Green Brick Partners Inc (GRBK) 2010 Q1 法說會逐字稿

Welcome to today's BioFuel Energy Corporation's first 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 will be given at that time.

Please bear in mind that we will be making a number of forward-looking statements on today's call. Forward-looking statements are any statements that are not historical fact. 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 improve 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 quarterly report on Form 10-Q 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, Chief Financial Officer.

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

Great, thank you, Justin. Good morning and thanks for joining us for our first quarter earnings call. The first quarter of the year our results were primarily impacted by the contraction in margins that seemed to have hit bottom around the end of the quarter. Even though we're not off to the start we expected we remain optimistic on the industry and did accomplish a number of the key initiatives that I talked about on our last call. These primarily revolved around work at our plants and I'll cover those in more detail shortly.

For starters, though, we had our best production month in the Company's history in March, yet unfortunately this was also the month with the weakest margins of the quarter. Since then ethanol has shown some strength and margins have improved by about $0.10 a gallon. To recap the results that Kelly will cover in more detail shortly, we had a net loss attributable to common shareholders of $8.2 million on revenue of $101 million for a net loss of $0.32 a share.

We are certainly not pleased with our financial results for the quarter, but as I suggested, there are a number of bright spots and particularly operational areas that I'm going to talk through. For starters we continue to see measurable improvement in safety and environmental and compliance. We have now gone 205 days without a recordable injury and 447 days without a lost time incident in our Fairmont, Minnesota plant. We also saw improvements throughout the quarter in several areas in our quest to drive out costs. A couple that are worth pointing out I'll get to in a moment, but the culture we're focused on of safety and environmental compliance we see as core ingredients of operational excellence, and if done well will support our goal of managing costs extremely well.

Though we are trending in right direction on costs with what we saw from January through March, no one at the Company is complacent. We can and will do better and reach our goal of being a low cost producer. As I shared in the past, it really does come down to the leadership and strength of the Management teams at our plants and we believe that we've now turned the corner from the challenges in getting through to reliable production and our plant operations teams are now increasingly focused on driving a cultural change at each location and bringing a whole new focus on cost control at each of our plants.

This effort encompasses all areas of operations including production, maintenance, training, vendor relationships and also adjusting fermentation recipes, looking at our processes and of finding areas to debottleneck. These efforts will be critical to getting the Company to the next level of operational excellence and low cost production, especially as we finish out our planned capital projects.

But the majority of our work, and I think we covered this a little bit on the last call, but is going to be completed this quarter and with that we have some tall but realistic goals for the balance of the year. To this end we remain very focused on the targeted business plan for 2010. This includes running the plants at nameplates for the first half of the year, completing projects in three key areas to improve reliability, efficiency and to remove bottlenecks, and then to consistency produce above nameplate during the second half of the year while also maintaining momentum and measurable progress on driving out costs.

In parallel to being driven to operational excellence, as I spoke about more on the last call but want to touch on, we remain focused on risk management and making this a core competency in the business. Our risk management program again builds on having stable and reliable operations, keeps us continually focused on being highly efficient of buying our key inputs and selling our products at each facility. We were not able to get ahead of the precipitous drop in margins that started in late February yet do have a better position for the current quarter and have locked in a healthy portion of our production at margins that beat current board spreads.

Our full year results for 2009 did show that we were able to consistently [leg] into margin throughout the year and thereby reduce some of the volatility of the business. I'm confident we'll continue to leverage the advantage of our relationship with Cargill in a similar manner in 2010 with the plants operating reliably and do even better as we progress throughout the rest of the year. With that overview of how we're operating and our focus on risk management I'm going to turn it over to Kelly and let him go through the details of our financial results, and then I'll come back and make a few comments about the industry before opening up to your questions. Kelly?

Thank you, Scott and good morning, everyone. As Scott mentioned earlier, we did have a challenging quarter due to the contraction in margins. For the first quarter of 2010 our net loss attributable to common shareholders was $8.2 million or $0.32 per share. We did record revenue of $100.9 million for the quarter which included just over $86 million from the sale of ethanol and around $15 million from the sale of distillers grains. Our cost of good sold totaled $105.6 million for the quarter including $70.5 million for the cost of corn which resulted in a gross loss of $4.7 million.

In addition, we incurred $3 million in general and administrative expenses for the quarter and $2.7 million in interest expense for the quarter. The last of the Company's interest rate swaps expired at the end of February with $200,000 of interest rate swap expense incurred in the first quarter. This resulted in a $10.4 million net loss for noncontrolling interests. The net loss attributable to noncontrolling interests totaled $2.2 million, therefore again our net income attributable to BioFuel common shareholders was the $8.2 million.

Depreciation expense was $6.7 million for the quarter most of which, about $6.4 million of it, is included in cost of goods sold with the remainder in G&A expense. By comparison for the first quarter of 2009 revenues totaled $97.5 million while our cost of goods sold was $102.6 million along with G&A expenses of $2.6 million and interest expense of $3.5 million resulting in a net loss before noncontrolling interests of $11.2 million. The Company's cash and equivalents balance at March 31st is $16.1 million. Our cash balance has increased since December 31st primarily due to the decrease in accounts receivable.

At March 31st the Company also had $2.6 million in borrowing availability under its working capital facility and $3.4 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 remain the same today. With that, Scott, I will turn it back over to you.

