Green Brick Partners Inc (GRBK) 2009 Q3 法說會逐字稿

Welcome to today's BioFuel Energy Corporation third 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 instruction 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.

Good morning, everybody. Thanks for joining us for our third quarter conference call. I've got Kelly Maguire, our Chief Financial Officer, with me. We're going to recap what we think was somewhat of a challenging quarter for reasons we'll cover. However, during the quarter we had several key accomplishments that we'll discuss, and moreover feel very good about the momentum we have going into the fourth quarter and as we look towards closing out the year in 2010.

So with that brief overview I'm going to turn it over to Kelly to go through our results and then I will walk through the operating results and how the Company's doing and touch upon what we're thinking about for the future. But with that, Kelly, you want to take us through the quarter's results, please?

Thank you, Scott. And good morning, everyone. For the quarter, Biofuel recorded 91.1 million in revenues, which included 79.8 million from the sale of ethanol and just over 11 million from the sale of distillery grain. Our cost of goods sold for the quarter totaled 89 million which included 60.5 million for corn, which resulted in gross income of 2.1 million for the three months. This is the first quarter ever in which we have had gross income attributed primarily to the continued improvement in commodity margins.

Although we generated gross income for the quarter, and are happy about that, our OpEx expenses which include costs such as repairs and maintenance, labor, leases and other miscellaneous expenses, were approximately $1 million higher for the third quarter in relation to both our operating budget as well as prior quarters actuals. Most of the higher costs were in the repairs and maintenance categories which Scott will touch on later in his discussion. In addition, we incurred 5.9 million in general and administrative and other operating expenses, which included 3.2 million of legal and financial advisory expenses associated with our negotiations with our senior lenders, relating to restructuring and loan conversion. This resulted in an operating loss for the three months of of $3.8 million. We also had depreciation expense of $6.7 million for the quarter, most of which, approximately $6.4 million, is included in cost of goods sold with the remainder included in G&A expense.

Finally we incurred 4.6 million in interest expense for the quarter, which included 1.1 million in additional interest as we were under base-rate interest versus LIBOR interest due to the default notice with the senior lenders, this resulted in a $8.4 million loss before non-controlling interests, the net loss attributable to non-controlling interests totals $2.2 million therefore the net loss attributable to Biofuel common shareholders was 6.2 million or $0.26 per share for the quarter. The Company's cash and equivalents balance was 8.2 million at September 30, and has increased from the $4.6 million balance at June 30. Our cash balances continue to increase with today's balance approximately $11 million. The Company, as previously disclosed also has 9.7 million in borrowing availability under its senior debt facility, which can be utilized to fund principle and interest payments under that facility.

From a financial perspective, we believe that the Company made several positive steps in the right direction during the quarter. We achieved resolution with the banks concerning our senior debt and loan conversion and saw continuing improved commodity margins. However work remains in the area of OpEx costs and consistent operational performance which Scott will touch on in more detail.

Thanks, Kelly. Well, look, since we spoke last summer, the Company and the industry have leveled out quite nicely, and some of that is evidenced by what Kelly just hit on but there is still work to do. The head line for quarter was, again, our bank issue and, again, as previously reported we were able to settle the matter and have since been able to return on focusing of running the business without the ongoing drag and distraction that that represents. I'll come back to that in a minute. But I first want to talk about the two main areas of the Company's operations, and then after covering bank outcome I'll close by talking about our future plans.

The two main areas I want to cover are our plants and margin management. With respect to our plants, as Kelly reported, we had higher OpEx costs during the quarter. This was a combination of non-recurring bank advisor costs, ongoing plant upgrades and our plants not running at capacity and these factors combined adversely impacted our results. However through September the plants combined production average was still 99% of capacity, though we ran at 100 for the first half of the year we had two major multi-day shutdowns in July and August to complete repairs and upgrades at each plant. And these extended shutdowns brought down our average for the third quarter. During this, we believe we've tackled the majority of the large issues that remained from taking over the work from our construction contractor. We've previously referred to this mostly as the work around the dryer. And so we had upgrades to the centrifuge work on some of conveyors and work on the dryer themselves that was a big part of what I'm speaking about in the work that we did.

We currently have ongoing work with continuing to overhaul our centrifuges and the water treatment plant in Fairmont that will enable us to meet our compliance on a regular basis, neither one of those will require taking the plants down. Against that major work that's done, and that was clearly one of our milestones that I view as an accomplishment for the quarter, we do believe that it's going to take an incremental capital investment for our plants to run above 100% on a steady basis. Most of this work we classify as optimization projects, our engineering team is currently working through planning and procurement but getting these things done will be key to achieving steady and reliable operations. And I'll come and speak to that here in just a second and why that's important around the margin management. But as far as operations, the only other issue facing the Company is filling key operational positions that remain open. Some of this was left over from the cloud with the bank situation, and yet it is something I think worth pointing out that we believe is important to keeping our plants running and staffed with the right personnel.

