PEIX - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Pacific Ethanol Incorporated Fourth Quarter and Full Year 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

to of conference LHA like today your now Shilton Moriah Investor would hand to the speaker I Relations. Please go ahead, madam.

Moriah Shilton

And Pacific and Thank today conference Joelle. thank for all you, joining call. for the year Ethanol full quarter fourth XXXX results you us

call Bryon President CEO; to On and summary the will McGregor, provide today and review the operating Neil outlook begin and for call Ethanol's then Pacific financial return will a discuss Neil with are Neil results, of Bryon Koehler, the the and CFO. business will and highlights, of open questions.

pacificethanol.com. press Pacific that Ethanol call prepared issued of yesterday, a Company presentation year-end a release is and available Company's results. also The the at quarterly on today's details the for providing website Company's

will of release. A Pacific replay available A through which Ethanol's today's available website. of details this be replay no Please XXth, April webcast longer press included the note may of of in earnings at on are at you information be call information and be any will that only also yesterday's accurate call the Xst, today, telephone advised time-sensitive therefore time March are that replay. as speaks

available differ statements Ethanol some presentation to and Pacific The Safe refer those Company's a of the says involve statements of number and slide forward-looking from actual results could of risks constitute uncertainties. which Harbor statements. the of two presentation the Please comments this future online, that, on materially in considerations that

applicable forward-looking with obligation in the such factors filings no the to and limited events, other to, contribute Ethanol's Factors previously required Except assumes update that as Company not could disclosed time-to-time risks, cause differences any by SEC. include, are statements. to law, but or from and Pacific

in monitor non-GAAP remarks, investors of financial performance measures the to the periods and the management's Management Company's In reported. measures being will for measures believe will assist these assessing performance these operations referenced. non-GAAP uses be prepared

or extinguishment loss income depreciation value Ethanol unaudited provision adjusted accounting for impairment, fair purchase Company and interest expense, debt, defines benefit as loss or expense. on before Pacific of attributed and amortization asset The net EBITDA adjustments adjustments, to taxes, income

To information press call, included non-GAAP was of this Company's support later table reconciling yesterday's release. a in the review on

to now is President Koehler, pleasure my Neil? introduce and Neil It CEO,

Neil Koehler

Thank for you, you Moriah, thank us everyone today. and joining

it as all the minds of discuss I'd the nationwide to novel The top First, spread coronavirus business. the of is it hearts how for significant and like our and affecting in our is stay-at-home overall which coronavirus have we has seen dramatically ethanol led sales to customers. has our markets, several turn to reductions in In demand. orders statewide in all reduced fuel country,

those expect pendency or upto markets, We orders. the of reduction during stay-at-home a in the more XX% impacted, most

prices on As Corn so also low of market have a unleaded to gasoline this basis. the prices result for plummeted levels. have percentage a historically demand ethanol less but fallen and disruption,

Accordingly, ethanol oversupplied compounding pandemic is the negative. adversity plant already margins production across an market. The the ethanol are of industry

expects and fuel the As commitments Pacific period avoid a is have March. feed to idling flow a over shutting operations. and Every production and to production end as XX% demand. meet reduce and supply reduced by customers is plants to during whole the negative of plant down by Ethanol result, has industry cash this

while an So, to production of minimizing orderly commitments, our shutting meeting in needs contractual cash down negative with objective occur manner, the impacts.

or record in amounts coronavirus, and ingredient producing high-quality Pekin, ICP hand of Illinois as the alcohol, shipping In response a sanitizers. facility of to is key the production

and into sold high-quality industrial, ICP markets. plant Our is alcohol that chemical grade primarily beverage produces

to are working now the critical modifying the our than Our meet alcohol. And have sanitizer are doubled do application need sales historically, product, for and production. accounts market, total processes, the this for in more increased we for and sales approximately production into more hand of this ICP XX% demand high-quality diligently with to

We're in coronavirus. this together that by health donate in all need to Pekin responders to to hand and time a workers pandemic. produce help frontline work and with This also is we first sanitizer impacted organizations to community the those to when working who health local are attending stop

