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 our unaudited consolidated financial statements and accompanying notes contained in this report together with our 2021 annual report. The results of operations for the three and six months endedJune 30, 2022 , are not necessarily indicative of the results we expect for the full year.
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 those discussed in Part I, Item 1A, "Risk Factors," of our 2021 annual report and in Part II, Item 1A, "Risk Factors," in this report, or incorporated by reference. Specifically, we may experience fluctuations in future operating results due to disruption caused by health epidemics, such as the COVID-19 outbreak; changes in general economic, market or business conditions; foreign imports of ethanol; fluctuations in demand for ethanol and other fuels; risks of accidents or other unscheduled shutdowns affecting our assets, including mechanical breakdown of equipment or infrastructure; risks associated with changes to federal policy or regulation; ability to comply with changing government usage mandates and regulations affecting the ethanol industry; price, availability and acceptance of alternative fuels and alternative fuel vehicles, and laws mandating such fuels or vehicles; changes in operational costs at our facilities and for our railcars; failure to realize the benefits projected for capital projects; competition; inability to successfully implement growth strategies; the supply of corn and other feedstocks; unusual or severe weather conditions and natural disasters; ability and willingness of parties with whom we have material relationships, includingGreen Plains Trade , to fulfill their obligations; labor and material shortages; changes in the availability of unsecured credit and changes affecting the credit markets in general; risks related to acquisition and disposition activities; and other risk factors detailed in our reports filed with theSEC . 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 nor do we 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 Partners provides fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage facilities, terminals, transportation assets and other related assets and businesses. We are Green Plains' primary downstream logistics provider and generate a substantial portion of our revenues under fee-based commercial agreements withGreen Plains Trade for receiving, storing, transferring and transporting ethanol and other fuels, which are supported by minimum volume or take-or-pay capacity commitments.
Recent Developments
Amendment to Credit Agreement
On
(“Amended Credit Facility”) to our existing credit facility with funds and
accounts managed by BlackRock (“BlackRock”) and
administrative agent.
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Under the terms of the Amended Credit Facility, BlackRock purchased the outstanding balance of the existing notes from the previous lenders, and the credit facility was modified to a term loan maturing onJuly 20, 2026 . Interest on the term loan is based on three-month LIBOR plus 8.00%, with a 0% LIBOR floor. Interest is payable on the 15th day of each March, June, September and December, which commencedSeptember 15, 2021 . The term loan does not require any principal payments; however, we have the option to prepay$1.5 million per quarter beginningJuly 2022 . OnFebruary 11, 2022 , the Amended Credit Facility was modified to allowGreen Plains Partners and its affiliates to repurchase outstanding notes. At that time, we purchased$1.0 million of the outstanding notes from accounts and funds managed by BlackRock and subsequently retired the notes, reducing the term loan balance from$60 million to$59.0 million . Financial covenants include a maximum consolidated leverage ratio of 2.50x and a minimum consolidated debt service coverage ratio of 1.10x. The Amended Credit Facility is secured by substantially all of the assets of the partnership.
Ord Disposition
OnMarch 22, 2021 , our parent closed on the sale of its ethanol plant located inOrd, Nebraska toGreenAmerica Biofuels Ord LLC . Correspondingly, the storage assets located adjacent to theOrd plant were sold to our parent for$27.5 million , along with the transfer of associated railcar operating leases. As part of this transaction, we amended the storage and throughput agreement withGreen Plains Trade to reduce the quarterly minimum volume commitment from 232.5 mmg of product per calendar quarter to 217.7 mmg. In addition, the storage and throughput agreement withGreen Plains Trade was extended one additional year toJune 30, 2029 . This transaction was reviewed and approved by the conflicts committee.
