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AVRW
Aventine Renewable Energy Holdings, Inc. Reports Second Quarter 2011 Financial Results
DALLAS, TX, August 8, 2011 (GLOBE NEWSWIRE) – Aventine Renewable Energy
Holdings, Inc. (OTCBB:AVRW) (“Aventine”), a leading producer of clean renewable energy, announced today its results for the second quarter 2011.
Net loss for the three months ended June 30, 2011 was $23.9 million, or $2.71 per diluted share, compared to a net loss of $9.3 million, or $1.06 per diluted share for the three months ended June 30, 2010. Net loss for the six months ended June 30, 2011 was $43.1 million, or $4.95 per diluted share, compared to a net loss of $16.4 million, or $1.87 per diluted share for the four months ended June 30, 2010 and a net loss of $266.3 million, or $6.14 per diluted share for the two months ended February 28, 2010.
“This was a challenging quarter for the Company with industry wide margins falling through most of the period. Operationally we continued to experience production problems at our Mt. Vernon facility leading to an extensive shutdown taken in July,” said Thomas Manual, Chief Executive Officer.
Revenues were $213.0 million for the three months ended June 30, 2011, compared to $96.9 million for the three months ended June 30, 2010. Revenues were $411.1 million for the six months ended June 30, 2011, compared to $133.9 million and $77.7 million, respectively, for the four months ended June 30, 2010 and the two months ended February 28, 2010.
“We expect to see improvements in our profitability over the next several quarters assuming industry wide margins are maintained at the current levels. With the upturn in the margin environment we have been able to lock in profitable margins on approximately 12% of our current production for the remainer of the year,” commented Manual. “Since quarter end we have made progress at the Mt. Vernon facility. Production there has stabilized for the first time since we started the plant. This is an encouraging development. We have also made significant strides to improve co-product yields at our Pekin plant. This coupled with the return of the Aurora East plant to production should have a positive impact on profits.” Manual also noted, “We are in the process of making system improvements at the Canton facility and expect to begin startup procedures in mid-October.”
Q2 2011 Activity
On April 7, 2011, we entered into an incremental amendment (the “Incremental Amendment”) with Citibank, N.A., as administrative agent for the lenders under the senior secured term loan agreement, dated as of December 22, 2010 (the “Term Loan Agreement”), and Macquarie Bank Limited, as lender (“Macquarie”), to the Term Loan Agreement. Pursuant to the Incremental Amendment, Macquarie loaned us an aggregate principal amount equal to $25.0 million, net of $1.3 million in fees. The loan under the Incremental Amendment has substantially the same terms as the existing loans under the Term Loan Agreement, including seniority ranking in right of payment and of security, maturity date, applicable margin and interest rate floor. We continue to be subject to all other terms and restrictions contained in the original Term Loan Agreement.
On April 27, 2011, we temporarily shut down our dry mill plant in Aurora, Nebraska to make some improvements to the fermentation process at the facility. This work was completed by the third week of May 2011, and we began grinding corn again during the week of July 25, 2011.
On May 13, 2011, the Company commenced a pro-rata distribution, consisting of 19,414 shares of common stock, to holders of the Company’s pre-petition notes and to holders of allowed general unsecured claims, with 9,806 shares distributed to holders of pre-petition notes and 9,608 shares to holders of allowed general unsecured claims. Approximately 1.1 million shares of common stock are reserved for future distributions of these holders.
Subsequent Events
On July 20, 2011, Aventine and each of its subsidiaries, as co-borrowers (collectively, the “Borrowers”), entered into a revolving credit facility (the “New Revolving Facility”) with the lenders party thereto (the “Lenders”), and Wells Fargo Capital Finance, LLC, as Lender and as agent for the Lenders (in such capacity, “Wells Fargo”) (the “New Revolving Facility Agreement”) with a $50.0 million commitment. The proceeds of loans under the New Revolving Facility were used to (1) repay the Borrowers’ obligations under Revolving Facility, (2) pay related transaction costs, fees and expenses, and (3) for general corporate purposes. In connection with the New Revolving Facility, the rights and obligations of the lenders under the Revolving Facility have been assigned from PNC to Wells Fargo.
