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YoY shift: Lean +
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.37pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.06pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.68pp
Lean +
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
closure+4
unable+3
adverse+1
negatively+1
litigation+1
Positive rising
beneficial+4
achieve+2
satisfy+1
Risk Factors (Item 1A)
8,615 words
Item 1A. Risk Factors.
Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in addition to the other information contained in this Report and in our other filings with the Securities and Exchange Commission, including subsequent reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on Alto Ingredients, our business, financial condition, results of operations and/or liquidity could be seriouslyharmed. In that event, the market price for our common stock will likely decline, and you may lose all or part of your investment.
Risks Related to our Business
Our results of operations and our ability to operate at a profit are largely dependent on our ability to manage the costs of corn, natural gas and other production inputs, with the prices of our alcohols and essential ingredients, all of which are subject to volatility and uncertainty.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
idling+4
outages+3
underperforming+2
damaged+2
abandoned+2
Positive rising
improved+8
opportunities+5
benefit+4
strong+3
improvement+2
MD&A (Item 7)
8,824 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included elsewhere in this report. This discussion contains forward-looking statements, reflecting our plans and objectives that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this report.
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. We have an annual alcohol production capacity of 330 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 of the alcohols produced at our facilities as well as alcohols produced by third parties. In 2025, we marketed and distributed approximately 350 million gallons combined of our own produced alcohols as well as fuel-grade ethanol produced by third parties, and over 1.2 million tons of essential ingredients.
Our results of operations are highly impacted by commodity prices, including the cost of corn, natural gas and other production inputs that we must purchase, and the prices of alcohols and essential ingredients that we sell. Prices and supplies are subject to and determined by numerous market and other forces over which we have no control, such as inclement or favorable weather, domestic and global demand, supply excesses or shortages, import and export conditions (including tariffs), inflationary conditions, global geopolitical tensions and various governmental policies in the United States and throughout the world.
Price volatility of corn, natural gas and other production inputs, and alcohols and essential ingredients, may cause our results of operations to fluctuate significantly. We may fail to generate expected levels of net sales and profits even under fixed-price and other contracts for the sale of specialty alcohols used in consumer products. 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. 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. Revenues from sales of alcohols, particularly fuel-grade ethanol, and essential ingredients have in the past and could in the future decline below the marginal cost of production, which have in the past and may again in the future force us to suspend production, particularly fuel-grade ethanol production, at some or all of our facilities. 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. 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, which remains idled.
In addition, some of our fuel-grade ethanol marketing and distribution activities for third-party gallons 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. When quantities in excess of our own production are needed to meet customer demand, we procure fuel-grade ethanol from third parties and therefore must buy fuel-grade ethanol at a price established at the time of purchase and sell fuel-grade ethanol at an index price established later at the time of sale that is generally reflective of movements in the market price of fuel-grade ethanol. 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.
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. Consequently, our results of operations and financial condition may be adversely affected by increases in the prices of corn, natural gas and other production inputs or decreases in the prices of our alcohols and essential ingredients.
The prices of our products are volatile and subject to large fluctuations, which may cause our results of operations to fluctuate significantly.
The prices of our products are volatile and subject to large fluctuations. For example, the market price of fuel-grade ethanol is dependent upon many factors, including the supply of ethanol and the price of gasoline, which is in turn dependent upon the price of petroleum which itself is highly volatile, difficult to forecast and influenced by a wide variety of global economic and geopolitical conditions, including decisions concerning petroleum output by the Organization of Petroleum Exporting Countries (OPEC) and their allies, an intergovernmental organization that seeks to manage the price and supply of oil on the global energy market. Other important factors that impact the price of petroleum include war and threats of war, attacks on or threats to shipping vessels as has recently occurred in the Red Sea, the consequent rerouting of supply lines to less direct or more expensive paths, and other supply chain disruptions.
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 $1.57 to $2.07 per gallon in 2025, $1.38 to $2.12 per gallon in 2024 and from $1.58 to $2.67 per gallon in 2023. In addition, even under longer-term, fixed-price contracts for our specialty alcohols, our customers may seek to renegotiate prices under those contracts during periods of falling prices or high price volatility. Fluctuations in the prices of our products may cause our results of operations to fluctuate significantly.
We may engage in hedging transactions and other risk mitigation strategies that could harm our results of operations and financial condition.
To partially offset the effects of production input and product price volatility, in particular, corn and natural gas costs and fuel-grade ethanol prices, we may enter into contracts to purchase a portion of our corn or natural gas requirements on a forward basis or to lock in the premium to fuel-grade ethanol market prices on portions of our alcohol production. In addition, we may engage in other hedging transactions involving exchange-traded futures contracts for corn, natural gas and unleaded gasoline from time to time. The financial statement impact of these activities is dependent upon, among other things, the prices involved and our ability to sell sufficient products to use all of the corn and natural gas for which forward commitments have been made. We have recognized losses in the past, and may sufferlosses in the future, from our hedging arrangements. For example, for the year ended December 31, 2023, we recognized net losses of $8.0 million related to the aggregate change in the fair values of hedging contracts.
Hedging arrangements also expose us to the risk of financial loss in situations where our counterparty to the hedging contract defaults on its contract or, in the case of exchange-traded contracts, where there is a change in the expected differential between the underlying price in the hedging agreement and the actual prices paid or received by us. In addition, our open contract positions may require cash deposits to cover margin calls, negatively impacting our liquidity. 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.
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.
Our business depends on the continuing availability of rail, road, port, storage and distribution infrastructure. In particular, due to limited storage capacity at some of our production facilities and other considerations related to production efficiencies, certain facilities depend on timely delivery of corn. Alcohol production also requires a significant and uninterrupted supply of other raw materials and energy, primarily water, electricity and natural gas. Local water, electricity and gas utilities may fail to reliably supply the water, electricity and natural gas that our production facilities need or may fail to supply those resources on acceptable terms. 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 late April 2025, during a period of rapidly rising river levels, our loadout dock at our Pekin Campus was damaged, negatively impacting production and logistics, and requiring our use of more costly third-party river transload vendors to minimize business interruption. In addition, in the first quarter of 2024, extreme cold weather conditions in January at our Pekin Campus restricted barge deliveries and increased standby fees. 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. In the third quarter of 2023 we experienced unusually high unscheduled production downtime for repairs and maintenance which reduced sales volumes and profits.
Disruptions in production or distribution, whether caused by labor difficulties, unscheduleddowntimes and other operational hazards inherent in the alcohol production industry, including equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents, climate change and natural disasters such as earthquakes, floods and storms, or other weather effects, or human error or malfeasance or other reasons, could prevent timely deliveries of corn or other raw materials and energy, and could delay transport of our products to market, and may require us to halt production at one or more production facilities, any of which could have a material adverse effect on our business, results of operations and financial condition.
Some of these operational hazards may also cause personal injury or loss of life, severedamage to or destruction of property and equipment or environmental damage, and may result in suspension of operations and the imposition of civil or criminalpenalties. Our insurance may not fully cover the potential hazards described above or we may be unable to renew our insurance on commercially reasonable terms or at all.
Increased alcohol or essential ingredient production or higher inventory levels may cause a decline in prices for those products, and may have other negative effects, materially and adversely impacting our results of operations, cash flows and financial condition.
