FutureFuel Releases Second Quarter and Six-Month 2020 Results

Rhea-AI Summary

FutureFuel Corp. (NYSE:FF) reported a net income of $15.2 million, or $0.35 per diluted share for Q2 2020, a significant increase from $3.7 million in Q2 2019. However, revenues declined by 33.1% to $47.4 million, primarily due to lower selling prices and reduced sales volume in the biofuel and chemical segments. Adjusted EBITDA fell to $2.7 million, down 24.5%. For the first half of 2020, net income rose to $34.2 million from $9.2 million year-over-year, while total revenues decreased 15.8% to $100.5 million.

Positive

• Net income for Q2 increased significantly to $15.2 million, up 311.1% year-over-year.
• Net income for the first half of 2020 rose to $34.2 million, up 272.3% from 2019.
• Adjusted EBITDA for the first half increased 43.7% to $12.8 million.
• Cash and cash equivalents totaled $249.9 million as of June 30, 2020.

Negative

• Revenues decreased by 33.1% in Q2 2020 compared to Q2 2019.
• Adjusted EBITDA fell by 24.5% in Q2.
• Lower selling prices in the biofuel segment contributed to significant revenue drops.
• Continued impact from COVID-19 reduced demand in both chemical and biofuel segments.

FutureFuel Second Quarter Net Income of $15.2 Million

Reports Net Income of $15.2 Million or $0.35 per Diluted Share, and Adjusted EBITDA of $2.7 Million

CLAYTON, Mo., Aug. 07, 2020 (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, 2020.

Second quarter 2020 Financial Highlights (all comparisons are with the second quarter of 2019)

	●	Revenues were $47.4 million, down 33.1% from $70.9 million
	●	Adjusted EBITDA was $2.7 million, down 24.5% from $3.5 million
	●	Net income increased to $15.2 million, or $0.35 per diluted share, from $3.7 million, or $0.08 per diluted share.

Six month 2020 Financial Highlights (all comparisons are with the first half of 2019)

	●	Revenues were $100.5 million, down 15.8% from $119.4 million
	●	Adjusted EBITDA was $12.8 million, up 43.7% from $8.9 million
	●	Net income increased to $34.2 million, or $0.78 per diluted share, from $9.2 million, or $0.21 per diluted share.

“Our manufacturing operation has continued to perform well against the backdrop of the global COVID-19 pandemic in both our Chemical and Biofuels segments. The certainty of the Blenders’ Tax Credit has allowed us to operate our Biodiesel operation at full capacity, albeit in a lower margin environment given low energy prices. Results from the Chemicals segment of our business are also reflective of the challenges facing domestic markets, specifically in the agrochemical and energy sectors related to foreign competition and overall lower demand,” said Tom McKinlay, Chief Operating Officer for FutureFuel Corp.

2020 Cash Dividends

FutureFuel paid a regular quarterly cash dividend in the amount of $0.06 per share on our common stock in the second quarter of 2020. In addition to the normal quarterly cash dividend of $0.06 per share paid in the first quarter of 2020, we also declared a special cash dividend of $3.00 per share paid in April. The remaining quarterly dividends of $0.06 per share are expected to 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
(Unaudited)

		Three Months Ended June 30,
										Dollar				%
		2020				2019				Change				Change
Revenue		$	47,422			$	70,864			$	(23,442	)			(33.1	%)
(Loss) income from operations		$	(1,139	)		$	1,185			$	(2,324	)			(196.2	%)
Net income		$	15,159			$	3,687			$	11,472				311.1	%
Earnings per common share:
Basic		$	0.35			$	0.08			$	0.27				337.5	%
Diluted		$	0.35			$	0.08			$	0.27				337.5	%
Capital expenditures (net of customer reimbursements)		$	563			$	451			$	112				24.8	%
Adjusted EBITDA		$	2,652			$	3,514			$	(862	)			(24.5	%)
		Six Months Ended June 30,
										Dollar				%
		2020				2019				Change				Change
Revenue		$	100,504			$	119,365			$	(18,861	)			(15.8	%)
Income from operations		$	12,840			$	2,396			$	10,444				435.9	%
Net income		$	34,202			$	9,186			$	25,016				272.3	%
Earnings per common share:
Basic		$	0.78			$	0.21			$	0.57				271.4	%
Diluted		$	0.78			$	0.21			$	0.57				271.4	%
Capital expenditures (net of customer reimbursements)		$	1,133			$	874			$	259				29.6	%
Adjusted EBITDA		$	12,829			$	8,929			$	3,900				43.7	%

