FutureFuel Releases Third Quarter and Nine Month 2014 Results

Reports Net Income of $11.5 Million or $0.26 Per Diluted Share, and Adjusted EBITDA of $15.9 Million

Conference Call Begins at 9:00 a.m. Eastern Time November 7, 2014

CLAYTON, Mo., Nov. 6, 2014 (GLOBE NEWSWIRE) -- FutureFuel Corp. FF, a manufacturer of custom and performance chemicals and biofuels, today announced financial results for the three and nine months ended September 30, 2014.

Third Quarter 2014 Financial Highlights (all comparisons are with the third quarter of 2013)

• Revenues were $103.1 million, down 15% from $121.1 million
• Adjusted EBITDA was $15.9 million, down 44% from $28.2 million
• Net income decreased to $11.5 million, or $0.26 per diluted share, from $15.3 million, or $0.35 per diluted share.

First Nine Months of 2014 Financial Highlights (all comparisons are with the first nine months of 2013)

• Revenues were $253.4 million, down 21% from $319.3 million
• Adjusted EBITDA was $32.7 million, down 54% from $71.3 million
• Net income decreased to $23.1 million, or $0.53 per diluted share, from $47.5 million, or $1.10 per diluted share.

"Although profits and revenues decreased from prior years, the Company performed admirably, especially in the most difficult biodiesel environment. New chemical projects continue to improve output," said Lee Mikles, President of FutureFuel Corp.

2014 Regular Cash Dividends

FutureFuel declared normal quarterly dividends of $0.12 per share for 2014. The remaining 2014 dividend will be paid in December.

Financial Overview and Key Operating Metrics

Financial and operating metrics, which include non-GAAP financial measures, include:

Third Quarter Financial and Business Summary

Revenues for the three months ended September 30, 2014 decreased 15% to $103,135,000 as compared to revenues for the three months ended September 30, 2013 of $121,119,000.  During the third quarter final shortfall revenue of $8,816,000 was recognized related to the production of the graphite anode material. The shortfall revenue recognized in the 3 months ended September 30, 2013 was $2,264,000. Excluding the impact of the shortfall revenue for both years, total revenue for the current three months ended decreased 21% as compared to the same quarter for the prior year. 

Revenues from biofuels decreased 25% to $58,196,000, a decrease of $19,238,000 from the third quarter of 2013 and accounted for 56% of total revenues in the third quarter of 2014 as compared to 64% in the third quarter of 2013. We experienced both decreased biodiesel demand and reduced biodiesel selling prices in the third quarter of 2014 as compared to the third quarter of 2013. The biodiesel industry continues to suffer severely from the absence of both the 2014 final renewable fuel mandate from the government and the $1.00 per gallon federal blenders' credit. The lack of the 2014 mandate has depressed the value of biodiesel RINs, which in turn has impacted biodiesel demand and revenue.

Revenues from chemicals increased 3% during the most recent quarter compared to the third quarter of 2013, accounting for 44% of total revenues compared to 36% in the same quarter a year ago. Exclusive of shortfall revenues, chemical revenue decreased 13% as compared to the same quarter for the prior year. Within the chemicals segment, revenues for the three months ended September 30, 2014 were primarily impacted by reduced sales volumes from the bleach activator, the discontinuation of two custom products, and sales deferred to October due to a process disruption. Chemical sales were benefitted by increased sales volumes of the new proprietary herbicide intermediate we began selling at the first of 2014. We are transitioning the production capacity of our original herbicide customer to produce new herbicide intermediates for other customers. 

Income from operations decreased to $18,175,000 in the three months ended September 30, 2014 from $23,515,000 in the three months ended September 30, 2013. FutureFuel does not report income from operations by segment, but does report segment gross profit. The chemicals segment gross profit increased 29% to $17,824,000 in the three months ended September 30, 2014 from $13,827,000 in the three month ended September 30, 2013. Biofuels segment gross profit decreased to $3,048,000 in the three months ended September 30, 2014 from $12,191,000 in the three months ended September 30, 2013. Market conditions were significantly less favorable for biodiesel in 2014 as compared to 2013 largely as a result of the expiration of the $1.00 per gallon federal blenders' credit and the absence of a final mandate from the government for 2014 renewable fuel volumes. Biofuels gross profit was benefitted by hedging gains. For the third quarter of 2014, hedging gains totaled $5,239,000, as compared to hedging losses of $1,947,000 in the third quarter of 2013.   The increase in the chemical segment gross profit was primarily the result of shortfall revenue from the graphite anode material mostly offset by reduced sales volumes of: (i) two custom chemicals we no longer sell; (ii) reduced sales volumes of other custom chemicals, in part from process disruption; and (iii) the impact of a larger fixed cost allocation as chemical segment revenues comprised a larger percentage of revenues. Chemical segment gross profit benefited from the absence of an asset impairment. In the third quarter of 2013, there was an impairment charge of $1,420,000 and no such impairment charge existed in the third quarter of 2014.

