FutureFuel Corp. (FF)

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FutureFuel Corp (FF)

Q1 2013 Earnings Call

May 8, 2013 9:00 am ET

Executives

Lee E. Mikles – President and Director

Rose M. Sparks – Principal Financial Officer

Christopher Schmitt – Chief Financial Officer

Analysts

Jonathan Tanwanteng – CJS Securities

Jeffrey David Osborne – Stifel Nicolaus & Company

Craig Irwin – Wedbush Securities

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to FutureFuel 2013 First Quarter Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we will hold a question-and-answer session. (Operator Instructions) As a reminder, this conference call is being recorded today, May 8, 2013.

I’d now like to turn the call over to Mr. Lee Mikles, President of FutureFuel Corp. Please go ahead, sir.

Lee E. Mikles

Good morning. This is Lee Mikles from FutureFuel. Thank you for participating in today’s call to discuss FutureFuel’s 2013 first quarter financial results and business progress. Joining me from FutureFuel today is, Chris Schmitt, our Chief Financial Officer, and Rose Sparks, our Principal Financial Officer.

I would like to remind the listeners that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include risks and uncertainties that could cause the actual results to be materially different from any anticipated results. For a list and description of these risks and uncertainties, please review FutureFuel’s filings with the Securities and Exchange Commission.

Please note that the content of this call contains time sensitive information that is accurate only as of today May 8, 2013. FutureFuel disclaims any intention or obligation to update or revise any financial projections or forward-looking statements whether as a result of new information, future events or otherwise. With that out of the way, I would like to turn our attention to the first quarter results.

We had very solid first quarter financial performance, revenues were up 8% to $92.2 million versus the first quarter of 2012.

Our adjusted EBITDA totaled $18 million, up 7%. Our net income increased to $14 million, or $0.33 of diluted share versus $7 million or $0.17 of diluted share. Rose will walk us through these details, and Chris and I will be available for questions afterwards, as well as Rose. Rose, go ahead please.

Rose M. Sparks

Thank you, Lee, and welcome everyone to today’s call. For the first quarter, revenue was up 8% to $92.2 million versus $85.7 million for the first quarter of 2012. Biofuel revenues increased 10% to $52 million as compared to $47.3 million in the first quarter of 2012. Demand was stronger in the first quarter of 2013 with the reinstatement of the dollar blenders' credit along with the increased government mandated renewable fuel standard for 2013 of 1.28 billion gallons of biodiesel.

Chemical revenues increased 4% to $40.5 million, up from $38.4 million in the first quarter of 2012. Revenues increased for the following chemicals; proprietary herbicide and intermediates was up 16%. This increase was equally attributed to increased sale price and change in product mix. The industrial intermediate utilized in the antimicrobial industry was up 20% on higher sales volumes.

Other custom chemicals was up 10% also on our sales volumes in addition to a couple of newly acquired products, which are campaigned in the batch plant. CPOs was up 9% on higher sales volume slightly offsetting these was DIPB, down 14% on lower sales volumes, and other performance chemicals was down 11% due to a shift in the orders of campaign products.

Revenues from the bleach activator were consistent with those from the same period last year.

Turning to gross profit, Biofuels segment increased to $8.3 million from $1.1 million in the first quarter of 2012. This segment was benefited by the reinstatement and recognition of the 2012 blenders’ credit for $2.5 million recognized as a reduction in cost of goods sold in the first quarter of 2013, the same period it was signed into law..

As discussed in the past, gains and losses on derivative instruments and cog their ability in our financial results due to the timing of the change in value of derivative instruments, relative to the sale of the biofuel being sold. Hedging gains for the first quarter 2013 totaled $1.3 million as compared to a loss of $3.4 million in the first quarter of 2012.

Chemical segment gross profit increased 12% to $13.1 million as compared to a $11.7 million for the first quarter of 2012. This increase was largely a result of price adjustments on existing chemical products, continued production process improvements, and minimize operating expenditures. Income from operations increased to $19 million from $10.6 million in the first quarter of 2012. Net income increased from $7.1 million or $0.17 per diluted share in the first quarter of 2012, as compared to $14.1 million or $0.33 per diluted share from the first quarter of 2013.

After-tax non-recurring items recognized in the first quarter of 2013 delighted to 2012 activity, which increased net income included the 2012 blenders’ credits, totaling $1.6 million the benefit from the small ag oil biodiesel producers credit, totaling $1.1 million and both of these credits are set to expire at end of this year December 31, 2013.

Further benefiting net income were net realized and unrealized gains on derivative instruments. On an after-tax basis, net income increased $0.8 million, as compared to after-tax net loss of $2.3 million in the first quarter of 2012. Adjusted EBITDA was $17.7 million versus $16.6 million for the first quarter of 2012.

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