# To Our Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_FF_2017/NYSE_FF_2017.mmd` · pages 2-8_

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To Our Shareholders

With the ever changing and challenging markets, we hold to our primary goal of creating enduring success for all FutureFuel stakeholders with exemplary safety, reliability, and environmental performance. In 2017, we progressed with this focus in both the chemicals and biofuel segments and remain positioned to capture a greater share of value in both the energy and agrochemical markets in 2018.

## 2017 Financial Highlights

(all comparisons are with the year ended December 31, 2016)

• Revenues were \(275.0 million, up 8.6% from \)253.2 million

• Adjusted EBITDA was \(26.4 million, down 52.3% from \)55.3 million (had the Bipartisan Budget Act passed in 2017 instead of 2018 FutureFuel would have reported EBITDA of \(55.3 for 2018 inclusive of the 2017 blenders' tax credit, unchanged from 2017).

• Net income decreased to \(23.5 million, or \)0.54 per diluted share, from \(56.3 million, or \)1.29 per diluted share (down from 2017 due to the timing of the reinstatement of the 2017 blenders' tax credit)

Chemical sales revenue increased 4.4% or \(4,479 in 2017 compared with 2016, breaking a three-year decline. The increase primarily resulted from higher sales prices and volumes in the agrochemical and energy markets, new customer product sales, and increased amortization of deferred revenue, which was partially offset by reduced sales volume and price of our laundry detergent additive.

Gross profit for the chemicals segment decreased 12.6% or \(4,039 in 2017 compared with 2016. This decrease resulted from the impact of reduced sales volumes of the laundry detergent additive and the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. Partially offsetting these declines were improved profits from higher volumes in the Agro chemical and energy markets.

Biofuels sales revenue increased 11.4% or \(17,354 in 2017 compared to 2016, also breaking a three-year decline. This improvement was primarily from increased sales prices of biodiesel, biodiesel blends, and RINs. The sale of separated, internally generated RINs, comprised a larger component of revenue in 2017 as compared to 2016. Partially offsetting this increase was reduced sales volumes of biodiesel and biodiesel blends and less common carrier pipeline sales. Pipeline sales totaled \)2,175 compared to \(9,018 in 2016. Sales volumes of biodiesel, biodiesel blends, and diesel were down given the unfavorable market (without the BTC credit, as compared to 2016, which had the credit in effect all year).

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Biofuels gross profit decreased \(22,558 in 2017 compared to 2016. Cost of goods sold increased as a result of the absence of the BTC which expired on December 31, 2016. The BTC for 2017 was retroactively reinstated on February 9, 2018. Gross profit would have benefited by \)28,853 had the reinstatement been passed in 2017. Gross profit was also reduced by the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting, a lower of cost or market adjustment on pipeline products, and to a lesser extent, reduced margins in common carrier pipelines. Partially offsetting these declines was the change in the activity of derivative instruments in comparison to the prior year with a loss of $3,844, in 2017, as compared to a loss of $6,220, in 2016.

Net income was benefited by a one-time tax benefit of \(12,066 recognized in 2017 resulting from the enactment of The Tax Cuts and Jobs Act of 2017. This benefit was due to an anticipated lower tax rate for future reversals of deferred tax liabilities.

In 2017, we paid a special dividend of \(2.92 totaling \)100.2 million and regular cash dividends of \(0.24 per share or \)10.5 million. We ended 2017 with cash and cash equivalents of $235 million compared with $305 million at the end of 2016.

We remain focused to capture additional value for all FutureFuel stakeholders in 2018. Thank you for your continued support.

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Paul A. Novelly

Chairman of the Board and Chief Executive Officer

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