Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 8-May-14 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Pacific Ethanol, Inc. | ' |
Entity Central Index Key | '0000778164 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 20,145,068 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current Assets: | ' | ' |
Cash and cash equivalents | $7,846 | $5,151 |
Accounts receivable, net (net of allowance for doubtful accounts of $14 and $187, respectively) | 51,426 | 35,296 |
Inventories | 28,297 | 23,386 |
Prepaid inventory | 9,341 | 12,315 |
Other current assets | 2,877 | 3,229 |
Total current assets | 99,787 | 79,377 |
Property and equipment, net | 153,973 | 155,194 |
Other Assets: | ' | ' |
Intangible assets, net | 3,141 | 3,260 |
Other assets | 3,106 | 3,218 |
Total other assets | 6,247 | 6,478 |
Total Assets | 260,007 | 241,049 |
Current Liabilities: | ' | ' |
Accounts payable - trade | 16,110 | 11,071 |
Accrued liabilities | 8,062 | 5,851 |
Current portion - capital leases | 4,517 | 4,830 |
Current portion - long-term debt due to a related party | 0 | 750 |
Accrued preferred dividends | 3,657 | 0 |
Other current liabilities | 3,353 | 5,714 |
Total current liabilities | 35,699 | 28,216 |
Long-term debt, net of current portion | 71,645 | 98,408 |
Accrued preferred dividends | 0 | 3,657 |
Capital leases, net of current portion | 5,299 | 6,041 |
Warrant liabilities at fair value | 32,679 | 8,215 |
Other liabilities | 5,086 | 1,611 |
Total Liabilities | 150,408 | 146,148 |
Commitments and Contingencies | ' | ' |
Pacific Ethanol, Inc. Stockholders' Equity: | ' | ' |
Common stock, $0.001 par value; 300,000,000 shares authorized; 18,014,034 and 16,126,287 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively | 18 | 16 |
Additional paid-in capital | 645,382 | 621,557 |
Accumulated deficit | -543,494 | -532,356 |
Total Pacific Ethanol, Inc. Stockholders' Equity | 101,907 | 89,218 |
Noncontrolling interest | 7,692 | 5,683 |
Total Stockholders' Equity | 109,599 | 94,901 |
Total Liabilities and Stockholders' Equity | 260,007 | 241,049 |
Series A Preferred Stock | ' | ' |
Pacific Ethanol, Inc. Stockholders' Equity: | ' | ' |
Preferred stock, $0.001 par value; 10,000,000 shares authorized; Series A: 1,684,375 shares authorized; 0 shares issued and outstanding as of March 31, 2014 and December 31, 2013; Series B: 1,580,790 shares authorized; 926,942 shares issued and outstanding as of March 31, 2014 and December 31, 2013; liquidation preference of $21,733 as of March 31, 2014 | 0 | 0 |
Series B Preferred Stock | ' | ' |
Pacific Ethanol, Inc. Stockholders' Equity: | ' | ' |
Preferred stock, $0.001 par value; 10,000,000 shares authorized; Series A: 1,684,375 shares authorized; 0 shares issued and outstanding as of March 31, 2014 and December 31, 2013; Series B: 1,580,790 shares authorized; 926,942 shares issued and outstanding as of March 31, 2014 and December 31, 2013; liquidation preference of $21,733 as of March 31, 2014 | $1 | $1 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current Assets: | ' | ' |
Allowance for doubtful accounts | $14,000 | $187,000 |
Stockholders' Equity: | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Common stock, par value | $0.00 | $0.00 |
Common stock, authorized | 300,000,000 | 300,000,000 |
Common stock, issued | 18,014,034 | 16,126,287 |
Common stock, outstanding | 18,014,034 | 16,126,287 |
Series A Preferred Stock | ' | ' |
Stockholders' Equity: | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares authorized | 1,684,375 | 1,384,375 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Series B Preferred Stock | ' | ' |
Stockholders' Equity: | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares authorized | 1,580,790 | 1,580,790 |
Preferred stock shares issued | 926,942 | 926,942 |
Preferred stock shares outstanding | 926,942 | 926,942 |
Preferred stock liquidation preference | $21,733,000 | ' |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Income Statement [Abstract] | ' | ' |
Net sales | $254,543 | $225,459 |
Cost of goods sold | 215,998 | 224,613 |
Gross profit | 38,545 | 846 |
Selling, general and administrative expenses | 3,670 | 4,005 |
Income (loss) from operations | 34,875 | -3,159 |
Fair value adjustments | -35,844 | -692 |
Interest expense, net | -4,351 | -3,481 |
Gain on extinguishment of debt | 0 | 817 |
Other expense, net | -227 | -87 |
Loss before provision for income taxes | -5,547 | -6,602 |
Provision for income taxes | -3,270 | 0 |
Consolidated net loss | -8,817 | -6,602 |
Net (income) loss attributed to noncontrolling interest | -2,009 | 1,148 |
Net loss attributed to Pacific Ethanol, Inc.. | -10,826 | -5,454 |
Preferred stock dividends | -312 | -312 |
Net loss available to common stockholders | ($11,138) | ($5,766) |
Net loss per share, basic and diluted | ($0.69) | ($0.57) |
Weighted-average shares outstanding, basic and diluted | 16,181,000 | 10,060,000 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Operating Activities: | ' | ' |
Consolidated net loss | ($8,817) | ($6,602) |
Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities: | ' | ' |
Fair value adjustments | 35,844 | -94 |
Depreciation and amortization of intangibles | 3,173 | 2,974 |
Deferred income taxes | 3,270 | 0 |
Amortization of debt discount | 1,557 | 225 |
Non-cash compensation | 367 | 630 |
Amortization of deferred financing fees | 112 | 108 |
Inventory valuation | 97 | 0 |
Loss (gain) on derivatives | -70 | 5 |
Bad debt expense | -34 | 208 |
Interest expense added to Plant Owners' debt | 0 | 2,276 |
Gain on extinguishment of debt | 0 | -817 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | -16,096 | -6,326 |
Inventories | -5,008 | -1,300 |
Prepaid expenses and other assets | 82 | 53 |
Prepaid inventory | 2,974 | -4,222 |
Accounts payable and accrued expenses | 5,425 | 6,428 |
Net cash provided by (used in) operating activities | 22,876 | -6,454 |
Investing Activities: | ' | ' |
Additions to property and equipment | -1,833 | -309 |
Purchases of New PE Holdco ownership interests | 0 | -1,639 |
Net cash used in investing activities | -1,833 | -1,948 |
Financing Activities: | ' | ' |
Proceeds from exercise of warrants | 12,130 | 2,064 |
Net proceeds from Kinergy's line of credit | 4,065 | 847 |
Principal Payments on Plant Owners' borrowings | -19,378 | -3,500 |
Principal Payments on senior notes | -13,007 | -1,880 |
Principal payments on capital leases | -1,096 | 0 |
Principal payments on related party note | -750 | 0 |
Proceeds from senior notes | 0 | 22,192 |
Proceeds from Series A Convertible Notes | 0 | 6,000 |
Proceeds from Plant Owners' borrowings | 0 | 4,000 |
Parent purchases of Plant Owners' debt | 0 | -23,357 |
Debt issuance costs | 0 | -1,044 |
Preferred stock dividends paid | -312 | -312 |
Net cash provided by (used in) financing activities | -18,348 | 5,010 |
Net increase (decrease) in cash and cash equivalents | 2,695 | -3,392 |
Cash and cash equivalents at beginning of period | 5,151 | 7,586 |
Cash and cash equivalents at end of period | 7,846 | 4,194 |
Supplemental Information: | ' | ' |
Interest paid | 2,712 | 737 |
Noncash financing and investing activities: | ' | ' |
Reclass of warrant liability to equity upon warrant exercises | 11,377 | 260 |
Reclass of noncontrolling interest to APIC upon acquisition | 0 | 8,161 |
Discount on senior and convertible debt | 0 | 4,940 |
Preferred stock dividends paid in common stock | $0 | $732 |
1_ORGANIZATION_AND_BASIS_OF_PR
1. ORGANIZATION AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
1. ORGANIZATION AND BASIS OF PRESENTATION | ' |
Organization and Business – The consolidated financial statements include, for all periods presented, the accounts of Pacific Ethanol, Inc., a Delaware corporation (“Pacific Ethanol”), and its direct and indirect subsidiaries, including its wholly-owned subsidiaries, Kinergy Marketing LLC, an Oregon limited liability company (“Kinergy”), Pacific Ag. Products, LLC, a California limited liability company (“PAP”) and PE Op Co. (“PE Op Co.,” formerly, New PE Holdco LLC), which owns the Plant Owners (as defined below) (collectively, the “Company”). | |
