be found under Item 1A - Risk Factors.
Industry Factors Affecting our Results of Operations
U.S. Ethanol Supply and Demand
According to the EIA, domestic ethanol production averaged 0.99 million barrels per day in 2021, which was 9% higher than the 0.91 million barrels per day in 2020. Refiner and blender input volume increased 10% to 875 thousand barrels per day for 2021, compared with 798 thousand barrels per day in 2020. Gasoline demand increased 0.8 million barrels per day, or 10%, in 2021 compared to the prior year. U.S. domestic ethanol ending stocks decreased by approximately 2.1 million barrels compared to the prior year, or 9%, to 21.4 million barrels as of December 31, 2021. As of December 31, 2021, according to Prime the Pump, there were approximately 2,555 retail stations selling E15 in 30 states, up from 2,300 at the beginning of the year, and approximately 267 pipeline terminal locations now offering E15 to wholesale customers.
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Global Ethanol Supply and Demand
According to the USDA Foreign Agriculture Service, domestic ethanol exports through November 30, 2021, were approximately 1,126 mmg, down 6% from 1,199 mmg for the same period of 2020. Canada was the largest export destination for U.S. ethanol accounting for 30% of domestic ethanol export volume. India, South Korea, China, and Brazil accounted for 12%, 12%, 9% and 6%, respectively, of U.S. ethanol exports. We currently estimate that net ethanol exports will range from 1.2 to 1.4 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.
In January 2020, China and the United States struck a “Phase I” trade agreement, which included commitments on agricultural commodity purchases. Ethanol, corn and distillers grains were included as potential purchases in the agreement. China has been purchasing large quantities of corn, which has raised domestic prices of this feedstock for our ethanol production process. In addition, in October 2020, it was announced that China had purchased a shipment of U.S. ethanol for the first time since March 2018. Total ethanol exports to China in 2020 were 32 million gallons, and through November 2021 were 100 million gallons, according to the USDA Foreign Agriculture Service.
Year-to-date U.S. distillers grains exports through November 30, 2021, were 10.7 million metric tons, or 5% higher than the same period last year, according to the USDA Foreign Agriculture Service. Mexico, Vietnam, South Korea, Indonesia and Turkey accounted for approximately 58% of total U.S. distillers grains export volumes.
Legislation and Regulation
We are sensitive to government programs and policies that affect the supply and demand for ethanol and other fuels, which in turn may impact the volume of ethanol and other fuels we handle. Over the 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. We believe it is unlikely that any of these bills will become law in the current Congress. In addition, the manner in which the EPA administers the RFS and related regulations can have a significant impact on the actual amount of ethanol blended into the domestic fuel supply.
Federal mandates and state-level clean fuel programs supporting the use of renewable fuels are a significant driver of ethanol demand in the U.S. Ethanol policies are influenced by concerns for the environment, diversifying the fuel supply, 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 U.S. market share. In addition, expansion of clean fuel programs in other states, or a national low carbon fuel standard could increase the demand for ethanol, depending on how it is structured.
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 15.0 billion gallons in 2015, which left the EPA to address existing limitations in both supply and demand. As of this filing, the EPA 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.
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. While conventional ethanol maintained 15 billion gallons, 2019 was the second consecutive year that the total RVO was more than 20% below the statutory volumes levels. Thus, the EPA was expected to initiate a reset rulemaking, and modify statutory volumes through 2022, and do so based on the same factors they are to use in setting the RVOs post 2022. These factors include environmental impact, domestic energy security, expected production, infrastructure impact, consumer costs, job creation, price of agricultural commodities, food prices, and rural economic development. However, in late 2019, the EPA announced it would not be moving forward with a reset rulemaking in 2020. It is unclear when or if the current EPA will propose a reset rulemaking, though they have stated an intention to propose a post 2022 set rulemaking by the end of 2021.
Under the RFS, RINs and SREs are important tools impacting supply and demand. The EPA assigns individual refiners, blenders, and importers the volume of renewable fuels they are obligated to use in each annual RVO based on their percentage of total domestic transportation fuel sales. Obligated parties use RINs to show compliance with the RFS mandated volumes. Ethanol producers assign RINs to renewable fuels and the RINs are detached when the renewable fuel is blended with transportation fuel domestically. Market participants can trade the detached RINs in the open market. The market price of detached RINs can affect the price of ethanol in certain markets and can influence purchasing decisions by obligated parties. As it relates to SREs, a small refinery is defined as one that processes fewer than 75,000 barrels of petroleum per day. Small refineries can petition the EPA for a SRE which, if approved, waives their portion of the annual RVO requirements.
The EPA, through consultation with the DOE and the USDA, can grant them a full or partial waiver, or deny it outright within 90 days of submittal. The EPA granted significantly more of these waivers for 2016, 2017 and 2018 than they had in the past, totaling 790 mmg of waived requirements for the 2016 compliance year, 1.82 billion gallons for 2017 and 1.43 billion gallons for 2018. In doing so, the EPA effectively reduced the RFS mandated volumes for those compliance years by those amounts respectively, and as a result, RIN values declined significantly. In the waning days of the Trump administration, the EPA approved three additional SREs, reversing one denial from 2018 and granting two from 2019. A total of 88 SREs were granted under the Trump Administration, totaling 4.3 billion gallons of potential blending demand erased. The 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. There are multiple legal challenges to how the EPA has handled SREs and RFS rulemakings.
The One-Pound Waiver that was extended in May 2019 to allow E15 to be sold year-round to all vehicles model year 2001 and newer was challenged in an action filed in Federal District Court for the D.C. Circuit. 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. The Supreme Court declined to hear a challenge to this ruling. As of this filing E15 is sold year-round in approximately 30 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. This includes funding for infrastructure, labeling changes and allowing E15 to be sold through E10 infrastructure. The USDA rolled out the Higher Blend Infrastructure Incentive Program in the summer of 2020, providing competitive grants to fuel terminals and retailers for installing equipment for dispensing higher blends of ethanol and biodiesel. In 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.
To respond to the COVID-19 health crisis and attempt to offset the subsequent economic damage, Congress passed multiple relief measures, most notably the CARES Act in March 2020, which created and funded multiple programs that have impacted our industry. The USDA was given additional resources for the Commodity Credit Corporation (CCC) and they are using those funds to provide direct payments to farmers, including corn farmers from whom we purchase most of our feedstock for ethanol production. Similar to the trade aid payments made by the USDA over the past two years, this cash injection for farmers could cause them to delay marketing decisions and increase the price we have to pay to purchase corn. The CARES Act also allowed for certain net operating loss carrybacks, which has allowed us to receive certain tax refunds. In December 2020, Congress passed and then President Trump signed into law an annual spending package coupled with another COVID relief bill which included additional funds for the Secretary of Agriculture to distribute to those impacted by the pandemic. The language of the bill specifically includes biofuels producers as eligible for some of this aid, and in March of 2021, the USDA indicated that biofuels would be able to apply for a portion of these funds in a forthcoming rulemaking. On June 15, 2021, the USDA indicated that $700 million would be made available to biofuels producers, and in December 2021, they released details for the program, specifying that domestic biofuel producers must apply for market losses due to COVID by February 11, 2022, with payments announced by March 12, 2022. It is not possible to predict the amount we would receive, if any, from this program.
The CARES Act provided a tax exclusion on the shipment of undenatured ethanol for use in manufacturing hand sanitizer, a key ingredient of which is undenatured ethanol of specific grades. The FDA announced that it is ending, effective December 31, 2021, the expanded guidance, which allowed for more denaturants to be used in ethanol intended for hand sanitizer production, and expanded the grades of ethanol for the duration of the public health crisis.
The current administration has indicated a desire to dramatically expand electric vehicle (EV) charging stations, and initially proposed $174 billion for EV charging infrastructure, purchase rebates, and other incentives. The recently-enacted bipartisan infrastructure package includes $15 billion for EV charging infrastructure, and $5 billion for electric busses and ferries. Additionally, Congress is considering expanded EV incentives in a budget reconciliation package, with the goal of installing 500,000 EV charging stations and providing incentives to middle and lower income Americans to purchase EVs, in addition to manufacturing incentives for car makers. The package would offer consumers tax rebates of $7,500 to $12,500 for purchasing EVs, and would invest billions in charging infrastructure. These tax incentives could reduce the overall market for liquid fuels in the surface transportation sector and with it, that of ethanol.
The budget reconciliation package currently being considered by Congress also would extend the $1.00/gallon tax credits for renewable diesel and biodiesel, which use our distillers corn oil as one of their low-carbon feedstocks. The package would also create a $1.25 - $1.75/gallon tax incentive for the production of sustainable aviation fuel, which could possibly utilize our distillers corn oil or our ethanol as a feedstock. The package would also expand tax credits for carbon capture and sequestration (CCS) and extend the time frame for projects to qualify for this credit. The fermentation process by which we
produce ethanol releases a nearly pure stream of carbon dioxide which has the potential to be captured and sequestered. The package would also create a technology-neutral clean fuel production tax credit for 2027, but this would not be applicable for fuels that take advantage of the CCS tax credits. The package in its current form also expands the eligibility of Master Limited Partnership tax status to clean energy projects, including CCS and renewable fuels. There can be no assurance, however, these provisions make it into any final legislation.
Government actions abroad can significantly impact the demand for U.S. ethanol. In September 2017, China’s National Development and Reform Commission, the National Energy Agency and 15 other state departments issued a joint plan to expand the use and production of biofuels containing up to 10% ethanol by 2020. China, the number three importer of U.S. ethanol in 2016, imported negligible volumes during 2018 and 2019 due to a 30% tariff on U.S. ethanol, which increased to 70% in early 2018. There is no assurance that China’s joint plan to expand blending to 10% will be carried to fruition, nor that it will lead to increased imports of U.S. ethanol in the near term. Ethanol is included as an agricultural commodity under the “Phase I” agreement with China, wherein they are to purchase upwards of $40 billion in agricultural commodities from the U.S. in both 2020 and 2021. According to the USDA Foreign Agricultural Service, China purchased 32 mmg of U.S. ethanol in 2020 and through November 2021 had imported 100 mmg.
In Brazil, the Secretary of Foreign Trade had issued a tariff rate quota which expired in December of 2020. All U.S. ethanol gallons now face a 20% tariff into Brazil. Exports to Brazil were 186 mmg in 2020 and 63 mmg through November 2021. Our exports also face tariffs, rate quotas, countervailing duties, and other hurdles in the European Union, India, Peru, Colombia and elsewhere, which limits the ability to compete in some markets. We believe some countries are using the COVID-19 crisis as justification for raising duties on imports of U.S. ethanol, or blocking our imports entirely.
In June 2017, the Energy Regulatory Commission of Mexico (CRE) approved the use of 10% ethanol blends, which was challenged by multiple lawsuits, of which several were dismissed. An injunction was granted in October 2017, preventing the blending and selling of E10, but was overturned by a higher court in June 2018, making it legal to blend and sell E10 by PEMEX (Petroleos Mexicanos, or Mexican Petroleum) throughout Mexico except for its three largest metropolitan areas. On January 15, 2020, the Mexican Supreme Court ruled that the expedited process for the CRE regulation was unconstitutional, and that after a 180 day period the maximum ethanol blend allowed in the country would revert to 5.8%. There was an effort to go through the full regulatory process to allow for 10% blends countrywide, including in the three major metropolitan areas. The 180 day window was extended multiple times due to COVID-19, but eventually lapsed in June 2021, decreasing the maximum ethanol blend back to 5.8%.
In January 2020, the updated North American Free Trade Agreement, known as the United States Mexico Canada Agreement or USMCA was signed. The USMCA went into effect on July 1, 2020, and maintains the duty free access of U.S. agricultural commodities, including ethanol, into Canada and Mexico. According to the USDA Foreign Agricultural Service, exports to Canada were 334 mmg and exports to Mexico were 41 mmg through November 2021.
Environmental and Other Regulation
Our operations are subject to environmental regulations, including those that govern the handling and release of ethanol, crude oil and other liquid hydrocarbon materials. Compliance with existing and anticipated environmental laws and regulations may increase our overall cost of doing business, including capital costs to construct, maintain, operate, and upgrade equipment and facilities. Our business may also be impacted by government policies, such as tariffs, duties, subsidies, import and export restrictions and outright embargos. We employ maintenance and operations personnel at each of its facilities, which are regulated by the Occupational Safety and Health Administration.
The U.S. ethanol industry relies heavily on tank cars to deliver its product to market. In 2015, the DOT finalized the Enhanced Tank Car Standard and Operational Controls for High-Hazard and Flammable Trains, or DOT specification 117, which established a schedule to retrofit or replace older tank cars that carry crude oil and ethanol, braking standards intended to reduce the severity of accidents and new operational protocols. The deadline for compliance with DOT specification 117 is May 1, 2023. The rule may increase our lease costs for railcars over the long term, which will, in turn, result in an increase in fees the partnership charges for railcar capacity. Additionally, existing railcars may be out of service for a period of time while upgrades are made, tightening supply in an industry that is highly dependent on railcars to transport product. We intend to strategically manage our leased railcar fleet to comply with the new regulations and have commenced transition of our fleet to DOT 117 compliant railcars. As of December 31, 2021, approximately 55% of our railcar fleet was DOT 117 compliant. We anticipate that an additional 30% of our railcar fleet will be DOT 117 compliant by the end of 2022, and that our entire fleet will be fully compliant by 2023.
In September 2015, the FDA issued rules for Current Good Manufacturing Practice, Hazard Analysis and Risk-Based Preventative Controls for food for animals in response to FSMA. The rules require FDA-registered food facilities to address
safety concerns for sourcing, manufacturing and shipping food products and food for animals through food safety programs that include conducting hazard analyses, developing risk-based preventative controls and monitoring, and addressing intentional adulteration, recalls, sanitary transportation and supplier verification. We believe we have taken sufficient measures to comply with these regulations.
Variability of Commodity Prices
Our business is highly sensitive to commodity price fluctuations, particularly for corn, ethanol, corn oil, distillers grains and natural gas, which are impacted by factors that are outside of our control, including weather conditions, corn yield, changes in domestic and global ethanol supply and demand, government programs and policies and the price of crude oil, gasoline and substitute fuels. We use various financial instruments to manage and reduce our exposure to price variability. For more information about our commodity price risk, refer to Item 7A. - Qualitative and Quantitative Disclosures About Market Risk, Commodity Price Risk in this report.
We maintained an average utilization rate of approximately 77% of capacity during 2021, compared with 71% of capacity, for the prior year. Our operating strategy is to reduce operating expenses, energy usage and water consumption through our Project 24 initiative while running at higher utilization rates in order to achieve improved margins. From time to time, due to economic operating conditions, we may exercise operational discretion that results in reductions in production. Additionally, we may experience lower run rates due to the construction of various projects as well as due to delays in receiving the necessary permits required to operate our facilities. It is possible that production could be below minimum volume commitments in the future, depending on various factors that drive each biorefineries variable contribution margin, including future driving and gasoline demand for the industry.
Effects of Inflation
While inflation has increased modestly relative to recent years, we do not expect it to have a material impact on our future results of operations.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires that we use estimates that affect the reported assets, liabilities, revenue and expense and related disclosures for contingent assets and liabilities. We base our estimates on experience and assumptions we believe are proper and reasonable. While we regularly evaluate the appropriateness of these estimates, actual results could differ materially from our estimates. The following accounting policies, in particular, may be impacted by judgments, assumptions and estimates used in the preparation of our consolidated financial statements.
Derivative Financial Instruments
We use various derivative financial instruments, including exchange-traded futures and exchange-traded and over-the-counter options contracts, to attempt to minimize risk and the effect of commodity price changes, including but not limited to, corn, ethanol, natural gas, soybean meal, soybean oil and crude oil. We monitor and manage this exposure as part of our overall risk management policy to reduce the adverse effect market volatility may have on our operating results. We may hedge these commodities as one way to mitigate risk; however, there may be situations when these hedging activities themselves result in losses.
By using derivatives to hedge exposures to changes in commodity prices, we are exposed to credit and market risk. Our exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the terms of the derivative contract. We minimize our credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring their financial condition. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. We manage market risk by incorporating parameters to monitor exposure within our risk management strategy, which limits the types of derivative instruments and strategies we can use and the degree of market risk we can take using derivative instruments.
We evaluate our physical delivery contracts to determine if they qualify for normal purchase or sale exemptions which are expected to be used or sold over a reasonable period in the normal course of business. Contracts that do not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating income unless the contracts qualify for, and we elect, cash flow hedge accounting treatment.
Certain qualifying derivatives related to ethanol production and agribusiness and energy services segments are designated as cash flow hedges. We evaluate the derivative instrument to ascertain its effectiveness prior to entering into cash
flow hedges. Unrealized gains and losses are reflected in accumulated other comprehensive income or loss until the gain or loss from the underlying hedged transaction is realized. When it becomes probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued, which affects earnings. These derivative financial instruments are recognized in current assets or current liabilities at fair value.
At times, we hedge our exposure to changes in inventory values and designate qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted in the current period for changes in fair value. Ineffectiveness of the hedges is recognized in the current period to the extent the change in fair value of the inventory is not offset by the change in fair value of the derivative.
Accounting for Income Taxes
Income taxes are accounted for under the asset and liability method in accordance with GAAP. Deferred tax assets and liabilities are recognized for future tax consequences between existing assets and liabilities and their respective tax basis, and for net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in years temporary differences are expected to be recovered or settled. The effect of a tax rate change is recognized in the period that includes the enactment date. The realization of deferred tax assets depends on the generation of future taxable income during the periods in which temporary differences become deductible. Management considers scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies to make this assessment. A valuation allowance is recorded by the company when it is more likely than not that some portion or all of a deferred tax asset will not be realized. In making such a determination, management considers the positive and negative evidence to support the need for, or reversal of, a valuation allowance. The weight given to the potential effects of positive and negative evidence is based on the extent it can be objectively verified.
To account for uncertainty in income taxes, we gauge the likelihood of a tax position based on the technical merits of the position, perform a subsequent measurement related to the maximum benefit and degree of likelihood, and determine the benefit to be recognized in the financial statements, if any.
Impairment of Goodwill
Our goodwill is related to certain acquisitions within our ethanol production and partnership segments. We review goodwill for impairment at least annually, as of October 1, or more frequently whenever events or changes in circumstances indicate that an impairment may have occurred.
Circumstances that may indicate impairment include a decline in future projected cash flows, a decision to suspend plant operations for an extended period of time, a sustained decline in our market capitalization, a sustained decline in market prices for similar assets or businesses or a significant adverse change in legal or regulatory matters, or business climate. Significant management judgment is required to determine the fair value of our goodwill and measure impairment, including projected cash flows. Fair value is determined through various valuation techniques, including discounted cash flow models utilizing assumed margins, cost of capital, inflation and other inputs, sales of comparable properties and third-party independent appraisals. Changes in estimated fair value as a result of declining ethanol margins, loss of significant customers or other factors could result in an impairment of goodwill.
Please refer to Note 10 - Goodwill and Intangible Assets to the consolidated financial statements for further details.
Recently Issued Accounting Pronouncements
For information related to recent accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies included as part of the notes to consolidated financial statements in this report.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Components of Revenues and Expenses
Revenues. For our ethanol production segment, our revenues are derived primarily from the sale of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil. For our agribusiness and energy services segment, our primary sources of revenue include sales of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil that we market for our ethanol plants, in which we earn a marketing fee, sales of ethanol we market for a third-party and sales of grain and other commodities purchased in the open market. For our partnership segment, our
revenues consist primarily of fees for receiving, storing, transferring and transporting ethanol and other fuels. Revenues include net gains or losses from derivatives related to products sold.
Cost of Goods Sold. For our ethanol production segment, cost of goods sold includes direct labor, materials and plant overhead costs. Direct labor includes compensation and related benefits of non-management personnel involved in ethanol plant operations. Plant overhead consists primarily of plant utilities and outbound freight charges. Corn is the most significant raw material cost followed by natural gas, which is used to power steam generation in the ethanol production process and dry distillers grains. Cost of goods sold also includes net gains or losses from derivatives related to commodities purchased.
For our agribusiness and energy services segment, purchases of ethanol, distillers grains, corn oil and grain are the primary component of cost of goods sold. Grain inventories held for sale and forward purchase and sale contracts are valued at market prices when available or other market quotes adjusted for differences, such as transportation, between the exchange-traded market and local markets where the terms of the contracts are based. Changes in the market value of grain inventories, forward purchase and sale contracts, and exchange-traded futures and options contracts are recognized as a component of cost of goods sold.
Operations and Maintenance Expense. For our partnership segment, transportation expense is the primary component of operations and maintenance expense. Transportation expense includes rail car leases, shipping and freight and costs incurred for storing ethanol at destination terminals.
Loss (Gain) on Sale of Assets, Net. We completed the sale of the ethanol plant located in Ord, Nebraska in March 2021 and the sale of the ethanol plant located in Hereford, Texas during the fourth quarter of 2020. The sale of Ord resulted in a pretax gain of $35.9 million recorded at the corporate level. The sale of Hereford resulted in a loss of $18.5 million recorded at the corporate level, a loss of $3.9 million recorded at the ethanol production level and the gain on the assignment of operating leases of $2.7 million recorded at the partnership level.
Selling, General and Administrative Expense. Selling, general and administrative expenses are recognized at the operating segment and corporate level. These expenses consist of employee salaries, incentives and benefits; office expenses; director fees; and professional fees for accounting, legal, consulting and investor relations services. Personnel costs, which include employee salaries, incentives, and benefits, as well as severance and separation costs, are the largest expenditure. Selling, general and administrative expenses that cannot be allocated to an operating segment are referred to as corporate activities.
Other Income (Expense). Other income (expense) includes interest earned, interest expense and other non-operating items, as well as a gain of $4.8 million related to the sale of our 50% interest in JGP Energy Partners LLC during fiscal year 2019.
Income from Equity Method Investees, Net of Income Taxes. Income from equity method investees, net of income taxes, represents our proportional share of earnings from our equity method investees. Refer to Note 20 - Equity Method Investments to the consolidated financial statements for further details.
Net Income from Discontinued Operations, Net of Income Taxes. Net income from discontinued operations, net of income taxes represents the operations of GPCC prior to its disposition during the third quarter of 2019. GPCC was previously a wholly owned subsidiary of Green Plains until the formation of the GPCC joint venture and disposition September 1, 2019. Refer to Note 5 - Acquisitions, Dispositions and Discontinued Operations to the consolidated financial statements for further details.
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Results of Operations
Comparability
The following summarizes various events that affect the comparability of our operating results for the past three years:
 September 2019
An aggregate 50% membership interest of GPCC was sold, resulting in the deconsolidation of GPCC and the equity method of accounting treatment of our continued investment. Operational results of GPCC prior to its disposition have been reclassified as discontinued operations in our consolidated financial statements. The assets and liabilities of GPCC have been reclassified as assets and liabilities of discontinued operations.
 October 2020
Our remaining 50% membership interest in GPCC was sold.
 December 2020
Hereford, Texas ethanol plant was sold and certain storage assets of this plant were acquired from the partnership prior to being sold.
 December 2020
 March 2021
Acquired a majority interest in FQT.
Ord, Nebraska ethanol plant was sold and certain storage assets of this plant were acquired from the partnership prior to being sold.
The year ended December 31, 2019, includes eight months of operations of GPCC, which are included in discontinued operations with the remaining four months of the GPCC joint venture being accounted for using the equity method of accounting. Additionally, operations of GPCC have been reclassified as discontinued operations and assets and liabilities of GPCC have been reclassified as assets and liabilities of discontinued operations. The year ended December 31, 2020, includes approximately nine months of operations of the GPCC joint venture being accounted for using the equity method of accounting.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2020, compared to the year ended December 31, 2019, can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 16, 2021.
Segment Results
We report the financial and operating performance for the following three operating segments: (1) ethanol production, which includes the production of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities, and (3) partnership, which includes fuel storage and transportation services. Results for our previously reported food and ingredients segment are now included in the agribusiness and energy services segment. The food and ingredients segment had no activity in either 2021 or 2020 and minimal activity in 2019.
During the normal course of business, our operating segments do business with each other. For example, our agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains and corn oil of our ethanol production segment. Our partnership segment provides fuel storage and transportation services for our agribusiness and energy services segment. These intersegment activities are treated like third-party transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment performance; however, they do not impact our consolidated results since the revenues and corresponding costs are eliminated.
Corporate activities include selling, general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment and the loss (gain) on sale of assets. 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.
‎
The selected operating segment financial information are as follows (in thousands):
Year Ended December 31,
Revenues:
Ethanol production:
Revenues from external customers
$
2,153,368
$
1,502,481
$
1,700,615
Intersegment revenues
-
Total segment revenues
2,153,368
1,502,581
1,700,715
Agribusiness and energy services:
Revenues from external customers
669,526
416,403
709,767
Intersegment revenues
21,958
27,468
27,184
Total segment revenues
691,484
443,871
736,951
Partnership:
Revenues from external customers
4,274
4,835
6,856
Intersegment revenues
74,178
78,510
75,531
Total segment revenues
78,452
83,345
82,387
Revenues including intersegment activity
2,923,304
2,029,797
2,520,053
Intersegment eliminations
(96,136)
(106,078)
(102,815)
Total Revenues
$
2,827,168
$
1,923,719
$
2,417,238
Year Ended December 31,
Cost of goods sold:
Ethanol production
$
2,063,283
$
1,507,335
$
1,791,099
Agribusiness and energy services
657,375
409,407
697,752
Partnership
-
-
-
Intersegment eliminations
(95,549)
(104,579)
(103,904)
$
2,625,109
$
1,812,163
$
2,384,947
Year Ended December 31,
Operating income (loss):
Ethanol production (1)
$
(27,996)
$
(129,618)
$
(178,575)
Agribusiness and energy services
17,458
15,773
22,701
Partnership
48,672
50,437
50,635
Intersegment eliminations
(587)
(1,400)
1,188
Corporate activities (2)
(12,039)
(57,888)
(38,519)
$
25,508
$
(122,696)
$
(142,570)
(1)Operating loss for the ethanol production segment for fiscal year 2020 includes a goodwill impairment charge of $24.1 million and $3.9 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant.
(2)Corporate activities for fiscal year 2021 include a $29.6 million net gain on sale of assets primarily from the sale of the Ord, Nebraska ethanol plant. Corporate activities for fiscal year 2020 include an $18.5 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant and a $1.5 million net gain from the sale of GPCC.
We use EBITDA and adjusted EBITDA as segment measures of profitability to compare the financial performance of our reportable segments and manage those segments. EBITDA is defined as earnings before interest expense, income tax expense, including related tax expense of equity method investments, depreciation and amortization excluding the amortization of right-of-use assets and debt issuance costs. Adjusted EBITDA includes adjustments related to operational results of GPCC prior to its disposition which are recorded as discontinued operations, our proportional share of EBITDA adjustments of our equity method investees, noncash goodwill impairment and the loss (gain) on sale of assets, net. 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 from continuing operations including noncontrolling interest to adjusted EBITDA (in thousands):
Year Ended December 31,
Net loss from continuing operations including noncontrolling interest
$
(44,146)
$
(89,654)
$
(148,829)
Interest expense (1)
67,144
39,993
40,200
Income tax expense (benefit), net of equity method income taxes
1,845
(43,879)
(21,316)
Depreciation and amortization (2)
91,952
78,244
72,127
EBITDA
116,795
(15,296)
(57,818)
EBITDA adjustments related to discontinued operations
-
-
17,703
Proportional share of EBITDA adjustments to equity method investees
7,093
4,974
Loss (gain) on sale of assets, net (3)
(29,601)
20,860
(4,799)
Noncash goodwill impairment
-
24,091
-
Adjusted EBITDA
$
87,378
$
36,748
$
(39,940)
(1)Interest expense for the year ended December 31, 2021, includes a loss on extinguishment of convertible notes of $22.1 million and a loss on settlement of convertible notes of $9.5 million.
(2)Excludes the amortization of operating lease right-of-use assets and amortization of debt issuance costs.
(3)Fiscal year 2019 includes gain reported in other income (expense).
The following table reconciles EBITDA by segment to adjusted EBITDA (in thousands):
Year Ended December 31,
Adjusted EBITDA:
Ethanol production (1)
$
55,056
$
(60,868)
$
(114,494)
Agribusiness and energy services
19,716
18,430
24,974
Partnership
53,109
54,907
54,853
Intersegment eliminations
(587)
(1,400)
1,188
Corporate activities (2)
(10,499)
(26,365)
(24,339)
EBITDA
116,795
(15,296)
(57,818)
EBITDA adjustments related to discontinued operations
-
-
17,703
Proportional share of EBITDA adjustments to equity method investees
7,093
4,974
Loss (gain) on sale of assets, net
(29,601)
20,860
(4,799)
Noncash goodwill impairment
-
24,091
-
Adjusted EBITDA
$
87,378
$
36,748
$
(39,940)
(1)Fiscal year 2020 includes the goodwill impairment charge of $24.1 million and $3.9 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant.
(2)Corporate activities for fiscal year 2021 include a $29.6 million net gain on sale of assets primarily from the sale of the Ord, Nebraska ethanol plant. Corporate activities for fiscal year 2020 include an $18.5 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant and the $1.5 million gain from sale of GPCC. Fiscal year 2019 includes a $4.8 million gain related to the sale of our 50% interest in JGP Energy Partners LLC.
Total assets by segment are as follows (in thousands):
Year Ended December 31,
Total assets (1):
Ethanol production
$
1,101,151
$
900,963
Agribusiness and energy services
487,164
378,720
Partnership
100,349
91,205
Corporate assets
524,206
228,074
Intersegment eliminations
(53,115)
(20,045)
$
2,159,755
$
1,578,917
(1)Asset balances by segment exclude intercompany balances.
Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020
Consolidated Results
Consolidated revenues increased $903.4 million in 2021, compared with 2020 primarily due to higher prices on ethanol, distillers grains and corn oil, as well as increased trading revenues within our agribusiness and energy services segment, slightly offset by lower volumes sold in our ethanol production segment.
Operating income increased $148.2 million and adjusted EBITDA increased $50.6 million in 2021, compared with 2020 primarily due to increased margins on ethanol production and the gain on sale of assets in 2021, offset by the write-off of the goodwill in the ethanol production segment and loss on sale of assets, net during fiscal year 2020. Interest expense increased $27.2 million in 2021, compared with 2020 primarily due to the loss upon settlement of convertible notes of $22.1 million recorded in the first quarter of 2021 and the $9.5 million loss upon settlement of convertible notes recorded in the second quarter of 2021. Income tax expense was $1.8 million in 2021, compared to an income tax benefit of $50.4 million in 2020. The income tax benefit in 2020 was primarily due to benefits recorded related to the CARES Act.
The following discussion provides greater detail about our segment performance.
Ethanol Production Segment
Key operating data for our ethanol production segment is as follows:
Year Ended December 31,
Ethanol sold
(thousands of gallons)
750,648
793,743
Distillers grains sold
(thousands of equivalent dried tons)
1,977
2,054
Corn oil sold
(thousands of pounds)
219,807
213,818
Corn consumed
(thousands of bushels)
259,786
275,351
Revenues in the ethanol production segment increased $650.8 million in 2021 compared with 2020 primarily due to higher prices on ethanol, distillers grains and corn oil, offset by lower ethanol volumes sold.
Cost of goods sold in the ethanol production segment increased $555.9 million for 2021 compared with 2020 due to higher corn and chemical costs. Operating income increased $101.6 million and EBITDA increased $115.9 million in 2021 compared with 2020 primarily due to improved margins offset by the write-off of the goodwill during fiscal year 2020. Depreciation and amortization expense for the ethanol production segment was $83.0 million for 2021, compared with $68.0 million during 2020.
Agribusiness and Energy Services Segment
Revenues in the agribusiness and energy services segment increased $247.6 million, operating income increased $1.7 million and EBITDA increased $1.3 million in 2021 compared with 2020. The increase in revenues was primarily due to an increase in ethanol, distillers grain and corn oil trading activity, as well as higher average realized prices for ethanol. Operating income and EBITDA increased primarily as a result of increased trading margins.
Partnership Segment
Revenues generated from the partnership segment decreased $4.9 million in 2021 compared with 2020. Railcar transportation services revenue decreased $2.3 million primarily due to a decrease in average volumetric capacity available for use associated with the sale of the Ord assets. Storage and throughput services revenue decreased $1.7 million primarily due to a decrease in throughput associated with the sale of the Ord assets. Trucking and other revenue decreased $0.6 million primarily due to a decrease in volumes transported for Green Plains Trade. Terminal services revenue decreased $0.3 million primarily as a result of a reduced throughput by Green Plains Trade.
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Operating income for the partnership segment decreased $1.8 million and EBITDA decreased $1.8 million in 2021 compared to 2020 due to the changes in revenues discussed above, partially offset by a decrease in operations and maintenance expenses of $3.1 million.
Intersegment Eliminations
Intersegment eliminations of revenues decreased by $9.9 million for 2021 compared with 2020 due to decreased storage and throughput fees paid to the partnership segment as well as decreased intersegment marketing fees within the agribusiness and energy services segment as a result of lower production volumes.
Corporate Activities
Operating loss decreased by $45.8 million for 2021 compared with 2020, primarily due to the net gain on sale of assets recorded during 2021 of $29.6 million and the net loss on sale of assets recorded during 2020 of $17.0 million.
Income Taxes
We recorded income tax expense of $1.8 million for 2021 compared to an income tax benefit of $50.4 million in 2020. The decrease in the amount of tax benefit was primarily due to an increase in the valuation allowance against increases in certain deferred tax assets compared to the tax benefit recorded for the same period in 2020 associated with the carry back of the 2019 tax NOLs to the 2014 tax year under the CARES Act of 2020, as well as the release of a previously recorded valuation allowance against the 2019 NOL and other deferred tax assets.
Liquidity and Capital Resources
Our principal sources of liquidity include cash generated from operating activities and bank credit facilities. We fund our operating expenses and service debt primarily with operating cash flows. Capital resources for maintenance and growth expenditures are funded by a variety of sources, including cash generated from operating activities, borrowings under bank credit facilities, or issuance of senior notes or equity. Our ability to access capital markets for debt under reasonable terms depends on our financial condition, credit ratings and market conditions. We believe that our ability to obtain financing at reasonable rates and our history of positive cash flow from operating activities, which have been positive for seven of the previous ten years, provide a solid foundation to meet our future liquidity and capital resource requirements.
On December 31, 2021, we had $426.2 million in cash and equivalents, excluding restricted cash, consisting of $339.5 million available to our parent company and the remainder at our subsidiaries. Additionally, we had $134.7 million in restricted cash and $124.9 million in marketable securities at December 31, 2021. Our marketable securities include highly liquid, fixed maturity investments with original maturities ranging from three to twelve months. We also had $287.8 million available under our committed revolving credit agreements and delayed draw term loan, some of which were subject to restrictions or other lending conditions. Funds held by our subsidiaries are generally required for their ongoing operational needs and restricted from distribution. At December 31, 2021, our subsidiaries had approximately $109.2 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 provided by operating activities was $4.2 million in 2021 compared to $98.9 million in 2020. Operating activities compared to the prior year were primarily affected by changes in working capital when compared to the same period of the prior year. Net cash used in investing activities was $236.3 million in 2021, compared to $11.5 million in 2020 due primarily to the purchase of marketable securities along with an increase in capital expenditures during fiscal year 2021. In 2021, we have invested in marketable securities that include highly liquid, fixed maturity investments with original maturities ranging from three to twelve months. Net cash provided by financing activities was $518.2 million in 2021, compared to net cash used in financing activities of $82.5 million in 2020 primarily due to proceeds from the issuance of common stock and debt offerings during 2021.
Additionally, Green Plains Trade, Green Plains Grain and Green Plains Commodity Management use revolving credit facilities to finance working capital requirements. We frequently draw from and repay these facilities which results in significant cash movements reflected on a gross basis within financing activities as proceeds from and payments on short-term borrowings.
We incurred capital expenditures of $187.3 million in 2021 primarily for high-protein expansion projects at our biorefineries, Project 24 upgrades and for various maintenance projects. The current projected estimate for capital spending for 2022 is approximately $250 million to $300 million, which is subject to review prior to the initiation of any project. The
estimate includes additional expenditures to deploy the FQT MSC™ Ultra-High Protein process technology, as well as expenditures for various other maintenance projects, and is expected to be financed with cash on hand, borrowings under our credit facilities and notes and cash provided by operating activities.
Our business is highly sensitive to the price of commodities, particularly for corn, ethanol, distillers grains, Ultra-High Protein, corn oil and natural gas. We use derivative financial instruments to reduce the market risk associated with fluctuations in commodity prices. Sudden changes in commodity prices may require cash deposits with brokers for margin calls or significant liquidity with little advanced notice to meet margin calls, depending on our open derivative positions. On December 31, 2021, we had $51.9 million in margin deposits for broker margin requirements included in the balance of restricted cash. We continuously monitor our exposure to margin calls and believe we will continue to maintain adequate liquidity to cover margin calls from our operating results and borrowings.
On June 18, 2019, we announced that our board of directors decided to suspend future quarterly cash dividends following the June 14, 2019 dividend payment, in order to retain and redirect cash flow to our Project 24 operating expense equalization plan, the deployment of high-protein technology and our stock repurchase program.
Our board of directors authorized a share repurchase program of up to $200.0 million of our common stock. Under the program, we may repurchase shares in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers or by other means. The timing and amount of repurchase transactions are determined by our management based on market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice. During 2020, we purchased a total of 880,979 shares of common stock for approximately $11.5 million. We did not repurchase any common stock in 2021. Since inception, we have repurchased 7,396,936 of common stock for approximately $92.8 million under the program.
On February 26, 2021, we filed an automatically effective shelf registration statement on Form S-3 with the SEC, registering an indeterminate number and amount of shares of common stock, warrants and debt securities.
We believe we have sufficient working capital for our existing operations. A continued sustained period of unprofitable operations, however, may strain our liquidity. We may sell additional assets or equity or borrow capital to improve or preserve our liquidity, expand our business or acquire businesses. We cannot provide assurance that we will be able to secure funding necessary for additional working capital or these projects at reasonable terms, if at all.
Debt
We were in compliance with our debt covenants at December 31, 2021. Based on our forecasts, we believe we will maintain compliance at each of our subsidiaries for the next twelve months or have sufficient liquidity available on a consolidated basis to resolve noncompliance. We cannot provide assurance that actual results will approximate our forecasts or that we will inject the necessary capital into a subsidiary to maintain compliance with its respective covenants. In the event a subsidiary is unable to comply with its debt covenants, the subsidiary’s lenders may determine that an event of default has occurred, and following notice, the lenders may terminate the commitment and declare the unpaid balance due and payable.
As outlined in Note 12 - Debt, we use LIBOR as a reference rate for certain credit facilities. 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 will cease the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new reference rate, the SOFR, calculated using short-term repurchase agreements backed by Treasury securities. The potential effect of any such event on interest expense cannot yet be determined.
Corporate Activities
In March 2021, we issued $230.0 million of 2.25% convertible senior notes due in 2027, or the 2.25% notes. The 2.25% notes bear interest at a rate of 2.25% per year, payable on March 15 and September 15 of each year, beginning September 15, 2021. The initial conversion rate is 31.6206 shares of the company’s common stock per $1,000 principal amount of 2.25% notes (equivalent to an initial conversion price of approximately $31.62 per share of the company’s common stock), representing an approximately 37.5% premium over the offering price of the company’s common stock. The conversion rate is subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. In addition, the company may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including the company’s calling the 2.25% notes for redemption. We
may settle the 2.25% notes in cash, common stock or a combination of cash and common stock. At December 31, 2021, the outstanding principal balance on the 2.25% notes was $230.0 million.
In June 2019, we issued $115.0 million of 4.00% convertible senior notes due in 2024, or the 4.00% notes. The 4.00% notes are senior, unsecured obligations, with interest payable on January 1 and July 1 of each year, beginning January 1, 2020, at a rate of 4.00% per annum. The initial conversion rate will be 64.1540 shares of our common stock per $1,000 principal amount of the 4.00% notes, which is equivalent to an initial conversion price of approximately $15.59 per share of our common stock. The conversion rate will be subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. In addition, we may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including our calling the 4.00% notes for redemption. We may settle the 4.00% notes in cash, common stock or a combination of cash and common stock.
In May 2021, we entered into a privately negotiated agreement with certain noteholders of the company’s 4.00% notes. Under this agreement, 3,568,705 shares of our common stock were exchanged for $51.0 million in aggregate principal amount of the 4.00% notes. Common stock held as treasury shares were exchanged for the 4.00% notes. At December 31, 2021, the outstanding principal balance on the 4.00% notes was $64.0 million.
In August 2016, we issued $170.0 million of 4.125% convertible senior notes due in 2022, or 4.125% notes, which are senior, unsecured obligations with interest payable on March 1 and September 1 of each year. Prior to March 1, 2022, the 4.125% notes are not convertible unless certain conditions are satisfied. The initial conversion rate is 35.7143 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $28.00 per share. The conversion rate will be subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. We may settle the 4.125% notes in cash, common stock or a combination of cash and common stock.
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 December 31, 2021, the outstanding principal balance on the 4.125% notes was $34.3 million.
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 December 31, 2021, 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 December 31, 2021, the outstanding principal balance was $30.0 million on the loan and the interest rate was 6.52%.
We also have small equipment financing loans, capital leases on equipment or facilities, and other forms of debt financing.
Agribusiness and Energy Services Segment
Green Plains Trade has a $300.0 million senior secured asset-based revolving credit facility to finance working capital up to the maximum commitment based on eligible collateral, which matures in July of 2022. This facility can be increased by up to $70.0 million with agent approval. Advances are subject to variable interest rates equal to a daily LIBOR rate plus 2.25% or the base rate plus 1.25%. The unused portion of the credit facility is also subject to a commitment fee of 0.375% per annum. At December 31, 2021, the outstanding principal balance was $137.2 million on the facility and the interest rate was 2.41%.
Green Plains Grain has a $100.0 million senior secured asset-based revolving credit facility to finance working capital up to the maximum commitment based on eligible collateral, which matures in June of 2022. This facility can be increased by up to $75.0 million with agent approval and up to $50.0 million for seasonal borrowings. Total commitments outstanding under the facility cannot exceed $225.0 million. At December 31, 2021, the outstanding principal balance was $20.0 million on the facility and the interest rate was 5.25%.
