Aventine Renewable Energy Holdings, Inc. (OTCBB:AVRW) ("Aventine"),
a leading producer of clean renewable energy, announced today its
results for the third quarter 2011.
Revenues were $221.6 million for the three months ended
September 30, 2011, compared to $97.5 million for the three months
ended September 30, 2010. Revenues were $632.7 million for the nine
months ended September 30, 2011, compared to $231.3 million and
$77.7 million, respectively, for the seven months ended September
30, 2010 and the two months ended February 28, 2010.
Net loss for the three months ended September 30, 2011 was $11.2
million, or $1.23 per diluted share, compared to a net loss of $6.6
million, or $0.76 per diluted share for the three months ended
September 30, 2010. Net loss for the nine months ended September
30, 2011 was $54.3 million, or $6.13 per diluted share, compared to
a net loss of $23.0 million, or $2.63 per diluted share for the
seven months ended September 30, 2010 and a net loss of $266.3
million, or $6.14 per diluted share for the two months ended
February 28, 2010.
Adjusted EBITDA, for the three months ended September 30, 2011
was $2.4 million compared to $0.9 million for the three months
ended September 30, 2010. Adjusted EBITDA for the nine months ended
September 30, 2011 was negative $2.8 million compared to a negative
$7.2 million for the seven months ended September 30, 2010 and a
positive $8.5 million for the two months ended February 28, 2010. A
definition of Adjusted EBITDA and a reconciliation of net loss to
EBITDA and Adjusted EBITDA is provided under 'EBITDA' below.
"The Company made strides in many areas in the quarter as we
continue to pursue increased production volumes and profitable
operations," said John Castle, Interim Chief Executive Officer.
"The Mount Vernon plant was, for the first time, operating cash
flow positive in August and September, after an extensive shutdown
was taken in July to correct several design issues. The Aurora East
plant returned to production in the quarter and the system
improvements that were made during its outage have paid off. The
plant is achieving consistent production rates at significantly
improved yields. The Pekin wet mill completed its annual shutdown
in the quarter and has seen significant improvements in
fermentation health. Beyond our internal focus the industry margin
environment has improved since the second quarter and we are taking
every opportunity to capitalize on ethanol production while the
margins are strong."
Third Quarter Conference Call
We will hold a conference call at 9 a.m. CST (10 a.m. Eastern
time) on Wednesday, November 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:
24275085, 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 November 16, 2011, on this Website or by dialing
(855) 859-2056 (U.S.), or (404) 537-3406 (International), access
code: 24275085. 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 Sept. 30,
2011 |
Three Months Ended Sept. 30,
2010 |
Nine Months Ended Sept. 30,
2011 |
Seven Months Ended Sept. 30,
2010 |
Two Months Ended February 28,
2010 |
|
(In thousands, except per share
amounts) |
Net sales |
$ 221,604 |
$ 97,460 |
$ 632,727 |
$ 231,338 |
$ 77,675 |
Cost of goods sold |
(212,486) |
(90,251) |
(624,705) |
(222,951) |
(66,686) |
Gross profit |
9,118 |
7,209 |
8,022 |
8,387 |
10,989 |
Selling, general and administrative
expenses |
(7,389) |
(9,243) |
(26,431) |
(23,595) |
(4,608) |
Start-up activities |
-- |
(175) |
-- |
(175) |
|
Other expenses |
(736) |
399 |
(2,678) |
(1,260) |
(515) |
Operating income (loss) |
993 |
(1,810) |
(21,087) |
(16,643) |
5,866 |
Interest income |
8 |
52 |
51 |
67 |
-- |
Interest expense |
(7,107) |
(2,051) |
(18,449) |
(5,151) |
(1,422) |
(Loss) gain on derivative transactions,
net |
(6,303) |
(233) |
(6,627) |
206 |
-- |
Loss on available for sale securities |
-- |
(1,753) |
-- |
(1,753) |
-- |
Loss on early retirement of debt |
(639) |
-- |
(10,038) |
-- |
-- |
Other non-operating income
(expense) |
1,945 |
35 |
1,875 |
245 |
-- |
Income (loss) before reorganization items and
income taxes |
(11,103) |
(5,760) |
(54,275) |
(23,029) |
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 |
(11,103) |
(5,760) |
(54,275) |
(23,029) |
(266,919) |
Income tax benefit (expense) |
74 |
881 |
45 |
(29) |
626 |
Net loss $ |
$ (11,177) |
$ (6,641) |