The Company is the leading producer and marketer of low-carbon renewable fuels in the Western United States. The Company also sells ethanol co-products, including wet distillers grain (“WDG”), a nutritious animal feed, and corn oil. Serving integrated oil companies and gasoline marketers who blend ethanol into gasoline, the Company provides transportation, storage and delivery of ethanol through third-party service providers in the Western United States, primarily in California, Arizona, Nevada, Utah, Oregon, Colorado, Idaho and Washington. The Company had a 91% and an 83% ownership interest in PE Op Co., the owner of four ethanol production facilities, as of March 31, 2014 and 2013, respectively. The facilities are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages. The Company sells ethanol produced by the Pacific Ethanol Plants (as defined below) and unrelated third parties to gasoline refining and distribution companies, sells its WDG to dairy operators and animal feed distributors and sells its corn oil to poultry and biodiesel customers. | |
The Company manages the production and operation of four ethanol production facilities, namely, Pacific Ethanol Madera LLC, Pacific Ethanol Columbia, LLC, Pacific Ethanol Stockton LLC and Pacific Ethanol Magic Valley, LLC (collectively, the “Pacific Ethanol Plants”) and their holding company, Pacific Ethanol Holding Co. LLC (“PEHC,” and together with the Pacific Ethanol Plants, the “Plant Owners”). PEHC is a wholly-owned subsidiary of PE Op Co. These four facilities have an aggregate annual ethanol production capacity of up to 200 million gallons. As of March 31, 2014, three of the facilities were operating and one of the facilities was in the process of restarting production, scheduled for the second quarter of 2014. On April 30, 2014, the previously idled facility commenced producing ethanol. As market conditions change, the Company may increase, decrease or idle production at one or more operational facilities or resume operations at any idled facility. | |
Reverse Stock Split – On May 14, 2013, the Company effected a one-for-fifteen reverse stock split. All share and per share information has been restated to retroactively show the effect of this stock split. | |
Liquidity – During the three months ended March 31, 2014, the Company funded its operations primarily from cash provided by operations, proceeds from warrant exercises and borrowings under its credit facilities. | |
The Company’s current available capital resources consist of cash on hand and amounts available for borrowing under Kinergy’s credit facility. In addition, the Plant Owners have credit facilities for use in the operations of the Pacific Ethanol Plants. The Company expects that its future available capital resources will consist primarily of its remaining cash balances, cash flow from operations, if any, amounts available for borrowing, if any, under Kinergy’s credit facility, cash generated from Kinergy’s ethanol marketing business, fees paid under the asset management agreement relating to the Company’s operation of the Pacific Ethanol Plants, cash proceeds from warrant exercises and distributions, if any, in respect of the Company’s ownership interest in PE Op Co. | |
The Company believes that current and future available capital resources, revenues generated from operations, and other existing sources of liquidity, including its credit facilities, will be adequate to meet its anticipated working capital and capital expenditure requirements for at least the next twelve months. If, however, the Company’s capital requirements or cash flow vary materially from its current projections, if crush and commodity margins, which reflect ethanol and co-product sales prices relative to ethanol production inputs such as corn and natural gas, decline in any material respect, or if other unforeseen circumstances occur, the Company may require additional financing. The Company’s failure to raise capital if and when needed could restrict its growth or hinder its ability to compete. | |
Accounts Receivable and Allowance for Doubtful Accounts – Trade accounts receivable are presented at face value, net of the allowance for doubtful accounts. The Company sells ethanol to gasoline refining and distribution companies, sells WDG to dairy operators and animal feed distributors and sells corn oil to poultry and biodiesel customers generally without requiring collateral. | |
The Company maintains an allowance for doubtful accounts for balances that appear to have specific collection issues. The collection process is based on the age of the invoice and requires attempted contacts with the customer at specified intervals. If, after a specified number of days, the Company has been unsuccessful in its collection efforts, a bad debt allowance is recorded for the balance in question. Delinquent accounts receivable are charged against the allowance for doubtful accounts once uncollectibility has been determined. The factors considered in reaching this determination are the apparent financial condition of the customer and the Company’s success in contacting and negotiating with the customer. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of ability to make payments, additional allowances may be required. | |
Of the accounts receivable balance, approximately $33,044,000 and $27,487,000 at March 31, 2014 and December 31, 2013, respectively, were used as collateral under Kinergy’s operating line of credit. The allowance for doubtful accounts was $14,000 and $187,000 as of March 31, 2014 and December 31, 2013, respectively. The Company recorded a recovery of $34,000 and bad debt expense of $208,000 for the three months ended March 31, 2014 and 2013, respectively. The Company does not have any off-balance sheet credit exposure related to its customers. | |
Provision for Income Taxes – For the three months ended March 31, 2014, although the Company incurred a net loss for the period, it generated income subject to income tax as a result of the nontax-deductible nature of its fair value adjustments for the period. As a result, the Company applied its net operating loss carryforwards to its potential taxable income and recorded a deferred provision for income taxes of $11.3 million, eliminating any need for a current tax provision or liability. Further, the Company reversed $8.0 million of its valuation allowance against its net tax assets, resulting in a benefit to its provision for income taxes with a net $3.3 million provision for income taxes for the period. Further, on April 1, 2014, New PE Holdco LLC was converted from a limited liability company to a C-Corporation and changed its name to PE Op Co. | |
Basis of Presentation–Interim Financial Statements – The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Results for interim periods should not be considered indicative of results for a full year. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The accounting policies used in preparing these consolidated financial statements are the same as those described in Note 1 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. | |
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates are required as part of determining the fair value of warrants and conversion features, allowance for doubtful accounts, estimated lives of property and equipment and intangibles, long-lived asset impairments, valuation allowances on deferred income taxes and the potential outcome of future tax consequences of events recognized in the Company’s financial statements or tax returns. Actual results and outcomes may materially differ from management’s estimates and assumptions. |
2_PACIFIC_ETHANOL_PLANTS
2. PACIFIC ETHANOL PLANTS | 3 Months Ended |
Mar. 31, 2014 | |
Pacific Ethanol Plants | ' |
2. PACIFIC ETHANOL PLANTS | ' |
Consolidation of PE Op Co. – The Company concluded that since PE Op Co.’s inception, through the point the Company became a 91% owner, PE Op Co. was a variable interest entity because the other owners of PE Op Co., due to the Company’s involvement through its contractual arrangements, at all times lacked the power to direct the activities that most significantly impacted its economic performance. However, since the Company’s recent acquisition bringing its ownership interest in PE Op Co. to 91%, the Company has obtained sufficient control both by way of agreements as well as based on structural control of PE Op Co., such that PE Op Co. is no longer considered a variable interest entity, and as such the Company will consolidate PE Op Co. under the voting rights model. | |
