Green Brick Partners Inc (GRBK) 2011 Q2 法說會逐字稿

Welcome to today's BioFuel Energy Corp. conference call entitled Second Quarter 2011 Earnings Release. 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. (Operator Instructions). Thank you for your attention. Please allow me to introduce your host, Mr. Scott Pierce, President and Chief Executive Officer.

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.

Well, good morning, everybody, and things very much for joining us for our second-quarter earnings call. I have Kelly Maguire, our Chief Financial Officer, with me today as well as Doug Anderson, our Executive Vice President of Operations.

We're going to go through a series of details around our planned improvements that we previously shared are priorities for the Company in 2011 on today's call. But first I'm going to give you a recap of the quarter, both from operations and financial perspectives.

For the second quarter of 2011 as compared to the same period in 2010 you can note significant improvement in our financial results. Against a more challenging commodity margin environment we realized a flat crush spread quarter over quarter and a 30% reduction in net loss for an improvement of 3.7 million. This is largely a result of the unit cost improvements we've covered in prior calls and our continued access to more favorable markets.

While maintaining and improving our unit production cost remains a priority, as shared earlier this year on our year-end earnings call, yield and co-product optimization are the main areas of focus for the Company in 2011. So let me first touch on the Company's operation before Kelly takes you through the details of our financial results for the quarter.

Our assets again performed well during the quarter, we sold 55 million gallons of ethanol which included low moisture export product. We are not routinely dialing in or producing any one of three ethanol product specifications, leveraging our facilities to serve the end customer in the most favorable markets.

For example, this quarter saw the highest percentage of our end product being sold to the export market which traded at a premium to domestic pricing for the quarter. We've also seen a very positive trend in yield improvement from our facilities, approximately 1% improvement over the course of the quarter. Each 1% improvement in yield represents an additional 2.2 million gallons a year or about a $0.03 a gallon improvement in our unit production cost at $7 corn.

Finally, I'll go through in a little more detail following Kelly's review of our financial results, but we are on track with the initiatives we have underway to further optimize our co-product revenue. When I say co-product I'm referring to our distillers, but also the different forms of it that we may have be it wet, dry and also potentially oil which we'll talk about.

We have done several things as far as modifying our wet distillers, changing dry marketers and, as we'll touch on, planning to install corn oil extraction units. When these initiatives are completed we expect them to provide the Company a higher relative value to corn and further reduce our unit cost to producing ethanol. But with this let me turn it over to Kelly before I share any additional details on our plans for the second half of the year.

Thank you, Scott, and good morning everyone. For the second quarter of 2011 our net loss attributable to common shareholders was $7 million or $0.07 per share. We recorded revenue of $168.5 million for the quarter including $140.6 million from the sale of ethanol and $27.9 million from the sale of distillers' grain.

Our cost of goods sold totaled $172.3 million for the quarter including $142.4 million for corn which resulted in a gross loss of $3.8 million. In addition, we incurred $2.5 million in general and administrative expenses for the quarter which resulted in an operating loss of $6.3 million.

Finally, we incurred $2 million in interest expense for the quarter. This resulted in an $8.3 million net loss before non-controlling interests. The net loss attributable to non-controlling interest totaled $1.3 million, therefore again the net loss attributable to BioFuel common shareholders was $7 million or $0.07 per share for the quarter.

Our depreciation expense was $6.7 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 second quarter of 2010 revenues totaled $96.4 million including $83.8 million from the sale of ethanol and $12.6 million from the sale of distillers' grains. Our cost of goods sold was $102.6 million while general and administrative expenses totaled $3.2 million and interest expense totaled $2.6 million resulting in a net loss before non-controlling interest of $12 million.

The net loss attributable to non-controlling interest totaled $2.6 million; therefore the net loss attributable to BioFuel common shareholders was $9.4 million or $0.37 per share for the second quarter of 2010.

Briefly, for the first six months of 2011 revenues totaled $326.5 million including $273.4 million from the sale of ethanol and $53.1 million from the sale of distillers' grains. Our cost of goods sold was $332.5 million while G&A expenses totaled $5.2 million and interest expense totaled $6.2 million resulting in a net loss before non-controlling interest of $17.4 million.

By comparison for the same period of 2010 revenues totaled $197.3 million while our cost of goods sold was $208.2 million, G&A expenses totaled $6.2 million and interest expense totaled $5.3 million resulting in a net loss before non-controlling interest of $22.4 million.

As Scott mentioned earlier, the $3.7 million improvement in our second-quarter net loss over the second quarter of 2010 results was largely attributable to our improvements in controllable costs while the $5 million improvement in our year-to-date net loss over the first six months of the prior year was attributable to a $6.7 million improvement in our controllable costs offset by a $1.7 million decline in crush spread margins.

At June 30 the Company's cash and equivalents balance was $8 million and has improved since this time, while the term loans outstanding under our senior credit facility totaled $183.1 million.

Thanks, Kelly. While we were not profitable for the quarter, you can clearly see that the trends are heading in the right direction. Before I cover a few thoughts on the industry I want to speak to our specific plans for the second half of the year. As noted earlier, yield and co-product optimization are key areas of focus. This comes after driving out substantial cost in 2010.

With respect to yield, we've seen improvements year to date that I've previously covered and further in September. So next month we're completing a further refinement to the front end of our plants during our fall shutdowns. We expect this will deliver another 1% increase in yield.