On July 20, 2011, Aventine entered into an amendment (“Citi Amendment”) to the Term Loan Agreement with the lenders party thereto and Citibank, N.A., as administrative agent and collateral agent (the “Term Loan Agent”). Under the terms of the Citi Amendment, the amount of indebtedness that Aventine is permitted to incur under the New Revolving Facility (including bank products and hedging obligations) is capped at $58.0 million. The Citi Amendment reduces Aventine’s minimum liquidity covenant for 2012 from $25.0 million to $15.0 million. The Citi Amendment also includes certain technical amendments to permit the New Revolving Facility.
Second Quarter Conference Call
We will hold a conference call at 9 a.m. CST (10 a.m. Eastern time) on Tuesday, August 9, 2011, to discuss the contents of this press release. Please dial in to the conference call at (877) 312-
5514 (U.S.), or (253) 237-1137 (International), access code: 85213032, approximately 10 minutes prior to the start time. A link to the broadcast can be found at
Aventine Renewable Energy, Inc. in the Investor Relations section under the "Conference Calls" link. If you are unable to participate at this time, a replay will be available through August 15, 2011, on this Website or by dialing (855) 859-2056 (U.S.), or (404) 537-3406 (International), access code: 85213032. Should you need any assistance accessing the call or the replay, please contact Aventine at (214) 451-6750.
About Aventine Renewable Energy
Aventine is a leading producer of ethanol. Through our production facilities, we market and distribute ethanol to many of the leading energy companies in the U.S. In addition to producing ethanol, our facilities also produce several by-products, such as distillers grain, corn gluten meal and feed, corn germ and grain distillers dried yeast, which generate revenue and allow us to help offset a significant portion of our corn costs.
Forward Looking Statements
Certain information included in this press release may be deemed to be "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” and the negatives of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements.
Some of the factors that may cause Aventine's actual results, developments and business decisions to differ materially from those contemplated by such forward looking statements include our ability to obtain and maintain normal terms with vendors and service providers, our estimates of allowed general unsecured claims, unliquidated and contingent claims and estimations of future distributions of securities and allocations of securities among various categories of claim holders, our ability to maintain contracts that are critical to our operations, our ability to attract and retain customers, our ability to fund and execute our business plan and any ethanol plant expansion or completion projects, our ability to receive or renew permits to construct or commence operations of our proposed capacity additions in a timely manner, or at all, laws, tariffs, trade or other controls or enforcement practices applicable to our operations, changes in weather and general economic conditions, overcapacity within the ethanol, biodiesel and petroleum refining industries, availability and costs of products and raw materials, particularly corn, coal and natural gas and the subsequent impact on margins, our ability to raise additional capital and secure additional financing, our ability to service our debt or comply with our debt covenants, our ability to attract, motivate and retain key employees, liability resulting from actual or potential future litigation or the outcome of any litigation with respect to our auction rate securities or otherwise, and plant shutdowns or disruptions.
Consolidated Financial Results
On March 15, 2010, Aventine emerged from bankruptcy and implemented fresh start accounting using a convenience date of February 28, 2010. The condensed consolidated financial statements prior to March 1, 2010 reflect results based upon our historical cost basis while the post-emergence consolidated financial statements reflect the new basis of accounting incorporating the fair value adjustments made in recording the effects of fresh start reporting. Therefore, the post-emergence periods are not comparable to the pre-emergence periods. As a result of the application of fresh start accounting, our condensed consolidated financial statements prior to and including February 28, 2010 represent the operations of our pre-reorganization predecessor company and are presented separately from the condensed consolidated financial statements of our post-reorganization successor company.
Summary Statement of Operations
Aventine Renewable Energy Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Successor
Predecessor
Three Months
Three Months
Six Months
Four Months
Two Months
Ended
Ended
Ended
Ended
Ended
June 30, 2011
June 30, 2010
June 30, 2011
June 30, 2010
February 28, 2010
(In thousands, except per share amounts)
Net sales .........................................................................................................................
$
213,019
$
96,904
$
411,123
$
133,878
$
77,675
Cost of goods sold .........................................................................................................
(219,483)
(95,401)
(412,219)
(132,700)
(66,686)
Gross profit ....................................................................................................................
