What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-15 compared with 2021-03-16 · 119 added, 149 removed, 325 unchanged (45% of the section changed)

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As of March 15, 2022, there are 43,763,243 shares of our common stock outstanding.

The shares of our common stock were held by approximately 278 holders of record on March 16, 2021 as recorded on our transfer agents’

The shares of our common stock were held by approximately 288 holders of record on March 15, 2022 as recorded on our transfer agents’

We believe that the number of beneficial owners of our common stock is substantially greater than the number of holders of record.

The payment of cash dividends by us is dependent upon our existing cash and cash equivalents, future earnings, capital requirements, and overall financial condition.

We declared and paid regular cash dividends for 2020 and 2019, a special dividend in 2020, and we have also declared dividends for 2021.

We declared and paid regular cash dividends for 2021 and 2020, a special dividend in 2021 and 2020, and we have also declared dividends for 2022.

While we anticipate similar regular cash dividends after 2022, no assurances can be given that we will declare or pay dividends for years after 2022.

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Under the Incentive Plan, awards are limited to 10% of the issued and outstanding shares of our common stock in the aggregate.

The shares to be issued under the Incentive Plan were registered with the SEC on a Form S-8 filed on November 9, 2017, and through December 31, 2020, we issued 44,000 options to purchase shares of our common stock and awarded no shares to participants under the Incentive Plan.

The following additional information regarding the incentive plans is as of December 31, 2020.

The shares to be issued under the Incentive Plan were registered with the SEC on a Form S-8 filed on November 9, 2017.

Through December 31, 2021, we issued 44,000 options to purchase shares of our common stock and awarded no shares to participants under the Incentive Plan.

Following is additional information regarding the incentive plans as of December 31, 2021.

Number of securities

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The graph below matches the cumulative 5-Year total return of holders of FutureFuel Corp's common stock with the cumulative total returns of the Russell 2000 index and a customized peer group of 26 companies grouped by SIC code (chemical industry) that includes:

Aemetis Inc., American Resources Corp, Amyris Inc., , Bluefire Renewables Inc., Celanese Corp, Cleantech Biofuels Inc., Data443 Risk Mitigatoin Inc., Easylink Solutions Corp, ESP Resources Inc., Glyeco Inc., Green Energy Live Inc., Green Plains Inc., Greenbelt Resources Corp, , Koppers Holdings Inc., Methes Energies International Ltd, New America Energy Corp, Newmarket Corp, Nouveau Life Pharmaceuticals Inc., Pacific Ethanol Inc., Postd Merchant Banque, Rayonier Advanced Materials Inc., Renewable Energy Group Inc., Rex American Resources Corp, Tantech Holdings Ltd, Westlake Chemical Partners LP, and Zeons Corp.

The graph assumes that the value of the investment in our common stock, in each index, and in the peer group (including reinvestment of dividends) was $100 on December 31, 2015 and tracks it through December 31, 2020.

Aemetis Inc., American Resources Corp, Amyris Inc., Celanese Corp, Cleantech Biofuels Inc., Data443 Risk Mitigation Inc., Easylink Solutions Corp, Glyeco Inc., Green Energy Live Inc., Green Plains Inc., Greenbelt Resources Corp, Koppers Holdings Inc., Methes Energies International Ltd, New America Energy Corp, Newmarket Corp, Nouveau Life Pharmaceuticals Inc., Postd Merchant Banque, Rayonier Advanced Materials Inc., Renewable Energy Group Inc., Rex American Resources Corp, Tantech Holdings Ltd, Westlake Chemical Partners LP, Zeons Corp., and Esp Resources Inc. The graph assumes that the value of the investment in our common stock, in each index, and in the peer group (including reinvestment of dividends) was $100 on December 31, 2016 and tracks it through December 31, 2021.

Recent Sales of Securities

We did not sell any of our securities within the three-year period ended December 31, 2020 in transactions that were not registered under the Securities Act.

We did not sell any of our securities within the three-year period ended December 31, 2021 in transactions that were not registered under the Securities Act.

Purchase of Securities by Us

During 2021, neither we, or anyone acting on our behalf, purchased any shares of our common stock, which is the only class of our equity securities that is registered pursuant to Section 12 of the Exchange Act.

Selected Financial Data.

