Aemetis, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2014. Amounts are in millions of U.S. dollars unless stated otherwise. Financial statements are unaudited. Aemetis operates an ethanol plant in Keyes, California, and a biodiesel and refining facility in Kakinada, India.
Financial performance
| Metric | Q2 2014 | Q2 2013 | Six months 2014 | Six months 2013 |
|---|---|---|---|---|
| Revenue | $57.195 | $47.353 | $117.860 | $66.773 |
| Gross profit | $11.353 | $3.751 | $26.977 | $3.998 |
| Gross margin | 19.9% | 7.9% | 22.9% | 6.0% |
| Operating income (loss) | $7.763 | $(0.357) | $20.445 | $(4.554) |
| Net income (loss) | $2.722 | $(9.593) | $10.409 | $(19.406) |
| Basic earnings (loss) per share | $0.13 | $(0.51) | $0.52 | $(1.04) |
Revenue increased 20.8% in Q2 and 76.5% for the first half. North American revenue rose substantially as the Keyes plant operated throughout the 2014 periods, versus extended downtime in 2013. Keyes production averaged 108% of nameplate capacity in Q2 and 113% for the first half. Lower corn costs and higher production improved North American gross profit. India revenue fell 72.3% in Q2 and 79.3% for the first half, and India gross profit fell to $0.067 million in Q2 and $0.020 million for the first half.
Six-month operating cash flow was $19.287 million, compared with cash used of $5.787 million in the prior-year period. Investing activities used $0.368 million, mainly for capital expenditures; financing activities used $19.055 million, principally reflecting debt repayments. Cash declined by $0.146 million to $4.780 million from year-end 2013.
Financial position and material changes
- At June 30, cash was $4.780 million, current assets $12.771 million, and current liabilities $30.915 million; the reported current ratio was 0.41, versus 0.35 at December 31, 2013.
- Total debt was $77.447 million, down from $91.758 million at year-end. Long-term debt was $65.301 million; the debt schedule shows $12.148 million due in the twelve months ending June 30, 2015. Stockholders’ deficit improved to $1.083 million from $12.767 million.
- The Third Eye Capital notes totaled approximately $58.5 million in principal, interest and fees, net of discounts. The facility had no remaining borrowing availability and was extended to July 1, 2015. The May amendment set the Term Notes’ rate at 14% and added a $2.0 million extension fee plus an escalating monitoring fee beginning January 2015.
- A 1-for-10 reverse stock split took effect May 15, 2014; all presented share and per-share data reflect it. Trading on the Nasdaq Global Market began June 5, 2014.
Outlook, risks and unusual items
- Management cited favorable ethanol and co-product prices relative to corn and energy costs, but warned that operating cash flow depends on volatile commodity prices and spreads. The filing provides no numerical earnings or revenue guidance.
- Management plans to sustain Keyes operations, use lower-cost non-food feedstocks, raise additional EB-5 financing, refinance senior debt, restructure the India bank loan, and increase international shipments from India. Management stated there is no assurance that operations, borrowing or other financing will provide sufficient liquidity.
- The Third Eye Capital debt matures July 1, 2015. The company said it intended to repay or refinance it through operating cash flow, EB-5 notes, refinancing or equity financing; it had engaged an investment bank to explore financing alternatives.
- The India subsidiary remained in default on principal, interest and covenants under its State Bank of India loan. The bank’s recovery action seeks approximately $5.0 million; an interim stay was obtained subject to payments. An adverse outcome could result in a recovery decree, including seizure of company property.
- Other legal matters include a $2.3 million UBS judgment already accrued, a separate UBS complaint against a subsidiary, and a patent-infringement case concerning corn-oil extraction. The company disputes the patent claims; the outcome is uncertain.
- The company accrued an obligation to repay California ethanol incentive funding as crush spreads strengthened; the filing reports a $1.5 million balance at June 30, versus $0.1 million at year-end, and describes $1.8 million of repayment obligation accrued during the first half.
- After quarter-end, July 1 amendments extended certain subordinated notes to no later than December 31, 2014, subject to earlier triggers, and granted warrants. The company recorded an approximately $1.2 million debt-extinguishment loss in July.
- Revenue concentration is significant: J.D. Heiskell-related ethanol and WDG sales represented 98% of North American segment revenue in Q2; three customers represented approximately 96% of India segment revenue.
Key facts for investors to verify
- Whether Keyes can maintain favorable operating margins and elevated production, and whether commodity spreads remain supportive.
- Progress and terms of refinancing the approximately $58.5 million Third Eye Capital obligations before their July 2015 maturity, including fees, covenants and cash-sweep requirements.
- Availability of additional EB-5 financing and other liquidity, given the low current ratio and lack of remaining Third Eye borrowing capacity.
- Status and potential consequences of the State Bank of India default and recovery proceedings, and the UBS and patent litigation.
- Whether India can restore biodiesel sales and reduce customer and shipment concentration.
- Debt and liquidity figures, including the filing’s stated repayment schedule and CEPIP repayment accrual; confirm details in the notes and subsequent filings.