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FutureFuel Releases 2018 Results

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Reports Net Income of $53.2 Million or $1.22 per Diluted Share, and Adjusted EBITDA of $74.0 Million

CLAYTON, Mo., March 15, 2019 (GLOBE NEWSWIRE) -- FutureFuel Corp. (FF) (“FutureFuel”), a manufacturer of custom and performance chemicals and biofuels, today announced financial results for the year ended December 31, 2018.

Fourth Quarter 2018 Financial Highlights (all comparisons are with the fourth quarter of 2017)

  • Revenues were $65.5 million, down 13.0% from $75.3 million

  • Adjusted EBITDA was $11.0 million, up 20.0% from $9.2 million

  • Net income decreased to $1.8 million, or $0.04 per diluted share, from $15.9 million, or $0.36 per diluted share.

2018 Financial Highlights (all comparisons are with the year ended December 31, 2017)

  • Revenues were $291.0 million, up 5.8% from $275.0 million

  • Adjusted EBITDA was $74.0 million, up 180.5% from $26.4 million

  • Net income increased to $53.2 million, or $1.22 per diluted share, from $23.5 million, or $0.54 per diluted share.

“We are pleased to present these results which reflect a strong year for our company. Revenues and contribution were up in both our Chemicals and Biofuels segments supported by excellent performance at our Batesville, AR manufacturing site.

Higher oil prices through most of 2018 led to strong demand for the chemicals we supply into the energy sector and we will look to build further on that during the year ahead. The contribution from our Biofuels segment was greatly enhanced by the retrospective reinstatement of the 2017 Blenders Tax Credit in 2018. Disappointingly, this credit has not been reinstated for volumes produced and sold in 2018, nor 2019 and its absence creates great uncertainty in our industry. We would urge our Lawmakers to bring clarity to this credit as soon as possible." said Tom McKinlay, Chief Operating Officer for FutureFuel Corp.

2019 Regular Cash Dividends

FutureFuel declared normal quarterly dividends of $0.06 per share for 2019.

Three months ended December 31:

Dollar

%

2018

2017

Change

Change

Revenues

$

65,513

$

75,261

$

(9,748

)

(13.0

%)

Income from operations

$

12,803

$

3,838

$

8,965

233.6

%

Net income

$

1,836

$

15,947

$

(14,111

)

(88.5

%)

Earnings per common share:

Basic

$

0.04

$

0.36

$

(0.32

)

(88.9

%)

Diluted

$

0.04

$

0.36

$

(0.32

)

(88.9

%)

Capital expenditures and intangibles (net of customer reimbursements and regulatory grants)

$

1,011

$

993

$

18

1.8

%

Adjusted EBITDA

$

10,986

$

9,152

$

1,834

20.0

%

Twelve months ended December 31:

Dollar

%

2018

2017

Change

Change

Revenues

$

291,018

$

275,026

$

15,992

5.8

%

Income from operations

$

63,439

$

9,887

$

53,552

541.6

%

Net income

$

53,158

$

23,511

$

29,647

126.1

%

Earnings per common share:

Basic

$

1.22

$

0.54

$

0.68

125.1

%

Diluted

$

1.22

$

0.54

$

0.68

125.1

%

Capital expenditures and intangibles (net of customer reimbursements and regulatory grants)

$

2,208

$

3,406

$

(1,198

)

(35.2

%)

Adjusted EBITDA

$

73,912

$

26,353

$

47,559

180.5

%

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)

Consolidated Financial Results Q4 2018 versus Q4 2017

Fourth quarter sales revenue of $65,513 decreased as biofuel volumes declined and were offset in part by continued volume strength in the chemical segment.

Income from operations of $12,803 increased mostly from improved chemical volume strength and improved gains from the change in the biofuel segment’s activity in derivative instruments.

Other losses, net, of $6,284 resulted from mark to market losses on equity securities of $7,639. In the prior year, mark to market adjustments were a component of other comprehensive income. Realized losses on equity securities were $1,099 in fourth quarter 2018 as compared with realized losses of $145 in the fourth quarter of 2017.

