Green Brick Partners Inc (GRBK) 2011 Q1 法說會逐字稿

Welcome to today's BioFuel Energy Corp.'s first quarter earnings call, hosted by Mr. Scott Pearce. 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 H. Pearce, President and CEO.

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 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 filings.

Thank you, and thanks to all of you for joining us. Today on the call, Kelly Maguire, our Chief Financial Officer, as well as Doug Anderson, our Executive Vice President of Operations, have joined me. I'm going to recap a few things, and then turn over to Kelly to go over our financials. As we saw at the end of 2010, margins remained under pressure, even though we continue to make headway on unit cost reductions. This drove our net loss. There are two key areas I'd like to highlight today and share on the call.

First, you may recall that our focus in 2010 was one of really drilling into reducing our unit production costs. This is the first full quarter in which we realized the full benefit of our 2010 initiatives, and this drove the associated improvement in our unit production costs. We will also go through in some detail these cost improvements, as this remains a key priority for the Company. Secondly, this is the first opportunity we've had to share the specific details of our improved balance sheet, which is the outcome of our successful rights offering that closed during the quarter. Our total debt per gallon is now down from $1.10 at year end, to $0.85 a gallon at the end of the first quarter on March 31, 2011.

So, as I said, I'm going to turn things over to Kelly shortly, and he will go through some of the financial results, highlighting some of the unit cost operations, as well as changes in our balance sheet. And then, Doug is on today and will share some color more at the plant and facility level on our successful journey that we followed over the course of the past 12 months, to stabilize production and drive out costs. I'm going to then come back on and cover a few updates on how our assets continue to be well-positioned, particularly in the export market, and a couple of examples of our ongoing work to improve margins, such as better co-product returns. And then, I'll conclude by giving you some perspective -- from our eyes, anyway, on the industry, before turning it over to your questions. So, with that, Kelly, can you take us through the financial results, please?

Thank you, Scott. And good morning, everyone. For the first quarter of 2011, our net loss attributable to common stockholders was $7.7 million, or $0.11 per share. We recorded revenues of $158 million for the quarter, including $132.7 million from the sale of ethanol, and $25.3 million from the sale of distillers grains. Our cost of goods sold totaled $160.2 million for the quarter, including $129.4 million for corn, which resulted in a gross loss of $2.2 million for the period.

In addition, we incurred $2.7 million in general and administrative expenses for the quarter, which resulted in an operating loss of $4.8 million for the period. Finally, we incurred $4.2 million in interest expense for the quarter, which included $1.5 million of unamortized fees and expenses, related to the Company's subordinated debt and bridge loan debt that were written off when those balances were paid off in February. This resulted in a $9 million net loss before non-controlling interests. The net loss attributable to non-controlling interest totaled $1.3 million; therefore, the net loss attributable to BioFuel Energy Corp. common stockholders was $7.7 million, or $0.11 per share.

Our depreciation expense was $6.8 million for the quarter; most of which, $6.5 million, is included in cost of goods sold, with the remainder in G&A expense. In comparison for the first quarter of 2010, revenues totaled $100.9 million, including $86.4 million from the sale of ethanol and $14.5 million from the sale of distillers grain. Our cost of goods sold was $105.6 million, while general and administrative expenses in the first quarter of 2010 totaled $3 million, and interest expense totaled $2.7 million, resulting in a net loss before non-controlling interests of $10.4 million. The net loss attributable to non-controlling interests totaled $2.2 million. Therefore, the net loss attributable to BioFuel common stockholders was $8.2 million, or $0.32 per share, for the first quarter of 2010.

As Scott mentioned earlier, we continued to focus on controllable cost improvements, and that focus shows in our first quarter 2011 results versus our first quarter 2010 results. The controllable cost portion of our cost of goods sold, which we characterize as cost of goods sold exclusive of corn and natural gas costs, has decreased on a per-gallon basis from $0.46 a gallon in the first quarter of 2010, to $0.41 per gallon in the first quarter of 2011, or an 11% increase -- decrease. In addition, our commission costs for the marketing of our ethanol and distillers grains has decreased by $0.01 per gallon from the first quarter of 2010 to the first quarter of 2011.

