What changed in this filing

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Item 1. Business

2022-03-15 compared with 2021-03-16 · 115 added, 111 removed, 317 unchanged (42% of the section changed)

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Trading of our common stock on the New York Stock Exchange (“NYSE”) commenced on March 23, 2011 under the symbol “FF”.

During 2020, we distributed normal quarterly cash dividends of $0.06 per share and a special dividend of $3.00 per share on our common stock.

During 2021, we distributed normal quarterly cash dividends of $0.06 per share and a special dividend of $2.50 per share on our common stock.

Additionally, we have declared normal quarterly cash dividends of $0.06 per share on our common stock for the calendar year 2022.

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We retain a strong emphasis on operational excellence, cost control, and efficiency improvements to enable us to compete in the worldwide chemical industry.

With respect to our biofuels segment, our plant has a demonstrated capacity near 59 MMgy (million gallons per year) with production of 58 MMgy during 2020 with the reinstatement of the blenders’

tax credit (“BTC”), which strengthened a COVID-19 weakened market for renewable fuel volumes and resulting price declines.

In late December 2019, the BTC was retroactively reinstated from its expiry on January 1, 2018 through December 31, 2022.

The future production of biodiesel is uncertain and will depend on various factors including:

(i) changes in feedstock prices relative to biodiesel prices;

(ii) competition from alternative products, such as renewable diesel;

(iii) whether government mandates with respect to biodiesel usage remain in effect;

(iv) whether certain tax credits with respect to biodiesel production remain in effect;

and (v) competitiveness and availability of foreign imports.

See the discussion below, including “Risk Factors”

beginning at page 15 below.

The COVID-19 pandemic and measures to address the pandemic have significantly reduced domestic demand for gasoline and diesel, thereby reducing demand for 2020 RINs.

Renewable Volume Obligations (RVOs) are based on the volume of sales of gasoline and diesel of an obligated party under RFS2.

As those volumes decrease, there is a corresponding decrease in the volume of RINs required for RFS compliance.

As a result, demand for RINs and the value of RINs going forward is uncertain.

Further, it is uncertain how long the impacts of COVID-19 will continue.

With respect to our biofuels segment, our plant has a demonstrated capacity near 59 MMgy (million gallons per year) with almost 55 MMgy produced during 2021.

This scale and the design of our plant in Batesville allows us to process a wide variety of feedstocks and continuously achieve high biodiesel yields.

Combined with the synergies of operating a shared chemical manufacturing facility, this has allowed us to be consistently successful in a highly competitive market.

The impact of the COVID-19 pandemic was first felt in the spring of 2020 and coincided with (and contributed to) a sharp decline in energy prices.

In 2021, as markets recovered from the initial shock, those same prices rose sharply and we adapted to new supply chain logistics, both in terms of product availability and increasing costs.

This has required us to be particularly alert to ensure that we maintain the appropriate operating margins for every element of our business, which we have done.

The future impact of the pandemic is still not wholly predictable and we must be prepared to remain agile and flexible in responding to new situations as they develop.

Narrative Description of Our Business

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For the year ended December 31, 2021, approximately 79% of our revenue was derived from biofuels, 16% from manufacturing specialty chemicals for specific customers (“custom manufacturing”), and 5% of revenues from multi-customer specialty chemicals (“performance chemicals”).

Our biofuels business segment primarily involves the production and sale of biodiesel and petrodiesel blends and the buying, selling, and shipping of refined petroleum products on common carrier pipelines.

Custom chemicals manufacturing involves producing unique products for strategic customers, generally under long-term contracts.

Our custom chemicals manufacturing portfolio includes agrochemicals and intermediates, detergent additives, biocides intermediates, specialty polymers, dyes, stabilizers, and chemicals intermediates.

Our biofuels business segment primarily involves the production and sale of biodiesel and petrodiesel blends.

We historically bought and sold refined petroleum products on common carrier pipelines.

However, in 2021, we significantly reduced this activity. 

Our custom chemicals manufacturing involves producing unique products for strategic customers, generally under long-term contracts.

The custom chemicals manufacturing portfolio includes agrochemicals and intermediates, biocides intermediates, specialty polymers, dyes, stabilizers, and chemicals intermediates.

Our performance chemicals product portfolio includes polymer modifiers that enhance stain resistance and dye-ability to nylon and polyester fibers, in addition to several small-volume specialty chemicals and solvents for diverse applications.

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For the biofuels business segment, we will continue to leverage our technical capabilities and quality certifications, secure local and regional markets, and expand marketing efforts to fleets and regional/national customers.

