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What changed in Alto Ingredients, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Alto Ingredients, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+346 added−351 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-14)

Top changes in Alto Ingredients, Inc.'s 2024 10-K

346 paragraphs added · 351 removed · 248 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

94 edited+17 added−13 removed37 unchanged
Biggest changeHealth, Home & Beauty Our products for the health, home and beauty markets include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. We offer a variety of specialty alcohols for the health, home and beauty markets, depending on usage and regulatory requirements, including API-grade, United States Pharmacopeia, or USP, -grade ethyl alcohols, and industrial-grade ethyl alcohol.
Biggest changeWe offer a variety of specialty alcohols for the health, home and beauty markets, depending on usage and regulatory requirements, including API-grade or USP-grade ethyl alcohols, and industrial-grade ethyl alcohol. - 5 - We have ISO 9001, FSSC 22000, ICH Q7 and EXCiPACT certifications, all of which are viewed as important attestations of quality control standards.
According to the Renewable Fuels Association, E15 is explicitly approved by the manufacturer for use in approximately 95% of model year 2024 cars and light trucks based on its annual review of vehicle owner’s manuals and warranty statements. Commercial sales of E15 have begun in a majority of states.
According to the Renewable Fuels Association, E15 is explicitly approved by the manufacturer for use in approximately 95% of model year 2024 and newer cars and light trucks based on its annual review of vehicle owner’s manuals and warranty statements. Commercial sales of E15 have begun in a majority of states.
E15 has historically been prohibited in most states during the summer driving season due to concerns over evaporative emissions and to meet federal clean air standards. For the 2022 and 2023 summer driving seasons, the EPA issued emergency fuel waivers to allow the sale of E15 to help alleviate high gasoline prices.
E15 has historically been prohibited in most states during the summer driving season due to concerns over evaporative emissions and to meet federal clean air standards. For the 2024, 2023 and 2022 summer driving seasons, the EPA issued emergency fuel waivers to allow the sale of E15 to help alleviate high gasoline prices.
We offer multiple alcohol quality grades ranging from industrial-grade alcohol to the highest beverage grade low moisture 200 proof alcohol available. We also offer a wide variety of essential ingredients and other products for food, feed and other markets. ● Barriers to entry .
We offer multiple alcohol quality grades ranging from industrial-grade alcohol to the highest beverage grade low moisture 200 proof alcohol available. We also offer a wide variety of essential ingredients and other products for food, feed and other markets. - 4 - ● Barriers to entry .
Renewable fuels, primarily fuel-grade ethanol, are used for a variety of purposes, including as octane enhancers for premium gasoline and to enable refiners to produce greater quantities of lower octane blend stock; for fuel blending to extend fuel supplies and reduce reliance on crude oil and refined products; and to comply with a variety of governmental programs, in particular, the national Renewable Fuel Standard, or RFS, which was enacted to promote alternatives to fossil fuels.
Renewable fuels, primarily fuel-grade ethanol, are used for a variety of purposes, including as octane enhancers for premium gasoline and to enable refiners to produce greater quantities of lower octane blend stock; for fuel blending to extend fuel supplies and reduce reliance on crude oil and refined products; and to comply with a variety of governmental programs, in particular, the national Renewable Fuel Standard, or RFS, enacted to promote alternatives to fossil fuels.
As a result, the wet milling process generates a higher level of cost recovery from corn than that produced at a dry mill. ● Our Midwest location allows us deep market insight and engagement in major specialty alcohol, fuel-grade ethanol, pet food and feed markets, thereby improving pricing opportunities. ● Our Midwest location sits atop the Mount Simon formation, identified as one of the best and largest aquafers in the country for carbon storage, potentially allowing us to benefit from this close proximity to store CO 2 .
As a result, the wet milling process generates a higher level of cost recovery from corn than that produced at a dry mill. ◾ Our Midwest location allows us deep market insight and engagement in major specialty alcohol, fuel-grade ethanol, pet food and feed markets, thereby improving pricing opportunities. ◾ Our Midwest location sits atop the Mount Simon formation, identified as one of the best and largest carbon storage locations in the country potentially allowing us to benefit from this close proximity to store CO 2 .
Suppliers Pekin Campus and Western Production Segments Our production operations depend upon various raw materials suppliers, including suppliers of corn, natural gas, electricity and water. The cost of corn is the most important variable cost associated with our alcohol production. We source corn for our plants using standard contracts, including spot purchase, forward purchase and basis contracts.
Suppliers Pekin Campus and Western Production Segments Our production operations depend upon various raw materials suppliers, including suppliers of corn, natural gas, electricity and water. The cost of corn, including delivery costs, is the most important variable cost associated with our alcohol production. We source corn for our plants using standard contracts, including spot purchase, forward purchase and basis contracts.
As of that same date, approximately 44% of our employees were represented by a labor union and covered by a collective bargaining agreement. We have never had a work stoppage or strike and we consider our relations with our employees to be good. Our compensation program is designed to attract, retain and motivate our personnel.
As of that same date, approximately 51% of our employees were represented by a labor union and covered by a collective bargaining agreement. We have never had a work stoppage or strike and we consider our relations with our employees to be good. Our compensation program is designed to attract, retain and motivate our personnel.
In addition, some governmental regulations are helpful to our production and marketing business. The fuel-grade ethanol industry in particular is supported by federal and state mandates and environmental regulations that favor the use of fuel-grade ethanol in motor fuel blends in North America. Some of the governmental regulations applicable to our production and marketing business are briefly described below.
The fuel-grade ethanol industry in particular is supported by federal and state mandates and environmental regulations that favor the use of fuel-grade ethanol in motor fuel blends in North America. Some of the governmental regulations applicable to our production and marketing business are briefly described below.
We believe that our competitive strengths include our customer and supplier relationships, our diverse product mix, the barriers to entry to our most profitable lines of business—including our modern technologies and certifications at our production facilities—our experienced management, and the strategic location of our Midwest production facilities.
We believe that our competitive strengths include our customer and supplier relationships, our diverse product mix, the barriers to entry to our most profitable lines of business—including our certifications at our production facilities—our experienced management, and the strategic location of our Midwest production facilities.
The largest producers of fuel-grade ethanol in the United States are POET, LLC, Valero Renewable Fuels Company, LLC, Archer-Daniels-Midland Company and Green Plains Inc., collectively with approximately 40% of the total installed fuel-grade ethanol production capacity in the United States.
The largest producers of fuel-grade ethanol in the United States are POET, LLC, Valero Renewable Fuels Company, LLC, Archer-Daniels-Midland Company and Green Plains Inc., collectively with approximately 39% of the total installed fuel-grade ethanol production capacity in the United States.
According to the United States Department of Energy, total annual gasoline consumption in the United States is approximately 137 billion gallons and total annual fuel-grade ethanol blended with gasoline represented approximately 10.4% of this amount in 2023.
According to the United States Department of Energy, total annual gasoline consumption in the United States is approximately 137 billion gallons and total annual fuel-grade ethanol blended with gasoline represented approximately 10.4% of this amount in 2024.
Our production facilities located in Oregon and Idaho are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages. All of our production facilities, other than our Magic Valley plant, were operating for all of 2023, subject to scheduled and unscheduled downtimes to address facility repair and maintenance.
Our production facilities located in Oregon and Idaho are near their respective fuel and feed customers, offering significant timing, product transportation cost and logistical advantages. All of our production facilities, other than our Magic Valley plant, were operating for all of 2024, subject to scheduled and unscheduled downtimes to address facility repair and maintenance.
The coarse grain and syrup portions are then mixed to produce wet distillers grains, or WDG, or can be mixed and dried to produce dried distillers grains with solubles, or DDGS. Both WDG and DDGS are high-protein animal feed products.
The coarse grain and syrup portions are then mixed to produce wet distillers grains with solubles, or WDGS, or can be mixed and dried to produce dried distillers grains with solubles, or DDGS. Both WDGS and DDGS are high-protein animal feed products.
Our senior executives have successfully navigated a wide variety of business and industry-specific challenges and deeply understand the business of successfully producing and marketing specialty alcohols and essential ingredients. -4- ● The strategic location of our Midwest production facilities . We operate three distinct but integrated production facilities at our Pekin Campus in the Midwest.
Our senior executives have successfully navigated a wide variety of business and industry-specific challenges and deeply understand the business of successfully producing and marketing specialty alcohols, renewable fuels and essential ingredients. ● The strategic location of our Midwest production facilities . We operate three distinct but integrated production facilities at our Pekin Campus in the Midwest.
Other significant producers of specialty alcohols in the United States are Archer-Daniels-Midland Company, Grain Processing Corporation, CIE and Greenfield Global Inc., which collectively make up a significant majority of the total installed specialty alcohol production capacity in the United States along with many smaller producers.
Other significant producers of specialty alcohols in the United States are Archer-Daniels-Midland Company, Grain Processing Corporation, BioUrja Renewables, LLC, CIE and Greenfield Global Inc., which collectively make up a significant majority of the total installed specialty alcohol production capacity in the United States along with many smaller producers.
In January 2024, we again temporarily hot-idled our Magic Valley production 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.
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 to achieve the intended production rate, quality and consistency from our corn oil and high protein system at the facility.
Enzymes are added to the mash to convert the starch into dextrose, a simple sugar. The mash is processed through a high temperature cooking procedure, which reduces bacteria levels prior to fermentation. The mash is then cooled and transferred to fermenters, where yeast is added and the conversion of sugar to alcohol and CO2 begins.
Enzymes are added to the mash to convert the starch into dextrose, a simple sugar. The mash is processed through a high temperature cooking procedure, which reduces bacteria levels prior to fermentation. The mash is then cooled and transferred to fermenters, where yeast is added and the conversion of sugar to alcohol and CO 2 begins.
We cannot predict the manner by which, or extent to which, these regulations will harm or help our business or the alcohol production and marketing industry in general. Human Capital Resources As of March 12, 2024, we had approximately 460 full-time employees. Our human capital resources objectives include attracting and retaining well-qualified and highly skilled and motivated employees and executives.
We cannot predict the manner by which, or extent to which, these regulations will harm or help our business or the alcohol production and marketing industry in general. Human Capital Resources As of March 12, 2025, we had approximately 393 full-time employees. Our human capital resources objectives include attracting and retaining well-qualified and highly skilled and motivated employees and executives.
We produce over 600,000 metric tons of carbon dioxide, CO 2, per year at our Pekin Campus, which sits atop the Mount Simon formation, identified as one of the best and largest aquafers in the country for carbon storage. We are prioritizing our carbon capture and storage, or CCS, project over other long-term capital projects.
We produce over 600,000 metric tons of CO 2 per year at our Pekin Campus, which sits atop the Mount Simon formation, identified as one of the best and largest carbon storage locations in the country. We are prioritizing our carbon capture and storage, or CCS, project over other long-term capital projects.
Renewable Fuels Our renewable fuels products include fuel-grade ethanol used as transportation fuel and distillers corn oil used as a biodiesel feedstock. Our renewable fuels business is supported by our own production of fuel-grade ethanol as well as fuel-grade ethanol produced by third parties.
Renewable Fuels Our renewable fuels products include fuel-grade ethanol primarily used as a transportation fuel additive and distillers corn oil used as a renewable diesel and biodiesel feedstock. Our renewable fuels business is supported by our own production of fuel-grade ethanol as well as fuel-grade ethanol produced by third parties.
After fermentation, the resulting “beer” is transferred to distillation where the alcohol is separated from the residual “stillage.” The resulting alcohol is concentrated to 190 proof using conventional distillation methods and then is dehydrated to approximately 200 proof, representing 100% alcohol levels, in either a molecular sieve system or a grits system.
After fermentation, the resulting “beer” is transferred to distillation where the alcohol is separated from the residual “stillage.” The resulting alcohol is concentrated to 190 proof using conventional distillation methods. It can then be dehydrated to approximately 200 proof, representing 100% alcohol levels, in either a molecular sieve system or a grits system.
These contracts generally run from year-to-year, subject to termination by either party upon advance written notice before the end of the then-current annual term. -9- During 2023, 2022 and 2021, we purchased and resold from third parties an aggregate of approximately 103 million, 118 million and 229 million gallons, respectively, of fuel-grade ethanol.
These contracts generally run from year-to-year, subject to termination by either party upon advance written notice before the end of the then-current annual term. During 2024, 2023 and 2022, we purchased and resold from third parties an aggregate of approximately 108 million, 103 million and 118 million gallons, respectively, of fuel-grade ethanol.
Overview of Our Key Markets and Market Opportunity We produce specialty alcohols, fuel-grade ethanol and essential ingredients, focusing on five key markets: Health, Home & Beauty ; Food & Beverage ; Industry & Agriculture; Essential Ingredients ; and Renewable Fuels .
Overview of Our Key Markets and Market Opportunity We produce specialty alcohols, renewable fuels and essential ingredients, focusing on five key markets: Health, Home & Beauty ; Food & Beverage ; Industry & Agriculture; Essential Ingredients ; and Renewable Fuels .
Under the RFS, the mandated use of all renewable fuels rose incrementally and peaked at 36.0 billion gallons in 2022, of which 15.0 billion gallons were required to be produced from conventional, or corn-based, ethanol. The RFS allows the Environmental Protection Agency, or EPA, to adjust the annual requirement based on certain facts and circumstances.
Under the RFS, the mandated use of all renewable fuels rose incrementally and peaked at 36.0 billion gallons in 2022, of which production of 15.0 billion gallons was required from conventional, or corn-based, ethanol. The RFS allows the Environmental Protection Agency, or EPA, to adjust the annual requirement based on certain facts and circumstances.
Wet Milling Process In the wet milling process, corn or other high-starch grain is first soaked or “steeped” in sulfurous acid for approximately 24 hours to soften the whole corn kernel ahead of milling.
Wet Milling Process In the wet milling process, corn or other high-starch grain is first soaked or “steeped” in sulfurous acid for approximately 24 hours to soften the whole corn kernel prior to milling.
For 2023, 2022 and 2021, sales to our two largest customers, Shell Trading US Company and Chevron Products USA represented an aggregate of approximately 16%, 20% and 22% of our net sales, respectively. For 2023, 2022 and 2021, sales to each of our other customers represented less than 10% of our net sales.
For 2024, 2023 and 2022, sales to our two largest customers, Chevron Products USA and Shell Trading (US) Company represented an aggregate of approximately 18%, 16% and 20% of our net sales, respectively. For 2024, 2023 and 2022, sales to each of our other customers represented less than 10% of our net sales.
For fuel-grade ethanol, the resulting anhydrous alcohol is then blended with approximately 2.5% denaturant, which is usually gasoline, and is then ready for shipment to renewable fuels markets. For specialty alcohols, the products can be sold pure or as one of the Tobacco Tax & Trade Bureau (TTB) approved specially denatured alcohol (SDA) formulations to meet customer specifications.
For fuel-grade ethanol, the resulting anhydrous alcohol is then blended with up to 2.5% denaturant, usually gasoline, and then shipped to renewable fuels markets. For specialty alcohols, the products can be sold pure or as one of the Alcohol Tobacco Tax & Trade Bureau (TTB) approved specially denatured alcohol (SDA) formulations to meet customer specifications.
We believe that the market price of WDG and DDGS is determined by a number of factors, including the market prices of corn, soybean meal and other competitive ingredients, the performance or value of WDG and DDGS in a particular feed formulation and general market forces of supply and demand, including export markets for these co-products.
We believe that the market price of WDGS and DDGS is determined by a number of factors, including the market prices of corn, soybean meal and other competitive ingredients, the performance or value of WDGS and DDGS in a particular feed formulation and general market forces of supply and demand, including export markets for these essential ingredients.
These laws, their underlying regulatory requirements and their potential enforcement, some of which are described below, impact, or may impact, nearly every aspect of our operations, including our production of alcohols (including distillation), our production of essential ingredients, our storage facilities, and our water usage, wastewater discharge, disposal of hazardous wastes and emissions, and other matters pertaining to our existing and proposed business by imposing: ● restrictions on our existing and proposed operations and/or the need to install enhanced or additional controls; ● special requirements applicable to food and drug additives; ● the need to obtain and comply with permits and authorizations; ● liability for exceeding applicable permit limits or legal requirements, in some cases for the remediation of contaminated soil and groundwater at our production facilities, contiguous and adjacent properties and other properties owned and/or operated by third parties; and ● other specifications for the specialty alcohols and essential ingredients we produce and market.
