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Mar 16, 2021

FutureFuel Releases 2020 Results

Reports Net Income of $46.6. Million or $1.06 per Diluted Share, and Adjusted EBITDA of $29.2 Million

CLAYTON, Mo., March 16, 2021 (GLOBE NEWSWIRE) -- FutureFuel Corp. (NYSE: FF) (“FutureFuel”), a manufacturer of custom and performance chemicals and biofuels, today announced financial results for the fourth quarter and year ended December 31, 2020.

Fourth Quarter 2020 Financial Highlights (all comparisons are with the fourth quarter of 2019)

  • Revenues were $49.9 million, up 147.1% from $20.2 million
  • Adjusted EBITDA was $10.7 million, down 82.9% from $63.1 million
  • Net income decreased to $5.5 million, or $0.13 per diluted share, from $72.4 million, or $1.65 per diluted share.

2020 Financial Highlights (all comparisons are with the year ended December 31, 2019)

  • Revenues were $204.5 million, down 0.4% from $205.2 million
  • Adjusted EBITDA was $29.2 million, down 63.0% from $78.7 million
  • Net income decreased to $46.6 million, or $1.06 per diluted share, from $88.2 million, or $2.02 per diluted share.

“We are pleased to be able to deliver $46.6 million of net income at the end of a very challenging year. Our Biodiesel operation benefited from the certainty of the Blenders’ Tax Credit being in place from the beginning of 2020 and we set record-breaking production volumes at our plant. It was even more significant that we achieved this milestone while adapting to the impact of the pandemic on our operation and the consequent disruptions to our feedstock supply chain. 

The diversity of our business model again proved to be valuable as the impact of the pandemic on the economy reduced demand in our chemical segment. We adjusted our operation accordingly and are now well positioned to take advantage of fresh opportunities during the year ahead." said Tom McKinlay, Chief Operating Officer for FutureFuel Corp.

"Note that the comparative fourth quarter 2019 revenue, adjusted EBITDA, and net income were impacted by the accounting treatment of the retroactive reinstatement of the blenders' tax credit passed into law in December 2019 for product physically sold and blended during the twelve months ended December 31, 2019 and 2018.  To better understand the current period financials with the prior period financials, see Note 2 of our consolidated financial statements that explains our accounting policy for the blenders' tax credit; Note 3 that summarizes the gross profit impact by year; and Note 16 showing the income tax benefit." said Rose Sparks, Chief Financial Officer of FutureFuel Corp.  

2021 Regular Cash Dividends

FutureFuel declared normal quarterly dividends of $0.06 per share for 2021.

  Three months ended December 31:
          Dollar   %
    2020     2019   Change   Change
Revenues $ 49,863   $ 20,177   $ 29,686     147.1 %
Income from operations $ 5,695   $ 59,638   $ (53,943 )   (90.5 %)
Net income $ 5,472   $ 72,373   $ (66,901 )   (92.4 %)
Earnings per common share:              
Basic $ 0.13   $ 1.65   $ (1.52 )   (92.1 %)
Diluted $ 0.13   $ 1.65   $ (1.52 )   (92.1 %)
Capital expenditures (net of customer reimbursements) $ 533   $ 797   $ (264 )   (31.3 %)
Adjusted EBITDA $ 10,753   $ 63,064   $ (52,311 )   (82.9 %)
               
               
  Twelve months ended December 31:
          Dollar   %
    2020     2019   Change   Change
Revenues $ 204,505   $ 205,226   $      (721 )   (0.4 %)
Income from operations $ 22,339   $ 65,309   $ (42,970 )   (65.8 %)
Net income $ 46,564   $ 88,181   $ (41,617 )   (47.2 %)
Earnings per common share:              
Basic $ 1.06   $ 2.02   $ (0.96 )   (47.5 %)
Diluted $ 1.06   $ 2.02   $ (0.96 )   (47.5 %)
Capital expenditures (net of customer reimbursements) $ 2,424   $ 2,243   $ 181     8.1 %
Adjusted EBITDA $ 29,157   $ 78,697   $ (49,540 )   (63.0 %)

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 2020 versus Q4 2019

Fourth quarter revenue increased 147.1% or $29,686. In the prior year quarter, revenue was reduced from the recognition of rebates owed to customers due to the retroactive reinstatement of the 2018 and 2019 BTC, $34,848 which related to 2018 and the first three quarters of 2019. Chemical revenue declined from the prior year quarter primarily due to two custom products we no longer sell and from the continued volume impact of the COVID-19 pandemic (“COVID-19”) on chemicals used in the energy, housing, and automobile markets.