For our chemicals segment, we intend to pursue commercialization of other products, including building block chemicals.

While pursuing this strategy, we will continue our efforts to establish a name identity for both segments.

For our chemicals segment, we intend to pursue development and commercialization of new products, including building block chemicals and intermediate chemicals requiring Good Manufacturing Practices (GMP).

GMP is a recognized and auditable system ensuring products are produced consistently and controlled according to strict quality standards.

It covers all aspects of manufacturing, facilities, equipment, and training utilizing detailed written procedures affecting the quality and consistency of the finished product.

GMP complements the Company’s current and active quality registrations, including ISO 9001 and BQ9000, and will benefit our custom chemicals business.

GMP will open growth opportunities for the Company to serve customers active in the pharmaceuticals intermediates, food ingredients, and other fine chemicals segment. While pursuing this strategy, we will continue our efforts to establish a name identity for both segments.

Biofuels Business Segment

Biofuel Products

Our biofuels business segment began in 2005 and primarily produces and sells biodiesel.

Our biofuels business segment began in 2005 and primarily includes the production and sale of biodiesel.

In addition, we sell petrodiesel in blends with our biodiesel and, from time to time, with no biodiesel added.

Finally, we are a shipper of refined petroleum products on common carrier pipelines, and we buy and sell petroleum products to maintain our active shipper status on these pipelines.

Finally, we were a shipper of refined petroleum products on common carrier pipelines, and bought and sold petroleum products to maintain our active shipper status on these pipelines.

During 2021, we made the decision to step back from this activity and impaired the value of the related intangible asset. 

See Note 10 to our consolidated financial statements ended December 31, 2021.

Biodiesel is a renewable energy product consisting of mono-alkyl esters of fatty acids.

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See https://afdc.energy.gov/files/pdfs/30882.pdf .

Our technical and operational competency acquired as a supplier of specialty chemicals enabled the development of a flexible manufacturing process, which can use a broad range of feedstock oils, including, but not limited to, soy oil, cottonseed oil, pork lard, poultry fat, inedible corn oil, yellow grease, inedible tallow, choice white grease, used cooking oil, and beef tallow.

Our technical and operational competency acquired as a supplier of specialty chemicals, inclusive of research and development and analytical laboratory testing, enabled the development of a flexible manufacturing process.

Our process can use a broad range of feedstock oils, including, but not limited to, soy oil, cottonseed oil, pork lard, poultry fat, inedible corn oil, yellow grease, inedible tallow, choice white grease, used cooking oil, and beef tallow.

Our Batesville plant produces biodiesel, which is sometimes referenced as “B100.”

A biodiesel blend is currently used in the facility’s diesel fleet and is available for retail sale at the site.

We offer B100 and biodiesel blended with petrodiesel (B2, B5, B10, B20, and B50 blends) at our short-term leased storage facility in Little Rock, Arkansas.

A biodiesel blend is currently used in the facility’s diesel fleet.

We offer B100 and biodiesel blended with petrodiesel (B2, B5, B10, B20, B50, and B99 blends) at our Batesville facility and at a short-term leased storage facility in Little Rock, Arkansas.

In addition, we deliver blended product to a small group of customers within our region.

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As a result, the biodiesel feedstock market in the United States transitioned from this expensive first-generation soy feedstock to alternative second-generation lower-cost, non-food feedstocks, such as waste vegetable oil, tallow, and inedible corn oil.

However, these second-generation feedstocks increased substantially in price as they are also used to produce renewable diesel which often commands a higher margin due to typically lower variable operating costs and its ability to be used as a direct substitute for petrodiesel.

Our continuous production line produces biodiesel from these second-generation lower-cost feedstocks with high-free fatty acids and has demonstrated a biodiesel production capacity in excess of 58 MMgy.

Legislative Incentives

Biodiesel production and use in the United States continues to be driven in large part by legislative initiatives at both the federal and state levels.

Biodiesel production and use in the United States continues to be heavily influenced in large part by legislative initiatives at both the federal and state levels.

Federal Renewable Fuels Mandate

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No differentiation was made among the various types of renewable fuels (e.g., biodiesel or ethanol).

On December 19, 2007, the Energy Independence and Security Act of 2007 (the “2007 Act”) was enacted which, among other things, expanded the RFS (the “RFS2”).

On December 19, 2007, the Energy Independence and Security Act of 2007 (the “2007 Act”) was enacted which, among other things, expanded the RFS (“RFS2”).

