FutureFuel releases 3Q financials, adjusted EBITDA at $24M

By FutureFuel Corp. | November 13, 2012

FutureFuel Corp., a manufacturer of custom and performance chemicals and biofuels, announced financial results from the three and nine months ended Sept. 30.

Third Quarter 2012 Financial Highlights (all comparisons are with the third quarter of 2011):

-Revenues were $88.3 million, down 2.2 percent from $90.3 million

-Adjusted EBITDA was $24.0 million, up 19.7 percent from $20.0 million

-Net income decreased to $12.5 million, or $0.30 per diluted share, from $12.7 million, or $0.31 per diluted share.

First Nine Months of 2012 Financial Highlights (all comparisons are with the first nine months of 2011 unless otherwise noted):

-Revenues were $277.2 million, up 25.9 percent from $220.3 million

-Adjusted EBITDA was $46.5 million, a 10.5 percent increase from $42.1 million

-Net income increased to $28.1 million, or $0.68 per diluted share, from $23.9 million, or $0.59 per diluted share, increases of 17.8 percent and 15.3 percent, respectively

“Overall, we were pleased with our financial results for the third quarter of 2012,” said Lee Mikles, FutureFuel president and CEO. “While they may not have demonstrated a high level of growth relative to the third quarter of 2011, the results were reassuring given the volatility seen in the biodiesel market in the third quarter of 2012. The gross profit of our chemicals segment increased in the third quarter of 2012 as compared to the third quarter of 2011. Unfortunately, the gross profit of our biofuels segment continues to be affected by difficult market conditions, including extreme volatility in the RINs market, and the continued negative impact of the expiration of the $1 per gallon federal blenders tax credit at Dec. 31, 2011.”

“Net income for the third quarter of 2012 is very similar to that earned in the third quarter of 2011,” Mikles said. “Net income for the first nine months of 2012, however, is up approximately 18 percent over net income for the first nine months of 2011.”

2012 Regular Cash Dividends

FutureFuel declared a normal quarterly dividend of $0.10 per share for 2012, payable in March, June, September, and December.

Financial Overview and Key Operating Metrics

Financial and operating metrics, which include nonGAAP financial measures, include:

FutureFuel Corp.

Certain Financial and Operating Metrics

(Dollars in thousands, except per share amounts)

(Unaudited)

 

 

Three Months 
Ended 
September 30, 
2012

Three Months 
Ended 
September 30, 
2011



Dollar 
Change




% Change

Revenues

$ 88,276

$ 90,307

$ (2,031)

(2.2%)

Income from operations

$ 19,181

$ 19,358

$ (177)

(0.9%)

Net income

$ 12,549

$   12,733

$ (184)

(1.4%)

Earnings per common share - basic

$ 0.30

$ 0.31

$ (0.01)

(3.2%)

Earnings per common share — diluted

$ 0.30

$ 0.31

$ (0.01)

(3.2%)

Capital expenditures (net of customer reimbursements and grants)

$ 2,656

$ 3,173

$ (517)

(16.3%)

Adjusted EBITDA

$ 23,991

$ 20,046

$ 3,945

19.7%

Cash and cash equivalents and marketable securities

$  196,400

$ 158,826

$ 37,574

23.7%

 

 

 

 

 

 

Nine Months 
Ended 
September 30, 
2012

Nine Months 
Ended 
September 30, 
2011



Dollar 
Change




% Change

Revenues

$ 277,240

$  220,276

$ 56,964

25.9%

Income from operations

$ 41,336

$ 35,234

$  6,102

17.3%

Net income

$ 28,135

$ 23,888

$ 4,247

17.8%

Earnings per common share - basic

$ 0.68

$  0.59

$ 0.09

15.3%

Earnings per common share — diluted

$ 0.68

$  0.59

$ 0.09

15.3%

Capital expenditures (net of customer reimbursements and grants)

$ 6,435

$ 8,042

$ (1,607)

(20.0%)

