FutureFuel First Quarter Net Income of
$3.4 Million
FutureFuel Corp. (NYSE:FF) (“FutureFuel”), a manufacturer of
custom and performance chemicals and biofuels, today announced
financial results for the three months ended March 31, 2017.
First Quarter 2017 Financial Highlights (all
comparisons are with the first quarter of 2016)
- Revenues were $54.1 million, up 16.0% from $46.6 million
- Adjusted EBITDA was $5.6 million, down 56.2% from $12.7
million
- Net income decreased to $3.4 million, or $0.08 per diluted
share, from $10.6 million, or $0.24 per diluted share.
“Revenues this quarter reflected a strong underlying performance
from our business. We are still challenged by the ongoing
regulatory vacuum on biodiesel production and the Blenders’ Tax
Credit. Resolution of this issue would bring much
needed clarity to the industry,” said Tom
McKinlay, Chief Operating Officer for FutureFuel Corp.
2017 Regular Cash Dividends
FutureFuel paid a special dividend of $2.29 and a normal
quarterly dividend of $0.06 per share in the first quarter of
2017. The remaining quarterly dividends of $0.06 per share
will be paid in June, 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 |
(Unaudited) |
|
|
Three months ended March 31,: |
|
|
|
|
|
Dollar |
|
% |
|
2017 |
|
2016 |
|
Change |
|
Change |
Revenues |
$ |
54,111 |
|
$ |
46,635 |
|
$ |
7,476 |
|
|
16.0 |
% |
Income from
operations |
$ |
3,475 |
|
$ |
8,529 |
|
$ |
(5,054 |
) |
|
(59.3 |
%) |
Net income |
$ |
3,396 |
|
$ |
10,569 |
|
$ |
(7,173 |
) |
|
(67.9 |
%) |
Earnings per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.08 |
|
$ |
0.24 |
|
$ |
(0.16 |
) |
|
(66.7 |
%) |
Diluted |
$ |
0.08 |
|
$ |
0.24 |
|
$ |
(0.16 |
) |
|
(66.7 |
%) |
Capital expenditures
and intangibles (net of customer reimbursements and regulatory
grants) |
$ |
842 |
|
$ |
778 |
|
$ |
64 |
|
|
8.2 |
% |
Adjusted EBITDA |
$ |
5,569 |
|
$ |
12,702 |
|
$ |
(7,133 |
) |
|
(56.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter Financial and Business
Summary
Chemical sales revenue in the three months ended
March 31, 2017 increased by $1,289 compared to the three months
ended March 31, 2016. Sales revenue for our custom chemicals
(unique chemicals produced for specific customers) for the three
months ended March 31, 2017 totaled $21,952, an increase of $1,660
from the comparable period in 2016. This increase was primarily
attributed to increased sales volumes in the agrochemical and
energy markets and increased amortization of deferred revenue
partially offset by the reduced price and volume of the laundry
detergent additive. Further impacting revenue was reduced selling
prices in accordance with contractual agreements indexed to key raw
materials. Performance chemical (comprised of multi-customer
products which are sold based on specification) sales revenues were
$4,405 in the three months ended March 31, 2017, a decrease of $371
from the three months ended March 31, 2016. This decrease was
primarily from timing of product shipments to customers.
Biofuels sales revenue in the three months ended
March 31, 2017 increased $6,187 when compared to the three months
ended March 31, 2016. This increase was primarily
from a favorable price variance on biodiesel and biodiesel blends
partially offset by the reduction in pipeline sales which totaled
$0 and $3,203 in the three months ended March 31, 2017 and 2016,
respectively.
Gross profit for the chemicals segment for the
three months ended March 31, 2017 decreased by $1,563 when compared
to the three months ended March 31, 2016. Gross profits were
decreased by the change in adjustments in the carrying value of our
inventory as determined utilizing the LIFO method of inventory
accounting. This adjustment decreased gross profit $419 in the
three months ended March 31, 2017 and increased gross profit $1,538
in the three months ended March 31, 2016. Excluding the
impact of the change in LIFO, cost of goods sold increased 5% as
compared to the 4% increase in sales revenue volume variance.
Biofuels gross profit in the three months ended
March 31, 2017 decreased $3,360 when compared to the three months
ended March 31, 2016. Cost of goods sold increased quarter over
quarter as a result of the absence of the blenders’ tax credit
which expired December 31, 2016 and was in effect in the prior
year’s quarter. Gross profits were further impacted by the change
in adjustments in the carrying value of our inventory as
determined utilizing the LIFO method of inventory accounting.
The LIFO adjustment decreased gross profit $1,458 in the three
months ended March 31, 2017 and benefited gross profit
$4,038 in the three months ended March 31, 2016. The LIFO
adjustment resulted in a lower of cost or market adjustment of
$955 and $3,544 in the three months ended March 31, 2017
and 2016, respectively.
