Aventine Renewable Energy Holdings, Inc. (OTCBB:AVRW) ("Aventine"),
a leading producer of clean renewable energy, announced today its
results for the second quarter 2011.
Net loss for the three months ended June 30, 2011 was $23.9
million, or $2.71 per diluted share, compared to a net loss of $9.3
million, or $1.06 per diluted share for the three months ended June
30, 2010. Net loss for the six months ended June 30, 2011 was $43.1
million, or $4.95 per diluted share, compared to a net loss of
$16.4 million, or $1.87 per diluted share for the four months ended
June 30, 2010 and a net loss of $266.3 million, or $6.14 per
diluted share for the two months ended February 28, 2010.
"This was a challenging quarter for the Company with industry
wide margins falling through most of the period. Operationally we
continued to experience production problems at our Mt. Vernon
facility leading to an extensive shutdown taken in July," said
Thomas Manual, Chief Executive Officer.
Revenues were $213.0 million for the three months ended June 30,
2011, compared to $96.9 million for the three months ended June 30,
2010. Revenues were $411.1 million for the six months ended June
30, 2011, compared to $133.9 million and $77.7 million,
respectively, for the four months ended June 30, 2010 and the two
months ended February 28, 2010.
"We expect to see improvements in our profitability over the
next several quarters assuming industry wide margins are maintained
at the current levels. With the upturn in the margin environment we
have been able to lock in profitable margins on approximately 12%
of our current production for the remainder of the year," commented
Manual. "Since quarter end we have made progress at the Mt. Vernon
facility. Production there has stabilized for the first time since
we started the plant. This is an encouraging development. We have
also made significant strides to improve co-product yields at our
Pekin plant. This coupled with the return of the Aurora East plant
to production should have a positive impact on profits." Manual
also noted, "We are in the process of making system improvements at
the Canton facility and expect to begin startup procedures in
mid-October."
Q2 2011 Activity
On April 7, 2011, we entered into an incremental amendment (the
"Incremental Amendment") with Citibank, N.A., as administrative
agent for the lenders under the senior secured term loan agreement,
dated as of December 22, 2010 (the "Term Loan Agreement"), and
Macquarie Bank Limited, as lender ("Macquarie"), to the Term Loan
Agreement. Pursuant to the Incremental Amendment, Macquarie
loaned us an aggregate principal amount equal to $25.0 million, net
of $1.3 million in fees. The loan under the Incremental
Amendment has substantially the same terms as the existing loans
under the Term Loan Agreement, including seniority ranking in right
of payment and of security, maturity date, applicable margin and
interest rate floor. We continue to be subject to all other
terms and restrictions contained in the original Term Loan
Agreement.
On April 27, 2011, we temporarily shut down our dry mill plant
in Aurora, Nebraska to make some improvements to the fermentation
process at the facility. This work was completed by the third
week of May 2011, and we began grinding corn again during the week
of July 25, 2011.
On May 13, 2011, the Company commenced a pro-rata distribution,
consisting of 19,414 shares of common stock, to holders of the
Company's pre-petition notes and to holders of allowed general
unsecured claims, with 9,806 shares distributed to holders of
pre-petition notes and 9,608 shares to holders of allowed general
unsecured claims. Approximately 1.1 million shares of common
stock are reserved for future distributions of these
holders.
Subsequent Events
On July 20, 2011, Aventine and each of its subsidiaries, as
co-borrowers (collectively, the "Borrowers"), entered into a
revolving credit facility (the "New Revolving Facility") with the
lenders party thereto (the "Lenders"), and Wells Fargo Capital
Finance, LLC, as Lender and as agent for the Lenders (in such
capacity, "Wells Fargo") (the "New Revolving Facility Agreement")
with a $50.0 million commitment. The proceeds of loans under
the New Revolving Facility were used to (1) repay the Borrowers'
obligations under Revolving Facility, (2) pay related transaction
costs, fees and expenses, and (3) for general corporate purposes.
In connection with the New Revolving Facility, the rights and
obligations of the lenders under the Revolving Facility have been
assigned from PNC to Wells Fargo.
On July 20, 2011, Aventine entered into an amendment ("Citi
Amendment") to the Term Loan Agreement with the lenders party
thereto and Citibank, N.A., as administrative agent and collateral
agent (the "Term Loan Agent"). Under the terms of the Citi
Amendment, the amount of indebtedness that Aventine is permitted to
incur under the New Revolving Facility (including bank products and
hedging obligations) is capped at $58.0 million. The Citi
Amendment reduces Aventine's minimum liquidity covenant for 2012
from $25.0 million to $15.0 million. The Citi Amendment also
includes certain technical amendments to permit the New Revolving
Facility.
Second Quarter Conference Call
We will hold a conference call at 9 a.m. CST (10 a.m. Eastern
time) on Tuesday, August 9, 2011, to discuss the contents of this
press release. Please dial in to the conference call at (877)
312-5514 (U.S.), or (253) 237-1137 (International), access code:
85213032, approximately 10 minutes prior to the start time. A link
to the broadcast can be found at http://www.aventinerei.com/ in the
Investor Relations section under the "Conference Calls" link. If
you are unable to participate at this time, a replay will be
available through August 15, 2011, on this Website or by dialing
(855) 859-2056 (U.S.), or (404) 537-3406 (International), access
code: 85213032. Should you need any assistance accessing the call
or the replay, please contact Aventine at (214) 451-6750.
About Aventine Renewable Energy
Aventine is a leading producer of ethanol. Through our
production facilities, we market and distribute ethanol to many of
the leading energy companies in the U.S. In addition to producing
ethanol, our facilities also produce several by-products, such as
distillers grain, corn gluten meal and feed, corn germ and grain
distillers dried yeast, which generate revenue and allow us to help
offset a significant portion of our corn costs.
