FutureFuel Corp.
FutureFuel Corp. (Form: 8-K, Received: 11/09/2017 16:04:37)

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): November 9, 2017

 

 

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware
(State or Other Jurisdiction of Incorporation)

 

0-52577  

20-3340900  

(Commission File Number)

(IRS Employer Identification No.)

 

8235 Forsyth Blvd., Suite 400
St. Louis, Missouri 63105

(Address of Principal Executive Offices)

 

(314) 854-8352
(Registrant’s Telephone Number)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

Written communications pursuant to Rule  425 under the Securities Act

 

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act

 

 

 

Pre-commencement communications pursuant to Rule  14d-2(b) under the Exchange Act

 

 

 

Pre-commence ment communications pursuant to Rule 13e-4(c) under the Exchange Act

 

 

 

Item 8.01 – Other Events

 

On November 9, 2017, FutureFuel Corp. (NYSE: FF) (the “ Company”) issued a press release announcing the Company’s financial and operating results for the third quarter and nine months ended, September 30,  2017. A copy of the press release is furnished as Exhibit 99.1 to this report.

 

Item 9.01 – Financial Statements and Exhibits

 

A copy of the press release is included as Exhibit  99.1.

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

FUTUREFUEL CORP.

 

 

 

 

 

 

 

 

 

 

By:

/s/  Paul A. Novelly

 

 

 

Paul A. Novelly, Chairman and Chief Executive Officer

 

Date: Novembeer 9 , 2017

 

 

FutureFuel Releases Third Quarter and Nine-Month 2017 Results

 

FutureFuel Third Quarter Net Income of $ 3.3 Million

 

Reports Net Income of $ 3.3 Million or $ 0.08 per Diluted Share, and Adjusted EBITDA of $ 9.6 Million

 

CLAYTON, Mo., Nov. 09, 2017 (GLOBE NEWSWIRE) -- FutureFuel Corp . (NYSE:FF) (“FutureFuel”), a manufacturer of custom and performance chemicals and biofuels, today announced financial results for the third quarter and the nine months ended September 30, 2017.

 

Third Quarter 2017 Financial Highlights (all comparisons are with the third quarter of 2016)

 

Revenues were $ 77.6 million, up 12 .0% from $69 .3 million

Adjusted EBITDA was $ 9.6 million, down 5.6% from $10.1 million

Net income decreased to $ 3.3 million, or $0.08 per diluted share, from $12.9 million, or $0.29 per diluted share.

 

Nine Month 2017 Financial Highlights (all comparisons are with the first nine months of 2016)

 

Revenues were $ 199.8 million, up 8.7% from $183.8 million

Adjusted EBITDA was $17.2 million, down 52.7% from $36.3 million

Net income decreased to $ 7.6 million, or $0.17 per diluted share, from $37.7 million, or $0.86 per diluted share.

 

Our chemicals segment benefited this quarter from robust demand, particularly in the energy and agricultural sectors. We also saw an improvement in our Biodiesel segment, where we were encouraged by the US Commerce Dept’s preliminary antidumping duties levied on biodiesel from Argentina and Indonesia as well as the EPA signaling its commitment to the Renewable Volume Obligations of the Renewable Fuel Standard. Each of these measures helps US domestic biodiesel producers compete on a more level playing field ,   said Tom McKinlay, Chief Operating Officer for FutureFuel Chemical Company.

 

 

2017 Regular Cash D ividends

 

FutureFuel paid a normal quarterly dividend of $0.06 per share in the third quarter of 2017. The remaining quarterly dividend of $0.06 per share will be paid in 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 September 30,

 
                   

Dollar

   

%

 
   

2017

   

2016

   

Change

   

Change

 

Revenues

  $ 77,606     $ 69,306     $ 8,300       12.0%  

Income from operations

  $ 3,200     $ 7,841     $ (4,641 )     (59.2% )

Net income

  $ 3,334     $ 12,868     $ (9,534 )     (74.1% )

Earnings per common share:

                               

Basic

  $ 0.08     $ 0.29     $ (0.21 )     (72.4% )

Diluted

  $ 0.08     $ 0.29     $ (0.21 )     (72.4% )

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

  $ 856     $ 853     $ 3       0.4%  

Adjusted EBITDA

  $ 9,553     $ 10,117     $ (564 )     (5.6% )
                                 
   

Nine months ended September 30,

 
                   

Dollar

   