The prices of our alcohols and essential ingredients are highly impacted by competing third-party supplies of those products. In addition, if fuel-grade ethanol production margins improve, we anticipate that owners of production facilities operating at below capacity, or owners of idled production facilities, will increase production levels, thereby resulting in more abundant fuel-grade ethanol supplies and inventories. Increases in the supply of alcohols and essential ingredients may not be commensurate with increases in demand for alcohols and essential ingredients, thus leading to lower prices. Any of these outcomes could have a material adverse effect on our results of operations, cash flows and financial condition.
We may sufferimpairments in the value of our long-lived assets which may materially and adversely affect our results of operations.
We evaluate our long-lived assets annually for impairment or when circumstances indicate that the full carrying value of an asset may be unrecoverable. These evaluations rely on financial and other assumptions concerning the assets, any of which may not materialize in the future. For example, we recognized asset impairments of $0.8 million, $24.8 million and $6.5 million for the years ended December 31, 2025, 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 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 adverselyharming our business.
We produce our alcohols from corn and our plants are constructed and operate primarily as corn-based alcohol production facilities. Competitors and other third parties have undertaken research to develop competing products to corn-based alcohols, and ethanol in particular, as well as new process technologies. These research efforts seek alternatives to corn-based ethanol and traditional process technologies aimed at improving real or perceived problems with the fuel, such as the carbon and energy intensity of its production, its lower energy content compared to gasoline and its hydrophobic nature resulting in water separation in transit or at other times. Competitors and other third parties may develop new alcohols and processes that improve on any of these or other real or perceived problems with corn-based alcohols, including ethanol. If viable competing products or new process technologies are developed and attract widespread or even modest adoption, we may be forced to modify our production facilities, including our process technologies, if possible, to transition in full or in part to these other products or process technologies to remain competitive. Modifying our production facilities may require expertise that our personnel may not possess and would likely require significant capital expenditures the funding for which we may not have. An inability to remain competitive due to the introduction and adoption of competing products or new process technologies, or significant costs associated with the adoption of new products and process technologies, would materially and adversely affect our business, financial condition and results of operations.
Inflation and sustained higher prices may adversely impact our results of operations and financial condition.
We have experienced adverse inflationary impacts on key production inputs, wages and other costs of labor, equipment, services and other business expenses. In addition, we have experienced adverse inflationary impacts on our budgets and expenses for many of our in-process and planned capital projects. Inflation, including through tariffs, and its negative impacts could escalate in future periods. 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, inflation and sustained higher prices may have a material adverse effect on our results of operations and financial condition.
Climate change, and governmental regulations aimed at addressing climate-related issues, may affect conditions to which our business is highly sensitive, many of which could materially and adverselyharm our business, results of operations and financial condition.
Our business is highly sensitive to commodity prices, in particular, the prices of corn and natural gas. Inclement weather from climate change, including extreme temperatures or drought, may adversely affect growing conditions, which may reduce available corn supplies, our primary production input, and other grain substitutes, driving up prices and thereby increasing our production input costs. In addition, governmental regulators may disfavor carbon-based energy sources, such as natural gas, leading to regulations that disincentivize their use or otherwise make their production more difficult and costly, driving up their prices. Higher natural gas prices would likewise increase our production input costs.
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, will negatively impact us.
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 adverselyharm our business, results of operations and financial condition.
Risks Related to our Finances
We have incurred significant losses and negative operating cash flow in the past and we may incur losses and negative operating cash flow in the future, which may hamper our operations and impede us from expanding our business.
We have incurred significant losses and negative operating cash flow in the past. For example, for the years ended December 31, 2024 and 2023, we incurred consolidated net losses of approximately $59.0 million and $28.0 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. We expect to rely on cash on hand, cash, if any, generated from our operations, borrowing availability under our lines of credit and proceeds from our future financing activities, if any, to fund all of the cash requirements of our business. Additional losses and negative operating cash flow may hamper our operations and impede us from expanding our business.
We are engaged in multiple capital improvement initiatives and projects. These initiatives and projects, and their financing, costs, timing and effects, are based on our plans, expectations and various assumptions that may not eventuate. We may therefore be unable to timely achieve, or achieve at all, the results we expect.
We are engaged in multiple capital improvement initiatives and projects to diversify and enhance our revenue streams and to expand margins and profitability by reducing costs. These initiatives and projects have different timelines, returns on investment and risk profiles, including regulatory risks. In addition, we may have to raise significant additional capital to complete some of our initiatives and projects. Our expected financial and other results from these initiatives and 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. 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. 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 capital improvement initiatives and projects. We can provide no assurances that any particular benefit will be available to us upon completion of any capital improvement initiative or project.
We may have insufficient financial resources, and we may be unable to raise sufficient capital, to complete our projects timely or at all. Although we intend to use reputable third-party contractors with expertise in their fields to implement our projects, adverse conditions and events as well as delays in capital projects are not uncommon. Moreover, the projects’ interaction with existing processes may result in the degradation of other plant operations. 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.
We can provide no assurances that our projects will be completed, or if completed, will be completed timely or within budget. 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. 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.
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. For the years ended December 31, 2025, 2024 and 2023, we incurred $30.1 million, $34.6 million and $29.5 million, respectively. 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 must perform routine equipment maintenance and must periodically replace a variety of parts such as motors, pumps, pipes and electrical parts, and engage in other repairs. In addition, our production facilities require periodic shutdowns to perform major maintenance and upgrades. Our production facilities also occasionally require unscheduledshutdowns to perform repairs. 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 Columbia facility was hampered by equipment issues that extended the facility’s regularly scheduled outage. 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. These scheduled and unscheduledshutdowns 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.
We may be unable to qualify for and receive anticipated Section 45Z tax credit benefits available to low carbon fuel producers.
Section 45Z of the Inflation Reduction Act of 2022 provides a technology-neutral tax credit for the production of “clean fuel” that is produced in the United States and sold to an unrelated person during calendar years 2025 through 2029, with the amount of the credit determined in part by the fuel’s carbon intensity relative to a statutory baseline. We currently expect our Columbia plant and our Pekin Campus dry mill to be eligible to apply for and claim Section 45Z tax credits with respect to qualifying fuel they produce and sell. Our ability to qualify for and receive these tax credits will depend on, among other things, our ability to produce qualifying low carbon fuel in anticipated volumes, to achieve and document the carbon intensity levels required under Section 45Z and applicable Treasury and IRS guidance, and to comply with related registration, measurement, reporting and substantiation requirements. If we are unable to produce low carbon fuel in anticipated amounts (including as a result of plant outages or other operational issues), if our fuels do not achieve the required or expected carbon intensities under the applicable carbon intensity methodology, or if we fail to satisfy applicable tax, regulatory, or documentation requirements, we may be unable to qualify for and receive Section 45Z tax credits in the amounts we currently anticipate, or at all, which could materially and adversely affect our results of operations and financial condition. In addition, Section 45Z is scheduled to be available only for qualifying fuel produced and sold from January 1, 2025 through December 31, 2029, and there can be no assurance that Congress will extend or replace this credit.
Our indebtedness may expose us to risks that could negatively impact our business, prospects, liquidity, cash flows and results of operations.