Turning to our balance sheet, we successfully completed our rights offering and concurrent LLC private placement during the quarter, which generated gross aggregate proceeds of $46 million. The Company used the proceeds to repay in full its bridge loan facility, $20.3 million including accrued interest; its subordinated debt facility, $21.5 million including accrued interest; to pay $2.8 million of its Cargill debt; and to pay certain transaction fees and expenses. The Company also issued 6.6 million shares of common stock to Cargill in exchange for extinguishment of remaining amount owed to Cargill.

As a result of these transactions, the Company has significantly delevered its balance sheet. Its current ratio, defined as current assets versus current liabilities, has increased to 1.76 to 1 as of March 31, while its debt-to-equity ratio has declined to 1.95 to 1 as of March 31. Finally, as Scott mentioned, our debt per gallon has declined from $1.10 per gallon as of the end of 2010, to $0.85 per gallon as of March 31, 2011. The Company's cash and cash equivalents balance was $7.4 million at March 31, and remains at approximately that level today. At this time, I will turn it over to Doug Anderson, our EVP of Operations, to give his operational overview and update.

Thank you, Kelly, and good morning, everyone. Scott has asked me to give a brief overview of what was accomplished in operations in 2010, and I'd like to share that with you at this time. As far as myself, I joined the Company in March of 2010. I came to the Company with 27 years of manufacturing experience, 19 years of that being in the dry pet food industry, with the Iams Procter & Gamble company. I joined the ethanol sector in 2004.

As I came to the Company, one of the main focal areas that wanted to focus on going into it was, first of all, the overall operational culture. Secondly, our customers, our products, and our people, and to analyze the operational excellence. It's very, very important to establish the philosophy of running smart and day-to-day operations. After joining the Company, I spent the first 60 days basically observing and learning. I wanted to know exactly what we were doing within the Company, and how we could make it better. I identified the core strengths; and one of the strengths that stood out above all to me in my role was the people. I found the people within the Company to be very good and have a strong, strong passion to want to succeed and do what was right.

The next step within operations, we identified the weaknesses that were out there, part of those being cost control and the need to have operational reliability. With that in place, in operations, we next developed an action plan for improvement to reapply what was learned in the past to encompass and to build upon those fundamentals of a proper operational culture, to focus on our customer base, to improve our product quality in all of our co-products, and to continue to focus on our people and the development and educational piece thereof.

As an operational group, we then went to work to set our strategy to reduce our overall costs and to improve the quality of our core products. It's very, very important that we enhance that, and also to work with our customers to enhance that relationship, and also to identify the training needs of our people and to get them built as we began our journey. As we set that action plan in place, we developed a model for our group. That model being one team, one dream, to be the best. And also, we developed our rallying cry for $0.10 in 2010; and with that said, we began our journey to focus on the deliverables and the KPIs that were set forth for the plants.

As part of that, we focused and educated all associates about all costs that we had within the operations group, and took the appropriate steps to address those cost savings. We focused on operational reliability, taking a step back and analyzing our facilities from front to back, and looking for any potential bottlenecks that were there, and began addressing those bottlenecks to improve those opportunities. We also focused on our co-products that were produced, and worked very diligently to enhance our overall quality, so that we could become known as a producer of choice and to improve our overall -- the quality of our products thereof.

We made significant improvements during 2010. We have improved our overall costs and have become reliable operationally, and those results continue in 2011. In the operations group, we've enjoyed the challenge, and we now remain focused on 2011. And our new model that we've developed for the operational group is leave no stone unturned, as we continue to strive to be the best. With that, I'd like to thank everyone and turn the meeting back over to Scott. Thank you.

Thanks a lot, Doug. Both Doug and Kelly are very good at what they do, and it's a pleasure to work with them through an industry that's still emerging in many ways. Let me touch on a little bit of the industry, and then again, as I shared earlier, talk about some of our key initiatives as we look at 2011, and to a limited degree, beyond. But at this point in time, it's still a very interesting time for the ethanol industry. There are a significant -- or a series of significant macro events, if you take and consider what's going on in the global energy market, the unrest that we've seen, the tightness in the grain markets that started last summer. We, I think, focus on energy -- and with that, the energy trends suggest to us something that should be supportive of margins in the mid to longer term.

For the US ethanol industry, margins were tight during the quarter, and remain that way today -- primarily, in our view, anyway, because of the tightness of the grain markets and the high price of our main input cost, corn. This is against a supply-and-demand balance for ethanol, in which there is a higher capacity utilization, much firmer balance between that supply and demand than we've seen in years past. A key reason that the ethanol supply and demand is tight is that US corn ethanol remains the cheapest replacement to fossil fuels in the world. And with this, exports from the US remained at all-time highs, and we expect to remain that way for the foreseeable future.