Green Plains Grain has short-term inventory financing agreements with a financial institution with a maximum commitment of up to $50.0 million, which matures June 2022. Green Plains Grain has accounted for the agreements as short-term notes, rather than sales, and has elected the fair value option to offset fluctuations in market prices of the inventory. Green Plains Grain had no short-term notes payable related to these inventory financing agreements as of December 31, 2021.
The Green Plains Grain and Green Plains Trade credit facilities will mature in June and July, 2022 respectively, unless extended by agreement of the lenders or replaced by another funding source. While we have not yet finalized negotiations to replace these credit facilities, we believe it is probable that we will source appropriate funding prior to maturity given our history of obtaining working capital financing on reasonable commercial terms. In the unlikely scenario that we are unable to refinance the facilities with the lenders prior to its maturity, we will consider other financing sources.
Green Plains Commodity Management has an uncommitted $40.0 million revolving credit facility which matures April 2023, to finance margins related to its hedging programs. Advances are subject to variable interest rates equal to SOFR plus 1.75%. At December 31, 2021, the outstanding principal balance was $16.2 million on the facility and the interest rate was 1.83%.
Partnership Segment
Green Plains Partners, through a wholly owned subsidiary, has a term loan to fund working capital, capital expenditures and other general partnership purposes. On July 20, 2021, the partnership’s prior credit facility was amended in the Amended and Restated Credit Agreement (“Amended Credit Facility”) with BlackRock and TMI Trust Company as administrative agent. The Amended Credit Facility decreased the total amount available to $60.0 million, extended the maturity from December 31, 2021 to July 20, 2026, and converted the balance to a term loan. The term loan does not require any principal payments; however, the partnership has the option to prepay $1.5 million per quarter beginning twelve months after the closing date. As of December 31, 2021, the term loan had a balance of $60.0 million and an interest rate of 8.22%.
Under the terms of the Amended Credit Facility, BlackRock purchased the outstanding balance of the existing notes from the previous lenders. Interest on the term loan is based on 3-month LIBOR plus 8.00%, with a 0% LIBOR floor and is payable on the 15th day of each March, June, September and December, during the term, with the first interest payment being September 15, 2021. The Amended Credit Facility continues to be secured by substantially all of the assets of the partnership.
During the year ended December 31, 2021, prior to the amendment, principal payments of $50.0 million were made on the previous credit facility, including $19.5 million of scheduled repayments, $27.5 million related to the sale of the storage assets located adjacent to the Ord, Nebraska ethanol plant and a $3.0 million prepayment made with excess cash.
On February 11, 2022, the Amended Credit Facility was modified to allow Green Plains Partners and its affiliates to repurchase outstanding notes. 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 February 11, 2022, the term loan had a balance of $59.0 million.
Refer to Note 12 - Debt included as part of the notes to consolidated financial statements for more information about our debt.
Contractual Obligations and Commitments
In addition to debt, our material future obligations include certain lease agreements and contractual and purchase commitments related to commodities. Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of December 31, 2021 totaled $75.8 million, with $19.0 million payable in the next twelve months. As of December 31, 2021, we had contracted future purchases of grain, natural gas, ethanol and distillers grains valued at approximately $475.9 million. Refer to Note 17 - Commitments and Contingencies included in the notes to consolidated financial statements for more information.
‎

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Q ualitative and Quantitative Disclosures About Market Risk.
We use various financial instruments to manage and reduce our exposure to various market risks, including changes in commodity prices and interest rates. We conduct the majority of our business in U.S. dollars and are not currently exposed to material foreign currency risk.
Interest Rate Risk
We are exposed to interest rate risk through our loans which bear interest at variable rates. Interest rates on our variable-rate debt are based on the market rate for the lender’s prime rate or LIBOR. A 10% increase in interest rates would affect our interest cost by approximately $1.0 million per year. At December 31, 2021, we had $722.7 million in debt, $232.9 million of which had variable interest rates.
Refer to Note 12 - Debt included as part of the notes to consolidated financial statements for more information about our debt.
Commodity Price Risk
Our business is highly sensitive to commodity price risk, particularly for ethanol, corn, distillers grains, corn oil and natural gas. Ethanol prices are sensitive to world crude oil supply and demand, the price of crude oil, gasoline, corn, the price of substitute fuels, refining capacity and utilization, government regulation and consumer demand for alternative fuels. Corn prices are affected by weather conditions, yield, changes in domestic and global supply and demand, and government programs and policies. Distillers grains prices are impacted by livestock numbers on feed, prices for feed alternatives and supply, which is associated with ethanol plant production. Natural gas prices are influenced by severe weather in the summer and winter and hurricanes in the spring, summer and fall. Other factors include North American energy exploration and production, and the amount of natural gas in underground storage during injection and withdrawal seasons.
To reduce the risk associated with fluctuations in the price of ethanol, corn, distillers grains, corn oil and natural gas, at times we use forward fixed-price physical contracts and derivative financial instruments, such as futures and options executed on the Chicago Board of Trade, the New York Mercantile Exchange and the Chicago Mercantile Exchange. We focus on locking in favorable operating margins, when available, using a model that continually monitors market prices for corn, natural gas and other inputs relative to the price for ethanol and distillers grains at each of our production facilities. We create offsetting positions using a combination of forward fixed-price purchases, sales contracts and derivative financial instruments. As a result, we frequently have gains on derivative financial instruments that are offset by losses on forward fixed-price physical contracts or inventories and vice versa. Our results are impacted by a mismatch of gains or losses associated with the derivative instrument during a reporting period when the physical commodity purchases or sale has not yet occurred. For the year ended December 31, 2021, revenues included net losses of $254.4 million and cost of goods sold included net gains of $33.4 million associated with derivative instruments.
Ethanol Production Segment
In the ethanol production segment, net gains and losses from settled derivative instruments are offset by physical commodity purchases or sales to achieve the intended operating margins. To reduce commodity price risk caused by market fluctuations, we enter into exchange-traded futures and options contracts that serve as economic hedges. Our results are impacted when there is a mismatch of gains or losses associated with the derivative instrument during a reporting period when the physical commodity purchases or sale has not yet occurred.
‎
Our exposure to market risk, which includes the impact of our risk management activities resulting from our fixed-price purchase and sale contracts and derivatives, is based on the estimated net income effect resulting from a hypothetical 10% change in price for the next 12 months starting on December 31, 2021, are as follows (in thousands):
Commodity
Estimated Total Volume
‎Requirements for the Next
‎12 Months (1)
Unit of Measure
Net Income Effect of
‎Approximate 10% Change
‎in Price
Ethanol
958,000
Gallons
$
152,153
Corn
330,000
Bushels
$
143,404
Distillers grains
2,500
Tons (2)
$
31,716
Corn Oil
290,000
Pounds
$
7,601
Natural gas
27,700
MMBTU
$
4,579
(1)Estimated volumes assume production at full capacity.
(2)Distillers grains quantities are stated on an equivalent dried ton basis.
Agribusiness and Energy Services Segment
In the agribusiness and energy services segment, our inventories, physical purchase and sale contracts and derivatives are marked to market. To reduce commodity price risk caused by market fluctuations for purchase and sale commitments of grain and grain held in inventory, we enter into exchange-traded futures and options contracts that serve as economic hedges.
The market value of exchange-traded futures and options used for hedging are highly correlated with the underlying market value of grain inventories and related purchase and sale contracts for grain. The less correlated portion of inventory and purchase and sale contract market values, known as basis, is much less volatile than the overall market value of exchange-traded futures and tends to follow historical patterns. We manage this less volatile risk by constantly monitoring our position relative to the price changes in the market. Inventory values are affected by the month-to-month spread in the futures markets. These spreads are also less volatile than overall market value of our inventory and tend to follow historical patterns, but cannot be mitigated directly. Our accounting policy for futures and options, as well as the underlying inventory held for sale and purchase and sale contracts, is to reflect their current market values and include gains and losses in the consolidated statement of operations.
Our daily net commodity position consists of inventories related to purchase and sale contracts and exchange-traded contracts. The fair value of our position was approximately $13 thousand for grain at December 31, 2021. Our market risk at that date, based on the estimated net income effect resulting from a hypothetical 10% change in price, was approximately $1 thousand.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financi al Statements and Supplementary Data.
The required consolidated financial statements and accompanying notes are listed in Part IV, Item 15.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes i n and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9 A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure information that must be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
‎
Under the supervision of and participation of our chief executive officer and chief financial officer, management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and concluded that our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.
Under the supervision and participation of our chief executive officer and chief financial officer, management assessed the design and operating effectiveness of our internal control over financial reporting as of December 31, 2021, based on the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2021.
The effectiveness of the company’s internal control over financial reporting as of December 31, 2021, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which is included herein.
Changes in Internal Control over Financial Reporting
Management is responsible for establishing and maintaining effective internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with GAAP. We have not identified any changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
‎
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
‎Green Plains Inc.:
Opinion on Internal Control Over Financial ReportingWe have audited Green Plains Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated February 18, 2022 expressed an unqualified opinion on those consolidated financial statements.
Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Omaha, Nebraska
‎February 18, 2022
‎
Item 9B. Other Info rmation.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Direc tors, Executive Officers and Corporate Governance.
Information in our Proxy Statement for the 2022 Annual Meeting of Stockholders (“Proxy Statement”) under “Corporate Governance,” “Proposal 1 - Election of Directors,” “Our Management,” and “Delinquent Section 16(a) Reports” is incorporated by reference.
We have adopted a code of ethics that applies to our chief executive officer, chief financial officer and all other senior financial officers. Our code of ethics is available on our website at www.gpreinc.com in the “Investors - Corporate Governance” section. Amendments or waivers are disclosed within five business days following its adoption.
Item 11. Executive Compensation.
Information included in the Proxy Statement under “Corporate Governance” and “Executive Compensation” is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information in the Proxy Statement under “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation” is incorporated by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information in the Proxy Statement under “Transactions with Related Persons, Promoters and Certain Control Persons” is incorporated by reference.
Item 14. Principal Accounting Fees and Services.
Information in the Proxy Statement under “Independent Public Accountants” is incorporated by reference.
‎
PART IV
Item 1 5. Exhibits, Financial Statement Schedules.
(1) Financial Statements. The following consolidated financial statements and notes are filed as part of this annual report on Form 10-K.
Page
Report of Independent Registered Public Accounting Firm
Auditor Name: KPMG LLP
Auditor Location: Omaha, NE
Auditor Firm ID: 185
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years-ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income (Loss) for the years-ended December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the years-ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years-ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules. All schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.
(3) Exhibits. The following exhibits are incorporated by reference, filed or furnished as part of this annual report on Form 10-K.
Exhibit Index
Exhibit No.
Description of Exhibit
2.1
Stock Purchase Agreement among Green Plains Inc., Green Plains II LLC and Kerry Holding Co. dated October 23, 2018. (The schedules to the Stock Purchase Agreement have been omitted. The Company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 2.1 of the company’s Current Report on Form 8-K filed October 25, 2018)
2.2
Securities Purchase Agreement, dated as of September 6, 2019, by and among Green Plains Inc., Green Plains Cattle Company LLC, TGAM Agribusiness Fund Holdings-B LP, and StepStone Atlantic Fund, L.P. (Certain schedules to the Securities Purchase Agreement have been omitted. The company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 2.1 of the company’s Current Report on Form 8-K filed September 9, 2019)
2.3
Second Amended and Restated Limited Liability Company Agreement of Green Plains Cattle Company LLC, dated September 6, 2019 (Certain schedules to the Second Amended and Restated Limited Liability Company Agreement have been omitted. The company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed September 9, 2019)
2.4
Securities Purchase Agreement, dated as of October 9, 2020, by and among Green Plains Inc., Green Plains Cattle Company LLC, AGR Special Opportunities Fund I, LP, TGAM Agribusiness Fund LP, and StepStone Atlantic Fund, LP (incorporated herein by reference to Exhibit 2.1 to the company’s Current Report on Form 8-K filed on October 13, 2020) (Certain schedules to the Securities Purchase Agreement have been omitted. The company will furnish such schedules to the SEC upon request)
2.5(a)
Asset Purchase Agreement among Hereford Ethanol Partners, L.P. and Green Plains Hereford LLC, dated December 11, 2020. (The schedules to the Asset Purchase Agreement have been omitted. The Company will furnish such schedules to the SEC upon request.)
2.5(b)
Asset Purchase Agreement, dated December 14, 2020, by and among Green Plains Partners LP, Green Plains Holdings LLC, Green Plains Operating Company LLC, Green Plains Ethanol Storage LLC, Green Plains Logistics LLC, Green Plains Inc., Green Plains Trade Group LLC and Green Plains Hereford LLC. (incorporated herein by reference to Exhibit 2.2 to the company’s Current Report on Form 8-K filed on December 15, 2020)
2.6
Asset Purchase Agreement, dated January 25, 2021, by and among Green Plains Partners LP, Green Plains Holdings LLC, Green Plains Operating Company LLC, Green Plains Ethanol Storage LLC, Green Plains Logistics LLC, Green Plains Inc., Green Plains Trade Group LLC and Green Plains Ord LLC. (incorporated herein by reference to Exhibit 2.1 to the company’s Current Report on Form 8-K filed on January 27, 2021)
3.1(a)
Second Amended and Restated Articles of Incorporation of the company (incorporated herein by reference to Exhibit 3.1 of the company’s Current Report on Form 8-K filed October 15, 2008)
3.1(b)
Articles of Amendment to Second Amended and Restated Articles of Incorporation of Green Plains Renewable Energy, Inc. (incorporated herein by reference to Exhibit 3.1 of the company’s Current Report on Form 8-K filed May 9, 2011)
3.1(c)
Second Articles of Amendment to Second Amended and Restated Articles of Incorporation of Green Plains Renewable Energy, Inc. (incorporated herein by reference to Exhibit 3.1 of the company’s Current Report on Form 8-K filed May 16, 2014)
3.2
Fourth Amended and Restated Bylaws of Green Plains Inc., dated September 27, 2021 (incorporated herein by reference to Exhibit 3.1 to the company’s Current Report on Form 8-K filed on September 28, 2021)
4.1(a)
Shareholders’ Agreement by and among Green Plains Renewable Energy, Inc., each of the investors listed on Schedule A, and each of the existing shareholders and affiliates identified on Schedule B, dated May 7, 2008 (incorporated herein by reference to Appendix F of the company’s Registration Statement on Form S-4/A filed September 4, 2008)
4.1(b)
Indenture, dated March 1, 2021, between Green Plains Inc. and Wilmington Trust, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the company’s Current Report on Form 8-K dated March 1, 2021)
4.2(a)
Indenture relating to the 4.125% Convertible Senior Notes due 2022, dated as of August 15, 2016, between Green Plains Inc. and Wilmington Trust, National Association, including the form of Global Note attached as Exhibit A thereto (incorporated herein by reference to Exhibit 4.1 to the company’s Current Report on Form 8-K filed August 15, 2016)
4.2(b)
First Supplemental Indenture relating to the 2.25% Convertible Senior Notes due 2027, dated as of March 1, 2021, between Green Plains Inc. and Wilmington Trust, National Association, including the form of Global Note attached as Exhibit A thereto (incorporated herein by reference to Exhibit 4.2 to the company’s Current Report on Form 8-K dated March 1, 2021)
4.3(a)
Indenture relating to the 3.25% Convertible Senior Notes due 2019, dated as of August 14, 2018, between Green Plains Inc. and Wilmington Trust, National Association, as trustee (including therein Form of 3.25% Convertible Senior Notes Due 2019) (incorporated herein by reference to Exhibit 4.1 to the company’s Current Report on Form 8-K filed August 14, 2018)
4.3(b)
Form of Global Note representing 2.25% Convertible Senior Notes due 2027 (included as a part of Exhibit 4.2(b)).
4.4
Indenture relating to the 4.00% Convertible Senior Notes due 2024, dated as of June 21, 2019, between Green Plains Inc. and Wilmington Trust, National Association, including the form of Global Note attached as Exhibit A thereto (incorporated herein by reference to Exhibit 4.1 of the company’s Current Report on Form 8-K filed on June 21, 2019)
4.5
Description of Securities Registered Under Section 12 of the Exchange Act (incorporated herein by reference to Exhibit 4.7 of the company’s Annual Report on Form 10-K filed February 20, 2020)
*10.1
2007 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 27, 2007)
10.2
Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.53 of the company’s Registration Statement on Form S-4/A filed August 1, 2008)
*10.3(a)
Employment Agreement with Todd Becker (incorporated herein by reference to Exhibit 10.54 of the company’s Registration Statement on Form S-4/A filed August 1, 2008)
*10.3(b)
Amendment No. 1 to Employment Agreement with Todd Becker, dated December 18, 2009. (incorporated herein by reference to Exhibit 10.7(b) of the company’s Annual Report on Form 10-K filed February 24, 2010)
*10.3(c)
Amendment No. 2 to Employment Agreement with Todd Becker, dated March 27, 2018 (incorporated herein by reference to Exhibit 10.52 of the company’s Quarterly Report on Form 10-Q filed on May 7, 2018)
*10.4(a)
2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K dated May 11, 2009)
*10.4(b)
Amendment No. 1 to the 2009 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 25, 2011)
*10.4(c)
Amendment No. 2 to the 2009 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 29, 2013)
*10.4(d)
Amended and Restated 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.1 of the company’s Registration Statement on Form S-8 filed June 23, 2017)
*10.4(e)
Form of Stock Option Award Agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.19(b) of the company’s Annual Report on Form 10-K filed February 24, 2010)
*10.4(f)
Form of Restricted Stock Award Agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.19(c) of the company’s Annual Report on Form 10-K/A (Amendment No. 1) filed February 25, 2010)
*10.4(g)
Amended Form of Restricted Stock Award agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.53 of the company’s Quarterly Report on Form 10-Q filed on May 7, 2018)
*10.4(h)
Form of Deferred Stock Unit Award Agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.19(d) of the company’s Annual Report on Form 10-K filed February 24, 2010)
*10.4(i)
Form of Performance Share Unit Award agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.54 of the company’s Quarterly Report on Form 10-Q filed on May 7, 2018)
*10.4(j)
2019 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 28, 2019)
*10.4(k)
Amendment No. 1 to the 2019 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 26, 2020)
10.5(a)
Second Amended and Restated Revolving Credit and Security Agreement dated April 26, 2013 by and among Green Plains Trade Group LLC and PNC Bank, National Association (as Lender and Agent) (incorporated herein by reference to Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(b)
Third Amended and Restated Revolving Credit and Security Agreement dated November 26, 2014 by and among Green Plains Trade Group LLC, the Lenders and PNC Bank, National Association (as Lender and Agent) (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed December 2, 2014)
10.5(c)
Fourth Amended and Restated Revolving Credit and Security Agreement dated July 28, 2017, among Green Plains Trade Group LLC, the Lenders and PNC Bank, National Association as Lender and Agent (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated July 31, 2017)
10.5(d)
First Amendment to Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of August 29, 2017, among Green Plains Trade Group LLC and PNC Bank, National Association, as agent, and the lenders party to the Credit and Security Agreement (incorporated herein by reference to Exhibit 10.4(a) to the company’s Current Report on Form 8-K dated August 29, 2017)
10.5(e)
Second Amendment to Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of March 15, 2018, by and among Green Plains Trade Group LLC and PNC Bank, National Association (incorporated herein by reference to Exhibit 10.1 to the company’s Quarterly Report on Form 10-Q dated May 7, 2018)
10.5(f)
Third Amendment to Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of November 27, 2019, by and among Green Plains Trade Group LLC and PNC Bank, National Association (incorporated herein by reference to Exhibit 10.5(f) of the company’s Annual Report on Form 10-K filed February 20, 2020)
10.5(g)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and Citibank, N.A. (incorporated herein by reference to Exhibit 10.2(b) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(h)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and BMO Harris Bank N.A. (incorporated herein by reference to Exhibit 10.2(c) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(i)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and Alostar Bank of Commerce (incorporated herein by reference to Exhibit 10.2(d) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(j)
Second Amended and Restated Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and PNC Bank, National Association (Incorporated by reference to Exhibit 10.2(a) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(k)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and Bank of America (incorporated here by reference to Exhibit 10.2(e) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(l)
ABL Intercreditor Agreement, dated as of August 29, 2017, among PNC Bank, National Association, as ABL Collateral Agent, and BNP Paribas, as Term Loan Collateral Agent, and acknowledged by Green Plains Trade Group LLC and the other ABL Grantors (incorporated herein by reference to Exhibit 10.4(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
10.5(m)
Guaranty, dated as of August 29, 2017, in favor of PNC Bank, National Association, as agent (incorporated herein by reference to Exhibit 10.4(c) to the company’s Current Report on Form 8-K dated August 29, 2017)
*10.6
Umbrella Short-Term Incentive Plan (incorporated herein by reference to Appendix A of the company’s Proxy Statement filed April 3, 2014)
*10.7
Director Compensation effective May 11, 2016 (incorporated herein by reference to Exhibit 10.4 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
*10.8
Director Compensation effective November 14, 2017 (incorporated herein by reference to Exhibit 10.9 of the company’s Annual Report on Form 10-K filed February 15, 2018)
10.9(a)
Credit Agreement dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc., BNP Paribas Securities Corp. as Lead Arranger, Rabo Agrifinance, Inc. as Syndication Agent, ABN AMRO Capital USA LLC as Documentation Agent and BNP Paribas as Administrative Agent (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(b)
Security Agreement dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc. and BNP Paribas (incorporated herein by reference to Exhibit 10.2 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(c)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc. and Bank of Oklahoma (incorporated herein by reference to Exhibit 10.3 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(d)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc. and U.S. Bank National Association (incorporated herein by reference to Exhibit 10.4 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(e)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc. and Farm Credit Bank of Texas (incorporated herein by reference to Exhibit 10.5 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(f)
First Amendment to Credit Agreement dated January 6, 2012 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc., BNP Paribas and the Required Lenders (incorporated herein by reference to Exhibit 10.26(k) of the company’s Annual Report on Form 10-K filed February 17, 2012)
10.9(g)
Second Amendment to Credit Agreement, dated October 26, 2012, by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex, Inc., BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.5 of the company’s Quarterly Report on Form 10-Q filed November 1, 2012)
10.9(h)
Third Amendment to Credit Agreement, dated August 27, 2013, by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex, Inc., BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.3 of the company’s Quarterly Report on Form 10-Q filed October 31, 2013)
10.9(i)
Fourth Amendment to Credit Agreement, dated August 8, 2014, by and among Green Plains Grain Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.3 of the company’s Quarterly Report on Form 10-Q filed October 30, 2014)
10.9(j)
Fifth Amendment to Credit Agreement, dated June 1, 2015, by and among Green Plains Grain Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.5 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.9(k)
Sixth Amendment to Credit Agreement, dated January 5, 2016, by and among Green Plains Grain Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.6 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.9(l)
Seventh Amendment to Credit Agreement, dated July 27, 2016, by and among Green Plains Grain Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.7 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.9(m)
Eighth Amendment to Credit Agreement, dated as of August 29, 2017, among Green Plains Grain Company and BNP Paribas, as Administrative Agent, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.3(a) to the company’s Current Report on Form 8-K dated August 29, 2017)
10.9(n)
Ninth Amendment to Credit Agreement, dated as of June 28, 2019, among Green Plains Grain Company LLC and BNP Paribas, as Administrative Agent, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed on July 1, 2019)
10.9(o)
ABL Intercreditor Agreement, dated as of August 29, 2017, among BNP Paribas, as ABL Collateral Agent, and BNP Paribas, as Term Loan Collateral Agent, and acknowledged by Green Plains Grain Company LLC and the other ABL Grantors (incorporated herein by reference to Exhibit 10.3(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
10.9(p)
Guaranty, dated as of August 29, 2017, in favor of BNP Paribas, as administrative agent (incorporated herein by reference to Exhibit 10.3(c) to the company’s Current Report on Form 8-K dated August 29, 2017)
*10.10
Employment Agreement by and between Green Plains Renewable Energy, Inc. and Patrich Simpkins dated April 1, 2012 (incorporated herein by reference to Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q filed May 1, 2014)
*10.11
Employment Agreement with Michelle S. Mapes (incorporated herein by reference to Exhibit 10.12 of the company’s Annual Report on Form 10-K filed February 20, 2020)
10.12
Amended and Restated Credit Agreement, dated as of August 28, 2019, by and among Green Plains Cattle Company LLC, Bank of the West and ING Capital LLC, as Joint Administrative Agents, and the lenders party to the Credit Agreement (Certain schedules to the Amended and Restated Credit Agreement have been omitted. The company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.3 of the company’s Current Report on Form 8-K filed September 9, 2019)
10.13
Contribution, Conveyance and Assumption Agreement, dated July 1, 2015, by and among Green Plains Inc., Green Plains Obion LLC, Green Plains Trucking LLC, Green Plains Holdings LLC, Green Plains Partners LP and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.14(a)
Omnibus Agreement, dated July 1, 2015, by and among Green Plains Inc., Green Plains Holdings LLC, Green Plains Partners LP and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.14(b)
First Amendment to the Omnibus Agreement, dated January 1, 2016, by and among Green Plains Inc., Green Plains Holdings LLC, Green Plains Partners LP and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.22(b) to the company’s Annual Report on Form 10-K for the year ended December 31, 2015)
10.14(c)
Second Amendment to the Omnibus Agreement, dated September 23, 2016, by and among Green Plains Inc., Green Plains Partners LP, Green Plains Holdings LLC and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated September 26, 2016)
10.14(d)
Third Amendment to the Omnibus Agreement, dated November 15, 2018, by and among Green Plains Inc., Green Plains Partners LP, Green Plains Holdings LLC and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.18(d) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.15(a)
Operational Services and Secondment Agreement, dated July 1, 2015, by and between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.15(b)
Amendment No. 1 to the Operational Services and Secondment Agreement, dated January 1, 2016, by and between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.23(b) to the company’s Annual Report on Form 10-K for the year ended December 31, 2015)
10.15(c)
Amendment No. 2 to Operational Services and Secondment Agreement, dated September 23, 2016, between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated September 26, 2016)
10.15(d)
Amendment No. 3 to Operational Services and Secondment Agreement, dated November 15, 2018, between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.19(d) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.15(e)
Amendment No. 4 to Operational Services and Secondment Agreement, dated December 28, 2020, between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K filed December 28, 2020)
10.15(f)
Amendment No. 5 to Operational Services and Secondment Agreement, dated March 22, 2021, between Green Plains Inc. and Green Plains Holdings LLC. (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K dated March 23, 2021)
10.16(a)
Rail Transportation Services Agreement, dated July 1, 2015, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.4 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.16(b)
Amendment No. 1 to Rail Transportation Services Agreement, dated September 1, 2015, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.1 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.16(c)
Correction to Rail Transportation Services Agreement, dated May 12, 2016, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.3 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.16(d)
Amendment No. 2 to Rail Transportation Services Agreement, dated November 30, 2016 (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated December 1, 2016)
10.16(e)
Amendment No. 3 to Rail Transportation Services Agreement, dated November 15, 2018 (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated November 15, 2018)
10.16(f)
Corrective Amendment to Rail Transportation Services Agreement, dated November 15, 2018, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.20(f) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.16(g)
Amendment No. 4 to Rail Transportation Services Agreement, dated December 28, 2020 (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated December 28, 2020)
10.16(h)
Amendment No. 5 to Rail Transportation Services Agreement, dated March 22, 2021, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed March 23, 2021)
10.17(a)
Ethanol Storage and Throughput Agreement, dated July 1, 2015, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.5 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.17(b)
Amendment No. 1 to the Ethanol Storage and Throughput Agreement, dated January 1, 2016, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.25(b) to the company’s Annual Report on Form 10-K for the year ended December 31, 2015)
10.17(c)
Clarifying Amendment to Ethanol Storage and Throughput Agreement, dated January 4, 2016, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.17(d)
Amendment No. 2 to Ethanol Storage and Throughput Agreement, dated September 23, 2016, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K dated September 26, 2016)
10.17(e)
Amendment No. 3 to Ethanol Storage and Throughput Agreement, dated November 15, 2018, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated November 15, 2018) (The exhibits to Amendment No. 3 have been omitted. The company will furnish such schedules to the SEC upon request).
10.17(f)
Amendment No. 4 to Ethanol Storage and Throughput Agreement, dated December 28, 2020, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated December 28, 2020)
10.17(g)
Amendment No. 5 to Ethanol Storage and Throughput Agreement, dated March 22, 2021, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC. (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K filed March 23, 2021) (The exhibits to Amendment No. 5 have been omitted. The Company will furnish such schedules to the SEC upon request).
10.18(a)
Credit Agreement, dated July 1, 2015, by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A., and the other lenders party thereto (incorporated herein by reference to Exhibit 10.6 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.18(b)
First Amendment to Credit Agreement, dated September 16, 2016 by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A., and the other lenders party thereto (incorporated herein by reference to Exhibit 10.22(b) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.18(c)
Incremental Joinder Agreement, dated October 27, 2017, among Green Plains Operating Company LLC and Bank of America, as Administrative (incorporated herein by reference to Exhibit 10.8 to the company’s Quarterly Report on Form 10-Q dated November 2, 2017)
10.18(d)
Second Amendment to Credit Agreement, dated February 16, 2018 by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A., and the other lenders party thereto (incorporated herein by reference to Exhibit 10.22(d) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.18(e)
Incremental Joinder Agreement, dated February 20, 2018, among Green Plains Operating Company LLC and Bank of America, as Administrative (incorporated herein by reference to Exhibit 10.22(e) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.18(f)
Third Amendment to Credit Agreement, dated October 12, 2018 by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A., and the other lenders party thereto (incorporated herein by reference to Exhibit 10.22(f) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.18(g)
Consent to Credit Agreement, dated July 15, 2019, by and among Green Plains Operating Company LLC and Bank of America, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the company’s Quarterly Report on Form 10-Q dated August 6, 2019)
10.18(h)
Fourth Amendment to Credit Agreement, dated June 4, 2020, by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A. and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed on June 4, 2020)
10.18(i)
Amended and Restated Credit Agreement, dated July 20, 2021, by and among Green Plains Operating Company LLC, as the Borrower, the guarantors identified therein, TMI Trust Company, as Administrative Agent and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed on July 26, 2021)
10.19
Second Amendment to Term Loan Agreement, dated July 13, 2018, among Green Plains Inc. and BNP Paribas, as administrative agent and collateral agent (incorporated herein by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q dated August 2, 2018)
10.20
Partial Release of Security Interest, dated as of April 30, 2018, by and among Green Plains Inc., its subsidiaries and BNP Paribas, as collateral agent (incorporated herein by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q dated May 7, 2018)
10.21(a)
Revolving Credit Facility, dated as of April 30, 2018, by and among Green Plains Commodity Management LLC and Macquarie Bank Limited (incorporated herein by reference to Exhibit 10.4 to the company’s Quarterly Report on Form 10-Q dated May 7, 2018)
10.21(b)
Amendment to Revolving Credit Facility, dated as of June 18, 2019, by and among Green Plains Commodity Management LLC and Macquarie Bank Limited (incorporated herein by reference to Exhibit 10.24(b) of the company’s Annual Report on Form 10-K filed February 20, 2020)
10.22
Promissory Note between Green Plains Inc. and StepStone Atlantic Fund, L.P., dated September 6, 2019 (incorporated herein by reference to Exhibit 10.2 of the company’s Current Report on Form 8-K filed September 9, 2019)
10.23(a)
Loan Agreement dated September 3, 2020 by and among Green Plains Wood River LLC and Green Plains Shenandoah LLC, as the Borrowers, and MetLife Real Estate Lending LLC, as the Lender (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.23(b)
Delayed Draw Term Promissory Note dated September 3, 2020 by and among Green Plains Wood River LLC and Green Plains Shenandoah LLC, as the Borrowers, and MetLife Real Estate Lending LLC, as the Lender (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.23(c)
Loan Guaranty Agreement dated September 3, 2020 by and among Green Plains Inc, as the Guarantor, and MetLife Real Estate Lending LLC, as the Lender (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.23(d)
Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated September 3, 2020 by and among Green Plains Wood River LLC, as the Trustor, and MetLife Real Estate Lending LLC, as the Beneficiary (incorporated herein by reference to Exhibit 10.4 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.23(e)
Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated September 3, 2020 by and among Green Plains Shenandoah LLC, as the Borrower, and MetLife Real Estate Lending LLC, as the Lender (incorporated herein by reference to Exhibit 10.5 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.24(a)
Note Purchase Agreement dated February 9, 2021 by and among Green Plains SPE LLC, as the Issuer, Green Plains Inc., as Guarantor, and Purchasers signatory thereto. (The schedules to the Note Purchase Agreement have been omitted. The Company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed on February 12, 2021)
10.24(b)
Pledge and Security Agreement dated February 9, 2021 by and among Green Plains SPE LLC, as the Pledgor, in favor of Wilmington Trust, National Association, as Trustee. (The schedules to the Pledge and Security Agreement have been omitted. The Company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K filed on February 12, 2021)
10.24(c)
Indenture dated February 9, 2021 by Green Plains SPE LLC, as Issuer, Green Plains Inc., as Guarantor and Wilmington Trust, National Association, as Trustee. (The schedules to the Indenture have been omitted. The Company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K filed on February 12, 2021)
10.24(d)
First Priority Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement from Green Plains Mount Vernon LLC, as Mortgagor and Wilmington Trust, National Association, as Mortgagee. (incorporated herein by reference to Exhibit 10.4 to the company’s Current Report on Form 8-K filed on February 12, 2021)
10.24(e)
First Priority Deed of Trust, Assignment of Leases and Rents, Security Agreement and Financing Statement from Green Plains Obion LLC, as Mortgagor and Wilmington Trust, National Association, as Mortgagee. (incorporated herein by reference to Exhibit 10.5 to the company’s Current Report on Form 8-K filed on February 12, 2021)
*10.25
Employment Agreement with Leslie van der Meulen
10.26
Amendment No. 1 to Amended and Restated Credit Agreement, dated February 11, 2022, by and among Green Plains LLC, as the Borrower, the guarantors identified therein, TMI Trust Company, as Administrative Agent and the other lenders party thereto
21.1
Schedule of Subsidiaries
23.1
Consent of KPMG LLP
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following information from Green Plains Inc.’s Annual Report on Form 10-K for the annual period ended December 31, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (iv) the Consolidated Statements of Stockholders’ Equity (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements and Financial Statement Schedule.
The cover page from Green Plains Inc. Annual Report on Form 10-K for the year ended December 31, 2021, formatted in iXBRL
_______________________________________________________
* Represents management compensatory contracts
Item 16. Form 10-K Summary.
None.
‎
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
c
‎
‎
‎
‎
Date: February 18, 2022
GREEN PLAINS INC
(Registrant)
By: /s/ Todd A. Becker
Todd A. Becker
‎President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Todd A. Becker
President and Chief Executive Officer
February 18, 2022
Todd A. Becker
(Principal Executive Officer) and Director
/s/ G. Patrich Simpkins Jr.
Chief Financial Officer (Principal Financial
February 18, 2022
G. Patrich Simpkins Jr.
Officer and Principal Accounting Officer)
/s/ Wayne B. Hoovestol
Chairman of the Board
February 18, 2022
Wayne B. Hoovestol
/s/ Jim Anderson
Director
February 18, 2022
Jim Anderson
/s/ Farha Aslam
Director
February 18, 2022
Farha Aslam
/s/ Ejnar A. Knudsen III
Director
February 18, 2022
Ejnar A. Knudsen III
/s/ Brian D. Peterson
Director
February 18, 2022
Brian D. Peterson
/s/ Martin Salinas Jr.
Director
February 18, 2022
Martin Salinas Jr.
/s/ Alain Treuer
Director
February 18, 2022
Alain Treuer
/s/ Kimberly Wagner
Director
February 18, 2022
Kimberly Wagner
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
‎Green Plains Inc.:
Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of Green Plains Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 18, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for convertible debt instruments as of January 1, 2021 due to the adoption of Accounting Standards Update (ASU) 2020-06, Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity.
Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair value of physical delivery contracts
‎As discussed in Note 2 to the consolidated financial statements, the Company records physical delivery contracts that do not meet the normal purchase or sale criteria at fair value. The Company estimates a fair value based on exchange-quoted prices, adjusted as appropriate for regional location basis values, which represent differences in local markets including
transportation as well as quality or grade differences. Basis values are generally determined using inputs from broker quotations or market transactions. As of December 31, 2021, the recorded balances of the Company’s derivative assets and liabilities associated with physical delivery contracts were $26.7 million and $26.1 million, respectively, and are classified as Level 2 assets and liabilities within Note 6.
We identified the assessment of the valuation of physical delivery contracts as a critical audit matter. Specifically, evaluating the valuation of physical delivery contracts, which includes assumptions related to exchange-quoted prices, and adjustments for regional location basis values, involved complex auditor judgment due to the subjectivity involved in determining the fair value.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the valuation of physical delivery contracts. To assess the valuation of physical delivery contracts, for a sample of contracts, we tested the Company’s exchange-quoted prices by comparing the amounts used to observable market transactions and evaluated the Company’s adjustments for regional location basis values by comparing inputs used by the Company to third-party information, including broker quotations or market transactions.
/s/ KPMG LLP
We have served as the Company’s auditor since 2009.
Omaha, Nebraska
‎February 18, 2022
‎
GRE EN PLAINS INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31,
ASSETS
Current assets
Cash and cash equivalents
$
426,220
$
233,860
Restricted cash
134,739
40,950
Marketable securities
124,859
-
Accounts receivable, net of allowances of $682 and $143, respectively
119,961
55,568
Income taxes receivable
Inventories
267,838
269,491
Prepaid expenses and other
16,483
16,531
Derivative financial instruments
26,738
25,292
Total current assets
1,117,749
642,353
Property and equipment, net
893,517
801,690
Operating lease right-of-use assets
64,042
61,883
Other assets
84,447
72,991
Total assets
$
2,159,755
$
1,578,917
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
146,063
$
140,058
Accrued and other liabilities
56,980
38,471
Derivative financial instruments
43,244
20,265
Operating lease current liabilities
16,814
14,902
Short-term notes payable and other borrowings
173,418
140,808
Current maturities of long-term debt
35,285
98,052
Total current liabilities
471,804
452,556
Long-term debt
514,006
287,299
Operating lease long-term liabilities
49,795
49,549
Other liabilities
22,131
12,849
Total liabilities
1,057,736
802,253
Commitments and contingencies (Note 17)
Stockholders' equity
Common stock, $0.001 par value; 75,000,000 shares authorized;
‎61,840,434 and 47,470,505 shares issued, and 53,595,978
‎and 35,657,344 shares outstanding, respectively
Additional paid-in capital
1,069,573
740,889
Retained earnings (deficit)
(15,199)
39,375
Accumulated other comprehensive loss
(12,310)
(2,172)
Treasury stock, 8,244,456 and 11,813,161 shares, respectively
(91,626)
(131,287)
Total Green Plains stockholders' equity
950,500
646,852
Noncontrolling interests
151,519
129,812
Total stockholders' equity
1,102,019
776,664
Total liabilities and stockholders' equity
$
2,159,755
$
1,578,917
See accompanying notes to the consolidated financial statements.
‎
GREE N PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31,
Revenues
Product revenues
$
2,806,629
$
1,918,884
$
2,410,382
Service revenues
20,539
4,835
6,856
Total revenues
2,827,168
1,923,719
2,417,238
Costs and expenses
Cost of goods sold (excluding depreciation and amortization expenses reflected below)
2,625,109
1,812,163
2,384,947
Operations and maintenance expenses
23,061
26,125
25,657
Selling, general and administrative expenses
91,139
84,932
77,077
Loss (gain) on sale of assets, net
(29,601)
20,860
-
Goodwill impairment
-
24,091
-
Depreciation and amortization expenses
91,952
78,244
72,127
Total costs and expenses
2,801,660
2,046,415
2,559,808
Operating income (loss) from continuing operations
25,508
(122,696)
(142,570)
Other income (expense)
Interest income
4,333
Interest expense
(67,144)
(39,993)
(40,200)
Other, net
(1,940)
5,495
Total other expense
(68,509)
(38,434)
(30,372)
Loss from continuing operations before income taxes and income from equity method investees
(43,001)
(161,130)
(172,942)
Income tax (expense) benefit
(1,845)
50,383
21,316
Income from equity method investees, net of income taxes
21,093
2,797
Net loss from continuing operations including noncontrolling interest
(44,146)
(89,654)
(148,829)
Net income from discontinued operations, net of income taxes
-
-
Net loss
(44,146)
(89,654)
(148,000)
Net income attributable to noncontrolling interests
21,846
19,121
18,860
Net loss attributable to Green Plains
$
(65,992)
$
(108,775)
$
(166,860)
Earnings (loss) per share - basic and diluted
Net loss from continuing operations
$
(1.41)
$
(3.14)
$
(4.40)
Net income from discontinued operations
-
-
0.02
Net loss attributable to Green Plains
$
(1.41)
$
(3.14)
$
(4.38)
Weighted average shares outstanding:
Basic and diluted
46,652
34,631
38,111
See accompanying notes to the consolidated financial statements.
‎
GRE EN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Year Ended December 31,
Net loss
$
(44,146)
$
(89,654)
$
(148,000)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on derivatives arising during the period, net of tax benefit (expense) of $7,806, $257 and ($14,431), respectively
(24,230)
(768)
55,973
Reclassification of realized losses (gains) on derivatives, net of tax expense (benefit) of ($4,540), $857 and $10,002, respectively
14,092
(2,566)
(38,795)
Other comprehensive income (loss), net of tax
(10,138)
(3,334)
17,178
Share of equity method investees other comprehensive gain (loss) arising during the period, net of tax benefit (expense) of $0, ($3,929) and $3,929, respectively
-
12,226
(12,226)
Total other comprehensive income (loss), net of tax
(10,138)
8,892
4,952
Comprehensive loss
(54,284)
(80,762)
(143,048)
Comprehensive income attributable to noncontrolling interests
21,846
19,121
18,860
Comprehensive loss attributable to Green Plains
$
(76,130)
$
(99,883)
$
(161,908)
See accompanying notes to the consolidated financial statements.
‎
GRE EN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Total
Common
Additional
Retained
Accum. Other
Green Plains
Non-
Total
Stock
Paid-in
Earnings
Comp. Income
Treasury Stock
Stockholders'
Control.
