UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the
‎Securities Exchange Act of 1934

For the Quarterly Period Ended ~~September~~June 30, ~~2017~~2019

Commission File Number 001-32924

Green Plains Inc.

(Exact name of registrant as specified in its charter)


Iowa	84-1652107
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1811 Aksarben Drive, Omaha, NE 68106	(402) 884-8700
(Address of principal executive offices, including zip code)	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	GPRE	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒x Yes ☐o No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

☒

x Yes ☐o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐ x	Accelerated filer ☒o

Non-accelerated filer ~~☐ (Do not check if a smaller reporting company)~~o

Smaller reporting company ☐o	Emerging growth company ☐o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐o Yes ☒x No

The number of shares of common stock, par value $0.001 per share, outstanding as of ~~October 27, 2017,~~ August 2, 2019, was ~~41,162,204~~38,186,133 shares.

Commonly Used Defined Terms

The abbreviations, acronyms and industry terminology used in this quarterly report are defined as follows:

Green Plains Inc., Subsidiaries, and ~~Subsidiaries:~~Partners:


Green Plains; the company	Green Plains Inc. and its subsidiaries
BioProcess Algae	BioProcess Algae LLC
Fleischmann’s Vinegar	Fleischmann’s Vinegar Company, Inc.
Green Plains Cattle	Green Plains Cattle Company LLC
Green Plains Grain	Green Plains Grain Company LLC
Green Plains Partners; the partnership	Green Plains Partners LP
~~Green Plains Processing~~	~~Green Plains Processing LLC and its subsidiaries~~
Green Plains Trade	Green Plains Trade Group LLC

Accounting Defined Terms:


ASC	Accounting Standards Codification
~~EBITDA~~Bgy	Billion gallons per year
EBITDA	Earnings before interest, income taxes, depreciation and amortization
EPS	Earnings per share
Exchange Act	Securities Exchange Act of 1934, as amended
GAAP	U.S. Generally Accepted Accounting Principles
LIBOR	London Interbank Offered Rate
LTIP	Long-Term Incentive Plan
R&D Credits	Research and development tax credits
~~LTIP~~SEC	~~Green Plains Partners LP 2015 Long-Term Incentive Plan~~
~~SEC~~	Securities and Exchange Commission

Industry Defined Terms:


~~VIE~~CAFE	~~Variable interest entity~~

~~Industry Defined Terms:~~


~~CAFE~~	Corporate Average Fuel Economy
~~E15~~D.C.	District of Columbia
E10	Gasoline blended with up to 10% ethanol by volume
E15	Gasoline blended with up to 15% ethanol by volume
E85	Gasoline blended with up to 85% ethanol by volume
EIA	U.S. Energy Information Administration
~~EISA~~EPA	~~Energy Independence and Security Act of 2007, as amended~~
~~EPA~~	U.S. Environmental Protection Agency
~~MmBTU~~MmBtu	Million British Thermal Units
Mmg	Million gallons
~~Mmgy~~MTBE	~~Million gallons per year~~Methyl tertiary-butyl ether
RFS II	Renewable Fuels Standard II
~~RVO~~RIN	Renewable ~~volume obligations~~identification number
~~U.S.~~RVO	Renewable volume obligation
U.S.	United States
USDA	U.S. Department of Agriculture

‎

PART I1 – FINANCIAL INFORMATION

Item 1. Financial ~~Statements~~Statements.

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


	September 30, 2017		December 31, 2016		June 30, ‎2019		December 31, ‎2018
	(unaudited)				(unaudited)
ASSETS	ASSETS				ASSETS
Current assets
Cash and cash equivalents	$	261,588	$	304,211	$	193,280	$	251,683
Restricted cash		30,773		51,979		40,628		66,512
Accounts receivable, net of allowances of $234 and $266, respectively		114,978		147,495
Accounts receivable, net of allowances of $193 and $194, respectively						108,700		100,361
Income taxes receivable		14,145		10,379		12,879		12,418
Inventories		612,447		422,181		658,506		734,883
Prepaid expenses and other		14,895		17,095		11,993		14,470
Derivative financial instruments		51,563		47,236		60,202		26,315
Total current assets		1,100,389		1,000,576		1,086,188		1,206,642
Property and equipment, net of accumulated depreciation of $489,349 and $417,993, respectively		1,188,270		1,178,706
Property and equipment, net of accumulated depreciation ‎and amortization of $467,212 and $430,405, respectively						872,154		886,576
Operating lease right-of-use assets						58,092		-
Goodwill		182,879		183,696		34,689		34,689
Deferred income taxes						3,582		-
Other assets		156,999		143,514		86,022		88,525
Total assets	$	2,628,537	$	2,506,492	$	2,140,727	$	2,216,432

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY				LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	174,788	$	192,275	$	105,802	$	156,901
Accrued and other liabilities		48,500		67,473		59,863		58,973
Derivative financial instruments		12,004		8,916		9,670		24,776
Operating lease current liabilities						16,667		-
Short-term notes payable and other borrowings		457,764		291,223		523,529		538,243
Current maturities of long-term debt		6,486		35,059		1,225		54,807
Total current liabilities		699,542		594,946		716,756		833,700
Long-term debt		829,923		782,610		370,880		298,190
Deferred income taxes		48,787		140,262		5,478		10,123
Operating lease long-term liabilities						44,108		-
Other liabilities		35,892		9,483		8,931		11,430
Total liabilities		1,614,144		1,527,301		1,146,153		1,153,443

Commitments and contingencies (Note 13)

Stockholders' equity
Common stock, $0.001 par value; 75,000,000 shares authorized; 46,430,449 and 46,079,108 shares issued, and 41,163,335 and 38,364,118 shares outstanding, respectively		46		46
Common stock, $0.001 par value; 75,000,000 shares authorized; ‎46,918,984 and 46,637,549 shares issued, and 38,186,133 ‎and 41,101,975 shares outstanding, respectively						47		47
Additional paid-in capital		682,073		659,200		726,068		696,222
Retained earnings		283,592		283,214		226,869		324,728
Accumulated other comprehensive loss		(13,607)		(4,137)
Treasury stock, 5,267,114 and 7,714,990 shares, respectively		(54,193)		(75,816)
Accumulated other comprehensive income (loss)						24,177		(16,016)
Treasury stock, 8,732,851 and 5,535,574 shares, respectively						(98,032)		(58,162)
Total Green Plains stockholders' equity		897,911		862,507		879,129		946,819
Noncontrolling interests		116,482		116,684		115,445		116,170
Total stockholders' equity		1,014,393		979,191		994,574		1,062,989
Total liabilities and stockholders' equity	$	2,628,537	$	2,506,492	$	2,140,727	$	2,216,432

See accompanying notes to the consolidated financial statements.
‎

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
									2019		2018		2019		2018
Revenues
Product revenues	$	899,534	$	839,786	$	2,670,458	$	2,472,741	$	894,161	$	985,217	$	1,534,171	$	2,028,876
Service revenues		1,701		2,066		4,724		6,042		1,692		1,620		3,997		3,248
Total revenues		901,235		841,852		2,675,182		2,478,783		895,853		986,837		1,538,168		2,032,124

Costs and expenses
Cost of goods sold		815,787		758,883		2,457,702		2,293,094
Cost of goods sold (excluding depreciation and amortization expenses reflected below)										888,257		910,625		1,523,832		1,898,960
Operations and maintenance expenses		8,309		8,564		25,107		25,713		6,234		7,893		13,098		16,293
Selling, general and administrative expenses		28,589		24,264		77,946		68,226		21,648		29,731		42,294		55,734
Depreciation and amortization expenses		27,834		19,286		80,105		56,132		19,094		26,823		38,329		53,297
Total costs and expenses		880,519		810,997		2,640,860		2,443,165		935,233		975,072		1,617,553		2,024,284
Operating income		20,716		30,855		34,322		35,618
Operating income (loss)										(39,380)		11,765		(79,385)		7,840

Other income (expense)
Interest income		383		484		1,061		1,263		923		709		2,186		1,346
Interest expense		(31,889)		(11,819)		(69,815)		(33,117)		(15,969)		(22,021)		(30,396)		(44,149)
Other, net		1,444		(1,553)		2,811		(2,050)		(406)		2,545		432		2,479
Total other expense		(30,062)		(12,888)		(65,943)		(33,904)		(15,452)		(18,767)		(27,778)		(40,324)
Income (loss) before income taxes		(9,346)		17,967		(31,621)		1,714
Income tax expense (benefit)		(48,775)		5,083		(60,905)		(4,339)
Net income		39,429		12,884		29,284		6,053
Loss before income taxes										(54,832)		(7,002)		(107,163)		(32,484)
Income tax benefit										14,653		10,753		29,113		16,780
Net income (loss)										(40,179)		3,751		(78,050)		(15,704)
Net income attributable to noncontrolling interests		5,035		4,956		14,853		14,072		5,163		4,745		10,091		9,407
Net income (loss) attributable to Green Plains	$	34,394	$	7,928	$	14,431	$	(8,019)
Net loss attributable to Green Plains									$	(45,342)	$	(994)	$	(88,141)	$	(25,111)

Earnings per share:
Net income (loss) attributable to Green Plains - basic	$	0.83	$	0.21	$	0.36	$	(0.21)
Net income (loss) attributable to Green Plains - diluted	$	0.74	$	0.20	$	0.48	$	(0.21)
Net loss attributable to Green Plains - basic									$	(1.13)	$	(0.02)	$	(2.19)	$	(0.63)
Net loss attributable to Green Plains - diluted									$	(1.13)	$	(0.02)	$	(2.19)	$	(0.63)
Weighted average shares outstanding:
Basic		41,348		38,282		40,008		38,301		40,081		40,194		40,200		40,168
Diluted		50,647		39,136		50,693		38,301		40,081		40,194		40,200		40,168

Cash dividend declared per share	$	0.12	$	0.12	$	0.36	$	0.36	$	0.12	$	0.12	$	0.24	$	0.24

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(unaudited and in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Net income
$
39,429

$
12,884

$
29,284

$
6,053
Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on derivatives arising during period,
net of tax (expense) benefit of $4,575, $(1,331), $5,633
and $762, respectively

(7,660)

1,919

(9,436)

(1,395)
Reclassification of realized (gains) losses on derivatives, net
of tax expense (benefit) of $(2,650), $(1,144), $21
and $(1,369), respectively

4,453

2,150

(34)

2,506
Total other comprehensive income (loss), net of tax

(3,207)

4,069

(9,470)

1,111
Comprehensive income

36,222

16,953

19,814

7,164
Comprehensive income attributable to noncontrolling interests

5,035

4,956

14,853

14,072
Comprehensive income (loss) attributable to Green Plains
$
31,187

$
11,997

$
4,961

$
(6,908)


	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
	2019		2018		2019		2018
Net income (loss)	$	(40,179)	$	3,751	$	(78,050)	$	(15,704)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on derivatives arising during the period, net of tax benefit (expense) of ($9,884), $1,145, ($7,804) and ($3,971), respectively		33,260		(4,277)		26,377		12,873
Reclassification of realized losses (gains) on derivatives, net of tax benefit (expense) of ($947), $185, ($4,087) and $365, respectively		3,440		(581)		13,816		(1,184)
Total other comprehensive income (loss), net of tax		36,700		(4,858)		40,193		11,689
Comprehensive loss		(3,479)		(1,107)		(37,857)		(4,015)
Comprehensive income attributable to noncontrolling interests		5,163		4,745		10,091		9,407
Comprehensive loss attributable to Green Plains	$	(8,642)	$	(5,852)	$	(47,948)	$	(13,422)

See accompanying notes to the consolidated financial statements.

‎

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

Nine Months Ended
September 30,

2017

2016
Cash flows from operating activities:

Net income
$
29,284

$
6,053
Adjustments to reconcile net income to net cash provided (used) by operating activities:

Depreciation and amortization

80,105

56,132
Amortization of debt issuance costs and debt discount

11,222

7,588
Loss on exchange of 3.25% convertible notes due 2018

1,291

-
Gain on disposal of assets

(2,439)

-
Write-off of deferred financing fees related to extinguishment of debt

9,460

-
Deferred income taxes

(88,565)

(16,413)
Other noncurrent assets and liabilities

18,062

-
Stock-based compensation

8,761

7,043
Undistributed equity in loss of affiliates

120

2,067
Other

-

57
Changes in operating assets and liabilities before effects of business combinations:

Accounts receivable

32,267

(36,431)
Inventories

(168,788)

46,126
Derivative financial instruments

(16,430)

6,279
Prepaid expenses and other assets

2,180

(849)
Accounts payable and accrued liabilities

(34,278)

(23,704)
Current income taxes

(1,540)

8,089
Other

1,361

1,150
Change in restricted cash

(4,289)

-
Net cash provided (used) by operating activities

(122,216)

63,187

Cash flows from investing activities:

Purchases of property and equipment, net

(36,475)

(35,658)
Acquisition of a business, net of cash acquired

(61,727)

(252,488)
Investments in unconsolidated subsidiaries

(12,033)

(1,388)
Net cash used by investing activities

(110,235)

(289,534)

Cash flows from financing activities:

Proceeds from the issuance of long-term debt

551,500

337,000
Payments of principal on long-term debt

(487,450)

(40,578)
Proceeds from short-term borrowings

3,301,630

2,969,034
Payments on short-term borrowings

(3,135,347)

(2,967,191)
Cash payment for exchange of 3.25% convertible notes due 2018

(8,523)

-
Payments for repurchase of common stock

(5,733)

(6,005)
Payments of cash dividends and distributions

(29,267)

(27,837)
Payment penalty on early extinguishment of debt

(2,881)

-
Change in restricted cash

25,495

(7,200)
Payments of loan fees

(15,541)

(7,810)
Payments related to tax withholdings for stock-based compensation

(4,105)

(2,206)
Proceeds from exercise of stock options

50

1,632
Net cash provided by financing activities

189,828

248,839

Net change in cash and cash equivalents

(42,623)

22,492
Cash and cash equivalents, beginning of period

304,211

384,867
Cash and cash equivalents, end of period
$
261,588

$
407,359


~~Continued on the following page~~


	Six Months Ended ‎June 30,
	2019		2018
Cash flows from operating activities:
Net loss	$	(78,050)	$	(15,704)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		38,329		53,297
Amortization of debt issuance costs and debt discount		10,306		7,515
Gain from insurance proceeds		-		(2,624)
Deferred income taxes		(27,543)		(23,061)
Stock-based compensation		4,809		5,435
Undistributed equity loss of affiliates		109		239
Other		1,328		-
Changes in operating assets and liabilities before effects of business combinations and dispositions:
Accounts receivable		(11,312)		14,054
Inventories		76,791		88,450
Derivative financial instruments		3,088		1,513
Prepaid expenses and other assets		2,830		2,797
Accounts payable and accrued liabilities		(51,901)		(96,295)
Current income taxes		(2,137)		10,540
Other		1,144		(297)
Net cash provided by (used in) operating activities		(32,209)		45,859

Cash flows from investing activities:
Purchases of property and equipment, net		(23,467)		(14,640)
Proceeds from the sale of assets, net		3,155		-
Acquisition of businesses, net of cash acquired		-		(1,629)
Investments in unconsolidated subsidiaries		-		(2,253)
Other investing activities		-		7,500
Net cash used in investing activities		(20,312)		(11,022)

Cash flows from financing activities:
Proceeds from the issuance of long-term debt		147,700		42,300
Payments of principal on long-term debt		(45,125)		(43,370)
Proceeds from short-term borrowings		1,444,516		2,089,208
Payments on short-term borrowings		(1,518,008)		(2,158,274)
Payments for repurchase of common stock		(39,870)		-
Payments of cash dividends and distributions		(20,692)		(20,580)
Proceeds from disgorgement of shareholder short-swing profits		6,699		-
Payments of loan fees		(4,892)		(2,622)
Payments related to tax withholdings for stock-based compensation		(2,094)		(3,013)
Proceeds from exercise of stock options		-		150
Net cash used in financing activities		(31,766)		(96,201)

Net change in cash, cash equivalents and restricted cash		(84,287)		(61,364)
Cash, cash equivalents and restricted cash, beginning of period		318,195		312,360
Cash, cash equivalents and restricted cash, end of period	$	233,908	$	250,996

Continued on the following page

7
‎

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

Continued from the previous page

Nine Months Ended
September 30,

2017

2016
Non-cash financing activity:

Exchange of 3.25% convertible notes due 2018 for shares of
common stock
$
47,743

$
-
Exchange of common stock held in treasury stock for 3.25%
convertible notes due 2018
$
27,356

$
-

Supplemental disclosures of cash flow:

Cash paid for income taxes
$
2,062

$
3,348
Cash paid for interest
$
39,984

$
24,280

Supplemental investing and financing activities:

Assets acquired in acquisitions and mergers, net of cash
$
62,209

$
257,942
Less: liabilities assumed

(482)

(2,647)
Less: allocation of noncontrolling interest in
consolidation of BioProcess Algae

-

(2,807)
Net assets acquired
$
61,727

$
252,488


Continued from the previous page
	Six Months Ended ‎June 30,
	2019		2018
Reconciliation of total cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	193,280	$	235,133
Restricted cash		40,628		15,863
Total cash, cash equivalents and restricted cash	$	233,908	$	250,996

Non-cash financing activity:
Exchange of common stock held in treasury stock for 3.25% ‎convertible notes due 2018	$	-	$	1

Supplemental investing and financing activities:
Assets acquired in acquisitions, net of cash	$	-	$	1,629

Supplemental disclosures of cash flow:
Cash paid (refunded) for income taxes	$	564	$	(3,163)
Cash paid for interest	$	23,039	$	36,923

See accompanying notes to the consolidated financial statements.

‎

GREEN PLAINS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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. ~~The~~The company owns a ~~62.5%~~49.1% limited partner interest and a 2.0% general partner interest in Green Plains Partners LP. Public investors own the remaining ~~35.5%~~48.9% 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 ~~VIE.~~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 ~~the obligation~~is obligated to absorb losses orand has the right to receive benefits that could be ~~potentially~~ significant to the ~~partnership; therefore,~~partnership. Therefore, the company is considered the primary beneficiary and consolidates the ~~partnership.~~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 ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018, excluding intercompany balances, are ~~$73.0~~$103.2 million and ~~$75.0~~ $67.3million, respectively, and primarily consist of property and equipment, operating lease right-of-use assets and goodwill. The partnership’s consolidated total liabilities as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018, excluding intercompany balances, are ~~$155.8~~$196.6 million and ~~$156.0~~$152.9 million, respectively, which primarily consist of long-term debt as discussed in Note 8 – ~~Debt.~~Debt and operating lease liabilities. The liabilities recognized as a result of consolidating the partnership do not represent additional claims on our general assets. The ~~partnership is consolidated~~company also owns a 90.0% interest in ~~the company’s financial statements.~~ ~~Effective April 1, 2016, the company increased its ownership of~~ BioProcess Algae, a joint venture formed in 2008, ~~to 82.8%~~ and ~~consolidated BioProcess Algae~~consolidates their results in its consolidated financial ~~statements beginning on that date.~~statements.

The accompanying unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Because they do not include all of the information and ~~footnotes~~notes required by GAAP, the consolidated financial statements should be read in conjunction with the company’s annual report on Form 10-K for the year ended December 31, ~~2016.~~2018, as filed with the SEC on February 20, 2019.

The unaudited financial information reflects adjustments, which are, in the opinion of management, necessary for a fair presentation of results of operations, financial position and cash flows for the periods presented. The adjustments are normal and recurring in nature, unless otherwise noted. Interim period results are not necessarily indicative of the results to be expected for the entire year.

Reclassifications

Certain prior year amounts were reclassified to conform to the current year presentation. These reclassifications did not affect total revenues, costs and expenses, net ~~income~~loss or stockholders’ equity.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of ~~the~~ consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, ~~and~~ 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, depreciation of property and equipment, carrying value of intangible assets, operating leases, impairment of long-lived assets and goodwill, derivative financial instruments, ~~and~~ 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

~~Green Plains is North America’s second largest consolidated owner of ethanol plants.~~ The company operates within four business segments: (1) ethanol production, which includes the production of ethanol, distillers grains and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, ~~and~~commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities, (3) food and ingredients, which includes cattle ~~feedlots, vinegar production~~feeding and food-grade corn oil operations and included vinegar production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018 and (4) partnership, which includes fuel storage and transportation services.

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 or for payment towards a revolving credit agreement. 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 statements of cash flows.

Revenue Recognition

The company recognizes revenue when obligations under the ~~following criteria~~terms of a contract with a customer are ~~satisfied: persuasive evidence that an arrangement exists, title~~satisfied. Generally this occurs with the transfer of ~~product~~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 ~~risk of loss~~other taxes the company collects concurrent with revenue-producing activities are ~~transferred to the customer, price is fixed and determinable and collectability is reasonably assured.~~excluded from revenue.

Sales of ethanol, distillers grains, corn oil, natural gas and other commodities by the company’s marketing business are recognized when ~~title~~obligations under the terms of ~~product and risk~~a contract with a customer are satisfied. Generally, this occurs with the transfer of ~~loss are transferred to an external customer.~~ control of products or services. Revenues related to marketing for third parties are presented on a gross basis ~~when~~as the company controls the product prior to the sale to the end customer, takes title of the product and ~~assumes risk of loss.~~has inventory risk. Unearned revenue is recorded for goods in transit when the company has received payment but ~~the title~~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 ~~fixed-price,~~ 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. ~~These~~Energy trading transactions are reported net as a component of ~~revenues.~~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 ~~ineffectiveness on cash flow hedges~~ and reclassifications of realized gains and losses on ~~effective~~ cash flow hedges from accumulated other comprehensive income or loss.

Sales of products, including agricultural commodities, cattle and vinegar, are recognized when ~~title~~control of the product ~~and risk of loss are~~is transferred to the customer, which depends on the agreed upon ~~terms. The sales terms provide passage of title when~~ shipment ~~is made~~ or ~~the commodity is delivered.~~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 when 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 ~~there~~railcar volumetric capacity is ~~evidence an arrangement exists, risk of loss~~provided, and ~~title transfer to the customer, the price is fixed or determinable, and collectability is reasonably ensured. Revenues from base storage, terminal or~~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 ~~once these services are performed, which occurs when~~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 ~~product is delivered to~~associated products. Accordingly, the ~~customer.~~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 ~~plant,~~production cattle feeding operations and vinegar ~~and cattle feedlot operations.~~production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018. 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, process chemicals, cattle and veterinary supplies. Corn feedstock costs include ~~unrealized~~ 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 ~~realized~~reclassifications of gains and losses on ~~related derivative financial instruments, ineffectiveness on cash flow hedges and reclassifications of realized gains and losses on effective~~ cash flow hedges from accumulated other comprehensive income or loss. Plant overhead consists primarily of plant and feedlot utilities, repairs and maintenance, ~~yard~~feedlot expenses 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 sales contracts to attempt to minimize the effect of price changes on ethanol, grain, natural gas and cattle ~~inventories and forward purchase and sales contracts.~~inventories. 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 differences, primarily in transportation, between the exchange-traded market and local market where the terms of the contract is based. Changes in ~~the fair value of grain~~

~~inventories held for sale,~~ 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 Expenses

In the partnership segment, transportation expenses represent the primary component of operations and maintenance expenses. Transportation expenses ~~includes~~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 ~~related~~including but not limited to, corn, ethanol, cattle, 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,~~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, agribusiness and energy services, and food and ingredients segments are designated as cash flow hedges. The company evaluates the derivative instrument to ascertain its effectiveness

prior to entering into cash flow hedges. ~~Ineffectiveness is recognized in current period results, while other unrealized~~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 other current liabilities at fair value.

At times, the company hedges its exposure to changes in ~~the value of inventories~~inventory values and designates qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted in the current period ~~results~~ for changes in fair value. Ineffectiveness of the hedges is recognized in the current period ~~results~~ to the extent the change in fair value of the inventory is not offset by the change in fair value of the derivative.

Recent Accounting Pronouncements

Effective January 1, ~~2017,~~2019, the company adopted the amended guidance in ASC ~~Topic 330,~~ ~~Inventory: Simplifying~~842, Leases. Please refer to Note 13 – Commitments and Contingencies for further details.

2. REVENUE

Revenue Recognition

Revenue is recognized when obligations under the ~~Measurement~~terms of ~~Inventory, which requires inventory~~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 ~~measured at lower of cost~~received in exchange for transferring goods or ~~net realizable value. Net realizable~~providing services. Sales, value ~~is the estimated selling prices during the ordinary course of business, less reasonably predictable costs of completion, disposal~~add, and ~~transportation. The amended guidance was applied prospectively.~~

~~Effective January 1, 2017,~~other taxes the company ~~adopted the amended guidance in ASC Topic 718,~~ ~~Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which requires all income tax effects related to awards to be recognized in the income statement when the awards vest or settle.~~ collects concurrent with revenue-producing activities are excluded from revenue.