We have incurred 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. In addition, our indebtedness could:
require a substantial portion of our cash flows from operations for debt service payments, thereby reducing the availability of our cash flows to fund working capital, additional capital expenditures, acquisitions, dividend payments and for other general corporate purposes; make it more difficult to repay or refinance our indebtedness if it becomes due during adverse economic and industry conditions;
limit our flexibility to pursue strategic opportunities or react to changes in our business and the industries in which we operate and, consequently, place us at a competitive disadvantage to our competitors who have less debt;
limit our ability to procure additional financing for working capital or other purposes; or
result in adverse consequences due to a breach of our financial or other covenants and obligations in favor of our lenders.
Our ability to generate operating results and sufficient cash to make all required principal and interest payments when due, and to satisfy our financial covenants and other obligations, depends on our performance, which is subject to a variety of factors beyond our control, including the cost of key production inputs, the supply of and demand for alcohols and essential ingredients, and many other factors related to the industries in which we operate. We cannot provide any assurance that we will be able to timely service or satisfy our debt obligations, including our financial covenants. 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 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 ability to use net operating loss, or NOL, and tax credit carryforwards if an “ownership change” occurs for tax purposes, as defined in Section 382 of the Internal Revenue Code, or Code. In general, an ownership change occurs when one or more stockholders each owning 5% or more of a corporation entitled to use NOL or other loss carryforwards have increased their ownership by more than 50 percentage points during any three-year period. The annual base limitation under section 382 of the Code is calculated by multiplying the corporation’s value at the time of the ownership change by the greater of the long-term tax-exempt rate determined by the Internal Revenue Service in the month of the ownership change or the two preceding months. As a result, our ability to utilize our NOL and other loss carryforwards may be substantially limited. Any such limitation could result in increased future tax obligations, which could have a material adverse effect on our financial condition and results of operations.
Risks Related to Legal and Regulatory Matters
We may be adversely affected by environmental, health and safety laws and regulations, as well as related liabilities that may not be adequately covered by insurance .
We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground; the generation, storage, handling, use, transportation and disposal of hazardous materials and wastes; and the health and safety of our employees. In addition, some of these laws and regulations require us to operate under permits that are subject to renewal or modification. These laws, regulations and permits often require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. 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.
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. If these substances or wastes have been or are disposed of or released at sites that undergo investigation and/or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or other environmental laws for all or part of the costs of investigation and/or remediation, and for damages to natural resources. For example, our Pekin Campus used coal as its primary source of fuel for steam production until 2016. We managed associated waste in part through a coal ash pond, an engineered impoundment site used to store waste byproducts. We operated the pond under an Illinois state operating permit that included a special condition that any ash impoundments either be capped and closed in accordance with an Illinois EPA-approved closure plan or removed. Although we continue to operate pumps and maintain protocols under operating permit conditions, our permit has expired, has not been renewed and we are in discussions with the Illinois EPA regarding a closure plan or other remediation. The Illinois EPA previously denied our closure plan for a beneficial re-use that would have utilized the ash as a structural fill. Although we continue to pursue a closure plan that would involve beneficial re-use, including potential uses such as grain storage, cogeneration, CO 2 utilization, a hydrogen facility or other beneficial use, including third-party redevelopment, and that may offset all or a significant portion of any cleanup costs, we can provide no assurance that the Illinois EPA will allow any beneficial re-use and nor can we provide any assurance that the Illinois EPA will not mandate site cleanup, the costs of which, while not estimable at this time, could be substantial and could have a material adverse effect on our business, financial condition and results of operations.
We may also be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from those properties. Some of these matters may require us to expend significant amounts for investigation, cleanup or other costs not covered by insurance.
In addition, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant additional expenditures. Continued government and public emphasis on environmental issues will likely result in increased future investments for environmental controls at our production facilities. 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.
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 injuryclaims or damage to property and third parties. 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. 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.
We may be adversely affected by food and drug laws and regulations, as well as related liabilities that may not be adequately covered by insurance.
Some of our products are subject to regulation by the U.S. Food and Drug Administration, or FDA, as well as similar state agencies. The FDA regulates, under the Federal Food, Drug, and Cosmetic Act, or FDCA, the processing, formulation, safety, manufacture, packaging, labeling and distribution of food ingredients, vitamins, cosmetics and pharmaceuticals for active and inactive ingredients. Many of the FDA’s and FDCA’s rules and regulations apply directly to us as well as indirectly through their application in our customers’ products. 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.
If we fail to comply with laws and FDA regulations or those of similar state agencies, we may be prevented from selling certain of our products and may also be subject to government agency enforcement liability. 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. Some of these matters, if they arise, may require us to expend significant amounts for investigation and defense or other costs not covered by insurance. 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 other losses that are not fully covered by insurance could have a material adverse effect on our results of operations and financial condition.
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.
The domestic market for fuel-grade ethanol is significantly impacted by federal mandates for volumes of renewable fuels (such as ethanol) required to be blended with gasoline. 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.
The EPA has implemented the Renewable Fuel Standard under the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. The EPA, in coordination with the Secretary of Energy and the Secretary of Agriculture, determines annual quotas for the quantity of renewable fuels (such as fuel-grade ethanol) that must be blended into motor fuels consumed in the United States. The EPA finalized mandatory volumes of 15 billion gallons for each of 2025, 2024 and 2023 of conventional renewable fuels, or corn-based fuel-grade ethanol, and has proposed mandatory volumes of 15 billion gallons for each of 2026 and 2027, which could decline for those or other future years.
The EPA may grant small refinery exemptions, in whole or in part, that reduce or eliminate annual RFS volume obligations for small refineries, which are defined as refineries with an average aggregate daily crude oil throughput not exceeding 75,000 barrels. If granted, these exemptions can remove the affected refinery’s gasoline and diesel from applicable RFS percentage standards for the relevant compliance year. In the past, the EPA has granted small refinery exemptions that have materially and adversely affected overall demand for and the price of fuel-grade ethanol. The U.S. Court of Appeals for the Fifth Circuit, in November 2023, struck down the EPA’s decision to deny numerous small refinery exemption petitions, holding that the EPA’s denials were impermissibly retroactive, contrary to law and counter to evidence in the litigation record. In light of that decision and recent EPA actions granting full or partial exemptions to a substantial number of petitions, small refinery exemptions may continue to be granted at elevated levels, which could materially and adversely affect overall demand for, and the price of, fuel-grade ethanol.
Various bills in Congress introduced from time to time are also directed at altering existing renewable fuels energy legislation, but none have passed in recent years. Some legislative bills are directed at halting or reversing expansion of, or even eliminating in its entirety, the renewable fuel program.
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.
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.
