FutureFuel Second Quarter Net Income of $3.7 Million

Reports Net Income of $3.7 Million or $0.08 per Diluted Share, and Adjusted EBITDA of $3.3 Million

CLAYTON, Mo., Aug. 09, 2019 (GLOBE NEWSWIRE) -- FutureFuel Corp. (NYSE:FF) (“FutureFuel”), a manufacturer of custom and performance chemicals and biofuels, today announced financial results for the second quarter and the six months ended June 30, 2019.

Second quarter 2019 Financial Highlights (all comparisons are with the second quarter of 2018)

  • Revenues were $70.9 million, down 19.8% from $88.3 million
  • Adjusted EBITDA was $3.3 million, down 71.9% from $37.6 million
  • Net income decreased to $3.7 million, or $0.08 per diluted share, from $6.1 million, or $0.14 per diluted share.

Six month 2019 Financial Highlights (all comparisons are with the first half of 2018)

  • Revenues were $119.4 million, down 17.2% from $144.1 million
  • Adjusted EBITDA was $8.7 million, down 82.4% from $49.3 million
  • Net income decreased to $9.2 million, or $0.21 per diluted share, from $41.9 million, or $0.96 per diluted share.

“The Biodiesel market has been difficult in 2019 absent the Blenders’ Tax Credit which has yet to be reinstated for 2018 or 2019. We have invested significant resources with the expectation that this incentive would be in place and it is particularly disappointing that Congress cannot reach agreement on a measure that has traditionally held wide bipartisan support.

In our Chemicals segment, we are investing in the capacity expansion of a custom chemical product line to support the growing agrochemical and energy markets, which, although disrupting our production volumes this year, will serve us well in the future,” said Tom McKinlay, Chief Operating Officer for FutureFuel Corp.

2019 Regular Cash Dividends

FutureFuel paid a normal quarterly dividend of $0.06 per share in the second quarter of 2019. The remaining quarterly dividends of $0.06 per share will be paid in September, and December.

Financial Overview and Key Operating Metrics

Financial and operating metrics, which include non-GAAP financial measures, include dollars in thousands, except per share amounts:

FutureFuel Corp.
Certain Financial and Operating Metrics

 Three Months Ended June 30,
     Dollar %
  2019   2018  Change Change
Revenues$70,864  $88,336  $(17,472) (19.8%)
Income from operations$1,185  $5,840  $(4,655) (79.7%)
Net income$3,687  $6,051  $(2,364) (39.1%)
Earnings per common share:       
Basic$0.08  $0.14  $(0.06) (42.9%)
Diluted$0.08  $0.14  $(0.06) (42.9%)
Capital expenditures and intangibles (net of customer reimbursements and regulatory grants)$451  $536  $(85) (15.9%)
Adjusted EBITDA$3,384  $11,667  $(8,283) (71.0%)
 Six Months Ended June 30,
     Dollar %
  2019   2018  Change Change
Revenues$119,365  $144,083  $(24,718) (17.2%)
Income from operations$2,396  $40,407  $(38,011) (94.1%)
Net income$9,186  $41,877  $(32,691) (78.1%)
Earnings per common share:       
Basic$0.21  $0.96  $(0.75) (78.1%)
Diluted$0.21  $0.96  $(0.75) (78.1%)
Capital expenditures and intangibles (net of customer reimbursements and regulatory grants)$874  $897  $(23) (2.6%)
Adjusted EBITDA$8,799  $49,264  $(40,465) (82.1%)

Financial and Business Summary

Consolidated sales revenue in the three and six months ended June 30, 2019 decreased $17,472 and $24,717, respectively, compared to the three and six months ended June 30, 2018. This decrease primarily resulted from decreased sales volumes in biodiesel and in agro/energy chemicals. In addition, in the three-month period ended June 30, 2019, sales revenue was reduced by lower average selling prices in our biofuel segment. Partially offsetting the six-month period decrease was higher average selling prices in the biodiesel as compared with the same period in 2018. The prior year period was unfavorably impacted by rebates to customers that resulted from the retroactive reinstatement of the 2017 blenders’ tax credit (BTC) passed into law on February 9, 2018. The BTC has not been reinstated beyond 2017, therefore, these rebates did not reoccur in 2019. 

Gross profit in the three and six months ended June 30, 2019 decreased $5,001 and $39,246, respectively, compared to the three and six months ended June 30, 2018. This decrease was primarily from the biofuel segment with the prior year period benefiting from the aforementioned BTC which was not in law in 2019. Also negatively impacting gross profit in the current periods was reduced sales volumes in both the biofuels segment and chemical segment. Partially offsetting these decreases in gross profit was the favorable impact of the change in the unrealized and realized activity in derivative instruments with a gain of $443 in the three months ended June 30, 2019 as compared to a loss of $3,109 in the three months ended June 30, 2018 and a loss of $1,033 in the six months ended June 30, 2019, as compared to a loss of $3,271 in the same period of 2018. Additionally, gross profit was favorably impacted in the three and six months ended June 30, 2019, as compared to the three and six months ended June 30, 2018, by the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment increased gross profit of $287 and $1,924 in the three and six months ended June 30, 2019 as compared to a decrease in gross profit of $2,330 and $1,998 in the three and six months ended June 30, 2018, respectively.

