Alto Ingredients(US:ALTO)2025-05-09 20:16PART I - FINANCIAL INFORMATION Item 1. Financial Statements The company reported a Q1 2025 net loss of $11.7 million on sales of $226.5 million, alongside decreased cash, increased long-term debt, and negative operating cash flow Consolidated Balance Sheets Total assets slightly increased to $402.2 million while total liabilities grew to $188.3 million, resulting in a decrease in stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $26,778 | $35,469 | | Total current assets | $153,461 | $153,118 | | Total Assets | $402,209 | $401,438 | | Liabilities & Equity | | | | Total current liabilities | $53,116 | $57,804 | | Long-term debt | $110,664 | $92,904 | | Total Liabilities | $188,289 | $176,375 | | Total Stockholders' Equity | $213,920 | $225,063 | Consolidated Statements of Operations Net sales decreased 5.9% year-over-year to $226.5 million, while the gross loss improved and the net loss per share remained relatively stable Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $226,540 | $240,629 | | Gross loss | $(1,807) | $(2,400) | | Loss from operations | $(8,997) | $(10,332) | | Net loss | $(11,679) | $(11,725) | | Net loss attributable to common stockholders | $(11,991) | $(12,040) | | Net loss per share, basic and diluted | $(0.16) | $(0.17) | Consolidated Statements of Cash Flows Net cash used in operating activities was $18.2 million, a significant negative shift from the prior year, driven by changes in working capital Q1 2025 vs Q1 2024 Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(18,231) | $1,429 | | Net cash used in investing activities | $(7,810) | $(6,043) | | Net cash provided by financing activities | $17,001 | $1,206 | | Net decrease in cash | $(9,040) | $(3,408) | Notes to Consolidated Financial Statements Key notes detail the Kodiak Carbonic acquisition, segment performance shifts, commodity risk management, and an increase in long-term debt - On January 1, 2025, the company acquired Kodiak Carbonic, a beverage-grade liquid CO2 processor, for $7.6 million in cash to provide vertical integration and access to new markets2639 - The company cold-idled its Magic Valley facility on December 31, 2024, to minimize financial losses from margin compression and intends to resume operations when regional economic conditions improve30 Gross Profit (Loss) by Segment (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Pekin Campus production | $(3,073) | $4,268 | | Marketing and distribution | $3,914 | $3,532 | | Western production | $(1,258) | $(8,460) | - As of March 31, 2025, total long-term debt was $110.7 million, up from $92.9 million at year-end 2024, primarily due to increased borrowings on the Kinergy line of credit54 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses improved Adjusted EBITDA driven by cost savings and acquisitions, despite challenges from lower prices and operational disruptions - Adjusted EBITDA improved to $(4.4) million in Q1 2025 from $(7.1) million in Q1 2024, benefiting from the cold-idling of the Magic Valley plant ($4.8M savings) and the acquisition of the CO2 facility ($2.9M contribution)92106 - The company reduced headcount by 16% in Q4 2024 and Q1 2025, expecting approximately $8 million in annual savings starting in Q2 202593 - The company's Pekin Campus loadout dock was damaged in April due to rising river levels, negatively impacting production and logistics while temporary solutions are in place97 - The company's Carbon Capture and Storage (CCS) initiative faces potential challenges from proposed Illinois legislation that could restrict sequestration activity near the Mahomet Aquifer100 Results of Operations Consolidated net sales decreased 5.9% due to lower volumes, though gross loss improved from cost savings, while net interest expense increased Q1 2025 vs Q1 2024 Results Summary (in thousands) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $226,540 | $240,629 | (5.9)% | | Cost of goods sold | $228,347 | $243,029 | (6.0)% | | Gross loss | $(1,807) | $(2,400) | (24.7)% | | SG&A expenses | $7,190 | $7,932 | (9.4)% | | Interest expense, net | $2,729 | $1,634 | 67.0% | - The Pekin Campus segment's gross profit declined by $7.3 million to a gross loss of $2.2 million, entirely due to lower ethanol margins121 - The Western Production segment's gross loss improved by $7.1 million, primarily due to the cold-idling of the Magic Valley facility123 Liquidity and Capital Resources The company believes it has sufficient liquidity for the next twelve months, supported by cash, credit availability, and compliance with debt covenants Liquidity Position (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $27,171 | $36,211 | | Working capital | $100,345 | $95,314 | | Long-term debt, noncurrent portion | $110,664 | $92,904 | - As of March 31, 2025, the company had $11.7 million in unused borrowing availability under its Kinergy line of credit and $65.0 million potentially available under its Orion term loan129 - Net assets of approximately $55.6 million at subsidiaries were restricted and not available for transfer to the parent company due to credit facility terms132 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to commodity price risk for ethanol and corn, which it manages using non-speculative derivative instruments - The company's business is sensitive to changes in the prices of ethanol and corn and uses derivative instruments to manage this risk but not for trading or speculative purposes148 Market Risk Sensitivity Analysis (in millions) | Commodity | Approximate Adverse Change to Pre-Tax Income (from 10% price change) | | :--- | :--- | | Ethanol | $(7.0) | | Corn | $(6.9) | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes during the quarter - Management, including the CEO and CFO, concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level155 - No material changes to the company's internal control over financial reporting occurred during the most recently completed fiscal quarter156 PART II - OTHER INFORMATION Item 1. Legal Proceedings Management believes that pending legal matters from the ordinary course of business will not have a material adverse effect on the company - Based on currently available facts, management believes that pending legal proceedings will not adversely affect the company's financial condition, results of operations, or cash flows in any material respect161 Item 1A. Risk Factors The company faces significant risks from commodity price volatility, production disruptions, government regulations, and the execution of its CCS initiative - Business results are highly dependent on the volatile and uncertain prices of corn, natural gas, alcohols, and essential ingredients, which can cause results to fluctuate significantly164 - Capital improvement projects, particularly the CCS initiative, face significant execution, financing, and regulatory risks, and may not achieve expected results, including projected EBITDA189190 - The fuel-ethanol industry is highly dependent on federal and state laws, such as the Renewable Fuel Standard (RFS), and changes could materially harm results210 - The CCS project in Illinois may be adversely affected by new state legislation that imposes stringent requirements and could restrict storage locations, adding costs and potential delays203204 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company paid dividends on its preferred stock but has no history of or plans for paying dividends on its common stock - The company paid $0.3 million in dividends on its Series B Preferred Stock for the three months ended March 31, 2025239 - The company has never declared or paid cash dividends on its common stock and does not currently intend to do so239 Item 3. Defaults Upon Senior Securities Not applicable Item 4. Mine Safety Disclosures Not applicable Item 5. Other Information No directors or officers reported the adoption or termination of a Rule 10b5-1 trading arrangement during the first quarter of 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended March 31, 2025243 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files