Pacific Ethanol, Inc. Reports Fourth quarter and Year-End Results
Record Results as Ethanol Production Complements Marketing Revenues
Highlights
- Net sales for 2006 increased 158% to $226.3 million from $87.6 million in 2005
- Total gallons sold increased 94.5% to 101.7 million in 2006 from 52.3 million gallons in 2005
- Gross profit margin increased to 11.0% in 2006 from 3.6% in 2005
- Adjusted EBITDA totaled $5.4 million for 2006
- Strong cash position; total cash and liquid securities exceeds $109 million
- $325 million credit facility obtained
- Acquisition of 42% of Front Range Energy, LLC
- Successful startup of Madera plant; now operating above nameplate capacity
- Boardman, Oregon plant on schedule for completion by end of Q2 of 2007; construction begins on Burley, Idaho plant
SACRAMENTO, Calif., March 1 /PRNewswire-FirstCall/ -- Pacific Ethanol, Inc. (Nasdaq: PEIX), the largest West Coast-based marketer and producer of ethanol, today announced results for the three and twelve month periods ended December 31, 2006.
Pacific Ethanol's CEO, Neil Koehler, said, "2006 was a landmark year in many respects. During 2006, we nearly doubled the number of gallons sold, solidifying our position as a leading marketer of ethanol in the Western United States. In the fourth quarter, we began capturing higher gross profit margins as a result of production operations at our Madera, California facility and through our ownership position in Front Range Energy, LLC. We completed our first ethanol production facility at Madera on time and today it is operating above nameplate capacity, making us the largest West Coast-based producer of ethanol. We have a plant under construction in Oregon and one in Idaho. We expect to begin construction of two additional plants in California over the next few weeks. We made a key investment by acquiring an ownership interest in Front Range Energy, which owns a plant in Colorado that is operating well above nameplate capacity. We secured over $220 million in equity financing and have subsequently obtained a credit facility for an additional $325 million, providing what we believe is sufficient financing to complete construction of our first five plants, representing over 220 million gallons of annual production capacity. Our risk management programs and professionals have helped us manage volatility in both the corn and ethanol markets. As our marketing efforts continue to expand, our development team is working diligently to identify greenfield opportunities and other production assets that will help us achieve annual production capacity of 420 million gallons by the end of 2010. As our production capacity expands and matures, the rewards of our destination business model, which centers upon serving the fuel and feed needs of our customers in the Western United States, should become increasingly apparent through our financial performance in 2007. I would also like to thank our workforce for their continued safe performance and dedication."
Three Months Ended December 31, 2006
For the three months ended December 31, 2006, the Company recorded net sales of $80.5 million, an increase of $44.4 million, or 123.0%, compared to $36.1 million recorded for the three months ended December 31, 2005. The increase in net sales resulted from growth in the Company's sales volume of 65.9%, to 31.7 million gallons from 19.1 million gallons for the comparable period in 2005. A portion of that growth came from the commencement of ethanol production at the Company's Madera plant and as a result of the acquisition of a 42% interest in Front Range Energy. The production and sale of ethanol and co-products at the Company's Madera facility and through Front Range Energy provided $25.9 million in net sales for the three month period and all of 2006. The Company's average sales price of ethanol in the fourth quarter increased $0.37 per gallon, or 19.6%, to $2.26 per gallon, compared to an average sales price of $1.89 in the fourth quarter of 2005.
Gross profit for the fourth quarter of 2006 totaled approximately $11.7 million compared to $1.3 million achieved for the fourth quarter of 2005. Gross profit margin increased to 14.6% for the fourth quarter of 2006 compared to 3.7% for the same period in 2005. The increases in gross profit margin and gross profit are the result of higher producer margins obtained from sales from the Company's first ethanol production facility, the contribution of its interest in Front Range Energy and higher sales volume at its marketing subsidiary, Kinergy Marketing, LLC.
Net loss for the fourth quarter of 2006 was $3.1 million compared to $5.1 million for the fourth quarter of 2005. Loss available to common stockholders for the fourth quarter of 2006, including preferred stock dividends in the amount of $1.0 million, was $4.1 million, or $0.11 per common share, compared to $5.1 million, or $0.18 per common share, for the fourth quarter of 2005. Results were impacted during the fourth quarter of 2006 by non-cash charges of $3.9 million primarily related to non-cash compensation expenses.
Twelve Months Ended December 31, 2006
The Company's results of operations for the twelve months ended December 31, 2006 consist of the operations of the Company and all of its wholly-owned subsidiaries, including Kinergy, for that entire period. The Company's results of operations for the twelve months ended December 31, 2005 include the operations Kinergy only from March 23 through December 31, 2005. Kinergy's net sales for the period from January 1 through March 22, 2005 were approximately $23.6 million and, along with other components of Kinergy's results of operations, are not included in the Company's results of operations for 2005.