Revenue by Source

The amended guidance also allows an employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting and make a policy election to account for forfeitures as they occur. The amended guidance requiring recognition of excess tax benefits and tax deficiencies in the income statement was applied prospectively. The amended guidance related to the timing of when excess tax benefits are recognized, did not have an impact on the consolidated financial statements. The amended guidance related to the presentation of employee taxes paid on the statement of cash flows was applied retrospectively. This change resulted in ~~a $2.2 million~~ ~~increase in cash flows from operating activities and a decrease in cash flows from financing~~

~~activities~~following tables disaggregate revenue by major source for the ~~nine~~three and six months ended ~~September~~June 30, ~~2016. The company has elected to account~~2019 and 2018 (in thousands):


	Three Months Ended June 30, 2019
	Ethanol Production		Agribusiness & Energy Services		Food & Ingredients		Partnership		Eliminations		Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol	$	-	$	-	$	-	$	-	$	-	$	-
Distillers grains		12,315		-		-		-		-		12,315
Cattle		-		-		270,971		-		-		270,971
Service revenues		-		-		-		1,608		-		1,608
Other		1,773		442		-		-		-		2,215
Intersegment revenues		1,435		-		38		1,843		(3,316)		-
Total revenues from contracts with customers		15,523		442		271,009		3,451		(3,316)		287,109
Revenues from contracts accounted for as derivatives under ASC 815 ⁽¹⁾:
Ethanol		355,385		136,225		-		-		-		491,610
Distillers grains		64,069		8,833		-		-		-		72,902
Corn oil		12,993		10,463		-		-		-		23,456
Grain		-		17,987		-		-		-		17,987
Cattle		-		-		(85)		-		-		(85)
Other		903		1,887		-		-		-		2,790
Intersegment revenues		2,070		9,131		-		-		(11,201)		-
Total revenues from contracts accounted for as derivatives		435,420		184,526		(85)		-		(11,201)		608,660
Leasing revenues under ASC 842 ⁽²⁾:		-		-		-		17,374		(17,290)		84
Total Revenues	$	450,943	$	184,968	$	270,924	$	20,825	$	(31,807)	$	895,853

‎


	Six Months Ended June 30, 2019
	Ethanol Production		Agribusiness & Energy Services		Food & Ingredients		Partnership		Eliminations		Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol	$	620	$	-	$	-	$	-	$	-	$	620
Distillers grains		29,993		-		-		-		-		29,993
Cattle		-		-		493,875		-		-		493,875
Service revenues		-		-		-		3,691		-		3,691
Other		2,008		620		-		-		-		2,628
Intersegment revenues		1,463		-		76		3,221		(4,760)		-
Total revenues from contracts with customers		34,084		620		493,951		6,912		(4,760)		530,807
Revenues from contracts accounted for as derivatives under ASC 815 ⁽¹⁾:
Ethanol		556,543		213,302		-		-		-		769,845
Distillers grains		98,715		24,242		-		-		-		122,957
Corn oil		21,607		17,434		1,451		-		-		40,492
Grain		-		38,736		-		-		-		38,736
Cattle		-		-		(15,941)		-		-		(15,941)
Other		6,668		44,298		-		-		-		50,966
Intersegment revenues		4,159		15,544		-		-		(19,703)		-
Total revenues from contracts accounted for as derivatives		687,692		353,556		(14,490)		-		(19,703)		1,007,055
Leasing revenues under ASC 842 ⁽²⁾:		-		-		-		35,000		(34,694)		306
Total Revenues	$	721,776	$	354,176	$	479,461	$	41,912	$	(59,157)	$	1,538,168


	Three Months Ended June 30, 2018
	Ethanol Production		Agribusiness & Energy Services		Food & Ingredients		Partnership		Eliminations		Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol	$	634	$	-	$	-	$	-	$	-	$	634
Distillers grains		62,657		-		-		-		-		62,657
Cattle and vinegar		-		-		222,059		-		-		222,059
Service revenues		-		-		-		1,229		-		1,229
Other		1,201		806		-		-		-		2,007
Intersegment revenues		875		-		38		-		(913)		-
Total revenues from contracts with customers		65,367		806		222,097		1,229		(913)		288,586
Revenues from contracts accounted for as derivatives under ASC 815 ⁽¹⁾:
Ethanol		451,083		106,117		-		-		-		557,200
Distillers grains		49,940		32,706		-		-		-		82,646
Corn oil		19,132		3,488		5,350		-		-		27,970
Grain		337		22,843		-		-		-		23,180
Cattle and vinegar		-		-		(1,522)		-		-		(1,522)
Other		4,272		4,114		-		-		-		8,386
Intersegment revenues		3,344		14,128		-		2,517		(19,989)		-
Total revenues from contracts accounted for as derivatives		528,108		183,396		3,828		2,517		(19,989)		697,860
Leasing revenues under ASC 840 ⁽²⁾:		-		-		-		22,094		(21,703)		391
Total Revenues	$	593,475	$	184,202	$	225,925	$	25,840	$	(42,605)	$	986,837

‎


	Six Months Ended June 30, 2018
	Ethanol Production		Agribusiness & Energy Services		Food & Ingredients		Partnership		Eliminations		Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol	$	3,100	$	-	$	-	$	-	$	-	$	3,100
Distillers grains		119,902		-		-		-		-		119,902
Cattle and vinegar		-		-		489,475		-		-		489,475
Service revenues		-		-		-		2,447		-		2,447
Other		1,332		1,483		-		-		-		2,815
Intersegment revenues		1,537		-		80		-		(1,617)		-
Total revenues from contracts with customers		125,871		1,483		489,555		2,447		(1,617)		617,739
Revenues from contracts accounted for as derivatives under ASC 815 ⁽¹⁾:
Ethanol		893,656		228,658		-		-		-		1,122,314
Distillers grains		90,401		53,918		-		-		-		144,319
Corn oil		35,602		12,158		7,637		-		-		55,397
Grain		470		37,129		-		-		-		37,599
Cattle and vinegar		-		-		6,884		-		-		6,884
Other		8,556		38,515		-		-		-		47,071
Intersegment revenues		4,635		25,557		-		4,689		(34,881)		-
Total revenues from contracts accounted for as derivatives		1,033,320		395,935		14,521		4,689		(34,881)		1,413,584
Leasing revenues under ASC 840 ⁽²⁾:		-		-		-		44,589		(43,788)		801
Total Revenues	$	1,159,191	$	397,418	$	504,076	$	51,725	$	(80,286)	$	2,032,124

(1)Revenues from contracts accounted for ~~forfeitures~~ as ~~they occur. This change did not have a material impact on~~derivatives represent physically settled derivative sales that are outside the ~~financial~~ ~~statements.~~

~~Effective January 1, 2018, the company will adopt the amended guidance in~~scope of ASC ~~Topic 230,~~ ~~Statement of Cash Flows: Restricted Cash~~, which requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amended guidance will be applied retrospectively.

~~Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic~~ 606, Revenue from Contracts with Customers. (ASC ~~Topic~~606), where the company recognizes revenue when control of the inventory is transferred within the meaning of ASC 606 ~~is designed~~as required by ASC 610-20, Gains and Losses from the 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 for 2019 and ASC 840, Leases for 2018.

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 ~~create improved~~30 days after transfer of control or completion of services. In instances where the timing of revenue recognition ~~and disclosure comparability in financial statements. The provisions~~differs from the timing of ~~ASC Topic 606~~invoicing, the company has determined that contracts generally do not include a ~~five-step process by which an entity will determine~~significant financing component.

Contract Liabilities

The company records unearned revenue ~~recognition, depicting the transfer of~~when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to ~~customers~~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 ~~amounts which reflect~~ the ~~payment an entity~~subsequent quarter and is not material to the company. The company expects to ~~be entitled to in exchange for goods or services. The new guidance requires~~recognize all of the ~~company to apply the following steps: (1) identify the contract~~unearned revenue associated with ~~the customer; (2) identify the performance obligations~~service agreements as of June 30, 2019, in the ~~contract; (3) determine~~subsequent quarter when the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the company satisfies the performance obligation. In addition, ASC Topic 606 requires certain disclosures about contracts with customers and provides comprehensive guidance for transactions such as service revenue, contract modifications and multiple-element arrangements. The new standardinventory is ~~effective for fiscal years and interim periods within those years, beginning after December 15, 2017, and allows for early adoption.~~

The company completed a comparison of the current revenue recognition policies to ASC Topic 606 requirements for each of the company’s major revenue categories. Results indicate that the amended guidance will not materially change the amount or timing of revenues recognized by the company and the majority of the company's contracts will continue to be recognized at a point in time and that the number of performance obligations and the accounting for variable consideration are not expected to be significantly different from current practice. In addition, many of the company's sales contracts are considered derivatives under ASC Topic 815, ~~Derivatives and Hedging, and are therefore excluded~~withdrawn from the scope of Topic 606. ASC Topic 606 also requires disclosure of significant changes in contract asset and contract liability balances between periods and the amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period, when applicable. ASC Topic 606 may be adopted retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. The company anticipates adopting the amended guidance using the modified retrospective transition method.partnership’s tank storage.

~~Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 740,~~ ~~Income Taxes: Intra-Entity Transfers of Assets other than Inventory~~, which requires the recognition of current and deferred income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amended guidance will be applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption.

~~Effective January 1, 2018, the company will adopt the amended guidance in ASC Topic 805,~~ ~~Business Combinations: Clarifying the Definition of a Business~~, which clarifies the definition of a business with the objective of adding guidance to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The amended guidance will be applied prospectively.3. ACQUISITIONS AND DISPOSITIONS

~~Effective January 1, 2019, the company will adopt the amended guidance in ASC Topic 842,~~ ~~Leases~~, which aims to make leasing activities more transparent and comparable, requiring substantially all leases to be recognized by lessees on the balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. The new standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those years, and allows for early adoption. The company has established an implementation team to evaluate the impact of the new standard. The new standard will significantly increase right-of-use assets and lease liabilities on the company’s consolidated balance sheet, primarily due to operating leases that are currently not recognized on the balance sheet. The company anticipates adopting the amended guidance using the modified retrospective transition method.ACQUISITIONS

~~Effective January 1, 2019, the amended guidance in ASC Topic 815,~~ ~~Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities~~, becomes effective. ASC Topic 815 is designed to improve the alignment of risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedging results. The provisions of Topic 815 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to

eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the amendments in this update. Early adoption is permitted and the amended presentation and disclosure guidance is required only prospectively. Based on the company’s initial assessment, no material changes are anticipated and the company intends to implement the amended guidance in ASC Topic 815 in either the fourth quarter of fiscal 2017 or the first quarter of fiscal 2018.

~~Effective January 1, 2020, the company will adopt the amended guidance in ASC Topic 350,~~ ~~Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment~~, which simplifies the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The annual goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge equal to the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit, would be recognized. The amended guidance will be applied prospectively.

~~2. ACQUISITIONS~~

Acquisition of Cattle ~~Feedlots~~Feeding Operations – Bartlett Cattle Company, L.P.

On ~~May 16, 2017,~~August 1, 2018, the company acquired two cattle-feeding operations from ~~Cargill~~Bartlett Cattle ~~Feeders, LLC~~Company, L.P. for ~~$57.7~~$16.2 million, ~~including certain~~plus working capital ~~adjustments.~~of approximately $106.6 million primarily consisting of work-in-process inventory. The transaction included the feed yards located in ~~Leoti,~~Sublette, Kansas and ~~Yuma, Colorado,~~Tulia, Texas, which added combined feedlot capacity of ~~155,000~~97,000 head of cattle to the company’s operations. The transaction was financed using cash on ~~hand.~~ hand and proceeds from the Green Plains Cattle senior secured asset-based revolving credit facility. There were no material acquisition costs recorded for the acquisition.

As part of the transaction, the company also entered into a long-term cattle supply agreement with Cargill Meat Solutions Corporation. Under the cattle supply agreement, all cattle placed in the Leoti, Yuma and the company’s existing Kismet, Kansas feedlots will be sold exclusively to Cargill Meat Solutions under an agreed upon pricing arrangement.

‎

~~The purchase price allocation~~ is based on the preliminary results of internal valuations. The purchase price and purchase price allocation are preliminary until contractual post-closing working capital adjustments and valuations are finalized.

The following is a summary of the ~~preliminary purchase price of~~ assets acquired and liabilities assumed (in thousands):


~~Amounts of Identifiable Assets Acquired~~ ~~and Liabilities Assumed~~
~~Inventory~~		$	~~20,576~~
~~Prepaid expenses and other~~			52
~~Property and equipment, net~~			~~37,205~~

~~Current liabilities~~			~~(180)~~
	~~Total identifiable net assets~~	$	~~57,653~~


Amounts of Identifiable Assets Acquired and Liabilities Assumed
Accounts receivable		$	1,897
Inventory			104,809
Property and equipment, net			16,190

Current liabilities			(118)
	Total identifiable net assets	$	122,778

~~Acquisition of Fleischmann’s Vinegar Company~~

On October 3, 2016, the company acquired all of the issued and outstanding stock of SCI Ingredients Holdings, Inc., the holding company of Fleischmann’s Vinegar Company, Inc., for $258.3 million in cash. A portion of the purchase price was used to repay existing debt. Fleischmann’s Vinegar is one of the world’s largest producers of food-grade industrial vinegar.

~~The following~~ ~~is a summary of assets acquired and liabilities assumed (in thousands):~~


~~Amounts of Identifiable Assets Acquired~~ ~~and Liabilities Assumed~~
~~Cash~~		$	~~4,148~~
~~Inventory~~			~~9,308~~
~~Accounts receivable, net~~			~~13,919~~
~~Prepaid expenses and other~~			~~1,054~~
~~Property and equipment~~			~~49,175~~
~~Intangible assets~~			~~90,500~~

~~Current liabilities~~			~~(9,689)~~
~~Income taxes payable~~			~~(216)~~
~~Deferred tax liabilities~~			~~(41,882)~~
	~~Total identifiable net assets~~		~~116,317~~

~~Goodwill~~			~~142,002~~
	~~Purchase price~~	$	~~258,319~~

~~The amounts above reflect the final purchase price allocation. As of September 30, 2017, based~~ ~~on the final valuations~~, assets acquired and liabilities assumed were adjusted from the prior quarter to reflect an increase in the fair value of property and equipment of $6.2 million, a decrease in accumulated depreciation of $0.5 million, a decrease in the fair value of intangible assets of $4.0 million, a decrease in accumulated amortization of $0.3 million, a decrease in the fair value of goodwill of $0.8 million, a decrease of $0.1 million in income taxes payable and an increase in deferred tax liabilities of $1.5 million.

~~As of September 30, 2017, based~~ ~~on the final valuations, the company’s customer relationship intangible asset recognized in connection with the Fleischmann’s~~ ~~acquisition~~ is $74.7 million, net of $5.3 million of accumulated amortization, and has a remaining 14-year weighted-average amortization period. As of September 30, 2017, the company also has an indefinite-lived trade name intangible asset of $10.5 million. The company recognized $1.1 million and $3.9 million of amortization expense associated with the amortizing customer relationship intangible asset during the three and nine months ended September 30, 2017, respectively, and expects estimated amortization expense for the next five years of $5.6 million per annum. The excess purchase price over the intangibles fair values was allocated to goodwill, none of which is expected to be deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to arise after the acquisition.

~~Acquisition of Ethanol Plants~~

On September 23, 2016, the company acquired three ethanol plants located in Madison, Illinois, Mount Vernon, Indiana, and York, Nebraska from subsidiaries of Abengoa S.A. for approximately $234.9 million for the ethanol plant assets, and $19.1 million for working capital acquired and liabilities assumed. These ethanol facilities have a combined annual production capacity of ~~approximately 230 mmgy.~~

~~The following is a summary of~~ ~~assets acquired and~~ ~~liabilities assumed (in thousands):~~


~~Amounts of Identifiable Assets Acquired~~ ~~and Liabilities Assumed~~
~~Inventory~~		$	~~16,904~~
~~Accounts receivable, net~~			~~1,826~~
~~Prepaid expenses and other~~			~~2,224~~
~~Property and equipment, net~~			~~234,947~~
~~Other assets~~			~~3,885~~

~~Current maturities of long-term debt~~			~~(406)~~
~~Current liabilities~~			~~(2,580)~~
~~Long-term debt~~			~~(2,763)~~
	~~Total identifiable net assets~~	$	~~254,037~~

The amounts above reflect the final purchase price allocation, which ~~did not change materially~~included working capital true-up payments by the company of $0.9 million made during the third quarter of 2018.

DISPOSITIONS

Disposition of Fleischmann’s Vinegar

On November 27, 2018, the company and Green Plains II LLC, an indirect wholly-owned subsidiary of the company, completed the sale of Fleischmann’s Vinegar Company, Inc. to Kerry Holding Co. (“Kerry”). The company received as net consideration from ~~the initial allocation.~~

~~Concurrently with~~Kerry $353.7 million in cash and restricted cash, including net working capital adjustments. The divested assets were reported within the company’s ~~acquisition~~food and ingredients segment. The company recorded a pre-tax gain on the sale of Fleischmann’s Vinegar of $58.2 million, including offsetting related transaction costs of $7.4 million within the ~~Abengoa~~corporate segment.

The assets and liabilities of Fleischmann’s Vinegar at closing on November 27, 2018 were as follows (in thousands):


Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Cash		$	2,107
Accounts receivable, net			15,935
Inventory			15,167
Prepaid expenses and other			853
Property and equipment			64,552
Other assets			79,389

Current liabilities			(8,587)
Deferred tax liabilities			(26,617)
	Total identifiable net assets		142,799

Goodwill			142,002
	Net assets disposed	$	284,801

The amounts above reflect the preliminary working capital true-up payments made to and received from Kerry.

Disposition of Bluffton, Lakota and Riga Ethanol Plants

On November 15, 2018, the company completed the sale of three ethanol plants ~~on September 23, 2016,~~located in Bluffton, Indiana, Lakota, Iowa, and Riga, Michigan, and certain related assets from subsidiaries, to Valero Renewable Fuels Company, LLC (“Valero”) for the sale price of $323.2 million, including net working capital and other adjustments. Correspondingly, the partnership’s storage assets located adjacent to such plants were sold to Green Plains Inc. for $120.9 million. The company received as consideration from Valero approximately $323.2 million, while the partnership ~~acquired the storage assets of the Abengoa ethanol plants~~received as consideration from the company 8.7 million partnership units and a portion of the general partner interest equating to 0.2 million equivalent limited partner units to maintain the general partner’s 2% interest. In addition, the partnership also received additional consideration of approximately $2.7 million from Valero for ~~$90.0~~the assignment of certain railcar operating leases. The divested assets were reported within the company’s ethanol production, agribusiness and energy services and partnership segments. The company recorded a pre-tax gain on the sale of the three ethanol plants of $92.2 million, ~~in a transfer between entities under common control~~of which $89.5 million was recorded within the corporate segment and ~~entered into amendments to~~$2.7 million was recorded within the ~~related commercial agreements with Green Plains Trade.~~ partnership segment, including offsetting transaction costs of $4.2 million, of which $3.7 million were recorded within the corporate segment and $0.5 million were recorded within the partnership segment.

3.The assets and liabilities of the Bluffton, Lakota and Riga ethanol plants are as follows (in thousands):


Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Inventory		$	36,812
Prepaid expenses and other			189
Property and equipment			184,970
Other assets			1,717

Current liabilities			(746)
Other liabilities			(4,706)
	Total identifiable net assets		218,236

Goodwill			6,188
	Net assets disposed	$	224,424

The amounts above reflect the final working capital true-up payments by Valero of $3.4 million received during the first quarter of 2019.

4. FAIR VALUE DISCLOSURES

The following methods, assumptions and valuation techniques were used to ~~estimate~~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 1 unrealized gains and losses on commodity derivatives relate to exchange-traded open trade equity and option values in the company’s brokerage accounts.~~

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.

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 September 30, 2017
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Reclassification for Balance Sheet				Fair Value Measurements at June 30, 2019
	(Level 1)		(Level 2)		Presentation		Total		Quoted Prices in ‎ Active Markets for ‎Identical Assets		Significant Other ‎Observable Inputs
									(Level 1)		(Level 2)		Total
Assets:
Cash and cash equivalents	$	261,588	$	-	$	-	$	261,588	$	193,280	$	-	$	193,280
Restricted cash		30,773		-		-		30,773		40,628		-		40,628
Margin deposits		52,527		-		(52,527)		-
Inventories carried at market		-		114,410		-		114,410		-		36,459		36,459
Unrealized gains on derivatives		14,690		5,061		31,812		51,563		-		15,924		15,924
Other assets		115		-		-		115		113		1		114
Total assets measured at fair value	$	359,693	$	119,471	$	(20,715)	$	458,449	$	234,021	$	52,384	$	286,405

Liabilities:
Accounts payable (1)	$	-	$	31,377	$	-	$	31,377	$	-	$	7,263	$	7,263
Unrealized losses on derivatives		20,715		12,004		(20,715)		12,004		-		9,670		9,670
Other		-		15		-		15
Total liabilities measured at fair value	$	20,715	$	43,396	$	(20,715)	$	43,396	$	-	$	16,933	$	16,933


	Fair Value Measurements at December 31, 2016
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Reclassification for Balance Sheet				Fair Value Measurements at December 31, 2018
	(Level 1)		(Level 2)		Presentation		Total		Quoted Prices in ‎ Active Markets for ‎Identical Assets		Significant Other ‎Observable Inputs
									(Level 1)		(Level 2)		Total
Assets:
Cash and cash equivalents	$	304,211	$	-	$	-	$	304,211	$	251,683	$	-	$	251,683
Restricted cash		51,979		-		-		51,979		66,512		-		66,512
Margin deposits		50,601		-		(50,601)		-
Inventories carried at market (2)		-		154,022		-		154,022
Inventories carried at market										-		111,960		111,960
Unrealized gains on derivatives		8,272		14,818		24,146		47,236		-		9,976		9,976
Other assets		116		-		-		116		114		1		115
Total assets measured at fair value	$	415,179	$	168,840	$	(26,455)	$	557,564	$	318,309	$	121,937	$	440,246

Liabilities:
Accounts payable (1)	$	-	$	35,288	$	-	$	35,288��	$	-	$	16,573	$	16,573
Unrealized losses on derivatives		26,455		8,916		(26,455)		8,916		-		7,852		7,852
Other liabilities		-		81		-		81		-		2		2
Total liabilities measured at fair value	$	26,455	$	44,285	$	(26,455)	$	44,285	$	-	$	24,427	$	24,427

5. SEGMENT INFORMATION

~~As a result of acquisitions during 2016, the~~The company ~~implemented organizational segment changes during the fourth quarter of 2016, whereby the company management now~~ reports the financial and operating performance infor the following four operating segments: (1) ethanol production, which includes the production of ethanol, distillers grains and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, ~~and~~commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil ~~natural gas~~ and other commodities, (3) food and ingredients, which includes cattle ~~feedlots, vinegar production~~feeding and food-grade corn oil operations and included vinegar production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018 and (4) partnership, which includes fuel storage and transportation services. ~~Prior periods have been reclassified to conform to the revised segment presentation.~~

The company has re-evaluated the profitability measure of its reportable segments’ operating performance and has determined that segment EBITDA (earnings before interest, taxes, depreciation and amortization) is primarily used by the company’s management to evaluate segment operating activities, and therefore is a more meaningful profitability measure than the previously reported segment operating income. In addition, EBITDA is a financial measure that is widely used by analysts and investors in the company’s industries. As a result, the company is now including segment EBITDA as a performance measure.

