SEC Filing | Green Plains Inc.

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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 June 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 001-32924

GREEN PLAINS INC.

(Exact name of registrant as specified in its charter)


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

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

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

GPRE

The Nasdaq Stock Market LLC

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

☒ 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).

☒ Yes ☐ 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

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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).

☐ Yes ☒ No

The registrant had 58,092,288 common stock outstanding as of July 28, 2022.

Table of Contents

TABLE OF CONTENTS


		Page
Commonly Used Defined Terms		3
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	4

	Consolidated Balance Sheets	4

	Consolidated Statements of Operations	5

	Consolidated Statements of Comprehensive Income (Loss)	6

	Consolidated Statements of Cash Flows	7

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50

Item 4.	Controls and Procedures	51


PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	52

Item 1A.	Risk Factors	52

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	Mine Safety Disclosures	55

Item 5.	Other Information	55

Item 6.	Exhibits	56

Signatures

Table of Contents

Commonly Used Defined Terms

Green Plains Inc. and Subsidiaries:


Green Plains; the company			Green Plains Inc. and its subsidiaries
FQT			Fluid Quip Technologies, LLC
Green Plains Commodity Management			Green Plains Commodity Management LLC
Green Plains Finance Company			Green Plains Finance Company LLC
Green Plains Grain			Green Plains Grain Company LLC
Green Plains Mount Vernon; Mount Vernon			Green Plains Mount Vernon LLC
Green Plains Obion; Obion			Green Plains Obion LLC
Green Plains Partners; the partnership			Green Plains Partners LP
Green Plains Shenandoah; Shenandoah			Green Plains Shenandoah LLC
Green Plains Trade			Green Plains Trade Group LLC
Green Plains Wood River; Wood River			Green Plains Wood River LLC

Accounting Defined Terms:


AOCI			Accumulated Other Comprehensive Income
ASC			Accounting Standards Codification
EBITDA			Earnings before interest, income taxes, depreciation and amortization
EPS			Earnings per share
Exchange Act			Securities Exchange Act of 1934, as amended
GAAP			U.S. Generally Accepted Accounting Principles
LIBOR			London Interbank Offered Rate
SEC			Securities and Exchange Commission
SOFR			Secured Overnight Financing Rate

Industry and Other Defined Terms:


BlackRock			Funds and accounts managed by BlackRock
the CARES Act			Coronavirus Aid, Relief, and Economic Security Act
COVID-19			Coronavirus Disease 2019
CST			Clean Sugar TechnologyTM
DOE			Department of Energy
E10			Gasoline blended with up to 10% ethanol by volume
E15			Gasoline blended with up to 15% ethanol by volume
EIA			U.S. Energy Information Administration
EPA			U.S. Environmental Protection Agency
FFV			Flexible-fuel vehicle
LCFS			Low Carbon Fuel Standard
MmBtu			Million British Thermal Units
Mmg			Million gallons
MSCTM			Maximized Stillage Coproducts produced using process technology developed by Fluid Quip Technologies LLC
MTBE			Methyl tertiary-butyl ether
RFS			Renewable Fuels Standard
RIN			Renewable identification number
RVO			Renewable volume obligation
SRE			Small refinery exemption
U.S.			United States
USDA			U.S. Department of Agriculture

Table of Contents

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements.

GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


	June 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	508,151	$	426,220
Restricted cash	71,128		134,739
Marketable securities	24,966		124,859
Accounts receivable, net of allowances of $204 and $682, respectively	158,363		119,961
Income taxes receivable	1,067		911
Inventories	315,040		267,838
Prepaid expenses and other	20,634		16,483
Derivative financial instruments	60,347		26,738
Total current assets	1,159,696		1,117,749
Property and equipment, net of accumulated depreciation and amortization of $602,752 and $567,027, respectively	980,917		893,517
Operating lease right-of-use assets	66,681		64,042
Other assets	88,714		84,447
Total assets	$	2,296,008	$	2,159,755

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	127,163	$	146,063
Accrued and other liabilities	45,115		56,980
Derivative financial instruments	49,959		43,244
Operating lease current liabilities	17,768		16,814
Short-term notes payable and other borrowings	308,405		173,418
Current maturities of long-term debt	99,164		35,285
Total current liabilities	647,574		471,804
Long-term debt	495,027		514,006
Operating lease long-term liabilities	51,996		49,795
Other liabilities	19,682		22,131
Total liabilities	1,214,279		1,057,736