Adjusted EBITDA

$ 46,515

$ 42,101

$ 4,414

10.5%

Third Quarter Financial and Business Summary

Revenues for the three months ended Sept. 30, 2012, were $88,276,000 as compared to revenues for the three months ended Sept. 30, 2011, of $90,307,000, a decrease of 2 percent. Revenues from biofuels were essentially unchanged and accounted for 54 percent of total revenues in the third quarter of 2012 as compared to 53 percent in the third quarter of 2011. Revenues from chemicals decreased 4 percent and accounted for 46 percent of total revenues in the third quarter of 2012 as compared to 47 percent in the third quarter of 2011. Revenue from the bleach activator and the proprietary herbicide and intermediates are together the most significant components of our chemicals business revenue base, accounting for 26 percent of total revenues for the three months ended Sept. 30, 2012, as compared to 31 percent of total revenues for the three months ended Sept. 30, 2011. These products comprised a smaller percentage of our total revenues in the third quarter of 2012 due to growth in the biofuels segment and year-to-year decreases in these chemical products. Revenues from biofuels decreased from $48,123,000 in the three months ended Sept. 30, 2011, to $47,949,000 in the three months ended Sept. 30, 2012. The reinstatement of the $1 per gallon federal blenders credit in December 2010 along with the government mandated renewable fuel standard for biodiesel combined to improve the economics of biodiesel in 2011. However, the blenders credit expired on Dec. 31, 2011, and has not been reinstated. While we have not experienced a material decrease in demand for our biodiesel as a result of the loss of the blenders credit, the loss of the credit has adversely affected our biofuels segment gross profit by approximately $1 per gallon of biodiesel sold by us.    

Income from operations decreased to $19,181,000 in the third quarter of 2012 from $19,358,000 for the third quarter of 2011. FutureFuel does not report income from operations by segment, but does report segment gross profit. The chemicals segment gross profit increased 18 percent to $15,357,000 in the third quarter of 2012 from $13,064,000 in the third quarter of 2011. Biofuels segment gross profit decreased to $6,606,000 in the third quarter of 2012 from $8,931,000 in the third quarter of 2011. This decrease was partially a result of the receipt of approximately $1,900,000 under the USDA Section 9005—Advanced Biofuel Producers program—in the third quarter of 2011. This award totaled approximately $753,000 in the third quarter of 2012. The receipt of this award has been recorded as a reduction in cost of goods sold and distribution in both the third quarter of 2012 and 2011. Additionally, the profitability of the biofuels segment was affected by a general reduction in biofuel profit margins as a result of fluctuations in the biodiesel market and the expiration of the $1 per gallon federal blenders credit on Dec. 31, 2011.   

Chemicals segment gross profit increased primarily as a result of certain reductions in our operating costs due to an ongoing effort to minimize such expenditures, a reduction in cost of goods sold resulting from adjustments in our inventory carrying value as determined utilizing the LIFO method of inventory accounting and changes in capitalized inventory costs resulting from the change in product mix in inventory at Sept. 30, 2012.

FutureFuel reported net income of $12,549,000, or $0.30 per diluted share, for the third quarter of 2012, compared with net income of $12,733,000, or $0.31 per diluted share, for the third quarter of 2011. Adjusted EBITDA for the third quarter of 2012 was $23,991,000, up from $20,046,000 in the third quarter of 2011.

Nine Month Financial Summary

Revenues for the nine months ended Sept. 30, 2012, were $277,240,000 as compared to revenues for the nine months ended September 30, 2011 of $220,276,000, an increase of 26 percent. Revenues from biofuels increased 63 percent and accounted for 57 percent of total revenues in the first nine months of 2012 as compared to 44 percent in the first nine months of 2011. Revenues from chemicals decreased 3 percent and accounted for 43 percent of total revenues in the first nine months of 2012 as compared to 56 percent in the first nine months of 2011. Revenue from the bleach activator and the proprietary herbicide and intermediates are together the most significant components of our chemicals business revenue base, accounting for 23 percent of total revenues for the nine months ended Sept. 30, 2012, as compared to 36 percent of total revenues for the nine months ended Sept. 30, 2011. These products comprised a smaller percentage of our total revenues in the nine months ended 2012 due to growth in the biofuels segment and year-to-year decreases of these chemical products. Revenues from biofuels increased from $96,545,000 in the nine months ended Sept. 30, 2011 to $157,612,000 in the nine months ended Sept. 30, 2012. The reinstatement of the $1 per gallon federal blenders credit in December 2010 along with the government mandated renewable fuel standard for biodiesel combined to improve the economics of biodiesel in 2011. However, the blenders credit expired on Dec. 31, 2011 and has not been reinstated. While we have not experienced a material decrease in demand for our biodiesel as a result of the loss of the blenders credit, the loss of the credit has adversely affected our biofuels segment gross profit by approximately $1 per gallon of biodiesel sold by us.     