Financial and Business Summary

Consolidated revenue in the three and six months ended June 30, 2020, decreased $23,442 and $18,861, compared to the three and six months ended June 30, 2019, respectively. The decrease in the three months ended June 30, 2020 primarily resulted from lower selling prices in the biofuel segment of $19,473 which was negatively impacted by supply demand imbalance and lower sales volume in the chemical segment of $6,032 from an agrochemical product we no longer make.  The decrease in the six months ended June 30, 2020 primarily resulted from lower prices in the biofuel segment of $27,116 and lower sales volume in the chemical segment of $5,153.  Partially offsetting this decrease in the six-month comparison period was higher sales volumes in the biofuels segment of $10,935 given the favorable market conditions with the reinstatement of the blenders' tax credit ("BTC").

Gross profit in the three months ended June 30, 2020 decreased $2,359 compared to the three months ended June 30, 2019. This decrease was driven by lower prices in the biofuels segment and lower volumes in both the chemicals and biofuels segments resulting from reduced demand from the weakened global fuel market and the impact of the COVID-19 pandemic as well as an agrochemical product we no longer make.  Gross profit was also reduced by the change in the unrealized and realized activity in derivative instruments with a loss of $935 in the three months ended June 30, 2020 and a gain of $443 in the three months ended June 30, 2019.

Gross profit in the six months ended June 30, 2020 increased $10,778 compared to the six months ended June 30, 2019.  This increase primarily resulted from: i) the BTC being in effect for the current period versus not being in effect in the prior six-month period; and ii) the change in the unrealized and realized activity in derivative instruments with a gain of $5,922 in the six months ended June 30, 2020 and a loss of $1,033 in the six months ended June 30, 2019.  Also benefiting gross profit in both the three and six months ended June 30, 2020 and 2019 was the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting.  In the three months ended June 30, 2020 and 2019, this adjustment increased gross profit $1,575 and $287, respectively.  In the six months ended June 30, 2020 and 2019, this adjustment increased gross profit $2,893 and $1,924, respectively. 

Net Income

Net income for the three and six months ended June 30, 2020 increased $11,472 and $25,016, respectively, as compared to the same periods in 2019. This increase resulted primarily from biodiesel tax credits and incentives that were in effect in the three and six months ended June 30, 2020 that were not in effect for 2019 (see Note 2 to our consolidated financial statements) and tax benefits in effect in the first half of 2020 not in effect for the same period in 2019. In the three and six months ended June 30, 2020, income was also benefited by other income from the resolution of a prior year contractual matter. Partially offsetting this increase in the six-month period was the unrealized loss on equity securities.

Capital Expenditures

Capital expenditures were $2,759 in the first half of 2020, compared with $4,659 in the same period in 2019. FutureFuel was reimbursed for a portion of these expenditures by certain customers as summarized in the following table.

		Six Months Ended June 30,
		2020				2019
Cash paid for capital expenditures		$	2,759			$	4,659
Cash received from customers as reimbursement of capital expenditures		$	(1,626	)		$	(3,785	)
Cash paid for capital expenditures, net of reimbursements		$	1,133			$	874

Cash and Cash Equivalents and Marketable Securities

Cash and cash equivalents and marketable securities totaled $249,918 as of June 30, 2020, compared with $316,951 as of December 31, 2019.