The following table sets forth summary historical financial and operating data regarding us for the periods indicated below.

This summary historic financial and operating data has been derived from our consolidated financial statements for the twelve months ended December 31, 2016, 2017, 2018, 2019 and 2020.

The information presented in the table below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

and our financial statements and Notes thereto.

The financial data presented for 2017 and 2016 is not directly comparable between periods as a result of the adoption of Accounting Standard Codification ("ASC"), Topic 606, Revenue from Contracts with Customers in 2018 using the modified retrospective method.

(Dollars in thousands, except per share amounts)

Operating Revenue

Earnings per common share:

Long-term obligations

Dividends declared per common share

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

Management ’

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(i) consumer products (cosmetics and personal care products, specialty polymers, and specialty products used in the fuels industry);

(ii) proprietary herbicide intermediates manufactured for select strategic customers;

(iii) chlorinated polyolefin adhesion promoters and antioxidant precursors for a customer;

and (iv) a biocide intermediate for another customer.

(ii) chlorinated polyolefin adhesion promoters and antioxidant precursors for a customer;

and (iii) a biocide intermediate for another customer.

The custom chemicals group historically included a laundry detergent additive manufactured exclusively for a customer for use in a household detergent.

Revenues generated from the laundry detergent additive were based on a supply agreement with the customer.

In 2018, we entered into a new agreement to extend the supply of the laundry detergent additive to this customer through 2019 at reduced volumes and prices and to provide this customer with the option to purchase this product in 2020.

Sales to this customer ended in 2020 and no further sales are expected.

Our supply agreement with a major multi-national life sciences company to manufacture an intermediate for a herbicide was effective through December 31, 2020.

The agreement was not extended past 2020 and no further sales are anticipated.

Revenues generated from the laundry detergent additive were based on a supply agreement with the customer which ended in 2020 and no further sales of such products are expected.

In addition, our supply agreement with a major multi-national life sciences company to manufacture an intermediate for a herbicide was not extended past 2020 and no further sales are anticipated.

Pricing for the other custom manufacturing products is negotiated directly with the customer.

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

We also sell refined petroleum products on common carrier pipelines in part to maintain our status as an active shipper on these pipelines.

We also sell D4 RINs from time to time.

At December 31, 2021, we had 1.8 million D4 RINs in inventory.

Lastly, we also sell refined petroleum products on common carrier pipelines in part to maintain our status as an active shipper on these pipelines.

Most of our sales are FOB the Batesville plant, although some transfer points are in other states or foreign ports.

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The discussion of results of operations that follows is based on revenue and expenses in total and for individual product lines and does not differentiate related party transactions.

Fiscal Year Ended December 31, 2020 Compared to Fiscal Year Ended December 31, 2019

Fiscal Year Ended December 31, 2021 Compared to Fiscal Year Ended December 31, 2020

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

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Earnings per common share:

Capital expenditures (net of customer reimbursements)

Adjusted EBITDA

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Loss (gain) on disposal of property and equipment

(Gain) loss on derivative instruments

Loss (gain) on derivative instruments

Loss (gain) on marketable securities

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Interest and dividend income

Income tax provision

Gain (loss) on derivative instruments

Income tax benefit

Loss (gain) on derivative instruments

Change in fair value of derivative instruments

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Other non-operating income

Impairment of intangible asset

Adjusted EBITDA

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Operating expense

Income tax benefit (provision)

2020 Compared to 2019

Income tax benefit

2021 Compared to 2020

Consolidated sales revenue increased 57.2% or $116,881 in 2021 compared to 2020.

This increase primarily resulted from higher average sales prices in the biofuel segment reduced in part by lower sales volumes in both the biofuels and chemicals segment.

Gross profit decreased 24.8% or $7,770 in 2021 compared to 2020.

This decrease was primarily attributable to exorbitant natural gas prices incurred in February from Winter Storm Uri and the absence of two chemical contracts which expired in 2020. 

Partially improving gross profit in the same comparative period was higher margins on biodiesel inclusive of the change the realized and unrealized activity of derivative instruments which resulted in a reduction in gross profit in 2021 by $10,377, as compared to an increase in gross profit of $4,379 in 2020.

Operating expenses increased $1,671 in 2021 compared to 2020.