Results of Operations
During the second quarter of 2022, our parent maintained an average utilization rate of approximately 96.9% of capacity. Ethanol throughput was 232.5 mmg, which exceeded the contracted minimum volume commitment per quarter. As a result,Green Plains Trade utilized prior period credits in the amount of$0.8 million for the second quarter 2022. Prior year credits totaling of$0.6 million expired unused, leaving a cumulative balance of minimum volume deficiency credits available toGreen Plains Trade of$3.8 million . These credits expire, if unused, as follows:
•$1.9 million, expiring on
•$0.8 million, expiring on
•$1.1 million, expiring on
The above credits have been previously recognized as revenue by the partnership, and as such, future volumes throughput byGreen Plains Trade in excess of the quarterly minimum volume commitment, up to the amount of these credits, will not be recognized in revenue in future periods prior to expiration. Our parent's operating strategy is to transform to a value-added agricultural technology company. However, in the current environment, our parent may exercise operational discretion that results in reductions in production. Additionally, our parent may experience lower run rates due to the construction of various projects. It is possible that production could be below minimum volume commitments in the future, depending on various factors that drive each biorefineries variable contribution margin, including future driving and gasoline demand for the industry. At the same time, our parent is also focused on the deployment of MSCTM technology at each of its facilities, to take advantage of the world's growing demand for protein feed ingredients and low-carbon renewable corn oil, which could lead to our parent having more consistent margins and operating throughput rates over time.
Adjusted EBITDA and Distributable Cash Flow
Adjusted EBITDA is defined as earnings before interest expense, income tax
expense, depreciation and amortization excluding the amortization of
right-of-use assets, plus adjustments for transaction costs related to
acquisitions or financing transactions, unit-based compensation expense, net
gains or losses on asset sales, and our proportional share of EBITDA adjustments
of our equity method investee.
Distributable cash flow is defined as adjusted EBITDA less interest paid or
payable, income taxes paid or payable, maintenance capital expenditures, which
are defined under our partnership agreement as cash expenditures (including
expenditures for the construction or development of new capital assets or the
replacement, improvement or expansion of
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existing capital assets) made to maintain our operating capacity or operating income, and our proportional share of distributable cash flow adjustments of our equity method investee. Adjusted EBITDA and distributable cash flow are supplemental financial measures that we use to assess our financial performance. We believe their presentation provides useful information to investors in assessing our financial condition and results of operations. However, these presentations are not made in accordance with GAAP. The GAAP measure most directly comparable to adjusted EBITDA and distributable cash flow is net income. Since adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, diminishing their utility. Adjusted EBITDA and distributable cash flow should not be considered in isolation or as alternatives to net income or any other measure of financial performance presented in accordance with GAAP to analyze our financial performance and operating results. The following table presents reconciliations of net income to adjusted EBITDA and to distributable cash flow, for the three and six months endedJune 30, 2022 and 2021 (unaudited, dollars in thousands): Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Reconciliations to Non-GAAP Financial Measures: Net income$ 10,519 $ 10,298 $ 20,869 $ 21,025 Interest expense 1,384 1,411 2,623 3,339 Income tax expense 39 68 77 152 Depreciation and amortization 823 795 1,721 1,682 Transaction costs - - - 5 Unit-based compensation expense 60 80 119 159
Proportional share of EBITDA adjustments of equity
method investee (1)
45 50 90 94 Adjusted EBITDA 12,870 12,702 25,499 26,456 Interest paid or payable (1,384) (1,411) (2,623) (3,339) Income taxes paid or payable (39) (68) (77) (152) Maintenance capital expenditures (126) - (258) (2) Distributable cash flow (2)$ 11,321 $
11,223
Distributions declared (3)$ 10,666 $ 2,844 $ 21,213 $ 5,686 Coverage ratio 1.06 x 3.95 x 1.06 x 4.04 x (1) Represents our proportional share of depreciation and amortization of our equity method investee. (2) Distributable cash flow does not include adjustments for the principal payment on the term loan of$1.0 million for the six months endedJune 30, 2022 . Distributable cash flow does not include adjustments for the principal payments on the term loan of$9.3 million , of which$0.5 million relates to theOrd disposition, for the three months endedJune 30, 2021 , and$46.8 million , of which$27.5 million relates to theOrd disposition, for the six months endedJune 30, 2021 . (3) Represents distributions declared for the applicable period and paid in the subsequent quarter. 27
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Selected Financial Information and Operating Data
The following discussion reflects the results of the partnership for the three
and six months ended
Selected financial information for the three and six months ended
and 2021, is as follows (unaudited, in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 % Var. 2022 2021 % Var.