Prior to the enactment of the 2007 Act, the RFS requirement was mostly filled by ethanol.

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On July 1, 2010, RFS2’s biodiesel requirement became effective, thus requiring that a certain percentage of the diesel fuel consumed in the United States be made from renewable sources.

The biomass-based diesel mandate rose annually and reached 2.10 billion gallons per year in 2019.

Currently, the mandate is determined by the USEPA in coordination with the U.S.

Secretaries of Energy and Agriculture.

The last update to the mandate was issued on December 19, 2019, when the USEPA finalized the volume requirements and percentage standards under the RFS2 program for 2020 for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel and for biomass-based diesel for 2021.

The following table shows the finalized volume requirement by the USEPA with a modest growth rate in biomass-based diesel.

Final Renewable Fuel Volumes

The biomass-based diesel mandate rose annually and reached 2.43 billion gallons per year in 2021.

In December 2021, EPA published a proposed rule for the RFS volume requirements for 2020, 2021, and 2022 that contains a number of actions. 

Included in that proposal is a reduction of previously finalized volumes for 2020, 2021, and to set 2020, 2021 and 2022 proposed volumes below the statutory targets. 

The proposed reduction is based on significant and unanticipated events such as COVID.

The following table shows the finalized and proposed volume requirements by the USEPA with a modest growth rate in biomass-based diesel.

Renewable Fuel Volumes

Cellulosic biofuel (million gallons)

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The 2020 biomass-based diesel volume requirement was established in the 2019 final rule (40 CFR 80.1405, December 19, 2019).

See https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2020-and-biomass-based-diesel-volume

biomass-based diesel production capacity, of which biodiesel represents a significant amount, exceeded the federal mandate from 2016 through November 2020 as shown in the following chart:

Biomass Production Source :

production of renewable fuels in the RFS2 program broken out by fuel type and category is reported by the USEPA at https://www.eia.gov/biofuels/biodiesel/production/.

The 2021 biomass-based diesel mandate was established in the 2020 RFS annual rule (85FR 7016, February 6, 2020). 

The remaining mandates for 2021 and 2022 are proposed volumes.

See https://sgp.fas.org/crs/misc/R43325.pdf

Federal Blenders ’

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Biodiesel tax incentives have been provided through various federal statutes, including the 2005 Act and the American Jobs Creation Act, and later, the Emergency Economic Stabilization Act of 2008.

The most important of these is the one dollar per gallon BTC applicable to all biodiesel.

The most important of these is the one dollar per gallon Blenders' Tax Credit ("BTC") applicable to all biodiesel.

This credit has lapsed and been reinstated numerous times over the last decade.

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For each of these years, the BTC was retroactively reinstated.

The longest period of retroactive reinstatement was in late December 2019 which reinstated the credit for 2018 through December 31, 2022 (the longest established period in law).

The longest period of retroactive reinstatement was in late December 2019 which reinstated the credit for 2018 through December 31, 2022 (the longest continually established period in law).

Like the BTC, the small agri-biodiesel credit was not in place for the majority of 2019.

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FutureFuel continues to operate under the most recently published version of ASTM D6751, Standard Specifications for Biodiesel Fuel Blend Stock (B100) for Middle Distillate Fuels.

All biodiesel made in our continuous process meets the specifications for No.

All biodiesel made in our continuous process meets the more stringent specifications for No.

biodiesel industry created the BQ-9000 program to address quality issues that arose during the early years of the industry.

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A byproduct of the biodiesel process is crude glycerin, which is produced at the rate of approximately 10% by mass of the quantity of biodiesel produced.

Countervailing duties levied in 2017 by the U.S.

Commerce Department on biodiesel imported from Argentina and Indonesia reduced excess supply of imported glycerin.

The U.S glycerin market corrected in 2018 with supply/demand more in balance.

Crude glycerin (as generated from biodiesel production) is commonly sold into energy exploration and water treatment markets, the price of which is determined, among other factors, by energy prices, product supply, and corn commodity prices.

Crude glycerin can be refined into a pure form and then used in higher value markets such as specialty chemical production, agricultural formulations, food, pharmaceutical, and/or cosmetic applications.

Our business produces both crude glycerin and refined glycerin for commercial sales.

Crude glycerin is not suitable for most commercial applications due to high impurity levels, and is sold into commercially viable uses for the crude product such as energy, agricultural and animal feed, and other applications not requiring high purity.

The price of crude glycerin is impacted by supply and demand balance, energy prices, and prices for other commodities such as corn and soy.