Income from operations increased to $41,336,000 in the first nine months of 2012 from $35,234,000 in the first nine months of 2011. FutureFuel does not report income from operations by segment, but does report segment gross profit. The chemicals segment gross profit increased 37 percent to $38,277,000 in the first nine months of 2012 from $27,907,000 in the first nine months of 2011. Biofuels segment gross profit decreased to $10,887,000 in the nine months ended Sept. 30, 2012, from $14,516,000in the nine months ended Sept. 30, 2011. This decrease was largely a result of a combination of the following: (i) the expiration of the $1 per gallon federal blenders credit on Dec. 31, 2011; and (ii) in the first nine months of 2011 we received approximately $1,900,000 from the USDA from its Section 9005—Advanced Biofuel Producers program. In the first nine months of 2011, such receipt was recorded as a reduction to the cost of goods sold and distribution of the biofuels segment. In the first nine months of 2012, $753,000 was received under this program.

Chemical segment gross profit increased primarily as a result of a combination of the following: (i) a reduction in our cost of goods sold resulting from adjustments in our inventory carrying value as determined utilizing the LIFO method of inventory accounting; (ii) changes in capitalized inventory costs resulting from the change in product mix in inventory at Sept. 30, 2012; and (iii) we experienced certain reductions in our operating costs due to an ongoing effort to minimize such expenditures.     

FutureFuel reported net income of $28,135,000, or $0.68 per diluted share, for the first nine months of 2012, compared with net income of $23,888,000, or $0.59 per diluted share, for the first nine months of 2011. Adjusted EBITDA for the first nine months of 2012 was $46,515,000, up from $42,101,000 in the first nine months of 2011.

Capital Expenditures

Capital expenditures were $6.7 million for the first nine months of 2012, compared with $18.8 million for the first nine months of 2011. This decrease was attributable to the completion of certain capital projects undertaken on behalf of certain of our customers. FutureFuel is reimbursed for a portion of these expenditures by certain customers and grants as summarized in the following table. 

(Dollars in thousands)

 

 

Nine Months 
Ended 
September 30, 
2012

Nine Months 
Ended 
September 30, 
2011

Capital expenditures

$ 6,724

$ 18,849

Cash received from customers and grants as reimbursement of capital expenditures

(289)

(10,807)

Net cash paid for capital expenditures

$ 6,435

$ 8,042

Cash and Cash Equivalents and Marketable Securities

Cash and cash equivalents and marketable securities totaled $196.4 million as of Sept. 30, 2012, compared with$158.8 million as of Sept. 30, 2011. These balances increased primarily due to cash generated by FutureFuel's operations.

About FutureFuel

FutureFuel is a leading manufacturer of diversified chemical products and biobased products comprised of biofuels and biobased specialty chemical products. In its chemicals business, it manufactures specialty chemicals for specific customers (custom manufacturing) as well as multicustomer specialty chemicals (performance chemicals). Its custom manufacturing product portfolio includes a bleach activator for a major detergent manufacturer, a proprietary herbicide and intermediates for a major life sciences company, and chlorinated polyolefin adhesion promoters and antioxidant precursors for a major chemical company. The performance chemicals product portfolio includes polymer (nylon) modifiers and several small-volume specialty chemicals for diverse applications. In its biofuels segment, the company predominantly produces biodiesel. Visit www.futurefuelcorporation.comfor more information on FutureFuel.

