Alternative Energy Trade Option: Pacific Ethanol Inc. (PEIX)
  • Stock Alert for Pacific Ethanol Inc. ($PEIX)
  • Stock Report for Pacific Ethanol Inc. (PEIX)
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    Stock Alert for Pacific Ethanol Inc. (PEIX)

    Pacific Ethanol Inc. (NASDAQ: PEIX)

    Pacific Ethanol Inc. (PEIX) is a leading marketer and producer of low carbon renewable fuels in the western United States.  It produces and sells ethanol and its co-products, including wet distillers grain (WDG) and provides transportation, storage and delivery of ethanol through third-party service providers in the western United States, primarily in California, Nevada, Arizona, Oregon, Colorado, Idaho and Washington. PEIX’s customers are integrated oil companies and gasoline marketers who blend ethanol into gasoline. It supplies ethanol to its customers either from its own ethanol production facilities located within the regions it serves, or with ethanol procured in bulk from other producers. In addition, the Company owns a 42% interest in Front Range Energy LLC, which owns a facility located in Windsor, Colorado, with annual production capacity of up to 50 million gallons.  On May 17, 2009, five of its indirect wholly owned subsidiaries, Pacific Ethanol Holding Co. LLC, Pacific Ethanol Madera LLC, Pacific Ethanol Columbia LLC, Pacific Ethanol Stockton LLC and Pacific Ethanol Magic Valley LLC (collectively referred to as the Bankrupt Debtors), each commenced a case by filing voluntary petitions for relief under the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware in an effort to restructure their indebtedness.

    PEIX was founded in 2005 and is headquartered in Sacramento, California.

    Share Statistics (30-June-10) FY

    2008

    FY

    2009

    %

    Chg

    Q1 2009 Q1

    2010

    %

    Chg

    Symbol PEIX Revenue, $Mn 703.93 316.56 -55.0% 86.68 71.29 -17.8%
    Current price $0.64 Gross marg. -4.7% -7.0% 48.9% -12.8% -4.3% -66.4%
    52wk Range: 0.30-2.75 Oper. margin -92.6% -13.0%
    Avg Vol (3m): 2,199,000 Net margin -20.8% -97.3% 367.8% -27.6% -15.3% -44.6%
    Market Cap. 44.71M
    Shares Outstanding 69.86M EPS, $ -0.47 -1.08 129.8% -0.43 -0.15 -65.1%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    Quarterly Results

    PEIX reported net loss of $245.6 million for the three months ended December 31, 2009, which includes a noncash impairment charge of $250.2 million associated with the Company’s ethanol production facilities.

    The Company’s gross profit for the three months ended December 31, 2009, was positive $1.4 million compared to negative gross profit of $29.2 million for the same period in 2008.

    Selling, general and administrative expenses for three months ended December 31, 2009 were $4.3 million compared to $7.5 million for the same period in 2008.

    In the fourth quarter, the Company impaired its wholly owned ethanol production facilities to their estimated fair value. The estimated fair value was based on a combination of recent ethanol production facility transactions within the industry and the Company’s negotiations related to a plan of reorganization in respect of its plant subsidiaries. In addition, the Company recorded a gain from the write-off of liabilities of $14.2 million associated with the Company’s final disposition of its Imperial Valley project.

    After adjusting for these one-time non-cash items, the Company’s Adjusted EBITDA for the three months ended December 31, 2009, was positive $1.0 million, which included reorganization costs of $1.7 million, compared to Adjusted EBITDA of negative $22.2 million for the three months ended December 31, 2008.

    Year-end Results

    The Company reported net loss of  $311.4 million for the year ended December 31, 2009, compared to $151.4 million for the same period in 2008. The loss for 2009 includes non-cash impairment charges of $252.4 million associated with the Company’s ethanol production facilities, as well as an asset impairment charge attributed to the Company’s Imperial Valley project.

    The Company’s gross profit for the year ended December 31, 2009, was negative $22.0 million compared to negative gross profit of $33.4 million for the same period in 2008.

    Selling, general and administrative expenses for the year ended December 31, 2009, were $21.5 million compared to $31.8 million for the same period in 2008.

    The loss for 2008 includes a non-cash goodwill impairment charge and a non-cash asset impairment charge of $127.9 million associated with the original asset impairment on the Company’s Imperial Valley project. The Company’s Adjusted EBITDA for the year ended December 31, 2009, was negative $24.1 million compared to negative $29.0 million for the same period in 2008.