Crude glycerin can be refined into a purer form and then used in higher value markets such as specialty chemical production, agricultural formulations, food, pharmaceutical, and/or cosmetic applications.

We have added the capability to refine our crude glycerin to an industrial grade with higher value applications.

We currently market both crude and industrial grade glycerin with our product mix dependent upon refining capacity, product specifications, prices, and other market conditions.

Our business strives to maximize availability of the higher value refined glycerin based on refining capacity, product specifications, prices, and other market conditions.

Biodiesel Residue

An additional byproduct of the biodiesel production process is biodiesel residue.

We use distillation columns in our biodiesel production process.

Biodiesel residue accumulates in these columns as biodiesel is produced.

This is a low-priced commodity that we aggregate and sell to multiple customers, primarily for use in Bunker C #6 Oil and as an asphalt release agent.

An additional byproduct of the biodiesel production process is biodiesel distillation residue. 

This is a relatively low-priced commodity that we aggregate and sell to multiple customers, primarily for use in Bunker C #6 Oil and as an asphalt release agent.

Biodiesel Production Capacity

According to Biodiesel Magazine (December 15, 2020) the United States had a total combined annual capacity of 2,806 million gallons from 105 biodiesel plants.

According to Biodiesel Magazine (January 24, 2022) the United States had a total combined annual operational capacity of 2,634 million gallons from 66 biodiesel plants.

See http://www.biodieselmagazine.com/plants/listplants/USA/.

Available plant capacity increased 293 million gallons from 2017.

Operational plant capacity decreased almost 200 million gallons from 2020 as the renewable diesel market expanded (see Competition ) and feedstock prices increased.

We believe that the biodiesel industry will continue to be highly competitive given the excess capacity.

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Most biodiesel in the United States is consumed in the on-road diesel fuel market, although some is used for off-road purposes such as farming, residential/commercial heating oil, and power generation.

We currently market our biodiesel products by truck, rail, and barge directly to customers in the United States.

Through the utilization of liquid bulk storage facilities and barge loading capabilities, we are positioned to market biodiesel throughout the United States mainly for transportation.

We currently market our biodiesel products by truck and rail directly to customers in the United States.

We also have the capability to load through barge from a terminal in Little Rock, Arkansas.

Through the utilization of liquid bulk storage facilities and barge loading capabilities, we are positioned to market biodiesel throughout the United States predominately for transportation.

Although the regional market is still being developed, we estimate that the regional direct market available to us at maturity will be at least 30 million gallons per year.

For the twelve months ended December 31, 2020 and 2019, one customer represented approximately 20% and 22% of biofuel revenue (12% and 11% of total revenue).

For the twelve months ended December 31, 2018 four customers represented approximately 58% of biofuel revenue (35% of total revenue), with the remaining biofuel revenue spread across multiple other customers.

For the twelve months ended December 31, 2021, three customers represented approximately 52% of biofuel revenue (41% of total revenue).

For the twelve months ended December 31, 2020 and 2019, one customer represented approximately 20% and 22% of biofuel revenue (12% and 11% of total revenue), respectively.

We do not have long term contracts with any biofuels customer, but rather sell on the basis of monthly or short-term, multi-month purchase orders at prices based upon then-prevailing market rates.

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and (iv) our sales to the customers are not under fixed terms, and the customers have no obligation to purchase any minimum quantities except as stipulated by short term purchase orders.

Renewable diesel is a rapidly growing competing biofuel with biodiesel.

Renewable diesel is a rapidly growing and competing biofuel with biodiesel.

FutureFuel uses a conventional process of transesterification of feedstocks fats, vegetable oils, or waste cooking oils to make biodiesel.

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As a result, renewable diesel trades at a premium price to conventional biodiesel based on fungibility with petrodiesel, better cold weather performance and generation of a higher number of RINS on a per gallon basis.

According to the U.S.

Department of Energy, five plants produce renewable diesel in the United States, with a combined capacity of nearly 400 million gallons per year.

Production is expected to grow in the coming years due to expansions at existing plants and the construction of new plants.

Energy Information Administration (EIA) does not report renewable diesel production;

however, the U.S.

Environmental Protection Agency (EPA) reports RFS RIN data, which indicates that the United States consumed over 900 million gallons in 2019.

Nearly all domestically produced and imported renewable diesel is used in California due to economic benefits under the Low Carbon Fuel Standard.

See https://afdc.energy.gov/fuel/emerging_hydrocarbon.html#:~:text=Five%20plants%20produce%20renewable%20diesel, 400%20million%20gallons%20per%20year.

We compete with other producers of biodiesel regionally, nationally, and with foreign imports.

Renewable diesel operational capacity in the US is approximately 789 million gallons per year with that figure expected to triple within the next two years.

New facilities are also being proposed that could potentially see that total double again within the next five years.

This total is significantly greater than current biodiesel feedstock consumption and will require an increase in the supply chain to meet that demand.

That increase is presently being driven by price (feedstock prices have approximately tripled since the beginning of 2020);

and the economic benefits in California under the Low Carbon Fuel Standard where almost all domestically produced and imported renewable diesel is used.

The future for biodiesel will be driven feedstock availability;

its market price compared to renewable diesel;

and State and Federal regulations and incentives.

We also compete with other producers of biodiesel regionally, nationally, and with foreign imports.

The principal methods of competition in the biodiesel industry are price, supply reliability, biodiesel quality, and RIN integrity, i.e., the degree of confidence the market maintains in the validity of a biodiesel producer’s RINs.

The ten largest producers in terms of production capacity of biodiesel in the United States in 2020 were Renewable Energy Group, Inc., Marathon and affiliates, World Energy and affiliates, RBF Port Neches, LLC, Cargill and affiliates, Ag Processing, Inc., Louis Dreyfus Agricultural Industries LLC, Hero BX, Archer Daniels Midland Co., and Seaboard Energy and affiliates.

Operational biodiesel plants have dropped by one-third in the past two years.

See http://www.biodieselmagazine.com/articles/2517892/pillars-of-new-production. The ten largest producers in terms of production capacity of biodiesel in the United States in 2020 were Renewable Energy Group, Inc., Marathon and affiliates, World Energy and affiliates, RBF Port Neches, LLC, Cargill and affiliates, Ag Processing, Inc., Louis Dreyfus Agricultural Industries LLC, Hero BX, Archer Daniels Midland Co., and Sinclair Renewable Diesel.

See http://www.biodieselmagazine.com/plants/listplants/USA/.

These ten producers account for 59% of the total 2.8 billion gallons of production capacity available in 2020.

These producers account for 66% of the total 2.6 billion gallons of production capacity available in 2020.

Additionally, we compete with numerous other smaller producers and emerging renewable diesel and cellulosic based biodiesel technologies.

A significant capital investment would be required for FutureFuel to produce renewable diesel, and the current economics and business uncertainty do not support this level of investment.

We cannot give any assurances that renewable diesel fuel, green diesel, natural gas or some other product produced by these or similar competing technologies will not supplant biodiesel as an alternative to conventional petrodiesel. The manufacturing processes for biodiesel and renewable diesel are inherently different and it would not be economically feasible to retrofit the Company’s operation to produce renewable diesel.

The biodiesel industry also is in competition with the petroleum-based diesel fuel industry.

The biodiesel industry is small relative to the size of the petroleum-based diesel fuel industry, and large petroleum companies have greater resources than we do.

Without government incentives and requirements, the consequent impact on processing economics would be uncertain.

Without government incentives and requirements, it is uncertain how the market would adjust and what the consequent impact on processing economics would be.

Supply and Distribution

As a result of our feedstock-flexible process, we are able to source feedstock from a broad supplier base, which includes crude corn oil producers, reclaimed used cooking oil, and pork, chicken, and beef rendering facilities from both national and regional suppliers.

As a result of our feedstock-flexible process, we are able to source feedstock from a broad supplier base, which includes degummed soy oil, distilled corn oil producers, reclaimed used cooking oil, and pork, chicken, and beef rendering facilities from both national and regional suppliers.

Crude corn oil has been sourced from several national and regional producers.

All feedstocks are currently supplied by either rail or truck.

We believe that an adequate supply of feedstocks can be sourced to support our anticipated production.

As discussed in the previous section, sourcing supplies of economically attractive feedstocks is becoming increasingly competitive.

We sell biodiesel from our plant site as well as ship it to liquid bulk storage facilities for further distribution.

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Biodiesel is being delivered by Company-owned tank trucks and common carriers to a liquid bulk storage facility leased by us for distribution there and for further transportation by barge or tank truck.

Several biodiesel producers and petroleum refiners are investing in large scale renewable diesel production.

These include Neste Corporation with production facilities in Asia and Europe, Valero Corporation through its Diamond Green JV with Darling Ingredients in Norco, Louisiana and World Energy, Paramount California.

