What changed in this filing

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Item 1. Financial Statements

2022-08-08 compared with 2022-05-09 · 321 added, 142 removed, 636 unchanged (42% of the section changed)

3 unchanged sentences

(Dollars in thousands)

March 31, 2022  

June 30, 2022  

December 31, 2021

2 unchanged sentences

$ 137,521  

Accounts receivable, inclusive of the blenders' tax credit of $ 5,550  and $ 8,232 , at March 31, 2022 and December 31, 2021, respectively, and net of allowances for bad debt of $ 55  and $ 67  at March 31, 2022 and December 31, 2021, respectively

Accounts receivable, inclusive of the blenders' tax credit of $ 13,084  and $ 8,232 , at June 30, 2022 and December 31, 2021, respectively, and net of allowances for bad debt of $ 87  and $67 at June 30, 2022 and December 31, 2021, respectively

37,488  

50 unchanged sentences

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

Common stock, $ 0.0001 par value, 75,000,000 shares authorized, 43,763,243 and 43,763,243 issued and outstanding as of March 31, 2022 and December 31, 2021

Common stock, $ 0.0001 par value, 75,000,000 shares authorized, 43,763,243 and 43,763,243 issued and outstanding as of June 30, 2022 and December 31, 2021

Accumulated other comprehensive income

14 unchanged sentences

(Dollars in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

$ 117,640  

$ 73,813  

$ 159,714  

$ 114,971  

Revenue –

1 unchanged sentence

Cost of goods sold

113,798  

69,760  

161,017  

111,138  

Cost of goods sold –

related parties

11,937  

Distribution –

related parties

Gross profit (loss)

( 6,178 )  

Selling, general, and administrative expenses

4 unchanged sentences

Total operating expenses

Loss from operations

from operations

( 1,515 )  

( 2,003 )  

( 11,122 )  

Interest and dividend income

Interest expense

Loss on marketable securities

( 33 )  

( 65 )  

(Loss) gain on marketable securities

( 3,239 )  

( 7,366 )  

Other expense

Loss before taxes

( 1,355 )  

Other (expense) income

( 2,527 )  

( 6,022 )  

Loss before taxes

( 4,042 )  

( 17,144 )  

Income tax benefit

( 938 )  

( 1,642 )  

Net  ( loss) income

$ ( 3,104 )  

$ 3,481  

$ ( 15,502 )  

Earnings (loss) per common share

$ ( 0.07 )  

$ 0.08  

$ ( 0.35 )  

$ ( 0.07 )  

$ 0.08  

$ ( 0.35 )  

Weighted average shares outstanding

Comprehensive earnings

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

43,763,243  

43,754,232  

43,763,243  

43,748,768  

43,763,243  

43,754,422  

43,763,243  

43,748,768  

Comprehensive income (loss)

Net (loss) income

$ ( 3,104 )  

$ 3,481  

$ ( 15,502 )  

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

( 86 )  

( 148 )  

Income tax effect

Total other comprehensive (loss) income, net of tax

Comprehensive loss

( 68 )  

( 117 )  

Comprehensive (loss) income

$ ( 3,172 )  

$ 3,525  

$ ( 15,619 )  

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

2 unchanged sentences

(Dollars in thousands)

For the Three Months Ended March 31, 2022

For the Six Months Ended June 30, 2022

Comprehensive

1 unchanged sentence

Income (Loss)

Earnings (Deficit)

Balance - December 31, 2021

3 unchanged sentences

$ 288,928  

 Cash dividends declared, $ 0.24  per common share 

( 10,503 )  

Other comprehensive loss

Cash dividends declared, $ 0.24 per common share

( 10,503 )  

Other comprehensive loss  

( 49 )  

4 unchanged sentences

$ 265,978  

For the Three Months Ended March 31, 2021

Other comprehensive loss

( 68 )  

( 3,104 )  

Balance - June 30, 2022

43,763,243  

$ 282,443  

$ 262,806  

For the Six Months Ended June 30, 2021

Comprehensive

1 unchanged sentence

Income (Loss)

Earnings (Deficit)

Balance - December 31, 2020

43,743,243  

$ 282,215  

$ 89,456  

$ 371,883  

Other comprehensive loss

Balance - March 31, 2021

43,743,243  

$ 282,215  

$ 80,683  

$ 363,050  

Cash dividends declared, $ 2.50 per share

Proceeds for the issuance of stock

20,000  

Other comprehensive income

Balance - June 30, 2021

43,763,243  

$ 282,446  

$ 257,414  

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

3 unchanged sentences

(Unaudited) 

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

$ ( 15,502 )  

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

1 unchanged sentence

Benefit for deferred income taxes

( 1,672 )  

Change in fair value of equity securities

Change in fair value of derivative instruments

( 2,388 )  

(Gain) loss on the sale of investments

Loss on disposal of property and equipment

Impairment of intangible asset

Noncash interest expense

1 unchanged sentence

Accounts receivable

( 8,172 )  

Accounts receivable –

related parties

( 20 )  