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 and corn oil for the ethanol production segment. The partnership segment provides fuel storage and transportation services for the ~~agribusiness and energy services~~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 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Revenues:
Ethanol production:
Revenues from external customers	$	620,180	$	586,988	$	1,857,356	$	1,710,484	$	447,438	$	589,256	$	716,154	$	1,153,019
Intersegment revenues		3,579		-		6,624		-		3,505		4,219		5,622		6,172
Total segment revenues		623,759		586,988		1,863,980		1,710,484		450,943		593,475		721,776		1,159,191
Agribusiness and energy services:
Revenues from external customers		164,604		168,143		483,670		531,445		175,837		170,074		338,632		371,861
Intersegment revenues		14,406		8,936		33,679		24,934		9,131		14,128		15,544		25,557
Total segment revenues		179,010		177,079		517,349		556,379		184,968		184,202		354,176		397,418
Food and ingredients:
Revenues from external customers		114,750		84,655		329,432		230,812		270,886		225,887		479,385		503,996
Intersegment revenues		38		37		113		112		38		38		76		80
Total segment revenues		114,788		84,692		329,545		230,924		270,924		225,925		479,461		504,076
Partnership:
Revenues from external customers		1,701		2,066		4,724		6,042		1,692		1,620		3,997		3,248
Intersegment revenues		24,748		24,139		74,019		69,445		19,133		24,220		37,915		48,477
Total segment revenues		26,449		26,205		78,743		75,487		20,825		25,840		41,912		51,725
Revenues including intersegment activity		944,006		874,964		2,789,617		2,573,274		927,660		1,029,442		1,597,325		2,112,410
Intersegment eliminations		(42,771)		(33,112)		(114,435)		(94,491)		(31,807)		(42,605)		(59,157)		(80,286)
Revenues as reported	$	901,235	$	841,852	$	2,675,182	$	2,478,783	$	895,853	$	986,837	$	1,538,168	$	2,032,124


	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
	2019		2018		2019		2018
Cost of goods sold:
Ethanol production	$	483,352	$	581,613	$	776,839	$	1,146,172
Agribusiness and energy services		176,214		165,174		335,840		366,886
Food and ingredients		259,906		206,440		465,979		466,205
Partnership		-		-		-		-
Intersegment eliminations		(31,215)		(42,602)		(54,826)		(80,303)
	$	888,257	$	910,625	$	1,523,832	$	1,898,960


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Cost of goods sold:
Operating income (loss):
Ethanol production	$	590,904	$	549,705	$	1,802,688	$	1,649,641	$	(53,885)	$	(17,214)	$	(98,077)	$	(44,743)
Agribusiness and energy services		168,735		163,643		487,239		518,135		4,341		12,166		9,645		19,230
Food and ingredients		98,854		78,792		281,898		219,087		7,260		12,981		5,828		25,566
Partnership		-		-		-		-		13,156		16,129		25,707		31,489
Intersegment eliminations		(42,706)		(33,257)		(114,123)		(93,769)		(528)		144		(4,205)		212
Corporate activities										(9,724)		(12,441)		(18,283)		(23,914)
	$	815,787	$	758,883	$	2,457,702	$	2,293,094	$	(39,380)	$	11,765	$	(79,385)	$	7,840


	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
	2019		2018		2019		2018
EBITDA:
Ethanol production	$	(38,737)	$	3,362	$	(67,240)	$	(3,733)
Agribusiness and energy services		4,899		12,796		10,761		20,498
Food and ingredients		8,906		19,044		9,163		35,041
Partnership		14,017		17,138		27,788		33,761
Intersegment eliminations		(528)		144		(4,205)		212
Corporate activities		(8,326)		(10,642)		(14,705)		(20,817)
	$	(19,769)	$	41,842	$	(38,438)	$	64,962


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
EBITDA:
Depreciation and amortization:
Ethanol production	$	25,570	$	30,155	$	38,521	$	39,164	$	15,437	$	20,559	$	30,777	$	40,995
Agribusiness and energy services		5,150		6,310		15,910		21,246		552		618		1,101		1,248
Food and ingredients		13,272		5,465		39,741		10,430		1,583		3,444		3,194		6,848
Partnership		17,589		16,620		51,549		47,241		771		1,105		1,756		2,286
Intersegment eliminations		8		(39)		(147)		(1,174)
Corporate activities		(11,212)		(9,439)		(27,275)		(25,944)		751		1,097		1,501		1,920
	$	50,377	$	49,072	$	118,299	$	90,963	$	19,094	$	26,823	$	38,329	$	53,297

~~The following table sets forth third-party revenues by product line (in thousands):~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016
Revenues:

Ethanol
$
625,787

$
550,724

$
1,830,887

$
1,622,168
Distillers grains

97,136

129,345

303,527

357,070
Corn oil

33,678

49,844

121,166

111,727
Grain

19,338

30,003

73,860

145,800
Food and ingredients

112,697

70,012

305,211

201,423
Service revenues

1,701

2,066

4,724

6,042
Other

10,898

9,858

35,807

34,553

$
901,235

$
841,852

$
2,675,182

$
2,478,783

The following table sets forth total assets by operating segment (in thousands):


	September 30, 2017		December 31, 2016		June 30, ‎2019		December 31, ‎2018
Total assets (1):
Ethanol production	$	1,137,903	$	1,206,155	$	853,906	$	872,845
Agribusiness and energy services		467,955		579,977		390,846		399,633
Food and ingredients		691,663		406,429		559,879		552,459
Partnership		72,965		74,999		103,210		67,297
Corporate assets		272,844		257,652		247,751		334,236
Intersegment eliminations		(14,793)		(18,720)		(14,865)		(10,038)
	$	2,628,537	$	2,506,492	$	2,140,727	$	2,216,432


	June 30, ‎2019		December 31, ‎2018
Finished goods	$	99,075	$	99,765
Commodities held for sale		31,744		62,980
Raw materials		56,511		119,014
Work-in-process		440,410		423,840
Supplies and parts		30,766		29,284
	$	658,506	$	734,883

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						Fair Value
	June 30, ‎2019			December 31, ‎2018			June 30, ‎2019		December 31, ‎2018
Derivative financial instruments	$	15,924	⁽¹⁾	$	9,976	⁽²⁾	$	9,670	$	7,852	⁽³⁾
Other assets		1			1			-		-
Other liabilities		-			-			-		2
Total	$	15,925		$	9,977		$	9,670	$	7,854

(1)At June 30, 2019, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of $44.3 million, which include $33.0 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.

Asset Derivatives'

Liability Derivatives'

Fair Value

Fair Value

September 30,
2017

December 31,
2016

September 30,
2017

December 31,
2016
Derivative financial instruments (1)

$
5,061

$
14,818
(3)
$
-

$
-
Accrued and other liabilities

-

-

18,029 (2)

27,099
Other liabilities

-

-

15

81
Total

$
5,061

$
14,818

$
18,044

$
27,180

~~(1)~~

Derivative financial instruments as reflected on the consolidated balance sheets include related margin deposit assets of $52.5 million and $50.6 million at September 30, 2017 and December 31, 2016, respectively.

~~(2)~~

~~Balance~~ ~~at September 30, 2017~~ ~~includes $15.7 million~~ ~~of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.~~

~~(3)~~

~~Balance at December 31, 2016 includes $17.0 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.~~

(2)At December 31, 2018, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of $16.3 million.

(3)At December 31, 2018, derivative financial instruments, as reflected on the balance sheet, includes net unrealized losses on exchange traded futures and options contracts of $16.9 million, which included $16.5 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.

Refer to Note 34 - 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 ~~Stockholders’ Equity and~~ Comprehensive Income

The gains or losses recognized in income and other comprehensive income ~~(loss)~~ 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):

Gains (Losses) on Derivative Instruments Not

Three Months Ended
September 30,

Nine Months Ended
September 30,
Designated in a Hedging Relationship

2017

2016

2017

2016
Revenues

$
2,863

$
(1,084)

$
(7,400)

$
6,187
Cost of goods sold

2,036

(39)

17,256

(8,740)
Net increase (decrease) recognized in earnings before tax

$
4,899

$
(1,123)

$
9,856

$
(2,553)


	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
into Income	2019		2018		2019		2018
Revenues	$	(4,352)	$	(313)	$	(17,711)	$	1,448
Cost of goods sold		(35)		1,079		(192)		101
Net gain (loss) recognized in loss before tax	$	(4,387)	$	766	$	(17,903)	$	1,549

Gains (Losses) Due to Ineffectiveness

Three Months Ended
September 30,

Nine Months Ended
September 30,
of Cash Flow Hedges

2017

2016

2017

2016
Revenues

$
(48)

$
34

$
(229)

$
(5)
Cost of goods sold

(213)

96

(213)

(65)
Net increase (decrease) recognized in earnings before tax

$
(261)

$
130

$
(442)

$
(70)


	Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives
Gain (Loss) Recognized in Other	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
Comprehensive Income on Derivatives	2019		2018		2019		2018
Commodity contracts	$	43,144	$	(5,422)	$	34,181	$	16,844

Gains (Losses) Reclassified from Accumulated
Other Comprehensive Income (Loss)

Three Months Ended
September 30,

Nine Months Ended
September 30,
into Net Income

2017

2016

2017

2016
Revenues

$
(5,242)

$
25,254

$
1,734

$
12,029
Cost of goods sold

(1,861)

(28,548)

(1,679)

(15,904)
Net increase (decrease) recognized in earnings before tax

$
(7,103)

$
(3,294)

$
55

$
(3,875)


		Amount of Gain or (Loss)
		Recognized in Income on Derivatives
Derivatives Not Designated	Location of Gain or (Loss) Recognized in	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
as Hedging Instruments	Income on Derivatives	2019		2018		2019		2018
Commodity contracts	Revenues	$	(7,381)	$	7,027	$	(22,702)	$	7,963
Commodity contracts	Costs of goods sold		(9,071)		7,121		(8,905)		123
Net gain (loss) recognized in loss before tax		$	(16,452)	$	14,148	$	(31,607)	$	8,086

‎

The following amounts were recorded on the consolidated balance sheets related to cumulative basis adjustments for the fair value hedged items (in thousands):


	June 30, 2019				December 31, 2018
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	$	22,010	$	(1,924)	$	89,188	$	2,430

Effect of Cash Flow and Fair Value Hedge Accounting on the Statements of Operations

The effect of cash flow and fair value hedges and the line items on the consolidated statements of operations where they are reported are as follows (in thousands):


	Location and Amount of Gain or (Loss) Recognized in
	Income on Cash Flow and Fair Value Hedging Relationships
	for the Three Months Ended June 30,
		2019				2018
		Revenue		Cost of ‎Goods Sold		Revenue		Cost of ‎Goods Sold
Gain (loss) on cash flow hedging relationships:

Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income	$	(4,352)	$	(35)	$	(313)	$	1,079

Gain (loss) on fair value hedging relationships:

Commodity contracts:
Hedged item		-		723		-		1,103
Derivatives designated as hedging instruments		-		571		-		(446)

Total amounts of income and expense line items presented in the statement of operations in which the effects of cash flow or fair value hedges are recorded	$	(4,352)	$	1,259	$	(313)	$	1,736

‎

Effective Portion of Cash Flow
Hedges Recognized in

Three Months Ended
September 30,

Nine Months Ended
September 30,
Other Comprehensive Income (Loss)

2017

2016

2017

2016
Commodity Contracts

$
(12,235)

$
3,250

$
(15,069)

$
(2,157)


	Location and Amount of Gain Recognized in
	Income on Cash Flow and Fair Value Hedging Relationships
	for the Six Months Ended June 30,
		2019				2018
		Revenue		Cost of ‎Goods Sold		Revenue		Cost of ‎Goods Sold
Gain (loss) on cash flow hedging relationships:

Commodity contracts:
Amount of gain reclassified from accumulated other comprehensive income into income	$	(17,711)	$	(192)	$	1,448	$	101

Gain (loss) on fair value hedging relationships:

Commodity contracts:
Hedged item		-		(831)		-		10,496
Derivatives designated as hedging instruments		-		4,431		-		(8,878)

Total amounts of income and expense line items presented in the statement of operations in which the effects of cash flow or fair value hedges are recorded	$	(17,711)	$	3,408	$	1,448	$	1,719

Gains (Losses) from Fair Value

Three Months Ended
September 30,

Nine Months Ended
September 30,
Hedges of Inventory

2017

2016

2017

2016
Revenues (effect of change in inventory value)

$
61

$
(40)

$
1,451

$
1,379
Cost of goods sold (effect of change in inventory value)

(1,775)

(470)

(6,229)

7,712
Revenues (effect of fair value hedge)

(61)

40

(1,734)

(1,379)
Cost of goods sold (effect of fair value hedge)

3,085

918

8,530

(7,648)
Ineffectiveness recognized in earnings before tax

$
1,310

$
448

$
2,018

$
64

There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016.~~2018.

The open commodity derivative positions as of ~~September~~June 30, ~~2017,~~2019, are as follows (in thousands):



	Exchange Traded ⁽¹⁾		Non-Exchange Traded ⁽²⁾
Derivative ‎Instruments	Net Long & ‎(Short)		Long	(Short)	Unit of ‎Measure	Commodity
Futures	(46,875)				Bushels	Corn, Soybeans and Wheat
Futures	2,445	⁽³⁾			Bushels	Corn
Futures	(1,310)	⁽⁴⁾			Bushels	Corn
Futures	(41,805)				Gallons	Ethanol
Futures	1,670				MmBTU	Natural Gas
Futures	(8,140)	⁽⁴⁾			MmBTU	Natural Gas
Futures	(8,400)				Pounds	Cattle
Futures	(411,440)	⁽³⁾			Pounds	Cattle
Options	4,858				Bushels	Corn and Soybeans
Options	(11,424)				Gallons	Ethanol
Options	2,349				MmBTU	Natural Gas
Options	(35,023)				Pounds	Cattle
Options	3				Barrels	Crude Oil
Forwards			49,542	(1,086)	Bushels	Corn and Soybeans
Forwards			14,391	(310,836)	Gallons	Ethanol
Forwards			148	(453)	Tons	DDG
Forwards			5,184	(78,529)	Pounds	Corn Oil
Forwards			14,616	(5,525)	MmBTU	Natural Gas

September 30, 2017

Exchange Traded

Non-Exchange Traded

Derivative
Instruments

Net Long &
(Short) (1)

Long (2)

(Short) (2)

Unit of
Measure

Commodity

Futures

(39,030)

Bushels

Corn, Soybeans and Wheat
Futures

67,775
(3)

Bushels

Corn
Futures

(13,175)
(4)

Bushels

Corn
Futures

9,828

Gallons

Ethanol
Futures

(285,852)
(3)

Gallons

Ethanol
Futures

1,745

MmBTU

Natural Gas
Futures

(13,753)
(4)

MmBTU

Natural Gas
Futures

(7,200)

Pounds

Livestock
Futures

(336,300)
(3)

Pounds

Livestock
Futures

40

Barrels

Crude Oil
Futures

(293)
(4)

Barrels

Crude Oil
Futures

(420)

Pounds

Soybean Oil
Futures

5,838
(3)

Gallons

Natural Gasoline
Options

(1,010)

Bushels

Corn, Soybeans and Wheat
Options

2,156

Gallons

Ethanol
Options

(3,456)

Pounds

Livestock
Options

(1,032)

Pounds

Soybean Oil
Options

29

Barrels

Crude Oil
Forwards

17,166

(247)

Bushels

Corn and Soybeans
Forwards

53,872

(336,067)

Gallons

Ethanol
Forwards

173

(375)

Tons

Distillers Grains
Forwards

14,367

(92,344)

Pounds

Corn Oil
Forwards

14,862

(1,036)

MmBTU

Natural Gasoline
Forwards

712

(412)

Barrels

Crude Oil

~~(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 or non-exchange traded forwards used for fair~~ ~~value~~ ~~hedges.~~

(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 or non-exchange traded forwards 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 on energy trading contracts of ~~$3.1~~$0.8 million and ~~$18.3~~$9.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively and net gains on energy trading contracts of ~~$2.7~~$4.1 million and ~~$5.7~~$10.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2018, respectively.

8. DEBT

The components of long-term debt are as follows (in thousands):


	June 30, ‎2019		December 31, ‎2018
Corporate:
3.25% convertible notes due 2019	$	-	$	53,457
4.125% convertible notes due 2022		145,906		142,708
4.00% convertible notes due 2024		73,886		-
Green Plains Partners:
$200.0 million revolving credit facility		132,200		134,000
$8.1 million promissory note		8,100		8,100
Other		17,251		17,922
Total face value of long-term debt		377,343		356,187
Unamortized debt issuance costs		(5,238)		(3,190)
Less: current portion of long-term debt		(1,225)		(54,807)
Total long-term debt	$	370,880	$	298,190

September 30,
2017

December 31,
2016
Corporate:

$500.0 million term loan
$
487,440

$
-
$120.0 million convertible notes due 2018

60,241

108,817
$170.0 million convertible notes due 2022

131,752

127,239
Green Plains Partners:

$155.0 million revolving credit facility

129,000

129,000
Green Plains Processing:

$345.0 million term loan

-

294,011
Fleischmann's Vinegar:

$130.0 million term loan

-

125,609
$15.0 million revolving credit facility

-

4,000
Other

27,976

28,993
Total long-term debt

836,409

817,669
Less: current portion of long-term debt

(6,486)

(35,059)
Long-term debt
$
829,923

$
782,610

~~Short-term~~The components of short-term notes payable and other borrowings at September 30, 2017, include working capital revolvers at Green Plains Cattle, Green Plains Grain and Green Plains Trade with outstanding balances of $246.7 million, $64.0 million and $143.3 million, respectively. Green Plains Grain also had $3.7 million in outstanding short-term inventory financing arrangements at September 30, 2017. Short-term notes payable and other borrowings at December 31, 2016, include working capital revolvers at Green Plains Cattle, Green Plains Grain and Green Plains Trade with outstanding balances of $63.5 million, $102.0 million and $125.7 million, respectively.are as follows:


	June 30, ‎2019		December 31, ‎2018
Green Plains Cattle:
$500.0 million revolver	$	334,698	$	374,492
Green Plains Grain:
$100.0 million revolver		42,000		41,000
$50.0 million inventory financing		-		-
Green Plains Trade:
$300.0 million revolver		132,346		108,485
Green Plains Commodity Management:
$20.0 million hedge line		14,485		14,266
	$	523,529	$	538,243

Corporate Activities

During the three months ended June 30, 2019, the company issued $105.0 million of 4.00% convertible senior notes due in 2024, or the 4.00% notes. The company used approximately $57.8 million of the net proceeds to repurchase the $56.8 million outstanding principal amount of its 3.25% convertible senior notes due October 1, 2019 in cash, including accrued and unpaid interest, in privately negotiated transactions concurrently with this offering.

At issuance, the company separately accounted for the liability and equity components of the 3.25% convertible notes by bifurcating the gross proceeds between the indebtedness, or liability component, and the embedded conversion option, or equity component, by estimating an effective interest rate on the date of issuance for similar notes. The embedded conversion option was recorded in stockholders’ equity. Since the company did not exercise the embedded conversion option associated with the notes, pursuant to the guidance within ASC 470, Debt, the company recorded a loss upon extinguishment of $1.6 million, measured by the difference between the fair value and carrying value of the liability portion of the notes. As a result, the company recorded a charge to interest expense in the consolidated financial statements of approximately $1.6 million during the three months ended June 30, 2019. This charge included $0.1 million of unamortized debt issuance costs related to the principal balance extinguished. The remaining settlement consideration transferred was allocated to the reacquisition of the embedded conversion option and recognized as a reduction of additional paid-in capital.

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. 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.

In August 2016, the company issued $170.0 million of 4.125% convertible senior notes due ~~2022.~~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 conversion rate is subject to adjustment upon the occurrence of certain events, including when the quarterly cash dividend exceeds $0.12 per share and upon redemption of the 4.125% notes.~~ The initial conversion rate is 35.7143 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $28.00 per share. The conversion rate is subject to adjustment upon the occurrence of certain events, including upon redemption of the 4.125% notes.

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 September 2013, the company issued $120.0 million of 3.25% convertible senior notes due October 1, 2018. The 3.25% notes are senior, unsecured obligations of the company, with interest payable on April 1 and October 1 of each year. The company may settle the 3.25% notes in cash, common stock or a combination of cash and common stock.

Prior to April 1, 2018, the 3.25% notes are not convertible unless certain conditions are satisfied. The conversion rate is subject to adjustment when the quarterly cash dividend exceeds $0.04 per share. The conversion rate was recently adjusted to 49.9981 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $20.00 per share. The company may be obligated to increase the conversion rate in certain events, including ~~redemption of the 3.25% notes.~~

The company may redeem all of the 3.25% notes at any time, 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 3.25% notes have the option to require the company to repurchase the 3.25% 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 3.25% notes being declared due and payable.

During the second quarter of 2017, the company entered into several privately negotiated agreements with holders, on behalf of certain beneficial owners of the company’s 3.25% notes. Under these agreements, 2,783,725 shares of the company’s common stock and approximately $8.5 million in cash plus accrued but unpaid interest on the 3.25% notes, were exchanged for approximately $56.3 million in aggregate principal amount of the 3.25% notes. Common stock held as treasury shares were exchanged for the 3.25% notes. Following the closings of the agreements, $63.7 million aggregate principal amount of the 3.25% notes remain outstanding.

At issuance, the company separately accounted for the liability and equity components of the convertible notes by bifurcating the gross proceeds between the indebtedness, or liability component, and the embedded conversion option, or equity component. This bifurcation was done by estimating an effective interest rate on the date of issuance for similar notes. The embedded conversion option was recorded in stockholders’ equity. Since the company did not exercise the embedded conversion option associated with the notes, pursuant to the guidance within ASC Topic 470, ~~Debt~~, the company recorded a loss upon extinguishment measured by the difference between the fair value and carrying value of the liability portion of the notes. As a result, the company recorded a charge to interest expense in the consolidated financial statements of approximately $1.3 million during the three months ended June 30, 2017. This charge included $0.6 million of unamortized debt issuance costs related to the principal balance extinguished. The remaining settlement consideration transferred was allocated to the reacquisition of the embedded conversion option and recognized as a reduction of additional paid-in capital.

On August 29, 2017, the company entered into a $500.0 million term loan agreement, which matures on August 29, 2023, to refinance approximately $405.0 million of total debt outstanding issued by Green Plains Processing and Fleischmann’s Vinegar Company, pay associated fees and expenses and for general corporate purposes. The term loan is guaranteed by the company and substantially all of its subsidiaries, but not Green Plains Partners and certain other entities, and secured by substantially all of the assets of the company, including 17 ethanol production facilities, vinegar production facilities and a second priority lien on the assets secured under the revolving credit facilities at Green Plains Trade, Green Plains Cattle and Green Plains Grain.

The credit agreement contains certain customary representations and warranties, affirmative covenants, negative covenants, financial covenants and events of default. The negative covenants include restrictions on the ability to incur additional indebtedness, acquire and sell assets, create liens, make investments, make distributions and enter into transactions with affiliates. At the end of each fiscal quarter, the covenants of the credit agreement require the company to maintain a maximum term debt to total term capitalization of not more than 55% and a minimum interest coverage ratio of not less than 1.25x, as defined in the credit agreement. Beginning in 2018, the credit facility also has a provision requiring the company to make special annual payments of 50% or 75% of its available free cash flow, subject to certain limitations. Voluntary term loan prepayments are subject to prepayment fees of 1.0% if prepaid before the eighteen month anniversary of the credit agreement. Beginning in the fourth quarter of 2017, scheduled principal payments are $1.25 million until maturity. The term loan bears interest at a floating rate of a base rate plus a margin of 4.50% or LIBOR plus a margin of 5.50%.

Ethanol Production Segment

~~Green Plains Processing had a $345.0 million senior secured credit facility, which was guaranteed by the~~The company has small equipment financing loans, finance leases on equipment or facilities, and ~~certain subsidiaries~~other forms of Green Plains Processing and secured by the stock and substantially all of the assets of Green Plains Processing. The interest rate was LIBOR, subject to a 1.00% floor, plus 5.50% and was scheduled to mature on June 30, 2020. The terms of the credit facility required the borrower to maintain a maximum total leverage ratio of 4.00x at the end of each quarter, decreasing to 3.25x over the life of the credit facility, and a minimum fixed charge coverage ratio of 1.25x. This senior secured credit facility was extinguished in full on August 29, 2017 with the proceeds from the new $500.0 million secured term loan facility. In connection with the extinguishment of the senior secured credit facility, the company wrote off deferred financing fees of $5.9 million which were recorded as interest expense in the consolidated statement of operations during the three months ended September 30, 2017.debt financing.

Agribusiness and Energy Services Segment

Green Plains Grain has a ~~$125.0 million~~ senior secured asset-based revolving credit facility, which was amended on June 28, 2019, to ~~finance~~extend the existing maturity date from July 26, 2019 to June 28, 2022 and lower the maximum commitment from $125.0 million to $100.0 million. 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. ~~The credit facility matures on July 26, 2019.~~ 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 ~~$250.0~~$225.0 million. 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% per annum depending on utilization.

