What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-08 · 216 added, 275 removed, 682 unchanged (42% of the section changed)

3 unchanged sentences

(Dollars in thousands)

June 30, 2022  

September 30, 2022  

December 31, 2021

1 unchanged sentence

$ 137,521  

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

Accounts receivable, inclusive of the blenders' tax credit of $ 8,462  and $ 8,232 , at September 30, 2022 and December 31, 2021, respectively, and net of allowances for bad debt of $ 43  and $ 67  at September 30, 2022 and December 31, 2021, respectively

23,719  

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 June 30, 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 September 30, 2022 and December 31, 2021

Accumulated other comprehensive income

14 unchanged sentences

(Dollars in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

$ 117,640  

$ 73,813  

$ 159,714  

$ 114,971  

Three Months Ended September 30,

Nine Months Ended September 30,

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 –

1 unchanged sentence

Gross profit (loss)

( 6,178 )  

Selling, general, and administrative expenses

4 unchanged sentences

Total operating expenses

from operations

( 1,515 )  

( 2,003 )  

( 11,122 )  

Income (loss) from operations

Interest and dividend income

Interest expense

( 33 )  

( 65 )  

(Loss) gain on marketable securities

( 3,239 )  

( 7,366 )  

Loss on marketable securities

Other expense

( 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 )  

Other income (expense)

Income (loss) before taxes

Income tax provision (benefit)

Earnings per common share

Weighted average shares outstanding

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 )  

Comprehensive income

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

Income tax effect

Total other comprehensive (loss) income, net of tax

( 68 )  

( 117 )  

Comprehensive (loss) income

$ ( 3,172 )  

$ 3,525  

$ ( 15,619 )  

Total other comprehensive loss, net of tax

Comprehensive income

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

2 unchanged sentences

(Dollars in thousands)

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Retained  

Comprehensive

Earnings  

Stockholders ’

Income (Loss)

Earnings (Deficit)

Balance - December 31, 2021

19 unchanged sentences

$ 262,806  

For the Six Months Ended June 30, 2021

Stock based compensation  

Other comprehensive loss

( 56 )  

15,780  

Balance - September 30, 2022

43,763,243  

$ 282,489  

$ ( 3,922 )  

$ 278,576  

For the Nine Months Ended September 30, 2021

Retained  

Comprehensive

Earnings  

Stockholders ’

Income (Loss)

Earnings (Deficit)

Balance - December 31, 2020

17 unchanged sentences

$ 257,414  

Other comprehensive loss

Balance - September 30, 2021

43,763,243  

$ 282,446  

$ 266,563  

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

3 unchanged sentences

(Unaudited) 

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

$ ( 15,502 )  

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

Amortization of deferred financing costs

Benefit for deferred income taxes

( 1,672 )  

Benefit from deferred income taxes

Change in fair value of equity securities

Change in fair value of derivative instruments

( 2,388 )  

(Gain) loss on the sale of investments

Stock based compensation

Loss on disposal of property and equipment

3 unchanged sentences

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 )  

Net cash provided by operating activities

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

1 unchanged sentence

Capital expenditures

( 1,895 )  

Net cash (used in) provided by  

Net cash (used in) from  

investing activities

( 1,206 )  

16,248  

Cash flows from financing activities

1 unchanged sentence

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

6 unchanged sentences

(Dollars in thousands, except per share amounts)

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

FutureFuel Corp.

(“FutureFuel”

or “the Company”), through its wholly-owned subsidiary, FutureFuel Chemical Company (“FutureFuel Chemical”), owns and operates a chemical production facility located on approximately 2,200 acres of land six miles southeast of Batesville in north central Arkansas fronting the White River (the “Batesville Plant”).

FutureFuel Chemical manufactures diversified chemical products, biobased products composed of biofuels, and biobased specialty chemical products.

FutureFuel Chemical’s operations are reported in two segments:

chemicals and biofuels.

The chemical segment manufactures a diversified portfolio of chemical products that are sold to third party customers.

The majority of the revenues from the chemical segment are derived from the custom manufacturing of specialty chemicals for specific customers.

The biofuels segment primarily produces and sells biodiesel.