(4,664 )  

Income tax receivable

( 20 )  

Prepaid expenses

 Prepaid expenses - related parties

Prepaid expenses –

related parties

Accounts payable

19,171  

23,074  

Accounts payable –

1 unchanged sentence

Accrued expenses and other current liabilities

( 659 )  

Accrued expenses and other current liabilities –

1 unchanged sentence

Deferred revenue

( 2,769 )  

Other noncurrent liabilities

( 187 )  

Net cash used in operating activities

( 1,910 )  

Cash flows from investing activities

2 unchanged sentences

Proceeds from the sale of marketable securities

37,873  

Proceeds from the sale of property and equipment

Proceeds from the sale of intangible asset

Capital expenditures

Net cash (used in) provided by investing activities

( 1,895 )  

Net cash (used in) provided by  

investing activities

( 1,206 )  

16,248  

Cash flows from financing activities

Proceeds from the issuance of stock

Payment of dividends

( 5,251 )  

Net cash used in financing activities

( 5,251 )  

Net change in cash and cash equivalents

( 8,367 )  

Cash and cash equivalents at beginning of period

137,521  

198,122  

Cash and cash equivalents at end of period

$ 129,154  

$ 97,594  

Cash paid for interest

1 unchanged sentence

Noncash investing and financing activities:

Cash dividends declared, not paid

Noncash capital expenditures

Noncash operating leases

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

36 unchanged sentences

The Consolidated Appropriations Act, effective January 1, 2021 broadened the eligibility of the credit. 

FutureFuel is in the process of applying for this credit  and will recognize the benefit of the credit once reasonable assurance can be made as to the retention of the credit. 

FutureFuel is in the process of applying for this credit and will recognize the benefit of the credit once reasonable assurance can be made as to the retention of the credit. 

Notes to Consolidated Financial Statements of FutureFuel Corp.

17 unchanged sentences

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

The contract assets at March 31, 2022 and December 31, 2021 consist of unbilled revenue from one customer and are recorded as accounts receivable in the consolidated balance sheets.

The contract assets at June 30, 2022 and December 31, 2021 consist of unbilled revenue from one customer and are recorded as accounts receivable in the consolidated balance sheets.

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

Increases to contract liabilities from cash received for a performance obligation of chemical segment plant expansions were $ 0  and $ 209  for the three months ended March 31, 2022 and 2021, respectively.

Increases to contract liabilities from cash received for a performance obligation of chemical segment plant expansions were $ 0  and $ 320  and $ 0  and $ 529 for the three and six months ended 

June 30, 2022 and 2021, respectively.

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

Revenue recognized in the chemical segment from the contract liability reductions were $ 2,213  and $ 723 in the three months ended March 31, 2022 and 2021, respectively.

Revenue recognized in the chemical segment from the contract liability reductions were $ 961  and $ 1,014 for the three months, and $ 3,173  and $ 1,737 for the 

six months ended June 30, 2022 and 2021, respectively.

These contract asset and liability balances are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

3 unchanged sentences

Contract Assets and Liability Balances

March 31, 2022

June 30, 2022

December 31, 2021

3 unchanged sentences

Contract assets, included in accounts receivable

$ 1,422  

Contract liabilities, included in deferred revenue - short-term

6 unchanged sentences

Transaction price allocated to the remaining performance obligations:

At March 31, 2022, approximately $ 16,790  of revenue is expected to be recognized from remaining performance obligations.

At June 30, 2022, approximately $ 15,829  of revenue is expected to be recognized from remaining performance obligations.

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

5 unchanged sentences

Disaggregation of revenue - contractual and non-contractual :

Three Months Ended March 31,  

Three Months Ended June 30,

Six Months Ended June 30,

Contract revenue from customers with > 1-year arrangements

1 unchanged sentence

$ 5,771  

$ 16,290  

$ 10,877  

Contract revenue from customers with < 1-year arrangements

1 unchanged sentence

68,291  

143,656  

104,646  

Revenue from non-contractual arrangements

2 unchanged sentences

$ 74,118  

$ 160,057  

$ 115,634  

Timing of revenue :

Three Months Ended March 31,  

Three Months Ended June 30,

Six Months Ended June 30,

Bill-and-hold revenue

1 unchanged sentence

$ 7,878  

$ 17,247  

$ 15,427  

Non-bill-and-hold revenue

1 unchanged sentence

66,240  

142,810  

100,207  

Total revenue

1 unchanged sentence

$ 74,118  

As of March 31, 2022, $ 2,743  of the three months bill and hold revenue had not shipped. 

In comparison, $ 2,911  of bill and hold revenue recognized in the three months ended March 31, 2021 had not shipped. 

In addition, we continued to hold $ 572 of bill and hold inventory recognized as revenue in 2021.

$ 160,057  

$ 115,634  

As of June 30, 2022, $ 3,491  of the bill and hold revenue had not shipped. 

In comparison, $ 3,421  of bill and hold revenue as of 

30, 2021 had not shipped.

Notes to Consolidated Financial Statements of FutureFuel Corp.

