Good day, ladies and gentlemen. And welcome to the Pacific Ethanol Fourth Quarter and Full Year 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will have a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Becky Herrick at LHA. Please go ahead.

Thank you, Nicholas, and thank you all for joining us today for the Pacific Ethanol fourth quarter and full year 2014 financial results conference call. On the call today are Neil Koehler, President and CEO, and Bryon McGregor, CFO. Neil will begin with a review of business highlights. Bryon will provide a summary of the financial and operating results. And then Neil will return to discuss the Company's outlook and open the call for questions. Pacific Ethanol issued a press release yesterday providing details of the Company's quarterly results. The company also prepared a presentation for today's call that’s available on the company's website at pacificethanol.com. If you have any questions, please call LHA at 415-433-3777. A telephone replay of today's call will be available through March 12, the details of which are included in yesterday's earnings press release. A webcast replay will also be available at Pacific Ethanol's website. Please note that information in this call speaks only as of today, March 5, and therefore you're advised that time-sensitive information may no longer be accurate at the time of replay. Please refer to the company's Safe Harbor statement on slide two of the presentation available online, which says that some of the comments in this presentation constitute forward-looking statements and considerations that involve a number of risks and uncertainties. The actual future results of Pacific Ethanol could differ materially from those statements. Factors that could cause or contribute to such differences include, but are not limited to, events, risks, and other factors previously and from time-to-time disclosed in Pacific Ethanol's filings with the SEC. Except as required by applicable law, the company assumes no obligation to update any forward-looking statements. Also, please note that the company uses financial measures not in accordance with Generally Accepted Accounting Principles, commonly known as GAAP. To monitor the financial performance of operation, non-GAAP financial measures should be viewed in addition to and not as an alternative for the reported financial results as determined in accordance with GAAP. The company defines adjusted net earnings as unaudited earnings before fair value adjustments and warrant inducements, and gain or loss on extinguishment of debt. Adjusted EBITDA is defined by the company as unaudited earnings before interest, provision for income taxes, depreciation and amortization, fair value adjustments and warrant inducements, and non-cash gain or loss on extinguishment of debt. To support the company's review of non-GAAP information later in this call, a reconciling tables are included in yesterday's press release. It is now my pleasure to introduce Neil Koehler, President and Chief Executive Officer. Neil?

Thank you, Becky. And thank you all for joining us today. For the fourth quarter of 2014, we reported net sales of $256.2 million, a 19% increase over the fourth quarter of 2013. We also reported record total gallons sold at 134.6 million. Gross profit of $18.4 million, operating income of $13.6 million, and adjusted EBITDA of $16.3 million. 2014 was a pivotal year for Pacific Ethanol with a record $1.1 billion in sales. A record 513.2 million gallons of ethanol sold. $108million in gross profit, $91million in operating income and $95million in adjusted EBITDA. We achieved tremendous results on our operating efficiency and debt reduction initiatives put in place over the past few years. For 2014 these initiatives combined with strong market fundamentals to produce excellent production margins, improved net income and cash flow, and a solid balance sheet and in the year with $62 million of cash and total working capital of $114 million. We are pleased to met or surpass all of our goals for 2014. In the second quarter we successfully restarted our Madera plant. After having been off-line for more than five years, we achieved efficient operations quickly at Madera and it’s operated very well since. We committed $16 million of capital to invest in the operating plants to improve plant efficiencies and increase yields. Many of these projects are complete and some are still underway. With these projects, we have reduced our cost of production and increased revenue generating opportunities at each of our facilities positioning the plants to be even more competitive. Our plan to install corn oil separation technology at the remaining two plants is expected to be completed by the end of the first quarter for Madera and in the beginning of the second quarter for Boardman. We plan to sell…

