FutureFuel Releases Third Quarter 2022 Results
Source: Nasdaq GlobeNewswire / 09 Nov 2022 16:14:43 America/New_York
FutureFuel Third Quarter Net Income of $15.8 Million
Reports Net Income of $15.8 Million or $0.36 per Diluted Share, and Adjusted EBITDA of $14.8 Million
CLAYTON, Mo., Nov. 09, 2022 (GLOBE NEWSWIRE) -- FutureFuel Corp. (NYSE:FF) (“FutureFuel”), a manufacturer of custom and performance chemicals and biofuels, today announced financial results for the third quarter ended September 30, 2022.
Third quarter 2022 Financial Highlights (all comparisons are with the third quarter of 2021)
- Revenues were $118.1 million, up 20% from $98.7 million
- Adjusted EBITDA was $14.8 million, up from $11.1 million (see reconciliation table below)
- Net income was $15.8 million, or $0.36 per diluted share, up 71% from net income of $9.2 million, or $0.21 per diluted share.
Nine months 2022 Financial Highlights (all comparisons are with the first nine months of 2021)
- Revenues were $278.2 million, up 30% from $214.3 million
- Adjusted EBITDA was $35.6 million, up from $8.0 million (see reconciliation table below)
- Net income was $0.3 million, or $0.01 per diluted share, down from net income of $3.9 million, or $0.09 per diluted share.
“These results reflect a solid performance in all areas of our business this quarter. Biodiesel production has operated at full capacity and we have captured margin, even with continued volatility in the energy markets.
“Our Chemical segment is gaining momentum. Revenues and contribution have increased, both year on year and from the previous quarter. We are encouraged, not only by our current results, but by the opportunities we have identified for further growth,” said Tom McKinlay, Chief Executive Officer for FutureFuel Corp.
2022 Cash Dividends
FutureFuel paid a regular quarterly cash dividend in the amount of $0.06 per share on our common stock in the third quarter of 2022. The remaining quarterly dividend of $0.06 per share is expected to 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:
Certain Financial and Operating Metrics (Unaudited)
Three Months Ended September 30, Dollar % 2022 2021 Change Change Revenue $ 118,141 $ 98,682 $ 19,459 20 % Income from operations $ 16,890 $ 6,142 $ 10,748 175 % Net income $ 15,780 $ 9,202 $ 6,578 71 % Earnings per common share: Basic $ 0.36 $ 0.21 $ 0.15 71 % Diluted $ 0.36 $ 0.21 $ 0.15 71 % Adjusted EBITDA $ 14,806 $ 11,144 $ 3,662 33 % Nine Months Ended September 30, Dollar % 2022 2021 Change Change Revenue $ 278,198 $ 214,316 $ 63,882 30 % Income (loss) from operations $ 5,768 $ (8,919 ) $ 14,687 n/a Net income $ 278 $ 3,910 $ (3,632 ) (93 %) Earnings per common share: Basic $ 0.01 $ 0.09 $ (0.08 ) (89 %) Diluted $ 0.01 $ 0.09 $ (0.08 ) (89 %) Adjusted EBITDA $ 35,613 $ 7,987 $ 27,626 346 %
Financial and Business Summary
Consolidated sales revenue in the three and nine months ended September 30, 2022 increased $19,459 and $63,882 compared to the three and nine months ended September 30, 2021. These increases resulted from higher sales prices in the biofuels segment, and to a lesser extent, from increased prices and sales volume in the chemicals segment. The increases were partially reduced by lower sales volumes in biofuels for both the three-and nine-month periods ending September 30, 2022.
Income from operations in the three months ended September 30, 2022 increased $10,748 compared to the three months ended September 30, 2021. This improvement primarily resulted from increased margins from the biofuels segment and to a lesser extent, improved sales volume in the chemical segment.
Income (loss) from operations in the nine months ended September 30, 2022 improved $14,687 compared to the nine months ended September 30, 2021. This improvement primarily resulted from increased margins from biofuels, increased margins from the chemical segment due to product mix and higher sales volumes, and the prior year period included exorbitantly high natural gas prices experienced in the February 2021 Winter Storm Uri. Mostly offsetting this increase was the change in the activity in derivative instruments with a loss of $21.9 million in the current nine-month period as compared to $10.4 million in the same period of 2021. We experienced unprecedented volatility in the heating oil futures market which resulted in losses that were not fully recoverable on fuel sold. We have since amended our derivative execution strategy to help mitigate reoccurrence.
