Partners' Capital | 11. PARTNERS’ CAPITAL A roll forward of the number of common and subordinated limited partner units outstanding is as follows: Common Units - Public Common Units - Green Plains Subordinated Units - Green Plains Total Units, December 31, 2016 11,521,016 4,389,642 15,889,642 31,800,300 Units issued under the LTIP 15,827 - - 15,827 Units forfeited under the LTIP (4,278) - - (4,278) Units, December 31, 2017 11,532,565 4,389,642 15,889,642 31,811,849 Units issued under the LTIP 18,582 - - 18,582 Conversion of subordinated units - 15,889,642 (15,889,642) - Retirement of common units - (8,692,736) - (8,692,736) Units, December 31, 2018 11,551,147 11,586,548 - 23,137,695 Issuance of Additional Securities The partnership agreement authorizes the partnership to issue unlimited additional partnership interests on the terms and conditions determined by the general partner without unitholder approval. It is possible the partnership will fund acquisitions through the issuance of additional common units or other partnership interests. Holders of any additional common units are entitled to share equally with existing holders in the partnership’s distributions of available cash. The issuance of additional common units or other partnership interests may dilute the value of the existing holders of common units’ interests. In accordance with Delaware law and the provisions of the partnership agreement, the partnership may also issue additional interests that have rights to distributions or special voting rights the common units do not have, as determined by the general partner. In addition, the partnership agreement does not prohibit the partnership’s subsidiaries to issue equity interests, which may effectively rank senior to the common units. The general partner has the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase common units or other partnership interests from the partnership whenever, and on the same terms that, the partnership issues those interests to persons other than the general partner and its affiliates to maintain the percentage interest of the general partner and its affiliates, including interests represented by common units that existed immediately prior to each issuance. The other holders of common units do not have preemptive rights under the partnership agreement to acquire additional common units or other partnership interests. Subordinated Unit Conversion The requirements under the partnership agreement for the conversion of all of the outstanding subordinated units into common units were satisfied upon the payment of the distribution with respect to the quarter ended June 30, 2018. Accordingly, the subordination period ended on August 13, 2018, the first business day after the date of the distribution payment, and all of the 15,889,642 outstanding subordinated units were converted into common units on a one-for-one basis. The conversion of the subordinated units did not impact the amount of cash distributions paid or the total number of units outstanding. Retirement of Units On November 15, 2018, the partnership’s storage assets located adjacent to the ethanol plants in Bluffton, Indiana, Lakota, Iowa, and Riga, Michigan were sold to Green Plains for $120.9 million. As consideration, the partnership received from its parent 8,692,736 Green Plains units and a portion of the general partner interest equating to 177,403 equivalent limited partner units to maintain the general partner’s 2% interest. These units were retired upon receipt. The reduction in the number of units outstanding decreased the minimum quarterly cash distributions the partnership is required to pay by approximately $3.5 million. Cash Distribution Policy Quarterly distributions are made within 45 days after the end of each calendar quarter, assuming we have sufficient available cash. Available cash generally means, all cash and cash equivalents on hand at the end of that quarter less cash reserves established by the general partner plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the end of that quarter. The general partner is entitled to 2% of all distributions prior to the partnership’s liquidation. The general partner’s 2% general partner interest is reduced if the partnership issues additional partnership interests and the general partner does not contribute a proportionate amount of capital to the partnership to maintain its 2% general partner interest. For any quarter after the subordination period, the partnership is required to make distributions in the following manner: · first, 98% to the common unitholders, pro rata, and 2% to the general partner, until the partnership distributes an amount equal to the minimum quarterly distribution for that quarter on each outstanding common unit; · thereafter, in the manner described in the table below. The preceding discussion is based on the assumptions that the general partner maintains its 2% general partner interest and the partnership does not issue additional classes of equity securities. The general partner also holds incentive distribution rights that entitles it to receive increasing percentages, up to 48% , of available cash distributed from operating surplus, as defined in the partnership agreement, in excess of $0.46 per unit per quarter. The maximum distribution of 48% does not include any distributions the general partner or its affiliates may receive on its general partner interest or common units. The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and the general partner, as the holder of the incentive distribution rights, based on the specified target distribution levels: Marginal Percentage Interest in Distribution (1) Total Quarterly Distribution Per Unit - Target Amount Common and Subordinated Unitholders General Partner (as holder of Incentive Distribution Rights) (2) Minimum quarterly distribution $0.40 98.0% 2.0% First target distribution above $0.40 up to $0.46 98.0% 2.0% Second target distribution above $0.46 up to $0.50 85.0% 15.0% Third target distribution above $0.50 up to $0.60 75.0% 25.0% Thereafter above $0.60 50.0% 50.0% (1) Includes percentage interests of the general partner, as the holder of incentive distribution rights, and the unitholders when the partnership distributes available cash from operating surplus up to and including the corresponding amount in the column “Total Quarterly Distribution Per Unit Target Amount.” The percentage interests shown for the unitholders and the general partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. (2) The percentage interests for the general partner assume the general partner contributes additional capital necessary to maintain its 2% general partner interest, does not transfer any of its incentive distribution rights and there are no arrearages on common units. The table below summarizes the quarterly cash distributions for the periods presented: Three Months Ended Declaration Date Record Date Payment Date Quarterly Distribution December 31, 2018 January 17, 2019 February 1, 2019 February 8, 2019 $ 0.4750 September 30, 2018 October 18, 2018 November 2, 2018 November 9, 2018 0.4750 June 30, 2018 July 19, 2018 August 3, 2018 August 10, 2018 0.4750 March 31, 2018 April 19, 2018 May 4, 2018 May 11, 2018 0.4750 December 31, 2017 January 18, 2018 February 2, 2018 February 9, 2018 0.4700 September 30, 2017 October 19, 2017 November 3, 2017 November 10, 2017 0.4600 June 30, 2017 July 20, 2017 August 4, 2017 August 11, 2017 0.4500 March 31, 2017 April 20, 2017 May 5, 2017 May 15, 2017 0.4400 December 31, 2016 January 23, 2017 February 3, 2017 February 14, 2017 0.4300 September 30, 2016 October 20, 2016 November 4, 2016 November 14, 2016 0.4200 June 30, 2016 July 20, 2016 August 5, 2016 August 12, 2016 0.4100 March 31, 2016 April 21, 2016 May 6, 2016 May 13, 2016 0.4050 The total cash distributions paid during the periods indicated are as follows (in thousands): Year Ended December 31, 2018 2017 2016 General partner distributions $ 1,236 $ 1,155 $ 1,063 Incentive distributions 268 - - Total distributions to general partner 1,504 1,155 1,063 Limited partner common units - public 21,872 20,519 18,855 Limited partner common units - Green Plains 15,866 7,813 7,187 Limited partner subordinated units - Green Plains 22,563 28,284 26,020 Total distributions to limited partners 60,301 56,616 52,062 Total distributions paid $ 61,805 $ 57,771 $ 53,125 The total cash distributions declared during the periods indicated are as follows (in thousands): Year Ended December 31, 2018 2017 2016 General partner distributions $ 1,155 $ 1,183 $ 1,081 Incentive distributions 272 48 - Total distributions to general partner 1,427 1,231 1,081 Limited partner common units - public 21,938 20,985 19,176 Limited partner common units - Green Plains 19,307 7,989 7,309 Limited partner subordinated units - Green Plains 15,095 28,919 26,456 Total distributions to limited partners 56,340 57,893 52,941 Total distributions declared $ 57,767 $ 59,124 $ 54,022 |