What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-09 · 215 added, 280 removed, 732 unchanged (40% of the section changed)

3 unchanged sentences

(Dollars in thousands)

June 30, 2021

September 30, 2021  

December 31, 2020

2 unchanged sentences

$ 198,122  

Accounts receivable, inclusive of the blenders' tax credit of $ 12,160  and $ 8,300 at June 30, 2021 and December 31, 2020, respectively, and net of allowances for bad debt of $ 50  and $ 63 at June 30, 2021 and December 31, 2020, respectively

Accounts receivable, inclusive of the blenders' tax credit of $12,679  and $8,300 at September 30, 2021 and December 31, 2020, respectively, and net of allowances for bad debt of $55  and $63 at September 30, 2021 and December 31, 2020, respectively

26,473  

6 unchanged sentences

17,668  

Prepaid expenses

18 unchanged sentences

Liabilities and Stockholders ’

Accounts payable, inclusive of the blenders' tax credit rebates due customers of $ 890 and $ 1,116 at June 30, 2021 and December 31, 2020 respectively

Accounts payable, inclusive of the blenders' tax credit rebates due customers of $890  and $1,116 at September 30, 2021 and December 31, 2020, respectively

$ 25,864  

22 unchanged sentences

Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding

Common stock, $ 0.0001 par value, 75,000,000 shares authorized, 43,763,243 and 43,743,243  issued and outstanding at June 30, 2021 and December 31, 2020 respectively

Common stock, $0.0001 par value, 75,000,000 shares authorized, 43,763,243 and 43,743,243 issued and outstanding at September 30, 2021 and December 31, 2020, respectively  

Accumulated other comprehensive income

15 unchanged sentences

(Dollars in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

$ 73,813  

$ 47,310  

$ 114,971  

$ 99,682  

Three Months Ended September 30,

Nine Months Ended September 30,

Revenue –

1 unchanged sentence

Cost of goods sold

69,760  

43,469  

111,138  

76,250  

Cost of goods sold –

related parties

11,937  

Distribution –

related parties

Gross (loss) profit

( 43 )  

( 10,779 )  

17,310  

Gross profit (loss)

Selling, general, and administrative expenses

4 unchanged sentences

Total operating expenses

(Loss) income from operations

(2,003)  

(15,061)  

12,840  

Income (loss) from operations

Interest and dividend income

Interest expense

( 32 )  

( 64 )  

Gain (loss) on marketable securities

(Loss) gain on marketable securities

Other (expense) income

(1,355)  

( 1,355 )  

11,409  

(Loss) income before taxes

( 988 )  

10,270  

( 14,148 )  

16,101  

Other (expense) income

Income (loss) before taxes

Income tax benefit

( 4,469 )  

( 8,856 )  

Net income (loss)

$ 3,481  

$ 15,159  

$ ( 5,292 )  

$ 34,202  

Earnings (loss) per common share

$ 0.08  

$ 0.35  

$ ( 0.12 )  

$ 0.78  

$ 0.08  

$ 0.35  

$ ( 0.12 )  

$ 0.78  

Net income

Earnings per common share

Weighted average shares outstanding

43,754,232  

43,743,243  

43,748,768  

43,743,243  

43,754,422  

43,743,740  

43,748,768  

43,743,491  

Comprehensive income (loss)

Net income (loss)

$ 3,481  

$ 15,159  

$ ( 5,292 )  

$ 34,202  

Other comprehensive income (loss) from unrealized net gains (losses) on available-for-sale debt securities

Comprehensive income

Other comprehensive loss from unrealized net losses on available-for-sale debt securities

Income tax effect

( 16 )  

Total other comprehensive income (loss), net of tax

Comprehensive income (loss)

$ 3,525  

$ 15,309  

$ ( 5,292 )  

$ 34,039  

Total other comprehensive loss, net of tax

Comprehensive income

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Comprehensive

19 unchanged sentences

Other comprehensive income

Balance - June 30, 2021

43,763,243  

2 unchanged sentences

$ 257,414  

For the Six Months Ended June 30, 2020

Other comprehensive loss  

( 53 )  

Net income  

Balance - September 30, 2021

43,763,243  

$ 282,446  

$ ( 16,042 )  

$ 266,563  

For the Nine Months Ended September 30, 2020

Comprehensive

32 unchanged sentences

$ 369,944  

Other comprehensive loss  

Balance - September 30, 2020

43,743,243  

$ 282,215  

$ 94,482  

$ 376,827  

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

(Unaudited) 

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

Net (loss) income

$ ( 5,292 )  

$ 34,202  

Net income

Adjustments to reconcile net income to net cash from operating activities:

Amortization of deferred financing costs

Benefit for deferred income taxes

(8,881)  

Benefit from deferred income taxes

Change in fair value of equity securities

1 unchanged sentence

(Gain) loss on the sale of investments

( 758 )  

Stock based compensation

Loss on disposal of property and equipment

Loss (gain) on disposal of property and equipment

Impairment of intangible asset

2 unchanged sentences

Accounts receivable

( 9,946 )  

81,029  

Accounts receivable –

related parties

(19,625)  

Income tax receivable

Prepaid expenses

Prepaid expenses –

related parties

( 12 )  

Prepaid expenses - related parties

Accounts payable

23,074  

Accounts payable –

4 unchanged sentences

Deferred revenue

( 1,318 )  

Other noncurrent liabilities

( 342 )  

Net cash (used in) provided by operating activities

( 2,349 )  

84,201  

Net cash provided by operating activities

Cash flows from investing activities

Collateralization of derivative instruments

( 2,060 )  

Purchase of marketable securities

( 19,170 )  

Proceeds from the sale of marketable securities

37,873  

Proceeds from the sale of property and equipment

Proceeds from the sale of intangible asset  

Capital expenditures

( 488 )  

Net cash from (used in) investing activities

16,248  

Cash flows from financing activities

2 unchanged sentences

Deferred financing costs

Proceeds from the issuance of stock  

Payment of dividends

( 114,658 )  

Net cash used in financing activities

( 114,427 )  

Net change in cash and cash equivalents

( 100,528 )  

Cash and cash equivalents at beginning of period

198,122  

243,331  

Cash and cash equivalents at end of period

$ 97,594  

$ 187,823  

Cash paid for interest

22 unchanged sentences

The unaudited consolidated financial statements have been prepared by FutureFuel in accordance and consistent with the accounting policies stated in FutureFuel’s 2020  audited consolidated financial statements and should be read in conjunction with those financial statements.

