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8-K - FORM 8-K - FutureFuel Corp.ff20150305_8k.htm

 

Exhibit 99.1

 

March 12, 2015

 

COMPANY CONTACT:

FutureFuel Corp.

Paul M. Flynn

(314) 854-8385

www.futurefuelcorporation.com

 

 

FutureFuel releases full year 2014 results

Reports net income of $53.2 million or $1.22 per diluted share, and adjusted EBITDA of $43.6 million

Conference call begins at 9:00 a.m. Eastern Time March 13, 2015

 

CLAYTON, Mo. (March 12, 2015)FutureFuel Corp. (NYSE: FF), a manufacturer of custom and performance chemicals and biofuels, today announced financial results for the year ended December 31, 2014.

 

Fourth Quarter 2014 Financial Highlights (all comparisons are with the fourth quarter of 2013)

Revenues were $88.5 million, down 30% from $125.6 million

Adjusted EBITDA was $10.9 million, down 57% from $25.5 million

Net income increased to $30.1 million, or $0.69 per diluted share, from $26.5 million, or $0.61 per diluted share.

 

 

2014 Financial Highlights (all comparisons are with the year ended December 31, 2013)

 

Revenues were $341.8 million, down 23% from $444.9 million

Adjusted EBITDA was $43.6 million, a 55% decrease from $96.7 million

Net income decreased 28% to $53.2 million, or $1.22 per diluted share, from $74.0 million, or $1.71 per diluted share.

 

“Given the challenges of the biofuels market in 2014, we are pleased with our full year financial performance. We were able to finish strong in both our chemicals and biofuels segments.  Our chemicals segment benefited from improved execution on several product lines, and our biofuels segment benefited from the limited renewal of the $1.00 blenders’ tax credit (“BTC”) passed in December and retroactive to January 1, 2014;

 

“We continue to explore new growth opportunities for the company, both organically and strategically,” said Paul Flynn, Executive VP of Business and Marketing for FutureFuel Chemical Company. 

 

2015 Regular Cash Dividends

 

FutureFuel previously declared normal quarterly dividends of $0.06 per share for 2015, payable in March, June, September, and December. 

 

 
 

 

 

Financial Overview and Key Operating Metrics

 

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

 

FutureFuel Corp.

Certain Financial and Operating Metrics

(Dollars in thousands, except per share amounts)

(Three months unaudited/twelve months audited)

 

   

Three Months Ended December 31, 2014

   

Three Months Ended December 31, 2013

   

Dollar Change

   

% Change

 

Revenues

  $ 88,467     $ 125,572     $ (37,105 )     (29.5% )

Income from operations

  $ 26,331     $ 22,814     $ 3,517       15.4 %

Net income

  $ 30,128     $ 26,531     $ 3,597       13.6 %

Earnings per common share - basic

  $ 0.69     $ 0.61     $ 0.08       13.1 %

Earnings per common share – diluted

  $ 0.69     $ 0.61     $ 0.08       13.1 %

Capital expenditures (net of customer reimbursements)

  $ 1,212     $ 7,570     $ (6,358 )     (84.0% )

Adjusted EBITDA

  $ 10,855     $ 25,494     $ (14,639 )     (57.4% )

Cash and cash equivalents and marketable securities

  $ 211,799     $ 190,734     $ 21,065       11.0 %

 

   

Twelve Months Ended December 31, 2014

   

Twelve Months Ended December 31, 2013

   

Dollar Change

   

% Change

 

Revenues

  $ 341,838     $ 444,919     $ (103,081 )     (23.2% )

Income from operations

  $ 56,128     $ 90,254     $ (34,126 )     (37.8% )

Net income

  $ 53,200     $ 74,034     $ (20,834 )     (28.1% )

Earnings per common share - basic

  $ 1.22     $ 1.71     $ (0.49 )     (28.7% )

Earnings per common share – diluted

  $ 1.22     $ 1.71     $ (0.49 )     (28.7% )

Capital expenditures (net of customer reimbursements)

  $ 7,002     $ 6,370     $ 632       9.9 %

Adjusted EBITDA

  $ 43,604     $ 96,745     $ (53,141 )     (54.9% )

 

Full Year 2014 Financial and Business Summary

 