Stockholders'
Shares
Amount
Capital
(Deficit)
(Loss)
Shares
Amount
Equity
Interests
Equity
Balance, December 31, 2018
46,638
$
$
696,222
$
324,728
$
(16,016)
5,536
$
(58,162)
$
946,819
$
116,170
$
1,062,989
Net income (loss)
-
-
-
(166,860)
-
-
-
(166,860)
18,860
(148,000)
Cash dividends and distributions declared
-
-
-
(9,718)
-
-
-
(9,718)
(21,968)
(31,686)
Other comprehensive income before reclassification
-
-
-
-
55,973
-
-
-
-
-
Amounts reclassified from accumulated other comprehensive loss
-
-
-
-
(38,795)
-
-
-
-
-
Other comprehensive income, net of tax
-
-
-
-
17,178
-
-
17,178
-
17,178
Share of equity method investees other comprehensive loss arising during the period, net of tax
-
-
-
-
(12,226)
-
-
(12,226)
-
(12,226)
Proceeds from disgorgement of shareholders short-swing profits, net of tax
-
-
5,054
-
-
-
-
5,054
-
5,054
Issuance of 4.00% convertible notes due 2024, net of tax
-
-
24,928
-
-
-
-
24,928
-
24,928
Settlements of 3.25% convertible notes due 2019, net of tax
-
-
(271)
-
-
-
-
(271)
-
(271)
Repurchase of common stock
-
-
-
-
-
5,396
(61,646)
(61,646)
-
(61,646)
Stock-based compensation
-
7,052
-
-
-
-
7,052
7,371
Stock options exercised
-
1,595
-
-
-
-
1,595
-
1,595
Balance, December 31, 2019
46,964
734,580
148,150
(11,064)
10,932
(119,808)
751,905
113,381
865,286
Net income (loss)
-
-
-
(108,775)
-
-
-
(108,775)
19,121
(89,654)
Cash dividends and distributions declared
-
-
-
-
-
-
-
-
(9,675)
(9,675)
Other comprehensive loss before reclassification
-
-
-
-
(768)
-
-
-
-
-
Amounts reclassified from accumulated other comprehensive loss
-
-
-
-
(2,566)
-
-
-
-
-
Other comprehensive loss, net of tax
-
-
-
-
(3,334)
-
-
(3,334)
-
(3,334)
Share of equity method investees other comprehensive loss arising during the period, net of tax
-
-
-
-
12,226
-
-
12,226
-
12,226
Acquisition of subsidiary
-
-
-
-
-
-
-
-
6,667
6,667
Repurchase of common stock
-
-
-
-
-
(11,479)
(11,479)
-
(11,479)
Stock-based compensation
-
6,309
-
-
-
-
6,309
6,627
Balance, December 31, 2020
47,471
740,889
39,375
(2,172)
11,813
(131,287)
646,852
129,812
776,664
Impact of ASC 470-20 adoption
-
-
(49,496)
11,418
-
-
-
(38,078)
-
(38,078)
Balance, January 1, 2021
47,471
691,393
50,793
(2,172)
11,813
(131,287)
608,774
129,812
738,586
Net income (loss)
-
-
-
(65,992)
-
-
-
(65,992)
21,846
(44,146)
Cash dividends and distributions declared
-
-
-
-
-
-
-
-
(9,251)
(9,251)
Other comprehensive loss before reclassification
-
-
-
-
(24,230)
-
-
-
-
-
Amounts reclassified from accumulated other comprehensive loss
-
-
-
-
14,092
-
-
-
-
-
Other comprehensive loss, net of tax
-
-
-
-
(10,138)
-
-
(10,138)
-
(10,138)
Issuance of common stock, net of fees
14,214
355,963
-
-
-
-
355,978
-
355,978
Exchange of 4.00% convertible notes due 2024
-
-
17,683
-
-
(3,569)
39,661
57,344
-
57,344
Investment in subsidiaries
-
-
-
-
-
-
-
-
12,264
12,264
Issuance of warrants
-
-
3,431
-
-
-
-
3,431
(3,431)
-
Stock-based compensation
-
1,103
-
-
-
-
1,103
1,382
Balance, December 31, 2021
61,840
$
$
1,069,573
$
(15,199)
$
(12,310)
8,244
$
(91,626)
$
950,500
$
151,519
$
1,102,019
See accompanying notes to the consolidated financial statements.
‎
GREE N PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
Cash flows from operating activities:
Net loss from continuing operations including noncontrolling interest
$
(44,146)
$
(89,654)
$
(148,829)
Net income from discontinued operations, net of income taxes
-
-
Net loss
(44,146)
(89,654)
(148,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
91,952
78,244
72,127
Amortization of debt issuance costs and debt discount
8,402
22,500
20,364
Loss (gain) on the disposal of assets, net
(29,601)
21,464
(3,680)
Loss on extinguishment of debt
32,645
-
-
Goodwill impairment
-
24,091
-
Deferred income taxes
1,233
(13,336)
(17,252)
Stock-based compensation
6,058
7,915
9,692
Income from equity method investees, net of income taxes
(700)
(21,093)
(2,797)
Distribution from equity method investees, net of income taxes
1,500
27,910
-
Other
1,590
-
-
Changes in operating assets and liabilities before effects of
‎business combinations and dispositions:
Accounts receivable
(64,095)
57,060
(21,762)
Inventories
(20,543)
(21,632)
50,022
Derivative financial instruments
6,808
1,274
12,420
Prepaid expenses and other assets
(578)
(2,105)
Accounts payable and accrued liabilities
17,189
(22,772)
(1,778)
Current income taxes
(699)
30,073
3,138
Other
(2,769)
(1,044)
(288)
Net cash provided by (used in) operating activities - continuing operations
4,246
98,895
(27,001)
Net cash provided by operating activities - discontinued operations
-
-
17,469
Net cash provided by (used in) operating activities
4,246
98,895
(9,532)
Cash flows from investing activities:
Purchases of property and equipment, net
(187,195)
(110,579)
(75,481)
Proceeds from sale of discontinued operations, net of cash divested
-
-
76,884
Purchases of marketable securities
(124,859)
-
-
Proceeds from the sale of assets, net
87,217
39,952
3,469
Disposition of equity method investee
(2,948)
80,500
29,721
Acquisition of businesses, net of cash acquired
-
(21,325)
-
Distributions from (contribution to) equity method investees
-
-
Other investing activities
(8,500)
-
-
Net cash provided by (used in) investing activities - continuing operations
(236,285)
(11,452)
34,813
Net cash used in investing activities - discontinued operations
-
-
(4,169)
Net cash provided by (used in) investing activities
(236,285)
(11,452)
30,644
Cash flows from financing activities:
Proceeds from the issuance of long-term debt
367,701
33,000
157,710
Payments of principal on long-term debt
(188,700)
(12,987)
(45,702)
Proceeds from short-term borrowings
3,473,541
2,392,258
2,802,199
Payments on short-term borrowings
(3,445,634)
(2,468,485)
(2,840,505)
Payments on extinguishment of convertible debt
(20,861)
-
-
Payments for repurchase of common stock
-
(11,479)
(61,646)
Payments of cash dividends and distributions
(9,251)
(9,675)
(31,686)
Proceeds from issuance of common stock, net
355,978
-
-
Proceeds from disgorgement of shareholder short-swing profits
-
-
6,699
Payments of loan fees
(9,195)
(3,873)
(5,291)
Payments related to tax withholdings for stock-based compensation
(4,671)
(1,288)
(2,320)
Proceeds from exercises of stock options
-
-
1,595
Other financing activities
(720)
-
-
Net cash provided by (used in) financing activities - continuing operations
518,188
(82,529)
(18,947)
Net cash used in financing activities - discontinued operations
-
-
(50,464)
Net cash provided by (used in) financing activities
518,188
(82,529)
(69,411)
Net change in cash, cash equivalents and restricted cash
286,149
4,914
(48,299)
Cash, cash equivalents and restricted cash, beginning of period
274,810
269,896
283,284
Discontinued operations cash activity included above:
Add: Cash balance included in current assets of discontinued operations at beginning of period
-
-
34,911
Cash, cash equivalents and restricted cash, end of period
$
560,959
$
274,810
$
269,896
Continued on the following page
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Continued from the previous page
Year Ended December 31,
Reconciliation of total cash, cash equivalents and restricted cash:
Cash and cash equivalents
$
426,220
$
233,860
$
245,977
Restricted cash
134,739
40,950
23,919
Total cash, cash equivalents and restricted cash
$
560,959
$
274,810
$
269,896
Non-cash financing activity:
Settlement of NMTC transaction
$
-
$
-
$
8,100
Exchange of 4.00% convertible notes due 2024
$
51,000
$
-
$
-
Exchange of common stock held in treasury stock for 4.00% convertible notes due 2024
$
39,661
$
-
$
-
Supplemental investing and financing activities:
Assets acquired in acquisitions, net of cash
$
9,000
$
42,443
$
-
Less: liabilities assumed
-
(14,451)
-
Less: noncontrolling interests assumed
(4,500)
(6,667)
-
Net assets acquired
$
4,500
$
21,325
$
-
Assets disposed of in sale
$
54,626
$
67,711
$
527,614
Less: liabilities relinquished
(3,706)
(6,234)
(373,846)
Net assets disposed
$
50,920
$
61,477
$
153,768
Supplemental disclosures of cash flow:
Cash paid (refunded) for income taxes
$
1,479
$
(60,587)
$
Cash paid for interest of continuing operations
$
29,369
$
23,300
$
24,287
Capital expenditures in accounts payable
$
11,948
$
4,494
$
9,889
Cash paid for interest of discontinued operations
$
-
$
-
$
11,557
Cash premium paid for extinguishment of convertible notes
$
20,861
$
-
$
-
See accompanying notes to the consolidated financial statements.
‎
GRE EN PLAINS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION and DESCRIPTION OF BUSINESS
References to the Company
References to “Green Plains” or the “company” in the consolidated financial statements and in these notes to the consolidated financial statements refer to Green Plains Inc., an Iowa corporation, and its subsidiaries.
Consolidated Financial Statements
The consolidated financial statements include the company’s accounts and all significant intercompany balances and transactions are eliminated. Unconsolidated entities are included in the financial statements on an equity basis. As of December 31, 2021, the company owns a 48.9% limited partner interest and a 2.0% general partner interest in Green Plains Partners LP. Public investors own the remaining 49.1% limited partner interest in the partnership. The company determined that the limited partners in the partnership with equity at risk lack the power, through voting rights or similar rights, to direct the activities that most significantly impact partnership’s economic performance; therefore, the partnership is considered a variable interest entity. The company, through its ownership of the general partner interest in the partnership, has the power to direct the activities that most significantly affect economic performance and is obligated to absorb losses and has the right to receive benefits that could be significant to the partnership. Therefore, the company is considered the primary beneficiary and consolidates the partnership in the company’s financial statements. The assets of the partnership cannot be used by the company for general corporate purposes. The partnership’s consolidated total assets as of December 31, 2021 and 2020, excluding intercompany balances, are $100.3 million and $91.2 million, respectively, and primarily consist of property and equipment, operating lease right-of-use assets and goodwill. The partnership’s consolidated total liabilities as of December 31, 2021 and 2020, excluding intercompany balances, are $111.4 million and $151.2 million, respectively, which primarily consist of long-term debt as discussed in Note 12 - Debt and operating lease liabilities. The liabilities recognized as a result of consolidating the partnership do not represent additional claims on our general assets.
GPCC, previously a wholly owned subsidiary of Green Plains, was disposed of during the third quarter of 2019. The company concluded that the disposition of GPCC met the requirements under ASC 205-20 Presentation of Financial Statements - Discontinued Operations (“ASC 205-20”) to be presented as discontinued operations. As such, GPCC results prior to its disposition are classified as discontinued operations in prior period consolidated financial statements. Subsequently, GPCC was no longer consolidated in the company’s consolidated financial statements and the GPCC investment was accounted for using the equity method of accounting.
Additionally, on October 1, 2020, pursuant to the Securities Purchase Agreement, the company sold its remaining 50% joint venture interest in GPCC to AGR Special Opportunities Fund I, LP (AGR), TGAM Agribusiness Fund LP and StepStone Atlantic Fund, LP (StepStone). The transaction resulted in a reduction in investment in equity method investees of $69.7 million as a result of removal of the equity method investment in GPCC, and a reduction in accumulated other comprehensive income (loss) of $10.7 million as a result of the removal of the company’s share of equity method investees accumulated other comprehensive loss. See Note 5 - Acquisitions, Dispositions and Discontinued Operations and Note 20 - Equity Method Investments for further details.
The company also owns a 90.0% interest in BioProcess Algae, a joint venture formed in 2008, as well as a majority interest in FQT with their results being consolidated in our consolidated financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications did not affect total revenues, costs and expenses or net income. See Note 12 - Debt and Note 15 - Stockholders’ Equity for further details.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The company bases its estimates on historical experience and assumptions it believes are proper and reasonable under the circumstances and regularly evaluates the appropriateness of its estimates and assumptions. Actual
results could differ from those estimates. Key accounting policies, including but not limited to those relating to revenue recognition, carrying value of intangible assets, operating leases, impairment of long-lived assets and goodwill, derivative financial instruments, accounting for income taxes and assets acquired and liabilities assumed in acquisitions, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements.
Description of Business
The company operates within three operating segments: (1) ethanol production, which includes the production of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities and (3) partnership, which includes fuel storage and transportation services. Results for our previously reported food and ingredients segment are now included in the agribusiness and energy services segment. The food and ingredients segment had no activity in either 2021 or 2020 and minimal activity in 2019.
Ethanol Production Segment
Green Plains is one of the largest ethanol producers in North America. The company operates 11 ethanol plants in six states through separate wholly owned operating subsidiaries. The company’s ethanol plants use a dry mill process to produce ethanol and co-products such as wet, modified wet or dried distillers grains, Ultra-High Protein and corn oil. The corn oil systems are designed to extract non-edible corn oil from the whole stillage immediately prior to production of distillers grains. At capacity, the company expects to process approximately 330 million bushels of corn and produce approximately 1.0 billion gallons of ethanol, 2.5 million tons of distillers grains and 290 million pounds of industrial grade corn oil annually.
Agribusiness and Energy Services Segment
The company owns and operates grain handling and storage assets through its agribusiness and energy services segment, which has grain storage capacity of approximately 27.0 million bushels, with 25.8 million bushels of storage capacity at the company’s ethanol plants and 1.2 million bushels of total storage capacity at its one grain elevator. The company’s agribusiness operations provide synergies with the ethanol production segment as it supplies a portion of the feedstock needed to produce ethanol. The company has an in-house marketing business that is responsible for the sale, marketing and distribution of all ethanol, distillers grains, Ultra-High Protein and corn oil produced at its ethanol plants. The company also purchases and sells ethanol, distillers grains, corn oil, grain, natural gas and other commodities and participates in other merchant trading activities in various markets.
Partnership Segment
The company’s partnership segment provides fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. As of December 31, 2021, the partnership owns (i) 29 ethanol storage facilities located at or near the company’s 11 operational ethanol production plants and one non-operational ethanol production plant, which have the ability to efficiently and effectively store and load railcars and tanker trucks with all of the ethanol produced at the company’s ethanol production plants, (ii) four fuel terminal facilities, located near major rail lines, which enable the partnership to receive, store and deliver fuels from and to markets that seek access to renewable fuels, and (iii) transportation assets, including a leased railcar fleet of approximately 2,300 railcars which is utilized to transport ethanol from the company’s ethanol production plants to refineries throughout the United States and international export terminals.
2. SUMMARY OF SIGNIFICANT accounting POLICIES
Cash and Cash Equivalents
Cash and cash equivalents includes bank deposits as well as short-term, highly liquid investments with original maturities of three months or less.
Restricted Cash
The company has restricted cash, which can only be used for funding letters of credit, for payment towards a credit agreement, or for capital expenditures as specified in certain credit facility agreements. Restricted cash also includes cash margins and securities pledged to commodity exchange clearinghouses and at times, funds in escrow related to acquisition and disposition activities. To the degree these segregated balances are cash and cash equivalents, they are considered restricted cash on the consolidated balance sheets.
Marketable Securities
Marketable securities include highly liquid, fixed maturity investments with original maturities ranging from three to twelve months and are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity.
Revenue Recognition
The company recognizes revenue when obligations under the terms of a contract with a customer are satisfied. Generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects concurrent with revenue-producing activities are excluded from revenue.
Sales of ethanol, distillers grains, Ultra-High Protein, corn oil, natural gas and other commodities by the company’s marketing business are recognized when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs with the transfer of control of products or services. Revenues related to marketing for third parties are presented on a gross basis as the company controls the product prior to the sale to the end customer, takes title of the product and has inventory risk. Unearned revenue is recorded for goods in transit when the company has received payment but control has not yet been transferred to the customer. Revenues for receiving, storing, transferring and transporting ethanol and other fuels are recognized when the product is delivered to the customer.
The company routinely enters into physical-delivery energy commodity purchase and sale agreements. At times, the company settles these transactions by transferring its obligations to other counterparties rather than delivering the physical commodity. Energy trading transactions are reported net as a component of revenue. Revenues include net gains or losses from derivatives related to products sold while cost of goods sold includes net gains or losses from derivatives related to commodities purchased. Revenues also include realized gains and losses on related derivative financial instruments and reclassifications of realized gains and losses on cash flow hedges from accumulated other comprehensive income or loss.
Sales of products, including agricultural commodities, are recognized when control of the product is transferred to the customer, which depends on the agreed upon shipment or delivery terms. Revenues related to grain merchandising are presented gross and include shipping and handling, which is also a component of cost of goods sold. Revenues from grain storage are recognized over time as the services are rendered.
A substantial portion of the partnership revenues are derived from fixed-fee commercial agreements for storage, terminal or transportation services. The partnership recognizes revenue upon transfer of control of product from its storage tanks and fuel terminals, when railcar volumetric capacity is provided, and as truck transportation services are performed. To the extent shortfalls associated with minimum volume commitments in the previous four quarters continue to exist, volumes in excess of the minimum volume commitment are applied to those shortfalls. Remaining excess volumes generating operating lease revenue are recognized as incurred.
Shipping and Handling Costs
The company accounts for shipping and handling activities related to contracts with customers as costs to fulfill its promise to transfer the associated products. Accordingly, the company records customer payments associated with shipping and handling costs as a component of revenue, and classifies such costs as a component of cost of goods sold.
Cost of Goods Sold
Cost of goods sold includes direct labor, materials, shipping and plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in ethanol production. Grain purchasing and receiving costs, excluding labor costs for grain buyers and scale operators, are also included in cost of goods sold. Materials include the cost of corn feedstock, denaturant, and process chemicals. Corn feedstock costs include gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight charges, inspection costs and transfer costs, as well as reclassifications of gains and losses on cash flow hedges from accumulated other comprehensive income or loss. Plant overhead consists primarily of plant utilities, repairs and maintenance and outbound freight charges. Shipping costs incurred by the company, including railcar costs, are also reflected in cost of goods sold.
The company uses exchange-traded futures and options contracts and forward purchase and sale contracts to attempt to minimize the effect of price changes on ethanol, grain and natural gas. Exchange-traded futures and options contracts are valued at quoted market prices and settled predominantly in cash. The company is exposed to loss when counterparties default on forward purchase and sale contracts. Grain inventories held for sale and forward purchase and sale contracts are
valued at market prices when available or other market quotes adjusted for basis differences, primarily in transportation, between the exchange-traded market and local market where the terms of the contract is based. Changes in forward purchase contracts and exchange-traded futures and options contracts are recognized as a component of cost of goods sold.
Operations and Maintenance Expenses
In the partnership segment, transportation expenses represent the primary component of operations and maintenance expenses. Transportation expenses include railcar leases, freight and shipping of the company’s ethanol and co-products, as well as costs incurred storing ethanol at destination terminals.
Derivative Financial Instruments
The company uses various derivative financial instruments, including exchange-traded futures and exchange-traded and over-the-counter options contracts, to attempt to minimize risk and the effect of commodity price changes including but not limited to, corn, ethanol, natural gas and crude oil. The company monitors and manages this exposure as part of its overall risk management policy to reduce the adverse effect market volatility may have on its operating results. The company may hedge these commodities as one way to mitigate risk; however, there may be situations when these hedging activities themselves result in losses.
By using derivatives to hedge exposures to changes in commodity prices, the company is exposed to credit and market risk. The company’s exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the terms of the derivative contract. The company minimizes its credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring their financial condition. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. The company manages market risk by incorporating parameters to monitor exposure within its risk management strategy, which limits the types of derivative instruments and strategies the company can use and the degree of market risk it can take using derivative instruments.
The company evaluates its physical delivery contracts to determine if they qualify for normal purchase or sale exemptions which are expected to be used or sold over a reasonable period in the normal course of business. Contracts that do not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating income unless the contracts qualify for, and the company elects, cash flow hedge accounting treatment.
Certain qualifying derivatives related to ethanol production and agribusiness and energy services are designated as cash flow hedges. The company evaluates the derivative instrument to ascertain its effectiveness prior to entering into cash flow hedges. Unrealized gains and losses are reflected in accumulated other comprehensive income or loss until the gain or loss from the underlying hedged transaction is realized and the physical transaction is completed. When it becomes probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued, which affects earnings. These derivative financial instruments are recognized in current assets or current liabilities at fair value.
At times, the company hedges its exposure to changes in inventory values and designates qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted in the current period for changes in fair value. Estimated fair values carried at market are based on exchange-quoted prices, adjusted as appropriate for regional location basis values which represent differences in local markets including transportation as well as quality or grade differences. Basis values are generally determined using inputs from broker quotations or other market transactions. However, a portion of the value may be derived using unobservable inputs. Ineffectiveness of the hedges is recognized in the current period to the extent the change in fair value of the inventory is not offset by the change in fair value of the derivative.
Concentrations of Credit Risk
The company is exposed to credit risk resulting from the possibility that another party may fail to perform according to the terms of the company’s contract. The company sells ethanol, corn oil and distillers grains and markets products for third parties, which can result in concentrations of credit risk from a variety of customers, including major integrated oil companies, large independent refiners, petroleum wholesalers and other marketers. The company also sells grain to large commercial buyers, including other ethanol plants. Although payments are typically received within fifteen days of the sale, the company continually monitors its exposure. The company is also exposed to credit risk on prepayments of undelivered inventories with a few major suppliers of petroleum products and agricultural inputs.
The company has master netting arrangements with various counterparties. On the consolidated balance sheets, the associated net amount for each counterparty is reflected as either an accounts receivable or accounts payable. If the amount
for each counterparty were reflected on a gross basis, the company’s accounts receivable and accounts payable would increase by $7.8 million and $1.1 million at December 31, 2021 and 2020, respectively.
Inventories
Corn held for ethanol production, ethanol, corn oil, Ultra-High Protein and distillers grains inventories are recorded at the lower of average cost or net realizable value, except grain held for sale and fair-value hedged inventories.
Other grain inventories include readily marketable grain, forward contracts to buy and sell grain, and exchange traded futures and option contracts, which are all stated at market value. All grain inventories held for sale are marked to market. Changes are reflected in cost of goods sold. The forward contracts require performance in future periods. Contracts to purchase grain generally relate to current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of grain to processors or other consumers generally do not extend beyond one year. The terms of the purchase and sale agreements for grain are consistent with industry standards. Raw materials and finished goods inventories are valued at the lower of average cost or net realizable value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is generally calculated using the straight-line method over the following estimated useful life of the assets:
Years
Buildings and improvements
10-40
Plant equipment
15-40
Other machinery and equipment
5-7
Land improvements
20-30
Railroad track and equipment
20-30
Computer hardware and software
3-5
Office furniture and equipment
5-7
Property and equipment is capitalized at cost. Land improvements, interest incurred during construction and other property improvements are capitalized and depreciated. Betterment of property assets are those that extend the useful life, increase the capacity or improve the operating efficiency or improve the safety of our operations. Costs of repairs and normal maintenance are charged to expense when incurred. The company periodically evaluates whether events and circumstances have occurred that warrant a revision of the estimated useful life of its fixed assets.
Intangible Assets
Our intangible assets consist primarily of customer relationships, intellectual property, research and development technology and licenses. These intangible assets were capitalized at fair market value and are being amortized over their estimated useful lives.
Impairment of Long-Lived Assets
The company reviews its long-lived assets, currently consisting of property and equipment, operating lease right-of-use assets, intangible assets and equity method investments, for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Significant management judgment is required to determine the fair value of our long-lived assets and measure impairment, which includes projected cash flows. Fair value is determined by using various valuation techniques, including discounted cash flow models, sales of comparable properties and third-party independent appraisals. Changes in estimated fair value could result in an impairment of the asset. There were no material impairment charges recorded for the periods reported.
Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The determination of goodwill takes into
consideration the fair value of net tangible and intangible assets. The company’s goodwill is related to certain acquisitions within our ethanol production and partnership segments.
The company is required to perform impairment tests related to goodwill annually, which it performs as of October 1, or sooner if an indicator of impairment occurs. Circumstances that may indicate impairment include a decline in the company’s future projected cash flows, a decision to suspend plant operations for an extended period of time, sustained decline in the company’s market capitalization or market prices for similar assets or businesses, or a significant adverse change in legal or regulatory matters or business climate. Significant management judgment is required to determine the fair value of goodwill and measure impairment, which include, but are not limited to, market capitalization, prospective financial information, growth rates, discount rates, inflationary factors, and cost of capital. Fair value is determined by using various valuation techniques, including discounted cash flow models, sales of comparable properties and third-party independent appraisals. Changes in estimated fair value could result in a write-down of the asset.
For additional information, please refer to Note 10 - Goodwill and Intangible Assets.
Leases
The company leases certain facilities, parcels of land, and equipment. These leases are accounted for as operating leases, with lease expense recognized on a straight-line basis over the lease term. The term of the lease may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised. For leases with initial terms greater than 12 months, the company records operating lease right-of-use assets and corresponding operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. The company did not incur any material short-term lease expense for the years ended December 31, 2021, 2020 or 2019.
Operating lease right-of-use assets represent the right to control an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the company’s leases do not provide an implicit rate, the incremental borrowing rate is used based on information available at commencement date to determine the present value of future payments.
The company elected to utilize a portfolio approach for lease classification, which allows for an entity to group together leases with similar characteristics provided that its application does not create a material difference when compared to accounting for the leases at a contract level. For railcar leases, the company elected to combine the railcars within each rider and account for each rider as an individual lease.
From a lessee perspective, the company combines both the lease and non-lease components and accounts for them as one lease. Certain of the company’s railcar agreements provide for maintenance costs to be the responsibility of the company as incurred or charged by the lessor. This maintenance cost is a non-lease component that the company combines with the monthly rental payment and accounts for the total cost as operating lease expense. In addition, the company has a land lease that contains a non-lease component for the handling and unloading services the landlord provides. The company combines the cost of services with the land lease cost and accounts for the total as operating lease expense.
The partnership segment records the majority of it operating lease revenue from its storage and throughput services, rail transportation services and certain terminal services agreements with Green Plains Trade. In addition, the partnership may sublease certain of its railcars to third parties on a short-term basis. These subleases are classified as operating leases, with the associated sublease revenue recognized on a straight-line basis over the lease term.
Please refer to Note 17 - Commitments and Contingencies to the consolidated financial statements for further details on operating lease expense and revenue.
Investments in Equity Method Investees
The company accounts for investments in which the company exercises significant influence using the equity method so long as the company (i) does not control the investee and (ii) is not the primary beneficiary of the entity. The company recognizes these investments as a separate line item in the consolidated balance sheets and its proportionate share of earnings on a separate line item in the consolidated statements of operations. The company’s share of equity method investees other comprehensive income arising during the period is included in accumulated other comprehensive loss in the consolidated balance sheet.
‎
The company recognizes losses in the value of equity method investments when there is evidence of an other-than-temporary decrease in value. Evidence of a loss might include, but would not necessarily be limited to, the inability to recover the carrying amount of the investment or the inability of the equity method investee to sustain an earnings capacity that justifies the carrying amount of the investment. The current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment. The company evaluates equity method investments for impairment if there is evidence an investment may be impaired. We use the nature of distribution approach to classify distributions from equity method investments on the statements of cash flows.
Discontinued Operations
In determining whether a disposal group should be presented as discontinued operations, the company makes a determination of whether such a group being disposed of comprises a component of the entity, or a group of components of the entity, that represents a strategic shift that has, or will have, a major effect on the company's operations and financial results. If these determinations are made affirmatively, the results of operations of the group being disposed of are aggregated for separate presentation apart from the continuing operations of the company for all periods presented in the consolidated financial statements. General corporate overhead is not allocated to discontinued operations.
Net income from discontinued operations, net of income taxes, relates to the operations of GPCC, which was previously a wholly owned subsidiary of Green Plains until the formation of the GPCC joint venture and partial sale during the third quarter of 2019. The assets and liabilities of GPCC have been reclassified as assets and liabilities of discontinued operations in the prior year. The company entered into a shared service agreement whereby they continued to provide certain administrative services to GPCC and received $400 thousand on a quarterly basis through December 31, 2020, at which time administrative services began to unwind as a result of the disposition of the GPCC joint venture on October 1, 2020. See Note 5 - Acquisitions, Dispositions and Discontinued Operations for further details.
Financing Costs
Fees and costs related to securing debt are recorded as financing costs. Debt issuance costs are stated at cost and are amortized using the effective interest method for term loans and the straight-line basis over the life of the agreements for revolving credit arrangements and convertible notes.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of various expenses including employee salaries, incentives and benefits; office expenses; director compensation; professional fees for accounting, legal, consulting, and investor relations activities.
Stock-Based Compensation
The company recognizes compensation cost using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. The company used the Monte Carlo valuation model to estimate the fair value of performance shares issued to employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.
Income Taxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial reporting carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operating results in the period of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The company recognizes uncertainties in income taxes within the financial statements under a process by which the likelihood of a tax position is gauged based upon the technical merits of the position, and then a subsequent measurement relates the maximum benefit and the degree of likelihood to determine the amount of benefit recognized in the financial statements.
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Recent Accounting Pronouncements
On January 1, 2021, the company early adopted the amended guidance in ASC 470-20, Debt - Debt with Conversion and Other Options and ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity - Accounting for Convertible Instruments and Contracts in an Equity’s Own Equity. The adoption of this guidance resulted in a $49.5 million decrease in additional paid-in capital, an $11.4 million increase in retained earnings and a $38.1 million increase in long-term debt, which included a $39.4 million increase in debt principal offset by a $1.3 million increase in debt issuance costs, resulting from amounts previously bifurcated to equity being reclassified to debt. See Note 12 - Debt and Note 15 - Stockholders’ Equity for further details.
In March 2020, the FASB issued amended guidance in ASC 848, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and a subsequent update in January 2021, which provides optional expedients and exceptions to U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates. The expedients and exceptions provided by the amended guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The guidance is effective upon issuance and to be applied prospectively from any date beginning March 12, 2020 through December 31, 2022. The amended guidance is not expected to have a material impact on the company’s consolidated financial statements.
In December 2019, the FASB issued amended guidance in ASC 740, Income Taxes - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. The amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. The amended guidance is not expected to have a material impact on the company’s consolidated financial statements.
Effective January 1, 2020, the company adopted the amended guidance in ASC 326, Financial Instruments - Credit Losses, which replaces the current incurred loss impairment method with a method that reflects expected credit losses on financial instruments. The new standard is effective for fiscal years and interim periods within those years, beginning after December 15, 2019, and allows for early adoption. The adoption of the new guidance did not have a material impact on the company’s consolidated financial statements.
3. GREEN PLAINS PARTNERS LP
The partnership is a fee-based master limited partnership formed by Green Plains to provide fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. The partnership’s assets currently include (i) 29 ethanol storage facilities, located at or near the company’s 11 operational ethanol production plants, which have the ability to efficiently and effectively store and load railcars and tanker trucks with all of the ethanol produced at the company’s ethanol production plants, (ii) four fuel terminal facilities, located near major rail lines, which enable the partnership to receive, store and deliver fuels from and to markets that seek access to renewable fuels, and (iii) transportation assets, including a leased railcar fleet of approximately 2,300 railcars, which are contracted to transport ethanol from the company’s ethanol production plants to refineries throughout the United States and international export terminals. The partnership is the company’s primary downstream logistics provider to support its approximately 1.0 bgy ethanol marketing and distribution business since the partnership’s assets are the principal method of storing and delivering the ethanol the company produces.
As of December 31, 2021, the company owns a 48.9% limited partner interest, consisting of 11,586,548 common units, and a 2.0% general partner interest in the partnership. The public owns the remaining 49.1% limited partner interest in the partnership. The partnership is consolidated in the company’s financial statements.
A substantial portion of the partnership’s revenues are derived from long-term, fee-based commercial agreements with Green Plains Trade, a subsidiary of the company. The partnership’s agreements with Green Plains Trade include the following:
Storage and throughput agreement, expiring on June 30, 2029;
Rail transportation services agreement, expiring on June 30, 2025;
Trucking transportation agreement, expiring on May 31, 2022;
Terminal services agreement for the Birmingham, Alabama unit train terminal, expiring December 31, 2022; and
Various other terminal services agreements for other fuel terminal facilities, each with Green Plains Trade.
The partnership’s storage and throughput agreement, and certain terminal services agreements, including the terminal services agreement for the Birmingham facility, are supported by minimum volume commitments. The partnership’s rail transportation services agreement is supported by minimum take-or-pay capacity commitments. The company also has agreements which establish fees for general and administrative, and operational and maintenance services it provides. These transactions are eliminated when the company consolidates its financial results.
The company consolidates the financial results of the partnership and records a noncontrolling interest in the partnership held by public common unitholders. Noncontrolling interest on the consolidated statements of operations includes the portion of net income attributable to the economic interest held by the partnership’s public common unitholders. Noncontrolling interest on the consolidated balance sheets includes the portion of net assets attributable to the partnership’s public common unitholders.
4. REVENUE
Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects concurrent with revenue-producing activities are excluded from revenue.
Revenue by Source
The following tables disaggregate revenue by major source (in thousands):
Twelve Months Ended December 31, 2021
Ethanol Production
Agribusiness & Energy Services
Partnership
Eliminations
Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol
$
-
$
-
$
-
$
-
$
-
Distillers grains
19,535
-
-
-
19,535
Corn oil
-
-
-
-
-
Service revenues
16,265
-
4,191
-
20,456
Other
32,096
14,090
-
-
46,186
Intersegment revenues
-
-
8,028
(8,028)
-
Total revenues from contracts with customers
67,896
14,090
12,219
(8,028)
86,177
Revenues from contracts accounted for as derivatives under ASC 815 (1):
Ethanol
1,589,649
498,367
-
-
2,088,016
Distillers grains
355,230
40,763
-
-
395,993
Corn oil
113,249
32,528
-
-
145,777
Grain
37,118
-
-
37,169
Other
27,293
46,660
-
-
73,953
Intersegment revenues
-
21,958
-
(21,958)
-
Total revenues from contracts accounted for as derivatives
2,085,472
677,394
-
(21,958)
2,740,908
Leasing revenues under ASC 842 (2)
-
-
66,233
(66,150)
Total Revenues
$
2,153,368
$
691,484
$
78,452
$
(96,136)
$
2,827,168
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Twelve Months Ended December 31, 2020
Ethanol Production
Agribusiness & Energy Services
Partnership
Eliminations
Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol
$
-
$
-
$
-
$
-
$
-
Distillers grains
32,032
-
-
-
32,032
Corn oil
-
2,938
-
-
2,938
Service revenues
-
-
4,434
-
4,434
Other
4,306
6,423
-
-
10,729
Intersegment revenues
4,463
8,411
(12,974)
-
Total revenues from contracts with customers
36,438
13,824
12,845
(12,974)
50,133
Revenues from contracts accounted for as derivatives under ASC 815 (1):
Ethanol
1,150,018
287,261
-
-
1,437,279
Distillers grains
261,554
41,184
-
-
302,738
Corn oil
49,666
33,563
-
-
83,229
Grain
32,833
-
-
32,875
Other
4,863
12,201
-
-
17,064
Intersegment revenues
-
23,005
-
(23,005)
-
Total revenues from contracts accounted for as derivatives
1,466,143
430,047
-
(23,005)
1,873,185
Leasing revenues under ASC 842 (2)
-
-
70,500
(70,099)
Total Revenues
$
1,502,581
$
443,871
$
83,345
$
(106,078)
$
1,923,719
Twelve Months Ended December 31, 2019
Ethanol Production
Agribusiness & Energy Services
Partnership
Eliminations
Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol
$
$
-
$
-
$
-
$
Distillers grains
70,729
-
-
-
70,729
Service revenues
-
-
6,422
-
6,422
Other
2,589
3,684
-
-
6,273
Intersegment revenues
-
7,126
(7,226)
-
Total revenues from contracts with customers
74,038
3,684
13,548
(7,226)
84,044
Revenues from contracts accounted for as derivatives under ASC 815 (1):
Ethanol
1,338,093
522,572
-
-
1,860,665
Distillers grains
228,849
42,445
-
-
271,294
Corn oil
50,290
29,485
-
-
79,775
Grain
63,233
-
-
63,408
Other
9,270
48,348
-
-
57,618
Intersegment revenues
-
27,184
-
(27,184)
-
Total revenues from contracts accounted for as derivatives
1,626,677
733,267
-
(27,184)
2,332,760
Leasing revenues under ASC 842 (2)
-
-
68,839
(68,405)
Total Revenues
$
1,700,715
$
736,951
$
82,387
$
(102,815)
$
2,417,238
(1)Revenues from contracts accounted for as derivatives represent physically settled derivative sales that are outside the scope of ASC 606, where the company recognizes revenue when control of the inventory is transferred within the meaning of ASC 606 as required by ASC 610-20, Gains and Losses from Derecognition of Nonfinancial Assets.
(2)Leasing revenues do not represent revenues recognized from contracts with customers under ASC 606, and are accounted for under ASC 842, Leases.
Major Customer
There were no customers that accounted for more than 10% of total revenues for the year ended December 31, 2021. Revenues from Customer A represented 16% and 11% of total revenues for the year ended December 31, 2020 and 2019, respectively and are reported in the ethanol production segment.
Payment Terms
The company has standard payment terms, which vary depending upon the nature of the services provided, with the majority falling within 10 to 30 days after transfer of control or completion of services. In instances where the timing of revenue recognition differs from the timing of invoicing, the company has determined that contracts generally do not include a significant financing component.
Contract Liabilities
The company records unearned revenue when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of service and lease agreements. Unearned revenue from service agreements, which represents a contract liability, is recorded for fees that have been charged to the customer prior to the completion of performance obligations. Unearned revenue is generally recognized in the subsequent quarter and is not material to the company. The company expects to recognize all of the unearned revenue associated with service agreements as of December 31, 2021, in the subsequent quarter when the inventory is withdrawn from the partnership’s tank storage.
5. ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS
ACQUISITIONS
Acquisition of a Majority Interest in FQT
On December 9, 2020, the company acquired a majority interest in FQT. During the second quarter of 2021, the company identified additional information through analysis of the final FQT acquisition agreements that resulted in a reassessment of certain contingent considerations related to potential earn-out payments which identified an understatement of other long term assets by $16.7 million, accrued liabilities of $2.4 million, long term other liabilities of $12.4 million and noncontrolling interests of $1.9 million as previously reported within ethanol production segment as of December 31, 2020.
DISPOSITIONS
Disposition of Ord Ethanol Plant
On March 22, 2021, the company completed the sale of the plant located in Ord, Nebraska and certain related assets, to GreenAmerica Biofuels Ord LLC (the “Ord Transaction”) for a sale price of $64.0 million, plus working capital of $9.8 million. Correspondingly, the company entered into a separate asset purchase agreement with the Partnership to acquire the storage assets and assign the rail transportation assets to be disposed of in the Ord Transaction for $27.5 million, which was used to pay down a portion of the partnership’s credit facility. The divested assets were reported within the company’s ethanol production, agribusiness and energy services and partnership segments. The company recorded a pretax gain on the sale of the Ord plant of $35.9 million within corporate activities.
The asset and liabilities of the Ord ethanol plant at closing on March 22, 2021 were as follows: (in thousands):
Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Inventory
$
10,400
Prepaid expenses and other
Property and equipment
24,285
Operating lease right-of-use assets
1,811
Accrued and other liabilities
(156)
Operating lease current liabilities
(1,021)
Operating lease long-term liabilities
(790)
Total identifiable net assets disposed
$
35,161
Disposition of Hereford Ethanol Plant
On December 28, 2020, the company completed the sale of the ethanol plant located in Hereford, Texas, and certain related assets, to Hereford Ethanol Partners, L.P. for the sale price of $39.0 million, plus working capital. Correspondingly, the partnership’s ethanol storage assets located adjacent to such plants were sold to the company for $10.0 million, and certain railcar operating leases were assigned to Hereford Ethanol Partners, L.P. The divested assets were reported within the company’s ethanol production, agribusiness and energy and partnership segments. The company recorded a pretax loss on the sale of the ethanol plant of $22.4 million, of which a loss of $18.5 million was recorded within corporate activities and a loss of $3.9 million was recorded within the ethanol production segment. Transaction fees related to the disposal were not material. The agreement contains certain earn-out provisions to be received from the buyers if certain provisions are met. The company will record any contingent amounts in the consolidated financial statements when the amount is reasonably determinable or the consideration is realized.
The asset and liabilities of the Hereford ethanol plant at closing on December 28, 2020 were as follows: (in thousands):
Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Inventory
$
8,140
Prepaid expenses and other
Property and equipment
54,279
Operating lease right-of-use-assets
5,096
Accrued and other liabilities
(870)
Operating lease current liabilities
(977)
Operating lease long-term liabilities
(4,201)
Long-term liabilities
(186)
Total identifiable net assets disposed
$
61,477
Disposition of Equity Interest in Green Plains Cattle Company LLC
On October 1, 2020, pursuant to the Securities Purchase Agreement, the company sold its remaining 50% joint venture interest in GPCC to AGR, TGAM Agribusiness Fund LP and StepStone (the “Buyers”) for $80.5 million in cash, plus closing adjustments. The transaction resulted in a reduction in other assets of $69.7 million as a result of the removal of the equity method investment in GPCC, and a reduction in accumulated other comprehensive loss of $10.7 million as a result of the removal of the company’s share of equity method investees accumulated other comprehensive loss. Transaction fees related to the disposal were not material. The Securities Purchase Agreement contained certain earn-out provisions of up to $4.0 million to be paid to the Buyers if certain EBITDA thresholds are met. During the year ended December 31, 2021, the company recorded a loss of $2.9 million associated with the earn-out provision.
