Green Plains Inc.: Form 10-Q for the period ended Sep 30, 2024

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, 2023.

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, 2023 or incorporated by reference. Specifically, we may experience fluctuations in future operating results due to a number of economic conditions and other factors, including: the status, expected timing, and expected outcome of our Board of Directors' ongoing review of strategic alternatives; the failure to realize the anticipated results from the new products being developed; the failure to realize the anticipated costs savings or other benefits of the Merger; local, regional and national economic conditions and the impact they may have on the company and its customers; disruption caused by health epidemics, such as the COVID-19 outbreak; conditions in the ethanol and biofuels industry, including a sustained decrease in the level of supply or demand for ethanol and biofuels or a sustained decrease in the price of ethanol or biofuels; competition in the ethanol and biofuels industry and other industries in which we operate; commodity market risks, including those that may result from weather conditions; the financial condition of the company’s customers; any non-performance by customers of their contractual obligations; changes in safety, health, environmental and other governmental policy and regulation, including changes to tax laws; risks related to acquisition and disposition activities and achieving anticipated results; risks associated with merchant trading; risks related to our equity method investees; the results of any reviews, investigations or other proceedings by government authorities; the performance of the company; and other factors detailed in reports filed with the SEC.

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 an Iowa corporation, founded in June 2004 as a producer of low-carbon fuels and has grown to be a leading biorefining company maximizing the potential of existing resources through fermentation and patented agribusiness technologies. We continue the transition from a commodity-processing business to a value-added agricultural technology company creating sustainable, high-value ingredients from existing resources. To that end, we are currently executing on a number of initiatives to develop and implement proven agricultural, food and industrial biotechnology systems that allow for product diversification, new market opportunities and production of additional value-added low-carbon ingredients, such as Ultra-High Protein, glucose and dextrose corn syrups, renewable corn oil and more, as well as offering these technologies to the broader biofuels industry.

Green Plains Partners LP, a master limited partnership, is our primary downstream storage and logistics provider since its assets are the principal method of storing and delivering the ethanol we produce. On January 9, 2024, pursuant to the Merger Agreement, we completed the acquisition of all the publicly held common units of the partnership not already owned by us and our affiliates. As a result of the Merger, the partnership common units are no longer publicly traded.

Refer to Note 3 – Merger and Dispositions included in the notes to the consolidated financial statements included herein for more information.

We group our business activities into the following two operating segments to manage performance:

• Ethanol Production. Our ethanol production segment includes the production, storage and transportation of ethanol, distillers grains, Ultra-High Protein and renewable corn oil at ten biorefineries in Illinois, Indiana, Iowa, Minnesota, Nebraska and Tennessee. At capacity, our facilities are capable of processing approximately 310 million bushels of corn per year and producing approximately 903 million gallons of ethanol, 2.2 million tons of distillers grains and Ultra-High Protein, and 300 million pounds of renewable corn oil, a low-carbon feedstock for biodiesel and renewable diesel. This segment also includes 24 ethanol storage facilities, one fuel terminal facility and approximately 2,200 leased ethanol railcars. We are one of the largest ethanol producers in North America.
• Agribusiness and Energy Services. Our agribusiness and energy services segment includes grain procurement, with approximately 20.2 million bushels of grain storage capacity, and our commodity marketing business, which markets, sells and distributes the ethanol, distillers grains, Ultra-High Protein and renewable corn oil produced at our ethanol plants. We also market ethanol for a third-party producer as well as buy and sell ethanol, distillers grains, Ultra-High Protein, renewable corn oil, grain, natural gas and other commodities in various markets.

We have installed and are operating FQT MSC™ technology at five of our biorefineries. Through our value-added ingredients initiative, we produce Ultra-High Protein, a feed ingredient with protein concentrations of 50% or greater and yeast concentrations of 25%, increase production of renewable corn oil and produce other higher value products, such as post-MSC™ distillers grains. We successfully completed full scale 60% protein production runs using FQT's MSC™ system, which is our new specialty feed ingredient branded as Sequence™. In 2021, we formed a 50/50 joint venture with Tharaldson Ethanol Plant I LLC (Tharaldson Ethanol), which owns the MSC™ technology assets added adjacent to the Tharaldson Ethanol plant in Casselton, North Dakota to produce Ultra-High Protein and increase renewable corn oil yields. These assets completed commissioning and shipped the first commercial quantities during the second quarter of 2024. Including GP Turnkey Tharaldson's capacity, the annual Ultra-High Protein capacity we market is approximately 430 thousand tons.

We began pilot scale batch operations at the FQT CST™ production facility at our Innovation Center at York in the second quarter of 2021, which allows for the production of both food and industrial grade low carbon-intensity glucose and dextrose corn syrups to target applications in food production, renewable chemicals and synthetic biology. The world's first commercial scale FQT CST™ facility in Shenandoah, Iowa is now producing, with shipments expected to begin in the fourth quarter of 2024. We also anticipate modifying additional biorefineries to include FQT CST™ production capabilities to meet anticipated future customer demands.

Additionally, we have taken advantage of opportunities to divest certain assets to reallocate capital toward our current growth initiatives. We are focused on generating stable and growing operating margins through our business segments and risk management strategy.

SAF is a drop-in fuel, chemically identical to petroleum-based jet fuel and can be blended into the fuel supply at varying levels. There is an increasing focus on using this fuel to reduce the carbon footprint of air travel. SAF can be produced from vegetable and waste oil feedstocks, such as our renewable corn oil. Additionally, ATJ technologies are emerging and being commercialized that use low-CI ethanol as a feedstock to produce SAF. In January 2023, Green Plains, United Airlines and Tallgrass formed a joint venture, Blue Blade Energy, to develop and then commercialize ATJ SAF technology.