%

 
   

2017

   

2016

   

Change

   

Change

 

Revenues

  $ 199,765     $ 183,820     $ 15,945       8.7%  

Income from operations

  $ 6,049     $ 21,746     $ (15,697 )     (72.2% )

Net income

  $ 7,564     $ 37,661     $ (30,097 )     (79.9% )

Earnings per common share:

                               

Basic

  $ 0.17     $ 0.86     $ (0.69 )     (80.2% )

Diluted

  $ 0.17     $ 0.86     $ (0.69 )     (80.2% )

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

  $ 2,413     $ 2,988     $ (575 )     (19.2% )

Adjusted EBITDA

  $ 17,201     $ 36,328     $ (19,127 )     (52.7% )

 

 

Financial and Business Summary  

 

Consolidated sales revenue in the three and nine months ended  September 30, 2017 increased $8,300 and $15,945, respectively, compared to the three and nine months ended September 30, 2016. This increase primarily resulted from higher prices in the biofuel segment and increased sales volumes in the chemical segment.  In the nine-month comparison period, the increase from higher prices in the biofuel segment was partially offset by lower sales volumes largely from the expiration of the federal blenders’ tax credit (“BTC”).

 

  Gross profit in the three and nine months ended September 30, 2017 decreased $4,793 and $15,890, respectively, compared to the three and nine months ended September 30, 2016. In the biofuel segment, this decrease largely resulted from the absence of the BTC which expired on December 31, 2016.  We also experienced a reduction in pipeline profits for the nine months ended September 30, 2017 as compared to the prior year period. 

 

  Another significant impact to the reduction in gross profit in the nine months ended September 30, 2017, as compared to the prior year period, was the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting.  This adjustment reduced gross profit $5,329 in the nine months ended September 30, 2017 and increased gross profit $1,845 in the nine months ended September 30, 2016.  This change in LIFO resulted in a lower of cost or market adjustment of $1,877 in the three and nine months ended September 30, 2016 and no such adjustment was necessary in the three and nine months ended September 30, 2017.

 

Also contributing to the reduction in gross profit in the three months ended September 30, 2017, was the loss in the unrealized and realized activity in derivative instruments of $3,314, as compared to a gain of $803, in the prior year period.   The change in the derivative activity in the nine months ending September 30, 2017 favorably impacted gross profit with a loss of $1,511, as compared to a loss of $5,375 in the prior year period.

 

Capital Expenditures  

 

Capital expenditures and intangibles were $ 2,614 in the first nine months of 2017, compared with $3,107 in the same period in 2016. FutureFuel was reimbursed for a portion of these expenditures by certain customers as summarized in the following table.

 

   

Nine months ended September 30,

 
   

2017

   

2016

 

Cash paid for capital expenditures and intangibles

  $ 2,614     $ 3,107  

Cash received as reimbursement of capital expenditures

  $ (201 )   $ (119 )

Cash paid, net of reimbursement, for capital expenditures

  $ 2,413     $ 2,988  

 

 

 

 

Cash and Cash Equivalents and Marketable Securities  

 

Cash and cash equivalents and marketable securities totaled $ 236,833 as of September 30, 2017, compared with $305,418 as of December 31, 2016. The majority of the decrease in cash in the first nine months of 2017 was attributed to a special cash dividend of $100,188 that was paid on January 13, 2017.

 

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 a bleach activator for a major detergent manufacturer, 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 forw ard-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, 2016 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, FutureF uel 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, a nd 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)

         
   

September 30, 2017

   

December 31, 2016

 

Assets

               

Cash and cash equivalents

  $ 113,245     $ 199,272  

Accounts receivable, inclusive of the blenders' tax credit of $0 and $5,495 and net of allowances for bad debt of $0 and $0, at September 30, 2017 and December 31, 2016, respectively

    22,844       24,744  

Inventory

    43,523       52,093  

Marketable securities

    123,588       106,146  

Other current assets

    17,131       23,027  

Total current assets

    320,331       405,282  

Property, plant and equipment, net

    111,777       118,152  

Other assets

    5,463       5,609  

Total noncurrent assets

    117,240       123,761  

Total Assets

  $ 437,571     $ 529,043  

Liabilities and Stockholders ’ Equity

               

