Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 11, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Pacific Ethanol, Inc. | ' |
Entity Central Index Key | '0000778164 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-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 | ' | 24,484,605 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current Assets: | ' | ' |
Cash and cash equivalents | $56,256 | $5,151 |
Accounts receivable, net | 30,474 | 35,296 |
Inventories | 20,263 | 23,386 |
Prepaid inventory | 10,581 | 12,315 |
Other current assets | 2,197 | 3,229 |
Total current assets | 119,771 | 79,377 |
Property and equipment, net | 155,771 | 155,194 |
Other Assets: | ' | ' |
Intangible assets, net | 2,904 | 3,260 |
Other assets | 1,686 | 3,218 |
Total other assets | 4,590 | 6,478 |
Total Assets | 280,132 | 241,049 |
Current Liabilities: | ' | ' |
Accounts payable - trade | 12,338 | 11,071 |
Accrued liabilities | 8,346 | 5,851 |
Current portion - capital leases | 4,961 | 4,830 |
Current portion - long-term debt due to a related party | 0 | 750 |
Other current liabilities | 806 | 5,714 |
Total current liabilities | 26,451 | 28,216 |
Long-term debt, net of current portion | 30,475 | 98,408 |
Accrued preferred dividends | 2,194 | 3,657 |
Warrant liabilities at fair value | 4,793 | 8,215 |
Capital leases, net of current portion | 2,277 | 6,041 |
Other liabilities | 1,759 | 1,611 |
Total Liabilities | 67,949 | 146,148 |
Commitments and Contingencies | 0 | 0 |
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 September 30, 2014 and December 31, 2013; Series B: 1,580,790 shares authorized; 926,942 shares issued and outstanding as of September 30, 2014 and December 31, 2013; liquidation preference of $20,270 as of September 30, 2014 | 1 | 1 |
Common stock, $0.001 par value; 300,000,000 shares authorized; 24,328,872 and 16,126,287 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | 24 | 16 |
Additional paid-in capital | 732,801 | 621,557 |
Accumulated deficit | -524,531 | -532,356 |
Total Pacific Ethanol, Inc. Stockholders' Equity | 208,295 | 89,218 |
Noncontrolling interest | 3,888 | 5,683 |
Total Stockholders' Equity | 212,183 | 94,901 |
Total Liabilities and Stockholders' Equity | 280,132 | 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 September 30, 2014 and December 31, 2013; Series B: 1,580,790 shares authorized; 926,942 shares issued and outstanding as of September 30, 2014 and December 31, 2013; liquidation preference of $20,270 as of September 30, 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 September 30, 2014 and December 31, 2013; Series B: 1,580,790 shares authorized; 926,942 shares issued and outstanding as of September 30, 2014 and December 31, 2013; liquidation preference of $20,270 as of September 30, 2014 | $1 | $1 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
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 | 24,328,872 | 16,126,287 |
Common stock, outstanding | 24,328,872 | 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 | $20,270,000 | ' |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Income Statement [Abstract] | ' | ' | ' | ' |
Net sales | $275,573 | $233,880 | $851,260 | $693,147 |
Cost of goods sold | 257,587 | 230,357 | 761,153 | 681,813 |
Gross profit | 17,986 | 3,523 | 90,107 | 11,334 |
Selling, general and administrative expenses | 4,392 | 2,511 | 12,377 | 9,649 |
Income from operations | 13,594 | 1,012 | 77,730 | 1,685 |
Fair value adjustments and warrant inducements | -4,378 | 762 | -39,737 | 1,507 |
Interest expense, net | -1,133 | -4,530 | -8,370 | -11,983 |
Loss on extinguishments of debt | 0 | -2,573 | -2,363 | -1,795 |
Other expense, net | -172 | -106 | -734 | -321 |
Income (loss) before provision for income taxes | 7,911 | -5,435 | 26,526 | -10,907 |
Provision for income taxes | 3,163 | 0 | 13,629 | 0 |
Consolidated net income (loss) | 4,748 | -5,435 | 12,897 | -10,907 |
Net (income) loss attributed to noncontrolling interest | -723 | 464 | -4,126 | 1,533 |
Net income (loss) attributed to Pacific Ethanol, Inc.. | 4,025 | -4,971 | 8,771 | -9,374 |
Preferred stock dividends | -319 | -319 | -946 | -946 |
Income (loss) available to common stockholders | $3,706 | ($5,290) | $7,825 | ($10,320) |
Net income (loss) per share, basic | $0.16 | ($0.40) | $0.40 | ($0.91) |
Net income (loss) per share, diluted | $0.15 | ($0.40) | $0.35 | ($0.91) |
Weighted-average shares outstanding, basic | 22,986,000 | 13,177,000 | 19,713,000 | 11,380,000 |
Weighted-average shares outstanding, diluted | 24,307,000 | 13,177,000 | 22,073,000 | 11,380,000 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Operating Activities: | ' | ' |
Consolidated net income (loss) | $12,897,000 | ($10,907,000) |
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities: | ' | ' |
Depreciation and amortization of intangibles | 9,775,000 | 8,979,000 |
Deferred income taxes | 191,000 | 0 |
Interest expense added to Plan Owners' debt | 0 | 4,745,000 |
Loss on extinguishments of debt | 2,363,000 | 1,795,000 |
Fair value adjustments on convertible debt and warrants | 37,465,000 | -2,293,000 |
Amortization of debt discount | 1,815,000 | 875,000 |
Amortization of deferred financing fees | 1,139,000 | 1,621,000 |
Inventory valuation | 722,000 | 8,000 |
Non-cash compensation | 1,311,000 | 1,310,000 |
Derivative instruments | 700,000 | 1,652,000 |
Bad debt expense (recovery) | -40,000 | 231,000 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 4,862,000 | -1,282,000 |
Inventories | 2,401,000 | 2,507,000 |
Prepaid expenses and other assets | 962,000 | -1,696,000 |
Prepaid inventory | 1,734,000 | -5,810,000 |
Accounts payable and accrued expenses | -2,047,000 | 3,138,000 |
Net cash provided by operating activities | 76,250,000 | 4,873,000 |
Investing Activities: | ' | ' |
Additions to property and equipment | -9,996,000 | -1,936,000 |
Purchases of New PE Holdco ownership interests | -6,000,000 | -1,836,000 |
Net cash used in investing activities | -15,996,000 | -3,772,000 |
Financing Activities: | ' | ' |
Proceeds from equity offering | 26,073,000 | 0 |
Proceeds from exercise of warrants | 42,656,000 | 2,064,000 |
Proceeds from senior notes | 0 | 22,192,000 |
Proceeds from Series A and B convertible notes | 0 | 14,000,000 |
Proceeds from Plant Owners' borrowings | 0 | 5,000,000 |
Principal payments on senior notes | -13,984,000 | -5,303,000 |