(6,464)
1,503
(1,096)
1,178
10,989
Selling, general and administrative expenses .................................................................
(9,625)
(9,178)
(19,042)
(14,352)
(4,608)
Other expenses ...............................................................................................................
(746)
(595)
(1,942)
(1,659)
(515)
Operating income (loss) .................................................................................................
(16,835)
(8,270)
(22,080)
(14,833)
5,866
Interest income ...............................................................................................................
22
14
43
15
-
Interest expense .............................................................................................................
(6,020)
(2,386)
(11,342)
(3,100)
(1,422)
(Loss) gain on derivative transactions, net .....................................................................
(1,214)
263
(324)
439
-
Loss on early retirement of debt ....................................................................................
-
-
(9,399)
-
-
Other non-operating income (expense) ..........................................................................
(52)
210
(70)
210
-
Income (loss) before reorganization items and income taxes ..................................................................................................................
(24,099)
(10,169)
(43,172)
(17,269)
4,444
Reorganization items .....................................................................................................
-
-
-
-
(20,282)
Gain due to plan effects .................................................................................................
-
-
-
-
136,574
Loss due to fresh start accounting adjustments ..............................................................
-
-
-
-
(387,655)
Loss before income taxes ...............................................................................................
(24,099)
(10,169)
(43,172)
(17,269)
(266,919)
Income tax benefit (expense) .........................................................................................
217
(910)
29
(910)
626
Net loss ........................................................................................................................ $
$
(23,882)
$
(9,259)
$
(43,143)
$
(16,359)
$
(266,293)
Loss per common share – basic
$
(2.71)
$
(1.06)
$
(4.95)
$
(1.87)
$
(6.14)
Basic weighted-average number of shares
8,820
8,585
8,723
8,581
43,401
Loss per common share – diluted
$
(2.71)
$
(1.06)
$
(4.95)
$
(1.87)
$
(6.14)
Diluted weighted-average number of common and common equivalent shares
8,820
8,585
8,723
8,581
43,401
The Three Months Ended June 30, 2011 Compared To The Three Months Ended June 30, 2010
Net sales were generated from the following products:
Successor
Three Months
Ended
June 30,
Three Months
Ended
June 30,
2011
2010
(In millions)
Ethanol
$
164.7
$
75.4
By-Products
48.4
21.5
Total
$
213.0
$
96.9
The overall increase in net sales from the second quarter of 2010 to the second quarter of 2011 is primarily the result of increased sales volumes from our increased production, as well as an increase in the sales price per gallon of ethanol. During the second quarter of 2011, we produced 55.0 million gallons of ethanol compared to 45.9 million gallons during the second quarter of 2010, an increase of 9.1 million gallons, or 20%. We marketed and sold 62.5 million gallons of ethanol during the three months ended June 30, 2011 for an average sales price of $2.64 per gallon compared to 46.5 million gallons at an average sales price of $1.62 per gallon during the three months ended June 30, 2010.
The increase in by-product revenues is primarily a result of an increase in the price per ton sold, as well as an increase in the volume sold. We sold 247 thousand tons during the three months ended June 30, 2011 for an average price of $195.93 per ton compared to 235 thousand tons during the three months ended June 30, 2010 for an average price of $91.49 per ton. By-product revenues, as a percentage of corn costs, fell to 31.8% during the three months ended June 30, 2011 compared to 35.0% during the three months ended June 30, 2010. Co-products produced by the dry mill process have less value historically than those produced by the wet mill process. As a result of the addition of the Mt. Vernon dry mill, our overall product mix between wet and dry co-products produced changed from 60% higher value wet mill products and 40% lower value dry mill products during the second quarter of 2010, to roughly 47% higher value wet mill products and 53% lower value dry mill products during the second quarter of 2011.
Cost of goods sold consists of production costs (the cost to produce ethanol at our own facilities), the cost of purchased ethanol, the cost changes in our inventory, freight and logistics to ship ethanol and co-products and motor fuel taxes which have been billed to customers, which are discussed in detail below.