Lenders receive a first priority lien on certain cash, inventory, accounts receivable and other assets owned by Green Plains ~~Grain as security on the credit facility.~~Grain. The terms impose affirmative and negative covenants for Green Plains Grain, including maintaining minimum working capital to be the greater of ~~$20.0 million~~ (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 ~~$26.3 million for 2017.~~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 ~~annual leverage ratio~~long term debt capitalization of ~~6.00 to 1.00 at the end of each quarter. The fixed charge coverage ratio and long-term capitalization ratio apply only if Green Plains Grain has long-term indebtedness on the date of calculation.~~40%. As of ~~September~~June 30, ~~2017,~~2019, Green Plains Grain had no long-term indebtedness. ~~The credit facility also contains restrictions on distributions related to capital stock, with exceptions for distributions up to 50% of net profit before tax, subject to certain conditions.~~

Green Plains Trade has a $300.0 million senior secured asset-based revolving credit facility ~~which was amended on July 28, 2017,~~ to ~~increase the maximum commitment from $150 million to $300 million and extend the maturity date to July 28, 2022. The revolving credit facility finances~~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 ~~amended $300 million maximum commitment~~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. The amended credit~~ facility, ~~also~~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 ~~$300 million~~ 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 ~~1.15x.~~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) 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.

~~At September 30, 2017,~~ Green Plains T~~rade~~Grain has entered into short-term inventory financing agreements 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 ~~restricted cash~~ no short-term notes payable related to these inventory financing agreements as of ~~$9.5~~June 30, 2019.

Green Plains Commodity Management has an uncommitted $20.0 million ~~on the~~ ~~consolidated balance sheet, the use of~~revolving credit facility which ~~was restricted for repayment towards the outstanding loan balance.~~ matures April 30, 2023 to finance margins related to its hedging programs. Advances are subject to variable interest rates equal to LIBOR plus 1.75%.

Food and Ingredients Segment

Green Plains Cattle has a ~~$300.0~~$500.0 million senior secured asset-based revolving credit facility, which matures on April 30, 2020, to finance working capital for the cattle ~~feedlot~~feeding operations up to the maximum commitment based on eligible collateral equal to the sum of percentages of eligible receivables, inventories and other current assets, less miscellaneous adjustments. Advances ~~as amended,~~ are subject to variable interest rates equal to LIBOR plus 2.00% to 3.00%, or the base rate plus 1.00% to 2.00%, depending upon the preceding three months’ excess borrowing availability. The ~~amended~~ credit facility also includes an accordion feature that enables the credit facility to be increased by up to $100.0 million with agent approval. The unused portion of the credit facility is also subject to a commitment fee of 0.20% to 0.30% per annum, depending on the preceding three months’ excess borrowing availability.

Lenders receive a first priority lien on certain cash, inventory, accounts receivable, property and equipment and other assets owned by Green Plains Cattle ~~as security on the credit facility.~~. The ~~amended~~ terms impose affirmative and negative covenants, including maintaining a minimum working capital of 15% of the commitment amount, minimum tangible net worth of 20% of the commitment amount, plus 50% of net profit from the previous year, and a maximum total debt to tangible net worth ratio of ~~3.50x.~~3.50 to 1.00. Capital expenditures are limited to $10.0 million per year under the credit facility, plus $10.0 million per year if funded by a contribution from parent, plus any unused amounts from the previous year.

Fleischmann’s Vinegar had a $130.0 million senior secured term loan and a $15.0 million senior secured revolving credit facility, which was used to finance the purchase of Fleischmann’s Vinegar and to fund working capital for its vinegar

manufacturing operations, and were scheduled to mature on October 3, 2022. Beginning January 1, 2017, the term loan was subject to mandatory prepayments based on the preceding fiscal year’s excess cash flow. Term loan prepayments were generally subject to prepayment fees of 1.0% to 2.0% if prepaid before the second anniversary of the credit agreement. The term loan and loans under the revolving credit facility each bore interest at a floating rate based on the consolidated total net leverage ratio, adjusted quarterly beginning September 30, 2017, to either a base rate plus an applicable margin of 5.0% to 6.0% or to LIBOR plus an applicable margin of 6.0% to 7.0%. The unused portion of the revolving credit facility was also subject to a commitment fee of 0.5% per annum.

This senior secured credit term loan and senior secured revolving credit facility were extinguished in full on August 29, 2017 with the proceeds from the new $500.0 million secured term loan facility. In connection with the extinguishment of the senior secured credit facility, the company wrote off deferred financing fees of $3.5 million and paid a prepayment penalty of $2.9 million. These expenses are recorded as interest expense in the consolidated statement of operations during the three months ended September 30, 2017.

Partnership Segment

Green Plains Partners, through a wholly owned subsidiary, has a ~~$155.0~~$200.0 million revolving credit facility, ~~as amended,~~ which matures on July 1, 2020, to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes. Advances under the credit facility are subject to a floating interest rate based on the preceding fiscal quarter’s consolidated leverage ratio at a base rate plus 1.25% to 2.00% or LIBOR plus 2.25% to 3.00%. The credit facility ~~may~~can be increased ~~up to $100.0~~by an additional $20.0 million without the consent of the lenders. The unused portion of the credit facility is also subject to a commitment fee of 0.35% to 0.50%, depending on the preceding fiscal quarter’s consolidated leverage ratio.

The partnership’s obligations under the credit facility are secured by a first priority lien on (i) the capital stock 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 agreements with Green Plains Trade, and (iii) all proceeds and products of the equity interests of the partnership’s present and future subsidiaries and its personal property. The terms impose affirmative and negative covenants including restricting 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 credit facility also requires the partnership to maintain a maximum consolidated net leverage ratio of no more than 3.50x and a minimum consolidated interest coverage ratio of no less than 2.75x, each of which is calculated on a pro forma basis with respect to acquisitions and divestitures occurring during the applicable period. The consolidated leverage ratio is calculated by dividing total funded indebtedness minus the lesser of cash in excess of $5.0 million or $30.0 million by the sum of the four preceding fiscal quarters’ consolidated EBITDA. The consolidated interest coverage ratio is calculated by dividing the sum of the four preceding fiscal quarters’ consolidated EBITDA by the sum of the four preceding fiscal quarters’ interest charges.

The partnership, through a wholly owned subsidiary, has promissory notes payable of $8.1 million, which is recorded in long-term debt, and a note receivable of $8.1 million, which is recorded in other assets, to execute a New Markets Tax Credit transaction related to the Birmingham, Alabama terminal. Beginning in March 2020, the promissory notes and note receivable each require quarterly principal and interest payments of approximately $0.2 million. The partnership retains the right to call $8.1 million of the promissory notes in 2020. The promissory notes payable and note receivable will be fully amortized upon maturity in September 2031. Income tax credits were generated for the lender, which the company has guaranteed over their statutory life of seven years in the event the credits are recaptured or reduced. At the time of the transaction, the income tax credits were valued at $5.0 million. The partnership has not established a liability in connection with the guarantee because it believes the likelihood of recapture or reduction is remote.

Covenant Compliance

The company was in compliance with its debt covenants as of ~~September~~June 30, ~~2017.~~2019.

~~Capitalized Interest~~

~~The~~ ~~compa~~ny ~~had $16 thousand and $39 thousand~~ of capitalized interest during the three and nine months ended September 30, 2017, respectively, and $483 thousand and $1.4 million during the three and nine months ended September 30, 2016, respectively.

Restricted Net Assets

At ~~September~~June 30, ~~2017,~~2019, there were approximately ~~$124.5~~$174.8 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.

9. STOCK-BASED COMPENSATION

The company has an equity incentive plan that reserves 4,110,000 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 shares, 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.~~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. ~~Substantially all~~

Restricted Stock Awards and Deferred Stock Units

The non-vested stock award and deferred stock unit activity for the six months ended June 30, 2019, is 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, 2018	882,288	$	19.12
Granted	497,118		15.40
Forfeited	(80,521)		17.60
Vested	(440,891)		18.28
Non-Vested at June 30, 2019	857,994	$	17.54	1.9

Performance Shares

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 ~~existing stock-based compensation has been equity awards.~~plan. 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 ~~activity related~~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. If the company’s RONA and TSR achieve the maximum goals, the maximum amount of shares available to be issued pursuant to the 2018 and 2019 awards are 482,234 performance shares or 150% of the 321,489 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.

The company used 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 are illustrated in the following table:


	FY 2019 Performance Awards			FY 2018 Performance Awards
Risk-free interest rate		2.45	%		2.44	%
Dividend yield		3.13	%		2.64	%
Expected volatility		41.69	%		45.11	%
Monte Carlo valuation		99.62	%		97.39	%
Closing stock price on the date of grant	$	15.34		$	18.15

The non-vested performance share award activity for the six months ended June 30, 2019, is as follows:


	Performance ‎Shares	Weighted- ‎Average Grant- ‎Date Fair Value		Weighted-Average ‎Remaining ‎Vesting Term ‎(in years)
Non-Vested at December 31, 2018	134,022	$	17.92
Granted	216,703		15.43
Forfeited	(29,236)		16.23
Non-Vested at June 30, 2019	321,489	$	16.39	2.3

Stock Options

There remains 128,750 exercisable stock options outstanding at June 30, 2019, with a weighted-average exercise price of $12.72. The weighted average exercise price for options exercisable at June 30, 2019 was above the ~~nine months ended September~~company’s stock price at June 30, ~~2017, is as follows:~~2019. The weighted-average remaining contractual term of exercisable options was 0.5 years at June 30, 2019.

Shares

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual Term
(in years)

Aggregate Intrinsic Value
(in thousands)

Outstanding at December 31, 2016
148,750

$
12.36

2.8

$
2,305
Granted
-

-

-

-
Exercised
(5,000)

10.00

-

78
Forfeited
-

-

-

-
Expired
-

-

-

-
Outstanding at September 30, 2017
143,750

$
12.44

2.1

$
1,109
Exercisable at September 30, 2017 (1)
143,750

$
12.44

2.1

$
1,109

~~(1)~~

~~Includes in-the-money options totaling 143,750 shares at a weighted-average exercise price of $12.44.~~

Option awards allow employees to exercise options through cash payment for the shares of common stock or simultaneous broker-assisted transactions in which the employee authorizes the exercise and immediate sale of the ~~options~~shares in the open market. The company uses newly issued shares of common stock to satisfy its stock-based payment obligations.

~~The non-vested stock award and deferred stock unit activity for the nine months ended September 30, 2017, is 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, 2016
1,139,560

$
17.65

Granted
566,165

24.03

Forfeited
(42,430)

19.08

Vested
(542,764)

18.37

Non-Vested at September 30, 2017
1,120,531

$
20.47

2.0

Green Plains Partners

Green Plains Partners has ~~adopted the LTIP, an~~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 ~~based on units~~awards to employees, consultants and directors to encourage superior performance. The ~~incentive plan~~LTIP reserves 2,500,000 common limited partner units for issuance in the form ofoptions, restricted units, phantom units, ~~distributable~~distribution equivalent rights, substitute awards, unit appreciation rights, unit awards, ~~profits~~profit interest units or other unit-based awards. The partnership measures unit-based compensation at fair value on the grant date, with no adjustments for estimated forfeitures. The partnership records noncash compensation expense related to ~~equity~~the 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 ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, is 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, 2016
15,009

$
15.99

Granted
12,834

18.70

Forfeited
(4,278)

18.70

Vested
(15,009)

15.99

Non-Vested at September 30, 2017
8,556

$
18.70

0.8


	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, 2018	18,582	$	16.96
Vested	(18,582)		16.96
Non-Vested at June 30, 2019	-	$	-	0.0

Stock-Based and Unit-Based Compensation Expense

Compensation costs for stock-based and unit-based payment plans during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 were approximately ~~$3.3~~$2.3 million and ~~$8.8~~$4.8 million, respectively, and ~~$2.4~~$3.0 million and ~~$7.0~~$5.4 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively.~~2018. At ~~September~~June 30, ~~2017,~~2019, there was ~~$16.2~~$15.9 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 2.0 years. The ~~potential~~ potential tax benefit related to stock-based payment is approximately ~~37.7%~~25.0% of these ~~expenses.~~expenses.

10. 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.

During 2016, diluted EPS was computed using the treasury stock method for the convertible debt instruments, by dividing net income by the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of the convertible debt instruments and any other outstanding dilutive securities. During the first quarter of 2017, the company changed its method for calculating dilutive EPS related to its convertible debt instruments from the treasury stock method to the if-converted method, as the company changed its financial strategy with respect to cash settlement of these instruments. As such, theThe company computed diluted EPS ~~for 2017~~ 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.

The basic and diluted EPS are calculated as follows (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016
Basic EPS:

Net income (loss) attributable to Green Plains
$
34,394

$
7,928

$
14,431

$
(8,019)
Weighted average shares outstanding - basic

41,348

38,282

40,008

38,301
EPS - basic
$
0.83

$
0.21

$
0.36

$
(0.21)

Diluted EPS:

Net income (loss) attributable to Green Plains
$
34,394

$
7,928

$
14,431

$
(8,019)
Interest and amortization on convertible debt, net of tax effect:

3.25% notes

840

-

3,582

-
4.125% notes

2,050

-

6,089

-
Net income (loss) attributable to Green Plains - diluted
$
37,284

$
7,928

$
24,102

$
(8,019)

Weighted average shares outstanding - basic

41,348

38,282

40,008

38,301
Effect of dilutive convertible debt:

3.25% notes

3,178

760

4,551

-
4.125% notes

6,071

-

6,071

-
Effect of dilutive stock-based compensation awards

50

94

63

-
Weighted average shares outstanding - diluted

50,647

39,136

50,693

38,301

EPS - diluted
$
0.74

$
0.20

$
0.48

$
(0.21)


	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
	2019		2018		2019		2018
Basic EPS:
Net loss attributable to Green Plains	$	(45,342)	$	(994)	$	(88,141)	$	(25,111)
Weighted average shares outstanding - basic		40,081		40,194		40,200		40,168
EPS - basic	$	(1.13)	$	(0.02)	$	(2.19)	$	(0.63)

EPS - diluted	$	(1.13)	$	(0.02)	$	(2.19)	$	(0.63)

~~For the nine months ended September 30, 2016, 10~~8 ~~thousand~~The anti-dilutive effect of 7.4 million and 7.0 million shares related to the company’s convertible debt and stock-based compensation awards ~~and convertible debt were~~have been excluded from ~~the computation of~~ diluted EPS for the three and six months ended June 30, 2019, respectively and 10.2 million and 10.1 million sharesfor the three and six months ended June 30, 2018, respectively, as the inclusion of these shares would have been antidilutive.

‎

11. STOCKHOLDERS’ EQUITY

Components of stockholders’ equity for the three and six months ended June 30, 2019 and 2018 are as follows (in thousands):



								Accum.					Total
				Additional				Other					Green Plains		Non-		Total
	Common Stock			Paid-in		Retained		Comp.		Treasury Stock			Stockholders'		Controlling		Stockholders'
	Shares	Amount		Capital		Earnings		Income		Shares	Amount		Equity		Interests		Equity

Balance, January 1, 2019	46,638	$	47	$	696,222	$	324,728	$	(16,016)	5,536	$	(58,162)	$	946,819	$	116,170	$	1,062,989
Net income (loss)	-		-		-		(42,799)		-	-		-		(42,799)		4,928		(37,871)
Cash dividends and ‎distributions declared	-		-		-		(4,847)		-	-		-		(4,847)		(5,487)		(10,334)
Other comprehensive loss ‎before reclassification	-		-		-		-		(6,883)	-		-		(6,883)		-		(6,883)
Amounts reclassified from ‎ accumulated other ‎comprehensive loss	-		-		-		-		10,376	-		-		10,376		-		10,376
Other comprehensive income, ‎net of tax	-		-		-		-		3,493	-		-		3,493		-		3,493
Proceeds from disgorgement of shareholders short-swing profits, net⁽¹⁾	-		-		5,023		-		-	-		-		5,023		-		5,023
Stock-based compensation	284		-		428		-		-	-		-		428		79		507
Balance, March 31, 2019	46,922		47		701,673		277,082		(12,523)	5,536		(58,162)		908,117		115,690		1,023,807
Net income (loss)	-		-		-		(45,342)		-	-		-		(45,342)		5,163		(40,179)
Cash dividends and ‎distributions declared	-		-		-		(4,871)		-	-		-		(4,871)		(5,487)		(10,358)
Other comprehensive loss ‎before reclassification	-		-		-		-		33,260	-		-		33,260		-		33,260
Amounts reclassified from ‎ accumulated other ‎comprehensive loss	-		-		-		-		3,440	-		-		3,440		-		3,440
Other comprehensive income, ‎net of tax	-		-		-		-		36,700	-		-		36,700		-		36,700
Issuance of 4.00% convertible notes due 2024, net of tax	-		-		22,537		-		-	-		-		22,537		-		22,537
Settlement of 3.25% convertible ‎notes due 2019, net of tax	-		-		(271)		-		-	-		-		(271)		-		(271)
Repurchase of common stock	-		-		-		-		-	3,197		(39,870)		(39,870)		-		(39,870)
Stock-based compensation	(3)		-		2,129		-		-	-		-		2,129		79		2,208
Balance, June 30, 2019	46,919	$	47	$	726,068	$	226,869	$	24,177	8,733	$	(98,032)	$	879,129	$	115,445	$	994,574

‎

Accum.

Total

Additional

Other

Green Plains
Non-
Total

Common Stock
Paid-in
Retained
Comp.
Treasury Stock
Stockholders'
Controlling
Stockholders'

Shares
Amount
Capital
Earnings
Loss
Shares
Amount
Equity
Interests
Equity

Balance, December 31, 2016
46,079
$
46
$
659,200
$
283,214
$
(4,137) 7,715
$
(75,816)
$
862,507
$
116,684
$
979,191
Net income
-

-

-

14,431

-
-

-

14,431

14,853

29,284
Cash dividends and
distributions declared
-

-

-

(14,053)

-
-

-

(14,053)

(15,214)

(29,267)
Other comprehensive loss
before reclassification
-

-

-

-

(9,436)
-

-

(9,436)

-

(9,436)
Amounts reclassified from
accumulated other
comprehensive loss
-

-

-

-

(34)
-

-

(34)

-

(34)
Other comprehensive loss,
net of tax
-

-

-

-

(9,470)
-

-

(9,470)

-

(9,470)
Repurchase of common stock
-

-

-

-

-
336

(5,733)

(5,733)

-

(5,733)
Exchange of 3.25%
convertible notes due
2018
-

-

18,326

-

-
(2,784)

27,356

45,682

-

45,682
Stock-based compensation
346

-

4,497

-

-
-

-

4,497

159

4,656
Stock options exercised
5

-

50

-

-
-

-

50

-

50
Balance, September 30, 2017
46,430
$
46
$
682,073
$
283,592
$
(13,607) 5,267
$
(54,193)
$
897,911
$
116,482
$
1,014,393


								Accum.					Total
				Additional				Other					Green Plains		Non-		Total
	Common Stock			Paid-in		Retained		Comp.		Treasury Stock			Stockholders'		Controlling		Stockholders'
	Shares	Amount		Capital		Earnings		Income		Shares	Amount		Equity		Interests		Equity

Balance, December 31, 2017	46,410	$	46	$	685,019	$	325,411	$	(13,110)	5,326	$	(55,184)	$	942,182	$	116,954	$	1,059,136
Reclassification of certain ‎tax effects from other ‎comprehensive loss⁽²⁾	-		-		-		2,787		(2,787)	-		-		-		-		-
Balance, January 1, 2018	46,410		46		685,019		328,198		(15,897)	5,326		(55,184)		942,182		116,954		1,059,136
Net income (loss)	-		-		-		(24,117)		-	-		-		(24,117)		4,662		(19,455)
Cash dividends and ‎distributions declared	-		-		-		(4,831)		-	-		-		(4,831)		(5,420)		(10,251)
Other comprehensive income ‎before reclassification	-		-		-		-		17,150	-		-		17,150		-		17,150
Amounts reclassified from ‎ accumulated other ‎comprehensive income	-		-		-		-		(603)	-		-		(603)		-		(603)
Other comprehensive income ‎net of tax	-		-		-		-		16,547	-		-		16,547		-		16,547
Stock-based compensation	284		1		(512)		-		-	-		-		(511)		60		(451)
Stock options exercised	5		-		50		-		-	-		-		50		-		50
Balance, March 31, 2018	46,699	$	47	$	684,557	$	299,250	$	650	5,326	$	(55,184)	$	929,320	$	116,256	$	1,045,576
Net income (loss)	-		-		-		(994)		-	-		-		(994)		4,745		3,751
Cash dividends and ‎distributions declared	-		-		-		(4,851)		-	-		-		(4,851)		(5,478)		(10,329)
Other comprehensive income ‎before reclassification	-		-		-		-		(4,277)	-		-		(4,277)		-		(4,277)
Amounts reclassified from ‎ accumulated other ‎comprehensive income	-		-		-		-		(581)	-		-		(581)		-		(581)
Other comprehensive income ‎net of tax	-		-		-		-		(4,858)	-		-		(4,858)		-		(4,858)
Exchange of 3.25% convertible ‎notes due 2018	-		-		-		-		-	-		1		1		-		1
Stock-based compensation	52		-		2,812		-		-	-		-		2,812		60		2,872
Stock options exercised	10		-		100		-		-	-		-		100		-		100
Balance, June 30, 2018	46,761	$	47	$	687,469	$	293,405	$	(4,208)	5,326	$	(55,183)	$	921,530	$	115,583	$	1,037,113

(1)During the three months ended March 31, 2019, the company received $6.7 million from a shareholder of the company for disgorgement of shareholder short-swing profits under Section 16(b) under the Exchange Act. The amount was recorded as an increase to additional paid-in capital, net of tax.

(2)Effective January 1, 2018, the company early adopted the amended guidance in ASC 220, Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amendment eliminates the stranded tax effects resulting from the Tax Cuts and Jobs Act and is intended to improve the usefulness of information reported. As a result, the company recorded a $2.8 million reclassification from accumulated other comprehensive income to retained earnings during the first quarter of 2018.

Amounts reclassified from accumulated other comprehensive income ~~(loss)~~ are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Statements of Operations	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,				Statements of ‎Operations
	2017		2016		2017		2016		Classification	2019		2018		2019		2018		Classification
Gains on cash flow hedges:
Gains (losses) on cash flow hedges:
Commodity derivatives	$	(5,242)	$	25,254	$	1,734	$	12,029	Revenues	$	(4,352)	$	(313)	$	(17,711)	$	1,448	Revenues
Commodity derivatives		(1,861)		(28,548)		(1,679)		(15,904)	Cost of goods sold		(35)		1,079		(192)		101	Cost of goods sold
Total		(7,103)		(3,294)		55		(3,875)	Income (loss) before income taxes		(4,387)		766		(17,903)		1,549	Loss before income taxes
Income tax expense (benefit)		(2,650)		(1,144)		21		(1,369)	Income tax expense (benefit)		(947)		185		(4,087)		365	Income tax benefit
Amounts reclassified from accumulated other comprehensive income (loss)	$	(4,453)	$	(2,150)	$	34	$	(2,506)
Amounts reclassified from accumulated ‎other comprehensive income (loss)										$	(3,440)	$	581	$	(13,816)	$	1,184

12. INCOME TAXES

The company records actual income tax expense or benefit during interim periods rather than on an annual effective tax rate method. Certain items are given discrete period treatment and the tax effect of those items are reported in full in the relevant interim period. 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 pre-tax income or loss attributable to the noncontrolling interest in the partnership.

The ~~2017~~company recorded income tax benefit of $14.7 million and $29.1 million for the three and six months ended June 30, 2019, compared with $10.8 million and $16.8 million for the same periods in 2018.The amount of unrecognized tax benefits for uncertain tax positions was $51.6 million as of June 30, 2019 and December 31, 2018.

The 2019 effective tax rate can be affected by variances ~~among~~in the estimates and amounts of taxable income among the various states, entities and activity types, realization of tax credits, adjustments from resolution of tax matters under review, valuation allowances and the company’s assessment of its liability for uncertain tax positions.

~~Income tax benefit was $48.8 million~~13. COMMITMENTS AND CONTINGENCIES

Adoption of ASC 842

On January 1, 2019, the company adopted the amended guidance in ASC 842, Leases, and all related amendments (“new lease standard”) and applied it to all leases using the optional transition method which requires the amended guidance to be applied at the date of adoption. The standard does not require the guidance to be applied to the earliest comparative period presented in the financial statements. As such, comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The new lease standard had a material impact on the company’s consolidated balance sheets, increasing total assets and total liabilities by $60.9 million upon adoption. It did not have an impact on the consolidated statement of operations for the six months ended June 30, 2019.