Although many trade groups, academics and governmental agencies support ethanol as a fuel additive that promotes a cleaner environment, others criticize fuel-grade ethanol production and use as consuming considerably more energy and emitting more greenhouse gases than other biofuels and potentially depleting water resources. Some studies suggest that corn-based ethanol is less efficient than ethanol produced from other feedstock and that it negatively impacts consumers by causing increased prices for dairy, meat and other food generated from livestock that consume corn. Additionally, critics of fuel-grade ethanol contend that corn supplies are redirected from international food markets to domestic fuel markets. If negative views of corn-based ethanol production gain broader acceptance, support for existing measures promoting use and domestic production of corn-based ethanol as a fuel additive could decline, leading to a reduction or repeal of federal ethanol usage mandates, which would materially and adversely affect the demand for fuel-grade ethanol. 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. Discretionary blending is often determined by the price of fuel-grade ethanol relative to the price of gasoline. In periods when discretionary blending is financially unattractive, the demand for fuel-grade ethanol may decline. Also, the demand for fuel-grade ethanol is affected by the overall demand for transportation fuel. Demand for transportation fuel is affected by the number of miles traveled by consumers and vehicle fuel economy. Lower demand for fuel-grade ethanol and essential ingredients, including through the transition by consumers to alternative fuel vehicles such as electric vehicles and hybrid vehicles, would reduce the value of our ethanol and related products, erode our overall margins and diminish our ability to generate revenue or to operate profitably. 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 Loper Bright Enterprises v. Raimondo 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.
In June 2024, the United States Supreme Court, in Loper Bright Enterprises v. Raimondo, overruled its prior Chevron doctrine, which had required courts to defer to reasonable administrative interpretations of ambiguous federal statutes. This outcome could increase litigation risk and uncertainty around rulemaking and agency interpretations that are favorable to the renewable fuels industry, such as the EPA’s administration of the RFS. It could also materially and adversely affect the Treasury Department’s ability to promulgate and sustain favorable regulations under the Inflation Reduction Act of 2022, including regulations implementing tax credits such as the Section 45Z clean fuel production tax credit, as well as other industry-favorable tax credits. 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.
Risks Related to Ownership of our Common Stock
Our stock price is highly volatile, which could result in substantial losses for investors purchasing shares of our common stock and in litigationagainst us.
The market price of our common stock has fluctuated significantly in the past and may continue to fluctuate significantly in the future. 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;
regulatory developments or increased enforcement relating to our initiatives and projects or to our business;
our ability to qualify for and receive Section 45Z tax credits under the Inflation Reduction Act of 2022 for low carbon fuel, including in the anticipated amounts and at the expected times;
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;
stock market price and volume fluctuations generally;
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 price at which you purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. You may be unable to sell your shares of common stock at or above your purchase price, which may result in substantial losses to you and which may include the complete loss of your investment. In the past, securities class action litigation has often been brought against a company following periods of high stock price volatility. We may be the target of similar litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and our resources away from our business.
Any of the risks described above could have a material adverse effect on our results of operations, the price of our common stock, or both.
Because we do not plan to pay any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their shares unless and until they sell them.
We intend to retain a significant portion of any future earnings to finance the development, operation and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the near future. The declaration, payment, and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, our results of operations, cash flows, and financial condition, operating and capital requirements, compliance with any applicable debt covenants, and other factors our board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance of the amount of any such dividend. Unless our board of directors determines to pay dividends, our stockholders will be required to look solely to appreciation in the value of our common stock to realize any gain on their investment. There can be no assurance that any such appreciation will occur.
Our bylaws contain exclusive forum provisions that could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
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.
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.
For the avoidance of doubt, the exclusive forum provisions described above do not apply to any claims arising under the Securities Act or the Securities Exchange Act of 1934, as amended, or the Exchange Act, to the extent federal law requires otherwise. 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.
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 applicable courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. With respect to the provision making the Delaware Court of Chancery the sole and exclusive forum for certain types of actions, stockholders who do bring a claim in the Delaware Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. Finally, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a material adverse effect on us.
General Risk Factors
Cyberattacks through security vulnerabilities could lead to disruption of our business, reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position.
Security vulnerabilities may arise from our hardware, software, employees, contractors or policies we have deployed, which may result in external parties gaining access to our networks, data centers, cloud data centers, corporate computers, manufacturing systems, and/or access to accounts we have at our suppliers, vendors or customers. External parties may gain access to our data or our customers’ data, or attack the networks causing denial of service or attempt to hold our data or systems in ransom. The vulnerability could be caused by inadequate account security practices such as the failure to timely remove employee access when terminated. To mitigate these security issues, we have implemented measures throughout our organization, including firewalls, backups, encryption, employee information technology policies and user account policies. However, there can be no assurance that these measures will be sufficient to avoid cyberattacks. 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.
Further, if we fail to adequately maintain our information technology infrastructure, we may have outages and data loss. Excessiveoutages 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.
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. 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.
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. If any such unauthorized use or disclosure of, or access to, such personal information was to occur, our operations could be seriouslydisrupted, and we could be subject to demands, claims and litigation by private parties, and investigations, related actions, and penalties by regulatory authorities. In addition, we could incur significant costs in notifying affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating to the unauthorized access to, or use or disclosure of, personal information. Finally, any perceived or actual unauthorized access to, or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business, financial condition and results of operations.
We also own and operate a liquid CO 2 production facility adjacent to our plant in Oregon for the offtake of CO 2 gas from the plant for conversion to liquid CO 2 and subsequent sale. In addition, we break bulk and distribute specialty alcohols, produced by us and third parties.
We report our financial and operating performance in three distinct segments:
Pekin production , which includes the production and sale of alcohols and other products we refer to as “essential ingredients” described below, 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 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 mission is to produce the highest quality, sustainable ingredients that make everyday products better. 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.
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 . Products for Health, Home & Beauty markets include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. Products for Food & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar, as well as corn germ used for corn oils. Products for Industry & Agriculture markets include alcohols and other products for paint applications, inks, vehicle fluids and fertilizers. Products for Essential Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, distillers grains, gas and liquid CO 2 and liquid feed used in commercial animal feed and pet foods. We also sell yeast and gas 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. Our specialty alcohols for the Industry & Agriculture, Food & Beverage and Health, Home & Beauty markets represented approximately 11%, 6% and 2%, respectively, of our sales in 2025 to customers in these three markets.
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. 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 2025, other than for scheduled and unscheduleddowntimes to address facility repair and maintenance.
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. We restarted our Magic Valley facility in July 2024 and by October 2024, the facility consistently achieved average ethanol production rates at full capacity, the protein content yield from the plant reached 50% or greater, and we were able to expand our corn oil yields. Increases in regional corn basis and declining market prices for protein and corn oil resulted in overall margin compression, outweighing the economic benefits of our plant improvements. As a consequence, we cold-idled our Magic Valley facility for all of 2025 and through the filing of this report to minimize financial losses. We continue to provide ethanol terminaling services at the plant and may resume operations at the facility if the economic environment in the region sustainably improves.
As market conditions change, we may increase, decrease or idle production at one or more operating facilities or resume operations at any idled facility.
Marketing and Distribution Segment
We market and distribute all the alcohols and essential ingredients we produce at our facilities. We also market and distribute alcohols produced by third parties.
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.
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. Our customers collectively require fuel-grade ethanol volumes in excess of the supplies we produce at our facilities. We secure additional fuel-grade ethanol supplies from third-party ethanol producers. 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 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. 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 5 – Segments” to our Notes to Consolidated Financial Statements included elsewhere in this report for financial information about our business segments.
Q4 Financial Review, Current Initiatives and Outlook
Our fourth quarter capped a year of strong execution and was a pivotal milestone in our strategic realignment. Entering the year, we made tactical decisions to focus on opportunities under our control to maximize earnings. We adjusted staffing to align with our current organizational footprint, captured cost savings, invested in the throughput and efficiency of our plants, culled underperforming business activities in our marketing and distribution segment, and maintained operational discipline in support of our revenue diversification efforts.
In the fourth quarter, gross profit increased $16.6 million and net income improved $63.5 million while Adjusted EBITDA grew by $35.6 million compared to the same period in 2024. For the full year, gross profit increased $25.2 million and net income improved $72.4 million while Adjusted EBITDA grew by $53.2 million compared to the full year 2024. These robust improvements were driven by multiple key factors, primarily, increased crush margins, qualified Section 45Z tax credits, strong renewable fuel export sales and our receipt of excess insurance proceeds.
For the fourth quarter, crush margins were $0.23 per gallon compared to $0.08 in the same period in 2024. An increase in renewable fuel export sales at premiums to domestic sales contributed $5 million from both higher volumes and a higher average sales price per gallon. We also realized $2.6 million less in compensation costs for the quarter due to staff reductions implemented earlier in the year, including the impact of idling our Magic Valley plant and a gain on our annual pension valuation adjustment. In addition, the sale of Oregon carbon credits contributed an additional $2.9 million due to improved market pricing.
We continued to benefit in the fourth quarter from our Alto Carbonic acquisition, which contributed $1.4 million in gross profit to our Western Production segment. With the idling of our Magic Valley facility, our Western Production segment achievedpositive gross profit for the quarter and for the full year. With high-value liquid CO 2 now in our product mix, our essential ingredients return at our Western Production segment improved to 48% in the fourth quarter from 30% for the same period in 2024 and contributed to an increase in our overall 2025 consolidated return of 52% compared to 43% for the full-year 2024. Partially offsetting these improvements was net negative $4.2 million in combined realized and unrealized changes in derivatives at period end.
We made significant progress in determining the amount of Section 45Z transferable tax credits for 2025 and associated incremental earnings. We expect to qualify approximately 90 million gallons of combined production on an annual basis for Section 45Z credits at our Columbia and Pekin dry mill facilities. In the fourth quarter, we recorded $7.5 million, or $0.10 per gallon, net of monetization costs, in Section 45Z credit earnings for the full year. For 2026, with the removal of the indirect land use change (iLUC) from the GREET model, we expect to qualify for $0.20 per gallon at our Columbia and Pekin dry mill facilities and to generate approximately $15 million in total net proceeds. We continue to pursue opportunities to further lower our carbon scores. Our Pekin wet mill and our ICP plant do not currently qualify for these tax credits, but those facilities are advantaged to serve a variety of domestic and export markets with alcohol supplies predominantly sold at a premium to renewable fuel.
With respect to our efforts to optimize and monetize our Western assets, as previously disclosed, current market conditions, including operational improvements, together with the positive impact of our Alto Carbonic acquisition, have materially changed our calculus for simply selling the facilities. Given our Columbia plant’s improvedprofitability, we are no longer actively marketing this asset. We continue to evaluate all options for our Magic Valley facility, including selling the plant as well as restarting and capturing Section 45Z credits and monetizing the valuable CO 2 the facility would produce.
For 2026, we plan to boost our capital expenditures to approximately $25 million while maintaining strong cost discipline and prioritizing projects with the highest return on investment. Approximately 45% of our capital expenditures budget is earmarked for maintenance projects while the remaining 55% is allocated to optimization projects, including to implement higher production capacity at our Pekin dry mill. Included in the $25 million budget are the costs to complete repairs of our existing damaged Pekin Campus dock and to add a second alcohol loadout dock. We are building the second dock to mitigate future business interruption and enhance our logistical capabilities by expanding throughput and creating redundancy. We expect to begin repairing the original dock and installing the second dock this spring, and we anticipate completing both projects by the end of 2026.
We entered 2026 with a leaner cost structure and a better mix of premium exports and carbon utilization, as well as expanded CO₂ opportunities and potential upside from Section 45Z tax credits. We addressed losses at underperforming assets, removed structural costs and repositioned our portfolio toward higher value and more consistent revenue streams, and we are moving forward with plans to improve our return on assets. Improving our operations should strengthen our ability to capitalize on favorable margin environments, stabilize our business when margins are compressed and ensure that our assets are producing positive returns. In 2026, we intend to focus on factors within our control, driving improvedprofitability and executing on multiple opportunities to grow earnings.
The first quarter is a seasonally challenging period, and in January 2026, extreme cold weather disrupted river logistics and curtailed production at our Pekin Campus. We took advantage of the downtime to accelerate some of our planned repairs scheduled for the second quarter during our biennial wet mill outage. This has allowed us to defer the remaining work until the spring of 2027 and to recoup January’s lost production volumes in the second quarter. As to additional outages planned for 2026, we expect normal second quarter outages at our Columbia and ICP facilities, consistent with planned outages in 2025. In the second half of 2026, our Pekin dry mill is scheduled for a longer outage to implement a capacity project to increase production at the facility by approximately 8%, further improving the plant’s profitability.
CO 2 utilization remains a compelling opportunity as demand for liquid CO 2 continues to rise. In 2026, we intend to capitalize further on demand growth in the Pacific Northwest and on our liquid CO 2 processing capabilities by increasing our throughput volume and storage capacity. We are also assessing large scale CO 2 utilization and sequestration opportunities at our Pekin Campus and we are developing plans to capture more value for our CO 2 as rapidly as possible. We have contracted to sell a significant volume of renewable fuel exports for the first half of 2026 and we see more opportunities to expand volumes and premiums in this market. In addition, we are on track for 2026 to match our high-quality alcohol volumes in 2025.
Finally, on the regulatory front, we continue to view E15 as a meaningful long-term demand tailwind for the farming and renewable fuel industries. While permanent nationwide adoption is not yet finalized, the EPA has consistently supported summer E15 sales through waivers, and entering 2026, political momentum has strengthened with renewed Administration and bipartisan Congressional support. Taken together, we believe the trajectory for E15 remains clearly positive and supportive of incremental ethanol demand over time.
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. Management provides Adjusted EBITDA as a non-GAAP financial measure 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 Adjusted EBITDA as unaudited consolidated net income (loss) before interest expense, interest income, unrealized derivative gains and losses, excess insurance proceeds, acquisition-related expense (recoveries), provision or benefit 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). Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as an alternative to consolidated net income (loss) or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP.
Information reconciling forward-looking Adjusted EBITDA to forward-looking consolidated net income (loss) would require a forward-looking statement of consolidated net income (loss) prepared in accordance with GAAP, which is unavailable to us without unreasonable effort. We are not able to provide a quantitative reconciliation of forward-looking 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.
Reconciliation of Adjusted EBITDA to Consolidated Net Income (Loss)
Three Months Ended
December 31,
Years Ended
December 31,
(in thousands) (unaudited)
Consolidated net income (loss)
Adjustments:
Interest expense, net
Interest income
Unrealized derivative (gains) losses
Excess insurance proceeds
Acquisition-related expense (recoveries)
Asset impairments
Provision (benefit) for income taxes
Depreciation and amortization expense
Total adjustments
Adjusted EBITDA
2025 Financial Performance Summary
Our consolidated net sales declined by $47.3 million to $0.9 billion for 2025 from $1.0 billion for 2024. Our net income (loss) attributable to common stockholders increased by $72.4 million to $12.1 million for 2025 from a net loss of $60.3 million for 2024.
