Green Brick Partners Inc (GRBK) 2009 Q1 法說會逐字稿

Welcome to today's BioFuel Energy Corp. first quarter 2009 conference call. Hosted by Scott Pearce, President and CEO. During the presentation all lines will be in a listen-only mode. A question and answer session will follow the presentation and instructions for asking questions will be given at that time. Thank you for your attention.

I would now like to turn the conference over to your host, Mr. Scott Pearce.

Well, good morning from Denver, I guess it's afternoon there on the East Coast. Thank you for your attendance on today's first quarter earnings call. It is certainly an interesting time for the industry. If you look at some of the consolidation that has transpired since we last spoke with Valero's purchase of the VeraSun assets, Aventine and most recently this morning Pacific Ethanol's filing, reaffirmation of support for the BioFuel industry by Washington and some improvements that are showing through in the margins. Again makes it very interesting times to say the least.

I am going to turn the call over here to Kelly to first go through our results. I will come back and cover with you the results of the Company's operations, talk about the plants and specifically the situation with our banks and then I will finish by giving a brief commentary on the industry prior to opening it up for questions and answers. With that, Kelly, I am going to let you take us through the first quarter results if you would, please.

Thank you, Scott. For the three months ended March 31, BioFuel Energy Corp. recorded $97.5 million in revenues including $79.9 million from the sale of ethanol and $17.6 million from the sale of distillers grains. Our cost of goods sold for the quarter totaled $102.6 million which included $72 million for the cost of corn. In addition, we incurred $2.6 million in general and administrative expenses which included $1.5 million of compensation expense. This resulted in an operating loss of $7.7 million for the quarter which included, the operating loss of $7.7 million included, $6.6 million of depreciation expense. We also incurred $3.5 million in interest expense for the quarter which resulted in an $11.2 million loss before noncontrolling interests.

Our cash position at the end of the first quarter was $7.8 million of unrestricted cash. As of today we currently have $6.7 million of unrestricted cash. From a plant operating perspective, the plant operating margin for the first quarter was $0.5 million, so from a plant operating perspective before corporate overhead and depreciation and interest expense the plants actually generated a positive margin of $0.5 million for the quarter. Scott, those are the results. I'll turn it back over to you from-- to go over the operations.

Great. Thank you very much, Kelly. Since we last spoke, I believe it was right at the end of March we continued to make progress in stabilizing our operations and as well optimizing our main production facilities. That really has turned into our main day-to-day focus. We call it conversion efficiency but ultimately how can we get the most out of our plants on our pursuit to being a low cost producer. This started at the beginning of the year and was focused on the plants, now encompasses all aspects of the Company to corporate here in Denver and virtually all suppliers we work with down to the water treatment chemical supplier all the way through cargo.

I'll cover a couple key events for the quarter, share a couple of things that we are still not pleased with and touch on our current risk management program prior to talking about primarily the situation we face with our banking syndicate and as well the poor margins of the industry. That has been the real story of the first quarter and we anticipate that's going to continue as we move forward in 2009.

I'm pleased to report that the combined average nameplate capacity of our facilities was 100% for the quarter. That was up from 80% during the last quarter of the year. There were several shutdowns but we've gotten a lot better at planning those and making them fit our operational goals. To complete repairs that were punch lift items from the remaining construction work. We'll continue to do that through June of this year and in fact some of the projects will likely carry over into the third quarter. The main area that we continue to struggle with are the dryers and the related conveyor systems. We've talked about this before and the fact is these should be fairly simple systems in the end, there are a number of them that we are redesigning and from the last call when I reported we had our arms around it we've moved from having our arms around what we need to in some instances finalize and design and in other instances design well under way but in the cases where design is completed we have got systems on order and the overall magnitude of the costs we are talking about is not huge. In the order of a couple million dollars in terms of total projects remaining in this area in particular, less than that. But nevertheless things we need to do to optimize the plants and get the reliability we've always expected.

As to the balance of operation we now have a fully integrated and we believe a unique management process encompassing our risk management program. This allows us to synthesize logistics, risk management production, accounting between Denver, the plants and cargo headquarters. We continue to review these positions daily and yet for the time being have no choice but to stay very close to home. Margins have continued to be negative on a cash basis so there's very limited to no opportunity to lock in even break even margins but we would need the banks to free up liquidity to allow us to do so. We are hoping to attain that in the next month, maybe sooner but we do envision there may be some opportunities that we will have to forego if we did elect to lock in break even margins. But again doing so is going to require a lot of work and it probably will take longer than the month I mentioned.

As to the industry, we continue to face headwinds in the market. This is the biggest issue facing the Company now that we've gotten through and demonstrated the way our plants can run. As noted in our press release we have certain debt service requirements for the balance of 2009 and we are going to need help from our lenders in order to continue to operate as planned. We previously reported that the first principal payment under our senior facility was due at the end of June and that amount was $3.2 million. As further clarification, this payment does not necessarily represent a cash drain on the Company. As we mentioned last time we are in the process of converting this construction facility to a term loan. The deadline for doing so coincides with the first principal payment at the end of June. With that conversion of a debt service reserve would be funded in the amount of about $12 million and the unutilized proceeds from our construction which are around $3.5 million, Kelly?

