Alto Ingredients Reports Third Quarter 2021 Results

  • Third Quarter Net Loss of $3.5 million and Positive Adjusted EBITDA of $3.0 million
  • Subsequent to Quarter-End, the Company Sold its Stockton, CA Facility
  • Company is Now Term Debt Free

SACRAMENTO, Calif., Nov. 09, 2021 (GLOBE NEWSWIRE) -- Alto Ingredients, Inc. (NASDAQ: ALTO), a leading producer of specialty alcohols and essential ingredients, reported its financial results for the third quarter ended September 30, 2021.

“In the third quarter we made significant progress in advancing our strategic initiatives, expanding our essential ingredients business and improving our infrastructure,” said Mike Kandris, CEO of Alto Ingredients. “We launched an enhanced protein project through the installation of Harvesting Technology’s patented CoPromax™ system at our Magic Valley, Idaho facility. At our Pekin campus, we made significant progress on a number of initiatives. We completed our yeast expansion project and will have our upgraded feed dryers operational by year end. We also finished expanding the capacity of our corn oil production and significantly improved the efficiency and reliability of our Pekin wet mill to further support customer demand long term. We are also working on extending the certifications we obtained at the end of 2020 from our ICP distillery to our Pekin wet mill. We expect to complete this effort by the end of this year and by doing so, provide unique redundancy across the entire Pekin campus and further surety of quality supply to our customers.

“Subsequent to quarter end, on November 8th we announced the sale of our Stockton, California fuel-grade ethanol facility, completing the realignment of our fuel-grade ethanol operations we began 21 months ago. The proceeds from these asset sales were integral to our strategy and contributed to the retirement of approximately $150 million dollars in term debt over this same period – thus achieving our stated goal to prepay this expensive and restrictive term debt by year end 2021.

“We have completed or are on track to complete this year a number of projects that will increase our annual EBITDA by $18.5 million starting in 2022. Long-term, we will continue to build on our specialty alcohols and essential ingredients business, focusing our resources on driving profitable growth and progressing our strategic initiatives.”

“Net sales were $306 million, up approximately $100 million from the prior year’s quarter due to an increase in both gallons produced and the average price per gallon sold,” stated Bryon McGregor, CFO of Alto Ingredients. “Last year’s specialty alcohol sales uniquely benefited from a spike in sanitizer and disinfectant demand from COVID-19. When examining costs and bottom line comparatively, the planned outage of our wet mill, as expected, materially impacted our total revenues and cost of goods sold, driving the gross loss in this year’s quarter compared to last year’s gross profit.

“Going forward, while we anticipate continued volatility in sanitizer and disinfectant demand over foreseeable future, we expect a more stable, new demand-supply equilibrium will ultimately be achieved as COVID-19 impacts dissipate. We also expect an increase in fixed-price contracted specialty alcohol sales and growing specially alcohol exports. Our upgraded wet mill facility with significantly improved efficiency and reliability will enable us to further support customer demand long term.”

Financial Results for the Three Months Ended September 30, 2021 Compared to 2020

  • Net sales were $305.6 million, compared to $204.7 million.
  • Cost of goods sold was $309.0 million, compared to $183.8 million.  
  • Gross loss was $3.4 million, compared to a gross profit of $20.9 million.
  • Selling, general and administrative expenses were $5.5 million, compared to $6.4 million.
  • Operating loss was $8.9 million, compared to operating income of $26.3 million.
  • Net loss available to common stockholders was $3.5 million, or $0.05 per share, compared net income of $14.9 million, or $0.24 per diluted share.
  • Adjusted EBITDA was $3.0 million, compared to $34.1 million.
  • Cash and cash equivalents were $36.0 million at September 30, 2021, compared to $47.7 million at December 31, 2020.
  • On November 8, 2021, the company announced its sale of its fuel-grade ethanol production facility in Stockton, California for $24.0 million in cash.

Financial Results for the Nine Months Ended September 30, 2021 Compared to 2020

  • Net sales were $822.4 million, compared to $728.2 million.
  • Cost of goods sold was $796.7 million, compared to $689.0 million.  
  • Gross profit was $25.7 million, compared to $39.2 million.
  • Selling, general and administrative expenses were $19.8 million, compared to $25.2 million.
  • Operating income was $2.8 million, compared to $25.7 million.
  • Net income available to common stockholders was $9.0 million, or $0.12 per diluted share, compared to $4.1 million, or $0.07 per diluted share.
  • Adjusted EBITDA was $33.4 million, compared to $50.6 million.

