FutureFuel(FF) - 2024 Q2 - Quarterly Results

FutureFuel Second Quarter 2024 Results Financial Highlights FutureFuel reported a 15% revenue decrease to $72.4 million in Q2 2024, while net income significantly improved to a $9.6 million profit from a prior-year loss Q2 2024 Financial Highlights (vs. Q2 2023) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $72.4M | $85.3M | -$12.9M | -15% | | Net Income (Loss) | $9.6M | ($9.9M) | +$19.5M | N/A | | Diluted EPS | $0.22 | ($0.23) | +$0.45 | N/A | | Adjusted EBITDA | $6.9M | ($7.3M) | +$14.2M | N/A | Six Months 2024 Financial Highlights (vs. Six Months 2023) | Metric | H1 2024 (in millions) | H1 2023 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $130.7M | $159.5M | -$28.8M | -18% | | Net Income | $13.9M | $11.2M | +$2.7M | +24% | | Diluted EPS | $0.32 | $0.26 | +$0.06 | +23% | | Adjusted EBITDA | $14.0M | $8.6M | +$5.4M | +63% | Management Commentary Management attributes net income improvement to reduced RIN inventory fair market value, while revenue and margins were negatively impacted by low biodiesel and RIN prices and production issues - The primary driver for earnings improvement was the sale of separated RINs, reducing the fair market value of RIN inventory from $19.5 million at June 30, 2023, to $1.1 million at June 30, 2024[2] - Biofuels segment faced challenges from low biodiesel and RIN prices, which compressed margins, and production issues caused by extreme winter weather in Q1 2024 led to lower sales volumes in Q2[3] - In the Chemicals segment, lower glycerin prices and production disruptions impacted sales, with reduced sales to agricultural and energy markets partially offset by increased volumes to the automotive coatings market and a new product launch[3] Dividends and Capital Position FutureFuel paid a significant special cash dividend in Q2 2024, leading to a decrease in cash and cash equivalents to $115.1 million, despite increased capital expenditures - A special cash dividend of $2.50 per share was paid on April 9, 2024, totaling $109.4 million[4][12] - Regular quarterly cash dividends of $0.06 per share were paid in Q2 and are scheduled for September and December 2024[4] - Cash and cash equivalents stood at $115.1 million as of June 30, 2024, a decrease from $219.4 million at December 31, 2023, primarily due to the special dividend[12] - Capital expenditures for the first six months of 2024 were $5.3 million, up from $3.9 million in the same period of 2023[11] Detailed Financial Analysis Financial and Business Summary Q2 revenue declined due to lower biofuel sales, but operating income significantly increased by $17.0 million, primarily driven by reduced RINs inventory and favorable derivative positions - Q2 revenue decline was driven by a $7.4 million drop in biofuel sales volumes due to Q1 production issues and a $5.9 million decrease from lower biofuel prices[7] - The $17.0 million increase in Q2 operating income was primarily due to the benefit of holding minimal RINs inventory ($1.1 million vs $19.5 million prior year), a positive swing in unrealized derivative gains, and a favorable LIFO inventory adjustment[9] - For the first six months, the $28.8 million revenue decrease was mostly from a $17.9 million impact of lower biofuel prices, with the chemical segment revenue also declining by a net $3.3 million[8] - The six-month operating income increase of $1.0 million was supported by reduced RINs inventory and LIFO adjustments, but mostly offset by significant negative changes in realized and unrealized derivative instrument activity compared to the prior year[10] Segment Performance The Biofuel segment saw a revenue decrease but a dramatic improvement in gross profit in Q2 2024, while the Chemical segment maintained stable revenue but experienced a decline in gross profit Segment Revenue (in thousands) | Segment | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Chemical | $19,236 | $18,756 | $37,295 | $40,637 | | Biofuel | $53,173 | $66,552 | $93,395 | $118,852 | | Total | $72,409 | $85,308 | $130,690 | $159,489 | Segment Gross Profit (Loss) (in thousands) | Segment | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Chemical | $4,677 | $6,416 | $8,698 | $15,039 | | Biofuel | $3,980 | ($15,008) | $4,966 | ($2,008) | | Total | $8,657 | ($8,592) | $13,664 | $13,031 | - The company held 2.1 million RINs with a fair market value of $1.1 million at the end of Q2 2024, a substantial decrease from 11.8 million RINs valued at $19.5 million at the end of Q2 2023[25] Consolidated Financial Statements Condensed Consolidated Balance Sheets Total assets decreased to $261.2 million as of June 30, 2024, primarily due to a significant reduction in cash and cash equivalents, reflecting the impact of the special dividend payment Key Balance Sheet Items (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $115,060 | $219,444 | | Total current assets | $183,641 | $290,546 | | Total Assets | $261,185 | $367,081 | | Total current liabilities | $33,139 | $41,344 | | Total Liabilities | $46,790 | $57,201 | | Total Stockholders' Equity | $214,395 | $309,880 | Condensed Consolidated Statements of Income FutureFuel reported a significant turnaround in Q2 2024, achieving a gross profit of $8.7 million and net income of $9.6 million, compared to losses in the prior-year quarter Q2 Income Statement Highlights (in thousands, except EPS) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenue | $72,409 | $85,308 | | Gross Profit (Loss) | $8,657 | ($8,592) | | Income (Loss) from Operations | $5,451 | ($11,583) | | Net Income (Loss) | $9,571 | ($9,859) | | Diluted EPS | $0.22 | ($0.23) | H1 Income Statement Highlights (in thousands, except EPS) | Metric | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | $130,690 | $159,489 | | Gross Profit | $13,664 | $13,031 | | Income from Operations | $7,649 | $6,668 | | Net Income | $13,901 | $11,222 | | Diluted EPS | $0.32 | $0.26 | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $15.6 million in H1 2024, but financing activities, primarily dividend payments, led to a net decrease in cash of $104.4 million Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $15,588 | ($40,665) | | Net cash (used in) provided by investing activities | ($5,312) | $36,980 | | Net cash used in financing activities | ($114,660) | ($5,265) | | Net change in cash and cash equivalents | ($104,384) | ($8,950) | - The primary use of cash in financing activities was the payment of dividends totaling $114.7 million in H1 2024, compared to $5.3 million in H1 2023[21] Non-GAAP Measures and Reconciliations Explanation of Adjusted EBITDA Adjusted EBITDA is a non-GAAP measure used by management to assess performance and liquidity, excluding non-cash items and providing a comparative view of operating results - Adjusted EBITDA is a non-GAAP financial measure used by management to assess performance and liquidity, isolating effects of depreciation, amortization, non-cash stock compensation, and non-cash derivative gains/losses[17][18] Reconciliation of Adjusted EBITDA to Net Income Adjusted EBITDA for Q2 2024 was $6.9 million, reconciled from net income of $9.6 million, with key adjustments including depreciation and unrealized derivative gains or losses Adjusted EBITDA to Net Income Reconciliation (in thousands) | Description | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $9,571 | ($9,859) | $13,901 | $11,222 | | Depreciation | $2,145 | $2,604 | $4,760 | $5,155 | | Interest and dividend income | ($1,521) | ($1,732) | ($4,321) | ($4,068) | | Unrealized (gain) loss on derivatives | ($578) | $1,643 | $1,696 | ($3,259) | | Adjusted EBITDA | $6,907 | ($7,329) | $14,015 | $8,572 | Reconciliation of Adjusted EBITDA to Net Cash from Operations Adjusted EBITDA of $14.0 million for H1 2024 is reconciled from net cash provided by operating activities of $15.6 million, with adjustments for changes in operating assets and liabilities Adjusted EBITDA to Net Cash Reconciliation (H1, in thousands) | Description | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $15,588 | ($40,665) | | Changes in operating assets and liabilities, net | $5,486 | $53,283 | | Interest and dividend income | ($4,321) | ($4,068) | | Adjusted EBITDA | $14,015 | $8,572 | Company Information About FutureFuel FutureFuel Corp. manufactures diversified chemical products, including custom and performance chemicals, and produces biofuels, primarily biodiesel - The company operates through two main segments: Chemicals and Biofuels[13] - The Chemicals segment is divided into custom manufacturing (proprietary agrochemicals, adhesion promoters) and performance chemicals (nylon and polyester polymer modifiers)[13] Forward-Looking Statements This report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially, with investors advised to consult SEC filings for detailed risk factors - The document includes forward-looking statements subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from expectations[15][16] - Investors are advised to consult the company's SEC filings, including Form 10-K, for a comprehensive understanding of potential risk factors[16]