This increase was primarily the result of an impairment of intangible assets in 2021 (See Note 10 of our consolidated financials for details) and higher research and development expense primarily for the benefit of GMP.

Other income decreased $6,407 in 2021 primarily from non-operating income recognized in 2020 of $8,350. Partially improving other income was the absence of realized and unrealized losses on equity securities in 2021 as compared to 2020 (see Note 7 of our consolidated financial statements).

Income tax benefit  

The income tax be nefit in 2021 was $10,325 or an effective tax rate of (64.8%) as compar ed to a benefit in 2020 of $14,786 or an effective tax rate of  (46.5%).

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (Pub.L.

116-136) (“CARES Act”).

The CARES Act, among other things, provides that Net Operating Losses (“NOLs”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 shall be treated as a carryback available to offset 100% of taxable income in each of the 5 preceding taxable years unless the taxpayer elects to forego the carryback.

The Company’s effective tax rate for the year 2020 was positively impacted by its ability to carry back both its 2019 and 2020 federal NOLs in full to tax years with 35% marginal tax rates, rather than forward to years with anticipated 21% tax rates.

In the fourth quarter of 2020, the Company filed a refund claim of $7,695 and accrued an additional refund claim of $1,211, subsequently filed in January 2021, relating to the carryback of its NOL generated in 2019.

Refunds in the amount of $7,695 were subsequently received in 2021;

the $1,211 remains outstanding as of December 31, 2021.

In the fourth quarter of 2021, the Company filed a refund claim of $8,463 relating to the carryback of its NOL generated in 2020.

None of these refunds have been received as of December 31, 2021.

States in which the Company conducts the majority of its business have not conformed to the CARES Act’s enhanced NOL carryback provisions, and the anticipated benefits of these state NOL carryforwards are accordingly classified as deferred tax assets.

The Company’s effective tax rates for the years 2021 and 2020 reflect the positive effect of certain tax credits and incentives, the most significant of which are the BTC and the Small Agri-biodiesel Producer Tax Credit.

Based on technical guidance from the Internal Revenue Service, the Company excludes the portion of the BTC not used to satisfy excise tax liabilities from income.

See Note 3 for a discussion of the pretax earnings impact of the BTC.

The Company’s unrecognized tax benefit totaled $0 at December 31, 2021 and 2020.

2020 Compared to 2019

Consolidated sales revenue decreased $721 in 2020 compared to 2019.

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Income tax benefit  

The income tax benefit in 2020 was $14,786 or an effective tax rate of (46.5%) as compared to a benefit in 2019 of $8,386 or an effective tax rate of  (10.5%).

The income tax benefit in 2020 was $14,786 or an effective tax rate of (46.5%) as compared to a benefit in 2019 of $8,386 or an effective tax rate of (10.5%).

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (Pub.L.

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The Company’s effective tax rate for the year 2020 is positively impacted by its ability to carry back both its 2019 and 2020 federal NOLs in full to tax years with 35% marginal tax rates, rather than forward to years with anticipated 21% tax rates.

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The Company’s effective tax rate for the year 2020 reflects the positive effect of certain tax credits and incentives, the most significant of which were the BTC and the Small Agri-biodiesel Producer Tax Credit.

The Company’s effective tax rate for the year 2020 reflected the positive effect of certain tax credits and incentives, the most significant of which were the BTC and the Small Agri-biodiesel Producer Tax Credit.

Based on technical guidance from Internal Revenue Service, the Company excludes the portion of the BTC not used to satisfy excise tax liabilities from income.

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This tax benefit was recorded in the Company’s fourth quarter 2019 results.

See Note 3 for a discussion of the impact of the BTC for the years ended December 31, 2020, 2019, and 2018.

See Note 3 for a discussion of the impact of the BTC for the years ended December 31, 2020 and 2019.

The 2019 effective tax rate was also favorably impacted by the Company being granted a retroactive research and development credit for a prior year in the state of Arkansas where it does significant business.

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The Company’s unrecognized tax benefit totaled $0 at December 31, 2020 and 2019.

2019 Compared to 2018

Consolidated sales revenue decreased 30% or $85,792 in 2019 compared to 2018.

