Filing identity and reporting period
Important identity mismatch: The supplied filing is BioFuel Energy Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2012, not a filing for Green Brick Partners, Inc. The figures below describe BioFuel Energy and should not be attributed to Green Brick Partners without verification.
BioFuel Energy operated two ethanol plants in Nebraska and Minnesota, with combined nameplate capacity of approximately 220 million gallons annually. It produced ethanol, distillers grains and corn oil.
Financial performance and position
Amounts are in U.S. dollars; financial statement figures are in millions unless stated otherwise.
| Metric | Q1 2012 | Q1 2011 / prior date |
|---|---|---|
| Net sales | $139.4 | $158.0 |
| Gross loss (margin) | $(6.5) (-4.7%) | $(2.2) (-1.4%) |
| Operating loss | $(9.3) | $(4.8) |
| Net loss | $(11.1) | $(9.0) |
| Net loss attributable to BioFuel common stockholders | $(9.4); $(0.09) per share | $(7.7); $(0.11) per share |
| Cash from operating activities | $0.3 | $3.5 |
| Cash and equivalents at quarter-end | $11.7 | $15.1 at Dec. 31, 2011 |
| Total assets | $286.6 | $299.6 at Dec. 31, 2011 |
| Total liabilities | $197.4 | $199.6 at Dec. 31, 2011 |
Interest expense was $1.8 million, down from $4.2 million. Total reported debt was $176.4 million, including $173.6 million under the senior facility; tax increment financing of $5.2 million was reported separately. Senior facility borrowings carried a 3.2% weighted-average rate and mature in September 2014. Minimum quarterly principal payments are $3.15 million. No income tax provision or benefit was recorded.
Cash declined by $3.5 million during the quarter: operating cash flow of $0.3 million less $0.6 million of capital spending and $3.2 million of financing outflows, primarily scheduled debt repayment. The filing does not provide a clear standalone operating margin or EBITDA measure.
Material changes versus the prior comparable period
- Sales fell $18.6 million, or 11.8%, primarily because ethanol revenue declined $23.8 million as both realized prices and volumes decreased. Ethanol sold fell to 52.0 million gallons from 56.7 million.
- Co-product revenue rose $5.2 million, including initial corn oil sales; the company sold 6.8 million pounds of corn oil, compared with none in Q1 2011. Dry distillers-grain sales decreased, while wet distillers-grain sales increased.
- Cost of goods sold declined 8.9% to $145.9 million, less than the sales decline, so gross loss widened. Corn remained the largest cost, at $118.8 million.
- Interest expense decreased following repayment of bridge and subordinated debt in 2011. The per-share loss narrowed, while the total loss and loss attributable to common stockholders increased.
- Operating cash flow fell from $3.5 million to $0.3 million. The 2011 comparison included substantial equity proceeds and debt repayments; the 2012 quarter had no stock-sale proceeds.
Outlook, risks and contingencies
- Management gave no specific earnings or production guidance. It warned that continued narrow ethanol-to-corn margins could leave cash flow insufficient to operate the plants and service debt, exhaust liquidity, and lead to a senior-facility default; absent lender accommodations, bankruptcy relief could be required.
- Liquidity depended partly on Cargill’s extended corn-payment terms, which Cargill could terminate on little or no notice. BioFuel owed Cargill $6.5 million for corn purchases and had $16.6 million of Cargill receivables at quarter-end. Cargill accounted for 78% of Q1 sales.
- Commodity prices are volatile, and hedging was limited by financial resources and collateral requirements. The company estimated that an independent 10% adverse price move could reduce projected nine-month 2012 pretax income by $37.7 million for ethanol or $38.5 million for corn. A 100-basis-point rate increase was estimated to add $1.7 million to annual interest expense.
- The senior facility is secured by the plants, related receivables and property, and subsidiary equity; covenants restrict, among other things, additional debt and distributions. Debt maturities included $151.6 million in 2014.
- Long-term commitments include operating leases, corn supply and ethanol marketing agreements. Deferred Cargill lease payments of $1.6 million and deferred ethanol commissions of $1.2 million were reported. The company stated it had no material legal proceedings and no impairment test was performed because management identified no impairment indicators.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer: the supplied 10-Q identifies BioFuel Energy Corp., not Green Brick Partners, Inc.
- Verify that the intended reporting period and filing are correct before using any reported figures.
- Assess the company’s ability to sustain operations and meet debt service if crush spreads remain narrow, including dependence on Cargill’s payment-term accommodation.
- Review senior-facility covenants, collateral and 2014 maturity exposure, and the availability of lender or other liquidity support.
- Evaluate Cargill concentration, commodity-price sensitivity, limited hedging capacity and the economics of the newly installed corn oil systems.