Commitments and contingencies (Note 13)

Stockholders' equity
Common stock, $0.001 par value; 150,000,000 shares authorized; 62,086,595 and 61,840,434 shares issued, and 53,842,139 and 53,595,978 shares outstanding, respectively	62		62
Additional paid-in capital	1,069,921		1,069,573
Retained deficit	(30,275)		(15,199)
Accumulated other comprehensive loss	(16,909)		(12,310)
Treasury stock, 8,244,456 shares	(91,626)		(91,626)
Total Green Plains stockholders' equity	931,173		950,500
Noncontrolling interests	150,556		151,519
Total stockholders' equity	1,081,729		1,102,019
Total liabilities and stockholders' equity	$	2,296,008	$	2,159,755

See accompanying notes to the consolidated financial statements.

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GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues
Product revenues	$	1,009,935	$	721,786	$	1,786,625	$	1,273,766
Service revenues	2,459		2,632		7,204		4,292
Total revenues	1,012,394		724,418		1,793,829		1,278,058

Costs and expenses
Cost of goods sold (excluding depreciation and amortization expenses reflected below)	921,314		639,408		1,693,823		1,148,641
Operations and maintenance expenses	6,159		6,237		11,725		11,991
Selling, general and administrative expenses	30,113		23,383		60,976		46,901
Loss (gain) on sale of assets, net	—		3,825		—		(33,068)
Depreciation and amortization expenses	20,967		20,532		41,366		41,213
Total costs and expenses	978,553		693,385		1,807,890		1,215,678
Operating income (loss)	33,841		31,033		(14,061)		62,380

Other income (expense)
Interest income	806		441		877		471
Interest expense	(7,800)		(19,058)		(16,606)		(50,737)
Other, net	28,165		(1,250)		28,576		(1,240)
Total other income (expense)	21,171		(19,867)		12,847		(51,506)
Income (loss) before income taxes and income (loss) from equity method investees	55,012		11,166		(1,214)		10,874
Income tax benefit (expense)	(2,895)		4,783		(1,742)		2,921
Income (loss) from equity method investees	603		168		(196)		343
Net income (loss)	52,720		16,117		(3,152)		14,138
Net income attributable to noncontrolling interests	6,322		6,374		11,924		10,940
Net income (loss) attributable to Green Plains	$	46,398	$	9,743	$	(15,076)	$	3,198

Earnings per share:
Net income (loss) attributable to Green Plains - basic	$	0.87	$	0.21	$	(0.28)	$	0.08
Net income (loss) attributable to Green Plains - diluted	$	0.73	$	0.20	$	(0.28)	$	0.07

Weighted average shares outstanding:
Basic	53,033		45,425		52,960		41,581
Diluted	66,895		58,171		52,960		42,675

See accompanying notes to the consolidated financial statements.

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GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited and in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income (loss)	$	52,720	$	16,117	$	(3,152)	$	14,138
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on derivatives arising during the period, net of tax benefit (expense) of $3,579, ($1,616), $1,658 and ($89), respectively	(10,535)		5,131		(5,149)		282
Reclassification of realized losses on derivatives, net of tax benefit of ($878), ($1,246), ($177) and ($812), respectively	2,515		3,961		550		2,584
Total other comprehensive income (loss), net of tax	(8,020)		9,092		(4,599)		2,866
Comprehensive income (loss)	44,700		25,209		(7,751)		17,004
Comprehensive income attributable to noncontrolling interests	6,322		6,374		11,924		10,940
Comprehensive income (loss) attributable to Green Plains	$	38,378	$	18,835	$	(19,675)	$	6,064

See accompanying notes to the consolidated financial statements.