1 unchanged sentence

The carrying values of inventory were as follows as of:

March 31, 2022

June 30, 2022

December 31, 2021

13 unchanged sentences

$ 26,920  

For the three months ended March 31, 2022, a liquidation of $ 2,124  occurred as we exited the pipeline business. 

No liquidation occurred in the three months ended March 31, 2021.

For the six  months ended June 

30, 2022, a LIFO liquidation of $ 2,124  occurred as we exited the pipeline business. 

No LIFO liquidation occurred in the six  months ended June 

DERIVATIVE INSTRUMENTS

8 unchanged sentences

The Company has elected the normal purchase and normal sales exception for certain feedstock purchase contracts and supply agreements.

Realized gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the consolidated statements of operations as a component of cost of goods sold and amounted to a loss of $ 9,129 and $ 2,625  for the three months ended March 31, 2022 and 

Realized gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the consolidated statements of operations as a component of cost of goods sold and amounted to a loss of $ 17,476  and $ 26,605  for the three and six  months ended June 30, 2022, respectively and a loss of $ 5,405  

and $ 8,029  for the three months and six months ended June 30, 

2021, respectively.

1 unchanged sentence

Asset (Liability)

March 31, 2022

June 30, 2022

December 31, 2021

3 unchanged sentences

$ 1,902  

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $ 4,348  and $ 1,684  at March 31, 2022 and December 31, 2021, respectively, and was classified as other current assets in the consolidated balance sheets.

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $ 1,301  and $ 1,684  at June 30, 2022 and December 31, 2021, respectively, and was classified as other current assets in the consolidated balance sheets.

The carrying values of the margin account and of the derivative instruments are included net, in other current assets.

The estimated fair market value of the underlying physical commodity (feedstock and finished biodiesel inventory and undelivered feedstock commitments) was $ 9.0  million at March 31, 2022. 

This is an estimate only and not reflected in the consolidated financial statements for the three months ended March 31, 2022. 

See Note 16 regarding subsequent events.

The estimated fair market value of the underlying physical commodity (feedstock and finished biodiesel inventory and undelivered feedstock commitments) was $ 5.8  million at June 30, 2022. 

This is an estimate only and 

not reflected in the consolidated financial statements for the six months ended June 30, 2022.

Notes to Consolidated Financial Statements of FutureFuel Corp.

1 unchanged sentence

MARKETABLE SECURITIES

At March 31, 2022 and December 31, 2021, FutureFuel had investments in certain marketable equity and trust preferred (debt) securities which had a fair market value of $ 42,751 and $ 47,109 , respectively. 

At June 30, 2022 and December 31, 2021, FutureFuel had investments in certain marketable equity and trust preferred (debt) securities which had a fair market value of $ 39,426  and $ 47,109 , respectively. 

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

The Company has designated the trust preferred securities as being available-for-sale. 

Accordingly, these securities were recorded at fair value of $ 3,839  and $ 3,902 at March 31, 2022 and December 31, 2021, respectively, with the unrealized gains of $ 163  and $ 226 , net of taxes, as a component of stockholders' equity. 

In accordance with ASC 321, the change in the fair value of marketable equity securities (preferred and other equity instruments) for the three months ended March 31, 2022 and 2021, was a loss reported as a component of net income in the amount of $ 4,100 and $ 1,765 , respectively. 

The aggregate fair value of debt securities with unrealized losses totaled $ 0  at March 31, 2022 and 

December 31, 2021.

The Company determined an allowance for credit losses for these debt securities was not necessary as of March 31, 2022.

Accordingly, these securities were recorded at fair value of $ 3,754  and $ 3,902 at June 30, 2022 and December 31, 2021, respectively, with net unrealized gains of $ 77  and $ 226 , net of taxes, as a component of stockholders' equity. 

In accordance with ASC 321, the change in the fair value of marketable equity securities (preferred and other equity instruments) for the three months ended June 30, 2022 and 2021, was reported as a component of net income with a loss of $ 3,239  and a gain of $ 1,543 , respectively. 

The change in the fair value of marketable equity securities (preferred and other equity instruments) for the six months ended June 30, 2022 and 2021, was a loss of $ 7,339  and $ 222 , respectively. 

The aggregate fair value of debt securities with unrealized losses totaled $ 335  at June 30, 2022 and $ 0 at December 31, 2021.

The Company determined an allowance for credit losses for these debt securities was not necessary as of June 30, 2022.

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

There were no sales of debt securities in the three months ended March 31, 2022 or 2021.

The debt securities held at March 31, 2022, had a contractual maturity of greater than ten years.

There were no sales of debt securities in the six months ended June 30, 2022 or 2021.

The debt securities held at June 30, 2022, had a contractual maturity of greater than ten years.

Notes to Consolidated Financial Statements of FutureFuel Corp.

10 unchanged sentences

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

The following tables provide information by level for assets and liabilities that are measured at fair value, on a recurring basis, at March 31, 2022 and December 31, 2021. 

