FutureFuel(FF) - 2021 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements FutureFuel Corp. reported a net loss of $8.8 million in Q1 2021, a reversal from a $19.0 million net income in Q1 2020, driven by decreased revenue and a $10.7 million gross loss Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $340,093 | $342,605 | | Total Assets | $436,422 | $441,304 | | Total Current Liabilities | $43,027 | $32,988 | | Total Liabilities | $73,372 | $69,421 | | Total Stockholders' Equity | $363,050 | $371,883 | - Cash and cash equivalents decreased from $198.1 million at year-end 2020 to $194.0 million at the end of Q1 2021[6] - Inventory increased significantly from $33.9 million to $45.3 million during the quarter[6] Consolidated Statements of Operations and Comprehensive Income Q1 2021 vs. Q1 2020 Statement of Operations (in thousands, except per share) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Revenue | $41,516 | $53,082 | | Gross (Loss) Profit | ($10,736) | $16,399 | | (Loss) Income from Operations | ($13,058) | $13,979 | | Net (Loss) Income | ($8,773) | $19,043 | | Basic & Diluted EPS | ($0.20) | $0.44 | - The company experienced a significant reversal from a gross profit of $16.4 million in Q1 2020 to a gross loss of $10.7 million in Q1 2021, primarily due to a sharp increase in cost of goods sold[8] Consolidated Statements of Cash Flows Q1 2021 vs. Q1 2020 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | ($14,347) | $4,034 | | Net Cash Provided by Investing Activities | $12,828 | $3,838 | | Net Cash Used in Financing Activities | ($2,624) | ($3,101) | | Net Change in Cash | ($4,143) | $4,771 | - Operating activities consumed $14.3 million in cash, a stark contrast to the $4.0 million generated in the prior-year period, driven by the net loss and an increase in inventory[14] Notes to Consolidated Financial Statements Notes detail chemical and biofuel segments, key accounting policies, the impact of the Biodiesel Blenders' Tax Credit, a $2.6 million derivative loss, and a dispute over a February 2021 natural gas bill - The company operates in two segments: chemicals (custom and performance chemicals) and biofuels (primarily biodiesel)[17][18][19] - The Biodiesel Blenders' Tax Credit (BTC) was retroactively reinstated in late 2019 and extended through 2022, benefiting the biofuels segment by reducing cost of goods sold[22][23] Segment Revenue and Gross (Loss) Profit (in thousands) | Segment | Q1 2021 Revenue | Q1 2020 Revenue | Q1 2021 Gross (Loss) Profit | Q1 2020 Gross Profit | | :--- | :--- | :--- | :--- | :--- | | Chemicals | $16,110 | $27,693 | ($1,301) | $8,014 | | Biofuels | $25,406 | $25,389 | ($9,435) | $8,385 | | Total | $41,516 | $53,082 | ($10,736) | $16,399 | - The company is disputing its February 2021 natural gas bill following an extraordinary price increase, with payment pending investigation[84] - Subsequent to the quarter end, in April 2021, the company decided to exit its status as a shipper on a common carrier pipeline, which may lead to an impairment charge on an intangible asset valued at $1.4 million[86][56] Item 2. Management's Discussion and Analysis (MD&A) Management attributes the financial decline to Winter Storm Uri's impact on natural gas prices, derivative losses, and LIFO adjustments, while maintaining strong liquidity Results of Operations Consolidated Financial Performance Summary (in thousands) | Metric | Q1 2021 | Q1 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $41,516 | $53,082 | ($11,566) | (21.8%) | | Gross (Loss) Profit | ($10,736) | $16,399 | ($27,135) | (165.5%) | | Net (Loss) Income | ($8,773) | $19,043 | ($27,816) | (146.1%) | - The decline in gross profit was primarily driven by: exorbitant natural gas prices from Winter Storm Uri (increasing costs by $7.8 million), a loss on derivative instruments of $2.6 million versus a gain of $6.9 million in the prior year, and a negative LIFO inventory adjustment of $3.9 million[110] - Chemicals segment revenue decreased 41.8% to $16.1 million, mainly due to lower sales volumes in custom chemicals from natural gas curtailment, COVID-19 impacts, and product discontinuation[118] - Biofuels segment revenue was flat at $25.4 million, as higher selling prices for fuel and RINs offset lower sales volumes, but reported a gross loss of $9.4 million compared to a gross profit of $8.4 million in Q1 2020, largely due to Winter Storm Uri and derivative losses[121][123] Liquidity and Capital Resources - The company believes existing cash balances ($194.0 million at quarter-end) and its credit facility are sufficient to fund operations, dividends, and capital requirements[133][6] - The company has a $100 million revolving credit facility that expires in March 2025, with no borrowings outstanding as of March 31, 2021[138][62] - In Q1 2021, the company paid a regular quarterly cash dividend of $0.06 per share, totaling $2.6 million; in Q1 2020, a special cash dividend of $3.00 per share ($131.2 million) was also declared[140] Market Risk - The company is exposed to commodity price risk for both inputs (feedstock, natural gas) and outputs (chemicals, biofuels), mitigated by long-term contracts with price adjustment clauses and exchange-traded derivatives[148][149][150] Sensitivity Analysis of a 10% Adverse Price Change on Gross Profit | Item | Decrease in Gross Profit ($ thousands) | Percentage Decrease in Gross Profit | | :--- | :--- | :--- | | Biodiesel feedstocks | $3,115 | 29.0% | | Natural gas | $798 | 7.4% | | Methanol | $261 | 2.4% | | Electricity | $116 | 1.1% | PART II OTHER INFORMATION Item 1. Legal Proceedings The company is not party to any material pending legal proceedings beyond routine litigation incidental to its business - There are no material pending legal proceedings against the company outside of ordinary business litigation[162] Item 1A. Risk Factors No material changes to risk factors were reported since the filing of the 2020 Form 10-K - No material changes to risk factors were reported since the filing of the 2020 Form 10-K[163]