Noncontrolling interest increased from $5,683,000 at December 31, 2013 to $7,692,000 at March 31, 2014 due to net income attributed to noncontrolling interest of $2,009,000 for the three months ended March 31, 2014. | |
The Company’s acquisition of its ownership interest in PE Op Co. does not impact the Company’s rights or obligations under any of its contractual arrangements. Further, creditors of PE Op Co. do not have recourse to the Company. Since its acquisition, the Company has not provided any additional support to PE Op Co. beyond the terms of its contractual arrangements. |
3_INVENTORIES
3. INVENTORIES | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
3. INVENTORIES | ' | ||||||||
Inventories consisted primarily of bulk ethanol and unleaded fuel, and are valued at the lower-of-cost-or-market, with cost determined on a first-in, first-out basis. Inventory balances consisted of the following (in thousands): | |||||||||
31-Mar-14 | 31-Dec-13 | ||||||||
Finished goods | $ | 16,920 | $ | 10,287 | |||||
Raw materials | 7,280 | 9,418 | |||||||
Work in progress | 3,152 | 2,766 | |||||||
Other | 945 | 915 | |||||||
Total | $ | 28,297 | $ | 23,386 | |||||
4_DERIVATIVES
4. DERIVATIVES | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||||||
4. DERIVATIVES | ' | ||||||||||
The business and activities of the Company expose it to a variety of market risks, including risks related to changes in commodity prices and interest rates. The Company monitors and manages these financial exposures as an integral part of its risk management program. This program recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effects that market volatility could have on operating results. | |||||||||||
Commodity Risk – Cash Flow Hedges – The Company uses derivative instruments to protect cash flows from fluctuations caused by volatility in commodity prices for periods of up to twelve months in order to protect gross profit margins from potentially adverse effects of market and price volatility on ethanol sale and purchase commitments where the prices are set at a future date and/or if the contracts specify a floating or index-based price for ethanol. In addition, the Company hedges anticipated sales of ethanol to minimize its exposure to the potentially adverse effects of price volatility. These derivatives may be designated and documented as cash flow hedges and effectiveness is evaluated by assessing the probability of the anticipated transactions and regressing commodity futures prices against the Company’s purchase and sales prices. Ineffectiveness, which is defined as the degree to which the derivative does not offset the underlying exposure, is recognized immediately in cost of goods sold. For the three months ended March 31, 2014 and 2013, the Company did not designate any of its derivatives as cash flow hedges. | |||||||||||
Commodity Risk – Non-Designated Hedges – The Company uses derivative instruments to lock in prices for certain amounts of corn and ethanol by entering into forward contracts for those commodities. These derivatives are not designated for special hedge accounting treatment. The changes in fair value of these contracts are recorded on the balance sheet and recognized immediately in cost of goods sold. The Company recognized gains of $70,000 and losses of $5,000 as the change in the fair value of these contracts for the three months ended March 31, 2014 and 2013, respectively. | |||||||||||
Non Designated Derivative Instruments – The classification and amounts of the Company’s recognized gains (losses) for its derivatives not designated as hedging instruments are as follows (in thousands): | |||||||||||
Realized Gains (Losses) | |||||||||||
Three Months Ended March 31, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | 84 | $ | (73 | ) | |||||
Unrealized Gains (Losses) | |||||||||||
Three Months Ended March 31, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | (14 | ) | $ | 68 | |||||
5_DEBT
5. DEBT | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
5. DEBT | ' | ||||||||
Long-term borrowings are summarized as follows (in thousands): | |||||||||
31-Mar-14 | 31-Dec-13 | ||||||||
Kinergy operating line of credit | $ | 23,107 | $ | 19,042 | |||||
Senior unsecured notes | 977 | 13,984 | |||||||
Plant Owners’ term debt and accrued interest | 58,766 | 58,766 | |||||||
Plant Owners’ lines of credit and accrued interest | 16,000 | 35,378 | |||||||
Note payable to related party | – | 750 | |||||||
98,850 | 127,920 | ||||||||
Less: Parent purchased Plant Owners’ term debt | (27,088 | ) | (27,088 | ) | |||||
Total Consolidated Debt | 71,762 | 100,832 | |||||||
Less: Unamortized discount on senior unsecured notes | (117 | ) | (1,674 | ) | |||||
71,645 | 99,158 | ||||||||
Less short-term portion | – | (750 | ) | ||||||
Long-term debt | $ | 71,645 | $ | 98,408 | |||||
Kinergy Operating Line of Credit – For the three months ended March 31, 2014, Kinergy borrowed net $4,065,000 on its working capital line of credit. As of March 31, 2014, Kinergy had an available borrowing base under the credit facility of $6,893,000. | |||||||||
Senior Unsecured Notes – For the three months ended March 31, 2014, the Company paid in cash $13,007,000 on its senior unsecured notes. In April 2014, the Company fully retired the outstanding senior unsecured notes. | |||||||||
Plant Owners’ Term Debt and Operating Lines of Credit – The Plant Owners’ debt as of March 31, 2014 consisted of a $32,487,000 tranche A-1 term loan and a $26,279,000 tranche A-2 term loan. Pacific Ethanol, Inc., holds a combined $27,088,000 of these term loans, which are eliminated in consolidation. The Plant Owners’ availability under their revolving lines of credit was $50,378,000, which was subsequently reduced to $35,000,000, as discussed below. The term debt requires monthly interest payments at a floating rate equal to the three-month LIBOR or the Prime Rate of interest, at the Plant Owners’ election, plus 10.0%. The revolving credit facilities require monthly interest payments at a floating rate equal to the three-month LIBOR or the Prime Rate of interest, at the Plant Owners’ election, plus 10.0% and 4.5% for the $20,000,000 and $15,000,000 facilities, respectively. At March 31, 2014, the average interest rate was approximately 11%. Repayments of principal are based on available free cash flow of the Plant Owners, until maturity, when all principal amounts are due. | |||||||||
For the three months ended March 31, 2014, the Company paid in cash $19,378,000 on its revolving credit facilities. As of April 25, 2014, the outstanding principal balance on these revolving credit facilities was fully repaid, with an aggregate of $35,000,000 of availability. | |||||||||
Debt Modifications – On April 1, 2014, the Company entered into amendments to its credit facilities and term loan arrangements to achieve the following changes: | |||||||||
· | Adjust the terms of the credit agreements to take into account a restart of the Company’s Madera, California facility; | ||||||||
· | Reduce the Company’s revolving credit facility from $35,000,000 to $20,000,000 while increasing the maximum amount of the term loan outstanding to $65,766,000, allowing the Company to immediately borrow an additional $7,000,000. The additional $7,000,000 in borrowings was subject to an original issue discount of 6.25%, representing loan fees payable to the lenders, resulting in net proceeds from the additional borrowings of approximately $6,600,000. The Company intends to use the net proceeds of the additional loan for transaction expenses and expenses associated with restarting operations at the Company’s Madera, California facility; | ||||||||
· | Increase to $24,000,000 from $14,000,000 the level of permitted indebtedness, including capital lease liabilities that may be incurred for yield enhancing equipment or processing and separation equipment for corn oil and corn syrup at the Company’s ethanol production facilities; and | ||||||||