Successor
Three Months Ended
Three Months Ended
June 30,
2011
Percentage of Net sales
June 30,
2010
Percentage of Net sales
(In millions, except percentages)
Cost of goods sold
$
219.5
103.0%
$
95.4
98.4%
The increase in cost of goods sold from the three months ended June 30, 2010 compared to the three months ended June 30, 2011 is the result of higher volumes of ethanol produced and sold during the second quarter of 2011, as well as an increase in corn costs. The increase in cost of goods sold as a percentage of net sales is principally the result of increased corn costs, freight costs and depreciation (discussed below).
Production costs include corn costs, conversion costs, and depreciation and amortization, which are discussed below.
Corn costs for the three months ended June 30, 2011 and 2010 were $152.0 million and $61.5 million, respectively. The increase in corn costs is due to an increase in the number of bushels used in production, as well as an increase in the price per bushel. We used 20.5 million bushels of corn in production during the second quarter of 2011 compared to 17.4 million bushels during the second quarter of 2010. Additionally, during the three months ended June 30, 2011, corn used in production was approximately $7.43 per bushel compared to $3.53 per bushel for the three months ended June 30, 2010. Our average corn costs during the second quarter of 2011 were slightly higher than the CBOT average price of $7.31 during the same period.
Conversion costs for the three months ended June 30, 2011 and 2010 were as follows:
Successor
Three Months Ended
Three Months Ended
June 30,
2011
June 30,
2010
(In millions)
Utilities
$
13.8
$
9.0
Salary and benefits
5.9
5.0
Materials and supplies
6.6
5.0
Denaturant
2.9
1.8
Outside services
3.2
2.1
Other
0.8
0.8
$
33.2
$
23.7
The increases in utilities, materials and supplies, and outside services are primarily attributable to the start-up of our Mt. Vernon facility. Conversion costs per gallon were $0.60 for the second quarter of 2011 compared to $0.52 for the second quarter of 2010. Inefficiencies from lower
operating capacity at the Mt. Vernon facility contributed approximately $0.09 per gallon to the total conversion costs for the quarter ended June 30, 2011.
Depreciation and amortization expense for the three months ended June 30, 2011 was $6.2 million compared to $2.4 million in the three months ended June 30, 2010. Depreciation expense increased primarily as a result of the start-up of the Mt. Vernon facility.
Purchased ethanol is included in our cost of goods sold. For the second quarter of 2011, we purchased 3.1 million gallons for a total of $8.6 million compared to 285 thousand gallons during the second quarter of 2010 for a total of $0.4 million. The cost per gallon purchased was $2.77 during the three months ended June 30, 2011 compared to $1.43 during the three months ended June 30, 2010. This increase is consistent with the overall increase in ethanol spot prices using OPIS indices to an average price of $2.64 per gallon during the second quarter of 2011 from an average of $1.56 per gallon during the second quarter of 2010.
As stated above, cost of goods sold include the cost changes in our inventory. Our direct materials, labor and overhead costs in the condensed consolidated statements of operations are based on production amounts. The change in inventory included in cost of goods sold adjusts our statements of operations from cost of production to cost of sales. During the three months ended June 30, 2011, changes in inventory resulted in an expense of $10.6 million compared to an expense of $1.4 million in the three months ended June 30, 2010. The reduction in cost of goods sold for the three months ended June 30, 2011 was primarily the result of the quantity and value of ethanol produced and sold during the quarter.
Freight and logistics costs for the three months ended June 30, 2011 were $8.9 million compared to $6.0 million during the three months ended June 30, 2010. The increase is due to higher volumes shipped. During the second quarter of 2011, we marketed and distributed approximately 62.5 million gallons of ethanol compared to 46.5 million gallons during the three months ended June 30, 2010. On a per gallon basis, freight and logistics costs were $0.14 per gallon for the three months ended June 30, 2011 compared to $0.13 per gallon for the three months ended June 30, 2010. The increase in cost per gallon during the second quarter of 2011 compared to the second quarter of 2010 is the result of selling more by-products under contract to be delivered during 2011 compared to 2010, where we sold more by-products under contract to be picked up at our facilities.
Commodity spread, defined as gross ethanol selling price per gallon less net corn cost per gallon, was $0.75 for the three months ended June 30, 2011 compared to $0.75 for the three months ended June 30, 2010.
Successor
Three Months Ended