As far as co-products go, we recently terminated our prior dry distillers marketing agreement and have entered into an agreement with Gavilon. This completes what has been a long planned transition that has encompassed some capital improvements, process changes and marketing changes improvements; we expect to now have similar flexibility to serve the end customer in the feed markets that I previously covered or at least are analogous to the way we can serve different end product with ethanol.

While the pace of these changes on the co-product front has been frustratingly slow to us. we've moved deliberately to ensure that we will see the expected benefits and we'll be a co-product provider of choice for the feed industries we serve. For each additional $5 a ton we realize an improved -- that we realize in improved FOB values for our distillers, we see approximately 1 gallon -- a $0.01 a gallon improvement in revenues.

We have historically lagged the market by $10 to $15 a ton for this co-product and let me just say that we're very excited about having Gavilon market our distillers as we like their footprint in the distillers marketplace and the depth of their capabilities.

Finishing off in terms of our co-product focus, we are planning to install corn oil extracting units at each plant and expect to have these units online by the end of the year. This will follow the traditional start-up and debottlenecking process. We plan to realize the benefits of this investment beginning in the first quarter of 2012. We are excited by the potential revenues that we expect to derive from this additional co-product.

Our plans are to license GreenShift's technology as a platform for these systems. We have secured the major equipment and are currently finalizing the requisite financing, technology and installation agreements to support the schedule I just mentioned.

So that kind of wraps up our main focus for the second half of the year. The plants and Doug operationally have done a very solid job of delivering the improvements that I've spoken to year-to-date. We're very excited what the end of the year holds at the plant level.

As far as the industry goes, the corn market has been a concern, I think, for all of us given the tightness of the carry out and the ways that the current crop is progressing. Yesterday's USDA report dropped the yield from 158 down to 153 which is a pretty sharp drop for a new crop. However, adjustments made to demand suggested that the carry out was essentially flat, in fact they raised it just a little bit.

Our plants and the areas tributary to them are looking quite solid as far as the corn crop's progressing compared to at least what's going on elsewhere. We continue to realize benefits from the location and have a competitive advantage with basis levels, even with the basis level appreciation that I'll speak to a little bit further, but that has gone on industry wide in a kind of a tug-of-war between the old and new crop.

As far as ethanol goes, the market feels a whole lot better than when we last spoke. Stocks are now in the low 20 day range and, as indicated by yesterdays EIA report, we're down week over week nearly 4%, which is continuing a downward trend. We see several demand drivers for 2012 including exports and the uptick that is inherent in the mandate.

The main risk is probably the economy and driving demand. We really continue to have a similar view to what many have shared that [V-tech] and that tax credit are not going to have an impact on results going forward. And in fact, if you look at the June/July fireworks around the potential termination of the tax credit early at the end of July, the market really had no change at all which would suggest whatever may have been anticipated was already priced at.

Probably one of the bigger concerns we see in what is an otherwise pretty good outlook for the rest of the year as far as the ethanol market -- its tightness and margins go, even with the crop point I raised earlier, is that basis levels around the country, the Eastern corn belt has been Western corn belt. But our plants that typically would be at auction to Chicago maybe slightly over this time of the year have seen values higher than in terms of local basis levels.

Like I mentioned earlier with the Eastern plants, we confirm people paying $0.60 to as high as $1 over the Chicago Board. So the concern we have is whether these premiums will be reflected in ethanol prices as historically the industry has not shown much discipline or ability to pass on this type of increase from its main input.

That being said, and as shared before, corn ethanol remains the best alternative we have to fossil fuels. It's clean and also both an energy security and environmental solution that has added significant jobs in the US. With this, the impact it has positively on our balance of trade and continued innovation like corn oil which drives down unit production cost, we remain quite optimistic on the industry.

So now I'll turn it over to any questions you may have and then come back with some closing remarks.

(Operator Instructions). [Andre].

Yes, good morning, everybody. I was wondering the listing on the New York Stock market, as it's been below the threshold for a longer period of time, what you foresee for the future? Is it going to be continue to be listed or are you in conversations that that may change?

We believe it's going to continue to be listed. But I'll let Kelly answer that question specifically with what we can share that we're doing.

Thank you.

Yes, Andre, we are listed on the NASDAQ, did receive a listing notice in April at which point in time you're given six months to get your stock price back above the $1 threshold. That six-month window expires on the 17th of October. At this point in time we're looking at a couple different alternatives including asking the NASDAQ, which is relatively customary, for another extension and also other alternatives as far as what we can do to our stock price or from a standpoint of shares outstanding and things like that. So continuing to monitor it, go to the various alternatives that we've got as we continue to go down the path.

Okay, thank you.

(Operator Instructions).

Well, it looks like that's it, so I'll just wrap up with a couple of comments. Again, we continue to believe that we'll see policy that's net positive and supportive to the industry. And against that, and as I covered, I think Doug and the operations team have done an excellent job of putting us on track to have a solid end of year result with the improvements that I mentioned earlier.

We have seen an uptick in margins in the past quarter. We believe that the supply/demand for 2012 will be more supportive than in the past several years and that producers will get an opportunity to be rewarded for the risks they have taken in running through these times of surplus capacity.

We remain very focused on realizing our 2011 plan and objectives and are also beginning to look to the future on how best to leverage our strategically located and well performing assets. Thanks again to each of you for your continued support.

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