Thank you, Neil. Our solid fourth quarter results closed out a record year for Pacific Ethanol. In the fourth quarter, we reported net sales of $256 million, up 19% compared to $215 million in the fourth quarter 2013. Gross profit was $18.4 million this quarter, which compares to $21.6 million in the fourth quarter of 2013. The decline in gross profit was due to particularly strong production margins in the fourth quarter of 2013. SG&A expenses were $4.7 million, compared to $4.4 million in the fourth quarter of last year. This includes approximately $1 million in increased spending related to the Aventine merger. This quarter’s operating income was $13.7 million, compared to $17 million in the prior year period. We recorded income of $2.2 million in fair value adjustments for the quarter, compared to an expense of $2.5 million in the prior year period. Today, we have approximately 800,000 warrants outstanding at a weighted-average exercise price of approximately $8 per share. Just over a half of these warrants expire this September. And have an exercise price of approximately $9 per share. Interest expense was $1.1 million. This compares to $3.7 million in interest expense in the fourth quarter of 2013, reflecting the significant strides made introducing our overall debt balances. Our provision for income taxes was $1.5 million. During the quarter we finalized our estimate of NOLs available for use in 2004 in future years. Resulting in higher NOL utilization than previously estimated. Going forward, we expect to have an effective tax rate of 35% to 40%. In 2015, we expect to use approximately $3 million of NOLs and an $8 million of refund, from a 2014 overpayment to fund a portion of our tax obligations. Net income available to common stockholders was $12.2 million or $0.50 per diluted share.…

Thanks Bryon. We’re extremely pleased with the progress made in 2014, the health of the industry supported strong production margins and enhanced cash flow, which allowed us to reinvest in the business and set the foundation for continued profitable growth. I want to thank our team for their valuable contributions in executing our company goals and helping Pacific Ethanol to build the strong foundation it stands on today. Looking ahead to 2015, we expect to experience a significant evolution in our business with the planned merger with Aventine. The combination of the two companies will expand our production and marketing, diversify our technologies, broaden our co-product mix and establish Pacific Ethanol as the fifth largest producer and marketer of ethanol in the United States. We are impressed with the skilled and experienced employees who operate the Aventine business and we look forward to integrating our two teams and introducing our combined company to the market. For 2015, our goals are to close the Aventine merger and efficiently integrate our businesses. Continue reinvesting in our production business through initiatives focused on improving efficiencies, diversifying feedstock, creating new revenue streams and furthering our advanced biofuels initiatives. We believe we are very well situated to expand our share of the renewable fuels market and deliver long-term profitable growth. Nicholas, we are now ready to begin the Q&A session.

[Operator Instructions] And our first question comes from the line of Eric Stein with Craig Hallum. Your line is now open. Please proceed with your question.

Hi, Neil; hi, Bryon; nice quarter.

Thank you.

Thanks Eric.

I just want to start with ethanol prices and I know this is maybe a little tough to answer, but RBOB has rebounded pretty nicely since early February and just thoughts when you think ethanol prices could follow suit. And then just maybe a shot of what your thoughts are in prices dropped 2015 factoring in seasonality of the driving season and things like that?

Eric that is a difficult question to answer, I will say to your point RBOB has gotten more expensive, if you look at the forward curve and particularly to the driving season. We’re looking at about $1.90 on RBOB, the FD forward curve on ethanol is closer to about $50. So where we consistently trend as a nice discount to gasoline, that being said the value of ethanol is higher than the value of gasoline and the erosion in ethanol prices, our view has really been more a function of the supply and demand issues around ethanol, not really the lower oil prices and gasoline prices. But what these prices have certainly done is kept the pump primed on exports. We’ve seen very strong exports already this year. We expect that to continue. And we have seen a – just really in the last few days an uptick in ethanol prices. And we expect the values to continue to strengthen as we move into the driving season and we would expect to see some closing of that current discount on gasoline.

Got it, okay. And maybe just thoughts on how we should think about your utilization at the plant level just given that right now margins are pretty tight – pretty tight the industry as you kind work through that supply and demand picture.

Yes, as I mentioned in the prepared remarks, we and others in the industry have reduced production. Our own production rates are running about 90% right now, so we’re about 10% down. We were running right at the operating capacity in the fourth quarter. So that represents a meaningful decline. And then you can see in the aggregate numbers for the industry from 15.2 billion gallon run rate, which was a record run rate for the month of December. This last week’s numbers were down for the second week in a row and showing an annualized rate of 14.3 billion gallons. 14.3 billion gallons when you get into the driving season is about the demand we’ll see on an annualized rate in those summer months. And we expect the exports to be in and around where they were last year pushing on a billion gallons as you can see with those two numbers we would be bringing inventories down. Inventories are at about a two plus year high and they do need to come down to support better margins in the business and that is the trend that we are seeing.