Accounts payable

  $ 28,258     $ 24,053  

Dividends payable

    2,625       110,688  

Other current liabilities

    11,323       9,308  

Total current liabilities

    42,206       144,049  

Deferred revenue – long-term

    13,002       16,792  

Other noncurrent liabilities

    36,648       35,389  

Total noncurrent liabilities

    49,650       52,181  

Total liabilities

    91,856       196,230  

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, 43,74 1,670 and 43,749,970, issued and outstanding as of September 30, 2017 and December 31, 2016, respectively

    4       4  

Accumulated other comprehensive income

    8,152       3,540  

Additional paid in capital

    281,813       281,087  

Retained earnings

    55,746       48,182  

Total Stockholders ’ Equity

    345,715       332,813  

Total Liabilities and Stockholders ’ Equity

  $ 437,571     $ 529,043  

 

 

 

 

 

 

 

 

 

FutureFuel Corp.

Condensed Consolidated Statements of Operations

a nd Comprehensive Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

 

 

   

T hree months ended September 30,

   

Nine months ended September 30,

 
   

2017

   

2016

   

2017

   

2016

 

Revenue

  $ 77,606     $ 69,306     $ 199,765     $ 183,820  

Cost of goods sold and distribution

    72,080       58,987       186,311       154,476  

Gross profit

    5,526       10,319       13,454       29,344  

Selling, general, and administrative expenses

    1,391       1,790       4,870       5,485  

Research and development expenses

    935       688       2,535       2,113  
      2,326       2,478       7,405       7,598  

Income from operations

    3,200       7,841       6,049       21,746  

Other income, net

    1,864       1,159       4,890       3,258  

Income before income taxes

    5,064       9,000       10,939       25,004  

Provision/(benefit) for income taxes

    1,730       (3,868 )     3,375       (12,657 )

Net income

  $ 3,334     $ 12,868     $ 7,564     $ 37,661  
                                 

Earnings per common share

                               

Basic

  $ 0.08     $ 0.29     $ 0.17     $ 0.86  

Diluted

  $ 0.08     $ 0.29     $ 0.17     $ 0.86  

Weighted average shares outstanding

                               

Basic

    43,705,234       43,570,734       43,662,672       43,524,729  

Diluted

    43,714,753       43,572,997       43,671,420       43,529,423  
                                 

Comprehensive Income

                               

Net income

  $ 3,334     $ 12,868     $ 7,564     $ 37,661  

Other comprehensive income from unrealized net gain on available-for-sale securities

    1,006       1,714       7,102       3,741  

   Income tax effect

    (353 )     (832 )     (2,490 )     (1,542 )

     Total unrealized gain, net of tax

    653       882       4,612       2,199  

Comprehensive income

  $ 3,987     $ 13,750     $ 12,176     $ 39,860  

 

 

 

 

 

FutureFuel Corp.

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2017 and 2016

(Dollars in thousands)

(Unaudited)

 

 

   

Nine months ended September 30,

 
   

2017

   

2016

 

Cash flows provided by operating activities

               

Net income

  $ 7,564     $ 37,661  

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

               

Depreciation

    8,735       7,960  

Amortization of deferred financing costs

    109       108  

Benefit for deferred income taxes

    (1,303 )     (9,243 )

Change in fair value of derivative instruments

    (60 )     6,686  

Other than temporary impairment of marketable securities

    177       2,184  

Impairment of fixed assets

    28       178  

Gain/(loss) on the sale of investments

    366       (1,457 )

Stock based compensation

    878       1,431  

Losses on disposals of fixed assets

    145       147  

Noncash interest expense

    20       20  

Changes in operating assets and liabilities:

               

Accounts receivable

    3,081       16,333  

Accounts receivable – related parties

    (1,181 )     (21 )

Inventory

    8,570       17,009  

Income tax receivable

    5,546       (1,185 )

Prepaid expenses

    1,152       1,104  

Prepaid expenses – related parties

    (4 )     35  

Accrued interest on marketable securities

    22       (84 )

Other assets

    37       (413 )

Accounts payable

    1,425       (9,853 )

Accounts payable – related parties

    2,780       219  

Accrued expenses and other current liabilities

    1,587       3,565  

Accrued expenses and other current liabilities – related parties

    (142 )     -  

Deferred revenue

    (3,220 )     2,735  

Other noncurrent liabilities

    128       1,760  

Net cash provided by operating activities

    36,440       76,879  

Cash flows from investing activities

               

Collateralization of derivative instruments

    (760 )     (4,009 )