FutureFuel Chemical also sells petrodiesel in blends with the Company’s biodiesel and, from time to time, with no biodiesel added. 

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated financial statements have been prepared by FutureFuel in accordance and consistent with the accounting policies stated in FutureFuel’s 2021 audited consolidated financial statements and should be read in conjunction with these financial statements.

The accompanying unaudited consolidated financial statements have been prepared by FutureFuel Corp.

("FutureFuel" or "the Company") in accordance and consistent with the accounting policies stated in the Company’s 2021 Annual Report on Form 10 -K, inclusive of the audited consolidated financial statements and should be read in conjunction with these consolidated financial statements.

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

7 unchanged sentences

Intercompany transactions and balances have been eliminated in consolidation.

Recent Accounting Standards

No new accounting standards have been adopted recently and none are pending evaluation.

GOVERNMENT TAX CREDITS

3 unchanged sentences

Tax Credit (“BTC”) provides a one dollar per gallon tax credit to the blender of biomass-based diesel with at least 0.1% petroleum-based diesel fuel. 

The BTC will expire December 31, 2022 based on current law. 

The BTC was set to expire December 31, 2022.

On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law.

The IRA provides for new and revised tax incentives for clean energy, including the extension of the BTC through December 31, 2024. 

The Company records this credit as a reduction to cost of goods sold.

Within the law of the BTC, small agri-biodiesel producers with production capacity not in excess of 60 million gallons are eligible for an additional tax credit of $0.10 per gallon on the first 15 million gallons of agri-biodiesel sold (the “Small Agri-biodiesel Producer Tax Credit”).

The Company was eligible for this credit as part of the tax provision.

The Company recognizes this credit as part of the tax provision.

CARES ACT –

21 unchanged sentences

Contract Assets and Liabilities:

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

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 assets consist of unbilled amounts typically resulting from revenue recognized through bill-and-hold arrangements which the company invoices upon shipping.

The contract assets at September 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 $ 320  and $ 0  and $ 529 for the three and six months ended 

June 30, 2022 and 2021, respectively.

Increases to contract liabilities from cash received for a performance obligation of chemical segment plant expansions were $ 733  and $ 178  and $ 733  and $ 707  for the three and nine months ended September 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 $ 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.

Revenue recognized in the chemical segment from the contract liability reductions were $ 2,037  and $ 456  for the three months, and $ 5,211  and $ 2,192  for the 

nine months ended September 

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

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

Contract assets, included in accounts receivable

$ 1,045  

Contract liabilities, included in deferred revenue - short-term

6 unchanged sentences

Transaction price allocated to the remaining performance obligations:

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

At September 

30, 2022, approximately $ 14,525  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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Contract revenue from customers with > 1-year arrangements

15 unchanged sentences

Timing of revenue :

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Bill-and-hold revenue

13 unchanged sentences

$ 214,316  

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

As of September 

30, 2022, $ 3,762  of the bill and hold revenue had not shipped. 

In comparison, $ 3,052  of bill and hold revenue as of 

September 

30, 2021 had not shipped.

The amount unshipped excludes contract assets discussed above.

Notes to Consolidated Financial Statements of FutureFuel Corp.

1 unchanged sentence

The carrying values of inventory were as follows as of:

June 30, 2022

September 30, 2022

December 31, 2021

13 unchanged sentences

$ 26,920  

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 

For the nine months ended September 

30, 2022, a LIFO liquidation of $ 11,049  occurred with $ 2,124 related to the exit of the pipeline business and $ 8,925 related to reduced biodiesel feedstock and finished product inventory.

This liquidation of inventory increased biofuel segment profits $ 1,771 in the nine months ended September 30, 2022.

No LIFO liquidation occurred in the nine months ended September 

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 $ 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, 

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 gain of $ 4,688  and a loss of $ 21,917  for the three and nine months ended September 

30, 2022, respectively and a loss of $ 2,348  

and $ 10,377  for the three months and nine months ended September 

2021, respectively.

1 unchanged sentence

Asset (Liability)

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

$ 2,567  

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 margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $ 817  and $ 1,684  at September 

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 $ 5.8  million at June 30, 2022. 

