* Net income for Q2'07 was $12.6 million, and fully diluted EPS was $0.30 per share * Produced record 50.7 million gallons at Pekin, IL and Aurora, NE plants * Operating Cash Flow Totals $27.0 Million for Q2 * Construction contracts for 226 million gallons capacity new plants signed * New marketing alliance partners start producing ethanol during quarter
PEKIN, Ill., July 31, 2007 (PRIME NEWSWIRE) -- Aventine Renewable Energy Holdings, Inc. (NYSE:AVR), a leading producer, marketer and end-to-end provider of clean renewable energy, today released its results for the second quarter and six months ended June 30, 2007.
Ron Miller, Aventine's President and Chief Executive Officer said, "Despite historically high corn prices, we generated strong operating results in the second quarter. Higher realized ethanol prices, gains from our hedging strategy, and a reduction in SG&A expenses, offset the impact of higher corn, conversion, and per gallon freight costs as compared to the first quarter. Cash flows from operations increased sharply in the second quarter, to $27.0 million, as a result of reductions in working capital requirements from lower inventory levels and a lower sales volume. Adjusted EBITDA was $26.1 million in Q2'07, versus $27.4 million in Q1'07."
Miller added, "We continue to focus our efforts on operating our plants well, which allowed us to achieve record production levels in the second quarter. Our capacity addition plans are moving forward, as we completed and signed engineering, procurement and construction ("EPC") contracts for our Mt. Vernon and Aurora West projects in the second quarter. We have now begun site preparation work at both Aurora West and Mt. Vernon. When completed, these projects will add 226 million gallons of annual production capacity, bringing our total ethanol production capacity to 433 million gallons annually. Including what we have spent to date, plus the $385.8 million of cash and short-term investments on our balance sheet and an undrawn line of credit, these new projects are fully funded. We are pleased with the energy legislation recently passed by the Senate, and hope the House version is equally supportive and timely. We are also very pleased by the American farmers' response to the increase in corn demand by planting significantly more corn."
Second Quarter 2007 Financial Highlights
Revenue in Q2'07 decreased 9.6% over Q1'07 as a result of a lower volume of ethanol sold, offset somewhat by higher ethanol pricing. Revenue totaled $394.9 million in Q2'07. Co-product revenue was flat at $23.2 million in Q2'07, from $23.1 million in Q1'07. Total gallons of ethanol sold were 158.7 million gallons in Q2'07, versus 193.2 million gallons in Q1'07, reflecting the departure of VeraSun from our marketing alliance pool on April 1, 2007. The average gross sales price of ethanol in Q2'07 was $2.29 per gallon, up from $2.10 per gallon in Q1'07. The average inventory cost of $1.98 per gallon at the end of the Q2'07 versus $1.91 at the end of Q1'07 reflects both higher purchased ethanol costs and higher production costs.
Gallons sold in Q2'07 totaled 158.7 million gallons, as compared to 193.2 million gallons in Q1'07. In the second quarter of 2007, we produced 50.7 million gallons, purchased 75.1 million gallons from our marketing alliance partners, purchased 22.0 million gallons from unaffiliated producers and marketers and decreased inventory by 10.9 million gallons. Equity production increased in Q2'07 over Q1'07 by approximately 3.6%, as the 57 million gallon Pekin dry mill that began production in Q1'07 was fully operational for the entire quarter.
Corn costs in the second quarter of 2007 increased to $3.99 per bushel, significantly higher than our Q1'07 cost of $3.58 per bushel and the Q2'07 CBOT average daily closing price of $3.71 per bushel. We had previously locked in the price we would pay for a significant portion of our corn needs in the second quarter to protect against price increases. However, our second quarter corn costs have not been offset by net gains from our corn hedge positions. In Q2'07, we recorded hedging gains, net of losses, of $2.1 million, which include hedge positions on corn, and are recorded in other non-operating income.