In the opinion of FutureFuel, all normal recurring adjustments necessary for a fair presentation have been included in the unaudited consolidated financial statements.

All normal recurring adjustments necessary for a fair presentation have been included in the unaudited consolidated financial statements.

The unaudited consolidated financial statements have been prepared in compliance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with instructions to Form 10 -Q adopted by the Securities and Exchange Commission (“SEC”).

40 unchanged sentences

Contract assets consist of unbilled amounts typically resulting from revenue recognized through bill-and-hold arrangements.

The contract assets at June 30, 2021 

The contract assets at September 30, 2021 

and December 31, 2020 

1 unchanged sentence

Contract liabilities consist of advance payments related to material rights recorded as deferred revenue in the consolidated balance sheets.

Increases to contract liabilities from cash received for a performance obligation of chemical segment plant expansions were $ 320  and $ 1,051  and $ 529  and $ 3,358  for the three and six months ended June 30, 2021 

Increases to contract liabilities from cash received for a performance obligation of chemical segment plant expansions were $ 178  and $ 95  and $ 707  and $ 3,453  for the three and nine months ended September 30, 2021 

and 2020, respectively.

Contract liabilities are reduced as the Company transfers product to the customer under the renewal option approach.

Revenue recognized in the chemical segment from the contract liability reductions were $ 1,014  and $ 2,579  for the three months, and $ 1,737  and $ 3,906  for the six months ended June 30, 2021 

Revenue recognized in the chemical segment from the contract liability reductions were $ 456  and $ 174  for the three months, and $ 2,192  and $ 4,080  for the nine months ended September 30, 2021 

and 2020, respectively.

2 unchanged sentences

Contract Assets and Liability Balances

June 30, 2021

September 30, 2021

December 31, 2020

3 unchanged sentences

Contract assets, included in accounts receivable

$ 1,343  

Contract liabilities, included in deferred revenue - short-term

6 unchanged sentences

Transaction price allocated to the remaining performance obligations:

At June 30, 2021, approximately $ 20,505  of revenue is expected to be recognized from remaining performance obligations.

At September 

30, 2021, approximately $ 20,227  of revenue is expected to be recognized from remaining performance obligations.

FutureFuel expects to recognize this revenue ratably over expected sales over the expected term of its long-term contracts which range from three  to five years.

Approximately 25 % of this revenue is expected to be recognized over the next 12 months, and 75 % is expected to be recognized over the subsequent 48 months.

Approximately 30 % of this revenue is expected to be recognized over the next 12 months, and 70 % is expected to be recognized over the subsequent 45  months.

These amounts are subject to change based upon changes in the estimated contract life and estimated quantities to be sold over the contract life.

5 unchanged sentences

Disaggregation of revenue - contractual and non-contractual :

Three Months Ended June 30 ,

Six Months Ended June 30,

Three Months Ended September 30 ,

Nine Months Ended September 30,

Contract revenue from customers with > 1 year arrangements

15 unchanged sentences

Timing of revenue :

Three Months Ended June 30 ,

Six Months Ended June 30,

Three Months Ended September 30 ,

Nine Months Ended September 30,

Bill-and-hold revenue

13 unchanged sentences

$ 154,642  

As of June 30, 2021, $ 3,421  of the bill and hold revenue had not shipped.

As of September 30, 2021, $ 3,052  of the bill and hold revenue had not shipped.

The carrying values of inventory were as follows as of:

June 30, 2021

September 30, 2021

December 31, 2020

26 unchanged sentences

Realized gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the consolidated statements of operations as a component of cost of goods sold and amounted to a 

loss  of $ 5,404  and $ 8,029  for the three months and six months ended June 30, 2021, respectively and a loss of $ 935 and a gain of $ 5,922  for the three months and six months ended June 30, 2020, respectively.

loss  of $ 2,348  and $ 10,377  for the three months and nine months ended September 30, 2021, respectively and a gain of $ 867  and $ 6,789  for the three months and nine months ended September 30, 2020, respectively.

The volumes and carrying values of FutureFuel’s derivative instruments were as follows at: 

Asset (Liability)

June 30, 2021

September 30, 2021

December 31, 2020

2 unchanged sentences

Regulated fixed price future commitments

$ ( 1,013 )  

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $ 2,994  and $ 933  at June 30, 2021 

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $ 3,452  and $ 933  at September 30, 2021 

and December 31, 2020, respectively, and was classified as other current assets in the consolidated balance sheets.

1 unchanged sentence

MARKETABLE SECURITIES

At June 30, 2021 

and December 31, 2020, FutureFuel had investments in certain debt securities (trust preferred securities and exchange-traded debt instruments) and in preferred stock and other equity instruments.

At September 30, 2021 

and December 31, 2020, FutureFuel had investments in certain debt securities (trust preferred securities) and in preferred stock and other equity instruments.

These investments are classified as current assets in the consolidated balance sheets.

The unrealized gain  on equity securities held for the three months ended June 30, 2021 

and 2020  were $ 1,543  and $ 2,164 , respectively.

The unrealized loss on equity securities held for the six months ended June 30, 2021 and 2020 were $ 222  and $ 7,405 , respectively. 

The unrealized (loss) 

gain  on equity securities held for the three months ended September 30, 2021 

and 2020  was ($ 805 ) and $ 1,961 , respectively.

