Page

Commonly Used Defined Terms

2

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets

3

TABLE OF CONTENTS

PART II – OTHER INFORMATION

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 ~~June 30, 2019~~March 31, 2020

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 every Interactive Data File required to be submitted 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 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 xo	Accelerated filer ox

Non-accelerated filer 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 ~~August 2, 2019,~~May 1, 2020, was ~~38,186,133~~35,494,087 shares.

Table of Contents



		Page
Commonly Used Defined Terms		2
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements

	Consolidated Balance Sheets	3

	Consolidated Statements of Operations	4

	Consolidated Statements of Comprehensive Income	5

	Consolidated Statements of Cash Flows	6

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3533

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4846

Item 4.	Controls and Procedures	5047


PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	5149

Item 1A.	Risk Factors	5149

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5251

Item 3.	Defaults Upon Senior Securities	52

Item 4.	Mine Safety Disclosures	52

Item 5.	Other Information	52

Item 6.	Exhibits	5352

Signatures		5453

Table of Contents

Commonly Used Defined Terms

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

Green Plains Inc., Subsidiaries, and 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~~Cattle; GPCC	Green Plains Cattle Company LLC
Green Plains Grain	Green Plains Grain Company LLC
Green Plains Partners; the partnership	Green Plains Partners LP
Green Plains Trade	Green Plains Trade Group LLC

Accounting Defined Terms:


ASC	Accounting Standards Codification
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
SEC	Securities and Exchange Commission

Industry and Other Defined Terms:


CAFE	Corporate Average Fuel Economy
the CARES Act	Coronavirus Aid, Relief, and Economic Security Act
COVID-19	Coronavirus Disease 2019
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
EPA	U.S. Environmental Protection Agency
GATT	General Agreement on Tariffs and Trade
MmBtu	Million British Thermal Units
Mmg	Million gallons
MTBE	Methyl tertiary-butyl ether
MVC	Minimum volume commitment
RFS II	Renewable Fuels Standard II
RIN	Renewable identification number
RVO	Renewable volume obligation
U.S.	United States
USDA	U.S. Department of Agriculture
WTO	World Trade Organization

‎

Table of Contents

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements.

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


	June 30, ‎2019		December 31, ‎2018		March 31, ‎2020		December 31, ‎2019
	(unaudited)				(unaudited)
ASSETS	ASSETS				ASSETS
Current assets
Cash and cash equivalents	$	193,280	$	251,683	$	194,333	$	245,977
Restricted cash		40,628		66,512		11,191		23,919
Accounts receivable, net of allowances of $193 and $194, respectively		108,700		100,361
Accounts receivable, net of allowances of $196 and $166, respectively						34,447		107,183
Income taxes receivable		12,879		12,418		42,367		6,216
Inventories		658,506		734,883		214,336		252,992
Prepaid expenses and other		11,993		14,470		12,550		13,685
Derivative financial instruments		60,202		26,315		57,161		17,941
Total current assets		1,086,188		1,206,642		566,385		667,913
Property and equipment, net of accumulated depreciation ‎and amortization of $467,212 and $430,405, respectively		872,154		886,576
Property and equipment, net of accumulated depreciation ‎and amortization of $504,325 and $486,677, respectively						843,466		827,271
Operating lease right-of-use assets		58,092		-		53,909		52,476
Goodwill		34,689		34,689
Deferred income taxes		3,582		-
Investment in equity method investees						131,113		68,998
Other assets		86,022		88,525		43,225		81,560
Total assets	$	2,140,727	$	2,216,432	$	1,638,098	$	1,698,218

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY				LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	105,802	$	156,901	$	96,053	$	156,693
Accrued and other liabilities		59,863		58,973		35,637		39,384
Derivative financial instruments		9,670		24,776		15,589		8,721
Operating lease current liabilities		16,667		-		16,094		16,626
Short-term notes payable and other borrowings		523,529		538,243		167,043		187,812
Current maturities of long-term debt		1,225		54,807		130,785		132,555
Total current liabilities		716,756		833,700		461,201		541,791
Long-term debt		370,880		298,190		247,210		243,990
Deferred income taxes		5,478		10,123
Operating lease long-term liabilities		44,108		-		40,383		38,314
Other liabilities		8,931		11,430		9,224		8,837
Total liabilities		1,146,153		1,153,443		758,018		832,932

Commitments and contingencies (Note 13)
Commitments and contingencies (Note 14)

Stockholders' equity
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
Common stock, $0.001 par value; 75,000,000 shares authorized; ‎47,307,248 and 46,964,115 shares issued, and 35,494,087 ‎and 36,031,933 shares outstanding, respectively						47		47
Additional paid-in capital		726,068		696,222		734,616		734,580
Retained earnings		226,869		324,728		131,705		148,150
Accumulated other comprehensive income (loss)		24,177		(16,016)		30,939		(11,064)
Treasury stock, 8,732,851 and 5,535,574 shares, respectively		(98,032)		(58,162)
Treasury stock, 11,813,161 and 10,932,182 shares, respectively						(131,287)		(119,808)
Total Green Plains stockholders' equity		879,129		946,819		766,020		751,905
Noncontrolling interests		115,445		116,170		114,060		113,381
Total stockholders' equity		994,574		1,062,989		880,080		865,286
Total liabilities and stockholders' equity	$	2,140,727	$	2,216,432	$	1,638,098	$	1,698,218

See accompanying notes to the consolidated financial statements.
‎

Table of Contents

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)


	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,				Three Months Ended ‎March 31,
	2019		2018		2019		2018		2020		2019
Revenues
Product revenues	$	894,161	$	985,217	$	1,534,171	$	2,028,876	$	631,581	$	436,336
Service revenues		1,692		1,620		3,997		3,248		1,288		2,305
Total revenues		895,853		986,837		1,538,168		2,032,124		632,869		438,641

Costs and expenses
Cost of goods sold (excluding depreciation and amortization expenses reflected below)		888,257		910,625		1,523,832		1,898,960		617,228		434,391
Operations and maintenance expenses		6,234		7,893		13,098		16,293		6,160		6,864
Selling, general and administrative expenses		21,648		29,731		42,294		55,734		21,638		18,400
Goodwill impairment										24,091		-
Depreciation and amortization expenses		19,094		26,823		38,329		53,297		18,080		17,624
Total costs and expenses		935,233		975,072		1,617,553		2,024,284		687,197		477,279
Operating income (loss)		(39,380)		11,765		(79,385)		7,840
Operating loss from continuing operations										(54,328)		(38,638)

Other income (expense)
Interest income		923		709		2,186		1,346		593		1,186
Interest expense		(15,969)		(22,021)		(30,396)		(44,149)		(9,697)		(9,731)
Other, net		(406)		2,545		432		2,479		836		912
Total other expense		(15,452)		(18,767)		(27,778)		(40,324)		(8,268)		(7,633)
Loss before income taxes		(54,832)		(7,002)		(107,163)		(32,484)
Loss from continuing operations before income taxes and income (loss) from equity method investees										(62,596)		(46,271)
Income tax benefit		14,653		10,753		29,113		16,780		44,283		12,943
Net income (loss)		(40,179)		3,751		(78,050)		(15,704)
Income (loss) from equity method investees, net of income taxes										7,966		(74)
Net loss from continuing operations including noncontrolling interest										(10,347)		(33,402)
Net loss from discontinued operations, net of income taxes										-		(4,469)
Net loss										(10,347)		(37,871)
Net income attributable to noncontrolling interests		5,163		4,745		10,091		9,407		6,098		4,928
Net loss attributable to Green Plains	$	(45,342)	$	(994)	$	(88,141)	$	(25,111)	$	(16,445)	$	(42,799)

Earnings per share:
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)
Earnings per share - basic and diluted
Net loss from continuing operations									$	(0.47)	$	(0.95)
Net loss from discontinued operations										-		(0.11)
Net loss attributable to Green Plains									$	(0.47)	$	(1.06)

Weighted average shares outstanding:
Basic		40,081		40,194		40,200		40,168		34,665		40,315
Diluted		40,081		40,194		40,200		40,168		34,665		40,315

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

See accompanying notes to the consolidated financial statements.

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Table of Contents

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited and in thousands)

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)


	Three Months Ended ‎March 31,
	2020		2019
Net loss	$	(10,347)	$	(37,871)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on derivatives arising during the period, net of tax benefit (expense) of ($1,447) and $2,080, respectively		4,532		(6,883)
Reclassification of realized losses (gains) on derivatives, net of tax expense (benefit) of $1,432 and ($3,140), respectively		(4,485)		10,376
Other comprehensive income (loss), net of tax		47		3,493
Share of equity method investees other comprehensive income arising during the period, net of tax expense of $13,359, and $0, respectively		41,956		-
Total other comprehensive income, net of tax		42,003		3,493
Comprehensive income (loss) attributable to Green Plains		31,656		(34,378)
Comprehensive income attributable to noncontrolling interests		6,098		4,928
Comprehensive income (loss) attributable to Green Plains	$	25,558	$	(39,306)

See accompanying notes to the consolidated financial statements.

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Table of Contents

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)


	Six Months Ended ‎June 30,				Three Months Ended ‎March 31,
	2019		2018		2020		2019
Cash flows from operating activities:
Net loss from continuing operations including noncontrolling interest					$	(10,347)	$	(33,402)
Net loss from discontinued operations, net of income taxes						-		(4,469)
Net loss	$	(78,050)	$	(15,704)		(10,347)		(37,871)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		38,329		53,297		18,080		17,624
Amortization of debt issuance costs and debt discount		10,306		7,515		5,099		3,262
Gain from insurance proceeds		-		(2,624)
Goodwill impairment						24,091		-
Deferred income taxes		(27,543)		(23,061)		(23,895)		(12,927)
Stock-based compensation		4,809		5,435		1,324		2,485
Undistributed equity loss of affiliates		109		239
Income (loss) from equity method investees, net of income taxes						(7,966)		74
Distribution from equity method investment						3,247		-
Other		1,328		-		6		(81)
Changes in operating assets and liabilities before effects of business combinations and dispositions:
Accounts receivable		(11,312)		14,054		72,684		30,456
Inventories		76,791		88,450		38,626		36,569
Derivative financial instruments		3,088		1,513		(32,290)		18,141
Prepaid expenses and other assets		2,830		2,797		1,135		2,637
Accounts payable and accrued liabilities		(51,901)		(96,295)		(58,652)		(59,456)
Current income taxes		(2,137)		10,540		(13,251)		(1,564)
Other		1,144		(297)		(114)		2,843
Net cash provided by operating activities - continuing operations						17,777		2,192
Net cash used in operating activities - discontinued operations						-		(22,975)
Net cash provided by (used in) operating activities		(32,209)		45,859		17,777		(20,783)

Cash flows from investing activities:
Purchases of property and equipment, net		(23,467)		(14,640)		(38,792)		(9,388)
Proceeds from the sale of assets, net		3,155		-		-		3,155
Acquisition of businesses, net of cash acquired		-		(1,629)
Investments in unconsolidated subsidiaries		-		(2,253)
Other investing activities		-		7,500		(1,098)		-
Net cash used in investing activities		(20,312)		(11,022)
Net cash used in investing activities - continuing operations						(39,890)		(6,233)
Net cash used in investing activities - discontinued operations						-		(1,421)
Net cash used investing activities						(39,890)		(7,654)

Cash flows from financing activities:
Proceeds from the issuance of long-term debt		147,700		42,300		-		30,600
Payments of principal on long-term debt		(45,125)		(43,370)		(21)		(29,781)
Proceeds from short-term borrowings		1,444,516		2,089,208		820,264		525,456
Payments on short-term borrowings		(1,518,008)		(2,158,274)		(844,316)		(555,687)
Payments for repurchase of common stock		(39,870)		-		(11,479)		-
Payments of cash dividends and distributions		(20,692)		(20,580)		(5,498)		(10,334)
Proceeds from disgorgement of shareholder short-swing profits		6,699		-		-		6,699
Payments of loan fees		(4,892)		(2,622)
Payments related to tax withholdings for stock-based compensation		(2,094)		(3,013)		(1,209)		(1,978)
Proceeds from exercise of stock options		-		150
Net cash used in financing activities - continuing operations						(42,259)		(35,025)
Net cash provided by financing activities - discontinued operations						-		18,509
Net cash used in financing activities		(31,766)		(96,201)		(42,259)		(16,516)

Net change in cash, cash equivalents and restricted cash		(84,287)		(61,364)		(64,372)		(44,953)
Cash, cash equivalents and restricted cash, beginning of period		318,195		312,360		269,896		283,284
Discontinued operations cash activity included above:
Add: Cash balance included in current assets of discontinued operations at beginning of period						-		34,911
Less: Cash balance included in current assets of discontinued operations at end of period						-		(24,555)
Cash, cash equivalents and restricted cash, end of period	$	233,908	$	250,996	$	205,524	$	248,687

Continued on the following page

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Table of Contents

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)


Continued from the previous page
	Six Months Ended ‎June 30,				Three Months Ended ‎March 31,
	2019		2018		2020		2019
Reconciliation of total cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	193,280	$	235,133	$	194,333	$	214,068
Restricted cash		40,628		15,863		11,191		59,174
Discontinued operations cash activity included above:
Less: Cash, cash equivalents and restricted cash balance included in current assets of discontinued operations at end of period						-		(24,555)
Total cash, cash equivalents and restricted cash	$	233,908	$	250,996	$	205,524	$	248,687

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)	$	(4,663)	$	29
Cash paid for interest	$	23,039	$	36,923
Cash paid for interest of continuing operations					$	8,683	$	7,550
Cash paid for interest of discontinued operations					$	-	$	4,373

See accompanying notes to the consolidated financial statements.

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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 company owns a ~~49.1%~~49.0% limited partner interest and a 2.0% general partner interest in Green Plains Partners LP. Public investors own the remaining ~~48.9%~~49.0% limited partner interest in the partnership. The company determined that the limited partners in the partnership with equity at risk lack the power, through voting rights or similar rights, to direct the activities that most significantly impact partnership’s economic performance; therefore, the partnership is considered a variable interest entity. The company, through its ownership of the general partner interest in the partnership, has the power to direct the activities that most significantly affect economic performance and is obligated to absorb losses and has the right to receive benefits that could be significant to the partnership. Therefore, the company is considered the primary beneficiary and consolidates the partnership in the company’s financial statements. The assets of the partnership cannot be used by the company for general corporate purposes. The partnership’s consolidated total assets as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, excluding intercompany balances, are ~~$103.2~~$91.0 million and ~~$67.3~~$90.0 million, respectively, and primarily consist of property and equipment, operating lease right-of-use assets and goodwill. The partnership’s consolidated total liabilities as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, excluding intercompany balances, are ~~$196.6~~$182.5 million and ~~$152.9~~$180.9 million, respectively, which primarily consist of long-term debt as discussed in Note 89 – Debt and operating lease liabilities. The liabilities recognized as a result of consolidating the partnership do not represent additional claims on our general assets.

GPCC, a previously a wholly owned subsidiary of Green Plains, was disposed of during the third quarter of 2019. After closing, GPCC is no longer consolidated in the company’s consolidated financial statements and the GPCC investment is accounted for using the equity method of accounting. Additionally, the company concluded that the disposition of GPCC met the requirements under ASC 205-20 Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”) to be presented as discontinued operations. As such, GPCC results prior to its disposition are classified as discontinued operations in prior period consolidated financial statements. See Note 3 - Dispositions and Discontinued Operations for further details.

The company also owns a 90.0% interest in BioProcess Algae, a joint venture formed in 2008, and consolidates their results in its consolidated financial 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 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, ~~2018,~~2019, as filed with the SEC on February 20, ~~2019.~~2020.

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 relating to the discontinued operations of GPCC were reclassified to conform to the current year presentation. These reclassifications ~~did not affect~~affected certain balance sheet line items, total revenues, costs and ~~expenses, net loss or stockholders’ equity.~~expenses.

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Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The company bases its estimates on historical experience and assumptions it believes are proper and reasonable under the circumstances and regularly evaluates the appropriateness of its estimates and assumptions. Actual results could differ from those estimates. Key accounting policies, including but not limited to those relating to revenue recognition, ~~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

The company operates within ~~four~~4 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, 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 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.~~balance sheets.

Revenue Recognition

The company recognizes revenue when obligations under the terms of a contract with a customer are satisfied. Generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects concurrent with revenue-producing activities are excluded from revenue.

Sales of ethanol, distillers grains, corn oil, natural gas and other commodities by the company’s marketing business are recognized when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs with the transfer of control of products or services. Revenues related to marketing for third parties are presented on a gross basis as the company controls the product prior to the sale to the end customer, takes title of the product and has inventory risk. Unearned revenue is recorded for goods in transit when the company has received payment but control has not yet been transferred to the customer. Revenues for receiving, storing, transferring and transporting ethanol and other fuels are recognized when the product is delivered to the customer.

The company routinely enters into physical-delivery energy commodity purchase and sale agreements. At times, the company settles these transactions by transferring its obligations to other counterparties rather than delivering the physical commodity. Energy trading transactions are reported net as a component of revenue. Revenues include net gains or losses from derivatives related to products sold while cost of goods sold includes net gains or losses from derivatives related to commodities purchased. Revenues also include realized gains and losses on related derivative financial instruments and reclassifications of realized gains and losses on cash flow hedges from accumulated other comprehensive income or loss.

Sales of products, including agricultural commodities, ~~cattle and vinegar,~~ are recognized when control of the product is transferred to the customer, which depends on the agreed upon shipment or delivery terms. Revenues related to grain merchandising are presented gross and include shipping and handling, which is also a component of cost of goods sold. Revenues from grain storage are recognized ~~when~~over time as the services are rendered.

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A substantial portion of the partnership revenues are derived from fixed-fee commercial agreements for storage, terminal or transportation services. The partnership recognizes revenue upon transfer of control of product from its storage tanks and fuel terminals, when railcar volumetric capacity is provided, and as truck transportation services are performed. To the extent shortfalls associated with minimum volume commitments in the previous four quarters continue to exist, volumes in excess of the minimum volume commitment are applied to those shortfalls. Remaining excess volumes generating operating lease revenue are recognized as incurred.

‎

Shipping and Handling Costs

The company accounts for shipping and handling activities related to contracts with customers as costs to fulfill its promise to transfer the associated products. Accordingly, the company records customer payments associated with shipping and handling costs as a component of revenue, and classifies such costs as a component of cost of goods sold.