The impact on the consolidated balance sheet as of December 31, 2018 for the adoption of the new lease standard was as follows (in thousands):


	Balance at		Adjustments		Balance at
	December 31,		Due to		January 1,
	2018		ASC 842		2019
		(audited)
Assets
Operating lease right-of-use assets	$	-	$	61,268	$	61,268
Other assets		365		(365)		-

Liabilities
Accounts payable		196		(196)		-
Operating lease current liabilities		-		18,315		18,315
Operating lease long-term liabilities		-		46,024		46,024
Other liabilities		3,240		(3,240)		-

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.

Practical Expedients

Under the new lease standard, companies may elect various practical expedients upon adoption. The company elected the package of practical expedients related to transition, which states that an entity need not reassess initial direct costs for existing leases, the lease classification for any expired or existing leases, and whether any expired or existing contracts are or contain leases.

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.

The company also elected the practical expedient for lessees to include both the lease and non-lease components as a single component and account for them as a 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 elected to combine with the monthly rental payment and account 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 elected to combine the cost of services with the land lease cost and account for the total as operating lease expense.

A lessee may elect not to apply the recognition requirements in the new lease standard for short-term leases. Instead, the lease payments may be recognized into profit or loss on a straight-line basis over the lease term. The company has elected to use this short-term lease exemption, and therefore will not record a lease liability or right-of-use asset for leases with a term of one year or less. The company did not incur any short-term lease expense for the three and ~~nine~~six months ended ~~September~~June 30, 2017, respectively, compared with income tax expense of $5.1 million and income tax benefit of $4.3 million for the three and nine months ended September 30, 2016, respectively. The variation in tax expense was due primarily to the company’s recognition of tax benefits related to R&D Credits. 2019.

~~A study was conducted to determine whether certain activities the company performs qualify for the R&D credit allowed~~ Lease Expense

by the Internal Revenue Code Section 41. As a result of this study, the company concluded these activities do qualify for the credit and determined it was appropriate to claim the benefit of these credits for all open tax years.

During the quarter ended September 30, 2017, the company recognized a net tax benefit of $49.5 million for federal and state R&D Credits relating to tax years 2013 to 2016 as well as an estimated year-to-date tax benefit for federal and state R&D Credits for the 2017 tax year. Of this amount, $9.0 million ($5.9 million net) in refundable credits not dependent upon taxable income was recorded as a reduction of cost of goods sold and $43.6 million was recorded as an income tax benefit.

~~The amount of unrecognized tax benefits for uncertain tax~~ ~~positions was $27.3 million~~ ~~as of September 30, 2017, and $0.2 million as of December 31, 2016. Recognition of these benefits would have a favorable impact on the company’s effective tax rate.~~

~~13. COMMITMENTS AND CONTINGENCIES~~

~~Operating Leases~~

The company leases certain facilities, ~~equipment and~~ parcels of land, ~~under agreements that expire at various dates. For accounting purposes, rent expense is based~~and equipment, with remaining terms ranging from less than one year to 18.3 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 ~~amortization~~basis over the lease term.

The components of lease expense are as follows (in thousands):


	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Lease expense
Operating lease expense	$	5,406	$	10,955
Variable lease expense ⁽¹⁾		242		393
Total lease expense	$	5,648	$	11,348

(1)Represents amounts incurred in excess of the ~~total~~minimum payments required ~~over~~for the ~~lease. The company incurred~~handling and unloading of railcars for a certain land lease, ~~expenses~~ offset by railcar lease abatements provided by the lessor when railcars are out of ~~$11.2 million and $33.4 million~~ service during ~~the three and nine months ended September 30, 2017, respectively, and $9.1 million and $27.2 million during the three and nine months ended September 30, 2016, respectively.~~periods of maintenance or upgrade.

Supplemental cash flow information related to operating leases is as follows (in thousands):


	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,386	$	10,936

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	6,207	$	6,207

Supplemental balance sheet information related to operating leases is as follows:



	June 30, 2019
Weighted average remaining lease term		6.7 years

Weighted average discount rate		5.45%

‎

Aggregate minimum lease payments under ~~these~~the operating lease agreements for the remainder of ~~2017~~2019 and in future years are as follows (in thousands):


Year Ending December 31,	Amount		Amount
2017	$	10,168
2018		28,976
2019		19,544	$	10,143
2020		13,160		18,297
2021		6,444		10,349
2022				8,324
2023				4,747
Thereafter		22,105		22,024
Total	$	100,397		73,884
Less: Present value discount				(13,109)
Lease liabilities			$	60,775

~~Commodities~~Aggregate minimum lease payments remaining under the operating lease agreements under ASC 840, Leases as of December 31, 2018 are as follows (in thousands):


Year Ending December 31,	Amount
2019	$	23,552
2020		17,473
2021		9,812
2022		7,325
2023		3,594
Thereafter		28,542
Total	$	90,298

Lease Revenue

As described in Note 2 – 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 2 – Revenue for further discussion on lease revenue.

Commodities

As of ~~September~~June 30, ~~2017,~~2019, the company had contracted future purchases of grain, corn oil, natural gas, crude oil, ethanol, distillers grains and cattle, valued at approximately ~~$454.4~~$433.9 million.

Legal

In November 2013, the company acquired two ethanol plants located in Fairmont, Minnesota and Wood River, Nebraska. There is ongoing litigation related to the consideration for this acquisition. On August 19, 2016, the Delaware Superior Court granted Green Plains’ motion for summary judgment in part and held that the seller’s attempt to disclaim liability for certain shortfall amounts through the use of a disclaimer provision was ineffective. Based on the court order, the company determined that previously accrued contingent liabilities of approximately $6.3 million no longer represented probable losses. These accruals were reversed as a reduction of cost of goods sold during the year ended December 31, 2016, because the adjustment relates to a reduction in the cost of inventory purchased in the acquisitions. The court has directed the company and the seller to work together to determine the precise shortfall amount due to Green Plains. The company believes the remaining amount due to Green Plains is approximately $5.5 million; however, the seller has the right to dispute the details of the calculation and appeal the underlying Superior Court order. Accordingly, the total amount Green Plains may receive is yet to be determined. The remaining amount due to the company represents a gain contingency which will not be recorded until all contingencies are resolved.

~~In addition to the above-described proceeding, the~~ company is currently involved in litigation that has arisen induring 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.

14. RELATED PARTY TRANSACTIONS

~~Commercial Contracts~~

Three subsidiaries of the company have executed separate financing agreements for equipment with Amur Equipment Finance. Gordon Glade, a member of the company’s board of directors, is a shareholder of Amur Equipment Finance. ~~Balances of~~ approximately $638 thousand and $808 thousand related to these financing arrangements were included in debt at September 30, 2017, and December 31, 2016, respectively. Payments, including principal and interest, totaled $69 thousand and $207 thousand during each of the three and nine months ended September 30, 2017 and 2016, respectively. The weighted average interest rate for the financing agreements with Amur Equipment Finance was 6.8%.

~~Aircraft Leases~~

Effective ~~August~~January 1, ~~2017,~~2015, the company entered into two agreements with an entity controlled by Wayne Hoovestol for the lease of two ~~aircrafts, replacing the prior agreements.~~aircrafts. Mr. Hoovestol is chairman of the company’s board of directors. The company agreed to pay ~~$11,589~~$9,766 per month for the combined use of up to 125 hours per year of the aircrafts. Flight time in excess of 125 hours per year will incur additional hourly ~~charges~~. charges. Payments related to these leases totaled ~~$39~~$35 thousand and ~~$141~~$69 thousand during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~ 2019, respectively, and ~~$49~~$30 thousand and ~~$137~~$87 thousand during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2018, respectively. The company had $2 thousand in outstanding payables related to these agreements ~~at September~~as of June 30, ~~2017,~~2019 and no outstanding payables related to these agreements atas of December 31, ~~2016.~~2018.

‎

15. SUBSEQUENT EVENTS

On ~~October 27, 2017,~~July 19, 2019, the ~~partnership upsized its revolving credit facility by $40 million, from $155 million to $195 million, by accessing a portion~~company closed on the issuance of the ~~$100~~additional $10.0 million ~~incremental commitment~~aggregate principal amount of the 4.00% convertible notes due in ~~place~~2024 under the previously announced private offering which closed on June 21, 2019 (the “Option Notes”) to the ~~facility.~~initial purchasers. The Option Notes resulted in net proceeds to the company, after deducting commissions and the company’s offering expenses, of approximately $9.5 million. The company intends to use the additional proceeds for general corporate purposes. After the issuance of the Option Notes, total aggregate principal of the 4.00% notes was $115.0 million.

The Option Notes will have the same terms as the 4.00% notes issued on June 21, 2019, and will be issued under the same Indenture dated as of June 21, 2019 between the company and Wilmington Trust, National Association, as trustee. For additional information related to the 4.00% notes, see Note 8 – Debt included as part of the notes to consolidated financial statements.

‎

3034

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

The following discussion and analysis provides information we believe is relevant to understand our consolidated financial condition and results of operations. This discussion should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements contained in this report together with our annual report on Form 10-K for the year ended December 31, ~~2016.~~2018.

Cautionary Information Regarding Forward-Looking Statements

Forward-looking statements are made in accordance with safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations that involve a number of risks and uncertainties and do not relate strictly to historical or current facts, but rather to plans and objectives for future operations. These statements may be identified by words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “outlook,” “plan,” “predict,” “may,” “could,” “should,” “will” and similar expressions, as well as statements regarding future operating or financial performance or guidance, business strategy, environment, key trends and benefits of actual or planned acquisitions.

Factors that could cause actual results to differ from those expressed or implied in the forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A – Risk Factors of our annual report on Form 10-K for the year ended December 31, ~~2016,~~2018, or incorporated by reference. Specifically, we may experience ~~significant~~ fluctuations in future operating results due to a number of economic conditions, including: competition in the ethanol industry and other industries in which we operate; commodity market risks, including those that may result from weather conditions; financial market risks; counterparty risks; risks associated with changes to government policy or regulation, including changes to tax laws; risks related to ~~acquisitions~~acquisition and disposition activities and achieving anticipated results; risks associated with merchant trading, cattle feeding operations ~~vinegar production~~ and other ~~risk~~ factors detailed in reports filed with the SEC. Additional risks related to Green Plains Partners LP include compliance with commercial contractual obligations, potential tax consequences related to our investment in the partnership and risks disclosed in the partnership’s SEC filings associated with the operation of the partnership as a separate, publicly traded entity.

We believe our expectations regarding future events are based on reasonable assumptions; however, these assumptions may not be accurate or account for all risks and uncertainties. Consequently, forward-looking statements are not guaranteed. Actual results may vary materially from those expressed or implied in our forward-looking statements. In addition, we are not obligated ~~nor~~and do wenot intend to update our forward-looking statements as a result of new information unless it is required by applicable securities laws. We caution investors not to place undue reliance on forward-looking statements, which represent management’s views as of the date of this report or documents incorporated by reference.

Overview

Green Plains is a diversified commodity-processing business with operations related to ethanol production, grain handling and storage, cattle feedlots, food ingredients, and commodity marketing and logistics services. We are focused on generating stable operating margins through our diversified business segments and risk management strategy. Green Plains Partners LP is our primary downstream logistics provider, storing and delivering the ethanol we produce. We own a ~~62.5%~~49.1% limited partner interest, a 2.0% general partner interest and all of the partnership’s incentive distribution rights. The public owns the remaining ~~35.5%~~48.9% limited partner interest. The partnership is consolidated in our financial statements.

We are currently undergoing a number of project initiatives to improve margins. Through our Project 24 initiative, we anticipate reductions in operating expense per gallon across our non-ICM plants as a result of these investments. In addition, through our high-protein initiative, we expect to achieve increased margins per gallon as a result of the ability to produce various high protein animal feed products. The first installation is expected to be completed at our Shenandoah plant by the end of 2019, with the remaining locations being completed over the course of the next three years.

Recent Developments

4.00% Convertible Notes due in 2024

convertible senior notes due October 1, 2019, including accrued and unpaid interest, in privately negotiated transactions concurrently with the offering.

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 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. In addition, we may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including the calling of the 4.00% notes for redemption. We may settle the 4.00% notes in cash, common stock or a combination of cash and common stock. At June 30, 2019, the outstanding principal balance was $73.9 million on the 4.00% notes. For additional information related to the 4.00% notes, see Note 8 – Debt included as part of the notes to consolidated financial statements.

On July ~~28, 2017,~~19, 2019, we ~~amended our~~ closed on the issuance of the additional $10.0 million aggregate principal amount of the 4.00% notes to the initial purchasers. The Option Notes provided us with net proceeds, after deducting commissions and the company’s offering expenses, of approximately $9.5 million. The Option Notes have the same terms as the 4.00% notes issued on June 21, 2019, and were issued under the same Indenture dated as of June 21, 2019. After the issuance of the Option Notes, total aggregate principal of the 4.00% notes was $115.0 million.

Extension of Offer Period – JGP Energy Partners

Effective June 30, 2019, we agreed with the partnership to extend the offer period related to the potential purchase of the Green Plains ~~Trade~~interest in the JGP Energy Partners Beaumont, Texas terminal until September 30, 2019.

Ninth Amendment to Credit Agreement – Green Plains Grain Company LLC

On June 28, 2019, we entered into an amendment of our senior secured asset-based revolving credit facility. This Ninth Amendment to the Credit Agreement was completed to renew and extend the existing maturity date from July 26, 2019 to June 28, 2022 and lowered the senior secured asset-based revolving credit facility ~~to increase the maximum commitment~~ from ~~$150.0~~$125.0 million to ~~$300.0 million~~$100.0 million.

Suspension of Quarterly Cash Dividend

On June 18, 2019, we announced that our board of directors has decided to suspend our quarterly cash dividend in order to retain and ~~extend~~redirect cash flow to our Project 24 operating expense equalization plan, the ~~maturity~~ ~~date to July 28, 2022. The~~ ~~amended credit facility increases advance rates~~deployment of high-protein technology and modifies the eligible inventory definitions to include additional commodities and locations. 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.our stock repurchase program.

On August 29, 2017, the company entered into a $500.0 million term loan agreement which matures on August 29, 2023, to refinance approximately $405.0 million of total debt outstanding issued by Green Plains Processing and Fleischmann’s Vinegar Company, pay associated fees and expenses and for general corporate purposes. The term loan is guaranteed by the company and substantially all of its subsidiaries, but not Green Plains Partners and certain other entities, and secured by substantially all of the assets of the company, including 17 ethanol production facilities, vinegar production facilities and a

~~second priority lien on the assets secured under the revolving credit facilities at Green Plains Trade, Green Plains Cattle and Green Plains Grain.~~

In November of 2017, we anticipate completion of the Phase I development of intermodal export and import fuels terminal at Jefferson Gulf Coast Energy Partner’s existing Beaumont, Texas terminal. We anticipate offering our interest in the joint venture to the partnership once all phases of commercial development are completed.

Results of Operations

During the ~~third~~second quarter of ~~2017,~~2019, we ~~resumed~~continued to experience a weak margin environment. Our operating strategy, including the operating cost savings initiative, is to increase utilization rates ~~aligned with historic levels following idled~~and efficiency while reducing operating expenses to achieve improved margins in the current environment. As a result, capacity ~~at several plants in response to the weak margin environment during the previous quarter. We operated our ethanol production facilities at approximately 83.7%~~utilization increased from an average of 56.0% of capacity ~~resulting~~ in ~~ethanol~~the first quarter to 80.0% of capacity in the second quarter. Ethanol production ~~of 313.6~~was 224.0 mmg for the ~~third~~second quarter of ~~2017,~~2019, compared with ~~292.2~~296.3 mmg ~~or 92.5% of capacity,~~ for the same quarter last year. ~~Ethanol production capacity was increased with~~We expect to continue to run at higher average utilization rates to achieve the cost savings anticipated. Additionally, overall performance at our ~~acquisitions of the Madison, Illinois, Mount Vernon, Indiana,~~ethanol plants and ~~York, Nebraska plants, acquired on September 23, 2016.~~

~~Industry Trends~~cattle feeding operations were negatively impacted by severe weather and ~~Factors Affecting our Results of Operations~~

~~Seasonal summer driving demand was met by increased ethanol production~~associated flooding in areas where we transport products during the ~~third quarter~~first half of ~~2017.~~ 2019. The weather also drove corn prices up, negatively impacting margins.

U.S. Ethanol Supply and Demand

According to the EIA, ~~average daily~~ domestic ethanol production ~~was 1.03 million barrels per day during the third quarter of 2017, up slightly from 1.00~~averaged 1.05 million barrels per day during the second quarter of ~~2017. Average daily production increased 4% year-to-date compared with~~2019, which was 1% higher than the ~~same period~~1.04 million barrels for the second quarter of last ~~year due to incremental expansion by existing facilities to optimize production. Weekly refiner~~year. Refiner and blender input volume ~~which is linked to consumer demand, also~~ increased 1% ~~year-to-date~~to 938 thousand barrels per day for the second quarter of 2019, compared with 930 thousand barrels per day for the same quarter last year. Gasoline demand for the first quarter of 2019 increased slightly by 11 thousand barrels per day, or 0.1% compared to the same quarter last year. U.S. domestic ethanol ending stocks increased by approximately 0.9 million barrels, or 4%, to 22.8 million barrels for the second quarter of 2019. At the end of May 2019, the EPA finalized regulatory changes to apply the 1 pound per square inch Reid Vapor Pressure (RVP) waiver that currently applies to E10 during the summer months so that it applies to E15 as well. This removes a significant barrier to wider sales of E15 in the summer months, thus expanding the market for ethanol in transportation fuel. As of July 12, 2019, there were approximately 1,826 retail stations selling E15 in 31 states, up from 1,700 at the beginning of the year, according to Growth Energy.

Global Ethanol Supply and Demand

According to the USDA Foreign Agriculture Service, domestic ethanol exports for the first five months of 2019 were approximately 631.5 mmgy, down 19% from 776.2 mmgy for the same period ~~last year, helped~~of 2018. Brazil remained the largest export destination for U.S. ethanol, which accounted for 30% of domestic ethanol export volume despite the 20% tariff on U.S. ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter, imposed in September 2017 by Brazil’s Chamber of Foreign Trade, or CAMEX. Canada, India and South Korea accounted for 18%, 15% and 7%, respectively, of U.S. ethanol exports.

On April 1, 2018, China announced it would add an additional 15% tariff to the ~~growing number~~existing 30% tariff it had earlier imposed on ethanol imports from the United States and Brazil. China later raised the tariff further to 70% as the trade war escalated. There continues to be negotiations between the U.S. and China with no certainty of ~~retail gasoline stations offering higher ethanol blends~~when a trade agreement may be reached.

The cost to ~~consumers. According to Growth Energy, 1,043 retail stations were selling E15~~produce the equivalent amount of starch found in sugar from $3.50-per-bushel corn is 7 cents per pound. The average price of sugar remained at ~~October 5, 2017, up from 431 stations at December 31, 2016. Average daily gasoline demand was flat~~approximately 13 cents per pound during the ~~third~~second quarter of 2017, slowing by 1.5% for the nine months ended September 30, 2017, compared with the same periods in 2016. Ethanol futures traded at an average discount of $0.11 to RBOB during the third quarter. At September 30, 2017, domestic ethanol inventory of 21.5 million barrels was 1.4 million barrels higher than the ending stocks at the same time last year. Increased export volumes have partially offset the difference between increased production and blending volumes year over year.

2019. We currently estimate that net ethanol exports will reach between ~~1.1~~1.4 billion gallons and ~~1.3~~1.5 billion gallons in ~~2017. Year-to-date domestic ethanol exports through August 30, 2017, were 906.5 mmg, up 53%~~2019 based on historical demand from a variety of countries and certain countries who seek to improve their air quality and eliminate MTBE from their own fuel supplies.

Co-Product Supply and Demand

During the ~~comparable period in 2016. Brazil accounted~~second quarter of 2019, the market sentiment for ~~37%~~cattle feeding remained positive on strong forward margins, while worries around feed cost have tempered some expectations due to the late planting of the domestic ~~ethanol~~corn crop. Feeder supplies remain robust as a wet winter and spring have allowed stocker operations to expand. Domestic beef consumption per capita in 2019 is projected to increase 0.4 pounds to 57.6 pounds compared with 2018. Export demand for beef is forecasted to decrease approximately 0.3% in 2019 compared with 2018 according to the USDA.

Cow-calf operations continue to be profitable, which has supported a period of expansion. Excellent pasture conditions after a wet winter and spring will help to promote herd expansion, but supplemental feed cost could be a headwind in the near future. Year-to-date domestic cattle on feed increased 1.6% to 11.74 million head through June 1, 2019, compared to the same period last year.

Packer demand was driven by strong margins during the second quarter of 2019. Total fed cattle marketings through the end of May 2019 increased 0.8% compared with the first five months of 2018. Slaughter capacity constraints, primarily due to labor shortages, have limited the packers’ ability to increase slaughter rates at the same pace as cattle on feed inventories, resulting in higher packer margins. However, these higher margins should incentivize the packers to increase slaughter capacity, which will be crucial for cattle feeding margins moving forward.

The U.S. looks poised to grow its global market share for animal protein while Australia continues to struggle with drought conditions, and African Swine Fever (“ASF”) issues in China should result in larger world export ~~volumes, while~~demand for animal protein from the U.S.

Year-to-date U.S. distillers grains exports through May 31, 2019, were 4.4 million metric tons, or 5.3% lower than the same period last year, according to the USDA Foreign Agriculture Service. Mexico, South Korea, Vietnam, Indonesia, Turkey, Canada ~~India, the Philippines~~ and ~~United Arab Emirates~~Japan accounted for ~~24%~~approximately 69% of total U.S. distillers export volumes.

While ASF may have a positive impact on animal protein demand from the U.S., ~~11%, 5%~~it may have a negative impact on distillers grains exports and ~~4%, respectively.~~domestic usage. ASF may depress soybean meal demand in China which could make the animal feed more price competitive to distillers grains and allow for substitution of high-protein soybean meal worldwide.

Legislation and Regulation

We are sensitive to government programs and policies that affect the supply and demand for ethanol and other fuels, which in turn may impact the volume of ethanol and other fuels we handle. Various bills have been discussed in the House and Senate which would eliminate the RFS entirely, eliminate the corn based ethanol portion of the mandate, or make it more

difficult to sell fuel blends with higher levels of ethanol. However, we believe it is unlikely any of these bills will be passed in a divided Congress.

Federal mandates supporting the use of renewable fuels are a significant driver of ethanol demand in the U.S. Ethanol policies are influenced by environmental concerns, diversifying our fuel supply, and an interest in reducing the country’s dependence on foreign oil. Consumer acceptance of flex-fuel vehicles and higher ethanol blends of ethanol in non-flex-fuel vehicles may be necessary before ethanol can achieve further growth in U.S. market share. Congress first enacted Corporate Average Fuel Economy (CAFE) in 1975 to reduce energy consumption by increasing the fuel economy of cars and light trucks. It provides a 54% efficiency bonus to flexible-fuel vehicles, which can operate on ethanol blends up to E85.

Another important factor is a waiver in the Clean Air Act, known as the One-Pound Waiver, which allows E10 to be sold year-round, even though it exceeds the Reid Vapor Pressure limitation of nine pounds per square inch. At the end of May 2019, the EPA finalized a rule which extended the One-Pound Waiver to E15 expanding it beyond flex-fuel vehicles during the June 1 to September 15 summer driving season. This rule is being challenged in an action filed in Federal District Court for the DC Circuit. However, the One-Pound Waiver is in effect, and E15 is being sold during the summer driving season.

When the RFS II was passed in 2007 and rulemaking finalized in October 2010, the required volume of conventional renewable fuel to be blended with gasoline was to increase each year until it reached 15.0 billion gallons in 2015. In November 2018, the EPA announced it would maintain the 15.0 billion gallon mandate for conventional ethanol in 2019. On July 5, 2019, the EPA released an annual proposal for RFS volumes, which included 15.0 billion gallons for conventional renewable fuel in 2020.

The EPA has the authority to waive the mandates in whole or in part if there is inadequate domestic renewable fuel supply or the requirement severely harms the economy or environment. According to the RFS II, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. While conventional ethanol maintained 15 billion gallons, 2019 is the second year that the total proposed RVOs are more than 20% below statutory volumes levels. Thus, the EPA Administrator has directed his staff to initiate a reset rulemaking, wherein the EPA will modify statutory volumes through 2022, based on the same factors used to set 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.

The EPA assigns individual refiners, blenders, and importers the volume of renewable fuels they are obligated to use based on their percentage of total domestic transportation fuel sales. Obligated parties use RINs to show compliance with 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 affects the price of ethanol in certain markets and influences the purchasing decisions by obligated parties.