The unrealized loss on equity securities held for the nine months ended September 30, 2021 and 2020 was $ 1,027  and $ 5,445 , respectively. 

Available for sale s ecurities :

1 unchanged sentence

The following comprises the available-for-sale debt securities balances included within marketable securities in the consolidated balance sheets at the respective dates:

June 30, 2021

September 30, 2021

Adjusted Cost

11 unchanged sentences

$ 3,940  

The aggregate fair value of debt securities with unrealized losses totaled $ 0  at June 30, 2021 

The aggregate fair value of debt securities with unrealized losses totaled $ 0  

at September 30, 2021 

and $ 0 at December 31, 2020.

The Company determined an allowance for credit losses for these debt securities was not necessary as of June 30, 2021.

The Company determined an allowance for credit losses for these debt securities was not necessary as of September 30, 2021.

The large financial institutions have strong credit ratings with no recent history of defaulting on outstanding obligations, nor is the Company aware of any long-term credit risk related to delinquency under these obligations.

There were no sales of debt securities in the six  months ended June 30, 2021 

The debt securities held at June 30, 2021, had a contractual maturity of greater than ten years.

There were no sales of debt securities in the nine months ended September 30, 2021. 

Sales of debt securities amounted to $ 1,500 in the three and nine months ended September 30, 2020, resulting in a gain of $ 72 .

The debt securities held at September 30, 2021, had a contractual maturity of greater than ten years.

Notes to Consolidated Financial Statements of FutureFuel Corp.

10 unchanged sentences

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables provide information by level for assets and liabilities that are measured at fair value, on a recurring basis, at June 30, 2021 

The following tables provide information by level for assets and liabilities that are measured at fair value, on a recurring basis, at September 30, 2021 

and December 31, 2020. 

2 unchanged sentences

Fair Value Measurements Using Inputs Considered as:

June 30, 2021

September 30, 2021

Derivative instruments

$ ( 1,013 )  

Preferred stock and other equity instruments

$ 42,298  

Trust preferred stock and exchange-traded debt instruments

$ 3,939  

Trust preferred stock

Asset (Liability)

4 unchanged sentences

Preferred stock and other equity instruments

$ 60,464  

Trust preferred stock and exchange-traded debt instruments

$ 3,940  

Trust preferred stock

 INTANGIBLE ASSET S

3 unchanged sentences

At that time, it was also determined that the value of the remaining line space had declined. 

As a result, an impairment charge was recorded in Other Expense for $ 1,315 to further reduce the intangible asset carrying value to $0  at June 30, 2021 from $ 1,408 at December 31, 2020.

As a result, an impairment charge was recorded in Other Expense for $ 1,315 to further reduce the intangible asset carrying value to $0  at June 

30, 2021 from $ 1,408 at December 31, 2020.

Notes to Consolidated Financial Statements of FutureFuel Corp.

2 unchanged sentences

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at:   

June 30, 2021

Accrued expenses and other current liabilities consisted of the following at:

September 30, 2021

December 31, 2020

Accrued employee liabilities

$ 2,573  

$ 2,609  

Accrued property, franchise, motor fuel and other taxes

Lease liability, current

$ 5,218  

$ 5,077  

Accrued directors' fees

On March 30, 2020, FutureFuel, with FutureFuel Chemical as the borrower and certain of FutureFuel’s other subsidiaries as guarantors, amended and restated its credit agreement (the “Credit Agreement”) originally entered into on April 16, 2015 ( as amended, the “Prior Credit Agreement”) with the lenders party, Regions Bank as administrative agent and collateral agent, and PNC Bank, N.A., as syndication agent.

24 unchanged sentences

The terms of the Credit Facility contain certain negative covenants and conditions including a maximum consolidated leverage ratio and a consolidated minimum interest coverage ratio.

There were no borrowings under the Credit Agreement at June 30, 2021 

There were no borrowings under the Credit Agreement at September 30, 2021 

or at December 31, 2020.

1 unchanged sentence

The following table summarizes the income tax provision.  

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Income tax benefit

4 unchanged sentences

( 148.1 %)  

Because the Company was unable to reliably estimate its annual effective tax rate for the three and six months ended June 30, 2021, it determined its income tax benefit by applying its actual year-to-date effective tax rate to year-to-date pretax loss. 

In contrast, the tax benefit for the three and six months ended June 30, 2020 reflected the application of an estimated annual effective tax rate to year-to-date pretax income. 

In order to minimize the potential for ambiguity and distortion produced using the annual effective tax rate approach, the Company has determined its income tax benefits for the three and nine months ended September 30, 2021 by applying its actual year-to-date effective tax rate to year-to-date pretax loss. 

In contrast, the tax benefits for the three and nine months ended September 30, 2020 reflect the application of an estimated annual effective tax rate to year-to-date pretax income.

The effective tax rates for both periods reflect the positive effects of certain tax credits and incentives, the most significant of which were the BTC and Small Agri-biodiesel Producer Tax Credit. 

Additionally, the effective rate for the three and six months ended June 

30, 2020 was favorably impacted by the enhanced NOL carryback provisions of the CARES Act.

Additionally, the effective rate for the three and nine months ended September 30, 2020 was favorably impacted by the enhanced NOL carryback provisions of the CARES Act.

This law, enacted on March 27, 2020, allowed the Company to carry back its 2020 federal tax loss to a year with a higher tax rate rather than forward to a year with a lower rate.

2 unchanged sentences

EARNINGS PER SHARE

In the three and six months ended June 30, 2021 

In the three and nine months ended September 30, 2021 

and 2020, FutureFuel used the treasury method in computing earnings per share.