FutureFuel reported net income of $3.4 million,
or $0.08 per diluted share, in the first quarter of 2017 compared
to net income of $10.6 million, or $0.24 per diluted share in 2016.
Net income for the three months ended March 31, 2017 decreased
67.9% or $7,173 as compared to the same period in
2016. This decrease was from the benefit of tax
credits and incentives in effect in the three months ended
March 31, 2016 which was not in effect in the three months ended
March 31, 2017. Additionally, the adjustments in the carrying
value of our inventory as determined utilizing the LIFO method of
inventory accounting negatively impacted net income in the three
months ended March 31, 2017 and in comparison, benefited the three
months ended March 31, 2016.
Capital Expenditures
Capital expenditures and intangibles were $822 in the first
quarter of 2017, compared with $897 in the same period in 2016.
FutureFuel was reimbursed for a portion of these expenditures by
certain customers as summarized in the following table.
|
Three months ended March 31,: |
|
2017 |
|
2016 |
Cash paid for capital
expenditures and intangibles |
$ |
898 |
|
|
$ |
897 |
|
Cash received as
reimbursement of capital expenditures |
$ |
(56 |
) |
|
$ |
(119 |
) |
Cash paid, net of
reimbursement, for capital expenditures |
$ |
842 |
|
|
$ |
778 |
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents and Marketable
Securities
Cash and cash equivalents and marketable
securities totaled $212 million as of March 31, 2017, compared with
$305 million as of December 31, 2016.
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
involves predominantly the production of biodiesel and sales of
petroleum products on common carrier pipelines. 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, 2016 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) |
|
|
(Unaudited) |
|
|
|
March 31, 2017 |
|
December 31, 2016 |
Assets |
|
|
|
Cash and
cash equivalents |
$ |
94,686 |
|
$ |
199,272 |
Accounts
receivable, inclusive of the blenders' tax credit of $0 and $5,495
and net of allowances for bad debt of $0 and $0, at March 31, 2017
and December 31, 2016, respectively |
|
22,484 |
|
|
24,744 |
Inventory |
|
51,875 |
|
|
52,093 |
Marketable securities |
|
116,835 |
|
|
106,146 |
Other
current assets |
|
19,489 |
|
|
23,027 |
Total
current assets |
|
305,369 |
|
|
405,282 |
Property,
plant and equipment, net |
|
116,047 |
|
|
118,152 |
Other
assets |
|
5,581 |
|
|
5,609 |
Total
noncurrent assets |
|
121,628 |
|
|
123,761 |
Total
Assets |
$ |
426,997 |
|
$ |
529,043 |
Liabilities and
Stockholders’ Equity |
|
|
|
Accounts
payable |
$ |
19,006 |
|
$ |
24,053 |
Dividends
payable |
|
7,875 |
|
|
110,688 |
Other
current liabilities |
|
11,084 |
|
|
9,308 |
Total
current liabilities |
|
37,965 |
|
|
144,049 |
Deferred
revenue – long-term |
|
15,808 |
|
|
16,792 |
Other
noncurrent liabilities |
|
34,663 |
|
|
35,389 |
Total
noncurrent liabilities |
|
50,471 |
|
|
52,181 |
Total liabilities |
|
88,436 |
|
|
196,230 |
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, 43,749,970
and 43,749,970, issued and outstanding as of March 31, 2017 and
December 31, 2016, respectively |
|
4 |
|
|
4 |
Accumulated other comprehensive income |
|
5,415 |
|
|
3,540 |
Additional paid in capital |
|
281,564 |
|
|
281,087 |
Retained
earnings |
|
51,578 |
|
|
48,182 |
Total Stockholders’ Equity |
|
338,561 |
|
|
332,813 |
Total
Liabilities and Stockholders’ Equity |
$ |
426,997 |
|
$ |
529,043 |
|
|
|
|
|
|
|
FutureFuel Corp. |
Condensed Consolidated Statements of