· | Maintain the Company’s new revolving credit facility at $15,000,000 but allow the Company to terminate in whole or permanently reduce in part in $1,000,000 increments the lenders’ aggregate commitment. | ||||||||
Note Payable to Related Party – The Company repaid in cash its note payable to its Chief Executive Officer totaling $750,000 on March 31, 2014. | |||||||||
6_COMMON_STOCK_AND_WARRANTS
6. COMMON STOCK AND WARRANTS | 3 Months Ended |
Mar. 31, 2014 | |
Stockholders' Equity Note [Abstract] | ' |
6. COMMON STOCK AND WARRANTS | ' |
Warrant exercises – During the three months ended March 31, 2014 and 2013, certain holders exercised warrants and received an aggregate of 1,888,000 and 279,000 shares of the Company’s common stock upon payment of an aggregate of $12,130,000 and $2,064,000 in cash, respectively. During the three months ended March 31, 2013, the Company paid $785,800 in cash to the warrant holders as an inducement for such exercises and recorded an expense of approximately $785,800. Also, in March 2013, a holder exercised warrants on a cashless basis and received 11,356 shares of the Company’s common stock. There were no cashless exercises for the three months ended March 31, 2014. | |
Equity offering – In April 2014, the Company issued 1,750,000 shares of its common stock in a public offering for net proceeds of $26,000,000. |
7_COMMITMENTS_AND_CONTINGENCIE
7. COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
7. COMMITMENTS AND CONTINGENCIES | ' |
Sales Commitments – At March 31, 2014, the Company had entered into sales contracts with its major customers to sell certain quantities of ethanol, WDG, corn oil and syrup. The Company had open ethanol indexed-price contracts for 146,017,000 gallons of ethanol as of March 31, 2014. The Company had open WDG and syrup fixed-price sales contracts valued at $396,000, open corn oil sales contracts valued at $213,000, and open indexed-price sales contracts for 452 tons of WDG and syrup and 1,779,000 pounds of corn oil as of March 31, 2014. These sales contracts are scheduled to be completed throughout 2014. | |
Purchase Commitments – At March 31, 2014, the Company had fixed-price purchase contracts with its suppliers to purchase $21,642,000 of ethanol and indexed-price contracts to purchase 22,745,000 gallons of ethanol. These contracts are scheduled to be satisfied throughout the remainder of 2014. | |
Litigation – General – The Company is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related matters, and others. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. While there can be no assurances, the Company does not expect that any of its pending legal proceedings will have a material financial impact on the Company’s operating results. | |
On May 24, 2013, GS CleanTech Corporation (“GS CleanTech”), filed a suit in the United States District Court for the Eastern District of California, Sacramento Division (Case No.: 2:13-CV-01042-JAM-AC), naming Pacific Ethanol, Inc. as a defendant. On August 29, 2013, the case was transferred to the United States District Court for the Southern District of Indiana and made part of the pre-existing multi-district litigation involving GS CleanTech and multiple defendants. The suit alleges infringement of a patent assigned to GS CleanTech by virtue of certain corn oil separation technology in use at one or more of the ethanol production facilities in which the Company has an interest, including Pacific Ethanol Stockton LLC (“PE Stockton”), located in Stockton, California. The complaint seeks preliminary and permanent injunctions against the Company, prohibiting future infringement on the patent owned by GS CleanTech and damages in an unspecified amount adequate to compensate GS CleanTech for the alleged patent infringement, but in any event no less than a reasonable royalty for the use made of the inventions of the patent, plus attorney’s fees. The Company has since answered the complaint and counterclaimed that the patent claims at issue, as well as the claims in several related patents, are invalid and unenforceable and that the Company is not infringing. Pacific Ethanol, Inc. does not itself use any corn oil separation technology and may seek a dismissal on those grounds. | |
On March 17 and March 18, 2014, GS CleanTech filed suit naming as defendants two Company subsidiaries: PE Stockton and Pacific Ethanol Magic Valley, LLC (“PE Magic Valley”). The claims are similar to those filed against Pacific Ethanol, Inc. in May 2013. These two cases, currently pending in the United States District Court for the Eastern District of California and United States District Court for the Eastern District of Idaho, respectively, will be transferred to the multi-district litigation division in United States District Court for the Southern District of Indiana, where the case against Pacific Ethanol, Inc. is pending, in accordance with a Conditional Transfer Order issued by the Judicial Panel on Multidistrict Litigation on March 27, 2014. Although PE Stockton and PE Magic Valley do separate and market corn oil, the Company, PE Stockton and PE Magic Valley strongly disagree that either of the subsidiaries use corn oil separation technology that infringes the patent owned by GS CleanTech. The Company, PE Stockton and PE Magic Valley expect to mount vigorous defenses that include noninfringement, unenforceability, and invalidity of each of the patents at issue. |
8_FAIR_VALUE_MEASUREMENTS
8. FAIR VALUE MEASUREMENTS | 3 Months Ended | ||||||||||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||||||||||
8. FAIR VALUE MEASUREMENTS. | ' | ||||||||||||||||||||||||||||
The fair value hierarchy prioritizes the inputs used in valuation techniques into three levels, as follows: | |||||||||||||||||||||||||||||
· | Level 1 – Observable inputs – unadjusted quoted prices in active markets for identical assets and liabilities; | ||||||||||||||||||||||||||||
· | Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data; and | ||||||||||||||||||||||||||||
· | Level 3 – Unobservable inputs – includes amounts derived from valuation models where one or more significant inputs are unobservable. For fair value measurements using significant unobservable inputs, a description of the inputs and the information used to develop the inputs is required along with a reconciliation of Level 3 values from the prior reporting period. | ||||||||||||||||||||||||||||
The Company recorded its warrants issued from 2010 through 2013 at fair value and designated them as Level 3 on their issuance dates. | |||||||||||||||||||||||||||||
Warrants – Except for the warrants issued September 26, 2012, the Company’s warrants have been valued using a Monte Carlo Binomial Lattice-Based valuation methodology, adjusted for marketability restrictions. The warrants issued September 26, 2012, did not contain any anti-dilution protection features and as a result, the warrants were valued using the Black-Scholes Valuation Model. Of the various inputs used, the volatility and the current price of the Company’s common stock most significantly impact the fair value adjustments of the warrants. As the price of the Company’s common stock increases or decreases quarter-over-quarter, the valuation of the warrants will increase or decrease, respectively. As the estimated volatility of the Company’s common stock increases or decreases quarter-over quarter, the valuation of the warrants will increase or decrease, respectively. These changes may result in significantly higher or lower fair value measurements from period to period. | |||||||||||||||||||||||||||||
Significant assumptions used and related fair values for the Company’s warrants as of March 31, 2014 were as follows: | |||||||||||||||||||||||||||||
Original Issuance | Exercise Price | Volatility | Risk-Free Interest Rate | Term (years) | Discount for marketability restrictions | Warrants Outstanding | Fair Value | ||||||||||||||||||||||
3/28/13 | $ | 7.59 | 56.40% | 0.13% | 1 | 22.10% | 788,000 | $ | 5,098,000 | ||||||||||||||||||||
6/21/13 | $ | 7.59 | 55.40% | 0.13% | 1.24 | 24.20% | 1,051,000 | 6,703,000 | |||||||||||||||||||||
1/11/13 | $ | 6.32 | 60.60% | 1.32% | 3.79 | 41.00% | 813,000 | 5,343,000 | |||||||||||||||||||||
9/26/12 | $ | 8.85 | 54.60% | 0.29% | 1.49 | 40.60% | 1,639,000 | 7,382,000 | |||||||||||||||||||||