These laws, their underlying regulatory requirements and their potential enforcement, some of which are described below, impact, or may impact, nearly every aspect of our operations, including our alcohol production (including distillation), our liquid CO 2 production, our essential ingredient production, our storage facilities, and our water usage, wastewater discharge, disposal of hazardous wastes and emissions, and other matters pertaining to our existing and proposed business by imposing: ● restrictions on our existing and proposed operations and/or the need to install enhanced or additional controls; ● special requirements applicable to food and drug additives; ● the need to obtain and comply with permits and authorizations; ● liability for exceeding applicable permit limits or legal requirements, in some cases for the remediation of contaminated soil and groundwater at our production facilities, contiguous and adjacent properties and other properties owned and/or operated by third parties; and ● other specifications for the specialty alcohols and essential ingredients we produce, market and sell. - 12 - In addition, some governmental regulations are helpful to our production and marketing business.
During 2023, 2022 and 2021, purchases of fuel-grade ethanol from our four largest third-party suppliers represented 86%, 69% and 76%, respectively, of our total third-party ethanol purchases for each of those periods. Purchases from each of our other third-party ethanol suppliers represented less than 10% of total third-party ethanol purchases in each of 2023, 2022 and 2021.
During 2024, 2023 and 2022, purchases of fuel-grade ethanol from our four largest third-party suppliers represented 79%, 86% and 69%, respectively, of our total third-party ethanol purchases for each of those periods. Purchases from each of our other third-party ethanol suppliers represented less than 10% of total third-party ethanol purchases in each of 2024, 2023 and 2022.
Our high quality and high purity manufacturing enable our customers to use some of our essential ingredients in human foods while others are used in pet foods and animal feed. We expect the essential ingredients market to grow significantly due to global demand for higher-grade protein feed, such as feed used in fisheries and other applications.
Our high quality and high purity manufacturing enables our customers to use some of our essential ingredients in human foods while others are used solely in pet foods and animal feed. We expect the essential ingredients market to grow significantly due to global demand for higher-grade protein feed, such as feed used in fisheries and other applications for plant-based proteins.
We have an annual alcohol production capacity of 350 million gallons, including both fuel-grade ethanol and specialty alcohols ranging from industrial-, pharmaceutical-, and high-quality food- and beverage-grade alcohols. Of this amount, we can produce up to 110 million gallons annually of specialty alcohols, depending on our product mix among high-quality beverage-grade alcohol and alcohols of other quality specifications.
We have an annual alcohol production capacity of 350 million gallons, including both renewable fuels and specialty alcohols ranging from industrial-, pharmaceutical-, and high-quality food- and beverage-grade alcohols. Of this amount, we can produce up to 110 million gallons annually of specialty alcohols, depending on our product mix among high-quality beverage-grade alcohol and other quality specification alcohols.
We market and distribute all the alcohols produced at our facilities as well as alcohols produced by third parties. In 2023, we marketed and distributed approximately 383 million gallons combined of our own alcohols as well as fuel-grade ethanol produced by third parties, and over 1.5 million tons of essential ingredients on a dry matter basis.
We market and distribute all of the alcohols produced at our facilities as well as alcohols produced by third parties. In 2024, we marketed and distributed approximately 386 million gallons combined of our own produced alcohols as well as fuel-grade ethanol produced by third parties, and over 1.4 million tons of essential ingredients on a dry matter basis.
The market price of distillers grains is also often influenced by nutritional models that calculate the feed value of distillers grains by nutritional content, as well as reliability of consistent supply. Customers We market and sell through our wholly-owned subsidiary, Kinergy Marketing LLC, or Kinergy, all of the alcohols we produce. Kinergy also markets fuel-grade ethanol produced by third parties.
The market price of distillers grains is also often influenced by nutritional models that calculate the feed value of distillers grains by nutritional content, as well as reliability of consistent supply. Customers Our Kinergy Marketing LLC, or Kinergy, subsidiary sells all of our produced alcohols and also markets fuel-grade ethanol produced by third parties.
Industry & Agriculture Our products for the industry and agriculture market include alcohols and other products for paint applications and fertilizers. Essential Ingredients Our essential ingredients include dried yeast, corn gluten meal, corn gluten feed, and distillers grains and liquid feed used in commercial animal feed and pet foods. We also sell yeast for human consumption.
Industry & Agriculture Our products for the industry and agriculture market include alcohols and other products for paint applications, vehicle fluids and fertilizers. Essential Ingredients Our essential ingredients include dried yeast, corn protein meal, corn protein feed, and distillers grains and liquid feed used in commercial animal feed and pet foods. In addition, we sell yeast for human consumption.
We report our financial and operating performance in three segments: (1) Pekin production, which includes the production and sale of alcohols and essential ingredients produced at our three production facilities located in Pekin, Illinois, which we refer to as our Pekin Campus, (2) marketing and distribution, which includes marketing and merchant trading for company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade ethanol sourced from third parties, and (3) Western production, which includes the production and sale of renewable fuel and essential ingredients produced at our two western production facilities on an aggregated basis, none of which are individually so significant as to be considered a separately reportable segment.
We report our financial and operating performance in three distinct segments: ● Pekin production , which includes the production and sale of alcohols and essential ingredients produced at our three production facilities located in Pekin, Illinois, which we refer to as our Pekin Campus; ● Marketing and distribution , which includes marketing and merchant trading for company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade ethanol sourced from third parties; and ● Western production , which includes the production and sale of renewable fuels and essential ingredients and, beginning in 2025, liquid CO 2, produced at our western production facilities, including our liquid CO 2 plant, on an aggregated basis, none of which are individually so significant as to be considered a separately reportable segment.
Our quality management systems are supported by ISO 9001, ICH Q7, and EXCiPACT certifications which are viewed by our customers as important attestations of our quality control standards . ● Diverse product mix . We offer a wide range of specialty alcohol, essential ingredient and other products to meet customer demand.
Our quality management systems are supported by ISO 9001, FSSC 22000, ICH Q7 and EXCiPACT certifications which are viewed by our customers as important attestations of our quality control. ● Diverse product mix . We offer a wide range of specialty alcohols, essential ingredients and other products to meet customer demand.
Our mission is to produce the highest quality, sustainable ingredients from renewable resources that make everyday products better.
Our mission is to produce the highest quality, sustainable ingredients that make everyday products better.
We also market and distribute alcohols produced by third parties. Competition We are the largest producer of specialty alcohols in the United States.
We also market and distribute alcohols produced by third parties. - 11 - Competition We are a leading producer of specialty alcohols in the United States.
Pekin Campus Production Facilities Pekin Wet Facility Pekin Dry Facility Pekin ICP Facility Location Pekin, IL Pekin, IL Pekin, IL Current operating status Operating Operating Operating Approximate maximum annual alcohol production capacity (in millions of gallons) 100 60 90 Approximate maximum annual specialty alcohol production capacity (in millions of gallons) 74 — 66 Production milling process Wet Dry Dry Primary energy source Natural Gas Natural Gas Natural Gas Western Production Facilities Magic Valley Facility Columbia Facility Location Burley, ID Boardman, OR Current operating status Hot-Idled Operating Approximate maximum annual fuel-grade ethanol production capacity (in millions of gallons) 60 40 Production milling process Dry Dry Primary energy source Natural Gas Natural Gas Commodity Risk Management We employ various risk mitigation techniques.
Pekin Campus Production Facilities Pekin Wet Facility Pekin Dry Facility Pekin ICP Facility Location Pekin, IL Pekin, IL Pekin, IL Current operating status Operating Operating Operating Approximate maximum annual alcohol production capacity (in millions of gallons) 100 60 90 Approximate maximum annual specialty alcohol production capacity (in millions of gallons) 74 — 66 Production milling process Wet Dry Dry Primary energy source Natural Gas Natural Gas Natural Gas - 10 - Western Production Facilities Magic Valley Facility Columbia Facility Liquid CO 2 Facility Location Burley, ID Boardman, OR Boardman, OR Current operating status Cold-Idled Operating Operating Approximate maximum annual fuel-grade ethanol production capacity (in millions of gallons) 60 40 - Approximate maximum annual liquid CO 2 capacity (in thousands of tons) - - 70 Production milling process Dry Dry N/A Primary energy source Natural Gas Natural Gas Electricity Commodity Risk Management We employ various risk mitigation techniques.
The raw materials for our essential ingredients are generated as co-products from our production of alcohols. These co-products are further manufactured, altered and refined into our essential ingredients, including for special customer applications.
We also produce and sell liquid CO 2 . The raw materials for our essential ingredients are generated as co-products from our production of alcohols. These co-products are further manufactured, altered and refined into our essential ingredients, including for special customer applications.
Our Western production segment generated $57.3 million, $90.2 million and $31.1 million in net sales for the years ended December 31, 2023, 2022 and 2021, respectively, from the sale of essential ingredients.
Our Western production segment generated $37 million, $57 million and $90 million in net sales for the years ended December 31, 2024, 2023 and 2022, respectively, from the sale of essential ingredients.
For example, fuel-grade ethanol prices, as reported by the Chicago Mercantile Exchange, or CME, ranged from $1.58 to $2.67 per gallon during 2023, from $2.00 to $2.88 per gallon during 2022 and from $1.48 to $3.75 per gallon during 2021; and corn prices, as reported by the CME, ranged from $4.50 to $6.85 per bushel during 2023, from $5.64 to $8.18 per bushel during 2022 and from $4.84 to $7.73 per bushel during 2021.
For example, fuel-grade ethanol prices, as reported by the Chicago Mercantile Exchange, or CME, ranged from $1.38 to $2.12 per gallon during 2024, from $1.58 to $2.67 per gallon during 2023 and from $2.00 to $2.88 per gallon during 2022; and corn prices, as reported by the CME, ranged from $3.62 to $4.71 per bushel during 2024, from $4.50 to $6.85 per bushel during 2023 and from $5.64 to $8.18 per bushel during 2022.
At the direction and with the involvement of an environmental, social and governance, or ESG, committee established by our board of directors, we have established an ESG working committee that draws from our many administrative and operational departments to review key policies and procedures, conduct employee engagement surveys and training, champion volunteering and charitable drives, develop and implement recruiting efforts which promote diversity and inclusion and prioritize collecting and improving on key metrics from industry frameworks such as the Global Reporting Initiative and Sustainability Accounting Standards Board standards which are maintained by the International Sustainability Standards Board of the IFRS Foundation. -13-
At the direction and with the involvement of our Sustainability and Governance board committees, we have established a Sustainability working committee that draws from our many administrative and operational departments to review key policies and procedures, conduct employee engagement surveys, champion volunteering and charitable drives, develop and implement formalized recruiting and training efforts to prioritize collecting data and improving on key metrics from industry frameworks such as the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) standards which are maintained by the International Sustainability Standards Board of the IFRS Foundation. - 14 -
Item 1. Business. Business Overview We produce and distribute renewable fuel and essential ingredients. We are also the largest producer of specialty alcohols in the United States. We operate five alcohol production facilities. Three of our production facilities are located in Illinois, one is located in Oregon and another is located in Idaho.
Item 1. Business. Business Overview We are a leading producer and distributor of specialty alcohols, renewable fuels and essential ingredients in the United States. We operate five alcohol production facilities. Three of our production facilities are located in Illinois, one is located in Oregon and another is located in Idaho.
Our plants produce both WDG and DDGS. WDG is sold to customers proximate to the plants and DDGS is delivered by truck, rail and barge to customers in domestic and international markets. Producing WDG also allows us to use up to one-third less process energy, thus reducing production costs and lowering the carbon footprint of our production facilities.
WDGS is sold to customers proximate to the plants and DDGS is delivered by truck, rail and barge to customers in domestic and international markets. Producing WDGS uses up to one-third less process energy, thus reducing production costs and lowering the carbon footprint of our Western production facilities.
The EPA has set its annual requirements for conventional ethanol to 15.0 billion gallons for each of 2023, 2024 and 2025. See “—Governmental Regulation”. -6- According to the Renewable Fuels Association, the domestic fuel-grade ethanol industry produced over 15.5 billion gallons of ethanol in 2023, up from 15.4 billion gallons in 2022.
The EPA set its annual requirement for conventional ethanol to 15.0 billion gallons for 2025. See “—Governmental Regulation.” - 6 - According to the Renewable Fuels Association, the domestic fuel-grade ethanol industry produced over 16.1 billion gallons of ethanol in 2024, up from 15.5 billion gallons of ethanol in 2023.
We arrange for transportation, storage and delivery of fuel-grade ethanol purchased by our customers through our agreements with third-party service providers in the Western United States as well as in the Midwest from a variety of sources. We market our essential ingredient feed products to dairies and feedlots, in many cases located near our production facilities.
We arrange for transportation, storage and delivery of fuel-grade ethanol purchased by our customers through our agreements with third-party service providers in the Western United States as well as in the Midwest from a variety of sources. - 2 - We market food-grade essential ingredients to human and pet food markets, our feed products (such as distillers grains) primarily to export markets from our Pekin Campus, and other feed products to dairies and feedlots, in many cases located near our production facilities.
To be properly marketed and sold in the United States, a relevant product must be generally recognized as safe, approved and not adulterated or misbranded under the FDCA and relevant regulations issued under the FDCA. The FDA has broad authority to enforce the provisions of the FDCA.
For proper marketing and sale in the United States, an applicable product must be generally recognized as safe, approved and not adulterated or misbranded under the FDCA and relevant regulations issued under the FDCA. The FDA has broad authority to enforce the provisions of the FDCA.
We market our essential ingredient feed products to dairies and feedlots, in many cases located near our production facilities. These customers use our feed products for livestock as a substitute for corn and other sources of starch and protein. We sell our corn oil to poultry, renewable diesel and biodiesel customers. We do not market essential ingredients from other producers.
We market our essential ingredient feed products to dairies and feedlots, in many cases located near our production facilities. These customers use our feed products for livestock as a substitute for corn and other sources of starch and protein.
During 2023, 2022 and 2021, our Western production segment sold an aggregate of approximately 67.0 million, 92.4 million and 37.6 million gallons of alcohols and 642,300, 787,100 and 361,000 tons of essential ingredients, respectively, on a dry matter basis.
During 2024, 2023 and 2022, our Western production segment sold an aggregate of approximately 61 million, 67 million and 92 million gallons of alcohols and 514,600, 642,300 and 787,100 tons of essential ingredients, respectively, on a dry matter basis.
The Inflation Reduction Act of 2022 raised the carbon capture tax credit to $85 per metric ton, reflecting the 45Q tax incentive benefits established under the Act.
The Inflation Reduction Act of 2022 raised the carbon capture tax credit to $85 per metric ton, reflecting the section 45Q tax incentive benefits established under the Act. Section 45Z low carbon fuel tax credits are also available under the Act.
Our Western production segment generated $167.0 million, $253.6 million and $107.9 million in net sales for the years ended December 31, 2023, 2022 and 2021, respectively, from the sale of alcohols.
Our Western production segment generated $115 million, $167 million and $254 million in net sales for the years ended December 31, 2024, 2023 and 2022, respectively, from the sale of alcohols.
To mitigate fuel-grade ethanol inventory price risks, we may sell a portion of our production forward under fixed- or index-price contracts, or both. We may hedge a portion of the price risks by entering exchange-traded futures contracts and options.
To mitigate fuel-grade ethanol inventory price risks, we may sell a portion of our production forward under fixed- or index-price contracts, or both. We may hedge a portion of the price risks by entering exchange-traded futures contracts and options. Properly executing these risk mitigation strategies can reduce the volatility of our gross profit margins.
We intend to accomplish this goal in part by investing in our specialized and higher value specialty alcohol production and distribution infrastructure, expanding production in high-demand essential ingredients, expanding and extending the sale of our products into new regional and international markets, building efficiencies and economies of scale and by capturing a greater portion of the value stream.
We intend to accomplish this goal in part by investing in our specialized and higher value specialty alcohol production and distribution infrastructure, expanding production in high-demand essential ingredients, expanding and extending the sale of our products into new regional and international markets, building efficiencies and economies of scale and by capturing a greater portion of the value stream. - 1 - Production Segments We produce specialty alcohols, renewable fuels and essential ingredients, focusing on five key markets: Health, Home & Beauty ; Food & Beverage ; Industry & Agriculture ; Essential Ingredients ; and Renewable Fuels .
Our specialty alcohols for the Industry & Agriculture, Food & Beverage and Health, Home & Beauty markets represented approximately 6%, 4% and 2%, respectively, of our sales in 2023 from these three product segments. -1- We produce our alcohols and essential ingredients at our production facilities described below.
