from the Jackson Jambalaya blog:
http://kingfish1935.blogspot.com/2021/11/express-grain-collapse-over-100-million.html
http://kingfish1935.blogspot.com/2021/11/express-grain-collapse-over-100-million.html
Update on the Express Grain debacle
- Thread starter Duke Humphrey
- Start date
This doesn't make sense. Sure, fast growth can bring some financial pressures, but they should be of a temporary nature. If revenues went from $95M to $130M to $249M in 2 years, there should be enough money to pay creditors. Of course, nearly doubling revenues in 2021 raises some questions as well. That's a huge increase.
If the grain business is anything like the lumber business, you are usually operating on such thin margins that poorly run businesses (and operators that have a bad understanding of variable vs fixed costs) don't understand that they are chasing variable expense to the point that the more you sell, the more you lose. But to your point patdog... As prices rise, profit realizations usually do too. You have to be a special kind of dummy to screw that up.
Don't know the grain business... but here is how it looked before and how it now looks in building materials distribution.
A few years ago we had guys that were managing $50+ million dollar branches that couldn't understand that to truly understand profitability it is not your margins across the whole business, you have to look at the realizations of each product line. OSB was supposed to be what we called "truck filler". You have a truck of higher margin specialty building products going to a lumberyard, if there is space on the truck that needs to be filled, go ahead and put a unit or 2 of osb to fill it out. All of the freight expenses are already sunk. It's just a little gravy on the potatoes since the OSB is something a lumberyard can almost always have a little more of...
Well our geniuses used to sell truckloads of OSB out of the warehouse for $200/msf (1000 square feet) and you could put a 30 msf on a truck, so we are talking about $6k at a 10% margin ($600 in total gross profit.) The average variable cost to load, unload, warehouse, and deliver a truckload of OSB was $1100. I fought some really high level people that only cared about gross sales and total margin dollars... Idiots were losing $500 a truckload. The more they sold, the more they lost.
All they would look at is we sold $2 million of OSB this month at 10% and created $200K in "profit." Of course as you work down the P&L they would lose their mind over the freight expense and overtime... It was mind boggling that they couldn't understand, even when you laid it out.
Well fast forward to today. That same OSB now sells for $700/msf and a truck is worth $21,000. So at a 10% margin they are making $2100 per TL sold. Maybe variable expense is up 40%, but that is still only $1500 of cost per TL. So now they really are making $600 per TL sold. So Covidflation has made geniuses out of absolute idiots in the building material distribution business.
With that said, the only way you could dork it up I am guessing is if instead of selling on margin, you sold on a fixed adder. Anyway... I have seen a lot stupid people in the lumber business, I guess they same stupidity could infest the grain elevators too. But, I would certainly like to see the personal assets of the Coleman clan over the last 3 years, because even the idiots I know are riding the commodity tidal wave to record profits.
Don't know the grain business... but here is how it looked before and how it now looks in building materials distribution.
A few years ago we had guys that were managing $50+ million dollar branches that couldn't understand that to truly understand profitability it is not your margins across the whole business, you have to look at the realizations of each product line. OSB was supposed to be what we called "truck filler". You have a truck of higher margin specialty building products going to a lumberyard, if there is space on the truck that needs to be filled, go ahead and put a unit or 2 of osb to fill it out. All of the freight expenses are already sunk. It's just a little gravy on the potatoes since the OSB is something a lumberyard can almost always have a little more of...
Well our geniuses used to sell truckloads of OSB out of the warehouse for $200/msf (1000 square feet) and you could put a 30 msf on a truck, so we are talking about $6k at a 10% margin ($600 in total gross profit.) The average variable cost to load, unload, warehouse, and deliver a truckload of OSB was $1100. I fought some really high level people that only cared about gross sales and total margin dollars... Idiots were losing $500 a truckload. The more they sold, the more they lost.
All they would look at is we sold $2 million of OSB this month at 10% and created $200K in "profit." Of course as you work down the P&L they would lose their mind over the freight expense and overtime... It was mind boggling that they couldn't understand, even when you laid it out.
Well fast forward to today. That same OSB now sells for $700/msf and a truck is worth $21,000. So at a 10% margin they are making $2100 per TL sold. Maybe variable expense is up 40%, but that is still only $1500 of cost per TL. So now they really are making $600 per TL sold. So Covidflation has made geniuses out of absolute idiots in the building material distribution business.