7/3/12 | $ | 6.09 | 60.20% | 0.90% | 3.26 | 39.30% | 976,000 | 6,462,000 | |||||||||||||||||||||
12/13/11 | $ | 8.43 | 60.80% | 0.90% | 2.71 | 36.60% | 281,000 | 1,691,000 | |||||||||||||||||||||
$ | 32,679,000 | ||||||||||||||||||||||||||||
Significant assumptions used and related fair values for the Company’s warrants as of December 31, 2013 were as follows: | |||||||||||||||||||||||||||||
Original Issuance | Exercise Price | Volatility | Risk-Free Interest Rate | Term (years) | Discount for marketability restrictions | Warrants Outstanding | Fair Value | ||||||||||||||||||||||
3/28/13 | $ | 7.59 | 52.40% | 0.13% | 1.2 | 22.70% | 788,000 | $ | 495,000 | ||||||||||||||||||||
6/21/13 | $ | 7.59 | 52.40% | 0.13% | 1.24 | 22.70% | 1,051,000 | 660,000 | |||||||||||||||||||||
1/11/13 | $ | 6.32 | 63.30% | 1.27% | 4.03 | 43.80% | 1,709,000 | 2,892,000 | |||||||||||||||||||||
9/26/12 | $ | 8.85 | 58.50% | 0.38% | 1.74 | 42.30% | 1,771,000 | 702,000 | |||||||||||||||||||||
7/3/12 | $ | 6.09 | 61.20% | 1.27% | 3.51 | 40.20% | 1,812,000 | 3,008,000 | |||||||||||||||||||||
7/3/12 | $ | 5.47 | 52.80% | 0.01% | 0.01 | 42.30% | 804,000 | 3,000 | |||||||||||||||||||||
12/13/11 | $ | 8.43 | 60.40% | 0.78% | 2.95 | 37.90% | 306,000 | 455,000 | |||||||||||||||||||||
$ | 8,215,000 | ||||||||||||||||||||||||||||
Other Derivative Instruments – The Company’s other derivative instruments consist of commodity positions. The fair values of the commodity positions are based on quoted prices on the commodity exchanges and are designated as Level 1 inputs. | |||||||||||||||||||||||||||||
The following table summarizes fair value measurements by level at March 31, 2014 (in thousands): | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Commodity contracts(1) | $ | 388 | $ | – | $ | – | $ | 388 | |||||||||||||||||||||
Total Assets | $ | 388 | $ | – | $ | – | $ | 388 | |||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Warrants(2) | $ | – | $ | – | $ | 32,679 | $ | 32,679 | |||||||||||||||||||||
Commodity contracts(3) | 301 | – | – | 301 | |||||||||||||||||||||||||
Total Liabilities | $ | 301 | $ | – | $ | 32,679 | $ | 32,980 | |||||||||||||||||||||
__________ | |||||||||||||||||||||||||||||
(1) Included in other current assets in the consolidated balance sheets. | |||||||||||||||||||||||||||||
(2) Included in warrant liabilities at fair value in the consolidated balance sheets. | |||||||||||||||||||||||||||||
(3) Included in other current liabilities in the consolidated balance sheets. | |||||||||||||||||||||||||||||
The following table summarizes fair value measurements by level at December 31, 2013 (in thousands): | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Commodity contracts(1) | $ | 961 | $ | – | $ | – | $ | 961 | |||||||||||||||||||||
Total Assets | $ | 961 | $ | – | $ | – | $ | 961 | |||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Warrants(2) | $ | – | $ | – | $ | 8,215 | $ | 8,215 | |||||||||||||||||||||
Commodity contracts(3) | 859 | – | – | 859 | |||||||||||||||||||||||||
Total Liabilities | $ | 859 | $ | – | $ | 8,215 | $ | 9,074 | |||||||||||||||||||||
__________ | |||||||||||||||||||||||||||||
(1) Included in other current assets in the consolidated balance sheets. | |||||||||||||||||||||||||||||
(2) Included in warrant liabilities at fair value in the consolidated balance sheets. | |||||||||||||||||||||||||||||
(3) Included in accrued liabilities in the consolidated balance sheets. | |||||||||||||||||||||||||||||
For fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs is required along with a reconciliation of Level 3 values from the prior reporting period. The changes in the Company’s fair value of its Level 3 inputs were as follows (in thousands): | |||||||||||||||||||||||||||||
Warrants | |||||||||||||||||||||||||||||
Balance, December 31, 2013 | $ | 8,215 | |||||||||||||||||||||||||||
Adjustments to fair value for the period | 35,844 | ||||||||||||||||||||||||||||
Exercises of warrants | (11,377 | ) | |||||||||||||||||||||||||||
Expiration of warrants | (3 | ) | |||||||||||||||||||||||||||
Balance, March 31, 2014 | $ | 32,679 | |||||||||||||||||||||||||||
9_EARNINGS_PER_SHARE
9. EARNINGS PER SHARE | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||
9 .EARNINGS PER SHARE | ' | ||||||||||||
The following tables compute basic and diluted earnings per share (in thousands, except per share data): | |||||||||||||
Three Months Ended March 31, 2014 | |||||||||||||
Loss | Shares Denominator | Per-Share Amount | |||||||||||
Numerator | |||||||||||||
Net loss attributed to Pacific Ethanol, Inc. | $ | (10,826 | ) | ||||||||||
Less: Preferred stock dividends | (312 | ) | |||||||||||
Basic and diluted loss per share: | |||||||||||||
Loss attributed to common stockholders | $ | (11,138 | ) | 16,181 | $ | (0.69 | ) | ||||||
Three Months Ended March 31, 2013 | |||||||||||||
Loss | Shares Denominator | Per-Share Amount | |||||||||||
Numerator | |||||||||||||
Net loss attributed to Pacific Ethanol, Inc. | $ | (5,454 | ) | ||||||||||
Less: Preferred stock dividends | (312 | ) | |||||||||||
Basic and diluted loss per share: | |||||||||||||
Loss attributed to common stockholders | $ | (5,766 | ) | 10,060 | $ | (0.57 | ) | ||||||
There were an aggregate of 2,301,000 and 427,000 potentially dilutive weighted-average shares from convertible securities outstanding as of March 31, 2014 and 2013, respectively. These convertible securities were not considered in calculating diluted net loss per share for the three months ended March 31, 2014 and 2013, as their effect would have been anti-dilutive. In April 2014, the Company issued 1,750,000 shares of its common stock in a public offering. |
10_RELATED_PARTY_TRANSACTIONS
10. RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2014 | |
Related Party Transactions [Abstract] | ' |
10. RELATED PARTY TRANSACTIONS | ' |
Preferred Dividends – The Company had accrued and unpaid dividends in respect of its Series B Preferred Stock of $3,657,000 as of March 31, 2014 and December 31, 2013. | |
Note Payable to Related Party – The Company had a note payable to its Chief Executive Officer totaling $750,000 which was due on March 31, 2014. On March 31, 2014, the Company paid in cash the outstanding balance of the note payable. |
11_SUBSEQUENT_EVENTS
11. SUBSEQUENT EVENTS | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Subsequent Events [Abstract] | ' | ||||||||
11.SUBSEQUENT EVENTS | ' | ||||||||
Warrant Exercises – From April 1, 2014 through May 8, 2014, certain holders exercised warrants on a cash or cashless basis for an aggregate of 145,000 and 493,000 shares of the Company’s common stock, respectively, for aggregate cash payments of $883,000. | |||||||||
A summary as of May 8, 2014 of outstanding warrants, which the Company recorded at fair value, with a weighted-average exercise price of $7.57, is as follows: | |||||||||
Issuance Date | Expiration Date | Exercise Price | Warrants Outstanding | ||||||
6/21/13 | 6/21/15 | $7.59 | 1,051,000 | ||||||
3/28/13 | 3/28/15 | $7.59 | 296,000 | ||||||
1/11/13 | 1/11/18 | $6.32 | 813,000 | ||||||
9/26/12 | 9/26/15 | $8.85 | 1,639,000 | ||||||
7/3/12 | 7/3/17 | $6.09 | 830,000 | ||||||
12/13/11 | 12/13/16 | $8.43 | 281,000 | ||||||
4,910,000 | |||||||||
Equity Offering – In April 2014, the Company issued 1,750,000 shares of its common stock in a public offering for net proceeds of $26,000,000. | |||||||||
Payments on Senior Unsecured Notes – In April 2014, the Company fully retired its senior unsecured notes by paying in cash the outstanding principal amount and all accrued and unpaid interest. | |||||||||
Payments on Plant Owners’ Revolving Credit Facility – From April 1, 2014 through April 25, 2014, the Company made $16,000,000 in principal payments on its revolving lines of credit. As of May 9, 2014, the outstanding principal balance on these revolving lines of credit was $0, with $35,000,000 of availability. | |||||||||
Debt Modifications – On April 1, 2014, the Company entered into amendments to its credit facilities and term loan arrangements as discussed in detail in Note 5. |
1_ORGANIZATION_AND_BASIS_OF_PR1
1. ORGANIZATION AND BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Accounting Policies [Abstract] | ' |
Organization and Business | ' |