Co-product revenue for Q2'07 was flat, at $23.2 million, versus $23.1 million for Q1'07. Co-product returns, as a percentage of the price of corn, fell to 31.1% during Q2'07. Higher co-product volumes and prices for germ and meal were offset by lower pricing on feed, yeast and dried distiller's grains. In Q2'07, we sold 297.1 thousand tons, versus 267.1 thousand tons in Q1'07.
Conversion costs in the quarter increased to $0.61 per gallon, from $0.55 per gallon in Q1'07. The increase in conversion costs was primarily the result of higher denaturant, energy and maintenance costs.
Freight and distribution costs in Q2'07 increased to $0.18 per gallon from $0.16 per gallon in Q1'07. The increase in freight costs was the result of the combination of a reduction in the number of gallons over which fixed costs could be spread, due to the exit of VeraSun from the alliance pool, and from the continued expansion of our distribution footprint. While expanding our distribution network may increase our distribution cost per gallon, it also allows us to maximize the ethanol sales price we receive.
Depreciation expense for Q2'07 was $3.0 million, as compared to $2.9 million in Q1'07.
SG&A expenses were $8.8 million in Q2'07 as compared to $9.6 million in Q1'07. The decrease in SG&A expenses as compared to Q1'07 reflects a reduction in expenditures related to legal fees primarily associated with our capacity expansion efforts and expenses related to certain business taxes and fees.
Other non-operating income for the second quarter of 2007 includes $2.1 million of realized and unrealized net gains on derivative contracts, including the effect of marking to market derivative contracts, versus net gains in the first quarter of 2007 of $3.9 million. The gains recorded in Q2'07 reflect mark to market gains on short corn positions, and gains recorded on purchased put options. These gains are net of losses on short gasoline futures positions.
Interest income for Q2'07 totaled $4.2 million. Interest income increased significantly due to a combination of a higher average level of funds available to invest as a result of our recent note offering and funds from last year's initial public offering, combined with higher short-term investment rates due to increases in interest rates in general.
Interest expense for the second quarter was $7.0 million. Interest expense includes $7.5 million in interest on $300 million aggregate principal amount of our 10.0% senior unsecured notes, $0.2 million of amortization of deferred financing fees, reduced by capitalized interest of $0.7 million.
The income tax rate for the second quarter of 2007 was 28.9% versus a rate of 36.1% in the first quarter of 2007. In Q2'07, we adjusted our estimated tax provision to reflect a higher level of tax exempt interest income from investments for the remainder of 2007. The true-up in the second quarter adjusts the year-to-date rate 32.5%, which is the rate we now estimate we will incur for 2007.
Second Quarter 2007 versus Second Quarter 2006
Net income decreased in Q2'07 to $12.6 million, or $0.30 per diluted share, as compared to net income of $24.7 million, or $0.67 per diluted share, in Q2'06. Net income decreased primarily as a result of significantly higher corn costs combined with lower ethanol revenue per gallon sold. The commodity spread, defined as gross ethanol selling price per gallon less net corn cost per gallon, declined in Q2'07 to $1.28 per gallon, from $1.94 per gallon in Q2'06. The average sales price per gallon of ethanol declined in Q2'07 to $2.29 per gallon from the $2.41 average received in Q2'06. Corn costs during the second quarter of 2007 averaged $3.99 per bushel, significantly higher than our second quarter 2006 cost of $2.27 per bushel. A decrease in the conversion cost in Q2'07 of $0.61 per gallon as compared to $0.79 per gallon in Q2'06 was not sufficient to offset the decline in the commodity spread.
Q2'06 results benefited from the sale of 10.5 million gallons of ethanol from inventory at prices significantly higher than the weighted average cost at which they had been held in inventory of $1.58 per gallon, increasing gross profit in Q2'06 by approximately $18.6 million. Higher selling, general and administrative expenses in Q2'07 as the result of being a public company also attributed to the decline in net income from Q2'06.
Gallons of ethanol sold in the second quarter of 2007 decreased 10.0% to 158.7 million gallons, as compared to 176.3 million gallons in the second quarter of 2006. Ethanol sales for the quarter decreased as a result of lower marketing alliance purchases due to VeraSun Energy Corporation leaving our marketing alliance on April 1, 2007. The lower number of marketing alliance gallons purchased was offset somewhat by increased equity production. Ethanol production in the quarter was a record 50.7 million gallons, up from 28.9 million gallons in the second quarter of 2006. In January 2007, our new Pekin dry mill began full production, and we began to realize the benefits from the production capacity increase.
