Pacific Ethanol's Q4 net loss narrows to US$11.6M from US$244.8M a year ago as net sales grow nearly 53% to US$134.2M on increases from Magic Valley facility that was idle most of 2009, sales of other third-party gallons
March 28, 2011
– Total volume of ethanol gallons sold increased 50% for the fourth quarter of 2010 and increased 57% for all of 2010, compared to the same periods in 2009
Adjusted EBITDA increased 124% for the fourth quarter of 2010 to $2.2 million from $1.0 million in the fourth quarter of 2009
Pacific Ethanol, Inc. (NASDAQ CM: PEIX), the leading West Coast marketer and producer of low-carbon renewable fuels, reported its financial results for the quarter and year ended December 31, 2010.
2010 Business Highlights
• Resumed production at the Magic Valley facility in January 2010
• Led the Pacific Ethanol Plants out of bankruptcy in June 2010
• Closed the following four transactions on October 6, 2010:
o Raised $35.0 million in cash in a convertible note and warrant financing transaction;
o Sold ownership interest in Front Range Energy LLC (“Front Range”) for $18.5 million in cash;
o Purchased a 20% ownership interest in the four Pacific Ethanol Plants for $23.3 million in cash; and
o Retired approximately $17.0 million in corporate debt.
• Increased Kinergy’s working capital line of credit from $10.0 million to up to $20.0 million
• Resumed production at the Stockton facility in December 2010
• Grew Kinergy’s volume of marketed ethanol by 57%
“Pacific Ethanol achieved significant milestones in 2010, including strengthening our balance sheet while preserving the company’s equity value and renewing the growth of our core businesses of producing and marketing low carbon renewable fuels,” stated Neil Koehler, the company’s president and CEO. “In addition to continuing to deliver superior logistics and value to its customers, Kinergy maintained its strong growth in marketed ethanol gallons. During the fourth quarter, we resumed production at the 60 million gallon Stockton facility. Our objective is to resume operations to an annual rate of 200 million gallons at all four Pacific Ethanol Plants to best position the company to meet the increasing demand for low-carbon ethanol in the Western United States.”
Changes in Reporting
The company’s financial statements include the results of the Pacific Ethanol Plants for all periods except for the quarter ended September 30, 2010, during which the company had no ownership interest in the Pacific Ethanol Plants. On June 29, 2010, the Pacific Ethanol Plants emerged from bankruptcy, and the ownership of the Pacific Ethanol Plants was transferred to New PE Holdco LLC. On October 6, 2010, the company purchased a 20% ownership interest in New PE Holdco, which gave it the single largest equity position in New PE Holdco. Upon the acquisition, the company resumed consolidating the Pacific Ethanol Plants’ financial results in the fourth quarter of 2010.
Effective January 1, 2010, the company concluded it was no longer the primary beneficiary of Front Range, and therefore, deconsolidated the financial results of Front Range. As a result, the quarter and year ended December 31, 2009 includes Front Range’s financial results, whereas the quarter and year ended December 31, 2010, excludes Front Range’s financial results. On October 6, 2010, the company sold its ownership interest in Front Range.
Financial Results for the Fourth Quarter Ended December 31, 2010
Net sales were $134.2 million for the fourth quarter of 2010, compared to $87.9 million for the fourth quarter of 2009. Total gallons sold were 76.0 million for the fourth quarter of 2010, an increase of 25.5 million gallons over the 50.5 million gallons sold in the fourth quarter of 2009. The quarter-over-quarter and year-over-year increases in net sales are primarily attributed to operation of the Magic Valley facility during 2010 whereas it was idle for much of 2009, and an increase in sales of other third-party gallons.
Fourth quarter 2010 gross profit was $1.0 million, compared to $1.4 million in the fourth quarter of 2009. Corn costs for the fourth quarter of 2010 increased at a higher rate than ethanol prices compared to the fourth quarter of 2009, resulting in a lower gross profit. Selling, general and administrative (“SGA”) expenses for the fourth quarter of 2010 were $3.9 million as compared to $4.3 million in the same period of 2009. SGA expenses decreased as a result of the company’s continued cost reduction efforts. Operating loss for the fourth quarter of 2010 improved to $2.9 million from $253.1 million for the same period in 2009, which included asset impairments of $250.2 million related to the Pacific Ethanol Plants.