This decrease primarily resulted from lower sales volumes in both the biofuel and chemical segments and the reinstatement of the BTC for 2018 and 2019 credited to customers in 2019 in the amount of $39,423 (see Note 3 of our consolidated financial statements for further details).

Gross profit increased $741 in 2019 compared to 2018.

This increase was primarily attributable to the December 2019 reinstatement of the biodiesel BTC for 2018 and 2019, amounting to $57,872, (see Note 3 of our consolidated financial statements for further details) and the impact of adjustments in the carrying value of our inventory as determined using the LIFO method of inventory accounting.

The LIFO adjustment increased gross profit $2,490 in 2019 as compared to decreased gross profit of $2,249 in 2018.

The change in LIFO did not result in a lower of cost or market adjustment in 2019 or 2018.

These increases were mostly offset by:

i) the decreased selling price and volume in the biofuel segment;

ii) decreased volumes in the chemical segment from the agrochemical and energy markets;

and iii) the change in the derivative activity, which decreased gross profit $1,301 in 2019 as compared to increased gross profit $633 in 2018.

Operating expenses decreased $1,129 in 2019 compared to 2018.

This decrease was primarily the result of lower compensation expense and research and development expense.

Other income increased $17,748 in 2019 primarily from the change in the mark-to-market on equity securities and an increase in interest and dividend income of $876.

In 2019, the mark-to-market change was a gain of $6,283 and in 2018 the mark-to-market change was a loss of $13,238.

Partially offsetting this increase was the loss on equity securities sold of $1,837 in 2019 as compared to a gain of $1,054 in 2018.

Income tax benefit  

The income tax benefit in 2019 was $8,386 or an effective tax rate of (10.5%) as compared to a provision of ($7,019) or an effective tax rate of 11.7% in 2018.

The Company’s effective tax rate for the year 2019 reflected the positive effect of the reinstatement of certain tax credits and incentives for 2018 and 2019, the most significant of which was the BTC and Small Agri-biodiesel Producer Tax Credit.

The BTC and the Small Agri-biodiesel Producer Tax Credit were retroactively extended for 2018 and 2019 on December 20, 2019 and further extended through December 31, 2022.

This tax benefit was recorded in the Company’s fourth quarter 2019 results.

See Note 3 to our consolidated financial statements for a discussion of the impact of the BTC for the years ended December 31, 2019 and 2018.

The 2019 effective tax rate was also favorably impacted by a retroactive research and development credit for a prior year in the state of Arkansas.

Additionally, the Company’s effective tax rate reflected a one-time benefit from state legislation enacted during the year which applied a lower tax rate to future reversals of deferred tax liabilities.

The Company’s effective tax rate for the year 2018 reflected its uncertain tax position on prior year income of $2,728, net ($2,804, gross) plus interest of $448 in the fourth quarter of 2018.

Partially reducing the provision for income taxes was the benefit of the reinstatement of certain tax credits and incentives for 2018, the most significant of which were the BTC and the Small Agri-biodiesel Producer Tax Credit.

The BTC and Small Agri-biodiesel Producer Tax Credit were retroactively extended for 2017 (but, not beyond December 31, 2017) on February 9, 2018.

This tax benefit was recorded in FutureFuel’s first quarter 2018 results.

The Company’s unrecognized tax benefit totaled $0 and $2,804 at December 31, 2019 and 2018, respectively.

Chemicals Segment

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Volume/product mix effect

2020 Compared to 2019

2021 Compared to 2020

Chemical sales revenue decreased 14.7% or $11,636 in 2021 compared with 2020.

Sales revenue for our custom chemicals product line (chemicals produced for specific customers) totaled $50,675, a decrease of 20.7% or $13,219 from 2020.

This decrease was primarily driven by the loss of two products we no longer sell partially offset by increased volumes of other custom chemicals.

Performance chemicals revenue (comprised of multi-customer products which are sold based on specification) was $16,867 in 2021, an increase of 10.4% or $1,583 from 2020.

This increase resulted from higher selling prices of our glycerin products.

Gross profit for the chemicals segment decreased 45.3% or $11,548 in 2021 compared with 2020.

This decrease resulted primarily from: (i) the loss of two custom chemical products we no longer sell;

(ii) the impact of higher natural gas prices incurred during Winter Storm Uri in February 2021;

and (iii) increased material cost driven by inflation and the supply chain disruption caused by the COVID-19 pandemic and the responses to it.