Operational Highlights
The Company completed the EPC contracts for its planned capacity additions at Mt. Vernon, Indiana and Aurora, Nebraska during the second quarter. The Company's EPC contracts with Kiewit Energy Company ("Kiewit") provide for Kiewit to build an ethanol production facility at each site capable of initially producing 113 million gallons of denatured ethanol annually as the primary product. In addition, the EPC contracts also call for Kiewit to provide certain additional materials and services to prepare each site for a phase II expansion. A phase II expansion would double the capacity of each of the plants. Once a "Notice to Proceed" is given to Kiewit, the estimated substantial completion time is expected to be 18 months. Delta-T Corporation is the technology provider for the projects.
During the second quarter of 2007, we spent approximately $65.9 million on capital projects. Of this amount, $6.0 million was spent on maintenance and regulatory projects, while $59.9 million was spent on capacity additions. Amounts spent during Q2'07 on the Aurora West and Mt. Vernon projects included the pre-purchasing of long lead-time equipment and stainless steel material, licensing fees and site preparation work in anticipation of receiving environmental permits. For the year, we have spent $78.4 million, of which $8.7 million was for maintenance and regulatory projects, and $69.7 million was spent on capacity additions.
As of April 1, 2007, VeraSun Energy Corporation was no longer part of our marketing alliance. During the second quarter, two new marketing alliance partner projects began ethanol production. E3 Biofuels, of Mead, Nebraska, with production capacity of 24 million gallons of ethanol annually, and Redfield Energy, LLC, of Redfield, South Dakota, with production capacity of 50 million gallons of ethanol annually, both began shipping product during the second quarter. These two new plants bring the capacity of currently producing marketing alliance partners to 361 million gallons annually. We expect one more new plant with annual capacity of 50 million gallons to come online in 2007, along with the expansion of one existing plant to also add 50 million gallons of annual capacity. When these new plant/expansions becomes operational, and including our own recent Pekin II plant expansion, we will be marketing 668 million gallons of ethanol in the U.S. annually, nearly matching the total at the end of 2006. In addition, we have signed marketing agreements with another 16 plants with nameplate production capacity of 1.4 billion gallons, with 301 million gallons currently under construction and 1.1 billion gallons for projects that have been announced.
During Q2'07, we announced the addition of a major new biodiesel producer to our biodiesel marketing effort. In Q2'07, we sold 1.9 million gallons of biodiesel. Although this program is still in its infancy, we expect it to grow.
During the second quarter of 2007, the Company did not repurchase any shares if its common stock under the Company's stock repurchase program approved by the Board of Directors in October 2006. The amount remaining under the authorization to repurchase stock is approximately $48.8 million.
Second Quarter Conference Call
The Company will hold a conference call at 9:00 am central time (10:00 am eastern time) on Wednesday, August 1, 2007 to discuss the contents of this press release. Dial in to the conference call at (866) 277-1184 (U.S.) or (617) 597-5360 (International), access code: 38689200, ten minutes prior to the scheduled start time. A link to the broadcast can be found on the Company's website at www.aventinerei.com 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 31, 2007 on this website or by dialing (888) 286-8010 (U.S.) or (617) 801-6888 (International), access code: 83776089. Should you have any problems accessing the call or the replay, please contact the Company at (309) 347-9709.
The tables and information following the text of this press release provide financial data that are included in this press release and that will be discussed on the conference call. This includes a reconciliation of net income to adjusted earnings before interest, taxes, depreciation and amortization. This press release, including these financial details, is now available on the Aventine website at www.aventinerei.com in the Investor Relations section under the heading Press Releases.
About Aventine
Aventine is a leading producer, marketer and end-to-end distributor of ethanol to many leading energy companies in the United States. Aventine is also a marketer and distributor of biodiesel. In addition to ethanol, Aventine also produces distillers grains, corn gluten feed, corn germ and brewers' yeast. Our internet address is www.aventinerei.com.