The following tables provide information by level for assets and liabilities that are measured at fair value, on a recurring basis, at June 30, 2022 and December 31, 2021. 

Asset (Liability)

2 unchanged sentences

Inputs Considered as:

March 31, 2022

June 30, 2022

Derivative instruments

25 unchanged sentences

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

March 31, 2022

June 30, 2022

December 31, 2021

32 unchanged sentences

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

There were no borrowings under the Credit Agreement at March 31, 2022 or December 31, 2021.

There were no borrowings under the Credit Agreement at June 30, 2022 or December 31, 2021.

INCOME TAX PROVISION

The following table summarizes the income tax provision.  

Three Months Ended March 31,  

Income tax (benefit) provision

Three Months Ended June 30,

Six Months Ended June 30,

Income tax benefit

$ ( 938 )  

$ ( 1,642 )  

Effective tax rate

23.2 %  

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

The Company’s effective tax rate for the three months ended March 31, 2022 was unfavorably impacted by the assessment that the carryforwards of its 2022 net operating loss and tax credits would not more likely than not be realizable in full. 

The Company’s effective tax rate for the six months ended June 30, 2022 was unfavorably impacted by the assessment that the carryforwards of its 2022 net operating loss and tax credits would not more likely than not be realizable in full. 

Because the tax benefit of the year-to-date loss is greater than the anticipated realizable value of tax benefit of the full year loss, the year-to-date benefit has been limited to the anticipated full year benefit pursuant to ASC 740.

Additionally, the net income tax benefit for the three months ended March 31, 2022 

was unfavorably impacted by the recognition of tax expense for valuation allowances against various tax attributes existing at January 1, 2022.  

The Company evaluates its deferred tax assets quarterly and records a valuation allowance to reduce these assets to the amount that is more likely than not to be realized.

During the first quarter of 2022, based on all available evidence, the Company determined that portions of its deferred tax assets for carryforwards of capital losses, state tax credits, and state net operating losses expiring in the next ten years are not more likely than not to be realized.

In the three months ended March 31, 2021, because the Company was unable to reliably estimate its annual effective tax rate, the tax benefit was determined by applying an actual year-to-date effective rate to year-to-date pretax income. 

The effective tax rate for the three months ended March 31, 2021 reflected the positive effects of certain tax credits and incentives, the most significant of which are the BTC and Small Agri-biodiesel Producer Tax Credit. While the Company remains eligible for these credits in 2022, realizability concerns have limited their impacts on the effective rate.

not meet the realizability standard of more likely than not.

This assessment was modified in the second quarter, when a reduction in the forecasted annual tax loss facilitated the release of some of the valuation allowance established in the first quarter.

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

The effective tax rate for the three and six months ended June 

30, 2021 reflected the positive effects of certain tax credits and incentives, the most significant of which are the BTC and Small Agri-biodiesel Producer Tax Credit. While the Company remains eligible for these credits in 2022, realizability concerns have limited their impacts on the effective rate.

EARNINGS PER SHARE

In the three months ended March 31, 2022 and 2021, FutureFuel used the treasury method in computing earnings per share.

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

Three Months Ended March 31,  

In the three and six months ended June 30, 2022 and 2021, FutureFuel used the treasury method in computing earnings per share.

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

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income

$ (3,104)  

$ 3,481  

$ (15,502)  

Weighted average shares outstanding –

1 unchanged sentence

43,754,232  

43,763,243  

43,748,768  

Effect of dilutive securities:

3 unchanged sentences

43,754,422  

Basic loss per share

43,763,243  

Diluted loss per share

43,748,768  

For the three months ended March 31, 2022 and 2021, 24,000 and 44,000 options to purchase FutureFuel’s common stock were excluded in the computation of diluted earnings per share as all were anti-dilutive. 

Basic (loss) earnings per share

$ (0.07)  

$ 0.08  

$ (0.35)  

Diluted (loss) earnings per share

$ (0.07)  

$ 0.08  

$ (0.35)  

In the three and six months ended June 30, 2022, 12,000  and 24,000  options to purchase FutureFuel’s common stock were excluded, respectively, in the computation of diluted earnings per share as all were anti-dilutive. 

In the three and six months ended June 30, 2021, 11,905 and 33,905 options were excluded, respectively.

Notes to Consolidated Financial Statements of FutureFuel Corp.

27 unchanged sentences

FutureFuel employs derivative instruments to manage biofuel commodity trading risk. 

See Note 5  for additional discussion regarding the fair market value of unsold inventory and undelivered feedstock commitments at March 31, 2022.

See Note 5  for additional discussion regarding the fair market value of unsold inventory and undelivered feedstock commitments at June 

Summary of business by segment

Three Months Ended March 31,  

Three Months Ended June 30,

Six Months Ended June 30,

Custom chemicals

1 unchanged sentence

$ 12,260  

$ 27,981  

$ 22,935  

Performance chemicals

11,774  

Chemicals revenue

1 unchanged sentence

15,547  

39,755  

31,657  

Biofuels revenue

1 unchanged sentence

58,571  

120,302  

83,977  

Total Revenue

1 unchanged sentence

$ 74,118  

$ 160,057  

$ 115,634  

Segment gross (loss) profit

1 unchanged sentence

$ 4,285  

Total gross loss

$ 9,614  

$ 2,984  

( 3,219 )  

( 15,792 )  

Total gross (loss) profit

$ (6,178)  

Depreciation is allocated to segment cost of goods sold based on plant usage.

