Pacific Ethanol, Inc. (PEIX) – Buzz Stock of the Day

Posted on Tuesday, August 17th, 2010


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We first covered Pacific Ethanol, Inc. (Nasdaq: PEIX) on June 30, 2010, after the company announced that four of its wholly-owned subsidiaries had emerged from bankruptcy. Shares were up almost 60 percent on that day, from the previous day’s closing price.

Shares of Pacific Ethanol surged again on Tuesday, this time as much as 42 percent from the previous day’s closing price after the company posted earnings of $107.8 million or $1.43 per share for the three months ended June 30, compared to a loss of $28.2 million or 49 cents per share in the same period last year. The boost in earnings was primarily due a non-cash gain of $119 million, and an 88 percent increase in total gallons sold, offset by a ¬†lower average price per gallon.
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Net sales in the quarter increased 9 percent to $76.8 million, compared to $70.1 million in the same quarter a year ago. The company also reduced its SG&A expenses by 49 percent, and improved adjusted EBITDA by $8.4 million, compared to the second quarter of 2009.

Pacific Ethanol’s CEO Neil Koehler described the second quarter as “pivotal” for the company. “We delivered sales growth, dramatically reduced operating expenses, and improved adjusted EBITDA,” he said in a statement. “We successfully led the production facilities out of bankruptcy effective June 29th, substantially reducing our debt and other liabilities by $295 million. During the quarter, we also reduced other debt by $9 million. In addition to strengthening our balance sheet, we reduced selling, general and administrative expenses to less than half of what they were for the same quarter last year, thus establishing a stable platform for growth.”

On June 29, 2010, PEI’s wholly-owned plant holding company, PEH, and its four plant subsidiaries exited bankruptcy and the ownership of PEH was transferred to certain lenders. As a result, PEI recorded a $119.4 million non-cash gain from the disposition of liabilities of $294.5 million net of assets of $175.1 million that were removed from its balance sheet. Simultaneously, PEI began operating under its newly announced operating and marketing agreements with the ethanol production facilities upon their emergence from bankruptcy.

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