Income from operations decreased mostly from the $51,198 net benefit of the BTC reinstated for 2018 and the first three quarters of 2019 all of which was recognized in Q4 2019. See Note 3 of our consolidated financial statements for a detailed discussion of the full year impact. In addition, chemical margins declined due to the elimination of two products we no longer sell along with reduced biodiesel margins from the overall energy slowdown due to COVID-19. We took prudent measures to minimize labor and other costs to help offset these declines.

Net income of $5,472 decreased from the prior year quarter primarily from the benefit in the prior year of the reinstatement of the BTC and the Small Producer’s Tax Credit for 2018 and 2019 recognized in the fourth quarter 2019 (see Note 16 of the 2019 consolidated financial statements for further details on the full year impact).

Consolidated Financial Results 2020 versus 2019

Consolidated sales revenue decreased $721 in 2020 compared to 2019. This decrease primarily resulted from lower sales volumes in the chemical segment mostly offset by increased sales volumes in the biofuel segment.  

Income from operations decreased $42,970 in 2020 compared to 2019. This decrease was mainly attributable to a benefit in the prior year from the reinstatement of the biodiesel BTC for 2018 recognized in 2019, amounting to $31,301, (see Note 3 of the 2020 consolidated financial statements for further details), lower margins on biodiesel sold, the absence of a chemical contract that expired in 2019, and reduced chemical sales volumes primarily driven by the COVID-19 pandemic’s effect on the energy, housing, and automobile markets. Helping to reduce these declines was a 20% increase in biofuel sales volumes and cost reductions in labor and other costs.   

FutureFuel reported net income of $46,564, or $1.06 per diluted share for 2020, compared with net income of $88,181, or $2.02 per diluted share, for 2019. Net income in 2019 was mostly benefited by the retroactive reinstatement of the BTC for 2018 in 2019, income from two products we no longer sell, offset partially by the change in income tax benefit of $14,786 in 2020 as compared to $8,386 in 2019. See Note 3 for a discussion of the BTC effect on our financials and Note 16 for a discussion of income taxes to the 2020 consolidated financial statements for further details.

Capital Expenditures

Capital expenditures and intangibles were $4,464 in 2020, compared with $6,971 in 2019. FutureFuel was reimbursed for a portion of these expenditures by certain customers as summarized in the following table.

(Dollars in thousands)

    2020       2019  
Cash paid for capital expenditures $ 4,464     $ 6,971  
Cash received from customers as reimbursement of capital expenditures* $ (2,040 )   $ (4,728 )
Cash paid for capital expenditures, net of customer reimbursements $ 2,424     $ 2,243  

*This receipt of cash was reported as an increase in deferred revenue in cash flows from operations.

Cash and Cash Equivalents and Marketable Securities

Cash and cash equivalents and marketable securities totaled $262,526 as of December 31, 2020, compared with $316,951 as of December 31, 2019. The reduction in cash and cash equivalents and marketable securities resulted from a special cash dividend paid of $131,230 which was partially offset from the benefit of the reinstatement of the BTC.  