As part of our carbon reduction strategy, we committed our seven biorefineries in Nebraska, Iowa and Minnesota to carbon capture and sequestration projects through carbon pipeline transport, four with Summit Carbon Solutions and three with Trailblazer CO2 Pipeline LLC, which will lower GHG emissions through the capture of biogenic carbon dioxide at each of these biorefineries, significantly lowering their CI. We have executed agreements for the future purchase, financing and installation of carbon capture equipment at our three Nebraska plants. We anticipate completion of these Nebraska biorefinery carbon capture projects in the second half of 2025, and Summit Carbon Solutions intends to be operational in the second half of 2026. In addition, we are collaborating with global partners to explore innovative options for carbon use where pipeline transport or direct injection may not be feasible. Reducing the CI of our fuel ethanol could allow us to benefit from state and federal clean fuel programs, including LCFS and federal tax credits under the IRA, and could position our low-carbon ethanol as a potential feedstock for ATJ pathways to produce SAF.

In July 2023, we announced a technology collaboration with Equilon Enterprises LLC, which allows us to use FQT’s precision separation and processing technology with Shell Fiber Conversion Technology. The two technologies will combine fermentation, mechanical separation and processing, and fiber conversion into one platform. This has the potential to create a new process to liberate all available distillers corn oil currently bound in the fiber fraction of the corn kernel, generate cellulosic sugars for production of low-carbon ethanol, and enhance and expand available high protein to produce high-quality ingredients for global animal feed diets. Our collaboration completed the construction of a facility at Green Plains York and began commissioning during 2024.

Our profitability is highly dependent on commodity prices, particularly for ethanol, distillers grains, Ultra-High Protein, renewable corn oil, soybean meal, corn, and natural gas. Since market price fluctuations of these commodities are not always correlated, our operations may be unprofitable at times. We use a variety of risk management tools and hedging strategies to monitor price risk exposure at our ethanol plants and lock in favorable margins or reduce production when margins are compressed. Our profitability could be significantly impacted by price movements of the aforementioned commodities.

Recent Developments

Clean Sugar Technology

The company has achieved successful ongoing production of dextrose syrups with CSTTM at its Shenandoah facility. The syrups produced with CSTTM have proven successful in trials as feedstocks for fermentation of various bio-products and bio-chemicals, in addition to food ingredients. The company is going through final product approvals with multiple potential offtake partnerships.

Birmingham Terminal

On September 30, 2024, the company completed the sale of the terminal located in Birmingham, Alabama and certain related assets and transfer of liabilities (the "Birmingham Transaction") for a sale price of $47.5 million, plus working capital of $1.4 million. The company recorded a pretax gain on the sale of $30.7 million. The proceeds from the sale were used to repay the outstanding balance of the Green Plains Partners term loan due July 20, 2026. Refer to Note 3 – Merger and Dispositions in the notes to the consolidated financial statements included herein for more information.

Strategic Review

As previously announced, the company initiated a strategic review process in February 2024 to explore a broad range of opportunities to enhance long-term shareholder value, including, but not limited to, acquisitions, divestitures, a merger or sale, partnerships and financings. The Board of Directors continues to progress the strategic review process, working with its financial advisors, BMO Capital Markets Corp. and Moelis & Company, and legal advisors Vinson & Elkins LLP. There is no deadline or definitive timetable for completion of the strategic review process, and there can be no assurances that the process will result in a transaction or any other outcome. The company does not intend to make any further public comment regarding the review until the Board has approved a specific action or otherwise determines that additional disclosure is appropriate or required.

The Partnership Merger

On January 9, 2024, the transactions contemplated by the Merger Agreement were completed and the company acquired all of the publicly held common units of the partnership not already owned by the company and its affiliates. Refer to Note 3 – Merger and Dispositions in the notes to the consolidated financial statements included herein for more information.

Results of Operations

During the third quarter of 2024, we maintained an average utilization rate of approximately 96.8% of capacity, resulting in ethanol production of 220.2 mmg, compared with 223.4 mmg, or 93.9% of capacity, for the same quarter last year. Our operating strategy is to transform our company into a value-add agricultural technology company. Depending on the margin environment, we may exercise operational discretion that results in reductions in production volumes. It is possible that throughput volumes could fluctuate in the future, depending on various factors that drive each biorefinery’s variable contribution margin, including future driving and gasoline demand for the industry, demand for valuable coproducts we produce, and the supply and pricing of renewable feedstocks needed to operate our biorefineries. We are currently producing Ultra-High Protein at five of our biorefineries.

U.S. Ethanol Supply and Demand

According to the EIA, domestic ethanol production averaged 1.07 million barrels per day during the third quarter of 2024, which was 3.1% higher than the 1.04 million barrels per day for the same quarter last year. Refiner and blender input volume was 914 thousand barrels per day for the third quarter of 2024, compared with 907 thousand barrels per day for the same quarter last year. Gasoline demand was 2.7% higher than the prior year at 9.0 million barrels per day during the third quarter of 2024. U.S. domestic ethanol ending stocks increased by approximately 1.6 million barrels compared to the prior year, or 7.2%, to 23.5 million barrels as of September 30, 2024. As of this filing, according to Prime the Pump, there were approximately 3,571 retail stations selling E15 year-round.