Cost of Goods Sold

Cost of goods sold includes direct labor, materials, shipping and plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in ethanol ~~production cattle feeding operations and vinegar production until the sale of Fleischmann’s Vinegar during the fourth quarter of 2018.~~production. Grain purchasing and receiving costs, excluding labor costs for grain buyers and scale operators, are also included in cost of goods sold. Materials include the cost of corn feedstock, denaturant, and process ~~chemicals, cattle and veterinary supplies.~~chemicals. Corn feedstock costs include gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight charges, inspection costs and transfer costs, as well as reclassifications of gains and losses on cash flow hedges from accumulated other comprehensive income or loss. Plant overhead consists primarily of plant ~~and feedlot~~ utilities, repairs and maintenance ~~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~~sale contracts to attempt to minimize the effect of price changes on ethanol, grain and natural ~~gas and cattle inventories.~~gas. Exchange-traded futures and options contracts are valued at quoted market prices and settled predominantly in cash. The company is exposed to loss when counterparties default on forward purchase and sale contracts. Grain inventories held for sale and forward purchase and sale contracts are valued at market prices when available or other market quotes adjusted for differences, primarily in transportation, between the exchange-traded market and local market where the terms of the contract is based. Changes in forward purchase contracts and exchange-traded futures and options contracts are recognized as a component of cost of goods sold.

Operations and Maintenance Expenses

In the partnership segment, transportation expenses represent the primary component of operations and maintenance expenses. Transportation expenses include railcar leases, freight and shipping of the company’s ethanol and co-products, as well as costs incurred storing ethanol at destination terminals.

Derivative Financial Instruments

The company uses various derivative financial instruments, including exchange-traded futures and exchange-traded and over-the-counter options contracts, to attempt to minimize risk and the effect of commodity price changes including but not limited to, corn, ethanol, ~~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; 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

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do not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating income unless the contracts qualify for, and the company elects, cash flow hedge accounting treatment.

Certain qualifying derivatives related to ethanol production and agribusiness and energy services ~~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. 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.~~realized and the physical transaction is completed. When it becomes probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued, which affects earnings. These derivative financial instruments are recognized in current assets or ~~other~~ current liabilities at fair value.

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

~~Recent Accounting Pronouncements~~

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

2. REVENUE

Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Sales, value add, and other taxes the company collects concurrent with revenue-producing activities are excluded from revenue.

Revenue by Source

The following tables disaggregate revenue by major source for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ (in thousands):


	Three Months Ended June 30, 2019												Three Months Ended March 31, 2020
	Ethanol Production		Agribusiness & Energy Services		Food & Ingredients		Partnership		Eliminations		Total		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		16,475		-		-		-		-		16,475
Cattle		-		-		270,971		-		-		270,971
Service revenues		-		-		-		1,608		-		1,608		-		-		-		1,179		-		1,179
Other		1,773		442		-		-		-		2,215		2,959		390		-		-		-		3,349
Intersegment revenues		1,435		-		38		1,843		(3,316)		-		25		-		-		2,074		(2,099)		-
Total revenues from contracts with customers		15,523		442		271,009		3,451		(3,316)		287,109		19,459		390		-		3,253		(2,099)		21,003
Revenues from contracts accounted for as derivatives under ASC 815 ⁽¹⁾:
Ethanol		355,385		136,225		-		-		-		491,610		367,092		126,093		-		-		-		493,185
Distillers grains		64,069		8,833		-		-		-		72,902		72,527		4,709		-		-		-		77,236
Corn oil		12,993		10,463		-		-		-		23,456		14,684		5,730		-		-		-		20,414
Grain		-		17,987		-		-		-		17,987		6		7,950		-		-		-		7,956
Cattle		-		-		(85)		-		-		(85)
Other		903		1,887		-		-		-		2,790		1,957		11,009		-		-		-		12,966
Intersegment revenues		2,070		9,131		-		-		(11,201)		-		-		7,308		-		-		(7,308)		-
Total revenues from contracts accounted for as derivatives		435,420		184,526		(85)		-		(11,201)		608,660		456,266		162,799		-		-		(7,308)		611,757
Leasing revenues under ASC 842 ⁽²⁾:		-		-		-		17,374		(17,290)		84		-		-		-		17,018		(16,909)		109
Total Revenues	$	450,943	$	184,968	$	270,924	$	20,825	$	(31,807)	$	895,853	$	475,725	$	163,189	$	-	$	20,271	$	(26,316)	$	632,869

‎

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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												Three Months Ended March 31, 2019⁽³⁾
	Ethanol Production		Agribusiness & Energy Services		Food & Ingredients		Partnership		Eliminations		Total		Ethanol Production		Agribusiness & Energy Services		Food & Ingredients		Partnership		Eliminations		Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol	$	3,100	$	-	$	-	$	-	$	-	$	3,100	$	620	$	-	$	-	$	-	$	-	$	620
Distillers grains		119,902		-		-		-		-		119,902		17,681		-		-		-		-		17,681
Cattle and vinegar		-		-		489,475		-		-		489,475
Service revenues		-		-		-		2,447		-		2,447		-		-		-		2,083		-		2,083
Other		1,332		1,483		-		-		-		2,815		235		178		-		-		-		413
Intersegment revenues		1,537		-		80		-		(1,617)		-		25		-		-		1,392		(1,417)		-
Total revenues from contracts with customers		125,871		1,483		489,555		2,447		(1,617)		617,739		18,561		178		-		3,475		(1,417)		20,797
Revenues from contracts accounted for as derivatives under ASC 815 ⁽¹⁾:
Ethanol		893,656		228,658		-		-		-		1,122,314		201,158		77,077		-		-		-		278,235
Distillers grains		90,401		53,918		-		-		-		144,319		36,599		16,459		-		-		-		53,058
Corn oil		35,602		12,158		7,637		-		-		55,397		8,613		6,971		1,452		-		-		17,036
Grain		470		37,129		-		-		-		37,599		136		20,855		-		-		-		20,991
Cattle and vinegar		-		-		6,884		-		-		6,884
Other		8,556		38,515		-		-		-		47,071		5,766		42,536		-		-		-		48,302
Intersegment revenues		4,635		25,557		-		4,689		(34,881)		-		-		5,132		-		-		(5,132)		-
Total revenues from contracts accounted for as derivatives		1,033,320		395,935		14,521		4,689		(34,881)		1,413,584		252,272		169,030		1,452		-		(5,132)		417,622
Leasing revenues under ASC 840 ⁽²⁾:		-		-		-		44,589		(43,788)		801
Leasing revenues under ASC 842 ⁽²⁾:														-		-		-		17,612		(17,390)		222
Total Revenues	$	1,159,191	$	397,418	$	504,076	$	51,725	$	(80,286)	$	2,032,124	$	270,833	$	169,208	$	1,452	$	21,087	$	(23,939)	$	438,641

(1)Revenues from contracts accounted for as derivatives represent physically settled derivative sales that are outside the scope of ASC 606,~~Revenue from Contracts with Customers~~ ~~(ASC 606),~~ where the company recognizes revenue when control of the inventory is transferred within the meaning of ASC 606 as required by ASC 610-20, Gains and Losses from ~~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.

(3)Revenues include certain items which were previously considered intercompany transactions prior to the disposition of GPCC and therefore eliminated upon consolidation. These revenue transactions are now presented on a gross basis in product revenues. These revenue transactions total $3.4 million for ~~2019 and ASC 840,~~ ~~Leases~~ ~~for 2018.~~the three months ended March 31, 2019.

~~Payment Terms~~Major Customer

Revenues from 1 customer represented 19% and 14% of total revenues for the three months ended March 31, 2020 and 2019, respectively. Revenues from this customer are reported in the ethanol production segment.

3. DISPOSITIONS AND DISCONTINUED OPERATIONS

DISPOSITIONS

Disposition of Green Plains Cattle Company LLC

On September 1, 2019, the company, TGAM and StepStone formed a joint venture and entered into the LLC Agreement. GPCC was previously a wholly owned subsidiary of Green Plains. Green Plains also entered into a Securities Purchase Agreement with TGAM and StepStone, whereby TGAM and StepStone purchased an aggregate of 50% of the membership interests of GPCC from Green Plains for approximately $76.9 million in cash. There was 0 gain or loss recorded as part of this transaction. The LLC Agreement contains certain earn-out or bonus provisions to be paid by or received from GPCC if certain EBITDA thresholds are met. The company does not believe these are reasonably estimable and therefore has not recorded these amounts in the consolidated financial statements.

Under the LLC Agreement, Green Plains has certain rights and obligations, including but not limited to, the right or obligation: (i) to designate two Managers to the Board of Managers of GPCC (the “Board”), or in the event the size of the Board is increased, the number of Managers equal to two-fifths of the Board, rounded up, and (ii) to fund additional capital contributions in accordance with their percentage interest upon mutual agreement by Green Plains, TGAM and StepStone. Additionally, TGAM and StepStone both have the right or obligation to designate one Manager, or in the event the size of the Board is increased, the number of Managers equal to one-fifths of the Board, rounded up. Each Manager serving on the Board shall have one vote and a majority of the Managers serving on the Board shall constitute a quorum for the transaction of business of the Board. Green Plains’ allocation under the LLC Agreement will be subject to certain adjustments.

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The assets and liabilities of the GPCC at closing on September 1, 2019 were as follows (in thousands):



Amounts of Identifiable Assets Disposed and Liabilities Relinquished
Cash		$	2
Accounts receivable, net			17,920
Inventory			387,534
Derivative financial instruments			48,189
Property and equipment			71,678
Other assets			2,291

Current liabilities			(49,297)
Short-term notes payable and other borrowings			(38)
Current maturities of long-term debt			(324,028)
Long-term debt			(80)
Other liabilities			(403)
	Total identifiable net assets disposed	$	153,768

DISCONTINUED OPERATIONS

After closing, GPCC is no longer consolidated in the company’s consolidated financial statements and the GPCC investment is accounted for using the equity method of accounting. Additionally, the company concluded that the disposition of GPCC met the requirements under ASC 205-20. As such, GPCC results prior to its disposition are classified as discontinued operations for all applicable periods. Financial results of GPCC were previously recorded within the food and ingredients segment.

Summarized Results of Discontinued Operations

The ~~company has standard payment terms, which vary depending upon~~following table presents the ~~nature~~results of our discontinued operations for the services provided, with the majority falling within 10 to 30 days after transfer of control or completion of services. In instances where the timing of revenue recognition differs from the timing of invoicing, the company has determined that contracts generally do not include a significant financing component.

~~Contract Liabilities~~

The company records unearned revenue when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of service and lease agreements. Unearned revenue from service agreements, which represents a contract liability, is recorded for fees that have been charged to the customer prior to the completion of performance obligations. Unearned revenue is generally recognized in the subsequent quarter and is not material to the company. The company expects to recognize all of the unearned revenue associated with service agreements as of June 30, 2019, in the subsequent quarter when the inventory is withdrawn from the partnership’s tank storage.three months ended March 31, 2019.

~~3. ACQUISITIONS AND DISPOSITIONS~~
	Three Months Ended March 31, 2019

Product revenues	$	207,085

Costs and expenses
Cost of goods sold (excluding depreciation and amortization expenses reflected below)		204,557
Selling, general and administrative expenses		2,284
Depreciation and amortization expenses		1,611
Total costs and expenses		208,452
Operating loss		(1,367)

Other income (expense)
Interest income		77
Interest expense		(4,696)
Total other expense		(4,619)
Loss before income taxes		(5,986)
Income tax benefit		1,517
Net loss	$	(4,469)

~~ACQUISITIONS~~(1)

~~Acquisition~~Product revenues, costs of ~~Cattle Feeding Operations – Bartlett Cattle Company, L.P.~~

On August 1, 2018, the company acquired two cattle-feeding operations from Bartlett Cattle Company, L.P. for $16.2 million, plus working capital of approximately $106.6 million primarily consisting of work-in-process inventory. The transaction included the feed yards located in Sublette, Kansasgoods sold and ~~Tulia, Texas,~~selling, general and administrative expenses include certain revenue and expense items which ~~added combined feedlot capacity of 97,000 head of cattle~~were previously considered intercompany transactions prior to the ~~company’s operations.~~ ~~The transaction was financed using cash on hand~~disposition of GPCC and ~~proceeds from the Green Plains Cattle senior secured asset-based revolving credit facility. There were no material acquisition~~therefore eliminated upon consolidation. These revenue and costs ~~recorded~~of goods sold transactions total $3.4 million for the ~~acquisition.~~

three months ended March 31, 2019.

‎

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

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

~~The amounts above reflect the final purchase price allocation, which 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 Kerry $353.7 million in cash and restricted cash, including net working capital adjustments. The divested assets were reported within the company’s 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 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 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 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 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, of which $89.5 million was recorded within the corporate segment and $2.7 million was recorded within the 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.

~~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 in estimating the fair value of the company’s financial instruments:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities the company can access at the measurement date.

Level 2 – directly or indirectly observable inputs such as quoted prices for similar assets or liabilities in active markets other than quoted prices included within Level 1, quoted prices for identical or similar assets in markets that are not active, and other inputs that are observable or can be substantially corroborated by observable market data through correlation or other means. Grain inventories held for sale in the agribusiness and energy services segment are valued at nearby futures values, plus or minus nearby basis.

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 June 30, 2019						Fair Value Measurements at March 31, 2020
	Quoted Prices in ‎ Active Markets for ‎Identical Assets		Significant Other ‎Observable Inputs				Quoted Prices in ‎ Active Markets for ‎Identical Assets		Significant Other ‎Observable Inputs
	(Level 1)		(Level 2)		Total		(Level 1)		(Level 2)		Total
Assets:
Cash and cash equivalents	$	193,280	$	-	$	193,280	$	194,333	$	-	$	194,333
Restricted cash		40,628		-		40,628		11,191		-		11,191
Inventories carried at market		-		36,459		36,459		-		46,483		46,483
Unrealized gains on derivatives		-		15,924		15,924		-		22,943		22,943
Other assets		113		1		114		112		-		112
Total assets measured at fair value	$	234,021	$	52,384	$	286,405	$	205,636	$	69,426	$	275,062

Liabilities:
Accounts payable ⁽¹⁾	$	-	$	7,263	$	7,263	$	-	$	23,714	$	23,714
Unrealized losses on derivatives		-		9,670		9,670		-		15,589		15,589
Total liabilities measured at fair value	$	-	$	16,933	$	16,933	$	-	$	39,303	$	39,303

Fair Value Measurements at December 31, 2018
Quoted Prices in
‎ Active Markets for
‎Identical Assets
Significant Other
‎Observable Inputs
(Level 1)
(Level 2)
Total
Assets:
Cash and cash equivalents
$
251,683
$
-
$
251,683
Restricted cash
66,512
-
66,512
Inventories carried at market
-
111,960
111,960
Unrealized gains on derivatives
-
9,976
9,976
Other assets
114
1
115
Total assets measured at fair value
$
318,309
$
121,937
$
440,246
Liabilities:
Accounts payable ⁽¹⁾
$
-
$
16,573
$
16,573
Unrealized losses on derivatives
-
7,852
7,852
Other liabilities
-
2
2
Total liabilities measured at fair value
$
-
$
24,427
$
24,427

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	Fair Value Measurements at December 31, 2019
	Quoted Prices in ‎ Active Markets for ‎Identical Assets		Significant Other ‎Observable Inputs
	(Level 1)		(Level 2)		Total
Assets:
Cash and cash equivalents	$	245,977	$	-	$	245,977
Restricted cash		23,919		-		23,919
Inventories carried at market		-		73,318		73,318
Unrealized gains on derivatives		-		14,515		14,515
Other assets		113		-		113
Total assets measured at fair value	$	270,009	$	87,833	$	357,842

Liabilities:
Accounts payable ⁽¹⁾	$	-	$	37,294	$	37,294
Unrealized losses on derivatives		-		7,771		7,771
Total liabilities measured at fair value	$	-	$	45,065	$	45,065

(1)Accounts payable is generally stated at historical amounts with the exception of ~~$7.3~~$23.7 million and $~~16.6~~37.3 million at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, related to certain delivered inventory for which the payable fluctuates based on changes in commodity prices. These payables are hybrid financial instruments for which the company has elected the fair value option.

The ~~company believes the~~ fair value of ~~its~~the company’s debt was approximately $556.6 million compared with a book value of $545.0 millionat March 31, 2020. The fair value of the company’s debt approximated book value, which was ~~$895.6 million~~ ~~at June 30, 2019 and $891.2~~$564.4 million at December 31, ~~2018.~~2019. The company estimated the fair value of its outstanding debt using Level 2 inputs. The company believes the fair values of its accounts receivable approximated book value, which was ~~$108.7~~$34.4 million and $~~100.4~~107.2 million at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.

Although the company currently does not have any recurring Level 3 financial measurements, the fair values of tangible assets and goodwill acquired and the equity component of convertible debt represent Level 3 measurements which were derived using a combination of the income approach, market approach and cost approach for the specific assets or liabilities being valued.

‎

5. SEGMENT INFORMATION

The company reports the financial and operating performance for 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, 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 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.

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 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.

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The following tables set forth certain financial data for the company’s operating segments (in thousands):


	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019⁽¹⁾
Revenues:
Ethanol production:
Revenues from external customers	$	447,438	$	589,256	$	716,154	$	1,153,019	$	475,700	$	270,808
Intersegment revenues		3,505		4,219		5,622		6,172		25		25
Total segment revenues		450,943		593,475		721,776		1,159,191		475,725		270,833
Agribusiness and energy services:
Revenues from external customers		175,837		170,074		338,632		371,861		155,881		164,076
Intersegment revenues		9,131		14,128		15,544		25,557		7,308		5,132
Total segment revenues		184,968		184,202		354,176		397,418		163,189		169,208
Food and ingredients:
Revenues from external customers		270,886		225,887		479,385		503,996		-		1,452
Intersegment revenues		38		38		76		80		-		-
Total segment revenues		270,924		225,925		479,461		504,076		-		1,452
Partnership:
Revenues from external customers		1,692		1,620		3,997		3,248		1,288		2,305
Intersegment revenues		19,133		24,220		37,915		48,477		18,983		18,782
Total segment revenues		20,825		25,840		41,912		51,725		20,271		21,087
Revenues including intersegment activity		927,660		1,029,442		1,597,325		2,112,410		659,185		462,580
Intersegment eliminations		(31,807)		(42,605)		(59,157)		(80,286)		(26,316)		(23,939)
Revenues as reported	$	895,853	$	986,837	$	1,538,168	$	2,032,124	$	632,869	$	438,641

(1)Revenues include certain items which were previously considered intercompany transactions prior to the disposition of GPCC and therefore eliminated upon consolidation. These revenue transactions are now presented on a gross basis in product revenues. These revenue transactions total $3.4 million for the three months ended March 31, 2019.