13 unchanged sentences

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

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

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

However, as discussed in Note 12, Related Party Transactions, the natural gas supplier is not a related party of FutureFuel.

SUBSEQUENT EVENT

FutureFuel maintained a significant inventory position at March 31, 2022 for its biofuels segment consisting of finished biodiesel and feedstock purchase commitments. 

The Company uses derivative instruments to hedge commodity risk as described in Note 5.

Due to unprecedented volatility in the New York Mercantile Exchange May heating oil contract, FutureFuel incurred approximately $ 12  million of realized derivative losses during April and it is uncertain what additional costs will be incurred subsequently. 

These costs likely will not be fully recovered when the physical inventory is sold. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

17 unchanged sentences

We do not purchase RINs. 

As of March 31, 2022, we held 3.6 million D4 RINs with a market value of $5,314.   

As of June 30, 2022, we held 2.8 million D4 RINs with a market value of $4,943.   

During the COVID-19 pandemic, our objectives have been to protect the well-being of our employees, support our customers, obtain materials from our suppliers, and maintain our manufacturing operations.

6 unchanged sentences

COVID-19 is only one of many factors influencing the energy markets at the moment and we closely align our biodiesel production to match that demand when margins are positive.

Supply Chain Impact  –  Our initial concern was that supplier shutdowns might result in raw material or input shortages and negatively impact our ability to manufacture products and meet our customers’

Supply Chain Impact  – Our initial concern was that supplier shutdowns might result in raw material or input shortages and negatively impact our ability to manufacture products and meet our customers’

While we have managed supply such that our operations have not been significantly hindered by shortages, timing of deliveries and supply chain disruptions have on occasion tempered demand from our customers.

6 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Loss from operations

Net (loss) income

(Loss) earnings per common share:

Adjusted EBITDA

Six Months Ended June 30,

Loss from operations

Earnings per common share:

Loss per common share:

Adjusted EBITDA

19 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income 

Interest and dividend income

Non-cash interest expense and amortization of deferred financing costs

Loss on disposal of property and equipment

Losses on disposal of property and equipment

Loss on derivative instruments

Loss on marketable securities

(Loss) gain on marketable securities

Income tax benefit

1 unchanged sentence

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

Three Months Ended March 31,

Net cash used in operating activities

Six Months Ended June 30,

Net cash used in operating activities

Benefit for deferred income taxes

4 unchanged sentences

Change in operating assets and liabilities, net

Impairment of intangible asset

Adjusted EBITDA

Results of Operations  

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Volume/product mix effect

Gross profit (loss) 

Operating expenses

Other expense

Other (expense) income

Income tax benefit

Consolidated revenue in the three months ended March 31, 2022 increased 1.8% or $745 compared to the three months ended March 31, 2021.

This increase resulted from increased sales prices in both the chemicals and biofuels segments and increased sales volume in the chemical segment which was partially offset by reduced sales volumes in the biofuel segment.

Gross loss in the three months ended March 31, 2022 was $7,155 as compared to $10,736 in the three months ended March 31, 2021.

This decline primarily resulted from the change in the activity in derivative instruments with a loss of $9,129 in the three months ended March 31, 2022, as compared to $2,625 in the three months ended March 31, 2021 whereas inventories related to this change have not yet been sold.

See note 5 to our consolidated financial statements. Affordable feedstocks were acquired and converted to biodiesel which will be sold mostly in the three months ended June 30, 2022. 

Partially reducing gross losses was the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment increased gross profit $481 in the three months ended March 31, 2022 as compared to a decrease of $3,913 in the prior year quarter. 

See note 4 of our consolidated financial statements for additional detail. In addition, the prior year quarter was negatively impacted by the exorbitant natural gas prices invoiced from Winter Storm Uri which resulted in an addition to cost of goods sold of $7,800 with a reduction in production volumes given the natural gas curtailment.

Operating  e xpenses

Operating expenses increased $130 in the three months ended March 31, 2022, as compared to the three-months ended March 31, 2021.

This slight increase was primarily from increased compensation expense.

Other expense

Other expense was $3,495 in the three months ended March 31, 2022, as compared to the same period of the prior year of $102 which was primarily from the change in unrealized losses on marketable securities.

Net (loss) income 

Consolidated revenue in the three and six months ended June 30, 2022 increased $44 million compared to the three and six months ended June 30, 2021.

This increase resulted from increased sales prices in the biofuels segment, and to a lesser extent, from increased prices in the chemicals segment. 

This increase was partially reduced by lower sales volumes in biofuels for both the three-and six-month periods and from lower sales volumes in the chemical segment in the three-month period ending June 30, 2022.  

Gross profit in the three months ended June 30, 2022 increased $1.0 million as compared to the same periods of 2021.

The increase primarily resulted from improved margins from the biofuels segment. 

Mostly offsetting this increase was the change in the activity in derivative instruments with a loss of $17.5 million in the current three-month period, as compared to $5.4 million in the same period of 2021. 

We experienced unprecedented volatility in the heating oil futures market which resulted in losses that were not fully recoverable on fuel sold.

We have since amended our derivative strategy to help mitigate reoccurrence.  

Gross profit for the six months ended June 30, 2022 increased $4.6 million as compared to the same period of 2021.

This increase primarily resulted from improved margins from biofuels and the prior year period included exorbitantly high natural gas prices experienced in the February 2021 from Winter Storm Uri. 

Mostly offsetting this increase was the change in the activity in derivative instruments with a loss of $26.6 million in the current six-month period (from the unprecedented volatility noted previously), as compared to $8.0 million in the same period of 2021.  

Also impacting gross profit in both the three-and six-month periods ended June 30, 2022 as compared to the same period of 2021, was the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. 

 In the three months ended June 30, 2022 and 2021, this adjustment decreased gross profit $5.3 million and $3.1 million, respectively. In the six months ended June 30, 2022 and 2021, this adjustment decreased gross profit $4.8 million and $7.0 million, respectively. 

The change for the six months ended June 30, 2022 was inclusive of a liquidation of LIFO inventory from our biofuel segment as stated in note 4 to our consolidated financial statements.  

Operating  e xpenses 

Operating expenses increased $0.5 million and $0.7 million in the three and six months ended June 30, 2022, as compared to the same periods of 2021.

This increase was primarily from increased administrative fees and compensation expense.

Other (expense) income

Other (expense) income reduced income $3.5 million and $6.9 million in the three and six months ended June 30, 2022 as compared to the same periods of 2021. 

This reduction in both periods was primarily from unrealized losses on marketable securities. 

In addition, an impairment charge for an intangible asset reduced other income in the prior year periods by $1.4 million. 

Income tax benefit 

The Company’s effective tax rate for the six months ended June 30, 2022 was unfavorably impacted by the assessment that the carryforwards of its 2022 net operating loss and tax credits would not more likely than not be realizable in full. 

In contract, because the Company was unable to reliably estimate its annual effective tax rate for the three months ended March 31, 2021, the tax benefit was determined by applying an actual year-to-date effective rate to year-to-date pretax income. The effective tax rate for the three months ended March 31, 2021 reflected the positive effects of certain tax credits and incentives, the most significant of which are the BTC and Small Agri-biodiesel Producer Tax Credit. While the Company remains eligible for these credits in 2022, realizability concerns have limited their impacts on the effective rate.

Additionally, the net income tax benefit for the three months ended March 31, 2022 was unfavorably impacted by the recognition of tax expense for valuation allowances against various tax attributes existing at January 1, 2022. The Company evaluates its deferred tax assets quarterly and records a valuation allowance to reduce these assets to the amount that is more likely than not to be realized.

In contrast, because the Company was unable to reliably estimate its annual effective tax rate for the three and six months ended June 30, 2021, the tax benefit was determined by applying an actual year-to-date effective rate to year-to-date pretax income. The effective tax rate for the three and six months ended June 30, 2021 reflected the positive effects of certain tax credits and incentives, the most significant of which are the BTC and Small Agri-biodiesel Producer Tax Credit. While the Company remains eligible for these credits in 2022, realizability concerns have limited their impacts on the effective rate.

Additionally, the net income tax benefit for the six months ended June 30, 2022 was unfavorably impacted by the recognition of tax expense for valuation allowances against various tax attributes existing at January 1, 2022. The Company evaluates its deferred tax assets quarterly and records a valuation allowance to reduce these assets to the amount that is more likely than not to be realized.

During the first six months of 2022, based on all available evidence, the Company determined that portions of its deferred tax assets for carryforwards of capital losses, state tax credits, and state net operating losses expiring in the next ten years are not more likely than not to be realized.

Chemical Segment

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Volume/product mix effect

Gross profit (loss)

Chemical revenue in the three months ended March 31, 2022 increased 33.8% or $5,451 compared to the three months ended March 31, 2021.

Revenue for our custom chemicals (unique chemicals produced under contract for specific customers) for the three months ended March 31, 2022 totaled $15,715, an increase of $5,040 from the same period in 2021. 

Two custom chemicals used in the energy and microbial control industries experienced stronger volumes and higher selling prices. 

Performance chemicals (composed of multi-customer products which are sold to the open market based on specification) revenue was $5,846, an increase of $411 from the three months ended March 31, 2021.

This increase was from increased sales volume of glycerin partially offset by the production timing of certain products which are produced batch-wise during the course of the year. 

There was also a weaker market for our monomer additive.  