Revenues for the year ended December 31, 2014 were $341.8 million as compared to revenues for the year ended December 31, 2013 of $444.9 million, a decrease of 23%. Revenues from biofuels decreased 31% and accounted for 57% of total revenues in 2014 as compared to 64% in 2013. Revenues from chemicals decreased 10% and accounted for 43% of total revenues in 2014 as compared to 36% in 2013. Revenues from the bleach activator and the legacy proprietary herbicide and intermediates were together the most significant components of our chemicals segment revenue base, accounting for 14% of total revenues for the year ended December 31, 2014 as compared to 17% for the year ended December 31, 2013. These products comprised a slightly smaller percentage of our total revenues in 2014, while revenues from other chemicals comprised a larger percentage. Additionally, revenues from the bleach activator decreased in 2014 on reduced volumes. We ceased production of the legacy proprietary herbicide and began retrofitting the equipment for new proprietary herbicide intermediates. Revenues from biofuels decreased 31% from $283.4 million in 2013 to $195.7 million in 2014. The expiration of the BTC on December 31, 2013, along with the absence of a definitive government mandated renewable fuel standard for biodiesel, substantially weakened the economics of biodiesel in 2014. Both the BTC and a specific renewable fuel standard had contributed to superior market conditions in 2013.

 

Income from operations decreased to $56.1 million in 2014 from $90.3 million in 2013. The biofuels segment gross profit decreased 56% from $45.5 million in 2013 to $19.9 million in 2014 on weakened market conditions. The chemicals segment gross profit decreased 16% to $46.1 million in 2014 from $54.7 million in 2013. Operating earnings decreased primarily from: (1) reduced biodiesel selling price and reduced volumes; (2) reduced sales volume of the bleach activator; and (3) reduced sales volume of other custom chemicals. Partially offsetting these reductions in operating earnings was a hedging gain of $12.8 million in 2014 as compared to $1.2 million in 2013, and the recognition of graphite anode material shortfall payments of $8.8 million in 2014 as compared to $2.2 million in 2013. FutureFuel does not report income from operations by segment, but it does report segment gross profit.

 

 
 

 

 

FutureFuel reported net income of $53.2 million, or $1.22 per diluted share, for 2014, compared with net income of $74.0 million, or $1.71 per diluted share, in 2013. Adjusted EBITDA for 2014 totaled $43.6 million, down from $96.7 million in 2013.

 

Capital Expenditures

 

Capital expenditures were $8.1 million in 2014, compared with $18.5 million in 2013. This decrease was attributable to the completion of certain capital projects undertaken on behalf of certain of our customers in 2013. FutureFuel is reimbursed for a portion of these expenditures by certain customers as summarized in the following table.

 

(Dollars in thousands)

 

   

Twelve Months Ended December, 31

 
   

2014

   

2013

 

Capital expenditures

  $ 8,117     $ 18,542  

Cash received from customers as reimbursement of capital expenditures

    (1,115 )     (12,172 )

Net cash paid for capital expenditures

  $ 7,002     $ 6,370  

 

Cash and Cash Equivalents and Marketable Securities

 

Cash, cash equivalents, and marketable securities totaled $211.8 million as of December 31, 2014, compared with $190.7 million as of December 31, 2013.

 

Conference Call and Webcast

 

A conference call and webcast will be held March 13, 2015 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: 92729248.

 

About FutureFuel

 

FutureFuel is a leading manufacturer of diversified chemical products and biobased products comprised of biofuels and biobased specialty chemical products. In its chemicals business, FutureFuel 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, a 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 the 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, 2014 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, and 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)

 

   

Twelve Months Ended December, 31

 
   

2014

   

2013

 

Assets

               

Cash and cash equivalents

  $ 124,079     $ 86,463  

Accounts receivable, inclusive of $28,954 and $0 for the BTC at December 31, 2014 and 2013, respectively

    51,308       33,249  

Inventory

    45,353       42,164  

Marketable securities

    87,720       104,271  

Other current assets

    23,005       17,141  

Total current assets

    331,465       283,288  

Property, plant and equipment, net

    127,371       128,671  

Other assets

    2,652       2,488  

Total noncurrent assets

    130,023       131,159  

Total Assets

  $ 461,488     $ 414,447  
                 

Liabilities and Stockholders’ Equity

               

Accounts payable

  $ 33,298     $ 15,784  

Other current liabilities

    18,789       24,612  

Total current liabilities

    52,087       40,396  

Deferred revenue – long-term

    15,927       13,522  

Other noncurrent liabilities

    34,465       31,939  

Total noncurrent liabilities

    50,392       45,461  

Total liabilities

    102,479       85,857  

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, 43,722,388 and 43,342,830 issued and outstanding as of December 31, 2014 and 2013, respectively

    4       4  

Accumulated other comprehensive income

    4,259       7,436  

Additional paid in capital

    277,652       276,328  

Retained earnings

    77,094       44,822  

Total stockholders’ equity

    359,009       328,590  

Total Liabilities and Stockholders’ Equity

  $ 461,488     $ 414,447  

  

 
 

 

 

FutureFuel Corp.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

    Three Months Ended December 31,  
   

2014

   