Principal payments on related party note | -750,000 | 0 |
Parent purchases of Plant Owners' debt | -17,038,000 | -25,273,000 |
Net proceeds from Kinergy's line of credit | -5,570,000 | -599,000 |
Principal Payments on Plant Owners' borrowings | -35,378,000 | -8,622,000 |
Principal payments on capital leases | -3,772,000 | -465,000 |
Debt issuance costs | -440,000 | -1,560,000 |
Preferred stock dividends paid | -946,000 | -946,000 |
Net cash (used in) provided by financing activities | -9,149,000 | 488,000 |
Net increase in cash and cash equivalents | 51,105,000 | 1,589,000 |
Cash and cash equivalents at beginning of period | 5,151,000 | 7,586,000 |
Cash and cash equivalents at end of period | 56,256,000 | 9,175,000 |
Supplemental Information: | ' | ' |
Interest paid | 5,606,000 | 4,594,000 |
Income taxes paid | 10,470,000 | 0 |
Noncash financing and investing activities: | ' | ' |
Reclass of warrant liability to equity upon warrant exercises | 40,884,000 | 260,000 |
Preferred stock dividends paid in common stock | 1,463,000 | 2,195,000 |
Reclass of noncontrolling interest to APIC upon acquisitions of ownership positions in New PE Holdco | 80,000 | 9,087,000 |
Corn oil separation capital lease | 0 | 12,122,000 |
Original discount on senior and convertible debt | 0 | 8,558,000 |
Debt extinguished with issuance of common stock | $0 | $11,475,000 |
1_ORGANIZATION_AND_BASIS_OF_PR
1. ORGANIZATION AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 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., a Delaware corporation (“PE Op Co.,” formerly, New PE Holdco LLC, a Delaware limited liability company), 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 96% and an 85% ownership interest in PE Op Co., the owner of four ethanol production facilities, as of September 30, 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 the following four ethanol production facilities: 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 September 30, 2014, all four facilities were operating. On April 30, 2014, the Company’s previously idled facility in Madera, California 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 and nine months ended September 30, 2014, the Company funded its operations primarily from cash on hand, cash provided by operations, proceeds from an equity offering and 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. | |
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 $21,653,000 and $27,487,000 at September 30, 2014 and December 31, 2013, respectively, were used as collateral under Kinergy’s operating line of credit. The allowance for doubtful accounts was not material as of September 30, 2014 or December 31, 2013. The Company does not have any off-balance sheet credit exposure related to its customers. | |
Provision for Income Taxes – For the three and nine months ended September 30, 2014, the Company generated income subject to income tax. The Company’s fair value adjustments and warrant inducements are not tax deductible and thus resulted in larger taxable income as compared to reported income (loss) before provision for income taxes for the three and nine months ended September 30, 2014. The Company applied its net operating loss carryforwards to a portion of its taxable income for these periods. Further, the Company increased by $1.8 million and reduced by $5.7 million its valuation allowance against its net tax assets, resulting in a net provision for income taxes of $3.2 million and $13.6 million for the three and nine months ended September 30, 2014, respectively. | |
Conversion of New PE Holdco LLC – On April 1, 2014, New PE Holdco LLC was converted from a Delaware limited liability company to a Delaware 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. | |
Recently Issued Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance on the recognition of revenue. The guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company’s adoption begins with the first fiscal quarter of fiscal year 2017. Early adoption is not permitted. The Company is currently evaluating the impact of the adoption of this accounting standard update on its consolidated results of operations and financial position. | |
In April 2014, the FASB issued new guidance on the definition of a discontinued operation that requires entities to provide additional disclosures about disposal transactions that do not meet the discontinued operations criteria. The new guidance narrows the focus of discontinued operations to those components that 1) are disposed of or classified as held-for-sale and 2) represent a strategic shift that has or will have a major impact on the entity’s operations or financial results. The guidance is effective prospectively for all disposals or components initially classified as held-for-sale in periods beginning on or after December 15, 2014. Early adoption is permitted. Upon adoption, the Company does not believe this guidance will have a material impact on its consolidated results of operations or financial position. | |
In August 2014, the FASB issued new guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about its ability to continue as a going concern. The guidance is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early adoption is permitted. Upon adoption, the Company does not believe this guidance will have a material impact on its consolidated results of operations or financial position. |
2_PACIFIC_ETHANOL_PLANTS
2. PACIFIC ETHANOL PLANTS | 9 Months Ended |
Sep. 30, 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 acquisition in December 2013 that brought its ownership interest in PE Op Co. to 91%, the Company has obtained and maintained 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 consolidates PE Op Co. under the voting rights model. Noncontrolling interests decreased from $5,683,000 at December 31, 2013 to $3,888,000 at September 30, 2014 due to the Company’s purchase of an additional 5% interest in PE Op Co., which reduced noncontrolling interests by $5,921,000, which was partially offset by net income attributed to noncontrolling interests of $4,126,000 for the nine months ended September 30, 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. or its subsidiaries 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 | 9 Months Ended | ||||||||
Sep. 30, 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): | |||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Finished goods | $ | 12,396 | $ | 10,287 | |||||