Gross profit for the chemical segment for the three months ended March 31, 2022, increased $6,719 when compared to the same period of 2021 from increased sales as noted above and the absence of the unusually high natural gas price in the prior year period. 

Chemical revenue in the three and six months ended June 30, 2022 increased 17% or $2.6 million and 25.6% or $8.1 million compared to the three and six months ended June 30, 2021.

Revenue from our custom chemicals (unique chemicals produced under contract for specific customers) for the three and six months ended June 30, 2022 totaled $12.3 million and $28.0 million, no change from the three-month comparative period and an increase of $5.0 from the six-month comparative period in 2021, respectively. 

The improvement in the six-month period was driven mostly from higher selling prices. 

Performance chemicals (composed of multi-customer products which are sold to the open market based on specification) revenue was $5.9 million and $11.8 million, an increase of $2.6 million and $3.1 million as compared to the same periods of 2021, respectively.

The increase in the current year periods was from higher sales volume of glycerin partially offset by a weaker market for our monomer additive.  

Gross profit for the chemical segment for the three months ended June 30, 2022 decreased $0.1 primarily from product mix. 

For the six months ended June 30, 2022, gross profit increased $6.6 million when compared to the same periods of 2021 from increased sales as noted above and the absence of the unusually high natural gas price in the prior year period. 

Biofuels Segment

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Volume/product mix effect

Biofuels revenue in the three months ended March 31, 2022 decreased 18.5% or $4,706 as compared to the same period of 2021.

The biodiesel and biodiesel blend volumes decreased as compared to the prior year, primarily from the availability of economical feedstock.

Offsetting this volume decrease as compared to the same period of 2021, was higher selling prices with the overall improvement in the fuel industry and from improved RIN prices. 

Gross (loss) profit

Biofuels revenue in the three and six months ended June 30, 2022 increased 70.1% or $41.0 million and $36.3 million as compared to the same periods of 2021, respectively.

The biodiesel and biodiesel blend volumes decreased as compared to the prior year periods, primarily from the availability of economical feedstock.

Offsetting these volume decreases as compared to the same period of 2021, was higher selling prices with the overall increase in the fuel market. 

A significant portion of our biodiesel sold was to one major refiner/blender in the three months ended March 31, 2022 and to two major refiners in the first quarter of 2021. 

A significant portion of our biodiesel sold was to two major refiner/blender in the three and six months ended June 30, 2022 and 2021. 

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

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

Biofuels gross loss was $12,573 in the three months ended March 31, 2022, an increased loss of $3,138 from the same period of 2021. 

This increased loss was from:

i) the change in the activity in derivative instruments with a loss of $9,129 in the three months ended March 31, 2022, as compared to $2,625 in the three months ended March 31, 2021 whereas inventories related to this change have not yet been sold (See note 5 of our consolidated financial statements), and ii) a reduction in biodiesel margins. 

Partially offsetting the gross losses were i) the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting as compared to an increase in gross profit in the same period of 2021;

this adjustment decreased gross losses this period $967 as compared to $3,243 in the same prior year period. 

Also note, the loss in the three months ended March 31, 2021 was driven by Winter Storm Uri which dramatically increased the price of natural gas and consequently reduced sales volumes when production was curtailed to minimize natural gas consumption.  

Biofuels gross loss was $3.2 million in the three months ended June 30, 2022, an improvement of $1.1 million as compared to the same period of 2021. 

The increase primarily resulted from improved margins from the biofuels segment. 

We experienced unprecedented volatility in the heating oil futures market which resulted in losses that were not fully recoverable on fuel sold.

We have since amended the execution of our derivative strategy to help mitigate reoccurrence.  Also reducing gross profit was the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting as compared to the same period of 2021;

this adjustment decreased gross profit this period $4.6 million as compared to a decrease in gross profit of $2.8 million in the same prior year period. 

Gross losses were $15.8 million in the six months ended June 30, 2022, an increased loss of $2.0 million from the same period in 2021. 

This increased loss resulted primarily from:  i) the change in the activity in derivative instruments with a loss of $26.6 million and $8.0 million in the first six months of 2022 and 2021, respectively and ii) the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting as compared to the same period of 2021;

this adjustment decreased gross profit this period $3.7 million as compared to a decrease in gross profit of $6.0 million in the same prior year period. 

Partially offsetting this increased loss was the unfavorable impact in the prior year of Winter Storm Uri which dramatically increased the price of natural gas and consequently reduced sales volumes when production was curtailed to minimize natural gas consumption.

In regards to our derivative activity, we recognize all derivative instruments as either assets or liabilities at fair value in our consolidated balance sheets.

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Asset (Liability)

March 31, 2022

June 30, 2022

December 31, 2021

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

Bill-and-hold transactions for the three months ended March 31, 2022 and 2021 were related to custom chemicals customers whereby revenue was recognized in accordance with contractual agreements based upon product being produced and ready for use by the customer.

Bill-and-hold transactions for the three and six months ended June 30, 2022 and 2021 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.

Revenues under bill-and-hold arrangements were $9,276 and $7,549 for the three months ended March 31, 2022 and 2021, respectively.