Our specialty alcohols for the Industry & Agriculture, Food & Beverage and Health, Home & Beauty markets represented approximately 12%, 7% and 3%, respectively, of our sales in 2024 from these three markets. We produce our alcohols and essential ingredients at our facilities described below.
We are evaluating and plan to implement new equipment and technologies to increase our production yields, improve our operating efficiencies and reliability, reduce our overall carbon footprint, diversify our products and revenues, and increase our profitability as financial resources and market conditions justify these investments. -3- ● Increase our break bulk capabilities.
We are evaluating and plan to implement new equipment and technologies to increase our production yields, improve our operating efficiencies and reliability, reduce our overall carbon footprint, diversify our products and revenues, and increase our profitability as financial resources and market conditions Left these investments. ● Evaluate and pursue strategic opportunities . We are exploring opportunities to expand our business.
E15 may, however, be sold year-round in states that have a reformulated gasoline program. In addition, the EPA proposed in late 2023 that E15 be permitted for sale year-round in various Midwestern states effective in April 2024. The U.S. Office of Management and Budget approved the proposal in February 2024 but deferred the effective date to April 2025.
E15 may, however, be sold year-round in states that have a reformulated gasoline program. In addition, the EPA proposed in late 2023 that E15 be permitted for sale year-round in various Midwestern states effective in April 2024. The U.S.
Our products for the Renewable Fuels markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels.
We also sell yeast and liquid CO 2 for human consumption. Our products for the Renewable Fuels markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels.
Competitive Strengths We believe that our competitive strengths include: ● Customer and supplier relationships . We have extensive and long-standing close customer and supplier relationships, both domestic and international, for our specialty alcohols and essential ingredients. We have an excellent reputation for developing specialty alcohols under stringent quality control standards, particularly at our Pekin Campus.
We have strong, extensive and long-standing close customer and supplier relationships, both domestic and international, for our specialty alcohols, renewable fuels and essential ingredients. We have an excellent reputation for developing specialty alcohols under stringent quality control standards.
Our Corporate and other segment generated $15.8 million in net sales from Eagle Alcohol’s business for each of the years ended December 31, 2023 and 2022, and sold 4.0 million gallons of alcohols for each of those years.
Our Corporate and other segment, which includes Eagle Alcohol’s business, generated $11 million, $16 million and $16 million in net sales for the years ended December 31, 2024, 2023 and 2022, respectively, and sold 3.6 million, 4.0 million and 4.0 million gallons of alcohols, respectively, for those years.
During 2023, 2022 and 2021, purchases of corn from our three largest suppliers represented an aggregate of approximately 26%, 38% and 28% of our total corn purchases, respectively, for those periods. Purchases from each of our other corn suppliers represented less than 10% of total corn purchases in each of 2023, 2022 and 2021.
During 2024, 2023 and 2022, purchases of corn from our three largest suppliers represented an aggregate of approximately 29%, 26% and 38% of our total corn purchases, respectively, for those periods.
During 2023, 2022 and 2021, we produced or purchased from third parties and resold an aggregate of 382.5 million, 418.9 million and 479.6 million gallons of alcohols to approximately 88, 114 and 99 customers, respectively.
During 2024, 2023 and 2022, we produced or purchased from third parties and resold an aggregate of 386 million, 383 million and 419 million gallons of alcohols to approximately 85, 88 and 114 customers, respectively.
Various states including California, Oregon and Washington, and other regions such as the Canadian province of British Columbia, have implemented low carbon fuel standards focused on reducing the carbon intensity of transportation fuels.
Office of Management and Budget approved the proposal in February 2024 but deferred the effective date to April 2025. - 13 - Various states including California, Oregon and Washington, and other regions such as the Canadian province of British Columbia, have implemented low carbon fuel standards focused on reducing the carbon intensity of transportation fuels.
We market and sell through our wholly-owned subsidiary, Alto Nutrients, LLC, all of the essential ingredients we produce. We also sell break bulk quantities through Eagle Alcohol to customers in the beverage, food, industrial and related-process industries.
Our Alto Nutrients, LLC subsidiary sells all of the essential ingredients we produce. Our Alto Carbonic, LLC subsidiary sells all of the liquid CO 2 we produce and our Eagle Alcohol business sells our alcohols and third-party alcohols in break bulk quantities to customers in the beverage, food, industrial and related-process industries.
These customers include producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products manufacturers, producers of personal health/consumer health and personal care hygiene products, and global trading firms.
We have extensive and long-standing customer relationships, both domestic and international, for our specialty alcohols and essential ingredients. These customers include producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products manufacturers, producers of personal health/consumer health and personal care hygiene products, and global trading firms.
Our Pekin Campus production segment generated $502.2 million, $521.3 million and $498.2 million in net sales for the years ended December 31, 2023, 2022 and 2021, respectively, from the sale of alcohols.
Our Pekin Campus production segment generated $169 million, $218 million and $226 million in net sales for the years ended December 31, 2024, 2023 and 2022, respectively, from the sale of essential ingredients.
Our marketing and distribution segment generated $263.0 million, $228.9 million and $381.2 million in net sales for the years ended December 31, 2023, 2022 and 2021, respectively, from the sale of all alcohols.
Our marketing and distribution segment generated $217 million, $263 million and $229 million in net sales for the years ended December 31, 2024, 2023 and 2022, respectively, from the sale of our own alcohols and third-party produced alcohols.
We believe the financial benefits under the Inflation Reduction Act and the substantial additional economic benefits of the environmental attributes associated with low carbon ethanol will result in excellent returns on investment. ● Expand product offerings . We are pursuing initiatives to broaden our product offerings to appeal to a wider range of customers and uses in our key markets.
We believe the financial benefits under the Inflation Reduction Act and the substantial additional economic benefits of the environmental attributes associated with low carbon ethanol will result in excellent returns on investment.
Failure to comply with the laws and regulations of the FDA or similar state agencies could prevent us from selling certain of our products or subject us to liability. -12- Renewable Fuels Energy Legislation Under the RFS, the mandated use of all renewable fuels, including fuel-grade ethanol, rose incrementally and peaked at 36.0 billion gallons in 2022, of which 15.0 billion gallons are required from conventional, or corn-based, ethanol for each of 2023, 2024 and 2025.
Renewable Fuels Energy Legislation Under the RFS, the mandated use of all renewable fuels, including fuel-grade ethanol, rose incrementally and peaked at 36.0 billion gallons in 2022, of which 15.0 billion gallons are required from conventional, or corn-based, ethanol for 2025.
The principal specialty alcohol we offer for beverage-grade product is our grain neutral spirits, or GNS, alcohol. In addition, we primarily sell FCC 190 and USP 190 Ultra into vinegar markets. We are also introducing new high-quality 192 proof and low-moisture 200-proof GNS products to our existing and target customers in the beverage, food, flavor, personal care and pharmaceutical industries.
In addition, we sell FCC 190 and USP 190 Ultra into vinegar markets. We also sell high-quality 192 proof and low-moisture 200-proof GNS products to customers in the beverage, food, flavor and personal care industries.
Marketing and Distribution Segment Our marketing and distribution operations include alcohols and essential ingredients we produce but also depend upon various third-party producers of fuel-grade ethanol.
Purchases from each of our other corn suppliers represented less than 10% of total corn purchases in each of 2024, 2023 and 2022. - 9 - Marketing and Distribution Segment Our marketing and distribution operations include alcohols and essential ingredients we produce but also depend upon various third-party producers of fuel-grade ethanol.
Overall, we believe there are over 200 fuel-grade ethanol production facilities in the United States with a total installed production capacity of approximately 17.8 billion gallons and many brokers and marketers with whom we compete for sales of fuel-grade ethanol and its co-products. -11- Our fuel-grade ethanol also competes on a global market against production from other countries, such as Brazil, which may have lower production costs than United States producers.
Overall, we believe there are over 200 fuel-grade ethanol production facilities in the United States with a total installed production capacity of approximately 18 billion gallons and many brokers and marketers with whom we compete for sales of fuel-grade ethanol and its co-products.
Products for Essential 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.
Products for Industry & Agriculture markets include alcohols and other products for paint applications, vehicle fluids and fertilizers. Products for Essential Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, distillers grains, liquid CO 2 and liquid feed used in commercial animal feed and pet foods.
See “Note 5 – Segments” to our Notes to Consolidated Financial Statements included elsewhere in this report for financial information about our business segments. -2- Company History We are a Delaware corporation formed in 2005. Our common stock trades on The Nasdaq Capital Market under the symbol “ALTO.” Our Internet website address is http://www.altoingredients.com.
Company History We are a Delaware corporation formed in 2005. Our common stock trades on The Nasdaq Capital Market under the symbol “ALTO.” Our Internet website address is http://www.altoingredients.com. Information contained on our website is not part of this Annual Report on Form 10-K.
After steeping, the grain goes through coarse milling to gently open the kernels to separate the corn germ from which the corn oil can be further extracted in a separate process. The remaining fiber, gluten and starch components are further separated and sold.
After steeping, the grain is coarse milled to gently open the kernels to separate the corn germ and from which corn oil is further extracted in a separate process.
The fermentation process for alcohol at this stage is similar to the dry milling process. In addition, we separate and dry yeast to produce distillers yeast. -7- Overview of Distillers Grains Market Distillers grains are produced as a co-product of alcohol production and are valuable components of feed rations primarily to dairies and beef cattle markets, both nationally and internationally.
Overview of Distillers Grains Market Distillers grains are produced as a co-product of alcohol production and are valuable components of feed rations primarily to dairies and beef cattle markets, both nationally and internationally. Our plants produce both WDGS and DDGS.
Of this amount, we are able to produce up to 110 million gallons annually of specialty alcohols, depending on our product mix among high-quality beverage-grade alcohol and alcohols of other quality specifications. As market conditions change, we may increase, decrease or idle production at one or more operating facilities or resume operations at any idled facility.
Of this amount, we are able to produce up to 110 million gallons annually of specialty alcohols, depending on our product mix among high-quality beverage-grade alcohol and other quality specification alcohols.
All ingredients we produce for use in beverages, human and pet foods are third-party certified for ISO 9001 and hazard analysis and critical control points (HACCP).
All ingredients we produce for use in beverages, human and pet foods are third-party certified for ISO 9001 and hazard analysis and critical control points (HACCP). In addition, all of our animal feed production, including at our Oregon and Idaho facilities, has undergone third-party Food Safety Modernization Act (FSMA) auditing.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur bylaws also provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by applicable law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or the Securities Act, including all causes of action asserted against any defendant named in such complaint, including our officers and directors, underwriters for any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering.
Biggest changeOur bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Delaware Court of Chancery shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us to us or our stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (d) any action asserting a claim governed by the internal affairs doctrine. - 26 - Our bylaws also provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by applicable law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or the Securities Act, including all causes of action asserted against any defendant named in such complaint, including our officers and directors, underwriters for any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering.
These views could also negatively impact public perception of the fuel-grade ethanol industry and acceptance of ethanol as an alternative fuel. There are limited markets for fuel-grade ethanol beyond those established by federal mandates. Discretionary blending and E85 blending (i.e., gasoline blended with up to 85% fuel-grade ethanol by volume) are important secondary markets.
These views could also negatively impact public perception of the fuel-grade ethanol industry and acceptance of ethanol as an alternative fuel. - 24 - There are limited markets for fuel-grade ethanol beyond those established by federal mandates. Discretionary blending and E85 blending (i.e., gasoline blended with up to 85% fuel-grade ethanol by volume) are important secondary markets.
Failure to achieve our expected results may have a material adverse effect on our business, financial condition and results of operations. We regularly incur significant expenses to repair, maintain and upgrade our production facilities and operating equipment, and any interruption in our operations would harm our operating performance.
Failure to achieve our expected results may have a material adverse effect on our business, financial condition and results of operations. - 20 - We regularly incur significant expenses to repair, maintain and upgrade our production facilities and operating equipment, and any interruption in our operations would harm our operating performance.
In addition, we may be subject to product liability and other claims by our customers or by individuals alleging personal injury from our products as food and drug additives. -21- We maintain insurance coverage against some, but not all, potential losses.
In addition, we may be subject to product liability and other claims by our customers or by individuals alleging personal injury from our products as food and drug additives. We maintain insurance coverage against some, but not all, potential losses.
The EPA finalized mandatory volumes of 15.0 billion gallons for each of 2023, 2024, and 2025 of conventional renewable fuel, or corn-based fuel-grade ethanol, which could decline in future years.
The EPA finalized mandatory volumes of 15.0 billion gallons for each of 2023, 2024, and 2025 of conventional renewable fuels, or corn-based fuel-grade ethanol, which could decline in future years.
For example, in the third quarter of 2023 we experienced unusually high unscheduled production downtime for repairs and maintenance at our Pekin Campus which reduced sales volumes and increased losses.
In the third quarter of 2023 we experienced unusually high unscheduled production downtime for repairs and maintenance at our Pekin Campus which reduced sales volumes and increased losses.
As a result, our margins for fuel-grade ethanol sold in these transactions generally decline and may turn negative as the market price of fuel-grade ethanol declines. -14- We can provide no assurances that corn, natural gas or other production inputs can be purchased at or near current or any specific prices, or that our alcohols or essential ingredients will sell at or near current or any particular prices.
As a result, our margins for fuel-grade ethanol sold in these transactions generally decline and may turn negative as the market price of fuel-grade ethanol declines. - 15 - We can provide no assurances that corn, natural gas or other production inputs can be purchased at or near current or any specific prices, or that our alcohols or essential ingredients will sell at or near current or any particular prices.
Our expected financial and other results from these projects are based on assumptions around many factors, including their costs, timing, operation and market prices prevailing at project completion and thereafter, as well as tax and other favorable environmental attributes associated with low carbon ethanol that may accrue to our benefit.
Our expected financial and other results from these projects are based on assumptions around many factors, including their costs, timing, operation and market prices prevailing at project completion and thereafter, as well as tax and other favorable environmental attributes associated with low carbon alcohol that may accrue to our benefit.
Even if inflation stabilizes or abates, the prices of key production inputs, wages and other costs of labor, equipment, services, and other business expenses, and for our capital projects, may remain at elevated levels. We may not be able to include these additional costs in the prices of the products we sell.
Even if inflation stabilizes or abates, the prices of key production inputs, wages and other costs of labor, equipment, services, and other business expenses, and for our capital projects, will likely remain at elevated levels. We may not be able to include these additional costs in the prices of the products we sell.
As a result, our hedging activities and fluctuations in the price of corn, natural gas, fuel-grade ethanol and unleaded gasoline may adversely affect our results of operations, financial condition and liquidity. -15- Disruptions in our production or distribution, including from climate change and other weather effects, may adversely affect our business, results of operations and financial condition.
As a result, our hedging activities and fluctuations in the price of corn, natural gas, fuel-grade ethanol and unleaded gasoline may adversely affect our results of operations, financial condition and liquidity. - 16 - Disruptions in our production or distribution, including from climate change and other weather effects, may adversely affect our business, results of operations and financial condition.
Higher natural gas prices would likewise increase our production input costs. -17- Other factors that may result from climate change, or that may result from governmental regulations aimed at addressing climate-related issues, may also adversely affect our business, including the following: ● water is one of our key production inputs; water resource limitations may result from drought and other inclement weather; water resource limitations may also result from rationing and other governmental regulations limiting water use; ● higher water temperatures due to increased global or regional temperatures may negatively affect production efficiencies due to water temperature production requirements given the poor cooling capacities of our older facilities; ● flooding and other inclement weather may negatively affect our river access, other transportation logistics and costs, and storage requirements; ● an overall increase in energy costs will negatively impact our production costs generally and may critically impact certain high energy-intensive production technologies, such as our wet milling and multiple distillation processes for high-quality alcohol; ● regulatory and market transition away from combustion fuels and fuel-grade ethanol blending may threaten the viability of our renewable fuels business; and ● costs and regulatory burdens associated with governmental regulations that limit or tax greenhouse gas emissions, such as CO 2 , from alcohol production and distribution, or from truck transport and packaging associated with Eagle Alcohol’s business and use of drums and totes, will negatively impact us.