Now, update our I'd strategic initiatives. like to an provide on

additional As have strategic of yesterday, complete May we announced payment which and deferred interest gives additional our through XXth, secured initiatives. we the of principal debt to us runway

demonstrate While the continue with to pursue lenders our lenders, sheet the balance we adverse have our conditions, the neither to the Company now expected our to constructive while improve nor initiatives. our restructure acute market continuing relationships and liquidity extensions

in we on Mar as these We the and with Chief initiatives. team the us management welcome an added Company executive basis. yesterday Restructuring support assist to also efforts, to have negotiating a in lenders consulting Winston engaged the resource announced strategic implementing we To Officer, him

million capital step our In sell ownership Aurora Company $XX.X to February, a we signing XX% completed of to to working subject significant Elevator adjustments. consideration, in definitive agreement certain for by a Cooperative Aurora interest Pacific

We as are working soon possible. close diligently transaction as to this

are We regarding other multiple sale for strategic partnerships assets. with various the discussions in parties or

on are these transactions. actively working We

will the gallons annual has demand Circuit over forward. going for the exemptions small granting X the would to if On expected, refinery renewable restore of front, not on regulatory that inappropriate decided EPA nationally, eliminate applied fuels, Ruling the XXth billion of SREs appeal as the and

volumes to obligations. crisis. to As be be demand an the long-term supportive to EPA from do past illegally ethanol be will recover the restore for thing for the was years timely industry, This current and the over we right three future lost as working and market to added we'll annual the

set blending XXXX the ethanol Conventional will The volumes, minimum corn December. in target by standard for met be Congress the fuel released at billion by XX maintained gallon final for primarily biofuel rule requirements late XXXX. renewable was

use levels this drive EXX As markets to in certain and normal return markets. of after pandemic, will more demand the

be year, impact coronavirus on expect had trade the in strong of year the time, fourth to and about a from seasonally evolving as and this XXXX, and the negative exports full last slightly worldwide were were quarter At has for Exports the remains down unknown. same XXXX. we but

States significant being step phase may in China impact, trade the as to that U.S. one of support of emerge deal the China. on optimistic or China technologies and from as life carbon are Ethanol. The development, fuels a low-carbon Pacific a United reward buyer of With ethanol based first policies of emission fuel part their and strategy country coronavirus cycle market which between remains core we reductions,

which jurisdictions with will working to markets the low-carbon We value are we provide across produce. country, ethanol low-carbon the to expand other

call of year full I’d now the review over like to fourth to XXXX quarter for our and Bryon? and operational turn financial Bryon results.

Bryon McGregor

Thank you, Neil.

goods the million $XXX sold $XXX to of decreasing million, price to per which total prior part million $X.X gross compared a net third $XXX to offset $XX.X XXXX, reduction quarter, million in profit average compared Cost by a in were the gallon drove quarter. of quarter in fourth the For of a in of in increase gross sold sales an million was sold. loss gallons

SG&A expenses were third strategic increase $XX.X million million initiatives with reflecting professional the $X.X and associated compared services our in quarter, in loan to an amendments.

fees of the higher in lower our Although we initiatives, first expenses professional be at out to execute we half the as expect least general necessity SG&A year. be of significantly on will through XXXX

related obligations. secure loss per quarter, extinguishment in the loss on Pacific was million to $XX.X $X.X the asset and shareholders of or common LLC included million related to charge our million compared not per This impairment the Aurora which interest $XX.X a to sale share and to our available such a or $XX.X a pending in debt Loss $X.XX share amendment third charge. did debt million $X.XX of membership have

Adjusted EBITDA was negative positive million third $X.X million, XXXX. the in of compared to $XX.X quarter

loss were net Cost which prior sold, of per compared in year. $X.XX gallons to resulting average gross billion, goods XXXX, declined $XX.X of due million a For in the billion sales sales the of partially to $X.XX sold to was gallon. year compared million, loss in the full higher billion, $X.X by year-to-year fewer price offset $X.XX XXXX, gross

expenses SG&A costs. to to million an from $XX.X ongoing year, effort lower our million, the $XX.X overhead in due were prior improvement

was earlier noted, compared million per currently negative these $XX.X and $XX.X EBITDA Loss previously million in per obscured a difference professional year, $X.X compared the Adjusted available $X.XX in with associated asset $X.XX XXXX. shareholders million, or million, charge. our was are the being mentioned principal restructuring share, or $X.X offset to improvements share to prior impairment efforts. by to As common expenses