Net income of $1,836 was down primarily from an estimated net tax benefit recognized in the fourth quarter 2017 as a result of tax law changes. Net income also declined due to an uncertain tax position of $3,176 (inclusive of interest) recognized in the fourth quarter of 2018.

Consolidated Financial Results 2018 versus 2017

Consolidated sales revenue of $291,018 increased from higher selling prices in both the biofuel and chemical segments. Chemical sales volumes increased from improved conditions in the agrochemical and energy markets.

Income from operations of $63,439 increased primarily from: i) the reinstatement of the biodiesel BTC for 2017 in 2018, $28,853 (see Note 3 of the 2018 consolidated financial statements for further details) ii) increased volumes in the chemical segment from the agrochemical and energy markets iii) gains in the unrealized and realized activity in derivative instruments as compared to losses in the prior year; the change in the derivative activity increased gross profit $633 in 2018 as compared to decreasing gross profit $3,844 in 2017 and iv) the benefit of adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. The LIFO adjustment decreased gross profit $ 2,249 in 2018 and decreased gross profit $5,204 in 2017.

Other losses, net, of $3,262 resulted from mark to market losses on equity securities of $13,236. In the prior year, mark to market adjustments were a component of other comprehensive income. See Note 27 of the 2018 consolidated financial statements for further details.

FutureFuel reported net income of $53,158, or $1.22 per diluted share, for 2018, compared with net income of $23,511, or $0.54 per diluted share in 2017. Adjusted EBITDA for 2018 totaled $73,912, up from $26,353 in 2017. A one-time tax benefit of $12,066 was recognized in 2017 resulting from the enactment of The Tax Cuts and Jobs Act of 2017. This benefit was due to an anticipated lower tax rate for future reversals of deferred tax liabilities. Reducing net income was an uncertain tax position taken in the fourth quarter of $3,176 inclusive of interest expense. See Note 14 of the 2018 consolidated financial statements for further details.

Capital Expenditures

Capital expenditures and intangibles were $4,867 in 2018, compared with $3,581 in 2017. FutureFuel was reimbursed for a portion of these expenditures by certain customers as summarized in the following table.

(Dollars in thousands)

2018

2017

Cash paid for capital expenditures and intangibles

$

4,867

$

3,581

Cash received as reimbursement of capital expenditures

$

(2,659

)

$

(175

)

Cash paid, net of reimbursement, for capital expenditures

$

2,208

$

3,406

Cash and Cash Equivalents and Marketable Securities

Cash and cash equivalents and marketable securities totaled $294,860 as of December 31, 2018, compared with $235,326 as of December 31, 2017.

About FutureFuel

FutureFuel is a leading manufacturer of diversified chemical products and biofuels. FutureFuel’s chemicals segment manufactures specialty chemicals for specific customers (“custom chemicals”) as well as multi-customer specialty chemicals (“performance chemicals”). FutureFuel’s custom manufacturing product portfolio includes a laundry detergent additive, proprietary agrochemicals, adhesion promoters, a biocide intermediate, and an antioxidant precursor. FutureFuel’s performance chemicals products include a portfolio of proprietary nylon and polyester polymer modifiers and several small-volume specialty chemicals and solvents 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)
(Audited)

December 31, 2018

December 31, 2017

Assets

Cash and cash equivalents

$

214,972

$

114,627

Accounts receivable, net of allowances for bad debt of $0 and $0, at December 31, 2018 and
December 31, 2017, respectively

18,138

22,138

Inventory

39,296

43,754

Marketable securities

79,888

120,699

Other current assets

10,036

9,140

Total current assets

362,330

310,358

Property, plant and equipment, net

103,575

109,735

Other assets

5,250

5,470

Total noncurrent assets

108,825

115,205

Total Assets

$

471,155

$

425,563

Liabilities and Stockholders’ Equity

Accounts payable

$

21,670

$

19,579

Dividends payable

10,498

10,498

Other current liabilities

7,323

5,204

Total current liabilities

39,491

35,281

Deferred revenue – long-term

20,319

16,522

Other noncurrent liabilities

22,267

22,164

Total noncurrent liabilities

42,586

38,686

Total liabilities

82,077

73,967

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 and
43,741,670, issued and outstanding as of December 31, 2018 and 2017, respectively