Higher natural gas prices would likewise increase our production input costs. - 18 - Other factors that may result from climate change, or that may result from governmental regulations aimed at addressing climate-related issues, may also adversely affect our business, including the following: ● water is one of our key production inputs; water resource limitations may result from drought and other inclement weather; water resource limitations may also result from rationing and other governmental regulations limiting water use; ● higher water temperatures due to increased global or regional temperatures may negatively affect production efficiencies due to water temperature production requirements given the limited cooling capacities of our older facilities; ● flooding and other inclement weather may negatively affect our river access, other transportation logistics and costs, and storage requirements; ● an overall increase in energy costs will negatively impact our production costs generally and may critically impact certain high energy-intensive production technologies, such as our wet milling and multiple distillation processes for the highest quality specialty alcohols; ● regulatory and market transition away from combustion fuels and fuel-grade ethanol blending may threaten the viability of our renewable fuels business; and ● costs and regulatory burdens associated with governmental regulations that limit or tax greenhouse gas emissions, such as CO 2 , from alcohol production and distribution, or from truck transport and packaging associated with Eagle Alcohol’s business and use of drums and totes, will negatively impact us.
Our alcohol production relies on traditional corn-based feedstock and process technologies. New technologies could make corn-based alcohol production and traditional process technologies less competitive or even obsolete, materially and adversely harming our business. We produce our alcohols from corn. Moreover, our plants are constructed and operate exclusively as corn-based alcohol production facilities.
Our alcohol production relies on traditional corn-based feedstock and process technologies. New technologies could make corn-based alcohol production and traditional process technologies less competitive or even obsolete, materially and adversely harming our business. We produce our alcohols from corn. Moreover, our plants are constructed and operate primarily as corn-based alcohol production facilities.
Any of these outcomes could have a material adverse effect on our results of operations, cash flows and financial condition. -16- We may suffer impairments in the value of our long-lived assets which may materially and adversely affect our results of operations.
Any of these outcomes could have a material adverse effect on our results of operations, cash flows and financial condition. - 17 - We may suffer impairments in the value of our long-lived assets which may materially and adversely affect our results of operations.
Future demand for fuel-grade ethanol will largely depend on incentives to blend ethanol into motor fuels, including the price of ethanol relative to the price of gasoline, the relative octane value of ethanol, constraints on the ability of vehicles to use higher ethanol blends, and the Environmental Protection Agency’s, or EPA’s, established volumes from time to time, small refinery waivers, and other applicable environmental requirements.
Future demand for fuel-grade ethanol will largely depend on incentives to blend ethanol into motor fuels, including the price of ethanol relative to the price of gasoline, the relative octane value of ethanol, constraints on the ability of vehicles to use higher ethanol blends, and the EPA’s, established volumes from time to time, small refinery waivers, and other applicable environmental requirements.
We regularly incur significant expenses to repair, maintain and upgrade our production facilities and operating equipment, estimated at an average of $30.0 million per year. The machines and equipment we use to produce our alcohols and essential ingredients are complex, have many parts, and some operate on a continuous basis.
We regularly incur significant expenses to repair, maintain and upgrade our production facilities and operating equipment, estimated at an average of $30.0 million per year. We incurred $35.0 million of these expenses for 2024. The machines and equipment we use to produce our alcohols and essential ingredients are complex, have many parts, and some operate on a continuous basis.
The market price of our common stock may continue to fluctuate in response to one or more of the following factors, or any of the other risks or uncertainties discussed in this report, many of which are beyond our control: ● fluctuations in our quarterly or annual operating results; ● fluctuations in the market prices of our products; ● fluctuations in the costs of key production input commodities such as corn and natural gas; ● the timing, cost and effects of our capital improvement projects, including with respect to our CCS project and our corn oil and high protein system at our Magic Valley facility; ● anticipated trends in our financial condition and results of operations; ● our ability to obtain any necessary financing; ● the volume and timing of the receipt of orders for our products from major customers, including annual contracted sales volumes for our specialty alcohols; ● competitive pricing pressures; ● changes in market valuations of companies similar to us; -23- ● stock market price and volume fluctuations generally; ● regulatory developments or increased enforcement; ● additions or departures of key personnel; ● environmental, product or other liabilities we may incur; ● our financing activities and future sales of our common stock or other securities; and ● our ability to maintain contracts that are critical to our operations.
The market price of our common stock may continue to fluctuate in response to one or more of the following factors, or any of the other risks or uncertainties discussed in this report, many of which are beyond our control: ● fluctuations in our quarterly or annual operating results; ● fluctuations in the market prices of our products; ● fluctuations in the costs of key production input commodities such as corn and natural gas; ● the timing, cost and effects of, and our ability to fund, our capital improvement projects, including our CCS project; ● anticipated trends in our financial condition and results of operations; ● our ability to obtain any necessary financing; - 25 - ● the volume and timing of the receipt of orders for our products from major customers, including annual contracted sales volumes for our specialty alcohols; ● competitive pricing pressures; ● changes in market valuations of companies similar to us; ● stock market price and volume fluctuations generally; ● regulatory developments or increased enforcement; ● additions or departures of key personnel; ● environmental, product or other liabilities we may incur; ● our financing activities and future sales of our common stock or other securities; and ● our ability to maintain contracts that are critical to our operations.
We can provide no assurances that our projects will be completed, or if completed, will be completed timely. We also can provide no assurances that our project assumptions will reflect prevailing future conditions or that our projects will achieve the results we expect, including as to projected additional EBITDA and Adjusted EBITDA.
We also can provide no assurances that our project assumptions will reflect prevailing future conditions or that our projects will achieve the results we expect, including as to projected additional EBITDA and Adjusted EBITDA.
For example, we recognized asset impairments of $6.5 million and $3.1 million for the years ended December 31, 2023 and 2021, respectively. We may recognize additional impairments of the values of our long-lived assets in the future based on then-prevailing financial and other circumstances. Impairments of our long-lived assets may materially and adversely affect our results of operations.
For example, we recognized asset impairments of $24.8 million and $6.5 million for the years ended December 31, 2024 and 2023, respectively. We may recognize additional impairments of the values of our long-lived assets in the future based on then-prevailing financial and other circumstances. Impairments of our long-lived assets may materially and adversely affect our results of operations.
Our fuel-grade ethanol sales are tied to prevailing spot market prices rather than long-term, fixed-price contracts. Fuel-grade ethanol prices, as reported by the Chicago Mercantile Exchange, ranged from $1.58 to $2.67 per gallon in 2023, from $2.00 to $2.88 per gallon in 2022 and from $1.48 to $3.75 per gallon in 2021.
Our fuel-grade ethanol sales are tied to prevailing spot market prices rather than long-term, fixed-price contracts. Fuel-grade ethanol prices, as reported by the Chicago Mercantile Exchange, ranged from $1.38 to $2.12 per gallon in 2024, from $1.58 to $2.67 per gallon in 2023 and from $2.00 to $2.88 per gallon in 2022.
Additional losses and negative operating cash flow may hamper our operations and impede us from expanding our business. -18- We are engaged in a wide variety of capital improvement projects. These projects, and their financing, costs, timing and effects, are based on our plans, expectations and various assumptions that may not eventuate.
Additional losses and negative operating cash flow may hamper our operations and impede us from expanding our business. - 19 - We are engaged in multiple capital improvement projects. These projects, and their financing, costs, timing and effects, are based on our plans, expectations and various assumptions that may not eventuate.
Fluctuations are likely to continue to occur. A sustained negative or narrow spread, whether as a result of sustained high or increased corn prices or sustained low or decreased alcohol or essential ingredient prices, would adversely affect our results of operations and financial condition.
A sustained negative or narrow spread, whether as a result of sustained high or increased corn prices or sustained low or decreased alcohol or essential ingredient prices, would adversely affect our results of operations and financial condition.
Our ability to utilize net operating loss carryforwards and certain other tax attributes may be limited. Federal and state income tax laws impose restrictions on our use of net operating loss, or NOL, and tax credit carryforwards in the event that an “ownership change” occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code, or Code.
Federal and state income tax laws impose restrictions on our use of net operating loss, or NOL, and tax credit carryforwards in the event that an “ownership change” occurs for tax purposes, as defined by section 382 of the Internal Revenue Code, or Code.
For example, for the three months ended December 31, 2023 and the years ended December 31, 2023 and 2022, we incurred consolidated net losses of approximately $19.0 million, $28.0 million and $41.6 million, respectively. We may incur losses and negative operating cash flow in the future.
For example, for the years ended December 31, 2024, 2023 and 2022, we incurred consolidated net losses of approximately $59.0 million, $28.0 million and $41.6 million, respectively. For the year ended December 31, 2024, we incurred negative operating cash flow of $3.5 million. We may incur losses and negative operating cash flow in the future.
Our customers may not pay us timely or at all, even under longer-term, fixed-price contracts for our specialty alcohols, and may seek to renegotiate prices under those contracts during periods of falling prices or high price volatility. Over the past several years, for example, the spread between corn and fuel-grade ethanol prices has fluctuated significantly.
Our customers may not pay us timely or at all, even under longer-term, fixed-price contracts for our specialty alcohols, and may seek to renegotiate prices under those contracts during periods of falling prices or high price volatility. Historically, the spread between corn and fuel-grade ethanol prices has fluctuated significantly. Fluctuations are likely to continue to occur.
If any of these types of security breaches were to occur and we were unable to protect sensitive data, our relationships with our business partners and customers could be materially damaged, our reputation could be materially harmed, and we could be exposed to a risk of litigation and possible significant liability.
If any of these types of security breaches were to occur and we were unable to protect sensitive data, our relationships with our business partners and customers could be materially damaged, our reputation could be materially harmed, and we could be exposed to a risk of litigation and possible significant liability. - 27 - Further, if we fail to adequately maintain our information technology infrastructure, we may have outages and data loss.
We may therefore be unable to timely achieve, or achieve at all, the results we expect, including as to projected additional EBITDA and Adjusted EBITDA. We are engaged in a wide variety of capital improvement projects to diversify and enhance our revenue streams and to expand margins and profitability by reducing costs.
We may therefore be unable to timely achieve, or achieve at all, the results we expect, including as to projected additional EBITDA and Adjusted EBITDA. We are engaged in multiple capital improvement projects to diversify and enhance our revenue streams and to expand margins and profitability by reducing costs. These projects have different timelines, returns on investment and risk profiles.
Our failure to timely service or satisfy our debt obligations, including to meet our financial covenants, could result in our indebtedness being immediately due and payable, and would have a material adverse effect on our business, business prospects, liquidity, financial condition, cash flows and results of operations.
Our failure to timely service or satisfy our debt obligations, including to meet our financial covenants, could result in our indebtedness being immediately due and payable, and would have a material adverse effect on our business, business prospects, liquidity, financial condition, cash flows and results of operations. - 21 - Our ability to utilize net operating loss carryforwards and certain other tax attributes may be limited.
The United States fuel-grade ethanol industry is highly dependent upon various federal and state laws and regulations and any changes in those laws or regulations could have a material adverse effect on our results of operations, cash flows and financial condition.
Events that result in significant personal injury or other losses that are not fully covered by insurance could have a material adverse effect on our results of operations and financial condition. - 23 - The United States fuel-grade ethanol industry is highly dependent upon various federal and state laws and regulations and any changes in or reinterpretations of those laws or regulations could have a material adverse effect on our results of operations, cash flows and financial condition.
In addition, we believe that additional consumer acceptance of E15 and E85 fuels is necessary before fuel-grade ethanol can achieve any significant growth in market share relative to other transportation fuels.
In addition, we believe that additional consumer acceptance of E15 and E85 fuels is necessary before fuel-grade ethanol can achieve any significant growth in market share relative to other transportation fuels. The United States Supreme Court’s decision in the case of Chevron U.S.A., Inc. v.
Events that result in significant personal injury or other losses that are not fully covered by insurance could have a material adverse effect on our results of operations and financial condition.
Events that result in significant personal injury or damage to our property or third parties or other losses that are not fully covered by insurance could have a material adverse effect on our results of operations and financial condition. Our CCS project may be adversely affected by the SAFE CCS Act and other Regulations.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. -24- The choice of forum provisions in our bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers, employees, agents or other third parties, which may discourage such lawsuits against us and our directors, officers, employees, agents and other third parties even though an action, if successful, might benefit our stockholders.
The choice of forum provisions in our bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers, employees, agents or other third parties, which may discourage such lawsuits against us and our directors, officers, employees, agents and other third parties even though an action, if successful, might benefit our stockholders.
These scheduled and unscheduled shutdowns result in lower sales and increased costs in the periods during which a shutdown occurs and could result in unexpected operational issues in future periods resulting from changes to equipment and operational and mechanical processes made during shutdown. -19- Our indebtedness may expose us to risks that could negatively impact our business, prospects, liquidity, cash flows and results of operations.
These scheduled and unscheduled shutdowns result in lower sales and increased costs in the periods during which a shutdown occurs and could result in unexpected operational issues in future periods resulting from changes to equipment and operational and mechanical processes made during shutdown.
In addition, data security breaches experienced by us or our business partners or contractors could result in the loss of trade secrets or other intellectual property, public disclosure of sensitive commercial data, and the exposure of personally identifiable information (including sensitive personal information) of our employees, customers, suppliers, contractors and others. -25- Unauthorized use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our systems, breach of the systems of our suppliers or vendors by an unauthorized party, or through employee or contractor error, theft or misuse, or otherwise, could harm our business.
In addition, data security breaches experienced by us or our business partners or contractors could result in the loss of trade secrets or other intellectual property, public disclosure of sensitive commercial data, and the exposure of personally identifiable information (including sensitive personal information) of our employees, customers, suppliers, contractors and others.
Delayed sales or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation. Our and our business partners’ or contractors’ failure to fully comply with applicable data privacy or similar laws could lead to significant fines and require onerous corrective action.
Our and our business partners’ or contractors’ failure to fully comply with applicable data privacy or similar laws could lead to significant fines and require onerous corrective action.
We have incurred, and anticipate incurring additional, substantial indebtedness for our capital improvement projects. We expect that these projects, when completed, will generate financial returns sufficient to service and ultimately repay or refinance our indebtedness. However, the costs, timing, and effects of our capital improvement projects may not meet our projections.
Our indebtedness may expose us to risks that could negatively impact our business, prospects, liquidity, cash flows and results of operations. We have incurred, and anticipate incurring additional, substantial indebtedness for our capital improvement projects. We expect that these projects, when completed, will generate financial returns sufficient to service and ultimately repay or refinance our indebtedness.
For example, operation of our corn oil and high protein system at our Magic Valley facility has resulted in inconsistent product quality and degraded other operations at the plant, including production rates.
For example, operation of our corn oil and high protein system at our Magic Valley facility previously resulted in inconsistent product quality and degraded other operations at the plant, including production rates. In the past, we have extended our expected completion dates for various projects and, as circumstances require, may have to do so again.
Our results of operations, cash flows and financial condition could be adversely impacted if the EPA reduces mandatory volumes or issues significant small refinery waivers, or if any legislation is enacted that reduces volume requirements. -22- Future demand for fuel-grade ethanol is uncertain and may be affected by changes to federal mandates, public perception, consumer acceptance and overall consumer demand for transportation fuel, any of which could negatively affect demand for fuel-grade ethanol and our results of operations.
Future demand for fuel-grade ethanol is uncertain and may be affected by changes to federal mandates, public perception, consumer acceptance and overall consumer demand for transportation fuel, any of which could negatively affect demand for fuel-grade ethanol and our results of operations.
Present and future environmental laws and regulations, and interpretations of those laws and regulations, applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results of operations and financial condition.
Present and future environmental laws and regulations, and interpretations of those laws and regulations, applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results of operations and financial condition. - 22 - The hazards and risks associated with producing and transporting our products (including fires, natural disasters, explosions and abnormal pressures and blowouts) may also result in personal injury claims or damage to property and third parties.
In addition, we have made, and expect to make, significant capital expenditures on an ongoing basis to comply with increasingly stringent environmental laws, regulations and permits. -20- We may be liable for the investigation and cleanup of environmental contamination at each of our production facilities and at off-site locations where we arrange for the disposal of hazardous substances or wastes.
We may be liable for the investigation and cleanup of environmental contamination at each of our production facilities and at off-site locations where we arrange for the disposal of hazardous substances or wastes.
Further, if we fail to adequately maintain our information technology infrastructure, we may have outages and data loss. Excessive outages may affect our ability to timely and efficiently deliver products to customers or develop new products. Such disruptions and data loss may adversely impact our ability to fulfill orders and interrupt other processes.
Excessive outages may affect our ability to timely and efficiently deliver products to customers or develop new products. Such disruptions and data loss may adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.
Any violation of these laws and regulations or permit conditions may result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or production facility shutdowns.
Any violation of these laws and regulations or permit conditions may result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or production facility shutdowns. In addition, we have made, and expect to make, significant capital expenditures on an ongoing basis to comply with increasingly stringent environmental laws, regulations and permits.
