FutureFuel Corp (FF) 2012 Q2 法說會逐字稿

Welcome to the FutureFuel 2012 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 10, 2012.

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

Good morning. This is Lee Mikles from FutureFuel Corporation. Thank you for participating in today's call to discuss FutureFuel's 2012 second-quarter financial results and business progress.

Joining me from FutureFuel today is Chris Schmitt, our Chief Financial Officer. I'd 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 involve risks and uncertainties that could cause actual results to be meaningfully and 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 contents of this call contain time-sensitive information that is accurate only as of today, August 10, 2012. 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'd like to turn our attention to our second-quarter results. The second-quarter results for 2012 did not show the same level of growth that our Company had experienced over the last several quarters. Some of this is driven by accounting treatment that will be discussed later in the call. Overall, we were pleased with the results that we enjoyed.

Revenues increased 38% from Q2 2011. Our adjusted EBITDA totaled $5.9 million. Net income remained relatively flat over Q2 2011, $8.4 million last year and $8.5 million this year.

At this point, I'll turn the call over to Chris Schmitt. Chris?

Thank you, Lee, and welcome, everyone, to today's call. Revenues for the second quarter of 2012 were up 38% to $103.2 million versus $74.7 million in the second quarter of 2011. Biofuel revenues totaled $62.3 million in the second quarter of 2012, as compared to $37.9 million in the second quarter of 2011.

Despite the lack of the $1.00 federal blenders tax credit, demand for biodiesel remained steady in the second quarter of 2012. Throughout 2011 and into 2012, we've made improvements to our production processes, which have resulted in increased production. Increased production has been a significant driver in our increased sales from biofuels.

Chemical revenues increased 11% to $40.9 million from $36.9 million in the second quarter of 2011. Revenues from the bleach activator product increased, while sales of the proprietary herbicide product decreased due to declining volume metric demands of our customer. Revenues from our other custom chemical products increased 72% for the second quarter of 2012, compared to the second quarter of 2011. We continue to have discussions with the customer the proprietary herbicides surrounding their future product needs and how these needs will impact FutureFuel.

In terms of gross profit, biofuels -- the biofuels segment gross profit totaled $3.2 million in the second quarter of 2012, as compared to $8.4 million in the second quarter of 2011. Margins on biodiesel in the second quarter of 2012 are lower than the margins in the second quarter of 2011. There are various reasons for this. However, the single largest, most easily identified factor is the lack of the $1.00 federal blenders credit.

Additionally, our reported margins on biodiesel were impacted by our accounting treatment of RINs held in inventory at June 30, 2012. We do not allocate production costs to internally generated RINs. When we enter into sales of biodiesel on a RINs free basis, we retain possession of the RINs associated with the sold biodiesel and are responsible for the eventual sale of those RINs. Only when the RINs are sold do we recognize any RIN value. Such treatment results in sales revenues being recognized on the biodiesel at the time of the biodiesel sale, but may result in the value on the RIN sales not being realized until a later accounting period.

At June 30, 2012, we did retain an inventory of internally generated RINs. We did not carry a significant corresponding inventory at June 30, 2011. This accounting treatment may lead to volatility in our reported operating results.

Chemical segment gross profit increased 59% to $11.2 million from $7.1 million in the second quarter of 2011. In the second quarter of 2011, we incurred certain expenses, which we were unable to pass along to our customers. In the second quarter of 2012, such expenditures were not incurred.

Additionally, we were able to reduce certain fixed costs of future fuel as a result of an ongoing effort to minimize such expenditures. Income from operations increased to -- decreased from $11.6 million from $12.7 million. That income totaled $8.5 million as compared to $8.4 million in the second quarter of 2012. Diluted earnings per share were $0.20 in the second quarter 2012, as compared to $0.21 in the second quarter of 2011.

Moving on to the financial results for the six months ended June 30, 2012, revenues for the six months ended June 30, 2012, were up 45% to $189 million versus $130 million in the six months ended June 30, 2011. Biofuel revenues totaled $109.7 million in the first six months of 2012, as compared to $48.4 million in the comparable period of last year.

As mentioned above, overall demand for biodiesel has remained steady in the first six months of 2012. Additionally implemented production process improvements have increased the amount of biodiesel we are able to make and sell as compared to the first six months of 2011.

