Aemetis, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2013. The filing is unaudited. Aemetis operates a biodiesel and oils facility in Kakinada, India, and an ethanol plant in Keyes, California, and is developing renewable-fuels and biochemical technologies.
Financial performance
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $56.7 million | $53.4 million | $123.5 million | $141.9 million |
| Gross profit/(loss) | $3.0 million | $(2.3) million | $7.0 million | $(6.5) million |
| Operating loss | $(1.0) million | $(5.0) million | $(5.5) million | $(14.0) million |
| Net income/(loss) | $(8.3) million | $20.7 million | $(27.7) million | $2.6 million |
| Operating cash flow | Not reported for quarter | Not reported for quarter | $(6.1) million | $(12.5) million |
Q3 gross margin was approximately 5.4%, compared with a negative 4.2% a year earlier; nine-month gross margin was approximately 5.7%, compared with a negative 4.6%. Q3 2012 net income included a $40.3 million bargain-purchase gain from the Cilion acquisition; 2013 nine-month results included $3.7 million of debt-extinguishment loss and $10.5 million of amortization expense.
- Q3 revenue rose about 6% year over year, as India revenue increased to $7.5 million, partly offset by lower North American revenue. India’s quarterly increase was primarily tied to palm oil sales. North America generated $49.2 million.
- Nine-month revenue fell about 13%, primarily because the Keyes plant was idle from January 15 through April 22, 2013. North American revenue declined to $92.9 million; India revenue rose to $30.6 million.
- Management reported Keyes production at 105% of nameplate capacity in Q3, but 64% for the nine-month period. Lower Q3 corn cost per ton helped reduce North American cost of goods sold.
Financial position and liquidity
- At September 30, 2013, cash was $1.1 million, current assets $8.7 million, and current liabilities $34.1 million; the reported current ratio was 0.26. Cash included $0.9 million held in India. A further $2.0 million of EB-5 deposits was in escrow pending investor approval.
- Total debt was $89.4 million, net of discounts, versus $70.0 million at December 31, 2012. Stockholders’ deficit was $16.7 million, compared with positive equity of $3.5 million at year-end 2012. The company reported 196.8 million common shares outstanding at quarter-end and 197.9 million at October 31.
- Nine-month investing cash flow was positive $0.7 million, mainly from asset-sale proceeds; financing cash flow was positive $6.3 million, including $4.8 million of secured borrowings. Cash increased by $0.8 million during the period.
- Third Eye Capital debt accounted for approximately $71.1 million of outstanding principal, interest and fees, net of discounts. The company said no amounts remained available for future draw under its revolving facility. Its notes generally matured July 6, 2014; an October 2013 amendment gave the company an option to extend maturity by six months subject to conditions and an additional fee.
Outlook, risks and unusual items
- Management’s plans include operating Keyes at positive margins, using lower-cost non-food feedstocks, raising additional EB-5 financing, refinancing senior debt, restructuring the State Bank of India loan, and growing India sales. It also cited EPA approval to produce ethanol using grain sorghum and biogas to qualify for higher-value advanced-biofuel RINs. No quantified earnings or revenue guidance was provided.
- Management said it expects the identified actions to fund operations for the foreseeable future, but cautioned that existing facilities and operating cash may be insufficient and that additional financing may not be available on acceptable terms. The company depends on its senior lender and on working-capital and commercial relationships with J.D. Heiskell and Secunderabad Oils.
- Third Eye Capital amendments waived or modified several covenant and payment requirements. The company agreed to cash-flow sweeps, minimum quarterly ethanol production of 10 million gallons, restrictions on capital spending and additional debt, and substantial amendment and extension fees, some paid or payable in stock or additional notes. Amendment No. 6 also required cooperation with a lender-directed financial review and payment of equipment-sale proceeds to the lender.
- The State Bank of India loan was in default for missed principal, interest and covenants; the bank had demanded repayment and filed a recovery case seeking approximately $5 million. The filing warns that an adverse outcome could threaten company property and operations.
- Greenshift sued over alleged infringement involving the corn-oil extraction process, seeking royalties or damages, potentially enhanced damages, fees and an injunction. A loss was not predictable; the filing estimates damages and fees could be $1 million or more if the case is deemed exceptional. A separate UBS settlement was not performed as agreed; a $2.3 million judgment was accrued.
- Disclosure controls were deemed ineffective due to insufficient personnel with appropriate GAAP knowledge and experience; remediation was ongoing. Management noted a key accounting position had been filled and it was seeking qualified staff.
Important facts for investors to verify
- Whether operating cash flow and available financing can cover near-term obligations, including the senior debt and State Bank of India exposure.
- Whether the company meets Third Eye Capital’s cash-sweep, production and other amended requirements, and whether any maturity extension or refinancing is secured.
- Whether additional EB-5 investment can be attracted and whether the escrowed funds become available for operations.
- Developments in the State Bank of India recovery action, Greenshift patent litigation and UBS judgment payment.
- Progress in remediating ineffective disclosure controls, along with the impact of stock and warrant issuances on dilution.