During the fourth quarter of 2010, the company issued convertible notes and warrants for $35.0 million in cash. The company accounted for the convertible notes and warrants at fair value, resulting in a non-cash charge of $11.7 million, representing the initial valuation and subsequent fair value adjustments at December 31, 2010.
Net loss available to common stockholders for the fourth quarter of 2010 was $12.1 million, which included the aforementioned non-cash charge of $11.7 million, compared to a net loss of $245.6 million for the fourth quarter of 2009. Adjusted EBITDA, which excludes, fair value adjustments, impairment charges and certain gains, increased 124% to $2.2 million for the fourth quarter of 2010 from $1.0 million in the fourth quarter of 2009.
Financial Results for the Year Ended December 31, 2010
Net sales were $328.3 million for 2010, compared to $316.6 million for 2009. Total gallons sold were 271.6 million in 2010, an increase of 98.9 million gallons over the 172.7 million gallons sold in 2009.
Net income available to common stockholders for 2010 was $71.0 million, which included a $119.4 million non-cash gain from bankruptcy exit, a $12.1 million non-cash loss on the company’s investment in Front Range, and $11.7 million in net fair value adjustments from the company’s convertible note and warrant financing. Net loss was $311.4 million for 2009, which included $252.4 million in non-cash charges for the impairment of the company’s ethanol plant assets. Adjusted EBITDA was negative $10.1 million for 2010 compared to negative $24.1 million for 2009.
Reconciliation of Adjusted EBITDA to Net Income (Loss)
Management believes financial measures not in accordance with generally accepted accounting principles (“GAAP”) are useful measures of operations. The company defines Adjusted EBITDA as unaudited earnings before interest, taxes, depreciation and amortization, fair value adjustments, asset impairments, loss on investment in Front Range and gain from bankruptcy exit. The table at the end of this release provides a reconciliation of Adjusted EBITDA to net income (loss) attributed to Pacific Ethanol, Inc. Management provides an Adjusted EBITDA measure so that investors will have the same financial information that management uses, which may assist investors in properly assessing the company’s performance on a period-over-period basis. Adjusted EBITDA is not a measure of financial performance under GAAP, and should not be considered an alternative to net income (loss) or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of the company’s results as reported under GAAP.
About Pacific Ethanol, Inc.
Pacific Ethanol, Inc. (NASDAQ CM: PEIX) is the leading marketer and producer of low-carbon renewable fuels in the Western United States. Pacific Ethanol also sells co-products, including wet distillers grain (WDG), a nutritional animal feed. Serving integrated oil companies and gasoline marketers who blend ethanol into gasoline, Pacific Ethanol provides transportation, storage and delivery of ethanol through third-party service providers in the Western United States, primarily in California, Nevada, Arizona, Oregon, Colorado, Idaho and Washington. Pacific Ethanol has a 20% ownership interest in New PE Holdco LLC, the owner of four ethanol production facilities. Pacific Ethanol operates and manages the four ethanol production facilities, which have a combined annual production capacity of 200 million gallons. The facilities in operation are located in Boardman, Oregon, Burley, Idaho and Stockton, California, and one idled facility is located in Madera, California. The facilities are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages. Pacific Ethanol’s subsidiary, Kinergy Marketing LLC, markets ethanol from Pacific Ethanol’s managed plants and from other third-party production facilities, and another subsidiary, Pacific Ag. Products, LLC, markets WDG. For more information please visit www.pacificethanol.net.
Industry Intelligence Editor’s Note: In an omitted table, the company reported Q4 net loss attributed to Pacific Ethanol Inc. of US$11.6 million. For the same period a year ago, the company reported net loss attributed to Pacific Ethanol Inc. of US$244.8 million.
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