Green Brick Partners Inc (GRBK) 2009 Q2 法說會逐字稿

Welcome to today's BioFuel Energy Corp. second quarter earnings conference call. 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 the Company's President and CEO, Mr. Scott Pearce.

Thank you, and thank all of you for joining us. I guess it's still morning here in Denver, but this afternoon east coast time. In addition to myself, Kelly Maguire, our Chief Financial Officer, is on the call, and will be sharing the financial results of the quarter. I want to run through essentially the agenda first, then turn it over to Kelly.

In short, we have continued to live through a somewhat dynamic and interesting times for the industry. There's been some consolidation. We think that we've demonstrated our ability to be one of the long-term survivors in the industry. Washington has certainly reaffirmed its support for the industry. Another headline is that margins have shown improvement. We'll comment on all of that in more detail here in a minute as I walk through our operations, and the industry conditions. But before I do that, I'm going to turn it over to Kelly to go through our second quarter results.

Thank you, Scott. And good morning and good afternoon, everyone. For the quarter ended June 30th, 2009, we recorded $106.5 million in revenues, which included $88.3 million from the sale of ethanol, and $18.2 million from the sale of distiller's grain. Our cost of goods sold for the quarter totaled $107.3 million including $79.5 million for corn. In addition, we incurred $4.3 million in general and administrative expenses, which included $1.6 million of legal and financial advisory expenses associated with our ongoing negotiations with our lenders. This resulted in an operating loss for the quarter of $5.1 million.

We also had depreciation expense of $6.6 million for the quarter, and taking into account the nonrecurring legal and financial expenses of $1.6 million, and our depreciation expense of $6.6 million, we would have had, before those items, operating income of $3.1 million. Finally, we incurred $3.9 million of interest expense for the quarter which resulted in a $9 million loss before non controlling interest. Our cash balances as of June 30th, our unrestrict cash, was $4.6 million. Our receivables were $21.9 million, and our inventory was $11.4 million.

As noted in our press release, we have classified our senior debt and our subordinated debt in our June 30th financial statements as current liabilities due to the ongoing discussions and negotiations with our lenders concerning those. Our equity, as of June 30th, is $76 million.

Scott, with that I will turn it back over to you.

Great. Thanks, Kelly. Since we last spoke, as I said, we continue to experience a somewhat dynamic environment. Unfortunately, the headline of the quarter was our bank syndicate declaring a material adverse effect and default. And though this has had a direct impact by increasing our operating costs with advisers and the like, and others that I will mention, there were a number of noteworthy milestones & Company-driven accomplishments that I'm going to talk through. Let me first cover these as I go through and update you on operations. I'll come back to the bank situation at the end, then share some commentary on our industry outlook.

One of the first milestones is we, again, met our target of 100% of capacity for the quarter. While that's noteworthy, I'm equally and even more happy to report that we made progress on our optimization initiative and also met our cost per gallon reduction target for the quarter. As I shared in the last call, this now and will continue to encompass all aspects of the Company, from Denver to the suppliers and specifically down at our plants. We've completed what I would call phase one of the optimization initiative and are just beginning to contemplate a deeper dive into other ways we can reduce our operating costs that may not have have been the low hanging fruit that we've already worked through. And that will continue through the balance of the year. Of course, the main way to move the dial remains the crush spreads, and while we can't control commodity prices, we can be highly efficient at buying corn and selling our products, and with Cargill's help, we believe that some of the benefits we have anticipated from inception are beginning to show through.

As to the plants, we're almost to a point where we are through the completion of punch lists, or reliability projects remaining from closing out construction. This month particularly, we will have shut down next week in Fairmont, where we will do the balance of the major work remaining. We did the same sort of work by having the shut down in July at Wood River. With that, we will also close out the warranty period with TIC this month, and expect by the time we get to the end of this quarter to be having a more traditional capex program going forward. The only item that will continue to have activity will be water treatment at Fairmont. We are redoing certain elements of that plant to give us more capacity as we do have ongoing issues with specifically the way the waste treatment aspect of that facility is operating. Of course, we'll continue to have work as we work through these large facilities, and improve them, but again, the major efforts will be completed here, but for what I mentioned.