Okay. And then I mean so 90%. Obviously you can move that pretty quickly, but 90% would seem to be a decent assumption as we look out going forward knowing that…

Well, Eric, that is a decent assumption for the first quarter. I mean this is as you point we can move that quickly. We will move that in response to market conditions. And right now market conditions are suggesting that the industry as a whole should be running at rates that are closer to 90% of the capacity to bring the aggregate inventory levels down.

Yes, Okay. Maybe last question from me, just on a corn basis, I mean, that was another good number, a source of the strength in the quarter. Just curious on – and how you’re seeing that directionally? Have you been able to or are you able to lock some of that in at these levels going forward?

Sure, we’re always managing our positions sometimes very short and sometimes a little further out and – to achieve the lowest possible basis. We have locked some amount of that as we move forward. I would say that the – using kind of the spot corn basis is still the best proxy for analyzing our business and that today is running at about a dollar bushel over [indiscernible] actually lower than what we saw in the fourth quarter. Freight has become a more reasonable in fact itself in the market, a slight discount freight to our Western markets. Corn basis in the country and in the Midwest is running small discounts in the areas we pull from to the Chicago Board. We do actually see with numbers at the end of March which we anticipate will show some pretty good strong corn planting intentions. We think there's a good opportunity for the overall corn price to come off the current in and around $3.80 a bushel and that we could also see some additional relief on the basis as well.

Got it. So it sounds like you think even though $1.35 in Q4 that actually you could see improvement in that number in Q1?

We could see some marginal improvement in that in Q1, yes.

Okay, thank you very much.

All right, thank you Eric.

Our next question comes from the line of Craig Irwin with ROTH Capital Partners. Your line is now open. Please proceed with your question.

Craig?

Craig, your phone maybe mute?

Sorry about that.

Please proceed.

Good morning and congratulations on the strong quarter.

Thanks, Craig.

The present surprise for me in the numbers was the production volumes. Operating over 100% utilization across your plants, it’s always an impressive accomplishment. Given that you’ve got a lot going and everything from – you cogen project that you do more recently announced to corn oil to some of your advanced biofuels initiatives. A little bit of a surprise that you some strong volumes. Was there any thing that went particularly well for UM production side? Or is this something where you have the ability to flex upwards in the near future? And I guess the second part to the question is – in the past I think you mentioned the Boardman facility had renewable production capacity above the nameplate? Is that something that might factor in the far as your production – potential production capacity over the next several quarters?

Sure, our plants are very well dialed in. A lot of credit goes to our team for over the last couple of years. They’re really fine-tuning these plants, so that they are capable of comfortably running at operating capacities and in some cases even above that for periods of time. And so we have been able to manage all of our capital projects in ways that we will do major tie-ins when we have typical 24 hours, sometimes 48 hour shutdowns which are a scheduled part of our program throughout the year. And so we have been able to implement those projects without disrupting production. So it is a – again it’s a market related fact that we could – we look at in terms of do we want to run our plants at capacity, do we want to try to push them a bit above operating capacity, or do we want to – as we are today run them at some rate that is less than operating capacity. Very comfortable with the ability of our plants to perform reliably and consistently.

Great, my next question was similar. So you have mentioned a slow down of roughly 10% in the first quarter relative to the fourth quarter. Does this include the typical one or two week turnaround that most operators do with their plants when the snow breaks. I know snow is not a huge issue for you. But is this turnaround driven or is this driven by the opportunity to maybe furlough on margin and still meet commitments?

It’s the latter and that’s where meeting commitments in our Kinergy Marketing Company. We can always buy an ethanol, as you know, we do saw a lot of third party volume. So we have the ability to flex our own production up and down and have that a seamless event vis-à-vis our marketing and our customer commitments. This really has been a market driven event. We did anticipate frankly even through 2014 was one of the best years that the industry has ever had. We saw a period of negative margins in early January. It’s not uncommon at this time of the year to see a bit of a hinge on margins. And so we did schedule some more significant work at our Boardman, Oregon plant that we were going to do in the fourth quarter and we defer that to the first quarter and that was a good market call that we made. Our own plants don’t do one to two week turnarounds. The way our plans are designed, we typically every five, six, seven, eight weeks spending on how the plans are performing we’ll go down for a 24 hour period. But as I said in the first quarter, we had some outages that were longer than that, taken advantage of the market opportunity to slowdown and to some additional work.

