* Net loss and the fully diluted loss per share for Q4'08, both of
which were negatively affected by significant declines in ethanol
prices and special charges, totaled $36.9 million and $0.86 per
share, respectively
* Physical corn purchases in Q4'08 averaged $4.43 per bushel while
gains on short forward corn positions totaled $6.6 million.
* Construction was suspended on our capital expansion projects at
Mt. Vernon, Indiana and Aurora, Nebraska in Q4'08
* Total cash on hand and availability under our secured revolving
credit facility at the end of Q4'08 declined to $23.3 million, from
$119.2 million at the end of Q3'08, and declined further to $7.3
million at March 12, 2009
* We amended our secured revolving credit facility subsequent to
year-end
PEKIN, Ill., March 16, 2009 (GLOBE NEWSWIRE) -- Aventine Renewable Energy Holdings, Inc. (NYSE:AVR), a producer and marketer of clean renewable energy, today released results for its fourth quarter and full-year ended December 31, 2008. The net loss for the quarter was $36.9 million, or $0.86 per diluted share, as compared to net income of $3.3 million, or $0.08 per diluted share, in the fourth quarter of 2007.
Included in the Q4'08 results was a pre-tax cash charge of $9.9 million for demobilization expenses related to the suspension of our expansion projects, and pre-tax non-cash charges of $4.3 million related to a loss on an investment in a marketing alliance partner, $1.6 million related to the impairment of plant development costs and $6.7 million for the establishment of tax related valuation allowances. Q4'08 was also negatively impacted by falling ethanol prices. The economic impact of selling gallons held in inventory at the end of Q3'08 with a $2.08 per gallon value as prices decreased significantly during Q4'08 was a negative impact to gross margins of approximately $23.1 million. Conversely, increasing prices throughout Q4'07 positively impacted gross margins by $6.9 million during that period.
Gallons of ethanol sold in the fourth quarter of 2008 increased to 277.9 million gallons, a record, as compared to 176.2 million gallons in the fourth quarter of 2007. Gallons produced in Q4'08 increased to 48.1 million gallons from 45.6 million gallons in Q4'07. We expect ethanol shipments in 2009 to decline sharply as we rationalize our ethanol supply sourcing in light of the current ethanol economic environment.
Commodity spread, defined as gross ethanol selling price per gallon less net corn cost per gallon, declined to $0.63 per gallon in Q4'08 from $1.17 per gallon in Q4'07. The average sales price per gallon of ethanol decreased in Q4'08 to $1.81 per gallon from the $1.94 average received in Q4'07. Corn costs during Q4'08, excluding gains on our corn derivative positions, averaged $4.43 per bushel, significantly higher than our Q4'07 cost of $3.66 per bushel. The CBOT average daily closing price for Q4'08 was $3.84 per bushel. Conversion cost in Q4'08 was $0.67 per gallon as compared to $0.66 per gallon in Q4'07.
Results for Q4'08 were positively impacted by realized and unrealized net gains on derivative positions and lower SG&A costs. Gains on derivative positions in Q4'08 totaled $11.0 million versus losses on derivative positions of $5.1 million in Q4'07.
For the year, the net loss was $47.1 million, or $1.12 per diluted share, as compared to net income of $33.8 million, or $0.80 per diluted share for 2007. In addition to the fourth quarter charges described above, the 2008 results were also negatively impacted by $31.6 million of losses related to the sale of auction rate securities and the establishment of tax-related valuation allowances totaling $16.1 million.
Marketing Alliance
For the past few years, our marketing business has been an important component of our business. Using the gallons we sourced from third parties, we were able to distribute significantly more ethanol than we produced from our own equity production. However with severely declining margins and general liquidity stress due to frozen credit markets, this model no longer works for our Alliance partners or Aventine. As such, in Q4'08 we began negotiating termination agreements with most of our Marketing Alliance partners and have begun to rationalize our distribution network to primarily focus on sales of our equity production.