With respect to risk management, we continue to review our positions daily, remain very close to home, and are seeking to be in a position to lock in crush margins. Right now there's not a lot of that that could be done, but our ability to do so will certainly require resolution of the bank situation.

Against all this, we have a bit of wind at our back for a change, thankfully. We have been realizing break even depositive cash margins. When I say cash margins, I mean full ability to service debt and overhead, since May, and those things have gotten a little tighter lately. This trend, in terms of margins, continues.

This week the biggest issue now facing the Company and its stakeholders is resolving the bank situation. Unfortunately, as it is an ongoing matter, I cannot share much other than we have made progress recently, and though nothing can be assured, I believe we will have resolution of this matter yet this quarter. This would be a big step forward for the Company in not only eliminating the expense of attorneys and advisers, we don't need in terms of contributing to the business, but also in removing a cloud over the Company that has had a direct cost like unfavorable trade terms with vendors, to difficulty hiring and retaining key personnel.

The personnel matter is hard to quantify, but it's worth noting because I think it's probably the biggest single impact and will take some time to overcome. You may recall that our plants are large-scale facilities using Delta-T technology. Nobody else has yet figured out how to make them operate the way we have, and in that, it requires a lot more care than a typical plant, the benefit being not only do they run pretty well, but we do realize efficiency savings that we think are somewhat unique. But again, that comes at a price of having to have a little bit sharper operator and we definitely lost some ground there. That being said, like other things, it's something that we will overcome in time and are on a path to doing so.

So we look back at the quarter, we're still not doing high fives, but as noted, there are several positive data points that support our original business plan thesis. I do think that's worth reiterating, and that is to build large-scale plants focusing on operational excellence, and combining with the leverage of Cargill's US and global capabilities, extending our scale. In other words, we didn't want to try to build or rebuild that ourselves, especially when you're having to buy corn and ship over rail lines, that getting scale is certainly a pretty costly endeavor. All of which we expect will and is starting to show through in our ability to be a low-cost producer.

So if you put it all together and compare our quarterly operating results, again this quarter, as was the case in the last, we were better than we would have expected on our results as compared to spot prices. Against this, I think last time I also asked what else could we do. We're doing the same things that I mentioned, looking at ways we might be able to offer our management services through running other plants for a fee. We are also seeking to put ourselves in a position for opportunistic combinations, yet we are certainly not in a position to consummate anything today.

In terms of wrapping up the operations, we remain focused on working through the current situation. We think we are demonstrating our ability to be one of the long-term survivors, and we believe in the long-term fundamentals of the business and think, without a doubt, corn ethanol is here to stay and that there are ways to improve, that have yet to be really contemplated or driven into by most corn ethanol producers. And that will be a topic that we will be diving into from a strategy perspective this quarter, and to the end of the year and implementing in 2010.

So with that, unless I may have missed something, Kelly, I'll just comment briefly on industry conditions and then open up for questions and answers. The spreads, as I mentioned, have improved since May. One of the bigger items that we think drove that was the runup in gasoline prices and favorable blend margins. Against that, for a change, corn moved downward, and though we are not certain as far as what's going to happen with oil prices, and certainly don't have a crystal ball, don't get me wrong, we do have a bearish view on corn, and think that the crop is in phenomenal shape and will deliver quite a bit of supply. We're a little less clear in terms of a bias on oil and gas prices, but we think with the improving economic fundamentals in this country, and elsewhere, that the prices should hold up and not retreat.

Finally, I think it's worth noting that sugar is at an all-time high. It makes making ethanol in Brazil problematic, and moreover, the opportunity for Brazilian ethanol producers to ship into the United States, and therefore that is favorable to the supply and demand that has already been helped by the other producers that have been forced to shut down for various reasons, and we think will ultimately help carry through the end of the year, at the l, ast in terms of the kind of results we're seeing today from a crush perspective.

So with that, I think I'll open it up for any questions that there may be. Operator, we'll go from there.

Thank you. At this time, we'll begin the question-and-answer session. (Operator Instructions)

Looks like we don't have any questions. So again, thank you for your time, and those of you who have stuck with us, we certainly appreciate it. I hope by the tone optimistic about the future for our industry and our position in it and look forward to hopefully reporting more progress as the year continues on. Thanks again, everybody.

Thank you.

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