 

FutureFuel Corp.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

 

 

September 30,
2012

December 31,
2011

Assets

 

 

Cash and cash equivalents

$  114,593

$ 89,745

Accounts receivable, net of allowances of $0 and $10 at September 30, 2012 and December 31, 2011, respectively

20,833

35,677

Inventory

49,078

57,439

Marketable securities

81,807

56,294

Other current assets

2,010

3,370

Total current assets

268,321

242,525

Property, plant and equipment, net

139,143

140,517

Other assets

2,249

2,202

Total noncurrent assets

141,392

142,719

Total Assets

$ 409,713

$ 385,244

 

 

 

Liabilities and Stockholders' Equity

 

 

Accounts payable

$ 17,193

$ 21,688

Other current liabilities

24,360

14,111

Total current liabilities

41,553

35,799

Deferred revenue — long-term

28,206

29,256

Other noncurrent liabilities

32,199

31,951

Total noncurrent liabilities

60,405

61,207

Total liabilities

101,958

97,006

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, 41,326,057 and 41,308,446 issued and outstanding as of September 30, 2012 and December 31, 2011, respectively

4

4

Accumulated other comprehensive income

5,179

1,803

Additional paid in capital

253,907

253,505

Retained earnings

48,665

32,926

Total stockholders' equity

307,755

288,238

Total Liabilities and Stockholders' Equity

$ 409,713

$ 385,244

 

FutureFuel Corp.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended 
September 30,

 

2012

2011

Revenues

$ 88,276

$ 90,307

Cost of goods sold and distribution

66,313

68,312

Gross profit

21,963

21,995

Selling, general and administrative expenses

1,828

1,641

Research and development expenses

954

996

 

2,782

2,637

Income from operations

19,181

19,358

Other income

1,289

643

Income before income taxes

20,470

20,001

Provision for income taxes

7,921

7,268

Net income

$ 12,549

$ 12,733

 

 

 

Earnings per common share

 

 

Basic

$ 0.30

$ 0.31

Diluted

$ 0.30

$ 0.31

Weighted average shares outstanding

 

 

Basic

41,320,427

41,297,834

Diluted

41,471,373

40,478,005

 

 

 

Comprehensive Income

 

 

Net income

$ 12,549

$  12,733

Other comprehensive income/(loss) from unrealized gains and losses on available-for-sale securities, net of tax of $2,134in 2012 and of $(2,159) in 2011

3,423

(3,449)

Comprehensive income

$ 15,972

$ 9,284

 

 

 

 

 

Nine Months Ended 
September 30,

 

2012

2011

Revenues

$ 277,240

$ 220,276

Cost of goods sold and distribution

228,076

177,853

Gross profit

$ 49,164

42,423

Selling, general and administrative expenses

5,202

4,579

Research and development expenses

2,626

2,610

 

7,828

7,189

Income from operations

41,336

35,234

Other income

3,803

2,091

Income before income taxes

45,139

37,325

Provision for income taxes

17,004

13,437

Net income

$ 28,135

$ 23,888

 

 

 

Earnings per common share

 

 

Basic

$ 0.68

$ 0.59

Diluted

$ 0.68

$  0.59

Weighted average shares outstanding

 

 

Basic

41,318,123

40,509,810

Diluted

41,472,775

40,687,188

 

 

 

Comprehensive Income

 

 

Net income

$ 28,135

$ 23,888

Other comprehensive income/(loss) from unrealized gains/(losses) on available-for-sale securities, net of tax of $2,105 and$(1,887) in 2012 and 2011, respectively

3,376

(3,016)

Comprehensive income

$ 31,511

$ 20,872

FutureFuel Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

 

Nine Months Ended September 30,

 

2012

2011

Cash flows provided by operating activities

 

 

Net income

$ 28,135

$ 23,888

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation

7,789

6,351

Provision for deferred income taxes

42

3,453

Change in fair value of derivative instruments and marketable securities

(855)

869

(Gain) / loss on the sale of investments

(281)

414

Losses on disposals of fixed assets

62

93

Stock based compensation

281

502

Noncash interest expense

18

16

Changes in operating assets and liabilities:

 

 

Accounts receivable

15,668

9,399

Accounts receivable — related parties

(824)

(81)

Inventory

8,361

(6,344)

Income taxes receivable

--

519

Prepaid expenses

1,050

827

Prepaid expenses — related parties

(32)

--

Accrued interest on marketable securities

--

(123)

Other assets

(62)

544

Accounts payable

(2,556)

877

Accounts payable — related parties

(1,939)

(222)

Income taxes payable

3,670

4,570

Accrued expenses and other current liabilities

2,214

2,781

Accrued expenses and other current liabilities — related parties

(29)

35

Deferred revenue

1,427

11,743

Net cash provided by operating activities

62,139

60,111

Cash flows from investing activities

 

 

