gpp-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 2022

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

For the transition period from ______ to ______

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 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 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 23,246,822 common units outstanding as of October 28, 2022.

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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	25
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	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
Signatures.		38

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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:
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:
2021 annual report			The partnership’s annual report on Form 10-K for the year ended December 31, 2021, filed February 18, 2022
ARO			Asset retirement obligation
ASC			Accounting Standards Codification
Bgy			Billion gallons per year
BlackRock			Funds and accounts managed by BlackRock
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
MSCTM			Maximized Stillage Coproducts produced using process technology developed by Fluid Quip Technologies LLC
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			Renewable Fuels Standard
RIN			Renewable identification number
RVO			Renewable volume obligation
SEC			Securities and Exchange Commission
SRE			Small refinery exemption
USDA			U.S. Department of Agriculture

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

GREEN PLAINS PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(in thousands, except unit amounts)


	September 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	15,742	$	17,645
Accounts receivable	426		432
Accounts receivable from affiliates	16,499		14,123
Prepaid expenses and other	1,219		845
Total current assets	33,886		33,045

Property and equipment, net of accumulated depreciation and amortization of $35,145 and $35,215, respectively	26,579		28,773
Operating lease right-of-use assets	36,898		38,863
Goodwill	10,598		10,598
Investment in equity method investee	3,647		3,193
Other assets	316		—
Total assets	$	111,924	$	114,472

LIABILITIES AND PARTNERS' EQUITY
Current liabilities
Accounts payable	$	4,356	$	4,232
Accounts payable to affiliates	397		722
Accrued and other liabilities	4,161		4,264
Asset retirement obligations	1,894		1,156
Operating lease current liabilities	12,007		12,108
Total current liabilities	22,815		22,482

Long-term debt	58,531		59,467
Asset retirement obligations	2,279		2,658
Operating lease long-term liabilities	26,431		27,562
Total liabilities	110,056		112,169

Commitments and contingencies (Note 9)

Partners' equity
Common unitholders - public (11,660,274 and 11,641,105 units issued and outstanding, respectively)	135,544		135,666
Common unitholders - Green Plains (11,586,548 units issued and outstanding)	(133,721)		(133,420)
General partner interests	45		57
Total partners' equity	1,868		2,303
Total liabilities and partners' equity	$	111,924	$	114,472

See accompanying notes to the consolidated financial statements.

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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,
	2022		2021		2022		2021
Revenues
Affiliate	$	19,030	$	18,221	$	55,867	$	56,061
Non-affiliate	1,036		1,030		2,953		3,297
Total revenues	20,066		19,251		58,820		59,358
Operating expenses
Operations and maintenance (excluding depreciation and amortization reflected below)	6,287		5,161		18,012		17,153
General and administrative	949		892		3,059		3,152
Depreciation and amortization	1,194		1,089		2,915		2,771
Total operating expenses	8,430		7,142		23,986		23,076
Operating income	11,636		12,109		34,834		36,282
Interest expense	(1,516)		(2,781)		(4,139)		(6,120)
Income before income taxes and income from equity method investee	10,120		9,328		30,695		30,162
Income tax expense	(37)		(77)		(114)		(229)
Income from equity method investee	83		174		454		517
Net income	$	10,166	$	9,425	$	31,035	$	30,450

Net income attributable to partners' ownership interests:
General partner	$	204	$	188	$	621	$	609
Limited partners - common unitholders	9,962		9,237		30,414		29,841

Earnings per limited partner unit (basic and diluted):
Common units	$	0.43	$	0.40	$	1.31	$	1.29

Weighted average limited partner units outstanding (basic and diluted):
Common units	23,228		23,208		23,215		23,177

See accompanying notes to the consolidated financial statements.

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GREEN PLAINS PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	31,035	$	30,450
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,915		2,771
Accretion	196		(206)
Amortization of debt issuance costs	95		1,267
Loss on extinguishment of debt	—		1,009
Unit-based compensation	180		219
Income from equity method investee	(454)		(517)
Other	(372)		—
Changes in operating assets and liabilities before effects of asset dispositions:
Accounts receivable	46		387
Accounts receivable from affiliates	(2,376)		917
Prepaid expenses and other assets	(318)		(210)
Accounts payable and accrued liabilities	(145)		(2,123)
Accounts payable to affiliates	(325)		(572)
Operating lease liabilities and right-of-use assets	733		273
Other	—		11
Net cash provided by operating activities	31,210		33,676

Cash flows from investing activities:
Purchases of property and equipment	(432)		(494)
Disposition of assets	—		27,500
Net cash provided by (used in) investing activities	(432)		27,006

Cash flows from financing activities:
Payments of distributions	(31,650)		(8,528)
Proceeds from revolving credit facility	—		2,700
Payments on revolving credit facility	—		(2,700)
Proceeds from issuance of long-term debt	—		10,000
Principal payments on long-term debt	(1,031)		(50,000)
Payments of loan fees	—		(436)
Other	—		5
Net cash used in financing activities	(32,681)		(48,959)

Net change in cash and cash equivalents	(1,903)		11,723
Cash and cash equivalents, beginning of period	17,645		2,478
Cash and cash equivalents, end of period	$	15,742	$	14,201

Supplemental disclosures of cash flow:
Cash paid for income taxes	$	76	$	462
Cash paid for interest	$	4,010	$	3,922

Non-cash investing activities:
Assets disposed of in sale	$	—	$	310

See accompanying notes to the consolidated financial statements.

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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 “we,” “our,” “us” or “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 2021 annual report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 18, 2022.

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 and 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 leases, depreciation of property and equipment, asset retirement obligations, and impairment of long-lived assets and goodwill are impacted 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 1.0 bgy ethanol marketing and distribution business since the partnership’s assets are the principal method of storing and delivering the ethanol the parent produces. The ethanol produced by the parent is 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 or other fuels 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 $0.1 million short-term lease expense for the three and nine months ended September 30, 2022 and no short term lease expense for the three and nine months ended September 30, 2021.

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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.

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 component. 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 sublease 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 component. 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.

SEC Form 10-Q filed by Green Plains Partners LP