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 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, including, but not limited to the COVID-19 pandemic and the response thereto, 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, 2019 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)
		June 30, 2020				December 31, 2019
Assets
Cash and cash equivalents		$	187,823			$	243,331
Accounts receivable, inclusive of the blenders' tax credit of $16,307 and $97,295 at June 30, 2020 and December 31, 2019, respectively, and net of allowances for bad debt of $53 and $0 at June 30, 2020 and December 31, 2019, respectively			29,535				114,866
Inventory			42,183				37,573
Marketable securities			62,095				73,620
Other current assets			32,832				11,499
Total current assets			354,468				480,889
Property, plant and equipment, net			95,348				98,597
Other assets			7,030				7,019
Total noncurrent assets			102,378				105,616
Total Assets		$	456,846			$	586,505
Liabilities and Stockholders’ Equity
Accounts payable, inclusive of the blenders' tax credit rebates due customers of $6,802 and $39,423		$	32,978			$	62,554
Dividends payable			5,249				10,498
Other current liabilities			10,409				9,711
Total current liabilities			48,636				82,763
Deferred revenue – long-term			22,442				21,291
Other noncurrent liabilities			15,824				15,353
Total noncurrent liabilities			38,266				36,644
Total liabilities			86,902				119,407
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 at June 30, 2020 and December 31, 2019			4				4
Accumulated other comprehensive income			133				296
Additional paid in capital			282,215				282,166
Retained earnings			87,592				184,632
Total Stockholders’ Equity			369,944				467,098
Total Liabilities and Stockholders’ Equity		$	456,846			$	586,505

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

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Revenue		$	47,422			$	70,864			$	100,504			$	119,365
Cost of goods sold and distribution			46,511				67,594				83,194				112,833
Gross profit			911				3,270				17,310				6,532
Selling, general, and administrative expenses			1,282				1,297				2,867				2,642
Research and development expenses			768				788				1,603				1,494
			2,050				2,085				4,470				4,136
(Loss) income from operations			(1,139	)			1,185				12,840				2,396
Other income and expense, net			11,409				3,419				3,261				8,665
Income before income taxes			10,270				4,604				16,101				11,061
Income tax (benefit) provision			(4,889	)			917				(18,101	)			1,875
Net income		$	15,159			$	3,687			$	34,202			$	9,186
Earnings per common share
Basic		$	0.35			$	0.08			$	0.78			$	0.21
Diluted		$	0.35			$	0.08			$	0.78			$	0.21
Weighted average shares outstanding
Basic			43,743,243				43,743,243				43,743,243				43,743,243
Diluted			43,743,740				43,743,243				43,743,491				43,746,109
Comprehensive Income
Net income		$	15,159			$	3,687			$	34,202			$	9,186
Other comprehensive (loss) income from unrealized net
(losses) gains on available-for-sale debt securities			190				22				(207	)			278
Income tax effect			(40	)			(5	)			44				(59	)
Total other comprehensive (loss) income, net of tax			150				17				(163	)			219
Comprehensive income		$	15,309			$	3,704			$	34,039			$	9,405

FutureFuel Corp.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2020 and 2019
(Dollars in thousands)
(Unaudited)

		Six Months Ended June 30,
		2020				2019
Cash flows from operating activities
Net income		$	34,202			$	9,186
Adjustments to reconcile net income to net cash from operating activities:
Depreciation			5,862				5,602
Amortization of deferred financing costs			60				72
Benefit for deferred income taxes			699				(445	)
Change in fair value of equity securities			7,405				(4,891	)
Change in fair value of derivative instruments			198				(297	)
Loss on the sale of investments			1,080				1,138
Stock based compensation			49				-
Loss on disposal of property and equipment			2				11
Noncash interest expense			27				14
Changes in operating assets and liabilities:
Accounts receivable			81,029				(5,347	)
Accounts receivable – related parties			4,290				1,814
Inventory			(4,610	)			3,180
Income tax receivable			(19,380	)			1,336
Prepaid expenses			782				712
Prepaid expenses – related parties			-				12
Other assets			350				539
Accounts payable			(29,702	)			958
Accounts payable – related parties			220				(1,248	)
Accrued expenses and other current liabilities			2,572				688
Accrued expenses and other current liabilities – related parties			(64	)			-
Deferred revenue			(659	)			591
Other noncurrent liabilities			(211	)			(98	)
Net cash provided by operating activities			84,201				13,527
Cash flows from investing activities
Collateralization of derivative instruments			(2,877	)			908
Purchase of marketable securities			(2,359	)			(14,323	)
Proceeds from the sale of marketable securities			5,192				17,682
Proceeds from the sale of property and equipment			50				13
Capital expenditures			(2,759	)			(4,659	)
Net cash used in investing activities			(2,753	)			(379	)
Cash flows from financing activities
Loan proceeds			8,180				-
Payment on loan			(8,180	)			-
Deferred financing costs			(477	)			-
Payment of dividends			(136,479	)			(5,249	)
Net cash used in financing activities			(136,956	)			(5,249	)
Net change in cash and cash equivalents			(55,508	)			7,899
Cash and cash equivalents at beginning of period			243,331				214,972
Cash and cash equivalents at end of period		$	187,823			$	222,871
Cash paid for interest		$	1			$	-
Cash paid for income taxes		$	639			$	898
Noncash investing and financing activities:
Noncash capital expenditures		$	94			$	108
Noncash operating leases		$	-			$	432