These projects have different timelines, returns on investment and risk profiles. In addition, we must raise significant additional capital to complete some of our projects, including our carbon capture and storage project.
In addition, we must raise significant additional capital to complete some of our projects, including our CCS project.
In addition, some of our fuel-grade ethanol marketing and distribution activities will likely be unprofitable in a market of generally declining prices due to the nature of our business. For example, to satisfy customer demand, we maintain certain quantities of fuel-grade ethanol inventory for subsequent resale.
We restarted the Magic Valley facility in July 2024, but due to challenging market economics, we cold-idled the plant at the end of 2024. In addition, some of our fuel-grade ethanol marketing and distribution activities will likely be unprofitable in a market of generally declining prices due to the nature of our business.
For example, we hot-idled our Magic Valley facility in early 2023 due to unfavorable market conditions and again hot-idled our Magic Valley facility in early 2024 in part due to unfavorable market conditions.
For example, we hot-idled our Magic Valley facility in early 2023 due to unfavorable market conditions and again hot-idled our Magic Valley facility in early 2024 in part due to unfavorable market conditions and to expedite the installation of additional equipment needed to achieve the intended production rate, quality and consistency from the corn oil and high protein system at the facility.
These tax and other benefits may change, including as a result of new or repealed laws, new administrations and the implementation or interpretation of existing laws. We can provide no assurances that any particular benefit will be available to us upon completion of our CCS project, or thereafter, or any other capital improvement project.
We can provide no assurances that any particular benefit will be available to us upon completion of our CCS project, or thereafter, or any other capital improvement project. Capital improvement projects require significant outlays of capital and are often subject to material execution risks and delays.
In the past, poor weather has caused disruptions in rail transportation, which slowed the delivery of fuel-grade ethanol by rail, a key method by which fuel-grade ethanol from our Pekin Campus is transported to market. For example, in the third quarter of 2023 we experienced unusually high unscheduled production downtime for repairs and maintenance which reduced sales volumes and profits.
In the third quarter of 2023 we experienced unusually high unscheduled production downtime for repairs and maintenance which reduced sales volumes and profits.
Capital improvement projects require significant outlays of capital and are often subject to material execution risks. We may have insufficient financial resources, and we may be unable to raise sufficient capital, to complete our projects timely or at all.
Our CCS project in particular requires Environmental Protection Agency, or EPA, approval but the EPA’s own projected timeline for approval has lengthened and may lengthen further. We may have insufficient financial resources, and we may be unable to raise sufficient capital, to complete our projects timely or at all.
New legislation, including new or expanded cap-and-trade programs, could materially and adversely impact our production cost structure and the market viability of our products. Any of these factors could materially and adversely harm our business, results of operations and financial condition.
New legislation in the United States to address climate change issues, especially at the state and local levels, may be passed and implemented, materially and adversely impacting our business. Any of these factors could materially and adversely harm our business, results of operations and financial condition.
Removed
In addition, in 2020, we experienced closure of the Illinois River for lock repairs which required greater use of less cost-effective modes of product transport such as via rail and truck, which resulted in higher costs and negatively affected our results of operations.
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For example, to satisfy customer demand, we maintain certain quantities of fuel-grade ethanol inventory for subsequent resale.
Removed
New legislation in the United States to address climate change issues, including at the federal, state and local levels, likely will continue. This includes new or expanded cap-and-trade programs that may layer additional costs on any business that emits greenhouse gases.
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In the past, poor weather has caused disruptions in rail transportation, which slowed the delivery of fuel-grade ethanol and/or corn by rail to and from our facilities. For example, in the first quarter of 2024, extreme cold weather conditions in January at our Pekin Campus restricted barge deliveries and increased standby fees.
Removed
We continue to work to resolve the system’s issues but can provide no assurance that the system will perform as anticipated or perform sufficiently well to justify continued operation or expansion to our three other dry mills. In the past, we have extended our expected completion dates for various projects and, as circumstances require, may have to do so again.
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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.
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The hazards and risks associated with producing and transporting our products (including fires, natural disasters, explosions and abnormal pressures and blowouts) may also result in personal injury claims or damage to property and third parties. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses.
Added
These tax and other benefits may change, including as a result of new or repealed laws, new administrations and the implementation or interpretation of existing laws, or the exhaustion of funds or benefits available under a particular program. For example, in January 2025, the new administration suspended all Inflation Reduction Act spending for 90 days.
Removed
However, we could sustain losses for uninsurable or uninsured risks, or in amounts in excess of existing insurance coverages. Events that result in significant personal injury or damage to our property or third parties or other losses that are not fully covered by insurance could have a material adverse effect on our results of operations and financial condition.
Added
In addition, certain provisions of the Inflation Reduction Act lack proposed or final regulations and guidance. Regulators could issue new regulations or guidance that significantly narrows the application of clean energy tax incentives, and could even defer or withdraw regulations, which could materially and adversely affect the economic outcome of our CCS project.
Removed
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Delaware Court of Chancery shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us to us or our stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (d) any action asserting a claim governed by the internal affairs doctrine.
Added
In addition, our CCS project may be adversely affected by the SAFE CCS Act or the United States Supreme Court’s decision in the case of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., or both, as discussed below. The timing and economics of our CCS project may also be adversely affected by new rules proposed by the U.S.
Added
Department of Transportation’s Pipeline and Hazardous Materials Safety Administration that impose stronger standards for CO 2 pipelines and establish new standards for transporting CO 2 in a gaseous state via pipeline, adding additional requirements and costs to the project. We can provide no assurances that our projects will be completed, or if completed, will be completed timely or within budget.
Added
For example, we completed our biennial wet mill outage at our Pekin Campus in Spring 2024. The wet mill was offline for ten days, which negatively impacted sales and margins for the second quarter. In the first quarter of 2024, production at our Colombia facility was hampered by equipment issues that extended the facility’s regularly scheduled outage.
Added
However, the costs, timing, and effects of our capital improvement projects may not meet our projections.
Added
As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses. However, we could sustain losses for uninsurable or uninsured risks, or in amounts in excess of existing insurance coverages.
Added
The SAFE CCS Act was signed into law in Illinois in July 2024. We are pursuing at our Pekin Campus, located in Illinois, a CCS project that will require significant financial and personnel resources. Our CCS project is our most important ongoing capital improvement initiative.
Added
The SAFE CCS Act establishes stringent safety, financial and insurance requirements on CO 2 pipelines and imposes a moratorium on the construction of new CO 2 pipelines until the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration finalizes its new safety rules or July 1, 2026, whichever occur sooner.
Added
The SAFE CCS Act will result in increased compliance and other requirements likely adding costs and potentially adding time to complete our CCS project. In January 2025, the U.S.
Added
Department of Transportation’s Pipeline and Hazardous Materials Safety Administration proposed new rules that impose stronger standards for CO 2 pipelines and establish new standards for transporting CO 2 in a gaseous state via pipeline, adding additional requirements and costs to the project.
Added
We can provide no assurance that our CCS project will not be adversely affected by the SAFE CCS Act or other regulations or that it will be financially viable in light of any new requirements and potential delays.
Added
Our results of operations, cash flows and financial condition could be adversely impacted if the EPA reduces mandatory volumes or issues significant small refinery waivers, or if any legislation is enacted that reduces volume requirements or if existing legislation is reinterpreted to have the same effect.
Added
Natural Resources Defense Council, Inc. may result in less industry-favorable rulemaking and agency interpretations of laws and regulations, which could materially and adversely affect our results of operations, cash flows and financial condition as well as the business and financial prospects of certain capital improvement projects, such as CCS.
Added
The United States Supreme Court, in the landmark case of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., recently overturned its prior doctrine of judicial deference to administrative interpretations of laws and regulations.
Added
This outcome could materially and adversely affect rulemaking and agencies’ interpretations favorable to the renewable fuels industry, such as the EPA’s administration of the Renewable Fuel Standard.
Added
This outcome could also materially and adversely affect the Treasury Department’s ability to promulgate favorable regulations under the Inflation Reduction Act of 2022, including tax credits such as the section 45Q carbon capture and storage tax credits and section 45Z low carbon fuel tax credits, as well as other industry-favorable tax credits.
Added
Less industry-favorable rulemaking and agency interpretations of laws and regulations could materially and adversely affect our results of operations, cash flows and financial condition as well as the financial prospects of certain capital improvement projects, such as CCS.
Added
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Added
Unauthorized use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our systems, breach of the systems of our suppliers or vendors by an unauthorized party, or through employee or contractor error, theft or misuse, or otherwise, could harm our business.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe refine these measures based on our ongoing assessments, including cybersecurity threat intelligence updates. ● Incident Response and Recovery Planning: We maintain incident response and recovery frameworks, tested twice yearly through simulations and tabletop exercises, to improve our preparedness to effectively manage and mitigate cybersecurity incidents. -26- ● Education and Awareness: Our personnel undergo mandatory periodic training on cybersecurity threats, with updated insights into effective defense mechanisms and our evolving cybersecurity policies and practices. ● Use of Third Parties: We collaborate with external cybersecurity service providers, including auditors and consultants, to refine our cybersecurity measures.
Biggest changeWe refine these measures based on our ongoing assessments, including cybersecurity threat intelligence updates. ● Incident Response and Recovery Planning: We maintain incident response and recovery frameworks, tested twice yearly through backup restorations to critical systems, to improve our preparedness to effectively manage and mitigate cybersecurity incidents. ● Education and Awareness: Our personnel and members of our Board of Directors undergo mandatory periodic training on cybersecurity threats, with updated insights into effective defense mechanisms and our evolving cybersecurity policies and practices. ● Use of Third Parties: We collaborate with external cybersecurity service providers, including auditors, consultants and governmental agencies, to refine our cybersecurity measures.
Our Chief Financial Officer and Director of Information Technology, along with key executives, have roles in governance and facilitating alignment across our organization. ● Compliance and Standards: We design our cybersecurity program for compliance with industry-specific and other regulations (e.g., the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA)) demonstrating our commitment to both domestic and international information security standards.
Our Chief Financial Officer and Director of Information Technology, along with key executives, have roles in governance and facilitating alignment across our organization. - 28 - ● Compliance and Standards: We design our cybersecurity program for compliance with industry-specific and other regulations (e.g., the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA)) demonstrating our commitment to both domestic and international information security standards.
Management is notified of, and monitors, cybersecurity incidents through our EDR and SIEM systems. ● Our Director of Information Technology has over 20 years of experience in information technology and five years of experience serving directly as a Chief Information Security Officer for other organizations. ● Our networks and systems are continuously monitored by a combination of third-party service providers and an internal cybersecurity team.
Management is notified of, and monitors, cybersecurity incidents through our EDR and SIEM systems. ● Our Director of Information Technology has over 20 years of experience in information technology and five years of experience serving directly as a Chief Information Security Officer for other organizations. - 29 - ● Our networks and systems are continuously monitored by a combination of third-party service providers and an internal cybersecurity team.
These service providers carry out cybersecurity risk evaluations such as periodic assessments and vulnerability scans to pinpoint potential security flaws and suggest enhancements. -27- Engagement and Continuous Improvement We periodically evaluate our cybersecurity measures through internal and external audits and assessments to ensure our cybersecurity program is at the forefront of industry best practices.
These service providers carry out cybersecurity risk evaluations such as periodic assessments and vulnerability scans to pinpoint potential security flaws and suggest enhancements. Engagement and Continuous Improvement We periodically evaluate our cybersecurity measures through internal and external audits and assessments to ensure our cybersecurity program is at the forefront of industry best practices.
Management is promptly notified of cybersecurity incidents. ● Our Audit Committee is promptly notified by our management of any material cybersecurity breach. ● Our Board of Directors is briefed at least annually on the state of our cybersecurity program. ● Our internal cybersecurity team collaborates with external cybersecurity service providers, including auditors and consultants, to refine our cybersecurity measures.
Management is promptly notified of cybersecurity incidents. ● Our Audit Committee is promptly notified by our management of any material cybersecurity breach. ● Our Board of Directors is briefed at least quarterly on the state of our cybersecurity program. ● Our internal cybersecurity team collaborates with external cybersecurity service providers, including auditors, consultants and governmental agencies, to refine our cybersecurity measures.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 4. Mine Safety Disclosures. Not applicable. - 30 - PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis graph assumes that the value of the investment in our common stock and each of the comparison groups was $100 on December 31, 2018. -29- Years Ended 12/2018 12/2019 12/2020 12/2021 12/2022 12/2023 Alto Ingredients, Inc. 100.00 75.49 630.66 558.65 334.49 308.94 Nasdaq Composite 100.00 136.69 198.10 242.03 163.28 236.17 Nasdaq Clean Edge Green Energy 100.00 142.67 406.35 395.62 276.35 248.97 Dividend Policy We have never paid cash dividends on our common stock and do not intend to pay cash dividends on our common stock in the foreseeable future.
Biggest changeYears Ended 12/2019 12/2020 12/2021 12/2022 12/2023 12/2024 Alto Ingredients, Inc. 100.00 835.38 740.00 443.08 409.23 240.00 Nasdaq Composite 100.00 144.92 177.06 119.45 172.77 223.87 Nasdaq Clean Edge Green Energy 100.00 284.83 277.30 193.70 174.51 141.58 - 31 - Dividend Policy We have never paid cash dividends on our common stock and do not intend to pay cash dividends on our common stock in the foreseeable future.
Performance Graph The graph below shows a comparison of the cumulative total stockholder return on our common stock with the cumulative total return on The Nasdaq Composite Index and The Nasdaq Clean Edge Green Energy Index, or Peer Group, in each case over the five-year period ended December 31, 2023.
Performance Graph The graph below shows a comparison of the cumulative total stockholder return on our common stock with the cumulative total return on The Nasdaq Composite Index and The Nasdaq Clean Edge Green Energy Index, or Peer Group, in each case over the five-year period ended December 31, 2024.
These holders of record include depositories that hold shares of stock for brokerage firms which, in turn, hold shares of stock for numerous beneficial owners. On March 12, 2024, the closing sales price of our common stock on The Nasdaq Capital Market was $2.01 per share.
These holders of record include depositories that hold shares of stock for brokerage firms which, in turn, hold shares of stock for numerous beneficial owners. On March 12, 2025, the closing sales price of our common stock on The Nasdaq Capital Market was $1.39 per share.
Security Holders As of March 12, 2024, we had 75,697,150 shares of common stock outstanding held of record by approximately 320 stockholders and 896 shares of non-voting common stock outstanding held of record by one stockholder.
Security Holders As of March 12, 2025, we had 76,611,090 shares of common stock outstanding held of record by approximately 305 stockholders and 896 shares of non-voting common stock outstanding held of record by one stockholder.
For 2023, 2022 and 2021, we declared and paid cash dividends on our outstanding shares of Series B Preferred Stock as they became due. Recent Sales of Unregistered Securities None.
For 2024, 2023 and 2022, we declared and paid cash dividends on our outstanding shares of Series B Preferred Stock as they became due. Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] Not Applicable.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth information about repurchases of our common stock for the three months ended December 31, 2023: Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly- announced plans or programs (2) Approximate dollar value of shares that may yet be purchased under plans or programs (2)(3) October 1 to October 31, 2023 — $ — — $ — November 1 to November 30, 2023 436,000 $ 2.27 436,000 $ 45,001,000 December 1 to December 31, 2023 — $ — — $ — Three months ended December 31, 2023 436,000 $ 2.27 436,000 $ 45,001,000 (1) We repurchased 436,000 shares as part of our publicly announced share repurchase program during the three months ended December 31, 2023 and received no shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the period.
Added
This graph assumes that the value of the investment in our common stock and each of the comparison groups was $100 on December 31, 2019.
Removed
(2) On September 12, 2022, we announced a share repurchase program under which we may repurchase up to $50 million of our common stock with an initial purchase authorization of $10 million. Our lenders have further limited our purchase authorization to $5 million.
Removed
Amounts in excess of our lenders’ initial purchase authorization of $5 million will require additional lender consent and amounts in excess of the initial purchase authorization of $10 million will require additional board and preferred stockholder authorization.
Removed
The share repurchase program does not have an expiration date, does not require the repurchase of any particular amount of shares, and may be implemented, modified, suspended or discontinued in whole or in part at any time and without further notice.
