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

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:

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. 

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.

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.