Disposition of Green Plains Cattle Company LLC
On September 1, 2019, the company, TGAM and StepStone formed a joint venture and entered into the LLC Agreement. GPCC was previously a wholly owned subsidiary of Green Plains. Green Plains also entered into a Securities Purchase Agreement with TGAM and StepStone, whereby TGAM and StepStone purchased an aggregate of 50% of the membership interests of GPCC from Green Plains for approximately $76.9 million in cash. There was no gain or loss recorded as part of this transaction. The LLC Agreement contains certain earn-out or bonus provisions to be paid by or received from GPCC if certain EBITDA thresholds are met. Pursuant to the bonus provision, on August 31, 2020, Green Plains earned $2.0 million which has been recorded within loss (gain) on sale of assets, net on the consolidated statements of operations for the year ended December 31, 2020.
The assets and liabilities of the GPCC at closing on September 1, 2019 were as follows (in thousands):
Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Cash
$
Accounts receivable, net
17,920
Inventory
387,534
Derivative financial instruments
48,189
Property and equipment
71,678
Other assets
2,291
Current liabilities
(49,297)
Short-term notes payable and other borrowings
(38)
Current maturities of long-term debt
(324,028)
Long-term debt
(80)
Other liabilities
(403)
Total identifiable net assets disposed
$
153,768
DISCONTINUED OPERATIONS
After closing on September 1, 2019, GPCC is no longer consolidated in the company’s consolidated financial statements and the GPCC investment was accounted for using the equity method of accounting. Additionally, the company concluded that the disposition of GPCC met the requirements under ASC 205-20. As such, GPCC results prior to its disposition are classified as discontinued operations for the year ended December 31, 2019.
Summarized Results of Discontinued Operations
The following table presents the results of our discontinued operations for the periods presented. GPCC was disposed of on September 1, 2019, and as such, operational results through August 31, 2019 are included in the fiscal year 2019 amounts presented below (in thousands).
Year Ended December 31,
2019 (1)
Product revenues
$
638,122
Costs and expenses
Cost of goods sold (excluding depreciation and amortization expenses reflected below)
614,671
Selling, general and administrative expenses
5,931
Depreciation and amortization expenses
4,198
Total costs and expenses
624,800
Operating income
13,322
Other income (expense)
Interest income
Interest expense
(12,417)
Total other expense
(12,235)
Income before income taxes
1,087
Income tax expense
(258)
Net income
$
(1)Product revenues, costs of goods sold and selling, general and administrative expenses include certain revenue and expense items which were previously considered intercompany transactions prior to the disposition of GPCC and therefore eliminated upon consolidation. These revenue and costs of goods sold transactions total $14.5 million for the year ended December 31, 2019.
6. FAIR VALUE DISCLOSURES
The following methods, assumptions and valuation techniques were used in estimating the fair value of the company’s financial instruments:
Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities the company can access at the measurement date.
Level 2 - directly or indirectly observable inputs such as quoted prices for similar assets or liabilities in active markets other than quoted prices included within Level 1, quoted prices for identical or similar assets in markets that are not active, and other inputs that are observable or can be substantially corroborated by observable market data through correlation or other means. Grain inventories held for sale in the agribusiness and energy services segment are valued at nearby futures values, plus or minus nearby basis values, which represent differences in local markets including transportation or commodity quality or grade differences.
Level 3 - unobservable inputs that are supported by little or no market activity and comprise a significant component of the fair value of the assets or liabilities. The company currently does not have any recurring Level 3 financial instruments.
Derivative contracts include exchange-traded commodity futures and options contracts and forward commodity purchase and sale contracts. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1. The majority of the company’s exchange-traded futures and options contracts are cash-settled on a daily basis.
‎
There have been no changes in valuation techniques and inputs used in measuring fair value. The company’s assets and liabilities by level are as follows (in thousands):
Fair Value Measurements at December 31, 2021
Quoted Prices in
‎Active Markets for
‎Identical Assets
Significant Other
‎Observable Inputs
(Level 1)
(Level 2)
Total
Assets:
Cash and cash equivalents
$
426,220
$
-
$
426,220
Restricted cash
134,739
-
134,739
Marketable securities
-
124,859
124,859
Inventories carried at market
-
72,320
72,320
Unrealized gains on derivatives
-
26,738
26,738
Other assets
Total assets measured at fair value
$
561,070
$
223,925
$
784,995
Liabilities:
Accounts payable (1)
$
-
$
12,617
$
12,617
Accrued and other liabilities (2)
-
3,260
3,260
Unrealized losses on derivatives
-
26,117
26,117
Other liabilities (2)
-
7,788
7,788
Total liabilities measured at fair value
$
-
$
49,782
$
49,782
Fair Value Measurements at December 31, 2020
Quoted Prices in
‎Active Markets for
‎Identical Assets
Significant Other
‎Observable Inputs
(Level 1)
(Level 2)
Total
Assets:
Cash and cash equivalents
$
233,860
$
-
$
233,860
Restricted cash
40,950
-
40,950
Inventories carried at market
-
77,900
77,900
Unrealized gains on derivatives
-
21,956
21,956
Other assets
Total assets measured at fair value
$
274,922
$
99,885
$
374,807
Liabilities:
Accounts payable (1)
$
-
$
19,355
$
19,355
Unrealized losses on derivatives
-
10,997
10,997
Total liabilities measured at fair value
$
-
$
30,352
$
30,352
(1)Accounts payable is generally stated at historical amounts with the exception of $12.6 million and $19.4 million at December 31, 2021 and 2020, respectively, related to certain delivered inventory for which the payable fluctuates based on changes in commodity prices. These payables are hybrid financial instruments for which the company has elected the fair value option.
(2)As of December 31, 2021, accrued and other liabilities includes $3.3 million and other liabilities includes $7.6 million of consideration related to potential earn-out payments recorded at fair value.
The fair value of the company’s debt was approximately $891.1 million compared with a book value of $722.7 million at December 31, 2021. The fair value of the company’s debt was approximately $535.9 million compared with a book value of $526.2 million at December 31, 2020. The company estimated the fair value of its outstanding debt using Level 2 inputs. The company believes the fair values of its accounts receivable approximated book value, which was $120.0 million and $55.6 million, respectively, at December 31, 2021 and 2020.
Although the company currently does not have any recurring Level 3 financial measurements, the fair values of tangible assets and goodwill acquired represent Level 3 measurements which were derived using a combination of the income approach, market approach and cost approach for the specific assets or liabilities being valued.
‎
7. SEGMENT INFORMATION
The company reports the financial and operating performance for the following three operating segments: (1) ethanol production, which includes the production of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities, and (3) partnership, which includes fuel storage and transportation services. Results for our previously reported food and ingredients segment are now included in the agribusiness and energy services segment. The food and ingredients segment had no activity in either 2021 or 2020 and minimal activity in 2019 that is included in the agribusiness and energy services segment.
Corporate activities include selling, general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment.
During the normal course of business, the operating segments conduct business with each other. For example, the agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains, Ultra-High Protein and corn oil for the ethanol production segment. The partnership segment provides fuel storage and transportation services for the ethanol production segment. These intersegment activities are treated like third-party transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment performance; however, they do not impact the company’s consolidated results since the revenues and corresponding costs are eliminated.
The following tables set forth certain financial data for the company’s operating segments, excluding amounts related to discontinued operations (in thousands):
Year Ended December 31,
Revenues:
Ethanol production:
Revenues from external customers
$
2,153,368
$
1,502,481
$
1,700,615
Intersegment revenues
-
Total segment revenues
2,153,368
1,502,581
1,700,715
Agribusiness and energy services:
Revenues from external customers
669,526
416,403
709,767
Intersegment revenues
21,958
27,468
27,184
Total segment revenues
691,484
443,871
736,951
Partnership:
Revenues from external customers
4,274
4,835
6,856
Intersegment revenues
74,178
78,510
75,531
Total segment revenues
78,452
83,345
82,387
Revenues including intersegment activity
2,923,304
2,029,797
2,520,053
Intersegment eliminations
(96,136)
(106,078)
(102,815)
Total Revenues
$
2,827,168
$
1,923,719
$
2,417,238
Refer to Note 4 - Revenue, for further disaggregation of revenue by operating segment.
Year Ended December 31,
Cost of goods sold:
Ethanol production
$
2,063,283
$
1,507,335
$
1,791,099
Agribusiness and energy services
657,375
409,407
697,752
Partnership
-
-
-
Intersegment eliminations
(95,549)
(104,579)
(103,904)
$
2,625,109
$
1,812,163
$
2,384,947
‎
Year Ended December 31,
Operating income (loss):
Ethanol production (1)
$
(27,996)
$
(129,618)
$
(178,575)
Agribusiness and energy services
17,458
15,773
22,701
Partnership
48,672
50,437
50,635
Intersegment eliminations
(587)
(1,400)
1,188
Corporate activities (2)
(12,039)
(57,888)
(38,519)
$
25,508
$
(122,696)
$
(142,570)
(1)Operating loss for the ethanol production segment for fiscal year 2020 includes a goodwill impairment charge of $24.1 million and $3.9 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant.
(2)Corporate activities for fiscal year 2021 include a $29.6 million net gain on sale of assets primarily from the sale of the Ord, Nebraska ethanol plant. Corporate activities for fiscal year 2020 include a $18.5 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant and a $1.5 million net gain from sale of GPCC.
Year Ended December 31,
Depreciation and amortization:
Ethanol production
$
82,969
$
67,956
$
63,073
Agribusiness and energy services
2,535
2,512
2,222
Partnership
3,737
3,806
3,441
Corporate activities
2,711
3,970
3,391
$
91,952
$
78,244
$
72,127
Year Ended December 31,
Capital expenditures:
Ethanol production
$
181,731
$
109,970
$
72,374
Agribusiness and energy services
2,896
1,195
2,251
Partnership
Corporate activities
1,976
1,542
$
187,271
$
111,799
$
76,472
The following table sets forth total assets by operating segment (in thousands):
Year Ended December 31,
Total assets (1):
Ethanol production
$
1,101,151
$
900,963
Agribusiness and energy services
487,164
378,720
Partnership
100,349
91,205
Corporate assets
524,206
228,074
Intersegment eliminations
(53,115)
(20,045)
$
2,159,755
$
1,578,917
(1)Asset balances by segment exclude intercompany balances.
‎
8. INVENTORIES
Inventories are carried at the lower of cost or net realizable value, except grain held for sale and fair-value hedged inventories. Commodities held for sale are reported at market value. As of December 31, 2021 and 2020, there were no lower of cost or market inventory adjustments recorded.
The components of inventories are as follows (in thousands):
December 31,
Finished goods
$
91,448
$
89,223
Commodities held for sale
72,320
40,147
Raw materials
50,604
90,800
Work-in-process
19,783
13,201
Supplies and parts
33,683
36,120
$
267,838
$
269,491
9. PROPERTY AND EQUIPMENT
The components of property and equipment are as follows (in thousands):
December 31,
Plant equipment
$
1,000,820
$
940,363
Buildings and improvements
180,713
170,813
Land and improvements
83,403
86,909
Railroad track and equipment
32,971
34,637
Construction-in-progress
111,745
48,378
Computer hardware and software
19,927
20,477
Office furniture and equipment
3,356
3,797
Leasehold improvements and other
27,609
26,510
Total property and equipment
1,460,544
1,331,884
Less: accumulated depreciation and amortization
(567,027)
(530,194)
Property and equipment, net
$
893,517
$
801,690
Interest capitalized during the years ended December 31, 2021, 2020 and 2019 totaled $7.3 million, $1.8 million and $1.9 million, respectively.
10. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The company has two reporting units, to which goodwill was assigned. We are required to perform impairment tests related to our goodwill annually, which we perform as of October 1, or sooner if an indicator of impairment occurs.
The partnership performed its annual goodwill assessment as of October 1, 2021 using a qualitative assessment, which resulted in no indication of goodwill impairment. Similarly, the ethanol production segment’s qualitative goodwill assessment resulted in no indication of goodwill impairment.
Near term industry outlook due to the significant decrease in crude oil prices, lower gasoline demand, general uncertainty due to the COVID-19 outbreak and the subsequent decline in our stock price caused a decline in the company’s market capitalization during the three months ended March 31, 2020. As such, the company determined a triggering event had occurred that required an interim impairment assessment for its ethanol production reporting unit. Due to the impairment indicators noted as a result of these triggering events, we evaluated our goodwill as of March 31, 2020. Significant assumptions inherent in the valuation methodologies for goodwill were employed and included, but were not limited to, prospective financial information, growth rates, discount rates, inflationary factors, and cost of capital. Based on our quantitative evaluation, we determined that the fair value of the ethanol production reporting unit did not exceed its carrying value. As a result, we concluded that the goodwill assigned to the ethanol production reporting unit was impaired and recorded a non-cash impairment charge of $24.1 million in 2020.
During the first half of 2020, a decline in the partnership’s stock price resulted in a decrease in the partnership’s market capitalization. As such, the company determined a triggering event had occurred that required an interim impairment assessment as of March 31, 2020 and June 30, 2020. Significant assumptions inherent in the valuation methodologies for goodwill impairment testing were employed and include market capitalization, prospective financial information, growth rates, discount rates, inflationary factors, and cost of capital. Based on the partnership’s quantitative evaluation as of March 31, 2020 and June 30, 2020, it was determined that the fair value of the partnership reporting unit substantially exceeded its carrying value, and the partnership concluded that the goodwill was not impaired. The company performed its annual goodwill assessment as of October 1, 2020, and given the quantitative work performed during previous quarters as described above, the partnership used a qualitative assessment, which resulted in no goodwill impairment in 2020.
Changes in the carrying amount of goodwill attributable to each business segment during the years ended December 31, 2021 and 2020 were as follows (in thousands):
Ethanol
Production
Partnership
Total
Balance, December 31, 2019
$
24,091
$
10,598
$
34,689
Impairment charge
(24,091)
-
(24,091)
Balance, December 31, 2020 (1)
-
10,598
10,598
FQT acquisition
18,534
-
18,534
Balance, December 31, 2021 (1)
$
18,534
$
10,598
$
29,132
(1)The company records goodwill within other assets on the consolidated balance sheets.
Intangible Assets
The company recognized certain customer relationships, intellectual property and trade names in connection with the FQT acquisition during the fourth quarter 2020. As of December 31, 2021, the company’s intangible asset balance related to FQT was $22.8 million, which primarily consisted of $17.7 million of customer relationship and backlog assets, $9.7 million of intellectual property and $1.3 million of trade name assets, net of $5.9 million of accumulated amortization, and has a remaining 11.5-year weighted-average amortization period. The company recognized $5.7 million of amortization expense associated with amortization of these intangible assets during fiscal year 2021, and expects estimated amortization expense of $4.8 million, $2.8 million, $2.5 million, $2.2 million and $2.0 million, respectively for the years ended December 31, 2022, 2023, 2024, 2025 and 2026, as well as $8.5 million thereafter. The company’s intangible assets are recorded within other assets on the consolidated balance sheets.
11. DERIVATIVE FINANCIAL INSTRUMENTS
At December 31, 2021, the company’s consolidated balance sheet reflected unrealized losses of $12.3 million, net of tax, in accumulated other comprehensive loss. The company expects these items will be reclassified as operating income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount realized in operating income will differ as commodity prices change.
Fair Values of Derivative Instruments
The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets where they are reported are as follows (in thousands):
Asset Derivatives'
Liability Derivatives'
Fair Value at December 31,
Fair Value at December 31,
Derivative financial instruments
$
26,738
$
21,956
(1)
$
26,117
(2)
$
10,997
(3)
Other assets
-
-
Other liabilities
-
-
-
Total
$
26,746
$
21,985
$
26,313
$
10,997
(1)At December 31, 2020, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of $3.3 million, which include $2.8 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.
(2)At December 31, 2021, derivative financial instruments, as reflected on the balance sheet, includes net unrealized losses on exchange traded futures and options contracts of $17.1 million, which include $1.3 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.
(3)At December 31, 2020, derivative financial instruments, as reflected on the balance sheet, includes net unrealized losses on exchange traded futures and options contracts of $9.3 million, none of which were designated as cash flow hedging instruments.
Refer to Note 6 - Fair Value Disclosures, which contains fair value information related to derivative financial instruments.
Effect of Derivative Instruments on Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income
The gains or losses recognized in income and other comprehensive income related to the company’s derivative financial instruments and the line items on the consolidated financial statements where they are reported are as follows (in thousands):
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Location of Gain (Loss) Reclassified from
Year Ended December 31,
Accumulated Other Comprehensive Income into Income
Revenues
$
(60,261)
$
5,538
$
-
Cost of goods sold
41,629
(2,115)
-
Net income from discontinued operations, net of income taxes
-
-
48,797
Net gain (loss) recognized in loss before tax
$
(18,632)
$
3,423
$
48,797
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
Gain (Loss) Recognized in
Year Ended December 31,
Other Comprehensive Income on Derivatives
Commodity Contracts
$
(32,036)
$
(1,025)
$
70,404
Location of Gain (Loss)
Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives Not Designated
Recognized in
Year Ended December 31,
as Hedging Instruments
Income on Derivatives
Commodity contracts
Revenues
$
(194,143)
$
(10,813)
$
(10,202)
Commodity contracts
Costs of goods sold
6,498
32,914
(2,442)
Commodity contracts
Net loss from discontinued operations, net of income taxes
-
-
(2,470)
$
(187,645)
$
22,101
$
(15,114)
The following amounts were recorded on the consolidated balance sheets related to cumulative basis adjustments for the fair value hedged items (in thousands):
December 31, 2021
December 31, 2020
Line Item in the Consolidated Balance Sheet in Which the Hedged Item is Included
Carrying Amount of the Hedged Assets
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Carrying Amount of the Hedged Assets
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Inventories
$
72,320
$
6,291
$
53,963
$
9,041
Effect of Cash Flow and Fair Value Hedge Accounting on the Statements of Operations
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2021
Revenue
Cost of
‎Goods Sold
Net Income from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:
Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income
$
(60,261)
$
41,629
$
-
Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged item
-
20,567
-
Derivatives designated as hedging instruments
-
(14,695)
-
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded
$
(60,261)
$
47,501
$
-
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2020
Revenue
Cost of
‎Goods Sold
Net Income from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:
Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income
$
5,538
$
(2,115)
$
-
Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged item
-
5,098
-
Derivatives designated as hedging instruments
-
(3,752)
-
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded
$
5,538
$
(769)
$
-
‎
Location and Amount of Gain Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2019
Revenue
Cost of
‎Goods Sold
Net Income from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:
Commodity contracts:
Amount of gain reclassified from accumulated other comprehensive income into income
$
-
$
-
$
48,797
Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged item
-
(844)
-
Derivatives designated as hedging instruments
-
4,254
-
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded
$
-
$
3,410
$
48,797
There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the years ended December 31, 2021, 2020 and 2019.
The open commodity derivative positions as of December 31, 2021, are as follows (in thousands):
Exchange Traded
Non-Exchange Traded
Derivative Instruments
Net Long & (Short) (1)
Long (2)
(Short) (2)
Unit of Measure
Commodity
Futures
(28,280)
Bushels
Corn
Futures
6,375
(3)
Bushels
Corn
Futures
(8,065)
(4)
Bushels
Corn
Futures
(85,974)
Gallons
Ethanol
Futures
(18,900)
(3)
Gallons
Ethanol
Futures
(13,510)
mmBTU
Natural Gas
Futures
3,210
(3)
mmBTU
Natural Gas
Futures
(4,933)
(4)
mmBTU
Natural Gas
Futures
3,000
Pounds
Soybean Oil
Options
Tons
Soybean Meal
Options
71,754
Pounds
Soybean Oil
Options
26,643
Gallons
Ethanol
Forwards
57,697
(9)
Bushels
Corn
Forwards
3,248
(291,958)
Gallons
Ethanol
Forwards
(454)
Tons
Distillers Grains
Forwards
-
(136,594)
Pounds
Corn Oil
Forwards
12,576
(1,860)
mmBTU
Natural Gas
(1)Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.
(2)Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts.
(3)Futures used for cash flow hedges.
(4)Futures used for fair value hedges.
Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated statements of operations. Included in revenues are net gains of $1.1 million, $3.0 million, and $12.3 million for the years ended December 31, 2021, 2020 and 2019, respectively, on energy trading contracts.
12. DEBT
On January 1, 2021, the company early adopted the amended guidance in ASC 470-20, using the modified retrospective method of transition. The adoption of this guidance resulted in a $49.5 million decrease in additional paid-in capital, an $11.4 million increase in retained earnings and a $38.1 million increase in long-term debt, which included a $39.4 million increase in debt principal offset by a $1.3 million increase in debt issuance costs, resulting from amounts previously bifurcated to equity being reclassified to debt.
The components of long-term debt are as follows (in thousands):
December 31,
Corporate: (1)
2.25% convertible notes due 2027 (2)
$
230,000
$
-
4.00% convertible notes due 2024 (3)
64,000
89,125
4.125% convertible notes due 2022 (4)
34,316
156,441
Green Plains SPE LLC:
$125.0 million junior secured mezzanine notes due 2026 (5)
125,000
-
Green Plains Wood River and Green Plains Shenandoah:
$75.0 million delayed draw loan agreement (6)
30,000
30,000
Green Plains Partners:
$60.0 million credit facility (7) (8)
60,000
100,000
Other
15,531
15,936
Total book value of long-term debt
558,847
391,502
Unamortized debt issuance costs
(9,556)
(6,151)
Less: current maturities of long-term debt
(35,285)
(98,052)
Total long-term debt
$
514,006
$
287,299
(1)See discussion on early adoption of the amended guidance in ASC 470-20 above.
(2)Includes $6.5 million of unamortized debt issuance costs as of December 31, 2021.
(3)See discussion below regarding the exchange of convertible notes due in 2024. Includes $1.2 million and $2.2 million of unamortized debt issuance costs as of December 31, 2021 and 2020, respectively.
(4)See discussion below regarding the repurchase of convertible notes due in 2022. Includes $0.1 million and $1.3 million of unamortized debt issuance costs as of December 31, 2021 and 2020, respectively.
(5)Includes $0.9 million of unamortized debt issuance costs as of December 31, 2021.
(6)On September 3, 2020, Green Plains Wood River and Green Plains Shenandoah, wholly-owned subsidiaries of the company, entered into a $75.0 million delayed draw loan agreement. Includes $0.3 million of unamortized debt issuance costs as of December 31, 2021 and 2020.
(7)The Green Plains Partners credit facility was amended on July 20, 2021, reducing the total amount available to $60.0 million and includes $0.5 million and $2.3 million of unamortized debt issuance costs as of December 31, 2021 and 2020, respectively.
(8)On February 11, 2022, the credit facility was modified to allow Green Plains Partners and its affiliates to repurchase outstanding notes. 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 February 11, 2022, the term loan had a balance of $59.0 million.
Scheduled long-term debt repayments excluding the effects of any debt discounts and debt issuance costs, are as follows (in thousands):
Year Ending December 31,
Amount
$
35,411
1,838
65,832
1,829
186,827
Thereafter
267,110
Total
$
558,847
‎
The components of short-term notes payable and other borrowings are as follows (in thousands):
December 31,
Green Plains Trade:
$300.0 million revolver
$
137,208
$
79,251
Green Plains Grain:
$100.0 million revolver
20,000
38,700
$50.0 million inventory financing
-
-
Green Plains Commodity Management:
$40.0 million hedge line
16,210
21,682
Other
-
1,175
Total short-term notes payable and other borrowings
$
173,418
$
140,808
Corporate Activities
In March 2021, the company issued an aggregate $230.0 million of 2.25% convertible senior notes due in 2027, or the 2.25% notes. The 2.25% notes bear interest at a rate of 2.25% per year, payable on March 15 and September 15 of each year, beginning September 15, 2021, and mature on March 15, 2027. The 2.25% notes are senior, unsecured obligations of the company. The 2.25% notes are convertible, at the option of the holders, into consideration consisting of, at the company’s election, cash, shares of the company’s common stock, or a combination of cash and stock (and cash in lieu of fractional shares). However, before September 15, 2026, the 2.25% notes will not be convertible unless certain conditions are satisfied. The initial conversion rate is 31.6206 shares of the company’s common stock per $1,000 principal amount of 2.25% notes (equivalent to an initial conversion price of approximately $31.62 per share of the company’s common stock), representing an approximately 37.5% premium over the offering price of the company’s common stock. The conversion rate is subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. In addition, the company may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including the company’s calling the 2.25% notes for redemption.
On and after March 15, 2024, and prior to the maturity date, the company may redeem, for cash, all, but not less than all, of the 2.25% notes if the last reported sale price of the company’s common stock equals or exceeds 140% of the applicable conversion price on (i) at least 20 trading days during a 30 consecutive trading day period ending on the trading day immediately prior to the date the company delivers notice of the redemption; and (ii) the trading day immediately before the date of the redemption notice. The redemption price will equal 100% of the principal amount of the 2.25% notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, upon the occurrence of a “fundamental change” (as defined in the indenture for the 2.25% notes), holders of the 2.25% notes will have the right, at their option, to require the company to repurchase their 2.25% notes for cash at a price equal to 100% of the principal amount of the 2.25% notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
During June 2019, the company issued an aggregate $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 of the company, 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 4.00% notes will mature on July 1, 2024, unless earlier converted, redeemed or repurchased. The 4.00% notes will be convertible, at the option of the holders, into consideration consisting of, at the company’s election, cash, shares of the company’s common stock, or a combination of cash and shares of the company’s common stock until the close of business on the scheduled trading day immediately preceding the maturity date. However, before January 1, 2024, the 4.00% notes will not be convertible unless certain conditions are satisfied. The initial conversion rate is 64.1540 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $15.59 per share. The conversion rate will be subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. In addition, the company may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including the company’s calling the 4.00% notes for redemption.
On and after July 1, 2022, and prior to the maturity date, the company may redeem all, but not less than all, of the 4.00% notes for cash if the sale price of the company’s common stock equals or exceeds 140% of the applicable conversion price for a specified time period ending on the trading day immediately prior to the date the company delivers notice of the redemption. The redemption price will equal 100% of the principal amount of the 4.00% notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, upon the occurrence of a fundamental change,
holders of the 4.00% notes will have the right, at their option, to require the company to repurchase the 4.00% notes in cash at a price equal to 100% of the principal amount of the 4.00% notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
During May 2021, the company entered into a privately negotiated agreement with certain noteholders of the company’s 4.00% notes. Under this agreement, 3,568,705 shares of the company’s common stock were exchanged for $51.0 million in aggregate principal amount of the 4.00% notes. Common stock held as treasury shares were exchanged for the 4.00% notes. Pursuant to the guidance within ASC 470, Debt, the company recorded a loss of $9.5 million which was recorded as a charge to interest expense in the consolidated financial statements during the year ended December 31, 2021, of which $1.2 million related to unamortized debt issuance costs.
In August 2016, the company issued $170.0 million of 4.125% convertible senior notes due in 2022, or the 4.125% notes. The 4.125% notes are senior, unsecured obligations of the company, with interest payable on March 1 and September 1 of each year. The company may settle the 4.125% notes in cash, common stock or a combination of cash and common stock. Prior to March 1, 2022, the 4.125% notes are not convertible unless certain conditions are satisfied. The initial conversion rate is 35.7143 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $28.00 per share. The conversion rate will be subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering.
The company may redeem all, but not less than all, of the 4.125% notes at any time on or after September 1, 2020, if the company’s common stock equals or exceeds 140% of the applicable conversion price for a specified time period ending on the trading day immediately prior to the date the company delivers notice of the redemption. The redemption price will equal 100% of the principal plus any accrued and unpaid interest. Holders of the 4.125% notes have the option to require the company to repurchase the 4.125% notes in cash at a price equal to 100% of the principal plus accrued and unpaid interest when there is a fundamental change, such as change in control. If an event of default occurs, it could result in the 4.125% notes being declared due and payable.
In March 2021, concurrent with the issuance of the 2.25% notes, the company used approximately $156.5 million of the net proceeds of the 2.25% notes to repurchase approximately $135.7 million aggregate principal amount of the 4.125% notes, in privately negotiated transactions. Pursuant to the guidance within ASC 470, Debt, the company recorded a loss upon extinguishment of $22.1 million in interest expense. This charge included $1.2 million of unamortized debt issuance costs related to the principal balance extinguished.
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 (the “Junior Notes”) with BlackRock, a holder of a portion of the company’s common stock, for the purchase of all notes issued.
The Junior Notes will mature on February 9, 2026 and are secured by a pledge of the membership interests in and the real property owned by Green Plains Obion and Green Plains Mount Vernon. The proceeds of the Junior Notes will be used to construct high protein processing systems at the Green Plains Obion and Green Plains Mount Vernon facilities. The Junior Notes accrue interest at an annual rate of 11.75%. However, subject to the satisfaction of certain conditions, the Green Plains SPE LLC may elect to pay an amount in cash equal to interest accruing at a rate of 6.00% per annum plus an amount equal to interest accruing at a rate of 6.75% per annum to be paid in kind. The entire outstanding principal balance, plus any accrued and unpaid interest is due upon maturity. Green Plains SPE LLC is required to comply with certain financial covenants regarding minimum liquidity at Green Plains and a maximum aggregate loan to value. The Junior Notes can be retired or refinanced after 42 months with no prepayment premium. The Junior Notes have an unsecured parent guarantee from the company and have certain limitations on distributions, dividends or loans to the company unless there will not exist any event of default. Funds associated with the Junior Notes are administered by a trustee and are included in the balance of restricted cash as of December 31, 2021.
On September 3, 2020, Green Plains Wood River and Green Plains Shenandoah, wholly-owned subsidiaries of the company, entered into a delayed draw loan agreement with MetLife Real Estate Lending LLC. The $75.0 million delayed draw loan matures on September 1, 2035 and is secured by substantially all of the assets of the Wood River and Shenandoah facilities. The proceeds from the loan will be used to add high protein processing systems at the Wood River and Shenandoah facilities as well as other capital expenditures.
‎
The delayed draw loan bears interest at a fixed rate of 5.02%, plus an interest rate premium of 1.5% until the loan is fully drawn, which must occur within the 18 month draw period. After the earlier of the 18 month draw period or the loan being fully drawn, the interest rate premium may be adjusted quarterly from 0.00% to 1.50% based on the leverage ratio of total funded debt to EBITDA of Wood River and Shenandoah. Principal payments of $1.5 million per year begin 24 months from the closing date. Prepayments are prohibited until September 2024. Financial covenants of the delayed draw loan agreement include a minimum loan to value ratio of 50%, a minimum fixed charge coverage ratio of 1.25x commencing on June 30, 2021, a total debt service reserve of six months of future principal and interest payments and a minimum working capital requirement at Green Plains of not less than $0.10 per gallon of nameplate capacity or $95.8 million. The loan is guaranteed by the company and has certain limitations on distributions, dividends or loans to Green Plains by Wood River and Shenandoah unless immediately after giving effect to such action, there will not exist any event of default.
The company also has small equipment financing loans, finance leases on equipment or facilities, and other forms of debt financing.
Agribusiness and Energy Services Segment
Green Plains Trade has a $300.0 million senior secured asset-based revolving credit facility to finance working capital for marketing and distribution activities based on eligible collateral equal to the sum of percentages of eligible receivables and inventories, less miscellaneous adjustments. The credit facility matures on July 28, 2022 and consists of a $285 million credit facility and a $15 million first-in-last-out (FILO) credit facility and includes an accordion feature that enables the credit facility to be increased by up to $70.0 million with agent approval. Advances are subject to variable interest rates equal to daily LIBOR plus 2.25% on the credit facility and daily LIBOR plus 3.25% on the FILO credit facility. The total unused portion of the revolving credit facility is also subject to a commitment fee of 0.375% per annum.
The terms impose affirmative and negative covenants for Green Plains Trade, including maintaining a minimum fixed charge coverage ratio of 1.15 to 1.00. Capital expenditures are limited to $1.5 million per year under the credit facility. The credit facility also restricts distributions related to capital stock, with an exception for distributions up to 50% of net income if, on a pro forma basis, (a) average availability has been greater than $10.0 million for the last 30 days and (b) the borrower would be in compliance with the fixed charge coverage ratio on the distribution date.
Green Plains Grain has a $100.0 million senior secured asset-based revolving credit facility, which matures on June 28, 2022. The credit facility finances working capital up to the maximum commitment based on eligible collateral equal to the sum of percentages of eligible cash, receivables and inventories, less miscellaneous adjustments. Advances are subject to an interest rate equal to LIBOR plus 3.00% or the lenders’ base rate plus 2.00%. The credit facility also includes an accordion feature that enables the facility to be increased by up to $75.0 million with agent approval. The credit facility can also be increased by up to $50.0 million for seasonal borrowings. Total commitments outstanding cannot exceed $225.0 million. Depending on utilization, the total unused portion of the $100.0 million revolving credit facility is also subject to a commitment fee ranging from 0.375% to 0.50%.
Lenders receive a first priority lien on certain cash, inventory, accounts receivable and other assets owned by Green Plains Grain. The terms impose affirmative and negative covenants for Green Plains Grain, including maintaining minimum working capital to be the greater of (i) $18,000,000 and (ii) 18% of the sum of the then total commitment plus the aggregate seasonal line commitments. Minimum tangible net worth is required to be greater than 21% of the sum of the then total commitment plus the aggregate seasonal line commitments. The credit facility also requires the company to maintain a maximum annual leverage of 6.00 to 1.00. Capital expenditures are limited to $8.0 million per year under the credit facility, plus equity contributions from the company and unused amounts of up to $8.0 million from the previous year. In addition, if the company has long-term indebtedness on the date of calculation of greater than $10.0 million, the credit facility requires the company to maintain a minimum fixed charge coverage ratio of 1.25 to 1.00 and a maximum long term debt capitalization of 40%.
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 agreements as short-term notes, rather than sales, and has elected the fair value option to offset fluctuations in market prices of the inventory. The company had no short-term notes payable related to these inventory financing agreements as of December 31, 2021.
The Green Plains Grain and Green Plains Trade credit facilities will mature in June and July, 2022 respectively, unless extended by agreement of the lenders or replaced by another funding source. While we have not yet finalized negotiations to replace these credit facilities, we believe it is probable that we will source appropriate funding prior to maturity given our history of obtaining working capital financing on reasonable commercial terms. In the unlikely scenario that we are unable to refinance the facilities with the lenders prior to its maturity, we will consider other financing sources.
Green Plains Commodity Management has an uncommitted $40.0 million revolving credit facility which matures April 2023, to finance margins related to its hedging programs. Advances are subject to variable interest rates equal to SOFR plus 1.75%.
Partnership Segment
Green Plains Partners has a term loan to fund working capital, capital expenditures and other general partnership purposes. On July 20, 2021, the prior credit facility was amended decreasing the total amount available to $60.0 million, extending the maturity from December 31, 2021 to July 20, 2026, and converting the credit facility to a term loan. Under the terms of the amended agreement, BlackRock purchased the outstanding $50.0 million balance of the prior credit facility from the previous lenders. Interest on the amended term loan is based on 3-month LIBOR plus 8.00%, with a 0% LIBOR floor. Interest is payable on the 15th day of each March, June, September and December during the term with the first interest payment being September 15, 2021. The amended term loan does not require any principal payments; however, the partnership has the option to prepay $1.5 million per quarter beginning twelve months after the closing date.
During the year ended December 31, 2021, prior to the amendment, the partnership made principal payments of $50.0 million on the prior credit facility, including $19.5 million of scheduled repayments, $27.5 million related to the sale of the storage assets located adjacent to the Ord, Nebraska ethanol plant and a $3.0 million prepayment made with excess cash.
The partnership’s obligations under the term loan are secured by a first priority lien on (i) the equity interests of the partnership’s present and future subsidiaries, (ii) all of the partnership’s present and future personal property, such as investment property, general intangibles and contract rights, including rights under any agreements with Green Plains Trade, (iii) all proceeds and products of the equity interests of the partnership’s present and future subsidiaries and its personal property and (iv) substantially all of the partnership’s real property and material leases of real property. The terms impose affirmative and negative covenants, including restrictions on the partnership’s ability to incur additional debt, acquire and sell assets, create liens, invest capital, pay distributions and materially amend the partnership’s commercial agreements with Green Plains Trade. The term loan also requires the partnership to maintain a maximum consolidated leverage ratio and a minimum consolidated debt service coverage ratio, each of which is calculated on a pro forma basis with respect to acquisitions and divestitures occurring during the applicable period. The maximum consolidated leverage ratio required, as of the end of any fiscal quarter, is no more than 2.50x. The minimum debt service coverage ratio required, as of the end of any fiscal quarter, is no less 1.10x. The consolidated leverage ratio is calculated by dividing total funded indebtedness by the sum of the four preceding fiscal quarters’ consolidated EBITDA. The consolidated debt service coverage ratio is calculated by taking the sum of the four preceding fiscal quarters’ consolidated EBITDA minus income taxes and consolidated capital expenditures for such period divided by the sum of the four preceding fiscal quarters’ consolidated interest charges plus consolidated scheduled funded debt payments for such period.
Under the amended terms of the loan, the partnership has no restrictions on the amount of quarterly distribution payments, so long as (i) no default has occurred and is continuing, or would result from payment of the distribution, and (ii) the partnership and its subsidiaries are in compliance with its financial covenants and remain in compliance after payment of the distribution. The term loan is not guaranteed by the company.
Covenant Compliance
The company was in compliance with its debt covenants as of December 31, 2021.
Restricted Net Assets
At December 31, 2021, there were approximately $109.2 million of net assets at the company’s subsidiaries that could not be transferred to the parent company in the form of dividends, loans or advances due to restrictions contained in the credit facilities of these subsidiaries.
13. STOCK-BASED COMPENSATION
On May 6, 2020, the shareholders of the company approved the 2019 Equity Incentive Plan which granted an additional 1.6 million shares of common stock for stock-based compensation. All shares remaining under the 2009 Equity Incentive Plan rolled into the 2019 Equity Incentive Plan effective May 6, 2020. The 2019 Equity Inventive Plan reserves 5.7 million shares of common stock for issuance to its directors and employees. The plan provides for shares, including options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, restricted stock, performance share awards, and restricted and deferred stock unit awards, to be granted to eligible employees, non-employee directors and consultants. The company measures stock-based compensation at fair value on the grant date, with no adjustments for
estimated forfeitures. The company records noncash compensation expense related to equity awards in its consolidated financial statements over the requisite period on a straight-line basis.
Grants under the equity incentive plans may include stock options, stock awards, performance share awards or deferred stock units:
Restricted Stock Awards - Restricted stock awards may be granted to directors and employees that vest immediately or over a period of time as determined by the compensation committee. Stock awards granted to date vested immediately and over a period of time, and included sale restrictions. Compensation expense is recognized on the grant date if fully vested or over the requisite vesting period.
Deferred Stock Units - Deferred stock units may be granted to directors and employees that vest immediately or over a period of time as determined by the compensation committee. Deferred stock units granted to date vest over a period of time with underlying shares of common stock that are issuable after the vesting date. Compensation expense is recognized on the grant date if fully vested, or over the requisite vesting period.
Performance Share Awards - Performance share awards may be granted to directors and employees that cliff-vest after a period of time as determined by the compensation committee. Performance share awards granted to date cliff-vest after a period of time, and included sale restrictions. Compensation expense is recognized over the requisite vesting period.
Stock Options - Stock options may be granted that can be exercised immediately in installments or at a fixed future date. Certain options are exercisable regardless of employment status while others expire following termination. Options issued to date could have been exercised immediately or at future vesting dates, and expired five years to eight years after the grant date. Compensation expense for stock options that vest over time is recognized on a straight-line basis over the requisite service period.
Restricted Stock Awards and Deferred Stock Units
The non-vested restricted stock award and deferred stock unit activity for the year ended December 31, 2021, are as follows:
Non-Vested
‎Shares and
‎Deferred
‎Stock Units
Weighted-
‎Average Grant-
‎Date Fair Value
Weighted-Average
‎Remaining
‎Vesting Term
‎(in years)
Non-Vested at December 31, 2020
1,028,739
$
9.15
Granted
357,844
27.38
Forfeited
(118,814)
15.07
Vested
(474,432)
12.23
Non-Vested at December 31, 2021
793,337
$
14.64
1.9
Performance Share Awards
On February 18, 2021 and March 18, 2020, the board of directors granted performance shares to be awarded in the form of common stock to certain participants of the plan. These performance shares vest based on the level of achievement of certain performance goals, including the incremental value achieved from the company’s high-protein initiatives, annual production levels and return on investment (ROI). Performance shares granted in 2021 and 2020 do not contain market-based factors requiring a Monte Carlo valuation model. The performance shares were granted at a target of 100%, but each performance share will reduce or increase depending on results for the performance period. If the company achieves the maximum performance goals, the maximum amount of shares available to be issued pursuant to the 2021 and 2020 awards are 917,757 performance shares which represents approximately 273% of the 336,222 performance shares which remain outstanding. The actual number of performance shares that will ultimately vest is based on the actual performance targets achieved at the end of the performance period.
On February 19, 2019 and March 19, 2018, the board of directors granted performance shares to be awarded in the form of common stock to certain participants of the plan. These performance shares vest based on the company’s average return on net assets (RONA) and the company’s total shareholder return (TSR), as further described herein. The performance shares vest on the third anniversary of the grant, if the RONA and TSR criteria are achieved and the participant is then employed by the company. Fifty percent of the performance shares vest based upon the company’s ability to achieve a predetermined
RONA during the three year performance period. The remaining fifty percent of the performance shares vest based upon the company’s total TSR during the three year performance period relative to that of the company’s performance peer group.
The performance shares were granted at a target of 100%, but each performance share will reduce or increase depending on results for the performance period for the company's RONA, and the company’s TSR relative to that of the performance peer group. On March 19, 2021, based on criteria discussed above, the 2018 performance shares vested at a target of 75%. If the company’s RONA and TSR achieve the maximum goals, the maximum amount of shares available to be issued pursuant to the 2019 awards are 224,900 performance shares or 150% of the 149,933 performance shares which remain outstanding. The actual number of performance shares that will ultimately vest is based on the actual percentile ranking of the company’s RONA, and the company’s TSR compared to the peer performance at the end of the performance period.