4

4

Accumulated other comprehensive income

(20

)

8,433

Additional paid in capital

282,145

281,964

Retained earnings

106,949

61,195

Total Stockholders’ Equity

389,078

351,596

Total Liabilities and Stockholders’ Equity

$

471,155

$

425,563


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

Three months ended December 31:

2018

2017

Revenue

$

65,513

$

75,261

Cost of goods sold and distribution

50,546

68,454

Gross profit

14,967

6,807

Selling, general, and administrative expenses

1,483

1,845

Research and development expenses

681

1,124

2,164

2,969

Income from operations

12,803

3,838

Other (losses)/income, net

(6,284

)

1,872

Income before income taxes

6,519

5,710

Provision/(benefit) for income taxes

4,683

(10,237

)

Net income

$

1,836

$

15,947

Earnings per common share

Basic

$

0.04

$

0.36

Diluted

$

0.04

$

0.36

Weighted average shares outstanding

Basic

43,716,670

43,716,670

Diluted

43,728,058

43,728,058

Comprehensive Income

Net income

$

1,836

$

15,947

Other comprehensive income/(loss) from unrealized

net gains/(losses) on available-for-sale securities

(183

)

929

Income tax effect

39

(326

)

Total unrealized gains/(losses), net of tax

(144

)

603

Comprehensive income

$

1,692

$

16,550


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

Twelve months ended December 31:

2018

2017

Revenue

$

291,018

$

275,026

Cost of goods sold and distribution

217,620

254,765

Gross profit

73,398

20,261

Selling, general, and administrative expenses

6,435

6,715

Research and development expenses

3,524

3,659

9,959

10,374

Income from operations

63,439

9,887

Other (losses)/income, net

(3,262

)

6,762

Income before income taxes

60,177

16,649

Provision/(benefit) for income taxes

7,019

(6,862

)

Net income

$

53,158

$

23,511

Earnings per common share

Basic

$

1.22

$

0.54

Diluted

$

1.22

$

0.54

Weighted average shares outstanding

Basic

43,542,785

43,542,785

Diluted

43,547,538

43,547,538

Comprehensive Income

Net income

$

53,158

$

23,511

Other comprehensive income/(loss) from unrealized

net gains/(losses) on available-for-sale securities

(229

)

7,535

Income tax effect

49

(2,642

)

Total unrealized gains/(losses), net of tax

(180

)

4,893

Comprehensive income

$

52,978

$

28,404


FutureFuel Corp.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2018 and 2017
(Dollars in thousands)
(Audited)

2018

2017

Cash flows provided by operating activities

Net income

$

53,158

$

23,511

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

Depreciation

10,969

11,617

Amortization of deferred financing costs

144

145

Benefit for deferred income taxes

(1,253

)

(13,657

)

Change in fair value of equity securities

13,238

-

Change in fair value of derivative instruments

(2,130

)

2,170

Other than temporary impairment of marketable securities

-

814

Impairment of fixed assets

258

28

Gain on the sale of investments

(1,227

)

(127

)

Stock based compensation

357

998

Losses on disposals of fixed assets

41

195

Noncash interest expense

28

27

Changes in operating assets and liabilities:

Accounts receivable

5,679

2,386

Accounts receivable – related parties

(1,679

)

220

Inventory

4,458

8,339

Income tax receivable

79

13,571

Prepaid expenses

(107

)

34

Prepaid expenses – related party

-

-

Accrued interest on marketable securities

(25

)

16

Other assets

(317

)

(9

)

Accounts payable

1,243

(4,403

)

Accounts payable – related parties

506

(71

)

Accrued expenses and other current liabilities

274

60

Accrued expenses and other current liabilities – related parties

-

(142

)

Deferred revenue

(1,258

)

