Alto Ingredients Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
ALTO$3.74+1.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001213900-24-040876
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001213900-24-066660
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 106 previous paragraphs and 116 current paragraphs.
46 unchanged; 27 reworded; 37 added; 32 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 24 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (37)
Current report
Over the last few years, we have used cash flow from operations and excess liquidity to fund capital upgrades and repairs and maintenance to strengthen our facilities and improve our long-term profitability. While these additional expenses can impact short-term results, our recent efforts have begun to yield operational improvements and we are confident of their long-term benefits.
Current report
In the second quarter, we increased production at our Pekin Campus as a result of these initiatives, positioning us to benefit from improving ethanol margins. Our efforts further demonstrate our Pekin facilities’ advantages, including our ability to consistently operate them profitably. For example, despite over $5 million in expenses related to our biennial wet mill outage, which was completed on time and within budget, our Pekin Campus generated over $10 million of gross profit in the second quarter, up from over $4 million in the first quarter, reflecting the successful outcome of our capital upgrade and repairs and maintenance programs as well as higher crush margins starting in June. For the second quarter, the average Chicago crush margin increased to 21 cents per gallon compared to slightly above breakeven in the first quarter. In July, the average Chicago crush margin rose further to 48 cents per gallon. These improvements align with the optimism we expressed on our first quarter earnings call concerning stronger crush margins, solid corn supplies and growing export demand.
Current report
Our Pekin Campus is fully operational and is taking advantage of the favorable summer driving season economics. We remain on track to achieve 90 million gallons or more of specialty alcohol sales in 2024 and we are encouraged by the demand from existing and new customers. Assuming crush margins hold at or near present levels, we expect to deliver strong third quarter financial results.
Current report
Despite the strong performance from our Pekin Campus, our consolidated second quarter results and Adjusted EBITDA were negatively impacted by the cost of our biennial wet mill outage, preventative repairs and maintenance expenses at all our facilities, lower feed and carbon prices, particularly with respect to our Columbia facility, and losses on our hedging activities. We recorded $11.3 million in repairs and maintenance expense for the second quarter and remain on track for $34 million in total repairs and maintenance expense for all plants in 2024.
Current report
We are capitalizing on our Pekin Campus’s proximity to the Illinois River, which provides us with access to the Gulf of Mexico and an ability to export product. We are building a second loading dock at our Pekin Campus that will increase barge volume, reduce our overall transportation costs and provide critical redundancy. We expect the cost of the second dock will be less than $3 million.
Current report
To generate long-term sustainable profitability, we have been actively expanding our revenue streams, such as with initiatives to produce higher quality specialty alcohols, a diversity of essential ingredients, including corn oil and high protein feed, and carbon capture and storage, or CCS. We expect that regulatory developments and carbon market fluctuations will affect our CCS initiative on an ongoing basis. Most recently, Illinois passed the SAFE CCS Act in July, establishing stringent safety, financial and insurance requirements for carbon dioxide pipelines. The Act also imposes a moratorium on the construction of new carbon pipelines until the federal Pipeline and Hazardous Materials Safety Administration finalizes its new safety rules, or July 1, 2026, whichever occurs sooner. This timing aligns with our current proposed CCS project permitting and construction schedules. We believe the Act will add clarity for the industry on CCS projects, although we do anticipate increased compliance and other requirements.
Current report
The CCS market remains dynamic. For example, on the economic front, current prices in Low Carbon Fuel Standard markets are at historic lows and voluntary carbon markets are nascent. As a result, we cannot project with certainty, beyond the value of 45Q tax credits that begin at $85 per metric ton, what the dollar values of the associated environmental attributes will be over the life of our proposed CCS project. Given our plans to take a capital-light approach to this project, we must align with our various partners so that each party bears appropriate risks while retaining appropriate financial benefits. Given these evolving dynamics, it is important that we pursue our CCS project with the right partners. We believe we are doing so effectively as we continue to work collaboratively with Vault and other parties.
Current report
We continue to invest in our Western plants, which were built at a time when destination plants delivered a solid and differentiated value proposition. As competition and corn basis increased and carbon values declined, we began further investing in these plants to broaden our revenue streams and improve profitability. Our ultimate goal is to optimize their value, which could include operating them long-term as part of our portfolio of production assets or evaluating the sale of one or both plants.
Current report
At our Magic Valley plant, we continue to work with our high-protein system vendor, Harvesting Technology, to produce increased levels of corn oil and higher protein feed products that garner higher prices. In January, we hot-idled our Magic Valley plant due to negative regional crush margins and to address the excess water and mass balance challenges that inhibited our ability to operate the plant at capacity and to achieve the target results from our corn oil and high protein system. We have implemented significant modifications that include installing additional equipment and adjusting designed process flows. In the second quarter, to optimize plant efficiency upon restart, we accelerated routine maintenance activities, including tuning other major plant equipment and operating systems, performing routine cleanings and flushing prior process residuals. We resumed operations at our Magic Valley facility in early July and we are encouraged by the initial results. We are currently running the plant at approximately 70% of capacity and expect to increase production rates in the coming weeks as we complete system upgrades. We intend to do so carefully to ensure the process remains balanced and our products meet quality expectations. We anticipate having a clearer picture in late summer, and in time for our third quarter earnings call, of the effectiveness of these system modifications and the general performance of the plant. The system’s effectiveness will be measured against project goals and system production targets to determine the advisability of rolling the system out to other plants.
Current report
In the second quarter, we significantly improved production rates at our Columbia plant by addressing centrifuge limitations we experienced in the first quarter. As a result, we increased capacity utilization rates in the second quarter and anticipate further improvements as the summer driving season continues. We are currently working on other ways to improve the facility’s profitability and expect to share additional information in due course.
