Filing summary
Important entity mismatch: The supplied filing is BioFuel Energy Corp.’s Form 10-Q for the quarter ended June 30, 2012, not a Green Brick Partners, Inc. filing. The figures and disclosures below describe BioFuel Energy.
Business context and reporting period
BioFuel Energy operated two ethanol plants, in Nebraska and Minnesota, with combined nameplate capacity of approximately 220 million gallons annually. It also sold distillers grain and, beginning in 2012, corn oil. This unaudited 10-Q covers the three and six months ended June 30, 2012; results are not necessarily indicative of the full year.
Financial performance and position
| Metric | Q2 2012 | Q2 2011 | Six months 2012 | Six months 2011 |
|---|---|---|---|---|
| Net sales ($m) | 122.8 | 168.5 | 262.2 | 326.5 |
| Gross loss ($m) | (8.3) | (3.8) | (14.8) | (5.9) |
| Operating loss ($m) | (10.7) | (6.3) | (19.9) | (11.1) |
| Net loss ($m) | (12.4) | (8.3) | (23.5) | (17.4) |
| Net loss attributable to common stockholders ($m) | (10.6) | (7.0) | (20.0) | (14.7) |
Gross margin was approximately negative 6.7% in Q2, compared with negative 2.2% a year earlier; for the first half it was negative 5.6%, compared with negative 1.8%. Basic and diluted loss per share attributable to common stockholders was $2.05 for Q2 and $3.88 for the first half.
Six-month operating cash flow was $1.0 million, down from $8.1 million; investing cash outflow was $0.6 million and financing cash outflow was $6.4 million. Cash declined by $5.9 million to $9.2 million at June 30. Current assets were $47.0 million and current liabilities $29.6 million. Total assets were $275.1 million; total liabilities were $197.9 million.
Debt at June 30 included $170.5 million of senior term loans, $2.5 million of capital lease obligations and $0.3 million of notes payable; tax increment financing was $5.0 million. Senior loans carried a 3.25% weighted-average interest rate and mature in September 2014. Required quarterly principal payments were at least $3.15 million.
Changes versus prior comparable periods
- Sales fell 27.1% in Q2 and 19.7% in the first half, reflecting lower ethanol prices and lower production/sales volumes. The company attributed reduced grind rates to tighter corn supply.
- Gross losses widened despite lower cost of goods sold, because revenue fell faster. First-half net loss increased by $6.1 million year over year.
- Corn oil sales, absent in 2011, contributed $4.0 million of Q2 revenue and $6.7 million for the first half, partly offsetting weaker ethanol and distillers-grain revenue.
- Interest expense declined to $3.6 million for the first half from $6.2 million, principally because prior-year debt repayments reduced average debt and prior-year results included write-off of debt issuance costs.
- Cash from operations decreased, while cash fell from $15.1 million at year-end 2011 to $9.2 million at June 30, 2012. Senior debt principal declined to $170.5 million from $176.8 million.
Outlook, risks, contingencies and unusual items
- Management reported limited liquidity and warned that Midwest drought conditions after quarter-end had sharply increased corn prices and narrowed crush spreads. If margins remain depressed, operating cash may not cover plant operations and debt service; the company could exhaust liquidity, curtail or cease plant operations, default on debt, or need to seek bankruptcy relief absent lender accommodations.
- The company relied on extended Cargill payment terms. It owed Cargill $11.2 million for corn purchases, above the stated $10.0 million contractual limit; the arrangement could be terminated by Cargill on little or no notice. Cargill accounted for 76% of Q2 sales and 92% of receivables at period-end.
- Commodity hedging was limited by financial resources. A hypothetical 10% adverse price move for the second half of 2012 was estimated to reduce pretax income by $22.0 million for ethanol, $23.5 million for corn, $2.0 million for dry distillers grain, $3.3 million for wet distillers grain, and $0.7 million for natural gas; these are separate sensitivities, not a combined forecast.
- A 100-basis-point increase in interest rates was estimated to add $1.705 million to annual interest expense. The senior facility is secured by the plants and related assets and contains financial and other covenants.
- Operating lease commitments totaled $51.7 million. Deferred Cargill lease payments of $1.6 million and deferred ethanol commissions of $1.2 million remained outstanding. The filing reported no material legal proceedings.
- The company completed a 1-for-20 reverse stock split on June 15, 2012; share and per-share data were retrospectively adjusted. A management/investor ownership true-up was expected to transfer LLC units in Q3 2012, without issuing new shares.
- No impairment test was performed because management said no triggering circumstances existed at June 30. Income tax benefits were fully offset by a valuation allowance; no income tax provision or benefit was recorded.
Key facts for investors to verify
- Confirm the intended issuer: the provided document identifies BioFuel Energy Corp., not Green Brick Partners, Inc.
- Assess subsequent corn prices, crush spreads, production levels and whether the post-quarter deterioration affected liquidity or operations.
- Verify availability and continuation of Cargill’s extended payment terms and the company’s ability to meet required debt service.
- Review senior debt covenant compliance, cash restrictions in collateral accounts, and the September 2014 maturity and refinancing implications.
- Check subsequent-period results, including corn oil contribution, operating cash flow, and any impairment, plant curtailment, lender accommodation or default disclosures.