Liquidity
As a result of ethanol industry conditions that have negatively affected our business, we do not currently have sufficient liquidity to meet our anticipated working capital, debt service and other liquidity needs. In particular, we do not expect to have adequate liquidity to satisfy the $15 million interest payment due on April 1, 2009 on our outstanding senior unsecured 10% fixed-rate notes or the $24.4 million due to our EPC contractor, Kiewit Energy Company. In addition, we are currently in default under our outstanding 10% fixed-rate notes which permits the holders thereof to accelerate the $300 million principal amount thereof upon 60 days notice. The default under our 10% fixed rate notes constitutes an event of default under our secured revolving credit facility, which has been waived by lenders under our secured revolving credit facility until April 15, 2009. As a result, our 2008 financial statements will include an explanatory paragraph by our independent registered public accounting firm describing the substantial doubt as to our ability to continue as a going concern.
As of March 12, 2009, $22.2 million in letters of credit and $16.5 million in revolving loans were outstanding under the amended secured revolving credit facility. After giving effect to the recent amendment to our secured revolving credit facility, we had $0.7 million of cash and $6.6 million of additional borrowing availability thereunder as of such date. All of our cash receipts are automatically applied to reduce amounts outstanding under our amended secured revolving credit facility and to cash collateralize our letters of credit. As we continue to reduce the number of gallons of ethanol we sell and hold in inventory, working capital available to support borrowings under our secured revolving credit facility will reduce proportionately.
The amendment to our secured revolving credit facility requires us to successfully complete an exchange offer of our outstanding senior unsecured 10% fixed-rate notes for a like principal amount of a new series of "pay-in-kind" notes. We expect the "pay in kind" notes to (i) require no cash interest prior to April 1, 2010, (ii) require an increase in the interest rate to 12% per annum and (iii) grant a second lien on substantially all of our assets which must be contractually subordinated to the obligations under our secured revolving credit facility. In addition, to encourage holders of our senior unsecured 10% fixed-rate notes to participate in the exchange offer, we expect to need to offer the holders of our senior unsecured 10% fixed-rate notes 8.4 million shares of our common stock (representing approximately 19.9% of our currently outstanding shares of common stock). There can be no assurances, however, that the required percentage or any holders of the senior unsecured 10% fixed-rate notes will agree to an exchange on these terms or at all. Failure to have the holders of 80% of the existing senior unsecured 10% fixed-rate notes commit to participate in the exchange by March 31, 2009 or the failure to consummate the exchange for 90% of the existing senior unsecured 10% fixed-rate notes by April 15, 2009 would be an event of default under our secured revolving credit facility.
Even if we are successful with the senior unsecured 10% fixed-rate note exchange offer, we do not expect to have sufficient liquidity to meet anticipated working capital, debt service and other liquidity needs during the current year unless we experience a significant improvement in ethanol margins or obtain other sources of liquidity. Based on the current spread between corn and ethanol prices, the industry is operating at or near breakeven cash margins. We experienced negative gross margins during the second half of 2008 and expect negative gross margins to continue through the first quarter of 2009 due in part to our fixed price obligations to purchase corn and natural gas at above current market prices. The current spread between ethanol and corn prices cannot support the long-term viability of the U.S. ethanol industry in general or us in particular.
In addition, although we suspended construction at both Aurora West and Mt. Vernon during the fourth quarter, we continue to have construction payment obligations to Kiewit. On March 9, 2009, the Company received a notice from Kiewit cancelling the engineering, construction and procurement contracts for Aurora West and Mt. Vernon, referencing our failure to make a recent payment under the change order agreements dated December 31, 2008. As a result, all remaining payments due to it and its sub-contractors totaling $24.4 million at February 28, 2009 are due and payable. We are currently engaged in discussions with Kiewit to negotiate a payment schedule that falls within the economic constraints with which we are currently operating. We cannot give you any assurance that we will reach an agreement with Kiewit that works within our existing liquidity constraints.
Because our obligations to Kiewit are past due, the liens securing these obligations violate the terms of our 10% fixed rate notes and constitute a default thereunder. Unless such default is cured through payment, the release of the liens, a negotiated resolution or otherwise, the holders of our 10% fixed rate notes may accelerate the $300 million principal amount thereof upon 60 days notice. In addition, the default under our 10% fixed rate notes constitutes an event of default under our secured revolving credit facility, which is our only current source of liquidity. We have obtained a waiver from the lenders under our secured revolving credit facility until April 15, 2009. Any foreclosure on such liens by Kiewit would constitute an event of default under our amended secured revolving credit facility that is not covered by the waiver.
We remain contractually obligated to complete the suspended plants at Aurora and Mt. Vernon as well as an additional plant at Mt.