Global Ethanol Supply and Demand

According to the USDA Foreign Agriculture Service, domestic ethanol exports through August 31, 2024, were approximately 1,240 mmg, up from the 921 mmg for the same period of 2023. Canada was the largest export destination for U.S. ethanol accounting for approximately 35% of domestic ethanol export volume, driven in part by their national clean fuel standard. The United Kingdom, India, Colombia, and the Netherlands accounted for approximately 13%, 10%, 7% and 6%, respectively, of U.S. ethanol exports. We currently estimate that net ethanol exports will range from 1.7 to 1.9 billion gallons in 2024, based on historical demand from a variety of countries and certain countries that seek to improve their air quality, reduce GHG emissions through low-carbon fuel programs and eliminate MTBE from their own fuel supplies. Fluctuations in currencies relative to the U.S. dollar could impact the U.S. ethanol competitiveness in the global market.

Protein and Vegetable Oil Supply and Demand

Our dried distillers grains and high protein ingredients compete against other ethanol producers domestically and abroad, as well as with soybean meal, canola meal and other protein feed ingredients. Likewise, our distillers corn oil, which is a feedstock for producing biodiesel, renewable diesel and to some extent SAF, competes against other vegetable oils such as soybean oil, canola oil, and to some extent palm oil, as well as against waste oils such as used cooking oils, animal fats and tallow. Soybean processing capacity in the U.S. has been expanding to meet the rising demand for vegetable oils to produce renewable fuels. According to the National Oilseed Processors Association, for the third quarter of 2024, soybean crush was approximately 518 million bushels, up 18 million bushels from the 500 million bushels crushed during the third quarter of 2023. Soybean oil stocks as of September 30, 2024, were 1.1 billion pounds, which was consistent with stocks as of the prior year. Soybean meal production was 12.2 million short tons for the third quarter of 2024, up from the 11.8 million short tons from the same period in the prior year.

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 products we handle. Over the years, various bills and amendments have been proposed in the House and Senate, which would eliminate the RFS entirely, eliminate the corn-based ethanol portion of the mandate, lower the price of RINs and make it more difficult to sell fuel blends with higher levels of ethanol. Bills have also been introduced to require or otherwise incentivize higher levels of octane blending, allow for year-round sales of higher blends of ethanol and require car manufacturers to produce vehicles that can operate on higher ethanol blends. We believe it is unlikely that any of these bills will become law in the current Congress. In addition, the manner in which the EPA administers the RFS and related regulations can have a significant impact on the actual amount of ethanol and other biofuels blended into the domestic fuel supply.

Federal mandates and state-level clean fuel standards supporting the use of renewable fuels are a significant driver of ethanol demand in the U.S. Ethanol policies are influenced by concerns for the environment, diversifying the fuel supply, supporting U.S. farmers and reducing the country’s dependence on foreign oil. Consumer acceptance of FFVs, availability of higher ethanol blends and increased use of higher ethanol blends in non-FFVs may be necessary before ethanol can achieve further growth in the U.S. light duty surface transportation fleet market share. In addition, expansion of clean fuel standards in other states and countries, or a national LCFS could increase the demand for ethanol, depending on how they are structured. Incentives for automakers to produce FFVs phased out in 2020, and the EPA's proposed Corporate Average Fuel Economy (CAFE) standards further incentivize EV production, with the current administration's stated goal of having EVs represent two-thirds of vehicles sold by 2032. Sales of EVs in the U.S. were approximately 346 thousand vehicles during the third quarter of 2024, an 11% year over year increase. During the third quarter ended September 30, 2024, EV market share reached 8.9%, the highest on record. Transition of the light duty surface transportation fleet from internal combustion engines to EVs could decrease the demand for ethanol.

The IRA, which was signed into law on August 16, 2022, is a sweeping policy that could have many potential impacts on our business which we are continuing to evaluate. The legislation (1) created a new Clean Fuel Production Credit, section 45Z of the Internal Revenue Code, of $0.02 per gallon per CI point reduction for any fuel below a 50 CI threshold from 2025 to 2027, which could impact our fuel ethanol, depending on the level of GHG reduction for each gallon; (2) created a new tax credit for SAF, section 40B of the Internal Revenue Code, of $1.25 to $1.75 per gallon for 2023 and 2024, depending on the GHG reduction for each gallon, that could possibly involve some of our renewable corn oil or low carbon ethanol as feedstock through an ATJ pathway, depending on the life cycle analysis model being used (this credit expires after 2024 and shifts to the 45Z Clean Fuel Production Credit, where it qualifies for up to $0.035 per gallon per CI point reduction below a 50 CI threshold); (3) expanded the carbon capture and sequestration credit, section 45Q of the Internal Revenue Code, to $85 for each metric ton of carbon dioxide sequestered, which could impact our carbon capture strategies, though it cannot be claimed in conjunction with the 45Z Clean Fuel Production Credit, which could prove to be more valuable; (4) extended the $1.00 per gallon biomass-based diesel tax credit through 2024, which could impact our renewable corn oil values, as this co-product serves as a low-carbon feedstock for renewable diesel and biodiesel production (this credit expires after 2024 and shifts to the 45Z Clean Fuel Production credit, where all non-SAF fuels qualify for $0.02 per gallon for each point of CI reduction under the 50 CI threshold); (5) funded $500 million of biofuel blending infrastructure, which could impact the availability of higher level ethanol blended fuel; (6) increased funding for climate-smart agriculture and working lands conservation programs for farmers by $20 billion; and (7) provided credits for the production and purchase of EVs, which could impact the amount of internal combustion engines built and sold longer term, and by extension impact the demand for liquid fuels including ethanol. There are numerous additional clean energy credits included in this law, including investment tax credits for construction of clean energy infrastructure, that could impact us and our overall competitiveness. Regulatory rulemaking for the administration of these programs is underway, and the final regulations could impact many aspects of our business. On April 30, 2024, the U.S. Department of Treasury issued regulatory guidance along with an updated GREET lifecycle assessment model for the 40B SAF tax credit, which included a pathway for U.S. corn ethanol to qualify as a feedstock for SAF if the carbon intensity is lowered through utilization of various technologies and practices, including carbon capture and climate smart agriculture practices. On June 22, 2024, the USDA put out a Request for Information on the Production of Biofuel Feedstocks using climate smart practices, which could inform rulemaking for the 45Z Clean Fuel Production Credit. As of this filing, proposed regulations for 45Z had yet to be issued, despite its effective date of January 1, 2025.