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GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	(3,152)	$	14,138
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	41,366		41,213
Amortization of debt issuance costs and debt discount	2,450		4,879
Gain on sale of assets, net	—		(31,757)
Loss on extinguishment of debt	—		31,636
Deferred income taxes	1,482		(2,900)
Stock-based compensation	4,257		1,967
Loss (income) from equity method investees	196		(343)
Other	1,128		(217)
Changes in operating assets and liabilities before effects of business combinations and dispositions:
Accounts receivable	(41,162)		(22,022)
Inventories	(47,202)		(15,910)
Derivative financial instruments	(33,020)		(14,331)
Prepaid expenses and other assets	(4,151)		(545)
Accounts payable and accrued liabilities	(25,463)		(39,183)
Current income taxes	(45)		(428)
Other	(3,325)		3,591
Net cash used in operating activities	(106,641)		(30,212)

Cash flows from investing activities:
Purchases of property and equipment, net	(128,283)		(59,899)
Proceeds from the sale of assets	—		73,846
Proceeds from the sale of marketable securities	99,917		—
Other investing activities	(6,976)		(4,000)
Net cash provided by (used in) investing activities	(35,342)		9,947

Cash flows from financing activities:
Proceeds from the issuance of long-term debt	45,000		355,000
Payments of principal on long-term debt	(1,204)		(135,858)
Proceeds from short-term borrowings	1,406,520		1,682,698
Payments on short-term borrowings	(1,271,026)		(1,698,731)
Payments on extinguishment of convertible debt	—		(20,861)
Payments of cash distributions	(11,251)		(2,790)
Proceeds from issuance of common stock, net	—		191,134
Payments of loan fees	(2,522)		(8,614)
Payments related to tax withholdings for stock-based compensation	(3,790)		(4,480)
Other financing activities	(1,424)		3,330
Net cash provided by financing activities	160,303		360,828

Net change in cash, cash equivalents and restricted cash	18,320		340,563
Cash, cash equivalents and restricted cash, beginning of period	560,959		274,810
Cash, cash equivalents and restricted cash, end of period	$	579,279	$	615,373

Continued on the following page

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GREEN PLAINS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

Continued from the previous page


	Six Months Ended June 30,
	2022		2021
Reconciliation of total cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	508,151	$	496,932
Restricted cash	71,128		118,441
Total cash, cash equivalents and restricted cash	$	579,279	$	615,373

Non-cash financing activities:
Exchange of 4.00% convertible notes due 2024	$	—	$	51,000
Exchange of common stock held in treasury stock for 4.00% convertible notes due 2024	$	—	$	39,661

Supplemental investing activities:
Assets disposed of in sale	$	—	$	40,361
Less: liabilities relinquished	—		(156)
Net assets disposed	$	—	$	40,205

Supplemental disclosures of cash flow:
Cash paid for income taxes, net	$	305	$	576
Cash paid for interest	$	14,803	$	16,675
Capital expenditures in accounts payable	$	6,707	$	19,110
Cash premium paid for extinguishment of convertible notes	$	—	$	20,861

See accompanying notes to the consolidated financial statements.

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GREEN PLAINS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

References to the Company

References to “Green Plains” or the “company” in the consolidated financial statements and in these notes to the consolidated financial statements refer to Green Plains Inc., an Iowa corporation, and its subsidiaries.

Consolidated Financial Statements

The consolidated financial statements include the company’s accounts and all significant intercompany balances and transactions are eliminated. Unconsolidated entities are included in the financial statements on an equity basis. As of June 30, 2022, the company owns a 48.9% limited partner interest and a 2.0% general partner interest in Green Plains Partners LP. Public investors own the remaining 49.1% limited partner interest in the partnership. The company determined that the limited partners in the partnership with equity at risk lack the power, through voting rights or similar rights, to direct the activities that most significantly impact the partnership’s economic performance; therefore, the partnership is considered a variable interest entity. The company, through its ownership of the general partner interest in the partnership, has the power to direct the activities that most significantly affect economic performance and is obligated to absorb losses and has the right to receive benefits that could be significant to the partnership. Therefore, the company is considered the primary beneficiary and consolidates the partnership in the company’s financial statements. The assets of the partnership cannot be used by the company for general corporate purposes. The partnership’s consolidated total assets as of June 30, 2022 and December 31, 2021, excluding intercompany balances, are $100.1 million and $100.3 million, respectively, and primarily consist of property and equipment, operating lease right-of-use assets and goodwill. The partnership’s consolidated total liabilities as of June 30, 2022 and December 31, 2021, excluding intercompany balances, are $113.4 million and $111.4 million, respectively, which primarily consist of long-term debt as discussed in Note 8 – Debt and operating lease liabilities. The liabilities recognized as a result of consolidating the partnership do not represent additional claims on the company’s general assets.