2020 Compared to 2019

Chemical sales revenue decreased 24.5% or $25,649 in 2020 compared with 2019.

Sales revenue for our custom chemicals product line (chemicals produced for specific customers) totaled $63,894, a decrease of $27,068 from 2019.

Sales revenue for our custom chemical product line (chemicals produced for specific customers) totaled $63,894, a decrease of $27,068 from 2019.

This decrease was primarily driven by:

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Partially offsetting the decrease was the benefit of the recognition of contract revenue of $2,896 upon the termination of a custom contract that was not renewed 12/31/2020.

2019 Compared to 2018

Chemical sales revenue decreased 11% or $12,301 in 2019 compared with 2018.

Sales revenue for our custom chemicals product line (chemicals produced for specific customers) totaled $90,962, a decrease of $6,784 from 2018.

This decrease was primarily attributed to decreased sales volumes in the agrochemical and energy markets and reduced sales volumes of our laundry detergent additive.

Our contract for sales of the laundry detergent additive terminated in December 2020;

however, this customer declined to order any laundry detergent additive after 2019.

We continue to pursue other customers for this product.

However, we believe it will be a challenge to find a profitable market for this product.

Performance chemicals revenue (comprised of multi-customer products which are sold based on specification) was $13,865 in 2019, a decrease of $5,517 from 2018.

This decrease resulted from reduced sales volumes of our polymer modifier and reduced selling price and volume of glycerin.

Gross profit for the chemicals segment decreased 12% or $4,063 in 2019 compared with 2018.

This decrease resulted from lower sales volumes in the consumer product, agrochemical and energy markets and polymer modifier and glycerin.

Partially offsetting the decrease was the change in adjustments in the carrying value of our inventory as determined using the LIFO method of inventory accounting resulting primarily from deflation experienced in 2019 and inflation experienced in 2018.

The change in LIFO increased gross profit in 2019 by $780 and reduced gross profit by $422 in 2018.

Biofuel Segment

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Volume/product mix effect

2020 Compared to 2019

2021 Compared to 2020

Biofuels sales revenue increased 102.5% or $128,517 in 2021 compared to 2020, primarily from increased selling prices of biodiesel and biodiesel blends, inclusive of separated RIN sales.

Sales revenue declined in part on lower sales volumes as a result of Winter Storm Uri in February 2021 with its after effects in bringing the plant back to normal operations.

A portion of our biodiesel sold was to three major refiners in the United States in 2021 as compared with one major refiner in 2020.

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.

We do not believe that the loss of this customer would have a material adverse effect on our biofuels segment or on us as a whole in that:

(i) unlike our custom manufacturing products, biodiesel is a commodity with a large potential customer base;

(ii) we believe that we could readily sell our biodiesel to other customers as potential demand from other customers for biodiesel exceeds our production capacity;

(iii) our sales to this customer are not under fixed terms and the customer has no fixed obligation to purchase any minimum quantities except as stipulated by short term purchase orders;

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

Biofuels gross profit increased 65.3% or $3,778 in 2021 compared to 2020.

Gross profit primarily increased due to improved profit margins experienced in the petroleum and renewable industry.

The comparative margins in 2020 were weakened from COVID-19 effects on the transportation market.

Partially reducing gross profit in 2021 was the change in the realized and unrealized activity of derivative instruments in comparison to the prior year with a loss of $10,377 as compared to a gain of $4,379 in 2020.

2020 Compared to 2019

Biofuels sales revenue increased $24,928 in 2020 compared to 2019, primarily from increased sales volumes of biodiesel and biodiesel blends.

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Biofuels gross profit decreased $38,427 in 2020 compared to 2019.

Gross profit compared to 2019 primarily decreased due to 

the recognition of the 2018 BTC for $31,301 which was retroactively reinstated on December 20, 2019.

Gross profit compared to 2019 primarily decreased due to the recognition of the 2018 BTC for $31,301 which was retroactively reinstated on December 20, 2019.

See Note 3 of the consolidated financial statements for additional discussion.

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Partially benefiting gross profit in 2020 was the change in the realized and unrealized activity of derivative instruments in comparison to the prior year with a gain of $4,379 as compared to a loss of $1,301 in 2019.