Revenues
Storage and throughput
services $ 11,570 $ 11,564 0.1 % $ 23,128 $ 23,825 (2.9) %
Railcar transportation
services 5,119 4,795 6.8 9,771 9,837 (0.7)
Terminal services 2,036 2,218 (8.2) 4,120 4,260 (3.3)
Trucking and other 929 1,124 (17.3) 1,735 2,185 (20.6)
Total revenues 19,654 19,701 (0.2) 38,754 40,107 (3.4)
Operating expenses
Operations and maintenance
(excluding depreciation and
amortization reflected below) 6,160 6,238 (1.3) 11,725 11,992 (2.2)
General and administrative 925 1,059 (12.7) 2,110 2,260 (6.6)
Depreciation and amortization 823 795 3.5 1,721 1,682 2.3
Total operating expenses 7,908 8,092 (2.3) 15,556 15,934 (2.4)
Operating income $ 11,746 $ 11,609 1.2 % $ 23,198 $ 24,173 (4.0) %
Selected operating data for the three and six months ended
2021, is as follows (unaudited):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 % Var. 2022 2021 % Var.
Product volumes (mmg)
Storage and throughput services 232.5 191.8 21.2% 429.7 370.8 15.9%
Terminal services:
Affiliate 27.7 21.6 28.2 55.0 40.0 37.5
Non-affiliate 23.7 27.1 (12.5) 45.2 51.5 (12.2)
51.4 48.7 5.5 100.2 91.5 9.5
Railcar capacity billed (daily
avg.) 74.5 69.4 7.3 72.1 71.2 1.3
Three Months Ended
2021
Consolidated revenues for the three months endedJune 30, 2022 were comparable with the same period for 2021. Storage and throughput services revenue was consistent with the prior year. Railcar transportation services revenue increased$0.3 million primarily due to an increase in average volumetric capacity provided. Terminal services revenue decreased$0.2 million due to lower minimum volume commitment fees earned. Trucking and other revenue decreased$0.2 million primarily as a result of lower non-affiliate freight volume. Operations and maintenance expenses decreased$0.1 million for the three months endedJune 30, 2022 , compared with the same period for 2021 primarily due to a reduction in terminal services unloading fees and repairs and maintenance. 28
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General and administrative expenses decreased$0.1 million for the three months endedJune 30, 2022 compare with the same period for 2021 primarily due to lower accounting fees.
Distributable cash flow increased
increase in income from operations.
Six Months Ended
Consolidated revenues decreased$1.4 million for the six months endedJune 30, 2022 , compared with the same period for 2021. Storage and throughput services revenue decreased$0.7 million due to a reduction in contracted minimum volume commitments as a result of the sale of our parent'sOrd ethanol plant in the first quarter of 2021. Railcar transportation services revenue decreased$0.1 million primarily due to slightly lower capacity fees. Terminal services revenue decreased$0.1 million due to lower minimum volume commitment fees earned. Trucking and other revenue decreased$0.5 million primarily as a result of lower non-affiliate freight volume. Operations and maintenance expenses decreased$0.3 million for the six months endedJune 30, 2022 , compared with the same period for 2021 primarily due to a reduction in terminal services unloading fees and repairs and maintenance. General and administrative expenses decreased$0.2 million for the six months endedJune 30, 2022 compared with the same period for 2021 primarily due to a reduction in investor relations and board expenses. Distributable cash flow decreased$0.4 million for the six months endedJune 30, 2022 , compared with the same period for 2021, primarily due to the decrease in income from operations.
Industry Factors Affecting our Results of Operations
According to the EIA, domestic ethanol production averaged 1.01 million barrels per day during the second quarter of 2022, which was 1.1% higher than the 1.0 million barrels per day for the same quarter last year. Refiner and blender input volume was steady at 898 thousand barrels per day for the second quarter of 2022, compared with 903 thousand barrels per day for the same quarter last year. Gasoline demand decreased 0.2 million barrels per day, or 2.3% during the second quarter of 2022 compared to the prior year.U.S. domestic ethanol ending stocks increased by approximately 1.2 million barrels compared to the prior year, or 5.4%, to 22.7 million barrels as ofJune 30, 2022 . As of this filing, according to Prime the Pump, there were approximately 2,690 retail stations selling E15 in 31 states, up from 2,555 at the beginning of the year, and approximately 390 suppliers at 113 pipeline terminal locations now offering E15 to wholesale customers.