Current report
At our Pekin Campus, we are seeing improvements of up to 10% of total ethanol production capacity utilization and up to 15% of total essential ingredients production. Total capital expenditures through the second quarter were $9.3 million and we continue to expect $25 million in total capital expenditures for the full year.
Current report
We continue to make progress on the sustainability front and our customers have indicated their support of our efforts to continue to improve sustainability and lower our carbon footprint. In furtherance of those efforts, in July, our ICP and Pekin plants received the 2024 Bronze Medal Sustainability rating from EcoVadis, which honors the top 35% of companies assessed. EcoVadis is a globally recognized business sustainability rating service that sets corporate sustainability standards.
Current report
Three Months ended June 30, 2024 as compared to the Three Months ended June 30, 2023
Current report
Net sales of alcohol from our Pekin Campus production segment declined by $27.0 million, or 21%, to $100.7 million for the three months ended June 30, 2024 as compared to $127.7 million for the same period in 2023. Our total volume of production gallons sold increased by 0.6 million gallons, or 1%, to 50.8 million gallons for the three months ended June 30, 2024 as compared to 50.2 million gallons for the same period in 2023. The decrease of $0.56, or 22%, in the segment’s average sales price per gallon for the three months ended June 30, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $28.1 million. With the segment’s average sales price per gallon of $1.98 for the three months ended June 30, 2024, we generated $1.1 million more in net sales from the 0.6 million additional gallons of alcohol sold in the three months ended June 30, 2024 as compared to the same period in 2023.
Current report
Net sales of essential ingredients from our Pekin Campus production segment declined by $14.6 million, or 27%, to $39.4 million for the three months ended June 30, 2024 as compared to $54.0 million for the same period in 2023. Our total volume of essential ingredients sold increased by 2,700 tons, or 1%, to 210,000 tons for the three months ended June 30, 2024 from 207,300 tons for the same period in 2023. The decrease of $72.80, or 28%, in the segment’s average sales price per ton for the three months ended June 30, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $15.0 million. With the segment’s average sales price per ton of $187.48 for the three months ended June 30, 2024, we generated $0.4 million in additional net sales from the 2,700 additional tons of essential ingredients sold in the three months ended June 30, 2024 as compared to the same period in 2023.
Current report
Net sales of alcohol from our Western production segment declined by $26.9 million, or 61%, to $17.5 million for the three months ended June 30, 2024 as compared to $44.4 million for the same period in 2023. Our total volume of alcohol sold decreased by 7.5 million gallons, or 46%, to 9.0 million gallons for the three months ended June 30, 2024 as compared to 16.5 million gallons for the same period in 2023. With the segment’s average sales price per gallon of $1.94 for the three months ended June 30, 2024, we generated $14.6 million less in net sales from the 7.5 million fewer gallons of alcohol sold in the three months ended June 30, 2024 as compared to the same period in 2023. The decrease of $0.75, or 28%, in the segment’s average sales price per gallon for the three months ended June 30, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $12.3 million.
Current report
Net sales of essential ingredients from our Western production segment declined by $8.5 million, or 59%, to $5.9 million for the three months ended June 30, 2024 as compared to $14.4 million for the same period in 2023. Our total volume of essential ingredients sold decreased 77,000 tons, or 49%, to 79,800 tons for the three months ended June 30, 2024 from 156,800 tons for the same period in 2023. With the segment’s average sales price per ton of $74.56 for the three months ended June 30, 2024, we generated $5.7 million less in net sales from the 77,000 fewer tons of essential ingredients sold in the three months ended June 30, 2024 as compared to the same period in 2023. The decrease of $17.41, or 19%, in our average sales price per ton for the three months ended June 30, 2024 as compared to the same period in 2023 reduced our net sales of essential ingredients from the segment by $2.8 million.
Current report
Our consolidated gross profit declined to $7.6 million for the three months ended June 30, 2024 from $17.2 million for the same period in 2023, representing a gross margin of 3.2% and 5.4% for the three months ended June 30, 2024 and 2023, respectively. With sales volumes of alcohols being relatively flat, our consolidated gross profit declined due to higher repairs and maintenance expense, totaling $11.3 million across all plants, and lower average sales prices for our essential ingredients, in particular, a compression on protein prices due to an increase in soybean meal supply, a consequence of production growth in soy crush driven by the demand for renewable diesel. Gross profit was also negatively impacted by historic low carbon market pricing at our Columbia plant and significantly higher realized derivative losses of $2.9 million compared to $5.5 million in derivative gains for the prior year period.
Current report
Our Pekin Campus production segment’s gross profit, net of intercompany activity, declined by $3.7 million to a gross profit of $10.6 million for the three months ended June 30, 2024 as compared to $14.3 million for the same period in 2023. Of this decline, $3.8 million is attributable to lower alcohol sales margins, partially offset by $0.1 million attributable to higher sales volumes.
Current report
Our marketing and distribution segment’s gross profit, net of intercompany activity, declined by $0.2 million to a gross profit of $0.8 million for the three months ended June 30, 2024 as compared to a gross profit of $1.0 million for the same period in 2023. Of this decline, $0.3 million is attributable to lower margins from sales of third-party fuel-grade ethanol, partially offset by $0.1 million attributable to higher sales volumes.
Current report
Our Western production segment’s gross profit, net of intercompany activity, declined by $4.8 million to a gross loss of $3.7 million for the three months ended June 30, 2024 as compared to a gross profit of $1.1 million for the same period in 2023. Of this decline, $7.8 million is attributable to lower renewable fuel margins, partially offset by $3.0 million attributable to lower sales volumes at negative margins.