The RFS sets a floor for biofuels use in the United States. In June 2023, the EPA finalized RVOs for 2023, 2024 and 2025, setting the implied conventional ethanol levels at 15.25 billion gallons for 2023, and 15 billion for 2024 and 2025, inclusive of 250 million gallons of supplemental volume in 2023 to reflect a court-ordered remand of a previously lowered RVO. The EPA also proposed a modest increase in biomass-based diesel volumes over the three years, setting the volumes at 2.82 billion for 2023, 3.04 billion for 2024 and 3.35 billion for 2025. The EPA also indicated that corn kernel fiber would contribute to the finalized cellulosic volumes and could move to approve registrations that have been languishing for years at the agency. The EPA also removed a proposed e-RIN program to support EVs from the final rule, but indicated they may move forward with it in a separate rulemaking. The EPA is required to propose RVOs for 2026 and potentially additional years by November of 2024. From time to time, the EPA has delayed the proposed RVOs past the statutory deadlines, and on July 8, 2024, the administration indicated that it intends to propose RVOs for 2026 and potentially additional years in March 2025, and finalize them in December 2025.

Under the RFS, RINs impact supply and demand. The EPA assigns individual refiners, blenders, and importers the volume of renewable fuels they are obligated to use in each annual RVO based on their percentage of total production of domestic transportation fuel sales. Obligated parties use RINs to show compliance with the RFS mandated volumes. Ethanol producers assign RINs to each gallon of renewable fuel they produce and the RINs are detached when the renewable fuel is blended with transportation fuel domestically. Market participants can trade the detached RINs in the open market. The market price of detached RINs can affect the price of ethanol in certain markets and can influence purchasing decisions by obligated parties. SREs can reduce or waive entirely the obligation for a refinery, which has the practical effect of reducing the RVO, and by extension the number of RINs that need to be retired, which can impact their values and ultimately blending levels of renewable fuels. There are multiple on-going legal challenges to how the EPA has handled SREs and RFS rulemakings. On October 21, 2024, the U.S. Supreme Court agreed to review the various Circuit Court rulings on SREs to determine the proper venue.

The One-Pound Waiver, which was extended in May 2019 to allow E15 to be sold year-round to all vehicles model year 2001 and newer, was challenged in an action filed in Federal District Court for the D.C. Circuit. On July 2, 2021, the Circuit Court vacated the EPA’s rule so the future of summertime, defined as June 1 to September 15, sales of E15 is uncertain. The Supreme Court subsequently declined to hear a challenge to this ruling. In 2022, the EPA issued emergency waivers to allow for the continued sale of E15 during the summer months and similar summertime waivers have been issued each year since then, with the 2024 driving season marking the sixth consecutive year that E15 is able to be sold year-round nationwide, with the exception of California which has not approved the fuel. The EPA has also allowed for the elimination of the One-Pound Waiver for E10 in several Midwestern states beginning with the 2025 summer driving season, which would have the practical effect of allowing for E15 to be sold year- round in the following states: Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin.

In October 2019, the White House directed the USDA and EPA to move forward with rulemaking to expand access to higher blends of biofuels. This includes funding for infrastructure, labeling changes and allowing E15 to be sold through E10 infrastructure. The USDA rolled out the Higher Blend Infrastructure Incentive Program in the summer of 2020, providing competitive grants to fuel terminals and retailers for installing equipment capable of dispensing higher blends of ethanol and biodiesel. In December 2021, the USDA announced it would administer another infrastructure grant program. The IRA, signed into law in 2022, provided for an additional $500 million in USDA grants for biofuel infrastructure. On June 26, 2023, the USDA announced the initial $50 million in awards, and laid out a process for distributing the remaining $450 million, with $90 million being made available each quarter.

A string of recent U.S. Supreme Court decisions, namely Loper Bright Enterprises v. Raimondo, SEC v. Jarkesy and Corner Post, Inc. v. Board of Governors of the Federal Reserve, have the potential to redefine the power of federal agencies, as well as overturn the important principle of administrative law called "Chevron deference," based on a landmark case, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. The Chevron deference was a doctrine of judicial deference to administrative interpretations. The general shift in power from agencies to the judicial system resulting from these decisions could impact various regulatory rules affecting our business in ways that could affect our business, prospects and operations, and our financial performance positively or negatively.

Environmental and Other Regulation

Our operations are subject to environmental regulations, including those that govern the handling and release of ethanol, crude oil and other liquid hydrocarbon materials. Compliance with existing and anticipated environmental laws and regulations may increase our overall cost of doing business, including capital costs to construct, maintain, operate, and upgrade equipment and facilities. Our business may also be impacted by government policies, such as tariffs, duties, subsidies, import and export restrictions and outright embargos.