For 2006, the Company reported net sales of approximately $226.3 million, 158.4% greater than the $87.6 million reported for 2005. A portion of the increase is attributable to the exclusion of Kinergy's net sales for the period from January 1 through March 22, 2005 from the Company's results of operations for 2005. For 2006, sales volume increased by 49.4 million gallons, or 94.5%, to 101.7 million gallons from 52.3 million gallons for 2005. The Company's average sales price of ethanol increased in 2006 by $0.61 per gallon, or 36.5%, to $2.28 per gallon compared to an average price of $1.67 per gallon in 2005.
Gross profit for 2006 grew to $24.8 million compared to $3.2 million for 2005. Gross profit margin increased to 11.0% for 2006 as compared to 3.6% in 2005. Gross profit increased partly as a result of the exclusion of Kinergy's gross profit for the period from January 1 through March 22, 2005 from the Company's results of operations for 2005. The increase in gross profit margin and total gross profit are also attributable to advantageous buying and selling during a period of increasing market prices as well as the commencement of ethanol production at the Madera facility and the acquisition of the Company's interest in Front Range Energy, both of which occurred in the fourth quarter. Adjusted EBITDA for 2006 totaled $5.4 million.
Net loss for 2006 was $0.1 million compared to $9.9 million for 2005. Net loss was impacted during 2006 by non-cash charges of $6.2 million related to non-cash compensation expenses.
Loss available to common stockholders for 2006 was $87.1 million, or $2.50 per share, of which $84.0 million was a non-cash deemed dividend in respect of preferred stock acquired by Cascade Investment, L.L.C. in the second quarter of 2006, and included in the Company's results for the second quarter and all of 2006.
Reconciliation of Adjusted EBITDA to Net Income
This press release contains, and the Company's conference call will include, references to unaudited adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), a financial measure that is not in accordance with generally accepted accounting procedures ("GAAP"). The Company has adjusted EBITDA to reflect the non-cash or non-recurring nature of some of the charges taken in 2006 and 2005. The table set forth below provides a reconciliation of adjusted EBITDA to net income. Management believes that adjusted EBITDA is a meaningful measure of liquidity and the Company's ability to service debt because it provides a measure of cash available for such purposes. Additionally, management provides an adjusted EBITDA measure so that investors will have the same financial information that management uses with the belief that it will assist investors in properly assessing the Company's performance on a year-over-year and quarter-over-quarter basis. Adjusted EBITDA is not a measure of financial performance under GAAP, and should not be considered an alternative to net income 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.
Earnings Call
The Company will host a live conference call at 10:00 AM EST on March 1, 2007. To listen to the conference call by phone, United States callers may dial 800-817-2743. International callers may dial 913-981-4915. All callers should enter access code 7710114.
Approximately one hour after the conclusion of the call, an audio replay of the call will be available. To listen to the replay by phone, United States callers may dial 888-203-1112. International callers may dial 719-457-0820. All callers should enter access code 7710114. The replay will be available through March 8, 2007.
About Pacific Ethanol, Inc.
Pacific Ethanol is the largest West Coast-based marketer and producer of ethanol. Pacific Ethanol has an ethanol plant in Madera, California, two additional plants under construction in Boardman, Oregon and Burley, Idaho, and owns a 42% interest in Front Range Energy, LLC which owns an ethanol plant in Windsor, Colorado. Central to its growth strategy is its destination business model, whereby each respective ethanol plant achieves lower process and transportation costs by servicing local markets for both fuel and feed. In February 2007, Pacific Ethanol obtained a $325 million credit facility to provide financing for its first five ethanol production facilities. In May 2006, Pacific Ethanol completed an equity funding of $138 million which provided the Company with sufficient cash to both accelerate its stated goal of completing five ethanol production facilities totaling 220 million gallons of capacity per year by the middle of 2008 and its plans to complete additional ethanol production facilities, increasing total capacity to 420 million gallons per year by the end of 2010. In addition, Pacific Ethanol is working to identify and develop other renewable fuel technologies, such as cellulose-based ethanol production and bio-diesel.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
With the exception of historical information, the matters discussed in this press release including, without limitation, Pacific Ethanol's belief that the proceeds from the recent debt financing are sufficient to allow Pacific Ethanol to complete construction of its first five ethanol plants, that Pacific Ethanol will have in excess of 220 million gallons of annual production capacity by mid-2008 and that the rewards of its destination business model will be apparent as a result of its 2007 financial performance, are forward-looking statements that involve a number of risks and uncertainties. The actual future results of Pacific Ethanol could differ from those statements. Factors that could cause or contribute to such differences include, but are not limited to, the ability of Pacific Ethanol to conform to the funding and other requirements of its recently obtained credit facility; the ability of Pacific Ethanol to successfully and timely complete, in a cost- effective manner, construction of its ethanol plants in Boardman, Oregon and Burley, Idaho; the ability of Pacific Ethanol to obtain all necessary financing to complete the construction of its other planned ethanol production facilities; the ability of Pacific Ethanol to timely complete its ethanol plant build-out program and to successfully capitalize on its internal growth initiatives; the ability of Pacific Ethanol to operate its plants at their planned production capacities; the price of ethanol relative to the price of gasoline; and those factors contained in the "Risk Factors" section of Pacific Ethanol's Form 10-Q filed with the Securities and Exchange Commission on November 20, 2006.