Removed
(3) Amount represents the share repurchase program size of $50 million less approximately $5 million in aggregate share repurchases, but is subject to authorizations for purchases in excess of our lenders’ purchase authorization of $5 million and our board and preferred stockholders’ initial purchase authorization of $10 million. -30-

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

93 edited+56 added−78 removed33 unchanged
Biggest changeResults of Operations Selected Financial Information The following selected financial information should be read in conjunction with our consolidated financial statements and notes to our consolidated financial statements included elsewhere in this report, and the other sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report. -37- Certain performance metrics that we believe are important indicators of our results of operations include: Sales and Operating Metrics (unaudited) Years Ended December 31, Percentage Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Alcohol Sales (gallons in millions) Pekin Campus renewable fuel gallons sold 136.2 116.1 123.5 17 % (6 )% Western production renewable fuel gallons sold 67.0 92.4 37.6 (27 )% 146 % Third party renewable fuel gallons sold 102.6 117.9 229.0 (13 )% (49 )% Total renewable fuel gallons sold 305.8 326.4 390.1 (6 )% (16 )% Specialty alcohol gallons sold 76.7 92.5 89.5 (17 )% 3 % Total gallons sold 382.5 418.9 479.6 (9 )% (13 )% Sales Price per Gallon Pekin Campus $ 2.40 $ 2.55 $ 2.34 (6 )% 9 % Western production $ 2.49 $ 2.75 $ 2.87 (9 )% (4 )% Marketing and distribution $ 2.56 $ 2.83 $ 2.69 (10 )% 5 % Total $ 2.47 $ 2.64 $ 2.46 (6 )% 7 % Alcohol Production (gallons in millions) Pekin Campus 209.7 208.8 212.9 0 % (2 )% Western production 68.1 91.2 38.8 (25 )% 135 % Total 277.8 300.0 251.7 (7 )% 19 % Corn Cost per Bushel Pekin Campus $ 6.32 $ 7.32 $ 6.06 (14 )% 21 % Western production $ 7.45 $ 8.97 $ 7.40 (17 )% 21 % Total $ 6.58 $ 7.77 $ 6.22 (15 )% 25 % Average Market Metrics PLATTS Ethanol price per gallon $ 2.22 $ 2.47 $ 2.29 (10 )% 8 % CME Corn cost per bushel $ 5.64 $ 6.94 $ 5.82 (19 )% 19 % Board corn crush per gallon(1) $ 0.21 $ - $ 0.21 Essential Ingredients Sold (thousand tons) Pekin Campus: Distillers grains 332.7 334.4 338.5 (1 )% (1 )% CO2 182.4 164.8 164.9 11 % 0 % Corn wet feed 95.0 89.9 88.1 6 % 2 % Corn dry feed 90.6 81.6 78.8 11 % 4 % Corn oil and germ 73.8 66.7 69.0 11 % (3 )% Syrup and other 41.2 56.9 77.9 (28 )% (27 )% Corn meal 36.8 32.1 33.9 15 % (5 )% Yeast 25.9 23.9 24.0 8 % 0 % Total Pekin Campus essential ingredients sold 878.4 850.3 875.1 3 % (3 )% Western production: Distillers grains 459.7 643.7 274.0 (29 )% 135 % Syrup and other 119.1 77.4 26.3 54 % 194 % CO2 55.5 55.8 57.1 (1 )% (2 )% Corn oil 8.0 10.2 3.7 (22 )% 176 % Total Western production essential ingredients sold 642.3 787.1 361.1 (18 )% 118 % Total Essential Ingredients Sold 1,520.7 1,637.4 1,236.2 (7 )% 32 % Essential Ingredients Return % (2) Pekin Campus return 45.7 % 41.3 % 40.4 % 11 % 2 % Western production return 33.4 % 31.6 % 31.5 % 6 % 0 % Consolidated total return 42.4 % 37.9 % 38.8 % 12 % (2 )% (1) Assumes corn conversion of 2.80 gallons of alcohol per bushel of corn.
Biggest changeResults of Operations Selected Financial Information The following selected financial information should be read in conjunction with our consolidated financial statements and notes to our consolidated financial statements included elsewhere in this report, and the other sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report. - 39 - Certain performance metrics that we believe are important indicators of our results of operations include: Certain performance metrics that we believe are important indicators of our results of operations include the following: Percentage Change Years Ended December 31, 2024 vs 2023 vs 2024 2023 2022 2023 2022 Alcohol Sales (gallons in millions) Pekin Campus renewable fuel gallons sold 125.7 136.2 116.1 (8 )% 17 % Western production renewable fuel gallons sold 60.5 67.0 92.4 (10 )% (27 )% Third-party renewable fuel gallons sold 108.3 102.6 117.9 6 % (13 )% Total renewable fuel gallons sold 294.5 305.8 326.4 (4 )% (6 )% Specialty alcohol gallons sold 91.5 76.7 92.5 19 % (17 )% Total gallons sold 386.0 382.5 418.9 1 % (9 )% Sales Price per Gallon Pekin Campus $ 1.95 $ 2.40 $ 2.55 (19 )% (6 )% Western production $ 1.91 $ 2.49 $ 2.75 (23 )% (9 )% Marketing and distribution $ 2.00 $ 2.56 $ 2.83 (22 )% (10 )% Total $ 1.95 $ 2.47 $ 2.64 (21 )% (6 )% Alcohol Production (gallons in millions) Pekin Campus 212.4 209.7 208.8 1 % 0 % Western production 58.7 68.1 91.2 (14 )% (25 )% Total 271.1 277.8 300.0 (2 )% (7 )% Corn Cost per Bushel Pekin Campus $ 4.45 $ 6.32 $ 7.32 (30 )% (14 )% Western production $ 5.73 $ 7.45 $ 8.97 (23 )% (17 )% Total $ 4.72 $ 6.58 $ 7.77 (28 )% (15 )% Average Market Metrics PLATTS Ethanol price per gallon $ 1.69 $ 2.22 $ 2.47 (24 )% (10 )% CME Corn cost per bushel $ 4.24 $ 5.64 $ 6.94 (25 )% (19 )% Board corn crush per gallon (1) $ 0.18 $ 0.21 $ 0.00 (14 )% — Essential Ingredients Sold (in thousands of tons) Pekin Campus Distillers grains 336.4 332.7 334.4 1 % (1 )% CO 2 188.6 182.4 164.8 3 % 11 % Corn wet feed 121.8 95.0 89.9 28 % 6 % Corn dry feed 87.2 90.6 81.6 (4 )% 11 % Corn oil and germ 75.1 73.8 66.7 2 % 11 % Syrup and other 38.6 41.2 56.9 (6 )% (28 )% Corn meal 35.4 36.8 32.1 (4 )% 15 % Yeast 23.2 25.9 23.9 (10 )% 8 % Total Pekin Campus 906.3 878.4 850.3 3 % 3 % Western production Distillers grains 394.5 459.7 643.7 (14 )% (29 )% CO 2 57.7 119.1 77.4 (52 )% 54 % Syrup and other 54.8 55.5 55.8 (1 )% (1 )% Corn oil 7.6 8.0 10.2 (5 )% (22 )% Total Western Production 514.6 642.3 787.1 (20 )% (18 )% Total Essential Ingredients Sold 1,420.9 1,520.7 1,637.4 (7 )% (7 )% Essential Ingredients return % (2) Pekin Campus Return 49.7 % 45.7 % 41.3 % 9 % 11 % Western Production Return 32.0 % 33.4 % 31.6 % (4 )% 6 % Consolidated Total Return 45.2 % 42.4 % 37.9 % 7 % 12 % (1) Assumes corn conversion of 2.80 gallons of alcohol per bushel of corn.
Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from the fair value accounting and reporting requirements of derivative accounting. We enter into short-term cash, option and futures contracts as a means of securing purchases of corn, natural gas and sales of fuel-grade ethanol and managing exposure to changes in commodity prices.
Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from the fair value accounting and reporting requirements of derivative accounting. - 49 - We enter into short-term cash, option and futures contracts as a means of securing purchases of corn, natural gas and sales of fuel-grade ethanol and managing exposure to changes in commodity prices.
We believe we have sufficient sources of liquidity to meet our anticipated working capital, debt service, capital expenditure and other liquidity needs for at least the next twelve months from the date of this report. Quantitative Year-End Liquidity Status We believe that the following amounts provide insight into our liquidity and capital resources.
We believe we have sufficient sources of liquidity to meet our anticipated working capital, debt service, capital expenditure and other liquidity needs for at least the next twelve months from the date of this report. - 44 - Quantitative Year-End Liquidity Status We believe that the following amounts provide insight into our liquidity and capital resources.
Our renewable fuel customers are located throughout the Western and Midwestern United States and consist of integrated oil companies and gasoline marketers who blend fuel-grade ethanol into gasoline. Our customers depend on us to provide a reliable supply of fuel-grade ethanol and manage the logistics and timing of delivery.
Our renewable fuels customers are located throughout the Western and Midwestern United States and consist of integrated oil companies and gasoline marketers who blend fuel-grade ethanol into gasoline. Our customers depend on us to provide a reliable supply of fuel-grade ethanol and manage the logistics and timing of delivery.
The obligations of Kinergy and Alto Nutrients under the credit facility are secured by all of our tangible and intangible assets. We believe Kinergy and Alto Nutrients are in compliance with the fixed-charge coverage ratio covenant as of the filing of this report.
The obligations of Kinergy and Alto Nutrients under the credit facility are secured by all of our tangible and intangible assets. - 46 - We believe Kinergy and Alto Nutrients are in compliance with the fixed-charge coverage ratio covenant as of the filing of this report.
Year Ended December 31, 2022, Compared to the Year Ended December 31, 2021 An analysis of our financial results comparing 2022 to 2021 can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on March 14, 2023, which is available free of charge on the Securities and Exchange Commission’s website at www.sec.gov.
Year Ended December 31, 2023, Compared to the Year Ended December 31, 2022 An analysis of our financial results comparing 2023 to 2022 can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on March 14, 2024, which is available free of charge on the Securities and Exchange Commission’s website at www.sec.gov.
The selection of normal purchase or sales contracts, and use of hedge accounting, are accounting policies that can change the timing of recognition of gains and losses in the statement of operations. -48-
The selection of normal purchase or sales contracts, and use of hedge accounting, are accounting policies that can change the timing of recognition of gains and losses in the statement of operations.
Finally, in 2022 and 2021, Kinergy had exclusive sales agreements with two third-party owned fuel-grade ethanol plants under which it sold the plants’ fuel-grade ethanol production for a fee plus the costs to deliver the ethanol to Kinergy’s customers. Kinergy has since terminated these contracts. These sales are referred to as third-party agent sales.
Finally, in 2022, Kinergy had exclusive sales agreements with two third-party owned fuel-grade ethanol plants under which it sold the plants’ fuel-grade ethanol production for a fee plus the costs to deliver the ethanol to Kinergy’s customers. Kinergy has since terminated these contracts. These sales are referred to as third-party agent sales.
The decline was primarily driven by lower renewable fuel prices in 2023 largely due to lower oil and gasoline prices. o Our volume of essential ingredients sold declined by 0.1 million tons, or 7%, to 1.5 million tons for 2023 from 1.6 million tons for 2022 primarily due to lower alcohol production volumes during 2023.
The decline was primarily driven by lower renewable fuel prices in 2024 largely due to lower oil and gasoline prices. o Our volume of essential ingredients sold declined by 0.1 million tons, or 7%, to 1.4 million tons for 2024 from 1.5 million tons for 2023 primarily due to lower alcohol production volumes during 2024.
Liquidity and Capital Resources During the year ended December 31, 2023, we funded our operations primarily from cash on hand, cash flow from operations and proceeds from Kinergy’s operating line of credit.
Liquidity and Capital Resources During the year ended December 31, 2024, we funded our operations primarily from cash on hand and proceeds from Kinergy’s operating line of credit.
We also market essential ingredients produced by our production facilities, including dried yeast, corn gluten meal, corn gluten feed, corn germ, and distillers grains and liquid feed used in commercial animal feed and pet foods. We also sell yeast for human consumption.
We also market essential ingredients produced by our production facilities, including 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 and liquid CO 2 for human consumption.
We believe that our gross profit margins depend primarily on six key factors: ● the prices of our specialty alcohols and the market price of fuel-grade ethanol, the latter of which is impacted by the price of gasoline and related petroleum products, and government regulation, including government ethanol mandates; ● the market prices of key production input commodities, such as corn (including corn basis) and natural gas; ● the market prices of our essential ingredients; ● our ability to anticipate trends in the market and contracted prices of our alcohols, essential ingredients, and costs of key input commodities, and our ability to implement appropriate risk management through hedging and other means, and opportunistic pricing strategies; ● the proportion of our sales of specialty alcohols to our sales of fuel-grade ethanol produced at our facilities relative to their respective market and contracted prices; and ● the proportion of our sales of fuel-grade ethanol produced at our facilities to our sales of fuel-grade ethanol produced by unrelated third-parties relative to the market price of fuel-grade ethanol and marketing and distribution fees payable for third-party sales.
We believe that our gross profit margins depend primarily on the following key factors: ● the prices of our specialty alcohols and the market price of fuel-grade ethanol, the latter of which is impacted by the price of gasoline and related petroleum products, and government regulation, including government ethanol mandates; ● the market prices of key production input commodities, such as corn (including corn basis) and natural gas; ● the market prices of our essential ingredients; ● key variable costs (other than production input commodities), such as production and other personnel staffing; ● our ability to anticipate trends in the market and contracted prices of our alcohols, essential ingredients, and costs of key input commodities, and our ability to implement appropriate risk management through hedging and other means, and opportunistic pricing strategies, as well as the financial results of those hedging activities; ● the proportion of our sales of specialty alcohols to our sales of fuel-grade ethanol produced at our facilities relative to their respective market and contracted prices; and ● the proportion of our sales of fuel-grade ethanol produced at our facilities to our sales of fuel-grade ethanol produced by unrelated third-parties relative to the market price of fuel-grade ethanol and marketing and distribution fees payable for third-party sales.
The following table sets forth the fixed-charge coverage ratio financial covenant and the actual results for the periods presented: Years Ended December 31, 2023 2022 Fixed Charge Coverage Ratio Requirement 1.10 1.10 Actual 5.22 3.54 Excess 4.12 2.44 Alto Ingredients, Inc. has guaranteed all of Kinergy’s obligations under the credit facility.
The following table sets forth the fixed-charge coverage ratio financial covenant and the actual results for the periods presented: Years Ended December 31, 2024 2023 Fixed-Charge Coverage Ratio Requirement 1.10 1.10 Actual 3.53 5.22 Excess 2.43 4.12 Alto Ingredients, Inc. has guaranteed all of Kinergy’s obligations under the credit facility.
Our mission is to produce the highest quality, sustainable ingredients from renewable resources that make everyday products better.
Our mission is to produce the highest quality, sustainable ingredients that make everyday products better.
Our profitability is highly dependent on various commodity prices, including the market prices of corn, natural gas and fuel-grade ethanol. Our consolidated average alcohol sales price declined by 6% to $2.47 per gallon for 2023 compared to $2.64 per gallon for 2022.
Our profitability is highly dependent on various commodity prices, including the market prices of corn, natural gas and fuel-grade ethanol. Our consolidated average alcohol sales price declined by 21% to $1.95 per gallon for 2024 compared to $2.47 per gallon for 2023.
Our production facilities located in Illinois are in the heart of the Corn Belt, benefit from relatively low-cost and abundant feedstock and enjoy logistical advantages that enable us to provide our products to both domestic and international markets via truck, rail or barge.
We produce our alcohols and essential ingredients at our facilities described below. Our production facilities located in Illinois are in the heart of the Corn Belt, benefit from relatively low-cost and abundant feedstock and enjoy logistical advantages that enable us to provide our products to both domestic and international markets via truck, rail or barge.
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.
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 to achieve the intended production rate, quality and consistency from our corn oil and high protein system at the facility.
Overview We produce and distribute renewable fuel and essential ingredients. We are also the largest producer of specialty alcohols in the United States. We operate five alcohol production facilities. Three of our production facilities are located in Illinois, one is located in Oregon and another is located in Idaho.
Overview We are a leading producer and distributor of specialty alcohols, renewable fuels and essential ingredients in the United States. We operate five alcohol production facilities. Three of our production facilities are located in Illinois, one is located in Oregon and another is located in Idaho.
At the segment’s average sales price per gallon of $2.56 for 2023, net sales were $56.6 million higher as a result of the 22.1 million additional gallons sold in 2023 as compared to 2022. This increase was partially offset by the $0.27 decrease in our average sales price per gallon for 2023.
At the segment’s average sales price per gallon of $2.00 for 2024, net sales were $11.4 million higher as a result of the 5.7 million additional gallons sold in 2024 as compared to 2023. This increase was partially offset by the $0.56 decrease in our average sales price per gallon for 2024.