Operations |
and Comprehensive Income |
(Dollars in thousands, except per share
amounts) |
(Unaudited) |
|
|
Three months ended March 31,: |
|
2017 |
|
2016 |
Revenue |
$ |
54,111 |
|
|
$ |
46,635 |
|
Cost of goods sold and
distribution |
|
47,981 |
|
|
|
35,582 |
|
Gross profit |
|
6,130 |
|
|
|
11,053 |
|
Selling, general, and
administrative expenses |
|
1,900 |
|
|
|
1,837 |
|
Research and
development expenses |
|
755 |
|
|
|
687 |
|
|
|
2,655 |
|
|
|
2,524 |
|
Income from
operations |
|
3,475 |
|
|
|
8,529 |
|
Other income, net |
|
1,518 |
|
|
|
168 |
|
Income before income
taxes |
|
4,993 |
|
|
|
8,697 |
|
Provision/(benefit) for
income taxes |
|
1,597 |
|
|
|
(1,872 |
) |
Net income |
$ |
3,396 |
|
|
$ |
10,569 |
|
|
|
|
|
Earnings per common
share |
|
|
|
Basic |
$ |
0.08 |
|
|
$ |
0.24 |
|
Diluted |
$ |
0.08 |
|
|
$ |
0.24 |
|
Weighted average shares
outstanding |
|
|
|
Basic |
|
43,616,636 |
|
|
|
43,475,630 |
|
Diluted |
|
43,622,843 |
|
|
|
43,486,548 |
|
|
|
|
|
Comprehensive
Income |
|
|
|
Net income |
$ |
3,396 |
|
|
$ |
10,569 |
|
Other
comprehensive income from unrealized |
|
|
|
net gain on available-for-sale securities |
|
2,886 |
|
|
|
678 |
|
Income tax effect |
|
(1,011 |
) |
|
|
(238 |
) |
Total unrealized gain, net of tax |
|
1,875 |
|
|
|
440 |
|
Comprehensive income |
$ |
5,271 |
|
|
$ |
11,009 |
|
|
|
|
|
|
|
|
|
|
FutureFuel Corp. |
Consolidated Statements of Cash
Flows |
For the Three Months Ended March 31, 2017 and
2016 |
(Dollars in thousands) |
(Unaudited) |
|
|
Three months ended March 31,: |
|
2017 |
|
2016 |
Cash flows
provided by operating activities |
|
|
|
Net
income |
$ |
3,396 |
|
|
$ |
10,569 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation |
|
2,896 |
|
|
|
2,622 |
|
Amortization of deferred financing costs |
|
36 |
|
|
|
36 |
|
Benefit
for deferred income taxes |
|
(1,761 |
) |
|
|
(3,822 |
) |
Change in
fair value of derivative instruments |
|
1,202 |
|
|
|
3,398 |
|
Other
than temporary impairment of marketable securities |
|
177 |
|
|
|
1,240 |
|
Gain on
the sale of investments |
|
(46 |
) |
|
|
(222 |
) |
Stock
based compensation |
|
477 |
|
|
|
477 |
|
Losses on
disposals of fixed assets |
|
31 |
|
|
|
115 |
|
Noncash
interest expense |
|
6 |
|
|
|
7 |
|
Changes
in operating assets and liabilities: |
|
|
|
Accounts
receivable |
|
4,511 |
|
|
|
(8,153 |
) |
Accounts
receivable – related parties |
|
(2,251 |
) |
|
|
(2,293 |
) |
Inventory |
|
218 |
|
|
|
(4,950 |
) |
Income
tax receivable |
|
3,406 |
|
|
|
1,228 |
|
Prepaid
expenses |
|
151 |
|
|
|
106 |
|
Prepaid
expenses – related party |
|
(11 |
) |
|
|
- |
|
Accrued
interest on marketable securities |
|
13 |
|
|
|
(30 |
) |
Other
assets |
|
(8 |
) |
|
|
(127 |
) |
Accounts
payable |
|
(5,418 |
) |
|
|
(3,217 |
) |
Accounts
payable – related parties |
|
371 |
|
|
|
49 |
|
Accrued
expenses and other current liabilities |
|
1,385 |
|
|
|
1,436 |
|
Accrued
expenses and other current liabilities – related parties |
|
(142 |
) |
|
|
- |
|
Deferred
revenue |
|
(451 |
) |
|
|
2,720 |
|
Other
noncurrent liabilities |
|
94 |
|
|
|
8 |
|
Net cash provided by operating
activities |
|
8,282 |
|
|
|
1,197 |
|
Cash flows from
investing activities |
|
|
|
Collateralization of derivative instruments |
|
(1,223 |
) |
|
|
(1,349 |
) |
Purchase
of marketable securities |
|
(15,818 |
) |
|
|
(11,000 |
) |
Proceeds
from the sale of marketable securities |
|
7,884 |
|
|
|
9,124 |
|
Capital
expenditures |
|
(898 |
) |
|
|
(897 |
) |
Net cash used in investing activities |
|
(10,055 |
) |
|
|
(4,122 |