Net Income

Net income for the three and six months ended June 30, 2019 decreased $2,364 and $32,691, respectively, as compared to the same periods in 2018. The decrease in the three-month period resulted primarily from lower sales volumes of agro/energy chemicals and biodiesel. The decrease in the six-month period resulted primarily from the absence of biodiesel tax credits and incentives that were in law in the prior year and not in effect for 2019. 

Capital Expenditures

Capital expenditures and intangibles were $4,659 in the six months of 2019, compared with $1,103 in the same period in 2018. FutureFuel was reimbursed for a portion of these expenditures by certain customers as summarized in the following table.

 Six Months Ended June 30,
  2019   2018 
Cash paid for capital expenditures and intangibles$4,659  $1,103 
Cash received as reimbursement of capital expenditures$(3,785) $(206)
Cash paid, net of reimbursement, for capital expenditures$874  $897 

Cash and Cash Equivalents and Marketable Securities

Cash and cash equivalents and marketable securities remain strong at $303,431 as of June 30, 2019, compared with $294,860 as of December 31, 2018.

About FutureFuel

FutureFuel is a leading manufacturer of diversified chemical products, specialty chemical products, and biofuel products. In its chemicals business, FutureFuel manufactures specialty chemicals for specific customers (“custom chemicals”) as well as multi-customer specialty chemicals (“performance chemicals”). FutureFuel’s custom chemicals product portfolio includes a bleach activator for a major detergent manufacturer, proprietary herbicide and intermediates for major life sciences companies, and chlorinated polyolefin adhesion promoters and antioxidant precursors for a major chemical company. FutureFuel’s performance chemicals product portfolio includes polymer (nylon) modifiers and several small-volume specialty chemicals for diverse applications. FutureFuel’s biofuels segment primarily produces and sells biodiesel to its customers. Please visit www.futurefuelcorporation.com for more information.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements deal with FutureFuel’s current plans, intentions, beliefs, and expectations, and statements of future economic performance. Statements containing such terms as “believe,” “do not believe,” “plan,” “expect,” “intend,” “estimate,” “anticipate,” and other phrases of similar meaning are considered to contain uncertainty and are forward-looking statements. In addition, from time to time FutureFuel or its representatives have made or will make forward-looking statements orally or in writing. Furthermore, such forward-looking statements may be included in various filings that the company makes with United States Securities and Exchange Commission (the “SEC”), in press releases, or in oral statements made by or with the approval of one of FutureFuel’s authorized executive officers.

These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause actual results to differ include, but are not limited to, those set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in FutureFuel’s Form 10-K Annual Report for the year ended December 31, 2018 and in its future filings made with the SEC. An investor should not place undue reliance on any forward-looking statements contained in this document, which reflect FutureFuel management’s opinions only as of their respective dates. Except as required by law, the company undertakes no obligation to revise or publicly release the results of any revisions to forward-looking statements. The risks and uncertainties described in this document and in current and future filings with the SEC are not the only ones faced by FutureFuel. New factors emerge from time to time, and it is not possible for the company to predict which will arise. There may be additional risks not presently known to the company or that the company currently believes are immaterial to its business. In addition, FutureFuel cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. If any such risks occur, FutureFuel’s business, operating results, liquidity, and financial condition could be materially affected in an adverse manner. An investor should consult any additional disclosures FutureFuel has made or will make in its reports to the SEC on Forms 10-K, 10-Q, and 8-K, and any amendments thereto. All subsequent written and oral forward-looking statements attributable to FutureFuel or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this document.

Non-GAAP Financial Measures

In this press release, FutureFuel used adjusted EBITDA as a key operating metric to measure both performance and liquidity. Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is not a substitute for operating income, net income, or cash flow from operating activities (each as determined in accordance with GAAP), as a measure of performance or liquidity. Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP. FutureFuel defines adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization expenses, excluding, when applicable, non-cash share-based compensation expense, public offering expenses, acquisition-related transaction costs, purchase accounting adjustments, loss on disposal of property and equipment, gains or losses on derivative instruments, other non-operating income or expense. Information relating to adjusted EBITDA is provided so that investors have the same data that management employs in assessing the overall operation and liquidity of FutureFuel’s business. FutureFuel’s calculation of adjusted EBITDA may be different from similarly titled measures used by other companies; therefore, the results of its calculation are not necessarily comparable to the results of other companies.