For performance shares which include market based factors, the company uses the Monte Carlo valuation model to estimate the fair value of the performance shares on the date of the grant. The weighted average assumptions used by the company in applying the Monte Carlo valuation model for performance share grants and related valuation are illustrated in the following table:
FY 2019 Performance Awards
Risk-free interest rate
2.45
%
Dividend yield
3.13
%
Expected volatility
41.69
%
Monte Carlo valuation
99.62
%
Closing stock price on the date of grant
$
15.34
The non-vested performance share award activity for the year ended December 31, 2021, is as follows:
Performance
‎Shares
Weighted-
‎Average Grant-
‎Date Fair Value
Weighted-Average
‎Remaining
‎Vesting Term
‎(in years)
Non-Vested at December 31, 2020
517,969
$
10.82
Granted
183,316
26.41
Forfeited
(127,215)
16.65
Vested
(87,915)
17.68
Non-Vested at December 31, 2021
486,155
$
13.93
2.0
Stock Options
The fair value of the stock options is estimated on the date of the grant using the Black-Scholes option-pricing model, a pricing model acceptable under GAAP. The expected life of the options is the period of time the options are expected to be outstanding. The company did not grant any stock option awards during the years ended December 31, 2021, 2020 and 2019.
Green Plains Partners
Green Plains Partners has a long-term incentive plan (LTIP) intended to promote the interests of the partnership, its general partner and affiliates by providing unit-based incentive compensation awards to employees, consultants and directors to encourage superior performance. The LTIP reserves 2,500,000 common limited partner units for issuance in the form of options, restricted units, phantom units, distribution equivalent rights, substitute awards, unit appreciation rights, unit awards, profit interest units or other unit-based awards. The partnership measures unit-based compensation related to equity awards in its consolidated financial statements over the requisite service period on a straight-line basis.
‎
The non-vested unit-based awards activity for the year ended December 31, 2021, are as follows:
Non-Vested
‎Shares and
‎Deferred
‎Stock Units
Weighted-
‎ Average
‎ Grant-Date
‎Fair Value
Weighted-Average
‎Remaining
‎Vesting Term
‎(in years)
Non-Vested at December 31, 2020
47,620
$
6.72
Granted
25,976
12.32
Forfeited
(6,494)
12.32
Vested
(47,620)
6.72
Non-Vested at December 31, 2021
19,482
$
12.32
0.5
Stock-Based and Unit-Based Compensation Expense
Compensation costs for stock-based and unit-based payment plans during the years ended December 31, 2021, 2020 and 2019, were approximately $6.1 million, $7.9 million and $9.7 million, respectively. At December 31, 2021, there were $9.2 million of unrecognized compensation costs from stock-based and unit-based compensation related to non-vested awards. This compensation is expected to be recognized over a weighted-average period of approximately 1.9 years. The potential tax benefit related to stock-based payment is approximately 24.3% of these expenses.
14. EARNINGS PER SHARE
Basic earnings per share, or EPS, is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period.
The company computed diluted EPS by dividing net income on an if-converted basis, adjusted to add back net interest expense related to the convertible debt instruments, by the weighted average number of common shares outstanding during the period, adjusted to include the shares that would be issued if the convertible debt instruments were converted to common shares and the effect of any outstanding dilutive securities. In addition, due to the presentation of GPCC as discontinued operations, the company has presented basic and diluted earnings per share from both continuing operations and from discontinued operations.
The basic and diluted EPS are calculated as follows (in thousands):
Year Ended December 31,
Basic EPS:
Net loss from continuing operations (1)
$
(65,992)
$
(108,775)
$
(167,689)
Net income from discontinued operations
-
-
Net loss attributable to Green Plains
$
(65,992)
$
(108,775)
$
(166,860)
Weighted average shares outstanding - basic
46,652
34,631
38,111
EPS from continuing operations - basic
$
(1.41)
$
(3.14)
$
(4.40)
EPS from discontinued operations - basic
-
-
0.02
EPS - basic
$
(1.41)
$
(3.14)
$
(4.38)
Diluted EPS: (2)
Net loss from continuing operations (1)
$
(65,992)
$
(108,775)
$
(167,689)
Net income from discontinued operations
-
-
Net loss attributable to Green Plains
$
(65,992)
$
(108,775)
$
(166,860)
Weighted average shares outstanding - basic
46,652
34,631
38,111
Effect of dilutive convertible debt:
Effect of dilutive stock-based compensation awards
-
-
-
Weighted average shares outstanding - diluted
46,652
34,631
38,111
EPS from continuing operations - diluted
$
(1.41)
$
(3.14)
$
(4.40)
EPS from discontinued operations - diluted
-
-
0.02
EPS - diluted
$
(1.41)
$
(3.14)
$
(4.38)
Anti-dilutive weighted-average convertible debt and stock-based compensation (3)
12,952
14,089
10,560
(1)Net loss from continuing operations can be recalculated from the consolidated statements of operations by taking the net loss from continuing operations including noncontrolling interest less net income attributable to noncontrolling interests.
(2)The effect related to interest and amortization on convertible debt on an if converted basis has been excluded from diluted EPS for the periods presented as the inclusion of these effects would have been antidilutive.
(3)The effect related to the company’s convertible debt and certain stock-based compensation awards has been excluded from diluted EPS for the periods presented as the inclusion of these shares would have been antidilutive.
15. STOCKHOLDERS’ EQUITY
Early Adoption of ASC 470-20
On January 1, 2021, the company early adopted the amended guidance in ASC 470-20, using the modified retrospective method of transition. The adoption of this guidance resulted in a $49.5 million decrease in additional paid-in capital, an $11.4 million increase in retained earnings and a $38.1 million increase in long-term debt, which included a $39.4 million increase in debt principal offset by a $1.3 million increase in debt issuance costs, resulting from amounts previously bifurcated to equity being reclassified to debt.
Upon adoption of amended guidance in ASC 470-20, the company reversed the remaining deferred tax liability of $9.2 million associated to the equity portion of previously issued convertible debt. As the company had recorded a full valuation allowance against its deferred tax assets, the reversal of the $9.2 million deferred tax liability would require an increase to the existing valuation allowance by the same amount, which would normally be recorded through current income tax expense. However, because the change in the deferred tax liability is directly linked to the adoption of ASC 470-20, which is accounted for as a cumulative effect adjustment, the required increase to the valuation allowance is recorded as part of the cumulative adjustment to stockholders’ equity and has no effect on the income statement.
Public Offerings of Common Stock
On March 1, 2021, the company completed an offering of 8,751,500 shares of our common stock, par value $0.001 per share, in a public offering at a price of $23.00 per share (the “March Common Stock Offering”). The March Common Stock Offering resulted in net proceeds of $191.1 million, after deducting underwriting discounts and commissions and the company’s offering expenses.
On August 9, 2021, the company completed an offering of 5,462,500 shares of our common stock, par value $0.001 per share, in a public offering at a price of $32.00 per share (the “August Common Stock Offering”). The August Common Stock Offering resulted in net proceeds of $164.9 million, after deducting underwriting discounts and commissions and the company’s offering expenses.
Warrants
During the three months ended March 31, 2021, in connection with certain agreements, the company issued warrants to purchase shares of its common stock. The company measures the fair value of the warrants using the Black-Scholes option pricing model as of the issuance date. Exercisable warrants are equity based and recorded as a reduction in additional paid-in capital.
The company has reserved 2,550,000 shares of common stock for the exercise of warrants to non-employees, of which 2,275,000 are exercisable, treated as equity based awards and recorded as a reduction in additional paid-in capital. The remaining 275,000 warrants, of which 55,555 are exercisable as a result of achieving certain earn-out provisions and 219,445 are contingent upon certain earn-out provisions, are treated as liability based awards, and valued quarterly using the company’s stock price. These warrants could potentially dilute basic earnings per share in future periods. The exercise price of the warrants is $22.00 and expiration dates are December 8, 2025 for 275,000 warrants, February 9, 2026 for 275,000 warrants and April 28, 2026 for 2,000,000 warrants.
Convertible Note Exchange
On May 18, 2021, the company closed on a privately negotiated exchange agreement with certain noteholders of the company’s 4.00% notes, pursuant to which the noteholders agreed to exchange $51.0 million in aggregate principal for 3,568,705 shares of the company’s common stock at an implied price of $26.80.
Treasury Stock
The company holds 8.2 million shares of its common stock at a cost of $91.6 million. Treasury stock is recorded at cost
and reduces stockholders’ equity in the consolidated balance sheets. When shares are reissued, the company will use the weighted average cost method for determining the cost basis. The difference between the cost and the issuance price is added or deducted from additional paid-in capital.
Share Repurchase Program
The company’s board of directors authorized a share repurchase program of up to $200.0 million. Under the program, the company may repurchase shares in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers or by other means. The timing and amount of repurchase transactions are determined by its management based on market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice. The company repurchased 880,979 shares of common stock for approximately $11.5 million during 2020. The company did not repurchase any shares of common stock during 2021. Since inception, the company has repurchased 7,396,936 shares of common stock for approximately $92.8 million under the program.
Dividends
On June 18, 2019, the company announced that its board of directors decided to suspend its future quarterly cash dividend following the June 14, 2019 dividend payment, in order to retain and redirect cash flow to the company’s Project 24 operating expense equalization plan, the deployment of high-protein technology and its stock repurchase program.
For each calendar quarter commencing with the quarter ended September 30, 2015, the partnership agreement provides for a quarterly distribution to be paid within 45 days after the end of the quarter, provided the partnership has sufficient available cash. Available cash generally means, all cash and cash equivalents on hand at the end of that quarter less cash reserves established by the general partner of the partnership plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the end of that quarter. On January 20, 2022, the board of directors of the general partner of the partnership declared a cash distribution of $0.44 per unit on outstanding common units. The distribution is payable on February 11, 2022, to unitholders of record at the close of business on February 4, 2022.
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income are associated primarily with gains and losses on derivative financial instruments. Amounts reclassified from accumulated other comprehensive income are as follows (in thousands):
Year Ended December 31,
Statements of Operations
Classification
Gains (losses) on cash flow hedges:
Commodity derivatives
$
(60,261)
$
5,538
$
-
(1)
Commodity derivatives
41,629
(2,115)
-
(2)
Total gains (losses) on cash flow hedges from continuing operations
(18,632)
3,423
-
(3)
Gains (losses) on cash flow hedges from discontinued operations, net of income taxes
-
-
38,795
(4)
Income tax expense (benefit)
(4,540)
-
(5)
Amounts reclassified from accumulated other comprehensive income (loss)
$
(14,092)
$
2,566
$
38,795
(1)Revenues
(2)Costs of goods sold
(3)Loss from continuing operations before income taxes and income from equity method investees
(4)Net income from discontinued operations, net of income taxes
(5)Income tax (expense) benefit
At December 31, 2021 and 2020, the company’s consolidated balance sheets reflected unrealized losses of $12.3 million and $2.2 million, net of tax, in accumulated other comprehensive loss, respectively.
‎
16. INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases, and net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted rates expected to be applicable to taxable income in the years those temporary differences are recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income during the period that includes the enactment date. A valuation allowance is recorded by the company when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Green Plains Partners is a limited partnership, which is treated as a flow-through entity for federal income tax purposes and is not subject to federal income taxes. As a result, the consolidated financial statements do not reflect such income taxes on pretax income or loss attributable to the noncontrolling interest in the partnership.
Upon adoption of amended guidance in ASC 470-20, during the first quarter of 2021, the company reversed the remaining deferred tax liability of $9.2 million associated to the equity portion of previously issued convertible debt. As the company had recorded a full valuation allowance against its deferred tax assets, the reversal of the $9.2 million deferred tax liability would require an increase to the existing valuation allowance by the same amount which would normally be recorded through current income tax expense. However, as the change in the deferred tax liability is directly linked to the adoption of ASC 470-20, which is accounted for as a cumulative effect adjustment, the required increase to the valuation allowance is recorded as part of the cumulative adjustment to stockholders’ equity and has no effect on the consolidated statements of operations.
The CARES Act was signed into law on March 27, 2020. The CARES Act includes several significant business tax provisions including elimination of the taxable limit for certain net operating losses (“NOL”), allowing businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior tax years, accelerating refunds of previously generated corporate AMT credits, and loosening the business interest limitation under §163(j) from 30% to 50%. For 2021, the business interest limitation under §163(j) reverts back to 30%. The CARES Act also contains an employee retention credit to encourage employers to maintain headcounts even if employees cannot report to work because of issues related to COVID-19. In the second quarter of 2020, the company filed its preliminary 2019 federal income tax return, as well as a refund claim with the IRS to carry back our 2019 NOL to prior years. In the fourth quarter of 2020 the company filed its final 2019 federal income tax return and updated our 2019 NOL. For the year ended December 31, 2020, the company recorded an income tax benefit of $41.6 million related to the CARES Act including adjustments to certain valuation allowances. No additional tax benefit was recorded related to the CARES Act during the year ended December 31, 2021.
Income tax expense (benefit) consists of the following (in thousands):
Year Ended December 31,
Current
$
$
(37,047)
$
(2,177)
Deferred
1,233
(13,336)
(18,881)
Total
1,845
(50,383)
(21,058)
Less: Income tax expense - discontinued operations
-
-
Income tax expense (benefit) - continuing operations
$
1,845
$
(50,383)
$
(21,316)
‎
Differences between income tax expense from continuing operations at the statutory federal income tax rate and as presented on the consolidated statements of operations are summarized as follows (in thousands):
Year Ended December 31,
Tax expense at federal statutory rate
$
(8,883)
$
(33,698)
$
(36,317)
State income tax expense (benefit), net of federal benefit
(802)
(7,839)
Nondeductible compensation
1,037
Noncontrolling interests
(4,587)
(4,015)
(3,961)
Unrecognized tax benefits
(170)
(28)
R&D credits
-
-
(323)
Increase in valuation allowance
15,301
6,279
25,314
Disposition of subsidiary
-
-
(373)
Stock compensation
(1,954)
Amended return adjustments
-
(19,786)
-
Other
1,016
Income tax expense (benefit)
$
1,845
$
(50,383)
$
(21,316)
Significant components of deferred tax assets and liabilities are as follows (in thousands):
December 31,
Deferred tax assets:
Net operating loss carryforwards - Federal
$
14,857
$
11,670
Net operating loss carryforwards - State
12,147
10,875
Tax credit carryforwards - Federal
64,081
64,081
Tax credit carryforwards - State
7,281
7,369
Derivative financial instruments
4,728
-
Deferred revenue
Interest expense carryforward
12,063
6,609
Investment in partnerships
43,244
45,519
Inventory valuation
1,259
Stock-based compensation
1,312
1,439
Accrued expenses
4,511
5,351
Leases
8,885
7,958
Organizational and start-up costs
1,047
Other
Total
176,026
162,694
Valuation allowance
(69,834)
(43,336)
Total deferred tax assets
106,192
119,358
Deferred tax liabilities:
Convertible debt
-
(9,154)
Fixed assets
(100,166)
(104,364)
Derivative financial instruments
-
(724)
Right-of-use assets
(6,026)
(5,116)
Total deferred tax liabilities
(106,192)
(119,358)
Deferred income taxes
$
-
$
-
At December 31, 2021, the company has federal R&D credits of $67.8 million which will begin to expire in 2033. The company also has $7.3 million of state credits which will expire beginning in 2022. The company has federal net operating losses of $14.9 million which do not have an expiration date.
The company increased the valuation allowance associated with its net deferred tax assets due to uncertainty that it will realize these assets in the future. The valuation allowance on deferred tax assets was recognized as a result of negative evidence, including cumulative losses in recent years, outweighing the more subjective positive evidence. Management considers whether it is more likely than not that some or all of the deferred tax assets will be realized, which is dependent on the generation of future taxable income and other tax attributes during the periods those temporary differences become
deductible. Scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies are considered to make this assessment. The company will continue to regularly assess the realizability of deferred tax assets. Changes in earnings performance and future earnings projections, among other factors, may cause the company to adjust its valuation allowance on deferred tax assets, which would impact the company’s results of operations in the period it is determined that these factors have changed.
The company’s federal income tax returns for the tax years ended December 31, 2014, 2017 and 2018 are currently under audit. The company’s federal returns for the tax years ended December 31, 2015, 2016, 2019 and 2020 are still subject to audit.
A reconciliation of unrecognized tax benefits is as follows (in thousands):
Unrecognized Tax Benefits
Balance at December 31, 2020
$
51,569
Reduction for prior year tax positions
(215)
Balance at December 31, 2021
$
51,354
Recognition of these tax benefits would favorably impact the company’s effective tax rate. Unrecognized tax benefits were recorded as a reduction of the deferred asset associated with the federal tax credit carryforwards. Interest and penalties associated with uncertain tax positions are accrued as part of income taxes payable. Approximately $23 million in unrecognized tax benefits related to R&D credits are currently under audit. In addition, the results of the current audit may cause the company to significantly increase or decrease the unrecognized tax benefits associated with R&D credits for periods not under audit. At this time, the company does not have enough information to be able to estimate the potential adjustment.
17. COMMITMENTS AND CONTINGENCIES
Lease Expense
The company’s leases do not specify an implicit interest rate. Therefore, the incremental borrowing rate was used based on information available at commencement date to determine the present value of future payments.
The company leases certain facilities, parcels of land, and equipment, with remaining terms ranging from less than one year to 15.9 years. The land and facility leases include renewal options. The renewal options are included in the lease term only for those sites or locations in which they are reasonably certain to be renewed. Equipment renewals are not considered reasonably certain to be exercised as they typically renew with significantly different underlying terms.
The company may sublease certain of its railcars to third parties on a short-term basis. The subleases are classified as operating leases, with the associated sublease income being recognized on a straight-line basis over the lease term.
The components of lease expense are as follows (in thousands):
Year Ended December 31,
Lease expense
Operating lease expense
$
19,587
$
20,771
$
20,806
Variable lease expense (1)
1,225
1,681
Total lease expense
$
20,812
$
22,452
$
21,630
(1)Represents amounts incurred in excess of the minimum payments required for a certain building lease and for the handling and unloading of railcars for a certain land lease, offset by railcar lease abatements provided by the lessor when railcars are out of service during periods of maintenance or upgrade.
‎
Supplemental cash flow information related to operating leases is as follows (in thousands):
Year Ended December 31,
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
19,579
$
20,864
$
21,459
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
20,291
32,713
11,176
Right-of-use assets and lease obligations derecognized due to lease modifications:
Operating leases
1,889
5,176
1,726
Supplemental balance sheet information related to operating leases is as follows:
Weighted average remaining lease term
5.5 years
6.2 years
Weighted average discount rate
4.16%
4.55%
Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of December 31, 2021 are as follows (in thousands):
Year Ending December 31,
Amount
$
19,045
16,301
13,777
9,408
3,847
Thereafter
13,446
Total
75,824
Less: Present value discount
(9,215)
Lease liabilities
$
66,609
Lease Revenue
As described in Note 4 - Revenue, the majority of the partnership’s segment revenue is generated though their storage and throughput services and rail transportation services agreements with Green Plains Trade and are accounted for as lease revenue. Leasing revenues do not represent revenues recognized from contracts with customers under ASC 606, and are accounted for under ASC 842, Leases. Lease revenue associated with agreements with Green Plains Trade are eliminated upon consolidation. The remaining lease revenue is not material to the company.
Refer to Note 4 - Revenue for further discussion on lease revenue.
Commodities
As of December 31, 2021, the company had contracted future purchases of grain, natural gas, ethanol and distillers grains, valued at approximately $475.9 million.
Legal
The company is currently involved in litigation that has arisen in the ordinary course of business, but does not believe any pending litigation will have a material adverse effect on its financial position, results of operations or cash flows.
‎
18. EMPLOYEE BENEFIT PLANS
The company offers eligible employees a comprehensive employee benefits plan that includes health, dental, vision, life and accidental death, short-term disability and long-term disability insurance, and flexible spending accounts. The company also offers a 401(k) plan enabling eligible employees to save for retirement on a tax-deferred basis up to the limits allowed under the Internal Revenue Code and matches up to 4% of eligible employee contributions. Employee and employer contributions are 100% vested immediately. Employer contributions to the 401(k) plan for the years ended December 31, 2021, 2020 and 2019 were $1.9 million, $1.5 million and $1.6 million, respectively.
The company contributes to a defined benefit pension plan. Since January of 2009, the benefits under the plan were frozen; however, the company remains obligated to ensure the plan is funded according to its requirements. As of December 31, 2021, the plan’s assets were $5.9 million and liabilities were $6.6 million. At December 31, 2021 and 2020, net liabilities of $0.7 million were included in other liabilities on the consolidated balance sheets, respectively.
19. RELATED PARTY TRANSACTIONS
Green Plains Cattle Company LLC
The company engaged in certain related party transactions with GPCC, which was considered a related party until the fourth quarter of 2020 at which time the company’s remaining 50% interest was sold. The company provided a variety of shared services to GPCC, including accounting and finance, payroll and human resources, information technology, legal, communications and treasury activities. The company reduced selling, general and administrative expenses by $1.2 million and $0.5 million related to shared services provided for the years ended December 31, 2020 and 2019, respectively.
Green Plains Trade Group, a subsidiary of the company, enters into certain sale contracts with GPCC during the normal course of business. Related party revenues associated with GPCC were $8.2 million and $4.0 million for the years ended December 31, 2020 and 2019, respectively.
At the time of the sale of GPCC, Mr. Ejnar Knudsen, a member of the company’s board of directors, had an indirect ownership interest in GPCC of 0.0736% by reason of his ownership in TGAM Agribusiness Fund LP. Based on the purchase price, the value of that ownership interest is approximately $0.1 million. Mr. Knudsen also is the CEO and partial owner of AGR Partners LLC (AGR) which provides investment advisory services to TGAM Agribusiness Fund LP pursuant to a sub-advisory agreement between AGR Partners LLC and Nuveen Alternative Advisors LLC, which is the investment manager for TGAM Agribusiness Fund LP.
20. EQUITY METHOD INVESTMENTS
Green Plains Cattle Company LLC
On September 1, 2019, the company formed a joint venture with TGAM and StepStone. Such parties entered into the Second Amended and Restated Limited Liability Company Agreement of GPCC effective as of September 1, 2019. GPCC was previously a wholly owned subsidiary of Green Plains. Green Plains also entered into a Securities Purchase Agreement with TGAM and StepStone, whereby TGAM and StepStone purchased an aggregate of 50% of the membership interests of GPCC from Green Plains. After closing, GPCC was no longer consolidated in the company’s consolidated financial statements and the GPCC investment was accounted for using the equity method of accounting. GPCC results prior to its disposition are classified as discontinued operations in our current and prior period financials.
GPCC conducts the business of the joint venture, including (i) owning and operating the cattle feeding operations (as defined below), and (ii) any other activities approved by GPCC’s board of managers. The company did not consolidate any part of the assets or liabilities or operating results of its equity method investee. The company’s share of net income or loss in the investee increased or decreased, as applicable, the carrying value of the investment. With respect to GPCC, the company determined that this entity did not represent a variable interest entity and consolidation was not required. In addition, although the company had the ability to exercise significant influence over the joint venture through board representation and voting rights, all significant decisions required the consent of the other investors without regard to economic interest.
On October 1, 2020, the company sold its remaining 50% joint venture interest in GPCC to AGR, TGAM Agribusiness Fund LP and StepStone for $80.5 million in cash, plus closing adjustments. The transaction resulted in a reduction in other assets of $69.7 million as a result of removal of the equity method investment in GPCC, and a reduction in accumulated other comprehensive income (loss) of $10.7 million as a result of the removal of the company’s share of equity method investees accumulated other comprehensive loss.
Summarized Financial Information
Our equity method investments totaled $7.2 million and $4.0 million at December 31, 2021 and 2020, respectively and are reflected in other assets on the consolidated balance sheets.
Earnings from equity method investments, net of income taxes, were as follows (in thousands):
Year Ended December 31,
Green Plains Cattle Company LLC (1)
$
-
$
20,531
$
2,839
All others
(42)
Total income from equity method investments, net of income taxes
$
$
21,093
$
2,797
Distributions from equity method investments
$
1,500
$
27,910
$
Earnings (loss) from equity method investments, net of distributions
$
(800)
$
(6,817)
$
2,477
(1)Pretax equity method earnings of GPCC were $27.0 million and $3.8 million for the years ended December 31, 2020 and 2019.
The company reports its proportional share of equity method investment income (loss) in the consolidated statements of operations. The company’s share of equity method investees other comprehensive income arising during the period is included in accumulated other comprehensive loss in the consolidated balance sheet.
The following table present summarized information of GPCC.
December 31, 2020 (1)
December 31, 2019 (1)
Total revenues
$
747,824
$
370,383
Total operating expenses
693,753
362,878
Net income
$
54,071
$
7,505
(1)GPCC equity method treatment began on September 1, 2019 and ended on October 1, 2020. As such, fiscal year 2020 includes nine months of GPCC operations while fiscal year 2019 includes four months of GPCC operations.

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ITEM 9A. CONTROLS AND PROCEDURES

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Info rmation.
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Direc tors, Executive Officers and Corporate Governance.
Information in our Proxy Statement for the 2022 Annual Meeting of Stockholders (“Proxy Statement”) under “Corporate Governance,” “Proposal 1 - Election of Directors,” “Our Management,” and “Delinquent Section 16(a) Reports” is incorporated by reference.
We have adopted a code of ethics that applies to our chief executive officer, chief financial officer and all other senior financial officers. Our code of ethics is available on our website at www.gpreinc.com in the “Investors - Corporate Governance” section. Amendments or waivers are disclosed within five business days following its adoption.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
Information included in the Proxy Statement under “Corporate Governance” and “Executive Compensation” is incorporated by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information in the Proxy Statement under “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation” is incorporated by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information in the Proxy Statement under “Transactions with Related Persons, Promoters and Certain Control Persons” is incorporated by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
Information in the Proxy Statement under “Independent Public Accountants” is incorporated by reference.
‎
PART IV
Item 1 5. Exhibits, Financial Statement Schedules.
(1) Financial Statements. The following consolidated financial statements and notes are filed as part of this annual report on Form 10-K.
Page
Report of Independent Registered Public Accounting Firm
Auditor Name: KPMG LLP
Auditor Location: Omaha, NE
Auditor Firm ID: 185
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years-ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income (Loss) for the years-ended December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the years-ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years-ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules. All schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.
(3) Exhibits. The following exhibits are incorporated by reference, filed or furnished as part of this annual report on Form 10-K.
Exhibit Index
Exhibit No.
Description of Exhibit
2.1
Stock Purchase Agreement among Green Plains Inc., Green Plains II LLC and Kerry Holding Co. dated October 23, 2018. (The schedules to the Stock Purchase Agreement have been omitted. The Company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 2.1 of the company’s Current Report on Form 8-K filed October 25, 2018)
2.2
Securities Purchase Agreement, dated as of September 6, 2019, by and among Green Plains Inc., Green Plains Cattle Company LLC, TGAM Agribusiness Fund Holdings-B LP, and StepStone Atlantic Fund, L.P. (Certain schedules to the Securities Purchase Agreement have been omitted. The company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 2.1 of the company’s Current Report on Form 8-K filed September 9, 2019)
2.3
Second Amended and Restated Limited Liability Company Agreement of Green Plains Cattle Company LLC, dated September 6, 2019 (Certain schedules to the Second Amended and Restated Limited Liability Company Agreement have been omitted. The company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed September 9, 2019)
2.4
Securities Purchase Agreement, dated as of October 9, 2020, by and among Green Plains Inc., Green Plains Cattle Company LLC, AGR Special Opportunities Fund I, LP, TGAM Agribusiness Fund LP, and StepStone Atlantic Fund, LP (incorporated herein by reference to Exhibit 2.1 to the company’s Current Report on Form 8-K filed on October 13, 2020) (Certain schedules to the Securities Purchase Agreement have been omitted. The company will furnish such schedules to the SEC upon request)
2.5(a)
Asset Purchase Agreement among Hereford Ethanol Partners, L.P. and Green Plains Hereford LLC, dated December 11, 2020. (The schedules to the Asset Purchase Agreement have been omitted. The Company will furnish such schedules to the SEC upon request.)
2.5(b)
Asset Purchase Agreement, dated December 14, 2020, by and among Green Plains Partners LP, Green Plains Holdings LLC, Green Plains Operating Company LLC, Green Plains Ethanol Storage LLC, Green Plains Logistics LLC, Green Plains Inc., Green Plains Trade Group LLC and Green Plains Hereford LLC. (incorporated herein by reference to Exhibit 2.2 to the company’s Current Report on Form 8-K filed on December 15, 2020)
2.6
Asset Purchase Agreement, dated January 25, 2021, by and among Green Plains Partners LP, Green Plains Holdings LLC, Green Plains Operating Company LLC, Green Plains Ethanol Storage LLC, Green Plains Logistics LLC, Green Plains Inc., Green Plains Trade Group LLC and Green Plains Ord LLC. (incorporated herein by reference to Exhibit 2.1 to the company’s Current Report on Form 8-K filed on January 27, 2021)
3.1(a)
Second Amended and Restated Articles of Incorporation of the company (incorporated herein by reference to Exhibit 3.1 of the company’s Current Report on Form 8-K filed October 15, 2008)
3.1(b)
Articles of Amendment to Second Amended and Restated Articles of Incorporation of Green Plains Renewable Energy, Inc. (incorporated herein by reference to Exhibit 3.1 of the company’s Current Report on Form 8-K filed May 9, 2011)
3.1(c)
Second Articles of Amendment to Second Amended and Restated Articles of Incorporation of Green Plains Renewable Energy, Inc. (incorporated herein by reference to Exhibit 3.1 of the company’s Current Report on Form 8-K filed May 16, 2014)
3.2
Fourth Amended and Restated Bylaws of Green Plains Inc., dated September 27, 2021 (incorporated herein by reference to Exhibit 3.1 to the company’s Current Report on Form 8-K filed on September 28, 2021)
4.1(a)
Shareholders’ Agreement by and among Green Plains Renewable Energy, Inc., each of the investors listed on Schedule A, and each of the existing shareholders and affiliates identified on Schedule B, dated May 7, 2008 (incorporated herein by reference to Appendix F of the company’s Registration Statement on Form S-4/A filed September 4, 2008)
4.1(b)
Indenture, dated March 1, 2021, between Green Plains Inc. and Wilmington Trust, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the company’s Current Report on Form 8-K dated March 1, 2021)
4.2(a)
Indenture relating to the 4.125% Convertible Senior Notes due 2022, dated as of August 15, 2016, between Green Plains Inc. and Wilmington Trust, National Association, including the form of Global Note attached as Exhibit A thereto (incorporated herein by reference to Exhibit 4.1 to the company’s Current Report on Form 8-K filed August 15, 2016)
4.2(b)
First Supplemental Indenture relating to the 2.25% Convertible Senior Notes due 2027, dated as of March 1, 2021, between Green Plains Inc. and Wilmington Trust, National Association, including the form of Global Note attached as Exhibit A thereto (incorporated herein by reference to Exhibit 4.2 to the company’s Current Report on Form 8-K dated March 1, 2021)
4.3(a)
Indenture relating to the 3.25% Convertible Senior Notes due 2019, dated as of August 14, 2018, between Green Plains Inc. and Wilmington Trust, National Association, as trustee (including therein Form of 3.25% Convertible Senior Notes Due 2019) (incorporated herein by reference to Exhibit 4.1 to the company’s Current Report on Form 8-K filed August 14, 2018)
4.3(b)
Form of Global Note representing 2.25% Convertible Senior Notes due 2027 (included as a part of Exhibit 4.2(b)).
4.4
Indenture relating to the 4.00% Convertible Senior Notes due 2024, dated as of June 21, 2019, between Green Plains Inc. and Wilmington Trust, National Association, including the form of Global Note attached as Exhibit A thereto (incorporated herein by reference to Exhibit 4.1 of the company’s Current Report on Form 8-K filed on June 21, 2019)
4.5
Description of Securities Registered Under Section 12 of the Exchange Act (incorporated herein by reference to Exhibit 4.7 of the company’s Annual Report on Form 10-K filed February 20, 2020)
*10.1
2007 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 27, 2007)
10.2
Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.53 of the company’s Registration Statement on Form S-4/A filed August 1, 2008)
*10.3(a)
Employment Agreement with Todd Becker (incorporated herein by reference to Exhibit 10.54 of the company’s Registration Statement on Form S-4/A filed August 1, 2008)
*10.3(b)
Amendment No. 1 to Employment Agreement with Todd Becker, dated December 18, 2009. (incorporated herein by reference to Exhibit 10.7(b) of the company’s Annual Report on Form 10-K filed February 24, 2010)
*10.3(c)
Amendment No. 2 to Employment Agreement with Todd Becker, dated March 27, 2018 (incorporated herein by reference to Exhibit 10.52 of the company’s Quarterly Report on Form 10-Q filed on May 7, 2018)
*10.4(a)
2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K dated May 11, 2009)
*10.4(b)
Amendment No. 1 to the 2009 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 25, 2011)
*10.4(c)
Amendment No. 2 to the 2009 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 29, 2013)
*10.4(d)
Amended and Restated 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.1 of the company’s Registration Statement on Form S-8 filed June 23, 2017)
*10.4(e)
Form of Stock Option Award Agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.19(b) of the company’s Annual Report on Form 10-K filed February 24, 2010)
*10.4(f)
Form of Restricted Stock Award Agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.19(c) of the company’s Annual Report on Form 10-K/A (Amendment No. 1) filed February 25, 2010)
*10.4(g)
Amended Form of Restricted Stock Award agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.53 of the company’s Quarterly Report on Form 10-Q filed on May 7, 2018)
*10.4(h)
Form of Deferred Stock Unit Award Agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.19(d) of the company’s Annual Report on Form 10-K filed February 24, 2010)
*10.4(i)
Form of Performance Share Unit Award agreement for 2009 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.54 of the company’s Quarterly Report on Form 10-Q filed on May 7, 2018)
*10.4(j)
2019 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 28, 2019)
*10.4(k)
Amendment No. 1 to the 2019 Equity Incentive Plan (incorporated herein by reference to Appendix A of the company’s Definitive Proxy Statement filed March 26, 2020)
10.5(a)
Second Amended and Restated Revolving Credit and Security Agreement dated April 26, 2013 by and among Green Plains Trade Group LLC and PNC Bank, National Association (as Lender and Agent) (incorporated herein by reference to Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(b)
Third Amended and Restated Revolving Credit and Security Agreement dated November 26, 2014 by and among Green Plains Trade Group LLC, the Lenders and PNC Bank, National Association (as Lender and Agent) (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed December 2, 2014)
10.5(c)
Fourth Amended and Restated Revolving Credit and Security Agreement dated July 28, 2017, among Green Plains Trade Group LLC, the Lenders and PNC Bank, National Association as Lender and Agent (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated July 31, 2017)
10.5(d)
First Amendment to Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of August 29, 2017, among Green Plains Trade Group LLC and PNC Bank, National Association, as agent, and the lenders party to the Credit and Security Agreement (incorporated herein by reference to Exhibit 10.4(a) to the company’s Current Report on Form 8-K dated August 29, 2017)
10.5(e)
Second Amendment to Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of March 15, 2018, by and among Green Plains Trade Group LLC and PNC Bank, National Association (incorporated herein by reference to Exhibit 10.1 to the company’s Quarterly Report on Form 10-Q dated May 7, 2018)
10.5(f)
Third Amendment to Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of November 27, 2019, by and among Green Plains Trade Group LLC and PNC Bank, National Association (incorporated herein by reference to Exhibit 10.5(f) of the company’s Annual Report on Form 10-K filed February 20, 2020)
10.5(g)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and Citibank, N.A. (incorporated herein by reference to Exhibit 10.2(b) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(h)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and BMO Harris Bank N.A. (incorporated herein by reference to Exhibit 10.2(c) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(i)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and Alostar Bank of Commerce (incorporated herein by reference to Exhibit 10.2(d) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(j)
Second Amended and Restated Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and PNC Bank, National Association (Incorporated by reference to Exhibit 10.2(a) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(k)
Revolving Credit Note dated April 26, 2013 by and among Green Plains Trade Group LLC and Bank of America (incorporated here by reference to Exhibit 10.2(e) of the company’s Quarterly Report on Form 10-Q filed May 2, 2013)
10.5(l)
ABL Intercreditor Agreement, dated as of August 29, 2017, among PNC Bank, National Association, as ABL Collateral Agent, and BNP Paribas, as Term Loan Collateral Agent, and acknowledged by Green Plains Trade Group LLC and the other ABL Grantors (incorporated herein by reference to Exhibit 10.4(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
10.5(m)
Guaranty, dated as of August 29, 2017, in favor of PNC Bank, National Association, as agent (incorporated herein by reference to Exhibit 10.4(c) to the company’s Current Report on Form 8-K dated August 29, 2017)
*10.6
Umbrella Short-Term Incentive Plan (incorporated herein by reference to Appendix A of the company’s Proxy Statement filed April 3, 2014)
*10.7
Director Compensation effective May 11, 2016 (incorporated herein by reference to Exhibit 10.4 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
*10.8
Director Compensation effective November 14, 2017 (incorporated herein by reference to Exhibit 10.9 of the company’s Annual Report on Form 10-K filed February 15, 2018)
10.9(a)
Credit Agreement dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc., BNP Paribas Securities Corp. as Lead Arranger, Rabo Agrifinance, Inc. as Syndication Agent, ABN AMRO Capital USA LLC as Documentation Agent and BNP Paribas as Administrative Agent (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(b)
Security Agreement dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc. and BNP Paribas (incorporated herein by reference to Exhibit 10.2 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(c)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc. and Bank of Oklahoma (incorporated herein by reference to Exhibit 10.3 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(d)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc. and U.S. Bank National Association (incorporated herein by reference to Exhibit 10.4 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(e)
Promissory Note dated October 28, 2011 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc. and Farm Credit Bank of Texas (incorporated herein by reference to Exhibit 10.5 of the company’s Current Report on Form 8-K filed November 3, 2011)
10.9(f)
First Amendment to Credit Agreement dated January 6, 2012 by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex Inc., BNP Paribas and the Required Lenders (incorporated herein by reference to Exhibit 10.26(k) of the company’s Annual Report on Form 10-K filed February 17, 2012)
10.9(g)
Second Amendment to Credit Agreement, dated October 26, 2012, by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex, Inc., BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.5 of the company’s Quarterly Report on Form 10-Q filed November 1, 2012)
10.9(h)
Third Amendment to Credit Agreement, dated August 27, 2013, by and among Green Plains Grain Company LLC, Green Plains Grain Company TN LLC, Green Plains Essex, Inc., BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.3 of the company’s Quarterly Report on Form 10-Q filed October 31, 2013)
10.9(i)
Fourth Amendment to Credit Agreement, dated August 8, 2014, by and among Green Plains Grain Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.3 of the company’s Quarterly Report on Form 10-Q filed October 30, 2014)
10.9(j)
Fifth Amendment to Credit Agreement, dated June 1, 2015, by and among Green Plains Grain Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.5 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.9(k)
Sixth Amendment to Credit Agreement, dated January 5, 2016, by and among Green Plains Grain Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.6 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.9(l)
Seventh Amendment to Credit Agreement, dated July 27, 2016, by and among Green Plains Grain Company LLC (including in its capacity as successor by merger to Green Plains Essex Inc.), Green Plains Grain Company TN LLC, BNP Paribas, as the administrative agent under the Credit Agreement, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.7 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.9(m)
Eighth Amendment to Credit Agreement, dated as of August 29, 2017, among Green Plains Grain Company and BNP Paribas, as Administrative Agent, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.3(a) to the company’s Current Report on Form 8-K dated August 29, 2017)
10.9(n)
Ninth Amendment to Credit Agreement, dated as of June 28, 2019, among Green Plains Grain Company LLC and BNP Paribas, as Administrative Agent, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed on July 1, 2019)
10.9(o)
ABL Intercreditor Agreement, dated as of August 29, 2017, among BNP Paribas, as ABL Collateral Agent, and BNP Paribas, as Term Loan Collateral Agent, and acknowledged by Green Plains Grain Company LLC and the other ABL Grantors (incorporated herein by reference to Exhibit 10.3(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
10.9(p)
Guaranty, dated as of August 29, 2017, in favor of BNP Paribas, as administrative agent (incorporated herein by reference to Exhibit 10.3(c) to the company’s Current Report on Form 8-K dated August 29, 2017)
*10.10
Employment Agreement by and between Green Plains Renewable Energy, Inc. and Patrich Simpkins dated April 1, 2012 (incorporated herein by reference to Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q filed May 1, 2014)
*10.11
Employment Agreement with Michelle S. Mapes (incorporated herein by reference to Exhibit 10.12 of the company’s Annual Report on Form 10-K filed February 20, 2020)
10.12
Amended and Restated Credit Agreement, dated as of August 28, 2019, by and among Green Plains Cattle Company LLC, Bank of the West and ING Capital LLC, as Joint Administrative Agents, and the lenders party to the Credit Agreement (Certain schedules to the Amended and Restated Credit Agreement have been omitted. The company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.3 of the company’s Current Report on Form 8-K filed September 9, 2019)
10.13
Contribution, Conveyance and Assumption Agreement, dated July 1, 2015, by and among Green Plains Inc., Green Plains Obion LLC, Green Plains Trucking LLC, Green Plains Holdings LLC, Green Plains Partners LP and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.14(a)
Omnibus Agreement, dated July 1, 2015, by and among Green Plains Inc., Green Plains Holdings LLC, Green Plains Partners LP and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.14(b)
First Amendment to the Omnibus Agreement, dated January 1, 2016, by and among Green Plains Inc., Green Plains Holdings LLC, Green Plains Partners LP and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.22(b) to the company’s Annual Report on Form 10-K for the year ended December 31, 2015)
10.14(c)
Second Amendment to the Omnibus Agreement, dated September 23, 2016, by and among Green Plains Inc., Green Plains Partners LP, Green Plains Holdings LLC and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated September 26, 2016)
10.14(d)
Third Amendment to the Omnibus Agreement, dated November 15, 2018, by and among Green Plains Inc., Green Plains Partners LP, Green Plains Holdings LLC and Green Plains Operating Company LLC (incorporated herein by reference to Exhibit 10.18(d) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.15(a)
Operational Services and Secondment Agreement, dated July 1, 2015, by and between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.15(b)
Amendment No. 1 to the Operational Services and Secondment Agreement, dated January 1, 2016, by and between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.23(b) to the company’s Annual Report on Form 10-K for the year ended December 31, 2015)
10.15(c)
Amendment No. 2 to Operational Services and Secondment Agreement, dated September 23, 2016, between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated September 26, 2016)
10.15(d)
Amendment No. 3 to Operational Services and Secondment Agreement, dated November 15, 2018, between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.19(d) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.15(e)
Amendment No. 4 to Operational Services and Secondment Agreement, dated December 28, 2020, between Green Plains Inc. and Green Plains Holdings LLC (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K filed December 28, 2020)
10.15(f)
Amendment No. 5 to Operational Services and Secondment Agreement, dated March 22, 2021, between Green Plains Inc. and Green Plains Holdings LLC. (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K dated March 23, 2021)
10.16(a)
Rail Transportation Services Agreement, dated July 1, 2015, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.4 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.16(b)
Amendment No. 1 to Rail Transportation Services Agreement, dated September 1, 2015, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.1 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.16(c)
Correction to Rail Transportation Services Agreement, dated May 12, 2016, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.3 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.16(d)
Amendment No. 2 to Rail Transportation Services Agreement, dated November 30, 2016 (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated December 1, 2016)
10.16(e)
Amendment No. 3 to Rail Transportation Services Agreement, dated November 15, 2018 (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated November 15, 2018)
10.16(f)
Corrective Amendment to Rail Transportation Services Agreement, dated November 15, 2018, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.20(f) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.16(g)
Amendment No. 4 to Rail Transportation Services Agreement, dated December 28, 2020 (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated December 28, 2020)
10.16(h)
Amendment No. 5 to Rail Transportation Services Agreement, dated March 22, 2021, by and between Green Plains Logistics LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed March 23, 2021)
10.17(a)
Ethanol Storage and Throughput Agreement, dated July 1, 2015, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.5 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.17(b)
Amendment No. 1 to the Ethanol Storage and Throughput Agreement, dated January 1, 2016, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.25(b) to the company’s Annual Report on Form 10-K for the year ended December 31, 2015)
10.17(c)
Clarifying Amendment to Ethanol Storage and Throughput Agreement, dated January 4, 2016, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q filed August 3, 2016)
10.17(d)
Amendment No. 2 to Ethanol Storage and Throughput Agreement, dated September 23, 2016, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K dated September 26, 2016)
10.17(e)
Amendment No. 3 to Ethanol Storage and Throughput Agreement, dated November 15, 2018, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated November 15, 2018) (The exhibits to Amendment No. 3 have been omitted. The company will furnish such schedules to the SEC upon request).