Great. My next question about co product return rates, so other producers out there have expressed optimism that they will be able to catch some of the benefit from China stepping into market buying our facility streams again is this something that you think well benefit your coproduct return rates in 2015? Or do you have a component of your coproducts that are a lot in pre-existing sales agreements?

We have a very small amount that is locked up existing sales agreements. We do manage that more on a spot basis. We will have weekly, monthly pricing typically for the bulk of our volume it doesn't go much beyond that. Our wet distilleries grain is tied fairly directly to the movement and dry distillers grain pricing. So Chinese benefits is benefiting our plans as well and we are seeing an uplift in our coproduct return. As an industry not quite some of the lofty levels we saw in early and middle 2014 but certainly up from what we saw in the fourth quarter.

Great and then if I may before I hop back into the queue, corn oil, I may have missed this but last quarter you shared with us a number for corn oil. Can you share that number if you have it handy? And maybe if you could share with us what you’ve learned operating the corn oil on your existing facilities and how that’s progressing relative to your expectations.

Sure, Craig and many say number are you meaning the contribution to our operating income number? Is that what you are looking for?

Well, revenue and operating income was great. But I’ll take either.

Sure, it contributes for the plants that are running about $0.05 a gallon to our operating income gross profit contribution. And we have learned how to operate the corn oil systems better, our yields have increased overtime, we’re getting in some cases some weeks and days as high as a 8.9 pounds, 0.8 pounds of corn oil per bushel. And certainly our average our overall averages are better than they’ve been again probably closer to that 0.6, 0.7 range. So we’re that market is more stable in pricing than either the ethanol or distillery train [ph]. It’s a very high valuable feed product as well as a good feedstock for biodiesel and you know obviously it’s been an important part of our strategy and the industry strategy, as they continue to diversify the revenue streams and create a little more strength in the economic foundation of the business.

Bryon, congratulations again on the strong result and thanks for taking my questions.

Alright, thank you, Craig.

Our next question comes from the line of Jeff Osborne with Cowen and Company. Your line is now open. Please proceed with your question.

Hi, great and congratulations from me as well on the strong results. Just I might have missed this in response to the Weiss’ question, but is there a rough breakout that you can give us Neil us on the basis, in particular how much is related to freight that you highlighted some of the improvement in.

Sure, the freight component again it depends on the plan. But it’s on average, the freight is about 10 per bushel. So where we saw basis in the fourth quarter that was over $1.10, that was a combination in some cases we saw a basis in the Midwest that was over Chicago as well as particularly in the early part of the quarter when we were having the harvest, we saw the freight trading the premium. That made that all in freight number actually higher than $1.10. But that is in a market where the freight is balanced, right it actually trading at a small discount. That is a good number to keep in mind about $10 per bushel of the freight component.

Got you. And then just a couple of other quick ones from me, where are we now and may be the fourth quarter, but more importantly the plans for 2015 and 2016 on the kind of yields that you have on a gallon yield per bushel metrics. Are you slightly below 2.8 in the winter moths and then that will be slightly above, early in the year, just could you remind us of seasonality and then any efficiency improvements that you have in place for this year and next would be helpful?

Yes, there is no so much seasonality that is predictable in yield. If it does become impacted by the quality of the corn, we certainly saw in past years when the corn inventories were quite low and we're drawing off bottoms and bins in the older supplies of corn, we did see a negative impact and that would have been in the fall time timeframe, not really this last year where larger inventories has been past years. And then just depending on the growing seasons year-to-year, you can see a difference in the average starch content which is what is going to drive the yield in the market, that 2.8 is a reasonable number. We are always working to make incremental improvements on that and believe that the initiatives that we are implementing will get us above those levels, as we move forward. Very small increases in yield can have a very material positive impact on the bottom line.

Got you and then just two other quick ones, the CapEx of $50 million Bryon, should that be kind of evenly spread out through the year, or more inclined to the summer months, is there any kind of rhythm to how you think about spending that?

