Green Brick Partners Inc (GRBK) 2009 Q4 法說會逐字稿

Welcome to today's BioFuel Energy Corp.'s fourth quarter earnings call. A question-and-answer will follow today's presentation.

Please bear in mind that we will be making a number of forward-looking statements on today's call. Forward-looking statements or any statements that are not historical facts. These forward-looking statements are based on the current expectations of BioFuel Energy's management and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, our actual results could differ materially from management's expectations. Information about the risk factors that could cause our results to differ from our expectations are also referred to in this morning's earnings press release and are described in greater detail in our Annual Report on Form 10-K and in other periodic SEC filings.

We have Mr. Scott H. Pearce, the Company's President and Chief Executive Officer, and Mr. Kelly G. Maguire, the Chief Financial Officer. I would now like to turn the conference over to Mr. Scott Pearce.

Good morning, everyone, and thank you for joining us on our earnings call and 2009 recap. I am going give an overview of the operational results for the quarter, first, talk a little bit about our plans for the year and then I will turn it over to Kelly and let him go into more detail and depth on the financials and the fourth quarter.

I apologize in advance. I seem to have caught this cold others have had and I think the worst is over, but it is reeking a bit of havoc with my voice. I will just apologize in advance.

In any event, I think the most important thing is that we had our first full year of operations, hitting several significant milestones during the year, but the most significant and highlight is our first profitable quarter and strong fourth quarter results. Our entire team can be proud of having overcome a lot of the challenges that 2009 threw our way and yet delivering on a very solid fourth quarter.

Just to recap the results that Kelly is going to cover in a few minutes, we had net income of $6.8 million on revenue of $120 million for earnings of $0.21 a share on a fully diluted basis. Our plants ran well during the quarter producing 56 million gallons of anhydrous ethanol which is just above our nameplate production.

Against the momentum we we have for the fourth quarter, we feel good about the opportunity we have to have a better year in 2010. This starts at our plants and ongoing focus on operational excellence, and at our plants as I have pointed out before but it really comes down to leadership and the strength of our management teams at our sites.

We were able to fill the majority of the key operational positions we had open during the fourth quarter, and we recently announced the hiring of Doug Anderson and his addition to our team. Doug will head up our operations at the plants going forward. He has 25 years of manufacturing experience including assignments with a Fortune 100 company, and the last six years in the ethanol industry.

He has a strong passion for the industry and a track record of improving operational processes that we expect will help us to continue to raise the bar.

As for our plan for 2010, we have a very targeted business plan. This includes running at nameplate for the first half of the year, completing projects in three key areas of the plants to improve reliability and efficiency, and remove bottlenecks. Between these projects, ongoing training and focus on process improvements, we then expect to be able to consistently produce above nameplate during the second half of the year.

So, that gives you a wrap up of our operations and plan for the year. I would like to now turn to risk management. Last time we spoke, I talked about our margin management program and I would like to expand upon this.

We are highly focused on risk management and we view this as a core competency of the business we're in. Our risk management program builds on having stable and reliable operations and keeps us continually focused on being highly efficient at buying our key inputs and selling our products at each facility. Our plants are located in areas where there are relatively favorable corn and natural gas markets.

We use this advantage and leverage our relationship with Cargill towards a goal of locking in margins that beat the board spreads. As far as a couple questions that have come up and one thing that I just want to speak about on this call on being vertically integrated. A number of you have asked about this.

And I think the main point to make is we believe and now have over a year of operating data to support that we don't need to be vertically integrated or focused on scale for scale's sake. This is primarily due to our relationship with Cargill.

From inception, we have operated with the hypothesis that Cargill's 100-plus-year operating history, global reach and transportation infrastructure that, for example, places them among the top five rail shippers in the US gives us that scale. So with this, I'd like to turn to the current market, the dynamic with the regulatory support, and then I will turn it over to Kelly.