Restricted cash

--

21,086

Collateralization of derivative instruments

1,212

(2,162)

Purchase of marketable securities

(37,389)

(83,350)

Proceeds from the sale of marketable securities

17,638

30,979

Proceeds from the sale of fixed assets

247

12

Capital expenditures

(6,724)

(18,849)

Net cash used in investing activities

(25,016)

(52,284)

Cash flows from financing activities

 

 

Proceeds from the issuance of stock

100

15,798

Excess tax benefits associated with stock options

21

--

Payment of dividend

(12,396)

(12,126)

Net cash provided by financing activities

(12,275)

3,672

Net change in cash and cash equivalents

24,848

11,499

Cash and cash equivalents at beginning of period

89,745

91,057

Cash and cash equivalents at end of period

$ 114,593

$ 102,556

 

 

 

Cash paid for interest

$ 3

$ --

Cash paid for income taxes

$ 13,539

$ 4,896

Non-cash capital expenditures

$ --

$ 1,390

 

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 
September 30,

 

2012

2011

Adjusted EBITDA

$ 23,991

$ 20,046

Depreciation and amortization

(2,611)

(2,467)

Non-cash share-based compensation

(22)

--

Interest and dividend income

1,144

955

Interest expense

(6)

(6)

Loss/(gain) on disposal of property and equipment

45

(66)

(Losses)/gains on derivative instruments

(2,154)

1,779

Other income/(expense), net

83

(240)

Income tax expense

(7,921)

(7,268)

Net income

$ 12,549

$ 12,733

 

 

 

 

 

Nine Months Ended 
September 30,

 

2012

2011

Adjusted EBITDA

$ 46,515

$ 42,101

Depreciation and amortization

(7,789)

(6,351)

Non-cash share-based compensation

(281)

(502)

Interest income and dividend income

3,431

2,542

Interest expense

(21)

(176)

Loss on disposal of property and equipment

(62)

(93)

Gains/(losses) on derivative instruments

3,065

(14)

Other income, net

281

(182)

Income tax expense

(17,004)

(13,437)

 Net income

$ 28,135

$ 23,888

 

 

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

 

 

Nine Months 
Ended 
September 30, 
2012

Nine Months 
Ended 
September 30, 
2011

Adjusted EBITDA

$ 46,515

$ 42,101

Provision for deferred income taxes

42

3,453

Interest and dividend income

3,431

2,542

Income tax expense

(17,004)

(13,437)

Gains (losses) on derivative instruments

3,065

(14)

Change in fair value of derivative instruments and marketable securities

(855)

869

Changes in operating assets and liabilities, net

26,948

24,525

Other

(3)

72

Net cash provided by operating activities

$ 62,139

$  60,111

 

 

 

FutureFuel Corp.

Condensed Consolidated Segment Income

(Dollars in thousands)

(Unaudited)

 

 

Three Months Ended 
September 30,

 

2012

2011

Revenues

 

 

Chemicals

$ 40,327

$ 42,184

Biofuels

47,949

48,123

Revenues

$  88,276

$ 90,307

 

 

 

Segment gross profit

 

 

Chemicals

$ 15,357

$ 13,064

Biofuels

6,606

8,931

Segment gross profit

21,963

21,995

Corporate expenses

(2,782)

(2,637)

Income before interest and taxes

19,181

19,358

Interest and other income

1,295

955

Interest and other expense

(6)

(312)

Provision for income taxes

(7,921)

(7,268)

Net income

$ 12,549

$ 12,733

 

 

 

 

 

 

Nine Months Ended 
September 30,

 

2012

2011

Revenues

 

 

Chemicals

$  119,628

$ 123,731

Biofuels

157,612

96,545

Revenues

$ 277,240

$ 220,276

 

 

 

Segment gross profit

 

 

Chemicals

$ 38,277

$ 27,907

Biofuels

10,887

14,516

Segment gross profit

49,164

42,423

Corporate expenses

(7,828)

(7,189)

Income before interest and taxes

41,336

35,234

Interest and other income

3,824

2,542

Interest and other expense

(21)

(451)

Provision for income taxes

(17,004)

(13,437)

Net income

$ 28,135

$ 23,888

Depreciation is allocated to segment costs of goods sold based on plant usage. The total assets and capital expenditures ofFutureFuel 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.

 
 
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