FutureFuel Corp. (FF)

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FutureFuel (FF)

Q2 2013 Earnings Conference Call

August 9, 2013 09:00 ET

Executives

Lee Mikles - President

Rose Sparks - CFO

Analysts

Jonathan Tanwanteng - CJS Securities

Craig Irwin - Wedbush Securities

John Tanner - CJS Securities

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the FutureFuel 2013 second 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 is being recorded today, August 9, 2013.

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

Lee Mikles

Good morning. Thank you Kevin. Good morning this is Lee Mikles from FutureFuel Corporation. Thank you for participating in today's call to discuss FutureFuel's 2013 second quarter financial results and business progress. Joining me today from FutureFuel is Rose Sparks, our Chief Financial Officer.

I would like to remind the listeners that comments made during the call will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risk and uncertainties that could cause actual results to be materially different from any of the 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 August 9, 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 I would like to turn our attention to the second quarter results.

The second quarter 2013 results was a record quarter for financial performance. Revenues were up 3% for the quarter. Adjusted EBITDA totaled 25 million at 327% that income increased to
$18 million or $0.42 per diluted share from 8 million or $0.21 of diluted share.

Rose will walk us through the details and then we will be available for questions. Rose?

Rose Sparks

Thank you Lee and good morning everyone and thank you for joining us. For the second quarter revenue increased 3% to 16.1 million from 103.2 million in the second quarter of 2012. Biofuel’s revenue increased 3% and totaled 64 million as compared to 62.3 million in the comparable period in the prior year. We experienced increased biodiesel sales volume with a higher average selling price in a very strong market for biomass based diesel RINs. Chemical revenues increased 3% to 42 million, revenues increased for the following chemicals, (inaudible) industrial intermediate increased 92%, other custom chemicals 45%, other performance chemicals 6%.

Partially offsetting these increases was a 29% reduction in the proprietary herbicide intermediates at 12% reduction in the bleach activator, the 4% reduction in CPOs a 3% reduction in the DIPB (ph). As previously reported our sales contracts for the proprietary herbicide and intermediates will terminate on September 1st, we anticipate that we will continue to do business with our customer after the termination day provided we can reach mutually acceptable terms. Turning to gross profit for the quarter both segments experienced interest growth profits from economies of scale on fixed resources as new chemicals were added but to a greater extent from biodiesel over the comparable period of 2012.

Biofuel’s gross profit increased from 3.2 million in 2012 to 12.8 million. This difference resulted from improved market conditions for biodiesel largely as a result of the presence of the dollar blender’s credit in effect as compared to the second quarter of 2012 when the tax credit was not available. And for the comparison period biodiesel profitability in the second quarter of 2012 was negatively impacted due to our inventory of unsold internally generated RINs. We do not allocate production cost to internally generated RINs and from time to time we enter into sales of biodiesel on a RINs free basis. At June 30, 2012 we had RINs available for sale which was sold in the third quarter 2012 comparatively we had minimal RINs at June 30, 2013.

These improvements in gross profits for the quarter were partially offset by reduced hedging gains in the second quarter of 2013 which totaled 2.3 million as compared to 8.6 million in the same period of ’12. Chemicals segment gross profit increased 31% to 14.8 million from 11.2 million in the second quarter of ’12, the improvement in gross profit other than from improved economies of scale on fixed resources was attributed to an increase from the bleach activator business as the sales process increased customers reduced sales demands and in the variation in product mix. So income before interest and taxes was 25 million as compared to 11.6 million in the second quarter of ’12. Net income totaled 18.2 million for the second quarter or $0.42 per diluted share this compares against 8.5 million for the second quarter of 2012 or $0.20 per diluted share.

For the six months ended June 30, 2013 revenues increased 5% to 198.2 million as compared to 189 million in the first half of 2012. Biofuel’s revenue increased 6% from 109.7 million in the first half of 2012 to 116.1 million in the first half of this year. The gallon sold increased as did ever selling price of the 100 unit strong about the market conditions as previously mentioned.

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