Raw materials | 3,386 | 9,418 | |||||||
Work in progress | 3,114 | 2,766 | |||||||
Other | 1,367 | 915 | |||||||
Total | $ | 20,263 | $ | 23,386 |
4_DERIVATIVES
4. DERIVATIVES | 9 Months Ended | ||||||||||
Sep. 30, 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 and nine months ended September 30, 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 losses of $1,217,000 and gains of $1,168,000 as the change in the fair value of these contracts for the three months ended September 30, 2014 and 2013, respectively. The Company recognized losses of $700,000 and gains of $1,652,000 as the change in the fair value of these contracts for the nine months ended September 30, 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 Losses | |||||||||||
Three Months Ended September 30, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | (1,619 | ) | $ | (1,612 | ) | ||||
$ | (1,619 | ) | $ | (1,612 | ) | ||||||
Unrealized Gains | |||||||||||
Three Months Ended September 30, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | 402 | $ | 444 | ||||||
$ | 402 | $ | 444 | ||||||||
Realized Losses | |||||||||||
Nine Months Ended September 30, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | (1,070 | ) | $ | (1,714 | ) | ||||
$ | (1,070 | ) | $ | (1,714 | ) | ||||||
Unrealized Gains | |||||||||||
Nine Months Ended September 30, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | 370 | $ | 62 | ||||||
$ | 370 | $ | 62 | ||||||||
5_DEBT
5. DEBT | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
5. DEBT | ' | ||||||||
Long-term borrowings are summarized as follows (in thousands): | |||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Kinergy operating line of credit | $ | 13,472 | $ | 19,042 | |||||
Plant Owners’ third-party term debt | 17,003 | 31,678 | |||||||
Plant Owners’ lines of credit | – | 35,378 | |||||||
Senior unsecured notes | – | 13,984 | |||||||
Note payable to related party | – | 750 | |||||||
30,475 | 100,832 | ||||||||
Less: Unamortized discount on senior unsecured notes convertible notes | – | (1,674 | ) | ||||||
30,475 | 99,158 | ||||||||
Less short-term portion | – | (750 | ) | ||||||
Long-term debt | $ | 30,475 | $ | 98,408 | |||||
Kinergy Operating Line of Credit – For the three and nine months ended September 30, 2014, Kinergy repaid net $7,899,000 and $5,570,000 on its working capital line of credit, respectively. As of September 30, 2014, Kinergy had an available borrowing base under the credit facility of $14,828,000. | |||||||||
Senior Unsecured Notes – For the nine months ended September 30, 2014, the Company paid in cash $13,984,000 on its senior unsecured notes. These notes were fully retired at June 30, 2014. | |||||||||
Plant Owners’ Term Debt and Operating Lines of Credit – The Plant Owners’ debt as of September 30, 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 $41,763,000 of these term loans, which are eliminated in consolidation. 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 5.5% for the $19,500,000 and $15,000,000 facilities, respectively. At September 30, 2014, the average interest rate was approximately 11.0%. 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 and nine months ended September 30, 2014, the Company paid in cash $0 and $35,378,000, respectively, on its revolving credit facilities. As of September 30, 2014, the Company had no outstanding principal balances on these revolving credit facilities and an aggregate borrowing availability of $34,500,000. | |||||||||
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 used the net proceeds of the additional loan to restart operations at the Company’s Madera, California facility. The Company has since repaid the additional loan in full; | ||||||||
· | 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. | ||||||||
Parent Purchase of Debt – On June 6, 2014, the Company purchased $14,675,000 of term debt for $17,038,000 in cash, reducing its consolidated plant term debt by $14,675,000, and recorded a $2,363,000 loss on extinguishment of debt for the amount paid in excess of the principal balance. | |||||||||
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 | 9 Months Ended |
Sep. 30, 2014 | |
Stockholders' Equity Note [Abstract] | ' |
6. COMMON STOCK AND WARRANTS | ' |
Warrant Exercises – During the three and nine months ended September 30, 2014, certain holders exercised warrants and received an aggregate of 3,095,000 and 5,942,000 shares of the Company’s common stock upon payment of an aggregate of $24,417,000 and $42,575,000 in cash, respectively. During the three and nine months ended September 30, 2014, the Company paid an aggregate of $1,471,000 and $2,271,000, respectively, in cash to certain warrant holders as an inducement to exercise their warrants and recorded an expense of $1,471,000 and $2,271,000, respectively. During the nine months ended September 30, 2014, certain warrant holders exercised warrants on a cashless basis and received 291,000 shares of the Company’s common stock. | |
During the nine months ended September 30, 2013, certain holders exercised warrants and received an aggregate of 267,700 shares of the Company’s common stock upon payment of an aggregate of $2,064,000 in cash. During the nine months ended September 30, 2013, the Company paid an aggregate of $786,000 in cash to certain warrant holders as an inducement to exercise their warrants and recorded an expense of $786,000. During the nine months ended September 30, 2013, certain warrant holders exercised warrants on a cashless basis and received 11,000 shares of the Company’s common stock. | |
Equity Offering – In April 2014, the Company issued 1,750,000 shares of its common stock in a public offering for net proceeds of $26,073,000. | |
Grants of Stock – In June 2014, the Company granted an aggregate of 24,267 shares of restricted stock to non-employee members of the Company’s Board of Directors that vest on the earlier of (i) the date of the Company’s 2015 annual meeting of stockholders, or (ii) July 31, 2015, which had a grant date fair value of $15.21 per share. In June 2014, the Company granted an aggregate of 129,514 shares of restricted stock to the Company’s executive officers and other eligible employees that vest in equal amounts on each of April 1, 2015, 2016 and 2017, which had a grant date fair value of $15.21 per share. |