2019 Compared to 2018

Biofuels sales revenue decreased 42% or $73,491 in 2019 compared to 2018, primarily from decreased sales volumes of biodiesel and biodiesel blends given the challenging market without the BTC in effect and the increased number of RIN waivers granted.

Revenue was also reduced by the recognition of rebates (shown as a price effect) owed to customers of $39,423 in 2019 as compared to $13,599 in 2018 (see Note 3 of the consolidated financial statements for further information).

A portion of our biodiesel sold was to one major refiner in the United States in 2019 and four major refiners in 2018.

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.

We do not believe that the loss of these customers would have a material adverse effect on our biofuels segment or on us as a whole in that:

(i) unlike our custom manufacturing products, biodiesel is a commodity with a large potential customer base;

(ii) we believe that we could readily sell our biodiesel to other customers as potential demand from other customers for biodiesel exceeds our production capacity;

(iii) our sales to this customer are not under fixed terms and the customer has no fixed obligation to purchase any minimum quantities except as stipulated by short term purchase orders;

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

Biofuels gross profit increased $4,804 in 2019 compared to 2018.

Cost of goods sold decreased largely as a result of the 2018 and 2019 BTC (which was retroactively reinstated on December 20, 2019) in 2019 compared to 2018, when the 2017 BTC was retroactively reinstated on February 9, 2018.

See Note 3 of the consolidated financial statements for additional discussion.

Gross profit also benefited from the change in adjustments in the carrying value of our inventory as determined using the LIFO method of inventory accounting.

The LIFO reserve for the biofuel segment decreased $1,711 in 2019 and increased $1,828 in 2018.

Gross profit was reduced by the change in the realized and unrealized activity of derivative instruments in comparison to the prior year with a loss of $1,301 in 2019 and a gain of $633 in 2018.

Critical Accounting Policies and Practices

Critical Accounting Policies and Estimates

Allowance for Doubtful Accounts

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This estimate is subject to change based upon the changing financial condition of our customers.

At December 31, 2020 and 2019, we recorded an allowance for doubtful accounts of $63 and $0, respectively.

At December 31, 2021 and 2020, we recorded an allowance for doubtful accounts of $67 and $63, respectively.

We historically have not experienced significant problems in collecting our receivables, and we do not expect this to change going forward.

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The Company’s qualitative analysis includes, but is not limited to, assessing the changes in macroeconomic conditions, legal and regulatory environment, industry and market conditions, financial performance, and any other relevant events or circumstances specific to the intangible asset.

If it is more likely than not that the fair value of the intangible asset is greater than the carrying value, no further testing is required.

Otherwise, the Company will apply the quantitative impairment test method.

In performing the Company's qualitative analysis, the Company determined that it was more likely than not that the indefinite-lived intangible asset's fair value was greater than the carrying value.

During 2021, it was determined that the intangible asset had no value and was reduced to $0.

Asset Retirement Obligations

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Revenue Recognition

On January 1, 2018, we adopted Topic 606, Revenue from Contracts with Customers using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018.

Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 605.

Certain long-term contracts had an upfront non-refundable payment considered a material right.

The Company applied the renewal option approach in allocating the transaction price to the material right.

We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers , when performance obligations of the customer contract are satisfied.

We sell to customers through master sales agreements or standalone purchase orders.

The majority of our revenue is from short-term contracts with revenue recognized when a single performance obligation to transfer product under the terms of a contract with a customer is satisfied.

Accordingly, we recognize revenue when control is transferred to the customer, which is when products are considered to meet customer specification per the customer contract and title and risk of loss are transferred.

This typically occurs at the time of shipment or delivery;

or for certain contracts, this occurs upon delivery of the material to one of our storage locations, ready for customer pickup and separated from our other inventory.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products and is generally based upon a negotiated price.

We sell products directly to customers generally under agreements with payment terms of 30 to 75 days for chemical segment customers and 2 to 10 days for biofuels segment customers.

Certain long-term contracts have an upfront non-refundable payment considered a material right.

The Company applies the renewal option approach in allocating the transaction price to the material right.

For each of these contracts, the Company estimated the expected contractual volumes to be sold at the most likely expected sales price as a basis for allocating the transaction price to the material right.