Basic and diluted (losses) earnings per common share were computed as follows:  

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Basic and diluted earnings per common share were computed as follows:  

Three Months Ended September 30,

Nine Months Ended September 30,

$ 9,202  

14 unchanged sentences

43,744,107  

Basic earnings (loss) per share

Basic earnings per share

$ 0.21  

2 unchanged sentences

$ 0.94  

Diluted earnings (loss) per share

Diluted earnings per share

$ 0.21  

2 unchanged sentences

$ 0.94  

In the three and six months ended June 30, 2021, 11,905  and 33,905  options to purchase FutureFuel’s common stock were excluded in the computation of diluted earnings per share as all were anti-dilutive, respectively.

In the three  and six months ended June 30, 2020, 50,000 and 62,000  options were excluded, respectively.

In the three and nine months ended September 30, 2021, 24,000  and 30,603  options to purchase FutureFuel’s common stock were excluded in the computation of diluted earnings per share as all were anti-dilutive, respectively.

In the three  and nine months ended September 30, 2020, 40,000 and 54,667  options were excluded, respectively.

RELATED PARTY TRANSACTIONS

18 unchanged sentences

Biodiesel revenues are generated through the sale of biodiesel to customers through FutureFuel’s distribution network at the Batesville Plant, through distribution facilities available at leased oil storage facilities, and through a network of remotely located tanks.

Biofuels revenue also include the sale of biodiesel blends with petrodiesel;

Biofuels revenue also includes the sale of biodiesel blends with petrodiesel;

petrodiesel with no biodiesel added;

7 unchanged sentences

Summary of business by segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Custom chemicals

3 unchanged sentences

Performance chemicals

12,693  

11,139  

Chemicals revenue

13 unchanged sentences

$ 154,642  

Segment gross (loss) profit

Segment gross profit (loss)

$ 5,105  

3 unchanged sentences

( 10,676 )  

Total gross profit (loss)

$ 8,192  

Total gross (loss) profit

$ 6,446  

14 unchanged sentences

Effective March 12, 2020, the guidance in the update is in response to concerns about structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation.

This guidance will ease the accounting burden associated with transitioning away from reference rates that are expected to be discontinued within our credit facility as described in Note 10.

This guidance will ease the accounting burden associated with transitioning away from reference rates that are expected to be discontinued within our credit facility as described in Note 10, Borrowings.

LEGAL MATTERS

3 unchanged sentences

At this time the company is disputing the February 2021 natural gas bill and payment thereof is pending further investigation.

The natural gas expense was a component of Cost of goods sold-related parties in the Consolidated Statements of Operations and Comprehensive Income in the three months ended March 31, 2021 and six months ended June 30, 2021. 

However, as discussed in Note 13, Related Party Transactions, the "ultimate" natural gas supplier is not a related party of FutureFuel.

14 unchanged sentences

Management believes that the diversity of each segment strengthens the company in the ability to utilize resources and is committed to growing each segment.

Within the biofuels segment following the laws of the United States Environmental Protection Agency (EPA) Renewable Fuel Standard (RFS), we generate 1.5 Renewable Identification Numbers (RINs) for each gallon of biodiesel sold in the United States, a classification of a D4 RINs. 

RINs are used to monitor the level of renewable fuel traded in a given year in accordance with RFS 2 within the EPA moderated transaction system (EMTS).

We do not assign cost of goods sold to the generation of RINs as the physical fuel generates the full cost. 

We do not purchase RINs. 

The following table summarizes our RIN holdings and the median RIN market value at September 30, 2021 and September 30, 2020 according to Argus.

September 30,

D4 RIN quantity

Market Value per RIN

We are also registered in California's Low Carbon Fuel Standard program and Oregon's Clean Fuels Program.

Only minimal credits were held in California as of September 30, 2021 and none were held at September 30,2020. 

No credits were held in Oregon in either period.

In March 2020, the World Health Organization categorized COVID-19 as a pandemic and it continues to spread throughout the United States and other countries across the world. 

2 unchanged sentences

The effects of the pandemic are still uncertain.

The virus (including variants thereof) are still spreading. The three principle areas where COVID-19 may still negatively impact our financial performance are customer demand, raw material procurement, and our ability to operate our manufacturing facility.

The virus (including variants thereof) is still spreading. The three principal areas where COVID-19 may still negatively impact our financial performance are customer demand, raw material procurement, and our ability to operate our manufacturing facility.

Customer Demand – 

11 unchanged sentences

To date we have had no negative impact on our ability to operate the plant safely and in a way that meets our customers’

Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts on our financial condition and results of operations.

Even after the COVID-19 outbreak has subsided, we may experience materially adverse impacts on our financial condition and results of operations.

Summary of Financial Results

Set forth below is a summary of certain consolidated financial information for the periods indicated.

Three Months Ended June 30,

Loss from operations

Three Months Ended September 30,

Income from operations

Earnings per common share:

Adjusted EBITDA

Six Months Ended June 30,

Nine Months Ended September 30,

(Loss) income from operations

Net (loss) income

(Loss) earnings per common share:

Earnings per common share:

Adjusted EBITDA

15 unchanged sentences

We include this item as an adjustment as we believe it provides a relevant indicator of the underlying performance of our business in a given period.

Additionally, we invest in marketable securities of certain debt securities (trust preferred stock and exchange-traded debt instruments) and in preferred stock and other equity instruments.

Additionally, we invest in marketable securities of certain debt securities (trust preferred stock) and in preferred stock and other equity instruments.

The realized and unrealized gains and losses on these marketable securities can fluctuate significantly from period to period.

1 unchanged sentence

The following table reconciles net income, the most directly comparable GAAP performance financial measure, with adjusted EBITDA. 

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Three Months Ended September 30,

Nine Months Ended September 30,

Net income

Non-cash stock-based compensation

1 unchanged sentence

Non-cash interest expense and amortization of deferred financing costs

Losses on disposal of property and equipment

Loss (gain) on disposal of property and equipment

Loss (gain) on derivative instruments

(Gain) loss on marketable securities

Loss (gain) on marketable securities

Income tax benefit

1 unchanged sentence

The following table reconciles cash flows from operations, the most directly comparable GAAP liquidity financial measure, with adjusted EBITDA.