The estimated fair market value of the underlying physical commodity (feedstock and finished biodiesel inventory and undelivered feedstock commitments) was $0.7  million at September 

This is an estimate only and 

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

not reflected in the consolidated financial statements for the nine months ended September 

Notes to Consolidated Financial Statements of FutureFuel Corp.

1 unchanged sentence

MARKETABLE SECURITIES

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. 

At September 

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 $ 38,753  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 $ 3,754  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.

Accordingly, these securities were recorded at fair value of $ 3,683  and $ 3,902 at September 

30, 2022 and December 31, 2021, respectively, with net unrealized gains of $ 7  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 September 

30, 2022 and 2021, was reported as a component of net income with a loss of $ 602  and $ 805 , respectively. 

The change in the fair value of marketable equity securities (preferred and other equity instruments) for the nine months ended September 

30, 2022 and 2021, was a loss of $ 7,940  and $ 1,027 , respectively. 

The aggregate fair value of debt securities with unrealized losses totaled $ 1,675  at September 

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 September 

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

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

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

There were no sales of debt securities in the nine months ended September 

30, 2022 or 2021.

The debt securities held at September 

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 June 30, 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 September 

30, 2022 and December 31, 2021. 

Asset (Liability)

2 unchanged sentences

Inputs Considered as:

June 30, 2022

September 30, 2022

Derivative instruments

25 unchanged sentences

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

June 30, 2022

September 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 June 30, 2022 or December 31, 2021.

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

INCOME TAX PROVISION

The following table summarizes the income tax provision.  

Three Months Ended June 30,

Six Months Ended June 30,

Income tax benefit

$ ( 938 )  

Three Months Ended September 30,

Nine Months Ended September 30,

Income tax expense (benefit)

$ 1,697  

3 unchanged sentences

(Dollars in thousands, except per share amounts)

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.

The Company’s effective tax rate for the nine months ended September 30, 2022 reflects the favorable impact of the BTC.

This was partly offset by the derecognition of accumulated tax benefits inherent in carryforwards of certain tax attributes, as discussed below.

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 do 

During the first quarter of 2022, based on all available evidence, the Company determined that portions of its deferred tax assets for carryforwards of federal and state net operating losses, tax credits, and capital losses, do 

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.

In the three and nine months ended September 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 nine months ended September 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.

EARNINGS PER SHARE

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

In the three and nine months ended September 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

Three Months Ended September 30,

Nine Months Ended September 30,

$ 15,780  

13 unchanged sentences

43,753,709  

Basic (loss) earnings per share

Basic earnings per share

$ 0.36  

1 unchanged sentence

$ 0.01  

Diluted (loss) earnings per share

$ 0.09  

Diluted earnings per share

$ 0.36  

$ 0.21  

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.

$ 0.01  

$ 0.09  

In the three and nine months ended September 30, 2022, 44,000  and 30,667  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 nine months ended September 30, 2021, 24,000  and 30,603  options were excluded, respectively.

Notes to Consolidated Financial Statements of FutureFuel Corp.

26 unchanged sentences

The benefit derived from the eventual sale of the RINs is not reflected in results of operations until such time as the RINs sale has been completed, which may lead to variability in reported operating results.

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 June 

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 September 30, 2022.

Summary of business by segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Custom chemicals

5 unchanged sentences

17,233  

12,693  

Chemicals revenue

13 unchanged sentences

$ 214,316  

Segment gross (loss) profit

Segment gross profit (loss)

$ 8,362  

4 unchanged sentences

( 4,169 )  

Total gross (loss) profit

Total gross profit (loss)

$ 19,985  

$ 8,192  

$ 13,807  

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

2 unchanged sentences

(Dollars in thousands, except per share amounts)

 RECENTLY ISSUED ACCOUNTING STA NDARDS  

Recently Issued Accounting Standards Adopted  

Reference Rate Reform (ASU No.

In March 2020, the FASB issued an accounting standard update to provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform, if certain criteria are met.

The amendments in this update are effective for all entities from January 1, 2020 through December 31, 2022.