7_COMMITMENTS_AND_CONTINGENCIE
7. COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
7. COMMITMENTS AND CONTINGENCIES | ' |
Sales Commitments – At September 30, 2014, the Company had entered into sales contracts with its major customers to sell certain quantities of ethanol, WDG, syrup and corn oil. The Company had open ethanol indexed-price contracts for 134,896,000 gallons of ethanol as of September 30, 2014. The Company had open WDG, syrup and corn oil fixed-price sales contracts valued at $814,000 and open indexed-price sales contracts for 164,000 tons of WDG and syrup as of September 30, 2014. These sales contracts are expected to be completed over the next twelve months. | |
Purchase Commitments – At September 30, 2014, the Company had fixed-price purchase contracts with its suppliers to purchase $11,462,000 of ethanol and index-price purchase contracts for 19,318,000 gallons of ethanol. These contracts are expected to be satisfied over the next twelve months. | |
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. 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. | |
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. | |
The three cases (against the Company, PE Stockton and PE Magic Valley) were subsequently 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 “Pre-existing Cases”). The three Pacific Ethanol cases, along with several other lawsuits brought by GS CleanTech containing substantially the same allegations of infringement, have thus been attached to the Pre-existing Cases as “Tag-along Cases.” | |
The Company, PE Stockton and PE Magic Valley have answered the complaints and counterclaimed that the patent claims at issue, as well as the claims in several related patents, are invalid and unenforceable and that the defendants are not infringing. | |
On October 23, 2014, the United States District Court for the Southern District of Indiana issued a sealed order holding all asserted GS CleanTech's corn oil separation patents invalid and not infringed. While the Court's order currently applies only to the Pre-existing Cases, the Company believes the ruling will also be dispositive of the Tag-along Cases, and intends to file a motion to dismiss the cases against the Company, PE Stockton and PE Magic Valley. |
8_FAIR_VALUE_MEASUREMENTS
8. FAIR VALUE MEASUREMENTS | 9 Months Ended | ||||||||||||||||||
Sep. 30, 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 were 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, the valuation of the warrants will increase or decrease, respectively. As the estimated volatility of the Company’s common stock increases or decreases, 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 September 30, 2014 were as follows: | |||||||||||||||||||
Original Issuance | Exercise Price | Volatility | Risk-Free | Term (years) | Discount for | Warrants Outstanding | Fair Value | ||||||||||||
Interest | marketability | ||||||||||||||||||
Rate | restrictions | ||||||||||||||||||
9/26/12 | $8.85 | 51.20% | 0.13% | 0.99 | 35.60% | 473,000 | $ | 1,732,000 | |||||||||||
7/3/12 | $6.09 | 52.30% | 1.07% | 2.76 | 31.70% | 391,000 | 2,361,000 | ||||||||||||
12/13/11 | $8.43 | 52.00% | 0.58% | 2.21 | 29.20% | 138,000 | 700,000 | ||||||||||||
1,002,000 | $ | 4,793,000 | |||||||||||||||||
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 | ||||||||||||
8,241,000 | $ | 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 September 30, 2014 (in thousands): | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Assets: | |||||||||||||||||||
Commodity contracts(1) | $ | 1,130 | $ | – | $ | – | $ | 1,130 | |||||||||||
Total Assets | $ | 1,130 | $ | – | $ | – | $ | 1,130 | |||||||||||
Liabilities: | |||||||||||||||||||
Warrants(2) | $ | – | $ | – | $ | 4,793 | $ | 4,793 | |||||||||||
Commodity contracts(3) | 659 | – | – | 659 | |||||||||||||||
Total Liabilities | $ | 659 | $ | – | $ | 4,793 | $ | 5,452 | |||||||||||
__________ | |||||||||||||||||||
(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 with respect to its warrants were as follows (in thousands): | |||||||||||||||||||
Fair value of warrants, December 31, 2013 | $ | 8,215 | |||||||||||||||||
Adjustments to fair value for the period | 37,465 | ||||||||||||||||||
Exercises of warrants | (40,884 | ) | |||||||||||||||||
Expiration of warrants | (3 | ) | |||||||||||||||||
Fair value of warrants, September 30, 2014 | $ | 4,793 |
9_EARNINGS_PER_SHARE
9. EARNINGS PER SHARE | 9 Months Ended | ||||||||||||
Sep. 30, 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 September 30, 2014 | |||||||||||||
Income Numerator | Shares Denominator | Per-Share Amount | |||||||||||
Net income attributed to Pacific Ethanol | $ | 4,025 | |||||||||||
Less: Preferred stock dividends | (319 | ) | |||||||||||
Basic income per share: | |||||||||||||
Income available to common stockholders | $ | 3,706 | 22,986 | $ | 0.16 | ||||||||
Add: Warrants | – | 1,321 | |||||||||||
Diluted income per share: | |||||||||||||
Income available to common stockholders | $ | 3,706 | 24,307 | $ | 0.15 | ||||||||
Three Months Ended September 30, 2013 | |||||||||||||
Loss Numerator | Shares Denominator | Per-Share Amount | |||||||||||
Net loss attributed to Pacific Ethanol | $ | (4,971 | ) | ||||||||||
Less: Preferred stock dividends | (319 | ) | |||||||||||
Basic and diluted loss per share: | |||||||||||||
Loss available to common stockholders | $ | (5,290 | ) | 13,177 | $ | (0.40 | ) | ||||||
Nine Months Ended September 30, 2014 | |||||||||||||
Income Numerator | Shares Denominator | Per-Share Amount | |||||||||||
Net income attributed to Pacific Ethanol | $ | 8,771 | |||||||||||
Less: Preferred stock dividends | (946 | ) | |||||||||||
Basic income per share: | |||||||||||||
Income available to common stockholders | $ | 7,825 | 19,713 | $ | 0.4 | ||||||||
Add: Warrants | – | 2,360 | |||||||||||
Diluted income per share: | |||||||||||||
Income available to common stockholders | $ | 7,825 | 22,073 | $ | 0.35 | ||||||||
Nine Months Ended September 30, 2013 | |||||||||||||
Loss Numerator | Shares Denominator | Per-Share Amount | |||||||||||
Net loss attributed to Pacific Ethanol | $ | (9,374 | ) | ||||||||||
Less: Preferred stock dividends | (946 | ) | |||||||||||
Basic and diluted loss per share: | |||||||||||||
Loss available to common stockholders | $ | (10,320 | ) | 11,380 | $ | (0.91 | ) | ||||||