The EPA can, in consultation with the Department of Energy, waive the obligation for individual refineries that are suffering “disproportionate economic hardship” due to compliance with the RFS. To qualify, the refineries must be under total throughput of 75,000 barrels per day and state their case for an exemption in an application to the EPA each year.

The Trump administration waived the obligation for 19 of 20 applicants for compliance year 2016, totaling 790 million gallons, and 35 of 37 for compliance year 2017, totaling 1.82 billion gallons. These waivers effectively reduce the annual RVO by that amount, since the EPA does not reallocate the waived gallons to other obligated parties. The resulting surplus of RINs in the market has brought values down significantly to under $0.20. Since higher RIN values help to make higher blends of ethanol more cost competitive, lower RIN values could hinder or at least slow retailer and consumer adoption of E15 and higher blends. We believe there are 38 waiver applications pending for compliance year 2018, which could represent approximately 2 billion gallons of renewable fuel obligations.

Biofuels groups and biofuels opposition groups each have filed lawsuits related to RFS II. In addition to the E15 litigation discussed previously, biofuels groups have filed in the U.S. Federal District Court for the D.C. Circuit, challenging the 2019 RVO rule over the EPA’s failure to address small refinery exemptions in the rulemaking. Biofuel opposition groups have filed also in the DC Circuit, with such action consolidated with similar cases, to review the EPA’s 2018 RVO rulemaking. Biofuel groups have filed an action in the DC Circuit to compel EPA to produce information under the Freedom of Information Act related to small refinery exemptions. Certain biofuel groups have further filed suit in the Tenth Circuit Court of Appeals challenging small refinery exemption. Numerous other suits on related RFS II matters are also pending, namely involving RVOs and small refinery exemptions.

In 2017, the D.C. Circuit ruled in favor of biofuel groups against the EPA related to its decision to lower the 2016 volume requirements by 500 million gallons. As a result, the Court remanded to the EPA to make up for the 500 million gallons. Despite this, in the July 2019 proposed RVO rulemaking, the EPA stated it does not intend to make up the 500 million gallons as the court directed, citing potential burden on obligated parties. It is anticipated that litigation will ensue from this matter.

Government actions abroad can significantly impact the demand for U.S. ethanol. In September ~~13,~~ 2017, China’s National Development and Reform Commission, the National Energy Board 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, ~~has~~ imported negligible volumes ~~year-to-date~~during fiscal year 2018 due to a 30% tariff ~~imposed~~ on U.S. ~~and Brazil fuel~~ ethanol, which ~~took effect on January 1, 2017, and there~~increased to 70% in early 2018. There is no assurance ~~the recently issued~~that China’s joint plan will lead to increased imports of U.S. ~~ethanol. On September 1, 2017, Brazil’s Chamber~~ethanol in the near term. Our exports also face tariffs, rate quotas, countervailing duties, and other hurdles in Brazil, the European Union, India, Peru, and elsewhere, which limits our ability to compete in some markets.

In Brazil, the Secretary 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.~~quarter in September 2017. The ruling is valid for two ~~years.~~ years, and is set to expire at the end of August 2019. It remains unclear if Brazil will apply the 20% tariff to all gallons after that date, if they will expand the gallons they allow in duty free, or if they will reduce the tariff for all gallons.

In ~~Mexico, four lawsuits challenging the~~ June 2017, ~~decision by~~ the Energy Regulatory Commission of Mexico (CRE) ~~to approve~~approved the use of 10% ethanol blends, which was challenged by ten lawsuits. Four cases were dismissed. ~~A fifth lawsuit was allowed~~The six remaining cases follow one of two tracks: 1) to ~~proceed for judicial review, despite precedent set by~~determine the ~~Mexico Supreme Court for dismissal. The CRE is expected to defend its position before the judge makes a final decision. Should the judge rule in favor~~constitutionality of the ~~plaintiff,~~CRE regulation, or 2) to determine the ~~case will go~~benefits, or lack thereof, of introducing E10 to Mexico. An injunction was granted in October 2017, preventing the ~~Supreme Court.~~blending and selling of E10, but was overturned by a higher court in June 2018 making it legal to blend and sell E10 by PEMEX throughout Mexico except for its three largest metropolitan areas. U.S. ethanol exports to Mexico totaled 2929.4 mmg in ~~2016.~~2018.

On July 5, 2017, the EPA proposed maintaining the RVOs for conventional ethanol at 15.0 billion gallons while lowering the volume obligations for advanced alternatives, reducing the overall biofuel target to 19.24 billion gallons for 2018. On September 26, 2017, the EPA issued a Notice of Data Availability for comment, proposing to further reduce the 2018 advanced biofuel volume requirement by 315 mmg, to 3.77 billion gallons, and the total renewable fuel requirement to 18.77 billion gallons, leaving conventional ethanol at 15.0 billion gallons. According to RFS II, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. Since 2018 is the first year the total proposed RVOs are more than 20% below statutory levels, the EPA Administrator directed his staff to initiate the required technical analysis to perform any future reset consistent with the reset rules. If 2019 RVOs are also more than 20% below statutory levels, the RVO reset will be triggered under RFS II and the EPA will be required to modify statutory volumes through 2022 within one year of the trigger event, based on the same factors used to set the RVOs post-2022.

The U.S. Federal District Court for the D.C. Circuit ruled on July 28, 2017, in favor of the Americans for Clean Energy and its petitioners against the EPA related to its decision to lower the 2016 volume requirements. The Court concluded the EPA erred in how it interpreted the “inadequate domestic supply” waiver provision of RFS II, which authorizes the EPA to consider supply-side factors affecting the volume of renewable fuel available to refiners, blenders, and importers to meet the statutory volume requirements. The waiver provision does not allow the EPA to consider the volume of renewable fuel available to consumers or the demand-side constraints that affect the consumption of renewable fuel by consumers. As a result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through its waiver authority, which the EPA is expected to address. We believe this decision will benefit the industry overall, with the EPA’s waiver analysis now limited to supply considerations only, and expect the primary impact will be on the RINs market.

Year-to-date U.S. distillers grains exports through August 30, 2017, were 7.3 million metric tons, approximately 4% lower than year-to-date distillers grains exports for the same period last year. Mexico, Turkey, South Korea, Canada, Thailand and Indonesia accounted for 62% of total U.S. distillers export volumes, according to the EIA. On September 1, 2017, the Minister of Agriculture and Rural Development of Vietnam lifted the suspension which blocked imports of U.S. dried distillers grains since January 2017.

On October 19, 2017, the EPA Administrator reiterated his commitment to the text and spirit of the RFS II. In a letter to seven Senators from the Midwestern states, he stated the EPA will meet the November 30, 2017, deadline for issuing RVOs and the EPA’s preliminary analysis suggests that final RVOs should be set at amounts at or greater than those provided on July 5, 2017. Moreover, the EPA is actively exploring its authority to issue an RVP waiver and will be pursuing action on RINs involving ethanol exports.

On October 25, 2017, the Master Limited Partnership Parity Act was introduced in the Senate and House of Representatives (H.R. 4118), proposing to expand the definition of qualified sources of income to include clean energy resources, such as ethanol production, and infrastructure projects by publicly traded partnerships. Currently, qualifying income includes the transportation and storage of ethanol and certain specific alternative fuels.

World demand for U.S. beef has risen as diets continue to improve worldwide to include increased animal protein. In June of 2017, the U.S. resumed exporting beef to China, following a 13-year ban the Trump Administration lifted as part of a new bilateral agreement between the countries.

Comparability of our Financial Results

~~As a result of acquisitions during 2016, we implemented segment organizational changes during the fourth quarter of 2016, whereby we now~~We report the financial and operating performance infor the following four operating segments: (1) ethanol production, which includes the production of ethanol and distillers grains, and recovery of corn oil, (2) agribusiness and energy services, which includes grain handling and storage, ~~and~~commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities, (3) food and ingredients, which includes cattle ~~feedlots, vinegar production~~feeding and food-grade corn oil operations and included vinegar production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018 and (4) partnership, which includes fuel storage and transportation services. ~~Prior periods have been reclassified to conform to~~

The three and six months ended June 30, 2019 do not include operations of the ~~revised segment presentation.~~

~~We have re-evaluated~~Bluffton, Lakota, Hopewell and Riga ethanol plants which were either permanently closed or sold during the ~~profitability measure~~fourth quarter of ~~our reportable segments’ operating performance~~2018. Additionally, the three and have determined that segment EBITDA (earnings before interest, taxes, depreciation and amortization) is primarily used by our management to evaluate segment operating activities, and therefore is a more meaningful profitability measure than the previously reported segment operating income. In addition, EBITDA is a financial measure that is widely used by analysts and investors in our industries. As a result, we are now including segment EBITDA as a performance measure.

~~Effective April 1, 2016, we increased our ownership of BioProcess Algae, a joint venture formed in 2008, to 82.8% and currently own~~ ~~approximately 90.0%.~~ ~~Beginning April~~ ~~1, 2016,~~ ~~we consolidate the financial results of BioProcess Algae, and record a noncontrolling interest for the economic interest~~six months ended June 30, 2019 do not include Fleischmann’s Vinegar operations, which was also sold in the ~~joint venture held by others.~~fourth quarter of 2018.

On September 23, 2016, we acquired three ethanol production facilities located in Madison, Illinois, Mount Vernon, Indiana, and York, Nebraska, with combined annual production capacity of approximately 230 mmgy.

~~On October 3, 2016, we acquired Fleischmann’s Vinegar, one of the world’s largest producers of food-grade industrial vinegar which includes seven production~~ ~~facilities and four distribution warehouses.~~

~~On March 16, 2017, we acquired the assets of a cattle-feeding operation located in Hereford, Texas, which added a feedlot capacity of 30,000 head of cattle to our operations.~~

On May 16, 2017, we acquired the assets of two cattle-feeding operations located in Leoti, Kansas and Yuma, Colorado, which added a combined feedlot capacity of 155,000 head of cattle to our operations.

~~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, 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.

~~We,~~Corporate activities include selling, general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment. When we evaluate segment performance, we review the following segment information as well as earnings before interest, income taxes, depreciation and amortization, excluding amortization of operating lease right-of-use assets and amortization of debt issuance costs, or EBITDA.

The company also owns a 90.0% interest in BioProcess Algae, a joint venture formed in 2008. Beginning April 1, 2016, we consolidate the financial results of BioProcess Algae, and record a noncontrolling interest for the economic interest in the joint venture held by others.

As of June 30, 2019, we, together with our subsidiaries, own a ~~62.5%~~49.1% limited partner interest and a 2.0% general partner interest in the partnership and own all of the partnership’s incentive distribution rights, with the remaining ~~35.5%~~48.9% limited partner interest owned by public common unitholders. We consolidate the financial results of the partnership, and record a noncontrolling interest for the economic interest in the partnership held by the public common unitholders.

Segment Results

The selected operating segment financial information are as follows (in thousands):


	Three Months Ended September 30,				%	Nine Months Ended September 30,				%	Three Months Ended ‎June 30,				%	Six Months Ended ‎June 30,				%
	2017		2016		Variance	2017		2016		Variance	2019		2018		Variance	2019		2018		Variance
Revenues:
Ethanol production:
Revenues from external customers	$	620,180	$	586,988	5.7%	$	1,857,356	$	1,710,484	8.6%	$	447,438	$	589,256	(24.1%)	$	716,154	$	1,153,019	(37.9%)
Intersegment revenues		3,579		-	*		6,624		-	*		3,505		4,219	(16.9)		5,622		6,172	(8.9)
Total segment revenues		623,759		586,988	6.3		1,863,980		1,710,484	9.0		450,943		593,475	(24.0)		721,776		1,159,191	(37.7)
Agribusiness and energy services:
Revenues from external customers		164,604		168,143	(2.1)		483,670		531,445	(9.0)		175,837		170,074	3.4		338,632		371,861	(8.9)
Intersegment revenues		14,406		8,936	61.2		33,679		24,934	35.1		9,131		14,128	(35.4)		15,544		25,557	(39.2)
Total segment revenues		179,010		177,079	1.1		517,349		556,379	(7.0)		184,968		184,202	0.4		354,176		397,418	(10.9)
Food and ingredients:
Revenues from external customers		114,750		84,655	35.6		329,432		230,812	42.7		270,886		225,887	19.9		479,385		503,996	(4.9)
Intersegment revenues		38		37	2.7		113		112	0.9		38		38	0.0		76		80	(5.0)
Total segment revenues		114,788		84,692	35.5		329,545		230,924	42.7		270,924		225,925	19.9		479,461		504,076	(4.9)
Partnership:
Revenues from external customers		1,701		2,066	(17.7)		4,724		6,042	(21.8)		1,692		1,620	4.4		3,997		3,248	23.1
Intersegment revenues		24,748		24,139	2.5		74,019		69,445	6.6		19,133		24,220	(21.0)		37,915		48,477	(21.8)
Total segment revenues		26,449		26,205	0.9		78,743		75,487	4.3		20,825		25,840	(19.4)		41,912		51,725	(19.0)
Revenues including intersegment activity		944,006		874,964	7.9		2,789,617		2,573,274	8.4		927,660		1,029,442	(9.9)		1,597,325		2,112,410	(24.4)
Intersegment eliminations		(42,771)		(33,112)	29.2		(114,435)		(94,491)	21.1		(31,807)		(42,605)	(25.3)		(59,157)		(80,286)	(26.3)
Revenues as reported	$	901,235	$	841,852	7.1%	$	2,675,182	$	2,478,783	7.9%	$	895,853	$	986,837	(9.2%)	$	1,538,168	$	2,032,124	(24.3%)


	Three Months Ended ‎June 30,				%	Six Months Ended ‎June 30,				%
	2019		2018		Variance	2019		2018		Variance
Cost of goods sold:
Ethanol production	$	483,352	$	581,613	(16.9%)	$	776,839	$	1,146,172	(32.2%)
Agribusiness and energy services		176,214		165,174	6.7		335,840		366,886	(8.5)
Food and ingredients		259,906		206,440	25.9		465,979		466,205	(0.0)
Partnership		-		-	*		-		-	*
Intersegment eliminations		(31,215)		(42,602)	(26.7)		(54,826)		(80,303)	(31.7)
	$	888,257	$	910,625	(2.5%)	$	1,523,832	$	1,898,960	(19.8%)


	Three Months Ended ‎June 30,				%	Six Months Ended ‎June 30,				%
	2019		2018		Variance	2019		2018		Variance
Operating income (loss):
Ethanol production	$	(53,885)	$	(17,214)	(213.0%)	$	(98,077)	$	(44,743)	(119.2%)
Agribusiness and energy services		4,341		12,166	(64.3)		9,645		19,230	(49.8)
Food and ingredients		7,260		12,981	(44.1)		5,828		25,566	(77.2)
Partnership		13,156		16,129	(18.4)		25,707		31,489	(18.4)
Intersegment eliminations		(528)		144	*		(4,205)		212	*
Corporate activities		(9,724)		(12,441)	21.8		(18,283)		(23,914)	23.5
	$	(39,380)	$	11,765	*	$	(79,385)	$	7,840	*

											Three Months Ended ‎June 30,				%	Six Months Ended ‎June 30,				%
	Three Months Ended September 30,				%	Nine Months Ended September 30,				%	2019		2018		Variance	2019		2018		Variance
	2017		2016		Variance	2017		2016		Variance
Cost of goods sold:
EBITDA:
Ethanol production	$	590,904	$	549,705	7.5%	$	1,802,688	$	1,649,641	9.3%	$	(38,737)	$	3,362	*	$	(67,240)	$	(3,733)	*
Agribusiness and energy services		168,735		163,643	3.1		487,239		518,135	(6.0)		4,899		12,796	(61.7)		10,761		20,498	(47.5)
Food and ingredients		98,854		78,792	25.5		281,898		219,087	28.7		8,906		19,044	(53.2)		9,163		35,041	(73.9)
Partnership		-		-	*		-		-	*		14,017		17,138	(18.2)		27,788		33,761	(17.7)
Intersegment eliminations		(42,706)		(33,257)	28.4		(114,123)		(93,769)	21.7		(528)		144	*		(4,205)		212	*
Corporate activities												(8,326)		(10,642)	21.8		(14,705)		(20,817)	29.4
	$	815,787	$	758,883	7.5%	$	2,457,702	$	2,293,094	7.2%	$	(19,769)	$	41,842	*	$	(38,438)	$	64,962	*

Three Months Ended
September 30,

%

Nine Months Ended
September 30,

%

2017

2016

Variance

2017

2016

Variance
Operating income (loss):

Ethanol production
$
3,107

$
14,334

(78.3%)

$
(25,950)

$
(7,673)

(238.2%)
Agribusiness and energy services

3,686

7,241

(49.1)

13,138

20,744

(36.7)
Food and ingredients

10,132

5,199

94.9

30,472

9,594

217.6
Partnership

16,290

15,084

8.0

47,707

42,958

11.1
Intersegment eliminations

8

181

(95.6)

(147)

(612)

(76.0)
Corporate activities

(12,507)

(11,184)

11.8

(30,898)

(29,393)

5.1

$
20,716

$
30,855

(32.9%)

$
34,322

$
35,618

(3.6%)

Three Months Ended
September 30,

%

Nine Months Ended
September 30,

%

2017

2016

Variance

2017

2016

Variance
EBITDA:

Ethanol production
$
25,570

$
30,155

(15.2%)

$
38,521

$
39,164

(1.6%)
Agribusiness and energy services

5,150

6,310

(18.4)

15,910

21,246

(25.1)
Food and ingredients

13,272

5,465

142.9

39,741

10,430

281.0
Partnership

17,589

16,620

5.8

51,549

47,241

9.1
Intersegment eliminations

8

(39)

120.5

(147)

(1,174)

87.5
Corporate activities

(11,212)

(9,439)

18.8

(27,275)

(25,944)

5.1

$
50,377

$
49,072

2.7%

$
118,299

$
90,963

30.1%

* Percentage variance not considered meaningful.

We use EBITDA as a segment measure of profitability to compare the financial performance of our reportable segments and manage those segments. We believe EBITDA is a useful measure to compare our performance against other companies. EBITDA should not be considered an alternative to, or more meaningful than, net income, which is prepared in accordance with GAAP. EBITDA calculations may vary from company to company. Accordingly, our computation of EBITDA may not be comparable with a similarly titled measure of other companies.

The following table reconciles net income (loss) to EBITDA ~~for the periods indicated~~ (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Net income	$	39,429	$	12,884	$	29,284	$	6,053
Net income (loss)									$	(40,179)	$	3,751	$	(78,050)	$	(15,704)
Interest expense		31,889		11,819		69,815		33,117		15,969		22,021		30,396		44,149
Income tax expense (benefit)		(48,775)		5,083		(60,905)		(4,339)
Income tax benefit										(14,653)		(10,753)		(29,113)		(16,780)
Depreciation and amortization(1)		27,834		19,286		80,105		56,132		19,094		26,823		38,329		53,297
EBITDA	$	50,377	$	49,072	$	118,299	$	90,963	$	(19,769)	$	41,842	$	(38,438)	$	64,962

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

Ethanol Production Segment

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


	Three Months Ended ‎June 30,
	2019	2018	% Variance

Ethanol sold
(thousands of gallons)	224,023	296,282	(24.4)
Distillers grains sold
(thousands of equivalent dried tons)	586	739	(20.7)
Corn oil sold
(thousands of pounds)	53,040	75,556	(29.8)
Corn consumed
(thousands of bushels)	77,963	103,147	(24.4)

Revenues in our ethanol production segment decreased $142.5 million for the three months ended June 30, 2019 compared with the same period in 2018 primarily due to the disposition of three ethanol plants during the fourth quarter of 2018 as well as lower average realized prices for ethanol and distillers grains.

Cost of goods sold for our ethanol production segment decreased $98.3 million for the three months ended June 30, 2019 compared with the same period last year primarily due to the ~~Fleischmann’s Vinegar acquisition~~disposition of three ethanol plants. As a result of the factors identified above, operating income decreased $36.7 million and ~~additional cattle margins, partially offset by~~EBITDA decreased ~~margins in ethanol production. Interest expense increased $20.1~~$42.1 million for the three months ended ~~September~~June 30, ~~2017,~~2019 compared with the same period in ~~2016, primarily due to $12.3 million in~~2018. Depreciation and amortization expense ~~associated with~~for the ~~termination of previous credit facilities and higher average debt outstanding and borrowing costs. Income tax benefit~~segment was ~~$48.8~~$15.4 million for the three months ended ~~September~~June 30, ~~2017,~~2019 compared with $20.6 million for the same period last year, primarily due to the disposition of three ethanol plants during the fourth quarter of 2018.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment increased $0.8 million while operating income decreased by $7.8 million and EBITDA decreased by $7.9 million for the three months ended June 30, 2019 compared with the same period in 2018. The increase in revenues was primarily due to an increase in ethanol and corn oil trading activity, offset by a decrease in distillers grain and grain trading activity and lower average realized prices for ethanol. Operating income and EBITDA decreased primarily as a result of decreased margins.

Food and Ingredients Segment

Revenues in our food and ingredients segment increased $45.0 million for the three months ended June 30, 2019 compared with the same period in 2018. The increase in revenues was primarily due to the Bartlett acquisition which increased the number of cattle volumes sold during the three months ended June 30, 2019 partially offset by the sale of Fleischmann’s Vinegar during the fourth quarter of 2018. Cattle head sold for the three months ended June 30, 2019 and 2018 was approximately 164,000 and 118,000, respectively.

Operating income decreased by $5.7 million and EBITDA decreased $10.1 million for the three months ended June 30, 2019 compared with the same period in 2018 primarily due to the sale of Fleischmann’s Vinegar during the fourth quarter of 2018 as well as decreased margins in our cattle feeding operations during the second quarter of 2019.

Partnership Segment

Revenues generated by our partnership segment decreased $5.0 million for the June 30, 2019 compared to the same period of 2018, primarily due to lower storage and throughput volumes due to disposition of three ethanol plants during the fourth quarter of 2018 as well as lower revenues generated from rail transportation services due to the assignment of various railcar operating leases as part of the disposition. Operating income decreased $3.0 million and EBITDA decreased $3.1 million for the June 30, 2019 compared with the same period in 2018 primarily due to the factors described above.

Intersegment Eliminations

Intersegment eliminations of revenues decreased by $10.8 million for the three months ended June 30, 2019 compared with the same period in 2018 due to a decrease in storage and throughput fees paid to the partnership segment due to the disposition of the three ethanol plants during the further quarter of 2018 as well as decreased intersegment corn purchases and marketing fees within the agribusiness and energy services segment.

Corporate Activities

Operating income was impacted by a decrease in operating expenses for corporate activities of $2.7 million for the three months ended June 30, 2019 compared with the same period in 2018 primarily as a result of a workforce reduction which occurred as part of our portfolio optimization program in the last half of 2018.

Income Taxes

We recorded income tax ~~expense~~benefit of ~~$5.1~~$14.7 million for the three months ended June 30, 2019, compared with $10.8 million for the same period in ~~2016~~2018. The change in income tax benefit was due to a higher loss before income taxes for the three months ended June 30, 2019, and R&D credits recorded during the same period in 2018.

Six Months Ended June 30, 2019 Compared with the Six Months Ended June 30, 2018

Consolidated Results

Consolidated revenues decreased $494.0 million for the six months ended June 30, 2019 compared with the same period in 2018 primarily due to the ~~company’s recognition~~disposition of three ethanol plants and the sale of Fleischmann’s Vinegar during the fourth quarter of 2018 as well as lower production volumes at our remaining plants.

Operating income decreased $87.2 million and EBITDA decreased $103.4 million for the six months ended June 30, 2019 compared with the same period last year primarily due to lower volume and decreased margins on ethanol production and cattle as well as the disposition of Fleischmann’s Vinegar during the fourth quarter of 2018. Interest expense decreased $13.8 million for the six months ended June 30, 2019 compared with the same period in 2018, primarily due to the repayment of the $500 million senior secured term loan during the fourth quarter of 2018. Income tax ~~benefits related to R&D Credits.~~benefit was $29.1 million for the six months ended June 30, 2019 compared with $16.8 million for the same period in 2018.