$XX Turning were approximately to to XX, XXXX. cash the in our sheet, in sale million interest balance million $XX.X $XX million September at will and million, at notes. receive December equivalents compared XXXX, of ownership our LLC, cash in XX, close we the cash of promissory Pacific Aurora and our $XX.X Upon

back turn will I that, With the to Neil. call

Neil Koehler

the taken the industry's and why put few for key to Thank senior believe in These and agreements Company thrive continued payment with best We've growth in all for our and of restructuring the which in the the the prospects, ethanol, are in noteholders firmly already working lenders position country so, given times compelling a to including our initiatives our we bank levers terms. Company. extending strategic you, our steps and we are octane challenging carbon future. benefits Bryon. cost, is long-term Even

the discussions agreement Pacific multiple a around in appropriate. signed sale to and also or partnerships We we we other provide assets, sell are parties will and strategic as various definitive with of Aurora, in updates interest our ownership

to the With that, I'd call for like questions. open Joelle,

Operator

Eric Stine Instructions] [Operator comes you. Thank question from Our first with Craig-Hallum.

now is open. line Your

Eric Stine

that assume at would and going by utilization for run that other I ICP, out? full all just your wanted to than be would confirm, which And I to plants when. guess you're I plants

Neil Koehler

prepared this of end time to -- that on said total is idling the production. March reduction would in by it That XX% And some over of correct. be is the at as of level we've remarks,

Eric Stine

that ability term that that in even ICP, would above given the I then, market got a or is at to is run demand mean, there for mean, obviously be product? any there if demand I it's -- for -- nameplate, you've there short And

Neil Koehler

And Yes, increase humanly to meet can everything current there. we we we make some sell doing improvements that are can to We anything the been regard. produce possible incremental demand. the able to in have capacity

Eric Stine

I this plants as I -- half structural had others challenging off. would this a and was very an And temporary. have did, obviously, been production was to you there have it environments is production in it or do if the not some finally that because year environment last thought pretty -- where means over some the kind how industry-wide mean, a come more, something is, change of once as -- you're that stay Okay. made think back we severe is you're doing what and as still offline past? come this, do the response, see or the you come like they you looking maybe what see production doing down of in mean, as whether And industry, you that out people the in but it at then, seen they indication have look it, are. other shutting

Neil Koehler

question, That’s good Eric.

believe. I down the to think, -- a let down. through is, fermenters as run as to offline. takes takes your respects system to According painful is really over this it that capacity X gallons, quite time of billion to just RFA customers shut point it in time, And plants Obviously get now it shock it's the to probably are industry the needed you that as as I extremely some is the and your adjust, some down.

what's bit a there negative. are just of because not That's the it's there's product demand happening. and delay, the the for So, imperative margins is but so

but a just mostly were coronavirus and the and in Once plants opposed when lift Once was we come more events. think taking overreacted the reasonable see companies then is different And to we is the that margins will in -- recent out called that really around, to It’s And lot I a was come back, a just we see production, say plant increased the slowdowns, before we are we'll a down multiple out fall lot that control, -- down and margins started the of under did you're demand be some a happening, above December is what you probably obviously plants travel when and was then get demand a let's a back to came reduction, summer in for them bringing of as balanced the there the significant or this crisis. will the the slowdowns. are market kind by with matter shutdowns, two orders when of stay-at-home plants the of And general don't of and the coming of able that demand, see idled, expectation and it either back normal. spread industry case. we people or January exacerbated gasoline go to it. down, see of a and it levels right, even pandemic they’re to to

Eric Stine

I deferment that good interest the to last for see me. principal. the and months Maybe mean, on out two it. Got for one

does just could the initiative? process, Officer hand Your on strategic you're Chief near looking there, that commentary burner potentially on hand things kind as options the some imply it at that be of the Restructuring some there just maybe certainly front with and are it addition of the is term. But, in part of other

Neil Koehler

Yes. of stakeholders. sale, actual with the going forward looking the I announcement and with meet announced and assets terms all Pacific of sales that the mean, it's of -- partnerships Aurora best potential publicly as at the outline working the other and lenders to we've needs