Comparability

There are various events that could affect comparability of our operating results, including fluctuations in our production rates in 2024 compared to 2023, along with the disposition of our terminal in Birmingham, Alabama, on September 30, 2024, the disposition of our Atkinson, Nebraska ethanol plant in September 2023 and losses associated with an extended shut down in spring of 2023 at a facility.

Segment Results

We report the financial and operating performance for the following two operating segments: (1) ethanol production, which includes the production, storage, and transportation of ethanol, distillers grains, Ultra-High Protein and renewable corn oil and (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, renewable corn oil, natural gas and other commodities.

As a result of the Merger, the partnership's operations are included in the ethanol production operating segment. The following changes were made to the company's operating segments:

• The revenue and operating results from fuel storage and transportation services previously disclosed within the partnership segment are now included within the ethanol production segment.
• Intersegment activities between the partnership and Green Plains Trade associated with ethanol storage and transportation services previously treated like third-party transactions and eliminated on a consolidated level are now eliminated within the ethanol production segment.

Intersegment activities between the partnership and Green Plains Trade associated with terminal services transacted with the agribusiness and energy services segment will continue to be eliminated on a consolidated level.

Corporate activities include gain on sale of assets and selling, general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment.

During the normal course of business, our operating segments do business with each other. For example, our agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains, Ultra-High Protein, and renewable corn oil of our 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 our consolidated results since the revenues and corresponding costs are eliminated.

When we evaluate segment performance, we review the following segment information as well as earnings before interest expense, income taxes, depreciation and amortization, or EBITDA, and adjusted EBITDA.

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

42

(1) Costs historically reported as operations and maintenance expenses in the consolidated statements of operations are now being reported within cost of goods sold, resulting in increased cost of goods sold and decreased gross margin within the ethanol production segment.

(2) Depreciation and amortization for corporate activities includes impairment of a research and development technology intangible asset of $3.5 million for the three and nine months ended September 30, 2024.

(3) Ethanol production includes an inventory lower of average cost or net realizable value adjustment of $10.1 million and $1.7 million for the three and nine months ended September 30, 2024 and 2023, respectively.

(4) Corporate activities includes a $30.7 million and $5.7 million pretax gain on sale of assets for the three and nine months ended September 30, 2024 and 2023, respectively.

* Percentage variances not considered meaningful.

We use EBITDA, adjusted EBITDA, and segment EBITDA as 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 taxes, including related income taxes of equity method investments, depreciation and amortization excluding the amortization of right-of-use assets and debt issuance costs. Adjusted EBITDA includes adjustments related to other income associated with the USDA COVID-19 relief grant, gain on asset dispositions, and our proportional share of EBITDA adjustments of our equity method investees. We believe EBITDA, adjusted EBITDA and segment EBITDA are useful measures to compare our performance against other companies. These measures should not be considered an alternative to, or more meaningful than, net income, which is prepared in accordance with GAAP. EBITDA, adjusted EBITDA, and segment EBITDA calculations may vary from company to company. Accordingly, our computation of EBITDA, adjusted EBITDA, and segment EBITDA may not be comparable with a similarly titled measure of other companies.

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

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

(2) Other income includes a grant received from the USDA related to the Biofuel Producer Program of $3.4 million for the three and nine months ended September 30, 2023.

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

(1) Ethanol production includes an inventory lower of average cost or net realizable value adjustment of $10.1 million and $1.7 million for the three and nine months ended September 30, 2024 and 2023, respectively.

(2) Other income includes a grant received from the USDA related to the Biofuel Producer Program of $3.4 million for the three and nine months ended September 30, 2023.

* Percentage variances not considered meaningful.

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Consolidated Results

Consolidated revenues decreased $234.0 million for the three months ended September 30, 2024 compared with the same period in 2023 primarily due to lower weighted average selling prices on ethanol, distillers grains and renewable corn oil, as well as lower volumes sold on ethanol and distillers grains within our ethanol production segment as described below. Revenues were also lower within our agribusiness and energy services segment primarily due to lower weighted average ethanol trading prices.

Net income increased $22.3 million for the three months ended September 30, 2024 compared with the same period last year primarily due to a gain on the sale of assets from the Birmingham Transaction and higher margins in our ethanol production segment. Adjusted EBITDA increased $10.4 million primarily due to higher margins in our ethanol production segment. Interest expense was $10.1 million for three months ended September 30, 2024 compared to $9.6 million for the same period in 2023 due to higher loan fees in connection with the repayment of the Green Plains Partners term loan. Income tax benefit, including income tax benefit from equity method investees, was $1.5 million for the three months ended September 30, 2024 compared with income tax benefit of $7.8 million for the same period in 2023 primarily due to a decrease in the valuation allowance recorded against certain deferred tax assets for the three months ended September 30, 2023.

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

Ethanol Production Segment

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

Revenues in our ethanol production segment decreased $210.9 million for the three months ended September 30, 2024 compared with the same period in 2023, primarily due to lower weighted average selling prices on ethanol, distillers grains and renewable corn oil resulting in decreased revenues of $174.5 million, $27.6 million and $15.9 million, respectively, in addition to lower ethanol and distillers grain volumes sold resulting in decreased revenues of $8.6 million and $3.1 million, respectively. Revenues also increased as a result of hedging activities by $16.2 million.

Cost of goods sold in our ethanol production segment decreased $218.2 million for the three months ended September 30, 2024 compared with the same period last year primarily due to lower weighted average corn prices, ethanol volumes purchased and input costs related to natural gas of $123.3 million, $69.6 million and $23.9 million, respectively. Costs also decreased as a result of hedging activities of $9.1 million.