The company also owns a majority interest in FQT, with their results being consolidated in our consolidated financial statements.

The accompanying unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Because they do not include all of the information and notes required by GAAP, the consolidated financial statements should be read in conjunction with the company’s annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 18, 2022.

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

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The company bases its estimates on historical experience and assumptions it believes are proper and reasonable under the circumstances and regularly evaluates the appropriateness of its estimates and assumptions. Actual results could differ from those estimates. Key accounting policies, including but not limited to those relating to revenue recognition, carrying value of intangible assets, operating leases, impairment of long-lived assets and goodwill, derivative financial instruments, accounting for income taxes and assets acquired and liabilities assumed in acquisitions, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements.

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Description of Business

The company operates within three operating segments: (1) ethanol production, which includes the production of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities and (3) partnership, which includes fuel storage and transportation services.

Cash and Cash Equivalents

Cash and cash equivalents includes bank deposits as well as short-term, highly liquid investments with original maturities of three months or less.

Restricted Cash

The company has restricted cash, which can only be used for funding letters of credit, for payment towards a credit agreement, or for capital expenditures as specified in certain credit facility agreements. Restricted cash also includes cash margins and securities pledged to commodity exchange clearinghouses and at times, funds in escrow related to acquisition and disposition activities. To the degree these segregated balances are cash and cash equivalents, they are considered restricted cash on the consolidated balance sheets.

Marketable Securities

Marketable securities include highly liquid, fixed maturity investments with original maturities ranging from three to twelve months and are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity.

Revenue Recognition

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

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

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

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

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

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Shipping and Handling Costs

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

Cost of Goods Sold

Cost of goods sold includes direct labor, materials, shipping and plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in ethanol production. Grain purchasing and receiving costs, excluding labor costs for grain buyers and scale operators, are also included in cost of goods sold. Materials include the cost of corn feedstock, denaturant, and process chemicals. Corn feedstock costs include gains and losses on related derivative financial instruments not designated as cash flow hedges, inbound freight charges, inspection costs and transfer costs, as well as reclassifications of gains and losses on cash flow hedges from accumulated other comprehensive income or loss. Plant overhead consists primarily of plant utilities, repairs and maintenance and outbound freight charges. Shipping costs incurred by the company, including railcar costs, are also reflected in cost of goods sold.

The company uses exchange-traded futures and options contracts and forward purchase and sale contracts to attempt to minimize the effect of price changes on ethanol, grain and natural gas. Exchange-traded futures and options contracts are valued at quoted market prices and settled predominantly in cash. The company is exposed to loss when counterparties default on forward purchase and sale contracts. Forward purchase and sale contracts are valued at market prices when available or other market quotes adjusted for basis differences, primarily in transportation, between the exchange-traded market and local market where the terms of the contract is based. Changes in forward purchase contracts and exchange-traded futures and options contracts are recognized as a component of cost of goods sold.

Operations and Maintenance Expenses

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

Derivative Financial Instruments

The company uses various derivative financial instruments, including exchange-traded futures and exchange-traded and over-the-counter options contracts, to attempt to minimize risk and the effect of commodity price changes including but not limited to, corn, ethanol, natural gas and other agricultural and energy products. The company monitors and manages this exposure as part of its overall risk management policy to reduce the adverse effect market volatility may have on its operating results. The company may hedge these commodities as one way to mitigate risk; however, there may be situations when these hedging activities themselves result in losses.

By using derivatives to hedge exposures to changes in commodity prices, the company is exposed to credit and market risk. The company’s exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the terms of the derivative contract. The company minimizes its credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring their financial condition. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. The company manages market risk by incorporating parameters to monitor exposure within its risk management strategy, which limits the types of derivative instruments and strategies the company can use and the degree of market risk it can take using derivative instruments.

The company evaluates its physical delivery contracts to determine if they qualify for normal purchase or sale exemptions which are expected to be used or sold over a reasonable period in the normal course of business. Contracts that do not meet the normal purchase or sale criteria are recorded at fair value. Changes in fair value are recorded in operating income unless the contracts qualify for, and the company elects, cash flow hedge accounting treatment.