Each estimate will be updated quarterly on a prospective basis.

Each estimate is updated quarterly on a prospective basis.

These custom chemical contracts have payment terms of 30 days.

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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 2020 and 2019 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 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.

Sales revenue under bill-and-hold arrangements were $32,779, $51,700, and $44,924 for the years ended December 31, 2020, 2019, and 2018, respectively.

At December 31, 2020 and 2019, $2,628 and $3,255, respectively, was included in revenue for products that had not been shipped.

These amounts do not include Contract Assets of $808 and $1,067 that have not been billed nor shipped at December 31, 2020 and 2019, respectively.

Sales revenue under bill-and-hold arrangements were $34,655, $32,779, and $51,700 for the years ended December 31, 2021, 2020, and 2019, respectively.

At December 31, 2021 and 2020, $3,154 and $2,628, respectively, was included in revenue for products that had not shipped.

The latter amounts do not include Contract Assets of $362 and $808 that have not been billed nor shipped at December 31, 2021 and 2020, respectively.

Taxes collected from customers and remitted to governmental authorities are recorded on a net basis within cost of goods sold.

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Liquidity and Capital Resources

Our net cash provided by (used in) operating activities, investing activities, and financing activities for the years ended December 31, 2020, 2019, and 2018 are set forth in the following table.

Our net cash provided by (used in) operating activities, investing activities, and financing activities for the years ended December 31, 2021, 2020, and 2019 are set forth in the following table.

(Dollars in thousands) 

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Operating Activities

Cash provided by operating activities decreased in 2021 to $44,084 from $96,403 in 2020, a net decrease of $52,319.

This decrease was attributed to the change in accounts receivable, including accounts receivable - related parties, of $98,602.

The BTC increased cash from accounts receivable in 2020 by $97,295. Additionally, net income decreased in 2021 compared to 2020 by $20,309.

Primarily offsetting the decrease in cash from operations was the increase in accounts payable, including accounts payable –

related parties, of $57,932, $39,423 of which was rebates owed to customers for the BTC.

Cash provided by operating activities increased from$34,638 in 2019 to $96,403 in 2020,a net increase of $61,765.

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related parties, of $90,092, $39,423 of rebates owed to customers for the BTC and (ii) the decrease in net income in 2020 compared to 2019 of $41,617.

Cash provided by operating activities decreased from $85,613 in 2018 to $34,638 in 2019, a net decrease of $50,975.

This decrease was attributed to:

(i) the increase in accounts receivable, including accounts receivable - related parties, of $100,728, inclusive of the BTC of $97,295 for 2019 and 2018 and (ii) the increase in the fair value of equity securities of $19,521.

Primarily offsetting the decrease in cash from operations was:

(i) the increase in accounts payable, including accounts payable –

related parties, of $39,270, $39,423 of credit to customer for the BTC and (ii) the increase in net income in 2019 compared to 2018 of $35,023.

Investing Activities

Cash provided by investing activities was $474 in 2020 compared to $4,219 in 2019 for a net decrease in cash from investing activities of $3,745.

This decrease was primarily attributable to a $6,558 decrease in the net sales of marketable securities in 2020 compared to the net sales of marketable securities in 2019.

Such net sales totaled $4,730 in 2020, as compared to total net sales of $11,288 in 2019.

Cash provided by investing activities was $14,993 in 2021 compared to $474 in 2020 for a net increase in cash from investing activities of $14,519.

This increase was primarily attributable to a $12,376 increase in the net sales of marketable securities in 2021 compared to the net sales of marketable securities in 2020.

Such net sales totaled $17,106 in 2021, as compared to total net sales of $4,730 in 2020.

Reduced capital expenditures increased cash from investing activities by $3,008.

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Such net sales totaled $4,730 in 2020, as compared to total net sales of $11,288 in 2019.

The net decrease in cash from investing activities was also impacted by the increase in the cash used in capital expenditures of $2,104.

Our capital expenditures and customer reimbursements are summarized in the table below.

Cash paid for capital expenditures

Cash received from customers as reimbursement of capital expenditures*

Cash paid for capital expenditures, net of customer reimbursements

*This receipt of cash was reported as an increase in deferred revenue in cash flows from operations (see Note 4 of the consolidated financial statements for further discussion).