Organization and Business – The consolidated financial statements include, for all periods presented, the accounts of Pacific Ethanol, Inc., a Delaware corporation (“Pacific Ethanol”), and its direct and indirect subsidiaries, including its wholly-owned subsidiaries, Kinergy Marketing LLC, an Oregon limited liability company (“Kinergy”), Pacific Ag. Products, LLC, a California limited liability company (“PAP”) and PE Op Co. (“PE Op Co.,” formerly, New PE Holdco LLC), which owns the Plant Owners (as defined below) (collectively, the “Company”). | |
The Company is the leading producer and marketer of low-carbon renewable fuels in the Western United States. The Company also sells ethanol co-products, including wet distillers grain (“WDG”), a nutritious animal feed, and corn oil. Serving integrated oil companies and gasoline marketers who blend ethanol into gasoline, the Company provides transportation, storage and delivery of ethanol through third-party service providers in the Western United States, primarily in California, Arizona, Nevada, Utah, Oregon, Colorado, Idaho and Washington. The Company had a 91% and an 83% ownership interest in PE Op Co., the owner of four ethanol production facilities, as of March 31, 2014 and 2013, respectively. The facilities are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages. The Company sells ethanol produced by the Pacific Ethanol Plants (as defined below) and unrelated third parties to gasoline refining and distribution companies, sells its WDG to dairy operators and animal feed distributors and sells its corn oil to poultry and biodiesel customers. | |
The Company manages the production and operation of four ethanol production facilities, namely, Pacific Ethanol Madera LLC, Pacific Ethanol Columbia, LLC, Pacific Ethanol Stockton LLC and Pacific Ethanol Magic Valley, LLC (collectively, the “Pacific Ethanol Plants”) and their holding company, Pacific Ethanol Holding Co. LLC (“PEHC,” and together with the Pacific Ethanol Plants, the “Plant Owners”). PEHC is a wholly-owned subsidiary of PE Op Co. These four facilities have an aggregate annual ethanol production capacity of up to 200 million gallons. As of March 31, 2014, three of the facilities were operating and one of the facilities was in the process of restarting production, scheduled for the second quarter of 2014. On April 30, 2014, the previously idled facility commenced producing ethanol. As market conditions change, the Company may increase, decrease or idle production at one or more operational facilities or resume operations at any idled facility. | |
Reverse Stock Split | ' |
Reverse Stock Split – On May 14, 2013, the Company effected a one-for-fifteen reverse stock split. All share and per share information has been restated to retroactively show the effect of this stock split. | |
Liquidity | ' |
Liquidity – During the three months ended March 31, 2014, the Company funded its operations primarily from cash provided by operations, proceeds from warrant exercises and borrowings under its credit facilities. | |
The Company’s current available capital resources consist of cash on hand and amounts available for borrowing under Kinergy’s credit facility. In addition, the Plant Owners have credit facilities for use in the operations of the Pacific Ethanol Plants. The Company expects that its future available capital resources will consist primarily of its remaining cash balances, cash flow from operations, if any, amounts available for borrowing, if any, under Kinergy’s credit facility, cash generated from Kinergy’s ethanol marketing business, fees paid under the asset management agreement relating to the Company’s operation of the Pacific Ethanol Plants, cash proceeds from warrant exercises and distributions, if any, in respect of the Company’s ownership interest in PE Op Co. | |
The Company believes that current and future available capital resources, revenues generated from operations, and other existing sources of liquidity, including its credit facilities, will be adequate to meet its anticipated working capital and capital expenditure requirements for at least the next twelve months. If, however, the Company’s capital requirements or cash flow vary materially from its current projections, if crush and commodity margins, which reflect ethanol and co-product sales prices relative to ethanol production inputs such as corn and natural gas, decline in any material respect, or if other unforeseen circumstances occur, the Company may require additional financing. The Company’s failure to raise capital if and when needed could restrict its growth or hinder its ability to compete. | |
Accounts Receivable and Allowance for Doubtful Accounts | ' |
Accounts Receivable and Allowance for Doubtful Accounts – Trade accounts receivable are presented at face value, net of the allowance for doubtful accounts. The Company sells ethanol to gasoline refining and distribution companies, sells WDG to dairy operators and animal feed distributors and sells corn oil to poultry and biodiesel customers generally without requiring collateral. | |
The Company maintains an allowance for doubtful accounts for balances that appear to have specific collection issues. The collection process is based on the age of the invoice and requires attempted contacts with the customer at specified intervals. If, after a specified number of days, the Company has been unsuccessful in its collection efforts, a bad debt allowance is recorded for the balance in question. Delinquent accounts receivable are charged against the allowance for doubtful accounts once uncollectibility has been determined. The factors considered in reaching this determination are the apparent financial condition of the customer and the Company’s success in contacting and negotiating with the customer. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of ability to make payments, additional allowances may be required. | |
Of the accounts receivable balance, approximately $33,044,000 and $27,487,000 at March 31, 2014 and December 31, 2013, respectively, were used as collateral under Kinergy’s operating line of credit. The allowance for doubtful accounts was $14,000 and $187,000 as of March 31, 2014 and December 31, 2013, respectively. The Company recorded a recovery of $34,000 and bad debt expense of $208,000 for the three months ended March 31, 2014 and 2013, respectively. The Company does not have any off-balance sheet credit exposure related to its customers. | |
Provision for Income Taxes | ' |
Provision for Income Taxes – For the three months ended March 31, 2014, although the Company incurred a net loss for the period, it generated income subject to income tax as a result of the nontax-deductible nature of its fair value adjustments for the period. As a result, the Company applied its net operating loss carryforwards to its potential taxable income and recorded a deferred provision for income taxes of $11.3 million, eliminating any need for a current tax provision or liability. Further, the Company reversed $8.0 million of its valuation allowance against its net tax assets, resulting in a benefit to its provision for income taxes with a net $3.3 million provision for income taxes for the period. Further, on April 1, 2014, New PE Holdco LLC was converted from a limited liability company to a C-Corporation and changed its name to PE Op Co. | |
Basis of Presentation-Interim Financial Statements | ' |
Basis of Presentation–Interim Financial Statements – The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Results for interim periods should not be considered indicative of results for a full year. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The accounting policies used in preparing these consolidated financial statements are the same as those described in Note 1 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. | |
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates are required as part of determining the fair value of warrants and conversion features, allowance for doubtful accounts, estimated lives of property and equipment and intangibles, long-lived asset impairments, valuation allowances on deferred income taxes and the potential outcome of future tax consequences of events recognized in the Company’s financial statements or tax returns. Actual results and outcomes may materially differ from management’s estimates and assumptions. |