Refer to Note 2 - Revenue, for further disaggregation of revenue by operating segment.


	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019⁽¹⁾
Cost of goods sold:
Ethanol production	$	483,352	$	581,613	$	776,839	$	1,146,172	$	489,150	$	293,487
Agribusiness and energy services		176,214		165,174		335,840		366,886		156,502		159,626
Food and ingredients		259,906		206,440		465,979		466,205		-		1,516
Partnership		-		-		-		-
Intersegment eliminations		(31,215)		(42,602)		(54,826)		(80,303)		(28,424)		(20,238)
	$	888,257	$	910,625	$	1,523,832	$	1,898,960	$	617,228	$	434,391

(1)Cost of goods sold include certain items which were previously considered intercompany transactions prior to the disposition of GPCC and therefore eliminated upon consolidation. These cost of goods sold transactions are now presented on a gross basis in cost of goods sold. These cost of goods sold transactions total $3.4 million for the three months ended March 31, 2019.


	Three Months Ended March 31,
	2020		2019
Operating income (loss):
Ethanol production⁽¹⁾	$	(60,781)	$	(44,192)
Agribusiness and energy services		2,560		5,304
Food and ingredients		-		(65)
Partnership		12,430		12,551
Intersegment eliminations		2,133		(3,677)
Corporate activities		(10,670)		(8,559)
	$	(54,328)	$	(38,638)

(1)Operating loss for ethanol production includes a goodwill impairment charge of $24.1 million for the three months ended March 31, 2020.

‎

1716

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Three Months Ended
‎June 30,
Six Months Ended
‎June 30,
2019
2018
2019
2018
Operating income (loss):
Ethanol production
$
(53,885)
$
(17,214)
$
(98,077)
$
(44,743)
Agribusiness and energy services
4,341
12,166
9,645
19,230
Food and ingredients
7,260
12,981
5,828
25,566
Partnership
13,156
16,129
25,707
31,489
Intersegment eliminations
(528)
144
(4,205)
212
Corporate activities
(9,724)
(12,441)
(18,283)
(23,914)
$
(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
‎June 30,
Six Months Ended
‎June 30,
2019
2018
2019
2018
Depreciation and amortization:
Ethanol production
$
15,437
$
20,559
$
30,777
$
40,995
Agribusiness and energy services
552
618
1,101
1,248
Food and ingredients
1,583
3,444
3,194
6,848
Partnership
771
1,105
1,756
2,286
Corporate activities
751
1,097
1,501
1,920
$
19,094
$
26,823
$
38,329
$
53,297

~~The following table reconciles net income (loss) to EBITDA (in thousands):~~

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)
Interest expense
15,969
22,021
30,396
44,149
Income tax benefit
(14,653)
(10,753)
(29,113)
(16,780)
Depreciation and amortization ⁽¹⁾
19,094
26,823
38,329
53,297
EBITDA
$
(19,769)
$
41,842
$
(38,438)
$
64,962


	Three Months Ended March 31,
	2020		2019
Depreciation and amortization:
Ethanol production	$	15,898	$	15,340
Agribusiness and energy services		553		549
Partnership		961		985
Corporate activities		668		750
	$	18,080	$	17,624

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

‎

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


	June 30, ‎2019		December 31, ‎2018		March 31, 2020		December 31, 2019
Total assets ⁽¹⁾:
Ethanol production	$	853,906	$	872,845	$	903,447	$	884,293
Agribusiness and energy services		390,846		399,633		288,297		410,400
Food and ingredients		559,879		552,459
Partnership		103,210		67,297		90,992		90,011
Corporate assets		247,751		334,236		351,211		324,280
Intersegment eliminations		(14,865)		(10,038)		4,151		(10,766)
	$	2,140,727	$	2,216,432	$	1,638,098	$	1,698,218

(1)Asset balances by segment exclude intercompany balances.

6. INVENTORIES

Inventories are carried at the lower of cost or net realizable value, except grain held for sale and fair-value hedged inventories. Commodities held for sale are reported at market value. As of ~~June 30,~~March 31, 2020 and December 31, 2019, the company recorded a ~~$3.2~~$27.7 million and $6.6 million lower of cost or market inventory adjustment reflected in cost of goods sold within the ethanol production ~~segment.~~segment, respectively.

The components of inventories are as follows (in thousands):


	June 30, ‎2019		December 31, ‎2018		March 31, 2020		December 31, 2019
Finished goods	$	99,075	$	99,765	$	65,525	$	85,975
Commodities held for sale		31,744		62,980		21,409		42,836
Raw materials		56,511		119,014		81,938		77,900
Work-in-process		440,410		423,840		11,370		13,523
Supplies and parts		30,766		29,284		34,094		32,758
	$	658,506	$	734,883	$	214,336	$	252,992

7. GOODWILL

Goodwill

The company currently has 2 reporting units, to which goodwill is assigned. We are required to perform impairment tests related to our goodwill annually, which we perform as of October 1, or sooner if an indicator of impairment occurs. Near term industry outlook due to the significant decrease in crude oil prices, lower gasoline demand, general uncertainty due to the COVID-19 outbreak and the subsequent decline in our stock price caused a decline in the company’s market capitalization during the three months ended March 31, 2020. As such, the company determined a triggering event had occurred that required an interim impairment assessment for its ethanol production reporting unit. Due to the impairment indicators noted as a result of these triggering events, we evaluated our goodwill as of March 31, 2020. Significant assumptions inherent in the valuation methodologies for goodwill are employed and include, but are not limited to, prospective financial information, growth rates, discount rates, inflationary factors, and cost of capital. Based on our quantitative evaluation, we determined that the fair value of the ethanol production reporting unit did not exceed its carrying value. As a result, we concluded that the goodwill assigned to the ethanol production reporting unit was impaired and recorded a non-cash impairment charge of $24.1 million.

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Based on the company’s quantitative evaluation of the partnership’s goodwill, it was determined that the fair value of the partnership reporting unit exceeded its carrying value. As a result, the company concluded that the goodwill assigned to the partnership reporting unit was not impaired, but could be at risk of future impairment. The company continues to believe that its long-term financial goals of the partnership will be achieved. As a result of the analysis, the company did not take a goodwill impairment charge on its partnership reporting unit as of March 31, 2020.

Changes in the carrying amount of goodwill attributable to each business segment during the three months ended March 31, 2020 were as follows (in thousands):


	Ethanol
	Production		Partnership		Total
Balance, December 31, 2019	$	24,091	$	10,598	$	34,689
Impairment charge		(24,091)		-		(24,091)
Balance, March 31, 2020	$	-	$	10,598	$	10,598

8. DERIVATIVE FINANCIAL INSTRUMENTS

At ~~June 30, 2019,~~March 31, 2020, the company’s consolidated balance sheet reflected unrealized gains of ~~$24.2~~$30.9 million, net of tax, in accumulated other comprehensive income which primarily related to our share of equity method investees other comprehensive income. The company expects these gains will be reclassified as ~~operating~~ income from equity method investees, net of income taxes over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount realized in ~~operating~~ income from equity method investees, net of income taxes will differ as commodity prices change.

‎

Fair Values of Derivative Instruments

The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets where they are reported are as follows (in thousands):

Asset Derivatives'
Liability Derivatives'
Fair Value
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


	Asset Derivatives'						Liability Derivatives'
	Fair Value						Fair Value
	March 31, ‎2020			December 31, ‎2019			March 31, ‎2020		December 31, ‎2019
Derivative financial instruments	$	22,943	⁽¹⁾	$	14,515	⁽²⁾	$	15,589	$	7,771

(1)At ~~June 30,~~March 31, 2020, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of $34.2 million, which include $1.0 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.

(2)At December 31, 2019, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of ~~$44.3~~$3.4 million, which include ~~$33.0~~$0.1 million of net unrealized gains ~~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 4 - Fair Value Disclosures, which contains fair value information related to derivative financial instruments.

‎

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Effect of Derivative Instruments on Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income

The gains or losses recognized in income and other comprehensive income related to the company’s derivative financial instruments and the line items on the consolidated financial statements where they are reported are as follows (in thousands):


	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income								Amount of Gain (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
Location of Gain (Loss) Reclassified from Accumulated Other									Three Months Ended March 31,
Comprehensive Income into Income									2020		2019
Revenues	$	(4,352)	$	(313)	$	(17,711)	$	1,448	$	8,818	$	-
Cost of goods sold		(35)		1,079		(192)		101		(2,901)		-
Net loss from discontinued operations, net of income taxes										-		(13,516)
Net gain (loss) recognized in loss before tax	$	(4,387)	$	766	$	(17,903)	$	1,549	$	5,917	$	(13,516)


	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
Gain (Loss) Recognized in Other Comprehensive Income on	Three Months Ended March 31,
Derivatives	2020		2019
Commodity contracts	$	5,979	$	(8,963)

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


		Amount of Gain (Loss)
	Location of Gain (Loss)	Recognized in Income on Derivatives
Derivatives Not Designated	Recognized in Income	Three Months Ended March 31,
as Hedging Instruments	on Derivatives	2020		2019
Commodity contracts	Revenues	$	45,407	$	(12,824)
Commodity contracts	Costs of goods sold		(2,679)		3,410
Commodity contracts	Net loss from discontinued operations, net of income taxes		-		(5,741)
Net gain (loss) recognized in loss before tax		$	42,728	$	(15,155)

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				March 31, 2020				December 31, 2019
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		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	$	32,463	$	(6,185)	$	55,021	$	(2,808)

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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

‎


	Location and Amount of Gain Recognized in								Location and Amount of Gain or (Loss) Recognized in
	Income on Cash Flow and Fair Value Hedging Relationships								Income on Cash Flow and Fair Value Hedging Relationships
	for the Six Months Ended June 30,								for the Three Months Ended March 31,
		2019				2018				2020						2019
		Revenue		Cost of ‎Goods Sold		Revenue		Cost of ‎Goods Sold	Revenue		Cost of ‎Goods Sold		Income (Loss) from Discontinued Operations, Net of Income Taxes			Revenue	Cost of ‎Goods Sold		Loss from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:

Commodity contracts:
Amount of gain reclassified from accumulated other comprehensive income into income	$	(17,711)	$	(192)	$	1,448	$	101
Amount of gain (loss) reclassified from accumulated other comprehensive income into income									$	8,818	$	(2,901)	$	-	$	-	$	-	$	(13,516)

Gain (loss) on fair value hedging relationships:

Commodity contracts:
Hedged item		-		(831)		-		10,496		-		(7,594)		-		-		(1,553)		-
Derivatives designated as hedging instruments		-		4,431		-		(8,878)		-		8,114		-		-		3,859		-

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	$	8,818	$	(2,381)	$	-	$	-	$	2,306	$	(13,516)

There were no0 gains or losses from discontinuing cash flow or fair value hedge treatment during the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

‎

Table of Contents

The open commodity derivative positions as of ~~June 30, 2019,~~March 31, 2020, are as follows (in thousands):

Exchange Traded ⁽¹⁾

Non-Exchange Traded ⁽²⁾

Exchange Traded ⁽¹⁾

Non-Exchange Traded ⁽²⁾

Derivative
‎Instruments

Net Long &
‎(Short)

Long

(Short)

Unit of
‎Measure

Commodity

Net Long &
‎(Short)

Long

(Short)

Unit of
‎Measure

Commodity

Futures

(46,875)

Bushels

Corn, Soybeans and Wheat

(23,875)

Bushels

Corn and Soybeans

Futures

2,445

⁽³⁾

Bushels

Corn

(6,865)

⁽³⁾

Bushels

Corn

Futures

(1,310)

⁽⁴⁾

Bushels

Corn

(170,226)

Gallons

Ethanol

Futures

(41,805)

Gallons

Ethanol

(2,940)

⁽⁴⁾

Gallons

Ethanol

Futures

1,670

MmBTU

Natural Gas

(10,588)

MmBTU

Natural Gas

Futures

(8,140)

⁽⁴⁾

MmBTU

Natural Gas

(5,038)

⁽³⁾

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

Tons

Soybean Meal

Options

2,349

MmBTU

Natural Gas

(3,667)

Bushels

Corn

Options

(35,023)

Pounds

Cattle

18,358

Gallons

Ethanol

Options

Barrels

Crude Oil

615

MmBTU

Natural Gas

Forwards

49,542

(1,086)

Bushels

Corn and Soybeans

17,471

(811)

Bushels

Corn and Soybeans

Forwards

14,391

(310,836)

Gallons

Ethanol

1,885

(262,121)

Gallons

Ethanol

Forwards

148

(453)

Tons

DDG

159

(463)

Tons

DDG

Forwards

5,184

(78,529)

Pounds

Corn Oil

23,616

(120,471)

Pounds

Corn Oil

Forwards

14,616

(5,525)

MmBTU

Natural Gas

2,943

(391)

MmBTU

Natural Gas

(1)Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.

(2)Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts.

(3)Futures used for cash flow hedges.

(4)Futures 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 ~~$0.8~~$3.1 million and ~~$9.3~~$8.5 million for the three ended March 31, 2020 and ~~six months ended June 30,~~ 2019, ~~respectively and net gains on energy trading contracts of $4.1 million and $10.8 million for the three and six months ended June 30, 2018,~~ respectively.

8.9. DEBT

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


	June 30, ‎2019		December 31, ‎2018		March 31, 2020		December 31, 2019
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		-
$170.0 million convertible notes due 2022 ⁽¹⁾					$	150,990	$	149,256
$115.0 million convertible notes due 2024 ⁽²⁾						84,842		83,497
Green Plains Partners:
$200.0 million revolving credit facility		132,200		134,000
$8.1 million promissory note		8,100		8,100
$200.0 million revolving credit facility ⁽³⁾						130,200		132,100
Other		17,251		17,922		16,469		16,512
Total face value of long-term debt		377,343		356,187		382,501		381,365
Unamortized debt issuance costs		(5,238)		(3,190)		(4,506)		(4,820)
Less: current portion of long-term debt		(1,225)		(54,807)
Less: current maturities of long-term debt						(130,785)		(132,555)
Total long-term debt	$	370,880	$	298,190	$	247,210	$	243,990

(1)Includes $1.9 million and $2.0 million of unamortized debt issuance costs as of March 31, 2020 and December 31, 2019, respectively.

(2)Includes $2.6 million and $2.8 million of unamortized debt issuance costs as of March 31, 2020 and December 31, 2019, respectively.

(3)The Green Plains Partners revolving credit facility is included in current maturities of long-term debt balance on the consolidated balance sheets as of March 31, 2020 and December 31, 2019 as its maturity date is July 1, 2020.

‎

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The components of short-term notes payable and other borrowings are as follows:


	June 30, ‎2019		December 31, ‎2018		March 31, 2020		December 31, 2019
Green Plains Cattle:
$500.0 million revolver	$	334,698	$	374,492
Green Plains Trade:
$300.0 million revolver					$	61,208	$	138,204
Green Plains Grain:
$100.0 million revolver		42,000		41,000		78,000		40,000
$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
$30.0 million hedge line						27,835		9,608
	$	523,529	$	538,243	$	167,043	$	187,812

Corporate Activities

During ~~the three months ended June 30,~~ 2019, the company issued ~~$105.0~~an aggregate $115.0 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 in 2022, or the 4.125% notes. The 4.125% notes are senior, unsecured obligations of the company, with interest payable on March 1 and September 1 of each year. The company may settle the 4.125% notes in cash, common stock or a combination of cash and common stock.

Prior to March 1, 2022, the 4.125% notes are not convertible unless certain conditions are satisfied. The initial conversion rate is 35.7143 shares of common stock per $1,000 of principal, which is equal to a conversion price of approximately $28.00 per share. The conversion rate 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.

Ethanol Production Segment

The company has small equipment financing loans, finance leases on equipment or facilities, and other forms of debt financing.

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Agribusiness and Energy Services Segment

~~Green Plains Grain has a senior secured asset-based revolving credit facility, which was amended on June 28, 2019, 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. The credit facility~~ finances working capital up to the maximum commitment based on eligible collateral equal to the sum of percentages of eligible cash, receivables and inventories, less miscellaneous adjustments. Advances are subject to an interest rate equal to LIBOR plus 3.00% or the lenders’ base rate plus 2.00%. The credit facility also includes an accordion feature that enables the facility to be increased by up to $75.0 million with agent approval. The credit facility can also be increased by up to $50.0 million for seasonal borrowings. Total commitments outstanding cannot exceed $225.0 million. 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. The terms impose affirmative and negative covenants for Green Plains Grain, including maintaining minimum ~~working capital to be the greater of (i) $18,000,000~~ ~~and (ii) 18% of the sum of the then total commitment plus the aggregate seasonal line commitments.~~ Minimum tangible net worth is required to be greater than 21% of the sum of the then total commitment plus the aggregate seasonal line commitments. The credit facility also requires the company to maintain a maximum annual leverage of 6.00 to 1.00. Capital expenditures are limited to $8.0 million per year under the credit facility, plus equity contributions from the company and unused amounts of up to $8.0 million from the previous year. In addition, if the company has long-term indebtedness on the date of calculation of greater than $10.0 million, the credit facility requires

the company to maintain a minimum fixed charge coverage ratio of 1.25 to 1.00 and a maximum long term debt capitalization of 40%. As of June 30, 2019, Green Plains Grain had no long-term indebtedness.

Green Plains Trade has a $300.0 million senior secured asset-based revolving credit facility to finance working capital for marketing and distribution activities based on eligible collateral equal to the sum of percentages of eligible receivables and inventories, less miscellaneous adjustments. The credit facility matures on July 28, 2022 and consists of a $285 million credit facility and a $15 million first-in-last-out (FILO) credit facility, and includes an accordion feature that enables the credit facility to be increased by up to $70.0 million with agent approval. Advances are subject to variable interest rates equal to daily LIBOR plus 2.25% on the credit facility and daily LIBOR plus 3.25% on the FILO credit facility. The total unused portion of the revolving credit facility is also subject to a commitment fee of 0.375% per annum.

The terms impose affirmative and negative covenants for Green Plains Trade, including maintaining a minimum fixed charge coverage ratio of 1.15 to 1.00. Capital expenditures are limited to $1.5 million per year under the credit facility. The credit facility also restricts distributions related to capital stock, with an exception for distributions up to 50% of net income if, on a pro forma basis, (a) availability has been greater than $10.0 million for the last 30 days and (b) the borrower would be in compliance with the fixed charge coverage ratio on the distribution date.