    Source: Pacific Ethanol Inc.

    Financial Strength (30-June-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 0.22 0.30 0.69 0.81
    Current Ratio (MRQ) 0.33 0.35 0.92 0.97
    LT Debt to Equity (MRQ) 49.07 37.01 132.73
    Total Debt to Equity (MRQ) 60.90 47.23 198.00
    Interest Coverage (TTM) 1.64 11.76 40.67

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    There is no recommendation data available.

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Year Ending Dec-10 1 71.29 71.29 71.29
    EARNINGS (per share)
    Quarter Ending Jun-10 1 -0.12 -0.12 -0.12 0.04
    Quarter Ending Sep-10 1 -0.12 -0.12 -0.12 0.02
    Year Ending Dec-10 1 -0.37 -0.37 -0.37 0.07

    Investment Highlights

    PEIX’s destination model and production practices allow it to produce ethanol that reduces carbon dioxide emissions by 40% compared to conventional gasoline.  PEIX is also working to identify and develop other renewable fuel technologies, such as cellulose-based ethanol production and bio-diesel. With the ethanol sales and marketing experience of Kinergy Marketing, through which it markets and sells ethanol produced by third parties, and five plants in operation and construction, the Company believes it is strategically poised to keep up with the robust demand for cleaner burning fuels that are source domestically.

    In order to meet the demand for low-carbon ethanol, the Company has said that it is constructing more than 420 million gallons of capacity this year in strategic locations across the west. The Company stated that central to its growth strategy is its destination business model, whereby each respective ethanol plant achieves lower process and transportation costs by servicing local markets for both fuel and feed, providing us a strategic advantage in the marketplace.

    On May 17, 2009, five of PEIX’s indirect wholly owned subsidiaries, collectively referred to as the Bankrupt Debtors, each commenced a case by filing voluntary petitions for relief under the Bankruptcy Code in the Delaware bankruptcy court in an effort to restructure their indebtedness. On March 26, 2010, the Bankrupt Debtors filed a joint plan of reorganization with the Bankruptcy Court, which was structured in cooperation with certain of the Bankrupt Debtors’ secured lenders. Under this plan the plant subsidiaries would emerge with an even lower level of debt while providing sufficient liquidity to support existing operations and resume production at the Madera and Stockton, California facilities

    Recent Developments

    The Company recently announced that Pacific Ethanol Holding Co. LLC (PEH) and its four wholly owned ethanol production facility subsidiaries (the Plant Subsidiaries) had emerged from bankruptcy. PEIX achieved a significant milestone in its restructuring effort early this month after confirming a plan of reorganization, which would provide new liquidity and low debt levels for the Company.

    With that plan taking into effect, the Plant Subsidiaries, which are now owned by a newly formed holding company (New PEHC), will continue to be staffed, managed and operated by PEIX under a fee and profit-sharing arrangement negotiated with the owners of New PEHC. PEIX, through Kinergy Marketing, will also continue to market ethanol for the Plant Subsidiaries. PEIX has eliminated approximately $290 million in debt and other liabilities from its balance sheet, and has a 90-day exclusive option to buy a 25% equity interest in New PEHC for up to $30 million in cash.

    “Thanks to the dedicated work of our employees and the cooperation of our lenders we have achieved this important and positive outcome,” PEIX president and CEO Neil Koehler commented in a press release.  CEO Koehler had earlier said that with the federal Renewable Fuel Standard requiring increasing levels of ethanol to be blended into gasoline and the implementation of California’s Low Carbon Fuel Standard beginning in 2011, the Company is optimistic about the future of the ethanol industry and the success of the Company.

    Source: Pacific Ethanol Inc.

    Technical Analysis

    Source: http://stockcharts.com

    PEIX is below its 13-day moving average. This bearish sign is even more significant because the moving average is also trending lower.

    PEIX is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

    The MACD for PEIX currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of zero, which implies that the underlying moving averages are trending lower.

    Insider Trading Activity

    NET SHARES PURCHSE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases n/a 0
    Sales 313,566 2
    Net Shares Purchased (Sold) (313,566) 2
    Total Insider Shares Held 10.88M n/a
    % Net Shares Purchased (Sold) (2.8%) n/a

    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) (578,895)
    % Change in Institutional Shares Held (9.9%)

    Source: Yahoo Finance

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