3_INVENTORIES_Tables
3. INVENTORIES (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventories | ' | ||||||||
31-Mar-14 | 31-Dec-13 | ||||||||
Finished goods | $ | 16,920 | $ | 10,287 | |||||
Raw materials | 7,280 | 9,418 | |||||||
Work in progress | 3,152 | 2,766 | |||||||
Other | 945 | 915 | |||||||
Total | $ | 28,297 | $ | 23,386 |
4_DERIVATIVES_Tables
4. DERIVATIVES (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||||||
Derivatives not designated as hedging instruments | ' | ||||||||||
Realized Gains (Losses) | |||||||||||
Three Months Ended March 31, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | 84 | $ | (73 | ) | |||||
Unrealized Gains (Losses) | |||||||||||
Three Months Ended March 31, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | (14 | ) | $ | 68 | |||||
5_DEBT_Tables
5. DEBT (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Long Term Debt | ' | ||||||||
31-Mar-14 | 31-Dec-13 | ||||||||
Kinergy operating line of credit | $ | 23,107 | $ | 19,042 | |||||
Senior unsecured notes | 977 | 13,984 | |||||||
Plant Owners’ term debt and accrued interest | 58,766 | 58,766 | |||||||
Plant Owners’ lines of credit and accrued interest | 16,000 | 35,378 | |||||||
Note payable to related party | – | 750 | |||||||
98,850 | 127,920 | ||||||||
Less: Parent purchased Plant Owners’ term debt | (27,088 | ) | (27,088 | ) | |||||
Total Consolidated Debt | 71,762 | 100,832 | |||||||
Less: Unamortized discount on senior unsecured notes | (117 | ) | (1,674 | ) | |||||
71,645 | 99,158 | ||||||||
Less short-term portion | – | (750 | ) | ||||||
Long-term debt | $ | 71,645 | $ | 98,408 |
8_FAIR_VALUE_MEASUREMENTS_Tabl
8. FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended | ||||||||||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||||||||||
Assumptions used and related fair value for conversion feature | ' | ||||||||||||||||||||||||||||
Significant assumptions used and related fair values for the Company’s warrants as of March 31, 2014 were as follows: | |||||||||||||||||||||||||||||
Original Issuance | Exercise Price | Volatility | Risk-Free Interest Rate | Term (years) | Discount for marketability restrictions | Warrants Outstanding | Fair Value | ||||||||||||||||||||||
3/28/13 | $ | 7.59 | 56.40% | 0.13% | 1 | 22.10% | 788,000 | $ | 5,098,000 | ||||||||||||||||||||
6/21/13 | $ | 7.59 | 55.40% | 0.13% | 1.24 | 24.20% | 1,051,000 | 6,703,000 | |||||||||||||||||||||
1/11/13 | $ | 6.32 | 60.60% | 1.32% | 3.79 | 41.00% | 813,000 | 5,343,000 | |||||||||||||||||||||
9/26/12 | $ | 8.85 | 54.60% | 0.29% | 1.49 | 40.60% | 1,639,000 | 7,382,000 | |||||||||||||||||||||
7/3/12 | $ | 6.09 | 60.20% | 0.90% | 3.26 | 39.30% | 976,000 | 6,462,000 | |||||||||||||||||||||
12/13/11 | $ | 8.43 | 60.80% | 0.90% | 2.71 | 36.60% | 281,000 | 1,691,000 | |||||||||||||||||||||
$ | 32,679,000 | ||||||||||||||||||||||||||||
Significant assumptions used and related fair values for the Company’s warrants as of December 31, 2013 were as follows: | |||||||||||||||||||||||||||||
Original Issuance | Exercise Price | Volatility | Risk-Free Interest Rate | Term (years) | Discount for marketability restrictions | Warrants Outstanding | Fair Value | ||||||||||||||||||||||
3/28/13 | $ | 7.59 | 52.40% | 0.13% | 1.2 | 22.70% | 788,000 | $ | 495,000 | ||||||||||||||||||||
6/21/13 | $ | 7.59 | 52.40% | 0.13% | 1.24 | 22.70% | 1,051,000 | 660,000 | |||||||||||||||||||||
1/11/13 | $ | 6.32 | 63.30% | 1.27% | 4.03 | 43.80% | 1,709,000 | 2,892,000 | |||||||||||||||||||||
9/26/12 | $ | 8.85 | 58.50% | 0.38% | 1.74 | 42.30% | 1,771,000 | 702,000 | |||||||||||||||||||||
7/3/12 | $ | 6.09 | 61.20% | 1.27% | 3.51 | 40.20% | 1,812,000 | 3,008,000 | |||||||||||||||||||||
7/3/12 | $ | 5.47 | 52.80% | 0.01% | 0.01 | 42.30% | 804,000 | 3,000 | |||||||||||||||||||||
12/13/11 | $ | 8.43 | 60.40% | 0.78% | 2.95 | 37.90% | 306,000 | 455,000 | |||||||||||||||||||||
$ | 8,215,000 | ||||||||||||||||||||||||||||
Summary of fair value measurements by level | ' | ||||||||||||||||||||||||||||
The following table summarizes fair value measurements by level at March 31, 2014 (in thousands): | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Commodity contracts(1) | $ | 388 | $ | – | $ | – | $ | 388 | |||||||||||||||||||||
Total Assets | $ | 388 | $ | – | $ | – | $ | 388 | |||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Warrants(2) | $ | – | $ | – | $ | 32,679 | $ | 32,679 | |||||||||||||||||||||
Commodity contracts(3) | 301 | – | – | 301 | |||||||||||||||||||||||||
Total Liabilities | $ | 301 | $ | – | $ | 32,679 | $ | 32,980 | |||||||||||||||||||||
__________ | |||||||||||||||||||||||||||||
(1) Included in other current assets in the consolidated balance sheets. | |||||||||||||||||||||||||||||
(2) Included in warrant liabilities at fair value in the consolidated balance sheets. | |||||||||||||||||||||||||||||
(3) Included in other current liabilities in the consolidated balance sheets. | |||||||||||||||||||||||||||||
The following table summarizes fair value measurements by level at December 31, 2013 (in thousands): | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Commodity contracts(1) | $ | 961 | $ | – | $ | – | $ | 961 | |||||||||||||||||||||
Total Assets | $ | 961 | $ | – | $ | – | $ | 961 | |||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Warrants(2) | $ | – | $ | – | $ | 8,215 | $ | 8,215 | |||||||||||||||||||||
Commodity contracts(3) | 859 | – | – | 859 | |||||||||||||||||||||||||
Total Liabilities | $ | 859 | $ | – | $ | 8,215 | $ | 9,074 | |||||||||||||||||||||
__________ | |||||||||||||||||||||||||||||
(1) Included in other current assets in the consolidated balance sheets. | |||||||||||||||||||||||||||||
(2) Included in warrant liabilities at fair value in the consolidated balance sheets. | |||||||||||||||||||||||||||||
(3) Included in accrued liabilities in the consolidated balance sheets. | |||||||||||||||||||||||||||||
Changes in fair value of Level 3 inputs | ' | ||||||||||||||||||||||||||||
Warrants | |||||||||||||||||||||||||||||
Balance, December 31, 2013 | $ | 8,215 | |||||||||||||||||||||||||||
Adjustments to fair value for the period | 35,844 | ||||||||||||||||||||||||||||
Exercises of warrants | (11,377 | ) | |||||||||||||||||||||||||||
Expiration of warrants | (3 | ) | |||||||||||||||||||||||||||
Balance, March 31, 2014 | $ | 32,679 |
9_EARNINGS_PER_SHARE_Tables
9. EARNINGS PER SHARE (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||
Computation of basic and diluted earnings per share | ' | ||||||||||||
Three Months Ended March 31, 2014 | |||||||||||||
Loss | Shares Denominator | Per-Share Amount | |||||||||||
Numerator | |||||||||||||
Net loss attributed to Pacific Ethanol, Inc. | $ | (10,826 | ) | ||||||||||
Less: Preferred stock dividends | (312 | ) | |||||||||||
Basic and diluted loss per share: | |||||||||||||
Loss attributed to common stockholders | $ | (11,138 | ) | 16,181 | $ | (0.69 | ) |
1_ORGANIZATION_AND_BASIS_OF_PR2
1. ORGANIZATION AND BASIS OF PRESENTATION (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' |
Accounts receivable used as collateral | $33,044,000 | ' | $27,487,000 |
Allowance for doubtful accounts | 14,000 | ' | 187,000 |
Bad debt recovery (expense) | $34,000 | ($208,000) | ' |
2_PACIFIC_ETHANOL_PLANTS_Detai
2. PACIFIC ETHANOL PLANTS (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Pacific Ethanol Plants | ' |
Increase in noncontrolling interest | $2,009,000 |
3_INVENTORIES_Details
3. INVENTORIES (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Inventory balances | ' | ' |
Finished goods | $16,920 | $10,287 |
Raw materials | 7,280 | 9,418 |
Work in progress | 3,152 | 2,766 |
Other | 945 | 915 |
Total | $28,297 | $23,386 |
4_DERIVATIVES_Details
4. DERIVATIVES (Details) (Commodity contracts [Member], Non Designated Derivative Instruments [Member], Cost of goods sold [Member], USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Commodity contracts [Member] | Non Designated Derivative Instruments [Member] | Cost of goods sold [Member] | ' | ' |
Classification and amounts of the Company's derivatives not designated as hedging instruments | ' | ' |