Global Ethanol Supply and Demand
According to the USDA Foreign Agriculture Service, domestic ethanol exports throughMay 31, 2022 , were approximately 726 mmg, up from 582 mmg for the same period of 2021.Canada was the largest export destination forU.S. ethanol accounting for 25% of domestic ethanol export volume.India ,Brazil andthe Netherlands accounted for 11%, 8%, and 7%, respectively, ofU.S. ethanol exports. We currently estimate that net ethanol exports will range from 1.4 to 1.6 billion gallons in 2022, based on historical demand from a variety of countries and certain countries that seek to improve their air quality, reduce green house gas emissions through low carbon fuel programs and eliminate MTBE from their own fuel supplies.
Legislation and Regulation
We are sensitive to government programs and policies that affect the supply and demand for ethanol and other fuels, which in turn may impact the volume of ethanol and other fuels we handle. Over the years, various bills and amendments have been proposed in theHouse and Senate , which would eliminate the RFS entirely, eliminate the corn based ethanol portion of the mandate, and make it more difficult to sell fuel blends with higher levels of ethanol. We believe it is unlikely that any of these bills will become law in the currentCongress . In addition, the manner in which theEPA administers the RFS and related regulations can have a significant impact on the actual amount of ethanol blended into the domestic fuel supply. 29
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Federal mandates and state-level clean fuel programs supporting the use of renewable fuels are a significant driver of ethanol demand in theU.S. Ethanol policies are influenced by concerns for the environment, diversifying the fuel supply, and reducing the country's dependence on foreign oil. Consumer acceptance of flexible-fuel vehicles (FFVs) and higher ethanol blends in non-FFVs may be necessary before ethanol can achieve further growth inU.S. surface transportation fleet market share. In addition, expansion of clean fuel programs in other states and countries, or a national low carbon fuel standard, could increase the demand for ethanol, depending on how it is structured. The Inflation Reduction Act of 2022, which was introduced onJuly 27, 2022 , is a broad budget reconciliation bill that could have many potential impacts on our business which we are still evaluating. As proposed, the legislation would (a) create a new Clean Fuel Production Credit which could impact our parent's fuel ethanol, depending on the level of GHG reduction for each gallon; (b) create a new tax credit for sustainable aviation fuel, that could possibly involve some of our parent's low carbon ethanol through an alcohol to jet pathway, depending on the life cycle analysis model being used; (c) expand the carbon capture and sequestration credit, section 45Q, to$85 for each ton of carbon sequestered, which could impact our parent's carbon partnership; (d) extend the biodiesel tax credit which could impact our parent's renewable corn oil values, as this co-product serves as a low-carbon feedstock for renewable diesel and biomass based diesel production; (e) fund biofuel refueling infrastructure, which could impact the availability of higher level ethanol blended fuel; and (f) provide for the production and purchase credits for electric vehicles in this measure which could impact the amount of internal combustion engines on the road longer term, and by extension impact the demand for liquid fuels including ethanol. The RFS sets a floor for biofuels use inthe United States . When the RFS was established in 2010, the required volume of conventional, or corn-based, ethanol to be blended with gasoline was to increase each year until it reached 15 billion gallons in 2015, which left theEPA to address existing limitations in both supply and demand. As of this filing, theEPA has finalized RVOs, reducing the conventional ethanol levels for 2020 and 2021 to reflect lower fuel demand during the pandemic, and finalized an RVO at the statutory 15 billion gallons for 2022, with an additional 250 million gallons of supplemental volume to reflect a court-ordered remand of a previously-lowered RVO. According to the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, theEPA is required to modify, or reset, statutory volumes through 2022, the year through which the statutorily prescribed volumes run. While conventional ethanol maintained 15 billion gallons, 2019 was the second consecutive year that the total RVO was more than 20% below the statutory volume levels. Thus, theEPA was expected to initiate a reset rulemaking, and modify statutory volumes through 2022, and do so based on the same factors they are to use in setting the RVOs post 2022. These factors include environmental impact, domestic energy security, expected production, infrastructure impact, consumer costs, job creation, price of agricultural commodities, food prices, and rural economic development. However, in late 2019, theEPA announced it would not be moving forward with a reset rulemaking in 2020. The currentEPA has indicated they will not propose a reset rulemaking, though they have stated an intention to propose a post 2022 "set" rulemaking byNovember 16, 2022 , and finalize byJune 14, 2023 , in compliance with a consent decree from theU.S. District Court for D.C . Under the RFS, RINs and SREs are important tools impacting supply and demand. TheEPA 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 domestic transportation fuel sales. Obligated parties use RINs to show compliance with the RFS mandated volumes. Ethanol producers assign a RIN 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 