Green Plains Grain has a $100.0 million senior secured asset-based revolving credit facility, which matures on June 28, 2022. The credit facility finances working capital up to the maximum commitment based on eligible collateral equal to the sum of percentages of eligible cash, receivables and inventories, less miscellaneous adjustments. Advances are subject to an interest rate equal to LIBOR plus 3.00% or the lenders’ base rate plus 2.00%. The credit facility also includes an accordion feature that enables the facility to be increased by up to $75.0 million with agent approval. The credit facility can also be increased by up to $50.0 million for seasonal borrowings. Total commitments outstanding cannot exceed $225.0 million. Depending on utilization, the total unused portion of the $100.0 million revolving credit facility is also subject to a commitment fee ranging from 0.375% to 0.50%.

Lenders receive a first priority lien on certain cash, inventory, accounts receivable and other assets owned by Green Plains Grain. The terms impose affirmative and negative covenants for Green Plains Grain, including maintaining minimum working capital to be the greater of (i) $18,000,000 and (ii) 18% of the sum of the then total commitment plus the aggregate seasonal line commitments. Minimum tangible net worth is required to be greater than 21% of the sum of the then total commitment plus the aggregate seasonal line commitments. The credit facility also requires the company to maintain a maximum annual leverage of 6.00 to 1.00. Capital expenditures are limited to $8.0 million per year under the credit facility, plus equity contributions from the company and unused amounts of up to $8.0 million from the previous year. In addition, if the company has long-term indebtedness on the date of calculation of greater than $10.0 million, the credit facility requires the company to maintain a minimum fixed charge coverage ratio of 1.25 to 1.00 and a maximum long term debt capitalization of 40%.

Green Plains Grain has entered into 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 no0 short-term notes payable related to these inventory financing agreements as of ~~June 30, 2019.~~March 31, 2020.

~~Food and Ingredients Segment~~

~~Green Plains Cattle has a $500.0 million senior secured asset-based revolving credit facility, which matures on April 30, 2020, to finance~~ ~~working capital for the cattle feeding operations~~ ~~up to the maximum commitment based on eligible collateral equal to the sum of percentages of eligible receivabl~~es, inventories and other current assets, less miscellaneous adjustments. Advances 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 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~~. The 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 3.50 ~~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.

Partnership Segment

Green Plains Partners, through a wholly owned subsidiary, has a $200.0 million revolving credit facility ~~which matures on July 1, 2020,~~ to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes. The credit facility matures on July 1, 2020, and as a result, was reclassified to current maturities of long-term debt during the three months ended September 30, 2019. 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 can be increased 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

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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~~is required to file a ~~wholly owned subsidiary, has promissory notes payable~~Form of ~~$8.1 million,~~Compliance Certificate attesting to its compliance under the revolving credit facility each quarter by the earlier of 45 days from the end of each such quarter or within 5 days of the SEC filing for such quarter or with respect to each fiscal year, the earlier of 90 days from the end of such fiscal year or within 15 days of the SEC filing for such fiscal year. As of March 31, 2020, the partnership was in full compliance of all covenants, and will report a consolidated leverage ratio of 2.47x and a consolidated interest coverage ratio of 6.49x.

The revolving credit facility, which is ~~recorded in long-term debt, and~~supported by a ~~note receivable~~group of ~~$8.1 million, which is recorded in other assets, to execute a New Markets Tax Credit transaction related to~~financial institutions, will mature on July 1, 2020 unless extended by agreement of 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.~~lenders or replaced by another funding source. The partnership ~~retains~~is currently working with its existing lender group to extend the ~~right to call $8.1 million of~~credit facility. While 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~~yet formalized the credit facility or secured additional funding necessary to repay the loan, the partnership believes it is probable that it will source appropriate funding given the partnership’s consistent and stable fee-based cash flows, ongoing profitability, low debt leverage and history of obtaining financing on reasonable commercial terms. In the unlikely scenario that the partnership is unable to refinance its debt with the ~~guarantee because it believes~~lenders, the ~~likelihood~~partnership will consider other financing sources, including but not limited to, the restructuring or issuance of ~~recapture~~new debt with a different lending group, the issuance of additional common units, or ~~reduction is remote.~~other measures.

Covenant Compliance

The company was in compliance with its debt covenants as of ~~June 30, 2019.~~March 31, 2020.

Restricted Net Assets

At ~~June 30, 2019,~~March 31, 2020, there were approximately ~~$174.8~~$65.5 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.

9.10. 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, 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.

Restricted Stock Awards and Deferred Stock Units

The non-vested stock award and deferred stock unit activity for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, 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 ‎ 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
Non-Vested at December 31, 2019					751,315	$	17.48
Granted	497,118		15.40		476,474		10.64
Forfeited	(80,521)		17.60		(19,750)		16.20
Vested	(440,891)		18.28		(282,786)		19.49
Non-Vested at June 30, 2019	857,994	$	17.54	1.9

Non-Vested at March 31, 2020					925,253	$	13.37	2.3

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Performance Shares

On March 18, 2020, the board of directors granted performance shares to be awarded in the form of common stock to certain participants of the plan. These performance shares vest based on the level of achievement of certain performance goals, including the incremental value achieved from the company’s high-protein initiatives, annual production levels and return on investment (ROI). The performance shares were granted at a target of 100%, but each performance share will reduce or increase depending on results for the performance period. If the company achieves the maximum performance goals, the maximum amount of shares available to be issued pursuant to the 2020 awards are 641,823 performance shares which represents approximately 276% of the 232,566 performance shares which remain outstanding. The actual number of performance shares that will ultimately vest is based on the actual performance targets achieved at the end of the performance period.

On February 19, 2019 and March 19, 2018, the board of directors granted performance shares to be awarded in the form of common stock to certain participants of the plan. ~~Performance~~These performance shares vest based on the company’s average return on net assets (RONA) and the company’s total shareholder return (TSR), as further described herein. The performance shares vest on the third anniversary of the grant, if the RONA and TSR criteria are achieved and the participant is then employed by the company. ~~Fifty~~NaN percent of the performance shares vest based upon the company’s ability to achieve a predetermined RONA

during the three year performance period. The remaining ~~fifty~~50 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~~428,104 performance shares or 150% of the ~~321,489~~285,403 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~~three months ended ~~June 30, 2019,~~March 31, 2020, is as follows:


	Performance ‎Shares	Weighted- ‎Average Grant- ‎Date Fair Value		Weighted-Average ‎Remaining ‎Vesting Term ‎(in years)
Non-Vested at December 31, 2019	285,403	$	16.38
Granted	232,566		10.64
Non-Vested at March 31, 2020	517,969	$	13.80	2.4

‎

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

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Stock Options

~~There remains 128,750 exercisable~~The fair value of the stock options ~~outstanding at June 30, 2019, with~~is estimated on the date of the grant using the Black-Scholes option-pricing model, a ~~weighted-average exercise price~~pricing model acceptable under GAAP. The expected life of ~~$12.72.~~ the options is the period of time the options are expected to be outstanding. The ~~weighted average exercise price for options exercisable at June 30, 2019 was above~~company did not grant any stock option awards during the ~~company’s stock price at June 30, 2019. The~~ ~~weighted-average remaining contractual term of exercisable options was 0.5 years at June 30,~~three months ended March 31, 2020 and 2019.

~~Option awards allow employees~~The activity related to ~~exercise~~the exercisable stock 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 shares in the open market. The company uses newly issued shares of common stock to satisfy its stock-based payment obligations.three months ended March 31, 2020, is as follows:


	Shares	Weighted-Average ‎Exercise Price		Weighted-Average ‎ Remaining ‎ Contractual Term ‎(in years)	Aggregate Intrinsic Value ‎(in thousands)
Outstanding at December 31, 2019	10,000	$	16.95	0.2	$	-
Expired	(10,000)		16.95	-		-
Outstanding at March 31, 2020	-	$	-	-	$	-
Exercisable at March 31, 2020	-	$	-	-	$	-

Green Plains Partners

Green Plains Partners has a long-term incentive plan (LTIP) intended to promote the interests of the partnership, its general partner and affiliates by providing unit-based incentive compensation awards to employees, consultants and directors to encourage superior performance. The LTIP reserves 2,500,000 common limited partner units for issuance in the form of options, restricted units, phantom units, distribution equivalent rights, substitute awards, unit appreciation rights, unit awards, profit interest units or other unit-based awards. The partnership measures unit-based compensation at fair value on the grant date, with no adjustments for estimated forfeitures. The partnership records noncash compensation expense related to the awards over the requisite service period on a straight-line basis.

There was no change in the number of non-vested unit-based awards during the three months ended March 31, 2020.

~~The non-vested unit-based awards 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
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~~were approximately $1.3 million and $2.5 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~were approximately $2.3 million and $4.8 million, respectively, and $3.0 million and $5.4 million during the three and six months ended June 30, 2018.~~respectively. At ~~June 30, 2019,~~March 31, 2020, there was ~~$15.9~~$14.5 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~~2.3 years. The potential tax benefit related to stock-based payment is approximately ~~25.0%~~24.2% of these expenses.

~~10.~~11. EARNINGS PER SHARE

Basic earnings per share, or EPS, is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period.

The company computed diluted EPS by dividing net income on an if-converted basis, adjusted to add back net interest expense related to the convertible debt instruments, by the weighted average number of common shares outstanding during the period, adjusted to include the shares that would be issued if the convertible debt instruments were converted to common shares and the effect of any outstanding dilutive securities. In addition, due to the presentation of GPCC as discontinued operations, the company has presented basic and diluted earnings per share from both continuing operations and from discontinued operations.

‎

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The basic and diluted EPS are calculated as follows (in ~~thousands)~~thousands, except per share amounts):

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)


	Three Months Ended March 31,
	2020		2019
Numerator:
Net loss from continuing operations ⁽¹⁾	$	(16,445)	$	(38,330)
Net loss from discontinued operations		-		(4,469)
Net loss attributable to Green Plains	$	(16,445)	$	(42,799)

Denominator:
Weighted-average shares outstanding - basic		34,665		40,315
Dilutive effect of convertible debt and stock-based compensation ⁽²⁾		-		-
Weighted-average shares outstanding - diluted		34,665		40,315

EPS - basic and diluted:
EPS from continuing operations	$	(0.47)	$	(0.95)
EPS from discontinued operations		-		(0.11)
EPS	$	(0.47)	$	(1.06)

Anti-dilutive weighted-average convertible debt and stock-based compensation⁽²⁾		13,926		9,853

(1)Net loss from continuing operations can be recalculated from our consolidated statements of operations by taking the net loss from continuing operations including noncontrolling interest less net income attributable to noncontrolling interests.

(2)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 have been excluded from 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,~~periods presented as the inclusion of these shares would have been antidilutive.

‎

~~11.~~12. STOCKHOLDERS’ EQUITY

Components of stockholders’ equity for the three ended March 31, 2020 and ~~six months ended June 30,~~ 2019 ~~and 2018~~ are as follows (in thousands):


																										Accum.					Total
								Accum.					Total									Additional				Other					Green Plains		Non-		Total
				Additional				Other					Green Plains		Non-		Total		Common Stock			Paid-in		Retained		Comp.		Treasury Stock			Stockholders'		Controlling		Stockholders'
	Common Stock			Paid-in		Retained		Comp.		Treasury Stock			Stockholders'		Controlling		Stockholders'		Shares	Amount		Capital		Earnings		Income		Shares	Amount		Equity		Interests		Equity
	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
Balance, January 1, 2020																			46,964	$	47	$	734,580	$	148,150	$	(11,064)	10,932	$	(119,808)	$	751,905	$	113,381	$	865,286
Net income (loss)	-		-		-		(42,799)		-	-		-		(42,799)		4,928		(37,871)	-		-		-		(16,445)		-	-		-		(16,445)		6,098		(10,347)
Cash dividends and ‎distributions declared	-		-		-		(4,847)		-	-		-		(4,847)		(5,487)		(10,334)
Distributions declared																			-		-		-		-		-	-		-		-		(5,498)		(5,498)
Other comprehensive loss ‎before reclassification	-		-		-		-		(6,883)	-		-		(6,883)		-		(6,883)	-		-		-		-		4,532	-		-		4,532		-		4,532
Amounts reclassified from ‎ accumulated other ‎comprehensive loss	-		-		-		-		10,376	-		-		10,376		-		10,376	-		-		-		-		(4,485)	-		-		(4,485)		-		(4,485)
Other comprehensive income, ‎net of tax	-		-		-		-		3,493	-		-		3,493		-		3,493	-		-		-		-		47	-		-		47		-		47
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)
Share of equity method investees other comprehensive loss arising during the period, net of tax																			-		-		-		-		41,956	-		-		41,956		-		41,956
Repurchase of common stock	-		-		-		-		-	3,197		(39,870)		(39,870)		-		(39,870)	-		-		-		-		-	881		(11,479)		(11,479)		-		(11,479)
Stock-based compensation	(3)		-		2,129		-		-	-		-		2,129		79		2,208	343		-		36		-		-	-		-		36		79		115
Balance, June 30, 2019	46,919	$	47	$	726,068	$	226,869	$	24,177	8,733	$	(98,032)	$	879,129	$	115,445	$	994,574
Balance, March 31, 2020																			47,307	$	47	$	734,616	$	131,705	$	30,939	11,813	$	(131,287)	$	766,020	$	114,060	$	880,080

‎

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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


								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

(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 are as follows (in thousands):


	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,				Statements of ‎Operations	Three Months Ended March 31,				Statements of ‎Operations
	2019		2018		2019		2018		Classification	2020		2019		Classification
Gains (losses) on cash flow hedges:
Commodity derivatives	$	(4,352)	$	(313)	$	(17,711)	$	1,448	Revenues	$	8,818	$	-	⁽¹⁾
Commodity derivatives		(35)		1,079		(192)		101	Cost of goods sold		(2,901)		-	⁽²⁾
Total		(4,387)		766		(17,903)		1,549	Loss before income taxes
Income tax expense (benefit)		(947)		185		(4,087)		365	Income tax benefit
Amounts reclassified from accumulated ‎other comprehensive income (loss)	$	(3,440)	$	581	$	(13,816)	$	1,184
Total gains on cash flow hedges from continuing operations											5,917		-	⁽³⁾

Losses on cash flow hedges from discontinued operations											-		(10,376)	⁽⁴⁾

Income tax expense											1,432		-	⁽⁵⁾
Amounts reclassified from accumulated other comprehensive income (loss)										$	4,485	$	(10,376)

(1)Revenues

(2)Costs of goods sold

(3)Loss from continuing operations before income taxes and income (loss) from equity method investees

(4)Net loss from discontinued operations, net of income taxes

(5)Income tax benefit

~~12.~~13. 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 income taxes on pre-tax income or loss attributable to the noncontrolling interest in the partnership.

The CARES Act was signed into law on March 27, 2020. The CARES Act includes several significant business tax provisions including elimination of the taxable limit for certain net operating losses (“NOL”), allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior tax years, accelerate refunds of previously generated corporate AMT credits, and loosen the business interest limitation under §163(j) from 30% to 50%. The CARES Act also contains an employee retention credit to encourage employers to maintain headcounts even if employees cannot report to work because of issues related to the COVID-19. The company intends to carry back its’ 2019 NOL to previous years and has recorded that tax benefit of approximately $28.4 million in the first quarter.

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The company recorded income tax benefit of ~~$14.7 million and $29.1~~$44.3 million for the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, compared with ~~$10.8 million and $16.8~~$12.9 million for the same periods in ~~2018.~~2019. The increase in the amount of the tax benefit recorded for the three months ended March 31, 2020 compared to the same period in 2019 was to record the tax benefit associated with the carry back of the tax NOL generated in 2019 to the 2014 tax year under the newly enacted CARES Act, as well as the release of a previously recorded valuation allowance against the 2019 NOL and other deferred tax assets. The amount of unrecognized tax benefits for uncertain tax positions was $51.6 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

The ~~2019~~2020 effective tax rate can be affected by variances 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.

~~13.~~14. 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 six months ended June 30, 2019.

Lease Expense

The company leases certain facilities, parcels of land, and equipment, with remaining terms ranging from less than one year to ~~18.3~~17.6 years. The land and facility leases include renewal options. The renewal options are included in the lease term only for those sites or locations in which they are reasonably certain to be renewed. Equipment renewals are not considered reasonably certain to be exercised as they typically renew with significantly different underlying terms.

The company may sublease certain of its railcars to third parties on a short-term basis. The subleases are classified as operating leases, with the associated sublease income being recognized on a straight-line basis over the lease term.

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


	Three Months Ended		Six Months Ended		Three Months Ended March 31,
	June 30, 2019		June 30, 2019		2020		2019
Lease expense
Operating lease expense	$	5,406	$	10,955	$	4,945	$	5,482
Variable lease expense ⁽¹⁾		242		393		269		124
Total lease expense	$	5,648	$	11,348	$	5,214	$	5,606

(1)Represents amounts incurred in excess of the minimum payments required for the handling and unloading of railcars for a certain land lease, offset by railcar lease abatements provided by the lessor when railcars are out of service during periods of maintenance or upgrade.

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


	Three Months Ended		Six Months Ended		Three Months Ended March 31,
	June 30, 2019		June 30, 2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,386	$	10,936	$	4,849	$	5,484

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	6,207	$	6,207		5,675		-

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%~~

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Aggregate minimum lease payments under the operating lease agreements for the remainder of ~~2019~~2020 and in future years are as follows (in thousands):


Year Ending December 31,	Amount		Amount
2019	$	10,143
2020		18,297	$	14,710
2021		10,349		13,136
2022		8,324		11,215
2023		4,747		7,976
2024				6,157
Thereafter		22,024		25,949
Total		73,884		79,143
Less: Present value discount		(13,109)		(22,666)
Lease liabilities	$	60,775	$	56,477

~~Aggregate~~The partnership has additional railcar operating leases that will commence in the second half of 2020 and first half of 2021 to replace expiring leases, with estimated future minimum lease ~~payments remaining under~~commitments of approximately $26.6 million and lease terms of five years. The undiscounted amounts are not included in the ~~operating lease agreements under ASC 840, Leases as of December 31, 2018 are as follows (in thousands):~~tables above.

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 ~~June 30, 2019,~~March 31, 2020, the company had contracted future purchases of grain, corn oil, natural gas, ~~crude oil,~~ ethanol and distillers grains, ~~and cattle,~~ valued at approximately ~~$433.9~~$161.4 million.