$ (54,320) |
$ (23,000) |
$ (266,293) |
|
|
|
|
|
|
Loss per common share – basic |
$ (1.23) |
$ (0.76) |
$ (6.13) |
$ (2.63) |
$ (6.14) |
Basic weighted-average number of shares |
9,114 |
8,585 |
8,855 |
8,583 |
43,401 |
|
|
|
|
|
|
Loss per common share – diluted |
$ (1.23) |
$ (0.76) |
$ (6.13) |
$ (2.63) |
$ (6.14) |
Diluted weighted-average number of common and
common equivalent shares |
9,114 |
8,585 |
8,855 |
8,583 |
43,401 |
The Three Months Ended September 30, 2011 Compared to
the Three Months Ended September 30, 2010
Net sales were generated from the following products:
|
Successor |
|
Three Months Ended Sept. 30,
2011 |
Three Months Ended
Sept. 30, 2010 |
|
(In millions) |
Ethanol |
$ 170.6 |
$ 74.9 |
By-Products |
51.0 |
22.6 |
Total |
$ 221.6 |
$ 97.5 |
The overall increase in net sales from the third quarter of 2010
to the third 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 third
quarter of 2011, we produced 60.4 million gallons of ethanol
compared to 40.8 million gallons during the third quarter of 2010,
an increase of 19.6 million gallons, or 48.0%. We marketed and
sold 59.5 million gallons of ethanol during the three months ended
September 30, 2011 for an average sales price of $2.87 per gallon
compared to 41.5 million gallons at an average sales price of $1.80
per gallon during the three months ended September 30,
2010. These average prices exclude freight charges which are
included in cost of sales.
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 257.0 thousand tons during the three
months ended September 30, 2011 for an average price of $198.31 per
ton compared to 197.6 thousand tons during the three months ended
September 30, 2010 for an average price of $114.39 per ton.
By-product revenues, as a percentage of corn costs, fell to 31.2%
during the three months ended September 30, 2011 compared to 37.5%
during the three months ended September 30, 2010. Co-products
sold by the dry mill process have less value historically than
those sold 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 sold changed from 60% higher value
wet mill products and 40% lower value dry mill products during the
third quarter of 2010, to roughly 48% higher value wet mill
products and 52% lower value dry mill products during the third
quarter of 2011.
Cost of goods sold consists of corn costs, conversion 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 depreciation and
amortization which are discussed in detail below.
|
|
|
Successor |
|
Three Months Ended Sept. 30,
2011 |
Percentage of
Net sales |
Three Months Ended Sept. 30,
2010 |
Percentage of
Net sales |
|
(In millions, except
percentages) |
Cost of goods sold |
$ 212.5 |
95.9% |
$ 90.3 |
92.6% |
The increase in cost of goods sold from the three months ended
September 30, 2010 compared to the three months ended September 30,
2011 is the result of higher volumes of ethanol produced and sold
during the third 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).
Corn costs for the three months ended September 30, 2011 and
2010 were $163.1 million and $60.3 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 22.7 million bushels of corn in production
during the third quarter of 2011 compared to 15.7 million bushels
during the third quarter of 2010. Additionally, during the three
months ended September 30, 2011, corn used in production was
approximately $7.19 per bushel compared to $3.83 per bushel for the
three months ended September 30, 2010. Our average corn costs
during the third quarter of 2011 were slightly higher than the CBOT
average price of $6.96 during the same period.
Conversion costs for the three months ended September 30, 2011
and 2010 were as follows:
|
|
|
Successor |
|
Three Months Ended September
30, 2011 |
Three Months Ended September
30, 2010 |
|
(In millions) |
Utilities |
$ 15.0 |
$ 8.5 |
Salary and benefits |
5.9 |
5.1 |
Materials and supplies |
6.9 |
4.6 |
Denaturant |
3.1 |
1.5 |
Outside services |
5.0 |
1.4 |
Other |
.6 |
.6 |
|
$ 36.5 |
$ 21.7 |
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 third quarter of 2011, including $1.0 million for the planned
shutdown of the Pekin operation, compared to $0.53 for the third
quarter of 2010. The planned shutdown at Pekin cost the
Company approximately $0.02 per gallon. 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 September 30, 2011.