2013

 

Revenues

  $ 88,467     $ 125,572  

Cost of goods sold and distribution

    59,546       100,432  

Gross profit

    28,921       25,140  

Selling, general and administrative expenses

    1,721       1,455  

Research and development expenses

    869       871  
      2,590       2,326  

Income from operations

    26,331       22,814  

Other income

    2,817       1,084  

Income before income taxes

    29,148       23,898  

Benefit from income taxes

    (980     (2,633 )

Net income

  $ 30,128     $ 26,531  
                 

Earnings per common share

               

Basic

  $ 0.69     $ 0.61  

Diluted

  $ 0.69     $ 0.61  

Weighted average shares outstanding

               

Basic

    43,372,388       43,342,830  

Diluted

    43,381,070       43,396,273  
                 

Comprehensive Income

               
                 

Net income

  $ 30,128     $ 26,531  

Other comprehensive income (loss) from unrealized gains and losses on available-for-sale securities, net of tax of ($2,636) and $868 in 2014 and 2013, respectively

    (4,229 )     1,389  

Comprehensive income

  $ 25,899     $ 27,920  

  

 
 

 

 

FutureFuel Corp.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Dollars in thousands, except per share amounts)

(Audited) 

 

    Twelve Months Ended December 31,  
   

2014

   

2013

 

Revenues

  $ 341,838     $ 444,919  

Cost of goods sold and distribution

    275,865       344,754  

Gross profit

  $ 65,973     $ 100,165  

Selling, general and administrative expenses

    6,677       6,467  

Research and development expenses

    3,168       3,444  
      9,845       9,911  

Income from operations

    56,128       90,254  

Other income

    11,217       7,097  

Income before income taxes

    67,345       97,351  

Provision for income taxes

    14,145       23,317  

Net income

  $ 53,200     $ 74,034  
                 

Earnings per common share

               

Basic

  $ 1.22     $ 1.71  

Diluted

  $ 1.22     $ 1.71  

Weighted average shares outstanding

               

Basic

    43,357,602       43,237,513  

Diluted

    43,392,011       43,276,931  
                 

Comprehensive Income

               

Net income

  $ 53,200     $ 74,034  

Other comprehensive income (loss) from unrealized gains on available-for-sale securities, net of tax of ($1,980) and $3,018 in 2014 and 2013, respectively

    (3,177 )     4,839  

Comprehensive income

  $ 50,023     $ 78,873  

  

 
 

 

  

FutureFuel Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Audited)

 

   

Twelve Months Ended December 31,

 
   

2014

   

2013

 

Cash flows provided by operating activities

               

Net income

  $ 53,200     $ 74,034  

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

               

Depreciation

    8,981       10,316  

Provision for (benefit from) deferred income taxes

    5,388       (1,972 )

Change in fair value of derivative instruments

    (396 )     (617 )

Other than temporary impairment of marketable securities

    -       336  

Impairment of fixed assets

    247       18,102  

Gain on the sale of investments

    (4,335 )     (1,982 )

Losses on disposals of fixed assets

    108       261  

Stock based compensation

    1,440       -  

Noncash interest expense

    25       24  

Changes in operating assets and liabilities:

               

Accounts receivable

    (21,515 )     (5,838 )

Accounts receivable – related parties

    3,456       (4,629 )

Inventory

    (3,189 )     (172 )

Income taxes receivable

    (4,984 )     (14,732 )

Prepaid expenses

    173       (248 )

Prepaid expenses – related parties

    -       32  

Accrued interest on marketable securities

    99       (79 )

Other assets

    65       (266 )

Accounts payable

    15,459       2,338  

Accounts payable – related parties

    2,055       (3,030 )

Income taxes payable

    -       (620 )

Accrued expenses and other current liabilities

    (3,153 )     4,209  

Accrued expenses and other current liabilities – related parties

    43       3  

Deferred revenue

    (2,524 )     (14,734 )

Other noncurrent liabilities

    1,309       1,718  

Net cash provided by operating activities

    51,952       62,454  

Cash flows from investing activities

               

Collateralization of derivative instruments

    (985 )     1,374  

Purchase of marketable securities

    (41,369 )     (49,348 )

Proceeds from the sale of marketable securities

    57,098       42,348  

Proceeds from the sale of fixed assets

    81       57  

Capital expenditures

    (8,117 )     (18,542 )

Net cash used in investing activities

    6,708       (24,111 )

Cash flows from financing activities

               

Proceeds from the issuance of stock

    -       19,292  

Minimum tax withholding on stock options exercised

    (175 )     (45 )

Excess tax benefits associated with stock options

    59       40  

Payment of dividend

    (20,928 )     (29,904 )

Net cash provided by financing activities

    (21,044 )     (10,617 )

Net change in cash and cash equivalents

    37,616       27,726  

Cash and cash equivalents at beginning of period

    86,463       58,737  

Cash and cash equivalents at end of period

  $ 124,079     $ 86,463  
                 

Cash paid for interest

  $ -     $ 23  

Cash paid for income taxes

  $ 12,372     $ 38,890  

  

 
 

 

  

FutureFuel Corp.

Reconciliation of Non-GAAP Financial Measure to Financial Measure

(Dollars in thousands)

(Three months unaudited/twelve months audited)

 

Reconciliation of Adjusted EBITDA to Net Income

 

   

Three Months Ended December 31,

 
   

2014

   

2013

 

Adjusted EBITDA

  $ 10,885     $ 25,494  

Depreciation and amortization

    (2,259 )     (2,266 )

Reimbursement to customers for BTC

    (18,628 )     -  

Retroactive reinstatement of BTC

    28,954       -  

Non-cash stock –based compensation

    (532 )     -  

Interest and dividend income

    1,508       1,663  

Interest expense

    (6 )     (6 )

Gain on disposal of property and equipment

    (93 )     (174 )

Gains (losses) on derivative instruments

    7,812       (568 )

Other income (expense), net

    1,507       (245 )

Income tax expense

    980       2,633  

Net income

  $ 30,128     $ 26,531  


 

   

Twelve Months Ended December 31,

 
   

2014

   

2013

 

Adjusted EBITDA

  $ 43,604     $ 96,745  

Depreciation and amortization

    (8,981 )     (10,316 )

Reimbursement to customers for BTC

    (18,628 )     -  

Retroactive reinstatement of BTC

    28,954       2,535  

Non-cash stock-based compensation

    (1,440 )     -  

Interest and dividend income

    6,877       5,875  

Interest expense

    (25 )     (24 )

Loss on disposal of property and equipment

    (108 )     (261 )

Gains on derivative instruments

    12,757       1,151  

Gains on marketable securities

    4,335       1,646  

Income tax expense

    (14,145 )     (23,317 )

Net income

  $ 53,200     $ 74,034  

 

 
 

 

 

FutureFuel Corp.

Reconciliation of Non-GAAP Financial Measure to Financial Measure

(Dollars in thousands)

(Audited)

 

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

 

   

Twelve Months Ended  December 31,

 
   

2014

   

2013

 

Adjusted EBITDA

  $ 43,604     $ 96,745  

Provision for (benefit from) deferred income taxes

    5,388       (1,972 )

Reimbursement to customers for BTC

    (18,628 )     -  

Retroactive reinstatement of BTC

    28,954       2,535  

Impairment of fixed assets

    247       18,102  

Interest and dividend income

    6,877       5,875  

Income tax expense

    (14,145 )     (23,317 )

Gains on derivative instruments

    12,757       1,151  

Change in fair value of derivative instruments

    (396 )     (617 )

Changes in operating assets and liabilities, net

    (12,706 )     (36,048 )

Net cash provided by operating activities

  $ 51,952     $ 62,454  

  

 
 

 

 

FutureFuel Corp.

Condensed Consolidated Segment Income

(Dollars in thousands)

(Three months unaudited/twelve months audited)

 

   

Three Months Ended December 31,

 
   

2014

   

2013

 

Revenues

               

Chemicals

  $ 38,322     $ 35,654  

Biofuels

    50,145       89,918  

Total revenues

  $ 88,467     $ 125,572  
                 

Segment gross profit

               

Chemicals

  $ 12,073     $ 13,031  

Biofuels

    16,848       12,109  

Total segment gross profit

    28,921       25,140  

Corporate expenses

    2,590       (2,326

Income before interest and taxes

    26,331       22,814  

Interest and dividend income

    1,508       1,663  

Other income (expense)

    1,309       (579 )

Benefit from income taxes

    980       2,633  

Net income

  $ 30,128     $ 26,531  

 

 

   

Twelve Months Ended December 31,

 
   

2014

   

2013

 

Revenues

               

Chemicals

  $ 146,146     $ 161,501  

Biofuels

    195,692       283,418  

Total revenues

  $ 341,838     $ 444,919  
                 

Segment gross profit

               

Chemicals

  $ 46,062     $ 54,708  

Biofuels

    19,911       45,457  

Total segment gross profit

    65,973       100,165  

Corporate expenses

    (9,845 )     (9,911 )

Income before interest and taxes

    56,128       90,254  

Interest and dividend income

    6,877       5,875  

Other income

    4,340       1,222  

Provision for income taxes

    (14,145 )     (23,317 )

Net income

  $ 53,200     $ 74,034  

 

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.

 

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