Six Months Ended June 30,

Net cash (used in) provided by operating activities

Nine Months Ended September 30,

Net cash provided by operating activities

Benefit for deferred income taxes

7 unchanged sentences

Results of Operations  

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Volume/product mix effect

Gross (loss) profit

Gross profit (loss)

Operating expenses

Other (expense) income

Income tax benefit

Net income (loss)

Consolidated revenue in the three and six months ended June 30, 2021 increased $26,696 and $15,130, compared to the three and six months ended June 30, 2020.

This increase primarily resulted from increased prices in the biofuels segment partially offset by lower sales volumes in the chemicals segment. 

Biofuels volume increased sales revenue in the current three-month period, but reduced revenue in the six-month period, as compared to the same prior year periods.

Gross loss 

in the three months ended June 30, 2021 was $43 as compared to gross profit of $911 in the three months ended June 30, 2020.

This decline primarily resulted from: 

i) reduced sales volumes of two custom chemicals we no longer sell;

ii) the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting which decreased gross profit $3,115 in the current three-month period as compared to an increase in gross profit of $1,575 in the same prior year period and iii) the change in the unrealized and realized postitions in derivative instruments with a loss of $5,404 in the current three-month period as compared to a loss of $935 in the same prior year period. 

Mostly offsetting these declines was improved margins in the biofuel segment.

Gross loss in the six months ended June 30, 2021 was $10,779 as compared to gross profit of $17,310 in the three months ended June 30, 2020. 

Consolidated revenue in the three and nine months ended September 30, 2021 increased $44,544 and $59,674, compared to the three and nine months ended September 30, 2020.

This increase primarily resulted from increased prices in the biofuels segment.

Lower biofuels sales volumes partially reduced sales revenue in the comparative three- and nine-month periods.

Gross profit  

in the three months ended September 30, 2021 was $8,192 as compared to gross profit of $6,446 in the three months ended September 30, 2020.

This increase primarily resulted from: 

i) improved margins in the biofuel segment and ii) the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting which increased gross profit $961 in the current three-month period as compared to a decrease in gross profit of $628 in the same prior year period.

The change in the unrealized and realized positions in derivative instruments mostly offset these increases with a loss of $2,348 in the current three-month period as compared to a gain of $867 in the same prior year period.

Gross loss in the nine months ended September 30, 2021 was $2,587 as compared to gross profit of $23,756 in the nine months ended September 30, 2020.

This decline primarily resulted from:

i) exorbitant natural gas prices invoiced from Winter Storm Uri which resulted in an increase of $7,800 as compared to the prior year quarter; ii) a reduction in production volumes given the natural gas curtailment; iii) reduced sales volumes of two custom chemicals we no longer sale;

i) exorbitant natural gas prices invoiced from Winter Storm Uri which resulted in an increase of $7,800 as compared to the prior year period; ii) a reduction in production volumes given the natural gas curtailment; iii) reduced sales volumes of two custom chemicals we no longer sell;

iv) the change in the unrealized and realized positions in derivative instruments with a 

loss of $8,029 in the six months ended June 30, 2021 as compared to a gain of $5,922 in the six months ended June 30, 2020 and iv) the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. 

This adjustment decreased gross profit $7,028 in the six months ended June 30, 2021 as compared to an increase in gross profit of $2,894 in the same prior period.

loss of $10,377 in the nine months ended September 30, 2021 as compared to a gain of $6,789 in the nine months ended September 30, 2020 and v) the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. 

This adjustment decreased gross profit $6,067 in the nine months ended September 30, 2021 as compared to an increase in gross profit of $2,266 in the same prior period.

Partially offsetting these declines was improved margins in the biofuel segment.

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At this time the company is disputing the February 2021 natural gas bill and payment thereof is pending further investigation.

See Notes 13 and 16 of the consolidated financial statements for further details.

See Notes 13 and 17 of the consolidated financial statements for further details.

Operating  e xpenses

Operating expenses decreased $90 and $188 in the three and six months ended June 30, 2021, as compared to the same periods of 2020.

This slight decrease was primarily from decreased compensation expenses.

Other income decreased $10,394 in the three months ended June 30, 2021 as compared to the same period of the 2020. 

This decrease was primarily from a legal resolution reached in the prior year on a contractual matter for which an accrual of $8,350 was relieved as Other income. 

Other income in the three-month comparison period was also reduced by the impairment of intangible assets of $1,315.

In the six months ended June 30, 2021, Other income decreased $2,348 as compared to the same period in the prior year. 

In addition to the items noted for the change in three months ended June 30, 2021 compared to the prior year, the gain on marketable securities (including unrealized gains) improved to $537 in the six months ended June 30, 2021 as compared to a loss (including unrealized losses) of $8,486.

Income tax benefit 

In contrast, the tax benefit for the three and six months ended June 30, 2020 reflected the application of an estimated annual effective tax rate to year-to-date pretax income. 

Operating expenses decreased $592 and $780 in the three and nine months ended September 30, 2021, as compared to the same periods of 2020 from decreased compensation expenses.

Other income decreased $2,377 in the three months ended September 30, 2021 as compared to the same period of 2020, primarily due to the change in gains and losses in marketable securities. 

The loss (including unrealized losses) was $729 in the current three-month period as compared to gains (including unrealized gains) of $1,213 in the prior year period.

In the nine months ended September 30, 2021, Other income decreased $4,725 as compared to the same period in the prior year.

This decrease resulted from: 

i) a legal resolution reached in the prior year on a contractual matter for which an accrual of $8,350 was relieved as Other income;

ii) the impairment of intangible assets of $1,315 (see Note 8 of the consolidated financial statements for further details);

and iii) reduced interest and dividend income.

 In addition, Other income was benefited from reduced losses in marketable securities (including unrealized losses) in the nine months ended September 30, 2021 compared to the prior year. 