(4,215

)

Other noncurrent liabilities

3,177

(2,160

)

Net cash provided by operating activities

85,613

39,347

Cash flows from investing activities

Collateralization of derivative instruments

1,680

(1,901

)

Purchase of marketable securities

(19,664

)

(30,959

)

Proceeds from the sale of marketable securities

48,235

23,254

Proceeds from the sale of fixed assets

22

4

Capital expenditures

(4,867

)

(3,581

)

Net cash provided by (used in) investing activities

25,406

(13,183

)

Cash flows from financing activities

Minimum tax withholding on stock options exercised and awards vested

(176

)

(121

)

Excess tax benefits associated with stock options and awards

-

-

Proceeds from issuance of stock

-

-

Payment of dividends

(10,498

)

(110,688

)

Net cash used in financing activities

(10,674

)

(110,809

)

Net change in cash and cash equivalents

100,345

(84,645

)

Cash and cash equivalents at beginning of period

114,627

199,272

Cash and cash equivalents at end of period

$

214,972

$

114,627

Cash paid for interest

-

-

Cash paid for income taxes

$

9,182

$

55

Noncash items incurred:

Noncash dividends declared

$

10,498

$

10,498

Noncash capital expenditures

$

420

$

-


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

Reconciliation of Adjusted EBITDA to Net Income

Three months ended December 31:

Twelve months ended December 31:

2018

2017

2018

2017(1)

Adjusted EBITDA

$

10,986

$

9,152

$

73,912

$

26,353

Depreciation

(2,725

)

(2,882

)

(10,969

)

(11,617

)

Non-cash stock-based compensation

(36

)

(120

)

(357

)

(998

)

Interest and dividend income

2,495

2,130

9,183

7,809

Non-cash interest expense (including amortization of deferred financing costs)

(44

)

(43

)

(173

)

(172

)

Losses on disposal of property and equipment

-

(50

)

(41

)

(195

)

Gains/(losses) on derivative instruments

4,581

(2,333

)

633

(3,844

)

Losses on marketable securities

(8,738

)

(144

)

(12,011

)

(687

)

(Provision)/benefit for income taxes

(4,683

)

10,237

(7,019

)

6,862

Net income

$

1,836

$

15,947

$

53,158

$

23,511


Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

Twelve months ended December 31:

2018

2017

Adjusted EBITDA

$

73,912

$

26,353

Benefit for deferred income taxes

(1,253

)

(13,657

)

Impairment of fixed assets

258

28

Interest and dividend income

9,183

7,809

(Provision)/ benefit for income taxes

(7,019

)

6,862

Gains/(losses) on derivative instruments

633

(3,844

)

Change in fair value of derivative instruments

(2,130

)

2,170

Changes in operating assets and liabilities, net

12,030

13,626

Other

(1

)

-

Net cash provided by operating activities

$

85,613

$

39,347


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

Three months ended December 31:

Twelve months ended December 31:

2018

2017

2018

2017

Revenue

Custom chemicals

$

23,281

$

22,716

$

97,746

$

87,905

Performance chemicals

5,217

4,795

19,382

17,481

Chemicals revenue

$

28,498

$

27,511

$

117,128

$

105,386

Biofuels revenue

37,015

47,750

173,890

169,640

Total Revenue

$

65,513

$

75,261

$

291,018

$

275,026

Segment gross profit

Chemicals

$

9,516

$

7,615

$

33,986

$

28,016

Biofuels

5,451

(808

)

39,412

(7,755

)

Total gross profit

14,967

6,807

73,398

20,261

Corporate expenses

(2,164

)

(2,969

)

(9,959

)

(10,374

)

Income before interest and taxes

12,803

3,838

63,439

9,887

Interest and other income

2,495

2,130

9,183

7,809

Interest and other expense

(8,779

)

(258

)

(12,445

)

(1,047

)

(Provision)/benefit for income taxes

(4,683

)

10,237

(7,019

)

6,862

Net income

$

1,836

$

15,947

$

53,158

$

23,511

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