Purchase of marketable securities

    (25,795 )     (54,096 )

Proceeds from the sale of marketable securities

    14,913       20,768  

Proceeds from the sale of fixed assets

    4       -  

Capital expenditures

    (2,614 )     (3,107 )

Net cash used in investing activities

    (14,252 )     (40,444 )

Cash flows from financing activities

               

Minimum tax withholding on stock options exercised and awards vested

    (121 )     (59 )

Excess tax benefits associated with stock options and awards

    (31 )     (183 )

Payment of dividends

    (108,063 )     (7,869 )

Net cash used in financing activities

    (108,215 )     (8,111 )

Net change in cash and cash equivalents

    (86,027 )     28,324  

Cash and cash equivalents at beginning of period

    199,272       154,049  

Cash and cash equivalents at end of period

  $ 113,245     $ 182,373  
                 

Cash paid for interest

  $ -     $ 2  

Cash paid for income taxes

  $ 55     $ 986  

 

 

 

 

 

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

September 30,

 

Nine months ended

September 30,

 

2017

 

2016

 

2017

 

2016

Adjusted EBITDA

$ 9,553

 

$ 10,117

 

$ 17,201

 

$ 36,328

Depreciation

       (2,927)

 

       (2,739)

 

         (8,735)

 

        (8,068)

Non-cash stock-based compensation

          (128)

 

          (477)

 

            (878)

 

         (1,431)

Interest and dividend income

         1,965

 

        1,637

 

           5,679

 

         4,446

Interest expense

            (43)

 

              (9)

 

            (129)

 

             (22)

Losses on disposal of property and equipment

            (68)

 

            (10)

 

            (145)

 

           (147)

Gains/(losses) on derivative instruments

       (3,314)

 

           803

 

         (1,511)

 

        (5,375)

Gains/(losses) on marketable securities

              26

 

          (322)

 

            (543)

 

           (727)

Income tax (expense)/benefit

       (1,730)

 

        3,868

 

         (3,375)

 

        12,657

Net income

$ 3,334

 

$ 12,868

 

$ 7,564

 

$ 37,661

 

 

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

 

 

 

 

Nine months ended September 30,

 

2017

 

2016

Adjusted EBITDA

$ 17,201

 

$ 36,328

Benefit for deferred income taxes

   (1,303)

 

    (9,243)

Impairment of fixed assets

              28

 

         178

Interest and dividend income

         5,679

 

      4,446

Income tax (expense)/benefit

   (3,375)

 

    12,657

L osses on derivative instruments

    (1,511)

 

   (5,375)

Change in fair value of derivative instruments

   (60)

 

      6,686

Changes in operating assets and liabilities, net

       19,781

 

    31,204

Other

                -

 

    (2)

Net cash provided by operating activities

$ 36,440

 

$ 76,879

 

   

 

 

 

FutureFuel Corp.

Condensed Consolidated Segment Income

(Dollars in thousands)

(Unaudited)

 

 

   

T hree months ended September 30,

   

Nine months ended September 30,

 
   

2017

   

2016

   

2017

   

2016

 

Revenue

                               

   Custom chemicals

  $ 23,593     $ 20,455     $ 65,189     $ 60,148  

   Performance chemicals

    4,574       3,844       12,686       13,782  

       Chemicals revenue

  $ 28,167     $ 24,299     $ 77,875     $ 73,930  

       Biofuels revenue

    49,439       45,007       121,890       109,890  

Total Revenue

  $ 77,606     $ 69,306     $ 199,765     $ 183,820  
                                 

Segment gross profit

                               

   Chemicals

  $ 8,060     $ 7,853     $ 20,401     $ 22,722  

   Biofuels

    (2,534 )     2,466       (6,947 )     6,622  

Total gross profit

    5,526       10,319       13,454       29,344  

Corporate expenses

    (2,326 )     (2,478 )     (7,405 )     (7,598 )

Income before interest and taxes

    3,200       7,841       6,049       21,746  

Interest and other income

    1,965       1,637       5,679       4,446  

Interest and other expense

    (101 )     (478 )     (789 )     (1,188 )

(Provision)/benefit for income taxes

    (1,730 )     3,868       (3,375 )     12,657  

Net income

  $ 3,334     $ 12,868     $ 7,564     $ 37,661  

 

 

 

 

Depreciation is allocated to segment costs of goods sold based on plant usage. The total assets and capital ex penditures 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