Legal

The company is currently involved in litigation that has arisen during 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.~~15. RELATED PARTY TRANSACTIONS

Green Plains Cattle Company LLC

The company engages in certain related party transactions with GPCC. The company provides a variety of shared services to GPCC, including accounting and finance, payroll and human resources, information technology, legal, communications and treasury activities. The shared services provided by the company and billed to GPCC were $0.4 million for the three months ended March 31, 2020. The company had $2.0 million outstanding receivables related to the shared service agreement and expenses paid on behalf of GPCC as of March 31, 2020.

Green Plains Trade Group, a subsidiary of the company, enters into certain sale contracts with GPCC during the normal course of business. Revenues were $2.9 million for the three months ended March 31, 2020.

Mr. Ejnar Knudsen, a member of the company’s board of directors, has an indirect ownership interest in GPCC of 0.0736% by reason of his ownership in TGAM Agribusiness Fund LP. Based on the purchase price, the value of that ownership interest is approximately $0.1 million. Mr. Knudsen also is the CEO and partial owner of AGR Partners LLC (AGR) which provides investment advisory services to TGAM Agribusiness Fund LP pursuant to a sub-advisory agreement between AGR Partners LLC and Nuveen Alternative Advisors LLC, which is the investment manager for TGAM Agribusiness Fund LP.

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Aircraft Leases

Effective January 1, 2015, the company entered into ~~two~~2 agreements with an entity controlled by Wayne Hoovestol for the lease of ~~two~~2 aircrafts. Mr. Hoovestol is chairman of the company’s board of directors. The company agreed to pay $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. Payments related to these leases totaled ~~$35~~$24 thousand and ~~$69~~$34 thousand during the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019,, ~~respectively, and $30 thousand and $87 thousand during the three and six months ended June 30, 2018,~~ respectively. The company had ~~$2 thousand~~$0 in outstanding payables related to these agreements as of ~~June 30, 2019~~March 31, 2020 and no$17 thousand in outstanding payables related to these agreements as of December 31, ~~2018.~~2019.

16. EQUITY METHOD INVESTMENTS

Green Plains Cattle Company LLC

On September 9, 2019, Green Plains, TGAM and StepStone announced the formation of a joint venture. Such parties entered into the Second Amended and Restated Limited Liability Company Agreement of GPCC effective as of September 1, 2019. GPCC was previously a wholly owned subsidiary of Green Plains. Green Plains also entered into a Securities Purchase Agreement with TGAM and StepStone, whereby TGAM and StepStone purchased an aggregate of 50% of the membership interests of GPCC from Green Plains. After closing, GPCC is no longer consolidated in the company’s consolidated financial statements and the GPCC investment is accounted for using the equity method of accounting. GPCC results prior to its disposition are classified as discontinued operations in our current and prior period financials.

The GPCC investment is accounted for using the equity method of accounting. GPCC conducts the business of the joint venture, including (i) owning and operating the cattle feeding operations (as defined below), and (ii) any other activities approved by GPCC’s board of managers. GPCC continues to have the capacity to support 355,000 head of cattle and has approximately 11.7 million bushels of grain storage capacity. Historical GPCC operational results prior to its disposition are recorded as discontinued operations in the consolidated statement of operations.

The company does not consolidate any part of the assets or liabilities or operating results of its equity method investee. The company’s share of net income or loss in the investee increases or decreases, as applicable, the carrying value of the investment. With respect to GPCC, the company determined that this entity does not represent a variable interest entity and consolidation is not required. In addition, although the company has the ability to exercise significant influence over the joint venture through board representation and voting rights, all significant decisions require the consent of the other investors without regard to economic interest.

Summarized Financial Information

During the periods ended March 31, 2020 and December 31, 2019, our equity method investees were considered related parties and included:

Green Plains Cattle Company LLC, a joint venture formed on September 1, 2019, in which we have a 50% noncontrolling interest. See description of GPCC above.

Optimal Aqua LLC, in which we owned a 50% noncontrolling interest, until the acquisition of the remaining 50% interest during the first quarter of 2020, at which time the company consolidated their results in its consolidated financial statements. Optimal Aqua LLC produces high-quality aquaculture feeds utilizing proprietary techniques and high-protein feed ingredients.

NLR Energy Logistics LLC, in which the partnership has a 50% noncontrolling interest. NLR Energy Logistics LLC operates a unit train terminal in the Little Rock, Arkansas area with capacity to unload 110-unit cars and provide approximately 100,000 barrels of storage.

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~~15. SUBSEQUENT EVENTS~~Our equity method investments are summarized in the following table (in thousands):

~~On July 19, 2019,~~


	Ownership as of March 31, 2020	March 31, 2020		December 31, 2019
Green Plains Cattle Company LLC ⁽¹⁾	50%	$	126,626	$	64,161
Optimal Aqua LLC ⁽²⁾	100%		-		508
NLR Energy Logistics LLC	50%		4,487		4,329
Total		$	131,113	$	68,998

(1)The equity method investment in GPCC is impacted by the effect of deferred gains or losses on cattle sale contracts designated in a cash flow hedge relationship. Pre-tax accumulated other comprehensive income for GPCC was $39.2 million as of March 31, 2020 compared to pre-tax accumulated other comprehensive loss of $16.2 million as of December 31, 2019.

(2)The company acquired the remaining 50% share in Optimal Aqua LLC during the first quarter of 2020 at which time the company ~~closed on~~consolidated their results in its consolidated financial statements.

Earnings from equity method investments were as follows:


	Three Months Ended March 31,
	2020		2019
Green Plains Cattle Company LLC ⁽¹⁾	$	7,808	$	-
NLR Energy Logistics LLC		158		215
All others		-		(289)
Total income (loss) from equity method investments, net of income taxes	$	7,966	$	(74)

Distributions from equity method investments	$	3,247	$	-

Income (loss) from equity method investments, net of distributions	$	4,719	$	(74)

(1)Pre-tax equity method earnings of GPCC were $10.4 million during the issuance of the additional $10.0 million aggregate principal amount of the 4.00% convertible notes due in 2024 under the previously announced private offering which closed on June 21, 2019 (the “Option Notes”) to the 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.three months ended March 31, 2020.

The ~~Option Notes will have~~company reports its proportional share of equity method investment income (loss) in the ~~same terms as~~consolidated statements of operations. The company’s share of equity method investees other comprehensive income arising during the ~~4.00% notes issued on June 21, 2019, and will be issued under~~period is included in accumulated other comprehensive income (loss) in 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~~ accompanying balance sheet.

~~Note 8 – Debt~~ ~~included as part of the notes to consolidated financial statements.~~

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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, ~~2018.~~2019.

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, ~~2018,~~2019, Part II, Item 1A – Risk Factors in this report, or incorporated by reference. Specifically, we may experience fluctuations in future operating results due to a number of economic conditions, including: disruption caused by health epidemics, such as the COVID-19 outbreak; competition in the ethanol industry and other industries in which we operate; commodity market risks, including those that may result from weather conditions; financial market risks; counterparty risks; risks associated with changes to government policy or regulation, including changes to tax laws; risks related to acquisition and disposition activities and achieving anticipated results; risks associated with merchant ~~trading, cattle feeding operations~~trading; risks related to our equity method investees and other factors detailed in reports filed with the SEC. Additional risks related to Green Plains Partners LP include compliance with commercial contractual obligations, potential tax consequences related to our investment in the partnership and risks disclosed in the partnership’s SEC filings associated with the operation of the partnership as a separate, publicly traded entity.

We believe our expectations regarding future events are based on reasonable assumptions; however, these assumptions may not be accurate or account for all risks and uncertainties. Consequently, forward-looking statements are not guaranteed. Actual results may vary materially from those expressed or implied in our forward-looking statements. In addition, we are not obligated and do not intend to update our forward-looking statements as a result of new information unless it is required by applicable securities laws. We caution investors not to place undue reliance on forward-looking statements, which represent management’s views as of the date of this report or documents incorporated by reference.

Overview

Green Plains is a diversified commodity-processing business with operations ~~related to ethanol production,~~that include corn processing, grain handling and storage ~~cattle feedlots, food ingredients,~~ and commodity marketing and logistics services. The company is one of the leading corn processors in the world and, through its adjacent businesses, is focused on the production of high-protein feed ingredients and export growth opportunities. We are also 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 ~~49.1%~~49.0% limited partner interest, a 2.0% general partner interest and all of the partnership’s incentive distribution rights. The public owns the remaining ~~48.9%~~49.0% limited partner interest. The partnership is consolidated in our financial statements. In addition, Green Plains owns a 50% interest in Green Plains Cattle Company LLC.

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 high-protein installation ~~is expected to be~~was completed at our Shenandoah plant byduring the ~~end~~first quarter of ~~2019,~~2020 with shipments of dried product beginning in April 2020. We anticipate the remaining locations ~~being~~will be completed over the course of the next three to four years.

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Recent Developments

~~4.00% Convertible Notes due~~Impact of COVID-19 and Decline in ~~2024~~Oil Demand

~~On June 21, 2019, we issued $105.0 million~~We are closely monitoring the impact 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 $56.8 million outstanding principal amount~~COVID-19 on all aspects of our ~~3.25%~~

~~convertible senior notes~~business, including how it will impact our employees, customers, vendors, and business partners. Although we did not incur significant disruptions during the three months ended March 31, 2020 from COVID-19, we are unable to predict the impact that COVID-19 will have on our future financial position and operating results 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.~~numerous uncertainties.

~~On July 19, 2019, we closed~~The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty, and turmoil in the energy industry. In early March, the Organization of Petroleum Exporting Countries and their allies (collectively, OPEC+) failed to reach an agreement on production levels for crude oil. This was quickly followed by a widespread slowdown in the ~~issuance~~U.S. and global economy in an effort to slow the COVID-19 pandemic. While OPEC+ agreed in April to cut production, downward pressure on prices has continued and could continue for the foreseeable future. A combination of these events has significantly deteriorated both prices and demand for various energy commodities and motor fuels, including ethanol, which could negatively impact our business. The situation surrounding COVID-19 continues to evolve rapidly and the ultimate duration and impact 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 termsoutbreak as well as the ~~4.00% notes issued on June 21, 2019,~~continued decline in oil demand remains highly uncertain 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.~~subject to change.

~~Extension of Offer Period – JGP Energy Partners~~While we have instituted work from home arrangements for certain staff members, there has been no adverse effect on our ability to maintain operations, including our financial reporting systems, our internal controls over financial reporting or our disclosure controls and procedures. In addition, to date we have not incurred any material COVID-19 related contingencies.

~~Effective June 30, 2019, we agreed with~~For further information regarding the ~~partnership to extend~~impact of COVID-19 and the ~~offer period related to~~decline in oil demand on the ~~potential purchase of the Green Plains interest~~company, please see Part II, Item 1A, “Risk Factors,” 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 from $125.0 million to $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 redirect cash flow to our Project 24 operating expense equalization plan, the deployment of high-protein technology and our stock repurchase program.this report, which is incorporated herein by reference.

Results of Operations

During the ~~second~~first quarter of ~~2019,~~2020, we continued to experience a weak ethanol margin environment. ~~Our operating strategy,~~ including the operating cost savings initiative, is to increase utilization rates and efficiency while reducing operating expenses to achieve improved margins in the current environment. As a result, capacity utilization increased fromWe maintained an average utilization rate of approximately 85.9% of capacity, resulting in ethanol production of 240.5 mmg for the first quarter of 2020, compared with 155.0 mmg, or 56.0% of capacity, ~~in the first quarter to~~ ~~80.0% of capacity in the second quarter. Ethanol production was 224.0 mmg for the second quarter of 2019, compared with 296.3 mmg~~ for the same quarter last year. ~~We expect~~Our operating strategy is to ~~continue to run~~reduce operating expenses, energy usage and water consumption through our Project 24 initiative while running at higher ~~average~~ utilization rates in order to achieve improved margins. However, in the ~~cost savings anticipated. Additionally, overall performance at~~current environment, given the significant drop in driving and gasoline demand, we will exercise operational discretion, potentially resulting in reductions in production across the platform, in order to maximize our ~~ethanol plants~~cash liquidity. As such, it is possible that production could be below minimum volume commitments, depending on various factors that drive each bio-refineries variable contribution margin, including future driving and ~~cattle feeding operations were negatively impacted by severe weather and associated flooding in areas where we transport products during~~gasoline demand for the ~~first half of 2019. The weather also drove corn prices up, negatively impacting margins.~~industry.

U.S. Ethanol Supply and Demand

According to the EIA, domestic ethanol production averaged ~~1.05~~1.03 million barrels per day during the ~~second~~first quarter of ~~2019,~~2020, which was 1%2% higher than the ~~1.04~~1.01 million barrels for the ~~second~~first quarter of last year. Refiner and blender input volume ~~increased 1%~~decreased 3% to ~~938~~858 thousand barrels per day for the ~~second~~first quarter of ~~2019,~~2020, compared with ~~930~~886 thousand barrels per day for the same quarter last year. Gasoline demand for the first quarter of ~~2019 increased slightly by 11~~2020 decreased 348 thousand barrels per day, or ~~0.1%~~4% compared to the same quarter last year. U.S. domestic ethanol ending stocks increased by approximately ~~0.9~~1.7 million barrels, or 4%7%, to ~~22.8~~25.7 million barrels for the ~~second~~first quarter of ~~2019.~~2020. 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,~~March 17, 2020, there were approximately ~~1,826~~2,140 retail stations selling E15 in 3130 states, up from ~~1,700~~2,080 at the beginning of the year, a~~ccording~~according to Growth Energy.

In March 2020, members of the Organization of Petroleum Exporting Countries and their allies (collectively, OPEC+) failed to reach an agreement on production levels which led to a substantial decrease in oil prices and an increasingly volatile market. While OPEC+ agreed in April to cut production, downward pressure on prices has continued and could continue for the foreseeable future. In addition, with the widespread shutdowns and “shelter in place” orders across the United States also beginning in March 2020 related to the COVID-19 pandemic, driving miles and fuel consumption have been reduced significantly. This has had a similar impact on ethanol demand resulting in the shutdown of approximately 50% of total industry production capacity.

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Global Ethanol Supply and Demand

According to the USDA Foreign Agriculture Service, domestic ethanol exports ~~for the first five months of 2019~~through February 29, 2020 were approximately ~~631.5 mmgy, down 19%~~0.35 bgy, up 43% from ~~776.2 mmgy~~0.24 bgy for the same period of ~~2018.~~2019. Brazil remained the largest export destination for U.S. ethanol, which accounted for ~~30%~~33% 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,~~In a resolution published August 31, 2019, Brazil raised the annual import quota to 750 million duty free liters distributed on a quarterly basis as follows: September to November 100 million liters, December to February 100 million liters, March to May 275 million liters and June to August 275 million liters. In addition, India, ~~and~~Canada, South Korea, and the Netherlands accounted for 18%, ~~15%~~16%, 7%, and 7%, respectively, of U.S. ethanol exports.

On April 1, 2018, China announced it would add an additional 15% tariff to the 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~~In January 2020, China and the United States agreed to certain trade agreements, the impact of which on ethanol are yet to be ~~negotiations between the U.S. and China with no certainty of when a trade agreement may be reached.~~determined.

The cost to 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~~was approximately 1313.6 cents per pound during the ~~second~~first quarter of ~~2019.~~2020. We currently estimate that net ethanol exports will ~~reach between 1.4~~range from 1.1 billion ~~gallons and~~to 1.5 billion gallons in ~~2019~~2020, excluding any potential exports to China, 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 second quarter of 2019, the market sentiment for 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 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 demand for animal protein from the U.S.

Year-to-date U.S. distillers grains exports through ~~May 31, 2019,~~February 2020, were ~~4.4~~1.8 million metric tons, or ~~5.3% lower~~22.6% higher than the same period last year, according to the USDA Foreign Agriculture Service. Mexico, South Korea, ~~Vietnam,~~ Indonesia, ~~Turkey, Canada~~Thailand, Vietnam and Japan, accounted for approximately ~~69%~~64.5% of total U.S. distillers export volumes.

While ~~ASF~~African Swine Fever (ASF) may have a positive impact on animal protein demand from the U.S., it may have a negative impact on distillers grains exports and 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 II 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~~We believe it is unlikely that any of these bills will ~~be passed~~become law in the current Congress. In addition, the manner in which the EPA administers the RFS II can have a ~~divided Congress.~~significant impact on the actual amount of ethanol blended into the domestic fuel supply.

Federal mandates and state-level clean fuel programs supporting the use of renewable fuels are a significant driver of ethanol demand in the U.S. Ethanol policies are influenced by ~~environmental~~ concerns for the environment, 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)~~CAFE in 1975 to reduce energy consumption by increasing the fuel economy of cars and light trucks. ~~It provides~~Flexible-fuel vehicles (FFVs), which are designed to run on a ~~54% efficiency bonus~~mixture of fuels, including higher blends of ethanol such as E85, receive preferential treatment in the form of CAFE credits. There are approximately 21 million FFVs on the road in the U.S. today, 16 million of which are light duty trucks. FFV credits have been decreasing since 2014 and will be completely phased out in 2020. Absent CAFE preferences, auto manufacturers may not be willing to build flexible-fuel vehicles, which ~~can operate on ethanol blends up~~has the potential to ~~E85.~~slow the growth of E85 markets.

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. This allows E15 ~~expanding it beyond flex-fuel~~to be sold year round to all vehicles ~~during the June 1 to September 15 summer driving season.~~model year 2001 and newer. 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 for the first time ever, E15 ~~is being~~was legally sold to all vehicles model year 2001 and newer during the summer driving ~~season.~~season of June 1 to September 15, 2019.

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The RFS II has been a driving factor in the growth of ethanol usage in the United States. When the RFS II was ~~passed~~established in ~~2007 and rulemaking finalized in October~~ 2010, the required volume of ~~conventional renewable fuel~~“conventional” corn-based ethanol to be blended with gasoline was to increase each year until it reached 15.0 billion gallons in ~~2015. In November 2018,~~2015, which left the EPA to address existing limitations in both supply (ethanol production) and demand (usage of ethanol blends in older vehicles). On December 19, 2019, the EPA announced ~~it would maintain~~ the ~~15.0 billion gallon mandate~~final 2020 RVO for conventional ethanol, ~~in 2019. On July 5, 2019,~~which met the ~~EPA released an annual proposal for RFS volumes, which included 15.0 billion gallons for conventional renewable fuel in 2020.~~15.0-billion-gallon congressional target.