We are well aware of the recent contraction in crush spreads and are certainly monitoring this carefully against our 2010 business plan goals. To be very candid, it is pretty hard to make money at these current prices. However, if you look at the full year of 2009 you get a much better picture of normalized margins in a year that had a less favorable supply/demand balance than we have in 2010.

This would include now a 12 billion gallon RFS in a market in which there are virtually no imports and US ethanol is being exported to other parts of the world. We also view the recent news from the EPA and their ruling on the implementation of RFS2 it is very supportive to the ethanol industry, and corn ethanol in particular.

This not only confirmed the strong regulatory support to maintain the path we're on to 15 billion gallons of ethanol from corn in 2015, but it also opened the door more than anything we have seen to date for corn making up more than this 15 billion gallons of our country's supply. So in summary, while there are some risks to our 2010 plan we have a solid plan for the year. We have a stronger team.

We remain very focused on managing risk. We also believe with the economy improving, a very strong blend margins and continuation of solid regulatory support that we will see increasing demand and corresponding improvements in ethanol prices in the near term.

We also think we may get a little bit of help from corn. We have a consensus view or representing the consensus view, there will be more corn acres this year, about 3% to 4% over last, and barring an unusually wet spring we think we will see against this large corn crop some help from retreating corn prices.

So in closing, we are maintaining a very flexible posture for 2010. We have very optimistic about our position in the industry and proven experience in overcoming obstacles as we did in 2009. Expecting that we will realize our operational goals during the first half of the year, we plan to pursue a number of targeted growth opportunities during the second half of the year.

With that overview, I am going to turn it over to Kelly to go through the details on our financials.

Thank you, Scott. Good morning, everyone. As Scott mentioned earlier, we had a very strong quarter, in fact, our best quarter ever with net income attributable to common shareholders of $6.8 million or $0.21per diluted share.

We recorded record revenue of $120.4 million for the quarter, including $105.8 million from the sale of ethanol, and $14.6 million from the sale of distillers grain. Our cost of goods sold totaled $105.8 million including $73.1 million for corn, which resulted in gross profit of $14.6 million for the quarter.

In addition, we incurred $2.9 million in general and administrative expenses, which resulted in an operating income of $11.7 million for the quarter. Our general and administrative expenses were much more in line with our operating plan for the quarter, as we were no longer incurring legal and financial advisory expenses associated with our negotiations with our senior lenders relating to restructuring and loan conversion, which costs we incurred in second and third quarters of this past year.

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 remaining $0.3 million in G&A expense. Finally, we incurred $2.9 million in interest expense for the quarter. This amount as well was more in line with our operating plan as we were no longer incurring additional interest costs as we did in the second and third quarters due to the restructuring with our senior lenders.

This resulted in $8.8 million of net income before non-controlling interests. The net income attributable to those non-controlling interests totaled $2 million, therefore, net income, again, attributable to BioFuel common shareholders was $6.8 million. Briefly for the full year of 2009, revenues totaled $415.5 million. Our cost of goods sold was $404.8 million while G&A expenses and other operating expenses totaled $15.6 million.

Interest expense for the full year was $14.9 million resulting in a net loss before non-controlling interests of $19.7 million. The net loss attributable to non-controlling interests totaled $6.1 million, thereby resulting in a net loss attributable to BioFuel common shareholders of $13.6 million or $0.57 per share.

The Company's cash and equivalents balance was $6.1 million at December 31. Our cash balances have increased since year end primarily due to a decrease in accounts receivable with today's cash balance of approximately $15 million.

As of December 31, the Company had $2.5 million in borrowing availability under its working capital facility, and $6.6 million in borrowing availability under its term loan facility, which can be utilized to fund principal and interest payments under its senior debt facility. Those borrowing availability amounts are the same today.

As noted, above from a financial perspective, our fourth quarter was very positive. We took advantage of good margins by running our plants at just above 100% for the quarter and, therefore, were able to strengthen our liquidity position. That's a summary of our financial results for both the fourth quarter and year end. With that, I will turn it back to Scott. Thanks, Kelly. We'd now like to open it up to any questions you may have.