Depreciation and amortization expense for the three months ended
September 30, 2011 was $6.1 million compared to $2.3 million in the
three months ended September 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 third quarter of 2011, we purchased 2.8 million
gallons for a total of $8.0 million compared to 0.4 million gallons
during the third quarter of 2010 for a total of $0.7
million. The cost per gallon purchased during the three months
ended September 30, 2011 was $2.85 compared to $1.66 during the
three months ended September 30, 2010.
As stated above, cost of goods sold includes 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
September 30, 2011, changes in inventory resulted in a reduction to
cost of goods sold of $11.2 million compared to an expense of $0.1
million in the three months ended September 30, 2010. The
reduction in cost of goods sold for the three months ended
September 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 September
30, 2011 were $8.0 million compared to $6.4 million during the
three months ended September 30, 2010. The increase is due to
higher volumes shipped. During the third quarter of 2011, we
marketed and distributed approximately 59.5 million gallons of
ethanol compared to 41.5 million gallons during the three months
ended September 30, 2010. On a per gallon basis, freight and
logistics costs were $0.08 per gallon for ethanol for the three
months ended September 30, 2011 compared to $0.11 per gallon for
the three months ended September 30, 2010.
Commodity spread, defined as gross ethanol selling price per
gallon less net corn cost per gallon, was $1.01 for the three
months ended September 30, 2011 compared to $0.88 for the three
months ended September 30, 2010.
|
|
|
Successor |
|
Three Months Ended September
30, 2011 |
Three Months Ended September
30, 2010 |
Commodity spread |
$ 1.01 |
$ 0.88 |
Average sales price per gallon of
ethanol |
$ 2.87 |
$ 1.80 |
Average purchase price per bushel of
corn |
$ 7.19 |
$ 3.83 |
Co-product revenue as a percentage of corn
costs |
31.2% |
37.5% |
SG&A expenses were $7.4 million during the third quarter of
2011 compared to $9.2 million during the third quarter of
2010. SG&A expenses in the three months ended September
30, 2011 were primarily comprised of $3.5 million of salary and
benefits expense, $(0.3) million of stock compensation
expense, $1.7 million of outside services expenses, $0.5 million of
depreciation expense, $0.4 million of expense related to materials
and supplies, and $1.5 million of other expenses. Included in
the three months ended September 30, 2011 totals are carrying costs
related to our Canton and Aurora West facilities of $0.9
million. During the third quarter of 2011, the Company
recognized a net benefit of $0.3 million in equity compensation
expense. This net benefit is primarily the result of the
modification of various equity awards granted to our Chief
Executive Officer, who left the company in August 2011. The
Company recognized a net benefit of $1.1 million as a result of the
equity award modifications. The Company also recognized
expense of $1.0 million related to payments made to the former
Chief Executive Officer upon his departure. SG&A expenses
in the three months ended September 30, 2010 were primarily
comprised of $2.8 million of salary and benefits expense, $1.3
million of stock compensation expense, $3.1 million of outside
services expenses, $0.4 million of expense related to materials and
supplies and $1.6 million of other expenses.
Interest expense for the three months ended September 30, 2011
was $7.1 million compared to $2.1 million for the three months
ended September 30, 2010. Interest expense for the three
months ended September 30, 2011 includes $6.0 million related to
the term loan facility under the Term Loan Agreement (the "Term
Loan Facility"), $0.3 million of other interest expense, and $0.9
million of amortization of deferred financing fees and original
issue discount, reduced by capitalized interest of $0.1 million.
Interest expense for the three months ended September 30, 2010
includes $4.2 million of interest expense related to the Notes,
reduced by capitalized interest of $2.2 million.
Loss on derivative transactions, net for the three months ended
September 30, 2011 includes $6.3 million of net realized and
unrealized losses on corn and ethanol derivative contracts versus
net realized and unrealized losses in the three months ended
September 30, 2010 of $0.2 million. In the second quarter of 2011,
we entered into commodity transactions using financial instruments,
including futures and swaps, to lock in future margin which was
present for July to December. As the broader industry
margins expanded, we experienced losses on these positions in our
brokerage account. We did not have the same opportunity to
lock in positive margins in 2010, and therefore did not have the
same exposure in the brokerage account. 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").
Other non-operating income of $1.9 million for the three months
ended September 30, 2011 compared to none for the three months
ended September 30, 2010 is primarily related to gains on legal
settlements with E-BioFuels and Union Tank. See the discussion
under "Q3 2011 Activity".
