Pacific Ethanol, Inc. Announces Second Quarter Results and Provides New Details on Ethanol Production Projects
Friday August 18, 8:51 am ET
Highlights -- Net sales for Q2 of 2006 approximately double those of Q2 of 2005
-- Company closed on over $220 million in equity financings
-- Strong cash position
-- Construction of plants in California and Oregon continue on schedule for completion in Q4 of 2006 and Q2 of 2007, respectively
-- Three additional ethanol plant projects in advanced stages of development
-- Key executive group strengthened -- key positions filled
-- Board of Directors strengthened -- new board members appointed
FRESNO, Calif., Aug. 18 /PRNewswire-FirstCall/ -- Pacific Ethanol, Inc. (Nasdaq: PEIX - News) today reported operating results for the three and six months ended June 30, 2006.
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Three Months Ended June 30, 2006
For the quarter ended June 30, 2006, the Company reported net sales of $46.5 million, an increase of $23.6 million, or 104%, as compared to $22.8 million for the second quarter of 2005. This increase in net sales resulted from an increase in the Company's sales volume of approximately 4.2 million gallons, or 27%, to 19.8 million gallons from 15.6 million gallons for the second quarter of 2005 and an increase in the Company's average price of ethanol by $0.99, or 68%, to $2.45 per gallon from $1.46 per gallon for the second quarter of 2005.
Gross profit for the second quarter of 2006 totaled $3.3 million, as compared to $151,525 for the second quarter of 2005. Gross profit as a percentage of net sales increased to 7.1% for the quarter ended June 30, 2006 as compared to 0.7% for the same period in 2005. The increase in gross profit as a percentage of net sales and the increase of total gross profit are attributable to the Company's net long position on ethanol purchases, which provided the Company with significant supply volumes at prices that had been contracted for prior to an increase in ethanol market prices.
Net loss for the second quarter of 2006 decreased to $182,373, as compared to $2.2 million for the second quarter of 2005. The Company reported basic and diluted loss per common share of $2.56 for the second quarter of 2006 as compared to $0.08 for the same period in 2005. Approximately $2.53 of the total $2.56 in basic and diluted loss per common share is due to the Company recording a deemed dividend on its preferred stock in the amount of $84 million. This one-time non-cash, non-recurring dividend is to reflect the implied economic value to the preferred stockholder of being able to convert its shares into common stock at a price which is in excess of the fair value of the preferred stock on the date of issuance. Absent this one-time deemed dividend, the Company would have reported basic and diluted loss per common share of $0.03 for the second quarter of 2006.
Six Months Ended June 30, 2006
The Company's results of operations for the six months ended June 30, 2005 include the operations of the Company's wholly-owned subsidiary, Kinergy Marketing, LLC, only from March 23 through June 30, 2005. Kinergy's net sales for the period from January 1 through March 22, 2005 were approximately $23.6 million and, along with other components of Kinergy's results of operations, are not included in the Company's results of operations for the six months ended June 30, 2005. The Company's results of operations for the six months ended June 30, 2006 consist of the operations of the Company and all of its wholly-owned subsidiaries, including Kinergy, for that entire period.
For the six months ended June 30, 2006, the Company reported net sales of $84.7 million, an increase of $59.6 million, or 237%, as compared to $25.1 million for the same period in 2005. A substantial portion of the increase was attributable to the exclusion of Kinergy's net sales for the period from January 1 through March 22, 2005 from the Company's results of operations for the six months ended June 30, 2005. For the six months ended June 30, 2006, sales volume increased by 22.7 million gallons, or 134%, to 39.7 million gallons from 17.0 million gallons for the six months ended June 30, 2005 and the Company's average sales price of ethanol increased by $0.70 per gallon, or 47%, to $2.18 per gallon from $1.48 per gallon for the six months ended June 30, 2005.
Gross profit for the six months ended June 30, 2006 increased by $5.4 million to $5.6 million, as compared to $199,152 for same period in 2005. Gross profit as a percentage of net sales increased to 6.7% for the six months ended June 30, 2006 as compared to 0.8% for the same period in 2005. Gross profit increased partly as a result of the exclusion of Kinergy's gross profit for the period from January 1 through March 22, 2005 from the Company's results of operations for the six months ended June 30, 2005. The increase in gross profit as a percentage of net sales and the increase in total gross profit are also attributable to the Company's net long position on ethanol purchases, which provided the Company with significant supply volumes at prices that had been contracted for prior to the increase in ethanol market prices.
