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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2021

Commission File Number 001-37469

Green Plains PARTNERS LP

(Exact name of registrant as specified in its charter)

Delaware

47-3822258

(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(s)

Name of each exchange on which registered

Common Units, Representing Limited Partner Interests

GPP

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 ¨ 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 o

Accelerated Filer x

Non-Accelerated Filer ¨

Smaller Reporting Company o

Emerging Growth Company ¨

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.  ¨

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 registrant had 23,227,653 common units outstanding as of November 1, 2021.


TABLE OF CONTENTS

Page

PART I – FINANCIAL INFORMATION

Commonly Used Defined Terms

3

Item 1.

Financial Statements

4

Consolidated Balance Sheets

4

Consolidated Statements of Operations

5

Consolidated Statements of Cash Flows

6

Notes to Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

Signatures.

38

 

2


Commonly Used Defined Terms

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

Green Plains Partners LP, Subsidiaries, and Partners:

z

Green Plains Operating Company

Green Plains Operating Company LLC

Green Plains Partners; the partnership

Green Plains Partners LP and its subsidiaries

NLR

NLR Energy Logistics LLC

Green Plains Inc. and Subsidiaries:

Green Plains; the parent or sponsor

Green Plains Inc. and its subsidiaries

Green Plains Holdings, the general partner

Green Plains Holdings LLC

Green Plains Trade

Green Plains Trade Group LLC

Other Defined Terms:

2020 annual report

The partnership’s annual report on Form 10-K for the year ended December 31, 2020, filed February 16, 2021

ARO

Asset retirement obligation

ASC

Accounting Standards Codification

Bgy

Billion gallons per year

BlackRock

Funds and accounts managed by BlackRock

CAFE

Corporate Average Fuel Economy

Conflicts committee

The partnership’s committee responsible for reviewing situations involving certain transactions with affiliates or other potential conflicts of interest

COVID-19

Coronavirus Disease 2019

D.C.

District of Columbia

DOE

Department of Energy

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

EBITDA

Earnings before interest, taxes, depreciation and amortization

EIA

U.S. Energy Information Administration

EPA

U.S. Environmental Protection Agency

Exchange Act

Securities Exchange Act of 1934, as amended

FASB

Financial Accounting Standards Board

FFV

Flexible-fuel vehicle

GAAP

U.S. Generally Accepted Accounting Principles

LIBOR

London Interbank Offered Rate

LTIP

Green Plains Partners LP 2015 Long-Term Incentive Plan

Mmg

Million gallons

MTBE

Methyl tertiary-butyl ether

Partnership agreement

First Amended and Restated Agreement of Limited Partnership of Green Plains Partners LP, dated as of July 1, 2015, between Green Plains Holdings LLC and Green Plains Inc.

RFS II

Renewable Fuels Standard II

RIN

Renewable identification number

RVO

Renewable volume obligation

SEC

Securities and Exchange Commission

SRE

Small refinery exemption

USDA

U.S. Department of Agriculture


3


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

GREEN PLAINS PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(in thousands, except unit amounts)

September 30, 2021

December 31, 2020

(unaudited)

ASSETS

Current assets

Cash and cash equivalents

$

14,201

$

2,478

Accounts receivable

333

605

Accounts receivable from affiliates

13,222

14,139

Prepaid expenses and other

982

772

Total current assets

28,738

17,994

Property and equipment, net of accumulated depreciation and amortization of $34,342 and $34,301, respectively

29,601

32,119

Operating lease right-of-use assets

41,890

40,604

Goodwill

10,598

10,598

Investment in equity method investee

4,511

3,994

Other assets

-

11

Total assets

$

115,338

$

105,320

LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Current liabilities

Accounts payable

$

4,505

$

3,792

Accounts payable to affiliates

142

607

Accrued and other liabilities

1,762

4,527

Asset retirement obligations

902

911

Operating lease current liabilities

12,133

11,506

Current maturities of long-term debt

-

97,739

Total current liabilities

19,444

119,082

Long-term debt

59,579

-

Asset retirement obligations

2,879

2,865

Operating lease long-term liabilities

30,794

29,835

Total liabilities

112,696

151,782

Commitments and contingencies (Note 9)

 

 

Partners' equity (deficit)

Common unitholders - public (11,641,105 and 11,621,623 units issued and outstanding, respectively)

135,803

124,823

Common unitholders - Green Plains (11,586,548 units issued and outstanding)

(133,226)

(170,368)

General partner interests

65

(917)

Total partners' equity (deficit)

2,642

(46,462)

Total liabilities and partners' equity (deficit)

$

115,338

$

105,320

See accompanying notes to the consolidated financial statements.