affects the price of ethanol in certain markets and can influence purchasing decisions by obligated parties. As it relates to SREs, a small refinery is defined as one that processes fewer than 75,000 barrels of petroleum per day. Small refineries can petition theEPA for a SRE which, if approved, waives their portion of the annual RVO requirements. TheEPA , through consultation with theDOE and theUSDA can grant a full or partial waiver, or deny it outright within 90 days of submittal. TheEPA granted significantly more of these waivers for the 2016, 2017 and 2018 reporting years than they had in prior years, totaling 790 mmg of waived requirements for the 2016 compliance year, 1.82 billion gallons for 2017 and 1.43 billion gallons for 2018. In doing so, theEPA effectively reduced the RFS mandated volumes for those compliance years by those amounts respectively, and as a result RIN values declined significantly. In the waning days of the Trump administration, theEPA approved three additional SREs, reversing one denial from 2018 and granting two from 2019. A total of 88 SREs were granted under theTrump Administration , erasing a total of 4.3 billion gallons of potential blending demand. TheEPA , under the current administration, reversed the three SREs issued in the final weeks of the previous administration, and in conjunction with the RVO rulemaking for 2020, 2021 and 2022, denied all pending SREs. There are multiple on-going legal challenges to how theEPA has handled SREs and RFS rulemakings. 30
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The One-Pound Waiver, which was extended inMay 2019 to allow E15 to be sold year-round to all vehicles model year 2001 and newer, was challenged in an action filed inFederal District Court for the D.C. Circuit . OnJuly 2, 2021 , theCircuit Court vacated theEPA 's rule so the future of summertime, defined asJune 1 to September 15 , sales of E15 is uncertain. TheSupreme Court declined to hear a challenge to this ruling. OnApril 12, 2022 ,President Biden announced that he has directed theEPA to issue an emergency waiver to allow for the continued sale of E15 during the summer months, and that the temporary waiver should be extended as long as the gasoline supply emergency lasts. As of this filing, E15 is sold year-round at approximately 2,690 stations in 31 states. InOctober 2019 , theWhite House directed theUSDA andEPA 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. TheUSDA rolled out the Higher Blend Infrastructure Incentive Program in the summer of 2020, providing competitive grants to fuel terminals and retailers for installing equipment for dispensing higher blends of ethanol and biodiesel. InDecember 2021 , theUSDA announced they would administer another infrastructure grant program.Congress is considering legislation that would provide for an additional$500 million inUSDA grants for biofuel infrastructure from 2022 to 2031.
Impact of COVID-19
The COVID-19 pandemic, including resurgences and variants of the virus and the related economic repercussions, have created significant volatility, uncertainty, and turmoil in the energy industry. The situation surrounding COVID-19 continues to evolve and the ultimate duration and impact of COVID-19 remains highly uncertain and subject to change. We continue to closely monitor the impact of COVID-19 on all aspects of our business, including how it will impact our employees, customers, vendors, and business partners. There has been no material adverse effect due to COVID-19 on our ability to maintain operations, including our financial reporting systems, our internal controls over financial reporting or our disclosure controls and procedures. In addition, to date we have not incurred any material COVID-19 related contingencies. While we have not incurred significant disruptions from COVID-19, the demand for our parent's products remains volatile, in part due to COVID-19, and in turn that could have an impact on our future operating results and financial position.
For further information regarding the impact of COVID-19 on the partnership,
please see Part I, Item 1A, “Risk Factors,” of our 2021 annual report.
Liquidity and Capital Resources
Our principal sources of liquidity include cash generated from operating activities. We expect operating cash flows will be sufficient to meet our liquidity needs. We consider opportunities to repay or refinance our debt, depending on market conditions, as part of our normal course of doing business. Our ability to meet our debt service obligations and other capital requirements depends on our future operating performance, which is subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. We plan to utilize a combination of operating cash, refinancing and other strategic actions, to repay debt obligations as they come due.
As of
Net cash provided by operating activities was$21.2 million for the six months endedJune 30, 2022 , compared with$24.2 million for the six months endedJune 30, 2021 . The decrease in cash flows from operating activities resulted from a decrease in net income as well as changes in net working capital. Net cash used by investing activities was$0.3 million for the six months endedJune 30, 2022 , compared with net cash provided by investing activities of$27.2 million for the six months endedJune 30, 2021 , with the change primarily associated with theOrd disposition in the first quarter of 2021. Net cash used in financing activities was$22.0 million for the six months endedJune 30, 2022 , compared with$52.5 million for the six months endedJune 30, 2021 . The decrease was due to a reduction of required principal payments on our previous credit facility, offset by an increase in our quarterly distribution payment.