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

Ethanol Production Segment

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


	Three Months Ended September 30,			Six Months Ended ‎June 30,
	2017	2016	% Variance	2019	2018	% Variance

Ethanol produced
(thousands of gallons)	313,642	292,238	7.3%	379,063	576,692	(34.3)
Distillers grains produced
(thousands of equivalent dried tons)	817	790	3.4	984	1,468	(33.0)
Corn oil produced
(thousands of pounds)	75,440	72,176	4.5	88,023	144,690	(39.2)
Corn consumed
(thousands of bushels)	109,544	102,113	7.3	132,004	200,430	(34.1)

production volumes. As a result of the factors identified above, operating income decreased $53.3 million and ~~the cattle feedlots, partially offset by~~EBITDA decreased ~~ethanol margins as well as decreased grain trading activity. Interest expense increased $36.7~~$63.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with the same period in ~~2016, primarily due to higher average debt outstanding and borrowing costs, $12.3 million in expense associated with the termination of~~

previous credit facilities, and a $1.3 million charge related to the extinguishment of a portion of the 3.25% convertible notes. Income tax benefit was $60.9 million for the nine months ended September 30, 2017, compared with $4.3 million for the same period in 2016 primarily due to the company’s recognition of tax benefits related to the R&D Credits.

~~The following discussion provides greater detail about our segment performance for the first nine months of 2017.~~

~~Ethanol Production Segment~~

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

Nine Months Ended
September 30,

2017

2016

% Variance

Ethanol produced

(thousands of gallons)

915,607

813,464

12.6%
Distillers grains produced

(thousands of equivalent dried tons)

2,421

2,170

11.6
Corn oil produced

(thousands of pounds)

216,482

196,530

10.2
Corn consumed

(thousands of bushels)

318,709

284,282

12.1

Revenues in our ethanol production segment increased $153.5 million for the nine months ended September 30, 2017, compared with the same period in 2016 primarily due to higher volumes of ethanol, distillers grains and corn oil produced, partially offset by lower average distillers grains prices realized. The increase in volumes produced was primarily due to the acquisition of the Madison, Mount Vernon and York ethanol plants.

Cost of goods sold for the ethanol production segment increased $153.0 million for the nine months ended September 30, 2017, compared with the same period last year due to higher production volumes associated with the acquisition of the Madison, Mount Vernon and York ethanol plants as well as decreased margins on ethanol production. EBITDA decreased $0.6 million for the nine months ended September 30, 2017, compared with the same period in 2016 due to decreased margins in ethanol production.2018. Depreciation and amortization expense for the segment was ~~$61.4~~$30.8 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019 compared with ~~$46.7~~$41.0 million for the same period last ~~year.~~year, primarily due to the disposition of three ethanol plants during the fourth quarter of 2018.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased ~~$39.0~~$43.2 million while operating income decreased by $9.6 million and EBITDA decreased by ~~$5.3~~$9.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with the same period in ~~2016.~~2018. The decrease in revenues was primarily due to a decrease in ethanol, distillers grain and corn oil production and trading activity, ~~volumes, partially offset by higher~~as well as lower average realized prices for ~~distillers grain~~ethanol. Operating income and ~~increased intersegment distillers grain, marketing and corn revenues.~~ EBITDA decreased primarily as a result of decreased trading activity. Depreciation expense increased by $0.9 million for the nine months ended September 30, 2017, primarily as a result of accelerated depreciation related to the disposition of fixed assets at our St. Edward, Nebraska location.margins.

Food and Ingredients Segment

Revenues in our food and ingredients segment ~~increased $98.6~~decreased $24.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with the same period in ~~2016.~~2018. The ~~increase~~decrease in revenues was primarily due to the ~~acquisitions~~sale of Fleischmann’s Vinegar ~~and~~during the fourth quarter of 2018, partially offset by an increase in cattle ~~feedlots. The daily average company-owned cattle on feed~~volumes sold during the six months ended June 30, 2019. Cattle head sold for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018 was approximately ~~100,000~~291,000 and ~~65,000 head, respectively,~~255,000 respectively.

Operating income decreased by $19.7 million and ~~the daily average third-party owned cattle on feed for the nine months ended September 30, 2017 and 2016, was approximately 59,000 and 1,400, respectively.~~

EBITDA ~~increased by $29.3~~decreased $25.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with the same period in ~~2016~~2018 primarily due to the ~~acquisition~~sale of Fleischmann’s Vinegar during the fourth quarter of 2018, as well as ~~increased~~overall performance at our cattle ~~margins.~~ feeding operations, which was negatively impacted by severe winter weather and an abnormally negative basis during the first quarter of 2019.

Partnership Segment

Revenues generated by our partnership segment ~~increased $3.3~~decreased $9.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 compared to the same period of ~~2016,~~2018, primarily due to ~~higher~~lower storage and throughput volumes ~~partially offset by a decrease in~~due to disposition of three ethanol plants during the ~~average rate charged for the railcar volumetric capacity related to the rail transportation services agreement with Green Plains Trade,~~fourth quarter of 2018 as well as lower ~~throughput volumes under~~production at our remaining plants and lower revenues generated from rail transportation services due to the ~~terminal services agreements.~~assignment of various railcar operating leases as part of the disposition. Operating income decreased $5.8 million and EBITDA ~~increased $4.3~~decreased $6.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with the same period in ~~2016~~2018 primarily due to the increased storage and throughput revenues, as well as a decrease in operations and maintenance expenses of $0.6 million during the nine months ended September 30, 2017 compared with the same period of 2016.factors described above.

Intersegment Eliminations

Intersegment eliminations of revenues ~~increased~~decreased by ~~$19.9~~$21.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with the same period in ~~2016~~2018 due to ~~increased intersegment distillers grain and corn revenues paid to the ethanol production and agribusiness and energy services segments and the increase~~a decrease in storage and throughput fees paid to the partnership segment as well as decreased intersegment corn purchases and marketing fees within the agribusiness and energy services segment.

Corporate Activities

~~EBITDA decreased~~Operating income was impacted by ~~$1.3~~a decrease in operating expenses for corporate activities of $5.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with the same period in ~~2016 due to increases in selling, general and administrative expenses~~2018 primarily ~~driven by salaries, insurance, rent, utilities and property taxes~~ as a result of a workforce reduction which occurred as part of our portfolio optimization program in the ~~Fleischmann’s Vinegar and cattle feedlot acquisitions.~~last half of 2018.

Income Taxes

~~The~~We recorded income tax benefit ~~for the nine months ended September 30, 2017 was $60.9 million compared to $4.3~~of $29.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2019, compared with $16.8 million for the same period in 2018. The change in income tax benefit was due to a higher loss before income taxes for the ~~nine~~six months ended ~~September~~June 30, ~~2017 was primarily due to the company’s recognition of tax benefits related to~~2019, and R&D ~~Credits.~~

A study was conducted to determine whether certain activities the company performs qualify for the R&D credit allowed by the Internal Revenue Code Section 41. As a result of this study, the company concluded these activities do qualify for the credit and determined it was appropriate to claim the benefit of these credits ~~for all open tax years. The company recognized these credits~~recorded during the ~~third quarter of 2017, along with an estimate of the credit for qualified activities year-to-date. The company will continue to evaluate eligibility for R&D credits on a regular basis.~~same period in 2018.

Liquidity and Capital Resources

Our principal sources of liquidity include cash generated from operating activities and bank credit facilities. We fund our operating expenses and service debt primarily with operating cash flows. Capital resources for maintenance and growth expenditures are funded by a variety of sources, including cash generated from operating activities, borrowings under bank credit facilities, or issuance of senior notes or equity. Our ability to access capital markets for debt under reasonable terms depends on our financial condition, credit ratings and market conditions. We believe that our ability to obtain financing at

reasonable rates and history of consistent cash flow from operating activities provide a solid foundation to meet our future liquidity and capital resource requirements.

On ~~September~~June 30, ~~2017,~~2019, we had ~~$261.6~~$193.3 million in cash and equivalents, excluding restricted cash, ~~consisting~~consisting of ~~$201.3~~$133.6 million ~~available to~~held at our parent company and the remainder held at our subsidiaries. Additionally, we had $40.6 million in restricted cash at June 30, 2019. We also had ~~$297.0~~$458.8 million available under our committed revolving credit agreements, some of which were subject to restrictions or other lending conditions. Funds at certain subsidiaries are generally required for their ongoing operational needs and restricted from distribution. At ~~September~~June 30, ~~2017,~~2019, our subsidiaries had approximately ~~$124.5~~$174.8 million of net assets that were not available to us in the form of dividends, loans or advances due to restrictions contained in their credit facilities. ~~As a result of the August 29, 2017~~ $500 million term loan agreement and related debt extinguishment at Green Plains Processing and Fleischmann’s Vinegar, we no longer consider certain subsidiaries to have restrictions on cash and asset distributions.

Net cash used byin operating activities was ~~$122.2~~$32.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with net cash provided by operating activities ~~of $63.2~~$45.9 million for the same period in ~~2016.~~2018. Operating activities compared to the prior year were primarily affected by ~~an increase~~changes in ~~inventories and derivative financial instruments and~~working capital as well as decreases in ~~deferred~~operating income ~~taxes and accounts payable and accrued liabilities, partially offset by decreases in accounts receivable and increases in noncurrent assets and liabilities for~~when compared to the ~~nine months ended September 30, 2017. The changes in deferred income taxes and noncurrent asset and liabilities were driven by~~same period of the ~~R&D credits recognized during the third quarter of 2017.~~prior year. Net cash used by

in investing activities was ~~$110.2~~$20.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with $11.2 million for the same period in 2018, due primarily to ~~acquisitions of the cattle feedlots, as well as~~increased capital expenditures at our existing ethanol plants ~~and our vinegar operations.~~partially offset by cash received from other investing activities in 2018. Net cash ~~provided by~~used in financing activities was ~~$189.8~~$31.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 compared with ~~$248.8~~$96.2 million for the same period in ~~2016.~~2018, with the decrease in cash used resulting from an increase in net borrowings offset by payments for the repurchase of common stock.

Additionally, Green Plains Trade, Green Plains Cattle and Green Plains Grain 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 ~~$37.7~~$23.5 million in the first ~~nine months~~half of ~~2017~~2019 primarily for a high-protein expansion project at one of our ethanol plants, and for various maintenance ~~and expansion~~ projects. Capital spending for the remainder of ~~2017~~2019 is expected to be between approximately ~~$11.9~~$55.0 million and $65.0 million for various projects, ~~and investments in joint ventures are expected to be approximately $7.4 million,~~ which are expected to be financed with available borrowings under our credit facilities and cash provided by operating activities.

Our business is highly sensitive to the price of commodities, particularly for corn, ethanol, distillers grains, corn oil, natural gas and cattle. 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 September 30, 2017, we~~ ~~had $52.5 million~~ ~~in deposits for broker margin requirements.~~ 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.

We have paid a quarterly cash dividend since August 2013 and anticipate declaring a cash dividend in future quarters on a regular basis. Future declarations of dividends, however, are subject to board approval and may be adjusted as our liquidity, ~~business needs or market conditions change.~~ On ~~August 16, 2017,~~May 8, 2019, our board of directors declared a quarterly cash dividend of $0.12 per share. The dividend was paid on ~~September 15, 2017,~~June 14, 2019, to shareholders of record at the close of business on ~~August 28, 2017.~~May 24, 2019. On June 18, 2019, the company announced that its board of directors has 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 requires the partnership to distribute all available cash, as defined, to its partners, including us, within 45 days after the end of each calendar quarter. Available cash generally means all cash and cash equivalents on hand at the end of that quarter less cash reserves established by our general partner plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the end of that quarter. On ~~October 19, 2017,~~July 18, 2019, the board of directors of the general partner of the partnership declared a cash distribution of ~~$0.46~~$0.475 per unit on outstanding common and subordinated units. The distribution is payable on ~~November 10, 2017,~~August 9, 2019, to unitholders of record at the close of business on ~~November 3, 2017.~~August 2, 2019.

In August 2014, we announced a share repurchase program of up to $100 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. WeDuring the three months ended June 30, 2019, we purchased a total of 3,197,277 shares of our common stock for approximately $39.9 million. To date, we have repurchased ~~335,849 shares~~4,316,626 of common stock for approximately ~~$5.7~~$59.6 million under the ~~program during the third quarter of 2017. To date, we have repurchased 850,839 shares of common stock for approximately $15.7 million under the~~ program.

We believe we have sufficient working capital for our existing operations. Furthermore, our liquidity position was improved as a result of the sale of three of our ethanol plants as well as the sale of Fleischmann’s Vinegar during the fourth quarter of 2018. The majority of net cash proceeds from the sales, net of fees and taxes, was used to pay off the outstanding term loan balance. A continued sustained period of unprofitable operations, however, may strain our liquidity making it difficult to maintain compliance with our financing arrangements. We may sell additional assets or equity or borrow capital to improve or preserve our liquidity, expand our business ~~or build additional~~ or acquire existing businesses. We cannot provide assurance that we will be able to secure funding necessary for additional working capital or these projects at reasonable terms, if at all.

Debt

For additional information related to our debt, see Note 8 – Debt included as part of the notes to consolidated financial statements and Note 1112 – Debt included as part of the notes to consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, ~~2016.~~2018.

We were in compliance with our debt covenants at ~~September~~June 30, ~~2017.~~2019. Based on our forecasts, ~~and the current margin environment,~~ 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.

~~Corporate Activities~~

~~On August 29, 2017, the company and substantially all of the company’s subsidiaries, but not including Green Plains Partners and~~As outlined in Note 8 - Debt, we use LIBOR as a reference rate for certain other entities as guarantors, entered into a $500 million term loan agreement (the “Term Loan Agreement”) with BNP Paribas, as administrative agent and collateral agent (the “Term Loan Agent”) and certain other financial institutions, which matures on August 29, 2023, and mayrevolving credit facilities. LIBOR is currently set to be prepaid at any time without premium or penalty other than customary breakage costs with respect to Eurodollar-based loans or certain other limited circumstances in which event a 1.0% prepayment premium would be due.

The Term Loan Agreement requires principal payments of $1.25 million on the last day of each quarter, beginning on December 31, 2017, with a final installment payable on August 29, 2023, equal to the unpaid principal and interest balances of the Term Loan Agreement. Beginningphased out at the end of ~~2018, mandatory prepayments must~~2021. At this time, it is not possible to predict the effect of this change or the alternative reference rate to be ~~made~~used. We will need to renegotiate certain credit facilities to determine the interest rate to replace LIBOR with the new standard that is established. As such, the potential effect of any such event on interest expense cannot yet be determined.

Corporate Activities

On June 21, 2019, we issued $105.0 million of 4.00% convertible senior notes due in 2024, or the 4.00% notes. We used approximately $57.8 million of the net proceeds to repurchase the outstanding $56.8 million outstanding principal amount of our 3.25% convertible senior notes due October 1, 2019, including accrued and unpaid interest, in privately negotiated transactions concurrently with this offering. We used approximately $39.9 million of the net proceeds from the offering to repurchase approximately 3.2 million shares of common stock concurrently with the offering in privately negotiated transactions. The remaining proceeds will be used for general corporate purposes.

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 ~~annual basis at various percentages~~initial conversion price of ~~excess~~approximately $15.59 per share of our common stock. The conversion rate will be subject to adjustment upon the occurrence of certain events. In addition, we may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including our calling the 4.00% notes for redemption. We may settle the 4.00% notes in cash, ~~flow depending~~common stock or a combination of cash and common stock. At June 30, 2019, the outstanding principal balance was $73.9 million on the ~~total first lien leverage ratio as defined in~~4.00% notes.

On July 19, 2019, we closed on the Term Loan Agreement. The Term Loan Agreement will bear interest at a variable rate per annum at the Company’s election, equal to (a) the applicable LIBOR rate, subject to a 1.00% floor, plus 5.50% or (b) a base rate equal to 4.50% plus the greater of (i) the Federal Funds Rate plus 0.50%, (ii) the Prime Rate, or (iii) one month LIBOR plus 1.00%.

~~The Term Loan Agreement is guaranteed by the Company and the Term Loan Obligors, and secured by substantially all~~issuance of the ~~assets~~additional $10.0 million aggregate principal amount of the ~~Company~~4.00% notes to the initial purchasers. The Option Notes provided us with net proceeds, after deducting commissions and ~~the Term Loan Obligors, including 17 ethanol production facilities with annual capacity~~our offering expenses, of approximately ~~1.5 billion gallons, as well~~$9.5 million. The Option Notes will have the same terms as the ~~vinegar production facilities. The covenants~~4.00% notes issued on June 21, 2019, and will be issued under the same Indenture dated as of June 21, 2019. After the issuance of the ~~Term Loan Agreement require~~Option Notes, total aggregate principal of the Company to maintain a maximum term debt to total term capitalization, each as defined in the Term Loan Agreement, at the end of each fiscal quarter of not more than 55.0% and a minimum interest coverage ratio, as defined, at the end of each fiscal quarter of not less than 1.25 to 1.0.4.00% notes was $115.0 million.

The Term Loan Agreement provides for customary events of default, which include (subject in certain cases to customary grace and cure periods), among others, the following: nonpayment of principal or interest; breach of covenants or other agreements in the Term Loan Agreement; defaults in failure to pay certain other indebtedness; and certain events of bankruptcy or insolvency. If any event of default occurs, the remaining principal balance and accrued interest on the Term Loan Agreement will become immediately due and payable.

In August 2016, we issued $170.0 million of 4.125% convertible senior notes due in 2022, or 4.125% notes, which are senior, unsecured obligations with interest payable on March 1 and September 1 of each year. Prior to March 1, 2022, the 4.125% notes are not convertible unless certain conditions are satisfied. The initial conversion rate is 35.7143 shares of common stock per $1,000 of principal which is equal to a conversion price of approximately $28.00 per share. The conversion rate is subject to adjustment upon the occurrence of certain events, including when the quarterly cash dividend exceeds $0.12 per share. We may settle the 4.125% notes in cash, common stock or a combination of cash and common stock.

~~In September 2013, we issued $120.0~~ At June 30, 2019, the outstanding principal balance was $145.9 million of 3.25% convertible senior notes due in 2018, or 3.25% notes, which are senior, unsecured obligations with interest payable on April 1 and October 1 of each year. Prior to April 1, 2018, the 3.25% notes are not convertible unless certain conditions are satisfied. The conversion rate is subject to adjustment upon the occurrence of certain events, including when the quarterly cash dividend exceeds $0.04 per share. The conversion rate was recently adjusted as of September 30, ~~2017 to 49.9981 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $20.00 per share.~~ ~~We may settle the 3.25% notes in cash, common stock or a combination of cash and common stock.~~

During the second quarter of 2017, we entered into several privately negotiated agreements with holders, on behalf of certain beneficial owners of our 3.25% notes. Under these agreements, 2,783,725 shares of our common stock and approximately $8.5 million in cash plus accrued but unpaid interest on the ~~3.25% notes, were exchanged for approximately $56.3 million in aggregate principal amount of the 3.25%~~4.125% notes. ~~Common stock held as treasury shares were exchanged for the 3.25% notes. Following the closings of the agreements, $63.7 million aggregate principal amount of the 3.25% notes remain outstanding.~~

At issuance, we separately accounted for the liability and equity components of the convertible notes by bifurcating the gross proceeds between the indebtedness, or liability component, and the embedded conversion option, or equity component. This bifurcation was done by estimating an effective interest rate on the date of issuance for similar notes. The embedded

~~conversion option was recorded in stockholders’ equity. Since we did not exercise the embedded conversion option associated with the notes, pursuant to the guidance within ASC Topic 470,~~ ~~Debt~~, we recorded a loss upon extinguishment measured by the difference between the fair value and carrying value of the liability portion of the notes. As a result, we recorded a charge to interest expense in the consolidated financial statements of approximately $1.3 million during the three months ended June 30, 2017. This charge also included $0.6 million of unamortized debt issuance costs related to the principal balance extinguished. The remaining settlement consideration transferred was allocated to the reacquisition of the embedded conversion option and recognized as a reduction of additional paid-in capital.

Ethanol Production Segment

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

Agribusiness and Energy Services Segment

Green Plains Grain has a ~~$125.0~~$100.0 million senior secured asset-based revolving credit facility to finance working capital up to the maximum commitment based on eligible ~~collateral. The facility~~collateral, which matures in ~~July~~June of ~~2019.~~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 ~~$250.0~~$225.0 million. On June 28, 2019, the company amended the credit facility to extend the existing maturity date from July 26, 2019 to June 28, 2022 and lower the maximum commitment from $125.0 million to $100.0 million. At ~~September~~June 30, ~~2017,~~2019, the outstanding principal balance was ~~$64.0~~$42.0 million on the facility and the interest rate was ~~6.25%~~6.76%.

Green Plains Grain has entered into short-term inventory financing agreements 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 June 30, 2019.

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. The facility~~collateral, which matures in July of 2022. This facility can be increased by up to $70.0 million with agent approval. ~~At September 30, 2017, the outstanding principal balance was $143.3 million on the facility and the interest rate was 3.52%.~~

On July 28, 2017, we amended the credit facility, to increase the maximum commitment from $150.0 million to $300.0 million and extend the maturity date to July 28, 2022. The amended credit facility increases advance rates and modifies the eligible inventory definitions to include additional commodities and locations. 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 June 30, 2019, the outstanding principal balance was $132.3 million on the facility and the interest rate was 4.69%.

Green Plains Commodity Management has an uncommitted $20.0 million revolving credit facility which matures April 30, 2023 to finance margins related to its hedging programs. Advances are subject to variable interest rates equal to LIBOR plus 1.75%. At June 30, 2019, the outstanding principal balance was $14.5 million on the facility and the interest rate was 4.12%.

Food and Ingredients Segment

Green Plains Cattle has a ~~$300.0~~$500.0 million senior secured asset-based revolving credit facility to finance working capital up to the maximum commitment based on eligible ~~collateral. The facility~~collateral, which matures in April of 2020. This facility can be ~~increase~~increased by up to $100.0 million with agent ~~approval.~~approval and includes a swing-line sublimit of $20.0 million. At ~~September~~June 30, ~~2017,~~2019, the outstanding principal balance was ~~$246.7~~$334.7 million on the facility and our interest rate was ~~3.83%~~4.91%.

On April 28, 2017, we amended the credit facility to fund the additional working capital requirements related to the acquisition of two cattle feedlots located in Leoti, Kansas and Yuma, Colorado. The amendment increased the maximum commitment from $100.0 million to $200.0 million until July 31, 2017, at which time it increased to $300.0 million. The maturity date was extended from October 31, 2017 to April 30, 2020.

Advances under the revolving credit facility ~~as amended,~~ are subject to variable interest rates equal to LIBOR plus 2.0% to 3.0% or the base rate plus 1.0% to 2.0%, depending on the preceding three months’ excess borrowing availability. ~~The amended credit facility also includes an accordion feature that enables the credit facility to be increased by up to $100.0 million with agent approval.~~ The unused portion of the credit facility is also subject to a commitment fee of 0.20% to 0.30% per annum, depending on the preceding three months’ excess borrowing availability. Interest is payable as required, but not less than quarterly in arrears and principal is due upon maturity.

The amended terms impose affirmative and negative covenants, including maintaining working capital of 15% of the commitment amount, tangible net worth of 20% of the commitment amount and a total debt to tangible net worth ratio of 3.50x. Capital expenditures are limited to $10.0 million per year under the credit facility, plus $10.0 million per year if funded by a contribution from the parent, plus unused amounts from the previous year.

Partnership Segment

Green Plains Partners, through a wholly owned subsidiary, has a ~~$155.0~~$200.0 million ~~secured~~ revolving credit facility, which matures on July 1, 2020, to fund working capital, acquisitions, distributions, capital expenditures and other general partnership ~~purposes as of September 30, 2017.~~ purposes. The credit facility can be increased by ~~up to $100.0~~an additional $20.0 million without the consent of the lenders. ~~The facility matures in July of~~

~~2020.~~ At ~~September~~June 30, ~~2017,~~2019, the outstanding principal balance ~~was $129.0 million on~~of the facility was $132.2 million and ~~an average~~our interest rate was ~~3.74%~~5.41%.

On October 27, 2017, the partnership upsized its revolving credit facility by $40 million, from $155 million to $195 million, by accessing a portion of the $100 million incremental commitment in place on the facility. For more information related to our debt, see ~~Note 8 – Debt~~ ~~to the consolidated financial statements in this report.~~
‎

Contractual Obligations

Contractual obligations as of ~~September~~June 30, ~~2017,~~2019, were as follows (in thousands):


		Payments Due By Period										Payments Due By Period
Contractual Obligations		Total	Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years			Total	Less Than ‎1 Year		1-3 Years		3-5 Years		More Than ‎5 Years

Long-term and short-term debt obligations (1)	$	1,348,440	$	464,250	$	204,787	$	12,012	$	667,391	$	956,081	$	524,754	$	134,285	$	171,997	$	125,045
Interest and fees on debt obligations (2)		349,038		78,153		113,564		102,467		54,854		90,326		45,965		24,776		11,820		7,765
Operating lease obligations (3)		100,397		32,247		36,837		12,887		18,426		73,884		19,224		23,495		10,675		20,490
Other		9,042		2,722		1,403		2,398		2,519		20,799		2,849		7,251		2,351		8,348
Purchase obligations:
Forward grain purchase contracts (4)		212,750		199,622		9,961		2,000		1,167		291,754		288,150		2,187		1,417		-
Other commodity purchase contracts (5)		241,695		230,687		11,008		-		-		142,160		132,752		8,348		1,060		-
Other		490		331		159		-		-		41		41		-		-		-
Total contractual obligations	$	2,261,852	$	1,008,012	$	377,719	$	131,764	$	744,357	$	1,575,045	$	1,013,735	$	200,342	$	199,320	$	161,648

~~(1)~~

~~Includes the current portion of long-term debt and excludes the effect of any debt discounts and issuance costs.~~

~~(2)~~

Interest amounts are calculated over the terms of the loans using current interest rates, assuming scheduled principal and interest amounts are paid pursuant to the debt agreements. Includes administrative and/or commitment fees on debt obligations.

