Item 8. Financial Statements and Supplementary Data
Item 8.
Financial Statements and Supplementary Data.
 
Item
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 49 )
48
   
Consolidated Balance Sheets
49
   
Consolidated Statements of Income and Comprehensive Income
50
   
Consolidated Statements of Cash Flows
51
   
Consolidated Statements of Changes in Stockholders' Equity
52
   
Notes to Consolidated Financial Statements of FutureFuel Corp.
53
Note 1.    Description of business and operations
53
Note 2.    Significant accounting policies and basis of presentation
53
Note 3.    Government tax credits
59
Note 4.    Revenue Recognition
60
Note 5.  Inventory
62
Note 6.  Derivative instruments
62
Note 7.  Marketable securities
63
Note 8.  Fair value measurements
63
Note 9.  Property, plant, and equipment
64
Note 10.  Other assets
64
Note 11.  Accrued expenses and other current liabilities
64
Note 12.  Borrowings
65
Note 13.  Asset retirement obligations and environmental reserves
65
Note 14.  Lease commitments and purchase obligations
66
Note 15.  Income tax benefit
67
Note 16.  Earnings per share
69
Note 17.  Stock-based compensation
70
Note 18.  Stockholders' equity
72
Note 19.  Employee benefit plans
73
Note 20.  Related party transactions
73
Note 21.  Segment information
75
Note 22.  Quarterly financial information (unaudited)
76
Note 23.  Legal proceedings
76
 
47
Table of Contents
 
Report of Independent Registered Public Accounting Firm
 
To the Shareholders and the Board of Directors of FutureFuel Corp.
 
 
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of FutureFuel Corp. and its subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
 
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 14, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
 
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of this critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
 
Deferred income tax asset valuation allowance relating to the account balances Noncurrent deferred income tax liability and Income tax benefit - see also Note 1 and Note 15 to the consolidated financial statements
As described in Note 1 and Note 15 to the consolidated financial statements, the Company records deferred taxes which result from differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Additionally, valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Determining the required valuation allowance requires management’s judgment regarding projected future taxable income. We identified the income tax valuation allowance as a critical audit matter because auditing the valuation allowance involved significant auditor effort and judgement due to the subjective and complex nature of income tax projections and determining whether management can appropriately rely on such projections for purposes of calculating the valuation allowance.
 
Our audit procedures related to the Company’s income tax valuation allowance included the following, among others:
 
  ●
We obtained an understanding of the relevant controls over management’s accounting for the income tax valuation allowance, and their related financial reporting disclosures and tested such controls for design and operating effectiveness as of December 31, 2022
  ●
We obtained management’s calculation of the income tax valuation allowance, including the sources of projected taxable income
  ●
We tested the mathematical accuracy of management’s calculations
  ●
With the assistance of our income tax subject matter specialists, we performed the following procedures:
  o
We evaluated the appropriateness of management’s decision to not rely on projections of future taxable income due to the three year history of cumulative income tax losses and the Company’s related income tax policy
  o
We evaluated management’s considerations of both positive and negative evidence regarding other sources of taxable income, including any relevant tax planning strategies and reversal patterns of deferred tax liabilities into taxable income
  o We considered relevant tax laws and regulations in evaluating the appropriateness of management’s estimates of future sources of taxable income
  o
We evaluated management’s conclusion that the valuation allowance sufficiently reduces the amount of the deferred tax assets to an amount that is more likely than not to be realized
 
 
/s/ RSM US LLP
 
We have served as the Company’s auditor since 2019.
 
St. Louis, Missouri
March 14, 2023
 
48
Table of Contents
 
 
  
FutureFuel Corp.
Consolidated Balance Sheets
As of December 31, 2022   and 2021
(Dollars in thousands)
 
    2022
    2021
 
Assets
               
Cash and cash equivalents
  $ 175,640     $ 137,521  
Accounts receivable, inclusive of the blenders’ tax credit of $ 8,970 and $ 8,232 , and net of allowances for bad debt of $ 48 and $ 67 , respectively
    26,198       29,316  
Accounts receivable – related parties
    6       58  
Inventory
    26,761       26,920  
Income tax receivable
    1,959       9,760  
Prepaid expenses
    3,694       3,588  
Prepaid expenses – related parties
    12       4  
Marketable securities
    37,126       47,190  
Other current assets
    2,380       1,476  
Total current assets
    273,776       255,833  
Property, plant and equipment, net
    76,941       82,901  
Other assets
    5,252       5,596  
Total noncurrent assets
    82,193       88,497  
Total Assets
  $ 355,969     $ 344,330  
Liabilities and Stockholders ’ Equity
               
Accounts payable, inclusive of the blenders’ tax credit rebates due customers of $890 and $890, respectively
  $ 28,546     $ 14,912  
Accounts payable – related parties
    7,799       7,911  
Deferred revenue – current
    3,772       6,151  
Dividends payable
    10,503       -  
Accrued expenses and other current liabilities
    5,477       6,081  
Accrued expenses and other current liabilities – related parties
    1       1  
Total current liabilities
    56,098       35,056  
Deferred revenue – non-current
    15,079       16,755  
Noncurrent deferred income tax liability
    -       1,870  
Other noncurrent liabilities
    1,792       1,721  
Total noncurrent liabilities
    16,871       20,346  
Total liabilities
    72,969       55,402  
Commitments and contingencies:
                   
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 December 31, 2022 and 2021
    4       4  
Accumulated other comprehensive income
    ( 1 )
    178  
Additional paid in capital
    282,489       282,443  
Retained earnings
    508       6,303  
Total stockholders’ equity
    283,000       288,928  
Total Liabilities and Stockholders ’ Equity
  $ 355,969     $ 344,330  
 
The accompanying notes are an integral part of these financial statements.
 
49
Table of Contents
 
 
FutureFuel Corp.
Consolidated Statements of Income and Comprehensive Income
For the Years Ended December 31, 2022, 2021, and 2020
(Dollars in thousands, except per share amounts)
 
 
 
2022
 
 
2021
 
 
2020
 
Revenue
 
$
395,555
 
 
$
320,125
 
 
$
202,529
 
Revenue – related parties
 
 
459
 
 
 
1,261
 
 
 
1,976
 
Cost of goods sold
 
 
357,182
 
 
 
274,293
 
 
 
158,730
 
Cost of goods sold – related parties
 
 
5,425
 
 
 
16,593
 
 
 
6,890
 
Distribution
 
 
4,240
 
 
 
6,787
 
 
 
7,401
 
Distribution – related parties
 
 
174
 
 
 
176
 
 
 
177
 
Gross profit
 
 
28,993
 
 
 
23,537
 
 
 
31,307
 
Selling, general, and administrative expenses
 
 
 
 
 
 
 
 
 
 
 
 
Compensation expense
 
 
3,540
 
 
 
2,586
 
 
 
2,760
 
Other expense
 
 
3,881
 
 
 
3,920
 
 
 
2,600
 
Related party expense
 
 
611
 
 
 
649
 
 
 
620
 
Research and development expenses
 
 
3,415
 
 
 
3,484
 
 
 
2,988
 
Total operating expenses
 
 
11,447
 
 
 
10,639
 
 
 
8,968
 
Income from operations
 
 
17,546
 
 
 
12,898
 
 
 
22,339
 
Interest and dividend income
 
 
4,870
 
 
 
3,119
 
 
 
5,648
 
Interest expense
 
 
( 128
)
 
 
( 131
)
 
 
( 151
)
Loss on marketable securities
 
 
( 8,546
)
 
 
( 70
)
 
 
( 4,375
)
Other (expense) income
 
 
(4
)
 
 
114
 
 
 
8,317
 
Other (expense) income
 
 
( 3,808
)
 
 
3,032
 
 
 
9,439
 
Income before income taxes
 
 
13,738
 
 
 
15,930
 
 
 
31,778
 
Income tax benefit
 
 
( 1,473
)
 
 
( 10,325
)
 
 
( 14,786
)
Net income
 
$
15,211
 
 
$
26,255
 
 
$
46,564
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.35
 
 
$
0.60
 
 
$
1.06
 
Diluted
 
$
0.35
 
 
$
0.60
 
 
$
1.06
 
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
43,763,243
 
 
 
43,756,065
 
 
 
43,743,243
 
Diluted
 
 
43,763,489
 
 
 
43,756,113
 
 
 
43,744,150
 
 
 
 
2022
 
 
2021
 
 
2020
 
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
15,211
 
 
$
26,255
 
 
$
46,564
 
Other comprehensive loss from unrealized net losses on available-for- sale debt securities
 
 
( 227
)
 
 
( 38
)
 
 
( 111
)
Income tax effect
 
 
48
 
 
 
8
 
 
 
23
 
Total unrealized losses, net of tax
 
 
( 179
)
 
 
( 30
)
 
 
( 88
)
Comprehensive income
 
$
15,032
 
 
$
26,225
 
 
$
46,476
 
 
The accompanying notes are an integral part of these financial statements.
 