Operating income in our ethanol production segment increased $11.3 million for the three months ended September 30, 2024 compared with the same period in 2023 primarily due to increased margins as outlined above. Depreciation and amortization expense for the ethanol production segment was $21.4 million for the three months ended September 30, 2024, compared with $22.6 million for the same period last year.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased $23.2 million while operating income decreased $3.5 million for the three months ended September 30, 2024 compared with the same period in 2023. The decrease in revenues was primarily due to lower weighted average ethanol trading prices.

Intersegment Eliminations

Intersegment eliminations of revenues were consistent for the three months ended September 30, 2024 compared with the same period in 2023.

Corporate Activities

Operating income related to corporate activities for the three months ended September 30, 2024 was primarily impacted by an increase in gain on sale of assets and a decrease in personnel costs compared to the same period in 2023.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Consolidated Results

Consolidated revenues decreased $708.6 million for the nine months ended September 30, 2024 compared with the same period in 2023 primarily due to lower weighted average selling prices on ethanol, distillers grains and renewable corn oil, partially offset by higher volumes sold on ethanol and renewable corn oil within our ethanol production segment as described below. Revenues were also lower within our agribusiness and energy services segment primarily due to lower weighted average ethanol and natural gas trading prices.

Net loss decreased $61.8 million for the nine months ended September 30, 2024 compared with the same period last year primarily due to higher margins in our ethanol production segment, a gain on the sale of assets from the Birmingham Transaction and decreased depreciation expense. Adjusted EBITDA increased $36.5 million for the nine months ended September 30, 2024 compared with the same period last year primarily due to higher margins in our ethanol production segment. Interest expense decreased $3.7 million for the nine months ended September 30, 2024 compared with the same period in 2023 primarily due to lower working capital revolver balances. Income tax benefit, including income tax benefit from equity method investees, was $1.4 million for the nine months ended September 30, 2024, compared with income tax benefit of $5.4 million for the same period in 2023 primarily due to a decrease in the valuation allowance recorded against certain deferred tax assets for the nine months ended September 30, 2023.

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:

Revenues in our ethanol production segment decreased $606.4 million for the nine months ended September 30, 2024 compared with the same period in 2023, primarily due to lower weighted average selling prices on ethanol, distillers grains, and renewable corn oil resulting in decreased revenues of $532.3 million, $97.1 million, and $35.2 million, respectively, partially offset by higher ethanol and renewable corn oil volumes sold resulting in increased revenues of $30.8 million and $6.7 million, respectively. Revenues also increased as a result of hedging activities by $19.2 million.

Cost of goods sold in our ethanol production segment decreased $640.9 million for the nine months ended September 30, 2024 compared with the same period last year primarily due to lower weighted average corn prices, ethanol volumes purchased and lower input costs related to natural gas resulting in decreased costs of $467.4 million, $145.1 million and $78.0 million, respectively, partially offset by higher corn volumes processed resulting in increased corn costs of $20.6 million.

Operating loss decreased $42.5 million for the nine months ended September 30, 2024 compared with the same period in 2023 primarily due to increased margins as outlined above. Depreciation and amortization expense for the ethanol production segment was $62.5 million for the nine months ended September 30, 2024, compared with $69.6 million for the same period last year, with the decrease primarily due to certain assets becoming fully depreciated.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased $101.5 million while operating income decreased $1.6 million for the nine months ended September 30, 2024 compared with the same period in 2023. The decrease in revenues was primarily due to lower weighted average ethanol and natural gas trading prices.

Intersegment Eliminations

Intersegment eliminations of revenues increased by $0.7 million for the nine months ended September 30, 2024 compared with the same period in 2023 primarily due to increased corn origination fees paid to the agribusiness and energy services segment as a result of higher corn volumes processed.

Corporate Activities

Operating loss related to corporate activities for the nine months ended September 30, 2024, was primarily impacted by an increase in gain on sale of assets and a decrease in personnel costs compared to the same period in 2023.

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 or from debt and equity capital markets. 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 based on these factors remains sufficient and provides a solid foundation to meet our future liquidity and capital resource requirements.

On September 30, 2024, we had $227.5 million in cash and cash equivalents and $24.5 million in restricted cash. We also had $228.5 million available under our committed revolving credit agreement, subject to restrictions or other lending conditions. Funds at certain subsidiaries are generally required for their ongoing operational needs and restricted from distribution. At September 30, 2024, our subsidiaries had approximately $92.0 million of net assets that were not available to use in the form of dividends, loans or advances due to restrictions contained in their credit facilities.

Net cash used in operating activities was $3.0 million for the nine months ended September 30, 2024, compared with net cash used in operating activities of $55.4 million for the same period in 2023. Net cash used in operating activities compared to the prior year was primarily affected by a lower net loss as well as a decrease in cash used for inventory when compared to the same period of the prior year. Net cash used in investing activities was $34.6 million for the nine months ended September 30, 2024 compared with net cash used in investing activities of $69.1 million for the same period in 2023. Investing activities compared to the prior year were primarily affected by proceeds from the Birmingham Transaction in addition to a decrease in capital expenditures. Net cash used in financing activities was $89.2 million for the nine months ended September 30, 2024 compared with net cash used by financing activities of $9.7 million for the same period in 2023, primarily due to the retirement of debt related to the partnership along with the extinguishment of non-controlling interest when compared to the same period in 2023.