4


GREEN PLAINS PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per unit amounts)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Revenues

Affiliate

$

18,221

$

20,347

$

56,061

$

58,327

Non-affiliate

1,030

1,035

3,297

3,707

Total revenues

19,251

21,382

59,358

62,034

Operating expenses

Operations and maintenance (excluding depreciation and amortization reflected below)

5,161

6,647

17,153

19,410

General and administrative

892

1,116

3,152

3,038

Depreciation and amortization

1,089

940

2,771

2,867

Total operating expenses

7,142

8,703

23,076

25,315

Operating income

12,109

12,679

36,282

36,719

Interest expense

(2,781)

(2,498)

(6,120)

(6,182)

Income before income taxes and income from equity method investee

9,328

10,181

30,162

30,537

Income tax expense

(77)

(30)

(229)

(166)

Income from equity method investee

174

155

517

488

Net income

$

9,425

$

10,306

$

30,450

$

30,859

Net income attributable to partners' ownership interests:

General partner

$

188

$

206

$

609

$

617

Limited partners - common unitholders

9,237

10,100

29,841

30,242

Earnings per limited partner unit (basic and diluted):

Common units

$

0.40

$

0.44

$

1.29

$

1.31

Weighted average limited partner units outstanding (basic and diluted):

Common units

23,208

23,161

23,177

23,145

See accompanying notes to the consolidated financial statements.

 

5


GREEN PLAINS PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

Nine Months Ended
September 30,

2021

2020

Cash flows from operating activities:

Net income

$

30,450

$

30,859

Adjustments to reconcile net income to net cash
provided by operating activities:

Depreciation and amortization

2,771

2,867

Accretion

(206)

195

Amortization of debt issuance costs

1,267

1,125

Loss on extinguishment of debt

1,009

-

Unit-based compensation

219

239

Income from equity method investee

(517)

(488)

Distribution from equity method investee

-

1,000

Other

-

75

Changes in operating assets and liabilities before effects of asset dispositions:

Accounts receivable

387

829

Accounts receivable from affiliates

917

(950)

Prepaid expenses and other assets

(210)

(581)

Accounts payable and accrued liabilities

(2,123)

(1,435)

Accounts payable to affiliates

(572)

(160)

Operating lease liabilities and right-of-use assets

273

689

Other

11

13

Net cash provided by operating activities

33,676

34,277

Cash flows from investing activities:

Purchases of property and equipment

(494)

(117)

Disposition of assets

27,500

-

Net cash provided by (used in) investing activities

27,006

(117)

Cash flows from financing activities:

Payments of distributions

(8,528)

(16,958)

Proceeds from revolving credit facility

2,700

43,100

Payments on revolving credit facility

(2,700)

(47,500)

Proceeds from issuance of long-term debt

10,000

3,000

Principal payments on long-term debt

(50,000)

(12,500)

Payments of loan fees

(436)

(3,495)

Other

5

7

Net cash used in financing activities

(48,959)

(34,346)

Net change in cash and cash equivalents

11,723

(186)

Cash and cash equivalents, beginning of period

2,478

261

Cash and cash equivalents, end of period

$

14,201

$

75

Supplemental disclosures of cash flow

Cash paid for income taxes

$

462

$

96

Cash paid for interest

$

3,922

$

4,780

Non-cash investing activities:

Assets disposed of in sale

$

310

$

-

See accompanying notes to the consolidated financial statements.

6


GREEN PLAINS PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

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

Organization

References to “the partnership” in the consolidated financial statements and notes to the consolidated financial statements refer to Green Plains Partners LP and its subsidiaries.

Green Plains Holdings LLC, a wholly owned subsidiary of Green Plains Inc., serves as the general partner of the partnership. References to (i) “the general partner” and “Green Plains Holdings” refer to Green Plains Holdings LLC; (ii) “the parent,” “the sponsor” and “Green Plains” refer to Green Plains Inc.; and (iii) “Green Plains Trade” refers to Green Plains Trade Group LLC, a wholly owned subsidiary of Green Plains.