There were an aggregate of 669,000 and 657,000 potentially dilutive weighted-average shares from the Company’s outstanding convertible Series B Preferred Stock, warrants and options for the three and nine months ended September 30, 2014, respectively. These convertible securities were not considered in calculating diluted net loss per share for the three and nine months ended September 30, 2013, as their effect would have been anti-dilutive. |
10_RELATED_PARTY_TRANSACTIONS
10. RELATED PARTY TRANSACTIONS | 9 Months Ended | ||||||||||
Sep. 30, 2014 | |||||||||||
Related Party Transactions [Abstract] | ' | ||||||||||
10. RELATED PARTY TRANSACTIONS | ' | ||||||||||
Preferred Dividends – The Company recorded and paid preferred stock dividends of $319,000 for each of the three months ended September 30, 2014 and 2013. The Company recorded and paid preferred stock dividends of $946,000 for each of the nine months ended September 30, 2014 and 2013. For the years ended December 31, 2009, 2010 and 2011, the Company accrued but did not pay any preferred stock dividends. For the years ended December 31, 2012 and 2013, the Company paid its accrued dividends in cash. | |||||||||||
Beginning in 2012, the Company entered into a series of agreements with the parties to whom unpaid dividends were owed under which the Company issued shares of its common stock in satisfaction of a portion of the accrued and unpaid dividends. In connection with each payment of accrued and unpaid dividends, the payees agreed to forebear for a period of time from exercising any rights they may have with the respect to accrued and unpaid dividends. The following table summarizes the details of the Company’s agreements with the holders of its Series B Preferred Stock: | |||||||||||
Agreement Date | Amount of | Shares of Common Stock Issued | Extended Forbearance Date | ||||||||
Dividends Paid | |||||||||||
12-Aug-12 | $ | 732,000 | 157,000 | 1-Jan-14 | |||||||
26-Dec-12 | 732,000 | 144,500 | 30-Jun-14 | ||||||||
27-Mar-13 | 732,000 | 139,000 | 30-Sep-14 | ||||||||
26-Jul-13 | 731,000 | 175,000 | 31-Dec-14 | ||||||||
17-Sep-13 | 731,000 | 197,000 | 31-Mar-15 | ||||||||
23-May-14 | 1,463,000 | 120,000 | 30-Nov-15 | ||||||||
Total | $ | 5,121,000 | 932,500 | ||||||||
Accrued and unpaid dividends | $ | 2,194,000 | |||||||||
The Company believes it has adequate liquidity to continue to pay quarterly dividends in cash for at least the next twelve months. The Company may continue to pay down the balance of accrued and unpaid dividends in respect of its Series B Preferred Stock by issuing additional shares of common stock. The Company does not believe that these contemplated dividend payments in cash and stock will materially impact its liquidity. If the Company fails to make ongoing quarterly cash dividend payments, it will be in default under the terms of its agreements with the holders of its Series B Preferred Stock and the holders’ current forbearance through November 30, 2015 will be ineffective. | |||||||||||
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 | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Subsequent Events [Abstract] | ' | ||||||||
11.SUBSEQUENT EVENTS | ' | ||||||||
Warrant Exercises – From October 1, 2014 through November 11, 2014, certain holders exercised warrants in cash for an aggregate of 155,000 shares of the Company’s common stock for aggregate cash payments to the Company of $944,000. | |||||||||
A summary as of November 11, 2014 of outstanding warrants, which the Company recorded at fair value, with a weighted-average exercise price of $8.00, is as follows: | |||||||||
Issuance Date | Expiration Date | Exercise Price | Warrants Outstanding | ||||||
9/26/12 | 9/26/15 | $8.85 | 473,000 | ||||||
7/3/12 | 7/3/17 | $6.09 | 236,000 | ||||||
12/13/11 | 12/13/16 | $8.43 | 138,000 | ||||||
847,000 | |||||||||
1_ORGANIZATION_AND_BASIS_OF_PR1
1. ORGANIZATION AND BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Sep. 30, 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., a Delaware corporation (“PE Op Co.,” formerly, New PE Holdco LLC, a Delaware limited liability company), 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 96% and an 85% ownership interest in PE Op Co., the owner of four ethanol production facilities, as of September 30, 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 the following four ethanol production facilities: 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 September 30, 2014, all four facilities were operating. On April 30, 2014, the Company’s previously idled facility in Madera, California 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 and nine months ended September 30, 2014, the Company funded its operations primarily from cash on hand, cash provided by operations, proceeds from an equity offering and 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. | |
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 $21,653,000 and $27,487,000 at September 30, 2014 and December 31, 2013, respectively, were used as collateral under Kinergy’s operating line of credit. The allowance for doubtful accounts was not material as of September 30, 2014 or December 31, 2013. 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 and nine months ended September 30, 2014, the Company generated income subject to income tax. The Company’s fair value adjustments and warrant inducements are not tax deductible and thus resulted in larger taxable income as compared to reported income (loss) before provision for income taxes for the three and nine months ended September 30, 2014. The Company applied its net operating loss carryforwards to a portion of its taxable income for these periods. Further, the Company increased by $1.8 million and reduced by $5.7 million its valuation allowance against its net tax assets, resulting in a net provision for income taxes of $3.2 million and $13.6 million for the three and nine months ended September 30, 2014, respectively. | |
Conversion of New PE Holdco LLC | ' |
Conversion of New PE Holdco LLC – On April 1, 2014, New PE Holdco LLC was converted from a Delaware limited liability company to a Delaware 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. | |
Recently Issued Accounting Pronouncements | ' |