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 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, 2020 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)

  December 31, 2020   December 31, 2019
Assets      
Cash and cash equivalents $ 198,122     $ 243,331  
Accounts receivable, inclusive of the blenders' tax credit of $8,300 and $97,295 and net of allowances for bad debt of $63 and $0, respectively   22,813       114,866  
Inventory   33,889       37,573  
Marketable securities   64,404       73,620  
Other current assets   23,377       11,499  
Total current assets   342,605       480,889  
Property, plant and equipment, net   91,544       98,597  
Other assets   7,155       7,019  
    Total noncurrent assets   98,699       105,616  
Total Assets $ 441,304     $ 586,505  
Liabilities and Stockholders’ Equity      
Accounts payable, inclusive of the blenders' tax credit rebates due customers of $1,116 and $39,423 $ 13,437     $ 62,554  
Dividends payable   10,498       10,498  
Other current liabilities   9,053       9,711  
Total current liabilities   32,988       82,763  
Deferred revenue – long-term   21,861       21,291  
Other noncurrent liabilities   14,572       15,353  
Total noncurrent liabilities   36,433       36,644  
Total liabilities   69,421       119,407  
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 issued and outstanding as of December 31, 2020 and 2019   4       4  
Accumulated other comprehensive income   208       296  
Additional paid in capital   282,215       282,166  
Retained earnings   89,456       184,632  
Total Stockholders’ Equity   371,883       467,098  
Total Liabilities and Stockholders’ Equity $ 441,304     $ 586,505  

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

  Three months ended December 31:
    2020       2019  
Revenue $ 49,863     $ 20,177  
Cost of goods sold and distribution   42,312       (41,968 )
Gross profit   7,551       62,145  
Selling, general, and administrative expenses   1,262       1,643  
Research and development expenses   594       864  
    1,856       2,507  
Income from operations   5,695       59,638  
Other income, net   3,922       1,460  
Income before income taxes   9,617       61,098  
Income tax provision (benefit)   4,145       (11,275 )
Net income $ 5,472     $ 72,373  
       
Earnings per common share      
Basic $ 0.13     $ 1.65  
Diluted $ 0.13     $ 1.65  
Weighted average shares outstanding      
Basic   43,743,243       43,743,243  
Diluted   43,744,278       43,743,243  
       
Comprehensive Income      
Net income $ 5,472     $ 72,373  
Other comprehensive income (loss) from unrealized      
net gains on available-for-sale securities   104       121  
Income tax effect   (22 )     (25 )
Total unrealized gains, net of tax   82       96  
Comprehensive income $ 5,554     $ 72,469  

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

  Twelve months ended December 31:
    2020       2019  
Revenue $ 204,505     $ 205,226  
Cost of goods sold and distribution   173,198       131,087  
Gross profit   31,307       74,139  
Selling, general, and administrative expenses   5,980       5,639  
Research and development expenses   2,988       3,191  
    8,968       8,830  
Income from operations   22,339       65,309  
Other income, net   9,439       14,486  
Income before income taxes   31,778       79,795  
Income tax benefit   (14,786 )     (8,386 )
Net income $ 46,564     $ 88,181  
       
Earnings per common share      
Basic $ 1.06     $ 2.02  
Diluted $ 1.06     $ 2.02  
Weighted average shares outstanding      
Basic   43,743,243       43,743,243  
Diluted   43,744,150       43,744,676  
       
Comprehensive Income      
Net income $ 46,564     $ 88,181  
Other comprehensive income (loss) from unrealized      
net (losses) gains on available-for-sale securities   (111 )     400  
Income tax effect   23       (84 )
Total unrealized (losses) gains, net of tax   (88 )     316  
Comprehensive income $ 46,476     $ 88,497  

FutureFuel Corp.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2020 and 2019
(Dollars in thousands)
(Unaudited)