Greenea reported a six times potential growth in U.S.

installed capacity of Renewable Diesel over the next six years.

http://www.greenea.com/wp-content/uploads/2021/01/Greenea-Horizon-2030-Which-investments-will-see-the-light-in-the-biofuel-industry-1.pdf

Cyclicality and Seasonality

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In late December 2019, the BTC was retroactively reinstated from its expiry on January 1, 2018 and extended through December 31, 2022.

Further, it is anticipated that the U.S.

market may transition to larger plants, alternative feedstocks and second-generation technologies, resulting in consolidation among smaller, first-generation producers accompanied by a series of mergers and acquisitions in the field.

Although it is unclear whether this trend will occur, if it does, we believe that producers who are proactive in responding to these changes can compete with foreign imports and benefit in this emerging market.

Based on analysis from industry analysts, the biodiesel industry is entering a new era of transition to alternative feedstocks, emerging technologies, and revised government policies favoring sustainable feedstocks and fuels. Large scale investment in large scale renewable diesel plants competing for the same feedstock pool will put significant pressure on small scale conventional biodiesel producers.

We believe that producers who are proactive in responding to these changes can remain competitive and benefit in this emerging market.

These responses include:

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Chemical Products

Custom manufacturing involves producing unique products for strategic customers, generally under long-term contracts.

Many of these products are produced under confidentiality agreements in order to protect each company’s intellectual property.

Custom manufacturing involves producing unique products for strategic customers, generally under multi-year or long-term contracts.

Most of these products are produced under confidentiality agreements in order to protect each company’s intellectual property.

This is a service-based business where customers value dependability, regulatory compliance, technical capabilities, responsiveness, product quality, process scale up and improvement, operational safety, and environmental protection.

Our custom manufacturing products are manufactured by continuous production, dedicated batch or general-purpose batch mode depending on the volumes required.

Management believes that we are a strategic production partner to our key customers in this segment, and our engineering and technology teams collaboratively work together with our customers to further develop the processes and drive continued improvement.

Our custom manufacturing products are manufactured by continuous production, dedicated batch or general-purpose batch mode depending on specific product and the volumes required.

Management believes that we are a strategic production partner to our key and potential customers in this segment, and our sales, engineering and technology teams collaboratively work together with our customers to further develop the processes and drive continued improvement.

Our plant’s custom manufacturing product portfolio includes products that are used in the agricultural chemical, coatings, chemical intermediates, industrial and consumer cleaning, oil and gas, and specialty polymers industries.

Historically, our custom manufacturing product portfolio has been highly concentrated on two significant legacy products, namely a laundry detergent additive for a leading consumer products company and a proprietary row crop herbicide.

Historically, our custom manufacturing product portfolio was highly concentrated on two significant legacy products, namely a laundry detergent additive for a leading consumer products company and a proprietary row crop herbicide.

The year 2021 marked the first full year that these legacy products were no longer sold.

Our current custom manufacturing product portfolio is more diversified into multiple markets including agrochemicals, oilfield chemicals, industrial intermediates, and fabric care markets.

Performance chemicals comprise multi-customer products, which are sold based upon specification and/or performance in the end-use application.

Performance chemicals comprise products which are generally available to the open market and sold to multiple customers. 

These products are sold based upon specification and are intended for specific performance in the end-use application determined by the customer.

This portfolio includes a family of polymer (nylon and polyester) modifiers, glycerin products, and several small-volume specialty chemicals and solvents for diverse applications.

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Future Strategy

To build on and maintain our reputation as a technology-driven competitive chemical producer, we believe that we must continuously focus on customer relationship development, cost control, operational efficiency, capacity utilization, operational safety, and environmental protection to maximize earnings.

We believe that the ability to use large-scale batch and continuous production processes and a continuous focus on process improvements allows us to compete effectively in the global custom manufacturing market and to remain cost competitive with, and for some products cost-advantaged over, our competitors.

We intend to improve margins in this area of our business by careful management of product mix with regard to size of opportunity, timing to market, capital efficiency and matching of opportunities to assets and capabilities.

We possess a core competency in chemical processing of bio-based feedstocks, and we believe this, combined with our expertise in specialty chemical synthesis, will position us favorably as a preferred manufacturer of a rapidly growing sustainable products market.

We believe we have built a solid reputation as a safe, reliable, cost competitive, and technology-driven chemical producer.

To further build on this reputation, we must continuously increase our focus on maintaining and adding customer relationship development, cost control, operational efficiency, capacity utilization, operational safety, and environmental protection to maximize earnings.

We also believe that the ability to use large-scale batch and continuous production processes and a constant focus on process improvements allows us to compete effectively in the global custom manufacturing market and to remain cost competitive with, and for some products cost-advantaged over, our competitors.

