Aemetis, Inc. — FY2013 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2013; it is not a quarterly-only filing. Aemetis operates an ethanol plant in Keyes, California, and a biodiesel and refining facility in Kakinada, India, and is developing renewable fuels and chemicals technologies. The audited financial statements received an unqualified opinion from McGladrey LLP.
Key financial results
| Metric | 2013 | 2012 |
|---|---|---|
| Revenue | $177.5 million | $189.0 million |
| Gross profit (loss) | $18.3 million | ($8.9 million) |
| Operating income (loss) | $2.5 million | ($21.2 million) |
| Net loss | ($24.4 million) | ($4.3 million) |
| Net cash used in operations | $1.7 million | $16.9 million |
| Cash and cash equivalents at year-end | $4.9 million | $0.3 million |
| Total debt, net of discounts | $91.8 million | $70.0 million |
| Current assets / current liabilities | $12.7 million / $36.1 million | $6.8 million / $57.8 million |
| Stockholders’ equity (deficit) | ($12.8 million) | $3.5 million |
Gross margin was approximately 10.3% in 2013, versus a gross loss in 2012. The reported current ratio improved to 0.35 from 0.13, but current liabilities still substantially exceeded current assets. Interest expense, debt-issuance-cost amortization, and debt-extinguishment losses totaled approximately $28.0 million in 2013. Cash from financing activities was $6.2 million; investing activities provided $0.2 million.
Material changes versus 2012
- Revenue fell 6.1% overall. North America revenue declined 17.6%, mainly because the Keyes plant operated for about nine months after being idled from January 15 to April 22, 2013. India revenue rose 142.2%, including resumed European biodiesel sales.
- North America gross profit improved to $14.2 million from an $8.3 million loss; India gross profit improved to $4.1 million from a $0.6 million loss.
- Full-year net loss increased substantially, in part because 2012 included a $42.3 million bargain-purchase gain from the Cilion acquisition. The 2013 loss also included $3.7 million of debt-extinguishment losses and significant debt-related interest and amortization charges.
- Year-end debt increased by approximately $21.7 million, while accumulated deficit reached $94.2 million. Common shares outstanding rose from 180.3 million to 199.7 million during 2013.
- Fourth-quarter 2013 revenue was $54.1 million, operating income was $8.0 million, and net income was $3.3 million, compared with losses for the first three quarters. The filing does not establish that this quarterly result represents a sustainable trend.
Operations, outlook, and principal risks
- North America: Keyes produced and sold about 42.4 million gallons of ethanol in 2013, down 20% from 2012; the average selling price rose 5% to $2.62 per gallon. The EPA approved a grain-sorghum-and-biogas pathway for advanced-biofuel RINs in 2013. The company sold all ethanol and WDG through arrangements involving J.D. Heiskell, creating significant supplier, working-capital, and customer concentration.
- India: Biodiesel sales rose to 19,354 metric tons from 4,127, while the average sales price fell 26% to $929 per ton. Management expected phased reductions in Indian diesel subsidies to support biodiesel economics. The biodiesel distillation column and EU sustainability certification were completed in January 2014, after the reporting period. Customer concentration is material, and India biodiesel sales have no long-term contracts.
- Liquidity and refinancing: Approximately $72.3 million was outstanding under Third Eye Capital financing arrangements at year-end, with maturity in July 2014 and an option to extend to January 2015 subject to conditions and a fee. No further amounts were available to draw under those arrangements. Management’s plan depends on plant margins, additional EB-5 note sales, refinancing, and operating cash flow; the company cautioned that financing or sufficient cash generation is not assured.
- Defaults and legal contingencies: The India subsidiary remained in default on its State Bank of India loan, classified as current, with a recovery case pending before the Debt Recovery Tribunal and potential seizure of property. UBS obtained an approximately $2.3 million judgment after the company failed to perform a settlement term. A separate corn-oil-extraction patent suit seeks royalties, damages and potentially injunctive relief; the company disputes the claims, and the outcome was not predictable.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end due to material weaknesses involving complex accounting and reporting. Remediation was ongoing and not complete as of filing; the auditor did not attest to internal controls.
- Other risks: Commodity-price spreads, regulatory changes (including the proposed 2014 U.S. Renewable Fuel Standard reduction), operating interruptions, foreign-exchange exposure, environmental compliance, and dilution from convertible securities, options and warrants could affect results. The company reported no environmental accrual based on information then available and no off-balance-sheet arrangements at year-end.
Important facts for investors to verify
- Whether the Third Eye Capital debt was refinanced or extended on acceptable terms before maturity, and the actual outstanding balance and covenant status.
- Whether operating cash flow and liquidity improved after year-end, including the effect of the reported $7.5 million principal payments in December 2013 through February 2014.
- Progress and funding for the EB-5 program, commercial debt refinancing, and any additional equity financing or resulting dilution.
- Whether the Keyes plant sustained positive operating margins and achieved meaningful advanced-biofuel RIN revenue; confirm the final 2014 RFS requirements and their impact.
- Developments in the State Bank of India recovery case, UBS judgment enforcement, and the Greenshift patent litigation, including any recorded or subsequently accrued exposure.
- Whether the identified material weaknesses were remediated and whether subsequent filings required significant accounting or disclosure corrections.
- Customer and working-capital concentration, India market access and subsidy changes, and the post-year-end performance of the EU-ready biodiesel facility.