50
Table of Contents
 
 
FutureFuel Corp.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2022, 2021, and 2020
(Dollars in thousands)
 
    2022
    2021
    2020
 
Cash flows from operating activities
                       
Net income
  $ 15,211     $ 26,255     $ 46,564  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation
    10,454       10,452       11,150  
Amortization of deferred financing costs
    95       95       108  
Benefit for deferred income taxes
    ( 1,822 )
    ( 10,454 )
    ( 610 )
Change in fair value of equity securities
    8,297       904       246  
Change in fair value of derivative instruments
    ( 343 )
    609       ( 390 )
Loss (gain) on the sale of investments
    248       ( 834 )
    4,129  
Stock based compensation
    46       -       49  
Loss on disposal of property and equipment
    64       11       31  
Impairment of intangible asset
    -       1,315       -  
Noncash interest expense
    33       32       43  
Changes in operating assets and liabilities:
                       
Accounts receivable
    3,118       ( 7,929 )
    88,865  
Accounts receivable – related parties
    52       1,368       3,176  
Inventory
    162       6,969       3,684  
Income tax receivable
    7,801       7,908       ( 9,606 )
Prepaid expenses
    ( 106 )
    379       ( 2,035 )
Prepaid expenses – related party
    ( 8 )
    ( 4 )
    12  
Other assets
    799       732       658  
Accounts payable
    13,790       2,095       ( 48,639 )
Accounts payable – related parties
    ( 112 )
    6,927       ( 271 )
Accrued expenses and other current liabilities
    ( 948 )
    870       456  
Accrued expenses and other current liabilities – related parties
    -       1       ( 64 )
Deferred revenue
    ( 4,055 )
    ( 2,931 )
    ( 691 )
Other noncurrent liabilities
    ( 325 )
    ( 686 )
    ( 462 )
Net cash provided by operating activities
    52,451       44,084       96,403  
Cash flows from investing activities
                       
Collateralization of derivative instruments
    ( 404 )
    ( 750 )
    158  
Purchase of marketable securities
    -       ( 23,546 )
    ( 5,073 )
Proceeds from the sale of marketable securities
    1,292       40,652       9,803  
Proceeds from the sale of property and equipment
    61       -       50  
Proceeds from the sale of intangible assets
    -       93       -  
Capital expenditures
    ( 4,778 )
    ( 1,456 )
    ( 4,464 )
Net cash (used in) provided by investing activities
    ( 3,829 )
    14,993       474  
Cash flows from financing activities
                       
Loan proceeds
    -       -       8,180  
Payment on loan
    -       -       ( 8,180 )
Minimum tax withholding on stock options exercised
    -       ( 3 )
    -  
Deferred financing costs
    -       -       ( 477 )
Proceeds from the issuance of stock
    -       231       -  
Equipment financing proceeds
    -       -       119  
Payment of dividends
    ( 10,503 )
    ( 119,906 )
    ( 141,728 )
Net cash used in financing activities
    ( 10,503 )
    ( 119,678 )
    ( 142,086 )
Net change in cash and cash equivalents
    38,119       ( 60,601 )
    ( 45,209 )
Cash and cash equivalents at beginning of period
    137,521       198,122       243,331  
Cash and cash equivalents at end of period
  $ 175,640     $ 137,521     $ 198,122  
                         
Cash paid for interest
  $ 3     $ 47     $ 2  
Cash paid for income taxes
  $ 69     $ 83     $ 661  
Noncash investing and financing activities:
                       
Noncash capital expenditures
  $ 208     $ 364     $ -  
Noncash operating leases
  $ 707     $ 269     $ 442  
Dividends payable
  $ 10,503     $ -     $ 10,498  
 
The accompanying notes are an integral part of these financial statements.
 
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FutureFuel Corp.
Consolidated Statements of Changes in Stockholders ’ Equity
For the Years Ended December 31, 2022, 2021, and 2020
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
 
Additional
 
 
 
 
 
 
Total
 
 
 
Common Stock
 
 
Comprehensive
 
 
paid-in
 
 
Retained
 
 
Stockholders ’
 
 
 
Shares
 
 
Amount
 
 
Income
 
 
Capital
 
 
Earnings
 
 
Equity
 
Balance - December 31, 2019
 
 
43,743,243
 
 
$
4
 
 
$
296
 
 
$
282,166
 
 
$
184,632
 
 
$
467,098
 
Prior period adjustment: Change in accounting principles
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 12
)
 
 
( 12
)
Balance - January 1, 2020 - As adjusted
 
 
43,743,243
 
 
$
4
 
 
$
296
 
 
 
282,166
 
 
$
184,620
 
 
$
467,086
 
Cash dividends declared
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 141,728
)
 
 
( 141,728
)
Stock based compensation
 
 
-
 
 
 
-
 
 
 
-
 
 
 
49
 
 
 
-
 
 
 
49
 
Other comprehensive loss
 
 
-
 
 
 
-
 
 
 
( 88
)
 
 
-
 
 
 
-
 
 
 
( 88
)
Net income
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
46,564
 
 
 
46,564
 
Balance - December 31, 2020
 
 
43,743,243
 
 
$
4
 
 
$
208
 
 
$
282,215
 
 
$
89,456
 
 
$
371,883
 
Cash dividends declared
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 109,408
)
 
 
( 109,408
)
Proceeds from the issuance of stock
 
 
20,000
 
 
 
-
 
 
 
-
 
 
 
231
 
 
 
-
 
 
 
231
 
Minimum tax withholding
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 3
)
 
 
-
 
 
 
( 3
)
Other comprehensive loss
 
 
-
 
 
 
-
 
 
 
( 30
)
 
 
-
 
 
 
-
 
 
 
( 30
)
Net Income
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
26,255
 
 
 
26,255
 
Balance - December 31, 2021
 
 
43,763,243
 
 
$
4
 
 
$
178
 
 
$
282,443
 
 
$
6,303
 
 
$
288,928
 
Cash dividends declared
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 21,006
)
 
 
( 21,006
)
Stock based compensation
 
 
-
 
 
 
-
 
 
 
-
 
 
 
46
 
 
 
-
 
 
 
46
 
Other comprehensive loss
 
 
-
 
 
 
-
 
 
 
( 179
)
 
 
-
 
 
 
-
 
 
 
( 179
)
Net Income
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
15,211
 
 
 
15,211
 
Balance - December 31, 2022
 
 
43,763,243
 
 
$
4
 
 
$
( 1
)
 
$
282,489
 
 
$
508
 
 
$
283,000
 
 
The accompanying notes are an integral part of these financial statements
 
52
Table of Contents
 
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
 
1 )
Description of business and operations
 
FutureFuel Corp. (the “Company”) is a Delaware corporation with its wholly owned subsidiaries, FutureFuel Chemical Company; FFC Grain, L.L.C.; FutureFuel Warehouse Company, L.L.C.; and Legacy Regional Transport, L.L.C.
 
The Company’s sole operating facility is FutureFuel Chemical Company located in Batesville, Arkansas, a manufacturer of specialty and performance chemicals and biofuels.
  
 
2 )
Significant accounting policies and basis of presentation
 
Financial Presentation
 
The consolidated financial statements of FutureFuel Corp. and subsidiaries are prepared in conformity with accounting principles generally accepted (“GAAP”) in the United States and include amounts that are based upon management estimates and judgments which could differ from actual future results.  Intercompany transactions and balances are eliminated in consolidation. Certain reclassifications were made to prior year amounts to conform to the 2022  presentation.
 
Cash and cash equivalents
 
Cash equivalents consist of highly liquid investments with original maturities of three months or less and are carried at cost, which approximates market. The Company places its temporary cash investments with high credit quality financial institutions. At times, bank deposits may be in excess of the Federal Deposit Insurance Corporation insurance limit.
 