We did not record any impairments for assets held-for-sale for December 31, 2023 or 2022. -47- Valuation Allowance for Deferred Taxes We account for income taxes under the asset and liability approach, where deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse.
Valuation Allowance for Deferred Taxes We account for income taxes under the asset and liability approach, where deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse.
Derivative Instruments We evaluate our contracts to determine whether the contracts are derivative instruments. Management may elect to exempt certain forward contracts that meet the definition of a derivative from derivative accounting as normal purchases or normal sales.
As such, we have recorded a valuation allowance against our net deferred tax assets. Derivative Instruments We evaluate our contracts to determine whether the contracts are derivative instruments. Management may elect to exempt certain forward contracts that meet the definition of a derivative from derivative accounting as normal purchases or normal sales.
Products for Industry & Agriculture markets include alcohols and other products for paint applications and fertilizer s. Products for Essential 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.
Products for Essential Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, distillers grains, liquid CO 2 and liquid feed used in commercial animal feed and pet foods. We also sell yeast and liquid CO 2 for human consumption.
Our average sales price for our essential ingredients also declined primarily due to lower corn prices. -36- ● Gross Profit (Loss) .
Our average sales price for our essential ingredients declined primarily due to lower corn prices.
Pekin Campus Production Segment Our Pekin Campus production segment’s gross profit improved by $35.5 million to a gross profit of $13.7 million from a gross loss of $21.8 million. Of this increase, $35.2 million is attributable to higher commodity crush margins and $0.3 million is attributable to increased sales volumes in 2023 as compared to 2022.
Pekin Campus Production Segment Our Pekin Campus production segment’s gross profit improved by $12.7 million to a gross profit of $25.9 million from $13.3 million. Of this increase, $12.1 million is attributable to higher commodity crush margins and $0.6 million is attributable to increased sales volumes in 2024 as compared to 2023.
We report our financial and operating performance in three segments: (1) Pekin production, which includes the production and sale of alcohols and essential ingredients produced at our three production facilities located in Pekin, Illinois, which we refer to as our Pekin Campus, (2) marketing and distribution, which includes marketing and merchant trading for company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade ethanol sourced from third parties, and (3) Western production, which includes the production and sale of renewable fuel and essential ingredients produced at our two western production facilities on an aggregated basis, none of which are individually so significant as to be considered a separately reportable segment.
In addition, we break bulk distribute specialty alcohols, produced by us and third parties, through our Eagle Alcohol business. - 32 - We report our financial and operating performance in three distinct segments: ● Pekin production , which includes the production and sale of alcohols and essential ingredients produced at our three production facilities located in Pekin, Illinois, which we refer to as our Pekin Campus; ● Marketing and distribution , which includes marketing and merchant trading for company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade ethanol sourced from third parties; and ● Western production , which includes the production and sale of renewable fuels and essential ingredients and, beginning in 2025, liquid CO 2 produced at our western production facilities, including our liquid CO 2 plant, on an aggregated basis, none of which are individually so significant as to be considered a separately reportable segment.
A decline of $0.26, or 9%, in our average sales price per gallon in 2023 as compared to 2022 resulted in a $23.4 million decrease in net sales of alcohol from the segment compared to 2022. Net sales of essential ingredients declined by $32.9 million, or 36%, to $57.3 million for 2023 as compared to $90.2 million for 2022.
A decline of $0.58, or 23%, in our average sales price per gallon in 2024 as compared to 2023 resulted in a $39.2 million decrease in net sales of alcohol from the segment compared to 2023. Net sales of essential ingredients declined by $20.3 million, or 35%, to $37.0 million for 2024 as compared to $57.3 million for 2023.
At the segment’s average sales price per gallon of $2.49 for 2023, we generated $10.3 million in additional net sales from the 4.3 million additional gallons of alcohol sold in 2023 as compared to 2022.
At the segment’s average sales price per gallon of $1.95 for 2024, we generated $9.1 million in additional net sales from the 4.7 million additional gallons of alcohol sold in 2024 as compared to 2023.
We arrange for transportation, storage and delivery of fuel-grade ethanol purchased by our customers through our agreements with third-party service providers in the Western United States as well as in the Midwest from a variety of sources. We market our essential ingredient feed products to dairies and feedlots, in many cases located near our production facilities.
We arrange for transportation, storage and delivery of fuel-grade ethanol purchased by our customers through our agreements with third-party service providers in the Western United States as well as in the Midwest from a variety of sources.
The average price of fuel-grade ethanol as reported by the Chicago Mercantile Exchange, or CME, declined by 10% to $2.22 per gallon for 2023 compared to $2.47 per gallon for 2022. Our average cost of corn declined by 15% to $6.58 per bushel for 2023 from $7.77 per bushel for 2022.
The average price of fuel-grade ethanol as reported by the Chicago Mercantile Exchange, or CME, declined by 24% to $1.69 per gallon for 2024 compared to $2.22 per gallon for 2023. Our average cost of corn declined by 28% to $4.72 per bushel for 2024 from $6.58 per bushel for 2023.
In addition, our sales price declined by $25.45 per ton for 2023. The decline of $25.45, or 22%, in our average sales price per ton in 2023 as compared to 2022 resulted in a decrease of $20.0 million in net sales of essential ingredients from the segment compared to 2022.
In addition, our sales price declined by $17.35 per ton for 2024. The decline of $17.35, or 19%, in our average sales price per ton in 2024 as compared to 2023 resulted in a decrease of $11.1 million in net sales of essential ingredients from the segment compared to 2023.
The average price of corn as reported by the CME declined by 19% to $5.64 per bushel for 2023 from $6.94 per bushel for 2022.
The average price of corn as reported by the CME declined by 25% to $4.24 per bushel for 2024 from $5.64 per bushel for 2023.
We intend to accomplish this goal in part by investing in our specialized and higher value specialty alcohol production and distribution infrastructure, expanding production in high-demand essential ingredients, expanding and extending the sale of our products into new regional and international markets, building efficiencies and economies of scale and by capturing a greater portion of the value stream. -31- Production Segments We produce specialty alcohols, fuel-grade ethanol and essential ingredients, focusing on five key markets: Health, Home & Beauty ; Food & Beverage ; Industry & Agriculture; Essential Ingredients ; and Renewable Fuels .
We intend to accomplish this goal in part by investing in our specialized and higher value specialty alcohol production and distribution infrastructure, expanding production in high-demand essential ingredients, expanding and extending the sale of our products into new regional and international markets, building efficiencies and economies of scale and by capturing a greater portion of the value stream.
As of December 31, 2023, Kinergy had an outstanding balance of $30.7 million and $33.3 million of unused borrowing availability under the credit facility. -44- Orion Term Loan 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.
Orion Term Loan 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.
Changes in Working Capital and Cash Flows Working capital declined to $103.5 million at December 31, 2023 from $121.1 million at December 31, 2022 as a result of a $30.3 million decrease in current assets, partially offset by a $12.7 million decrease in current liabilities.
Changes in Working Capital and Cash Flows Working capital declined to $95.3 million at December 31, 2024 from $103.5 million at December 31, 2023 as a result of a $15.7 million decrease in current assets, partially offset by a $7.5 million decrease in current liabilities. Current assets declined primarily due to decreases in restricted cash, inventories and other current assets.
Management provides EBITDA and Adjusted EBITDA as non-GAAP financial measures so that investors will have the same financial information that management uses, which may assist investors in properly assessing our performance on a period-over-period basis.
Management provides EBITDA and Adjusted EBITDA as non-GAAP financial measures so that investors will have the same financial information that management uses, which may assist investors in properly assessing our performance on a period-over-period basis. We define EBITDA as unaudited consolidated net income (loss) before interest expense, interest income, provision for income taxes and depreciation and amortization expense.
However, a decrease of $0.14, or 6%, in the segment’s average sales price per gallon in 2023 as compared to 2022 resulted in a $29.4 million decline in net sales as compared to 2022. Net sales of essential ingredients declined by $8.2 million, or 4%, to $217.7 million for 2023 as compared to $225.9 million for 2022.
However, a decrease of $0.45, or 19%, in the segment’s average sales price per gallon in 2024 as compared to 2023 resulted in a $95.6 million decline in net sales as compared to 2023. Net sales of essential ingredients declined by $48.4 million, or 22%, to $169.3 million for 2024 as compared to $217.7 million for 2023.
Marketing and Distribution Segment Our marketing and distribution segment’s gross profit improved by $4.1 million to a gross profit of $3.7 million for 2023 from a gross loss of $0.4 million for 2022.
Marketing and Distribution Segment Our marketing and distribution segment’s gross profit declined by $0.2 million to a gross profit of $4.0 million for 2024 from $4.2 million for 2023.
Cash provided by our Operating Activities We generated $22.0 million in cash from our operating activities during 2023, as compared to $6.0 million in 2022.
Cash used in our Operating Activities We used $3.5 million in cash in our operating activities during 2024, as compared to $22.0 million in cash generated from our operating activities in 2023.
Our total volume of essential ingredients sold declined by 144,800 tons, or 18%, to 642,300 tons for 2023 from 787,100 tons for 2022. At our average sales price of $89.15 per ton for 2023, net sales were $12.9 million lower as a result of the 144,800 fewer tons sold in 2023 as compared to 2022.
Our total volume of essential ingredients sold declined by 127,700 tons, or 20%, to 514,600 tons for 2024 from 642,300 tons for 2023. At our average sales price of $71.81 per ton for 2024, net sales were $9.2 million lower as a result of the 127,700 fewer tons sold in 2024 as compared to 2023.
Of this increase, $3.3 million is attributable to higher margins from sales of third-party renewable fuel, and $0.8 million attributable to higher marketing volumes of third-party renewable fuel sold reported gross in 2023 as compared to 2022.
Of this decrease, $0.4 million is attributable to lower margins from sales of third-party renewable fuel, partially offset by an increase of $0.2 million attributable to higher marketing volumes of third-party renewable fuel sold reported gross in 2024 as compared to 2023.
Our cash, cash equivalents and restricted cash declined by $4.0 million due to $33.0 million used in our investing activities primarily for our capital improvement projects, partially offset by $22.0 million in cash provided by our operating activities and $7.0 million in cash provided by our financing activities.
Our cash, cash equivalents and restricted cash declined by $9.3 million due to $3.5 million of cash used in our operating activities and $13.5 million of cash used in our investing activities primarily for our capital improvement projects, partially offset by $7.7 million in cash provided by our financing activities, primarily due to proceeds from our operating line of credit.
December 31, 2023 December 31, 2022 Change Cash, cash equivalents and restricted cash $ 45,480 $ 49,525 (8.2 )% Current assets $ 168,770 $ 199,121 (15.2 )% Property and equipment, net $ 248,748 $ 239,069 4.0 % Current liabilities $ 65,288 $ 78,017 (16.3 )% Long-term debt, noncurrent portion $ 82,097 $ 68,356 20.1 % Working capital $ 103,482 $ 121,104 (14.6 )% Working capital ratio 2.59 2.55 1.6 % -42- Restricted Net Assets At December 31, 2023, we had approximately $64.6 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.
December 31, 2024 December 31, 2023 Change Cash, cash equivalents and restricted cash $ 36,211 $ 45,480 (20 )% Current assets $ 153,118 $ 168,770 (9 )% Property and equipment, net $ 214,742 $ 248,748 (14 )% Current liabilities $ 57,804 $ 65,288 (11 )% Long-term debt, noncurrent portion $ 92,904 $ 82,097 13 % Working capital $ 95,314 $ 103,482 (8 )% Working capital ratio 2.65 2.59 2 % Restricted Net Assets At December 31, 2024, we had approximately $54.1 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.
At our average sales price per ton of $247.84 for 2023, we generated $6.9 million in additional net sales from the 28,100 additional tons of essential ingredients sold in 2023 as compared to 2022.
At our average sales price per ton of $186.81 for 2024, we generated $5.2 million in additional net sales from the 27,900 additional tons of essential ingredients sold in 2024 as compared to 2023.
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.
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. 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.
Our net loss available to common stockholders improved by $13.6 million to a net loss of $29.3 million for 2023 from a net loss of $42.9 million for 2022. Factors that contributed to these results of operations for 2023 include: ● Net sales .
Our net loss attributable to common stockholders increased by $31.0 million to a net loss of $60.3 million for 2024 from a net loss of $29.3 million for 2023. Factors that contributed to these results of operations for 2024 include: ● Net sales .
Forecasts of future cash flows are estimates based on our experience and knowledge of our operations and the industry in which we operate. These estimates could be significantly affected by future changes in market conditions, the economic environment, including inflation, and the purchasing decisions of our customers.
These estimates could be significantly affected by future changes in market conditions, the economic environment, including inflation, and the purchasing decisions of our customers.
Pekin Campus Production Segment Net sales of alcohol from our Pekin Campus production segment declined by $19.1 million, or 4%, to $502.2 million for 2023 as compared to $521.3 million for 2022.
Pekin Campus Production Segment Net sales of alcohol from our Pekin Campus production segment declined by $86.5 million, or 17%, to $415.7 million for 2024 as compared to $502.2 million for 2023.
We assess the impairment of long-lived assets, including property and equipment, when events or changes in circumstances indicate that the fair value of an asset group could be less than the net book value of the asset group.
Impairment of Long-Lived Assets Our long-lived assets have been primarily associated with our production facilities, reflecting their original cost, adjusted for depreciation and amortization and any subsequent impairment. - 48 - We assess the impairment of long-lived assets, including property and equipment, when events or changes in circumstances indicate that the fair value of an asset group could be less than the net book value of the asset group.
Other Cash Obligations As of December 31, 2023, we had future commitments for certain capital projects totaling $15.6 million. These commitments are scheduled to be satisfied through 2024.
As of December 31, 2024 and 2023, the principal amount outstanding under the Term Loan was $60.0 million. Other Cash Obligations As of December 31, 2024, we had future commitments for certain capital projects totaling $9.1 million. These commitments are scheduled to be satisfied through 2025.
These customers include producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products manufacturers, producers of personal health/consumer health and personal care hygiene products, and global trading firms.
We have extensive and long-standing customer relationships, both domestic and international, for our specialty alcohols, renewable fuels and essential ingredients. These customers include producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products manufacturers, producers of personal health/consumer health and personal care hygiene products, and global trading firms.
The following represents a summary of our critical accounting policies and related estimates, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
The following represents a summary of our critical accounting policies and related estimates, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. - 47 - Accounting for Business Combinations Determining the fair value of assets acquired and liabilities assumed in a business combination is considered a critical accounting estimate because the allocation of the purchase price to assets acquired and liabilities assumed based upon fair values requires significant management judgment and the use of subjective measurements.
We have an annual alcohol production capacity of up to 350 million gallons, including both fuel-grade ethanol and specialty alcohols ranging from industrial-, pharmaceutical-, and high-quality food- and beverage-grade alcohols.
We have an annual alcohol production capacity of 350 million gallons, including both renewable fuels and specialty alcohols ranging from industrial-, pharmaceutical-, and high-quality food- and beverage-grade alcohols. Of this amount, we can produce up to 110 million gallons annually of specialty alcohols, depending on our product mix among high-quality beverage-grade alcohol and other quality specification alcohols.
The decrease of $0.27, or 10%, in our average sales price per gallon in 2023 as compared to 2022 resulted in a $21.6 million decline in net sales from our third-party renewable fuel sold by the segment compared to 2022.
The decrease of $0.56, or 22%, in our average sales price per gallon in 2024 as compared to 2023 resulted in a $57.9 million decline in net sales from our third-party renewable fuel sold by the segment compared to 2023. - 42 - Western Production Segment Net sales of alcohol from our Western production segment declined by $51.6 million, or 31%, to $115.4 million for 2024 as compared to $167.0 million for 2023.
In 2023, we marketed and distributed approximately 383 million gallons combined of our own alcohols as well as fuel-grade ethanol produced by third parties, and over 1.5 million tons of essential ingredients on a dry matter basis. We also specialize in break bulk distribution of specialty alcohols through our Eagle Alcohol subsidiary.
We market and distribute all of the alcohols produced at our facilities as well as alcohols produced by third parties. In 2024, we marketed and distributed approximately 386 million gallons combined of our own produced alcohols as well as fuel-grade ethanol produced by third parties, and over 1.4 million tons of essential ingredients on a dry matter basis.