Factors that contributed to these results of operations for 2025 include:
Net sales . Our net sales decline of $47.3 million was due to a decline in total gallons of alcohol sold and fewer tons of essential ingredients sold, partially offset by an increase in our average sales price per gallon.
Our average sales price per gallon increased by $0.07, or 4%, to $2.02 for 2025 from $1.95 for 2024. The improvement was primarily driven by higher renewable fuel prices in 2025 largely due to higher gasoline prices.
Our volume of essential ingredients sold declined by 0.2 million tons, or 14%, to 1.2 million tons for 2025 from 1.4 million tons for 2024 primarily due to lower alcohol production volumes during 2025, as our Magic Valley facility was cold-idled for all of 2025.
Our total gallons of alcohol sold decreased by 35.9 million gallons, or 9%, to 350.1 million gallons for 2025 from 386.0 million gallons for 2024.
Our renewable fuel production sales volume declined by 31.0 million gallons, or 17%, to 155.2 million gallons for 2025 from 186.2 million gallons for 2024, primarily due to the cold idling of our Magic Valley facility for all of 2025 resulting in no production from the facility.
Our third-party sales volume decreased by 1.4 million gallons, or 1%, to 106.9 million gallons for 2025 from 108.3 million gallons for 2024 primarily due to less volume sold in the market around our Magic Valley facility.
Our specialty alcohol production sales volume decreased by 3.5 million gallons, or 4%, to 88.0 million gallons for 2025 from 91.5 million gallons for 2024 primarily due to decreased customer demand for specialty alcohols during the year.
Gross Profit . Our gross profit increased $25.2 million to a gross profit of $34.9 million for 2025 from $9.7 million for 2024 due to stronger commodity crush margins from higher ethanol sales prices as well as lower corn costs. Our gross profit and margins were further positively impacted by our acquisition of Kodiak Carbonic and the cold-idling of our Magic Valley facility.
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. We also market essential ingredients produced by our production facilities, including dried yeast, corn protein meal, corn protein feed, corn germ, distillers corn oil and distillers grains and liquid feed used in commercial animal feed and pet foods. We also sell yeast and gas and liquid CO 2 for human consumption.
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 improved by 4% to $2.02 per gallon for 2025 compared to $1.95 per gallon for 2024. The average price of fuel-grade ethanol as reported by the Chicago Mercantile Exchange, or CME, also improved by 4% to $1.76 per gallon for 2025 compared to $1.69 per gallon for 2024. Our consolidated average cost of corn declined by 1% to $4.68 per bushel for 2025 from $4.72 per bushel for 2024. The average price of corn as reported by the CME increased 4% to $4.39 per bushel for 2025 from $4.24 per bushel for 2024.
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 regulations, 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.
We seek to optimize our gross profit margins by anticipating the factors above and, when resources are available, implementing hedging transactions and taking other actions designed to lock in margins, limit risk and otherwise address these factors. For example, we may seek to reduce inventory levels in anticipation of declining alcohol or essential ingredient prices and increase production and inventory levels in anticipation of rising alcohol or essential ingredient prices. We may also seek to alter our proportion or timing, or both, of purchase and sales commitments.
Our inability to anticipate the factors described above or their relative importance, and adverse movements in the factors themselves, could result in declining or even negative gross profit margins over certain periods of time. Our ability to anticipate these factors or favorable movements in these factors may enable us to generate above-average gross profit margins. However, given the difficulty associated with successfully forecasting any of these factors, we are unable to estimate our future sales or gross profit margins.
Results 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.
Certain performance metrics that we believe are important indicators of our results of operations include the following:
Percentage Change
Years Ended December 31,
Alcohol Sales (gallons in millions)
Pekin Campus renewable fuel gallons sold
Western production renewable fuel gallons sold
Third-party renewable fuel gallons sold
Total renewable fuel gallons sold
Specialty alcohol gallons sold
Total gallons sold
Sales Price per Gallon
Pekin Campus
Western production
Marketing and distribution
Total
Alcohol Production (gallons in millions)
Pekin Campus
Western production
Total
Corn Cost per Bushel
Pekin Campus
Western production
Total
Average Market Metrics
PLATTS Ethanol price per gallon
CME Corn cost per bushel
Board corn crush per gallon (1)
Essential Ingredients Sold (in thousands of tons)
Pekin Campus
Distillers grains
Corn wet feed
Corn dry feed
Corn oil and germ
Syrup and other
Corn meal
Yeast
Total Pekin Campus
Western Production
Distillers grains
Syrup and other
Corn oil
Total Western Production
Total Essential Ingredients Sold
Essential Ingredients return % (2)
Pekin Campus Return
Western Production Return
Consolidated Total Return
Assumes corn conversion of 2.80 gallons of alcohol per bushel of corn.
Essential ingredients revenues as a percentage of total corn costs consumed.
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Years Ended
December 31,
Dollar
Percentage
Results as a Percentage
of Net Sales for the
Years Ended
December 31,
Change
Change
(dollars in thousands)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Acquisition-related recoveries (expenses)
Gain on sale of assets
Asset impairments
Income (loss) from operations
Transferable tax credits, net
Excess insurance proceeds
Interest expense, net
Other income, net
Income (loss) before provision (benefit) for income taxes
Provision (benefit) for income taxes
Consolidated net income (loss)
Preferred stock dividends
Income (loss) attributable to common stockholders
Not meaningful.
Net Sales
The decline in our consolidated net sales for 2025 as compared to 2024 was due to a decrease in our volume of alcohol sold and lower volumes of essential ingredients sold, partially offset by an increase in our average alcohol sales price per gallon. The decreases in our volumes of alcohol and essential ingredients sold were primarily due to the cold-idling of our Magic Valley facility for all of 2025 and a higher volume of product in transit at the end of the year.
Pekin Campus Production Segment
Net sales of alcohol from our Pekin Campus production segment increased by less than $0.1 million, or 0%, to $415.8 million for 2025 as compared to $415.7 million for 2024. Our total volume of production gallons sold, decreased by 5.2 million gallons, or 2%, to 208.4 million gallons for 2025 as compared to 213.6 million gallons for 2024, due to the timing of shipments at year-end.
At the segment’s average sales price per gallon of $2.00 for 2025, we generated $10.4 million less in net sales from the 5.2 million fewer gallons of alcohol sold in 2025 as compared to 2024. However, an increase of $0.05, or 3%, in the segment’s average sales price per gallon in 2025 as compared to 2024 resulted in a $10.4 million increase in net sales in 2025 as compared to 2024.
Net sales of essential ingredients increased by $5.3 million, or 3%, to $174.6 million for 2025 as compared to $169.3 million for 2024. Our total volume of essential ingredients sold increased by 13,300 tons, or 1%, to 919,600 tons for 2025 from 906,300 tons for 2024. Sales volumes of essential ingredients from our Pekin Campus were higher in 2025 due to timing of shipments. An increase of $3.05, or 2%, in our average sales price per ton in 2025 as compared to 2024 resulted in a $2.8 million increase in net sales as compared to 2024. At our average sales price per ton of $189.86 for 2025, we generated $2.5 million in additional net sales from the 13,300 additional tons of essential ingredients sold in 2025 as compared to 2024.