Current report
Six Months ended June 30, 2024 as compared to the Six Months ended June 30, 2023
Current report
Net Sales
Current report
Net sales of alcohol from our Pekin Campus production segment declined by $51.1 million, or 20%, to $209.0 million for the six months ended June 30, 2024 as compared to $260.1 million for the same period in 2023. Our total volume of production gallons sold increased by 2.0 million gallons, or 2%, to 107.9 million gallons for the six months ended June 30, 2024 as compared to 105.9 million gallons for the same period in 2023. The decrease of $0.52, or 21%, in the segment’s average sales price per gallon for the six months ended June 30, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $55.0 million. With the segment’s average sales price per gallon of $1.94 for the six months ended June 30, 2024, we generated $3.9 million more in net sales from the 2.0 million additional gallons of alcohol sold in the six months ended June 30, 2024 as compared to the same period in 2023.
Current report
Net sales of essential ingredients from our Pekin Campus production segment declined by $31.5 million, or 27%, to $86.1 million for the six months ended June 30, 2024 as compared to $117.6 million for the same period in 2023. Our total volume of essential ingredients sold declined by 11,600 tons, or 3%, to 422,600 tons for the six months ended June 30, 2024 from 434,200 tons for the same period in 2023. The decrease of $67.12, or 25%, in the segment’s average sales price per ton for the six months ended June 30, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $29.1 million. With the segment’s average sales price per ton of $203.69 for the six months ended June 30, 2024, we generated $2.4 million less in net sales from the 11,600 fewer tons of essential ingredients sold in the six months ended June 30, 2024 as compared to the same period in 2023.
Current report
Net sales of alcohol from our marketing and distribution segment, excluding intersegment sales, declined by $32.4 million, or 21%, to $124.7 million for the six months ended June 30, 2024 as compared to $157.1 million for the same period in 2023.
Current report
Our volume of third-party alcohol sold reported gross by the segment increased by 3.6 million gallons, or 6%, to 64.1 million gallons for the six months ended June 30, 2024 as compared to 60.5 million gallons for the same period in 2023. With the segment’s average sales price per gallon of $1.94 for the six months ended June 30, 2024, we realized $7.0 million in additional net sales from the 3.6 million additional gallons of third-party alcohol sold gross in the six months ended June 30, 2024 as compared to the same period in 2023.
Current report
Net sales of alcohol from our Western production segment declined by $27.6 million, or 42%, to $37.7 million for the six months ended June 30, 2024 as compared to $65.3 million for the same period in 2023. Our total volume of alcohol sold decreased by 4.2 million gallons, or 17%, to 20.2 million gallons for the six months ended June 30, 2024 as compared to 24.4 million gallons for the same period in 2023. With the segment’s average sales price per gallon of $1.86 for the six months ended June 30, 2024, we generated $7.8 million less in net sales from the 4.2 million fewer gallons of alcohol sold in the six months ended June 30, 2024 as compared to the same period in 2023. The decrease of $0.81, or 30%, in the segment’s average sales price per gallon for the six months ended June 30, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $19.8 million.
Current report
Net sales of essential ingredients from our Western production segment declined by $9.0 million, or 39%, to $13.8 million for the six months ended June 30, 2024 as compared to $22.8 million for the same period in 2023. Our total volume of essential ingredients sold decreased 48,600 tons, or 21%, to 180,600 tons for the six months ended June 30, 2024 from 229,200 tons for the same period in 2023. With the segment’s average sales price per ton of $76.28 for the six months ended June 30, 2024, we generated $3.7 million less in net sales from the 48,600 fewer tons of essential ingredients sold in the six months ended June 30, 2024 as compared to the same period in 2023. The decrease of $23.08, or 23%, in our average sales price per ton for the six months ended June 30, 2024 as compared to the same period in 2023 reduced our net sales of essential ingredients from the segment by $5.3 million.
Current report
Net sales of alcohol from corporate and other declined by $2.5 million, or 30%, to $5.8 million for the six months ended June 30, 2024 as compared to $8.3 million for the same period in 2023. These sales are from Eagle Alcohol’s business.
Current report
Our consolidated gross profit declined to $5.2 million for the six months ended June 30, 2024 from $14.0 million for the same period in 2023, representing a gross margin of 1.1% and 2.2% for the six months ended June 30, 2024 and 2023, respectively. Our consolidated gross profit declined due to higher repairs and maintenance expense and lower average sales prices for our essential ingredients, in particular, a compression on protein prices due to an increase in soybean meal supply, a consequence of production growth in soy crush driven by the demand for renewable diesel. Gross profit was also negatively impacted by historic low carbon market pricing at our Columbia plant and significantly higher realized derivative losses compared to the prior year period.
Current report
Our Pekin Campus production segment’s gross profit, net of intercompany activity, increased by $2.9 million to a gross profit of $15.5 million for the six months ended June 30, 2024 as compared to $12.6 million for the same period in 2023. Of this improvement, $2.6 million is attributable to higher alcohol sales margins and $0.3 million attributable to higher sales volumes.
Current report
Our SG&A expenses increased for the three and six months ended June 30, 2024 as compared to the same periods in 2023. The period over period increases in SG&A expenses are primarily due to increased non-cash compensation and higher professional services fees from diligence work on strategic capital projects and other related up-front project costs, such as with respect to our CCS project, which are expensed until the project is at a stage where costs are capitalized.
Current report
Net Income (Loss) Available to Common Stockholders
Current report
The decrease in our net income available to common stockholders for the three and six months ended June 30, 2024 as compared to the same periods in 2023 is primarily due to lower margins caused by increased repairs and maintenance expense, realized derivative losses from hedging activities, higher up-front project costs, and other factors affecting gross profit (loss) as discussed above.
Current report
Quantitative Period-End Liquidity Status
Current report
Our current liabilities decreased primarily due to a decrease in accrued liabilities, derivative instruments and other current liabilities.