Net loss for the six months ended June 30, 2006 totaled $794,137 as compared to $3.9 million for the same period in 2005. The Company reported basic and diluted loss per common share of $2.73 for the six months ended June 30, 2006 as compared to $0.18 for the same period in 2005. Approximately $2.67 of the total $2.73 in basic and diluted loss per common share is due to the Company recording a deemed dividend on its preferred stock as described above. Absent this one-time deemed dividend, the Company would have reported basic and diluted loss per common share of $0.05 for the six months ended June 30, 2006.
As of June 30, 2006, the Company had cash totaling approximately $200 million (including restricted cash for plant construction and acquisitions in the amount of approximately $60 million). The Company's significant cash position is predominantly due to the completion of two equity financings during the second quarter of 2006.
Neil Koehler, President and Chief Executive Officer, commented, "The second quarter was a pivotal one for Pacific Ethanol on many fronts, and we are happy to observe that the Company is substantially stronger than it was just three months ago. We secured enough financing to accelerate our plant build-out program and broke ground on a second plant in Boardman, Oregon. The number of gallons of ethanol sold during the second quarter of 2006 increased by 27% over the number of gallons sold during the second quarter of 2005. Despite substantial costs associated with accounting, legal and other professional fees associated with our corporate finance activities and other investments in software and systems, our net loss showed substantial improvement over last year."
Mr. Koehler also noted that, "We are now in advanced stages of development of three additional ethanol plants in two Western states. We expect to begin construction on all of these sites before the end of the first quarter of 2007. When combined with our existing plant sites in Madera, California, and Boardman, Oregon, we expect that our total annual nameplate capacity will be 220 million gallons by mid-2008, putting us six months ahead of our earlier stated goals of achieving that level of production by the end of 2008. Combined with other projects currently under development, we are ahead of schedule to reach total annual nameplate capacity of 420 million gallons by 2010."
Bill Jones, Chairman of the Board, added "During the second quarter, we continued to add valuable members to our senior management team and our Board of Directors with the appointments of John Miller as Chief Operating Officer and Christopher Wright as General Counsel, and the appointments of Douglas Kieta and Robert Thomas to our Board. We anticipate further expansion of our management in the months ahead as we bring plants on line and expand the number of construction projects under way."
A copy of the Company's Form 10-Q is available at www.pacificethanol.net and www.sec.gov.
About Pacific Ethanol
The primary goal of Pacific Ethanol, Inc. is to become the leader in the development, production and marketing of renewable fuels in the Western United States. Established in 2003, Pacific Ethanol is constructing its first large scale ethanol production facilities in Madera County, California and Boardman, Oregon and is developing additional facilities in the Western United States. Pacific Ethanol, through its wholly-owned subsidiary, Kinergy Marketing, LLC, is the largest West Coast-based marketer of ethanol. In addition, Pacific Ethanol is working to identify and develop other renewable fuel technologies such as cellulose-based ethanol production and bio-diesel.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. The actual future results of Pacific Ethanol could differ from those statements. Factors that could cause or contribute to such differences include, but are not limited to, the ability of Pacific Ethanol to successfully and timely complete construction of its ethanol plants in Madera County, California and Boardman, Oregon; the ability of Pacific Ethanol to accelerate, maintain and timely complete its plant build-out program for additional ethanol plants and to successfully capitalize on its other internal growth initiatives; the ability of Pacific Ethanol to obtain all necessary financing to complete the construction of its planned ethanol production facilities; the ability of Pacific Ethanol to operate its plants at their planned production capacity; the price of ethanol relative to the price of gasoline; and those factors contained in the "Risk Factors" section of Pacific Ethanol's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006 filed with the Securities and Exchange Commission on August 18, 2006.