Capital expenditures were $3,692 in the first nine months of 2022, compared with $665 in the same period in 2021.
Cash and Cash Equivalents and Marketable Securities
Cash and cash equivalents and marketable securities totaled $210,021 as of September 30, 2022, compared with $184,711 as of December 31, 2021.
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.
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements deal with FutureFuel’s current plans, intentions, beliefs, and expectations, and statements of future economic performance. Statements containing such terms as “believe,” “do not believe,” “plan,” “expect,” “intend,” “estimate,” “anticipate,” and other phrases of similar meaning are considered to contain uncertainty and are forward-looking statements. In addition, from time-to-time FutureFuel or its representatives have made or will make forward-looking statements orally or in writing. Furthermore, such forward-looking statements may be included in various filings that the company makes with United States Securities and Exchange Commission (the “SEC”), in press releases, or in oral statements made by or with the approval of one of FutureFuel’s authorized executive officers.
These forward-looking statements are subject to certain known and unknown risks and uncertainties, including, but not limited to the COVID-19 pandemic and the response thereto, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause actual results to differ include, but are not limited to, those set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in FutureFuel’s Form 10-K Annual Report for the year ended December 31, 2021 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.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited) September 30, 2022 December 31, 2021 Assets Cash and cash equivalents $ 171,268 $ 137,521 Accounts receivable, inclusive of the blenders' tax credit of $8,462 and $8,232 and net of allowances for bad debt of $43 and $67, respectively 23,730 29,374 Inventory 17,400 26,920 Marketable securities 38,753 47,190 Other current assets 6,570 14,828 Total current assets 257,721 255,833 Property, plant and equipment, net 78,405 82,901 Other assets 5,212 5,596 Total noncurrent assets 83,617 88,497 Total Assets $ 341,338 $ 344,330 Liabilities and Stockholders’ Equity Accounts payable, inclusive of the blenders' tax credit rebates due customers of $890 and $890, respectively $ 32,204 $ 22,823 Dividends payable 2,626 - Other current liabilities 13,800 12,233 Total current liabilities 48,630 35,056 Deferred revenue – long-term 11,084 16,755 Other noncurrent liabilities 3,048 3,591 Total noncurrent liabilities 14,132 20,346 Total liabilities 62,762 55,402 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, 43,763,243, issued and outstanding at September 30, 2022 and December 31, 2021 4 4 Accumulated other comprehensive income 5 178 Additional paid in capital 282,489 282,443 Accumulated deficit (retained earnings) (3,922 ) 6,303 Total Stockholders’ Equity 278,576 288,928 Total Liabilities and Stockholders’ Equity $ 341,338 $ 344,330
Condensed Consolidated Statements of Operations
and Comprehensive Income
(Dollars in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
2022 2021 2022 2021 Revenue $ 118,141 $ 98,682 $ 278,198 $ 214,316 Cost of goods sold and distribution 98,156 90,490 264,391 216,903 Gross profit (loss) 19,985 8,192 13,807 (2,587 ) Selling, general, and administrative expenses 2,128 1,236 5,638 3,946 Research and development expenses 967 814 2,401 2,386 Total operating expenses 3,095 2,050 8,039 6,332 Income (loss) from operations 16,890 6,142 5,768 (8,919 ) Other income (expense), net 587 (121 ) (5,435 ) 792 Income (loss) before income taxes 17,477 6,021 333 (8,127 ) Income tax provision (benefit) 1,697 (3,181 ) 55 (12,037 ) Net income $ 15,780 $ 9,202 $ 278 $ 3,910 Earnings per common share Basic $ 0.36 $ 0.21 $ 0.01 $ 0.09 Diluted $ 0.36 $ 0.21 $ 0.01 $ 0.09 Weighted average shares outstanding Basic 43,763,243 43,763,243 43,763,243 43,753,646 Diluted 43,763,243 43,763,243 43,763,243 43,753,709 Comprehensive income Net income $ 15,780 $ 9,202 $ 278 $ 3,910 Other comprehensive loss from unrealized net loss on available-for-sale debt securities (71 ) (67 ) (219 ) (67 ) Income tax effect 15 14 46 14 Total other comprehensive loss, net of tax (56 ) (53 ) (173 ) (53 ) Comprehensive income $ 15,724 $ 9,149 $ 105 $ 3,857