So, with margins tighter in 2011, the first quarter of 2011 in comparison to 2010, and against the journey Doug described and Kelly went through in detail, our assets actually performed better year-over-year when normalized for commodity prices. In addition, during the quarter, we met our goals to obtain the remaining certification, such that our assets are even better positioned now to take advantage of premiums in the international export market when they're available. With the volatility in the market, tight margins, and our liquidity, we're managing our risk position very carefully, staying close to home and really not taking positions out far into the future at this point in time; although the fourth quarter has some profitability in it, third quarter's just not that way at all today.

So, stepping back into the Company just a little bit and some of what Kelly and Doug touched on, the initiative in 2010 has improved our platform; and while cost will remain a key focus, we have been spending more time on revenue enhancements at this point in time. As shared in some prior calls, we noted the underperformance of our distillers' relative value in mid-2010. And against some of what Doug described, this was at a counter-current to our goal to be a leader in maximizing co-product revenues through quality, as well, being able to access better markets.

So, with that, in December last year we implemented a local wet market program -- wet distillers program, that's been more successful than anticipated. The bottom line is, we realized an overall benefit of approximately $0.02 a gallon during the first quarter from this change. With this transition behind us, we are now in the process of changing our dry distillers program, expect this to implement this beginning in June. Taken together, we expect these changes will timely close the gap in relative performance that we've seen over the past -- or, over a part of 2010. Finally, to further improve our revenue from co-products, we plan to implement corn oil extraction at both sites, and are currently negotiating the commercial arrangements and construction schedules to get those in as timely as possible.

Turning back to the industry. The summer, and in particular the tightness in corn, is a concern for us. The USDA report yesterday and its change in stocks has taken some of the nearby pressure; but still, we need a pretty good crop to come out in the fall, and between here and there are going to have a tighter corn [S&D] than what we've seen in the past. We've bought some physical corn during these summer periods, but remain pretty cautious.

As I said earlier, the fourth quarter margins are much better, but the summer is currently showing margins to be quite red. Longer term, we believe that all the tightness in corn and the global grain situation will work itself out, mainly due to market forces. For instance, we believe farmers have this year a pretty strong incentive to produce more corn, due to the favorable economics compared to soybeans. And as a result, we think there's a good chance that corn acres planted will be better than projected, and this may further ease the pricing pressures on corn. Another supportive point is that ethanol plants continue to make yield improvements and are producing more ethanol with less corn.

And of course, that -- it's a natural incentive, and we think those type forces are what will ultimately balance things out during a period where we currently have historically low stocks. In addition to this, we have the ongoing improvements in agronomy and crop genetics that have driven yield per acre of corn planted. We believe those are going to continue. And I think we all know the improvements have been pretty notable over the course of -- especially the past 10 years.

Finally, with respect to ethanol, we continue to believe that there will be more supportive public policy across the US and abroad, as it's the only viable replacement for fossil fuels today, and an important bridge to any advanced biofuel plan that we may see in the future. And then, finally, I just would like to comment on the phase-out of VEETC. We do see that as an issue, but relatively minor in comparison to the current RBOB ethanol discount and the phase-in of E-15, which we do believe will take time, but will expand the market. So, having covered all of this, I'm now going to turn it to over any questions you may have. And then, we'll come back with a closing comment or two.

At this time, we will begin the question-and-answer session. (Operator Instructions) There are no questions at this time.

Well, thank you, Operator. So, in summary, we believe we'll continue to see policy that's net supportive to the industry, a lot of talk in Washington. I think it's a coin toss as to how some of the extensions may come up; but again, I think we have a fundamental view that the past will be indicative of what the future is, with respect to policy supportive of biofuels. Despite some of the challenges noted, and pointing to some of the initiatives that we accomplished and remain focused on, as well as some of the new initiatives, we are on-track to execute a solid operational plan for 2011.

We do expect to get more help from margins, but are not counting on it as much as our ongoing cost initiatives and revenue-maximizing initiatives. So, in addition to the 2011 plan, we are beginning to look toward the future and how to best leverage our strategically located and well-performing assets. And with that, we thank you for your continued support, and conclude today's call.

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