Thanks, Kelly. So as far as the industry goes, as noted, the contraction in margins during the quarter was quite severe. We believe that a combination of the winter storms and additional capacity were key factors to a buildup of inventory that created a larger than anticipated surplus of ethanol. We saw stock to use ratios climb and more recently, though, we don't have the confirmation via the EIA reports. They seem to be trending down corresponding with the improvement in margins.

As I mentioned, we -- in seeing the improved margins, in addition we've seen ethanol divorce itself from falling energy prices of late and maintain surprising strength. We think that's also supportive and an indicator that the stock to use is improving. Having said, that we're carefully monitoring the supply and demand balance and believe we are coming back into equilibrium, or may be there, with better prospects for the summer driving season that's just ahead of us.

We are a little more cautious about the fourth quarter with prospects of US ethanol coming to a halt and the potential resumption of imports from places like Brazil. However, balancing this risk is the prospect of the EPA approving an increase in the blend wall from E10 to E12 or E15, thereby adding a significant potential in terms of future demand.

Additionally, most reports on the corn crop are very promising. We think we're going to have a large crop. We think that the crop is largely in and planted early enough that yields should be quite strong.

Longer term as we look out past 2010 we think industry fundamentals are in favor of the producer. And barring any abrupt change in the current policies or deviation from the course we're on to help relieve the United States of its dependence on foreign oil, we expect to see several years starting at the end-- several good years starting at the end of this year as early as 2011.

I guess I'd just sum everything up to say that we believe we are on track to execute a solid operational plan for 2010. We did anticipate in this plan a stronger -- a slower start, I'm sorry, and a stronger finish. We're optimistic we'll get some help from improved margins and we do expect that we'll have our plants in a position to produce a higher amount of throughput the second half of the year as I covered.

Probably no surprise to most of you, but we did modify our plans based on margins we saw in this first quarter and accelerated some of the work in our capital improvements. These were-- this was work that required down time on our plants, but we thought that that was a better use of the time and our energy as margins were poor and the opportunity cost was not as high.

Finally just to reiterate, we have significant momentum on our mission towards operational excellence, driving out costs and I'm confident with the very positive improvements to our team, this will lead to a better future for the Company, its employees and shareholders. And with that I'm going to turn it over to you, Jonathan for any questions that there maybe.

Thank you. (Operator Instructions) And our first question today comes from [Trevor Ward], he's an individual investor. Please go ahead.

Yes, how you doing. Yes, bought your stock around a few years ago. I think ethanol was obviously going to be a good thing for the environment, clean burning fuel, less carbon print and I followed your stock all the way down and was hoping that it would come back but obviously there's a lot of negative press out there in terms of what if and all this and corn and using food for fuel. I'm just wondering is there an association of ethanol producers and what do you do to actually get it out there that ethanol is a good clean burning fuel, it's good for our environment? Apart from the numbers that you've stated, looking forward obviously I mean the numbers are what they are, but in terms of using ethanol more, creating more ethanol burning engines and actually using ethanol more to increase the amount of demand, what are you doing in that area to actually promote it more favorably?

Thanks for the question. There's a couple industry associations. The two probably most notable are the Renewable Fuels Association and Growth Energy. We do participate directly in the Renewable Fuel Association and are considering joining or working more with Growth energy.

By far the most vocal I think of the groups right now is Growth Energy. If you look at or type in their website and they're taking data from folks like us, but are really trying to promote not just the benefits you cited of ethanol, but also things like the misunderstanding that the industry I think know how to overcome where we've used with the distiller's grain a lot of our by-product to feed the animals that are out there. And the fact is most of the corn we use for ethanol is seed, not for consumption anyway. But the main point, Trevor, is we support that directly through those groups and they are mostly or most of the sound board for the industry.

Okay. I just one last question, then. In terms of obviously there's (inaudible) is obviously the scariest one. They went out and they're in bankruptcy right now and obviously the concern is are you going to be able to stay in business? And as far as the money that you -- the loans that you have, are you going to be able to stay in business? I mean are you going to be able to keep this thing rolling in terms of the cash you're burning to the expenses you have?

I think as far as addressing that point, we've laid out all of the risks to the business if our filings and updated that accordingly this quarter. We can't say a whole lot more other than I will tell you we're very focused on being in that top quadrant as far as cost goes. And we believe with that as you look at the pecking order and frankly, no different than what happened in the last downturn that we were able to keep our plants running and work through, that we'll be able to do so.

Yes. And I'm just looking at obviously this street hasn't seen it favorably especially in the last month. You've seen the stock fall 20%, 25%, 30% in the last month. So at some point the public is going to go okay well it's time to dump it. So at what point do you take your losses and move on? Anyways, thank you very much for your time and I'll hopefully hang around, then. I still think ethanol is a good fuel and good for the environment. So hopefully production will there be and you can turn it around and make sure I'll get a dividend one day. Thank you very much for your time.

Thanks for your support.

Thank you. (Operator Instructions) And at this time, that was our only question in queue.

Great. Well, as far as what I've already shared, I think we again believe and have a lot of confidence in our plan for 2010 and the outlook beyond that we think is favorable. Thanks to each of you for your continued support and we'll talk to you next quarter.

Thank you.

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