We allocate the transaction price to each performance obligation identified in the contract based on relative standalone selling prices and recognize the related revenue as control of each individual product is transferred to the customer in satisfaction of the corresponding performance obligations. -46- When we are the agent, the supplier controls the products before they are transferred to the customer because the supplier is primarily responsible for fulfilling the promise to provide the product, has inventory risk before the product has been transferred to a customer and has discretion in establishing the price for the product.
We allocate the transaction price to each performance obligation identified in the contract based on relative standalone selling prices and recognize the related revenue as control of each individual product is transferred to the customer in satisfaction of the corresponding performance obligations.
As of December 31, 2023, we had $30.0 million in cash and cash equivalents and $33.3 million available for borrowing under Kinergy’s operating line of credit. In addition, we have up to an additional $65.0 million that may be available for capital improvement projects under our Orion term loan, subject to certain conditions.
In addition, we have up to an additional $65.0 million that may be available for capital improvement projects under our Orion term loan discussed below, subject to certain conditions.
Our total volume of essential ingredients sold increased by 28,100 tons, or 3%, to 878,400 tons for 2023 from 850,300 tons for 2022. Sales volumes of essential ingredients were higher in 2023 due to an extended shut down for maintenance during the summer of 2022.
Our total volume of essential ingredients sold increased by 27,900 tons, or 3%, to 906,300 tons for 2024 from 878,400 tons for 2023. Sales volumes of essential ingredients from our Pekin Campus were higher in 2024 due to higher production rates for the year.
Of this improvement, $1.4 million is attributable to higher margins for renewable fuel and $2.1 million is attributable to lower sales volumes at negative margins in 2023 as compared to 2022. Corporate and Other Segment Gross profit from our Corporate and other segment was flat at $3.7 million for each of 2023 and 2022.
Of this decline, $15.8 million is attributable to significantly lower margins for renewable fuel, partially offset by $2.0 million attributable to lower sales volumes at negative margins in 2024 as compared to 2023. - 43 - Corporate and Other Segment Gross profit and loss from our Corporate and other segment was a gross loss of $0.9 million for 2024 and a gross profit of $3.7 million for 2023, primarily from Eagle Alcohol’s business.
In connection with our acquisition of Eagle Alcohol, we committed to contingent payments of up to $5.5 million in cash over the next two years if certain financial targets and other conditions are met. -45- Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
If the total amount of the undiscounted cash flows is less than the carrying value of the asset group, we then determine the fair value of the asset group. An impairment loss would be recognized when the fair value is less than the related net book value, and an impairment expense would be recorded in the amount of the difference.
If the total amount of the undiscounted cash flows is less than the carrying value of the asset group, we then determine the fair value of the asset group.
In addition, we produced and sold fewer tons of essential ingredients primarily due to lower alcohol production in 2023 compared to 2022. Our average sales price for our essential ingredients declined primarily due to lower corn prices.
Our average sales price per gallon declined primarily due to lower fuel-grade ethanol prices largely driven by lower oil and gasoline prices in 2024 compared to the prior year. We also produced and sold fewer tons of essential ingredients primarily due to lower alcohol production in 2024 compared to 2023.
Our volume of third-party renewable fuel sold reported gross by the segment increased by 22.1 million gallons, or 28%, to 102.6 million gallons for 2023 as compared to 80.5 million gallons for 2022.
Our volume of third-party renewable fuel sold reported gross by the segment increased by 5.7 million gallons, or 6%, to 108.3 million gallons for 2024 as compared to 102.6 million gallons for 2023. This increase resulted from a shift in the source of renewable fuel from our Magic Valley facility to third-party suppliers.
In addition to funding our operations, we used our capital resources to continue our capital improvement projects, make an annual payment related to our acquisition of Eagle Alcohol, repurchase shares of our common stock and pay preferred stock dividends.
In addition to funding our operations, we used our capital resources to continue our capital improvement projects, make an annual cash payment related to our acquisition of Eagle Alcohol and pay preferred stock dividends. As of December 31, 2024, we had $35.5 million in cash and cash equivalents and $23.1 million available for borrowing under Kinergy’s operating line of credit.
These sales are from Eagle Alcohol’s business. -40- Cost of Goods Sold and Gross Profit (Loss) Our consolidated gross profit (loss) improved to a gross profit of $15.7 million, representing a gross margin of 1.3% for 2023, from a gross loss of $27.6 million, representing a gross margin of negative 2.1%, for 2022.
Cost of Goods Sold and Gross Profit Our consolidated gross profit declined to a gross profit of $9.7 million, representing a gross margin of 1.0% for 2024, from $15.7 million, representing a gross margin of 1.3%, for 2023.
Looking ahead, we are working to obtain third-party greenhouse gas verifications, improve transportation safety and earn additional EcoVadis awards. Use of Non-GAAP Financial Measures Management believes that certain financial measures not in accordance with generally accepted accounting principles, or GAAP, are useful measures of operations.
Use of Non-GAAP Financial Measures Management believes that certain financial measures not in accordance with generally accepted accounting principles, or GAAP, are useful measures of operations.
We define Adjusted EBITDA as unaudited consolidated net income (loss) before interest expense, interest income, unrealized derivative gains and losses, acquisition-related expense, asset impairments, provision for income taxes and depreciation and amortization expense. Renewable fuel margins were strong for the second and third quarters of 2023.
We define Adjusted EBITDA as unaudited consolidated net income (loss) before interest expense, interest income, unrealized derivative gains and losses, acquisition-related expense, provision for income taxes, asset impairments, and depreciation and amortization expense. A table is provided below to reconcile Adjusted EBITDA to its most directly comparable GAAP measure, consolidated net income (loss).
Our production facilities located in Oregon and Idaho are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages.
Our production facilities located in Oregon and Idaho are near their respective fuel and feed customers, offering significant timing, product transportation cost and logistical advantages. - 33 - All of our production facilities, other than our Magic Valley plant, were operating for all of 2024, subject to scheduled and unscheduled downtimes to address facility repair and maintenance.
Our total volume of production gallons sold, however, increased by 4.3 million gallons, or 2%, to 208.9 million gallons for 2023 as compared to 204.6 million gallons for 2022, due to an extended shut down for maintenance during the summer of 2022.
Our total volume of production gallons sold, however, increased by 4.7 million gallons, or 2%, to 213.6 million gallons for 2024 as compared to 208.9 million gallons for 2023, due to production benefits realized in second half of the year from our biennial maintenance performed in Spring 2024 resulting in higher production rates.
Western Production Segment Our Western production segment’s gross loss improved by $3.5 million to a gross loss of $5.5 million for 2023 as compared to a gross loss of $9.0 million for 2022, despite lower production from our Magic Valley facility during the year.
Western Production Segment Our Western production segment’s gross loss worsened by $13.8 million to a gross loss of $19.3 million for 2024 as compared to a gross loss of $5.5 million for 2023.
We review our intangible assets, including goodwill, with indefinite lives at least annually or more frequently if impairment indicators arise. In our review, we determine the fair value of these assets using market multiples and discounted cash flow modeling and compare it to the net book value of the reporting unit.
In our review, we determine the fair value of these assets using market multiples and discounted cash flow modeling and compare it to the net book value of the reporting unit. Any assessed impairments will be recorded permanently and expensed in the period in which the impairment is determined.
Any assessed impairments will be recorded permanently and expensed in the period in which the impairment is determined. We performed our annual review of impairment and recognized an asset impairment loss of $6.0 million against our goodwill for the year ended December 31, 2023.
We performed our annual review of impairment and recognized asset impairments of $3.4 million and $6.0 million against our intangible assets and goodwill for the years ended December 31, 2024 and 2023, respectively. We did not recognize any asset impairments for the year ended December 31, 2022.
Based on our current and prior results, we do not have significant evidence to support a conclusion that we will more likely than not be able to benefit from our remaining deferred tax assets. As such, we have recorded a valuation allowance against our net deferred tax assets.
We had pre-tax consolidated net losses of $58.8 million, $27.9 million and $39.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. Based on our current and prior results, we do not have sufficient evidence to support a conclusion that we will more likely than not be able to benefit from our remaining deferred tax assets.
Cash used in our Investing Activities We used $33.0 million of cash in our investing activities for 2023, of which $29.5 million is attributable to additions to property and equipment resulting from our capital improvement projects and $3.5 million is attributable to cash paid for our acquisition of Eagle Alcohol. -43- Cash provided by our Financing Activities Cash provided by our financing activities was $7.0 million for 2023, of which $12.6 million is attributable to net proceeds from Kinergy’s line of credit, partially offset by $3.7 million in repurchases of our common stock, $1.3 million of preferred stock dividends and $0.7 million of debt issuance costs.
Cash provided by our Financing Activities Cash provided by our financing activities was $7.7 million for 2024, of which $9.0 million is attributable to net proceeds from Kinergy’s line of credit, partially offset by $1.3 million of preferred stock dividends.
We are not able to provide a quantitative reconciliation of forward-looking EBITDA or Adjusted EBITDA to forward-looking consolidated net income (loss) because certain items required for reconciliation are uncertain, outside of our control and/or cannot reasonably be predicted, such as net sales, cost of goods sold, unrealized derivative gains and losses, asset impairments and provision (benefit) for income taxes, which we view as the most material components of consolidated net income (loss) that are not presently estimable. -35- Reconciliation of Adjusted EBITDA to Consolidated Net Loss Three Months Ended December 31, Years Ended December 31, (in thousands) (unaudited) 2023 2022 2023 2022 Consolidated net loss $ (18,945 ) $ (33,072 ) $ (28,005 ) $ (41,597 ) Adjustments: Interest expense, net 2,126 968 7,425 1,827 Interest income (265 ) (169 ) (854 ) (510 ) Unrealized derivative losses 8,162 8,037 9,679 4,017 Acquisition-related expense 700 875 2,800 3,500 Asset impairments 5,970 — 6,544 — Provision for income taxes 97 1,925 97 1,925 Depreciation and amortization expense 5,698 5,973 23,080 25,095 Total adjustments 22,488 17,609 48,771 35,854 Adjusted EBITDA $ 3,543 $ (15,463 ) $ 20,766 $ (5,743 ) 2023 Financial Performance Summary Our consolidated net sales declined by $0.1 billion to $1.2 billion for 2023 from $1.3 billion for 2022.
Reconciliation of Adjusted EBITDA to Consolidated Net Loss Three Months Ended December 31, Years Ended December 31, (in thousands) (unaudited) 2024 2023 2024 2023 Consolidated net loss $ (41,712 ) $ (18,945 ) $ (58,984 ) $ (28,005 ) Adjustments: Interest expense, net 2,474 2,126 7,644 7,425 Interest income (112 ) (265 ) (689 ) (854 ) Unrealized derivative (gains) losses (5,495 ) 8,162 (13,574 ) 9,679 Acquisition-related expense 5,676 700 7,701 2,800 Asset impairments 24,790 5,970 24,790 6,544 Provision for income taxes 173 97 173 97 Depreciation and amortization expense 6,548 5,698 24,408 23,080 Total adjustments 34,054 22,488 50,453 48,771 Adjusted EBITDA $ (7,658 ) $ 3,543 $ (8,531 ) $ 20,766 - 37 - 2024 Financial Performance Summary Our consolidated net sales declined by $0.3 billion to $1.0 billion for 2024 from $1.2 billion for 2023.
Products for the Health, Home & Beauty markets include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. Products for the Food & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used for corn oils.
Products for Food & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar and corn germ used for corn oils. Products for Industry & Agriculture markets include alcohols and other products for paint applications and fertilizers.
Sales and Margins We generate sales by marketing all of the alcohols produced by our three production facilities in Illinois, all of the fuel-grade ethanol produced by our production facilities in Oregon and Idaho, and fuel-grade ethanol purchased from third-party suppliers throughout the United States.
Our gross profit and margins were further impacted by production challenges at our Magic Valley plant as we continued to incur costs to implement our high-protein and corn oil system at the facility coupled with higher repairs and maintenance costs due to our scheduled downtime at our Pekin Campus. - 38 - Sales and Margins We generate sales by marketing all of the alcohols produced by our three production facilities in Illinois, all of the fuel-grade ethanol produced by our production facilities in Oregon and Idaho, and fuel-grade ethanol purchased from third-party suppliers throughout the United States.
This decline in sales volume primarily resulted from lower production from our Magic Valley facility as we hot-idled the facility in the first quarter of 2023. At the segment’s average sales price of $2.49 per gallon for 2023, net sales were $63.2 million lower as a result of the 25.4 million fewer gallons sold in 2023 as compared to 2022.
At the segment’s average sales price of $1.91 per gallon for 2024, net sales were $12.4 million lower as a result of the 6.5 million fewer gallons sold in 2024 as compared to 2023.
These customers use our feed products for livestock as a substitute for corn and other sources of starch and protein. We sell our corn oil to poultry and biodiesel customers. We do not market essential ingredients from other producers.
These customers use our feed products for livestock as a substitute for corn and other sources of starch and protein. We sell our corn oil to poultry, renewable diesel and biodiesel customers. See “Note 4 – Segments” to our Notes to Consolidated Financial Statements included elsewhere in this report for financial information about our business segments.
Specific factors that contributed significantly to the change in cash generated by our operating activities include: ● a decline of $13.6 million in net loss primarily due to improved commodity crush margins resulting from lower corn costs; ● an increase related to inventories of $27.3 million due to the timing of production and sales where an increase in production did not result in a commensurate increase in sales by the end of the period; and ● an increase of $27.3 million related to changes in the fair value of our derivative instruments due to changes in commodity prices at period end 2023 as compared to 2022.
Specific factors that contributed significantly to the change in cash generated by our operating activities include: ● an increase of $31.0 million in net loss primarily due to lower commodity crush margins and increased asset impairments; ● a decrease of $19.1 million related to changes in the fair value of our derivative instruments due to changes in commodity prices at period-end 2024 as compared to 2023; ● a decrease of $8.9 million related to accounts receivable balances primarily due to the timing of sales and collections; and ● a decrease of $7.3 million in inventories due to lower period-end commodity prices. - 45 - These amounts were partially offset by: ● an increase of $22.5 million related to accounts payable and accrued expenses due to the timing of payments; and ● an increase of $18.2 million in asset impairments primarily related to the cold-idling of our Magic Valley facility.
A decrease of $17.80, or 7%, in our average sales price per ton in 2023 as compared to 2022 resulted in a $15.1 million decline in net sales as compared to 2022. -39- Marketing and Distribution Segment Net sales of renewable fuel from our marketing and distribution segment, excluding intersegment sales, increased by $34.1 million, or 15%, to $263.0 million for 2023 as compared to $228.9 million for 2022.
Marketing and Distribution Segment Net sales of renewable fuel from our marketing and distribution segment, excluding intersegment sales, decreased by $46.5 million, or 18%, to $216.5 million for 2024 as compared to $263.0 million for 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeEssential ingredients are sensitive to various demand factors such as numbers of livestock on feed, prices for feed alternatives and supply factors, primarily production of ethanol co-products by ethanol plants and other sources.
Biggest changeUnder the fixed price arrangements, we assume the risk of a decrease in the market price of corn between the time the price is fixed and the time the corn is utilized. - 50 - Essential ingredients are sensitive to various demand factors such as numbers of livestock on feed, prices for feed alternatives and supply factors, primarily production of ethanol co-products by ethanol plants and other sources.
We recognized net losses of $8.0 million, net gains of $19.3 million and net gains of $21.6 million related to the change in the fair values of these contracts for the years ended December 31, 2023, 2022 and 2021, respectively. -49- We prepared a sensitivity analysis as of December 31, 2023 to estimate our exposure to ethanol and corn.
We recognized net gains of $11.0 million, net losses of $8.0 million and net gains of $19.3 million related to the change in the fair values of these contracts for the years ended December 31, 2024, 2023 and 2022, respectively. We prepared a sensitivity analysis as of December 31, 2024 to estimate our exposure to ethanol and corn.
The results of this analysis for the year ended December 31, 2023, which may differ materially from actual results, are as follows (in millions): Commodity Volume Unit of Measure Approximate Adverse Change to Pre-Tax Income Ethanol 305.9 Gallons $ 45.5 Corn 72.6 Bushels $ 41.0
The results of this analysis for the year ended December 31, 2024, which may differ materially from actual results, are as follows (in millions): Commodity Volume Unit of Measure Approximate Adverse Change to Pre-Tax Income Ethanol 294.5 Gallons $ 31.6 Corn 66.5 Bushels $ 28.2
Removed
Under the fixed price arrangements, we assume the risk of a decrease in the market price of corn between the time the price is fixed and the time the corn is utilized.

Other ALTO 10-K year-over-year comparisons