Strong Financial and Operational Performance
Financial Highlights
- Diluted earnings per share (EPS) of $0.19
- Net income of $15.1 million, or 8.9 percent of revenues
- Revenues of $169.6 million, a 10.4 percent increase over the second
quarter of 2006
- Cash on hand of $663.9 million, including $249.5 million of designated
cash for future purchases of property and equipment
- EBITDA of $33.0 million, or 19.5 percent of revenues ($0.52 per gallon
sold)
- Ethanol sold totaled 63.4 million gallons, an 11.0 percent increase
over second quarter 2006
- Production of 81.5 million gallons, a 43.6 percent increase over the
second quarter of 2006
VeraSun Energy
Corporation (NYSE: VSE), one of the nation's largest ethanol producers, today
announced its financial results for the three months ended June 30, 2007.
Earnings were $15.1 million or $0.19 per diluted share. EBITDA was $33.0
million or 19.5 percent of revenues.
"VeraSun had a strong second quarter relative to first quarter of 2007,
but down from the exceptional margin period of 2006," said Donald L. Endres,
Chairman, Chief Executive Officer and President of VeraSun. "During the past
quarter we started up our Charles City, Iowa facility, transitioned ethanol
marketing in-house, and continued to operate our biorefineries above nameplate
capacity. Ethanol prices remained steady for the quarter and corn prices began
to moderate as we had expected.
"In our first quarter of managing the ethanol sales and distribution, we
achieved solid performance and consistently shipped unit trains from all
facilities with on-time deliveries and favorable railcar turn times," said
Endres. "Our unit train strategy and customer service focus are being well
received by our customers and these are points of positive differentiation for
VeraSun."
The Company also announced plans last week to acquire three ethanol plants
with a combined expected annual production capacity of 330 million gallons per
year (MMGY) from ASAlliances Biofuels, LLC. The acquisition, which provides
scale as well as geographic and operational diversity, is expected to close in
30-45 days and is subject to usual closing conditions. After the acquisition,
VeraSun expects to have an annual production capacity of approximately one
billion gallons by the end of 2008.
"We continue to focus on being an efficient, low-cost ethanol producer,
while executing on our long-term strategy for growth," said Endres. "The
ASAlliances transaction is a unique opportunity to acquire immediate
production and revenue at a cost similar to that of building and gives us
sister facilities that fit well into our current fleet and operations model."
Earlier this month, VeraSun worked in collaboration with General Motors to
bring the first E85 fueling location to our nation's Capital and announced a
strategic initiative with Enterprise Rent-A-Car to expand the use of E85.
Second Quarter 2007 Financial Highlights
Total revenues, which include revenue from the sale of ethanol, distillers
grains and VE85(TM), increased by $16.0 million, or 10.4 percent, to $169.6
million for the three months ended June 30, 2007 from $153.5 million for the
three months ended June 30, 2006. The increase in total revenues was primarily
the result of an 11.0 percent increase in ethanol volume sold, partially
offset by a decrease in average ethanol prices of $0.18 per gallon, or 7.6
percent, compared to the three months ended June 30, 2006. Ethanol production
increased by 24.7 million gallons, or 43.6 percent, as a result of the added
capacity from bringing the Charles City, Iowa facility on-line in April 2007.
Cost of goods sold grew by $46.5 million to $137.1 million in the second
quarter of 2007 from $90.6 million in the second quarter of 2006. This was
primarily due to higher corn costs and an increase of 6.3 million gallons of
ethanol sold.
- Corn costs represented 59.6 percent of our cost of goods sold before
taking into account our co-product sales and 43.2 percent of our cost
of goods sold after taking into account co-product sales for the three
months ended June 30, 2007. The comparable percentages were 47.7
percent and 32.1 percent, respectively, for the second quarter of 2006.
- Corn costs were $3.62 per bushel, up from $2.17 per bushel in the
second quarter of 2006. Our 2007 corn costs included mark-to-market
gains of $5.4 million for derivatives relating to future deliveries of
corn. We had recorded a mark-to-market loss of $2.7 million in the 2006
period, resulting in an $8.1 million decrease in corn costs between the
periods as a result of these mark-to-market adjustments.
- Natural gas costs increased by $0.9 million to $14.4 million and
accounted for 10.5 percent of cost of goods sold.
- Transportation expense increased by $0.2 million to $14.1 million and
accounted for 10.3 percent of cost of goods sold.
Selling, general and administrative expenses decreased $14.0 million to
$8.4 million for the three months ended June 30, 2007 from $22.4 million for
the three months ended June 30, 2006. The decrease was primarily the result of
$16.3 million of stock compensation expense in the 2006 period relating to our
initial public offering, which was partially offset by increased management
and administrative costs in the 2007 period to support our growth and public
company status.
Net income was $15.1 million for the second quarter of 2007, compared to
net income of $19.5 million for the same period in 2006.
EBITDA was $33.0 million or 19.5 percent of revenues for the second
quarter of 2007, compared to $45.2 million for the second quarter of 2006.
About VeraSun Energy Corporation
VeraSun Energy Corporation (NYSE: VSE), headquartered in Brookings, South
Dakota, is committed to be a leading producer of renewable fuel. The Company
has three operating ethanol production facilities located in Aurora, SD, Fort
Dodge, IA, and Charles City, IA, with three facilities under construction in
Hartley, IA, Welcome, MN and Reynolds, IN. VeraSun is in the process of
acquiring another three biorefineries currently under construction in Albion,
NE, Bloomingburg, OH and Linden, IN. Upon completion of the new facilities and
those being acquired, VeraSun will have an annual production capacity of
approximately one billion gallons by the end of 2008. The Company also has
plans to extract oil from dried distillers grains, a co-product of the ethanol
process, for use in biodiesel production.
The Company markets E85, a blend of 85 percent ethanol and 15 percent
gasoline for use in Flexible Fuel Vehicles (FFVs), directly to fuel retailers
under the brand VE85(TM). VE85(TM), the first-ever branded E85, is now
available at more than 90 retail locations. For more information, please visit
VeraSun's Web sites at http://www.verasun.com or http://www.VE85.com.
Certain statements in this release, and other written or oral statements
made by or on behalf of us, are "forward-looking statements" within the
meaning of the federal securities laws. Statements regarding future events and
developments and our future performance, as well as management's expectations,
anticipations, beliefs, plans, targets, estimates, or projections and similar
expressions relating to the future, are forward-looking statements within the
meaning of these laws. These statements are based on assumptions and
assessments made by our management in light of their experience and their
perception of historical trends, current conditions, expected future
developments and other factors they believe to be appropriate. Any forward-
looking statements are not guarantees of our future performance and are
subject to risks and uncertainties that could cause actual results,
developments and business decisions to differ materially from those
contemplated by any forward-looking statements. We disclaim any duty to update
any forward-looking statements. Some of the factors that may cause actual
results, developments and business decisions to differ materially from those
contemplated by any forward-looking statements include the volatility and
uncertainty of corn, natural gas, ethanol and unleaded gasoline prices; our
ability to develop an oil extraction business; the completion of our pending
acquisition; the results of our hedging transactions and other risk mitigation
strategies; operational disruptions at our facilities; our ability to
implement our expansion strategy as planned or at all; our ability to locate
and integrate potential future acquisitions; development of infrastructure
related to the sale and distribution of ethanol; our limited operating
history; excess production capacity in our industry; our ability to compete
effectively in our industry; our ability to implement a marketing and sales
network for our ethanol; changes in or elimination of governmental laws,
tariffs, trade or other controls or enforcement practices; environmental,
health and safety laws, regulations and liabilities; our reliance on key
management personnel; future technological advances; limitations and
restrictions contained in the instruments and agreements governing our
indebtedness; our ability to raise additional capital and secure additional
financing; and costs of construction and equipment, as more fully described in
the "Risk Factors" section of our quarterly report on Form 10-Q for the three
months ended June 30, 2007.
VERASUN ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30,
2007 2006
(unaudited)
(dollars in thousands)
Total revenues $169,556 100.0% $153,552 100.0%
Cost of goods sold 137,071 80.8 90,616 59.0
Gross profit 32,485 19.2 62,936 41.0
Selling, general and
administrative
expenses 8,397 5.0 22,412 14.6
Operating income 24,088 14.2 40,524 26.4
Other income (expense), net (787) (0.5) (11,445) (7.5)
Income before income taxes 23,301 13.7 29,079 18.9
Income tax expense 8,165 4.8 9,526 6.2
Net income $15,136 8.9% $19,553 12.7%
Basic shares outstanding 76,998,341 64,828,596
Diluted shares outstanding 80,918,850 68,484,396
Basic EPS $0.20 $0.30
Fully diluted EPS 0.19 0.29
Six Months Ended June 30,
2007 2006
(unaudited)
(dollars in thousands)
Total revenues $314,066 100.0% $264,408 100.0%
Cost of goods sold 272,337 86.7 172,126 65.1
Gross profit 41,729 13.3 92,282 34.9
Selling, general and
administrative
expenses 19,931 6.3 26,182 9.9
Operating income 21,798 7.0 66,100 25.0
Other income (expense), net 1,008 0.3 (26,071) (9.9)
Income before income taxes 22,806 7.3 40,029 15.1
Income tax expense 7,982 2.5 17,741 6.7
Net income $14,824 4.8% $22,288 8.4%
Basic shares outstanding 76,357,188 63,627,172
Diluted shares outstanding 80,697,289 67,028,128
Basic EPS $0.19 $0.35
Fully diluted EPS 0.18 0.33
The following table sets forth other key data for the periods presented
(in thousands, except per unit data):
Three Months Ended June 30, Six Months ended June 30,
2007 2006 2007 2006
Operating Data:
Ethanol sold
(gallons) (1) 63,368 57,104 123,579 111,585
Average gross price
of ethanol sold
(dollars per gallon) $2.21 2.39 $2.15 $2.09
Average corn cost
per bushel 3.62 2.17 3.77 2.02
Average natural gas
cost per MMBTU 7.59 7.75 7.85 8.69
Average dry distillers
grains gross price
per ton 96 83 93 84
Other financial data:
EBITDA(2) $33,027 $45,227 $36,817 $74,837
Net cash flows
provided by
operating activities 4,357 37,996 24,122 55,397
(1) Excludes internal gallons produced and used in VE85(TM) sales.