Adjusted EBITDA allows FutureFuel’s chief operating decision makers to assess the performance and liquidity of FutureFuel’s business on a consolidated basis to assess the ability of its operating segments to produce operating cash flow to fund working capital needs, to fund capital expenditures, and to pay dividends. In particular, FutureFuel management believes that adjusted EBITDA permits a comparative assessment of FutureFuel’s operating performance and liquidity, relative to a performance and liquidity based on GAAP results, while isolating the effects of depreciation and amortization, which may vary among its operating segments without any correlation to their underlying operating performance, and of non-cash stock-based compensation expense, which is a non-cash expense that varies widely among similar companies, and gains and losses on derivative instruments, whose immediate recognition can cause net income to be volatile from quarter to quarter due to the timing of the valuation change in the derivative instruments relative to the sale of biofuel.

A table included in this earnings release reconciles adjusted EBITDA with net income, the most directly comparable GAAP performance financial measure, and a table reconciles adjusted EBITDA with cash flows from operations, the most directly comparable GAAP liquidity financial measure.

FutureFuel Corp.
Condensed Consolidated Balance Sheets
(Dollars in thousands) 

 June 30, 2019 December 31, 2018
Cash and cash equivalents$222,871  $214,972 
Accounts receivable, net of allowance for bad debts of $0 21,671   18,138 
Inventory 36,116   39,296 
Marketable securities 80,560   79,888 
Other current assets 7,310   10,036 
Total current assets 368,528   362,330 
Property, plant and equipment, net 102,374   103,575 
Other assets 6,767   5,250 
Total noncurrent assets 109,141   108,825 
Total Assets$477,669  $471,155 
Liabilities and Stockholders’ Equity   
Accounts payable$21,146  $21,670 
Dividends payable 5,249   10,498 
Other current liabilities 9,269   7,323 
Total current liabilities 35,664   39,491 
Deferred revenue – long-term 20,233   20,319 
Other noncurrent liabilities 23,289   22,267 
Total noncurrent liabilities 43,522   42,586 
Total liabilities 79,186   82,077 
Commitments and contingencies   
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding -   - 
Common stock, $0.0001 par value, 75,000,000 shares authorized, 43,743,243, issued and outstanding as of June 30, 2019 and December 31, 2018 4   4 
Accumulated other comprehensive income 199   (20)
Additional paid in capital 282,145   282,145 
Retained earnings 116,135   106,949 
Total Stockholders’ Equity 398,483   389,078 
Total Liabilities and Stockholders’ Equity$477,669  $471,155 

FutureFuel Corp.
Condensed Consolidated Statements of Operations
and Comprehensive Income
(Dollars in thousands, except per share amounts)

 Three Months Ended June 30, Six Months Ended June 30,
  2019   2018   2019   2018 
Revenue$70,864  $88,336  $119,365  $144,083 
Cost of goods sold and distribution 67,594   80,065   112,833   98,305 
Gross profit 3,270   8,271   6,532   45,778 
Selling, general, and administrative expenses 1,297   1,647   2,642   3,405 
Research and development expenses 788   784   1,494   1,966 
  2,085   2,431   4,136   5,371 
Income from operations 1,185
   5,840   2,396   40,407 
Other income/(expense), net 3,419   2,214   8,665   (206)
Income before income taxes 4,604   8,054   11,061   40,201 
Provision/(benefit) for income taxes 917   2,003   1,875   (1,676)
Net income$3,687  $6,051  $9,186  $41,877 
Earnings per common share       
Basic$0.08  $0.14  $0.21  $0.96 
Diluted$0.08  $0.14  $0.21  $0.96 
Weighted average shares outstanding       
Basic 43,743,243   43,716,726   43,743,243   43,716,698 
Diluted 43,743,243   43,720,942   43,746,109   43,721,568 
Comprehensive Income       
Net income$3,687  $6,051  $9,186  $41,877 
Other comprehensive income/(loss) from unrealized net gain/(loss) on available-for-sale securities 22   55   278   (19)
Income tax effect (5)  (12)  (59)  4 
Total unrealized gain/(loss), net of tax 17   43   219   (15)
Comprehensive income$3,704  $6,094  $9,405  $41,862 

FutureFuel Corp.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2019 and 2018
(Dollars in thousands)