PACIFIC ETHANOL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended Years Ended
December 31, December 31,
2006 2005 2006 2005
Net sales $80,553 $36,067 $226,356 $87,599
Cost of goods sold 68,805 34,749 201,527 84,444
Gross profit 11,748 1,318 24,829 3,155
Selling, general and
administrative
expenses 11,350 6,037 24,641 12,638
Income (loss) from
operations 398 (4,719) 188 (9,483)
Other income (expense),
net 256 396 3,426 (440)
Non-controlling
interest in variable
interest entity (3,756) - (3,756) -
Loss before provision
for income taxes (3,102) (5,115) (142) (9,923)
Provision for income
taxes - - - -
Net loss $(3,102) $(5,115) $(142) $(9,923)
Preferred stock
dividends $(1,050) $ - $(2,998) $ -
Deemed dividend on
preferred stock $ - $ - $(84,000) $ -
Loss available to
common stockholders $(4,152) $(5,115) $(87,140) $ -
Net loss per share,
basic and diluted $(0.11) $(0.18) $(2.50) $(0.40)
Weighted-average shares
outstanding, basic
and diluted 39,266 28,699 34,855 25,066
PACIFIC ETHANOL, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
December 31,
ASSETS 2006 2005
Current Assets:
Cash and cash equivalents $55,172 $4,521
Investments in marketable securities 28,000 2,750
Accounts receivable (including $1,188
and $938 as of December 31, 2006 and
2005, respectively, from a related party) 29,322 4,948
Restricted cash 1,567 -
Notes receivable - related party - 136
Inventories 7,595 363
Prepaid expenses 1,053 627
Prepaid inventory 2,029 1,349
Derivative instruments 551 -
Other current assets 1,756 86
Total current assets 127,045 14,780
Property and Equipment, Net 196,156 23,208
Other Assets:
Restricted cash 24,851 -
Debt issuance cost, net - 48
Deposits and advances 9,040 14
Goodwill 85,307 2,566
Intangible assets, net 10,155 7,569
Other assets 1,266 -
Total other assets 130,619 10,197
Total Assets $453,820 $48,185
PACIFIC ETHANOL, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)
(in thousands)
December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2006 2005
Current Liabilities:
Current portion - related party note payable $ - $1,200
Current portion - notes payable 4,125 -
Accounts payable - trade 11,483 4,755
Accounts payable - related party 3,884 6,412
Accrued retention - related party 5,538 1,450
Accrued payroll 766 434
Other accrued liabilities 4,798 3,423
Total current liabilities 30,594 17,674
Related-party notes payable, net of current
portion - 1,995
Notes payable, net of current portion 28,970 -
Deferred tax liability 1,091 -
Other liabilities 357 -
Total Liabilities 61,012 19,669
Non-controlling interest in variable
interest entity 276,165 -
Stockholders' Equity:
Preferred stock, $0.001 par value;
10,000 shares authorized; 5,250 and 0
shares issued and outstanding as of
December 31, 2006 and 2005, respectively 5 -
Common stock, $0.001 par value; 100,000
shares authorized; 40,269 and
28,874 shares issued and outstanding as
of December 31, 2006 and 2005, respectively 40 29
Additional paid-in capital 397,535 42,071
Other comprehensive income 545 -
Accumulated deficit (281,482) (13,584)
Total stockholders' equity 116,643 28,516
Total Liabilities and Stockholders' Equity $453,820 $48,185
Reconciliation of Adjusted EBITDA to Net Income
Three Months Ended, Year Ended December 31,
(In thousands) 12/31/06 12/31/05 2006 2005
(Unaudited)
Net income (loss) $ (3,102) $ (5,115) $(142) $ (9,923)
Adjustments:
Interest expense* 906 179 1,381 511
Interest income* (975) (77) (4,737) (348)
Income taxes -- -- -- --
Non-cash compensation
and consulting expense 3,922 312 6,248 2,062
Depreciation and
amortization expense* 1,959 283 2,680 787
Total adjustments 5,812 697 5,572 3,012
Adjusted EBITDA $2,710 $ (4,418) $5,430 $ (6,911)
* Adjusted for non-controlling interest.
Commodity Price Performance
Three Months Ended, Year Ended December 31,
(Unaudited) 12/31/06 12/31/05 2006 2005
Ethanol sales
(million gallons) 31.7 19.1 101.7 52.3
Ethanol sales price
per gallon $ 2.26 $ 1.89 $ 2.28 $ 1.67
Delivered corn cost
per bushel $ 2.95 $ -- $ 2.95 $ --
Average basis 0.51 -- 0.51 --
Corn cost - CBOT
equivalent $ 2.44 $ -- $ 2.44 $ --
Co-product return % (1) 33.4% -- 33.4% --
Production commodity
margin per gallon (2) $ 1.45 $ -- $ 1.45 $ --
(1) Co-product revenue as a percentage of delivered cost of corn
(2) Ethanol sales price per gallon less net cost of corn (delivered cost
of corn less co-product revenue)
SOURCE Pacific Ethanol, Inc.
Released March 1, 2007