Net income for the quarter decreased 23% to $11,451,000 or $0.26 per diluted share from $15,297,000, or $0.35 per diluted share, for the third quarter of 2013.  This decrease was the net result of the factors noted above. Adjusted EBITDA totaled $15,902,000 in the third quarter of 2014 as compared to $28,177,000 in the third quarter of 2013.

Nine Month Financial and Business Summary

Revenues for the nine months ended September 30, 2014 decreased 21% to $253,371,000 as compared to revenues for the nine months ended September 30, 2013 of $319,347,000. Revenues from biofuels decreased 25% to $145,547,000, from $193,500,000 and accounted for 57% of total revenues in the first nine months of 2014, and 61% of total revenues in 2013.  Revenues from chemicals were $107,824,000, decreased 14% from $125,847,000 and accounted for 43% of total revenues in the first nine months of 2014.  Exclusive of the shortfall revenue, chemical revenues declined 20%.

Revenues for the chemical segment were primarily impacted by reduced sales volumes from the original herbicide intermediate customer, the bleach activator, and the discontinuation of two chemical products, changes in unit pricing, and sales deferred to October due to a process disruption. We are currently working to develop new markets and product applications for the proprietary bleach activator technology.

Revenues from the biofuels segment suffered from the weak renewable energy market circumstances with no 2014 renewable energy usage mandate in place and the expiration of the $1.00 per gallon federal blenders' credit at December 31, 2013. 

Income from operations for the nine months ended September 30, 2014 decreased 56% to $29,797,000 as compared to $67,440,000 for the nine months ended September 30, 2013. FutureFuel does not report income from operations by segment, but does report segment gross profit. Gross profit for biodiesel decreased to $3,063,000 for the nine months ended September 30, 2014 as compared to $33,347,000 for the nine months ended September 30, 2013. This significant reduction in biofuel segment gross profit was largely the result of items noted above for the three month period. Benefitting the biofuels segment was hedging gains that totaled $4,945,000 in the first nine months of 2014 as compared to hedging gains in the first nine months of 2013 of $1,719,000.

The chemicals segment gross profit decreased 18% to $33,989,000 in the nine months ended September 30, 2014 from $41,678,000 in the nine months ended September 30, 2013. The reduction in chemical segment gross profit was largely the result of reduced sales volumes, particularly volumes of: (i) two other custom chemicals we no longer sell; (ii) the bleach activator; (iii) the original proprietary herbicide intermediate; (iv) deferred sales due to process disruption; and (v) the impact of a larger fixed cost allocation as previously noted.  Chemical segment gross profit benefited from the absence of an asset impairment. In the first nine months of 2013, there was an impairment charge related to the graphite anode material of $1,420,000 and no such impairment charge existed in the first nine months of 2014.

Net income decreased 51% for the first nine months of 2014 to $23,072,000, or $0.53 per diluted share, compared with $47,503,000 or $1.10 per diluted share during the first nine months of 2013. This decrease was the net result of the factors noted above. Adjusted EBITDA totaled $32,719,000 in the first nine months of 2014 as compared to $71,251,000 in the first nine months of 2013.

Capital Expenditures

Capital expenditures were $6,691,000 in the first nine months of 2014, compared with $13,431,000 in the first nine months of 2013. FutureFuel was reimbursed for a portion of these expenditures by certain customers as summarized in the following table.

Cash and Cash Equivalents and Marketable Securities

Cash and cash equivalents and marketable securities totaled $194,878,000 as of September 30, 2014, compared with $190,734,000 as of December 31, 2013.

Conference Call and Webcast

A conference call and webcast will be held November 7, 2014 beginning at 9:00 a.m. Eastern time (8:00 a.m. Central time). To access the conference call, dial (877) 251-1860 (U.S. and Canada) or (224) 357-2386 (international callers). The webcast will also be available in the investor relations section of the company's website at www.futurefuelcorporation.com. A replay of the call and webcast will begin approximately two hours after the live call has ended. To access the replay, dial (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (international callers) and enter the conference ID number: 26605575 .

About FutureFuel

FutureFuel is a leading manufacturer of diversified specialty chemical products and biobased products comprised of biofuels and biobased chemical products. In its chemicals business, it manufactures specialty chemicals for specific customers (custom manufacturing) as well as multi-customer specialty chemicals (performance chemicals). Its custom manufacturing product portfolio includes a bleach activator for a major detergent manufacturer, 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.com for more information on FutureFuel.

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, 2012 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's 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 FutureFuel faces. 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, and, in 2013, the impact from the retroactive reinstatement of the 2012 $1.00 biodiesel blenders tax credit. 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.

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.