The Company is in the process of evaluating the adoption of this optional accounting standards update as certain exceptions provided under this guidance may be applicable to future reference rate reform related transitions.

LEGAL MATTERS

3 unchanged sentences

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

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

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

18 unchanged sentences

We do not purchase RINs. 

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

As of September 30, 2022, we held 8.1 million D4 RINs with a market value of $12,752.

Comparatively, we held 12.1 million D4 RINs at September 30,2021 with a market value of $17,145. 

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.

15 unchanged sentences

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

Three Months Ended June 30,

Loss from operations

Net (loss) income

(Loss) earnings per common share:

Three Months Ended September 30,

Income from operations

Earnings per common share:

Adjusted EBITDA

Six Months Ended June 30,

Loss from operations

Loss per common share:

Nine Months Ended September 30,

Income (loss) from operations

Earnings 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 June 30,

Six Months Ended June 30,

Net (loss) income 

Three Months Ended September 30,

Nine Months Ended September 30,

Non-cash stock-based compensation

Interest and dividend income

Non-cash interest expense and amortization of deferred financing costs

Losses on disposal of property and equipment

Loss on derivative instruments

(Loss) gain on marketable securities

Income tax benefit

Loss on disposal of property and equipment

(Gain) loss on derivative instruments

Loss on marketable securities

Income tax provision (benefit)

Adjusted EBITDA

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

Six Months Ended June 30,

Net cash used in operating activities

Nine Months Ended September 30,

Net cash provided by operating activities

Benefit for deferred income taxes

7 unchanged sentences

Results of Operations  

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Volume/product mix effect

Gross profit (loss) 

Operating expenses

Other (expense) income

Income tax benefit

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. 

Other income (expense)

Income tax (provision) benefit

Consolidated revenue in the three and nine months ended September 30, 2022 increased $19 and $64 million, compared to the three and nine months ended September 30, 2021, respectively.

The increases resulted from higher sales prices in the biofuels segment, and to a lesser extent, from increased prices and sales volumes in the chemicals segment. 

This increase was partially reduced by lower sales volumes in biofuels for both the three-and nine-month periods ending September 30, 2022.  

Gross profit in the three months ended September 30, 2022 increased $11.8 million as compared to the same period of 2021.

The increase primarily resulted from improved margins from the biofuels segment and to a lesser extent, improved sales volume in the chemical segment.

Gross profit for the nine months ended September 30, 2022 increased $16.4 million as compared to the same period of 2021.

This increase primarily resulted from: 

i) improved margins from biofuels, ii) improved margins from the chemical segment from product mix and increased sales volumes, and iii) the prior year period included exorbitantly high natural gas prices experienced in the February 2021 from Winter Storm Uri.

Mostly offsetting these increases was the change in the activity in derivative instruments with a loss of $21.9 million in the current nine-month period, as compared to $10.4 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.  

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

Also favorably impacting gross profit in the three-month period ended September 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 September 30, 2022 and 2021, this adjustment increased gross profit $6.1 million and $1.0 million, respectively. In the nine months ended September 30, 2022 and 2021, this adjustment increased gross profit $1.3 million and decreased gross profit $6.1 million, respectively. 

The change for the nine months ended September 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.

Operating expenses increased $1.0 million and $1.7 million in the three and nine months ended September 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. 

Other income (expense)

Other income (expense) increased pretax profit $0.7 million in the three months ended September 30, 2022 as compared to the prior year period on increased interest and dividends. 

In the nine-month comparison period for 2022 and 2021, pretax profit decreased $6.2 million. This reduction was primarily from unrealized losses on marketable securities. 

In addition, an impairment charge for an intangible asset reduced other income in the prior year period 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 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.

The Company’s effective tax rate for the nine months ended September 30, 2022 reflects the favorable impact of the BTC. 

This was partly offset by the derecognition of accumulated tax benefits inherent in carryforwards of certain tax attributes, as discussed below.

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.

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.

Chemical Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Volume/product mix effect

Chemical revenue in the three and six months ended June 30, 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. 

Chemical revenue in the three and nine months ended September 30, 2022 increased $4.8 million and $12.9 million compared to the three and nine months ended September 30, 2021.