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.~~2022 – the year through which the statutorily prescribed volumes run. While conventional ethanol maintained 15 billion gallons, 2019 iswas the second consecutive year that the total proposed ~~RVOs are~~RVO was more than 20% below statutory volumes levels. Thus, the EPA ~~Administrator has directed his staff~~was expected to initiate a reset rulemaking, ~~wherein the EPA will~~and modify statutory volumes through 2022, and do so based on the same factors ~~used~~they are to ~~set~~use in setting the RVOs post-2022. These factors include environmental impact, domestic energy security, expected production, infrastructure impact, consumer costs, job creation, price of agricultural commodities, food prices, and rural economic development. However, on December 19, 2019, the EPA announced it would not be moving forward with a reset rulemaking in 2020.

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~~the RFS II mandated volumes. Ethanol producers assign RINs to renewable fuels and the RINs are detached when the renewable fuel is blended with transportation fuel domestically. Market participants can trade the detached RINs in the open market. The market price of detached RINs affects the price of ethanol in certain markets and influences the purchasing decisions by obligated parties.

On April 15, 2020, five Governors sent a letter to the EPA requesting a general waiver from the RFS due to the drop in demand caused by COVID-19 travel restrictions. They contend that the compliance costs – i.e. cost to purchase RINs – is onerous and could put some refineries out of business. The EPA has 90 days to respond, and as of this filing had indicated only that they are “watching the situation closely, and reviewing the governors’ letter.”

Under the RFS II, a small refinery is defined as one that processes fewer than 75,000 barrels of petroleum per day. Small refineries can inpetition the EPA for a SRE which, if approved, waives their portion of the annual RVO requirements. The EPA, through consultation with the Department of Energy ~~waive~~and the ~~obligation~~Department of Agriculture, can grant them a full or partial waiver, or deny it outright within 90 days of submittal. The EPA granted significantly more of these waivers for ~~individual refineries that are suffering “disproportionate economic hardship” due to compliance with~~2016, 2017 and 2018 than they had in 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,~~past, totaling 790 million gallons ~~and 35~~ of 37waived requirements for the 2016 compliance year, ~~2017, totaling~~ 1.82 billion ~~gallons. These waivers effectively reduce the annual RVO by that amount, since~~gallons for 2017 and 1.43 billion gallons for 2018. In doing so, the EPA ~~does not reallocate~~effectively reduced 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~~RFS II mandated volumes for those compliance years by those amounts respectively, and as a result, 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.have declined significantly.

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~~a lawsuit in the ~~U.S. Federal District~~ Court of Appeals for the D.C. Circuit, challenging the 2019 RVO rule over the EPA’s failure to address small refinery exemptions in the rulemaking. ~~Biofuel opposition~~This was the first RFS II rulemaking since the expanded use of the exemptions came to light; however, the EPA had declined to cap the number of waivers it grants, and until late 2019, had declined to alter how it accounts for the retroactive waivers in its annual volume calculations. The EPA has a statutory mandate to ensure the volume requirements are met, which are achieved by setting the percentage standards for obligated parties. The EPA’s recent approach accomplished the opposite. Even if all the obligated parties complied with their respective percentage obligations for 2019, the nation’s overall supply of renewable fuel would not meet the total volume requirements set by the EPA. This undermines Congressional intent to increase the consumption of renewable fuels in the domestic transportation fuel supply. Biofuels groups have ~~filed also~~argued the EPA must therefore adjust its percentage standard calculations to make up for past retroactive waivers and adjust the standards to account for any waivers it reasonably expects to grant in the ~~DC Circuit, with such action consolidated with similar cases,~~future.

In a supplemental rulemaking to ~~review~~ the ~~EPA’s 2018~~2020 RVO ~~rulemaking. Biofuel groups have filed an action in~~rule, the ~~DC Circuit to compel~~ EPA ~~to produce information under~~changed their approach, and for the ~~Freedom of Information Act related~~first time accounted for the gallons that they anticipate they will be waiving from the blending requirements due to small refinery exemptions. ~~Certain biofuel groups have further filed suit~~To accomplish this, they are adding in the ~~Tenth Circuit Court~~trailing three year average of ~~Appeals challenging~~gallons the Department of Energy recommended be waived, in effect raising the blending volumes across the board in anticipation of waiving the obligations in whole or in part for certain refineries that qualify for the exemptions. Though the EPA has often disregarded the recommendations of the Department of Energy in years past, they stated in the rule their intent to adhere to these recommendations going forward, including granting partial waivers rather than an all or nothing approach. The EPA will be adjudicating the 2020 compliance year small refinery ~~exemption. Numerous other suits on related RFS II matters are also pending, namely involving RVOs and small refinery exemptions.~~

exemption applications in early 2021, but have indicated they will adhere to Department of Energy

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recommendations for the 2019 compliance year applications as well, which should be adjudicated in 2020. There were 26 applications pending as of this filing.

On January 24, 2020, the U.S. Court of Appeals for the 10th Circuit ruled on RFA et. al. vs. EPA in favor of biofuels interests, overturning EPA’s granting of refinery exemptions to three refineries on two separate grounds. The Court agreed that, under the Clean Air Act, refineries are eligible for SREs for a given RVO year only if such exemptions are extensions of exemptions granted in previous RVO years. In this case, the three refineries at issue did not qualify for SREs in the year prior to the year that EPA granted them. They were thus ineligible for additional SRE relief because there were no immediately prior SREs to extend. In addition, the Court agreed that the disproportionate economic hardship prong of SRE eligibility should be determined solely by reference to whether compliance with the RFS II creates such hardship, not whether compliance plus other issues create disproportionate economic hardship. The Court thus vacated EPA's grant of SREs for certain years and remanded the grants back to EPA. The refiners appealed for a rehearing which was denied. It is possible the decision will be appealed to the U.S. Supreme Court. If the decision against the EPA is upheld by the Supreme Court, it is uncertain how the EPA will propose to remedy the situation.

The White House directed the USDA and EPA to move forward with rulemaking to expand access to higher blends of biofuels. This includes funding for infrastructure, labeling changes and allowing E15 to be sold through E10 infrastructure.

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 proposed 2020 RVO rulemaking released in 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. The EPA has indicated that it plans to address this court ordered remand in 2020.

To respond to the COVID-19 health crisis and attempt to offset the subsequent economic damage, Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in late March 2020. It created and funded multiple programs that have impacted or could impact our industry. The USDA was given additional resources for the Commodity Credit Corporation (CCC) and they are using those funds to provide direct payments to farmers, including corn farmers from whom we purchase most of our feedstock for ethanol production. Similar to the trade aid payments made by the USDA over the past two years, this cash injection for farmers could cause them to delay marketing decisions and increase the price we have to pay to purchase the corn. The USDA did not include any CCC funds for ethanol plants as of this filing.

The CARES Act also provided for the Small Business Administration (SBA) to assist companies with fewer than 500 employees, and for some North American Industry Classification System (NAICS) codes, 1,000 employees, and keep them from laying off workers. The Paycheck Protection Program (PPP) was created and quickly paid out all of the funds appropriated, including some to farmers and to ethanol plants with fewer than 1,000 employees. This could create a competitive imbalance in the marketplace, and for farmers, like the CCC funds, incentivize them to delay marketing corn. The PPP had its authorization increased by $321 billion in April.

The CARES Act also directed the Treasury Department to create programs to support medium-sized businesses, with fewer than 1,000 employees in the case of our business, however we did not qualify for these PPP funds from SBA. The “Main Street” programs provide low interest loans to qualifying companies and we are awaiting the Treasury Department final guidelines to determine if we qualify.

Ethanol is ~~anticipated that litigation will ensue from this matter.~~the primary ingredient in hand sanitizer. The CARES Act also provided a tax exclusion on the shipment of un-denatured ethanol for use in manufacturing hand sanitizer. The FDA has provided expanded guidance to allow for more denaturants to be used in ethanol intended for hand sanitizer production, and has expanded the grades of ethanol allowed for the duration of the public health crisis.

Government actions abroad can significantly impact the demand for U.S. ethanol. In September 2017, China’s National Development and Reform Commission, the National Energy ~~Board~~Agency and 15 other state departments issued a joint plan to expand the use and production of biofuels containing up to 10% ethanol by 2020. China, the number three importer of U.S. ethanol in 2016, imported negligible volumes during ~~fiscal year~~ 2018 and 2019 due to a 30% tariff on U.S. ethanol, which increased to 70% in early 2018. There is no assurance that China’s joint plan to expand blending to 10% will be carried to fruition, nor that it will lead to increased imports of U.S. ethanol in the near term. ~~Our exports also face tariffs, rate quotas, countervailing duties,~~Ethanol is included as an agricultural commodity under the “Phase I” agreement with China, wherein they are to purchase upwards of $40 billion in agricultural commodities from the U.S. in both 2020 and ~~other hurdles in Brazil, the European Union, India, Peru, and elsewhere, which limits our ability to compete in some markets.~~2021.

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In Brazil, the Secretary of Foreign Trade 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 in September 2017. The initial ruling iswas valid for two ~~years, and is set to expire~~years; however, it was extended at the end of August ~~2019. It remains unclear if~~2019 for an additional year. On an annual basis, Brazil will ~~apply~~now allow into the ~~20% tariff to all gallons after that date, if they will expand the gallons they allow in~~country 750 million duty free ~~or if they will reduce~~liters distributed on a quarterly basis as follows: September to November 100 million liters, December to February 100 million liters, March to May 275 million liters and June to August 275 million liters.

Our exports also face tariffs, rate quotas, countervailing duties, and other hurdles in the ~~tariff for all gallons.~~European Union, India, Peru, and elsewhere, which limits the ability to compete in some markets.

In June 2017, the Energy Regulatory Commission of Mexico (CRE) approved the use of 10% ethanol blends, which was challenged by ~~ten lawsuits. Four cases~~multiple lawsuits, of which several were dismissed. The ~~six~~ remaining four cases follow one of two tracks: 1) to determine the constitutionality of the CRE regulation, or 2) to determine the benefits, or lack thereof, of introducing E10 to Mexico. An injunction was granted in October 2017, preventing the blending and selling of E10, but was overturned by a higher court in June 2018 making it legal to blend and sell E10 by PEMEX throughout Mexico except for its three largest metropolitan areas. On January 15, 2020, the Mexican Supreme Court ruled that the expedited process for the CRE regulation was unconstitutional, and that after a 180 day period the maximum ethanol blend allowed in the country would revert to 5.8%. There is an effort underway to go through the full regulatory process to allow for 10% blends countrywide, including in the three major metropolitan areas. U.S. ethanol exports to Mexico totaled ~~29.4~~31.2 mmg in ~~2018.~~2019.

On January 29, 2020, the President signed into law the updated North American Free Trade Agreement, known as the United States Mexico Canada Agreement or USMCA. The pact maintains the duty free access of U.S. agricultural commodities, including ethanol, into Canada and Mexico. The USMCA will take effect on July 1, 2020.

Colombia has banned imports of fuel ethanol for two months, with the possibility of extending the ban one additional month. The Columbian President ordered this emergency decree citing COVID-19 as the rationale. This action is WTO compliant under Article 20 of the GATT. In 2019, the U.S. shipped Columbia 80.2 million gallons of ethanol.

Comparability of our Financial Results

We report the financial and operating performance for 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, 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 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.

We sold an aggregate 50% membership interest in GPCC to TGAM and StepStone during the third quarter of 2019. After closing, GPCC is no longer consolidated in the company’s consolidated financial statements and the GPCC investment is accounted for using the equity method of accounting. The company concluded that the disposition of GPCC met the requirements under ASC 205-20. Therefore,GPCC results for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 ~~do not include~~ ~~operations of the~~ Bluffton, Lakota, Hopewell and Riga ethanol plants which were either permanently closed or sold during the fourth quarter of 2018. Additionally, the three and six months ended June 30, 2019 do not include Fleischmann’s Vinegar operations, which was also sold in the fourth quarter of 2018.are classified as discontinued operations.

During the normal course of business, our operating segments do business with each other. For example, our agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains and corn oil of our ethanol production segment. Our partnership segment provides fuel storage and transportation services for our agribusiness and energy services segment. These intersegment activities are treated like third-party transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment performance; however, they do not impact our consolidated results since the revenues and corresponding costs are eliminated.

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

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As of ~~June 30, 2019,~~March 31, 2020, we, together with our subsidiaries, own a ~~49.1%~~49.0% 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 ~~48.9%~~49.0% 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 ‎June 30,				%	Six Months Ended ‎June 30,				%	Three Months Ended March 31,				%
	2019		2018		Variance	2019		2018		Variance	2020		2019⁽¹⁾		Variance
Revenues:
Ethanol production:
Revenues from external customers	$	447,438	$	589,256	(24.1%)	$	716,154	$	1,153,019	(37.9%)	$	475,700	$	270,808	75.7%
Intersegment revenues		3,505		4,219	(16.9)		5,622		6,172	(8.9)		25		25	-
Total segment revenues		450,943		593,475	(24.0)		721,776		1,159,191	(37.7)		475,725		270,833	75.7
Agribusiness and energy services:
Revenues from external customers		175,837		170,074	3.4		338,632		371,861	(8.9)		155,881		164,076	(5.0)
Intersegment revenues		9,131		14,128	(35.4)		15,544		25,557	(39.2)		7,308		5,132	42.4
Total segment revenues		184,968		184,202	0.4		354,176		397,418	(10.9)		163,189		169,208	(3.6)
Food and ingredients:
Revenues from external customers		270,886		225,887	19.9		479,385		503,996	(4.9)		-		1,452	*
Intersegment revenues		38		38	0.0		76		80	(5.0)		-		-	-
Total segment revenues		270,924		225,925	19.9		479,461		504,076	(4.9)		-		1,452	*
Partnership:
Revenues from external customers		1,692		1,620	4.4		3,997		3,248	23.1		1,288		2,305	(44.1)
Intersegment revenues		19,133		24,220	(21.0)		37,915		48,477	(21.8)		18,983		18,782	1.1
Total segment revenues		20,825		25,840	(19.4)		41,912		51,725	(19.0)		20,271		21,087	(3.9)
Revenues including intersegment activity		927,660		1,029,442	(9.9)		1,597,325		2,112,410	(24.4)		659,185		462,580	42.5
Intersegment eliminations		(31,807)		(42,605)	(25.3)		(59,157)		(80,286)	(26.3)		(26,316)		(23,939)	9.9
Revenues as reported	$	895,853	$	986,837	(9.2%)	$	1,538,168	$	2,032,124	(24.3%)	$	632,869	$	438,641	44.3%


	Three Months Ended ‎June 30,				%	Six Months Ended ‎June 30,				%	Three Months Ended March 31,				%
	2019		2018		Variance	2019		2018		Variance	2020		2019⁽¹⁾		Variance
Cost of goods sold:
Ethanol production	$	483,352	$	581,613	(16.9%)	$	776,839	$	1,146,172	(32.2%)	$	489,150	$	293,487	66.7%
Agribusiness and energy services		176,214		165,174	6.7		335,840		366,886	(8.5)		156,502		159,626	(2.0)
Food and ingredients		259,906		206,440	25.9		465,979		466,205	(0.0)		-		1,516	*
Partnership		-		-	*		-		-	*
Intersegment eliminations		(31,215)		(42,602)	(26.7)		(54,826)		(80,303)	(31.7)		(28,424)		(20,238)	40.4
	$	888,257	$	910,625	(2.5%)	$	1,523,832	$	1,898,960	(19.8%)	$	617,228	$	434,391	42.1%


	Three Months Ended ‎June 30,				%	Six Months Ended ‎June 30,				%	Three Months Ended March 31,				%
	2019		2018		Variance	2019		2018		Variance	2020		2019		Variance
Operating income (loss):
Ethanol production(1)	$	(53,885)	$	(17,214)	(213.0%)	$	(98,077)	$	(44,743)	(119.2%)	$	(60,781)	$	(44,192)	37.5%
Agribusiness and energy services		4,341		12,166	(64.3)		9,645		19,230	(49.8)		2,560		5,304	(51.7)
Food and ingredients		7,260		12,981	(44.1)		5,828		25,566	(77.2)		-		(65)	*
Partnership		13,156		16,129	(18.4)		25,707		31,489	(18.4)		12,430		12,551	(1.0)
Intersegment eliminations		(528)		144	*		(4,205)		212	*		2,133		(3,677)	*
Corporate activities		(9,724)		(12,441)	21.8		(18,283)		(23,914)	23.5		(10,670)		(8,559)	24.7
	$	(39,380)	$	11,765	*	$	(79,385)	$	7,840	*	$	(54,328)	$	(38,638)	40.6%

(1)Operating loss for ethanol production includes a goodwill impairment charge of $24.1 million for the three months ended March 31, 2020.

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	Three Months Ended ‎June 30,				%	Six Months Ended ‎June 30,				%
	2019		2018		Variance	2019		2018		Variance	Three Months Ended March 31,				%
EBITDA:
											2020		2019		Variance
Depreciation and amortization:
Ethanol production	$	(38,737)	$	3,362	*	$	(67,240)	$	(3,733)	*		15,898		15,340	3.6%
Agribusiness and energy services		4,899		12,796	(61.7)		10,761		20,498	(47.5)		553		549	0.7
Food and ingredients		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)		961		985	(2.4)
Intersegment eliminations		(528)		144	*		(4,205)		212	*
Corporate activities		(8,326)		(10,642)	21.8		(14,705)		(20,817)	29.4		668		750	(10.9)
	$	(19,769)	$	41,842	*	$	(38,438)	$	64,962	*	$	18,080	$	17,624	2.6%

* Percentage variance not considered meaningful.

We use EBITDA and adjusted EBITDA as a segment ~~measure~~measures of profitability to compare the financial performance of our reportable segments and manage those segments. EBITDA is defined as earnings before interest expense, income tax expense, including related tax expense of equity method investments, depreciation and amortization excluding the change in right-of-use assets and debt issuance costs. Adjusted EBITDA includes adjustments related to operational results of GPCC prior to its disposition which are recorded as discontinued operations, our proportional share of EBITDA adjustments of our equity method investees and noncash goodwill impairment. We believe EBITDA ~~is a~~and adjusted EBITDA are useful ~~measure~~measures to compare our performance against other companies. EBITDA and adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, which is prepared in accordance with GAAP. EBITDA and adjusted EBITDA calculations may vary from company to company. Accordingly, our computation of EBITDA and adjusted EBITDA may not be comparable with a similarly titled measure of other companies.