Thank you. (Operator Instructions). Please hold while our system compiles your responses. (Operator Instructions) Our first question comes from [Jonathan Rowley] of [Clean Valley Partners], please go ahead.

Hi. How are you guys doing?

Good.

Could you just clarify for me what pricing you are seeing for distillers grain right now?

Basically we are seeing right around $100 a ton. The inverse, or the rail-to-truck difference, has actually moved around a lot more than we would expect. But that's essentially what we have been seeing at current market.

Can you, you guys mentioned the three key projects to improve efficiency?

Sure.

So that suggest the plants will be down after the first six months at some point?

It will be during the first six months, Jonathan, but, yes.

Okay. Can you just give me an idea of what they are and how much it will cost?

Sure. The total budget actually for them is just about $4 million. The three main areas are improvements to the conveyer system that moves the slightly dried by the centrifuge's distilled grain over to the dryers.

The vent gas system which is a system that is essentially controlling the vent gas for the plants, it is kind of the overall system, and then finally, the clean and process, or mainly front-end how we keep bacteria and infections down to a minimum. Those are the three main projects.

The conveyers, and your question about the down time, are the main project that will take down time and for us it is a long period of time. That having been said, it is three days or about a total of 72 hours of lost production. That's why we are forecasting at capacity the first half of the year as opposed to the second.

You guys last year cut pretty hard into your capital spending (inaudible) about $14 million according to your K.

Yes.

Including these projects, what is your CapEx budget for 2010?

Our CapEx budget, and it is a fluid process, Jonathan, but in addition to the $4 million of projects that Scott has discussed, there is about another $2 million of smaller type projects that are on our list. We may do them, we may not. We continually evaluate them. But again the biggest projects are the $4 million that Scott discussed.

So if I am looking at the $14 million from last year, none of that is really maintenance CapEx, it is stuff that was discretionary?

Well, one of the things you need to keep in mind, on the $14 million in last year, that included payment to TIC of our construction retainage.

Right.

If you'll recall, we held back 5% of construction. So of that $14.3 million last year, just over $9 million of that included construction or was construction retainage.

Right. Thank you. Best of luck guys, thanks for the answers.

Okay.

Thank you.

Thank you. (Operator Instructions). And our next question comes from George [Dean.] Please go ahead.

Hi, guys, congratulations on the quarter.

Thank you.

Do you guys have any expectations on the EPA blend wall decision coming up here? I mean do you think it is going to be somewhat of a moving target forward to 15 and how long do you think it would take to kind of implement those changes?

Well, just I guess, starting with, my crystal ball is no better than the other guys, especially when it comes to what government is going to do. My view, or our view in talking to folks and trying to be as informed as we can is that we will see it move here pre-summer or in the June timeframe, and that it will be incremental, it won't go straight to the E15.

And as far as the timing to be implemented and impact on the industry, I don't think, at least as we have talked with folks downstream, beyond the resistance from maybe some of the traditional players in the market that there's any real impediments once that decision is made to the infrastructure or the bottlenecks. In other words, if somebody is blending to 10, to go to 12 or 15 isn't going to require big changes in what's out there today.

Okay. Thanks a lot.

You're very welcome.

Thank you. It appears we have no further questions at this time.

Great. Well, let me just wrap up for everybody. Again, thanks for spending some time with us this morning to go over 2009 and in particular a good quarter. As I said before, we are quite optimistic about our position in the industry and especially given the experience of 2009.

Many of you may note that follow the industry while there has been a contraction in margins it is not to the same degree that we experienced last year, and as I mentioned about some of the fundamentals of the market that are different this year than last, overall, we feel pretty good about that. If you combine that with what, as Kelly covered and highlighted, as far as our cash position goes, we are in a much stronger position than we were last year.

So with that all of that, we look forward to what 2010 holds and getting through our work we have slated for the first half of the year to focus on growth opportunities during the second. Again, thank you very much. We look forward to talking to you next quarter.

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