10.17(f)
Amendment No. 4 to Ethanol Storage and Throughput Agreement, dated December 28, 2020, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K dated December 28, 2020)
10.17(g)
Amendment No. 5 to Ethanol Storage and Throughput Agreement, dated March 22, 2021, by and between Green Plains Ethanol Storage LLC and Green Plains Trade Group LLC. (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K filed March 23, 2021) (The exhibits to Amendment No. 5 have been omitted. The Company will furnish such schedules to the SEC upon request).
10.18(a)
Credit Agreement, dated July 1, 2015, by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A., and the other lenders party thereto (incorporated herein by reference to Exhibit 10.6 to the company’s Current Report on Form 8-K dated July 6, 2015)
10.18(b)
First Amendment to Credit Agreement, dated September 16, 2016 by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A., and the other lenders party thereto (incorporated herein by reference to Exhibit 10.22(b) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.18(c)
Incremental Joinder Agreement, dated October 27, 2017, among Green Plains Operating Company LLC and Bank of America, as Administrative (incorporated herein by reference to Exhibit 10.8 to the company’s Quarterly Report on Form 10-Q dated November 2, 2017)
10.18(d)
Second Amendment to Credit Agreement, dated February 16, 2018 by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A., and the other lenders party thereto (incorporated herein by reference to Exhibit 10.22(d) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.18(e)
Incremental Joinder Agreement, dated February 20, 2018, among Green Plains Operating Company LLC and Bank of America, as Administrative (incorporated herein by reference to Exhibit 10.22(e) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.18(f)
Third Amendment to Credit Agreement, dated October 12, 2018 by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A., and the other lenders party thereto (incorporated herein by reference to Exhibit 10.22(f) to the company’s Annual Report on Form 10-K for the year ended December 31, 2018)
10.18(g)
Consent to Credit Agreement, dated July 15, 2019, by and among Green Plains Operating Company LLC and Bank of America, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the company’s Quarterly Report on Form 10-Q dated August 6, 2019)
10.18(h)
Fourth Amendment to Credit Agreement, dated June 4, 2020, by and among Green Plains Operating Company LLC, as the Borrower, the subsidiaries of the Borrower identified therein, Bank of America, N.A. and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed on June 4, 2020)
10.18(i)
Amended and Restated Credit Agreement, dated July 20, 2021, by and among Green Plains Operating Company LLC, as the Borrower, the guarantors identified therein, TMI Trust Company, as Administrative Agent and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed on July 26, 2021)
10.19
Second Amendment to Term Loan Agreement, dated July 13, 2018, among Green Plains Inc. and BNP Paribas, as administrative agent and collateral agent (incorporated herein by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q dated August 2, 2018)
10.20
Partial Release of Security Interest, dated as of April 30, 2018, by and among Green Plains Inc., its subsidiaries and BNP Paribas, as collateral agent (incorporated herein by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q dated May 7, 2018)
10.21(a)
Revolving Credit Facility, dated as of April 30, 2018, by and among Green Plains Commodity Management LLC and Macquarie Bank Limited (incorporated herein by reference to Exhibit 10.4 to the company’s Quarterly Report on Form 10-Q dated May 7, 2018)
10.21(b)
Amendment to Revolving Credit Facility, dated as of June 18, 2019, by and among Green Plains Commodity Management LLC and Macquarie Bank Limited (incorporated herein by reference to Exhibit 10.24(b) of the company’s Annual Report on Form 10-K filed February 20, 2020)
10.22
Promissory Note between Green Plains Inc. and StepStone Atlantic Fund, L.P., dated September 6, 2019 (incorporated herein by reference to Exhibit 10.2 of the company’s Current Report on Form 8-K filed September 9, 2019)
10.23(a)
Loan Agreement dated September 3, 2020 by and among Green Plains Wood River LLC and Green Plains Shenandoah LLC, as the Borrowers, and MetLife Real Estate Lending LLC, as the Lender (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.23(b)
Delayed Draw Term Promissory Note dated September 3, 2020 by and among Green Plains Wood River LLC and Green Plains Shenandoah LLC, as the Borrowers, and MetLife Real Estate Lending LLC, as the Lender (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.23(c)
Loan Guaranty Agreement dated September 3, 2020 by and among Green Plains Inc, as the Guarantor, and MetLife Real Estate Lending LLC, as the Lender (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.23(d)
Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated September 3, 2020 by and among Green Plains Wood River LLC, as the Trustor, and MetLife Real Estate Lending LLC, as the Beneficiary (incorporated herein by reference to Exhibit 10.4 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.23(e)
Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated September 3, 2020 by and among Green Plains Shenandoah LLC, as the Borrower, and MetLife Real Estate Lending LLC, as the Lender (incorporated herein by reference to Exhibit 10.5 to the company’s Current Report on Form 8-K filed on September 8, 2020)
10.24(a)
Note Purchase Agreement dated February 9, 2021 by and among Green Plains SPE LLC, as the Issuer, Green Plains Inc., as Guarantor, and Purchasers signatory thereto. (The schedules to the Note Purchase Agreement have been omitted. The Company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed on February 12, 2021)
10.24(b)
Pledge and Security Agreement dated February 9, 2021 by and among Green Plains SPE LLC, as the Pledgor, in favor of Wilmington Trust, National Association, as Trustee. (The schedules to the Pledge and Security Agreement have been omitted. The Company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K filed on February 12, 2021)
10.24(c)
Indenture dated February 9, 2021 by Green Plains SPE LLC, as Issuer, Green Plains Inc., as Guarantor and Wilmington Trust, National Association, as Trustee. (The schedules to the Indenture have been omitted. The Company will furnish such schedules to the SEC upon request.) (incorporated herein by reference to Exhibit 10.3 to the company’s Current Report on Form 8-K filed on February 12, 2021)
10.24(d)
First Priority Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement from Green Plains Mount Vernon LLC, as Mortgagor and Wilmington Trust, National Association, as Mortgagee. (incorporated herein by reference to Exhibit 10.4 to the company’s Current Report on Form 8-K filed on February 12, 2021)
10.24(e)
First Priority Deed of Trust, Assignment of Leases and Rents, Security Agreement and Financing Statement from Green Plains Obion LLC, as Mortgagor and Wilmington Trust, National Association, as Mortgagee. (incorporated herein by reference to Exhibit 10.5 to the company’s Current Report on Form 8-K filed on February 12, 2021)
*10.25
Employment Agreement with Leslie van der Meulen
10.26
Amendment No. 1 to Amended and Restated Credit Agreement, dated February 11, 2022, by and among Green Plains LLC, as the Borrower, the guarantors identified therein, TMI Trust Company, as Administrative Agent and the other lenders party thereto
21.1
Schedule of Subsidiaries
23.1
Consent of KPMG LLP
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following information from Green Plains Inc.’s Annual Report on Form 10-K for the annual period ended December 31, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (iv) the Consolidated Statements of Stockholders’ Equity (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements and Financial Statement Schedule.
The cover page from Green Plains Inc. Annual Report on Form 10-K for the year ended December 31, 2021, formatted in iXBRL
_______________________________________________________
* Represents management compensatory contracts
Item 16. Form 10-K Summary.
None.
‎
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
c
‎
‎
‎
‎
Date: February 18, 2022
GREEN PLAINS INC
(Registrant)
By: /s/ Todd A. Becker
Todd A. Becker
‎President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Todd A. Becker
President and Chief Executive Officer
February 18, 2022
Todd A. Becker
(Principal Executive Officer) and Director
/s/ G. Patrich Simpkins Jr.
Chief Financial Officer (Principal Financial
February 18, 2022
G. Patrich Simpkins Jr.
Officer and Principal Accounting Officer)
/s/ Wayne B. Hoovestol
Chairman of the Board
February 18, 2022
Wayne B. Hoovestol
/s/ Jim Anderson
Director
February 18, 2022
Jim Anderson
/s/ Farha Aslam
Director
February 18, 2022
Farha Aslam
/s/ Ejnar A. Knudsen III
Director
February 18, 2022
Ejnar A. Knudsen III
/s/ Brian D. Peterson
Director
February 18, 2022
Brian D. Peterson
/s/ Martin Salinas Jr.
Director
February 18, 2022
Martin Salinas Jr.
/s/ Alain Treuer
Director
February 18, 2022
Alain Treuer
/s/ Kimberly Wagner
Director
February 18, 2022
Kimberly Wagner
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
‎Green Plains Inc.:
Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of Green Plains Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 18, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for convertible debt instruments as of January 1, 2021 due to the adoption of Accounting Standards Update (ASU) 2020-06, Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity.
Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair value of physical delivery contracts
‎As discussed in Note 2 to the consolidated financial statements, the Company records physical delivery contracts that do not meet the normal purchase or sale criteria at fair value. The Company estimates a fair value based on exchange-quoted prices, adjusted as appropriate for regional location basis values, which represent differences in local markets including
transportation as well as quality or grade differences. Basis values are generally determined using inputs from broker quotations or market transactions. As of December 31, 2021, the recorded balances of the Company’s derivative assets and liabilities associated with physical delivery contracts were $26.7 million and $26.1 million, respectively, and are classified as Level 2 assets and liabilities within Note 6.
We identified the assessment of the valuation of physical delivery contracts as a critical audit matter. Specifically, evaluating the valuation of physical delivery contracts, which includes assumptions related to exchange-quoted prices, and adjustments for regional location basis values, involved complex auditor judgment due to the subjectivity involved in determining the fair value.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the valuation of physical delivery contracts. To assess the valuation of physical delivery contracts, for a sample of contracts, we tested the Company’s exchange-quoted prices by comparing the amounts used to observable market transactions and evaluated the Company’s adjustments for regional location basis values by comparing inputs used by the Company to third-party information, including broker quotations or market transactions.
/s/ KPMG LLP
We have served as the Company’s auditor since 2009.
Omaha, Nebraska
‎February 18, 2022
‎
GRE EN PLAINS INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31,
ASSETS
Current assets
Cash and cash equivalents
$
426,220
$
233,860
Restricted cash
134,739
40,950
Marketable securities
124,859
-
Accounts receivable, net of allowances of $682 and $143, respectively
119,961
55,568
Income taxes receivable
Inventories
267,838
269,491
Prepaid expenses and other
16,483
16,531
Derivative financial instruments
26,738
25,292
Total current assets
1,117,749
642,353
Property and equipment, net
893,517
801,690
Operating lease right-of-use assets
64,042
61,883
Other assets
84,447
72,991
Total assets
$
2,159,755
$
1,578,917
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
146,063
$
140,058
Accrued and other liabilities
56,980
38,471
Derivative financial instruments
43,244
20,265
Operating lease current liabilities
16,814
14,902
Short-term notes payable and other borrowings
173,418
140,808
Current maturities of long-term debt
35,285
98,052
Total current liabilities
471,804
452,556
Long-term debt
514,006
287,299
Operating lease long-term liabilities
49,795
49,549
Other liabilities
22,131
12,849
Total liabilities
1,057,736
802,253
Commitments and contingencies (Note 17)
Stockholders' equity
Common stock, $0.001 par value; 75,000,000 shares authorized;
‎61,840,434 and 47,470,505 shares issued, and 53,595,978
‎and 35,657,344 shares outstanding, respectively
Additional paid-in capital
1,069,573
740,889
Retained earnings (deficit)
(15,199)
39,375
Accumulated other comprehensive loss
(12,310)
(2,172)
Treasury stock, 8,244,456 and 11,813,161 shares, respectively
(91,626)
(131,287)
Total Green Plains stockholders' equity
950,500
646,852
Noncontrolling interests
151,519
129,812
Total stockholders' equity
1,102,019
776,664
Total liabilities and stockholders' equity
$
2,159,755
$
1,578,917
See accompanying notes to the consolidated financial statements.
‎
GREE N PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31,
Revenues
Product revenues
$
2,806,629
$
1,918,884
$
2,410,382
Service revenues
20,539
4,835
6,856
Total revenues
2,827,168
1,923,719
2,417,238
Costs and expenses
Cost of goods sold (excluding depreciation and amortization expenses reflected below)
2,625,109
1,812,163
2,384,947
Operations and maintenance expenses
23,061
26,125
25,657
Selling, general and administrative expenses
91,139
84,932
77,077
Loss (gain) on sale of assets, net
(29,601)
20,860
-
Goodwill impairment
-
24,091
-
Depreciation and amortization expenses
91,952
78,244
72,127
Total costs and expenses
2,801,660
2,046,415
2,559,808
Operating income (loss) from continuing operations
25,508
(122,696)
(142,570)
Other income (expense)
Interest income
4,333
Interest expense
(67,144)
(39,993)
(40,200)
Other, net
(1,940)
5,495
Total other expense
(68,509)
(38,434)
(30,372)
Loss from continuing operations before income taxes and income from equity method investees
(43,001)
(161,130)
(172,942)
Income tax (expense) benefit
(1,845)
50,383
21,316
Income from equity method investees, net of income taxes
21,093
2,797
Net loss from continuing operations including noncontrolling interest
(44,146)
(89,654)
(148,829)
Net income from discontinued operations, net of income taxes
-
-
Net loss
(44,146)
(89,654)
(148,000)
Net income attributable to noncontrolling interests
21,846
19,121
18,860
Net loss attributable to Green Plains
$
(65,992)
$
(108,775)
$
(166,860)
Earnings (loss) per share - basic and diluted
Net loss from continuing operations
$
(1.41)
$
(3.14)
$
(4.40)
Net income from discontinued operations
-
-
0.02
Net loss attributable to Green Plains
$
(1.41)
$
(3.14)
$
(4.38)
Weighted average shares outstanding:
Basic and diluted
46,652
34,631
38,111
See accompanying notes to the consolidated financial statements.
‎
GRE EN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Year Ended December 31,
Net loss
$
(44,146)
$
(89,654)
$
(148,000)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on derivatives arising during the period, net of tax benefit (expense) of $7,806, $257 and ($14,431), respectively
(24,230)
(768)
55,973
Reclassification of realized losses (gains) on derivatives, net of tax expense (benefit) of ($4,540), $857 and $10,002, respectively
14,092
(2,566)
(38,795)
Other comprehensive income (loss), net of tax
(10,138)
(3,334)
17,178
Share of equity method investees other comprehensive gain (loss) arising during the period, net of tax benefit (expense) of $0, ($3,929) and $3,929, respectively
-
12,226
(12,226)
Total other comprehensive income (loss), net of tax
(10,138)
8,892
4,952
Comprehensive loss
(54,284)
(80,762)
(143,048)
Comprehensive income attributable to noncontrolling interests
21,846
19,121
18,860
Comprehensive loss attributable to Green Plains
$
(76,130)
$
(99,883)
$
(161,908)
See accompanying notes to the consolidated financial statements.
‎
GRE EN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Total
Common
Additional
Retained
Accum. Other
Green Plains
Non-
Total
Stock
Paid-in
Earnings
Comp. Income
Treasury Stock
Stockholders'
Control.
Stockholders'
Shares
Amount
Capital
(Deficit)
(Loss)
Shares
Amount
Equity
Interests
Equity
Balance, December 31, 2018
46,638
$
$
696,222
$
324,728
$
(16,016)
5,536
$
(58,162)
$
946,819
$
116,170
$
1,062,989
Net income (loss)
-
-
-
(166,860)
-
-
-
(166,860)
18,860
(148,000)
Cash dividends and distributions declared
-
-
-
(9,718)
-
-
-
(9,718)
(21,968)
(31,686)
Other comprehensive income before reclassification
-
-
-
-
55,973
-
-
-
-
-
Amounts reclassified from accumulated other comprehensive loss
-
-
-
-
(38,795)
-
-
-
-
-
Other comprehensive income, net of tax
-
-
-
-
17,178
-
-
17,178
-
17,178
Share of equity method investees other comprehensive loss arising during the period, net of tax
-
-
-
-
(12,226)
-
-
(12,226)
-
(12,226)
Proceeds from disgorgement of shareholders short-swing profits, net of tax
-
-
5,054
-
-
-
-
5,054
-
5,054
Issuance of 4.00% convertible notes due 2024, net of tax
-
-
24,928
-
-
-
-
24,928
-
24,928
Settlements of 3.25% convertible notes due 2019, net of tax
-
-
(271)
-
-
-
-
(271)
-
(271)
Repurchase of common stock
-
-
-
-
-
5,396
(61,646)
(61,646)
-
(61,646)
Stock-based compensation
-
7,052
-
-
-
-
7,052
7,371
Stock options exercised
-
1,595
-
-
-
-
1,595
-
1,595
Balance, December 31, 2019
46,964
734,580
148,150
(11,064)
10,932
(119,808)
751,905
113,381
865,286
Net income (loss)
-
-
-
(108,775)
-
-
-
(108,775)
19,121
(89,654)
Cash dividends and distributions declared
-
-
-
-
-
-
-
-
(9,675)
(9,675)
Other comprehensive loss before reclassification
-
-
-
-
(768)
-
-
-
-
-
Amounts reclassified from accumulated other comprehensive loss
-
-
-
-
(2,566)
-
-
-
-
-
Other comprehensive loss, net of tax
-
-
-
-
(3,334)
-
-
(3,334)
-
(3,334)
Share of equity method investees other comprehensive loss arising during the period, net of tax
-
-
-
-
12,226
-
-
12,226
-
12,226
Acquisition of subsidiary
-
-
-
-
-
-
-
-
6,667
6,667
Repurchase of common stock
-
-
-
-
-
(11,479)
(11,479)
-
(11,479)
Stock-based compensation
-
6,309
-
-
-
-
6,309
6,627
Balance, December 31, 2020
47,471
740,889
39,375
(2,172)
11,813
(131,287)
646,852
129,812
776,664
Impact of ASC 470-20 adoption
-
-
(49,496)
11,418
-
-
-
(38,078)
-
(38,078)
Balance, January 1, 2021
47,471
691,393
50,793
(2,172)
11,813
(131,287)
608,774
129,812
738,586
Net income (loss)
-
-
-
(65,992)
-
-
-
(65,992)
21,846
(44,146)
Cash dividends and distributions declared
-
-
-
-
-
-
-
-
(9,251)
(9,251)
Other comprehensive loss before reclassification
-
-
-
-
(24,230)
-
-
-
-
-
Amounts reclassified from accumulated other comprehensive loss
-
-
-
-
14,092
-
-
-
-
-
Other comprehensive loss, net of tax
-
-
-
-
(10,138)
-
-
(10,138)
-
(10,138)
Issuance of common stock, net of fees
14,214
355,963
-
-
-
-
355,978
-
355,978
Exchange of 4.00% convertible notes due 2024
-
-
17,683
-
-
(3,569)
39,661
57,344
-
57,344
Investment in subsidiaries
-
-
-
-
-
-
-
-
12,264
12,264
Issuance of warrants
-
-
3,431
-
-
-
-
3,431
(3,431)
-
Stock-based compensation
-
1,103
-
-
-
-
1,103
1,382
Balance, December 31, 2021
61,840
$
$
1,069,573
$
(15,199)
$
(12,310)
8,244
$
(91,626)
$
950,500
$
151,519
$
1,102,019
See accompanying notes to the consolidated financial statements.
‎
GREE N PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
Cash flows from operating activities:
Net loss from continuing operations including noncontrolling interest
$
(44,146)
$
(89,654)
$
(148,829)
Net income from discontinued operations, net of income taxes
-
-
Net loss
(44,146)
(89,654)
(148,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
91,952
78,244
72,127
Amortization of debt issuance costs and debt discount
8,402
22,500
20,364
Loss (gain) on the disposal of assets, net
(29,601)
21,464
(3,680)
Loss on extinguishment of debt
32,645
-
-
Goodwill impairment
-
24,091
-
Deferred income taxes
1,233
(13,336)
(17,252)
Stock-based compensation
6,058
7,915
9,692
Income from equity method investees, net of income taxes
(700)
(21,093)
(2,797)
Distribution from equity method investees, net of income taxes
1,500
27,910
-
Other
1,590
-
-
Changes in operating assets and liabilities before effects of
‎business combinations and dispositions:
Accounts receivable
(64,095)
57,060
(21,762)
Inventories
(20,543)
(21,632)
50,022
Derivative financial instruments
6,808
1,274
12,420
Prepaid expenses and other assets
(578)
(2,105)
Accounts payable and accrued liabilities
17,189
(22,772)
(1,778)
Current income taxes
(699)
30,073
3,138
Other
(2,769)
(1,044)
(288)
Net cash provided by (used in) operating activities - continuing operations
4,246
98,895
(27,001)
Net cash provided by operating activities - discontinued operations
-
-
17,469
Net cash provided by (used in) operating activities
4,246
98,895
(9,532)
Cash flows from investing activities:
Purchases of property and equipment, net
(187,195)
(110,579)
(75,481)
Proceeds from sale of discontinued operations, net of cash divested
-
-
76,884
Purchases of marketable securities
(124,859)
-
-
Proceeds from the sale of assets, net
87,217
39,952
3,469
Disposition of equity method investee
(2,948)
80,500
29,721
Acquisition of businesses, net of cash acquired
-
(21,325)
-
Distributions from (contribution to) equity method investees
-
-
Other investing activities
(8,500)
-
-
Net cash provided by (used in) investing activities - continuing operations
(236,285)
(11,452)
34,813
Net cash used in investing activities - discontinued operations
-
-
(4,169)
Net cash provided by (used in) investing activities
(236,285)
(11,452)
30,644
Cash flows from financing activities:
Proceeds from the issuance of long-term debt
367,701
33,000
157,710
Payments of principal on long-term debt
(188,700)
(12,987)
(45,702)
Proceeds from short-term borrowings
3,473,541
2,392,258
2,802,199
Payments on short-term borrowings
(3,445,634)
(2,468,485)
(2,840,505)
Payments on extinguishment of convertible debt
(20,861)
-
-
Payments for repurchase of common stock
-
(11,479)
(61,646)
Payments of cash dividends and distributions
(9,251)
(9,675)
(31,686)
Proceeds from issuance of common stock, net
355,978
-
-
Proceeds from disgorgement of shareholder short-swing profits
-
-
6,699
Payments of loan fees
(9,195)
(3,873)
(5,291)
Payments related to tax withholdings for stock-based compensation
(4,671)
(1,288)
(2,320)
Proceeds from exercises of stock options
-
-
1,595
Other financing activities
(720)
-
-
Net cash provided by (used in) financing activities - continuing operations
518,188
(82,529)
(18,947)
Net cash used in financing activities - discontinued operations
-
-
(50,464)
Net cash provided by (used in) financing activities
518,188
(82,529)
(69,411)
Net change in cash, cash equivalents and restricted cash
286,149
4,914
(48,299)
Cash, cash equivalents and restricted cash, beginning of period
274,810
269,896
283,284
Discontinued operations cash activity included above:
Add: Cash balance included in current assets of discontinued operations at beginning of period
-
-
34,911
Cash, cash equivalents and restricted cash, end of period
$
560,959
$
274,810
$
269,896
Continued on the following page
GREEN PLAINS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Continued from the previous page
Year Ended December 31,
Reconciliation of total cash, cash equivalents and restricted cash:
Cash and cash equivalents
$
426,220
$
233,860
$
245,977
Restricted cash
134,739
40,950
23,919
Total cash, cash equivalents and restricted cash
$
560,959
$
274,810
$
269,896
Non-cash financing activity:
Settlement of NMTC transaction
$
-
$
-
$
8,100
Exchange of 4.00% convertible notes due 2024
$
51,000
$
-
$
-
Exchange of common stock held in treasury stock for 4.00% convertible notes due 2024
$
39,661
$
-
$
-
Supplemental investing and financing activities:
Assets acquired in acquisitions, net of cash
$
9,000
$
42,443
$
-
Less: liabilities assumed
-
(14,451)
-
Less: noncontrolling interests assumed
(4,500)
(6,667)
-
Net assets acquired
$
4,500
$
21,325
$
-
Assets disposed of in sale
$
54,626
$
67,711
$
527,614
Less: liabilities relinquished
(3,706)
(6,234)
(373,846)
Net assets disposed
$
50,920
$
61,477
$
153,768
Supplemental disclosures of cash flow:
Cash paid (refunded) for income taxes
$
1,479
$
(60,587)
$
Cash paid for interest of continuing operations
$
29,369
$
23,300
$
24,287
Capital expenditures in accounts payable
$
11,948
$
4,494
$
9,889
Cash paid for interest of discontinued operations
$
-
$
-
$
11,557
Cash premium paid for extinguishment of convertible notes
$
20,861
$
-
$
-
See accompanying notes to the consolidated financial statements.
‎
GRE EN PLAINS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION and DESCRIPTION OF BUSINESS
References to the Company
References to “Green Plains” or the “company” in the consolidated financial statements and in these notes to the consolidated financial statements refer to Green Plains Inc., an Iowa corporation, and its subsidiaries.
Consolidated Financial Statements
The consolidated financial statements include the company’s accounts and all significant intercompany balances and transactions are eliminated. Unconsolidated entities are included in the financial statements on an equity basis. As of December 31, 2021, the company owns a 48.9% limited partner interest and a 2.0% general partner interest in Green Plains Partners LP. Public investors own the remaining 49.1% limited partner interest in the partnership. The company determined that the limited partners in the partnership with equity at risk lack the power, through voting rights or similar rights, to direct the activities that most significantly impact partnership’s economic performance; therefore, the partnership is considered a variable interest entity. The company, through its ownership of the general partner interest in the partnership, has the power to direct the activities that most significantly affect economic performance and is obligated to absorb losses and has the right to receive benefits that could be significant to the partnership. Therefore, the company is considered the primary beneficiary and consolidates the partnership in the company’s financial statements. The assets of the partnership cannot be used by the company for general corporate purposes. The partnership’s consolidated total assets as of December 31, 2021 and 2020, excluding intercompany balances, are $100.3 million and $91.2 million, respectively, and primarily consist of property and equipment, operating lease right-of-use assets and goodwill. The partnership’s consolidated total liabilities as of December 31, 2021 and 2020, excluding intercompany balances, are $111.4 million and $151.2 million, respectively, which primarily consist of long-term debt as discussed in Note 12 - Debt and operating lease liabilities. The liabilities recognized as a result of consolidating the partnership do not represent additional claims on our general assets.
GPCC, previously a wholly owned subsidiary of Green Plains, was disposed of during the third quarter of 2019. The company concluded that the disposition of GPCC met the requirements under ASC 205-20 Presentation of Financial Statements - Discontinued Operations (“ASC 205-20”) to be presented as discontinued operations. As such, GPCC results prior to its disposition are classified as discontinued operations in prior period consolidated financial statements. Subsequently, GPCC was no longer consolidated in the company’s consolidated financial statements and the GPCC investment was accounted for using the equity method of accounting.
Additionally, on October 1, 2020, pursuant to the Securities Purchase Agreement, the company sold its remaining 50% joint venture interest in GPCC to AGR Special Opportunities Fund I, LP (AGR), TGAM Agribusiness Fund LP and StepStone Atlantic Fund, LP (StepStone). The transaction resulted in a reduction in investment in equity method investees of $69.7 million as a result of removal of the equity method investment in GPCC, and a reduction in accumulated other comprehensive income (loss) of $10.7 million as a result of the removal of the company’s share of equity method investees accumulated other comprehensive loss. See Note 5 - Acquisitions, Dispositions and Discontinued Operations and Note 20 - Equity Method Investments for further details.
The company also owns a 90.0% interest in BioProcess Algae, a joint venture formed in 2008, as well as a majority interest in FQT with their results being consolidated in our consolidated financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications did not affect total revenues, costs and expenses or net income. See Note 12 - Debt and Note 15 - Stockholders’ Equity for further details.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The company bases its estimates on historical experience and assumptions it believes are proper and reasonable under the circumstances and regularly evaluates the appropriateness of its estimates and assumptions. Actual
results could differ from those estimates. Key accounting policies, including but not limited to those relating to revenue recognition, carrying value of intangible assets, operating leases, impairment of long-lived assets and goodwill, derivative financial instruments, accounting for income taxes and assets acquired and liabilities assumed in acquisitions, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements.
Description of Business
The company operates within three operating segments: (1) ethanol production, which includes the production of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities and (3) partnership, which includes fuel storage and transportation services. Results for our previously reported food and ingredients segment are now included in the agribusiness and energy services segment. The food and ingredients segment had no activity in either 2021 or 2020 and minimal activity in 2019.
Ethanol Production Segment
Green Plains is one of the largest ethanol producers in North America. The company operates 11 ethanol plants in six states through separate wholly owned operating subsidiaries. The company’s ethanol plants use a dry mill process to produce ethanol and co-products such as wet, modified wet or dried distillers grains, Ultra-High Protein and corn oil. The corn oil systems are designed to extract non-edible corn oil from the whole stillage immediately prior to production of distillers grains. At capacity, the company expects to process approximately 330 million bushels of corn and produce approximately 1.0 billion gallons of ethanol, 2.5 million tons of distillers grains and 290 million pounds of industrial grade corn oil annually.
Agribusiness and Energy Services Segment
The company owns and operates grain handling and storage assets through its agribusiness and energy services segment, which has grain storage capacity of approximately 27.0 million bushels, with 25.8 million bushels of storage capacity at the company’s ethanol plants and 1.2 million bushels of total storage capacity at its one grain elevator. The company’s agribusiness operations provide synergies with the ethanol production segment as it supplies a portion of the feedstock needed to produce ethanol. The company has an in-house marketing business that is responsible for the sale, marketing and distribution of all ethanol, distillers grains, Ultra-High Protein and corn oil produced at its ethanol plants. The company also purchases and sells ethanol, distillers grains, corn oil, grain, natural gas and other commodities and participates in other merchant trading activities in various markets.
Partnership Segment
The company’s partnership segment provides fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. As of December 31, 2021, the partnership owns (i) 29 ethanol storage facilities located at or near the company’s 11 operational ethanol production plants and one non-operational ethanol production plant, which have the ability to efficiently and effectively store and load railcars and tanker trucks with all of the ethanol produced at the company’s ethanol production plants, (ii) four fuel terminal facilities, located near major rail lines, which enable the partnership to receive, store and deliver fuels from and to markets that seek access to renewable fuels, and (iii) transportation assets, including a leased railcar fleet of approximately 2,300 railcars which is utilized to transport ethanol from the company’s ethanol production plants to refineries throughout the United States and international export terminals.
2. SUMMARY OF SIGNIFICANT accounting POLICIES
Cash and Cash Equivalents
Cash and cash equivalents includes bank deposits as well as short-term, highly liquid investments with original maturities of three months or less.
Restricted Cash
The company has restricted cash, which can only be used for funding letters of credit, for payment towards a credit agreement, or for capital expenditures as specified in certain credit facility agreements. Restricted cash also includes cash margins and securities pledged to commodity exchange clearinghouses and at times, funds in escrow related to acquisition and disposition activities. To the degree these segregated balances are cash and cash equivalents, they are considered restricted cash on the consolidated balance sheets.
Marketable Securities
Marketable securities include highly liquid, fixed maturity investments with original maturities ranging from three to twelve months and are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity.
Revenue Recognition
The company recognizes revenue when obligations under the terms of a contract with a customer are satisfied. Generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects concurrent with revenue-producing activities are excluded from revenue.
Sales of ethanol, distillers grains, Ultra-High Protein, corn oil, natural gas and other commodities by the company’s marketing business are recognized when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs with the transfer of control of products or services. Revenues related to marketing for third parties are presented on a gross basis as the company controls the product prior to the sale to the end customer, takes title of the product and has inventory risk. Unearned revenue is recorded for goods in transit when the company has received payment but control has not yet been transferred to the customer. Revenues for receiving, storing, transferring and transporting ethanol and other fuels are recognized when the product is delivered to the customer.
The company routinely enters into physical-delivery energy commodity purchase and sale agreements. At times, the company settles these transactions by transferring its obligations to other counterparties rather than delivering the physical commodity. Energy trading transactions are reported net as a component of revenue. Revenues include net gains or losses from derivatives related to products sold while cost of goods sold includes net gains or losses from derivatives related to commodities purchased. Revenues also include realized gains and losses on related derivative financial instruments and reclassifications of realized gains and losses on cash flow hedges from accumulated other comprehensive income or loss.
Sales of products, including agricultural commodities, are recognized when control of the product is transferred to the customer, which depends on the agreed upon shipment or delivery terms. Revenues related to grain merchandising are presented gross and include shipping and handling, which is also a component of cost of goods sold. Revenues from grain storage are recognized over time as the services are rendered.
A substantial portion of the partnership revenues are derived from fixed-fee commercial agreements for storage, terminal or transportation services. The partnership recognizes revenue upon transfer of control of product from its storage tanks and fuel terminals, when railcar volumetric capacity is provided, and as truck transportation services are performed. To the extent shortfalls associated with minimum volume commitments in the previous four quarters continue to exist, volumes in excess of the minimum volume commitment are applied to those shortfalls. Remaining excess volumes generating operating lease revenue are recognized as incurred.
Shipping and Handling Costs
The company accounts for shipping and handling activities related to contracts with customers as costs to fulfill its promise to transfer the associated products. Accordingly, the company records customer payments associated with shipping and handling costs as a component of revenue, and classifies such costs as a component of cost of goods sold.
Cost of Goods Sold
Cost of goods sold includes direct labor, materials, shipping and plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in ethanol production. Grain purchasing and receiving costs, excluding labor costs for grain buyers and scale operators, are also included in cost of goods sold. Materials include the cost of corn feedstock, denaturant, and process chemicals. Corn feedstock costs include gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight charges, inspection costs and transfer costs, as well as reclassifications of gains and losses on cash flow hedges from accumulated other comprehensive income or loss. Plant overhead consists primarily of plant utilities, repairs and maintenance and outbound freight charges. Shipping costs incurred by the company, including railcar costs, are also reflected in cost of goods sold.
The company uses exchange-traded futures and options contracts and forward purchase and sale contracts to attempt to minimize the effect of price changes on ethanol, grain and natural gas. Exchange-traded futures and options contracts are valued at quoted market prices and settled predominantly in cash. The company is exposed to loss when counterparties default on forward purchase and sale contracts. Grain inventories held for sale and forward purchase and sale contracts are
valued at market prices when available or other market quotes adjusted for basis differences, primarily in transportation, between the exchange-traded market and local market where the terms of the contract is based. Changes in forward purchase contracts and exchange-traded futures and options contracts are recognized as a component of cost of goods sold.
Operations and Maintenance Expenses
In the partnership segment, transportation expenses represent the primary component of operations and maintenance expenses. Transportation expenses include railcar leases, freight and shipping of the company’s ethanol and co-products, as well as costs incurred storing ethanol at destination terminals.
Derivative Financial Instruments
The company uses various derivative financial instruments, including exchange-traded futures and exchange-traded and over-the-counter options contracts, to attempt to minimize risk and the effect of commodity price changes including but not limited to, corn, ethanol, natural gas and crude oil. The company monitors and manages this exposure as part of its overall risk management policy to reduce the adverse effect market volatility may have on its operating results. The company may hedge these commodities as one way to mitigate risk; however, there may be situations when these hedging activities themselves result in losses.
By using derivatives to hedge exposures to changes in commodity prices, the company is exposed to credit and market risk. The company’s exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the terms of the derivative contract. The company minimizes its credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring their financial condition. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. The company manages market risk by incorporating parameters to monitor exposure within its risk management strategy, which limits the types of derivative instruments and strategies the company can use and the degree of market risk it can take using derivative instruments.
The company evaluates its physical delivery contracts to determine if they qualify for normal purchase or sale exemptions which are expected to be used or sold over a reasonable period in the normal course of business. Contracts that do not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating income unless the contracts qualify for, and the company elects, cash flow hedge accounting treatment.
Certain qualifying derivatives related to ethanol production and agribusiness and energy services are designated as cash flow hedges. The company evaluates the derivative instrument to ascertain its effectiveness prior to entering into cash flow hedges. Unrealized gains and losses are reflected in accumulated other comprehensive income or loss until the gain or loss from the underlying hedged transaction is realized and the physical transaction is completed. When it becomes probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued, which affects earnings. These derivative financial instruments are recognized in current assets or current liabilities at fair value.
At times, the company hedges its exposure to changes in inventory values and designates qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted in the current period for changes in fair value. Estimated fair values carried at market are based on exchange-quoted prices, adjusted as appropriate for regional location basis values which represent differences in local markets including transportation as well as quality or grade differences. Basis values are generally determined using inputs from broker quotations or other market transactions. However, a portion of the value may be derived using unobservable inputs. Ineffectiveness of the hedges is recognized in the current period to the extent the change in fair value of the inventory is not offset by the change in fair value of the derivative.
Concentrations of Credit Risk
The company is exposed to credit risk resulting from the possibility that another party may fail to perform according to the terms of the company’s contract. The company sells ethanol, corn oil and distillers grains and markets products for third parties, which can result in concentrations of credit risk from a variety of customers, including major integrated oil companies, large independent refiners, petroleum wholesalers and other marketers. The company also sells grain to large commercial buyers, including other ethanol plants. Although payments are typically received within fifteen days of the sale, the company continually monitors its exposure. The company is also exposed to credit risk on prepayments of undelivered inventories with a few major suppliers of petroleum products and agricultural inputs.
The company has master netting arrangements with various counterparties. On the consolidated balance sheets, the associated net amount for each counterparty is reflected as either an accounts receivable or accounts payable. If the amount
for each counterparty were reflected on a gross basis, the company’s accounts receivable and accounts payable would increase by $7.8 million and $1.1 million at December 31, 2021 and 2020, respectively.
Inventories
Corn held for ethanol production, ethanol, corn oil, Ultra-High Protein and distillers grains inventories are recorded at the lower of average cost or net realizable value, except grain held for sale and fair-value hedged inventories.
Other grain inventories include readily marketable grain, forward contracts to buy and sell grain, and exchange traded futures and option contracts, which are all stated at market value. All grain inventories held for sale are marked to market. Changes are reflected in cost of goods sold. The forward contracts require performance in future periods. Contracts to purchase grain generally relate to current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of grain to processors or other consumers generally do not extend beyond one year. The terms of the purchase and sale agreements for grain are consistent with industry standards. Raw materials and finished goods inventories are valued at the lower of average cost or net realizable value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is generally calculated using the straight-line method over the following estimated useful life of the assets:
Years
Buildings and improvements
10-40
Plant equipment
15-40
Other machinery and equipment
5-7
Land improvements
20-30
Railroad track and equipment
20-30
Computer hardware and software
3-5
Office furniture and equipment
5-7
Property and equipment is capitalized at cost. Land improvements, interest incurred during construction and other property improvements are capitalized and depreciated. Betterment of property assets are those that extend the useful life, increase the capacity or improve the operating efficiency or improve the safety of our operations. Costs of repairs and normal maintenance are charged to expense when incurred. The company periodically evaluates whether events and circumstances have occurred that warrant a revision of the estimated useful life of its fixed assets.
Intangible Assets
Our intangible assets consist primarily of customer relationships, intellectual property, research and development technology and licenses. These intangible assets were capitalized at fair market value and are being amortized over their estimated useful lives.
Impairment of Long-Lived Assets
The company reviews its long-lived assets, currently consisting of property and equipment, operating lease right-of-use assets, intangible assets and equity method investments, for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Significant management judgment is required to determine the fair value of our long-lived assets and measure impairment, which includes projected cash flows. Fair value is determined by using various valuation techniques, including discounted cash flow models, sales of comparable properties and third-party independent appraisals. Changes in estimated fair value could result in an impairment of the asset. There were no material impairment charges recorded for the periods reported.
Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The determination of goodwill takes into
consideration the fair value of net tangible and intangible assets. The company’s goodwill is related to certain acquisitions within our ethanol production and partnership segments.