Marketing and Distribution Segment
Net sales of renewable fuel from our marketing and distribution segment, excluding intersegment sales, increased by $4.8 million, or 2%, to $221.3 million for 2025 as compared to $216.5 million for 2024.
Our volume of third-party renewable fuel sold reported gross by the segment decreased by 1.4 million gallons, or 1%, to 106.9 million gallons for 2025 as compared to 108.3 million gallons for 2024. The increase of $0.07, or 4%, in our average sales price per gallon in 2025 as compared to 2024 resulted in a $7.7 million increase in net sales in 2025 from our third-party renewable fuel sold by the segment compared to 2024. At the segment’s average sales price per gallon of $2.07 for 2025, net sales were $2.9 million lower as a result of the 1.4 million fewer gallons sold in 2025 as compared to 2024.
Western Production Segment
Net sales of alcohol from our Western production segment declined by $48.1 million, or 42%, to $67.3 million for 2025 as compared to $115.4 million for 2024. Our total volume of gallons sold declined by 27.9 million gallons, or 46%, to 32.6 million gallons for 2025 as compared to 60.5 million gallons for 2024. This decline in sales volume primarily resulted from the cold-idling of our Magic Valley facility for all of 2025. At the segment’s average sales price of $2.06 per gallon for 2025, net sales were $57.5 million lower as a result of the 27.9 million fewer gallons sold in 2025 as compared to 2024. This decrease was partially offset by an increase of $0.15, or 8%, in our average sales price per gallon in 2025 as compared to 2024 resulting in a $9.4 million increase in net sales of alcohol from the segment compared to 2024.
Net sales of essential ingredients declined by $5.4 million, or 15%, to $31.6 million for 2025 as compared to $37.0 million for 2024. Our total volume of essential ingredients sold declined by 215,000 tons, or 42%, to 299,600 tons for 2025 from 514,600 tons for 2024. At our average sales price of $105.31 per ton for 2025, net sales were $22.6 million lower as a result of the 215,000 fewer tons sold in 2025 as compared to 2024. This decline was partially offset by a higher sales price, which increased by $33.50 per ton for 2025. The increase of $33.50, or 47%, in our average sales price per ton in 2025 as compared to 2024 resulted in an increase of $17.2 million in net sales of essential ingredients from the segment compared to 2024.
Corporate and Other Segment
Net sales from our Corporate and other segment, which is comprised of our Eagle Alcohol business, declined by $4.0 million, or 35%, to $7.4 million for 2025 as compared to $11.4 million for 2024.
Cost of Goods Sold and Gross Profit
Our consolidated gross profit improved to $34.9 million, representing a gross margin of 3.8% for 2025, from $9.7 million, representing a gross margin of 1.0%, for 2024. Our consolidated gross profit improved due to higher overall commodity crush margins, increased export sales at premium prices to domestic renewable fuel and overall cost savings. In 2025, we spent a total of $30.1 million for repairs and maintenance, in line with our annual estimate.
Pekin Campus Production Segment
Our Pekin Campus production segment’s gross profit declined by $3.8 million to a gross profit of $22.1 million from $25.9 million. Of this decrease, $3.2 million is attributable to lower commodity crush margins and $0.6 million is attributable to decreased sales volumes in 2025 as compared to 2024.
Marketing and Distribution Segment
Our marketing and distribution segment’s gross profit improved by $5.1 million to a gross profit of $9.1 million for 2025 from $4.0 million for 2024. Of this increase, $5.2 million is attributable to higher margins from sales of third-party renewable fuel, partially offset by a decrease of $0.1 million attributable to lower marketing volumes of third-party renewable fuel sold reported gross in 2025 as compared to 2024.
Western Production Segment
Our Western production segment’s gross profit improved by $22.3 million to a gross profit of $3.0 million for 2025 as compared to a gross loss of $19.3 million for 2024. Of this improvement, $24.9 million is attributable to significantly higher margins for renewable fuel, partially offset by $2.6 million attributable to lower sales volumes at negative margins in 2025 as compared to 2024.
Corporate and Other Segment
Our Corporate and other segment reported a gross profit of $0.7 million for 2025 and a gross loss of $0.9 million for 2024, primarily from Eagle Alcohol’s business.
Selling, General and Administrative Expenses
Our selling, general and administrative, or SG&A, expenses decreased by $2.5 million to $27.2 million for 2025 as compared to $29.7 million for 2024. SG&A expenses decreased primarily due to lower operating costs, including reduced staff levels, and professional fees.
Acquisition-related Expenses
Our acquisition-related expenses decreased by $8.2 million to a recovery of $0.5 million for 2025 as compared to $7.7 million for 2024. In 2024, we accelerated and accrued all remaining amounts payable in 2025 for our acquisition of Eagle Alcohol. We paid out a final amount in 2025 that was $0.5 million less than the amount we accrued in 2024. We have no further payment obligations for our acquisition of Eagle Alcohol.
Asset Impairments
We recorded asset impairment charges of $0.8 million for 2025 as compared to $24.8 million for 2024. The 2025 impairments relate to certain abandoned projects. The 2024 impairments reflect $21.4 million for our Magic Valley asset group, as we cold-idled the plant at the end of the year, and $3.4 million for intangible assets of Eagle Alcohol.
Transferable Tax Credits, net
Transferable tax credits, net, for the year ended December 31, 2025, reflect the recognition of $7.5 million of federal tax credits related to Section 45Z clean fuel production.
Excess Insurance Proceeds
In April 2025, our Pekin Campus loading dock was damaged. We filed a claim with our insurer and received gross proceeds of $10.0 million. A portion of the proceeds related to extra costs incurred due to logistical challenges as we made temporary repairs to the dock. The extra costs reimbursed amounted to $3.3 million, with the remaining $6.7 million in proceeds recorded as a gain of excess insurance proceeds. We will use these funds to complete the necessary permanent dock repairs and construct a secondary alcohol loadout dock in 2026.
Interest Expense, net
Interest expense, net, increased by $3.2 million to $10.8 million for 2025 from $7.6 million for 2024. The increase in interest expense, net, is primarily due to higher debt balances, as well as higher interest rates under Kinergy’s line of credit and our term debt.
Year Ended December 31, 2024, Compared to the Year Ended December 31, 2023
An analysis of our financial results comparing 2024 to 2023 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, 2024, filed with the Securities and Exchange Commission on March 13, 2025, which is available free of charge on the Securities and Exchange Commission’s website at www.sec.gov.
Liquidity and Capital Resources
During the year ended December 31, 2025, we funded our operations primarily from cash on hand, cash generated from our operating activities, and proceeds from Kinergy’s operating line of credit. In addition to funding our operations, we used our capital resources to continue our capital improvement projects, purchase Kodiak Carbonic, make our final cash payment related to our acquisition of Eagle Alcohol and pay preferred stock dividends.
As of December 31, 2025, we had $23.4 million in cash and cash equivalents and $37.4 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 discussed below, subject to certain conditions. 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. The following selected financial information should be read in conjunction with our consolidated financial statements and notes to 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 (dollars in thousands).
December 31, 2025
December 31, 2024
Change
Cash, cash equivalents and restricted cash
Current assets
Property and equipment, net
Current liabilities
Long-term debt, noncurrent portion
Working capital
Working capital ratio
Restricted Net Assets
At December 31, 2025, we had approximately $68.4 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.