Third Quarter 2021 Results Conference Call
Management will host a conference call at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time on Tuesday, November 9, 2021, and will deliver prepared remarks via webcast followed by a question-and-answer session.

The webcast for the call can be accessed from Alto Ingredients’ website at www.altoingredients.com. Alternatively, you may dial the following number up to ten minutes prior to the scheduled conference call time: (877) 847-6066. International callers should dial 00-1 (970) 315-0267. The pass code will be 3778898. If you are unable to participate in the live call, the webcast will be archived for replay on Alto Ingredients’ website for one year. In addition, a telephonic replay will be available at 8:00 p.m. Eastern Time on Tuesday, November 9, 2021, through 8:00 p.m. Eastern Time on Tuesday, November 16, 2021. To access the replay, please dial (855) 859-2056. International callers should dial 00-1 (404) 537-3406. The pass code will be 3778898.

Use of Non-GAAP Measures

Management believes that certain financial measures not in accordance with generally accepted accounting principles ("GAAP") are useful measures of operations. The company defines Adjusted EBITDA as unaudited net income (loss) attributed to Alto Ingredients, Inc. before interest expense, interest income, provision (benefit) for income taxes, asset impairments, loss on extinguishment of debt, purchase accounting adjustments, fair value adjustments, and depreciation and amortization expense. A table is provided at the end of this release that provides a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, net income (loss) attributed to Alto Ingredients, Inc. Management provides this non-GAAP 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 as an alternative to net income (loss) attributed to Alto Ingredients, Inc. 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 this measure in isolation or as a substitute for analysis of the company's results as reported under GAAP.

About Alto Ingredients, Inc.
Alto Ingredients, Inc. (ALTO), formerly known as Pacific Ethanol, Inc., is a leading producer of specialty alcohols and essential ingredients. The company is focused on products for four key markets: Health, Home & Beauty; Food & Beverage; Essential Ingredients; and Renewable Fuels. The company’s customers include major food and beverage companies and consumer products companies. For more information please visit www.altoingredients.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements and information contained in this communication that refer to or include Alto Ingredients’ estimated or anticipated future results or other non-historical expressions of fact are forward-looking statements that reflect Alto Ingredients’ current perspective of existing trends and information as of the date of the communication. Forward looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “should,” “estimate,” “expect,” “forecast,” “outlook,” “guidance,” “intend,” “may,” “might,” “will,” “possible,” “potential,” “predict,” “project,” or other similar words, phrases or expressions. Such forward-looking statements include, but are not limited to, statements concerning the timing and effects of Alto Ingredients’ strategic initiatives, including its plant improvement projects and extended certifications; the expected effect on annual EBITDA of Alto Ingredients’ plant improvement projects; and Alto Ingredients’ other plans, objectives, expectations and intentions. It is important to note that Alto Ingredients’ plans, objectives, expectations and intentions are not predictions of actual performance. Actual results may differ materially from Alto Ingredients’ current expectations depending upon a number of factors affecting Alto Ingredients’ business. These factors include, among others, adverse economic and market conditions, including for specialty alcohols and essential ingredients; export conditions and international demand for the company’s products; fluctuations in the price of and demand for oil and gasoline; raw material costs, including production input costs, such as corn and natural gas; Alto Ingredients’ ability to successfully and timely execute on its plant improvement projects; and the effects – both positive and negative – of the coronavirus pandemic and its resurgence or abatement. These factors also include, among others, the inherent uncertainty associated with financial and other projections; the anticipated size of the markets and continued demand for Alto Ingredients’ products; the impact of competitive products and pricing; the risks and uncertainties normally incident to the specialty alcohol production and marketing industries; changes in generally accepted accounting principles; successful compliance with governmental regulations applicable to Alto Ingredients’ distilleries, products and/or businesses; changes in laws, regulations and governmental policies; the loss of key senior management or staff; and other events, factors and risks previously and from time to time disclosed in Alto Ingredients’ filings with the Securities and Exchange Commission including, specifically, those factors set forth in the “Risk Factors” section contained in Alto Ingredients’ Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 10, 2021.

