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.
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 unscheduled downtimes 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 .
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 achieved positive 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 improved profitability, 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 improved profitability 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 .
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.