Forward Looking Statements
Certain information included in this press release may be deemed
to be "forward looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. In some cases, you can identify these
statements by forward-looking words such as "may," "might," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," and the negatives of these
terms and other comparable terminology. These forward-looking
statements, which are subject to known and unknown risks,
uncertainties and assumptions about us, may include projections of
our future financial performance based on our growth strategies and
anticipated trends in our business. These statements are only
predictions based on our current expectations and projections about
future events. There are important factors that could cause our
actual results, level of activity, performance or achievements to
differ materially from the results, level of activity, performance
or achievements expressed or implied by the forward-looking
statements.
Some of the factors that may cause Aventine's actual results,
developments and business decisions to differ materially from those
contemplated by such forward looking statements include our ability
to obtain and maintain normal terms with vendors and service
providers, our estimates of allowed general unsecured claims,
unliquidated and contingent claims and estimations of future
distributions of securities and allocations of securities among
various categories of claim holders, our ability to maintain
contracts that are critical to our operations, our ability to
attract and retain customers, our ability to fund and execute our
business plan and any ethanol plant expansion or completion
projects, our ability to receive or renew permits to construct or
commence operations of our proposed capacity additions in a timely
manner, or at all, laws, tariffs, trade or other controls or
enforcement practices applicable to our operations, changes in
weather and general economic conditions, overcapacity within the
ethanol, biodiesel and petroleum refining industries, availability
and costs of products and raw materials, particularly corn, coal
and natural gas and the subsequent impact on margins, our ability
to raise additional capital and secure additional financing, our
ability to service our debt or comply with our debt covenants, our
ability to attract, motivate and retain key employees, liability
resulting from actual or potential future litigation or the outcome
of any litigation with respect to our auction rate securities or
otherwise, and plant shutdowns or disruptions.
Consolidated Financial Results
On March 15, 2010, Aventine emerged from bankruptcy and
implemented fresh start accounting using a convenience date of
February 28, 2010. The condensed consolidated financial statements
prior to March 1, 2010 reflect results based upon our historical
cost basis while the post-emergence consolidated financial
statements reflect the new basis of accounting incorporating the
fair value adjustments made in recording the effects of fresh start
reporting. Therefore, the post-emergence periods are not comparable
to the pre-emergence periods. As a result of the application of
fresh start accounting, our condensed consolidated financial
statements prior to and including February 28, 2010 represent the
operations of our pre-reorganization predecessor company and are
presented separately from the condensed consolidated financial
statements of our post-reorganization successor company.
Summary Statement of Operations
Aventine Renewable
Energy Holdings, Inc. and Subsidiaries |
Condensed Consolidated
Statements of Operations |
(Unaudited) |
|
|
|
|
Successor |
Predecessor |
|
Three Months Ended June 30,
2011 |
Three Months Ended June 30,
2010 |
Six Months Ended June 30,
2011 |
Four Months Ended June 30,
2010 |
Two Months Ended February 28,
2010 |
|
(In thousands, except per share
amounts) |
|
|
|
|
Net sales |
$ 213,019 |
$ 96,904 |
$ 411,123 |
$ 133,878 |
$ 77,675 |
Cost of goods sold |
(219,483) |
(95,401) |
(412,219) |
(132,700) |
(66,686) |
Gross profit |
(6,464) |
1,503 |
(1,096) |
1,178 |
10,989 |
Selling, general and administrative
expenses |
(9,625) |
(9,178) |
(19,042) |
(14,352) |
(4,608) |
Other expenses |
(746) |
(595) |
(1,942) |
(1,659) |
(515) |
Operating income (loss) |
(16,835) |
(8,270) |
(22,080) |
(14,833) |
5,866 |
Interest income |
22 |
14 |
43 |
15 |
-- |
Interest expense |
(6,020) |
(2,386) |
(11,342) |
(3,100) |
(1,422) |
(Loss) gain on derivative transactions,
net |
(1,214) |
263 |
(324) |
439 |
-- |
Loss on early retirement of debt |
-- |
-- |
(9,399) |
-- |
-- |
Other non-operating income
(expense) |
(52) |
210 |
(70) |
210 |
-- |
Income (loss) before reorganization items and
income taxes |
(24,099) |
(10,169) |
(43,172) |
(17,269) |
4,444 |
Reorganization items |
-- |
-- |
-- |
-- |
(20,282) |
Gain due to plan effects |
-- |
-- |
-- |
-- |
136,574 |
Loss due to fresh start accounting
adjustments |
-- |
-- |
-- |
-- |
(387,655) |
Loss before income taxes |
(24,099) |
(10,169) |
(43,172) |
(17,269) |
(266,919) |
Income tax benefit (expense) |
217 |
(910) |
29 |
(910) |
626 |
Net loss |
$ (23,882) |
$ (9,259) |
$ (43,143) |
$ (16,359) |
$ (266,293) |
|
|
|
|
|
|
Loss per common share – basic |
$ (2.71) |
$ (1.06) |
$ (4.95) |
$ (1.87) |
$ (6.14) |
Basic weighted-average number of shares |
8,820 |
8,585 |
8,723 |
8,581 |
43,401 |
|
|
|
|
|
|
Loss per common share – diluted |
$ (2.71) |
$ (1.06) |
$ (4.95) |
$ (1.87) |
$ (6.14) |
Diluted weighted-average number of common and
common equivalent shares |
8,820 |
8,585 |
8,723 |
8,581 |
43,401 |
The Three Months Ended June 30, 2011 Compared To The
Three Months Ended June 30, 2010
Net sales were generated from the following products:
|
|
|
Successor |
|
Three Months Ended June
30, 2011 |
Three Months Ended June
30, 2010 |
|
(In millions) |
|
Ethanol |
$ 164.7 |
$ 75.4 |
By-Products |
48.4 |
21.5 |
Total |
$ 213.0 |
$ 96.9 |
The overall increase in net sales from the second quarter of
2010 to the second quarter of 2011 is primarily the result of
increased sales volumes from our increased production, as well as
an increase in the sales price per gallon of ethanol. During
the second quarter of 2011, we produced 55.0 million gallons of
ethanol compared to 45.9 million gallons during the second quarter
of 2010, an increase of 9.1 million gallons, or 20%. We
marketed and sold 62.5 million gallons of ethanol during the three
months ended June 30, 2011 for an average sales price of $2.64 per
gallon compared to 46.5 million gallons at an average sales price
of $1.62 per gallon during the three months ended June 30,
2010.