PACIFIC ETHANOL, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2006 AND DECEMBER 31, 2005
ASSETS June 30, December 31,
2006 2005
(unaudited)
Current Assets:
Cash and cash equivalents $139,994,795 $4,521,111
Restricted cash 893,878 --
Investments in marketable securities -- 2,750,000
Accounts receivable (including
$661,839 and $937,713 as of
June 30, 2006 and December 31, 2005,
respectively, from related parties) 12,764,801 4,947,538
Notes receivable - related party -- 135,995
Inventories 2,973,345 362,972
Prepaid expenses 321,422 626,575
Prepaid inventory 649,030 1,349,427
Derivative instruments 1,770,282 --
Other current assets 1,560,872 86,054
Total current assets 160,928,425 14,779,672
Property and Equipment, net 52,049,443 23,208,248
Restricted cash for plant construction
and acquisitions 60,175,169 --
Goodwill 2,565,750 2,565,750
Intangible assets, net 7,215,839 7,568,723
Other assets 227,803 62,419
Total Assets $283,162,429 $48,184,812
PACIFIC ETHANOL, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2006 AND DECEMBER 31, 2005
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31,
2006 2005
(unaudited)
Current Liabilities:
Current portion - related party
note payable $2,123,978 $1,200,000
Accounts payable - trade 10,894,201 4,755,235
Accounts payable - related party 4,660,049 6,411,618
Accrued retention - related party 2,510,794 1,450,500
Accrued payroll 279,672 433,887
Other accrued liabilities 3,829,163 3,422,565
Total current liabilities 24,297,857 17,673,805
Related-Party Notes Payable,
Net of Current Portion -- 1,995,576
Total Liabilities 24,297,857 19,669,381
Commitments and Contingencies (Note 7)
Stockholders' Equity:
Preferred stock, $0.001 par value;
10,000,000 shares authorized:
Series A Cumulative Redeemable
Convertible Preferred Stock,
5,250,000 and 0 shares issued
and outstanding and aggregate
liquidation preference of
$84,897,534 and $0 as of
June 30, 2006 and
December 31, 2005, respectively 5,250 --
Common stock, $0.001 par value;
100,000,000 shares authorized,
37,223,236 and 28,874,442 shares
issued and outstanding as of
June 30, 2006 and
December 31, 2005, respectively 37,223 28,874
Additional paid-in capital 358,356,147 43,697,486
Unvested consulting expense (1,048,014) (1,625,964)
Accumulated other comprehensive income 790,602 --
Due from stockholders (600) (600)
Accumulated deficit (99,276,036) (13,584,365)
Total stockholders' equity 258,864,572 28,515,431
Total Liabilities and
Stockholders' Equity $283,162,429 $48,184,812
PACIFIC ETHANOL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Net sales (including
$2,722,864, $8,584,749,
$1,496,178 and $1,849,236
for the three and six months
ended June 30, 2006
and 2005, respectively,
to a related
party) $46,461,077 $22,814,433 $84,700,244 $25,116,430
Cost of goods sold 43,153,457 22,662,908 79,067,377 24,917,278
Gross profit 3,307,620 151,525 5,632,867 199,152
Operating expenses:
Selling, general
and administrative
expenses 4,758,996 2,393,071 7,743,080 3,136,304
Services rendered
in connection with
feasibility study -- -- -- 852,250
Loss from
operations (1,451,376) (2,241,546) (2,110,213) (3,789,402)
Other income
(expense), net 1,277,479 18,294 1,329,257 (89,559)
Income (loss)
before provision
for income taxes (173,897) (2,223,252) (780,956) (3,878,961)
Provision for
income taxes 8,476 3,200 13,181 4,800
Net loss $(182,373) $(2,226,452) $(794,137) $(3,883,761)
Preferred stock
dividends $(897,534) $-- $(897,534) $--
Deemed dividend on
preferred stock (84,000,000) -- (84,000,000) --
Loss available to
common
stockholders $(85,079,907) $(2,226,452) $(85,691,671) $(3,883,761)
Weighted average
shares outstanding 33,214,606 27,977,127 31,410,920 21,415,102
Basic and diluted
loss per
common share $(2.56) $(0.08) $(2.73) $(0.18)
PACIFIC ETHANOL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Net loss $(182,373) $(2,226,452) $(794,137) $(3,883,761)
Other comprehensive
income, net of tax:
Cash flow hedges:
Net change in
the fair value
of derivatives,
net of tax 116,394 -- 790,602 --
Comprehensive loss $(65,979) $(2,226,452) $(3,535) $(3,883,761)
PACIFIC ETHANOL, INC.
PRO FORMA SUMMARY OF NON-GAAP ADJUSTMENTS TO BASIC
AND DILUTED LOSS PER COMMON SHARE TO REFLECT EXCLUSION OF DEEMED
DIVIDEND ON PREFERRED STOCK
Three Months Ended Six Months Ended
June 30, 2006 June 30, 2006
(unaudited) (unaudited)
Actual Pro Forma Actual Pro Forma
Net loss $(182,373) $(182,373) $(794,137) $(794,137)
Preferred stock
dividends $(897,534) $(897,534) $(897,534) $(897,534)
Deemed dividend on
preferred stock (84,000,000) -- (84,000,000) --
Loss available
to common
stockholders $(85,079,907) $(1,079,907) $(85,691,671) $(1,691,671)
Weighted average
shares outstanding 33,214,606 33,214,606 31,410,920 31,410,920
Basic and diluted
loss per common
share $(2.56) $(0.03) $(2.73) $(0.05)
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Source: Pacific Ethanol, Inc. |
