BioFuel Energy Corp. (BIOF) filed Quarterly Report for the period ended 2009-06-30.
BIOFUEL ENERGY CORP. is a publicly traded company whose goal is to become one of the leading ethanol producers in the United States. Headquartered in Denver Colorado the company is currently starting up large-scale ethanol production facilities in Fairmont Minnesota and Wood River Nebraska. BioFuel Energy enjoys a strong commercial relationship with Cargill Inc. one of the world\'s leading agricultural concerns. Cargill will play a key role in many of the core operational aspects of the business including corn procurement ethanol distribution and by-product sales. BioFuel Energy is managed by a seasoned group of executives with a deep experience in the energy field. It is backed by a prominent group of institutional investors. BioFuel Energy Corp. has a market cap of $16.2 million; its shares were traded at around $0.69 with and P/S ratio of 0.1.
Highlight of Business Operations:
The Operating Subsidiaries, entered into engineering, procurement and construction or EPC contracts with The Industrial Company — Wyoming or TIC for the construction of the Wood River and Fairmont plants. Pursuant to these EPC contracts, TIC was to be paid a total of $272.0 million, subject to certain adjustments, for the turnkey construction of the two plants. The Operating Subsidiaries of the LLC entered into agreements with TIC, effective December 11, 2008, that settled certain issues that had arisen between the parties under the terms of the EPC contracts during the course of constructing the plants. Among the items agreed to were that each plant had met both substantial completion and project completion, that TIC would continue to be responsible for its warranty obligations, and that TIC would pay the subsidiaries of the LLC $2.0 million for each plant, which amounts would be deducted from the retainage amounts owed to TIC. The construction retainage liability at December 31, 2008 of $9.4 million was recorded net of the $2.0 million for each plant owed by TIC as part of the settlement agreement and was paid to TIC in February 2009. At June 30, 2009, property, plant and equipment related to the EPC contracts was $248.9 million, net of liquidated damages of $19.1 million arising out of completion delays at both plants and net of $4.0 million arising out of the settlement agreements. As of June 30, 2009 the Company estimated that an additional $3 million will be spent by the Operating Subsidiaries on plant infrastructure and other requirements to permit the plants to be operated safely and reliably at their nameplate capacities.
Cost of goods sold and gross loss: Cost of goods sold was $107,307,000 for the three months ended June 30, 2009 which resulted in a gross loss of $843,000. Cost of goods sold included $79,476,000 for corn, $5,517,000 for natural gas, $1,629,000 for denaturant, $3,122,000 for electricity, $3,978,000 for chemicals and enzymes, $7,303,000 for general operating expenses, and $6,282,000 for depreciation. Our cost of goods sold was high in relation to revenues primarily due to the cost of corn per gallon of ethanol being greater than it historically has been, resulting in a narrowed crush spread.
General and administrative expenses: General and administrative expenses decreased $4,165,000 or 49.6%, to $4,232,000 for the three months ended June 30, 2009, compared to $8,397,000 for the three months ended June 30, 2008. The decrease was primarily due to a decrease in compensation expense of $1,408,000 and other expense of $2,757,000. Of the $1,408,000 decrease in compensation expense, $1,067,000 was attributable to plant employees who began working and training at the Wood River and Fairmont plants in early 2008. As the plants did not begin commercial operation until June 2008, the plant employees’ compensation costs were included in general and administrative expenses for most of the three months ended June 30, 2008 while the plant employees’ costs are included in cost of goods sold for the entire three months ended June 30, 2009. Of the $2,757,000 decrease in other expense, $2,385,000 was attributable to expenses relating to the plants. As the plants did not begin commercial operation until June 2008, all start-up costs were included in general and administrative expenses until that time. Subsequent to June 2008, plant costs are now included in cost of goods sold. Other expenses for the three months ended June 30, 2009 included $1,649,000 of legal and financial advisory expenses, primarily related to the Company’s negotiations with the lenders under the Senior Debt facility concerning restructuring and loan conversion, which included $755,000 of legal and advisory expenses of BNP Paribas and the other lenders.
Noncontrolling Interest. The net loss attributable to the noncontrolling interest increased $3,889,000 to $2,454,000 for the three months ended June 30, 2009, compared to income of $1,435,000 for the three months ended June 30, 2008. The increase was attributable to the Company’s loss before noncontrolling interest increasing from income of $2,383,000 for the three months ended June 30, 2008 to a loss of $8,988,000 for the three months ended June 30, 2009, offset by the decrease in the percentage ownership of the noncontrolling interest from 53.1% at June 30, 2008 to 25.0% at June 30, 2009.
Cost of goods sold and gross loss: Cost of goods sold was $209,872,000 for the six months ended June 30, 2009 which resulted in a gross loss of $5,914,000. Cost of goods sold included $151,280,000 for corn, $13,134,000 for natural gas, $3,116,000 for denaturant, $5,993,000 for electricity, $9,149,000 for chemicals and enzymes, $14,650,000 for general operating expenses, and $12,550,000 for depreciation. Our cost of goods sold was high in relation to revenues primarily due to the cost of corn per gallon of ethanol being greater than it historically has been, resulting in a narrowed crush spread.
General and administrative expenses: General and administrative expenses decreased $5,625,000 or 45.0%, to $6,874,000 for the six months ended June 30, 2009, compared to $12,499,000 for the six months ended June 30, 2008. The decrease was primarily due to a decrease in compensation expense of $2,361,000 and other expense of $3,264,000. Of the $2,361,000 decrease in compensation expense, $1,777,000 was attributable to plant employees who began working and training at the plants in early 2008. As the plants did not begin commercial operation until June 2008, the plant employees’ compensation costs were included in general and administrative expenses for most of the six months ended June 30, 2008 while the plant employees’ costs are included in cost of goods sold for the six months ended June 30, 2009. Of the $3,264,000 decrease in other expense, $2,739,000 was attributable to expenses relating to the plants. As the plants did not begin commercial operation until June 2008, all start-up costs were included in general and administrative expenses until that time. Subsequent to June 2008, plant costs are now included in cost of goods sold. Other expenses for the six months ended June 30, 2009 included $1,723,000 of legal and financial advisory expenses, primarily related to the Company’s negotiations with the lenders under the Senior Debt facility concerning restructuring and loan conversion, which included $755,000 of legal and advisory expenses of BNP Paribas and the other lenders.
BIOF is in the portfolios of Daniel Loeb of Third Point, LLC, David Einhorn of Greenlight Capital Inc.
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