) |
Cash flows from
financing activities |
|
|
|
Minimum
tax withholding on stock options exercised and awards vested |
|
- |
|
|
|
(53 |
) |
Excess
tax benefits associated with stock options and awards |
|
- |
|
|
|
(136 |
) |
Payment
of dividends |
|
(102,813 |
) |
|
|
(2,623 |
) |
Net cash used in financing activities |
|
(102,813 |
) |
|
|
(2,812 |
) |
Net change in cash and
cash equivalents |
|
(104,586 |
) |
|
|
(5,737 |
) |
Cash and cash
equivalents at beginning of period |
|
199,272 |
|
|
|
154,049 |
|
Cash and cash
equivalents at end of period |
$ |
94,686 |
|
|
$ |
148,312 |
|
|
|
|
|
Cash paid for
interest |
$ |
- |
|
|
$ |
- |
|
Cash paid for income
taxes |
$ |
1 |
|
|
$ |
906 |
|
|
|
|
|
|
|
|
|
|
FutureFuel Corp. |
Reconciliation of Non-GAAP Financial Measure to
Financial Measure |
(Dollars in thousands) |
(Unaudited) |
|
Reconciliation of Adjusted EBITDA to Net
Income |
|
|
Three months ended March 31,: |
|
2017 |
|
2016(1) |
Adjusted EBITDA |
$ |
5,569 |
|
|
$ |
12,702 |
|
Depreciation and
amortization |
|
(2,896 |
) |
|
|
(2,622 |
) |
Non-cash stock-based
compensation |
|
(477 |
) |
|
|
(477 |
) |
Interest and dividend
income |
|
1,723 |
|
|
|
1,345 |
|
Interest expense |
|
(43 |
) |
|
|
(43 |
) |
Losses on disposal of
property and equipment |
|
(31 |
) |
|
|
(115 |
) |
Gains/(losses) on
derivative instruments |
|
1,279 |
|
|
|
(1,039 |
) |
Losses on marketable
securities |
|
(131 |
) |
|
|
(1,018 |
) |
Income tax
(provision)/benefit |
|
(1,597 |
) |
|
|
1,872 |
|
Other |
|
- |
|
|
|
(36 |
) |
Net income |
$ |
3,396 |
|
|
$ |
10,569 |
|
|
Reconciliation of Adjusted EBITDA to Net Cash Provided by
Operating Activities |
|
|
Three months ended March 31,: |
|
2017 |
|
2016(1) |
Adjusted EBITDA |
$ |
5,569 |
|
|
$ |
12,702 |
|
Benefit for deferred
income taxes |
|
(1,761 |
) |
|
|
(3,822 |
) |
Interest and dividend
income |
|
1,723 |
|
|
|
1,345 |
|
Income tax
(provision)/benefit |
|
(1,597 |
) |
|
|
1,872 |
|
Gains/(losses) on
derivative instruments |
|
1,279 |
|
|
|
(1,039 |
) |
Change in fair value of
derivative instruments |
|
1,202 |
|
|
|
3,398 |
|
Changes in operating
assets and liabilities, net |
|
1,868 |
|
|
|
(13,223 |
) |
Other |
|
(1 |
) |
|
|
(36 |
) |
Net cash provided by
operating activities |
$ |
8,282 |
|
|
$ |
1,197 |
|
(1) Prior year adjusted EBITDA reconciliations have been
modified to be consistent with current year
presentations.
|
|
FutureFuel Corp. |
Condensed Consolidated Segment
Income |
(Dollars in thousands) |
(Unaudited) |
|
|
Three months ended March 31,: |
|
2017 |
|
2016 |
Revenue |
|
|
|
Custom
chemicals |
$ |
21,952 |
|
|
$ |
20,292 |
|
Performance chemicals |
|
4,405 |
|
|
|
4,776 |
|
Chemicals
revenue |
$ |
26,357 |
|
|
$ |
25,068 |
|
Biofuels
revenue |
|
27,754 |
|
|
|
21,567 |
|
Total Revenue |
$ |
54,111 |
|
|
$ |
46,635 |
|
|
|
|
|
Segment gross
profit |
|
|
|
Chemicals |
$ |
7,009 |
|
|
$ |
8,572 |
|
Biofuels |
|
(879 |
) |
|
|
2,481 |
|
Total gross profit |
|
6,130 |
|
|
|
11,053 |
|
Corporate expenses |
|
(2,655 |
) |
|
|
(2,524 |
) |
Income before interest
and taxes |
|
3,475 |
|
|
|
8,529 |
|
Interest and
dividend income |
|
1,723 |
|
|
|
1,345 |
|
Interest and other
expense |
|
(205 |
) |
|
|
(1,177 |
) |
(Provision)/benefit for
income taxes |
|
(1,597 |
) |
|
|
1,872 |
|
Net income |
$ |
3,396 |
|
|
$ |
10,569 |
|
|
|
|
|
|
|
|
|
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.
COMPANY CONTACT
FutureFuel Corp.
Tom McKinlay
(314)854-8352
www.futurefuelcorporation.com
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