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. All statements, other than statements of historical facts, included in this press release, are forward looking statements. Any forward looking statements are not guarantees of Aventine's future performance and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by such forward looking statements. Aventine disclaims any duty to update any 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 tatements include the following:
* Changes in or elimination of laws, tariffs, trade or other
controls or enforcement practices such as:
* National, state or local energy policy;
* Federal ethanol and biodiesel tax incentives;
* Regulation currently proposed and/or under consideration
which may increase the existing renewable fuel standard and
other legislation mandating the usage of ethanol or
biodiesel;
* State and federal regulation restricting or banning the use
of Methyl Tertiary Butyl Ether;
* Environmental laws and regulations applicable to Aventine's
operations and the enforcement thereof;
* Changes in weather and general economic conditions;
* Overcapacity within the ethanol, biodiesel and petroleum refining
industries;
* Total United States consumption of gasoline;
* Availability and costs of products and raw materials,
particularly corn, coal and natural gas;
* Labor relations;
* Fluctuations in petroleum prices;
* The impact on margins from a change in the relationship between
prices received from the sale of co-products and the price paid
for corn;
* Aventine's or its employees' failure to comply with applicable
laws and regulations;
* Aventine's ability to generate free cash flow to invest in its
business and service any indebtedness;
* Limitations and restrictions contained in the instruments and
agreements governing Aventine's indebtedness;
* Aventine's ability to raise additional capital and secure
additional financing, and our ability to service such debt, if
obtained;
* Aventine's ability to retain key employees;
* Liability resulting from actual or potential future litigation;
* Competition;
* Plant shutdowns or disruptions at our plant or plants whose
products we market;
* Availability of rail cars and barges;
* Renewal of alliance partner contracts;
* Our ability to receive and/or renew permits to construct and/or
commence operations of our proposed capacity additions in a
timely manner, or at all; and
* Fluctuations in earnings resulting from increases or decreases in
the value of ethanol or biodiesel inventory
Aventine Renewable Energy Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(In thousands except per share amounts)
Six months ended
Three months ended June 30,
------------------------------ -------------------
6/30/07 3/31/07 6/30/06 2007 2006
------------------------------ -------------------
Net sales $394,914 $436,662 $442,905 $831,576 $756,425
Cost of goods
sold 367,485 408,247 392,697 775,732 675,622
---------------------------------------------------------------------
Gross profit 27,429 28,415 50,208 55,844 80,803
Selling, general
and administra-
tive expenses 8,779 9,598 7,371 18,377 13,637
Other expense
(income) (514) (164) (342) (678) (607)
---------------------------------------------------------------------
Operating income 19,164 18,981 43,179 38,145 67,773
Other income
(expense):
Interest income 4,167 1,368 1,228 5,535 1,883
Interest expense (7,021) (336) (4,236) (7,357) (8,601)
Other non-
operating income
(expense) 2,139 3,869 1,899 6,008 2,454
Minority interest (725) (518) (1,651) (1,243) (2,917)
---------------------------------------------------------------------
Income before
income taxes 17,724 23,364 40,419 41,088 60,592
Income tax
expense 5,117 8,424 15,765 13,541 23,751
---------------------------------------------------------------------
Net income $ 12,607 $ 14,940 $ 24,654 27,547 $ 36,841
---------------------------------------------------------------------
Per share data:
Income per common
share - basic: $ 0.30 $ 0.36 $ 0.70 $ 0.66 $ 1.05
---------------------------------------------------------------------
Basic weighted
average number of
common shares 41,912 41,811 35,152 41,861 35,149
---------------------------------------------------------------------
Income per
common share
- diluted: $ 0.30 $ 0.35 $ 0.67 $ 0.65 $ 1.01
---------------------------------------------------------------------
Diluted weighted
average number
of common and
common equivalent
shares 42,649 42,458 36,572 42,554 36,527
---------------------------------------------------------------------
Gallons by source:
Gallons produced 50,679 48,907 28,902 99,586 65,578