We incurred capital expenditures of
approximately
maintenance costs.
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We did not make any equity method investee contributions related to the NLR joint venture for the six months endedJune 30, 2022 , and we do not anticipate making significant equity contributions to NLR for the remainder of 2022. We expect to receive future distributions from NLR as excess cash becomes available.
Term Loan Facility
OnJuly 20, 2021 , we entered into the Amended Credit Facility to our existing credit facility with funds and accounts managed byBlackRock andTMI Trust Company as administrative agent. The Amended Credit Facility reduced the total amount available to$60.0 million , extended the maturity fromDecember 31, 2021 toJuly 20, 2026 , and converted the balance to a term loan. OnFebruary 11, 2022 , the Amended Credit Facility was modified to allowGreen Plains Partners and its affiliates to repurchase outstanding notes. At that time, we purchased$1.0 million of the outstanding notes from accounts and funds managed by BlackRock and subsequently retired the notes. The term loan does not require any principal payments; however, we have the option to prepay$1.5 million per quarter beginningJuly 2022 . As ofJune 30, 2022 , the term loan had a balance of$59.0 million and an interest rate of 9.83%. Under the terms of the Amended Credit Facility, BlackRock purchased the outstanding balance of the existing notes from the previous lenders. Interest on the term loan is based on three-month LIBOR plus 8.00%, with a 0% LIBOR floor, and is payable on the 15th day of each March, June, September and December, during the term, and commencedSeptember 15, 2021 . Financial covenants of the Amended Credit Facility include a maximum consolidated leverage ratio of 2.5x and a minimum consolidated debt service coverage ratio of 1.10x. The Amended Credit Facility is secured by substantially all of the assets of the partnership. The administrator of LIBOR ceased publication of the one-week and two-month LIBOR settings immediately following the LIBOR publication onDecember 31, 2021 , and announced that the remaining USD LIBOR settings, including the three-month LIBOR, will cease immediately following the LIBOR publication onJune 30, 2023 . We use three-month LIBOR as a reference rate for our term loan. It is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will be established by the applicable phase out dates. We may need to amend our credit facility to determine the interest rate to replace LIBOR with the new standard that is established. The potential effect of any such event on interest expense cannot yet be determined.
For more information related to our debt, see Note 3 – Debt to the consolidated
financial statements in this report.
Distributions to Unitholders
OnFebruary 11, 2022 , the partnership distributed$10.4 million to unitholders of record as ofFebruary 4, 2022 , related to the quarterly cash distribution of$0.44 per unit that was declared onJanuary 20, 2022 , for the quarter endedDecember 31, 2021 . OnMay 13, 2022 , the partnership distributed$10.5 million to unitholders of record as ofMay 6, 2022 , related to the quarterly cash distribution of$0.445 per unit that was declared onApril 21, 2022 , for the quarter endedMarch 31, 2022 . OnJuly 21, 2022 , the board of directors of the general partner declared a quarterly cash distribution of$0.45 per unit, or approximately$10.7 million , for the quarter endedJune 30, 2022 . The distribution is payable onAugust 12, 2022 , to unitholders of record at the close of business onAugust 5, 2022 .
Effects of Inflation
While inflation has increased relative to recent years, we do not expect it to have a material impact on our future results of operations. However, inflation may also impact the interest rate environment in which we operate resulting in a higher cost of capital. See Item 3 below for additional information related to interest rate risk.
Contractual Obligations and Commitments
In addition to debt, our material future obligations include certain lease agreements associated with our railcar fleet. Aggregate minimum lease payments under these operating lease agreements for future fiscal years asJune 30, 2022 totaled$44.5 million . Refer to Note 9 - Commitments and Contingencies included in the notes to consolidated financial statements for more information. 32
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Critical Accounting Policies and Estimates
Key accounting policies, including those relating to revenue recognition, leases, impairment of long-lived assets and goodwill are impacted significantly by judgments, assumptions and estimates used to prepare our consolidated financial statements. Information about our critical accounting policies and estimates is included in our 2021 annual report.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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