The increase in by-product revenues is primarily a result of an
increase in the price per ton sold, as well as an increase in the
volume sold. We sold 247 thousand tons during the three months
ended June 30, 2011 for an average price of $195.93 per ton
compared to 235 thousand tons during the three months ended June
30, 2010 for an average price of $91.49 per ton. By-product
revenues, as a percentage of corn costs, fell to 31.8% during the
three months ended June 30, 2011 compared to 35.0% during the three
months ended June 30, 2010. Co-products produced by the dry
mill process have less value historically than those produced by
the wet mill process. As a result of the addition of the Mt.
Vernon dry mill, our overall product mix between wet and dry
co-products produced changed from 60% higher value wet mill
products and 40% lower value dry mill products during the second
quarter of 2010, to roughly 47% higher value wet mill products and
53% lower value dry mill products during the second quarter of
2011.
Cost of goods sold consists of production costs (the cost to
produce ethanol at our own facilities), the cost of purchased
ethanol, the cost changes in our inventory, freight and logistics
to ship ethanol and co-products and motor fuel taxes which have
been billed to customers, which are discussed in detail below.
|
|
|
Successor |
|
Three Months Ended June 30,
2011 |
Percentage of Net
sales |
Three Months Ended June 30,
2010 |
Percentage of Net
sales |
|
(In millions, except
percentages) |
Cost of goods sold |
$ 219.5 |
103.0% |
$ 95.4 |
98.4% |
The increase in cost of goods sold from the three months ended
June 30, 2010 compared to the three months ended June 30, 2011 is
the result of higher volumes of ethanol produced and sold during
the second quarter of 2011, as well as an increase in corn costs.
The increase in cost of goods sold as a percentage of net sales is
principally the result of increased corn costs, freight costs and
depreciation (discussed below).
Production costs include corn costs, conversion costs, and
depreciation and amortization, which are discussed below.
Corn costs for the three months ended June 30, 2011 and 2010
were $152.0 million and $61.5 million, respectively. The
increase in corn costs is due to an increase in the number of
bushels used in production, as well as an increase in the price per
bushel. We used 20.5 million bushels of corn in production
during the second quarter of 2011 compared to 17.4 million bushels
during the second quarter of 2010. Additionally, during the three
months ended June 30, 2011, corn used in production was
approximately $7.43 per bushel compared to $3.53 per bushel for the
three months ended June 30, 2010. Our average corn costs
during the second quarter of 2011 were slightly higher than the
CBOT average price of $7.31 during the same period.
Conversion costs for the three months ended June 30, 2011 and
2010 were as follows:
|
|
|
|
Successor |
|
Three Months Ended June 30,
2011 |
Three Months Ended June 30,
2010 |
|
(In millions) |
Utilities |
$ 13.8 |
$ 9.0 |
Salary and benefits |
5.9 |
5.0 |
Materials and supplies |
6.6 |
5.0 |
Denaturant |
2.9 |
1.8 |
Outside services |
3.2 |
2.1 |
Other |
0.8 |
0.8 |
|
$ 33.2 |
$ 23.7 |
The increases in utilities, materials and supplies, and outside
services are primarily attributable to the start-up of our Mt.
Vernon facility. Conversion costs per gallon were $0.60 for
the second quarter of 2011 compared to $0.52 for the second quarter
of 2010. Inefficiencies from lower operating capacity at the
Mt. Vernon facility contributed approximately $0.09 per gallon to
the total conversion costs for the quarter ended June 30,
2011.
Depreciation and amortization expense for the three months ended
June 30, 2011 was $6.2 million compared to $2.4 million in the
three months ended June 30, 2010. Depreciation expense
increased primarily as a result of the start-up of the Mt. Vernon
facility.
Purchased ethanol is included in our cost of goods
sold. For the second quarter of 2011, we purchased 3.1 million
gallons for a total of $8.6 million compared to 285 thousand
gallons during the second quarter of 2010 for a total of $0.4
million. The cost per gallon purchased was $2.77 during the
three months ended June 30, 2011 compared to $1.43 during the three
months ended June 30, 2010. This increase is consistent with
the overall increase in ethanol spot prices using OPIS indices to
an average price of $2.64 per gallon during the second quarter of
2011 from an average of $1.56 per gallon during the second quarter
of 2010.
As stated above, cost of goods sold include the cost changes in
our inventory. Our direct materials, labor and overhead costs in
the condensed consolidated statements of operations are based on
production amounts. The change in inventory included in cost
of goods sold adjusts our statements of operations from cost of
production to cost of sales. During the three months ended
June 30, 2011, changes in inventory resulted in an expense of $10.6
million compared to an expense of $1.4 million in the three months
ended June 30, 2010. The reduction in cost of goods sold for
the three months ended June 30, 2011 was primarily the result of
the quantity and value of ethanol produced and sold during the
quarter.