Removed paragraphs (32)
Previous report
We began the year with a refined vision to produce a variety of essential ingredients and the highest-grade beverage alcohol in the industry while prioritizing our carbon capture and storage, or CCS, initiative. Although encouraged by our strategic and operational progress thus far in 2024, relatively low but now improving crush margins and various weather factors impacted our first quarter financial results. Despite these challenges, specialty alcohol sales from our Pekin Campus increased year-over-year contributing toward an overall improved gross profit and higher Adjusted EBITDA. Our results also reflect our ability to leverage the unique capabilities of our Pekin Campus and our other production assets to moderate the impact of crush margin fluctuations. During the first quarter, we also completed our annual Scope I and II greenhouse gas verifications as part of our sustainability efforts.
Previous report
Our outlook for the remainder of 2024 is positive. Crush margins have continued to improve in the second quarter compared to the first quarter, and we expect further improvement, particularly during the summer driving season. While we forecast lower feed prices for the balance of the year, we have solid corn inventories and see improved export demand for ethanol. In addition, the EPA’s summer waiver for 15% blends will facilitate sustained use of higher-blend renewable transportation fuel and support ethanol prices in the coming months. We expect our recent repair and maintenance work will result in more consistent and higher production rates, enhancing reliability and profitability. We continue to evaluate our path to increase margins, improve profitability and deliver the highest return to our shareholders by evaluating our current portfolio of assets.
Previous report
Our goal for our CCS project is to create value for us, our customers and the communities surrounding our Pekin Campus by substantially reducing our carbon footprint. Our Pekin Campus facilities, given their CO 2 production and their location, provide us with a unique CCS opportunity. We continue to negotiate the terms of our proposed CCS agreements with potential financial partners and with Vault 44.01, a leading CCS company focused on the development, capitalization and operation of carbon storage assets. Our plan is to work with Vault to safely transport CO 2 to a geological reservoir nearby and permanently and securely store the CO 2 deep underground. As noted in our March update, together with Vault, we are driving forward with our respective activities for system design, community outreach, vendor negotiations and schedule alignment requirements to procure equipment for compression and to support the installation of additional power. Vault has completed a 2-dimensional seismic geological survey and has begun data analysis. Vault has also advanced the work required to submit the EPA Class VI permit application. Our goal is for Vault to submit its application by the end of the third quarter, which will impact the timing of when we order CCS equipment and when our energy needs for the project must be resolved. We expect the most significant outlays of capital for our CCS project will begin in the first half of 2025.
Previous report
Our CCS project provides compelling economics that we believe we can enhance with more efficient, lower-cost energy production. To this end, we are evaluating multiple capital-light options. We are in discussions with a highly regarded, independent energy company. We engaged this potential partner to complete a front-end engineering and design (FEED) study for an energy cogeneration facility that the partner would build, own, operate and maintain onsite at our Pekin Campus. The cogeneration facility would lower our capital expenditures, improve operating efficiencies and reduce our forecasted long-term energy costs. We also continue to explore an opportunity with our current utility provider to expand energy supply capabilities as an alternative to cogeneration.
Previous report
Longer term, the updated guidelines around tax credits for including ethanol in the production of sustainable aviation fuel further validates our CCS efforts. Overall, we are pleased with the progress we have made with our CCS initiative and the value we expect to deliver to stakeholders.
Previous report
In the first quarter, we sold 26 million gallons of specialty alcohol, up from 21 million gallons in the same period for 2023. As discussed in our March update, we have contracted to sell approximately 93 million gallons of fixed-price specialty alcohol for 2024 at an average premium to renewable fuel of 31 cents per gallon. Our specialty alcohols include highly differentiated 192 proof and low-moisture 200 proof grain neutral spirits that create customer opportunities higher up the value chain.
Previous report
We completed our biennial wet mill outage at our Pekin Campus in April. The wet mill was offline for ten days while we executed a scope of work with over 450 discrete tasks focused on corrective and preventative maintenance as well as upgrades to plant infrastructure. The plant has returned safely to operation and is ramping up to target production rates. Although these efforts will negatively impact sales and margins for the second quarter, they will result in more consistent and higher production rates, improving reliability as we approach the summer driving season.
Previous report
At our Magic Valley facility, we are diligently working on our corn oil and high protein system to return the plant to more sustainable profitability by reducing the impact of periodic low crush margins and higher destination corn basis costs. As outlined in our March update, we are working with the system vendor, Harvesting Technology, to achieve the intended production rate, quality and consistency of corn oil and high protein output at the facility. We will evaluate a roll-out of the system to our other plants based on the system’s performance at our Magic Valley facility. The equipment for the system modifications has been ordered and based on current delivery and installation schedules, we expect to resume production in late June or early July. Harvesting Technology continues to pay for the direct costs of equipment and design changes associated with the system. During this downtime we are accelerating routine maintenance activities to optimize plant efficiency upon restart.
Previous report
Net Sales, Cost of Goods Sold and Gross Loss
Previous report
Pekin Campus Production Segment
Previous report
Net sales of alcohol from our Pekin Campus production segment declined by $24.0 million, or 18%, to $108.4 million for the three months ended March 31, 2024 as compared to $132.4 million for the same period in 2023. Our total volume of production gallons sold increased by 1.3 million gallons, or 2%, to 57.1 million gallons for the three months ended March 31, 2024 as compared to 55.8 million gallons for the same period in 2023. The decrease of $0.48, or 20%, in the segment’s average sales price per gallon for the three months ended March 31, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $26.5 million. With the segment’s average sales price per gallon of $1.90 for the three months ended March 31, 2024, we generated $2.5 million more in net sales from the 1.3 million additional gallons of alcohol sold in the three months ended March 31, 2024 as compared to the same period in 2023.