With that said, the only way you could dork it up I am guessing is if instead of selling on margin, you sold on a fixed adder. Anyway... I have seen a lot stupid people in the lumber business, I guess they same stupidity could infest the grain elevators too. But, I would certainly like to see the personal assets of the Coleman clan over the last 3 years, because even the idiots I know are riding the commodity tidal wave to record profits.
Their screwup was the oil mill. Last I heard that thing was hemorrhaging money. What Joe Lee is saying is pretty accurate too, when you make a couple of bad decisions in the grain business you can get upside down really quick.
I was told they were paying a basis of $2 more than competitors to the farmers, so they were overpaying for crops to draw the business in. I've also heard someone say they think they just sunk too much into the biodiesel plant. This is all speculative, but as has been said, with that good looking revenue growth came some heavy expenses. My first thought was fraud, and based on the article it appears there was financial statement fraud. I'm not sure how the Coleman's live/lived, but the dad is a well respected dentist in town, so he's well off without the Express Grain headache. It's probably just as simple as they mismanaged the business' finances, and their bank allowed them to 17 a lot of farmers this harvest season.
There's a valuable lessons for farmers here - do your due diligence on your business relationships.
There's a valuable lessons for farmers here - do your due diligence on your business relationships.
I'll be interested to see how that lawsuit against the bank plays out. Accused of propping Express up long enough to steal the harvest revenues.
Dr. Coleman is an actual MD (Ophthalmologist) and been practicing in Greenwood since the late 80s. He has (had?) a great reputation.
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If that turns out to be true, the people involved should have to pay every freaking penny to the farmers personally with hand delivered bags of cash. There’s a special cell of punishment for people that screw farmers. That infuriates me.
I had 80% of my beans booked through express. Well, I started cutting the bean ground on the date of the filing of the bankruptcy. The petition was filed at about 10 am. I got one truckload in before that. And, then seven more in till about 3 pm when I heard about the filing.
I got paid last Friday on all of the delivered beans at contracted price, minus the one load prepetition which I’m screwed on. I’m super lucky. The only big negative is that I lost all of my marketing of my beans. That hurts to the tune of about $2 per bushel.
Yes, should have seen it coming. Last year, they didn’t pay me until late February/March 2021 for beans delivered in October. Gave me 8% on top of what I was owed.
I got paid last Friday on all of the delivered beans at contracted price, minus the one load prepetition which I’m screwed on. I’m super lucky. The only big negative is that I lost all of my marketing of my beans. That hurts to the tune of about $2 per bushel.
Yes, should have seen it coming. Last year, they didn’t pay me until late February/March 2021 for beans delivered in October. Gave me 8% on top of what I was owed.
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Makes plenty of sense
Rule of thumb, 10% increase in sales, means you will need more capital.
It may not have been available to them.
Their sales/revenues went thru the roof. Based on what I just read.
Rule of thumb, 10% increase in sales, means you will need more capital.
It may not have been available to them.
Their sales/revenues went thru the roof. Based on what I just read.
I saw on the bankruptcy docs that Jackson jambalaya posted they had something like $1.2 million in accounts receivables, most of which were current or around 30 days. However, their accounts payable was around $40 million and every single one was at least 60 days. Number 1 sign a company is not turning revenue to cash flow is when they start riding payables out that far, while accounts receivable days are staying strong.
I hate you’re having to go through all this. Is there another company like express grain in the delta that farmers sell to?
Plenty of elevators, not any that are about a 7 min truck drive from the majority of our acreage around Sidon.
For those us who grew up in the 70s/80s, Dr J was the GOAT! Dr. Pepper is also acceptable.
Looks like Horne was doing their financial statements, it would be interesting to see those.
No. It’s going to be a total disaster. I’m
thinking 20-30 cents on a dollar. How would you like to have delivered $2 million dollars worth of grain and walk away with $500k. Jeez.
Again, I’m super lucky. Put most of my beans in our bins and took the others somewhere else.
thinking 20-30 cents on a dollar. How would you like to have delivered $2 million dollars worth of grain and walk away with $500k. Jeez.
Again, I’m super lucky. Put most of my beans in our bins and took the others somewhere else.
Yeah. You're right. I was looking at it backwards without thinking. Hopefully, they can show that the bank was colluding by waiting so long to call the loans. They may have a case. Looks like this thing should have been shut down long ago.
Now that he's done screwing his constituents on the pumps, maybe he can get some retroactive bankruptcy legislation that lowers the priority of farmers in any payout.
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