Certain qualifying derivatives related to ethanol production and agribusiness and energy services are designated as cash flow hedges. The company evaluates the derivative instrument to ascertain its effectiveness prior to entering into cash flow hedges. Unrealized gains and losses are reflected in accumulated other comprehensive income or loss until the gain or loss from the underlying hedged transaction is realized and the physical transaction is completed. When it becomes probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued, which affects earnings. These derivative financial instruments are recognized in current assets or current liabilities at fair value.

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At times, the company hedges its exposure to changes in inventory values and designates qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted in the current period for changes in fair value. Estimated fair values carried at market are based on exchange-quoted prices, adjusted as appropriate for regional location basis values which represent differences in local markets including transportation as well as quality or grade differences. Basis values are generally determined using inputs from broker quotations or other market transactions. However, a portion of the value may be derived using unobservable inputs. Ineffectiveness of the hedges is recognized in the current period to the extent the change in fair value of the inventory is not offset by the change in fair value of the derivative.

2. REVENUE

Revenue by Source

The following tables disaggregate revenue by major source (in thousands):


	Three Months Ended June 30, 2022
	Ethanol Production		Agribusiness & Energy Services		Partnership		Eliminations		Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol	$	—	$	—	$	—	$	—	$	—
Distillers grains	9,401		—		—		—		9,401
Corn oil	—		—		—		—		—
Service revenues	1,547		—		912		—		2,459
Other	5,729		1,661		—		—		7,390
Intersegment revenues	—		234		2,053		(2,287)		—
Total revenues from contracts with customers	16,677		1,895		2,965		(2,287)		19,250
Revenues from contracts accounted for as derivatives under ASC 815 (1):
Ethanol	644,641		138,032		—		—		782,673
Distillers grains	143,435		8,173		—		—		151,608
Corn oil	51,956		1,551		—		—		53,507
Other	4,457		899		—		—		5,356
Intersegment revenues	—		7,009		—		(7,009)		—
Total revenues from contracts accounted for as derivatives	844,489		155,664		—		(7,009)		993,144
Leasing revenues under ASC 842 (2):	—		—		16,689		(16,689)		—
Total Revenues	$	861,166	$	157,559	$	19,654	$	(25,985)	$	1,012,394

Table of Contents


	Six Months Ended June 30, 2022
	Ethanol Production		Agribusiness & Energy Services		Partnership		Eliminations		Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol	$	—	$	—	$	—	$	—	$	—
Distillers grains	16,763		—		—		—		16,763
Corn oil	—		—		—		—		—
Service revenues	5,287		—		1,917		—		7,204
Other	15,350		2,949		—		—		18,299
Intersegment revenues	—		234		3,938		(4,172)		—
Total revenues from contracts with customers	37,400		3,183		5,855		(4,172)		42,266
Revenues from contracts accounted for as derivatives under ASC 815 (1):
Ethanol	1,116,563		233,692		—		—		1,350,255
Distillers grains	241,947		23,299		—		—		265,246
Corn oil	92,845		3,957		—		—		96,802
Other	9,964		29,296		—		—		39,260
Intersegment revenues	—		12,844		—		(12,844)		—
Total revenues from contracts accounted for as derivatives	1,461,319		303,088		—		(12,844)		1,751,563
Leasing revenues under ASC 842 (2):	—		—		32,899		(32,899)		—
Total Revenues	$	1,498,719	$	306,271	$	38,754	$	(49,915)	$	1,793,829


	Three Months Ended June 30, 2021
	Ethanol Production		Agribusiness & Energy Services		Partnership		Eliminations		Total
Revenues:
Revenues from contracts with customers under ASC 606:
Ethanol	$	—	$	—	$	—	$	—	$	—
Distillers grains	4,425		—		—		—		4,425
Corn oil	—		—		—		—		—
Service revenues	1,462		—		1,159		—		2,621
Other	12,367		2,217		—		—		14,584
Intersegment revenues	—		—		2,172		(2,172)		—
Total revenues from contracts with customers	18,254		2,217		3,331		(2,172)		21,630
Revenues from contracts accounted for as derivatives under ASC 815 (1):
Ethanol	413,592		138,931		—		—		552,523
Distillers grains	95,465		9,015		—		—		104,480
Corn oil	25,349		7,775		—		—		33,124
Grain	—		10,798		—		—		10,798
Other	2,613		(761)		—		—		1,852
Intersegment revenues	—		5,512		—		(