Reduced capital expenditures increased cash from investing activities by $2,507.

Financing Activities

Cash used in financing activities decreased from $142,086 in 2020 to $119,678 in 2021, a net decrease of $22,408.

This decrease resulted from the payment of special dividends in 2021 of $109,408 compared to the payment of special dividends in 2020 of $131,230.

Cash used in financing activities increased from $10,498 in 2019 to $142,086 in 2020, a net increase of $131,588.

This increase resulted from the payment of special dividends in 2020 of $131,230.

Cash used in financing activities decreased from $10,674 in 2018 to $10,498 in 2019, a net decrease of $176.

This decrease was due to the decrease in the minimum tax withholding on stock compensation in 2019 compared to 2018.

Capital Expenditure Commitments

We had no material capital projects that generated commitments as of December 31, 2020.

We had $752 of infrastructure capital repair projects that generated commitments as of December 31, 2021.

Historically, we finance capital requirements for our business with cash flows from operations and have not had the need to incur bank indebtedness to finance any of our operations during the periods discussed herein.

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The Credit Facility contains certain affirmative and negative covenants, including negative covenants that limit or restrict, among other things, indebtedness, liens and encumbrances, dividends, burdensome agreements, mergers and fundamental changes, assets sales, investments, transactions with affiliates, changes in fiscal years, and other matters customarily restricted in such agreements.

The interest rate floats at the following margins over LIBOR or base rate based upon our leverage ratio.

The interest rate floats at the following margins over LIBOR (see Note 2 to our financial statements regarding rate reform) or base rate based upon our leverage ratio.

The material financial covenants, ratios, or tests contained in the Credit Facility are i) a consolidated leverage ratio as of the end of any fiscal quarter less than or equal to 3.00 to 1.0;

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The regular cash dividends totaled $10,498.

On May 10, 2021, we also declared a special cash dividend of $2.50 per share on our common stock.

This special cash dividend paid on June 4, 2021, amounted to $109,408.

Total cash dividends paid in 2021 were $119,906.

In 2020, we paid regular cash dividends aggregating $0.24 per share on our common stock with record dates and payment dates as previously discussed.

The regular cash dividends totaled $10,498.

On March 23, 2020, we also declared a special cash dividend of $3.00 per share on our common stock.

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Dividends declared, but not paid, were accrued at December 31, 2019.

In 2018, we paid regular cash dividends aggregating $0.24 per share on our common stock with record dates and payment dates as previously discussed.

The regular cash dividends totaled $10,498.

On November 19, 2018, we declared normal quarterly dividends of $0.06 per share on our common stock with record dates and payment dates as previously discussed.

Dividends declared, but not paid, were accrued at December 31, 2018.

Capital Management

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Accordingly, they are recorded at fair value with the unrealized gains and losses, net of taxes, reported as a component of stockholders’

The fair value of these preferred stock, trust preferred securities, and other equity instruments, including accrued dividends and interest, totaled $3,940 as of December 31, 2020.

The fair value of preferred stock, trust preferred securities, exchange traded debt, and other equity instruments, including accrued dividends and interest, totaled $5,479 as of December 31, 2019.

The unrealized losses on equity securities were $247 for 2020;

unrealized gains on equity securities were $6,281 for 2019.

The fair value of these preferred stock, trust preferred securities, and other equity instruments, including accrued dividends and interest, totaled $47,190 and $64,404 as of December 31, 2021 and 2020, respectively.

The unrealized losses on equity securities were $904 and $246 for December 31, 2021 and 2020, respectively.

Lastly, we maintain depository 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 on our consolidated balance sheets at December 31, 2020 and 2019.

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

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

These hedging transactions are recognized in earnings and do not qualify as a hedge accounting treatment on our consolidated balance sheets at December 31, 2020 or 2019, as they do not meet the definition of a hedge instrument as defined under GAAP.

These hedging transactions are recognized in earnings and do not qualify as a hedge accounting treatment on our consolidated balance sheets at December 31, 2021 or 2020, as they do not meet the definition of a hedge instrument as defined under GAAP.

The purchase of biofuels feedstock generally involves two 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-K

Item 5. Market for Registrant’s Common Equity