Furthermore, our site’s fully integrated infrastructure facilities, including utilities and waste treatment, provide us with an advantage over many of our competitors, and allow us to provide a complete package of custom manufacturing services.

With GMP capabilities and ISO/BQ certifications, we strengthen our capabilities to grow our business further.

We intend to improve margins in this area of our business by expansion of the customer base in additional market segments, careful management of product mix with regard to size of opportunity, timing to market, capital efficiency and matching of opportunities to assets and capabilities.

We possess a core competency in chemical processing of bio-based feedstocks and expertise in specialty chemical synthesis and process development.

We believe this positions us favorably as a preferred manufacturer of custom chemicals and sustainable products in growing markets.

Customers and Markets

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In such cases, we may be unable to increase or maintain our level of sales revenue for these products.

We agreed to extend the supply of our laundry detergent additive to our customer through 2020.

However, demand for the laundry detergent additive has continued to decrease, and this customer will not require further production of any of this laundry detergent additive.

We believe it is unlikely that there is a profitable market for new customers for this product.

No chemical customer represented greater than 10% of total sales revenue in 2020.

One of our chemical customers and its affiliates, represented 10% or more of our 2019 and 2018 consolidated sales revenues.

This customer represented approximately 22%, and 27% of our chemicals revenue (11% of total revenues each year) in 2019 and 2018, respectively.

No chemical customer represented greater than 10% of total sales revenue in 2021 or 2020.

One of our chemical customers and its affiliates, represented 10% or more of our 2019 sales revenues.

This customer represented approximately 22% of our chemical revenue (11% of total revenues) in 2019.

We sell multiple products to various affiliates of this customer under both long-term and short-term contracts.

One product contract was not renewed at December 31, 2020 representing 17%, 10%, and 12% of chemical revenue (7%, 5%, and 5% of total revenue) for 2020, 2019, and 2018, respectively.

Another product contract was not renewed at December 31, 2019 representing 15% of chemical revenue in 2019 (7% of total revenue) and 14% of chemical revenue in 2018 (6% of total revenue).

We are actively considering new business for the general purpose equipment vacated; however, there is no guarantee if or when we will be successful finding new business.

At December 31, 2020, one product contract was not renewed representing 17% and 10% of chemical revenue (7% and 5% of total revenue) for 2020 and 2019, respectively.

Another product contract was not renewed at December 31, 2019 representing 15% of chemical revenue in 2019 (7% of total revenue).

We are actively considering new business for the general-purpose equipment vacated and believe we are advantaged to be a reliable source of U.S.

manufacturing; however, there is no guarantee if or when we will be successful finding new business.

Historically, there have been significant barriers to entry for competitors with respect to specialty chemicals, primarily due to the fact that the relevant technology and manufacturing capability has been held by a small number of companies.

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innovating, developing, and improving performance chemical products and manufacturing processes.

Our research and development capabilities comprise analytical chemistry competencies to assay and characterize raw materials and products, organic chemistry expertise applied across a breadth of reaction chemistries and materials, design and process engineering capabilities for batch and continuous processing of both solid and liquid materials, and proficiency in process safety to design and scale-up safe chemical manufacturing processes.

Our research and development capabilities comprise analytical chemistry competencies to assay and characterize raw materials and products, organic chemistry expertise applied across a breadth of reaction chemistries and materials, design and process engineering capabilities for batch and continuous processing of both solid and liquid materials, and proficiency in process safety and scale-up necessary to design safe chemical manufacturing processes.

We believe that these core competencies, established in support of the legacy chemical business, are applicable to building a technology-based position in biofuels and associated bio-based specialty products and expanding our performance chemicals product line.

Research and development expense incurred by us for the years ended December 31, 2020, 2019, and 2018 were $2,988, $3,191, and $3,524, respectively.

Research and development expense incurred by us for the years ended December 31, 2021, 2020, and 2019 were $3,484, $2,988, and $3,191, respectively.

Substantially all of such research and development expense are related to the development of new products, services, and processes or the improvement of existing products, services, and processes.

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The federal Oil Pollution Act of 1990 (or “OPA”) and regulations thereunder impose liability on responsible parties for damages resulting from oil spills into or upon navigable waters, adjoining shorelines, or in the exclusive economic zone of the United States.

A responsible party includes the owner or operator of an onshore facility.

Spill cleanup liability may not apply if a spill is caused by a party’s gross negligence or willful misconduct, the spill resulted from violation of a federal safety, construction, or operating regulation, or if a party fails to report a spill or to cooperate fully in a clean-up.