Previous report
Net sales of essential ingredients from our Pekin Campus production segment declined by $16.9 million, or 27%, to $46.7 million for the three months ended March 31, 2024 as compared to $63.6 million for the same period in 2023. Our total volume of essential ingredients sold declined by 14,300 tons, or 6%, to 212,600 tons for the three months ended March 31, 2024 from 226,900 tons for the same period in 2023. The decrease of $60.73, or 22%, in the segment’s average sales price per ton for the three months ended March 31, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $13.8 million. With the segment’s average sales price per ton of $219.70 for the three months ended March 31, 2024, we generated $3.1 million less in net sales from the 14,300 fewer tons of essential ingredients sold in the three months ended March 31, 2024 as compared to the same period in 2023.
Previous report
Western Production Segment
Previous report
Net sales of alcohol from our Western production segment declined by $0.7 million, or 3%, to $20.2 million for the three months ended March 31, 2024 as compared to $20.9 million for the same period in 2023. Our total volume of alcohol sold increased by 3.3 million gallons, or 42%, to 11.2 million gallons for the three months ended March 31, 2024 as compared to 7.9 million gallons for the same period in 2023. With the segment’s average sales price per gallon of $1.80 for the three months ended March 31, 2024, we generated $6.0 million more in net sales from the 3.3 million additional gallons of alcohol sold in the three months ended March 31, 2024 as compared to the same period in 2023. However, the decrease of $0.84, or 32%, in the segment’s average sales price per gallon for the three months ended March 31, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $6.7 million.
Previous report
Net sales of essential ingredients from our Western production segment declined by $0.6 million, or 7%, to $7.8 million for the three months ended March 31, 2024 as compared to $8.4 million for the same period in 2023. Our total volume of essential ingredients sold increased by 28,400 tons, or 39%, to 100,800 tons for the three months ended March 31, 2024 from 72,400 tons for the same period in 2023. With the segment’s average sales price per ton of $77.64 for the three months ended March 31, 2024, we generated $2.2 million more in net sales from the 28,400 additional tons of essential ingredients sold in the three months ended March 31, 2024 as compared to the same period in 2023. The decrease of $37.73, or 33%, in our average sales price per ton for the three months ended March 31, 2024 as compared to the same period in 2023 reduced our net sales of essential ingredients from the segment by $2.8 million.
Previous report
Corporate and other
Previous report
Our consolidated gross loss declined to a gross loss of $2.4 million for the three months ended March 31, 2024 from a gross loss of $3.2 million for the same period in 2023, representing a gross margin of negative 1.0% for the three months ended March 31, 2024 and 2023. With sales volumes relatively flat, our consolidated gross loss declined due to slightly higher average commodity margins from proportionally lower production input costs despite lower sales prices, and increased sales of higher-margin specialty alcohol as well as the positive impact of our efforts to increase returns on our essential ingredients, reduce costs and expand our operating efficiencies.
Previous report
Three significant additional factors impacted our gross profit in the first quarter. First, we recognized $4.9 million in incremental costs, compared to $8.6 million for the same period in 2023, from our natural gas hedging activities, which benefitted us during the cold spike in January but resulted in losses for the remainder of the quarter due to unseasonably moderate weather conditions and ensuing historically low natural gas prices resulting from higher natural gas production and supply coupled with lower consumer demand. Second, extreme cold weather conditions in January at our Pekin Campus restricted barge deliveries and increased standby fees. To manage inventory levels, we transported more product by rail, a higher cost mode of transportation. Cold weather conditions also required us to shift to lower margin feed products and reduced our production rates across our Pekin Campus, hindering our ability to produce specialty alcohol at full capacity. Finally, first quarter production at our Colombia facility was hampered by equipment issues which we addressed by extending the facility’s regularly scheduled outage in mid-March to install equipment upgrades that will increase reliability and reduce ongoing maintenance costs.
Previous report
Our repairs and maintenance expense for the first quarter was $7.5 million, an increase of $1.0 million compared to the same period in 2023. This increase reflects accelerated repairs and maintenance costs, and we remain on track to achieve our overall estimate of $34 million in repairs and maintenance expenses for 2024.
Previous report
Pekin Campus Production Segment
Previous report
Our Pekin Campus production segment’s gross profit, net of intercompany activity, improved by $6.5 million to a gross profit of $4.9 million for the three months ended March 31, 2024 as compared to a gross loss of $1.6 million for the same period in 2023. Of this improvement, $6.4 million is attributable to higher fuel-grade ethanol margins and $0.1 million is attributable to higher sales volumes.
Previous report
Western Production Segment
Previous report
Corporate and other
Previous report
Our SG&A expenses were essentially flat for the three months ended March 31, 2024 as compared to the same period in 2023. However, as a percentage of net sales, our SG&A expenses increased primarily due to additional legal and other costs associated with progress on our strategic capital improvement projects.
Previous report
Interest Expense, net
Previous report
The following table presents our interest expense, net, in dollars and as a percentage of net sales (in thousands, except percentages):
Previous report
Our interest expense, net, increased for the three months ended March 31, 2024 as compared to the same period in 2023. The less than $0.1 million period over period increase in interest expense, net, is primarily due to higher debt balances compared to the prior year period.
Previous report
Net Loss Available to Common Stockholders
Previous report
The decrease in net loss available to common stockholders is primarily due to lower net sales at negative margins and a decline of $0.6 million in asset impairments for the three months ended March 31, 2024 as compared to the same period in 2023.
Previous report
Quantitative Year-End Liquidity Status
Previous report
Our current liabilities decreased primarily due to lower accounts payable and accrued liabilities as a result of timing of payments, and a decrease in derivative liabilities from changes in commodity prices for open contracts.