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


	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Net income (loss)	$	(40,179)	$	3,751	$	(78,050)	$	(15,704)
Net loss from continuing operations including noncontrolling interest									$	(10,347)	$	(33,402)
Interest expense		15,969		22,021		30,396		44,149		9,697		9,731
Income tax benefit		(14,653)		(10,753)		(29,113)		(16,780)
Income tax benefit, net of equity method income tax expense										(41,798)		(12,943)
Depreciation and amortization ⁽¹⁾		19,094		26,823		38,329		53,297		18,080		17,624
EBITDA	$	(19,769)	$	41,842	$	(38,438)	$	64,962		(24,368)		(18,990)
EBITDA adjustments related to discontinued operations										-		322
Proportional share of EBITDA adjustments to equity method investees										2,937		331
Noncash goodwill impairment										24,091		-
Adjusted EBITDA									$	2,660	$	(18,337)

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

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


	Three Months Ended March 31,				%
	2020		2019		Variance
Adjusted EBITDA:
Ethanol production	$	(44,125)	$	(28,503)	54.8%
Agribusiness and energy services		3,128		5,862	(46.6)
Food and ingredients		-		(64)	*
Partnership		13,548		13,771	(1.6)
Intersegment eliminations		2,133		(3,677)	*
Corporate activities ⁽¹⁾		948		(6,379)	*
EBITDA		(24,368)		(18,990)	28.3
EBITDA adjustments related to discontinued operations		-		322	*
Proportional share of EBITDA adjustments to equity method investees		2,937		331	*
Noncash goodwill impairment		24,091		-	*
Adjusted EBITDA	$	2,660	$	(18,337)	114.5

(1)Includes corporate expenses, offset by earnings from equity method investments of $7.8 million.

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Three Months Ended ~~June 30, 2019~~March 31, 2020 Compared with the Three Months Ended ~~June 30, 2018~~March 31, 2019

Consolidated Results

Consolidated revenues ~~decreased $91.0~~increased $194.2 million for the three months ended ~~June 30, 2019~~March 31, 2020 compared with the same period in ~~2018~~2019 primarily due to ~~the disposition~~higher production volumes of ~~three~~ ethanol, ~~plants~~distillers grains and ~~the sale of Fleischmann’s Vinegar during the fourth quarter of 2018, offset by increased cattle volumes due to the acquisition of two cattle feed lots in the third quarter of 2018.~~corn oil.

Operating ~~income decreased $51.1 million and EBITDA decreased $61.6~~loss increased $15.7 million for the three months ended ~~June 30, 2019~~March 31, 2020 compared with the same period last year primarily due to ~~decreased margins on~~the pre-tax write-off of the goodwill in the ethanol production segment. Adjusted EBITDA increased $21.0 million due to equity earnings from the GPCC joint venture as well as higher earnings from our ethanol production segment excluding the ~~disposition of Fleischmann’s Vinegar during the fourth quarter of 2018.~~goodwill impairment. Interest expense ~~decreased $6.1~~for the three months ended March 31, 2020 was comparable with the same period in 2019. Income tax benefit was $44.3 million for the three months ended ~~June 30, 2019,~~March 31, 2020 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 benefit was $14.7 million for the three months ended June 30, 2019 compared with $10.8$12.9 million for the same period in ~~2018.~~2019. The increase in income tax benefit was primarily due to the utilization of previously recorded tax NOLs in the three month period ended March 31, 2020 as allowed under the provisions of the recently enacted CARES Act.

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

Ethanol Production Segment

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


	Three Months Ended ‎June 30,			Three Months Ended March 31,
	2019	2018	% Variance	2020	2019	% Variance

Ethanol sold
(thousands of gallons)	224,023	296,282	(24.4)	240,466	155,040	55.1
Distillers grains sold
(thousands of equivalent dried tons)	586	739	(20.7)	642	398	61.3
Corn oil sold
(thousands of pounds)	53,040	75,556	(29.8)	62,552	34,983	78.8
Corn consumed
(thousands of bushels)	77,963	103,147	(24.4)	83,883	54,041	55.2

Revenues in our ethanol production segment ~~decreased $142.5~~increased $204.9 million for the three months ended ~~June 30, 2019~~March 31, 2020 compared with the same period in ~~2018~~2019 primarily due to ~~the disposition~~higher production volumes of ~~three~~ ethanol, ~~plants during the fourth quarter of 2018 as well as lower average realized prices for ethanol~~distillers grains and ~~distillers grains.~~corn oil.

Cost of goods sold for our ethanol production segment ~~decreased $98.3~~increased $195.7 million for the three months ended ~~June 30, 2019~~March 31, 2020 compared with the same period last year primarily due to ~~the disposition of three ethanol plants. As a result of the factors identified above, operating~~higher production volumes. Operating income decreased ~~$36.7~~$16.6 million and EBITDA decreased $42.1 million for the three months ended June 30, 2019 compared with the same period in 2018. Depreciation and amortization expense for the segment was $15.4 million for the three months ended June 30, 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 benefit of $14.7 million for the three months ended June 30, 2019, compared with $10.8 million for the same period in 2018. The change in income tax benefit was due to a higher loss before income taxes for the 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 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 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~~ ~~year-to-date~~ ~~segment performance.~~

~~Ethanol Production Segment~~

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

Six Months Ended
‎June 30,
2019
2018
% Variance
Ethanol produced
(thousands of gallons)
379,063
576,692
(34.3)
Distillers grains produced
(thousands of equivalent dried tons)
984
1,468
(33.0)
Corn oil produced
(thousands of pounds)
88,023
144,690
(39.2)
Corn consumed
(thousands of bushels)
132,004
200,430
(34.1)

Revenues in our ethanol production segment decreased $437.4 million for the six 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 production volumes of ethanol, distillers grains and corn oil due to the depressed margin environment and lower average realized prices for ethanol and distillers grains.

Cost of goods sold for our ethanol production segment decreased $369.3 million for the six months ended June 30, 2019 compared with the same period last year primarily due to the disposition of three ethanol plants in addition to lower

production volumes. As a result of the factors identified above, operating income decreased $53.3 million and EBITDA decreased $63.5 million for the six months ended June 30, 2019 compared with the same period in 2018. Depreciation and amortization expense for the segment was $30.8$15.6 million for the three months ended March 31, ~~2019~~2020 compared with ~~$41.0~~the same period in 2019 primarily due to the goodwill impairment charge recognized in the first quarter of 2020. Excluding the impairment charge, both operating income and EBITDA increased due to improved margins on ethanol production. Depreciation and amortization expense for the ethanol production segment was $15.9 million for the three months ended March 31, 2020 compared with $15.3 million for the same period last ~~year, primarily due to the disposition of three ethanol plants during the fourth quarter of 2018.~~year.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased ~~$43.2~~$6.0 million while operating income ~~decreased by $9.6 million~~ and EBITDA decreased by ~~$9.7~~$2.7 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared with the same period in ~~2018.~~2019. The decrease in revenues was primarily due to a decrease in ethanol, distillers grain and corn oil ~~production and~~ trading activity, as well as 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~~The food and ingredients segment, ~~decreased $24.6 million for~~which now represents food-grade corn oil production had no activity during the ~~six~~three months ended June 30, 2019 compared with the same period in 2018. The decrease in revenues was primarily due to the sale of Fleischmann’s Vinegar during the fourth quarter of 2018, partially offset by an increase in cattle volumes sold ~~during the six months ended June 30, 2019. Cattle head sold for the six months ended June 30, 2019 and 2018 was approximately 291,000 and 255,000 respectively.~~March 31, 2020.

~~Operating income decreased by $19.7 million and EBITDA decreased $25.9 million for the six months ended June 30, 2019 compared with the same period in 2018 primarily due to the sale~~
‎

Table of Fleischmann’s Vinegar during the fourth quarter of 2018, as well as overall performance at our cattle feeding operations, which was negatively impacted by severe winter weather and an abnormally negative basis during the first quarter of 2019.Contents

Partnership Segment

Revenues generated by our partnership segment decreased ~~$9.8~~$0.8 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020, compared towith the same period for 2019. Terminal services revenue decreased $0.6 million as a result of ~~2018, primarily due to lower storage and~~a $0.9 million decrease in MVC charges, partially offset by a $0.3 million increase associated with higher throughput ~~volumes due to disposition of three ethanol plants during the fourth quarter of 2018 as well as lower production at our remaining plants and lower~~ ~~revenues~~volumes. Revenues generated from rail transportation services ~~due to the assignment~~decreased $0.5 million. These decreases were partially offset by an increase of ~~various railcar operating leases as part of the disposition.~~ $0.3 million in trucking and other revenue.Operating income ~~decreased $5.8 million~~ and EBITDA ~~decreased $6.0 million~~ for the ~~six~~three months ended ~~June 30, 2019 compared~~March 31, 2020 were comparable with the same period in ~~2018~~ ~~primarily due to the factors described above.~~2019.

Intersegment Eliminations

Intersegment eliminations of revenues ~~decreased~~increased by ~~$21.1~~$2.4 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared with the same period in ~~2018~~2019 due to ~~a decrease in storage~~increased marketing and ~~throughput fees paid to the partnership segment as well as decreased intersegment~~ corn ~~purchases and marketing~~origination fees within the agribusiness and energy services segment.

Corporate Activities

Operating income was impacted by ~~a decrease~~an increase in operating expenses for corporate activities of ~~$5.6~~$2.1 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared with the same period in ~~2018~~2019 primarily due to increased selling, general and administrative expenses primarily as a result of ~~a workforce reduction which occurred as part of our portfolio optimization program in the last half of 2018.~~personnel costs.

Income Taxes

We recorded income tax benefit of ~~$29.1~~$44.3 million for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared with ~~$16.8~~$12.9 million for the same period in ~~2018.~~ 2019. The ~~change~~increase in ~~income~~the amount of tax benefit ~~was due to a higher loss before income taxes~~recorded for the ~~six~~three months ended ~~June 30, 2019, and R&D credits recorded during~~March 31, 2020 compared to the same period in ~~2018.~~2019 was due to the tax benefit associated with the carry back of the tax NOL generated in 2019 to the 2014 tax year under the newly enacted CARES Act, as well as the release of a previously recorded valuation allowance against the 2019 NOL and other deferred tax assets.

Income from Equity Method Investees

Income from equity method investees increased $8.0 million for the three months ended March 31, 2020 compared with the same period last year due to earnings from our GPCC joint venture during the current period. Prior to its disposition during the third quarter of 2019, GPCC was a consolidated entity.

Net Income from Discontinued Operations

As previously discussed, we sold an aggregate 50% membership interest in GPCC to TGAM and StepStone during the third quarter of 2019. After closing, GPCC is no longer consolidated in the company’s consolidated financial statements and the GPCC investment is accounted for using the equity method of accounting. The company concluded that the disposition of GPCC met the requirements under ASC 205-20. Therefore,GPCC results for the three months ended March 31, 2020 are classified as discontinued operations. Net loss from discontinued operations was $4.5 million for the three months ended March 31, 2019 which was primarily due to severe winter weather and abnormally negative basis during the first quarter of 2019.

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 ~~June 30, 2019,~~March 31, 2020, we had ~~$193.3~~$194.3 million in cash and equivalents, excluding restricted cash, consisting of ~~$133.6~~$121.0 million held at our parent company and the remainder held at our subsidiaries. Additionally, we had ~~$40.6~~$11.2 million in restricted cash at ~~June 30, 2019.~~March 31, 2020. We also had ~~$458.8~~$330.6 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 ~~June 30, 2019,~~March 31, 2020, our subsidiaries had approximately ~~$174.8~~

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$65.5 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.

Net cash ~~used in~~provided by operating activities for continuing operations was ~~$32.2~~$17.8 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared with net cash provided by operating activities ~~$45.9~~for continuing operations of $2.2 million for the same period in ~~2018.~~2019. Operating activities compared to the prior year were primarily affected by a decrease in the operating loss, goodwill impairment and changes in working capital ~~as well as decreases in operating income~~ when compared to the same period of the prior year. Net cash used in investing activities for continuing operations was ~~$20.3~~$40.0 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared with ~~$11.2~~net cash used in investing activities for continuing operations of $6.2 million for the same period in ~~2018,~~2019, due primarily to ~~increased~~an increase capital expenditures ~~at our existing ethanol plants partially offset by cash received from other investing activities in 2018.~~during 2020. Net cash used in financing activities for continuing operations was ~~$31.8~~$42.3 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared with ~~$96.2~~$35.0 million for the same period in ~~2018, with the~~2019, primarily due to an increase in share repurchases offset by a decrease in cash ~~used resulting from an increase in net borrowings offset by payments for the repurchase of common stock.~~dividends and distributions during 2020.

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 ~~$23.5~~$38.8 million in the first ~~half~~quarter of ~~2019~~2020 primarily for aProject 24 operating expense reduction and high-protein expansion ~~project~~projects at ~~one of our~~various ethanol plants, and for various maintenance projects. Capital spending for the remainder of ~~2019~~2020 is expected to be between approximately ~~$55.0~~$15 million and ~~$65.0~~$20 million for various projects, 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 and natural ~~gas and cattle.~~gas. We use derivative financial instruments to reduce the market risk associated with fluctuations in commodity prices. Sudden changes in commodity prices may require cash deposits with brokers for margin calls or significant liquidity with little advanced notice to meet margin calls, depending on our open derivative positions. We continuously monitor our exposure to margin calls and believe we will continue to maintain adequate liquidity to cover margin calls from our operating results and borrowings.

On May 8, 2019, our board of directors declared a quarterly cash dividend of $0.12 per share. The dividend was paid on June 14, 2019, to shareholders of record at the close of business on 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~~the general partner, including those for future capital expenditures, future acquisitions and anticipated future debt service requirements, plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the end of that quarter. On ~~July 18, 2019,~~April 16, 2020, the board of directors of the general partner of the partnership ~~declared a~~reduced the quarterly cash distribution ~~of $0.475~~by 75% to $0.12 per unit on outstanding common ~~and subordinated~~ units. This reduction will free up approximately $33.8 million annually, which the partnership intends to use to reduce debt. The distribution is payable on ~~August 9, 2019,~~May 8, 2020, to unitholders of record at the close of business on ~~August 2, 2019.~~May 1, 2020.

~~In August 2014, we announced~~Our board of directors authorized a share repurchase program of up to ~~$100~~ $200 million of our common stock. Under the program, we may repurchase shares in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers or by other means. The timing and amount of repurchase transactions are determined by our management based on market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice. During the three months ended ~~June 30, 2019,~~March 31, 2020, we purchased a total of ~~3,197,277~~880,979 shares of our common stock for approximately ~~$39.9~~$11.5 million. To date, we have repurchased ~~4,316,626~~7,396,936 of common stock for approximately ~~$59.6~~$92.8 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.~~liquidity. We may sell additional assets or equity or borrow capital to improve or preserve our liquidity, expand our business 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 89 – Debt included as part of the notes to consolidated financial statements and Note 12 – Debt included as part of the notes to consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, ~~2018.~~2019.

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We were in compliance with our debt covenants at ~~June 30, 2019.~~March 31, 2020. Based on our forecasts, we believe we will maintain compliance at each of our subsidiaries for the next twelve months or have sufficient liquidity available on a consolidated basis to resolve noncompliance. We cannot provide assurance that actual results will approximate our forecasts or that we will inject the necessary capital into a subsidiary to maintain compliance with its respective covenants. In the event a subsidiary is unable to comply with its debt covenants, the subsidiary’s lenders may determine that an event of default has occurred, and following notice, the lenders may terminate the commitment and declare the unpaid balance due and payable.

As outlined in Note 89 - Debt, we use LIBOR as a reference rate for certain revolving credit facilities. LIBOR is currently set to be phased out at the end of 2021. At this time, it is not possible to predict the effect of this change or the alternative reference rate to be 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,~~In 2019, we issued ~~$105.0~~$115.0 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 initial conversion price of approximately $15.59 per share of our common stock. The conversion rate will be subject to adjustment upon the occurrence of certain events. In addition, we may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including our calling the 4.00% notes for redemption. We may settle the 4.00% notes in cash, common stock or a combination of cash and common stock. At ~~June 30, 2019,~~March 31, 2020, the outstanding principal balance was ~~$73.9~~$84.8 million on the 4.00% notes.

On July 19, 2019, we 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 our offering expenses, of approximately $9.5 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. After the issuance of the Option Notes, total aggregate principal of the 4.00% notes was $115.0 million.

In August 2016, we issued $170.0 million of 4.125% convertible senior notes due in 2022, or 4.125% notes, which are senior, unsecured obligations with interest payable on March 1 and September 1 of each year. 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. At ~~June 30, 2019,~~March 31, 2020, the outstanding principal balance was ~~$145.9~~$151.0 million on the 4.125% notes.

Ethanol Production Segment

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

Agribusiness and Energy Services Segment

Green Plains Grain has a $100.0 million senior secured asset-based revolving credit facility to finance working capital up to the maximum commitment based on eligible collateral, which matures in June of 2022. This facility can be increased by up to $75.0 million with agent approval and up to $50.0 million for seasonal borrowings. Total commitments outstanding under the facility cannot exceed $225.0 million. 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 June 30, 2019, the outstanding principal balance was $42.0 million on the facility and the interest rate was 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, which matures in July of 2022. This facility can be increased by up to $70.0 million with agent approval. Advances are subject to variable interest rates equal to a daily LIBOR rate plus 2.25% or the base rate plus 1.25%. The unused portion of the credit facility is also subject to a commitment fee of 0.375% per annum. At ~~June 30, 2019,~~March 31, 2020, the outstanding principal balance was ~~$132.3~~$61.2 million on the facility and the interest rate was ~~4.69%~~2.48%.

Green Plains Grain has a $100.0 million senior secured asset-based revolving credit facility to finance working capital up to the maximum commitment based on eligible collateral, which matures in June of 2022. This facility can be increased by up to $75.0 million with agent approval and up to $50.0 million for seasonal borrowings. Total commitments outstanding under the facility cannot exceed $225.0 million. At March 31, 2020, the outstanding principal balance was $78.0 million on the facility and the interest rate was 3.94%.

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 March 31, 2020.

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Green Plains Commodity Management has an uncommitted ~~$20.0~~$30.0 million revolving credit facility which matures April 30, 2023 to finance margins related to its hedging programs. Advances are subject to variable interest rates equal to LIBOR plus 1.75%. At ~~June 30, 2019,~~March 31, 2020, the outstanding principal balance was ~~$14.5~~$27.8 million on the facility and the interest rate was ~~4.12%~~2.25%.

~~Food and Ingredients Segment~~

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

Advances under the revolving credit facility 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 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.