Yes, it was actually $30 million that we quoted. So the $4 million of normal CapEx for the four plants will be spread out throughout the year. As you can imagine some of the $11.4 million, I think it was carry over from the $16 million is going to be related to corn oil. So those will have some, as we mention those we expect to have the final to corn oil facilities up and running within the next month or two. So will have final payment on those. I think what we indicated to this was in total this will be about $8 million.

So a little bit more…

Yes, I think a little over front end loaded and then he started to add more payments on the co-generation, which we expect to be completed in first half of 2016. So I think as we review those numbers it's probably a good assumption that we spread out pretty evenly throughout the year.

Perfect I appreciate the detail. Thanks.

Our next question comes from the line of Katja Jancic with Sidoti and Company. Your line is now open. Please proceed with your question.

Hi, thank you for taking my call. First regarding the CapEx, the $11.5 million is that just the corn oil or are there additional project included in that?

No there is additional projects. So of the $16 million to $8 million was corn oil, so there was this other investments and improvements there.

Can you talk a little bit more about those, what can we expect from them?

I think consistent with the corn oil we will expect them to be contributing part of that contributory factor that I indicated in prepared remarks with regards to that $10 million to $12 million of annual contribution.

Okay. Now I know, Neil you were mentioning that you see a strong export market right now. Can you talk a bit more about how much of ethanol has already been exported to other markets? A – Neil Koehler: Well we will see I believe it’s Friday we will see the first government report in 2015 for January, and market expectations are that we saw somewhere between 70 million and 80 million gallons exported in January. And so we'll see. We don't right now certainly after the integration of Aventine will be looking at export markets but our current model of we don’t export out of the country, all of sales are local. So do went have a lot of personal visibility on that, other then just talking to the trade and its very clear, that with the ethanol prices flexing with gasoline the product continues to be very competitive and in demand throughout the world and at the exports have been strong and continue to be strong. We’ve heard from some other reporting companies that they booked exports into the second quarter and we are now hearing of exports being booked in third and even some in fourth. So there is Brazil has been a good market, they just announced yesterday that as of March 16, they are moving to their 27% land level, that could create some new opportunities, Canada continues to be a very consistent and the largest destination for ethanol exports and continue to seen interest in Asia and other parts of the world, as well.

Okay, lastly, regarding Aventine can you provide any information as to how they did in the fourth quarter?

No, unfortunately [indiscernible] until this integration and the deal is finally closed, they are a private company and we can’t comment on their financial results, I would drive your attention to the S4 that we filed, it did provided, some summary financial information for Aventine through the third quarter and I would assume that as we amend our S4and respond to questions from the SEC that there maybe an opportunity to see some fourth quarter results, as well.

Okay, thank you, so much.

You’re welcome.

Our next question comes from the line of Matt Farwell with Imperial Capital. Your line is now open. Please to see with your question.

Hey, good morning, congratulations on a great quarter.

Hi, good morning.

Just wanted to talk about the current margin environment, I did join lately, you may have already discussed this but going back to the first quarter of last year the sort of the West Coast ethanol inventories were a little bit tighter than they are now may or now. Is that probably the best way of determining the premium price for Ethanol in the West Coast relative to cbot that could eventually benefit your margins in the second quarter, and can you – did you give an idea of where margins - what kind of margins you’re seeing today?

No. We didn’t give any specific guidance on that other than just say that they have been under pressure for the whole industry and that’s we do see that with the production levels having declined fairly significantly from the record run rates in December from $15.2 billion run rate in December 2 what was reported this week at a $14.3 million, that the key is that we have the inventory levels over 21,000 barrels we need to see – I’m sorry – 21 million barrels we need to see that number come down to really support higher margins more typical of what we saw last year and we anticipate that we see some drawn inventories as we’re moving into the higher demand season in exports continue to strong combined with the some moderation in industry production levels. On our model you – you’re right to look at the spread from Chicago to the West Coast, we did see some very high basis numbers last year at this time, lot of that was weather related and just logistical constraints on rail we’ve seen a less of those problems this year whether there has been better little bit of pressure taken off of the rails from slowdown in the movement approved. So we’re seeing more historically normal levels in and around $0.20 premiums over Chicago which that’s works for us with normal corn basis, premium we get to the ethanol and distillers grain that puts us in a very solid competitive environment. We have seen a little bit with some of the weather on the East Coast and Midwest we’ve actually seen a little flexing up of that basis of last few days and that could continue to be the case over the next period of time. So we’re certainly take advantage of that, when the market presents that opportunity.