Changes in Working Capital and Cash Flows
Working capital increased to $96.8 million at December 31, 2025 from $95.3 million at December 31, 2024 as a result of a $2.8 million increase in current assets, partially offset by a $1.3 million increase in current liabilities.
Current assets increased due to increases in inventories, transferable tax credits, net, and restricted cash, partially offset by decreases in cash and cash equivalents and accounts receivable. Our current liabilities increased due to an increase in the current portion of our long-term debt, partially offset by decreases in accounts payable and accrued liabilities.
Our cash, cash equivalents and restricted cash declined by $10.5 million due to cash used in our financing activities of $16.4 million for payments on Kinergy’s line of credit to reduce interest expense, a principal payment on our term debt and preferred stock dividends, and cash used in our investing activities of $7.4 million for our capital improvement projects, the purchase of Kodiak Carbonic and our final payment to the owners of Eagle Alcohol, partially offset by cash provided by our operating activities of $13.2 million.
Cash provided by (used in) our Operating Activities
We generated $13.2 million in cash from our operating activities during 2025, as compared to using $3.5 million in cash from our operating activities in 2024. Specific factors that contributed significantly to the change in cash generated by our operating activities include:
an increase of $72.3 million in net income primarily due to higher commodity crush margins;
an increase of $3.0 million related to changes in the fair value of our derivative instruments due to changes in commodity prices at December 31, 2025 as compared to December 31, 2024; and
an increase of $2.8 million related to accounts receivable balances primarily due to the timing of sales and collections.
These amounts were partially offset by:
a decrease of $24.0 million in asset impairments primarily related to an asset impairment in 2024 due to the cold-idling of our Magic Valley facility;
a decrease of $17.1 million related to inventories due to the timing of sales;
a decrease of $12.8 million related to accounts payable and accrued expenses due to the timing of payments; and
a decrease of $7.5 million related to accrued transferable tax credits, net, due to their occurrence in 2025 and none recorded for 2024.
Cash used in our Investing Activities
We used $7.4 million of cash in our investing activities for 2025, of which $4.6 million was for additions to property and equipment resulting from our capital improvement projects, $7.3 million was for our acquisition of Kodiak Carbonic and $2.2 million was for our final payment with respect to our acquisition of Eagle Alcohol, partially offset by $6.7 million of excess insurance proceeds.
Cash used in our Financing Activities
Cash used in our financing activities was $16.4 million for 2025, of which we used $10.1 million to pay down Kinergy’s line of credit, $5.0 million to make a principal payment on our term debt and $1.3 million to pay preferred stock dividends.
Kinergy’s Operating Line of Credit
Kinergy maintains an operating line of credit for an aggregate amount of up to $85.0 million. The credit facility matures on November 7, 2027. Interest accrues under the credit facility at a rate equal to (i) the daily Secured Overnight Financing Rate, plus (ii) a specified applicable margin ranging from 1.25% to 1.75%. The credit facility’s monthly unused line fee is 0.25% to 0.375% of the amount by which the maximum credit under the facility exceeds the average daily principal balance during the preceding month. Payments that may be made by Kinergy to Alto Ingredients, Inc. as reimbursement for management and other services provided by Alto Ingredients, Inc. to Kinergy are limited under the terms of the credit facility to $1.5 million per fiscal quarter. The credit facility also includes the accounts receivable of our indirect wholly-owned subsidiary, Alto Nutrients, LLC, or Alto Nutrients, as additional collateral. Payments that may be made by Alto Nutrients to Alto Ingredients, Inc. as reimbursement for management and other services provided by Alto Ingredients, Inc. to Alto Nutrients are limited under the terms of the credit facility to $0.5 million per fiscal quarter. Alto Nutrients markets our essential ingredients and also provides raw material procurement services to our subsidiaries. In addition, the amount of cash distributions that Kinergy or Alto Nutrients may make to us is also limited to up to 75% of excess cash flow.
For all monthly periods in which excess borrowing availability falls below a specified level, Kinergy and Alto Nutrients must collectively maintain a fixed-charge coverage ratio (calculated as a twelve-month rolling earnings before interest, taxes, depreciation and amortization divided by the sum of interest expense, capital expenditures, principal payments of indebtedness, indebtedness from capital leases and taxes paid during such twelve-month rolling period) of at least 1.10 and are prohibited from incurring certain additional indebtedness (other than specific intercompany indebtedness). 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 following table sets forth the fixed-charge coverage ratio financial covenant and the actual results for the periods presented:
Years Ended
December 31,
Fixed-Charge Coverage Ratio Requirement
Actual
Excess
Alto Ingredients, Inc. has guaranteed all of Kinergy’s obligations under the credit facility. As of December 31, 2025, Kinergy had an outstanding balance of $29.6 million and $37.4 million of unused borrowing availability under the credit facility.
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. 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.
We must prepay amounts outstanding under the Term Loan on a semi-annual basis beginning with the six-month period ending December 31, 2023 in an amount equal to a percentage of our excess cash flow based on a specified leverage ratio, as follows: (i) if our leverage ratio is greater than or equal to 3.0x, then the mandatory prepayment amount will equal 100% of our excess cash flow, (ii) if our leverage ratio is less than 3.0x and greater than or equal to 1.5x, then the mandatory prepayment amount will equal 50% of our excess cash flow, and (iii) if our leverage ratio is less than 1.5x, then the mandatory prepayment amount will equal 25% of our excess cash flow.
As of December 31, 2025 and 2024, the principal amount outstanding under the Term Loan was $55.0 million and $60.0 million, respectively. In addition, we estimate our excess cash flow payment for the six months ended December 31, 2025 due in March 2026 will be $16.6 million, of which $10.0 million was paid in February 2026.
Other Cash Obligations
As of December 31, 2025, we had future commitments for certain capital projects totaling $17.5 million. These commitments are scheduled to be satisfied through 2026.
Critical Accounting 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. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. The following represents a summary of our critical accounting estimates, defined as those estimates 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.
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.
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. Generally, we assess long-lived assets for impairment by first determining the forecasted, undiscounted cash flows each asset is expected to generate plus the net proceeds expected from the sale of the asset group. 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. When the estimated fair value of the asset group is less than its carrying value, we recognize an impairment expense equal to the difference between the asset group’s carrying value and estimated fair value. 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. As a result, we recorded asset impairments of $0.8 million, $21.4 million and $0.6 million with respect to various abandoned projects, the cold-idling of our Magic Valley facility and our right of use assets associated with our operating leases for the years ended December 31, 2025, 2024 and 2023, respectively.
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. 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 did not recognize any asset impairments for the year ended December 31, 2025. 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.
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 allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
We evaluate our deferred tax asset balance for realizability. To the extent we believe it is more likely than not that some portion or all of our deferred tax assets will not be realized, we will establish a valuation allowance against the deferred tax assets. Realization of our deferred tax assets is dependent upon future taxable income during the periods in which the associated temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. These changes, if any, may require possible material adjustments to these deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period when such determinations are made.
We had pre-tax consolidated net income of $12.7 million, and net losses of $58.8 million and $27.9 million for the years ended December 31, 2025, 2024 and 2023, 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. As such, we have recorded a valuation allowance against our net deferred tax assets.