Consolidated Financial Statements

The consolidated financial statements include the accounts of the partnership and its controlled subsidiaries. All significant intercompany balances and transactions are eliminated on a consolidated basis for reporting purposes. Results for the interim periods presented are not necessarily indicative of the expected results for the entire year.

The accompanying unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Because they do not include all of the information and footnotes required by GAAP, the consolidated financial statements should be read in conjunction with the partnership’s 2020 annual report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on February 16, 2021.

The partnership accounts for its interest in joint ventures using the equity method of accounting, with its investment recorded at the acquisition cost plus the partnership’s share of equity in undistributed earnings and reduced by the partnership’s share of equity in undistributed losses and distributions received.

Use of Estimates in the Preparation of Consolidated Financial Statements

Preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the reporting period. The partnership bases its estimates on historical experience and assumptions it believes are proper and reasonable under the circumstances. The partnership regularly evaluates the appropriateness of these estimates and assumptions. Actual results could differ from those estimates. Key accounting policies, including, but not limited to, those related to revenue recognition, leases, depreciation of property and equipment, asset retirement obligations, and impairment of long-lived assets and goodwill are impacted significantly by judgments, assumptions and estimates used to prepare the consolidated financial statements.

Description of Business

The partnership provides fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage terminals, transportation assets and other related assets and businesses. The partnership is its parent’s primary downstream logistics provider to support the parent’s approximately 0.96 bgy ethanol marketing and distribution business since the partnership’s assets are the principal method of storing and delivering the ethanol its parent produces. The ethanol produced by the parent is predominantly fuel grade, made principally from starch extracted from corn, and is primarily used for blending with gasoline. Ethanol currently comprises approximately 10% of the U.S. gasoline market and is an economical source of octane and oxygenates for blending into the fuel supply. The partnership does not take ownership of, or receive any payments based on the value of the ethanol, other fuels or products it handles. As a result, the partnership does not have any direct exposure to fluctuations in commodity prices.

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Revenue Recognition

The partnership recognizes revenue when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs with the completion of services or the transfer of control of products to the customer or another specified third party. For contracts with customers in which a take-or-pay commitment exists, any minimum volume deficiency charges are recognized as revenue in the period incurred and are not allowed to be credited towards excess volumes in future periods.

The partnership generates a substantial portion of its revenues under fee-based commercial agreements with Green Plains Trade. Operating lease revenue related to minimum volume commitments is recognized on a straight-line basis over the term of the lease. Under the terms of the storage and throughput agreement with Green Plains Trade, 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.

Please refer to Note 2 - Revenue to the consolidated financial statements for further details.

Operations and Maintenance Expenses

The partnership’s operations and maintenance expenses consist primarily of lease expenses related to the transportation assets, labor expenses, outside contractor expenses, insurance premiums, repairs and maintenance expenses, and utility costs. These expenses also include fees for certain management, maintenance and operational services to support the storage and terminal facilities, trucks, and leased railcar fleet allocated by Green Plains under the operational services and secondment agreement.

Concentrations of Credit Risk

In the normal course of business, the partnership is exposed to credit risk resulting from the possibility a loss may occur due to failure of another party to perform according to the terms of their contract. The partnership provides fuel storage and transportation services for various parties with a significant portion of its revenues earned from Green Plains Trade. The partnership continually monitors its credit risk exposure and concentrations. Please refer to Note 2 – Revenue and Note 10 – Related Party Transactions to the consolidated financial statements for additional information.

Impairment of Long-Lived Assets and Goodwill

The partnership reviews its long-lived assets, currently consisting primarily of property and equipment and operating lease right-of-use assets, for impairment when events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment charges were recorded for the periods reported.

The partnership’s goodwill currently is comprised of amounts recognized by the MLP predecessor related to terminal services assets. The partnership reviews goodwill at the reporting unit level for impairment at least annually, as of October 1, or more frequently when events or changes in circumstances indicate that impairment may have occurred.