A responsible party may include, but is not limited to, the owner or operator of an onshore facility.

Spill cleanup liability may not apply to the facility if a spill is caused by another party’s gross negligence or willful misconduct. Responsible parties may be subject to penalties if the spill resulted from violation of a federal safety, construction, or operating regulation, or if a party fails to report a spill or to cooperate fully in a clean-up.

Failure to comply with OPA’s requirements may subject a responsible party to civil, criminal, or administrative enforcement actions via the Water Pollution Control Act.

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Changes in the estimates on which the accruals are based, unanticipated government enforcement action, or changes in health, safety, environmental, chemical control regulations, and testing requirements could result in higher or lower costs.

Our cash expenditures related to environmental protection and improvement were approximately $10,057, $10,024, and $10,940 for the years ended December 31, 2020, 2019, and 2018, respectively, and are included in costs of goods sold in the consolidated statements of income for each period.

Our cash expenditures related to environmental protection and improvement were approximately $9,547, $10,057, and $10,024 for the years ended December 31, 2021, 2020, and 2019, respectively, and are included in costs of goods sold in the consolidated statements of income for each period.

These amounts pertain primarily to operating costs associated with environmental protection equipment and facilities but also include expenditures for construction and development.

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We continue to monitor the seller’s compliance with its remediation obligations.

FutureFuel is a leading provider of renewable fuel and actively works to reduce our carbon footprint.

The company supports the global movement transitioning to a low-carbon economy and strives to control climate change related costs through process innovation, inventory control, and price indexing. Energy, transportation, and raw material costs have all been negatively impacted by climate change. 

FutureFuel has the ability to treat hazardous and non-hazardous waste on-site.

Over 99% of all generated waste is treated at the facility, eliminating most greenhouse gas emissions associated with transportation of waste, and significantly reducing liability associated with public exposure to waste.

Greenhouse gases may have an adverse impact on global weather patterns and crop production and, therefore, could impact the availability and pricing of raw materials used in biodiesel production. FutureFuel has developed strategies for coping with seasonal, weather related, and market driven volatility. These strategies improve the company’s ability to dampen the impact of climate driven challenges but may not successfully overcome poor market conditions. Profits may be negatively impacted if FutureFuel is unable to pass along price increases to our customers.

FutureFuel’s chemical segment uses many commodities derived from crude oil feedstock. These materials are affected by climate change driven policies that regulate petroleum and other energy production industries. Prices are subject to volatility caused in part by supply and demand, political movements, production difficulties, transportation disruptions, and other world events that may be linked to climate change.

FutureFuel has on-site emergency response equipment, trained personnel, and preparedness plans in place detailing actions needed to cope with the occurrence of severe weather. 

The company’s production location is in an area generally unaffected by hurricanes or floods;

however, changing weather patterns and the increased occurrence of severe weather has the potential to impede raw material supply lines, product distribution, and plant operations. 

Key raw materials and spare production equipment are maintained on-site to mitigate the effects of such occurrences.

Management Team and Human Capital

Our executive management team at the Batesville plant consists of individuals with a combined 90 plus years of experience in the chemicals industry, comprising technical, operational, and business responsibilities.

The members of the executive team also have international experience, including assignments in Europe.

The members of the executive team also have international experience, including assignments in Europe and Asia.

The operational and commercial management group at the Batesville site includes additional degreed professionals with an average experience of over 25 years in the chemical industry.

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We make available free of charge, through the “Investor Relations - SEC Filings”

section of our Internet website (https://futurefuelcorporation.gcs-web.com/financial-information/sec-filings), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (or the Exchange Act), as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC.

section of our Internet website (https://futurefuel-corporation.ir.rdgfilings.com), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (or the Exchange Act), as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC.

We also make available free of charge, through the “Investor Relations - Corporate Governance”

section of our website (https://futurefuelcorporation.gcs-web.com/corporate-governance), the corporate governance guidelines of our board of directors, the charters of each of the committees of our board of directors, and the code of business conduct and ethics for our directors, officers, and employees.

section of our website (https://futurefuel-corporation.ir.rdgfilings.com/company-information), the corporate governance guidelines of our board of directors, the charters of each of the committees of our board of directors, and the code of business conduct and ethics for our directors, officers, and employees.

Such materials will be made available in print upon the written request of any shareholder to FutureFuel Corp., 8235 Forsyth Blvd., 4th Floor, Clayton, Missouri 63105, Attention:

1 unchanged sentence

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-K

Item 1. Business