The company is required to perform impairment tests related to goodwill annually, which it performs as of October 1, or sooner if an indicator of impairment occurs. Circumstances that may indicate impairment include a decline in the company’s future projected cash flows, a decision to suspend plant operations for an extended period of time, sustained decline in the company’s market capitalization or market prices for similar assets or businesses, or a significant adverse change in legal or regulatory matters or business climate. Significant management judgment is required to determine the fair value of goodwill and measure impairment, which include, but are not limited to, market capitalization, prospective financial information, growth rates, discount rates, inflationary factors, and cost of capital. Fair value is determined by using various valuation techniques, including discounted cash flow models, sales of comparable properties and third-party independent appraisals. Changes in estimated fair value could result in a write-down of the asset.
For additional information, please refer to Note 10 - Goodwill and Intangible Assets.
Leases
The company leases certain facilities, parcels of land, and equipment. These leases are accounted for as operating leases, with lease expense recognized on a straight-line basis over the lease term. The term of the lease may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised. For leases with initial terms greater than 12 months, the company records operating lease right-of-use assets and corresponding operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. The company did not incur any material short-term lease expense for the years ended December 31, 2021, 2020 or 2019.
Operating lease right-of-use assets represent the right to control an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the company’s leases do not provide an implicit rate, the incremental borrowing rate is used based on information available at commencement date to determine the present value of future payments.
The company elected to utilize a portfolio approach for lease classification, which allows for an entity to group together leases with similar characteristics provided that its application does not create a material difference when compared to accounting for the leases at a contract level. For railcar leases, the company elected to combine the railcars within each rider and account for each rider as an individual lease.
From a lessee perspective, the company combines both the lease and non-lease components and accounts for them as one lease. Certain of the company’s railcar agreements provide for maintenance costs to be the responsibility of the company as incurred or charged by the lessor. This maintenance cost is a non-lease component that the company combines with the monthly rental payment and accounts for the total cost as operating lease expense. In addition, the company has a land lease that contains a non-lease component for the handling and unloading services the landlord provides. The company combines the cost of services with the land lease cost and accounts for the total as operating lease expense.
The partnership segment records the majority of it operating lease revenue from its storage and throughput services, rail transportation services and certain terminal services agreements with Green Plains Trade. In addition, the partnership may sublease certain of its railcars to third parties on a short-term basis. These subleases are classified as operating leases, with the associated sublease revenue recognized on a straight-line basis over the lease term.
Please refer to Note 17 - Commitments and Contingencies to the consolidated financial statements for further details on operating lease expense and revenue.
Investments in Equity Method Investees
The company accounts for investments in which the company exercises significant influence using the equity method so long as the company (i) does not control the investee and (ii) is not the primary beneficiary of the entity. The company recognizes these investments as a separate line item in the consolidated balance sheets and its proportionate share of earnings on a separate line item in the consolidated statements of operations. The company’s share of equity method investees other comprehensive income arising during the period is included in accumulated other comprehensive loss in the consolidated balance sheet.
‎
The company recognizes losses in the value of equity method investments when there is evidence of an other-than-temporary decrease in value. Evidence of a loss might include, but would not necessarily be limited to, the inability to recover the carrying amount of the investment or the inability of the equity method investee to sustain an earnings capacity that justifies the carrying amount of the investment. The current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment. The company evaluates equity method investments for impairment if there is evidence an investment may be impaired. We use the nature of distribution approach to classify distributions from equity method investments on the statements of cash flows.
Discontinued Operations
In determining whether a disposal group should be presented as discontinued operations, the company makes a determination of whether such a group being disposed of comprises a component of the entity, or a group of components of the entity, that represents a strategic shift that has, or will have, a major effect on the company's operations and financial results. If these determinations are made affirmatively, the results of operations of the group being disposed of are aggregated for separate presentation apart from the continuing operations of the company for all periods presented in the consolidated financial statements. General corporate overhead is not allocated to discontinued operations.
Net income from discontinued operations, net of income taxes, relates to the operations of GPCC, which was previously a wholly owned subsidiary of Green Plains until the formation of the GPCC joint venture and partial sale during the third quarter of 2019. The assets and liabilities of GPCC have been reclassified as assets and liabilities of discontinued operations in the prior year. The company entered into a shared service agreement whereby they continued to provide certain administrative services to GPCC and received $400 thousand on a quarterly basis through December 31, 2020, at which time administrative services began to unwind as a result of the disposition of the GPCC joint venture on October 1, 2020. See Note 5 - Acquisitions, Dispositions and Discontinued Operations for further details.
Financing Costs
Fees and costs related to securing debt are recorded as financing costs. Debt issuance costs are stated at cost and are amortized using the effective interest method for term loans and the straight-line basis over the life of the agreements for revolving credit arrangements and convertible notes.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of various expenses including employee salaries, incentives and benefits; office expenses; director compensation; professional fees for accounting, legal, consulting, and investor relations activities.
Stock-Based Compensation
The company recognizes compensation cost using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. The company used the Monte Carlo valuation model to estimate the fair value of performance shares issued to employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.
Income Taxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial reporting carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operating results in the period of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The company recognizes uncertainties in income taxes within the financial statements under a process by which the likelihood of a tax position is gauged based upon the technical merits of the position, and then a subsequent measurement relates the maximum benefit and the degree of likelihood to determine the amount of benefit recognized in the financial statements.
‎
Recent Accounting Pronouncements
On January 1, 2021, the company early adopted the amended guidance in ASC 470-20, Debt - Debt with Conversion and Other Options and ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity - Accounting for Convertible Instruments and Contracts in an Equity’s Own Equity. The adoption of this guidance resulted in a $49.5 million decrease in additional paid-in capital, an $11.4 million increase in retained earnings and a $38.1 million increase in long-term debt, which included a $39.4 million increase in debt principal offset by a $1.3 million increase in debt issuance costs, resulting from amounts previously bifurcated to equity being reclassified to debt. See Note 12 - Debt and Note 15 - Stockholders’ Equity for further details.
In March 2020, the FASB issued amended guidance in ASC 848, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and a subsequent update in January 2021, which provides optional expedients and exceptions to U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates. The expedients and exceptions provided by the amended guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The guidance is effective upon issuance and to be applied prospectively from any date beginning March 12, 2020 through December 31, 2022. The amended guidance is not expected to have a material impact on the company’s consolidated financial statements.
In December 2019, the FASB issued amended guidance in ASC 740, Income Taxes - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. The amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. The amended guidance is not expected to have a material impact on the company’s consolidated financial statements.
Effective January 1, 2020, the company adopted the amended guidance in ASC 326, Financial Instruments - Credit Losses, which replaces the current incurred loss impairment method with a method that reflects expected credit losses on financial instruments. The new standard is effective for fiscal years and interim periods within those years, beginning after December 15, 2019, and allows for early adoption. The adoption of the new guidance did not have a material impact on the company’s consolidated financial statements.
3. GREEN PLAINS PARTNERS LP
The partnership is a fee-based master limited partnership formed by Green Plains to provide fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. The partnership’s assets currently include (i) 29 ethanol storage facilities, located at or near the company’s 11 operational ethanol production plants, which have the ability to efficiently and effectively store and load railcars and tanker trucks with all of the ethanol produced at the company’s ethanol production plants, (ii) four fuel terminal facilities, located near major rail lines, which enable the partnership to receive, store and deliver fuels from and to markets that seek access to renewable fuels, and (iii) transportation assets, including a leased railcar fleet of approximately 2,300 railcars, which are contracted to transport ethanol from the company’s ethanol production plants to refineries throughout the United States and international export terminals. The partnership is the company’s primary downstream logistics provider to support its approximately 1.0 bgy ethanol marketing and distribution business since the partnership’s assets are the principal method of storing and delivering the ethanol the company produces.
As of December 31, 2021, the company owns a 48.9% limited partner interest, consisting of 11,586,548 common units, and a 2.0% general partner interest in the partnership. The public owns the remaining 49.1% limited partner interest in the partnership. The partnership is consolidated in the company’s financial statements.
A substantial portion of the partnership’s revenues are derived from long-term, fee-based commercial agreements with Green Plains Trade, a subsidiary of the company. The partnership’s agreements with Green Plains Trade include the following:
Storage and throughput agreement, expiring on June 30, 2029;
Rail transportation services agreement, expiring on June 30, 2025;
Trucking transportation agreement, expiring on May 31, 2022;
Terminal services agreement for the Birmingham, Alabama unit train terminal, expiring December 31, 2022; and
Various other terminal services agreements for other fuel terminal facilities, each with Green Plains Trade.
The partnership’s storage and throughput agreement, and certain terminal services agreements, including the terminal services agreement for the Birmingham facility, are supported by minimum volume commitments. The partnership’s rail transportation services agreement is supported by minimum take-or-pay capacity commitments. The company also has agreements which establish fees for general and administrative, and operational and maintenance services it provides. These transactions are eliminated when the company consolidates its financial results.
The company consolidates the financial results of the partnership and records a noncontrolling interest in the partnership held by public common unitholders. Noncontrolling interest on the consolidated statements of operations includes the portion of net income attributable to the economic interest held by the partnership’s public common unitholders. Noncontrolling interest on the consolidated balance sheets includes the portion of net assets attributable to the partnership’s public common unitholders.
4. REVENUE
Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects concurrent with revenue-producing activities are excluded from revenue.
Revenue by Source
The following tables disaggregate revenue by major source (in thousands):
Twelve Months Ended December 31, 2021
Ethanol Production
Agribusiness & Energy Services
Partnership
Eliminations
Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol
$
-
$
-
$
-
$
-
$
-
Distillers grains
19,535
-
-
-
19,535
Corn oil
-
-
-
-
-
Service revenues
16,265
-
4,191
-
20,456
Other
32,096
14,090
-
-
46,186
Intersegment revenues
-
-
8,028
(8,028)
-
Total revenues from contracts with customers
67,896
14,090
12,219
(8,028)
86,177
Revenues from contracts accounted for as derivatives under ASC 815 (1):
Ethanol
1,589,649
498,367
-
-
2,088,016
Distillers grains
355,230
40,763
-
-
395,993
Corn oil
113,249
32,528
-
-
145,777
Grain
37,118
-
-
37,169
Other
27,293
46,660
-
-
73,953
Intersegment revenues
-
21,958
-
(21,958)
-
Total revenues from contracts accounted for as derivatives
2,085,472
677,394
-
(21,958)
2,740,908
Leasing revenues under ASC 842 (2)
-
-
66,233
(66,150)
Total Revenues
$
2,153,368
$
691,484
$
78,452
$
(96,136)
$
2,827,168
‎
Twelve Months Ended December 31, 2020
Ethanol Production
Agribusiness & Energy Services
Partnership
Eliminations
Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol
$
-
$
-
$
-
$
-
$
-
Distillers grains
32,032
-
-
-
32,032
Corn oil
-
2,938
-
-
2,938
Service revenues
-
-
4,434
-
4,434
Other
4,306
6,423
-
-
10,729
Intersegment revenues
4,463
8,411
(12,974)
-
Total revenues from contracts with customers
36,438
13,824
12,845
(12,974)
50,133
Revenues from contracts accounted for as derivatives under ASC 815 (1):
Ethanol
1,150,018
287,261
-
-
1,437,279
Distillers grains
261,554
41,184
-
-
302,738
Corn oil
49,666
33,563
-
-
83,229
Grain
32,833
-
-
32,875
Other
4,863
12,201
-
-
17,064
Intersegment revenues
-
23,005
-
(23,005)
-
Total revenues from contracts accounted for as derivatives
1,466,143
430,047
-
(23,005)
1,873,185
Leasing revenues under ASC 842 (2)
-
-
70,500
(70,099)
Total Revenues
$
1,502,581
$
443,871
$
83,345
$
(106,078)
$
1,923,719
Twelve Months Ended December 31, 2019
Ethanol Production
Agribusiness & Energy Services
Partnership
Eliminations
Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol
$
$
-
$
-
$
-
$
Distillers grains
70,729
-
-
-
70,729
Service revenues
-
-
6,422
-
6,422
Other
2,589
3,684
-
-
6,273
Intersegment revenues
-
7,126
(7,226)
-
Total revenues from contracts with customers
74,038
3,684
13,548
(7,226)
84,044
Revenues from contracts accounted for as derivatives under ASC 815 (1):
Ethanol
1,338,093
522,572
-
-
1,860,665
Distillers grains
228,849
42,445
-
-
271,294
Corn oil
50,290
29,485
-
-
79,775
Grain
63,233
-
-
63,408
Other
9,270
48,348
-
-
57,618
Intersegment revenues
-
27,184
-
(27,184)
-
Total revenues from contracts accounted for as derivatives
1,626,677
733,267
-
(27,184)
2,332,760
Leasing revenues under ASC 842 (2)
-
-
68,839
(68,405)
Total Revenues
$
1,700,715
$
736,951
$
82,387
$
(102,815)
$
2,417,238
(1)Revenues from contracts accounted for as derivatives represent physically settled derivative sales that are outside the scope of ASC 606, where the company recognizes revenue when control of the inventory is transferred within the meaning of ASC 606 as required by ASC 610-20, Gains and Losses from Derecognition of Nonfinancial Assets.
(2)Leasing revenues do not represent revenues recognized from contracts with customers under ASC 606, and are accounted for under ASC 842, Leases.
Major Customer
There were no customers that accounted for more than 10% of total revenues for the year ended December 31, 2021. Revenues from Customer A represented 16% and 11% of total revenues for the year ended December 31, 2020 and 2019, respectively and are reported in the ethanol production segment.
Payment Terms
The company has standard payment terms, which vary depending upon the nature of the services provided, with the majority falling within 10 to 30 days after transfer of control or completion of services. In instances where the timing of revenue recognition differs from the timing of invoicing, the company has determined that contracts generally do not include a significant financing component.
Contract Liabilities
The company records unearned revenue when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of service and lease agreements. Unearned revenue from service agreements, which represents a contract liability, is recorded for fees that have been charged to the customer prior to the completion of performance obligations. Unearned revenue is generally recognized in the subsequent quarter and is not material to the company. The company expects to recognize all of the unearned revenue associated with service agreements as of December 31, 2021, in the subsequent quarter when the inventory is withdrawn from the partnership’s tank storage.
5. ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS
ACQUISITIONS
Acquisition of a Majority Interest in FQT
On December 9, 2020, the company acquired a majority interest in FQT. During the second quarter of 2021, the company identified additional information through analysis of the final FQT acquisition agreements that resulted in a reassessment of certain contingent considerations related to potential earn-out payments which identified an understatement of other long term assets by $16.7 million, accrued liabilities of $2.4 million, long term other liabilities of $12.4 million and noncontrolling interests of $1.9 million as previously reported within ethanol production segment as of December 31, 2020.
DISPOSITIONS
Disposition of Ord Ethanol Plant
On March 22, 2021, the company completed the sale of the plant located in Ord, Nebraska and certain related assets, to GreenAmerica Biofuels Ord LLC (the “Ord Transaction”) for a sale price of $64.0 million, plus working capital of $9.8 million. Correspondingly, the company entered into a separate asset purchase agreement with the Partnership to acquire the storage assets and assign the rail transportation assets to be disposed of in the Ord Transaction for $27.5 million, which was used to pay down a portion of the partnership’s credit facility. The divested assets were reported within the company’s ethanol production, agribusiness and energy services and partnership segments. The company recorded a pretax gain on the sale of the Ord plant of $35.9 million within corporate activities.
The asset and liabilities of the Ord ethanol plant at closing on March 22, 2021 were as follows: (in thousands):
Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Inventory
$
10,400
Prepaid expenses and other
Property and equipment
24,285
Operating lease right-of-use assets
1,811
Accrued and other liabilities
(156)
Operating lease current liabilities
(1,021)
Operating lease long-term liabilities
(790)
Total identifiable net assets disposed
$
35,161
Disposition of Hereford Ethanol Plant
On December 28, 2020, the company completed the sale of the ethanol plant located in Hereford, Texas, and certain related assets, to Hereford Ethanol Partners, L.P. for the sale price of $39.0 million, plus working capital. Correspondingly, the partnership’s ethanol storage assets located adjacent to such plants were sold to the company for $10.0 million, and certain railcar operating leases were assigned to Hereford Ethanol Partners, L.P. The divested assets were reported within the company’s ethanol production, agribusiness and energy and partnership segments. The company recorded a pretax loss on the sale of the ethanol plant of $22.4 million, of which a loss of $18.5 million was recorded within corporate activities and a loss of $3.9 million was recorded within the ethanol production segment. Transaction fees related to the disposal were not material. The agreement contains certain earn-out provisions to be received from the buyers if certain provisions are met. The company will record any contingent amounts in the consolidated financial statements when the amount is reasonably determinable or the consideration is realized.
The asset and liabilities of the Hereford ethanol plant at closing on December 28, 2020 were as follows: (in thousands):
Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Inventory
$
8,140
Prepaid expenses and other
Property and equipment
54,279
Operating lease right-of-use-assets
5,096
Accrued and other liabilities
(870)
Operating lease current liabilities
(977)
Operating lease long-term liabilities
(4,201)
Long-term liabilities
(186)
Total identifiable net assets disposed
$
61,477
Disposition of Equity Interest in Green Plains Cattle Company LLC
On October 1, 2020, pursuant to the Securities Purchase Agreement, the company sold its remaining 50% joint venture interest in GPCC to AGR, TGAM Agribusiness Fund LP and StepStone (the “Buyers”) for $80.5 million in cash, plus closing adjustments. The transaction resulted in a reduction in other assets of $69.7 million as a result of the removal of the equity method investment in GPCC, and a reduction in accumulated other comprehensive loss of $10.7 million as a result of the removal of the company’s share of equity method investees accumulated other comprehensive loss. Transaction fees related to the disposal were not material. The Securities Purchase Agreement contained certain earn-out provisions of up to $4.0 million to be paid to the Buyers if certain EBITDA thresholds are met. During the year ended December 31, 2021, the company recorded a loss of $2.9 million associated with the earn-out provision.
Disposition of Green Plains Cattle Company LLC
On September 1, 2019, the company, TGAM and StepStone formed a joint venture and entered into the LLC Agreement. GPCC was previously a wholly owned subsidiary of Green Plains. Green Plains also entered into a Securities Purchase Agreement with TGAM and StepStone, whereby TGAM and StepStone purchased an aggregate of 50% of the membership interests of GPCC from Green Plains for approximately $76.9 million in cash. There was no gain or loss recorded as part of this transaction. The LLC Agreement contains certain earn-out or bonus provisions to be paid by or received from GPCC if certain EBITDA thresholds are met. Pursuant to the bonus provision, on August 31, 2020, Green Plains earned $2.0 million which has been recorded within loss (gain) on sale of assets, net on the consolidated statements of operations for the year ended December 31, 2020.
The assets and liabilities of the GPCC at closing on September 1, 2019 were as follows (in thousands):
Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Cash
$
Accounts receivable, net
17,920
Inventory
387,534
Derivative financial instruments
48,189
Property and equipment
71,678
Other assets
2,291
Current liabilities
(49,297)
Short-term notes payable and other borrowings
(38)
Current maturities of long-term debt
(324,028)
Long-term debt
(80)
Other liabilities
(403)
Total identifiable net assets disposed
$
153,768
DISCONTINUED OPERATIONS
After closing on September 1, 2019, GPCC is no longer consolidated in the company’s consolidated financial statements and the GPCC investment was accounted for using the equity method of accounting. Additionally, the company concluded that the disposition of GPCC met the requirements under ASC 205-20. As such, GPCC results prior to its disposition are classified as discontinued operations for the year ended December 31, 2019.
Summarized Results of Discontinued Operations
The following table presents the results of our discontinued operations for the periods presented. GPCC was disposed of on September 1, 2019, and as such, operational results through August 31, 2019 are included in the fiscal year 2019 amounts presented below (in thousands).
Year Ended December 31,
2019 (1)
Product revenues
$
638,122
Costs and expenses
Cost of goods sold (excluding depreciation and amortization expenses reflected below)
614,671
Selling, general and administrative expenses
5,931
Depreciation and amortization expenses
4,198
Total costs and expenses
624,800
Operating income
13,322
Other income (expense)
Interest income
Interest expense
(12,417)
Total other expense
(12,235)
Income before income taxes
1,087
Income tax expense
(258)
Net income
$
(1)Product revenues, costs of goods sold and selling, general and administrative expenses include certain revenue and expense items which were previously considered intercompany transactions prior to the disposition of GPCC and therefore eliminated upon consolidation. These revenue and costs of goods sold transactions total $14.5 million for the year ended December 31, 2019.
6. FAIR VALUE DISCLOSURES
The following methods, assumptions and valuation techniques were used in estimating the fair value of the company’s financial instruments:
Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities the company can access at the measurement date.
Level 2 - directly or indirectly observable inputs such as quoted prices for similar assets or liabilities in active markets other than quoted prices included within Level 1, quoted prices for identical or similar assets in markets that are not active, and other inputs that are observable or can be substantially corroborated by observable market data through correlation or other means. Grain inventories held for sale in the agribusiness and energy services segment are valued at nearby futures values, plus or minus nearby basis values, which represent differences in local markets including transportation or commodity quality or grade differences.
Level 3 - unobservable inputs that are supported by little or no market activity and comprise a significant component of the fair value of the assets or liabilities. The company currently does not have any recurring Level 3 financial instruments.
Derivative contracts include exchange-traded commodity futures and options contracts and forward commodity purchase and sale contracts. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1. The majority of the company’s exchange-traded futures and options contracts are cash-settled on a daily basis.
‎
There have been no changes in valuation techniques and inputs used in measuring fair value. The company’s assets and liabilities by level are as follows (in thousands):
Fair Value Measurements at December 31, 2021
Quoted Prices in
‎Active Markets for
‎Identical Assets
Significant Other
‎Observable Inputs
(Level 1)
(Level 2)
Total
Assets:
Cash and cash equivalents
$
426,220
$
-
$
426,220
Restricted cash
134,739
-
134,739
Marketable securities
-
124,859
124,859
Inventories carried at market
-
72,320
72,320
Unrealized gains on derivatives
-
26,738
26,738
Other assets
Total assets measured at fair value
$
561,070
$
223,925
$
784,995
Liabilities:
Accounts payable (1)
$
-
$
12,617
$
12,617
Accrued and other liabilities (2)
-
3,260
3,260
Unrealized losses on derivatives
-
26,117
26,117
Other liabilities (2)
-
7,788
7,788
Total liabilities measured at fair value
$
-
$
49,782
$
49,782
Fair Value Measurements at December 31, 2020
Quoted Prices in
‎Active Markets for
‎Identical Assets
Significant Other
‎Observable Inputs
(Level 1)
(Level 2)
Total
Assets:
Cash and cash equivalents
$
233,860
$
-
$
233,860
Restricted cash
40,950
-
40,950
Inventories carried at market
-
77,900
77,900
Unrealized gains on derivatives
-
21,956
21,956
Other assets
Total assets measured at fair value
$
274,922
$
99,885
$
374,807
Liabilities:
Accounts payable (1)
$
-
$
19,355
$
19,355
Unrealized losses on derivatives
-
10,997
10,997
Total liabilities measured at fair value
$
-
$
30,352
$
30,352
(1)Accounts payable is generally stated at historical amounts with the exception of $12.6 million and $19.4 million at December 31, 2021 and 2020, respectively, related to certain delivered inventory for which the payable fluctuates based on changes in commodity prices. These payables are hybrid financial instruments for which the company has elected the fair value option.
(2)As of December 31, 2021, accrued and other liabilities includes $3.3 million and other liabilities includes $7.6 million of consideration related to potential earn-out payments recorded at fair value.
The fair value of the company’s debt was approximately $891.1 million compared with a book value of $722.7 million at December 31, 2021. The fair value of the company’s debt was approximately $535.9 million compared with a book value of $526.2 million at December 31, 2020. The company estimated the fair value of its outstanding debt using Level 2 inputs. The company believes the fair values of its accounts receivable approximated book value, which was $120.0 million and $55.6 million, respectively, at December 31, 2021 and 2020.
Although the company currently does not have any recurring Level 3 financial measurements, the fair values of tangible assets and goodwill acquired represent Level 3 measurements which were derived using a combination of the income approach, market approach and cost approach for the specific assets or liabilities being valued.
‎
7. SEGMENT INFORMATION
The company reports the financial and operating performance for the following three operating segments: (1) ethanol production, which includes the production of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities, and (3) partnership, which includes fuel storage and transportation services. Results for our previously reported food and ingredients segment are now included in the agribusiness and energy services segment. The food and ingredients segment had no activity in either 2021 or 2020 and minimal activity in 2019 that is included in the agribusiness and energy services segment.
Corporate activities include selling, general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment.
During the normal course of business, the operating segments conduct business with each other. For example, the agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains, Ultra-High Protein and corn oil for the ethanol production segment. The partnership segment provides fuel storage and transportation services for the ethanol production segment. These intersegment activities are treated like third-party transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment performance; however, they do not impact the company’s consolidated results since the revenues and corresponding costs are eliminated.
The following tables set forth certain financial data for the company’s operating segments, excluding amounts related to discontinued operations (in thousands):
Year Ended December 31,
Revenues:
Ethanol production:
Revenues from external customers
$
2,153,368
$
1,502,481
$
1,700,615
Intersegment revenues
-
Total segment revenues
2,153,368
1,502,581
1,700,715
Agribusiness and energy services:
Revenues from external customers
669,526
416,403
709,767
Intersegment revenues
21,958
27,468
27,184
Total segment revenues
691,484
443,871
736,951
Partnership:
Revenues from external customers
4,274
4,835
6,856
Intersegment revenues
74,178
78,510
75,531
Total segment revenues
78,452
83,345
82,387
Revenues including intersegment activity
2,923,304
2,029,797
2,520,053
Intersegment eliminations
(96,136)
(106,078)
(102,815)
Total Revenues
$
2,827,168
$
1,923,719
$
2,417,238
Refer to Note 4 - Revenue, for further disaggregation of revenue by operating segment.
Year Ended December 31,
Cost of goods sold:
Ethanol production
$
2,063,283
$
1,507,335
$
1,791,099
Agribusiness and energy services
657,375
409,407
697,752
Partnership
-
-
-
Intersegment eliminations
(95,549)
(104,579)
(103,904)
$
2,625,109
$
1,812,163
$
2,384,947
‎
Year Ended December 31,
Operating income (loss):
Ethanol production (1)
$
(27,996)
$
(129,618)
$
(178,575)
Agribusiness and energy services
17,458
15,773
22,701
Partnership
48,672
50,437
50,635
Intersegment eliminations
(587)
(1,400)
1,188
Corporate activities (2)
(12,039)
(57,888)
(38,519)
$
25,508
$
(122,696)
$
(142,570)
(1)Operating loss for the ethanol production segment for fiscal year 2020 includes a goodwill impairment charge of $24.1 million and $3.9 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant.
(2)Corporate activities for fiscal year 2021 include a $29.6 million net gain on sale of assets primarily from the sale of the Ord, Nebraska ethanol plant. Corporate activities for fiscal year 2020 include a $18.5 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant and a $1.5 million net gain from sale of GPCC.
Year Ended December 31,
Depreciation and amortization:
Ethanol production
$
82,969
$
67,956
$
63,073
Agribusiness and energy services
2,535
2,512
2,222
Partnership
3,737
3,806
3,441
Corporate activities
2,711
3,970
3,391
$
91,952
$
78,244
$
72,127
Year Ended December 31,
Capital expenditures:
Ethanol production
$
181,731
$
109,970
$
72,374
Agribusiness and energy services
2,896
1,195
2,251
Partnership
Corporate activities
1,976
1,542
$
187,271
$
111,799
$
76,472
The following table sets forth total assets by operating segment (in thousands):
Year Ended December 31,
Total assets (1):
Ethanol production
$
1,101,151
$
900,963
Agribusiness and energy services
487,164
378,720
Partnership
100,349
91,205
Corporate assets
524,206
228,074
Intersegment eliminations
(53,115)
(20,045)
$
2,159,755
$
1,578,917
(1)Asset balances by segment exclude intercompany balances.
‎
8. INVENTORIES
Inventories are carried at the lower of cost or net realizable value, except grain held for sale and fair-value hedged inventories. Commodities held for sale are reported at market value. As of December 31, 2021 and 2020, there were no lower of cost or market inventory adjustments recorded.
The components of inventories are as follows (in thousands):
December 31,
Finished goods
$
91,448
$
89,223
Commodities held for sale
72,320
40,147
Raw materials
50,604
90,800
Work-in-process
19,783
13,201
Supplies and parts
33,683
36,120
$
267,838
$
269,491
9. PROPERTY AND EQUIPMENT
The components of property and equipment are as follows (in thousands):
December 31,
Plant equipment
$
1,000,820
$
940,363
Buildings and improvements
180,713
170,813
Land and improvements
83,403
86,909
Railroad track and equipment
32,971
34,637
Construction-in-progress
111,745
48,378
Computer hardware and software
19,927
20,477
Office furniture and equipment
3,356
3,797
Leasehold improvements and other
27,609
26,510
Total property and equipment
1,460,544
1,331,884
Less: accumulated depreciation and amortization
(567,027)
(530,194)
Property and equipment, net
$
893,517
$
801,690
Interest capitalized during the years ended December 31, 2021, 2020 and 2019 totaled $7.3 million, $1.8 million and $1.9 million, respectively.
10. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The company has two reporting units, to which goodwill was assigned. We are required to perform impairment tests related to our goodwill annually, which we perform as of October 1, or sooner if an indicator of impairment occurs.
The partnership performed its annual goodwill assessment as of October 1, 2021 using a qualitative assessment, which resulted in no indication of goodwill impairment. Similarly, the ethanol production segment’s qualitative goodwill assessment resulted in no indication of goodwill impairment.
Near term industry outlook due to the significant decrease in crude oil prices, lower gasoline demand, general uncertainty due to the COVID-19 outbreak and the subsequent decline in our stock price caused a decline in the company’s market capitalization during the three months ended March 31, 2020. As such, the company determined a triggering event had occurred that required an interim impairment assessment for its ethanol production reporting unit. Due to the impairment indicators noted as a result of these triggering events, we evaluated our goodwill as of March 31, 2020. Significant assumptions inherent in the valuation methodologies for goodwill were employed and included, but were not limited to, prospective financial information, growth rates, discount rates, inflationary factors, and cost of capital. Based on our quantitative evaluation, we determined that the fair value of the ethanol production reporting unit did not exceed its carrying value. As a result, we concluded that the goodwill assigned to the ethanol production reporting unit was impaired and recorded a non-cash impairment charge of $24.1 million in 2020.
During the first half of 2020, a decline in the partnership’s stock price resulted in a decrease in the partnership’s market capitalization. As such, the company determined a triggering event had occurred that required an interim impairment assessment as of March 31, 2020 and June 30, 2020. Significant assumptions inherent in the valuation methodologies for goodwill impairment testing were employed and include market capitalization, prospective financial information, growth rates, discount rates, inflationary factors, and cost of capital. Based on the partnership’s quantitative evaluation as of March 31, 2020 and June 30, 2020, it was determined that the fair value of the partnership reporting unit substantially exceeded its carrying value, and the partnership concluded that the goodwill was not impaired. The company performed its annual goodwill assessment as of October 1, 2020, and given the quantitative work performed during previous quarters as described above, the partnership used a qualitative assessment, which resulted in no goodwill impairment in 2020.
Changes in the carrying amount of goodwill attributable to each business segment during the years ended December 31, 2021 and 2020 were as follows (in thousands):
Ethanol
Production
Partnership
Total
Balance, December 31, 2019
$
24,091
$
10,598
$
34,689
Impairment charge
(24,091)
-
(24,091)
Balance, December 31, 2020 (1)
-
10,598
10,598
FQT acquisition
18,534
-
18,534
Balance, December 31, 2021 (1)
$
18,534
$
10,598
$
29,132
(1)The company records goodwill within other assets on the consolidated balance sheets.
Intangible Assets
The company recognized certain customer relationships, intellectual property and trade names in connection with the FQT acquisition during the fourth quarter 2020. As of December 31, 2021, the company’s intangible asset balance related to FQT was $22.8 million, which primarily consisted of $17.7 million of customer relationship and backlog assets, $9.7 million of intellectual property and $1.3 million of trade name assets, net of $5.9 million of accumulated amortization, and has a remaining 11.5-year weighted-average amortization period. The company recognized $5.7 million of amortization expense associated with amortization of these intangible assets during fiscal year 2021, and expects estimated amortization expense of $4.8 million, $2.8 million, $2.5 million, $2.2 million and $2.0 million, respectively for the years ended December 31, 2022, 2023, 2024, 2025 and 2026, as well as $8.5 million thereafter. The company’s intangible assets are recorded within other assets on the consolidated balance sheets.
11. DERIVATIVE FINANCIAL INSTRUMENTS
At December 31, 2021, the company’s consolidated balance sheet reflected unrealized losses of $12.3 million, net of tax, in accumulated other comprehensive loss. The company expects these items will be reclassified as operating income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount realized in operating income will differ as commodity prices change.
Fair Values of Derivative Instruments
The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets where they are reported are as follows (in thousands):
Asset Derivatives'
Liability Derivatives'
Fair Value at December 31,
Fair Value at December 31,
Derivative financial instruments
$
26,738
$
21,956
(1)
$
26,117
(2)
$
10,997
(3)
Other assets
-
-
Other liabilities
-
-
-
Total
$
26,746
$
21,985
$
26,313
$
10,997
(1)At December 31, 2020, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of $3.3 million, which include $2.8 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.
(2)At December 31, 2021, derivative financial instruments, as reflected on the balance sheet, includes net unrealized losses on exchange traded futures and options contracts of $17.1 million, which include $1.3 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.
(3)At December 31, 2020, derivative financial instruments, as reflected on the balance sheet, includes net unrealized losses on exchange traded futures and options contracts of $9.3 million, none of which were designated as cash flow hedging instruments.
Refer to Note 6 - Fair Value Disclosures, which contains fair value information related to derivative financial instruments.
Effect of Derivative Instruments on Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income
The gains or losses recognized in income and other comprehensive income related to the company’s derivative financial instruments and the line items on the consolidated financial statements where they are reported are as follows (in thousands):
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Location of Gain (Loss) Reclassified from
Year Ended December 31,
Accumulated Other Comprehensive Income into Income
Revenues
$
(60,261)
$
5,538
$
-
Cost of goods sold
41,629
(2,115)
-
Net income from discontinued operations, net of income taxes
-
-
48,797
Net gain (loss) recognized in loss before tax
$
(18,632)
$
3,423
$
48,797
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
Gain (Loss) Recognized in
Year Ended December 31,
Other Comprehensive Income on Derivatives
Commodity Contracts
$
(32,036)
$
(1,025)
$
70,404
Location of Gain (Loss)
Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives Not Designated
Recognized in
Year Ended December 31,
as Hedging Instruments
Income on Derivatives
Commodity contracts
Revenues
$
(194,143)
$
(10,813)
$
(10,202)
Commodity contracts
Costs of goods sold
6,498
32,914
(2,442)
Commodity contracts
Net loss from discontinued operations, net of income taxes
-
-
(2,470)
$
(187,645)
$
22,101
$
(15,114)
The following amounts were recorded on the consolidated balance sheets related to cumulative basis adjustments for the fair value hedged items (in thousands):
December 31, 2021
December 31, 2020
Line Item in the Consolidated Balance Sheet in Which the Hedged Item is Included
Carrying Amount of the Hedged Assets
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Carrying Amount of the Hedged Assets
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Inventories
$
72,320
$
6,291
$
53,963
$
9,041
Effect of Cash Flow and Fair Value Hedge Accounting on the Statements of Operations
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2021
Revenue
Cost of
‎Goods Sold
Net Income from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:
Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income
$
(60,261)
$
41,629
$
-
Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged item
-
20,567
-
Derivatives designated as hedging instruments
-
(14,695)
-
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded
$
(60,261)
$
47,501
$
-
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2020
Revenue
Cost of
‎Goods Sold
Net Income from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:
Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income
$
5,538
$
(2,115)
$
-
Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged item
-
5,098
-
Derivatives designated as hedging instruments
-
(3,752)
-
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded
$
5,538
$
(769)
$
-
‎
Location and Amount of Gain Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2019
Revenue
Cost of
‎Goods Sold
Net Income from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:
Commodity contracts:
Amount of gain reclassified from accumulated other comprehensive income into income
$
-
$
-
$
48,797
Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged item
-
(844)
-
Derivatives designated as hedging instruments
-
4,254
-
Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded
$
-
$
3,410
$
48,797
There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the years ended December 31, 2021, 2020 and 2019.
The open commodity derivative positions as of December 31, 2021, are as follows (in thousands):
Exchange Traded
Non-Exchange Traded
Derivative Instruments
Net Long & (Short) (1)
Long (2)
(Short) (2)
Unit of Measure
Commodity
Futures
(28,280)
Bushels
Corn
Futures
6,375
(3)
Bushels
Corn
Futures
(8,065)
(4)
Bushels
Corn
Futures
(85,974)
Gallons
Ethanol
Futures
(18,900)
(3)
Gallons
Ethanol
Futures
(13,510)
mmBTU
Natural Gas
Futures
3,210
(3)
mmBTU
Natural Gas
Futures
(4,933)
(4)
mmBTU
Natural Gas
Futures
3,000
Pounds
Soybean Oil
Options
Tons
Soybean Meal
Options
71,754
Pounds
Soybean Oil
Options
26,643
Gallons
Ethanol
Forwards
57,697
(9)
Bushels
Corn
Forwards
3,248
(291,958)
Gallons
Ethanol
Forwards
(454)
Tons
Distillers Grains
Forwards
-
(136,594)
Pounds
Corn Oil
Forwards
12,576
(1,860)
mmBTU
Natural Gas
(1)Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.
(2)Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts.
(3)Futures used for cash flow hedges.
(4)Futures used for fair value hedges.
Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated statements of operations. Included in revenues are net gains of $1.1 million, $3.0 million, and $12.3 million for the years ended December 31, 2021, 2020 and 2019, respectively, on energy trading contracts.
12. DEBT
On January 1, 2021, the company early adopted the amended guidance in ASC 470-20, using the modified retrospective method of transition. The adoption of this guidance resulted in a $49.5 million decrease in additional paid-in capital, an $11.4 million increase in retained earnings and a $38.1 million increase in long-term debt, which included a $39.4 million increase in debt principal offset by a $1.3 million increase in debt issuance costs, resulting from amounts previously bifurcated to equity being reclassified to debt.
The components of long-term debt are as follows (in thousands):
December 31,
Corporate: (1)
2.25% convertible notes due 2027 (2)
$
230,000
$
-
4.00% convertible notes due 2024 (3)
64,000
89,125
4.125% convertible notes due 2022 (4)
34,316
156,441
Green Plains SPE LLC:
$125.0 million junior secured mezzanine notes due 2026 (5)
125,000
-
Green Plains Wood River and Green Plains Shenandoah:
$75.0 million delayed draw loan agreement (6)
30,000
30,000
Green Plains Partners:
$60.0 million credit facility (7) (8)
60,000
100,000
Other
15,531
15,936
Total book value of long-term debt
558,847
391,502
Unamortized debt issuance costs
(9,556)
(6,151)
Less: current maturities of long-term debt
(35,285)
(98,052)
Total long-term debt
$
514,006
$
287,299
(1)See discussion on early adoption of the amended guidance in ASC 470-20 above.
(2)Includes $6.5 million of unamortized debt issuance costs as of December 31, 2021.
(3)See discussion below regarding the exchange of convertible notes due in 2024. Includes $1.2 million and $2.2 million of unamortized debt issuance costs as of December 31, 2021 and 2020, respectively.
(4)See discussion below regarding the repurchase of convertible notes due in 2022. Includes $0.1 million and $1.3 million of unamortized debt issuance costs as of December 31, 2021 and 2020, respectively.
(5)Includes $0.9 million of unamortized debt issuance costs as of December 31, 2021.
(6)On September 3, 2020, Green Plains Wood River and Green Plains Shenandoah, wholly-owned subsidiaries of the company, entered into a $75.0 million delayed draw loan agreement. Includes $0.3 million of unamortized debt issuance costs as of December 31, 2021 and 2020.
(7)The Green Plains Partners credit facility was amended on July 20, 2021, reducing the total amount available to $60.0 million and includes $0.5 million and $2.3 million of unamortized debt issuance costs as of December 31, 2021 and 2020, respectively.
(8)On February 11, 2022, the credit facility was modified to allow Green Plains Partners and its affiliates to repurchase outstanding notes. 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 February 11, 2022, the term loan had a balance of $59.0 million.
Scheduled long-term debt repayments excluding the effects of any debt discounts and debt issuance costs, are as follows (in thousands):
Year Ending December 31,
Amount
$
35,411
1,838
65,832
1,829
186,827
Thereafter
267,110
Total
$
558,847
‎
The components of short-term notes payable and other borrowings are as follows (in thousands):
December 31,
Green Plains Trade:
$300.0 million revolver
$
137,208
$
79,251
Green Plains Grain:
$100.0 million revolver
20,000
38,700
$50.0 million inventory financing
-
-
Green Plains Commodity Management:
$40.0 million hedge line
16,210
21,682
Other
-
1,175
Total short-term notes payable and other borrowings
$
173,418
$
140,808
Corporate Activities
In March 2021, the company issued an aggregate $230.0 million of 2.25% convertible senior notes due in 2027, or the 2.25% notes. The 2.25% notes bear interest at a rate of 2.25% per year, payable on March 15 and September 15 of each year, beginning September 15, 2021, and mature on March 15, 2027. The 2.25% notes are senior, unsecured obligations of the company. The 2.25% notes are convertible, at the option of the holders, into consideration consisting of, at the company’s election, cash, shares of the company’s common stock, or a combination of cash and stock (and cash in lieu of fractional shares). However, before September 15, 2026, the 2.25% notes will not be convertible unless certain conditions are satisfied. The initial conversion rate is 31.6206 shares of the company’s common stock per $1,000 principal amount of 2.25% notes (equivalent to an initial conversion price of approximately $31.62 per share of the company’s common stock), representing an approximately 37.5% premium over the offering price of the company’s common stock. The conversion rate is subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. In addition, the company may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including the company’s calling the 2.25% notes for redemption.