Our tax rate for the three months ended September 30, 2011 was
0.7% of pre-tax loss compared to a tax rate for the three months
ended September 30, 2010 of 15.3% of pre-tax loss. Our
effective tax rate differs from the statutory tax rate primarily
due to valuation allowances on our deferred taxes.
The Nine Months Ended September 30, 2011 Compared to the
Seven Months Ended September 30, 2010 and Two Months Ended February
28, 2010
Net sales were generated from the following products:
|
|
|
|
Successor |
Predecessor |
|
Nine Months Ended September 30,
2011 |
Seven Months Ended September 30,
2010 |
Two Months Ended February 28, 2010 |
|
(In millions) |
|
Ethanol |
$ 486.4 |
$ 179.4 |
$ 60.1 |
By-Products |
146.3 |
51.9 |
17.6 |
Total |
$ 632.7 |
$ 231.3 |
$ 77.7 |
The overall increase in net sales from the seven months ended
September 30, 2010 and two months ended February 28, 2010 to the
nine months ended September 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 nine months of 2011, we produced 177.3 million gallons of
ethanol compared to 102.5 million gallons and 32.0 million gallons
of ethanol, respectively, during the seven months ended September
30, 2010 and two months ended February 28, 2010. We marketed
and sold 185.6 million gallons of ethanol during the nine months
ended September 30, 2011 for an average sales price of $2.62 per
gallon compared to 105.6 million gallons at an average sales price
of $1.70 per gallon during the seven months ended September 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 794.2 thousand tons during the nine
months ended September 30, 2011 for an average price of $184.27 per
ton compared to 506.7 thousand tons during the seven months ended
September 30, 2010 for an average price of $102.44 per ton and
154.0 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 31.3% during the nine months
ended September 30, 2011 compared to 36.0% and 39.8%, respectively,
during the seven months ended September 30, 2010 and two months
ended February 28, 2010. Co-products sold by the dry mill
process have less value historically than those sold 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 first
nine months of 2010, to roughly 47% higher value wet mill products
and 53% lower value dry mill products during the first nine months
of 2011.
Cost of goods sold consists of corn costs, conversion 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 depreciation and
amortization which are discussed in detail below.
|
|
|
|
Successor |
Predecessor |
|
Nine Months Ended September
30, 2011 |
Percentage of
Net sales |
Seven Months Ended September
30, 2010 |
Percentage of
Net sales |
Two Months Ended February
28, 2010 |
Percentage of
Net sales |
|
|
|
|
|
|
|
Cost of goods sold |
$ 624.7 |
98.7% |
$ 223.0 |
96.4% |
$ 66.7 |
85.9% |
The increase in cost of goods sold from the seven months ended
September 30, 2010 and two months ended February 28, 2010 compared
to the nine months ended September 30, 2011 is principally the
result of higher volumes of ethanol produced and sold during the
first nine months 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 nine months ended September 30, 2011, seven
months ended September 30, 2010 and two months ended February 28,
2010 were $467.1 million, $144.0 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 66.6 million bushels of corn
in production during the first nine months of 2011 compared to 39.2
million bushels and 12.1 million bushels, respectively, used during
the seven months ended September 30, 2010 and two months ended
February 28, 2010. Additionally, during the nine months ended
September 30, 2011, corn used in production was approximately $7.01
per bushel compared to $3.68 per bushel for the seven months ended
September 30, 2010 and $3.66 per bushel for the two months ended
February 28, 2010. Our average corn costs during the first
nine months of 2011 were slightly higher than the CBOT average
price of $6.99 during the same period.