Yes. So I guess the first quarter of last year may have been – a bit of aberration due to the rail constraints but certainly in the second and third quarters given the production levels and the levels of exports that industry seems to be very confident and we should see a significant improvement and demand, I think the numbers on the inventory start looking a lot better coming [ph] summer time?

That is certainly when we run our projections and look at the balance sheet numbers, we would agree with that. And in a market that is tighter on supply demand, we do tend to see those basis numbers to our markets increase as you would expect as logistics to get trains down for export and overall increase in demand even without weather impacts and we’ve seen where that can support the pricing now in our destination markets.

From what I am looking at the Midwest margins seem attractive, will you get any benefit from that when the transaction with Aventine is closed?

Absolutely, I mean it’s what we have indicated is that these are very volatile market both the corn basis, ethanol basis, distillers grain basis all these things move around quite a bit both domestically and internationally and their times when our margins we saw any number of times last year, we are significantly better in the Midwest. We see times when they’re the same we see times when they’re not as good. And so just by diversifying the portfolio with technology and geographically, we’re in a better position to essentially hedge those markets and arbitrage the opportunities to flex margins up and in the case of where we will look at and see margin is not as good in one area, we could slowdown one area and speed up another, so it definitely give us more optionality to play the various arbitrage opportunities between the origin and the destination.

And in Aventine generates cash between now and transaction close the cash eventually flows through to PIX, correct?

That is correct.

Okay. Great, well, thanks for answering my question. And I will get back in the queue.

Thank you.

Our next question comes from the line of Paul Resnik with Resnik Asset Management. Your line is now open. Please proceed with your question.

Good morning and I’ll add my congratulations.

Thank you, Paul.

Just a couple of clean up question here. The Exxon plant explosion and its impact on gasoline prices in California, how long do you think that is going to last?

Well, it’s you probably better as gets on through that question in terms of the refinery but that was a major damage to FCC unit that is a very significant contributor to gasoline production and its not that is certainly in the time zone of months this is my understanding. But again we have no insight information on that. That combined with the Tesoro refinery in North California are being down over a labor dispute has created a significant impact on gasoline supply in California. So we’re seeing very high relatively other parts of the country prices in California to the tune of $0.30, $0.40 on the wholesale market basis premiums and we’re obviously seen it on the street, gas pricing is above $3 today in California. Frankly this just underlines the importance of the industry have access to higher level blends on ethanol certainly relative to RBOB gasoline but even more certainly related to California gasoline is a huge advantage and the market is short liquid fuels its short octane and if we could blend 15% ethanol or higher into California gasoline today we would be helping relieve the supply situation would be helping to reduce gasoline prices and helping the state to recognize its carbon initiatives by lowering the carbon intensity of the fuel.

Aventine, I guess your previous comment gives me the feeling that if I ask you what sort of operating rate there at that source are not public information?

Yes. That is correct, Paul.

Okay. And lastly long-term rail issues regarding railcar safety in the inclusion of ethanol in that issue. Any update on that and your thoughts about were that might be going?

Well, we are all waiting for the final rule from the federal government. And, we do believe that that rule will include ethanol whether there is a differentiation on the rules and regulations between ethanol and crude oil we - as an industry think there should be but we’ll have to wait and see. But there will be some impacts that will require some retrofitting of existing cars over time. And new cars that have some additional features is there that are being constructed. So that will to some degree increase the cost of moving ethanol by rail with the Aventine merger we will be part of that from the standpoint of those plans but from the standpoint of our existing facilities that’s always been an advantage for us or not putting any of the ethanol that we produced in our western plans in railcars.

Once again, fantastic quarter, great outlook. Well done.

All right. Thanks Paul.

Thank you. There are no further questions in the queue. I would like to turn the call over to Neil Koehler for closing remarks.

Thank you, Nicholas. And thank you all for joining us today. We obviously very proud of our results and very optimistic about the future of the industry in our company and we really appreciate your continued support of Pacific Ethanol. And we will talk to you soon. Have a good day. Bye-bye.

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Have a good day everyone.