So stepping back and against what I've discussed with some of the challenges we've had, we've been able to maintain our risk management and margin management focus throughout the year and continue to refine this process. Our risk management program really starts with our plant managers and our focus on running plants at capacity as efficiently as possible. With our large scale facilities this's significant operating leverage in running them at or above capacity and that is our goal. In doing this, and having consistent, steady and predictable results we have been able to continue to make good progress on the margin management that I'll talk through. The work in the running of the plants has been more difficult than we anticipated, yet by empowering our plant managers and allowing them to timely make decisions while we continue to wisely invest and upgrade certain areas, we're making steady progress.

And so against that, and focusing on the plants running at capacity, we aggressively contract for our main inputs in this case focusing on buying cash corn on a deferred basis and begin to tie down our plant margin. In parallel we're seeking to sell forward as much ethanol as we can that locks in an acceptable margin. With this philosophy we are not able to lock up a margin in times like today where the forward curve is at a pretty steep inverse, so most of our margin management is done staying close to home and not being very far forward or selling out very far forward. So thus while we can't control commodity prices we can be highly efficient at both buying and selling our products and with Cargill some of the benefits we anticipated from inception continue to show through in our results. I would like to add that this plan is consistent with our internally developed risk management plan that has been approved by our banks and does not put us in a position of being long one commodity but rather focused on securing a margin.

With that, in terms of market, we have seen a steady improvement in margins that provide a good opportunity for the Company to build up its balance sheet, improve liquidity and are support tough of fully servicing our debt. Key factors driving the margin improvement are the balanced US ethanol supply and demand, the punchlike there we think is the market worked and there's certain plants that are down and some that won't come come back. High sugar prices as well as high oil and gas prices have certainly been supported. And then incremental demand coming online from -- in areas like the southeast against some of the larger players bringing plants online, we think will keep things in balance for the foreseeable future.

As reported last month, and now I'm going to step back and just cover the bank settlement, what we were able to settle this on terms acceptable to the Company. Through the summer we were able to work with the banks to convert our construction to a term loan. In addition we were able to secure an additional 10 million from our facility. We also continue to have access to our working capital loan and we did obtain some help from Cargill to further improve our liquidity and finally we made our first principal payment of 3.2 million from operating cash at the end of September. We think this is a good outcome for our lenders and the company and to both the operations team and Kelly really a fine job in working together on a dual front of keeping our plants running during the distracting times and as well just working through some challenges, but a good outcome.

So finally I'd just like to point out that we are going through our 2010 planning to develop our operating budget. Within this effort we remain confident that we'll emerge with a very strong plan and clear path to having stable and predictable operations that put our Company and plants in the top quadrant of the industry from an overall cost of production and then against that we can improve the margin management even more that I spoke to earlier. In parallel we're also looking at our longer-term 2 to 5 year strategic plan and looking at how within that we can obtain our goal of being a leader in the industry.

We have also returned to selectively looking for opportunities in the sector. And remain keen observers of how alliances are trading to determine one and if we can grow through a combination or an acquisition but having said that our main focus is on our plants. So, again, in closing we're focused on operational excellence, margin management and levering our Cargill relationship as best we can and plotting a course to grow as we stabilize our operations in the coming year.

With that, I'd like to open it up to questions and answers.

Thank you. (Operator instructions). And our first question comes from Anthony Ward who is an investor. Please go ahead.

Yes. Do you have any other -- apart from corn, are you looking at any other biomass in terms of later on down the line, are you looking at any other form of buying in mass and your facilities are they able to process other biomass apart from corn?

The answer is we aren't looking at that right now, although as we look at our longer-term plan and the focus, especially around the proposed climate bill, we will be looking at that more actively. I -- I'm -- pretty confident. As far as the ability to process something like that at our facilities, we really have just traditional gas-fired boilers at both sites and if I understand your question about using biomass specifically for energy, we would need to do something differently. If it were to be -- to use part of the existing front end, we may need different handling equipment but if we were using biomass to convert to ethanol, some of the existing fermenter could be used.

Okay. So right now you really are joined at the hip to some extent with Cargill?

Yes.

Thank you.

Thank you. (Operator Instructions). And it appears that our next question comes from Todd [Ikovitch] of Jay Fishman Investment Council. Please go ahead.

Hey, gentlemen, hey, Kelly, how are you doing this afternoon?

Good.

A couple of questions for you guys, a couple of quarters ago you spoke about cash margins occurring with the cash spread coming at $0.25 if I'm not mistaken. Does that still apply right now going forward?

As -- as far as what the crush spread is right now or?

No. In terms of your break-even cash.

Yes. I mean from -- from the standpoint of our break even cash, that's right. We need around the $0.25 margin.

Okay. So that hasn't changed?

That really hasn't changed.

And what was -- what was your operating capacity through the quarter on average? What was it this past quarter?

It was just at 92%?

About 92%? Okay.

Yes.

Okay, gentlemen. Thanks so much. Appreciate it.

Thank you.

Thank you. (Operator Instructions). And it appears there are no further questions at this time.

Okay. Well, with that, we will just end by again thanking you for your time and reiterating our focus on our plant and operational excellence while plotting a course to the future. We look forward to talking to you next quarter. Thank you.

This concludes today's conference call. All participants may now disconnect.