Filing identity and reporting period
Important metadata mismatch: The request names Green Brick Partners, Inc., but the supplied filing is BioFuel Energy Corp.’s unaudited Form 10-Q for the quarter ended September 30, 2012, filed November 14, 2012. The summary below reflects the supplied filing, not Green Brick Partners.
BioFuel produces ethanol, distillers grains and corn oil at plants in Wood River, Nebraska, and Fairmont, Minnesota. Results cover the three and nine months ended September 30, 2012, compared with the corresponding 2011 periods. Figures below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Financial performance and position
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Net sales | $116.1 | $162.5 | $378.4 | $489.1 |
| Gross profit (loss) | $(8.0) | $7.0 | $(22.8) | $1.1 |
| Operating income (loss) | $(10.1) | $4.5 | $(30.1) | $(6.6) |
| Net income (loss) | $(11.3) | $2.5 | $(34.8) | $(14.8) |
| Net income (loss) attributable to BioFuel common stockholders | $(9.8) | $2.2 | $(29.8) | $(12.5) |
| Basic loss per share | $(1.88) | $0.43 income | $(5.76) | $(2.72) |
- Gross margin was negative 6.9% in Q3 2012 versus positive 4.3% in Q3 2011; for the nine-month periods it was negative 6.0% versus positive 0.2%.
- Cash provided by operations was $2.7 million for the first nine months, down from $14.1 million. Capital spending was $0.6 million; financing activities used $6.4 million, principally debt repayment. Cash declined by $4.3 million to $10.8 million.
- At September 30, cash was $10.8 million, total current assets $42.1 million and total current liabilities $186.5 million. Total liabilities were $196.9 million and equity $66.2 million.
- Debt included $170.5 million under the Senior Debt Facility, classified entirely as current following a payment default, plus $2.7 million of other long-term debt and $5.0 million of tax increment financing. The senior facility’s weighted-average interest rate was 3.3%.
- No income tax provision or benefit was recorded. The company reported a $227.5 million net operating loss carryforward and a full valuation allowance against net deferred tax assets.
Changes versus prior periods
- Q3 sales fell 28.6% year over year; nine-month sales fell 22.6%. Management attributed the decreases mainly to lower ethanol prices and lower production and sales volumes.
- Q3 ethanol sales volume fell to 36.3 million gallons from 50.7 million; nine-month volume declined to 134.8 million from 162.4 million. Corn ground fell to 12.6 million bushels in Q3 from 18.0 million.
- Cost of goods sold declined, but less than revenue: 20.1% in Q3 and 17.8% for the first nine months. Corn cost per ethanol gallon rose to $2.76 from $2.50 in Q3, while nine-month corn cost per gallon was $2.41 versus $2.46.
- Corn oil sales began in Q1 2012, contributing $4.4 million of Q3 revenue and $11.1 million for the nine-month period. These new co-product revenues partly offset lower ethanol revenue.
- Nine-month interest expense fell to $5.5 million from $8.2 million, primarily reflecting lower average debt after repayment of prior bridge and subordinated loans.
Outlook, risks and unusual items
- Liquidity and going concern: Management stated that conditions raise substantial doubt about the company’s ability to continue as a going concern. It had limited and declining liquidity and relied on extended payment terms from Cargill; Cargill could terminate that arrangement on little or no notice.
- Default and lender discussions: Operating subsidiaries missed $3.6 million of scheduled principal and interest payments due September 28, 2012 and received a notice of default. A November 5 forbearance agreement postponed lender remedies only through November 15, 2012. Discussions over a possible capital infusion, forbearance or restructuring were ongoing; no resolution was assured. Failure to agree could result in lender remedies and potentially bankruptcy.
- Facility idling: The company announced on September 24 that it would idle Fairmont until crush spreads improved. It warned it might curtail or idle Wood River if spreads narrowed further. The filing provides no quantified earnings or cash-flow forecast.
- Commodity exposure: Drought reduced corn yields, raising corn prices while ethanol prices did not keep pace amid oversupply. Corn, natural gas, ethanol and distillers-grain prices are volatile; the company said limited liquidity constrained hedging. Its sensitivity analysis estimated that a hypothetical 10% adverse price move would reduce fourth-quarter 2012 pretax income by $7.2 million for corn, $6.3 million for ethanol, $2.6 million for dry distillers grains, $1.8 million for wet distillers grains and $0.2 million for natural gas, considered separately.
- Other matters: No impairment charge was recorded after management’s September 30 review. The filing reports $0.7 million of other income for Q3 and year-to-date 2012 but does not clearly explain its nature in the supplied text. Sales and receivables were concentrated with Cargill: it accounted for 74% of Q3 sales and 87% of accounts receivable at September 30.
Most important facts for investors to verify
- Confirm the issuer: the supplied document is BioFuel Energy Corp., not Green Brick Partners, Inc.
- Check the status and terms of any lender agreement after the November 15, 2012 forbearance deadline, including whether the default was cured or remedies were exercised.
- Assess available liquidity, Cargill’s continued payment-term support, and the cash needs of the idled Fairmont and operating Wood River plants.
- Track crush spreads, corn and ethanol prices, facility operating levels, and whether further shutdowns or asset impairments arise.
- Review any subsequent disclosures on going-concern uncertainty, restructuring or bankruptcy risk, and the unexplained $0.7 million other-income item.