~~(3)~~

~~Operating lease costs are primarily for railcars and office space.~~

~~(4)~~

~~Purchase contracts represent index-priced and fixed-price contracts. Index purchase contracts are valued at current quarter-end prices.~~

~~(5)~~

~~Includes fixed-price ethanol, dried distillers grains and natural gas purchase contracts.~~

(1)Includes the current portion of long-term debt and future finance lease obligations and excludes the effect of any debt discounts and issuance costs.

(2)Interest amounts are calculated over the terms of the loans using current interest rates, assuming scheduled principal and interest amounts are paid pursuant to the debt agreements. Includes administrative and/or commitment fees on debt obligations.

(3)Operating lease costs are primarily for railcars and office space.

(4)Purchase contracts represent index-priced and fixed-price contracts. Index purchase contracts are valued at current quarter-end prices.

(5)Includes fixed-price ethanol, dried distillers grains and natural gas purchase contracts.

Critical Accounting Policies and Estimates

Key accounting policies, including ~~but not limited to,~~ those relating to revenue recognition, depreciation of property and equipment, ~~asset retirement obligations,~~carrying value of intangible assets, impairment of long-lived assets and goodwill, derivative financial instruments, and accounting for income taxes, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements. Information about our critical accounting policies and estimates are included in our annual report on Form 10-K for the year ended December 31, ~~2016.~~2018.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet ~~arrangements other than the operating leases, which are entered into during the ordinary course of business and disclosed in the~~ ~~Contractual Obligations~~ ~~section above.~~arrangements.

Item 3. Quantitative and Qualitative ~~and Quantitative~~ Disclosures ~~about~~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 all of our business in U.S. dollars and are not currently exposed to 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 ~~$6.7~~$3.3 million per year. At ~~September~~June 30, ~~2017,~~2019, we had ~~$1.3 billion~~$895.6 million in debt, ~~$1.1 billion~~$655.7 million of which had variable interest rates.

Commodity Price Risk

Our business is highly sensitive to commodity price risk, particularly for ethanol, corn, distillers grains, corn oil, ~~corn,~~ natural gas, and cattle. Ethanol prices are sensitive to world crude oil supply and demand, the price of crude oil, gasoline and 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. Ethanol prices are sensitive to world crude oil supply and demand, the price of crude oil, gasoline and corn, the price of substitute fuels, refining capacity and utilization, government regulation and consumer demand for alternative fuels. Distillers grains prices are impacted by livestock numbers on feed, prices for feed alternatives and supply, which is associated with ethanol plant production. Cattle prices are impacted by weather conditions, overall economic conditions and government ~~regulations.~~regulations and packer processing disruptions.

To reduce the risk associated with fluctuations in the price of ethanol, corn, ~~natural gas, ethanol,~~ distillers grains, corn oil, natural gas and cattle, 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, ~~and~~ 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. During the three and ~~nine~~ six months ended ~~September~~June 30, ~~2017,~~2019, revenues included net losses of ~~$2.5~~$11.7 million and ~~$7.6~~$40.4 million, respectively, and cost of goods sold included net ~~gains~~losses of ~~$3.0~~$8.5 million and ~~$23.9~~$4.7 million, respectively, associated with derivative financial 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 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 ~~September~~June 30, ~~2017, are~~2019, which is 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		Estimated Total Volume ‎ Requirements for the ‎ Next 12 Months (1)	Unit of ‎Measure	Net Income Effect of ‎ Approximate 10% ‎Change in Price

Ethanol	1,470,000	Gallons	$	118,305	1,123,000	Gallons	$	129,109
Corn	524,000	Bushels	$	121,574	387,000	Bushels	$	129,632
Distillers grains	4,100	Tons (2)	$	23,993	2,900	Tons (2)	$	29,573
Corn Oil	340,000	Pounds	$	6,487
Corn oil					292,000	Pounds	$	5,117
Natural gas	41,700	MmBTU	$	5,900	31,200	MmBTU	$	4,341

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 ~~subject to market risk~~ was approximately ~~$0.4~~$0.7 million for grain ~~based on market prices~~ at ~~September~~June 30, ~~2017.~~2019. Our market risk at that date, based on the estimated net income effect resulting from a hypothetical 10% change in price, was approximately ~~$26~~$50 thousand.

Food and Ingredients Segment

In the food and ingredients segment, our physical cattle 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 cattle, 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 purchase and sale contracts for cattle. 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 ~~subject to market risk~~ was approximately ~~$3.5~~$6.7 million for cattle ~~based on market prices~~ at ~~September~~June 30, ~~2017.~~2019. Our market risk at that date, based on the ~~estimated~~estimated net income effect resulting from a hypothetical 10% change in price, was approximately ~~$0.2~~$0.5 million.

Our daily net commodity position consists of inventories related to purchase and sale contracts and exchange-traded contracts. The fair value of our position ~~subject to market risk~~ was approximately ~~$17.8~~$13.3 million for ~~gain~~grain and other cattle feed ~~based on market prices~~ at ~~September~~June 30, ~~2017.~~2019. Our market risk at that date, based on the ~~estimated~~estimated net income effect resulting from a hypothetical 10% change in price, was approximately ~~$1.1~~$1.0 million.

Item 4. 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 ~~September~~June 30, ~~2017,~~2019, 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.

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 U.S. generally accepted accounting principles. There were no material changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

‎

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are currently involved in litigation that has arisen during the ordinary course of business. We do not believe this litigation will have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors.

Investors should carefully consider the discussion of risks and the other information in our annual report on Form 10-K for the year ended December 31, ~~2016,~~2018, in Part I, Item 1A, “Risk Factors,” and the discussion of risks and other information in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under “Cautionary Information Regarding Forward-Looking Statements,” of this report. Investors should also carefully consider the discussion of risks with the partnership under the heading “Risk Factors” and other information in their annual report on Form 10-K for the year ended December 31, ~~2016.~~2018. Although we have attempted to discuss key factors, our investors need to be aware that other risks may prove to be important in the future. New risks may emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. The following risk ~~factor supplements~~factors supplement and/or updates risk factors previously disclosed and should be considered in conjunction with the other information included in, or incorporated by reference in, this quarterly report on Form 10-Q.

~~Government mandates affecting ethanol usage could change~~Our risk management and ~~impact the ethanol market.~~

~~Our operations~~commodity trading strategies could be ~~adversely impacted by legislation~~ineffective and expose us to decreased liquidity.

As market conditions warrant, we use forward contracts to sell some of our ethanol, distillers grains, corn oil, and live cattle or ~~EPA actions, as set forth below~~buy some of the corn, natural gas, or ~~otherwise, that may reduce the RFS II mandate. Similarly, should federal mandates regarding oxygenated gasoline be repealed, the market~~feeder cattle 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 ~~domestic~~corn, natural gas, cattle and ethanol ~~could be adversely impacted. Economic incentives to blend based~~and other agricultural commodities. The financial impact of these activities depends on the relative value of gasoline versus ethanol, taking into consideration the octane value of ethanol, environmental requirements and the RFS II mandate, may affect future demand. A significant increase in supply beyond the RFS II mandate could have an adverse impact on ethanol prices. Moreover, changes to RFS II could negatively impact the price of ~~ethanol~~ the commodities involved and/or ~~cause imported sugarcane ethanol~~our ability to ~~become more economical than domestic ethanol.~~physically receive or deliver the commodities.

~~Flexible-fuel vehicles, which are designed~~Hedging arrangements expose us to ~~run~~risk of financial loss when the counterparty defaults on ~~a mixture of fuels such as E85, are eligible for vehicle manufacturer incentives~~its contract or, in the ~~form~~case of ~~CAFE credits. Flexible-fuel vehicle credits have been decreasing since 2014~~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, natural gas and feeder cattle and an increased cash price for ethanol, distillers grains, live cattle 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 ~~completely phased out~~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.

The interest rates under our revolving credit facility may be impacted by ~~2020, which may impact manufacturers’ willingness to continue building flexible-fuel vehicles and ultimately result in slower E85 growth and lower ethanol prices.~~the phase-out of LIBOR.

~~Under~~LIBOR is the ~~provisions~~basic rate of ~~the EISA, Congress established~~interest widely used as a ~~mandate~~reference for setting the ~~minimum volume of renewable fuels~~interest rates on loans globally. We use LIBOR as a reference rate for our revolving credit facilities. In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that ~~must be blended with gasoline under the RFS II, which affects the domestic market for ethanol. The EPA has the authority~~it intends 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 determinedphase out LIBOR by the ~~EPA in coordination with the Secretaries~~end of ~~Energy and Agriculture, taking into account such factors as impact on environment, energy security, future rates~~2021. It is unclear if LIBOR will cease to exist at that time or if new methods 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.~~

On July 5, 2017, the EPA proposed maintaining the RVOs for conventional ethanol at 15.0 billion gallons while lowering the volume obligations for advanced alternatives, reducing the overall biofuel target to 19.24 billion gallons for 2018. On September 26, 2017, the EPA issued a Notice of Data Availability for comment, proposing to further reduce the 2018 advanced biofuel volume requirement by 315 mmg, to 3.77 billion gallons, and the total renewable fuel requirement to 18.77 billion gallons, leaving conventional ethanol at 15.0 billion gallons. According to RFS II, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. Since 2018 is the first year the total proposed RVOs are more than 20% below statutory levels, the EPA Administrator directed his staff to initiate the required technical analysis to perform any future reset consistent with the reset rules. If 2019 RVOs are also more than 20% below statutory levels, the RVO resetcalculating LIBOR will be ~~triggered under RFS II and the EPA will be required~~established such that it continues to ~~modify statutory volumes through 2022 within one year of the trigger event, based on the same factors used to set the RVOs post-2022.~~

exist after 2021. The U.S. Federal ~~District Court for~~Reserve, in conjunction with the ~~D.C. Circuit ruled on July 28, 2017, in favor~~Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index, the Secured Overnight Financing Rate (“SOFR”), calculated using short-term repurchase agreements backed by Treasury securities. We are evaluating the potential impact of the ~~Americans for Clean Energy and its petitioners against~~eventual replacement of the ~~EPA related~~LIBOR benchmark interest rate, however, we are not able to ~~its decision~~predict whether LIBOR will cease to ~~lower~~be available after 2021, whether SOFR will become a widely accepted benchmark in place of LIBOR, or what the ~~2016 volume requirements. The Court concluded the EPA erred in how it interpreted the “inadequate domestic supply” waiver provision~~impact of ~~RFS II, which authorizes the EPA~~such a possible transition to ~~consider supply-side factors affecting the volume of renewable fuel available to refiners, blenders, and importers to meet the~~

statutory volume requirements. The waiver provision does not allow the EPA to consider the volume of renewable fuel available to consumers or the demand-side constraints that affect the consumption of renewable fuel by consumers. As a result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through its waiver authority, which the EPA is expected to address. We believe this decision will benefit the industry overall, with the EPA's waiver analysis now limited to supply considerations only, and expect the primary impact willSOFR may be on ~~the RINs market.~~our business, financial condition, and results of operations.

On October 19, 2017, EPA Administrator Pruitt issued letter to seven Senators from Midwestern States reiterating his commitment to the text and spirit of the RFS. He stated that the EPA will meet the November 30, 2017 deadline for issuing RVOs, that the EPA’s preliminary analysis suggests that final RVOs should be set at amounts at or greater than those provided on July 5, 2017, that EPA is actively exploring its authority to issue an RVP waiver and EPA will be pursuing action on RINs that involves ethanol exports.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Employees surrender shares when restricted stock grants are vested to satisfy statutory minimum required payroll tax withholding obligations.

The following table lists the shares that were surrendered during the ~~third~~second quarter of ~~2017.~~2019:

Period

Total Number of
Shares Withheld for
Employee Awards

Average Price
Paid per Share
July 1 - July 31

-

$
-
August 1 - August 30

1,565

17.07
September 1 - September 30

15,022

18.49
Total

16,587

$
18.36


Period	Total Number of ‎ Shares Withheld for ‎Employee Awards	Average Price ‎Paid per Share
April 1 - April 30	-	$	-
May 1 - May 31	6,750		16.17
June 1 - June 30	-		-
Total	6,750	$	16.17

In August 2014, we announced a share repurchase program of up to $100 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.

The following table lists the shares repurchased under the share repurchase program during the ~~third~~second quarter of ~~2017.~~2019.

Period

Number of
Shares
Repurchased

Average Price
Paid per Share

Total Number of Shares
Repurchased as Part of
Repurchase Program

Approximate Dollar Value of
Shares that may yet be
Repurchased under the Program
(in thousands)
July 1 - July 31

-

$
-

514,990

$
89,993
August 1 - August 30

285,849

17.10

800,839

85,097
September 1 - September 30

50,000

16.70

850,839

84,260
Total

335,849

$
17.04

850,839

$
84,260


Period	Number of ‎ Shares ‎ Repurchased	Average Price ‎Paid per Share		Total Number of Shares ‎ Repurchased as Part of ‎Repurchase Program	Approximate Dollar Value of ‎ Shares that may yet be ‎ Repurchased under the Program ‎(in thousands)
April 1 - April 30	-	$	-	1,119,349	$	80,290
May 1 - May 31	-		-	1,119,349		80,290
June 1 - June 30	3,197,277		12.47	4,316,626		40,420
Total	3,197,277	$	12.47	4,316,626	$	40,420

Since inception, the company has repurchased 4,316,626 shares of common stock for approximately $59.6 million under the program.

Item 3. Defaults ~~upon~~Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~Revolving Credit Facility Upsizing~~None.

On October 27, 2017, the partnership upsized its revolving credit facility by $40 million, from $155 million to $195 million, accessing a portion of the $100 million incremental commitment in place on the facility. The credit increase is in accordance with the Incremental Joinder Agreement, which is filed as Exhibit 10.8 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

4952

Item 6. Exhibits.

Exhibit Index



~~Exhibit No.~~	~~Description of Exhibit~~
~~10.1~~Exhibit No.	Description of Exhibit
4.1	~~Fourth Amended and Restated Revolving Credit and Security Agreement~~Indenture relating to the 4.00% Convertible Senior Notes due 2024, dated ~~July 28, 2017, among~~as of June 21, 2019, between Green Plains ~~Trade Group LLC, the Lenders~~Inc. and ~~PNC Bank,~~Wilmington Trust, National Association, including the form of Global Note attached as ~~Lender and Agent (Incorporated~~Exhibit A thereto. (incorporated herein by reference to Exhibit ~~10.1 to~~4.1 of the company’s Current Report on Form 8-K ~~dated July 31, 2017)~~filed on June 21, 2019)
~~10.2(a)~~10.1	~~Term Loan~~Consent to Credit Agreement, dated ~~as of August 29, 2017,~~July 15, 2019, by and among Green Plains ~~Inc., BNP Paribas,~~Operating Company LLC and Bank of America, as administrative agent and collateral agent and BNP Paribas Securities Corp., BMO Capital Markets Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and joint book runners (Incorporated by reference to Exhibit 10.1(a) to the company’s Current Report on Form 8-K dated August 29, 2017)Administrative Agent
~~10.2(b)~~10.2	Guaranty, dated as of August 29, 2017, in favor of BNP Paribas, as collateral agent and administrative agent, and the other lenders party to the Term Loan Agreement (Incorporated by reference to Exhibit 10.1(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.2(c)~~	Pledge Agreement, dated as of August 29, 2017, among Green Plains Inc., its subsidiaries and BNP Paribas, as collateral agent (Incorporated by reference to Exhibit 10.1(c) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.2(d)~~	Security Agreement, dated as of August 29, 2017, among Green Plains Inc., its subsidiaries and BNP Paribas, as collateral agent (Incorporated by reference to Exhibit 10.1(d) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.2(e)~~	Term Loan Intercreditor and Collateral Agency Agreement, dated as of August 29, 2017, among BNP Paribas, as Term Loan Collateral Agent, BNP Paribas, as Pari Passu Collateral Agent, Bank of the West and ING Capital LLC, as ABL-Cattle Agent, BNP Paribas, as ABL-Grain Agent, PNC Bank, National Association, as ABL-Trade Agent, and acknowledged by Green Plains Inc. and new grantors (Incorporated by reference to Exhibit 10.1(e) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.3(a)~~	Fourth Amendment to the Credit Agreement, dated as of August 29, 2017, 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 (Incorporated by reference to Exhibit 10.2(a) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.3(b)~~	ABL Intercreditor Agreement, dated as of August 29, 2017, among Bank of the West and ING Capital LLC, as Joint ABL Collateral Agent, and BNP Paribas, as Term Loan Collateral Agent, and acknowledged by Green Plains Cattle Company LLC and the other ABL Grantors (Incorporated by reference to Exhibit 10.2(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.3(c)~~	Guaranty, dated as of August 29, 2017, in favor of Bank of the West and ING Capital LLC, as joint administrative agents (Incorporated by reference to Exhibit 10.2(c) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.4(a)~~	~~Eighth~~Ninth Amendment to Credit Agreement, dated as of ~~August 29, 2017,~~June 28, 2019, among Green Plains Grain Company LLC and BNP Paribas, as Administrative Agent, and the lenders party to the Credit Agreement ~~(Incorporated~~(incorporated herein by reference to Exhibit ~~10.3(a) to~~10.1 of the company’s Current Report on Form 8-K ~~dated August 29, 2017)~~filed on July 1, 2019)
~~10.4(b)~~31.1	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 by reference to Exhibit 10.3(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.4(c)~~	Guaranty, dated as of August 29, 2017, in favor of BNP Paribas, as administrative agent (Incorporated by reference to Exhibit 10.3(c) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.5(a)~~	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 by reference to Exhibit 10.4(a) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.5(b)~~	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 by reference to Exhibit 10.4(b) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.5(c)~~	Guaranty, dated as of August 29, 2017, in favor of PNC Bank, National Association, as agent (Incorporated by reference to Exhibit 10.4(c) to the company’s Current Report on Form 8-K dated August 29, 2017)
~~10.6~~	~~Employment Agreement with John Neppl (Incorporated by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K dated September 5, 2017)~~

~~10.7~~	~~First Amendment to Term Loan Agreement, dated October 16, 2017, among Green Plains, Inc. and BNP Paribas, as administrative agent and collateral agent~~
~~10.8~~	~~Incremental Joinder Agreement, dated October 27, 2017, among Green Plains Operating Company LLC and Bank of America, as Administrative~~
~~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
101	The following information from Green Plains Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended ~~September~~June 30, ~~2017,~~2019, formatted in Inline Extensible Business Reporting Language ~~(XBRL)~~(iXBRL): ~~(i)~~i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements
104	The cover page from Green Plains Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, formatted in iXBRL.

‎

5153

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	~~GREENPLAINSINC.~~
‎ ‎ ‎ ‎Date: August 6, 2019	GREEN PLAINS INC. (Registrant)


~~Date: November 2, 2017~~	By:	/s/ Todd A. Becker_
		Todd A. Becker
		‎President and Chief Executive Officer	(Principal Executive Officer)
‎ ‎ ‎Date: August 6, 2019		~~(Principal Executive Officer)~~



~~Date: November 2, 2017~~	By:	/s/ ~~John W. Neppl~~G. Patrich Simpkins Jr._
		~~John W. Neppl~~
		G. Patrich Simpkins Jr. ‎Chief Financial Officer
		(Principal Financial Officer)

5254


	September 30, 2017		December 31, 2016
Finished goods	$	123,860	$	99,009
Commodities held for sale		42,783		65,926
Raw materials		128,072		135,516
Work-in-process		283,936		91,093
Supplies and parts		33,796		30,637
	$	612,447	$	422,181

TABLE OF CONTENTS

Page

Commonly Used Defined Terms

2

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets

3

PART II – OTHER INFORMATION


	Ethanol Production		Food and Food
	Production		Ingredients		Partnership		Total
Balance, December 31, 2016	$	30,279	$	142,819	$	10,598	$	183,696
Adjustment to preliminary Fleischmann's Vinegar Valuation		-		(817)		-		(817)
Balance, September 30, 2017	$	30,279	$	142,002	$	10,598	$	182,879


Gains (Losses) Due to Ineffectiveness	Three Months Ended September 30,				Nine Months Ended September 30,
of Cash Flow Hedges	2017		2016		2017		2016
Revenues	$	(48)	$	34	$	(229)	$	(5)
Cost of goods sold		(213)		96		(213)		(65)
Net increase (decrease) recognized in earnings before tax	$	(261)	$	130	$	(442)	$	(70)


Gains (Losses) from Fair Value	Three Months Ended September 30,				Nine Months Ended September 30,
Hedges of Inventory	2017		2016		2017		2016
Revenues (effect of change in inventory value)	$	61	$	(40)	$	1,451	$	1,379
Cost of goods sold (effect of change in inventory value)		(1,775)		(470)		(6,229)		7,712
Revenues (effect of fair value hedge)		(61)		40		(1,734)		(1,379)
Cost of goods sold (effect of fair value hedge)		3,085		918		8,530		(7,648)
Ineffectiveness recognized in earnings before tax	$	1,310	$	448	$	2,018	$	64


September 30, 2017
	Exchange Traded		Non-Exchange Traded
Derivative Instruments	Net Long & (Short) (1)		Long (2)	(Short) (2)	Unit of Measure	Commodity

Futures	(39,030)				Bushels	Corn, Soybeans and Wheat
Futures	67,775	(3)			Bushels	Corn
Futures	(13,175)	(4)			Bushels	Corn
Futures	9,828				Gallons	Ethanol
Futures	(285,852)	(3)			Gallons	Ethanol
Futures	1,745				MmBTU	Natural Gas
Futures	(13,753)	(4)			MmBTU	Natural Gas
Futures	(7,200)				Pounds	Livestock
Futures	(336,300)	(3)			Pounds	Livestock
Futures	40				Barrels	Crude Oil
Futures	(293)	(4)			Barrels	Crude Oil
Futures	(420)				Pounds	Soybean Oil
Futures	5,838	(3)			Gallons	Natural Gasoline
Options	(1,010)				Bushels	Corn, Soybeans and Wheat
Options	2,156				Gallons	Ethanol
Options	(3,456)				Pounds	Livestock
Options	(1,032)				Pounds	Soybean Oil
Options	29				Barrels	Crude Oil
Forwards			17,166	(247)	Bushels	Corn and Soybeans
Forwards			53,872	(336,067)	Gallons	Ethanol
Forwards			173	(375)	Tons	Distillers Grains
Forwards			14,367	(92,344)	Pounds	Corn Oil
Forwards			14,862	(1,036)	MmBTU	Natural Gasoline
Forwards			712	(412)	Barrels	Crude Oil


	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2016	148,750	$	12.36	2.8	$	2,305
Granted	-		-	-		-
Exercised	(5,000)		10.00	-		78
Forfeited	-		-	-		-
Expired	-		-	-		-
Outstanding at September 30, 2017	143,750	$	12.44	2.1	$	1,109
Exercisable at September 30, 2017 (1)	143,750	$	12.44	2.1	$	1,109


	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, 2016	1,139,560	$	17.65
Granted	566,165		24.03
Forfeited	(42,430)		19.08
Vested	(542,764)		18.37
Non-Vested at September 30, 2017	1,120,531	$	20.47	2.0


Period	Total Number of Shares Withheld for Employee Awards	Average Price Paid per Share
July 1 - July 31	-	$	-
August 1 - August 30	1,565		17.07
September 1 - September 30	15,022		18.49
Total	16,587	$	18.36


Period	Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Repurchased as Part of Repurchase Program	Approximate Dollar Value of Shares that may yet be Repurchased under the Program (in thousands)
July 1 - July 31	-	$	-	514,990	$	89,993
August 1 - August 30	285,849		17.10	800,839		85,097
September 1 - September 30	50,000		16.70	850,839		84,260
Total	335,849	$	17.04	850,839	$	84,260