Yes.

So 15.5 million, $16 million that has yet to be drawn would go to those two respective areas and per the credit facility the principal payment and potentially even interest would be made from that debt service reserve account. Again previously we were not as clear as I hope I've just made that in covering the exact mechanics of how we would pay that particular payment at the end of June. However it does require that the banks would fund.

To date the operating subsidiaries continue to meet all of their obligation. As I said last quarter and just continue to struggle and we hoped at this point we would be chipping away at our debt with cash flow from operations but the market conditions have certainly not allowed that. But with us in our operating facilities meeting their obligations the reserve fund and several industry comparables there are ample ways that the banks can help. We do have as shared before a diverse and strong lending syndicate and we think that they will be constructive to working to our current situation and subject to working out a mutually satisfying agreement with our banks that we think we all have a vested interest in doing that we will be able to have something to report to you but unfortunately at this time I have nothing on the subject that I can share further than what I just covered.

So if we look back on the first quarter, we are certainly not doing high fives but there are several areas that we can look to as the first specific operational data points that support our original business plan thesis. You recall we were intending to build large scale plants that would have a low fixed cost relative to the operations. We focus on operational excellence to have lowest possible variable cost and highest conversion efficiency. And then combined with those two items we would leverage Cargill's specifically U.S. although certainly their global capabilities help to be a low cost producer. If you put all this together and you compare our first quarter operating results with spot prices our results were better than we would have expected based on just spot prices alone.

So last time we spoke I asked the question, what else should we be doing. At that time, as I noted we continue to work through the current situation with the global being one of the last standing in the industry. Again, the fundamentals that brought us here remain. We are still believes in the industry and I think that though the near term is going to continue to be choppy mid and long-term has some very significant promise. We (inaudible) some of our services to others in the industry in terms of asset management and in doing so believe that it's away for us to leverage and as well share what we have demonstrated in terms of our operational excellence and capabilities. To date frankly, there have not been other than interest in proposals a lot of takers. I think that a lot of the new owners and in many instances banks continue to look for other alternatives in having to manage these assets and put new capital into them. And then my expectation is maybe that will not begin to break this quarter but it will take to the third quarter for people to really come to grips with what the best decisions are in terms of either running these facilities or mothballing them and needing help in doing so.

The only other thing that we are beginning to do, while we clearly have our hands full and are focused on the issues with the Company's liquidity, we are beginning to look at the landscape for an advanced BioFuel strategy. There are reasons strategically this makes all kinds of sense for the Company and whether it's converting or being able to use in our facility a process like Gevo has, for instance, with butanol or some of the firms that are focused on something like acetic acid and then finally some of the low hanging fruit that could come from just extracting the oil from our distiller's grains. We are seeking by the end of the year to have this strategy fully mapped out and take advantage of all the good work that's been done investing in what we do believe in the future will be bio refinery, not much different than the current refining process that you see in the petroleum industry.

So with that as far as the industry goes, I'll take more questions if there are some but for those of you that follow us closely you'll note that because of the lateness of planting in the eastern corn belt more than anything else we've seen corn run a little higher than we had expected. This comes in an ironic set of events if you will because from where our plants are located in the western region of the corn belt planting was reported to be as perfect as it's been in recent history. But if you take the net effect we are about at the same place or as of last week in terms of planting progress than we were last year when we had wet weather and late spring that kept people from getting much corn in anywhere.

Nevertheless, the positive side of this is that ethanol and the overall energy complex have been on the rise and ethanol has kept up with rising corn more so than it has of late. So if we look at our twenty-day average in terms of crush spread we are somewhere in the neighborhood of 0.02 to $0.05 better than, today than that twenty-day average suggests.

So with that you continue to see plants struggling. We are impressed at the plants that continue to stay online or on stream and even more so that some continue to start up that are finishing construction and we do think that the overall supply and demand through the balance of 2009 and 2010 is going to continue to be in an over supply situation. But nobody is building new plants and with the mandate that's required in 2010 and specifically '11 we are going to soon get to a place, not soon enough for us I might say, but where supply and demand will be in balance given the amount of capacity that will remain in the corn ethanol industry. So with that, Kelly, I think we both covered everything we wanted to. Anything you think we need to hit before turning it over to questions?

I don't think so, Scott.

Okay. Well, with that, why don't, operator, we turn it back over to you and open it up for any questions that our participants may have.

Thank you. (Operator Instructions) It looks like we have no questions at this time.

Okay. Well, with that, then, we will go back to work. We've got plenty to do. Thanks again for all of your participation this morning and we look forward to keeping you apprised of our progress as we work through this quarter and the balance of the year. We will visit at the end of the second quarter. Thanks again.

Thank you all for your attention. This concludes today's conference call. All participants may now disconnect.