Filing summary
Entity mismatch: The request identifies Green Brick Partners, Inc., but the supplied Form 10-Q is for BioFuel Energy Corp. This summary describes the filing provided, not Green Brick Partners.
Business context and reporting period
Unaudited results cover the three months ended March 31, 2013, compared with the same quarter of 2012. BioFuel Energy produces ethanol and co-products at plants in Wood River, Nebraska, and Fairmont, Minnesota. Fairmont had been idle since September 2012 and remained idle during the quarter.
Key financial metrics
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Net sales | $89.0 million | $139.4 million |
| Gross loss | $1.9 million | $6.5 million |
| Operating loss | $4.9 million | $9.3 million |
| Net loss | $5.3 million | $11.1 million |
| Net loss attributable to BioFuel Energy common stockholders | $4.6 million | $9.4 million |
| Loss per share, basic and diluted | $0.87 | $1.83 |
| Cash provided by operating activities | $0.8 million | $0.3 million |
Gross margin improved to approximately negative 2.1% of sales from negative 4.7%. Cash and cash equivalents were $9.6 million at March 31, 2013. Total current liabilities were $188.9 million, including $170.6 million of current debt. Senior Debt Facility principal outstanding was $170.5 million; total debt, including capital leases and notes payable, was $173.4 million. The company also reported $4.7 million of tax increment financing, including $0.4 million current.
Material changes versus the prior comparable period
- Sales fell $50.4 million, or 36.2%, mainly because lower production and sales at the idled Fairmont plant reduced ethanol and co-product volumes; higher per-unit prices partly offset the decline.
- Ethanol sold declined to 27.6 million gallons from 52.0 million; corn ground fell to 9.8 million bushels from 18.9 million.
- Cost of goods sold declined 37.7% to $90.9 million, chiefly from lower corn consumption. Fixed operating costs and depreciation increased per gallon as volumes fell.
- Q1 2013 included $1.5 million of other income from subleasing excess ethanol tanker cars; there was no comparable amount in Q1 2012.
- Cash increased $0.3 million during the quarter, versus a $3.5 million decrease in Q1 2012. No scheduled Senior Debt Facility payment was made in Q1 2013.
Outlook, risks and unusual items
- Going concern: Management stated that the debt default, Fairmont shutdown and limited liquidity raise substantial doubt about the company’s ability to continue as a going concern. The statements contain no adjustments for possible consequences if it cannot continue.
- Debt default and strategic alternatives: The operating subsidiaries had missed scheduled principal and interest payments since September 2012; unpaid scheduled payments totaled $12.9 million through March 31, 2013. An April 11, 2013 lender agreement provided a grace period through July 30, 2013, subject to milestones, to pursue alternatives including a plant sale. A deed-in-lieu agreement was placed in escrow; transfer of the plants to lender designees could satisfy the Senior Debt Facility. The company deposited $938,000 into escrow. Any value to shareholders from a sale or transfer was uncertain.
- Liquidity dependence: The company had $9.6 million cash, of which $1.3 million was at the operating subsidiaries and subject to lender liens. It also relied on extended Cargill payment terms; the subsidiaries owed Cargill $10.6 million for corn. Cargill could terminate the arrangement on little or no notice.
- Plant outlook: Crush spreads improved in Q1, but Fairmont remained idle. Management was assessing whether a restart was economically viable and what working capital it would require. Market-risk estimates assumed Fairmont would resume normal operations in October 2013; this was an assumption, not stated guidance.
- Commodity and concentration risks: Results are highly exposed to corn, natural gas, ethanol and distillers-grain prices. Cargill accounted for 73% of Q1 2013 sales and 89% of receivables at quarter-end. Hedging was limited by liquidity and collateral requirements.
- No income tax provision or benefit was recorded. The company reported a $242.4 million net operating loss carryforward and maintained a valuation allowance against deferred tax assets.
Important facts for investors to verify
- Confirm the filing is for BioFuel Energy Corp., not Green Brick Partners, Inc., and verify the intended issuer and reporting period.
- Check subsequent filings for the outcome of the lender grace period, any plant sale or deed-in-lieu transfer, and the resulting recovery, if any, for shareholders.
- Verify whether Cargill’s extended payment terms continued and whether the company obtained sufficient working capital to operate or restart Fairmont.
- Assess production, crush spreads, cash balances, debt status and any asset impairment in subsequent periods; the filing’s outlook depended on volatile commodity prices and an assumed Fairmont restart.