Freight and logistics costs for the three months ended June 30,
2011 were $8.9 million compared to $6.0 million during the three
months ended June 30, 2010. The increase is due to higher
volumes shipped. During the second quarter of 2011, we
marketed and distributed approximately 62.5 million gallons of
ethanol compared to 46.5 million gallons during the three months
ended June 30, 2010. On a per gallon basis, freight and
logistics costs were $0.14 per gallon for the three months ended
June 30, 2011 compared to $0.13 per gallon for the three months
ended June 30, 2010. The increase in cost per gallon during the
second quarter of 2011 compared to the second quarter of 2010 is
the result of selling more by-products under contract to be
delivered during 2011 compared to 2010, where we sold more
by-products under contract to be picked up at our
facilities.
Commodity spread, defined as gross ethanol selling price per
gallon less net corn cost per gallon, was $0.75 for the three
months ended June 30, 2011 compared to $0.75 for the three months
ended June 30, 2010.
|
|
|
Successor |
|
Three Months Ended June 30,
2011 |
Three Months Ended June 30,
2010 |
Commodity spread |
$ 0.75 |
$ 0.75 |
Average purchase price per bushel of
corn |
$ 7.43 |
$ 3.53 |
Co-product revenue as a percentage of corn
costs |
31.8% |
35.0% |
SG&A expenses were $9.6 million during the second quarter of
2011 compared to $9.2 million during the second quarter of
2010. SG&A expenses in the three months ended June 30,
2011 were primarily comprised of $1.9 million of salary and
benefits expense, $3.4 million of stock compensation expense, $1.6
million of outside services expenses, $0.5 million of depreciation
expense, $0.4 million of expense related to materials and supplies,
$0.8 million of plant carrying costs and $1.0 million of other
expenses. SG&A expenses in the three months ended June 30,
2010 were primarily comprised of $2.5 million of salary and
benefits expense, $1.2 million of stock compensation expense, $3.6
million of outside services expenses, $0.5 million of expense
related to materials and supplies and $1.4 million of other
expenses.
Interest expense for the three months ended June 30, 2011 was
$6.0 million compared to $2.4 million for the three months ended
June 30, 2010. Interest expense for the three months ended
June 30, 2011 includes $5.9 million related to the term loan
facility under the Term Loan Agreement (the "Term Loan Facility"),
$0.3 million of other interest expense, and $0.7 million of
amortization of deferred financing fees, reduced by capitalized
interest of $0.9 million. Interest expense for the three months
ended June 30, 2010 includes $3.4 million of interest expense
related to the Notes, reduced by capitalized interest of $1.0
million.
(Loss) gain on derivative transactions, net for the three months
ended June 30, 2011 includes $1.2 million of net realized and
unrealized losses on corn and ethanol derivative contracts versus
net realized and unrealized gains in the three months ended June
30, 2010 of $0.3 million. We do not mark to market forward physical
contracts to purchase corn or sell ethanol as we account for these
transactions as normal purchases and sales under ASC 815,
Derivatives and Hedging ("ASC 815").
Our tax benefit rate for the three months ended June 30, 2011
was 1.0% of pre-tax loss compared to a tax benefit rate for the
three months ended June 30, 2010 of 8.9% of pre-tax loss. Our
effective tax rate differs from the statutory tax rate primarily
due to valuation allowances on our deferred taxes.
The Six Months Ended June 30, 2011 Compared to the Four
Months Ended June 30, 2010 and Two Months Ended February 28,
2010
Net sales were generated from the following products:
|
|
|
|
Successor |
Predecessor |
|
Six Months Ended June
30, 2011 |
Four Months Ended
June 30, 2010 |
Two Months Ended
February 28, 2010 |
|
(In millions) |
Ethanol |
$ 315.8 |
$ 104.6 |
$ 60.1 |
By-Products |
95.3 |
29.3 |
17.6 |
Total |
$ 411.1 |
$ 133.9 |
$ 77.7 |
The overall increase in net sales from the four months ended
June 30, 2010 and two months ended February 28, 2010 to the six
months ended June 30, 2011 is primarily the result of increased
sales volume from our increased production, as well as an increase
in the sales price per gallon of ethanol. During the first
half of 2011, we produced 116.8 million gallons of ethanol compared
to 62.0 million gallons and 32.0 million gallons of ethanol,
respectively, during the four months ended June 30, 2010 and two
months ended February 28, 2010. We marketed and sold 126.1
million gallons of ethanol during the six months ended June 30,
2011 for an average sales price of $2.50 per gallon compared to
64.1 million gallons at an average sales price of $1.63 per gallon
during the four months ended June 30, 2010 and 31.5 million gallons
at an average sales price of $1.91 per gallon during the two months
ended February 28, 2010.
The increase in by-product revenues is primarily a result of an
increase in the price per ton sold, as well as an increase in the
volume sold. We sold 537 thousand tons during the six months
ended June 30, 2011 for an average price of $177.55 per ton
compared to 325 thousand tons during the four months ended June 30,
2010 for an average price of $90.23 per ton and 154 thousand tons
during the two months ended February 28, 2010 for an average price
of $114.12 per ton. By-product revenues, as a percentage of corn
costs, fell to 31.4% during the six months ended June 30, 2011
compared to 35.0% and 39.8%, respectively, during the four months
ended June 30, 2010 and two months ended February 28,
2010. Co-products produced by the dry mill process have less
value historically than those produced by the wet mill
process. As a result of the addition of the Mt. Vernon dry
mill, our overall product mix between wet and dry co-products
produced changed from 61% higher value wet mill products and 39%
lower value dry mill products during the first half of 2010, to
roughly 45% higher value wet mill products and 55% lower value dry
mill products during the first half of 2011.
Cost of goods sold consists of production costs (the cost to
produce ethanol at our own facilities), the cost of purchased
ethanol, the cost changes in our inventory, freight and logistics
to ship ethanol and co-products and motor fuel taxes which have
been billed to customers, which are discussed in detail below.
|
|
|
|
Successor |
Predecessor |
|
Six Months Ended June
30, 2011 |
Percentage of Net
sales |
Four Months Ended June
30, 2010 |
Percentage of Net
sales |
Two Months Ended February
28, 2010 |
Percentage of Net
sales |
|
|
|
|
|
|
|
Cost of goods sold |
$ 412.2 |
100.3% |
$ 132.7 |
99.2% |
$ 66.7 |
85.9% |
The increase in cost of goods sold from the four months ended
June 30, 2010 and two months ended February 28, 2010 compared to
the six months ended June 30, 2011 is principally the result of
higher volumes of ethanol produced and sold during the first half
of 2011, as well as an increase in corn costs. The increase in cost
of goods sold as a percentage of net sales is principally the
result of increased corn costs, freight costs and depreciation
(discussed below).
Production costs include corn costs, conversion costs, and
depreciation and amortization, which are discussed below.
Corn costs for the six months ended June 30, 2011, four months
ended June 30, 2010 and two months ended February 28, 2010 were
$303.9 million, $83.8 million, and $44.2 million,
respectively. The increase in corn costs is due to an increase
in the number of bushels used in production, as well as an increase
in the price per bushel. We used 43.9 million bushels of corn
in production during the first half of 2011 compared to 23.4
million bushels and 12.1 million bushels, respectively, used during
the four months ended June 30, 2010 and two months ended February
28, 2010. Additionally, during the six months ended June 30, 2011,
corn used in production was approximately $6.92 per bushel compared
to $3.58 per bushel for the four months ended June 30, 2010 and
$3.66 per bushel for the two months ended February 28,
2010. Our average corn costs during the first half of 2011
were slightly lower than the CBOT average price of $7.01 during the
same period.
Conversion costs for the six months ended June 30, 2011, four
months ended June 30, 2010 and two months ended February 28, 2010
were as follows:
|
|
|
|
Successor |
Predecessor |
|
Six Months Ended June 30,
2011 |
Four Months Ended June 30,
2010 |
Two Months Ended February 28,
2010 |
|
(In millions) |
Utilities |
$ 28.3 |
$ 12.3 |
$ 7.6 |
Salary and benefits |
11.8 |
6.8 |
3.3 |
Materials and supplies |
13.7 |
6.8 |
3.2 |
Denaturant |
6.1 |
2.4 |
1.4 |
Outside services |
5.3 |
2.7 |
0.5 |
Other |
0.9 |
1.0 |
0.6 |
|
$ 66.1 |
$ 32.0 |
$ 16.6 |
The increases in utilities, materials and supplies, and outside
services are primarily attributable to the start-up of our Mt.
Vernon facility. Conversion costs per gallon were $0.57 for
the six months ended June 30, 2011, $0.52 for the four months ended
June 30, 2010, and $0.52 for the two months ended February 28,
2010. Inefficiencies from lower operating capacity at the Mt.
Vernon facility contributed approximately $0.08 per gallon to the
total conversion costs for 2011.
Depreciation and amortization expense for the six months ended
June 30, 2011, four months ended June 30, 2010 and two months ended
February 28, 2010 was $11.2 million, $3.3 million and $2.3 million,
respectively. Depreciation expense increased primarily as a
result of the start-up of the Mt. Vernon facility.
Purchased ethanol is included in our cost of goods
sold. For the six months ended June 30, 2011, four months
ended June 30, 2010 and two months ended February 28, 2010, we
purchased 3.9 million gallons, 495 thousand gallons and 210
thousand gallons, respectively. Purchased ethanol totaled
$10.4 million, $0.8 million, and $0.4 million, respectively, for
the six months ended June 30, 2011, four months ended June 30, 2010
and two months ended February 28, 2010. The average cost per
gallon purchased was $2.71 during the six months ended June 30,
2011 compared to $1.62 during the four months ended June 30, 2010
and $1.88 during the two months ended February 28, 2010. This
increase is consistent with the overall increase in ethanol spot
prices using OPIS indices to an average price of $2.53 per gallon
during the first six months of 2011 from an average of $1.64 per
gallon during the first half of 2010.
As stated above, cost of goods sold include the cost changes in
our inventory. Our direct materials, labor and overhead costs in
the condensed consolidated statements of operation are based on
production amounts. The change in inventory included in cost
of goods sold adjusts our statements of operations from cost of
production to cost of sales. During the six months ended June
30, 2011, changes in inventory resulted in an expense of $3.2
million compared to an expense of $5.1 million in the four months
ended June 30, 2010 and a reduction in cost of goods sold of $0.2
million in the two months ended February 28, 2010. The expense
for the six months ended June 30, 2011 was primarily the result of
the quantity and value of ethanol produced and sold during the
first half of 2011.
Freight and logistics costs for the six months ended June 30,
2011 were $16.9 million compared to $7.7 million and $3.4 million,
respectively, for the four months ended June 30, 2010 and two
months ended February 28, 2010. The increase is due to higher
volumes shipped. During the first half of 2011, we marketed
and distributed approximately 126.1 million gallons of ethanol
compared to 64.1 million gallons and 31.5 million gallons,
respectively, during the four months ended June 30, 2010 and two
months ended February 28, 2010. On a per gallon basis, freight
and logistics costs were $0.14 per gallon, $0.12 per gallon and
$0.11 per gallon, respectively, for the six months ended June 30,
2011, four months ended June 30, 2010 and two months ended February
28, 2010. The increase in cost per gallon during the first six
months of 2011 compared to the four months ended June 30, 2010 and
two months ended February 28, 2010 is the result of selling more
by-products under contract to be delivered during 2011 compared to
2010, where we sold more by-products under contract to be picked up
at our facilities.
Commodity spread, defined as gross ethanol selling price per
gallon less net corn cost per gallon, was $0.72, $0.78 and $1.08,
respectively, for the six months ended June 30, 2011, four months
ended June 30, 2010 and two months ended February 28,
2010. The decrease in commodity spread was due to an increase
in the average sales price per gallon of ethanol being less than
the increase in the average corn cost per bushel, as well as a
decrease in co-product revenue as a percentage of corn costs in
each period as follows:
|
|
|
|
Successor |
Predecessor |
|
Six Months Ended June
30, 2011 |
Four Months Ended June
30, 2010 |
Two Months Ended February 28,
2010 |
Commodity spread |
$ 0.72 |
$ 0.78 |
$ 1.08 |
Average sales price per gallon of
ethanol |
$ 2.50 |
$ 1.68 |
$ 1.91 |
Average purchase price per bushel of
corn |
$ 6.92 |
$ 3.58 |
$ 3.66 |
Co-product revenue as a percentage of corn
costs |
31.4% |
35.0% |
39.8% |
SG&A expenses were $19.1 million, $14.4 million, and $4.6
million, respectively, for the six months ended June 30, 2011, four
months ended June 30, 2010 and two months ended February 28,
2010. SG&A expenses in the six months ended June 30, 2011
were primarily comprised of $4.7 million of salary and benefits
expense, $5.1 million of stock compensation expense, $3.3 million
of outside services expenses, $0.9 million of depreciation expense,
$0.8 million of expense related to materials, $2.1 million of plant
carrying costs and supplies and $2.2 million of other
expenses. SG&A expenses for the four months ended June 30,
2010 were primarily comprised of $4.1 million of salary and
benefits expense, $2.9 million of stock compensation expense, $4.7
million of outside services expenses, and $2.7 million of other
expenses. SG&A expenses in the two months ended February 28,
2010 were primarily comprised of $0.8 million of salary and
benefits expense, $0.2 million of stock compensation expense, $1.7
million of outside services expenses, and $1.9 million of other
expenses.
Interest expense for the six months ended June 30, 2011, four
months ended June 30, 2010 and two months ended February 28, 2010
was $11.3 million, $3.1 million, and $1.4 million,
respectively. Interest expense for the six months ended June
30, 2011 includes $11.2 million related to the Term Loan Facility,
$1.1 million related to the Notes, $0.5 million of other interest
expense, and $1.3 million of amortization of deferred financing
fees, reduced by capitalized interest of $2.8 million. Interest
expense for the four months ended June 30, 2010 includes $4.0
million of interest expense related to the Notes and $0.1 million
of other interest expense, reduced by capitalized interest of $1.0
million. Interest expense for the two months ended February 28,
2010 includes pre-petition amended secured revolving credit
facility interest expense of $0.6 million, interest expense on our
debtor-in-possession debt facility of $0.5 million, and $0.3
million of amortization of deferred financing fees.
(Loss) gain on derivative transactions, net for the six months
ended June 30, 2011 includes $0.3 million of net realized and
unrealized losses on corn and ethanol derivative contracts versus
net realized and unrealized gains in the four months ended June 30,
2010 of $0.4 million. We recorded no realized or unrealized gains
or losses on derivative contracts during the two months ended
February 28, 2010. We do not mark to market forward physical
contracts to purchase corn or sell ethanol as we account for these
transactions as normal purchases and sales under ASC 815.
On January 21, 2011, we redeemed our $155.0 million Notes at a
redemption price of 105% of the principal amount, plus accrued and
unpaid interest. In connection with the redemption, we
recognized a $9.4 million loss on the early extinguishment of
debt.
During the two months ended February 28, 2010, we recognized
reorganization expenses of $20.3 million, of which $9.6 million
related to provision for rejected executory contracts and other
accruals, $8.8 million related to professional fees directly
related to reorganization and $1.9 million related to other
expenses.
The loss due to fresh start accounting adjustments of $387.7
million in the two months ended February 28, 2010 consisted of
adjustments required to report assets and liabilities upon
emergence from bankruptcy at fair value. See our discussion of
fresh start accounting above. Gain due to plan effects in the
two months ended February 28, 2010 of $136.6 million related to
implementation of our First Amended Joint Plan of Reorganization
under Chapter 11 of Title 11 of the United States Code (as
modified, the "Plan") and consisted of $193.5 million of
liabilities subject to compromise which were discharged upon
emergence less $5.8 million of unamortized debt issuance costs on
our pre-petition notes, $1.6 million related to the write-off of
predecessor prepaid directors and officer insurance, $5.3 million
of successor-based professional fees awarded under the Plan, $42.6
million related to loss on shares granted in connection with the
Notes and $1.6 million of other miscellaneous costs.
Our tax expense rate for the six months ended June 30, 2011 was
less than 1% of pre-tax loss compared to a tax expense rate for the
four months ended June 30, 2010 of 5.3% of pre-tax loss and a tax
benefit rate for the two months ended February 28, 2010 of 0.2% of
pre-tax loss. Our effective tax rate differs from the
statutory tax rate primarily due to valuation allowances on our
deferred taxes.
EBITDA
We have included EBITDA and Adjusted EBITDA primarily as
performance measures because management uses them as key measures
of our performance. EBITDA is defined as earnings before interest
expense, interest income, income tax expense, and depreciation.
EBITDA is not a measure of financial performance under accounting
principles generally accepted in the U.S. ("GAAP") and should not
be considered an alternative to net earnings 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 (particularly since, in the latter case,
management views EBITDA as a performance measure rather than a
liquidity measure). EBITDA has its limitations as an analytical
tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under generally
accepted accounting principles. Some of the limitations of EBITDA
are:
- EBITDA does not reflect our cash used for capital
expenditures;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated or amortized often will have to be
replaced and EBITDA does not reflect the cash requirements for such
replacements;
- EBITDA does not reflect changes in, or cash requirements for,
our working capital requirements;
- EBITDA does not reflect the cash necessary to make payments of
interest or principal on our indebtedness; and
- EBITDA includes non-recurring loss items which are reflected in
other income (expense).
In order to emphasize the effects of certain income and loss
items in our financial statements, we also report a second
computation referred to as Adjusted EBITDA, which adjusts EBITDA
for certain items. Our adjusted EBITDA is adjusted for (i)
reorganization items, (ii) gain due to plan effects, (iii) loss due
to the application of fresh start accounting adjustments, (iv)
stock-based compensation, (v) loss on available for sale securities
and (vi) gain on resolution of bankruptcy issues. Previously
presented calculations have been modified to reflect the current
definition of Adjusted EBITDA.
Management believes EBITDA and Adjusted EBITDA are meaningful
supplemental measures of operating performance and so highlights
trends in our core business that may not otherwise be apparent when
relying solely on GAAP financial measures. We also believe
that securities analysts, investors, and other interested parties
frequently use EBITDA in the evaluation of companies, many of which
present EBITDA when reporting their results. 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 our
performance on a year-over-year and quarter-over-quarter
basis. Our management and external users of our financial
statements, such as investors, commercial banks, research analysts,
and others, use EBITDA and Adjusted EBITDA to assess:
- the financial performance of our assets without regard to
financing methods, capital structure or historical cost basis;
- our operating performance and return capital as compared to
those of other companies in our industry, without regard to
financing or capital structure; and
- the feasibility of acquisitions and capital expenditure
projects and the overall rate on alternative investment
opportunities.
Reconciliation of Income (Loss) to Adjusted
EBITDA
|
|
|
Successor |
|
For the Three Months Ended
June 30, 2011 |
For the Three Months Ended
June 30, 2010 |
Statement of Operations
Data: |
(In thousands) |
Net loss |
$ (23,882) |
$ (9,259) |
Interest income |
(22) |
(14) |
Interest expense (a) |
6,021 |
2,386 |
Income tax expense (benefit) |
(217) |
(910) |
Depreciation |
6,647 |
2,419 |
EBITDA |
$ (11,453) |
$ (5,378) |
|
|
|
Stock-based compensation |
$ 3,425 |
$ 1,152 |
Adjusted EBITDA |
$ (8,028) |
$ (4,226) |
(a) Interest capitalized was $0.9 million and $1.0 million,
respectively, for the three months ended June 30, 2011 and
2010.
|
|
|
|
Successor |
Predecessor |
|
For the Six Months Ended June
30, 2011 |
For the Four Months Ended
June 30, 2010 |
For the Two Months Ended
February 28, 2010 |
Statement of Operations
Data: |
(In thousands) |
Net loss |
$ (43,143) |
$ (16,359) |
$ (266,293) |
Interest income |
(43) |
(15) |
-- |
Interest expense (b)(c) |
11,342 |
3,100 |
1,422 |
Income tax expense (benefit) |
(29) |
(910) |
(626) |
Depreciation |
12,161 |
3,287 |
2,795 |
EBITDA |
$ (19,712) |
$ (10,897) |
$ (262,702) |
|
|
|
|
Stock-based compensation |
$ 5,127 |
$ 2,881 |
$ 277 |
Loss on early retirement of debt |
9,399 |
-- |
-- |
Reorganization items |
-- |
-- |
20,282 |
Gain due to plan effects |
-- |
-- |
(136,574) |
Loss due to fresh start
accounting adjustments |
-- |
-- |
387,655 |
Adjusted EBITDA |
$ (5,186) |
$ (8,016) |
$ 8,938 |
(b) Interest capitalized was $2.8 million for the six
months ended June 30, 2011 and $1.0 million for the four months
ended June 30, 2010. There was no capitalized interest during the
two months ended February 28, 2010.
(c) Contractual interest expense not recorded was $5.0
million for the two months ended February 28, 2010.
Summary Balance Sheets
Aventine Renewable
Energy Holdings, Inc. and Subsidiaries |
Condensed Consolidated
Balance Sheets |
|
|
|
Successor |
|
June 30, 2011 |
December 31,
2010 |
|
(Unaudited) |
|
Assets |
(In thousands, except share and
per share amounts) |
Current assets: |
|
|
Cash and cash equivalents |
$ 24,623 |
$ 34,533 |
Restricted cash |
-- |
164,765 |
Accounts receivable, net of allowance for
doubtful accounts of $112 in 2011 and $75 in 2010 |
11,411 |
11,571 |
Inventories |
42,631 |
44,179 |
Income taxes receivable |
968 |
954 |
Prepaid expenses and other current
assets |
10,739 |
14,185 |
Total current assets |
90,372 |
270,187 |
|
|
|
Property, plant and equipment, net |
297,950 |
296,289 |
Restricted cash |
15,240 |
16,211 |
Other assets |
12,584 |
11,291 |
Total assets |
$ 416,146 |
$ 593,978 |
Liabilities and Stockholders'
Equity |
|
|
Current liabilities: |
|
|
Current maturities of long-term
debt |
$ 2,281 |
$ 157,718 |
Current obligations under capital
leases |
278 |
789 |
Accounts payable |
16,640 |
23,311 |
Accrued liabilities |
2,998 |
4,906 |
Other current liabilities |
11,664 |
10,589 |
Total current liabilities |
33,861 |
197,313 |
|
|
|
Long-term debt |
214,525 |
190,239 |
Deferred tax liabilities |
2,026 |
2,026 |
Other long-term liabilities |
2,644 |
2,742 |
Total liabilities |
253,056 |
392,320 |
|
|
|
Stockholders' equity: |
|
|
Common stock, par value $0.001 per share
(15,000,000 shares authorized; 7,489,666 shares outstanding, net of
28,771 shares held in treasury at June 30, 2011; 7,448,916 shares
outstanding, net of 7,791 shares held in treasury at December
31, 2010) |
8 |
8 |
Preferred stock (5,000,000 shares authorized;
no shares issued or outstanding) |
-- |
-- |
Additional paid-in-capital |
231,935 |
227,360 |
Retained deficit |
(68,607) |
(25,464) |
Accumulated other comprehensive income
(loss), net |
(246) |
(246) |
Total stockholders' equity |
163,090 |
201,658 |
Total liabilities and stockholders'
equity |
$ 416,146 |
$ 593,978 |
Summary Cash Flows
Aventine Renewable
Energy Holdings, Inc. and Subsidiaries |
Condensed Consolidated
Statements of Cash Flows |
(Unaudited) |
|
|
|
|
Successor |
Predecessor |
|
Six Months Ended June 30,
2011 |
Four Months Ended June 30,
2010 |
Two Months Ended
February 28, 2010 |
|
(In thousands) |
Operating Activities |
|
|
|
Net loss |
$ (43,143) |
$ (16,359) |
$ (266,293) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
|
Loss on early retirement of
debt |
9,399 |
-- |
-- |
Depreciation and
amortization |
13,129 |
3,675 |
2,795 |
Stock-based compensation
expense |
5,127 |
2,881 |
277 |
Deferred income tax |
-- |
(910) |
-- |
Non-cash loss on
available-for-sale securities |
(484) |
-- |
-- |
Non-cash gain due to plan
effects |
-- |
-- |
(136,574) |
Non-cash loss due to fresh
start accounting adjustments |
-- |
-- |
387,655 |
Provision for rejected
executory contracts and leases |
-- |
-- |
9,590 |
Changes in operating assets and
liabilities: |
|
|
|
Accounts receivable, net |
160 |
3,137 |
2,560 |
Income tax receivable |
(14) |
-- |
-- |
Inventories |
1,548 |
5,236 |
1,543 |
Prepaid expenses and other
current assets |
184 |
-- |
-- |
Other assets |
(1,535) |
(3,101) |
1,339 |
Accounts payable |
(6,671) |
(797) |
7,061 |
Other liabilities |
(799) |
763 |
(21,640) |
Net cash used in operating activities |
(23,099) |
(5,475) |
(11,687) |
Investing Activities |
|
|
|
Additions to property, plant and equipment,
net |
(13,083) |
(21,498) |
(2,086) |
Deposit on asset acquisition |
-- |
(5,000) |
-- |
Net cash used in investing activities |
(13,083) |
(26,498) |
(2,086) |
Financing Activities |
|
|
|
Proceeds from the issuance of debt |
25,000 |
-- |
-- |
Repayment of senior secured notes |
(155,000) |
-- |
-- |
Repayment of term loan |
(1,062) |
-- |
-- |
Repayment of short-term note payable |
-- |
(5,252) |
-- |
Restricted cash |
165,736 |
2,512 |
(7,833) |
Penalty on early retirement of debt |
(7,750) |
-- |
-- |
Payments on capital lease obligations |
(643) |
-- |
-- |
Payments on mortgage note |
(15) |
-- |
-- |
Proceeds from issuance of senior
secured notes |
-- |
-- |
98,119 |
Debt issuance costs |
-- |
-- |
(1,190) |
Net repayments on revolving credit
facilities |
-- |
-- |
(27,765) |
Repayments of debtor-in-possession debt
facility |
-- |
-- |
(15,000) |
Repurchase of treasury shares |
-- |
(355) |
-- |
Proceeds from warrants exercised |
6 |
6 |
-- |
Proceeds from stock option exercises |
-- |
-- |
96 |
Net cash provided by financing
activities |
26,272 |
(3,089) |
46,427 |
Net increase (decrease) in cash and
equivalents |
(9,910) |
(35,062) |
32,654 |
Cash and equivalents at beginning of the
period |
34,533 |
85,239 |
52,585 |
Cash and equivalents at end of the
period |
$ 24,623 |
$ 50,177 |
$ 85,239 |
Liquidity and Capital Resources
The following table sets forth selected information concerning
our financial condition:
|
June 30, 2011 |
December 31,
2010 |
|
(In millions, except current
ratio) |
Cash and cash equivalents |
$ 24.6 |
$ 34.5 |
Net working capital |
$ 56.5 |
$ 72.9 |
Total debt (1) |
$ 217.1 |
$ 348.7 |
Current ratio |
2.67 |
1.37 |
(1) Concurrent with the closing of our Term Loan Agreement in
December 2010, we irrevocably deposited in trust with the trustee
for the Notes, $164.8 million of the proceeds from the Term Loan
Facility, funds sufficient to pay the redemption price for all
$155.0 million aggregate principal amount of the Notes. We redeemed
such Notes on January 21, 2011.
CONTACT: Calvin Stewart, Chief Accounting & Compliance Officer
(214) 451-6766
Calvin.Stewart@aventinerei.com
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