Leases

The partnership leases certain facilities, parcels of land, and railcars. These leases are accounted for as operating leases, with lease expense recognized on a straight-line basis over the lease term. The term of the lease may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised. For leases with initial terms greater than 12 months, the partnership records operating lease right-of-use assets and corresponding operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. The partnership had no short-term lease expense for the three and nine months ended September 30, 2021 or 2020.

Operating lease right-of-use assets represent the right to control an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the partnership’s leases do not provide an implicit rate, the incremental borrowing rate is used based on information available at the commencement date to determine the present value of future payments.

8


The partnership utilizes 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 the partnership’s railcar leases, the partnership combines the railcars within each contract rider and accounts for each contract rider as an individual lease.

From a lessee perspective, the partnership combines both the lease and non-lease components and accounts for them as one lease. Certain of the partnership’s railcar agreements provide for maintenance costs to be the responsibility of the partnership as incurred or charged by the lessor. This maintenance cost is a non-lease component that the partnership combines with the monthly rental payment and accounts for the total cost as operating lease expense. In addition, the partnership has a land lease that contains a non-lease component for the handling and unloading services the landlord provides. The partnership combines the cost of services with the land lease cost and accounts for the total as operating lease expense.

The partnership records operating lease revenue as part of its operating lease agreements for storage and throughput services, rail transportation services, and certain terminal services. In addition, the partnership may sublease certain of its railcars to third parties on a short-term basis. These subleases are classified as operating leases, with the associated sublease revenue recognized on a straight-line basis over the lease term.

From a lessor perspective, the partnership classifies certain costs as lease costs for accounting purposes, which may differ from a tax or legal perspective. The partnership combines both the lease and non-lease components and accounts for them as one lease. The storage and throughput agreement consists of costs paid by Green Plains Trade for the rental of the terminal facilities, which for accounting purposes are treated as lease costs, as well as other costs for the throughput services provided by the partnership, which are treated as non-lease costs. For this agreement, the partnership combines the facility rental revenue and the service revenue and accounts for the total as leasing revenue. Similarly, the railcar transportation services agreement consists of costs paid by Green Plains Trade for the use of the partnership’s railcar assets, which are treated as lease costs for accounting purposes, as well as costs for logistical operations management and other services, which are treated as non-lease costs. For this agreement, the partnership combines the railcar rental revenue and the service revenue and accounts for the total as leasing revenue.

Please refer to Note 9 – Commitments and Contingencies to the consolidated financial statements for further details on operating lease expense and revenue. Please refer to Note 2 - Revenue to the consolidated financial statements for further details on the operating lease agreements in which the partnership is a lessor.

Asset Retirement Obligations

The partnership records an ARO for the fair value of the estimated costs to retire a tangible long-lived asset in the period incurred if it can be reasonably estimated, which is subsequently adjusted for accretion expense. Corresponding asset retirement costs are capitalized as a long-lived asset and depreciated on a straight-line basis over the asset’s remaining useful life. The expected present value technique used to calculate the fair value of the AROs includes assumptions about costs, settlement dates, interest accretion, and inflation. Changes in assumptions, such as the amount or timing of estimated cash flows, could increase or decrease the AROs. The partnership’s AROs are based on legal obligations to perform remedial activity related to land, machinery and equipment when certain operating leases expire.

Segment Reporting

The partnership accounts for segment reporting in accordance with ASC 280, Segment Reporting, which establishes standards for entities reporting information about the operating segments and geographic areas in which they operate. Management evaluated how its chief operating decision maker has organized the partnership for purposes of making operating decisions and assessing performance, and concluded it has one reportable segment.

9


Recent Accounting Pronouncements

In March 2020, the FASB issued amended guidance in ASC 848, Reference Rate Reform Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and a subsequent update in January 2021, which provides optional expedients and exceptions to U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The expedients and exceptions provided by the amended guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The guidance is effective upon issuance and to be applied prospectively from any date beginning March 12, 2020, through December 31, 2022. The amended guidance is not expected to have a material impact on the partnership’s consolidated financial statements.

2. REVENUE

Revenue Recognition

The partnership recognizes revenue when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs with the completion of services or the transfer of control of products to the customer or another specified third party. Revenue is measured as the amount of consideration expected to be received in exchange for providing services.

Revenue by Source

The following table disaggregates our revenue by major source (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Revenues