Conversion costs for the nine months ended September 30, 2011,
seven months ended September 30, 2010 and two months ended February
28, 2010 were as follows:
|
|
|
|
Successor |
Predecessor |
|
Nine Months Ended September
30, 2011 |
Seven Months Ended
September 30, 2010 |
Two Months Ended February 28,
2010 |
|
(In millions) |
|
Utilities |
$ 43.3 |
$ 20.7 |
$ 7.6 |
Salary and benefits |
17.7 |
11.9 |
3.3 |
Materials and supplies |
19.9 |
11.4 |
3.2 |
Denaturant |
9.3 |
3.9 |
1.4 |
Outside services |
10.2 |
4.1 |
0.5 |
Other |
1.5 |
1.7 |
0.6 |
|
$ 101.9 |
$ 53.7 |
$ 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 nine months ended September 30, 2011, $0.52 for the seven
months ended September 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 nine months ended
September 30, 2011, seven months ended September 30, 2010 and two
months ended February 28, 2010 was $17.4 million, $5.5 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 nine months ended September 30, 2011, seven
months ended September 30, 2010 and two months ended February 28,
2010, we purchased 6.7 million gallons, 0.9 million gallons and 0.2
million gallons, respectively. Purchased ethanol totaled $18.5
million, $1.5 million, and $0.4 million, respectively, for the nine
months ended September 30, 2011, seven months ended September 30,
2010 and two months ended February 28, 2010. The average cost
per gallon purchased was $2.77 during the nine months ended
September 30, 2011 compared to $1.64 during the seven months ended
September 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 $2.63 per gallon during the first nine months of 2011 from
an average of $1.72 per gallon during the first nine months of
2010.
As stated above, cost of goods sold includes 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 nine months ended
September 30, 2011, changes in inventory resulted in a reduction in
cost of goods sold of $7.4 million compared to reduction in cost of
goods sold of $0.4 million in the seven months ended September 30,
2010 and expense of $0.2 million in the two months ended February
28, 2010. The expense for the nine months ended September 30,
2011 was primarily the result of the quantity and value of ethanol
produced and sold during the first nine months of 2011.
Freight and logistics costs for the nine months ended September
30, 2011 were $25.5 million compared to $14.1 million and $3.4
million, respectively, for the seven months ended September 30,
2010 and two months ended February 28, 2010. The increase is
due to higher volumes shipped. During the first nine months of
2011, we marketed and distributed approximately 185.6 million
gallons of ethanol compared to 105.6 million gallons and 31.5
million gallons, respectively, during the seven months ended
September 30, 2010 and two months ended February 28, 2010. On
a per gallon basis, freight and logistics costs were $0.09 per
gallon, $0.10 per gallon and $0.08 per gallon, respectively, for
the nine months ended September 30, 2011, seven months ended
September 30, 2010 and two months ended February 28,
2010.
Commodity spread, defined as gross ethanol selling price per
gallon less net corn cost per gallon, was $0.81, $0.80 and $1.08,
respectively, for the nine months ended September 30, 2011, seven
months ended September 30, 2010 and two months ended February 28,
2010. The increase 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 |
|
|
Nine Months Ended September
30, 2011 |
Seven Month Ended September
30, 2010 |
Two Months Ended February 28,
2010 |
Commodity spread |
$ .81 |
$ .80 |
$ 1.08 |
Average sales price per gallon of
ethanol |
$ 2.62 |
$ 1.70 |
$ 1.91 |
Average purchase price per bushel of
corn |
$ 7.01 |
$ 3.68 |
$ 3.66 |
Co-product revenue as a percentage of corn
costs |
31.3% |
36.0% |
39.8% |
SG&A expenses were $26.4 million, $23.6 million, and $4.6
million, respectively, for the nine months ended September 30,
2011, seven months ended September 30, 2010 and two months ended
February 28, 2010. SG&A expenses in the nine months ended
September 30, 2011 were primarily comprised of $8.2 million of
salary and benefits expense, $4.8 million of stock compensation
expense, $5.0 million of outside services expenses, $1.5 million of
depreciation expense, $1.2 million of expense related to materials,
and $5.7 million of other expenses. Included in the nine
months ended September 30, 2011 totals are carrying costs related
to our Canton and Aurora West facilities of $3.3 million. SG&A
expenses for the seven months ended September 30, 2010 were
primarily comprised of $6.9 million of salary and benefits expense,
$4.1 million of stock compensation expense, $7.8 million of outside
services expenses, and $4.8 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 nine months ended September 30, 2011,
seven months ended September 30, 2010 and two months ended February
28, 2010 was $18.4 million, $5.2 million, and $1.4 million,
respectively. Interest expense for the nine months ended
September 30, 2011 includes $17.2 million related to the Term
Loan Facility, $1.1 million related to the Notes, $0.8 million of
other interest expense, and $2.2 million of amortization of
deferred financing fees, reduced by capitalized interest of $2.9
million. Interest expense for the seven months ended September 30,
2010 includes $8.2 million of interest expense related to the Notes
and $0.2 million of other interest expense, reduced by capitalized
interest of $3.2 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 on derivative transactions, net for the nine months ended
September 30, 2011 includes $6.6 million of net realized and
unrealized losses on corn and ethanol derivative contracts versus
net realized and unrealized gains in the seven months ended
September, 2010 of $0.2 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.
Other non-operating income of $1.9 million for the nine months
ended September 30, 2011 compared to $0.3 million for the nine
months ended September 30, 2010 is primarily related to gains on
legal settlements with E-BioFuels and Union Tank.
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 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 rate for the nine months ended September 30, 2011 was
0.1% of pre-tax loss compared to a tax benefit rate for the seven
months ended September 30, 2010 of 0.1% 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.
Q3 2011 Activity
On August 19, 2011, Thomas Manuel ("Mr. Manuel"), retired as
Chief Executive Officer of the Company. Mr. Manuel and the
Company entered into a mutual release agreement, dated August 19,
2011 (the "Release Agreement"), whereby the parties acknowledged
that Mr. Manuel would no longer serve as Chief Executive Officer of
the Company. Mr. Manuel also retired from his position as a
director of the Company, effective the same date. Pursuant to
the terms of the Release Agreement, Mr. Manuel received among other
things, (i) a separation payment of $1,000,000; (ii) the vesting of
his outstanding equity awards, effective as of August 19, 2011 and
(iii) his outstanding restricted stock units, which were settled on
October 18, 2011. Mr. Manuel's options and hybrid equity
units will remain exercisable until August 19, 2012
On September 3, 2009, Union Tank Car Company ("Union Tank")
filed notice of a claim against the Company with the U.S.
Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court") for a general unsecured claim in the amount of $82.6
million for certain estimated end charges including railcar
cleaning cost and unpaid rental payments for leased
railcars. Union Tank also filed an administrative claim
against the Company in the amount of $0.1 million for the alleged
use of railcars after the effective date of the rejection of the
leases for such railcars. . The Company disputed both of
these claims. On September 30, 2011, the Court ruled that the
claim shall be allowed in the amount of $27.6 million. Partial
distribution of shares on account was made October 31, 2011 in
accordance with the terms of the First Amended Joint Plan of
Reorganization under Chapter 11 of Title 11 of the U.S. Code (as
modified, the "Plan") and at such time as the distribution was made
to other holders of claims in classes five and six that were
allowed as of September 30, 2011. As a result of the
settlement on September 30, 2011, the Company reversed the related
reserve for this matter of $0.1 million through non-operating
income on the statement of operations.
The Company initiated a civil action against E-Biofuels in 2009
related to breach of agreement, and asked for not less than $3.0
million in compensation. This suit was later transferred to
the Bankruptcy Court and subsequently settled in the Company's
favor on July 6, 2011. Under the terms of the settlement, the
Company received $0.2 million in cash and 425,000 shares of
Imperial (E-Biofuels' parent company) stock. The stock
was valued at $0.7 million on the date of receipt of July 6,
2011. The Company also had previously recorded a liability
related to E-Biofuels taxes of $0.7 million which was relieved by
the settlement. The net gain of $1.6 million is included in
other non-operating income on the statement of operations. The
stock was booked as short-term investments which are classified as
available for sale securities on the balance sheet. For the
three and nine months ended September 30, 2011, the Company booked
a loss on available for sale securities of $0.3 million related to
the decrease in the current trading price of the stock which is
included in other comprehensive income on the statements of
stockholders' equity. These "Accumulated other comprehensive
income (loss)" ("OCI") adjustments are reported before tax effect
due to a valuation allowance fully offsetting the tax effect of
these adjustments.
Subsequent Events
On October 31, 2011, the Company commenced a pro-rata
distribution, consisting of 774,425 shares of common stock, to
holders of the Company's pre-petition notes and to holders of
allowed general unsecured claims, with 399,993 shares distributed
to holders of pre-petition notes and 374,432 shares to holders of
allowed general unsecured claims. Approximately 0.4 million
shares of common stock are reserved for future distributions to
these holders.
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 (which includes
gains and losses on derivative transactions) before interest
expense, interest income, income tax expense, and depreciation and
amortization. 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. 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, (vi) gain on resolution of bankruptcy issues, (vii)
loss on early retirement of debt, (viii) CEO retirement, (ix) E
BioFuels settlement, and (x) Union Tank settlement. 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 Sept. 30, 2011 |
For the Three Months
Ended Sept. 30, 2010 |
Statement of Operations Data: |
(In thousands) |
Net loss |
$ (11,177) |
$ (6,641) |
Interest income |
(8) |
(52) |
Interest expense (a) |
7,107 |
2,051 |
Income tax expense (benefit) |
74 |
881 |
Depreciation and amortization |
6,691 |
2,478 |
EBITDA |
$ 2,687 |
$ (1,283) |
|
|
|
Loss on early retirement of debt |
640 |
-- |
Stock-based compensation |
(284) |
1,263 |
Loss on available for sale securities |
-- |
1,753 |
Gains on resolution of bankruptcy issues |
-- |
(873) |
CEO Retirement |
1,014 |
-- |
E-BioFuels settlement |
(1,572) |
-- |
Union Tank settlement |
(90) |
-- |
Adjusted EBITDA |
$ 2,395 |
$ 860 |
|
|
|
(a) Interest capitalized
was $0.1 million and $2.2 million, respectively, for the three
months ended September 30, 2011 and
2010. |
|
|
|
|
|
|
Successor |
Predecessor |
|
For the Nine
Months Ended Sept. 30, 2011 |
For the Seven
Months Ended Sept. 30, 2010 |
For the Two
Months Ended February 28, 2010 |
Statement of Operations
Data: |
(In thousands) |
|
Net loss |
$ (54,320) |
$ (23,000) |
$ (266,293) |
Interest income |
(51) |
(67) |
-- |
Interest expense (b)(c) |
18,449 |
5,151 |
1,422 |
Income tax expense (benefit) |
45 |
(29) |
(626) |
Depreciation |
18,851 |
5,764 |
2,332 |
EBITDA |
$ (17,026) |
$ (12,181) |
$ (263,165) |
|
|
|
|
Stock-based compensation |
$ 4,845 |
$ 4,144 |
$ 277 |
Loss on early retirement of debt |
10,038 |
-- |
-- |
Loss on available for sale securities |
-- |
1,753 |
-- |
Gains on resolution of bankruptcy issues |
-- |
(873) |
|
CEO Retirement |
1,014 |
-- |
-- |
E-BioFuels settlement |
(1,572) |
-- |
-- |
Union Tank settlement |
(90) |
-- |
-- |
Reorganization items |
-- |
-- |
20,282 |
Gain due to plan effects |
-- |
-- |
(136,574) |
Loss due to fresh start accounting
adjustments |
-- |
-- |
387,655 |
Adjusted EBITDA |
$ (2,791) |
$ (7,157) |
$ 8,475 |
|
|
|
|
(b) Interest capitalized
was $2.9 million for the nine months ended September 30, 2011 and
$3.2 million for the seven months ended September 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. |
|
|
|
Aventine Renewable
Energy Holdings, Inc. and Subsidiaries |
Condensed Consolidated
Balance Sheets |
|
|
|
Successor |
|
September 30,
2011 |
December 31,
2010 |
|
(Unaudited) |
Assets |
(In thousands, except share and
per share amounts) |
Current assets: |
|
|
Cash and cash equivalents |
$ 22,101 |
$ 34,533 |
Restricted cash |
5,752 |
164,765 |
Short-term investments |
429 |
-- |
Accounts receivable, net of allowance for
doubtful accounts of $51 in 2011 and $75 in 2010 |
12,701 |
11,571 |
Inventories |
52,039 |
44,179 |
Income taxes receivable |
917 |
954 |
Prepaid expenses and other current
assets |
9,336 |
14,185 |
Total current assets |
103,275 |
270,187 |
|
|
|
Property, plant and equipment, net |
297,608 |
296,289 |
Restricted cash |
-- |
16,211 |
Other assets |
14,969 |
11,291 |
Total assets |
$ 415,852 |
$ 593,978 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities: |
|
|
Current maturities of long-term
debt |
$ 2,282 |
$ 157,718 |
Current obligations under capital
leases |
282 |
789 |
Accounts payable |
18,471 |
23,311 |
Short term borrowings |
6,000 |
-- |
Accrued liabilities |
3,193 |
4,906 |
Other current liabilities |
15,308 |
10,589 |
Total current liabilities |
45,536 |
197,313 |
|