Realized Gains (Losses) | $84 | ($73) |
Unrealized Gains (Losses) | ($14) | $68 |
4_DERIVATIVES_Details_Narrativ
4. DERIVATIVES (Details Narrative) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Additional details | ' | ' |
Recognized gains and losses due to change in fair value | $70 | ($5) |
5_DEBT_Details
5. DEBT (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Debt Disclosure [Abstract] | ' | ' |
Kinergy operating line of credit | $23,107 | $19,042 |
Senior unsecured notes | 977 | 13,984 |
Plant Owner's term debt and accrued interest | 58,766 | 58,766 |
Plant Owner's operating lines of credit and accrued interest | 16,000 | 35,378 |
Note payable to related party | 0 | 750 |
Total debt | 98,850 | 127,920 |
Less: Parent purchased Plant Owners' term debt | -27,088 | -27,088 |
Total Consolidated debt | 71,762 | 100,832 |
Less: Unamortized discount on senior unsecured notes | -117 | -1,674 |
Long-term Debt, current and non-current | 71,645 | 99,158 |
Less short-term portion | 0 | -750 |
Long-term debt | $71,645 | $98,408 |
5_DEBT_Details_Narrative
5. DEBT (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Proceeds from lines of credit | $4,065,000 | $847,000 |
Payments on senior unsecured notes | 13,007,000 | 1,880,000 |
Repayment of lines of credit | 19,378,000 | 3,500,000 |
Repayment of related party debt | 750,000 | 0 |
Tranche A-1 | ' | ' |
Line of credit availability | 20,000,000 | ' |
Line of credit amount outstanding | 32,487,000 | ' |
Tranche A-2 | ' | ' |
Line of credit availability | 15,000,000 | ' |
Line of credit amount outstanding | 26,279,000 | ' |
Consolidated | ' | ' |
Line of credit amount outstanding | 27,088,000 | ' |
Kinergy [Member] | ' | ' |
Line of credit availability | 6,893,000 | ' |
Proceeds from lines of credit | $4,065,000 | ' |
6_COMMON_STOCK_AND_WARRANTS_De
6. COMMON STOCK AND WARRANTS (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Stockholders' Equity Note [Abstract] | ' | ' |
Warrants exercised, shares received | 1,888,000 | 279,000 |
Warrants exercised, cash received | $12,130,000 | $2,064,000 |
Cost of inducement | ' | 785,800 |
Stock issued in public offering, shares issued | 1,750,000 | ' |
Stock issued in public offering, proceeds | $26,000,000 | ' |
7_COMMITMENTS_AND_CONTINGENCIE1
7. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | |
Corn contract | Syrup contracts | Ethanol contracts | |
Sales commitments | $213,000 | $396,000 | ' |
Purchase commitments | ' | ' | $21,642,000 |
8_FAIR_VALUE_MEASUREMENTS_Deta
8. FAIR VALUE MEASUREMENTS (Details-Significant Assumptions and Fair Value) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
Significant assumptions used in the valuations | ' | ' |
Fair value | $32,679,000 | $8,215,000 |
Original Issuance 03/28/2013 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | $7.59 | $7.59 |
Volatility | 56.40% | 52.40% |
Risk free interest rate | 0.13% | 0.13% |
Term (years) | '1 year | '1 year 2 months 12 days |
Discount for Marketability restrictions | 22.10% | 22.70% |
Warrants Outstanding | 788,000 | 788,000 |
Fair value | 5,098,000 | 495,000 |
Original Issuance 06/21/2013 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | $7.59 | $7.59 |
Volatility | 55.40% | 52.40% |
Risk free interest rate | 0.13% | 0.13% |
Term (years) | '1 year 2 months 26 days | '1 year 2 months 26 days |
Discount for Marketability restrictions | 24.20% | 22.70% |
Warrants Outstanding | 1,051,000 | 1,051,000 |
Fair value | 6,703,000 | 660,000 |
Original issuance 1/11/2013 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | $6.32 | $6.32 |
Volatility | 60.60% | 63.30% |
Risk free interest rate | 1.32% | 1.27% |
Term (years) | '3 years 9 months 14 days | '4 years 11 days |
Discount for Marketability restrictions | 41.00% | 43.80% |
Warrants Outstanding | 813,000 | 1,709,000 |
Fair value | 5,343,000 | 2,892,000 |
Original issuance 9/26/2012 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | $8.85 | $8.85 |
Volatility | 54.60% | 58.50% |
Risk free interest rate | 0.29% | 0.38% |
Term (years) | '1 year 5 months 26 days | '1 year 8 months 26 days |
Discount for Marketability restrictions | 40.60% | 42.30% |
Warrants Outstanding | 1,639,000 | 1,771,000 |
Fair value | 7,382,000 | 702,000 |
Original issuance 7/3/2012 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | $6.09 | $6.09 |
Volatility | 60.20% | 61.20% |
Risk free interest rate | 0.90% | 1.27% |
Term (years) | '3 years 3 months 4 days | '3 years 6 months 4 days |
Discount for Marketability restrictions | 39.30% | 40.20% |
Warrants Outstanding | 976,000 | 1,812,000 |
Fair value | 6,462,000 | 3,008,000 |
Original issuance 12/13/2011 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | $8.43 | $8.43 |
Volatility | 60.80% | 60.40% |
Risk free interest rate | 0.90% | 0.78% |
Term (years) | '2 years 8 months 16 days | '2 years 11 months 12 days |
Discount for Marketability restrictions | 36.60% | 37.90% |
Warrants Outstanding | 281,000 | 306,000 |
Fair value | 1,691,000 | 455,000 |
Original issuance 7/3/2012 (2nd one) | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | ' | $5.47 |
Volatility | ' | 52.80% |
Risk free interest rate | ' | 0.01% |
Term (years) | ' | '4 days |
Discount for Marketability restrictions | ' | 42.30% |
Warrants Outstanding | ' | 804,000 |
Fair value | ' | $3,000 |
8_FAIR_VALUE_MEASUREMENTS_Deta1
8. FAIR VALUE MEASUREMENTS (Details-Fair value measurements) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets: | ' | ' |
Assets | $388 | $961 |
Liabilities: | ' | ' |
Liabilities | 32,980 | 9,074 |
Commodity contracts [Member] | ' | ' |
Assets: | ' | ' |
Assets | 388 | 961 |
Liabilities: | ' | ' |
Liabilities | 301 | 859 |
Warrants [Member] | ' | ' |
Liabilities: | ' | ' |
Liabilities | 32,679 | 8,215 |
Level 1 [Member] | ' | ' |
Assets: | ' | ' |
Assets | 388 | 961 |
Liabilities: | ' | ' |
Liabilities | 301 | 859 |
Level 1 [Member] | Commodity contracts [Member] | ' | ' |
Assets: | ' | ' |
Assets | 388 | 961 |
Liabilities: | ' | ' |
Liabilities | 301 | 859 |
Level 1 [Member] | Warrants [Member] | ' | ' |
Liabilities: | ' | ' |
Liabilities | 0 | 0 |
Level 2 [Member] | ' | ' |
Assets: | ' | ' |
Assets | 0 | 0 |
Liabilities: | ' | ' |
Liabilities | 0 | 0 |
Level 2 [Member] | Commodity contracts [Member] | ' | ' |
Assets: | ' | ' |
Assets | 0 | 0 |
Liabilities: | ' | ' |
Liabilities | 0 | 0 |
Level 2 [Member] | Warrants [Member] | ' | ' |
Liabilities: | ' | ' |
Liabilities | 0 | 0 |
Level 3 [Member] | ' | ' |
Assets: | ' | ' |
Assets | 0 | 0 |
Liabilities: | ' | ' |
Liabilities | 32,679 | 8,215 |
Level 3 [Member] | Commodity contracts [Member] | ' | ' |
Assets: | ' | ' |
Assets | 0 | 0 |
Liabilities: | ' | ' |
Liabilities | 0 | 0 |
Level 3 [Member] | Warrants [Member] | ' | ' |
Liabilities: | ' | ' |
Liabilities | $32,679 | $8,215 |
8_FAIR_VALUE_MEASUREMENTS_Deta2
8. FAIR VALUE MEASUREMENTS (Details-Level 3) (Level 3 [Member], Warrants [Member], USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2014 |
Level 3 [Member] | Warrants [Member] | ' |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' |
Beginning Balance | $8,215 |
Adjustments to fair value for the period | 35,844 |
Exercises of warrants | -11,377 |
Expiration of warrants | -3 |
Ending Balance | $32,679 |
9_EARNINGS_PER_SHARE_Details
9. EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Loss Numerator | ' | ' |
Net loss attributed to Pacific Ethanol, Inc. | ($10,826) | ($5,454) |
Preferred stock dividends | -312 | -312 |
Basic and diluted loss per share: | ' | ' |
Loss available to common stockholders | ($11,138) | ($5,766) |
Shares Denominator | ' | ' |
Loss available to common stockholders | 16,181,000 | 10,060,000 |
Per-Share Amount | ' | ' |
Loss available to common stockholders | ($0.69) | ($0.57) |
9_EARNINGS_PER_SHARE_Details_N
9. EARNINGS PER SHARE (Details Narrative) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Dilutive securities | ' | ' |
Potentially dilutive weighted-average shares from convertible securities not considered in calculation of diluted shares | 2,301,000 | 427,000 |
10_RELATED_PARTY_TRANSACTIONS_
10. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Related Party Transactions [Abstract] | ' | ' |
Accrued preferred dividends | $3,657,000 | $3,657,000 |
Note payable related party | $0 | $750,000 |