Revenue from our custom chemicals (unique chemicals produced under contract for specific customers) for the three and nine months ended September 30, 2022 totaled $16.0 million and $44.0 million, an increase of $3.3 and $8.4 from the three-and nine-month comparative periods in 2021, respectively. 

The improvement in the current year periods was primarily from contractual sales prices indexed to raw material prices and general inflation.

Performance chemicals (composed of multi-customer products which are sold to the open market based on specification) revenue was $5.5 million and $17.3 million, an increase of $1.5 million and $4.5 million as compared to the same periods of 2021, respectively.

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

Gross profit for the chemical segment for the three and nine months ended September 30, 2022 increased $3.3 and $9.9 million, respectively, from product mix and, to a lesser extent, from increased sales volumes and the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting.

For the nine months ended September 30, 2022, gross profit increased when compared to the same period of 2021 from the absence of the unusually high natural gas price in the prior year period. 

Biofuels Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Volume/product mix effect

Gross (loss) profit

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

Gross profit (loss)

Biofuels revenue in the three and nine months ended September 30, 2022 increased $14.6 million and $51.0 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.

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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. 

A significant portion of our biodiesel sold was to two major refiner/blender in the three and nine months ended September 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 $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.

Biofuels gross profit was $11.6 million in the three months ended September 30, 2022, an improvement of $8.5 million compared to the same period of 2021 primarily from 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 increased gross profit this period $5.4 million as compared to an increase in gross profit of $1.1 in the same prior year period.

Also increasing gross profits was improved margins.

Gross losses were $4.2 million in the nine months ended September 30, 2022, a decreased loss of $6.5 million from the same period in 2021.

This gross loss included the unpredicted volatility in the NYMEX Heating Oil contract in the current nine-month period. 

The decreased loss resulted primarily from:  i) 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 increased gross profit this period $1.8 million as compared to a decrease in gross profit of $4.9 million in the same prior year period, and ii) the prior year period was unfavorably impacted by dramatically increased prices of natural gas resulting from Winter Storm Uri which 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)

June 30, 2022

September 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 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.

Bill-and-hold transactions for the three and nine months ended September 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 pickup or delivery by the customer.

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

The product was custom manufactured and stored at the customer’s request and could not be sold to another buyer.

The product was custom manufactured and stored at a FutureFuel warehouse at the customer’s request and could not be sold to another buyer.

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

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

Revenues under bill-and-hold arrangements were $9,713 and $26,960 for the three and months ended September 30, 2022.

Liquidity and Capital Resources

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

Net cash (used in) provided by investing activities

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

Nine Months Ended September 30,

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

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Operating Activities

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.

Cash provided by operating activities was $44,127 in the first nine months of 2022 as compared to $19,828 in the same period of 2021.

This increase in cash was attributable to the change in inventory, demonstrating a cash inflow of $19,328;

the change in benefit for deferred income taxes of $11,935;

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. 

the change in accounts receivable, including accounts receivable-related parties, of $9,386; and the change in fair value of equity securities of $6,913 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 $11,429 primarily from the timing of vendor payments; and the change in the fair value of derivative instruments of $5,200 also demonstrating a cash out flow. 

Investing Activities

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. 

Cash used by investing activities was $2,503 in the nine months ended September 30, 2022 as compared to cash provided by investing activities of $15,891 in the nine months ended September 30, 2021. 

Of the $18,394 change, $18,718 was the result of a decrease in net sales of marketable securities. 

Such net sales totaled $263 in the first nine months of 2022, compared to $18,981 in net sales in the first nine months of 2021. 

The remaining change resulted from an increase in the collateralization of derivative instruments of $3,383 and an increase in capital expenditures of $3,027. 

Financing Activities

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. 

Cash used in financing activities was $7,877 and $117,053 in the nine months ended September 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 nine 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.

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. 

In the three and nine 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 $2,626 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.

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

In the periods ended September 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 $39,426 and $47,190 at June 30, 2022 and December 31, 2021, respectively.

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

This activity was captured in our consolidated balance sheets at September 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 June 30, 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 September 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