(2) EBITDA is defined as earnings before interest expense, income tax
expense, depreciation and amortization. Amortization of debt issuance
costs and debt discount are included in interest expense.
Reconciliation of EBITDA to Net Income
Management believes that EBITDA is useful in evaluating its operating
performance in relation to other companies in its industry because the
calculation of EBITDA generally eliminates the effects of financings and
income taxes which items may vary for different companies for reasons
unrelated to overall operating performance. EBITDA is not a measure of
financial performance under generally accepted accounting principles in the
U.S., or GAAP, and should not be considered an alternative to net income
(loss), or any other measure of performance under GAAP, or to cash flows from
operating investing or financing activities as an indicator of cash flows or
as a measure of liquidity. EBITDA has its limitations as an analytical tool,
and you should not consider it in isolation or as a substitute for analysis of
the company's results as reported under GAAP. Some of the limitations of
EBITDA are:
-- EBITDA does not reflect the company's cash used for capital
expenditures;
-- Although depreciation and amortization are non-cash charges, the assets
being depreciated or amortized often will have to be replaced and
EBITDA does not reflect the cash requirements for replacements;
-- EBITDA does not reflect changes in, or cash requirements for, the
company's working capital requirements;
-- EBITDA does not reflect the cash necessary to make payments of interest
or principal on the company's indebtedness; and
-- EBITDA includes non-recurring payments to the company which are
reflected in other income.
Because of these limitations, EBITDA should not be considered as a measure
of discretionary cash available to the company to service its debt or to
invest in the growth of its business. Management compensates for these
limitations by relying on the company's GAAP results as well as on its EBITDA.
The following table reconciles the company's EBITDA to net income (loss)
for the periods presented (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2007 2006 2007 2006
Net income $15,136 $19,553 $14,824 $22,288
Depreciation 3,547 2,382 6,080 4,746
Interest expense 6,179 13,766 7,931 30,062
Income tax expense 8,165 9,526 7,982 17,741
EBITDA $33,027 $45,227 $36,817 $74,837
VERASUN ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
2007 2006
Cash Flows from Operating Activities
Net income $14,824 $22,288
Adjustments to reconcile net income to
net cash provided by operating activities:
Excess tax benefits from share-based payment
arrangements (6,865) -
Change in derivative financial instruments 6,756 (3,331)
Depreciation 6,080 4,746
Deferred income taxes 5,425 10,485
Stock-based compensation expense 2,679 19,709
Amortization of debt issuance costs and debt
discount 730 649
Accretion of deferred revenue (48) (47)
(Gain) loss on disposal of equipment (83) 10
Change in fair value of convertible put warrant - 19,670
Changes in current assets and liabilities:
(Increase) decrease in:
Receivables 18,697 (16,548)
Inventories (37,920) 2,392
Prepaid expenses (3,235) 1,109
Increase (decrease) in:
Accounts payable 11,059 (8,099)
Accrued expenses 6,023 2,364
Net cash provided by
operating activities 24,122 55,397
Cash Flows from Investing Activities
Investment in designated cash and
cash equivalents (249,516) -
Purchases of property and equipment (129,551) (6,117)
Payment of deposits (202) -
Proceeds from sale of equipment 6 838
Net cash used in
investing activities (379,263) (5,279)
Cash Flows from Financing Activities
Proceeds from long-term debt 447,750 -
Debt issuance costs paid (11,375) (1,044)
Proceeds from the issuance of 2,530,793 and
12,731,446 shares of common stock,
respectively 8,285 234,155
Excess tax benefits from share-based payment
arrangements 6,865 -
Costs of raising capital (5) -
Net cash provided by
financing activities 451,520 233,111
Net increase in cash and
cash equivalents 96,379 283,229
Cash and Cash Equivalents
Beginning 318,049 29,714
Ending $414,428 $312,943
SOURCE VeraSun Energy Corporation
Investor Contact - Danny C. Herron, +1-605-696-7200, investor@verasun.com,
or
Media
Contact - Mike Lockrem, +1-605-696-7257, mlockrem@verasun.com, both of VeraSun Energy
Corporation
http://www.verasun.com