Accounts receivable, allowance for doubtful accounts, and credit risk
 
Accounts receivable are recorded at the invoiced amount and only bear interest if outstanding beyond the agreed upon payment terms. The Company has established procedures to monitor credit risk and has not experienced significant credit losses in prior years. Accounts receivable have been reduced by an allowance for amounts that may be uncollectible in the future. This estimated allowance is based upon management’s evaluation of the collectability of individual invoices and is based upon management’s evaluation of the financial condition of its customers and historical bad debt experience. Write-offs are recorded at the time a customer receivable is deemed uncollectible.
 
The Company adopted Accounting Standards Update (“ASU’) 2016 - 13, Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments on January 1, 2020 on a modified retrospective approach. This methodology reflects expected credit losses based on a broader range of reasonable and supportable information to inform credit loss estimates. The adoption did not have a material impact on the Company’s consolidated financial statements.
 
Customer concentrations
 
For the twelve months ended December 31, 2022, 2021, and 2020, significant portions of the Company’s sales were made to a relatively small number of customers. Sales to two biodiesel customers totaled $ 107,898  ( 27 % of revenue) in 2022. Sales to three biodiesel customers totaled $ 133,231 ( 41 % of total revenue) in 2021 and sales to one customer totaled $ 25,460 ( 12 % of revenue) in 2020. Receivables for the significant customers at December 31, 2022 and 2021, were 2 % and 28 % of total receivables, respectively.
 
No chemical customers represented a greater than 10% of total sales revenue in 2022, 2021, or 2020.
  
 
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
Inventory
 
Inventories are valued at the lower of cost or market. The Company determines the cost of raw materials, work in process, and finished goods inventories by the last-in, first -out (“LIFO”) method. The cost of all other inventories is determined by the average cost method, which approximates the first -in, first -out (“FIFO”) method. The Company writes-down its inventories for estimated obsolescence or unmarketable inventory equal to the difference between the carrying value of inventory and the estimated market value based upon assumptions about future demand and market conditions.
 
Derivative instruments
 
The Company records all derivative instruments at fair value. Fair value is determined by using the closing prices of the derivative instruments on the New York Mercantile Exchange at the end of an accounting period. Changes in the fair value of derivative instruments are recognized at the end of each accounting period and recorded in the statement of income as a component of cost of goods sold.
 
In order to manage commodity price risk caused by market fluctuations in biofuel prices, future purchases of feedstock used in biodiesel production, physical feedstock, finished product inventories attributed to the process, and other petroleum products purchased or sold, the Company may enter into exchange-traded commodity futures and options contracts. The Company accounts for these derivative instruments in accordance with Accounting Standards Codification (“ASC”) 815 - 20 - 25, Derivatives and Hedging . Under this standard, the accounting for changes in the fair value of a derivative instrument depends upon whether it has been designated as an accounting hedging relationship and, further, on the type of hedging relationship. To qualify for designation as an accounting hedging relationship, specific criteria must be met and appropriate documentation maintained. The Company had no derivative instruments that qualified under these rules as designated accounting hedges in 2022  or 2021. The Company has elected the normal purchase and normal sales exception for certain feedstock purchase contracts and supply agreements.
 
Marketable securities
 
Investments consist of marketable equity and debt securities stated at fair value. The debt securities are designated as available-for-sale securities at the time of purchase based upon the intended holding period. Gains and losses from the sale of marketable securities and the changes in the fair value of equity securities are recognized as “gains (losses) on marketable securities” as a component of other income (expense) in the consolidated statements of income and comprehensive income. The cost basis used for all marketable securities is specific identification. Changes in the fair value of debt securities are recognized in “accumulated other comprehensive income” on the consolidated balance sheets, unless the Company determines that an unrealized loss will not be recovered before it is sold, in which case, the Company will recognize the loss as a component of other income (expense).
 
See Notes 7 and  8 for further information on marketable securities and fair value measurements.
 
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
Fair value measurements
 
The Company records recurring and non-recurring financial assets and liabilities as well as all non-financial assets and liabilities subject to fair value measurement at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. These fair value principles prioritize valuation inputs across three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. An asset or liability's classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement.
 
Property, plant , and equipment
 
Property, plant, and equipment is carried at cost. Maintenance and repairs are charged to earnings; replacements and betterments are capitalized. When the Company retires or otherwise disposes of an asset, it removes the cost of such asset and related accumulated depreciation from the accounts. The Company records any profit and loss on retirement or other disposition in earnings.
 
Depreciation expense is calculated based on historical cost and the estimated useful lives of the assets, generally using the straight-line method with the following useful lives:
 
Building & building equipment (years)
  20 –  39  
Machinery and equipment (years)
  3 – 33  
Transportation equipment (years)
  5 – 33  
Other (years)
  5 – 33  
 
Impairment of assets
 
The Company evaluates the carrying value of long-lived tangible assets when events or changes in circumstances indicate that the carrying value may not be recoverable. Such events and circumstances include, but are not limited to, significant decreases in the market value of the asset, adverse changes in the extent or manner in which the asset is being used, significant changes in business climate, or current or projected cash flow losses associated with the use of the assets. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from such assets are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. For long-lived assets to be held for use in future operations and for tangible assets, fair value is determined primarily using either the projected cash flows discounted at a rate commensurate with the risk involved or an appraisal. For long-lived assets to be disposed of by sale or other than sale, fair value is determined in a similar manner, except that fair values are reduced for disposal costs.
 
55
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands,
except per share amounts)
 
Asset retirement obligations and environmental costs
 
The Company establishes reserves for closure/post-closure costs associated with the environmental and other assets it maintains, which include, but are not limited to, waste management units, such as a chemical waste destructor, storage tanks, and boilers. When these types of assets are constructed or installed, a liability is established with a corresponding asset for the future costs anticipated to be associated with the closure of the site based on an expected life of the environmental assets, the applicable regulatory closure requirements, and the Company’s environmental policies and practices. These expenses are charged into earnings over the estimated useful life of the assets. Currently, the Company estimates the useful life of each individual asset up to 27 years. Changes made in estimates of the asset retirement obligation costs or the estimate of the useful lives of these assets are reflected in earnings as an increase or decrease in the period such changes are made.
 
Environmental costs are capitalized if they extend the life of the related property, increase its capacity, and/or mitigate or prevent future contamination. The cost of operating and maintaining environmental control facilities is charged to expense.
 
Litigation  
 
The Company and its operations from time to time may be parties to or targets of lawsuits, claims, investigations, and proceedings including product liability, personal injury, patent and intellectual property, commercial, contract, environmental, health and safety, and environmental matters, which are handled and defended in the ordinary course of business. The Company accrues a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When a single amount cannot be reasonably estimated but the cost can be estimated within a range, the Company accrues the minimum amount.
 
56
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
Revenue recognition  
 
In accordance with ASC Topic 606, Revenue from Contracts with Customers , the Company recognizes revenue when performance obligations of the customer contract are satisfied. The Company sells to customers through master sales agreements or standalone purchase orders. The majority of the Company’s revenue is from short-term contracts with revenue recognized when a single performance obligation to transfer product under the terms of a contract with a customer is satisfied. Accordingly, the Company recognizes revenue when control is transferred to the customer, which is when products are considered to meet customer specification per the customer contract and title and risk of loss are transferred. This typically occurs at the time of shipment or delivery; or for certain contracts, this occurs upon delivery of the material to a Company storage location, ready for customer pickup and separated from other Company inventory. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products and is generally based upon a negotiated price. The Company sells its products directly to customers generally under agreements with payment terms of 30 to 75 days for chemical segment customers and 2 to 10 days for biofuels segment customers.
 
The Company applies the practical expedient and excludes the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less; and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed.
 
Revenue within the biofuel segment includes revenue from biodiesel RINs. RINs are renewable identification numbers under the Renewable Fuel Standard ( “RFS2” ) used to incent the use of renewable fuels domestically. RINs are generated at 1.5 RINs per gallon of biodiesel produced and sold. Revenue is recognized from RINs when transferred to the buyer in the government provided tracking system. No cost is incurred in the generation of a RIN.
 
Taxes collected from customers remitted to governmental authorities are excluded from revenue. Shipping and handling fees related to sales transactions are billed to customers and recorded as sales revenue.
 
Cost of goods sold and distribution
 
Cost of goods sold consists of raw and packaging materials, direct manufacturing costs, depreciation, analytical lab costs, inbound freight, purchasing, and other indirect costs necessary to manufacture products. Biodiesel cost of goods sold also includes a credit for the one dollar per gallon Blenders’ Tax Credit (“BTC”) for blending biodiesel with petroleum diesel when in law. The BTC was in law during 2021 and 2022 and is in effect until December 31, 2024. See Note 3 for further discussion.
 
Distribution expense includes outbound freight costs, depreciation of distribution equipment, and other indirect costs necessary to distribute product.
 
Selling, general, and administrative expenses
 
Selling, general, and administrative expenses include personnel costs associated with sales, marketing, and administration; legal and related costs; consulting and professional service fees; advertising expenses; and other similar costs.
 
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Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
Research and development expenses
 
Research and development expenses include direct salaries, depreciation of equipment, material expenditures, contractor fees, and other indirect costs. All costs identified as research and development costs are charged to expense when incurred.
 
Comprehensive income
 
Comprehensive income is comprised of net income and other comprehensive income (loss) (“OCI”). Comprehensive income comprises all changes in stockholders’ equity from transactions and other events and circumstances from non-owner sources. The Company’s OCI comprises unrealized gains and losses resulting from its investments in marketable debt securities classified as available-for-sale (see Note 7 ).
 
Unrealized gains and losses are determined using the specific identification method and are classified in OCI.
 
Income taxes
 
The income tax (benefit) provision is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for (benefit from) income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. 
 
A tax valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In assessing the recoverability of its deferred tax assets, the Company evaluates available positive and negative evidence to estimate whether it is more likely than not that sufficient future taxable income will be generated to permit use of the existing deferred tax assets in each taxpaying jurisdiction. In making this determination, the Company considers positive evidence in the form of projections of future taxable income, reversing temporary differences, and tax planning strategies.  In years in which the Company has experienced objective negative evidence in the form of three cumulative years of tax losses, the Company no longer uses taxable income projections to overcome the presumption of losses and deferred tax asset valuations are computed using only the reversing net deferred tax liability as a source of income.
 
Recently adopted accounting standards
 
None.
 
58
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
Recently issued accounting pronouncements
 
Reference Rate Reform (ASU No. 2020 - 04 )
 
In March 2020, the Financial Accounting Standards Board (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 was effective for all entities from January 1, 2020 through December 31, 2022. The FASB extended the amendment to December 2024. The Company is in the process of evaluating and adopting a replacement.
  
 
3 )
Government tax credits
 
BTC and Small Agri-Biodiesel Producer Tax Credit
 
The 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 Company recorded this credit as a reduction to cost of goods sold as applicable sales were made.
 
The Further Consolidated Appropriations Act of 2020 was passed by Congress and signed into law on December 20, 2019, retroactively reinstating the BTC for 2018 and 2019 and extending it through December 31, 2022.  With the passage of the Inflation Reduction Act (“IRA”) in August 2022,  the BTC was extended through December 31, 2024.
 
As part of each law from which the BTC mentioned above was reinstated, small agri-biodiesel producers with production capacity not in excess of 60 million gallons were eligible for an additional income 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 and recognized $ 1,500 for 2022, 2021, and 2020  in the same accounting period as the benefit from the BTC as described above.  The benefit of this credit is recognized as a component of income tax (benefit) provision.
 
CARES ACT – EMPLOYEE RETENTION TAX CREDIT
 
The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), was enacted on  March 27, 2020,  to encourage eligible employers to retain employees on their payroll.  The Consolidated Appropriations Act, effective  January 1, 2021,  broadened the eligibility of the credit.  The Company applied for this credit and will recognize the benefit of the credit once reasonable assurance can be made as to the retention of the credit. 
 
59
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
4 )
Revenue recognition
 
The majority of revenue is from short term contracts with revenue recognized when a single performance obligation to transfer product under the terms of a contract with a customer are satisfied.
 
Certain of the Company’s custom chemical contracts within the chemical segment contain a material right, as defined by ASC Topic 606, from the provision of a customer option to purchase future goods or services at a discounted price as a result of upfront payments provided by customers. Each contract also has a performance obligation to transfer products with 30 -day payment terms. The Company recognizes revenue when the customer takes control of the inventory, either upon shipment or when the material is made available for pick up. If the customer is deemed to take control of the inventory prior to pick up, the Company recognizes the revenue as a bill-and-hold transaction in accordance with ASC Topic 606. The Company applies the renewal option approach in allocating the transaction price to these material rights and transfer of product. As a basis for allocating the transaction price to the material right and transfer of product, the Company estimates the expected life of the contract, the expected contractual volumes to be sold over that life, and the most likely expected sales price. Each estimate is updated quarterly on a prospective basis.
 
Contract Assets and Liabilities:
 
Contract assets consist of unbilled amounts resulting from revenue recognized through bill-and-hold arrangements. The contract assets for 2022  and 2021  consist of unbilled revenue from only 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 $ 1,983  and $ 1,114  in 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 $ 5,816  and $ 3,824  in 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.
 
The following table provides the balances of receivables, contract assets, and contract liabilities from contracts with customers.
 
Contract balances
 
Contract Assets and Liabilities
  December 31,
 
    2022
    2021
 
Trade receivables, included in accounts receivable*
  $ 16,459     $ 20,780  
Contract assets, included in accounts receivable
    775       362  
Contract liabilities, included in Deferred revenue - short-term
    3,565       5,944  
Contract liabilities, included in Deferred revenue - long-term
    11,605       13,059  
 
 
* Exclusive of the BTC of $ 8,970   and $ 8,232 , respectively, and net of allowances for bad debt of $ 48   and $ 67 , respectively, as of the dates noted.
 
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
Transaction price allocated to the remaining performance obligations
 
As of December 31, 2022, approximately $ 15,170  of revenue is expected to be recognized in the future from remaining performance obligations. The Company expects to recognize this revenue ratably based upon the expected sales over the expected term of its long-term contracts which range from one  to five  years. Approximately 24 % of this revenue is expected to be recognized over the next 12 months, and 76 % is expected to be recognized between one and four  years. These amounts are subject to change based upon changes in the estimated contract life, estimated quantities, and most-likely expected sales price over the contract life. See Note 2 for further information.
 
Disaggregation of revenue - contractual and non-contractual
               
    Twelve months ended
 
    December 31,
 
    2022
    2021
 
Contract revenue from customers with > 1-year arrangement
  $ 33,686     $ 25,918  
Contract revenue from customer with < 1-year arrangement
    362,106       295,246  
Revenue from non-contractual arrangements
    222       222  
Total revenue
  $ 396,014     $ 321,386  
 
Timing of revenue
               
    Twelve months ended
 
    December 31,
 
    2022
    2021
 
Bill-and-hold revenue
  $ 36,805     $ 34,695  
Non-bill-and-hold revenue
    359,209       286,691  
Total revenue
  $ 396,014     $ 321,386  
 
Bill-and-hold transactions consisted of four  specialty chemical customers in each of 2022, 2021, and 2020 whereby revenue was recognized in accordance with contractual agreements based on product produced, readied for use and loaded into customer provided containers. These sales were subject to written monthly purchase orders with revenue recognized upon production and loading into customer provided containers. The inventory was segregated from other Company inventory as it was custom manufactured and stored at the customer’s request and could not be sold to another buyer. Credit and payment terms for bill-and-hold transactions are similar to other specialty chemical customers. Sales revenue under bill-and-hold arrangements totaled $ 36,805 , $ 34,695 , and $ 32,779 , for the years ended December 31, 2022, 2021, and 2020, respectively. Of the bill and hold sales revenue recognized, $ 4,473  and $ 3,154 had not been shipped for the years ended December 31, 2022 and 2021, respectively. These balances do not include contract assets that have not been billed or shipped as described above.
 
The Company’s revenues for the years ended December 31, 2022, 2021, and 2020  attributable to the United States and foreign countries (based upon the billing addresses of its customers) were as follows.
 
    Twelve months ended December 31:
 
    2022
    2021
    2020
 
United States
  $ 394,671     $ 320,148     $ 203,365  
All Foreign Countries
    1,343       1,238       1,140  
Total
  $ 396,014     $ 321,386     $ 204,505  
 
For the years ended December 31, 2022, 2021, and 2020, no revenues from a single foreign country were greater than 1% of total revenues.
 
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
5 )
Inventory
 
The carrying values of inventory were as follows as of December 31:
 
    2022
    2021
 
At average cost (approximates current cost)
               
Finished goods
  $ 11,719     $ 12,132  
Work in process
    879       462  
Raw and indirect materials
    33,897       30,117  
      46,495       42,711  
LIFO reserve
    ( 19,734 )     ( 15,791 )
Total inventory
  $ 26,761     $ 26,920  
 
In 2022 and 2021, a LIFO liquidation resulted in a decrease of $ 2,124 and $ 3,836 , respectively to “Cost of goods sold”. 
  
 
6 )
Derivative instruments
 
Realized and unrealized gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the consolidated statements of income as a component of cost of goods sold and amounted to a net loss of $ 24,360 , net loss of $ 10,377 , and a net gain of $ 4,379  for the years ended December 31, 2022, 2021, and 2020, respectively.
 
The volumes and carrying values of the Company’s derivative instruments were as follows at December 31:
 
    Asset/ (Liability)
 
    2022
    2021
 
    Contract
Quantity
    Fair
Value
    Contract
Quantity
    Fair
Value
 
Regulated fixed price future commitments, included in other current assets (in thousand barrels)
    305     $ ( 142 )     142     $ ( 485 )
 
The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $ 2,088  and $ 1,684  at December 31, 2022  and 2021, respectively, and is classified as other current assets in the consolidated balance sheet. 
 
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
7 )
Marketable securities
 
At December 31, 2022  and 2021, the Company had investments in certain marketable equity and debt securities which had a fair market value of $ 37,126 and $ 47,190 , 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 $ 3,675 and $ 3,902 at December 31, 2022 and 2021, respectively, with the unrealized loss of $ 1 and an unrealized gain of $ 226 , net of taxes, as a component of stockholders’ equity. As of December 31, 2022, the contractual maturities of these debt securities were greater than 10 years.
 
For the years ended December 31, 2022, 2021, and 2020, in accordance with ASC 321, the change in the fair value of equity securities (preferred and other equity instruments) was reported as a loss on marketable securities as a component of net income in the amount of $ 8,297 , $ 904 , and $ 246 , respectively. 
 
In 2022, 2021, and 2020, the Company recategorized a net gain of $ 0 , $ 0 , and $ 99 , respectively, from accumulated other comprehensive income to a component of net income as a result of sales of available-for-sale securities.
  
 
8 )
Fair value measurements
 
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants as of the measurement date. Fair value accounting pronouncements also include a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
 
Marketable securities and derivative instruments were fair value measurements using inputs considered as Level 1. The Company had no Level 2 or Level 3 securities. 
 
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
9 )
Property, plant, and equipment
 
Property, plant, and equipment consisted of the following at December 31:
 
    2022
    2021
 
Land and land improvements
  $ 5,923     $ 5,924  
Buildings and building equipment
    27,226       27,229  
Machinery and equipment
    183,999       180,498  
Construction in progress
    771       1,024  
Accumulated depreciation
    ( 140,978 )     ( 131,774 )
Total
  $ 76,941     $ 82,901  
 
Depreciation expense totaled $ 10,454 , $ 10,452 , and $ 11,150  for the years ended December 31, 2022, 2021, and 2020, respectively. 
  
 
10 )
Other assets
 
Other assets primarily comprise supplies and parts which are not expected to be used in the twelve -month period subsequent to the consolidated balance sheet date. The balance related to these items totaled $ 4,114  and $ 4,425  at December 31, 2022  and 2021, respectively.
  
 
11 )
Accrued expenses and other current liabilities
 
Accrued expenses and other current liabilities consisted of the following at December 31:
 
    2022
    2021
 
Accrued employee liabilities
  $ 3,287     $ 3,347  
Accrued property, franchise, motor fuel and other taxes
    1,165       1,912  
Lease liability, current
    630       644  
Other
    395       178  
Total
  $ 5,477     $ 6,081  
 
64
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
12 )
Borrowings
 
On March 30, 2020, the Company, with FutureFuel Chemical Company as the borrower and certain of the Company’s other subsidiaries as guarantors, amended and restated its credit agreement (the “Credit Agreement”) originally entered into on April 16, 2015 ( as amended, the “Prior Credit Agreement”) with the lenders party, Regions Bank as administrative agent and collateral agent, and PNC Bank, N.A., as syndication agent. The Credit Agreement consists of a five -year revolving credit facility in a dollar amount of up to $100,000, which includes a sublimit of $ 30,000 for letters of credit and $ 15,000 for swingline loans (collectively, the “Credit Facility”). The Credit Facility expires on March 30, 2025.
 
On March 1, 2023, the Company entered into a First Amendment to the Credit Agreement (the “First Amendment”). The First Amendment primarily amends the Credit Agreement to transition the Credit Facility from LIBOR to the Secured overnight financing rate (“SOFR”) and other conforming changes, in each case as more specifically set forth in the First Amendment. The First Amendment does not modify the aggregate amount, or expiration date, of the Credit Facility. We do not expect the transition from LIBOR to have a material impact on the Credit Facility. Pursuant to the First Amendment, the interest rate floats at the following margins over SOFR or base rate based upon our leverage ratio.
 
Consolidated Leverage Ratio
  Adjusted SOFR
Rate Loans
and Letter of Credit Fee
    Base Rate Loans
    Commitment
Fee
 
< 1.00:1.0
        1.00 %       0.00 %       0.15 %  
≥ 1.00:1.0
And
< 1.50:1.0
    1.25 %       0.25 %       0.15 %  
≥ 1.50:1.0
And
< 1.50:1.0
    1.50 %       0.50 %       0.20 %  
≥ 2.00:1.0
And
< 1.50:1.0
    1.75 %       0.75 %       0.20 %  
≥ 2.50:1.0
        2.00 %       1.00 %       0.25 %  
 
The terms of the Credit Facility contain certain negative covenants and conditions including a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio.    
 
There were  no  borrowings under the Credit Agreement at December 31, 2022  or 2021.
 
On  March 27, 2020,  the CARES Act was enacted to provide emergency assistance for individuals, families and businesses affected by the coronavirus pandemic. Under the CARES Act, certain subsidiaries of the Company entered into a loan with Saint Louis Bank pursuant to the Paycheck Protection Program (“PPP”) totaling $ 8,180  on  April 10, 2020 .  At the time that the Company applied for the PPP loan, it qualified to receive the funds pursuant to the then published eligibility requirements. Receipt of the PPP loan ensured continued operation as part of the nation’s critical infrastructure. However, the Small Business Administration and Treasury Department subsequently issued new guidance that cast doubt on the ability of public companies to qualify for a PPP loan. As a result, the Company repaid the full amount of the PPP loan on  May 5, 2020 .
 
At December 31, 2022 and 2021, the Company had $ 46 and $ 86 outstanding with a domestic financing company for computer technology under a three -year financing agreement.
  
 
13 )
Asset retirement obligations and environmental reserves
 
The Batesville plant generates hazardous and non-hazardous wastes, the treatment, storage, transportation, and disposal of which are regulated by various governmental agencies. In addition, the Batesville plant may be required to incur costs for environmental and closure and post-closure costs under the Resource Conservation and Recovery Act. The Company’s liability for asset retirement obligations and environmental contingencies was $ 1,396  and $ 1,363  as of December 31, 2022  and 2021, respectively. These amounts are recorded in other noncurrent liabilities in the accompanying consolidated balance sheet. The accretion expense for 2022, 2021, and 2020 was $ 32 , $ 32 , and $ 43 , respectively. The periodic review of the asset retirement obligation calculations resulted in an addition to the reserve of $ 0  in 2022, 2021, and 2020.
 
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
14 )
Lease commitments and purchase obligations
 
The Company leases railcars under multi-year arrangements primarily for delivery of feedstock and biodiesel within its biofuels segment. The lease fees are fixed with no option to purchase and no upfront fees or residual value guarantees. All railcar leases are direct, and no subleases exist. The Company determines lease existence and classification at inception when an agreement conveys the right to control the identified property for a period of time in exchange for consideration. These leases have remaining terms from one  to two  years with a weighted average remaining term of 1.7  years. As operating leases do not provide a readily determinable implicit interest rate, the Company uses an incremental borrowing rate based on information available at the commencement date in determining present value of the lease payments.
 
Following are supplemental income statement and cash flow information related to leases.
 
    Twelve Months Ended
         
    December 31,
         
    2022
    2021
    2020
 
Operating lease expense
  $ 862     $ 887     $ 841  
Short-term lease expense
  $ 31     $ 23       106  
Cash paid for operating leases
  $ 862     $ 887       841  
Right of use assets obtained in exchange for lease obligations
  $ 707     $ 269       442  
Weighted average discount rate, per annum
    5.2 %
    3.6 %
    3.7 %
 
On December 31, 2022 and 2021, a right of use asset was reported as other noncurrent assets of $ 1,109 and $ 956 , other current liabilities of $ 630 and $ 644 , and other noncurrent liabilities of $ 389 and $ 312 , respectively.
 
Following are maturities of lease liabilities at December 31, 2022.
 
2023
  $ 667  
2024
    398  
Total
    1,065  
Less: imputed interest
    46  
Present value of lease liabilities
  $ 1,019  
 
Purchase obligations
 
The Company has entered into contracts for the purchase of goods and services including contracts for feedstocks for biodiesel, expansion of the Company’s specialty chemicals segment, and related infrastructure with less than one -year terms.
 
The Company holds one non-cancelable obligation for software maintenance with payment obligations presented as follows.
 
2023
  $ 37  
2024- 2026
    80  
Total
  $ 117  
 
66
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Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
15 )
Income tax benefit
 
The following table summarizes the income tax (benefit) provision for the years ended:
 
    2022
    2021
    2020
 
Income before taxes - U.S.
  $ 13,738     $ 15,930     $ 31,778  
Income tax provision:
                       
Federal
                       
Current
    290       142       ( 14,234 )
Deferred
    ( 1,998 )     ( 10,417 )
    1,120  
State and other
                       
Current
    60       ( 13 )
    59  
Deferred
    175       ( 37 )
    (1, 731 )
Total
  $ ( 1,473 )   $ ( 10,325 )
  $ ( 14,786 )
 
Differences between the income tax (benefit) provision computed using the U.S. federal statutory income tax rate were as follows:
 
    2022
    2021
    2020
 
Amount computed using the statutory rate of 21% for 2022, 2021, and 2020
    21.0 %
    21.0 %
    21.0 %
Agri-biodiesel production credit
    ( 8.6 )
    ( 7.4 )
    ( 3.7 )
Federal BTC benefit
    ( 76.2 )
    ( 75.2 )
    ( 38.7 )
State BTC benefit
    ( 7.0 )
    ( 8.9 )
    ( 3.8 )
Credit for increasing research activities
    ( 1.0 )
    ( 0.7 )
    ( 0.5 )
Dividends received deduction
    ( 1.6 )
    ( 1.6 )
    ( 0.9 )
State income taxes, net
    5.1       3.5       ( 0.5 )
State research credits
    ( 0.1 )
    -       ( 1.0 )
State rate change and other deferred adjustments
    3.6       5.0       -  
Valuation allowance for deferred tax assets
    53.8       -       -  
CARES Act
    -       -       ( 17.4 )
Other
    0.3       ( 0.5 )
    ( 1.0 )
Income tax benefit
    ( 10.7 )%
    ( 64.8 )%
    ( 46.5 )%
 
The income tax benefit in 2022 is $ 1,473 or an effective rate of ( 10.7 %) as compared to an income tax benefit of $ 10,325  or an effective tax rate of ( 64.8 %) in 2021 and an income tax benefit of $ 14,786 or an effective tax rate of ( 46.5 %) in 2020.
 
On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act, among other things, provides that Net Operating Losses (“NOLs”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 shall be treated as a carryback available to offset 100% of taxable income in each of the five preceding taxable years unless the taxpayer elects to forego the carryback. The Company’s effective tax rate for the year 2020 was positively impacted by its ability to carry back both its 2019 and 2020 federal NOLs in full to tax years with 35% marginal tax rates, rather than forward to years with anticipated 21% tax rates. In the fourth quarter of 2020, the Company filed a refund claim of $ 7,695 and accrued an additional refund claim of $ 1,211 , subsequently filed in January 2021, relating to the carryback of its NOL generated in 2019.  All refunds from these filings have been received as of December 31, 2022. In the fourth quarter of 2021, the Company filed a refund claim of $ 8,463 relating to the carryback of its NOL generated in 2020 of which, $ 2,299 remains outstanding as of December 31, 2022. States in which the Company conducts the majority of its business have not conformed to the CARES Act’s enhanced NOL carryback provisions, and the anticipated benefits of these state losses are carryforwards are accordingly classified as deferred tax assets.
 
The Company’s effective tax rates for the years 2022, 2021, and 2020 reflect the positive effect of the BTC and Small Agri-biodiesel Producer Tax Credit. Based on technical guidance from the Internal Revenue Service, the Company excludes the portion of the BTC not used to satisfy excise tax liabilities from income. Both incentives are currently due to expire in December 2024.
 
The Company’s 2022 and 2021 effective tax rate provisions reflect the negative impact to the Company’s overall state income tax position of its 2021 decision to phase out its shipments on the petroleum products common carrier pipelines and the termination of these operations in 2022. This operational change shifts the Company’s business among various states such that its net deferred tax liabilities will be realized at higher rates. Additionally, the Company’s  2021 state deferred tax provision reflects a one -time benefit from state legislation enacted during the year which applies a lower tax rate to future reversals of deferred tax liabilities.
 
As further discussed below, in 2022 the Company determined that its deferred tax assets are realizable only to the extent of its deferred tax liabilities and recorded a valuation allowance that reduces its net deferred tax asset to $0.
 
67
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
The significant components of deferred tax assets and liabilities were as follows as of December 31:
 
    2022
    2021
 
Deferred tax assets
               
Compensation
  $ 391     $ 427  
Inventory reserves
    601       685  
Self-insurance
    70       100  
Asset retirement obligation
    323       314  
Deferred revenue
    4,081       5,295  
Federal net operating loss carryforwards
    9,360       5,428  
State net operating loss carryforwards
    1,884       2,311  
Accrued expenses
    2,648       759  
Stock based compensation
    24       14  
Federal credit carryforwards
    5,216       3,598  
State credit carryforwards
    687       676  
Research & development costs
    749       -  
Derivative instruments
    29       102  
Capital loss carryforwards
    1,241       1,084  
Trading securities
    656       -  
Other
    96       -  
Intangible asset impairment
    -       168  
Subtotal deferred tax assets
    28,056       20,961  
Valuation Allowance
    ( 7,392 )
    -  
Total deferred tax assets
    20,664       20,961  
                 
Deferred tax liabilities
               
Available for sale securities
    -       ( 47 )
LIFO inventory
    ( 2,740 )
    ( 2,589 )
Depreciation
    ( 17,046 )
    ( 18,266 )
Trading securities
    -       ( 1,090 )
Prepaid expenses
    ( 878 )
    ( 839 )
Total deferred tax liabilities
    ( 20,664 )
    ( 22,831 )
                 
Net deferred tax liabilities
  $ 0     $ ( 1,870 )
 
The Company’s federal net operating loss carryforwards at December 31, 2022 do not expire and can be carried forward indefinitely. Utilization of these carryforwards is limited to 80 % of taxable income in any given year. State net operating loss carryforwards at December 31, 2022 reflect losses generated in 2019 through 2022 and, if unused, will expire in years 2024 through 2032. Federal and state tax losses are primarily a function of the nontaxable nature of the BTC.
 
Federal tax credit carryforwards at December 31, 2022 include the Small Agri-biodiesel Producer Credit and Credit for Increasing Research generated in years 2019 through 2022 and expiring in 2039 through 2042. State credit carryforwards comprise Arkansas In-house Research Credits generated in 2019 through 2022 and expiring in 2028 through 2031.
 
Capital loss carryforwards were generated in 2019 through 2022 and will expire in 2024 through 2027.  
 
A tax valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In assessing the recoverability of its deferred tax assets, the Company evaluates available positive and negative evidence to estimate whether it is more likely than not that sufficient future taxable income will be generated to permit use of the existing deferred tax assets in each taxing jurisdiction. In making this determination, the Company considers positive evidence in the form of projections of future taxable income, reversing temporary differences, and tax planning strategies. In years in which the Company has experienced objective negative evidence in the form of three cumulative years of tax losses, the Company no longer uses taxable income projections to overcome the presumption of losses and deferred tax asset valuations are computed taking into account tax planning strategies and the reversing net deferred tax liability as a source of income.
 
As of December 31, 2022, the Company recorded a valuation allowance of $ 7,392 after determining that its total deferred tax assets are more likely than not realizable only to the extent of its deferred tax liabilities.
 
There are no unrecognized tax positions as of December 31, 2022, 2021, or 2020, and the Company does not anticipate any change over the next twelve months.
 
The Company records interest expense (income) and penalties, net, as a component of income tax (benefit) provision and had accrued interest and penalties of ($ 95 ), ($ 60 ), and $ 27 for December 31, 2022, 2021, and 2020, respectively. Liabilities for accrued interest and tax penalties on unrecognized tax benefits were $ 0 at both December 31, 2022  and 2021, respectively.
 
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and with various state jurisdictions. In general, the Company is subject to U.S., state, and local examinations by tax authorities from 2019  forward.
 
68
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
16 )
Earnings per share
 
In the year ended December 31, 2022, 2021  and 2020, the Company used the treasury method in computing earnings per share as all shares with participating security holders had vested.
 
There were no outstanding restricted stock units for the year ended December 31, 2022, 2021 or 2020.
 
Basic and diluted earnings per common share were computed as follows:  
 
    For the twelve months ended December 31:
 
    2022
    2021
    2020
 
Numerator:
                       
Net income
  $ 15,211     $ 26,255     $ 46,564  
Denominator:
                       
Weighted average shares outstanding – basic
    43,763,243       43,756,065       43,743,243  
Effect of dilutive securities:
                       
Stock options
    246       48       907  
Weighted average shares outstanding – diluted
    43,763,489       43,756,113       43,744,150  
                         
Basic earnings per share
  $ 0.35     $ 0.60     $ 1.06  
Diluted earnings per share
  $ 0.35     $ 0.60     $ 1.06  
 
Certain options to purchase the Company’s common stock were not included in the computation of diluted earnings per share for the years ended December 31, 2022, 2021  and 2020  because they were anti-dilutive in the period. The weighted number of options excluded on this basis was 33,754 , 28,953 , and 43,500 , respectively.
 
69
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
17 )
Stock-based compensation
 
The Board of Directors of the Company adopted an omnibus incentive plan which was approved by the shareholders of the Company at its 2017 annual shareholder meeting (the “Incentive Plan”). The purpose of the plan is to:
 
  ●
Encourage ownership in the Company by key personnel whose long-term employment with or engagement by the Company or its subsidiaries is considered essential to its continued progress and, thereby, encourage recipients to act in the Company’s shareholders’ interests and share in its success;
  ●
Encourage such persons to remain in the Company’s employ or in the employ of its subsidiaries; and
  ●
Provide incentives to persons who are not the Company employees to promote the Company’s success.
 
The Incentive Plan authorizes the Company to issue stock options (including incentive stock options and nonqualified stock options), common stock awards, and stock appreciation rights. Eligible participants in the plan include: (i) members of the Company’s board of directors and its executive officers; (ii) regular, active employees of the Company and any of its subsidiaries; and (iii) persons engaged by the Company or any of its subsidiaries to render services to the Company or its subsidiaries as an advisor or consultant.
 
Awards under the Incentive Plan are limited to shares of the Company’s common stock, which may be shares acquired by the Company, including shares purchased in the open market, or authorized but un-issued shares. Awards are limited to 10 % of the issued and outstanding shares of the Company’s common stock in the aggregate.
 
The Incentive Plan became effective upon its approval by the Company’s shareholders on September 7, 2017 and continues in effect for a term of ten years thereafter unless amended and extended by the Company or unless otherwise terminated.
 
The Company recognizes compensation expense in its financial statements for common stock-based options based upon the grant-date fair value over the requisite service period.
 
No common stock awards were issued in 2022, 2021  or 2020.
 
In August 2022 and January 2020, the Company granted a total of 20,000 and 24,000 stock options, respectively, to two new members of the Board of Directors and to the Chief Operating Officer, also respectively. No stock options were granted under the Incentive Plan in 2021. The options awarded in each of the years have an exercise price equal to the mean between the highest and lowest quoted sales prices for the Company’s common stock as of the grant date as reported by the New York Stock Exchange. All options awarded in 2022 vested immediately and expire in August 2027. All options awarded in 2020 vested immediately upon grant and expire in January 2025. The Company has used the Black Scholes Merton option pricing model, which relies on certain assumptions, to estimate the fair value of the options it granted. The weighted average fair value of options granted was $ 2.30 and $ 2.05  per option in 2022 and  2020, respectively.
 
70
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
There were no stock options exercised in 2022 or 2020. All of the options exercised in 2021  were exercised on a cash basis.
 
The assumptions used in the determination of the fair value of the options granted are provided in the following table: 
 
Assumptions
  2022
Options
    2021
Options
    January 2020
Options
 
Expected volatility rate
    56.61 %     n/a       31.53 %
Expected dividend yield
    3.34 %     n/a       2.08 %
Risk-free interest rate
    3.20 %     n/a       1.60 %
Expected forfeiture rate
    0.00 %     n/a       0.00 %
Expected term in years
    2.3       n/a       2.5  
 
The volatility rate for the options granted in 2022 and  2020  were derived from the historical stock price volatility of the Company’s common stock over the same time period as the expected term of each stock option award. The volatility rate is derived by a mathematical formula using the daily closing stock price data over the expected term.
 
The expected dividend yield is calculated using the Company’s expected dividend amount at the date of the option grant over the expected term divided by the fair market value of the Company’s common stock.
 
For the years ended December 31, 2022, 2021, and 2020, total share-based compensation expense (before tax) totaled $ 46 , $0, and $ 49 , respectively. In the years ended December 31, 2022  and 2020, this balance was recorded as an element of selling, general, and administrative expenses. As of December 31, 2022  and 2021, there was no unrecognized compensation expense related to stock options.
 
A summary of the activity of the Company’s stock options and awards for the period beginning January 1, 2020  and ending December 31, 2022  is presented below.
 
            Weighted
Average
 
    Options
    Exercise Price
 
Outstanding at January 1, 2020
    50,000     $ 14.05  
Granted
    24,000     $ 11.56  
Exercised
    -     $ -  
Canceled, forfeited, or expired
    ( 30,000 )
  $ 13.99  
Outstanding at December 31, 2020
    44,000     $ 12.73  
Granted
    -     $ -  
Exercised
    ( 20,000 )
  $ 11.56  
Canceled, forfeited, or expired
    -     $ -  
Outstanding at December 31, 2021
    24,000     $ 13.71  
Granted
    20,000     $ 7.18  
Exercised
    -     $ -  
Canceled, forfeited, or expired
    -     $ -  
Outstanding at December 31, 2022
    44,000     $ 10.74  
 
71
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
There were 4,310,167 options available for grant under the Incentive Plan. The following table provides the remaining contractual term and weighted average exercise prices of stock options outstanding and exercisable from the Incentive Plan at December 31, 2022.
 
          Options Outstanding
    Options Exercisable
 
                  Weighted
                         
          Number
    Average
    Weighted
    Number
    Weighted
 
          Outstanding at
    Remaining
    Average
    Exercisable at
    Average
 
  Exercise
    December 31,
    Contractual
    Exercise
    December 31,
    Exercise
 
  Price
    2022
    Life
    Price
    2021
    Price
 
  $ 16.21       10,000       0.81     $ 16.21       10,000     $ 16.21  
  $ 12.07       10,000       1.71     $ 12.07       10,000     $ 12.07  
  $ 11.56       4,000       2.06     $ 11.56       4,000     $ 11.56  
  $ 7.18       20,000       4.61     $ 7.18       20,000     $ 7.18  
            44,000       2.86     $ 10.74       44,000     $ 10.74  
 
The aggregate intrinsic values of total options outstanding and exercisable at December 31, 2022  and 2021  were $ 19  and $ 0 , respectively. Intrinsic value is the amount by which the last trade price of the common stock closest to December 31, 2022  and 2021, respectively, exceeded the exercise price of the options granted.
  
 
18 )
Stockholders’ equity
 
St. Albans Global Management, LLC (“St. Albans”), an entity affiliated with Mr. P. A. Novelly II, a member of the board, is entitled to demand that the Company register under the Securities Act of 1933, as amended (the “Securities Act”), the resale of all shares of the Company’s common stock beneficially owned by it. If St. Albans exercises its registration rights with respect to all 17,085,100 shares of the Company’s common stock currently owned by it, there will be an additional 6,637,600 registered shares of common stock available for trading in the public market. 
 
72
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
19 )
Employee benefit plans
 
Defined contribution savings plan
 
The Company currently offers its employees a company 401 (k) matching savings plan, which covers substantially all employees. Under this plan, the Company matches the amount of eligible employees’ contributions, subject to specified limits, up to 6 % of earnings. Company contributions totaled $ 1,719 , $ 1,770 , and $ 1,906  for the years ended December 31, 2022, 2021, and 2020, respectively.
  
 
20 )
Related party transactions
 
The Company enters into transactions with companies affiliated with or controlled by a director or significant stockholder. Revenues, expenses, accounts receivable, prepaid amounts, and unpaid amounts related to these transactions are captured on the consolidated financial statements as related party line items. These related party transactions are summarized in the following table and further described below.
 
Related party balance sheet accounts
 
    2022
    2021
 
Accounts receivable
               
Biodiesel, petrodiesel, blends and other petroleum products
  $ 6     $ 58  
Total accounts receivable
  $ 6     $ 58  
Prepaid expenses
               
Administrative services and other
  $ 12     $ 4  
Total prepaid expenses
  $ 12     $ 4  
Accounts payable
               
Natural gas and fuel purchases
  $ 7,788     $ 7,900  
Travel and administrative services
  $ 11     $ 11  
Total accounts payable
  $ 7,799     $ 7,911  
Accrued liabilities
               
Travel and administrative services
  $ 1     $ 1  
Total accrued liabilities
  $ 1     $ 1  
 
Related party income statement accounts
 
    For the years ended December 31:
 
    2022
    2021
    2020
 
Revenues
                       
Biodiesel, petrodiesel, blends and other petroleum products
  $ 459     $ 1,261     $ 1,976  
Total revenues
  $ 459     $ 1,261     $ 1,976  
Cost of goods sold
                       
Biodiesel, petrodiesel, blends, and other petroleum products
  $ 5,425     $ 5,233     $ 3,865  
Natural gas purchases
    -       11,360       3,025  
Total cost of goods sold
  $ 5,425     $ 16,593     $ 6,890  
Distribution
                       
Distribution and related services
  $ 174     $ 176     $ 177  
Total distribution
  $ 174     $ 176     $ 177  
Selling, general and administrative expenses
                       
Commodity trading advisory fees
  $ 307     $ 308     $ 308  
Travel and administrative services
    184       221       192  
Income tax, consulting services and other
    120       120       120  
Total selling, general, and administrative expenses
  $ 611     $ 649     $ 620  
 
73
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
 
Biodiesel, petrodiesel,   blends, and other petroleum products
 
The Company enters into agreements to buy and sell biofuels (biodiesel, petrodiesel, biodiesel/petrodiesel blends, RINs, and biodiesel production byproducts) and other petroleum products, such as gasoline, with an affiliate from time to time. Such agreements are priced at the then-current market price of the product as determined from bids from other customers and/or market pricing services. Cost of goods sold related to these sales includes variable costs and allocated fixed costs. The revenue amounts presented in the table above result when the Company sells biodiesel, petrodiesel, blends, and other petroleum products to a related party regardless of who the material was purchased from.  Likewise, cost of goods sold amounts result when biodiesel, petrodiesel, blends, and other petroleum products are purchased from a related party regardless of who the material was sold to.  
 
Natural gas purchases
 
The Company uses natural gas to generate steam for its manufacturing process and to support certain of its air and waste treatment utilities. This natural gas is purchased through an affiliate provider of natural gas marketing services. Expenses related to these purchases include the cost of the natural gas only; transportation charges are paid to an independent third party. The natural gas matter as discussed in Note 23, Legal proceedings, is in reference to the natural gas supplier, not the related party.
 
Distribution and related services
 
The Company leases oil storage capacity from an affiliate under a storage and throughput agreement. This agreement provides for the storage of biodiesel, diesel or biodiesel/petrodiesel blends, methanol, and biodiesel feedstocks in above-ground storage tankage at designated facilities of the affiliate. Expenses related to this agreement include monthly lease charges, generally on a per-barrel basis, and associated heating, throughput, and other customary terminalling charges.
 
Commodity trading advisory fees
 
The Company entered into a commodity trading advisory agreement with an affiliate. Pursuant to the terms of this agreement, the affiliate provides advice to the Company concerning the purchase, sale, exchange, conversion, and/or hedging of commodities as requested from time to time.
 
Travel and administrative services
 
The Company reimburses an affiliate for legal, trading, travel and other administrative services incurred on its behalf. Such reimbursement is performed at cost with the affiliate realizing no profit on the transaction.
 
Income tax and consulting services
 
An affiliate provides professional services to the Company, primarily in the area of income tax preparation and consulting. The Company also receives certain finance and accounting expertise from this affiliate as requested. Expenses related to these services comprise an agreed quarterly fee plus reimbursement of expense, at cost and are reported as selling, general, and administrative expenses.
 
74
Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
21 )
Segment information
 
The Company has two reportable segments organized along similar product lines – chemicals and biofuels. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2.
 
Chemicals
 
The Company’s chemicals segment manufactures diversified chemical products that are sold to third party customers. This segment comprises two product groups: “custom manufacturing” (manufacturing chemicals for specific customers) and “performance chemicals” (multi-customer specialty chemicals).
 
Biofuels
 
The Company’s biofuels segment manufactures and markets biodiesel. Biodiesel revenues are generated through the sale of biodiesel to customers through the Company’s distribution network at the Batesville plant, through distribution facilities available at leased oil storage facilities, and through a network of remotely located tanks. Results of the biofuels business segment also reflect the sale of biodiesel blends with petrodiesel, petrodiesel with no biodiesel added, RINs, biodiesel production byproducts, and the purchase and sale of other petroleum products on common carrier pipelines.
 
Summary of business by segment
 
    Twelve months ended December 31,
 
    2022
    2021
    2020
 
Revenue
                       
Custom chemicals
  $ 58,737     $ 50,675     $ 63,894  
Performance chemicals
    22,156       16,867       15,284  
Chemicals revenue
    80,893       67,542       79,178  
Biofuels revenue
    315,121       253,844       125,327  
Total Revenue
  $ 396,014     $ 321,386     $ 204,505  
                         
Segment gross profit
                       
Chemicals
  $ 25,645     $ 13,970     $ 25,518  
Biofuels
    3,348       9,567       5,789  
Total gross profit
  $ 28,993     $ 23,537     $ 31,307  
 
Depreciation is allocated to segment cost of goods sold based on plant usage. The total assets and capital expenditures of the Company have not been allocated to individual segments as large portions of these assets are shared to varying degrees by each segment, causing such an allocation to be of little value.
 
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Table of Contents
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share amounts)
  
 
22 )
Quarterly financial information (unaudited)
 
    Quarter
 
    1st
    2nd
    3rd
    4th
 
2022
                               
Revenues
  $ 42,261     $ 117,796     $ 118,141     $ 117,816  
Gross (loss) profit
  $ ( 7,155 )
  $ 977     $ 19,985     $ 15,186  
Net (loss) income
  $ ( 12,398 )
  $ ( 3,104 )
  $ 15,780     $ 14,933  
Net income per common share:
                               
Basic
  $ ( 0.28 )
  $ ( 0.07 )
  $ 0.36     $ 0.34  
Diluted
  $ ( 0.28 )
  $ ( 0.07 )
  $ 0.36     $ 0.34  
                                 
2021
                               
Revenues
  $ 41,516     $ 74,118     $ 98,682     $ 107,070  
Gross (loss) profit
  $ ( 10,736 )
  $ ( 43 )
  $ 8,192     $ 26,124  
Net (loss) income
  $ ( 8,773 )
  $ 3,481     $ 9,202     $ 22,345  
Net income per common share:
                               
Basic
  $ ( 0.20 )
  $ 0.08     $ 0.21     $ 0.51  
Diluted
  $ ( 0.20 )
  $ 0.08     $ 0.21     $ 0.51  
 
Earnings per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly amounts will not necessarily equal the total for the year.
  
 
23 )
Legal proceedings
 
The Company is not a party to, nor is any of its property subject to, any material pending legal proceedings, other than ordinary routine litigation incidental to its business. However, from time to time, the Company may be a party to, or a target of, lawsuits, claims, investigations, and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which the Company expects to be handled and defended in the ordinary course of business. While the Company is unable to predict the outcome of any matters currently pending, the Company does not believe that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations, or cash flows. However, adverse developments could negatively impact earnings or cash flows in future periods.
 
As a result of the extraordinary increase in natural gas prices in February 2021, the Attorney General of Arkansas launched a civil investigative demand against several natural gas suppliers.  At this time the Company is disputing its  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 period ended  December 31, 2021.   However, as discussed in Note  21,  Related Party Transactions, the “ultimate” natural gas supplier is  not  a related party of the Company.
 
  
 
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Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
 
None.