The losses on marketable securities (including unrealized losses) were $192 and $7,273 in the nine months ended September 30, 2021 and 2020, respectively.

Income tax benefit

In contrast, the tax benefits for the three and nine months ended September 30, 2020 reflect the application of an estimated annual effective tax rate to year-to-date pretax income.

The effective tax rates for both periods reflect the positive effects of certain tax credits and incentives, the most significant of which were the BTC and Small Agri-biodiesel Producer Tax Credit. 

Additionally, the effective rate for the three and six months ended June 30, 2020 was favorably impacted by the enhanced NOL carryback provisions of the CARES Act.

Additionally, the effective rate for the three and nine months ended September 30, 2020 was favorably impacted by the enhanced NOL carryback provisions of the CARES Act.

This law, enacted on March 27, 2020, allowed the Company to carry back its 2020 federal tax loss to a year with a higher tax rate rather than forward to a year with a lower rate.

Net income for the three and six months ended June 30, 2021 decreased $11,678 and $39,494 as compared to the same period in 2020, respectively.

This decrease resulted primarily from the changes explained in gross (loss) profit as previously noted, Other income, and Income tax benefit.  

Net income for the three and nine months ended September 30, 2021 increased $2,312 and decreased $37,182 as compared to the same period in 2020, respectively.

This decrease resulted primarily from the changes explained in gross profit (loss) as previously noted, Other income, and Income tax benefit.  

Chemical Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Volume/product mix effect

Chemical revenue in the three and six months ended June 30, 2021 decreased 31.9% or $7,291 and 37.4% or $18,874 compared to the three and six months ended June 30, 2020.

Revenue for our custom chemicals (unique chemicals produced for specific customers) for the three and six months ended June 30, 2021 totaled $12,260 and $22,935, a decrease of $5,781 and $18,866 from the same period in 2020.

Two products we no longer sell benefited the prior year revenue $7,526 and $15,623, respectively. 

The remaining decrease in the six-month comparison period was primarily from lower sales volumes with the natural gas curtailment and COVID-19. 

Performance chemicals (composed of multi-customer products which are sold based on specification) revenue for the three and six months was $3,287 and $8,722, a decrease of $1,510 from the three months ended June 30, 2020.

This decrease was primarily from decreased sales volume of glycerin and the timing of campaign products, although market conditions were more supportive than during the same period of last year. 

Performance chemicals sales revenue in the six-month comparison periods were unchanged.

Gross profit for the chemical segment for the three and six months ended June 30, 2021, decreased $3,292 and $12,607 when compared to the same period of 2020 driven mostly by the unusually high natural gas price, the loss of sales volume in our custom chemical products primarily driven by the effects of COVID-19 on customer demand, and the loss of two custom chemical products we no longer sell. 

Also reducing gross profit in the three and six months ended June 30, 2021 as compared to the same prior year periods was the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. 

This change in adjustments decreased gross profit $324 and $1,064 in the three and six months ended June 30, 2021, and increased gross profit $258 and $760, in the same periods of 2020, respectively.

Chemical revenue in the three months ended September 30, 2021 increased 31.0% or $3,954 compared to the three months ended September 30, 2020.

Revenue from our custom chemicals (unique chemicals produced for specific customers) was $12,720, an increase of $2,391. 

Revenue from our performance chemicals (composed of multi-customer products which are sold based on specification) was $3,971, an increase of $1,562. 

Prior year sales volumes for both product lines were negatively impacted by COVID.

In the nine months ended September 30, 2021, chemical revenue totaled $48,348, a decrease of 23.6% or $14,920 from the same period in 2020.

Revenue from custom chemicals was $35,655, a decrease of $16,474 from the prior year comparison period resulting from two products we no longer sell. 

The remaining decrease in the nine-month comparison period was from lower sales volumes given the natural gas curtailment experienced in February of this year. 

Sales revenue improved $1,554 to $12,693 in the nine-month comparison period for performance chemicals.

This increase was from:

i) improved market conditions with higher sales volumes of our polymer modifier, ii) improved price of glycerin, and iii) the timing of campaigned products.

Gross profit for the chemical segment for the three and nine months ended September 30, 2021, increased $351 and decreased $12,256 when compared to the same periods of 2020.

The decline of gross profit in the nine-month comparison period was driven mostly by the unusually high natural gas price, the loss of sales volume in our custom chemical products primarily driven by the effects of COVID-19 on customer demand, and the loss of two custom chemical products we no longer sell. Also reducing gross profit in the nine months ended September 30, 2021 as compared to the same prior year period was the increase in the LIFO reserve due to higher prices which decreased gross profit $1,202 in the nine months ended September 30, 2021;

alternatively, in the same period of 2020, the LIFO reserve decreased due to lower prices increasing gross profit $748.

Biofuels Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Volume/product mix effect

Gross (loss) profit

Biofuels revenue in the three and six months ended June 30, 2021 increased $33,987 and $34,004 compared to the same periods of 2020, respectively.

This increase was primarily driven from the overall improvement in fuel and RIN prices. 

The biodiesel and biodiesel blend volumes decreased approximately $3,000 in the six-month comparison period primarily from the impact of Winter Storm Uri.

A significant portion of our biodiesel sold was to two major refiners in the three months ended June 30, 2021 and to three major refiner/blenders in the six months ended June 30, 2021. In the same periods of the 2020, one major refiner was greater than 10% of revenue.

Gross profit (loss)

Biofuels revenue in the three and nine months ended September 30, 2021 increased $40,590 and $74,594 compared to the same periods of 2020, respectively.

This increase was primarily driven from the overall improvement in fuel and RIN prices.

The biodiesel and biodiesel blend volumes decreased approximately $ 3,000 in the nine-month comparison period primarily from the impact of Winter Storm Uri.

A significant portion of our biodiesel sold was to three  major refiners in the three months ended September 30, 2021 and to three 

major refiner/blenders in the nine months ended September 30, 2021. In the same periods of the 2020, one major refiner was greater than 10% of revenue.

No assurances can be given that we will continue to sell to such major refiners, or, if we do sell, the volume we will sell or the profit margin we will realize.

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and (iii) the prices we receive from these customers are based upon then-market rates, as would be the case with sales of this commodity to other customers.

Biofuels gross loss was $4,328 in the three months ended June 30, 2021, as compared to a gross loss of $6,666 in the same period of 2020, primarily from:

i) the impact of Winter Storm Uri which dramatically increased the price of natural gas and consequently reduced sales volumes when production was curtailed to minimize natural gas consumption, further exacerbated by delays in restarting caused by the freezing weather; ii) the change in the activity in derivative instruments with a loss of $5,404 in the three months ended June 30, 2021, as compared to a loss of $935 in the three months ended June 30, 2020 and iii) the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting in the three months ended June 30, 2021 as compared to the same period of 2020;

Biofuels gross profit was $3,087 in the three months ended September 30, 2021, as compared to a gross profit of $1,692 in the same period of 2020, primarily from : 

i) improved margins on biodiesel and ii) the reduction in our LIFO reserve from reduced inventories which increased gross profit $1,099 in the current period as compared to an increase in the LIFO reserve from higher prices in the same period of the prior year decreasing gross profit $616. 

Biofuels gross profit decreased further in the three-month comparison periods by the change in the activity in derivative instruments with a loss of $2,348 in the three months ended September 30, 2021, as compared to a gain of $867 in the three months ended September 30, 2020.

Biofuels gross loss was $10,676 in the nine months ended September 30, 2021, as compared to a gross profit of $3,411 in the same period of 2020, primarily from: i) the impact of Winter Storm Uri which dramatically increased the price of natural gas and consequently reduced sales volumes when production was curtailed to minimize natural gas consumption, further exacerbated by delays in restarting caused by the freezing weather; ii) the change in the activity in derivative instruments with a loss of $10,377 in the nine months ended September 30, 2021, as compared to a gain of $6,789 in the nine months ended September 30, 2020 and iii) increased LIFO reserve from increased prices in the nine months ended September 30, 2021 as compared to reduced prices lowering the LIFO reserve in the same period of 2020;

this adjustment decreased gross profit $4,865 and increased gross profit $1,518, respectively.

Biofuels gross loss was $13,763 in the six months ended June 30, 2021, as compared to a gross profit of $1,719 in the same period of 2020, primarily from: 

i) the impact of Winter Storm Uri which dramatically increased the price of natural gas and consequently reduced sales volumes when production was curtailed to minimize natural gas consumption, further exacerbated by delays in restarting caused by the freezing weather; ii) the change in the activity in derivative instruments with a loss of $8,029 in the six months ended June 30, 2021, as compared to a gain of $5,922 in the six months ended June 30, 2020 and iii) the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting in the six months ended June 30, 2021 as compared the same period of 2020;

this adjustment decreased gross profit $5,964 and increased gross profit $2,134, respectively.

We recognize all derivative instruments as either assets or liabilities at fair value in our consolidated balance sheets.

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Asset (Liability)

June 30, 2021

September 30, 2021

December 31, 2020

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Revenue from bill-and-hold transactions in which a performance obligation exists is recognized when the total performance obligation has been met and control of the product has transferred.

Bill-and-hold transactions for the three months ended June 30, 2021 and 2020 were related to custom chemicals customers whereby revenue was recognized in accordance with contractual agreements based upon product being produced and ready for use by the customer.

Bill-and-hold transactions for the three months ended September 30, 2021 and 2020 were related to custom chemicals customers whereby revenue was recognized in accordance with contractual agreements based upon product being produced and ready for use by the customer.

These sales were subject to written monthly purchase orders with agreement that production was reasonable.

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Credit and payment terms for bill-and-hold customers are similar to other custom chemicals customers.

Revenue under bill-and-hold arrangements was $7,878 and $7,335 for the three months ended June 30, 2021 and 2020, respectively. 

For the six months ended June 30, 2021 and 2020 bill and hold sales revenue was $15,427 and $17,488, respectively.

Revenue under bill-and-hold arrangements was $9,185 and $7,400 for the three months ended September 30, 2021 and 2020, respectively. 

For the nine months ended September 30, 2021 and 2020 bill and hold sales revenue was $24,612 and $24,888, respectively.

Liquidity and Capital Resources

Our net cash from operating activities, investing activities, and financing activities for the six months ended June 30, 2021 and 2020 are set forth in the following table.

Six Months Ended June 30,

Net cash (used in) provided by operating activities

Our net cash from operating activities, investing activities, and financing activities for the nine months ended September 30, 2021 and 2020 are set forth in the following table.

Nine Months Ended September 30,

Net cash provided by operating activities

Net cash provided by (used in) investing activities

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Operating Activities

Cash was used by operating activities of $2,349 in the first six months of 2021 as compared to cash provided by in the first six months of 2020 of $84,201, for a net decrease of $86,550.

This decrease was primarily attributable to the change in accounts receivable, including accounts receivable-related parties, of $93,860. 

This change resulted from the receipt of $85,319 in the first half of 2020, primarily from BTC payments, compared to an $8,541 increase in accounts receivable for the same period in 2021.

Also contributing to the net decrease was the change in net income of $34,202 in the first half of 2020 to a net loss of $5,292 for the same period in 2021 for a net decrease of $39,494, and higher cash outflows from inventory of $15,015 in the first half of 2021 compared to the first half of 2020.

Partially offsetting these net cash outflows was a net change in accounts payable, including accounts payable-related parties, demonstrating a cash inflow of $31,033 in the first half of 2021 as compared to a cash outflow of $29,482 in the first half of 2020, also primarily related to BTC rebates due to customers paid in 2020.

In addition, there was a net change in income tax receivable, demonstrating a cash inflow of $801 in the first half of 2021 as compared to a cash outflow of $19,380 in the same period of 2020.

Cash provided by operating activities was $19,827 in the first nine months of 2021 as compared to cash provided in the first nine months of 2020 of $76,576, for a net decrease of $56,749. This decrease was primarily attributable to the change in accounts receivable, including accounts receivable-related parties, of $80,001. 

This change resulted from the receipt of $76,259 in the first nine months of 2020, primarily from BTC payments, compared to a $3,742 increase in accounts receivable for the same period in 2021.

Also contributing to the net decrease was the change in net income from $41,092 in the first nine months of 2020 to a net income of $729 for the same period in 2021 for a net decrease of $40,363, and higher cash outflows from inventory of $18,291 in the first nine months of 2021 compared to the first nine months of 2020.

Partially offsetting these net cash outflows was a net change in accounts payable, including accounts payable-related parties, demonstrating a cash inflow of $21,024 in the first nine months of 2021 as compared to a cash outflow of $52,052 in the first nine months of 2020, also primarily related to BTC rebates due to customers paid in 2020.

In addition, there was a net change in income tax receivable, demonstrating a cash inflow of $7,768 in the first nine months of 2021 as compared to a cash outflow of $14,379 in the same period of 2020.

Investing Activities

Cash from investing activities increased to $16,248 of cash provided by in the first six months of 2021 as compared to cash used in of $2,753 in the first six months of 2020.

Of the $19,001 change, $15,870 was the result of an increase in net sales of marketable securities in the first six months of 2021 compared to the first six months of 2020.

Such net sales totaled $18,703, in the first six months of 2021, compared to $2,833 in net sales in the first six months of 2020. 

Cash from investing activities was $15,891 in the first nine months of 2021 as compared to cash used in of $156 in the first nine months of 2020.

Of the $16,047 change, $16,325 was the result of an increase in net sales of marketable securities in the first nine months of 2021 compared to the first nine months of 2020.

Cash from net sales totaled $18,981, in the first nine months of 2021, compared to $2,656 in the first nine months of 2020. 

Financing Activities

Cash used in financing activities was $114,427 and $136,956, in the six months ended June 30, 2021 and 2020, respectively.

This $22,529 difference primarily resulted from the payment of the special dividend of $109,408 on our common stock in the first six months of 2021 compared to the payment of the special dividend of $131,230 in the same period of 2020, for a net difference of $21,822.

Cash used in financing activities was $117,053 and $139,580, in the nine months ended September 30, 2021 and 2020, respectively.

This $22,527 difference primarily resulted from the payment of the special dividend of $109,408 on our common stock in the first nine months of 2021 compared to the payment of the special dividend of $131,230 in the same period of 2020, for a net difference of $21,822.

Credit Facility

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We do not believe there will be a need to issue any securities to fund such capital requirements.

In the first three and six months of 2021 and 2020, we paid a regular quarterly cash dividend in the amount of $0.06 per share on our common stock.

The regular cash dividend amounted to $2,624 in each period.

On May 10, 2021 we declared a special cash dividend of $2.50 per share and paid $109,408 on June 4, 2021. In the three months ended March 31, 2020, we declared a special cash dividend of $3.00 per share and paid $131,230 on April 17, 2020.

In the three and nine months ended September 30, 2021 and 2020, we paid regular quarterly cash dividends in the amount of $0.06 per share on our common stock.

The regular cash dividend amounted to $ 2,625  in each of the first three quarters.

On May 10, 2021 we also declared a special cash dividend of $2.50 per share and paid $109,408 on June 4, 2021. In the three months ended March 31, 2020, we declared a special cash dividend of $3.00 per share and paid $131,230 on April 17, 2020.

Capital Management

As a result of our initial equity offering, our subsequent positive operating results, the exercise of warrants, and the issuance of shares in our at-the-market offering, we accumulated excess working capital.

As a result of our positive operating results, we accumulated excess working capital.

Some of this excess working capital has been paid out as special and regular cash dividends.

Additionally, regular dividends will be paid in 2021, as previously reported.

Additionally, regular dividends will be paid in December 2021, as previously reported.

Third parties have not placed significant restrictions on our working capital management decisions.

A significant portion of these funds was held in cash or cash equivalents at multiple financial institutions.

In the periods ended June 30, 2021 and December 31, 2020, we also had investments in certain preferred stock, debt securities, and other equity instruments.

In the periods ended September 30, 2021 and December 31, 2020, we also had investments in certain preferred stock, debt securities, and other equity instruments.

We classify these investments as current assets in the accompanying consolidated balance sheets and designate the debt securities as being “available-for-sale.”

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These equity instruments are recorded at fair value, with the unrealized gains and losses reported as a component of net income.

The fair value of the debt securities and equity instruments totaled $46,238 and $64,404 at June 30, 2021 and December 31, 2020, respectively.

The fair value of the debt securities and equity instruments totaled $45,164 and $64,404 at September 30, 2021 and December 31, 2020, respectively.

Lastly, we maintain depositary accounts such as checking accounts, money market accounts, and other similar accounts at selected financial institutions.

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First, we hedge our biofuels sales through the purchase and sale of futures contracts and options on futures contracts of energy commodities.

This activity was captured in our consolidated balance sheets at June 30, 2021 and December 31, 2020.

This activity was captured in our consolidated balance sheets at September 30, 2021 and December 31, 2020.

Second, we hedge our biofuels feedstock through the execution of purchase contracts and supply agreements with certain vendors or they meet the normal purchase and normal sales exception of ASC 815 

Derivatives and Hedging .

These hedging transactions are recognized in earnings and were not recorded in our consolidated balance sheets at June 30, 2021 or December 31, 2020 because they do not meet the definition of a hedge instrument as defined under GAAP.

These hedging transactions are recognized in earnings and were not recorded in our consolidated balance sheets at September 30, 2021 or December 31, 2020 because they do not meet the definition of a hedge instrument as defined under GAAP.

The purchase of biofuels feedstock generally involves two risk components:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements