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Pacific Ethanol Reports Profitable Third Quarter 2014 Results

October 29,2014

Screen Shot 2014-10-29 at 2.52.30 PMSacramento-based Pacific Ethanol reported a profitable third quarter as well as 9 months this week – beating earnings estimates.

“We delivered solid financial results for the third quarter of 2014, supported by efficient operations and continued strong ethanol market fundamentals,” stated Neil Koehler, the company’s president and CEO. “Over the last twelve months, Pacific Ethanol generated adjusted EBITDA of $96.9 million. To sustain our profitable growth, we are implementing several capital expenditure projects to improve efficiencies, diversify feedstock and develop our advanced biofuel initiatives.”

Analysts had estimated 21 cents EPS and the company reported 33 cents earnings per diluted share.Revenue also beat estimates.

The company’s stock had been under pressure until a few days ago as lower ethanol prices followed gasoline down – hurting margins.  The price of ethanol has dropped more than 50 cents in September. But the industry’s main input – corn is also much cheaper this fall than a year ago and going forward. Their stock fell in September from a high of around $25 down to $10 in October until the past few days rising to near $13.It is down today in after hours trading to $11.50.

For the third quarter Pacific Ethanol sold West Coast ethanol at an average price of $2.32 a gallon compared to $2.62 a for the third quarter of 2013.

They paid $5.15 a bushel for delivered corn in the latest quarter  compared to $7.44 in the quarter a year ago.

Financial Results for the Three Months Ended September 30, 2014

Net sales were $275.6 million, an increase of 18%, compared to $233.9 million for the third quarter of 2013. The company’s increase in net sales is attributable to its record total gallons sold resulting from increases in both production and third party gallons.

Gross profit was $18.0 million, compared to $3.5 million for the third quarter of 2013. The improvement in gross profit was driven by significantly improved production margins and corn oil production.

Selling, general and administrative (“SG&A”) expenses were $4.4 million, compared to $2.5 million for the third quarter of 2013. The increase in SG&A is primarily due to an increase in compensation costs tied to the company’s continued profitable results and an increase in professional fees from higher corporate and plant activities.

Operating income was $13.6 million, compared to $1.0 million for the third quarter of 2013.

Fair value adjustments and warrant inducements were $4.4 million, including $1.5 million in warrant inducements in July 2014, as well as $2.9 million in adjustments for intra-quarter warrant exercises. As of October 29th, the company had less than one million warrants remaining outstanding.

Interest expense, net, was $1.1 million, compared to $4.5 million for the third quarter of 2013. This reduction is due to significantly lower debt balances in 2014.

Net income available to common stockholders was $3.7 million, or $0.15 per diluted share, compared to a net loss of $5.3 million, or a $0.40 loss per diluted share for the third quarter of 2013.

Adjusted net income, which excludes fair value adjustments and warrant inducements and extinguishments of debt, was $8.1 million, or $0.33 per diluted share, compared to an adjusted net loss of $3.5 million, or a $0.26 loss per diluted share, for the third quarter of 2013.
Adjusted EBITDA was $15.5 million, compared to $3.4 million for the third quarter of 2013.

Cash at September 30, 2014 was $56.3 million, compared to $5.2 million at December 31, 2013.

Bryon McGregor, the company’s CFO, stated: “During the third quarter, we further strengthened our balance sheet and operating liquidity. Since December 31, 2013, we increased our cash balances by over $51.1 million. As a result, our working capital increased to approximately $93.3 million from $51.2 million at the end of 2013.”
Financial Results for the Nine Months Ended September 30, 2014
Net sales were $851.3 million, compared to $693.1 million in the same period of 2013.

Net income available to common stockholders was $7.8 million, or $0.35 per diluted share, compared to a net loss of $10.3 million, or a $0.91 loss per diluted share, in the same period of 2013.

Adjusted net income was $49.9 million, or $2.26 per diluted share, compared to an adjusted net loss of $10.0 million, or an $0.88 loss per diluted share, for the same period of 2013.

Adjusted EBITDA was $78.7 million, compared to $10.4 million for the same period of 2013.

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