Previous report
Cash provided by our Operating Activities
Reworded paragraphs (27)
Previous wording
We also specialize in break bulk distribution of specialty alcohols through our Eagle Alcohol subsidiary. We purchase bulk alcohol from suppliers and then store, denature, package, and resell alcohol products in smaller sizes, including tank trucks, totes and drums that typically garner a premium price to bulk alcohols. We deliver products to customers in the beverage, food, industrial and related-process industries via our own dedicated trucking fleet and common carrier.
Current wording
We also specialize in break bulk distribution of specialty alcohols, through our Eagle Alcohol subsidiary, produced by us and third-parties. We then store, denature, package, and resell alcohol products in smaller sizes, including tank trucks, totes and drums that typically garner a premium price to bulk alcohols. We deliver products to customers in the beverage, food, industrial and related-process industries via our own dedicated trucking fleet and common carrier.
Previous wording
We produce specialty alcohols, fuel-grade ethanol and essential ingredients, focusing on five key markets:Health, Home & Beauty;Food & Beverage;Industry & Agriculture; Essential Ingredients; andRenewable Fuels. Products for theHealth, Home & Beauty markets include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. Products for theFood & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used for corn oils. Products forIndustry & Agriculture markets include alcohols and other products for paint applications and fertilizers.Products forEssential Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, and distillers grains and liquid feed used in commercial animal feed and pet foods. We also sell yeast for human consumption. Our products for theRenewable Fuels markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels.
Current wording
We produce specialty alcohols, renewable fuel and essential ingredients, focusing on five key markets:Health, Home & Beauty;Food & Beverage;Industry & Agriculture; Essential Ingredients; andRenewable Fuels. Products for theHealth, Home & Beauty markets include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. Products for theFood & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used for corn oils. Products forIndustry & Agriculture markets include alcohols and other products for paint applications and fertilizers.Products forEssential Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, and distillers grains and liquid feed used in commercial animal feed and pet foods. We also sell yeast for human consumption. Our products for theRenewable Fuels markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels.
Previous wording
All of our production facilities are currently operating except our Magic Valley plant, which we temporarily hot-idled in January 2024 to minimize losses from negative regional crush margins and to expedite the installation of additional equipment needed to achieve our intended production rate, quality and consistency from our corn oil and high protein system. We intend to restart Magic Valley production in late June or early July once the modifications are complete. As market conditions change, we may increase, decrease or idle production at one or more operating facilities or resume operations at any idled facility.
Current wording
All of our production facilities are currently operating. In January 2024, we temporarily hot-idled our Magic Valley facility to minimize losses from negative regional crush margins and to expedite the installation of additional equipment needed to achieve our intended production rate, quality and consistency from our corn oil and high protein system at the facility. We restarted our Magic Valley facility in July 2024. As market conditions change, we may increase, decrease or idle production at one or more operating facilities or resume operations at any idled facility.
Previous wording
Reconciliation of Adjusted EBITDA to Consolidated Net Loss
Current wording
Reconciliation of Adjusted EBITDA to Consolidated Net Income (Loss)
Previous wording
Certain performance metrics that we believe are important indicators of our results of operations include:
Current wording
Certain performance metrics that we believe are important indicators of our results of operations include the following:
Previous wording
The following table presents our net sales, cost of goods sold and gross profit (loss) in dollars and gross profit (loss) as a percentage of net sales (in thousands, except percentages):
Current wording
The following table presents our net sales, cost of goods sold and gross profit in dollars and gross profit as a percentage of net sales (in thousands, except percentages):
Previous wording
The decrease in our consolidated net sales for the three months ended March 31, 2024 as compared to the same period in 2023 is attributable to lower average sales prices per gallon for both specialty alcohol and renewable fuel as well as lower average sales prices of essential ingredients due to a lower commodity price environment.
Current wording
The decrease in our consolidated net sales for the three months ended June 30, 2024 as compared to the same period in 2023 is primarily attributable to lower average sales prices per gallon for both specialty alcohol and renewable fuel as well as lower average sales prices of essential ingredients due to a lower commodity price environment. In addition, we had lower sales of renewable fuel and essential ingredients due to the hot-idling of our Magic Valley plant in January 2024 and the biennial wet mill outage at our Pekin Campus for repairs and maintenance in April 2024.
Previous wording
Net sales of alcohol from our marketing and distribution segment, excluding intersegment sales, declined by $30.0 million, or 36%, to $54.5 million for the three months ended March 31, 2024 as compared to $84.5 million for the same period in 2023.
Current wording
Net sales of alcohol from our marketing and distribution segment, excluding intersegment sales, declined by $2.5 million, or 3%, to $70.2 million for the three months ended June 30, 2024 as compared to $72.7 million for the same period in 2023.
Previous wording
Our volume of third-party alcohol sold reported gross by the segment declined by 4.2 million gallons, or 12%, to 29.7 million gallons for the three months ended March 31, 2024 as compared to 33.9 million gallons for the same period in 2023. With the segment’s average sales price per gallon of $1.83 for the three months ended March 31, 2024, we realized $7.7 million less in net sales from the 4.2 million fewer gallons of third-party alcohol sold gross in the three months ended March 31, 2024 as compared to the same period in 2023.
Current wording
Our volume of third-party alcohol sold reported gross by the segment increased by 7.8 million gallons, or 29%, to 34.4 million gallons for the three months ended June 30, 2024 as compared to 26.6 million gallons for the same period in 2023. With the segment’s average sales price per gallon of $2.04 for the three months ended June 30, 2024, we realized $15.9 million in additional net sales from the 7.8 million additional gallons of third-party alcohol sold gross in the three months ended June 30, 2024 as compared to the same period in 2023.