Media Contact:                 
Bryon McGregor, Alto Ingredients, Inc., 916-403-2768, mediarelations@altoingredients.com

Company IR Contact:                 
Michael Kramer, Alto Ingredients, Inc., 916-403-2755, Investorrelations@altoingredients.com

IR Agency Contact:
Moriah Shilton, LHA Investor Relations, 415-433-3777, Investorrelations@altoingredients.com

 

ALTO INGREDIENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2021
  2020
  2021
  2020
 
         
Net sales $ 305,556     $ 204,727     $ 822,400     $ 728,205    
Cost of goods sold   308,955       183,797       796,729       688,983    
Gross profit (loss)   (3,399 )     20,930       25,671       39,222    
Selling, general and administrative expenses   (5,533 )     (6,404 )     (19,777 )     (25,245 )  
Asset impairments               (3,100 )        
Gain on litigation settlement         11,750             11,750    
Income (loss) from operations   (8,932 )     26,276       2,794       25,727    
Interest expense, net   (429 )     (4,199 )     (3,359 )     (14,153 )  
Income from loan forgiveness   5,973             9,860          
Fair value adjustments         (6,856 )           (7,497 )  
Other income (expense), net   256       (6 )     641       (1,164 )  
Income (loss) before benefit for income taxes   (3,132 )     15,215       9,936       2,913    
Benefit for income taxes                        
Consolidated net income (loss)   (3,132 )     15,215       9,936       2,913    
Net loss attributed to noncontrolling interests                     2,166    
Net income (loss) attributed to Alto Ingredients, Inc. $ (3,132 )   $ 15,215     $ 9,936     $ 5,079    
Preferred stock dividends $ (319 )   $ (319 )   $ (946 )   $ (949 )  
Net income (loss) available to common stockholders $ (3,451 )   $ 14,896     $ 8,990     $ 4,130    
Net income (loss) per share, basic $ (0.05 )   $ 0.25     $ 0.13     $ 0.07    
Net income (loss) per share, diluted $ (0.05 )   $ 0.24     $ 0.12     $ 0.07    
Weighted-average shares outstanding, basic   71,383       58,503       71,002       55,620    
Weighted-average shares outstanding, diluted   71,383       61,699       72,260       57,958    


ALTO INGREDIENTS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par value)

  September 30,
2021
  December 31,
2020
ASSETS      
Current Assets:    
Cash and cash equivalents $ 36,029   $ 47,667
Accounts receivable, net   78,424     43,491
Inventories   58,117     37,925
Prepaid inventory   5,480     891
Derivative instruments   12,977     17,149
Assets held-for-sale   30,158     58,295
Other current assets   5,413     8,628
Total current assets   226,598     214,046
Property and equipment, net   224,319     229,486
Other Assets:    
Right of use operating lease assets, net   12,715     11,046
Notes receivable   12,423     14,337
Intangible assets   2,678     2,678
Other assets   4,671     5,225
Total other assets   32,487     33,286
Total Assets $ 483,404   $ 476,818


ALTO INGREDIENTS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(unaudited, in thousands, except par value)

  September 30,
2021
  December 31,
2020
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current Liabilities:    
Accounts payable – trade $ 28,387     $ 13,047    
Accrued liabilities   15,455       11,101    
Current portion – operating leases   3,216       2,180    
Current portion – long-term debt   17,687       25,533    
Derivative instruments   2,735          
Liabilities held-for-sale   10,500       19,542    
Other current liabilities   6,468       15,524    
Total current liabilities   84,448       86,927    
     
Long-term debt, net of current portion   70,621       71,807    
Operating leases, net of current portion   9,365       8,715    
Other liabilities   13,774       13,134    
Total Liabilities   178,208       180,583    
     
Stockholders’ Equity:    
Alto Ingredients, Inc. Stockholders’ Equity:    
Preferred stock, $0.001 par value; 10,000 shares authorized;
Series A: 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020
Series B: 927 shares issued and outstanding as of September 30, 2021 and December 31, 2020
  1       1    
Common stock, $0.001 par value; 300,000 shares authorized; 72,800 and 72,487 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively   73       72    
Non-voting common stock, $0.001 par value; 3,553 shares authorized; 1 share issued and outstanding as of September 30, 2021 and December 31, 2020            
Additional paid-in capital   1,036,608       1,036,638    
Accumulated other comprehensive loss   (3,878 )     (3,878 )  
Accumulated deficit   (727,608 )     (736,598 )  
Total Stockholders’ Equity   305,196       296,235    
Total Liabilities and Stockholders’ Equity $ 483,404     $ 476,818    


Reconciliation of Adjusted EBITDA to Net Income (Loss)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in thousands) (unaudited)          
2021
 