Gallons purchased
from alliance
partners 75,105 134,709 120,156 209,814 240,768
Gallons purchased
from non-affiliated
producers 22,085 21,528 16,701 43,613 31,125
Inventory
(increase)
decrease 10,862 (11,956) 10,508 (1,094) 3,649
---------------------------------------------------------------------
Total gallons
sold 158,731 193,188 176,267 351,919 341,120
---------------------------------------------------------------------
Aventine Renewable Energy Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, June 30,
2007 2006 Dec. 31,
(In thousands) (Unaudited) (Unaudited) 2006
---------------------------------------------------------------------
Assets
------
Cash and cash equivalents $ 44,059 $ 38,982 $ 29,791
Short-term investments 341,773 -- 98,925
Accounts receivable, net 48,897 57,141 79,729
Inventory 74,923 73,694 67,051
Income taxes receivable 5,220 -- 6,446
Other current assets 5,821 3,888 4,549
Property, plant and equipment, net 188,023 72,366 115,645
Restricted cash for plant expansion -- 33,814 --
Net deferred tax assets 2,345 -- --
Other assets 13,991 9,591 6,000
---------------------------------------------------------------------
Total assets $725,052 $289,476 $408,136
---------------------------------------------------------------------
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable and other
accrued expenses $ 65,925 $ 88,050 $ 83,244
Long-term debt 300,000 160,000 --
Minority interest 9,953 9,865 10,221
Net deferred tax liabilities -- 6,082 6,104
Other long-term liabilities 13,639 6,240 4,404
---------------------------------------------------------------------
Total liabilities 389,517 270,237 103,973
Stockholders' equity 335,535 19,239 304,163
---------------------------------------------------------------------
Total liabilities and
stockholders' equity $725,052 $289,476 $408,136
---------------------------------------------------------------------
Aventine Renewable Energy Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended
June 30,
----------------------
(In thousands) 2007 2006
---------------------------------------------------------------------
Operating Activities
Net income $ 27,547 $ 36,841
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,205 2,765
Deferred income taxes 1,373 --
Stock based compensation expense 3,345 3,053
Minority interest 1,243 2,917
Other 248 (656)
Net changes in operating assets
and liabilities 5,024 (1,385)
---------------------------------------------------------------------
Net cash provided by operating activities 44,985 43,535
Investing Activities
Additions to property, plant and equipment (78,354) (31,610)
Increase in restricted cash for investing
activities -- (1,110)
Use of restricted cash for plant expansion -- 27,658
Investment in short-term securities (242,848) --
---------------------------------------------------------------------
Net cash provided by (used for) investing
activities (321,202) (5,062)
Financing Activities
Proceeds from the issuance of senior unsecured
notes 300,000 --
Payment of debt issuance costs (8,221) --
Net repayments on revolving credit facilities -- (1,514)
Proceeds from stock option exercises 200 --
Tax benefit from stock option exercises 17 --
Distributions to minority shareholders (1,511) (1,727)
---------------------------------------------------------------------
Net cash provided by (used for) financing
activities 290,485 (3,241)
Net increase in cash and cash equivalents 14,268 35,232
---------------------------------------------------------------------
Cash and cash equivalents at beginning
of period 29,791 3,750
---------------------------------------------------------------------
Cash and cash equivalents at end of period $ 44,059 $ 38,982
---------------------------------------------------------------------
This press release contains, and our conference call will include,
references to unaudited adjusted earnings before interest, taxes
depreciation and amortization (EBITDA), a non-GAAP financial measure.
We have adjusted EBITDA to reflect the non-cash or non-recurring
nature of some charges. The following table provides a reconciliation
of net income to adjusted EBITDA. Management believes adjusted EBITDA
is a meaningful measure of liquidity and the Company's ability to
service debt because it provides a measure of cash available for such
purposes. Additionally, management provides an adjusted EBITDA
measure so that investors will have the same financial information
that management uses with the belief that it will assist investors in
properly assessing the Company's performance on a year-over-year and
quarter-over-quarter basis.
Six months ended
(In thousands) Three months ended June 30,
(Unaudited) 6/30/07 3/31/07 6/30/06 2007 2006
---------------------------------------------------------------------
Net income $ 12,607 $ 14,940 $ 24,654 $ 27,547 $ 36,841
Depreciation 3,025 2,950 1,052 5,975 2,098
Non-cash
stock-based
compensation
expense 1,751 1,594 1,745 3,345 3,053
Minority interest 725 518 1,651 1,243 2,917
Interest expense 7,021 336 4,236 7,357 8,601
Interest income (4,167) (1,368) (1,228) (5,535) (1,883)
Income tax
expense 5,117 8,424 15,565 13,541 23,751
---------------------------------------------------------------------
Adjusted earnings
before interest,
taxes, deprecia-
tion and
amortization $ 26,079 $ 27,394 $ 47,675 $ 53,473 $ 75,378
---------------------------------------------------------------------
Six months ended
Three months ended June 30,
6/30/07 3/31/07 6/30/06 2007 2006
--------------------------- ----------------
Ethanol revenue
per gallon sold $ 2.29 $ 2.10 $ 2.41 $ 2.18 $ 2.11
Corn cost per
bushel $ 3.99 $ 3.58 $ 2.27 $ 3.79 $ 2.19
Yield (gallons
per bushel) (1) 2.71 2.70 2.60 2.71 2.63
Bushels consumed
(in millions) 18.7 18.1 11.1 36.8 24.9
Co-product
return % (2) 31.1% 35.7% 46.2% 33.2% 48.1%
Commodity spread
(per gallon) (3) $ 1.28 $ 1.25 $ 1.94 $ 1.24 $ 1.68
Conversion cost per
gallon produced $ 0.61 $ 0.55 $ 0.79 $ 0.58 $ 0.66
Freight/distribution
cost per gallon
sold (4) $ 0.18 $ 0.16 $ 0.17 $ 0.17 $ 0.15
Inventory value
per gallon $ 1.98 $ 1.91 $ 2.19 $ 1.98 $ 2.19
Inventory gallons
(in millions) (5) 30.6 41.9 30.5 30.6 30.5
(1) Yield equals gallons produced divided by bushels consumed
(2) Co-product return percentage equals co-product quarterly
revenue divided by quarterly gross corn cost
(3) Commodity spread equals average gross ethanol sales price per
gallon sold less net corn cost
(4) Calculated by taking total freight/distribution costs incurred
and dividing by total ethanol gallons sold. Total
freight/distribution costs may also include cost to ship
co-products.
(5) Inventory gallons reflect ethanol gallons on hand at period
end, and may include adjustments for volume gains or losses.
Cost of Goods Sold Breakout
Six months ended
Three months ended June 30,
(In millions) 6/30/07 3/31/07 6/30/06 2007 2006
------------ -------------------------- ----------------
Gross corn costs $ 74.7 $ 64.7 $ 25.3 $139.4 $ 54.5
Conversion costs 30.9 27.0 22.9 57.9 43.5
Depreciation 3.0 2.9 1.1 5.9 2.1
Freight/distribution
costs 28.0 30.2 29.6 58.2 52.0
Inventory change
Volume (1) 21.6 (22.7) 12.5 (1.1) 2.3
Price (2) (2.1) -- (18.6) (2.1) (21.7)
Other (3) (0.8) (1.0) 1.4 (1.8) 1.1
------ ------ ------ ------ ------
Total inventory
change 18.7 (23.7) (4.7) (5.0) (18.3)
------ ------ ------ ------ ------
Purchased ethanol
and pass through
taxes 212.2 307.1 318.5 519.3 541.8
------ ------ ------ ------ ------
Total cost of
goods sold $367.5 $408.2 $392.7 $775.7 $675.6
------ ------ ------ ------ ------
(1) Volume = change in volume x previous quarters price
(2) Price = change in price x current quarter volume
(3) Other is made up of changes in co-product inventory and
adjustment entries related to the timing of product unloading and
volume gains or losses