Chemical revenues decreased 3% in the six months ended June 30, 2012, to $79.3 million from $81.5 million in the six months ended June 30, 2011. Revenues from the bleach activator product and from our proprietary herbicide both decreased in the period. Partially offsetting these decreases in these two products was a 42% increase in other custom chemicals in the six months ended June 30, 2012, as compared to the six months ended June 30, 2011.

Biofuels segment gross profits totaled $4.3 million for the six months ended June 30, 2012, as compared to $5.6 million in the six months ended June 30, 2011. The primary drivers for the decline in gross profit, despite the increased revenue totals in biofuels for the six months ended June 30, 2012, are the earlier discussed pressure on biodiesel margins and accounting treatment of internally generated RINs.

Chemicals segment gross profit increased 54% to $22.9 million from $14.8 million in the six months ended June 30, 2012.

Chemical segment gross profit increased, despite the decrease in chemical segment revenues, due to reduction of fixed cost experienced by FutureFuel in the second quarter of 2012, as well as certain expenditures being incurred in 2011, which we were unable to pass on to our customers, that we did not incur in the first six months of June 30, 2012. Income from operations increased to $22.2 million from $15.9 million. Net income totaled $15.6 million as compared to $11.2 million, and diluted earnings per share for the first six months of 2012 totaled $0.38 per share as compared to $0.28 on the six months ended June 30, 2011.

And, with that, I'll turn the call back over to Lee.

Thank you, Chris. I appreciate it very much. Good job. Let me just make a couple of notes and kind of preempt some of the questions that I think we're going to be discussing here.

On the chemical side, I think we're very proud of the job that we've done in picking up new business, increasing existing business, given that our two largest customers show declines in volumes in the first six months, and we've been able to plug that hole and I think operate very efficiently.

Please understand, when you see now in this quarter, because there is some seasonality to the biodiesel business, you're looking at 50% -- roughly a little more than that -- increase in biodiesel sales over our chemical sales. We did $62 million in biodiesel sales in the quarter versus $40 million of the chemical sales. You're going to get more allocated overhead going to biodiesel because some of our allocated overhead at the overall plant is by revenues, by reactors used, etc. So that's going to have the effect of putting more of the costs to the overall plan to biodiesel than chemicals.

So I think we've done a good job on that side, and I think it's something that, as you kind of get into this on a more granular basis, one needs to understand.

Two questions that I think are on the front of mind when it comes to chemical business or our bleach activator business and where are we with that business going forward, I think we've had good -- very good discussions with our customers. We think we'll be continuing with that customer for a period of time that fits both of our needs, and we look forward to doing business with them on an ongoing basis. The existing contract has been disclosed. I believe it is April 2013. We are hopeful to do business with that party after that period of time. So I think that is moving in a positive direction.

Our pre-emerging herbicide business continues to decline. We anticipate that that's probably the direction of that business. We've given a cancellation notice. It's a mechanism within the contract. That contract has two portions to it. One expires in September of 2013, the other October of 2013.

So, again, if we can't negotiate a new contract there, we believe that we'll be doing business with them on an ongoing basis on a purchase order basis. So, again, I think with the two largest customers declining, we've done a terrific job of being able to plug that hole with other custom chemicals. So I'm very pleased with that.

I think that I would warn anybody looking at our results on a quarter to quarter basis, this isn't a business that will lend itself to linking -- linking quarter to quarter where everything grows in some linear fashion. And there's a lot of reasons for that. Chris went over it, I think, in detail, but I think it's very important to note that the timing of the derivative business that we have that's a hedge against the biodiesel, how that's reported, have some really material effect on how many RINs we retain in the quarter and don't sell that don't show up through the income statement. May be a quarter late; may be longer than that.

So I think it's very hard to look at this business on a quarter by quarter basis. I think you need to take a little bit longer view. And, again, there's some seasonality in the biodiesel business that I think is important to note.

So, with that, I'll turn it back over to the operator, and we'll try to go to some questions.

(Operator Instructions).

Just as we're waiting for people to queue up, there has been much discussion in the press over the last few weeks about an effort to put pressure from the Senate and Congressional side on RSF2, renewable fuel standards two, as it relates to ethanol. Again, we fall under that with biodiesel on the 1 billion gallon required usage this year.

We're going to make sure during this recess period that we get to many congressional members and Senate members to understand there's a meaningful difference between ethanol and biodiesel. They tend to want to confuse the two. And I know of no one using any meaningful amount of soy product in biodiesel as it relates to the drought, obviously. We don't use that product, and we can't use it profitably. So we use the much lower valued feed stocks in that. So we want to make sure that there's a clear distinction in the mind of the politicians as they try to apply pressure on the EPA for monitoring of the required usage mandate.

Craig Irwin, Wedbush Securities.

Hi, Lee. Hi, Chris. This is David for Craig. Congratulations on chemicals coming in better than expected this quarter. I was wondering if you could talk a little bit -- the bleach activator looks to be a bit unexpected. Were you expecting it to come in that strong, or has there been a paid change to demand?

No, I think a little bit of that is seasonally adjusted, if you will. It's how much product they had in inventory at the end of the year, how much maybe we had as well. Again, I think that that business continues to be a very good business for them, a good business for us. Again, I think those volumes over time are probably not in an upward sloping direction. But again, I don't know that it was expected or not. We get indications at the beginning of each quarter, but it's going to be -- but that business, I think, has been surprisingly strong for the first six months -- surprising in a modest way. But, again, I think that business remains one that we are highly focused on.

And for the seasonality of that business, could you give us a little sense of what the back half of the year looks like, typically, for the seasonality?

Oh, no. Historically, there's been a little bit of a slowdown and then pickup towards the end of the year. But again, we don't know if that's going to happen or not. It really goes to the customer needs. I think, David, that's a little bit of being a custom manufacturer. We can't go drive sales. We are really making the product for a customer who is out there driving their sales, and they've probably got a much better feel than we do for it, to say the least. But we get an indication at the beginning of the quarter what it's going to be. But, again, I think that business remains strong for us. It's a great relationship, and we hope it continues long into the future.

Okay. Could you talk a little bit about the anode business that you mentioned, and I believe that's got a take or pay on that. Is there any update you could give us there? Maybe the timing of the take or pay or how that's progressing.

Sure. I think a couple of things. I don't anticipate -- the end of the first calendar year of that agreement is the end of August. We don't anticipate that there will be any product produced and shipped during that time period for the requirements of our customer. The take or pay provision would kick in at that time, but there's also a one-year pullback on that over and above past August. So the next year, if they take the product, they get it.

So, again, Chris could probably get into the accounting granularity of that. I don't think it's going to be meaningful this year either in the August timeframe or beyond that. Over the next year, I think you'll start to see that kick in whether we produce the product or not. We're clearly hopeful that the end user, if you will -- and there are multiple end users, we believe -- start to see a pickup in the demand, and thus, we can at some point start to produce the product and ultimately produce more than take or pay minimums that are out there.

Can you give us a sense of the size of that take or pay minimum?

We've never given that information.

Okay. Moving on to the biodiesel side of things, with the gross margins, can you give us further sense of what you're looking at going forward and maybe update us on expected seasonality for the back half of the year?

A couple of things. Again, there has always been a seasonality to this business where your second, third quarter, and maybe at the beginning of the fourth quarter, are your strongest time periods. And that's weather related more than it is anything else.

Again, what we anticipate going forward in terms of margins in that business, there's only a certain part, David, that we can control, and we typically hedge our product as soon as we buy the feedstock. We hedge it into the marketplace, and that's really done with heating oil, which is diesel. And it's an inelegant hedge, as I think I've described it prior.

Again, the portion that we can't hedge, because there's no effective mechanism to hedge, is the RINs. And, again, if we hold RINs and don't sell it with the product where we only get a portion of the value of that RIN, it's typically the most -- it's the highest margin business that we can add, but, again, it's the most unpredictable. And, again, as that RIN value floats up and down, it has dramatic effect on the profitability of the business.

So there is little bit too much in terms of moving parts there to be able to give you a view past this afternoon. But, again, I think it's a business that we manage as well as anybody, and I think having the balance sheet that we have has a tremendous positive effect. And the expertise that our Executive Chairman has in this particular area bodes very well for us to be able to mine as much profitability as there is in that business.

Fantastic. One more follow-up on the RINs, if you could, please. Is there any update on the RIN fraud that's been discussed that you could maybe provide further details on?

Sure. Chris, that's probably something you deal with more on a daily basis.

Sure. I don't know have a specific update on it, but it does seem as though the number of cases that are being announced seem to have dwindled down here recently. But this is still -- I mean, it's a significant issue. I mean, it's an issue that the obligated parties continue to bring up with the EPA, and it continues to be kind of a hot point in any discussions concerning RFS2.

I think on one hand it can be sort of seen as a healthy thing for the industry in that it is signaling to the obligated parties that they need to be careful who they're dealing with. We believe that we at FutureFuel are -- we represent the best risk out there for them to take. We manage this process very, very well. We have very strict quality guidelines. We have a very rigorous process to ensure that we are only generating valid RINs.

But, at the other hand, it's certainly undermined some of the credibility of the industry. We need to be very careful of that. It has been a very unfortunate thing that a very few bad apples have really caused issues for the entire industry. But I think steps are being made now to progress past that point, and there are numerous different initiatives that are being started to allow RIN buyers to feel more comfortable about the RINs that they are purchasing, different verification type services.

And I think that's the point -- and Chris makes a great point there. There's an idea that there will be a certification. That is one of the ideas being kicked around that is kind of moving forward is there will be a certification on the RINs going forward. But, again, I think when an obligated party looks at us, looks at our balance sheet, looks at -- maybe they've come out and looked at our production facility, we are one of the real players in the marketplace. And, again, Chris said it right, there were a few bad actors as anything that puts some fraudulent RINs in the marketplace and that it has an effect on the market, and still does, to a lesser degree, everyday. But, again, I think that that's going to work its way through in short order.

Thank you very much, gentlemen, for taking my questions.

Ian Gilson, Zacks Investment Research.

Good morning, gentlemen. I've got a few sort of add-ons to past questions. Is there currently a trading market for RINs? I know that it did then for a while.

Yes, there is. But, Ian, you raised the point. I mean, the market it is subject to -- there's only so many obligated parties, and from time to time, the volume isn't as great as we would like it to be. But there was a period of time or later in the second quarter where things were less liquid than we are accustomed to. That seems to have picked up here recently, and I guess it's anyone's guess to see how things progress on throughout the rest of the year.

Okay. On the treatment accounting basis, those RINs are going into inventory? Is that at the market value, or what value do you report into those RINs when they are in the accounting statements?

That's a good question, Ian. In researching this particular topic, there are two main ways in which RINs could potentially be accounted for. One would be treating them as inventory, similar to how you just indicated and allocating a certain value to them and allocating that value to the balance sheet, again, as an element of your inventory.

Another way the companies account for RINs is by treating them as an internally generated intangible asset. That's the way in which we have accounted for them. Internally generated intangible assets generally do not have costs allocated to them. So we do not allocate any value to the RINs that we may be holding from one accounting period to another.

So while we may physically have them, no value has been assigned to them for purposes of our balance sheet.

And again, Ian, it's important to note, that's only on gallons where they're sold without the RINs attached and we are the obligated party.

Yes. Yes. I understand that. I understand that. What is the current capacity of the biodiesel plant. You said you've improved the throughput. Is it still the (technical difficulty)?

Again, if you go back, we were at 59 million gallons using the higher valued feedstocks. We went, I think, as low on the totem pole as we could go in terms of feedstock, dropped down to 39. And, Chris, what's in the queue? 45 million gallons?

Right. Well, we were saying we will be producing a little over 45 million gallons per year on an annual rate.

And, again, Ian, I think the idea is we will continue to step that up as a constant debottlenecking process, if you will, and process improvement. Again, I think we are pioneering a lot of the front end of that process. So, again, it's our intent to take it back if at all possible to that 59 million and try to expand from there at some point in the future, if market demands are there.

Do we have any problems, or do you have any problems, in obtaining feedstock?

No. I mean, there are certainly times in which the market for feedstock is more liquid or is more of a buyer's market and sometimes when it flips to be more of a seller's market. But to date we have not had issues in acquiring feedstock, finding sources for it. And some of that is driven by what Lee was just referring to in that we have a pretty large menu of feedstocks that we can handle. So that helps us remain -- or keep us from being dependent upon any one source. And that's helped.

I understand that one of the large chicken processors down your way is a customer for -- you know, Greece is currently not operating as planned. Is that sort of situation to give you an opportunity?

Well, I'm not familiar with that particular situation, Ian, but absolutely. Less competition, less buyers out there in the market for this material. It's certainly better for us.

Okay. And finally, there was a writer added to the Family and Business Tax Cut Certainty Act (multiple speakers) anything that is certain, but basically was scheduled to be added on August 2. Do you happen to remember what happened to that? Was there any resolution? Did it not get added? Did it get added or what?

Ian, I'm not aware of any resolution to that issue. I'm familiar with what you are referring to. But there has been no resolution on that particular topic, and the way that Congress works, I think we kind of take a wait and see mentality. We'll see what happens, but we won't -- it is hard to react to things until they get a little further down the road than that particular bill happens to be.

Okay. Great. Thank you very much.

(Operator Instructions) [Greg Kapuchin], Burlingame Asset Management.

Good morning and congratulations on the chemicals business performance.

Thank you very much. Good morning to you, too.

Can you provide any suggestions on how to think about the portion of the gains on derivative instruments corresponding to biofuels sold and hedges closed during the quarter, which seems like an operating gain offsetting assets to realize biodiesel price?

That's better for you, Chris.

That's a good question. Historically -- and this is why in our adjusted EBITDA figures we have always backed it out. Historically, the gain and losses on hedges haven't been so large to where it's really pushed around the operating results of the business. Obviously, in the second quarter of this year, the gain on hedges was much larger, and that was the result of, I believe, it was a pretty steep decline in heating oil prices on the back half of May.

And yes, a certain portion of that certainly relates to biodiesel, which was sold in the period and, as you said, would pertain to a hedge that was closed. And certainly a certain portion of it relates to a change in inventory value for gallons, which are held over the accounting period.

Traditionally, we have not given any breakout as to which dollars relate to biodiesel gallons that are sold versus which were held in inventory, and I really don't anticipate us as providing that going forward. That's not always the easiest breakout to make.

Just to follow up on it, where would the unrealized gains reside? Would they be on the balance sheet because you have a change in fair value of derivative instruments during the second quarter of negative $2 million. So it doesn't seem like the gain went there. So did it go into the inventory?

The P&L impact of the changes -- the P&L impact of all derivative activity, both realized and unrealized, is recorded as an element of our cost to the goods sold. So to the extent that there was a gain -- for example, in the second quarter of this year there was -- about $8.6 million -- that $8.6 million gain would serve as a reduction of costs of goods sold within our income statement.

On the balance sheet, if the total hedging account is an asset, we recorded as another current asset. If it's a net liability, as it was at the end of the second-quarter 2012, that liability we recorded is another current liability. The item which you referred to, the change in fair market value of the derivative instruments -- I think you got that from the cash flow statement?

No. Well, actually what I did was I looked on the balance sheet. I looked on the fair value of derivative instruments on the balance sheet, and it went from roughly speaking negative $1 million at the end of the first quarter to negative $3 million at the end of the second quarter. And I said, well, so the derivatives that you had on the balance sheet, which I assumed were unrealized hedges unrealized, actually went negative by $2 million over the quarter.

Right.

I was trying to back what is the unrealized hedging gain in the quarter versus the one you actually realized.

Okay. Well, I think if you were to look at the total for the quarter, the total gains and losses was $8.6 million. That's both realized and unrealized. And then I think if you look at the balance sheet for the unrealized portion and look at the change like you did and look at that change versus the $8.6 million, that would spit out your realized portion.

Greg, page 19 of the 10-Q probably simplifies that as best we're going to in terms of disclosure.

Okay. No. That's helpful. This answered my question. My second question is also a biodiesel question. It appears that producers are currently relying on high-value low pre-pay asset feed stocks, likely unprofitable at the current commodity prices, perhaps substantially so, while local overseas stocks still work. Do you have a sense of what it would take for some of the higher cost capacity (technical difficulty) out of the market and create some margin uplift for the low-cost guys?

I think we're already seeing it. I can't imagine there's any producer in the country who can produce with soy or a meaningful amount of say and make any money. It's a loser, and it's a loser by a lot.

So, again, I think that they'll continue over time to come out of the market, if they're not already out. Certainly the smaller players are out. In terms of the bigger players that have any portion of their capacity running on soy, either they're going to take a dramatically reduced margin if they are using it as a mix or they're going to lose an awful lot per gallon if they are using soy.

So, again, I think that's a progression, Greg, over time. But I think we've seen a little bit of that. And it's really part of this issue as it relates to the renewable identification number, the RIN values. And as we start to get towards the end of the year and the mandates, the billion gallons that's out there, is if the industry is trending well below that, you could see a pressure at the end of the year to either buy RINs or take products with RINs attached as we move forward. And I can't imagine at these prices for soy that any portion, certainly no meaningful portion of that is going to come out of the soy producers. So I think that's going to give an advantage to people, a distinct advantage to people who can produce at lower-valued feedstocks, and there are many.

Are you in any way positioning for the potential RIN shortage if soy guys continue to drop out and aren't able to come back in the end of the year, and is some of the RIN inventory basically opportunist positioning for that?

I don't think we'd like to get into that in any -- because that kind of gives away our strategy a little bit, if you will, and that strategy is changing depending on market conditions. Again, thus far, it's been kind of a -- I think one of our colleagues described it as the dog that hasn't barked yet. But, again, we're hopeful that that transpires toward the end of the year, and we will continue to manage our RIN inventory accordingly.

Thank you very much.

Thank you.

[Ted Thornton], private investor.

Good morning. I'm a new, small shareholder, and so this question may have been discussed previously. I bought the stock because I think it's rather cheap. And so I wonder, given your very strong balance sheet, whether you've considered a significant Dutch auction share repurchase. It appears to me like you could handle rather easily $100 million.

Ted, thanks for the question. Obviously, we've got a very strong balance sheet -- $178 million in cash, no debt. I think we pay an attractive dividend. We're paying over $16 million, almost $16.5 million in dividends a year currently, on an announced basis. Again, there's a lot of different potentials for that cash. Acquisitions, I think, would probably be first and foremost on the list. But it's something I think that the Board actually actively discusses.

In terms of your Dutch auction thought, again, I think the Board -- I think I speak for the Board when I say that any purchase of shares would have the effect of taking what little de minimis float that we have in the marketplace out. Again, we'd like to increase that float if we possibly could, not decrease it. And, again, anything above book value, tangible book, has the effect of making that number go down and decreasing the book value of the Company.

So it's something I think we've got some pretty sophisticated financial minds on our Board. It is something that we look at actively. I think we've been very shareholder friendly at this Company and will continue to do so. But I think we're exploring at all times all alternatives for that cash.

Very good. Thank you.

Ian Gilson, Zacks Investment Research.

If we go back and look at the times when you used to break out the business with P&G and Arista, the ratio of the two revenue streams were basically 2 to 1 with P&G being 2 and the Arista revenue being 1. That would lead me to believe that with the reductions that you've discussed, that the Arista is down about the $5 million per quarter run rate. Is that a reasonable assumption?

Well, again, on a run rate going forward or a run rate previously?

Run rate currently.

Currently.

Ian, we don't really get into that level of detail for a couple of reasons. But I mean one of the reasons is that that type of information can also be information that customers don't necessarily want to disclose either. So you can back into some numbers, but I don't think we're going to be able to comment with any great deal of specificity with regard to those two particular customers.

Okay. Now on the P&G business, which you said was strong in the quarter and pretty good in the first half, was that just a normal contract basis, seasonally adjusted, or did you pick up extra business?

No, no. We only produce for one customer.

Excuse me, Lee?

We only produce for one customer. When you say extra business, do you mean from other customers because that's -- ?

No, no, no. Just from the one customer.

Yes, just from the one customer.

Did you pick up any extra that you wouldn't have expected given the prior year's decline?

No, I don't think that there's anything that you can link year-to-year in that business, and again, a lot of that is inventory driven; some of it is demand driven. Ultimately, it's going to be demand driven. But I think, again, some of that flex and modulation in that business has to do with inventory and that ultimate demand as it shakes out over a number of linked quarters.

Okay. Is there a potential of finding another customer for that?

There may be at some point in the future.

Okay. Great. Thank you.

With no further questions in queue, I'd like to turn the conference back over to Mr. Mikles for any closing remarks.

Great. Thank you all very much for your time this morning, and we appreciate your interest in FutureFuel and will look forward to talking up on further quarter calls. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect. Have a great rest of the day.