Partnership Segment

Green Plains Partners, through a wholly owned subsidiary, has a $200.0 million revolving credit facility, which matures on July 1, 2020, to fund working capital, acquisitions, distributions, capital expenditures and other general partnership purposes. ~~The credit facility can be increased by an additional $20.0 million without the consent of the lenders.~~ At ~~June 30, 2019,~~March 31, 2020, the outstanding principal balance of the facility was ~~$132.2~~$130.2 million and our interest rate was ~~5.41%~~3.95%.

‎The revolving credit facility, which is supported by a group of financial institutions, will mature on July 1, 2020 unless extended by agreement of the lenders or replaced by another funding source. We are currently working with the existing lender group to extend the credit facility. While we have not yet formalized the credit facility or secured additional funding necessary to repay the loan, we believe it is probable that we will source appropriate funding given our consistent and stable fee-based cash flows, ongoing profitability, low debt leverage and history of obtaining financing on reasonable commercial terms. In the unlikely scenario that the partnership is unable to refinance its debt with the lenders, the partnership will consider other financing sources, including but not limited to, the restructuring or issuance of new debt with a different lending group, the issuance of additional common units, or other measures.

Contractual Obligations

Contractual obligations as of ~~June 30, 2019,~~March 31, 2020 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⁾	$	956,081	$	524,754	$	134,285	$	171,997	$	125,045	$	598,712	$	297,828	$	170,781	$	115,753	$	14,350
Interest and fees on debt obligations ⁽²⁾		90,326		45,965		24,776		11,820		7,765		54,998		19,313		21,260		7,837		6,588
Operating lease obligations ⁽³⁾		73,884		19,224		23,495		10,675		20,490		79,143		19,130		23,002		12,815		24,196
Other		20,799		2,849		7,251		2,351		8,348		11,873		4,972		4,194		1,624		1,083
Purchase obligations:
Forward grain purchase contracts ⁽⁴⁾		291,754		288,150		2,187		1,417		-		67,996		65,257		2,095		644		-
Other commodity purchase contracts ⁽⁵⁾		142,160		132,752		8,348		1,060		-		93,372		71,406		21,700		266		-
Other		41		41		-		-		-
Total contractual obligations	$	1,575,045	$	1,013,735	$	200,342	$	199,320	$	161,648	$	906,094	$	477,906	$	243,032	$	138,939	$	46,217

(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 those relating to revenue recognition, ~~depreciation of property and equipment, 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, ~~2018.~~2019.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We use various financial instruments to manage and reduce our exposure to various market risks, including changes in commodity prices and interest rates. We conduct 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 ~~$3.3~~$1.0 million per year. At ~~June 30, 2019,~~March 31, 2020, we had ~~$895.6~~$545.0 million in debt, ~~$655.7~~$297.2 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 and natural ~~gas, and cattle.~~gas. 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. ~~Cattle prices are impacted by weather conditions, overall economic conditions and government regulations and packer processing disruptions.~~

To reduce the risk associated with fluctuations in the price of ethanol, corn, distillers grains, corn oil, and 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, 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 six~~ months ended ~~June 30, 2019,~~March 31, 2020, revenues included net ~~losses~~gains of ~~$11.7~~$54.2 million ~~and $40.4 million, respectively,~~ and cost of goods sold included net ~~losses~~gains of ~~$8.5~~$2.5 million ~~and $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.

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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 ~~June 30, 2019,~~March 31, 2020, 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	1,123,000	Gallons	$	129,109	1,123,000	Gallons	$	77,859
Corn	387,000	Bushels	$	129,632	387,000	Bushels	$	106,095
Distillers grains	2,900	Tons (2)	$	29,573	2,900	Tons (2)	$	32,231
Corn oil	292,000	Pounds	$	5,117	292,000	Pounds	$	4,835
Natural gas	31,200	MmBTU	$	4,341	31,200	MmBTU	$	4,787

(1) Estimated volumes assume production at full capacity.

(2) Distillers grains quantities are stated on an equivalent dried ton basis.

Agribusiness and Energy Services Segment

In the agribusiness and energy services segment, our inventories, physical purchase and sale contracts and derivatives are marked to market. To reduce commodity price risk caused by market fluctuations for purchase and sale commitments of grain and grain held in inventory, we enter into exchange-traded futures and options contracts that serve as economic hedges.

The market value of exchange-traded futures and options used for hedging are highly correlated with the underlying market value of grain inventories and related purchase and sale contracts for grain. The less correlated portion of inventory and purchase and sale contract market values, known as basis, is much less volatile than the overall market value of exchange-traded futures and tends to follow historical patterns. We manage this less volatile risk by constantly monitoring our position relative to the price changes in the market. Inventory values are affected by the month-to-month spread in the futures markets. These spreads are also less volatile than overall market value of our inventory and tend to follow historical patterns, but cannot be mitigated directly. Our accounting policy for futures and options, as well as the underlying inventory

held for sale and purchase and sale contracts, is to reflect their current market values and include gains and losses in the consolidated statement of operations.

Our daily net commodity position consists of inventories related to purchase and sale contracts and exchange-traded contracts. The fair value of our position was approximately ~~$0.7~~$0.8 million for grain at ~~June 30, 2019.~~March 31, 2020. Our market risk at that date, based on the estimated net income effect resulting from a hypothetical 10% change in price, was approximately ~~$50~~$58 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 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 was~~ ~~approximately $6.7 million for~~ ~~cattle at June 30, 2019. Our market risk at that date, based on the estimated net income effect resulting from a hypothetical 10% change in price, was approximately $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 was~~ ~~approximately $13.3 million for~~ ~~grain and other cattle feed at June 30, 2019. Our market risk at that date, based on the estimated net income effect resulting from a hypothetical 10% change in price, was approximately $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 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 ~~June 30, 2019,~~March 31, 2020 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.

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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.

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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, ~~2018,~~2019, 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, ~~2018.~~2019. 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 factors supplement and/or ~~updates~~update 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.

Our ~~risk~~ ~~management and commodity trading strategies could be ineffective and expose us to decreased liquidity.~~

As market conditions warrant, we use forward contracts to sell some of our ethanol, distillers grains, corn oil, and live cattle or buy some of the corn, natural gas, or 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 corn, natural gas, cattle and ethanol and other agricultural commodities. The financial impact of these activities depends on the price of the commodities involved and/or our ability to physically receive or deliver the commodities.

Hedging arrangements expose us to risk of financial loss when the counterparty defaults on its contract or, in the case of exchange-traded contracts, when the expected differential between the price of the underlying and physical commodity changes. Hedging activities can result in losses when a position is purchased in a declining market or sold in a rising market. Hedging losses may be offset by a decreased cash price for corn, 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 profitable or effectively offset commodity price volatility. If they are not our results of operations and financial positionbusiness 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 inimpacted by the ~~future.~~recent COVID-19 outbreak.

The ~~interest rates under our revolving credit facility may be impacted~~recent outbreak of the coronavirus or COVID-19, which has been declared by the ~~phase-out~~World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. COVID-19 poses a risk on all aspects of ~~LIBOR.~~our business, including how it will impact our employees, customers, vendors, and business partners. We are unable to predict the impact that COVID-19 will have on our future financial position and operating results, due to numerous uncertainties. These uncertainties include, but are not limited to:

the severity of the virus;

the duration of the outbreak;

federal, state or local governmental regulations or other actions which could include limitations on our operations;

the effect on customer demand resulting in a decline in the demand for our products;

impacts on our supply chain and potential limitations of supply of our feedstocks;

interruptions of our distribution systems and delays in the delivery of our products;

the health of our workforce, and our ability to meet staffing needs which is vital to our operations; and

volatility in the credit and financial markets.

~~LIBOR is the basic rate of interest widely used~~We are actively managing our response in collaboration with customers, government officials, team members and business partners and assessing potential impacts to our future financial position and operating results, as ~~a reference for setting the interest rates on loans globally. We use LIBOR~~well as ~~a reference rate for~~adverse developments in our ~~revolving credit facilities. In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021.~~business. It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new 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 eventual replacement of the LIBOR benchmark interest rate, however, we are not ~~able~~possible for us to predict whether ~~LIBOR~~there will ~~cease~~be additional government-mandated shelter-in-place and similar government orders that could affect our business, how long the existing orders will remain in place, and how these measures will impact our operations.

The ability or willingness of OPEC and other oil exporting nations to set and maintain production levels has a significant impact on oil and natural gas commodity prices.

The Organization of Petroleum Exporting Countries and their allies (collectively, OPEC+), is an intergovernmental organization that seeks to manage the price and supply of oil on the global energy market. Actions taken by OPEC+ members, including those taken alongside other oil exporting nations, have a significant impact on global oil supply and pricing. For example, OPEC+ and certain other oil exporting nations have previously agreed to take measures, including production cuts, to support crude oil prices. In March 2020, members of OPEC+ considered extending and potentially increasing these oil production cuts, however these negotiations were unsuccessful. As a result, Saudi Arabia announced an immediate reduction in export prices and Russia announced that all previously agreed oil production cuts will expire on April 1, 2020. These actions led to an immediate and steep decrease in oil prices. There can be no assurance that OPEC+ members and other oil exporting nations will agree to future production cuts or other actions to support and stabilize oil prices, nor can

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there be any assurance that they will not further reduce oil prices or increase production. Uncertainty regarding future actions to be ~~available after 2021, whether SOFR will become a widely accepted benchmark~~taken by OPEC+ members or other oil exporting countries could lead to increased volatility in ~~place~~the price of ~~LIBOR, or what the impact of such a possible transition to SOFR may be on~~oil, which could adversely affect our business, future financial condition and results of operations.

The partnership’s revolving credit facility includes restrictions that may limit their ability to finance future operations, meet their capital needs or expand their business. In addition, the partnership’s revolving credit facility matures on July 1, 2020 and we may not be able to renew, extend or replace the expiring facility. If we fail to comply with covenants in the partnership’s revolving credit facility or if the facility is terminated, the partnership may be required to repay its indebtedness thereunder, which may have an adverse effect on their liquidity.

The partnership is dependent upon the earnings and cash flow generated by their operations in order to meet their debt service obligations and to allow them to pay cash distributions to its unitholders. The operating and financial restrictions and covenants in their revolving credit facility or in any future financing agreements could restrict their ability to finance future operations or capital needs or to expand or pursue their business activities, which may, in turn, limit their ability to pay cash distributions to their unitholders. For example, the revolving credit facility restricts the partnership’s ability to, among other things:

make certain cash distributions;

incur certain indebtedness;

create certain liens;

make certain investments;

merge or sell certain of their assets; and

expand the nature of their business.

Furthermore, the revolving credit facility contains covenants requiring them to maintain certain financial ratios.

The provisions of the revolving credit facility may affect their ability to obtain future financing and pursue attractive business opportunities and their flexibility in planning for, and reacting to, changes in business conditions. In addition, a failure to comply with the provisions of their revolving credit facility could result in an event of default that could enable their lenders, subject to the terms and conditions of their revolving credit facility, to declare the outstanding principal of that debt, together with accrued interest, to be immediately due and payable and/or to proceed against the collateral granted to them to secure such debt. If there is a default or event of default under their debt the payment of their debt is accelerated, defaults under their other debt instruments, if any, may be triggered, and their assets may be insufficient to repay such debt in full. Therefore, the holders of their units could experience a partial or total loss of their investment.

The partnership’s revolving credit facility matures on July 1, 2020, and any outstanding balance is due in full on that date. As of March 31, 2020, the partnership had an outstanding principal balance of $130.2 million under the credit facility. The ability to renew the credit facility, refinance the debt or otherwise repay the outstanding debt prior to maturity is dependent upon capital/credit market conditions as well as their financial condition, operating results and cash flows, all of which are subject to prevailing economic and competitive conditions in addition to financial, business, legislative, governmental, political, regulatory and other factors beyond their control. Therefore, the partnership can give no assurance that they will be able to renew the credit facility or refinance the debt on terms favorable to them, or at all, or that they will otherwise be able repay the credit facility obligations in full by the maturity date. In such event, they could face substantial liquidity problems, which could cause a materially adverse impact on its results of operations, cash flows and ability to make distributions to its unitholders.

Future demand for ethanol is uncertain and changes in federal mandates, public perception, consumer acceptance and overall consumer demand for transportation fuel could affect demand.

While many trade groups, academics and government agencies support ethanol as a fuel additive that promotes a cleaner environment, others claim ethanol production consumes considerably more energy, emits more greenhouse gases than other fuels and depletes water resources. While we do not agree, some studies suggest ethanol produced from corn is less efficient than ethanol produced from switch grass or wheat grain. Others claim corn-based ethanol negatively impacts consumers by causing the prices of meat and other food derived from corn-consuming livestock to increase. Ethanol critics also contend the industry redirects corn supplies from international food markets to domestic fuel markets, and contributes to land use change domestically and abroad.

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There are limited markets for ethanol beyond the federal mandates. We believe further consumer acceptance of E15 and E85 fuels may be necessary before ethanol can achieve significant market share growth. Discretionary and E85 blending are important secondary markets. Discretionary blending is often determined by the price of ethanol relative to gasoline, and availability to consumers. When discretionary blending is financially unattractive, the demand for ethanol may be reduced.

Demand for ethanol is also affected by overall demand for transportation fuel, which is affected by cost, number of miles traveled and vehicle fuel economy. Miles traveled typically increases during the spring and summer months related to vacation travel, followed closely behind the fall season due to holiday travel. Global events, such as COVID-19, have greatly decreased miles traveled and in turn, the demand for ethanol. Consumer demand for gasoline may be impacted by emerging transportation trends, such as electric vehicles or ride sharing. Additionally, factors such as over-supply of ethanol, which has been the case for some time, could continue to negatively impact our business. Reduced demand for ethanol may depress the value of our products, erode its margins, and reduce our ability to generate revenue or operate profitably.

Our insurance policies do not cover all losses, costs or liabilities that we may experience, and insurance companies that currently insure companies in the energy industry may cease to do so or substantially increase premiums.

We are insured under property, liability and business interruption policies, subject to the deductibles and limits under those policies. We have acquired insurance that we believe to be adequate to prevent loss from material foreseeable risks. However, events may occur for which no insurance is available or for which insurance is not available on terms that are acceptable. Loss from an event, such as, but not limited to war, riots, pandemics, terrorism or other risks, may not be insured and such a loss may have a material adverse effect on our operations, cash flows and financial position.

Certain of our ethanol production plants and our related storage tanks, as well as certain of our fuel terminal facilities are located within recognized seismic and flood zones. We believe that the design of these facilities have been modified to fortify them to meet structural requirements for those regions of the country. We have also obtained additional insurance coverage specific to earthquake and flood risks for the applicable plants and fuel terminals. However, there is no assurance that any such facility would remain in operation if a seismic or flood event were to occur.

Additionally, our ability to obtain and maintain adequate insurance may be adversely affected by conditions in the insurance market over which we have no control. In addition, if we experience insurable events, our annual premiums could increase further or insurance may not be available at all. If significant changes in the number or financial solvency of insurance underwriters for the ethanol industry occur, we may be unable to obtain and maintain adequate insurance at a reasonable cost. We cannot assure our unitholders that we will be able to renew our insurance coverage on acceptable terms, if at all, or that we will be able to arrange for adequate alternative coverage in the event of non-renewal. The occurrence of an event that is not fully covered by insurance, the failure by one or more insurers to honor its commitments for an insured event or the loss of insurance coverage could have a material adverse effect on our financial condition, results of operations, cash flows and ability of the partnership to make distributions to its unitholders.

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 ~~second~~first quarter of ~~2019:~~2020:

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


Period	Total Number of ‎ Shares Withheld for ‎Employee Awards	Average Price ‎Paid per Share
January 1 - January 31	-	$	-
February 1 - February 29	37,115		13.56
March 1 - March 31	76,476		9.37
Total	113,591	$	10.74

~~In August 2014, we announced~~Our board of directors authorized a share repurchase program of up to ~~$100~~$200 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.

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The following table lists the shares repurchased under the share repurchase program during the ~~second~~first quarter of ~~2019.~~2020.

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


Period	Number of Shares Purchased		Average Price Paid per Share		Number of Shares Repurchased as Part of Repurchase Program	Total Number of Shares Repurchased as Part of Repurchase Program	Approximate Dollar Value of Shares that may yet be Repurchased under the Program ⁽²⁾ ‎(in thousands)
January 1 - January 31	731,774		$	12.99	731,774	7,247,731	$	109,120
February 1 - February 29	149,205			13.08	149,205	7,396,936		107,165
March 1 - March 31	30,000	⁽¹⁾		4.79	-	7,396,936		107,165
Total	910,979		$	12.73	880,979	7,396,936	$	107,165

(1)Includes one open market purchase by Eugene S. Edwards, Director, of 30,000 shares at $4.79 per share on March 20, 2020, as previously disclosed in their Form 4 filing with the SEC.

Since inception, the company has repurchased ~~4,316,626~~7,396,936 shares of common stock for approximately ~~$59.6~~$92.8 million under the program.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Index




Exhibit No.	Description of Exhibit
~~4.1~~	Indenture relating to the 4.00% Convertible Senior Notes due 2024, dated as of June 21, 2019, between Green Plains Inc. and Wilmington Trust, National Association, including the form of Global Note attached as Exhibit A thereto. (incorporated herein by reference to Exhibit 4.1 of the company’s Current Report on Form 8-K filed on June 21, 2019)
~~10.1~~	~~Consent to Credit Agreement, dated July 15, 2019, by and among Green Plains Operating Company LLC and Bank of America, as Administrative Agent~~
~~10.2~~	Ninth Amendment to Credit Agreement, dated as of June 28, 2019, among Green Plains Grain Company LLC and BNP Paribas, as Administrative Agent, and the lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed on July 1, 2019)
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 ~~June 30, 2019,~~Mach 31, 2020, formatted in Inline Extensible Business Reporting Language (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,~~March 31, 2020, formatted in iXBRL.

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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.



‎ ‎ ‎ ‎Date: ~~August~~May 6, ~~2019~~2020	GREEN PLAINS INC. (Registrant) By: /s/ Todd A. Becker _ Todd A. Becker ‎President and Chief Executive Officer (Principal Executive Officer)
‎ ‎ ‎Date: ~~August~~May 6, ~~2019~~2020	By: /s/ G. Patrich Simpkins Jr. _ G. Patrich Simpkins Jr. ‎Chief Financial Officer (Principal Financial Officer)

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	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


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


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


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


	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


		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


	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


	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)		-


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

March 31, 2020

December 31, 2019

Weighted average remaining lease term

Weighted average discount rate