Recently Issued Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance on the recognition of revenue. The guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company’s adoption begins with the first fiscal quarter of fiscal year 2017. Early adoption is not permitted. The Company is currently evaluating the impact of the adoption of this accounting standard update on its consolidated results of operations and financial position. | |
In April 2014, the FASB issued new guidance on the definition of a discontinued operation that requires entities to provide additional disclosures about disposal transactions that do not meet the discontinued operations criteria. The new guidance narrows the focus of discontinued operations to those components that 1) are disposed of or classified as held-for-sale and 2) represent a strategic shift that has or will have a major impact on the entity’s operations or financial results. The guidance is effective prospectively for all disposals or components initially classified as held-for-sale in periods beginning on or after December 15, 2014. Early adoption is permitted. Upon adoption, the Company does not believe this guidance will have a material impact on its consolidated results of operations or financial position. | |
In August 2014, the FASB issued new guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about its ability to continue as a going concern. The guidance is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early adoption is permitted. Upon adoption, the Company does not believe this guidance will have a material impact on its consolidated results of operations or financial position |
3_INVENTORIES_Tables
3. INVENTORIES (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventories | ' | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Finished goods | $ | 12,396 | $ | 10,287 | |||||
Raw materials | 3,386 | 9,418 | |||||||
Work in progress | 3,114 | 2,766 | |||||||
Other | 1,367 | 915 | |||||||
Total | $ | 20,263 | $ | 23,386 |
4_DERIVATIVES_Tables
4. DERIVATIVES (Tables) | 9 Months Ended | ||||||||||
Sep. 30, 2014 | |||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||||||
Derivatives not designated as hedging instruments | ' | ||||||||||
Realized Losses | |||||||||||
Three Months Ended September 30, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | (1,619 | ) | $ | (1,612 | ) | ||||
$ | (1,619 | ) | $ | (1,612 | ) | ||||||
Unrealized Gains | |||||||||||
Three Months Ended September 30, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | 402 | $ | 444 | ||||||
$ | 402 | $ | 444 | ||||||||
Realized Losses | |||||||||||
Nine Months Ended September 30, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | (1,070 | ) | $ | (1,714 | ) | ||||
$ | (1,070 | ) | $ | (1,714 | ) | ||||||
Unrealized Gains | |||||||||||
Nine Months Ended September 30, | |||||||||||
Type of Instrument | Statements of Operations Location | 2014 | 2013 | ||||||||
Commodity contracts | Cost of goods sold | $ | 370 | $ | 62 | ||||||
$ | 370 | $ | 62 | ||||||||
5_DEBT_Tables
5. DEBT (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Long Term Debt | ' | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Kinergy operating line of credit | $ | 13,472 | $ | 19,042 | |||||
Plant Owners’ third-party term debt | 17,003 | 31,678 | |||||||
Plant Owners’ lines of credit | – | 35,378 | |||||||
Senior unsecured notes | – | 13,984 | |||||||
Note payable to related party | – | 750 | |||||||
30,475 | 100,832 | ||||||||
Less: Unamortized discount on senior unsecured notes convertible notes | – | (1,674 | ) | ||||||
30,475 | 99,158 | ||||||||
Less short-term portion | – | (750 | ) | ||||||
Long-term debt | $ | 30,475 | $ | 98,408 |
8_FAIR_VALUE_MEASUREMENTS_Tabl
8. FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||
Assumptions used and related fair value for conversion feature | ' | ||||||||||||||||||
Original Issuance | Exercise Price | Volatility | Risk-Free | Term (years) | Discount for | Warrants Outstanding | Fair Value | ||||||||||||
Interest | marketability | ||||||||||||||||||
Rate | restrictions | ||||||||||||||||||
9/26/12 | $8.85 | 51.20% | 0.13% | 0.99 | 35.60% | 473,000 | $ | 1,732,000 | |||||||||||
7/3/12 | $6.09 | 52.30% | 1.07% | 2.76 | 31.70% | 391,000 | 2,361,000 | ||||||||||||
12/13/11 | $8.43 | 52.00% | 0.58% | 2.21 | 29.20% | 138,000 | 700,000 | ||||||||||||
1,002,000 | $ | 4,793,000 | |||||||||||||||||
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 | ||||||||||||
8,241,000 | $ | 8,215,000 | |||||||||||||||||
Summary of fair value measurements by level | ' | ||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Assets: | |||||||||||||||||||
Commodity contracts(1) | $ | 1,130 | $ | – | $ | – | $ | 1,130 | |||||||||||
Total Assets | $ | 1,130 | $ | – | $ | – | $ | 1,130 | |||||||||||
Liabilities: | |||||||||||||||||||
Warrants(2) | $ | – | $ | – | $ | 4,793 | $ | 4,793 | |||||||||||
Commodity contracts(3) | 659 | – | – | 659 | |||||||||||||||
Total Liabilities | $ | 659 | $ | – | $ | 4,793 | $ | 5,452 | |||||||||||
__________ | |||||||||||||||||||
(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 | |||||||||||
__________ | |||||||||||||||||||
Changes in fair value of Level 3 inputs | ' | ||||||||||||||||||
Adjustments to fair value for the period | 37,465 | ||||||||||||||||||
Exercises of warrants | (40,884 | ) | |||||||||||||||||
Expiration of warrants | (3 | ) | |||||||||||||||||
Fair value of warrants, September 30, 2014 | $ | 4,793 | |||||||||||||||||
9_EARNINGS_PER_SHARE_Tables
9. EARNINGS PER SHARE (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2014 | |||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||
Computation of basic and diluted earnings per share | ' | ||||||||||||
Three Months Ended September 30, 2014 | |||||||||||||
Income Numerator | Shares Denominator | Per-Share Amount | |||||||||||
Net income attributed to Pacific Ethanol | $ | 4,025 | |||||||||||
Less: Preferred stock dividends | (319 | ) | |||||||||||
Basic income per share: | |||||||||||||
Income available to common stockholders | $ | 3,706 | 22,986 | $ | 0.16 | ||||||||
Add: Warrants | – | 1,321 | |||||||||||
Diluted income per share: | |||||||||||||
Income available to common stockholders | $ | 3,706 | 24,307 | $ | 0.15 | ||||||||
Three Months Ended September 30, 2013 | |||||||||||||
Loss Numerator | Shares Denominator | Per-Share Amount | |||||||||||
Net loss attributed to Pacific Ethanol | $ | (4,971 | ) | ||||||||||
Less: Preferred stock dividends | (319 | ) | |||||||||||
Basic and diluted loss per share: | |||||||||||||