Previous wording
The $0.66 per gallon, or 27%, decrease in the segment’s average sales price per gallon for the three months ended March 31, 2024 as compared to the same period in 2023 resulted in a $22.3 million decline in our net sales from third-party fuel-grade ethanol sold by the segment.
Current wording
The $0.69 per gallon, or 25%, decrease in the segment’s average sales price per gallon for the three months ended June 30, 2024 as compared to the same period in 2023 resulted in a $18.4 million decline in our net sales from third-party fuel-grade ethanol sold by the segment.
Previous wording
Net sales of alcohol from corporate and other declined by $1.1 million, or 27%, to $3.0 million for the three months ended March 31, 2024 as compared to $4.1 million for the same period in 2023. These sales are from Eagle Alcohol’s business.
Current wording
Net sales of alcohol from corporate and other declined by $1.4 million, or 33%, to $2.8 million for the three months ended June 30, 2024 as compared to $4.2 million for the same period in 2023. These sales are from Eagle Alcohol’s business.
Previous wording
Our marketing and distribution segment’s gross profit, net of intercompany activity, declined by $0.6 million to a gross profit of $0.7 million for the three months ended March 31, 2024 as compared to a gross profit of $1.3 million for the same period in 2023. Of this decline, $0.5 million is attributable to lower margins from sales of third-party fuel-grade ethanol and $0.1 million is attributable to lower sales volumes for the three months ended March 31, 2024 as compared to the same period in 2023.
Current wording
Our marketing and distribution segment’s gross profit, net of intercompany activity, declined by $0.8 million to a gross profit of $1.6 million for the six months ended June 30, 2024 as compared to a gross profit of $2.4 million for the same period in 2023. This decline is attributable primarily to lower margins from sales of third-party fuel-grade ethanol for the six months ended June 30, 2024 as compared to the same period in 2023.
Previous wording
Our Western production segment’s gross profit, net of intercompany activity, declined by $3.7 million to a gross loss of $8.3 million for the three months ended March 31, 2024 as compared to a gross loss of $4.6 million for the same period in 2023. Of this decline, $1.3 million is attributable to lower renewable fuel margins and $2.4 million is attributable to higher sales volumes of both renewable fuel and essential ingredients at lower margins.
Current wording
Our Western production segment’s gross profit, net of intercompany activity, declined by $8.5 million to a gross loss of $12.0 million for the six months ended June 30, 2024 as compared to a gross loss of $3.5 million for the same period in 2023. Of this decline, $11.1 million is attributable to lower renewable fuel margins and hot-idling costs attributable to our Magic Valley facility, partially offset by $2.6 million attributable to lower sales volumes at negative margins.
Previous wording
Gross profit from corporate and other declined by $1.4 million to a gross profit of $0.3 million for the three months ended March 31, 2024 as compared to $1.7 million for the same period in 2023, all of which were from Eagle Alcohol’s business.
Current wording
Gross profit from corporate and other declined by $2.4 million to a gross profit of $0.1 million for the six months ended June 30, 2024 as compared to $2.5 million for the same period in 2023, all of which were from Eagle Alcohol’s business.
Previous wording
The following table presents our net loss available to common stockholders in dollars and as a percentage of net sales (in thousands, except percentages):
Current wording
The following table presents our net income (loss) available to common stockholders in dollars and as a percentage of net sales (in thousands, except percentages):
Previous wording
During the three months ended March 31, 2024, we funded our operations primarily from proceeds from cash on hand, cash flow from our operations, and Kinergy’s operating line of credit. In addition to funding our operations, our capital resources were used to advance our capital improvement projects and make an annual payment for our acquisition of Eagle Alcohol. As of March 31, 2024, we had $42.1 million in cash, cash equivalents and restricted cash, $25.9 million available for borrowing under Kinergy’s operating line of credit and $65.0 million that may be available for capital improvement projects under our Orion term loan, subject to certain conditions. We believe we have sufficient liquidity to meet our anticipated working capital, debt service and other liquidity needs for the next twelve months from the date of this report.
Current wording
During the six months ended June 30, 2024, we funded our operations primarily from cash on hand and Kinergy’s operating line of credit. In addition to funding our operations, our capital resources were used to advance our capital improvement projects and make an annual payment relating to our acquisition of Eagle Alcohol. As of June 30, 2024, we had $28.4 million in cash, cash equivalents and restricted cash, $30.3 million available for borrowing under Kinergy’s operating line of credit and $65.0 million that may be available for capital improvement projects under our term loan with Orion Infrastructure Capital, subject to certain conditions. We believe we have sufficient liquidity to meet our anticipated working capital, debt service and other liquidity needs to fund our operations for at least the next twelve months from the date of this report. We must, however, raise significant additional capital to advance and complete some of our capital improvement projects, including our CCS project.
Previous wording
At March 31, 2024, we had approximately $53.0 million of net assets at our subsidiaries that were not available to be transferred to Alto Ingredients, Inc. in the form of dividends, distributions, loans or advances due to restrictions contained in our subsidiaries’ credit facilities.
Current wording
At June 30, 2024, we had approximately $57.4 million of net assets at our subsidiaries that were not available to be transferred to Alto Ingredients, Inc. in the form of dividends, distributions, loans or advances due to restrictions contained in our subsidiaries’ credit facilities.
Previous wording
Working capital declined to $95.8 million at March 31, 2024 from $103.5 million at December 31, 2023 as a result of a decrease of $17.9 million in current assets, partially offset by a decrease of $10.2 million in current liabilities.
Current wording
Working capital remained relatively flat at $103.9 million at June 30, 2024 compared to $103.5 million at December 31, 2023 due to a decrease of $15.5 million in current liabilities and a decrease of $15.1 million in current assets.
Previous wording
Current assets declined primarily due to a decrease in inventories from reduced production volumes.