Operator

comes Dayal Our Instructions] from next question [Operator Wainwright. H.C. Amit with

open. Your is line now

Amit Dayal

that but issues appeal there still steps? benefits you views begin least on waiver to not this your to will how decision seems to as to be next share the first several before materially. accrue Could EPA resolved the need be a ruling, it out underlying this appear play step, like With at good

Neil Koehler

about southwest to good qualify part of of automatic That's refiners the effect the in, granted gallons, takes in country XXth believe is There a which of Amit. when -- down, believe refinery SREs have when The central is all two I that blanket I the that eliminated. XX% Circuit, Yes. immediately back only question, small refined in the that. the receive it only that refiners the exemptions the for ruling the were XXXX, so exemptions it mostly came when was be

be there'll exemptions. says fund So, smaller basically, no it

if case question real it's put was they will principle precedent because this the And it is, EPA this one to take It And nationally? disadvantage hard wouldn't put the to implication. and legal imagine that, is now The that nationally. it competitive apply another. to be refiner its also EPA that's legal do down action were clearly an that and would not then in national additional the to apply would at there

in And EPA, that issue. our was fairness a that. indication agreed there's So, they that discussions with with

for the two there are those are XX% a rehearing granted. have XXth the If stats. appealed than of So, -- refiners Circuit, less requests in

suggests an just find no well. appeal be We there, to average will rehearing. be Supreme law There be unlikely is So, of that the there to as could which Court.

So, that in the how coronavirus immediately. that -- how this and But, would now, what EPA be be implemented? that's up have to get it's may going to provide And indications to fairly the implications about there does going delays they say we are. to to expected nationally some given are apply this the

that will a the not because action we to immediate had the be and would the averages, the how in XXXX, based DOE that acts they retroactive on because years if the what will was most exemptions expect we exemptions regulatory gallons the EPA The And be this front for that XXXX. of And, about of gallons, that would refinery essentially recall, anticipated, anticipated of would three the recommendations front ruling when already them, to of EPA refinery added million be those, they most victory you XXX granting. small small said RVOs the on they upon granted. are reallocate that they

is with now view RVOs. would will that refinery into granting passed any hard the that a than they RVO time very higher of exemptions. have was a And XXXX those then Our translate small

along how the up going way. law manage they the steps to are There new land positive. to now of this to EPA the indicate So, It's going forward. really are

Amit Dayal

you That really that, Neil. for was Thank helpful.

Neil Koehler

be and obviously with as we an champions on because Yes. point, critical to very it's diligent will issue. our this continue industry a And

Amit Dayal

Understood.

have XXXX? be in for your what visibility cash you do terms could of side, right burn operating the now On

Bryon McGregor

It's assess a question, difficult Amit. at really good this to point. It's really

our CRO, efforts lenders get his debt Neil As operating prepared That regards focus is So, need profitability. other working anyhow and expectation our is remarks, are our to to with efforts said that come restructuring executing has with on to our that with burn with to our our our working cash profitable, well, achieve as to to initiatives. -- right? we will reduce in plants are --

give at difficult this time to an it's any kind estimate. of So, actually you

Neil Koehler

cash But, reduce to working to part and as that of hard also limit burn overhead. is our

that can very-focused control, we those are on costs. we So, reducing costs

Amit Dayal

Understood. impact Aurora closing me. coronavirus for one And any maybe has is on things On the issue the one this still this for just on track? last there closing transaction, -- timing or are

Neil Koehler

coronavirus. track. it It’s track. But, at is There's still aspects on all certainly juncture, with economy in the on of the this uncertainty

Amit Dayal

Okay. guys. That's have, it. so much. I I Thank appreciate all you

Neil Koehler

Thank you.

Operator

to now over closing Thank any this for questions remarks. not Koehler to back showing call like at you. I'm Neil time. the turn I'd further

Neil Koehler

Thank especially have support We we difficult safe. appreciate you hope all and And the this Thank times. we’ll these together, day. crisis. And get your you stay Company. us good of all a and for through joining in you

Operator

for conference and gentlemen, today's concludes Ladies this participating. you call. Thank

You may now disconnect.

Alto Ingredients (ALTO) 27 Mar 202019 Q4 Earnings call transcript