|
|
Long-term debt |
214,284 |
190,239 |
Deferred tax liabilities |
2,027 |
2,026 |
Other long-term liabilities |
2,641 |
2,742 |
Total liabilities |
264,488 |
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 September 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 |
231,653 |
227,360 |
Retained deficit |
(79,784) |
(25,464) |
Accumulated other comprehensive loss,
net |
(513) |
(246) |
Total stockholders' equity |
151,364 |
201,658 |
Total liabilities and stockholders'
equity |
$ 415,852 |
$ 593,978 |
Aventine Renewable
Energy Holdings, Inc. and Subsidiaries |
Condensed Consolidated
Statements of Cash Flows |
(Unaudited) |
|
|
|
|
Successor |
Predecessor |
|
Nine Months Ended September
30, 2011 |
Seven Months Ended September
30, 2010 |
Two Months Ended February 28,
2010 |
|
(In thousands) |
|
Operating Activities |
|
|
|
Net loss |
$ (54,320) |
$ (23,000) |
$ (266,293) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
|
Provision for rejected
executory contracts and leases |
-- |
-- |
9,590 |
Depreciation and
amortization |
21,609 |
6,411 |
2,795 |
Stock-based compensation
expense |
4,845 |
4,144 |
277 |
Deferred income tax |
-- |
(910) |
-- |
Loss on Renewable
Identification Numbers (RINs) |
99 |
-- |
-- |
Non-cash gain due to plan
effects |
-- |
-- |
(136,574) |
Non-cash loss due to fresh
start accounting adjustments |
-- |
-- |
387,655 |
Loss on early retirement of
debt |
10,038 |
-- |
-- |
Non-cash loss on
available-for-sale securities |
-- |
1,753 |
-- |
Changes in operating assets and
liabilities: |
|
|
|
Accounts receivable, net |
(1,130) |
(209) |
2,560 |
Income tax receivable |
37 |
-- |
-- |
Inventories |
(7,860) |
2,164 |
1,543 |
Prepaid expenses and other
current assets |
882 |
1,713 |
-- |
Other assets |
569 |
(2,517) |
1,339 |
Accounts payable |
(4,839) |
(6,049) |
7,061 |
Other liabilities |
2,487 |
1,854 |
(21,640) |
Net cash used in operating activities |
(27,583) |
(14,646) |
(11,687) |
Investing Activities |
|
|
|
Additions to property, plant and equipment,
net |
(20,171) |
(50,537) |
(2,086) |
Canton, Illinois facility acquisition |
-- |
(18,613) |
-- |
Net cash used in investing activities |
(20,171) |
(69,150) |
(2,086) |
Financing Activities |
|
|
|
Proceeds from the issuance of debt |
25,000 |
-- |
-- |
Repayment of senior secured notes |
(155,000) |
-- |
-- |
Payment of term loan |
(1,625) |
-- |
-- |
Draw on revolving facility |
6,000 |
-- |
-- |
Repayment of short-term note payable |
(21) |
(5,252) |
|
Restricted cash |
175,225 |
(3,783) |
(7,833) |
Penalty on early retirement of debt |
(8,350) |
-- |
-- |
Payments on capital lease obligations |
(646) |
(153) |
-- |
Long-term liabilities assumed on Canton,
Illinois facility |
-- |
1,745 |
-- |
Proceeds from issuance of senior
secured notes |
-- |
50,750 |
98,119 |
Debt issuance costs |
(5,266) |
(2,546) |
(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 |
5 |
6 |
-- |
Proceeds from stock option exercises |
-- |
-- |
96 |
Net cash provided by financing
activities |
35,322 |
40,412 |
46,427 |
Net increase (decrease) in cash and
equivalents |
(12,432) |
(43,384) |
32,654 |
Cash and equivalents at beginning of the
period |
34,533 |
85,239 |
52,585 |
Cash and equivalents at end of the
period |
$ 22,101 |
$ 41,855 |
$ 85,239 |
Liquidity and Capital Resources
The following table sets forth selected information concerning
our financial condition:
|
September 30,
2011 |
December 31,
2010 |
|
(In millions, except current
ratio) |
Cash and cash equivalents |
$22.1 |
$34.5 |
Net working capital |
$57.7 |
$72.9 |
Total debt (1) |
$222.8 |
$348.7 |
Current ratio |
2.27 |
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: Aventine Renewable Energy Holdings, Inc.
Calvin Stewart, Interim Chief Financial Officer
(214) 451-6766
Calvin.Stewart@aventinerei.com
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