Revenues under bill-and-hold arrangements were $7,983 and $17,259 for the three and months ended June 30, 2022.

Liquidity and Capital Resources

Our net cash from operating activities, investing activities, and financing activities for the three months ended March 31, 2022 and 2021 are set forth in the following table.

Three Months Ended March 31,

Our net cash from operating activities, investing activities, and financing activities for the three months ended June 30, 2022 and 2021 are set forth in the following table.

Six Months Ended June 30,

Net cash used in operating activities

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Operating Activities

Cash used in operating activities was $10,576 in the three months ended March 31, 2022 as compared to $14,347 in the same period of 2021.

This increase was primarily attributable to the change in accounts receivable, including accounts receivable - related parties, demonstrating a cash inflow of $16,466 in the three months ended March 31, 2022 compared to the same period of 2021 primarily from the timing of customer payments. 

Partially offsetting cash inflow was a net change in accounts payable, including accounts payable-related parties, demonstrating a cash outflow of $12,757 primarily from the timing of vendor payments.

Also note, cash used for inventories was similar in each three-month period of 2022 and 2021, $10,700 and $11,389, respectively. 

Cash used in operating activities was $1,910 in the first six months of 2022 as compared to $2,349 in the same period of 2021.

This increase in cash was attributable to the change in inventory, demonstrating a cash inflow of $14,961;

the change in benefit for deferred income taxes of $7,253;

and the change in fair value of equity securities of $7,117 also demonstrating cash inflows.

Partially offsetting cash inflow was a net change in accounts payable, including accounts payable-related parties, demonstrating a cash outflow of $11,536 primarily from the timing of vendor payments, and the change in net income of $10,254 also demonstrating a cash out flow. 

Investing Activities

Cash used by investing activities was $3,335 in the three months ended March 31, 2022 as compared to cash provided by investing activities of $12,828 in the three months ended March 31, 2021. 

Of the $16,163 of change, $12,830 was the result of a decrease in net sales of marketable securities. 

Such net sales totaled $250, in the first three months of 2022, compared to $13,080 in net sales in the first three months of 2021. 

Cash used by investing activities was $1,206 in the six months ended June 30, 2022 as compared to cash provided by investing activities of $16,248 in the six months ended June 30, 2021. 

Of the $17,454 of change, $18,453 was the result of a decrease in net sales of marketable securities. 

Such net sales totaled $250 in the first six months of 2022, compared to $18,703 in net sales in the first six months of 2021. 

The remaining change resulted from an increase in the collateralization of derivative instruments of $2,443 and an increase in capital expenditures of $1,407. 

Financing Activities

Cash used in financing activities was $2,626 and $2,624 in the three months ended March 31, 2022 and 2021, respectively, for payments of dividends on our common stock. 

Cash used in financing activities was $5,251 and $114,427 in the six months ended June 30, 2022 and 2021, respectively, for payments of dividends on our common stock.

This change resulted from the payment of a special dividend of $109,408 in the first six months of 2021. 

Credit Facility

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

On February 1, 2022, we declared a quarterly cash dividend program of $0.06 per common share. 

In the three months ended March 31, 2022 and 2021, we paid a regular quarterly cash dividend in the amount of $0.06 per share on our common stock.

The regular cash dividend amounted to $2,626 in the three months ended March 31, 2022 and $2,624 in the three months ended March 31, 2021. 

In the three and six months of 2022 and 2021, we paid a regular quarterly cash dividend in the amount of $0.06 per share on our common stock. 

The regular cash dividend amounted to $2,625 in each of the periods in 2022 and $2,624 in each of the periods of 2021.  On May 10, 2021 we declared a special cash dividend of $2.50 per share and paid $109,408 on June 4, 2021.

Capital Management

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

In the periods ended March 31, 2022 and December 31, 2021, we also had investments in certain preferred stock, debt securities, and other equity instruments.

In the periods ended June 30, 2022 and December 31, 2021, we also had investments in certain preferred stock, debt securities, and other equity instruments.

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

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

The fair value of the debt securities and equity instruments totaled $42,751 and $47,190 at March 31, 2022 and December 31, 2021, respectively.

The fair value of the debt securities and equity instruments totaled $39,426 and $47,190 at June 30, 2022 and December 31, 2021, respectively.

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

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

This activity was captured in our consolidated balance sheets at March 31, 2022 and December 31, 2021.

This activity was captured in our consolidated balance sheets at June 30, 2022 and December 31, 2021.

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

Derivatives and Hedging .

These hedging transactions are recognized in earnings and were not recorded in our consolidated balance sheets at March 31, 2022 or December 31, 2021 because they do not meet the definition of a hedge instrument as defined under GAAP.

These hedging transactions are recognized in earnings and were not recorded in our consolidated balance sheets at June 30, 2022 or December 31, 2021 because they do not meet the definition of a hedge instrument as defined under GAAP.

The purchase of biofuels feedstock generally involves two risk components:

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

What changed 10-Q

Item 1. Financial Statements