Loss available to common stockholders | $ | (5,290 | ) | 13,177 | $ | (0.40 | ) | ||||||
Nine Months Ended September 30, 2014 | |||||||||||||
Income Numerator | Shares Denominator | Per-Share Amount | |||||||||||
Net income attributed to Pacific Ethanol | $ | 8,771 | |||||||||||
Less: Preferred stock dividends | (946 | ) | |||||||||||
Basic income per share: | |||||||||||||
Income available to common stockholders | $ | 7,825 | 19,713 | $ | 0.4 | ||||||||
Add: Warrants | – | 2,360 | |||||||||||
Diluted income per share: | |||||||||||||
Income available to common stockholders | $ | 7,825 | 22,073 | $ | 0.35 | ||||||||
Nine Months Ended September 30, 2013 | |||||||||||||
Loss Numerator | Shares Denominator | Per-Share Amount | |||||||||||
Net loss attributed to Pacific Ethanol | $ | (9,374 | ) | ||||||||||
Less: Preferred stock dividends | (946 | ) | |||||||||||
Basic and diluted loss per share: | |||||||||||||
Loss available to common stockholders | $ | (10,320 | ) | 11,380 | $ | (0.91 | ) | ||||||
10_RELATED_PARTY_TRANSACTIONS_
10. RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended | ||||||||||
Sep. 30, 2014 | |||||||||||
Related Party Transactions [Abstract] | ' | ||||||||||
Schedule of dividends | ' | ||||||||||
Agreement Date | Amount of | Shares of Common Stock Issued | Extended Forbearance Date | ||||||||
Dividends Paid | |||||||||||
12-Aug-12 | $ | 732,000 | 157,000 | 1-Jan-14 | |||||||
26-Dec-12 | 732,000 | 144,500 | 30-Jun-14 | ||||||||
27-Mar-13 | 732,000 | 139,000 | 30-Sep-14 | ||||||||
26-Jul-13 | 731,000 | 175,000 | 31-Dec-14 | ||||||||
17-Sep-13 | 731,000 | 197,000 | 31-Mar-15 | ||||||||
23-May-14 | 1,463,000 | 120,000 | 30-Nov-15 | ||||||||
Total | $ | 5,121,000 | 932,500 | ||||||||
Accrued and unpaid dividends | $ | 2,194,000 |
1_ORGANIZATION_AND_BASIS_OF_PR2
1. ORGANIZATION AND BASIS OF PRESENTATION (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' | ' | ' |
Accounts receivable used as collateral | $21,653,000 | ' | $21,653,000 | ' | $27,487,000 |
Increase (decrease) in valuation allowance | 1,800,000 | ' | -5,700,000 | ' | ' |
Provision for income taxes | $3,163,000 | $0 | $13,629,000 | $0 | ' |
2_PACIFIC_ETHANOL_PLANTS_Detai
2. PACIFIC ETHANOL PLANTS (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Pacific Ethanol Plants | ' | ' | ' | ' |
Decrease in noncontrolling interest | ' | ' | ($5,921,000) | ' |
Income from noncontrolling interest | $723,000 | ($464,000) | $4,126,000 | ($1,533,000) |
3_INVENTORIES_Details
3. INVENTORIES (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Inventory balances | ' | ' |
Finished goods | $12,396 | $10,287 |
Raw materials | 3,386 | 9,418 |
Work in progress | 3,114 | 2,766 |
Other | 1,367 | 915 |
Total | $20,263 | $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 | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 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) | ($1,619) | ($1,612) | ($1,070) | ($1,714) |
Unrealized Gains (Losses) | $402 | $444 | $370 | $62 |
4_DERIVATIVES_Details_Narrativ
4. DERIVATIVES (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ' | ' | ' |
Recognized gains and losses due to change in fair value | ($1,217,000) | $1,168,000 | ($700,000) | $1,652,000 |
5_DEBT_Details
5. DEBT (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Senior unsecured notes | $0 | $13,984,000 |
Note payable to related party | 0 | 750,000 |
Total debt | 30,475,000 | 100,832,000 |
Less: Unamortized discount on senior unsecured notes | 0 | -1,674,000 |
Long-term Debt, current and non-current | 30,475,000 | 99,158,000 |
Less short-term portion | 0 | -750,000 |
Long-term debt | 30,475,000 | 98,408,000 |
Line of Credit [Member] | Kinergy [Member] | ' | ' |
Line of credit | 13,472,000 | 19,042,000 |
Line of Credit [Member] | Consolidated Plant Owner Operating Line of Credit [Member] | ' | ' |
Line of credit | 0 | 35,378,000 |
Long-term Debt [Member] | Plant Owners [Member] | ' | ' |
Long term debt | $17,003,000 | $31,678,000 |
5_DEBT_Details_Narrative
5. DEBT (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | |
Senior Unsecured Notes [Member] | Line of Credit [Member] | Line of Credit [Member] | Line of Credit [Member] | Line of Credit [Member] | Line of Credit [Member] | Line of Credit [Member] | Line of Credit [Member] | |||||
Kinergy [Member] | Kinergy [Member] | Kinergy [Member] | Plant Owners [Member] | Plant Owners [Member] | Plant Owners [Member] | Plant Owners [Member] | ||||||
Tranche A-1 | Tranche A-2 | Consolidated Plant Owner Operating Line of Credit [Member] | Consolidated Plant Owner Operating Line of Credit [Member] | |||||||||
Line of credit maximum borrowing capacity | $34,500,000 | ' | $34,500,000 | ' | ' | ' | ' | ' | $32,487,000 | $26,279,000 | $41,763,000 | $41,763,000 |
Line of credit remaining borrowing availability | ' | ' | ' | ' | ' | 14,828,000 | 14,828,000 | ' | ' | ' | 34,500,000 | 34,500,000 |
Payments on senior unsecured notes | ' | ' | 13,984,000 | 5,303,000 | 13,984,000 | ' | ' | ' | ' | ' | ' | ' |
Line of credit amount outstanding | ' | ' | ' | ' | ' | 13,472,000 | 13,472,000 | 19,042,000 | 32,487,000 | 26,279,000 | 41,963,000 | 41,963,000 |
Repayment of lines of credit | ' | ' | ' | ' | ' | 5,570,000 | 7,899,000 | ' | ' | ' | 0 | 35,378,000 |
Repayment of related party debt | ' | ' | 750,000 | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Note outstanding | ' | ' | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' |
Credit line average interest rate | ' | ' | ' | ' | ' | ' | ' | ' | 11.00% | 11.00% | ' | ' |
Loss on extinguishment of debt | $0 | ($2,573,000) | ($2,363,000) | ($1,795,000) | ' | ' | ' | ' | ' | ' | ' | ' |
6_COMMON_STOCK_AND_WARRANTS_De
6. COMMON STOCK AND WARRANTS (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | |
Warrants exercised, common shares issued | 3,095,000 | 5,942,000 | 267,700 |
Warrants exercised, cash received | $24,417,000 | $42,656,000 | $2,064,000 |
Cost of inducement | 1,471,000 | 2,271,000 | 786,000 |
Cashless exercise of warrants, common stock issued | ' | 291,000 | 11,000 |
Stock issued in public offering, shares issued | ' | 1,750,000 | ' |
Stock issued in public offering, proceeds | ' | $26,073,000 | ' |
Employees | ' | ' | ' |
Restricted stock granted | ' | 129,514 | ' |
Non-employees | ' | ' | ' |
Restricted stock granted | ' | 24,267 | ' |
7_COMMITMENTS_AND_CONTINGENCIE1
7. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | |
Corn contract | Syrup contracts | Ethanol contracts | ||
Open indexed-price sales contracts open, gallons | '134,896,000 gallons | ' | ' | ' |
Open WDG, syrup and corn oil fixed-price sales contracts, value | $814,000 | ' | ' | ' |
Open WDG, syrup and corn oil fixed-price sales contracts, tons | '164,000 tons of WDG and syrup | ' | ' | ' |
Sales commitments, open indexed-price sales contracts | ' | '1.8 million pounds of corn | '2,000 tons of WEG and syrup | ' |
Purchase commitments | ' | ' | ' | $11,462,000 |
Purchase commitments, product | '19,318,000 gallons of ethanol | ' | ' | ' |
8_FAIR_VALUE_MEASUREMENTS_Deta
8. FAIR VALUE MEASUREMENTS (Details-Significant Assumptions and Fair Value) (USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Significant assumptions used in the valuations | ' | ' |
Warrants Outstanding | 1,002,000 | 8,241,000 |
Fair value (in dollars) | $4,793,000 | $8,215,000 |
Original Issuance 09/26/2012 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | $8.85 | ' |
Volatility | 51.20% | ' |
Risk free interest rate | 0.13% | ' |
Term (years) | '11 months 26 days | ' |
Discount for Marketability restrictions | 35.60% | ' |
Warrants Outstanding | 473,000 | ' |
Fair value (in dollars) | 1,732,000 | ' |
Original issuance 7/3/2012 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | $6.09 | $6.09 |
Volatility | 52.30% | 61.20% |
Risk free interest rate | 1.07% | 1.27% |
Term (years) | '2 years 9 months 4 days | '3 years 6 months 4 days |
Discount for Marketability restrictions | 31.70% | 40.20% |
Warrants Outstanding | 473,000 | 1,812,000 |
Fair value (in dollars) | 1,732,000 | 3,008,000 |
Original issuance 12/13/2011 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | $8.43 | $8.43 |
Volatility | 52.00% | 60.40% |
Risk free interest rate | 0.58% | 0.78% |
Term (years) | '2 years 2 months 16 days | '2 years 11 months 12 days |
Discount for Marketability restrictions | 29.20% | 37.90% |
Warrants Outstanding | 138,000 | 306,000 |
Fair value (in dollars) | 700,000 | 455,000 |
Original Issuance 03/28/2013 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | ' | $7.59 |
Volatility | ' | 52.40% |
Risk free interest rate | ' | 0.13% |
Term (years) | ' | '1 year 2 months 12 days |
Discount for Marketability restrictions | ' | 22.70% |
Warrants Outstanding | ' | 788,000 |
Fair value (in dollars) | ' | 495,000 |
Original Issuance 06/21/2013 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | ' | $7.59 |
Volatility | ' | 52.40% |
Risk free interest rate | ' | 0.13% |
Term (years) | ' | '1 year 2 months 26 days |
Discount for Marketability restrictions | ' | 22.70% |
Warrants Outstanding | ' | 1,051,000 |
Fair value (in dollars) | ' | 660,000 |
Original issuance 1/11/2013 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | ' | $6.32 |
Volatility | ' | 63.30% |
Risk free interest rate | ' | 1.27% |
Term (years) | ' | '4 years 11 days |
Discount for Marketability restrictions | ' | 43.80% |
Warrants Outstanding | ' | 1,709,000 |
Fair value (in dollars) | ' | 2,892,000 |
Original issuance 9/26/2012 | ' | ' |
Significant assumptions used in the valuations | ' | ' |
Exercise price | ' | $8.85 |
Volatility | ' | 58.50% |
Risk free interest rate | ' | 0.38% |
Term (years) | ' | '1 year 8 months 26 days |
Discount for Marketability restrictions | ' | 42.30% |
Warrants Outstanding | ' | 1,771,000 |
Fair value (in dollars) | ' | 702,000 |
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 (in dollars) | ' | $3,000 |
8_FAIR_VALUE_MEASUREMENTS_Deta1
8. FAIR VALUE MEASUREMENTS (Details-Fair value measurements) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets: | ' | ' |
Assets | $1,130 | $961 |
Liabilities: | ' | ' |
Liabilities | 5,452 | 9,074 |
Commodity contracts [Member] | ' | ' |
Assets: | ' | ' |
Assets | 1,130 | 961 |
Liabilities: | ' | ' |
Liabilities | 659 | 859 |
Warrants [Member] | ' | ' |
Liabilities: | ' | ' |
Liabilities | 4,793 | 8,215 |
Level 1 [Member] | ' | ' |
Assets: | ' | ' |
Assets | 1,130 | 961 |
Liabilities: | ' | ' |
Liabilities | 659 | 859 |
Level 1 [Member] | Commodity contracts [Member] | ' | ' |
Assets: | ' | ' |
Assets | 1,130 | 961 |
Liabilities: | ' | ' |
Liabilities | 659 | 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 | 4,793 | 8,215 |
Level 3 [Member] | Commodity contracts [Member] | ' | ' |
Assets: | ' | ' |
Assets | 0 | 0 |
Liabilities: | ' | ' |
Liabilities | 0 | 0 |
Level 3 [Member] | Warrants [Member] | ' | ' |
Liabilities: | ' | ' |
Liabilities | $4,793 | $8,215 |
8_FAIR_VALUE_MEASUREMENTS_Deta2
8. FAIR VALUE MEASUREMENTS (Details-Level 3) (Level 3 [Member], Warrants [Member], USD $) | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 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 | 37,465 |
Exercises of warrants | -40,884 |
Expiration of warrants | -3 |
Ending Balance | $4,793 |
9_EARNINGS_PER_SHARE_Details
9. EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Income (Loss) Numerator | ' | ' | ' | ' |
Net income (loss) attributed to Pacific Ethanol, Inc. | $4,025 | ($4,971) | $8,771 | ($9,374) |
Preferred stock dividends | -319 | -319 | -946 | -946 |
Income (loss) available to common stockholders | 3,706 | -5,290 | 7,825 | -10,320 |
Add: convertible debt | ' | 61 | ' | ' |
Income available to common stockholders | $3,706 | $797 | $7,825 | ($10,320) |
Shares Denominator | ' | ' | ' | ' |
Weighted average shares - basic | 22,986,000 | 13,177,000 | 19,713,000 | 11,380,000 |
Add incremental shares - warrants | 1,321,000 | ' | ' | ' |
Add incremental shares - convertible debt | ' | ' | 2,360,000 | ' |
Weighted average shares - diluted | 24,307,000 | 13,177,000 | 22,073,000 | 11,380,000 |
Per-Share Amount | ' | ' | ' | ' |
Loss available to common stockholders - basic | $0.16 | ($0.40) | $0.40 | ($0.91) |
Loss available to common stockholders - diluted | $0.15 | ($0.40) | $0.35 | ($0.91) |
9_EARNINGS_PER_SHARE_Details_N
9. EARNINGS PER SHARE (Details Narrative) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | |
Dilutive securities | ' | ' |
Potentially dilutive weighted-average shares from convertible securities not considered in calculation of diluted shares | 669,000 | 657,000 |
10_RELATED_PARTY_TRANSACTIONS_1
10. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 |
Related Party Transactions [Abstract] | ' | ' | ' | ' | ' |
Preferred stock dividends | $319 | $319 | $946 | $946 | ' |
Note payable related party | $0 | ' | $0 | ' | $750 |