 Six Months Ended June 30,
  2019   2018 
Cash flows from operating activities   
Net income$9,186  $41,877 
Adjustments to reconcile net income to net cash from operating activities:   
Depreciation 5,472   5,512 
Amortization of deferred financing costs 72   72 
Benefit for deferred income taxes (445)  (3,885)
Change in fair value of equity securities (4,891)  6,412 
Change in fair value of derivative instruments (297)  (1,559)
Impairment of fixed assets 130   171 
(Gain)/loss on the sale of investments 1,138   (2,324)
Stock based compensation -   214 
Loss on disposal of fixed assets 11   37 
Noncash interest expense 14   14 
Changes in operating assets and liabilities:   
Accounts receivable (5,347)  (417)
Accounts receivable – related parties 1,814   (11)
Inventory 3,180   (3,767)
Income tax receivable 1,336   3,456 
Prepaid expenses 712   706 
Prepaid expenses – related parties 12   - 
Accrued interest on marketable securities 19   (82)
Other assets 520   39 
Accounts payable 958   16,316 
Accounts payable – related parties (1,248)  (402)
Accrued expenses and other current liabilities 688   4,584 
Deferred revenue 591   (1,603)
Other noncurrent liabilities (98)  - 
Net cash provided by operating activities 13,527   65,360 
Cash flows from investing activities   
Collateralization of derivative instruments 908   1,237 
Purchase of marketable securities (14,323)  (10,690)
Proceeds from the sale of marketable securities 17,682   35,718 
Proceeds from the sale of fixed assets 13   20 
Capital expenditures (4,659)  (1,103)
Net cash (used in)/provided by investing activities (379)  25,182 
Cash flows from financing activities   
Payment of dividends (5,249)  (5,248)
Net cash used in financing activities (5,249)  (5,248)
Net change in cash and cash equivalents 7,899   85,294 
Cash and cash equivalents at beginning of period 214,972   114,627 
Cash and cash equivalents at end of period$222,871  $199,921 
Cash paid for interest$-  $- 
Cash paid for income taxes$898  $759 
Noncash items incurred:   
Noncash capital expenditures$108  $- 
Noncash operating leases$432  $- 

FutureFuel Corp.
Reconciliation of Non-GAAP Financial Measure to Financial Measure
(Dollars in thousands)

Reconciliation of Adjusted EBITDA to Net Income

 Three Months Ended June 30, Six Months Ended June 30,
  2019   2018   2019   2018 
Adjusted EBITDA$3,384  $11,667  $8,799  $49,264 
Depreciation (2,747)  (2,756)  (5,472)  (5,512)
Non-cash stock-based compensation -   (107)  -   (214)
Interest and dividend income 2,750   2,153   5,112   4,145 
Non-cash interest expense (including amortization of deferred financing costs) (44)  (43)  (87)  (86)
Loss on disposal of property and equipment (8)  (32)  (11)  (37)
Gains/(losses) on derivative instruments 443   (3,109)  (1,033)  (3,271)
Gains/(losses) on marketable securities 826   281   3,753   (4,088)
Income tax (expense)/benefit (917)  (2,003)  (1,875)  1,676 
Net income$3,687  $6,051  $9,186  $41,877 

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

 Six Months Ended June 30,
  2019   2018 
Adjusted EBITDA$8,799  $49,264 
Benefit for deferred income taxes (445)  (3,885)
Impairment of fixed assets 130   171 
Interest and dividend income 5,112   4,145 
Income tax (expense)/benefit (1,875)  1,676 
Losses on derivative instruments (1,033)  (3,271)
Change in fair value of derivative instruments (297)  (1,559)
Changes in operating assets and liabilities, net 3,137   18,819 
Other (1)  - 
Net cash provided by operating activities$13,527  $65,360 

FutureFuel Corp.
Condensed Consolidated Segment Income
(Dollars in thousands)

 Three Months Ended June 30, Six Months Ended June 30,
  2019   2018   2019   2018 
Custom chemicals$21,965  $27,072  $45,665  $50,492 
Performance chemicals 3,894   4,455   7,546   10,116 
Chemicals revenue 25,859   31,527   53,211   60,608 
Biofuels revenue 45,005   56,809   66,154   83,475 
Total Revenue$70,864  $88,336  $119,365  $144,083 
Segment gross profit/(loss)       
Chemicals$7,181  $8,016  $14,490  $15,572 
Biofuels (3,911)  255   (7,958)  30,206 
Total gross profit 3,270   8,271   6,532   45,778 
Corporate expenses (2,085)  (2,431)  (4,136)  (5,371)
Income before interest and taxes 1,185   5,840   2,396   40,407 
Interest and other income 3,576   2,434   8,865   4,145 
Interest and other expense (157)  (220)  (200)  (4,351)
(Provision)/benefit for income taxes (917)  (2,003)  (1,875)  1,676 
Net income$3,687  $6,051  $9,186  $41,877 

Depreciation is allocated to segment costs of goods sold based on plant usage. The total assets and capital expenditures of FutureFuel have not been allocated to individual segments as large portions of these assets are shared to varying degrees by each segment, causing such an allocation to be of little value.

FutureFuel Corp.
Tom McKinlay