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

Reconciliation of Net Income to Adjusted EBITDA

		Three Months Ended June 30,								Six Months Ended June 30,
		2020					2019*				2020				2019*
Net income		$	15,159			$	3,687			$	34,202			$	9,186
Depreciation			2,858				2,877				5,862				5,602
Non-cash stock-based compensation			-				-				49				-
Interest and dividend income			(1,519	)			(2,750	)			(3,486	)			(5,112	)
Non-cash interest expense and amortization of deferred financing costs			31				44				87				87
Losses on disposal of property and equipment			-				8				2				11
(Gain) loss on derivative instruments			935				(443	)			(5,922	)			1,033
Loss (gain) on marketable securities			(1,573	)			(826	)			8,486				(3,753	)
Other income			(8,350	)			-				(8,350	)			-
Income tax (benefit) provision			(4,889	)			917				(18,101	)			1,875
Adjusted EBITDA		$	2,652			$	3,514			$	12,829			$	8,929

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

		Six Months Ended June 30,
		2020				2019*
Net cash provided by operating activities		$	84,201			$	13,527
Benefit for deferred income taxes			(699	)			445
Interest and dividend income			(3,486	)			(5,112	)
Income tax (benefit) provision			(18,101	)			1,875
(Gain) loss on derivative instruments			(5,922	)			1,033
Change in fair value of derivative instruments			(198	)			297
Change in operating assets and liabilities, net			(34,617	)			(3,137	)
Other income			(8,350	)			-
Other			1				1
Adjusted EBITDA		$	12,829			$	8,929

*Prior year amounts have been restated for comparison

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

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Revenue
Custom chemicals		$	18,041			$	21,965			$	41,801			$	45,665
Performance chemicals			4,797				3,894				8,730				7,546
Chemicals revenue		$	22,838			$	25,859			$	50,531			$	53,211
Biofuels revenue			24,584				45,005				49,973				66,154
Total Revenue		$	47,422			$	70,864			$	100,504			$	119,365
Segment gross profit (loss)
Chemicals		$	7,577			$	7,181			$	15,591			$	14,490
Biofuels			(6,666	)			(3,911	)			1,719				(7,958	)
Total gross profit			911				3,270				17,310				6,532

Depreciation is allocated to segment cost 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

FAQ

What were FutureFuel's Q2 2020 net income figures?

FutureFuel reported a net income of $15.2 million for Q2 2020.

How did FutureFuel's revenues change in Q2 2020?

Revenues for Q2 2020 were $47.4 million, down 33.1% from $70.9 million in Q2 2019.

What is FutureFuel's adjusted EBITDA for the first half of 2020?

FutureFuel's adjusted EBITDA for the first half of 2020 was $12.8 million, up 43.7% from the previous year.

How did the COVID-19 pandemic affect FutureFuel's business?

The COVID-19 pandemic led to reduced demand in both the chemical and biofuel segments, impacting revenues.

What was FutureFuel's cash dividend in Q2 2020?

FutureFuel paid a regular quarterly cash dividend of $0.06 per share in Q2 2020.