Additionally, Green Plains Finance Company, Green Plains Trade, Green Plains Grain and Green Plains Commodity Management use revolving credit facilities to finance working capital requirements. We frequently draw from and repay these facilities, which results in significant cash movements reflected on a gross basis within financing activities as proceeds from and payments on short-term borrowings.

We incurred net capital expenditures of approximately $67.8 million during the nine months ended September 30, 2024, primarily for the clean sugar expansion project at Shenandoah and for various other capital projects. Capital spending for the remainder of 2024 is expected to be between $20.0 million and $30.0 million, which is subject to review prior to the initiation of any project. This excludes an estimated $110 million of additional expenditures related to our carbon capture and sequestration projects expected to occur in 2024 and 2025 and to be funded through project related financing. The 2024 estimate includes expenditures for various capital projects, which are expected to be financed with cash on hand and with cash provided by operating activities.

Our business is highly sensitive to the price of commodities, particularly for corn, ethanol, distillers grains (including Ultra-High Protein), renewable corn oil and natural gas. We use derivative financial instruments to reduce the market risk associated with fluctuations in commodity prices. Sudden changes in commodity prices may require cash deposits with brokers for margin calls or significant liquidity with little advanced notice to meet margin calls, depending on our open derivative positions. 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.

In August 2014 and October 2019, our board of directors authorized a share repurchase program of up to $200.0 million of our common stock. Under the program, we may repurchase shares in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers or by other means. The timing and amount of repurchase transactions are determined by our management based on market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice. Since the inception of the repurchase program, we have repurchased 7.4 million shares of common stock for approximately $92.8 million under the program. We did not repurchase any shares of common stock during the third quarter of 2024.

We believe we have sufficient working capital for our existing operations. A continued sustained period of unprofitable operations, however, may strain our liquidity. We may sell additional assets or equity or borrow capital to improve or preserve our liquidity, expand our business or acquire businesses.

Debt

We were in compliance with our debt covenants at September 30, 2024. Based on our forecasts, we anticipate we will maintain compliance at each of our subsidiaries for the next twelve months or have sufficient liquidity available on a consolidated basis to resolve noncompliance. We cannot provide assurance that actual results will approximate our forecasts or that we will inject the necessary capital into a subsidiary to maintain compliance with its respective covenants. In the event a subsidiary is unable to comply with its debt covenants, the subsidiary’s lenders may determine that an event of default has occurred, and following notice, the lenders may terminate the commitment and declare the unpaid balance due and payable.

Corporate Activities

In March 2021, we issued $230.0 million of unsecured 2.25% convertible senior notes due in 2027, or the 2.25% notes. The 2.25% notes bear interest at a rate of 2.25% per year, payable on March 15 and September 15 of each year. The initial conversion rate is 31.6206 shares of our common stock per $1,000 principal amount of 2.25% notes (equivalent to an initial conversion price of approximately $31.62 per share of our common stock), representing an approximately 37.5% premium over the offering price of our common stock. The conversion rate is subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; or a tender or exchange offering. In addition, we may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including our calling the 2.25% notes for redemption. We may settle the 2.25% notes in cash, common stock or a combination of cash and common stock. At September 30, 2024, the outstanding principal balance on the 2.25% notes was $230.0 million.

Ethanol Production Segment

On February 9, 2021, Green Plains SPE LLC, a wholly-owned special purpose subsidiary and parent of Green Plains Obion and Green Plains Mount Vernon issued $125.0 million of junior secured mezzanine notes due February 2026 with BlackRock. These notes accrue interest at an annual rate of 11.75% and will mature on February 9, 2026.

Green Plains Shenandoah, a wholly-owned subsidiary, has a $75.0 million secured loan agreement, which matures on September 1, 2035. During the second quarter of 2024, the agreement was modified to remove the Wood River facility from the assets considered to be secured under the loan agreement and Green Plains Wood River was removed as a counterparty to the loan agreement. At September 30, 2024, the outstanding principal balance was $72.0 million on the loan and the interest rate was 5.52%.

Green Plains Partners, through a wholly owned subsidiary, had a secured term loan to fund working capital, capital expenditures and other general partnership purposes. Interest on the term loan was based on 3-month SOFR plus 8.26%. At September 30, 2024, the interest rate on the term loan was 13.21%. On September 30, 2024, the proceeds from the Birmingham Transaction were used to repay the outstanding principal and interest of the loan in full. Prepayments totaling $53.0 million and $56.0 million were made during the three and nine months ended September 30, 2024, respectively, and $1.5 million and $3.0 million during the three and nine months ended September 30, 2023, respectively.

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

Agribusiness and Energy Services Segment

Green Plains Finance Company, Green Plains Grain and Green Plains Trade have total senior secured revolving commitments of $350.0 million and an accordion feature whereby amounts available under the facility may be increased by up to $100.0 million of new lender commitments subject to certain conditions. The facility matures in March 2027. Each SOFR rate loan shall bear interest for each day at a rate per annum equal to the Term SOFR rate for the outstanding period plus a Term SOFR adjustment and an applicable margin of 2.25% to 2.50%, which is dependent on undrawn availability under the facility. Each base rate loan shall bear interest at a rate per annum equal to the base rate plus the applicable margin of 1.25% to 1.50%, which is dependent on undrawn availability under the facility. The unused portion of the facility is also subject to a commitment fee of 0.275% to 0.375%, dependent on undrawn availability. At September 30, 2024, the outstanding principal balance was $109.0 million on the facility and the interest rate was 8.11%.

