Aemetis, Inc. — FY 2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014. The filing also provides unaudited quarterly results; this is an annual report, not a standalone fourth-quarter filing. Aemetis operates a 55-million-gallon-per-year ethanol plant in Keyes, California, and a 50-million-gallon-per-year biodiesel plant in Kakinada, India.
Financial performance and liquidity
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | $207.7 million | $177.5 million |
| Gross profit | $37.1 million | $18.3 million |
| Gross margin | 17.9% | 10.3% |
| Operating income | $24.1 million | $2.5 million |
| Net income (loss) | $7.1 million | $(24.4) million |
| Diluted earnings (loss) per share | $0.34 | $(1.28) |
| Net cash from (used in) operations | $20.6 million | $(1.7) million |
Cash and cash equivalents fell to $0.3 million from $4.9 million. Current assets were $7.9 million versus current liabilities of $27.3 million; the reported current ratio was 0.29. Total debt was $77.3 million, including $64.6 million of long-term debt. Stockholders’ deficit improved to $3.0 million from $12.8 million.
Fourth quarter: Revenue was $41.5 million, gross profit $2.5 million, operating loss $1.0 million, and net loss $3.7 million. Quarterly revenue and gross profit declined sequentially during 2014.
Material changes versus prior year
- Revenue increased 17.0%, led by North America, where revenue rose 35.1% to $195.4 million. Keyes ethanol sales volume increased 42% to 60.2 million gallons, while average selling price declined 3% to $2.54 per gallon. WDG volume rose 36%, while its average price fell 9%.
- North American gross profit increased to $36.7 million from $14.2 million, principally because corn costs fell faster than ethanol prices. The Keyes plant averaged 109% of nameplate capacity.
- India revenue fell 62.6% to $12.3 million and gross profit fell to $0.4 million from $4.1 million. Biodiesel sales volume declined 53% and refined glycerin volume declined 54%; management cited commissioning of the distillation unit and fewer international shipments.
- Profitability improved despite substantial financing costs: interest expense, debt amortization and debt-extinguishment losses totaled approximately $16.9 million, down from $26.9 million in 2013.
- Operating cash flow turned positive, but financing activities used $23.2 million, largely reflecting debt repayments; cash declined by $4.6 million for the year.
Outlook, risks, contingencies and unusual items
- Management expects operations, additional EB-5 funding, refinancing, working-capital facilities, and improved India sales to support operations for the foreseeable future, but states there is no assurance of adequate cash flow or financing. No specific earnings or revenue guidance is provided.
- Third Eye Capital notes had approximately $57.6 million outstanding at year-end and were due July 1, 2015, with an option to extend to January 2016 for a fee. The filing identifies refinancing and repayment as material risks. A March 2015 amendment permitted a roughly $5.5 million share repurchase, with the price added to the debt balance, and waived certain covenants.
- The company had only $0.3 million of cash at year-end and depended on working-capital arrangements with J.D. Heiskell in the U.S. and Secunderabad Oils in India. Its reported current ratio was 0.29.
- At December 31, 2014, $22.0 million of EB-5 subscriptions were held in escrow pending immigration-agency approval. By the filing date, $18.5 million associated with 37 investors had been authorized for release; approval and timing remained uncertain.
- India subsidiary UBPL remained in default on its State Bank of India loan. The lender’s recovery case could result in seizure of the Kakinada facility; the filing cites approximately $5 million in the case and elsewhere refers to a higher demand amount. Default interest was accruing.
- Commodity spreads are volatile. Management said ethanol prices declined significantly after October 2014, narrowing margins. The company also faces feedstock, energy, currency, regulatory, customer-concentration and financing risks.
- The GS Cleantech corn-oil patent claims were found invalid by the court, but a remaining claim and potential appeal remained. The company said damages could be $1 million or more if the invalidity ruling were successfully appealed. The UBS dispute related to the Cilion acquisition was settled in 2014.
- Other notable items: the company completed a 1-for-10 reverse stock split and began Nasdaq Global Market trading in June 2014; it reported no off-balance-sheet arrangements. Management and the auditor concluded internal control over financial reporting was effective.
Most important facts for investors to verify
- Whether Third Eye Capital debt was refinanced, extended or repaid at maturity, and the impact of the March 2015 share repurchase and related amendments on leverage and covenants.
- How much EB-5 funding was ultimately released from escrow, when it became available, and whether additional subscriptions were secured.
- Subsequent cash balances, operating cash flow and liquidity, given the year-end cash balance of $0.3 million and 0.29 current ratio.
- Whether ethanol and corn margins recovered after the late-2014 price decline, and whether the Keyes plant sustained its production and margins.
- Whether India biodiesel volumes and margins improved following diesel subsidy removal, distillation completion and access to European markets.
- Developments in the State Bank of India default and recovery proceedings, including potential exposure to the Kakinada plant.
- Final outcome of the remaining GS Cleantech claim and any appeal of the patent-invalidity decision.