Business context and reporting period
Filing identity mismatch: The supplied filing is BioFuel Energy Corp.’s unaudited Form 10-Q for the quarter ended June 30, 2013—not a filing for Green Brick Partners, Inc. This summary reflects the filing actually provided.
BioFuel Energy produces ethanol and co-products at dry-mill plants in Wood River, Nebraska, and Fairmont, Minnesota. Fairmont had been idle since September 2012; Wood River continued operating. The company attributed its results chiefly to volatile corn, ethanol, and co-product prices and the resulting “crush spread.”
Financial results and position
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Net sales | $91.0 million | $122.8 million | $180.1 million | $262.2 million |
| Gross loss | $2.3 million | $8.3 million | $4.2 million | $14.8 million |
| Operating loss | $5.4 million | $10.7 million | $10.3 million | $19.9 million |
| Net loss | $4.7 million | $12.4 million | $10.1 million | $23.5 million |
| Net loss attributable to BioFuel Energy common stockholders | $4.1 million | $10.6 million | $8.8 million | $20.0 million |
| Basic and diluted loss per share | $(0.77) | $(2.05) | $(1.65) | $(3.88) |
Gross margin was approximately negative 2.5% in Q2 2013 versus negative 6.7% in Q2 2012; for the six-month periods, approximately negative 2.3% versus negative 5.6%. No income tax provision or benefit was recorded.
For the first six months, operating cash flow was $3.0 million, investing cash outflow $1.1 million, and financing cash outflow $0.1 million; cash increased $1.9 million to $11.2 million. At June 30, total assets were $239.7 million, total liabilities $194.2 million, and total equity $45.4 million. Current assets were $38.3 million and current liabilities $184.5 million.
Total debt was $173.4 million, including $170.5 million principal under the Senior Debt Facility. The full Senior Debt Facility balance was classified as current because of the payment default. Cash included $9.3 million at the LLC and $1.9 million at operating subsidiaries, where it was subject to lender liens. Operating subsidiaries also owed Cargill $3.6 million for corn purchases.
Material changes versus the prior comparable period
- Q2 sales declined 25.9% and first-half sales declined 31.3%, principally because the Fairmont shutdown reduced production and volumes; higher per-unit selling prices partly offset the decline.
- Q2 ethanol sold fell to 28.3 million gallons from 46.5 million; first-half sales fell to 55.9 million from 98.5 million. Lower volumes also reduced corn and other production costs, but fixed costs per gallon rose.
- Losses narrowed year over year. Q2 gross loss improved by $6.0 million and first-half gross loss by $10.6 million, while sales volumes remained substantially lower.
- General and administrative expense rose to $3.1 million in Q2 and $6.1 million in the first half, including $1.2 million and $2.2 million, respectively, in lender-related legal and financial advisory costs.
- Other income was $2.6 million for Q2 and $4.1 million for the first half, from subleasing excess ethanol tanker cars; there was no corresponding income in 2012.
- The company made no scheduled Senior Debt Facility principal or interest payments in the first half of 2013; it had made $6.3 million of debt repayments in the first half of 2012.
Outlook, risks, contingencies, and unusual items
- Going concern: Management stated that the debt default, Fairmont shutdown, and limited liquidity raised substantial doubt about the company’s ability to continue as a going concern. The financial statements contain no adjustments for a possible failure to continue.
- Default and potential asset transfer: Operating subsidiaries had missed scheduled debt service since September 2012; unpaid scheduled principal and interest totaled $17.6 million through June 30, 2013. A lender agreement provided a grace period originally through July 30, 2013, and a deed-in-lieu arrangement contemplated transferring the plants and related assets to lender designees in satisfaction of the senior debt. Lenders could direct the transfer following an asserted milestone failure. The filing says no such direction had been delivered as of its reporting discussion, while discussions continued.
- Strategic alternatives: The company was exploring plant sales and other financing or consensual arrangements to retain one or both plants. It reported indications of interest but no offer expected to leave meaningful residual proceeds for the company. It could not assure that a transaction would occur or provide value to shareholders.
- Liquidity dependence: Cargill allowed extended corn-payment terms beyond the contractual limit, subject to conditions, and could end that arrangement on little or no notice. The filing also describes $0.9 million placed in escrow for anticipated obligations in a potential deed-in-lieu transfer.
- Operating outlook: Crush spreads improved in the first half of 2013, but Fairmont remained idle; management continued evaluating whether a restart was economically viable and what working capital it would require. No formal earnings or production guidance was provided. The market-risk sensitivity scenario assumed Fairmont would resume normal operations in October 2013; this was an assumption, not confirmed guidance.
- Other exposures: Sales to Cargill were 75% of first-half 2013 net sales, and Cargill represented 91% of receivables at June 30. The company cited commodity-price volatility and limited ability to hedge. It also disclosed $40.2 million of future minimum operating lease payments.
Important facts for investors to verify
- Confirm the issuer: the provided document is BioFuel Energy Corp.’s 2013 Q2 10-Q, not Green Brick Partners, Inc.’s filing.
- Check subsequent lender actions and the status or outcome of the grace period, release event, deed-in-lieu arrangement, and any plant sale or financing process.
- Verify the company’s available and accessible liquidity, including cash subject to lender liens and whether Cargill’s extended payment terms remained available.
- Assess whether Fairmont resumed operations, the working capital needed for a restart, and the effect of plant utilization and crush spreads on cash generation.
- Review the ultimate recovery available to shareholders after senior debt, other liabilities, and any asset transfer or sale proceeds.