Pacific Ethanol's CEO Discusses Q3 2012 Results - Earnings Call Transcript
November 13, 2012 12:19 PM ET
Pacific Ethanol, Inc. (PEIX)
Q3 2012 Earnings Call
November 13, 2012, 11:00 am ET
Becky Herrick - IR, Lipper/Heilshorn & Associates
Neil Koehler - President & CEO
Bryon McGregor - CFO
Paul Resnik - Uncommon Equities
Good day, ladies and gentlemen and welcome to the Pacific Ethanol Incorporated Third Quarter 2012 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today's conference call is being recorded.
I would now like to introduce the host of this conference call Ms. Becky Herrick. You may begin ma’am.
Thank you, operator and thank you everyone for joining us today for the Pacific Ethanol third quarter 2012 results conference call. On the call today are, Neil Koehler, President and CEO and Bryon McGregor, CFO. Neil will begin with a review of business highlights and then Bryon will provide details on the company's quarterly financial and operating results. Neil will return to discuss Pacific Ethanol's outlook and open the call for questions.
Before we get underway, let me first inform you that Pacific Ethanol issued a press release yesterday that provides details of the company's quarterly results. The company also prepared a presentation for today's conference call that is available for download on the company's website at, www.pacificethanol.net. If you have any questions, please call LHA at 415-433-3777. A telephone replay of today's call will be available until 11:59 p.m. Eastern Time on November 20, 2012, the details of which are included in yesterday’s press release. A webcast replay will also be available at Pacific Ethanol's website.
Please note that information in this call speaks only as of today, November 13, 2012, and therefore, you are advised any time-sensitive information may no longer be accurate at the time of any replay.
Please refer to the company's Safe Harbor statement on slide two of the presentation available online which shows that some of the comments in this presentation constitute forward-looking statements that reflect management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results.
Forward-looking statements are based on many assumptions and factors. Any change of such assumptions or factors could produce significantly different results. Information about potential factors that could affect the company's financial results is available in the company's risk factors as updated in the company's SEC filings. To the extent permitted under applicable law, the company assumes no obligation to update any forward-looking statements as a result of new information or future events.
Also please note that the company's financial measures are not in accordance with Generally Accepted Accounting Principles, commonly known as GAAP to monitor the financial performance of operations. Non-GAAP financial measures should be viewed in addition to and not as an alternative for the reported financial results as determined in accordance with GAAP. The company defines adjusted EBITDA as unaudited earnings before interest, taxes, depreciation and amortization and fair value adjustments. To support the company's review of non-GAAP information later in this call, a reconciling table is included in the press release the company issued yesterday.
It is now my pleasure to introduce Neil Koehler, President and CEO. Neil?
Thanks, Becky, and thank you all for joining us this morning to discuss our quarterly results. During the third quarter, we further executed on the plans we laid out at the beginning of the year to secure financial stability for the company and build a strong foundation for growth. On July 3rd, we completed a $12 million public equity offering. These proceeds combined with $10 million in senior unsecured notes enabled us to increase our ownership in the Pacific Ethanol plants from 34% to 67%. Consolidating our interest has given us greater strategic control of the plants and supports more efficient and cost effective operations.
On September 26th, we completed another public equity offering of $11 million, the proceeds from which we paid the $10 million in senior unsecured notes. We now have eliminated virtually all of our parent company debt. In addition, shortly after the close of the quarter, we obtained a new $10 million line of credit for the Pacific Ethanol plants from a group of existing lenders led by Credit Suisse. This line of credit provides near-term liquidity necessary in light of the current challenging margin environment. Over the next couple of quarters, we will be focusing on refinancing the remaining plant debt, at levels in terms that provide long-term stability for the operations of these assets.
We believe these steps have enabled us to build a stronger foundation for growth that positions us for profitability when market conditions improve. These are tough times in the ethanol business and our third quarter results reflect the challenging market environment. Nevertheless, we remain steadfast in our commitment to the long-term profitability of the business.
Ethanol producers have suffered in a year when record drought conditions in the Midwest have severely impacted the supply and price of corn. Corn costs have increased significantly while ethanol prices have not, thereby narrowing the spread. Many producers in the industry have idle facilities in response to these market conditions with now approximately 1.6 billion gallons of annual capacity currently idled. We have been moderating production at our plants and are keeping the Madera facility idled to match current demand and we’ll continue to adjust appropriately in response to market conditions.
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