    2020       2019  
Cash flows from operating activities      
Net income $ 46,564     $ 88,181  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation   11,150       12,087  
Amortization of deferred financing costs   108       144  
Benefit for deferred income taxes              (610 )     (5,145 )
Change in fair value of equity securities          246       (6,281 )
Change in fair value of derivative instruments   (390 )     (30 )
Loss (gain) on the sale of investments           4,129       1,662  
Stock based compensation                49       21  
(Gain) loss on disposal of property and equipment              31       (11 )
Noncash interest expense                43       29  
Changes in operating assets and liabilities:      
Accounts receivable        88,865       (93,970 )
Accounts receivable – related parties            3,176       (2,758 )
Inventory           3,684       1,723  
Income tax receivable   (9,606 )     (1,204 )
Prepaid expenses   (2,035 )     (165 )
Prepaid expenses – related party               12              -    
Other assets              658       206  
Accounts payable   (48,639 )     41,453  
Accounts payable – related parties   (271 )     (434 )
Accrued expenses and other current liabilities           456       1,087  
Accrued expenses and other current liabilities – related parties               (64 )     64  
Deferred revenue           (691 )     1,628  
Other noncurrent liabilities              (462 )     (3,649 )
Net cash provided by operating activities         96,403       34,638  
Cash flows from investing activities      
Collateralization of derivative instruments             158       (111 )
Purchase of marketable securities           (5,073 )     (20,131 )
Proceeds from the sale of marketable securities         9,803       31,419  
Proceeds from the sale of property and equipment                50       13  
Capital expenditures   (4,464 )     (6,971 )
Net cash provided by investing activities               474       4,219  
Cash flows from financing activities      
Loan proceeds   8,180       -  
Payment on loan   (8,180 )                   -  
Deferred financing costs   (477 )     -  
Equipment financing proceeds   119       -  
Payment of dividends   (141,728 )     (10,498 )
Net cash used in financing activities      (142,086 )     (10,498 )
Net change in cash and cash equivalents        (45,209   )     28,359  
Cash and cash equivalents at beginning of period   243,331       214,972  
Cash and cash equivalents at end of period $ 198,122     $ 243,331  
       
Cash paid for interest $ 2     $ -  
Cash paid for income taxes $ 661     $ 2,372  
Noncash investing and financing activities:      
Noncash capital expenditures $ -     $ 207  
Noncash operating leases $ 442     $ 432  
Noncash items incurred for dividends $ 10,498     $ 10,498  

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
December 31:
  Twelve months ended
December 31:
      2020       2019       2020       2019  
Net income   $ 5,472     $ 72,373     $ 46,564     $ 88,181  
Depreciation     2,596       2,995       11,150       12,087  
Non-cash stock-based compensation     -       -                        49       21  
Interest and dividend income     (1,116 )     (2,220 )                 (5,648 )     (10,050 )
Non-cash interest expense and amortization of deferred financing costs     32       43       151       173  
Loss (gain) on disposal of property and equipment     82       -                      31       (11 )
Loss (gain) loss on derivative instruments     2,410       590                 (4,379 )     1,301  
Loss (gain) on marketable securities     (2,898 )     558                 4,375       (4,619 )
Other non-operating income     -       -       (8,350 )     -  
Income tax provision (benefit)     4,145       (11,275 )     (14,786 )     (8,386 )
Adjusted EBITDA   $ 10,723     $ 63,064     $ 29,157     $ 78,697  

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

  Twelve months ended December 31:
    2020       2019  
Net cash provided by operating activities $ 96,403     $ 34,638  
Benefit for deferred income taxes                    610       5,145  
Interest and dividend income                    (5,648 )     (10,050 )
Income tax provision   (14,786 )     (8,386 )
(Gain) loss on derivative instruments                  (4,379 )     1,301  
Change in fair value of derivative instruments   390       30  
Changes in operating assets and liabilities, net                  (35,083 )     56,017  
Other non-operating income   (8,350 )     -  
Other                           -       2  
Adjusted EBITDA $ 29,157     $ 78,697  

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

  Three months ended December 31:   Twelve months ended December 31:
    2020     2019       2020     2019
Revenue              
Custom chemicals $ 11,765   $ 20,027     $ 63,894   $ 90,962
Performance chemicals   4,145     2,943       15,284     13,865
Chemicals revenue $ 15,910   $ 22,970     $ 79,178   $ 104,827
Biofuels revenue   33,953     (2,793 )     125,327     100,399
Total Revenue $ 49,863   $ 20,177     $ 204,505   $ 205,226
               
Segment gross profit              
Chemicals $ 5,173   $ 6,946     $ 25,518   $ 29,923
Biofuels   2,378     55,199                     5,789     44,216
Total gross profit $ 7,551   $ 62,145     $ 31,307   $ 74,139

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

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Source: FutureFuel Corp.