Aemetis, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2015. Financial statement amounts are unaudited and, unless noted otherwise, in millions of dollars. Aemetis operates an ethanol plant in Keyes, California, and a biodiesel and glycerin facility in Kakinada, India.
Financial performance
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $38.1 | $57.2 | $72.8 | $117.9 |
| Gross profit | $1.9 | $11.4 | $1.7 | $27.0 |
| Operating income (loss) | $(1.3) | $7.8 | $(5.3) | $20.4 |
| Net income (loss) | $(6.3) | $2.7 | $(14.9) | $10.4 |
| Basic loss per share | $(0.32) | $0.13 income | $(0.74) | $0.52 income |
- Gross margin fell to about 5.1% in Q2 and 2.4% for the first half, from about 19.8% and 22.9%, respectively, in 2014.
- Six-month operating cash flow was $(3.5) million, versus $19.3 million provided in the prior-year period. Investing cash flow was $(0.02) million and financing cash flow was $6.5 million. Cash increased from $0.3 million at year-end to $3.3 million at June 30.
- At June 30, current assets were $12.3 million and current liabilities $30.0 million; the reported current ratio was 0.41. Stockholders’ deficit was $23.7 million, compared with a deficit of $3.0 million at December 31, 2014.
- Total debt was $99.4 million, including $14.8 million current and $84.6 million long-term, net of discounts. Senior secured notes were $57.4 million and EB-5 notes $21.7 million. Debt increased substantially from $77.3 million at year-end, primarily reflecting EB-5 financing, stock-repurchase amounts added to the revolver, fees, working-capital borrowing and accrued interest.
Material changes and operating drivers
- Revenue declined 33.4% in Q2 and 38.2% for the first half. North American revenue fell 36.8% and 40.4%, respectively, largely as ethanol prices and sales volumes dropped. Q2 ethanol price decreased 35% to $1.78 per gallon; first-half price decreased 39% to $1.73. Keyes production averaged 103% of nameplate capacity.
- North American gross profit fell sharply: $1.6 million in Q2 versus $11.3 million, and $1.5 million for the first half versus $27.0 million. Lower ethanol prices and lower sales were the principal pressures, despite reduced corn costs.
- India revenue increased 22.7% in Q2 and 13.8% for the first half, with expanded domestic biodiesel and glycerin sales. India gross profit improved, but remained modest at $0.3 million in Q2 and $0.3 million for the first half.
- Interest and debt-related amortization remained significant expenses. First-half interest expense was $5.0 million and debt-related amortization expense was $4.1 million.
Liquidity, outlook and risks
- Management said operations depended on senior-lender funding and that substantially all excess operating cash was remitted to the senior lender. Only $0.6 million remained available to draw on the revolving credit facility at the report’s publication.
- The company reported $20.0 million of EB-5 funding released in the first half and expected $11.0 million held in escrow to be released in the second half of 2015 and early 2016, subject to investor and USCIS-related conditions. Up to $14.5 million of additional EB-5 notes remained available if qualified investors could be attracted.
- Third Eye Capital debt was scheduled to mature April 1, 2016. An August 6, 2015 amendment, after quarter-end, provided a conditional path to extend maturity to April 1, 2017, subject to EB-5 escrow, investment-banking and share-repurchase conditions; it included a $1.0 million amendment fee and a 5% extension fee. The company also reported engaging an investment bank to explore financing alternatives.
- Management’s plans include operating Keyes, using lower-cost non-food feedstocks when economical, securing further EB-5 funding, refinancing senior debt, restructuring the State Bank of India loan and increasing Kakinada shipments. Management cautioned that funding and continued lender support were not assured, and that additional financing might not be available on acceptable terms.
- Key risks include volatile ethanol, corn, energy and biodiesel-feedstock prices; variable-rate debt; foreign-exchange exposure; customer and supplier concentration; and refinancing and working-capital needs. The filing also describes a State Bank of India recovery proceeding involving the overdue India loan, with potential recovery against company property, and a corn-oil patent dispute. The court had found the asserted patents invalid and not infringed, but a remaining inequitable-conduct claim was scheduled for trial in October 2015; a successful appeal by the plaintiff could result in damages of $1 million or more.
- The filing reports no change in risk factors from the 2014 Form 10-K. Management concluded disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether the conditional senior-debt extension requirements were met and whether refinancing or other capital was secured.
- Whether escrowed and prospective EB-5 funds were released, and the timing and terms of any further financing.
- Subsequent operating margins and cash generation, particularly the impact of ethanol prices, corn costs and feedstock spreads.
- The status and repayment or restructuring terms of the State Bank of India loan and related legal proceeding.
- The outcome of the remaining GS Cleantech litigation claim and any appeal affecting the patent rulings.