Consolidated Statements of Cash Flows
(Dollars in thousands)
Nine Months Ended September 30, 2022 2021 Cash flows from operating activities Net income $ 278 $ 3,910 Adjustments to reconcile net income to net cash from operating activities: Depreciation 7,850 7,887 Amortization of deferred financing costs 72 72 Benefit for deferred income taxes (255 ) (12,190 ) Change in fair value of equity securities 7,940 1,027 Change in fair value of derivative instruments (3,053 ) 2,147 Loss (gain) on the sale of investments 15 (835 ) Stock based compensation 46 - Loss on disposal of property and equipment 60 11 Impairment of intangible asset - 1,315 Noncash interest expense - 24 Changes in operating assets and liabilities: Accounts receivable 5,597 (5,086 ) Accounts receivable – related parties 47 1,344 Inventory 9,523 (9,085 ) Income tax receivable 7,759 7,895 Prepaid expenses 2,711 3,129 Prepaid expenses – related parties (8 ) (12 ) Other assets 296 522 Accounts payable 9,257 13,379 Accounts payable – related parties 338 7,645 Accrued expenses and other current liabilities 25 (387 ) Accrued expenses and other current liabilities – related parties (1 ) - Deferred revenue (4,128 ) (1,652 ) Other noncurrent liabilities (242 ) (513 ) Net cash used in operating activities 44,127 19,827 Cash flows from investing activities Collateralization of derivative instruments 865 (2,518 ) Purchase of marketable securities - (21,671 ) Proceeds from the sale of marketable securities 263 40,652 Proceeds from the sale of property and equipment 61 - Proceeds from the sale of intangible asset - 93 Capital expenditures (3,692 ) (665 ) Net cash (used in) provided by investing activities (2,053 ) 15,891 Cash flows from financing activities Proceeds from the issuance of stock - 231 Payment of dividends (7,877 ) (117,284 ) Net cash used in financing activities (7,877 ) (117,053 ) Net change in cash and cash equivalents (33,747 ) (81,335 ) Cash and cash equivalents at beginning of period 137,521 198,122 Cash and cash equivalents at end of period $ 171,268 $ 116,787 Cash paid for interest $ - $ 43 Cash paid for income taxes $ 72 $ 83 Noncash investing and financing activities: Noncash capital expenditures $ 214 $ 32 Noncash operating leases $ - $ 269
Reconciliation of Non-GAAP Financial Measure to Financial Measure
(Dollars in thousands)
Reconciliation of Adjusted EBITDA to Net Income
Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net income $ 15,780 $ 9,202 $ 278 $ 3,910 Depreciation 2,574 2,656 7,850 7,877 Non-cash stock-based compensation 46 - 46 - Interest and dividend income (1,210 ) (654 ) (2,621 ) (2,449 ) Non-cash interest expense and amortization of deferred financing costs 7 33 72 96 Losses on disposal of property and equipment 10 11 60 11 (Gains) losses on derivative instruments (4,688 ) 2,348 21,917 10,377 Loss on marketable securities 590 729 7,956 192 Income tax provision (benefit) 1,697 (3,181 ) 55 (12,037 ) Adjusted EBITDA $ 14,806 $ 11,144 $ 35,613 $ 7,987
Reconciliation of Adjusted EBITDA to Net Cash Used in Operating Activities
Nine Months Ended September 30, 2022 2021 Net cash used in operating activities $ 44,127 $ 19,827 Benefit for deferred income taxes 255 8,882 Interest and dividend income (2,621 ) (2,449 ) Income tax provision (benefit) 55 (12,037 ) Loss on derivative instruments 21,917 10,377 Change in fair value of derivative instruments 3,053 (2,147 ) Change in operating assets and liabilities, net (31,174 ) (16,459 ) Impairment of intangible asset - (1,315 ) Other 1 - Adjusted EBITDA $ 35,613 $ 7,987
Condensed Consolidated Segment Income
(Dollars in thousands)
Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue Custom chemicals $ 16,047 $ 12,720 $ 44,028 $ 35,655 Performance chemicals 5,459 3,971 17,233 12,693 Chemicals revenue $ 21,506 $ 16,691 $ 61,261 $ 48,348 Biofuels revenue 96,635 81,991 216,937 165,968 Total Revenue $ 118,141 $ 98,682 $ 278,198 $ 214,316 Segment gross profit (loss) Chemicals $ 8,362 $ 5,105 $ 17,976 $ 8,089 Biofuels 11,623 3,087 (4,169 ) (10,676 ) Total gross profit (loss) 19,985 8,192 13,807 (2,857 )
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.
- Revenues were $118.1 million, up 20% from $98.7 million