2020
 
2021
 
2020
Net income (loss) attributed to Alto Ingredients, Inc. $ (3,132 )   $ 15,215     $ 9,936     $ 5,079  
Adjustments:        
Interest expense   429       4,199       3,359       14,153  
Interest income   (183 )     (196 )     (553 )     (368 )
Asset impairments               3,100        
Fair value adjustments         6,856             7,497  
Benefit for income taxes                      
Depreciation and amortization expense*   5,851       8,049       17,520       24,254  
Total adjustments   6,097       18,908       23,426       45,536  
Adjusted EBITDA $ 2,965     $ 34,123     $ 33,362     $ 50,615  

* Adjusted for noncontrolling interests.

Commodity Price Performance

  Three Months Ended
September 30,
    Nine Months Ended
September 30,
  
(unaudited)            2021     2020     2021     2020   
Fuel-grade ethanol production gallons sold (in millions)   38.3       21.9       118.6       148.0    
Specialty alcohol production gallons sold (in millions)   19.7       21.6       63.1       74.9    
Third party fuel-grade ethanol gallons sold (in millions)   67.2       76.7       180.5       213.0    
Total gallons sold (in millions)   125.2       120.2       362.2       435.9    
           
Total gallons produced (in millions)   60.6       45.2       182.2       209.1    
Production capacity utilization   59 %     40 %     57 %     54 %  
           
Average sales price per gallon $ 2.47     $ 1.71     $ 2.27     $ 1.60    
Average CBOT ethanol price per gallon $ 2.25     $ 1.27     $ 2.08     $ 1.20    
           
Corn cost – CBOT equivalent $ 6.09     $ 3.29     $ 5.71     $ 3.49    
Average basis   0.89       0.22       0.53       0.29    
Delivered cost of corn $ 6.98     $ 3.51     $ 6.24     $ 3.78    
           
Total essential ingredients tons sold (in thousands)   305.6       255.5       886.5       1,177.5    
Co-product return % (1)   29.5 %     50.2 %     33.8 %     44.6 %  

(1) Co-product revenue as a percentage of delivered cost of corn.

Segment Financials

  Three Months Ended
September 30,
  Nine Months Ended
September 30, 
 
   2021     2020     2021     2020  
Net sales          
Kinergy marketing and distribution:          
Alcohol sales, gross $ 112,391     $ 84,001     $ 255,702     $ 212,625    
Alcohol sales, net   505       382       1,489       1,117    
Intersegment sales   2,415       1,598       7,277       7,751    
Total marketing and distribution sales   115,311       85,981       264,468       221,493    


Pekin Campus production, recorded as gross:
         
Alcohol sales $ 114,587     $ 77,075     $ 341,967     $ 255,737    
Essential ingredient sales   46,016       27,619       140,670       101,123    
Intersegment sales   293       197       920       877    
Total Pekin Campus sales   160,896       104,891       483,557       357,737    
           
Other production, recorded as gross:          
Alcohol sales $ 25,190     $ 11,765     $ 63,311     $ 120,797    
Essential ingredient sales   6,867       3,885       19,261       36,806    
Intersegment sales   259       420       896       1,121    
Total Other production sales   32,316       16,070       83,468       158,724    
           
Intersegment eliminations   (2,967 )     (2,215 )     (9,093 )     (9,749 )  
Net sales as reported $ 305,556     $ 204,727     $ 822,400     $ 728,205    
                                 
Cost of goods sold:
                               
Kinergy marketing and distribution $ 105,902     $ 84,589     $ 245,606     $ 210,827    
Pekin Campus production   169,721       80,280       468,972       302,120    
Other production   35,613       20,718       87,055       181,382    
Intersegment eliminations   (2,281 )     (1,790 )     (4,904 )     (5,346 )  
Cost of goods sold as reported $ 308,955     $ 183,797     $ 796,729     $ 688,983    
                                 
Gross profit (loss):                                
Kinergy marketing and distribution $ 9,409     $ 1,392     $ 18,862     $ 10,666    
Pekin Campus production   (8,825 )     24,611       14,585       55,617    
Other production   (3,297 )     (4,648 )     (3,587 )     (22,658 )    
Intersegment eliminations   (686 )     (425 )     (4,189 )     (4,403 )    
Gross profit (loss) $ (3,399 )   $ 20,930     $ 25,671     $ 39,222    

 


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Source: Alto Ingredients, Inc.