Current wording
Current assets declined primarily due to a decrease in cash, cash equivalents and restricted cash and a decrease in inventories, partially offset by an increase in accounts receivable and derivative assets for the six months ended June 30, 2024 as compared to the same period in 2023.
Previous wording
Our cash, cash equivalents and restricted cash declined by $3.4 million due to $6.0 million in cash used in our investing activities, partially offset by $1.4 million in cash provided by our operating activities and $1.2 million in cash provided by our financing activities.
Current wording
Our cash, cash equivalents and restricted cash declined by $17.1 million primarily due to $12.3 million in cash used in our operating activities and $12.1 million in cash used in our investing activities, partially offset by $7.3 million in cash provided by our financing activities, as further detailed below.
Previous wording
Our cash flow provided by our operations was $1.4 million for the three months ended March 31, 2024 as compared to $23.3 million of cash used in our operating activities for the same period in 2023. Specific factors that contributed to the change in cash provided by our operating activities include:
Current wording
We used $12.3 million in cash for our operating activities during the six months ended June 30, 2024 as compared to $12.9 million in cash used in our operations for the same period in 2023. Specific factors that contributed to the change in cash from our operating activities include:
Previous wording
We used $4.6 million in cash during the quarter for capital expenditures to fund additions to property and equipment and $1.4 million in cash to make contingent purchase price payments for our acquisition of Eagle Alcohol. Our capital expenditures for the first quarter are in line with our overall $25 million capital expenditure budget for 2024.
Current wording
We used $12.1 million in cash during the six months ended June 30, 2024 to fund $9.3 million of additions to property and equipment, including for our capital improvement projects, and to fund $2.8 million of contingent purchase price payments for our acquisition of Eagle Alcohol.
Previous wording
Cash provided by our financing activities was $1.2 million for the three months ended March 31, 2024, which reflects net proceeds of $1.5 million from Kinergy’s operating line of credit, partially offset by $0.3 million paid in preferred dividends.
Current wording
Cash provided by our financing activities was $7.3 million for the six months ended June 30, 2024, which reflects net proceeds of $8.0 million from Kinergy’s operating line of credit, partially offset by $0.6 million paid in preferred stock dividends.
Previous wording
Alto Ingredients, Inc. has guaranteed all of Kinergy’s obligations under the credit facility. As of March 31, 2024, Kinergy had an outstanding balance of $32.2 million and $25.9 million of unused borrowing availability under the credit facility.
Current wording
Alto Ingredients, Inc. has guaranteed all of Kinergy’s obligations under the credit facility. As of June 30, 2024, Kinergy had an outstanding balance of $38.6 million and $30.3 million of unused borrowing availability under the credit facility.
Previous wording
On November 7, 2022, we entered into a credit agreement with certain funds managed by Orion Infrastructure Capital, or Lenders, under which the Lenders extended a senior secured credit facility in the amount of up to $125.0 million, or Term Loan. The Term Loan is secured by a first priority lien on certain of our assets and a second priority lien on certain assets of Kinergy and Alto Nutrients.
Current wording
On November 7, 2022, we entered into a credit agreement with certain funds managed by Orion Infrastructure Capital, or Lenders, under which the Lenders extended a senior secured credit facility in the amount of up to $125.0 million, or Term Loan. The Term Loan is secured by a first priority lien on certain of our assets and a second priority lien on certain assets of Kinergy and Alto Nutrients. The Lenders agreed to advance to us up to $125.0 million upon the satisfaction of certain conditions. Interest accrues on the unpaid principal amount of the Term Loan at a fixed rate of 10% per annum. The Term Loan matures on November 7, 2028, or earlier upon acceleration.
Previous wording
As of March 31, 2024, we had future commitments for certain capital projects totaling $10.8 million. These commitments are scheduled to be satisfied through 2024.
Current wording
As of June 30, 2024, we had future commitments for certain capital projects totaling $7.8 million. These commitments are scheduled to be satisfied through 2024.
Previous wording
In connection with our acquisition of Eagle Alcohol, we committed to contingent payments of up to $4.1 million in cash over the next two years if certain targets are met.
Current wording
In connection with our acquisition of Eagle Alcohol, we committed to contingent payments of up to $2.7 million in cash in early 2025 if certain targets are met.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Net Sales, Cost of Goods Sold and Gross Profit
Current report — wording carried from elsewhere
Gross profit from corporate and other declined by $0.9 million to a gross loss of $0.1 million for the three months ended June 30, 2024 as compared to a gross profit of $0.8 million for the same period in 2023, all of which were from Eagle Alcohol’s business.
Current report — wording carried from elsewhere
The decrease in our consolidated net sales for the six months ended June 30, 2024 as compared to the same period in 2023 is primarily attributable to lower average sales prices per gallon for both specialty alcohol and renewable fuel as well as lower average sales prices of essential ingredients due to lower corn prices. In addition, we had lower sales of renewable fuel and essential ingredients due to the hot-idling of our Magic Valley plant in January 2024 and the biennial wet mill outage at our Pekin Campus for repairs and maintenance in April 2024.
Current report — wording carried from elsewhere
The $0.66 per gallon, or 25%, decrease in the segment’s average sales price per gallon for the six months ended June 30, 2024 as compared to the same period in 2023 resulted in a $39.4 million decline in our net sales from third-party fuel-grade ethanol sold by the segment.
Current report — wording carried from elsewhere
Cost of Goods Sold and Gross Profit (Loss)
Current report — wording carried from elsewhere
Cash used in our Operating Activities
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The Lenders agreed to advance to us up to $125.0 million upon the satisfaction of certain conditions. Interest accrues on the unpaid principal amount of the Term Loan at a fixed rate of 10% per annum. The Term Loan matures on November 7, 2028, or earlier upon acceleration.