Green Plains Commodity Management has an uncommitted $40.0 million secured revolving credit facility to finance margins related to its hedging programs. During the first quarter of 2023, this revolving credit facility was extended five years to mature on April 30, 2028. Advances are subject to variable interest rates equal to SOFR plus 1.75%. At September 30, 2024, the outstanding principal balance was $14.1 million on the facility and the interest rate was 6.59%.

Green Plains Grain has a short-term inventory financing agreement with a financial institution. The company has accounted for the agreement as short-term notes, rather than revenues, and has elected the fair value option to offset fluctuations in market prices of the inventory. This agreement is subject to negotiated variable interest rates. The company had no outstanding short-term notes payable related to the inventory financing agreement as of September 30, 2024.

Refer to Note 8 – Debt in the notes to the consolidated financial statements included herein for more information about our debt.

Effects of Inflation

We have experienced inflationary impacts on labor costs, wages, components, equipment, other inputs and services across our business and inflation and its impact could escalate in future quarters, many of which are beyond our control. Moreover, we have fixed price arrangements with our customers and are not able to pass those costs along in most instances. As such, inflationary pressures could have a material adverse effect on our performance and financial statements.

Contractual Obligations and Commitments

In addition to debt, our material future obligations include certain lease agreements and contractual and purchase commitments related to commodities, storage and transportation, and construction. Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of September 30, 2024 totaled $81.4 million. As of September 30, 2024, we had contracted future purchases of grain, distillers grains and natural gas valued at approximately $187.8 million, future commitments for storage and transportation valued at approximately $26.3 million, and accumulated commitments related to the construction of carbon capture and sequestration equipment at our three Nebraska plants of $7.2 million. Refer to Note 14 – Commitments and Contingencies included in the notes to the consolidated financial statements included herein for more information.

Critical Accounting Policies and Estimates

Critical accounting policies, including those relating to 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, 2023.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

We use various financial instruments to manage and reduce our exposure to various market risks, including changes in commodity prices and interest rates. We conduct the majority of our business in U.S. dollars and are not currently exposed to material foreign currency risk.

Interest Rate Risk

We are exposed to interest rate risk through our loans which bear interest at variable rates. Interest rates on our variable-rate debt are based on the market rate for the lender’s prime rate or SOFR. At September 30, 2024, we had $559.8 million in debt, $123.1 million of which had variable interest rates. A 10% increase in interest rates would affect our interest cost by approximately $1.2 million per year.

For additional information related to our debt, see Note 8 – Debt included herein as part of the notes to the consolidated financial statements and Note 12 – Debt included as part of the notes to the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2023.

Commodity Price Risk

Our business is highly sensitive to commodity price risk, particularly for ethanol, corn, distillers grains (including Ultra-High Protein), renewable corn oil and natural gas. Ethanol prices are sensitive to world crude oil supply and demand, the price of crude oil, gasoline, corn, the price of substitute fuels, refining capacity and utilization, government regulation and consumer demand for alternative fuels. Corn prices are affected by weather conditions, yield, changes in domestic and global supply and demand, and government programs and policies. Distillers grains and Ultra-High Protein prices are impacted by livestock numbers on feed, prices for feed alternatives and supply, which is associated with ethanol plant production. Renewable corn oil prices are impacted by prices for renewable diesel fuel, diesel fuel and competing feedstocks. Natural gas prices are influenced by severe weather in the summer and winter and hurricanes in the spring, summer and fall. Other factors include North American energy exploration and production, and the amount of natural gas in underground storage during injection and withdrawal seasons.

To reduce the risk associated with fluctuations in the price of ethanol, corn, distillers grains, Ultra-High Protein, renewable corn oil and natural gas, at times we use forward fixed-price physical contracts and derivative financial instruments, such as futures and options executed on the Chicago Board of Trade, the New York Mercantile Exchange and the Chicago Mercantile Exchange. We focus on locking in favorable operating margins, when available, using a model that continually monitors market prices for corn, natural gas and other inputs relative to the price for ethanol and distillers grains at each of our production facilities. We create offsetting positions using a combination of forward fixed-price purchases, sales contracts and derivative financial instruments. As a result, we frequently have gains on derivative financial instruments that are offset by losses on forward fixed-price physical contracts or inventories and vice versa. Our results are impacted by a mismatch of gains or losses associated with the derivative instrument during a reporting period when the physical commodity purchases or sale has not yet occurred. During the three months ended September 30, 2024, revenues included net gains of $16.1 million, while cost of goods sold included net losses of $4.2 million, and during the nine months ended September 30, 2024, revenues included net gains of $14.2 million, and cost of goods sold included net losses of $9.9 million, associated with derivative financial instruments.

Ethanol Production Segment

In the ethanol production segment, net gains and losses from settled derivative instruments are offset by physical commodity purchases or sales to achieve the intended operating margins. To reduce commodity price risk caused by market fluctuations, we enter into exchange-traded futures and options contracts that serve as economic hedges.

Our exposure to market risk, which includes the impact of our risk management activities resulting from our fixed-price purchase and sale contracts and derivatives, is based on the estimated net income effect resulting from a hypothetical 10% change in price for the next 12 months starting on September 30, 2024, which is as follows (in thousands):

(1) Estimated volumes assume production at full capacity.

(2) Includes Ultra-High Protein.

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

Agribusiness and Energy Services Segment

In the agribusiness and energy services segment, our physical purchase and sale contracts and derivatives are marked to market. Our inventories are carried at the lower of average cost or net realizable value, except fair-value hedged inventories. 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 the 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.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure the 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 September 30, 2024 as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and concluded that our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

Management is responsible for establishing and maintaining effective internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles. There were no material changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, 2023, 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, 2023. 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.