Income from operations increased from $10.6 million the first three months of 2012 to $19.0 million in the first three months of 2013. FutureFuel does not report income from operations by segment, but does report segment gross profit. The chemicals segment gross profit increased 12% to $13.1 million in the first three months of 2013 from $11.7 million in the first three months of 2012. Biofuels segment gross profit increased to $8.3 million in the first three months of 2013 from $1.1 million in the first three months of 2012. Market conditions were more favorable for biodiesel in 2013 as compared to 2012 largely as a result of the reinstatement of the $1.00 blenders' credit in January 2013. Additionally, the biofuels segment gross profit was benefited from our recognition in the first quarter of 2013 of the retroactive reinstatement of the 2012 $1.00 per gallon biodiesel blenders' tax credit which totaled $2.5 million, which was recorded as a reduction of costs of goods sold and distribution expense. Additionally, hedging gains for the first quarter of 2013 totaled $1.3 million, up from a loss of $3.4 million in the first quarter of 2012.
Net income increased from $7.1 million for the three months ended March 31, 2012 to $14.1 for the three months ended March 31, 2013. This increase was the net result of several factors including the before mentioned improved market conditions in the biodiesel industry, profits realized from production process improvements in the chemicals segment, and new chemical products added to our chemical portfolio. Additionally, however, net income in the first quarter of 2013 was significantly benefited by certain non-recurring or unpredictable items. These items include the impact of the retroactive reinstatements of the $1.00 biodiesel blenders' credit and the agri-biodiesel production credit for 2012. The retroactive reinstatement of the $1.00 biodiesel blenders' credit for 2012 increased first quarter 2013 net income by $2.5 million on a pretax basis, $1.5 million on an after-tax basis. The retroactive reinstatement of the agri-biodiesel production credit for 2012 benefited net income in the first three months of 2013 by $0.9 million on an after-tax basis. While both of these items pertained to 2012 activity, their benefit was not recorded as a component of our net income until 2013 as the law granting these benefits was not enacted until the first quarter 2013. The benefit realized in the first quarter of 2013 from the retroactive reinstatement of these two items for 2012 is not expected to recur. Both the $1.00 biodiesel blenders credit and agri-biodiesel production credits are set to expire at December 31, 2013.
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