On and after March 15, 2024, and prior to the maturity date, the company may redeem, for cash, all, but not less than all, of the 2.25% notes if the last reported sale price of the company’s common stock equals or exceeds 140% of the applicable conversion price on (i) at least 20 trading days during a 30 consecutive trading day period ending on the trading day immediately prior to the date the company delivers notice of the redemption; and (ii) the trading day immediately before the date of the redemption notice. The redemption price will equal 100% of the principal amount of the 2.25% notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, upon the occurrence of a “fundamental change” (as defined in the indenture for the 2.25% notes), holders of the 2.25% notes will have the right, at their option, to require the company to repurchase their 2.25% notes for cash at a price equal to 100% of the principal amount of the 2.25% notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
During June 2019, the company issued an aggregate $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 of the company, 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 4.00% notes will mature on July 1, 2024, unless earlier converted, redeemed or repurchased. The 4.00% notes will be convertible, at the option of the holders, into consideration consisting of, at the company’s election, cash, shares of the company’s common stock, or a combination of cash and shares of the company’s common stock until the close of business on the scheduled trading day immediately preceding the maturity date. However, before January 1, 2024, the 4.00% notes will not be convertible unless certain conditions are satisfied. The initial conversion rate is 64.1540 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $15.59 per share. The conversion rate will be subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering. In addition, the company may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including the company’s calling the 4.00% notes for redemption.
On and after July 1, 2022, and prior to the maturity date, the company may redeem all, but not less than all, of the 4.00% notes for cash if the sale price of the company’s common stock equals or exceeds 140% of the applicable conversion price for a specified time period ending on the trading day immediately prior to the date the company delivers notice of the redemption. The redemption price will equal 100% of the principal amount of the 4.00% notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, upon the occurrence of a fundamental change,
holders of the 4.00% notes will have the right, at their option, to require the company to repurchase the 4.00% notes in cash at a price equal to 100% of the principal amount of the 4.00% notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
During May 2021, the company entered into a privately negotiated agreement with certain noteholders of the company’s 4.00% notes. Under this agreement, 3,568,705 shares of the company’s common stock were exchanged for $51.0 million in aggregate principal amount of the 4.00% notes. Common stock held as treasury shares were exchanged for the 4.00% notes. Pursuant to the guidance within ASC 470, Debt, the company recorded a loss of $9.5 million which was recorded as a charge to interest expense in the consolidated financial statements during the year ended December 31, 2021, of which $1.2 million related to unamortized debt issuance costs.
In August 2016, the company issued $170.0 million of 4.125% convertible senior notes due in 2022, or the 4.125% notes. The 4.125% notes are senior, unsecured obligations of the company, with interest payable on March 1 and September 1 of each year. The company may settle the 4.125% notes in cash, common stock or a combination of cash and common stock. Prior to March 1, 2022, the 4.125% notes are not convertible unless certain conditions are satisfied. The initial conversion rate is 35.7143 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $28.00 per share. The conversion rate will be subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; the event of a cash dividend or distribution; or a tender or exchange offering.
The company may redeem all, but not less than all, of the 4.125% notes at any time on or after September 1, 2020, if the company’s common stock equals or exceeds 140% of the applicable conversion price for a specified time period ending on the trading day immediately prior to the date the company delivers notice of the redemption. The redemption price will equal 100% of the principal plus any accrued and unpaid interest. Holders of the 4.125% notes have the option to require the company to repurchase the 4.125% notes in cash at a price equal to 100% of the principal plus accrued and unpaid interest when there is a fundamental change, such as change in control. If an event of default occurs, it could result in the 4.125% notes being declared due and payable.
In March 2021, concurrent with the issuance of the 2.25% notes, the company used approximately $156.5 million of the net proceeds of the 2.25% notes to repurchase approximately $135.7 million aggregate principal amount of the 4.125% notes, in privately negotiated transactions. Pursuant to the guidance within ASC 470, Debt, the company recorded a loss upon extinguishment of $22.1 million in interest expense. This charge included $1.2 million of unamortized debt issuance costs related to the principal balance extinguished.
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 (the “Junior Notes”) with BlackRock, a holder of a portion of the company’s common stock, for the purchase of all notes issued.
The Junior Notes will mature on February 9, 2026 and are secured by a pledge of the membership interests in and the real property owned by Green Plains Obion and Green Plains Mount Vernon. The proceeds of the Junior Notes will be used to construct high protein processing systems at the Green Plains Obion and Green Plains Mount Vernon facilities. The Junior Notes accrue interest at an annual rate of 11.75%. However, subject to the satisfaction of certain conditions, the Green Plains SPE LLC may elect to pay an amount in cash equal to interest accruing at a rate of 6.00% per annum plus an amount equal to interest accruing at a rate of 6.75% per annum to be paid in kind. The entire outstanding principal balance, plus any accrued and unpaid interest is due upon maturity. Green Plains SPE LLC is required to comply with certain financial covenants regarding minimum liquidity at Green Plains and a maximum aggregate loan to value. The Junior Notes can be retired or refinanced after 42 months with no prepayment premium. The Junior Notes have an unsecured parent guarantee from the company and have certain limitations on distributions, dividends or loans to the company unless there will not exist any event of default. Funds associated with the Junior Notes are administered by a trustee and are included in the balance of restricted cash as of December 31, 2021.
On September 3, 2020, Green Plains Wood River and Green Plains Shenandoah, wholly-owned subsidiaries of the company, entered into a delayed draw loan agreement with MetLife Real Estate Lending LLC. The $75.0 million delayed draw loan matures on September 1, 2035 and is secured by substantially all of the assets of the Wood River and Shenandoah facilities. The proceeds from the loan will be used to add high protein processing systems at the Wood River and Shenandoah facilities as well as other capital expenditures.
‎
The delayed draw loan bears interest at a fixed rate of 5.02%, plus an interest rate premium of 1.5% until the loan is fully drawn, which must occur within the 18 month draw period. After the earlier of the 18 month draw period or the loan being fully drawn, the interest rate premium may be adjusted quarterly from 0.00% to 1.50% based on the leverage ratio of total funded debt to EBITDA of Wood River and Shenandoah. Principal payments of $1.5 million per year begin 24 months from the closing date. Prepayments are prohibited until September 2024. Financial covenants of the delayed draw loan agreement include a minimum loan to value ratio of 50%, a minimum fixed charge coverage ratio of 1.25x commencing on June 30, 2021, a total debt service reserve of six months of future principal and interest payments and a minimum working capital requirement at Green Plains of not less than $0.10 per gallon of nameplate capacity or $95.8 million. The loan is guaranteed by the company and has certain limitations on distributions, dividends or loans to Green Plains by Wood River and Shenandoah unless immediately after giving effect to such action, there will not exist any event of default.
The company also has small equipment financing loans, finance leases on equipment or facilities, and other forms of debt financing.
Agribusiness and Energy Services Segment
Green Plains Trade has a $300.0 million senior secured asset-based revolving credit facility to finance working capital for marketing and distribution activities based on eligible collateral equal to the sum of percentages of eligible receivables and inventories, less miscellaneous adjustments. The credit facility matures on July 28, 2022 and consists of a $285 million credit facility and a $15 million first-in-last-out (FILO) credit facility and includes an accordion feature that enables the credit facility to be increased by up to $70.0 million with agent approval. Advances are subject to variable interest rates equal to daily LIBOR plus 2.25% on the credit facility and daily LIBOR plus 3.25% on the FILO credit facility. The total unused portion of the revolving credit facility is also subject to a commitment fee of 0.375% per annum.
The terms impose affirmative and negative covenants for Green Plains Trade, including maintaining a minimum fixed charge coverage ratio of 1.15 to 1.00. Capital expenditures are limited to $1.5 million per year under the credit facility. The credit facility also restricts distributions related to capital stock, with an exception for distributions up to 50% of net income if, on a pro forma basis, (a) average availability has been greater than $10.0 million for the last 30 days and (b) the borrower would be in compliance with the fixed charge coverage ratio on the distribution date.
Green Plains Grain has a $100.0 million senior secured asset-based revolving credit facility, which matures on June 28, 2022. The credit facility finances working capital up to the maximum commitment based on eligible collateral equal to the sum of percentages of eligible cash, receivables and inventories, less miscellaneous adjustments. Advances are subject to an interest rate equal to LIBOR plus 3.00% or the lenders’ base rate plus 2.00%. The credit facility also includes an accordion feature that enables the facility to be increased by up to $75.0 million with agent approval. The credit facility can also be increased by up to $50.0 million for seasonal borrowings. Total commitments outstanding cannot exceed $225.0 million. Depending on utilization, the total unused portion of the $100.0 million revolving credit facility is also subject to a commitment fee ranging from 0.375% to 0.50%.
Lenders receive a first priority lien on certain cash, inventory, accounts receivable and other assets owned by Green Plains Grain. The terms impose affirmative and negative covenants for Green Plains Grain, including maintaining minimum working capital to be the greater of (i) $18,000,000 and (ii) 18% of the sum of the then total commitment plus the aggregate seasonal line commitments. Minimum tangible net worth is required to be greater than 21% of the sum of the then total commitment plus the aggregate seasonal line commitments. The credit facility also requires the company to maintain a maximum annual leverage of 6.00 to 1.00. Capital expenditures are limited to $8.0 million per year under the credit facility, plus equity contributions from the company and unused amounts of up to $8.0 million from the previous year. In addition, if the company has long-term indebtedness on the date of calculation of greater than $10.0 million, the credit facility requires the company to maintain a minimum fixed charge coverage ratio of 1.25 to 1.00 and a maximum long term debt capitalization of 40%.
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 agreements as short-term notes, rather than sales, and has elected the fair value option to offset fluctuations in market prices of the inventory. The company had no short-term notes payable related to these inventory financing agreements as of December 31, 2021.
The Green Plains Grain and Green Plains Trade credit facilities will mature in June and July, 2022 respectively, unless extended by agreement of the lenders or replaced by another funding source. While we have not yet finalized negotiations to replace these credit facilities, we believe it is probable that we will source appropriate funding prior to maturity given our history of obtaining working capital financing on reasonable commercial terms. In the unlikely scenario that we are unable to refinance the facilities with the lenders prior to its maturity, we will consider other financing sources.
Green Plains Commodity Management has an uncommitted $40.0 million revolving credit facility which matures April 2023, to finance margins related to its hedging programs. Advances are subject to variable interest rates equal to SOFR plus 1.75%.
Partnership Segment
Green Plains Partners has a term loan to fund working capital, capital expenditures and other general partnership purposes. On July 20, 2021, the prior credit facility was amended decreasing the total amount available to $60.0 million, extending the maturity from December 31, 2021 to July 20, 2026, and converting the credit facility to a term loan. Under the terms of the amended agreement, BlackRock purchased the outstanding $50.0 million balance of the prior credit facility from the previous lenders. Interest on the amended term loan is based on 3-month LIBOR plus 8.00%, with a 0% LIBOR floor. Interest is payable on the 15th day of each March, June, September and December during the term with the first interest payment being September 15, 2021. The amended term loan does not require any principal payments; however, the partnership has the option to prepay $1.5 million per quarter beginning twelve months after the closing date.
During the year ended December 31, 2021, prior to the amendment, the partnership made principal payments of $50.0 million on the prior credit facility, including $19.5 million of scheduled repayments, $27.5 million related to the sale of the storage assets located adjacent to the Ord, Nebraska ethanol plant and a $3.0 million prepayment made with excess cash.
The partnership’s obligations under the term loan are secured by a first priority lien on (i) the equity interests of the partnership’s present and future subsidiaries, (ii) all of the partnership’s present and future personal property, such as investment property, general intangibles and contract rights, including rights under any agreements with Green Plains Trade, (iii) all proceeds and products of the equity interests of the partnership’s present and future subsidiaries and its personal property and (iv) substantially all of the partnership’s real property and material leases of real property. The terms impose affirmative and negative covenants, including restrictions on the partnership’s ability to incur additional debt, acquire and sell assets, create liens, invest capital, pay distributions and materially amend the partnership’s commercial agreements with Green Plains Trade. The term loan also requires the partnership to maintain a maximum consolidated leverage ratio and a minimum consolidated debt service coverage ratio, each of which is calculated on a pro forma basis with respect to acquisitions and divestitures occurring during the applicable period. The maximum consolidated leverage ratio required, as of the end of any fiscal quarter, is no more than 2.50x. The minimum debt service coverage ratio required, as of the end of any fiscal quarter, is no less 1.10x. The consolidated leverage ratio is calculated by dividing total funded indebtedness by the sum of the four preceding fiscal quarters’ consolidated EBITDA. The consolidated debt service coverage ratio is calculated by taking the sum of the four preceding fiscal quarters’ consolidated EBITDA minus income taxes and consolidated capital expenditures for such period divided by the sum of the four preceding fiscal quarters’ consolidated interest charges plus consolidated scheduled funded debt payments for such period.
Under the amended terms of the loan, the partnership has no restrictions on the amount of quarterly distribution payments, so long as (i) no default has occurred and is continuing, or would result from payment of the distribution, and (ii) the partnership and its subsidiaries are in compliance with its financial covenants and remain in compliance after payment of the distribution. The term loan is not guaranteed by the company.
Covenant Compliance
The company was in compliance with its debt covenants as of December 31, 2021.
Restricted Net Assets
At December 31, 2021, there were approximately $109.2 million of net assets at the company’s subsidiaries that could not be transferred to the parent company in the form of dividends, loans or advances due to restrictions contained in the credit facilities of these subsidiaries.
13. STOCK-BASED COMPENSATION
On May 6, 2020, the shareholders of the company approved the 2019 Equity Incentive Plan which granted an additional 1.6 million shares of common stock for stock-based compensation. All shares remaining under the 2009 Equity Incentive Plan rolled into the 2019 Equity Incentive Plan effective May 6, 2020. The 2019 Equity Inventive Plan reserves 5.7 million shares of common stock for issuance to its directors and employees. The plan provides for shares, including options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, restricted stock, performance share awards, and restricted and deferred stock unit awards, to be granted to eligible employees, non-employee directors and consultants. The company measures stock-based compensation at fair value on the grant date, with no adjustments for
estimated forfeitures. The company records noncash compensation expense related to equity awards in its consolidated financial statements over the requisite period on a straight-line basis.
Grants under the equity incentive plans may include stock options, stock awards, performance share awards or deferred stock units:
Restricted Stock Awards - Restricted stock awards may be granted to directors and employees that vest immediately or over a period of time as determined by the compensation committee. Stock awards granted to date vested immediately and over a period of time, and included sale restrictions. Compensation expense is recognized on the grant date if fully vested or over the requisite vesting period.
Deferred Stock Units - Deferred stock units may be granted to directors and employees that vest immediately or over a period of time as determined by the compensation committee. Deferred stock units granted to date vest over a period of time with underlying shares of common stock that are issuable after the vesting date. Compensation expense is recognized on the grant date if fully vested, or over the requisite vesting period.
Performance Share Awards - Performance share awards may be granted to directors and employees that cliff-vest after a period of time as determined by the compensation committee. Performance share awards granted to date cliff-vest after a period of time, and included sale restrictions. Compensation expense is recognized over the requisite vesting period.
Stock Options - Stock options may be granted that can be exercised immediately in installments or at a fixed future date. Certain options are exercisable regardless of employment status while others expire following termination. Options issued to date could have been exercised immediately or at future vesting dates, and expired five years to eight years after the grant date. Compensation expense for stock options that vest over time is recognized on a straight-line basis over the requisite service period.
Restricted Stock Awards and Deferred Stock Units
The non-vested restricted stock award and deferred stock unit activity for the year ended December 31, 2021, are as follows:
Non-Vested
‎Shares and
‎Deferred
‎Stock Units
Weighted-
‎Average Grant-
‎Date Fair Value
Weighted-Average
‎Remaining
‎Vesting Term
‎(in years)
Non-Vested at December 31, 2020
1,028,739
$
9.15
Granted
357,844
27.38
Forfeited
(118,814)
15.07
Vested
(474,432)
12.23
Non-Vested at December 31, 2021
793,337
$
14.64
1.9
Performance Share Awards
On February 18, 2021 and March 18, 2020, the board of directors granted performance shares to be awarded in the form of common stock to certain participants of the plan. These performance shares vest based on the level of achievement of certain performance goals, including the incremental value achieved from the company’s high-protein initiatives, annual production levels and return on investment (ROI). Performance shares granted in 2021 and 2020 do not contain market-based factors requiring a Monte Carlo valuation model. The performance shares were granted at a target of 100%, but each performance share will reduce or increase depending on results for the performance period. If the company achieves the maximum performance goals, the maximum amount of shares available to be issued pursuant to the 2021 and 2020 awards are 917,757 performance shares which represents approximately 273% of the 336,222 performance shares which remain outstanding. The actual number of performance shares that will ultimately vest is based on the actual performance targets achieved at the end of the performance period.
On February 19, 2019 and March 19, 2018, the board of directors granted performance shares to be awarded in the form of common stock to certain participants of the plan. These performance shares vest based on the company’s average return on net assets (RONA) and the company’s total shareholder return (TSR), as further described herein. The performance shares vest on the third anniversary of the grant, if the RONA and TSR criteria are achieved and the participant is then employed by the company. Fifty percent of the performance shares vest based upon the company’s ability to achieve a predetermined
RONA during the three year performance period. The remaining fifty percent of the performance shares vest based upon the company’s total TSR during the three year performance period relative to that of the company’s performance peer group.
The performance shares were granted at a target of 100%, but each performance share will reduce or increase depending on results for the performance period for the company's RONA, and the company’s TSR relative to that of the performance peer group. On March 19, 2021, based on criteria discussed above, the 2018 performance shares vested at a target of 75%. If the company’s RONA and TSR achieve the maximum goals, the maximum amount of shares available to be issued pursuant to the 2019 awards are 224,900 performance shares or 150% of the 149,933 performance shares which remain outstanding. The actual number of performance shares that will ultimately vest is based on the actual percentile ranking of the company’s RONA, and the company’s TSR compared to the peer performance at the end of the performance period.
For performance shares which include market based factors, the company uses the Monte Carlo valuation model to estimate the fair value of the performance shares on the date of the grant. The weighted average assumptions used by the company in applying the Monte Carlo valuation model for performance share grants and related valuation are illustrated in the following table:
FY 2019 Performance Awards
Risk-free interest rate
2.45
%
Dividend yield
3.13
%
Expected volatility
41.69
%
Monte Carlo valuation
99.62
%
Closing stock price on the date of grant
$
15.34
The non-vested performance share award activity for the year ended December 31, 2021, is as follows:
Performance
‎Shares
Weighted-
‎Average Grant-
‎Date Fair Value
Weighted-Average
‎Remaining
‎Vesting Term
‎(in years)
Non-Vested at December 31, 2020
517,969
$
10.82
Granted
183,316
26.41
Forfeited
(127,215)
16.65
Vested
(87,915)
17.68
Non-Vested at December 31, 2021
486,155
$
13.93
2.0
Stock Options
The fair value of the stock options is estimated on the date of the grant using the Black-Scholes option-pricing model, a pricing model acceptable under GAAP. The expected life of the options is the period of time the options are expected to be outstanding. The company did not grant any stock option awards during the years ended December 31, 2021, 2020 and 2019.
Green Plains Partners
Green Plains Partners has a long-term incentive plan (LTIP) intended to promote the interests of the partnership, its general partner and affiliates by providing unit-based incentive compensation awards to employees, consultants and directors to encourage superior performance. The LTIP reserves 2,500,000 common limited partner units for issuance in the form of options, restricted units, phantom units, distribution equivalent rights, substitute awards, unit appreciation rights, unit awards, profit interest units or other unit-based awards. The partnership measures unit-based compensation related to equity awards in its consolidated financial statements over the requisite service period on a straight-line basis.
‎
The non-vested unit-based awards activity for the year ended December 31, 2021, are as follows:
Non-Vested
‎Shares and
‎Deferred
‎Stock Units
Weighted-
‎ Average
‎ Grant-Date
‎Fair Value
Weighted-Average
‎Remaining
‎Vesting Term
‎(in years)
Non-Vested at December 31, 2020
47,620
$
6.72
Granted
25,976
12.32
Forfeited
(6,494)
12.32
Vested
(47,620)
6.72
Non-Vested at December 31, 2021
19,482
$
12.32
0.5
Stock-Based and Unit-Based Compensation Expense
Compensation costs for stock-based and unit-based payment plans during the years ended December 31, 2021, 2020 and 2019, were approximately $6.1 million, $7.9 million and $9.7 million, respectively. At December 31, 2021, there were $9.2 million of unrecognized compensation costs from stock-based and unit-based compensation related to non-vested awards. This compensation is expected to be recognized over a weighted-average period of approximately 1.9 years. The potential tax benefit related to stock-based payment is approximately 24.3% of these expenses.
14. EARNINGS PER SHARE
Basic earnings per share, or EPS, is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period.
The company computed diluted EPS by dividing net income on an if-converted basis, adjusted to add back net interest expense related to the convertible debt instruments, by the weighted average number of common shares outstanding during the period, adjusted to include the shares that would be issued if the convertible debt instruments were converted to common shares and the effect of any outstanding dilutive securities. In addition, due to the presentation of GPCC as discontinued operations, the company has presented basic and diluted earnings per share from both continuing operations and from discontinued operations.
The basic and diluted EPS are calculated as follows (in thousands):
Year Ended December 31,
Basic EPS:
Net loss from continuing operations (1)
$
(65,992)
$
(108,775)
$
(167,689)
Net income from discontinued operations
-
-
Net loss attributable to Green Plains
$
(65,992)
$
(108,775)
$
(166,860)
Weighted average shares outstanding - basic
46,652
34,631
38,111
EPS from continuing operations - basic
$
(1.41)
$
(3.14)
$
(4.40)
EPS from discontinued operations - basic
-
-
0.02
EPS - basic
$
(1.41)
$
(3.14)
$
(4.38)
Diluted EPS: (2)
Net loss from continuing operations (1)
$
(65,992)
$
(108,775)
$
(167,689)
Net income from discontinued operations
-
-
Net loss attributable to Green Plains
$
(65,992)
$
(108,775)
$
(166,860)
Weighted average shares outstanding - basic
46,652
34,631
38,111
Effect of dilutive convertible debt:
Effect of dilutive stock-based compensation awards
-
-
-
Weighted average shares outstanding - diluted
46,652
34,631
38,111
EPS from continuing operations - diluted
$
(1.41)
$
(3.14)
$
(4.40)
EPS from discontinued operations - diluted
-
-
0.02
EPS - diluted
$
(1.41)
$
(3.14)
$
(4.38)
Anti-dilutive weighted-average convertible debt and stock-based compensation (3)
12,952
14,089
10,560
(1)Net loss from continuing operations can be recalculated from the consolidated statements of operations by taking the net loss from continuing operations including noncontrolling interest less net income attributable to noncontrolling interests.
(2)The effect related to interest and amortization on convertible debt on an if converted basis has been excluded from diluted EPS for the periods presented as the inclusion of these effects would have been antidilutive.
(3)The effect related to the company’s convertible debt and certain stock-based compensation awards has been excluded from diluted EPS for the periods presented as the inclusion of these shares would have been antidilutive.
15. STOCKHOLDERS’ EQUITY
Early Adoption of ASC 470-20
On January 1, 2021, the company early adopted the amended guidance in ASC 470-20, using the modified retrospective method of transition. The adoption of this guidance resulted in a $49.5 million decrease in additional paid-in capital, an $11.4 million increase in retained earnings and a $38.1 million increase in long-term debt, which included a $39.4 million increase in debt principal offset by a $1.3 million increase in debt issuance costs, resulting from amounts previously bifurcated to equity being reclassified to debt.
Upon adoption of amended guidance in ASC 470-20, the company reversed the remaining deferred tax liability of $9.2 million associated to the equity portion of previously issued convertible debt. As the company had recorded a full valuation allowance against its deferred tax assets, the reversal of the $9.2 million deferred tax liability would require an increase to the existing valuation allowance by the same amount, which would normally be recorded through current income tax expense. However, because the change in the deferred tax liability is directly linked to the adoption of ASC 470-20, which is accounted for as a cumulative effect adjustment, the required increase to the valuation allowance is recorded as part of the cumulative adjustment to stockholders’ equity and has no effect on the income statement.
Public Offerings of Common Stock
On March 1, 2021, the company completed an offering of 8,751,500 shares of our common stock, par value $0.001 per share, in a public offering at a price of $23.00 per share (the “March Common Stock Offering”). The March Common Stock Offering resulted in net proceeds of $191.1 million, after deducting underwriting discounts and commissions and the company’s offering expenses.
On August 9, 2021, the company completed an offering of 5,462,500 shares of our common stock, par value $0.001 per share, in a public offering at a price of $32.00 per share (the “August Common Stock Offering”). The August Common Stock Offering resulted in net proceeds of $164.9 million, after deducting underwriting discounts and commissions and the company’s offering expenses.
Warrants
During the three months ended March 31, 2021, in connection with certain agreements, the company issued warrants to purchase shares of its common stock. The company measures the fair value of the warrants using the Black-Scholes option pricing model as of the issuance date. Exercisable warrants are equity based and recorded as a reduction in additional paid-in capital.
The company has reserved 2,550,000 shares of common stock for the exercise of warrants to non-employees, of which 2,275,000 are exercisable, treated as equity based awards and recorded as a reduction in additional paid-in capital. The remaining 275,000 warrants, of which 55,555 are exercisable as a result of achieving certain earn-out provisions and 219,445 are contingent upon certain earn-out provisions, are treated as liability based awards, and valued quarterly using the company’s stock price. These warrants could potentially dilute basic earnings per share in future periods. The exercise price of the warrants is $22.00 and expiration dates are December 8, 2025 for 275,000 warrants, February 9, 2026 for 275,000 warrants and April 28, 2026 for 2,000,000 warrants.
Convertible Note Exchange
On May 18, 2021, the company closed on a privately negotiated exchange agreement with certain noteholders of the company’s 4.00% notes, pursuant to which the noteholders agreed to exchange $51.0 million in aggregate principal for 3,568,705 shares of the company’s common stock at an implied price of $26.80.
Treasury Stock
The company holds 8.2 million shares of its common stock at a cost of $91.6 million. Treasury stock is recorded at cost
and reduces stockholders’ equity in the consolidated balance sheets. When shares are reissued, the company will use the weighted average cost method for determining the cost basis. The difference between the cost and the issuance price is added or deducted from additional paid-in capital.
Share Repurchase Program
The company’s board of directors authorized a share repurchase program of up to $200.0 million. Under the program, the company may repurchase shares in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers or by other means. The timing and amount of repurchase transactions are determined by its management based on market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice. The company repurchased 880,979 shares of common stock for approximately $11.5 million during 2020. The company did not repurchase any shares of common stock during 2021. Since inception, the company has repurchased 7,396,936 shares of common stock for approximately $92.8 million under the program.
Dividends
On June 18, 2019, the company announced that its board of directors decided to suspend its future quarterly cash dividend following the June 14, 2019 dividend payment, in order to retain and redirect cash flow to the company’s Project 24 operating expense equalization plan, the deployment of high-protein technology and its stock repurchase program.
For each calendar quarter commencing with the quarter ended September 30, 2015, the partnership agreement provides for a quarterly distribution to be paid within 45 days after the end of the quarter, provided the partnership has sufficient available cash. Available cash generally means, all cash and cash equivalents on hand at the end of that quarter less cash reserves established by the general partner of the partnership plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the end of that quarter. On January 20, 2022, the board of directors of the general partner of the partnership declared a cash distribution of $0.44 per unit on outstanding common units. The distribution is payable on February 11, 2022, to unitholders of record at the close of business on February 4, 2022.
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income are associated primarily with gains and losses on derivative financial instruments. Amounts reclassified from accumulated other comprehensive income are as follows (in thousands):
Year Ended December 31,
Statements of Operations
Classification
Gains (losses) on cash flow hedges:
Commodity derivatives
$
(60,261)
$
5,538
$
-
(1)
Commodity derivatives
41,629
(2,115)
-
(2)
Total gains (losses) on cash flow hedges from continuing operations
(18,632)
3,423
-
(3)
Gains (losses) on cash flow hedges from discontinued operations, net of income taxes
-
-
38,795
(4)
Income tax expense (benefit)
(4,540)
-
(5)
Amounts reclassified from accumulated other comprehensive income (loss)
$
(14,092)
$
2,566
$
38,795
(1)Revenues
(2)Costs of goods sold
(3)Loss from continuing operations before income taxes and income from equity method investees
(4)Net income from discontinued operations, net of income taxes
(5)Income tax (expense) benefit
At December 31, 2021 and 2020, the company’s consolidated balance sheets reflected unrealized losses of $12.3 million and $2.2 million, net of tax, in accumulated other comprehensive loss, respectively.
‎
16. INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases, and net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted rates expected to be applicable to taxable income in the years those temporary differences are recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income during the period that includes the enactment date. A valuation allowance is recorded by the company when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Green Plains Partners is a limited partnership, which is treated as a flow-through entity for federal income tax purposes and is not subject to federal income taxes. As a result, the consolidated financial statements do not reflect such income taxes on pretax income or loss attributable to the noncontrolling interest in the partnership.
Upon adoption of amended guidance in ASC 470-20, during the first quarter of 2021, the company reversed the remaining deferred tax liability of $9.2 million associated to the equity portion of previously issued convertible debt. As the company had recorded a full valuation allowance against its deferred tax assets, the reversal of the $9.2 million deferred tax liability would require an increase to the existing valuation allowance by the same amount which would normally be recorded through current income tax expense. However, as the change in the deferred tax liability is directly linked to the adoption of ASC 470-20, which is accounted for as a cumulative effect adjustment, the required increase to the valuation allowance is recorded as part of the cumulative adjustment to stockholders’ equity and has no effect on the consolidated statements of operations.
The CARES Act was signed into law on March 27, 2020. The CARES Act includes several significant business tax provisions including elimination of the taxable limit for certain net operating losses (“NOL”), allowing businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior tax years, accelerating refunds of previously generated corporate AMT credits, and loosening the business interest limitation under §163(j) from 30% to 50%. For 2021, the business interest limitation under §163(j) reverts back to 30%. The CARES Act also contains an employee retention credit to encourage employers to maintain headcounts even if employees cannot report to work because of issues related to COVID-19. In the second quarter of 2020, the company filed its preliminary 2019 federal income tax return, as well as a refund claim with the IRS to carry back our 2019 NOL to prior years. In the fourth quarter of 2020 the company filed its final 2019 federal income tax return and updated our 2019 NOL. For the year ended December 31, 2020, the company recorded an income tax benefit of $41.6 million related to the CARES Act including adjustments to certain valuation allowances. No additional tax benefit was recorded related to the CARES Act during the year ended December 31, 2021.
Income tax expense (benefit) consists of the following (in thousands):
Year Ended December 31,
Current
$
$
(37,047)
$
(2,177)
Deferred
1,233
(13,336)
(18,881)
Total
1,845
(50,383)
(21,058)
Less: Income tax expense - discontinued operations
-
-
Income tax expense (benefit) - continuing operations
$
1,845
$
(50,383)
$
(21,316)
‎
Differences between income tax expense from continuing operations at the statutory federal income tax rate and as presented on the consolidated statements of operations are summarized as follows (in thousands):
Year Ended December 31,
Tax expense at federal statutory rate
$
(8,883)
$
(33,698)
$
(36,317)
State income tax expense (benefit), net of federal benefit
(802)
(7,839)
Nondeductible compensation
1,037
Noncontrolling interests
(4,587)
(4,015)
(3,961)
Unrecognized tax benefits
(170)
(28)
R&D credits
-
-
(323)
Increase in valuation allowance
15,301
6,279
25,314
Disposition of subsidiary
-
-
(373)
Stock compensation
(1,954)
Amended return adjustments
-
(19,786)
-
Other
1,016
Income tax expense (benefit)
$
1,845
$
(50,383)
$
(21,316)
Significant components of deferred tax assets and liabilities are as follows (in thousands):
December 31,
Deferred tax assets:
Net operating loss carryforwards - Federal
$
14,857
$
11,670
Net operating loss carryforwards - State
12,147
10,875
Tax credit carryforwards - Federal
64,081
64,081
Tax credit carryforwards - State
7,281
7,369
Derivative financial instruments
4,728
-
Deferred revenue
Interest expense carryforward
12,063
6,609
Investment in partnerships
43,244
45,519
Inventory valuation
1,259
Stock-based compensation
1,312
1,439
Accrued expenses
4,511
5,351
Leases
8,885
7,958
Organizational and start-up costs
1,047
Other
Total
176,026
162,694
Valuation allowance
(69,834)
(43,336)
Total deferred tax assets
106,192
119,358
Deferred tax liabilities:
Convertible debt
-
(9,154)
Fixed assets
(100,166)
(104,364)
Derivative financial instruments
-
(724)
Right-of-use assets
(6,026)
(5,116)
Total deferred tax liabilities
(106,192)
(119,358)
Deferred income taxes
$
-
$
-
At December 31, 2021, the company has federal R&D credits of $67.8 million which will begin to expire in 2033. The company also has $7.3 million of state credits which will expire beginning in 2022. The company has federal net operating losses of $14.9 million which do not have an expiration date.
The company increased the valuation allowance associated with its net deferred tax assets due to uncertainty that it will realize these assets in the future. The valuation allowance on deferred tax assets was recognized as a result of negative evidence, including cumulative losses in recent years, outweighing the more subjective positive evidence. Management considers whether it is more likely than not that some or all of the deferred tax assets will be realized, which is dependent on the generation of future taxable income and other tax attributes during the periods those temporary differences become
deductible. Scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies are considered to make this assessment. The company will continue to regularly assess the realizability of deferred tax assets. Changes in earnings performance and future earnings projections, among other factors, may cause the company to adjust its valuation allowance on deferred tax assets, which would impact the company’s results of operations in the period it is determined that these factors have changed.
The company’s federal income tax returns for the tax years ended December 31, 2014, 2017 and 2018 are currently under audit. The company’s federal returns for the tax years ended December 31, 2015, 2016, 2019 and 2020 are still subject to audit.
A reconciliation of unrecognized tax benefits is as follows (in thousands):
Unrecognized Tax Benefits
Balance at December 31, 2020
$
51,569
Reduction for prior year tax positions
(215)
Balance at December 31, 2021
$
51,354
Recognition of these tax benefits would favorably impact the company’s effective tax rate. Unrecognized tax benefits were recorded as a reduction of the deferred asset associated with the federal tax credit carryforwards. Interest and penalties associated with uncertain tax positions are accrued as part of income taxes payable. Approximately $23 million in unrecognized tax benefits related to R&D credits are currently under audit. In addition, the results of the current audit may cause the company to significantly increase or decrease the unrecognized tax benefits associated with R&D credits for periods not under audit. At this time, the company does not have enough information to be able to estimate the potential adjustment.
17. COMMITMENTS AND CONTINGENCIES
Lease Expense
The company’s leases do not specify an implicit interest rate. Therefore, the incremental borrowing rate was used based on information available at commencement date to determine the present value of future payments.
The company leases certain facilities, parcels of land, and equipment, with remaining terms ranging from less than one year to 15.9 years. The land and facility leases include renewal options. The renewal options are included in the lease term only for those sites or locations in which they are reasonably certain to be renewed. Equipment renewals are not considered reasonably certain to be exercised as they typically renew with significantly different underlying terms.
The company may sublease certain of its railcars to third parties on a short-term basis. The subleases are classified as operating leases, with the associated sublease income being recognized on a straight-line basis over the lease term.
The components of lease expense are as follows (in thousands):
Year Ended December 31,
Lease expense
Operating lease expense
$
19,587
$
20,771
$
20,806
Variable lease expense (1)
1,225
1,681
Total lease expense
$
20,812
$
22,452
$
21,630
(1)Represents amounts incurred in excess of the minimum payments required for a certain building lease and for the handling and unloading of railcars for a certain land lease, offset by railcar lease abatements provided by the lessor when railcars are out of service during periods of maintenance or upgrade.
‎
Supplemental cash flow information related to operating leases is as follows (in thousands):
Year Ended December 31,
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
19,579
$
20,864
$
21,459
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
20,291
32,713
11,176
Right-of-use assets and lease obligations derecognized due to lease modifications:
Operating leases
1,889
5,176
1,726
Supplemental balance sheet information related to operating leases is as follows:
Weighted average remaining lease term
5.5 years
6.2 years
Weighted average discount rate
4.16%
4.55%
Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of December 31, 2021 are as follows (in thousands):
Year Ending December 31,
Amount
$
19,045
16,301
13,777
9,408
3,847
Thereafter
13,446
Total
75,824
Less: Present value discount
(9,215)
Lease liabilities
$
66,609
Lease Revenue
As described in Note 4 - Revenue, the majority of the partnership’s segment revenue is generated though their storage and throughput services and rail transportation services agreements with Green Plains Trade and are accounted for as lease revenue. Leasing revenues do not represent revenues recognized from contracts with customers under ASC 606, and are accounted for under ASC 842, Leases. Lease revenue associated with agreements with Green Plains Trade are eliminated upon consolidation. The remaining lease revenue is not material to the company.
Refer to Note 4 - Revenue for further discussion on lease revenue.
Commodities
As of December 31, 2021, the company had contracted future purchases of grain, natural gas, ethanol and distillers grains, valued at approximately $475.9 million.
Legal
The company is currently involved in litigation that has arisen in the ordinary course of business, but does not believe any pending litigation will have a material adverse effect on its financial position, results of operations or cash flows.
‎
18. EMPLOYEE BENEFIT PLANS
The company offers eligible employees a comprehensive employee benefits plan that includes health, dental, vision, life and accidental death, short-term disability and long-term disability insurance, and flexible spending accounts. The company also offers a 401(k) plan enabling eligible employees to save for retirement on a tax-deferred basis up to the limits allowed under the Internal Revenue Code and matches up to 4% of eligible employee contributions. Employee and employer contributions are 100% vested immediately. Employer contributions to the 401(k) plan for the years ended December 31, 2021, 2020 and 2019 were $1.9 million, $1.5 million and $1.6 million, respectively.
The company contributes to a defined benefit pension plan. Since January of 2009, the benefits under the plan were frozen; however, the company remains obligated to ensure the plan is funded according to its requirements. As of December 31, 2021, the plan’s assets were $5.9 million and liabilities were $6.6 million. At December 31, 2021 and 2020, net liabilities of $0.7 million were included in other liabilities on the consolidated balance sheets, respectively.
19. RELATED PARTY TRANSACTIONS
Green Plains Cattle Company LLC
The company engaged in certain related party transactions with GPCC, which was considered a related party until the fourth quarter of 2020 at which time the company’s remaining 50% interest was sold. The company provided a variety of shared services to GPCC, including accounting and finance, payroll and human resources, information technology, legal, communications and treasury activities. The company reduced selling, general and administrative expenses by $1.2 million and $0.5 million related to shared services provided for the years ended December 31, 2020 and 2019, respectively.
Green Plains Trade Group, a subsidiary of the company, enters into certain sale contracts with GPCC during the normal course of business. Related party revenues associated with GPCC were $8.2 million and $4.0 million for the years ended December 31, 2020 and 2019, respectively.
At the time of the sale of GPCC, Mr. Ejnar Knudsen, a member of the company’s board of directors, had an indirect ownership interest in GPCC of 0.0736% by reason of his ownership in TGAM Agribusiness Fund LP. Based on the purchase price, the value of that ownership interest is approximately $0.1 million. Mr. Knudsen also is the CEO and partial owner of AGR Partners LLC (AGR) which provides investment advisory services to TGAM Agribusiness Fund LP pursuant to a sub-advisory agreement between AGR Partners LLC and Nuveen Alternative Advisors LLC, which is the investment manager for TGAM Agribusiness Fund LP.
20. EQUITY METHOD INVESTMENTS
Green Plains Cattle Company LLC
On September 1, 2019, the company formed a joint venture with TGAM and StepStone. Such parties entered into the Second Amended and Restated Limited Liability Company Agreement of GPCC effective as of September 1, 2019. GPCC was previously a wholly owned subsidiary of Green Plains. Green Plains also entered into a Securities Purchase Agreement with TGAM and StepStone, whereby TGAM and StepStone purchased an aggregate of 50% of the membership interests of GPCC from Green Plains. After closing, GPCC was no longer consolidated in the company’s consolidated financial statements and the GPCC investment was accounted for using the equity method of accounting. GPCC results prior to its disposition are classified as discontinued operations in our current and prior period financials.
GPCC conducts the business of the joint venture, including (i) owning and operating the cattle feeding operations (as defined below), and (ii) any other activities approved by GPCC’s board of managers. The company did not consolidate any part of the assets or liabilities or operating results of its equity method investee. The company’s share of net income or loss in the investee increased or decreased, as applicable, the carrying value of the investment. With respect to GPCC, the company determined that this entity did not represent a variable interest entity and consolidation was not required. In addition, although the company had the ability to exercise significant influence over the joint venture through board representation and voting rights, all significant decisions required the consent of the other investors without regard to economic interest.
On October 1, 2020, the company sold its remaining 50% joint venture interest in GPCC to AGR, TGAM Agribusiness Fund LP and StepStone for $80.5 million in cash, plus closing adjustments. The transaction resulted in a reduction in other assets of $69.7 million as a result of removal of the equity method investment in GPCC, and a reduction in accumulated other comprehensive income (loss) of $10.7 million as a result of the removal of the company’s share of equity method investees accumulated other comprehensive loss.
Summarized Financial Information
Our equity method investments totaled $7.2 million and $4.0 million at December 31, 2021 and 2020, respectively and are reflected in other assets on the consolidated balance sheets.
Earnings from equity method investments, net of income taxes, were as follows (in thousands):
Year Ended December 31,
Green Plains Cattle Company LLC (1)
$
-
$
20,531
$
2,839
All others
(42)
Total income from equity method investments, net of income taxes
$
$
21,093
$
2,797
Distributions from equity method investments
$
1,500
$
27,910
$
Earnings (loss) from equity method investments, net of distributions
$
(800)
$
(6,817)
$
2,477
(1)Pretax equity method earnings of GPCC were $27.0 million and $3.8 million for the years ended December 31, 2020 and 2019.
The company reports its proportional share of equity method investment income (loss) in the consolidated statements of operations. The company’s share of equity method investees other comprehensive income arising during the period is included in accumulated other comprehensive loss in the consolidated balance sheet.
The following table present summarized information of GPCC.
December 31, 2020 (1)
December 31, 2019 (1)
Total revenues
$
747,824
$
370,383
Total operating expenses
693,753
362,878
Net income
$
54,071
$
7,505
(1)GPCC equity method treatment began on September 1, 2019 and ended on October 1, 2020. As such, fiscal year 2020 includes nine months of GPCC operations while fiscal year 2019 includes four months of GPCC operations.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES